NASDAQ, TSX: NVCN
VANCOUVER, May 10, 2018 /PRNewswire/ - Neovasc Inc.
("Neovasc" or the "Company") (NASDAQ, TSX: NVCN), a leader in the
development of minimally invasive transcatheter mitral valve
replacement technologies, today announced financial results for the
quarter ended March 31, 2018 (all
figures in U.S. dollars unless otherwise indicated).
"Despite a challenging period for our shareholders, we are
encouraged by our improved financial position through the receipt
of $12.3 million in proceeds from
investor-initiated exercises of Series C warrants that were issued
during our November 2017 public
offering," commented Fred Colen,
Neovasc's Chief Executive Officer. "This additional capital
provides us with increased runway to support our clinical and
operating activities into early 2019 at our current cash burn rate,
including achieving further clinical milestones for Tiara and
increasing commercial sales of Reducer in Europe."
"We continue to see steady enrollment progress in our Tiara I
and II studies, with 34 patients implanted with Tiara to-date in
these trials, compared to 21 patients at the end of 2017,"
continued Colen. "The initial development of the transfemoral,
trans-septal version of Tiara is on track, and we are pleased to
report that we completed our first, small animal feasibility study
with a first set of prototypes and that for the first time in the
history of Tiara, we have been able to access the heart
trans-septally, to pass through the mitral valve annulus from the
right side of the heart and deploy a Tiara mitral valve".
"We are pleased to have had several scientific articles
published which presented data on Reducer, including an editorial
in the Journal of the American College of Cardiology (JACC)
publication, Vol. 11, No. 8, 2018 by Dr. Wijns and Dr. Behan: "New
Treatment Options for the "No Option" Patient with Refractory
Angina." We are excited to have additional Reducer data included in
these peer-reviewed publications, including U.S. publications, to
help drive greater industry awareness of the Reducer," concluded
Colen.
The Tiara Mitral Valve
The Tiara™ mitral valve (the
"Tiara") has demonstrated its potential in a total patient
population of 56 patients as a viable clinical treatment in the
early results of the Company's clinical trials, as well as in
compassionate use cases for patients with severe Mitral
Regurgitation and enlarged left ventricles and in patients at high
risk for surgery.
Enrollment of patients in the European Tiara II ("TIARA-II") CE
Mark clinical study continues to scale, in part due to
implementation of an easy-to-use, local pre-screening process and
tool for physicians and clinical sites. Neovasc also increased its
field clinical engineering support in Europe, which will allow it to support
additional sites, as well as reduce the time from when a site
identifies a patient to when they are enrolled and scheduled to
have the procedure. These efforts complement our initiative to
recruit and qualify additional clinical study sites in Germany, the UK, Spain, the
Netherlands and Israel. Currently, we have ten
clinical sites: five in Germany,
three in Italy and two in the
UK. Our goal is to add clinical sites in Germany, the UK, Spain, Israel
and the Netherlands. As a result,
the Company believes the TIARA II study is on track for the
application for CE Mark approval submitted in 2020.
Year-to-date, there have been 13 implants of Tiara, with 8 for
TIARA-II and 5 for the TIARA-I study. The apical in/out procedure
time for the most recent 4 TIARA-II implants were 9 minutes, 9
minutes, 10 and 12 minutes, respectively. For the 2 recent TIARA-I
implants, they were 11 minutes and 45 minutes (mainly due to
challenging echo imaging quality).
There have been 16 patients enrolled in the TIARA-II study out
of the total 115 required under the trial design. The 30-day
survival rate of the Tiara remains at 90% overall and is at 93% for
the TIARA-II study.
The Reducer
The Company is encouraged by the ramping
of market interest in the Neovasc Reducer™ (the "Reducer"), which
includes five new, independent articles in scientific publications.
The clinical results discussed in these articles include data from
96 Reducer patients in two separate single center studies, which is
encouraging. The studies each highlight the data that demonstrate
real world clinical results and are very consistent with the
randomized COSIRA trial outcomes. The TCTMD publication and the
Editorial in JACC point to a new option for the treatment of these
Refractory Angina patients. The Company believes, the case report
for the first time powerfully demonstrates increased perfusion of
the ischemic regions of the heart in a human in these published PET
pictures.
