Good morning, and welcome to the InspireMD Third Quarter of 2023 Earnings Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that this conference is being recorded. I would now turn the conference over to Mr. Chuck Padala with LifeSci Advisors. Thank you. You may begin.

Thank you, operator, and good morning, everyone. Thank you for joining us to the InspireMD Third Quarter 2023 Financial Results and Corporate Update Conference Call. Joining us today from InspireMD are Marvin Slosman, Chief Executive Officer; and Craig Shore, Chief Financial Officer. During the call, management will be making forward-looking statements, not historical facts, which are based upon management's current expectations, beliefs and projections, many of which, by their nature, are inherently uncertain. These forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those expressed in such 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 or on any updates in our current reports on Form 8-K filed with the U.S. Securities and Exchange Commission and InspireMD's press release that accompanies this call, particularly the cautionary statements made in it. This call contains time-sensitive information that is accurate only as of today, November 6, 2023. 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, CEO. Please go ahead, Marvin.

Thank you, Chuck, and thanks to everyone for joining the call this morning. The third quarter proved to be a transformational time for our company with several milestones, further validating our strategy and mission to transform the carotid revascularization market with a superior next-generation stent implant, along with our focus on the broadest range of tools, providing both patients and physicians optimal procedural solutions. Execution against internal objectives remains our focus, but I would like to start today with a brief mention of the recent national coverage decision by CMS, enabling a monumental shift by expanding reimbursement for carotid artery stenting, or CAS procedures, to include both standard surgical risk and asymptomatic patients, neither of which were previously covered. We will get into those details shortly. In terms of our financials for the third quarter of 2023, we generated total revenue of $1.556 million on 2,734 devices sold, representing nearly a 9% revenue growth over the comparable period in 2022. Measuring procedural volume continues to be a key metric of our success as our distributor model discounts our average sales price by way of transfer pricing. Unit sales more accurately measures market share in our served territories, a key driver of our growth objectives. As we drive market awareness, utilization and global expansion in [ plant ] performance will remain the cornerstone of our focus, having now established a baseline of real-world experience and world-class data with more than 45,000 CGuard Stent sold to date in nearly 2,200 patients enrolled in clinical studies. We were pleased a few days ago to present the 30-day data from our C-GUARDIANS IDE clinical trial at the VIVA Conference. As a reminder, the C-GUARDIANS trial is designed to support a PMA submission in the second half of next year, which would give us line…

Thanks, Marvin. For the 3 months ended September 30, 2023, revenue was $1,556,000 compared to $1,431,000 during the 3 months ended September 30, 2022. This revenue increase of $125,000 was predominantly driven by an increase in commercial sales of $166,000 of CGuard EPS to existing geographies, offset by a $41,000 decrease in the United States as we completed in June 2023, as the enrollment of all patients in the C-Guardians IDE clinical trial. And accordingly, there was no further enrollments in the 3 months ended September 30, 2023. For the 3 months ended September 30, 2023, gross profit increased by 19.7% to $438,000 from $366,000 during the same period in 2022. This increase in gross profit resulted from an $85,000 increase in revenues less the associated related material and labor, offset by miscellaneous expenses. Gross margin increased to 28.1% during the 3 months ended September 30, 2023 from 25.6% during the 3 months ended September 30, 2022, driven by the factors just mentioned. Total operating expenses for the third quarter of 2023 or $6,077,000, an increase of $1,101,000 or 22.1% compared to $4,976,000 for the third quarter of 2022. This increase was predominantly due to an increase in compensation expenses. Total financial income for the third quarter of 2023 was $461,000 an increase of $380,000 or 469% compared to $81,000 for the third quarter of 2022. This increase was primarily due to a $412,000 increase in interest income from investment in marketable securities, money market funds and short-term bank deposits. Net loss for the third quarter of 2023 totaled $5,178,000 or $0.15 per basic and diluted share compared to a net loss of $4,529,000, or $0.58 per basic and diluted share for the same period in 2022. As of September 30, 2023, cash, cash equivalents and short-term investments and bank deposits were $43 million compared to $17.8 million as of December 31, 2022. That concludes our prepared remarks. We will now open the call for questions. Operator?

Thank you, sir. Ladies and gentlemen, we will now be conducting the question and answer session. [Operator Instructions] Our first question comes from Adam Meader of Piper Sandler. Please go ahead.

