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spk02: Good morning and welcome to the INSPIRE MD third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I'll now turn the conference over to Chuck Vidala with LifeSci Advisors. Thank you. You may begin.
spk03: Thank you, operator. And good morning, everyone. Thank you for joining us for the InspireMD Third Quarter 2022 Financial Results and Corporate Update Conference Call. Joining us today from InspireMD are Marvin Flossman, Chief Executive Officer, and Craig Shore, Chief Financial Officer. During this call, management will be making forward-looking statements, not historical facts, and are based upon management's current expectations, beliefs, and projections, many of which by their nature are inherently uncertain. They involve risks and uncertainties that may cause actual results to differ materially from those expressed in the forward-looking statements. For more information about these risks, please refer to the risk factors described in InspireMD's most recently filed periodic reports on Form 10-K and Form 10-Q filed to the U.S. Securities and Exchange Commission and InspireMD's press release that accompanies this call, particularly the cautionary statements made in it. The call contains time-sensitive information that is accurate only as of today, November 8th, 2022. Except as required by law, it's by RMDs. This claims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to Marvin Flossman, Chief Executive Officer. Marvin, please go ahead.
spk05: Thank you, Chuck, and thanks to everyone for joining our call this morning. Our third quarter results reflect a continuation of our recent progress and momentum. We generated total Seaguard revenue of over $1.4 million, representing growth of nearly 39% over the third quarter last year. During the quarter, we sold 2,624 Seaguard stent systems as compared to 1,709 in the same period a year ago. This represents a growth of 54% year over year. As we share a portion of our sales revenue with distributors in the majority of our markets, procedural volume is a more accurate indication of market penetration and share retention. As we indicated last quarter, we currently enjoy greater than 20% share in approximately half of our markets, with some territories up to over 80%, which remains the bellwether of our focus in dominating the carotid revascularization space with the C-Guard stent system across the broadest vascular specialists treating patients. Launching our new delivery systems, including a new trans-carotid and advanced next-generation transfemoral platform, will enable share growth and accelerate the conversion of vascular surgeons converting to our endovascular platform. As a reminder, amongst vascular interventions, carotid artery disease lags all other procedures in terms of percentage of cases that are treated endovascularly estimated at 25% currently. So when you look at the availability of conversion of procedures to stenting, there remains a significant number of surgical procedures that we believe can be converted with our next generation Micronet mesh protected device, driven by our unmatched clinical data now out as far as five years with best patient outcomes as compared to both first generation stents and open surgery. In terms of market conditions, the regulatory landscape in Europe for all medical device companies remains in the midst of a sea change with new compliance regulations under the new MDR certification for CEmark. We are working with our notified body on compliance and to secure the continuation of our certificate under the new regulation, which currently ends November 12th, while preparing our customers and distributors with sufficient inventory to mitigate as best as possible any potential delays in the certification process. Our presence at important medical meetings is also a key component of our long-term growth strategy and provides an effective platform from which we can espouse the many benefits of C-Guard as compared to both conventional stents and surgery. In September, the C-Guard Optima study was selected in the 2022 TCT conference to be presented as a part of the featured research program. The presentation, which was delivered by Professor Piotr Misialek, reviewed the findings of this multicenter investigator-initiated trial known as C-Guard Optima, comparing both procedural residual plaque prolapse through the stent struts and clinical outcomes of patients treated with C-Guard versus objective performance goals after carotid stenting. Professor Misialek described the results as unprecedented because of the total elimination of carotid artery-related plaque prolapse with C-Guard measured with systemic IVUS ultrasound assessment. The clinical outcome showed at 30 days an ipsilateral minor stroke rate of only 0.57% and no major strokes. This presentation adds to the significant body of evidence that we have compiled over the years, including 1,850 patients demonstrating unmatched performance and stroke prevention delivered by C-Guard with its proprietary Micronet mesh protection. versus all other cast stent platforms and surgical treatment options currently available. Therefore, our strategy remains unchanged, which is to focus on stent performance through superior outcomes and patient care with all specialists treating carotid artery disease. Now turning to other developments. In September, we jointly announced with NAMSA, a leading comprehensive medical technology contract research organization, that we have entered into a strategic partnership agreement to accelerate new product development and commercialization. Speed to market is a critical success factor for any new medical technology, and