Good day, everyone, and thank you for standing by. Welcome to Nyxoah Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I will pass the call over to your first speaker today, Mikaela Kirkwood.

Thank you, and good afternoon and good evening, everyone, and welcome to our earnings call for the second quarter and first half of 2024. 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 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 listed description 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 20, 2024. 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 and first half of 2024 earnings call. 2024 is a pivotal year for Nyxoah with an increased focus on preparing for U.S. market entry. In March this year, we announced of DREAM U.S. pivotal study achieved its primary endpoints and demonstrated the Genio at the potential for best-in-class outcomes for OSA patients. Subsequently, our regulatory team filed in the fourth and final module in our model of PMA submission, which has set the stage for FDA approval as early as the end of 2024. We strengthened recently our balance sheet with over EUR 85 million in new capital raised, which extends our cash runway into mid-2026 and are actively building our U.S. commercialization organization led by our recently hired new Chief Commercial Officer, Scott Holstine. Commercially, we reported first half 2024 European sales of EUR 2 million, representing an increase of 29% from the first half of 2023 and ended the second quarter with 55 active implanting accounts in Germany. To recap DREAM, the study has 2 primary endpoints of AHI respond rate criteria at 12 months and ODI respond rate at 12 months. At baseline, subjects had a mean AHI of 28 and an ODI of 27 and a body mass index of 28.5. On an intent-to-treat or ITT basis, the DREAM study shows an AHI respond rate of 63.5% with a p-value of 0.002 and an ODI respond rate of 71.3% with a p-value less than 0.001. With these strong results, the DREAM study met its primary endpoints. Additionally, subjects demonstrated a median 12-month AHI reduction of 70.8% with similar AHI improvements in supine and non-supine sleeping positions. The safety results were favorable with 11 serious adverse events or…

Thank you, Olivier. Good day to everyone, and thank you for joining us today. Revenue for the second quarter ended June 30, 2024, was EUR 780,000. Total operating loss for the second quarter was EUR 13.3 million versus EUR 11.9 million in the second quarter of 2023, driven by an acceleration in commercial investments in U.S. as well as in Europe. During the second quarter, we raised over EUR 85 million in gross capital through to EUR 48.5 million equity offering and a loan facility agreement with the European Investment Bank for EUR 37.5 million. This extends our cash runway to mid-2026. As of June 30, 2024, cash and financial assets totaled EUR 78 million. This excludes the first EUR 10 million tranche of the EMV launch, which drew down in July. Finally, our monthly cash burn was EUR 4 million for the quarter. This concludes the formal part of our presentation. Operator, I will turn the call over to you to begin our Q&A session.

[Operator Instructions] And it comes from the line of Suraj Kalia with Oppenheimer.

Hi. Loic, Olivier. Can you hear me all right? Pardon the background noise, it's raining pretty heavily here. So Olivier, congrats on all the progress in the modular PMA submission. Let me turn the direction to Germany, Olivier, if I could. It's been more than 4 quarters you all have been in Germany. What are the lessons learned from Germany? Is that translatable to the U.S.? Is it or has it been a market that has met your expectations? And maybe if you could talk about other discussions about supine versus non-supine in Germany?

Okay. Thank you for the question, Suraj. So first of all, when we look at the journey of launch goals were to demonstrate proof of concept by, one, breaking the monopoly that has currently hypoglossal nerve stimulation; and, two, expanding the hypoglossal nerve stimulation market. Those 2 objectives we have accomplished. Now all things, to your point, where we see the European experience is showing our ability to take share. Just as a reminder, we had 27% German market share for the second year of the launch. I think that is also something that exceeded our expectations. In mind, the German accounts of implanting Genio and we estimate that we go minimum above 30% and in some of those top 10 we are the market leader after 24 months. So that is also a very complete learning that will give us -- that is giving us confidence on the U.S. launch. And also the fact that we see in Germany based on independent survey data, but also done and talking in attracting the patients that we see that there is over 20% of it also nerve stimulation candidates that are declining a base major due to the invasiveness of the procedure on the system. And therefore, Genio can further expand the market. So, so far, so good. I think those are the learnings. That being said, let's also be very open on this. Germany still is a very small revenue market and there is still the potential for quarter-to-quarter variability, driven by a limited number of accounts implanting and implant volume. But if you look at -- and we feel that it's more accurate looking at our performance in the first half of the year, where we still are up to almost 30% versus the first half. So I do think, overall, we are pleased with what we see in Germany. We take the lessons helping us prepare for a successful U.S. launch. And also as a last reminder, the positive feedback in Germany since we were able to release the DREAM data is definitely helping us in driving future growth. So I think that was the first question. Yes.

