IceCure Medical - Q1 2022
May 18, 2022
Transcript
Operator (participant)
Welcome to IceCure's first quarter 2022 results conference call. Management will provide an overview of IceCure's financial results as well as clinical and operational highlights. On the call today are IceCure's CEO, Eyal Shamir, and CFO, Ronen Tsimerman. They are joined today by Dr. Richard E. Fine. Dr. Fine is a trial investigator for IceCure's ICE3 clinical trial on cryoablation of small low-risk breast cancer. Dr. Fine is also a past president and chairman of the American Society of Breast Surgeons, program director of the Breast Surgical Oncology Fellowship, and director of education and research at the Margaret West Comprehensive Breast Center in Germantown, Tennessee. Following the presentation, IceCure's management and Dr. Fine will be available for a question and answer session. I will now take a brief moment to read the safe harbor statement.
This presentation contains 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. 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, IceCure is using forward-looking statements in this presentation when it discusses pursuit of regulatory approval and FDA review, strategic plans, commercial growth, expansion of clinical applications with its minimally invasive cryoablation technology, advancing regulatory and commercial strategies, and expected quarter-over-quarter revenue variations for future periods. Because such statements deal with future events and are based on IceCure's current expectations, they are subject to various risks and uncertainties, and actual results, performance, or achievements of IceCure could differ materially from those described in or implied by the statements in this presentation.
The forward-looking statements contained or implied in this presentation 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 ending December 31, 2021, filed with the SEC on April 1, 2022, which is available on the SEC's website, www.sec.gov. The company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law. I will now turn the call over to IceCure CEO, Eyal Shamir.
Eyal Shamir (CEO)
Hello, everyone, and thanks for joining our first quarter 2022 call today. We will start with a review of our significant business development since the beginning of the year. I will turn the call over to Ronen for an overview of the financial results. We will then turn the call over to Dr. Richard Fine. We are grateful to him for sharing his time with us today. Dr. Fine is an investigator of our ICE3 clinical trial who uses ProSense with his patients. He can provide valuable insight on ProSense and how it can potentially optimize treatment in a low risk and early stage breast cancer. On the commercial front, we started the year strong due in large part to the reopening of post-pandemic travel, making in-person business and clinical visits a reality again.
Several new ProSense systems were installed with our global customer base. I will remind listeners that ProSense is approved for various indications in 14 countries. We have a commercial presence in 20 countries, including the U.S. We have CPT I code for coverage of cryoablation procedures such as kidney, liver, lung, and bone cancer, fibroadenoma, which is benign breast tumors. We have also CPT III code for breast cancer. We have resumed in-person practitioner site visits and have been conducting hands-on demos and training sessions. Our business development team is now more effectively able to pursue and close on sales opportunity. We are happy to report that our sales in the U.S. increased in Q1. ProSense was extremely well received at three very important oncology conferences in the U.S. and Europe.
Through data presentations and hands-on demos and symposia, we have generated a great deal of excitement for ProSense. Notably, at the 23rd annual meeting of the American Society of Breast Surgeons in April, IceCure publication regarding our ICE3 breast cancer cryoablation study interim results, originally published in the scientific journal Annals of Surgical Oncology, was chosen as one of the best paper of 2021 from thousands of breast cancer articles published annually. Dr. Helen Pass, the past president of the American Society of Breast Surgeons, presented the paper as part of her annual address at the conference.
The American Society of Breast Surgeons is a highly regarded and influential organization that sets the treatment guidelines and standard of care for breast cancer in the U.S. These presentations of our study is very significant in our view, and it point to the potential improvement ProSense can deliver in the standard of care in a low risk early stage breast cancer. Dr. Pass presentation was made to a large audience of breast surgeons and related medical professionals who were attending to the conference in person and online. During the second quarter, we continued to work towards U.S. FDA approval for ProSense in early stage breast cancer. We had previously filed our pre-submission package with the FDA in the end of November of last year. In our final submission, we plan to suggest a De Novo classification, including requests for a sprint discussion under the FDA procedures.
