Q4 2021 Artivion Inc Earnings Call

[music].

Greetings and welcome to our T V in <unk>, and your and 2021 financial conference call.

At this time all.

Participants are in a listen only mode.

A 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.

As a reminder, this conference is being recorded.

It's now my pleasure to introduce your host.

I will now turn the call over to Brian Johnson.

The children watching growth. Thank you.

You may begin.

Thanks, operator, good afternoon, and thank you for joining the call today, joining me today from <unk> management team are Pat Mackin, CEO and Ashley Lee CFO before we begin I'd like to make the following statements to comply with the safe Harbor requirements of the private Securities Litigation Reform Act of 1095 comments made on this call that look forward in <unk>.

Time involve risks and uncertainties and are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.

The forward looking statements include statements made as to the Companys or managements intentions hopes beliefs expectations or predictions of the future. These forward looking statements are subject to a number of risks uncertainties estimates and assumptions that may cause actual results to differ materially from these forward looking statements additional information concerning certain risks and uncertainties that may.

The impact. These forward looking statements is contained from time to time in the Companys SEC filings and the press release that was issued earlier today now I'll turn it over to <unk> CEO Pat Mackin.

Hey, Thanks, Brian and good afternoon, and thanks for joining us on the call.

This is our first call since rebranding as <unk>.

His name is derived from the words aorta innovation envision.

And reflects our evolution to be a global leader, providing innovative treatments for yorick disease, and our vision to continually innovate to maintain our position of leadership.

It was time to change your name as we significantly evolved from the Cryolife I joined seven years ago.

During these past seven years as we continue to evolve.

I'd come across investors and customers, who are not aware of the significant transformation that was taking place in our company.

Investors and customers and I don't have a fresh look at our <unk> to see what we do and to learn more about our significant transformation.

<unk> now encapsulates all that we've accomplished since we acquired on X in 2016.

Through a series of strategic acquisitions, and divestitures and our new development initiatives, we've assembled a portfolio of products focused on aortic repair.

We believe can compete with those of any company on the market today.

We provide cardiac and vascular surgeons with innovative solutions to their most difficult challenges.

To do so in the future as our product pipeline and new regulatory approvals, we'll open access to our innovative therapies to many more patients around the globe.

My goals since becoming CEO of Cryolife was to transform into our <unk>.

And our employees by collaborating with each other and our physicians have basically John just done just that we now expect to organically grow our revenue double digits at the midpoint of our 2022 guidance.

We believe our product pipeline and our regulatory strategy sets us up well for continued success for years to come.

Our rebranding followed on the heels of a record fourth quarter 2021 for our <unk>.

As we posted strong quarterly revenue growth.

Revenues for the fourth quarter to quarter were $79 4 million, that's up 16, 9% compared to the fourth quarter of 2020 and up 18, 8% on a pro forma constant currency basis.

Revenues were up $13 five on a pro forma constant currency basis compared to the fourth quarter of <unk> 19.

Our growth in Q4 was driven by our stenting stent grafts as well as our awning product segments.

More specifically on a pro forma constant currency basis, comparing Q4, 'twenty one to Q4 of 'twenty Stenson stent grafts grew 33% on X grew 13, 5%.

Here the growth rates for the products that are in the stenting stent grafts segment, <unk> up 20% Neo up 73% inside up 39% next is up 233%.

We also saw a return to growth in cardiac tissue as well as the relaunch of our TMR business.

In all we are pleased with our fourth quarter results. Despite continued and lingering headwinds from the Delta variant and omicron variance that were associated with staffing issues and patient overflow issues in the hospitals.

As I explained on our last call our near term plan is to accelerate revenue growth through three main initiatives.

First we plan to drive on X growth, while commercializing <unk> Nexus inside EMEA.

Our new aortic stent graft products.

Second we plan to further expand into Asia Pacific and Latin America by gaining regulatory approvals and expanding our commercial channels.

Finally to secure regulatory approvals for per clock and protect mitral in the U S and <unk> in China.

I will walk you through an update on each of these three initiatives.

Starting with aimed yes. This is the world's first arch re modeling hybrid device for use in the treatment of acute type eight sections. We remained very optimistic on the product line given our experience to date.

As noted earlier during the fourth quarter revenues increased 20% on a pro forma constant currency basis over the fourth quarter of 2020 increase.

The increases were driven by continued strength in Europe , and our regulatory approvals in countries outside of EMEA and the U S.

Second next is posted quarterly revenues of 233% increase on a constant currency basis compared to the fourth quarter of 2020.

Given the anticipated decline in COVID-19 infection rates associated with hospital staffing shortages and travel restrictions as well as improved physician adoption, we anticipate an uptick in nexus procedures in 2022.

Third and this is our newest device in our portfolio to treat thoracoabdominal aneurysms with Endovascular stent grafts.

Our revenues in this product line, which include Ensign and Xtra design grew 39% on a constant currency basis, when compared to Q4 of 2020.

Fourth our Vito open Neil this is our newest product in the frozen elephant trunk category. This is used to treat dissections and aneurysms in the aortic arch revenues from this product line, which include a Vito open plus and neo grew 73% on a constant currency basis compared to Q4 2020.

Regarding and yet we've decided to make modifications to the delivery system based on customer input and anticipate releasing this product in early 2023.

We anticipate the demand for these products will continue to build its market adoption improves koga.

COVID-19 infection decrease or become less Berlin and hospital staffing shortages abate.

Most of these products were fully launched during the COVID-19 pandemic or shortly before and therefore have not seen their full potential and environment not significantly hampered by the effects of the pandemic.

In addition, while Nexus and <unk>, both launched shortly before the pandemic. They also benefited from our larger more experienced sales force in Europe .

Given the positive feedback we've received in our newly offered products I believe our growth in these product lines would have been even greater in the absence of the pandemic.

Moving onto our next initiative international expansion in Asia Pacific and Latin America through new regulatory approvals and commercial footprint expansion.

I'm pleased to report that we are executing very well on this strategy.

Our quarterly revenues on a pro forma constant currency basis increased in Asia Pacific and Latin America by 29% and 34% respectively. Those are over the fourth quarter of 2020.

We continue to expect these regions to be important contributors to our growth over the coming years as we continue to execute on this strategy.

Regarding our third initiative, we continue to make progress on achieving three regulatory approvals in major markets.

Our first is to obtain U S. A lower INR label for the on X mitral valve.

We've submitted our PMA supplement to the FDA and it is currently under review.

Our new label is approved we believe lowering anticoagulation levels will be a significant clinical benefit for patients.

We are in active dialogue with the FDA, we continue to expect to receive PMA approval for the lower INR label of the on X mitral valve like our lower INR label for aortic valves sometime during 2022.

If approved we believe we will take significant market share in the U S with on X mitral valve just as we've done and are continuing to do with the on X aortic valve.

For per clock as you know we filed the PMA with the FDA last quarter, we're working closely with the FDA, we still expect to receive approval from the FDA during the second half of 2022.

If approved for approximately two years thereafter, we will supply protocol out to Baxter and generate revenue.

Lastly, as it relates to the regulatory approval for <unk> in China, We remain actively engaged with NPA and expect to have more clarity about a possible approval pathway within the next couple of months.

In addition to our progress in each of these initiatives. We also continue to make strides in our midterm pipeline with key products currently in the U S clinical trials and other is expected to start later this quarter.

These three products are proactive next.

Nexus and Andas.

We continue to make significant progress in enrollment in our proactive trial.

This is our prospective randomized clinical trial to determine if patients for the on X aortic valve can be maintained safely and effectively on <unk> versus warfarin.

We currently have enrolled 573 patients in this trial and feedback from surgeons and patients participating has been excellent.

We anticipate completing enrollment in the trial around the end of the second quarter of 2022 and assuming the trial meets its endpoints. We believe we can achieve FDA approval for this new indication by late 'twenty for early 'twenty five.

If approved by the FDA, we believe the onyx aortic valve using <unk>, rather than coumadin should become the market share leader in the aortic valve market in patients under the age of 70.

As for AMD.

We recently received FDA approval to begin our pivotal clinical trial called persevere.

The first of your trial as a non randomized clinical trial in up to 25 sites in the U S.

