Q3 2025 Artivion Inc Earnings Call
Speaker #3: Good afternoon , and welcome to the ARTIVION, INC. . Third quarter 2020 earnings Call . At this time , all participants are in a listen only mode .
Speaker #3: A brief question and session will follow the formal presentation . If anyone should require operator assistance during the conference , please press Star Zero on your telephone keypad .
Speaker #3: As a reminder , this conference is answer It is now my pleasure to introduce your host , Lane Morgan from the Gil Martin Group .
Speaker #3: Thank you . You may begin .
Speaker #4: Thanks . Operator . Good afternoon , and thank you for joining the call today . Joining me today from ARTIVION, INC. management team are Pat Mackin CEO and Lance Berry COO and CFO .
Speaker #4: 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 .
Speaker #4: 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 .
Speaker #4: The forward looking statements include statements made as to the company's or management's intentions , hopes , beliefs , expectations or predictions of the future .
Speaker #4: 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 .
Speaker #4: 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 .
Speaker #4: It can also find a brief presentation with details highlighted on today's call on the Investor Relations section of the ARTIVION, INC. website . Now , I'll turn it over to ARTIVION, INC. CEO Pat Mackin .
Speaker #5: Thanks , Elaine , and good afternoon , everyone . I'm pleased to report another strong quarter of financial and operational results in which we delivered total constant currency revenue growth of 16% and adjusted EBITDA growth of 39% year over year .
Speaker #5: Further , we continue to make good progress in each of our key clinical and pipeline initiatives , which we believe will drive continued growth in the near term .
Speaker #5: Medium term and long term . Our Q3 performance was enabled by continued growth across our product portfolio , with Stentgrafts and valves acting as significant growth engines .
Speaker #5: From a product category perspective , stent graft revenues grew 31% on a constant currency basis . In the third quarter compared to the same period last year .
Speaker #5: Continued sequential growth was again driven in large part by amds . As we've benefited from growing early adoption and initial stocking orders . We see our portfolio as a foundational component of our growth strategy , and we're we are encouraged by these strong results with AMD's .
Speaker #5: Looking ahead , we intend to replicate our proven strategy by bringing additional stent graft products that are already generating revenue in Europe to the US and Japan , unlocking a meaningful expansion of our total addressable market relative to AMD's US launch .
Speaker #5: We're very pleased with the market enthusiasm since we received the aid in late 2020 for feedback from early adopters , remains exceptional , and we're seeing more and more customers moving through the three step process , including IRB approval , VAC analysis and company required surgeon training prior to implanting an amds under the HDE .
Speaker #5: Our early success reflects both the dedication of our existing sales force and the still growing body of positive clinical data , validating the unparalleled clinical benefits of Amds with respect to new clinical data .
Speaker #5: We were very pleased to see two late-breaking science sessions highlighting the favorable data regarding our AMD technology at the recent X Annual Meeting in Copenhagen in October.
Speaker #5: Late-breaking data from our AMDS Persevere trial highlighted the positive benefits of AMDS beyond the region treated by the stent. For the subset of patients with preoperative visceral and renal malperfusion, the results continue to demonstrate the benefit for patients with malperfusion, even in subsets of malperfusion.
Speaker #5: Also , at late , breaking data from our Amds protect trial reported real world outcomes from our European and Canadian multicenter registry , demonstrating excellent 3 to 6 month results consistent with those from Amds .
Speaker #5: Persevere in the Dart studies . Notably , there were no occurrences of paralysis paraparesis aortic rupture , myocardial infarction , as well as over 95% of the patients showed positive remodeling with the true lumen diameter increasing or remaining stable in zone 1 to 3 .
Speaker #5: These data build upon our prior positive findings and further support life saving . The life saving nature of amds . Lastly , on Amds , we're very pleased to see that CMS recently established a new Ms-drg DRG 209 specifically for complex aortic procedures .
Speaker #5: This code was made effective on October 1, 2025, and reflects a meaningful increase to the reimbursement available to healthcare providers for these procedures.
Speaker #5: We believe this improved rate of more , more accurately reflects the clinical necessity and complexity of these cases , as well as the hospital resources required to deliver life saving treatments such as amds .
Speaker #5: We expect this will strengthen our economic value proposition even further , improve patient access , and acts as an incremental tailwind for already adopting trend for already adopting these trends .
Speaker #5: Overall , we're encouraged by the early commercial traction of Amds , our expanding base of clinical evidence and the reimbursement updates , and an even stronger value proposition for this life saving technology .
Speaker #5: We're excited to continue growing Amds revenue as we further tap into what we estimate to be $150 million annual US market Opportunity . The vast majority of which is already unlocked through the HDE , with limited competitive alternatives alongside AMD's Onyx continues to be another major growth factor in 2025 .
Speaker #5: In Q3 , we delivered exceptional results in our Onyx business , with revenue growing 23% year over year on a constant currency basis .
