InspireMD, Inc.
Q4 2018 Earnings Call Transcript

Published: 19 Feb 2019

[Operator:]

Greetings and welcome to the InspireMD Fourth Quarter and Fiscal Year 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Jeremy Feffer, Investor Relations of InspireMD. Thank you. You may begin.

[Jeremy Feffer:]

Thank you, Michelle. Good morning, everyone, and thank you for joining us for the InspireMD's fourth quarter 2018 business update conference call. On the line with us today are Jim Barry, Chief Executive Officer of InspireMD; and Craig Shore, Chief Financial Officer. We will start with an overview of the company results and our recent highlights and then we will open up the call to your questions. Before we begin, let me take a minute to note that this conference call may contain forward-looking statements. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. Such information is subject to known and unknown risks, uncertainties, and other factors that can influence actual results or events and cause actual results or events to differ materially from those stated, anticipated, or implied in the forward-looking information. Listeners are cautioned not to place undue reliance on forward-looking information as no assurance can be given after the future results, levels of activity, or achievements. And having addressed that, it is my pleasure to turn the call over to Jim Barry. Please go ahead, Jim?

[Jim Barry:]

Thank you, Jeremy, and thanks all of you who are joining us on the call and the webcast today. During the fourth quarter, and into 2019, we have continued to add to the body of growing evidence suggesting that our novel best-in-class CGuard Embolic Prevention System which we refer to as CGuard EPS, provides safer and more durable benefits to patients suffering from carotid artery disease. By way of some background for those of you who are new to the InspireMD story, CGuard EPS is our lead product, it's a highly differentiated, minimally invasive treatment for carotid artery disease designed around our proprietary and elegantly simple MicroNet technology to dramatically reduce or even eliminate the incidence of stroke following carotid artery procedures. CGuard EPS is designed to prevent current procedural and late ambulization by tracking potential ambula against the arterial valve behind the MicroNet, while maintaining perfusion of blood flow to the external carotid artery other branch vessels and ultimately to the brain. This is an important breakthrough in the field of treating carotid artery disease as a minimally invasive implantable device as approximately 80% of patients with high grade carotid stenosis who could benefit from a minimally invasive procedure versus the more invasive carotid endarterectomy are guided to the latter by their physicians due to the stroke risk that has been associated with conventional carotid stents. Therefore it is important that we continue to demonstrate that CGuard is both safe, easy to use, and reduces the risk of stroke. We continue to make traction not only with the interventional radiologist, interventional neurologists, and interventional cardiologists, but also with vascular surgeons who perform the majority of surgical carotid endarterectomy procedures. And this is a critical element of our long-term growth strategy. Today, I'm pleased to say that we're making good progress. In 2017, we moved away from the single distributor model and replaced that with local distributors throughout Europe. Furthermore during 2018, we addressed the geographical gaps in our distribution network in the Far East and Latin America. These initiatives are now being completed except in regions where the regulatory hurdles are very high, namely the United States, China, and Japan. The latter group of countries remain a strategic focus for our company, with the IDE submission in the United States being planned for later this year as well as our continued ongoing efforts to find a suitable partner or partners in China and Japan. However our immediate strategic focus has now shifted from growing sales to two growing sales in our key European markets. To this end, we have refocused our efforts to educate and convert European clinicians to the advantages of CGuard EPS. I would like to touch on just a few of the key initiatives that have been implemented to this end. Last quarter, we reported that we established Centers of Excellence at two leading hospitals in Germany and Italy which are key markets for CGuard to train and educate surgeons and interventionists on the benefits of CGuard as a safer choice for carotid revascularization and stroke prevention and to allow clinicians to share their positive experiences using the device in their daily practice. Last year, we conducted two very successful sessions at these centers and 12 new clinicians were trained by their peers. This year, we have greatly accelerated our Center of Excellence program and are conducting one such event at least every month. In addition, we opened a new center in Italy, Slovenia, Poland, and we introduced a roaming center in Spain, which is run by visiting experts in