Q2 2020 InspireMD Inc Earnings Call
Good day and welcome.
In spite of M. <unk> second quarter 2020 financial results on corporate update conference call.
At this time, all participants are in listen only mode.
Do you need assistance being sick teleconference specialist bypassing the starkey followed by Seattle.
After todays presentation, there will be an opportunity to ask questions.
You asked a question Human Press Star then one on your telephone keypad.
To withdraw your question. Please press Star then do.
Participants on this call at twice the <unk>. This conference call is being broadcast live over the Internet and is also being recorded for replay Backflips is.
Oh webcast replay of the goal will be available approximately one hour. After the end of the called through November four 2020.
I'd now like to turn the call <unk> Golden That's then of course.
And he's investor relations phone.
Please go ahead itself.
[music].
Thank you Stanford.
Good morning, everyone and thank you for joining us for the inspire indeed second quarter 2020 financial results screen corporate update conference call.
Joining us today from expire in D.R. Morrow <unk>, Chief Executive Officer, inspired Andy and Craig Shore, Chief Financial Officer.
During this call management, well be making forward looking statements, including statements that address inspire MTGE expectations for future performance or operational results, particularly unlike the cobot 19 can damage.
These statements involve risks and other factors that may cause actual results to differ materially from those statements.
More information about these risks please refer to the risk factors described to inspire mtwos. Most recently filed periodically reports.
10-K, and form 10-Q, the form 8-K filed with the FCC today and Inspiremd each press release that accompanies this call, particularly the cautionary statements in it.
Contents of this call contains time sensitive information that is accurate only as of today August 2020, except as required by law Inspiremd de disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occurred after this call.
It's now my pleasure to turn the call over the Marvin's Losman Chief Executive Officer Marvin.
Thank you Scott and thank you all for joining the call and webcast today.
As I reflect back on our first quarter earnings call I talked about uncertainty in the world admit to covert 19 pandemic in the global challenges, it's created I'm happy to report that even as the pandemic <unk>.
Our team continues to respond to deliver with great boys and committed to fulfilling our customers' needs.
Likely continue rising Kogan, 19 cases, placing pressure on health care operations globally, specifically with regard to volume of elective procedures included carotid stent placement, we're still providing critical and lifesaving products that are proving superior like safety and producing affected the outcomes, although at a slower paced and prepaid.
Pandemic.
However, these lower volumes are tempered by the gradual reopening a facilities and practices throughout Europe, as well was expanded territories, which I will discuss shortly.
To be sure our Q2 financial results, where I personally unpack. It as result of health care system, diverting attention and resources to fighting coping 19 governments implemented restrictions on elective procedures and people avoided seeking treatment or even for emergency conditions.
We are however, senior were searching for electrics procedures, you know key markets in expected, we will continue to see gradual assumption.
The impacting the pandemic is better managed and controlled.
We've also taken proactive measures to implement policies and procedures that will ensure that we originally this crisis as strong as possible, including continuing to look at ways to operate more efficiency and lower operating costs were encouraged by the fact that prior to Kobe 2020 trajectory was very positive in shaping up.
To be a meaningful year, which we hope to re emerge after the recovery.
I would like to now share three significant achievements for company milestones, we've anticipated for some time and I'm proud to have achieved in Q2 as levers of growth and further value creation.
In June we announced the completion of an equity financing raising believing and a half million dollars.
The offering included $1.5 million in the underwriters full exercise its over allotment option for the offering.
The additional cash balance sheet will go a long way to help ensure the health of our business and advancement of programs in commercial focus even during these challenging comps we perceived the success of this offering as a proxy for confirming our value proposition in the marketplace, even under extraordinary circumstances, which the pandemic hedged.
Created one that provides us with a crucial runway to continue accomplishing what our expansive growth plans and important drivers and milestones.
Despite the challenges imposed by the pandemic, we accomplished a critical milestone for our continued international expansion in the second quarter as well with the announcement of our approval by the Brazilian registration authority to distribute our see guard micronized copper instead.
In Brazil, which is the largest health care consuming market in South America and is expected to reach 1.8 billion with a growing categories like were sent dropping forecasted period 2023.
This is a critical development process. It represents an opportunity to start with a major emerging health care system.
