IceCure Medical Q3 2023 Earnings Call Transcript

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November 15, 2023

There are 10 speakers on the call.

Operator

Good morning and thank you for standing by. Currently, all participants are in a listen only mode. After management's discussion, there will be a question and answer session. Please be advised that today's conference call is being recorded. I would now like to turn the conference over to Michael Pulleyview.

Operator

Please go ahead.

Speaker 1

Thank you, Yoni, and welcome to iSecure Medical's conference call to review the financial results for the 9 months ended September 30, 2023 and provide an update on recent operational highlights. You may refer to the earnings press release that we issued earlier this morning. Participating on today's call are Icacare Medical's CEO, Eyal Shremier and the company's CFO and COO, Ronen Zimmerman. Before we begin, I will now take a moment to read a statement about forward looking statements. This call and the question and answer session that follows contain forward looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws.

Speaker 1

Words such as expects, anticipates, intends, plans, believes, seeks, estimates, and similar expressions or variations of such words are intended to identify forward looking statements. For example, we will use some forward looking statements in this presentation when we discuss the achievements we expect to accomplish as we continue to advance our growth strategy, our position to make significant commercial advances in key markets, pursuit of regulatory approval in various jurisdictions, including with respect to the appeal we filed requesting that review of the de novo classification proposals, expansion of clinical applications for retail results from our clinical trials, potential market adoption and future sales of iSecure's minimum invasive cryo ablation technology, advancing regulatory and commercial strategies, strategic plans and our belief that we are in a position to meet our primary goals in 2024. Because such statements deal with future events and are based on iSecure's current expectations, they are subject to various risks and uncertainties and actual results, performance or achievements provides characteristics materially from those described in or implied by the statements during this call. The forward looking statements contained or implied during this call are subject to other risks and uncertainties, many of which are beyond the control of the company, including those set forth in the Risk Factors section of the company's annual report on Form 20 F for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 29, 2023, which is available on the SEC's website at www.sec.gov.

Speaker 1

The company disclaims any intention or obligation, except as required by law, to update or revise any forward looking statements, whether because of new information, future events or otherwise. This conference call contains time sensitive information and speaks only as of the live broadcast today, November 15, 2023. I would now like to turn the call over to iSecure Medical's CEO, Eyal Shah Mir. Eyal, please go ahead.

Speaker 2

Thanks, Michael, and hello, everyone, and thank you for joining us today to review our operating results for the 9 months ended September 13, 2023. To begin and on behalf of the entire Aistio team, I want to thank those who have reached out of us over the past few weeks. We greatly appreciate your thoughts, well wishes and concerns. While our team and everyone in Israel is personally impacted by the war with Hamas and why it remains difficult and challenging matter, I want to reiterate that ICT remains laser focused, and we will continue to execute our plan of delivering our life preserving technology to people around the world for improved healthcare outcomes. We will continue to push forward.

Speaker 2

And as reflected in several key developments that have achieved during the current quarter, we are also experiencing a high trended level of interest for our process system. We had some significant achievement on the regulatory front, including approval for process in Brazil in Canada. Additionally, we are encouraged with the vast number of independent studies being initiated, conducted and published by doctors using ProSense. Our prior ablation system was highlighted at several medical conferences and commercial distribution continues to expand as our ProSense systems and disposable prop sales continue to increase. Given the importance of their development, I have hired Shail Lavab, our Vice President of Regulatory Affairs, Quality Assurance and Clinical Applications and Lalit Boussitelso, our Vice President of Business Development and Global Marketing, to provide some additional comments.

Speaker 2

Earlier today, we announced that we filed an appeal with the FDA requesting an additional review of IQ de novo classification request. Shai will provide more specifics about the appeal, in addition to sharing our regulatory pathway. Khalid will also provide more insight into the impact of the independent study and how it helps our global commercial penetration. They will both be available to answer your questions during the Q and A session at the end of this call. Shai, let's begin with our prepared remarks.

Speaker 2

Please go ahead.

