Avinger, Inc.

Greetings and welcome to Avengers 2021 third 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. Please press star 1 if you wish to enter the queue to ask a question. This conference is being recorded and it is now my pleasure to introduce Matt Kreps, Managing Director at Darrow Associates Investor Relations. Mr. Kreps, you may begin.

Thank you, Paul. And thank you all for joining and participating in today's call. I would like to welcome you to Avenger's third quarter 2021 conference call. Joining us today are Avenger's CEO, Jeff Zielinski, and Chief Financial Officer, Mark Wineswood. Earlier today, Avenger released financial results for the third quarter ended September 30th, 2021. A copy of the release is posted on the Avenger 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 risk 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. Avenger 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. 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. On this Veterans Day, we wish our best and give our thanks to any military veterans listening to our call this afternoon. During the third quarter, we took important steps to advance our strategic initiatives in several key areas. Early in the quarter, we announced the submission of a 510K application to expand the clinical indication for Pantheris to include an instant restenosis claim, based upon the positive clinical data generated in our INSIGHT clinical trial. In August, we filed a 510K submission for our next generation Lightbox 3 imaging console. Throughout the quarter, we made significant advancements in the development of two new catheter line extensions for our peripheral product portfolio. As we explore opportunities to extend our technology platform into new therapeutic areas, we've also initiated a formal development program for the first ever image-guided CTO crossing catheter for the treatment of coronary artery disease, which we believe could be a transformational opportunity for our company. While we're pleased with the progress we made in these important strategic areas, the third quarter was challenging as hospitals across the country reduced access and limited procedures due to a surge in COVID cases related to the Delta variant. The impact of these restrictions, along with hospital staffing shortages, was particularly strong in hospital accounts in the southern U.S., a key market area for us. Even with these challenges, we were able to deliver modest revenue growth in the third quarter compared to the prior year quarter. Our revenue declined from the second quarter of this year, which had minimal impact from COVID-19 restrictions. There were some positive notes in the third quarter, including the opening of eight new Lumavascular accounts, underscoring the appeal of our value proposition to new users. We've seen this pattern before as the market pulled back in response to the original surge of COVID-19 infection in 2020, followed by a recovery in case volumes that propelled us to rapid growth and record results in subsequent quarters. While we continue to feel the effect of the COVID-related restrictions and hospital staffing shortages in the fourth quarter, we believe these limitations will be transient and that case activity at hospitals will increase as the situation improves in the coming quarters. Our Pantheras NextGen, Pantheras SV, and CTO crossing devices, including TigerEye, fulfill an important need in the market, and there is clear demand for our highly differentiated products. Launching three new innovative devices over the past three years has enabled us to make inroads into new accounts and secure a greater share of cases at existing user sites, even during the pandemic-driven challenges for hospital access. We believe our two newest 510 filings will build upon that success and provide the opportunity to accelerate adoption of our technologies in the future. In July, we announced the filing of a 510 submission to expand our US label for Pantheris to include the treatment of instant restenosis or ISR. With 200,000 stents deployed in the lower extremity arteries annually and a high propensity for restenosis over a two to three year timeframe, ISR represents a large and underserved market that will continue to grow as more stents are placed each year. We believe Pantheris provides a significant and exciting competitive advantage in ISR, combining the ability to visualize and direct treatment while avoiding the stent struts, advantages other devices simply cannot offer for these challenging cases. Our 510 case submission for the treatment of ISR is supported by positive clinical data from the INSIGHT trial, which was designed to evaluate the safety and effectiveness of Pantheris for treating instant restenosis in the lower extremity arteries. INSIGHT is a multicenter, prospective, single-arm trial that was conducted at 17 institutions with 97 subjects enrolled. In October, Dr. John George, a leading interventional cardiologist and endovascular medicine specialist at the University of Pennsylvania Health System, presented clinical data from the INSIGHT study at the Vascular Interventional Advances, or VIVA, conference in Las Vegas. Key outcomes presented from the trial included 82% luminal gain, which is the increase in the channel for blood flow following the procedure. 93% of patients were free from target lesion revascularization, or TLR, which is an indication of restenosis, at six months post-procedure. and 89% of patients were free from TLR at 12 months. Both results are significantly better than those achieved by laser atherectomy in the XITE ISR trial. Dr. George made particular note of the extremely high 12-month freedom from TLR delivered by Pantheris in the INSIGHT study and the stability of this endpoint between six and 12 months, indicating a long-lasting and durable outcome. 97% of subjects, were free of device-related major reverse events at 30 days, indicating the safety of the procedure, and there were no amputations at 6 and 12 months post-procedure. Mean ankle brachial index, or ABI, at 6 months was 0.96, a 39% improvement from the baseline of 0.69 pre-procedure. And there was a 71% improvement in Rutherford class, a measurement of disease severity at six months with 77% of subjects at Rutherford Class 0 or 1. We are very pleased with this data and excited about what our proprietary system can offer to patients suffering from ISR if approved for the expanded clinical indication. Our second 510 case submission announced in the third quarter is for our next generation Lightbox 3 imaging console. which we believe represents a major leap forward for our platform. We filed this 510 in August and hope to receive US pre-marketing clearance by the end of this year. In addition, we've taken the steps required to receive CE marking for the Lightbox 3 so that we can market the new console in Europe and other CE mark countries. We expect to receive CE marking this quarter, and pending approval, plan to conduct our first cases with the Lightbox 3 in Germany prior to the end of the year. The Lightbox 3's dramatically reduced size and weight provides for increased portability and seamless integration into the cath lab environment. The Lightbox 3 is designed to fit into a case similar in size to a carry-on suitcase and weighs less than 20 pounds, a 90% reduction compared to our current console. The new Lightbox 3 also has improved economics, reducing cost by as much as 50%. In addition to these size and cost improvements, the Lightbox 3 incorporates enhanced capabilities, including