Avinger, Inc.

Greetings and welcome to the Avenger second quarter 2023 results call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Matt Kreps, Investor Relations at Avenger. You may begin.

Thank you, Paul, and thank you, everyone, for participating in today's call. I would like to welcome you to Avenger's second quarter 2023 conference call. Joining us there, Avenger's CEO, Jeff Swinsky, and principal financial officer, Nabeel Spinetti. Earlier today, Avenger released financial results for the quarter ended June 30th, 2023. 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 in the Private Securities Litigation and Reform Act of 1995. These 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 filings with the Securities and Exchange Commission. Avenue 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 to the most comparable GAAP financial measures is available within the earnings relief, which can be found on Avenger's website. And 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. The second quarter was an exciting time for Avenger as we received FDA 510K clearance for two innovative new devices, Tiger Eye ST and Pantheris LV, providing the opportunity for two important new product launches in the second half of this year, a first for Avenger. We had good momentum in our business in the second quarter, increasing revenue by 8% on a sequential quarter basis and adding new resource to our sales team. We are confident that the introduction of these two new products will provide meaningful growth opportunities for our PAD business as we move to the second half of the year. Combined with our new Lightbox 3 advanced HD imaging console, we believe the launch of these two new catheter systems completes the build-out of our image-guided peripheral product portfolio, allowing us to focus most of our R&D efforts on the development of our first coronary product application. By leveraging our proprietary image-guided platform, we believe we can redefine the market for crossing coronary CTOs, providing a superior, simplified, and more certain solution for a challenging condition, and providing Avengers first inroads to the high-value coronary artery disease market. We made significant progress on this initiative during the second quarter, advancing design candidates through the first stage of animal trials, incorporating valuable feedback from coronary CTO specialists, and preparing for the next round of animal studies this quarter. With this progress, we believe we remain on track to file an investigational device exemption or IDE application with the FDA in the first half of next year to allow for initiation of a clinical study in 2024. While we made excellent progress on our new product initiatives, we also reported solid operating metrics. During the second quarter, we maintained gross margin at 30% and held to our efficient operating cost model, driving significant improvement in adjusted EBITDA compared to both the prior quarter and year-ago period. Sales productivity or revenue per sales head remained strong for our existing team members, and during the quarter, we hired four additional clinical specialists to provide expanded case coverage capability in future quarters. Let me take a few minutes to provide further updates on our two recently cleared peripheral products. We received 510 clearance for our new Tiger IST high-speed CTO crossing catheter in April and initiated limited launch in May. Since that time, physicians at nine sites have completed more than 30 cases with the new system. We have sold catheters into an additional five sites and expect to support additional cases in both these and existing sites to complete our limited launch activities over the next month. Based on the product reliability, clinical success, and positive physician feedback from the cases completed so far, we've begun preparations, training our broader sales team and building product inventory for expansion to full commercial launch later this quarter, consistent with the plans communicated earlier this year. As a reminder, Tiger Eye ST is a low-profile, five-french system designed to cross chronic total occlusions, or CTOs, which are completely blocked arteries, in the peripheral vasculature both above and below the knee. Tiger Eye ST spins at speeds up to 1,000 RPM and provides real-time, high-definition OCT imaging during the procedure. providing valuable information for the physician to guide treatment and help them stay in the true lumen during crossing, which is highly beneficial for the patient. Tiger IST has a user-controlled deflectible tip to precisely direct the catheter during treatment and incorporates multiple design upgrades in the tip configuration and catheter shaft to increase crossing power and procedural success in challenging morphology. It also adds design features to aid in image interpretation during the procedure and performs exceptionally well with our advanced Lightbox 3 imaging platform. Tiger IST limited launch cases have already contributed to the growth of our CTO business in the second quarter, and we're excited about the potential for this innovative new product to be a significant growth driver as we expand the full commercial launch through the back half of the year. In June, we received our second 510K clearance in the quarter with the FDA clearance of our new Pantheris LV image-guided atherectomy system. We developed Pantheris LV with the objective of streamlining the atherectomy procedure, opening additional user and case opportunities for our platform, and in combination with our Lightbox 3 imaging console, expanding the mainstream appeal of our image-guided platform. Pantheris LV builds on our success with our Pantheris SV small vessel device, incorporating several design features from this system for larger vessel application. The Pantheris LV device is designed to treat vessels 3 to 7 millimeters in diameter and is ideally suited to treat lesions in the SFA and popliteal arteries above and behind the knee where the majority of PAD procedures are performed. Pantheris LV incorporates a proprietary design for plaque apposition without the need for a balloon and operates at significantly higher rotational speeds than our current large vessel offering. It also introduces enhanced guidewire management and plaque management systems to the platform. We initiated limited launch for Pantheris LV this month and expect to gain case experience in up to 12 clinical sites in the coming months. As with Tiger IST, the limited launch period provides important benefits to fully understand the clinical capabilities of the new device, gauge product performance and reliability in a real-world clinical setting, and prepare our clinical sales team for full national launch. If all goes according to plan, we expect to expand Pantheris LV to full commercial launch in the fourth quarter of this year. We look forward to updating you on our continued clinical experience with these two new products, and we're excited about their potential to positively impact our revenue as we expand both products to full commercial launch in the second half of this year. Our advanced and highly portable Lightbox 3 imaging console continues to receive rave reviews from physician users and is the perfect complement for our new high-speed catheter systems. allowing catheters to spin at higher speeds without image degradation. While we continue to support the larger installed base of our legacy L250 platform, Lightbox 3 is now responsible for approximately 25% of our case volume, providing significant upside opportunity as we expand penetration of this platform. Lightbox 3 is being used to efficiently engage with new accounts as well as provide upgrade opportunities in existing accounts. While most Lightbox 3 procedures are performed on a portable console brought in by our clinical support team, we sold three Lightbox systems in the second quarter. Our best-in-class Pantheris SV small vessel atherectomy device continues to deliver exceptional patient outcomes and continues to be a strong market performer for Avenger. 