Avinger, Inc.

Welcome to Avenger's fourth quarter and full year 2023 results call. At this time, all participants are in 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'd like to welcome you to Avenger's fourth quarter and full year 2023 conference call. Joining us today are Avenger's CEO, Jeff Zawinski, and Principal Financial Officer, Neville Spinetti. Earlier today, Avenger released financial results for the quarter and year ended December 31, 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 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 and expected timing for commercial launch of products and filings with the FDA are based on 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. 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. Also, today's presentation will 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 release, 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. It's been an exciting time at Avenger since our last earnings call. We recently announced a multifaceted strategic partnership with Xylox Tunbridge, a leading company in the interventional vascular space in China. We've advanced commercial activities on two innovative new peripheral devices, Tiger Eye ST and Pantheris LV, We've expanded our field sales force to broaden our geographic sales footprint and strengthen our presence in key markets. And we've made significant progress towards an IDE filing for our exciting first coronary product application. First, let's discuss our new strategic partnership with Xylox Tonbridge. Xylox is a fully integrated medical device company and a leader in the peripheral vascular and neurovascular markets in China. They are an innovative company with a well-developed R&D capability, and since their founding in 2012, Xilox has developed and launched 36 products into the greater China interventional markets. Xilox maintains a state-of-the-art manufacturing facility at their headquarters in Hangzhou, China, not far from Shanghai. They are certified to ISO 1345-2016, and have commercialized their products in 19 countries outside of Greater China. With a sales and marketing organization of more than 130 people and a vast and well-developed distribution network, we believe that Xilox is extremely well qualified to distribute Avenger products in the Greater China Territory. Our partnership with Xilox Tunbridge has several key elements which provide significant strategic benefits to both companies. First, Under the terms of an equity financing agreement, Xilox will invest up to $15 million into Avenger through the purchase of preferred and common stock in two tranches. The $7.5 million first tranche investment has already been funded. This initial investment was priced at the market under NASDAQ rules at a purchase price of $3.66 per share on an as-converted-to-common-stock basis. A second tranche $7.5 million equity investment will be funded upon achieving key milestones, including successfully registering Xilox as a manufacturer of Avenger's products with the U.S. FDA and Avenger achieving $10 million in aggregate revenue over four consecutive quarters. Avenger's obligation to accept conversion of the initial shares of preferred stock and issue and sell shares of preferred stock upon completion of the milestones are each subject to the approval of Avenger stockholders, and we expect to file a proxy for a stockholder vote on these proposals in the near term. Second, under the terms of a license and technology transfer agreement, Xilox has exclusive rights to distribute and manufacture Avenger's proprietary image-guided devices in the greater China region, including mainland China, Hong Kong, Macau, and Taiwan. With Avenger's support, Xilox will lead all regulatory activities for the registration of the Avenger products in the territory. We will sell products to Xilox to support their regulatory process and initial product launch following regulatory clearance until such time as Xilox has established their own manufacturing capability and gained regulatory authorization for manufacturing Avenger products for the China markets. Sales of Avenger products in the Xylox territory will be royalty-bearing to Avenger. Third, under the terms of a strategic cooperation framework agreement, Avenger has the right to access certain Xylox peripheral vascular products for distribution in the U.S. and Germany, where we have our own direct sales capability. In the U.S., this provides access to a suite of high-quality peripheral devices, such as PTA balloon catheters, including a proprietary scoring balloon, introducer sheaths, and other accessory products. In Germany, Xilux has already obtained CE marking for a number of peripheral products, including PTA balloon catheters, peripheral stent systems, including a drug-eluting stent, and a drug-coated PTA balloon. Avenger is conducting a market and regulatory assessment of these products for potential distribution in markets where we have a sales presence. We believe this could provide the opportunity for incremental revenue growth and increased productivity of our sales force without the need for significant R&D investment. And fourth, once Xilox has established their manufacturing capability and been successfully registered as a manufacturer of Avenger's products with the U.S. FDA, Avenger will have the option to source finished product from Xilox on a cost-plus basis. We believe this could provide the opportunity for Avenger to reduce cost of goods sold, improve gross margin, and reduce facility and related overhead expense in the future. As mentioned in our press release and outlined in our 8 filing, concurrent with Xilox's initial investment, CRG Partners, the primary holder of Avenger debt and preferred equity, exchanged its Series A preferred stock with an aggregate liquidation preference of approximately $60 million for new Series A1 preferred stock with a value of $10 million. The new Series A1 preferred stock is convertible at a conversion price of $3.66 per share and carries no liquidation preference or dividends. CRG also extended principal payments on our debt by three years from the first quarter of 2024 to the first quarter of 2027, with PIC interest payments accruing during this time. The Xilox-Tonbridge strategic partnership and related transactions with CRG are critical positive steps forward for Avenger, strengthening our balance sheet and improving our capitalization structure, opening vast new markets for our products, providing access to new products for our existing markets, and creating the opportunity to improve our gross margin and cost structure over time. Most of all, we are excited about the opportunity for many more physicians and patients around the world to realize the benefits of our Lumavascular technology as we advance our mission of radically changing the way vascular disease is treated. The Xilox investment also provides new funding to support our U.S. growth initiatives and the development of our first coronary product. And at this point, I'd like to provide updates in each area. On our third