Avinger Inc (AVGR) 2014 Q4 法說會逐字稿

Good day ladies and gentlemen and welcome to the Avinger Fourth Quarter 2014 Earnings Conference Call.

At this time all participants are in a listen-only mode.

Later we will conduct the question-and-answer session and instructions will follow at that time.

(Operator Instructions)

As a reminder, this conference call is being recorded.

I would now like to turn the call over to your host Ms. Leigh Salvo.

Ms. Salvo, you may begin.

Thank you, Bridgette.

And thank you all for participating in today's call.

Joining us today is Avinger's CEO, Jeff Soinski; Executive Chairman, Dr. John Simpson; and Chief Financial Officer, Matt Ferguson.

Earlier today Avinger released financial results for the quarter ended December 31, 2014.

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 you may [pursue at] the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements.

All forward-looking statements, including without limitation our examination of historical operating trends and our future financial expectations, are based upon our current estimates and various assumptions.

These statements involve material risks and uncertainties that could cause actual results for events to differ materially from those anticipated or implied by these forward-looking statements.

Accordingly, you should not place undue reliance on these statements.

For a list and description of the risks and uncertainties associated with our business please our filings with the SEC.

Avinger disclaims any intention or obligation except as required by laws to update or revise any financial projections or forward-looking statements whether because of new information, future events or otherwise.

This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 12, 2015.

I'll now turn the call over to Jeff Soinski.

Jeff?

Thanks, Leigh.

Good afternoon everyone and thank you for joining us today.

As many of you know, Avinger is a commercial stage medical device company that develops, manufactures themselves, image-guided catheter-based systems for the treatment of peripheral artery disease or PAD.

We have a significant market opportunity before us with over 570,000 catheter-based PAD procedures performed in the US alone in 2013.

This corresponds to a greater than $1 billion market which continues to grow based on the variety of suicidal and demographic factors such as an aging population, smoking and the incidents of obesity and diabetes.

PAD is not only a large and growing market, it's also greatly underserved.

Despite its prevalence PAD is underdiagnosed and undertreated relative to other serious vascular conditions in part because many PAD patients are asymptomatic or dismissed their symptoms as normal signs of aging.

It's estimated that only about 5% of people with PAD actually receive some form of interventional treatment.

This provides Avinger with a tremendous opportunity to both dramatically improve and expand the treatment of vascular disease through the introduction of products based on our lumivascular platform, which is the only technology available that combines highly effective therapy with real-time imaging inside the vessel.

Since this is our first call as a publicly traded company, I'd like to take a few minutes to first review our business, share some recent accomplishments of the Company and discuss why we're so excited about where we are heading in 2015 and beyond.

I'll then ask Dr. Simpson to provide an update on our Pantheris atherectomy device and our VISION clinical study.

Following his comments, Matt will review the financials, and at that point we'll open the call up for your questions.

I joined Avinger a few months ago but have been familiar with the Company's mission to provide physicians with the best possible treatment options for vascular disease for some time.

It's an honor to partner with John Simpson, the visionary behind our lumivascular technology, to advance our mission and build value for our stockholders.

Over the course of an extraordinary career Dr. Simpson has founded a number of important vascular medical device companies including advanced cardiovascular systems, Perclose and FoxHollow Technologies.

And through these companies he has innovated entirely new product categories including the atherectomy market in which we will primarily compete.

Avinger has already gained traction in the PAD market with its initial lumivascular product offerings and achieved a number of important research and development and clinical milestones.

Taking endovascular treatment such as stents, angioplasty and atherectomy one step further we believe our lumivascular platform can significantly expand treatment options for PAD and deliver meaningfully improved patient outcomes.

Our lumivascular products currently include our Lightbox imaging console as well as the Ocelot family of catheters that is designed to allow physicians to penetrate chronic total occlusions or CTOs which are total blockages in an artery.

Our lumivascular platform is unique in that it uses real-time imaging during treatment to enable a physician to minimize disruption to arterial structures such as the external elastic lamina or, as we call it, the black line and the adventitia which is the outermost layer of the artery wall.

