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TriSalus Life Sciences, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning. And welcome to TriSalus Life Sciences Fourth Quarter and Full Year 2023 Earnings Conference Call. Currently, all participants are on a listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to your host, Jim Young, Senior Vice President, Investor Relations and Treasurer at TriSalus for a few introductory comments.

Jim Young: Thank you all for participating in today’s call. Joining me today from TriSalus Life Sciences are Mary Szela, President and Chief Executive Officer; Sean Murphy, Chief Financial Officer; and Dr. Steven Katz, Chief Medical Officer. Earlier this morning, TriSalus released unaudited financial results for the fourth quarter and full year ended December 31, 2023. A copy of the press release is available on TriSalus’ website. Before we begin, I would like to remind you that management will make statements during this call that includes forward-looking statements within the meaning of federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Reform Act of 1995. Any statements contained in this call, other than the statements of historical fact, are forward-looking statements.

All forward-looking statements, including without limitation, statements related to our sales and operating trends, business and hiring prospects, financial and revenue expectations, the timing of the filing of our annual report on Form 10-K and future product development and approvals are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties, including the impact of macroeconomic conditions and global events that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our Form 10-Q on file with the SEC and available on EDGAR and in our other reports filed periodically with the SEC.

TriSalus disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, April 1, 2024. As noted in our press release, TriSalus has filed or will soon file a Form 12b-25 Notification of Late Filing with the SEC related to the company’s annual report on Form 10-K for 2023. This filing provides the company an extension of up to 15 days to file the company’s annual report. If the company files its annual report within such a 15-day period, the annual report will be deemed to have been filed timely, as if we had filed on the due date prescribed by the SEC.

The company filed Form 12b-25 primarily due to the calculation of non-cash stock compensation expense caused by data errors associated with a transition to a new service provider in 2023. As a result, the operating results provided on the call today are unaudited and subject to potential adjustments. And with that, I’ll turn the call over to Mary.

Mary Szela: Good morning and thank you for joining today’s call. I’m pleased to reflect on the significant milestone achieved by TriSalus in 2023, marking a pivotal year in our company’s journey. We’ve made substantial progress in advancing our disruptive drug delivery technology, PEDD, aimed at enhancing therapeutic outcomes for liver and pancreatic tumors. Furthermore, I’m also excited to highlight our strides in integrating our technology with our investigational immunotherapeutic nelitolimod, a Class C toll-like receptor non-agonist across various liver and pancreatic indications. Together, these advancements signify our commitment to advancing outcomes for patients suffering with liver and pancreatic tumors. This morning, I’d like to speak to you regarding our quarterly results, as well as the achievements in the past year, which have created a strong foundation for future growth.

In the midst of a challenging economic environment, our people delivered 77% growth in the fourth quarter and 49% operational growth for the year. We’re pleased to report that we delivered another high growth quarter, concluding a very strong year of topline revenue growth. TriSalus continues to execute the key components of our company building strategy, which include 50% topline revenue growth, advancing our pipeline, improving manufacturing and gross margin, securing permanent reimbursement, continuing to manage costs while investing wisely, and finally, accessing the public markets. TriSalus executed on our key objectives, creating a strong foundation for future growth and pipeline advancement. First, let me begin with the accomplishments in the past year.

TriSalus achieved $18.5 million in net sales, 49% growth over 2022, earning TriSalus recognition as one of the fastest-growth MedTech technologies. TriSalus received a unique and permanent HCPCS code for TriNav from CMS, C9797, which has been assigned to (APC) 5194, Level 4 Endovascular Procedures. This code can be used without restriction for any embolization or occlusion procedure consistent with the TriNav instructions for use and is reimbursed in the hospital outpatient and ambulatory surgery settings. This allows for physicians to use TriNav broadly for both mapping and embolization procedures. We completed enrollment in Phase 1 clinical trials in uveal melanoma liver metastases, hepatocellular cancer and intrahepatic cholangiocarcinoma in leading academic oncology centers across the United States.

In these trials, PEDD devices are used to administer our investigational immunotherapy candidate, nelitolimod, through a regional intravascular approach for patients with liver and pancreatic tumors. Data from these trials will emerge in the second half of 2024, where we’ll determine which indication to progress. We initiated first-in-man Phase 1 clinical trial of our novel pancreatic infusion technology plus nelitolimod to demonstrate safety and efficacy. We conducted a large health, economic and outcome research study, 300 million patient data set, covering over 98% of U.S. patients, capturing real-world safety and clinical outcomes for TriNav in its launch phase 2020 through 2022, demonstrating that TriNav patients, despite a higher baseline disease burden and clinical complexity, showed overall clinical results that were comparable to patients with a lower disease burden.

