Imricor Medical Systems, Inc. (IMR) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Imricor Medical FY '21 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Steve Wedan, Chair and CEO. Please go ahead.

Hello, everyone, and thank you for joining us today to discuss Imricor's full year results. I'm Steve Wedan, Imricor's Chair and CEO, and I'm joined today by our CFO, Lori Milbrandt. Today, we'll provide you with the business update on the progress we've made during 2021, including our key achievements and the progress we've made on our overall strategy. Lori will then discuss the financial results before I review our market opportunity and the outlook for the remainder of this year. We will then move to a Q&A session. So despite the challenges of the pandemic, Imricor has delivered on a number of strong outcomes and key achievements in 2021. These achievements are highlighted on Slide 3 (sic) [ Slide 5 ]: Signed 5 new sites through the year and adding 2 new countries, 1 new site commencing first cases and 3 other sites recommencing procedures resulting in 4 operational sites. In Australia, we appointed a local agent and received TGA approval for Imricor's Advantage-MR system. While in New Zealand, we received Medsafe approval for all Imricor products. In the U.S., we filed our application for an Investigational Device Exemption, or IDE, with the U.S. Food and Drug Administration. We successfully raised AUD 16.5 million versus -- via an institutional placement at $1 per CDI and raised AUD 1 million via an oversubscribed security purchase plan. And we signed 2 new strategic agreements with MiRTLE Medical and NordicNeuroLab. Moving now to Slide 4 (sic) [ Slide 6 ] and Imricor's strategic pillars. For those of you who are joining us today who are new to the Imricor story, let me start by outlining our strategic plan. Our strategic plan consists of 3 key drivers, which include: first, to increase the number of iCMR sites by growing our installed base in Europe and expanding our geographies beyond Europe; secondly, to increase the number of procedures that each site can perform by expanding our products' indications for use, that is the types of medical conditions that we're allowed to treat; and third, to realize higher revenue per procedure by developing new products that allow for these expanded indications and evolving existing products for improved margins. To support the strategic plan 3 key drivers, we are executing across the 4 pillars I just mentioned: growing our installed base, expanding our geographies, expanding our approved indications and expanding our product range with new development. While these challenges of the pandemic have slowed the progress of our site rollout plans over the past year, they have not slowed our progress toward expanding our geographies beyond Europe, such as FDA approval. They have not slowed our progress toward expanding our indications for use, in particular, delivering a solution for ventricular tachycardia ablation. Nor have they slowed the product development that supports these initiatives while improving margins. I'd like now to move to the business update, starting with the outward-facing highlights of 2021. Despite the prolonged pandemic conditions and slow uptake in site signings, we were pleased to announce that we contracted 5 new sites across Europe, bringing the total number of sites signed to 14. And although planned procedures were largely stalled throughout 2021, we still had a total of 4 sites that were operational on and off. The company announced first procedures at South Paris Cardiovascular Institute and the recommencement of procedures at the Helios Leipzig Heart Centre, the Dresden Heart Centre and Maastricht University Medical Centre. Following the end of the period, the company announced that Münster University Hospital in Münster Germany has successfully performed its first iCMR ablation procedure. So today, Imricor has 5 operational sites: 2 additional sites where the installation is complete, 4 sites that are preparing for installation and 3 sites with iCMR labs that are under construction. Additional highlights are on the next slide. In the first half of the year, we appointed Regional Healthcare Group as our local agent in Australia to help facilitate TGA approval in Australia and Medsafe approval in New Zealand. So far, we have received Medsafe approval for all Imricor products in New Zealand, and our products are now registered in the WAND database for medical devices there. We've also received TGA approval for Imricor's Advantage-MR system. And currently, the TGA's review of our Vision-MR Ablation Catheter is underway. Achieving these approvals represents an important milestone in our geographic expansion plans. We also entered into a distribution agreement with the Regional Health Care Group under the terms of which they are the exclusive distributor of Imricor's consumables and nonexclusive distributor of Imricor's capital equipment, both in Australia and New Zealand. We are working closely with Regional Health Care Group and our other third-party equipment partners to deliver iCMR ablation solutions in the ANZ region as soon as possible once all devices are approved. Our U.S. expansion plans also progressed well in 2021. With the completion of our pre-submission meetings with the FDA and the filing of our application for an Investigational Device Exemption, commenced a clinical trial for iCMR ablation. U.S. sites are currently being selected for participation in the trial and as originally planned, we continue to target the end of 2023 for FDA approval. As I mentioned previously, in September, the company successfully raised AUD 16.5 million via an institutional placement. In October, then the company raised an additional AUD 1 million in an oversubscribed security purchase plan. The funds raised have been and