Avinger, Inc.
Q4 2020 Earnings Call Transcript

Published: 11 Mar 2021

[Operator:]

Greetings, and welcome to the Avinger's 2020 Fourth Quarter Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. I'll remind you that this conference is being recorded. It is now my pleasure to introduce Matt Kreps, Managing Director at Darrow Associates Investor Relations. Mr. Kreps, you may begin.

[Matt Kreps:]

Thank you, Alex, and thank you all for participating in today's call. I would like to welcome you to Avinger's fourth quarter 2020 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 fourth quarter ended December 31, 2020. A copy of the release is posted on the Avinger website under Investor Relations.

[Jeff Soinski:]

Thank you, Matt. Good afternoon and thank you for all joining us. I hope that you and your families remain safe and healthy. We're grateful that the continued rollout of the COVID-19 vaccines has provided a light at the end of the tunnel and we look forward to the time when we can all return to normalcy. We were very pleased with our team's continued strong operating performance and revenue growth in the fourth quarter, despite the resurgence of COVID-19 infections and limitations on the procedural volume in certain regions late in the quarter. Fourth quarter revenue increased 19% over the third quarter and 7% year-over-year, demonstrating our continued sales recovery following the second quarter COVID-related shutdowns and exhibiting the market's excitement for our new Tigereye CTO crossing catheter. The incremental sales from the Tigereye limited launch program were a significant contributor to revenue growth in the fourth quarter, driving a 38% increase in our image-guided CTO crossing revenue over the third quarter and a 24% increase year-over-year. During the quarter, our new account activities also continued to bear fruit. We opened nine new Lumivascular accounts in the fourth quarter bringing our total new accounts open for the year to 36. More and more physicians are beginning to realize the unique benefits provided by our proprietary image-guided technologies. We expect this to continue as our three new catheter introductions over the past three years broaden the appeal of our product line. In the year ahead, we see several growth drivers, including the continued rollout of Tigereye to our full customer base, the release of our next-generation Lightbox 3 which we expect to be commercially available in the second half of this year and the strategic expansion of our field sales team. We are executing on these opportunities as a leaner more efficient operating company backed by a very strong balance sheet and our broadest product portfolio to treat PAD.

[Mark Weinswig:]

Thank you, Jeff. Total revenue for the fourth quarter of 2020 was $2.7 million, a 19% increase from the third quarter and 7% increase year-over-year. It's important to note that many of our sites are still not back to pre-COVID volumes. And as a result, in the latter part of the fourth quarter, procedure volume was unfavorably impacted by the resurgence of COVID-19 infections. This makes our strong revenue performance in the fourth quarter even more impressive. But probably the most exciting aspect of the quarter's performance was the strong revenue contribution from our Tigereye device, which as Jeff discussed led to a 38% quarter-to-quarter increase in our overall image-guided CTO catheter revenue.

[Jeff Soinski:]

Thanks, Mark. The fourth quarter began with good momentum and the excitement steadily built as we conducted the initial cases under our Tigereye limited launch program. New site activity and case activity remained strong and we executed well on efficiency and operating metrics. With our next-generation Lightbox 3 imaging system, clinical study programs and sales expansion plans we are carrying this enthusiasm into 2021. We're focusing our energy and attention on growing the business and expanding our product set. We look forward to executing our strategy to build value for Avinger's stockholders and fulfill our mission of improving the standard of care for patients with vascular disease. At this point, we'd be happy to take your questions.

[Operator:]

Our first question is from Nathan Weinstein with Aegis Capital. Please proceed with your question.

[Nathan Weinstein:]

Good afternoon Jeff and Mark. Thanks for taking my question. Good to see the ongoing growth in your business and perhaps, we could start with a couple pandemic-related questions. I know, Mark touched on this in your prepared remarks, but if you guys could perhaps share some more insights into the resumption of case volumes you're seeing in your markets as we come back from the pandemic lows?

[Jeff Soinski:]

Yes. Thanks, Nathan. As you saw in our third quarter results, we came back strong following the significant and severe shutdowns in the second quarter. As we went into the fourth quarter, we continued that strong momentum. Kind of coming off the Thanksgiving break and the resurgence of COVID infection nationwide, we did see a slowdown of volume, particularly, in the latter part of December and additional or maybe the reinstatement of certain limitations especially in certain regions of the country. And so that did carry over into the early part of the first quarter and we also had the additional impact of the snowstorms and ice storms in Texas. However, we've come back very quickly from that. Our field representatives have stayed active and in the labs. And we're really pleased with how they've been able to address these challenges and how our physician customers have put the needs of their patients first. So we see an improvement. Really we've seen an improvement throughout the first quarter and a continued lessening of restrictions kind of following the January limitations and feel good about where the market is now especially as more and more vaccines roll out. Most of our representatives have been vaccinated and clinical specialists and certainly most physicians and frontline healthcare workers in the labs we work in have been vaccinated as well.

[Nathan Weinstein:]

Great. Thank you. And just had one follow-up on the pandemic front which is -- and this is something we talked about much earlier. It was like maybe 2Q-3Q of last year. But your integration of virtual tools in the selling and training process kind of where are you with that?

[Jeff Soinski:]

Yes, we still have -- and thanks for mentioning that, especially, in the second quarter we took advantage of the technology and in some cases more time for the physicians to engage with us via Zoom calls, Webinars et cetera. We're continuing that program. We're continuing that for -- and really Dr. Jaafer Golzar, who's our Chief Medical Officer is very involved in this in training our reps and getting people comfortable and getting them ready, especially, around Tigereye and launching Tigereye into these new accounts. And you saw the pretty dramatic uptake on new accounts already this first quarter almost doubling to 23 accounts with Tigereye so far in the quarter. So we're continuing to use those tools. There is no substitute for being there in person certainly to drive and support case volume. So we're staying present. We're staying active. We're staying in the field even myself and several of our senior team were in the field quite a bit, especially, in the fourth quarter with the limited launch of Tigereye. But we're weaving in and continuing to use the technology and kind of, maybe the greater acceptance of using that technology as we engage with physicians and our customers.

