Back in early September, we introduced our Stockhouse audience to a unique play in the emerging medical tech space –
Neovasc Inc. (
TSX: NVCN,
OTCQB: NVCN,
Forum). The company develops, manufactures, and markets products for the rapidly growing cardiovascular marketplace. Its products include the Tiara for the transcatheter treatment of mitral valve disease and the Neovasc Reducer for the treatment of refractory angina.
Stockhouse Media’s Dave Jackson was recently joined by company President & CEO Fred Colen and COO Bill Little to get our investor audience and company shareholders up-to-date on this intriguing med-tech play.
(CLICK IMAGE TO PLAY VIDEO)
TRANSCRIPT BELOW:
SH: To start off with, for our investor audience that might be new to Neovasc, can you tell us a little bit about yourselves and the history of the company?
Fred Colen: Yeah. So let me start with that. So I'm Fred Colen and I'm the CEO of Neovasc. I have been in medical technology for a long time, I would say about 40 years and really specialized in bringing to the market novel products. So it's mostly around the R&D functions, research development, clinical trials, regulatory approval to getting the product going in a market. That's essentially what I've been focused on for the most part of my career. I've worked in small, medium and very large companies. Very well-known big companies but I've also the privilege of working in very small startup companies and I love that as much. Neovasc is a company that has been an existence for quite some time, originally focused on tissue processing for the leaflets of a heart valve and it wasn't in that business for a long, long time until the company decided and this was all before my time, to really focus on two specific products and those are Tiara for the heart valve as well as Reducer device for Refractory Angina. Since 2017, the company really was focused on those two products. I came on board in 2018 to lead your organization with these two products and have been here ever since. So that's basically my short intro. So let's see what Bill has to say about himself.
Bill Little: Yeah. Sure. Thanks Fred. So, so my name is Bill Little, I'm the Chief Operating Officer and I've been in the cardiovascular device space for a little over 25 years now primarily in interventional cardiology and structural heart diseases. So working on things like the reducer device and like our Tiara Mitral Valve program. So this has really been in my area of experience for my entire career and I've been with the organization for about two years.
SH: Can you update our investor audience and your Neovasc shareholders on any new company developments, especially in the wake of COVID-19?
Fred Colen: Yeah. So let me start by saying that the year 2021 obviously was a very interesting year in many ways. Certainly the COVID situation has been impacting our lives in general and certainly also has impacted us as a company as one can imagine and certainly has also impacted us there where we are already selling the reduce, which is in Europe. So we saw it firsthand that clinics got overwhelmed at points in time. It's an up and down, we all were hoping this would go by fast. Unfortunately, it stayed a lot longer and we see the same thing in Europe with the clinics that are continuing to be busy with COVID patients and therefore we see ups and downs as it relates to how Reducer business, the impact of that because of cases being postponed.
Sometimes it's the hospital that's too busy with all the things. Sometimes it's just the patients who are scared to go to the hospital because they are scared to get COVID when they go to the hospital. So that is another factor. We were actually very hopeful in the third quarter of this year that this will be behind us, unfortunately and by the way, we had great results in Q3 on the revenue development side. Unfortunately, as you probably heard already Europe Q4 doesn't look all that great. They struggle again with quite an uptake in COVID. So we do see that in our numbers as well. Other than that 2021 was an interesting year for us, in particular earlier in the year because we were able to raise $72 million in cash and really finance our operation for quite a long period of time and actually our current estimation is until the middle of 2024.
We did make some adjustments after that in terms of focusing on the opportunities that are closest to fruition which is basically to Reducer the device because it's already in early commercialization and because we really want to focus on the US clinical study, the COSIRA-II study and therefore we actually postponed some of the additional newer developments on valve side because that was eating up quite a bit of cash and would have a much later return. So we postponed those and so now with this big raise of $72 million, we are able to finance this big new COSIRA-II study in the U.S. and still have cash until the middle of 24. So that itself is a very positive development for Neovasc.
