This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: Welcome to ISECURE's conference call on the financial results for the nine months ended September 30, 2022, and update on recent operational highlights. Management will provide an overview of ISECURE's financial results as well as clinical, commercial, and operational highlights. Participating on the call today are ISECURE's CEO, Eyal Shamir, and CFO, Ronen Simmerman. They are joined by Dr. Hania Bednarski, Oncoplastic Breast Surgeon and Cryobolation Specialist at Serenity Surgery and Wellness in Myrtle Beach, South Carolina. Currently, all participants are in a listen-only mode. Following the presentation, ice cures management and Dr. Bednarski will be available for the question and answer session. Before we begin, I will now take a moment to read a statement about forward-looking statements. This call and the question and answer session that follows it contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Words such as expects, anticipates, intends, plans, believes, seeks, estimates, and similar expressions or variations of such words are intended to identify forward-looking statements. For example, we are using forward looking statement in this presentation when we discuss pursuit of regulatory approvals in various jurisdictions, strategic plans, commercial growth, expansion of clinical applications, release of results from our clinical trials, potential market adoption, and future sales of ice cures, minimally invasive cryobolation technology, advancing regulatory and commercial strategies, and expected quarter over quarter revenue variations, and other key business and operational highlights for future periods. Because such statements deal with future events and are based on IceCure's current expectations, they are subject to various risks and uncertainties, and actual results, performance, or achievements of IceCure could differ materially from those described in or implied by the statements in this presentation. The forward-looking statements contained or implied in this presentation are subject to other risks and uncertainties, many of which are beyond the control of the company, including those set forth in the Risk Factors section of the company's annual report on Form 20-F for the year ended December 31, 2021, filed with the SEC on April 1, 2022, which is available on the SEC's website, www.sec.gov. The company undertakes no obligation to update these statements, or revisions or changes after the date of this release, except as required by law. I will now turn the call over to iSCURE CEO Eyal Shamir.
spk03: Hello, everyone, and thank you for joining us today. We will start this review of our significant business development for the third quarter of 2022, followed by an interview of the financial results of the nine months ended September 30, 2022. We will then hear from Dr. Badnarski, who will share her thoughts on breast tumors cryoablation from the breast surgeon's perspective before opening the call for Q&A. An already adopter of the technology, Dr. Badnarski has been performing cryoablation for benign and malignant breast tumors since 2014. During and immediately following the end of the third quarter, we made huge strides towards the commoditization of process for breast cancer in the U.S. on both the regulatory and reimbursement fronts. We believe women with a low risk early stage breast cancer need a better alternative to the current standard of care of lumpectomy. Minimally invasive cryoablation, which destroys tumors without open surgery, reduces recovery time and cost while improving cosmetic outcomes. Most importantly, our vast I3 clinical trial interim data for ProSense breast cancer treatment show a recurrence-free rate at approximately 97%. In October, we submitted a de novo classification request regulatory filing with the FDA for marketing authorization of ProSense for the indication of early stage low risk breast cancer in patients who are at risk to surgery and therefore are not suitable for surgical alternatives. These initial indications alone represent approximately 43,000 women in the U.S. annually. We were able to submit for marketing clearance based on our very strong results on our interim I3 clinical trials analysis. In the first half of 2024, we expect to release the final results from the I3 five-year follow-up. At that time, we plan to file for a broader indication with the FDA reflecting the entire study population of early-stage low-risk breast cancer for patients age 50 and over, representing approximately 65,000 women in the U.S. annually. In the future, we plan to explore more indications for additional subgroups that are part of the total group of Luminal A breast cancer. An estimated of 144,000 cases annually for women of all ages in the US. While we look forward to the FDA's response to our filing, we have concurrently achieved a significant milestone in the Medicare reimbursement in the US for prosence breast cancer treatments. In November, the Center of Medicare and Medicaid Services assigned prosence breast cancer cryoablation treatment, a specific CPT category three code, which will go into effect on January 1st, 2023. Under the CPT category three