Q1 2020 Earnings Call
Good day, ladies and gentlemen, and welcome to your Aventura first quarter 2020 results call. All lines have been placed on the listen only mode and the floor will be open for questions. Following the presentation. If you should require assistance during the conference. Please press star zero on your telephone to reach a life.
At this time it as my pleasure to turn the floor over to macro managing director of Darrow associates, Sir the floor is yours.
[music] Nike Christie.
Participating on today's call.
Welcome all of you challengers first quarter 2020 conference call going out there I Wonder CEO, Jeff Salinsky, <unk>, Chief Financial Officer, Mark Whiteside.
Earlier today Bridger released financial results from first quarter ended March 31, 2020, a copy of the release is posted on the average or website under Investor Relations.
Before I begin.
I'd like to remind you that Matt will make statements. During this call include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions on the private Securities Litigation Reform Act to body part areas.
Any statements contained in this call there [laughter].
Sure the D.C. Warren.
All forward looking statements, including without limitation or future financial expectations are based on current estimates in various assumptions.
These statements involve material risks and uncertainties could cause actual results worried that materially different from doesn't stated or implied bodies form.
Accordingly, you should not place undue reliance on leasing.
Well, that's a description of the risks and uncertainties.
Our business.
Our form 10-K, 10-Q filings with the Securities and Exchange Commission.
How did your disclaims any intention.
Okay.
I want to update or revise any financial projection.
Well, there because of the operation future events or otherwise.
I'd now like turn call over to John.
Thank you Matt Good afternoon, and thank you all for joining us I'd like to open the call by extending my best wishes to each of you and your families as we as a nation deal with the challenges presented by Cobiz 19.
The unprecedented steps taken to mitigate the spread of covert 19 virus appended many aspects of our daily lives, including the health care procedures central to the needs of those suffering from P.A.D. and have impacted the businesses, who provide the tools for physicians to treat this pervasive disease.
Several states are taking the first steps toward resuming some degree of normalcy much of the U.S. is still under varying degrees of shelter in place or social distancing orders.
As we disclosed in April the first quarter was off to a very strong start prior to the impact of cobot 19, and what we call. It we will cover a number of exciting developments in the first quarter on our call. Today are opening remarks, we'll also provide perspective on the second quarter. How we've responded to the pandemics effects on our business in the.
He milestones that we believe will drive our business in the second half of 2020 and into 2021.
Setting the stage a bit throughout 2019, we focused our efforts on successful commercialization of our new products and evolve their business models to prioritize growth can disposable product sales and new account acquisition.
As a result, we've continued to move away from legacy products and our reliance on large capital sales. This strategy appears to be working as we reported yearend results that were significantly better than prior years demonstrating success. In these efforts increased momentum in our markets and the benefits of scale as we continue to deliver on our bid.
This objectives.
Looking at the first quarter of 2020 total revenue in the first quarter grew 23% over the prior year continuing the positive trend from 2019.
Disposable sales also increased by 39% a key metric of case activity and Pantheris revenue increased by 75% to $1.6 million. These numbers are encouraging since they reflect much higher rates of growth in January and February prior to the onset of the Cobiz 19th.
And then make in March and the rapid decline in case activity as states eliminated or reduced access to alecto healthcare procedures.
Adding new accounts continues to be a key element of our growth strategy. We made significant progress in this area in the second half of 2019, adding 14, new lumivascular sites in the third and fourth quarter combined.
In the first quarter, we increased our pace of new account acquisition with the launch of 11, new clinical sites, including locations in high volume States, such as Arizona, Michigan in Louisiana.
This illustrates the momentum we've been gaining in the marketplace due to the strong interest in our new atherectomy products, including Pantheris SB.
We're looking to continue to grow our customer base and centers begin to reopen and during the current downturn, we've but we have a focused effort on marketing the lumivascular solution to positions and customers went a little more time available to learn about Avon's yours technologies.
On the product from Pantheris SB continued to perform very well from both the commercial and clinical perspective in the first quarter.
We have now shipped this exciting new device to more than 70 accounts and feedback from the field is overwhelmingly positive.
