Hello, my name is Oscar Bergman. I'm a life science analyst here at Redeye. At Redeye, we are covering some 150 companies in the life science and tech field. In addition to being one of the market leaders in that field, we also provide other services such as Certified Advisory and Corporate Finance Services. Today, we will only be focusing on OssDsign, an exciting company in the cranial field, so to say. Welcome, Morten. Thank you very much. Please proceed. Thank you. Good afternoon, everyone. Welcome to OssDsign's Strategy Update. As always, when we do these presentations, the disclaimer. What I really want to share with you today is to show you how we can leverage the foundation we've built to generate future value creation. I also want to take a step back and do a little recap of why the acquisition of Sirakoss was a transformative first step. I want to show you today how attractive the markets will be and are. I'll also talk to some of the unmet clinical needs that we are addressing as a company. Last but certainly not least, which is the point of today, I want to talk about the future of OssDsign and how our new strategy, which we call ASCENT25, will take us into the future. Just in case there are any newcomers to OssDsign out there, OssDsign is a Swedish company. We operate in the orthopedic industry. We are headquartered in Uppsala, and really what our focus is regenerative bone solutions. We're about 50 people, give or take, and we operate in 10 markets globally. Historically, we've seen about an annual growth rate of 50%. We've sold more than 1,000 of our main product called Cranial PSI, and we have a full patent estate. All the markets that we operate in, we operate in fully reimbursed markets. The history of OssDsign is really about surgeons and scientists together addressing unmet clinical needs. The company was founded in 2011, started clinical exploration around 2014, and then from 2016 and onwards, it's really been around commercialization, and it's peaked in the last couple of years with an IPO in 2019, and in 2020 with the acquisition of Sirakoss, and we also hit the very important milestone of 1,000 Cranial PSI implants. Throughout these years, we've managed to build a very solid commercial infrastructure that means that we are participating and present in all the key markets you want to be in as a medtech player, not least in the U.S., where we've spent actually a lot of time during the pandemic on keep building the infrastructure so that we now have not only a direct subsidiary which we operate, but we also work in a hybrid model with, at the moment, around 60 sub-distributors and agents. In addition to that, we also have main distributors in Asia, in Europe, we are direct in Germany and the U.K., and agents and distributors in the southern part of Europe. Let's talk a little bit about the market we operate in. The orthopedic industry and the spaces we are in is a very attractive place to be in when you look at the macro trends out there. The macro trends are really around an aging population and an increased life expectancy. What does that mean for OssDsign? It means that as we look into not only the first or the second or the third year, but actually way beyond that, we are expecting to see a continuous growth of volume. As we grow older, we get degenerative diseases, and we need treatment. When you look at the orthopedic industry overall, it's very clear that the U.S. represents by far the largest part of the market, followed by EMEA, Europe, with almost a fourth. U.S. importance to succeed for OssDsign cannot be under-emphasized. If we talk a little bit about Sirakoss, what is Sirakoss? For OssDsign, Sirakoss is another growth platform, and therefore, we believe it was a transformative first step. Not only did it provide access to a large and fast-growing and profitable orthobiologics market, it also broadened our portfolio with products that are very scalable. And it also allows us to use the broad commercial synergies which we think we have, not only in terms of our direct sales force, but also certainly in terms of our sales network that we have, in particular in the U.S. Also from an organizational point of view, this is the space that a number of us have operated in before. We know it well. As we also said, our focus with the Sirakoss acquisition will be on the spinal fusion market. If you look at the size of it's very clear that the biggest opportunity is in spine, and actually the vast majority of that opportunity is in the U.S. What it means for OssDsign is that relative to where we were before, with a pure focus on cranio-maxillofacial, so CMF, it now means that we are operating with a 5 times bigger addressable market. It means, as you think about OssDsign right now, we'll be covering approximately 15% of the orthopedic industry, we'll be present in CMF, and we'll be present in orthobiologics with the acquired synthetic bone graft. It gives us an addressable market in excess of $3 billion. Both segments are actually fast-growing. It's the fastest-growing segments within the orthopedic industry, around 7%. They are both very profitable, but clearly also orthobiologics and the bone graft business is at the very high end of profitability, in particular when we look at gross profits. Enough about the market. Let's talk about some of the clinical needs that we are addressing. If we start with the CMF business. There are many people every single day who get head injuries in some shape or form. It could be a trauma to the head, it could be a tumor, it could be other things. They need a surgery, and