Speaker 3

Thank you, Eyal. As most of you know, in October 2022, ISQ filed a novel classification request with the FDA for process for treating patients with early stage low risk breast cancer. The filing included interim analysis from IOL I3 breast cancer study because we believe that the data demonstrated efficacy and safety. With a 5 year estimate of 95.7 percent recurrence free rate and 100 percent doctor and patient satisfaction with cosmetics results. We saw this as an opportunity to make this minimally invasive cryoablation procedure available to women in the U.

Speaker 3

S. Sooner. Following a nearly 1 year review, which is typical, the FDA denied our de novo request in September 2023. We reviewed the FDA's comment letter in greater detail and in consulting with our regulatory consultants, we have come to conclude that the FDA's response was largely due to the agency's choice of a comparator group against which the I3 interim results were evaluated. There is a large amount of data from published studies in the scientific literature, including meta studies that provide efficacy and safety numbers for women with early stage low risk breast cancer with lymphoma.

Speaker 3

We added robust and less literature in the de novo filing request And this is why we had been expecting a more favorable response from the FDA. It was consistent with our expectation based on the conversation we had with them during the review process. We decided to appeal because we believe a dialogue with the FDA will allow us to come to an agreement on a proper comparator, mainly due to the fact that the new published article that was not available at the time of the last material submission to the FDA was cited in the denial letter and incorporating this article into the meta analysis is more appropriate for the patient population we seek to treat with ProSENCE. We believe a subsequent analysis of the data may make the benefits of ProSENCE more obvious and therefore lead to granting of the de novo submission and marketing authorization. We expect a response to our appeal from the FDA by the end of January 2024 and our goal is to work closely with FDA to come to agreements on the comparator and on the classification of process.

Speaker 3

Upon completing the review process with the FDA, we seek to finalize the qualification and the classification of process. Our I3 study remains on track and is expected to be completed in the Q1 of 2024. Following the last patient's 5 year follow-up exam, which has remained consistent throughout the trial. Furthermore, the FDA's decision regarding the de novo for breast cancer has no effect on process FDA cleared authorizations from 4 other indications in the U. S, so patients and doctors continue to have access to and benefit from ProSense in the U.

Speaker 3

S. Outside of the U. S, ProSense is approved for early stage low risk breast cancer in numerous countries, including

Speaker 2

Thank you, Shai, for that thorough review. In this exact same indication, early stage low risk breast cancer, 2 independent studies conducted in Spain and Italy were recently presented at the European Society of Breast Imaging Annual Scientific Meeting by doctors who are using ProSENCE. They started to produce data that are similar to our I3 results, adding to the growing body of evidence, pointing to ProSENCE as a minimally invasive alternative in this indication. While ICOS is in the process of conducting 2 studies, i3 in early stage low risk breast cancer and iSECRET in kidney cancer, it is important to acknowledge that there are 17 additional independent non sponsored study ongoing for PROSENCE. This is in addition to the 12 studies that have already been published in peer reviewed journals and medical conferences.

Speaker 2

Certain of the published and ongoing studies are for breast cancer, again offering more confidence in our minimally invasive prior ablation offer. The remaining independent studies are focused on fibroadenoma, endometriosis and Marigand or benign tumors of the kidney, lung, musculoskeletal system. Why would so many doctors who are using process around the world for multiple indications be taking their own time to conduct and publish such studies. We believe it is because they see firsthand the benefit that POCSN provide for their patients. This gives us greatest confidence in POCSN and iQ.

Speaker 2

We hope you agree. This growing body of data and our focused effective commercialization strategy and leading to a greater process users globally as evidenced in the increased sales of process systems and disposable cryoprops. In the U. S, we recently appointed Mr. Shad Good, a talented healthcare sales executive with solid track records in breast diagnostic and therapeutic devices.

Speaker 2

As our VP of sales for North America, this market represents a significant market opportunity for ProSense, and I believe that upon a successful outcome of our trial and regulatory strategy will be fully realized as Chad and his team will make a significant contribution towards the acceleration of ProSUN cells in the U. S. In Europe, we expanded distribution in Portugal with a new distributor, NC Medical, the largest distributor of third party medical devices in the country. In India, the first ever breast cancer cryoablation procedure in the country was performed using ProSense. We believe as India adopt more early detection for breast cancer, migrating to a minimally invasive solution like ours will improve the lives of women by providing them with an alternative to lumpectomy.

