InspireMD, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Unaudited results; financial amounts below are in U.S. dollars, generally in thousands. InspireMD develops and commercializes medical devices using its MicroNet stent platform. CGuard EPS, its carotid product, is the main commercial product; the company sells internationally through distributors. Its products were not approved for general sale in the United States, though it recorded U.S. study-related sales.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $1,531 | $1,038 | $2,714 | $2,044 |
| Gross profit / margin | $431 / 28.1% | $262 / 25.2% | $553 / 20.4% | $368 / 18.0% |
| Operating expenses | $5,112 | $3,702 | $9,720 | $7,122 |
| Operating loss | $(4,681) | $(3,440) | $(9,167) | $(6,754) |
| Net loss | $(4,636) | $(3,507) | $(9,117) | $(6,750) |
| Basic and diluted loss per share | $(0.59) | $(0.46) | $(1.17) | $(0.98) |
Q2 revenue grew 47.6%, driven chiefly by CGuard EPS sales, up 47.8% to $1,505. For the first half, revenue rose 32.8%, with CGuard sales of $2,666 versus $1,987. Gross margins improved year over year in both periods. CGuard accounted for nearly all reported revenue; MGuard revenue was $26 in Q2 and $48 for the first half.
Research and development expense increased to $2,056 in Q2 and $3,736 for the first half, primarily reflecting the C-Guardians FDA study. Selling and marketing expense was $986 and $1,732, respectively; general and administrative expense was $2,070 and $4,252. Higher study, marketing, regulatory, insurance and share-based compensation costs contributed to increased losses.
For the six months, net cash used in operations was $7,243, compared with $6,169 in 2021. Investing activities provided $1,801, principally from a $2,000 withdrawal of short-term deposits; financing used $37. Cash and cash equivalents were $6,393 at June 30, down from $12,004 at year-end. Short-term deposits were $20,078, giving cash and deposits of approximately $26,471. Working capital was $24,788, down $7,959 from year-end. Current assets exceeded current liabilities by 6.3 times.
The balance sheet reports no conventional borrowings. Total liabilities were $7,024, including $1,774 in operating lease liabilities (current and long term). Total assets were $32,766 and equity was $25,742. Management stated that available resources could fund planned operations for at least 12 months from the financial statements’ issuance, but expects continuing losses and negative operating cash flows until CGuard becomes commercially profitable and may need additional capital.
Material changes and developments
- Revenue growth reflected expansion in existing and new markets and U.S. sales connected with C-Guardians study use. For the first half, reported geographic revenue increases included Europe, Latin America, Asia and North America.
- During Q2, the company ceased MGuard Prime sales after a phase-out, citing declining demand and industry preference for drug-eluting stents.
- Enrollment continued in the C-Guardians pivotal study of CGuard for U.S. carotid artery stenosis; first European recruitment was completed in April 2022.
- On June 3, 2022, InspireMD established an at-the-market sales agreement allowing up to approximately $8.313 million of common stock to be sold. No shares had been sold under the program as of the filing.
- The Israeli facility lease was amended to add space and extended through December 31, 2026.
Outlook, risks and contingencies
- European regulatory certification: CGuard’s existing CE mark under the prior EU medical-device rules was scheduled to expire on November 12, 2022. The company was undergoing technical-documentation review for MDR recertification and warned that delays or failure to comply could prevent sales in CE-mark European countries until recertification. The filing gives no assurance of timely approval.
- Funding and losses: Management expects continued operating losses and negative operating cash flows; additional financing may be needed. The filing provides no numerical revenue or earnings guidance.
- COVID-19: Further pandemic effects could cause sales and clinical-enrollment fluctuations and supply-chain disruption.
- Russia, Ukraine and Belarus: These markets represented approximately 10.5% of 2021 sales. Russia represented 6.8% of first-half 2022 sales and 10.9% of Q2 sales; there were no Ukraine sales and minimal Belarus sales. Sanctions, currency moves and collection difficulties could adversely affect business and cash flows.
- Other stated risks include clinical-trial outcomes and delays, regulatory approvals, market acceptance, manufacturing dependence and capacity, reimbursement, competition, foreign-exchange movements, and possible escalation of hostilities affecting Israeli operations.
- The company reported no pending material legal proceedings and no off-balance-sheet arrangements. Management concluded disclosure controls were effective at a reasonable-assurance level as of June 30, 2022.
Important facts for investors to verify
- Subsequent MDR certification status and any effect on CGuard sales in Europe after the November 12, 2022 deadline.
- Cash burn, cash and deposit balances, and whether the stated 12-month funding horizon remains adequate; potential use of the $8.313 million ATM program and resulting dilution.
- C-Guardians enrollment progress, clinical results, timing and costs, and the pathway to U.S. commercial approval.
- Sustainability of revenue growth and gross-margin improvement, including geographic and distributor/customer concentration; the largest customer contributed 28% of Q2 revenue.
- Effects of MGuard discontinuation, sanctions and collection risk in Russia-related markets, and continued operating costs relative to sales.