Nightingale Health Oyj

F:7XE

Earnings Call Transcript 2022-Q2

[Teemu Suna, Founder, CEO & Director]

Good afternoon, and welcome to the Nightingale First Half Results Webcast. My name is Teemu Suna. I'm CEO and one of the founders of Nightingale. And we will be going through the first half results today, together with our CFO. So let's start.So here is the agenda for today. I will be first coloring kind of very briefly the Nightingale story. Then we will be moving into the key achievements for the half year period. Then we will have a look at the financial review and our CFO, Tuukka Paavola, will join me on stage to go through that as well as the targets for the financial year, we will be giving a brief update on that as well. And then there are some significant events after the end of the half year period. So we look those also briefly. And then we will be having the Q&A as usual. So please post your questions and we have reserved some time in the end to go through those.All right. So let's start from the brief Nightingale summary. So Nightingale is a preventative health company. So what we do, we have created a novel way to test blood samples. With this technology, we can not only look at the people who are already sick, but rather taking a novel point of view and looking at the healthy people. So with our blood test, we can detect from the healthy individuals, if there is a risk to develop a disease in the future. And if there is a risk, it's not your judgement day, it's an opportunity to improve. And we help you with this technology, we help you to make the improvements, we are helping you to take the right steps towards healthier life.The technology is based on very strong scientific and regulatory validation. There are more than 300 peer-reviewed scientific publications, demonstrating the power of the technology. And these are -- this is independent peer-reviewed science. So it is showing the ability how the predictive power is actually working with very large data sets. And then we have very strong validation with regulatory frameworks for example, the CE mark in Europe and the Nightingale technology with that is already being used in health care settings, for example, in Finland.We have laboratories in Finland, Japan, the U.K. and the U.S. So the operation is already quite extensive. So we are, as a company, very well positioned in the preventative health market. So why the preventative health is such a big thing is that if we look at the overall health care costs. So we -- many times, we only discuss, we only look at the kind of the big numbers we say like, okay, health care costs are like up to 20% of gross domestic product. We talk about like in Finland, the health care costs around EUR 20 billion every year. But when we look kind of behind those numbers, we actually see that approximately 90% of those costs are caused by chronic diseases, heart disease, type 2 diabetes as kind of the biggest examples. And these diseases are very expensive to treat.Now the good thing here is that actually -- and this is a number from the World Health Organization, around 80% of these diseases can be prevented. So this is not only about enabling healthier, longer people to live longer, healthier. So there is the kind of the individual benefits that are obvious. But there is also a systemic benefit with the prevention, with the preventative help. And this is why we need to build it. And what happens with the prevention is actually it enables the ultimate solution to health care problems. It is to have less sick people. I mean we have all kinds of different initiatives, all around the world where we are looking to improve the current health care system.And this is very important. Of course, we need to find better ways to improve also the current system. But no matter what we do, we are not addressing the main problem. The key problem, the best way to solve this health care burden is to have less sick people. And we can have less sick people by preventing diseases. So it's not something -- preventative health is not something that it may be coming, it will come because it has to come. We have to enable preventative health in order to keep our health systems functional because otherwise, there are just too many sick people. So the problem why there is -- currently, there has not been very good solutions with this, is that these diseases, these chronic diseases, another name actually for this is lifestyle diseases.They don't happen at the doctor's office. They happen in our everyday lives. So if we want to address the problem, it's not enough to build a centralized system where people go kind of to visit the doctor. We have to build a system where we empower all the individuals, and we empower people with better health information. This health information is something that helps people to steer towards healthier life. This has been missing -- there has not been such a system before. But now there is and it is enabled by Nightingale. And this makes our mission, our technology, extremely important part when we are looking the future of health.So how we do it? When we want to prevent something, we need to be able to predict some future events. If we compare the traditional blood test, the traditional blood tests are -- they are built, they are designed to detect to diagnose a disease. And it's very efficient system. I mean, you can kind of identify single biomarkers from a blood sample that can be used to diagnose if a person has a disease. For example, glucose, blood glucose, I think, very well known by many people. It's you used to diagnose if you have type 2 diabetes. Now if we are not only looking to diagnose the diseases, but we are looking to do prevention. The problem is a bit different.Now we need to look -- we need to analyze blood samples from healthy individuals, and we need to be able to look -- we need to be able to predict what will happen in the future. This can be done when we capture from the same blood sample, we capture more biological information. So more biomarker data. When we capture more biomarker data, we can also understand the underlying biology more holistically. And