Q3 2020 Avinger Inc Earnings Call

Greetings and welcome to the habit your third quarter 2020 results conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation if.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn the conference over to your host back perhaps.

Thank you Omar and thank you all for joining us and participate in todays call.

You're welcome all of you to average <unk> third quarter 2020 conference call joining us today around your CEO, Jeff Soinski, Chief Financial Officer, Mark wants what.

Earlier today I have enjoyed its financial results for the third quarter ended September 30 of 2020, a copy of the release is posted on the average or website under Investor Relations.

Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of Max 95, any statements contained in this call that are not statements of historical fact should be deemed to be forward looking statements.

All forward looking statements, including without limitation, our future financial expectations are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from doesn't dissipated or implied by these forward looking statements.

Accordingly, you should not place undue reliance on these statements for a list of to lift the description of the risks and uncertainties associated with our business. Please see our form 10-K, and 10-Q filings with the Securities and Exchange Commission.

Average or 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 I'd like to now turn the call over to John.

Thank you Matt Good afternoon, and thank you all for joining us I hope that you and your families remain safe and healthy as we all continue to address the challenges presented by Cobot Nite TV.

We're very pleased with our teams operating performance in the third quarter burst. We returned the business to pre call good levels of revenue as our sales and clinical teams engage with physicians and hospitals and outpatient centers.

To support increased P.A.D. case activity, that's electric procedural volume returns.

Second we achieved key milestones to improve our revenue growth opportunities ahead.

Including the FDA clearance of our Tiger I next generation, CTO cross or and the strategic expansion of our commercial team.

Third we strengthened our operating model, providing both sustainable opex reductions in funding for our growth initiatives through 2021.

During the third quarter, we met chief financial goals, including delivering a 57% sequential increase in revenue and significantly improving gross margin to 34%, while maintaining a lean operating cost structure.

We ended the third quarter with our strongest balance sheet in the past four years with the capital resource is anticipated to fund our new product launches clinical studies and case activity growth programs through 2021.

While we remain watchful for further developments in the COVID-19 pandemic. We believe aventura has emerged from a tough year stronger leaner and better equipped to grow.

On the new account fraud I'm happy to report that we opened 10, new sites in the third quarter and already have launched an additional four new sites in the fourth quarter. Our new account outlook is promising for the remainder of the year is made even brighter with the addition of Pantheris SV and now Tiger I to our product portfolio.

I know that many of you are interested in our launch plans for Tiger I, our new image guided CTO crossing catheter.

We are using the same successful launch program that we executed for Pantheris SV.

First starting with initial launch into a limited number of highly experienced lumivascular sites and then following this initial experience expanding commercial availability for national launch.

We believe the staged approach works best to obtain insights and learning on the performance and capabilities of the device no real world clinical setting prior to launch to less experience door, new lumivascular users it.

It also allows us to develop case studies and fine tune our training programs for physicians in our clinical support teams, including cycling our sales reps and clinical specialists through the initial sites for training prior to national launch.

As we announced in October we have successfully completed our first cases with Tiger I S. Three U.S. sites.

We were very encouraged by physician feedback on the performance of the device and most of all patient outcomes and the number of highly challenging CTO.

I was very happy to be able to personally observe cases that all of these first sites and was thrilled with the patient outcomes delivered by these pioneering positions.

Many of these first C.L.I. patients treated with Tiger I had previously experienced failed crossing attempts using conventional approaches which several scheduled for highly indicted invasive bypass surgery subject to possible future amputation.

Since announcing our first cases, we've already launched one additional site and have three more sites scheduled to launch next week with the plan to launch up to 10 sites by the end of the fourth quarter.

Based on the success of this program, we anticipate expanding commercial availability for national launch in January 2021.

We're excited about the prospects for Tiger I to drive growth of our image guided CTO crossing business.

Current awful lot family of CTO crossing catheters have been in the market for almost eight years well. These are strong devices with a good following weve seen awful lot sales volumes declined in recent years.

During this time, our physician customers increased utilization of our Pantheris atherectomy catheters, which were refreshed in 2018 with the launch of our next generation Pantheris catheter and then again last year with the launch of Pantheris, SV, which expands the franchise for the treatment of small vessels, both above and below.

Below the knee.

We believe Tiger I will vitalize, our CTO crossing business. The introduction of important new features that were developed based on input and feedback from our physician users during the development cycle.

New design elements include high definition real time in Trivascular imaging similar to the imaging provided by our next generation Pantheris catheters.

A user controlled the flexible tip designed to assist in serum ability within the vessel and a new distal chip configuration with faster rotational speeds designed to penetrate challenging lesions.

The Tiger I catheter as a working length of 140 centimeters and five French sheath compatibility for treatment of lesions in the peripheral vessels, both above and below the knee.

Since Tiger I runs on the same O C T platform as our Pantheris products. It allows for rapid exchange to do a pantheris device for atherectomy following CTO crossing.

Most tiger I cases completed to date have been followed by treatment with one of our Pantheris atherectomy devices with Tiger right. We believe we've strengthened the opportunity to drive growth across all of our disposable product categories.

