Q4 2020 InspireMD Inc Earnings Call

Ladies and gentlemen, thank you for standing by.

Good morning, and welcome to the inspire MD year, and 2020 financial results and corporate update conference call. At this time all participants are in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be and opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.

Participants on this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes.

Webcast replay of the call will be available approximately one hour. After the end of the call through June nine 2021.

I would now like to turn the call over to Scott Gordon President of core IR, The company's Investor Relations firm. Please go ahead Sir.

Thank you Andrew.

Good morning, everyone and thank you for joining us for the inspire and the year end 2020 financial results and corporate update conference call joining us today from inspire M. D are Marvin <unk>, Chief Executive Officer, and Craig Shore, Chief Financial Officer. During this call management will be making forward looking statements including statements.

And I'll address and inspire empties and expectations for future performance or operational results, particularly in light of the COVID-19 pandemic forward looking statements involve risks and other factors that.

May cause actual results to differ materially from those statements for more information about these risks. Please refer to the risk factors described and inspire and most recently filed periodic reports on form 10-K and form 10-Q, the form 8-K filed with the SEC today and inspire Mds.

Yes release that accompanies this call, particularly the cautionary statements and at the.

And the content of this call may contain <unk>.

Time sensitive information that is accurate only as of today March nine 2021, except as required by law and inspire M. D disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur. After this call. It is now my pleasure to turn the call over to Margaret.

And then Chief Executive Officer Marvin. Please go ahead.

Thank you Scott and thank you all for joining the call and webcast today.

The year 2020 began as a year of transition and the optimism and despite of the unprecedented historical impact throughout the world and in particular, the health care community. As a result of COVID-19, we not only weather these challenges and inspire M D, but if it becomes stronger by way of many important milestones achieved during the year.

We set a focused direction and 2020 built around our <unk> EPS platform to advance awareness utilization and recognition within the medical community of the value and superiority of <unk> garg.

As measured by our growing body of clinical evidence and positive patient outcomes and stroke prevention.

<unk> unique and proprietary design makes it the most advanced treatment of carotid artery disease of all other stent technologies and endarterectomy, a highly invasive surgical procedure.

Inclusive of all vascular specialty and delivery system options. Our goal is to continue to establish SEDAR and Edgar karate device of choice amongst physicians across the multiple clinical specialties that treat carotid artery disease. Our teams performance. During these times remain steadfast as we focused on availability of our <unk>.

Thanks to our served markets with a patient first mindset.

Execution of our strategic priorities financial stability and the growth of our commercial footprint, all continued with focus and determination.

As expected revenue performance for the year was impacted primarily by the effects of COVID-19, which restricted elective procedures across our markets, we anticipated procedures to return to pre pandemic levels and even grow as vaccines continued rollout globally, and we will return to a more normalized way of life.

Even with the headwinds of extraordinary and unforeseen onetime historic events, we experienced a promising year of remarkable milestones and have positioned our business for success.

Supporting and growing our customers use of CRT EPS for treating carotid artery disease, and our 33 served markets remains our top priority.

We're proud to have sold over 21000, and CRT EPS systems to date continuing to grow the number of patients receiving the best performing and safest carotid stent and the market.

We continued our global expansion and market penetration goals, including achieving regulatory registration and distribution for CCAR to EPS and Brazil, the largest market for medical devices and Latin America more recently, we secured an investment and product registration agreement with a key medical device partner, enabling the commercial availability of <unk>.

Guard EPS to the Chinese market.

We're also pleased to have settled the dispute with a former distributor dating back to 2014 permitting us to advance our business with a clean slate.

Perhaps our biggest achievement. This past year was receiving approval from the U S. FDA for our investigational device exemption or IDE E application to initiate a pivotal clinical study of CCAR to EPS and the United States, bringing <unk> to the U S market is a top priority for inspire and D. And we are pursuing that objective from a.

Politically and with measured tenacity.

And we recently partnered with the World Class CRO Heart clinical consultants, who will provide the clinical support to the upcoming global E trial with significant expertise and successfully conducting global trials and the cardiovascular market.

