Neovasc Inc (NVCN) 2020 Q4 法說會逐字稿

Greetings, and welcome to the Neovasc, Inc. Fourth Quarter and Year-End 2020 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce Mike Cavanaugh, Managing Director at Westwicke. Thank you. You may begin.

Thank you. Good afternoon, and thank you for joining us today. Earlier today, Neovasc, Inc. released financial results for the quarter and fiscal year ended December 31, 2020. The release is currently available on the Investors section of the company's website at www.neovasc.com/investors. Fred Colen, President and Chief Executive Officer; and Chris Clark, Chief Financial Officer, will host this afternoon's call.

Before we get started, I'd like to remind everyone that management will be making statements during this call that include forward-looking statements within the meaning of applicable securities laws, which are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 and Canadian Securities Laws.

Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including, without limitation, our examination of historical operating trends, expectations regarding coverage decisions, pricing and enrollment matters and our future financial expectations and results are based upon current estimates and various assumptions. Words such as expect, outlook, will, should, continue, strategy, potential, intend, try, believe, plan, and similar words are expressed or expressions are meant to identify forward-looking statements. These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements.

For more information on risks and uncertainties related to these forward-looking statements, please refer to the cautionary statement regarding forward-looking statements and Risk Factors sections of Neovasc's annual information report on Form 40-F and the discussion in Neovasc's MD&A, which are available on EDGAR and SEDAR.

The information provided in this conference call speaks only to the live broadcast today, March 11, 2020 (sic) [2021]. Neovasc disclaims any intention or obligation except as required by law, to update or revise any information or forward-looking statements, whether because of new information, future events or otherwise.

I will now turn the call over to Fred.

Thank you, Mike, and good afternoon, everyone. Overall, we are pleased with the progress we made in 2020 despite the serious challenges posed by the COVID pandemic and a setback around FDA approval of the Reducer in October. We all know that patients are experiencing serious barriers to visiting their health care providers and undergoing surgical procedures. Nevertheless, Reducer implants recovered sharply from the pandemic-related lows of the first half of the year in the third quarter, but were impacted again in Q4, overall, generating approximately $2 million in revenue.

While we have much greater aspirations for Reducer, we believe this is a testament to Reducer's underlying demand and potential to help people with refractory angina, who often suffer serious quality of light issues and have nowhere else to turn.

As we have said before, refractory angina is a difficult disease that is in need of better solutions, and we continue to firmly believe that Reducer is a major part of the solution.

We also continued the important work of strengthening the corporate capital structure with multiple transactions throughout the year. We took steps to retire convertible debt and to raise cash for the balance sheet through direct placements to institutional investors.

We capped the year and fourth quarter with a $6.1 million raise, which gave us operating capital through the end of May 2021 and brought our total gross proceeds raised during the year through debt and equity to $45.2 million. Although it occurred after the close of the year, I think it is important to discuss the $72 million raise we completed in February of this year.

For the first time since May 2016, Neovasc can fund operations, including ongoing trials for Tiara and Reducer for over 2 years without the necessity of assessing the capital markets. We believe that this may turn out to be a significant transaction in the life of the company. It has allowed us to mitigate risks related to further near-term dilution and the overall solvency of the company. And has given us the opportunity to allow better decision-making around resource allocation and partnership opportunities.

We believe that the U.S. market opportunity for Reducer remains significant. And we intend to pursue an IDE study for Reducer with the objective of obtaining FDA approval for the device. We look forward to working with FDA and our investigators, and hope to finalize the trial design and begin enrollment this year. We will, of course, update you as these plans emerge.

Turning to Europe, where the Reducer has been used safely and effectively for over 9 years. We continue our efforts to expand the commercial footprint into new countries and to pursue additional reimbursement.

We have made significant progress in several major European markets, including France, the U.K. and other countries as we work towards obtaining sufficient reimbursement in those markets. A positive reimbursement decision in France, if it happens, may enable us to build a direct sales force in France as well as we did in Germany.

In December, we announced the first Reducer implant in France, the second largest market in the European Union, and we are optimistic that we will continue to expand the use of the unique device.

Turning to our Tiara mitral valve replacement device. We are advancing our regulatory submission for the Tiara TA transapical mitral valve replacement system, targeting a European CE Mark decision under the Medical Device Directive.

Neovasc is in ongoing collaborative discussions and ongoing submission of data with our notified body, and we are targeting an approval decision for Tiara TA in the first half of the year. We are also exploring possible partnership opportunities in Europe in the event that we receive approval for the Tiara TA there.