Speaker #5: Growth was driven by a continued global market share gains , supported by Onyx unique clinical profile . As the only mechanical aortic heart valve that can be maintained at a low INR of 1.0 to 1 point 5 to 2.0 , based upon the proven clinical benefits of the Onyx aortic valve , as well as the growing body of evidence supporting the use of mechanical valves in younger patients .
Speaker #5: We maintain our strong conviction that Onyx is the best aortic valve on the market for patients under the age of 65 , and will continue to take market share worldwide .
Speaker #5: In the US . We are benefiting from expanding awareness and adoption of onyx valves driven by positive new data , as well as cross-selling opportunities from our Amds launch .
Speaker #5: This dynamic , in particular , reinforces our conviction in our innovation led , multi-pronged growth strategy and further strengthens our confidence in both our near and long outlooks for growth and profitability .
Speaker #5: In line with that strategy, and in anticipation of continued growth, we've taken meaningful steps in the third quarter to expand our Onyx operational footprint.
Speaker #5: During the quarter , we entered into two real estate agreements to purchase two facilities in Austin , Texas . The first facility where we currently lease an occupy , serves as the basis for Onyx Manufacturing operation and includes about 75,000ft² of combined manufacturing , administrative , laboratory and term warehouse , warehouse and office space .
Speaker #5: Meanwhile , the second adjacent facility allows us to expand our footprint in Austin as our capacity needs continue to rise in the coming years .
Speaker #5: We expect these facilities to provide long term capacity for the Onyx business . Ultimately , we remain confident in the growth trajectories of our Stent-graft and Onyx businesses , where we continue to focus our investments on maximizing and sustaining our growth momentum .
Speaker #5: Beyond these growth engines , we also are maintaining a strong position across our highly differentiated and highly defendable base businesses . Tissue processing and bioglue in Q3 tissue processing revenue increased 5% year over year on a constant currency basis .
Speaker #5: As a reminder , a significant portion of our tissue revenue comes from our Scintigraph pulmonary valves , for which demand largely outstrips supply every quarter , and therefore we hold no inventory .
Speaker #5: At this point , we believe tissue processing volumes have normalized following the disruption caused earlier this year . By the 2024 cybersecurity event .
Speaker #5: As a result , we expect full year 25 tissue revenue to be relatively flat compared to 2020 . For with mid-single digit revenue growth expected for the full year of 26 and beyond .
Speaker #5: Meanwhile , Bioglue grew 1% in Q3 on a constant currency basis compared to the same period last year . As we've discussed previously , we expect to see some variability in the growth rate of Bioglue quarter over quarter , driven by the significant amount of stock and distributor business in this product line on an annual basis , we expect Bioglue to grow in the mid-single digit range .
Speaker #5: In summary , we're encouraged by our third quarter commercial performance , driven by our unique portfolio of highly differentiated PMA approved products . Looking ahead , we're advancing a robust pipeline pipeline of high margin innovations that we expect will unlock approximately $1 billion of incremental market opportunity over the next five plus years .
Speaker #5: Our near-term PMA opportunities for AMD's while the HDE enables us to sell Amds in the US before obtaining the PMA , PMA , we are focused on securing the PMA for Amds .
Speaker #5: To date , we've successfully . We've already filed three of the four modules , keeping us on track for FDA approval in mid 2026 .
Speaker #5: As for Nexus , endo span is expected to present its one year data from its US IDE trial . Triumph for the Nexus device at the upcoming STS annual meeting in late January .
Speaker #5: Assuming the data shows the trial endpoints have been met , Nexus remains on track for approval in the second half of 2026 . In Q3 , we took strategic steps to strengthen our balance sheet in anticipation for a for a potential end of span acquisition by refinancing our existing credit agreement to extend its maturity to 20 2031 .
Speaker #5: We also secured more favorable interest rate and gain access to a new $150 million delayed draw term loan facility . Lastly , on our pipeline , I'm pleased to announce we recently enrolled our first patient in our pivotal trial called Artisan .
Speaker #5: As a reminder , in July we received investigational Device Exemption approval . I'd for the FDA to begin our US pivotal trial . Our LSA , which is our third generation frozen elephant trunk used to replace the entire aortic arch .
Speaker #5: The trial will evaluate the safety and effectiveness of Archivo in the treatment of acute and chronic arch pathologies , and will enroll 132 patients up to 30 sites .
Speaker #5: We are optimistic that the trial will be successful , supported by the positive clinical results from our current generation frozen elephant trunk , Evita , open neo in conclusion , we believe our accelerated top line growth at 16% constant currency deposit of new , late breaking clinical data presented at ex for Amds .
Speaker #5: The establishment of the approved DRG 209 for Amds all serve as clear validation of our strategy and the strength of our unique , innovative product portfolio and pipeline .
Speaker #5: We look forward to continuing to build on our momentum as we close out the year and remain confident in our ability to deliver sustained double digit revenue growth while growing adjusted EBITDA at twice the rate of constant currency revenue growth .
