Q1 2021 CryoLife Inc Earnings Call
Greetings and welcome to the Cryolife first quarter, 2020, One financial conference call. At this time all participants are in a listen only mode. A question and answer session will follow the final presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.
And we'll now turn the conference over to your host Bryan Johnson from the Gilmartin group. Thank you you may begin.
Thanks, operator, good afternoon, and thank you all for joining the call today, joining me from Cryolife management team are Pat Mackin, CEO and actually CFO.
Before we begin I would like to make the following statements to comply with the safe Harbor requirements of the private Securities Litigation Reform Act of 1995 comments made on this call that look forward and time involved risks and uncertainties that are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.
The forward looking statements include statements made and so the companys or managements intentions hopes beliefs expectations or predictions for the future. These forward looking statements are subject to a number of risks and uncertainties estimates and assumptions that may cause actual results to differ materially from those from these forward looking statements.
Additional information concerning certain risks and uncertainties that may impact. These forward looking statements is contained from time to time and the company's SEC filings and in the press release that was issued earlier today.
With that I'll turn the call over to Cryolife CEO Pat Mackin.
Hey, Thanks, Brian and good afternoon, everyone. Thanks for joining us this afternoon.
And as you can see from our results our strategy is working and the recovery and our business is ahead of where we thought it would be at this time.
And you'll hear our business does continue to be impacted by COVID-19, especially in Europe, when we have a significant presence.
But our business has remained resilient and the face of COVID-19, and it continues to rebound, which we believe bodes well for the future.
We've made substantial progress and the first quarter and continue to see demand build for our recently launched innovative aortic repair products.
We also continue to invest and growth initiatives, including our R&D programs and clinical trials.
Despite continued headwinds from COVID-19, we achieved seven 7% revenue growth on a GAAP basis, and 3% pro forma constant currency revenue growth for the first quarter of 'twenty, one versus the first quarter of 2020.
When we last spoke to you and mid February the vaccine rollout was just beginning to accelerate and the U S.
Unfortunately, many countries in Europe, we're starting to experience renewed spikes and COVID-19 infections, and we're Reappraising Reimposing Lockdowns, which continue to this day.
We expressed a cautious outlook for the first quarter due to these factors coupled with the anticipated decrease and tissue supply.
While we resolve the truth ceiling issue that arose in the fourth quarter of last year.
Unfortunately, as the quarter unfolded, and we experienced improved conditions in the U S.
And as well as the positive impact from our new product launches increased you take inventory and lessen and anticipated impact from our tissue processing revenues are.
Our Q1, 2020 when revenues were stronger than anticipated.
For example, and the first quarter of 2021 M. D S increased by 67%.
And excess revenues increased by 87% and.
And <unk> revenues increased by 11% all on a pro forma constant currency basis compared to the first full quarter of 'twenty 20 last year.
In addition, and the first quarter on a constant currency basis, we saw on X revenues increased 6% compared to the first quarter of last year.
On X aortic valve revenues grew 16% and North America.
As a reminder, the onyx aortic valve has a significant clinical advantage for patients over competitive valves and.
And that it's the only FDA approved and mechanical aortic valve that can run on a lower INR from one five to 2.0, rather than 2.1 to three point out.
And you've all seen the U S made significant progress on the vaccine rollouts since our last earnings call.
And as a result, we've seen improved hospital and management of COVID-19 and some of these conditions have improved and the U S.
Unfortunately, the vaccine rollout in Europe has not been as good as it and the U S and they've been and COVID-19, and Theres been a COVID-19 resurgence.
Many European countries are back and locked down and Brazil, a growth market for US is currently experiencing its worst impact from COVID-19.
However, yes.
If as we hope the vaccine Rollouts and vaccine adoption continue to progress and conditions improve and these regions. We expect our pro forma revenue should accelerate later this year.
Ashley will provide more commentary on our outlook and Q2 for Q2 later on the call.
