IceCure Medical Ltd. (NASDAQ:ICCM) Q3 2023 Earnings Conference Call November 15, 2023 10:00 AM ET
Michael Polyviou – EVC Group, Investor Relations
Eyal Shamir – Chief Executive Officer
Ronen Tsimerman – Chief Financial Officer and Chief Operating Officer
Shay Levav – VP of Regulatory Affairs, Quality Assurance & Clinical Applications
Tlalit Bussi Tel-Tzure – VP of Business Development and Global Marketing
Conference Call Participants
Anthony Vendetti – Maxim Group
Ben Haynor – Alliance Global Partner
Kemp Dolliver – Brookline Capital Markets
Yi Chen – H.C. Wainwright
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 Polyviou. Please go ahead.
Thank you, Tony, and welcome to IceCure Medical’s conference call to review the financial results for the nine 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 IceCure Medical’s CEO, Eyal Shamir, and the company’s CFO and COO, Ronen Tsimerman.
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 follows it contains forward-looking statements within the meaning of the Safe Harbor provisions of the Private Security Litigation Reform Act of 1995 and other federal security laws. Words such as expects, anticipates, intents, plans, beliefs, states, estimates, and similar expressions or variations of such words are intended to identify political 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 position to make significant commercial advances in key markets, pursue the regulatory approvals in various jurisdictions, including with respect to the appeal we file requesting review of the noble classification ProSense, expansion of political applications for retail results from our clinical trials, potential market adoption, and future sales of IceCure’s minimally invasive cryoablation technology, advancing regulatory commercial strategies, strategic plans, and our belief that we are in position to meet our primary goals in 2024.
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 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. The company disclaims any undertakes any intentional or obligation except 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 will now turn the call to IceCure Medical CEO, Eyal Shamir. Eyal, please go ahead.
Thanks, Michael, and hello, everyone, and thank you for joining us today to review our operating results for the nine months ended September 13, 2023. To begin, and on behalf of the entire IceCure 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 concern. 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 IceCure will laser-focus and we will continue to execute our plan of delivering our life-reserving technology to people around the world for improved healthcare outcomes. We will continue to push forward, and as reflected in several key developments that have achieved during the current quarter, we are also experiencing a high-tended level of interest for our ProSense system. We had some significant achievement on the regulatory front, including approval for ProSense in Brazil and Canada.
Additionally, we encourage with the vast number of independent studies being initiated, conducted, and published by doctors using ProSense. Our cryoablation system was highlighted at several medical conferences, and commercial distribution continues to expand as our ProSense systems and disposable prop cells continue to increase.
Given the importance of this development, I have asked Shay Levav, our Vice President of Regulatory Affairs, quality assurance, and clinical applications, and Tlalit Bussi Tel-Tzure, our Vice President of Business Development and Global Marketing, to provide some additional comments.
Earlier today, we announced that we filed an appeal with the FDA requesting an additional review of IceCure’s De Novo classification request. Shay will provide more specific about the appeal in addition to sharing our regulatory pathway. Tlalit 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&A session at the end of this call.
Shay, let’s begin with our prepared remarks. Please go ahead.
Thank you, Eyal. As most of you know, in October 2022, IceCure filed a De Novo classification request with the FDA for ProSense for treating patients with early stage low-risk breast cancer. The filing included interim analysis from IOL ICE3 breast cancer study because we believe that the data demonstrated efficacy and safety. With a five-year estimate of 95.7% recurrence free rate and 100% doctor and patient satisfaction with cosmetic results. We saw this as an opportunity to make this minimally invasive cryoblation procedure available to women in the U.S. sooner.
Following a nearly one-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 consultation 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 [Indiscernible].
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 a 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 which seek to treat with ProSense.
We believe a subsequent analysis of the data may make the benefits of ProSense 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 the FDA to come to agreements on the comparator and on the classification of ProSense.
Upon completing the review process with the FDA, we seek to finalize the classification and the classification of ProSense. Our I3 study remains on track and is expected to be completed in the first quarter of 2024, following the last patient’s five-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 ProSense FDA-cleared authorizations for other indications in the U.S., so patients and doctors continue to have access to and benefit from ProSense in the U.S. Outside of the U.S., ProSense is approved for early-stage low-risk breast cancer in numerous countries, including the European countries, Brazil, and China.