unfortunately, what we see in the literature is that a lot of implants actually have to be removed. Literature ranges from anywhere from 7%-15%, but broadly speaking, more than 10% needs to be removed. That is a very clear unmet clinical need that we are addressing. If you look at the orthobiologics business, which we intend to use it for spinal fusion, you will see that almost one-third. Of course, there are many different kind of clinical data out there, but up to one-third, and I think the common denominator is probably 20%-25%, don't achieve the clinical outcome that you want. You come into surgery because you have back pain, you get spinal instability, and what you want is something, what we call a fusion, so it stabilizes your spine. Up to one-third, that doesn't happen. Those are the unmet clinical needs that we are addressing as a company. The way we are addressing it right now is with the portfolio that you see here. We have our Cranial PSI, which is clearly driving most of the sales today, cranial accessories, Facial and CranioPlug that we, in particular in the U.S., just launched before the pandemic came in. For orthobiologics, it will be around the synthetic bone graft and the putty, which is what you see in the picture, the bone graft delivered in a syringe. What is it we've shown with our technology platforms? We'll spend some time on that. If you look at what we've demonstrated, already back in 2018, there was a study made by the Karolinska University Hospital. What that showed is that when using OssDsign's Cranial PSI, you have an explantation rate, so a removal of 2%. That 2% needs to be seen relative to the 10%-15% that I talked about earlier. It's a very significant delta between what the market average is and what we're proving. That data we just published in the beginning of January in our post-market surveillance. We have data with more than 1,000 patients across all geographies in the world, covering more than 180 hospitals, and we are still able to demonstrate that that number is only 2%. I think it's fair to say that we are, and we have been setting completely new industry standards when it comes to cranial reconstruction. We have a growing body of peer-reviewed evidence, actually around 10 now, all talking to the same thing. If you look at our other technology platform, which is the orthobiologics technology platform, that is, of course, not commercialized yet. Let me walk you through some of the things we are seeing in that market. Today, there is really only one product out there that generates the fusion and the clinical outcome that you want as a surgeon, and that is something called BMP-2 or INFUSE in the U.S. It's a Medtronic product. It's not a synthetic bone graft. It also costs anywhere from SEK 4,000-SEK 8,000 per surgery. It's an extremely expensive product. Recently there has also been some adverse incidents at least, which means the surgeons are a little bit skeptical of using it. Why is that interesting? It is interesting because when you look at the preclinical data on the Osteo3, so the Sirakoss product that we acquired, you will see that after 12 weeks, actually, the product that we demonstrated showed an equivalent fusion rate in the Boden model, which I'll talk to you in a second, but it showed an equivalent fusion rate similar to that of BMP-2. Very significant, very promising preclinical data. We take that preclinical data and you compare it to the other synthetic bone graft that are out there in the market. In human beings, they typically perform around 80%, as we talked about 80% fusion. When you test it in the Boden model, the Boden model is a discriminating model, it is a rapid model, which means that you're really stress-testing your product. What you see out there in the market today in that preclinical model is that other synthetic bone graft actually only fuse 25%-50%. What the Sirakoss product, Osteo3 showed is that we're getting closer to 100% already after 12 weeks, but certainly after 26 weeks, it's 100%. Right now, the preclinical data we have, which we will be using when we commercialize the product in the second half of this year, means that we can demonstrate in a preclinical model that we're not only outperforming what has been out there in the market, but we are also demonstrating results that are on par with the best product out there called BMP-2. Very promising data. As I said, it's only preclinical, but it's certainly enough to commercialize the product. To sum it all up, what I believe that OssDsign has, which is the platform we will use to think about the future and to build the future on, is a proven technology platform that will allow us to drive innovation. It is a strong sales engine, it's a strong footprint that will allow us to commercialize products, and it is an experienced team also well beyond just the CMF focus that the company historically has had, that will allow us to build a successful business. That's really the basis. That's where we're coming from, that we will be using going forward. Over the last month, we've spent a significant amount of time on conducting a strategic review of the business and where the business should be going in the years to come. That means we've developed a new strategy for OssDsign called ASCENT25, and I'll walk you through it now. Essentially, the strategy will take OssDsign from being a niche-focused player in CMF to a company that will participate across three different orthopedic segments, and it will have five very clear strategic priorities in the years to come. The path to that ambition means that when you look backwards, as