Q2 2020 Avinger Inc Earnings Call
Greetings and welcome to Aventura, 2022nd quarter Conference call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation I'd like to remind you that this conference is being recorded it. It's now my pleasure to introduce that crap managing director.
Sure It Darrow Associates Investor Relations Mr., Chris you may begin.
Thank you parents and thank you all for participating in today's call.
I would like to welcome all of you Challenger second quarter 2020 conference call. Joining us today are having your CEO, Jeff Soinski and Chief Financial Officer Mark points what.
Earlier today I've enjoyed released financial results for a second quarter ended June Thirtyth 2020, a copy of the releases posted on the adventure website under Investor Relations.
Before we begin I'd like to remind you that match that will make statements. During this call that includes forward looking statements with and the median of federal Securities laws, which are made pursuant to safe Harbor provision.
Securities Litigation Reform Act 1995.
Any statements contained in this call there are not statement to historical fact should be deemed to be forward looking statements.
All forward looking statements, including without limitation or future financial expectations are based upon the current estimates in various assumptions.
These statements involve material risks and uncertainties that could cause actual results or that's materially differ from those anticipated or implied by these forward looking statements.
Accordingly, you should not place undue reliance obviously.
For a list and description of risks and uncertainties associated with our business. Please see our form 10-K, and 10-Q filed with Securities Exchange Commission.
I was your disclaims any intention or obligation except as required by law update or revise any financial projection or forward looking statements, whether because of new information future events or otherwise and with that I'd now like turn the call over to John.
Thank you Matt Good afternoon. Thank you all for joining us I hope that each of you are staying safe and healthy as the nation continues to face the challenges presented by Cobot 19.
We opened our call we'd like to thank the physicians nurses and staff, including Avon's Your staff, who are working in hospitals and labs around the country everyday to support patience. During this critical time.
In recent months, we've seen steadily increasing atherectomy case activity and improvement in our business levels. We continue to be very aware of the impacts of the cobot 19 pandemic on health care providers.
Back to process of working our way back to normal see to continue to unfold over the months ahead.
We've taken aggressive actions to adapt to the current environment, we're working more closely than ever with our physician customers to support their case activity and open new sites.
At the same time, we've taken important steps to reduce our cost structure through a combination of temporary and permanent measures to improve operating efficiency and conserve cash. We've also significantly strengthened our balance sheet through our financing activities too and the second quarter with $16.6 million in cash.
During the quarter, we made tangible progress on key programs that we expect to drive additional future revenue growth most notably our five 10-K submission for us Solaris our next generation CTO crossing system.
We're excited about the potential for us alaris to drive growth of our image guided CTO crossing business continue to anticipate U.S. premarketing clearance for this advanced device and the second half of this year.
Following market launch I Solaris would represent a third new P.D. treatment device introduced by Avon's you're in the last three years.
We're committed to continually improving and expanding the utility of our proprietary image guided approach to the treatment of P. AG and it's exciting to see these efforts pay off with the development of new products indications and compelling clinical data.
Looking at second quarter results as previously communicated April was sharply impacted by covert 19.
Provider access was limited as health care systems, Reprioritized resources in reduced elective procedures anticipating a surge in cobot 19 cases.
This was compounded by patients who are uncertain about venturing out due to stay at home and social distancing orders.
While we continued to support and <unk> more urgent cases, such as critical limb ischemia or see allied many patients who are in need of treatment had their procedures deferred.
However, the ability to defer P.D. treatment has limited as the disease, if not treated well continue to worsen.
Throughout May and June we saw an increase in procedural volume as more states and communities began to loosen restrictions on elective procedures and providers started to read but deferred cases.
In the third quarter, we've seen continued growth in case volume and utilization with July 2020, realizing higher revenues in both July 2019 and July 2018.
During the second quarter of 2020, <unk> total revenue declined 37% from the prior year to $1.5 million, although a steep decline. This decrease was less severe than originally anticipated and speaks to the resilience of our organization in health care providers and the pace of the pandemic.
As you might recall in May we disclose case volumes were up by more than 50% in the first weeks of the second quarter.
During the quarter disposable sales decreased by 28% the bright spot being pantheris sales, which declined by only 13% from the prior year.
The Pantheris image guided atherectomy platform continues to see strong results, primarily due to the introduction of Pantheris SB are low profile device used to treat smaller vessels, including those below the knee, where many see alike cases occur.
