Good day, and thank you for standing by, and welcome to Nyxoah's Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that, today's conference is being recorded. Now, I'd like to hand -- I would now like to introduce your host for today's call Mikaela Kirkwood, Investor Relations and Communications Manager. Please go ahead.

Thank you. Good afternoon, and good evening, everyone, and welcome to our earnings call for the second quarter of 2023. I am Mikaela Kirkwood, Investor Relations and 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 second quarter financial results released after US 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 of descriptions 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, Mikaela. Good afternoon, and good evening, everyone and thank you for joining us for our second quarter 2023 earnings call. The evolution of Nyxoah enlarging its US footprint is well underway with our current focus on patient follow-up in our U.S. pivotal study DREAM. As a reminder, we completed all 115 implants in the study earlier this year, and expect to report 12-month results in the first quarter of 2024. We are highly confident in DREAM outcomes based on the over 500 implants in our prior clinical and commercial settings globally, and the DREAM efficacy and 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-month follow-up which demonstrated a 65% AHI responder rate and a 76% ODI responder rate, and safety data on all patients enrolled in the study, which were in line with our expectations and compared favorable to other neuromodulation studies. As a reminder, for the trial to be successful of the 115 patients at least 63% need to be AHI and ODI responders at a 12-month follow-up. The modular PMA submission continues to progress with the second module being filed during quarter two. We continue to anticipate submitting, the third module later this year, and the fourth and final module which will include 12-month safety and efficacy data shortly after the follow-up period is completed early next year. We remain on track for FDA approval before the end of 2024. The US ACCCESS 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 neurostimulation eligible to treat OSA patients who are contraindicated to commercially available HGNS therapy…

Thank you, Olivier. Good day to everyone, and thank you for joining us today. Revenue for the second quarter ended June 30 2023 was €1.1 million. Total operating loss for the second quarter was €11.9 million versus €7.4 million in the second quarter of 2022, driven by an acceleration in clinical activities notably the start of the ACCCESS study, as well as commercial investments in Europe. Last quarter, we raised €3 million pursuant to the company $50 million at-the-market program. As of June 30, 2023 cash and financial assets totaled €84.5 million compared to €96.1 million [ph] on December 31, 2022. During the second, quarter our monthly cash burn was €4.8 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.

Thank you, Loic. We are entering the most exciting time in Nyxoah's history. We have less than nine months away, from DREAM clinical data readout, which should result in obtaining FDA approval and initiating US commercialization. The uniqueness of Genio system resonates well with both physicians and patients confirmed by independent market research. I look forward to continue to scale the company in anticipation of entering the US 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.

And thank you. [Operator Instructions] And our first question comes from Jon Block from Stifel. Your line is now open.

Hey everyone. This is Joe Federico on for Jon. Thanks for the questions. To start, I know you gave some color on the reimbursement details. I just wanted to ask I think in the past you had said that you expected to hear from the AMA before the end of the year on some of the coding clarity. Can you give us an update on where that sits?

Yes. No definitely. So, we are working as I mentioned with ENT Society AAO and they are collaborating with the AMA making recommendations. There are two options that are fully and further discussed and we are still sticking to the same time line that we believe that before year-end there will be clarity on which of the two options will be the one that we can use for the Genio system going forward.

Okay, great. Thanks for the color. And then just a follow-up. I wanted to ask about gross margin in the quarter. It looks like it came in a little bit below our estimates. Can you kind of expand on some of the drivers there and maybe how you expect that to play out over the remainder of the year? Thanks guys.

I will hand over this question to our CFO.

Yes. Hi. Thank you for the question. The gross margin for the second quarter was 62% versus 64% for the first quarter. So, there is a 2% decrease in terms of margin which is due to the additional site we now have in Belgium. So, this said with the acceleration of the business and the ramp-up of the volumes we expect the gross margin to increase over time specifically in the second half of 2023 and then in 2024 based on volume and absorption of fixed costs.

