Q4 2020 Avinger Inc Earnings Call
Greetings and welcome to adding gross 2024th 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. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad remind you that this conference is being recorded it is now my pleasure to introduce Matt.
Kreps managing director at Darrow Associates Investor Relations. Mr. Kreps, you may begin.
Thank you Alex and thank you all for participating in todays call.
I would like to welcome you to average risk for quarter 2020 conference call joining us today, our average are CEO, Jeff <unk>, and Chief Financial Officer, Mark Weinberg.
Earlier today average or released financial results for the fourth quarter ended December 31 2020.
A copy of the releases posted on the average are website under our Investor relations before.
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 provision for the private Securities Litigation Reform Act of 1995.
Any statements contained in this call. They 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 could cause actual results or events.
Sure really 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 see our form 10-K, and 10-Q filings with Securities and Exchange Commission.
I Havent youre disclaims any intention or obligation except as required by law.
<unk> any financial projections for forward looking statements, whether because of new information future events or otherwise.
And now I'd like to turn the call over to Jeff.
Thank you Matt Good afternoon, and thank you all for joining us I hope that you and your families remain safe and healthy we're grateful that the continued rollout of the COVID-19 vaccines has provided a light at the end of the tunnel and we look forward to the time when we can all returned to normalcy.
We are very pleased with our team's continued strong operating performance and revenue growth in the fourth quarter. Despite the resurgence of COVID-19 infections and limitations on procedural volume in certain regions late in the quarter.
Fourth quarter revenue increased 19% over the third quarter and 7% year over year.
Demonstrating our continued sales recovery following the second quarter Covid related shutdowns and exhibiting the market's excitement for our new Tigereye CTO crossing catheter.
Incremental sales from the Tiger I limited launch program were a significant contributor to revenue growth in the fourth quarter driving a 38% increase in our image guided CTO crossing revenue over the third quarter, and a 24% increase year over year.
During the quarter, our new account activity has also continued to bear fruit.
We opened nine new luma vascular accounts in the fourth quarter, bringing our total new accounts opened for the year to 36.
More and more physicians are beginning to realize the unique benefits provided by our proprietary image guided technologies. We expect this to continue as our three new catheter introductions over the past three years broaden the appeal of our product line.
In the year ahead, we see several growth drivers, including the continued rollout of Tigereye to our full customer base. The release of our next generation light box, three which we expect to be commercially available in the second half of this year and the strategic expansion of our field sales team.
We're executing on these opportunities as a leaner more efficient operating company backed by a very strong balance sheet and our broadest product portfolio to treat P. E D.
Let me share some details on these initiatives.
We were thrilled with the results of our Tigereye limited launch in the fourth quarter and based on our experience with the device made the decision to advance to full commercial launch in January 2021.
As you May remember, we received FDA clearance for Tiger I in September 2020, and commenced our first U S limited launch cases in October.
By the end of the fourth quarter positioned successfully completed approximately 50 Tigereye cases at 12 clinical sites.
David will attend first cases at several of the initial launch sites and observed firsthand the excellent clinical results delivered by these talented physicians and a variety of challenging C. T OS for.
Physician feedback has been very positive with physicians reporting that Tiger is enhanced imaging increased control and higher rotational speeds improve their ability to safely and effectively cross complex C. T OS including cases that may have required more invasive procedures, such as bypass or amputation.
Yeah.
The response to Tiger is limited launch and progression to full commercial launch in January has brought a high level of excitement to the company.
Just as our Pinterest S vs. Small vessel device opened access to another large segment of the atherectomy market tigereye shaping into an important growth opportunity to expand access to the approximately $100 million peripheral CTO market.
Since expanding the full commercial launch in mid January Tigereye has continued to drive positive momentum in our CTO business.
We have almost doubled our number of Tigereye sites. The device now launched in 23 clinical centers and new sites coming onboard each week.
Utilization and revenue continue to ramp nicely with now over 120 cases performed in the U S.
We have advanced our internal and physician training programs and continue to document exciting clinical outcomes.
We're shipping more devices every week to support both existing and new sites with the Tigereye solution for their C. T O patients.
This momentum is particularly exciting because the CTO portion of our sales our earliest luma vascular product line had been declining over the past few years, even as our Panther as next generation and Panther is S V franchises, we're accelerating.
