IceCure Medical Ltd
Q1 2022 Earnings Call Transcript

Published: 18 May 2022

[Operator:]

Welcome to IceCure’s First Quarter 2022 Results Conference Call. Management will provide an overview of IceCure’s financial results as well as clinical and operational highlights. On the call today are IceCure’s CEO, Eyal Shamir and CFO, Ronen Tsimerman. They are joined today by Dr. Richard Fine. Dr. Fine is a trial investigator for IceCure’s ICE3 clinical trial on cryoablation of small Low-Risk Breast cancer. Dr. Fine is also a past President and Chairman of the American Society of American Society of Breast Surgeons, Program Director of the Breast Surgical Oncology Fellowship and Director of Research and Education at the West Comprehensive Breast Center in Germantown, Tennessee. Following the presentation, IceCure’s management and Dr. Fine will be available for a question and answer session. I will now take a brief moment to read the Safe Harbor statement. This presentation contains forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions or variations of such words are intended to identify forward-looking statements. For example, IceCure is using the forward-looking statement in this press release when it discusses pursuit of regulatory approvals and FDA review, strategic plans, commercial growth, expansion of clinical applications with its minimally-invasive cryoablation technology, advancing regulatory and commercial strategies and expected quarter-over-quarter revenue variations for future periods. Because such statements deal with future events and are based on IceCure's current expectations, they are subject to various risks and uncertainties and actual results, performance, or achievements of IceCure could differ materially from those described in or implied by the statements in this presentation. The forward-looking statements contained or implied in this presentation are subject to other risks and uncertainties, many of which are beyond the control of the Company, including those set forth in the Risk Factors section of the Company's Annual Report on Form 20-F for the year ending December 31, 2021 filed with the SEC on April 1, 2022, which is available on the SEC's website, www.sec.gov. The Company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law. I will now turn the call over to IceCure’s CEO, Eyal Shamir.

[Eyal Shamir:]

Hello, everyone and thanks for joining our first quarter 2022 call today. We will start with a review of our significant business developments since the beginning of the year. Then, I will turn the call over to Ronen, for an overview of the financial results. We will then turn the call over to Dr. Richard Fine. We are grateful to him for sharing his time with us today. Dr. Fine is an investigator of our ICE3 clinical trial who uses ProSense with his patients. He can provide valuable insights on ProSense and how it’s planned potentially optimize treatment in a low-risk and early-stage breast cancer. On the commercial front, we started the year strong due in large part of the reopening of post-pandemic travel making in-person business and clinical visits a reality again. Several new ProSense systems were installed with our global customer base. I will remind listeners that ProSense is approved for various indications in four key countries. We have a commercial presence in twenty countries including the U.S. We have a CPT1 code for coverage of cryoablation procedures such as kidney, liver, lung and bone cancer, fibroadenoma, which is benign breast tumors. We have also CPT3 code for breast cancer. We have resumed in-person practitioner site visits and have been conducting hands on demos and training sessions. Our business development team is now more effectively able to pursue and close on sales opportunities. We are happy to report that our sales in the U.S. increased in Q1. ProSense was extremely well received at three very important oncology conferences in the U.S. and Europe grow through data presentations and hands on demos and symposia. We have generated a great deal of excitement for ProSense. Notably, at the 23rd Annual Meeting of the American Society of Breast Surgeons in April, IceCure publication regarding our ICE3 breast cancer cryoablation study interim results originally published in the scientific journal, the Annals of Surgical Oncology was chosen as one of the best data of 2021from thousands of breast cancer articles published annually. Dr. Helen Pass, President of the American Society of Breast Surgeons presented the beta as part of the annual address at the conference. The American Society of Breast Surgeons is a highly regarded and influential organization that sets the treatment guidelines and standard-of-care for breast cancer in the U.S. These presentations of our study is very significant in our view and explore into the potential improvement ProSense can deliver in the standard of care in a low-risk early-stage breast cancer. Dr. Pass presentation was made to a large audience of breast surgeons and related medical professionals who were attending to the conference in-person and online. During the second quarter, we continued to work towards USFDA approval for ProSense in early-stage breast cancer. We had previously filed our pre-submission package with the FDA in the end of November of last year. In our final submission, we plan to suggest a De Novo classification, including request for a sprint discussion under the FDA procedures. The proposed intended use is for early-stage breast cancer patients at high risk for surgery. Our continued discussions with the FDA is part of our breakthrough device designation we were granted last year. Our published ICE3 interim trial results in this indication show clear benefit including that almost 98% of the patients will receive the ProSense System cryoablation treatment or Recurrence stream with a 76 patients having reached five years post-treatment. 98% of the doctors and 95% of the patients reported satisfaction with the cosmetic results. I will now turn the call over to Ronen for the financials.