when we can understand that more holistically, we can also predict a future disease onset. And because we can do this, we can do prevention.And we are bringing this directly to the people. We are providing this information interpreted in a way that it actually -- it actually is actionable without being a medical professional. How we make that happen is that we have measured some of the world's largest Biobank collections. So what we have got from these Biobanks is actually blood samples that have been collected from healthy individuals like 10 years ago. Those samples are put into freezers. And then there has been follow-up period for around like for 10 years. And all the data, all health incidents have been collected during this time. Now we have got these blood samples from the freezer and the health incidents. We have run for all those blood samples, the Nightingale blood test and got this holistic biomarker information.But because we have also the follow-up over 10 years of these individuals, we have been able to map the biomarker profile that we measure into the actual health outcomes, actual health events. So now I'm kind of when -- if we are not medical professionals, and I will say to a person, your apolipoprotein B is 3.2 millimoles per liter. How many knows what that means? Not very many. And frankly, people should not kind of -- we cannot train everyone with medical training. It's -- it doesn't work that way. But if we take the blood sample and we say, okay, based on this blood sample, you are on a journey towards developing, for example, diabetes over the next 5 years.But if you change -- if you make typically rather minor changes in your lifestyle, you can change that development. You can change your destiny. That sounds pretty crazy. But actually, that's what it is in the end of the day. If you can change your lifestyle, you can change your future prediction and change the time line of developing the disease, even avoiding the disease altogether. The numbers presented in this slide why we have here like 0.5 million samples from the U.K. Biobank over 1 million samples measured. We just highlighted here because these numbers -- with these numbers, we are #1 in the world.So the statistical power that we have is extremely strong. And then you don't have to take it from me, kind of the question is the technology working? Well, just look at the data, look at the science, look at the regulatory approvals. It's working, and it's working very well. Then when looking at the operations side, this is, of course, when I was talking about the preventative health mission describing the purpose, describing the meaning, it's rather obvious that this is not a local game in Finland. This is not a game in Europe or a game in the U.S. This is a global initiative. This is a global challenge that needs to be solved. And the good thing here is that blood is global.Think about electricity, think about anything kind of what else is global. Electricity, there are multiple electricity systems in the world. Blood is global. There are, of course, some ethnic differences with the disease development. And also in that front, Nightingale is a world-leading company. We have extensive blood sample collections where we have managed to validate these kind of ethnic differences. For example, we have done it in Japan, in Singapore and many, many others. So we can actually also capture how different environments effect to the disease risks. And then this technology, the global expansion, everything that I've been talking about, everything comes down in the end to the key question, how can we enable preventative health globally?The very simple answer by empowering people. There is no other way to do it because we are addressing the healthy population. This is not something that the current health care system should be doing. Current health care system is fantastic in taking care of the sick. We should free up the resources of taking care of the sick. But at the same time, we have to reduce the number of sick people. The health care system cannot take the burden caused by the chronic diseases. And then when we add up at the same time, for example, a pandemic, we have very big problems. So we need to build a system where we empower all the people, all the individuals to take better care of their health. And this is the -- this is what Nightingale is all about in the end of the day.All right. Let's have a look of the key achievements over the past half year. So let's start from the service models. So as we've been communicating also earlier, there are basically like 2 fundamental service models. One is the Nightingale Home, which is a service model where we bring the technology directly to the consumer. So you can buy the Nightingale Home kit, you get the ability to test the bloods and give the blood sample at home. This is how we are kind of taking away all the possible burdens and restrictions to follow up your health. We bring it into the homes of people. So giving the sample is very, very fast, very easy. It's very straight forward to do.And there is also, if you think this from the business point of view, this is also extremely scalable model because this is based on postal logistics, working very well in many places, in many countries globally. Then we have the other side, which is the Nightingale Pro or Nightingale Professional, which is the business-to-business side of things. Here, because the Nightingale's technology, yes, we can bring this to the people directly. We can empower people with health information that is being interpreted in a way that it's actionable without medical training. But because the technology is fundamentally a medical technology, it can be used also in -- with health care professionals.So we are also bringing this technology to be used by the health industry. And here, we can then enable we can also make the Nightingale's blood sample analysis, a tool for the medical doctors. And I think there's been quite a lot of excitement about this also in the medical community because if you think about the situation in primary care, for example, I would say that it's in the