As I explained on our last call our near term plan is to accelerate revenue with three key initiatives first the commercialization of our five new aortic stent instinct graft products in Europe and these are a M. D. S. Nexis, our next generation Yo Tech products and side have you to open neo and and yet.
Second the continued expansion into Asia Pacific and Latin America.
Third.
Near term regulatory approvals and approvals in major markets. This includes per clock PMA product mitral, PMA and Baidu and China.
I will walk you through and update on each of these initiatives starting with a review of our five new aortic stent and stent grafts.
First.
A M D S. As the world's first archery modeling hybrid device used for treatment of acute type aortic dissections and we remain very optimistic.
As I noted earlier during the first quarter, we posted $1.3 million and revenue and increase of 67% on a pro forma constant currency basis over the first quarter of 2020.
This growth continued on our occurred despite the regional Lockdowns in Europe through a good portion of the quarter.
We also continued to secure.
Marketing authorizations in select markets around the world, which was additional regulatory approvals, we expect to secure.
And that's very well for further increases and AMD as particularly when the pandemic dissipates and these key markets.
And second Nexus posted revenues of $408000 and increase of 87% on a constant currency basis compared to the first quarter of 2020.
We believe these resonated results would've been better for Nexus as well as for other products, if not for the renewed lockdowns and travel restrictions and Europe.
For example, we had several nexus cases scheduled during the first quarter debt were rescheduled as a result of the latest spike and infection rates.
We still continue to see Nexus cases scheduled for the upcoming weeks and months and remain optimistic regarding the prospects for this technology.
Third and side as our newest device and our portfolio to treat oracle abdominal aneurisms with Endovascular stent grafts.
Our revenues for this product line, which include inside and the extra design portfolio grew 48% on a constant currency basis, when compared to Q1 of 2020.
Fourth I V.
To open Neo is our newest product and our frozen elephant trunk category. This is to treat dissections and aneurysms of the aortic arch.
Revenues from this product line, which include a Vito open plus and Vito open Neo grew 30% on a constant currency basis compared to Q1 of 2020.
Fifth regarding and yet we expect to resume on market release later in 2020 one.
We expect demand for these five products to build as vaccinations and vaccine adoption accelerates as.
And as well as the market adoption for these products continues.
In addition, we expect to benefit from improved Yotel inventory, resulting from our own internal efforts and the on boarding of a second source sewing supplier.
Moving to our next initiative international expansion and Asia Pacific and Latin America through new regulatory approvals for existing products as well as expansion of our commercial footprint and our footprint in these regions.
These efforts are beginning to pay dividends despite the pandemic.
Our revenues and Asia Pacific increased 11% on a pro forma constant currency basis, and the first quarter of 2021 compared to the first quarter of 2020.
Unfortunately, and Latin America, Brazil continues to be severely impacted by COVID-19, and our business and that region is disproportionately weighted in Brazil.
We anticipate that growth will accelerate and both these regions as the pandemic subsides and we gain additional marketing authorizations in both Asia Pacific and Latin America.
Our third initiative is gaining three near term regulatory approvals in major markets.
More specifically.
We expect to be submitting PMA for per clot and port proactive mitral and the second half of 2021.
As well as continuing to pursue China FDA approval for bio glue.
And that if approved should help accelerate revenue in 2020 two.
On this initiative. The first program is the PMA for for my for per clock.
We will be submitting for both open surgery, and laparoscopic indications across multiple specialties as well as for large scale manufacturing capabilities.
And we're on track to submit our PMA to the FDA and Q3, 2020 one.
Second we expect to submit our PMA and mid 2021 for regulatory approval for a lower INR label for the on X mitral valve.
This is similar to our INR label for on X aortic valves.
And if this new labels approved for the mitral valve patients with the on X mitral valve will be able to be maintained on lower doses of coumadin compete compared to patients implanted with other mechanical valves.
For example, the current standard of care is coming in with and INR rate from two five to 3.5, and we'll be going after a label of cumin and for INR levels from two to 2.5.