will continue to be used to support the company's product development pipeline, support clinical and regulatory efforts and provide working capital to support -- working capital support for general purpose activities. Lastly, we have continued to promote iCMR site adoption and indication expansion through our strategic partnership agreements. The company entered into 2 new sales distribution agreements in the year with NordicNeuroLab and MiRTLE Medical. Headquartered in Norway, NordicNeuroLab are a leading maker of MRI-compatible, in-room monitors. Under the terms of the sales distribution agreement, Imricor is a nonexclusive distributor of NordicNeuroLab's so-called InroomViewingDevice, a high-quality, 40-inch MRI-compatible monitor for use in the magnet room of an iCMR lab. MiRTLE, the maker of MRI-compatible, 12-lead ECG system, have been a great strategic partner of Imricor since 2017. Under the terms of the new sales distribution agreement, Imricor will be the nonexclusive distributor of MiRTLE's 12-lead ECG systems. The sale of MiRTLE's 12-lead ECG system is very important in Imricor's strategic plan of enabling iCMR cardiac ablations of complex arrhythmias, such as ventricular tachycardia or VT. Entering both agreements streamlines the sales process for all parties and strengthens the range of third-party iCMR lab equipment Imricor offers to our customers. In the case of the MiRTLE partnership, it also strengthens our ability to expand our indications to VT ablation. This, in turn, promotes the growth of Imricor's installed base. In addition, in late November, we announced a small but strategic investment in MiRTLE, further deepening our relationship with the company. As part of the investment, we received about 2% equity in MiRTLE along with 3 ECG systems, each with a list price of about USD 125,000 for use in our planned VT clinical trial and for customer demonstration purposes. We also received 4 observation rights and the right of first negotiation for an acquisition of MiRTLE through November of 2024. We are very pleased to have had the opportunity to deepen our relationship with MiRTLE through this investment, and it's a great example of our planned, purposeful derisking of our strategic goals, in this case, the goal of expanding our indications for use. Moving on to the next slide, we'll focus on the current status of our site expansion plans. As mentioned earlier, Imricor signed 5 new agreements in this year. These sites include the Helios Hospital Berlin-Buch, the second Helios Hospital added to our installed base; and Semmelweis University and Vascular Centre (sic) [ Semmelweis University Heart and Vascular Centre ], which is our first site to be established in Hungary. I should note that the iCMR program at Semmelweis is being led by Dr. Béla Merkely, the receiver of the prestigious Széchenyi Prize last year, a prize that honors the greatest scientists in Hungary that are alive today. In Germany, we added the German Heart Centre Berlin and the Charité Medical University Virchow-Klinikum Campus, both in Berlin. These are 2 sites that have well-established facilities and programs, like the MRI core lab at the Charité and the CMR Academy at the German Heart Centre Berlin. And lastly, the Henry Dunant Hospital Centre, which is one of the largest and most technologically advanced hospital centers in Southeast Europe became our latest site and the first Imricor hospital in Greece. As I mentioned at the outset, and as many of you know, the pandemic greatly slowed our rollout plans over the past year or so, and it was, therefore, very pleasing to close the year out with 5 new signed sites. Imricor now has a total of 14 sites signed across Germany, the Netherlands, France, Hungary and Greece. And this year, we will continue to grow our number of iCMR sites as the effects of the pandemic continue to diminish. Moving to Slide 9 (sic) [ Slide 11 ], we'll discuss the current operational status of our 14 sites. As I mentioned, we now have 5 operational sites where procedures are being performed. These are the Dresden Heart Centre, Maastricht University Medical Centre, Helios Leipzig Heart Centre, South Paris Cardiovascular Institute and as of late -- as late as last week, Münster University Hospital. The table presented on Slide 9 breaks down our lab status and procedure status for all 14 sites. Beyond the operational sites, we have: 2 additional sites where installation is complete and procedures will commence soon; 4 sites that are preparing for installation, meaning the physical lab is ready and the equipment will be delivered for installation, training and commencement of procedures; and 3 sites where the iCMR lab is under construction. And now that COVID restrictions are lifting, our clinical sales reps, or CSRs, are focused on getting sites up and running as soon as possible by coordinating equipment ordering, installation and training. And then, once each site is operational, our CSRs focus on delivering on-site clinical support to promote robust procedure volume with the goal being to capture all or at least most of the atrial flutter ablations at each site. You'll see a lot of activity in this area over the coming months. Now moving to Slide 10 (sic) [ Slide 12 ] and our product pipeline. On this slide, we highlight that our research and development pipeline remains a clear priority to drive future growth through expanded indications as well as gross margin improvement. We remain on track to begin preclinical trials for expanded indications using our steerable sheath and transseptal needle in March of 2022. We are also progressing well with our diagnostic catheter, which will deliver material improvements in gross margin, and we expect this device will receive CE mark this year. With that, I'd like to hand it over to Lori to take you through our financial performance for 2021.

