Q4 2022 InspireMD Inc Earnings Call

Speaker 2: Good morning and welcome to the Inspire MD fourth quarter and full year 2022 earnings call.

Speaker 2: At this time, all participants are in a listen-only mode.

Speaker 2: Please note this conference is being recorded.

Speaker 2: I will now turn the conference over to Chuck Padala with Lifesci Advisors. Thank you. Let me begin.

Speaker 3: Thank you, operator, and good morning, everyone. Thank you for joining us for the InspireMD fourth quarter and full year 2022 financial results and corporate update conference call.

Speaker 3: Joining us today from InspireMD are Barbara Slosman, Chief Executive Officer, and Craig Schur, Chief Financial Officer.

Speaker 3: During this call, management will be making forward-looking statements, not historical facts, and are based upon management's current expectations, beliefs, and projections, many of which, by their nature, are inherently uncircum.

Speaker 3: They involve risks and uncertainties that may cause actual results to differ materially from those expressed in the forward-looking statements.

Speaker 3: information about these risks please refer to the risk factor described in InspireMD's most recently filed periodic reports on form 10k and 10q filed with the US Securities and Exchange Commission and InspireMD's press release that accompanies this call particularly the cautionary statements made in it.

Speaker 3: The call contains time-sensitive information that is accurate only as of today, March 30th, 2023.

Speaker 3: except as law be required by law inspire MD disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.

Speaker 3: It is now my pleasure to turn the call over to Marvin Slausman, CEO of InspireMD. Please go ahead, Marvin.

Speaker 3: Thank you, Chuck, and thanks to everyone for joining the call. I want to start this morning with a regulatory note as our revenue results for the fourth quarter were impacted by the cessation of SeaGuard shipments due to a temporary expiration of our CE mark on November 12, 2022.

Speaker 3: This was due to well-documented significant delays by the European regulatory bodies in the processing of applications and audits under the new Medical Device Regulation, or MDR, recertification process.

Speaker 3: By way of background, the MDR replaced the Medical Device Directive, or MDD, which had historically governed the approval and marketing of medical devices in the EU until May 2021. The MDR deadline for transition to updated certification has taken more than three years with multiple revisions.

Speaker 3: delays, and requirement changes putting the entire medical device industry serving the EU markets at risk. This complexity, combined with the constantly changing requirements and deadlines, has forced the market into a very precarious situation.

Speaker 3: Our position from the beginning was to follow the new guidelines of MDR as a prudent measure of long-term compliance mandated for all new product introductions requiring this certification.

Speaker 3: We have worked tirelessly with our notified body to complete the process throughout this uncertainty.

Speaker 3: Due to the chronic delays of scheduling our final audit prior to the expiration of our MDD certification on November 12, 2022, we temporarily lost our ability to sell in the EU markets on that date. In anticipation, we proactively worked with our distributor partners to provide as much available inventory as possible to avoid shortages while continuing to complete the MDR process to re-establish sales.

Speaker 3: Despite our best efforts, our fourth quarter revenue reflects a shortfall of shipments following the certificate expiration.

Speaker 3: Therefore, our fourth quarter seaguar revenue totaled $1,026,000 with a carry forward of approximately $250,000 in backlog, not shift after the loss of the CE mark.

Speaker 3: Had we been able to operate without this interruption, we would have recorded approximately $1.3 million in revenue. $1 billion in revenue.

However, I'm pleased to report that earlier this month we were able to reinstate our CE mark and shift all EU countries and other jurisdictions under our previous MDD certificate as a temporary measure as we work through the final steps in our MDR certification which we believe to be imminent.

We resumed shipments effective March 18th and although late in the quarter, we are taking every step to refill channels and ensure as a priority the availability of the Seaguard Stent platform for life-saving patient care without interruption.

Managing this turbulent transition has been challenging, but we anticipate we will be one of the first companies to receive MDR certification very soon, and for the long term this will serve us well as a foundation of continuing to drive market growth in the EU.

We currently enjoy greater than 25% market share in over half of our served markets, with some territories exceeding 80%.

Our continued efforts on the ground, together with this near-term launch of two new stent delivery systems, including a new transcarotid and advanced next-generation transfemoral platform, will enable share growth and accelerate the conversion of surgeries to endovascular standard of care with the Seaguard stent system.

In turning now to our US regulatory activities, our SeaGuardians US IDE trial continues at a remarkable pace of enrollment with 20 active trial sites. We anticipate completing enrollment next quarter.

