InspireMD, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. InspireMD develops and commercializes MicroNet-based stent products, principally CGuard EPS for carotid artery disease. Financial amounts below are U.S. dollars in thousands unless otherwise indicated.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $1,556 | $1,431 | $4,444 | $4,145 |
| Gross profit | $438 | $366 | $1,302 | $919 |
| Gross margin | 28.1% | 25.6% | 29.3% | 22.2% |
| Operating expenses | $6,077 | $4,976 | $16,637 | $14,696 |
| Operating loss | $(5,639) | $(4,610) | $(15,335) | $(13,777) |
| Net loss | $(5,178) | $(4,529) | $(14,511) | $(13,646) |
| Basic and diluted loss per share | $(0.15) | $(0.58) | $(0.69) | $(1.75) |
Q3 revenue grew 8.7%, primarily from existing markets. Nine-month revenue rose 7.2%; CGuard sales volume increased 8.5%. Gross margin improved, while operating losses widened, notably with higher general and administrative costs. Financial income was $461 in Q3 and $824 for the nine months, largely reflecting interest on investments and deposits.
Cash, liquidity and capital
- At September 30, cash and cash equivalents were $13,839 and marketable securities were $29,159; the securities were U.S. government bonds, with $23,417 maturing within one year and $5,742 within one to two years.
- Current assets were $46,728 against current liabilities of $4,690. Working capital was $42,038, and management reported current assets at 10 times current liabilities.
- Net cash used in operating activities was $12,199 for the first nine months, compared with $12,347 in the prior-year period. Investing activities used $16,056, including $28,838 of marketable-security purchases; financing provided $37,534 net.
- The May 2023 private placement generated approximately $42.2 million gross and $37.5 million net proceeds after offering costs. Management stated it could fund planned operations for at least 12 months from the financial statements’ issuance date, but expects continued operating losses and negative operating cash flow and may need additional capital.
- The filing reports no borrowings. Lease liabilities totaled $1,559, including $497 current and $1,062 long-term.
Material changes, outlook and risks
- General and administrative expense increased 49.3% in Q3 and 28.7% for the nine months, largely from share-based compensation, new commercial hires, legal costs and MDR-related regulatory expense. R&D expense included continued SwitchGuard and CGuard Prime regulatory work, partly offset by lower C-Guardians study expense following completion of enrollment.
- In June, the company completed enrollment of 316 patients at 24 sites in the C-Guardians IDE trial. On November 1, 2023, after quarter-end, it reported a 0.95% 30-day DSMI rate. The filing does not provide the completed one-year endpoint results or FDA approval timing.
- CGuard EPS MDR recertification remained pending, with technical documentation under review. EU rules allow continued marketing under the prior framework through December 31, 2027, subject to procedural requirements.
- The company’s principal R&D and sole manufacturing facilities are in Israel. The October 2023 Israel-Hamas war could disrupt operations; the company said the effect and duration were uncertain. Russia and Belarus represented 13.1% of nine-month sales and 19.6% of Q3 sales; sanctions, currency movements and collection difficulties are risks.
- Management provided no specific revenue or earnings guidance. It cited distributor ordering patterns, regulatory timing, clinical milestones, manufacturing efficiency, foreign exchange, reimbursement, competition and capital needs as factors affecting results. It stated there were no pending material legal proceedings and no material changes in contractual commitments during the quarter.
- Potential dilution is substantial: at September 30, 53.4 million warrants and 15.6 million pre-funded warrants were outstanding. The May placement warrants have an exercise price of $1.3827 and include milestone-related expiry provisions; exercise proceeds are not assured. Common shares outstanding were 21.4 million at quarter-end.
Most important facts for investors to verify
- Cash burn, investment maturities and whether management’s stated 12-month funding runway remains adequate.
- Full C-Guardians follow-up data and FDA review milestones for CGuard products and SwitchGuard.
- Progress and requirements for MDR recertification and continued EU commercialization.
- Warrant and pre-funded warrant terms, potential dilution, and whether warrants are exercised for cash.
- Operational continuity at the Israel facility and Russia/Belarus sales and receivable collection exposure.