Earnings call transcript: OssDsign reports robust Q1 2025 growth, stock rises

OssDsign AB’s earnings call for Q1 2025 highlighted significant revenue growth and a positive market reaction, with the stock price rising 9.6% following the announcement. The company’s revenue surged by 65% year-over-year, driven by strong organic growth and high gross margins, which reached 96.4%. According to InvestingPro data, the company has maintained impressive margins, with a trailing twelve-month gross profit margin of 95.38%. These results reflect OssDsign’s strategic focus on its innovative Catalyst technology and expanding market presence in the orthobiologics sector.

Key Takeaways

• Revenue growth of 65% year-over-year indicates strong business expansion.
• High gross margin of 96.4% suggests efficient operations and profitability.
• Stock price increased by 9.6%, reflecting positive investor sentiment.

Company Performance

OssDsign’s Q1 2025 performance showcases its successful transition to a pure-play orthobiologics company, focusing on its Catalyst synthetic bone graft technology. The company reported a 65% increase in revenue year-over-year and an impressive 60% organic growth on a constant currency basis. The gross margin also improved, reaching 96.4%, up 270 basis points from Q1 2024. These achievements underscore OssDsign’s growing market presence and operational efficiency.

Financial Highlights

• Revenue: Increased by 65% year-over-year
• Gross margin: 96.4%, up 270 basis points from the previous year
• Organic growth: 60% on a constant currency basis

Market Reaction

Following the earnings announcement, OssDsign’s stock price rose by 9.6%, reflecting strong investor confidence in the company’s performance and future prospects. InvestingPro data reveals the stock has delivered an impressive 93.59% return over the past six months, though it’s currently trading slightly above its Fair Value. The stock’s current price of $1.37 positions it well within its 52-week range of $0.61-$1.51. Investors appear encouraged by the robust revenue growth and high gross margins, despite a negative EPS of -$0.05 in the last twelve months.

Outlook & Guidance

OssDsign remains focused on expanding its US market access and leveraging its Catalyst technology to drive growth. With a market capitalization of $122.24 million and an overall Financial Health Score of "GREAT" from InvestingPro, the company appears well-positioned to execute its growth strategy. The company plans to continue building clinical evidence and gradually expand into adjacent orthopedic segments. With a stable market environment post-COVID and an aging population, OssDsign sees significant untapped potential in the US orthobiologics spine market. Discover 7 additional exclusive ProTips and comprehensive financial analysis by subscribing to InvestingPro.

Executive Commentary

CEO Morten Hinnenwald emphasized the company’s growth potential, stating, "We have an enormous untapped potential." He also highlighted the strong demand outlook, noting, "We are seeing a very healthy volume demand many years out." These comments reinforce the company’s strategic focus and confidence in its market positioning.

Risks and Challenges

• Market competition: Despite unique product offerings, competition remains a challenge.
• Niche market focus: The company’s concentration on orthobiologics may limit broader growth.
• Undefined EPS results: Lack of specific earnings data could create uncertainty among investors.

Q&A

During the earnings call, analysts inquired about potential impacts from tariffs and the company’s hiring plans. OssDsign confirmed minimal tariff impact and moderate hiring intentions, reflecting confidence in its current cash position and market strategy.

Full transcript - OssDsign AB (OSSD) Q1 2025:

Webcast Moderator: Hello, and welcome to today’s webcast with Osterstein, where CEO Morten Hennevel and CFO Anders Schrensson will present the report for the first quarter of twenty twenty five. After the presentation, there will be a Q and A. So if you have any questions, you can send them in via the form to the right. And with that said, I hand over the word to you guys.

Anders Wenzhen, CFO, Osterstein: Thank you.

Morten Hinnenwald, CEO, Osterstein: Thank you, and welcome. Good morning, everyone. My name is Morten Hinnenwald. I’m the CEO of Vostersign. As always, I have our CFO, Anders Wenzhen, with me.

