Sedana Medical AB’s Year-end report 2023

Full year sales at upper end of financial guidance and an exciting year ahead

Fourth quarter 2023

• Net sales for the quarter totalled MSEK 44.5 (35.8), equivalent to an increase of 24% compared to the same quarter 2022. At constant exchange rates, sales increased by 18%.
• Gross profit was MSEK 31.0 (25.7) equivalent to a margin of 70% (72%).
• Earnings before interest, taxes, depreciation and amortisation (EBITDA) totalled MSEK -9.1 (-17.6), equivalent to an EBITDA margin of -20% (-49%). EBITDA ex-US for the quarter was MSEK -8.1 (-17.4) corresponding to a margin of -19% (-49%).
• Operating income (EBIT) totalled MSEK -14.9 (-23.2), equivalent to an EBIT margin of -33% (-65%).
• Net income for the quarter was MSEK -38.1 (-35.9) and earnings per share before and after dilution was SEK -0.38 (-0.36). The decrease in net income is due to a lower financial net compared to the same quarter 2022.
• Cash and short-term investments at the end of the quarter totalled MSEK 382 compared to MSEK 453 at the beginning of the quarter.
• Cash flow from operating activities totalled MSEK 8.8 (-22.6). The positive operating cash flow derives from received interest on cash and cash equivalents of MSEK 8.9 (3.6).
• Cash flow from investments in intangible assets totalled MSEK -41.5 (-27.3). Total cash flow from investment activities totalled MSEK -41.8 (27.3).
• Total cash flow for the quarter was MSEK -34.3 (-51.1).

January-December 2023

• Net sales totalled MSEK 153.9 (122.9), equivalent to an increase of 25% compared to 2022. At constant exchange rates, sales increased by 16%.
• Gross profit was MSEK 109.0 (86.1), equivalent to a margin of 71% (70%).
• Earnings before interest, taxes, depreciation and amortisation (EBITDA) totalled MSEK -43.0 (-83.1), equivalent to an EBITDA margin of -28% (-68%). EBITDA ex-US for the year was MSEK -40.1 (-80.2) corresponding to a margin of -26% (-65%).
• Operating income (EBIT) totalled MSEK -65.5 (-105.9), equivalent to an EBIT margin of -43% (-86%).
• Net income for the year was MSEK -59.6 (-73.5) and earnings per share before and after dilution was SEK -0.60 (-0.74).
• Cash and short-term investments amounted to MSEK 382 at the end of the period compared to MSEK 608 at the beginning of the year, of which short-term investments were MSEK 151 (0).
• Cash flow from operating activities totalled MSEK -38.1 (-115.4).
• Investments in intangible assets amounted to MSEK -168.4 (-137.0)
• In order to favor from better interest rates, investments in short-term deposits were made during the year. These amounted to a total of MSEK -465.4 whereof MSEK 312.4 has been repaid. Cash flow from investing activities thus totalled MSEK –322.0 (-137.8).
• Total cash flow for the year was MSEK -364.9 (-254.7). Adjusted for the allocation of cash to deposits, total cash flow was MSEK -211.8 (-254.7).
• The Board of Directors proposes that no dividend be paid for the 2023 financial year.

CEO comments

Full year sales at upper end of financial guidance and an exciting year ahead

Reflecting on the progress we have made during the year 2023, I am pleased to see that Sedana Medical stands as a much stronger and healthier company today compared to a year ago: we have returned to consistent sales growth after the challenging post-Covid period, we have taken decisive steps towards reaching profitability in our ex-US business, and we are making progress towards our launch on the US market - our single largest growth opportunity and a pivotal milestone for the company.

Continued sales growth

We report net sales of 154 MSEK for the full year, which is at the upper end of our financial guidance of 145-155 MSEK. Excluding exchange rate effects, we have grown the business 18% in Q4 and 16% for the full year, translating to 24% and 25% in SEK, respectively.

In Q4, ICUs in our main market Germany saw approximately 9% less patients than the year before. Despite that market headwind, our German business grew by 9% in the quarter and 14% in the full year (15% and 23% in SEK respectively). Overall, we were able to increase the market penetration of our therapy from 10% in 2022 to approximately 12% in 2023. The growth is a result of our strategic focus to continuously enhance field force effectiveness, by maximizing the time we spend with our customers and to help them identify more patients likely to benefit from the compelling clinical benefits of inhaled sedation.