Achieving this enrollment milestone will enable next steps in the submission and approval process as we get closer to the potential launch of SeaGuard in the US market.

As we continue to invest in preparation of the U.S. market launch, we have added a seasoned commercial executive in the vascular space, Shane Gleason, to the leadership team who will lead our go-to-market preparation as GM of the Americas in global marketing strategy.

In terms of product pipeline, focus on our Seaguar EPS Stent platform remains the foundation of our business and we believe the importance of the implant to patient outcomes remains the single most important variable beyond the selected delivery option.

In order to fully realize the potential of SeaGuard, however, we've developed two new delivery systems to drive utilization across the broadest vascular specialist community. We continue to advance development, regulatory approval, and launch plans for our new trans-femoral delivery system, SeaGuard Prime, and other

which will be available in both standard and short shaft versions, compatible with the development of SwitchGuard, our TCAR accessory device.

will enable TCAR with the best-sent solution for those choosing to utilize this method of neuroprotection.

We continue to work tirelessly toward our goal of changing the paradigm of how carotid disease is managed and strokes are prevented.

With Seaguar DPS, we believe we can offer the best patient outcomes with the broadest set of tools to unlock the tremendous potential of this rapidly evolving market segment.

We look forward to a catalyst-rich 2023 as we continue to establish Seaguard as the standard of care.

With that, I will turn the call over to Craig for the review of our first quarter financials. Craig? Thank you, Marvin. For the fourth quarter of 2022, total revenue was $1,026,000 compared to $1,380,000 during the fourth quarter of 2021.

This represents a decrease of 25.7%. This decrease was predominantly driven by a 20.6% decrease in sales of CVARD EPS to $1,026,000 in the fourth quarter of 2022 for $1,291,000 in the same period one year ago.

As Marvin mentioned, this sales decrease was caused by reduced shipments due to the temporary expiration of our CE Mark certification for the second half of the fourth quarter, resulting from the ongoing transition to the MDR regulatory framework from MDB previously. This was partially offset by an increase in US sales related to stents used in our Seguardian

Gross profit for the fourth quarter of 2022 decreased by $96,000 or 32.7% to $198,000 compared to a gross profit of $294,000 for the fourth quarter of 2021. This decrease resulted from the lower revenue due to the temporary loss of the CE mark offset by a decrease in miscellaneous expenses.

Gross margin decreased to 19.3% during the three months ended December 31, 2022, and 21.3% during the three months ended December 31, 2021. All operating expenses for the fourth quarter of 2022 were $5,134,000.

an increase of $909,000 or 21.5% compared to $4,225,000 for the fourth quarter of 2021. This increase was primarily due to increases in expenses related to the SeaGuardians FDA study as we move towards end of enrollment, sales and marketing expenses, and regulatory expenses.

Net loss for the fourth quarter of 2022 totaled $4,845,000, or 60 cents per basic and diluted share, compared to a net loss of $4,097,000, or 53 cents per basic and diluted share for the same period in 2021.

As of December 31, 2022, cash, cash equivalents and short-term bank deposits were $17.8 million compared to $34 million as of December 31, 2021. That concludes the financial review. Alright, let us start our review.

I'd like to thank everyone for taking the time today to join the call and for your ongoing support.

I'm extremely proud of how our team has responded to the regulatory challenges pertaining to our CE mark certification. I look forward to the assumption of the market penetration as we continue to gain share in our approved markets while in parallel progressing in our SeaGuardians US clinical trial.

We are now open for questions. Thank you. We will now be conducting a question and answer session.

If you would like to ask a question, please press star 1 on your telephone keypad.

A confirmation tone will indicate your line is in the question queue.

You may press star 2 if you would like to remove your question from the queue. For participants using speaker recruitment, it may be necessary to pick up your handset before pressing the star key.

One moment please while we poll for questions. Our first question is from the line of Ben Haener with Alliance Global Partners. Please go ahead. Good morning gentlemen. Thanks for taking the question. Thanks for your time.

First off for me, I appreciate the code on the MVD and MDR that you experienced in Q4.

Q1 and I guess ongoing. But can you give us a little bit of color on kind of how that impacts Q1 given there's one day left in the quarter and you know you had the $250,000 backlog. I mean it's the way to think about it that European revenues may be something less than Swell offered because right now you know firstOLER, you mentioned about US dollar

you know, kind of the $250,000 backlog during Q1.