CGuard EPS for regional doctors at their hospitals. This quarter, we plan to hold six such events with the goal of educating over 30 doctors that have elected to introduce CGuard into their practices as their preferred treatment for carotid artery disease. I want to make a special mention of our new Italian Center of Excellence at the Department of Surgery at the University of Rome led by Professor Speziale a noted vascular surgeon in Europe. This center specializes in training vascular surgeon and will conduct sessions for interesting clinicians from across Europe. Our efforts to educate doctors on the advantage of CGuard EPS however are not confined to the Centers of Excellence. We have greatly expanded our clinical specialist team and are now supporting all our key markets on a daily basis. We work with our distributors to conduct local workshop, give informative presentations in key markets, and support local conferences. This has been met with great enthusiasm by our distribution partners who are now able to build their CGuard businesses far more efficiently. Since our last quarterly call in November, CGuard has been featured in a number of presentations at leading international vascular medicine conferences reflecting the growing support that we're receiving from leaders in the field across specialties. At the recent LEIPZIG INTERVENTIONAL COURSE known as LINC in 2019 in Leipzig, Germany, in January, CGuard EPS was featured in the transmission of two successful live cases that allow close to 5,000 attendees to see first-end the simplicity of the CGuard EPS procedure in two complex cases as conducted by world renowned interventional cardiologist and angiologist from Bergamo, Italy, and by the conference host and organizer from the University Hospital in Leipzig, Germany. Importantly these live cases were conducted on patients with multiple comorbidities and both patients were successfully treated in procedures that lasted about 20 minutes each. This is the second consecutive year that CGuard was chosen to be prominently featured in live cases transmitted oblique. Additionally Professor Schmidt who conducted one of these cases is the host and organizer of LINC. Having the conference host Chu as one of his live case demonstrations, the use of CGuard is we believe yet another strong endorsement of the potential of CGuard to change the treatment paradigm in carotid artery disease. At the same conference, Doctors Karpenko and Ignatenko from the Siberian Federal Biomedical Research Center in Russia presented interim data from their first 50 patients in the investigator initiated SIBERIA trial which compares CGuard EPS with AcculInk one of the market leading conventional carotid stent. While it is important to note that this is an interim analysis the data was encouraging. Patients treated with CGuard EPS had significantly lower incidence of multiple lesions in the brain, 16% versus 44%, a lower incidence of large variable lesions 24% versus 40%, and less major adverse clinical events defined as death, myocardial infarction, and stroke. After 30 days, 0% versus 12% as compared to the patients treated with the AcculInk stent. It's also worth noting at this interim analysis that the CGuard treated patient group had a higher clinical risk profile than the AcculInk treated group. The SIBERIA study will ultimately enroll 100 patients, 50 in each arm, and we are expecting to hear the final result sometime later this year. Also at LINC, Professor Christian Wissgott, from the Institute for Diagnostic and Interventional Radiology/Neuroradiology, Westkuestenklinikum in Heide, Germany presented his findings from his investigator initiated study highlighting CGuard one size fits all SmartFit feature that he has demonstrated could be used across a broad range of carotid artery diameters. The SmartFit technology is another differentiating feature of CGuard and has the unique feature of form fitting to the artery. In treating a carotid lesion, it's common for the device to stand from the internal carotid artery out into the common carotid artery because there are variations of artery diameters between the common carotid and the internal carotid it can be difficult to select the correct size of a carotid stent. In preliminary bench study, Professor Wissgott demonstrated that the 10 millimeter diameter CGuard EPS had virtually equivalent outward forces in diameters ranging from 5.5 millimeters to 9.5 millimeters. In his subsequent clinical study of 30 consecutive routine patients with a range of carotid artery diameters, Professor Wissgott, demonstrated that by using only the 10 millimeter diameter device the CGuard EPS readily adapted to a range of carotid artery diameter changes. The 10 millimeter CGuard was implanted with 100% technical success with no carrying procedural complications and no major or minor stroke at the six months follow-up and the average vessel diameter treated with a 10 millimeter device range from 5.8 plus or minus 0.6 millimeters in the internal carotid artery to 9.0 plus or minus 0.6 millimeters in the common carotid artery. In addition a subgroup of 10 