For those who have not heard about Paxman, could you tell us about your business, what you do, and what markets you are active in?

Paxman are world leaders in managing the side effects of chemotherapy, with a mission to make our scalp cooling caps, designed to reduce chemotherapy-induced hair loss, accessible to patients worldwide. Our company has a history spanning over two decades, originating from a personal experience in the 1990s when my mother was diagnosed with breast cancer. She underwent a form of scalp cooling that unfortunately proved ineffective. That was the first time the disease really took a visible toll on her, and us. She started to look like a cancer patient, and it hit hard, not just for my mom, but for all of us as a family. 

Motivated by this, my father began exploring why the treatment failed and how future patients could be better supported. Over the past 20 years, we have developed our technology extensively, conducting numerous successful clinical trials worldwide. More recently, we have focused on enhancing market access, all in line with our vision to ensure that everyone, everywhere, can benefit from this technology. The passing of my mother more than two decades ago has made this mission far more significant than a mere commercial endeavor. While the impact of our work is profound on a personal level, it is also a commercially viable enterprise.

Financially, we saw a strong performance during 2023, achieving revenues exceeding 220 MSEK and a stable EBITDA. Although we did not achieve full-year cash flow positivity, we reached this milestone in the last quarter. We have established clear goals to achieve profitability and sustain cash flow positivity in the future. As we move into 2024, our investments are yielding substantial returns, with quarterly revenues surpassing 60 MSEK, EBITDA with margins exceeding 20%, and strong cash flow generation. This growth allows us to continue investing in R&D and expanding in key markets, particularly in the US, which remains our largest market.

In terms of market presence, the UK is our leading market as of now, where our technology is used in nearly all cancer centers. I believe that what we have achieved in the UK can be replicated in other advanced healthcare systems globally. The Netherlands is furthermore a key market in terms of utilization, while the US, now accounting for 50% of our revenue, holds the highest growth potential globally. Our direct markets include Canada, France, Germany, Spain, India, and Sweden. Asia, however Japan, is becoming increasingly more important. Over the past few years, we have made significant progress in South Korea, working on regulatory approvals, with reimbursement efforts underway. We recently initiated the regulatory approval process in China, reflecting our global outreach.

As Paxman continues to develop and mature, it is essential that we remain focused on our core markets, including those mentioned above. Overall, we are in a strong position to move forward.

Can you elaborate a bit on your product, and how it holds up against competitors? 

When discussing how we measure up against our competitors, I emphasize our services, how we operate, R&D efforts, our dedicated team, and our clinical trials, both published and ongoing. While we remain a relatively small business with around 100 employees, this is significantly larger than the teams of some of our competitors, which enables us to be in the forefront always.

Paxman’s technology is a scalp cooling device available in two configurations: a single model that treats one patient and a double model designed to treat two patients simultaneously. In healthcare systems with a more socialized structure, we offer a reusable cap.

Our robust R&D pipeline is critical to maintaining our competitive edge, particularly in an increasingly competitive market. We are actively pursuing advancements in cooling caps and cap covers, both of which are integral to our continued success. Furthermore, we are exploring different cooling technologies, including our thermoelectric cooling project, which is currently under development. In addition, we are working on a project targeting peripheral neuropathy, with ongoing clinical trials in this area. Our goal is not only to expand the market but also to continuously enhance the quality of our offering. 

Could you provide an update on the progress of the CIPN product and share your thoughts on the market potential for it?

It is essential to understand the significance of chemotherapy-induced peripheral neuropathy (CIPN), which provides a debilitating side effect of chemotherapy treatment. Currently, it remains an unmet clinical need, one that is increasingly recognized and is crucial to address. Addressing this unmet need is critical.

This side effect has a broad impact on the person and the society, given that over 20 million new cancer cases are diagnosed each year globally. Among these, approximately 1.5 million patients worldwide are affected by CIPN. The market size for this treatment is comparable to that of our scalp cooling device which is approx. 1 bnUSD.

We have ongoing clinical trials in Singapore and the United States. Notably, we are conducting a fully funded SWOG study sponsored by the National Cancer Institute (“NCI”), involving 25 locations and 777 patients. Currently, we have enrolled approx. 200 patients in this study. Earlier this year, we presented data from our clinical trial in Singapore at the MASC conference in Lille.

The trial’s results showed that approximately 57% of patients completed all planned chemotherapy treatments without any dose reductions. Moreover, only 8% of patients required dose modification due to peripheral neuropathy. Additionally, 65% of patients did not experience any CIPN, and 32% developed grade 1 CIPN, a relatively low level. Only one patient in the study developed grade 2 CIPN, a significant reduction compared to typical clinical trial outcomes. Ultimately, the study concluded that the treatment is both safe and well-tolerated at this early stage.

