Q1 2022 Neovasc Inc Earnings Call
[music].
Greetings and welcome to the Neovasc first quarter 2022 earnings call. At this time, all participants are in a listen only mode.
I can 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'd now like to turn the call over to Mike Cavanaugh of Investor Relations. Thank you you may begin.
Good afternoon, and thank you for joining us today.
Earlier today Neovasc incorporated released financial results for the quarter ended March 31 2022.
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 1995 and Canadian Securities laws.
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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.
Missing and enrollment matters, and our future financial expectations and results are based upon current estimates and various assumptions.
Words, such as expect anticipate estimate outlook well may should continue strategy potential.
<unk> 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 report on form 20-F and.
In the discussion and Neovasc, MD&A, which are available on Edgar and SEDAR.
The information provided in this conference call speaks only to the live broadcast today May 12 2022.
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'll now turn the call over to Fred.
Yeah.
Thank you, Mike and good afternoon, everyone.
As always thank you for joining us today.
I'll start today's call with an overview of the quarter and a business update before turning the call over to Chris to discuss our first quarter financials.
The first quarter of 2022 was a record breaking first quarter with revenue was up 35% year over year.
Coming in at approximately 611000 U S dollars, which Chris will touch base on a little bit later.
As many of you know the fourth quarter tends to be the fourth quarter tends to be our largest quarter in terms of sales and to see such a strong result in the first quarter is encouraging and is a testament to the continued focus of the entire neovasc.
Pete.
Our team continues to build in all three legs of all value creation strategies, making great strides across the board.
Now a few highlights from Neovasc first quarter.
The reimbursement efforts in Europe , and elsewhere, including the United States has been tremendous.
And we have seen strong momentum beginning in November of last year.
As we announced in January we have begun enrolling our first patients in the pivotal Coursera two clinical trial, which is intended to prepare the reducer for a full PMA submission to the FDA.
One of the pillars of our value creation strategy is expanding the use of reduced sort of outside of the United States.
In our fourth quarter and year end earnings call, we discussed various milestones of full reimbursement abroad.
In November of 2021, we announced that the National Institute for Health and care excellence of the United Kingdom provided positive guidance for the Neovasc reducer system.
This supports the first therapeutic intervention for stable angina patients who have not responded to treatment.
As a result of the positive guidance, we are seeing an increase in utilization in the United Kingdom.
We expect further growth in the coming quarters, driven by increased utilization ending spat and expanding margins.
Shortly thereafter, the Neovasc reducer system was granted please all Chavez pozzi toile, all packed reimbursement in France by the National Health authority, or France or Haas.
The reduce or is the first therapy to be approved under this newly established <unk> process.
In February we announced the German Institute for the hospital <unk> system awarded the reducer and you'd be one status one designation again for 2022.
The reducer was previously been granted status one.
Is the highest priority designation available.
For 2020 to 256, German hospitals applied for the reducer and Youll be and they can now negotiate full reimbursement coverage for the reducer therapy in Germany.
Securing reimbursement in three of the largest markets in Europe has been very fruitful.
Our team has done great work, but we also think this is a testament to benefits. The reducer can provide two healthcare systems across the globe, especially improved outcomes for patients and resulting cost savings to payers.
We continue to see a steady increase in the use of reducer in those areas of Europe , and we are grateful to see the growing acceptance and use of the reducer for the treatment of refractory angina.
Shifting to the second pillar of our value creation strategy the U S market.
In January 2022, we announced the first patient enrollment in our <unk> clinical trial.
As a reminder, the corsair about two clinical trials target enrollment is approximately 380 patients across as many as 50 investigational clinical sites and the trial is pivotal for our efforts to gain approval for the reducer in the U S.
For the first time patients that experienced that.
Debilitating FX effects of refractory angina will have access to an FDA designated breakthrough medical device in our placebo controlled trial.
Marking this as a major step towards commercialization in the United States.
Today, we are on track with 21 patients enrolled in the clinical trial.
We are expecting the first readout from Luca <unk> two trial in the third quarter of 2024, which would potentially put us on track for an FDA decision around mid 2025.
Please keep in mind that enrollment is not linear over time that should increase over time as more clinical sites are being activated.
As for the third leg of our value creation strategy, we are continuing to pursue the CE Mark designation for our <unk> T. A mitral valve replacement device.
As noted on our fourth quarter and year end update we continue to work on the critical bench tests and new tests required by the new European medical device regulations or MD our requirements.
We anticipate a decision under the new MDI rules in late 2023.
The European Union's MTR process requires a higher standard for approval then the previous medical device directive mbd process of the past.
As a result, we are seeing delays as we work to clarify and potentially meet those requirements.
There can be no certainty that we will be able to meet these requirements in a timely manner or at all but our team continues to work towards that goal.
