Q3 2024 Artivion Inc Earnings Call
Speaker Change: Greetings, and welcome to the Ativion Third Quarter 2024 Financial Conference Call.
Speaker Change: At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad.
As a reminder, this conference is being recorded.
Speaker Change: I would now like to turn the conference over to your host, Lane Morgan, from Gilmartin Group. Please go ahead.
Lane Morgan: Thanks, Operator. Good afternoon and thank you for joining the call today.
Lane Morgan: Joining me today from our Kibbians management team are Pat Mackin, CEO, and Lance Berry, 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 1995.
Lane Morgan: 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 1995. The forward-looking statements include statements made as to the company's or management's intentions, hopes, beliefs, expectations, or predictions of the future.
Lane Morgan: 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.
Lane Morgan: Additional information concerning certain risks and uncertainties that may impact these forward-looking statements is contained from time to time in the company's SEC filings and in the press release that was issued earlier today.
Lane Morgan: You can also find a brief presentation with details highlighted on today's call on the investor relations section of the Artivian website. Now I'll turn it over to Artivian CEO, Pat Mackin.
Pat Mackin: Hey, thanks Lane and good afternoon everyone. I'm pleased to report continued strong financial performance through the third quarter as we delivered robust revenue growth and further improved operating leverage.
Pat Mackin: We also made breakthrough progress on several key clinical and regulatory initiatives that have collectively given us greater conviction in our ability to execute our best-in-class PMA-focused pipeline and deliver sustained double-digit revenue growth while growing EBITDA twice as fast as revenue.
Thank you. Thank you.
Pat Mackin: In the third quarter of 2024, we delivered constant currency revenue growth of 10% year-over-year, representing $95.8 million in revenue, and adjusted EBITDA growth of 28% year-over-year compared to the third quarter of 2023.
Pat Mackin: Let me first cover our Q3 financial performance before addressing the significant clinical and regulatory updates for the quarter.
Pat Mackin: From a financial perspective, our strong Q3 performance was enabled by continued growth across our product portfolio, as well as continued benefit from regulatory approvals and commercial footprint expansion in key international markets, especially in Latin America and Asia Pacific.
Pat Mackin: From a product category perspective, Onyxx revenues increased 15% year over year on a constant currency basis as we continue to take market share globally with the only mechanical aortic valve that can be maintained at a low INR of 1.5 to 2.0.
Pat Mackin: Based on feedback from the field, our recent market share gains, and the proven clinical benefits of the Onyx aortic valve, we maintain our strong conviction that Onyx is the best aortic valve in the market and will continue to take market share worldwide.
Pat Mackin: Bioglue grew 14% on a constant currency basis compared to the same period last year. This was the second straight quarter of double-digit constant currency revenue growth for Bioglue.
Pat Mackin: We are pleased with the strong performance to date of BioGlue as we continue to grow this differentiated product globally.
Pat Mackin: Also in Q3, our Stencraft revenues grew 13% on a constant currency basis in the third quarter compared to the same period last year.
Pat Mackin: Our Stencraft portfolio remains a key component of our growth strategy, and we are encouraged by our strong results, which were driven by our differentiated portfolio products, focused on a more complex segment of the Stencraft market.
Pat Mackin: Today the products in our Stencraft portfolio are primarily sold in Europe where we leverage our existing direct sales infrastructure to create significant cross-selling opportunities across our unique aortic product offering.
Pat Mackin: Our pipeline consists largely of bringing these proven products to the U.S. and Japan markets, which represents a significant growth opportunity.
Pat Mackin: Lastly, tissue processing grew 2% year over year on a constant currency basis compared to Q3 of last year.
Pat Mackin: This slightly lower-than-expected growth is driven by lower-than-anticipated donor allograft volumes in the third quarter.
Pat Mackin: While we do not report revenues on a product-by-product basis, for context, tissue processing growth is driven primarily by our Synagraft pulmonary valves, which are used in the Roth procedure.
Pat Mackin: For those unfamiliar with the Ross procedure, it's a double valve procedure in which a patient's native pulmonary valve is used to replace a patient's defective aortic valve, and then the patient's pulmonary valve is then replaced by the donor pulmonary allograft.
