Good day and welcome to the InspireMD Second Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Vivian Cervantes with Investor Relations. Please go ahead.

Thank you, Chad. Good afternoon and welcome to InspireMD's conference call and webcast to discuss second quarter ended June 30, 2015 results. For today's call, we have InspireMD's CEO, Alan Milinazzo; CFO, Craig Shore and COO, Jim Barry. During this call, the company will be making forward-looking statements. These statements can obviously differ from actual results, which relied on them is subject to risk. Factors that could cause forward-looking statements in this call to differ materially from actual results are discussed in the company's Form 10-K for the year ended December 31, 2014 and any subsequent filings with the Securities and Exchange Commission. At this time, I will turn the call over to Alan.

Thank you, Vivian. Good afternoon everyone and thank you for joining our conference call for the second quarter and three months period ended June 30, 2015. During the call, we will review our results for the quarter, our 2015 agenda and how we are executing against our overall plans for this year. I would like to first comment on the press release we issued this afternoon about our strategic distribution partnership with Penumbra. Penumbra is a leading interventional technology company that develops and markets innovative medical devices to the neurovascular and peripheral vascular medical communities around the world. As we have indicated on prior calls, we believe one of the keys to our success is in collaborating with established business partners in the market segments in which we are participating. Our technology lends itself perfectly to this type of partnering and the markets we participate in our enormous and growing living room for InspireMD and our partners to mutually benefit. Further, our technology enhances therapies that already exist but have clinical gaps that can be filled with our advanced MicroNet innovation. The agreement we announced today with Penumbra has been month in the making and we couldn’t be more excited to partner with one of the most innovative and one of the fastest growing companies in the interventional space. Our expectation is that this agreement will provide us with predictable, sustainable and profitable revenue growth in our carotid franchise over the coming months, quarters and years. I will come back to this agreement later in the call but we are confident Penumbra is the perfect partner for our carotid franchise. As mentioned on prior calls, we have a four part plan to restore momentum to the business. The first is financial flexibility to execute on our plans, the second is…

Thank you, Alan and good to speak with everybody this afternoon. Today, I want to touch on our two focus areas, CGuard and our neurovascular development program. As Alan mentioned, we are incredibly excited to have a partner in Penumbra. They are a vibrant innovative and grown company whose interest in CGuard only further validates our belief in the MicroNet technology to prevent the devastating consequences of embolic events in the brain. Penumbra’s priority focus on cerebral stroke has led down and their customers to the CGuard technology and we are excited to be working with them. The CGuard rollout has been proceeding as planned. Today, CGuard has been used by approximately 70 physicians in 11 countries across all four specialties, interventional cardiology, vascular surgery, interventional neuroradiology and interventional radiology. Feedback continues to be extremely positive on all aspects of the product. Clinical trials with CGuard continue to support the benefit of the CGuard and MicroNet system. More recently, the result of the PARADIGM trial were released at the percutaneous carotid revascularization. The PARADIGM trial was a single center physician directed trial led by Professor Piotr Musialek. Professor Musialek and his team conducted 71 CGuard procedures in 68 patients and in unselected all-comer patient population. The observation by the investigators were the CGuard system success rate and procedure success rate were 100% in patients were greater than 50% were symptomatic and represent very complicated disease. There were no major adverse cardiac or neurological events that occurred at procedure at 48 hours or at 30 days as evaluated by an independent neurologist and non-invasive cardiologist. The investigators went on to conclude that greater than 90% in an all comer population could be safely treated with CGuard. Use of the CGuard enables endovascular reconstruction of the disease coronary artery across the wide…

Thank you, Jim. Let me begin with our revenue results for the second quarter. Revenue for the second quarter ended June 30, 2015 increased $500,000 to $700,000 compared to $200,000 during the same period in 2014. The 2015 period included an increase in sales of MGuard Prime EPS, our coronary product, due to the suspension of sales that occurred in the three months ended June 30, 2014 due to our voluntary field corrective action which began on April 30, 2014, as well as the sales of our new carotid product CGuard EPS, which was launched in limited fashion in October 2014. Gross loss for the quarter was $200,000 compared to a gross loss of $400,000 for the same period in 2014. The improvement of 46% in gross loss was largely attributable to the increase in product revenue and no costs associated with our VFA, which occurred during the three months ended June 30, 2014. This improvement was partially offset by write-offs and other related adjustments of MGuard Prime EPS inventory due to the trend of increased usage of drug eluting stents in STEMI patients. Total operating expenses for the quarter ended June 30, 2015 were $3.4 million, a decrease of 51% compared to $6.8 million for the same period in 2014. This decrease was primarily due to a reduction of expenses related to MGuard Prime EPS' MASTER II trial, a decrease in compensation related expenses and other savings associated with our cost reduction plans. The loss from operations was $3.6 million, a decrease of 51% compared to a loss of $7.2 million for the same period in 2014. Financial expenses remained flat at $300,000 compared to the same period in 2014. The net loss for the quarter ended June 30, 2015 totaled $3.9 million or $0.05 per basic and diluted…

