Imricor Medical Systems Inc

ASX:IMR

Earnings Call Transcript 2021-Q4

[Aisha Jabeen]

Good morning, everyone, and welcome to Imricor's quarterly results for the period ending 31 December 2021. My name is Aisha Jabeen, and I will be moderating this morning's call. I am pleased to be joined by Steve Wedan, Imricor's CEO; and Lori Milbrandt, Imricor's CFO. Steve will provide an update on Imricor's activities during the quarter, followed by a question-and-answer session. I'll give instructions on how to ask a question at the end of the briefing. With that, I'll hand over to Steve.

[Steve Wedan, CEO, President & Executive Chairman]

Thanks, Aisha. I just want to check. Can you hear me?

[Aisha Jabeen]

Yes.

[Steve Wedan, CEO, President & Executive Chairman]

Okay. Thank you, everyone, for joining us today, and Happy New Year. As Aisha said, I'll make some comments on the quarterly update we released this morning. But for those of you joining us today who are new to the Imricor's story, let me start by outlining our strategic plan. Since our IPO, we've maintained a very clear focus on delivering our strategic plan for the business, which is to, first, increase the number of iCMR sites through growing our installed base in Europe and expanding our geographies beyond Europe. Secondly, increase the number of procedures that each site can perform by expanding our products indications for use, that is the types of medical conditions we're allowed to treat. And third, realize higher revenue per procedure by developing new products that allow for the expanded indications and also evolve existing products for improved margins. While the pandemic has slowed the progress of our site rollout plans over the past year, it has not slowed our progress on many fronts. It has not slowed our progress toward expanding our geographies beyond Europe such as FDA approval. It has not slowed our progress toward expanding our indications for use, in particular, delivering a solution for ventricular tachycardia ablation and has not slowed the product development that supports these initiatives while improving margins. When I also look back on the quarter. At the start of the quarter, we announced the signing of our 11th site, Semmelweis University Heart and Vascular Centre in Budapest, Hungary. This was the first of 4 new sites to be signed in the quarter. In the addition of Semmelweis to our clinical customer base expanded our European footprint into the Hungarian market. Next, when we think of doing ventricular tachycardia or VT ablations in the iCMR that expanded indication I mentioned, we need an MR-compatible 12-lead ECG system. In late November, we announced a small but strategic investment in a startup MiRTLE Medical, the maker of such a system. We started working with MiRTLE in late 2017 with the establishment of a joint development agreement to interface MiRTLE's prototype 12-lead ECG system with Imricor's Advantage-MR EP Recorder/Stimulator. And in May of last year, with our support, MiRTLE received CE Mark certification for its system. We then expanded our relationship with MiRTLE in September through the establishment of a sales distribution agreement, making Imricor a nonexclusive distributor of MiRTLE's 12-lead ECG system. The strategic investment we made in MiRTLE last quarter further deepens our relationship with them. As part of the investment, we received about 2% equity in MiRTLE along with 3 ECG systems, each with a list price of $125,000 for use in our planned VT clinical trial and for customer demonstration purposes. We also received Board observation rights and the right of first negotiation for an acquisition of MiRTLE through November of 2024. We're very pleased to have had the opportunity to deepen our relationship with MiRTLE through this strategic 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. Next, our work toward regulatory approvals in the U.S. market passed a major milestone in mid-November with the filing of our application for an investigational device exemption or IDE from the U.S. Food and Drug Administration. The IDE is an important step on the path towards gaining FDA approval of Imricor's devices in the U.S. And if granted, the IDE will allow us to commence a clinical study aimed at gathering the clinical data required to support approval. Since our application, we've been working with the FDA through the normal review process of our IDE, which can be lengthy, and we look forward though to informing you as our overall progress toward FDA approval continues. As I mentioned at the outset, and as many of you know, the pandemic has greatly slowed our rollout plans over the past year or so. It was, therefore, very pleasing to close the year out with the signing of 3 additional new sites. Two of these new sites were in Germany, one of Imricor's core markets where we added the German Heart Centre Berlin and the Charite Medical University Virchow-Klinikum Campus also in Berlin. The third site we signed in December was the Henry Dunant Hospital Centre in Athens, Greece. And this new site once again expands our European footprint, this time into the Greek market in line with our strategic plan. Again, that was 4 new sites in the fourth quarter. And as a result of these new signings, we now have a total of 14 contracted sites at year-end. This is a trend we intend to continue. Turning our attention to procedures. We note that due to COVID restrictions across Europe, procedure volumes have been constrained. But with that said, during the quarter, procedures were performed across 4 of our sites, the Dresden Heart Center, Leipzig Heart Center, Maastricht University Medical Center and the Cardiovascular Institute of South Paris. We have and will continue to work closely with all of our sites to support the commencement of cases when conditions and rules permit. And we have many sites planned to begin procedures in February once Omicron settles down. Finally, I want to note that we put plans in place in the last quarter of 2021, and we are executing those plans now to strengthen our sales and marketing organizations as we relaunch our technology into this post-COVID era. I'm pleased to note that Mr. Nick Twohy, formerly our Executive Director of Marketing, was promoted to Vice President of Marketing on January 1. We've also reorganized our European sales team to drive site adoption and utilization more effectively in 2022 and beyond, including the planned hiring of a new European-based sales director and several new clinical sales representatives. The interview processes across all of these positions are currently underway. In addition, we're streamlining our site contracting agreements to speed the overall approval process with hospital administration, and we have implemented volume-based incentives to help drive procedure volume. All of these efforts are geared toward an acceleration of our revenue-generating activities as we work to fulfill our mission of changing the standard of care. In closing, we're very pleased to have secured 4 new sites in the final quarter of 2021 during what has been a challenging year with the pandemic. The entire Imricor team remains focused on expanding our site base and delivering the broader strategic goals of growing the space, expanding our indications for use and broadening our geographic reach. We remain very excited about the opportunities ahead of us in the coming year and look forward to keeping you all updated on our progress. With that, I'd like to hand it back to Aisha for Q&A.

