Avinger Q4 2022 Earnings Call Transcript

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Provided by Quartr
March 15, 2023

Key Takeaways

  • Negative Sentiment: Q4 revenue declined to $2.0 million from $2.4 million year-over-year due to sales headcount turnover and ongoing staffing shortages that limited clinical case coverage.
  • Positive Sentiment: Gross margin improved to 34% from 30% in the prior year quarter, while operating expenses fell 15% as the company leveraged favorable product mix and cost efficiencies.
  • Positive Sentiment: In April, Avinger launched its LightBox 3 imaging platform, adding 20 net new accounts in 2022 and completing over 600 cases at more than 60 sites to boost account engagement and sales productivity.
  • Positive Sentiment: The Image BTK post-market study of Pantheris SV reported 100% freedom from major adverse events at 30 days, 94% patency at 6 months, and 92% patency at 12 months, demonstrating durable outcomes in critical limb ischemia patients.
  • Positive Sentiment: Avinger filed FDA 510(k) submissions for Tiger IST and Pantheris LV, expecting clearance for Tiger IST in Q2 and for Pantheris LV by mid-2023 in preparation for staged commercial launches.
AI Generated. May Contain Errors.
Earnings Conference Call
Avinger Q4 2022
00:00 / 00:00

There are 4 speakers on the call.

Operator

Afternoon, ladies and gentlemen, and welcome to the Avinger 4th Quarter and Full Year 2022 Results Call. At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation. It It is now my pleasure to turn the floor over to Matt Krets, Investor Relations for Avinger. Matt, the floor is yours. Thank you, Tom, and thank you everyone for participating in today's call.

Operator

I'd like to welcome you to Avinger's Q4 2022 conference call. Joining us today are Avinger's CEO, Jeff Silinski and Principal Financial Officer, Nabil Spannadi. Earlier today, Avinger released financial results for the quarter year ended on December 31, 2022. A copy of the release is posted on Avinger's website under the Investor Relations tab. 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 remain pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Operator

Any statements contained in this call that are not statements Historical facts 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 ks and 10 Q filings with the Securities and Exchange Commission.

Operator

Avaner 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. Today's presentation will also include reference to non GAAP financial measures, such as adjusted EBITDA. A reconciliation of these non GAAP financial measures and the most comparable GAAP financial measures is available within the earnings release, which we found on Avinger's website. And with that, I'd like to now turn the call over to Jeff.

Speaker 1

Thank you, Matt. Good afternoon and thank you all for joining us. Over the past year, we made important strategic moves to advance our technology platform, build out our peripheral product portfolio and create exciting new future growth opportunities for the company. In April, we launched our LightBox 3 next generation imaging platform, which incorporates a state of the art laser system into a sleek, highly portable console, expanding our capabilities and bringing new efficiencies to our engagement with both new and existing accounts. We've also filed FDA 510 submissions for 2 new image guided catheters, Tiger IST for CTO crossing and Pantheris LV for atherectomy, which bring important new features and benefits to our peripheral portfolio and provide the opportunity for 2 new product launches this year.

Speaker 1

Over the past several months, we've made significant progress in the development of our first coronary product application, Establishing a clinical advisory board made up of highly experienced interventional cardiologists in the fields of coronary CTO crossing and intravascular imaging and gaining important feedback on design prototypes for further development and evaluation. Our work to date has made us even more enthusiastic about the Potential for our proprietary OCT guided approach to revolutionize this market with the 1st and only image guided system for crossing coronary CTOs. During the Q4, we reported solid operating metrics, improving gross margin and driving Continued improvement in our operating cost model compared to the year ago period. While the direct impact of the COVID crisis itself has lessened, We continue to see the effect of staffing shortages on facility and procedure availability in certain areas. Our 4th quarter revenue was more directly impacted by turnover in our sales force, leading to reduced sales headcount and clinical case coverage capability.