code, the prosence breast cancer treatment try for a coverage at approximately $3,400. This is for the facility fee alone. We expect additional coverage, including payments for the physician, upon establishment of the permanent CPT Category 1 code, which will condition on several factors, including our receipts of FDA marketing authorization of the FDA for breast cancer. To our knowledge, iStew is the first and the only company to file and receive a CPT code for cryoablation of breast cancer. We were able to achieve this based on our results of our i3 study, the largest controlled multicenter clinical trial ever performed in the U.S. for liquid nitrogen-based cryoablation of small, low-risk, early-stage malignant tumors as an alternative to surgery. We are proud of this achievement and our leadership position, which helps to pave the way for the wider use of minimally invasive cryoablation treatments that deliver better outcomes for patients. Globally, we made additional advances on our regulatory front. In Brazil, process cryoprops and introducers, which are essential single-use disposable components of our process system, received regulatory approval for indications including breast and other cancers, benign tumors, and palliative interventions. Applications for the process were also filed in Canada and Vietnam. I will turn the call over to Ronen now for the financial results. Before I do, I want to point out a very encouraging trend and that is the increase in sales of our single-use disposable props. This indicates that the increasing number of treatments are being conducted with the installed base of POSIM system across the world. While our quarterly revenue may continue to be variable in the near future, we see the prop sales as a positive indicator for market acceptance on our liquid nitrogen-based cryoablation therapy which we believe will translate into sales. Roland?
spk02: Thank you, Eyal. For the nine months ended September 30, 2022, revenue decreased by 22% to approximately $2.1 million, compared to approximately $2.8 million for the same period last year. The decrease is due to decreased revenue recognition of approximately $500,000 from the distribution agreements with the rumor corporation and a decrease in sales of new systems, which was partially offset by higher sales of disposable probes as previously sold and installed systems were utilized for procedures in clinical settings. For the nine months ended September 30th, 2022, sales in the US and Europe increased by 65% and 37% respectively. compared to the same period in 2021. The increase in sales in the US and Europe was offset by a decrease in sales in Asia and other territories. Gross profit was approximately $1 million for the nine months as of September 30, 2022, compared to approximately $1.6 million for the same period last year. Gross margin was approximately 46% from the nine months ended September 30, 2022, compared to approximately 56% for the same period in 2021. The decrease in gross margin compared to the same period last year was attributable mostly to the decrease in sales and in revenue recognition from the Terumo Distribution Agreement. Research and development expenses for the nine months ended September 30, 2022, were approximately $6.9 million compared to approximately $4.3 million for the same period last year. The increase was attributed to acceleration in development of iSCU's next-generation single-probe system and due to clinical and regulatory activities. Sales, marketing, and general administrative expenses for the nine months ended September 30, 2022, were approximately $6.9 million compared to approximately $3.9 million for the same period in 2021. The increase was attributed to the company's expanding commercialization efforts and to increased NASDAQ listing related expenses. Total operating expenses for the nine months ended September 30, 2022 were approximately $13.8 million compared to approximately $8.2 million for the same period last year. The increase in operating expenses was primarily attributable to increased development, commercialization, and NASDAQ listing-related activities. As a result of lower revenue and increased operation activities, net loss reported for the nine months ended September 30, 2022, was increased to approximately $13 million or $0.35 per share, compared with a net loss of approximately $6.7 million or $0.25 per share for the same period last year. As of September 30, 2022, iSCURE had cash and cash equivalents, including short-term deposits of approximately $14.2 million. I will now turn the call over to Dr. Hania Bednarski. Dr. Bednarski is an oncoplastic breast surgeon and specialist in breast tumor cryoablation. She is the owner and CEO of Serenity Surgery and Wellness in Myrtle Beach, South Carolina, where she is performing a wide array of breast procedures from biopsy through reconstruction of the breasts. She's also author of the book Freeze Breast Cancer, Your Guide to an Alternative Breast Cancer Treatment. Dr. Bednarski recently co-hosted an ISQ webinar titled Breast Tumor Cryoablation for Breast Surgeons that was well received by fellow breast surgeons and radiologists. We are very pleased to have her join us today.