[Ronen Tsimerman:]

Thank you, Eyal. IceCure has successfully transitioned into the commercial-stage company while continuing our innovative clinical and R&D work. Our quarter-over-quarter revenues rise and we expect this to continue into the foreseeable future due to revenue recognition from international distribution agreements as well as viability in sales. For the three months ended March 31, 2022, revenue decreased by 48% to approximately $0.75 million, compared to $1.4 million in the first quarter of the last year. The decrease is due to decreased revenue recognition of approximately $0.4 million from the distribution agreement with Terumo for the commercialization of ProSense to treat malignant breast tumors in Japan, Singapore and Thailand and a decrease in sales in the Asia region, which is impacted by COVID surges and associated restrictions on commercial activity. These decreases were partially offset by an increase in sales in the U.S. Gross profit was approximately $0.44 million for the three months ended March 31, 2022, compared to approximately $0.94 million for the same period in 2021. Gross margin was approximately 58% for the three months period ended March 31, 2022, compared to approximately 65% for the first quarter of 2021. The decrease in gross margin is mostly attributable to the decrease in revenue recognition from the Terumo distribution agreements. Research and development expenses for the three months ended March 31, 2022 were $2.4 million compared to $1.1 million for the period last year. The increase is attributed to the acceleration in the development of IceCure's next-generation single-probe system and clinical and regulatory activities. Selling, marketing, general and administrative expenses, in aggregate for the three months ended March 31, 2022 were $2.5 million, compared to approximately $1 million for the first quarter of three months ended March 31, 2021. The increase is attributed to the Company's expanding commercialization efforts and to the increased NASDAQ listing related expenses. Total operating expenses for the three months ended March 31, 2022 were approximately $4.9 million compared to $2.1 million for the three months March 31, 2021. The increase in operating expenses is attributable to increased development, commercialization, and NASDAQ listing related activities. As a result of lower revenue and increased operation activities, net loss reported for the three months period ended March 31, 2022 increased to approximately $4.4 million, or $0.12 per share, compared with a net loss of approximately $1.4 million or $0.07 per share, for the same period last year. As of March 31, 2022, the Company had cash and cash equivalents of approximately $22.4 million, compared with approximately $25.6 million as of December 31, 2021. I will now turn the call over to Dr. Fine. Dr. Fine has been a breast surgeon since 1988 and has served as the Board Member or trustee in organizations including the National Consortium of Breast Centers, the National Accreditation of Breast Centers Program and The American Cancer Society. Dr. Fine was the President of the American Society of Breast Surgeons in 2003, 2004 and Chairman of the Board there from 2015 to 2018.

[Richard Fine:]

Thank you. I wanted to review, I know that Mr. Shamir mentioned that we had published the interim results of the cryoablation without excision for early-stage breast cancer in the prestigious journal Annals of Surgical Oncology this past fall and it was brought to the attention of the members at the American Society of Breast Surgeons as one of the better papers from the year. The ICE3 trial I was actually on the scientific advisory board in designing the trial. The trial goal was to evaluate the safety and efficacy of breast cryoablation in older patients with low-risk early-stage breast cancer to see if they would benefit from a non-surgical treatment avoiding the surgical risk of going to the operating room for surgical removal of the tumor. This was a prospective multi-center trial. There were approximately 20 sites across the country. Our site in Germantown Tennessee at the Margaret West Comprehensive Breast Center we actually put on 50 of the 194 patients that were received successful cryoablation per the trial protocol. The exciting results at the interim three years was that, only four of the 194 patients or 2% had had a recurrence. This was showing that this was a very promising alternative to surgery, but it also offer the benefits of a minimally-invasive procedure with minimal risk. I’ll be happy to answer at the end any questions about the trial. We also – Mr. Shamir mentioned the coding for cryoablation with the help of the American Society of Breast Surgeons, as well as other organizations such as the American College of Radiology couple of years we’re very successful in getting a Category 3 new technology code for cryoablation of breast cancer. The reason that’s important is because, as the utilization increases and continued work on treating patients with breast cancer, we will be able to convert this Category 3 code to a Category 1 code, which already exists as Mr. Shamir mentioned for other areas of cancer, as well as for benign breast tumors. The last thing that I wanted to mention was the excitement about cryoablation for breast cancer that exist today. The American Society of Breast Surgeons has been working on developing a registry to expand the indications for cryoablation from the ICE3 trial. We are expanding the age group down to the age of 55. We are also going to more standardize the treatment so that we can evaluate post-cryoablation radiation and its effect on the patients’ breast. So that it’s exciting trial to answer so many questions that were brought up on the ICE3 trial. The other thing that’s exciting is that, I have been approached multiple times from centers across the country including Mayo Clinic in Rochester, as well as the University of Washington. They are all interested in creating their own cryoablation registries or trials. So there is a lot of excitement around the country in terms of using cryoablation in the appropriately selected patients for the purpose of avoiding surgery in these patients. So that is a quick summary of the points I wanted to make and I am happy to answer any questions that those points bring up.