Speaker 1

While total revenue declined in the Q4 of 2022, our sales productivity measured by revenue per field sales head remain consistent with the year ago period. We are in the process of recruiting additional clinical specialists to expand our case coverage capability in key markets and are beginning to see a larger pool of available talent as larger companies trim their headcounts to reduce costs. By leveraging the flexibility provided by our new Lightbox 3 Imaging Console, we added 5 new accounts during the Q4, bringing our total number of new accounts added during the year to 20. As we gain more experience with Lightbox 3, we continue to be thrilled with the performance and reliability of this innovative new platform. Lightbox 3 has now been used in approximately 600 cases by 85 physicians in more than 60 accounts.

Speaker 1

Our Pantheris image guided atherectomy products continue to perform well in the market with both our Pantheris 7 French and Pantheris SV devices each growing 6% on a sequential quarter basis. Atherectomy is a competitive and growing market with attractive reimbursement rates that continue to trend positively for Avinger. For 2023, the Centers For Medicare and Medicaid Services or CMS has increased outpatient reimbursement in by 4% to 5% and decreased atherectomy reimbursement in office based labs or OBLs by approximately 6%. This is the 2nd year in a row with increasing hospital reimbursement and decreasing OBL reimbursement, widening the gap in reimbursement between the two settings. We see this as a net positive for Avinger since approximately 90% of our revenue is derived from hospital accounts.

Speaker 1

Our Pantheris SV small vessel atherectomy device introduced in 2019 continues to be a strong performer and is now our single largest selling Pantheris SV is primarily used to treat patients with below the knee lesions, many of whom suffer from critical limb ischemia or CLI, the most severe form of PAD. Physicians rely on the real time imaging and precise control provided by Pantheris SV to precisely target the disease while avoiding damage to the arterial vascular structures of great benefit when treating lesions within these narrow 2 to 4 millimeter diameter vessels. Clinical outcomes in this challenging patient population continue to be excellent. To document these results, we're conducting a post market clinical study called Image BTK designed to evaluate Pantheris SV for the treatment of below the knee lesions in a real world clinical setting. We have now enrolled approximately 40 patients in the study and expect to complete enrollment this year.

Speaker 1

Interim results continue to be outstanding. As of December 31, 35 subjects have been enrolled in the study with 25 patients completing their 6 month visit and 22 patients completing their 12 month visit. Primary safety for this patient population has been excellent with 100% freedom from major adverse events at 30 days. Performance against the efficacy endpoints are equally compelling with 94% of lesions having a residual stenosis of less than 50% after treatment with Pantheris SV alone and 100% of lesions having a residual stenosis of less than 30% post adjunctive therapy. On average, patients had a stenosis or blockage of 95% prior to treatment.

Speaker 1

Treatment with Pantheris SV alone reduced the stenosis by 75% to 24% on average. This reduction in stenosis increased to 92% post adjunctive therapy with average stenosis of only 8% at the end of the procedure. Most exciting are the longer term outcomes reported so far in the study. At 6 months, patients exhibited 100 percent freedom from target lesion revascularization or TLR and 94% patency via Duplex ultrasound adjudicated by an independent core lab. These results are proving to be Extremely durable with patients showing 92% freedom from TLR and 92% patency at 12 months.

Speaker 1

Truly remarkable results in this challenging anatomy and challenging patient population, many of whom would otherwise be at significant risk of amputation. We plan to build on this success with the introduction of Pantheris LV, our new large vessel device that incorporates key design principles From our Pantheris SV device, we filed a 510 application for Pantheris LV in early January and anticipate FDA clearance by mid year 2023, which would allow for commercial launch in the second half of this year. Pantheris LV is designed to treat vessels 3 to 7 millimeters in diameter and is ideally suited to treat lesions in the SFA and popliteal above and behind the knee, where the majority of PAD procedures are performed. Pantheris LV utilizes a proprietary design for plaque apposition without the need for a balloon and is designed to operate at significantly higher rotational speeds to streamline the atherectomy procedure and expand our capabilities in this anatomy. It also enhances Guidewire Management and implements a modified plaque management system to further improve procedural efficiency.