an advanced solid-state laser, a more powerful computing platform, and a redesigned software system with highly intuitive user interface, which is designed to streamline workflows for practitioners and support increased utilization of our image-guided devices. We expect this new platform to accelerate the speed and efficiency of new account acquisition, as well as provide the opportunity to support new catheter capabilities in the future for both potential peripheral and coronary applications. In addition to these recent 510 filings, we are making excellent progress on the development of two additional new catheter line extensions for our peripheral product portfolio. As we've demonstrated with our Pantheris SV and Tiger Eye launches, the introduction of new products to expand our addressable market and bring new capabilities to our platform has a galvanizing effect on growing our business. Our first new product in development is a line extension of our Tiger Eye CTO crossing catheter for the treatment of fully blocked arteries. This new device has a spinning outer tip for tough caps and calcium. an advanced shaft design for pushability and torque response in a challenging environment, and a three-marker system to facilitate consistent image interpretation across our platform. Our second new catheter product in development is an extension of the Pantheris family of image-guided atherectomy devices, designed to provide a more streamlined approach for physicians when treating PAD. This new product, is seven French sheath compatible and is designed to expand our capabilities for the treatment of larger vessels three to seven millimeters in diameter. It utilizes a proprietary design for plaque opposition without the need for a balloon and is designed to operate at higher rotational speeds and challenging plaque. This new Pantheris line extension also adds rotational control for efficient guide wire management and a modified plaque management system for tissue packing and removal. We're excited about these two new devices, which have the potential to expand our product line to a wider group of physicians and streamline procedural efficiency. We expect a complete development for both devices over the next few months and file for regulatory clearance in the U.S. and CE-MARC countries in the first half of 2022. If all goes according to plan, this will provide the opportunity for us to receive pre-marketing clearance and launch both devices into the U.S. and international markets next year. While we've continued to make important advances in our peripheral portfolio, expanding our technology to new markets is critical to our long-term growth opportunities. Our first foray is into the coronary artery disease market, and our initial area of focus is to extend our proprietary image-guided platform to crossing CTOs in the coronary arteries on a less invasive, percutaneous basis. We believe this could be a transformational opportunity for Avenger that would significantly increase the addressable market for our products and change the standard of care in a clinically challenging and largely underserved market. It's estimated that approximately 50,000 CTO PCI procedures are performed in the U.S. each year. While the number of hospital centers performing these procedures is growing, CTO PCI crossing continues to be a highly complex and challenging procedure. requiring specialized and demanding technique with a steep learning curve, the use of multiple devices, and significant time under fluoroscopy, which results in high X-ray radiation exposure and contrast burden. In addition, an estimated 200,000-plus highly invasive coronary artery bypass grafting, or CABG surgeries, are performed in the U.S. annually, with estimates of 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 proprietary new tools that would make a percutaneous approach more accessible and reduce the need for extended time under fluoroscopy radiation. High reimbursement of $10,000 to $16,000 per procedure is already in place for CTO PCI in the US. In addition, we anticipate that our OCT-guided catheters with their high-resolution imaging and anticipated diagnostic and measurement capabilities would qualify for existing OCT diagnostic imaging reimbursement in the coronary arteries. We believe that an image-guided catheter designed for crossing efficiency and the need for fewer support devices combined with an attractive reimbursement scenario provides the opportunity for a highly positive clinical and economic value proposition. Augmented by the learning with our CTO crossing catheters in peripheral arteries, we've made good progress on our initial development efforts for the first image-guided CTO crossing device for the treatment of coronary artery disease. Our development efforts are focused on catheter designs that combine real-time OCT guidance with precise control and steerability to allow physicians to safely and efficiently cross CTOs while avoiding damage to the vessel wall. We are designing our first coronary CTO catheter in a low-profile, four French size to provide for accessibility and maneuverability in small coronary vessels. Similar to our peripheral catheters, our coronary devices are expected to incorporate a precise measurement capability, ideally suited for physicians to properly size balloons or stents prior to placement, which is critical for optimal outcomes. We anticipate the U.S. regulatory pathway for this new device to be a 510 submission supported by data from an IDE clinical study. We expect to complete product design for our first coronary device in 2022 with the goal of conducting a clinical study in 2023 to support our regulatory submission. As we reflect on our experience this year and look to the future, we saw significant growth in the first half of the year as case volumes returned to normal following the initial waves of COVID-19 infection in 2020 and widespread vaccinations being made available throughout the U.S. With the recent resurgence of COVID-19, our business was impacted negatively. As market conditions improve and our new products and clinical indications come online, we expect to return to a more accelerated pace of growth. We have the best product catalog in our history and have grown revenue for our Pantheris family of atherectomy catheters by greater than 250% over the past three years. Pantheris SV, our small vessel catheter, has been a major growth driver for the company, extending our reach to the treatment of below the knee or BTK lesions. TigerEye has reinvigorated our image-guided CTO franchise and expanded our share of the approximately $100 million peripheral CTO market. We've now sold TigerEye to more than 50 sites. With the addition of TigerEye, our combined CTO sales have grown by 67% in the first nine months of this year, compared to the same period in 2020. We've made tremendous strides in developing our portfolio and are excited about the potential of our new product development efforts, including the exciting opportunity to expand our platform to coronary applications in the future. As we drive growth across our primary product lines, add upside opportunities from our Lightbox 3 and ISR indication, and develop new products to expand our addressable market, we provide new growth opportunities for the company, and most importantly, empower physicians to provide the best possible care for their patients with the most advanced therapeutic devices on the market. At this point, I'd like to ask Mark to cover our financials, and then I'll return for Q&A. Mark?