Q1 2021 Avinger Inc Earnings Call

And welcome to the Avon's your first quarter 2021 results call all lines have been placed on a listen only mode and the floor will be opened for questions and comments. Following the presentation. If you should require assistance throughout the conference. Please press star zero on your telephone keypad to reach of live operator at this time and it's my pleasure to turn.

And the floor over to your host Matt Kreps, Sir the floor is yours.

Thank you and.

Thank you everyone for participating on today's call I would like to welcome you to <unk> first quarter 2021 conference call joining us for their Avon's CEO, Jeff the Lynskey and Chief Financial Officer, Mark One for you.

Earlier today <unk> released financial results for the first quarter ended March 31, 2021, and a copy of the release is posted on the average of website under Investor Relations.

Before we begin I'd like to remind you that management will make statements. During this call and include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provision and the private Securities Litigation Reform Act of 1995.

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 and 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 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 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 and with.

And I can now turn the call over to Jeff.

Thank you Matt Good afternoon, and thank you all for joining us and we're excited to report a strong first quarter driven by the early success of our Tiger on commercial launch and the continued market expansion of our <unk> SV small vessel atherectomy device the <unk>.

Innovative new devices have enabled us to make significant inroads into new accounts and secure a greater share of cases at existing user site.

And at the same time, the rollout of COVID-19, vaccines and continued easing of pandemic related restrictions has put the market on a path to normalcy and it has abled greater access for our sales and clinical support teams of customer site.

Our first quarter revenue increased 13% year over year, continuing a positive trend from the third and fourth quarters and putting us squarely back on our pre pandemic growth curve for.

First quarter sales were the highest in the past for years as we drove top line growth through the marketing of our expanded product line and the addition of new accounts and increased utilization at existing sites.

During the first quarter, we opened eight new accounts, adding to the nine accounts, we launched and the fourth quarter of 2020.

As we continue to advance our platform physicians are seeking the unique benefits provided by our proprietary image guided technologies.

Our three new catheter introductions over the past three years of created a compelling and differentiated product line that is delivering excellent clinical results.

We believe the 2021 will be an inflection year for average or with several growth drivers coming together.

These include increased market penetration of our Panther is SV device. The continued rollout of tigereye to our growing customer base and the initial release of our Lightbox three next generation imaging console, which we expect to be commercially available and the second half of this year.

We are also strategically expanding our sales force with recruiting efforts underway for the addition of sales representatives and clinical specialists and both existing and new high potential market.

And as we gain revenue scale, we expect to see continued gross margin improvement and enhanced operating cost leverage at the same time, we're continuing to invest and key strategic initiatives to support our future growth and build value for stockholders.

Let me share some details on these initiatives.

We advanced the full commercial launch of our new Tigereye CTO crossing catheter in January of 2021, following a positive limited launch experience and key opinion leader sites during the fourth quarter.

We ended 2020 with Tigereye launched at 12 clinical sites and early April we announced that we had increase this to 30 sites and we continue to ship tigereye to new customers each week.

The most important positions of reliably delivering excellent clinical results using tigereye to treat a variety of challenging cto's feedback.

Feedback on Tiger I has been positive with the enhanced imaging new to the distal tip design increased control and higher rotational speeds, enabling physicians to safely and effectively cross complex cto's, including cases that may of required more invasive procedures, such as bypass or amputation.

In short we are helping physicians address some of their most challenging cases, where the stakes of the highest and delivering excellent clinical outcomes for patients are critical.

Notably the rapid rollout of Tigereye has increased our total image guided CTO revenue and the first quarter by more than 60% year over year converting what had been of declining sales franchise into a growth driver for our business and providing a foundation for us to expand our share of the approximately 100 million.

Peripheral CTO market.

This is an important point that I'd like to underscore over the past three years, we grew revenue for our <unk> family of atherectomy catheters by over 50% on an annual basis. However, this growth was partially offset by declining sales of our legacy CTO products with the launch of three new products and three years.

<unk>, including our new Tigereye CTO crossing device. We believe we are now well positioned to drive growth across all of our catheter solutions.