Speaker 1

In addition to our new Pantheris LV filing, in the Q3 of 2022, we filed a five requested by FDA as part of their standard review process. We have no open requests on our 510 submission at this time. Time to clearance for our 510 submissions typically takes from 4 to 8 months. So we are still within our normal timeframes with this filing. Given the completeness of our response and the strength of our data, we believe that we are nearing the end of the review process and anticipate FDA clearance in the coming weeks.

Speaker 1

We're making preparations to initiate limited launch on an expedited basis pending FDA clearance and are excited to gain clinical experience with the Significantly advanced new device. Tiger IST incorporates design upgrades to the tip configuration and catheter shaft to increase crossing power and procedural success in challenging lesions. It also incorporates design enhancements for ease of image interpretation during the procedure. Tiger IST continues to provide the high definition real time imaging, user controlled deflectible tip and faster rotational speeds introduced to the platform in 2021. By bringing new capabilities to the system, Tiger And the addressable market for our image guided CTO catheters in the treatment of advanced peripheral disease.

Speaker 1

Taken together, we believe the anticipated commercial launch of our Tiger Ist CTO crossing device in the first half of the year and launch of our new Pantheris LV atherectomy device in the second half of the year will bring excitement to our platform and Expand addressable case opportunities for our products. Combined with our new Lightbox 3 imaging console, we believe these new catheters will assert our technology leadership in the peripheral vascular space and provide new growth opportunities for our company. As we look to the future, we're very excited about the progress we're making in the development of our first coronary product application, which provides the opportunity for 1st mover innovation in a large and growing market with existing reimbursement codes in place. Crossing chronic total occlusions in the coronary arteries is a complex, expensive and challenging procedure utilizing currently available technology. By leveraging our proprietary technology platform, we believe we can redefine this market with the 1st and only fully integrated image guided system for crossing coronary CTOs.

Speaker 1

Our coronary CTO development efforts are focused on low profile catheter designs that combine real OCT guidance with precise control and steerability to facilitate an integrated approach and allow physicians to safely and efficiently cross coronary CTOs. Similar to our peripheral catheters, our coronary devices will incorporate SITE's measurement capability to help physicians properly size balloons or stents prior to placement, which is critical for optimal outcomes. An image guided coronary CTO crossing device with diagnostic capabilities would access existing reimbursement codes both for the therapeutic procedure as well as for coronary OCT diagnostic imaging immediately upon FDA clearance. We believe that an OCT guided catheter designed for Crossing efficiency with the need for fewer support devices and less contrast media usage, combined with a highly attractive reimbursement scenario, provides the opportunity for a differentiating and highly compelling economic value proposition. To guide our development We've established a clinical advisory board made up of highly experienced interventional cardiologists who are key opinion leaders in the fields of coronary CTO crossing and intravascular imaging.

Speaker 1

Over the past several months, we've evaluated different design approaches and bench top models and have recently shared our designs and findings with our clinical advisors, getting important feedback for further development and evaluation. We anticipate assessing prototypes in animal studies in the 2nd quarter with a goal of filing an investigational device exemption or IDE with the FDA in the next 12 months to allow for initiation of a clinical study to evaluate safety and efficacy of the device in 2024. There is a definite excitement around our development program and the opportunity to meet a large market need with an elegant solution to what is today an incredibly difficult procedure. Given the vast potential represented by the coronary markets, advancing coronary CTO product development is our principal R and D program for 2023. On a commercial basis, we're focused on execution in 3 strategic areas to drive growth of our peripheral business.