given the increasingly complex regulatory and clinical requirements in many markets, NAMHSA's full continuum of development services will serve us well as we work to further expand our pipeline as quickly and efficiently as possible. In terms of our US IDE trials, see Guardians. We currently have 19 US sites enrolling patients with plans for two more in Europe. Five sites are now enrolling, and all 24 are actively enrolling sites that are building cases in an accelerating pace, which is very encouraging. Our current outlook remains consistent with enrollment completion by approximately Q1 of 2023. Regarding Japan, we have made progress since our last quarterly update in our discussions with potential distributor partners interested in representing SeaGuard and we continue to see a very high level of interest. An agreement, if executed, would complement the distribution agreement in China we signed last year. As we have noted in the past, Asia is a very important market to us as the existing standard of care for procedural intervention is predominantly endovascular focused and less surgically dominated than the US and certain European markets. In terms of product pipeline, the Seaguard EPS stent platform remains the foundation of our business as the device drives patient outcomes beyond the selected delivery option. To fully utilize the full potential of Seaguard, we are developing two new delivery systems to drive utilization across the broadest vascular specialist community. We continue to advance developments of our new transfemoral delivery system, Seaguard Prime, which will be available in both standard and short-shaft versions compatible with the development of SwitchGuard, our TCAR accessory device. In combination, these will offer a trans carotid option to our portfolio designed for those clinical needs and conversion of greater surgical procedures to the C-Guard EPS stent platform. We continue to work tirelessly toward our goal of changing the paradigm of how carotid stenosis is managed. With C-Guard EPS, we believe we can offer the best patient outcomes and brought a set of tools to unlock the tremendous potential of this rapidly evolving market segment. We look forward to a catalyst-rich 2023 as we continue to establish CGARD as standard of care. With that, I'll turn the call over to Craig to review our first quarter financials. Craig.
spk00: Thank you, Marvin. For the third quarter of 2022, total revenue was $1,431,000 compared to $1,071,000 during the third quarter of 2021. This represents an increase of 33.6%. This increase is predominantly driven by a 38.8% increase in the sales of C-Guard EPS to $1,431,000 in the third quarter of 2022, from $1,031,000 in the same period one year ago. This sales increase was due to growth in existing markets, as well as U.S. sales-related dissents used in the C-Guardian's U.S. Food and Drug Administration clinical trial. Gross profit for the third quarter of 2022 was $366,000 compared to a gross profit of $92,000 for the third quarter of 2021. This represents an increase of almost 300%. This increase resulted from higher revenue and reduction in write-offs, training expenses, and miscellaneous expenses. Gross margin increased to 25.6% during the three months ended September 30th, 2022, from 8.6% during the three months ended September 30th, 2021. Total operating expenses for the third quarter of 2022 were $4,976,000, an increase of $853,000 compared to $4,123,000 for the third quarter of 2021. This increase was primarily due to increases in expenses related to the commencement of the Sea Guardians FDA study and share-based compensation expenses. Net loss for the third quarter of 2022 totaled $4,529,000, or 58 cents per basic and diluted share, compared to a net loss of $4,071,000, or 53 cents per basic and diluted share, for the same period in 2021. As of September 30, 2022, cash, cash equivalents, and short-term bank deposits were $21 million compared to $34 million as of December 31, 2021. That concludes the financial review. Operator, we will now turn the call over to you for questions.
spk02: And at this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
spk01: One moment, please, while we poll for questions. And our first question comes from the line of Ben Hainer with Alliance Global Partners.
spk02: Please proceed with your questions.
spk04: Good morning, gentlemen. Congrats on the progress, and thanks for taking the questions. First off, for me, just on the enrollment for Sea Guardians, good to see that it remains on track to your earlier schedule. Could you give us a sense of where enrollment stands today? I mean, I would imagine it's safe to say that you've got over 200 people enrolled in the study, but any additional color that you can provide there? Yeah.
spk05: Hi, Ben. Thanks. Thanks for the question. I would characterize it this way. We've accelerated our enrollment pretty aggressively over the last quarter or so, as we've mentioned in prior calls. And I think your question is relevant. And I think we'll certainly hope that we can be within that timeframe in the first quarter, by the end of the first quarter of 2023 for full enrollment. So things are going very well. And I think adding our European sites over the last quarter has certainly helped the enrollment as has added new U.S. sites. So far, everything is going according to plan for end of Q1 in 2023.
spk04: Okay, great. And then on CREST 2, any more color there? I think the last quarter you were looking at, you know, kind of the first case being done in the very near future. You know, have there been a lot of cases done, you know, where I think you were talking about 20 potential sites. Where does that stand today?
