AngioDynamics, Inc.

Good morning and welcome to the Angio Dynamics Fiscal Year 2021 Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone today should require operator assistance, please press star zero from your telephone keypad. As a reminder, this conference call is being recorded. The news release detailing the fiscal 2021 second quarter results crossed the wire earlier this morning and is available on the company's website. This conference call is also being broadcast live over the internet at investors' section of the company's website at www.angiodynamics.com, and the webcast replay of the call will be available at the same site approximately one hour after the end of today's call. Before we begin, I would like to caution listeners that during the course of this conference call, the company will make projections or forward-looking statements regarding future events, including statements about expected revenue, adjusted earnings, and gross margins for fiscal year 2021. Management encourages you to review the company's past and future filings with the SEC, including, without limitation, the company's forms 10-Q and 10-K, which identify specific factors that may cause the actual results or events to differ materially from those described in the forward-looking statements. The slide package offering insight into the company's financial results is also available on the Investors section of the company's website under Events and Presentations. This presentation should be read in conjunction with the press release discussing the company's operating results and financial performance during this morning's conference call. I'd now like to turn the call over to Jim Clemmer, Angio Dynamics President and Chief Executive Officer. Mr. Clemmer?

Thank you, Rob, and good morning, everyone, and thank you for joining us for Angio Dynamics Fiscal 2021 Second Quarter Earnings Call. Joining me on today's call is Steve Trowbridge, Angio Dynamics Executive Vice President and Chief Financial Officer. who will provide a detailed analysis of our second quarter financial performance. I'm very pleased with our second quarter performance. We delivered strong revenue growth while continuing to invest in our key technology platforms. Arion, AngioVac, and Nanonife all delivered strong performances during the quarter, resulting in second quarter revenue of $72.8 million, growing 4% year over year. Additionally, we continue to balance near-term cash and expense management with strategic investment in our long-term growth initiatives, and we're pleased to deliver an adjusted EPS of one cent for the second quarter. The COVID-19 pandemic continues to impact both the angiodynamics team and our customers. However, we observed improvements in certain geographies throughout the quarter, as hospitals and local governments continue to navigate the pandemic. We're very excited that there have been several positive developments in the global fight against COVID-19, including the approval of several vaccines. However, we expect headwinds to continue to impact our markets through the back half of our fiscal year and do not anticipate a full return to pre-COVID levels of demand in the near term. I am extremely proud of the resilience our team has shown over the past several months as we continue to navigate this unprecedented global crisis. We have established very solid momentum through the first half of our fiscal year while continuing to make progress on our key growth initiatives. I am excited about the upcoming product launches we have planned throughout calendar year 2021, including the planned release of our new multi-purpose mechanical aspiration thrombectomy device, which I will discuss in more detail later on our call. As we've discussed about in recent quarters, we are focused on deriving growth across our three key technology platforms through internal R&D, M&A, and clinical and regulatory pathway expansion. Arion was the most recent acquisition and continues to perform well and in line with our expectations for the year. We successfully launched our Arion atherectomy system during the quarter, and we have seen strong customer interest in this new product. We reported Arion-related revenue of $2.1 million in the quarter, bringing our fiscal year first half revenue to $3.2 million. And we continue to anticipate Arion revenue in the range of $7 to $10 million for the full fiscal year. While like last quarter, M&A was not an area of focused spending in the quarter, it will continue to play an important role in our transformation in the future. We continue to pause any M&A activity until we are comfortable that the COVID pandemic is behind us, at which time we will resume our disciplined approach of identifying appropriate M&A targets and assessing strategic opportunities. In terms of internal R&D, we continue to invest for growth, and during the second quarter, we saw continuous strength from our AngioVac platform, which grew 24% year over year. We are also very excited about the upcoming launch of our multi-purpose mechanical aspiration thrombectomy device, another product resulting from our focused internal research and development. We have continued to see strong momentum in our NanoKnife platform, with strong disposable sales in the corner, building off the strong capital sales last fiscal year, as well as the increased visibility into the uniqueness of this technology provided by the comprehensive direct study. On that note, our sponsored clinical studies, Direct and Pathfinder, remain a primary focus and continue to require flexibility in the current environment. As of today, we have 26 direct study sites that have secured IRB approval, three additional sites since the update we provided you on our first quarter earnings call. We are pleased with the significant number of leading hospitals that have signed on to participate in this important study. Moving forward, we anticipate shifting efforts from additional site initiation to patient screening and enrollment. As can be expected, screening activity has been challenging in the current environment due to COVID-related protocols at many hospitals. Our Pathfinder Arion Registry study has nine sites initiated and enrolling subjects. As of today, we are about 75% of the way toward our enrollment target, and we expect enrollment to be completed by the end of the third quarter. The vast majority of sites participating in Pathfinder are office-based laboratories. To date, these OBLs are not experiencing the same type of significant COVID-related delays as hospitals. Finally, with respect to reimbursement, we would like to highlight CMS's final decision to provide for and increase Medicare payment of IRE, which is NanoKnife's method of action, in the hospital outpatient setting. This is a significant milestone for the technology. As we previously discussed, IRE received tissue agnostic CPT3 codes. These codes now have payment associated with them in the hospital outpatient setting, at least on par with other ablation technologies. And we believe that the advantages of IRE and the newly established reimbursement levels will drive adoption in the outpatient setting, a setting that is very well utilized in Europe by specialties like urologists and interventional radiologists. With that, I'd like to turn the call over to Steve Trowbridge our Executive Vice President and Chief Financial Officer, to review the quarter in more detail.

