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Operator
Good morning and welcome to the INSPIRE MDE fourth quarter and full year 2022 earnings call. At this time, all participants are in a listen-only mode. Please note, this conference is being recorded. I will now turn the conference over to Chuck Padala with LifeSci Advisors. Thank you. You may begin.
Chuck Padala
Thank you, Operator, and good morning, everyone. Thank you for joining us for the InspireMD fourth quarter and full year 2022 financial results and corporate update conference call. Joining us today from InspireMD are Marvin Schlossman, 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 risks factor described in InspireMD's most recently filed periodic reports on Form 10-K and 10-Q filed with 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, March 30th, 2023, except as required by law, InspireMD disclaims 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 Slossman, CEO of InspireMD. Please go ahead, Marvin.
Marvin Schlossman
Thank you, Chuck, and thanks to everyone for joining the call. I want to start this morning with a regulatory note, as our revenue results for the fourth quarter were impacted by the cessation of Seaguard shipments due to a temporary expiration of our CE mark on November 12, 2022. This was due to well-documented significant delays by the European regulatory body's in the processing of applications and audits under the new Medical Device Regulation, or MDR, recertification process. By way of background, the MDR replaced the Medical Device Directive, or MDD, which had historically governed the approval and marketing of medical devices in the EU until May 2021. deadline for transition to updated certification has taken more than three years with multiple revisions, delays, and requirement changes putting the entire medical device industry serving the EU markets at risk. This complexity, combined with the constantly changing requirements and deadlines, has forced the market into a very precarious situation. Our position from the beginning was to follow the new guidelines of MDR as a prudent measure of long-term compliance mandated for all new product introductions requiring this certification. We have worked tirelessly with our notified body to complete the process throughout this uncertainty. Due to the chronic delays of scheduling our final audit prior to the expiration of our MDD certification on November 12, 2022, we temporarily lost our ability to sell in the EU markets on that date. In anticipation, we proactively worked with our distributor partners to provide as much available inventory as possible to avoid shortages while continuing to complete the MDR process to reestablish sales. Despite our best efforts, our fourth quarter revenue reflects a shortfall of shipments following the certificate expiration. Therefore, our fourth quarter C-Guard revenue totaled $1,026,000 with a carry forward of approximately $250,000 in backlog not shift after the loss of the CE mark. Had we been able to operate without this interruption, we would have recorded approximately $1.3 million in revenue. However, I'm pleased to report that earlier this month, we were able to reinstate our CE mark and shift to all EU countries and other jurisdictions under our previous MDD certificate as a temporary measure as we work through the final steps in our MDR certification, which we believe to be imminent. We resumed shipments effective March 18th, and although late in the quarter, we're taking every step to refill channels and ensure as a priority the availability of the C-Guard Stent Platform for life-saving patient care without interruption. Managing this turbulent transition has been challenging, but we anticipate we will be one of the first companies to receive MDR certification very soon. And for the long term, this will serve us well as a foundation of continuing to drive market growth in the EU. We currently enjoy greater than 25% market share in over half of our served markets, with some territories exceeding 80%. Our continued efforts on the ground, together with this near-term launch of two new stent delivery systems, including a new transcarotid and advanced next-generation transfemoral platform, will enable share growth and accelerate the conversion of surgeries to endovascular standard of care with the C-Guard stent system. And turning now to our U.S. regulatory activities, our C-Guardians U.S. IDE trial continues at a remarkable pace of enrollment with 20 active trial sites. We anticipate completing enrollment next quarter. Achieving this enrollment milestone will enable next steps in the submission and approval process as we get closer to the potential launch of SeaGuard in the U.S. market. As we continue to invest in preparation of the U.S. market launch, we have added a seasoned commercial executive in the vascular space, Shane Gleason, to the leadership team who will lead our go-to-market preparation as GM of the Americas and global marketing strategy. In terms of product pipeline, focus on our Seaguard EPS stent platform remains the foundation of our business, and we believe the importance of the implant to patient outcomes remains the single most important variable beyond the selected delivery option. In order to fully realize the potential of Seaguard, however, we've developed two new delivery systems to drive utilization across the broadest vascular specialist community. We continue to advance development, regulatory approval, and launch plans for our new transfemoral delivery system, C-Guard Prime, which will be available in both standard and short shaft versions, compatible with the development of SwitchGuard, our TCAR accessory device. In combination, we believe our trans-carotid kit will enable TCAR with the best stent solution for those choosing to utilize this method of neuroprotection. We continue to work tirelessly toward our goal of changing the paradigm of how carotid disease is managed and strokes are prevented. With Seaguard EPS, we believe we can offer the best patient outcomes with the broadest 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 Seaguard as the standard of care. With that, I'll turn the call over to Craig for the review of our first quarter financials. Craig?