Pat Mackin: Because of the success of this procedure, demand for our synagraft pulmonary valves significantly exceeds our supply and therefore our growth is dependent on donor allograft volumes which tend to fluctuate from quarter to quarter.
Pat Mackin: Still tissue processing revenues have grown 11% year-to-date on a year-over- year cost of currency basis.
Pat Mackin: Importantly, our team has also initiated new measures to further improve donor yields beginning in Q4 and early into 2025, leaving us increasingly confident that our tissue business can be a mid-single-digit grower over the long term.
Pat Mackin: However, you should expect to see some fluctuations in growth rates quarter to quarter driven by underlying fluctuations in donation.
Pat Mackin: From a geographic standpoint, we continue to see great results from our growth initiatives across Latin America and Asia Pacific, primarily through new regulatory approvals and commercial footprint expansion.
Pat Mackin: Latin America and Asia-Pacific delivered constant currency growth, revenue growth of 32 and 23 percent, respectively, compared to the third quarter of last year.
Thank you. Thank you.
Speaker Change: We continue to anticipate strong revenue growth for both regions for the full year and over the coming years as we continue to leverage our industry-leading product portfolio in those regions.
Speaker Change: I will now turn to our Product Pipeline and Regulatory Developments.
Speaker Change: We're excited to announce that we recently filed the first module of the PMA application for AMDS for the FDA.
Speaker Change: We continue to anticipate FDA approval, PMA approval for AMDS in Q4 of 2025, which as we've discussed, would open up a U.S. addressable market opportunity of approximately $150 million with no competitive alternatives.
Speaker Change: I'm also pleased to announce our recent regulatory approval from the National Medical Products Administration, also known as NPA, to commercialize Baiwu in China.
Speaker Change: We estimate that approximately 12,000 patients in China each year have an acute type A dissection, which could benefit from BioGo each year.
Speaker Change: There are some additional administrative steps that we have to take to gain reimbursement and then to get access at the hospital level.
Speaker Change: These steps are expected to take 9 to 12 months, and therefore we expect to begin commercializing Viagra in China in the second half of 2025.
Speaker Change: BioGlue has been a great product for patients for many years and we're excited to be able to bring this technology to another large market in China.
Speaker Change: Now to discuss the two regulatory updates, I would like to now update you on our pipeline and recently released clinical data.
Speaker Change: First, in October, Endospan completed enrollment in the US IDE pivotal trial called TRIUMPH for its Nexus aortic arch stenograph system.
Speaker Change: Assuming the trial endpoints are met, Nexus remains on track for approval in the second half of 2026.
Speaker Change: As a reminder, aortic arch disease with aneurysms or dissections who receive treatment have previously had no or had little choice before NEXUS but to undergo an operative chest surgery, which is an invasive operation associated with lengthy hospitalizations and prolonged recuperation.
Speaker Change: Nexus is a highly differentiated technology that transforms a complex surgical aortic arch repair into a minimally invasive endovascular repair.
Thank you for watching. Be safe out there. Stay safe.
Speaker Change: Second, at EX in October, we are very pleased to see our AMDS and AVIDA Open Neo technologies take center stage at the Aortic Focus Late Breaking Science Sessions at EX.
Speaker Change: Late-breaking five-year data from our AMDS DARTS trial reported long-term clinical follow-up on the remaining 25 of 46 study participants with acute type A dissections who are treated with a proximal aortic repair in AMDS.
Speaker Change: The results demonstrate 94% of patients were free from aortic reoperation compared to existing literature on hemiarchial outcomes, which report freedom from late aortic artery operation as low as 76%.
Speaker Change: Additionally, 95% of patients were free from total aortic diameter growth above five millimeters at zones two and four.
Speaker Change: This compares favorably to existing literature on hemiarch-only outcomes, which suggests a majority of patients have early aortic diameter growth in the proximal descending aorta.
Speaker Change: For context, significant growth of the aorta can lead to increased risk of rupture, dissection, and reoperation.
Speaker Change: Long-term results from DART's trials show a large majority of patients experience stable or decreased total aortic diameter following the treatment with AMDS and thus are at decreased risk for further aortic dissection or reoperation as far out as five years post implantation, thus showing the durable effect of the therapy.
