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Operator
Good morning and welcome to the InspireMD third quarter of 2023 earnings call. Currently, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press start in zero on your telephone keypad. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Chuck Badala, with LifeSite Advisors. Thank you. You may begin.
Chuck Badala
Thank you, Operator, and good morning, everyone. Thank you for joining us to the InspireMD third quarter 2023 financial results and corporate update conference call. Joining us today from InspireMD are Marvin Slossman, Chief Executive Officer, and Craig Shore, Chief Financial Officer. During the call, management will be making forward-looking statements, not historical facts, which are based upon management's current expectations, beliefs, and projections, many of which, by their nature, are inherently uncertain. These forward-looking statements involve risks and uncertainty that may cause actual results to differ materially from those expressed in such 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 or on any updates in our current reports on Form 8-K 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. This call contains time symptoms of information that is accurate only as of today, November 6, 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.
Marvin Slossman
Please go ahead, Marvin. Thank you, Chuck, and thanks to everyone for joining the call this morning. The third quarter proved to be a transformational time for our company with several milestones, further validating our strategy and mission to transform the carotid revascularization market with a superior next generation stent implant, along with our focus on the broadest range of tools, providing both patients and physicians optimal procedural solutions. Execution against internal objectives remains our focus, but I would like to start today with a brief mention of the recent national coverage decision by CMS enabling a monumental shift by expanding reimbursement for carotid artery stenting or CAS procedures to include both standard surgical risk and asymptomatic patients, neither of which were previously covered. We will get into those details shortly. In terms of our financials for the third quarter of 2023, we generated total revenue of $1.556 million on 2,734 devices sold, representing nearly a 9% revenue growth over the comparable period in 2022. Measuring procedural volume continues to be a key metric of our success as our distributor model discounts our average sales price by way of transfer pricing. Unit sales more accurately measures market share and our served territories, a key driver of our growth objectives. As we drive market awareness, utilization and global expansion, implant performance will remain the cornerstone of our focus, having now established a baseline of real world experience and world class data with more than 45,000 C-Guard stents sold to date and nearly 2,200 patients enrolled in clinical studies. We were pleased a few days ago to present the 30-day data from our Sea Guardians IDE clinical trial at the VIVA conference. As a reminder, the Sea Guardians trial is designed to support a PMA submission in the second half of next year, which would give us line of sight to possible approval of Sea Guard EPS in the U.S. in the first half of 2025. Reviewing the results from July 2021 through June 2023, 316 patients were prospectively enrolled in this single-arm carotid artery stenting, or CAST, study performed at 24 sites in the U.S. and Europe, utilizing C-Guard EPS as the carotid stent system. The primary endpoint is a composite of incidents of major adverse events, including death, all-cause mortality, any stroke or myocardial infarction through 30 days, post-index procedure, or ipsilateral stroke from date 31 to date 365. All events are adjudicated by a clinical events committee. Dr. Chris Metzger, the PI of the Sea Guardians trial, presented unprecedented data at 30 days, total major adverse events, DSMI, of 0.95%, as measured by intent to treat analysis considered to be the most rigorous measure of results. These first-in-kind results demonstrate the neuroprotective effect of the C-GARD stent and add to the significant and growing body of evidence showing that C-GARD delivers outstanding short and long-term patient outcomes as compared to alternative stent and the current standard of care in revascularization carotid endarterectomy. We were pleased to share these compelling results at VIVA, which is among the most important gatherings of endovascular specialists and should go a long way toward raising awareness of C-GARD among the endovascular community, key opinion leaders, and other practitioners alike. Staying on the topic of our IDE trial for a moment, we announced in June that we had completed enrollment of this trial, something that was achieved in just 23 months. And recall that this study also includes the 1st, human cases performed with our new C guard prime cast and delivery system. Study follow up is progressing as planned. And we reiterated our expectation for primary endpoint results in the 2nd, half of next year with anticipated approval in the 1st, half of 2025. Revisiting one of the key market drivers transforming revascularization towards stenting, on October 11th, CMS issued a National Coverage Determination, or NCD, implementing coverage of CAS for both symptomatic and asymptomatic patients, whether considered to be high or standard risk for surgery. This coverage determination is very consistent with the draft memo that