IceCure Medical Ltd (NASDAQ:ICCM) Q1 2024 Earnings Call Transcript

IceCure Medical Ltd (NASDAQ:ICCM) Q1 2024 Earnings Call Transcript May 28, 2024

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 Polyviou. Please go ahead.

Michael Polyviou: Thank you, Yoni, and welcome to IceCure Medical’s conference call to review the financial results for the three months ended March 31, 2024, 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; CFO and COO, Ronen Tsimerman; and VP of Business Development and Global Marketing, Tlalit Bussi Tel-Tzure. Before we begin, I will now take a moment to read the statement about forward-looking statements. This call and the question-and-answer session that follows it, contain forward-looking statements within the meaning of the safe public 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, 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 and sales goals, our positioning to make significant commercial advances in key markets, the pursuit of regulatory approvals in various jurisdictions, including the expectation that cryoablation for breast cancer will be available to women in the U.S. this year, our expansion of clinical applications, including continued adoption of ProSense for many indications, potential market adoption and future sales of IceCure’s minimal invasive cryoablation technology, advancing regulatory commercial strategies that we expect to continue positive response from the medical community as our commercial footprint expands and that a positive regulatory outcome in the U.S. for breast cancer will boost commercial traction for the treatment of breast cancer treatment through cryoablation.

Because such statements yield future events and are based on IceCure’s current expectations, they are subject to risks — various risks and uncertainties and actual results, performance or achievements of IceCure could differ 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 after the year ended December 31, 2023, filed with the SEC on April 3, 2024, which is available on the SEC website, www.sec.gov. 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, May 28, 2024. In addition, during the course of this call, we will discuss certain metrics that are non-GAAP measures, and we refer you to the reconciliation tables and other information about these non-GAAP measures included in the earnings press release that we issued earlier this morning. I will now turn the call over to IceCure Medical CEO, Eyal Shamir. Eyal, please go ahead.

Eyal Shamir: Thanks, Michael, and hello, everyone, and thank you for joining us today. I’m pleased to report that in the first quarter of 2024, we continued to see consistent growth in sales. Product sales were up 30% for the first quarter of this year compared to the same period in 2023, demonstrating the ongoing adoption and utilization for our cryoablation system worldwide. Ronen will go over the numbers in more details. The continued positive trend is very encouraging and an indicator of the need and the demand for ProSense. While we may see fluctuation in revenues quarter-over-quarter, we strongly believe that the major catalysts we achieved during the first quarter of 2024 and recently had the potential to significantly move the needle for us.

This catalyst, including the completion of our ICE3 study, the publication of the ICE3 study data and submission to the full set of ICE3 data set to the FDA. During Q1, we completed the five-year follow-up of our last patient in our ICE3 study, a 10-year long rigorous clinical study, the largest of its kind in the U.S., and to our knowledge, the first cryoablation without excision study for breast cancer that has been completed. The results, we believe, were excellent. ProSense offer the advantages of a faster, lower cost and more accessible clinic-based outpatient procedure as compared to open surgery in the hospital. Per the ICE3 analysis at the five-year follow-up evaluation, 96.3% of the subgroup of patients treated with ProSense cryoablation, followed by hormone therapy, were estimated to be free from local recurrence.

100% patient and physician satisfaction was reported. Along with these results, ICE3 produced a wealth of data that we believe is supportive of the ProSense adoption globally, especially in countries in which it is already approved for breast cancer. Tlalit will speak to this point today. The ICE3 data was very well received by the breast surgeons at The American Society of Breast Surgeons annual meeting, where it was presented by the ICE3 investigator, Dr. Richard Fine. In fact, his oral presentation won the American Society of Breast Surgeons Scientific Impact Award, demonstrating the significant of ProSense cryoablation and its potential to see a new standard of care. Last month, we submitted the full and final data set to the FDA and requested marketing authorization for ProSense for the indication of treating patients with early-stage T1 invasive breast cancer with cryoablation and adjuvant hormone therapy.