Importantly, the data demonstrated that the device can be safely administered in conjunction with scalp cooling therapy. This concomitant cooling showed promising evidence of no significant changes in sensory scores in the hands and feet, while also facilitating the effective administration of chemotherapy

To summarize, this project represents an exciting opportunity with vast market potential and the possibility of making a meaningful impact on the lives of cancer patients.

Could you address the importance of Average Daily Treatment Revenue (ADTR) and highlight any other KPI’s that investors should pay attention to?

ADTR refers to the revenue generated per patient in the US, where our income model is based on reimbursements from patients or healthcare providers for each treatment administered. The key to increasing the ADTR lies in securing broader insurance reimbursements.

While ADTR is the primary KPI we monitor, reimbursement will act as the catalyst for its growth. Although we can achieve organic growth by adding new treatment sites, utilization remains critical, as it directly drives ADTR. The factor that will ultimately unlock higher utilization rates is reimbursement.

Looking ahead, another essential KPI to focus on over the next five years is the development of recurring revenue streams. As a business, it is imperative that we move beyond simply selling equipment and place greater emphasis on establishing sustainable, recurring revenue models, as we have done in the United States, Canada, Mexico, and Japan. This model, where we generate revenue on a per-patient basis, and sell single-use cooling caps, creates a more exciting and viable long-term business strategy, enhancing both growth potential and profitability.

How do you navigate the complexities of the U.S. insurance network? Do you believe securing coverage is primarily a matter of time, or are there specific strategies you employ to ensure success? 

Primarily it is a matter of time, and I believe we will have coverage, coding, and payment. I am confident we will eventually secure clear and structured reimbursement in these areas. However, it is a complex and lengthy process. The three pillars of insurance as I mentioned before are: coding, coverage, and payment. In all these areas, we must continue deploying and refining our strategies.

Currently, we are utilizing CPT 3 codes, but our goal is to develop CPT 1 codes, which will transition us from an investigational phase to a more permanent solution. These codes would ideally include an associated payment amount, though this is not guaranteed. Typically, such developments undergo a thorough value analysis. Additionally, we need to strengthen coverage policies, whether through Local Coverage Determinations (LCDs), which we are working on, or commercial pay coverage policies.

Lastly, securing improved payment rates is critical to ensure that hospitals feel confident in offering this service. We have key strategies in place across all these areas, supported by consultants and advisers throughout the United States, to ultimately achieve the necessary reimbursement that will unlock significant growth, as previously mentioned.

Your installed base in the U.S. is quite extensive, and there has been a slowdown in new installations over the last year. Is the current focus shifting towards maximizing the utilization of existing systems rather than growing new installations?

Looking back at 2022 and 2023, we faced a period of uncertainty in public and capital markets. As a business, our focus shifted to prioritizing profitability and cash flow positivity. One of the primary drivers of cash usage was deploying equipment in the United States. At that time, we made the strategic decision to slow down the number of systems being installed at new sites and to scale back our business development activities from a growth perspective. Instead, we concentrated on improving utilization at existing sites.

Today, we are working to strike a balance. While we have increased the number of new customers we engage with since it is challenging to turn away new business opportunities, we are still heavily focused on improving the reimbursement process, which is key to driving utilization. It is a delicate balancing act between acquiring new customers and optimizing existing relationships, all while aiming to achieve strong EBITDA and cash flow positivity, which we are currently delivering.

Where do you see Paxman in three years?

Our vision is clear: to ensure that no matter where you are in the world, regardless of your income, ethnicity, or cancer type, you will have access to our technology. While we may not fully achieve that vision in the next three years, I believe we will make significant progress compared to previous years. Moreover, Paxman will no longer be just a one-product company, we will have commercialized our newer product.

Paxman will look very different in the near future. The opportunity in addressing CIPN is enormous. We will have two products on the market, and we already sell to the customers that will need our CIPN devices. This positions us strongly to grow, develop, and continue working toward fulfilling our vision.

Could you give three reasons as to why Paxman is a good investment today?

• Impact: Investing in Paxman supports a company that significantly improves patients’ lives, through innovative solutions for conditions like chemotherapy-induced alopecia and peripheral neuropathy.
• Historical Performance: We have demonstrated a strong financial performance with profitability, robust EBITDA, and positive cash flow, which I think is a great indicator.
• Promising Future Growth: We are well-positioned for future growth, with expansion opportunities not only in scalp cooling systems but also with our CIPN product, which market size is as substantial as our current.