We expect to enroll approximately 100 participants who have experienced an acute type a dissection.

The combined primary efficacy and safety endpoints of the trial or the reduction in all cause mortality.

The new disability stroke C myocardial infarction, indeed, new onset renal failure requiring dialysis.

As well as the re expansion of the true eliminate aorta.

Anticipate enrolling the first patient this quarter and completing full enrollment by the end of this year.

With a one year follow up period, we anticipate we received FDA approval for <unk> in late 'twenty four.

In addition to the progress we've made on the proactive trial as well as the Mds trial. We also wanted to update investors about our partner Endo spend and how they are making progress on their U S. IDE trial for Nexus called <unk>.

As you recall, we secured an option to potentially acquire <unk>.

Due primarily to delays, resulting from the pandemic enrolment in the <unk> trial has been slower than anticipated.

As a result, we do not believe in enrollment in the trial will be completed until sometime in 2023.

We therefore do not anticipate approval for the Nexus system until sometime in 2025 at the earliest given the time required for follow up PMA submission and FDA review and approval.

Given this delay as well as associated challenges related to market adoption. During the pandemic. We are also fully impair the value of the option to purchase understand and recorded an associated charge.

Accordingly, we've pushed the potential capital need at least one year, if we decided to proceed.

With that said, we still remain bullish on the Nexus technology and Ashley will provide more color in his comments.

If each of these three trials proceed as anticipated we anticipate FDA approval for <unk> <unk> indexes by late 'twenty, four 'twenty, five which would increase our addressable market opportunity by an estimated $1 5 billion.

With that I'll now turn the call over to Ashley.

Thanks, Pat and good afternoon, everyone.

Total revenues were $79 4 million for the fourth quarter of 16, 9% on a GAAP basis, and up 18, 8% on a pro forma constant currency basis, both compared to the fourth quarter of 2020 Rep.

Revenues benefited from strength in aortic stent in stent grafts on X cardiac tissues and the relaunch of TMR.

On a year over year basis in the fourth quarter of 2021 aortic stent graft revenues increased 31%, reflecting increased procedure volumes and revenues from our new product launches.

On X revenues increased 14% and <unk> revenues increased 8%, reflecting improved procedure volumes relative to the fourth quarter of 2020.

And tissue processing revenues increased 17% benefiting from the release of tissue impacted by the truths hold in 2020.

On a pro forma constant currency basis compared to the fourth quarter of 2020 aortic stent instant direct revenues increased 33% on X revenues increased 13%.

<unk> revenues increased 8% and tissue processing revenues increased 17%.

On a pro forma constant currency basis compared to the fourth quarter of 2019 on X revenues increased 16%.

The extent and stent graft revenues increased 37% <unk> increased 3% and tissue processing revenues increased 4%.

On a regional basis fourth quarter 2020 revenues in EMEA increased 22%.

Asia Pacific increased 28% let.

Latin America increased 31% in North America increased 12% all compared to the fourth quarter of 2020.

On a pro forma constant currency basis revenues in Europe increased 27%.

Specific increased 29% Latin America increased 34% in North America increased 11% all compared to the fourth quarter of 2020.

Gross margins were 64, 7% in the fourth quarter compared to 65, 7% for the fourth quarter of 2020, the decrease was driven by higher than anticipated inventory obsolescence and inflationary impacts.

G&A expenses in the fourth quarter were $51 3 million compared.

Compared to $36 1 million in the fourth quarter of 2020.

Excluding non recurring acquisition related and business development charges of $10 million in 2021.

Which primarily consist of the noncash $4 $5 million charge related to fair value adjustments for a Cyrus contingent consideration.

And a noncash $4 $9 million charge related to the impairment of the in the span purchase option.

And excluding $4 $8 million and charges in 2020, primarily related to noncash fair value adjustments for Osiris.

G&A expenses were $41 2 million and $31 3 million, respectively in the fourth quarters of 2021 and 2020.

With the impact of the pandemic and fish physician adoption and sales of mixes both historically and in the future. We evaluated the purchase option relative to the purchase price and forecasted operating results and determined that it was appropriate to take an impairment charge.

The remaining increase in SG&A, primarily relates to personnel related expenses, including salaries commissions stock compensation and travel as our spending returned closer to pre COVID-19 levels and additional expenses to support our expected future growth.

R&D expenses were $9 5 million in the fourth quarter compared to $6 6 million for the fourth quarter of 2020, reflecting increased spending related to the <unk> trial and investments to bring our aortic stent pipeline.

In the U S.

Fourth quarter interest expense of $3 9 million included approximately $2 5 million of expense related to our term loan b $1 $1 million related to our convertible debt and approximately 300000 in amortization of debt origination cost.

Other expense in Q4 includes $2 9 million in realized and unrealized foreign currency translation losses.

Income tax expense of $4 million in the fourth quarter.

Flex valuation allowances against deferred tax assets.

On the bottom line, we reported GAAP net loss of approximately $20 1 million or <unk> 51 per diluted share in the fourth quarter.

non-GAAP net loss was $141000 or zero cents per share in the fourth quarter.

GAAP and non-GAAP earnings includes a pre tax loss of approximately $2 4 million or approximately <unk> <unk> per share related foreign currency translation losses.

Adjusted operating income was $5 7 million for the fourth quarter of <unk> 21, compared to $11 million of $11 1 million for the fourth quarter of 2020, adjusted operating income reflects add backs of amortization expense business development and other nonrecurring charges the operating income.

As of December 31, 2021, we had approximately $55 million in cash $317 million in debt and the full $30 million available under our revolving credit facility.

Adjusted EBITDA for the fourth quarter of 2021 was $10 8 million compared.

Compared to $12 1 million for the fourth quarter of 2020 net leverage as defined by our credit facility stood at five one times.

On other balance sheet related items, Pat mentioned are in those fan relationship as you mentioned given the pandemic related delays and commercial traction in Europe to date, we recorded an impairment in the value of the option related to this opportunity.

While we remain positive on this product the clinical timing delays push out any potential deal to acquire in the span and any associated capital need by at least one year to 2025 or later.

Please refer to our press release for additional information about our non-GAAP results, including a reconciliation of these results to our GAAP results.

And now for our initial 2022 outlook, we expect constant currency growth of between nine and 11% for the full year of 2022 compared to 2021.

Using a euro USD exchange rate of 113 revenues are expected to be $319 million to $325 million.

The average Euro USD exchange rate in 2021 was $1 eight resulting in a $6 million revenue headwind for 2022.

Our guidance assumes an impact from COVID-19 during the first quarter of this year and a return to a more normal operating environment for the balance of the year, meaning limited deferred surgeries and staff shortages and more in person selling.

Although we do not anticipate a significant improvement in operating margin and adjusted EBITDA. In 2022, we believe that we can comfortably continue to invest in our commercial channels in Asia, and Latin America, our R&D pipeline and service our debt without having to raise additional capital I will turn the call back to Pat for his closing comments.

Thanks, Ashley so before we move to take your questions I'll leave you with a few final thoughts our business momentum is strong. We believe we have the strategy the products and the team in place to continue that trend.

We just posted strong year over year revenue growth, despite COVID-19 related headwinds.

We expect we expect this momentum to continue into 2022, particularly into the second quarter and beyond.

As I explained earlier, we have three short term initiatives that will drive growth from now through the end of 'twenty four.

First we should see continued growth in on X and our new <unk> aortic stent in stent grafts Amd's next.

Nexis insight and Neil.

Second we anticipate further upside from our investments in our channels and new regulatory approvals in Asia and Latin America.

Third in 2022, we expect to receive PMA approval.

And for <unk> and on X product mitral in the U S. And finally, we have a robust midterm pipeline with three U S. PMA as they're currently rolling I E <unk> or <unk> or about to start enrolling amd's persevere.

Based on our enrollment projections for these three trials, we anticipate three PMA approvals in late 'twenty four or into 'twenty, five and will expand our total addressable market by $1 5 billion.

I would encourage all of you to join US in New York City for our Investor Analyst Day on March 23rd there will be an excellent opportunity for you to learn more about our strategy our products, our R&D pipeline and our leadership team if any questions you'd like to attend in person. Please reach out to Investor relations team at investors at our TVN Dot com.

