The company now has enough money for commercialization in the US
Nyxoah, a medtech company that combats sleep apnea with an implantable neurostimulator, signed an agreement with the European Investment Bank (EIB) for a credit facility of 37.5 million EUR at the beginning of July. Earlier this year, the group already raised 47.5 million EUR in capital. Now, the group has sufficient resources to commercially roll out its Genio system in the US, pending FDA approval. CEO Olivier Taelman, who will soon move to the US, puts this all in perspective.
Yu Zhang, Head of Division – Equity and Growth Capital – Industry 4.0 & Life Sciences with EIB & Olivier Taelman, CEO de Nyxoah
Sufficient Funds Secured
“In the medtech sector, it is crucial to maintain a strong cash position,” says Taelman bluntly. “Securing this credit facility with the EIB should be seen in that light.” This facility amounts to 37.5 million EUR and consists of three tranches. Nyxoah can access the funds as needed, and they have already drawn the first tranche of 10 million EUR with an interest rate of 5% and a capitalized interest rate of 5%. Earlier this year, the group raised 47.5 million EUR. “We now have enough funds until the end of 2026 to focus entirely on the commercialization of our implantable Genio solution in the US, once FDA approval is obtained. For the execution of our strategic plan, which includes having enough products and continuing to invest in R&D and innovation, we need sufficient funds.” Taelman emphasizes that he does not want to raise funds in 2025, as the group aims to fully concentrate on breaking into the American market. The revenue figures during the first year of market commercialization are crucial, according to him.
Expected FDA Approval
The FDA approval is expected by the end of this year. On one hand, the group must prepare for commercialization today, but there is still some uncertainty. Taelman does not currently consider this, even though investment house Degroof Petercam still estimates a 10% risk of a negative FDA recommendation. “Attaching percentages to this today is speculative. The biggest risk is something happening to one of our patients during the study phase, but since we have already implanted 560 patients in Europe and are closely monitoring everything, the chance is almost nonexistent.”
Why the European Investment Bank?
How did Nyxoah end up with the EIB? “We try to remain very respectful to all our shareholders when raising funds, both early and new investors. Raising capital through the issuance of new shares is quite direct but always involves dilution. Since we already conducted a capital increase, our CFO explored other avenues without creating a negative perception or the impression that we absolutely need money and want to saddle the company with heavy debts. We avoided so-called credit sharks, who are only out for profit.” This led to the EIB, whose mission is to support innovative companies, which perfectly aligns with Nyxoah.
“Given today’s economic situation, these are not the easiest times,” Taelman continues. “If you can negotiate with the EIB and their terms are acceptable and moderate, the choice is quickly made. The fact that they wanted to enter a partnership where they could generate more if we are successful, through those warrants*, instead of opting for a few extra percentage points, also helped. They firmly believe in our technology; otherwise, they would never have created such a structure.”
Market Potential
Nyxoah specializes in obstructive sleep apnea, which involves the complete relaxation of the tongue at the back of the throat and relaxation of the neck muscles around the windpipe, causing compression and obstruction during sleep, leading to breathing problems. “Some people experience at least 15 obstructions per hour per night but face moderate danger. However, at 30 obstructions, the risk becomes serious as the cardiovascular risk increases fivefold, and the risk of stroke or brain hemorrhage doubles. Each obstruction deprives vital organs of oxygen,” Taelman explains.
He emphasizes that these individuals need effective treatment. “The sleep apnea market is enormous and underpenetrated, with the gold standard today being a CPAP machine and a mask. We know CPAP works well, but you have to wear it, which is inconvenient, can fall off, and makes noise. More than 50% of people who receive a CPAP stop using it within three years. So, there is a real need for an alternative.” Currently, only one player approaches the problem differently: Inspire Medical Systems, a giant with a market capitalization of 4 billion USD. It’s a spin-off of Medtronic, where Olivier Taelman worked for eight years and led the neuromodulation division in Europe. He knows their products very well. “It’s a technology that works well but involves quite invasive surgery with three incisions to implant the pulse generator. In short, an operation that quickly lasts two to three hours. And if the generator’s battery ever dies, you have to go under the knife again.”