Thanks, Jim. Good morning, everyone. Before I begin, I'd like to point you to the presentation on our Investor Relations website summarizing the key items associated with our quarterly results. As I've done in each of the last two quarters, I'd note that with respect to the second quarter and our business moving forward, we will continue to provide slightly more inter-quarter detail than we would in a normal operating environment. Our net sales for the second quarter of fiscal 2021 increased 4% year over year to $72.8 million. As I stated last quarter, our same customer analysis of our business has indicated that volumes remain below pre-COVID levels. And assuming the recovery continues along its current trajectory, we do expect this to remain a factor throughout the course of fiscal 2021. Our second quarter results reflected less severe declines than the 10% to 15% decline we discussed on last quarter's call. But we are still keeping a close eye on the third quarter and currently expect that the third quarter is likely to see a more pronounced impact from COVID-related headwinds. As has been true in our recent quarters, The ongoing pandemic has impacted each of our three businesses in varying ways. Our VA and VIT businesses performed the strongest during the quarter, as the number of procedures improved from the COVID lows we saw in the second half of last fiscal year, but still remained below pre-COVID levels. Our oncology business also performed well during the quarter, but did face a difficult comparison on the capital side. Our total VIT business increased 8.8% year over year, driven by AngioVac sales growth of 24%. Now note that this is the first quarter that comped against the launch of our Gen 3 platform. So while in absolute terms, the growth rate appears lower than previous quarters, the trajectory of this business remains quite strong and unchanged. Our VIT business also benefited from $2.1 million in sales related to Ariane. We officially announced the commercial launch of Arion in September, and the early response from the marketplace has been positive. As we stated in the past, we anticipate this product will represent an increasing part of our VIT business moving forward, with sequential quarterly improvement throughout the rest of this year. For our VIT business, this growth was driven by AngioVac and Arion was somewhat offset by a 10.6% decline in venous sales, resulting from a decline in the number of elective procedures being performed due to the COVID-19 pandemic. This impact is consistent with what we have seen in the previous two quarters, and we anticipate these headwinds will continue throughout the remainder of fiscal 21. Vascular access revenue increased 5% during the quarter. Growth in this business was driven by growth in PICs and midlines for the third straight quarter, as well as growth in ports and dialysis. Our strong second quarter performance was partly attributable to the fact that the headwinds we faced as a result of the COVID-19 pandemic were less severe than we had expected. But again, we expect a more pronounced impact during the third quarter given elevated cases across the country and the globe. Revenue from our oncology business declined 7% during the quarter. This decline was the result of lower nanonife capital sales on a year-over-year basis when compared to the second fiscal quarter of last year, during which we saw strong capital sales driven by the release of our NanoKnife 3.0. We were very pleased that NanoKnife probe sales grew 30% in the quarter, led by 76% growth in the United States. This strong probe growth is driven in large part by the increased installed base resulting from the strong capital sales we reported in previous quarters, giving us further confidence in our ability to drive growth in probes through an increasingly large installed base. Moving down the income statement, our gross margin for the second quarter of fiscal 2021 was 55.2%, a decrease of 410 basis points compared to a year ago, but an increase of 430 basis points sequentially from our first quarter. The decline was split fairly evenly between Arian startup costs and planned underabsorption in our manufacturing facility. As we've discussed in the past, this decline was anticipated given the ongoing focus on employee safety and predictability. In addition, we reported an inventory reduction during the quarter of $3.2 million, resulting in a year-to-date reduction of $10.3 million. As previously noted, our plans will have an impact on our full-year gross margin as we assess the shape and timing of the COVID-19 recovery. But we continue to expect to finish the year with quarterly gross margin running closer to pre-COVID levels. Our research and development expenses during the second quarter of fiscal 21 were $9.7 million, or 13.3% of sales, compared to $7.8 million, or 11.1% of sales, a year ago. We remain focused on strategically investing in R&D in order to improve our key technology platforms while remaining thoughtful about our investments given the COVID environment. Staying true to this plan, we expect to accelerate our investment in anticipation of the launch of our new multipurpose mechanical aspiration thrombectomy device in calendar 2021, with opportunities for additional investment in the back half of fiscal 21. This investment is included in our R&D guidance, and while we reserve the right to pull back on these investments if the environment changes meaningfully, for fiscal 21, we anticipate that R&D spend will come in at the higher end of our previously provided range, of between $35 and $40 million, as we've accelerated certain investments on the heels of our first half performance. SG&A expense for the second quarter of fiscal 21 decreased slightly from the previous year to $29.4 million, representing 40.4% of sales, compared to $31.1 million, representing 44.4% of sales, a year ago. We're continually assessing controllable discretionary spend with an eye toward cash management while maintaining investment in our key technologies. We now anticipate our full year SG&A spending to come in toward the lower end of our previously provided range of between $123 and $127 million. Our adjusted net income for the second quarter of fiscal 21 was $0.6 million or earnings of $0.01 per share compared to adjusted net income of $2.2 million or $0.06 per share in the second quarter of last year. Adjusted EBITDA in the second quarter of fiscal 21 was 5.2 million, compared to 6.4 million in the second quarter of fiscal 2020. Turning to our balance sheet, in the second quarter of fiscal 21, we began the quarter with roughly 47.9 million in cash and cash equivalents, and we generated 11.5 million of cash from operating activities. During the second quarter, we had capital expenditures of 1.4 million, As of November 30, 2020, we had $58 million in cash and cash equivalents and $40 million in debt outstanding. Subsequent to the end of our second fiscal quarter, we repaid $10 million of our outstanding debt and now have $30 million in debt outstanding at the time of this call. Turning now to guidance. Based upon what we are currently seeing, we continue to anticipate fiscal year 2021 net sales will be in the range of $278 to $284 million. and full year adjusted earnings per share to be in the range of zero to five cents. While we obviously had a strong second quarter, we do expect to see a sequential decline in third quarter revenue as a result of the typical seasonality in our business and reflecting our current thinking around the impacts of the COVID-19 pandemic on our third quarter results. Historically, we have seen a one to three percent sequential decline in revenue from our second fiscal quarter to our third fiscal quarter. Overall, we are pleased with our strong performance in the second quarter despite continued headwinds from COVID-19. We will remain committed to growing our key technology platforms and will continue to invest to support new product launches and product updates for 2021 and beyond. With that, I'll turn it back to Jim.