Speaker 2

I will turn the call over now to Lalit, our Vice President of Business Development and Global Marketing, for further insight on how ProSense is gaining increased recognition globally as an excellent minimally invasive alternative to surgery across multiple indications. Lalit?

Speaker 4

Thank you, Eyal. As independent user data continues to grow and is shared at medical conference and in journals, this is creating a growing momentum as more and more doctors and patients become aware of ProSense as a minimally invasive option. We believe the independent study data is a major catalyst for PROSENCE adoption and our marketing team and distribution partners are very active at medical conference, speaking with doctors, answering questions and providing non financial support to those who are interested in conducting studies. We are very pleased that doctors who use the technology and are eager to present and share experience at medical conferences. I participated in a formal conference immediately after the Professor Yoshio Kurei in Japan performed 600 test procedures led a symposium with PROSENCE.

Speaker 4

In India, at the 10th annual conference of the Breast Imaging Society of India, results from the ICURE i3 study were presented by study's co primary investigator, Doctor. Kenneth R. Tomkovich. In Copenhagen, Denmark, at the Cardiovascular Interventional Radiology Society of Europe for 2023, a tumor ablation hands on device training with ProSense was conducted and a symposium about cryoablation was conducted by 2 leading interventional radiologists to use PROCENCE, one of whom conducted a cryoobation endometriosis study, which was recently published. In Valencia, Spain, at the European Imaging Annual Scientific Meeting, the 2 independent studies in early stage low risk breast cancer were presented, as previously mentioned by AI.

Speaker 4

Clearly, PROSENCE is gaining significant traction and momentum amongst doctors, and we believe this translate into more system and disposable demand globally. I'll now turn the call over to Ronnen for a summary of the financial results. Ronnen?

Speaker 5

Thank you, Khalid. For the 9 months ended September 30, 2023, process systems and disposable probe sales increased by 11 percent to $1,700,000 compared to $1,500,000 for the 9 months ended September 30, 2022, driven by higher sales in the U. S. And China. Total revenue for the 9 months ended September 30, 2023 was approximately $2,000,000 compared to $2,100,000 for the 9 months ended September 30, 2020 2.

Speaker 5

As expected, the lower revenue was due to the end of the revenue recognition from the exclusive distribution rights agreement with Terumo Corporation in Japan. However, this was partially offset by an increase in process systems and disposable sales. Gross profit was $73,000,000 for the 9 months ended September 30, 2023, compared to $98,000 for the 9 months ended September 30, 2022. Gross margin was 37% for the 9 months ended September 30, 2023 compared to 46% for the 9 months ended September 30, 20 22. The decrease in gross profit and gross margin was attributable to the decrease in revenue recognition from the Terumo distribution agreement.

Speaker 5

If we deduct the revenue recognition, our gross margins increased slightly. Research and development expenses for the 9 months ended September 30, 2023 were $6,390,000 compared to $6,89,000 for the 9 months ended September 30, 2022. The decrease was primarily due to a reduction in development expenses of Ice Tier Next Generation Single Probe System. In support of ongoing global commercialization adoption and in the anticipation of enhancing our U. S.

Speaker 5

Commercial sales infrastructure, sales and marketing expenses for the 9 months ended September 30, 2023, were $3,230,000 compared to $2,220,000 for the 9 months ended September 30, 2022. General and administrative expenses for the 9 months ended September 30, 2023 narrowed by 30 percent to $3,270,000 compared to $4,670,000 for the 9 months ended September 30, 2022. Total operating expenses for the 9 months ended September 30, 2020 3 were $12,89,000 compared to $13,790,000 for the 9 months ended September 30, 2022. The decrease in operating expenses was primarily attributable to reductions in general and administrative expenses as well as a decrease in research and development expenses, which were partially offset by the increase in sales and marketing expenses. Net loss reported for the 9 months ended September 30, 2023 decreased by 11% to 11 point $66,000,000 or $0.26 per share, compared with a net loss of $13,030,000 or $0.5 per share for the same period last year.