Speaker Change: Third, regarding AMDS 30-day from the PERSEVERE trial, showed a cerebral malperfusion resolution of 90% of affected subjects in the AMDS implantation group.
Speaker Change: The results also indicate a stroke occurrence of 10.8% following AMDS implant, which compares favorably to 20.9% for hemiarch alone based on the five articles and literature.
Speaker Change: Cerebral malperfusion, often leading to stroke, is a major complication for acute type A aortic dissections.
Speaker Change: These positive results from PERSEVERE trials show that AMDS reduces malprofusion and the rate of stroke. We're excited to see the continued positive results from both DARTS and PERSEVERE studies, further reinforcing the significant clinical benefits and life-saving nature of AMDS.
Speaker Change: Lastly at EX, one-year data from the NEOs trial showed that the Avida Open NEO is safe and effective in treating aortic arch pathologies.
Speaker Change: Aveda Open Neo is our current generation frozen elephant trunk that is sold internationally and is the predecessor to our pipeline product called Arcevo LSA.
Speaker Change: Notably, the 161 patients treated with Vito Open Neo experienced lower one-year mortality and one-year combined major adverse event rates compared to the current market-leading device.
Speaker Change: Given that we anticipate the Arcevo USID trial will be in the range of 120 patients, these results give us greater confidence in the future success of that trial.
Speaker Change: In summary, we are encouraged by our Q3 financial performance and thrilled with the progress this quarter on the regulatory and clinical fronts.
Speaker Change: Our strong financial, clinical, and regulatory performance positions us well for the remainder of 24 and beyond. It increases the confidence we have in our ability to deliver sustainable double-digit revenue growth while driving EBITDA margin expansion and growing EBITDA twice as fast as sales.
With that, I'll now turn the call over to Lance.
Lance Berry: Thanks, Pat, and good afternoon, everyone. Before I begin, I'd like to remind you to please refer to our press release published earlier today for information regarding our non-GAAP results, including a reconciliation of these results to our GAAP results.
Lance Berry: Additionally, all percentage changes discussed will be on a year-over-year basis and revenue growth rates will be in constant currency unless otherwise noted.
Lance Berry: Total revenues were $95.8 million for the third quarter of 2024, up 10% constant currency compared to Q3 of 2023. Adjusted EBITDA increased approximately 28% from $13.9 million to $17.7 million in the third quarter of 2024.
Lance Berry: Adjusted EBITDA margin was 18.5% in the third quarter of 2024, a 270 basis point improvement over the prior year, driven by a 220 basis point reduction in general administrative and marketing expense as a percentage of sales.
Lance Berry: We continue to believe our sales and G&A infrastructure is very scalable, and the significant leverage we've produced in the first half of the year supports our belief.
Thank you.
Lance Berry: From a product line perspective, Onyx revenues increased 15%, BioGlu revenues grew 14%, StemGraft revenues grew 13%, and Tissue Processing revenues grew 2% in the third quarter of 2024.
Lance Berry: Other revenues declined to approximately $561,000 and 17% in the third quarter of 2024.
Lance Berry: While relatively nominal to the business, the decline in Q3 was driven by the timing of per cloud orders from Baxter as they continued to manage down to inventory levels.
Lance Berry: Though the underlying end-user sales of Percloud are beginning to ramp up, we expect these inventory dynamics to continue through the balance of 2024.
Lance Berry: Excluding this impact, our underlying business grew 11% in the third quarter compared to Q3 of 2023.
Lance Berry: On a regional basis, revenues in Latin America increased 32 percent, Asia Pacific increased 23 percent, EMEA increased 15 percent, and North America increased 2 percent, all compared to the third quarter of 2023.
Lance Berry: As anticipated, gross margins were 64% in Q3, flat compared to the third quarter of 2023.
Lance Berry: General Administrative and Marketing expenses in the third quarter were $50 million compared to $51.1 million in the third quarter of 2023.
Lance Berry: Non-GAAP general administrative and marketing expenses were $46.6 million in the third quarter compared to $44.7 million in the third quarter of 2023.