[Aisha Jabeen]

[Operator Instructions] The first question comes from Sarah Mann from Moelis.

[Sarah Mann, Analyst]

Can you hear me? Can you guys hear me, okay?

[Steve Wedan, CEO, President & Executive Chairman]

Sure can, Sarah.

[Sarah Mann, Analyst]

Perfect. Just wanted to ask a bit more around the procedure volume. So obviously, you've got 4 sites that are now doing procedures despite Omicron in the quarter, which is obviously good. Can you give me a bit of a feel for what the run rate was across those sites in the period, firstly? And secondly, I guess any color that you or the physicians that you're speaking to might have around when case volumes might move back to a normalized run rate at all?

[Steve Wedan, CEO, President & Executive Chairman]

Well, that's a great question, Sarah. We had a relatively slow run rate through the fourth quarter. We had -- it was actually a condition of starting and stopping at various institutions as coronavirus cases ramped up and then settled down and so forth. So it's not a great indication of run rate. But we are targeting each of our sites, and this is part of the reorganization of our sales team to get more focus now as sites are established at driving the procedure volume in those sites. So each site has a specific strategy and tactical implementation that will be put in place to make sure that they are doing as many atrial flutter ablations as they possibly can do. When that will happen, I think is -- well, it's a little bit to be determined yet, but I think that we should start to see these implementations get put in place and have some success in this quarter and certainly as we go into the second quarter. And just to touch on that a bit more. Part of our reorganization strategy is -- it used to be that we had set the sales team up to have a group of people that closed sites and a different clinical group of people that tried to drive utilization. And now it's reorganized more regionally, meaning the same sales leader who's in charge of closing the site also has the clinical sales representatives working for that person to drive the procedure volume. That way, it's a more holistic approach to the customer. So it's not -- you don't sell the site and walk away, and now it's someone else's problem to drive procedure volume. It's actually the same team that will stick with that team or that hospital forever. So that we think is going to be very positive. And ramping up the number of clinical sales representatives we have is also a key component to driving this procedure volume. It's something we've shied away from in last year, in particular because there's just no sense in ramping up a team when they can't get into the hospital and do procedures. So now we believe as Omicron starts to settle down. And actually, as hospitals have been able to effectively work through this variant that we can start to implement the tactics that we have envisioned to drive this utilization and procedure volume.

[Sarah Mann, Analyst]

Right. And how many, I guess, clinical reps do you expect to have post hiring the additional ones you just flagged then?

