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

Welcome to Imricor Medical Systems Full Year Financial 2024 results presentation released on the ASX this morning. From the company today, we have the Founder and Managing Director, Steve Wedan; the company's Chief Financial Officer, Jonathon Gut; and the company's VP of Corporate Strategy, Nick Corkill. [Operator Instructions] Steve, I'll hand it over to you now. Thank you.

All right. Thanks, Simon. Hello, everyone. Thank you for joining us today to discuss Imricor's full year results for 2024. For those new to our story, Imricor is the global leader in designing and manufacturing MRI-compatible interventional tools and equipment that enable physicians to harness the superior imaging capabilities of MRI during and throughout interventional procedures. Our initial focus has been on electrophysiology, specifically cardiac ablation, which is a rapidly growing market approaching USD 10 billion annually. When we started the development of MRI-compatible devices for cardiac ablation presented a significant technical challenge, requiring unique insights that only Imricor was able to provide, which is why we are the only company in the world now to succeed in making MRI-compatible ablation catheters and other devices that are needed for these MRI-guided procedures. Our goal to move cardiac ablations away from x-ray and into MRI also requires the development and approval of many different devices. Essentially, every device you need to perform one of these ablation procedures. We had to develop all of them from scratch to be uniquely MRI compatible based on our platform technology and our expertise. This is something many companies, large and small, have tried to do over the years, but only Imricor has succeeded. Many companies tried because the promise of MRI-guided cardiac ablations has always been to deliver faster, more successful procedures at lower cost and with improved safety. Now keeping in mind that securing regulatory clearance for a single medical device is a major milestone for any company. Consider that for Imricor, the task of that milestone of approval is even greater. That's because our approvals encompass an entire platform of devices, including multiple consumable devices, capital equipment and soon, the world's only MRI native interventional mapping and guidance system we call NorthStar. We've successfully received approval for our platform in Europe and in the Middle East, adding NorthStar to the roster of approved devices in those places pretty soon, and we are progressing the approval process with the FDA in the U.S. right now. Each approval reflects years of rigorous development and extensive regulatory documentation involving thousands of pages, and I want to take a moment to commend our regulatory and quality teams whose exceptional work continues to drive progress, and I look forward to celebrating new approval milestones with them, the broader team and our shareholders throughout 2025. The most exciting news is that the technology is fully developed, proven safe and delivering outstanding performance. We are now in the early stages of global commercialization, expanding our footprint and unlocking value for patients and physicians worldwide. Those of you who have been following us for a while will know that we are not stopping at cardiac ablation. As more doctors gain experience using the technology, the applications continue to expand. And MRI-guided biopsy tool is one example that's often requested and is in our product road map. Beyond this, there are potential applications for renal denervation, which is the treatment of hypertension and further potential applications in structural heart, oncology, neurology and on and on. On the software side, NorthStar is emerging as the central guidance system for MRI-based interventions with potential diagnostic applications that can open an entirely new market of significant scale. The first 19 slides of our deck today provide background information that's just really for reference purposes because today, I'll focus on our key achievements in 2024, starting from Slide 20 before handing over to Jon to discuss our financials. And then I will provide an update on the significance of what we're doing, doing the first VT case, growing our pipeline on NorthStar and its approval pathway as well as outline the major milestones ahead of us for 2025. We'll leave ample time for Q&A after the presentation. So this slide summarizes some of our major accomplishments in 2024. In short, we've made significant regulatory process in both Europe and in the U.S. Notably, we received CE Mark approval for our diagnostic catheter under the new more stringent European medical device regulations. And just a short while ago, we followed that up with the CE Mark of our second-generation ablation catheter. We've submitted NorthStar, our 3D mapping and guidance system for CE Mark approval, and we expect to commercialize NorthStar in Europe in the second half of this year in 2025. In the U.S., we're making excellent progress with FDA's modular review process. Our regulatory team is overseeing the approval pathways for more than a dozen products, and I want to again extend my appreciation to Jen Weisz and her team for their exceptional work. In Europe, we're preparing for one of the most significant milestones in Imricor's history, the first-ever MRI-guided VT ablation procedure, a transformative step for the field and something I'll touch on more later. Beyond regulatory processes, we continue to establish Imricor as a truly global health care company dedicated to revolutionizing cardiac arrhythmia treatments. A key milestone for me personally in 2024 was the first MRI-guided procedure performed in the U.S. at Johns Hopkins University, where the concept of MRI-guided interventions was first conceived over 20 years ago. Additionally, we have commenced procedures in Switzerland and Croatia with Hungary set to begin shortly. And in the Middle East, following recent approvals, we received our first purchase order from Qatar. I have to say that I'm particularly pleased with the caliber of talent we have attracted to our sales team and their efforts have significantly expanded our pipeline, both in terms of new site engagement and progress towards new hospital adoption. So with that, I'll now hand it over to Jon to walk through the financials.

