IceCure Medical Ltd (ICCM) Q1 2023 Earnings Report, Transcript and Summary

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 Todd Kehrli. Please go ahead.

…ended March 31, 2023, and provide an update on recent operational highlights. You may refer to the earnings press release that we issued early this morning. Participating on this morning’s call are IceCure Medical’s CEO, Eyal Shamir; and VP of Business Development and Global Marketing, Tlalit Bussi Tel-Tzure; and the company’s CFO and COO, Ronen Tsimerman. After the prepared comments, management will make -- will be available to address your questions. Before we begin, I will take a moment now to read a statement about forward-looking statements. This call and the question-and-answer session that follow 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, could, 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 during this conference call that we will hold courses or master classes as part of future conferences or our plans to exhibit our technology at future conferences and believe that there will be a rapid adoption of ProSense with the indication of early-stage with high risk to surgery breast cancer if it receives FDA approval. 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 our 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 at www.sec.gov. The company undertakes no obligation to update these statements for revisions or changes after the call -- after the date of this call, except as required by law. I will now turn the call over to IceCure Medical’s CEO, Eyal Shamir. Eyal, please go ahead.

Thank you, and hello, everyone, and thanks for joining us today. We will start with a review of our significant business development for the first quarter of 2023, followed by an overview of financial results for the three months ended March 31st before opening the call for Q&A. IceCure has benefited significantly from the growing awareness and inference of in cryoablation part of a broader trend towards minimally invasive treatment. ProSense, we believe is the go-to cryoablation system of choice for physicians, including breast surgeons, breast radiologists and interventional oncology. Our focused commercialization and marketing efforts in the U.S. are creating great benefits in North America, as well as carrying over the momentum into global markets. We continue to engage with the FDA through ongoing discussions that are part of the regulatory submission process. In a major milestone, we received approval in China where our systems and cryoprobes are now fully approved for commercial use. An independent which IceCure did not sponsor in any way was conducted in France using ProSense and another cryoablation technology to treat endometriosis. We were very pleased to learn that the results which were published in the Journal of Vascular and Interventional Radiology, showing a 92.8% efficacy in avoiding secondary surgery. In what may be one of the most significant milestone from cryoablation in the treatment of breast cancer, the American Society of Breast Surgeons or ASBrS, the leading medical society comprised a 3,000 healthcare providers for breast surgery share it’s plan for cryoablation trial at the Society Annual Meeting. We believe such a trial could potentially establish a new minimally invasive standard for the treatment of early-stage breast cancer. Importantly, it will support our commercialization process at ASBrS members, participating the trial, gain experience with performing cryoablation treatment and see the benefits of its use firsthand. I will now turn the call over to Tlalit, who will elaborate on our commercial activities. Tlalit?