We advanced our technology pipeline with 510k clearance for TriNav Large and TriGuide, and finally, substantially improved manufacturing yield improvements, resulting in gross margins approaching 90%. These results were made possible by the concerted efforts of TriSalus employees, united under the leadership of TriSalus management, with extensive experience in pioneering new markets, executing on strategic initiatives and managing complex environments. Now let me turn to the future growth of TriSalus. We believe TriSalus is poised for breakout growth in 2024 due to permanent reimbursement and robust clinical and real-world evidence data for TriNav. As mentioned earlier, TriSalus published a health, economic and outcome research study looking at real-world evidence capturing both safety and clinical complications data for TriNav as compared to conventional catheters over the 2020 to 2022-time period.

This study utilized a large 300 million patient data set, covering 98% of U.S. payers. These data, which compared key characteristics and clinical complication rates of 258 PEDD patients with those of 8,940 non-PEDD patients, provides valuable insights into the benefits of PEDD technology. This would otherwise take many years to accumulate through alternative approaches, for example, randomized controlled trials. Key findings include that TriNav patients, despite a higher baseline disease burden and clinical complexity as compared to non-TriNav patients, showed overall clinical results comparable to the patients with lower disease burden. The study also revealed the following. TriNav patients were more likely to have received prior systemic therapy and were much more likely to have received a prior embolization.

In TACE procedures, interventional radiologists could deliver significantly more chemotherapeutic to the tumor when using TriNav versus the amount delivered using standard catheters, a critical treatment goal for TACE procedures. In a matched cohort comparison, TriNav patients had fewer 30-day inpatient visits post-procedure than non-TriNav patients. TriNav HCC patients were more likely to have a post-procedure liver transplant in a matched cohort comparison. TriNav care patients with liver metastases had fewer clinical complications post-procedure versus non-TriNav patients in a matched cohort comparison. TriNav care patients with liver metastases had lower rates of post-procedure fatigue versus non-TriNav patients. Given that TriNav patients can achieve outcomes similar to patients with lower disease burden overall and given impressive trends towards better outcomes like the successful liver transplants and lower rates of clinical complications, we believe TriNav is well positioned to become standard-of-care for the complex patient who may benefit from liver embolization.

We believe that a significant majority of embolization patients are complex patients defined by one or more of the following. Previous embolization or systemic therapy, multinodal or bilobar lesions or significant tumor burden, large tumors greater than 8 centimeters, multiple comorbidities, hypovascular tumors or diffuse tumors throughout the liver. Given this evidence base, we are positioning TriNav to become standard-of-care for complex patients and are instructing our sales organization to focus interventional radiologist utilization of TriNav on these complex patients where TriNav has been shown to provide benefit versus the standard Microcatheter. We will be executing a multifaceted strategy including additional clinical evidence, educational initiatives, comprehensive reimbursement support, as well as the pursuit of guideline inclusion.

Another critical milestone for the company was the progress of nelitolimod in several Phase 1 clinical trials. Currently, we’re investigating nelitolimod as a therapeutic candidate to reactivate the immune system within the liver and pancreas, and to enable deeper and more durable responses to checkpoint inhibitors. We’re initially evaluating nelitolimod for the treatment of uveal melanoma with liver metastases, hepatocellular carcinoma, intrahepatic cholangiocarcinoma, and locally advanced pancreatic ductal adenocarcinoma. We believe delivering nelitolimod to our proprietary FDA cleared device using our PEDD technology creates a potential opportunity to change the paradigm of how liver and pancreatic cancer are treated. Our current pipeline represents a major market opportunity, particularly in locally advanced pancreatic cancer and intrahepatic cholangiocarcinoma, given the high unmet need in these indications.

A research facility with medical professionals surrounded by diagnostic equipment.

Phase 1 data for the PERIO-01 program was presented at a late-breaking oral session by our lead investigator from MD Anderson at the Society of Immunotherapy for Cancer meeting in November of 2023. Data presented included safety data on 56 uveal melanoma patients with liver metastases, of whom 65% had failed prior therapy. Grade 3 or greater treatment-related serious adverse event rate was 11% across all doses and cohorts. Pharmacokinetic data from the PERIO-01 trial indicate TriNav is able to achieve high drug levels in the liver and systemic exposure is limited with drugs undetectable by 4 hours in more than 95% of patients. Among patients with available data, ctDNA clearance was 59%, with 86% showing reduction in ctDNA. Disease control rate was 58% across all dose levels, and at the presumed optimal biologic dose of 2-milligram, there was a disease control rate of 81%, median progression-free survival of 11.7 months and a one-year overall survival of 86%.