Brazil ranks as the sixth largest popular populous country in the world and we have partnered with Super eight one is the largest medical supplies distributors headquartered in Sao Paulo to reach and serve this critical market with our advanced technology disapproval, it's an important milestone for us.
And supports our global and continued expansion in South America, particularly in adjacent markets, such as Argentina and Colombia.
Also during the second quarter, we announced results Siberia clinical trial, which evaluated see guard versus Abbott labs actually like Siberia trial evaluated 100 patients who qualified for crowded revascularization with high risk surgery and were randomized one to one with either see guard or actually like.
The study evaluated 30 day exciting brain influx associated with the use of accurately conventional open sell nightmare Stan persons to see guard micronet coverage debt in the head to head evaluation, our products showed a threefold decreased and silent brain in Florida versus actually like what is your old. Please proceed.
Future ODAC heart attack or stroke at 30 days.
The data from this important study Serbs to add to the growing body of clinical evidence that provides critical validation that.
Yeah, we work to make CRT P. S. A standard of care in carotid artery disease.
Additionally, we publish a 12 month results from the paradigm trial in New York Euro intervention Journal. The paper details results of 100 anyone unselected consecutive real life patients treated with seaboard micro net for carotid stenosis and the 12 month.
Prevention oppose procedural neurological gets without going too deep into the data 12 months. After the carotid intervention be seek already he asked Mike Burnett covered stead deliberate sustained protection against post procedural neurological events at 30 days only one adverse events include a minor transient strong.
Well no other strokes myocardial infarction or.
No strokes occurred between 30 days in 12 months. This studies continue to follow patients up to five years from the initial implant and the results have been very promising.
It's perceived safety concerns are a major obstacle to more widespread stenting persons crowded endarterectomy surgery. This data is critical to our ongoing efforts to convert not only the conventional stent market, but also vascular surgeon, who perform more than 80% of carotid artery revascularization procedures.
Finally on June 25th 2020, the U.S. XT eight granted conditional approval for our investigational device exemption or I'd. He application to initiate a pivotal study seek already E. P. S. The conditional approval is contingent upon inspiremd be addressing the stent embolic protection device.
D compatibility performance testing with the agency within 45 days or proceed if there were approval letter we've already completed this testing of additional stance. According to the FDIC specification and have employed alternative visualization modalities that we believe will ultimately allow us to gain full approval.
Having an approved I'd. He is an extremely significant step toward enabling us to initiate a pivotal trial in the United States.
We previously indicated that the FDA had concurred with all clinical study design and data requirements to support the market approval of the device. Accordingly, we believe that we're well positioned from a regulatory perspective in terms of our ability to initiate the trial.
I would like to turn now to our second quarter in first half results.
Recall that last year, we experienced an issue with our sterilization partner that essentially prohibited us from shifting product during the first quarter last year. The impact was to shift 592000 dollar sales from the first quarter ended the second that together with the impact of Coke at 19 makes a year over year compare.
We're seeing more difficult than otherwise would be the case with that said for the three months ended June 30 of 2020, we generated total revenue of $313000 as compared to 1.354 million for the same period a year ago.
For the six months ended June Thirtyth 2020, we generated a total revenue of 1.347 million as compared to 1.769 million or the same period in 2019.
We did anticipate and realize softness in Q2 procedural volumes as hospitals and physicians kick pivoted to treat Tobin 19 patients.
As a reminder, carotid stenting procedures or elective in nature at least in terms of timing, but I'm pleased to report that we're seeing signs of rebound and elective procedures and several of our key European territories, notably, Italy, Spain, and Germany, and our initiatives to regain share in those markets are progressing.
And in addition to our U.S. I'd. He activities, we continue to execute on our planned expansion into growth markets in South America, and the Asia Pacific region.
As I stated last quarter I also see numerous opportunities to expand our pipeline leveraging new indications for use it see guard and Mike that along with our research into a Perry procedural protection device, which is advancing in development.
So notwithstanding the enormous challenges proposed by the pandemic I'm as optimistic it's ever been our technology were up for such a tree advancement in the treatment of carotid artery disease and potentially other vascular conditions, where innovation is so needed I.
I would like to credit the entire Inspiremd de team for quickly adapting to the new work culture, new normal necessitated by the pandemic and driving that sport as a company to continue to progress toward our shared long term goals.