Congrats on the excellent interim data presentation last week, the print and the operating progress. Maybe just to start, I wanted to give you the opportunity to kind of flesh out the Q3 performance just a little bit more. Can you talk about kind of the key trends, messages in the quarter? And then I had a handful of follow-ups.

Adam, thanks for the question. So our progress in commercial growth outside of the U.S. continues to be strong. And I think the message continues to be consistent, which is to drive clinical outcomes and performance by way of data. Our distributors, I think, are becoming more and more comfortable with CGuard. In fact, we had a full distributor call the other day with all of them. And I think the momentum that we're building just in recognizing what's happening in the U.S. is also engaging them more and is paying residual benefits to our markets outside the U.S. So in terms of real numbers and growth, we're seeing consistency there and we'll continue to drive that in those markets as our foundation of revenue at this point.

That's helpful color. My next question is a multipart question on the Israel-Hamas war. And I hope all of your team members are staying safe. Can you just talk about kind of any thoughts around your ability to supply the market? Do you anticipate any future impact to commercial sales or any kind of hindrances to push forward the U.S. initiatives in an efficient manner? And then I guess along this one in as well. Just -- are you taking any precautions or proactive steps with inventory management or alternative manufacturing efforts?

Yes. Thanks for the question, Adam. Thus far, we've not had any direct impact on our ability to deliver and perform by way of the war. And -- but we're not sitting still. Obviously, we're keeping a very close eye on things and have put into place some examples of mitigating risk there by way of advancing our supply chain, building inventory, looking at alternative locations for securing finished goods and just other things that are good practices under the circumstances. Our shift toward a U.S. focus continues as well. But in the short term, all of our team is operating pretty much according to plan there. We have a couple of folks that have gone to active duty from reserve. But everybody is picking up the extra work to be done. In terms of our progress toward U.S. approval, nothing changes there. We're all on plan. Many of our consultants and activities are actually based outside of Israel as it relates to our regulatory effort and work and testing and those kinds of things. So I think most critical right now is to make sure that our supply chain and production remains sound, and we're continuing to see good results there, but are also looking at making sure that if this progresses into a different direction that we're on good ground as well there.

That's great to hear, Marvin. Thank you for the fulsome response there. Maybe switching over to kind of the forward outlook. I certainly recognize you don't have guidance, but was wondering if you can give any broad strokes or color about how you're thinking about the business in Q4 as well as 2024 from a top line standpoint?

Yes. So I think the way to frame our growth direction at this point is to say that we continue to operate effectively in the 30 countries that we serve. We want to see consistent growth in those countries until we're able to offer new tool sets, which we're working on aggressively in the area of TCAR and obviously, our new CGuard Prime transfemoral CAS delivery system. I think things will remain consistent according to what we've presented up to this point. But obviously, those new tools at a very different dimension to how we believe we can penetrate the market. Our objective outside of the U.S. is the same as it will be in the U.S., which is to convert surgeries to end the vascular first by using our stent performance to do that, and that is no different outside of the U.S. So there's still a lot of endarterectomy being practiced. There's a lot of surgeries being done. And so our goal is not just to have the premier stent in the market but most importantly, to continue to convert surgeries. So that will remain consistent. And I think our growth plan is to continue to show consistency there as well.

That's helpful. If I was to maybe push a little bit there, Marvin, the CGuard Prime and the TCAR European CE Mark approval. Are you able to kind of give an update at this point? Obviously, I know MDR is a little bit unpredictable, but just any latest thoughts and when you could have those commercially available internationally?

Yes. I think, as you said, the whole MDR process and just the regulatory environment in Europe in general has been somewhat frustrating. We're certainly prepared, but are waiting for the longest pole in the tent here, which remains the ability to get this through the regulatory cycles. But I'm anticipating that mid-year 2024, we'll be in a good position to hopefully be able to launch new tools into the 30 countries that we're serving now.

That's helpful. I wanted to ask a similar kind of forward outlook question. This one for Craig and Craig, welcome back. Nice to hear from you. Wanted to ask you about Q4 and '24 in terms of the P&L components. Gross margin, do you think you can continue to drive year-over-year growth improvement there? And then how do we think about the pace of OpEx spend in '24 as we -- as you guys start to prepare for U.S. launch?

