InspireMD, Inc. Q4 FY2021 Earnings Call

Greetings, and welcome to InspireMD's Fourth Quarter and Full Year 2021 Earnings Call. Please note this conference is being recorded. I would now like to turn this conference over to Chuck Padala with LifeSci Advisors. Thank you. You may begin.

Thank you, operator, and good morning, everyone. Thank you for joining us for the InspireMD Fourth Quarter and Full Year 2021 Financial Results and Corporate Update Conference Call. Joining us today from InspireMD are Marvin Slosman, Chief Executive Officer; and Craig Shore, our Chief Financial Officer. During this call, management will be making forward-looking statements, not historical facts. These are based on management's current expectations, beliefs, and projections, many of which are inherently uncertain. They involve risks and uncertainties that may cause actual results to differ materially from those expressed in the forward-looking statements. For more information about these risks, please refer to the risk factors described in InspireMD's most recently filed periodic reports on Form 10-K and Form 10-Q filed with the U.S. Securities and Exchange Commission, as well as InspireMD's press release that accompanies this call, particularly the cautionary statements made. The call contains time-sensitive information that is accurate only as of today, March 8, 2022. Except as required by law, InspireMD disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to Marvin Slosman, Chief Executive Officer. Marvin, please go ahead.

Good morning. Let's start by reaffirming our mission at InspireMD, which is to establish CGuard EPS as the standard of care for managing carotid artery disease and preventing strokes. The CGuard carotid stent system facilitates this transition through its unique design and proprietary MicroNet mesh protection, which has generated an extensive and growing collection of clinical evidence both from real-world use and ongoing clinical studies. We aim to support all physician specialists treating carotid artery disease, emphasizing the stent system and patient outcomes. As we enhance awareness of the benefits of CGuard as a first-line option for preventing brain embolization—not just during carotid stenting but also post-procedure—our scientifically validated MicroNet mesh feature provides a distinct clinical advantage. Together with our next-generation delivery system and new transcarotid accessory solution, we believe we can transform this surgical-dominated $5 billion global total addressable market into a less invasive endovascular standard of care. We will discuss this further later. The year 2021 was transformative, with a focus on increasing the number of CGuard users and procedures in our 40 served markets. We created awareness and gained experience within the U.S. physician community through the C-Guardians FDA trial and our comprehensive studies of the device across several clinical trials, demonstrating solid clinical evidence of CGuard's superior results in an ever-expanding endovascular-focused market, leading to more users and establishing CGuard as a leader in carotid stenting. CGuard's unique and proprietary design positions it as the most advanced treatment for carotid artery disease compared to other stent technologies and surgical endarterectomy, which is a highly invasive procedure. We continue to execute our strategic priorities, maintain financial stability, and grow our commercial presence as we enter 2022. In terms of 2021 results, our commercial business grew 56% year-over-year in CGuard sales, equating to approximately 7,000 units shipped for procedures. Sales in our top eight markets increased by 67%, primarily driven by a rise in market share. For instance, in Italy, we reached a 36% market share of existing CAS implants, up from 26% the previous year. Procedural volume is a key indicator of our business's strength and size, as we currently share a portion of the average sales price in major markets with our distributor partners. This further highlights our priority to convert more markets to a direct sales approach for complete top-line revenue capture. To date, we have sold over 28,000 CGuard EPS systems, establishing a strong foundation of unmatched clinical data, both short and long-term, reinforcing CGuard as the best-performing, most studied, and safest carotid stent available. Our accelerated enrollment in the C-Guardians FDA IDE trial currently involves 12 sites enrolling in the U.S., with plans to initiate 3 more sites and 4 in Europe in the second quarter. Over the past 60 days, patient enrollment has rapidly increased due to more investigator experience and confidence in CGuard, resulting in ongoing enrollment at sites post-launch. We have assembled a world-class team and partners to enhance enrollment and study execution, and we are pleased with our increasing case results. Our goal is to complete trial enrollment by Q1 2023. Dr. Chris Metzger, the principal investigator at Ballad Health System in Eastern Tennessee, is leading the enrollment with 50 cases to date and continues to guide our efforts. As previously mentioned, in 2020, we successfully raised sufficient capital to support our strategic plans, providing an adequate runway to achieve significant milestones in 2022 and 2023. In Europe, we are building momentum in France as our latest country approved and reimbursed for CGuard. We have hired direct sales representatives to capitalize on this launch momentum. At the same time, we are accelerating our plans for direct sales in select strategic locations to achieve higher average sales prices and ensure better control over the sales process, mirroring our success in the U.K. and France. Our strategy in Asia is ongoing, including discussions in Japan with distributor partners interested in representing CGuard. As noted previously and inline with our agreement in China, we believe the Asian market presents an opportunity for CGuard, as the current standard of care for procedural intervention is primarily endovascular and less surgical. Our strategic commercial path for CGuard involves a new transfemoral delivery system, CGuard Prime, which provides greater navigation and flexibility for more complex patient anatomy along with a wider range of evolving indications. We will offer CGuard Prime in both standard and short shaft versions, compatible with our development of the TCAR accessory device designed to facilitate a transcarotid solution aimed at vascular surgeons who conduct most carotid revascularizations. Both devices are set to launch in late 2022 or early 2023, and we believe they will fundamentally alter CGuard utilization among a broader group of specialists performing endovascular procedures. Our mission is to support all who treat carotid artery disease with the necessary tools for optimal patient outcomes. As we explore new methods for managing carotid stenosis and preventing strokes using our clinically validated CGuard EPS system, we aim to provide the best patient outcomes and a comprehensive set of tools to realize the significant potential of this rapidly evolving market. Now, I'll turn the call over to Craig to discuss our financial results.