This will lead to significant clinical benefits for patients.
We believe that this approval for our mitral valve and weren't able to take significant market share and the mechanical and mitral heart valve market similar to the market share gains we've experienced with our on X aortic valve.
Third as it relates to regulatory approval for biogas and China.
And M P, a which is the Chinese equivalent to the F D. A.
Has recently requested additional data that may require additional testing.
This request for additional testing and makes it unlikely and our view that we can receive approval for biogas and China during 2021.
We continue to have discussions with the N M. P. A M and will provide an update on our approval timeline and when were fruit when we have further clarity.
This potential delay does not meaningfully impact and our view on accelerating near term revenue growth opportunity as I described earlier.
In addition to our progress on these initiatives. We also continue to make very good progress on our midterm pipeline with key products that are currently and U S. Clinical trials are on ones for which we expect to start in the U S. Clinical trials later this year.
These three trials are proactive on a nexus and E M D S.
We continue to make significant progress on the enrollment and our proactive on a trial a prospective randomized clinical trial to determine if patients with the on X aortic valve can be maintained safely and effectively on <unk> versus warfarin.
We currently have 51 sites qualified and beginning enrollment.
And 38 sites actively enrolling and over 235 patients currently participating in the study.
Feedback from surgeons and patients participating in the trial remains very positive.
Despite the pandemic headwinds and assuming the trial and meets its endpoints. We believe we can still achieve FDA approval by late 'twenty for early 'twenty five.
If we successfully obtained such an approval we believe the on X aortic valve will become the market share leader and the aortic valve market and patients under the age of 70.
In addition to the proactive on a trial our partner and to spend is making great progress on its U S. IDE trial for the Nexus device and that trial is known as <unk>.
Okay.
Finally, we are on track to submit our I D for our recently acquired a M. D S device and mid 2021.
Which if submitted that and would put us on track to begin our a M. D S clinical trial by year end.
If these trials proceed as we expect we anticipate FDA approvals for proactive on a M. D S and Nexus by late 'twenty, four 'twenty, five which will give the company and additional $1 billion and total addressable market at that time.
With that I'll now turn the call over to Ashley.
Thanks, Pat and good afternoon, everyone.
Total company revenues were $71 $1 million for the first quarter up 7% on a GAAP basis compared to Q1 of 2020 and up 3% on a pro forma constant currency basis, compared to Q1, 2020 Rev.
Revenues came in ahead of our quarterly guidance student and improving procedure volume, so the U S and better than anticipated revenues and Europe. Despite the pandemic.
On a year over year basis, and the first quarter 2021.
And you would extend and stent graft revenues increased 31%, reflecting an improved inventory position. The addition of the a M D S and September of 2020.
And the acceleration of adoption of Nexus and the E U.
On X revenues increased 7% and bio glue revenues increased 7%, reflecting improving procedure volumes and the U S.
Tissue processing revenues decreased 11% due to the true ceiling issue discussed on last quarter's call and the impact of COVID-19.
On a pro forma constant currency basis, aortic stent and stent graft revenues increased 16%.
On X revenues increased 6% and bio glue revenues increased 5%.
Performance in each of these product lines was adversely affected by the COVID-19 pandemic.
On a regional basis first quarter, 'twenty, and 'twenty revenues and Europe increased 25%.
North America was flat.
And the Pacific increased 11%.
And Latin America decreased 40%, all compared to the first quarter of 2020.
On a pro forma constant currency basis revenues in Europe increased 12%.
And North America was flat.
Asia Pacific increased 11%.
And Latin America decreased 38%, all compared to the first quarter of 2020.
Our gross margins were 67% for the first quarter of 2021 and.
And 66% for the first quarter of 2020.
G&A expenses and the first quarter were $38 $6 million compared to $39 million and the first quarter of 2020.
The first quarter of 2021 includes acquisition related and other nonrecurring charges of $1.5 million, primarily related to fair value charges related to the Cypress acquisition.
