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Operator
Good afternoon, ladies and gentlemen, and welcome to the Avenger third quarter 2022 results call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Matt Kreps. Sir, the floor is yours.
Matt Kreps
Thank you, Ali, and thank you, everyone, for participating in today's call. I'd like to welcome you to AVENGER's third quarter 2022 conference call. Joining us today are AVENGER's CEO, Jeff Zawinski, and Principal Financial Officer, Nabeel Spinetti. Earlier today, AVENGER released financial results for the quarter ended September 30th, 2022. 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 and Reform Act of 1995. Any statements contained in this call that are not statements of historical fact should be deemed to be forward-looking statements. All forward-looking statements, including without limitation our future financial expectations, are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties, that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please see our Form 10-K and 10-Q filing with the Securities and Exchange Commission. AVENGER disclaims any intention or obligation accepted as required by law to update or revise any financial projections or forward-looking statements whether because of new information, future events, or otherwise. Additionally, today's presentation will include reference to non-GAAP financial measures, such as the adjusted EBITDA. A reconciliation of those non-GAAP financial measures to the most comparable GAAP financial measures is available within the earnings release, which is found on Avenger's website. Now I'd like to turn the call over to Jeff.
Ali
Thank you, Matt. Good afternoon, and thank you all for joining us. We continue to make good progress in our business results even as the healthcare markets continue to deal with a relatively unpredictable environment. During the third quarter, we increased both revenue and gross margin while moving forward on strategic initiatives that we believe will be important value drivers for the company. These include expanding our technology platform and peripheral product portfolio, generating best-in-class clinical data supporting our image-guided approach, and advancing our coronary product development program to enable us to enter into new large markets with existing reimbursement codes. We grew third quarter revenue 6% over the second quarter during what is typically a seasonally slower quarter for procedural volume over the summer months. Capital sales were an important contributor to our growth in the third quarter, supported by the launch of our new Lightbox 3 imaging console earlier this year. Our Pantheris SV small vessel atherectomy device continues to perform very well in the market. Pantheris SV is primarily used to treat below-the-knee lesions, and we are thrilled with the clinical outcomes physicians are achieving in this challenging anatomy and patient population, many of whom suffer from critical limb ischemia, or CLI, the most severe form of PAD. The real-time imaging and precise control provided by our proprietary technology are critical for physicians to precisely target the disease while avoiding damage to the arterial vascular structures of paramount importance when working within these narrow two to four millimeter diameter vessels. We continue to make progress in the enrollment of our ImageBTK post-market study designed to evaluate Pantheris SV for the treatment of below-the-knee lesions in a real-world clinical setting. We expect to enroll up to 60 patients in the study, with patients evaluated at intervals up to one year post-procedure. We now have two clinical sites in the US and two clinical centers in Germany enrolling in the study and anticipate completion of enrollment early in 2023. Most patients enrolled in IMAGE-BTK suffer from critical limb ischemia, and the early clinical results in this challenging patient population continue to be outstanding. An update on the interim findings from the IMAGE-BTK study was presented at the AMP clinical conference in August by the principal investigator in the study. Demonstrating the safety and effectiveness of our image-guided approach, physicians have achieved 90% reduction in percent stenosis or blockage following treatment. with zero complications or adverse events within 30 days of the index procedure. Interim data for patients reaching the one-year endpoint of the study are equally exciting, with 93% of patients having freedom from target vessel restenosis and 93% of patients showing patency after 12 months. This is particularly encouraging since patency with duplex ultrasound is often considered a gold standard for assessing outcomes in these types of procedures. These results are quite simply life-changing to the patients being treated, many of whom would otherwise be at significant risk of amputation. Turning to another key driver, we initiated the commercial launch of our Lightbox 3 Next Generation Imaging Console in April, and we continue to demonstrate the incredible value of this advanced and highly portable platform. Lightbox 3 has now been used in over 400 cases in more than 50 accounts in both new and existing sites. At this point, more than 70 physicians have used this new console, and the feedback on the enhanced high-definition imaging provided by the Lightbox 3 continues to be excellent, with many physicians reporting that image interpretation is easier and that details of the various arterial structures and types of plaque are more pronounced with this new system. The portability of the Lightbox 3 opens new sales opportunities for our company by allowing a sales rep or clinical specialist to initiate evaluation of our