Thank you, Steve, and hello, everyone. As a reminder, all numbers are in U.S. dollars. As set out on Slide 22, we generated total revenues of $959,000 for the year, which was up 56% compared with the prior corresponding period. The increase was driven by double-digit growth in both equipment and consumable revenues, including the first sale of consumable devices in the Middle East. The initial Middle East order also included equipment, but that revenue is expected to be recognized in 2025 following installation at the site. Equipment revenues of $306,000 were up 109% compared to the prior corresponding period. For consumable product sales, revenue of $461,000 was up 59% compared to the prior corresponding period and benefited from the Middle East order received during Q4. While we experienced strong top line growth during the year in percentage terms, this is just the beginning of our recommercialization efforts, and we are excited about the significant potential for continued growth moving forward. It is worth noting that some of our European sites are exclusively enrolling patients in the VISABL-AFL trial to support FDA approval, and these have not been revenue-generating procedures. Additionally, several Philips hospitals are expected to commence procedures later in 2025 following the release of their R12.3 software update. This is the update that will support the rollout of our NorthStar mapping system on the Philips platform once the NorthStar system is approved under MDR, which is expected to be received in the second half of this year. Costs and non-R&D expenses continue to be well contained in 2024 and decreased by $502,000 or 5% compared to the prior year. This reduction was primarily the result of continued decreases in D&O insurance premiums and charges for new inventory reserves. R&D spend for the year increased by $247,000 or 3% in comparison to the prior year, primarily due to targeted investments in staffing and an increase in product development costs related to the FDA approval process. These increases were partially offset by a decline in the regulatory compliance costs as our second-generation products progress through the final stages of MDR approval in Europe. The fair value change recognized in the current year is primarily related to the convertible notes and warrants issued during 2022 and 2023. The change in the fair value of these liabilities correlates with the movement in our stock price and the larger charge recorded in 2024 parallels the increase in our stock price that occurred during the year. This accounting adjustment does not have a direct impact on future cash flow. The net loss for the period was $29.7 million, an increase of 31% from the prior year, which was driven by the fair value change. Adjusted for this, our underlying net loss for the period would have been $15.6 million, a decrease of 7% compared to the prior year's adjusted net loss of $16.6 million. Our balance sheet is provided on Slide 23. Regarding significant changes in the balance sheet, the decrease in accounts payable reflects the payment of the nonrecurring invoices for third-party equipment inventory and regulatory compliance costs that were received during the fourth quarter of 2023. The decrease in other current assets is primarily due to the lower D&O insurance premiums, which are prepaid during the third quarter with funds obtained from a financing obligation. Contract liabilities represent deferred revenue where Imricor has at least one future obligation to be met before the revenue can be recognized. The outstanding convertible notes at the end of the period are recorded at their estimated fair value of approximately $19.9 million. It is important to note that this valuation does not represent the amount to be paid if the notes were settled in cash on their maturity dates. The outstanding principal and accrued interest at December 31 totaled $6 million. The option and warrant liabilities relate to securities issued as part of the financing activities completed in the second half of 2023 and are also recorded at their estimated fair value in accordance with U.S. GAAP. Moving to cash flow on Slide 24. Our operating cash outflow for the year amounted to approximately $15.6 million, showing an increase of $2.6 million compared to the prior year. This increase is primarily driven by the decrease in the accounts payable balance at December 31, which increased our cash flows during the period. During the year, we completed 2 equity placements and a rights offering, which resulted in gross proceeds of approximately $32.9 million. At the conclusion of the period, our cash balance stood at $15.7 million. Now I'll turn it over to Steve to continue with the rest of the presentation.

