IceCure Medical Ltd (NASDAQ:ICCM) Q3 2022 Earnings Call Transcript

IceCure Medical Ltd (NASDAQ:ICCM) Q3 2022 Earnings Call Transcript December 5, 2022

IceCure Medical Ltd reports earnings inline with expectations. Reported EPS is $-0.11 EPS, expectations were $-0.11.

Operator: Welcome to IceCure’s Conference Call on the Financial Results for the Nine Months Ended September 30, 2022, and update on recent operational highlights. Management will provide an overview of IceCure’s financial results as well as clinical, commercial and operational highlights. Participating on the call today are IceCure’s CEO, Eyal Shamir; and CFO, Ronen Tsimerman. They are joined by Dr. Hania Bednarski, Oncoplastic Breast Surgeon and Cryoablation Specialist at Serenity Surgery & Wellness in Myrtle Beach, South Carolina. Currently, all participants are in a listen only mode. Following the presentation, IceCure’s management and Dr. Bednarski will be available for the question-and-answer session. 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 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, we are using forward-looking statement in this presentation when we discusses pursuit of regulatory approvals in various jurisdictions, strategic plans, commercial growth, expansion of clinical applications release of results from our clinical trials, potential market adoption and future sales of IceCure’s minimally-invasive cryoablation technology, advancing regulatory and commercial strategies and expected quarter-over-quarter revenue variations and other key business and operational highlights 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 ended 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 or revisions or changes after the date of this release, except as required by law.

I will now turn the call over to IceCure’s CEO, Eyal Shamir.

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Eyal Shamir: Hello, everyone, and thank you for joining us today. We will start this review of our significant business development for the third quarter of 2022 followed by an interview of the financial results of the nine months ended September 30, 2022. We will then hear from Dr. Bednarski, who will share her thoughts on breast tumors cryoablation from the breast surgeon’s perspective before opening the call for Q&A. And already a doctor of the technology, Dr. Bednarski has been performing cryoablation for benign and malignant breast tumors since 2014. During and immediately following the end of the third quarter, we made huge strides towards the commoditization of ProSense for breast cancer in the U.S. on both the regulatory and reimbursement fronts.

We believe women with low risk, early stage breast cancer need a better alternative to the current standard of care of lumpectomy. Minimally-invasive cryoablation, which destroys tumors without open surgery, reduces recovery time and cost, while improving cosmetic outcomes. Most importantly, our (ph) ICE3 clinical trial interim data for ProSense breast cancer treatment show a recurrence free rate at approximately 97%. In October, we submitted a De Novo classification request regulatory filing with the FDA for marketing authorization of ProSense for the indication of early stage low risk breast cancer in patients who are at risk to surgery and therefore are not suitable for surgical alternatives. These initial indications alone represents approximately 43,000 women in the U.S. annually.

We were able to submit for marketing clearance based on our very strong results on our interim ICE3 clinical trial analysis. In the first half of 2024, we expect to release the final results from the ICE3 five year follow-up. At that time, we plan to file for a broader indication with the FDA reflecting the entire study population of early stage low risk breast cancer for patients age 50 and older, representing approximately 65,000 women in the U.S. annually. In the future, we plan to explore more indications for additional subgroups that are part of the total group of Luminal A breast cancer. An estimated of 144,000 cases annually for women of all ages in the U.S. While we look forward to the FDA’s response to our filing, we have concurrently achieved a significant milestone in the Medicare reimbursement in the U.S. for ProSense’s breast cancer treatments.

In November, the Center of Medicare and Medicaid Services assigned ProSense breast cancer cryoablation treatment a specific CPT Category III code, which will go into effect on January 1, 2023. Under the CPT category III code, the ProSense breast cancer treatment try for a coverage at approximately $3,400. This is for the facility fee alone, we expect additional coverage, including payments for the physician upon establishment of the permanent CPT Category I code, which will conditioned on several factors, including our receipt of FDA marketing authorization of the FDA for breast cancer. To our knowledge, IceCure is the first and the only company to file and receive the CPT code for cryoablation of breast cancer. We were able to achieve this based on our results of our ICE3 study, the largest controlled multicenter clinical trial ever performed in the U.S. for liquid nitrogen based cryoablation of small low-risk early stage malignant tumors as an alternative to surgery.

We are proud of this achievement and our leadership position, which helps to pave the way for the wider use of minimally-invasive cryoablation treatments that deliver better outcomes for patients. Globally, we made additional advances on our regulatory front. In Brazil, ProSense cryoprobes and introducers, which are essential single use disposable components of our ProSense system received regulatory approval for indications including breast and other cancers, benign tumors and palliative interventions. Applications for the ProSense were also filed in Canada and Vietnam. I will turn the call over to Ronen now for the financial results. Before I do, I want to point out a very encouraging trend and that is the increase in sales of our single use disposable probes.

