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Operator
Greetings. Welcome to INSPIRE MD fourth quarter and full year 2023 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 store zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Chuck Padala with Lakeside Advisors. Please proceed.
Chuck Padala
Thank you, Operator, and good morning, everyone. Thank you for joining us for the InspireMD fourth quarter and full year 2023 financial results and corporate update conference call. Joining us today from InspireMD are CEO Marvis Lossman and CFO Greg Shore. During this 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 uncertainties 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 any updates on our current reports on Form 8K filed with the U.S. Securities and Exchange Commission and its IRMD's press release that accompanies this call, particularly the cautionary statements made in it. This call contains time-sensitive information that is accurate only as of today, March 6, 2024, Except as required by law, Inspire indeed 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 this call over to Marvin Slossman, Chief Executive Officer. Marvin, please go ahead.
Marvis Lossman
Thank you, Chuck, and thanks to everyone for joining the call this morning. I'm pleased to share a tremendously productive fourth quarter, completing a remarkable end to 2023 for our company. We have carried this energy and enthusiasm into the new year as we continue our mission to lead the carotid revascularization market with our best-in-class C-Guard carotid stent platform. Looking forward to reporting one-year primary endpoint results from the C-Guardians trial in the first half of this year, with a view to potential approval and commercialization in the United States in the first half of 2025, as well as our continued focus on growth in our 30-plus served OUS markets. Our investment in both CAS and TCAR methods and tools addressing the broadest market potential was purposeful and done anticipating a time when technology innovation and procedural reimbursement moved the tides toward an endovascular standard of care. 2023 marked the beginning of what we believe to be a sea change toward this shift away from surgery with best-in-class outcomes with SeaGuard catalyzing our leadership potential. We plan to continue to build our growing body of data and real-world evidence from our OUS markets as we create inertia to lead the U.S. market post-approval. Craig will cover the financials shortly, but I wanted to share a brief review of our fourth quarter performance. We generated record total Seaguard revenue of $1.76 million, representing growth of 71.6% as compared to the fourth quarter of 2022. Recall that our fourth quarter 2022 sales were negatively impacted by the temporary expiration of our CE mark in November of last year as European regulators transitioned from the Medical Device Directive, or MDD, to the new Medical Device Regulation, or MDR, framework. We indicated at that time that the temporary suspension of our CE mark impacted our fourth quarter 2022 sales by approximately $250,000. Even considering these circumstances, on an adjusted basis, we generated year-over-year sales growth of 38%, reflecting our commercial focus on building a growing awareness of C-Guard's superior patient outcomes as we work to make it the gold standard of carotid implants globally. We sold 3,107 stents, up more than 74% year-over-year, advancing our global sales to date to more than 48,000 stents annually. building on our real-world market penetration and experience. Another significant highlight was the notification from the European regulators of our CE Mark re-certification under MDR. The transition from MDD to MDR was challenging and required us, like the rest of the medical device industry broadly, to be patient, persistent, and comprehensive in our approach to addressing these changes in requirements, timelines, and priorities during this lengthy process. With our formal recertification under MDR now granted, we've de-risked this topic and removed uncertainty in our ability to continue to sell in EU-certified countries while enabling our product development pipeline provided under MDR as we continue to invest in our OUS markets in parallel with our increased U.S. focus. Turning to C-Guardians, our U.S. pivotal IDE trial, which is designed to support approval of C-Guard Prime in the U.S. Dr. Chris Metzger, System Vascular Chief at Ohio Health in Columbus, Ohio, and Principal Investigator of the C-Guardians trial, presented 30-day follow-up data from the trial at VIVA 23 and then at V Symposium, both of which took place in November of last year. As an important reminder of the results, the primary endpoint of the trial is a composite of incidents of major adverse events, including death, all-cause mortality, any stroke or myocardial infarction, DSMI, through 30 days post-index procedure, or it's a lateral