We are in continued discussions with the FDA as they review our file. Since the U.S. is one of our largest market in the world, if the FDA cleared ProSense for marketing, we believe delivering alternative surgery-free options to women in the U.S. This will have a significant impact on treating patients with breast cancer. We believe that this will also lead to a substantial growth in product sales, especially as we intend to continue to work on more reimbursement coverage and our commercial team in the U.S. is ready for rollout. We see a demand building ahead of a potential approval in the U.S. At the American Society of Breast Surgeons’ annual meeting, a lot of positive talks and interest were created following two data presentations centered around breast cryoablation.

We had many surgeons come to our booth to learn more, and we continue to engage with them as they consider incorporating cryoablation into their practice. Further validation, the finding of our ICE3 data and the progress in the U.S., recent independent study in Italy and Japan published similar results. The Italian study found 100% tumor reduction in early-stage breast cancer at the six to 12 months following cryoablation. In Japan, where our distributor Terumo, plans to file the regulatory approval of ProSense for the breast cancer in the second half of 2024, a study reported zero local recurrence following treatment with ProSense. To comment further on our global commercial development, I would like to turn the call over to Tlalit.

Tlalit Bussi Tel-Tzure: Thank you, Eyal. Indeed, the growing number of independent studies in breast cancer as well as other indications clearly demonstrates physicians’ enthusiasm about using ProSense. In addition to the breast cancer studies that Eyal mentioned, an endometriosis study conducted in France found that after treatment with ProSense, women reported pain reduction from a median of 7 on a scale of 0 to 10 to a median of 1 with some patients even reporting 0. In additional evidence of efficacy in endometriosis in this study included the disappearance of hemorrhagic signals and development of necrotic changes. This adds to the endometriosis data from other independent studies. Endometriosis is a very large indication for which there is not a good treatment alternative on the market today.

In addition to our focus in breast cancer, we are exploring other indications in women’s health. Circling back to breast cancer, we believe the full ICE3 data set helps establish ProSense as the gold standards for breast cryoablation globally, particularly in many countries in which ProSense already has regulatory approval for breast cancer such as Europe, India and Brazil. In general, doctors around the world are very interested in data that comes out of the U.S. trial, and they closely watch for FDA approvals. We found this is certainly the case with the ProSense. This data also supports more utilization of ProSense as we recently saw the first breast cancer procedures performed in Brazil and Romania. During and just after the first quarter of 2024, ProSense was featured and ICE3 data were presented at medical conference across the world, including the American Society of Resurgence and Society of Interventional Oncology annual meetings in the U.S. Globally, ProSense was featured for physician training sessions at conference in India and Japan.

At the European Conference of Interventional Oncology, which took place last month, there was a strong interest in the ICE3 data. Four abstracts featuring ProSense were accepted for presentation at this conference, two of which from Germany and France were for breast cancer and two more from Hungary and India were for benign breast tumors. We are also seeing more doctors and researchers submitting an abstract and poster and presentation of their ProSense studies to various other medical conference. We have a very full conference scheduled for the remainder of 2024, and we expect continued positive response from the medical community as our commercial footprint expands. We are optimistic about continued adoption of ProSense worldwide for many indications as we look ahead for the FDA’s decision.

A positive regulatory outcome in the U.S. for breast cancer, we believe, would boost commercial traction for this indication worldwide. I will now turn the call over to Ronen to go over the financial results. Ronen?

Ronen Tsimerman: Thanks, Tlalit. As Eyal mentioned earlier, our product sales continued their consistent growth. For the three months ended March 31, 2024, ProSense systems and disposable probes sales increased by 30% to $743,000 compared to $573,000 for the three months ended March 31, 2023, driven primarily by higher sales in the U.S. and Japan. Total revenues for the three months ended March 31, 2024 were $733,000 compared to $710,000 for the three months ended March 31, 2023, an increase of 5%, due to an increase in the sales of ProSense products, which was partially offset by the end of revenue recognition from the exclusive distribution rights agreement with the Terumo Corporation in Japan, for which no revenue was recognized in the three months ended March 31, 2024.