Driving growth across all three of our platforms is a key element of our growth strategy and as mentioned earlier, we are already seeing the impact of this expanded revenue opportunity in our fourth quarter results.
Tiger I was designed to be used together with our pen terrorists atherectomy products and allows for more efficient exchange to a pan terrace device for atherectomy treatment following CTO crossing.
Many of our Tigereye cases have been followed by treatment with one of our Penn theorists atherectomy catheters, adding to the synergies provided by the new device.
Tiger I as our third new product in three years, putting average are on the leading edge of P. E D therapeutic technology Clint.
Clinical outcomes support this leadership with physicians using our devices to produce measurable verifiable results for their patients the ability to use adventures real time imaging inside the vessel allows physicians to see and treat the disease to safely and effectively restore blood flow, while minimizing damage to the hell.
The vessel, which has been clinically proven to result in positive and durable outcomes for patients.
We're making excellent progress on a number of additional strategic milestones in 2021 starting with our Lightbox three next generation imaging console.
We are nearing completion of development for this revolutionary redesign and expect to submit a five 10-K application for U S pre marketing clearance by mid year.
If all goes according to plan, we hope to be in a position to release. This next generation console into the market in the second half of 2021.
We believe Lightbox three represents a major leap forward in imaging portability and capability compared with our current unit and are very excited to get this new console into the labs of both new and existing customers.
Lightbox III radically reduced size and weight compared to our current L. 250 platform from a console that is the size of a large ultrasound machine in waves 240 pounds to a portable unit that fits into a carry on sized suitcase and weighs less than 20 pounds. This radical reduction in size and 90% low.
Your weight provides for easy transportation, a simplified service strategy and streamlined integration into the Cath lab environment.
We also expect the Lightbox three to breakthrough one of the most significant barriers cost with a reduction of up to 50 per cent compared to our current Lightbox, we believe lightbox three's portability and more favorable economics will accelerate their evaluation process in new accounts increase the uptake rate for new account.
Zishan and improve the physician experience with an advanced solid state laser a more powerful computing platform redesign software system and highly intuitive user interface. The lightbox three is anticipated to ease physician physician adoption and support increased utilization of our proprietary image guided.
Devices once on site.
In addition to our work on Lightbox three we are also exploring opportunities to expand our peripheral product portfolio with new catheter solutions that would provide additional utilization opportunities and continue to differentiate excuse me to differentiate avid during the marketplace. We look forward to discussing these products in more detail on that.
Future.
Finally, I wanted to briefly discuss the topic that's generated a lot of interest recently, our potential transition into the C E D or coronary artery disease market.
As previously indicated we believe the fundamental technology and Tiger I could have coronary applications developed specifically for that indication.
The treatment of chronic total occlusions in the coronary arteries represents a clinically challenging and largely underserved market due.
Due to the size and tortuosity are the vessels risk of perforation or other adverse events and complexity of the procedure currently only a limited group of interventional cardiologists regularly perform percutaneous coronary intervention to treat complex C. T OS.
These C T O P C. I procedures, often require the use of multiple wires balloons and other devices and can take up to four to five hours under fluoroscopy subjecting the Cath lab staff and patient to extended exposure to X Ray radiation.
Even with these limitations. It is estimated that there are approximately 50000 C. T O P. C I procedures performed each year.
In addition, it is estimated that over 200000 highly invasive coronary artery bypass graft or cabbage surgeries are performed in the U S. Each year with up to 30 per cent of these procedures related to the treatment of coronary C. T OS.
By combining real time imaging inside the vessel with precisely controlled therapeutic catheters. We believe that we can provide important new tools to support physicians efforts to safely and efficiently treat coronary C. T OS on a less invasive percutaneous basis.
We also believe that our proprietary image guided approach could expand the number of interventional cardiologists willing to take on C. T O PCI procedures and potentially reduce the number of highly invasive cabbage surgeries performed for this debilitating condition.
While we know it will take some time to complete product development and anticipate that a clinical study will be required to support the regulatory clearance process. We believe this could be a transformational opportunity for average or.
Turning to our clinical study initiatives, while the pandemic impacted some of our efforts in 2020, we've made good progress on our key programs our insight I D. E. Clinical trial is designed to evaluate pen therapy for the treatment of in stent restenosis or ISR in lower extremity arteries.