The proposed intended use is for early stage breast cancer patients at high risk for surgery. Our continued discussions with the FDA is part of our Breakthrough Device Designation we were granted last year. Our published ICE3 interim trial results in this indication show clear benefit, including that almost 98% of the patients who received the ProSense system cryoablation treatment are recurrence free, with 76 patients having reached five years post treatment. 98% of the doctors and 95% of the patients reported satisfaction with the cosmetic results. I will now turn the call over Ronen for the financials.
Ronen Tsimerman (CFO)
Thank you, Eyal. IceCure has successfully transitioned into a commercial stage company while continuing our innovative clinical and R&D work. Our quarter-over-quarter revenues vary, and we expect this to continue into the foreseeable future due to revenue recognition from international distribution agreements, as well as variability in sales. For the three months ended March 31, 2022, revenue decreased by 48% to approximately $750,000, compared to $1.4 million in the first quarter of the last year. The decrease is due to decreased revenue recognition of approximately $400,000 from the distribution agreements with Terumo for the commercialization of ProSense to treat malignant breast tumors in Japan, Singapore and Thailand, and a decrease in sales in the Asia region, which is impacted by COVID surges and associated restrictions on commercial activity.
These decreases were partially offset by an increase in sales in the U.S. Gross profit was approximately $440 million for the three months ended March 31, 2022, compared to approximately $940 million for the same period in 2021. Gross margin was approximately 58% for the three months period ended March 31, 2022, compared to approximately 65% for the first quarter of 2021. The decrease in gross margin is mostly attributable to a decrease in revenue recognition from the Terumo distribution agreements. Research and development expenses for the three months ended March 31, 2022, were $2.4 million, compared to $1 million for the period last year. The increase is attributed to the acceleration in the development of IceCure's next generation single-probe system and clinical and regulatory activities.
Selling, marketing, general and administrative expenses in aggregate for the three months ended March 31, 2022, were $2.5 million, compared to approximately $1 million for the first quarter of 2021. The increase is attributed to the company's expanding commercialization efforts and to the increased Nasdaq listing related expenses. Total operating expenses for the three months ended March 31, 2022, were approximately $4.9 million compared to $2.1 million for the same period last year. The increase in operating expenses is attributable to increased development, commercialization and Nasdaq listing related activities.
As a result of lower revenue and increased operating activities, net loss reported for the three-month period ended March 31, 2022, increased to approximately $4.4 million or $0.12 per share, compared with a net loss of approximately $1.4 million or $0.07 per share for the same period last year. As of March 31, 2022, the company had cash and cash equivalents of approximately $22.4 million, compared with approximately $25.6 million as of December 31, 2021. I will now turn the call over to Dr. Fine. Dr. Fine has been a breast surgeon since 1988 and has served as a board member or trustee in organizations including the National Consortium of Breast Centers, the National Accreditation Program for Breast Centers and the American Cancer Society.
Dr. Fine was the president of the American Society of Breast Surgeons in 2003, 2004, and chairman of the board there from 2015-2018.
Richard Fine (Director of Education and Research)
Thank you. I wanted to review, I know that, Mr. Shamir mentioned that we had published the interim results of the cryoablation without excision for early-stage breast cancer in the prestigious journal, Annals of Surgical Oncology this past fall. It was brought to the attention of the members at the American Society of Breast Surgeons as one of the better papers from the year. The ICE3 trial, I was actually on the scientific advisory board in designing the trial. The trial goal was to evaluate the safety and efficacy of breast cryoablation in older patients with low-risk, early-stage breast cancer to see if they would benefit from a nonsurgical treatment, avoiding the surgical risk of going to the operating room for surgical removal of a tumor. This was a prospective multi-center trial. There were approximately 20 sites across the country.