Operator would you please open the line for questions.

Thank you.

This time, we will be conducting a question and answer session.

If you would 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 would like to remove your question from the queue.

For participants using speaker equipment it may.

Be necessary to pick up your handset before pressing the star keys.

One moment, please while we poll for questions.

Our first question is from Cecilia furlong with Morgan Stanley . Please go ahead.

Hey, Thanks for taking the question. This is calvin on for Cecilia.

Two kind of buckets of questions first off I want.

To ask about the Mds trial progress. So I'm wondering if you could speak a little bit more to your confidence in enrolling this within sort of a nine month period. I think you spoke to in your prepared remarks, how and how you think about potential COVID-19 related pressure on their enrollment that you've seen kind of in your other trials and also just initial thoughts on driving awareness around AMD and.

Then I had a follow up.

Yes, so I think maybe one one good surrogate is the proactive trial I mean, we started enrollment in that trial in may of 2022 about six weeks after COVID-19 hit the U S.

We've enrolled almost 570 patients during the pandemic.

So we're on track to enroll 1000 patient trial in two years under a pandemic.

The second thing about <unk>, we've got the IDE approved.

We should enroll our first patient this quarter.

We have 25 centers the trials about 100 patients.

Those 25 centers represent the largest aortic centers in the country.

I personally visited all of them I know, how many cases, they do a year.

And this is a lifesaving procedure.

These patients are typically medevac in at night.

Covid is the least of People's worries when it comes to the acute type a dissections.

<unk>.

Theres always the kind of the contracting and getting through IRB and these kind of things it takes time, but.

We feel that given the importance of this technology the life saving nature of this procedure.

That with the centers, we're in and the volume that they do that we should enroll this trial pretty quickly.

Got it very helpful.

Second one is just on margins I have two <unk>. One is on gross margin I wanted to dig a little bit into the sequential compression. So just curious what's reflected in <unk> associated with kind of your tissue coming back versus inflationary pressures that you spoke to and how you think about that jumping off into 'twenty two and then also on.

On the R&D cadence in 'twenty two between Pro Act in a ramping of Mds and just other drivers what would drive that R&D cadence in <unk> and thank you so much.

Yes, so grow gross margins as you know are a combination of many many moving parts right. So clearly.

The inflationary pressures from whether it's increased labor costs or increased materials are baked in there. The second thing we've seen in 'twenty. One is increased obsolescence, primarily around we were staffed up.

Product in the field to support the normal growth rates.

And we just had more.

Closure to obsolescence, given the kind of the volume reductions and then third as you mentioned theres mix, whether it's international or to our product line and we did see a higher return to growth of our cardiac tissue, which has a lower gross margin than our.

Our kind of our high end devices. So it was kind of a mix of all those things.

Clearly the inflationary pressures was one that was unforecastabel at the beginning of the year.

And then maybe you.

You can comment on the R&D actually yes. So we ended up fourth quarter at about $9 $5 million in R&D.

Clearly.

Productivity continues to ramp up we're going to be starting <unk>, but we're also going to have some.

R&D efforts that are going to be rolling off this year, we invested a lot of money.

And getting to the point, where we could submit <unk> to the FDA. So we are going to have some programs.

And for like Mitral, just recently wrapped up as well so with all that being said we think that.

R&D in 2022 is going to be in the high $30 million to the low 40 millions in a lot of it will just depend on the progress that we make.

With the programs.

Great. Thanks, so much.

Thank you. The next question is from Jeffrey Cohen with.

With Ladenburg Thalmann. Please go ahead.

Hi, Pat and Ashley how are you.

Hey, Jeff.

So.

Firstly.

Could you talk a little bit about the <unk>.

Stan pipeline I know you had some some manufacturers and throughput issues that youre checking youre, putting up a second.

<unk> under development, what's the status there.

Are you caught up have you caught up what are the plans going forward.

And we grew 33% in the fourth quarter.

So no issues on.

Backlog whatsoever.

We brought on we brought on a new sewing suppliers. We mentioned, we've built a new facility, which note, which is not up and running but we've had no issues on the supply side is that we put up.

Depending on which number you want to look at versus 'twenty. We grew the extensive stent grafts almost 30%.

And versus 19, we grew 22% so.

Got it fantastic, Okay, and then could you comment a little bit on.

Your channels and the size of the commercial force for Asia, Latin America, and how you're tackling that and as far as direct versus distribution arrangements.

Yeah. So we've talked kind of consistently over the last probably 18 months about we see this as one of our growth drivers.

And we saw a nice performance in both of those markets this quarter.

Commented on the growth rates in Asia Pacific and Latin America.

We're seeing 34% growth in Latin America, and 29% growth in Asia.

Those channels, we're expecting to build Asia up more it's obviously a bigger geography.

So I think theres, probably another 15 to 20 people will be adding there over the next three years.

Albeit.

Half of that in Latin America, and then we basically are fully staffed up and don't need to add anymore. So it's an investment that's actually returning right now really nice growth rates.

And we're also.

Feeding the feeding the regions as they grow.

When COVID-19 hit we kind of slowed it down.

And then when things started loosening it up we started adding people back on.

But we expect to have that investment probably flattening out itself in the next 24 months.

Okay Perfect got it and then lastly for us absolutely.

So any comment on the.

The 10 million <unk>.

Integration severance and business development from Q4.

One time in nature, we should should we expect any further impacts into the first half this year.

Yes.

The fair value accounting for the Cyrus contingent consideration is something that we will see every quarter.

Going forward until.

The milestones are fully earned and paid and Thats way out in the future. So going forward, our best estimate right now for Cyrus as maybe a million and a half per quarter, but again that could change based on a variety of factors progress. That's made discount rates. There are a lot of things, but that's our best guess for.

For Indo span.

The up the option is fully written off so you won't see any charges related to that.

We do have an obligation.

To pay them another $5 million once they reached 50% enrollment in their clinical trial.

We anticipate them hitting 50% at some point this year.

And whenever.

They reached that milestone and we make that payment there will be a $5 million charge approximately in other expense.

Perfect.

Thanks for taking the questions. Thanks, Jeff.

Thank you.

The next question is from Mike Matson with Needham and company. Please go ahead.

Yes, thanks for taking my questions.

Yes, I just wanted to ask about the revenue guidance. So.

You just grew 19% on a pro forma constant currency basis, you're guiding to around 10% I mean I understand there is some COVID-19 impact.

Particularly in the early part of the year, but.

Why why the slowdown I guess and.

I guess as a follow up to that just was there any kind of one offs in the fourth quarter that helped your growth. It arguably sustainable I guess, maybe that's part of why you got it.

Yeah, I think the biggest issue Viking again. This is one that's probably not common for a lot of companies of our size that have.

Single products are mostly in the U S. I mean, almost 40% of our businesses in Europe and the Euro dropped seven points in the last year, that's a $6 million headwind. So if you're if people are kind of taken our Q4 number and trying to straight line it out to next year.

It's the wrong math equation.

The euro a year ago was $1 22, this quarter and now it's $1 13, So we've got a serious headwind when it comes to the Euro in Europe , and we have a big chunk of business. There. So it's got nothing to do with our we're backing off on what we think is going to happen. It's got a lot more to do with the headwind on <unk>.

Currency.

Yeah, and the other thing too is that 18% growth that was against the fourth quarter of 'twenty, we were up 13, 5% against the fourth quarter of 2019. So.

We're guiding to between nine and 11 versus again, if the comparison is 2019 that was 13 five.

Alright.

Yes, I think the big I think the big thing people arent catchy.

Catching as the currency.

Right, because if you revalue 'twenty.

2021 revenues at the new currency.

Our 298 eight turns into like 293, it's the 7% drop in it's all currency.

Yes.

We're saying we're going to grow 911, you just got to I'm not going to get set up with I can't control currency.

Yes, no I understand that.

Curt to guidance.

Fine Okay alright.

Alright, and then.

Let's see.

So.

Just wanted to ask about the FERC first quarter specifically.

It sounds like Youre expecting some COVID-19 impact there I didn't really care needs within the revenue range is there anything it looks like consensus is just under $79 million, which would sort of imply a 11% growth versus the first quarter of 'twenty, one by maps, alright, so that probably too high base.