Gross profit for the three months ended March 31, 2024 was $269,000 compared to $320,000 for the three months ended March 31, 2023. Gross margin for the three months ended March 31, 2024 was 36% compared to 45% for the three months ended March 31, 2023. Non-GAAP gross profit for the three months ended March 31, 2024 was $269,000 compared to $183,000 for the three months ended March 31, 2023, an increase of $86,000 or 47%. Non-GAAP gross margin for the three months ended March 31, 2024 was 36% compared to 32% for the three months ended March 31, 2023. Total operating expenses for the three months ended March 31, 2024 were approximately $3.9 million compared to approximately $4.3 million for the three months ended March 31, 2023. The decrease is attributable mostly to reductions in research and development and general and administrative expenses.

Net loss for the three months ended March 31, 2024 was approximately $3.6 million or $0.08 per share, compared to a net loss of approximately $3.8 million or $0.08 per share for the same period last year. As of March 31, 2024, the company had cash and cash equivalents, including short-term deposits, of approximately $11 million, the same as on December 31, 2023. As of May 28, 2024, the company had cash and cash equivalents of approximately $10.8 million. During the first quarter of 2024, we raised approximately $3 million in gross proceeds from the sales of ordinary shares under our ATM offering facility. We continue to manage our resources and cash well, while supporting sales growth through commercial activities worldwide, as well as achieving key value-driving milestones such as completion of our ICE3 study, analyzing and reporting data and submitting the data to the FDA.

Operator, we will now open the call for Q&A.

Q&A Session

Operator: Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] The first question is from Kemp Dolliver of Brookline Capital Markets. Please go ahead.

Kemp Dolliver: Thank you, and good day. So, first question relates to the application with FDA and your interactions with them so far. Can you characterize the communications since you’ve filed the application?

Eyal Shamir: Yeah. Hi, Kemp. Good morning. This is Eyal. We have continued discussions with them on the data set that we had submitted last month, regular Q&A. While they are working, we are waiting and providing any information that they additionally ask.

Kemp Dolliver: Great. Thank you. And with regard to any U.S. sales so far of the systems as opposed to the probes, are there any patterns that you’re seeing yet with regard to how practice — the structure of the transactions, are these — are they purchasing them outright? Are they leasing them? What are you finding there? Is the nature — how they’re trying to finance, bringing the system in-house?

Eyal Shamir: It’s a combination of purchasing the system, it’s a combination of leasing, and also a placement for a minimum monthly quantity of probe for a higher price. So, from the business model point of view and what we see actually in the market, it’s a combination of the different business models.

Kemp Dolliver: Great. Thank you. That’s all I have for the moment.

Operator: The next question is from Anthony Vendetti of Maxim Group. Please go ahead.

Anthony Vendetti: Thank you. I was wondering if you could just talk about the distributor relationship in Japan with Terumo. And then, in terms of the payments you’re expected to receive from them, is there a schedule for that? How is that expected to play out this year?

Eyal Shamir: Yeah. Thank you, Anthony. The agreement with Terumo is a strategic distribution agreement. Terumo is busy to finalize the submission to the PMDA, which is the Japanese FDA, with our support of course, and they will use the ICE3 data, including other local Japanese data. So, this is supposed to be on the second semester of this year. As part of the $5 million distribution agreement — distribution rights that we announced after we signed the agreement, we supposed to get some additional three milestones that we will get by the submission time, by the regulatory approval, and also by the submission of the reimbursement in the Japanese health and welfare office, which could be after the submission. So, we have another milestone to get some distribution rights. And then, of course, they will behind — back to their commitment to buy [consoles] (ph) of probes.

Anthony Vendetti: Okay. And then, I was wondering if you can elaborate a little bit on the cryogen flow control patent in Japan. How is that differentiated from your competitors? Do you see that as an advantage? And if so, why?

