Imricor Medical Systems Inc

ASX:IMR

Earnings Call Transcript 2022-Q4

[Simon Hinsley]

Good morning, and welcome to Imricor's quarterly investor webinar for the period ending 30th June 2022. On the webinar today, we have the founder and CEO, Steve Wedan, and the company's CFO, Jonathon Gus. Before I hand it over to the guys to get started and go through a brief presentation, I'll just remind you that you can ask questions through the Q&A panel at the bottom of the screen. We'll get to those post the brief presentation.

Steve, Jonathon, I'll now hand it over to you to get started. Thanks very much.

[Steve Wedan, executive]

Thank you, Simon. Check that I'm off mute. Yes. Thanks, everyone, for joining us today, this morning. Imricor released its Appendix 4C for the second quarter of 2022, and we'd like to discuss these results as well as provide a general business update. So Jon will begin by presenting the quarterly cash flow results. Jon?

[Jonathon Gut, executive]

Thank you, Steve, and hello, everyone. As a reminder, all numbers are unaudited and in U.S. dollars. The net cash outflow from operating activities was $4.2 million for the quarter, which was down approximately $700,000 on the prior quarter. Receipts from customers of $251,000 in the quarter were comprised of the sales of consumable products and equipment.

Overall, cash out in relation to operating costs was lower than the prior quarter. A decrease in staffing costs was primarily driven by annual bonuses being paid in the prior quarter with some of the decrease being the result of staff reductions. The increase in marketing costs was primarily driven by attendance at annual congresses and a corresponding increase in travel activity.

Net cash outflow from investing was $57,000, largely relating to the purchase of property, plant and equipment. Net cash flow from financing activities were 0 due to the repayment of borrowings being offset by the return of the security deposit, which is related to leased equipment. At the 30th of June, we had a cash balance of $9.1 million.

I'll hand back to Steve now to provide you with a business update.

[Steve Wedan, executive]

Thanks, Jon. So for those of you who might be new to Imricor, let me provide a brief overview of what we're doing and why we think it's significant.

I'll start with the medicine. For a patient whose heart is not beating correctly due to electrical abnormalities, cardiac ablation is a minimally invasive therapy procedure designed to restore normal heart rhythm. In a cardiac ablation procedure, a catheter is guided into the heart, and a doctor can use the catheter to sense electrical activity, pace the heart for diagnostic purposes and deliver destructive ablative energy such as heat or freezing to destroy or isolate problem areas.

Since the earliest days of cardiac ablation, physicians have utilized X-ray fluoroscopy imaging to locate their catheters within the patient. But one major deficiency of X-ray fluoroscopy is that the heart itself is nearly invisible to X-rays. And so while the doctor can see the devices within the heart, they can't see the heart itself.

What we've done at Imricor is that we've developed a platform technology that allows us to make the same kinds of tools that doctors use today for cardiac ablations, like the catheters I just mentioned, with the additional characteristic of our devices being uniquely safe for use in a magnetic resonance imaging, or MRI, environment. This, in turn, allows physicians to perform cardiac ablations while imaging the patient with real-time MRI throughout the procedure, meaning that for the first time, they can actually see the patient's heart and they can see the physiological changes that occur as they deliver ablative therapy.

The overall goal of what we call real-time iCMR ablations, iCMR standing for Interventional Cardiac Magnetic Resonance, the overall goal is to provide faster, safer and more effective treatments of arrhythmias compared to conventional means. And since this is a new field and since MRI machines aren't found in conventional ablation procedure rooms, we're focused on increasing the number of iCMR labs in which our procedures can be performed and then growing the number of procedures performed in each lab.

It's important to note that once an iCMR lab is established, only Imricor's consumable devices can be used in the lab since all devices in an iCMR lab need to be MRI compatible and only Imricor delivers the MRI-compatible devices. This makes each new iCMR lab very valuable to us, growing our value as we grow a new field of interventional medicine.