Thanks, Steve. I am pleased with our balanced approach of managing expenses and cash while continuing to strategically invest in our three key technology platforms, AngioVac, Arion, and NanoKnife. I believe this approach will position us to achieve profitable long-term growth as the effects of the COVID-19 pandemic begin to subside. Before moving on to the question and answer session, I want to take the opportunity to highlight one of our key areas of investment during the quarter. our new multi-purpose mechanical aspiration thrombectomy device. Over the course of the past 18 months, we have discussed with you our desire to expand our offerings in the mechanical thrombectomy space with an off-circuit device. And today, we are excited to announce the planned release of this device in calendar year 21, which will expand our AngioVac platform and open up a significantly larger piece of the addressable market in the moderately complex area, as you can see on page 12 of our investor presentation. We anticipate filing a 510 in the first half of calendar year 21 and expect to receive clearance in the second half of calendar year 21, followed by a commercial launch. As many of you know, this is a large and rapidly growing market where physicians are becoming increasingly comfortable with choosing mechanical thrombectomy to treat DVT cases. And we look forward to providing them another choice in the treatment of their patients. Our new device will be a unique design, which has been guided by the well-respected key opinion leaders on our medical advisory board. And we believe once physicians experience the intuitive and thoughtful design of this product, they'll want to have this device in their arsenal. What you'll see over the coming 36 months are extensions to this product family through the introduction of new sizes as well as the clinical and regulatory initiatives necessary to secure an indication for pulmonary embolism, positioning us to enter additional sizable addressable markets. To provide you with some context in that regard, Our current AngioVac system serves a market that is made up of approximately 15,000 cases annually, while our new multi-purpose mechanical aspiration thrombectomy device will be aimed at a DVT market that sees over 200,000 cases treated annually, and eventually the PE indication, which sees over 150,000 cases treated annually. This is a significant increase in the size of the addressable market, and we believe the design of our platform positions us well to take share in what is an already growing market. Innovation drives outcomes, and outcomes drive growth, and that is what this industry is built upon. We are really excited to be bringing this new product to market. As I mentioned earlier in our remarks, I am pleased with our performance during the quarter and thrilled about the future here at AngioDynamics as we continue to execute on our transformation. Our quarterly performance underscores the long-term growth potential of our key technology platforms. We still have a lot of work ahead of us, but I am encouraged by the progress we have continued to make against our long-term goals. I would like to thank the incredible AngioDynamics team once again for their commitment and dedication as we continue to deliver innovative solutions that improve the lives and treatment of patients worldwide. With that, I'd like to turn the call back to the operator for questions.