Speaker #5: With that , I'll turn the call over to Lance . Thanks ,
Speaker #6: 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 .
Speaker #6: Additionally , all percentage change is discussed will be on a year over year basis and revenue growth rates will be in constant currency unless otherwise noted .
Speaker #6: Total revenues were $113.4 million for the third quarter of 2025 , up approximately 16% compared to Q3 of 2020 . For adjusted EBITDA increased approximately 39% from 17.7 million to 24.6 million in the third quarter of 2025 .
Speaker #6: Adjusted EBITDA margin was 21.7% in the third quarter of 2025 , and approximately 320 basis point improvement over the prior year , driven by improvements in gross margin and leverage in G&A .
Speaker #6: From a product line perspective , stent revenues increased 31% . Onyx grew 23% , tissue processing revenues grew 5% , and Bioglue revenues grew 1% in the third quarter of 2025 .
Speaker #6: On a regional basis , revenues in North America increased 19% . Asia Pacific increased 18% , EMEA increased 12% , and Latin America increased 10% .
Speaker #6: All compared to the third quarter of 2020 . For our as reported expenses included approximately $700,000 in Q3 associated with the 2024 Cyber incident , which are excluded from adjusted EBITDA .
Speaker #6: While we have sought insurance reimbursement for some of the costs we've incurred since the incident , this process will take some time . We will exclude any insurance proceeds we receive from adjusted EBITDA as well .
Speaker #6: Gross margins were 65.6% in Q3 , compared to 63.7% in the third quarter of 2020 . Four . This reflects an approximate 200 basis point increase from 2024 , due primarily to favorable mix from AMD's HD revenues in the US and the exceptional Onyx growth , particularly in the US .
Speaker #6: General and and marketing expenses . In the third quarter were 57.3 million , compared to $50 million in the third quarter of 2020 .
Speaker #6: For . non-GAAP general , Administrative and marketing expenses were 53.6 million , or 47.3% of sales , in the third quarter , compared to 46.6 million , or 48.6% of sales , in the third quarter of 2020 .
Speaker #6: For reflecting 130 basis point improvement , while funding our AMD's HD launch costs , R&D expenses for the third quarter were 8.1 million , or 7.1% of sales , compared to 6.6 million , or 6.9% of sales in the third quarter of 2020 .
Speaker #6: For reflecting consistent investment in our pipeline as a percentage of sales . Interest expense , net of interest income , was 5.9 million as compared to 8 million in the prior year .
Speaker #6: Other income and expense this quarter included foreign currency translation losses of approximately $100,000 , free cash flow was $17.7 million in the third quarter of 2025 .
Speaker #6: Free cash flow for the full year is anticipated to be impacted by a one time cash payment of approximately 12 million during the fourth quarter , and 8 million in Q1 2026 .
Speaker #6: Related to the opportunistic purchase of two facilities in Austin . To reiterate , Pat's comments , we view these purchases as a prudent , long term investment in our operational infrastructure .
Speaker #6: Owning these assets allows us to avoid potential future rent escalations , reduce long term occupancy costs , and ensure stability and long term capacity for our Onyx manufacturing operations .
Speaker #6: With this opportunistic $12 million purchase , we now expect to be slightly cash flow negative for the full year 2025 , but we anticipate being free cash flow positive in 2026 despite the expected $8 million Q1 payment .
Speaker #6: As of September 30th , 2025 . We had approximately 73.4 million in cash and $214.9 million in debt , net of $5.1 million of Unamortized loan origination costs .
Speaker #6: At the end of the third quarter . Our net leverage ratio was 1.8 , down from 3.9 in the prior year . In regard to the recently amended credit facility , we are pleased to have extended the maturity date by one year to 2031 .
Speaker #6: While also securing a more favorable interest rate . In addition , the amendment provides us with optional access to a new $150 million delayed draw term loan facility , which enhances our financial financial flexibility and positions us well to pursue the potential acquisition of Dospan .
Speaker #6: Assuming receipt of FDA approval for Nexus . As a result , we expect to realize an annualized reduction in interest expense of approximately $1.5 million .
Speaker #6: And now for our outlook for the remainder of 2025 , we are raising the midpoint of our full year 2025 revenue and adjusted EBITDA guidance .
Speaker #6: We now expect constant currency revenue growth between 13 and 14% compared to the previous range of 12 to 14% . We expect reported revenues to be in the range of 439 to 445 million , compared to our previous range of 435 to 443 million , reflecting greater confidence in our overall growth outlook .
Speaker #6: This guidance range reflects our current estimate that currency will have a slight favorable impact to full year 2025 , as compared to 2024 , with our continued top line revenue growth .
Speaker #6: In general , expense management , we now expect full year 2025 adjusted EBITDA to be in the range of 88 to 91 million , representing a 24 to 28% growth over 2024 compared to the previous guidance of 21 to 28% and approximately 200 basis points of adjusted EBITDA margin .
