InspireMD, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Amounts are in U.S. dollars; financial statement amounts are in thousands unless otherwise noted. InspireMD develops and commercializes MicroNet-based stent products, primarily CGuard EPS for carotid artery disease, and sells through distributors, mainly in international markets. Its products were not approved for sale or marketing in the United States.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $1,071 | $980 | $3,115 | $2,327 |
| Gross profit | $92 | $298 | $460 | $473 |
| Gross margin | 8.6% | 30.4% | 14.8% | 20.3% |
| Operating expenses | $4,123 | $2,493 | $11,245 | $7,135 |
| Operating loss | $(4,031) | $(2,195) | $(10,785) | $(6,662) |
| Net loss | $(4,071) | $(2,233) | $(10,821) | $(6,691) |
| Basic and diluted loss per share | $(0.53) | $(0.96) | $(1.50) | $(5.75) |
Liquidity and capital: At September 30, cash and cash equivalents were $13.1 million, with $24.0 million in short-term bank deposits; working capital was $36.4 million. Current assets were $40.1 million and current liabilities $3.7 million. Total liabilities were $5.5 million, including lease liabilities and employee retirement obligations; the filing reports no conventional borrowings. Equity was $37.1 million.
Cash flows, nine months: Operating cash use was $10.3 million, investing cash use was $24.3 million (primarily the $24.0 million placement in short-term deposits), and financing provided $35.0 million. Cash increased by $0.4 million. Financing included public and ATM offerings, warrant exercises, and a share investment by a Chinese distributor partner.
Material changes versus the prior comparable periods
- Q3 revenue increased 9.3%; nine-month revenue increased 33.9%. CGuard sales rose 23.8% in Q3 and 45.4% year to date, partly as non-emergency procedures resumed after COVID-related postponements. CGuard accounted for $3.0 million of nine-month revenue.
- MGuard revenue declined 72.8% in Q3 and 61.5% for the first nine months, amid market preference for drug-eluting stents over bare-metal stents.
- Gross margin fell substantially in both comparison periods. Management cited higher material and labor costs, component-supply-related write-offs, employee training, and other production costs.
- Operating expenses rose 65% in Q3 and 58% year to date, mainly due to C-Guardians clinical-trial and product-development spending, expanded selling and marketing activity, compensation and share-based compensation, and higher insurance and shareholder-related expenses.
- Net loss widened 82.3% in Q3 and 61.7% year to date. Year-to-date operating cash use increased by $3.4 million from 2020.
- Common shares outstanding increased from 3.28 million at December 31, 2020 to 7.90 million at September 30, 2021, reflecting equity issuance, warrant exercises, and conversions. A 1-for-15 reverse split took effect April 26, 2021; share and per-share data are presented retroactively.
Outlook, commentary, and risks
- Management stated the company could fund planned operations for at least 12 months from the financial statements’ issuance date, but expected continuing losses and negative operating cash flows until products, primarily CGuard, reach commercial profitability. Additional capital may be needed.
- No quantified revenue, earnings, or cash-flow guidance was provided. Management expects continued variability from COVID-19, distributor ordering patterns, regulatory timing, clinical-trial progress, manufacturing efficiency, currency movements, and reimbursement policies.
- The C-Guardians U.S. pivotal study began enrollment in July 2021 and is expected to enroll approximately 315 patients. Study progress and clinical outcomes are key commercial and regulatory dependencies.
- In February 2021, the company entered an agreement with China-based partners to conduct registration trials and, subject to the agreement, receive exclusive distribution rights for eight years, with minimum purchase obligations. In October 2021, after quarter-end, CGuard received a positive French reimbursement decision and was added to France’s reimbursed-products list effective October 25.
- Management intends to phase out MGuard Prime sales in 2022. COVID-19 variants and restrictions could continue to affect product sales and study enrollment. Other disclosed risks include clinical or regulatory setbacks, market acceptance, manufacturing dependence and quality, competition, reimbursement, foreign-currency exposure, and potential need for dilutive financing.
- The filing reports no material changes to previously disclosed legal proceedings, risk factors, or contractual obligations. Disclosure controls were assessed as effective at a reasonable-assurance level.
Most important facts for investors to verify
- Whether CGuard sales growth and French reimbursement access translate into sustained commercial demand and improved gross margins.
- Whether component availability, manufacturing costs, and write-offs improve, given the sharp Q3 gross-margin decline.
- C-Guardians enrollment, trial costs, timelines, and eventual clinical and regulatory outcomes.
- Cash burn and runway relative to management’s stated 12-month funding assessment, and whether additional capital will be required.
- Execution and regulatory progress of the China partnership, including registration trials and minimum purchase obligations.
- The pace of MGuard phase-out and any resulting effect on revenue.