And thank you. And our next question comes from Ed White from H.C. Wainwright. Your line is now open.

Good evening. Thanks for taking my questions. So, with the increase in the use of GLP-1 drugs, I just wanted to get your thoughts on the potential impact to the HGNS market?

Thank you for this question. And it's really a hot question at the moment. So, the way we are looking at this at Nyxoah is as the following; if you look at both published data and commentary from leading KOLs indicating that we have the highest HGNS response it's best to lower BMI to 35 than to treat high BMI patients. So, our view is that lowering BMI from high BMI patients, thereby increasing the number of HGNS appropriate candidates will more than offset any patients that might drop out of the funnel. In other words, we are really welcoming GLP-1 into the market and we do believe that the effect can be meaningful and benefiting in increasing the HGNS eligible candidates.

Great. Thank you. And just another question. You were in 41 accounts in Germany in the first quarter 42 in the second quarter. I just wanted to get your thoughts on how many accounts you're expecting to be in by year-end? And your competitor was in over 50 accounts I believe in the first quarter, just where do they stand now? And what's your overlap with them? Thank you.

Yes. So, first of all I want to complement the German team in driving and opening new accounts. They are doing really a great job on this. Today we are at roughly 42 accounts. And going forward I do not want to provide specific guidance on exactly how many accounts we will be opening, but it's also clear that we will continue to anticipate a steady increase in the number of implanting centers over the course of the year. And just as some kind of reference in our view our competitors, they are having slightly above 50, 55 accounts in Germany. We have 42 at this moment. And as I mentioned, we want a steady increase also the number of implanting centers over the course of the year.

Okay, great. Thanks for taking my questions.

With pleasure.

And thank you. And our next question comes from Adam Maeder from Piper Sandler. Your line is now open.

Hi Olivier, hi Loic. Congrats on the progress and thank you for taking the questions. Maybe just to start I wanted to ask about some of the pre-commercialization US activities that you're engaging on right now. I think I heard the word accelerated mentioned once or twice. So, can you just level set us kind of exactly where does the infrastructure stand? How are you thinking about headcount at US launch? And maybe just remind us of kind of the initial go-to-market strategy in the US? And then I have a follow-up. Thanks.

Thank you, Adam for the question and in joining the call. So when it comes to our go-to-market strategy, as I mentioned before, we will gradually increase our investment in US pre-commercialization going hand-in-hand also with our increased confidence in the DREAM study data outcome. What I can say is that first of all we hired already our CCO, Chris. Next to this we have our market access directors. We also recently have refocused our VP of operations fully dedicated also to help preparing the pre-commercialization. And going forward, of course, we will further – sorry expand and also we are preparing an internal plan where we are anticipating having a full sales force of 100 to 150 people hired and trained by the time of launch. These reps will target both implanting ENTs but also referring sleep clinicians supported by a relatively modest DTC investment. At this moment, we are doing the targeting of accounts how many we aim to come and also to enter. But on all this, I will come back during quarter three the moment we get even more closer to US commercialization.

Okay. Totally fair. And thank you for additional color there. Maybe just for the follow-up. Obviously, you guys don't provide revenue guidance. It looks like the Street is modeling around €5 million or so for full year 2023. Curious, if you have any reaction to that figure? And just any thoughts around kind of the back half cadence Q3 versus Q4 that you can share regarding your business? Thanks, again.

Thanks for the question, Adam. I will take it. So as you said, we are not providing revenue guidance but we're very confident in the momentum of the business and we're confident in terms of the high growth in Germany. This is the only thing I can comment on.

Thank you.

And thank you. And one moment for our next question. And our next question comes from Ross Osborn from Cantor Fitzgerald. Your line is now open.

Hi, thank you for taking our questions. Would you please provide an update on how some of the headwinds you called out during the first quarter played out year-to-date? Specifically has hospital capacity and staffing improved or centers stay the same? And how have new accounts dealt with administrative burdens you mentioned? Thank you.