spk00: Thank you so much. So I want to start by just mentioning a few things about the ProSense cryoablation system. It's truly easy to use. It's simple to set up for office-based procedures. I've been using the system off and on since 2014 and more regularly since 2019, 2020. And recently, it's my single cryoablation system in the office. Liquid nitrogen is really easy to handle. It's readily available, super easy to source in the area. This saves a lot of time for the patients and the providers. So with a cryoablation procedure, fibroadenomas can be treated in as few as 15 to 30 minutes, depending on the size and the location of the tumor. And breast cancer cases can be treated within an hour to an hour and a half. There's no need for general anesthesia. This is done under purely local anesthesia. Patients are very comfortable throughout and they can resume their normal activities just as soon as they would after an ultrasound guided biopsy. The other thing that I really appreciate about cryoablation for breast tumors is that we get really wonderful cosmetic results. regardless of the size of the tumor and regardless of the position of the tumor in the breast. Unfortunately, when we do surgery for breast cancers, especially at the upper inner breast, we can often get a defect that's quite visible. There's very little breast tissue there in the first place. And when we take out more tissue in that décolletage area, patients can really have a defect, even if they don't have a scar, even if the scar is well-positioned. the defect tells all and patients can be very self-conscious of that. The other thing that I'll mention is that re-excision statistics in the United States at least are about 20 to 40 percent depending on the study that you look at for general surgery applications. So when we do surgical excision of breast cancers in 20 to 40 percent of the cases we have to go back for additional margins meaning that our margins are not clear. So we have either a very close margin of breast cancer or breast cancer is found at the edge of the margin that's removed. And interestingly, with surgery, we aim for a minimum of a one millimeter margin. There are some studies that will say no ink on tumor, but one millimeter is the generally accepted margin for breast surgery. With cryoablation, we actually aim for one centimeter margins, so 10 millimeter margins, and that's really quite refreshing, and you can actually watch the ice ball form on ultrasound in real time, and that gives me a lot of confidence in achieving the margin that I need to achieve. In the operating room, this is a lot more difficult, even with the use of ultrasound. I feel that I've gotten really wonderful support from IceCure's clinical training team. It really doesn't take long to feel comfortable using the system. My staff can use the system with facile procedure. And it's been really great that, you know, in a private practice, I've been able to set up breast cryoablation with very minimal issue, really no problems at all. And patients want this procedure, they're willing to pay out of pocket for the procedure. I personally do not take any insurance in my office and everything is out of pocket and they are willing to pay that. So it's been really refreshing to give this procedure to office, procedure to my patients and to have really good success. And I'll turn it over for any questions.
spk03: Thank you, Dr. Badnowski, for sharing your insights. I'm sure our shareholders appreciate your perspective as a clinician in a private practice who has been using ProSense.
spk01: Operator, we would like now to open the call for questions. Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star 1. If you wish to cancel your request, please press star 2. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be polled in an order they are received. Please stand by while we poll for your questions. The first question is from Ben Hainor of Alliance Global Partners. Please go ahead.
spk05: Good morning. Thanks for taking the questions. First off, for Dr. Bednarski, I appreciate you sharing your experience with the ice cure system. Do you also perform lumpectomies? And if you do, when patients are presented with a cryoablation option versus lumpectomy, what goes into that decision for a lot of patients?
spk00: Yes, I absolutely do. So I am an oncoplastic breast surgeon, meaning that I do everything from biopsy through reconstruction, and I absolutely do partial mastectomies, lumpectomies, and mastectomies in my practice and reconstruction of the same. You know, this is an interesting discussion. So for patients that fit the criteria of undergoing cryoablation, it's very much a personal choice. discussion at that point as a personal decision-making process, I should say at that point, as far as, you know, I equally offer both at that point. So if they fit the criteria for luminal A tumors in women over 50 years of age, they really could have either or. So at that point, it's very much a decision on the patient's part of There are some women that simply will not rest until the tumor is sitting on a pathologist's desk. And obviously cryoablation does not offer that. With cryoablation, we freeze the tumor and then the cryoablation zone, the necrotic tissue stays in the breast and then slowly is dissipated over time. But if a woman is the type of person that really just wants that tumor out, she's not going to go for cryoablation. The other part of it is, at that point, cost. Again, I don't take insurance in my practice. However, patients can apply for insurance, and there's no question that it's much easier at this time to get reimbursement for a lumpectomy or partial mastectomy than it is for cryoablation. I'm hoping that that's going to change in the future, but for now, I would say that those are the two biggest decision-making points.
