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Edited Transcript of IMR.AX earnings conference call or presentation 27-Jan-21 10:00pm GMT

·17 min read

Q4 2020 Imricor Medical Systems Inc Earnings Call Jan 28, 2021 (Thomson StreetEvents) -- Edited Transcript of Imricor Medical Systems Inc earnings conference call or presentation Wednesday, January 27, 2021 at 10:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Lori Milbrandt Imricor Medical Systems, Inc. - CFO & VP of Finance * Steve Wedan Imricor Medical Systems, Inc. - CEO, President & Executive Chairman ================================================================================ Conference Call Participants ================================================================================ * Elyse Miriam Shapiro Bell Potter Securities Limited, Research Division - Analyst * Sarah Mann Moelis Australia Securities Pty Ltd, Research Division - Analyst * Carrie Barrack ================================================================================ Presentation -------------------------------------------------------------------------------- Carrie Barrack, [1] -------------------------------------------------------------------------------- Well, hello, everyone, and welcome to Imricor's quarterly results call for the period ended 31 December 2020. My name is Carrie Barrack, and I'll be moderating your call today. I'm pleased to be joined by Steve Wedan, Imricor's CEO; and Lori Milbrandt, Imricor's CFO. Steve and Lori will provide you with a brief business update, followed by question-and-answer session, and I'll give you instructions on how to ask a question at the end of the briefing. With that, I'll hand over to Steve. -------------------------------------------------------------------------------- Steve Wedan, Imricor Medical Systems, Inc. - CEO, President & Executive Chairman [2] -------------------------------------------------------------------------------- Thanks, Carrie, and thank you, everyone, for joining us today. This morning, Imricor released its appendix 4C for the fourth quarter of 2020, and we'd like to discuss these results as well as provide you with a business update, particularly given the COVID-19 situation in Europe and its impact on our lab rollout plans. Lori will begin with presenting the quarterly cash flow results. -------------------------------------------------------------------------------- Lori Milbrandt, Imricor Medical Systems, Inc. - CFO & VP of Finance [3] -------------------------------------------------------------------------------- Thank you, Steve, and hello, everyone. As a reminder, all numbers are unaudited and in U.S. dollars. The net cash outflow from operating activities was $2.9 million for the quarter, which was down approximately $0.5 million from the prior quarter. Revenue and associated cash receipts in Q4 2020 continue to be impacted by the COVID-19 pandemic. And while 3 new sites were established in the quarter, procedure volumes remained low due to hospital closures. Our cash receipts in the quarter included one capital equipment sale, the sale of consumable products, revenue from service agreements and proceeds from our NIH contract. Overall, cash out in relation to operating costs of $3.264 million was slightly lower than the prior quarter, largely due to some cost elevation in the prior period due to the timing of insurance payments and lower recruitment freeze in the current quarter. Net cash outflow from investing was $98,000 in the quarter, and we had a net cash inflow from financing activities of $20.339 million, this included proceeds from Imricor's AUD 28.45 million institutional placement completed in November, and AUD 1.55 million security purchase plan completed in December, both of which were well oversubscribed. At December 31, we have a cash balance of $25.14 million. I'll hand it back over to Steve now to provide you with a business update. -------------------------------------------------------------------------------- Steve Wedan, Imricor Medical Systems, Inc. - CEO, President & Executive Chairman [4] -------------------------------------------------------------------------------- Thanks, Lori. Making sure I'm unmuted if I am. While delays have been experienced in the rollout of new clinical sites due to the impact of the second wave of COVID in Europe, Imricor has continued to achieve solid progress in the execution of our growth strategy across a number of areas that I'd like to discuss today with you. We have 9 clinical sites currently contracted in Europe, 5 in Germany, 3 in the Netherlands and 1 in France. We are in well advanced discussions across many additional sites, and we expect to start signing some of these very soon. The impact of the second wave of COVID in Europe was significantly worse than expected and across our key target geographies of Germany and the Netherlands, strict COVID containment measures remain in place. While we had expected to have signed at least 5 of these sites by the end of 2020, COVID has delayed this sales process. We're very focused on progressing these new sites in agreements as expediently as possible while remaining respectful of the pressures being faced by hospitals in regions that had been particularly hard hit by COVID and the associated containment measures. I think it's important to note that while we have seen disruption in our commercial rollout due to COVID, our pipeline of potential sites remains very strong. Interest in our products across the medical community continues to increase. And even while hospitals and doctors are navigating the ongoing challenges of the pandemic, we are not seeing potential customers withdraw from our pipeline. In fact, our pipeline continues to grow. COVID