stroke from day 31 to day 365 post-procedure. Between July 2021 and June 2023, 316 patients were prospectively enrolled in a single-arm study performed at 24 sites in the U.S. and Europe, including the C-Guard carotid stent system, which also included our next-generation C-Guard Prime. With the acknowledgement of FDA, 30-day results were presented reporting best-in-class data with the lowest 30-day MACE rate of any carotid pivotal trial to date. Patients with carotid artery stenosis at high risk for carotid endarterectomy treated with C-Guard had a DSMI rate of 0.95% from procedure through 30-day follow-up. This data continues to validate the unique neuroprotective qualities of C-Guard utilizing our innovative Micronet mesh, and it's consistent in our real-world experience. We remain on track to report 12-month primary endpoint results anticipated in mid-year, followed by the submission of our premarket approval application, or PMA, in the third quarter of this year. Based on these timelines, we anticipate possible FDA approval of C-Guard in the United States in the first half of 2025. These timelines remain consistent with our prior guidance. Turning now to our major product development and clinical programs. Seaguardians 2, the clinical study of our SwitchGuard neuroprotection system, along with our short-shaft Seaguard and accessory devices for TCAR procedures, continues with intention as we look to advance our TCAR tool set with next-generation enhancements. As a reminder, the SwitchGuard NPS is designed to prevent embolic debris generated during the carotid stenting procedure from traveling to the brain passing the blood through an integrated filter and returning it to the patient in a closed circuit to minimize blood loss during the procedure. We were pleased to announce just a few weeks ago that Dr. Patrick Garrity, Professor of Surgery and Radiology at Washington University School of Medicine in St. Louis, Missouri, and Dr. Pat Muck, Director and Chief of Vascular Surgery at Good Samaritan Hospital in Cincinnati, Ohio, have enthusiastically agreed to act as our lead PIs for C-Guardians 2, and that Dr. William Gray, System Chief of Cardiopulmonary at Mainline Health in Wynwood, PA, and Professor of Medicine at Thomas Jefferson University in Philadelphia, will act as an advisor to the company. Together, Doctors Geraghty, Muck, and Gray bring a wealth of knowledge and experience in the field of carotid interventions in both TCAR and CAS, and we are very fortunate to be able to benefit from their extensive knowledge, insight, and direction as we build our leadership objectives and strategy. they join an established multi-specialty group of thought leaders that are already providing guidance to us in these initiatives. Turning now to reimbursement, in October, the Centers for Medicare and Medicaid Services, or CMS, expanded coverage for CAFs and TCAR to include both asymptomatic patients at either high or standard risk for carotid endarterectomy. The broader availability of these less invasive options will enable physicians to tailor treatment plans to meet the needs of their individual patients. This expansion of coverage by CMS validates our strategy, which is to be agnostic to whether the stent is implanted via CAS or TCAR, as we are unique in offering comprehensive solutions. The timing of these changes and reimbursements and our potential approval of C-Guard in the U.S. provide us a tremendous opportunity to lead the market with this stent-first approach. Also during the fourth quarter, we announced a strategic agreement with the Jacobs Institute at the State University of New York in Buffalo and Dr. Adnan Siddiqui, Vice Chair and Professor of Neurosurgery, to conduct an early feasibility study of C-Guard Prime for severe carotid stenosis or occlusion in conjunction with thrombectomy in patients presenting with acute ischemic stroke and tandem lesions. Seaguard Prime, with its proprietary Micronet mesh, is designed to provide superior embolic prevention during carotid artery stenting. We believe that this study will demonstrate safety and feasibility of using our stent in these acute stroke procedures. Our investment in the study reflects our unwavering commitment to the neuro community and represents a critical component in our long-term growth strategy. We are pleased to share that FDA has approved our study, and we anticipate first patient enrollment in Q2 of this year. Before turning the call over to Craig to review the financials, I'd like to welcome Pete Ligotti, who joined in January as Executive Vice President and General Manager of North America. Pete brings more than 30 years of general management and commercial leadership experience to InspireMD, And it's the latest addition to what I believe is a truly world-class team capable of achieving our goals and growth objectives. At this point, I'd like to turn the call over to Craig for the financials. Craig?