Speaker 5

As of September 30, 2023, the company had cash and cash equivalents including short term deposits of approximately $13,200,000 compared to 20 $3,600,000 as of December 31, 2022. We believe our efforts to reduce non revenue generating and clinical efforts cost will lower our monthly cash utilization, ensuring the company can meet its primary goals in 2024. Before I hand the call back over to the operator, Eyal and I will be in San Francisco during the JPMorgan Healthcare Conference in January, And we hope to see you there as well. Please reach to Michael Polyview at EVC Group if you would like to schedule a meeting. Operator, we will now open the call for Q and A.

Operator

Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. The first question is from Anthony Vendetti of Maxim Group. Please go ahead.

Speaker 6

Thank you. Hi, all. Hi, gentlemen. Hi, team. I just wanted to focus a little bit on a point you made in the press release as well as on the call is that even though the FDA denied the de novo classification and appeal that it is still approved, the persistent system is still approved here in the U.

Speaker 6

S. Can you remind us what indications it is approved for right now in the U. S? And then I have a follow-up question. Thank you.

Speaker 2

[SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Yes, thank you, Anthony Schein. So please respond on the approved indication in the U. S.

Speaker 6

Yes.

Speaker 3

Thank you, Eyal. So, the system is approved in the U. S. In several areas, including neurology, oncology, dermatology, gynecology, ENT and general surgery as well as thoracic, cholestry and proctology. And this is maintained without any change.

Speaker 6

Okay, great. And then

Speaker 2

so you submitted an appeal.

Speaker 6

You said that you expect the response to the appeal by the end of January. What are the options? If they deny the appeal, do you wait for the last patient follow-up data and then resubmit then? Or how does what are the next steps for the early stage low risk breast cancer

Speaker 2

approval? Thank you, Anthony, We believe that Aperi is the best way for us to come to an agreement with the agency on the comparator. This is the kind of a main issue. If they will not reopen the file, we of course could submit a new press submission and to come with an agreement with the FDA on the comparator. And then we will make a formal submission after the study will be completed.

Speaker 2

And as we mentioned, we have less than 20 patients that need to come to the final exam, and this supposed to be done during the Q1. So we could go to a press submission and other press submission and then to make the discussions and the agreement on the comparator and then to make submission for the entire study. Entire study, okay.

Speaker 6

And then you also have approvals in Canada and recently in Brazil. Can you talk about the initial sales traction in Brazil? And then how are sales going in China?

Speaker 2

Yes. So I mean,

Speaker 4

in Canada.

Speaker 6

Yes, in Canada.

Speaker 2

Brazil, we have to we started our commercial activities, the order has been shipped out as we participated to 2 conferences. We had a group of top KOLs who came to Israel a few months ago for training. So we could see it start of penetration and working with top KOLs to penetrate the Brazilian market. Canada will be part of our U. S.

Speaker 2

Activities, which will mainly focus on the U. S, but Canada is in our target. And I just came back from China and Japan business trip. And in China as well, we are exploring participating, achieving some coding and reimbursement and starting our penetration in the Chinese market.

Speaker 6

Okay. And I know you're working with Medtronic there. In Japan, you're working with Terumo, the largest medical device company in Asia. Can you talk a little bit about that? And then I'll turn it back over and hop back in the queue.

Speaker 6

Thank you.

Speaker 2

Yes. In China, we have in portal Turing Medical, who is like the official master distributor, and he is working with Medtronic as well. In Japan, Chirumu is busy working to get the regulatory approval. And as soon as they will get the regulatory approval, they will start to sell. And meanwhile, IQ is selling in Japan directly under Doctor.

Speaker 2

Importation license. And as soon as TORONTO will get the PMDA regulatory approval, they will start to do all the sales and marketing synergies in Japan.

Speaker 6

Okay, great. And I'd just like to conclude with, we stand I stand personally with Israel's fight against terrorism, And we wish you, your company and everyone in Israel best of luck and Godspeed.

Speaker 2

Thank you. Thank you. Thank you for your great support.

Operator

The next question is from Ben Haynor of Alliance Global Partners. Please go ahead.

Speaker 7

Good day, guys. Thanks for taking my questions. First off for me, and I'm sorry if I missed this, but what is the FDA looking at as a comparator group?

Speaker 2

The local hi, Ben. They are looking to comparator of local recurrence for standard of care, which mean lumpectomy.

