Earnings Call Transcript - ICCM Q4 2022

Operator, Operator

Good morning, and thank you for being here. I would now like to hand the conference over to Todd Kehrli. Please proceed.

Todd Kehrli, Manager

Thank you, Operator, and welcome to IceCure Medical’s conference call to review the financial results for the 12 months ended December 31, 2022, and to provide an update on recent operational highlights. We ask that you refer to this morning’s press release and 20-F to review the audited 2022 year-end financial results. Participating on the call are IceCure Medical’s CEO, Eyal Shamir; and CFO & COO, Ronen Tsimerman. After the prepared comments, Eyal and Ronen will be available to address your questions. Before we begin, I will take a moment to read a statement about forward-looking statements. This call and the question-and-answer session that follow it contain forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Words such as expects, anticipates, intends, plans, believes, seeks, estimates, and similar expressions, or variations of such words, are intended to identify forward-looking statements. For example, we are using forward-looking statements in this presentation when we discuss the achievements we expect to accomplish as we continue to advance our growth strategy, our positioning to make significant commercial advances in key markets, pursuit of regulatory approvals in various jurisdictions, expansion of clinical applications, release of results from our clinical trials, potential market adoption and future sales of IceCure's minimally-invasive cryoablation technology, advancing regulatory and commercial strategies, strategic plans, and our belief that we are well-capitalized to execute on commercial opportunities to increase shareholder value. Because such statements deal with future events and are based on IceCure’s current expectations, they are subject to various risks and uncertainties, and actual results, performance, or achievements of IceCure could differ materially from those described in or implied by statements in this presentation. The forward-looking statements contained or implied in this presentation are subject to other risks and uncertainties, many of which are beyond the control of the company, including those set forth in the Risk Factors section of the company’s Annual Report on Form 20-F for the year ended December 31, 2022, filed with the SEC on March 29, 2023, which is available on the SEC’s website, www.sec.gov. The company undertakes no obligation to update these statements or revisions or changes after the date of this release, except as required by law. I will now turn the call over to IceCure Medical’s CEO, Eyal Shamir. Eyal, please go ahead.

Eyal Shamir, CEO

Thank you, Todd, and welcome, everyone. My comments will be brief and will focus on the significant achievements we accomplished during the year, as well as those we expect over the coming months as we continue to advance our growth strategy. I will begin with yesterday’s development, the receipt of regulatory approval in China for our disposable cryoprobes. The latest approval allows us to use the IceSense3 disposable cryoprobes in combination with our previously approved IceSense3 console. This is an exciting catalyst, and we believe this will generate increased commercial activities in China. This will be driven by our exclusive distributor agreement in China with Shanghai Medtronic Zhikang Medical Devices Co. Ltd, an affiliate of Medtronic PLC, and Beijing Turing Medical Technology Co. Ltd. If you recall, the initial three-year period of this agreement includes minimum purchase targets of $3.5 million. In the U.S. market, which we believe represents a sizable addressable market, the revenue trend we are currently experiencing is encouraging, and consumable sales represented 20% of our 2022 revenues, almost double the 11% reported in 2021. Globally, our consumable sales accounted for 43% of our 2022 revenue, up from 29% in 2021, indicating increased physician awareness of our system. On the regulatory front, we are awaiting the U.S. FDA response to our regulatory filing for ProSense in the treatment of early-stage breast cancer. We believe, based on our data emerging from our ICE3 trial, ProSense is a highly beneficial invasive option for physicians treating breast cancer to address the initial indication market of 43,000 women in the U.S. annually. Moreover, last year we received an initial reimbursement code from the Center for Medicare and Medicaid Services to help offset some of the cost for the treatment with respect to the facility fee. Globally, we’re expecting responses to applications filed in several other countries, including Brazil, Vietnam, and Canada. On the clinical front, we reported positive interim results from the ICE Secret study, which continues to validate that ProSense is safe and effective in treating kidney cancer tumors, with an 89.5% recurrence-free rate. In summary, our results demonstrate that we are a results-oriented company, and I believe we are well-capitalized to execute on commercial opportunities in the U.S. and globally to increase shareholder value. With that, Ronen and I are ready to take your questions. Operator, we would like to open the call for questions.

Operator, Operator

The first question is from Kemp Dolliver of Brookline Capital Markets. Please go ahead.

