Avinger Inc (AVGR) 2021 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Avinger First Quarter 2021 Results Call.

(Operator Instructions)

At this time, it is my pleasure to turn the floor over to your host, Matt Kreps.

Sir, the floor is yours.

Thank you.

And thank you, everyone, for participating in today's call.

I would like to welcome you to Avinger's First Quarter 2021 Conference Call.

Joining us today are Avinger's CEO, Jeff Soinski; and Chief Financial Officer, Mark Weinswig.

Earlier today, Avinger released financial results for the first quarter ended March 31, 2021.

A copy of the release is posted on the Avinger website under Investor Relations.

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.

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

All forward-looking statements, including, without limitation, 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 or events to materially differ 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 see our Form 10-K and 10-Q filings with the Securities and Exchange Commission.

Avinger 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.

And with that, I'd like to now turn the call over to Jeff.

Thank you, Matt.

Good afternoon, and thank you all for joining us.

We're excited to report a strong first quarter driven by the early success of our Tigereye commercial launch and the continued market expansion of our Pantheris SV small-vessel atherectomy device.

These innovative new devices have enabled us to make significant inroads into new accounts and secure a greater share of cases at existing user sites.

At the same time, the rollout of COVID-19 vaccines and continued easing of pandemic-related restrictions has put the market on a path to normalcy, and it enabled greater access for our sales and clinical support teams at customer sites.

Our first quarter revenue increased 13% year-over-year, continuing a positive trend from the third and fourth quarters and putting us squarely back on our pre-pandemic growth curve.

First quarter sales were the highest in the past 4 years as we drove top line growth through the marketing of our expanded product line, the addition of new accounts and increased utilization at existing sites.

During the first quarter, we opened 8 new accounts, adding to the 9 accounts we launched in the fourth quarter of 2020.

As we continue to advance our platform, physicians are seeking the unique benefits provided by our proprietary image-guided technologies.

Our 3 new catheter introductions over the past 3 years have created a compelling and differentiated product line that is delivering excellent clinical results.

We believe that 2021 will be an inflection year for Avinger with several growth drivers coming together.

These include increased market penetration of our Pantheris SV device, the continued rollout of Tigereye to our growing customer base and the initial release of our Lightbox 3 next-generation imaging console, which we expect to be commercially available in the second half of this year.

We are also strategically expanding our sales force with recruiting efforts underway for the addition of sales representatives and clinical specialists in both existing and new high-potential markets.

As we gain revenue scale, we expect to see continued gross margin improvement and enhanced operating cost leverage.

At the same time, we're continuing to invest in key strategic initiatives to support our future growth and build value for stockholders.

Let me share some details on these initiatives.

We advanced a full commercial launch of our new Tigereye CTO-crossing catheter in January 2021, following a positive limited launch experience in key opinion leader sites during the fourth quarter.

We ended 2020 with Tigereye launched at 12 clinical sites.

In early April, we announced that we had increased this to 30 sites, and we continue to ship Tigereye to new customers each week.

Most important, physicians are reliably delivering excellent clinical results using Tigereye to treat a variety of challenging CTOs.

Feedback on Tigereye has been positive with the enhanced imaging, new distal tip design, increased control and higher rotational speeds, enabling physicians to safely and effectively cross complex CTOs, including cases that may have required more invasive procedures such as bypass or amputation.

In short, we are helping physicians address some of their most challenging cases where the stakes are the highest and delivering excellent clinical outcomes for patients are critical.

Notably, the rapid rollout of Tigereye has increased our total image-guided CTO revenue in the first quarter by more than 60% year-over-year, converting what had been a declining sales franchise into a growth driver for our business and providing a foundation for us to expand our share of the approximately $100 million peripheral CTO market.

This is an important point that I'd like to underscore.

Over the past 3 years, we grew revenue for our Pantheris family of atherectomy catheters by over 50% on an annual basis.

However, this growth was partially offset by declining sales of our legacy CTO products.

With the launch of 3 new products in 3 years, including our new Tigereye CTO-crossing device, we believe we are now well positioned to drive growth across all of our catheter solutions.

Our sales team is using Tigereye to expand our presence and gain a larger share of cases at customer sites, driving higher effectiveness and efficiency of our sales organization.