[Steve Wedan, CEO, President & Executive Chairman]

It's an ongoing hiring throughout the year. But we'll start with each sales -- regional sales manager bringing on one clinical sales or -- yes, clinical sales representative. And then we'll grow as volume in that region grows. So we expect to put a very high emphasis and focus on each of our new sites, meaning we'll give them a lot of attention in the beginning. So we'll err on the side of making sure that we are -- they're more than we otherwise might need to be. So it's going to be a matter of how these sites -- the ramp-up of hiring, how these sites come on board and when they start doing procedures.

[Sarah Mann, Analyst]

Got it. That makes sense. And then in terms of the other 10 sites that you have signed up, you mentioned that a bunch of them are going to start procedures in February. Can you give us a bit more color around, I guess, some of the expected timing of launch across all 10 of those sites? And also how many of those sites now are fully installed and have received training, just so we can get a feel for, I guess, where they're at.

[Steve Wedan, CEO, President & Executive Chairman]

That's a great question about the second one. I'm not entirely sure. Yes, I'm not exactly sure the precise number of how many are installed and trained. We do like to do -- for some of them, the installation and training right before they start doing procedures. But there are others like Haga in the Netherlands that have been trained for quite some time and then just haven't been able to get back to doing cases through the COVID. So it's -- I don't have a precise answer for that. What we had in -- going into the last quarter was a situation where we thought everyone was able to get started that was signed except for one site that didn't yet have access to an MRI system. And that is a problem that our sales leader, Greg Englehardt, solved in the last quarter of last year. So we now have a clear path to beginning procedures at every one of our sites. And we, in fact, we're scheduled to do some procedures at some of the new sites in January, but because of Omicron we postponed that until February. But those plans are -- when I say we're working with these sites, what I mean is we have dates scheduled and sometimes those dates get pushed out as restrictions for the pandemic dictate, but we feel like that is coming to an end. And so we think these dates will start to stick, and we'll get back to doing the business of cardiology.

[Sarah Mann, Analyst]

Great. And can you give us a little bit more color around the pipeline as well and how that's moved in the quarter?

[Steve Wedan, CEO, President & Executive Chairman]

So in the last quarter, I'd say the pipeline continues to progress in a normal fashion. It is -- one of the things we identified and I mentioned a moment ago is that we find a very long review process within the hospitals and part of that is because we think we could have made it easier or simpler with the agreements that we signed with hospitals. So we've streamlined those agreements to make the legal review process, knowing that we're going to not just to centers in one particular country, but to centers in multiple countries where they all have different rules and different expectations. We streamline these agreements in a way that we hope will speed that process. So we have a good pipeline for this year and for the coming years, 2023 and 2024 as well. And we expect that, that will continue to grow. It's quite robust. What we're focused on now is identifying those that are in the mix of our sales process that could potentially close this year and then focusing on getting those ones closed in this year.

[Sarah Mann, Analyst]

Right. And last question for me. Have you had any impacts from, I guess, the supply chain issues that are kind of being experienced in the U.S. at the moment? And if so, is there any impact on your margins at all?

[Steve Wedan, CEO, President & Executive Chairman]

I can't point to a supply chain issue that we are personally being -- are suffering through. But we do have a partner as we look toward our VT clinical trial that we want to do this year in Europe. There's a component for our partner who's making the inboard defibrillation system. That won't come in, I think, until March. And so that has delayed the start of our -- the application for starting our VT trial. But we're combating that with increased site enrollment and increasing only at each site so that we can keep that trial on track as best as possible.

[Lori Milbrandt, CFO & VP of Finance]

This is Lori. Just briefly, and don't quote me on this, but I believe we have 7 sites that are installed at this point. It could be one-off. And when I look at our CRM database to look at what our projected installs are, there's several between January, February, March and April, the vast majority of them. I think one of our sites is going to be later than that because they're still building out their lab. So generally, I think it's 7 with 5 or 6 that are scheduled. But of course, as Steve mentioned, sometimes that changes, but we have 5 or 6 that are scheduled over the next 3 months at this point.

[Aisha Jabeen]

And I think that concludes our questions. So I will now hand back to Steve to close the call.

[Steve Wedan, CEO, President & Executive Chairman]

Okay. Well, thanks. I want to thank everyone for joining us today. We'll, of course, continue to keep you updated as things progress. And Lori and I look forward to catching up with many of you following the release of our full year results. Have a great day.