spk05: And for the ones that want to see the tumor on the table, what's your sense of what proportion of women want to see that?
spk00: So if cost is taken out of the equation, if we're just talking about that specific angle, I would say it's not a big number. It's probably only about 10% of those patients.
spk05: Okay, so it's fairly small. It really is. You've been doing cryoablation since 2014. It sounds maybe a little bit like you've used systems other than ProSense. Is that the case? Any color on how it stacks up? I mean, it sounds like you're in favor of liquid nitrogen as a better experience for you, but any color there would be helpful.
spk00: Yes, you're absolutely right. So I started with ProSense system. I tried a couple of other systems. And I guess it speaks for itself that I came back to the ProSense system. I came back to IceCure and their machine. I do feel that this is really the best system on the market, for me at least, for my use. And I really do like it. I think it's very easy, very straightforward, simple. I trust the liquid nitrogen aspect of it. I feel that the coolness, the cold that we get with liquid nitrogen is much better than other and I feel that the probes are really well-sized and achieve a really good margin for our patients.
spk05: Okay. That's helpful. And then, you know, just your sense of what your colleagues or peers think of cryoablation. I mean, is it kind of known at the moment? I mean, do you think once they get an FDA clearance on label that it becomes a bigger problem? modality pretty quickly or how do you think your peers think about cryoablation for breast?
spk00: Yeah, so at the American Society of Breast Surgeons meeting in May of this year, our last speaker of the conference who was the past president actually talked about how important it is to be well-versed in cryoablation. And essentially, if you're not doing cryoablation, you're being left behind. And I do believe that that's true. So to answer your question about awareness, I think that the awareness is definitely there. I'm truly hopeful that with FDA clearance, that yes, more and more of my colleagues will take on this process because it's just such a wonderful thing that we can do for our patients.
spk05: Excellent. And then a couple for, I guess, Vernon and Al. You know, just considering now we've got, you know, a handful of weeks left in Q4, is there anything that you can kind of share in terms of, you know, what the financials for Q4 might look like on the revenue side or anything we should be on the lookout for on the expense side?
spk03: Ben, thank you very much for the question. As you know, Ben, we didn't give or we are not giving, you know, any guidance, you know, for revenue and expenses. You know, we will report it at the beginning of the year like we are doing it normally.
spk05: Okay, that's fair enough. I just thought I'd try it. And then, you know, congrats on getting the FDA submission in. You know, have you guys had any conversations with the FDA post the submission and, you know, anything you can share on that process?
spk03: We have a continuous discussion with them after we had the submission on October 18. We don't have anything, you know, yet to report, but we are sharing information with the agency in order to get the clearance.
spk05: Okay, so there's no surprises or showstoppers on that point?
spk03: Not at this stage. We have a continuous good discussion.
spk05: Okay, well, thank you guys for taking the questions, and congrats on all the progress.
spk01: Thank you very much. The next question is from Anthony Vendetti of Maxim Group. Please go ahead.
spk06: Thank you. I'll start with Dr. Bednarski. So that was really helpful. Thank you so much for sharing your experience with patients and your expertise. I was just wondering on tumor size, with the ProSense system, do you feel that there's a limit to the size, or is that just a limit right now based on the way the system's set up and the consumables? And do you believe it could be used for larger tumors?
spk00: Thank you for the question. So the way that the probes are currently manufactured, each probe, breast cancer, we're talking about breast cancer here, will be able to manage a two centimeter tumor. you know, maybe 2.2 centimeters. We really don't like to go much bigger than that because we want to make sure to cover the entire tumor with a one centimeter margin all the way around. That said, hypothetically, there's nothing to say that you can't place multiple probes within a tumor. So if a tumor is larger, you could potentially have overlapping ice balls and overlapping probe positioning to cover a larger tumor size.