And Olivier, for my follow-up question. Maybe I missed it in your prepared remarks on the status of the ACCESS trial. And also for the U.S., as you plan out for your commercial launch, the 31 sites that you referenced, how would you characterize the volume that these 31 sites do, and the rest you would need?

Yes. So the 31 sites to start with the end of your question, those are all high-volume implanters or implanted that of what we call the Tier 1 AG&S implanters in the U.S. So that is the first part. Second part, when it comes to ACCESS. So we continue to make progress with the study. We are not disclosing the number of patients implanted, but that said, we plan to close implants by the end of 2024. I do not want to go back to Germany on this. But as you know, in Europe, we have see integrated in our level and the response that we are getting there is that also physicians are confirming similar results for CCC patients as well non-CCC patients. So this also is giving a confirmation that bilateral simulation is a key differentiator when it comes to treating successfully CCC patients.

It comes from the line of Ed White with H.C. Wainwright.

Good afternoon. Thanks for taking my question. Olivier, maybe you could just tell us about your U.S. reimbursement strategy?

Yes. No, definitely. First of all, I'm really excited that we are having these questions because it also means that we are getting extremely close to launching in the U.S. Now as I already mentioned in the previous earnings call, we are partnering with the American Association of Otolaryngology, the AAO, which will make a formal recommendation on established what they call bridge category 1 CPT code for use at launch. And I think this is so important that at launch, we have of CPT codes in place. That is not the final code, but it's the bridging code. And in parallel, of course, we are pursuing a geo-specific CPT code or time. But based on precedent, we know that this likely will take a little bit longer, even up to a couple of years. No. That being said, at launch and I keep coming back to this and assisting doctors will submit Medicare claims using the bridge category 1 CPT code, which is currently covered by all Medicare administrative contractors on the MAX. Reimbursements will be in line with current AG&S payment rates. And I think that this is the most important update for today. No, to be really complete and we have to give credit to our competitors because they have done a terrific job educating the commercial payers about the benefits of hypoglossal nerve stim resulting in all having AG&S coverage policies in place. We have enrolled in the FDA only payer feedback program and we are conducting payer advisory interviews. We are already engaged in an informal discussion with the payers and we expect to be able to leverage those policies at launch.

It comes from the line of Jon Block with Stifel.

Hey, everyone. This is Joe Federico on for Jon Block. Thanks for taking the question. I guess just to start maybe on the revenue result in the quarter. That was a bit below what we were modeling and that follows stronger revenue results in the fourth quarter of last year and last quarter. During that time, your competitor was also having some regulatory dynamic issues. And I just wanted to ask for some additional clarity. Now that they've kind of sorted that out this quarter, rather took a step back, do you think that played a role in kind of the revenue dynamics for this quarter?

Yes. So first of all, let me start by saying that competition is good for the market. It's always nice to have 2 options to choose for physicians and for patients. And it also keeps everyone sharp and really making sure that we can provide the latest and greatest technology and then upgrade to patients. Well, I have to repeat a little bit what I was offering to Suraj. Germany still stays overall a very small revenue market if you look at the total AG&S market. So that is one aspect. And therefore, potential variability driven by limited numbers of an implant volume is the case and it's a fact. That is correct. Now going back and assuming that because of product shortage of issue with competition in Q4, this would have strengthened our Q4 results. I think it's not completely true because if I'm well informed, I do think there was quite some inventory of products in Germany, especially with the top accounts to continue having also competition and counting in Q4. Overall, we see that the market of AG&S keeps growing strong. I think that's a confirmation of all this. And of course, without providing new guidance, it's also clear that we anticipate revenue in the second half of '24 to increase over the second half of '23. But as mentioned, quarter-to-quarter sales are hard to forecast. But given the process in the third quarter just for also the collaboration with ResMed on identifying new patients that are including their CPAP and actively converting them, it's something that maybe took a little bit longer than we expected, but we do see the results and we are more than excited also to see the impact of this on our revenue in the second half '24.