Lance Berry: R&D expenses for the third quarter were $6.6 million compared to $6.4 million in the third quarter of 2023. We still anticipate full year R&D spend as a percentage of sales to be relatively flat to prior year.
Lance Berry: Interest expense net of interest income was $8 million as compared to $6.3 million in the prior year.
Lance Berry: Other income expenses this quarter included foreign currency translation gains of approximately $2.4 million.
Lance Berry: Free cash flow was $7.8 million in the third quarter of 2024. Importantly, we continue to expect free cash flow to be positive for the full year 2024.
Go to Beadaholique.com for all of your beading supplies needs!
Lance Berry: As of September 30, 2024, we had approximately $56.2 million in cash and $314 million in debt, net of $6.3 million of unamortized loan origination costs.
Lance Berry: This is inclusive of the impact of a recently closed July amendment agreement to end a span.
Lance Berry: I'd also like to add that our convertible debt moved to current on our balance sheet this quarter as expected.
Lance Berry: As we've discussed, our delayed draw term loan announced earlier this year provides us with flexibility to opportunistically settle the convert with cash or shares, assuming our stock price exceeds $23.46 at maturity in July 2025.
Lance Berry: We do not anticipate the need to raise additional capital to fund our debt obligations, our investments in our channels, or our pipeline in the foreseeable future.
Lance Berry: Our net leverage at the end of Q3 was 3.9, down from 5.3 in prior years.
Lance Berry: At the midpoint of our EBIDTA guidance range, we expect net leverage to be closer to 3.5 by the end of the year and to continue to decrease in 2025.
Now for our outlet for the remainder of 2024.
Lance Berry: We are continuing to expect constant currency growth of between 10 and 12% for the full year 2024 compared to 2023.
Lance Berry: Narrowing our range of reported revenues to $389-$396 million compared to our previously articulated range of $388-$396 million.
Lance Berry: At current FX rates, we expect FX to have a negligible impact on full-year revenue growth rates.
Lance Berry: As we look ahead, we have conviction in the ability of the overall business to grow low double digits year over year over the long term, driven by our portfolio of differentiated products and our best-in-class R&D pipeline.
Lance Berry: With our continued top-line revenue growth and general expense management through Q3, we continue to expect adjusted EBITDA to be in the range.
of $69 to $72 million for the full year 2024.
representing a 28 to 34 percent growth over 2023.
Lance Berry: and 280 basis points of adjusted margin, EBITDA margin expansion at the midpoint of our ranges.
Lance Berry: As a reminder, we expect gross margins to remain at levels similar to 2023 and continue to expect to draw significant leverage from our global sales force and G&A infrastructure.
Lance Berry: Additionally, R&D expenses are expected to remain relatively flat at the percentage of sales.
Lance Berry: Lastly, I would like to discuss 2025. We will provide 2025 guidance in February during our Q4 earnings call, but I did want to provide you with some directional comments as you think about 2025.
Lance Berry: In general, we expect the same dynamics to be in place for the existing product portfolio in 2025 as there are in 2024, with the exception that we will not have the one-quarter of significant center-graft pulmonary valve increase benefit in our tissue business in 2025 that we had in 2024.
Lance Berry: We expect to continue to drive the Dow Margin expansion by leveraging sales and G&A expenses.
Speaker Change: With that, I will turn the call back to Pat for his closing thoughts.
Pat Mackin: Thanks Lance. So if you as you've heard throughout of our comments we're committed to shareholders that we will deliver double-digit revenue growth and two times that for EBITDA.
Pat Mackin: You've also just heard about our strong execution of our R&D pipeline, which gives us stronger confidence that we can deliver on these financial commitments going forward.
Pat Mackin: More specifically, we have the following key regulatory approval and three PMAs in our R&D pipeline that will help us to deliver on the continued revenue and EBITDA growth. First, BioGlue China regulatory approval. This opens up a major new market starting in the second half of 2025.
Pat Mackin: Second, the AMDS PMA. We've just completed the one-year follow-up of the PERSEVERE trial and we just filed the first PMA module, both of which put us on track for a Q4 2025 PMA approval.
Third, the Nexus PMA.
Pat Mackin: The Endospain, our partner Endospain, completed enrollment in the Nexus IDE trial called Triumph, which puts the PMA on track for approval in the second half of 2026.