SH: You’ve recently announced Q3 2021 financial results, generating record revenue…up 12-percent from the same period in 2020. Can you unpack some of these positive numbers?
Bill Little: Yeah, sure. So fundamentally, I think it reflects the core strength in our underlying business to be able to show that type of revenue growth, as you said, 12% year over year really is reflective of the demand that we're seeing out of the marketplace, particularly in Europe and so we're really happy with those numbers. I think as we look into Q4 and Fred mentioned we're still looking for good revenue in Q4. We are doing it in the face of another uptick in COVID in Europe, which is our primary market at this point but really if we look at the last couple of quarters, whether year over year or quarter over quarter, in fact I think they are reflective of the underlying demand that we're seeing. We're seeing more physicians that are interested in using the reducer device and we're seeing good results and so we feel good about the direction we're headed.
SH: You have two main products in your specialty medical device portfolio – Neovasc Reducer and Neovasc Tiara. Can you briefly tell us about the benefits these state-of-the-art products?
Fred Colen: Yeah, so the mitral valve replacement device, the Tiara, their heart valve is there for patients that have severe regurgitation. Basically the valve, the native original valve doesn't work well anymore. It leaks and so blood goes in the wrong way. That's called regurgitation and that puts an enormous stress on the heart because basically the valve is not closing well. So it makes the heart very inefficient and pumping blood, especially on the left side which is where we're talking about that that provides blood to the entire body. So if and when you are a younger patient and this happens, you basically go through open heart surgery and you get a surgical implant that is a replacement valve. Unfortunately many and actually would say most of these issues occur in patients at older age because some of this just has to do with the fact that the heart has beaten already so many times there is calcification and other issues that can happen to the heart and our general quality of life that impacts the function and so when you then talk about these patients at an older age, it becomes quite difficult because if you're 70, 75 years old, do you really want to go through this open heart surgery which has a risk in itself.
So these patients get in a difficult position of choosing between one and the other and many then choose not to do anything. So that creates this, what we call very big unmet medical need. There was a lot of patients that have an insufficient heart function because of this leaky mitral valve. Yet they're too old to really go to surgery and that's why companies are developing these, what we call a minimally invasive implantable valve replacements. This is what the Tiara is. We implant it transapically meaning, we go actually through and in between the chest. So in between the ribs of the chest and we enter the heart and the bottom of the heart and put it in this way so that the chest is not opened at all.
It's a minimally-invasive way to put in this new heart valve and it takes a lot of screening and preparational work, but if everything goes well, this procedure can be done in about half an hour time, and you would have a new heart valve. So you can see the benefit for these patients that this device would bring. So that is one product that we're focused on. That product is in clinical trials. So it's not commercially available anywhere and the other device that we have is the Reducer device. It's a device that basically regulates blood flow in a very intelligent and unique manner. There is no competitive product available for the reducer and it basically provides relief for patients with what we call Refractory Angina. So angina is basically when you have a heart pain, shortness of breath, you feel that “oh my God, my heart is really hurting”.
Many patients that have onset of angina might even feel they have a heart attack but it is not really a heart attack. The heart muscle in itself is not getting enough oxygen but it's not that the heart muscle cells are dying. It just that they're saying, “hey, I'm not getting enough oxygen” and therefore it's painful. So we put in this Reducer device to actually provide more oxygenated blood to the smaller blood vessels in the myocardium. That's basically what it does. It doesn't help at all the big coronary arteries that are on top of the heart that is being treated by stents and if they're really bad, they they're being bypassed in the bypass surgery but many of these patients have done that still have angina after those procedures and that's because the small little micro vessels inside the heart muscle itself are also starting to clog up and therefore there isn't enough oxygen blood that gets to the muscle. That's basically what we treat with the device and we regulate it and we get more oxygen into the blood, to the areas of the heart muscle that really need it and that's how we reduce those symptoms. So those are the two products that we have.
SH: Fred, you’ve said that investors have not seen the company’s full potential. How so?