I would also like to discuss the various third party publications supporting the reducer device in the first quarter of 2022.
On January 18th we announced the publication of a case series and the peer review Journal cardiovascular Revascularization Medicine, which describes the successful uses of the Neovasc reducer under a compassionate use protocol in the.
The United States.
Also in January we were thrilled to announce the publication of an article entitled the effectiveness of CFS reducer for the treatment of refractory angina, a meta analysis and the Canadian journal of Cardiology.
They also of this publication concluded.
This meta analysis of clinical studies, describing the outcomes of patients with refractory angina implanted with the reducer foresee as narrowing demonstrates its safety and efficacy.
The vast majority of patients experienced improvement in China severity quality of life and functional performance.
In February we announced a third publication authored by a miracle She's ft graduate school of Health Economics and management.
The Catholic University, a softcore Coiro Rome, Italy.
The analysis included a budget impact analysis.
And a cost utility analysis, which will both positive for the reducer therapy.
The various publications in the first quarter of fiscal year 2020 to signal the continued spread of adoption and awareness we are driving in various target markets.
I am incredibly proud of the team for all of the hard work and positive milestones we hit in the first quarter as demonstrated by the various publications and strides and reimbursement.
Finally, following the activation of six clinical sites.
The enrollment of 21 patients into the trial.
Medication stabilization and the required pre procedural testing we have no randomized our first four patients into coursera to trial.
Notably due to the strong efforts of our team in coordination with CMS.
And our clinical trial sites.
The device is reimbursable in the Coursera to study without endangering the blinding of the study.
And thus we generated our first ever U S revenue with reducer in the first quarter another important milestone.
We now have CMS coding coverage and payment for the reducer device in the United States, including during the Coursera to clinical trial.
We also had a number of key events during the quarter from a corporate perspective.
In early April 2022, we were pleased to announce the results of the votes on matters considered at its annual general and special meeting of shareholders held on April 12, 2022 in Vancouver, British Columbia, Canada.
The shareholders of the company reelected to the board of directors.
Appointed grain grant Thornton the U S as our new auditors.
And approve the proposed a one for 25 share consolidation with over 95% of the votes in favor that.
That became effective on April 29, 2022.
As many of you recall, we received a written notification from the NASDAQ stock market LLC in late November 'twenty, one granted an additional 180 calendar day period until may 23rd 2022, within which to evidence compliance with the minimum $1.
Price requirement.
The impact of the share consolidation was to reduce the number of common shares issued and outstanding from approximately 68 million common shares to approximately $2 7 million common shares and increased the share price from 29 per share to $7 25 per share.
As a result, it is anticipated that the company's share price will remain above $1 per share for 10 consecutive trading days ending on May 12, 2022 meeting the requirements to regain compliance with the NASDAQ $1 minimum bid price rule.
Additionally, in late March we announced the consolidation and extension of the convertible debt was as true medical group.
The 2022 restated note was issued in an aggregate principal amount of $13 million.
And consolidates the amount owed by the company under certain convertible notes the company issued two screw medical group in 2019 and 2020.
The company paid out in cash an additional amount of $290961 that was owed under the 2019 and 2020 notes.
This restructuring further solidifies the company's balance sheet and provides the company with a cash runway into mid 2024.
Yeah.
Before I turn over the call to Chris to discuss the financials I would like to thank our investors employees and customers for the continued support of Neovasc. It.
It is gratifying to see momentum across our various value creation strategies reimbursement initiatives and adoption of the reducer and many prominent markets with that I will now turn the call over to Chris for a review of our financial results Chris.
Thanks Fred.
My comments on this quarter.
Revenues increased by 35% $611000 for the three months ended March 31st 2022 compared to revenues of $452000 for the same period in 2021.
That spread as already mentioned this is a record first quarter revenue for reduce it.
The cost of goods sold for the three months ended March 31st 2022 was $136000 compared to $72000 for the same period in 2021.
The overall gross margin for the three months ended March 31st 2022 was 78% compared to 84% gross margin for the same period in 2021.
Our mix of sales are skewed towards sales through distributors.
COVID-19 late in Germany, but we sell direct.
The restricted reducer procedures in that country.
Total expenses for the three months ended March 31 2022.
A $7 1 million compared to $10 6 billion in.
2021, representing.
Representing a decrease of $3 5 million.
33%.
Substantially explained by one a $1 6 million decrease in legal and underwriting fees related to the February 2021 financing.
At $1 3 million dollar decrease in noncash share based payments due to an adjustment in the expected life of the share appreciation plan.
And due to voluntary recall.
Of certain incentive auctions by certain employees.
Three a $1 million decrease in employee expenses and other product development and clinical trial expenses.
Has been definitely paused all activities related to the crts transfer modal mitral valve replacement program.
In June 2021.
The other losses for the three months ended March 31st 2022.