First quarter interest expense of $4 million includes approximately $2 3 million.
On the expense related to our term loan b.
$1 1 million related to our convertible debt and approximately 600000 and amortization of debt origination cost.
Other expense in Q1 includes $1 $9 million and realized and unrealized foreign currency translation losses.
On the bottom line, we reported GAAP net loss of $3 $1 million or eight cents per fully diluted share and the first quarter of 2021.
Non-GAAP net income was $1 $4 million or <unk> <unk> per share and the first quarter.
<unk> GAAP and non-GAAP earnings includes the pre tax loss of $1 $9 million or approximately four cents per share related to foreign currency translation losses.
Reconciliations of GAAP to non-GAAP income and EPS are included in the press release that we issued this afternoon.
Adjusted operating income was $7 $2 million for the first quarter of 'twenty, one compared to $2 $7 million for the first quarter of 2020.
Adjusted operating income reflects add backs, the amortization expense and acquisitions and other related charges and so.
Operating income.
As of March 31, 2021 we had approximately $57 1 million and cash.
$320 million and debt and the full $30 million available under our revolving credit facility.
Adjusted EBITDA for the first quarter of 'twenty, one was $11 $4 million compared to $7 4 million for the first quarter of 2020.
Gross leverage as defined by our credit facility stood at six three times and net leverage stood at five two times.
And as referred to our press release for additional information about our non-GAAP results, including a reconciliation of these results to our GAAP results.
Regarding the tissue situation that we discussed on our last call. Our further testing establishes that the $5 million and quarantine tissue is safe to be implanted in patients. We have notified the S. D E and these results and we hope to be able to release. This tissue later this year.
And now for our outlook.
Continued uncertainties regarding COVID-19, 19, variance and vaccine rollout and adoption specifically in Europe.
Difficult for us to predict long term results recall that approximately 55% of our revenues are generated in North America and the remainder are generated overseas. The majority of which is in Europe, where we are introducing our new products.
Given the potential for meaningful impact to procedure volumes internationally relative to Q1, and specifically to our new product launches in Europe, we will not be issuing full year 2021 guidance at this time.
Due to these factors. We believe we just we continue to believe that COVID-19 will adversely impact Q2 performance and potentially later quarters.
With that said.
Our expectation is that Q2 revenues will be between 71 and $73 million.
And if COVID-19 vaccine metrics continue to improve and the overall environment normalizes, we expect improvement and top line growth and Q3 and Q4.
Regarding our ongoing investments designed to fuel future growth, we intend to continue to invest and our commercial channels, particularly in Asia, and Latin America, as well as and our R&D pipeline.
We believe that we will be able to fund these investments through our ongoing operations and that we can comfortably make these investments and service our debt without having to raise additional capital.
I will turn the call back to Pat for his closing comments.
Hey, Thanks, Ashley and closing have you've heard this afternoon.
The global pandemic, our business continues to perform very well that is without question do the outstanding efforts of our employees around the world and our leadership team.
Forward and we're optimistic that the rollout of the various vaccines around the world will continue to approve and market conditions provided that the vaccine acceptance continues and improves.
What procedure volumes returned to previous levels, we believe there'll be better positioned to realize the commercial potential of our products.
Even though we're not providing formal full year 'twenty, one and financial guidance, we do believe that when the pandemic subsides and vaccines are more widely available and accepted will be and are better positioned to deliver double digit year over year revenue growth.
We have several catalysts in 2020, one that we do not have and 2020.
As I explained earlier, we have three initiatives that will drive growth in the period over 'twenty one to 'twenty three first in 2020. One we should see continued growth of our five new aortic stent and stent grafts, a M D S Nexus and side neo and and yet.
And second in 'twenty, 'twenty, one and we anticipate further upside from our investments and our channels and new regulatory approvals and Asia Pacific and Latin America.