On what you are saying because your full year guidance I mean, that's at the high end of the range for the full year.

Yes, that's 79 has no impact of the 6% drop in currency.

So I think people need to readjust their numbers based on.

2022 currency.

And we're giving you when we've given full year guidance 911, and clearly Covid is <unk>.

Is an issue in the first quarter I mean January was with slow.

We are in our checks with hospitals.

A lot of these hospitals that as many patients in January as it did at any point in the pandemic.

We're reducing elective procedures.

The bigger issue was frankly hospital staffing I think the good news is we're seeing cases drop hospitals empty out and staffing coming back. So we don't think it's going to persist, but we definitely think Q1 is going to be lighter than the rest of the year. Yes. Mike. This is Ashley so I mean to Pat's point talking about currency last year, we posted 70.

$1 million in revenue and if you take into account.

The change in FX rates that 71 translates to <unk> 69, So that's really the base that you should be looking at in and if you just take the midpoint of our guidance that we guided to which is 9% to 11% and 10% on top of that is <unk> 76, and as Pat indicated that Covid has really had an impact at least.

To date this quarter.

Yes, Okay I understand.

Alright, and then just as far as on X mitral goes so when you when you hopefully get that approval.

For the lower INR, how quickly do you think the uptake will be on that I mean, you've talked about it being.

I think up $40 million, if I remember right opportunities so yes.

Quickly can you get to $40 million dollars I guess there.

Yes, I think you've seen I mean, we have a great case study right because we've already done. This we did it on the aortic side, where we got the exact same.

It's the sister product right, we had a lower INR for aortic. It has to have the paper has to get out it has to get socialized and educate educate your physicians the great News about Pro Act mitral as we again, we've already done it with aortic number one number two the valves are already on the shelves, we have mitral valves in probably 500 accounts.

In this country.

So.

All of that's going to happen to the label is going to change and our reps are going to market the paper.

Yes.

Making making new product and getting it out and all of that which is what happens with a lot of our other products that doesn't exist, where we have product on the shelf.

So I think we're going to see a steady increase in the mitral like we did with <unk>.

With on X aortic over the next.

Three or four years.

Yeah, Okay, alright, thank you.

Thanks, Matt.

Yes.

Thank you.

Our next question is from Suraj Kalia with Oppenheimer and company. Please go ahead.

Hey, Pat Ashley Hope, everyone is safe and healthy.

Hey, Suraj.

So Pat Onyx.

On X mitral.

Love to get you guys' perspective, what is the reception been on the data and.

And if I could piggyback on the previous questioner.

On X aortic right. If my math is right like visit five years.

You guys became pretty much the market leader in New York.

Just kind of a map of the trajectory of on X mitral if he could.

Knowing that this is let's say, a 40 $40 million to $50 million opportunity in the U S.

Yeah, No I think it's a good point dovetailing off Mic Madison's question.

Looking at the Onyx numbers.

So compared to 2021 versus 'twenty, we grew on X, 18% 21 versus <unk> 19, if you think that's too easy we grew 14%. So here we are five years after we acquired them and after they got the indication.

Given the pandemic, we had a little bit of a slowdown during the pandemic, but we've basically grown onyx double digits every year for the last five years.

So one of the things you see and you know this well from a new paper gets out.

You've got to educate your physicians you've got to look to get the guidelines changed.

And I do think we have a kind of a tailwind because we just did it for the last five years, we've with on X aortic. So I think that the brand represents.

A different valve with anticoagulation.

So I think the steps here are.

Getting getting the publication out.

<unk> physicians and obviously, we've got to get the FDA approval I mean, we can't really do any of this stuff until we get the FDA approval.

Once we get that I mean, the products on the shelves of our reps know the surgeons.

We'll present the data the feedback we've had has been excellent.

A lot of market research.

Again, it's a little bit like the aortic valve and that why Wouldnt you want a lower INR.

If you're a patient who is going to get a mitral valve.

We've shown that we can protect the valve with less coming in in the aortic position and that was very well adopted.

And now we're we've done it with the mitral valve so I.

I think it's.

You don't get it all you don't get all $40 million in one year nobody does that.

Technology adoption and uptake, but I do think it's going to probably go faster.

Then the aortic did.

Pak proactive 10 eight five.

570 patients enrolled so far if I heard you guys correctly that's right.

To what do you anticipate a pickup in enrollment to maintain the Q2.

Timing for finishing up enrollment.

Yes, I mean I think.

We continue to add centers. So we've got 60 centers signed up we have 55 onboard at this point. So we've got five more centers coming in and.

And we typically see a bolus of patients when a new center comes in.

And we've seen nice enrollment I do think.

I think it's not misstating it when.

You see a massive surge in a hospital like.

Like in January I think it's fair to say that clinical trial is probably get impacted.

People are busy and doing other things. So I think it is helpful.

For us as things kind of calmed down on the.

Covid front with a hospital that it should help but we're I mean, we're very aggressive we're having regular investigator meetings, but we've got the centers all up and running it's now a matter of just putting the foot down and getting these patients in.

Fair enough.

Last question from my side and I'll hop back in queue.

So Pat you've been there seven years right take a step back and obviously you have transformed the company.

And I'm curious as you look at it.

At the current juncture.

How would you characterize let's say average rep productivity.

Ridge reps per account.

What do you see as optimal levels what is what's the GAAP analysis tell you.

How do we fill that gap gentlemen, thank you for taking my questions.

Yeah. Thanks, Yeah. So I think it depends on the region right. So if you if you look at Europe .

We've put we've thrown a lot of new products with them right.

We acquired <unk> and then we brought on Endo span with an exodus and then we brought on <unk> we've.

We've launched relaunched and side, we've launched neo so it's like we've got kind of a point a treasurer of products in Europe , you've got the whole pipeline.

So I would say that that group is extremely busy.

U S team is it kind of comparison, they haven't really gotten any of the new stuff.

But they've got product mitral come in and they are very well positioned for that.

So we've got kind of 60 feet on the street in the U S.

They are well positioned for product mitral.

They are well positioned.

For proactive when it comes in well positioned for AMD and I think that's one that people don't necessarily grass and a lot of these businesses that I've been in you really got to add a lot more reps when you bring in new products, we don't need any more reps I can add.

$400 million worth of new revenue into the U S and not add a single rep.

So I think that's one of the real kind of secret sauces of.

Our <unk> is once we finish our investment in Asia Pacific and maybe some spotty things here and there in Europe as we maybe go direct and countries.

And we're mostly direct there now.

We're going to kind of flatten out our investment in direct distribution in all of these new products that come through.

Going to see significant drop through to the bottom line accelerating growth and accelerating gross margin as well as.

Just sheer drop through because we don't have to add any more reps.

So I think it's a unique thing about cardiac surgery in particular.

Where you can cover a lot of accounts without a lot of reps.

Yeah.

Okay, operator any more questions.

Mr. Mackin there are.

No further questions at this time.

I would like to turn the floor back over to management for closing comments.

Okay, Yes, well first of all thanks for joining today and we appreciate you spending some time with us.

We've tried to try to simplify the story to a pretty digestible plan, which as you know.

Phase one or the current growth initiative number one is our new products right, we're showing significant growth.

Our on X platform.

Grew this year, 18% versus 20 or 14% versus 19 are stenson stent grafts.

Grew 28% versus 2020 or 22% versus 19, so any comparator, we're talking about nice growth that is driving the growth of our <unk>.

So thats our first pillar in our growth. The second is Asia Pacific Latin America, we've talked about the growth rates in those two regions. We continue to invest in those areas. The third is we got to <unk>. It should come through this year.

<unk>, which will give us a $25 million payment from Baxter and then revenue that we sell to them and then product mitral, which we've talked a lot about on the call and then the fourth piece of the puzzle is.

<unk>, we're enrolling <unk>.

We're 57% of the way done with that trial, we expect to enroll in the first half of this year.

We expect to enroll our first patient in the second trial persevere, which is <unk>.

And we're still pursuing FDA approval with the Nexus device so I.

I think we've got a great story.