[Operator:]

[Operator Instructions] And the first question is from Ben Haynor of Alliance Global Partners. Please go ahead.

[Ben Haynor:]

Good morning, gentlemen. Thanks for taking the question. Just firstly on the FDA and where your with that and you got the pre-submission package you are planning to suggest that de novo classification and got a sprint discussion request and is that correct? And then, when do you expect to submit for a general 510 (k) clearance?

[Eyal Shamir:]

[Indiscernible] Very much Ben, this is Eyal, the CEO. We are continuing in process of sharing info and working closely with the FDA in order to lead our submission for clearance of cryoablation of early-stage breast cancer operations who are high risk for surgery. The 510(k) - it’s a 510(k) de novo. This is our – this is going to be our first approach. We’d like to remind to all of us the endpoints to the ICE3 study, which requires a full five year follow-up which will be completed at spring 2024 as the last patient enrolled February 2019, which means full five years will be February 2024. Our approach after we got the breakthrough device designation grant and the spring discussions with the FDA is to get the self-indication for low-risk breast cancer and high-risk for surgery. As soon as we will finalize this process and we will have a full submission, we will of course update the investors accordingly. This is still in process.

[Ben Haynor:]

Okay. This is – you don’t have a timeline necessarily on when that would be kind of figured out.

[Eyal Shamir:]

We are still working with the agency and as soon as we will finalize it, we will be able to make the submission and then of course, we will have a full announcement.

[Ben Haynor:]

Okay. Got it. And then, on the regulatory front in China, obviously, they’ve had their more COVID lockdowns. Have those impacted the NMPA, as well and any update to the clearance timeline in China?

[Eyal Shamir:]

We expect that to have our probe approval by September, October this year. We hope that the lockdown both in Shanghai and in Beijing not to delay too much our assumption at the moment that it can be before the end of this year. This is the assumption our discussions with the NMPA China, as well.

[Ben Haynor:]

Okay. Got it. And then, for Ronen, just how do you expect operating expenses to kind of track throughout this year? I mean, this Q1 kind of look like a good runrate as we move forward throughout the year?

[Eyal Shamir:]

Ronen?

[Ronen Tsimerman:]

Thank you, Ben. So, we accelerated our research and development of our next-generation single probe and also our next-generation multi-probe systems. So, as we push forward, of course, the expenses also incline. So I would expect that the runrate will be in this area. But again it depends on how strong and how fast we are pushing forward. Okay. These decisions are made accordingly and will – maybe made accordingly in the future.

[Ben Haynor:]

Okay. Okay. Got it. And then, Dr. Fine, just it sounds like there is some excitement kind of brewing around cryoablation with the Image Mail and other centers looking to do their own studies. Can you maybe characterize just kind of a general level of awareness and receptiveness to cryoablation amongst your fellow colleagues?

[Richard Fine:]

Yes, Ben. Thanks.

[Eyal Shamir:]

Yes, Dr. Fine. Please go ahead.

[Richard Fine:]

Oh sorry. Okay. So, I think that you are right. There is a lot of excitement and I think that the publication of the interim results of ICE3 as well a lot of people are waiting for, they wanted to see that patients who did not have their tumors removed and that were treated with cryoablation and followed that they did well. As of April, 75 of the patients that were entered in the trial has completed five years of follow-up and there has only been one additional recurrence in that time. So that showing results that are very equivalent to breast conservation surgery. And with that publication, I think that there has been a lot of excitement people are recognizing that this is going to be a good alternative for a sub-group of patients that have tumor biology that’s more favorable. One of the things that’s happen in breast cancer is we’ve been able to recognize that cancers are different. Some are very aggressive, but there are a lot of them that are non-aggressive. And if we can treat the ones that are not as aggressive without having to go to surgery, that’s an ideal situation.