I'm happy to report that we've completed additional cases and data collection and are now working to finalize data analysis for submission of a five 10-K application in the second quarter.
With the goal of expanding our U S label for Penn tariffs to include the ISR indication.
The data are highly encouraging and we believe will be very compelling compared to the laser atherectomy devices that have received the ISR indication in the past.
For the second clinical study image V. Teekay is a post market trial designed to evaluate safety and efficacy endpoints for Panther is S V in the treatment of peripheral artery lesions below the knee.
We enrolled our first patients in the study in 'twenty 'twenty, but paused new site initiation due to COVID-19, with the lessening of COVID-19 restrictions. We have now opened for clinical site for enrollment and are expanding our patient enrollment efforts. We're excited about the potential to develop strong data in support of the outstanding clinical outcomes.
Outcomes, we see in Cath Labs every day with this revolutionary small vessel device.
It's exciting to start 2021 with positive momentum and new opportunities for growth I believe that we are beginning to see the potential of our proprietary approach to the treatment of vascular disease and with three new compelling products designed to address even the most challenging cases avon's your builds upon its position as a technology.
<unk> in the treatment of P E D.
By lowering the barriers to adoption with our new Lightbox III, we expect to make our innovative solutions more readily accessible to physicians and by empowering physicians with real time imaging during a therapeutic procedure, we provide them the information they need to best treat their patients. We continue to see the positive impact of this approach in our <unk>.
<unk> data and our increasing case activity every day.
In order to take advantage of these favorable developments, we plan to expand our commercial footprint and geographic reach in the U S. In 2020 one with the addition of new sales and clinical support personnel over.
Over the past couple of years, we've modestly expanded the size of our sales force to 27 full time employees, including sales management at the end of the fourth quarter, we plan to increase the size of our field sales team by about 20% this year.
At this point I'd like to ask Mark to cover our financials, and then I'll come back for Q&A Mark. Thank.
Thank you Jeff.
Total revenue for the fourth quarter of 2020 was $2 7 million, a 19% increase from the third quarter and 7% increase year over year. It's important to note that many of our sites are still not back to pre COVID-19 volumes and as a result in the latter part of the fourth quarter procedure volume was unfavorably impacted by the research.
<unk> of COVID-19 infection.
This makes our strong revenue performance in the fourth quarter, even more impressive.
But probably the most exciting aspects of the quarter's performance was a strong revenue contribution from our Tigereye device, which I just discussed led to a 38 per cent quarter to quarter increase in our overall image guided CTO catheter revenue.
Gross margin in the third quarter was 36% an improvement of 200 basis points compared with 34 per cent in the third quarter and flat with the year ago quarter.
36% is the highest gross margin level that average or has achieved as we continue to work hard to generate operating efficiency.
We believe there are opportunities to further increase our gross margins as we scale volumes and gain economies of scale.
Operating expenses for the fourth quarter were $5 2 million up slightly from $4 9 million in the third quarter, but down 12% from $5 9 million from a year ago period.
Importantly, we have maintained a lower operating cost profile than prior to the COVID-19 pandemic, enabling us to direct capital towards investment in strategic initiatives, such as expanding our commercial sales activities.
Many of our next generation products and our clinical study programs.
We believe that these activities are key to Avon true differentiation and future success.
Net loss attributable to common shareholders was $4 6 million in the fourth quarter up point 1 million from $4 6 million in the third quarter, an improvement of <unk> 5 million from a year ago period.
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 with a loss of $3 7 million an improvement of <unk> 5 million year over year, a copy of the.
<unk> from net loss to adjusted EBITDA can be found in today's press release, which is also posted on our website at www Dot <unk> dot com under the investors section.
Cash and cash equivalents totaled $22 2 million as of December 31st.
During the first quarter, we raised an additional roughly $13 million in net proceeds from a bought deal offering providing a cash balance of more than $35 million when added to the year end balance.
Finally, another important note that we concluded was amending the existing loan agreement in January 2021.
These changes included an extension of the interest only period and maturity date of the term loan by two and a half years with the interest only period being extended from June 30th 2021 to December 31, 2023, and the maturity date being extended to December 31 2025.
