Surmodics, Inc.

Ladies and gentlemen, thank you for your patience in holding the conference will begin momentarily. Please remain on the line. Again, thank you for your patience in holding the conference will begin momentarily. Please remain on the line. THE END Oh, my God. Thank you. Thank you. Good day and welcome to the Sermonix First Quarter Fiscal 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Tim Ahrens, Senior Vice President of Finance and Chief Financial Officer. Please go ahead.

Thank you, Stephanie. Good morning and welcome to Sermonix Fiscal 2021 First Quarter Earnings Call. Before we begin, I would like to remind you that during this call, we will make forward-looking statements. These forward-looking statements are covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include statements regarding Sermotic's future financial and operating results or other statements that are not historical facts. Please be advised that actual results could differ materially from those stated or implied by our forward-looking statements, resulting from certain risks and uncertainties, including those described in our SEC filings. Sermotics disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments, or otherwise. We'll also refer to non-GAAP measures because we believe they provide useful information for our investors. Today's news release contains reconciliation tables to GAAP results. This conference call has been webcast and is accessible through the investor relations section of the Sermotics website. where the audio recording of the webcast will also be archived for future reference. A press release disclosing our quarterly results was issued this morning and is available on our website at sermatics.com. I will now turn the call over to Gary Maharaj. Gary?