Speaker #6: Expansion at the midpoint of our ranges . Lastly , I would like to . Discuss 2026 . We will provide 2026 guidance in February during our Q4 earnings call .
Speaker #6: But I did want to provide you with some directional comments . As you think about next year in general , we expect the same dynamics to be in place for the business in 2026 as there are in 2025 , with two exceptions .
Speaker #6: First , we will be in year two of the AMD's launch , resulting in more difficult comps as we progress throughout the year .
Speaker #6: Second , on the expense side , we will have a full year of our civil trial costs . Ultimately , we still expect to continue to drive double digit revenue growth with adjusted EBITDA growing at twice the rate of constant currency revenue growth .
Speaker #6: With that , I will turn the call back to Pat for his closing comments .
Speaker #5: Thanks , Lance . So to close things up , we're very pleased with our third quarter results , which reflect strong execution , sustained momentum across our core product lines , and meaningful progress of our pipeline .
Speaker #5: We continue to deliver significant top line growth , expanding adjusted EBITDA at twice the rate while strengthening our balance sheet and investing in long term growth .
Speaker #5: As we enter the final quarter of the year , we remain confident in our ability to drive continued performance by leveraging our differentiated portfolio , global infrastructure and targeted commercial strategy .
Speaker #5: More specifically , we expect future growth to be driven by the following growth drivers . Number one , the AMD's HD . We're commercializing AMD's in the US , starting to penetrate the $150 million annual US market opportunity with new clinical data and reimbursement dynamics likely to act as a further tailwind to growth .
Speaker #5: Number two , Onyx Heart valve data . We're educating healthcare providers on the Jack clinical data showing mortality benefit in patients under 60 compared to bioprosthetic valves .
Speaker #5: This is a new $100 million annual market opportunity that we are pursuing , with the only mechanical valve aortic valve that can be maintained at a low INR of 1.5 to 2.0 .
Speaker #5: Number three , the Nexus PMA endo span is expected to present one year clinical data from the late clinical trial in late January 2026 , which would , assuming we exercise our option to acquire endo span , bring us one step closer to being able to access the annual US market opportunity of $150 million .
Speaker #5: And fourth , the our LSA , IDE trial , the first patient was recently treated with our third generation frozen Alta trunk device .
Speaker #5: Our SIBO as part of our U.S. IDE trial. Finally, I want to thank all of our employees around the globe for their continued dedication to our mission of being a leading partner to surgeons focused on aortic disease.
Speaker #5: With that , operator , please open the line for questions .
Speaker #3: Thank you . We will now be conducting a question and answer session . If you would like to ask a question , please press star one on your telephone keypad .
Speaker #3: A confirmation tone will indicate that your line is in the question queue . You may press star two . If you would like to remove your question from the queue .
Speaker #3: For participants using speaker equipment , it may be necessary to pick up your handset before pressing the star keys . One moment please .
Speaker #3: While we pull for questions . Our first question comes from John McCauley with Stifel . Please proceed with your question .
Speaker #7: Hi , Pat . Hi , Lance . I wanted to start off with the comments you made about 2026 . Just want to make sure I'm fully understanding .
Speaker #7: So, from our perspective, just any kind of general sense of what this trial is going to cost on an annualized basis.
Speaker #7: And , and two , from , as you mentioned , AMD's tougher comps understandable . But on the other hand , the dollar contribution should be much stronger .
Speaker #7: It seems like sort of small contribution beginning this year , ramping through the end of this year . So just want to get a better sense of what you mean exactly by by tougher comps .
Speaker #7: In that sense , does it imply slower growth . So sort of two parts or sevo . And AMD's would be helpful to start .
Speaker #6: Sure . So our Sevo , you know , we've said repeatedly , we think we can fund our pipeline investing in R&D at a rate of 7 to 8% of sales , you know , on a on an annual basis .
Speaker #6: You know , this year , realistically , we're going to come in toward the very low end of that range , but we're only going to have , you know , a few months of a clinical trial that is ongoing this year .
Speaker #6: Next year , obviously , we'll have a full year . And , you know , it's possible that could push that into the higher end of the range so that that would be , you know , something to keep in mind .
Speaker #6: And then on AMD's I mean , just I mean , just from a growth rate perspective , it's smaller numbers this year . But as compared to a prior year of zero .
Speaker #6: So you know , that obviously that helps the growth rate quite a bit . And just recognizing as we've moved throughout the year , we're going to have , you know , actual numbers in the prior year when we think about what the actual contribution is to the growth rate and just making sure that everyone keeps that in mind .
Speaker #7: Okay, understood. And to follow up on Onyx, we're seeing another quarter of growth at a 20-plus percent rate. I just want to get a sense from what you're hearing, either from your reps or from direct conversations with doctors.