Implant rates for the Reducer are gaining traction in
Europe and the Middle East, with a 29% increase in Reducer
implants and a 30% increase in revenue for the first quarter of
2018 compared to the first quarter of 2017. This puts the
commercial efforts on-track to achieve the Company's goal of
achieving a doubling of implants for the Reducer in Europe in 2018 over 2017. One of the drivers
behind this success is the NUB 1 status for new therapies in
Germany, which the Reducer
received at the end of January
2018.
The Company continues to enroll in the Reducer I clinical study
and is exploring options for initiating of the COSIRA-II IDE study,
a 385-patient study to be conducted at up to 35 centers in
the United States, which was
approved by the FDA in late 2017.
Results for the three months ended March 31, 2018 and 2017
Revenues
Revenues decreased 77% to $339,922 for the three months ended March 31, 2018, compared to revenues of
$1,481,360 for the same period in
2017. In December 2017, the Company
closed its contract manufacturing and consulting services business
and is now focused on the commercialization of its own product, the
Reducer.
Sales of the Reducer for the three months ended March 31, 2018 were $339,922 compared to $260,765 for the same period in 2017,
representing an increase of 30%. The Company is encouraged by the
progress this year, but recognizes that future revenues may be
unstable before the Reducer becomes widely adopted. The
continued success of the commercialization of the Reducer will be
dependent on the amount of internal resources allocated to the
product, obtaining appropriate reimbursement codes in various
territories and correctly managing the referrals process.
Cost of Goods Sold
The cost of goods sold for the
three months ended March 31, 2018 was
$87,393 compared to $808,628 for the same period in 2017. The overall
gross margin for the three months ended March 31, 2018 was 74%, compared to 45% gross
margin for the same period in 2017. The gross margin now
reflects the gross margin on the Reducer product only.
Expenses
Total expenses for the three months ended
March 31, 2018 were $6,755,420, compared to $8,489,404 for the same period in 2017,
representing a decrease of $1,733,984
or 20%. The decrease in total expenses for the three months
ended March 31, 2018 compared to the
same period in 2017 reflects a $779,622 reduction in general and administrative
expenses due to restructuring of the Company and a $1,054,132 decrease in product development and
clinical trial expenses to preserve cash resources.
Selling expenses for the three months ended March 31, 2018 were $286,938, compared to $187,168 for the same period in 2017,
representing an increase of $99,770,
or 53%. The increase in selling expenses for the three months ended
March 31, 2018 compared to the same
period in 2017 reflects an increase in costs incurred for
commercialization activities related to the Reducer. The
Company continues to minimize its selling expenses as the cash
resources of the Company are still limited.
General and administrative expenses for the three months ended
March 31, 2018 were $2,469,091, compared to $3,248,713 for the same period in 2017,
representing a decrease of $779,622
or 24%. The decrease in general and administrative expenses
for the three months ended March 31,
2018 compared to the same period in 2017 can be
substantially explained by a $812,580
decrease in litigation expenses (as there are fewer ongoing
litigation matters) and a $586,159
decrease in share-based payments (as the option awards in 2018 were
lower in value than in 2017) offset by a $576,364 charge for employee termination expenses
due to restructuring of the Company.
Product development and clinical trial expenses for the three
months ended March 31, 2018 were
$3,999,391 compared to $5,053,523 for the same period in 2017,
representing a decrease of $1,054,132
or 21%. The decrease in product development and clinical
trial expenses for the three months ended March 31, 2018 was the result of a $653,973 decrease in share-based payments (as the
option awards in 2018 were lower in value than in 2017) and a
$366,227 decrease in other expenses,
as the cash resources of the Company are still limited.
Other Income and Loss
The other loss for the three
months ended March 31, 2018 was
$48,324,003 compared to income of
$28,299 for the same period in 2017,
an increase in other loss of $48,352,302. The increase in the other loss
can be substantially explained by the accounting treatment of the
November 2017 financings, which
resulted in a $49,277,477 increase in
net loss between the periods.
Losses
The operating losses and comprehensive losses
for the three months ended March 31,
2018 were $6,502,891 and
$55,466,915, respectively, or
$0.38 basic and diluted loss per
share, as compared with losses of $7,816,672 and $7,927,304, or $0.10 basic and diluted loss per share, for the
same period in 2017.