And today we want to walk you through our first quarter results. But we’ve also come a very long way in a short amount of time with our clinical evidence and publications, so today’s call will also put some extra emphasis on that. As always, we will do these presentations the normal disclaimer. If we look at the highlights of the first quarter, then firstly, we continue to see strong growth and we follow the same trajectory as in the previous quarters. Secondly, as can be witnessed by the numbers, we continue to see more and more operating leverage in this quarter and we are showing by far the best underlying result in the history of the company.

Thirdly, also as in previous quarters, we continue to see a very healthy development in the strong fundamentals with further access in The U. S. Market, so more and more approvals, increasing customer base as well as more usage of phosphatidylase within those accounts. And last but certainly not least, just after the quarter ended, we came out with an additional two publication, one preclinical study showing best in class potency of osteosyne catalyst, and we also came out with a long term follow-up on our tough fusion study showing a 100% fusion rate. I will now hand you over to Anders to walk you through the financial results for the quarter before I come back and spend some more time on our clinical programs and evidence.

Anders Wenzhen, CFO, Osterstein: Thank you, Morten. Just before going to the numbers, I just want to call out that we have now operated as an orthobiologics pure play company for a full year, meaning we now compare to the same business last year as opposed to earlier when we had to compare each quarter to previous blended period. And as Morten mentioned, we continue to see high growth in the company during the quarter, reporting growth of 65% compared to the same period last year on a reported basis. On a constant currency basis, the organic growth came in at 60%. And as we have also said before, growth will not necessarily be linear, but will more take the form of a staircase where we increase accounts and users in one quarter, and then we may slow down somewhat in the following quarter as we get all those new customers up and running and then go back to increasing again.

Now I appreciate that although we mentioned this, that’s not what actually has happened in the last couple of quarters where we’ve seen a strong quarter over quarter increase. We’re, of course, very pleased with that development. But, we continue to believe that the best way to look at the underlying momentum in the company is to look at the twelve month run rate, which we refer to as LTM. As you can see here, for the first quarter, it’s a strong trajectory continuing, and the LTM momentum is up 83% year over year. We believe that’s an excellent performance and we are really happy about it.

Gross margin then. In the quarter, it remained at a very high level after the good Q4. We ended up at 96.4%, which is up two seventy basis points against Q1 twenty twenty four. And we see that we are able to maintain a very strong ASP level in the market. And really, there were no particular items affecting the gross margin, either positively or negatively, in the first quarter.

Moving on to tariffs and FX effects then. So we received many questions on The U. S. Tariff effect as well as the fluctuations in The U. S.

Dollar SEK exchange rate, which has been quite brutal lately. We just want to touch on these on the impact of these just a little bit here. Now if we start with The US tariffs, as you know, we produce partly in The US and partly in The UK where the final products are shipped from. The tariffs are now in effect, the the, you know, the original 10%. And we have seen the first impact, and we can confirm, as we have indicated earlier, that the impact on our financials is minimal to the point where we don’t see any need to change any of the previous guidance that we’ve given.

Moving on to the US dollar exchange rate. As you know, we’ve seen some really big swings lately in the dollar, and the SEK has strengthened greatly against the dollar since February. And this will naturally impact on the reported sales numbers, particularly going forward then as we have 100% of our sales in The U. S. There was no such impact in Q1.

On the operating results, however, we really have a natural hedge these days as most of our costs are now also in The U. S. And we therefore see any FX impact on the operating result to be fairly neutral. On a more general level, it’s important to point out that swings in the US dollar rate can impact also on the gross margin. For example, if we produce at a high FX rate and then sell sell those products, say, six months later at a lower level, this will negatively impact the reported gross margin as production has then been relatively expensive, whereas the later sales are relatively cheap, so to speak.

And of course, vice versa, if the opposite happens, it will impact positively. It’s also worth noting that this will be more relevant when you compare different quarters where these swings will have the biggest impact. On a full year basis, we expect this to even out a bit more. I will now hand you back to Morten to talk about the clinical evidence that we are building.