Thanks, Jon. So I'd now like to discuss some of the upcoming value drivers for 2025. Let's talk for a moment about ventricular tachycardia or VT ablations. VT ablations have some of the poorest outcomes when using conventional x-ray-based guidance and physicians consistently tell us that MRI has great potential to add value to this procedure, both in terms of the duration and the effectiveness, given its superior ability to visualize the tissue characteristics that cause the arrhythmia. We believe the upcoming VISABL-VT clinical trial could provide the data necessary to redefine the standard of care and drive widespread adoption of iCMR labs globally. An interesting study published in a cardiac medical journal called Circulation Arrhythmia and Electrophysiology demonstrated the benefits of MR imaging for VT procedures a while back. While this study used preprocedural MRI imaging uploaded to conventional mapping systems rather than using real-time MRI guidance like we're talking about, it still resulted in significant improved procedure times and outcomes. By implementing real-time MRI guidance as we are pioneering, we expect even greater benefits. These advancements, along with growing physician support reinforce our confidence in the transformative potential of MR-guided VT ablations. NorthStar also represents a major step forward. This system has the potential to become the central hub of every iCMR lab, generating both upfront licensing revenue and annual recurring fees at a software-like margin. The inbound demand from physicians has been highly encouraging, leading to the acceleration of our CE Mark and FDA submissions. We anticipate CE Mark approval by mid-2025 and FDA clearance in Q3, positioning Imricor for its first U.S. sale and expansion into new hospitals shortly after approval. We're also excited about the recently announced license agreement we signed with ADIS, a Switzerland-based developer of cardiac-focused AI applications. We already had a joint technical development agreement in place with them to develop AI modules for integration with NorthStar, and we believe that these and more AI capabilities will position NorthStar to be the vehicle through which we increasingly harvest the benefits of MRI for patient treatment across many medical specialties, including, of course, cardiac ablation. A third area I want to highlight as we look ahead to 2025 is our pipeline of sites. We have strategically expanded our sales team and the impact of that has been significant. Our pipeline in Europe has more than tripled since mid-2024, while our Middle Eastern pipeline has more than doubled. As hospitals, capital budgets recover and awareness of Imricor's technology grows, again, we expect momentum to accelerate. There is also an upcoming Philips software update that will allow Philips MRI systems to gain connectivity with NorthStar. This will unlock existing hospital sites with Philips-based iCMR labs and also open the door for additional hospital adoption. I'd like to conclude our prepared remarks highlighting the overall outlook for 2025. On the regulatory front, we expect to have several major announcements as we complete various submissions and gain new regulatory approvals, both in Europe and the U.S. As I mentioned earlier, this is an entire platform of technology with over a dozen products going through the process. So it is likely there will be many milestones to announce throughout the year. The biggest item in the very near term is the first-in-human iCMR-guided VT procedure to be performed at the Amsterdam University Medical Center. To start this program, it has taken significant partnership, development, approvals and planning. We are delighted with the engagement and excitement from the entire team at Amsterdam, and I genuinely believe that we will refer to Imricor's journey as the time before VT and the time after VT. It really is that significant, and the procedure is highly anticipated by both physicians and the industry globally. We expect to continue to add new customer sites across Europe and the Middle East throughout the year, and we will communicate those as they close as well. The second half should see a pickup in the cadence as Philips hospitals can finally connect to NorthStar following the scheduled software upgrade from Philips. And finally, Imricor is making steady progress in starting our pulsed field ablation or PFA program. PFA is an exciting new energy source being used for ablation. Our team is already ablated using PFA as an energy source in preclinical feasibility studies using our existing catheter, and we are excited to move this important project forward. Even as PFA grows in popularity with physicians, the technology limitations are also coming better into focus, and we believe MRI will bring the same value to PFA ablations as it does to RF ablations. We believe that no matter what energy source doctors use, MRI can provide a procedural endpoint that tells the physician when enough ablation has been given, but not too much ablation. With that, I'd like to thank our dedicated team at Imricor for their hard work, our MRI partners at Siemens, Philips and GE and of course, our physicians and shareholders for their support in advancing this exciting new field. I'll now turn it back over to you, Simon, and we're happy to take any questions.

The first question is from Sarah Mann at Moelis.

Can you hear me okay?

We can.

Great. First question from me is just on the Flutter trial in the U.S. Cognizant that obviously, you can't comment directly on how the trial is progressing from a recruitment perspective. But can I firstly confirm that you're still tracking to, I guess, have approvals and kind of first sales in the second half of this calendar year? And then secondly, on that, can I confirm that there's 3 sites participating? And just wondering if there's intentional interest from other hospitals to join the clinical program as well.