Again, thanks for the call. We did our best to make sure that we prepared properly for the either the MDR approval or being able to claw back the MDD which we were successful at. So I think on balance as an organization we tried to make sure that we were set for either of those to occur.

So in terms of the first quarter, we've tried to minimize any impact market-wise on being able to take those steps in advance. So even though it has been laid in the quarter, the preparation up to that point, I think we'll...

will serve us well in terms of being able to address those open market orders and being able to get back on track. So I think the preparation was certainly in order.

Okay, that makes sense. And then you mentioned the press release, the increased demand for Sea Guard. Can you share a little bit more about that, you know, where you're seeing it in any particular areas of strength? I think, you know, I know that.

MDR, MDD certainly has an impact, but it sounds like you're seeing an increased demand regardless. Can you share more of that?

Great question Ben. It's interesting because from the very beginning our stent focus driven by the best clinical data supporting the SeaGuard stent has always been the foundation of our effort. And so as we went through this regulatory process, I think we always assumed that there was high demand for SeaGuard out there but most important is that we were able to get the data out there and get the data out there.

with constant communication that there is this consistent and ongoing demand for SeaGuard, that it's not just about having a carotid stent available. It was specific to SeaGuard, so we felt really good about that process, and now that we've been able to cross this fertile to refill channels, we will obviously be able to satisfy those needs.

You know, on balance, our continued goal and objective is to make SeaGuard the first line stint selected for carotid revascularization. And we continue every day to have that reinforcement that we're gaining on that, both through our distributors as well as our customers in Europe .

And of course our enrollment in the US trial I think has been a proxy to the support of the STEM as well in terms of the accelerated enrollment to the trial.

Okay, great. That's helpful. And then, you know, I know that the approval timeline is a bit of a risky proposition, but, you know, just thinking about SwitchGuard and Seaguar Prime, Transfemoral, the new delivery systems, do you have any thoughts on when those might go into the regulatory bodies?

the timeline there? Yes, for both Europe and the US, we have a very clear strategy and timeline related to our regulatory objective. The devices are complete and we're in the regulatory framework.

As you mentioned and so we're hoping that if those go according to plan that will remain consistent with the dates We've outlined prior in terms of availability into the market But we are into that into that regulatory roadmap as we speak So I think we've crossed over the development hurdle and are well, you know into making sure that we clear the next steps here

to get market availability as soon as we can for both Europe and of course the US market.

And then on that kind of maybe the new indication or new product, I noticed in the 10K you mentioned Enguard EPS for acute stroke with tandem lesions.

Can you tell us a little bit more there? Yes, I think a great opportunity for the Seaguar Stent because of the properties of having the micronut mesh as well as the design of our stent. We know that in about 25% of acute stroke cases the carotids are involved. So we refer to that as tandem lesions.

And so we're looking at that as an indication opportunity that's well suited for our stint and continue to work that in a parallel path to our approval under the current IDE as we believe is best suited in that neuro application. And right now there are no labels, specific labels or indications for tandem.

Tandem lesions stenting so we continue to advance that process and are really encouraged by the stents ability to perform in that acute setting Much more to come on that in the next few calls.

Okay, I'll be on the lookout there. And last but not least, I appreciate the updates on Sea Guardians. I was just curious what you're seeing out of Quest 2.

I'll be on the lookout there. And lastly, I appreciate the updates on Sea Guardians. I was just curious what you're seeing out of Quest 2. Any updates there?

Yes, we started enrollments with the Sea Guard and CRES 2 administratively. As you can imagine, there's a lot that goes into making sure that all of the hospital systems are set and the standards available and everything is done from a paperwork perspective. But having put that in the rearview mirror, we're now beginning the enrollment process.

Encourage that that will see more and more enrollments with with the seaboard So we're we're looking forward to an accelerated process there with Crestoo as well Okay, great. That's all I have. Thanks for taking the questions gentlemen.

Thanks, Ben.

Thanks, Ben.

Thank you. As there are no further questions at this time, I would like to turn the floor back over to Marvin Schlossman for closing comments.

Thank you again. We appreciate everybody attending the call and we look forward to the balance of 2023 and a great reporting and continuing to progress in our advancement of the SeaGuard STEM system. Thank you for the call today.

Thank you again. We appreciate everybody attending the call and we look forward to the balance of 2023 and a great reporting and continuing to progress in our advancement of C-Guard. Thank you for the call today.

Connect your lines at this time. Thank you for your participation.

the

C but that.

The St that.

That.

The.

I.

The.

I.