Q3 2021 Neovasc Inc Earnings Call
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Greetings and welcome to the Neovasc in third quarter 2021 earnings call. At this time, all participants are in a listen only mode.
And answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn the conference over to your host Mike Cavanaugh managing director at Westwood. Please proceed.
Good afternoon, and thank you for joining us today earlier today Neovasc incorporated released financial results for the quarter ended September 32021.
The release is currently available on the investors section of the company's website at Www Dot Neovasc Dot com slash investors.
Fred Colen, President and Chief Executive Officer, and Chris Clark, Chief Financial Officer will host this afternoon's call.
Before we get started I would like to remind everyone that management will be making statements. During this call that include forward looking statements within the meaning of applicable securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of $19 95, and Canadian Securities laws.
Any statements contained in this call that are not statements of historical facts should be deemed to be forward looking statements.
All forward looking statements, including without limitation, our examination of historical operating trends expectations regarding coverage decisions pricing and enrollment matters and our future financial expectations and results are based upon current estimates and various assumptions.
Words, such as expect outlook will should continue strategy potential intend try believe plan and similar words or expressions.
Are meant to identify forward looking statements.
These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward looking statements. Accordingly, you should not place undue reliance on these statements.
For more information on risks and uncertainties related to these forward looking statements. Please refer to the cautionary statement regarding forward looking statements and risk factors section of Neovasc annual information report on form 40 F and the discussion of Neovasc and DNA, which are available on Edgar and SEDAR.
The information provided in this conference call speaks only to the live broadcast today November nine 2021.
Neovasc disclaims any intention or obligation, except as required by law to update or revise any information or forward looking statements, whether because of new information future events or otherwise.
I will now turn the call over to Fred.
Thank you, Mike and good afternoon, everyone.
As always thank you for joining us today, I will give an overview of the quarter and a business update before turning the call over to Chris to discuss our financials.
Q3 was a strong quarter operationally for Neovasc as we continued to advance our three value creation strategies.
We are particularly pleased with our sales results generating record reducer revenues.
We made great progress in advancing preparations to begin to cause share about two U S. Based trial for reducer and continued to advance our efforts to secure reimbursement for reducer in Europe.
Importantly, some of the initiatives we executed in the first half of 2021 have solidified our financial footing and we are now expected to extend our cash runway into mid 2024, which Chris will further discuss.
One of the three pillars of our value creation strategy is expanding the use of reducer in Europe and elsewhere outside of the United States through marketing efforts expanding into new markets and driving reimbursement coverage.
Bask has direct salespeople in Europe, working hard to market reducer, and additional distributor partnerships throughout Europe, including Switzerland, and the United Kingdom, Italy, Spain, the Netherlands and Austria.
The benefits of these efforts can be seen in the top line as we recorded record revenues of just over $700000 joined the quarter. Despite lingering COVID-19 issues in Europe.
It is gratifying to see growing acceptance and use of the reducer for the treatment of refractory angina.
We have seen firsthand how would you be user can change lives of people with no other traditional options.
We are using these tangible success stories to help us continue to pursue reimbursement for the reducer in multiple countries.
We think the value based benefits reducer brings to patients and health care systems alike are clear and we are convinced that this is the foundation for the progress. We believe we continue to make to what's our reimbursement objectives and the United States.
In the United Kingdom, France, and Germany.
We believe we will have more news in the coming months on the specific outcomes.
Turning to our athletes to promote and gain approval for reducer in the United States.
Our key initiative here is to advance towards the first patient enrollment in our new U S. IDE clinical study called the Corsair out to in 2021, whereas the aim of supporting a future PMA submission to the F D. A.
We achieved an important milestone in September of 2021, when we received approval for the study protocol from the F D. A.
The protocol is designed to investigate the safety and efficacy of the reducer for patients suffering from refractory angina.
The primary endpoint of the trial will be exercise tolerance. After six months and we expect to enroll approximately 380 patients and up to 50 U S and Canadian sites.
With an interim look upon 80% enrollment and the ability to adjust the sample size as needed to increase the likelihood of achieving statistically significant results.
With this important approval secured we remain on track to enroll the first patients in the trial in Q4 of 2021.
In the meantime, we are working on the selection of several best suited service providers. For example, an appropriate clinical research organization in the United States and the core labs for the trial.
And we are qualifying our clinical trial sites, obtaining institutional review board approvals and initiating and reviewing contracts with clinical sites.
In addition, we have successfully filed for the registration of course, there are two in the clinical trials Dod golf system.