I’ll now turn it over to Ronen who will share our operating developments.
Thank you, Shay for that thorough review. In this — some indication, early-stage low-risk breast cancer, two independent studies conducted in Spain and Italy were recently presented at the European Society of Breast Imaging annual scientific meetings by doctors who are using ProSense. The study produced data that are similar to our I3 results, adding to the growing body of evidence pointing to ProSense as a minimally invasive alternative in this indication. While ICE3 is in the process of conducting two studies, I3 in early-stage low-risk breast cancer and ICESECRET in kidney cancer, it is important to acknowledge that there are 17 additional independent non-sponsored studies ongoing for ProSense. This is in addition to the 12 studies that have already been published in peer-reviewed journals and medical conferences.
13 of the published and ongoing studies are for breast cancer, again offering more confidence in our minimally invasive cryoablation options. The remaining independent studies are focused on fibroadenomas endometriosis and malignant or benign tumor of the kidney-lung musculoskeletal system. Why would so many doctors who are using ProSense around the world for multiple indications be taking their own time to conduct and publish such studies?
We believe it is because they see first-hand the benefit that ProSense provides for their patients. This gives us the greatest confidence in ProSense and IceCure. We hope you agree. This growing body of data and our focus effective commercialization strategy are leading to a greater ProSense usually globally as evidence in the increased cells of ProSense systems and disposable cryoprobes.
In the U.S., we recently appointed Mr. Shad Good, a talented health care sales executive, with solid track records in breast diagnostic and therapeutic devices. 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, we will be fully realized as Shad and his team will make a significant contribution towards the acceleration of ProSense cells in the U.S.
In Europe, we expanded distribution in Portugal with a new distributor MC Medical, the largest distributor of a 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 life of women by providing them with an alternative to lumpectomy. I will turn the call over now to Tlalit, 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. Tlalit?
Tlalit Bussi Tel-Tzure
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 ProSense 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 encourage these doctors who use ProSense [Indiscernible] the analogy in our present and shared experience at medical conference. [technical difficulty] led a symposium with ProSense. In India, at the 10th Annual Conference of the Breast Imaging Society of India, results from the IceCure’s ICE3 study were presented by the study’s Co-Primary Investigator, Dr. Kenneth R. Tomkovich.
In Copenhagen, Denmark, at a 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 two leading interventional radiologists who used ProSense one of whom conducted a cryoablation endometriosis which was recently published.
In Valencia, Spain, at the European Imaging Annual Scientific Meeting, the two independent studies in early stage low-risk breast cancer were presented as previously mentioned by Eyal. Clearly, ProSense is gaining significant traction and momentum amongst doctors, and we believe this translates into more system and disposable demand globally.
I’ll now turn the call over to Ronen for a summary of the financial results. Ronen?
Thank you, Tlalit. For the nine months ended September 30, 2023, ProSense systems and disposable probe sales increased by 11% to $1.7 million, compared to $1.5 million for the nine months ended September 30, 2022, driven by higher cells in the U.S. and China. Total revenue for the nine months ended September 30, 2023 was approximately $2 million, compared to $2.1 million for the nine months ended September 30, 2022.
As expected, the lower revenue was due to the end of the revenue recognition from the Exclusive Distribution Rights Agreement with the Terumo Corporation in Japan. However, this was partially offset by an increase in ProSense systems and disposable sales.
Gross profit was $0.73 million for the nine months ended September 30, 2023, compared to $0.98 million for the nine months ended September 30, 2022. Gross margin was 37% for the nine months ended September 30, 2023, compared to 46% for the nine months ended September 30, 2022. The decreasing gross profit and gross margin was attributable to the decreasing revenue recognition from the Terumo Distribution Agreement. If we deduct the revenue recognition, our gross margins increase slightly.
Research and development expenses for the nine months ended September 30, 2023 were $6.39 million, compared to $6.89 million for the nine months ended September 30, 2022. The decrease was primarily due to a reduction in development expenses of IceCure next-generation single-probe system.