We're looking to deliver the numbers, we talked about and look forward to updating you on the next call and thanks for attending.

Thank you. This concludes today's conference you may disconnect your lines at this time.

Thank you for your participation.

[music].

[music].

[music].

Greetings and welcome to our T V in folk you and your and 2021 financial conference call.

At this time all participants are in a.

And only mode.

A 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.

As a reminder, this conference is being recorded.

It's now my pleasure to introduce your host.

I will now turn the call over to Brian Johnson.

The children watching growth. Thank you.

You may begin.

Thanks, operator, good afternoon, and thank you for joining the call today, joining me today from <unk> management team are Pat Mackin, CEO and Ashley Lee CFO before we begin I'd like to make the following statements to comply with the safe Harbor requirements of the private Securities Litigation Reform Act of 1095 comments made on this call that look forward in.

Time involve risks and uncertainties and are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.

The forward looking statements include statements made as for the Companys or managements intentions hopes beliefs expectations or predictions of the future. These forward looking statements are subject to a number of risks uncertainties estimates and assumptions that may cause actual results to differ materially from these forward looking statements additional information concerning certain risks and uncertainties that may.

The impact. These forward looking statements is contained from time to time in the Companys SEC filings and the press release that was issued earlier today now I'll turn it over to <unk> CEO Pat Mackin.

Hey, Thanks, Brian and good afternoon, and thanks for joining us on the call.

This is our first call since rebranding as our TV.

His name is derived from the words aorta innovation envision.

And reflects our evolution to be a global leader, providing innovative treatments for aortic disease, and our vision to continually innovate and maintain our position of leadership.

It was time to change your name as we significantly evolved from the Cryolife I joined seven years ago joining.

During these past seven years as we continue to evolve.

We've come across investors and customers, who are not aware of the significant transformation that was taking place in our company.

Investors and customers and I don't have a fresh look at our <unk> to see what we do and to learn more about our significant transformation.

Our TVO now encapsulates all that we've accomplished since we acquired on X in 2016.

Through a series of strategic acquisitions, and divestitures and our new development initiatives, we've assembled a portfolio of products focused on aortic repair.

We believe can compete with those of any company on the market today.

We provide cardiac and vascular surgeons with innovative solutions to their most difficult challenges and we'll continue to do so in the future as our product pipeline and new regulatory approvals, we'll open access to our innovative therapies to many more patients around the globe.

My goals since becoming CEO of Cryolife was to transform into our <unk> and.

And our employees by collaborating with each other and our physicians have basically John just done just that.

It's at the midpoint of our 2022 guidance.

We believe our product pipeline and regulatory strategy sets us up well for continued success for years to come.

Our rebranding followed on the heels of a record fourth quarter 2021 for our <unk>.

As we posted strong quarterly revenue growth.

Revenues for the fourth quarter to quarter were $79 4 million, that's up 16, 9% compared to the fourth quarter of 2020 and up 18, 8% on a pro forma constant currency basis.

Revenues were up $13 five on a pro forma constant currency basis compared to the fourth quarter of 19.

Our growth in Q4 was driven by our stenting stent grafts as well as our awning product segments.

More specifically on a pro forma constant currency basis, comparing Q4, 'twenty one to Q4 of 'twenty Stenson stent grafts grew 33% on X grew 13, 5%.

Here the growth rates for the products that are in the stenting stent grafts segment, <unk> up 20% Niel up 73% and signed up 39% Nexus up 233%.

We also saw a return to growth in cardiac tissue as well as the relaunch of our TMR business.

In all we are pleased with our fourth quarter results. Despite continued lingering headwinds from the Delta variant and omnicom variance that were associated with staffing issues and patient overflow issues in the hospitals.

As I explained on our last call our near term plan is to accelerate revenue growth through three main initiatives.

First we plan to drive Onyx growth, while commercializing <unk> Nexus inside EMEA.

Our new aortic stent graft products.

Second we plan to further expand into Asia Pacific and Latin America by gaining regulatory approvals and expanding our commercial channels.

Finally to secure regulatory approvals for per client and product mitral in the U S and <unk> in China.

I will walk you through an update on each of these three initiatives.

Starting with <unk>. This is the world's first arch re modeling hybrid device for use in the treatment of acute type aided sections. We remained very optimistic on the product line given our experience to date.

As noted earlier during the fourth quarter revenues increased 20% on a pro forma constant currency basis over the fourth quarter of 2020.

Increases were driven by continued strength in Europe , and our regulatory approvals in countries outside of EMEA and the U S.

Second next is posted quarterly revenues of 233% increase on a constant currency basis compared to the fourth quarter of 2020.

Given the anticipated decline in COVID-19 infection rates associated with hospital staffing shortages and travel restrictions as well as improved physician adoption, we anticipate an uptick in <unk> procedures in 2022.

Third inside this is our newest device in our portfolio to treat thoracoabdominal aneurysms with Endovascular stent grafts.

Our revenues in this product line, which include inside and extra designed grew 39% on a constant currency basis, when compared to Q4 of 2020.

Fourth our Vito open Neil this is our newest product in the frozen elephant trunk category. This is used to treat dissections and aneurysms in the aortic arch revenues from this product line, which include a Vito open plus and neo grew 73% on a constant currency basis compared to Q4 2020.

Regarding and yet we've decided to make modifications to the delivery system based on customer input and anticipate releasing this product in early 2023.

We anticipate the demand for these products will continue to build its market adoption improves Kobe.

COVID-19 infection decrease or become less Berlin and hospital staffing shortages abate.

Most of these products were fully launched during the COVID-19 pandemic or shortly before and therefore have not seen their full potential and environment not significantly hampered by the effects of the pandemic.

In addition, while Nexus and <unk>, both launched shortly before the pandemic. They also benefited from our larger more experienced sales force in Europe .

Given the positive feedback we received at our newly offered products I believe our growth in these product lines would have been even greater in the absence of the pandemic.

Moving on to our next initiative International expansion in Asia Pacific and Latin America through new regulatory approvals and commercial footprint expansion.

I'm pleased to report that we are executing very well on this strategy.

Our quarterly revenues on a pro forma constant currency basis increased in Asia Pacific and Latin America by 29% and 34% respectively. Those are over the fourth quarter of 2020.

We continue to expect these regions to be important contributors to our growth over the coming years as we continue to execute on this strategy.

Regarding our third initiative, we continue to make progress on achieving three regulatory approvals in major markets.

Our first is to obtain U S. A lower INR label for the on X mitral valve.

We've submitted our PMA supplement to the FDA and it is currently under review.

Our new label was approved we believe lowering anticoagulation levels will be a significant clinical benefit for patients.

We are in active dialogue with the FDA, we continue to expect to receive PMA approval for the lower INR label of the on X mitral valve like our lower INR label for aortic valves sometime during 2022.

If approved we believe we will take significant market share in the U S with the on X mitral valve just as we've done and are continuing to do with the on X aortic valve.

For per clock as you know we filed the PMA with the FDA last quarter, we're working closely with the FDA, we still expect to receive approval from the FDA during the second half of 2022.

If approved for approximately two years thereafter, we will supply protocol out to Baxter and generate revenue.

Lastly, as it relates to the regulatory approval for <unk> in China, We remain actively engaged with NPA and expect to have more clarity about a possible approval pathway within the next couple of months.

In addition to our progress in each of these initiatives. We also continue to make strides in our mid term pipeline with key products currently in the U S clinical trials and other is expected to start later this quarter.

These three products our proactive <unk> next.

Nexus and Andas.

We continue to make significant progress in enrollment in our proactive trial.

This is our 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 enrolled 573 patients in this trial and feedback from surgeons and patients participating has been excellent.

We anticipate completing enrollment in the trial around the end of the second quarter of 2022 and assuming the trial meets its endpoints. We believe we can achieve FDA approval for this new indication by late 'twenty for early 'twenty five.

If approved by the FDA, we believe the on X aortic valve using <unk>, rather than coming in should become the market share leader in the aortic valve market in patients under the age of 70.

As for AMD.

We recently received FDA approval to begin our pivotal clinical trial called persevere.

The first of your trial as a non randomized clinical trial in up to 25 sites in the U S.

