InspireMD, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with the three months ended March 31, 2021 unless otherwise noted. InspireMD develops and commercializes medical devices using its MicroNet stent platform, led by its CGuard carotid system. The unaudited financial statements are in U.S. dollars, in thousands except per-share data, and should be read with the company’s 2021 Form 10-K.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 | Change / context |
|---|---|---|---|
| Revenue | $1,183 | $1,006 | Up $177, or 17.6% |
| Gross profit / margin | $122 / 10.3% | $106 / 10.5% | Profit up $16; margin down 0.2 percentage points |
| Operating expenses | $4,608 | $3,420 | Up $1,188, primarily due to clinical-trial spending and compensation |
| Operating loss | $(4,486) | $(3,314) | Loss increased |
| Net loss | $(4,481) | $(3,243) | Loss increased $1,238, or 38.2% |
| Basic and diluted loss per share | $(0.57) | $(0.53) | Weighted-average shares were 7.80 million and 6.12 million, respectively |
| Net cash used in operating activities | $(4,152) | $(3,641) | Use increased $511 |
CGuard revenue was $1,161, up from $969; MGuard revenue was $22, down from $37. Cost of revenue was $1,061 versus $900. The company attributed higher revenue mainly to increased CGuard sales in existing and new markets, fewer pandemic-related procedure postponements, and U.S. clinical-trial device sales. Gross margin remained low; management said the gross-profit increase reflected fewer write-offs, partly offset by miscellaneous expenses.
At March 31, 2022, cash and cash equivalents were $7.798 million and short-term bank deposits were $22.053 million, compared with $12.004 million and $22.036 million, respectively, at year-end 2021. Current assets were $32.632 million, current liabilities $3.691 million, and working capital $28.941 million, down $3.806 million from year-end. The company reported no financing cash inflow in Q1 2022; Q1 2021 included $35.068 million, principally from equity and warrant-related proceeds. Investing cash use was $47,000. The filing reports lease liabilities and employee-retirement obligations, but no conventional borrowings or funded debt are presented.
Material changes and business developments
- Research and development expense rose to $1.680 million from $839,000, primarily due to $910,000 of costs associated with the C-Guardians FDA study, which began enrollment in 2021.
- Selling and marketing expense was $746,000, compared with $708,000. General and administrative expense rose to $2.182 million from $1.873 million, with increased compensation, share-based compensation, and directors’ and officers’ insurance cited.
- Financial income fell to $5,000 from $71,000, mainly because of less favorable foreign-exchange effects, partly offset by interest income from bank deposits.
- Revenue from Russia, Ukraine, and Belarus was disrupted: the company reported no 2022 sales in Russia and Ukraine and minimal sales in Belarus. It said collecting some regional receivables had become more difficult.
- Customer A and Customer B accounted for 21% and 11% of Q1 2022 revenue, respectively, versus 23% and 13% in Q1 2021.
Outlook, risks, and other matters
Management stated that available resources were expected to fund planned operations for at least 12 months from the financial-statement issuance date. It nevertheless expects continued losses and negative operating cash flows until products, primarily CGuard, reach commercial profitability, and said additional capital may be needed. No specific financial guidance was provided.
The company was continuing the C-Guardians pivotal study, designed to enroll approximately 315 patients at up to 40 U.S. and European sites; it reported completing its first European recruitment in April 2022. CGuard Prime and SwitchGuard delivery solutions were anticipated to launch in early 2023. The company intended to phase out MGuard Prime sales during 2022, citing market preference for drug-eluting stents. Its products were not approved for sale or marketing in the United States; U.S. revenue related to devices used in the ongoing trial.
Key disclosed risks include further COVID-19 effects on procedures, study enrollment, and supply chains; Russia-Ukraine conflict, sanctions, currency fluctuations, and collection risk; the need for additional financing and potential dilution; clinical, regulatory, reimbursement, manufacturing, competitive, and market-acceptance risks; and foreign-exchange exposure. The company cited dependence on a single manufacturing facility. It reported no pending material legal proceedings, no material changes to contractual commitments, and no material changes to previously disclosed risk factors. Management concluded disclosure controls were effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether cash, short-term deposits, and actual operating cash burn support the stated minimum 12-month funding outlook, and whether additional financing will be required.
- Progress, enrollment pace, costs, and eventual results of the C-Guardians study, including the timing of U.S. regulatory and commercial milestones.
- Whether CGuard sales growth and gross margins can improve enough to offset rising operating expenses and ongoing losses.
- The effect of the Russia-Ukraine situation, sanctions, and receivable collection difficulties on sales and cash flows.
- The timing and commercial prospects for the planned early-2023 delivery-solution launches and the 2022 MGuard phaseout.