In support of ongoing global commercialization adoption and in anticipation of enhancing our U.S. commercial sales infrastructure, sales and marketing expenses for the nine months ended September 30, 2023, was $3.23 million, compared to $2.22 million for the nine months ended September 30, 2022.
General and administrative expenses for the nine months ended September 30, 2023, narrowed by 30% to $3.27 million, compared to $4.67 million for the nine months ended September 30, 2022.
Total operating expenses for the nine months ended September 30, 2023 were $12.89 million, compared to $13.79 million for the nine 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 nine months ended September 30, 2023, decreased by 11% to $11.66 million, or $0.26 per share, compared with a net loss of $13.03 million or $0.5 per share for the same period last year. As of September 30, 2023, the company had cash and cash equivalents including short term deposits of approximately $13.2 million, compared to $23.6 million 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 Polyviou at EVC Group if you would like to schedule a meeting.
Operator, we will now open the call for Q&A.
Thank you. [Operator Instructions] The first question is from Anthony Vendetti of Maxim Group. Please go ahead.
Thank you. I just want to focus a little bit on a point you made in the press release as well as on the call. Even though the FDA demand to De Novo classification in the ProSense of [Indiscernible], it is still approved. The ProSense system is still approved here in the U.S. Can you remind us what indications it is approved for right now in the U.S.? I’m going to have a follow-up question. Thank you.
Yes, thank you. Anthony. Shay, so please respond on the approved indication in the U.S.
Yes, thank you, Eyal. So the system is approved in the U.S. in several areas including urology and oncology, dermatology, gynaecology, E&T and general surgery, as well as thoracic, surgery and proctology. And this is maintained without any change.
Okay, great. And then, so you submitted an Appeal. You said that you expect a response in 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 what are the next steps for the early stage low-risk breast cancer approval?
Thank you, Anthony, for this question. We believe that Appeal 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 re-open the file, we of course could submit a new breast 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.
And as we mentioned, we have less than 20 patients that need to come to the final exam and they’re supposed to be done during the first quarter. So we could go to a press submission, another press submission, and then to make the discussions and the agreement on the comparator, and then to make a submission for the entire study.
The entire study. Okay. 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? Yes, in Canada.
Yes, in Brazil, after we got started our commercial activities, the orders were skipped. Out of the participating two conferences, we had a group of top KOLs who came to Israel a few months ago for training. So we could see it start also penetration and working with the top KOL to penetrate the Brazilian market. Canada will be part of our U.S. activities, which will mainly focus on the U.S., but Canada in our target. And I just came back from China and Japan, a business trip. And in China as well, we are exploring, participating, achieving some coding and reimbursement and starting our penetration in the Chinese market.
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. Thank you.
Yes. In China, we have [Indiscernible], who is medical, who is like the official master distributor. And he’s working with Medtronic as well. In Japan, Terumo 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, IceCure is selling in Japan directly under doctor importation license. And as soon as Terumo will get the PMDA regulatory approval, they will start to do all the sales and marketing activities in Japan.
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 in Godspeed. Thank you.
Thank you. Thank you for your great support.
The next question is from Ben Haynor of Alliance Global Partner. Please go ahead.
Good day, guys. Thanks for taking my question. First off, for me, and I’m sorry if I missed this, but what is the FDA looking at as a comparator group?
The local, hi Ben they’re looking to comparator of local recurrence for standard-of-care, which mean lumpectomy.
Okay, and what you’ve submitted, if I’m not mistaken, is for patients that are at high risk of surgery, as in, you know, not suitable for surgical alternatives. Is that right?
Yes, Shay, please elaborate on the 510-K, De Novo that we submitted on October last week, last year.
Yes, sure. The original submission, the original, the 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 five years follow-up of the entire population is comparable to the standard-of-care, which is the lumpectomy.
Okay, I mean, I guess to me it seems like kind of an odd comparator for the FDA to choose. I mean, to me, if you 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, in that case, we want to evaluate the swimming performance of toddlers or quadriplegics or something that doesn’t compute, at least in my mind, 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 let that one lie.