Additionally, we were pleased to announce world right now and interventional cardiologist Dr. Christopher Metzger has agreed to lead the trial of investigators who will conduct the IV trial now named the CRD and study.

We also welcome Dr. Christina Brent and a leading clinical researcher at northwest Health system, and New York, who will assist with the trial execution.

We previously announced the addition of Dr. Gary Rubin, and pioneer and carotid artery stenting to our board of directors and he remains actively involved and the trial effort guiding our strategic planning as well.

In addition, we continue to build out our senior leadership team, adding Mr. Patrick J M. Net guys, our vice President business development, and strategic initiatives and Mr. Andre and Thomas solely as senior Vice President of global sales and marketing both of whom will develop and implement the strategies to execute on our aggressive commercial goals for.

Perhaps our most impactful event for the company was our ability to have recently completed a targeted oversubscribed capital raised of $27 million. This should provide us with the essential financial support needed to complete our CRD and study, which is the first step to the U S market as well as funding company operations through 2023.

Including our expanding R&D efforts with a pipeline of new delivery solutions to facilitate broader and greater utilization of CCAR.

Our strategic commercial pathway to business growth for CCAR and includes expansion of market share across the multiple clinical specialties that treat carotid artery disease by making CCAR and EPS. The first line standard solution with continued focus on conversion of vascular surgeons, who perform the vast number of carotid revascularization.

Patients. This is a significant sea change for growth and we will continue to work diligently to increase awareness and foster these conversions and our current and future markets.

Speaking of growth markets, we filed for registration and reimbursement in France and plan to establish a direct sales effort.

And part of our and enhanced overall go to market strategy, Japan, Taiwan, and Korea are also advancing market expansion opportunities as well as our overall Asia growth initiatives combined with our China agreement and our.

Our served markets, we have plans to expand our online training and Procter and efforts along with reinstating our centers of excellence or Coa programs, which prior to Covid provided highly effective educational support and new users for the <unk> platform.

Finally, we are advancing our work with new tools accessories and portfolio additions to support broad utilization of C Guard and look forward to providing progress updates soon.

As we look back at the past year of unprecedented challenge and the unpredictability of the market. We also look forward with optimism to a renewed consistency and patient care and 2021, we remain entrenched and our fundamental value proposition, which is to change how carotid artery disease is managed and stroke has prevented with.

Our clinically proven proprietary pet platform solution, the CCAR and embolic protection system <unk>.

Historically physicians have had to make inherent compromises and choosing a carotid artery stent with either open or closed cell designs CCAR and EPS eliminates those compromises and and offers the best of both worlds are simultaneously, providing open and closed cell features with performance that we believe to be the most advanced.

And protection of Embolic events is the leading cause of stroke.

<unk> unique micro net technology mitigates the prolapse of plaque into the alumina of the artery and thus presents associated embolization it.

Continues to demonstrate superior clinical outcomes for patients compared to alternative carotid stent types conventional or next generation double layered stents as well as invasive surgical procedures such as endarterectomy.

<unk> has demonstrated clinical superiority and protected treatment of carotid artery disease with the potential to firmly establish a new standard of care and to that and we aspire and are committed to improving outcomes for patients and changing the practice of vascular medicine with that I will turn the call over to Craig to review our year end.

And fourth quarter financials and Greg.

Thank you Marvin and to everyone for joining today here are some key financial highlights for our fourth quarter and year end 2020 results.

Total revenue for the three months ended December 31, 2020 was $158000 a decrease of 84, 4% compared to $1.013 million. During the three months ended December 31, 2019 revenues were negatively impacted by our settlement of litigation with a fee.

And distributor relating to the 2014 transaction as Martin alluded to earlier per the settlement, we agreed to pay them $580000 under U S. GAAP, we were required to charge that and now again sale, excluding such impact revenue was $738000 a day.

And for 27, 1% compared to $1 million $13000 during the similar period and 2019.

This decrease was driven mainly by a 25, 2% decrease and sales volume of CCAR and E. P. S from $921000. During the three months ended December 31, 2019 to $689000. During the three months ended December 31, and 2020, mainly due to the postponement of procedures.