patients underwent DW-MRI follow-up at 30 days in its six months with no new collateral lesions observed at either time points. This study provides a strong endorsement of CGuard's conformability, ease of use and reduction of embolic events out to six months. In December, we announced the publication in the Journal of the American College of Cardiology Cardiovascular Intervention, a meta analysis of four clinical trials citing the benefits of Next Generation Mesh-Covered and Dual-Layered Carotid Stent and CGuard was prominently featured. The analysis concluded that carotid artery disease patients treated with mesh-covered stents experienced a 30 day minor stroke rate of 1.25% which is lower than 30 day minor stroke rates reported in other widely cited studies such as CREST and ACT 1 for patients treated with both carotid endarterectomy and with those treated with conventional carotid stent. This paper was also the focus of a follow-up article in Medscape along with a discussion with the leading European interventional cardiologist Professor Harald Mudra. CGuard was also featured in several noteworthy presentations at the 45th Annual Symposium on Vascular and Endovascular Issues, Techniques and Horizons Symposium otherwise known as the VEITHsymposium which was held in New York in November. Professor Piotr Musiałek, from the Department of Cardiac and Vascular Diseases, John Paul II Hospital, in Kraków, Poland presented an update of his ongoing paradigm extend clinical trial of all comers with high risk carotid stenosis. In 251 patients with CGuard, he noted that the device delivered excellent safety and efficacy both during the procedure and at the long-term 36 month follow-up. Professor Wissgott presented positive six month follow-up data on 70 consecutive patients treated with CGuard in an additional clinical study he had been conducting which mirrored Professor Musiałek's results. Additionally, the six month data he presented showed no observed intra-stent restenosis and the DW-MRI data from a subgroup of 29 of his 70 patients detected no ipsilateral lesions in the brain after 30 days and six months. Finally, doctors Laura Capoccia and Francesco Speziale presented an update on the ongoing IRONGUARD 2 multicenter perspective registry study of 342 patients with severe carotid stenosis. The presentation which included data from 15 centers in Italy showed no major stroke, no permanent neurological symptoms, no re-stenosis and no neurological death in 51 of the 342 patients who completed their one-year follow-up. Clearly, CGuard EPS continues to demonstrate its clinical advantages over conventional carotid stents and this coupled with the additional Centers of Excellence in key countries as expanded clinical sales force and support of local and regional conferences in conjunction with our distribution partners will drive continued expansion that is critical to our long-term commercial success. We previously reported that during the fourth quarter, we received regulatory approvals in Australia, the third largest country in the Asia-Pacific region in terms of healthcare spending. Subsequent to the end of the quarter, we announced a partnership with a distributor in South Africa. This is noteworthy because it was treating physicians in South Africa who became aware of CGuard and work proactively with South African regulators and distributors to make the product available to their patients. This pull-through demand which results from our attendance at important industry conferences such as VEITH and LINC complements our own sales effort. And on the topic of future geographic expansion, the U.S. represents the most important market of all and we are continuing the preclinical testing required to file an IDE mid-year. With CGuard, we are pursuing what we estimate to be at minimum a $1 billion addressable market and perhaps significantly more as the percentage of physicians and patients opt for CGuard instead of surgery. It is estimated that as many as 13 million people have high grade stenosis in the carotid artery around the world. Of those just 2.2 million have been diagnosed and only 600,000 received some form of treatment with approximately 80% surgically treated by carotid endarterectomy. The remaining 20% are treated with conventional carotid stent. If we take the roughly 600,000 who are treated at approximately 1,600 end user price per stent that equates to a $1 billion addressable market. Clearly, if the remaining 1.6 million people who are diagnosed but untreated were to undergo treatment that would drive a significant increase in the size of the market. And we believe CGuard can evolve into the standard of care and begin to find its way into the treatment of these patients. This is why we believe there's an enormous commercial opportunity for InspireMD in our products which can deliver significant value for our investors and make a substantial improvement in the care of patients. As always, we appreciate the continued support of our shareholders as we continue our strategy. And at this point, I'd like to turn the call over to Craig for a review of the financials.