Rob? Thank you. We'll now be conducting the question and answer session. If you'd like to ask a question, please press star one on your telephone keypad, and the confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants that are using speaker equipment, It may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question is from the line of Jason Bedford with Raymond James. Please proceed with your questions.

Good morning, guys, and Happy New Year to you. So I guess just a few questions. First, on the quarter, do you think there was any benefit from catch-ups at all in fiscal 2Q here?

So, Jason, it's Jim. Maybe a little. We tried to measure that closely. There might have been a little bit in the beginning of the quarter. I don't think there was a lot, Jason, because we also measured closely what we call, quote, unquote, same store sales as well. And there's still a decline as to what we would have expected based upon prior year. So I think I know what you're looking for. There may have been a little bit of effect, but I don't think it was measurable.

Okay. And then if there's any way you can compare the trends you saw in fiscal 2Q, which ended in November, and maybe the trends you're seeing or you saw in December, I'm just kind of curious as to kind of the step up, if there's a difference here with the severity of COVID ramping.

So Jason, I'll give you what's going on in the field and Steve can give you some numbers to highlight that. But again, we're hearing from our customers, as probably many of our peer companies are, that they're very concerned and they're limiting some care and they're limiting our access. So that has been in effect. We've seen that some customers have asked us to stand down. Some of the outpatient centers that we serve have actually shut down temporarily dealing with COVID. And Steve, what do you think from the numbers side?

Yeah, look, we're keeping an eye on it, as we've said in the prepared remarks. There's no doubt that it is an impact globally. Quite frankly, we expected a little bit more of an impact in our Q2. You know, we've got the odd Q2, September, October, November. We were pleased with how we came through that. We're keeping an eye on our Q3. You know, as I did say, we'll give a little bit more inter-quarter detail than we have in the past. probably I was expecting a little bit more of a pronounced impact in December than we actually saw. So our trajectory so far have been holding relatively consistent. We like what we're seeing, but we're keeping an eye on it because there's no doubt that you're seeing increased stress in the system throughout the US and globally.

Okay, that's helpful. On the new multipurpose mechanical aspiration device, will you have some data at launch?

