Itamar Medical Ltd. (Nasdaq and TASE: ITMR), a leading medical device and digital health company focused on the integration of sleep apnea management into the cardiac patient care pathway, today reported unaudited financial results for the third quarter of 2021.

“Third quarter results represent the strong traction our WatchPAT™ platform technology has gained entering the second half of 2021. Growth in the U.S. continues to outpace our overall growth on top of expanding adoption in the markets we serve throughout Europe and the rest of the world,” said Gilad Glick, President and Chief Executive Officer of Itamar Medical.

Third Quarter 2021 Highlights and Recent Achievements

  • Total revenues were $13.6 million, an increase of 23% year-over-year.
  • U.S. WatchPAT revenues were $11.3 million, an increase of 27% year-over-year.
  • Added 137 new WatchPAT ONE customers, including 115 new to Itamar Medical.
  • Non-IFRS gross margin was 73%, compared to 70% in the third quarter of 2020 and 73% in the second quarter of 2021. (See “Use of Non-IFRS Measures” below(.
  • Entered into a definitive agreement on September 13, 2021with ZOLL Medical Corporation, an Ashai Kasei Company (ZOLL), under which ZOLL will acquire all the outstanding ordinary shares of Itamar Medical. The agreement was approved by the Company shareholders on November 16, 2021 and closing is expected in December 2021.
  • IFRS Operating expenses include transaction costs incurred during the third quarter of $1.7 million relating to the acquisition of the Company by ZOLL.
  • On November 2, 2021, the Centers for Medicare & Medicaid Services (CMS) issued a final fee schedule under which Code 95800 reimbursement rate (average national) in 2022 will be $159.19, a decrease of 6.5% from the 2021 rate of $170.28, while the competitive Code 95806 will be decreased by 11.6% from $102.59 to $90.68.

Third Quarter 2021 Financial Results

Revenues for the third quarter of 2021 increased 23% to $13.6 million, compared to $11.0 million in the same quarter in 2020. Revenue growth was mainly driven by an increase in WatchPAT sales in the U.S. and Europe.

Worldwide WatchPAT revenues for the third quarter of 2021 increased 25% to $13.2 million, compared to $10.5 million in the same quarter in 2020.

U.S. WatchPAT revenues for the third quarter of 2021increased 27% to $11.3million, compared to $8.9million in the same quarter in 2020, driven mainly by WatchPAT ONE sales, as well as WatchPAT Direct sales. Sales from disposables and renewable products, including WatchPAT ONE, comprised approximately 75% of WatchPAT revenues in the U.S. for the third quarter of 2021, compared to 73% for the same quarter in 2020.

Gross profit for the third quarter of 2021 increased to $9.2 million, compared to $7.5 million in the same quarter in 2020. Gross margin was 68% in the third quarter of 2021 and 2020. Gross margin in the third quarter of 2021 was mainly impacted by a non-recurring write-off of inventories of $0.4 million in such quarter, resulting from the relocating the Company’s production facilities. Non-IFRS gross margin (see Reconciliation of IFRS to Non-IFRS Financial Measures below) increased to 73%, compared to 70% in the same quarter in 2020. The improvement in Non-IFRS gross margin is primarily attributable to a consistent decrease in WatchPAT ONE production costs and increased efficiency and cost reduction in the production process. (See “Use of Non-IFRS Measures” below(.