Scientific and clinical studies have shown that minimizing disruption to the adventitia significantly reduces restenosis or the renarrowing of a blood vessel following treatment.

We believe this totally unique and competitively differentiated approach will lead to dramatically improve patient outcomes.

And we're excited about continuing to build the clinical body of evidence to support it.

With our Lightbox imaging console and Ocelot catheters for image-guided CTO crossing as well as our legacy non-imaging CTO crossing devices, Avinger is already a commercial stage company.

Revenue for 2014 was approximately $11.2 million.

In the fourth quarter of 2013 we made a strategic decision to shift commercial focus to our lumivascular products from our legacy non-imaging devices.

Related to this decision we restructured several of our internal resources in order to prioritized expansion of our lumivascular platform, improve our commercial and R&D efficiency, and reduce cash consumption prior to Pantheris availability.

While this realignment resulted in a year-over-year decline in total revenue it had the anticipated positive impact on sales productivity and cost containment.

Most important, these focus efforts enabled us to advance our lumivascular programs and objectives over the course of the year.

We added seven new lumivascular accounts in the fourth quarter and ended 2014 with an installed base of 60 lumivascular accounts.

Our sales and marketing strategy today is focused on raising awareness of our lumivascular platform and its advantages compared to conventional therapies, expanding the number of lumivascular accounts, and driving utilization of our currently available image guided catheters.

At the same time, we are strategically building our sales and marketing infrastructure in anticipation of Pantheris' launch in 2016.

We are extremely excited about the future introduction of Pantheris, which combines state-of-the-art directional atherectomy with real-time intravascular imaging.

We announced today that we've completed enrollment of a 133-patient US clinical trial called VISION, intended to support a 510(k) submission to the FDA in the second half of this year.

We believe that Pantheris will significantly enhance our market opportunity within PAD and that it has the ability to expand the overall addressable market.

Following Pantheris' approval we'll be well-positioned to leverage our growing network of lumivascular accounts for future growth and we look forward to that opportunity.

We recently strengthened our Board of Directors with the addition of two industry leaders who share our passion for the advancement of innovative healthcare technologies.

Jim Cullen is an experienced business executive who currently serves as a director of Johnson & Johnson and is a non-executive chairman of Agilent Technologies along with other Board positions.

Dr. Tom Fogarty is internationally recognized cardiovascular surgeon, inventor and entrepreneur, who's been involved with a wide spectrum of innovations including the Fogarty balloon embolectomy catheter and is the founder of more than 45 medical device companies.

At the end of January we completed a successful initial public offering, raising net proceeds of approximately $56.8 million.

This positions the Company well to support the completion of our clinical and regulatory programs for Pantheris, fund our commercial expansion and advance our mission to dramatically improve the way vascular disease is treated.

We're at an exciting point in the Company's history.

We believe that the confluence of Avinger's novel technology, a capable and proven management team and a compelling market opportunity position Avinger to achieve a leadership role in the field.

We think Pantheris can significantly penetrate the well-established billion-dollar PAD market and we see a clear pathway to expand treatment in this underserved market.

At this point, I'd like to turn the call over to Dr. Simpson to provide an update on Pantheris and our VISION clinical trial.

John?

Thank you, Jeff.

It's a pleasure to participate in this call.

As you mentioned, we developed our lumivascular approach based on the premise that the combination of real-time visualization will allow interventionists to precisely target the diseased portion of an artery thereby minimizing disruption to the more normal arterial wall structures, thereby significantly improving the safety and efficacy of endovascular procedures in patients with PAD.

The key element in our strategy, of course, is the successful introduction of Pantheris, our image-guided atherectomy system, in the U.S. market.

A very important step in this process is the completion of our VISION ID clinical trial designed in collaboration with the FDA to evaluate the safety and efficacy of the Pantheris for atherectomy in peripheral arteries.

We initiated enrollment in this 133-patient clinical trial in the third quarter of 2014 and announced our intent to complete enrollment in the VISION trial by the end of this month.