Our site in Germantown, Tennessee, at the Margaret West Comprehensive Breast Center, we actually put on 50 of the 194 patients that were received successful cryoablation per the trial protocol. The exciting results at the interim at three years was that only four out of the 194 patients, or 2%, had had a recurrence. This was showing that this was a very promising alternative to surgery, but it also offered the benefits of a minimally invasive procedure with minimal risk. I'll be happy to answer at the end any questions about the trial. We also Mr. Shamir mentioned the coding for cryoablation.
With the help of The American Society of Breast Surgeons, as well as other organizations such as the American College of Radiology, a couple of years ago, we were very successful in getting a category three new technology code for cryoablation of breast cancer. The reason that's important is because as the utilization increases and continued work on treating patients with breast cancer, we will be able to convert this category three code to a category one code, which already exists, as Mr. Shamir mentioned, for other areas of cancer as well as for benign breast tumors. The last thing that I wanted to mention was the excitement about cryoablation for breast cancer that exists today. The American Society of Breast Surgeons has been working on developing a registry to expand the indications for cryoablation from the ICE3 trial.
We are expanding the age group down to the age of 55. We're also going to more standardize the treatment so that we can evaluate post cryoablation radiation and its effect on the patient's breast. That's an exciting trial to answer many questions that were brought up on the ICE3 trial. The other thing that's exciting is that I have been approached multiple times from centers across the country, including Mayo Clinic in Rochester, as well as the University of Washington. They're all interested in creating their own cryoablation registries or trials. There is a lot of excitement around the country in terms of using cryoablation in the appropriately selected patients for the purpose of avoiding surgery in these patients.
That is a quick summary of the points I wanted to make, and I'm happy to answer any questions that those points bring up.
Operator (participant)
Thank you. Ladies and gentlemen, at this time, we'll begin the question and answer session. If you have a question, please press star one. If you wish to cancel your request, please press star two. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be pulled in the order they are received. Please stand by while we pull for your questions. The first question is from Ben Haynor of Alliance Global Partners. Please go ahead.
Ben Haynor (Managing Director and Medical Technology Research Analyst)
Good morning, gentlemen. Thanks for taking the question. Just first for me, on the FDA and where you're at with them. You've got the pre-submission package in. You're planning to suggest a De Novo classification and you've got a sprint discussion request in. Is that correct? You know, when do you expect to submit for De Novo 510 clearance?
Eyal Shamir (CEO)
Thank you very much, Ben. This is Eyal, the CEO. We are continuing in process of sharing. We're working closely with the FDA in order to lead our submission for clearance of cryoablation of early-stage breast cancer for patients who are at high risk for surgery as a 510(k) De Novo. This is going to be our first approach. We'd like to remind all of us that the endpoint in the ICE3 study, which required a full five-year follow-up, which will be completed in the spring 2024, as the last patient enrolled February 2019. Which means full five years will be February 2024. Our approach after we got the Breakthrough Device Designation granted and the sprint discussions with the FDA is to get the first indication of a low-risk breast cancer and high risk for surgery.
As soon as we will finalize this process and we will have a full submission, we will, of course, update the investors, accordingly. This is still in process.
Ben Haynor (Managing Director and Medical Technology Research Analyst)
Okay. You don't have a timeline necessarily either way, and that'll be kind of figured out.
Eyal Shamir (CEO)
Yeah. We are still working with the agency, and as soon as we will finalize it, we will be able to make the submission. Of course, we will have a full announcement.
Ben Haynor (Managing Director and Medical Technology Research Analyst)
Okay. Got it. On the regulatory front in China, obviously they've had their more COVID lockdowns. Have those impacted the NMPA as well? And you know, any update to the clearance timeline in China?
Eyal Shamir (CEO)
Yeah. We expected to have our probe approval by September, October this year. We hope that the lockdown both in Shanghai and in Beijing will not delay too much our assumption at the moment that it will be before the end of this year. This is the assumption, our discussions with the NMPA China as well.
