IceCure Medical - Q4 2022

Transcript

Operator (participant)

Good morning, 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 Todd Kehrli. Please go ahead.

Todd Kehrli (Head of Investor Relation)

Thank you, operator. Welcome to IceCure Medical's conference call to review the financial results for the 12 months ended December 31st, 2022, and to provide an update on recent operational highlights. We ask that you refer to this morning's press release and 20-F to review the audited 2022 year-end financial results. Participating on this morning's call are IceCure Medical's CEO, Eyal Shamir, and CFO and COO, Ronen Zimmerman. After the prepared comments, Eyal and Ronen will be available to address your questions. Before we begin, I'll take a moment to read a statement about forward-looking statements. This call and the question and answer session that follow it 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.

Words such as expects, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are identified or intended to identify forward-looking statements. For example, we are using forward-looking statements in this presentation when we discuss the achievements we expect to accomplish as we continue to advance our growth strategy, our positioning to make significant commercial advances in key markets, pursuit of regulatory approvals in various jurisdictions, expansion of clinical applications, release of results from our clinical trials, potential market adoption and future sales of IceCure's Minily and Basic cryoablation technology, advancing regulatory and commercial strategies, strategic plans and our belief that we are well capitalized to succeed on commercial opportunities to increase shareholder value.

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 and achievement of IceCure could differ materially from those described and or implied by 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 described in the Risk Factors section of the company's annual report on Form 20-S for the year ended December 31st, 2022, filed with the SEC on March 29, 2023, 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 now turn the call over to IceCure Medical's CEO, Eyal Shamir. Eyal, please go ahead.

Eyal Shamir (CEO)

Thank you, Todd, and welcome everyone. My comments will be brief and will focus on the significant achievements we accomplished during the year as well as those we expect over the coming months as we continue to advance our growth strategy. I will begin with yesterday's development, the receipt of regulatory approval in China for our disposable cryoprobes. The latest approval allow us to use the IceSense3 disposable cryoprobes in combination with our previously approved IceSense3 console. This is an exciting catalyst and we believe that this will generate increased commercial activities in China. This will be driven by our exclusive distribution agreement in China with Shanghai Medtronic Zhikang Medical Devices Co. Ltd., an affiliate of Medtronic plc and Beijing Turing Medical Technology Co. Ltd.. If you recall, the initial three years period of this agreement includes minimum purchase target of $3.5 million.

In the U.S. market, which we believe represents the sizable addressable market. The revenue trends we are currently experiencing are encouraging and consumable sales represented 20% of our 2022 revenue, almost double the 11% reported in 2021. Globally, our consumable sales accounted for 43% of our 2022 revenue, up from 29% in 2021, indicating increased physician awareness of our system. On the regulatory front, we are awaiting the U.S. FDA response to our regulatory filing for ProSense in treatment of early-stage breast cancer. We believe based on our data emerging from our ICE3 trial, ProSense is a highly beneficial, minimally invasive option for physicians treating breast cancer to address the initial indication market of 43,000 women in the U.S. annually.

Moreover, last year we received an initial reimbursement code from the Centers for Medicare & Medicaid Services to help offset some of the costs for the treatment with respect to the facility fee. Globally, we're expecting responses to applications filed in several other countries, including Brazil, Vietnam and Canada. On clinical front, we reported positive interim results from the ICESECRET study, which continues to validate that ProSense is a safe and effective in treating kidney cancer tumors with an 89.5% recurrence-free rate. In summary, our results demonstrate that we are a results-oriented company, and I believe we are well-capitalized to execute on commercial opportunities in the US and globally to increase shareholder value. With that, Ronen and I are ready to take your questions. Operator, we would like to open the call for questions.

Operator (participant)

Thank you. Ladies and gentlemen, at this time, we will 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, unlist the handset before pressing the numbers. Your questions will be pulled in the order they are received. Please stand by while we poll for your questions. The first question is from Kemp Dolliver of Brookline Capital Markets. Please go ahead.

Kemp Dolliver (Director of Research and Senior Analyst)

Hi. Thank you and good morning. I'll ask a couple questions and go back into the queue. Now that you have the approval in China, how will the rollout proceed? How much... Some of these decisions I acknowledge may be in the hands of your partners, but I'm assuming you'll... I mean, are you contemplating pursuing government reimbursement at some point, or strictly focused on the cash-pay market? You know, just I'll start with that.