technology and utilization of our catheters prior to contracting for placement of a piece of capital equipment. We launched five new accounts in the third quarter on top of the eight new accounts we launched in the second quarter and continue to leverage this exciting new console for efficient expansion of our user base and identification of new or upgrade capital sales opportunities. On the catheter front, we continue to make progress on the expansion of our peripheral product portfolio with development and regulatory filing for two new advanced devices. In July, we announced the filing of a 510 submission for our new Tiger Eye ST catheter, a next generation chronic total occlusion or CTO crossing system for use in peripheral arteries. This new image-guided catheter has an integrated spinning outer tip for penetrating challenging blockages and CTO caps, incorporates an advanced shaft design for pushability and torque response, and adds a three-marker system to facilitate consistent image interpretation across our platform. By adding advanced capabilities to the platform, the new Tiger Eye ST device is expected to expand the utility and addressable market for our image-guided CTO catheters of advanced disease. Our 510 submission has been progressing through the clearance process with the FDA, and we hope to receive FDA clearance around year end. Consistent with past new catheter introductions, once we receive FDA clearance, we will initiate a limited launch in a select number of clinical sites prior to proceeding to full commercial launch anticipated in the first half of 2023. We are also moving quickly on the development of Pantheris LV, our new image-guided atherectomy device for the treatment of larger vessels. This device will be primarily used to treat lesions in the SFA and popliteal arteries above and behind the knee, where the majority of PAD procedures are performed today. Pantheris LV leverages design elements of our highly successful Pantheris SV catheter to streamline the procedure and expand our capabilities in this anatomy. Pantheras 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 engage challenging plaque. It also enhances guidewire management and implements a modified plaque management system to further improve procedural efficiency. We expect to file a 510K application for this new device near year end with FDA clearance anticipated by mid-year 2023, which would set up commercial launch of this highly efficient new device in the second half of the year. With the anticipated commercial launch of our Tiger Eye ST CTO crossing device in the first half of the year, and the anticipated launch of our Pantheris LV atherectomy device in the second half of the year, 2023 would represent a banner year for Avenger with the launch of two highly anticipated image-guided devices in a single year. In combination with our new Lightbox 3 imaging console, we believe these new catheters will assert our technology leadership in a clinically important space and provide new growth opportunities for our company. As we look to expand our technology to new markets, we are very excited about the progress we are making in the development of our first coronary product application. Coronary artery disease, or CAD, represents a massive addressable market with existing reimbursement codes in place. We believe that our proprietary technology provides the opportunity to revolutionize this market with the first and only fully integrated image guided system for the less invasive percutaneous crossing of CTOs in the coronary arteries. By leveraging our experience in peripheral arteries and the technological advances we've made across our platform, we believe we can redefine a category by providing a safe, reliable, patient-oriented solution to what is today a complex, expensive, and uncertain procedure. Current CTO PCI crossing procedures are highly complex require specialized and demanding technique with a steep learning curve, and the use of multiple devices. These procedures require extended time under fluoroscopy, which results in high X-ray radiation exposure and contrast media burden, creating health risks for both the medical team and patient. In addition, it is estimated that more than 200,000 highly invasive coronary artery bypass grafting, or CABG, procedures are performed in the U.S. annually. with estimates of up to 30% of these surgeries related to the treatment of coronary CTOs. This market provides an exciting target for our image-guided system, which would make a percutaneous approach accessible to more physicians and reduce x-ray radiation exposure and contrast burden during the procedure. An image-guided coronary CTO crossing device with diagnostic capabilities would access highly attractive reimbursement for the therapeutic procedure immediately upon FDA clearance, as well as existing OCT diagnostic imaging reimbursement in the coronary arteries. We believe that an image-guided catheter designed for crossing efficiency with the need for fewer support devices combined with an attractive reimbursement scenario provides the opportunity for a compelling economic value proposition. Our coronary CTO development efforts are focused on low-profile catheter designs that combine real-time 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 a precise measurement capability to help physicians properly size balloons or stents prior to placement, which is critical for optimal outcomes. Our coronary CTO crossing devices will leverage the advanced capabilities of our new Lightbox 3 imaging system and recent innovations in our catheter technologies. We continue to make good progress on the development and evaluation of catheter design candidates in our internal