Q3 2024 Avinger Inc Earnings Call
Swayampakula Ramakanth, Matthew Kreps, Nabeel Subainati,
Speaker Change: Good day and welcome to the Avenger third quarter 2024 results conference call. At this time all participants are on a listen-only mode. After management's prepared remarks there will be a question and answer session. I would now like to turn the call over to Matt Kreps, Investor Relations for Avenger. The floor is yours.
Matt Kreps: Thank you, Kelly, and thank you everyone for participating in today's call. I would like to welcome you to Avengers' third quarter 2024 conference call. Joining us today are Avengers CEO Jeff Soinski and Principal Financial Officer Nabeel Subainati.
Matt Kreps: Earlier today, we released the financial results for the quarter ended September 30, 2024. A copy of the release is posted on the Avenger website under Investor Relations.
Matt Kreps: Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Matt Kreps: Any statements contained in this call that are not statements of historical fact
should be deemed before the statement.
All forward-looking statements, including, without limitation, our future financial expectations.
Expected timing for commercial launch of products.
Matt Kreps: status of our clinical sites, the expected benefits of our products, filings with the FDA and regulatory filings in China, and the anticipated timing of Xalex's full manufacturing scale of our devices.
are based upon our current estimates and various assumptions.
Matt Kreps: These statements involve material risks and uncertainties that could cause actual results.
Matt Kreps: were events materially different from those anticipated or implied by these forward-looking statements.
Matt Kreps: Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please see our Form 10-K and 10-Q files with the Securities and Exchange Commission.
Matt Kreps: Avenger disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise.
Speaker Change: Today's presentation will also include reference to non-GAAP financial measures such as adjusted EBITDA. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures is available with an earnings release, which can be found on Avenger's website. And with that, I'd like to now turn the call over to Jeff.
Jeff Soinski: Thank you, Matt. Good afternoon and thank you all for joining us. In the third quarter, we achieved notable improvements in operating efficiency and made meaningful strides toward our strategic objectives.
Jeff Soinski: This progress highlights our dedicated efforts to streamline our peripheral operations, focusing on high-value accounts and channeling resources into what we believe could be a groundbreaking advancement in the treatment of coronary artery disease.
Jeff Soinski: In June, we implemented a cost-savings program that reduced our overall headcount by 24%, including a one-third reduction in our commercial team.
Jeff Soinski: The September quarter marks the first full operating period reflecting these savings, with a direct reduction in operating costs and cash needs, as well as improved efficiency in gross margin and revenue per sales head.
Jeff Soinski: Our field sales team, now comprising 16 professionals, is focused on supporting our most active peripheral clinical sites.
Jeff Soinski: These sites demonstrate steady case activity and a strong commitment to utilizing our best-in-class technology to achieve superior patient outcomes, especially for complex peripheral artery disease, or PAD.
Jeff Soinski: Despite a much leaner sales team, we maintained approximately 90% of revenue in the third quarter compared to both the prior quarter and the same period last year.
Jeff Soinski: We remain dedicated to supporting our user sites and expanding the tools available to provide the best therapeutic solutions for patients.
Jeff Soinski: This includes the ongoing commercialization of our Tiger IST crossing catheter and the full commercial launch of our new Pantheras LV large vessel peripheral atherectomy catheter.
Jeff Soinski: Pantheris LV is designed to streamline the aphorectomy procedure and paired with our portable Lightbox 3 imaging console, expand the mainstream appeal of our image guided platform.
Jeff Soinski: In August, we announced the appointment of Dr. Tom Davis, a highly experienced interventional cardiologist and director of cardiovascular research at St. John Hospital and Medical Center in Detroit, as our chief medical officer.
Jeff Soinski: Joined by key opinion leaders in vascular intervention, Dr. Davis hosted a physician focused webinar in October titled, New Approaches to Treating Peripheral Artery Disease Below the Knee and Promising New BTK Data.
Jeff Soinski: During the session, Dr. Davis presented updated interim data from the IMAGE-BTK post-market study, which evaluates the use of Pantheras SV for treating advanced disease in the smaller vessels below the knee.
Jeff Soinski: The study continues to demonstrate exceptional clinical outcomes in this challenging patient population.
Jeff Soinski: showing 100% freedom from major adverse events at 30 days, 97% freedom from target lesion revascularization, an indicator of restenosis, and 94% primary patency as assessed by duplex ultrasound at 12 months.
Jeff Soinski: Turning to our coronary program, we've made substantial progress on developing our first coronary product application, an image-guided CTO crossing system based on our proprietary optical coherence tomography or OCT guided platform.