interest of everyone to have better tools to motivate people to change their lifestyle towards kind of better direction. So it's kind of a tool that allows interaction between the medical doctor and the patient.And I think that's quite powerful because it gives a tool for the medical doctor to also steer the pace towards better direction before there is a disease. Think about occupational health, for example. I think it's a very appealing fit in there. So I will talk a bit about the concrete commercial models in the next slide. Something to mention about the development highlights. So we have done very strong investments into the mobile app development. And you can -- based on what I've been describing today, it's pretty easy to see why these investments have been very important. Now like instead of we estimated earlier that the mobile app will launch by the end of our fiscal year. So now with these additional investments, we are 1 quarter ahead of time.And we have done this push to accelerate the time line because we really see that there is a strong demand for this kind of solutions. And the preventative health is already happening. The tools are just missing and we wanted to kind of accelerate that development to bring the mobile app and the service available as soon as possible. Part of that was the acquisition of Yolife, a German digital health company. We did the acquisition because I think it's very obvious part of the Nightingale Home Solutions to have very strong digital health offering in there.And then at the same time also, what is very important, we have been talking about the project we have with the Estonian Biobank aiming to take the Nightingale's technology also to nationwide use, that is also progressing rapidly. So now more than 50,000 samples already analyzed and this means that there are now the opportunities also to accelerate into these national health programs. We are kind of all these actions, we are aiming to kind of move the time lines closer. And I'm very happy about all this development and the Nightingale team has done once again amazing job. We have managed to kind of operate in multiple fronts.And as you will see from the financial numbers, we've been also -- we have managed to do this very efficiently when looking at the cash burn. So that -- I think that tells the story what our team, what we can do. And I see no reason why this would slow down in the future. I would actually say that it will be the opposite, because with this development, we have also managed to do, I would say that when looking at our home market, it's pretty much the maximum performance. We are working with the best partners in the home market. We managed to bring these deals. We managed to close these deals in a faster time line than anticipated. We are very comfortable of our position now. And with these commercial deals, it gives us a fantastic position to move into the international cases.And kind of in the Finnish market, in our home market, which is the place where we should start. What else can you do? It's a very, very nicely done and I think the team has done also a great job with this. But it doesn't end here. So what I'm also very proud about is the performance in Japan. And many times when I talk with our international partners, I think the Japanese market is famous about being pretty difficult. And the difficult -- why it's difficult is that the Japanese, they are very careful. They are very kind of quality focused. They want to do things properly. And many times, that means that it takes time and something that we have heard from some other companies also who have done or tried to do the Japanese market entry. Typically, the time lines are 2 to 3x longer than what we have done. So I think this progress also in there is very, very nice.So all in all, we are moving forward ahead of schedule, which is very, very good. However, at the same time, as we have communicated all the time, the large revenue ramp-up is a long-term goal. Everything starts from the beginning. You have to build, you have to establish the presence. You have to start from small in order to get big. But with this groundwork, I think we have a very good, very strong position to move forward according to our mission and our business plan. It's also good to note that this is a new service. This is something that has not been in the market before. So sometimes I have heard that, yes, this is the same thing as they are doing in the primary care every day. No, it's not. This is a very different thing.And the fact that this is a very different thing is also realized in when we are launching these new services. We are actually facing a challenge that we have to explain to the market, to the customers what this new service means, which is a very traditional and typical sign of a new service of something that has not existed in the market before. Here in Finland, and apologies for the international viewers. There is some Finnish in the slides. But to explain the context, this is the advertisement campaign that took place in this autumn in Finland together with our health care -- private health care partner in the Finnish market, Terveystalo.So we together launched a well-being membership to the Finnish market, and it has been very visible in the Finnish media. And I think it has been a very good -- very good to see how much excitement there has been around this new preventative thinking around the new way of utilizing the blood samples to actually benefit the well-being of people. So very excited about that, and I wanted to share with you some of the concrete examples how our technologies is on one hand -- in one hand, integrated with health care providers, this example of our B2B business. And then on the other hand, how this kind of market rollouts are being done. And it, of course, builds a very exciting reference also for some other international markets.All right. That's it. Let's move into the financial review. And I'm delighted to invite on stage, our CFO, Tuukka Paavola. So welcome Tuukka. And Tuukka will give a short introduction of himself as this is the first time on stage with Nightingale.