So this is a 510 device, and so it's not requiring a lot of clinical data for clearance. You know, as we've shown with our other product launches, we are absolutely committed to creating a foundation of data to support those launches. And so I would expect that we're going to continue to do the same thing. And that may take the form of registries. It may take the form of other studies. We'll support the launch with data. But we see this as an extension that is going to be building off of the strong use cases and data that we have with the current AngioVac platform, moving into that, you know, less complex DVT section that is off-circuit. And then we'll be continuing to support that product launch, you know, with the collection, assessment, and generation of clinical data as we move forward.

Okay. And maybe, Steve or Jim, Will you build a separate sales team for this or will it go through the existing team?

So, Jason, I think, you know, two years ago we kind of, you know, reshifted some of the priorities in our sales bags. So what we'll do today is it'll still be sold by the same sales team that sells the AngioVac product today. And we'll add selling resources there. So we look to expand that team. But the current AngioVac sales force will take this product to market to our customers.

Jason, we've talked about the different spectrum of treatment, and we talk about the very complex where AngioVac currently plays. On the other end of the spectrum, you've got the less complex where you may do catheter-directed thrombolysis, and then you've got that middle section, which is really what we're looking to go after with this new product launch. The call point is all the same. So the same physicians that are doing those procedures are the ones that are typically doing this. Now, there may be some cardiothoracic surgeons that are focusing more on the right heart procedures that current Angio has, and this may be a product that may be more indicative of an IR. But the call points that we're currently going after are all the same, so it's going to fit right into that same sales force with the additional investment that Jim talked about.

Okay. That's helpful. I'll ask one, and then I'll let someone else jump in. You mentioned early on, excuse me, Jim, product launches throughout sales. 21, outside of the new aspiration device, what else are you looking to launch this year?

So the most impactful is the aspiration device. We have some other products, Jason, that we're looking at. You know, in our vascular access business, there's extension to our dialysis catheter line we're looking to launch this year, which is really important. That business has been, as you've seen, you know, you've known our company for years. It's being really well run, combination of the new products we've added in the VA business. And just really good management by that team has helped. And, Jason, we're also, you know, you and I have talked and we've talked to our investors about our interest in expanding nanonife into other organs eventually. Now that we have, you know, the direct study, which is, you know, we're trying to prove that it's the right product for pancreas treatment. And we've talked about, you know, prostate being the next organ that we're interested in. And so, Jason, what you'll see from us, and I'll give more details in the near future, but last year the FDA released new guidance on focal therapies. and prostate, which really aligns well with the technology and the mechanism of action of NanoKnife. And we've seen a lot of physicians and urologists outside of the U.S. utilize this product for successful treatment. So now we're looking at now we're engaged with the FDA in discussions as to what it will take to gain an indication. We'd like to have NanoKnife on label for prostate. When we do that, Jason, you'll probably see us launching maybe some different products and setups that are geared towards servicing that urologist. to treat the unique need of focal therapy in a prostate case. So that's something we're excited about, and we'll give you more details soon on that.

Okay, that's helpful. Thank you.

The next question comes from the line of Matthew Mission with KeyBank Capital Markets. Pleased to see your questions. Hey, good morning, guys.

Just for the new mechanical thrombectomy device, What is the technology differentiation that you're migrating down from AngioVac to the wider market? And specifically, how do you think this device can improve patient outcomes?

So a couple of things, Matt, we can both answer. You know, really, when you look at how successful AngioVac has been and really the product we launched in November of 19, the newest version, a lot of the physicians that have adopted this product have asked us, boy, this works really well for a few reasons. It's very special. And as you see in our deck, we show the uniqueness of the product. And there's really a couple unique factors. One of which is on circuit allows reperfusion of blood to keep the patient healthy during a complex procedure. But number two, the Vortex Funnel Tip allows us to really pull massive clot burden into the device out of the patient's body. And they love that feature. So they've asked us to design a product now off circuit so they can utilize it in more cases that don't require the complexity of the perfusion circuit. And that's really what we've done. So When we can share with you the device, the design, you'll see we've taken kind of the best features of that Vortex Funnel Tip and how that works to pull mass clot burdens with a really uniquely designed tool on the other end, which gives physicians control that they've asked for, control of the process and procedure, utilizing the amount of torque and pull that we can give to remove clot, yet giving the physicians the control they aspire to have. So that's really kind of a blend of technologies, and that's what we're excited about, the Medical advisory board has guided us. These physicians are excited by what AngioVac can do and what this new off-circuit product can do in their hands to treat less aggressive clot.