Jeff Soinski: Since our last earnings call, we have successfully completed all Phase III verification and validation testing necessary to support an Investigational Device Exemption, or IDE, application with the FDA.
Jeff Soinski: Working closely with our coronary physician advisors, we've defined the clinical study parameters, including inclusion-exclusion criteria, study endpoints, treatment protocol, and patient follow-up requirements.
Jeff Soinski: We've also completed a biostatistical analysis to determine the optimal sample size for our study, targeting 110 patients with a 30-day follow-up period.
Jeff Soinski: To maximize alignment with the FDA, we opted to submit a pre-submission package in September ahead of the IDE application.
Jeff Soinski: This approach enables us to seek FDA feedback on our study design, target patient population, and choice of predicate device for an anticipated 510K regulatory pathway.
Jeff Soinski: Once the pre-submission process is complete, which we anticipate in the fourth quarter, we'll be ready to file the IDE.
Jeff Soinski: In the meantime, we are actively engaging high-volume clinical sites for participation in the trial, with five identified and discussions underway with several more.
Jeff Soinski: We expect to expand to 10 or more sites ahead of study initiation and are planning to begin patient enrollment upon receiving FDA approval of the IDE, which is anticipated in the first half of 2025.
Jeff Soinski: We're excited to complete this process and advance this revolutionary new technology through the clinical study and regulatory approval process.
Jeff Soinski: We believe our coronary device has the potential to redefine a large and underserved market.
Jeff Soinski: Crossing chronic total occlusions, or CTOs, in coronary arteries is currently a complex, time-consuming, and costly procedure with a documented high failure rate.
Jeff Soinski: By harnessing our proprietary image-guided technology, we aim to provide physicians with a superior, streamlined, and more effective solution for crossing coronary CTOs.
Jeff Soinski: Our technology is deployed within a low-profile catheter system, integrating real-time OCT guidance with the precise control and steerability needed for an anti-grade approach.
Jeff Soinski: We expect this to significantly reduce procedure times and improve crossing success rates while remaining within the true lumen.
Jeff Soinski: Similar to our peripheral devices, our coronary system also incorporates precise vessel measurement capabilities, enabling physicians to accurately size balloons or stents prior to placement, a critical factor for optimal patient outcomes.
Jeff Soinski: The design of our unique image-guided system is expected to allow physicians to cross coronary CTOs with less dependence on specialty wires, support catheters, and re-entry devices.
Jeff Soinski: use of real-time OCT imaging minimizes x-ray radiation exposure and iodine based contrast dye usage which pose significant health risks to both physicians and patients
Jeff Soinski: Our extensive animal and cadaver studies, along with our experience with OCT guided therapy and peripheral applications.
Jeff Soinski: support our confidence that this combination of on-board image guidance and vessel specific directional control will deliver a strong safety profile in clinical practice.
Jeff Soinski: We expect our coronary CTO crossing system to benefit from favorable reimbursement dynamics.
Jeff Soinski: Upon FDA clearance, our device would immediately qualify for existing high-value reimbursement codes for coronary CTO crossing and OCT diagnostic imaging.
Jeff Soinski: This advantage sets it apart from peripheral markets where dedicated reimbursement codes for CTO crossings and diagnostic OCT imaging are not available.
Jeff Soinski: Additionally, our system is expected to drive substantial cost savings for hospitals by reducing crossing times, lowering contrast media usage, and minimizing the need for accessory devices.
Jeff Soinski: These benefits enable a more favorable cost profile, allowing hospitals to treat more cases or allocate resources more efficiently.
Jeff Soinski: We look forward to sharing our continued progress in the development of this exciting new clinical and business opportunity in the coming quarters.
Speaker Change: Before I turn the call over to Nabeel, I'd like to take a few minutes to update you on our strategic partnership with Xylox Tunbridge, a leader in the peripheral vascular and neurovascular markets in China.
Speaker Change: This relationship consists of three important components. First, investment alignment. Earlier this year, Zilox made a substantial equity investment in Avenger, aligning their interests with ours as shareholders in our future success.
Second, market access.
Speaker Change: Our agreement has paved the way for introducing our image-guided devices to the vast and growing greater China market through Xilox's extensive and well-established sales and marketing network.
Speaker Change: and third, cost-effective manufacturing. The partnership provides a pathway for lower-cost offshore manufacturing of our devices for use in worldwide markets.