Thank you, Craig. Before opening the call to questions, I’d like to summarize that although we have recently shifted our strategic focus, we have made tangible progress in multiple dimensions. Revenues are growing primarily driven by our CGuard product, expenses are down, cash consumption is decreasing and our partnership efforts are beginning to bear fruit. Rest assured that senior management and the board are operating with a high sense of urgency. We believe the leading indicators for success are beginning to trend in a positive direction. These improving metrics coupled with today’s announcement of a significant strategic partnership with Penumbra improve the near term outlook for our financial performance. With that, operator, I’d like to open the call for questions.

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes today from Josh Jennings with Cowen & Company.

Hi, thanks gentlemen and congratulations on the Penumbra distribution agreement, nice validation to CGuard platform and incredible partner to have in the neurovascular space. I guess just a start off, I was just curious about your comments on the delivery system of Neuromax to Penumbra in combination with CGuard and just any further color there and there is also any updates on the supply constraints on your won CGuard RX delivery system.

Yes. Thank you, Josh. We are really delighted about the relationship with Penumbra and again as I mentioned months in the making a various significant intelligence process and as both organizations went through it, the fit just seems better and better. So the comment I made was that as we look at the clinical experience we are gaining with CGuard in the marketplace as Jim alluded, we’ve got about 300 plus cases now under our belt. We are getting a sense of how the product performs with various delivery catheters. There are delivery systems available from a number of different manufacturers. Penumbra happens to have one that we routinely hear, worked very well with our system so the dimensions of the system itself and the performance characteristics of their delivery catheter just continue to come back to us is very positive from physicians who use the product in particular as we got experience with INRs. Jim also mentioned our roll out has been very deliberate across all four specialties. So we had a chance to see and work with a lot of the INRs that introduced us really that have product. We didn’t know what is well as we do now. So that really was sort of how we came to be aware of that product being so good with as a delivery system. Relative to supply constraints, we are getting better. We continue to improve month-to-month relative to the overall rejection rate of our products etc but we should be in good shape by the end of September when we will start the rollout with Penumbra. So improving outlook for inventory as well.

And that’s on the same – everything in the same way for CGuard to the extent itself and the manufacturing capacity improving month-to-month. So we just still see that ramp in the second half here in preparation for the September full launch.

Exactly. What we plan to do is, much like we did with our roll out with our limited distribution group. We’re going to target really rep-by-rep, physician-by-physician, we’ve already done a handful of cases with Penumbra physicians as part of the diligence process that all went very well. But we are going to go back out deliberately I think mid September we’ve got a meeting with their full organization to roll the product out and then inventory will go in the hands of the sales reps, you’ve got to obviously provide inventory for the launch. And so we expect from mid September to late September to hit our stride and then really ramp up October through the end of the year. So we feel very good about our supply going into that launch.

Great. And you had a nice update on the flow diversion device and there is not much more for me to ask there, but can you maybe talk about some of your thoughts on the market size for flow diverters understanding that some of the current devices on the market may have some limitations but how do you think about the market opportunity for flow diverters in your Inspire flow diverter specifically.

Yes, Josh. This is Jim. If you look at the flow diverter market in Europe, we have pegged at about $40 million right now and growing. I believe globally it’s a $125 million market.

Great. And on the stent side of the business, anymore color? I may have missed a little bit if Alan I apologize but just on the OEM proposal from the DS partner and maybe just what are the next steps from here? Sorry if I missed and you are repeating yourself, but just wanted to get that download.

No, you didn’t Josh. We are really pleased to – as we said earlier, we identified 12 products from nine companies that originally we thought could be viable platforms for us. We continue those conversations but obviously we shifted gears pretty dramatically with the limited resources we have to really executing and crated in the neurovascular and so we’ve sort of had DES a little bit on the backburner. Nonetheless one of those folks has approached us with what we would consider to be an attractive proposal, but we are resource constraint right now. And so in order for us to execute on this, we really need to take a hard look at our resources and how we would allocate them. So we wanted to advice our investors that we do have an opportunity to explore, we are exploring it and certainly by the end of the year we should be able to talk more about it. In the short term, we will continue to be challenged on the bare metal front although we did show revenue growth this quarter, we did show some regulatory success in Brazil. If we can get Russia back online, we should start to see some improvement but for now, the OEM partnership is a good one to have, available to us but we’ve got to find the resources to bring it forward, again more on that later.