Yeah, the control that Jim talked about, Matt, is really important. So we understand this market. We've learned a lot. We know where the current AngioVac product plays. And Jim mentioned the funnel tip, which is proprietary to AngioVac, which is a huge advantage. It allows a much greater clot burden to come out. One of the big advantages of the current angiovec system is the minimization of blood loss because we've got that reinfusion circuit. But as Jim said, it's a very complex procedure, and it requires additional specialties, requires perfusion. So we're looking at a product, we're listening to our customers, and we think that it's important to provide that funnel tip to go after the big clot burden, but take away the complexity of adding perfusion, but still give the physicians the control to know that when they're going after clot, they have the ability to limit blood loss while going after that clot burden, we think that's the benefit that we're going to provide.

Excellent. Of the 2.1 million for Arion, how much of that was recurring revenue and how much of that was the initial placement?

Yeah, so that's all recurring. You know, as we've said, this is the meeting spending a little bit more time with the OBLs as opposed to the hospital-based setting, just given the current environment. The marketplace there, as we've mentioned, has been to place lasers pursuant to use agreements and then have the recurring revenue with the catheters. And that's all of what we saw in Q2.

Is the expectation that the 2.1 million recurring you know, increases sequentially from here or is there, is there some level of like inventory build with like initial stocking?

Yeah. And we mentioned, we expect to see sequential increasing throughout this year. Uh, you know, with, with the Ari on sales, you know, we, we come out at the beginning of the quarter, we said we expect to see seven to 10. Um, we're, we're, we're very comfortable with, with the pace that we're seeing and that implies some sequential increases and that's what we'd like to see.

Okay. Yeah, Matt, we're measuring the cases performed each week very carefully. And we've added, if you remember back when we made the acquisition, there was one commercial person that came in the XMO acquisition, the great scientist in Israel. But there's one commercial person. We now have over 30 people dedicated to this business on the commercial side, whether they're selling, marketing, or field clinical support specialists in our customers each day. So we're making sure that each week that goes by, we have the capability that ramps up, provide that support to our customers. So we expect sequential usage to keep growing.

And last question, when do you think you'll be able to give an update or milestone for the nanonite trials outside of the number of sites registered?

Yeah, so it's a good question, and we're continually assessing where we are on that. So the one statistic we have given is the number of sites, and we gave that this quarter with 26 coming up from 23. You know, we had talked about timing of our expectations of enrollment of the registry side of that study. And it indicated that as COVID hit, we certainly saw a delay and a push out and probably, you know, a restarting of that clock. And we had, you know, always talked about two and a half years as our expectation for enrolling the registry side of the study, but felt that, you know, COVID did impact that. And we were, you know, restarting that clock kind of the, you know, during our first quarter of this year. And I think that that's fair to say that, you know, we're not seeing, you know, that same full pause, right? So we're a quarter plus into that two and a half year expectation as we're seeing the enrollment go.

All right. Thank you.

Thanks, Matt. Thanks, Matt. Our next question comes from the line of Bill Flavanek with Canaccord Genuity. Pleased to see you with your questions.

Great. Thanks. Good morning. Can you hear me okay? Hi, Bill. Good morning. Thanks. Hey, so just a couple of questions. Just start out on the AngioVac product. You know, it's pretty strong growth year over year. How much of that do you think is COVID related versus or new account related or any color would be greatly appreciated?

Yeah, we don't think that that's COVID-related. I mean, you know, as we talked about earlier, you know, kind of mid-last year when the COVID pandemic was first hitting, there was some discussion in the medical community about increased clotting. But the angiovec cases that we're seeing, we don't feel that they're COVID-related. We feel that this is a pretty good run rate for the overall DVT market, the thrombectomy market. We obviously are bringing new cases on, so we have some new customers that are signing on, and we're increasing utilization with our current base as well. So we've been pretty pleased with that performance.

Okay. Thanks. And then in terms of the mechanical product, you know, just looking at the timeline, so it looks like this will be a launch approval and launch late this calendar year. And I'm looking at slide 12 of the chart. And I'm just, so that's first, just to clarify that. And then secondly, trying to understand what's the difference between Gen 1 and Gen 2, and if you can help us out with that.