Our sales team is using tigereye to expand our presence and gain a larger share of cases at customer sites driving higher effectiveness and efficiency of our sales organization.

As an added benefit Tigereye was designed for more efficient exchange two of 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 synergy provided by the new device.

Our Pan <unk> SV catheter also continues to show significant market gains and April we announced and important commercial milestone with the launch of <unk> SV into more than 100 accounts.

<unk> provides a highly differentiated atherectomy solution for physicians to treat smaller and more distal vessels, including those below the knee.

This is an underserved market, including a high number of patients with critical limb ischemia or CLI. The most severe form of the PID.

The onboard image guidance provided by Panther SSP enables physicians to safely and effectively target plaque and vessels just two to four millimeters in diameter, while avoiding damage to healthy tissue.

Over a year into the launch of pentair as the SP. Our users of reporting outstanding clinical results for their patients with significant luminal gain following treatment and durable longer term outcomes.

We recently announced publication of the new clinical study and the peer reviewed journal of critical limb ischemia, highlighting the benefits of <unk> for the treatment of below the knee.

<unk>.

This study conducted by physicians at the division of cardiovascular disease, and Endovascular Medicine at Einstein Medical Center in Philadelphia observed of luminal gain of 64% and freedom from target lesion, Revascularization and indication of restenosis of 91% at the six month and point of the study.

Representing very positive clinical outcomes for these patients, especially given the limitations of other minimally invasive invasive approaches for the treatment of CLI and the negative consequences of of failed intervention.

We're excited to add to the clinical body of evidence and support of Panther SSD with our image V. Teekay post market clinical study.

We are currently enrolling patients and for clinical sites and anticipate completing enrollment and the study this year with patient follow up data collected at 30 days six months and one year post treatment.

Turning to our pipeline products, we are making excellent progress on the development of our Lightbox three next generation of imaging console and expect to submit a five 10-K application for U S pre marketing clearance by mid year 2021.

Our goal is to gain regulatory clearance and have the lightbox III available for initial launch and the second half of this year.

We believe the Lightbox III represents a major leap forward and imaging portability and capability and that this new platform provides a great opportunity to accelerate the pace and efficiency of new account acquisition, while energizing existing user.

Lightbox III presents a radical reduction in size weight and cost compared to the existing platform, which as anticipated the speed the evaluation process and reduce barriers to adoption and new accounts.

By eliminating 90% of the weight and the footprint of our current console Lightbox three provides for easy transport a simplified service strategy and streamlined integration into the Cath lab and environment, all important factors and opening new accounts, and and and an increasing efficiency of our operations.

By reducing costs by as much as 50% Lightbox III is anticipated to increase the uptake rate for new account acquisition and provide further improvement to efficiency.

The Lightbox III and incorporates an advanced solid state laser of more powerful computing platform.

Redesigned software system and highly intuitive user interface.

All of these improvements have been guided by physician feedback and are designed to improve the user experience and support increased utilization of of our proprietary image guided devices once on site.

While the Lightbox III simplifies the adoption of the average your solution. We are also working to expand our peripheral product portfolio with new PID catheters that would provide additional utilization opportunities and further differentiate average or in the marketplace.

As mentioned on our last call of new large market that we're exploring is the coronary artery disease or see a day market. The treatment of chronic total occlusions and coronary arteries represents of clinically challenging and largely underserved market.

We believe that our technology platform would bring significant clinical benefits to this market segment and provide a highly attractive opportunity to expand our business.

And currently only a limited number of interventional cardiologist attempt less invasive percutaneous coronary intervention or PCI procedures to treat coronary CTO of <unk>. These are highly complex procedures that require the use of multiple wires balloons and other devices and carry a risk of perforate.

<unk> and our other procedural complications.

The CTO PCI procedures also require significant time under fluoroscopy subjecting the Cath lab staff and the patient to extended exposure to X ray radiation as well as the patient to high volumes of contrast die of injection.

Even with these limitations, it's estimated that approximately 50000 and CTO PCI procedures are performed and the U S. Each year.

