InspireMD, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Dollar amounts below are in U.S. dollars, in thousands, unless otherwise stated. InspireMD develops and commercializes MicroNet-based vascular stent products, primarily CGuard EPS for carotid artery disease.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $1,239 | $1,183 | +4.7% |
| Gross profit / margin | $373 / 30.1% | $122 / 10.3% | Margin +19.8 percentage points |
| Operating expenses | $4,754 | $4,608 | +$146 |
| Operating loss | $(4,381) | $(4,486) | Improved $105 |
| Net loss | $(4,256) | $(4,481) | Improved $225 |
| Basic and diluted loss per share | $(0.53) | $(0.57) | — |
| Operating cash flow | $(4,831) | $(4,134) | Use increased $697 |
Revenue was entirely from CGuard in Q1 2023; MGuard contributed no revenue, compared with $22 in Q1 2022. Management said shipments resumed to EU countries during the second half of the quarter after a shipping interruption, and the resulting revenue increase may not reflect underlying market demand. Gross profit improved largely because write-offs declined by $184, alongside higher revenue.
Liquidity, balance sheet and capital
- At March 31, 2023, cash and cash equivalents were $4,228 and short-term bank deposits were $8,657, down from $4,632 and $13,171, respectively, at December 31, 2022.
- Working capital was $12,320, down $3,936 during the quarter; current assets exceeded current liabilities by 3.8 times.
- Total liabilities were $6,495, including $1,498 in current and long-term operating lease liabilities. The filing reports no financing cash flows in either comparison period and no conventional borrowings on the balance sheet.
- Management stated that available resources were expected to fund operations only through the end of September 2023 and disclosed substantial doubt about the company’s ability to continue as a going concern, absent successful commercialization or additional financing.
- Subsequent to quarter-end, the company entered into a May 12 private placement agreement expected to generate approximately $42.2 million in gross proceeds, before estimated fees and expenses of approximately $4.6 million. Closing was expected on or about May 15, subject to customary conditions. Full cash exercise of associated warrants could generate a further $71.4 million, but is not assured. The offering includes substantial warrant coverage and potential dilution.
Material changes, outlook and risks
- R&D expense rose 9.7% to $1,843, primarily due to CGuard Prime regulatory and approval work; selling and marketing expense increased 5.6% to $788. G&A declined 2.7% to $2,123, mainly from lower share-based compensation, partly offset by higher MDR-related regulatory expense.
- The company was pursuing MDR recertification for CGuard EPS in Europe. Although its prior CE mark had expired, regulatory measures described in the filing permitted continued marketing in the EU and certain other jurisdictions, subject to procedural requirements; the company said it was continuing the recertification process.
- The C-Guardians pivotal trial was enrolling at approximately 20 sites. Management expected enrollment to be completed around the end of Q2 2023; this is an expectation, not a guarantee. Development and regulatory plans also included CGuard Prime and the SwitchGuard TCAR delivery system.
- Sales to Russia and Belarus represented 7.9% of Q1 2023 revenue, versus 1.5% in Q1 2022. Sanctions, collection difficulties, geopolitical developments and currency movements could affect sales and cash flows.
- Other key risks include ongoing losses and cash burn, ability to raise capital, regulatory or clinical setbacks, competition, reliance on a single manufacturing facility, reimbursement and distributor-order variability, foreign exchange exposure, and possible disruption from hostilities in Israel. The filing gives no formal revenue or earnings guidance.
- Management concluded disclosure controls were effective at the reasonable assurance level as of March 31, 2023; no material change in internal control over financial reporting was reported. No pending material legal proceedings were disclosed.
Most important facts for investors to verify
- Whether the May 2023 private placement closed on the stated terms, its net proceeds, and the resulting share count and dilution.
- Whether financing and operating cash flows extend liquidity beyond the disclosed September 2023 runway and address the going-concern uncertainty.
- Progress and timing of MDR recertification, including continued eligibility to sell CGuard EPS in Europe.
- C-Guardians enrollment and results milestones, and regulatory progress for CGuard Prime and SwitchGuard.
- Whether revenue growth reflects sustained demand after the shipment interruption, and the effects of regional sales concentration and Russia/Belarus exposure.