Thank you, Eyal. Hello, everyone. Over the past few months, IceCure has been busy attending Professional Medical Society Conference across the globe and we are very pleased and encouraged by the number of symposium and professional training programs for breast cryoablation procedures being led by the society. We see this as the best endorsement of our process technology. Most notably, this year was the first time ever that the ASBrS Annual Meeting offered a continued medical education course on breast cryoablation. The solid out course [ph] use our ProSense system, presented results from our ICE3 trial and gave breast surgeons hands-on experience with our system. In addition to the course, cryoablation and specifically the ICE3 data were mentioned very favorably many times throughout the five-day conference. Dr. Nathalie Johnson, ASBrS outgoing President herself, spoke highly of cryoablation during her keynote speech, which ended in a beautiful song she sings that included cryoablation and delighted audience. As Eyal mentioned, the ASBrS plans for a study to evaluate cryoablation as a treatment for early-stage breast cancer for women between the ages of 55 to 85. These inclusion criteria would broaden the indication beyond what we have applied for with the FDA. We believe there is a high interest in the study based on the large number of breast surgeons who visited our booth at the Annual Meeting and participated in more hands-on demos with us. We received a similarly high level of interest when ProSense was also demonstrated in hands-on training at the ASBrS Breast Fellows Course in January. We very recently attended the Society of Breast Imaging Annual Meeting in Maryland and had a lot of traffic to our booth from breast radiologists of the globe. The symposium feature talk on breast cryoablation, including ablation, the time is now, but how to start by Dr. Louis Benta [ph] and by ProSense user Dr. Rob Ward, both of whom mentioned ICE3 data favorably. SBI intends to have a breast cryoablation course as part of next year’s meeting and they have already requested IceCure to take an active part in this course and workshop. We have seen a growing interest in cryoablation from U.S. breast surgeons and breast radiologists, but also a remarkable interest from across the globe by interventional radiologists and interventional oncologists who wants to add breast cryoablation to their practice. The interventional radiologists and interventional oncologists are already familiar with cryoablation procedure in general and they are eager to add breast tumor treatment as a new clinical application to their practice. The U.S. based Society of Interventional Oncology, SIO, all featured ICE3 trial and interim data in its annual meetings during the breast session led by doctors, some of whom are currently using the system. ProSense was also demonstrated throughout the duration of the conference at our booth where interventional oncologists engaged with the system and expressed great interest. SIO has already announced, they are planning a breast cryoablation master class to be offered as part of their January 2024 conference. They requested that ProSense be part of the hands-on section of the course and the ICE3 trial data will be contained in the didactic part. The announcement of the course has already generated a lot of prior interest globally. Additionally, yet another medical group, the Society of Interventional Radiology Annual Conference featured ProSense in a session titled, Chest Ablation: Inside and Outside, led by ICE3 Trial Co-Primary Investigator and a former guest on one of our prior earnings calls, Dr. Kenneth Tomkovich. Breast cryoablation was also discussed throughout the European Conference of Interventional Oncology meeting. In the second half of 2023, IceCure is planning to exhibit and host liquid nitrogen cryoablation symposium with key speakers at the Cardiovascular and Interventional Radiology Society of Europe Conference, CIRSE, and for the first time, exhibit at the European Society of Breast Imaging Conference, EUSOBI. All of this exposure and physician education builds the foundation for what we be a rapid adoption rate of ProSense for the indication of early-stage with high-risk surgery breast cancer should we receive a favorable FDA response to our marketing authorization submission. Overall, the key takeaway is that interest in breast cryoablation is high, and physicians and professional organizations are coming to IceCure because of our strong clinical data in breast cancer cryoablation and our ProSense system. I will now turn the call over to Ronen for a summary of the quarter’s financial results.

Thank you, Tlalit. For the three months ended March 31, 2023, revenues rose $710,000, compared to revenues of $750,000 for the three months ended March 31, 2022. Sales increased in the U.S. and Europe during the first quarter of 2023 relative to the same quarter last year. Gross profit was $320,000 for the three months ended March 31, 2023, compared to $430,000 for the same period last year. Gross margin was 45% in the first quarter of 2023, compared to 58% for the first quarter of 2022. The decrease in gross margin compared to the same period last year mostly resulted from an increase in manufacturing costs. Research and development expenses for the three months ended March 31, 2023 were approximately $2.1 million, compared to approximately $2.4 million for the three months ended March 31, 2022. The decrease was primarily due to a decrease in development expenses for our next-generation single-probe system, partially offset by an increase in clinical and regulatory activities. As a result of our expanding commercialization efforts, sales and marketing expenses in the first quarter of 2023 were approximately $1.1 million, compared to approximately $750,000 for the first quarter of 2022. General and administrative expenses for the three months ended March 31, 2023 were approximately $1.1 million, compared to approximately $1.72 million for the same period last year, mainly due to a decrease in cost of director’s insurance. Total operation expenses for the three months ended March 31, 2023 were approximately $4.3 million, compared to approximately $4.9 million for the same period in 2022, due primarily to a decrease in R&D expenses and director’s insurance costs. Net loss for the three months ended March 31, 2023 decreased to approximately $3.8 million or $0.08 per share, compared with a net loss of approximately $4.4 million or $0.12 per share for the same period last year. As of March 31, 2023, cash and cash equivalents, including short-term deposits were approximately $20.5 million, compared to approximately $23.7 million as of December 31, 2022. Operator, we would like now -- to now open the call for questions.

Thank you. [Operator Instructions] The first question is from Yi Chen. Please go ahead.

Hey, everyone. This is Chait on behalf of Yi Chen. I have a couple of quick questions. The first one on your potential, any potential insights into your discussions with the FDA for the approval in early-stage low-risk breast cancer and also any potential guideline -- timelines for approval?

Yeah. Thank you. This is Eyal. We have a continuous discussion dialogue with the FDA that for additional information, we provide whatever is required and it’s an ongoing discussion and we believe that in the next few months we will get a reply from them, but it’s ongoing discussion.

Excellent. Thank you. And also previously, you indicated a minimum purchase target of $3.5 million for the initial three years in China with your exclusive distributors. Just figuring out if that is still on track and any color on that would be helpful?