Operating loss for the third quarter of 2021 was $7.3 million, compared to $2.5 million in the same quarter in 2020. The increase in operating loss was primarily due to an increase in operating expenses, partially offset by the increase in revenues. Operating expense increase was mainly driven by the following:

  • Operating expenses include transaction costs of $1.7 million relating to the acquisition of the Company by ZOLL.
  • Selling and marketing expenses increased 22% to $7.6 million, compared to $6.2 million in the same quarter in 2020, due to the planned expansion of the U.S. sales team into new geographical territories and verticals (42 territories and verticals as of September 30, 2021, compared to 32 territories and verticals as of September 30, 2020), as well as additional sales commissions resulting from the increase in revenues and resuming travel.
  • Research and development expenses increased 153% to $3.5 million, compared to $1.4 million in the same quarter in 2020, driven by expenses of $1.0 million associated with research and development of the acquired Remote Patient Monitoring (RPM) technology assets from SPRY, including amortization of intangible assets of $0.4 million, increased personnel and consultants to support product development, mainly related to the Company’s digital health platform, and increased share-based payments.
  • General and administrative expenses increased 56% to $3.8 million, compared to $2.4 million in the same quarter in 2020, mainly driven by increased legal expenses, mainly attributed to the commercial dispute in defense of Itamar Medical’s intellectual property initiated by the Company, as well as an increase in payroll and related expenses due to increase in personnel and an increase in directors’ and officers’ insurance premium.

Non-IFRS operating loss for the third quarter of 2021 was $3.9 million, compared to $1.9 million in the same quarter in 2020. Non-IFRS operating loss excluded approximately $3.4 million in transaction costs relating to the acquisition of the Company by ZOLL; share-based payments; depreciation and amortization of property and equipment and intangible assets; change in provision for doubtful and bad debt; non-recurring expenses related to relocating our production facilities; and other non-recurring expenses, compared to $0.6 million of similar expenses for the same quarter in 2020 (see “Use of Non-IFRS Measures” below).

Net loss for the third quarter of 2021 was $8.0 million, compared to $2.8 million in the same quarter in 2020.

Non-IFRS net loss for the third quarter of 2021 was $4.6 million, compared to $2.1 million in the same quarter in 2020. Non-IFRS net loss excluded approximately $3.4 million in transaction costs relating to the acquisition of the Company by ZOLL; share-based payments; depreciation and amortization of property and equipment and intangible assets; change in provision for doubtful and bad debt; non-recurring expenses related to relocating our production facilities; and other non-recurring expenses, compared to $0.7 million of similar expenses and gains for the same quarter in 2020 (see “Use of Non-IFRS Measures” below).

As of September 30, 2021, the Company had cash, cash equivalents and a short-term bank deposit of $68.7 million.

Nine Month Ended September 30, 2021 Financial Results

Revenues for the nine months ended September 30, 2021 increased 35% to $38.1 million, compared to $28.3 million for the nine months ended September 30, 2020. Revenue growth was mainly driven by an increase in WatchPAT sales in the U.S., in Europe and in the rest of the world.

Worldwide WatchPAT revenues for the nine months ended September 30, 2021 increased 36% to $36.1 million, compared to $26.6 million for the nine months ended September 30, 2020.

U.S. WatchPAT revenues for the nine months ended September 30, 2021 increased 38% to $29.8 million, compared to $21.6 million for the nine months ended September 30, 2020, driven mainly by WatchPAT ONE sales, as well as WatchPAT Direct sales. Sales from disposables and renewable products, including WatchPAT ONE, comprised approximately 77% of WatchPAT revenues in the U.S. for the nine months ended September 30, 2021, compared to 75% for the nine months ended September 30, 2020.

Gross profit for the nine months ended September 30, 2021 increased to $26.2 million, compared to $19.9 million for the nine months ended September 30, 2020. Gross margin decreased to 69%, compared to 70% the nine months ended September 30, 2020. Gross margin decline was mainly driven by non-recurring expenses of $0.8 million related to relocating the Company’s production facilities and increased WatchPAT ONE sales, offset by improvement attributable to a consistent decrease in WatchPAT ONE production costs and increased efficiency and cost reduction in the production process. Non-IFRS gross margin (see Reconciliation of IFRS to Non-IFRS Financial Measures below) was 72% in the nine-month periods ended September 30, 2021 and 2020.