We expect to enroll approximately 100 participants who have experienced an acute type a dissection.

The combined primary efficacy and safety endpoints of the trial or the reduction in all cause mortality.

<unk>, new disability stroke C myocardial infarction, indeed, new onset renal failure requiring dialysis.

As well as the re expansion of the true eliminate aorta.

We anticipate enrolling the first patient this quarter and completing full enrollment by the end of this year.

With a one year follow up period, we anticipate we received FDA approval for <unk> in late 'twenty four.

In addition to the progress we've made on the proactive trial as well as the Mds trial. We also wanted to update investors about our partner Endo spend and how theyre, making progress on their U S. IDE trial for <unk> called <unk>.

As you recall, we secured an option to potentially acquire <unk> do.

Due primarily to delays, resulting from the pandemic enrolment in the <unk> trial has been slower than anticipated.

As a result, we do not believe in enrollment in the trial will be completed until sometime in 2023.

We therefore do not anticipate approval for the Nexus system until sometime in 2025 at the earliest given the time required for follow up PMA submission and FDA review and approval.

Given this delay as well as associated challenges related to market adoption. During the pandemic. We are also fully impair the value of the option to purchase understand and recorded an associated charge.

Accordingly, we've pushed the potential capital need at least one year, if we decided to proceed.

With that said, we still remain bullish on the next technology and Ashley will provide more color in his comments.

If each of these three trials proceed as anticipated we anticipate FDA approval for <unk> <unk> and Nexus by late 'twenty, four 'twenty, five which would increase our addressable market opportunity by an estimated $1 5 billion.

With that I'll now turn the call over to Ashley.

Thanks, Pat and good afternoon, everyone.

Total revenues were $79 $4 million for the fourth quarter of 16, 9% on a GAAP basis, and up 18, 8% on a pro forma constant currency basis, both compared to the fourth quarter of 2020 Rep.

Revenues benefited from strength in aortic stent in stent grafts on X cardiac tissues and the relaunch of TMR.

On a year over year basis in the fourth quarter of 2021.

<unk> extends <unk> revenues increased 31%, reflecting increased procedure volumes and revenues from our new product launches.

On X revenues increased 14% and <unk> revenues increased 8%, reflecting improved procedure volumes relative to the fourth quarter of 2020 and.

In tissue processing revenues increased 17% benefiting from the release of tissue impacted by the truths hold in 2020.

On a pro forma constant currency basis compared to the fourth quarter of 2020.

Aortic stent and <unk> revenues increased 33% on X revenues increased 13%.

<unk> revenues increased 8% and tissue processing revenues increased 17%.

On a pro forma constant currency basis compared to the fourth quarter of 2019 on X revenues increased 16%.

The extent and stent graft revenues increased 37% <unk> increased 3% and tissue processing revenues increased 4%.

On a regional basis fourth quarter 2020 revenues in EMEA increased 22%.

Pacific increased 28%.

Latin America increased 31% in North America increased 12% all compared to the fourth quarter of 2020.

On a pro forma constant currency basis revenues in Europe increased 27%.

Asia Pacific increased 29% Latin America increased 34% in North America increased 11% all compared to the fourth quarter of 2020.

Gross margins were 64, 7% in the fourth quarter compared to 65, 7% for the fourth quarter of 2020, the decrease was driven by higher than anticipated inventory obsolescence and inflationary impacts.

G&A expenses in the fourth quarter were $51 3 million compared to $36 1 million in the fourth quarter of 2020.

Excluding non recurring acquisition related and business development charges of $10 million in 2021.

Which primarily consist of a non cash $4 $5 million charge related to fair value adjustments for a cyrus contingent consideration.

And a noncash $4 $9 million charge related to the impairment of the Indo spanned purchase option.

And excluding $4 $8 million in charges in 2020, primarily related to noncash fair value adjustments for Osiris.

G&A expenses were $41 2 million and $31 3 million, respectively in the fourth quarters of 2021 and 2020.

With the impact of the pandemic and fish physician adoption and sales of mixes both historically and in the future. We evaluated the purchase option relative to the purchase price and forecasted operating results and determined that it was appropriate to take an impairment charge.

The remaining increase in SG&A, primarily relates to personnel related expenses, including salaries commissions stock compensation and travel as our spending returned closer to pre COVID-19 levels and additional expenses to support our expected future growth.

R&D expenses were $9 5 million in the fourth quarter compared to $6 6 million for the fourth quarter of 2020, reflecting increased spending related to the <unk> trial and investments to bring our aortic stent pipeline.

In the U S.

Fourth quarter interest expense of $3 9 million included approximately $2 5 million of expense related to our term loan b $1 $1 million related to our convertible debt and approximately 300000 in amortization of debt origination cost.

Other expense in Q4 includes $2 9 million in realized and unrealized foreign currency translation losses.

Income tax expense of $4 million in the fourth quarter.

Flex valuation allowances against deferred tax assets.

On the bottom line, we reported GAAP net loss of approximately $20 1 million or <unk> 51 per diluted share in the fourth quarter.

non-GAAP net loss was $141000 or zero cents per share in the fourth quarter GAAP and non-GAAP earnings includes a pre tax loss of approximately $2 4 million or approximately <unk> <unk> per share related to foreign currency translation losses.

Adjusted operating income was $5 7 million for the fourth quarter of 'twenty, one compared to $11 million of $11 1 million for the fourth quarter of 2020, adjusted operating income reflects add backs of amortization expense business development and other nonrecurring charges the operating income.

As of December 31, 2021, we had approximately $55 million in cash $317 million in debt and the full $30 million available under our revolving credit facility.

Adjusted EBITDA for the fourth quarter of 2021 was $10 8 million compared.

Compared to $12 1 million for the fourth quarter of 2020 net leverage as defined by our credit facility stood at five one times.

On other balance sheet related items, Pat mentioned are in those fan relationship as you mentioned given the pandemic related delays and commercial traction in Europe to date, we recorded an impairment in the value of the option related to this opportunity.

While we remain positive on this product the clinical timing delays push out any potential deal to acquire in this span and any associated capital need by at least one year to 2020 fiber later.

Please refer to our press release for additional information about our non-GAAP results, including a reconciliation of these results to our GAAP results.

And now for our initial 2022 outlook, we expect constant currency growth of between nine and 11% for the full year of 2022 compared to 2021.

Using a euro USD exchange rate of $1. One three revenues are expected to be $319 million to $325 million.

The average Euro USD exchange rate in 2021 was $1 eight resulting in a $6 million revenue headwind for 2022.

Our guidance assumes an impact from COVID-19 during the first quarter of this year and a return to a more normal operating environment for the balance of the year, meaning limited deferred surgeries and staff shortages and more in person selling.

Although we do not anticipate a significant improvement in operating margin and adjusted EBITDA. In 2022, we believe that we can comfortably continue to invest in our commercial channels in Asia, and Latin America, our R&D pipeline and service our debt without having to raise additional capital I will turn the call back to Pat for his closing comments.

Okay. Thanks, Ashley so before we move to take your questions I'll leave you with a few final thoughts our business momentum is strong. We believe we have the strategy the products and the team in place to continue that trend.

We just posted strong year over year revenue growth. Despite COVID-19 related headwinds. We expect we expect this momentum to continue into 2022, particularly into the second quarter and beyond.

As I explained earlier, we have three short term initiatives that will drive growth from now through the end of 'twenty four.

First we should see continued growth in on X and our news aortic stent in stent grafts Amd's next.

Nexis inside and Neil.

Second we anticipate further upside from our investments in our channels and new regulatory approvals in Asia and Latin America.

Third in 2022, we expect to receive PMA approval.

<unk> for <unk> and on X product mitral in the U S. And finally, we have a robust midterm pipeline with three U S. PMA as they're currently rolling I E <unk> or <unk> or about to start enrolling amd's persevere.

Based on our enrollment projections for these three trials, we anticipate three PMA approvals in late 'twenty four or into 'twenty, five and will expand our total addressable market by $1 5 billion.

I would encourage all of you to join US in New York City for our Investor Analyst Day on March 23rd there will be an excellent opportunity for you to learn more about our strategy our products, our R&D pipeline and our leadership team if any questions you'd like to attend in person. Please reach out to Investor relations team at investors at our TV Dot com.