As an added benefit, Tigereye was designed for more efficient exchange to a Pantheris device for atherectomy treatment following CTO crossing.

Many of our Tigereye cases have been followed by treatment with one of our Pantheris atherectomy catheters, adding to the synergy provided by the new device.

Our Pantheris SV catheter also continues to show significant market gains.

In April, we announced an important commercial milestone with the launch of Pantheris SV into more than 100 accounts.

Pantheris SV provides a highly differentiated atherectomy solution for physicians to treat smaller and more distal vessels, including those below the knee.

This is an underserved market, including a high number of patients with critical limb ischemia, or CLI, the most severe form of PAD.

The onboard image guidance provided by Pantheris SV enables physicians to safely and effectively target plaque in vessels just 2 to 4 millimeters in diameter while avoiding damage to healthy tissue.

Over a year into the launch of Pantheris SV, our users are reporting outstanding clinical results for their patients with significant luminal gain following treatment and durable longer-term outcomes.

We recently announced publication of a new clinical study in the peer-reviewed Journal of Critical Limb Ischemia, highlighting the benefits of Pantheris SV for the treatment of below-the-knee PAD.

This study, conducted by physicians at the division of cardiovascular disease and endovascular medicine at Einstein Medical Center in Philadelphia, observed a luminal gain of 64% and freedom from target-lesion revascularization and indication of restenosis of 91% at the 6-month endpoint of the study, representing very positive clinical outcomes for these patients, especially given the limitations of other minimally invasive approaches for the treatment of CLI and the negative consequences of a failed intervention.

We're excited to add to the clinical body of evidence in support of Pantheris SV with our IMAGE-BTK post-market clinical study.

We are currently enrolling patients in 4 clinical sites and anticipate completing enrollment in the study this year with patient follow-up data collected at 30 days, 6 months and 1 year post-treatment.

Turning to our pipeline products.

We are making excellent progress in the development of our Lightbox 3 next-generation imaging console and expect to submit a 510(k) application for U.S. premarketing clearance by midyear 2021.

Our goal is to gain regulatory clearance and have the Lightbox 3 available for initial launch in the second half of this year.

We believe the Lightbox 3 represents a major leap forward in imaging, portability and capability and that this new platform provides a great opportunity to accelerate the pace and efficiency of new account acquisition while energizing existing users.

Lightbox 3 presents a radical reduction in size, weight and cost compared to the existing platform, which is anticipated to speed the evaluation process and reduce barriers to adoption in new accounts.

By eliminating 90% of the weight and footprint of our current console, Lightbox 3 provides for easy transport, a simplified service strategy and streamlined integration into the cath lab environment, all important factors in opening new accounts and an increasing efficiency of our operations.

By reducing cost by as much as 50%, Lightbox 3 is anticipated to increase the uptake rate for new account acquisition and provide further improvement to efficiency.

The Lightbox 3 incorporates an advanced solid-state laser, a more powerful computing platform, a redesigned software system and highly intuitive user interface.

All of these improvements have been guided by physician feedback and are designed to improve the user experience and support increased utilization of our proprietary image-guided devices once on site.

While the Lightbox 3 simplifies the adoption of the Avinger solution, we are also working to expand our peripheral product portfolio with new PAD catheters that would provide additional utilization opportunities and further differentiate Avinger in the marketplace.

As mentioned on our last call, a new large market that we are exploring is the coronary artery disease or CAD market.

The treatment of chronic total occlusions in coronary arteries represents a clinically challenging and largely underserved market.

We believe that our technology platform would bring significant clinical benefits to this market segment and provide a highly attractive opportunity to expand our business.

Currently, only a limited number of interventional cardiologists attempt less-invasive percutaneous coronary intervention or PCI procedures to treat coronary CTOs.

These are highly complex procedures that require the use of multiple wires, balloons and other devices and carry a risk of perforation or other procedural complications.

These CTO PCI procedures also require significant time under fluoroscopy, subjecting the cath lab staff and the patient to extended exposure to X-ray radiation as well as the patient to high volumes of contrast dye injection.

Even with these limitations, it's estimated that approximately 50,000 CTO PCI procedures are performed in the U.S. each year.