It's from CCAR, and PFS, which are generally schedule or non emergency procedures and hospital shifted resources to patients affected by COVID-19 to 46, 7% decrease in sales volume and gone and PFS from $92000. During the three months ended December 31, 2019 to 49000 and.

During the three months ended December 31, 2020 was also mainly due to the impact of COVID-19, as previously mentioned for the.

Three months ended December 31, 2020, we had a gross loss of $390000 compared to a gross profit of $259000. During the three months ended December 31, 2019. This decrease in gross profit resulted from the impact of the $580000 settlement with a former distributor.

And as well as the $79000 decrease and revenue less the related and material and labor cost. This decrease was partially offset by a decrease of $10000 and miscellaneous expenses. During the three months ended December 31, 2000, and 'twenty gross margin decreased by a negative 247% during the three of them.

And at December 31, 2000, and 'twenty from 25, 6% during the three months ended December 31st 2019, driven mainly by the negative effect of the gross margin up from 273% due to the $580000 settlement with a former distributor.

Total operating expenses for the quarter ended December 31, 2020, $3.328 million and increase of 24% compared to $2.765 million from the same period and 2019. This increase was primarily due primarily due to increases.

And a $363000 and compensation expenses, we added as we added resources to our clinical and product development and sales infrastructure and $134000 or directors and officers liability insurance expense due to recent economic changes and the insurance industry $96000 and.

Expenses associated with CCAR, and EPS, mainly related to the new advanced delivery system and associated accessories, and $75000 and miscellaneous expenses. These increases were partially offset by a decrease and travel expenses of $105000 and lighter restrictions imposed by governments worldwide and in order to mitigate.

The spread of COVID-19.

For the three months ended December 31, 2020 financial expenses increased to $131000 from $27000. During the three months ended December 31, 2019, this increase and financial expenses, primarily resulted from changes in exchange rates.

Net loss for the fourth quarter of 2020 totaled 3 million and $853000 or 10 cents per basic and diluted share compared to a net loss of 2 million and $557000 or <unk> 57 per basic.

And diluted share for the same period and 2019.

For the 12 months ended December 31, 2000, and it's funny revenue was 2 million and $485000 a decrease of 33, 2% compared to 3 million and $721000. During the 12 months ended December 31, 2019 revenue was negatively impacted by $15.

6% due to the previously mentioned and settlement of our litigation with the former distributor.

As I previously stated and under U S. GAAP, we were required to charge was $580000 settlement against sales, excluding such impact revenue was $3.065 million and a decrease of 17, 6% compared to 3 million and $721000. During the 12 months ended December 31 2019.

This decrease was driven mainly by a 15, 3% decrease and sales volume of CCAR to Etfs from 3 million and $265000. During the 12 months ended December 31, 2019, 2 million and $764000. During the 12 months ended December 31, 2000, and 'twenty, mainly due to the.

Fulfillment of procedures with CCAR, and Etfs, which are generally as I said, which are generally scheduled or non emergency procedures and hospitals shifted their resources to patients affected by COVID-19. There was also a 34% decrease and sales volume of Vanguard Prime EPS from $456000. During the 12 months and or December 30 <unk>.

2019 to $301000. During the 12 months ended December 31st 2020 also mainly due to the impact of COVID-19.

For the 12 months ended December 31, 2020, gross profit decreased by 89% to $83000 compared to $756000 for the same period and 2019. Once again. This decrease in gross profit resulted from the impact and a $580000 settlement with a former distributor as.

Well, it's $198000 decrease and revenue less the related material and labor cost. This decrease was partially offset by a decrease of $69000 and expenses related to upgrades made or a production facility and during the year ended December 31, and 2019, which did not reoccur during the year ended December 31 2020.

And a decrease of $36000 and miscellaneous expenses.

Gross margin decreased to three 3% during the day here of 2000 and 'twenty from 23%. During the year ended 2019, driven mainly by a negative effect on gross margin of 18, 3% due to the settlement of our former distributor, which was offset by a one 3% gross margin increase due to the <unk>.