[Ben Haynor:]

Okay. It makes sense. And then, just kind of curious on the receptiveness of your patients when they are – they have a cancer that would be treatable with cryoablation. I mean, do the patients kind of gravitate towards cryoablation over surgery, as well?

[Eyal Shamir:]

I was actually very pleasantly surprised during the years then I was putting the patients on the trial. I didn’t have to work very hard at all in terms of encouraging patients to participate. When you mention to a patient a non-surgical option, and you’ve already explained to them that they have a tumor that has some very favorable features, they gravitate towards a non-surgical option very readily. Even those patients that require go into surgery to check their lymph nodes because they were in the younger age group, even those patients don’t wanted to have the cryoablation on the breast. And I think it’s more about having a scar on the breast, having volume removal from the breast and those things excite patients about not having to have surgery. So, I was actually very pleasantly surprised how women actually were very much excited about being able to participate.

[Ben Haynor:]

Okay. So, you would expect once you have the FDA clearance, hopefully before too long as CPT1 code that for the patient that would be good candidates quite a lot of them are trying to choose cryoablation?

[Eyal Shamir:]

Yeah, I feel very confident in that.

[Ben Haynor:]

Okay. Great. And then, do you have a sense on the time line? What that would look like to get the CPT1 code? I mean, is that like in 2025 or what would you…

[Eyal Shamir:]

Dr. Fine is also the Chairman of the CPT and Coding for the American Society of Breast Surgeons and they supported us very much in order to get the CPT3 code. Hence we will need to get the FDA clearance and then to apply to move from CPT3 to CPT1 and of course which will come together with coverage and reinvestment. So, I think that 2025, this is a possible to have the CPT1 and coverage and reimbursement. This is just an assumption. We need to work with the different partners in that. But I believe that at the beginning, we will be able – all the users will be able even to stop cash payment - patients who will pay cash for that kind of treatment until that it will be fully covered by CPT coding and reimbursement and coverage.

[Ben Haynor:]

Okay. That’s helpful. I think that’s all I had, gentlemen. Thanks for taking the questions and congrats on the progress.

[Eyal Shamir:]

Thank you. Thank you very much.

[Operator:]

The next question is from Kemp Dolliver of Brookline Capital Markets. Please go ahead.

[Kemp Dolliver:]

Hi. Good day to everybody. First question relates to the FDA discussions. Previously, it sounded that the impression we were getting is that you thought you would be able to file with the FDA sometime this calendar year or maybe early next year. Has the tenor of the discussions changed or because you also mentioned having the five years of data available in early 2024. So, can you provide more detail regarding the status of what you are thinking is?

[Eyal Shamir:]

Thank you very much. As I mentioned, our intention, our plan and discussions with the FDA, with the agency is to do the first test submission during this year. Therefore the first indication, which I will repeat again will be for early-stage breast cancer for patients who are high risk for surgery. We don’t launch it until early 2024, when the ICE3 study will be completed and all patients will pass five years of follow-up. So this is still the plan to do the submission this year.

[Kemp Dolliver:]

Got it. So, in a way, would the way to think about this as the first submission will be a subset of the appropriate patient population and then when you have the balance of the data, you would then file for the broader population that was in the trial. Is that a pretty fair description?

[Eyal Shamir:]

Absolutely. They are as long as early 2024, we will be able to do a submission of the indication of a low-risk early-stage breast cancer. So this is the indication that we started – the ICE3 started.

[Kemp Dolliver:]

All right. Okay. Good. And just a follow-up on this, and maybe Dr. Fine can give some clarity around it. How significant is that distinction with regard to the patient population that you would be able to treat under the initial submission or indication versus the second indication? Adoption rates for new procedures typically take several years anyway, these types of submissions are probably a gating factor initially in those adoption rates. So, what perspective do you have on that Dr. Fine?

[Richard Fine:]

Yes. So, I feel like that what you’ve got is, the sub-group of patients that we are talking about high-risk for surgery. But when we are making those submissions we are trying to keep the high risk for surgery criteria somewhat broad. Okay, so a lot of the patients that would meet criteria in general are older patients that have – usually will have hypertension, they’ll have diabetes. They’ll have – if they’ve been smokers they’ve got lung disease and things like that. So by keeping the criteria in the description of what makes a patient at higher surgical risk, I think that we’ll be able to keep the eligibility of patients to be treated under that narrower indication, we’ll be able to keep that eligibility criteria pretty broad. Does that make sense?