In addition, it is estimated that over 200,000 highly invasive coronary artery bypass grafting or CABG surgeries are performed in the U.S. annually, with up to 30% of these procedures related to the treatment of coronary CTOs.

This creates a sizable and growing market that we believe is ripe for expansion with a proprietary new tool that would make a percutaneous approach accessible to more physicians and reduce the need for extended time under fluoroscopy with potentially fewer procedural complications.

We believe that our proprietary OCT-guided technology platform is ideally suited to provide the basis for new catheter-based solutions designed to help physicians safely and effectively cross coronary CTOs on a less-invasive percutaneous basis.

Bolstered by our learning with Tigereye in the peripheral arteries, we have begun initial development of an image-guided CTO-crossing device for the coronary arteries.

While it will take time to complete product development and we anticipate that a clinical study will be required to support the regulatory clearance process, we believe this could be a transformational opportunity for Avinger that would significantly increase the addressable market for our products.

On the clinical front, in addition to the IMAGE-BTK study for Pantheris SV that we discussed earlier, we continue to work towards completion of our INSIGHT IDE study designed to evaluate Pantheris for the treatment of in-stent restenosis or ISR in lower extremity arteries.

We are in the process of finalizing data analysis for submission of a 510(k) application in the coming months with the goal of receiving regulatory clearance this year to expand our U.S. label for Pantheris to include the ISR indication.

A specific ISR indication would provide further differentiation for Pantheris as the only directional atherectomy device with the claim.

We believe this will establish an important point of entry for new accounts and support expanded utilization for the sizable and difficult-to-treat disease segment.

We also recently announced the publication of an additional clinical study based on work from the physicians at Einstein Medical Center in Philadelphia, which documented the significant reduction in radiation exposure and contrast dye usage gained by combining CO2 angiography with our OCT-guided therapeutic catheters, an important advance for patients suffering from chronic kidney disease.

In addition, as we gain more experience with Tigereye, we are working with physicians to identify potential clinical studies for Tigereye that could lead to publications for this innovative new device.

Growing our top line is a key goal for Avinger, and we are making significant investments in our commercial infrastructure to drive this growth.

This year, we plan to expand our commercial organization by approximately 20% as we seek to capture more sites and grow market share.

Coupled with our new products and increased geographic reach, we believe Avinger is firmly positioned for growth in 2021.

The past several months have been an exciting time for Avinger as many of our product, clinical and commercial initiatives come together.

With many of the pieces in place, I believe that Avinger is now at a key inflection point as we transition to growth across all of our primary product lines with additional upside opportunities from our Lightbox 3, which should lower barriers to adoption; our clinical programs, which can expand our labeling and key indications; and our development efforts that can take us into even higher-value markets such as coronary artery disease.

All of our efforts center around empowering physicians with real-time intravascular imaging and precise control during a therapeutic procedure so that they can best treat their patients.

Our clinical data and growing case activity affirm we are making solid inroads towards this objective.

At this point, I'd like to ask Mark to cover our financials, and then I'll return for Q&A.

Mark?

Thank you, Jeff.

Total revenue for the first quarter of 2021 was $2.6 million, a 13% increase from the first quarter last year.

It's important to note that we believe we are seeing a clear path back to normalcy, although many of our sites were still working to return to pre-COVID volumes in the first quarter.

In the first quarter, catheter or disposable sales were at an almost 4-year high, driven by robust demand for Pantheris SV and Tigereye.

Growing our high-margin, recurring disposable revenue streams is a core element of our growth strategy.

Gross margin in the first quarter was 35%, up from 22% in the first quarter of last year.

We continue to see opportunities to generate further operating efficiency.

As we have mentioned previously, Avinger's contribution margin from sales of disposable catheter products is significantly higher than our reported gross margin, providing important leverage in our operating model as we scale the business.

Operating expenses for the first quarter were $5.5 million, down from $6 million in the first quarter a year ago.

We have maintained a lower operating cost profile than prior to the COVID-19 pandemic.

And at the same time, we are directing increased investment in product development, clinical programs and sales team expansion to fuel future growth.

We believe these investments will improve our strategic position.

Net loss attributable to common shareholders was $5.1 million in the first quarter, down from $5.9 million in the first quarter a year ago.