[Craig Shore:]

Thank you, Jim. Overall revenue for the fourth quarter ended December 31, 2018, was $822,000 compared to $833,000 during the same period in 2017. CGuard EPS sales increased 16% or $97,000 versus Q4 2017 primarily due to our continued focus on expanding in existing markets such as Russia and Germany and expanding into new geographies such as India and a transition from a prior exclusive distribution partner for most of Europe to local distributors. Total Q4 sales decline was due to the decrease in MGuard Prime EPS sales driven largely by doctors predominantly using drug eluting coronary stents rather than the bare metal stents such as MGuard Prime EPS in patient coronary artery disease. The company's gross profit for the quarter ended December 31, 2018, was $227,000 compared to $210,000 for the same period in 2017. Gross margin increased to 27.6% in the three months ended December 31, from 25.2% in the same period in 2017. Total operating expenses for the quarter ended December 31, 2018, was $2.4 million an increase of 46.6% compared to $1.7 million for the same period in 2017. This increase was primarily due to an increase in salary expenses primarily due to a salary related accrual which reduced our salary expenses in 2017, an increase in clinical expenses associated with CGuard EPS mainly related to the IDA efforts in 2018. Financial expenses for the quarter ended December 31, 2018, was $7,000 compared to $24,000 for the same period in 2017. Net loss for the quarter ended December 31, 2018, totaled $2.2 million or $0.05 per basic and diluted share compared to a net loss of $1.5 million or $7.38 per basic and diluted share for the same period in 2017. Revenue for the 12 months ended December 31, 2018, was $3.6 million compared to $2.8 million for the same period in 2017. The increase was primarily due to an increase in sales of CGuard EPS as a result of our transition from our prior exclusive distribution partner for most of Europe to local distributors, continued focus on expanding existing markets such as Germany, Russia, Spain, and Italy, and expansion into new geographies such as India. The company's gross profit for the 12 months was $995,000 compared to $585,000 for the same period in 2017. Gross margin increased to 27.6% in 2018 versus 21.2% in the same period in 2017 driven mainly by higher volume of sales and more efficient utilization of fixed manufacturing resources. Total operating expenses for the 12 months ended December 31, were $8.6 million, a decrease of 2.4% compared to $8.8 million for the same period of 2017. This decrease was primarily due to a decrease in share-based compensation expenses and a decrease in salary expenses primarily due as salary related accrual in 2017. These decreases were partially offset by an increase in quality assurance and regulatory expenses related to annual audit activities which include validation reviews required every two years and an increase in clinical expenses associated with CGuard EPS that we stated earlier. Financial income for the 12 months ended December 31, 2018, was $371,000 compared to $179,000 of financial expenses for the same period in 2017, largely due to a non-cash income associated with preferred stock. Net loss for the 12 months ended December 31, totaled $7.2 million or $0.32 per basic and diluted share compared to a net loss of $8.4 million or $0.35 [sic] per basic and diluted share for the same period in 2017. As of December 31, 2018, cash and cash equivalents were $9.4 million compared to $3.7 million as of December 31, 2017. I would like to turn the call back to Jim.

[Jim Barry:]

And we will turn it to the operator for questions.

[Operator:]

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Thomas D'Amico [Ph] who is Private Investor. Please proceed with your question.

[Unidentified Analyst:]

Good morning. My question is what's going to happen in March with the reverse split. Thank you very much for your time.

[Jim Barry:]

I'm sorry; we're having a lot of trouble hearing you. Could you repeat it?

[Unidentified Analyst:]

What's going to happen in March with the reverse split that could take place with the stock?

[Jim Barry:]

Yes, the reverse split is -- is not something that we want to do nor are we planning on doing it. Again the reverse has been put out there in the proxy primarily addressed any potential de-listing as a result of our low trading price. And additionally it gives us flexibility in our capital structure and could also expand sort of the market appeal by attracting interest from institutional investors that have a stock price limitation on companies that they can invest in. So as I said no plans as of right now.

[Unidentified Analyst:]

Okay. Thank you very much for your time.

[Operator:]

Thank you. [Operator Instructions]. We have reached the end of our question-and-answer session. I would like to turn the floor back over to Mr. Barry for any closing remarks.

[Jim Barry:]

Okay, thank you, Michelle. So that will conclude our call today. Thank you again for taking the time to join us and hear the latest on InspireMD. I wish you all good day and look forward to speaking with you again next time.

[Operator:]

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.