InspireMD Inc.

To the InspireMD second quarter 2023 earnings call. Currently, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, please press star, then two. Please note, this conference is being recorded. I will now turn the conference over to Glenn Garment with LifeSci Advisors. Thank you. You may begin.

Thank you, operator. Good morning, everyone. Thank you for joining us for the InspireMD second quarter 2023 financial results and corporate update conference call. Joining us today from InspireMD are Marvin Slossman, Chief Executive 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 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, August 8th, 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's now my pleasure to turn the call over to Marvin Slossman, Chief Executive Officer. Marvin, please go ahead.

Thank you, Glenn, and thanks to everyone for joining our call this morning. I'm pleased to share that the second quarter of 2023 proved to be a transformational time for our company as we advanced our mission to lead the carotid revascularization market with next-generation solutions built on the foundation of our Seaguard carotid stent platform. The second quarter produced our highest revenue to date for our Seaguard carotid stent system, as well as the successful financing of up to $113.6 million in new capital. Specific to our financials, we generated total revenue of $1.649 million, our highest Seaguard quarterly revenue to date, representing growth of nearly 10% over the second quarter of 2022 and sequential growth of 33% over the first quarter of 2023. We sold 2,804 stent systems during the quarter as compared to 2,602 during the second quarter of 2022, in 2033 during the first quarter of 2023 procedural volume continues to be the key metrics of our success measuring unit volume and market utilization this record record quarterly performance reflects the acceleration and use of seaguard eps and our approved ce mark territories as we continue to focus on growing share Foundationally, we have established a baseline of real-world experience and best-in-class data with more than 40,000 Seaguard stents sold to date. As we drive market awareness and global expansion, in-plant performance will remain the cornerstone of our focus. We announced in May the completion of a private placement financing of up to $113.6 million with $42.2 million upon closing of the transaction, followed by issuance of warrants for an additional $71.4 million tied to the achievement of four pre-specified milestones worth $17.5 million each. The tranches are tied to the following milestones with warrants expiring 20 trading days following. The first tranche is tied to the release of primary and secondary endpoints related to one-year follow-up of study results from our Seaguardian's pivotal trial. Proceed of pre-market approval of FDA for Seaguard Prime 135 carotid stent system. the receipt of FDA approval for the SwitchGuard Transcarotid Neuroprotection System and SeaGuard Prime 80 CM Stent System, and completion of four quarters of commercial sales of the SeaGuard in the United States. We value the significance of this recapitalization of our company by some of the world's top-tier healthcare investors, including Marshall Waste, OrbiMed, Solius, Rosalyn, Nanahala, and Velen, as a validation of our business strategy and direction. It fuels a long-term growth plan to market leadership through advancement of our plans to serve the broadest specialist community treating carotid artery disease with the most complete offering of delivery and neuroprotection systems. As the only company developing and offering both transfemoral casts and trans carotid neuroprotection systems. Prioritizing procedural optimization with a focus on the implant as the catalyst to best clinical results forms the foundation of our business, and we look to lead the market by way of this comprehensive approach. Now to updates on our clinical programs. Most recently, we announced enrollment completion of our SeaGuardians IDE clinical trial, which is designed to support eventual FDA approval of the SeaGuard Prime EPS stent system in the United States. The objective of the trial, which enrolled 316 patients across 20 centers in the U.S. and five in Europe, is to evaluate the safety and efficacy of the SeaGuard carotid stent system for the treatment of carotid artery stenosis. The trial's primary endpoint is a composite of the incidence of death, stroke, and myocardial infarction at 30 days and ipsilateral stroke from day 31 to a one-year follow-up. Enrollment in the Sea Guardians was completed in just 23 months, offering a line of sight to results and a pre-market approval submission planned in the second half of next year. If we achieve those timelines with acceptable results, we anticipate launching C-Guard Prime in the United States in the first half of 2025. Notably, the trial also included the first in human cases successfully treated with our next generation C-Guard Prime cast delivery system, which includes advanced features and functional improvements that increase the ease of stent trackability and deployment and is included in our regulatory approval pathway. In anticipation of potential approval of C-Guard EPS in the first half of 2025, we have initiated pre-commercial activities in the United States to include the build-out of a world-class team in infrastructure to make C-Guard broadly available to patients who stand to benefit from this novel stenting technology. By way of an update in market drivers towards stenting, in July, CMS issued a proposed decision memo recommending coverage of CAS for both symptomatic and asymptomatic patients, whether considered to be high or standard risk for surgery. This coverage decision is expected to be finalized in October, and if approved, would represent a very meaningful expansion of the addressable market for CAS and further shift the standard risk approach. This adds to our enthusiasm, U.S. market opportunity for C-Guard Prime for both CAS and TCAR, both of which are an integral part of our sales strategy. Broader access to endovascular options is good for patients, and this expanded coverage for stenting, optimizing procedural results. C-Guard EPS has demonstrated superior clinical results over 1,850 patients studied in rigorous peer-reviewed trials with over 40,000 real-world procedures performed to date, establishing a foundation for best-in-class results. This potential expansion of reimbursement and trends toward an endovascular first shift away from surgery fit the approach we've advocated for some time, a consistent driver of outcomes remains the performance of the implant, which will remain our priority as clinical evidence remains the cornerstone of our story as we leverage our next generation C-Guard stent with proprietary Micronet mesh. Turning now to the quarter, as our Chief Financial Officer, Craig Shore, is recovering from a recent medical procedure, I will now cover the quarterly financials in detail. For the second quarter of 2023, we generated total Seaguard revenue of $1.649 million, a 9.6% increase over $1.505 million for the second quarter of 2022, and sequential growth of 33% over the first quarter of 2023. This includes $59,000 of Seaguard Prime revenue. Recall that our first quarter of 2023 revenue was negatively impacted by the temporary suspension of our CE mark until approximately mid-February, and as a result, we ended Q2 with a product backlog of approximately $600,000. For the three months ended June 30, 2023, gross profit increased by $60,000 per 14% to $491,000 from $431,000 during the first three months ended June 30, 2022. This increase in gross profit resulted from a $90,000 increase in revenue, as mentioned before, less the associated related material and labor offset by $30,000 in miscellaneous expenses. Gross margin, gross profits as a percentage of revenue, increased to 29.8% during the three months ended June 30th, 2023, from 28.1% during the three months ended June 30th, 2022, driven by the factors mentioned above. Total operating expenses for the second quarter of 2023 were $5,806,000, an increase of $694,000, or 13.6%, compared to $5,112,000 for the second quarter of 2022. This increase was primarily due to increases in share-based compensation-related expenses to the expense recognition of grants made during the second quarter of 2023, increase in salary expenses mainly due to hiring of a general manager for North America and VP of global marketing, and increase in legal expenses. Net loss for the second quarter of 2023 totaled $5,077,000, or 0.24 cents per basic diluted share, compared to a net loss of $4,636,000, or 59 cents per basic and diluted share for the same period in 2022. As of June 30, 2023, cash, cash equivalents, and short-term bank deposits and marketable securities were $47 million compared to $17.8 million as of December 31, 2022. This includes an upfront payment of approximately $37.5 million net of expenses that we received in May pursuant to the terms of the transformational private financing that I discussed earlier.