Adjusted EBITDA, which is a non-GAAP measure that excludes certain excess and obsolete inventory charges, depreciation and amortization expenses, stock compensation and other items, as noted in the tables in today's press release, was a loss of $4 million, an improvement of $0.8 million compared to Q1 2020.

The higher revenue and margins were a key contributor to our improved adjusted EBITDA.

A copy of the reconciliation from net loss to adjusted EBITDA can be found in today's press release, which is also posted on our website at www.avinger.com under the Investors section.

Cash and cash equivalents totaled $30.4 million at March 31, up from $22.2 million at year-end, which included $13.1 million in net proceeds from a bought deal offering in February.

Avinger's cash levels relative to its operating burn provides us with the runway we need to complete many of our strategic initiatives.

Additionally, as announced previously, we amended our loan agreement in January 2021.

This amendment significantly improved certain terms, including the extension of our interest-only period and maturity date of the term loan by 2.5 years with the maturity date extended to December 31, 2025.

Subsequent to the first quarter, in April 2021, Avinger received confirmation that its $2.3 million Paycheck Protection Program loan and related interest fees were fully forgiven by the U.S. Small Business Administration, improving our working capital.

At this point, I'd like to turn the call back to Jeff for Q&A.

Thanks, Mark.

The first quarter continued our positive momentum from the second half of 2020 as our business recovered from the effects of the COVID-19 pandemic.

We've expanded on that success with the Tigereye commercial launch, strong results from Pantheris SV and record catheter sales since we relaunched with our Pantheris next-generation device.

New site activity remains strong, and we are nearing 510(k) submission for our next-generation Lightbox 3 imaging system.

We're actively growing our sales team in 2021 to drive scale with our expanded product set as we seek to capture more sites and more cases at existing sites.

We look forward to executing our strategy to build value for Avinger stockholders and fulfill our mission of radically changing the way vascular disease is treated.

At this point, we'd be happy to take your questions.

(Operator Instructions) And our first question comes from Nathan Weinstein from Aegis Capital.

So it's good to see that ongoing existing growth in your top line and also the healthy margin expansion occurring for yet another quarter.

And so perhaps we could just start with a discussion on the Tigereye commercial launch.

Any additional details you could share there on the progression?

And also, why are customers finding the products so appealing?

Thank you, Nathan, for the question.

We're very pleased with the initial transaction and, most importantly, the physician response to our Tigereye product, and it's in the -- as we progress to full commercial launch.

As I said on the call, we've already launched in over 30 accounts, and we're shipping new accounts every week.

We believe we're well on track to achieve our internal goal of launching Tigereye in 40 accounts by the end of the quarter.

So good traction, good positive momentum and very pleased with the work the sales force is doing, not only to get Tigereye into our existing account base, but to prepare physicians for their first cases.

So physician feedback has been very positive related to the efficiency of the workflow, the enhanced imaging we provide due to the higher rotational speeds and versatility that's provided by the ability to precisely control deflection of the device in real time during a case.

Overall, I think you see this in our business results, we're driving more CTO case volume.

Our total revenue for our CTO business, which includes Tigereye and Ocelot, increased over 60% compared to the year-ago period.

As we'd hoped, there has been limited cannibalization of our Ocelot business with most Tigereye volume being additive to our existing base of business.

And as discussed in the call, this now enables us to grow across both our atherectomy and our CTO franchises.

We're continuing to learn about the capabilities for the device in a real-world clinical setting and also continuing to learn how to best sell, train and support the device.

And as I mentioned, we're working with thought-leading physicians to identify some near-term clinical study opportunities for Tigereye, including potentially retrospective studies based on already available clinical data so that we can document these outstanding clinical outcomes we're seeing in the field and keep this momentum going.

Jeff, that's great.

Maybe just turning to the organization.

We understand that you're expanding the sales team.

Any other details you can share there, maybe in terms of quantity or even the composition of your growing organization?

Yes.

So we ended the year at 27 people in our sales organization, including sales management.

We've said on our last call and, I think, reasserted here that we intend to grow that group by about 20% in 2021, which would be 5 to 6 people and end the year somewhere around 32, 33 people.

Our sales force is broken really into 2 primary groups: sales representatives, who are, of course, supporting cases, but primarily tasked with developing new users, developing new accounts; and clinical specialists, who are supporting day-to-day utilization in sites.