I said, 2018 to 2020, we've spent the years on building the platform. The next three years are really going to be around expansion and investment, and it's going to be expansion and investment on the portfolio, on our U.S. footprint, and it's going to be expansion and investment in clinical, both trials and registries. Then, as we look further into the future to 2024 and 2025, we believe that's where we're going to have the scale. In a very meaningful way, we can start addressing profits and cash flows in a completely different way than we will be doing over the next years, which is really, as I said, around investment. It also means that we've set a new financial ambition. Of course, in the middle of a pandemic, it is somewhat difficult to try to predict about the future. We've set an ambition for ourselves, which is to deliver between SEK 300 million-SEK 400 million in net sales by 2025. We've also set an ambition for ourselves to become cash flow positive from operations by 2024. Those are the two financial ambitions that we will be striving for as a company. We've also set five strategic priorities for the company. The first one is win in the U.S. What does that mean? It means that we are going to disproportionately direct investments towards the U.S. market. It's going to be around increasing our footprint and our sales coverage. It's going to be around accelerating our surgeon engagement and our key opinion leader activities in general. Those will be the biggest focus areas for us. Of course, with Sirakoss, which we'll commercialize and expect the first sales in the second half of this year, we need to build the orthobiologics business. We'll be investing and focusing very heavily on driving surgeon ambassadorship. We also need to extend the portfolio beyond what it is today. Of course, which you'll hear me talk a little bit about later, we need to make some very meaningful investments in clinical trials and registries within that business. Number three is around the portfolio. I said today, we are seeing a large share of our sales on our Cranial PSI. That's something we want to change. We will be driving much more innovation in the portfolio, both in terms of developing and using the standalone CMF technology platform or the orthobiologics technology platform. We also see very meaningful ways of combining that, in particular as we have an ambition to also enter the spine segment by 2023. Number four is around clinical superiority. Clinical will be a major investment area for OssDsign in the years to come, and it will be centered on investments in more preclinical trials, in clinical trials, and in clinical registries. In particular, clinical registries in the U.S. The fifth priority will be driving operational efficiencies. We think we can do better in terms of bringing down costs and therefore getting a better gross profit margin in the company. We also know that delivery time to our customers is very important for them. We are also going to set ourselves new targets for bringing down the lead time, which we of course expect will translate into more sales. As we are doing that and as we are scaling the company, of course, we need to keep thinking about and putting measures in place to drive increased robustness and reduce vulnerability as we get bigger and bigger. Three segments will be playing in CMF as we are in today. We'll enter orthobiologics in 2021, later this year, and we have an ambition to also enter the spine segment 2023, and we're going to do that by executing on those five priorities that you see here on the screen. When you focus a company, in the case of OssDsign, it means focusing the company on where we see synergies. We see a lot of synergies in serving neurosurgeons and spinal surgeons. That's where we've built credibility, that's where we are present, that's where we have relationships, that's where we can use our sales network. When you do that, it also means that there are certain things that we are engaged in today that may not have the same fit as we think into the future. For instance, we demonstrated that we can use the technology platform we have, and we could create similar outcomes in the oral cavity to use for dental surgery. That may still be something that can be explored from a technology point of view, but the fit to our business in terms of OssDsign being the ones that actually will commercialize it and enter the dental market, that's not something really that we see. We don't believe that we should be the ones commercializing that, but we may actually start to engage in dialogues. It could be someone else. When it comes to Facial PSI, that has been a product that has been much discussed over the years in OssDsign. What we are trying to do with the Facial PSI is really to help surgeons, because they have no good solution out there. We have tried to help them to the best of our ability, and it's gone quite well, actually. It also means that we have served many different cases, many different types of customers. We've tried to solve many different indications. If Facial PSI is going to continue in the portfolio of OssDsign, we need to have a much clearer line of sight to a product that can be scaled, a product that is targeted towards certain indications and customer groups. Right now, that's not the case, so we will be reassessing the potential and the clinical usage of that product. We also do that to really focus on the things that matters, on the things that we believe can drive significant value in the company in the years to come. We see in particular three different areas where that