Okay. Great. That's helpful color. And then just a quick follow-up. You had said that FDA approval for Genio could come as early as year-end '24. Is your expectation to get approval by year-end '24? Or could that maybe flip into early 2025? And then could you remind us just the number of sales reps you're targeting upon the eventual U.S. launch and maybe training centers in the first 12 months?

Yes, definitely. So to your point, we have more of P&A. You know that after you submit the fourth and final module, that is the 180 days time clock that is currently activated. I can already share that there is a lot of activities from FDA that we have very positive engagement with them, so forth. And if you then do simply the math, we should be good to have FDA approval by the end of 2024. So we are still very confident that this will happen. However, I want to be a little bit prudent in the sense that I'm not controlling FDA time line completely. So that's why sometimes we're also mentioning up to early '25. But if you just stick to the math, we see the interaction, all the work has been done, the files have been submitted, everything -- interactive reviews, ongoing site visits taking place. So we are fairly confident that by the end of this year, we could have FDA approval. No, the second part of the question is like how would we launch. I think I already elaborated a little bit how important it is for us to work with territory managers fully focused on revenue and patient referral. And next to them, we would have field engineers fully focus on high-quality implants, sleep specialists fully focused on post-implant patient follow-up and titration. So numbers, we will start and we will make our approach scalable since we are focused on the Tier 1 accounts in the U.S. on the high-volume side and we will start with 15 territory managers. They are under the lead of one sales vice president that we already have onboard. Then all 15, there will be another 15 in total field engineers and field specialists focused on the patients. So in summary, our sales leadership is in place. We will go for a scalable approach with 15 territory managers only focused on revenue and driving new patients and they will be supported with in total 15 field engineers and 3 [inaudible].

And it comes from the line of Ross Osborn with Cantor Fitzgerald.

Hi, thanks for taking our question. Starting off, I would be curious to hear how your manufacturing ramp efforts are progressing ahead of U.S. launch. Do you believe you'll have sufficient scale to meet demand in 2025?

So the short answer is yes, we do believe we have significant demand. As you also know that we have currently of Genio 2.1 version. That is the one that we are using commercially in Europe. And it allows us to have stimulation trimming to be adjusted at small increments to provide patients sensitive to stimulation more options. And then also of patients' daily feedback using an app and even the autonomy to adjust stimulation. That is our current product that we have and that we are using commercially in Europe and that we also use currently in our studies. Now we already have our 3.1 generation with ceramic encapsulation of the internal component, making Genio an implant for life, a more ergonomic activation chip that will contain the coil, improving gross margins at eco-friendliness and a patient hub, which will be the base for close connectivity and advanced feedback. With this product, we are planning to launch in the U.S. FDA approval and also the area manufacturing lines set up in the U.S. with the service provider and also in Europe and going forward so that we have also derisk to our manufacturing and increased our capacity in the U.S. and also outside of the U.S.

Okay. Great. And then one modeling question. Looking at OpEx and anticipating an inflection ahead of the U.S. launch, should we think of that as more of a 3Q or a 4Q activity?

We -- so yes, if you look at the cash -- the shape of the cash flow, we expect the -- an inflection that will start in Q3 because as Olivier was saying, we have started to recruit the management for the U.S. organization. And we will have the first rate. So yes, the cash burn will start to increase in Q3 and continue to increase in Q4. So it will be a steady increase that we expect in the second half of the year before the sales start in Q1 next year.

Okay. Great. And then lastly and I realize it's early on, but following the hiring of Scott, how do you shape your commercialization plan for the U.S. launch?

So next to Scott, we have also hired a sales leader. We have hired our marketing leader of reimbursements of market access leaders. We are finalizing a search for a human resource U.S. or global leader. We are also looking at nonoperational director. And then we also started actively recruiting our salesforce. And what really, really I -- gave me great confidence is just seeing the high number of spontaneous applications that we are getting. And I do not want to, I mean, start throwing in numbers that it's really a high number of people reaching out that want to be part of the Nyxoah team that we'll be launching in the U.S.

Our next question comes from the line of David Rescott with Baird.