We've added a new role in the organization in 2021, which is a sales associate role, which will -- who will work with an established territory sales manager to help to develop a new market within their broader territory, again, looking at not only going deeper in existing territories where we're getting more penetration and more accounts to cover, usually with the addition of a clinical specialist, but also looking at expanding our geographic reach efficiently into new markets or submarkets of a larger territory.

In addition to that, we are adding TSMs, the territory sales managers in new markets where we have some entrée, maybe even 1 or 2 accounts, but don't have a strong sales presence to, again, expand our geographic reach and drive more growth for the business.

Okay.

That's helpful.

And maybe just stepping back for a second and thinking about the market backdrop, what are you seeing from your perspective on the atherectomy market overall as we kind of come back from the pandemic lows?

Yes.

So I think the market overall -- and certainly, we saw an impact of COVID early in the first quarter, and that was a carryover from the post-holiday surge that was well-publicized in the media.

Our business came back strong in mid to second half of the first quarter, resulting in the results we put out today with very strong quarter growth year-over-year during a quarter that's typically a lighter quarter on a seasonal basis.

So with the widespread vaccination, especially in the health care community, and continued lessening of restrictions in the health care facilities we work in around the country, feeling an unexpected resurgence, we feel the worst of COVID is behind us.

I also think we've been feeling the impact of our sales force maintaining a strong presence and engagement in the field throughout the whole COVID experience.

And I think you saw this on how quickly our business came back in the third and fourth quarters of last year.

So we're building on that.

On a personal basis, I'm very much enjoying getting back out in the field with our sales reps and physicians.

Over the past few weeks alone, I was in Texas, Michigan, Florida, and I will be spending most of next week in Pennsylvania.

I'm thrilled with the quality of engagement from both our reps and the physicians, but also the quality of cases I've seen.

I feel like we're really at the start of something terrific here.

And COVID has been a horrible thing for the world and certainly challenging for every medical device business through 2020, but I think it's provided an opportunity for us to really reset as we go forward into 2021 and bear fruit of the kind of forbearance of our team through a tough time.

Great.

Jeff, it's good to hear your perspective on the market there and getting back into the normal swing.

So I guess just one more question from me, and this is turning back to the product side of the business.

The Lightbox, obviously, we can hear the enthusiasm in your team as you speak about this.

So maybe just any details on timing you can share, kind of what your progress is with development?

Yes.

So we are confident that we'll be in a position to file our 510(k) for U.S. premarketing clearance over the next few months, so sticking with the midyear timing that we've been talking about.

Based on a midyear filing, we anticipate that we'll receive U.S. regulatory clearance in the second half of this year, which is really exciting because it gives us an opportunity to have our initial commercial launch, at least on a limited basis, before the end of '21, which sets up a terrific opportunity for Lightbox 3 to be a major growth driver for our business in '22.

So those are the kind of the U.S. activities in anticipation.

We also will see CE marking for Lightbox in the third quarter.

And as we've done with our new catheters in the past, we think this will provide an opportunity for us to get early experience in the field with our commercial Lightbox 3 in Europe even prior to receiving U.S. clearance.

So a couple of important milestones, filing U.S. clearance, CE marking in Europe and then first cases both in Europe and in the U.S., potentially all prior to the end of this year.

Okay.

Great.

Thanks for sharing the detail there.

I really appreciate the updates overall.

I'm looking forward to watching the ongoing progress in your business.

Well, thank you.

Thank you very much, Nathan.

And we have reached the allotted time for Q&A for this call.

I would now like to turn the floor back over to Jeff Soinski.

Sir, the floor is yours.

Well, thank you for joining our call.

We continue to advance the key growth drivers for our business, including 3 compelling and highly differentiated PAD solutions, a new Lightbox console that breaks through barriers to adoption, clinical work that continues to document outstanding outcomes for patients and our initial efforts to expand our platform into the coronary market where we see an incredible opportunity for our technology.

We very much appreciate your interest in our company and your support, and look forward to an exciting year of progress ahead.

Thank you.

Thank you.

This does conclude today's conference.

We thank you for your participation.

You may disconnect your lines at this time, and have a wonderful day.