The optimal biologic dose assessment was made based on PFS, OS and immune signals, including myeloid-derived suppressor cell elimination from liver metastases. There was also evidence of systemic immune activation as measured by serum cytokines and peripheral immune cell activation. Additionally, study data released in November 2023 for patients receiving nelitolimod via our novel pancreatic infusion device demonstrated immune signals consistent with what we reported for liver metastasized patients. We anticipate reporting the full Phase 1 experience in late 2024, and if the data is favorable, we plan to begin Phase 1b enrollment. We have completed Phase 1 enrollment in uveal melanoma, intrahepatic cholangiocarcinoma and hepatocellular cancer.

We plan to evaluate the data from our Phase 1 clinical studies and determine which indications will progress into further clinical studies. A chosen indication would be one in which we believe there is evidence of significant treatment effect to support a rapid regulatory pathway and strong commercial success. We anticipate that progression of nelitolimod would require additional equity financing. Additionally, we’ve made meaningful progress in our technology pipeline. This year, we received 510k clearance for a larger vessel size of TriNav, TriNav Large and its dedicated guide catheter, TriGuide. Currently, we’re in market evaluation for both devices and intend to launch the second half of 2024. The launch of TriNav provides a significant market expansion since the larger vessel size can access an incremental 25% of the embolization market.

Our commercial organization and manufacturing teams are fully prepared for the launch and we’ll also implement a multifaceted launch strategy to drive strong uptake. In summary, we’re a science-led company, which keeps the patient at the center of everything we do and we’re making important advancements for patients suffering with liver and pancreatic tumors. In this building year for the company, we have made considerable progress in advancing our commercialization efforts for TriNav, progressing our technology pipeline in nelitolimod, as well as strengthening our overall company operations. With our focus on achieving continued operational and strategic excellence, I’m confident in our ability to continue the strong growth of TriNav, the ability to advance our pipeline, and importantly, deliver both short- and long-term shareholder value.

Finally, I can tell you that I have the confidence because our people who are so committed to our patients are company and delivering for our shareholders. I want to express my gratitude to our dedicated team and our shareholders for their unwavering support. I look forward to providing future updates on our progress and impact. With that, I’ll turn it over to our CFO, Sean Murphy.

Sean Murphy: Good morning, everyone, and thank you, Mary. I am pleased to announce that TriSalus achieved outstanding results in the fourth quarter that ended December 31, 2023. Our revenue, solely driven by the success of the TriNav device in the U.S., reached $5.7 million. This sales achievement represents the highest quarterly sales in the company’s history, reflecting a very strong 77% increase compared to the same period in 2022 and up 10% sequentially compared to the third quarter. TriSalus has a record of growth, as illustrated on slide one, in which the company has grown at a compound annual growth rate of approximately 50% since our product launch in 2020. This segment of the business, excluding nelitolimod clinical costs, is expected to approach breakeven late in 2024.

In terms of full year revenues in 2023, we have reached $18.5 million, a 49% increase from the prior year. These results can be attributed to several factors, including the adoption of TriNav in new accounts, increased utilization in existing accounts and the continued expansion of the salesforce, all of which has led to an increase in our market share for 2023 to 7% of the liver, TACE and TARE procedures. These factors, as well as permanent reimbursement and real-world evidence data, allow us to forecast 2024 growth in excess of 50%. In the fourth quarter, we captured 11 new hospital accounts and 55 accounts year-to-date. Our account utilization reached 12.7 units per account, an increase of 2.8 units or a 29% increase over last year. Finally, we increased our sales team with the funding we received by going public.

At the beginning of 2023, we started the year with 10 representatives, and by the end of the fourth quarter, we had reached 28. We also added seven clinical specialists to support higher volume territories. We are proud to report a robust gross margin profile of 90% in the fourth quarter of 2023 and 86% gross margin for the full year, compared to 75% in the fourth quarter and 82% for the full year in 2022. This favorable margin profile in 2023 can be attributed to increased factory volumes, improved batch yields and other operating efficiencies, including the transition to 100% direct distribution, resulting in a higher average selling price. Our facility in Westminster, Colorado, has the capacity to support our growth over the next five years with minimal capital investment.