Kemp Dolliver, Analyst

Hi. Thank you and good morning. I'll ask a couple of questions and go back into the queue. Now that you have the approval in China, how will the rollout proceed? And some of these decisions, I acknowledge, may be in the hands of your partners, but I'm assuming - are they contemplating pursuing government reimbursement at some point, or strictly focused on the cash pay market? I'll start with that.

Eyal Shamir, CEO

Thank you, Kemp. We are very excited about the opportunity in China. We always believed China would be a growth market for IceCure. Our partner in China, which is mainly Shanghai Medtronic Zhikang, and together with Turing Medical, they will approach public hospitals mainly at the beginning, because most of those cases will be done in hospitals, and later they will go for private clinics. Even in public hospitals, they will be able to start with some co-payment from the patients, and in parallel, they will pursue reimbursement in China.

Kemp Dolliver, Analyst

Okay, very good. Thank you. And just switching to the U.S., you have been evaluating partnering versus self-distribution. How's that thought process evolving over the last few months?

Eyal Shamir, CEO

Yes, we are still in the process on that. I think that it might be a combination of a direct sales team with some partners, but this is still under evaluation as we did a strategic market approach and market plan in order to enter the market. But it might be some level of combination.

Kemp Dolliver, Analyst

Would that be by geography or some other criterion? It'll be by geography, but also by some other partnering that will have some benefits with specific organizations, DNAs, and other aspects that will help us to make the market penetration.

Operator, Operator

The next question is from Yi Chen of H.C. Wainwright. Please go ahead.

Chaitanya G., Analyst

Hey, everyone. This is Chait on behalf of Yi. And I'm sorry if I missed some of the information in your prepared remarks. My call was in and out, but any guidance on the anticipated sales in China this year or even next year would be helpful. And also again, please bear with me if I've missed it. Any guidance for 2023 topline guidance for 2023. And also, on ICE Secret and any other indications? Are there any future data presentations that may happen this year? Would be very helpful. Thank you.

Eyal Shamir, CEO

So, thank you very much. On China, we are not giving a specific guideline on specific sales every year. The minimum quantity agreement that we signed, the triangle agreement with Shanghai Medtronic Zhikang, and with Turing Medical, is a minimum of $3.5 million for the next three years. Other than that, we are not giving a specific guideline on sales every year. IceCure is running two sponsor trials. One of them is the ICE3 breast cancer cryoablation trial that we filed on October last year. And we have the interim results on the kidney that we published last December. At this stage, we don't have other sponsored studies. There are some other studies that are investigational studies, and they will make their publication and results according to their own study and time.

Chaitanya G., Analyst

Thank you. And if I may sneak in one more quick question, could you provide some color on the impact that the CPT Category III code that was assigned to you by the CMS in November 2022? How has that impacted your marketing efforts or the uptake or adoption that you've seen in the U.S.? Any trends would be very helpful after you've received the CPT code.

Eyal Shamir, CEO

Yes. So, as you mentioned, on November 1 last year, we got a payment assignment on our CPT III code for breast cancer in a level of $3,428 for the first time ever. And this will be effective after we get the first FDA clearance, and this will be for a facility fee. So, it'll be able to offset some of the cost. After we get the FDA, we will be able to start the process to move from CPT III code to CPT I code, which will include also the physician fee.

Operator, Operator

The next question is from Ben Haynor of Alliance Global Partners. Please go ahead. Ben Haynor, could you ask your question?

Ben Haynor, Analyst

Sorry. Can you hear me, gentlemen?

Operator, Operator

Yes. Now we can hear you clearly.

Ben Haynor, Analyst

Got it. So, for me, I apologize, I'm jumping between calls here, but just on the submission for a category one - CPT I code, do you think you'll have enough societies’ support and usage data to submit that next year, and could we expect a code to be in place come 2025? What's the current timeline thinking on that?

Eyal Shamir, CEO

Yes, thank you very much, Ben. In 2019 when we did the submission to the AMA in order to create the CPT III code, we had five societies. Of course, the first one, and the most important one is the American Society of Breast Surgeons, but other four societies, including interventional radiologists supported that. And we are working very closely and participating in the interventional radiology societies’ meetings, and they would like to adopt cryoablation for breast cancer. So, they told us that they are going to fully support our application to move from CPT III to CPT I code. And I believe that during 2024, we will be able to make this process and to make the submission after we collect all the relevant data in front of the AMA, which they need to make the decision to move to CPT I.