Chuck
Thank you, Marvin. For the fourth quarter of 2022, total revenue was $1,026,000 compared to $1,380,000 during the fourth quarter of 2021. This represents a decrease of 25.7%. This decrease was predominantly driven by a 20.6% decrease in sales of Seagard EPS to $1,026,000 in the fourth quarter of 2022 from $1,291,000 in the same period one year ago. As Marvin mentioned, this sales decrease was caused by reduced shipments due to the temporary expiration of our CE mark certification for the second half of the fourth quarter, resulting from the ongoing transition to the MDR regulatory framework from MVD previously. This was partially offset by an increase in U.S. sales related to stents used in our Sea Guardians U.S. clinical trial. We ended the quarter with a backlog of approximately $250,000 due to the temporary expiration of our CE mark. Had we been able to ship without this temporary interruption, as Marvin said, our revenue would have been approximately $1.3 million. Gross profit for the fourth quarter of 2022 decreased by $96,000 or 32.7% to $198,000 compared to a gross profit of $294,000 for the fourth quarter of 2021. This decrease resulted from the lower revenue due to the temporary loss of the CE mark, offset by a decrease in miscellaneous expenses. Gross margin decreased to 19.3% during the three months ended December 31st, 2022, from 21.3% during the three months ended December 31st, 2021. Total operating expenses for the fourth quarter of 2022 were $5,134,000, an increase of $909,000, or 21.5%, compared to $4,225,000 for the fourth quarter of 2021. This increase was primarily due to increases in expenses related to the Cigardians FDA study as we move towards end of enrollment, sales and marketing expenses, and regulatory expenses. Net loss for the fourth quarter of 2022 totaled $4,845,000 or $0.60 per basic and diluted share compared to a net loss of $4,097,000 or $0.53 per basic and diluted share for the same period in 2021. As of December 31st, 2022, cash, cash equivalents, and short-term bank deposits were $17.8 million compared to $34 million as of December 31st, 2021. That concludes the financial review. Marvin?
Marvin Schlossman
I'd like to thank everyone for taking the time today to join the call and for your ongoing support. I'm extremely proud of how our team has responded and to the regulatory challenges pertaining to our CE-MARC certification and I look forward to assumption of the market penetration as we continue to gain share in our approved markets while in parallel progressing in our Sea Guardians US clinical trial.
spk02
We'll now open for questions.
Operator
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker recruitment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question is from the line of Ben Hainer with Alliance Global Partners. Please go ahead.
Ben Hainer
Good morning, gentlemen. Thanks for taking the question. First off, for me, I appreciate the color on the MVD and MDR that you experienced in Q4 and Q1 and I guess ongoing. But can you give us a little bit of color on kind of how that impacts Q1 given, you know, there's one day left in the quarter and, you know, you have the $250,000 backlog. I mean, it's the way to think about it that European revenues may be something less than, you know, kind of the $250,000 backlog during Q1.
Marvin Schlossman
Hi, Ben. Thanks for the call. We did our best to make sure that we prepared properly for either the MDR approval or being able to claw back the MDD, which we were successful at. So I think on balance as an organization, we tried to make sure that we were set for either of those to occur. So in terms of the first quarter, we've tried to minimize any impact market-wise on being able to take those steps in advance. So, even though it has been late in the quarter, the preparation up to that point I think will serve us well in terms of being able to address those open market orders and being able to get back on track. So, I think the preparation was certainly in order.