We've now shipped pantheris that speed over 80 accounts in the U.S. and expect penetration to continue to grow as we prioritize new account acquisition.
Adding new accounts continues to be a key element of our growth strategy. You may recall that we added 14 lumivascular sites in the second half of last year and then another 11 new sites in the first quarter of 2020.
Despite the challenges presented by Cobot 19, we were able to launch two new clinical sites in the second quarter for a total of 27 new sites in the trailing 12 months.
This positive momentum has continued into the third quarter as we've already launched five new sites in July so.
Sales Rep access continues to improve we are bearing the fruit from our selling efforts in marketing outreach programs such as our highly attended physician Webinars series that we implemented over the past quarter.
As mentioned earlier in May we filed the five 10-K submission with the F.D.A. for U.S. Premarketing clearance of our Solaris our next generation image guided catheter for CTO crossing.
Chronic total occlusions or CTO shows are among the hardest P.D. cases to treat and the most critical since the patient is facing a complete blockage of the artery.
Oh Solaris is designed to bring several improvements to our CTO platform, including real time video rate imaging rotational speeds up to 1000, RPM and a user controlled the flexible Tim for precise maneuverability within the lumen.
All of which we believe will enhance physicians ability for true luminal crossing of the wider range of Cts.
We continue to anticipate FDA clearance for us Solaris and the second half of this year.
And as we did with the successful launch of our Pantheris as speed advice. Following FDA clearance, we expect to initially launch us Alaris do a limited number of U.S. sites.
Starting with experienced Lumivascular operators and targeted sites gives us the opportunity to build real world clinical experience with the device developed case studies in clinical support protocols and refine our position in Salesforce training programs prior to roll out to more accounts and eventually national launch this is a big milestone.
For Aventura, and we hope to have good news to share with you in the upcoming months.
We've also made significant progress on 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 LCT imaging to a state of the art solid state laser more powerful computing platform and advanced software.
Our system.
The L. 300 also incorporates a redesigned user interface, which we believe will streamline the operation for customer ease of use and efficiency.
Most exciting we expect to deliver the enhanced capability of the L 300, and a small form factor the radically reduce size and weight less than 20 pounds. This will provide for easy transport by our sales reps cost efficient shipping in a simplified service strategy and efficient integration into the Cath lab environment.
Just as important we expect the L 300 to provide a significant cost reduction of up to 50 per cent compared to our current lightbox and other imaging technology consoles.
We believe all of these enhancements will have a positive impact on new account acquisition being more efficiency door operation and improve the physician experience with our platform.
We're building final prototypes for verification and validation testing and anticipate being in a position to submit a five 10-K application for the L. 300 late this year or early in 2021.
Based on this timing, we expect to receive Premarketing clearance for U.S. launch in the first half of 2021 and anticipate gaining CE, marking for trial in Europe and certain other international markets early in 2021.
On the clinical side, we've continued our clinical study activity through the pandemic, although as would be expected there have been delays in certain programs due to the disruption and chase activity and limitations imposed by healthcare institutions.
We've been ban start insight <unk> clinical trial evaluating pantheris for the treatment of in stent, restenosis or IAH Saar in lower extremity arteries and anticipate completing patient enrollment this year.
Depending upon how quickly patient follow up in final data analysis can be completed we expect to be in a position to submit a five 10-K application in the first quarter of 2021 to expand our Pantheris label to include the I.S. our indication.
The initial data we're seeing from this study continues to be highly encouraging and we believe we'll be very compelling compared to other non image guided atherectomy devices that have received the <unk> SAR indication in the past.
In January we announced the start of our image BTK clinical study for Penn Theres SV image be Teekay is a post market trial designed to evaluate safety and efficacy endpoints for pantheris as fee and the treatment of peripheral artery lesions below the knee.
We had enrolled our first patients in this study early this year the pause news site initiation due to covert 19 restrictions as we restart. These efforts we expect to be in a position to begin enrolling patients in new sites in the fourth quarter.
Before I turn the call over to Mark to review our financials I'd like to end my opening comments with some perspective.
The second quarter began with uncertainty and concern of over how the impact or how the pandemic would impact our business and our future prospects as a company.
As we demonstrated the avid your team has been able to successfully navigate what we hope will be the worst of the crisis. Our team has continued their dedicated support of the health care heroes, our physician users in their staff, we're putting their help on the line everyday to provide critical care for their patients.
We've expanded our outreach to new and current users and returned the company to a positive new account acquisition trend.
