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Edited Transcript of NSPR earnings conference call or presentation 12-Nov-19 1:30pm GMT

Q3 2019 InspireMD Inc Earnings Call

TEL AVIV-YAFO Dec 4, 2019 (Thomson StreetEvents) -- Edited Transcript of InspireMD Inc earnings conference call or presentation Tuesday, November 12, 2019 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Craig Shore

InspireMD, Inc. - CFO, Chief Administrative Officer, Secretary & Treasurer

* James J. Barry

InspireMD, Inc. - President, CEO & Director

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Conference Call Participants

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* Vernon Tolentino Bernardino

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Glenn Garmont

LifeSci Advisors, LLC - MD

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Presentation

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Operator [1]

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Greetings, welcome to the InspireMD Third Quarter 2019 Earnings Conference Call. (Operator Instructions) Please note this call is also being recorded.

I will now turn the conference over to your host, Mr. Glenn Garmont, Investor Relations. You may begin.

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Glenn Garmont, LifeSci Advisors, LLC - MD [2]

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Thank you, Lexie. Good morning, everyone, and thank you for joining us for the InspireMD Third Quarter 2019 Business Update Conference Call.

On the line with us today is Jim Barry, Chief Executive Officer; and Craig Shore, Chief Financial Officer. We'll start with an overview of the company's results and recent highlights and then we'll open the call for your questions.

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 can 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 as to future results, levels of activity or achievements.

Having said that, it's my pleasure now to turn the call over to Jim Barry. Jim?

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James J. Barry, InspireMD, Inc. - President, CEO & Director [3]

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Thank you, Glenn, and thank you all for joining us on the call and the webcast today. While Craig will review our financial results in detail in a few minutes, I want to begin by commenting on revenue. Third quarter was very strong for our company with revenue of approximately $939,000, which is up 22% year-over-year. This was driven by the largest number of CGuard EPS orders received and shipped in a single quarter since launching the product.

This resulted in CGuard revenue growth of 41% year-over-year, which is particularly noteworthy since the third quarter is typically seasonally soft. We believe this growth reflects an increasing awareness on the part of physicians, of the clinical advantages of CGuard relative to both conventional carotid stents as well as surgery or carotid endarterectomy. These strong results give us a high degree of conviction that our commercial activities such as the Centers of Excellence training program and our strong clinical data is having a positive impact on physicians treating carotid artery disease.

While the strong third quarter results were driven by our continued commercial focus on CGuard in our key territories, we continue working to introduce it into new markets, which provide significant opportunity. As we have noted in the past, most of these potential new markets have higher regulatory requirements that need to be addressed, including South Korea, Taiwan, China and Japan. In addition, we continue to anticipate that Anvisa, the regulatory body in Brazil, will approve CGuard EPS by the end of the year or early next year. This is significant as Brazil is currently the fifth largest market in the world that treats carotid artery disease and has attractive pricing for carotid devices.

A major component of our long-term multifaceted growth strategy is our Centers of Excellence or COE initiative, which began late last year and seeks to provide physicians interested in using CGuard, including vascular surgeons, with training and real-world experience of using the device.

This enables our distribution partners to target key physicians they wish to convert to CGuard. As we have pointed out, vascular surgeons treat the vast majority of patients with carotid endarterectomy, which is an invasive surgical procedure, compared to the minimally invasive alternative that CGuard provides. So education on the safety and efficacy of CGuard is an important driver for enabling growth, while benefiting countless numbers of patients who would no longer have to undergo an invasive surgical procedure with all its associated risks.

In our COE sessions, we educate on the compelling clinical data of CGuard compared to conventional carotid stents, other double-layered next-generation carotid devices and carotid endarterectomy. We then train the visiting clinicians with a number of hands-on, live patient cases, allowing them to return ready-to-use CGuard in their own clinics.