And for upgrades made to our production facilities and miscellaneous expenses as mentioned above were previously.

Total operating expenses for the 12 months ended December 31, 2020, or $10 million and $463000, a decrease of 1% and compared to 10 million and $572000 for the same period and 2019. This decrease was primarily due to a decrease of $861000 and clinical and stuff.

Mrs associated with CCAR and E. P S mainly related to the IV approval process for which an approval from the yesterday FTA was received on September eight 2020.

$421000 and travel expenses and lighter the restrictions imposed by governments related to COVID-19.

$354000 due to the settlement expenses that were paid to a former service provider pursuant to a settlement agreement. During the 12 months ended 2019, $136000 and quality assurance and regulatory expenses related to the development of various projects and $129000 and promotional expenses.

Related.

And so for a and chip.

And I.

Outreach program already built and our social media infrastructure and 2019. These decreases were partially offset by an increase in expenses of $531000 and development expenses related to CCAR and ETF, new advanced delivery system, and accessories and $400000 due to the settlement agreement with the underwriter of our prior offering.

Pedro and the 12 months ended 2020, $386000 and compensation expenses as we added resources to our clinical product development and sales infrastructure and $249000 and our directors and officers liability insurance expenses.

Due to recent changes and the insurance industry and $177000 and regulatory expenses required for new regulatory standards set by the European Union and $49000 and miscellaneous expenses financial expenses for the 12 months ended December 31, 2000, and 'twenty was 160000.

Dollars compared to $200000 for the same period and 2019.

Decrease in financial expenses, primarily resulted from changes in exchange rates.

Net loss for the 12 months ended December 31, 2020 totaled $10 million and $544000 or 46 cents per basic and diluted share compared to a net loss of $10.040 million or $4.80 per basic and diluted share for the same period and 2019.

As of December 31, 2020, cash and cash equivalents were $12 million and $645000 compared to $5 million and $514000 as of December 31, 2019. During the first quarter of 2021, the company raised and net of $35 $1 million.

Various equity and transition transactions with that I'd now like to turn the call over for questions. Operator. Please go ahead.

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One moment please for the first question.

The first question comes from Benjamin Hayner of Alliance Global Partners. Please go ahead.

Good day gentlemen, thanks for taking the questions.

First of all from me just on the.

And the cigar trial here.

You know when do you kind of expect how do you expect the ramp up of sites to track when do you expect the first patient and you know.

Any color you can give us on on kind of the kick off of this thing would be would be helpful.

Great. Thanks, Ben Thanks for the question.

We're excited about the progress that we're making and named and Chris metric or is the pie was was a huge advantage for us and.

We have subsequently been working diligently to make sure that all the setup is properly done sites have been identified the protocols and reviewed and so forth. So I think it's one of those scenarios, where we want to measure three times to cut once and so where we're trying to make sure that everything falls in place and nicely we anticipate.

First patient enrollment some time around the June 1st.

I'm from sometime beginning of June and everything since we've hired HCC, So our CRO and brought Chris on board because it's gone very well, we're also and the process of building additional investigation sites in Europe, and we feel that that's that's important given the experience of of some of our operators.

And the European market as well so we looked at generally that the timeframe to begin enrollment of patients.

Okay. That's helpful. So we're about a quarter out from there and and then you know the European site. So you know how.

You know I know you can't do more than hang up with it but how many do you expect to add or is it too early to be talking about that.

Yeah, we don't have a firm number at this point, Ben but I think it's safe to assume that the quality of the sites. Its most important more than quantity and we anticipate that up to about 20% of the enrollment. We believe is reasonable from from the European sites and operators, who have had you know.

A breath of experience using C guard at this point. So we look forward to fine tuning that number but at this point, that's that's where we think we'll land.

Okay. So stay tuned and got it and then you know.

And just the reimbursement process.

How is that moving along and France or is that something that.

We could see before the years out and then you know what.

Your expectation and you know once you do and the reimbursement.

And I was kind of.

Early adopter.

Cohort kind of defined over there.

We do.

And the process has gone quite well, we submitted the dossier and at the beginning of the year and so far all the indications back from the French Health Authority has been positive and we hope to be able to get.