Fourth, our CERO LSA PMA.
Pat Mackin: presentation of the clinical data at EACS from the NEOs clinical trial that is our current generation frozen elephant trunk called NEO was in 161 patients which showed clinical results that are better than the commercially available devices on the US market today.
Pat Mackin: Given that our USID trial for our SIVA LSA would hold around 120 patients, the results of the NEOS trial gives us great confidence that their SIVA LSA trial will also be successful.
Pat Mackin: Finally, I want to thank all of our employees around the globe for the continued dedication to our mission of being the leading partner to surgeons focused on aortic disease. With that, operator, please open the line for questions.
and James Mackin. Thank you.
Speaker Change: 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 then 1 on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You may press star and then 2 if you would like to remove your question from the queue.
Speaker Change: Again, if you would like to ask a question, please press star and then 1 now.
Speaker Change: The first question that we have comes from Daniel Stoda of Citizens JMP. Please go ahead.
Daniel Stoda: Yeah, great. Thank you. I guess I'll just start off on the aortic stent graft business.
Another strong quarter despite 3Q23 being a tougher comp.
Daniel Stoda: I just wanted to ask if you can give any more color on, you know, what specific products are performing well, or if you could just give us any puts and takes on what's driving this business, and, you know, is it any cross-selling benefits or anything you're seeing in the market?
Thank you.
Speaker Change: Yeah, I would say a couple things, and Lance, you can chime in as well. I mean, when you look at, we don't break out the specific product segment detail. We've got, you know, a half a dozen products that cover the entire span of Aorta.
Pretty much every one of them is growing double digits.
Speaker Change: and continues to do so. So we're very kind of confident in that business continuing to grow in the double digit range.
Speaker Change: We're seeing it in Europe, we're seeing it in Asia, we're seeing it in Latin America. So, I mean, I think it's kind of more of the same because we've got such a differentiated portfolio and we're expanding globally at the same time.
Great, thanks. And this is one follow-up on ONIX.
Speaker Change: So you noted some share gains internationally. I just wanted to get a sense of what extent are you seeing this and how should we think about this?
or where this could go in 2025.
Speaker Change: And are you seeing, you know, more traction just mostly because of the new data with the reduced bleeding? Just any...
You know.
Speaker Change: Put some tags or any other additional commentary and as we think about that. Thank you Yeah, so if you if you if you started to kind of a globe we've got about a 30% market share globally
Speaker Change: We are much stronger in the U.S. We're in the 55% range in the U.S.
Speaker Change: The share gains we're seeing are really across across the globe
Speaker Change: We continue to take share in the U.S. driven by the post-approval trial. And just as a refresher, you know, we ran the original PMA trial for...
Speaker Change: Onyx Low INR, and it showed a 60% reduction in major bleeding. We've ended a post-approval trial with five-year follow-up required by the FDA at 500 valves. We presented that in May. It showed an 87% reduction in major bleeding.
Speaker Change: Based on our market checks and research, we expect our market share in the U.S. to continue to go up.
and we've got even more upside opportunity internationally.
Speaker Change: I think ONIX continues and as we've told investors, we think that's a double-digit growth product and it has been for the last six or seven years. So we'll continue to execute on what we said we would do.
Great, thank you very much.
Speaker Change: Thank you. The next question we have comes from Suraj Kalia of Oppenheimer & Co. Please go ahead.
Suraj Kalia: Hi Pat, Lance, congrats on the quarter. Can you hear me all right?
Speaker Change: Yeah, we can hear you fine. Perfect. So, Pat, Synagraph, you know, long-term, mid-single-digit growth, I guess just a tangential question, do you think?
Speaker Change: there are some other ways in terms of alternative assets that
Speaker Change: can be complementary to growth rates? How do you all think, or basically, this is the way the Ross has done, this is the way Sengraf does, and the donation algorithm, and that's the way we should start thinking about it.
Speaker Change: Yeah, I think so. There's a couple things that are, I think, super impressive about one, the Roths, and two, the Roths with Synagraft.