Theres SBS lower profile and longer length enable physicians to safely treat a variety of lesions in the smaller vessels below the knee an underserved area and one that we believe expands our addressable market by as much as 50%.
We believe that SV also gives us a unique competitive position in the marketplace by driving usage across our family of P.A.D. products and increasing familiarity with the lumivascular approach and its compelling benefits.
We also continue to make significant progress and the development of our pipeline of new products, including our Solaris Our next generation image guided CTO crossing catheter.
You may recall that we received CE, marking for us Solaris in December 2019, and soon after completed the first successful procedures in Europe with this new device across a variety of lesion types in the peripheral arteries, both above and below the knee.
Those early cases reinforced our belief that this product is a game changer in the treatment of chronic total occlusions, our CTO, which are completely blocked arteries.
Oh Solaris is designed to bring several improvements to our platform, including real time video rate imaging rotational speeds up to 1000, RPM and a user controlled to flexible chip for precise maneuverability within the lumen.
All of which we believe will enhance positions ability for true luminal crossing of a wider range of see geos.
In spite of the recent disruptions caused by Cobiz 19, we remain on track to achieve our goal of filing a five 10-K submission for U.S. premarketing clearance with the F.D.A. this quarter.
Pending FDA clearance, we're hopeful that off Solaris will be available for market launch and a contributor to our revenue growth in the fourth quarter of this year timely as we hope. This will also coincided with increased case activity across our key markets as restrictions on elective procedures are lifted a more states and cath lab schedules returned to more normal.
Operations.
We also continued to invest in the accelerated development of our next generation imaging console D. L 300, Lightbox. Our next generation L. 300 system is designed to deliver our proprietary L.C.G. imaging through the use of a state of the arts solid state laser a more powerful computing platform.
And advanced software system.
It's also designed to provide variable high speed catheter rotation, which we believe could be important for future catheter applications.
Most exciting we believed that we can deliver this enhanced capability within a highly portable radically reduce size and weight configuration.
We anticipate the final L 300 design to weigh less than 20 pounds be mountable on an Ivy Paul and fit inside the standard carry on case, providing for easy transport by our sales reps in clinical specialists.
Cost efficient shifting to a standard overnight carrier and efficient integration into the Cath lab environment, an existing image bags.
We also expect the L 300 to provide a significant cost reduction compared to our current lightbox overcoming a key barrier to entry.
We believe that all of these enhancements will have a positive impact on new account acquisition provide a more efficient service strategy and broaden customer expansion of our image guided platform to a wide range of accounts.
We expect to be in a position to complete product validation in the upcoming months and at this point anticipate being in a position to file a five 10-K submission with the F.D.A. prior to the end of the year.
On the clinical side, we continue to make important progress on our insight I'd. He clinical trial evaluating pantheris for the treatment of in stent, restenosis or I S R and lower extremity arteries.
The preliminary data from the first patients enrolled in this study was presented last year and was highly encouraging.
We anticipate completing enrollment in the insights study and being in a position to submit a five 10-K application to expand our label to include the <unk> SAR indication by the end of this year.
In addition insight in January we announced that we had initiated enrollment.
Of our first patient and a new clinical study for Pantheris estee called image be T.K.
The image be T.K. as opposed market trial designed to evaluate safety and efficacy endpoints for Pantheris SP and the treatment of peripheral artery lesions below the knee.
This study has been pause due to covert 19, and we expect progress to resume in the second half of the year. When case activities returned to more normal levels. We will update you as we have more information on how to schedule for this study will change.
As discussed earlier Cobot 19 began to impact our business in March with case activity declining rapidly as hospitals in medical providers deferred elective procedures in accordance with the guidelines or the guidance issued by the U.S. surgeon general and centers for Medicare and Medicaid services and the restrictions put in place by state.
Local governments. In addition, many hospitals restricted access for sales representatives and clinical support staff as they prioritize resources for the treatment of Cobiz 19 patients and take measures to limit the spread of the virus.
We've continued to see the impact of these restrictions in the second quarter with overall case volume off by more than 50% in the first week so the quarter.