Speaker Change: We're excited about the rapid progress NILOX is making in expanding access to our proprietary image-guided products for the estimated 50 million people in China affected by peripheral artery disease.
Speaker Change: Our team has been working closely with Xilox to support their efforts in completing regulatory filings for our high-speed peripheral catheters and the Lightbox 3 imaging console in China.
Speaker Change: before the end of this year, with registration clearance anticipated in 2025.
Speaker Change: Related to these efforts, Xilox recently received the prestigious Innovative Medical Device Review designation for our Pantheras device in China.
Speaker Change: akin to the breakthrough device designation in the U.S. This recognition enables priority regulatory review and underscores the impact of our technology in this important new market.
Speaker Change: We are also supporting Xilox's professional education initiatives and initial pre-market promotion activities in China.
Speaker Change: Our products were presented for the first time at the China Endovascular Course, CEC, the leading clinical conference for Chinese endovascular surgeons, where many physicians expressed strong interest in our image-guided technology.
Speaker Change: In addition, we are working with Xilox's Operations Group to support the development of manufacturing capabilities for Avenger products at their state-of-the-art manufacturing facility in Hangzhou, China.
Speaker Change: We anticipate that Xilox will complete its full manufacturing scale-up for our devices by mid-2025, which is expected to enhance production efficiency and provide the opportunity for additional cost reductions in the future.
Speaker Change: As a reminder, sales of Avenger products in the Xilox territory will be royalty bearing for Avenger.
Speaker Change: Following regulatory approval we will sell finished goods to Xilox until their self-manufactured products are available for sale in China. We're excited about the potential of this partnership and the positive impact it could have on our growth.
Jeff Soinski: At this point, I'd like to turn the call over to Nabeel Subainati, our principal financial officer, to take us through the financial results. Nabeel? Thank you, Jeff.
Nabeel Subainati: Total revenue for the third quarter of 2024 was $1.7 million, down slightly from $1.8 million in both the previous quarter and the same period last year.
Nabeel Subainati: This aligns with our strategic decision to concentrate field support on higher volume user sites, while significantly reducing the peripheral sales team as part of our cost savings initiative.
Nabeel Subainati: Gross margin for the third quarter of 2024 was 26%. Increase from 20% in the second quarter of 2024 and 21% in the third quarter of 2023. Reflecting improved operating efficiency following our strategic realignment.
Nabeel Subainati: Operating expenses for the third quarter of 2024 declined to 4.1 million dollars compared with 4.5 million dollars in the second quarter of 2024 and 4.4 million dollars in the third quarter of 2023.
Nabeel Subainati: In June, we reduced our headcount by approximately one-fourth as we streamlined our peripheral operations and directed resources to the development of our coronary artery disease program.
Nabeel Subainati: Reflective of these actions, selling general administrative expenses decreased by close to $0.6 million, or 16%, in the third quarter of 2024.
Nabeel Subainati: while research and development expense increased by approximately 0.2 million or 20% compared to the prior quarter.
Nabeel Subainati: Net loss and comprehensive loss for the third quarter of 2024 was $3.7 million, reflecting a 15% improvement compared to $4.4 million in the second quarter of 2024 and a 17% improvement compared to $4.5 million in the third quarter of 2023.
Nabeel Subainati: Adjusted EBITDA, as defined under non-GAAP financial measures provided in today's press release, was a loss of $3.4 million, a 12% improvement compared to a loss of $3.8 million in the second quarter of 2024, and a 10% improvement compared to a loss of $3.7 million in the third quarter of 2023.
Nabeel Subainati: For more information regarding non-GAAP financial measures, please see non-GAAP financial measures and the reconciliation of non-GAAP measures to the nearest GAAP measure provided in the tables in today's press release.
Nabeel Subainati: Cash and cash equivalents totaled $5.9 million as of September 30th.
Speaker Change: At this point, I'd like to turn the call back to Jeff for Q&A.
Jeff Soinski: Thanks, Nabeel. We made significant progress across the company in the third quarter, realizing significant cost savings and improved operating efficiency following our strategic realignment in June.
Speaker Change: expanding our Pantheras LV large vessel atherectomy system to full commercial launch.
Speaker Change: advancing the development of our first coronary product entry which we believe will be a game-changer for the safe and effective treatment of coronary CTOs.
Speaker Change: and supporting Xilox's commercialization efforts for entry into the vast and growing greater China market.
Speaker Change: We appreciate the commitment of our team as we look forward to achieving critical milestones in these and other areas, and remain dedicated to our mission of radically changing the way vascular disease is treated.