Fred Colen: Well, so like anything in life, good things take a while to get to majority and in particular with medical devices it is a somewhat lengthy journey. It takes a lot of work to not only figure out the science and the technology and to develop a product but then you have to do all kinds of clinical trials. You have to really convince the regulators. It's an extremely lengthy process and for novel technologies as this what we are talking about here, it can easily take 10 years and more to go through this entire journey of this ever-increasing regulatory landscape of getting approval. I'm talking about regulators like the FDA or similar agencies around the world and by the way, it's region by region. If you get an approval in one country or one region doesn't mean you get approval for other, but you have to do it over and over again in all these different countries.
So it takes a long, long time. Now the good news is that we have been at it already for quite some time. So we don't need another 10 plus years. We need another few years to get to a really transformational event like potentially an FDA approval in the United States. That is, we think about something like three years or so away from where we are today, which really, I think is going to be a transformational event. In Europe, we are already approved. We have CE mark will be on the early stage of growing that business and in Europe it's a different game. It's mostly about reimbursement. So we have the regulatory approval but now do you actually get paid by the health insurance companies by the governments and the US will be CMS, the Medicare foundation.
So do we actually get the reimbursement in place for this device and get paid for what you're offering? That's mostly what we face in Europe, it's on a country-by-country basis. So it's different and separate process for the UK and France and for Germany and Italy on a country-by-country basis and we go through the reimbursement to get this device accepted for payment and we are on that journey. That is an ongoing thing and we actually believe we're going to have some major milestones in the next several months up to the next year or two to continue to actually get more and more reimbursements in place in European countries, which will also enable growth and all of that will lead to more revenue, more growth and obviously better bottom-line financial numbers and therefore value creation for the products and the company and the shareholders.
SH: In September, the company received approval from the U-S F-D-A for the investigational device exemption regarding your aforementioned Cosira-II IDE clinical trial. Can you expand on this initiative for investors?
Fred Colen: Yeah, first of all, let me just give a short intro and then I'll let Bill talk about some of the more important than an interesting details. So, first of all in my mind, this is what I would like to call a transformational groundbreaking clinical trial. It is a very novel trial in interventional cardiology. Intervention Cardiology is defined as the area of cardiology where they basically treat clogged up blood vessels. The physicians there, they do a lot of the things. When we talk to these physicians about this trial they go like, wow, this is a very interesting study. It's not just another standard study. It is really foundational and a whole different way of thinking about how we can treat these patients for angina. It’s really in that sense, groundbreaking.
The other part of it that's groundbreaking is it's a double blind sham control trial, meaning that half the patients will actually go through the procedures but will not get the device and the other half will get the device and so we have a very straight and direct comparison and outcome six months later about do the devices really help the patients or not and it's not a psychological effect like, oh, I have less pain must be the device because the patient doesn't really know if they got the device or not. So in that sense it is also a very unique on the profile. So Bill, you may want to add on to some of the things that I just mentioned.
Bill Little: Yeah. Thanks Fred and I think getting back to what's unique about it. I want to spend just a little bit of time talking about the device itself and why we think it offers so much promise. Typically when patients have chest pain, they may go in and get to stenting procedure where they may have bypass surgery. Those are the most common first lines of treatment after a patient has failed taking various types of medical therapy or drugs. So we'll try drugs to see if that helps alleviate the chest pain. If that doesn't work, typically patients, depending on the extent of their disease would go in and they would either get stent or of bypass. Unfortunately for somewhere between 20% and say, 40% of these patients, even after they've tried drugs or after they've tried stent or after they tried bypass surgery, they still have chest pain.
Those patients have refractory angina. That's what we're treating with this device and we're doing it differently than a stent or a bypass. What a stent or a bypass does is basically go in and take a clog artery and open it up or build a new artery around it. If you open it up and prop it open, that's a stenting procedure. If you build a little vessel around the blockage, that's called the bypass and simply that's how those are done. What we're doing is different. There are three big arteries that put blood into the heart and that blood delivers the oxygen, which allows the heart to beat and function properly. If the heart's not getting enough oxygen, that's when patients have chest pain, that's that angina chest pain that we hear so much about and we know that it's so common after patients have stent or after they have bypass that they still have angina.