In addition, and has estimated that over 200000 highly invasive coronary artery bypass grafting or cabbage surgeries are performed and the U S annually with up to 30% of these procedures related to the treatment of coronary CTO of <unk>.

This creates the sizable and growing market that we believe is ripe for expansion with the proprietary new tool that would make a percutaneous approach accessible to more physicians and reduce the need for extended time under fluoroscopy with potentially fewer procedural complications.

We believe that our proprietary OCG guided technology platform is ideally suited to provide the basis for new catheter based solutions designed to help physicians safely and effectively cross coronary CTO of <unk> on a less invasive percutaneous basis.

Bolstered by our learning with Tiger and the peripheral arteries, we have begun initial development of and image guided CTO crossing device for the coronary arteries and.

While it will take time to complete product development and we anticipate that of clinical study will be required to support the regulatory clearance process. We believe this could be of transformational opportunity for average or that would significantly increase the addressable market for our products.

On.

On the clinical front. In addition to the image BT case study for Panther SSP that we discussed earlier, we continue to work towards completion of our insight <unk> study designed to evaluate <unk> for the treatment of in stent restenosis or ISR in lower extremity arteries.

And the process of finalizing data analysis for submission of a five 10-K application in the coming months with the goal of receiving regulatory clearance. This year to expand our U S label for <unk> to include the ISR indication.

The specific ISR indication would provide further differentiation for Penn terrorists as the only directional atherectomy device with the claim we believe this will establish an important point of entry for new accounts and support expanded utilization for the sizeable and difficult to treat disease segment.

We also recently announced the publication of and additional clinical study based on work from the physicians and Einstein Medical Center in Philadelphia, which.

Which documented the significant reduction and radiation exposure and contrast dye usage gained by combining <unk> and geography with our OCD guided therapeutic catheters and important advance for patients suffering from chronic kidney disease.

In addition, as we gain more experience with Tigereye, we're working with physicians to identify potential clinical studies for Tigereye debt could lead the publications for this innovative new device.

Growing our topline as a key goal for average are and we are making significant investments and our commercial infrastructure to drive this growth.

This year, we plan to expand our commercial organization by approximately 20% as we seek to capture more sites and grow market share.

Coupled with our new products and increased geographic reach we believe average or is firmly positioned for growth and 2021.

For the past several months have been and exciting time for average or as many of our product clinical and commercial initiatives come together with many of the pieces in place I believe that average or is now on a key inflection point as we transition to growth across all of our primary product line with additional upside opportunities from our Lightbox III.

<unk>, which had lower barriers to adoption, our clinical programs, which can expand our labeling and key indications and our development efforts that can take us into even higher value markets, such as coronary artery disease.

All of our efforts center around empowering physicians with real time, Intravascular imaging and precise control during of therapeutic procedure. So they can best treat their patients our clinical data and growing case activity of firm, we are making solid inroads towards this objective at this point I'd like to ask Mark to cover our financials and.

And then I'll return for Q&A Mark.

And you Jeff.

Total revenue for the first quarter of 2021 with $2 6 million of 13% increase from the first quarter last year.

Point of note.

We believe we are seeing a clear path back to normalcy, although many of our sites, we're still working to return to pre COVID-19 volumes and the first quarter.

And the first quarter catheter or disposable sales were on an almost for year high driven by robust demand for <unk> SV and Tigereye.

Our high margin recurring disposable revenue streams as a core element of our growth strategy.

Gross margin and the first quarter was 35% up from 22% and the first quarter of last year, we continue to see opportunities to generate further operating efficiency.

As we've mentioned previously <unk> contribution margin from sales of disposable catheter products.

<unk> higher than our reported gross margin, providing important leverage and our operating model as we scale of the business.

Operating expenses for the first quarter were $5 5 million down from $6 million and the first quarter of year ago.

We have maintained a lower operating cost profile than prior to the COVID-19 pandemic and at the same time, we are directing increased investment and product development clinical programs and sales team expansion to fuel future growth.

We believe these investments will improve our strategic position.

Net loss attributable to common shareholders was $5 1 million and the first quarter down from $5 9 million and the first quarter of year ago adjust.