spk06: Okay, that's helpful. And then in terms of the stages, right now it's for early stage breast cancer. Do you see that evolving to be able to treat later stage or once it gets later stage, that's when, you know, you talk about different options?
spk00: Well, I think that some of both is available. So yes, I do see the system being able to be used for larger tumors, later stages. So right now, stage one is what it's being used for, which essentially is defined as a tumor less than two centimeters. Tumors two to five centimeters, that automatically bumps them into a stage two breast cancer. So Yes, I definitely see it being potentially useful for larger tumors. At the same time, there are some breast cancers that simply would not be treatable by cryoablation no matter what. So things like inflammatory breast cancer should not be treated by cryoablation. Tumors that actually infiltrate the nipple itself you know, that's something that should not be treated with cryoablation. So there are certainly limitations, but generally, I think that this system can be used quite extensively for many different applications in breast cancer.
spk06: Okay, that's very helpful. And since, Dr. Bednarcy, you've been doing this since 2014, just if you can give us a little more color on the... competitive cryoablation systems out there. I know you said you came back to the ProSense system. Just in terms of what other systems are out there, was it just the liquid nitrogen or anything else specifically about the ProSense system that you said this is clearly the best system out there? A little more color on that would be very helpful. Thank you so much.
spk00: Sure, thank you. So one thing that I'll mention, I believe I mentioned it earlier, is the support from IceCure. I think that that is a huge aspect of why I came back to this system. That said, yes, there are some competing systems on the market, mainly argon-based, and I feel that argon-based systems are – subpar, quite honestly, for breast cancer use at least. Certainly, maybe for other cancers, they can be used more facilely. But for breast cancer, I feel that the probes are much smaller. The tissue does not get as cold. It really is not as effective from my experience and my reviews of the literature. As far as liquid nitrogen competitors, I don't know that there are any right now. There were some in the past, and I believe I've heard some talk that there are some trying to facilitate themselves. But right this minute, I believe that IceCure is the only liquid nitrogen-based cryoablation system on the market.
spk06: Okay, great. That's very helpful. And then just one question for you all. I know you received regulatory approval in Brazil and you submitted approvals in Canada and Vietnam. You submitted for those. Any update on expectations? Is that on schedule in Canada and Vietnam? And then now that you have approval in Brazil, Can you talk a little bit about the commercialization there? Thank you.
spk03: Thank you, Anthony. So I would like firstly to clear about Brazil. Brazil required two submissions. So we got already, as I mentioned in my review, that we got the regulatory approval from Anvisa on our single-use probes. We are still waiting to get the approval on our machine, on our box. This should be during the first semester of next year. We have already assigned distribution agreement and they started to do soft launching and actually even sending some breast radiologists and breast surgeons to some training in the U.S. So as soon as we will get the regulatory approval, we will start commercialization, which is supposed to be before summer. Canada has also expected to be doing the first semester of next year, as well as Vietnam. So this is the plan.
spk06: Okay, so everything's on schedule. Yes. Okay, great. All right, thank you so much. I'll hop back in the queue.
spk01: Okay. The next question is from Kemp Dolliver of Brookline Capital Markets. Please go ahead.
spk04: Thank you and good day. I have a couple of questions for Dr. Bednarski, mainly related to her practice. So how many breast cancer cases do you see annually and how does the demographics of your patients patient population square with the data that is in the press release and has been talked about with regard to percentage that are low-risk cases versus high-risk cases, for instance, as a starting point?
spk00: Yeah, so I will mention, thank you for the question, I will mention that I have recently had a change in my practice. So I was hospital employed earlier in the year and recently came back into private practice and As an aside, I've been doing cryoablation both in hospital employment and in private practice. So my practice has changed a bit. So my numbers have dropped a little. And I would say that right now I'm averaging probably about 120 new cancers a year. In the past, I've averaged about 200 to 250 breast cancers per year. numbers have dropped a little bit, especially with the change in my practice with going to all cash-based practice. That said, I feel that my patient population percentages really do follow the general population. So there's really no difference there. And I would say that about 60 to 65% of my patients are, you know, stage one luminal A cancers, which is in line with the general population uh so i think that you know that's of of the patients that i see about 60 to 65 very easily fit into the criteria for cryoablation procedures great thank you and you mentioned earlier that roughly 10 of your patients just want the lumpectomy um
spk04: And I'm curious, do you notice any demographic patterns here? For instance, I'm wondering if these are older patients who are just emotionally tied to lumpectomy versus younger patients who may be more open to trying something new.