[Nathan Weinstein:]

Great. Thanks. That's helpful. And switching gears here to the product side, you've done a great job largely refreshing the portfolio. I know there's more products on the way. But maybe you could explain what it means on a portfolio level when you approach new perspective clinics. They typically start with one of your products and then expand to being a consumer of multiple different Avinger products. And how does that process go?

[Jeff Soinski:]

You know, we typically will start with selling and communicating the benefits of our image-guided Lumivascular approach. And that really is the fundamental core of our selling process and our selling message. And I think it's quite easy for physicians based on the data, but also based on their own personal experience and just the intuitiveness of being able to precisely target disease and preserve healthy vessel. Typically the first products that are used are our atherectomy products, and usually our seven French Pantheris next-gen product in the SFA, which is a more comfortable area for the physicians to work with a new technology and a new device. But it doesn't take long to transfer that experience to treating the smaller vessels below-the-knee with our Pantheris SV device. Now having said that Pantheris SV has been very effective in opening the doors to new accounts that are focused on BTK and CLI disease. And where there really isn't a safe and effective -- or a safe and effective device to provide large luminal gain below-the-knee without damaging or perfing these very small vessels. And so overall, we'll start with Pantheris, atherectomy we'll also work in or sometimes start with Pantheris SV and then we'll proceed to use of our CTO crossing devices. Now up until now we've only had Ocelot, and we're continuing to sell and support Ocelot, and continue to be very pleased with the case results we see with our Ocelot catheter. But now we have another new tool to introduce into the hands of our physicians and that is our Tigereye device. But one of the things we're focused on is getting our reps and our clinical support specialists very, very comfortable with the device to make sure that they can provide the expert support that physicians deserve. So, typically we'll start with atherectomy. We have obviously the stronger reimbursement in atherectomy as well. And especially in a hospital environment that will lead to usage of our CTO crossing devices.

[Nathan Weinstein:]

Great. Thanks Jeff. And we, of course, look at revenue as a gauge of business progress and also expected growth in the field sales team as a driver of that -- or one of the drivers of that. But maybe shifting towards another metric that's important in the P&L which is your margin profile. It's nice to see margins continue to expand. Can you talk about maybe in general in terms what we can expect on that front and what levers you have on that with margins?

[Jeff Soinski:]

Yes. Certainly. I'm going to ask Mark to expand on that Nathan.

[Mark Weinswig:]

Yes, Nathan, thanks for the question. So, the nice thing about Avinger's product set is that we have very, very high direct and contribution margins above 60%. The one limiting factor that we have is just the volume that we run through the factory. As we continue to drive revenue with new products and with new customers, we do expect to be able to increase our gross margins, especially, as we gain additional efficiencies and operating leverage. And so we're really excited about what a new product means for us and also winning additional accounts, and how that can really drive our gross margins higher and higher. We're very pleased with our performance in the fourth quarter, and we look forward to additional margin expansion in future quarters as we can drive our revenue growth.

[Nathan Weinstein:]

Okay. Great. Thanks for the clarification on those points. And as just a final question from me regarding the expected growth in the field sales team, are there specific roles or geographies that you're hiring for or looking to hire for? And then what -- how would you characterize the environment in terms of the availability of talent?

[Jeff Soinski:]

Yes. So maybe I'll take the second part first. There is -- it is a competitive environment to get -- to find and retain talented experienced people in the Cath lab. We have not found it to be a challenge though because we're offering a differentiated device, which is a little more exciting than just going in and selling a typical peripheral product. And so in a way we kind of self-select for reps and clinical specialists, who are excited about being involved with a new technology in a growing company that's really making a difference in the market. Now, as it relates to our strategy in specific geographies, we're doing really a combination of factors. We're going deeper in certain markets where we've shown significant growth, new account activity, either by adding clinical specialists to support the account so the rep can move on to find new accounts, the territory sales manager. We also have identified and created a new position as part of our sales structure called a sales associate, which is a more junior sales rep that might be very active in greenfield opportunities, and kind of trying to develop new markets typically in partnership with a more experienced TSM. And then, we are looking at adding a couple of new markets and geographies, where we may have one or two accounts that have come in through leads et cetera, and are being supported by reps that are pretty – or clinical specialists that are pretty distant. But we see based on the data and a strategic analysis, the opportunity to really create a beachhead and grow a new market. And so it's really a combination of all three working together. We're working obviously in partnership with our sales leadership and leveraging data as much as possible, and really trying to be efficient and make sure that we're not being too spread out as a small organization, because we want to build kind of density of accounts and assets for our greater efficiency. And that's just one investment. That's an area, of course that we're making significant investment, but we're also as you know investing in R&D, investing in new products trying to broaden and deepen the bag of our reps and make them more efficient give them more to sell. And then also have some very exciting clinical data coming down the pike all of which works together to make the job of the field sales rep, which is a tough job easier.

[Nathan Weinstein:]

Got it. Understood. And thank you Jeff and Mark for addressing my questions and we're looking forward to ongoing progress in the business for the balance of 2021.

[Jeff Soinski:]

Thank you very much. Appreciate the questions, Nathan.

[Operator:]

Thank you. We have reached the end of the question-and-answer session. And I will now turn the call over to Jeff Soinski for closing remarks.

[Jeff Soinski:]

Well, thank you very much for joining our call today. We very much appreciate your continued interest in our company and your support, and look forward to an exciting year of progress ahead. Thank you.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.