Thank you, Steve, and good day, everyone. As a reminder, all numbers are in U.S. dollars. As set out on Slide 13 (sic) [ Slide 14 ], we generated revenue of $696,000, which is basically flat in 2020 due to the continuing COVID pandemic, which continued to temporarily stall our lab rollout and procedure plans. Cost and non-R&D expenses increased by $4 million in 2021 compared to the prior period due primarily to additional staffing, inventory reserves, excess manufacturing capacity charged directly to operational expenses, D&O insurance and increased sales and marketing spend. It is worth noting that the increase in inventory reserves is a noncash charge as this inventory had been built in prior periods. R&D spend increased by around $4 million in 2021, primarily due to increased prototype and testing costs, additional staffing and increased regulatory spending. The company recorded a $758,000 receivable related to its qualifying for an Employee Retention Credit as provided by the CARES Act. The funds are expected to be received sometime during 2022. The net loss for the period was $19.7 million. Our balance sheet is provided on Slide 13. In terms of key balance sheet movements, during 2021, our cash decreased due to an increase in cost and R&D spend, as discussed previously, which is partially offset by proceeds from our placement and Security Purchase Plan. Other current assets include the $758,000 Employee Retention Credit receivable. Our accrued expenses include $213,000 for inventory purchase commitments. Certain obligations were entered in 2020 to ensure that we would have enough supply of certain components to support our commercialization efforts. Given the lasting impact of COVID, we have determined that we likely won't use all of the inventory that we have committed to purchase. This is because future generation products will obsolete certain components used in first-generation products. Moving to cash flow on Slide 14 (sic) [ Slide 16 ]. Our operating cash outflow for the year was $17.5 million, up $5.3 million on the prior comparable period due to increased operating costs and R&D expenses, as outlined on Slide 12 (sic) [ Slide 14 ]. These increased costs and expenses are partially offset by noncash charges related to inventory reserves, depreciation and stock-related compensation expenses, which were greater during '21 than 2020 as well as the reduction in cash burn related to purchasing raw materials and building COVID -- inventory due to COVID. During the year, we completed a placement and a share purchase plan, which resulted in net proceeds of $12.1 million. We ended the year with $18.5 million in cash to continue to support commercialization plans and future growth initiatives. I will now hand it back to Steve to take you through the rest of the presentation.

Thanks, Lori. Before moving to our focus for 2022, I'd like to briefly review Imricor's market opportunity and strategy. Imricor continues to target a large addressable market, estimated to be over USD 6 billion worldwide, with growth supported by several key drivers, including increased incidence of cardiac disease, a shift towards minimally invasive procedures and the cost effectiveness of catheter ablation treatment options. As you can see on Slide 16 (sic) [ Slide 18 ], atrial flutter procedures, our current approved indication in Europe, accounts for around 23% of the ablation market. This provides us with a significant immediate opportunity as well as a significant opportunity to grow through expanding our approved indications to other arrhythmias. Ventricular tachycardia ablation, or VT, is our next targeted indication. And while VT is shown on this graph as only representing 8% of ablation procedures, there are great opportunities to expand this market by delivering the advantages of ablating in the iCMR lab using our products. The size and forecast growth of the ablation market as well as the ability of our technology to deliver solutions that will expand this market underpins our future growth strategy. And this is overlaid by the fact that we are the only company globally to offer cardiac ablation devices for use in the MR environment. Moving to Slide 17 (sic) [ Slide 19 ]. To date, we are focused on managing our recovery from the effects of the pandemic. And now more than ever, things are going very well. Since the last time I spoke to you, we have seen an increase in the procedure volumes at our operational sites, and we are progressing well toward getting the rest of our sites up and running. This was one area that was necessarily paused during the pandemic, as you can imagine. And while beginning of 2022 was still impacted by Omicron, we are now seeing a renewed progression of new sites moving through our sales process. These things are happening not only due to the diminishing effects of the pandemic, but also due to purposeful actions taken by our team. As we move into 2022, we have clear initiatives that reflect -- that are reflective of our greater strategic goals of site growth, utilization, market expansion and product development. And now is the right time for us to do all the things we want to do. Now is the right time for us to grow our installed base through 2022. Our team is engaging more than ever with electrophysiologists to drive awareness and demand for iCMR, and we continue to work collaboratively with Philips and Siemens to drive site adoption. For example, we're hosting our first real-time iCMR ablation global summit on March 12 in Amsterdam. We currently have 19 doctors from 16 different hospitals registered to attend this summit in person, and only 2 of those hospitals are current Imricor sites, having recently been added to our customer base. In addition, representatives from both Siemens and Philips will also attend the summit. Now is the right time also to initiate procedures across all of our contracted sites and focus on increasing the procedure volume at each site. The 4 procedures performed at the Cardiovascular Institute of South Paris last week, while I was there, each completed in 20 to 30 minutes, are a good illustration of the kind of procedure volume that is possible, with good clinical outcomes and clear economic benefit. And now is the right time to expand our market as we progress on our approvals of VT indications, complete the TGA approval process for our Vision-MR Ablation Catheter in Australia, and work with the FDA on our IDE review process to open the door for a clinical trial in the U.S. And finally, now is the right time to drive to completion the new products, our team has been working so hard on through the pandemic, products that support expanded indications and margin improvement. In turn, that opens up resources for us to accelerate the development of new devices, like our endomyocardial biopsy system, which will open new markets for us in the future. As you see, we're making excellent progress, and we're on track with our larger, strategic goals of geographic expansion, indication expansion and product expansion. And while we experienced pandemic headwinds in 2021, we ended the year on an exciting note. And we expect 2022 and beyond to be the most exciting years for Imricor ever. Restrictions are lifting, the shackles are off and this is our time. With that, I'd like to hand it back to the operator for questions.