Ben Haynor (Managing Director and Medical Technology Research Analyst)
Okay. Got it. For Ronen, just how do you expect the operating expenses to kind of track throughout this year? I mean, does Q1 kind of look like, you know, a good run rate as we, you know, move forward throughout the year?
Eyal Shamir (CEO)
Ronen?
Ronen Tsimerman (CFO)
Thank you, Ben. We accelerated our research and development of our next generation single-probe and also our next generation multi-probe systems. As we push forward, of course, the expenses also increase. I would expect that the burn rate will be, you know, in this area. Again, it depends on how strong and how fast we're pushing forward. These decisions are made accordingly and may be made accordingly in the future.
Ben Haynor (Managing Director and Medical Technology Research Analyst)
Okay. Got it. Dr. Fine, just, you know, it sounds like there's some excitement kind of brewing around cryoablation with, I think you mentioned Mayo and other centers looking to do their own studies. Can you maybe characterize just kind of the general level of awareness and, you know, receptiveness to cryoablation amongst your fellow colleagues?
Eyal Shamir (CEO)
I think-
Richard Fine (Director of Education and Research)
Yes.
Eyal Shamir (CEO)
Yes, Dr. Fine, please go ahead.
Richard Fine (Director of Education and Research)
Oh, sorry. Okay. I think that, you know, you're right. There's a lot of excitement, and I think that the publication of the interim results of ICE3 is what a lot of people were waiting for. They wanted to see that patients who did not have their tumors removed and that were treated with cryoablation and followed, that they did well. As of April, 75 of the patients that were entered in the trial have completed five years of follow-up, and there's only been one additional recurrence in that time. That's showing results that are very equivalent to breast-conserving surgery. With that publication, I think that there's been a lot of excitement. People are recognizing that this is going to be a good alternative for a subgroup of patients. Patients that have tumor biology that's more favorable.
One of the things that's happened in breast cancer is we've been able to recognize that cancers are different. Some are very aggressive, but there are a lot of them that are not aggressive. If we can treat the ones that are not as aggressive without having to go to surgery, that's an ideal situation.
Ben Haynor (Managing Director and Medical Technology Research Analyst)
Okay. Makes sense. Then just kind of curious on the receptiveness of your patients when, you know, they have a cancer that would be treatable with cryoablation. I mean, do the patients kind of gravitate towards cryoablation over surgery as well?
Richard Fine (Director of Education and Research)
I was actually pleasantly surprised during the years that I was putting the patients on the trial. I didn't have to work very hard at all in terms of, encouraging patients to participate. When you mention to a patient the nonsurgical option, and you've already explained to them that they have a tumor that has some very favorable features, they gravitate towards a nonsurgical option, very readily. Even those patients that required going to surgery to check their lymph nodes because they were in the younger age group, even those patients still wanted to have the cryoablation on the breast. I think it's more about having a scar on the breast, having volume removal from the breast, and those things excite patients about not having to have surgery.
I was actually very pleasantly surprised how women actually were very much excited about being able to participate.
Ben Haynor (Managing Director and Medical Technology Research Analyst)
Okay. You would expect, you know, once you have the FDA clearance and, you know, hopefully before too long a CPT I code that, for the patients that would be good candidates, quite a lot of them are going to choose cryoablation. Is that a fair characterization?
Richard Fine (Director of Education and Research)
I feel very confident. Yeah, I feel very confident in that.
Ben Haynor (Managing Director and Medical Technology Research Analyst)
Okay, great. Then do you have a sense on the timeline, what that would look like to get the CPT I code? I mean, is that like in a 2025 or
Eyal Shamir (CEO)
Usually, Dr. Fine, he's also the chairman of the CPT and coding for the American Society of Breast Surgeons and they supported us very much in order to get the CPT three code. Firstly, we need to get the FDA clearance and then to apply to move from CPT III to CPT I, and of course, which will come together with coverage and reimbursement. I think that 2025 this is possible to have CPT one and coverage and reimbursement. This is just an assumption. We need to work with the different partners in that.