Finally, we are working on finding a path towards U S reimbursement for coverage and device payment by CMS jewelry, because there were two clinical trial.
This is a complex undertaking and the outcome is not certain at all but we have initiated our request.
We also continued to see a steady flow of positive data for example, near the end of the quarter. The results of the Reducer. One study were published in the journal Euro intervention.
The data published from this real World study confirmed a strong safety profile as well as a sustained improvement in engine of severity and quality of life out to two years.
More recently in October the Reducer was featured in an article in the Polish Heart Journal.
<unk> evaluated Andy article demonstrated a statistically significant improvement in the Canadian cardiovascular Society angina score a measure of chest pain severity in patients with right sided ischemia.
All he reduce of trials have been primarily conducted in patients with the left side of ischemia. We continue to be very pleased with the flow of data that supports the safety and efficacy of reducer.
Recently, two European physicians demonstrated a very meaningful improvement in the absolute coronary blood flow into the heart muscle upon implementation of the reducer in two consecutive patients.
This is the very first time this could be demonstrated in humans using the most advanced diagnostic tools and leading silence.
The physicians both world renowned experts in coronary physiology, where am.
Prophetic about the positive results.
For the first time, the physicians were able to demonstrate in real time that implantation of the coronary sinus reducer resulted in an immediate increase in blood flow to the heart muscle.
This is important because it points to the potential mechanism of action of the reducer.
Patients experienced in China, when the heart muscle doesn't get enough oxygenated blood, increasing the oxygen in the blood flow to the muscle is critical to relieve the chest pain associated with and you know.
More work is still to be done here, but this is potentially a key development and may signify the beginning of a new era and interventional cardiology for the optimal treatment of occluded loved vessels of the heart.
Moving on to our efforts to advance our chiller technology as many of you are aware, we paused work on the chair of our transdermal device to focus on the chair Upfronts apical device, which is more advanced in its development stage than the transfer program.
We continue to work with our notified body in Europe to advance our CE Mark application for the chair Upfronts apical.
And we are targeting a decision under the new European medical device regulation or M. D. Our rules in late 2022.
I would also be faced with some of the actions we took during the first half of the year and the resultant effect on our balance sheet.
As many of you will recall, we made some difficult decisions during the first half of the year largely centered on the suspension of our development of the chair Upfronts from old system, which included a significant corporate head count reduction.
These decisions did in fact result in a significant reduction of our cash burn and we believe that we now have a cash runway extending at least into mid 2024, which allows us to among other things focus on and execute the nuke or say about two IDE clinical trial for reducer.
Overall, we are pleased with the progress we made in the quarter to position Neovasc going forward.
And before I turn the call over to Chris I would like to take this opportunity to comment on our current strategy to regain compliance with the NASDAQ listing rules.
As you are likely aware we are currently in breach of the NASDAQ $1 minimum bid price rule and we have been granted an initial grace periods to cure this breach.
We can still kill this breach by closing 10 consecutive trading days above one dollar before November 22nd 2021.
It's maybe unlike me, though that we can achieve this in the remaining short period of time.
However, we do believe that according to the NASDAQ rules and guidelines, we could be eligible for a second 180 day Grace period until May 21, 2022, giving us additional time to cure this breach.
We will make an application for a second grace period in the coming weeks, but NASDAQ will only be able to decide then all eligibility for the addition of grace period on or off of the last day of the initial Grace period on November 22nd 2021.
I would also like to point out that while our shareholders equity remains greater than two and a half million dollars satisfying to shareholders equity requirement the $35 billion market capitalization requirement is not applicable for neovasc.
Overall, we are glad to see that the $72 million of financing in February. This year has placed us in a stronger position also to meet the NASDAQ listing requirements and we believe that there is a potential pathway to being granted a second 180 day grace period in which to cure that.
Our remaining breach of the NASDAQ rules. We also believe we have a strong operational plan over the next six months.
We accomplished a great deal during the third quarter advancing our goals to expand adoption and reimbursement of the reducer and we are beginning to see the financial benefits of some wise, but difficult decisions. We made in the first half of the year.
However, we understand there is more to be done on all fronts, and we hope to before more positive milestones joined the balance of 2021 and beyond.
As always we want to thank our investors our employees and our customers for their continued support of Neovasc I will now turn the call over to Chris for a review of our financial results Chris.
Thank you Fred.
As Fred mentioned briefly in his comments, we're happy to report that we.
We recorded record revenues and units sold during the quarter revenues increased by 12% to $703000 for the three months ended September 30 of 2021.