The next key initiative to watch will be activity leading up to a first human implant and regulatory interactions for the next-generation Tiara TF device. As we have discussed earlier, we are making a few design modifications to the TF delivery system based on feedback from our executive steering committee. We believe the slight delay will be worthwhile given the potential device improvements from the modifications. We are targeting the first-in-human implant of the Tiara TF in the second half of 2021.

The company is encouraged by the positive feedback it has received on the device. Most notably, physicians are supportive of the system's low profile, control delivery and unique D-shaped implant design that set it apart from competitive offerings and development. We continue to believe in the potential of Tiara TF to expand the size of the market and to be more broadly applicable than competitive systems under development and our own transapical Tiara system.

While 2020 was a challenging year for almost everyone, we are proud of the way Neovasc weathered the storm and is now financially stronger than it has been in years. Furthermore, we hope to report multiple milestones in 2021, as we continue to develop our devices, including a CE Mark decision for Tiara TA, a first-in-human implant of Tiara TF, a potential new U.S. IDE trial for the Reducer and a growing commercial footprint and reimbursement strategy, allowing for expansion into new Reducer markets. We want to thank our investors for their continued support of Neovasc.

I will now turn the call over to Chris for a review of our financial results.

Thank you, Fred. As everyone is actually aware, a restriction on elective procedures, which included Reducer implants, was implemented by the hospitals, health authorities and governments of a substantial portion of all our major markets due to COVID-19. This caused Reducer implantations to significantly slow beginning in March 2020.

Beginning in June 2020, we saw a return of implants in several of our international markets with a strong rebound in Germany, Italy and other select markets. We then experienced a second reduction in revenue during the second wave of COVID-19 lockdowns. As a result, revenues decreased by 6% to $1.96 million for the year ended December 31, 2020, compared to revenues of $2.09 million for the same period in 2019. The cost of goods sold for the year ended December 31, 2020, were $446,000 compared to $458,000 for the same period in 2019. The overall gross margins for the year ended December 31, 2020, were 77% compared to 78% for the same period in 2019.

The company continues to focus on Germany where the company sells Reducer direct for higher margins. Total departmental expenses for the year ended December 31, 2020, were $36.7 million compared to $31.7 million for the same period in 2019, representing an increase of $5 million or 16%. The increase in total departmental expenses for the year ended December 31, 2020, compared to the same period in 2019, can be substantially explained by a $2.5 million increase in legal costs related to the 2020 financings, as we completed 5 different transactions, a $1.7 million increase in noncash share-based payments, and a $1.1 million increase in employee-related expenses due to an increase in headcount, including our COO, and an increase in the vacation accruals direct impact of COVID-19 delayed vacations.

Product development and clinical trial expenses for the year ended December 31, 2020, were $20.4 million compared to $20.0 million for 2019, representing an increase of $380,000 or 2%. We continue to focus our expenditures on the clinical regulatory and commercial pathways to maximize value for our Reducer and Tiara products.

The operating loss and comprehensive loss for the year ended December 31, 2020, were $35.2 million and $30.2 million, respectively, or $1.72 basic and diluted loss per share as compared with $30.0 million and $33.6 million, or $5.40 basic and diluted loss per share for the same period in 2019.

Neovasc finances it's operations and capital expenditures with cash generated from operations and through equity and debt financings. The company had approximately $12.9 million in cash and cash equivalents on December 31, 2020, and approximately $72 million as of today's date.

Finally, subsequent to the February 2021 financing, the company had approximately 67 million common shares issued and outstanding, with a fully diluted share count of approximately 106 million shares.

As mentioned by Fred, we are now in a strong position financially. We are actively engaged in potential partnership opportunities and expect that we will reach critical value creation events before needing more capital. We look forward to updating the market with positive updates in 2021 and beyond. Fred?

Thank you, Chris, and thank you all for listening to our opening remarks. Neovasc is finally, after almost 5 years, on a new foundational footing. We have achieved the transformation of this company to a now more typically funded startup company with a clean balance sheet. This is primarily due to the strength of our 2 products, which I'm convinced, will transform the lives of millions of patients to come, but it is also due to the Neovasc team, a loyal, dedicated and very hard-working group of individuals across the globe, in Canada, the U.S. and Europe. Nothing scared them or us, and we continued moving forward, underscored by the huge turbulences around us.

Finally, it is due to a large group of dedicated long investors and investors who completely support our never-give-up mantra and who are always there to support the company. Once again, we want to thank you all for your dedication and your continued trust and support.

I would like to now open the call up for questions.

(Operator Instructions) Thank you. There are no questions at this time. And with that, I would like to conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Have a great day.

Thank you. Bye-bye.