The good news is we enrolled the 133rd patient today.

Difficult for me to describe how pleased I am with the performance of every Avinger employee and the clinical investigator as well as all the support staff that the investigators have in their individual hospitals.

It's amazing the amount of support that was provided for this effort.

It was large and it's greatly appreciated.

A special credit has to go, though, to the tireless efforts of our clinical team within Avinger and they were the ones that really essentially made this happen.

So I've been involved in a fair number of clinical trials during my career, so I have a bit of a unique perspective.

And having personally attended a great majority of the VISION cases, I can confidently say it is hard for to imagine a better outcome.

I'm so happy with the way the trial enrolled which is always very important.

And the results we have seen today -- in our IPO perspectives, we shared interim results related to the primary safety and efficacy requirements defined in the study.

And based on the current available data, we believe that we continue to be on track to meet or exceed these critical endpoints as described in the previous disclosures.

The VISION ID study design calls for a follow-up data collection at two time points.

The first will be 30 days post treatment and then there's also a requirement for a six-month post treatment follow-up.

Thirty-day follow-up data is expected to be available in the second quarter of this year and we expect to have six-month data collection completed in the third quarter.

So then our plan is to present the 30-day data and the six-month study results at relevant medical society meetings, of course, in the second and the fourth quarters respectively once data analysis is compete.

So look for more news from us on this pivotal clinical study as we continue to drive forward to the completion of the protocol.

As Jeff mentioned, we are on track to file our 510(k) application with the FDA in the second half of the year.

And if all goes according to plan, we anticipate FDA clearance and the US Pantheris launch in early 2016.

In the meantime, our clinical investigators will still have access to the Pantheris device through a continued access program which has already been approved by the FDA.

As a company, we remain focused on successfully completing the VISION trial and, of course, preparing for the filing of the Pantheris 510(k) application later this year.

At the same time, we continue to make progress in our line extension strategy for Pantheris and developing pathways for new products, applications of our lumivascular technology.

Given the profound acute safety profile of our current lumivascular devices and our pre-clinical and clinical experience to date, I'm convinced more than ever that this platform should provide the basis for important new devices for the treatment of vascular disease in the peripheral but also in the coronary arteries.

And I'm fully committed to realizing the clinical potential of this technology.

So with that, I'd like to turn the call over to Matt Ferguson to discuss our financials.

Matt?

Okay.

Thank you very much, John.

Starting with our full year 2014 financial results, total revenue for 2014 was $11.2 million compared to $13 million in 2013.

The decrease in total revenue was related to strategic decisions that we made in the fourth quarter of 2013 to focus commercial efforts on our lumivascular programs to broaden physician exposure to our OCT image interpretation, [fill] the install dates of the Lightbox imaging console and reduce cash consumption prior to Pantheris' availability.

Related to these objectives, we reduced the size of our sales force by approximately 50% from its peak and restructured several of our internal resources to focus on the lumivascular opportunity.

Although this realignment resulted in a 49% decrease in non-imaging catheter sales, it also produced a 37% increase in Lightbox console sales and at the same time led to a 23% improvement in sales force productivity and a 29% decrease in operating expenses.

Our revenue mix in 2014 included $7.3 million from disposable devices and $3.9 million from our Lightbox imaging console and related services.

Gross margin for 2014 was 42%, an increase of five percentage points compared to the 37% in the prior year.

The increase was primarily attributable to the increase in sales of our higher margin lumivascular platform products as well as the decrease in personnel related expenses that began in the fourth quarter of 2013.

Operating expenses were $29.7 million, a decrease of 29% compared to $41.7 million in the prior year.

Several factors contributed to this decrease including reductions in personnel related expenses, outside services and product development materials and related costs began as we focused R&D efforts on our lumivascular platform products and in particular Pantheris.

Operating expenses included R&D of $11.2 million, a decrease of 30%, and SG&A expenses of $18.5 million, a decrease of 28% from 2013.

Our loss from operations for 2014 was $25.0 million compared to $37 million in the prior year.