Eyal Shamir: The only competition that we could see now in Japan is the old argon and helium technology that they have regulatory approval in kidney only. This is a very complicated and a very expensive system. For the console price point of view, the cost of argon is pretty expensive. And more importantly, Japan is very strictly following the role that you cannot put the patients and the argon gas in the same room because this is considered as a high-risk gas. They didn’t do and they didn’t do any try in breast, not in the U.S., not globally and not in Japan. So, we are not seeing them going to the breast. So, from cryoablation point of view, at this stage, we don’t see any competition.

Anthony Vendetti: Okay. I know the focus obviously is on early-stage breast cancer. But the ProSense system obviously could be used for other tumors and fibroids and so forth. Can you — do you have any update on the potential for ProSense to be used for endometriosis?

Eyal Shamir: Yeah. We are even now under our [GI] (ph) indication. We are treating endometriosis now in the U.S., same as we are doing in Europe as well, and we had some publication that the ProSense was part of it. So we — as part of our interventional oncology indication, we would like to look after women health, which it will be breast endometriosis and in the future also [ uterine fibroid. And as part of our interventional radiology indication we would like to look mainly, but not only, on lung, which is a quite big unmet need, and the new XSense system that we submitted to the FDA as a general 510(k) will allow us also to have an opportunity to develop a flexible probe, which will be able to compatible also with some of the bronchoscope assistant robotics that we will be able to work into the nodules of the lung.

Anthony Vendetti: Okay. And then last question is on the sales force. I know in anticipation of FDA approval for early-stage breast cancer, you’ve started to build the sales team. Can you tell us where that’s at and what the plans are for the rest of 2024?

Eyal Shamir: As we mentioned and announced about seven, eight months ago, we hired Mr. Shad Good as our Vice President, Sales for North America. Shad is bringing with him almost 20 years of experience in the breast field coming from Johnson & Johnson, Mammotome and others. So, Shad is building the current team that we have in the U.S. And just before clearance, Shad will continue to build the team. So, this new team that will add the current team, we’ll be able to support the growth that we plan for 2025 and on.

Anthony Vendetti: Okay. Great. I’ll hop back into the queue. Thank you.

Operator: The next question is from Ben Haynor of Lake Street Capital Markets. Please go ahead.

Ben Haynor: Good day, gentlemen. Thanks for taking the questions, and congrats on the getting the data into the FDA on the breast cancer submission. Was curious about the XSense submission and the commercialization in the U.S. once you get clearance there. I mean it sounds to me like that could be on a similar timeline as the breast cancer clearance. Any thoughts there on how you might commercialize both the system and with the new indication?

Eyal Shamir: Yeah, you are right, Ben, and thank you for the questions. We expect to get clearance on the XSense early 2025. We are building now together with Mr. Shad Good the launching activities that we will start most probably early 2025. And this system that has a lot of advantages, not just the size of the footprint and the weight of the system, which is half of what we have now and footprint in clinics, it’s always an issue. This is really state-of-the-art liquid nitrogen technology that will give some additional benefit like much longer continuous freezing ability. And again, as I mentioned, the XSense would be a platform for additional indication and also will allow us to consider a development of a flexible probe, which will give also additional indication. But we believe that during 2025, we will start to launch XSense in the U.S. market.

Ben Haynor: Okay. Great. And then just remind me, once you get that clearance, do you need to do anything special if the breast cancer clearance has already come, or is that — would that kind of be covered under the FDA rules?

Eyal Shamir: Again, I’m not sure that I understood correctly your question, but I will try. Firstly, the breast cancer clearance will be on the ProSense. All the current indication that we have on the ProSense, of course, will be for the XSense. But immediately after we will get the clearance on the breast cancer cryoablation for the ProSense, we will be able to add it to the XSense. So, at the end of the day, both will be with the same indication.

Ben Haynor: Okay. You got exactly what I was asking poorly.

Eyal Shamir: Thank you, Ben.