Operating loss for the nine months ended September 30, 2021 was $17.2 million, compared to $7.7 million for the nine months ended September 30, 2020. The increase in operating loss was primarily due to an increase in operating expenses, partially offset by the increase in revenues. Operating expense increase was mainly driven by the following:

  • Operating expenses include total of $2.8 million comprised of: (i) transaction costs of $1.7 million relating to the acquisition of the Company by ZOLL; and (ii) $1.1 million (recorded in the first quarter of 2021) related to non-recurring share-based payments resulting from the extended exercise period of vested service options from five to ten years.
  • Selling and marketing expenses increased 28% to $22.4 million, compared to $17.4 million in the same period in 2020, due to the planned expansion of the U.S. sales team into new geographical territories and verticals, as well as additional sales commissions resulting from the increase in revenues, resuming travel, increased consulting fees relating to reimbursement in the U.S., Australia, China and Japan, and increased share-based payments, as mentioned above.
  • Research and development expenses increased 140% to $9.8 million, compared to $4.1 million in the same period in 2020, driven by expenses of $2.9 million associated with research and development of the acquired RPM technology assets from SPRY, including amortization of intangible assets of $1.1 million, increased personnel and consultants to support product development, mainly related to the Company’s digital health platform, and increased share-based payments, as mentioned above.
  • General and administrative expenses increased 57% to $9.5 million, compared to $6.1 million in the same period in 2020, mainly driven by an increase in legal expenses, mainly attributed to the commercial dispute in defense of Itamar Medical’s intellectual property initiated by the Company as well as increased payroll and related expenses due to increase in personnel, increase in directors’ and officers’ insurance premium, and increased share-based payments, as mentioned above.

Non-IFRS operating loss for the nine months ended September 30, 2021 was $9.8 million, compared to $5.7 million for the nine months ended September 30, 2020. Non-IFRS operating loss excluded approximately $7.4 million in transaction costs relating to the acquisition of the Company by ZOLL; share-based payments; depreciation and amortization of property and equipment and intangible asset; change in provision for doubtful and bad debt; non-recurring expenses related to relocating our production facilities; and other non-recurring expenses, compared to $2.0 million of similar expenses for the nine months ended September 30, 2020 (see “Use of Non-IFRS Measures” below).

Net loss for the nine months ended September 30, 2021 was $18.3 million, compared to $8.0 million for the nine months ended September 30, 2020.

Non-IFRS net loss for the for the nine months ended September 30, 2021 was $10.8 million, compared to $6.0 million for the nine months ended September 30, 2020. Non-IFRS net loss excluded approximately $7.4 million in transaction costs relating to the acquisition of the Company by ZOLL; share-based payments; depreciation and amortization of property and equipment and intangible assets; change in provision for doubtful and bad debt; non-recurring expenses related to relocating our production facilities; and other non-recurring expenses, compared to $2.0 million of similar expenses and gains for the nine months ended September 30, 2020 (see “Use of Non-IFRS Measures” below).

ZOLL Medical Corporation Transaction Update

On September 13, 2021, Itamar Medical announced that it had entered into a definitive agreement with ZOLL Medical Corporation,an Ashai Kasei Company (ZOLL), pursuant to which ZOLL will acquire all outstanding ordinary shares of Itamar Medical for $1.0333333 per ordinary share, or $31.00 per American Depository Share of the Company. On November 16, 2021, Itamar Medical’s shareholders voted to approve the transaction at a shareholders meeting. Based on this information, Itamar Medical believes the acquisition remains on track to close in December 2021, subject to the satisfaction of customary closing conditions.

In light of this transaction, Itamar Medical will not host a conference call to review third quarter 2021 financial results.