was released in July. The updated NCD creates a very meaningful expansion of the addressable market for CAS and will shift the standard of care toward a patient-first approach with greater procedural options, including stenting. This adds to our enthusiasm for the U.S. market opportunity for C-Gard Prime for both CAS and TCAR, both of which are an integral part of our long-term sales strategy. We believe that broader access to endovascular options is good for patients. Recall that C-Guard APS has demonstrated outstanding clinical results now in nearly 2,200 patients who were studied in rigorous clinical trials, published in peer-reviewed journals, and tens of thousands of real-world procedures performed to date, establishing a foundation of best-in-class results. This expansion of reimbursement and the broader trend toward an endovascular-first shift away from surgery support the approach we have advocated for some time. The consistent driver of outcomes remains the performance of the stent implant, which will remain our priority as clinical evidence remains the cornerstone of our story, leveraging our third-generation C-Gard stent with its proprietary Micronet mesh. In anticipation of potential approval for C-Gard in the first half of 2025, we've initiated pre-commercial activities in the U.S., and we continue to build out what I consider to be a world-class leadership team. Last month, we announced the hiring of Dr. Patrick Furto as our new executive VP of clinical and medical affairs. Patrick adds tremendous experience in the karate field, having supported much of its clinical advancement over the last 20 years, and he brings an impeccable reputation amongst key opinion leaders, medical and regulatory bodies. We also announced the hiring of Cheryl Tall to lead our quality assurance and regulatory affairs function with tremendous expertise in building business scale and capability on a global level. And finally, after six months of having a significant impact as our General Manager of North America and VP of Global Marketing, Shane Gleason has been promoted to Chief Commercial Officer, expanding his responsibilities to support our global commercial growth. I would like to close with a word on behalf of our team based in Israel for their remarkable tenacity and bravery to deliver on commitments and objectives, allowing our company to operate without interruption during such a profoundly difficult time. It is truly a testament to our team fulfilling our mission to deliver the best life-saving and stroke-preventing devices to patients worldwide. I'm now pleased to re-welcome Craig Shore back to the call as our CFO. Craig?
Marvin
Thanks, Marvin. For the three months ended September 30th, 2023, revenue was $1,556,000 compared to $1,431,000 during the three months ended September 30th, 2022. This revenue increase of $125,000 was predominantly driven by an increase in commercial sales of $166,000 of Seaguard EPS to existing geographies. offset by a $41,000 decrease in the United States as we completed in June 2023 the enrollment of our patients in our Sea Guardians IDE clinical trial. And accordingly, there was no further enrollments in the three months ended September 30th, 2023. For the three months ended September 30th, 2023, gross profit increased by 19.7%. to $438,000 from $366,000 during the same period in 2022. This increase in gross profit resulted from an $85,000 increase in revenues, less the associated related material and labor, offset by miscellaneous expenses. Gross margin increased to 28.1% during the three months ended September 30th, 2023, from 25.6% during the three months ended September 30th, 2022 driven by the factors just mentioned. Total operating expenses for the third quarter of 2023 were $6,077,000, an increase of $1.1 million or 22% compared to $4,976,000 for the third quarter of 2022. This increase was predominantly due to an increase in compensation expenses. Total financial income for the third quarter of 2023 was $461,000, an increase of $380,000, or 469%, compared to $81,000 for the third quarter of 2022. This increase was primarily due to a $412,000 increase in interest income from investment in marketable securities, money market funds, and short-term bank deposits. Net loss for the third quarter of 2023 totaled $5,178,000 or 15 cents per basic and diluted share compared to a net loss of $4,529,000 or 58 cents per basic and diluted share for the same period in 2022. As of September 30th, 2023, cash, cash equivalents and short-term investments and bank deposits for $43 million compared to $17.8 million as of December 31st, 2022. That concludes our prepared remarks. We will now open the call for questions. Operator?
Operator
Thank you, sir. Ladies and gentlemen, we will now be conducting the question and answer session. If you would like to ask a question, please press start in one on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You may press Start 2 to leave the question queue. For participants making use of speaker equipment, it may be necessary to pick up the handset before pressing the Start key.
spk02
Our first question comes from Adam Meader of Piper Sandler. Please go ahead.
Adam Meader
Thank you for taking the questions. Congrats on the excellent interim data presentation last week, the print and the operating progress. Maybe just to start, wanted to give you the opportunity to kind of flesh out the Q3 performance just a little bit more. You know, can you talk about kind of the key trends, messages in the quarter, and then a handful of follow-ups? Thanks. Thanks.
