InspireMD, Inc. (NSPR) Q1 2018 Earnings Report, Transcript and Summary

Greetings. And welcome to the InspireMD First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. David Waldman. Please go ahead.

Good afternoon. And thank you for joining InspireMD's first quarter 2018 business update conference call. On the call with us today is Jim Barry, Chief Executive Officer of InspireMD and Craig Shore, Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for your questions. If anyone has any questions after the call, please contact Crescendo Communications at 212-671-1021. Before we begin, let me take a minute to note that this conference call may contain forward-looking statements. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. Such information is subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward-looking information. Listeners are cautioned not to place undue reliance on forward-looking information as no assurance can be given after the future results, levels of activity or achievements. With that out of the way, please let me now turn the call over to Jim Barry, CEO. Go ahead, Jim.

Thanks David, and thanks everybody for joining us this afternoon. Let me first start by saying that we appreciate the continued support of our investors as we continue to execute on the strategies that I have laid out on our previous conference calls. It is clear our plan is working and in fact for the first time since we implemented our new strategy, we are reporting sales in excess of $1 million for the quarter. Sales of CGuard EPS, the company's lead product designed to prevent stroke during the treatment of carotid artery disease, increased 132% over the same period last year, an increased 37% over the fourth quarter of 2017, which marks our fifth consecutive quarter of double digit growth. This result is due to our continued progress in established markets like Germany and Italy, as well as our expansion into new markets in Asia and Latin America. Additionally, CGuard continues to gain significant visibility at the top industry conferences and continues to be features in leading pre review publications. As an example, the CGuard Embolic Prevention System was recently features at the ICCA Stroke Conference held in Warsaw, Poland, in five separate talks and a panel discussion that consisted of thought leaders from all over the world focused on the treatment and prevention of stroke. CGuard was also prominently featured in two live case transmissions at the LINK 2018 Interventional Conference held in Leipzig, Germany. Both ICCA Stroke and LINK are two of the premier conferences in Europe targeting clinical specialties that treat carotid artery disease and stroke. In additions to conference presentations, physicians are approaching us unsolicited to be involved with our program and with CGuard. They are even spending their own time and money and purchasing product to run independent trials involving CGuard. As an example, patient enrollment is continuing in the investigator-initiated trial led by vascular surgeon professor Andrei Karpenko, comparing Abbott's RX Acculink Carotid Stent versus CGuard EPS. 31 patients have been enrolled to date and the trial appears on track to complete enrollment by the end of this year. The objective of this trial is to compare the superiority of CGuard EPS versus a market-leading conventional carotid stent for embolic events as evaluated by DW MRI in patients at high risk for the surgical procedure carotid endarterectomy. The trial is being conducted at the Center for vascular and hybrid surgery within the Scientific Institute of Circulation Pathology in Novosibirsk, Russia. The buildup of clinical data continues to suggest that CGuard may offer a safer alternative to carotid endarterectomy; the current standard of care for treating carotid artery disease. This continuing trend of data is consistent with additional analyses that are suggesting CGuard would be safe and effective in patients at lower risk of stroke, which are currently treated with standard medical therapy, which could significantly expand the addressable market for CGuard. To further explain this, the risk factors are similar for carotid artery stenting when using a conventional carotid stent versus carotid endarterectomy the surgical procedure. As a result, many surgeons are still performing carotid endarterectomy to reduce the risk of post-surgical embolization or stroke that has been associated with carotid artery stenting using conventional carotid stents. However, when surgeons understand the post procedural safety advantages of the CGuard device, we believe they will be compelled to reevaluate their options and some are now switching to treating carotid artery disease with CGuard. We believe such acceptance and expansion could broaden the addressable market for our device from the reported approximately $500 million for carotid stenting to well over a $1 billion. Just last week, we announced regulatory approval for CGuard in Vietnam. This follows previously announced approvals in India and Peru, as well as distribution partners in Greece, the Caribbean and South Korea. Using Vietnam as an example not only did we get regulatory approval, but we secured a valid import license and product reimbursement from the appropriate regulatory bodies with the support of our distributor. Thus enabling us to begin commercialization rather quickly. In India, we announced the commercial launch and first sales of CGuard immediately following receipt of regulatory marketing clearance. This not only illustrates our ability to secure distributors but also to quickly implement our commercial strategy in new markets. Much of this new and quick commercialization is due to our ability to attract and sign up leading distributors in these countries, particularly those with experience and endovascular devices; those with excellent sales coverage and those with connections to key opinion leaders who treat carotid artery disease in a particular country or region. In line with our strategy, we continue to strengthen our scientific advisory board adding new members to complement an already strong and knowledgeable team of experts from the endovascular field. The Scientific Advisory Board of InspireMD was formed to provide guidance and direction for our research product development and clinical programs. The Board members are physicians, knowledgeable opinion leaders and researchers in endovascular diseases and disorders. They represent leading medical centers, hospitals, clinics and research institutions in the United States, Europe, Latin America, Russia and Israel. We are incredibly honored that these leading physicians from around the world are excited about joining our team. Given the traction we are gaining around the world, we continue to evaluate restarting our efforts in the United States. As noted on a previous call, we met with the FDA last year and had a positive meeting regarding our proposed preclinical testing plan, as well as our proposed clinical trial design. Both of these must be accepted by FDA in order to obtain an investigational device exemption or IDE. As you know, entering the United States market takes significant time and money. And thus we need to approach this wisely and ensure once we commit to a US strategy, we can see it through to a successful conclusion. Further, as we evaluate additional internal pipeline opportunities, we will focus on products that address unmet needs and are synergistic, but also have relatively low development risk and thus low expense and leverage our proprietary micronet mesh technology that provides a competitive advantage and is a product differentiator. Lastly, given the foundation we're building and our commercial distribution network, our business operations and the strengthening of our capital structure, we are also exploring a variety of other synergistic opportunities and product extensions that may allow us to further leverage to sales channels and distribution networks we have established and continued expand across Europe., Asia and Latin America. As I discussed on the last call, given the improvements we're starting to see in the base business and the revenue growth, we felt it was time to turn our attention to our capital structure,. In November of last year, we announced the plan to begin the process of recapitalizing the company and cleaning up our capital structure. Towards this end, we completed a series of capital raises that not only strengthened our balance sheet, but also allowed us to convert most of the preferred shares and eliminate the most problematic preferential provisions. This was critical to ensuring the future of the company as it eliminates preferential terms that new investors will no longer have to worry about and provides a level playing field between existing shareholders and potential new shareholders, who wish to invest in the company. We believe this has also removed a major overhang in the stock that has prevented us from attracting more fundamental health care funds and strategic investors as well as making the story more attractive to investors in general. So as of today, the shares outstanding assuming conversion of all the preferred shares is 8.6 million. We believe the steps we have taken were necessary and will ultimately prove beneficial for shareholders given the operational success we are now experiencing. When I joined the Board of Directors of InspireMD in 2012, I did it because I fundamentally believed in the potential of this technology to make meaningful difference for patients that suffer from catastrophic consequences of embolic events in the vascular system. Since taking the helm as CEO in mid-2016 with the goal of rebuilding the organization and ensuring these important products are available to all patients that can benefit from them, I believe we've made substantial progress and are now on a much more solid footing both commercially and clinically. Importantly, we ended the quarter with over $4.6 million in cash and subsequently added another $4.1 million in net proceeds from our recent capital raise, which closed in April. Our burn rate for the Florida was down approximately a $0.5 million from the same period in 2017. This is a result of our continued focus on cash management. We now have much greater flexibility to execute on our growth strategy. We expect 2018 will be a strong year and we're off to a great start with over 1 million in sales for the first quarter and 132% growth in CGuard from the same period last year. Including achieving the first $1 million quarter since we implemented the new strategy. Once again, we appreciate the patience and support of our shareholders. And I look forward to answering your questions after Craig presents the financials. Craig?