quarter earnings call, we spoke about our plans to increase the size of our U.S. sales force by more than 25% in order to expand our sales footprint and deepen our presence in certain territories. We achieved this goal by adding six sales professionals to our organization since the end of the third quarter, including the addition of an experienced sales leader for the Midwest region, bringing our current sales headcount to 26. Most important, we are very pleased with the quality of hiring and how our new team members are progressing through their initial training period. Along with our more tenured sales team, we expect these new hires to be important contributors to our growth over the next 12 months, as they build their sales pipelines and gain clinical proficiency with our devices. In addition to the investment in our sales team, we've also expanded commercial activities in the U.S. on two innovative new peripheral devices, Tiger IST and Pantheras LV, both of which we believe will be important growth drivers for our business. Let's begin with Tiger IST. Tiger IST is a low-profile, five-french system designed across chronic total occlusions, or CTOs, which are completely blocked arteries, in the peripheral vasculature both above and below the knee. Tiger IST spins at speeds up to 1,000 RPM and generates high-definition OCT imaging during the procedure, providing real-time information to guide treatment and help physicians stay in the true lumen during crossings. a critical advantage for the patient. This innovative new device has a user-controlled deflectible tip to allow the physician to precisely direct the catheter during treatment and incorporates multiple design features to increase crossing power and procedural success. We received 510 clearance and initiated limited launch for Tiger Eye ST in the second quarter of 2023. Based on the positive physician feedback, clinical outcomes, and reliability demonstrated during the limited launch period, we made the decision to expand to full commercial launch late in the third quarter. While still early in the commercial launch period, we are encouraged by the progress we are seeing in the field, with Tiger Eye ST revenue increasing by more than 50% in the fourth quarter compared to the prior quarter. and 32 physicians at 25 sites using the device since introduction. The more experience we have with this advanced device, the more excited we are about the potential for Tiger IST to drive growth of our peripheral CTO business throughout the year. Now, turning to Pantheras LV. Our new Pantheris LV image-guided atherectomy system is designed to streamline the atherectomy procedure, and in combination with our Lightbox 3 imaging console, expand the mainstream appeal of our image-guided platform. LV stands for large vessel, and consistent with its name, Pantheris LV is ideal for the treatment of the larger arteries above and behind the knee, where the majority of PAD procedures are performed today. Pantheris LV does not require a balloon for plaque apposition and operates at significantly higher rotational speeds than our current atherectomy offerings, with variable speeds up to 3,000 RPM. It also introduces enhanced guidewire management and plaque management systems to our platform. We initiated limited launch for Pantheris LV in the third quarter, and since that time have been gaining valuable case experience with the device in a real-world clinical setting, with 19 physicians performing approximately 50 cases with Pantheris LV since limited launch. We continue to gain additional case experience with the device, and based on our learning to date, expect to be in a position to advance this exciting new device to full commercial launch mid-year 2024. With the build-out of our peripheral device portfolio now largely complete, we've shifted our primary R&D efforts to focus on the development of our first coronary product application. And we are very excited to bring the benefits of our image-guided platform to the large and growing coronary artery disease market. Crossing chronic total occlusions in the coronary arteries can be complex, challenging, and time-consuming procedures with uncertain outcomes. By leveraging our proprietary image-guided technology, we believe we can provide physicians with a superior, simplified, and more predictable solution for crossing coronary CTOs with the need for less radiation exposure and contrast media usage. We think this makes great sense from both a clinical and business perspective and believe our lumavascular approach has the potential to redefine the standard of care the less invasive percutaneous crossing of coronary CTOs. Our development program focuses on low-profile catheter designs that combine real-time OCT guidance with precise control and steerability to facilitate an antigrade approach intended to allow a larger number of physicians to safely and efficiently cross coronary CTOs. Like our peripheral catheters, our coronary device incorporates a precise measurement capability to help physicians properly size balloons or stents prior to placement, which is critical for optimal outcomes. We believe our coronary CTO crossing device will present a highly compelling economic value proposition. Reducing crossing time, contrast media usage, and the need for certain accessory devices would result in significant cost savings for the hospital system. In addition, our coronary device would not only access existing high-value reimbursement codes for CTO crossing, it would also access existing codes for coronary OCT diagnostic imaging immediately upon FDA clearance. We continue to make excellent progress on this initiative, including successfully completing a third round of animal studies and a second round of human cadaver heart studies with key opinion leader physicians. enabling us to finalize design selection and complete phase two of our development process prior to the end of the year. We are working diligently on the verification and validation of our selected design and at this point anticipate being in a position to file an investigational device exemption or IDE application with the FDA in the third quarter of this year to allow for initiation of a clinical study following approval. The past few months have been transformative for Avenger. Our strategic partnership with Xilox Tunbridge opens a pathway to exciting new markets in Asia and provides the potential for incremental revenue and significant cost savings in the future. Our expanded sales team and the launch of two strategically important new peripheral products provides a foundation for growth in the U.S. And our progress on the development of our first coronary product brings the exciting opportunity represented by this revolutionary device closer to reach. We look forward to reporting our continued progress in these and other areas in the coming quarters. At this point, I'd like to turn the call over to Nabeel Spinetti, our principal financial officer and accounting officer, to take us through the financial results. Then I'll return for Q&A. Nabeel?