Use of Non-IFRS Measures

In addition to disclosing financial results prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB), this press release contains Non-IFRS financial measures for operating loss and net loss, which are adjusted from results based on IFRS to exclude: (i) transaction costs relating to the acquisition of the Company by ZOLL; (ii) share-based payments; (iii) depreciation and amortization of property and equipment and intangible assets; (iv) change in provision for doubtful and bad debt; (v) non-recurring expenses related to relocating our production facilities; and (vi) other non-recurring expenses. Management believes that the Non-IFRS financial measures provided in this press release are useful to investors’ understanding and assessment of the Company’s performance. Management uses both IFRS and Non-IFRS measures when operating and evaluating the Company’s business internally and therefore decided to make these Non-IFRS adjustments available to investors. The presentation of this Non-IFRS financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with IFRS. For further details, see a reconciliation of operating loss and net loss on an IFRS basis to a Non-IFRS basis that is provided in the table that accompanies this press release.

About Itamar Medical Ltd.

Itamar Medical is a medical technology company focused on the development and commercialization of non-invasive medical devices and solutions to aid in the diagnosis of respiratory sleep disorders. Itamar Medical commercializes a digital healthcare platform to facilitate the continuum of care for effective sleep apnea management with a focus on the core sleep, cardiology and direct to consumer markets. Itamar Medical offers a Total Sleep Solution to help physicians provide comprehensive sleep apnea management in a variety of clinical environments to optimize patient care and reduce healthcare system costs. The Company’s key product, WatchPAT, is commercially available within major markets including the U.S., Japan and Europe. Itamar Medical is a public company traded on the Nasdaq and on the Tel Aviv Stock Exchanges, and is based in Caesarea, Israel with U.S. headquarters based in Atlanta, GA. For additional information visit www.itamar-medical.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and other applicable securities laws. Statements preceded by, followed by, or that otherwise include the words "believes", "expects", "anticipates", "intends", "estimates", "plans", and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. For example, when we discuss the closing of the ZOLL Medical Corporation acquisition of Itamar, we are using forward-looking statements. Because such statements deal with future events, they are subject to various risks, uncertainties and assumptions, including events and circumstances out of Itamar Medical's control and actual results, expressed or implied by such forward-looking statements, could differ materially from Itamar Medical's current expectations. Factors that could cause or contribute to such differences include, but are not limited to, risks, uncertainties and assumptions discussed from time to time by Itamar Medical in reports filed with, or furnished to, the U.S. Securities and Exchange Commission (SEC) and the Israel Securities Authority (ISA), including the Company’s Annual Report on Form 20-F, which is on file with the SEC (accessible at www.sec.gov) and the ISA. Except as otherwise required by law, Itamar Medical undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Itamar Medical Investor Relations Contact (U.S.)Leigh SalvoGilmartin GroupPhone: +1-415-937-5412investors@itamar-medical.com 

* The contents of any website or hyperlinks mentioned in this press release are for informational purposes and the contents thereof are not part of this press release.

 
ITAMAR MEDICAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)  
     
  September 30,   December 31,
   2021    2020
               
               
  U.S. dollars in thousands
Assets              
Current assets              
Cash and cash equivalents $ 10,654     $ 9,670  
Short-term bank deposits   58,000       30,000  
Trade receivables   11,042       8,354  
Other receivables   2,756       2,251  
Inventories   7,379       7,164  
Total current assets   89,831       57,439  
               
Non-current assets              
Long-term restricted deposits and prepaid expenses   508       547  
Long-term trade receivables   162       412  
Property and equipment   3,425       2,904  
Intangible assets   2,980       1,037  
Right-of-use assets   5,432       1,801  
Total non-current assets   12,507       6,701  
Total assets $ 102,338     $ 64,140  
               
Liabilities              
Current liabilities              
Short-term bank loan $ 5,000     $ 5,000  
Current maturities of long-term loan   135       135  
Current maturities of lease liabilities   682       700  
Trade payables   5,410       4,418  
Other payables   6,026       5,973  
Accrued expenses   3,529       1,091  
Provisions   352       321  
Short-term employee benefits   650       354  
Total current liabilities   21,784       17,992  
               