This indicates that the increasing number of treatments are being conducted with the installed base of ProSense system across the world. While our quarterly revenue may continue to be variable in the near future, we see the ProSense as a positive indicator for market acceptance on our liquid nitrogen based cryoablation therapy, which we believe will translate into sales. Ronen?

Ronen Tsimerman: Thank you, Eyal. For the nine months ended September 30, 2022, revenue decreased by 22% to approximately $2.1 million compared to approximately $2.8 million for the same period last year. The decrease is due to decreased revenue recognition of approximately $500,000 from the distribution agreements with Terumo Corporation and a decrease in sales of new systems, which was partially offset by higher sales of disposable probes as previously sold and installed systems were utilized for procedures in clinical settings. For the nine months ended September 30, 2022, sales in the U.S. and Europe increased by 65% and 37%, respectively, compared to the same period in 2021. The increase in sales in the U.S. and Europe was offset by a decrease in sales in Asia and other territories.

Gross profit was approximately $1 million for the nine months ended September 30, 2022 compared to approximately $1.6 million for the same period last year. Gross margin was approximately 46% from the nine months ended September 30, 2022 compared to approximately 56% for the same period in 2021. The decrease in gross margin compared to the same period last year was attributable mostly to the decrease in sales and in revenue recognition from the Terumo distribution agreement. Research and development expenses for the nine months ended September 30, 2022, were approximately $6.9 million compared to approximately $4.3 million for the same period last year. The increase was attributed to acceleration in development of IceCure’s next generation single probe system and due to clinical and regulatory activities.

Sales, marketing and general and administrative expenses for the nine months ended September 30, 2022 were approximately $6.9 million compared to approximately $3.9 million for the same period in 2021. The increase was attributed to the company’s expanded commercialization efforts, and two, increased NASDAQ listing related expenses. Total operating expenses for the nine months ended September 30, 2022 were approximately $13.8 million compared to approximately $8.2 million for the same period last year. The increase in operating expenses was primarily attributable to increased development, commercialization and NASDAQ listing related activities. As a result of lower revenue and increased operation activities, net loss reported for the nine months ended September 30, 2022, was increased to approximately $13 million or $0.35 per share compared with a net loss of approximately $6.7 million or $0.25 per share for the same period last year.

As of September 30, 2022, IceCure had cash and cash equivalents, including short term deposit of approximately $14.2 million. I will now turn the call over to Dr. Hania Bednarski. Dr. Bednarski is an oncoplastic breast surgeon and specialist in breast tumor cryoablation. She is the owner and CEO of Serenity Surgery & Wellness in Myrtle Beach, South Carolina, where she is performing a wide array of breast procedures from biopsy through reconstruction of the breast. She is also author of the book Freeze Breast Cancer, Your Guide To An Alternative Breast Cancer Treatment. Dr. Bednarski recently co-hosted an IceCure webinar titled Breast Tumor Cryoablation for breast surgeons that was well received by fellow breast surgeons and radiologists. We are very pleased to have her join us today.

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Hania Bednarski: Thank you so much. So I want to start by just mentioning a few things about the ProSense cryoablation system. It’s truly easy to use. It’s simple to set up for office based procedures. I’ve been using the system often on since 2014 and more regularly since 2019-2020. And recently, it’s my single cryoablation system in the office. Liquid nitrogen is really easy to handle. It’s readily available, super easy to source in the area. This saves a lot of time for the patients and the providers. So with cryoablation procedure, fibroadenomas can be treated in as few as 15 to 30 minutes depending on the size and location of the tumor. And breast cancer cases can be treated within an hour to an hour and a half. There is no need for general anesthesia.

This is done under purely local anesthesia. Patients are very comfortable throughout and they can resume their normal activities just as soon as they would after an ultrasound guided biopsy. The other thing that I really appreciate about cryoablation for breast tumors is that, we get really wonderful cosmetic results regardless of the size of the tumor and regardless of the position of the tumor in the breast. Unfortunately, when we do surgery for breast cancers, especially at the upper inner breast, we can often get a defect that’s quite visible. There’s very little breast tissue there in the first place. And when we take out more tissue in that decolletage area, patients can really have a defect, even if they don’t have a scar, even if the scar is well positioned, the defect tells all and patients can be very self-conscious of that.

The other thing that I’ll mention is that, statistics in the United States at least are about 20% to 40% depending on the study that you look at for general surgery applications. So when we do surgical excision of breast cancers in 20% to 40% of the cases, we have to go back for additional margins, meaning, that our margins are not clear. So we have either a very close margin of breast cancer or breast cancer is found at the edge of the margin that’s removed. And interestingly, with surgery we aim for a minimum of a one millimeter margin. There are some studies that will say no ink on tumor, but one millimeter is the generally accepted margin for breath surgery. With cryoablation, we actually aim for one centimeter margins. So 10 millimeter margins and that’s really quite refreshing.