Thanks Jim. Revenue for the first quarter ended March 31st, 2018 was $1 million compared to $569,000 during the same period in 2017. This was primarily due to an increase in sales of CGuard as we transition from our prior exclusive distribution partner for most of Europe to local specialized distributors, continued focus on expanding existing markets such as Germany and Italy, and expanded into new geographies such as India. Total operating expenses for the quarter were $2.2 million, a decrease of almost 10% compared to $2.5 million for the same period in 2017. This decrease was primarily due to a decrease in share based compensation expenses and a decrease in salary expenses primarily due to a salary related accrual in 2017, partially offset by an increase in legal expenses. Financial expenses for the quarter ended March 31st, 2018 were $436,000 compared to $154,000 for the same period in 2017, largely due to a non-cash expense associated with our preferred stock. Net loss for the quarter ended March 31st totaled $2.4 million, or $1.08 per basic and diluted share compared to a net loss of $2.6 million, or $28.31 per basic and diluted share in the same period in 2017. As of March 31, cash and cash equivalents were $4.6 million, compared to $3.7 million as of December 31st, 2017, which we believe will be sufficient to meet our operating requirements for approximately 12 months from the balance sheet date. At this point, we'd like to open up the call for questions.

[Operator Instructions] Our first question comes from [Ellen Litvak] with Forest Capital. Please go ahead.

Thank you and congratulation guys on a very strong quarter, good job. I see that you guys signed up a lot of new distributors recently which is great, but which markets do you see as the strongest contributors to growth? And what other markets are you targeting?

So, yes, as you've seen we signed up numerous distributors as we were expanding, but we're also expanding within those various regions. So take Germany for example, Germany really didn't start implementing its distribution until Q3, and we've seen terrific growth in Germany. And there's no reason to believe that would be any less. I would say it's also very similar in Italy. And Italy as you may know is one of the first countries that we actually introduced the device and have had solid growth since that time in 2014 when we started in Italy. So we still expect to see some growth in all of these established countries, but I think the other thing that just generally speaking I think our growth is going to come from converting vascular surgeons to use CGuard. As I think I mentioned in the script today, the current gold standard is a surgical procedure called carotid endarterectomy. And if - and that's done by surgeons who are concerned about potential embolic events from conventional stent. So if they start looking at the CGuard data I think we can start converting them over to the minimally invasive process of implanting CGuard. So I think a lot of the growth generally across the board is going to come from our ability to actually convert those vascular surgeons.

There doesn't seem to be any further questions. I would like to turn the floor over to Jim for closing comments.

Okay. Thanks again everybody for joining us this afternoon. I just wanted in enclosing reiterate that I'm happy to report a $1 million sales quarter and our fifth consecutive quarter of double-digit growth with sales of CGuard increasing 132% versus the same period last year. At the same time, we've cleaned up our capital structure and now strengthen our balance sheet. Overall, I'm very encouraged by the outlook for InspireMD. The strategy we put in place in 2017 was clearly the right decision and continuous release of highly supportive clinical data demonstrates that we have a very important product for patients suffering from carotid artery disease. Obviously, we're not happy with the share price but we will continue to do the things we believe will bring this turnaround to a conclusion, so that we can focus all our time on further building this company and reaching the full potential that I know it has. Thank you again and have a nice evening.

This concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time.