I believe that at the beginning, we will be able, or the users will be able even to start with cash-pay patients, who will pay cash for that kind of treatment until that it will be fully covered by CPT and coding and reimbursement and coverage.
Ben Haynor (Managing Director and Medical Technology Research Analyst)
Okay. That's helpful. I think that's all I had, gentlemen. Thanks for taking the questions and congrats on the progress.
Eyal Shamir (CEO)
Thank you. Thank you very much.
Operator (participant)
The next question is from Kemp Dolliver of Brookline Capital Markets. Please go ahead.
Kemp Dolliver (Director of Research and Senior Analyst)
Hi. Good day to everybody. First question relates to the FDA discussions. You know, previously it sounded, the impression we were getting was that you thought you would be able to file with FDA sometime this calendar year or maybe early next year. Has the tenor of the discussions changed or, because you also mentioned having the five years of data available in early 2024. Can you provide more detail regarding the status of the discussions and where you're thinking of?
Eyal Shamir (CEO)
Yeah. Thank you very much. As I mentioned, our intention, our plan and discussions with the FDA, with the agency is to do the first submission during this year. For the first indication, which I will repeat again, will be for early-stage breast cancer for patients who are high risk for surgery. We don't want to wait until early 2024 when the ICE3 study will be completed, and all patients will pass five years follow-up. This is still a plan to do the submission this year.
Kemp Dolliver (Director of Research and Senior Analyst)
Got it. In a way, the way to think about this first submission would be a subset of the appropriate patient population, and then when you have the balance of the data, you would then file for the broader population that was in the trial. Is that a?
Eyal Shamir (CEO)
Yeah.
Kemp Dolliver (Director of Research and Senior Analyst)
Pretty fair description?
Eyal Shamir (CEO)
Yeah. Absolutely.
Kemp Dolliver (Director of Research and Senior Analyst)
Okay.
Eyal Shamir (CEO)
After early 2024, we will be able to do a submission for the indication of a low risk early stage breast cancer, which is the indication that we started the ICE3 study.
Kemp Dolliver (Director of Research and Senior Analyst)
Right. Okay, good. Just to follow up on this, and maybe Dr. Fine can give some clarity around it. How significant is that distinction with regard to the patient population that you would be able to treat under the initial submission or indication versus then the second indication? You know, adoption rates for new procedures typically take, you know, several years anyway. These types of submissions are probably a gating factor initially in those adoption rates. What perspective do you have on that, Dr. Fine?
Richard Fine (Director of Education and Research)
Yeah. I feel like that what you've got is the subgroup of patients that we're talking about high risk for surgery. When we are making the submission, we're trying to keep the high risk for surgery criteria somewhat broad because a lot of the patients that would meet criteria in general are older patients that have, you know, usually will have hypertension, they'll have diabetes, they'll have if they've been smokers, you know, got lung disease and things like that. By keeping the criteria and the description of what makes a patient a higher surgical risk, I think that we'll be able to keep the eligibility of patients to be treated under that narrower indication. We'll be able to keep that eligibility criteria pretty broad. Does that make sense? We're trying not to.
Kemp Dolliver (Director of Research and Senior Analyst)
Yeah.
Richard Fine (Director of Education and Research)
Not make it so narrow that we can only, let's say, you know, treat a patient who is on death's door. We're gonna be treating patients who are older that have lots of medical problems, and so that's how we're trying to frame the patient at high risk.
Kemp Dolliver (Director of Research and Senior Analyst)
Right. Okay. No, that makes a lot of sense, clinically and also to, I think, to laypeople. Just moving on to other topics. You know, Terumo is still a significant contributor to your business. You know, you mentioned the decline in Q1. Is there any sign of a recovery in the Terumo markets in Q2?