Regarding our investment in research and development, expenses in the fourth quarter of 2023 totaled $7.6 million, an increase of 22% from the fourth quarter of 2022. Full year R&D expenses amounted to $29.5 million, reflecting a 38% increase from the corresponding period in 2022. These investments are primarily related to completing patient enrollment in our three PERIO Phase 1 trials. We expect our clinical costs to decrease in 2024 as we finish patient follow-up and analyze the trials data. Our dedication to growth is also evident in our investment in sales and marketing. In the fourth quarter of 2023, we invested $5.6 million, a 45% increase from the fourth quarter of 2022. Full year sales and marketing expenses reached $17 million, a 34% increase from 2022.

These investments are tied — are closely tied to our ongoing sales force expansion. General and administrative expenses for the fourth quarter of 2023 totaled $6 million, representing an increase of 48% compared to the fourth quarter of 2022. Full year general administrative expenses of $23.5 million were 88% more than in 2022. These increased costs include a one-time cost of $7.9 million for the year related to completing our deSPAC process in August of 2023. Our operating losses for the fourth quarter in 2023 totaled $14.1 million, compared to losses of $11.4 million in the fourth quarter of 2022. Year-to-date losses in 2023 amounted to $54.2 million, compared to losses of $36.4 million in 2022. As mentioned earlier, the increased losses in 2023 can be attributable to higher operating expenses in research and development, sales and marketing, and general administrative expenses.

These increased expenses were partially offset by the increased gross margins from increased TriNav revenues and improved gross margin profile. As noted in our third quarter earnings call, operating earnings provide the most accurate insight into our ongoing profitability. These figures closely align with EBITDA and exclude non-cash valuation adjustments related to equity issuance, fair value adjustments to tranche and warrant liabilities, and fair value adjustments of contingent earn-out liabilities. It is important to note that these non-cash valuation adjustments may continue to produce material fluctuations in our next earnings results during the next several years. In 2023, the company raised $61 million. This included an insider private round and a $41 million PIPE to support going public.

At the end of the year, we had $11.8 million in cash and cash equivalents. We have sufficient liquidity to fund operations into the second quarter of 2024. The company is currently in the process of obtaining additional liquidity to fund the company through 2024. This funding will be a combination of non-dilutive sources and the use of our SEPA agreements. And now, I’ll turn the call back to Mary for closing remarks.

Mary Szela: Thank you, Sean, and a warm welcome to all of you participating in the call today. At TriSalus, we’re delighted to share our achievements during the quarter. We continue to make meaningful progress in expanding our TriNav business and continue to advance our PERIO clinical program, both of which are shaping an exciting future for the company. With that, I will open the floor for any questions you may have. Your insights and questions are valuable to us.

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Operator: Thank you, ladies and gentlemen. [Operator Instructions] Our first question comes from Jason McCarthy with Maxim Group. Your line is open.

Jason McCarthy: Hi. Thanks for taking the questions. I was just wondering about the inclusion of the clinical specialists for the sales of TriNav. I guess, how many do you have currently, sorry if I missed that and how many centers could they cover to help expand adoption?

Mary Szela: So we — this is Mary. We currently have seven clinical specialists. And typically, what they do is, once a sales representative opens an account, trains the physicians, often the clinical specialists will spend some additional time with them until they get up to speed and feel very comfortable using the technology independently. So we use those specialists across a wider range of territories to support utilization. Your question is a good one in terms of how they drive adoption. What we have is our own internal metric for when a sales rep just doesn’t have the capacity to cover all those accounts, then we’ll deploy the clinical specialist in the territory to have him cover a number of those accounts until we get them up to speed.

Jason McCarthy: Great. Thanks. And then, I guess, just sort of what are the next steps again in the pancreatic work to get to a larger Phase 2 trial?

Mary Szela: So, Steven Katz, our Chief Medical Officer, is online. Steven, do you want to take that question, then I’ll follow up as well.

Dr. Steven Katz: Yeah. Thanks, Mary. Jason, thanks for the question. Right now, we’re completing enrollment in the Phase 1 single agent, nelitolimod experience, so we need to complete that to establish the safety and feasibility of the drug-device combination and help establish what we feel will be the optimal biologic dose. And then, the next step would be to move into a Phase 1b in which we combine nelitolimod delivered with our technology with systemic checkpoint inhibition and we hope to start that by the end of the year, assuming the data from the Phase 1 continues to be favorable. Mary?

Mary Szela: No. I have nothing to add. Steven has covered it completely.

Jason McCarthy: Great. That’s all for me and thanks again for taking the questions.

Mary Szela: Thank you, Jason.

Operator: [Operator Instructions] And I’m not showing any further questions at this time. I’d like to turn the call back over to Mary.

Mary Szela: Well, thank you, everyone. We really appreciate it. Thank you, Kevin.

Operator: You’re welcome. Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day.