To prepare for the anticipated rebounds, we work during the second quarter to ensure that both our support organization as well as our ability to supply product remain firmly intact. These initiatives are already paying dividends as we see demand to revert back to pre pandemic levels.
Same time, we continue to take a close look at our operating expenses and while I believe we're running a lean and efficient organization, we're always going to look out for additional ways to extend our cash runway.
As we've discussed before the backbone of our go to market strategy. It's ongoing conversion of vascular surgeons, who as I've said performed a vast number of carotid revascularization procedures more than 80% through carotid endarterectomy.
We view carotid artery disease at the next significant vascular condition to evolve toward an endovascular standard of care much the same way that cerebral aneurisms coronary artery disease, thoracic and abdominal aortic aneurisms and peripheral artery disease I've already down. This is why the vascular surgery community remains an important.
I already.
Part of the strategy includes exploring additional Perry procedural protection devices to our portfolio. We look forward to advancing our efforts in this initiative in working with leading vascular surgeons on our strategic pathway.
Let's see Gardy P.S., we have what we believe it's a superior technology platform in a market segment that is poised for rapid expansion in the coming years.
Turning now to new market developments as we indicated last quarter Cobot 19 has extended certain timelines associated with product registration and distribution contracts with channel partners that we've been pursuing in other countries in Europe Asia, and Latin America, but this besides these challenges we've been continuing our internal work to achieve.
These approvals and key milestones for growth in addition to expanding our reach in Brazil, The French market remains a pillar of growth in our European strategy. We're pleased to report that despite being particularly hard hit by the pandemic, that's delaying our discussions with the French health authorities were now advancing the approval for CRT P. S under the.
Standard reimbursement option with additional consideration to special reimbursement. This bifurcated strategy allows us to faster access the French market and in addition puts in place a pillar of our direct sales model.
In terms of Asia Pacific, both China, and Japan represent more than double our current addressable market and as such these markets are another high priority par business. That's we continue discussions with potential distributor partners in both regions to expand and these highly valuable Asian markets and with that I'll turn the call over to Craig for review.
The second quarter financials Craig.
Thank you Marvin it's everyone for joining today here are some key financial highlights for the second quarter 2000, it's one.
The three months ended June 32020 revenue was $330000, that's compared to $1.354 million. During the three months ended June Thirtyth 2019. This decrease was predominately driven by 76% decrease in sales volume of CRT P. S.
From 1.1 million during the three months ended June 30 to 92019 the $300000. During the three months ended June 32000 and for me. This decrease as Martin mentioned was mainly due to the fact that procedures with CRT P. S, which are generally scheduled or non emergency procedures were mostly postponed as hospitals.
Shifting resources to patients affected by Colby 19 did you hear me was also due to large it makes the CRT P. S. When we made during the three months ended June Thirtyth 2019 backlog that accumulated in the three months ended March 31st 2019.
Able to shut previously utilized for third party sterilizer equipment failures.
Those large shipments to not recovered during the three months ended June Thirtyth 2020. In addition, there isn't an 82% decrease in sales volume of and have already P.S. from $230000. During the three months ended June Thirtyth 2019, $42000. During the three months ended June Thirtyth 2020.
We do to similar reasons I've just mentioned.
Company reported a gross loss for the quarter ended June Thirtyth 2020 of $120000 compared to a gross profit of $442000 for the same period in 2019. This decrease in gross profit resulted primarily from $448000 decrease in revenues.
That's the related material and labor costs and a decrease following the receipt of $135000 compensation received in the quarter ended June Thirtyth 2019 from a former third part sterilizer because the delays related to the product sterilization interruption go into three months ended March 31st 2019.
But you're not reoccur in three months ending June Thirtyth 2020.
Offset by a 21000 decrease in miscellaneous expenses.
Gross margin decreased four minus 38.3% doing three months ended June Thirtyth 2020, and 32.6% during the three months ended June Thirtyth 2019, driven by the reasons previously mesh mentioned.
Total operating expenses for the quarter ended June Thirtyth, 2020, well $2.3 million, a decrease of 11% compared to $2.6 million for the same period. In 2019. This decrease was primarily due to reduction of almost $400000 in clinical expenses associated with the Guardian.