Speaker 7

Okay. And what you submitted, if I'm not mistaken, is for patients that are at high risk of surgery, as in not suitable for surgical alternatives. Is that right?

Speaker 2

Yes. Fai, please elaborate on the 510 de novo that we submitted on October last year?

Speaker 3

Yes, sure. The original submission the original de novo submission and the original indication was indeed for the high risk to surgery, which is a subpopulation of the I3 study. In our last material that was sent to the FDA, we showed that the results the estimated result of the 5 years follow-up of the entire population is comparable to the start out of care, which is the lumpectomy.

Speaker 7

Okay. I mean, I guess, to me, it seems like kind of an odd competitor for the FDA to choose. I mean, to me, it'd be kind of like saying, while we were trying to evaluate the swimming performance of college athletes is kind of the standard. And then we go in, we want to evaluate the FDA says, we want to evaluate the swimming performance

Speaker 8

of toddlers or quadriplegics or something that doesn't compute, at

Speaker 7

least in my mind.

Speaker 8

And maybe that's more of a rhetorical question than anything. So I don't know if there's any commentary there or if you'll put that one line.

Speaker 6

Line?

Speaker 2

Ben, they would like to compare it to stand out Oscar. I believe that we will be able to get it via the appeal process, which will take the discussion also to management and fresh eye. And I believe that they will be open and up to discuss this comparator to come to an agreement and then we will be able to make the final submission.

Speaker 7

Okay. That's fair enough. And then lastly for me, just any color you can share on how the hands on cryoablation session went for you guys at SIRCE?

Speaker 2

Lalit, please elaborate on the success that we had in at Silfe?

Speaker 4

I can share that it was overbooked. There is a room for a certain amount of people and they had to pre register and the room was full and there was a waiting list. And in all, whenever we do a hands on, we see that we have a full house and there is a lot of engagement, a lot of interest. And then after the workshop, we have people coming to ice your boots to learn more. And one more thing to elaborate on that is a clear benefit of iCURE versus other companies that are working in cryoablation.

Speaker 4

With our liquid nitrogen technology, we're able to perform workshop and demos at our booth freely versus other companies that need restricted area, restricted room, specific workshop in order to perform cryoablation with argon based system. So for iCURE, the buzz around the workshop, which again is very nicely attended, is not just during the workshop, but also on our booth whenever the exhibit is open. We are doing like a free workshop to everyone who attends the booth and it's always very nicely attended and we follow-up later on with increased demand of new potential customers.

Operator

The next question is from Kent Oliver of Brookline Capital Markets. Please go ahead.

Speaker 8

Great. Thank you and good day. First, I just want to follow-up on the discussion regarding the competitor group. Is the basic challenge here that the subpopulation you defined as part of your filing probably hasn't been studied with the same definition in other populations, because I remember from talking when you had one of your other KOLs on a call talking about the filing that some extent you need to work out with FDA the actual definition of this patient population to proceed with the filing. Is that a pretty fair assessment of

Speaker 6

the work you need to do here?

Speaker 2

Shai?

Speaker 3

Yes. Thank you for the question, Ken. So, I would say that the main argument and the reason why we are appealing is because of the new cited article that FDA cited in their denial letter, which needs to be incorporated into the comparator. And I still did not have a chance to work with the FDA because of the timing of this cited article. In our appeal, what we would like to do with the FDA is to incorporate this new cited article into the meta analysis that was submitted in the past and compare it to the results of the I3 interim analysis.

Speaker 8

And to be clear, the inclusion of that article is part of what you're doing as part of the appeal?

Speaker 3

Yes. So, in the appeal, we have referred to this new cited article and showing FDA how it is incorporated and how it is compared to our results.

Speaker 8

Perfect. Thank you very much for that. How quickly can you if you have to refile after or refile however we should word it after the last visit assuming you don't get approval, how quickly are you able to complete that process?

Speaker 2

Thank you, Kempe. Assuming that the last patient will come to the final exam during the Q3, I believe that by summer next year, we will be able to submit for the entire population of the IH3 study. So basically, next summer, we are planning to make the submission for the final study. Thank you.

Speaker 8

And then just turning to 1 or 2 financial questions. Are there any potential distribution additional distribution deals that you could sign this year?