Culler
Good morning, Adam. Thanks for the question. So our progress in commercial growth outside of the U.S. continues to be strong, and I think the message continues to be consistent, which is to drive clinical outcomes and performance by way of data. Our distributors, I think, are becoming more and more comfortable with C-Guard. In fact, we had a full distributor call the other day with all of them. And I think the momentum that we're building just in recognizing what's happening in the U.S. is also engaging them more and is paying residual benefits to our markets outside the U.S. So in terms of real numbers and growth, we're seeing consistency there, and we'll continue to drive that in those markets as our foundation of revenue at this point.
Adam Meader
That's helpful, Culler. Thank you for that. My next question is a multi-part question on the Israel Hamas war. And, you know, I hope all of your team members are staying safe. Can you just talk about, you know, kind of any thoughts around, you know, your ability to supply the market? You know, do you anticipate any, you know, future impact to commercial sales or any kind of, you know, hindrances to push for the U.S. initiatives in an efficient manner? And then I guess I'll lump this one in as well. Just are you taking any precautions or proactive steps with inventory management or alternative manufacturing efforts?
Culler
Yeah, thanks for the question, Adam. Thus far, we've not had any direct impact on our ability to deliver and perform by way of the war, but we're not sitting still. Obviously, we're keeping a very close eye on things and have put into place some examples of mitigating risk there by way of advancing our supply chain, building inventory, looking at alternative locations for securing finished goods and just other things that are good practices under the circumstances. You know, our shift toward a U.S. focus continues as well, but in the short term, All of our team is operating pretty much according to plan there. We have a couple of folks that have gone to active duty from reserve, but everybody is picking up the extra work to be done. In terms of our progress toward U.S. approval, nothing changes there. We're all on plan. Many of our consultants and activities are actually based outside of Israel as it relates to our regulatory effort and work and testing and those kinds of things. So I think most critical right now is to make sure that our supply chain and production remain sound and we're continuing to see good results there, but are also looking at making sure that if this progresses into a different direction that we're on good ground as well there.
Adam Meader
That's great to hear, Marvin. Thank you for the fulsome response there. Maybe switching over to kind of the forward outlook, certainly recognize you don't have guidance, but was wondering if you can give any broad strokes or color about how you're thinking about the business in Q4, as well as 2024 from a top line standpoint.
Culler
Yeah, so I think the way to frame our growth direction at this point is to say that we continue to operate effectively in the 30 countries that we serve. We want to see consistent growth in those countries. Until we're able to offer new tool sets, which we're working on aggressively in the area of TCAR and obviously our new C-Guard Prime transfemoral cast delivery system, I think things will remain consistent according to what we've presented up to this point. But obviously those new tools add a very different dimension to how we believe we can penetrate the market. Our objective outside of the U.S. is the same as it will be in the U.S., which is to convert surgeries to endovascular first by using our stent performance to do that. And that is no different outside of the U.S. So there's still a lot of endarterectomy being practiced. There's a lot of surgeries being done. And so our goal is not just to have the premier stent in the market, but most importantly, to continue to convert surgeries so that will remain consistent. And I think our growth plan is to continue to show consistency there as well.
Adam Meader
That's helpful. If I was to maybe push a little bit there, Marvin, the Seaguard Prime and the TCAR European CMERC approval, are you able to kind of give an update at this point? Obviously, I know MDR is a little bit unpredictable, but just any latest thoughts on when you could have those commercially available internationally?
Culler
Yeah, I think, as you said, the whole MDR process and just the regulatory environment in Europe in general has been somewhat frustrating. We're certainly prepared, but are waiting for the longest pole in the tent here, which remains the ability to get this through the regulatory cycles. But I'm anticipating that mid-year 2024 will be in a good position to hopefully be able to launch new tools into the 30 countries that we're serving now.
Adam Meader
That's helpful. Thank you. Wanted to ask a similar kind of forward outlook question. This one for Craig. And Craig, welcome back. Nice to hear from you. You know, wanted to ask about Q4 and 24 in terms of the P&L components. Gross margin, do you think you can continue to drive your growth improvement there? And then how do we think about the pace of OPEC spend in 24 as you guys start to prepare for U.S. launch?
Craig
Okay, so thanks, Adam, for welcoming back.
Marvin
For the fourth quarter, we're anticipating a higher spend as we start doing more of the studies that we talked about, in particular TCAR, and also as we start focusing a little bit more on the sales and marketing activities in Europe. I wouldn't be expecting a huge amount of money to be spent in the United States until we get closer to the launch.