The reimbursement finalized and approved.

And within the let's call it the third quarter. So we hope that for 2021 will be able to realize the benefit of of entering entering the market commercially we've already put into place.

Commercial backbone, but begun to think about locations operators and we want to certainly be prepared that once we get that reimbursement and approval, where we're ready to go full speed ahead. So there's there's great momentum from from that standpoint, and and awareness within the French market, obviously see guard.

Even though we we've not been commercially available there before the European market in general is well aware. So we have a couple of kols in particular that are.

Really excited to have the product and their hands.

Okay, Great and then and then and now that you've locked in and I believe you launched and Brazil, and then you've got the yes, a lot of stuff in place there.

And what's been the initial feedback there.

Yes.

It's been quite strong and <unk>.

And Fortunately the Brazilian market was was affected by Covid and the and a really terrible way and so that's been a bit of a challenge and the country in general is quite large and diverse we've got five sub distributors that are in place, but the results. So far has been remarkably positive and we've tried to focus on.

The operators that are really at the high volume centers, and the innovators and and really kind of build our base of business from there and and so far it's it's gone really well. So we hope that that will continue.

And to get out into deeper segments of the market.

We get into 2020, one, but so far so good.

And then and then on the R&D front and in terms of the new delivery and accessories solutions that you mentioned.

Okay.

It was more of that spending.

And the half a million bucks or so that you spent last year and it was more of that and the latter half of the year and then.

And it does sound like we could hear more on what those products look like and the near future.

And any any more color you can provide there.

Yeah, I mean, the spend was generally level loaded, but as we get closer to submitting to get growth and and the other regulatory bodies.

You know the spend obviously increased as we get closer to the and tier and and certainly we wanted to discuss those and detail it's a little bit premature at this point, but we're really excited about the the fact that we've got a couple of new delivery systems available or coming to the market, which which we hope will broaden.

Both access and acceptance to the CRT P. S platform generally speaking our goal is to make sure that our our standard is used by the the broadest range of vascular operators and.

We want to make sure that we have a full breadth of delivery systems that allow this as a first line stent solution.

Got it.

And lastly from me.

And one of the other players and and.

The carotid market.

So as far as I guess not file a PMA for standard risk patients.

And.

And I just wanted to get your thoughts there I mean.

And I know that you know whatever a third of the Mt.

Or so but you know your thoughts on that and Ah you know whether that.

And of expanse.

Market or kind of I guess.

And if they get and kind of paves the way for adoption of CCAR. Once you guys are able to take and.

U S clients.

Yes, Ben I think we certainly value the fact that they're converting surgeries over to stenting is as certainly our priority and our focus has been and will continue to be on the value of CCAR and is the best and and the marketplace, but we certainly welcome that trend of transit.

And to the Endovascular World from surgery, and we'll continue to do our efforts to support those things, but but certainly we believe that the transition was inevitable and I think the value of multiple companies approaching.

And the same objective, maybe a bit differently, but approaching the same objective will only benefit that that conversion from taking place and and getting surgeries converted over to stenting, So where we're.

And we're encouraged by by all of that adoption and conversion.

Excellent well I'll leave it there thanks, a lot gentlemen, and congrats on the progress.

Thanks, Brent I appreciate it.

This concludes the question and answer session of the call I will now return the call to Marvin's horseman for closing remarks.

Thank you I I'd like to thank everyone for their ongoing support of inspire M D and to remind you that despite the challenges of 2020, we're well positioned for a successful and impactful 2021 and in spite of the continued COVID-19 associated challenges to date. She guard Etfs continues to outperform with clinical evidence.

All other competitive carotid stents, and we will continue to drive this awareness to our customers and provide the best absolute clinical and patient outcomes.

We're expanding our reach and preparing for perhaps the most exciting.

Year ahead, and the Companys history.

As we prepare to execute on our U S pivotal trial, and we look forward to continuing to report on our success and we thank you for your support.

The conference has concluded you may disconnect. Your line at this time. Thank you.

And.

Okay.

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And.

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Okay.

And then.