Morten Hinnenwald, CEO, Osterstein: Thank you Anders. I know we’ve discussed, some of this a few times before, so I’ll go a little bit, quickly initially. But I want to set the scene before we go into our clinical evidence and repository. And if we first look at the challenge in spine surgery, it’s simply how to overcome human biology. The clinical goal is to stabilize the spine and relieve pain.

And to do this, surgeons will use screws and rods and cages and other metalware to create space for the nerves, which decrease nerve pressure and pain. But to have a successful outcome, need to have fusion between the vertebra as well as the interbody space and therefore require a bone graft to deliver successful fusion. When the bone graft is in contact with bleeding surfaces, which is what we call a vascular environment, typically at the edges, there will be natural bone formation due to blood cells stimulating this. However, where there are no blood cells in what we call an avascular environment, there is nothing biologically in the human body to drive that required in the chondral bone formation in the center of the fusion mass or, for example, in the void between the vertebra. If in the chondral bone formation is not happening and therefore a fully bridging bone is not formed, you will not have a fusion and therefore not a successful outcome.

And that is the goal of spine surgery. It is to build bone in the vascular environment. And what we’re seeing with Catalyst is exactly that. It’s a technology that drives rapid, reliable bone formation, including solid, this what we call the chondrole bone formation, in poorly vascularized environments. And traditional synthetic, bone graft will form bone in what we call a creeping fashion, meaning that they operate outside in, essentially from the edges towards the middle.

And the problem here is that it may never reach the middle or it may take so long that you will see adverse events occurring long before that happens. Ostezine catalysts on the other hand, which is some of the things that we have just, given more, evidence to, is working simultaneously inside out from the center of the fusion mass to the edges and at the same time outside in from the edges towards the middle. And this is something that was specifically tested as you can see on the slide where catalyst grew almost four times as much bone in the center section compared to a traditional synthetic. So when we look at osteosyne catalyst, it is essentially state of the art innovation when it comes to operating at nanoscale, where we’ve managed to get it all the way down to mimic native bone. It’s also the only synthetic to be combined at a level that we are with silicate substitutes, and therefore we can see it triggers what we call a dual bone formation pathway.

So with that challenge and background, let’s move a little bit on to, our clinical programs and what we are doing and what we have published to generate the evidence behind this. This is an overview of, I would say, the larger preclinical and clinical programs, and we have four studies, here. The first preclinical study, which is called the Boden model, was published in 2020 and is now fully reported and published. A week after we made the product technically available in The US, we also initiated TORF fusion, which is our first in patient study. That study is now also fully completed and published.

And the following year, we started our prospective spinal fusion registry called PROPEL, which is ongoing and now has more than 300 patients enrolled. And as we have previously indicated, we expect to publish the clinical results for the first one hundred patient cohort in the near term. And then, which we’ll come back to in a second, we have also performed an additional preclinical study which were published last month in what we call an ova and intramuscular defect study. And the reason for doing that is that it’s an even more challenging model than the Boden head, and it essentially mimics a very extreme case of anovascular error in the human body. So we’ll come back to to all of these in a second.

What I really want to demonstrate here is the pattern we are seeing when it comes to, clinical evidence, preclinical and real, real clinical evidence, on why Catalyst is such a differentiated and brings something substantially new to the table. So if we go all the way back to 2020, we published, the first preclinical study, which was also the study used for five ten k clearance in the in The US market. We not only saw very high fusion rate similar to those of the well known BMP two drugs, more importantly, we saw very rapid bone formation after six weeks, which was double that of the FDA gold standard autograft and four times compared to the predicate device that we tested against. Last month, we then published a highly exciting new preclinical study specifically comparing the bone forming potential of different silicate containing calcium phosphate synthetic bone grafts, which was published in the peer reviewed Scientific Journal of Orthopedic Surgery and Research. The research which was led by esteemed professors from the University of Aberdeen and the University of New South Wales in Australia compared various synthetic bone grafts in a preclinical setting.