Speaker #7: It seems like we're in a mechanical valve , sort of renaissance . We've done a few calls on it ourselves here . Just want to get a sense of what's driving the growth .
Speaker #7: Is it ? Do you think it's share gain from competition ? Is it some of the data you've cited ? What's going on there ?
Speaker #5: Well , I think it's both . I mean , we've we've shown over the last eight years we've taken market share every year because we're the only product that has an aortic valve with a low INR indication from the FDA .
Speaker #5: So that was that was kind of already in the works . And we were continuing to kind of we've been growing that business double digits for a long time .
Speaker #5: I think the new information . I think there's two other pieces . There's been some new clinical data . We've talked about it previously .
Speaker #5: You know , a paper came out in January that presented Stz , published in Jack that showed a mortality benefit in mechanical valve patients in favor over bioprosthetic valve patients in patients under 60 .
Speaker #5: There was another paper that just came out last week in 140,000 patients, showing a huge difference between [missing information] and [missing information]. This is in patients under 65.
Speaker #5: The difference at ten years , you know , from people who have mortality or are re-operation the combined for for ten years for a mechanical valves like 87% of patients didn't die or have a re-op and only 69% of bioprosthetic valve patients didn't die of ever re-up .
Speaker #5: It's like a 20 point real difference . So I think there's a real , you sea change in the feeling towards mechanical valves in these younger patients .
Speaker #5: And you know , we haven't even mentioned this on the last call . We've been focused on AMD's launch in the US , and we haven't even really started our kind of marketing program to cardiologist .
Speaker #5: And we know that they're very excited about the clinical data that we have with Onyx , as well as the data that's coming out in these big series , because it's better for patients .
Speaker #5: So I think we've got a very exciting growth opportunity here with Onyx .
Speaker #7: Thanks . That's helpful .
Speaker #3: Our next question comes from Frank Dickinson with Lake Street Capital Markets . Please proceed with your question .
Speaker #8: Great . Thanks for taking the questions . Congrats on the quarter . I was hoping I could start with some more commentary around the new drug that was in place .
Speaker #8: Maybe speak to what it was previously. Was there an economic challenge with it previously? Where is it now, and does it solve that challenge?
Speaker #8: And then as an extension to that , I appreciate you just launched the product , but is there a pathway to get some ASP expansion out of the product over time ?
Speaker #8: Under the new drug ?
Speaker #5: Yeah . So let me start high level . I mean , so when when CMS looks at these changes in reimbursement , it basically what they've done here is it reflects when they look at a procedure , the high costs and complexity of an advanced aortic arch procedure .
Speaker #5: So they recognize this . This is very complex area . There's a lot of cost a lot of work that's done in the replacement and repair of an aortic arch , you know , as it relates to amds , you know , this wasn't a big challenge from a , you know , the economics equation .
Speaker #5: However , we've you know , we've been going through value analysis committees . So certainly that will be more of a tailwind going forward .
Speaker #5: If , you know , there'll be less constrained by cost . I think the final point is , you know , I think this this new DRG reflects the value of our portfolio of products across the complex aortic arch .
Speaker #5: This new DRG 209 kind of covers that whole arch segment . And I think it validates kind of our strategy in that , in that complex area .
Speaker #8: Got it . Okay . That makes sense . Thanks for that . And then maybe just talking a little bit more about Nexus .
Speaker #8: Heard the comment that you're on track with the second half of 26 . Approval is the expectation still maybe talk through that process around exercising that option versus not anything that you're still waiting to see ?
Speaker #8: Or is it pretty much at this point ? If you feel like the the approval goes through as intended , it's an exercise .
Speaker #8: The option and carry forward .
Speaker #5: Yeah . So I'm not going to tell you what we're going to do . I mean , this is an option . Clearly we've set everything up .
Speaker #5: I mean I think all the all the pieces are set up , you know , the next piece of information is going to be the one year data presented at STS at the end of January .
Speaker #5: They're currently , under review with the FDA on their PMA . We've been telling people for the last probably two years that we think it's going to be second half of 26 and when they get FDA approval , you know , we will make the analysis at that time , whether we buy them or not .
Speaker #5: We also , as you heard in our , you know , debt facility , we now have $150 million delayed draw term loan so we can acquire them .
Speaker #5: We've got the money to acquire them . I don't know if you would add anything .
Speaker #6: No , I mean , I think you know , we're optimistic about process , but things aren't approved to they're approved and labels aren't labels to their labels .
Speaker #6: And , you know , we'll have to evaluate it at that point in time .
Speaker #5: I will say from a , from a clinical standpoint , I've had a chance to talk to a number of the investigators and cardiac surgeons , vascular surgeons .
Speaker #5: There was a lot of excitement about the nexus technology . This is a platform . You know , it's not just one product .
Speaker #5: There's multiple products behind it . So we're very excited by it . But we're not going to tell you what we're going to do .
Speaker #5: It's just not appropriate .
