Earnings Call Transcript - ICCM Q4 2023

Operator, Operator

Good morning and thank you for standing by. Currently, all participants are in a listen-only mode. After management's discussion, there will be a question-and-answer session. Please be advised that today's conference call is being recorded. I would now like to turn the conference over to Michael Polyviou. Please go ahead.

Michael Polyviou, VP of Investor Relations

Thank you, and welcome to IceCure Medical's conference call to review the financial results for the 12 months ended December 31, 2023, and provide an update on recent operational highlights. You may refer to the earnings press release that we issued earlier this morning. Participating on today's call are IceCure Medical's CEO, Eyal Shamir; CFO and COO, Ronen Tsimerman; VP of Sales, North America, Shad Wood; and Tlalit Bussi Tel-Tzure, VP of Business Development and Global Marketing. Before we begin, I will now take a moment to read a statement about forward-looking statements. This call and the question-and-answer session that follows it contain forward-looking statements within the meaning of the Safe Harbor provisions of the Private Security Litigation Reform Act of 1995 and other federal security laws. Words such as expects, anticipates, intends, plans, beliefs, 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 position to make significant commercial advances in key markets, the pursuit of regulatory approvals in various jurisdictions, including with respect to the appeal we have filed requesting review of De Novo Classification ProSense, which earlier was granted, expansion of clinical applications, the release of results from our clinical results, 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 in a position to meet our primary goals in 2024. Because such statements deal with future events and are based on IceCure's current expectations, they are subject to various risks and uncertainties and the actual results, performance, or achievements of IceCure could differ materially from those described or implied by the statements during this call. The forward-looking statements contained or implied during this call 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, 2023, filed with the SEC earlier today. The company disclaims any intention or obligation, except as required by law, to update or revise any forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and speaks only as of the live broadcast today. I will now turn the call to IceCure Medical CEO, Eyal Shamir. Eyal, please go ahead.

Eyal Shamir, CEO

Thanks, Michael, and hello, everyone. Thank you for joining us today to review our 2023 year-end operating results, along with other key developments that have been achieved to date in 2024. The results were in line with our preliminary results we published in early January, and Ronen will review these during his prepared remarks. I will focus my remarks on the achievements to date in 2024 and the expectations over the coming quarters, which are anticipated to make this a pivotal and exciting time for IceCure. As a combination of 10 years of rigorous clinical study, our ICE3 drug process for the treatment of early-stage low-risk breast cancer is now complete, following a five-year follow-up on our last patient. This is a significant achievement, and our knowledge is the first time a cryoablation without excision study for breast cancer has been completed, which seeks to provide women with a safe, effective, minimally invasive treatment, redefining a woman's experience in early-stage breast cancer. This timing coincides well with our FDA De Novo filing request for marketing clearance for treating patients with early-stage low-risk breast cancer. We published the top-line result last month, demonstrating a 96.39% local recurrence-free rate, similar to the interim results we published in 2022 and validated by numerous independent studies performed by leading physicians globally. We are preparing the full dataset and expect to submit the data along with real-world data to the FDA as requested later this month. In conjunction with this filing, data from the study will also be presented at the upcoming American Society of Breast Surgeons Annual Meeting by leading breast surgeons in two separate sessions. As we await the FDA decision, we have continued to prepare our commercial readiness plan for ProSense for early-stage breast cancer in the U.S. We know there is a significant market need for an alternative to lumpectomy, one that benefits women and reduces costs for payers. We believe the breast cancer market represents a major value driver for our company, and to share our commercial plans is Shad Wood, Vice President of Sales for North America. Shad’s primary responsibility is to build out a sales infrastructure in anticipation of a broader commercialization of the company's ProSense system in the U.S. and Canada. Shad, please go ahead.