Well, most noncritical procedures have been deferred our image guided devices continued to be used in hospitals and outpatient centers every day for the treatment of more urgent cases, such as critical limb ischemia or see alike. The severe form of P.A.D. that can lead to tissue and Lynn loss if left untreated.
In most of these cases, our clinical support staff is present at the invitation of the treating physician and in compliance with hospital guidelines.
As more states loosen restrictions on elective and noncritical procedures and resources become available on the health care system. We are starting to see an improvement in case activity and expect to see this improvement continue in the latter part of the second quarter and ended the third quarter, when we hope to see positive steps towards the return.
Turn to more normal case volumes.
However, as communicated previously we expect our revenue to be significantly impacted by cobot 19 throughout the second quarter.
During this time, our priority is to maintain a strong connection with our position customers and to be ready and available to support their cases now and in the future as case volumes improve.
We've also continued our outreach to current and potential customers through direct communication and broader marketing efforts.
We have initiated a series of physician focused webinars led by key opinion leader physicians and kicked off this series last week with a session on the treatment of below the knee lesions that was virtually attended by over 70 physicians.
We're also conducting virtual referral meetings, starting podiatrist and other referring physicians for our current Lumivascular sites and we've implemented training programs for sales in clinical teams to strengthen our organization as we prepare for turned to higher volumes.
I could not be more proud of our headquarters in field based teams as we continue to advance our strategic initiatives, including the commercialization of our next generation products.
Actively deal with the challenges presented by Kobin 19, and most importantly continue to support positions in their lindeman lifesaving work treating patients with critical P.A.D.
As Mark will address in a few moments during this period. We've also taken steps to increase our cash resources and reduce our cost structure in response to the disruption from Cobiz 19.
We believe these actions would give us the need is needed flexibility in runway to navigate through the second half of the year.
As case volumes increase in demand returns, we expect to be in a position to rapidly resume full market capabilities and grow our market opportunities through the addition of new products, new label indications and new customer site.
At this point I'd like to ask Mark to cover our financials, and then I'll come back for today Mark.
Thank you Jeff.
Total revenue for the first quarter of 2020 was 2.3 million an increase of 23% year over year. The increase included a strong start to case volumes in January and February well in March we saw a decline in elective in deferred ruble procedures as hospitals and health systems prepared for unexpected influx of kobin patients.
In addition shelter in place and stay at home waters in most states limited patient access to non critical health care services.
Despite the slowdown in activity in March the first quarter saw 35% year over year, increasing catheter sales primarily in our Pantheris next generation and Pantheris SB families.
It's important to note that sales from legacy products in console revenues continue to decline as our business evolves to a sales strategy focusing on higher margin disposable catheters.
Gross margin in the first quarter was 22% compared with 20% in a year ago quarter and 36% in the fourth quarter of 2019.
Gross margin decline relative to the prior quarter, primarily due to lower revenues, a manufacturing activity and higher expenses.
Operating expenses for the first quarter were 6 million up from the first quarter of the prior year to relatively flat with the fourth quarter.
As Jeff mentioned, we continue to invest heavily to accelerate the development of both our ancillary next generation CTO catheter and L. 300, Lightbox Council, both of which are slated for five 10-K submission this year and both both of which are expected to contribute strong revenue growth upon clearance and commercial.
Launch.
Net loss was 5.99 in the first quarter up from 5.1 million, but the first quarter.
The prior year and the fourth quarter.
The change from the prior quarter was primarily due to lower revenues and gross profits primarily related to the impact cobot 19.
Adjusted EBITDA, which is a non-GAAP measure that excludes certain excess and obsolete inventory charges restructuring stock compensation and other items as noted in the tables in today's press release with a loss of 4.8 million.
Happy the reconciliation from net loss to adjusted EBITDA can be found in today's press release, which is also posted on our website at www Dot aventura dot com under the Investor section.
Cash and cash equivalents totaled 9.9 million as of March 31st 2020, compared with 10.9 million as of December 31st 2019.
April 1st we have raised 3.6 million of gross proceeds from an equity financing and received 2.3 million in loan proceeds pursuant to the Paycheck protection program created under the Corona virus aid relief and economic Security Act. These additional proceeds are expected to provide us with the needed capital as he worked.