vaccines are now being rolled out across Europe, and we're seeing the benefits of containment measures being reflected in daily case numbers, both of which will result in the easing of restrictions that have been hampering our progress over recent months. Importantly, we're well positioned to progress quickly once restriction ease, and I remain very confident that we will deliver an acceleration in lab adoption as we move through 2021. Generally, across our contracted sites, procedures remain on hold as COVID containment measures restrict elective surgeries. We anticipate that the procedures will be commenced as restrictions ease. We are working closely with contracted sites who did not start procedures in 2020 to schedule installation, training and commencement of cases in the coming weeks. We are continuing to work closely with Philips to target future iCMR labs as well as in training, installation and installation at contracted labs to support the initiation of procedures at these sites. In November, we started training the Philips European sales force on Imricor's technology and products. And this sales force will become active in the field as soon as COVID restrictions allow. And this is expected to drive a material increase in Imricor's installed base in 2021. We continue our strong collaboration with Siemens and are currently working towards the establishment of a similar sales distribution agreement. Our strategy to expand in the U.S. market is progressing well. Having now held 2 pre-submission meetings with the FDA, and we're expecting alignment on clinical trial design in subsequent meetings with the FDA. We continue to target 2021 and 2022 to execute these pivotal trials -- of this pivotal trial. In Australia, we're close to finalizing the appointment of a local agent to facilitate both TGA approval and the eventual distribution of our products in the Australian market. We hope to announce this partnership in March. We do not expect clinical trials to be a requirement for TGA approval. Our research and development pipeline remain a clear priority, particularly regarding products that will enable the treatment of expanded indications such as ventricular tachycardia and atrial fibrillation, markets where we see large growth opportunities for Imricor. We're currently in the prototype phase for our steerable sheet and transseptal needle, which in turn will enable access to the left side of the heart via the interatrial septum. This development is on schedule, and we still expect that these products will be ready for clinical trial during 2021. We're also progressing well with our diagnostic catheter, which will deliver material improvements in our gross margin. The diagnostic catheter will be a simplified version of our next-generation ablation catheter, which is currently in development and will form part of a 2 product set, an ablation catheter and diagnostic catheter, required to perform atrial flutter procedures. As we announced last year, we delayed the commercial release of our diagnostic catheter to late 2021 or early 2022, pending CE mark approval. This has enabled us to utilize technological advancements and cost improvements incorporated into the next-generation ablation catheter to provide physicians with a consistent product line for use in procedures and Imricor with the benefits of lower component and production costs to drive improved gross margins. As announced in late September, we were very pleased to be granted a contract by the National Institutes of Health to develop a prototype system of devices that can biopsy the inter walls of the heart while using MRI to guide the procedure. This development is progressing well and on schedule. This is an exciting opportunity with the potential to mark Imricor's first product line expansion beyond cardiac ablation. We believe that the addressable market for an MRI compatible biopsy system is significant and likely similar to that for Imricor's MRI compatible cardiac ablation catheter. In-depth market research to determine the size of that opportunity is underway, and I look forward to sharing further details with you in Q2. It's important to emphasize that while COVID has impacted our commercialization plans in Europe, we have not been standing still. We remain highly focused on growing our pipeline of potential sites to support an acceleration in lab rollout 2021. We have continued to move forward on growth opportunities through geographic expansion and the expansion of our approved indications, remaining on schedule with these activities. Supporting this, we continue to grow our workforce and ensure that we have the resources available to succeed in fulfilling our strategic plan. As announced, at the end of 2020, we have also promoted our Vice President of Operations, Gregg Stenzel, to Chief Operating Officer. Gregg has over 20 years of medical device experience and has been a key member of the Imricor team since 2007. He was the backbone of my early recruits after establishing the company in 2006, and he is deeply committed and passionate about this business. Greg is leading the execution of our strategic plan across most functional areas of the business, providing me greater capacity to drive an acceleration in our lab rollout plans across Europe in 2021. The ongoing challenges of the COVID-19 pandemic have certainly been a disappointing disruption to our rollout plans, but we continue to make excellent progress across the business, and we are well positioned for growth as we move into 2021 and beyond. We're excited about the opportunities ahead of us in the coming year and look forward to keeping you updated on our progress. With that, I'd like to hand it back to Carrie for Q&A. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Carrie Barrack, [1] -------------------------------------------------------------------------------- Thank you, Steve. (Operator Instructions) Okay, I just have a question coming from the line, if you'd like to unmute and go ahead? -------------------------------------------------------------------------------- Sarah Mann, Moelis Australia Securities Pty Ltd, Research Division - Analyst [2] -------------------------------------------------------------------------------- It's Sarah from Moelis. Look, I just wanted to ask a question. So obviously, during the COVID second wave, at that time, you had kind of a number of sites that are already signed up, like contracted with you, but still required kind of installation and a bit of training before they could begin procedures. Can you give us a feel for where those discussions are at now, given they're in lockdown? Are they giving you any indications of when they might be ready to start doing some training and begin procedures again? -------------------------------------------------------------------------------- Steve Wedan, Imricor Medical Systems, Inc. - CEO, President & Executive Chairman [3] -------------------------------------------------------------------------------- Yes, that's a good question. What we're doing is we're staying ready every week to -- and we have the time scheduled at these sites to go and install and train and commence procedures. But each week, the government will make a determination based on their current situation, whether they're going to keep the restrictions on for the following week or increase the restrictions or ease the restrictions. And so we've had tickets booked for our U.S. personnel to go to Europe. We've had all the arrangements, plan to start all these trainings in each week. If we're not allowed, we just shift it to the next week. So as we left last year, the expectation was that by mid-January, all the hospitals thought that they would be back to normal. That has been pushed by the governments to -- they're just not allowing the procedures to happen, and that's been pushed into the second week of February right now. So we have all those same plans in place. Our people are ready to go. And as soon as it's allowed, we'll be there, and we'll begin to get those folks started. That has also that same shift. And this -- it's a last minute thing. We find out on Monday what's happening for that week and the following weeks. That has also taken -- it's the reason why we haven't signed some of those 5 sites that we expect to sign before the end of the year. They just can't start procedures now. So there's no pressure for them to get these signatures done because it will be some time before they -- before we'll be able to schedule them and get them in. That has allowed us to give them some breathing space, which these physicians really need. Many of the people we work with are leaders in their hospitals, and they've been tremendously overburdened by COVID. So there's no impact on us that we can control by just letting the process happen over this month in particular, and giving them some breathing space so that we don't irritate them or create extra stresses on them, as we're trying to get things started. But once we're allowed, we are ready to execute very quickly. And that's been a key priority for us over the past several weeks. -------------------------------------------------------------------------------- Sarah Mann, Moelis Australia Securities Pty Ltd, Research Division - Analyst [4] -------------------------------------------------------------------------------- Sure. That makes sense. And then just in terms of, I guess, procedures recommencing, is it safe to say that pretty much all the sites currently are not able to do procedures at the moment because there's, I guess, a stop on nonessential work? -------------------------------------------------------------------------------- Steve Wedan, Imricor Medical Systems, Inc. - CEO, President & Executive Chairman [5] -------------------------------------------------------------------------------- It's actually, yes, it's prohibited right now for them to do scheduled procedures. We have -- there's, for instance, in like say, if a person walks in, this is unlikely, but if a person walks in and says, I have atrial flutter and I need to get treated today, they're prepared to do that procedure in the MR lab with our products. They're all set up. They have catheters, they have the systems, and they've been trained. But that's just not likely to happen. So until they're able to start scheduling again, yes, we're just on hold. But what we have been doing while we're waiting for that is we're planning at each site, recognizing that each site has its individual characteristics. We're planning with each of those sites how we get their utilization up to a steady state as quickly as possible once ones were allowed to do that. And it involves making sure that multiple doctors are trained that they don't need backup facilities, but they can use the MRI lab as an augmentation to their practice, meaning they can treat more patients than they would be able to if they didn't have that MRI lab. And working closely with the physicians on all kinds of different fronts. It's again, very specific to each site. So we're really excited about our plans and how we can get each of these sites up and running and up to steady state as quickly as possible. We've hired -- part of our hiring recently has been a new clinical support specialist. So somebody to help cover cases and drive utilization. She's in mid-German area. So we have somebody in the Netherlands, and we have somebody in Germany now to support the cases at these