[Tuukka Paavola, Chief Financial Officer]

Thank you very much, Teemu. It's great to be on stage. Great to be at the company with such a great, great mission to really change the world. So I joined the company in December and here really supporting all the great people in the company, doing and executing on our business plan. So if you take a look at the numbers then from the 6-month period from our current fiscal year, on the revenue side, our revenue is at roughly EUR 1.3 million. It is still primarily coming from the collaboration agreements with research institutions. But we are also delighted to see that the new service models have also started generating revenue.On the cost side, we have continued strong focus on the commercialization activities, which is driving up operational costs. We have also made considerable investments building our strategic capabilities like Teemu discussed about the mobile app, but also in our product concepts and laboratories in both Finland and Japan. These 2 factors are driving our profitability, which means that our EBITDA is landing at roughly minus EUR 3.3 million and operating profit at EUR 4.8 million for the period. We do have a solid capital structure and a very strong liquidity position that provides us with a great platform to continue executing our business plan, continue the commercialization activities and continue building Nightingale towards its vision.If we then move on and take a look at the business targets for this fiscal year, we have defined 5 business targets. Firstly, to get an FDA approval in the U.S.; secondly, launch a new version of the company's mobile app; thirdly, launch a commercial service based on the at-home test; fourth, is signing an international commercial partnership agreement; and finally, reaching an order book of EUR 5 million by the end of the fiscal year. And it is, of course, great to see that we have already now met one of these goals, which is launching this commercial Nightingale Home test in collaboration with this pharmacy chain in Finland. And with regards to the other targets, we are progressing as planned to meet the targets by end of the fiscal year.That was a short summary of our financials and the business targets. And I would now actually like to hand it back over to Teemu to talk about some events after the half year period.

[Teemu Suna, Founder, CEO & Director]