The COEs are proctored by key opinion leaders or KOLs, who are all well respected in their specific clinical specialties. These KOL partners also gather valuable real-world data for CGuard on an ongoing basis in the clinic, generating important clinical data that is not only presented to the clinical community and publications in conferences, but is brought back into the COE process, always ensuring the latest data and educational material is available.

Today, we have opened COEs in Italy, Spain, Poland and Slovenia with extremely positive results. Last month, we opened our first COE in Germany and will soon be opening one in the U.K. As a result of this initiative, we now have a waiting list for key physicians to participate in our COEs. It's our goal to make CGuard available to the broadest possible patient population, and our Centers of Excellence program will go a long way toward making this happening by driving awareness and utilization.

In addition to our COEs, additional presentations and publications of clinical data supporting the value of CGuard is also helping to raise awareness. During the third quarter, we continued to add to the extensive body of evidence highlighting the safety and performance of CGuard versus other carotid stents. Data was presented for the first time on a patient-level mesh stent meta-analysis that included 556 symptomatic and asymptomatic carotid artery disease patients from 4 trials at the recent joint congress of the World Heart Federation and the European Society of Cardiology.

The results demonstrate superiority of CGuard EPS in clinical safety and efficacy as compared to competitor devices, both first-generation carotid stents and second-generation double-layer or mesh-covered carotid devices as well as equality or superiority to publish data on carotid endarterectomy, the current surgical treatment for carotid artery disease.

At the 1-year follow-up, patients who received a competitive double-layered stent or another mesh-covered stent experienced an intra-stent restenosis/thrombosis rate of 4% compared to CGuard EPS with a reduced incidence of 0.7%, with a p-value of 0.007, meaning that CGuard showed a highly statistically significant advantage in this clinical endpoint.

CGuard also demonstrated positive trends compared to competitors' devices, with the combined endpoint at 12 month showing a 33% reduction in death and stroke and a greater than 50% reduction in overall mortality compared to the same competitive devices.

In another session, Professor Piotr Musialek presented follow-up data from his ongoing PARADIGM-Extend study. The presentation demonstrated solid short- and long-term clinical results for CGuard. After 402 patients were treated with 436 CGuards, no major strokes occurred at 30 days and less than 1% of any death stroke or myocardial infarction occurred at 30 days.

Additionally, Professor Musialek reported on 61 patients now followed out to 4 years, showing no device-related or procedure-related adverse events and thus a sustained 4-year benefit.

Turning now to publications, Professor Musialek's 36-month follow-up on the ongoing PARADIGM-Extend trial was published in the prestigious European Heart Journal. The paper presented clinical and duplex ultrasound evidence that is consistent with sustained safety and cerebral embolization prevention of the CGuard EPS for stroke prevention in symptomatic and increased stroke risk asymptomatic subjects with carotid stenosis.

Also, preliminary results from the ongoing large real-world Italian registry, IRONGUARD 2 study, were published in the Journal of Vascular Surgery.

The registry included 729 patients treated in 12 centers across Italy and included physicians with the different clinical specialties that treat carotid artery disease, including vascular surgeons, interventional radiologists and interventional cardiologists.

The paper concluded that in this large multicenter, multispecialty registry, the use of CGuard EPS in routine, real-world, clinical practice is associated with no major peri-procedural or 30-day neurologic complications.

These very compelling data accepted into peer-reviewed journals strongly support our ongoing commercial efforts as we work to raise awareness of these important safety advantages.

All of the data that has been generated to date continues to support the fact that CGuard EPS is an important breakthrough, representing a new paradigm in the treatment of carotid artery disease, which remains the leading risk factor for stroke. We estimate that CGuard can address a $1 billion near-term market opportunity based solely on patients who are currently treated with either conventional carotid stents or carotid endarterectomy. This opportunity could grow exponentially if we can convert the approximately 1.6 million people out there who are diagnosed, but untreated.