spk05: Yeah, the process of getting these contracts completed with these sites has been a little more time consuming than we had thought. And since we're piggybacking on a current trial that's being sponsored, you know, outside of our control, it's been a little slow in terms of enrollment. But we certainly look forward to that progressing and accelerating as well. We've, as I think I mentioned in the last call, we've added sites specifically that are also Sea Guardian sites, which I think will help in terms of training and comfort with the device. So we'll give you an update in a bit more detail, I think, over the next quarterly reporting in terms of specific number of cases. Okay, that's helpful.
spk04: And then on the CE Mark certification, you know, if there is a delay, I know you've got a handful of days left here. Do you have a sense of how long it might be before that's in place?
spk05: Yeah, Ben, it's difficult to estimate that. We've worked very closely with our notified body there. As you know, the complexities of the regulatory climate in Europe have changed dramatically, and we've stayed very close to this, obviously, and it's our top priority. as a company to make sure that all the documents are well in order and that we're in full compliance. But as we work through the details, there are just some unknowns that we haven't fully gotten our hands around and we're waiting for feedback. But we've also been working closely with our distributor partners to make sure that there's sufficient inventory in the market so that C-guards are always available. But certainly as that unfolds, we'll provide a lot more detail. But we're working very closely and on a day-to-day basis with our notified body to make sure that things remain in order.
spk04: Okay. So is it fair to say that you don't anticipate any impact to, you know, the end users or at least at this time? Or how would you characterize that?
spk05: Yeah, I think our first priority, Ben, has been to make sure that we have sufficient inventory in the market, notwithstanding the dates of certification. So that's priority one, is to make sure that C-guards are sufficiently inventoried in the market as we work through the final details as far as the certificate is concerned. So that's step number one. And then as we work through the timetable with our notified body, hopefully there'll be no delays in further filling the pipeline with devices.
spk04: Okay, that's helpful. Just on the, you know, obviously there have been some pretty big currency impacts here, you know, dollar versus euro, certainly. But, you know, backing those out, I mean, it looks to me like your local currency ASPs have increased, you know, kind of mid-single digits. Does that sound right, Craig? And then You know, any more color on the market share gains? I think you mentioned maybe a couple of geographies being over 60% last quarter, and now it sounds like there's at least one that's over 80% share that you guys have picked up. Any color on that?
spk00: Yeah, so you're right about the exchange. You know, most of our sales in Europe, and we're with the euro market, So there has been a strengthening of the U.S. dollar, which we reported. But we have been trying to raise prices across the board as supply chain issues, you know, are causing prices to go up worldwide. But that's why we're focusing on number of units sold. And as you can see, we're over 50% growth year over year. So it's more, you know, so that is the correct way to look at it. And as far as market share, yeah, you're actually correct. So we do, as Marvin said, about 50% of our company is greater than 20%, and we have some countries actually reaching 60% as well as 80% of the market.
spk04: Okay, great. And then lastly for me on the Japanese level of interest, just curious on are there – terms that are more or less likely? I mean, is it more, if you do, once you do find a partner over there, is it more likely to be more upfront loaded or backend loaded with, you know, royalty or what's kind of the current thinking there to the extent that you can share?
spk05: Yeah, Ben, I think we've sort of considered three aspects of, of, two, maybe three different distributor partners over the last year or so that have expressed consideration. One is obviously the regulatory path, making sure that they're prepared to participate with us and as we did in China to make sure that the regulatory path was clear and that that could be considered as part of any agreement. Second is obviously their reputation and capability to distribute the carotid stents within their marketplace. And then beyond that, it generally follows kind of a standard royalty approach to numbers of units, numbers of years, those kinds of things. But we also are looking at the consideration of an investment as well, which was also consistent in China when we signed that agreement. Those three aspects are what we're considering, and as I said, we've got more than one interested party, so that's good as well, and we're working on those details. So we hope to have some new information soon along those lines.
spk04: Okay, great. Well, that's all I have, gentlemen. Thanks for taking the questions, and congrats again on the progress. Thanks, Ben. As always, we appreciate it.
spk02: And we have reached the end of the question and answer session. I'll now turn the call back over to Marvin Schlossman for closing remarks.
spk05: Great. Thank you. I'd like to thank everyone for taking the time today to join the call and the ongoing support. We're extremely proud of the progress from this quarter and year to date. Look forward to a strong finish as well as continued momentum into 2023. Thanks very much.
spk02: And this concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.
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