The $47,539,611 increase in the
comprehensive loss incurred for the three months ended March 31, 2018 compared to the same period in
2017 can be substantially explained by the accounting treatment of
the November 2017 financings,
resulting in an unrealized loss on derivative liability and
convertible note of $4,337,049, a
realized loss of $17,557,693 on the
exercise of warrants and $27,382,735
amortization of deferred loss. This was offset by a $779,622 reduction in general and administrative
expense and a decrease in product development and clinical trial
expenses of $1,054,132.
Discussion of Liquidity and Capital Resources
Neovasc
finances its operations and capital expenditures with cash
generated from operations and equity and debt financings. As
at March 31, 2018, the Company had
cash and cash equivalents of $12,261,559 compared to cash and cash equivalents
of $17,507,157 as at December 31, 2017. The Company will require
significant additional financing in order to continue to operate
its business. Given the current nature of the Company's
capital structure, there can be no assurance that such financing
will be available on favorable terms, or at all.
The Company is in a negative working capital position of
$1,275,879, with current assets of
$14,036,460 and current liabilities
of $15,312,339. However, of the
current liabilities, only $2,231,090
are cash liabilities, as the liability for the senior secured
convertible notes (the "Notes") and the derivative liability from
the November 2017 underwritten public
offering (the "Public Transaction") and private placement (the
"Private Placement" and together with the "Public Transaction" the
"2017 Financings") are accounting entries to account for the value
of the instruments issued in the 2017 Financings.
Cash used in operating activities for the three months ended
March 31, 2018, was $5,245,425, compared to $6,308,755 for the same period in 2017. For
the three months ended March 31,
2018, operating expenses were $5,909,597, compared to $6,193,498 for the same period in 2017, a
decrease of $283,091 that can be
explained by decrease in product development and clinical trial
expenses to preserve cash resources. Net cash provided from the net
change in non-cash working capital items for the three months ended
March 31, 2018 was $691,591, compared to a net cash outflow of
$285,226 in the same period in
2017. The net cash inflow can be attributed to a change in
the balance sheet structure as the Company closed its consulting
services and contract manufacturing businesses.
Net cash applied to investing activities for the three months
ended March 31, 2018 was $17,162 compared to $351,260 for the same period in 2017, primarily
due to a $245,227 decrease in
purchase of property, plant and equipment, as there is still a
requirement to preserve cash resources in 2018.
Subsequent Events
As of May 10,
2018, the Company has received cash proceeds of $12,338,854 from the investor-initiated exercise
of 7,642,781 series C warrants, issued pursuant to the Public
Transaction (the "Series C Warrants") at an exercise price of
$1.46 per Series C Warrant as further
described below. The cash proceeds represent an increase in
cash of approximately 106% compared to the $12,261,559 cash and cash equivalents as at
March 31, 2018.
As announced today, the Nasdaq has confirmed that the Company
has maintained its market capitalization above $35 million for 20 consecutive trading days and
has regained compliance with the Nasdaq's market value listing
rule. As described in our Annual Report on Form 20-F, we must still
regain compliance with the Nasdaq $1.00 minimum bid price listing rule.
Warrant Exercises
None of the 25,676,368 series A
warrants (the "Series A Warrants") or 22,431,506 series E warrants
(the "Series E Warrants") issued pursuant to the 2017 Financings
have been exercised and all such warrants remain outstanding.
As of May 10, 2018, all of the
25,676,368 series B warrants (the "Series B Warrants") initially
issued pursuant to the 2017 Financings, have been exercised using
the cashless alternative net number mechanism for 846,072,506
common shares ("Common Shares") and all of the 22,431,506 series F
warrants (the "Series F Warrants") initially issued pursuant to the
2017 Financings have been exercised using the cashless alternate
net number mechanism for 295,739,698 common shares.
As of May 10, 2018, of the
10,273,972 Series C Warrants initially granted, 8,451,270 have been
exercised for 8,451,270 shares, 8,451,270 Series A Warrants and
8,451,270 Series B Warrants. None of the 8,451,270 underlying
Series A Warrants have been exercised and 8,417,292 of the
8,451,270 underlying Series B Warrants have been exercised using
the cashless alternate net number mechanism for 395,930,429 common
shares.
As of May 10, 2018, cumulatively
there were 34,127,638 Series A Warrants, 33,978 Series B Warrants,
1,822,702 Series C Warrants and 22,431,507 Series E Warrants
outstanding. 97% of the warrants with an alternate net number
mechanism have been exercised.