Through the present challenges of the Cobot 19 pandemic.
In addition to strengthening the balance sheet. We also undertook aggressive cost reduction measures in early April.
Included a companywide, 20% reduction and based compensation for salaried employees, a commensurate reduction in hours for manufacturing employs a cutting discretionary spending and other measures to reduce cash used in operations on a run rate basis. We expect these temporary measures to reduce our operating costs by almost $1 million and.
Second quarter.
Even though we are cutting costs as I mentioned previously we are investing heavily in key programs that can change the long term growth trajectory for aventura, including R&D projects, such as also listen the L 300, and our insight clinical study.
Well, we anticipate it would take some time to returned to pre cobot sales volumes, we maintain our position of readiness and responsiveness for our business all the while advancing our internal programs for future revenue growth drivers.
Now, let me turn the call back to Jeff.
Thanks, Mark well the for first quarter began with strong progress momentum in cases ended news sites. The disruption that began in March and has carried into the second quarter has significantly impacted our business.
In the face of these challenges we've continued to advance our new product platforms. We've continued to support more urgent cases and expand our outreach efforts and we raise new capital and made the necessary cost reductions to provide for the sustainability of our business.
Most importantly, we are positioned to emerge quickly as demand returns and work closely with our sites to address the need for P.A.D. treatment that has been building on our key markets.
We anticipate filing a five 10-K submission for our next pipeline product or Solaris and the second quarter and we're excited about the potential for adding this next generation image guided CTO crossing device to our marketed product portfolio later this year.
Despite the challenges presented by covert 19, the average or team remains focused determined and committed to advancing our technology platforms delivering on the growth prospects for our company and most of all supporting physicians and their critical work of treating patients with vascular disease before we open to Q day I'd like to take a moment.
To recognize each and every employee of adventure for their resilience and professionalism. During these times I'm inspired by their I've heard some proud to be part of this team at this point, we'd be happy to take your questions.
Thank you that's why it is now open for questions. If you would like to ask that question. Please press star one on your telephone keypad to join the queue and if you're using a speakerphone. Please pick up your handset to provide the best sound quality. We also asks the please keep your questions limited to one and a follow up.
Hello, everyone a chance to publish their question.
We'll go first with Jeffrey Cohen with Ladenburg Thalmann. Please go ahead.
Hi, This is actually destiny on for Jeff. Thank you for taking a question I would like ours.
Yes, I'm getting a feel for what percentage.
Total procedure volumes.
Typically hey, I'm, so much urgent procedures like.
In more normalize corners.
Yeah, Thanks, Hi, Destiny. Thanks for the question.
The majority of our procedures are typically are for what would be non critical cases, just just similar to how the the percentage aquatic ends versus see ally breaks out in the market you as we said on the call. Our case volume was down a little over 50% in the first week.
So the corridor, we're seeing.
You know of course more see alike cases at this point with the restrictions that are put in place.
You know, we typically would see probably 60, 65% Quater kens and the 35, 40% more urgent cases and typical case volume.
Even our business kind of breaks out.
More of the Pantheris SV the below the knee devices used for the more urgent cases were seeing an uptick in and SV utilization relative to Pantheris SV in this quarter. So far in the first quarter. You know we had more of a typical breakout of about two thirds the.
The seven French device and about a third.
Or a little more than a third of the SD device. So so typically that 60 40 65 35 split.
Now of course, the vast majority being more urgent cases, but we're just starting to see some of the elective procedures come back as states loosen guidelines.
Okay got it. Thank you and then just for my follow up I'm curious about the size Salesforce currently I think it was about 28 representative.
Before and I'm, just curious with all the Kobin things going on.
Predominantly intact.
Yes. So we were I think about 25 26 and in the at the end of the fourth quarter. We are Salesforce is now at 23, we did take the opportunity with coded to trend a little bit in the sales force and streamline our management structure, our focus as an organization.
As on driving efficiency and improvement in revenue per head.
We feel like we have a very strong team. We have a few open positions that were looking to add in the latter part of the year when when the more normalized case volumes come back and we've also been using this time I'm very effectively the sales leadership in partnership with our marketing group and our medical group in.