And you can actually watch the ice ball form on ultrasound in real time and that gives me a lot of confidence in achieving the margin that I need to achieve. In the operating room, this is a lot more difficult, even with the use of ultrasound. I feel that I’ve gotten really wonderful support from IceCure’s clinical training team. It really doesn’t take long to feel comfortable using the system. My staff can use the system with facile procedure. And it’s been really great that in a private practice, I’ve been able to set up breast cryoablation with very minimal issue, really no problems at all. And patients want this procedure. They’re willing to pay out of pocket for the procedure, I personally do not take any insurance in my office and everything is out of pocket and they are willing to pay that.

So it’s been really refreshing to give this procedure to office, procedure to my patients and to have really good success. And I’ll turn it over for any questions.

Eyal Shamir: Thank you, Dr. Bednarski for sharing your insights. I’m sure our shareholders appreciate your perspective as a clinician in a private practice who has been using ProSense. Operator, we would like now to open the call for questions.

Q&A Session

Operator: Thank you. Ladies and gentlemen, at this time we will begin the question-and-answer session. First question is from Ben Haynor of Alliance Global Partners. Please go ahead.

Ben Haynor: Good morning. Thanks for taking the questions. First off, for Dr. Bednarski, appreciate you sharing your experience with the IceCure system. Do you also perform lumpectomies? And if you do, when patients are presented with a cryoablation option versus lumpectomy? What goes into that decision for a lot of patients?

Hania Bednarski: Yes, I absolutely do. So I am an Oncoplastic Breast Surgeon, meaning, that I do everything from biopsy through reconstruction, and I absolutely do partial mastectomies, lumpectomies, and mastectomies in my practice and reconstruction are the same. This is an interesting discussion. So for patients that fit the criteria of undergoing cryoablation, it’s very much a personal discussion at that point as a personal decision making process, I should say, at that point. As far as — I equally offer both at that point. So if they fit the criteria for Luminal A tumors in women over 50 years of age, they really could have either or. So at that point, it’s very much a decision on the patient’s part of — there are some women that simply will not rest until the tumor is sitting on a pathologist’s desk.

And obviously, cryoablation does not offer that. With cryoablation, we freeze the tumor and then the cryoablation zone, the necrotic tissue stays in the breast and then slowly is dissipated over time. But if a woman is the type of person that really just wants that tumor out, she’s not going to go for cryoablation. The other part of it is, at that point cost, again, I don’t take insurance in my practice. However, patients can apply for insurance. And there’s no question that it’s much easier at this time to get reimbursement for a lumpectomy or partial mastectomy than it is for cryoablation. I’m hoping that that’s going to change in the future. But for now, I would say that those are the two biggest decision making points.

Ben Haynor: And for the ones that want to see the tumor on the table, what’s your sense of what proportion of women want to see that?

Hania Bednarski: So if cost is taken out of the equation, if we’re just talking about that specific angle, I would say it’s not a big number. It’s probably only about 10% of those patients.

Ben Haynor: Okay. So it’s fairly small. And then cryoablation since 2014. It sounds maybe a little bit like you’d use systems other than ProSense. Is that the case? And any color on how it stacks up? I mean, it sounds like liquid nitrogen as a better experience for you. But Any color there would be helpful.

Hania Bednarski: Yes, you’re absolutely right. So I started with ProSense system. I tried a couple of other systems. And I guess it speaks for itself that I came back to the ProSense system. I came back to IceCure and their machine. I do feel that this is really the best system on the market for me, at least for my use. And I really do like it. I think it’s very easy, very straightforward, simple. I trust the liquid nitrogen aspect of it. I feel that the coolness, the cold that we get with liquid nitrogen is much better than other solutions. And I feel that the probes are really well sized and achieve a really good margin for our patients.

Ben Haynor: Okay. Thanks. That’s helpful. And then just your sense of what your colleagues or peers think of cryoablation? I mean, there’s a kind of known at the moment, I mean, do you think once they get an FDA clearance on label that it becomes a bigger modality pretty quickly or how do you think your peers think about cryoablation will progress?

Hania Bednarski: Yes. So at the American Society of Breast Surgeons meeting in May of this year, our last speaker of the conference who was the past President, actually talked about how important it is to be well versed in cryoablation. And essentially, if you’re not doing cryoablation, you’re being left behind. And I do believe that that’s true. So to answer your question about awareness, I think that the awareness is definitely there. I’m truly hopeful that with FDA clearance, yes, more and more of my colleagues will take on this process, because it’s just such a wonderful thing that we can do for our patients.

Ben Haynor: Okay. Excellent. And then a couple for, I guess, for Eyal. Just — considering now we’ve got a handful of weeks left in Q4. Is there anything that you can kind of share in terms of what the financials for Q4 might look like on the revenue side or anything we should be looked on on the expense side?

Eyal Shamir: Ben, as you — thank you very much for the question. And as you know, Ben, we didn’t give or we are not giving any guidance for revenue and expenses, we will report it at the beginning of the year, right? We are doing it normally.