Speaker Change: We have 25 years of data on the Ross procedure with Synagraft, and it's phenomenal. The reason the procedure's taken off is because of that data. There's been a kind of a...
a number of different papers that have...
you know, been published recently that show...
Speaker Change: You know, if you get a Roth procedure, then you can actually match the survival and lifestyle of a patient who didn't have one.
Speaker Change: So, the data is outstanding. The challenge here is that we're just constrained by donation. Now, we are doing things. We're always working on continuous improvement.
Speaker Change: You know, last year, this past year, we've worked on our yields on the Cinegraph pulmonary valve, which has been very impressive. We've got more kind of tricks up our sleeve. We've got other things we're working on because we're always looking at stuff. So we'll continue to work at it.
Speaker Change: You know, I don't have the luxury of, you know, telling the factory to make more. So, we literally sell everyone that comes out, and we're working to make sure that we can, you know, meet the demands of the market to the best of our ability.
. . . . . . . . .
Speaker Change: In terms of, and I know this might be dumb, but the Nexus trial, obviously the 30 day outcomes were good in terms of.
Speaker Change: stroke and paraplegia and whatnot. Even though the trial, a triumph trial calls out 30 days, remind us again, is there any late migration we should be worried about?
Speaker Change: So we've had, I think the only public data on Nexus, the USID trial called TRIOMPH, was presented at STS last year, I think in 20 patients. It was Brad Lechenauer from Emory who presented that data and did show very good results. And the big thing they're looking at, right, is...
Speaker Change: what's the stroke rate, what's the paraplegia rate, what's the re-operate, what's the mortality, renal dialysis, so all the same stuff we track in Persevere.
Speaker Change: So, we have not seen the full 60-day cohort that will be presented to the FDA. We may see that in January, we may see that in May, just, you know, we don't run that trials. Endoscan runs that, so as soon as they get that data out, we'll be able to react to it.
Speaker Change: I think the one thing that's very important about this device, and we went through this in our diligence when we looked at it, it is the only arch thoracic sphincraft designed for the arch.
Speaker Change: And if you ask surgeons about it, it's specifically designed for the arch.
Speaker Change: To my knowledge, we've seen no migration on this technology because of that reason. It's a custom or specifically designed technology for the aortic arch. And we've seen excellent results to date. And I'm very excited to see what the 60 show, because I think this is going to be a game changer for patients.
Speaker Change: Got it. Lance, one question for you and I'll hop back in the queue. Is the game plan still if the stock is, you know, let's say above 30 bucks?
Speaker Change: force a conversion and then should we start factoring in on an as-converted basis when we think about the fully diluted EPS?
Speaker Change: because you guys are pretty close right now to break even and you just wanted to make sure from a modeling perspective, any color would be great. Gentlemen, thank you for taking my questions.
Thanks, Raj.
Speaker Change: Yeah, so we've continued to say we're in the we have the luxury now of having options With our delay draw term loan, and we've been saying for the past couple of quarters Look we we have the ability to take a wait-and-see approach
Speaker Change: to see what goes on with interest rates, what goes on our stock price, and then based on that decide.
Speaker Change: We're still in that mode. What I would tell investors is it could go either way.
Speaker Change: and just to take whatever you think is the most conservative approach. If you want to put the shares in and assume that they get converted to shares is the most conservative approach.
Speaker Change: do that. If you want to assume that we draw down the delay-draw term loan and have incremental interest expense, if you think that's a more conservative approach, I would tell you to do that. And at the moment, we're still watching it, and it could go either way.
Thank you.
Speaker Change: Thank you. The next question we have comes from Frank Tackanen of Lake Street Capital. Please go ahead.
Speaker Change: Hey guys, this is Nelson Cox on for Frank and congrats on all the progress. I maybe just want to start with AMDS. Can you walk us through how we should think about the launch of that? Maybe just the learning curve. You guys need to go through VAX. Is this a soft launch in 25 with a full launch in 26? And then maybe just some other things.
Any other comments would be helpful.
Speaker Change: Yeah, and just to kind of refresh people where we are, right? So I mentioned in my comments, we've just hit the one-year follow-up. We're gonna have to obviously get that data pulled together and that'll be the clinical module that gets submitted.
Speaker Change: Based on how we've laid out the modules, we've submitted our first module.