various sites, and we'll continue to add that as sites come up and get started. -------------------------------------------------------------------------------- Sarah Mann, Moelis Australia Securities Pty Ltd, Research Division - Analyst [6] -------------------------------------------------------------------------------- Very good. So then just in terms of the pipeline, you flagged in your presentation before that it had grown stronger. Can you just give me a bit of a feel for how much of that growth in the pipeline has come from, I guess, your internal marketing efforts versus how much has come from Philips and/or Siemens? -------------------------------------------------------------------------------- Steve Wedan, Imricor Medical Systems, Inc. - CEO, President & Executive Chairman [7] -------------------------------------------------------------------------------- Yes. Just about everything we do now is in partnership with Philips and Siemens. We haven't gotten a lot of their salespeople coming back and saying here are the folks, because their sales people are also not allowed to go to the hospital, so they're on hold as well. But we meet with each of those groups several times each week, and one of those meetings each week with each of them is to talk about new sites, what's the planning for getting the sites that are just about ready to get started? What are the new target sites that we're looking at? Philips is doing internal research about where their MRI systems are and what might be good next targets. So that's an ongoing process that we do each week. So I would say that probably from now on, it's a very collaborative effort between us and our MRI partners. -------------------------------------------------------------------------------- Carrie Barrack, [8] -------------------------------------------------------------------------------- Sorry, I was on mute. Thanks here. I've got another caller on the line who'd like to ask some questions. If you'd like to unmute, you can proceed. -------------------------------------------------------------------------------- Elyse Miriam Shapiro, Bell Potter Securities Limited, Research Division - Analyst [9] -------------------------------------------------------------------------------- It's Elyse Shapiro from Bell. Just on the pipeline discussions, how are you seeing that split then between Philips and Siemens, and is there a preference to have one of those kind of selling more than the other in terms of the terms of those agreements? -------------------------------------------------------------------------------- Steve Wedan, Imricor Medical Systems, Inc. - CEO, President & Executive Chairman [10] -------------------------------------------------------------------------------- So we don't have -- and it's a good question, Elyse. We don't have a preference. Our customers have preferences based on what equipment they have, what they're trained on, where their relationships are. But we've worked hard to make sure that the system works with both systems equally, and we continue to have no preference on what the customer chooses. So yes, for us, it just doesn't -- and we get that question sometimes, which sites, which would I go. And we always say the same thing, which is, you should talk to them both and choose based on your needs and what they can offer you from an imaging standpoint. -------------------------------------------------------------------------------- Elyse Miriam Shapiro, Bell Potter Securities Limited, Research Division - Analyst [11] -------------------------------------------------------------------------------- Okay. And would you say kind of at this point now that the sales forces for both Philips and Siemens, they're kind of fully up to speed and ready to go? Or is there more training... -------------------------------------------------------------------------------- Steve Wedan, Imricor Medical Systems, Inc. - CEO, President & Executive Chairman [12] -------------------------------------------------------------------------------- I would say it's -- yes, the Philips people, in particular, are training up to go. I think it's more of an introductories training. I would characterize on the Siemens side. And we are still waiting to have a final completion of the sales distribution agreement with Siemens. They're reviewing it again now this week. We do think that, that will wrap up pretty quickly, but they have a lot of different groups. Interventional MRI is a new field for them. So they have -- they get quality people involved from all kinds of different areas. And every time you bring a new person and there's new questions for them. So they're working through their process as a big company would, and we expect that to be completed pretty quickly. Once that's completed, then we'll do a deeper dive on targeting sites and getting their sales folks up and running. -------------------------------------------------------------------------------- Carrie Barrack, [13] -------------------------------------------------------------------------------- (Operator Instructions) Okay, so I think that concludes our questions, Steve. So I will hand back to you to close out our call. -------------------------------------------------------------------------------- Steve Wedan, Imricor Medical Systems, Inc. - CEO, President & Executive Chairman [14] -------------------------------------------------------------------------------- Okay. Great. Well, thanks. I want to thank everyone for joining us today. We'll, of course, continue to keep you updated as things progress. And Lori and I look forward to catching up with many of you following the release of our full year results. So for now, have a great day, and we'll talk soon.