Yeah. After we got the final NMPA approval on our cryoprobes with the previous approval clearance on the console. So now the affiliates of Medtronic got from high LTD, they could start doing launching and they are keeping the original plan.

Excellent. Thank you. And I know you also mentioned symposia in the second half of this year at a few conferences, and I am sorry, I missed it during your prepared remarks. But could you please provide more color on the upcoming conference presentations that we should look out for in 2023?

Yeah. Tlalit, could you please elaborate on that?

Yes. We are going to attend this year’s conference, which is the Cardio -- European Cardiovascular Interventional Radiology Meeting that will be mid-September in Copenhagen. And during this conference, we will host the symposium in which a couple of our key users Interventional Oncologists from Europe will share their experience with our ProSense system with multiple applications that will be happening mid-September, as I said. And by the end of September, we will exhibit at the European Society of Breast Imaging, that will be the first time that IceCure will exhibit in this European meeting. And over there as well we will allow demonstration, talks and provide explanation about our liquid nitrogen cryoablation system, specifically for breast application. Those two meetings are European meetings and this is the plan for the second half of the year.

Excellent. Thank you. And…

But I could add -- I could ask as well, because to Tlalit and European they are so busy. So maybe she forgot to, for example, on August at Tlalit and the team and the clinical team, we are going to exhibit with our partner in Thailand, Terumo Thailand as part of the Thai Breast Cancer Society. So the two European extremely important conferences that Tlalit mentioned, this is like a full European, but we have also some local like the Thai Breast Council Society Meeting mid-August.

Excellent. Thank you so much.

The next question is from Anthony Vendetti of Maxim Group. Please go ahead.

Thank you. Yes. I was wondering if you could just give an update on the initial commercial traction within China since you received the regulatory approval for the ICE3 probes. And then were there any orders that you took in 2023, but weren’t able to -- first quarter 2023, weren’t able to recognize in the first quarter that you expect to recognize in the second quarter?

So Ronen, please elaborate on that?

So for your second question, we recognized almost all of our sales in the first quarter. But we do, of course, have customer orders that we will be able to supply on the second quarter.

Okay. Then on the…

Anthony, could you repeat please your question regarding China?

Yes. Since we received regulatory approval for the probes, have you started selling them yet, if so, what’s been the initial traction or response?

Yes. Thank you for that. So, for example, again, the affiliates of Medtronic MDT together with Turing Medical, who is our distributor and our team. For example, we did launching and got very nice attraction at the Chinese Liver Cancer Society. This is quite an important indication in China and this is part of our very wide range of indications that we have in China. The team started to make a soft launching and also to participate to some important tenders that will create sales of the team, which mean Turing met the distributor together with Medtronic, they are working on that to explore traction and to create sales.

Thank you. And then the last question and then I will hop back in the queue. Do you continue to expect to conclude the ICE3 trial by some time in the first half 2024?

Yeah. The last patient enrolled February 2019. So in the next nine months, we have -- still a small group of patients that need to come for the follow-up and after February 2024, we will conclude and validate all the data to finalize and to complete the trial. This is the plan.

Okay. Excellent. Thanks for all that information. I will hop back in the queue. Appreciate it.

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

Hi. Thank you. What was the driver of increased manufacturing costs in the quarter since it compressed margins?

Thank you for your question. So we are seeing an increase in manufacturing costs, but I believe this is something, which is a little bit more one-time costs, so -- and as long as our sales are still at the lower numbers, these issues might influence our gross margin in the next quarters. So as we see…

Okay. So it sounds…

… our sales go up, the gross margin I believe will stabilize.

Okay. So it sounds like spreading fixed cost over the volume?

Yeah. Yeah. It mainly is the fixed costs are fixed and if you have a small peak then it influences your gross margin.

All right. Good. And with regard to your revenue this quarter, it looks like there was not any license fee revenue included, correct, and do you have a breakdown of consoles versus probes?

So we still have revenues from our Terumo deal, which is basically the same as we had in the last quarter of 2022. So there’s no change in this revenue. And in the quarters, we don’t have the spread of or we don’t give the spread of sales between probes and systems. We do see adoption of our system in the U.S., since we are having systems in place and we see that doctors are continuing to buy probes. So we do see the increase of adoption in the U.S. mainly.

Great. Thank you.

[Operator Instructions] There are no further questions at this time. I will give the call to Eyal for a closing statement. Please go ahead.

Thank you very much everyone. We continue to pursue all our milestones that we planned at the beginning of the year for the next 12 months to 18 months and we highly appreciate your support.

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