Okay. So thanks, Adam, for welcoming me back. [ 2024 ] for the fourth quarter, anticipating a higher spend as we start doing more of the studies that we talked about, in particular TCAR, and also as we start focusing a little bit more on the sales and marketing activities in Europe. I wouldn't be expecting a huge amount of money to be spent in the United States until we get closer to the launch. I mean a few positions here and there, but nothing major.

Okay. And I think that's a good segue into my last question, which is on some of the clinical work you're doing outside of the pivotal. The U.S. TCAR study, I think you pointed to early '24 for a start date. What's the latest there? Any more specifics on timing or trial design? And then also the Tandem Lesion Early Feasibility study, are you still targeting first half '24 for that clinical work?

Yes, let's start with the -- yes. Thanks, Adam. Let's start with the last one first. We are still anticipating for the Tandem EFS, first half of 2024 for enrollment in that and continue to progress in that area. Just to note, we've had 2 conversations -- separate conversations with the FDA on a pre-sub basis for both our TCAR study as well as the Tandem EFS, which have gone very well. So we're just in the midst right now of buttoning up all of the procedural details, the protocols, aligning the investigators to begin this process of enrollment. And so I think it's safe to assume that both of them we'll initiate those studies in the first half of 2024. As we get to all those details. As you know, there's a lot of administrative effort that goes into the setup and the roll-in to get started there. But what I will mention is that we've had a remarkable response on both fronts, both from the surgical community on our TCAR system as well as the EFS within the neuro community. We think that the neuro community has been underserved by carotid focus, and we're looking forward to having both those added to our tool set for our foundational cash system.

The next question comes from Ben Haynor of Alliance Global Partners.

First off for me, congrats on the national coverage determination. But regarding that, I guess, what's your view on the expansion in terms of numbers? If the addressable patient population was x and now it's x plus y, what are those Xs and Ys?

Yes. Great question, Ben. Thanks. I think some of that is certainly to be determined, right? What we know is that there is a tremendous amount of energy behind this decision by CMS. What we think about over the next several years is a shift from surgery first, let's call it, a 70% or 80% surgery first to a 70% or 80% end the vascular stenting first. How that plays out in terms of what percent of that market is CAS procedures versus TCAR is still to be determined. We know that both are very viable options, which is why we invested in both of those tool that sets in order to give us the broadest range within carotid revascularization. It's interesting that at the conferences, some of the discussion now is becoming -- is that a stentable lesion, which you've never heard before as opposed to just assuming the default on endarterectomy or surgery being sort of the baseline. So the CMS coverage really opens up the market opportunity for us, and I think fits perfectly to our strategy, which is to make sure that we've got the full coverage of tool set regardless of which access is used for the best implant. So I think we're in good shape there and feel good about the transition. The question of timing and percentage is still to be determined.

Okay. That's helpful. And then just regarding the -- you mentioned the discussion that's going on at these conferences, obviously, at VIVA. Any additional color there? And any surprises on the discussions where -- is that a sensible lesion things that maybe you hadn't thought off? Or -- just see anything surprising there?

Well, I think what's been most surprising is just the remarkable results that we presented. I mean let's think about the unprecedented nature of being able to deliver, even in 30 days, a sub-1% complication rate is really unprecedented. So I think it goes beyond just will stents become standard of care. It's really a question of this is a unique platform that frankly has never been seen before in terms of these outcomes. Now I will mention also that this validates our previous experience in the 1,850 patients we've studied at about 1.2% rate. So I think it's -- listen, it's a combination of a lot more discussion, momentum and transition, but we like being in a position of being able to lead that way by talking about clinical outcomes and procedural opportunities that really result in best implant and best outcomes because that's going to be the trend, right? There will be more momentum in CAS and in TCAR. But I think ultimately, the decision points will be what's best for the patient and how do those outcomes translate from the implant itself and not just the procedure.

Thank you. Ladies and gentlemen, we have reached the end of our question-and-answer session. I will now hand over to Mr. Marvin Slosman for closing remarks.

I would like to thank everyone for joining the call today. We look forward to a strong finish in 2023 and advancing our plans of growth toward great execution for 2023 and beyond.

Thank you, sir. Ladies and gentlemen, that concludes today's event. Thank you for attending, and you may now disconnect your lines.