All right. Thanks, Tuukka, and Tuukka will also stay on stage to -- for the Q&A part. So we wanted to take a very brief dive into the -- some of the significant events after the end of the half year period. I think it's pretty obvious, we want to talk about the genetic testing and the acquisition of the genetic testing company Negen that we completed in January. So why did we do the acquisition? So there are -- if you look at the broad market, you look at the global market, genetic testing, this consumer genetic testing is actually something that it's pretty well known around the world.However, there is one particular problem with all of these genetic testing companies. The problem is that when you do the genetic testing, the data you get is static. What it means? It means that no matter what you do, the data will not -- the data will not change. So it's actually something -- so genetic data is something you have inherited from your parents. If you test the genetic data when the person is 5-year old or the same person is 50 year old, the data is the same. So now if there is a, for example, a prediction of chronic disease, like type 2 diabetes. How this data can be used to -- how can it be actionable because there is nothing you can follow up the progress.And now when we know that the diabetes is more connected, far more connected with your lifestyle and what you have inherited from your parents, we have a problem. And this problem applies to all the consumer genetic companies. So why do we then acquire a genetic testing company because we can solve this problem. So when we put together the genetic testing, the information that you have inherited from your parents with the Nightingale blood test data, so we take from the same person, the genetic test and the Nightingale blood test. And we put the data together. What happens is that we can improve our risk prediction with the information that you have inherited from your parents.But because of the Nightingale blood test, which is dynamic data, it is changing in your body, depending how you're living your life, you can actually do something about to your risk. So we are making this consumer genetics. We are making genetic testing actionable. And this is a huge, huge thing to do because, of course, if we know what the person inherited from his or her parents, and we know how the lifestyle is kind of building up the risk. Pulling these 2 data assets together allows us to understand the risk better and take actions kind of steer also the actions better. So in the end then, everything this acquisition comes down to our mission, if you go back to what I was describing earlier, the Nightingale is the preventative health company.Our mission is to empower people with better tools, with better health information so that people can take better health actions in their lives and live longer, healthier lives. Integrating the genetic data into this combination improves our ability to do so. It's also from the business point of view, it's pretty massive increase to the addressable market of Nightingale. I think that is also quite attractive point. And then thinking about the competitive advantage, there are companies who do genetic testing. There are companies who do blood testing, but there are no companies really who can do the combination in the same level what we can do. So this is also building to increase the competitive advantage of Nightingale.So pretty exciting stuff. And we will be providing a deep dive around the genetic testing later on. And there are also an exciting product launch coming soon. So we will be sending out invites to the product launch. And this is obviously the new mobile app. So we will be organizing a separate event to go that through and discuss all the details, discuss about the -- discuss the app from the point of view of the users, but also discussing more about how that -- what kind of a business model that is creating. So that's something that we are very excited about. And then, of course, as I mentioned, we will be providing a separate event on genetics, and this event will be organized before summer.And there, of course, I just scratched the surface a moment ago about the possibilities with genetics. And then in that event, we will bring the real experts on stage, and we will be taking a deep dive what we are going to do with the genetics capabilities.All right. I think that wraps it up and now moving into the questions and answers, and this is like already becoming a tradition, so I'm delighted to invite our Chief Operating Officer, Satu Saksman on stage with the questions. So we will try to answer as many as we can. So time is limited. So let's start. Hello, Satu.

[Satu Saksman, Co]

Thank you, Teemu, and good afternoon on my behalf also. So let's shoot right away to the questions. There have been several questions regarding our fiscal year targets, especially the ones that are with FDA approval and then the international agreement. So can you elaborate maybe a little bit -- maybe are these 2 connected? Or what is the situation with the FDA and what might happen in the U.S. and so on.

[Teemu Suna, Founder, CEO & Director]

Yes. So first thing to say is that I think it's a very good question. And I think the key part is like these are not connected. So these are not connected because the FDA approval is something that is -- with that, we can target to a very specific cases in the U.S. But there are plenty of other cases that we are also currently working on. So they are not connected. But let's dive into the FDA question first. So we've been working very closely with FDA for some time already. We are able to answer all of their requests promptly. So with looking from the substance point of view, there are no worries. Things are moving forward as we have planned.However, there is something very important to note, which is that FDA is the kind of -- it's the same organization that is also handling a lot of these COVID questions. So if you think about it, there -- I don't know how many different COVID-related medical device regulatory filings there are. Is it 100? Is it more? But it's -- in any case, it's a lot. And now, of course, which is very understandable, the COVID things are taking priority, which is causing some -- potentially causing some delays on the FDA side. And this is not in our control.Nevertheless, as Tuukka was saying, our -- the current understanding of the situation with FDA is that we are moving on time and still holding the guidance on that because it's substance wise, moving forward very well. Then very briefly about the commercial deal. I cannot, of course, open a lot of details behind it. But as mentioned in the presentation, we have a very strong portfolio of cases like we have very strong references, these technologies actually being used in important health care -- cases health care environments. So I think it builds pretty attractive setup combining the technology and the reference that we are already running in Finland and in Japan. So we are very -- we believe very strongly that we are on track also with that.