Our next major new product in development is the L 300, Lightbox imaging console, which will be marketed under the brand name Lightbox three since it represents the third major advance in our lifetime box platform with the last major platform improvement introduced in 2016.

During the third quarter, we continued to make progress on this revolutionary redesign as you may recall the next generation Lightbox three system incorporates our proprietary LCT imaging through a state of the art solid state laser brings a more powerful computing platform and adds an advanced software system.

Lightbox three also incorporates an improved user interface, which we believe will streamline the operation for customer ease of use and efficiency.

Perhaps most exciting of all Lightbox three comes with a radically reduce size and weight of approximately 17 pounds compared to 240 pounds for our current Lightbox system. This 90% reduction will provide for easy transport cost efficient shipping simplified service strategy and efficient.

Gration into the Cath lab environment.

We also expect a lightbox three to provide a significant cost reduction of up to 50% compared to our current lightbox.

We believe the Lightbox three will accelerate the evaluation process in new accounts increased the uptake rate for new account acquisition and improve the physician experience overall in short the Lightbox three is anticipated to ease budget physician adoption, which we believe will help more prospective accounts get our aluminum.

Steeler technology into their Cath lab sooner and support increased utilization of our proprietary image guided devices once on site.

Lightbox three product design is largely complete and prototypes have been successfully used to run our image guided catheters and laboratory and cadaver testing.

We're in the process of building final prototypes and anticipate initiating final verification and validation testing this quarter.

Based on successful completion of this testing, we expect to receive CE, marking for the Lightbox three for trial in Europe in the first half of 2021.

We anticipate submitting a five 10-K application to the FDA for U.S. pre marketing clearance Lightbox three in the first half of 2021 and hope to receive clearance for us launch in the middle of 2021.

On the clinical side, while the pandemic has slowed some of our efforts we continue to advance key programs, including our insight <unk> clinical trials evaluating pantheris for the treatment of in stent Restenosis, where is our in lower extremity arteries. We.

We anticipate completing patient follow up and data analysis for a sufficient number of patients to support submission of a five 10-K application in the first quarter of 2021 to expand our U.S. label for Pantheris to include the <unk> SAR indication.

The data we are seeing from the study continue to be highly encouraging and we believe we'll be very compelling compared to other atherectomy devices that have received the I.S. our indication in the past.

Our other primary clinical study is image B.T.K., a post market trial designed to evaluate the safety and efficacy end points for Pantheris SP in the treatment of peripheral artery lesions below the knee.

As you might recall, we had enrolled our first patient in this study early this year, but paused new site initiation due to COVID-19 restrictions we are in the process of adding three new sites to the study and have already restarted patient enrollment in our existing site this quarter.

Unless further delayed by COVID-19, we believe we should be able to complete patient enrollment in the study in the first half of 2021.

We've also continued to make progress on the international distribution of our products last week, we announced market launch and successful first cases with our lumivascular products in Israel through a distribution relationship with Neil farm medical supplies.

We've also signed a distributor distributor agreement for our products in Mexico and are in the process of working through the registration process in that country. We're an anticipated market launch in the first half of 2021.

Before I turn the call over to Mark I want to highlight once more that while our rapid return to growth in our new products are exciting. We believe we are just beginning to realize the clinical and business potential of our unique approach to the treatment of vascular disease.

By empowering positions with real time imaging during a therapeutic procedure, we provide them the information they need to make the best decisions for their patients both during and after treatment. We're seeing the positive impact of this approach in our clinical data and then our increasing case activity every day.

We've taken important steps to improve our operations and strengthen our balance sheet with our leaner operating structure and renewed balance sheet anticipated to fund our business initiatives through 2021.

Well this has been a difficult year in many respects I believe we're now better positioned to execute that at any time in the past several years, we approached the end of 2020 in the beginning of a new year very excited about the future at this point I'd like to ask Mark to cover our financials and then I'll come back for Q an art. Thank.

Thank you Jeff.

Total revenue for the third quarter of 2020 was 2.3 million a 57% increase from the second quarter, where we saw the significant effects of the cobot 19th endemic in our case revenue.

Although we believe that not all of our sites are back to pre coated volumes. We saw a strong return of case activity in Q3 as most sites seem to be reopened and working with an appropriate protocols to ensure patients have access to PD treatments over.

Over the prior year revenue fell 5%.

Delving into our third quarter results, we delivered strong growth of our Pantheris next generation and Pantheris SB products with Pantheris revenue, increasing 71% compared to the prior quarter.

On a year over year basis, our pantheris product revenues increased slightly but were offset by the expected decrease from our legacy products.

Our new Tiger I, CTO catheter and next generation light boxes are key tools and accelerating future revenue growth once deployed commercially.

Gross margin in the third quarter was 34% compared with 24% in the second quarter and 35% in the year ago quarter.

Gross margin largely returned to pre coping levels as revenue rebounded.

Operating expenses for the third quarter were 4.9 million up from 4 million in the second quarter as we return salaries to pre kobin levels and variable compensation rose due to the increase in revenues.