Thank you, Ross. Thank you for this question. And you recall this very correct. So in the first quarter, we were impacted with what we call transitory factors, mainly driven by doctor availability and reimbursement approvals in new opened centers. So the resolution of these issues combined with occupation focused initiatives drove the sales rebound in the second quarter and that's also expanding how we landed at more than €1.1 million in quarter two.

Got it. Thank you for that. And then just one more for us. Would you be able to disclose what percent of total revenue Germany accounted for? And how accounts outside of Germany performed?

So at this moment German, the German revenue is really driving our revenue business with more than 90% of all international revenue coming from Germany. We are really pleased that we also see Switzerland having full DRG code in place, we recently also generated our first revenue in Austria. So besides Germany, we have Switzerland, Austria. We had Spain already and we expect more revenue to come in the second half from Spain. And then going forward and further expanding, we are aiming at Italy, where we expect first revenue generation next year and we're also looking at the UK.

And thank you. And one moment for our next question. And our next question comes from David Rescott from Baird. Your line is now open.

Hi. Thanks for taking the questions. I wanted to start on the DTC campaign in Europe that you called out I think you mentioned maybe 50,000 monthly website visits. Just wonder if you had any more color on, if and how that's translating to revenue growth toward patients going into centers, towards patients translating into ultimate implants. Any color on the ROI you've seen there? And I think you mentioned in the US, you're expecting a modest kind of DTC campaign associated with the commercialization. Just wondering if that's something you're expecting to invest in ahead of the launch maybe at the time of the launch or something that rolls out thereafter?

So let me start by answering the first part of your question on DTC in Europe. So a direct-to-consumer advertising campaign was launched in March in Germany, and has raised awareness of HGNS and Genio. As a result, we are seeing and we have seen rapid growth in appointment requests to the helpline. The current time from patient identification to Genio implant, it's between six to eight months, so we would not anticipate appointment requests translating to implants until in fact Q4 this year. But we are seeing that there is really increased interest. Now jumping and taking this learning into the US. I think it's obvious, and also if you just see what is happening with other companies or with the leading company in HGNS that DTC is really showing effect and its positive effect on recruiting patients. So also when it slowly launched in the US, we will invest in DTC. However, we want to do this in a more selective way that we know that in line with the centers that we are opening understand that we call center of excellence that we can do really focused DTC investments driving patients to these centers resulting in an increased implant rate for Genio.

All right. Great. That's helpful. And then just on the cash balance. I think, you called out maybe 100 to 150 or so US reps potentially in the sales force pre-commercialization. I think you also called out cash balance gets you to towards the late end of 2024. Do those comments or does the cash balance getting you there account for potentially bringing on this sales force in the middle part maybe of 2024, or should we be thinking about any type of incremental investment in the cash position of the business ahead of that launch as well? Thank you.

Yes. No, no. And this is really a really interesting question and it's also a question that we are debating and talking. I think it should be -- I will start the answer on them. I'm sure that we can also follow in on this. In short, at this moment we are having a really healthy cash position that will bring us to end 2024. We know that the major inflection point is coming with the 12-month DREAM data readout in Q1 next year in 2024. At that moment, it's also I think clear that in order to prepare a real successful commercial launch in the US where we will be making a big splash when entering that we will also need to raise more money to finance this. Now what the exact numbers are and will be. I don't think this is the correct moment to disclose this, but we have currently a healthy cash position. We have a big inflection point coming up and we also know and we are preparing an aggressive pre-launch in the US trying to make a big splash when we enter. And therefore most likely we will be raising more money. But the exact amount again it's not this moment that we want to comment further on this. Loic, if you could add something please?

No. This is -- this is totally complete. So the cash burn until end of 2024 covers the -- all the pre-commercial activities. And since we are looking at the launch plan, the detailed plans and the phasing of those plans, this will be incremental investments.