And the results were quite striking. Ostezine Catalyst has emerged as the first clinically available synthetic bone graft capable of generating robust functional bone in a very challenging vascular environment at an early time point. And the study employed what we call an ovine intramuscular defect model, maybe a little bit technical here, but it’s a sophisticated model that basically mimics real world conditions. And over six and twelve weeks, the researchers observed the performance of three commercially available synthetic bone graft substitutes. And the results were very clear.

Ostezine Catalyst outperformed its competitors demonstrating significant functional bone as mentioned after six weeks. And therefore, when we look at this, it’s not just a scientific advancement. It’s a very practical solution that really could transform patient outcomes. The abilities to stimulate new bone growth in challenging conditions, of course, also opens up to new treatment, possibilities for surgeons. Similarly, if we move on, when we published our twelve month data from our first clinical study of fusion in January of twenty twenty four, we not only again saw a very high fusion rate of ninety three percent, we also, follow patient very closely and after three months we could see that every single patient were either fully fused or partially fused at a very early time point.

And of course last month we followed up with a long term twenty four month, result from the same study showing that fusion rate had now increased to one hundred percent, meaning that all patients had a successful outcome. On this slide you can also see the progression to fusion, and I want to point out here, as you can see, that after only six months we had two thirds approximately of all patients fully fused. And the same observations have been consistently, confirmed in the case reports that we’ve either published or written up as white papers, of which you can see two examples here. So to sum it all up, the very clear pattern we are seeing across numerous preclinical and clinical publications, studies, registry is that we have now consistently reported not only strong outcomes, but also an incredibly fast speed of fusion that significantly outpaces what is typically seen in the market, which is something that surgeons also observe and are, of course, attracted by and something that, patients benefit from. So when we if we take a step back, despite only being active in the orthobiologic space for a little more than three years, we have already built a very solid repository of evidence with a total of 14 preclinical and clinical publications and white papers.

And I think it’s worth pointing out, when we entered 2024 in January of last year, we did not have a single piece of clinical evidence but had commercialized solely on the preclinical evidence from the golden model. So during the last sixteen months or so, we’ve therefore generated more than 10 publications and white papers, which is something that I’m incredibly proud of and which is crucially important to the company, not only now, but also, in the future. We are doing all the right things here and setting ourselves up for future success. And that is of course also knowing that we still have 90% of the, US, orthobiologics market within spine, which is still untapped. And of course while we are very, pleased with the progress today, we are a lot more preoccupied in how to, gain access to the remaining 90%.

And equally, as we contemplate entry into adjacent segment in the future where we are already cleared, all the clinical data that we’re generating will also help us when, we decide to put some more weight behind future expansion. So to sum it all up, you’ve all seen this slide, before. We can conclude that things are going well. The company is on a strong trajectory with strong fundamentals in place. We’re seeing a high, growth momentum.

We are maintaining a very high gross margin. And as I tried to demonstrate today here, we have a highly differentiated offering to the markets that solves the core clinical challenge, in this vascular space. And we are continuously building further clinical support to, evidence to support this. So we have an enormous untapped potential, and it’s therefore all about continuing to execute on the four strategic approaches, which you know well, which is to build access and coverage in The US market, leverage the powerful Catalyst technology to bring new products to the market, build clinical evidence, and gradually over time expand into adjacent orthopedic segments. So I think with those words, I want to thank you all for listening to the presentation and hand back to the operator who will handle questions.

Webcast Moderator: Thank you so much for the presentation, Eir. And as you mentioned, we will now carry on with the Q and A here. So the first question here. Can you elaborate on what is driving sales? It’s quite hard to get a good picture with such silly information.

Morten Hinnenwald, CEO, Osterstein: Yeah. I mean, we, we don’t necessarily disclose all the operational, elements of of the business. I can confirm that, growth is is is driven as you would expect by two things. It is access to new accounts and onboarding new surgeons, but it is also driven by a, an increasing usage by surgeons in the accounts we were already approved.

Webcast Moderator: Thank you. Has there been any pushback on price and have any customers decided to stop using Catalyst?

Anders Wenzhen, CFO, Osterstein: Well, there’s you always get pushback from customers who want to pay less, but we don’t really accept that. So we’ve managed to maintain and even excel in terms of average sales price in the market.