Third in 2020, one we were filing our PMA is for both per clock and the on X mitral valve on.
All of these catalysts are and ours is our expectation and continue to deliver on the operational goals I've outlined previously supported by our strong financial position makes us and.
It makes us optimistic regarding our ability to drive accelerated revenue growth as the pandemic subsides.
So in summary, we will continue to work diligently and to strategically invest for growth mitigate operational risks and manage our expenses.
The first quarter once again demonstrated the resilience of our product portfolio and the effectiveness of our strategy to focus on aortic repair.
Based on how our products and our organization has performed over the last year, I'm, more confident and our business and prospects than ever before and with that I'll turn the call back over the operator for questions.
Yeah.
At this time, we'll be conducting a question and answer session and I'd like to ask a question. Please press star.
And one on your telephone keypad and a confirmation tone will indicate your line is and the question. Kim You May Press Star two and he would like to remove your question from the queue.
Okay, Great Clinton and I will be necessary to pick up your handset before pressing and stacking my mom and place while we poll for questions.
Yeah.
Yeah.
Yeah.
My first question is from Mike Matson of Needham. Please state your question.
Yeah.
Yeah, Hi, Pat and Ashley This is actually David Sachs non for Mike. Thanks for taking the questions and congrats on the quarter I. Appreciate all the color I guess my first question is just on second quarter guidance can.
Can you just kind of talk us through what what that implies I guess from a geographic perspective, Europe. I think you said was up 12% and.
Pro forma.
Does that does Europe improve from here and I think you said North America was flat. So just given the increasing vaccines and North America and do you think volumes improve there and then I have a couple of follow ups. Thanks.
Yeah, I would say that I mean, there were two things and the first quarter that we kind of highlighted a folks one was the the tris tissues issue that we had and and that clearly impacted that's mostly a north American products. So that clearly impacted the first quarter and the U S. So while the you know the vaccine rollout improved and the U S.
And we saw a good return for some of the other products and the U S or our tissue business was you know was heavily weighted on and the first quarter. So.
And we actually made it and it made a comment in his remarks, you know we've we've done all the testing on the on the tissue. We Havent you know, we've we've submitted that to the FDA and and we haven't heard back yet. So you know I think the U S.
And is in better shape than it was in the first quarter I think the you know part of our guidance and it shows sequential growth from from Q1, but you know you've been you've seen the news whats going on in Europe. So Europe actually performed extremely well we grew double digits.
As a business and the face of all these resurgence who's and continued Lockdowns and so you know where were anticipating growth and the second quarter. The question is I you know I think I've been proven and a number of times that you know trying to predict what's going to happen as it relates to COVID-19 is kind of a dangerous business. So yeah, we're showing sequential growth.
And hopefully it'll improve from there, but I think it's up and get to a.
Fair estimate about what's going on particularly where so we're so heavily weighted in Europe.
Both from a revenue standpoint, as well as that's where all of our new products are so it's like a double whammy, if Europe slowed down.
Slows down the overall business.
Okay. That's helpful. And then I did have a question on and yeah.
You mentioned.
You know you'll resume on a market released later on this year I guess before that happens are.
Are there any major projects are on tests that need to be done before you you do that or you know or are you pretty much I'm just.
Kind of finalizing on that launch before before you go for lunch and typically when this is this is and you know 30 years of doing this typically what we do is a we start with a limited market release and start to roll the product out and you know what we'll go through that through that phase and then you know.
And if we're happy with how that goes and we'll ramp it up into a full market release. So you know we're not waiting on any approvals or anything like that its really just you know we're going through the limited market release and that moving into full market release.
Okay, and then if I could just squeeze it a lot and I'll ask one and just M. B S.
I think you said $1 9 million in the quarter correct me, if that's wrong, but I I guess my question is how is the sales force doing with that I mean with given its just such a high margin product is a are there incentives in place to push that or and and then also you know how how are they balancing.