In addition, the amendment reset the material adverse change representation date, and adjusted the minimum revenue requirement.
At this point I'd like to turn the call back to Jeff for Q&A.
Thanks, Mark for fourth quarter began with good momentum and the excitement steadily built as we conducted the initial cases under our Tiger I Limited launch program New site activity in case activity remained strong and we executed well on efficiency and operating metrics with our next generation Lightbox three imaging system clinical study programs.
And sales expansion plans, we are carrying this enthusiasm into 2021.
We're focusing our energy and attention on growing the business and expanding our product set we look forward to executing our strategy to build value for average 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 well 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 is 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 sorry.
Sorry to pick up your handset before pressing the star.
Our first question is from Nathan Weinstein with Aegis capital.
With your question.
Hey, good afternoon, Jeff and Mark Thanks for taking my question good to see the ongoing growth in your business and perhaps we could start with a couple of pandemic related questions I know mark touched on this in your prepared remarks, but if you guys could perhaps share some more insights into the resumption of case volume.
Youre seeing in your markets as we come back from the pandemic lows.
Yeah. Thanks, Thanks, Nathan as you saw in our third quarter results. We came back strong following the significant and severe shutdowns in the second quarter.
As we went in to the fourth quarter. We continued the strong momentum kind of coming off of the Thanksgiving break and the resurgence of of Covid infection nationwide. We did see a slowdown in volume, particularly in the latter part of December.
And additional.
We are maybe the the reinstatement of certain limitations, especially in certain regions of the country and so that did carryover into the early part of the first quarter and we also had the additional impact of the snowstorms and ice storms in Texas. However.
However, we've come back very quickly from that our Rep field Representatives have stayed active in in the labs and we're really pleased with how they've been able to address these challenges and how our physician customers have put the needs of their patients first so we see an improvement really a week.
<unk> seen an improvement throughout the first quarter.
Continued lessening of restrictions kind of following the the January the.
For January limitations.
And feel good about where the market is now, especially as more and more vaccines roll out most of our representatives have been vaccinated and clinical specialists and certainly most physicians and frontline health care workers in the labs, and we work and have been vaccinated as well.
Oh, great. Thank you and just had one follow up on the pandemic front, which is and this is something we talked about much earlier. It was like maybe Q2 Q3 Q of last year, but Ah.
Your integration of virtual tools in the selling and training process.
Where are you with that.
Yes, we still have and thanks for mentioning that especially in the second quarter. We took advantage of the technology and in some cases more time for the physicians to engage with us via zoom calls Webinars et cetera, we're continuing that program, we're continuing that for.
And really Doctor a job for Golar Who's our Chief Medical Officer is very involved in this and training, our reps and getting people comfortable and getting them ready, especially around tigereye and launching tigereye into these new accounts and you saw the pretty dramatic uptake on new accounts already this first quarter almost doubling to 23.
Free accounts with with Tigereye, so far in the quarter. So so we're continuing to use those tools. There is no substitute for being there in person are certainly to drive and support case volume. So we're staying present, we're staying active we're staying in the field are even you know myself and several of our senior team.
We're in the field quite a bit, especially in the fourth quarter with the limited launch of Tigereye, but but we're weaving in and continuing to use the technology and kind of maybe the greater acceptance of of of using that technology as we engage with physicians and our customers.
Great. Thanks, that's helpful and switching gears here and said that for the product side.
<unk> done a great job largely refreshing the portfolio and know there's more products on the way, but maybe you could explain what it means on a on a portfolio level. When you approach new prospective clinics. They typically start with one of your products and then expand to being a consumer of multiple different average our products and how does that process go.
We typically will start with selling and communicating the benefits of our image guided luma vascular approach and that really is the fundamental core of our selling process and our selling message and I think it's quite easy for physicians based on the data, but also based on their own personal.
Periods, and just the intuitiveness of being able to precisely target disease and preserve healthy vessel.
Typically the first products that are used are our atherectomy products and usually our seven French pentair as nextgen product in the SFA, which is a more comfortable area for the physicians to work with a new technology and a new device, but it doesn't take long to transfer that.
That experience to treating the smaller vessels below the knee with our Panther SSD device now having said that pentair is V has been very effective in opening the doors to new accounts that are focused on V. Teekay in CLI disease, and where there really isn't a safe and effective.