Yes, mainly related to the I'd approval process to one or $35000 in compensation related to temporary salary reductions due to the immediate impact to covert 19 on cash flow and $82000 the miscellaneous expense reduction.
The board offset by an increase of $400000 due to a settlement agreement with the underwriter of our prior offerings.
<unk> expenses for the quarter ended June Thirtyth, 2020, or $34000 compared to $23000 for the same period in 2019 net loss for the second quarter 2020 totaled $2.480 million or 20 cents per basic and diluted share compared to a net loss.
$2.206 million, where dollar 59 per basic and diluted share the same period in 2019.
As of June Thirtyth, 2020, cash and cash equivalents were $13.861 million compared to $5.514 million as at December 31st 2019.
I'd now like to turn the call over for questions. Stafford. Please go ahead.
Thank you.
Ladies and gentlemen, if you wish to ask a question on today's call you will need to press Star then the number one on your telephone.
If your question has been on food and you wish to withdraw your question you might do so by pressing the phone.
If you are using the speakerphone, please pick up Johansson beforehand.
I'm speaking wonderful.
One moment please for the first question.
The first question comes from Benjamin Handoff from aligns Global partners. Please go ahead.
Good morning gentleman, thanks for taking the questions and congrats on all the recent progress.
Just first off for me I'm on the Brazil approval, what is ER supervises plan regarding the launch in there and the you know what what does the timeline kind of look like.
Yeah, Ben Thanks, Thanks for the question its and its an important transition as we prepared for the registration approval, we weren't constant contact with with both superior as well as their sub distributors you know, Brazil geographically is a very large market. So there are some distributors with with then.
Most of their organization. So we did much if the pre training and effort in advance of of the registration approval to prepare for gas most of which as you can imagine was online and in Brazil, It's been particularly hard hit by the pandemic. So all of the contracts are now in place and now it's about really beginning to embed.
I'd see guard into the marketplace and they feel very comfortable and confident because of our pre planning that they will be able to go ahead and initiate you know see guard procedures, a pretty aggressively as they roll out the product. So we're we feel well prepared within the context of of obviously this new normal.
And we'll have to see how that progresses, accordingly, and hopefully as as the cobot issue resolved itself. It will become much more of a hands on effort and then then much of the video work that's been done.
So the groundworks.
Completely employees, there and a you know just kind of a waiting for everything to get out there great Oh so.
The order so well that's okay. The order the orders were placed as soon as a registration what's what's completed so all the groundwork was was formerly status.
Excellent. So then you also mentioned the you're pursuing found the dual class pathway in France with the standard reimbursement and then at the same time pursuing the special reimbursed <unk> can you tell me give us a sense on how those pathways work and and you know the upcoming developments, we shouldn't expect on on the friends front.
Sure. So so what we identified a with with our consulting firm and perhaps what sort of two pathways that exist. One it's in the existing reimbursements format that they have in France support for crowded stench, we were able to pursue a what we believed to be a much more aggressive timeline in order to get approval base.
Stronger data that we've already achieved in our approval within the CE Mark.
But that doesn't preclude us from going after the special designation for see guard and asking for a higher reimbursement level. So that this will take a bit more time and there are a registry obligation that or get are a part of that in terms of enrolling patients and and having a deeper level of scrutiny by the health authority in order to approve it.
New code as opposed to working off the backbone of there just isn't code. So our decision was to pursue both because they're not mutually exclusive and if we if we received the existing reimbursement code sooner than they were prepared to to launch and and develop our our commercial strategy. There are thought is is to.
I want to direct basis in France, as it is and so I think that fits well with you know within the context of that strategy for being able to take advantage of the full amount of <unk> reimbursement in the ASV.
It makes sense in it and then what would the timeline look like on the special reimbursement if it if it if it does come.
We've been we've been told that I'm good it somewhere in the nine to 12 month range. So you know we began to accumulate to the data I understand the protocols and put in place to the necessary components of that but I I think at some it's probably in a in a 12 month window, we hope that the standard reimbursement will will go away.
Sure.
So it's still it's still fairly fairly quick, though so yes absolutely.
Got it.