That with the rest of the portfolio. Thanks for taking the questions. Yeah. So we did we did $1 3 million and the quarter and that was 67% pro forma constant currency growth over Q1 of last year.
And.
And so a couple of things a couple of things I would add on this so we have approval and every country in Europe, we have a proven and Canada were getting selective approvals and markets and in Asia, and Latin America that recognize the CE Mark.
Given that the majority of where this opportunity is was under severe lockdowns and the quarter or the fact that we grew 67% so something about the product.
And it's not just I mean, you know the Lockdowns are one thing, but trying to launch new products and are in a locked out when people are having a hard time moving across regions.
Regions, and and and the like so.
I think it's a great product and as as these vaccines rollout and in Europe, and you know continue and even in Canada.
We will see the acceleration of of AMD, Yes, we're also going to be getting some more markets improved throughout the year and Asia and Latin America. So I think it's a it's a great product the other thing and that's really nice about the product as it fits perfectly in the portfolio. So if you think about.
And our reps call on a heart surgeon.
This device is put in by heart surgeons.
And those heart surgeons use our on X aortic valve and use our on X mitral valve they use bio glue they use our new frozen elephant trunk they use a M D S. So.
And you know more and more people to see and and a really significant opportunity to cross sell across the aortic you know procedures that we've talked about so I think that debt.
On the cross selling and the pandemic subsiding and getting more markets. I mean, we think AMD is who's going to do extremely well going forward.
Yeah.
Great. Thank you.
Our next question is from Suraj Kalia of Oppenheimer and co.
Please state your question.
Good afternoon, everyone can you hear me all right.
Hey, Suraj.
Pat and Ashley Congrats on a great quarter.
So Pat bunch of questions and forgive me if some of these had been mentioned just jumping around between two calls.
<unk> Pruitt Penny Pat the current enrollment numbers and are you still on track for and is equal to greater than 500 by end of 2021.
Yeah. So we did we did $2 34 at 235 right now on enrolled and we've got 51 centers signed up and 38 kind of activated so we're still kind of going through that bringing all of our centers up to being able to enroll yeah, I think I think five.
100 is well within reach for for this year in fact, I'm, hoping we'd do better we've had a couple of really big centers come online a very recently, so and do you think 500 is well within reach.
Got it.
On pet proactive mitral and remind us again when are we going to see data on that than the structural dynamics with the low INR 222.5 walk us through what you would consider as the low hanging fruit for the taking.
Yeah. So it's you know the great thing is we have a we have a proxy for this right we have proactively on it.
And so you guys I mean, you know the story right. So we run a trial, where we show you can use a lower INR and it's actually more dramatic and the mitral position since that's a low pressure valve yeah, you'd have to run a patient's INR and a high level higher level. So two five to three five which carries with it a significant amount of bleeding. So the fact that you can drop down and again, we have to wait till we see what would've.
Proof of what label, we get from the F. D. A but you know we're submitting that P M and PMA this summer, but on a two to two five and I've had surgeons tell me first of all it's a it's a great valve. It's it's the best mechanical aortic valve or mitral valve on the market.
Before we get the label change number two.
If you can run a patient and between two and two five instead of two five to three five what surgeons tell me. It's like it just gives me peace of mind like why wouldn't you do that I mean, if you can lower the risk of bleeding for a patient I mean, it's kind of a no brainer I'm. So I think the combination of the fact that we have a great valve.
And we'll be the only ones with and FDA label, assuming we get the approval for a two to two five versus the two five to three five you've already seen. This movie played out you know we've taken significant market share with our aortic valve and we continue to think we'll do the same with the mitral valve.
The first part of your question about when will it be presented obviously with COVID-19, we we actually want to get this we we always try to time. This two when the approval is going to be I think it's lining up like S. T S and January next year.
Because if we submit the P and it's a it's a PMA supplement which is typically a six to nine month time frame, we should get that approved and the first half of 2020 two and so we try to line. It up so it's close to you know ideally you'd like to go into S. T S and have an approval and your hand, and you could have a late breaker and it.