What we do is different. There are three arteries that go in, well, all of them drain out to a single vein called the coronary sinus. We go into that coronary sinus vein and we create a reduction in the diameter. When we reduce that diameter, it's like putting your thumb over a garden hose and that garden hose swells up well, in this case, that garden hose cause all of the micro vessels between the big arteries that are bringing the blood into the heart and the big vein that's draining it out. So we're essentially filling that part muscle up with oxygenated blood and when you do that, patient's symptoms get a lot better. So I think it's important to understand what we're doing with this trial and why it's so unique and in the COSIRA-II trial, we're going to be testing whether or not patients that get the device can actually exercise more after they get the device compared to patients that don't get the device. So we're going to see potentially an objective improvement in how these patients feel and how much exercise capacity they have. That's what's so unique about this trial.
SH: For company shareholders and potential investors, what kind of future development and progress can we expect with any or all of your ongoing clinical trials?
Fred Colen: So I would say obviously we're talking here primarily about the COSIRA-II clinical trial, that is the most important one and the biggest one we have. The other one that we still have on the Reducer side is the Reducer-I study in Europe, which is a registry study that basically follows patients that got the commercial device. We're up to about 300 enrolled patients in that and that's why all has up to 400 patients in it. So we're getting close to filling that trial up but the key study here is the COSIRA-II clinical trial. I expect that to be quite a few positive steps along the way first of all, the initiation of it. So when will we have our first patient enrolled in this study, when will these oppose patients actually be able to get into the study and then actually get treated? I am sure that over time we'll have more news also around, how many did we enroll? How fast do we get to our number of about 380 patients that we want to enroll in this study? We have FDA's approval to do this and up to 50 clinical sites in the US, most in the US and some in Canada as well. So I'm sure there will be news about the clinical sites that we have engaged and I think there's also another important aspect here, which is something we're still working very hard on and we still don't have the final answer to but is it potentially possible to even get reimbursed for the device is being used in this trial, that is something we're working on as well.
I think we will have some news about that in the next, let's call it a quarter or two as well. So I think there's going to be a stream of important news updates as it relates to how we go along in this clinical trial and then obviously after we have enrolled these patients, there will be an analysis of the data. There will be information about how does it all look, and then when we filed to the FDA and then the FDA goes through, they have a review process. So it's going to be an exciting journey to go through this trial and to see it come together over time and hopefully to a positive outcome and so Bill did I jump over something here, or is that pretty much the picture?
Bill Little: Yeah, I think that's it related to the trial and I think Dave is maybe interested in what the upcoming milestones are as well for the company. I pre-empt that a little bit. I think that's part of it as well and I think a key issue there is looking at expanding our presence internationally. So I think the other big sets of milestones that I will be looking for Dave, particularly if I was an investor is expanding our markets. As Fred mentioned earlier the importance of reimbursement around the world and to give investors some perspective, really Germany has the largest market in Europe. The next two are the United Kingdom and France and as we've told investors in the past, we have really good reimbursement in Germany. It tends to be our largest market and it tends to be a good bellwether for the uptake of our product.
Recently last quarter, we announced that we had gotten dedicated reimbursement in the United Kingdom which we haven't really seen the impact of that yet. That's when our trading positions starting to ramp up in the United Kingdom and I think that's another important area that I will be looking for as an investors. How's the uptake going in the United Kingdom and what's happening since you've gotten that really positive reimbursement. There are other markets like France for example, where we are working to get reimbursement and we're hopeful that we may be able to make some progress there and as Fred finally said if we're able to get reimbursement during the trial in the United States, that would also be a major milestone and something that I think would be particularly important for investors and so that's really what we're focused on and we've got work to do but I will say we're making good progress now.
SH: What separates Neovasc from the competition and makes your business model unique?