Outstanding Share Data
As at May 10, 2018, the Company had 1,777,789,654
Common Shares issued and outstanding. Further, the following
securities are convertible into Common Shares:
10,190,591 stock options with a weighted average price of
$2.14, 58,415,824 warrants and
the Notes, which could convert into 22,431,507 Common Shares
(not taking into account the alternate conversion price
mechanism). Our fully diluted share capital as of the same date is
1,868,968,102. Our fully diluted share capital, adjusted on the
assumption that all the remaining Series B Warrants are
exercised using the cashless alternative net number mechanism and
the outstanding Notes are exercised using the alternate conversion
price at the closing price on May 10,
2018 is 2,691,587,744.
For description of the terms of the securities issued pursuant
to the 2017 Financings, see the forms of warrants and note
previously filed on SEDAR and with the SEC on Form 6-K and the
prospectus supplement previously filed on SEDAR and with the SEC.
For a description of the risks associated with the securities
issued pursuant to the 2017 Financings, the amount of such
securities exercised or converted to date, the dilution to date
caused by such exercises and conversions, and the potential
dilution in the future due to such exercises and conversions, see
the Company's Annual Report on Form 20-F, which is available on
SEDAR at www.sedar.com and as filed with the SEC at
www.sec.gov.
The Company prepares its consolidated financial statements in
accordance with International Financial Reporting Standards, as
issued by the International Accounting Standards Board.
Neovasc's 2017 Annual Report on Form 20-F, Management's
Discussion and Analysis and Consolidated Financial Statements and
related notes are posted on the Company's website
at www.neovasc.com and were filed on SEDAR and with the SEC.
In addition to the summary contained herein, readers are encouraged
to review the full disclosure in these documents.
Conference Call and Webcast information
Neovasc will
be hosting a conference call today at 4:30 pm ET to
discuss these results. To participate in the conference call,
please dial 800-239-9838 (domestic) or 323-794-2551 (international)
and use passcode 9386338#.
A recording of the call will be available until May 24, 2018 by calling 844-512-2921 (domestic)
or 412-317-6671 (international) and using passcode 9386338#.
A link to the live and archived audio webcast of the conference
call will also be available on the Presentations and Events page of
the Investors section of Neovasc's website at www.neovasc.com.
About Neovasc Inc.
Neovasc is a specialty medical
device company that develops, manufactures and markets products for
the rapidly growing cardiovascular marketplace. Its products
include the Neovasc Reducer™, for the treatment of refractory
angina, which is not currently available in the United States and has been available in
Europe since 2015, and the Tiara™,
for the transcatheter treatment of mitral valve disease, which is
currently under clinical investigation in the United States, Canada and Europe. For more information, visit:
www.neovasc.com.
This news release contains forward-looking statements within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995 and applicable Canadian securities laws regarding the
Company's plans and expectations concerning its runway and ability
to fund its operations with current cash into early 2019, future
enrollment in the Company's clinical studies for the Tiara and
Reducer, supporting new sites and reducing patient processing times
for the TIARA-II study, applying for CE Mark approval in 2020 for
the Tiara, the Reducer gaining traction in Europe and the Middle East, the Company's ability to initiate
the Reducer COSIRA-II IDE study, increasing commercials sales of
the Reducer in Europe, and the
Company's ability to attain additional financing, the Company's
ability to remain listed on the Nasdaq Capital Market and the
Company's fully diluted share capital. Words and phrases such as
"continue", "strategy", "believe", "may", "could", "should",
"expect" and "will", and similar words or expressions, are intended
to identify these forward-looking statements. Forward-looking
statements are based on estimates and assumptions made by the
Company in light of its experience and its perception of historical
trends, current conditions and expected future developments, as
well as other factors that the Company believes are appropriate in
the circumstances. Many factors and assumptions could cause the
Company's actual results, performance or achievements to differ
materially from those expressed or implied by the forward-looking
statements, including, without limitation, the substantial doubt
about the Company's ability to continue as a going concern; risks
relating to the warrants (the "Warrants") and Notes issued pursuant
to the 2017 Financings, resulting in significant dilution to the
Company's shareholders; risks relating to the Company's need for
significant additional future capital and the Company's ability to
raise additional funding; risks relating to cashless exercise
and adjustment provisions in the Warrants and Notes issued pursuant
to the 2017 Financings, which could make it more difficult and
expensive for the Company to raise additional capital in the future
and result in further dilution to investors; risks relating to the
sale of a significant number of Common Shares of the Company; risks
relating to the exercise of Warrants or conversion of Notes issued
pursuant to the 2017 Financings, which may encourage short sales by