Shad Wood, VP of Sales, North America

Thanks, Eyal. I'll start off with a little bit about my background. I previously spent 18 years working in the breast cancer diagnostic and surgical space. Most recently, I've led the U.S. sales organization in the launch of an emerging technology, the wire-free device for lumpectomies. My goal today is to provide a brief overview of our commercial plan for ProSense. To begin, our U.S. commercial team currently includes four people: myself, two people in sales, and one clinical application specialist. Despite the limited sales footprint, we are having success as we continue to experience increased system sales and utilization. We also believe that upon the FDA decision we can achieve our initial post-launch sales goals with the current team. We have been very active with medical conferences and direct sales of ProSense for the indication for which it's already approved in the U.S. We've experienced strong interest in ProSense from breast surgeons and radiologists. However, we also believe rising patient awareness will generate greater interest and demand. Our goal over the next 90 to 120 days is to leverage the strengths of our current team while ensuring we are putting the pieces in place to support a larger sales team in anticipation of potential FDA clearance in early-stage breast cancer. That includes a phased approach to build out our sales organization, grow utilization with our existing installed base, and expand system sales with breast surgeons and radiologists. This go-to-market strategy includes working with medical societies to increase adoption through educational programs and hands-on training. If FDA clearance is granted, our aim is the eventual integration of ProSense into standard-of-care, as well as ensuring appropriate reimbursement. We have a very clear reimbursement plan. At a recent Society of Interventional Oncology Master Class, breast cryoablation received high levels of attention and interest. Doctors traveled from across the country to come to these sessions to learn about breast cryoablation. We believe that upon approval, many of these doctors will integrate ProSense into their practice. The published ICE3 study data is compelling. The groundwork has been laid, and we are ready to serve the market for early-stage breast cancer with our current sales, clinical, and distribution organization. I'll turn the call back over to Eyal. Thank you.

Eyal Shamir, CEO

Thank you, Shad. Doctors in the U.S. are very aware of the use of and data coming from breast surgeons, interventional radiologists, and breast radiologists in Europe and Asia. Similarly, we expect potential FDA approval will have a very positive impact on global sales of ProSense for early-stage breast cancer. Tlalit, who leads the global marketing effort, will provide some comments on our initiatives. Tlalit, go ahead.

Tlalit Bussi Tel-Tzure, VP of Business Development and Global Marketing

Thank you, Eyal. We believe the publication of the full dataset from ICE3 and the FDA approval in early-stage low-risk breast cancer will be a major catalyst for increased commercial adoption globally, particularly in Europe, India, and Brazil. We remain very active at medical conferences for a range of specialties, including breast surgeons, breast radiologists, interventional oncologists, and interventional radiologists. These conferences are featuring educational sessions about breast cancer cryoablation and are being conducted by key opinion leaders who are using ProSense. Furthermore, numerous independent studies have been presented on ProSense's safety and efficacy in treating breast cancer. Beyond the major international conferences in each market, we are collaborating with our distribution partners to engage the local medical community, where the U.S. data is highly regarded and influential. The increase in product-driven revenues in 2023 was driven by our efforts in the United States as well as in other territories where we are growing our distribution networks, such as in Europe. We saw a marked increase in usage by interventional radiologists who comprise the majority of our customers in Europe and in Asia in the treatment of other clinical applications such as kidney, bone, and soft tissue. Our distribution partners and the large audience of doctors are awaiting full data for the ICE3 trial, which we expect to be a catalyst for accelerated growth to add breast cryoablation to the treatments they offer today. Internationally recognized medical societies are now offering breast cryoablation sessions in their scientific programs at increasing rates. We believe this supports further adoption because in the countries where ProSense is already approved for early-stage breast cancer, we are experiencing continued increase in demand. I will now turn the call over to Ronen, who will go over the financial results. Ronen?

Ronen Tsimerman, CFO and COO

Thank you, Tlalit. In 2023, we were encouraged by the sales growth as we continue to transition from an R&D-focused company to a commercially focused company. For the 12 months ended December 31st, 2023, revenues from sales of ProSense systems and disposables increased by 26% to $3 million compared to $2.3 million for the 12 months ended December 31st, 2022. This increase was driven primarily by higher sales in the U.S. and other territories. Total revenues for the 12 months ended December 31st, 2023, were $3.2 million, relatively flat compared to $3.1 million in the prior year due to the increase in revenue from sales of systems and disposables, which was partially offset by the decrease in revenue recognition from the exclusive distribution rights agreement with the Terumo Corporation. Gross profit was $1.3 million for the 12 months ended December 31st, 2023, compared to $1.4 million for the 12 months ended December 31st, 2022. Gross margin was 40% in 2023 compared to 47% in 2022. The decrease in gross margin was primarily attributable to the decrease in revenue recognition from the Terumo distribution agreement, which was partially offset by an increase in sales of our systems and disposables. Non-GAAP gross profit and gross margin from the 12 months ended December 31st, 2023, which included ProSense systems and disposable cryoprobe sales but did not include revenues from the Terumo agreement, were $1 million and 35%, respectively, compared to $0.7 million and 30% in 2022, an increase of approximately 47% in non-GAAP gross profit. Total operating expenses for 2023 narrowed to $16.9 million compared to $18.2 million for 2022. This was primarily attributable to a reduction in R&D expenses and general and administrative expenses, which were partially offset by the increase in sales and marketing expenses. Net loss for 12 months ended December 31st, 2023, decreased by 14% to $14.7 million or $0.32 per share compared with the net loss of $17 million or $0.46 per share for the same period last year. As of December 31st, 2023, the company had cash and cash equivalents, including short-term deposits, of approximately $11.1 million. Our initiative to manage our resources during the year achieved the desired effect, and we lowered our monthly cash utilization without having to sacrifice our revenue-generating clinical efforts. During the first quarter, we raised approximately $3 million in gross proceeds from our ATM and ended the first quarter with cash and cash equivalents of approximately $11 million. I believe our continuing efforts to manage our cash, when combined with the prudent use of ATM, provide us with the resources to execute our clinical, regulatory, and commercial objectives for 2024.