Speaker Change: would put us in the, you know, and that the approval has us on track for Q4 of 25, so a year from now.
Speaker Change: I think you're, I mean, you know, assuming we get it in Q4 of 25, I think a soft launch is a good way to describe Q4 of 25. We do have to...
Speaker Change: go through value analysis committees. We do have to train surgeons.
Speaker Change: We've got to get them to buy the devices, so, you know.
Speaker Change: We've got a great sales force. We know these customers. We know these hospitals. We already have all the relationships, but we still have to go through the process. I also think that the fact that this is a life-saving, I just told you that we saw strokes cut in half with acute type A dissections that was just published at EACS from the Persevere trial.
Thank you.
Speaker Change: I think the fact that the mortality is so much lower, the stroke is so much lower, Dane is so much lower, that we're hopeful that we can get through these value analysis committees faster, but I'll know it when we do it. I'll have better visibility once we've launched it. But we are geared up and we'll have the sales team ready to go.
and maybe I'll jump in.
Put my plug in for everyone as you think about
Speaker Change: from a modeling standpoint, I would advise everyone to not put any revenue in for AMDS. With the Q4 approval and just the things you have to do to get going, revenue would be very minimal, if any, in 2025. I think the same thing.
Speaker Change: at the moment to assume zero, and then if we get beneficial timing and it's sooner, then we can talk about adding some then.
[inaudible]
perfect thanks for that and then
Speaker Change: Maybe just about the price and opportunity in the preservation business, specifically Centergraft.
Speaker Change: Do you see more room to take additional price or do you kind of feel like you're reaching a point where it can maybe stay consistent for a while?
Speaker Change: There are other other areas where we will be getting price increases, but I think the Cinegraph one is probably not one We're going to be going after anytime soon
Perfect. Thanks, guys.
Speaker Change: Thank you. Ladies and gentlemen, just a reminder, if you would like to ask a question, please press star and then 1 now.
Speaker Change: The next question we have comes from Mike Massen of Needham & Co. Please go ahead.
Yeah, thanks for taking my questions.
I guess with AMDS
Speaker Change: I'm a little surprised that it's the first module because I feel like the data is usually like the final module. So can you maybe just talk about...
Mike Massen: Oh yeah, let me clarify Mike. I think I might have made it sound confusing when I just said that, right?
Mike Massen: So we have four or five modules we're going to submit. We submitted the first module. The last module will be clinical.
Speaker Change: okay and you're correct you're correct the last module is going to be clinical
Speaker Change: And so when will, when would that final module be submitted, do you think?
probably in the second quarter.
and quarter of next year.
24
Twenty-five, yeah.
Speaker Change: Okay, and you still think it can be approved in the fourth quarter?
Speaker Change: yeah I do okay all right um okay and then just on bioglue in China I seem to remember you talking about that being like a 20 million dollar opportunity is that still the right number and yeah no it's actually it's actually
Go ahead.
Speaker Change: And then how, I'll let you answer that. Let me just go ahead and finish the question. How fast is that, would that ramp, I mean is this kind of like a one-year step up or would it be like a more gradual kind of like tailwind over like several years as you penetrate that market?
yeah so so first thing is we
Speaker Change: Lance and I had to go back and look at our earnings transcripts and find out when we last talked about Bioglobal China. It was two years ago.
Speaker Change: And we basically said, we're working with the Chinese regulators, and you'll hear from us in the summer of 24.
Speaker Change: We obviously are very happy to have a report on the approval. Your math is correct. But I think it's like most things, right? So I mentioned in my comments that we've...
Speaker Change: You know, China has its own special requirements, right? So we've got to get the national medical registration, then we have to get province registration, and we've got to get on hospital price list. So, you know, it takes some time. So we aren't really expecting anything meaningful until the second half of 25.
Speaker Change: But this will be a, you know, we'll be rolling this out the hospitals. We've got to train surgeons We've got to get them familiar with the product So this would be kind of a gradual kind of uptick over over several years not a one-year thing
Thank you.
Yeah, okay. Got it. All right. And then.
Speaker Change: The per clot manufacturing agreement, how much revenue is that generating and when does that end? When will that, to what degree will that become a headwind at some point? And what year would that be when that happens?