As we discussed in our second quarter call, we plan to add business development resources to more effectively assess inbound queries that we have been receiving, and more importantly, implement a more focused proactive business development strategy. Business development has always been a key pillar of our long-term growth strategy, and with the recent inquiries, we recognize the need to place additional focus on this pillar.

Turning now to intellectual property. We continue to reinforce our substantial global IP franchise to protect our innovations. In September, we announced that we were granted 2 new U.S. patents covering our proprietary single-fiber, mesh-jacket stent technology. The first, a method of stenting and a method of providing a stent assembly with an expandable mesh jacket that includes a therapeutically effective amount of active pharmaceutical agent alluded to advantageously treat a disorder in a carotid or coronary artery.

The second patent covers a method of stenting and a stent assembly, where the stent, which includes an expandable stent and expandable mesh jacket, is adapted to treat an aneurysm generally. This new IP should help us expand into both the peripheral vascular and neurovascular fields with highly differentiated and patent-protected devices.

Before turning the call over to Craig to review the financials, I want to take a moment to provide an update on our U.S. Investigational Device Exemption or IDE submission. In September, we announced that the FDA have requested additional information. As we had noted in the past, the FDA requesting additional information in support of an IDE submission is not unusual, and we continue to work closely with the agency to provide the further-requested bench testing information. We have been working through a very interactive and cooperative process to resolve the remaining outstanding requests.

Importantly, the FDA has concurred with the clinical study design, which provides specificity on the clinical data requirement to support the market approval of the device. Given the significant body of evidence confirming the safety profile of CGuard, we remain optimistic that our IDE will be approved.

With that, I'll turn the call over to Craig for a review of the financials.

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Craig Shore, InspireMD, Inc. - CFO, Chief Administrative Officer, Secretary & Treasurer [4]

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Thanks, Jim. For the 3 months ended September 30, 2019, revenue increased by $170,000 or 22% to $939,000 from $769,000 during the same period in 2018.

This increase was predominantly driven by a 41% increase in sales volume of CGuard EPS from $604,000 during the 3 months ended September 30, 2018, to $852,000 during the 3 months ended September 30, 2019, mainly due to our continued focus on expanding existing markets such as Italy and Russia.

As a side note, as Jim previously mentioned, during the quarter, we had the highest number of CGuard orders since launching the product. This increase in sales of CGuard EPS was partially offset by a 47% decrease in sales of MGuard Prime EPS from $165,000 during the 3 months ended September 30, 2018, to $87,000 during the 3 months ended September 30, 2019, largely driven by the predominant industry preferences favoring drug-eluting stents rather than bare metal stents such as MGuard Prime EPS and stent mutation.

The company's gross profit for the quarter ended September 30, 2019, was $128,000 compared to a gross profit of $198,000 for the same period in 2018.

Gross margin decreased to 13.6% in the third quarter of 2019 from 25.7% for the same period in 2018. This decrease in gross profit resulted from $65,000 increase in write-offs, predominantly driven by a nonrecurring component supply issue.

Total operating expenses for the quarter ended September 30, 2019, were $2.125 million, a decrease of 2% compared to $2.177 million for the same period in 2018. This decrease was primarily due to a nonrecurring marketing consulting expenses associated with CGuard EPS in 2018.

Financial expenses for the quarter ended September 30, 2019, were $73,000 compared to financial expenses of $32,000 for the same period in 2018. This increase in financial expenses of $41,000 was predominantly due to changes in exchange rates.

Net loss for the third quarter of 2019 totaled 2.070 million or $1.26 per basic and diluted share compared to a net loss of $2.011 million or $2.47 per basic and diluted share for the same period in 2018.

As of September 30, 2019, cash and cash equivalents were $7.154 million. Included in this number is the additional $5 million gross we raised in September through an underwritten public offering.

At this point, we'll turn the call over to the operator for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Vernon Bernardino with H.C. Wainwright & Co.