Understood. And then just back to CGuard in a nice update here with the PARADIGM data into quarter. Can you talk to us about what to expect from a data front as we move through the second half of this year and into 2016, any presentations out in the upcoming conferences for CGuard. Thanks a lot gentlemen and congrats again.

Josh, I don’t know if we know of any specific trials that are going on. We do know a lot of the investigators have become very interested in the device and much like PARADIGM we had sort of an investigator initiated trial there and we suspect we will probably see more of those but timing we are not exactly sure of.

Okay. Great.

Thank you, Josh.

[Operator Instructions] Our next question comes from Yi Chen with H.C. Wainwright.

Hi, thank you for taking my questions. First question, can you give us a breakdown of MGuard and CGuard revenues for this quarter.

The CGuard was $200,000 and MGuard was approximately $400,000.

As you said with the collaboration with Penumbra, you predict to have sustainable and accelerating CGuard revenues. So can you give us more color on the CGuard revenue and how that revenue will shape up into 2016, and do you expect that to have sustainable positive gross profit going forward.

Let me just correct, the $200,000 with CGuard is $500,000 for MGuard our coronary product. And can you just repeat, you were asking something about the profit?

No, I asked what do you expect the revenue to shape, how the revenue will shape up in 2016. Whether you will have a positive gross profit going forward?

The gross profit going forward should become positive as we now have economies of scale with the Penumbra agreement. We anticipate our cost being lower for the CGuard or carotid product. As far as the revenue outlook, I’ll led Alan talk a little bit about that.

So a couple of things, one is, our gross profits may not officially compress due to some write offs that we had on MGuard. But our target has been in the mid 50s to 60s on gross margin. We feel pretty comfortable going forward that we can achieve those gross margin ranges. Relative to revenues for 2016, we are not prepared to give any guidance in that regard but we are excited because the rollout for the Penumbra organization is obviously going to be a critical part of that revenue growth and we expect the roll out to be completed by the end of 2015. So we expect to be in all of their direct reps and all of their direct markets by the end of the year which would make 2016 a very positive look for us relative to revenue growth. But again between now, September and end of the year, we will be working on full roll out and we should be unconstrained inventory wise and really in a very good position to grow revenues with CGuard for 2016 but we are just not prepared to give you any guidance at this point.

Thank you. Just to clarify you will continue to market MGuard yourself, correct?

That’s correct. This agreement is for CGuard only, it is not for MGuard. We continue to have a direct – an independent distribution group that handles the MGuard product.

So with the challenges MGuard faces, is it reasonable to expect that the MGuard growth will kind of diminish in the coming quarters or the coming years.

I think the bare metal, I mean we’ve talked about this a few times and the outlook for bear metal stents is certainly not good. This is outside of MGuard. MGuard is obviously bear metal platform but we expect that MGuard sales will probably be relatively consistent from this point out. We might have a few variations for example Q3 is often a very soft quarter in Europe with the majority of our business comes from. Q4 is generally a very strong quarter. One of our largest markets, Russia, we are currently still in the regulatory review process there. So once we are back on the market in Russia that should provide us with a bit of an uplift, that’s probably a Q4 event assuming things continue to go as we expect. But I think for the next couple of quarters, I look for relatively in line with where we are today. And then subject to what we do on DES front, we’ll certainly update you how that might affect us relative to the outlook for the coronary business.

Thank you. Final question, as of this moment, there is still no clear outlook for a U.S. market entrance. Is that correct?

So one of the interesting things for us, we’ve developed a U.S. IDE strategy for the CGuard product. We want to continue to test that and as we started the discussions with Penumbra there may be some other ways to look at the U.S. market entry. I don’t see that as being something that we will make a decision on this quarter and possibly not even next. But if we do something in the U.S. it will be in a partnership strategy, no doubt about it. But we will have a lot of opportunity to get experienced with the CGuard between now and when we finalize that strategy, but as of today I’d say it’s probably a mid-2016 data in terms of submitting.

Thank you very much.

Thank you.

[Operator Instructions] This concludes our question-and-answer session. I would like to like to turn the conference back over to Alan Milinazzo for any closing remarks.

Thank you, Chad, and thanks everyone for dialing in today. All in all, we are gaining confidence in our strategy and our ability to deliver on our strategic imperatives while creating value for our shareholders. We are leveraging our financial flexibility to fund our return to growth programs including entering into the strategic distribution partnership with Penumbra which flows through our outlook for revenue growth and also gives us some confidence around future collaboration agreements that will be run in parallel with our organic pipeline development programs. We appreciate the ongoing support of patience in the past couple of quarters, look forward to keeping you updated on the progress on many fronts. Thanks again.

The conference has now concluded. Thanks for attending today’s presentation. You may now disconnect.