We continue to manufacture products, an adult safety inventory to provide for our customer needs.
We've made personal sacrifices to significantly reduce cost in the company and we put significant new cash on the balance sheet to fund our corporate priorities in growth strategy.
I could not be more proud of our team's hard work dedication and commitment to our mission as we face the challenges presented by covert 19 were aware the apparent that the pandemic is far from over and that there will be continued challenges to face in the coming months.
Encouraged by the positive progress, we're seeing so far in the third quarter and we're confident that we have the right stuff as an organization to face the challenges ahead.
At this point I'd like to ask Mark to cover our financials and then we'll open up for Q in a mark.
Thank you Jeff.
Revenue for the second quarter of 20 21.5 million a decrease from 2.3 million in both the second quarter 2019, and the first quarter 2020.
The decrease directly related to the reduction in procedures across the medical industry due to colder 19.
More serious Phd procedures continued avon's yourself, a sharp reduction in April shipments and then we like a steady increase in case activity during may and June.
In the second quarter, and Theres revenue declined 13% year over year with the strong relative performance due to the addition of Pentair SB, which started in the third quarter of 2019.
Sales of legacy products continued to decline as expected and in line with our goal to should start commercial focus to our next generation catheter products.
It's overlaid sales and service revenue increased slightly on a sequential basis as he continue to roll out new sites.
Gross margin in the second quarter was 24%.
Ted with 22% in the first quarter and 31% year ago quarter.
Gross margin was impacted in the quarter by the reduced volumes and the roughly $95000 in excess and obsolete charges for older products as disclosed in today's release.
We expect our gross margin improved as the revenue increased back to pre pandemic levels.
Operating expenses for the second quarter were 4 million a significant decrease from six me in the first quarter and 5.49, a year ago quarter.
As Jeff mentioned, we're very successful in our cost reduction efforts while at the same time, we continue to invest heavily in the Dell development of both our Ocelot next generation CTO catheter.
Oh, 300, Lightbox console and in our clinical studies.
We believe that these investments will contribute contribute to future revenue growth after achieving five 10-K clearance and indications.
We will further discuss the operating expense trend later in the call.
Net loss attributable to common shareholders was 5 million in the second quarter of 2020 down from 6.8 million in the first quarter in 5.5 million in a year ago second quarter.
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 table in today's press release was a loss of 2.9 million, notably improved from a loss of 4.8 name in the first quarter and a loss of 4 million in the second quarter of less.
Last year.
This quarter's adjusted EBITDA results with the best results in the company's history and illustrate how successful we were in controlling our cost base.
A copy of 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 16.6 million as of June thirtyth compared with 9.99 as at March 31st.
During the second quarter, we raised 9 million of gross proceeds from equity financings and received 2.3 main in loan proceeds pursuant to the Paycheck protection program.
These additional proceeds are expected to provide us with the needed capital to sustain our corporate growth initiatives.
Please note that we received an additional 0.8 million in gross proceeds from the exercise of the over allotment in July.
Having your continues to monitor closely the coping 19th situation as we discussed previously we undertook aggressive cost reduction measures. In April. This included a companywide, 20% reduction based compensation for salaried employees a reduction hours worked for hourly employees, a cutting discretionary spending and other measures.
Reduce cash used in operations.
We expect our operating expenses to increase in third quarter with the return to normal salary levels for all employees any expected increase in our variable costs come as a commensurate with the rise in our expected business levels.
We used to announce that some of the cost reductions. We have made are going to continue in our structural change in how we operate the business to be more efficient.
As Jeff discussed we are seeing improved case volumes in July a trend, we hope to maintain through the third quarter.
We have shown everyone passengers a very nimble organization.
Ready to respond to the needs of the business I think environment changes at this point I'd like to turn the call back over to Jeff.
Thanks, Mark as I said previously the second quarter began with uncertainty in concern of how the pandemic would impact our business. These challenges brought out the best in our people and works and we exited the quarter as a stronger more efficient and more confident organization, we saw increasing case activity and utilization throughout the quarter, which is.
Carried over into the third quarter, we remain connected and committed to our physician partners that have added seven new accounts in June and July we filed a five 10-K submission for US Solaris, our next new product and significantly advance or L. 300 program and we exited the quarter with a reduced cost structure and strengthen cash position.
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We look forward to updating you on or off Polaris five 10-K submission and other important milestones as we advance through the second half of what has proven to be an unprecedented year.