You know, Ben, they would like to compare it to standard-of-care. 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 there will be open and absolute discussion, and we will be able to discuss this comparator to come to an agreement, and then we will be able to make the final submission.
Okay, that’s fair enough. And lastly for me, just any color you can share on how the hand-on cryoablation session with for you guys at CIRSE?
Tlalit, please elaborate on the success that we had in at CIRSE.
Tlalit Bussi Tel-Tzure
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 hand-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 IceCure Booths to learn more.
And one more thing to elaborate on that is the clear benefit of IceCure versus other companies that are working in cryoablation. With our liquid nitrogen technology, we’re able to perform workshop and demos at our booth or, freely, versus other companies that need a restricted area, restricted room specific workshop in order to perform cryoablation with Argon-based system.
So for IceCure, 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.
Okay, that sounds great. Well, thanks for taking the questions, and I appreciate the time, guys.
The next question is from Kemp Dolliver of Brookline Capital Markets. Please go ahead.
Great. Thank you, and good day. First, I just wanted to follow up on the discussion regarding the comparative group. Is there a 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, to some extent you had to work out with FDA the actual definition of this patient population to proceed with the filing. Is that a pretty fair assessment of the work you need to do here?
Yes, thank you for the question, Kemp. 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. So 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.
And to be clear, the inclusion of that article is part of what you’re doing as part of the appeal?
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.
Perfect. Thank you very much for that. How quickly can you re — If you have to re-file after — or re-file however we should word it, after the last visit, assuming you don’t get approval, how quickly are you able to complete that process?
Thank you, Kemp. Assuming that the last patient will come to the final exam during the third quarter, I believe that by summer next year we will be able to submit for the entire population of the I3 study. So basically, next summer we are planning to make the submission for the final study.
Thank you. And then just turning to one or two financial questions. Are there any potential distribution, additional distribution deals that you could find this year?
Kemp, I will reply today, so until in the next six weeks that some of the — during the fourth [Ph] quarter we are not going to have any additional new distribution agreement. We are materialized mainly the new distribution agreement that we signed like Portugal, which again is extremely important for us to — for them to help to support them for better penetration. Same like Brazil, the team just came back like two or maybe less than two weeks ago from two important conferences in India and some, work there with existing top KOLs like Tata Memorial Cancer Center. So we are mainly exercising and getting some of our work with the existing new agreements and our existing customers.
Thank you. And my last question relates to the expense controls. How significant reductions or tightening just how — how should we think about the — how the spending will proceed from here as you work through the process with FDA?
Thank you Kemp. So as I said, sorry, earlier we had the $13.2 million 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, 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. And this is what we will focus in the coming months.
Okay. Thank you.
[Operator Instructions] The next question is from Yi Chen of H.C. Wainwright. Please go ahead.
Thank you for taking my question. Is FDA’s approach to selecting a 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 for the future application for the entire study?
Thank you. Thank you, Chen. 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. We tried to have the first indication based on our very good and excellent interim results, but the main goal remained to submit for the study after full five-year follow-up. So the comparator will be for both cases.
Okay, got it. And notice that the company’s top-level revenue in the third quarter appears to be lower than the first 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 world’s, the sequential growths to occur?
Yes, so again, thank you, Yi. Yes, the third quarter was a little bit challenging. Usually we see that the third quarter is not an easy quarter, mostly because of summer vacations. So we see sales are a little bit slower. We don’t give guidance for the whole year. So I can’t really give you any kind of phone number for the rest of the year.
Okay, but could you comment on any available hurdles in the market that will prevent you from growing faster?
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. We had 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. And as you can see, we had an increase of 11% in sales of products in this year versus last year.
Okay, okay. Thank you.
This concludes the Q&A session. Eyal Shamir, would you like to make your concluding remarks?
Thank you, Yarni [Ph] 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 ProSense to doctors and patients who are clearly appreciating the benefit as an alternative to open surgery. Our ICE3 trial, which is being performed in the U.S., is unaffected. We are working closely with our global distribution partners 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 IceCure. Thank you.
This concludes the IceCure third quarter 2023 results conference call. Thank you for your participation. You may go ahead and disconnect.