Chuck
Thanks, Marvin. For the fourth quarter of 2023, total revenue increased 71.6% to $1,761,000. From $1,026,000 during the fourth quarter of 2022, This increase was predominantly driven by the CE mark recertification which occurred subsequent to the end of the fourth quarter 2022 and overall growth in existing and new markets. Gross profit for the fourth quarter of 2023 increased by $307,000, or 155.1%, to $505,000 compared to a gross profit of $198,000 for the fourth quarter of 2022. This increase resulted from higher revenue offset by a decrease in miscellaneous expenses. Gross margin increased to 28.7%. during the three months ended December 31st, 2023, from 19.3% during the three months ended December 31st, 2022. Total operating expenses for the fourth quarter of 2023 were $6.3 million, an increase of $1.2 million, or 23%, compared to $5.1 million for the fourth quarter of 2022. This increase is primarily due to increases in expenses related to the salaries and share-based compensation, offset by a reduction in clinical expenses as we near completion of the Sea Guardians trial. Total financial income for the fourth quarter of 2023 was $468,000, an increase of $349,000, or 293%, compared to $119,000 for the fourth quarter of 2022. This increase was primarily due to $349,000 increase in interest income from investment in marketable securities, money market funds, and short-term bank deposits. Net loss for the fourth quarter of 2023 totaled $5.4 million, or $0.16 per basic and diluted share, compared to a net loss of $4.8 million, or $0.60 per basic and diluted share for the same period in 2022. As of December 31st, 2023, cash, cash equivalents, short-term bank deposits, and marketable securities were $39 million compared to $17.8 million as of December 31st, 2022. That concludes our pre-prepared remarks, as we will now open the call for questions. Operator?
Operator
Thank you. 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 equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Adam Mader with Piper Sandler. Please proceed.
Adam Mader
Hi. Good morning, Marvin and Craig. Thank you for taking the questions here, and congrats on the nice finish to the year. Maybe just to start, as we think about the international business for 2024, I know you don't have guidance out there, but was hoping you could just kind of walk us through some puts and takes as we think about the business this year from a top line standpoint. And specifically, you know, wondering about some of the potential new products that may be coming down the pike with Seaguard Prime and SwitchGuard in Europe. And then I had a couple of follow-ups. Thanks.
Marvin
Hey Adam, thanks for the question. So as it relates to our European business, we're continuing to invest heavily in our commercial effort. We'll continue to do so. As you know, this MDR overhang from a pipeline perspective has been a bit of a challenge. And now that we have the MDR certification, it allows us to open up some of those channels of product development and look to advancing new products which was a bit of a challenge before under the MDD. So I would say, you know, on balance, we continue to invest heavily in the markets. We're looking to try to integrate our new product pipeline into the markets that are open to that. And we'll continue to hopefully grow it at a double digit pace. But, you know, no plans to to limit our access to that market. It continues to grow aggressively, and it's given us a great foundation to build our business.
Adam Mader
That's helpful, Color. I appreciate that. And sorry to push you a little bit, but just on Seaguard Prime and SwitchGuard for DMARC approval, do you expect that to come in 24? Is that a 25 event? Just any finer point you can put on it?
Marvin
Yeah, our hope is to have C-Guard Prime in 24. We have been, as I said, somewhat restricted by our ability to get our files reviewed, which have been delivered to our notified body for some time. And so now that that's opened up that process, we hope that that review will go quickly and we'll be able to integrate C-Guard Prime into the market in 24. As it relates to SwitchGuard, we're still assessing the market potential of TCAR in Europe and trying to figure out how we advance that through our channels and what the return on that investment looks like. So that will likely shift outside of 24. But for Seagard Prime purposes, our plan is to get it into the market as quickly as we can.