Eyal Shamir (CEO)
No, no. Thank you, Kemp, for these questions. What Ronen mentioned in his explanation, if we all remember, IceCure got some distribution rights from Terumo, Japan, for the distribution agreement that we signed with them for Japan, Singapore, and Thailand. This, according to some rule with accountant, we need to recognize all the time. And of course, during a period of time, that revenue recognition, you know, is going down. At Terumo, Japan, especially after the pandemic, they are still extremely busy working for the PMDA application and the regulatory approval in Japan. Singapore and Thailand, they started to sell as IceCure got the regulatory approval for that. Just the revenue recognition declined, not from the business perspective.
This is part of the, of the revenue that we did over time according to the operating rules. The business from Japan mainly will come in the future like we are growing some of the business from Singapore and Thailand that they started to penetrate the market.
Kemp Dolliver (Director of Research and Senior Analyst)
Okay. If I can rephrase that, there's an element of the revenue decline that is not related to the actual activity levels because you get revenue from both actual shipments to them, and then I think, if I remember correctly, there may be some amortization of revenue, or recognition of deferred revenue.
Eyal Shamir (CEO)
Yeah. For the upfront distribution rights, we got from them $9 million just as we signed with them distribution agreement. This is not all according, you know, to sales and day-to-day activities. This is what Ronen explained as the revenue recognition.
Kemp Dolliver (Director of Research and Senior Analyst)
Excellent. Okay. Thank you. This is probably another question for Dr. Fine, but what's the timeframe that you expect for the implementation of the registry and any thinking regarding the institutions that have expressed interest in their registries and trials? You know, how quickly you expect these processes to start?
Eyal Shamir (CEO)
I will start to answer that. We are working very closely and of course, together with Dr. Fine and the board of the society, the leadership of the society, to finalize the trial that basically supposed to be under the rules of the society. After everything will be finalized on that from the protocol side, from the group side, number of patients, especially on number of sites, then of course, we will do a proper announcement.
The society, we'd like to work with IceCure very closely and of course, we would like to work together with them, like, Dr. Fine mentioned, to reduce the patient age, and to make it, you know, wide, quite wide, road, and to work closely with additional sites. We will be able to start to work. On this study and to continue to collect data, which will be additional evidence-based to the medical community and of course, the future publication. Dr. Fine, if you have anything to add.
Richard Fine (Director of Education and Research)
Yeah. Okay. I'll add a couple of things. We have been working on the protocol because we want the protocol for the registry to be very strong. We have already had the Society Research Committee review it, give us some comments back. We've been addressing those comments and also worked with a consultant to make sure that the design of the registry will also be beneficial for the FDA looking at, you know, the submissions, 'cause all of this data that is collected over time is gonna be helpful. We're working very diligently to get all of these things accomplished. I would feel like that our timeline or goal would be hopefully to get this started towards the end of the summer or the beginning of fall.
That would be my wishes for that to be the latest.
Kemp Dolliver (Director of Research and Senior Analyst)
Fabulous. Thank you. You know, just one last question. There was reference in the discussion around G&A to Nasdaq listing costs. Are those costs that are ongoing in nature, or were there some one-time expenses in the first quarter?
Ronen Tsimerman (CFO)
Thank you for the question. Well, as you know, insurance costs have risen in the last two years, especially for Nasdaq-listed companies. We are looking at insurance costs and other costs. I can't really say what are going to be the insurance costs, for example, in the next insurance submission. But again, I do not expect that these costs will decrease significantly. I believe you can look at them as a cost that will go on.
Kemp Dolliver (Director of Research and Senior Analyst)
Great. Thank you so much.
Operator (participant)
There are no further questions at this time. Mr. Shamir, would you like to make your concluding statement?
Eyal Shamir (CEO)
I would like to thank especially Dr. Fine and all the participants for taking the time to join us today. I wish all of us excellent and best day. Thank you very much.
Operator (participant)
Thank you. This concludes the IceCure Medical Limited.