Ben Haynor: Great. And then, on the studies that show the boost to the T cell immune response [indiscernible] cancer benefit, I guess, how do you see future investigations going there and applications developing? As kind of a — for instance, how much have you heard, say, biopharma firms taking notice of the effects that you’re seeing there?

Eyal Shamir: In many — I could say, almost in all interventional radiology conferences, both U.S., Europe or even globally, you could hear now more and more lectures and you could see research on what they call cryoimmunology. Researchers found that after cryoablation and especially after liquid nitrogen, again, even nothing to do with IceCure, this is the physics of liquid nitrogen that allow you to freeze much deeper and much faster. So, the cell immune system of the patient, and with the combination with immunotherapy drugs or even intratumoral immunotherapy drugs after cryoablation showing and much better effect. And pharmaceutical companies and researchers try to find some additional treatment that enhance the immunotherapy drugs and it looked like the cryoablation could be one of the basic treatment that will support this future way of improving immunotherapy drugs for patients.

Ben Haynor: Makes sense. Excellent. Well, that’s all I had, guys. Thanks for taking the questions.

Eyal Shamir: Thank you.

Operator: [Operator Instructions] The next question is from Yi Chen of H.C. Wainwright. Please go ahead.

Yi Chen: Thank you for taking my questions. Can you please clarify again, is the — I mean, what is the key difference between XSense and ProSense? Are the two systems supposed to be on the market together or one system, XSense, eventually supposed to replace ProSense?

Eyal Shamir: The XSense system, even from the very basic of footprint and weight of the system, its half. This is really state-of-the-art technology that allow to continuously do freezing for a much longer time. The whole way of liquid nitrogen management will be totally different, and it will allow us also to use it as a platform for new technologies and new devices like the flexible probe, like the catheter that will allow us to consider an additional indication. For example, not just percutaneous treatment for lung cancer for tumors on the surface of the lung, but it could work with one of the compatible robotic assistant broncoscope that will be — will give us the ability potentially to treat tumors in the — inside the lung.

So, it will open us additional platform of technology, also for additional indications. And to the second part of your question, we will start with a soft launching in the U.S., but gradually, it’s going to replace, and the XSense will be the main product for the U.S. And of course, we will continue to support and to sell probes for the old ProSense current user in the U.S., but XSense in the future will be the leading flagship product of IceCure in the U.S. and later in other markets.

Yi Chen: Got it. Thank you. With respect to operating expenses, are the numbers reported for the first quarter, will those numbers remain relatively stable until you obtain an FDA approval and then start marketing ProSense for breast cancer in the U.S.?

Eyal Shamir: Ronen?

Ronen Tsimerman: Yes, thank you, Yi. So, yes, we expect that the numbers would stay relatively stable until we have an approval. You can see that there is a steady increase in sales. But again, we believe that the ramp-up will be only after we have a clearance from the FDA.

Yi Chen: And my last question is, once ProSense obtains FDA approval, do you plan to start an additional clinical trial for additional indication for ProSense — or XSense?

Eyal Shamir: In some point, we will consider to do some level of additional clinical study mainly in order to try to get additional indication. For example, endometriosis, at the moment, no one of the competitors has a specific indication of endometriosis. So, this is something that we will consider after we will get some additional results. We could treat this kind of off-label as part of the GI indication, but in order to get a specific indication, this is something that we will consider in the future or if we will have additional new indications that we would like to treat.

Yi Chen: Got it. Thank you.

Operator: There are no further questions at this time. I’ll hand the call back to Eyal to make a concluding statement. Eyal, please go ahead.

Eyal Shamir: Thank you, everyone, for participating on our call today. While we await the FDA decision on ProSense for breast cancer in the U.S., our entire team is working full steam ahead to continue our sales growth. Momentum worldwide across many indications, 2024 could potentially bring a major boost to the IceCure and the new minimally invasive treatment for women with breast cancer in the U.S. Please stay tuned. Thank you.

Operator: Thank you. This concludes the IceCure first quarter 2024 results conference call. Thank you for your participation. You may go ahead and disconnect.