S T S and the end of January and then come out with and approval rates soon thereafter.
The other beautiful thing about this is this is the same product our reps are carrying in their bag today. It's the same consignment that's already on the shelves Oh, we have to do is change the label. So we came up and new marketing brochures, and we changed the label and our reps are well versed at and you know selling these types of products. So again I think this is a real a real.
Opportunity for the company with a great product.
So Pat I'll, just throw out all my and Nick the questions and I'll hop back into queue. So first pet perked, a lot and and mitral.
What are your expectations and and panel that's one thing.
And the thing actually for you Bioclean, whose contribution was very healthy and the corner right at 90, and 95% gross margins you know the composite gross margins also there was an uptick how sustainable are these moving forward and third Pat maybe for you Pat I I look at the numbers.
And I look at consensus for FY 'twenty, one and then for FY 'twenty do you guys are obviously hampered with lack of Procter ing and Europe, just given travel everything you mentioned.
He'd always consult it comes across you guys would be.
Over conservative and you should easily blow past.
These consensus numbers gentlemen, thank you for taking my questions and congrats again.
Yeah. So let me at least you on one two or three I'll go first and then Ashley and then I'll come back to the last one so the first one on the on the F. D. A on the PMA submission. So per card is it is a full PMA submission and I'm not the F D. A but based on the level of risk of that product I would.
Handicap highly that that is not going to go to a panel its a clean trial and we hit the endpoints. It's safe it's effective I just I don't see that go into a panel and.
And you know, we'll be we're hopeful that it'll it'll you know me.
Through quickly because it's a it's a very clean package.
Perfect Mitral is a PMA as a supplement to the original mitral PMA. So that's all that will knock wood a panel and that's gonna be a normal kind of review cycle as a supplement them. So that's the first question maybe actually you can take the second question on gross margin.
Yeah. So suraj as you know, we don't give formal gross I mean guidance on gross margin, but with that being said.
We believe that we do have some incremental opportunity to improve margins as we go throughout the year.
You know a couple of the.
Key drivers of that and and you noted one of them you wait and strong performance from bio glue and Onyx. What was also strong, especially in North America, where the business grew 16% and it's obviously a higher margin product here and the U S and the third thing is is that you know there are a lot of love.
The growth and in Q1 was driven by.
The new product launches and and pet spoke about you know five of them.
And in four of them and being you know the the a M D S and inside and Neil and the gross margins on those products or are higher than the corporate average and and as a result of that you're seeing a benefit to the gross margin line in Q1 versus Q1 of last year, but like I said I think that we have incremental opportunity approved to improve gross.
And as we go throughout the year.
Yeah, and then your third question on saying you know what I mean, basically you know that.
We have a opportunity to beat the current consensus out there yeah, I mean look I'm actually very pleased with how we performed and the AR and the first quarter I mean coming into the quarter, you know Europe, both the U S and Europe, we're kind of raging with COVID-19 and the U S has really done a great job with the vaccine and we saw a big resurgence and the U S. Now.
We're a little bit handicapped as we'd said net and the last call with this kind of tissue issue I mean, if our tissue and we didn't we hadn't had that issue in Q4, we would've grown and probably in the 5% to 7% range, even with the pandemic still raging and in Europe. We also have gotten positive news back on on Tris from a testing the testing and just came out kind of flawless.
But we're waiting to get the green light from the FDA. So that that's another potential upside for US look at the performance of our of our new aortic stent and stent grafts, and Europe, 87% growth in excess of 67% growth and a M. D. S. These are pro forma constant currency this isn't comparing to some like easy number.
We're growing our R Taco abdominal stent grafts and as a percent of our girls and are growing on a frozen elephant trunk business, 30% and that's in a pandemic I mean every country in Europe and I get on not much people are paying attention, but every country and major country and Europe locked down.