Webcast Moderator: Thank you. Can you elaborate on the expected patient population from Propyl and how it may impact results from the first hundred patients?

Morten Hinnenwald, CEO, Osterstein: Well, you know, if we go a little bit step back, the reason why a registry is very meaningful not just to us but also to surgeons is that when you’re doing a randomized controlled study, the patients are always very clean. Right? They can be an NSAIDs. It’s typically a very simple procedure. A registry, on the other hand, is a true reflection of the real real world population.

So we know when that publishes that it’s gonna be a much more complex cohort. You’re gonna have patients, suffering from obesity, diabetes. You’re gonna have smokers in there. You’re gonna have multi multilevel, procedures, taking place. You’re gonna see, several comorbidities with patients.

So it it will be a much, much tougher and complex cohort that we will publish on than what you typically see, in a randomized controlled study, which is, of course, something that that everyone needs to be mindful of when they start to compare outcomes. But as I said, we are waiting for the publication to come out, which we expect in in the near term, and then we can talk more about that.

Webcast Moderator: Thank you. What is your confidence level that the cash position will be enough for you to reach a positive cash flow?

Anders Wenzhen, CFO, Osterstein: Well, that’s a tricky one to answer because, of course, that depends on so many factors, not the least what our board decides for us going forward. But I think if you just go back to the report, I think it’s we feel pretty confident with the cash we have right now, at least in the medium term. And as you can see, looking just at the cash flow in Q1 reported, that was quite substantial. But if you see that what we’ve in our analysis there and you take out the quarter specific payments which which occur in Q1, we’re down to around about sorry, 8,000,000, which is fairly similar level to what we had in Q4 and Q3 last year. So I think if you start at that level, you can see that that’s going to last for many quarters.

So we don’t see any immediate urgency there.

Webcast Moderator: Thank you. Could you highlight how the momentum looked through the first quarter? Anything that surprised you, especially interested in the finish of the quarter and potentially also how Q2 has started? No.

Morten Hinnenwald, CEO, Osterstein: I mean, we are seeing a good solid strong trajectory throughout, and we’ve also seen that continuing into the beginning of the second quarter. So I think as in previous quarters, we’re seeing a good steady momentum.

Webcast Moderator: Thank you. How are you seeing investment needs of the company from here? What can you share on timing of expanding to further segments such as exterminates? Also, how are you looking up on the regions outside of The US?

Morten Hinnenwald, CEO, Osterstein: Well, that’s a few questions in one. Let me try to answer it. So we have a very large untapped potential in spine for biologics where our focus is. So we are preparing to enter new segments. We are collecting data.

We as you know, we have had users in particular in the foot and angle segments from the very beginning. We launched a product. But, of course, when exactly we will put more weight behind to to enter that at full force, time will decide. That’s not something we we can guide on. When it comes to new markets, we see a huge potential as a as a something like a broken record here, but we have 90% of the market that we’re not even addressing in The US.

So we will remain US focused for the foreseeable future. When and if we decide to go into markets later on, that will eventually also depend on what clinical data is required in particular under the new MDR regime or or any other markets in the world. But for now and the foreseeable future, we will be an entirely focused US company.

Webcast Moderator: Thank you. What clinical milestones do you think we should look out for in the coming twelve months?

Morten Hinnenwald, CEO, Osterstein: Well, I think the big one clearly is the PROPEL first patient cohort. It’s a first large, cohort we’ll be publishing. It will carry statistical significance, and it will be an absolutely true reflection of the real world population as I mentioned before. So to me, that’s the big one. But, of course, right now, we have more than 300 patients.

We’ve decided to keep building that registry. It, it is extremely meaningful to us. We’re also seeing the FDA taking a more flexible stand to using registry data for for further indication expansion potentially. So, we will keep publishing, not only case reports, but also cohort studies, from the registry. I can’t say exactly, which one right now.

The the next one would be the first hundred patient cohort.

Webcast Moderator: Thank you. Did anticipation of tariffs lead to upfront demand in Q1?