Speaker #8: Yep . Got it . That makes sense . Appreciate the color . Congrats again on the quarter .
Speaker #3: Our next question comes from John Young with Canaccord Genuity . Please proceed with your question .
Speaker #9: Lance , thanks for taking my question . And congratulations on a great quarter . I wanted to just go back to AMD's , you know , is there any way to think about the strong results you saw in the quarter in terms of the aortic stent graft business , in terms of sell through versus sell in for the product ?
Speaker #6: Yeah , I mean , I would say just in general , you have to get the product on the shelf before you can get it used in a in a surgery .
Speaker #6: So right now the majority of the revenue really continues to be heavily weighted towards that initial stocking . But as you can imagine , we're every month seeing the number of implantations increase .
Speaker #6: And obviously that's super important part of the future is getting that adoption rate up . So right now , honestly , the revenue is still heavily weighted towards the initial stocking .
Speaker #6: But with , you , no positive exciting ramp to the Implantations as well . And I would say also more importantly , the feedback from these early adopters on the surgeries has been excellent .
Speaker #6: Yeah .
Speaker #9: I appreciate that , Lance . And then is there any way to quantify just , you know , what inning you terms of that 600 center initial target you guys gave for AMD's in terms of stocking ?
Speaker #6: It's pretty early .
Speaker #9: Got it . And then by the squeeze this one more in Bioglue China . Should we expect any stocking in Q4 from that launch .
Speaker #6: You know , we've been well , as you can imagine , China's challenging under any normal circumstances . And the world's gotten , you know , weirder in that regard .
Speaker #6: Over the past year . So , you know , we've kind of just told people to think about that as an incremental opportunity that's going to help us get to our mid-single digit annual growth rate targets and to not really think about that as an incremental uptake .
Speaker #6: And so I would advise you to continue to think about it that way , okay .
Speaker #9: Appreciate all the comment . Thank you .
Speaker #3: Our next question comes from Suraj Kalia with Oppenheimer and Co . Please proceed with your question .
Speaker #10: Hi , Pat . Lance , congrats on a nice quarter . Hey , thanks for lens . Many calls going on . So if you don't mind I'll just pose both of my questions up front .
Speaker #10: Pat for you a two part question and forgive me if you've already highlighted this just how you size . How should we size the or market and Pat , what are you hearing about the partner ?
Speaker #10: Three seven year , especially the savr arm performance . Any color there would be would be great lens to you . You know , AMD is obviously the stentgraft business is strong .
Speaker #10: I'm just curious how how we should think about AMD's performance . I think so you had said earlier , 100 plus sites just just size up .
Speaker #10: AMD's for us in the quarter because we had roughly around 5 to 10 million contribution for the year . Help us guide where where AMD's should land up .
Speaker #10: Gentlemen , thank you for taking my questions .
Speaker #5: Yeah . Thanks , Raj . I'll take the one first . So the you know , our our sense of the frozen elephant trunk market in the US is about 80 million .
Speaker #5: So that's just the US segment , which would be our first product in that segment . When that gets , you know , hopefully gets approved .
Speaker #5: So that's the first question . The second is that , you know , the the seven year data from partners three that were presented was presented at TCT .
Speaker #5: I think there's a there's a there's a bunch there . I'm not going to get into the , into the nuances of the specific trial , but I think I have some big picture comments about , you know , the , the results and how to put them in context vis a vis what what matters to ARTIVION, INC. .
Speaker #5: So the first , first thing , which you know well is the average age of that trial was 73 years old . The lines for Savr and TAVR are already bumping up against each other .
Speaker #5: People worried they were going to cross . So , you know , you're right . They're already at seven years . Our focus on patients is , you know , under the age of 65 with our product portfolio , both with Onyx and our pulmonary valve .
Speaker #5: If you look at the life expectancy for a 65 year old in the US , it's like 20 years . So if you're struggling to kind of cross the lines at seven , why on earth would you be getting this technology if you're under 65 years old ?
Speaker #5: I think that's really the important takeaway message . And even more importantly , the two papers that have come out recently . And , you know , I know you're very familiar with the Jack paper from January .
Speaker #5: There's another one that came out that's published in Annals in 140,000 patients . I just mentioned earlier , but there's now two huge papers that whether it's under 65 or under 60 , it's showing that the mortality in Re-op rates from a tissue valve and a mechanical valve , and patients under 65 is significantly different in the benefit of mechanical valves .
Speaker #5: So it's not even , you know , when you start talking about tavard , a 73 year old , when we already know that under 65 year olds just don't do well with tissue valves .
Speaker #5: I think that's kind of my how I , how I position that trial relative to , you know , our patient population and our , our technology .
Speaker #6: And then on AMD's , we've said previously we're not going to break out us AMD's performance specifically , but , you know , a couple of things .
Speaker #6: Obviously , we had a very nice acceleration in the stent graft growth rates this quarter . You know , safe to assume that AMD's was a huge factor .