Good all 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 at this point, we'd be happy to take your questions.
Ladies and gentlemen, the floor is now open for questions. If you do have a question. Please press star one on your telephone keypad at this time.
Sure.
Well posing your question you pick up your handset to provide the best sound quality.
Again, ladies and gentlemen, if you do have a question or comment. Please press star one your telephone keypad at this time.
Well take our first question from Nathan Weinstein with Aegis capital. Please go ahead Sir.
Hi, Jeff and Mark Thanks for taking my questions.
Ah if we could just start with sales in the most recent quarter there actually better than we've seen just given the environment that you were operating in and I know you may have touched on this a bit in your prepared remarks, but if you could kind of recap and discuss how is the base. How are you guys able to hold the business and better than expected.
So so Nathan I I agree and appreciate your comment the impact of co bid was less than anticipated earlier in the quarter. As you know procedural volume really dried up in April and was quite limited to more severe cases.
Probably as encouraging as the level of revenue that we were able to achieve for the quarter was the increase of utilization throughout may and June so I'm seeing that increasing volume, which is now carried forward into July and ended the third quarter as as more states of loosened restrictions. So the trend. In addition to the absolute number was incurred.
Bridging I think we did it in a couple of ways first we stay connected in president and where we could get access to the physicians labs. We were there. So our sales team didn't hold back in any way and understood. The importance of their work and most importantly, the work of the physicians to treat these see allied.
Patients.
As we stay connected as we continue to be president and readily available. We benefited as these cases came back and more elective procedures were introduced Mark I don't know if you have anything to add to that and I think that we also felt obviously felt very good by the end result, especially with the fact that we saw an increase.
In May over April June over May and then other thing July being so far very very strong month for us.
Got it thank you.
And just thinking a little bit ahead.
I've done a great job a refreshing the the product portfolio and think about the new product pipeline, that's coming along any anticipated disruption on timing due to Colin.
No as we look at our pipeline, we're right on track with Solaris, We filed as you know our five 10-K in May which was right in line with our anticipated timing.
Hefty a is been open and and interactive and we feel based on the visibility we have that we will gain the approval hopefully right on on time and you know the second half of this year and are making steps.
Preparing for a limited launch sometime following that clearance, but we haven't seen any delay or experience any delay related to co bid in the us alaris or new product development programs.
We did have a little bit of slow down obviously with the insights study.
But we are so far along in that study that we feel timelines won't be significantly impacted.
Image be Teekay, which we just started prior to the and the kind of advent of coded and all the restrictions was impacted on a timing basis.
You don't expect to really began enrolling again in a significant way until the fourth quarter. As we now are starting to initiate new site and prepare to get back in the clinic on that study, but other than that I think weve maintained.
Good progress on all of our strategic milestones and initiatives, then and you know we were able to stay open and and manufacturing as an essential.
Central business and I think have made good use of the time.
We've had here over the second quarter to focus on some of the internal operations and business.
Great. Thank you that's very helpful. And then I suppose just a final question for me on the reimbursement environment from your perspective are you guys seeing any potential changes significant changes on the horizon with regards to reimbursement.
No you know there has been discussion of potentially the endovascular codes coming up for review just starting later this year, but that would be obviously a multiyear process.
Everything we've seen in her does not indicate that there would be any significant diminishment in reimbursement for the atherectomy codes, which our primary codes.
And you know I think that there could be potentially incremental opportunities for us as we've discussed previously related to the fact that we have imaging claims diagnostic claims cleared by FDA. In addition to our therapeutic claims which were hopeful could provides the basis at some point in the future.
For incremental reimbursement.
Got it thanks for taking my questions and a great great to see the continued progress in the business.
Thank you Jason.
As a reminder, ladies and gentlemen, if you'd like to ask a question or have a comment. Please press star one on your telephone keypad at this time again, that's star one on your telephone keypad at this time.
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Once more ladies and gentlemen, if you'd have a question or would like to if you'd like to ask a question I have a comment you May press star one on your telephone keypad.
Just one more moment.
And that appears to be all the questions that we have today. This will include conclude our question and answer session. We'll now turn the floor back over to Mr. Salinsky. Please go ahead Sir.
Thank you. Thank you all for joining our call today, we very much appreciate your continued interest in our company and your support during this unprecedented times and look forward to updating you on our continued progress on our next quarterly call. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation you may disconnect. Your lines at this time and have a great day.
Adjusting for Q.
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