And finally, I'd like to point out that there are several different types of arrhythmias that are treated with ablation. And as is normally done for new catheters, our catheter's first approved indications was to treat atrial flutter. Our next target indication is ventricular tachycardia, or VT. And VT is a more complex arrhythmia, and it is exactly the type of arrhythmia that I had in mind when I founded Imricor 16 years ago.

So now let's look back on the quarter. I don't want to simply repeat what we released in our 4C announcement this morning but rather add some color to it for you. The agreements we signed with Siemens were very significant. As we described, these allow us to release our 3D mapping system, which we are calling [ North Star ], on all newer Siemens scanners. Meanwhile, [ North Star ] is nearing the end of its technical development and is 100% on schedule. We have done in 7 months what it took others years to accomplish and what some could not accomplish at all. And needless to say, [ North Star ] is a major development initiative that we have undertaken this year. We did this because having our own 3D mapping system and deploying it on our time line rather than anyone else's eases our sales efforts and derisks our VT clinical trial execution because now we are in control.

Meanwhile, the VT clinical trial planning is in full force. We completed the preclinical work required for our submission to perform a trial. And our Director of Clinical Affairs, Dr. Katherine Lindborg, just returned from a nearly 2-week European trip, where she met with clinical sites all over the continent to align and plan everything from timing to medical protocols.

We previously planned to submit for approval to start a trial by the end of this month. However, unfortunately, our partner, MIPM, who has developed the MRI-compatible defibrillator, which will be used in the trial, they ran into a delay, which will push the group's submission into August. We expect no further delays, and we will work hard to speed enrollment once the trial starts to keep the end timing on track.

On a related topic, as part of a complex strategy executed across several groups within Imricor, including product development, operations, regulatory, quality and clinical, we submitted for CE mark certification for our second-generation Vision-MR Ablation Catheter as planned and on time in the second quarter. The second generation of catheter is optimized not only for atrial flutter ablations but also for these ventricular tachycardia ablations with improved physical characteristics and cost savings designed in.

This was a tremendous accomplishment that was several years in the making, and the team here did a fantastic job over a long time to push it to completion while overcoming the inevitable hurdles, which, in this case, included a pandemic and subsequent supply chain disruptions. It was a really big deal, and I want to publicly thank all of the dedicated and passionate Imricor team members who got this done successfully and on time.

Touching on sales. I mentioned that early in the year, we expected to essentially relaunch our technology into a post-COVID world in 2022. And in the second quarter, we did exactly that. Under the leadership and guidance of our new European Sales Director, Thomas Worgul, we grew to 6 active accounts, meaning contracted sites who have commenced our procedures post the pandemic. And the installation, training and commencement of procedures at our contracted sites will continue through the rest of this year. We've done one new site. In fact, we have one new site that's doing their first procedure tomorrow.

Meanwhile, the sales team is actively moving sites through our sales pipeline, a process that takes some time in the background but will start showing results publicly soon. A key focus for the team is to work with multiple sites at once now, moving each of their sites at their own pace within the constraints of their individual circumstances and filling the funnel with a pipeline that we expect to result in more regular site adoption moving forward.

Generally speaking, while efforts across both sales priorities are always -- they always progress in tandem, I'd say that in Q2, we emphasized getting our contracted sites up and running. And in Q3, we're emphasizing on growing our roster of contracted sites. These 2 things, of course, build on and support each other.

And finally, I want to address our balance sheet and cash position. I want to assure you that all -- we have been very focused here on limiting our spending, extending our runway and seeking additional sources of capital outside of massively dilutive capital raise. We reduced our planned spending for 2022 and 2023 combined by about USD 10 million by purposefully focusing our efforts almost exclusively on European commercialization and the VT trial. We've reduced our headcount accordingly, and we do not expect to grow significantly until our balance sheet supports the growth absent a capital raise.

I don't have anything resolved today that I can announce, but we have many options on the table, and we're moving forward with these plans as well as a wide range of backup plans. For instance, if you follow me on LinkedIn, you may have seen that Imricor joined the Bioscience Association of North Dakota recently. And we're applying for the economic incentive programs that are available to us should we choose to grow our manufacturing capabilities in Fargo, North Dakota rather than here in Minneapolis. We're also exploring new sales opportunities outside of Europe and even the potential to OEM some of our accessory devices for use in conventional X-ray procedures.

