InspireMD, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Financial figures are in U.S. dollars; income statement and cash-flow amounts are in thousands unless noted. InspireMD develops and commercializes MicroNet-based vascular stent products, principally CGuard EPS for carotid disease. It sells through distributors, mainly in international markets; its products were not approved for sale in the United States.
Key financial results
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | $1.006 million | $1.034 million; down 2.7% |
| Gross profit / margin | $106,000 / 10.5% | $295,000 / 28.5% |
| Operating expenses | $3.420 million | $2.316 million |
| Operating loss | $3.314 million | $2.021 million |
| Net loss | $3.243 million; $0.53 per share | $1.978 million; $6.42 per share |
| Cash used in operating activities | $3.641 million | $2.354 million |
| Cash and cash equivalents | $44.034 million at March 31 | $12.645 million at December 31, 2020 |
| Working capital | $43.384 million | Increase of $31.750 million during Q1 |
Q1 financing activities provided $35.068 million, primarily from equity and warrant transactions; investing activities used $24,000. Total liabilities were $4.681 million, including $1.275 million of operating lease liabilities; the filing reports no material conventional borrowings. Management stated that available resources could fund planned operations for at least 12 months from issuance of the financial statements, while noting expected ongoing losses and operating cash outflows until commercial profitability.
Period changes and notable items
- Revenue was nearly flat overall. CGuard revenue was $969,000 versus $971,000; MGuard revenue declined to $37,000 from $63,000, which management attributed in part to preference for drug-eluting stents over bare-metal products.
- Gross profit fell 64.1%. Management attributed the decline principally to $156,000 of higher write-offs, mainly related to a component supply issue, and $33,000 of higher miscellaneous expenses.
- Operating expenses rose $1.104 million. R&D increased to $839,000, including spending on CGuard delivery-system and accessory development. G&A rose to $1.873 million, including higher compensation, share-based compensation, insurance, and shareholder-related costs.
- Net loss increased $1.265 million year over year, reflecting lower gross profit and higher operating expenses.
- Cash rose following financing: the February public offering generated approximately $18.9 million net; the company also sold shares through its ATM program and received proceeds from warrant exercises and a $900,000 investment by a Chinese distributor partner. Common shares outstanding increased substantially during the quarter. The filing gives 7,852,791 shares at March 31 after retroactively applying the subsequent reverse split.
- On April 26, 2021, after quarter-end, the company effected a 1-for-15 reverse stock split, primarily to support Nasdaq Capital Market listing requirements. The filing said the company had been approved for Nasdaq listing and was taking steps to begin trading there.
Outlook, risks, and contingencies
- No specific revenue or earnings guidance was provided. Management expects continued losses and negative operating cash flows until products, primarily CGuard, reach commercial profitability; additional capital may be needed.
- COVID-19-related postponements of elective procedures continued to affect sales. Management expected sales fluctuations to persist and said the pandemic’s ultimate effect remained uncertain.
- The company entered an agreement with three China-based partners to conduct registration trials and, subject to approvals and minimum purchase obligations, distribute its products exclusively in China for eight years.
- CARENET-III, a U.S. pivotal study of CGuard, was planned to enroll approximately 315 patients at up to 40 sites. U.S. commercial sales remain dependent on regulatory approval.
- Principal disclosed risks include clinical and regulatory delays or unfavorable results, market acceptance and competition, dependence on a single manufacturing facility, additional financing and dilution, customer or supplier concentration, foreign-exchange exposure, and geopolitical or operational disruption in Israel. The filing reports no material changes to contractual commitments and no material change in legal proceedings from the prior annual report.
Investor verification points
- Assess whether the 10.5% gross margin and the cited component-supply issue were temporary, and whether cost of goods and manufacturing reliability improved subsequently.
- Track operating cash burn against the stated 12-month funding runway and the company’s ability to reach commercial profitability or obtain additional capital.
- Verify progress, enrollment, results, and regulatory milestones for CARENET-III and other product approvals, including China registration trials.
- Review dilution from shares issued, outstanding warrants, and potential future equity financing; confirm share counts and per-share figures are interpreted on the post-reverse-split basis.
- Monitor recovery in elective procedures and distributor demand, particularly given geographic and customer concentration.