Craig
I mean, a few positions here and there, but nothing major.
Adam
Okay. Thank you for the color there.
Adam Meader
And I think that's a good segue, you know, into my last question, which is on some of the clinical work you're doing outside of the pivotal. The US TCAR study, I think you've pointed to early 24 for a start date. You know, what's the latest there? Any more specifics on timing or trial design? And then also the tandem lesion early feasibility study. Are you still targeting first half 24 for that clinical work? Thank you.
Culler
Yeah, let's start with the, yeah, thanks, Adam. Let's start with the last one first. We are still anticipating for the tandem EFS first half of 2024 for enrollment in that and continue to progress in that area. Just to note, we've had two conversations, separate conversations with the FDA on a pre-sub basis for both our TCAR study as well as the tandem EFS, which have gone very well. So we're just in the midst right now of buttoning up all of the the procedural details, the protocols, aligning the investigators, you know, to begin this process of enrollment. And so I think it's safe to assume that both of them will initiate those studies in the first half of 2024 as we get to all those details. As you know, there's a lot of administrative effort that goes into the the setup and the roll-in to get started there. But what I will mention is that we've had a remarkable response on both fronts, both from the surgical community on our TCAR system as well as the EFS within the neuro community. We think that the neuro community has been underserved by carotid focus, and we're looking forward to having both those added to our tool set for our foundational CAS system.
Adam
Thanks for the color, Marvin. That's all for me. I'll hop back in queue. Thanks. Thanks.
Operator
The next question comes from Ben Heyer of Alliance Global Partners. Please go ahead.
Ben Heyer
Good morning, gentlemen. Thanks for taking the questions. First off, for me, you know, congrats on the national coverage determination. But regarding that, I guess what's your view on the expansion in terms of numbers? If the addressable patient population was X and now it's X plus Y, what are those Xs and Ys?
Culler
Great question, Ben. Thanks. I think some of that is certainly to be determined. What we know is that there's a tremendous amount of energy behind this decision by CMS. What we think about over the next several years is a shift from surgery first let's call it a 70 or 80 percent surgery first to a 70% or 80% endovascular stenting first. How that plays out in terms of what percent of that market is CAST procedures versus TCAR is still to be determined. We know that both are very viable options, which is why we invested in both of those tool sets in order to give us the broadest range within carotid revascularization. It's interesting that at the conferences, some of the discussion now is becoming, you know, is that a stentable lesion, which you've never heard before, as opposed to just assuming the default on endarterectomy or surgery being sort of the baseline. So the CMS coverage really opens up the market opportunity for us, and I think foots perfectly to our strategy, which is to make sure that we've got the full coverage of tool set regardless of of which access is used for the best implant. So I think we're in good shape there and feel good about the transition. The question of timing and percentage is still to be determined.
Ben Heyer
Okay. Is that helpful? And then, you know, just regarding the – you mentioned the discussion that's going on at these conferences, you know, obviously at Viva. You know, any additional color there and, you know, any surprises on – the discussions where, you know, is that a sensible lesion, things that maybe you hadn't thought of or just anything surprising there?
Culler
Well, I think what's been most surprising is just the remarkable results that we presented. I mean, let's think about the unprecedented nature of being able to deliver, even in 30 days, a sub-1% complication rate is really unprecedented. So I think it goes beyond just, you know, will stents become standard of care? It's really a question of this is a unique platform that, frankly, has never been seen before in terms of these outcomes. Now, I will mention also that this validates our previous experience in the 1,850 patients we've studied at about a 1.2% rate. So I think it's, listen, it's a combination of a lot more discussion, momentum, and transition, but we like being in a position of being able to lead that way by talking about clinical outcomes and procedural opportunities that really result in best implant and best outcomes, because that's going to be the trend, right? There will be more momentum in casts. and in TCAR, but I think ultimately the decision points will be what's best for the patient and how do those outcomes translate from the implant itself and not just the procedure.
Ben Heyer
Okay. That makes sense. I think that's all I had, gentlemen. Thanks for taking the questions.
Culler
Thanks, Ben. Good to hear from you.
Operator
Thank you. Ladies and gentlemen, we have reached the end of our question and answer session. I will now hand over to Mr. Marvin Slossman for closing remarks.
Culler
I would like to thank everyone for joining the call today. We look forward to a strong finish in 2023 and advancing our plans of growth toward great execution for 2023 and beyond. Thank you.
Operator
Thank you, sir. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your lines.
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