Compared to the prior year operating expenses decreased 11% from 5.5 million as we have successfully maintained our lean cost structure, while investing in strategic initiatives such as expanding our commercial sales activities development of our next generation Lightbox imaging console and investing in our clinical study programs.

We believe that these programs are key to having a successful future.

Net loss attributable to common shareholders was 4.5 million I'll point 5 million from $4 million in the second quarter and improved 0.1 million from 4.6 million a year ago adjust.

Adjusted EBITDA, which is a non-GAAP measure that excludes certain excess and obsolete inventory charges depreciation and amortization expenses stock compensation and other items as noted in the tables in today's press release was a loss of 3.5 million an improvement of almost 10% compared to 3.9 million a year ago.

In the prior quarter, our revenue our EBITDA loss was 2.9 months.

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 investors section.

Cash and cash equivalents totaled 25.3 million as of September thirtyth, compared with 16.6 million as of June Thirtyth.

During the third quarter, we raised 12 million of net proceeds from equity financings. These additional proceeds are expected to provide us with the needed capital just to sustain our corporate growth and strategic initiatives through 2021.

Average, there's cash resources, both on an absolute basis and compared to its reduced operating burn levels are at the most favorable level in the past four years and illustrate our stronger financial position.

As we have shown in the third quarter Aventura was able to resume full operations, while maintaining a number of the cost reductions we undertook as part of the Kobin pandemic, while we expect operating costs will rise as we grow we have established a leaner more efficient operating structure and seek to continue this approach going forward so as to maximize our op.

Operating leverage as revenues improve.

We are also seeking to increase revenue generation by our sales reps actually rolling out our new Tiger I device, enabling our reps to sell and support a greater number of cases in the clinics we serve.

At this point I'd like to turn the call back to Jeff for Q and a.

[noise]. Thanks, Mark the third quarter began with good momentum that has carried through into the fourth quarter New site activity in case activity remains strong we are working hard to maximize every opportunity to generate revenue and win more business for avon's you're at the same time, we continue to make EXL.

Progress on our strategic growth initiatives, including our Tiger I launch commercialization of our next generation Lightbox three imaging system and our clinical study programs. The challenges from earlier this year have driven us to achieve more with less and we've emerged stronger leaner and with an expanded growth opportunity ahead of us.

We currently have the strongest balance sheet in the past four years, enabling us to focus our energy and attention fully on growing the business and expanding our products that we look forward to executing our strategy to build value for avid your stockholders and fulfill our mission of improving the standard of care for patients with vascular disease at this point, we'd be happy to take your.

Questions.

At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line of in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing star keys.

Moment, please while we poll for questions.

Our first question is from Royal Mail, the O'neil with age is capital.

Yeah, Thanks, very much for taking my question.

Just was.

Wanted to ask about the international launch in Israel, obviously, great announcements I Wonder if you could just talk about the addressable market. There just given that I know the Israeli signing these oh since Israel, but I know, they're saying these treaties with some other neighboring countries might expand the doors.

You touched on Mexico, what are some of the other markets as well.

The international front that but you might look to to expand too. Thanks.

No. Thank you for the question.

As you know are likely know Israel is a relatively small market just little under 9 million people in the market. However, it's a market that's highly values technology and technology advances in health care. So we're really delighted to bring our are what we believe is the most advanced technology for the treatment of P.A.D. to this market we have a strong.

In partnership with a a good distributor there and we we believe that we will we will have the opportunity to build sizable inroads in a in a relatively small market.

In addition to Israel, we have signed a distribution agreement with a strong distributor in Mexico. We believe that there will be a sizable opportunity for us there were in the registration process now.

That seems to be going well and we anticipate that we will receive the clearance and be able to market in that country sometime in early 2021, and so those are the two countries that are pending as you may know, we do have existing distributor relationships.

In the.

You are you.

As well as Hong Kong, and our largest international market is in Germany, where we take advantage of the strong relationships that we have with some very important clinical thought leaders in that market.

To have our first experience with our devices, even advair in advance of of U.S. launch since we typically are able to gain CE marking.

On a more.

Rapid basis or more quickly than we can receive clearance in the U.S. and that relationship has been invaluable from a strategic standpoint beyond just the revenue. That's contributed overall, our our international revenue is little less than you know less than 10% closer to probably five six per se.

Of the total business. So most of our revenue due to where our sales force is centered due to reimbursement.

Superior reimbursement in the U.S. is driven out of the U.S., but but we believe the international work that we're doing is very important strategically as we develop this company and developed the platform.

Great. Thanks, so much for the color.

Thank you.

And as a reminder, we are conducting a question and answer session. If you'd like to ask a question. Please dial star one on your telephone keypad. Thank you.

Well. It appears we have no further questions I'd like to turn the floor back over to Jeff for any closing remarks.

Well. Thank you very much for joining our call today, we very much appreciate your interest in our company and your support during these unprecedented times.

Look forward to updating you on our continued progress in further outlining our plans for 2021 on our year end call. Thank you.

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Thank you. So much. This concludes today's conference you may disconnect. Your lines at this time again. Thank you very much for your participation have a great evening.

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