Speaker Change: So that depends on how fast they can be ready to take it over. They obviously would like to take it over as fast as they can, and we'd be more than happy to transfer it to them.
Speaker Change: If it went away completing a full year in and then a full year out, you're talking about slightly less than a one percentage point headwind. So it's just not significant. This year it's created some noise quarter to quarter, but it's always about a point.
Speaker Change: You know, so for the full year this year, it's probably about a point headwind.
Speaker Change: to last year, and if it stays at that level, which is our assumption, when it goes away completely, it'll be about a point headwind that year. Right now, it looks like, probably for sure, we'll have it for the full year of 25, and then we'll have to assess after that.
Okay, got it.
It also had really little to no impact on EBITDA.
manufacturer's law.
Yeah, got it. Okay, thank you.
Thanks, Mike.
Speaker Change: Thank you. The next question we have comes from Jeffrey Cohen of Ladenburg-Pullman. Please go ahead.
Speaker Change: Good afternoon. Thanks for taking our questions. So, I guess firstly, Lance, you had some commentary about the
Speaker Change: or Q1 this year as it would pertain to Q1 next year.
Speaker Change: so we you know we took that we took the big increase
and Price for Cinegraph in Q2 of 2023.
Speaker Change: So we had one quarter in 2024 of elevated growth rates from that price increase before we annualized that. So if you look back in Q1 of 2024, we had a very high growth rate for the tissue business.
Speaker Change: and that's the one thing I'm calling out that really that'll be the one thing that's different if you think about 2025 versus 2024. We will not have that one quarter of elevated growth rate in the tissue business.
Yep, that was the $25.7 million increase.
Speaker Change: to from 26.3. Okay, I got that. That's that's clear to me. Could you talk a little bit about LATAM and APAC by specific countries, Japan as well as the balance APAC specific countries and or LATAM specific countries?
Speaker Change: Yeah, you know, we're not going to get into specific countries, Jeff. You know, I don't necessarily need to telegraph it to our competitors what we're doing.
Speaker Change: I will say that, you know, in Asia, when I started here, we had one person, and now we've got 50. In Latin America, we had none, and now we have 25.
Thank you.
Speaker Change: You know, we're direct in Brazil. We've talked about that before. We mostly run a distributor business in LATAM. So we've gotten direct in several countries in Asia, but I'm not going to get into the specifics of where we are now and where we're going later.
Speaker Change: Okay, got it. And then lastly, Lance, any further commentary on gross margins for Q4 and or for 25? Does it feel like mid-60s is the right territory to think about?
Lance Berry: Yeah, I think at the moment we just need to think about gross margins being relatively flat.
Lance Berry: revenue mix in any given quarter. And then once down the line, when we get approvals of these products in our pipeline and they come to the U.S. market, then we should be able to see some
Lance Berry: Gross Margin Expansion through Mix, but at the moment I would tell people to just kind of model gross margin is fairly flat year-to-year
Speaker Change: Okay, perfect. That does it for us. Thanks for taking the questions.
Thanks, Joe.
Speaker Change: Ladies and gentlemen, we have reached the end of our question and answer session, and I would like to turn the call back to Pat Mackin for closing remarks. Please go ahead, sir.
Pat Mackin: Thanks for joining. We appreciate it. We had another strong quarter of double-digit revenue growth.
More than twice that on the bottom line at 28%.
You heard about some really amazing performance on our pipeline.
Pat Mackin: Regulatory approval in China, late-breaking trials on AMDS at EACS in Europe, the biggest cardiac meeting in Europe, the NEO trial presented at EACS as well. We've also got
Pat Mackin: Nexus has finished enrollment in their pivotal trial, which puts them on track for 26.
Pat Mackin: And we just saw the NEOS trial in Europe in 161 patients, which is more than we're going to do in the U.S. And we had very positive results that are better than the market, the only product in the U.S. market from a competitive standpoint.
Pat Mackin: We're very confident that we can continue to grow this business double-digit, top-line, and twice as fast on the bottom line. Thanks for joining, and we'll see you at our next call.
and James Mackin. Thank you.
Speaker Change: Thank you, sir. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.