Okay. Great. Thank you.

And thank you. And one moment for our next question. And our next question comes from Suraj Kalia from Oppenheimer & Company. Your line is now open.

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

We can hear you perfect, Suraj.

Perfect. Olivier, congrats on all the progress. So Olivier a number of questions have been asked. Maybe let me ask you a slightly different flavor. In Germany, what are the average procedure times for Genio? And is our math approximately right that we are --in Q2 we are talking about roughly one implant per site, or a little more than one?

Okay. So what we are seeing from implant procedure in Germany we are having -- we have seen a range that is varying between 45 to 60 minutes. So depending a little bit on the surgical technique, the handiness of surgeons but we see roughly that 45 to 60 minutes that is what it's taking the surgeons to do an implant procedure. Now when it comes to one implant by site, if you look at it purely mathematically, yes, you could come up with this calculation. However, the site that we are opening are not at the same state as a site that were opened before so we also have a variability between sites. There are sites that are doing 10 implants, there are sites and that are doing one or two implants. But our aiming going forward is also making an increase in overall implant numbers and to this one we calculate it further and that's what we are aiming for with our most experienced site that we can come with weekly implants or even multiple implants on weekly base depending on the overall availability that they're having.

Got it. So Olivier when you look at Germany I remember you had talked about a 50% market share by year end. I'd love to get the status update if possible on that? And Olivier as you think about launching in the US, how do you envision this hand-to-hand combat with Inspire? Do you think it will be determined by DTC spend? Do you think it will be determined by outcomes, feet on the ground, price differential? Just kind of give us some additional color on how you guys are thinking about the US market, especially.

Yes. And before I answer the question about German and the market share I would like to answer the second part of your question if this -- that is okay with you Suraj because I think you touched on something that is really, really important. And how can we differentiate with Inspire and how can we drive success in the US and going forward? So first of all, yes, we do believe and we are convinced that the product differentiation will convince the majority of patients to cruise for Genio over base major platform technology. That is our belief. That is what we are seeing. That's what we are seeing confirmed when we do independent market research. So we do believe that patients suffering from OSA will choose the less invasive technology, the safest technology, where you have for example the full body BMI compatibility, where you have one incision where you will always have access to the latest and greatest technology update without having to undergo a reoperation. That's already one thought. On the other hand, we also do believe that in going forward and in launching, the effect of DTC cannot be underestimated, because it's directly also linked to the patient choice of technology and we will also be investing in this. Another differentiating point is, when you speak to surgeons and you listen also with the bilateral stimulation effect and the option to also have the label expansion, treating CCC patients, which would make it for surgeons less cumbersome. We don't have to think about guys of a similar identification model to select or identify CCC. If you combine all these things starting with a clear product differentiation, with a patient acceptance ratio, with a less-invasive technology in combination with surgeons, who do not need to exclude…

Got it. And Loic, one last question for you, if I may. What do you anticipate is going to be the spend on ACCCESS, assuming it gets wrapped up by next year? Gentlemen, thank you for taking my questions.

Yes. So, a study like ACCCESS will cost around $50 million. And we will incur this year close to $4 million. So the remainder will be for next year.

And thank year-over-year. And I am showing no further questions. I would now like to turn the call back over to Olivier Taelman, CEO for closing remarks.

Yes. Thank you. And again, thank you all for joining. Thank you for the interactions we had and also the good questions. I would like simply to close by repeating what I was already saying, we are entering the most exciting time of Nyxoah being less than nine months away from US data DREAM readout. We are looking also in further expanding our European revenue and commercialization and of course with that hand-in-hand, we are further scaling up the organization. We are getting ready also from a manufacturing perspective. So, it's really all excitement at Nyxoah at this moment and we are really looking forward into the coming months and the end of the year. So thank you, all for participating and for your questions.

This concludes today's conference call. Thank you for participating. You may now disconnect.