Adjusted EBITDA, a non-gap measure, was a loss of $22.9 million for 2014 as compared to a loss of $34.8 million in 2013.

Our definition of adjusted EBITDA excludes stock-based compensation.

Moving now to our results for the fourth quarter, revenues were $3.1 million, which was a 9% decrease over revenues of $3.4 million in Q4 2013.

Gross margin was 49%, up 18 points from 31% in the comparable quarter of 2013.

Operating expenses were $8.5 million, consistent with the fourth quarter of 2013, reflecting the impact of the reductions implemented in the fourth quarter of 2013.

Loss from operations was $7.0 million compared to $7.4 million in the same quarter of the prior year.

And adjusted EBITDA was a loss of $6.5 million compared to a $6.9 million loss for the fourth quarter of 2013.

Turning briefly to our balance sheet, we finished 2014 with $12.3 million in cash and cash equivalents.

However, in January of 2015, we closed an additional $6.2 million in our last round of private funding as a private company.

And also, in January, as you know, we completed our IPO, which generated approximately $56.8 million in net proceeds.

Including the capital from these two transactions, our pro-forma cash balance at year end 2014 would've been $75.3 million.

Including the shares issued in these two financings, our fully diluted post IPO share count is 12.2 million shares.

At this point, I'd like to provide our financial guidance for 2015.

We expect the revenue for the year to be in the range of $12 million to $14 million which represents year-over-year growth ranging from 7% to 25%.

And adjusted EBITDA is expected to be at loss in the range of $31 million to $33 million as we continue to invest in the development of our lumivascular platform and expansion of our commercial infrastructure.

I'll note that this excludes estimated stock-based comp expense of approximately $6 million.

And with that, we will now open the call to your questions.

(Operator Instructions)

Our first question is from Jason Mills with Canaccord Genuity.

Your line is open.

Super.

Congratulations on your first quarter, out of the box, guys.

Can you hear me okay?

We can hear you just fine, Jason.

Super.

So, there's several questions, but I'll try to limit myself and then get back into the queue.

John, I think to start, congratulations on closing the VISION trial earlier than we expected.

Perhaps it'd be good for not only me but everyone on the call and investors new to the story, if you could run through as we look forward to the data -- both the 30-day and the 6-month data -- the key clinical metrics that you'll be looking for, investigators will care about and ultimately the FDA will care about.

And the comparable hurdles, that performance criteria of hurdles that you'll be comping against and your confidence in being able to exceed those hurdles.

Yes.

So the structure of the trial that was negotiated with the FDA, everything was really effectively predefined and so we have to enroll 133 patients and those patients then had to be followed for six months and then we collect data both at the 30 days and then the sixth month.

And we had this acute efficacy endpoint that we have to meet and that's greater than or I'll say a little over 90% of the patients have to have a reduction and the narrowing -- just using the Pantheris device, the narrowing has to be reduced to less than 50%.

And so I feel confident that based on our experience to date that that is an achievable endpoint.

And that's an acute efficacy endpoint.

And there's the safety endpoint, is defined in kind of a strange way.

It's the real safety of this but it also adds restenosis into the endpoint.

And we have to be better than 43% for that and of course that requires a six-month follow-up to find out effectively -- is the restenosis rate than 43%?

And that's kind of the ballpark statement.

And so I feel like based on what we've already disclosed and that I experienced to date, although early, that, that is also an achievable milestone.

So, both of those milestones then, if they are achieved, then that goes to the FDA as a part of our filing for our 510(k) and then they decide.

So they have 90 days to make the decision from the time that we do the filings.

So if you think that we have six months now to follow-up the last patients -- so, six months effectively from today we will have a follow-up on the last patients enrolled in the trial -- then it'll take -- rarely can you file the same day, so it'll take a while to get all the data just perfect.

To file with the FDA, let's say it takes a month to get the data organized.

Finally with the FDA they have 90 days then to review it.

And so that -- we're sort of looking at maybe say 10 months from today was when we would be hopefully targeting some kind of decision would be the way I was sort of tend to think about it.