spk00: Interestingly, I would tell you that there's really no demographic difference. I've seen both respond very similarly and very differently all at the same time. So I would not say that there's a specific demographic that fit into that type of assessment. Although I will say that, not that we can really call a certain demographic on this, but those patients that are much more anxious are the ones that will want that tumor out. The ones that no matter what you tell them, even when I tell them breast cancer is not an emergency and we have time to put our thoughts together and get all of our ducks in a row and all of that good stuff, the reality is that there are some patients that they hear the word cancer and it's automatically, it's such an emotional emergency that it becomes a medical emergency. And they really just want that tumor out.
spk04: Got it, thank you. And what improvements would you like to see in either the console or the probes?
spk00: Yeah, I think that the only improvement that I would love to see at this point is the hose that connects the probe to the console is a little bulky and difficult to maneuver. So I would say that that's probably it. The handheld probe fits very nicely in my hand. I have a, I guess, a mid to large hand for a woman, but it's really very easy to use. It's not heavy. It's easy to maneuver. But that hose, if we could make it a little bit more pliable, I think that that would be my only concern. The footprint of the machine, the footprint of the console is nice. It's, you know, I think for my practice, it works just fine. I don't know if there's a possibility to make the console smaller, to have a smaller footprint, but honestly, I think that it works just as it is.
spk04: Great, thank you. And one last question, and that is, How did you finance the acquisition of the system? Because there are presumably numerous options out there with regard to how you structure the transaction.
spk00: Correct. So I'm currently leasing the unit and I am purchasing the disposables. And that's working out very well.
spk04: Great. Thank you for your answers.
spk01: Thank you. If there are any additional questions, please press star 1. If you wish to cancel your request, please press star 2. Please stand by while we poll for more questions. There are no further questions at this time. There is a follow-up question from Ben Hainor of Alliance Global Partners. Please go ahead.
spk05: Hey, just a couple quick ones for Dr. Bednarski. How do you structure your days when you are doing the cryo places? I mean, do you do it every couple weeks and do a handful of patients, or is it just, you know, as the folks kind of come into your office and choose their treatment modality?
spk00: So right now we're doing... We're doing them in sets of Monday, Tuesday, Wednesday timing. And I would say it averages out to about every other week. So I'll do a whole bunch, you know, within three days. And then we have our off time so that we can honestly interview more patients for eye oplation. And then we do a whole bunch again. So it's really been refreshing to see how many patients are opting for this procedure. And I feel that I'm just going to get busier and busier. But right now, we're doing them kind of in bulk. So we'll do a whole bunch, and then we'll take a week or two off and then do a whole bunch again.
spk05: Okay, that makes sense. You know, just being that you broke the book on... the cryovolation in breast, what's the furthest away that you've had a patient come to your practice from?
spk00: So I'm in Myrtle Beach, South Carolina, and I really appreciate this question because I think it's a lot of fun to talk about. So the furthest patient right now that's come to me has been from Los Angeles, California. I do have a patient currently that's reaching out to me from Gibraltar. So I'll be speaking with her later today. But, yeah, it's super exciting. I've had patients from all over. I have had a patient from Canada reach out to me. We have not decided that she's actually a good candidate for the procedure. But I can tell you the patient from L.A. not only reached out to me, but she's already had her cryoablation with me. Cool. Okay.
spk05: There's more for my own curiosity than anything, but thanks for taking the follow-up question.
spk00: Of course.
spk01: This concludes the iSecure third quarter 2022 results conference call. Thank you for your participation. You may go ahead and disconnect.
Disclaimer