It was $3 5 million compared to other income of $8 million for the same period in 2021.
A change of $11 $5 million.
The change in the other loss can be substantially explained by an $11 3 million change related to the accounting treatment of the 2019 notes 2020 notes 2022 months and the derivative liability warrants.
The operating losses and comprehensive losses. The three months ended March 31st 2020 to $6 6 million and $10 $4 million, respectively, or $3 75, basic and diluted loss per share as compared with $10 $1 million operating losses at <unk>.
$2 $9 million comprehensive losses for one.
$1 <unk> basic and diluted share loss per share for the same period in 2021.
The company ended the quarter with $44 $2 million in cash.
We spent $5 7 million to fund operations during the quarter absorbed $1 4 million.
Onto the balance sheet.
And paid approximately $290000 to steward medical group.
Crude interest on old notes in excess of the new $13 million.
Actually you're right.
Thank you Chris and thank you all for joining US today, we have made great strides in the first quarter of 2022, driving awareness adoption and demand for our life changing device.
Importantly, you the shareholders voted for the share consolidation, which is expected to cure our breach was the NASDAQ we strongly.
We believe that remaining listed on the NASDAQ was in the best interest of the shareholders.
We continued to advance across all pillars of the business and we are confident that we are marching towards our long term success.
I look forward to the days to come and I'm grateful for your participation in today's call with that I would now like to open the call open for questions.
Thank you we will now be conducting a question and answer session. She would like to ask a question. Please press star one on your telephone keypad.
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One moment, please while we poll for your questions.
Our questions come from the line of Vernon Bernardino with H C. Wainwright. Please proceed with your questions.
Good afternoon, everybody and Fred and Chris Congrats on the process progress.
The 21 patients is very intriguing.
I think that was.
Quite an accomplishment, especially in this environment, even though things are getting looser.
People are still careful and such.
Sometimes it takes a little bit of a dipping your toe in first before you can.
You have an idea of how quickly.
You can get back to normal.
Cooking and electric procedures, what are you seeing out there and perhaps you can share us too.
What has driven our enrollment and if there are any things that youre seeing that may actually.
And therefore accelerate.
Yes, Hi, Vernon this is Fred thanks for joining us today and for your question.
So, yes, I mean.
I would say that similarly to Europe , where we see enthusiasm in the market, we see physicians seeing the benefit of the reducer in their own patient population and that continues to drive demand.
Similarly in the U S. We see quite a bit of answers yes from.
I would say the most prominent clinics.
First of all we had a couple of clinics in the U S that had actually implanted the reducer under.
A a prior.
Possibility of a consent by the patient and the FDA.
And those two clinics actually saw.
Really remarkable success with the patients with a few patients that they treat it.
Before the cross sell of our trial and therefore, they were very enthusiastic and getting going.
Right away in.
And Nick will share our trial.
That's just for those two but we also see this from a number of our clinics in the U S and I would really say we work with the most prominent clinics in the U S in <unk>.
Europe .
In Florida.
All over the country.
And these leading clinics are really enthusiastic about finally, having an option for a patient population that so far they they really couldn't treat.
So it really has to do with Andrew Yes.
These physicians and these clinics.
That's one the other part of it is that obviously the fact that we are getting reimbursement by CMS for the trial also helps.
The clinics are getting paid by us for their for their work their expenses.
But then for the implant.
They are able to get reimbursement by CMS and we are able to obtain payment by CMS for the device all of these things that help to really create an enthusiasm in the market for the device.
So I would say it is a testament to primarily to the physicians and the clinics that we work with that are really excited about being able to participate in this trial. It is I have to say quite a complex trial and I just want to explain I mean, there are a huge amount of steps that we and our clinical team has to go.
True to.
To get a site up and going and there is a lot of different steps that they have to go to just get a trial clinical trial site approved but then outside of that when you start looking at the patients. There are a lot of requirements for this I would say highly scientific clinical study and the safe guarding.
The the treated population grows as the control population. So for example, there are strict requirements for these patients being on a stable medication regimens and that has to be in place for a while so that these patients really are stable on their medications and that no medication change.
Can be impacting the results one way or the other depending on if the patient gets to be in a controller and they're all in the reducer arm. That's one theres also requirement for for example, the PE.
You cannot have a in all of our procedure or relatively shortly before being enrolled and of course. They are cloud. So even if a patient does get like for example, stenting procedure.
We're pretty quickly before enrolling in our study that's another issue that is not possible and then we have to do this treadmill tests.
For the patient.
It can be.
Can be subject to randomization.
And there are strict requirements for the treadmill, if a patient does.
Some patients have difficulty doing a treadmill test at all and some maybe two good they may be actually.
Doing the treadmill test I'm, just I'll just way too good and therefore outside of the time stipulated that basically points to the fact that the patient is not sick enough. Because we are supposed to treat class III and class for angina patients. So there really are a lot of hurdles that you have to go through so this is a.