But there's always some mystery [in dealing] with the FDA.

But this particular trial was structured in consultation with the FDA for a long time and it's very much in line with what they believe all of the important parameters that need to be identified is very much in line with what they've asked for.

(Crosstalk)

I'm sorry, did you want to follow-up on it?

^ Yes.

I just wanted to add that because this is not a blinded study.

As you know, Jason, we were able to publish interim data in the IPO perspectives and we showed at that point on the primary efficacy endpoint of being greater than 87% we were tracking at 98%, and that's an acute efficacy endpoint.

So that's something we can track in real time as we complete cases, unlike the safety endpoints which are based on six-month follow-up.

Yes.

Thanks for adding that.

As a follow-up to that, John and Jeff, with your perspective -- you've seen a lot of clinical trials, John, you mentioned that in the periphery of disease space, and I'm wondering if you could juxtapose that six-month safety endpoint of 43% or being better than 43% -- if you were to exceed that or even hit that mark how would that compare or how would that read out to your colleagues in interventional cardiology?

I'll presume the FDA set that level for a reason and if you're able to beat that then that would probably read out positively.

But perhaps your perspective on that.

And then just sort of concomitant to that, you had experienced ramping FoxHollow which is similarly directional atherectomy without imaging, if you're able to hit your targets here, how do you think about the ramp in Pantheris relativeto the ramp that everyone I think on the call knows you we're able to produce and then with FoxHollow?

So, let's leave with that question the FoxHollow ramp and what we would anticipate there first and then we can go to the previous question, which I'll ask you to re-ask because I will have forgotten it by then.

But comparing the potential for the ramp here, I think it is extraordinary.

It's really based primarily on the safety profile.

And what we talked about a lot is that by being able to see the artery you can not only target the disease, but almost perhaps the most important thing that we contribute is we know when to stop -- say cut it on the artery, when to stop that [resecting plat] to almost like being able to know when to stop is the safety issue and that's what will translate into one of the most important elements of the coronary device at some point in the future.

But at this point we've treated -- and having treated 130 some odd patients let's say with my [several hawk] experience, I had just encountered more difficulties in that era.

And not that perforations were really frequent but when they did occur they were notable and I had more dissections at that time, but the key element for us is being able really, honestly to avoid those things.

And that's going to be I think will drive the ramp in a pretty dramatic way.

And I don't know for sure that it would be fair right now to make a direct comparison, but just to say that eventually we will have head to head comparisons with different devices.

But the sole purpose of the VISION trial is really focused on just one thing and that is meeting the FDA requirements for approval.

And then once we made approval then we can start doing the head-to-head trials.

And of course we have a lot of enthusiasm with that because I think we already know the answer based on our tissue analysis.

And the tissue analysis it continues to be extraordinarily favorable in every way just like we had previously disclosed.

So I don't know if that really answers your question, but --

Yes.

Yes, that was perfect, John, thank you.

And then Jeff, just finally for me -- I know you've done spending a lot of your time to look out with the strategy from a commercialization standpoint, and Matt gave us some guidance for 2015, and I was just wondering if you could give us some insight into the Lightbox capital sales funnel and for 2013 and sort of what is implicit in that guidance that Matt gave us for the install base as you get it towards Pantheris approval exiting this year?

Thanks, guys and congrats on a good quarter.

Thank you, Jason.

Yes.

So, as we talked about in the opening statements, Jason, and as you know we ended the year with 60 Lightboxes installed, one of the really nice things about the timing here and the way this opportunity is structured is, our lumivascular platform is truly a platform technology.

We currently are in the market with a disposable device for CTO crossing Ocelot that leverages that platform.

So even though we are not and are not able to go out and market Pantheris prior to approval, we certainly can be marketing and increasing the install base of our lumivascular platform.

That is a primary commercial objective for this year.

We also know that by giving a physician experience with our Ocelot device for CTO crossing that they get a lot of great experience in image interpretation which prepares them very well to be successful with Pantheris right away.

So very quick learning curve.