Speaker #6: AMD in the US was a huge factor in that acceleration . You know , also at the beginning of the year , we were pretty clear that , you know , the swing factor in , you know , whether we come in toward the higher end or the lower end of our original guidance range was likely to be the AMD's US launch and how well we did with that early on .
Speaker #6: I'd say , you know , we've we've consistently narrowed our range to the high end each quarter . And I think it's also safe to assume that , therefore , AMD's is is trending towards the high end of our original expectations of what we could do in year one .
Speaker #6: So I think lots of positive things to point to without actually giving you a number . And I think you should assume that it's going well .
Speaker #3: Our next question comes from Mike Matson with Needham Co . Please proceed with your question .
Speaker #11: Hi guys . It's Joseph on for Mike . A quick one on AMD's . And then maybe gross margin question can you just remind us I don't know if you've actually given a timeline , but the expectations for AMD's internationally .
Speaker #11: Well , I guess in China and in Japan . Because I guess it is available in Europe and Canada , I believe . But just targets there for for the , Asian markets .
Speaker #6: So we haven't really spoken about about China . You know , we have spoken about Japan in the past and just in general , you know , bringing our products to the Japan market post the US market .
Speaker #6: So usually there is a little bit , you know , a year or so . Time frame post receiving your PMA approval to get into the Japanese market .
Speaker #6: And then you also need to work on reimbursement . So step one is for us to get our US PMA . And we're obviously working thinking ahead on that , Japan PMA , but that's kind of the first step there .
Speaker #6: Then we would move towards trying to get approval in Japan and then trying to get reimbursement in Japan .
Speaker #11: Okay . Yeah , that's clear . And then I guess Lance , just given what you discussed on , you know , I guess AMD's comp being a headwind more or less a headwind in 2026 , I'm just wondering if you could frame for us what growth would look like in 2026 .
Speaker #11: If we is it is it mid-teens ? The teens ? Low teens ? I guess , you know , is it anywhere in that range depending on how the launch goes .
Speaker #11: And then real quick , just wanted to get a little bit more color on gross margin . Obviously great improvement year over year , but even looking sequentially , you know , third quarter versus second quarter pretty similar quarters even with the revenue splits .
Speaker #11: But there was substantial gross margin improvement . Is that just , you know , more ? AMD's and less Bioglue . Yeah . Any color there would be helpful .
Speaker #6: Yes . Maybe I'll take the gross margin first and then turn about 26 . You know , my numbers here is about about a 50 basis point improvement sequentially from Q2 to Q3 .
Speaker #6: So which was in a similar from Q1 to Q2 , that's really that's really a largely driven by X , AMD's , but also with Onyx in the US growing faster as well .
Speaker #6: Those are two of the highest gross margin products , honestly , Bioglue is a fantastic gross margin product , in general , less Bioglue is not a good thing from a gross margin standpoint , but you know , with the strength of AMD's and Onyx in the US , that's what's really driving that .
Speaker #6: Continued mix benefit , which is what we've talked about . That's an expectation as we go forward and we bring these products to the US market , they should have substantially higher gross margins than our current corporate average and should allow us to continue to drive mix in gross margin for a while .
Speaker #6: As it relates to 2026 , you know , we're not going to get into specifics right now . We'll give hard guidance in in February , but just wanted to give you a little bit of color .
Speaker #6: And I think mainly I would focus on my first comment , which is , you know , we expect dynamics that are in place now to be similar dynamics to their employees in 2026 .
Speaker #6: So , you know , I want to make sure that people aren't thinking about this as an ever accelerating growth rate . We've had really good top line growth the last two quarters , but I think if you kind of think about the way we think about annual growth for this year , signaling , you know , annual growth for the full year , this year is what I'm telling you is how you should be thinking about 2026 as well .
Speaker #6: At this point just .
Speaker #11: Okay . Yeah , that makes sense . Thank you very much for taking our questions . And congrats on a very strong quarter .
Speaker #6: Thanks .
Speaker #3: Our next question comes from Daniel Statter with JMP securities . Please proceed with your question .
Speaker #12: Yeah . Great . Thanks for the questions . So first one for me on Onyx . Great to see the growth here . But I wanted to ask on the cross-selling benefits .
Speaker #12: I think you noted last quarter that there was a large uptick in new accounts . Could you give us any color on these new users ?
Speaker #12: I know it's early days , but are you seeing any notable utilization trends from these new surgeons ? You know , are they converting their usage to Onyx after initial using it ?
Speaker #12: Just trying to get an idea of some of the stickiness with Onyx and some of these new ads . Thanks .
Speaker #6: Yeah . I mean , I would just point to the growth rate we had pretty similar growth rate . You know , Q3 versus Q2 , which I think is a very positive sign .
Speaker #6: We're very early on in in this with with the new data . But , you know , early signs are really positive and and again , I think maintaining that growth rate for two quarters is a is a good sign .