Speaker 2

Chemp, I will reply to date. So until in the next 6 weeks that some of the or during the Q4, we are not going to have any additional new distribution agreement. We have materialized mainly the new distribution agreement that we signed like Portugal, which again is extremely important for us to for them to help support them for better penetration. Same like Brazil, the team just came back like 2 or maybe less than 2 weeks ago from 2 important conferences in India and some work there with existing top KOLs like Tata Memorial Cancer Center. So we are mainly anxensizing and deepens our work with the existing new agreements and our existing customers.

Speaker 8

Thank you. And my last question relates to the expense controls. How significant reductions or tightening, just how should we think about the how the spending will proceed from here as you work through the process with FDA?

Speaker 5

Yes. So thank you, Kempe. So as I said earlier, we had $13,200,000 at the end of the quarter And the cost reduction that we're doing is basically meant to give us some more time to do our plans in 2024. And I believe that it will give us the opportunity to perform our plans in the next year. So we will, of course, increase or let's say, focus in our efforts to increase sales and also to complete all the necessary submissions and everything that is needed for the FDA approval.

Speaker 5

And this is what we will focus in in the coming months.

Operator

The next question is from Yi Chen of H. C. Wainwright. Please go ahead.

Speaker 9

Thank you for taking my Is FDA's approach to selecting comparative group not only affecting the de novo application, but also going to affect the future application for the entire study population? And is that one of the reasons you need to appeal for the de novo application at this time instead of just waiting to file the future application for the entire study?

Speaker 6

[SPEAKER DOCTOR. PAVEL MASLOVSKIY:]

Speaker 2

PAVEL MASLOVSKIY:] Thank you, Qing. Basically speaking, the comparator that we are going to agree with the FDA, it will be for lumpectomy for low risk early stage breast cancer patients. So for them, it will be the same comparator for the high risk subgroup of patients and also for the entire study. So the same agreement will support us in those two cases and we will see if we will be able to get the first indication or by the time, like Shay mentioned, end of January, we will be so close to finalize the data. So most probably, we will just use this comparator in order to make a new submission for the entire study, which this was our main goal and our primary endpoint.

Speaker 2

We tried to have first indication based on our very good and excellent interim results, but the main goal remains to submit for the study after full 5 years follow-up. So the comparator will be for both cases.

Speaker 5

Okay, got it.

Speaker 9

And I noticed that the company's top line revenue in the 3rd quarter appears to be lower than the 1st and second quarter. Could you comment on how the revenue what's your expectation on how the revenue is going to trend going forward? And what are the current hurdles for this growth the sequential growth to occur?

Speaker 2

Roman?

Speaker 5

Yes. So, again, thank you, Yi. Yes, the 3rd quarter was a little bit challenging. Usually, we see that the 3rd quarter is not an easy quarter, mostly because of summer vacations. So we see sales are a little bit slower.

Speaker 5

We don't give guidance for the whole year. So I can't really give you any guidance on number for the rest of the year.

Speaker 9

Okay. But could you comment on any available hurdles in the market that will prevent you from growing faster?

Speaker 5

No, nothing special. Of course, we were happy if you would have the FDA approval. This would definitely assist us in penetrating the market. But we do have sales before the denial letter from the FDA, and we do have sales also now. So we don't really see any significant effect on our current sales.

Speaker 5

And as you can see, we had an increase of 11% in sales of products in this year versus last

Speaker 3

year.

Operator

This concludes the Q and A session. Eyal Shamir, would you like to make your concluding remarks?

Speaker 2

Thank you, Yoni, and thank you everyone for participating on our call today. Despite the challenges we are facing here in Israel, our entire team remains committed and continue to put our best into bringing Crozent to doctors and patients who clearly appreciate the benefit as an alternative to open surgery. Our ICE risk trial, which is being performed in the U. S. Is unaffected.

Speaker 2

We are working closely with our global distribution partners to to ensure uninterrupted distribution and support for ProSense so that patients can receive the care they deserve. We thank all our investors for your continued support and confidence in ICURE. Thank you.

Operator

This concludes the icure 3rd quarter 2023 results conference call. Thank you for your participation. You may go ahead and disconnect.

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