So as a company, we structured and, as you know, have focused our sales force on really kind of two key elements, one, building that lumivascular platform, and two, adding the driving utilization of our disposable devices through our, what we call, area sales managers who are focused on disposable devices sales.

We ramped and built that lumivascular platform that we have now over about a two-year period.

We've added sales heads already coming into this year and anticipate adding additional sales heads this year as we lead into approval of Pantheris.

What I'm thrilled about is we have this opportunity and this time to strategically hire, to continue to train and develop our existing sales force, and to really be able to hit the ground running when we have Pantheris approval.

So all of these activities give us a chance to really see and prepare the market for Pantheris which, as John said, we anticipate launches we plan in the first quarter of 2016.

Thank you.

Thank you.

And our next question is from Josh Jennings with Cowen &Company.

Your line is open.

Hi.

Good afternoon, gentlemen.

Thanks a lot.

Hey, Josh.

I just wanted to start first for Jeff and maybe Dr. Simpson can chime in as well.

But a little follow-up on Jason's question about the VISION date, and assuming everything is positive, and you get approval and start the commercialization of Pantheris.

With the VISION trial data set, you've got some other competitive technologies that are out in the field here that other clinicians have some long-term experience with.

What do you think within the VISION data set how -- what's the sales pitch going to be to these (inaudible) [interventionalists], is it going to be the primary safety and efficacy end points?

Or what's going to be the marketing message to try and be more competitive or as competitive that you can be in the early days of the launch?

Well, I think that -- John, I don't know if -- I'll go ahead and start.

Then maybe, John, you could add on.

Clearly, as John said, is we're delivering very strong efficacy results, but what's truly differentiating here is the visibility that's provided during position, the control that they're given so that they can truly fulfill their Hippocratic oath of doing no harm to knowing when to stop which is as important as knowing where to cut.

We know based on the body of scientific and clinical evidence that exist that if we can avoid damaging or disrupting the black line in the adventitia that we can bring down restenosis rates.

That is highly compelling in its own right.

We also know that being able to see what we're doing and being able to not damage the artery that we believe and we're seeing this already in our clinical study that we can reduce the reliance on adjunctive therapy.

So this is a highly efficient device.

We think it's an empowering device.

We think because of the visibility, we also could potentially open up atherectomy to interventionists who may have not felt comfortable doing atheretomy before just through the limited visibility provided by fluoroscopy.

So it's truly leveraging what's unique and different about our technology.

Aand stressing not only that the long-term safety and reduction and we hope will show in restenosis rates, but also the profound acute safety profile.

So, John, I don't know if you want to add anything to that.

You already told us with everything you said.

But I'll just reemphasize that safety is just the most critical thing that you can have here, I would say.

Maybe just add a couple of other elements that we haven't discussed too much.

And that is the -- what does the artery look like if we work on it?

And we leave incredibly smooth surfaces behind, and this is really key.

So it's one thing to be able to go in and take out just the plaque and leave the immediate adventitia alone.

But when you take that out, you also need to leave the smooth surface behind.

It helps promote the condition called laminar flow which is very smooth flow.

And it helps reduce the inflammation of the artery wall at the same time.

And we've seen good evidence as we've already reported that that is the case.

And we will continue to focus a lot of attention on that because the clinical community understands that a smooth surfaced artery is the best kind of an artery to have.

And particularly, if you can do it standalone without any additional interventions, I think that's going to be a real opportunity.

Any follow-up, Josh?

Sorry about that.

I had you on mute.

So, yes, just a quick follow-up on the VISION trial data.

Dr. Simpson, I think you mentioned that you might present 30-day data and then six-month data this year.

If you could just lay that out for us again.

And then should we expect a publication some time in '15 or '16?

Well, for sure as we collect the data, we'll probably present it at one of the national meetings.

And then it would also be published in pure review articles.

I think that would be, for sure, that would be the case.

So you would expect the 30-day data to be published or surely presented and I think published this year.

And the six-month data would be presented this year.

It might be published this year or next year depending on how much it takes time for the peer review process to take place.

