Neovasc (NVCN) has implemented a series of strategic initiatives focused on enhancing current shareholder value
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via NewMediaWire -- Neovasc Inc. (“Neovasc” or the “Company”) (NASDAQ, TSX: NVCN) today announced that the Company has implemented a series of strategic initiatives focused on enhancing current shareholder value, minimizing dilution, extending its cash runway well into 2024, focusing investments on near term value drivers, and more deeply reviewing the Company’s core business activities.
The Company is focused on expanding reimbursement and increasing revenues in international markets for the Neovasc Reducer™ (“Reducer”). In addition to our direct sales force in Germany, the Company operates through a series of distributors in most of the major European countries including, among others, the U.K., Italy, Spain, Austria and Switzerland. The company intends to hire a direct sales force in France if it is able to gain adequate reimbursement for Reducer in the future.
As previously announced, the Company has had productive sprint discussions with the U.S. Food and Drug Administration (“FDA”) as it prepares to initiate COSIRA II, the pivotal U.S. trial for Reducer. In our sprint discussion on May 26, 2021, the FDA was generally pleased with the proposed changes to the study, as well as with the two proposed imaging sub-studies, although reserved final judgement pending a more detailed review of our complete submission. The Company is in the final stages of developing the protocols and considering important decisions regarding awarding contracts to key outside suppliers. An Investigational Device Exemption (“IDE”) supplement will subsequently be filed with FDA, likely during the summer months and the Company continues to work towards a first patient enrollment near the end of 2021. The study will be an approximately 380-patient, randomized, double-blind, multicenter (US and Canada), sham-controlled trial, designed to test whether Reducer therapy improves exercise tolerance testing time, along with other secondary endpoints, in patients suffering from refractory angina despite medical treatment. The principal investigators of the trial are Gregg Stone, M.D., Icahn School of Medicine at Mount Sinai, New York, and Timothy Henry, M.D., The Carl and Edyth Lindner Center for Research and Education, Christ Hospital, Cincinnati.
The Company has also had productive discussions with its notified body in Europe as it pursues CE Mark approval for the Tiara TA transcatheter mitral valve replacement system. As previously announced, the Company is working towards meeting the requirements of the European Medical Device Regulation (“MDR”) for approval of Tiara TA. Given the additional laboratory testing required to reach a regulatory decision on Tiara TA and the new European regulations, the Company now expects to receive a decision during the second half of 2022. The Company remains pleased with the clinical outcomes of the Tiara TA device and looks forward to future dissemination of the results of the Tiara TA clinical trial program at scientific meetings. The Tiara TA program has potential to be the second mitral valve replacement device approved in Europe, and with the right distribution partner, we believe it could be a competitive device in the European market, if approved. With good clinical performance data, progress towards reducing the development risk and, in our view, an underserved market, we have decided to continue our efforts on the Tiara TA regulatory path towards a potential CE mark, assuming a reasonable transition to MDR for all review work already completed and no further enrollment of patients required in the Tiara II clinical study.
Additionally, the Company has made the difficult decision to pause all activities related to the Tiara TF transfemoral mitral valve replacement program. Given the additional time and substantial investment required to develop the Tiara TF program to approval and the related research and development, clinical, regulatory and manufacturing costs, the Company believes focusing its efforts on core Reducer and Tiara TA activities is warranted. This comes despite the fact that we continue to believe we have developed a promising new Tiara TF platform concept with a next generation Tiara mitral valve, which might also be utilized in a future TA platform. The Company also believes that the opportunities for partnering the Tiara TF program have been pushed out further in the development cycle. While in the past, mitral valve replacement programs have been acquired after small, early feasibility studies, a series of high-profile failures and overall delays in the mitral valve replacement sector have highlighted the technical and clinical trial enrollment challenges for competitive programs. Today, potential acquirers are more cautious and they are expecting programs to be approved or near approval before showing potential interest in acquiring a new mitral valve technology. Given this change in environment, the limited cash on hand, the overall market capitalization of the Company, and the substantial time and cost of taking the Tiara TF program to approval, the Company believes that pausing the Tiara TF program is the correct course of action.
“Our business is at an important inflection point as we expand our commercial activities with Reducer and initiate the COSIRA II U.S. IDE study,” commented Fred Colen, President and Chief Executive Officer of Neovasc. “As we have evaluated the market potential for Reducer and Tiara, it has become increasingly clear that Reducer and Tiara TA represent the best near-term opportunities for value creation for Neovasc. Pausing a program is never easy, however making these difficult decisions will enable Neovasc to focus our efforts on nearer term core opportunities and prioritize our deployment of capital to reflect the strategic shift.”
Staff and program expense reductions
These strategic actions will result in the Company reducing the size of its workforce through targeted headcount reductions and related project expenses. The Company will reduce its headcount by over 40% and pause all activity on the Tiara TF program. As a result of the changes, the Company now expects to book estimated total pre-tax GAAP charges of approximately $700,000 due to fixed asset write-offs and certain other exit charges. The vast majority of these charges will be recorded during the second quarter of 2021. The decision is expected to be accretive to earnings, saving over $20 million in expenses over the next two and a half years, even before we were to initiate an expensive and lengthy Tiara TF FDA Pre-Market Approval clinical study. We believe the changes will extend our cash runway from approximately 18 months to well over three years.
All figures reported above with respect to the second quarter of 2021 are estimates and are unaudited and subject to change and adjustment as the Company prepares its consolidated financial statements for the second quarter 2021. Accordingly, investors are cautioned not to place undue reliance on the foregoing information. The financial estimates provided in this news release constitute "forward-looking information" and "forward-looking statements" within the meaning of applicable Canadian and U.S. securities laws, are based on several assumptions and are subject to a number of risks and uncertainties. Actual results may differ materially. See "Forward-looking Statement Disclaimer".
Our aim is to curtail our expenses and limit further dilution of the Company’s share capital. Our issued and outstanding share count is approximately 67.5 million and our fully diluted share count is approximately 111.9 million shares. Included within the fully diluted share count are approximately 32.3 million warrants, which if exercised, would generate useful cash for the Company, but this has not been considered in our strategic analysis.
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