This really takes a clinical site and a group of clinical researchers in these clinics that are really dedicated to work with us and I'm really happy to say that that is what we see and that is the case because these physicians and their clinical staff are really interested in a therapy.
They could not offer to a patient before and that's really the driving factor that plus all the international success that has been publicized in so many journals.
Where physicians and patients talk about the successes that they have had I mean physicians have high expectations in the U S. Also with the success of this device. So I think that kind of I think that kind of like it describes the environment, we see Vernon.
That's terrific and it's great that you have these.
Our sites, which already has had experience implanting.
The reducer, but how much education do you still have to go through for example, when you.
Visit our sites, who have not and what kind of comp.
Conversations.
If you could share any regarding.
What looks to be <unk>.
Pharmacy environment as far as.
Reimbursement from CMS. Thank you.
Yes.
There is a lot of training there is a lot of training going on by us to each individual site.
Two are basically educate them on all the requirements on what all needs to be done to get to the right kind of patient to be enrolled and then obviously there was also training that we provide with our own staff as it relates to how the device has to be implanted. So the clinical sites that have patients before in the <unk>.
Compassionate use environment.
<unk> already had a certain amount of training that certainly helped.
But we are doing is still a lot of training in general for all the requirements from the clinical trial and then also for the first several implants of the reducer.
So that is something we have to safeguard as well that these physicians are properly trained as to how to implant. The device. It is not really a complicated implant, but there are some tweaks that you need to learn that are important. So that you really have the best possible outcome for the patient and so there is a training component there as well that is important.
As it relates to CMS we.
We did spend quite a bit of time with CMS and over the last I would say year and a half.
That has accumulated really in.
And a very good outcome for us and the last piece of it was basically a separate reimbursement code.
For our patients and of course, there are two clinical trial. So basically the way. This works is.
So how do we get paid for our device without endangering the blind.
Basically done by CMS on our suggestion by the way taking the approach of let's take one patient who go through the entire procedure, but doesn't get to device then let's let's look at the next patients who will go through entire procedure and all the costs for that but then including the.
<unk> then you take those two together and divided by two so when you get an average cost for the statistical average patient.
And that is the reimbursement amount that that CMS has.
It has a stated now for patients in the <unk> two trial. So all of that the clinic does it basically.
State that this is a patient that participated in the Coursera to clinical study and then there is this particular reimbursement code and particular reimbursement amount that is being provided which is basically an average of the two different scenarios and that is how we are still being able to get paid for.
For the device without endangering the blind. So we really have been able to work this out a nicely with CMS I can tell you that.
I mean.
Neovasc has really done.
Quite a bit of groundbreaking work in the space of reimbursement you look at the U K for the very first time, we get a positive if we got a positive statement from nice before.
Before the statement recommending the use of the reducer by nice before that nice lift basically recommending that the patients had to go through psychological counseling in terms of how to deal with the pain.
And then when when we worked with them. They are now basically recommended the use of the reducer. So that is a absolute first for these angina patients.
In France, we were the very first company.
That was able to get reimbursement under the new French reimbursement <unk> process at the very first there wasn't medtronic it wasn't none of the big companies I'm sure. They all would have liked to be the first neovascular was the first to actually get this process is done and actually got the reimbursement out of it.
Then last but not least I can tell you that neovasc.
Is the company, who has worked with CMS and as far as I know is the fee.
First and only company.
<unk> is executing on reimbursement.
For a device in a clinical trial the way I described it I don't think that this actually has been executed this way before so there are a lot of novel ways that we actually are going and actually have succeeded in.
To be able to work with authorities in the UK and France and in the U S to really put the reducer therapy in the forefront of these authorities.
And last but on these growing and I think to put it in perspective, it's not just.
We are saying well you should be using to reduce it you shouldn't be doing the reducer.
We all recommended in the European guidelines that's one.
For cardiology, and the second one and I would say, that's equally and maybe even more important.
There is more and more evidence and studies out there that demonstrate that the use of the reducer device in the therapy for the patient will actually save the healthcare system money and that part is extremely important.
It's this is a good therapy for patient it actually does good for the patient to patient.
In the most in most cases not always but in most cases, the patient will do better and the health care systems actually save money. Because this is such a very expensive patient population that needs a lot of attention in any health care system.
And those are the things that really help us in getting these first accomplished I just wanted to explain that to you one more time.
Yeah.
Terrific those are very helpful.
Helpful Insight.
Thank you for sharing and thank you for taking my question I appreciate it.
Thank you Vernon Thank you so much.
Yeah.
Thank you that is all the time, we have for questions. Today. This does conclude today's teleconference. We appreciate your participation you may disconnect your lines at this time.
Joy the rest of your day.
Yeah.