[Kemp Dolliver:]

Yes.

[Eyal Shamir:]

So, we are trying not to make it so narrow that we can only, let’s say treat a patient who is on death store, we are going to be treating patients who are older that have lots of medical problems. And so, that’s how we are trying to frame the patient at high risk.

[Kemp Dolliver:]

All right. Okay. That makes a lot of sense clinically and also to I think to lame people. So, just moving on to other topics, Terumo is still a significant contributor to your business. You have mentioned that decline in Q1, is there any sign of a recovery in the Terumo markets in Q2?

[Eyal Shamir:]

Thank you, Kemp for this question. What Ronen mentioned, the explanation is we all remember IceCure got some distribution rights from Terumo Japan for the distribution agreement that we signed with them for Japan, Singapore and Thailand. These according to some rule is a content we need to recognize over time. And of course, during a period of time, that revenue recognition now is going down. Terumo Japan, especially after the pandemic, they are still extremely busy working for the PMDA application and the regulatory approval in Japan. At Singapore and Thailand, they started to sell as IceCure brought the regulatory approval for that. So, just the revenue recognition declined not from the business perspective, this is part of the revenue that we did over time according to the operators. The business was from Japan mainly will come with a future life we are growing some of the business from Singapore and Thailand that they started to penetrate the markets.

[Kemp Dolliver:]

Okay. So, if I can rephrase that, there is an element of the revenue decline that is not related to the actual activity levels, because you get revenue from both actual shipments to them and then I think – if I remember correctly there may be some amortization of revenue recognition for revenue.

[Eyal Shamir:]

Yes. For the upfront distribution rights, we got from them nice millions of dollars just as we signed the distribution agreement. This is not all according to sales and day-to-day activities. This is what Ronen explained as the revenue recognition.

[Kemp Dolliver:]

Excellent. Okay. Thank you. And just probably another question for Dr. Fine, but, what’s the timeframe that you expect for the implementation or the – of the registry? And any thinking regarding the institutions that have expressed interest in their registries and trials. How quickly do you expect these process will start?

[Eyal Shamir:]

I will start to answer that. We are working very closely and of course, together with Dr. Fine and the board, the society, the leadership of the society to finalize the drug that basically supposed to be under the rules of the society and also everything will be finalized on that on the protocol aside from the group number of patients who approaching the number of sites, then of course we will do a proper announcement, but the society we’d like to work with I see it very closely. And of course, we would like to work together with them like Dr. Fine mentioned to reduce their patient age and to make it growth-wise and to work closely with traditional sites who were being able to start the work from this study and to continue to collect data with the additional exempts made to the manufacturing entity and of course in future publication. Dr. Fine, if you have anything to add?

[Richard Fine:]

Yeah, okay. I’ll add a couple of things. So, we have been working on the protocol, because we want the protocol for the registry to be very strong. We have already had the society research committee review that gives some comments back. We’ve been addressing those comments and also worked with the consultant to make sure that the design of the registry will also be beneficial for the FDA looking at the submissions, because all of this data that is collected over time is going to be helpful. So, we are working very diligently to get all these things accomplished. I would feel like there are timeline or goal would be hopefully to get this started towards the end of the summer or the beginning of fall. So that would be my wishes for that to be the latest.

[Kemp Dolliver:]

Fabulous. Thank you. And just one last question, there was a reference in the discussion around G&A to NASDAQ listing cost. Are those costs that are ongoing in nature or were there some one-time expenses in the first quarter?

[Ronen Tsimerman:]

Thank you for the question. Well, as you know, insurance costs have raised in the last two years, especially for NASDAQ listed companies. So, we are looking insurance costs and other costs. I can’t really say what are going to be the insurance cost for example, in the last – in the next insurance submission, but again, I do not expect that these costs will decrease significantly. So, I believe you can look at them as cost that will go up.

[Kemp Dolliver:]

Great. Thank you so much.

[Operator:]

There are no further questions at this time. Mr. Shamir, would you like to make your concluding statement?

[Eyal Shamir:]

I would like to thank, especially, Dr. Fine and all the participants for taking the time to join us today and I wish all of us present in the Investor Day. Thank you very much.

[Operator:]

Thank you. This concludes the IceCure Medical Limited First Quarter 2022 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.