is happening. Regulatory approvals, as you can see, we're going to do a 510(k) update on our Cranial PSI. We're going through MDR right now. We also expect to get our cranial accessories approved in Japan. Next year, U.S., and Japan, we're also going to get more regulatory approvals, is our expectation. From 2023 and onwards, that's where we expect to take our synthetic bone graft product and actually take it into Europe and Japan. In particular, around clinical data, that is an area where we expect to keep driving a lot of value out. Not only are we going to continue our cranial post-market surveillance, which is now more than 1,000 patients, and we will keep building that cohort over the years to make it more and more robust. We are also going to start a number of clinical trials and preclinical trials. Our CranioPlug prospective trial, which we're going to start this year. As I also said on the Sirakoss product, we've seen a potential on osteoinductivity, and we think that warrants that we actually look at it from a preclinical study. We're also going to start that. Today, there is an extended clearance on the Sirakoss product, Osteo3, which means that it is mixed with bone graft. We also want a claim that it can be used as a standalone. That we're also going to start. We're also going to do our first clinical trial, first-in-human clinical trial, on the Osteo3 product. A lot of products, some of which we'll be able to report on this year, some we'll be able to report in 2022. Then we are also in planning mode for a larger, more comparative study, which of course is going to take longer, and it will take us into probably 2024 before we can report on it. We do want to have and see the first clinical trial and the outcome of that before we get fixed on exactly how that comparative study should be set up. Equally important, we also this year are going to set up a cranial registry in the U.S., and we're going to set up a bone graft registry in the U.S. Why is that interesting? Well, registries allow us to do many things. Many of you may know the importance of the Swedish Hip Registry when you look at hip arthroplasty worldwide. It was the first registry that was done, and the importance worldwide has been very significant. We also want to set up a registry on both cranial in the U.S. and also on the Osteo3 on bone graft. That will allow us to do two things. We're going to get time series data, so maybe this year we'll already get three-month data on the first patients, and then 12 next year and 24. What it will also allow us to do is to build a base where we can mine that data, which means we know, for instance, that surgeons have particular problems when it comes to spinal fusions, when it comes to smokers, when it comes to diabetics. Collecting all this data will allow us to really slice and dice and learn and publish very meaningful data. Not necessarily peer-reviewed, but certainly in white paper format. Of course, we're going to have some commercial milestones. At the end of this year or the second half of this year, we expect our first orthobiologic sales. As I said, we are exploring ways to enter the spine market in 2023. As I also mentioned, we have a financial ambition of becoming cash flow positive in 2024. When I look at the future of OssDsign now, I see quite a different journey in the past. Also, a more focused journey, focused on neuro and spinal surgeons that allows us to address their needs in CMF, in orthobiologics, and in spine. We have five very clear priorities that will allow us to keep driving more and more value in the company, as you see up here. I think with that was all for me right now, and I think we'll go to a Q&A session. Thank you, Morten, for that presentation. I think I will start the Q&A session with a question about the equity issue that you had this morning. Could you just give some sentences on that? This year, in connection with the launch of our new strategy, we also announced the launch of a rights issue of SEK 240 million. There is also a SEK 30 million over-allotment option, which means that if all goes well, we'll be able to raise SEK 270 million in gross proceeds. Perfect. This, in part, will finance the Sirakoss acquisition. Yeah. Could you just explain a little bit to me how that came to be? What's your decisions on focusing on this specific segment and specifically on this company? Yeah. I think it goes a little bit back to there is a market component, there's also kind of an OssDsign component. As I said, the history of OssDsign is really around addressing unmet clinical needs. I think we're doing that in CMF, we also know that spinal surgeons and neurosurgeons doing spinal surgeries have a particular challenge, simply that the outcomes are not good enough. Now, synthetic bone grafts have come into the market some years ago. I don't think they had the same success as we've seen. What we saw in Sirakoss is a product that can really make a change. That can really be a game-changer. If you're American, you would have said that. We think that it's really something that can help us do what OssDsign does best, which is to address the unmet clinical needs. Having said that, it also addresses a number of different things. It is a much bigger market than where we historically have been. It is growing at the same pace. It is much more profitable, it's scalable. It's volume production, which is different to our traditional patient-specific implant business. It will allow us to scale the company in a very different way by having these two franchises or these two legs of the company. Yeah, exactly. Your