InspireMD, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Unaudited results; amounts below are U.S. dollars unless noted. InspireMD develops and commercializes MicroNet-based medical devices. CGuard EPS, its carotid stent product, generated nearly all revenue; the company sells primarily through international distributors. It ceased MGuard Prime sales in Q2 2022.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $1.431m | $1.071m | $4.145m | $3.115m |
| Gross profit | $366k | $92k | $919k | $460k |
| Gross margin | 25.6% | 8.6% | 22.2% | 14.8% |
| Operating expenses | $4.976m | $4.123m | $14.696m | $11.245m |
| Operating loss | $(4.610)m | $(4.031)m | $(13.777)m | $(10.785)m |
| Net loss | $(4.529)m | $(4.071)m | $(13.646)m | $(10.821)m |
| Basic and diluted loss per share | $(0.58) | $(0.53) | $(1.75) | $(1.50) |
Revenue increased 33.6% in Q3 and 33.1% year to date, mainly from CGuard growth in existing and new markets and sales for the U.S. C-Guardians clinical study. CGuard revenue was $1.431m in Q3 and $4.097m for nine months. R&D expense rose to $2.061m in Q3 and $5.797m year to date, primarily reflecting C-Guardians enrollment costs. Nine-month selling and marketing and G&A expenses also rose, including from resumed travel and marketing, share-based compensation, and higher patent and insurance costs. Despite improved gross margin, higher operating expenses drove larger year-to-date losses.
Cash, liquidity and capital resources
- At September 30, cash and cash equivalents were $3.934m, down from $12.004m at December 31, 2021. Short-term bank deposits were $17.111m, for cash and deposits totaling $21.045m.
- Nine-month operating cash use was $12.347m, compared with $10.309m in 2021. Investing activities provided $4.555m, including a $5.0m withdrawal of short-term deposits; financing activities used $140k, primarily for ATM program costs.
- Working capital was $20.731m, down $12.016m from year-end. Current assets were $24.692m and current liabilities $3.961m.
- The balance sheet reports no conventional borrowings. Long-term liabilities included $1.261m of operating lease liabilities and $969k of employee retirement liabilities. Total lease liabilities, including current obligations, were $1.677m.
- Accumulated deficit was $196.740m. Management said available resources were expected to fund operations only through the end of September 2023 and disclosed substantial doubt about the company’s ability to continue as a going concern.
Material developments, outlook and risks
- European certification: CGuard’s CE mark was due to expire November 12, 2022. The company said it did not expect to complete MDR recertification by then because of notified-body review delays. If certification lapsed, it could not market CGuard in countries requiring the CE mark until recertified; a prolonged interruption could materially harm results and cash flows.
- Funding needs: Management plans to continue commercialization and seek capital through equity, debt, or strategic partnerships, but gave no assurance financing would be available. A June 2022 ATM agreement permits sales of up to approximately $8.313m of stock; no shares had been sold under it as of the filing. Failure to obtain financing or commercialize successfully could require reduced activity or cessation of operations.
- Clinical and product plans: The C-Guardians U.S. pivotal trial was enrolling toward approximately 315 patients, with enrollment acceleration contributing to higher R&D costs. The filing provides no specific financial guidance or quantified sales outlook.
- Regional and operating risks: Russia, Ukraine and Belarus accounted for 22.2% of Q3 sales and 12.1% of nine-month sales. Sanctions, currency volatility, and collection difficulties could affect sales and receivables. The company also cited COVID-related sales, trial-enrollment and supply-chain uncertainty; distributor ordering variability; foreign-exchange exposure; reimbursement, regulatory and competitive risks; and dependence on a single manufacturing facility.
- Other items: MGuard sales ended following declining demand amid preference for drug-eluting stents. No material pending legal proceedings were reported. Management concluded disclosure controls were effective at a reasonable-assurance level, with no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether and when CGuard received MDR recertification, and the effect of any CE-mark interruption on European sales.
- Actual cash burn, updated cash and deposit balances, and the company’s ability to fund operations beyond the stated September 2023 runway.
- Progress and costs of C-Guardians enrollment, and whether trial outcomes and regulatory approvals support U.S. commercialization.
- Whether the ATM or other financing was used after the reporting date, and the resulting dilution or financing terms.
- Exposure to Russia, Ukraine and Belarus, including customer collections, sanctions compliance and any resulting revenue changes.