Just like they did a year ago. So what we have said is as Europe kind of gets back on track with the vaccine you know we we agree with you I mean, we think we're very well positioned and hopefully it's this quarter. This is the last kind of COVID-19 corridor, and Europe, and we start to see a return to significant growth and in the second half, which is exactly what we said and our comp.
Oh.
Okay.
Okay.
And it's all over the place.
Yeah.
Operator calls there.
Sorry, you cut out for a moment there.
Yeah.
Oh, sorry, yeah.
I don't know how much of how much you heard on know what happened with a line there.
I think we missed the last couple of sentences.
Okay.
Yeah.
I agree with Suraj.
And you know, we're growing significantly and we're growing double digits in Europe, and a pandemic imagine what happens when the vaccines get rolled out and we actually get back to kind of normal there.
Okay.
Minder and he would like to ask a question. Please press star one on your telephone keypad and confirmation tone will indicate your line is and the question Kim.
And that's using speaker equipment, it may be necessary and I got your handset before pressing the psyche.
One moment, please while we poll for additional questions.
Our next question is from Jeffrey Cohen of Ladenburg Thalmann and state your question.
Hi, This is actually destiny on for Jeff. Thank you for taking my question I noticed and commentary around the TMR hand pieces and I'm. Just wondering how is that situation going and when should or could we expect revenue to be at more normalized level of 2020, one 2020, two and any color would be super helpful.
Yeah, I mean, the good news on T M.
And as we've we've gotten clearance from the FDA. So that was obviously the biggest holdup that we had we're now working with our or supplier that supplies. This was hand pieces and ramping them back up which.
Which has proven to be somewhat challenging during a pandemic. So you know I think we'll have better visibility on on on kind of what that will look like probably you know later this year and we even said when we announced the we'd gotten their approval back that we weren't expecting anything meaningful on until the second half of the year. So we can probably give a better update at the next call.
Okay got it. Thank you and then Ashley perhaps I missed this did you break out preservation services between cardiac and vascular.
We did not we had indicated and our last conference call that we were going to be combining.
Those into one single line item.
Forward.
Okay. Thank you for that reminder.
From bio glue and China, what additional testing are they looking for are you able to discuss that and any further detail.
We're not going to give that level of detail I. Just I mean this is this is normal in and approval process debt. You know you submit and they ask questions you submit information and they come back with more questions on this as a normal kind of a back and forth and and approval process.
And they've come back with at this point and what they've asked for is testing that's going to take us. It's it's not we're not redo on a clinical trial, but it's you know, it's supposed to potentially animal and bench top testing.
And that could take more than a couple of quarters, which is why we're saying we don't think we're gonna be able to get inside of 2020, one, but we're not going to get into the details of exactly what the testing requirements are for the Chinese government.
Got it yeah, I know the regulatory process, there can be a little hard to predict so I guess any feedback if it's helpful. I think that does it from me all my other questions have already been answered. Thank you.
Thanks, Stephanie.
We have reached the end of our question and answer session and I will now turn the call back over to Mr. Mackin for closing remarks.
Yeah, and thanks for joining the call and and and as I said I mean, you know I think I think suraj as question sums it up well I mean, we're actually very bullish but for the the kind of resurgence of COVID-19 and in Europe, we're showing sequential growth in Q2, and we hopefully are this is our kind of Alaska on COVID-19 quarter, and we can kind of get back to normal and the second half of the year.
As I said, we've got a bunch of catalysts that we didn't have and are in 2020 eight.
Hey, M D S Nexus inside and neo and yet or investments in Asia Pacific and Latin America, as well as our come in right around the corner as our PMA for per Claude and Pro Act mitral. So you know we're very bullish on the accelerating growth here at the company and you know as soon as we can kind of get out of.
This COVID-19 overhanging and Europe, and Brazil, I think the you'll see the growth improved significantly. So I appreciate your attention on the call and I look forward to our next update.
This concludes today's conference.
Your line is open.
Thank you for your participation and have a great day.