Or or or a safe and effective device to provide large luminal gain below the knee without damaging or perfect. These very small vessels and so you know overall will start with 10 terrorists atherectomy will will.
Also work in or sometimes start with Panther says V. And then we will proceed to use of our CTO crossing devices now up until now we've only had awful lot and we're continuing to sell and support ocelot and continue to be very pleased with the case results, we see with our ocelot catheter, but now we have another new tool.
<unk> to introduce into the hands of our physicians and that is our tigereye device, but you know one of the things. We're focused on is getting our reps and our clinical support specialists very very comfortable with that device to make sure that they can provide the expert support the physicians deserve. So typically we will start with atherectomy, we have obviously the stronger reimbursement or not.
Direct me as well and especially in a hospital environment that will lead to usage of our CTO crossing devices.
Great. Thanks, Jeff.
We of course look at revenue as a gauge of the business progress and and also expected growth from the field sales team as a driver of that or one of the drivers from that but maybe shifting towards another metric that's important in the P&L, which is on your margin profile, it's nice to see margins continue to expand.
Can you talk about maybe in general terms, what we can expect from that front end and what levers you have on that with margins.
Yeah, certainly I'm going to ask Mark to expand on that Nathan Yeah Nathan.
Nathan Thanks for the question. So the nice thing about average as product set is that we have very very high direct and contribution margins above 60% you know the one limiting factor that we have is just the volume that will run through the factory as.
As we continue to drive revenue with new products and with new customers. We do expect to be able to increase our gross margin, especially as we gain additional efficiencies and operating leverage and so we're really excited about you know when a new product means for us and also winning additional accounts and how they can really drive our gross margins higher and higher.
We're very pleased with our performance in the fourth quarter and we look forward to additional margin expansion in future quarters as we can drive our revenue growth.
Okay, great. Thanks for the clarification on those points and I was just a final question from me regarding.
Regarding the expected growth from the field sales team are there specific roles or geographies.
That you're hiring for looking to hire for and then what how would you characterize the environment in terms of the availability of talent.
Yeah, So maybe I'll take the second part first there there is it is a competitive environment to get to find and retain talented experienced people in the cath lab, we have not found it to be.
A challenge, though because we're offering a differentiated device, which is a little more exciting than just going in and selling a typical peripheral product and so in a way we kind of self select for reps and clinical specialists, who are excited about being involved with the new technology and a growing company. That's that's.
Really making a difference in the market.
Now as it relates to our strategy in specific geographies.
We're doing really a combination of factors, we're going deeper in certain markets, where we have shown significant growth new account activity either by adding clinical specialists to support the accounts of the rep can move on to find new accounts. The territory sales manager. We also have identified and created a new position as part of our.
Sales structure called a sales associate which is the more junior sales rep that might be very active in greenfield opportunities and kind of trying to develop new markets typically in partnership with a more experienced T. S M.
And then we are looking at adding a couple of new markets and geographies, where we may have one or two accounts that have come in through leads et cetera, and are being supported by reps that are pretty or clinical specialists that are pretty distant but we see based on the data and the strategic analysis the opportunity to really create a beachhead and grow a new mom.
And so it's really a combination of all three working together.
For we're working obviously in partnership with our sales leadership and are leveraging data as much as possible and and really trying to be efficient and make sure that we're not being too spread out as a small organization because we want to build kind of density of the cow.
And assets for our greater efficiency.
And you know that's true.
Yes ma'am.
Just one investment you know that's an area of course that we're making significant investment, but we're also as you know investing in R&D investing in new products, you know trying to broaden and deepen the bag of our of our reps and make them more efficient and give them more to sell and then also have some very exciting clinical data coming down the pike all of which works together.
Other to make the job of the field sales are up which is a tough job easier.
Yeah.
Got it understood and thank you, Jeff and Mark for for addressing my questions and we're looking forward to see ongoing progress from our business for the balance from about 21.
Thank you very much I appreciate the questions Nathan.
Thank you we have reached the end of the question and answer session and I will now turn the call over to Jeff Filinski for closing remarks.
Well. Thank you very much for joining our call today, we very much appreciate your continued interest in our company and your support and look forward to an exciting year of progress ahead.
Thank you.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.