But I do think that -- because really, it looks favorable as we've said and I'm feeling good about that.

Great.

And just one last one.

Sorry to focus only on the VISION trial but you also mentioned just some head-to-head trials with competitive platforms in the future.

But just wondering if you could lay out the roadmap in terms about how we should think about the accrual of clinical evidence behind lumivascular platform post the VISION trial.

And any details you can give on Avinger's plan to fund for the clinical trials or we should expect or what you expect from the academic community to really help build out the deeper body of evidence?

Thanks a lot, gentlemen.

And congrats on the completion of the enrollment of VISION.

Yes, thanks.

I think that with certainty, I probably am not in a very good position to disclose exactly what the trial structures will look like.

But all I can say with confidence is that we're very serious about doing the kind of head-to-head trials that a lot of people have asked for, I'd say, during the IPO process.

But we are not going to do anything to defocus us from getting the FDA approval with Pantheris.

So we'll continue to do that.

As soon as we get FDA approval, since you cannot compare an unapproved device to one that is approved, we will -- as soon as we get that, then we'll start doing head-to-head trials.

I mean, it's obvious that the groups that we compete with, that do atherectomy, then those would be the device that would want to be compared to quickly.

Right.

And just to underscore from a timing perspective, once we have an approved device, we'd like to be in a position to begin those post market studies including head-to-head studies.

Here again, though, I think we're in a very good position because we have this year to really work with our scientific advisory groups, et cetera, to define the studies that we're going to do, to design them and to be ready to go on approval of Pantheris, again using this time for good strategic planning and preparation for activities related to Pantheris next year.

Great.

Thanks a lot.

Thank you.

(Operator Instructions).

And our next question is from Chris Cooley with Stephens.

Your line is open.

Thank you.

Good afternoon.

And let me add my congratulations on a successful completion on the VISION trial enrollment early.

It's a great job.

If I can, maybe just to expand upon the same line of logic but maybe a little bit more clarity on the post-market studies.

I know during your road show, you talked about a next generation Pantheris.

Could you just walk us through assuming FDA clearance in the first half -- early first half of next year, how quickly you could move forward with a next gen version of Pantheris such that you could have a lower profile device going below-the-knee?

And would that be the device which would be most ideal to compare in the head-to-head type trial versus competitors?

And then I just have one other quick follow up.

Thank you.

So I see.

Jeff, I'll take this to start with and you can add some color on it also.

I would say that the device that we started off the VISION trial with, we do want to improve certain features and that does make ease-of-use in some of those stuff rather than the handle and the [blend] and the flush and all these stuff, and we're making great progress in that.

I think my thought currently is that we would proceed with the launch of the device very similar to this with some improved efficacy which is it's a bit of a larger device, 8 French.

But following on the heels of the approval, probably with a special 510(k) for a 7 French device, and we've made very good progress in the design and the testing of the 7 French device.

And I think the regulatory path for getting a smaller device approved is always more straightforward than getting a large device approved.

So the hope would be that the special 510(k) as a 30-day filing would allow us to get the 7 French device approved.

And that's probably the device that we would definitely want to go head-to-head with.

That could be used in some of the below-the-knee devices.

But I think most of that still is going to be restricted to [poplar TLNS FA] disease.

Eventually, we would have smaller devices, 6, and definitely conceived of -- and then we get a 5 French device mostly because we -- or we had to use downsizes around the optical fiber that takes up very little or no space.

So I think that we are in the position to start those trials really quickly.

And I would start them I think with the 7 French device but not this early for just below-the-knee disease, if I understood the question correctly.

Yes.

Maybe I could just add to that that kind of the bigger vision here and the long term vision for this company is that we have best in class CTO crossing and atherectomy, above-the-knee, below-the-knee, and in the coronary.

And so obviously we're starting with the Pantheris device which, as John said, is primarily an above-the-knee device with the current sizing.

We already have an active development program to get smaller and get below-the-knee.

And then obviously the longer term goal and objective based on the profound acute safety profile of this device is to get into the coronaries.