Adam Mader
I got it. Okay. That's helpful. Thank you. And then I guess pivoting over to the U.S., good to hear timelines there. for potential commercialization are still tracking consistent with past timelines. I wanted to ask about the data disclosure strategy for the company. I guess what I'm trying to ask is, will you top line the full results from Sea Guardians in the form of a press release or investor call? or should the investment community expect to wait for a presentation at a medical meeting and or a journal publication in the back half of the year? Just any more kind of color on disclosure strategy would be helpful. Thank you.
Marvin
Adam, I think our intention there is to obviously disclose this data as quickly as possible. There's a lot of reasons why we want to do that, and we're trying to pick the appropriate format. We certainly would prefer to do it in a conference setting as we did with the 30-day data. We're trying to time that out to see how that looks, but our intention is to do more than just press release that and do it in a much more robust setting as we've done previously. The challenge is being able to time that disclosure with what conferences are happening at what period of time. As you know, the summer gets a little quiet, so we're trying to match our intention to get it out as quickly as possible, but in a format that gives us the greatest response.
Adam Mader
I got it. That's helpful. And if I was to ask about the commercial sales force and plans for hiring, I was hoping you could kind of illuminate that for us. You know, where are you today when we look to onboard folks? I presume that's more of a, you know, a back half of the year exercise. But maybe just talk about kind of the plans there. And for Craig, you know, just any color around OPEX spend in 24.
Marvin
So our intention is to begin to build commercial infrastructure on the back half of the year, as you mentioned. We've spent a tremendous amount of time with Shane figuring out how to build and architect the optimal approach to territory size coverage and so forth. So on approval, we get the most out of our launch and go-to-market strategy. So back half of the year would be the heaviest as far as hiring is concerned. But there's a lot of work to be done between now and then in terms of, you know, developing tools, training, infrastructure, all those things that we're investing in. We've got Pete Ligotti on board as our general manager now that's working on a U.S. infrastructure as well. So we want to be able to support the commercial effort in addition to having a full team of high-powered sales reps ready to go.
Adam Mader
That's helpful. And just a couple more for me, if that's okay. So I wanted to ask about the USTCAR study. So you've announced the PIs. you know, Marvin, when should we expect that study to commence? And, you know, what can you share on the study design in terms of number of patients and patient follow-ups and even endpoints? And then, you know, as we think about commercial timing for switch guard, you know, is that a back half 25 event? I just want to make sure that those timelines are still good. Thanks.
Marvin
Yeah, so as we mentioned in our previous call, Adam, we had a very productive pre-sub meeting with FDA to map out our strategy for SwitchGuard and our TCAR entry into the U.S., and so we're following their lead. We also gathered a tremendous amount of feedback from our strategic advisory board and the vascular surgery community to make sure that the tool set that we're developing is addresses some of the open topics that they felt were important. We want to make sure that this is world-class, next-generation technology. We like the position of a second mover advantage as long as we can take advantage of addressing some of those things. So we've integrated that feedback into our design and device approach, and that adds the next layer of V&V, and then we get into the regulatory pathway. So the simple and short answer is we've identified our PIs We've got a structure in place. We have to validate that with FDA, but we hope to get started in that study late this year. And our direction in terms of availability will depend on enrollment and FDA finalizing our approach there. But I think the timelines that we've previously discussed remain consistent, likely late 25 for approval.
Adam Mader
Very good. I will hop back in queue. Thanks, Marvin.
Operator
Our next question is from Ben Hainer with Alliance Global Partners. Please proceed.
Ben Hainer
Good afternoon, gentlemen, or good day, gentlemen, I should say. Thanks for taking the questions. First off, for me, just on the study design, the tandem lesion 15-patient study, how quickly do you expect that to enroll? Sounds like that will kick off next quarter. Any other color you can provide there?