Ben Hainer
Okay. That makes sense. You mentioned in the press release the increased demand for C-Guard. Can you share a little bit more about that, where you're seeing it, any particular areas of strength? I know the MDR, MDD certainly has an impact, but it sounds like you're seeing an increased demand regardless. Can you share more of that?
Marvin Schlossman
Yeah, great question, Ben. So it's interesting because from the very beginning our stent-focused driven by the best clinical data supporting the C-Guard stent has always been the foundation of our effort. And so as we went through this regulatory process, I think we always assumed that there was high demand for C-Guard out there, but most importantly, the feedback from our distributors and more importantly, our customers was hopeful that they would not run short of being able to continue to support patient care with the best stent out there and And so our planning in that process and making sure that we kept our channels sufficiently filled was a great indication with constant communication that there is this consistent and ongoing demand for Seaguard, that it's not just about having a carotid stent available. It was specific to Seaguard. So we felt really good about that process. And now that we've been able to cross this hurdle to refill channels, we will obviously be able to satisfy those needs. You know, on balance, our continued goal and objective is to make Sea Guard the first line stent selected for carotid revascularization. And we continue every day to have that reinforcement that we're gaining on that, both through our distributors as well as our customers in Europe. And of course, our enrollment in the U.S. trial, I think, has been a proxy to the support of the stent as well in terms of the accelerated enrollment to the trial.
Ben Hainer
Okay, great. That's helpful. And then, you know, I know getting an approval timeline is a bit of a risky proposition, but, you know, just thinking about SwitchGuard and C-Guard Prime, Transfemoral, the new delivery systems, do you have any thoughts on when those might go into the regulatory bodies and the timeline there? Sure.
Marvin Schlossman
Yeah, for both Europe and the U.S., we have a very clear strategy and timeline related to our regulatory objective. The devices are complete and we're in the regulatory framework, as you mentioned. And so we're hoping that if those go according to plan, that we'll remain consistent with the dates that we've outlined prior in terms of availability into the market. But we are into that regulatory roadmap as we speak. I think we've crossed over the development hurdle and are well into making sure that we clear the next steps here to get market availability as soon as we can for both Europe and, of course, the U.S. market.
Ben Hainer
And then on that kind of maybe the new indication or new product, I noticed in the 10K you mentioned Engard EPS for acute stroke with tandem lesions. Can you tell us a little bit more there?
Marvin Schlossman
Yes, I think a great opportunity for the C-Guard stent because of the properties of having the Micronet mesh as well as the design of our stent. We know that in about 25% of acute stroke cases, the carotids are involved. We refer to that as tandem lesions. And so we're looking at that as an indication opportunity that's well-suited for our stent and continue to work that in a parallel path to our approval under the current IDE. as we believe is best suited in that neuroapplication. And right now there are no labels, specific labels or indications for tandem lesion stenting. So we continue to advance that process and are really encouraged by the stents' ability to perform in that acute setting. Much more to come on that in the next few calls.
Ben Hainer
Okay, I'll be on the lookout there. Last but not least, I appreciate the updates on Sea Guardians. I was just curious what you're seeing out of CREST 2. Any updates there?
Marvin Schlossman
Yes, we've started enrollments with the Sea Guardian CREST 2. Administratively, as you can imagine, there's a lot that goes into making sure that all of the hospital systems are set and the stent is available and everything's done from a paperwork perspective. But having put that in the rearview mirror, we're now beginning the enrollment process and are encouraged that we'll see more and more enrollments with the Sea Guard. So we're looking forward to an accelerated process there with CRESTU as well.
spk02
Okay, great. That's all I have. Thanks for taking the question, gentlemen. Thanks, Ben.
Operator
thank you as there are no further questions at this time I would like to turn the flow back over to Marvin slossman for closing comments
Marvin Schlossman
Thank you again, we appreciate everybody attending the call and we look forward to the balance of 2023 and a great reporting and continuing to progress in our advancement of C guard stent system. Thank you for the call today.
Operator
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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