Conducting training sessions, and just keeping that group strong and improving them. So that there really ready for one case volumes come back, but the clearly answer your question. We're at about 23 in the sales force now which is down a bit from the fourth quarter.
But but primarily through our action.
Trim, the force and really be leading ready for when the business comes back.
Okay perfect. Thank you.
Thanks for the question.
Next we'll move on to Nathan Weinstein with the piece capital. Please go ahead.
Hi, Jeff from Mark Thanks for taking my questions look really nice increase in disposable sales in the quarter and so maybe you can touch on how that might trend ahead, and then also what could that mean for future margin expansion.
Right. So so I'll take the first part of that question and then turned over to Mark for the gross margin discussion.
You know our focus in strategic focus as a company is on driving case volume disposable sales and.
Gaining access to new sites with significant atherectomy volume and so.
You'll I think you'll continue to see that shift towards disposable sales and less reliance on the large capital sales.
That's strategic and directed on our part as we go throughout the rest of this year and into 2021.
Does that answer your question on remark Nathan.
Yes. Thanks.
Okay, Great and then on the margin question just real quickly we have very high margins on our our disposable products are catheter as we're able to increase revenues are those products. We would expect there to be a significant amount of operating leverage on the gross margin line I'm just doesn't mean, you're able to increase volume and also and getting.
Economies of scale.
Great. Thanks, a lot I suppose just a follow up question.
If I may <unk> <unk>, you think you touched on this in your prepared remarks, but if you could perhaps discuss for a moment given that a lot of things have been virtualized can you just discuss.
Virtual sales and marketing capability.
Yeah, you know it's interesting you know first of all we are supporting cases every day, our reps are being asked in and provided access for treating these more urgent cases and as the elective procedures come back so.
I don't think of us is not having access or being president and cases, you know literally every day so.
So that's that's good news however, we are.
Learning and using technology to be able to keep these strong connections with our physicians either on and one on one basis.
And even you know continuing our outreach programs to new accounts and providing sales presentations, you know via zoom et cetera.
But I'm really pleased with how the team has worked together the sales and marketing group to come up with programs to to take advantage of a little more time that some of our physicians have as they are doing fewer procedures. During October 19 restrictions and one of the specific examples as we've kicked off a rig.
Dealer program a virtual webinars.
One of the really lead care wells in this space in the country Dr., Tom Davis out of Michigan led a below the knee.
Webinars with a interactive Q and a et cetera that was hosted by our Chief Medical Officer Dr. John for goals are where we had over 70 physicians actively participate in that call. We'll have our next call next week.
The end of next week and we're going to continue on this every two to three week virtual Webinars program. The result is are the the response has been so positive that I think this is something we'll continue after code. It's a very efficient way to provide good useful clinical information peer to peer discussion and and teaching.
Without asking people to get on an airplane and travel.
So so that's one example, another example is we're partnering with physicians to do referral meetings.
With their referring physicians or prospective referring physicians, where the physician lumivascular physician can present, our technology talk about his practice and and and help guide these referring physicians to recognize P.D. and send hopefully case volume to them.
So this is again something that we've been really pleased with our first a referral meeting at over 30 physicians engaged and this is something that we'll continue to do I think even after covert 19, and finally, we're taking advantage of this time and some more availability of our sales team to have very proactive and and.
Regular.
Training programs, both in small groups and for the sales force overall to just keep getting better for all of us to keep getting better as we prepare for the volume to come back. So again, taking advantage of the technology. Some of its just by need because of the the restrictions on travel and and being able to be president.
But but I think it's a very efficient way and forcing us that I'm sure. We're not the only company that's learning to be more efficient.
Through some of the restrictions that are being placed on us.
Great. Thanks, a lot for the color.
Thank you.
And that does conclude our question and answer session for today, So I'll turn it back over to Jeff. So when you for any closing remarks.
Well, thank you and thank you all for joining our call today, we very much appreciate your interest in our company and your support during these unprecedented times and look forward to updating you on our continued progress on our next quarterly call. Thank you.
And that does conclude today's teleconference. We appreciate your patience.
You may now disconnect your lines that have a great day.
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Yeah.