InspireMD, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Financial amounts below are in U.S. dollars, thousands, except per-share data. InspireMD develops and commercializes MicroNet-based vascular stents, led by CGuard EPS for carotid disease; its products are not approved for sale in the United States.
Financial results and liquidity
- Q2 revenue: $1.038 million, up 231.6% from $313,000. CGuard revenue was $1.019 million; MGuard revenue was $19,000.
- Six-month revenue: $2.044 million, up 51.7% from $1.347 million. CGuard revenue increased to $1.987 million from $1.242 million; MGuard declined to $57,000 from $105,000.
- Gross profit and margin: Q2 gross profit was $262,000 versus a $120,000 loss; gross margin was 25.2% versus negative 38.3%. Six-month gross profit was $368,000 versus $175,000; margin was 18.0% versus 13.0%.
- Operating expenses and losses: Q2 operating expenses were $3.702 million and net loss was $3.507 million, compared with $2.326 million and $2.480 million, respectively. Six-month operating expenses were $7.122 million and net loss was $6.750 million, versus $4.642 million and $4.458 million. Six-month basic and diluted loss per share was $0.98, compared with $7.73; share counts changed materially, so per-share comparisons warrant context.
- Cash flow: Six-month operating cash use was $6.169 million in the cash-flow statement, versus $3.837 million in 2020. Investing cash use was $114,000; financing provided $35.069 million. Cash rose to $41.419 million from $12.645 million at year-end. The MD&A reports operating cash use of $6.154 million, differing from the statement; the filing text does not reconcile the values.
- Liquidity and obligations: Working capital was $40.243 million; current assets were 11.9 times current liabilities. Total liabilities were $5.545 million, including lease liabilities and employee retirement obligations; the filing reports no material borrowings. Management said planned operations could be funded for at least 12 months from issuance, but expected continuing losses and negative operating cash flows and said additional funding may be needed.
Material changes and developments
- Revenue growth principally reflected recovery in CGuard procedures as hospitals resumed non-emergency care after COVID-19 disruptions. Management attributed improved Q2 margin in part to fewer inventory write-offs; the six-month margin improvement reflected higher revenue net of related costs.
- R&D spending increased, including costs for the U.S. C-Guardians study and CGuard accessory development. Selling and marketing costs rose with expansion activity; G&A increased with compensation, share-based compensation, insurance premiums, and shareholder-related expenses.
- The company raised capital through a February public offering, ATM sales, warrant exercises, and a Chinese investor transaction. Six-month financing cash inflow was $35.069 million. Common shares outstanding rose to 7,914,339 at June 30 from 3,284,322 at year-end. A one-for-fifteen reverse stock split took effect April 26; reported share and per-share data are retroactively adjusted.
- In February, InspireMD entered a China distribution agreement with three partners responsible for registration trials and, subject to commercial approval, exclusive distribution rights for eight years, with minimum purchase obligations. One partner invested $900,000.
- Shares began Nasdaq trading in May and warrants in June. The Series A warrants expired July 7, 2021.
Outlook, risks, and contingencies
- Enrollment in the C-Guardians pivotal study began after quarter-end; the company announced first cases on July 22. The planned study is expected to enroll approximately 315 patients at up to 40 sites in the United States and Europe. No financial or commercial guidance was provided.
- Management expects continued sales volatility from COVID-19, including renewed restrictions in Europe and Latin America. Other cited uncertainties include clinical and regulatory outcomes, market acceptance, reimbursement, competition, manufacturing capacity and reliance on a single manufacturing facility, customer or supplier concentration, currency movements, and possible need for additional capital and shareholder dilution.
- The filing states there were no material changes to previously reported legal proceedings, risk factors, or contractual obligations. It reports no material changes to internal financial controls and no off-balance-sheet arrangements.
Important facts for investors to verify
- Reconcile the $6.169 million operating cash use in the cash-flow statement with the $6.154 million amount in MD&A.
- Track operating cash burn and whether management’s stated 12-month funding capacity remains adequate as trial and commercialization spending continues.
- Review C-Guardians enrollment, milestones, costs, and regulatory progress; U.S. sales were not permitted as of the filing.
- Assess the durability of CGuard revenue recovery, COVID-related disruption, and declining MGuard demand.
- Monitor dilution from share issuance and outstanding warrants, and the China partners’ regulatory progress and minimum-purchase performance.