So I think we're well on-track with our plan.

We're very focused.

And we understand the great opportunity in all three of those areas but we need to execute along the way as we introduce new products.

Super.

And that was a great segue, Jeff.

Here's my last question.

Here is in response to the coronaries.

We attended the CTO Summit this past weekend and it definitely seems like a number of the larger institutions are implementing programs here to try and aggressively cross CTOs just to maintain kind of their institutional stature and be at the forefront of this.

But clearly what's needed was a visualization of several of the live cases there.

So the best operators in the world found out they weren't where they thought they were.

So could you talk to us about the pathway for taking this type of the Solaris maybe platform into the coronaries?

Yes.

Let me start that off as well.

So we've had some of the very, very preliminary experience with a few patients in South America where we have used imaging inside the coronaries for crossing CTOs and mostly with sort of a downsized version of the Pixel device, and they're incredibly safe.

Incredibly safe and really remarkable in the sense that you can see -- you can actually, with our imaging, you can see actually through the coronary arteries.

So, you can see the pericardium on one side, the heart muscle on the other side and so you know for sure exactly how and where to position the device.

So it's going to change things in a dramatic way I think for crossing coronary CTOs because imaging is just such a pivotal element for that because it so drives the safety profile.

We did find out that with the device, [the use of the available software, the use of the small arm], all things that we know how to do and so we definitely are on track to figure all of that out.

I think I have to re-emphasize that -- we had to make sure that we do that without distracting ourselves from our current mission of getting Pantheris approved.

Understood.

Congratulations again on a great win there on the VISION trial.

Thank you.

I did it all by myself so I'm glad you guys [are free].

Well, you should know that John is actually at a hospital right now where he has just observed the final case.

So that's how involved he's been throughout this whole process.

Yes.

So he'll have all my [scrubs] too, so I think he'll be impressed with that.

Thank you.

And our next question is from Steve Lichtman with Oppenheimer.

Your line is open.

Thank you.

Hi, guys.

Just a couple of follow-ups here.

In terms of the sales force, wondering where did you end up in the end of 2014?

Where do you expect to end in '15?

And based upon the Pantheris approval timeline and data, how should we be thinking about the build of the sales force over the next 12 to 18 months?

So this is Jeff.

So we ended the year at 32 sales people.

We've already added some in the first quarter and we plan to add throughout the year, say, 10 to 15 sales people.

We have a young sales force currently in terms of tenure with us.

We have very focused hiring profiles.

We're being strategic about where we add.

Certainly providing an opportunity for training prior to Pantheris, and also very much understanding our current lumivascular platform and devices.

So expect us to end the year about 10 to 15 higher than we are now, 42 to 47.

And then we'll continue certainly once we receive approval of Pantheris or as we get closer to that, we'll accelerate the rate of hiring throughout 2016.

Okay.

Great.

And then just secondly on the P&Ls, we think about gross margin over the next four quarters.

Should we be thinking of it building perhaps with disposable revenue making a higher portion of the mix as we exit the year or what sort of cadence should we be thinking about on gross margin this year?

Yes.

So, Steve, this is Matt.

I think if you looked at where we were on the latter part of 2014, that's a pretty good indication of where we'll be this year as well.

The product mix will stay approximately the same with some growth which will allow us to spread out some of our overhead which is significant in events of much bigger and better things to come beyond 2015.

So I think if you were to look at the Q4 number and second half of 2014, that's a pretty good indicator of where we expect to be in 2015.

Yes.

Great.

Thanks guys.

Thank you.

Thank you.

And I'm not showing any further questions at this time.

Well, I'd like to close by thanking you all again for joining our call and for your questions.

It's a big day for Avinger as we have completed an important clinical milestone for Pantheris and build a strong foundation for our future success.

We look forward to continuing to update you on our progress on our next conference call when we report first quarter results.

And in the meantime, we'll stay focused on executing our plan.

Thank you.

Thank you.

Thank you.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude the program and you may all disconnect.

Everyone, have a great day.