Non-current liabilities              
Long-term loan   53       154  
Long-term lease liabilities   4,978       1,380  
Recognized liability for defined benefit plan, net   269       271  
Other long-term liabilities   1,326       1,271  
Total non-current liabilities   6,626       3,076  
Total liabilities   28,410       21,068  
               
Equity              
Ordinary share capital   1,342       1,140  
Additional paid-in capital   207,170       161,006  
Accumulated deficit   (134,584 )     (119,074 )
Total equity   73,928       43,072  
Total liabilities and equity $ 102,338     $ 64,140  
               

 

ITAMAR MEDICAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
         
  Three Months Ended     Nine Months Ended
  September 30,     September 30,
    2021       2020       2021       2020  
                               
                               
                               
  U.S. dollars in thousands (except per share and ADS data)
                               
Revenues $ 13,566     $ 10,999     $ 38,103     $ 28,262  
Cost of revenues   4,357       3,471       11,943       8,390  
Gross profit   9,209       7,528       26,160       19,872  
Operating expenses:                              
Selling and marketing expenses   7,611       6,240       22,406       17,446  
Research and development expenses   3,498       1,385       9,758       4,064  
General and administrative expenses   3,763       2,417       9,522       6,051  
Transaction costs relating to the acquisition of the Company by ZOLL   1,672       -       1,672       -  
Total operating expenses   16,544       10,042       43,358       27,561  
Operating loss   (7,335 )     (2,514 )     (17,198 )     (7,689 )
Financial income (expenses):                              
Financial income   180       143       437       530  
Financial expenses   (376 )     (293 )     (953 )     (693 )
Financial expenses, net   (196 )     (150 )     (516 )     (163 )
Loss before taxes on income   (7,531 )     (2,664 )     (17,714 )     (7,852 )
Taxes on income   (452 )     (95 )     (538 )     (147 )
Net loss $ (7,983 )   $ (2,759 )   $ (18,252 )   $ (7,999 )
                               
Loss per share – basic and diluted (in U.S. dollars) $ (0.02 )   $ (0.01 )   $ (0.04 )   $ (0.02 )
                               
Weighted average number of shares used in computation of loss per shares – basic and diluted (in thousands)   492,330       424,010       482,752       412,480  
                               
Loss per ADS – basic and diluted (in U.S. dollars) $ (0.49 )   $ (0.20 )   $ (1.13 )   $ (0.58 )
                               
Weighted average number of ADSs used in computation of loss per ADS – basic and diluted (in thousands)   16,411       14,134       16,092       13,749  
                               