Technological Advantage
Taelman believes Nyxoah’s Genio system, named after the genioglossus muscle (the tongue), offers several advantages. “The tongue nerve splits into two branches, left and right, and today we are the only ones in the world to stimulate this bilaterally. Another advantage is that only a small incision of 4 cm under the chin is needed to place a passive device without a battery, performed by an ENT specialist. This procedure takes less than an hour and is done in a day hospital. An additional benefit is that the scar is almost invisible.” The only thing needed, he adds, is to place a small battery under the chin when going to sleep (see photo below). “This activates the device. It records everything and then displays it on an app. The next morning, the sleep quality can be checked, even by the doctor. These are all reasons why we believe we are better positioned than Inspire.”
Taelman points out that since the market is so underpenetrated, there isn’t really any need for competition. “We will simply increase the number of possible treatments, providing a choice between two treatments. Today, there is a monopoly, which neither doctors nor patients like.” Market research among doctors has shown a need for an alternative: 22% of patients eligible for Inspire don’t want the procedure because it’s too invasive.
He secretly hopes to replicate in the US what Nyxoah has done in Germany. “Our treatment has been reimbursed there for two years now, and in that time, we have captured 47% of Inspire’s market. I think that confirms our proof of concept, and doctors and patients indeed want to embrace our technology.” Although the CEO is quite ambitious, he knows the limits. “Our goal is to become a global player in neuromodulation, and our mission is to treat as many people as possible and dethrone Inspire. However, we must realize that we are currently a small Belgian company competing against a renowned company with vast resources and personnel.”
A Different Approach
Therefore, he understands the need for a wise commercial strategy. “We can’t do it like Inspire, which directly targets patients through TV spots during the Super Bowl, among other things. Last year, the group invested nearly 100 million dollars in such campaigns. They bring their technology directly to the patient, hoping they will ask the doctor for the procedure. However, not all sleep doctors are in favor of surgery. We are taking a different approach, directly targeting sleep physicians and positioning our procedure among other alternatives like the mask.”
The CEO explains that a very focused strategy with minimal capital investment will be applied. “In the US, there are 1,400 hospitals currently implanting Inspire. Of those, around 300 generate 80% of Inspire’s total revenue. We have selected 100 of these 300 based on various criteria, including referrals from sleep doctors, where we believe we can be successful. If things go well after six months, we will add the next 100 centers, and so on: a playbook for scalability, as they call it in English.” Nyxoah is leaving nothing to chance and has already done some preparatory work. Of the 100 centers they are targeting first, 24 are already involved in earlier studies, and very recently, they included 35 in a usability study where surgeons are trained. “When you add that up, we already have 60 of the 100 sites that know how to work with our technology.” In the second wave of 100 hospitals, Taelman expects word-of-mouth to have done much of the work.
To help guide this entire process smoothly, the CEO and his family are moving to the US. “The biggest challenge will be hiring the right people to promote our product. That’s also the only reason I want to be there for the first two to three years. I want to meet everyone who comes to work for us. And I know from experience that I can put the right people in the right place.”
Potential Acquisition?
In a recent report, an analyst from Degroof Petercam wrote that ultimately an acquisition would be the best scenario for Nyxoah. What does the CEO think of this statement? “Banks only think about shareholders and return on investment. If we were tobe acquired at a good price, that would indeed be the best financial scenario for our shareholders. But if you look at our mission, which is to treat as many patients as possible, it depends greatly on who would acquire us. If it were ResMed, it could boost our ability to reach more patients. And with those extra resources, everything could move faster.” ResMed is the market leader in CPAP masks and owns 6% of Nyxoah. But Taelman concludes that today, finding a major partner is not the immediate goal. The ambition today is still to get approval, launch in the US, expand further in Europe, and then become a global player.
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*The synthetic warrants give the EIB the right to receive a cash payment from Nyxoah equal to the volume-weighted average price over 20 days of Nyxoah shares, minus the applicable exercise price per synthetic warrant, multiplied by the number of synthetic warrants exercised by the EIB. For the first tranche, 468,384 synthetic warrants with an exercise price of €8.11 are expected to be granted to the EIB, which can be exercised after the maturity date of the first tranche (5 years) or, in exceptional situations, earlier. This means the EIB could receive additional compensation if Nyxoah’s share price averages above €8.11 over a 20-day period in five years. On July 10, the share price hovered around €8.2, already above the exercise price.