third parties; risks relating to the possibility that the Company's
Common Shares may be delisted from the Nasdaq or the TSX, which
could affect their market price and liquidity; risks relating to
the Company's Common Share price being volatile; risks relating to
the influence of significant shareholders of the Company over the
Company's business operations and share price; risks relating to
the Company's significant indebtedness, and its effect on the
Company's financial condition; risks relating to claims by third
parties alleging infringement of their intellectual property
rights; risks relating to lawsuits that the Company is subject to,
which could divert the Company's resources and result in the
payment of significant damages and other remedies; the Company's
ability to establish, maintain and defend intellectual property
rights in the Company's products; risks relating to results from
clinical trials of the Company's products, which may be unfavorable
or perceived as unfavorable; the Company's history of losses and
significant accumulated deficit; risks associated with product
liability claims, insurance and recalls; risks relating to use of
the Company's products in unapproved circumstances, which could
expose the Company to liabilities; risks relating to competition in
the medical device industry, including the risk that one or more of
the Company's competitors may develop more effective or more
affordable products; risks relating to the Company's ability to
achieve or maintain expected levels of market acceptance for the
Company's products, as well as the Company's ability to
successfully build its in-house sales capabilities or secure
third-party marketing or distribution partners; the Company's
ability to convince public payors and hospitals to include the
Company's products on their approved products lists; risks relating
to new legislation, new regulatory requirements and the efforts of
governmental and third-party payors to contain or reduce the costs
of healthcare; risks relating to increased regulation, enforcement
and inspections of participants in the medical device industry,
including frequent government investigations into marketing and
other business practices; risks associated with the extensive
regulation of the Company's products and trials by governmental
authorities, as well as the cost and time delays associated
therewith; risks associated with post-market regulation of the
Company's products; health and safety risks associated with the
Company's products and industry; risks associated with the
Company's manufacturing operations, including the regulation of the
Company's manufacturing processes by governmental authorities and
the availability of two critical components of the Reducer; risk of
animal disease associated with the use of the Company's products;
risks relating to the manufacturing capacity of third-party
manufacturers for the Company's products, including risks of supply
interruptions impacting the Company's ability to manufacture its
own products; risks relating to the Company's dependence on limited
products for substantially all of the Company's current revenues;
risks relating to the Company's exposure to adverse movements in
foreign currency exchange rates; risks relating to the possibility
that the Company could lose its foreign private issuer status under
U.S. federal securities laws; risks relating to breaches of
anti-bribery laws by the Company's employees or agents; risks
associated with future changes in financial accounting standards
and new accounting pronouncements; risks relating to the Company's
dependence upon key personnel to achieve its business objectives;
the Company's ability to maintain strong relationships with
physicians; risks relating to the sufficiency of the Company's
management systems and resources in periods of significant growth;
risks associated with consolidation in the health care industry,
including the downward pressure on product pricing and the growing
need to be selected by larger customers in order to make sales to
their members or participants; risks relating to the Company's
ability to successfully identify and complete corporate
transactions on favorable terms or achieve anticipated synergies
relating to any acquisitions or alliances; risks relating to the
Company's ability to successfully enter into fundamental
transactions as defined in the Series C warrants issued pursuant to
the 2017 Financings; anti-takeover provisions in the Company's
constating documents which could discourage a third party from
making a takeover bid beneficial to the Company's shareholders; and
risks relating to conflicts of interests among the Company's
officers and directors as a result of their involvement with other
issuers. These risk factors and others relating to the Company are
discussed in greater detail in the "Risk Factors" section of the
Company's Annual Report on Form 20-F and in Management's Discussion
and Analysis for the quarter ended March 31,
2018 (copies of which may be obtained at
www.sedar.com or www.sec.gov). These factors should be
considered carefully, and readers should not place undue reliance
on the Company's forward-looking statements. The Company has
no intention and undertakes no obligation to update or revise any
forward-looking statements or to provide information relating to
further incremental exercises of Warrants or conversion of Notes
beyond required periodic filings with securities regulators,
whether as a result of new information, future events or otherwise,
except as required by law.
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SOURCE Neovasc Inc.