Operator would you please open the line for questions.

Thank you.

At this time, we will be conducting a question and answer session.

If you would 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 he would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please while we poll for questions.

Our first question is from Cecilia furlong with Morgan Stanley . Please go ahead.

Hey, Thanks for taking the question. This is calvin on for Cecilia.

Two kind of buckets of questions first off I wanted to ask about the Mds trial progress. So I'm wondering if you could speak a little bit more to your confidence in enrolling this within sort of a nine month period.

Spoke to in your prepared remarks, how and how you think about potential COVID-19 related pressure on their enrollment that you've seen kind of in your other trials and also just initial thoughts on driving awareness around <unk> and then I had a follow up.

Yes, so I think maybe one one good surrogate is the proactive trial I mean, we started enrollment in that trial in may of 2022 about six weeks after COVID-19 hit the U S.

We've enrolled almost 570 patients during the pandemic.

So we're on track to enroll 1000 patient trial in two years under a pandemic.

I think the second thing about <unk>, we've got the IDE approved we should enroll our first patient this quarter.

We have 25 centers the trials about 100 patients.

Those 25 centers represent the largest aortic centers in the country.

I personally visited all of them I know, how many cases, they do a year.

And this is a lifesaving procedure.

These patients are typically medevac in at night.

So COVID-19 has the least people's worries when it comes to acute type a dissections.

So.

Theres always the kind of the contracting and getting through IRB and these kind of things it takes time, but we.

We feel that given the importance of this technology the life saving nature of this procedure.

That with the centers, we're in and the volume that they do that we should enroll this trial pretty quickly.

Got it very helpful.

The second one is just on margins I have two <unk>. One is on gross margin I wanted to dig a little bit into the sequential compression could just curious whats reflected in <unk> associated with kind of your tissue coming back versus inflationary pressures that you spoke to and how you think about that jumping off into 'twenty two and then also.

On the R&D cadence in 'twenty two between Pro Act in a ramping of MTS and just other drivers what would drive that R&D cadence in <unk> and thank you so much.

Yes, so grow gross margins as you know are a combination of many many moving parts right. So clearly.

The inflationary pressures from whether it's increased labor costs or increased materials are baked in there. The second thing we've seen in 'twenty. One is increased obsolescence primarily around <unk>.

We were staffed up and had product in the field to support the normal growth rates.

And we did.

Had more exposure to obsolescence given the kind of the volume reductions and then third as you mentioned theres mix, whether it's international or to our product line and we did see a higher return to growth of our cardiac tissue, which has a lower gross margin than our.

Kind of our high end devices. So it was kind of a mix of all those things.

Clearly the inflationary pressures was one that was <unk> at the beginning of the year.

And then maybe you.

You can comment on the R&D Ashley yes. So we ended up the fourth quarter at about $9 $5 million in R&D and clear.

Clearly.

Productivity continues to ramp up we're going to be starting <unk>, but we're also going to have some.

R&D efforts that are going to be rolling off this year, we invested a lot of money and getting to the point, where we could submit per cloud to the FDA. So we are going to have some programming missile and for like mitral just recently wrapped up as well so with all that being said we think that.

R&D in 2022 is going to be in the high $30 million to the low 40 millions in a lot of it will just depend on the progress that we make.

With the programs.

Great. Thanks, so much.

Thank you. The next question is from Jeffrey Cohen.

With Ladenburg Thalmann. Please go ahead.

Hi, Pat and Ashley how are you.

Hey, Jeff.

So.

Firstly could you talk a little bit about the <unk>.

<unk> pipeline I know you had some some manufacturers and throughput issues that youre checking youre, putting up a second source under development what is said.

Yes there.

Are you caught up have you caught up what are the plans going forward.

And we grew 33% in the fourth quarter.

So no issues on.

Backlog whatsoever, yes, we.

Brought on we brought on a new selling suppliers. We mentioned, we built a new facility, which note, which is not up and running but we've had no issues on the supply side things that we put up.

Depending on which number you want to look at versus 'twenty. We grew the extensive stent grafts almost 30%.

And versus 19, we grew 22% so.

Yes.

Got it fantastic, Okay, and then could you comment a little bit on.

Your channels and the size of the commercial force for Asia, Latin America, and how you're tackling that as far as direct versus distribution arrangements.

Yeah. So we've talked kind of consistently over the last probably 18 months about we see this as one of our growth drivers and.

And we saw a nice performance in both of those markets this quarter.

Commented on the growth rates in Asia Pacific and Latin America.

We're seeing <unk>.

34% growth in Latin America, and 29% growth in Asia.

Those channels, we're expecting to build Asia up more it's obviously a bigger geography.

So I think theres, probably another 15 to 20 people will be adding there over the next three years.

Albeit.

<unk> of that in Latin America, and then we basically are fully staffed up and don't need to add anymore. So yes. It is.

An investment that's actually returning right.

Right now really nice growth rates.

And we're also.

Feeding the feeding the regions as they grow.

When COVID-19 hit we kind of slowed it down and then when things started losing it up we started adding people back on.

But we expect to have that investment probably flattening out itself in the next 24 months.

Okay Perfect got it and then lastly for us absolutely.

So any comment on the.

The 10 million <unk>.

Integration severance and business development from Q4, which are onetime in nature, we should should we expect any.

Further impacts into the first half this year, yes.

Yes.

The fair value accounting for the Cyrus contingent consideration is something that we will see every quarter.

Going forward until.

The milestones are fully earned and paid and Thats way out in the future. So.

Going forward, our best estimate right now for Cyrus as maybe a $1 million and a half per quarter, but again that could change based on a variety of factors progress. That's made discount rates. There are a lot of things, but that's our best guess for four <unk>.

The up the option is fully written off so you won't see any charges related to that.

We do have an obligation.

To pay them another $5 million once they reached 50% enrollment in their clinical trial.

We anticipate them hitting 50% at some point this year.

And whenever.

They reset milestone and we make that payment there will be $5 million charge approximately in other expense.

Yes.

Perfect that does it for us.

Thanks for taking the questions. Thanks, Jeff.

Thank you.

The next question is from Mike Matson with Needham and company. Please go ahead.

Yes, thanks for taking my questions.

Yes, I just wanted to ask about the revenue guidance so you're.

You just grew 19% on a pro forma constant currency basis, you're guiding to around 10% I mean I understand there is some COVID-19 impact.

Particularly in the early part of the year, but.

Why why the slowdown I guess and.

I guess as a follow up to that just was there any kind of one offs in the fourth quarter that helped your growth that arent really sustainable I guess, maybe that's part of why it got it.

Yes, I think the biggest issue Viking again. This is one that's probably not common for a lot of companies of our size that have.

Single products are mostly in the U S. I mean, almost 40% of our businesses in Europe and the Euro dropped seven points in the last year, that's a $6 million headwind. So if you're if people are kind of taken our Q4 number and trying to straight line it out to next year.

It's the wrong math equation.

The euro a year ago was 122 this quarter and now it's $1 13, So we've got a serious headwind when it comes to the Euro in Europe , and we have a big chunk of business. There. So it's got nothing to do with our we're backing off on what we think is going to happen. It's got a lot more to do with the headwind on currency.

Yes, and the other thing by two is that 18% growth that was against the fourth quarter of 'twenty, We were up 13, 5% against the fourth quarter of 2019. So.

We're guiding to between nine and 11 versus again, if the comparison is 2019 that was $13 an ounce.

Alright, I don't think yes, I think the big I think the big thing people aren't catching.

Catching as the currency.

Right, because if you revalue 'twenty.

<unk> 2021 revenues at the new currency.

Our 298 eight turns into like 293, it's the 7% drop in it's all currency.

Yes.

We're saying we're going to grow nine to 11, you just got to I'm not going to get set up with I can't control currency.

Yes, no I understand that cost curve to guidance.

Okay.

Alright, and then.

So.

Just wanted to ask about the FERC first quarter specifically.

It sounds like Youre expecting some COVID-19 impact there and even drilling here needs within the revenue range is there anything it looks like consensus is just under $79 million, which would sort of imply a 11% growth versus the first quarter of 'twenty, one by maps alright, so that.