Anders Wenzhen, CFO, Osterstein: Sorry. I’m not sure what you’re saying.

Webcast Moderator: Yes. I can repeat. Did anticipation of tariffs lead to upfront demand in Q1?

Anders Wenzhen, CFO, Osterstein: No, not at all. I mean we have the tariffs have such a small impact anyway, so that’s I don’t see why that would drive demand. They have the prices they have, so.

Webcast Moderator: Thank you. How is the underlying market developing in The U. S? What are the key trends?

Morten Hinnenwald, CEO, Osterstein: Well, think we’re seeing very much I don’t know if you would call it a stable market these days, but at least within the the business we are operating in, I think it’s fairly stable. I think we’ve seen, more stability around the hospitals. Post COVID, we we saw a number of bankruptcies, hospitals posting really bad results. I think it’s important to point out that we are typically dealing with a patient population which is plus 60 years old, and that population, will only grow very, very significantly, not only tomorrow, but many, many years out. On a global scale, it’s set to double in the next twenty five years or so.

So we are seeing a very healthy, volume demand many, many years out in in this industry.

Webcast Moderator: Thank you. What is included in the net financials, 1,900,000.0 minus SEK? Do you want me to repeat the the question there?

Anders Wenzhen, CFO, Osterstein: Okay. Okay. So and I just had to look at it.

Webcast Moderator: Ah, sorry.

Anders Wenzhen, CFO, Osterstein: That’s just basically exchange rate effects from the balance sheet.

Webcast Moderator: Thank you. And how do you see your operation cash flow developing during the year compared with the minus SEK 25.9 in Q1?

Morten Hinnenwald, CEO, Osterstein: I think Anders already answered that question. Right? We we have a number of, you know, items that occur in in q one, which is the bonus payment every year and also some extraordinary LTIP costs coming in. And, I think Anders guided that the underlying number around, eight to eight, nine, million, that that’s the true underlying, number that people should be thinking of. Yep.

Webcast Moderator: Thank you. Thank you. Let’s see here. How has the weaker USD currency affected sales and results in Q1?

Anders Wenzhen, CFO, Osterstein: Well, first of all, it isn’t weaker. It’s stronger. So it hasn’t really it’s sales positively. I think people get a bit confused because the dollar has come down so much from mid February, early March onwards to a very low level now, but it was extremely high all the way through January and half February. So if you look at the average for the for the quarter, it was higher than quarter one last year.

So we actually had a positive effect. As you’ve seen from our growth numbers, have 65% reported growth, but only 60% if we reported in the FX adjusted. On the profit or EBIT line, there isn’t really much impact either way because we have so much cost now in U. S. Dollars that it’s pretty much a natural hedge.

So there’s not going to be much effect there.

Webcast Moderator: Thank you. Will you report currency adjusted key figures on sales in USD so that it’s easier to track sales going forward?

Anders Wenzhen, CFO, Osterstein: No. We’re not going to report key figures on that level. We will mention how it affects sales, how it affects gross margin, and how it affects cost and EBIT as we do now, but we’re not going to break down and report new key figures.

Morten Hinnenwald, CEO, Osterstein: But of course, as we have done for many, many, many quarters, we are reporting sales growth in on a reported basis and on a constant currency basis, and that essentially answers that question.

Webcast Moderator: Thank you. And moving on to the last question here. Could you come back on your hiring ambition in The U. S. In the short term and the medium term?

Morten Hinnenwald, CEO, Osterstein: Well, I think we’re not really disclosing exactly what we are hiring. What we do know is that we are, we are building our production capacity right now, knowing that we’re gonna have to start producing into 26 demand. And that may that may drive a need for for a very few number of people. And as always, we have more more approvals than we can necessarily chase on a day to day basis. So you’ll probably see us increasing the number of salespeople by by a very small amount, but it’s gonna be very moderate in overall.

Webcast Moderator: Thank you so much for the presentation here today, and thank you all for tuning in. I wish you a pleasant week.

Anders Wenzhen, CFO, Osterstein: Thank you.

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