Ben Haynor, Analyst

Okay, got it. And is there a chance that you guys might not even need to be kind of a sponsor of the CPT I submission? I ran across another company recently in a different space that the society took it upon themselves to bring it through the process. Could that be something that happens with you guys as well, do you think?

Eyal Shamir, CEO

Yes, the breast cancer and the head of the Coding and Reimbursement Committee of the American Society of Breast Surgeons, they did it with great support, and together with the American Surgery Society. So, they will give us the support, or they will make it by themselves.

Ben Haynor, Analyst

Okay, great. Yes, I know you guys have a lot of support. It's good to hear that. And then on the $3.5 million in minimum purchase targets for the Chinese distribution agreement with the affiliate of Medtronic, I apologize if this has already been asked, but is that $3.5 million over the next several years in the term of the agreement, or is that just for the current year’s period?

Eyal Shamir, CEO

No, the minimum quantity that they committed for the coming three years is $3.5 million.

Ben Haynor, Analyst

Okay, got it. Okay, that makes sense.

Eyal Shamir, CEO

This is the minimum for the next first three years.

Ben Haynor, Analyst

Okay, got it. And then, obviously, there are always considerations when you're setting terms with a distribution partner anywhere, but are there any things that we should be thinking about when it comes to the potential for extending that agreement? Is it something that you guys need to see that they're hitting the ground running and generating a lot of the sales for you guys? Would there be anything that would cause you to try to switch to another partner, or what kind of goes into a potential renewal there, to the extent you can discuss it?

Eyal Shamir, CEO

Of course, we would like to evaluate different aspects, of course. The most important one is future sales relationships with the different societies, creating guidelines, working on reimbursement, all the educational staff, all the clinical support that they need to be. It's not only sales. All the KOL support, clinical support, especially for training at the beginning. So, we will evaluate, like any other partner, all that aspect to be sure that they are delivering what we need in order to be very successful in the market.

Kemp Dolliver, Analyst

Hi, thank you. Just quickly, and I know you are reluctant to give specific guidance, but with regard to your spending this year, how should we think about it relative to 2022? And that would be for all three expense buckets.

Eyal Shamir, CEO

Ronen?

Ronen Tsimerman, CFO & COO

Okay. So, Eyal, would you like me to take the answer? Okay. We are expecting that 2023 will be quite similar to 2022. If you look at the numbers, you will see that we are investing more in R&D and all the regulatory affairs and clinical affairs and also in marketing. So, from all these aspects, you can expect to see probably the same numbers. We are planning to spend a little bit more on marketing, especially in the U.S.

Kemp Dolliver, Analyst

Great. Thank you.

Operator, Operator

The next question is from Yi Chen of H.C. Wainwright. Please go ahead.

Chaitanya G., Analyst

Hey, this is Chait again on behalf of Yi. Just a quick follow up. I know I've seen that you've presented interim study results at the Urological Association Conference in Israel. And please bear with me if you have already touched upon this in your earlier calls, but what was the feedback from the physician community at that conference with regards to the data that you've presented?

Eyal Shamir, CEO

I would like to be sure that you refer to the kidney conference interim study that we published in December. This is what?

Chaitanya G., Analyst

Yes.

Eyal Shamir, CEO

Okay. So, the feedback that we got from the conference itself and from other KOLs and physicians that we shared this information with in some of the events that we exhibited, like on February in the interventional radiology meeting in India, and in January, at the society interventional oncology in Washington, D.C., they believe that the results are very good, and they see the benefits of using one probe instead of a multi-probe system. In one probe, which is less costly than two to three probes, that is how they used to work with Galil Medical and endocrine, argon, and helium cryoablation technology. From the results of complication, navigation time, costing, the three probes cost much more. And the reimbursement, for example, in the U.S., it is the same amount if you buy one probe or three probes from the results. They believe that the interim results are showing very promising results.

Chaitanya G., Analyst

Thank you so much.

Operator, Operator

There are no further questions at this time. This concludes the IceCure fourth quarter and full-year 2022 results conference call. Thank you for your participation. You may go ahead and disconnect.