Our other direct markets achieved a growth rate of 54% in Q4 and 56% for the full year (62% and 67% in SEK). The robust growth has increased the share of these markets in our total sales from 18% in 2022 to 24% in 2023. Spain continued to be the main growth engine, and with the pricing and reimbursement approval and the subsequent launch of our pharmaceutical Sedaconda (isoflurane) in Q4, further growth is anticipated. Our other markets are also going into 2024 with a positive momentum. After the MHRA approval in Q4, we are finally able to actively promote inhaled sedation as a registered treatment in the UK. And with several important university hospitals as new customers and promising tenders underway, France is also poised for growth in 2024.

For the first time in 2023, our distributor markets showed positive growth in Q4. Sales were 18% higher than last year (25% in SEK). To counter previous sales declines, we have revamped our distributor model, established a new leadership team and intensified our focus on key partners with the highest growth prospects.

Decisive steps towards ex-US profitability

2024 will be an important year for Sedana Medical as we aim to reach EBITDA break-even in our ex-US business during the year. This would mark a significant achievement, representing the first time in the company's history, with the exception of Q1 2020, when the extraordinary Covid-related sales resulted in a slightly positive EBITDA.

Continuing on the positive trajectory, our full-year EBITDA loss excluding US-related costs amounted to 40 MSEK, which is half of the 80 MSEK loss recorded in the preceding year. Notably, the remaining loss in Q4 was 8 MSEK, with 2 MSEK attributed to severance payments related to further organizational streamlining.

The consistent improvement in our bottom line quarter after quarter underscores our commitment to financial resilience and our clear aim to reach ex-US break-even during the year.

Progress in the USA

We estimate the market potential for our inhaled sedation products in the United States to 10-12 BSEK. This figure is approximately three times greater than the combined market potential of our current direct markets in Europe. Several factors contribute to this significant opportunity, including the larger population size, a medical practice more in favor of intubation compared to Europe, and an overall attractive pricing environment.

Beyond the evident clinical benefits for patients, the key determinant of a medical product's success in the US market lies in its reimbursement status and impact on customers' economics. In the past quarter, we conducted an in-depth analysis of the US reimbursement landscape and how our therapy aligns within it. Based on these insights, we are now even more optimistic about the commercial success of inhaled sedation in the US.

Although a variety of inpatient hospital payment mechanisms exist, the DRG (“diagnoses-related groups”) system is the dominant one for ventilated patients in the ICU. Under the DRGs, a hospital is paid a preset rate based on the patient’s diagnoses and procedures. For mechanically ventilated patients, this will in most cases mean that hospitals will see a tangible positive financial effect if patients wake up faster, spend less time on the ventilator and leave the ICU faster – all of which are benefits of inhaled sedation, which we are hoping to prove in our US clinical trial.

Moreover, heightened awareness of opioid risks in the US, exacerbated by the opioid crisis with over 100,000 drug overdose deaths annually, positions our inhaled sedation therapy as a compelling future alternative. If our US study confirms the significant reduction of opioid use observed in our previous clinical studies, we stand to benefit from the widespread preference for opioid-sparing therapies.

The benefits of inhaled sedation are also well aligned with existing treatment recommendations, such as the CDC’s “Wake up and Breathe” Collaborative, which is intended to get patients off the ventilator sooner and improve recovery time, opening up opportunities to get well positioned in treatment guidelines.

Our timeline with regards to the US launch remains unchanged. We are working towards an NDA submission in the first quarter of 2025, positioning us for a potential launch in 2026, assuming the FDA adheres to their standard 10-month review time. INSPiRE-ICU 1 has now recruited more than 200 of 235 randomized patients and INSPiRE-ICU 2 is following slightly behind. We will apply for different benefits we may be entitled to, based on the Fast Track Designation that FDA has granted us. If successful, this could mean an acceleration of several months. However, it's important to note that FDA will assess our eligibility for these benefits only after our NDA submission, following their standard protocol.

With 382 MSEK in cash and short-term investments and a plan to reach EBITDA break-even ex-US during 2024, we assess we have funding in place to achieve US approval and launch in the US market.

An exciting year ahead

Coming out of a successful 2023, we have set ourselves ambitious targets for 2024: reaching an all-time-high in sales, delivering EBITDA break-even ex-US during the year, and receiving top-line data from our INSPiRE-ICU program in the US, which could open the doors to the single biggest growth opportunity of our future. I am excited about the prospects of this year and look forward to updating you on our 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) Thursday February 15, 2024.

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: https://www.finwire.tv/webcast/sedana-medical/year-end-report-2023/

If you wish to participate via teleconference: +46 850 539 728. Meeting ID: 867 8317 2727.

For additional information, please contact:
Johannes Doll, CEO, +46 (0)76 303 66 66
Johan Spetz, CFO, +46 (0)730 36 37 89
[email protected]

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 February 15, 2024 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.