Eyal Shamir (CEO)

Thank you, Kemp. You know, we are very excited about the opportunity in China. We always had believed China will be a growth market for our ProSense. Our partner in China, which is both mainly Shanghai Medtronic Zhikang, and together with Turing Medical, they will approach public hospitals mainly at the beginning, because most of those cases will be done in hospitals. Later, they will go for private clinics. Even in the public hospitals, they will be able to start with some co-payment by the patients, and in parallel, they will pursue for reimbursement in China.

Kemp Dolliver (Director of Research and Senior Analyst)

Okay. Very good. Thank you. Just switching to the U.S., you have been evaluating partnering versus self-distribution. You know, how has that whole process evolving over the last few months?

Eyal Shamir (CEO)

Yeah. You know, we are still in process on that. I think that it might be a combination of a direct sales team with some partners. This is still under evaluation as we did a strategic market approach and a market plan in order to enter the market. It might be some level of combination.

Kemp Dolliver (Director of Research and Senior Analyst)

Would that be by geography or some other criterion?

Eyal Shamir (CEO)

It will be by geography, but also by some other, you know, partnering that will have some benefits with specific organization of NDAs and other aspects which will help us to make the market penetration.

Kemp Dolliver (Director of Research and Senior Analyst)

Okay. Very good. Thank you. I'll be back in the queue.

Operator (participant)

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

Speaker 6

Hey, everyone. This is [Chet] on behalf of Yi. I'm sorry if I missed some of the information in your prepared remarks. My call was in and out. Any guidance on the anticipated sales in China this year or even next year would be helpful. Also, again, please bear with me if I missed it, any guidance for 2023, top line guidance for 2023. Also on ICE3, any other indications, are there any future data presentations that may happen this year? That'd be very helpful. Thank you.

Eyal Shamir (CEO)

Thank you very much. On China, you know, we are not giving a specific guideline on specific sales every year. At the minimum quantity agreement that we signed, the triangle agreement with Shanghai Medtronic Zhikang and with the Turing Medical, it's a minimum of $3.5 million for the next three years. Other than that, we are not giving a specific guideline on sales every year. You know, IceCure is running two sponsored trials. One of them is the ICE3 breast cancer cryoablation trial that we did the file, that we filed on October last year. And we have the interim results on the kidney that we published on last December. At this stage, we don't have other sponsored study. There are some other studies that they are investigating, studies, and they will make their publications and results, according to own study and time.

Speaker 6

Thank you. If I may sneak in one more quick question. Also, could you provide some color or elaborate on the impact that the CPT Category III code that was assigned to you by the CMS in November 2022, how has that impacted your, you know, marketing efforts or the uptake or adoption that you've seen in the U.S.? Any trends would be there after you've received the CPT code.

Eyal Shamir (CEO)

Yeah. As you mentioned, November 1st last year, we got a payment assignment from our CPT 3 code for breast cancer in a level of $3,468 for the first time ever. This will be effective after we will get the first FDA clearance. This will be for a facility fee. We could be able to offset some of the costs. After we will get the FDA, we will be able to start the process to move from CPT 3 code to CPT 1 code, which will include also the physician fee.

Speaker 6

Excellent. Thank you so much.

Operator (participant)

The next question is from Ben Haynor of Alliance Global Partners. Please go ahead. Ben Haynor, could you ask your question?

Ben Haynor (Managing Director)

Excuse me. Sorry, can you hear me, gentlemen?

Operator (participant)

Yes. Now we can hear you clearly.

Ben Haynor (Managing Director)

Got it. I apologize, I'm jumping between calls here. Just on the permission for a Category I CPT I code, do you still have enough society support and usage data to submit that next year? Could we expect, you know, a code to be in place, you know, come 2025? What's the approximate timeline team on that?

Eyal Shamir (CEO)

Yeah. Thank you very much, Ben. On 2019, when we did the submission to the AMA in order to create the CPT 3 code, we had the five societies. Of course, the first one and the most important one is the American Society of Breast Surgeons. The other four societies, including Interventional Radiology, supported that, and we are working very closely and participating to the Interventional Radiology society's meetings, and they would like to adopt cryoablation for breast cancer. They told us that they are going to fully support us for this application moving from CPT 3 to CPT 1 code. I believe that, during 2024, we will be able to make this process and to make the submission after we will collect all the relevant data, in front of the AMA, which they need to make a decision to move in CPT 1.

Ben Haynor (Managing Director)

Okay. Is there a chance that you guys might not even need to be kind of a sponsor of the CPT 1 submission? I read about another company recently in a different space that the societies, the relevant societies type of took it, are taking it upon themselves to bring it through the process. Do you think something that happens to you guys, how do you think?