Yes. How about this Sarah. I'll answer those in reverse order. A fourth site will start up in Amsterdam. We actually hope that they would start a couple of weeks ago, but the approval from METC didn't come through quite in time. So that will be our fourth site. And that's a site that does commercial cases clinically on an ongoing basis. We'll just replace those commercial cases with VISABL-AFL cases. And at the other 3 sites, the enrollment is accelerating. And so we always -- we never wanted the clinical trial to be the long pole in the regulatory process, and it still isn't. So we're happy with how the trial is progressing and everything is still on track. When it comes to regulatory approval, there's things we can control and things we can't control, but we're still tracking toward second half of this year approval from FDA. And like I mentioned earlier, and I think we put an announcement previously as well, we swapped the order a bit. So NorthStar, which is a 510(k) product, will be submitted first, and we pushed a couple of other things out just a little bit so the team could work on NorthStar because we believe that with NorthStar, it can get 510(k) approval well ahead of the rest of the technology, and there is a market we have inbound interest for NorthStar already. So we're going to sort of step that up and put that in front.

Great. That makes a lot of sense. And then the other question is just on the European VT trial. I mean you've kind of called out that it should happen pretty imminently. Is there anything that needs to happen before procedures can commence, firstly? And then secondly, are you getting much inbound interest from other sites potentially looking to join VT as well given that it's, I guess, such a groundbreaking procedure?

We do, we are getting inbound interest, and we're working with all those sites to try to get them set up so they can participate in the trial. The answer to the first part of the question is, yes, we're -- there is a lot of new stuff in the VT procedure. The first time of transseptal crossing, the Gen 2 catheter, the second-generation ablation catheter as opposed to the first-generation ablation catheter, and of course, an entirely different part of the heart to be working in with a sicker patient population. So we've been working with Amsterdam to try to get as many of the new tools worked with and comfortable before taking this step over to VT. And to that end, a whole team of them are coming for a whole week. So not practicing medicine, but taking that time off, that's how important it is. They're coming to Minnesota. We're going to do a series of preclinical studies with all of the new tools to give them the repeated access and practice with these new devices, make sure everyone is super comfortable, and then we'll go back and 2 weeks later, do a series of multiple days in a row of flutter cases followed by the first VT case. So it's planned. It's well planned, I should say, and we're executing right now to that plan. So it's coming and more than anything, we want to make sure that it's successful and it is the great procedure that can be even though it will be the first-in-human study.

Great. And then final one for me. Nice to see that your European pipeline is growing. Can you give us a rough breakdown as to what percent of the sites in that pipeline are Philips versus Siemens? Because presumably, if the Philips sites are still waiting for the software release to come through, once that comes through potentially your pipeline could accelerate again? Or is it currently like a reasonably even mix between 2 MR OEMs?

Yes, there are -- the pipeline is growing actually with brand-new sites. So that's one thing. And there's also an activation of sites. And talking about the activation sites, we have a lot of Philips sites for a while with iSuite that Philips had developed being the sort of frontrunner prior to NorthStar existing, we were really kind of pushing for Philips adoption because that's the system that you could most quickly and easily move to complex ablations like participating in the VT trial. Once iSuite was pulled back and we developed NorthStar to replace it, that sidelined all of those sites. So we pushed for Philips sites for a while, and then they're all sort of sitting there waiting for the next software release from Philips to allow connectivity to NorthStar. So we'll activate a bunch of sites as soon as that software is released. And then also, as we look at the pipeline, it's always a matter of whether a hospital or a site that's interested in doing this happens to be a Philips site or a GE site or a Siemens site and having the Philips sites not be able to connect to NorthStar kind of limits that pipeline. So that will continue to grow as well.

Nick here, I might just add that it's broadly represented by the market shares of both of those companies. As I look through the pipeline, it's pretty much a pretty even split as it is in the market.

Our next question is from Scott Power at Morgans.

I just want to keep -- try and get your comments more on NorthStar. You've talked about it as the central hub. So I just want to just double check what you said in terms of the timing of approval. So European by midyear and U.S. approval by third quarter. Is that correct?

That's what we're shooting for.

That's what you're timing. Okay. And then perhaps could you just sort of talk a little more about the revenue opportunities that you're seeing there? You spoke about licensing opportunities. Can you expand on that and just how we should think about that in terms of the use of the product in the cardiac setting, plus perhaps in alternative settings?