Speaker 1

1st, increasing case coverage capability and catheter utilization in our core geographic areas through the expansion and training of our clinical sales team. 2nd, driving new account activity and expanding our user base through deployment of our new Lightbox 3 Imaging Console. And 3rd, completing the regulatory approval process for our 2 new peripheral devices in preparation for commercial launch this year, which we believe will broaden the appeal of our product portfolio and create new usage drivers for our platform. We look forward to updating you on these initiatives as well as the continued progress on our coronary product development program throughout the year. At this point, I'd like to turn the call over to Nabil Spinnetti, our Principal Financial Officer and Accounting Officer to take us through the financial results and then I'll return for Q and A.

Speaker 1

Nabeel?

Speaker 2

Thank you, Jeff. Total revenue for the Q4 of 2022 was $2,000,000 compared with $2,300,000 in the 3rd quarter and $2,400,000 in the Q4 of 2021. As Jeff mentioned, the decrease in revenue compared to the prior periods was primarily related to reduce sales headcount during the quarter. Gross margin for the 4th quarter was 34%, relatively stable with 35% in the 3rd quarter and representing a 4 percentage point increase from 30% in the year ago quarter, primarily reflecting favorable product mix and certain cost efficiencies. Operating expenses for the Q4 were $4,500,000 flat with the 3rd quarter and decreasing 15% from $5,300,000 in the year ago quarter as we complete peripheral product development activities and continue to control operating expenses while investing in our core strategic initiatives.

Speaker 2

Net loss and comprehensive loss for the Q4 of 2022 was $4,200,000 relatively stable with 4.1 $4,100,000 in the 3rd quarter and representing a 16% improvement from $5,000,000 in the Q4 of 2021. Adjusted EBITDA as defined under our non GAAP financial measures in the press release was a loss of $3,800,000 compared to a loss of $4,300,000 in the Q4 of 2021 and a loss of $3,600,000 in the Q3 of 2022. 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 $14,600,000 as of December 31. We remain in a strong financial position as we continue to fund our strategic initiatives and invest in the growth of our business.

Speaker 2

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

Speaker 1

Thanks, Nabeel. We're encouraged by the progress we're making in advancing important strategic initiatives for our future. Our new Lightbox III system opens new account opportunities and new opportunities for physician engagement. Our Image BTK Program provides the opportunity for 2 major new product launches in 2023 and the development of our first coronary product application provides the opportunity to redefine a large and underserved market with a highly differentiated solution that we believe can advance the standard of care for millions of patients and provide a transformational value opportunity for Avinger. At this point, we'd be happy to take your questions.

Operator

Thank you. Ladies and gentlemen, the floor is now open for questions. To provide optimal sound quality. Please hold a moment while we poll for questions. And our first question today is coming from Ramakanth Swayampakula from H.

Operator

C. Wainwright. Ramachanth, your line is live. Please go ahead.

Speaker 3

Thank you. Good afternoon, folks. So a couple

Speaker 1

of quick

Speaker 3

questions. First one is, what's your confidence in approval of The Tiger ISD during Q2 and the Panther's LV in the second half.

Speaker 1

Okay. Hello, RK. Thanks for the questions. Given where we are in the process with Tiger for a while now, we have answered all questions, completed all additional testing, including some biocompatibility testing requested by FDA, which is really a normal part of the process where there will be additional questions and requests for information as you go through the review process. And given that the data from the testing we did is so positive and strong, we feel very that we're nearing the end of the review process and should be in a position to get the clearance in the coming weeks.

Speaker 1

Of course, that is not fully in our control, but based on the information we have at this time, we feel very confident. And due to that confidence, we're making preparations to initiate limited launch very soon after we receive the clearance. On Pantheris LV, we have received the Formal request for additional documentation and certain questions And based on the data we have and the robustness of the submission that we had made, We feel confident that we can answer all of those questions and provide any additional information by the middle part of the Q2, which should lead, of course, pending any additional follow-up questions on those specific items to clearance by mid year 2023. So we feel we're in a good position on both filings, nearing the end on Tiger IS And I think very well positioned to achieve our goal of clearance by mid year for the Pantheris LV. I should always qualify though that that's based on our understanding of the data, where the process is and ultimately The FDA will take the time they need to complete a thorough review.