Operator, Operator

Thank you. Ladies and gentlemen, we will now start the question-and-answer session. The first question comes from Kemp Dolliver of Brookline Capital Markets. Please proceed.

Kemp Dolliver, Analyst

Great. Thank you and congratulations on the progress. First question is, given the ICE3 trial, you had a U.S. footprint, what's the current installed base of ProSense such that those former trial sites in particular can start treating patients immediately upon approval?

Eyal Shamir, CEO

Thank you, Kemp. This is Eyal, CEO. I will start and then Shad will add some more information. Our current install base for users who are treating mainly breast tumors. We have another site that we announced on catering in New York, very important that deals with endometriosis using our ProSense system. Shad and his team will continue to grow the market in parallel for our ProSense with the FDA. So we would like to be fully ready for that respect. So Shad, if you have anything to add?

Shad Wood, VP of Sales, North America

No, I don't have anything else to add to your comment.

Kemp Dolliver, Analyst

Great. And then, my next question relates to the XSense filing announced yesterday. And what are the features of the XSense relative to ProSense?

Eyal Shamir, CEO

Thank you. ProSense remains our primary system, and we, along with our global partners, are focusing on selling this system to penetrate different markets. When XSense is closer to becoming commercially available, we will have a developed strategy to reduce delays in decision-making. XSense is our next-generation liquid nitrogen, single-probe cryoablation system. We announced some top patents that we got around it. This is really state-of-the-art latest technology, and this is also set as a platform that will allow us a future product pipeline for indications. So the recent filing request for clearance is for all of the indications of ProSense that we have at the moment, and we will have a proper transition commercial phase, but the XSense will open us potential future indications and future platforms for different technologies.

Kemp Dolliver, Analyst

Great. Thank you.

Operator, Operator

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

Yi Che, Analyst

Thank you for taking my questions. Could you comment once you submit the application, how quickly can FDA reach a decision? And once the approval is granted, what is the estimated expense for marketing the device in the U.S., and how do you see the U.S. sales ramp-up looking like in 2025? Thank you.

Eyal Shamir, CEO

Thank you, Yi. It's Eyal. It's remain unknown regarding timing. Since this is still a process from the initial De Novo application that we submitted in October 2022, it is very important that we not speculate on the timing. However, we believe that it can be anywhere from a few months to perhaps the end of the year or very early in 2025. The FDA didn't open a new clock, and it's still running under the timing of the original 510(k) De Novo submission. Our goal is certainly to continue our continuous communication with the agency and to work, and to prepare ourselves regardless of the timing, which means to prepare the market and our infrastructure. As Shad mentioned, we are working on reimbursement, working with global KOLs, and developing independent non-sponsored trials for breast cancer. So we are going to have everything ready for getting the clearance. And after that, Shad will increase the team, because we are anticipating much more demand, and we would like, of course, to increase the sales. We are not giving any guidelines on projection at the moment, but we are planning to grow the business significantly from 2025 onward.

Yi Che, Analyst

Thank you.

Operator, Operator

There are no further questions at this time. Mr. Eyal Shamir, would you like to make your concluding statement?

Eyal Shamir, CEO

Yeah. Thank you, everyone, for participating on our call today. Stay tuned for our ICE3 full data announcement, as well as other major developments. We sincerely thank all of the patients who participated in the ICE3 study and their families. We hope women who experience the ProSense plus treatment are enjoying healthy lives free of surgical scarring. We are also grateful to all our shareholders who support in helping to bring a much-needed minimally invasive solution to women with early-stage breast cancer. Thank you very much, everyone.

Operator, Operator

Thank you. This concludes the IceCure fourth quarter 2023 results conference call. Thank you for your participation. You may go ahead and disconnect.