Marvin
Hey Ben, good to hear from you. You know, I think the EFS as we've structured it with Dr. Siddiqui and the group at Jacobs Institute is really intended to test drive the thesis behind how C-Guard performs in this acute setting where thrombectomy and other things are being applied. We're going to go at a pace that allows us to continue to provide data to FDA as we go along. This is not going to be a fast march to the finished event. The whole theory behind the EFS is to do things in a very deliberate manner, carefully, to make sure that what we believe to be the case from a safety profile perspective is true. And so I wouldn't put any timelines to enrollment. I think what's most important is our commitment to the neuro community and making sure that we're acting on the feedback. We know that there's a lot of carotid stenting that's taking place. There's not a dedicated label for that in some of these settings, and we think that C-Guard, based on the feedback from the physicians, is optimally suited for that. So we're going to take it a step at a time and use EFS as a big first step to make sure that that thesis is validated, and then we'll go from there.
Ben Hainer
Okay. Got it. So methodical approach there. I guess not a big surprise with you guys. That's good. And then, you know, just any more reactions that you can share from the 30-day data for Sea Guardians? I know we talked about VEVA on the last call, but, you know, VEVA and anything that's kind of flowed in since then?
Marvin
You know, Ben, overall, I think it was a remarkable presentation that I won't say caught a lot of people by surprise, but was very favorably received. From our perspective, it was consistent with our real-world experience, which was also great to have. Obviously, we have to take next steps here to follow up on the one-year data so that we've got a comprehensive package to prepare and present to FDA. But so far, on the foundation of our 30-day data, there's been a tremendous amount of confidence and and our movement forward and the ability to get and secure FDA approval. So we'll look to this next readout as the next step in that process, but excitement up to this point.
Ben Hainer
Okay, that makes sense. And then more for Craig. CRD is too, and just kind of the expenses they have running through R&D. How should we model that as the year goes on this year? Is there a step up in any particular quarter as you kick that thing off later this year or anything in particular that we should be thinking about?
Chuck
Yeah, I think for R&D, you should think that there's going to be step ups. for the ESS as well as the trial for SwitchGuard for Guardians 2. So, yeah, I would just, you know, within the first couple quarters already start to include a step up.
Ben Hainer
Okay. Step up and then step up for a couple quarters and then kind of level off is the thinking or does that continue to step up throughout the year?
Chuck
No, no, no, no, no. In the first couple quarters a step up and then just level it off.
Ben Hainer
Okay. That's helpful. And then I guess maybe a little bit for both of you. Marvin, you mentioned a full team of high-powered sales reps. How big is that team? You know, how quickly do you bring them on? Anything else that you can help us out with there?
Marvin
Yeah, I think we've, Shane has spent a considerable amount of time modeling this and we're working through some different scenarios. We've both done this before. I think for the U.S. market, you know, the optimal number is somewhere in the ballpark of 60 dedicated, you know, full-time direct sales reps with obviously support structure clinically and other things. And so we're building our models around that. In terms of absorption in the market, our goal is to make sure that we're addressing each of the markets appropriately and we're not getting ahead of our speed but at the same time we're anticipating a very robust response to that approval so um you know we're working hard to kind of can can figure out to figure out how we how we um take these people on at what period of time it's probably about a two-year runway i would anticipate then to sort of get fully locked and loaded on, you know, on our commercial go-to-market strategy. But we're obviously going to address those markets that are most robust, and we're going to go as fast as the market sends us signals that they're ready to buy and use Seaguard. So, architecting the plan's first step. And as you can imagine, we've had a lot of inbound inquiries from a lot of really talented reps in this market that see us as being, you know, sort of this next step in carotid revascularization, and they love the direction we're headed. So inbound inquiries are always a good indicator of, you know, how we can land in a good place.
Ben Hainer
Good to hear that. Excitement from the inbound end. I think that's all I had, gentlemen. Congrats on the progress, and thanks for taking the questions.
Marvin
Thanks, Ben.
Ben Hainer
Thanks for staying in touch.
Operator
This concludes our question and answer session. I would like to hand the conference back over to Marvin for closing comments.
Marvin
Great. Thank you, Operator. We appreciate everybody calling in today, and we're really looking forward to a very robust 2024, and thank you for calling in.
Operator
Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
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