Speaker 3

Okay. And just to make sure I understand this correctly, For both the products, you will be starting off commercialization using a limited launch or is it going to be different for different products?

Speaker 1

So that is our process. We've been doing that really for several years now. We feel it's an important and responsible step Not only to gain clinical experience with our device, but also to help understand how to best support physicians with the device, Hal's gives us an opportunity to provide in clinic training and experience for our sales force prior to opening up to full commercial launch. So we will initiate limited launch on both devices. Typically in the past that's taken not a terribly long time, 2 to 3 months before we then make the decision based on the feedback to go into broad full U.

Speaker 1

S. Commercial availability.

Speaker 3

Okay. So talking about learnings, now that you have 60 clinical sites using your Lightbox 36 100 cases. So what are the learnings that you have had for at this point Such that it can help you to increase not only the usage, but also cases using Lightbox 3.

Speaker 1

Yes. So first of all, I think there we always anticipated that the Lightbox 3 would be important as it related to accelerating the pace of new account acquisition and getting from a first meeting with an interested physician Kind of through the process and doing first cases and we are seeing that to be the case. What I didn't anticipate as much is just how Citing the new Lightbox 3 would be to our existing physicians. The user interface is completely different. It's Simplified, the amount of space the Lightbox 3 takes up in the lab is not even comparable to the existing platform.

Speaker 1

But the new state of the art laser system and the advanced imaging capability that we've built into the device, Really it's got the attention of even our users who've used our platform for many years. The Christmas of the image, the brightness of the image, the detail that they can see, on the relative not only to the disease, but So the arterial vascular structure is quite compelling. And we also with the Lightbox 3 have now brought new capabilities for our catheters. We were limited by the original platform as to how Fast we could spin or rotate our devices. For example, the current Panthera 7 French device has 1,000 RPM rotation.

Speaker 1

The new Pantheris LV has variable rate rotation that can go up 3,000 RPMs. That we would not be able to spin catheters that fast and preserve the image quality on our original platform. But with the new Lightbox 3, we can now take advantage of some of this increased capability.

Speaker 3

Okay, fantastic. And the last question from me, I mean, understanding that you just put the advisory board together for the coronary What do you think is the timeline for getting a clinical program started?

Speaker 1

So we obviously are into and have been now for months into the development program. We've received terrific feedback from a very engaged group of advisors, clinical advisors with tremendous experience, not only in the Our goal and I think this is a very realistic goal is to get experience with the next Generation of prototypes in animal studies in the second quarter, which will then Of course, lead to more learning, more iteration. Our goal is to complete design selection, in the Q3 and to be in a position where we can then advance the product prototypes through verification and validation in preparation for and IDE or an investigational device exemption filing within the next 12 months. Assuming everything goes according to plan and we're able to file that IDE in early in 2024 or before, We feel that we would be in a position to initiate our clinical studies in 2024. It's really just a question of when in 2024 do we start.

Speaker 1

And so, a very, I think accelerated process primarily because we're leveraging years and years of learning, development and evolution in our peripheral platform to our coronary program. And we're very excited to get the product there. We believe the regulatory route for these products will be a 510 with clinical human clinical study and our goal and expectation is that we would be in a position to initiate enrollment in that human clinical study in 2024.

Speaker 3

Perfect. Thank you very much. Thanks for taking all my questions.

Speaker 1

No, thanks for the questions.

Operator

Thank you. And there are no further questions in queue at this time. I would now like to turn the floor back to Jeff Silinski for closing remarks.

Speaker 1

Thank you for joining our call this afternoon. We very much appreciate your interest in our company and look forward to reporting our continued progress on our Q1 2023 call. Have a good afternoon.

Operator

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

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