Bottom line, we are, of course, aware of our situation. And while market conditions are difficult for many companies at our stage and in our position right now, we're simply doing what we always do: we work the problem, we find solutions, and we implement the solutions. And I look forward to updating you as we resolve this issue.

With that, I'd like to open it up to questions, please.

[Simon Hinsley]

Great. Thanks, Steve, and thanks, Jonathon. [Operator Instructions] First question. Steve, thanks for taking the question. Can you just talk through what we should be looking to for key milestones or catalysts in the next 6 months? Should we expect a ramp in new labs and increasing procedures or more strategic achievements?

[Steve Wedan, executive]

All of those things. So the big things to look for are a ramp in labs. That's something that -- again, it takes a little bit of momentum, and that's what we spent this last quarter doing, is building that momentum to move these sites into the contracted stage. At the same time, it also takes a bit of planning and momentum to build -- to get a site started for the first time. There's a lot of scheduling and planning. And so while we did a lot of that work in the second quarter, the third quarter and the fourth quarter is where we'll continue to see the results from that.

So we'll see more procedures being done. We'll see more contracted sites. And also, the third biggest thing is the start of our ventricular tachycardia trial. And we will let folks know when we submit for approval, when we receive approval to start the trial, when the trial starts. And then that will be, I think, a very big inflection point for us.

[Simon Hinsley]

Thanks, Steve. I just got a question from Moelis. I'll just allow them to talk.

[Ian McKenzie, analyst]

It's Ian McKenzie. Sarah is not on the line because she's really crooked today. She's got a very bad cold. So I apologize for that. Just quickly, can you talk a little bit about the number of sales of the consumables and how they've gone over the last sort of 3 months?

[Steve Wedan, executive]

Yes. Actually, Jon probably has the numbers right at his fingertips there, but I'll -- I can generally say what we've done is -- we've seen the most procedures that have ever been performed in a particular quarter. We didn't actually start counting the procedures until May. So I can't tell you precisely how many, but we have all of our sites now that are running are doing regular procedures. We saw the -- an increase in consumable device revenues jumped almost 50% over last quarter and over 90% from last year at this time.

And what we expect is to just -- well, not just continue that trend but really accelerate that trend as we go into the third quarter and the fourth quarter. We're really excited. It's about getting these folks up and running and doing procedures. And everybody is a little frustrated with their time lines as it's gone with respect to COVID. So they're anxious to get started. They've queued up patients, and they're all ready to go. So it should be -- not only was it good this quarter. It's going to be much better next quarter and the quarter after that.

[Simon Hinsley]

Thanks, Ian. Next question, just can you please update on the timing for the FDA approval process?

[Steve Wedan, executive]

Sure. The FDA approval process -- and you'll notice I didn't really talk about that. One of the things that the FDA approval process does not do is it doesn't directly affect European sales or the VT trial. Nonetheless, it's a process that is moving forward, and we don't want to stop it or scrap it. So we are continuing with our IDE back and forth with the FDA.

We're doing the testing. We're submitting -- they wanted us to test, for instance, to some newer standards compared to the ones that we had tested when we did CE mark. So just a redo of some of those things. It's been a great process, and we will continue that. We expect, if things go as we think they will, for us to receive that IDE approval by the end of this year. And that's pretty much where we want it to be.

Now we don't have to take that IDE approval and immediately start a clinical trial in the United States if we don't have the financing or the funding to support that trial. We can wait with no harm and let our revenues ramp up to support such a trial or look at alternate ways to support that trial when the time comes. So for now, we don't have to make that decision. So we're not. We're just leaving our options open. But the process itself is still on track.

[Simon Hinsley]

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

[Steve Wedan, executive]

That's great. Well, I want to thank everybody for joining us today. And as I mentioned, we will, of course, continue to keep you updated as things progress. And Jon and I look forward to catching up with many of you following the release of our half year results, [ just to put them up there so away ]. So have a great day. Thanks very much.

[Simon Hinsley]

Cheers. Thank you.