ITAMAR MEDICAL LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
           
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2021    2020    2021   2020
                                 
                                 
  U.S. dollars in thousands
Cash flows from operating activities                             
Net loss $ (7,983 )   $ (2,759 )   $ (18,252 )   $ (7,999 )
Adjustments for:                             
Depreciation and amortization   875       456       2,554       1,345  
Share-based payment   571       372       2,744       1,043  
Change in provision for doubtful and bad debt   48       48       278       206  
Net financial cost (income)   (128 )     (18 )     71       (217 )
Increase in trade receivables   (1,923 )     (867 )     (2,717 )     (411 )
Decrease (increase) in other receivables   (160 )     63       (552 )     (541 )
Decrease (increase) in inventories   98       (1,958 )     (514 )     (3,773 )
Increase in trade payables   1,890       782       992       1,362  
Increase in other payables   2,731       754       1,418       328  
Increase in provisions   3       65       31       310  
Increase (decrease) in employee benefits   (89 )     49       294       110  
Income tax expenses   452       95       538       147  
Taxes paid during the period   -       (19 )     (16 )     (49 )
Interest paid during the period   (28 )     (99 )     (296 )     (349 )
Interest received during the period   45       129       159       432  
Net cash used in operating activities   (3,598 )     (2,907 )     (13,268 )     (8,056 )
Cash flows from investing activities                                
Redemption of (investment in) short-term bank deposits, net   1,000       (8,500 )     (28,000 )     (16,000 )
Redemption of (investment in) restricted long-term deposits   86       -       86       (50 )
Purchase of property and equipment, intangible assets and capitalization of development expenditure   (708 )     (895 )     (3,534 )     (1,604
Net cash provided by (used in) investing activities   378       (9,395 )     (31,448 )     (17,654 )
Cash flows from financing activities        
Proceeds from issuance of shares, net of share issuance costs (share issuance costs)   -       (38 )     46,181       36,147  
Repayment of principal of lease liabilities   (149 )     (220 )     (645 )     (665 )
Repayment of long-term loan   (33 )     -       (99 )     -  
Issuance of shares due to the exercise of stock options   37       51       184       132  
Net cash provided by (used in) financing activities   (145 )     (207 )     45,621       35,614  
Increase (decrease) in cash and cash equivalents   (3,365 )     (12,509 )     905       9,904  
Cash and cash equivalents at beginning of period   13,968       37,666       9,670       15,115  
Effect of exchange rate fluctuations on balances of cash and cash equivalents   51       (4 )     79       134  
Cash and cash equivalents at end of period $ 10,654     $ 25,153     $ 10,654     $ 25,153  
Non-cash investing activity - acquisition of intangible assets $ -     $ -     $ 551     $ -  
           

 

ITAMAR MEDICAL LTD.
RECONCILIATIONS OF IFRS TO NON-IFRS FINANCIAL MEASURES
(Unaudited)
 
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
    2021       2020       2021       2020  
                               
                               
   
  U.S. dollars in thousands (except per ADS data)
                               
IFRS operating loss $ (7,335 )   $ (2,514 )   $ (17,198 )   $ (7,689 )
IFRS net loss $ (7,983 )   $ (2,759 )   $ (18,252 )   $ (7,999 )
Cost of revenues:                              
Share-based payment   27       10       87       17  
Depreciation and amortization of property and equipment and intangible assets   266       152       604       416  
Non-recurring expenses related to relocating the Company’s production facilities*   374       -       750       -  
Other non-recurring expenses   -       -       -       27  
    667       162       1,441       460  
Operating expenses:                              
Selling and marketing:                              
Share-based payment   202       142       1,041       341  
Depreciation and amortization of property and equipment and intangible assets   31       34       99       102  
Other non-recurring expenses   -       -       -       63  
    233       176       1,140       506  
Research and development:                              
Share-based payment   197       70       759       212  
Depreciation and amortization of property and equipment and intangible assets   430       29       1,153       79  
Other non-recurring expenses   -       -       65       18  
    627       99       1,977       309  
General and administrative:                              
Share-based payment   145       144       857       454  
Depreciation and amortization of property and equipment and intangible assets   21       19       64       53  
Change in provision for doubtful and bad debt   48       48       278       206  
Other non-recurring expenses   -       -       -       9  
    214       211       1,199       722  
Transaction costs relating to the acquisition of the Company by ZOLL   1,672       -       1,672       -  
                               
Financial income (expenses), net:                              
Share-based payment   -       6       -       19  
    -       6       -       19  
Non-IFRS operating loss $ (3,922 )   $ (1,866 )   $ (9,769 )   $ (5,692 )
Non-IFRS net loss $ (4,570 )   $ (2,105 )   $ (10,823 )   $ (5,983 )
                               
* Including write-off of inventories resulting from the relocating the Company’s production facilities $ 374     $ -     $ 374     $ -  
                               
IFRS loss per ADS – basic and diluted (in U.S. dollars) $ (0.49 )   $ (0.20 )   $ (1.13 )   $ (0.58 )
Non-IFRS loss per ADS – basic and diluted (in U.S. dollars) $ (0.28 )   $ (0.15 )   $ (0.67 )   $ (0.44 )
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