And then just kind of thinking about the big picture and you kind of mentioned how traditionally you opened procedures have converted over to you know lesson base of Endovascular procedures over the years and you know it seems like somewhat of a mystery as to why carotid Revascularization has not yet sounds like there have been a number of things sort of conspired you know maybe.
We are you know traditional carotid stenting, requiring greater Korea prior authorization and the open procedure. You know can you can you maybe talk about some of the things that may have held carotid 17 or credit revascularization, a in a less invasive fashion back over the years and and maybe you know how.
Do you envision these things are changing in the not too distant future.
Yeah, Great question, but I think I think in the context of that first generation carotid stent open shelf stench, they weren't protected with with our micro <unk> mesh covering frankly, just did not perform according to expectation against all carotid endarterectomy are open surgical procedures to me there was great expectation that.
That stenting would would perform clinically at a much higher level and and I think that was was probably to the first disappointing area of of evidence that that they just did not and so I think that's what's most meaningful about our comparative data and what we're discovering from a clinical performance perspective, it's not only are we.
You know advancing beyond all the the standard open sell first generation stance, but by the as measured against endarterectomy in surgery, where we're seeing are the same level of superiority in terms of of less post procedural advance and and I think what what is also important to understand isn't it.
Printing many of of the events that occur or post procedurally citic sit well in the context of of our micron that being able to prevent these embolic showers from occurring post procedurally, which is which is where you know many of these issues occurred. So I think there's a certain level of of technology innovator.
And then advancement.
To go along with the accumulated data that we've we've demonstrated and through see guard S.. We think we have though the best solution. There clearly the focus is also to <unk> to advance our efforts with vascular surgeons and get them more comfortable with our system and the endovascular delivery system.
We had as opposed to to open open surgical procedures, which we're doing through our centers of excellence and other commercial activities.
Okay. That's helpful. Then correct, if I'm wrong, but but ER in terms of embolic protection devices being used on on some of those early a kind of the first generation that carotid stent <unk> <unk>. My recollection is they want a I'll always used in those types of procedures that.
The case.
Most of the time, there there's embolic protection through a filter system. During the procedure itself I was referring to that the actual micronet mesh, which covers ours are see guard stand and being able to provide that that extra level of protection. The early version to open sell stance did not have a umesh covering for post procedural you know.
When the standards in embedded in the artery.
Right, but I guess I was I was.
Referring to the filter kind of embolic protection devices that were now those are pretty much shoes.
Correct in some fashion or another but early on the credit stats that you know kinda were first generation my recollection was the the filter devices weren't always used in in those procedures at least early on at <unk>.
Am I Miss remembering that are okay. I think that's correct right got it and then you mentioned the the Perry procedural device or devices that a year advancing into development.
Is there anymore, you can share on that and <unk>. If you do develop a those and the I would assume those would fall under five 10-K.
What do you have to is that correct as well.
That's correct. We're looking at we're looking at advancing you know a number of different options within the context of our credit portfolio I mean, those those can.
Oh can run a full gamut from you know filters or through the rather other advanced opportunity shorter catheters and other things. So we're we're continuing to look at it all the opportunities that are available to us to to make the C Guard UBS much more available and much more a user specific into the Tabasco.
Other surgical community as a part of just broadening our portfolio in general.
Okay.
Great well, that's all I had this morning, gentlemen, congrats again on the progress and I'm sure we'll be in person.
Thanks Ben.
Thank you.
Ladies and gentlemen, if you'd like to ask questions. You May Press Star then the number one on your telephone.
[noise] [noise].
Thank you.
This concludes the glisten nonprofessional vertical.
I'll now turn the call to Marvin sloshing around for closing comments.
Thank you, let me conclude by saying that I hope, everyone is staying safe and healthy and our thoughts or what the many people it's been affected by the code and 18 pandemic.
I'd like to recognize incredible heroism resolved and sacrifice of the frontline healthcare workers in fighting cope at night team as well as our employees who are supporting them. Many of these frontline healthcare workers or our customers and our friends and we are continued to be inspired by their selfless efforts and care for others.
As has been said this pandemic represents the world with an unprecedented challenge, which requires unprecedented response and that includes our team at inspire Andy we stand ready to respond to the market and we all look forward to the normalization for us all and thank you very much for your support.
Thank you very much.
Ladies and gentlemen that completes the conference call for today.
Disconnect.
[noise] [noise].