core focus before has been the cranial implants, and I expect that to continue. If you look down the road now, in a couple of years' time, how much of the resources will be divided between the cranial implants and then the bone grafts, would you say? I think it's difficult to say anything specifically on how resources are going to be spent. As I said, there are some very strong commercial synergies, which means that you can drive both product groups or products through the same sales channel. Bone graft and orthobiologics will be a very meaningful part of the business. We're certainly not abandoning our CMF business. We think it's very lucrative, and we have ample room to grow. We think it's a very interesting and very exciting complement to the business. Of course, we need to invest in it as well. You expect some sales from the Sirakoss acquisition already this year. As a life science equity researcher, you always look at the clinical validation- Yeah. ...there. What's your view on how you will be able to start selling already and the clinical trials going forward? Yeah, I think I outlined our thinking around some of the clinical trials, which I think will be meaningful. Listen, I think it's important to remember, I'm trying to address it every time I talk about this, the orthobiologics of the bone graft business. You do not need solid clinical data over many, many years or level one data to really start commercializing a product with bone graft. I think we appreciate that you need to keep building it, when you look at the products that are out there, and you look at the amount of peer-reviewed clinical evidence they have, you'll probably be surprised about how little it really is. A lot of surgeons will look at your histology. They will look at the data you've generated in pictures, and they can see if bone is forming, and they can also see if bone is forming fast. Those things are really the things that we'll be driving, and that's also what was very attractive with Sirakoss. The histology shows very, very clearly that you get a lot of bone ingrowth, and you get it very fast. Yeah, you mentioned there briefly that there are other products, of course. Could you explain the competitive landscape just briefly and how you will- Yeah. ...compete with these competitors? Yeah. No, I think in overall, there are many bone graft out there. There are also many bone graft similar types of technologies- ...in the U.S. market. In that sense, it is crowded. It is a crowded market, but it's also crowded because it's extremely attractive, right? A bone graft of the syringe you saw on the picture, the average selling price is anywhere from $1900 - $2,000, so it's quite an attractive place to be. When you look at it, there is one product, as I said, which is the INFUSE, the BMP-2 from Medtronic that really took a large part of the market and have demonstrated fusion rates that sits well beyond everyone else. When you look at the rest, there are really not any products that solve these last 20%, 25%. That's what we'll be going after with this. We're not going to target anything specifically. We are also going to go very focused to the market. We know the market. We know the customer. We're not going to do shotgun approach. We're going to go very targeted to centers that we think we not only can have a meaningful conversation with, but also people that can help us generate the data and set up the registries as we talked about. I know you have a quite extensive commercial infrastructure already in the U.S., and that this can be leveraged to start selling the Osteo Putty. Do you think that this could be a product that is interesting for eventual partnerships to launch in the U.S., or will you do this on your own? No. I think we're doing both, right? It's actually a hybrid model. We are managing the country through a direct subsidiary, but we will have what's in the U.S. is called distributors, but it's commission-based agents really, that will work on our behalf. Our network and our reach is way, way bigger than just our directly employed sales force. Clearly it will be, and we already had people coming to us who would like to work with us on distributing the products in the U.S. It's going to be dynamic. It's going to be a dynamic exercise. Yeah. Judging from this presentation, it is clear that you are doing some major strategic shifts. It seems like you will have less focus on your facial implants. Is there any risk that you will perhaps also slow down with the CranioP lugs that you are selling? No. That I can say we're definitely not slowing down. If we're doing anything, we are accelerating that. It's a really good product. It has a osteoconductive claim, and we've had extremely good customer feedback. Unfortunately, in the U.S., we just launched it just before the pandemic came, and right now we're just not allowed to go in and introduce new products. Let me just make that clear. This is a product that will stay in. It's a product that we are going to invest in and accelerate. Yeah. The facial implants, do you have a set strategy now for an eventual FDA process, or is that also put aside? No, I think as we say, when you look at parts of your portfolio and you say, if this is a product that you're going to be driving very hard and focused in the years to come, you need to have a very clear strategy for that product. Right now we feel that we don't have that, and we need to do a reassessment both of the potential of that product, but certainly also the best clinical usage of that product because we also want solid outcomes on the product. Yes, of