Compared to revenues of $626000 for the same period in 2020.
It is particularly gratifying this occurred during the latest COVID-19 Delta Berry search over the summer.
The cost of goods sold for the three months ended September 30 of 2021 was $165000 compared to $151000 for the same period in 2020.
The overall gross margin for the three months ended September 30 of 2021 with 77% compared to 70, 776% gross margin.
At the same period in 2020.
Somebody continues to take some Germany.
The company sells the reducer direct for higher margins.
Total expenses for the same in terms of September 30th 20, coming along with $7 $3 million compared to $10 $6 million for 2020.
A decrease of $3 $4 million or 32%.
The decrease in total expenses during the quarter.
And be substantially explained by a $2 $1 million decrease in legal and underwriting fees related to the August 2020, followed suit.
A $1 million decrease in employment expenses.
The reduction in force at the end of 2020 and callable in June 2021.
$849000 decrease in other product development and clinical trial expenses as the company and definitely caused all activities related to the tiara TF. Thanks to more powerful replacement program in June 2021.
All offset by a $430000 increase in noncash share based payments.
Selling expenses for the three months ended September 32021, $786000 compared to $499000 for 2020.
Presenting an increase of <unk> $7000 or 58%.
The year over year increase in selling expenses can be substantially explained by a COVID-19 $19000 increase in other expenses until commercialization activities related to the reducer of the company increased selling activities from the COVID-19, driven low point from a comparable period.
General and administrative expenses for the three months ended September 30 of 2021 with $3 million compared to $4 $6 million for the same period in 2020, representing a decrease of $1 6 million or 35%.
The decrease can be substantially explained by $1 million decrease in legal and.
The Viking cruises related to the August coming from refinancing offset by $545000 increase in non cash share based payments.
Product development and clinical trial expenses for the three months ended September 32021 for $3 5 million compared to $5 $5 million for 2020.
Representing a decrease of $2 million for Covid.
No.
The decrease in product development and clinical trial expenses can be especially explained by $924000 decrease in employee employment expenses.
The company's reduction of course at the end of 'twenty 'twenty and thirdly in June 2021 and in.
$849000 Gpus, and other product development and clinical trial expenses.
Company has definitely caused all activities related to keep.
Thanks to more of a mitral valve replacement program in June 2021.
The operating losses and comprehensive losses for the three months ended September 30 of 2021 was $6 7 million and $6 $9 million, respectively. On 11 basic and diluted loss per share as compared with $10 $2 million operating losses of $10 $4 million comprehensive loss.
51 basis, 61, basic and diluted loss per share for the same periods in 2020.
The decrease of $3 4 million in operating losses, especially be yours.
It's got to be explained by a $3 4 million decrease in op.
The dispensers as described earlier.
All shares issued and outstanding increased by 2667 shares during the quarter to $67 million 587, and 79 shares and our fully diluted share count, including the exercise of all the money warrants and equity incentives.
And the conversion of all outstanding debt at a conversion price hard when the contract is approximately $113 6 million shares.
We ended the third quarter of 'twenty, and 'twenty, one with cash and cash equivalents.
Cash equivalents of 50.
$55 $8 million.
During the quarter, we spent $7 $5 million.
$4 $4 million spent on ongoing operating activities in leases of which $3 $7 million was spent on sales and product development.
And 3.3 dollars $1 billion was injected into the balance sheet, principally in one time transactions.
Thirdly, we made our final payment on a settlement collaboration agreements of $1 million to $5 million in seconds older accounts payable of $1 $1 million.
Bringing our operating burn rate below $5 million for the quarter. It wasn't it was important to allow room for expenses to increase as we initiate our kefir to study.
I'll still aiming to maintain a long cash runway.
As Fred Fred mentioned, we are in a strong position financially and I hope the level reached critical valuation creation events before needing more capital.
Complex process, but we hope to like positive updates in the future.
Yeah.
Thank you Chris and thank you all for listening to all operate all opening remarks, we have sharpened our focus on advancing the three value creation strategies and we have begun to realize the benefits of a cleaner balance sheet and lower expense base.
We continue to believe in the value potential of our devices and we are gratified to see a steady flow of data supporting the efficacy and safety of reducer. Once again. Thank you all for your continued support.
I would now like to open up the call for questions.
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At this time I would like to turn the call back over to Mr. Fred Colen for closing comments.
Okay, well it looks like there were no further questions. Thank you all very much for your petition participation is very much appreciate it and we'll talk to you again after the next quarter, we look forward to it. Thank you all bye bye.
This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation and have a great day.
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