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Vernon Tolentino Bernardino, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [2]

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Congrats on the really good results with CGuard EPS, a strong growth there. And congrats also on the presentations and publications that continue to show CGuard's safety. Just have a few questions. So MGuard continues to, I guess, sell a lower level because of the changes in STEMI. Do you anticipate that this is now perhaps around a steady state, because the results here are perhaps similar to the first quarter this year?

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James J. Barry, InspireMD, Inc. - President, CEO & Director [3]

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It's Jim. I will let Craig comment on this too, but I would just tell you, MGuard has sort of been lumpy, I think, through the quarters. It's still -- it's challenged by its lack of a drug, but it still has some very loyal users that use it not only in STEMI patients, but also saphenous vein graft patients. So it's still an important tool out there, and we want to keep it out there for those folks who like to use it. But I don't know, I'll let you comment on, Craig, what do you think about the numbers.

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Craig Shore, InspireMD, Inc. - CFO, Chief Administrative Officer, Secretary & Treasurer [4]

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Yes. I think Jim is correct. It is lumpy, and that's predominantly due to the fact that it's very heavily driven by tenders. So you could see up-spikes here and there in the countries where it's actually being used today.

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Vernon Tolentino Bernardino, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [5]

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Perfect. And the other question I have is regarding the gross profit and perhaps the inventory concerns that you had before. Are all the inventory concerns now behind?

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James J. Barry, InspireMD, Inc. - President, CEO & Director [6]

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Are you -- I assume you're referring to the sterilization issue that we had in the first quarter?

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Vernon Tolentino Bernardino, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [7]

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Yes.

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James J. Barry, InspireMD, Inc. - President, CEO & Director [8]

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Yes. All good. In fact, I think this quarter actually sends a really positive sign that we got through that. So we got through it in the second quarter, no problem, and obviously a pretty good third quarter, actually somewhat of a record third quarter for us. So yes, all behind us. As we said, a onetime event and I think we've shown that.

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Operator [9]

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Mr. Bernardino, there are no further questions, so you may continue.

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Vernon Tolentino Bernardino, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [10]

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Perfect. So regarding the pathway for the FDA, what kind of discussions do you currently have? I mean let's say, like how frequently, what information is needed by them that you need to provide?

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James J. Barry, InspireMD, Inc. - President, CEO & Director [11]

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Yes. So actually it's probably a monthly cycle right now, I would say, in discussions with them, and it's all been mechanical bench testing data that they have been looking for some clarifications on. So we get those clarifications, we provide them additional data and we sort of await their responses.

And I would tell you again, it's been pretty productive. We've been asked some questions, asked for additional data. A lot of it has been resolved. There is still a few more pieces where -- that are still outstanding we're trying to get clarification on. So -- but it's been good. And actually, all things considered, I would say, more frequent than I would've expected.

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Vernon Tolentino Bernardino, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [12]

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Monthly is definitely rather frequent. You mentioned bench testing, but you also provide them data that comes from outside the United States as far as real-life experience?

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James J. Barry, InspireMD, Inc. - President, CEO & Director [13]

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Yes. We do. Of course, we have to do that. It can't be used -- it can only be used as informational data for their review. So while I think it's probably helpful and comforting, they can't really use it in their approval of the IDE.

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Vernon Tolentino Bernardino, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [14]

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Perfect. Congrats on the really strong CGuard EPS results. Looking for more.

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James J. Barry, InspireMD, Inc. - President, CEO & Director [15]

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All right. Thanks, Bernardino.

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Operator [16]

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Thank you. We have reached the end of the question-and-answer session. I will now turn the call back over to Mr. Jim Barry for closing remarks.

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James J. Barry, InspireMD, Inc. - President, CEO & Director [17]

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Okay. So that concludes today's call. Thank you, everybody, for taking the time to join us this morning. And I look forward to speaking with you again on our next quarterly update call in November.

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Operator [18]

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Thank you. This concludes today's conference, and you may now disconnect your lines. Thank you for your participation.