models and through engagement with highly experienced interventional cardiologists. As our peripheral development programs near completion and in light of the vast potential represented by the coronary markets, we plan on prioritizing our R&D efforts on our coronary program in 2023 with a goal of filing an investigational device exemption or IDE with the FDA in 2023 to allow for the initiation of a clinical study to evaluate safety and efficacy of the device in advance of a regulatory filing. As we push to the end of this year and prepare for 2023, we are focusing on execution in three strategic areas to drive growth of our peripheral business. First, increasing case volume opportunities and catheter utilization in our core geographic areas through the direct efforts of our sales team. Second, driving new account activity and expanding our user base through deployment of our new Lightbox 3 imaging console. And third, advancing our two new peripheral devices through the regulatory approval process in preparation for commercial launch in 2023, which we believe will broaden the appeal of our product portfolio and create new usage drivers for our platform. As we look to the future, our primary R&D focus in 2023 will be to advance our coronary CTO program. We believe our image-guided platform provides the opportunity to redefine how CTO PCI procedures are performed with a safe, effective, and more efficient approach to this challenging and time-consuming procedure. We are excited about the economic value proposition that our technology-enabled approach would provide to this large and underserved market with reimbursement codes for both CTO crossing and OCT diagnostic imaging already in place. Yet, we are most excited about providing physicians with an innovative new tool to support them in providing the best possible care for their patients, and by doing so, advance our mission of radically changing the way vascular disease is treated. At this point, I'd like to turn the call over to Nabil Spanetti, our Principal Financial and Accounting Officer, to take us through the financial results, and then I will return for Q&A. Nabil?
Matt
Thank you, Jeff. Total revenue for the third quarter of 2022 was 2.3 million, an increase from 2.1 million in the second quarter, with increased capital sales contributing to our growth in the third quarter. We are pleased by our progress in the third quarter, but remain cautious around the potential impact of hospital staffing challenges and increased respiratory virus infections, including COVID-19 as we enter these winter months. Gross margin for the third quarter was 35%, a 4 percentage point increase from 31% in the second quarter, reflecting increased revenue levels and a shift in product mix to more capital sales in the third quarter, supported by availability of our new Lightbox 3 imaging console. Operating expenses for the third quarter were $4.5 million, up slightly from $4.4 million in the second quarter, as we continue to tightly control operating expenses while advancing in our core strategic initiatives. Net loss and comprehensive loss for the third quarter of 2022 was $4.1 million, an improvement from $4.2 million in the second quarter. Adjusted EBITDA, as defined under non-GAAP financial measures in today's press release, was a loss of $3.6 million, an improvement from a loss of $3.7 million in the second quarter of this year. 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 under the investor section. Cash and cash equivalents totaled $17.3 million as of September 30th. We raised gross proceeds of $5 million in August through a combination of registered direct and private placement offerings priced at the market under NASDAQ rules, further strengthening our financial position as we continue to fund our strategic initiatives and invest in the growth of our business. At this point, I'd like to turn the call back to Jeff for Q&A.
Ali
Thanks, Nabil. We're excited about the progress we made in the third quarter as we continue to drive our business and advance important strategic initiatives for our future. Our new Lightbox 3 system opens new account opportunities and new opportunities for physician engagement. Our peripheral catheter development program provides the opportunity for two major new product launches in 2023. and very exciting, the development of our first coronary product application provided the opportunity to redefine a large and underserved market with a highly differentiated solution, which we believe can advance the standard of care for millions of patients and provide a transformational value opportunity for Avenger. We remain diligent with our financial execution and look forward to reporting our continued progress in the coming quarters. At this point, we'd be happy to take your questions.
Operator
Thank you. Ladies and gentlemen, the floor is now open for questions from institutional investors. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset, if listening on speakerphone, to provide optimum sound quality. Please hold while we poll for questions. Sirs, there appear to be no questions in queue at this time, so I'll hand it back to Mr. Sawinski for any closing comments he may have.
Ali
All right. Well, thank you very much for joining our call this afternoon. We very much appreciate your interest in our company and your support, and we look forward to reporting our continued progress on our year-end 2022 call. Have a good afternoon.
Operator
Thank you, ladies and gentlemen, and this does conclude today's conference call. You may disconnect your lines at this time and have a wonderful day. And we thank you for your participation.
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