Adjusted EBITDA, which is the 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 the loss of $4 million and improvement of $8 million compared to Q1 and 2020.

The higher revenue and margins for a key contributor to our improved adjusted EBITDA.

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 average of dot com under the investors section.

Cash and cash equivalents totaled $30 4 million at March 31 up from $22 2 million at year end, which included $13 1 million and net proceeds from a bought deal offering and February averages cash levels relative to its operating burn provides us with the runway we need to complete many of our strategic initiatives.

Additionally, as announced previously we amended our loan agreement in January 2021, This amendment significantly.

Significantly improved certain terms, including the extension of our interest only period and maturity date of the term loan by two and a half years with the maturity date extended to December 31 2025.

Subsequent to the first quarter and in April 2021 average of received confirmation that it's $2 $3 million Paycheck protection program loan and related interest fees were fully forgiven by the U S small business administration and improving our working capital at this point I'd like to turn the call back to Jeff for Q&A. Thanks, Mark.

The first quarter continued our positive momentum from the second half of 2020 of our business recovered from the effects of the COVID-19 pandemic, we've expanded on that success with the Tigereye commercial launch strong results from Panther SSP and record catheter sales since we relaunched with our Pan <unk> next generation device.

New site activity remains strong and we are nearing five 10-K submission for our next generation Lightbox III imaging system, we're actively growing our sales team in 2020 one to drive scale with our expanded product set as we seek to capture more sites and more cases at existing sites.

We look forward to executing our strategy to build value for avid and your stockholders and fulfill our mission of radically changing the way vascular disease is treated at this point, we'd be happy to take your questions.

Thank you the floor is now open for questions. If you do have a question you May press star one on your telephone keypad at this time and for your question has been answered you could remove yourself from the queue by pressing one again, ladies and gentlemen, Thats star one and our <unk>.

First question comes from Nathan Weinstein from I guess capital will go ahead and Nathan.

And Jeff and Mark and good afternoon, and thanks for taking my questions.

And.

So it's good to see that ongoing and sustained growth and your top line and also the healthy margin expansion non occurring for yet another quarter and so perhaps we can just start with the discussion on the Tigereye commercial launch and any additional details you can share there on the the progression and also why are customers finding the.

Products are appealing.

Hello, and thank you Nathan for the question, we're very pleased with the initial transaction and and most importantly, the physician response to our Tigereye product and it's in the as we progressed the full commercial launch as I said on the call we've already launched and over 30 accounts and we're shipping new accounts every week.

We believe we are well on our track well on track to achieve our internal goal of launching Tigereye and 40 accounts by the end of the quarter. So good traction and good positive momentum and very pleased with the work. The sales force is doing not only to get tigereye into our existing account base, but to prepare and physicians for their first cases, so positioned for.

Feedback has been very positive related to the efficiency of the workflow the enhanced imaging, we provide due to the higher rotational speeds and versatility that's provided by the ability to precisely control deflection of the device and real time during a case.

Overall, I think you'll see this on our business results, we're driving more Cta CTO case volume.

Total revenue for our CTO of business, which includes Tigereye and awful lot increased over 60% compared to the year ago period.

As we'd hoped there'd been theres been limited cannibalization of our ocelot business with most tigereye volume being additive to our existing base of business and as discussed on the call. This now enables us to grow across both our atherectomy and our CTO of franchises.

And we're continuing to learn about the capabilities for the device and of real world clinical setting and and also continuing to learn how to best sell train and support the device.

And as I mentioned, we're working with thought leading physicians to identify some near term clinical study opportunities for tigereye, including potentially retrospective studies based on already available clinical data. So that we can document these outstanding clinical outcomes, we're seeing and the field and keep this momentum going.

Thank you John that's that's great.

Maybe just turning to the organization and I understand that you're expanding the sales team and the other details you can share there and maybe in terms of the quantity or even the composition of your growing organization.

Yes, so we.

We ended the year at 27 people and our sales organization, including sales management.

We've said on on our last call and and I think read and reasserted here that we intend to grow that group by about 20% in 2021, which would be five to six people.