Robley too high based on what you are saying because your full year guidance I mean, that's at the high end of the range for the full year.

Yes, that's 79 has no impact of the 6% drop in currency.

So I think people need to readjust our numbers based on 'twenty.

<unk> 2022 currency.

And were given when we give them the full year guidance 911, and clearly COVID-19 is.

He is an issue in the first quarter I mean January was was slow.

In our in our checks with hospitals.

A lot of these hospitals that as many patients in January as it did at any point in the pandemic.

They were reducing electric procedures.

The bigger issue is frankly hospital staffing I think the good news is we're seeing cases drop hospitals empty out and staffing coming back. So we don't think it's going to persist, but we definitely think Q1 is going to be lighter than the rest of the year. Yes. Mike. This is Ashley so I mean to Pat's point talking about currency last year, we posted seven.

$1 million in revenue and if you take into account.

The change in FX rates that 71 translates to <unk> 69, So that's really the base that you should be looking at in and if you just take the midpoint of our guidance that we guided to which is 9% to 11% and 10% on top of that is <unk> 76, and as Pat indicated that Covid has really had an impact at least.

To date this quarter.

Yes, Okay I understand.

Alright, and then just as far as on X mitral goes so when you when you hopefully get that approval.

For the lower INR, how quickly do you think the uptake will be on that I mean, you've talked about it being.

Think up $40 million, if I remember right opportunities. So yes, how quickly can you get to $40 million I guess there.

I think you've seen I mean, we have a great case study right because we've already done. This we did it on the aortic side, where we got the exact same.

It's the sister product right, we had a lower INR for aortic. It has stayed at the paper has to get out it has to get socialized and educate you have to educate your physicians the great News about Pro Act mitral as we again, we've already done it with aortic number one number two the valves are already on the shelves, we have mitral valves in probably 500, okay.

<unk> in this country.

So.

All of that's going to happen to label is going to change and our reps are going to market the paper so.

Yes.

Making making new product and getting it out and all that which what happens with a lot of our other products that doesn't exist, where we have product on the shelf.

So I think we're going to see a steady increase in the mitral.

We did with with on X aortic over the next.

Three years or four years.

Okay alright, thank you.

Thanks, Matt.

Yes.

Thank you.

Our next question is from Suraj Kalia with.

And company. Please go ahead.

Hey, Pat Ashley Hope, everyone is safe and healthy.

Hey, Suraj.

So Pat Onyx.

<unk> mitral.

Love to get you guys' perspective, what is the reception been on the data and.

And if I could piggyback on the previous questioner.

On X aortic right. If my math is right like visit five years.

You guys became pretty much the market leader in you already just kind a map of the trajectory of on X mitral if he could.

Knowing that this is let's say a $44 $50 million opportunity in the U S.

Yes, no I think it's a good point dovetailing off Mic Madison's question.

Looking at the on X numbers.

So compared to 2021 versus 'twenty, we grew on X 18%.

'twenty one versus <unk> 19, if you think that's too easy we grew 14%. So here we are five years after we acquired them and after they got the indication.

Given the pandemic, we had a little bit of a slowdown during the pandemic, but we've basically grown onyx double digits every year for the last five years.

So one of the things you see and you know this well from a new paper gets out.

You've got to educate your physicians you've got to look to get the guidelines changed.

And I do think we have a kind of a tailwind because we just did it for the last five years with.

With on X aortic, so I think that the brand represents.

A different valve within a coagulation.

So I think the steps here are.

Getting getting the publication out.

<unk> physicians and obviously, we've got to get the FDA approval I mean, we can't really do any of this stuff until we get the FDA approval.

Once we get that I mean, the products on the shelves of our reps know the surgeons.

We'll present the data the feedback we've had has been excellent.

A lot of market research.

And again, it's a little bit like the aortic valve and that why Wouldnt you want a lower INR.

If you're a patient who is going to get a mitral valve.

We've shown that we can protect the valve with less coming in in the aortic position and that was very well adopted.

And now we've done it with the mitral valve so.

I think it's.

You don't get it all you don't get all $40 million in one year nobody does that.

Technology adoption and uptake, but I do think it's going to probably go faster.

NDA Arctic did.

Pat proactively.

570 patients enrolled so far if I heard you guys correctly, that's right. That's correct two but do you anticipate a pickup in enrollment to maintain the Q2.

Timing for finishing up enrollment.

Yes, I mean I think.

We continue to add centers. So we've got 60 centers signed up we have 55 onboard at this point. So we've got five more centers coming in.

Typically see a bolus of patients when a new center comes in.

And we've seen nice enrollment I do think.

I think it's not misstating it.

When you see a massive surge in a hospital.

Like in January I think.

It's fair to say that clinical trial is probably get impacted.

People are busy and doing other things. So I think it is helpful for us as things kind of calmed down on the.

Covid front with the hospital.

It should help but we're I mean, we're very aggressive we're having regular investigator meetings, but we got the centers all up and running it's now a matter of just putting the foot down and get these patients.

Fair enough.

Last question from my side and I'll hop back in queue.

So Pat you've been there seven years right take a step back and obviously you have transformed the company.

And I'm curious as you look at it.

At the current junction.

Would you characterize let's say average rep productivity average revenue per account.

Do you see as optimal levels what is what's the GAAP analysis tells you and how do we fill that gap gentlemen, thank you for taking my questions.

Yes. Thanks.

So I think it depends on the region right. So if you if you look at Europe .

We've put we've thrown a lot of new products with them right.

We acquired <unk> and we brought on Endo span with an exodus and then we have brought on A&D.

We've launched and we launched inside we've launched neo so it's like we've got kind of a point.

Treasurer of products in Europe , they've got the whole pipeline.

So I would say that that that group is extremely busy.

U S team is it kind of comparison, they haven't really gotten any of the new stuff.

But they've got product mitral come in and they are very well positioned for that.

So we've got kind of 60 feet on the street in the U S.

They are well positioned for product mitral.

They are well positioned.

For proactive when it comes in well positioned for AMD and I think that's one that people don't necessarily grass and a lot of these businesses that I've been in you really got to add a lot more reps when you bring in new products, we don't need to add more reps I can add.

$400 million worth of new revenue into the U S and not add a single rep.

So I think that's one of the real kind of secret sauces of.

Our <unk> is once we finish our investment in Asia Pacific and maybe some spotty things here and there in Europe as we maybe go direct and countries.

And we're mostly director now.

We're going to kind of flatten out our investment in direct distribution in all of these new products that come through.

Going to see significant drop through to the bottom line accelerating growth and accelerating gross margin as well as.

Just sheer drop through because we don't have to add any more reps.

So I think it's a unique thing about cardiac surgery in particular.

Where you can cover a lot of accounts without a lot of reps.

Yeah.

Okay, operator any more questions.

Mr. Mackin there are.

No further questions at this time.

I would like to turn the floor back over to management for closing comments.

Okay, Yes, well first of all thanks for joining today and we appreciate you spending some time with us.

We've tried to try to simplify the story to a pretty digestible plan, which is.

Phase one or the current growth initiative number one is our new products right, we're showing significant growth.

Our on X platform.

Grew this year, 18% versus 20 or 14% versus 19 are stenson stent grafts.

Grew 28% versus 2020 or 22% versus 19, so any comparator, we're talking about nice growth that is driving the growth of our <unk>.

So thats our first pillar in our growth. The second is Asia Pacific Latin America, we've talked about the growth rates in those two regions. We continue to invest in those areas. The third is we've got two PMA PMA as it should come through this year.

Which would give us a $25 million payment from Baxter and then revenue that we sell to them and then product mitral, which we've talked a lot about on the call and then the fourth piece of the puzzle is.

<unk>, we're enrolling <unk>.

We're 57% of the way done with that trial, we expect to enroll in the first half of this year.

We expect to enroll our first patient in the second trial persevere, which is <unk>.

And we're still pursuing FDA approval with the Nexus device so I.

I think we've got a great story.

We're looking to deliver the numbers, we talked about and look forward to updating you on the next call and thanks for attending.

Thank you. This concludes today's conference you may disconnect your lines at this time.

Thank you for your participation.