Speaker #12: Yeah , definitely . Great . Yeah . Just one quick follow up . So I know you also on on I know you had said in the past that you know , the first half growth really came without much marketing on your end .
Speaker #12: And I'm not sure if you touched on this , but is that still the case ? And have you put more capital towards marketing the two data sets ?
Speaker #12: And if not , when might that start and how much more of a tailwind could that be ? Thanks .
Speaker #6: Yeah , I mean , we're still getting spooled up on that now , obviously . Like we're in front of a lot of surgeons right now because of AMD's .
Speaker #6: And when we get in front of them , we're making sure that we are making sure they're aware of the data in that regard .
Speaker #6: You know , when we talk about marketing the data , you know , we also need to get that information out to cardiologists , not just cardiac surgeons .
Speaker #6: That is a little bit longer lead time initiative . And I would say that really hasn't started at all . That's going to be probably more of a 2026 type activity .
Speaker #12: Okay . Great . Thanks . Yeah . The cardiologist piece I guess is what I was referring to . So appreciate it . Thanks for the questions .
Speaker #12: Congrats on the quarter .
Speaker #6: Thanks .
Speaker #3: Our next question comes from Jeffrey Cohen with Ladenburg Thalmann . Please proceed with your question .
Speaker #13: Hi , Pat . Thanks for taking the question . So I wondered if you could dive into the trial a little bit and give us a sense of what time of pace recruitment you expect in a little compare and contrast versus the current Evita open and perhaps a sense of a number of SKUs that you would expect as well .
Speaker #5: Yeah . So this is a the neo device is currently available in Europe , and a bunch of international markets . You know , we've we've had a product through our acquisition in that space for 20 years .
Speaker #5: And this is the the , the third generation device , the really unique kind of differentiating factor which has been patented . And we have a , a license on is a subclavian branch , which again , you know , technical .
Speaker #5: But it just makes the procedure easier and faster , which is really helpful in these really sick patients . So this is a 100 and like 130 patient trial in 30 centers .
Speaker #5: You know , it's roughly the same . It's kind of an equivalent trial to what we did with persevere with AMD's a lot of the same centers , roughly the same numbers .
Speaker #5: You know , we're not going to get the details and stuff like that . But , you know , we've already started enrolling .
Speaker #5: We put a press release out this morning , and we expect to have sites kind of rolling on board and being enrolling over the next , you know , I'd say 12 to 18 months .
Speaker #13: Okay . Got it . Then a quick follow up . If you could . Besides pulmonary grafts , anything to call out specifically in the tissue business from the quarter .
Speaker #13: Strengths , weaknesses or the areas of note ? Thank you .
Speaker #6: Yeah . So the tissue business , you know , is back to kind of normalized growth at 5% . We did note that we now expect the full year to be closer to flat than mid-single digits .
Speaker #6: You know , we have at this point pretty much caught up all the backlog that we had on releasing our very high demand tissue from the cyber event from last year .
Speaker #6: So that's that's all done . Honestly . Like we're not going to quite see the 100% catch up that we thought we did .
Speaker #6: We're going to be close , but we're not going to quite get back to mid-single digits for the full year . But we , you know , with the normalized run rate and , you know , what we're seeing on the donation side , we expect to get back to that kind of mid-single digit growth next year .
Speaker #6: So that's kind of where we are on the tissue business okay .
Speaker #13: Got it . Thanks for taking our questions . Congrats on the quarter .
Speaker #5: Thanks , Jeff . Thanks .
Speaker #3: Mr. Mechan , there are no further questions at this time , so I would now like to turn the floor back over to management for closing comments .
Speaker #5: Yeah , well , thanks for thanks for joining the call . And we were super excited about the results , you know , 16% top line and 39% bottom line while reducing our leverage .
Speaker #5: And with great cash flow , I think it just kind of shows the business model in action . We've got a couple of great growth drivers with with Onyx .
Speaker #5: We've talked a lot about it on this call with a low INR , the new data , the cross-selling with the Amds trainings , AMD's with a new reimbursement code , DRG 209 , and our new clinical data .
Speaker #5: We just presented ex . So we're going to be driving the growth in those segments . I think the last point I would make is , you know , really our business model is about bringing aortic innovations to the market .
Speaker #5: And it's basically setting up that every two years you've got a new aortic technology coming to the US , and that will take other places .
Speaker #5: AMD's obviously be launched in 25 . And then hopefully with the Nexus getting approval and our acquisition of them , we launched that fully in 27 , 28 .
Speaker #5: And we're kind of finishing up that launch . We'll be launching our Sibo , so just PMA after PMA , after PMA , and then we've got a bunch more behind it .
Speaker #5: So this is a business model that's really just getting going . So we appreciate everybody's support and look forward to the next call .
Speaker #3: This concludes today's teleconference . You may disconnect your lines at this time . Thank you for your participation and have a wonderful afternoon .