course, when you take a step back, it means that you are reconsidering a lot of things. Do you think that this acquisition of Sirakoss can potentially increase your potential to also sell the cranial implants in the U.S.? Yeah. I have no doubt that that's the case. Maybe it's just important to understand that in Europe, neurosurgeons tend to do neurosurgery and typically what we call cervical spine surgery, so the top of the spine. In the U.S., they actually perform a full spine surgery, which means that they do deformity cases, they do all kind of cases. The closer you get to surgeons, the more business you get with surgeons, the more reasons you have to work with them on generating data and showcasing your product. Of course, we expect that they will have a positive kind of drag impact both ways on both the CMF products, but certainly also on the orthobiologics and bone graft. I think before I continue with my own questions, I will look here at some of the viewers we have online. Yeah. First off, this financing that you have done now, is that something that you expect will carry you to positive cash flow? Yes, if we take in the full amount, and of course it's depending on that we're delivering to our plans that we've laid out. But yes, the clear intention is that if we also trigger the overallotment option of the SEK 30 million, that is what we expect will take us to positive cash flow. One question here that is I think also very interesting. How are things progressing with the cranial implant in Japan? Well, nothing has changed to what I said in our Q1 result. We were essentially ready to launch it towards the end of Q4, then the cases spiked, and the state of emergency came in. I'm still saying the same as I did early in February on our Q4 result that right now, unfortunately, we think it's going to drag all the way into Q2 before we can launch- Okay. ...from what we can see right now. All right. I will ask you three more questions, Morten. Yeah. You have these financial ambitions of SEK 300 million-SEK 400 million in revenues. With this now exciting venture into the bone grafts market, could you walk us through how you landed on these figures? Also, can you say anything about the contribution between the two verticals? Yeah. I'm glad you're saying it's SEK. It's not dollars. Let me make that clear. At this point in time, we're not breaking down any further. I think we want to keep those numbers and that modeling to ourselves. As I said, the way to think about bone graft or the orthobiologic side of our business now is that it will be a very meaningful part of the future company, not just a small fraction. A follow-up question. Of course, it might be hard for you to answer this one, but do you think that perhaps going into 2022 or so, you will be able to provide some sort of guidance for this new vertical? Maybe, maybe not. I don't think I can promise anything. Listen, I understand we are kind of growing up as a company. There is an interest to also look at our gross profitability, of course, at a different level now than we are. We start to expand and go into new businesses. Of course, we also understand that there is an interest in seeing how those are working. I can't give you any promises now, but of course, we are also considering those kind of things. I know you want to know. Yeah, that's up to me to decide in my models. Okay, you also briefly mentioned that you will try to automate production to a high degree. Yeah. From what I have understood, you're relying to a high degree on the CAD engineers to design these implants. Yeah. How does that fit into that? Well, again, when we think about automation, it’s not only for the CMF products, the patient-specific, it’s certainly also for the orthobiologics, but also in the future, any potential spine product. I think it’s a more general statement that as we want to get scale, we also need to think smarter ways of producing at scale. Having said that, I think there are things you can do on the patient-specific implants. Right now it is hand-carrying, of course, and it is also very much depending on the knowledge that we have as an organization. I think there are ways where you can also institutionalize some of these things. We have line of sight to a number of immediate things that we can start to address to kind of speed up the end-to-end process. Okay, Morten. During the coming quarters for this year, what are the key activities that you are looking forward to the most? Well, we need to deliver our sales right, and then come out on the other side of the pandemic. I think to me, that's an important thing, that the minute we start to see the easing like we saw in Germany or we saw in certain states in the U.S., that we're able to go after that. Of course commercializing and launching orthobiologics is going to be a big, big milestone for us this year. I also think there are a number of important areas relative to the clinical acceleration, so we can significantly accelerate clinical work this year, even relative to 2020. We need to get those things off the ground, and some of the things is what I outlined earlier. I think to me, those are really the big things, quickly coming out of the pandemic, launching orthobiologics, and really get movement and traction on the clinical side. Yeah. Okay, Morten. Thank you for the presentation, and good luck with the equity issue. I hope it plays out nicely. Well, thank you very much. Thanks for having me. Thank you. Thank you to all the viewers. As usual, you can always look at this presentation again once it is uploaded on the Redeye webpage.