Eyal Shamir (CEO)

Yeah. The breast cancer and the head of the coding and reimbursement committee of the American Society of Breast Surgeons, you know, they did it with a great support with and together with the American Surgery Society. They will give us the support, or they will make it, you know, by themselves.

Ben Haynor (Managing Director)

Okay. Great. Yeah, I know you guys have a lot of support. It's good to hear that. Then on the $2.5 million in minimum purchase targets for the Chinese distribution agreement with the affiliate Medtronic. I apologize if this has already been asked, is that $2.5 million over the next several in the next three years in the term of the agreement, or is that just for the current year's period?

Eyal Shamir (CEO)

No. The minimum quantity that they committed for the coming three years is the $3.5 million dollar.

Ben Haynor (Managing Director)

Okay, got it.

Eyal Shamir (CEO)

This is a minimum for next three years.

Ben Haynor (Managing Director)

Okay. Got it. You know, obviously there's always, you know, considerations when you're setting terms with a distribution partner anywhere. Are there any things that we could, we should be thinking about when it comes to the potential for extending that agreement? Is it something that, you know, you guys seem to see that they're hitting the ground running and generating a lot of sales for you guys? You know, would there be anything that would cause you to switch, try to switch to another partner? Or what kind of goes into a potential renewal there, to the extent you can discuss it?

Eyal Shamir (CEO)

You know, of course you would like, you would like to evaluate, you know, different aspects of calls, and the most important one is, you know, future sales, relationship with the different societies, creating, you know, guidelines, working on the reimbursements, you know, all the educational stuff, all the clinical support that they need to be. You know, it is not, you know, only sales. You know, all the KOL support, the clinical support, you know, especially for training at the beginning. We will evaluate like any other partner, all that aspect to be sure that they are delivering, you know, what we need in order to be very successful in the market.

Ben Haynor (Managing Director)

Okay. Got it. That's all I had. Thanks for taking the questions, gentlemen. Appreciate it.

Eyal Shamir (CEO)

Thank you, Ben.

Operator (participant)

If there are any additional questions, please press star one. If you wish to cancel your request, please press star two. Please stand by while we poll for more questions. The next question is a follow-up question from Kemp Dolliver of Brookline Capital Markets. Please go ahead.

Kemp Dolliver (Director of Research and Senior Analyst)

Hi. Thank you. Just quickly, I know you are reluctant to give specific guidance, but with regard to your spending this year, how should we think about it relative to 2022? That would be for all three expense cases.

Ronen Zimmerman (CFO and COO)

Eyal, would you like to take the answer?

Okay. We're expecting that 2023 will be quite similar to 2022. If you will look at the numbers, you will see that we are investing more in R&D and all the regulatory affairs and clinical affairs, and also in the marketing. From all these aspects, you can expect to see probably the same numbers. We are planning to spend a little bit more on marketing, especially in the U.S.

Kemp Dolliver (Director of Research and Senior Analyst)

Great. Thank you.

Operator (participant)

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

Speaker 6

Hey, this is [Chet] again, on behalf of Yi. Just a quick follow-up. I know of, I've seen that you've presented interim study results at the Urological Association conference in Israel. Please bear with me if you've already touched upon this in your earlier calls. What was the feedback from the physician community at that conference, with regards to the data that you're presenting?

Eyal Shamir (CEO)

I would like to be sure that you refer to the kidney cancer interim study that we published from the partner. This is what-

Speaker 6

Okay.

Eyal Shamir (CEO)

You know, the feedback that we got, you know, from the conference itself and with other KOL and physicians that we share this information in some of the events that we exhibited, like on February, in the interventional radiology meeting in India. January it was the Society Interventional Oncology in Washington D.C. You know, they believe that the results are very good, they see the benefits of using, you know, one probe instead of a multi-probe system. You know, in one probe, which is less costly than the two to three probes, that this is how they do when they work with the Galil Medical and Endocare argon and helium cryoablation technology.

From the results of complication, navigation time, costing, the three probes which cost much more and the reimbursement, for example, in the U.S., it is a same amount if you buy one probe or three probes. From the results, they believe that the results are promising in the interim, and they believe that this is an indication that they will be more than happy to use it. Actually, we are doing this study for clinical evidence. We have kidney cancer cryoablation as part of our intended use and indication to use both in Europe and also in other countries. They believe that the interim results are showing, you know, very promising results.

Speaker 6

Thank you so much.

Operator (participant)

There are no further questions at this time. This concludes the IceCure Q4 and full year 2022 results conference call. Thank you for your participation. You may go ahead and disconnect.