Thank you, Marvin. Revenue for the fourth quarter of 2021 was $1,380,000, an increase of $1,222,000 or 774% compared to $158,000 in the fourth quarter of 2020. Excluding the $580,000 negative impact on revenue from our settlement of litigation with a former distributor from 2014 in the fourth quarter of 2020, total revenue increased by $642,000 or 87% to $1,380,000 from $738,000 during the fourth quarter of 2020. This increase was predominantly driven by an increase in revenue of CGuard EPS by $603,000 or 88% to $1,291,000 for the fourth quarter of 2021 from $689,000 during the fourth quarter of 2020. This increase is mainly due to the growth in market share in our major markets; expansion into new markets; and due to the fact that in the fourth quarter of 2021, procedures with CGuard EPS, which are generally scheduled for nonemergency procedures, began to return to normal levels as compared to the fourth quarter of 2020 when procedures with CGuard EPS were postponed as hospitals shifted resources to patients affected by COVID-19 beginning in February 2020. For the fourth quarter of 2021, gross profits increased by $684,000 to $294,000 compared to a gross loss of $390,000 for the fourth quarter of 2020. This increase in gross profit resulted from the impact of the $580,000 settlement with our former distributor in 2014, which was recorded in the 3 months ended December 31, 2020, as previously mentioned; as well as a $207,000 increase in revenues less the related material and labor costs. Gross margin increased to 21.3% during the fourth quarter of 2021 from a negative 247% during the fourth quarter of 2020 driven by reasons previously mentioned. For the fourth quarter of 2021, total operating expenses were $4,225,000, an increase of $897,000 or 27% compared to $3,328,000 for the fourth quarter of 2020. This increase was primarily due to increases in expenses related to the commencement of C-Guardians FDA study; share-based compensation-related expenses due to the recognition of grants made since August 31, 2020; and sales and marketing expenses associated with expansion of existing and new markets. For the fourth quarter of 2021, financial expenses decreased by 7.6% or $10,000 to $121,000 from $131,000 during the fourth quarter of 2020. Net loss for the fourth quarter of 2021 totaled $4,097,000 or $0.53 per basic and diluted share compared to a net loss of $3,853,000 or $1.52 per basic and diluted share for the same period in 2020. The average amount of shares outstanding used for the earnings per share calculation were 7,796,027 in the fourth quarter of 2021 and 2,533,936 during the fourth quarter of 2020, both adjusted to reflect the 1:15 reverse split effected by us on April 26, 2021. As of December 30, 2021, cash, cash equivalents, and short-term bank deposits were $34 million compared to $12.6 million as of December 31, 2020. This concludes our commercial remarks. I will now turn the call back to the operator for Q&A.

Our first question comes from Ben Haynor with Alliance Global.

Can you hear me all right?

We can, Ben. Thanks.

Excellent. So just to start off, congrats on the inclusion in CREST-2. There's not a ton of similarly large trials that have happened in the past, I suppose. And so it's kind of a small sample size. But are you guys aware of a similar situation where a device that hasn't gained regulatory clearance has been included in a trial of a similar profile?

It's a really good question, Ben. We're not aware of that, and we think it's a great proxy to the fact that CGuard was allowed to be included in something as important as a CREST-2 effort. So from our perspective, this was a great accomplishment to be able to have a stent technology that's not yet approved to be included in such a meaningful effort. So we're very proud of that and think it's a good indication of the value of CGuard.

I mean, congrats on that. That makes a lot of sense. So then, my understanding is the stenting arm is running a little bit behind the CA arm. Do you have a sense of how many CGuards could be used in CREST-2?

Yes, we are currently trying to understand how many devices we can participate with. We are working closely with the CREST-2 executive committee to get everything launched and organized. We hope to fully engage within the context of the current stenting arm and the participants enrolling in that arm. We believe that introducing this next-generation technology will reignite interest in using CGuard and continue the development of stenting. At this moment, we do not have a specific number to share, but we are confident that this news will stimulate interest among those interested in stenting and utilizing CGuard.

Okay. That makes sense. It sounds like you'll have 19 or 20 sites operational in the C-Guardians trial by the end of Q2. There are around 140 to 150 CREST-2 sites. Do you have an idea of how many sites you could potentially have in CREST-2? Also, how much overlap exists between C-Guardians and CREST-2?

Sure. No, really good question. And we're working again with the CREST-2 Executive Committee to figure out what the best pathway is related to both sites that are currently participating in C-Guardians and those that are participating in CREST-2. So obviously, we're looking at those sites that are currently C-Guardians sites and seeing if they would participate in CREST-2 and then CREST-2 sites that may be interested in becoming C-Guardians sites. Those are the easiest pathway to progress. And then, obviously, outside of that, there's more sites that we could bring in. But for the value of being able to get ones that are ready, those 2 categories seem to be the easiest path to follow at this point.

Okay. Got it. I have a question regarding the numbers. With the CGuard development moving forward and the trial enrolling, how do you foresee R&D expenses changing throughout the year?

Ben, it's Craig. As we progress with the FDA trial, you should see expenses going up with R&D as we continue to recruit and activate new sites and also with some of the development work for the new products that Marvin mentioned. And then you should see a decline coming in the next couple of years as we start to wind down the FDA trial.

Okay. That makes sense. I think that's all I had, guys. Congrats on the progress.

We are only taking questions from covering analysts today. We have reached the end of today's question-and-answer session. I would like to turn this call back over to Mr. Marvin Slosman for closing remarks.

Great. Thank you. I'd like to thank everyone for taking the time to join the call today. We're extremely proud of the accomplishments of our global team in 2021 and certainly look forward to with great anticipation, our progress in 2022 with focus in growth and market expansion. Thanks for taking the time to join the call.

This concludes today's conference. You may disconnect your line at this time. Thank you for your participation. Enjoy the rest of your day.