And then the year somewhere around 30 to 33 people.

And our sales forces.

Broken really into two primary groups sales representatives who are of.

Of course, supporting cases, but primarily tasked with developing new users developing new accounts and clinical specialists, who are supporting day to day utilization and sites. We've added a new role and the organization in 2021, which is the sales associate role, which will where who will work.

With an established territory sales manager to help to develop a new market within the broader territory again looking at not only going deeper in existing territories, where we're getting more penetration and more accounts to cover usually with the addition of the clinical specialists, but also looking at expanding our geographic reach of <unk>.

<unk> into new markets or Submarkets of of larger territory and addition of that we are adding the.

TSM the territory sales managers in new markets, where we have some entree, maybe even one or two accounts, but don't have a strong sales presence to again expand our geographic reach and drive more growth for the business.

Okay. Thanks, that's helpful and maybe just stepping back for a second and thinking about the market backdrop.

What are you seeing from your perspective on the atherectomy market overall, as we kind of come back from the pandemic lows.

Yes, so so I think the market overall, and certainly we saw and impact of COVID-19 early in the first quarter and.

And that was a carryover from the post holiday surge that was well publicized and the media.

And our business came back strong and mid to second half of the first quarter, resulting and the results we put out today and with very strong quarter of growth year over year during a quarter thats typically a lighter quarter on a seasonal basis. So.

And with the widespread vaccination, especially and the health care community and continued lessening of restrictions and the health care facilities, we work and around the country.

Failing and unexpected resurgence we feel the worst of COVID-19 is behind us.

And I also think we've been feeling the impact of our sales force, maintaining a strong presence and engagement and the field throughout the whole COVID-19 experience and I think you saw this and how quickly our business came back and the third and fourth quarters of last year. So we're building on that on a personal basis I'm I'm very much enjoying getting back out and the field with our sales reps.

And physicians and over the past few weeks alone and I was and Texas, Michigan, Florida, and the new spending most of next week and Pennsylvania.

Thrilled with the quality of engagement from both our reps and the physicians, but also the quality of cases I've seen.

And I feel like we're really at the start of something terrific here and and COVID-19 has been and horrible thing for the world and certainly challenging for every medical device business through 2020.

But I think it provided an opportunity for us to really reset as we go forward into 2021, and and bear fruit of the kind of forbearance of our team through a tough time.

Great. Thanks, that's good to.

And to hear your perspective on the on the market, there and getting back and cause the normal swing. So I guess just one more question from me and this is turning back to the product side of business.

And the Lightbox, obviously, we can hear the enthusiasm and your team and you speak about this.

And maybe just.

Any details on timing you can share on kind of what your progress is with development.

Yes. So we are confident that we will be in a position to file our 10-K for U S. Pre marketing clearance over the next few months, so sticking with the mid year timing that we've been talking about.

Based on a mid year filing we anticipate that we'll receive U S regulatory clearance and the second half of this year, which is really exciting because it gives us an opportunity to have our initial commercial launch at least on a limited basis.

Before the end of 'twenty, one, which sets up a terrific opportunity for Lightbox three the made to be of major growth driver for our business and 22. So those are the kind of the U S activities and anticipation.

We also will seek CE, marking for Lightbox and the third quarter and as we've done with our new catheters and the past. We think this will provide an opportunity for us to get early experience and the field with our commercial Lightbox III and Europe, even prior to receiving U S clearance. So a couple of important mile.

Stones filing U S clearance and CE, marking and Europe, and then first cases, both and in Europe, and and the U S potentially all prior to the end of this year.

Okay, great. Thanks for sharing the detail there I really appreciate the updates overall and looking forward to watching the ongoing progress and your business.

Thank you. Thank you very much Nathan.

And we have reached the.

Lots of time for Q&A for this call I would now like to turn the floor back over to Jeff Sowinski sort of the floor is yours.

Well, thank you for joining our call and we continue to advance the key growth drivers for our business, including three compelling and highly differentiated solutions, a new lightbox console that breakthrough barriers to adoption clinical work that continues to document outstanding outcomes for patients and our initial efforts to expand our plan.