Well, I don't want to tip our hand, Scott, too much to some of the really cool ideas we have about how NorthStar can expand beyond just cardiac ablations. But when I say a central hub, what I mean is it is the thing that it's the vehicle through which we're not just going to say we can do these procedures in MR. We're going to start to harvest the value of why we should do these procedures in MR. And when you look at harvesting that value for cardiac ablations, for instance, or cardiac biopsies or structural heart delivery systems or renal denervation, that's one thing. But there are also other -- as we build AI into tissue assessment of disease, I don't want to say heart because it's beyond the heart. But as we look at the tissue assessment capabilities and the AI that we'll be building into this, we think that this can have a real great application towards directing therapy across other things, even if there isn't an interventional product in that equation. It's a little obscure. I apologize. But again, I don't want to announce some really cool things that we're thinking about doing. What we do in the really short term is there are a bunch of pediatric sites across the United States, for instance, who are trying to do simple diagnostic right heart catheterizations or left heart catheterizations. These are pressure measurements that they take on kids who need to have reconstructive congenital heart surgery. As they do these, they have to do a bunch of them, so they -- and it's so important to minimize radiation that they're doing these in MR. But it's harder to do an MR than it is in X-ray. But with NorthStar, we can give them an interventional environment that will let them easily -- more easily do these procedures. And so we're getting, as I mentioned earlier, a lot of inbound interest. So there's -- NorthStar has a way to kickstart itself pretty quickly. And that's, of course, great for us as well because as a pediatric center starts adopting NorthStar and using it for these procedures, there's always, of course, an associated adult hospital with that children's hospital. That's a great exposure for us to get -- for our sales team to get in front of the EPs in the adult hospital as well. So it all should build on itself quite nicely.

Right. Okay. And just a final question for me, just in terms of the progress with the TGA in Australia.

So we just got that -- you saw the announcement recently that we got the second generation. You might recall that last year, it was taking so long to get the first-generation approval complete, and they were looking for a little bit more clinical data and so on and so forth. It didn't make any sense at that point because we were going to -- the potential was to get approval of the first-generation catheter in Australia just as the second-generation catheter gets approved everywhere else in the world. And that approval is just now happening. The second-generation catheter is the one that's going to -- that's under approval for FDA, and it's the one that just got approved in Europe. It's the one that's being used in the VISABL-VT trial. So as we get indications for VT, that's the catheter that we'll have and not the first-generation catheter. So we pulled that back, and we were told by our consultants with TAG that they value the new medical device regulations, more than they value CE Marks under the old medical device directive. And our first-generation catheter was cleared under the Medical Device Directive. So we think -- thought and think now that a good strategy is to -- now that we have an MDR cleared medical device regulation cleared Gen 2 catheter, we can go back to TGA and try it again and streamline the process. So that is the plan now. I can't put a time line on it. Obviously, the time line last time surprised us quite a bit, but we think we have a pretty good path forward.

Steve, the next question, what is the potential in entering the Asia Pacific market, specifically Mainland China? There's just over 20,000 MRI units installed throughout Chinese hospitals being mindful of IP protection. Is there any vision or initiative to enter this ecosystem considering its enormous potential for NorthStar and consumables alike?

Yes, there's definitely a vision, but I can't say that there's an initiative to do it right now. We've got our hands full with 2 global clinical trials and commercialization across the 2 largest markets that we have in front of us being Europe and the U.S. But obviously, China, in particular, is a great place for us to direct our attention pretty soon.

Thanks, Steve. And just a final question. Any early works done in ablation treatment of atrial fibrillation, potentially a much larger market?

Yes. It's -- that's the PFA is all about. We -- I've talked in the past about how we start with atrial flutter and that establishes as a platform and gets that approved. And then as we study and move to more complex ablations like VT or AFib, then we're only studying the ablation catheter itself. And so we had this choice before many years ago, actually, what do we do next? Do we go to AF, atrial fibrillation or do we go to VT? And we chose VT because, one, it's a miserable procedure conventionally, and we think that MR has just such tremendous value to add to that. And the imaging is so straightforward, and it's just a really easy value proposition. And doctor after doctor would say, yes, I can really solve this, would be great for VT. And at the same time, I started the company really with AF in mind and utilizing MRI to detect whether we've left gaps and lesions and things like that. But at that time, we also saw pulse field ablation coming. And while this would be unfortunate if we got this whole RF ablation system through an AFib trial, which is a much larger trial with longer follow-up, hundreds of patients with 12-month follow-up, we do all that work and then just to get sort of leapfrogged by pulse field ablation, which is -- and AFib is where pulse field ablation is really focused. RF ablation is still going to be the thing for the ventricle for lots of technical reasons. But I think that was a good choice because now as we drive forward our PFA program, that will be focused on AF.

Great. Thanks, Steve. That concludes the Q&A segment. I'll just hand it back to you for closing remarks.

Thanks. So I just want to thank everybody for joining us today. Again, we really look forward to -- I mean, last year was about setting ourselves up for success, and we did it. And now we're looking forward to a really, really exciting 2025. You can feel it in the air in here. You can feel it in the field as we talk to hospitals and doctors, and we look forward to sharing it with all of you. So thanks so much.