Fred Colen: Well first of all, we are a small startup company that in itself is I believe actually reinvigorating. We have a small but very enthusiastic team. When you look at the history of Neovasc, we went through some tumultuous times yet for the most part, we have held our team together. We have a dedicated group of very hardworking individuals that really believe in the future of the products and the company and so we have a very efficient organization. One that works very closely together even in the COVID days. I mean the virtual technology and meetings really help a lot. I mean we have a good portion in enrichment and close to Vancouver in Canada. We have a sizable team in the twin cities, Minneapolis, St. Paul and Minnesota where essentially all of our clinical regulatory work is being done as well as some R&D function as well and then we have management and sales and marketing efforts around the globe with quite a nice team in Europe as well. So we really have a global company but it's all in the hands of essentially a small organization and even with the virtual meetings it really works. We can still connect and be very efficient and very effective at what we do.
Now in the meantime we live in a world that's highly regulated and so we go through regular audits, financial audits, people will understand that quite easily but we also have a lot of quality regulatory audits that we go through regularly and we've really put a lot of effort and work into our, what we call quality system to really be well under control as it relates to what we do and how we deal with all business and all products. So that is an ongoing effort that we always have going and I'm very pleased where we have gotten to be over time with our performance on the quality compliance side. It's really phenomenal. So we have two promising products that are on a journey to get over the different hurdles that are out there. We have a very enthusiastic, small, very effective team to pull it all together and to keep going. So I think that makes Neovasc unique.
SH: I have to mention your stock has been on a bit of a roller coaster ride over the past 12 months. What can you tell our investor audience regarding the current valuation of your stock and why you think it’s a good buy right now?
Fred Colen: Yeah, so it is interesting because the stock price, it's all relative. I talk about this a lot in my life. It's like, nothing is absolute, everything is relative. So that's true for the stock price as well. It all depends on what you compare and how you compare it. So as I said before, I joined in 2018 and we unfortunately had to go through a slide down in our stock price and dramatic slide down because of issues in 2017, which by the way, we have completely behind us. Now we have a clean balance sheet. We have no toxic financing anymore. That was a struggle we had in 2016 and 2017 that we've now put behind us in terms of relativity that matters to me because I went through all those days and all those struggles.
So yes, the stock price is low in my mind, but number one, it has essentially stabilized at and so in the phase of all these sayings, I think that's a positive, it has stabilized but it has stabilized at a very low number. I actually believe that the company is very undervalued. When you look at compared the stock price to the valuation, we are actually being valued at less than the cash that we have in our hands or in our bank account. So that essentially tells us there's really not a lot of value being given to the products that we have, yet. One of the two products already is generating revenue and is growing in revenue in Europe and on top of it, we are entering just then a very interesting big US clinical trial. In a number of years, we hope there to be a very positive development. So I think if you would compare that to other med tech companies, our space that are early commercialization, I think you will find that the stock price is indeed undervalued. So I say, it has essentially stabilized at what I call it a low level. I think this is a good time to invest that that would be my personal opinion about that.
SH: And finally, gentlemen, if there’s anything I’ve overlooked please feel free to elaborate.
Bill Little: Yeah. So I would just like to say, thanks for the opportunity to just tell our story, Dave. It's been great to be able to speak with you and to our investors and I can say personally, I've never been more enthusiastic than I am right now with where we are heading into this this really important clinical trial for the Reducer in the United States. It's rewarding. I'm talking to these customers every day and I can tell you the enthusiasm is there and we're absolutely looking forward to enrolling these patients and bringing the technologies to patients around the world, including the United States. Thank you.
Fred Colen: Dave, from my side, I would just say I'm very optimistic. I'm excited about where Neovasc and the journey we're on and the team that I'm lucky to lead is very excited about our future. So we just keep at it and we just keep working at it and continue to make progress. I'm certain that these things will come to fruition. It's a matter of time. So I really appreciate the opportunity to talk to you today. It has been a great pleasure for us.
For regular updates, visit
www.neovasc.com.
FULL DISCLOSURE: This is a paid article p