Sure, Bill. So what you'll see, again, as I said in my prepared remarks, we expect a file for the 510K in the first half of calendar year. And as you see in the chart, you're correct. We expect approval second half of clearance. So Gen 1 will be a larger board device. Gen 2 will start to introduce smaller French sizes, enabling us to go deeper into the body and access other DVT. So it will expand the market. That's what the chart here shows. So we intend to have, over time, different sizes to make sure physicians can access different parts of the body and treat different areas of DVT. And ultimately, again, working on a PE indication. We think the product is really, really well-designed. to really be a really good product for PE over time. So we'll do the clinical and regulatory work necessary to seek that indication.

I'm sorry, Bill. One of the defining elements of this market is that we know that there's not a one-size-fits-all solution. AngioVac, in its current form, has a great role to play. We like the space that we're playing in there, and we show that in the slide deck. We're moving into an area that we think is a bigger market, There's some other customer competitors in there. They've done a good job. They've got products. Physicians will have a number of products in their tool bag, and we think that this is going to be a great product to add to that. But you don't have to displace everything out there. This is not a one-size-fits-all, and there's plenty of room in this really attractive, growing market for a number of solutions, and we think we've got a really good one here.

Okay, and then two more questions. Just one in clarity on the mechanical product. As you talk about control, would that be some sort of automated aspiration associated with it, or would it be manual?

So it's a manual piece, Bill. It really allows the physicians, where the physicians help us design it. They really asked us. They said, look, we're really good at this. Give us a tool that enables us to utilize our skill here. That's what we did. We designed it really on their guidance. So there'll be no automation. It's a fully mechanical device that they'll utilize their hands and their skill.

Okay. And then this last question was bigger picture volume related. I think, Steve, you mentioned you were a bit pleasantly surprised at the amount of COVID impact in December. And just as we think about that, as you think about kind of moving into your fiscal third quarter, There's two impacts. There's seasonality, which is typically down 1% to 3%, and then there's the COVID impact. I mean, how is where through December and into January, and it seems like it's less, it seems, not to put words in your mouth, but it's more of a stable environment or from it, it's down, whatever, it's 5% to 10% off normal volumes, but that seems to be kind of stable the last couple of months. Is that what I'm hearing? If you could just clarify, help clarify that for me from a broader volume standpoint.

Yeah, Bill, I think your characterization is absolutely fair. As we said, we're very keenly keeping an eye on what's going on in the broader environment. There's no secret that you're seeing increased cases. There's no secret that you are seeing in pockets stress being put on the system. But as we talked about when we came out with guidance at the end of our first quarter, the way that we saw this happening and our expectations for the market is that you will see a lot of these peaks coming up, but it's gonna be a little bit more geographically isolated and it's gonna be more specific to certain areas. They'll have stress, they'll come down, other areas will be okay. We're not seeing full across the board shutdowns like we saw back in the March, April timeframe. That is held consistent, that is what we're seeing. That's what we expect to see going forward for the rest of our fiscal year here as well as those little flare ups in different geographies and stresses coming around, but more isolated. So as of so far, yes, we're not back to pre-COVID levels. We are still seeing the resilience and stability. We may be moving into a little different time period as we get to the end of January and February with some of these increases cases that we're seeing in the U.S., but as what we're seeing now, I think the way that you characterize it is exactly right.

Great. Thanks for taking my questions.

Thanks, Bill. Thank you. At this time, we've reached the end of the question and answer session, and I'll turn the call over to Jim Klimmer for closing remarks.

Thanks, Rob. And we at Angio Dynamics are pleased with our performance. We understand the global complexity that everybody is facing dealing with COVID. Our customers are under stress and pressure, and our people are as well. We work really hard to maintain safety and security of our people and our workforce. Our folks in our operations and quality team have done an amazing job. They're working to produce our products that produce life-saving ability for physicians to utilize for care. So we're really committed to making sure we can get through this pandemic, keep our people safe and secure, and make sure our customers are getting access to the products they need. We're also really excited about our future, and we shared some of that today about our new multipurpose mechanical thrombectomy product. We'll have other products coming out of our R&D pipeline soon. We're very pleased with our quarter. We're looking forward to the future. Thank you for joining us again today.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.