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. Safety is of paramount importance when treating lesions within these very small two to four millimeter diameter vessels. And in CLI cases, clinical outcomes can determine whether the patient will be able to avoid amputation. The real-time imaging and precise control provided by Pantheris SV allows physicians to precisely target the disease while avoiding damage to the arterial vascular structures, safely restoring blood flow for limb preservation, and minimizing or avoiding adverse events or future re-narrowing of the vessels. Pantheris SV is now responsible for approximately 50% of our atherectomy case volume, and we are excited to extend design features that have driven success with this device to the above-the-knee market with our new Pantheris LV system. The unique and compelling benefits of Pantheris SV have inspired our ImageBTK post-market clinical study, designed to evaluate Pantheris SV for the treatment of below-the-knee lesions in a real-world clinical setting. We continue to build the clinical data set at the 12-month post-procedure study endpoint and expect to complete patient enrollment this quarter. Principal investigators for the study have recently presented updated interim results at major clinical conferences in the U.S. and Europe. Clinical outcomes from IMAGE-BTK continue to be outstanding. Commenting on his presentation at the Link Symposium in June, Dr. Michael Liechtenberg, Chief Medical Officer and Director of the Angiology Department and Vascular Center at Klinikum Arnsberg, said, Pantheris SV shows enormous promise for the treatment of PAD in challenging below-the-knee anatomy, backed by real-world data in patients in Rutherford class 3 through 6. We have seen tremendous outcomes for patients at 6- and 12-month follow-up at this point in the MHBT case study, with 96% freedom from TLR and 93% patency at 12 months. and 100% freedom from major adverse events across enrollees. As compared to re-stenosis rates as high as 70% using balloon angioplasty, these type of results support OCT-guided directional atherectomy as an excellent option to address vascular disease in the arteries below the knee. In addition to the exceptional safety and durability of patient outcomes data discussed by Dr. Liechtenberg, Luminal gain or the opening of the vessel for blood flow has been equally impressive in the study. On average, the 41 patients treated at this point in the study began with a 94% stenosis or blockage of the target vessel. This was reduced by 73% to a blockage of only 25% following treatment with Pantheris alone. and reduced further to a blockage of 9% following the optional use of adjunctive therapy, such as an angioplasty balloon, representing a 90% reduction in stenosis overall. These clinical results are unprecedented in the treatment of advanced disease and below the knee vasculature, emphasizing the value of our proprietary approach, which combines the safety of image-guided therapy with the targeted luminal gain of directional atherectomy. We currently have 46 patients enrolled in the ImageBTK study and anticipate achieving our 50-patient target enrollment this quarter. Patients will be followed to the 12-month endpoint of the study, and we expect to continue to release interim results as additional data becomes available in the coming months. As we look to the future, we're excited to bring the benefits of our image-guided platform to the large and growing coronary artery disease market. Our first product application targets development of a superior image-guided solution to the complex, expensive, and uncertain procedures currently used to cross chronic total occlusions in the coronary arteries. By leveraging our proprietary technology platform, we believe we can redefine the standard of care in this market with the first and only fully integrated image-guided system for crossing coronary CTOs. Our coronary CTO development program focuses on low-profile catheter designs that combine real-time OCT guidance with precise control and steerability to facilitate nanograde approach and allow a larger number of physicians to safely and efficiently cross coronary CTOs. Like 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. An image-guided coronary CTO crossing device with diagnostic capabilities, such as we are developing, would access existing reimbursement codes both for the therapeutic procedure and for coronary OCT diagnostic imaging immediately upon FDA clearance. This is a key distinction from PAD codes. We believe that an OCT-guided catheter designed for crossing efficiency combined with an immediately available attractive reimbursement scenario, provides the opportunity for a highly compelling economic value proposition. Having largely completed our peripheral R&D efforts, we are now primarily focusing development activities on this coronary initiative. We have made significant progress and gained valuable feedback for the evolution of our design prototypes through our key opinion leader advisory board. We successfully completed our first round of animal studies this past quarter and are preparing for a second round of animal studies at a top KOL center next week. Based on our experience to date, we are even more excited about the potential for this groundbreaking product to change the standard of care for the treatment of coronary CTOs, and we believe we remain on track to file an ID application with the FDA in the first half of next year to allow for initiation of a clinical study in 2024. We made tangible progress across several fronts over the past quarter, securing FDA clearance for two strategically important peripheral products and advancing both devices to limited launch, building our revenue base and expanding our case coverage capability with new sales hires, and making substantive progress on the development of our first coronary product application, At the same time, we continued to carefully control operating expenses and delivered significant improvement in adjusted EBITDA performance. As we look to the back half of the year, we're excited to expand our Tiger ISTE and Pantheras LV devices to full commercial launch, broadening the appeal of our product portfolio and creating new usage drivers for our platform. We will continue to leverage our new Lightbox 3 imaging console to drive new account activity and grow our user base and look to make strategic investment in our commercial field presence to increase case coverage capability as we move through the remainder of the year. The second half of the year is also a critically important time in the development of our first coronary product application as we continue to gain valuable learning on our design approach and complete phase two design selection and phase three verification and validation over the coming months to prepare for an ID application IDE application with the FDA in the first half of next year. We look forward to reporting our progress against these initiatives throughout the year. And at this point, I'd like to turn the call over to Nabil Spinetti, our principal financial officer and accounting officer, to take us through the financial results. I'll then return for Q&A. Nabil? Thank you, Jeff.