[Operator Instructions] Your first question comes from Sarah Mann from MA Moelis Australia.

First question for me is just, I guess, around the run rate of procedures that are being done now that you've come out of Omicron. You've now got 5 sites in Europe that are doing procedures. And you even did 4 last week in the center in Paris, which I'm not sure if we should straight line like feel they're a good outcome. Can you give us a rough feel for what, I guess, procedure volumes have kind of been run rating at on a per week basis in recent weeks as we've come out of Omicron?

That's a great question, Sarah. Well, it's not so much about what has been happening. Because coming out of Omicron is something that's very, very recent, so it's difficult to look back. Many of our sites, for instance, while not strict in particular, were not doing procedures still in January and into early February. So it's more important to look at the Cardiovascular Institute of South Paris or ICPS, as it is called, as a model for what we expect to do moving forward. What we did is we went there, we made sure that they had good clinical outcomes. We looked at the rate procedure -- the procedure rate that they had planned for the year, and then worked with the site and are continuing to work even today with the site to determine what we can do to increase their procedure volumes to the maximum possible. And the maximum possible at each location is, of course, different. But what we wanted to show while we were in Paris was that you can do 4 procedures in about 2 hours. We did them over 2 days in the morning of Tuesday, and in the morning of Thursday, and get good -- not only good outcomes, but good economic benefit because that's a fast procedure, whether you're in a conventional lab or in the MRI. And one of those procedures, in particular, would have been extraordinarily difficult in the X-ray lab because of a particular Eustachian ridge and the difficulty they would have had to know where precisely they could ablate. These images from MRI, gave them a clear indication of where they needed to go, and they are able to finish that procedure in 19 minutes. So the process is, first, good clinical outcomes and support by our team; followed by talking through what is holding back each site from doing the procedures that they're -- at the rate they're doing now to the rate that they could be doing, whether it's MR time, is it -- whatever. And so that's something that we are solving at one site, and we'll take that same program on the road to each of our sites until we get each of them running at the rate that is possible for that site. So as you're looking at modeling, which I imagine is where your question is geared toward, I think it's safe to say as we come out of COVID, we'll be at a lower rate per site than the full rate that's expected. And that we'll gradually work our way toward getting at the maximum rate for each site.

Great. And so those 4 procedures that you did at ICPS, I mean, it sounds like it was in a pretty short period of time. Like it sounds like it's reasonable that could be a kind of consistent run rate for them once things are back to normal.