Thank you, Tim. Good morning, and welcome to Sermatics' fiscal first quarter 2021 earnings call. During our first quarter, I was pleased with our solid financial and operational performance, as well as the progress we made on our strategic objectives. My thanks and a huge shout-out to the entire semantics team. Their dedication, perseverance, and grit are admirable by any standard. During our first quarter, we made important progress on our strategic objectives for fiscal 2021. As a reminder, they are, first, to continue building traction with Surveil, marching towards the PMA approval, beginning with our final submission to the FDA. Second, to accelerate advancement of our robust pipeline through product development, regulatory clearances, and clinical evaluation and feedback. Third, to optimize cash flow from our IVD and medical device coatings offerings to support our strategic growth initiatives. Starting with Surveil, on January 25th at the LINCS 2021 virtual event, Dr. Ken Rosenfield, a principal investigator of the Transcend study, presented safety and efficacy data of our Surveil drug-coated balloon. In this late-breaking session, the data demonstrated that Surveil was non-inferior to the Impact Admiral drug-coated balloon in both the primary safety and efficacy endpoints, despite the fact that the Impact device has 75% more Paxifaxil on board. In theory, from a benefit-to-risk viewpoint, if a lower dose of a powerful cytotoxic drug can produce similar positive outcomes for a patient, as a higher dose of the same powerful cytotoxic drug, then the benefit-to-risk profile favors the low-dose formulation of the drug and may represent a better clinical choice for that patient. This is why we perform the first, and still only, as far as I'm aware, pre-market, head-to-head, pivotal, multi-center, multi-geography trial of its kind versus a high-dose device. This has provided strong clinical evidence to support Surveil as a compelling therapeutic choice in any market where it secures regulatory approval for commercialization. This is a significant achievement for a small organization. However, we had lots of help. We had many partners along this journey, and I want to thank the entire internal somatics Surveil team and the extended large Transcend clinical trial team of physicians healthcare providers, clinical research partners, and research coordinators for their support in the conduct of this very difficult but necessary trial in the midst of both the papillotaxel debate and the COVID-19 pandemic. I would especially like to thank our national principal investigators and the trial steering committee. We are well on our way and on plan. However, we're not yet done. Regarding the PMA approval process, After several meetings with the FDA, we now have clarity on the required long-term mortality data and the process for submitting these data as part of our PMA submission. As we've discussed in previous calls, to ascertain long-term safety, the FDA is requiring a minimal threshold of mortality, also called vital status, follow-up data for patients of two years and three years from the time of their treatment. While I can't comment on the specifics of these requirements, I believe we remain on track to receive the PMA for surveilled by the end of calendar 2021. You'll recall there are substantial financial outcomes from our commercialization agreement with Abbott, including $45 million of remaining milestones. We expect payment later this month for the first component of this, a $15 million milestone based on Abbott's receipt and review of the final written clinical report and related materials that demonstrate the primary safety endpoint and the primary efficacy endpoint for the TRANSCEND clinical study were met. Tim will provide more details later in today's call on the fiscal 2021 financial impacts of this $15 million milestone payment. The remaining $30 million milestone payment would be achieved upon approval of all surveilled ECB by the FDA. Regarding our product pipeline, we continue to move forward with products in all three platforms within our pipeline. The first of these platforms is vascular drug delivery by our drug-coated balloon technology. Also surveilled, the next product in our DCP pipeline using our proprietary technology is our Sundance serolimus-coated drug-coated balloon. It's an 014 percutaneous PTA platform. I'm pleased to announce that in January, we completed enrollment in the SWING first in human clinical trial for Sundance ahead of schedule. SWING enrolled 35 patients across eight sites in Europe, Australia, and New Zealand. As a reminder, the primary safety and efficacy endpoints of the trial are composite freedom for major adverse limb events and perioperative set at 30 days, and late lumen loss at six months, respectively. We anticipate having six-month results from this trial in early Q1 of fiscal 22. We believe that Sundance has the potential to improve the treatment of arterial blockage below the knee, which, left untreated, can lead to amputation and eventually death. Our third DCE product in our pipeline is our AVES-AV fistula, drug code blue. Six-month data from our VES-first-in-human study demonstrated that target lesion patency At 30 days and 6 months was 100% and 90.9% respectively. And only one re-intervention was required within 6 months. The study showed no mortality and no device nor procedure-related adverse events at 30 days. And all patients maintained functional arteriovenous fistulate, or AVF, for hemodialysis. We're quite pleased with these results, and it strengthens our belief that the Avess DCB could be a safe and promising treatment. We plan on using our ongoing learnings from Surveil to guide us through the best regulatory and clinical strategy for our next steps with Avess. We're currently completing the development of the full matrix of drug-coded balloon sizes for Avess for use in future clinical trials and regulatory submissions. The second platform of our product pipeline is our sublime radial access platform. We have already had our first clinical use of our sublime guide sheet with excellent positive feedback from the treating physician. We'll continue to expand the clinical use and the product evaluation of the sublime guide sheet so that we have substantial information on its performance in a broad scope of cases. We have encountered some delays in the scale-up manufacturing validation of our sublime 014 radial below-the-knee PTA balloon catheter. Our team is working diligently to get back on schedule. Regarding our follow-on offering, the 018 balloon catheter product, we are making progress in completing this development and expect to file for FDA 510K clearance, which we will expect to submit in Q3 of this fiscal year. We believe that developing these first-of-a-kind devices, while quite challenging, gives peripheral interventionists another essential tool to treat proximal vessels behind and above the knee via radial access for all patients suffering a peripheral artery disease. Finally, we received many questions about our exciting Pounce thrombectomy platform. As a reminder, we received FDA clearance for our Pounce thrombus retrieval system last September. which gives peripheral interventions an innovative non-surgical tool for treating arterial thrombotic occlusions. Our team is working diligently in all the necessary product and the process validations and early manufacturing bills so that we can have products for clinical use before the end of our fiscal year. Turning to our IBD and medical device businesses, Tim will comment on the detailed financial performance shortly. With regard to our medical device business, the dramatic increase in COVID-19 cases and hospitalization in our fiscal Q1 in many large metropolitan areas of the United States and in certain areas of Europe has forced many hospitals to postpone or even cancel numerous elective procedures. Our medical devices team has done a superb job of dealing with all the difficult logistical and operational circumstances brought on by this pandemic. even as we continue to support our customers with the ultimate goal of providing essential services to patients. Our IBD business had a great quarter. Strong demand of our distributed antigen products and our microwave slide service products led to a 17% year-over-year revenue growth and delivered 53% operating margin. In closing, I'm proud of our continued execution of our critical strategic objectives while protecting our team's health and safety and meeting all of our partners' and customers' requirements. While we can't predict when things will be back to a pre-COVID normal, we continue to execute our strategic plan. In the past nine months, we have received multiple regulatory clearances, announced strong clinical data for two exciting new products, even as we manage our core businesses, optimize cash and capital allocation during a worldwide pandemic. While there's much yet to be done, I'm highly confident that we are well positioned to deliver sustained growth and shareholder value over the long term. I'll now turn the call over to Tim to provide more details on our fiscal first quarter 21 results. Tim?