Great. Thanks for taking the questions. I want to clarify a couple of pieces. I heard some numbers being thrown around and I've been up around calls as well. So I want to make sure I'm hearing everything correctly. I thought in the last call you had talked about maybe the 75 to 100 higher-volume centers. Again, I may have totally heard it wrong this quarter, but I heard the number 31. I kind of called out there, I also heard you're looking to go after where about 85% of the volumes in the U.S. are occurring. So can you just help kind of clarify what may be the near intermediate and then kind of longer-term go-to-market account opening strategy is in the U.S.?

Apologies if things were not completely clear, but let me try to make it clear. So the Tier 1 accounts that I was referring to were the surgeons have participated in our usability study and have provided a feedback. Just as a reminder, they were trained on the product from an autonomic perspective, from a implant perspective in both animal and cadavers. And then within 24 hours, they have to reproduce an implant in the cadaver independently. And their overall feedback was extremely positive and they were really waiting and asking when this technology would be available for them to be used in their accounts. That's the 31 number. The other numbers I was referring to, I'm always saying we focus on Tier 1 accounts. If you look at the Tier 1 accounts in total below representing 85% of all hypoglossal nerve stimulation revenue, we are talking about 200 to 250 accounts in the U.S. Out of this number, we will be focusing on 150 from the beginning. We will be doing this in a scalable approach, meaning with our 15 sales rep in quarter 1 of launch, they will go after the first, let's say, 50 to 75 accounts. And every quarter, the number of accounts will increase until we reach also the 200-plus Tier 1 top implanting accounts and in parallel of course, we will increase also our number of territory managers, field engineers and sleep specialists. I hope this is more clarifying your question.

Yes. That's great. Maybe just on -- you heard some of the comments on the P&L, the cash balance where you're at today and how the ramp maybe should look over the next couple of years, that mid-'26 cash runway. Have you kind of thought about what that longer-term kind of breakeven profit numbers look like? I know it's still pretty far away, but just wondering if we were to model out over the next three to four years, how we should be thinking about the rest of the P&L?

Thank you for the questions. As discussed during the call, our U.S. launch strategy will be focused at scalable. We will initially target the top AG&S account and selectively invest in DCC to drive patient referrals. With our commercial structure, the territory manager will be supported by field engineers and field sleep specialists, which will enable a highly productive commercial organization. That's what we have in mind. So with this approach, we anticipate achieving profitability at around $250 million of sales in the U.S. So that's what we have in mind.

And I think in addition, 2 comments, if I can add. For us, it was crucial also to have a healthy balance sheet that is fully standing the U.S. launch. We have this because of the acuity base in combination with the loan facility, we are now having more than EUR 85 million added to our existing balance sheet. I think it is also giving us some contracts to fully focus on the execution of the launch.

And it is from the line of Adam Maeder with Piper Sandler.

This is James on for Adam. Just one. I wanted to give you guys the opportunity to comment on the SURMOUNT OSA study that was recently released at ADA. We were just curious to get your reaction to that data? And if there's been any change to how you guys are thinking about GLP-1s and the impact on your business? Thanks.

We are saying we welcome GLP-1s overall because it will definitely help increase also the total OSA market and patient numbers to treat. What we learned if I go a little bit more in depth is that if we look at the data, we see a placebo-adjusted 50% reduction in AHI and an 80% reduction in BMI coming out of the SURMOUNT OSA data. The recent data demonstrate in the placebo-adjusted reduction in OSA, severity and magnitude of OSA reduction that was below those shown by hypoglossal nerve stimulation, I think that's also very important to point mode. And then last, both published data and commentary from the leading KOLs indicate that to have the highest hypoglossal nerve stimulation response or therapeutic effect, it is best to lower BMI and bring it below 35 than to treat high BMI patients. And in that perspective, the SURMOUNT data reinforce our view that GLP-1s will increase the hypoglossal nerve stimulation patient funnel as in the GLP-1 only on AHI went from 50 to 22 with a BMI from 39 to 32 and that gives us great confidence, as I was saying in the beginning and we welcome therefore also GLP-1s into the market.

Thank you. As I see no further questions in the queue, I will conclude the session and conference for today. Thank you all who participated and you may now disconnect. Thank you, everyone.