It could be. That is a site that does about 250 atrial flutter ablations per year, which is a large number of atrial flutter ablations. And when we can do them in 20 or 30 minutes, what happens then is the MRI lab, which is a shared resource with their radiology department, but one that the radiology department has granted them access to up to 4 mornings a week if they wanted to. And -- but when we can do them that quickly, they hardly need 4 mornings a week to be able to do these. And it's additive to their whole ablation program, meaning they have EPs up in the -- in their existing labs, and they can do additional procedures down in the MRI lab as flutter patients come in. And at a site like that, and in many sites, when flutter patients come in, the idea is to get them treated as quickly as possible. So you don't know that next week, you're going to have a flutter patient on Wednesday. You know that on Tuesday, when the patient shows up and you want to get that patient back into sinus rhythm as quickly as possible. So it really is a good economic benefit for the site as well. And ICPS, is not a university research institution. It is a standard, really high quality, but standard for-profit hospital. So it's -- it works for everyone in that case.

Got it. And you also mentioned, I think, at the quarterly that you put out that you'd restructured your sales process to drive volume at each of the sites. Can you talk about how that's kind of going so far? Or where it's probably in the month or so in? But any color around that would be useful.

Yes. Well, I was in Paris. I was actually with our latest, our newest hire of clinical sales representative, and he did fantastic, really, really a high-quality hire, and that's what we're seeing across our sales team. The focused difference between where we started and where we are now is this: Before, we had envisioned, and this is not atypical, to have a sales team that would close sites and facilitate the sale of catheters; and a clinical support team that would help sites get up and running, answer questions and be available if questions come up down the road as well. We've changed that model a bit, where the teams are working together. So there's no handoff of the site. It's not like I sign the site and then now it's your responsibility to make sure procedures happen. Instead, we're working together. That means our clinical sales -- our clinical representatives aren't just clinical support. They're also clinical sales, meaning they're there to help understand what the roadblocks are to increasing procedure volume as well as making sure that you're having a great outcome in all of your procedures. That's been the shift in the organization of the sales team. And right now, we have a lot of reqs up. Every one of our regional sales managers, for whom the clinical sales representatives will work in their territory, have reqs out for more CSRs. It's one of the areas we will be growing significantly as we launch into the rest of this year. So I should say, in addition, we are in the final throes of interviewing for a European Director of Sales, someone to organize in Europe all of the activities that we're doing there. We found that -- we think that would be a better way to keep everybody well organized to have somebody on site in Europe who is at the director level as well.

No, that makes sense. And then you made a comment about the pipeline being strong. So just if you could give any more color around that? And what's kind of driven the strong pipeline? I mean is that just you guys progressing your existing relationships? Or is Philips helping move things forward as well? Any color on that would be good.

Yes. It's very collaborative. It's hard to point to a site and say, well, that's a Philips site or that's a Siemens site or that's a site that Imricor brought to the table. It is -- we continue to have very open lines of communication with both of our strategic MRI partners and working together to target sites. Now if you're an MRI company, typically what -- your customers are radiologists. And what we're really targeting are electrophysiologists. So sometimes it's a matter of us identifying EPs, electrophysiologists, as customers and then crossing that with the MR company to find out whose customers they are and who the radiology counterparts are. And then working together to bring those people to the table to talk about what we can do in the short term, which is typically using a radiology MRI lab as an iCMR lab, as plans then would progress for a construction of a dedicated cardiology-owned iCMR lab. And we expect that, that's the way it will continue for a while. But slowly, you'll start to see iCMR labs by cardiology being built. So our announcements will be not so much about a site that's signed that has an MRI that we will begin working with immediately, to a site that has started construction on an iCMR lab as part of their regular EP lab structures. And they'll started in some 9 to 12 months after that.

Great. And then just last question for me around the diagnostic catheter, which you said you're expecting approval for this calendar year. Can you give us any feedback around the interactions you've had with the regulatory bodies over there?

Sure. So remember, this is the first device that we submitted under the new medical device regulations. And so it was going to be a bit of a test run for us to find out how this process is going to work. It's in fact, a new process, not only for us, but of course, also for our notified body. And typically, we expect 3 rounds of review, and we are currently in the middle of our second round of review with the notified body. So everything is moving forward pretty well, I would say. And that is why -- we have a high degree of confidence that, that device will get CE mark yet this year. And we're looking forward to that.

[Operator Instructions] There are no further questions at this time. I'll now hand back to Mr. Wedan for closing remarks.

All right. Well, thank you again for joining Lori and me today. I do want to say last week, for me personally, I look back at that as one of the best weeks in the history of Imricor. And I'm really excited for where we are today. I hope that as you watch us and the announcements that come out in the coming weeks, that you'll share that enthusiasm for what we're doing and where we're going. And we look forward to catching up with each and many of you virtually over the coming weeks as we have further calls and results. Well, have a great day, and thanks again.

That does conclude our conference for today. Thank you for participating. You may now disconnect.