[Satu Saksman, Co]

Okay. Now then that you mentioned the COVID situation. The next question is, when will the COVID risk metric be available in your app?

[Teemu Suna, Founder, CEO & Director]

It will be part of the immunity score that we introduced in our special event, An Hour with Nightingale. And that will be launched as a part of the new app. So stay tuned for the event, we will be sending out the invitations soon.

[Satu Saksman, Co]

Okay. Then maybe a question, Tuukka, to you. There has been several questions about the revenue split. You now mentioned Terveystalo and Japanese collaborations. Is there something that you can tell more about those splits and maybe in also kind of in the total revenue that we have covered for the first half?

[Tuukka Paavola, Chief Financial Officer]

Yes. Thank you. So I think, first of all, the good thing about our business is that since we are a platform business that provides us with a lot of different possibilities and opportunities how to cater for different revenue models and of which revenue split with a partner is one of the typical ones. Unfortunately, since both of those mentioned partners are big, listed corporates, we can't really comment on the details. But we can just comment that we have seen first revenues coming from those agreements, but really can't comment anything more on the structures nor the actual amounts.

[Satu Saksman, Co]

Okay. Then shortly mention the Estonian Biobank collaboration. What is expected to happen this year in concrete level?

[Tuukka Paavola, Chief Financial Officer]

Yes. So in Estonia, we are now working -- I mentioned we have now analyzed this more than 50,000 samples. Now when the samples are analyzed, the next step is to start returning this Nightingale health information to the participants of the Biobank. So that's something that we are expecting to start rolling out this calendar year. And we will be -- when that will happen, we will have separate announcements of that also because I think it's quite a major step forward.

[Satu Saksman, Co]

Okay. Then maybe I think we are ending time soon. So the final question, there have been also several questions around this, so bundling these 2. When can we expect to see the significant revenue growth? I think you already touched that topic a little bit, but maybe opened up a little bit more. And then kind of how is that related to the current share price or if you have any thoughts on that?

[Tuukka Paavola, Chief Financial Officer]

Yes. Well, maybe I start with the kind of the -- I think these both questions really comes down to the mission and the strategy that we have communicated from the very start. So this is a long term kind of the major revenue ramp-up is a long-term goal. And that has been our kind of how we envision the business ramp up from the very beginning. The reasons for this, why it takes time, it's something new to the market. It's very international. So it takes some time to do the market entries. And it's -- this is like -- it's a regulated environment in many ways.However, we are now kind of -- we are building the -- it's also a reference game. So when you get these reference cases, when you manage to build this, they start to build up the momentum when people actually see what is happening, what can be done with the technology. But because this is so new, we first have to get these new services into the markets so that people can see what can be done. And then we have now rolling out the direct-to-consumer side of things, which I think is also very, very exciting. But it's good to remember that the product for direct-to-consumer, it's rolling out now in the end of the quarter.So it will take some time to get it running there. But in the big picture, I'm thinking that it's -- this is exactly what we have planned. So there is nothing special. The only thing we have not planned is that we are clearly ahead of the time line. When it comes to the share price, I -- of course, I cannot give comments about that. But when you look at the performance of this company, when we look what we have managed to do, we are very confident that we are on the right track. We are ahead of the time. So we have very strong, extremely strong cash position. We see our future, we see the opportunity the same way we saw it when we listed, we see there is a massive, massive opportunity here, and we are working every day to make it happen, and we are very proud of the progress so far.

[Satu Saksman, Co]

All right. Thank you. I think that was all the questions that we are already running -- run out of time.

[Teemu Suna, Founder, CEO & Director]

All right. So once again, thank you, everyone, for turning the webcast, and we will be returning with the invites to the special event. But for now, bye-bye and take care. Thank you.