Speaker Change: At this point, we'd like to open the call to your questions.
Speaker Change: Certainly. The floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a moment while we pull for questions.
Speaker Change: Your first question is coming from RK with HT Wainwright. Please pose your question. Your line is live.
Speaker Change: Thank you. Good afternoon, Jeff and Nabeel. A couple of quick questions. The first one is on Panteras. As you said, this is the first quarter of police.
Speaker Change: first quarter of commercialization so what are you what are you hearing you know from the physicians how are they liking
Thank you.
and how should we think about future adoption.
No, I...
Thanks. Thanks.
Speaker Change: Thanks, Arkay. So, first of all, you're referring to the full commercial launch of the Pantera SLV in the third quarter, and obviously we announced that late in the quarter, and so it's still early days.
Speaker Change: But we're very pleased with the response we're getting in the market from a clinical perspective. I think physicians are very pleased with the simplicity of operation. As you know, we had made
changes versus our current large vessel device.
to simplify and streamline the procedure.
Speaker Change: to make it easier for new physicians to pick up the device and have success with it, more similar to other directional atherectomy products that they may have used before. And picking up on a lot of the advances and improvements we made in Panthera's SV.
Speaker Change: which, as you know, has been a very strong product for us but is also delivering outstanding clinical data.
Speaker Change: and one of the primary motivators for PantheraSLV is in combination with our portable Lightbox 3 imaging console to really broaden the mainstream appeal of our of our technology.
and so
Speaker Change: maybe as a kind of a more tangible expression of the early success with the product.
Speaker Change: Although we didn't expand until the latter part of the quarter, our Panthera LV revenue did increase over 20%.
Speaker Change: versus the sales in the second quarter. So, a good start, we're
Speaker Change: have not seen, you know, because we were in limited launch for a pretty significant amount of time, we were able to make some improvements in the product before expanding the full commercial launch. So, very, very pleased with the performance and what we're seeing so far.
Thank you very much.
on your collaboration. So, how sure are you?
Speaker Change: get the approval in time, you know, and also how much more additional work do they need to do to get the commercialization going.
Speaker Change: So first of all, we have been working very, very closely with Xilox through this process and so we have good visibility on what is happening in China and with their filings to NMPA.
Speaker Change: One of the major steps in China, first step, is to go through an extensive and rigorous what they call type testing process. All of our products have now been through the type testing process successfully.
Speaker Change: which is kind of a verification, validation type of testing protocols that are very rigorous. They've all successfully completed that testing and several of the filings have already been made and we are told and we are confident that the remainder of filings for our captors and products will be completed prior to the end of this year.
Speaker Change: So we're projecting regulatory approval in China in the second half of 2025. In the meantime, we...
Speaker Change: Xilox is developing their own manufacturing capability for our products. We actually have people over in China right now, including our CTO.
Speaker Change: helping them establish, you know, their manufacturing lines. We've been supplying parts and jigs and fixtures and components to help bring their lines up.
Speaker Change: So, again, there again, I believe that they are right on track with their internal plan and right on track with our expectation to have completed their manufacturing scale-up process by, you know, the middle of next year and to have qualified that facility.
Speaker Change: That's important for us because it could provide the opportunity for us to source from Xilox following FDA registration of their facility.
Speaker Change: and bring our costs down, not only on our cost of goods, but provide other cost savings opportunities.
Speaker Change: It also would provide a foundation for them to pursue approval.
for a
Thank you.
Speaker Change: domestically manufactured version of our product. But the initial regulatory process and pathway, as we talked about before, will be a first to get our product improved as an imported product.
Speaker Change: We will supply product to Xylox following approval, and then when they have their own self-manufactured product cleared, provide the opportunity for them to fulfill their own market needs.
Speaker Change: We did have a presentation of the products and demo sessions.
Speaker Change: that was very well attended by physicians that Xylox hosted at the...
Chinese
Speaker Change: Endovascular Conference. We also had people in attendance supporting those efforts and you know again we have been incredibly impressed with the professionalism of their organization, the capabilities of their organization and and how well they've embraced us in the process. So we have high hopes.
that this massive market will be unlocked.
Speaker Change: by Zylox with these very innovative products. And as we talked about on the call, they've received the innovative medical device designation, which should help.
Speaker Change: accelerate their regulatory review and approval process as well. So all good things coming out of China over the past, you know, several months.
Thank you. Thank you both for being here.
All right. Thank you, RK.
Speaker Change: There are no questions in queue at this time. I would now like to turn the floor back over to Jeff Soinski for any closing remarks.