Surmodics, Inc.

Good day and welcome to the Sermatix Second Quarter Fiscal 2022 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Tim Ahrens, Senior Vice President of Finance and Chief Financial Officer. Please go ahead, sir.

Thank you, Jess. Good morning and welcome to Sermatix Fiscal 2022 Second 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 Cermotic'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 Sermonix 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 sermonix.com. I will now turn the call over to Gary Maharaj. Gary?

Thank you, Tim. Good morning, and thank you for joining us on our second quarter earnings calls. We are pleased with both our financial performance and the progress we've made in executing our strategic priorities during the quarter. Starting with our second quarter financial performance, which delivered above expectations, we achieved revenue of $26.1 million in the second quarter compared to $35 million in the prior year quarter, which included $10.8 million in revenue recognized on the $15 million average milestone payment associated with successful completion of the Transcend clinical report. Normalizing for this milestone payment, we grew revenue by 1.5 million, or 6%, year-over-year, driven by solid performance from both our medical device and IVD businesses. We reported gap diluted loss per share of 29 cents and non-gap diluted loss per share of 22 cents. We are updating our financial guidance for the full year to reflect the strength of our year-to-date financial performance. Tim will provide additional detail on our quarterly results, as well as our updated guidance later in today's call. During our second quarter, we continue to make progress on our strategic objectives for the fiscal year. As a reminder, these are, first, to achieve the PMA for surveil and support Abbott's commercialization efforts. Second, to build a commercial pipeline for our sublime radial and pounce arterial and venous thrombectomy platforms. Third, to drive top-line revenue growth and optimize cash flow from our IVD and medical device coatings offerings. Starting with Surveil, we've made important progress to support Surveil's pre-market approval. Since we last spoke in February, we have completed and have shared with the agency our responses that address their main questions related to preclinical data, including the impact of different sterilization doses on materials used in the final product. In addition, the FDA has confirmed a date for our request for the submission issue review meeting on May the 4th to drive towards alignment in our responses. While we asked for earlier meeting dates, May the 4th was the earliest date that the agency was able to provide. Following this May 4th meeting, we'll have a clearer view of the path and timing to the PMA, including any further preclinical studies as needed. We are confident that we have compelling data to secure the PMA approval. We now have substantial two- and three-year clinical data that demonstrate a continued excellent safety and efficacy profile for the first surveilled drug-coded balloon. While our goal remains to secure the PMA in fiscal 2022, the agency will still have 90 days to respond after we have completed our final submission. With that in mind, we continue to exercise a conservative view of the approval timing and believe FDA approval will likely occur before the end of the current calendar year. Our recent discussions with our partner Abbott have been encouraging. We are anticipating that the 24-month Transcend clinical data will be presented at an upcoming conference later this fall. The expectation continues to be that a U.S. launch of Surveil will follow the receipt of the pre-market approval. Moving to Sundance, or below-the-knee serolimus drug code balloon. During last quarter's call, I shared that the Physician Steering Committee for our SWING First in Human Clinical Trial had advised us to conduct additional analyses of the clinical data. We have completed these analyses, and the physicians in the Steering Committee are pleased with both the analysis and the clinical results. We're looking forward to submitting these data to a late-breaking clinical trial presentation at a conference in the coming months. In addition, we have just recently shared the Swing Clinical Study Report with Abbott, which has the option to negotiate a commercialization agreement for Sundance. Our second strategic objective is to demonstrate the commercial viability of our sublime radial platform and our pounce arterial and venous thrombectomy platforms. As I mentioned in our last call, Fiscal 22 is in large part about building this commercial pipeline. that is, the activities that lead to customer purchase, an essential catalyst to driving our value-creating goal and delivering consistent double-digit revenue growth. We are seeing the early fruits of our efforts as our team has established an initial and growing base of customers. Importantly, the team is currently engaged with nearly 100 prospective customers that are in various stages of evaluation, purchase, or reordering of our Sublime and or Pounce products. Much of the credit for our progress lies with our commercial team, which has grown to a total of 19 sales professionals at the end of second quarter. First, I'll comment on our sublime radial access, which consists of the sublime radial access guide sheet, the 014 and 018 PTA balloon catheters. I'm pleased to report that we have several dozen accounts that have placed initial orders for one or more of these devices. Next is our Pounce arterial thrombectomy platform. The Pounce arterial device is an intuitive, easy-to-use device that enables physicians to treat a wide variety of arterial clot extraction without the need for aspiration or additional capital equipment. We now have a dozen accounts that have placed initial orders of the Pounce arterial thrombectomy device. In addition, our team is managing a commercialization pipeline consisting of more than 50 prospective customers primarily hospitals, which are in various stages of the account process. Yesterday, Dr. Gary Ansell presented the first inhuman data on the Pounce thrombectomy system at the Charing Cross International Symposium in London. These data included outcomes from the first 20 thrombectomy procedures that were performed at six U.S. medical centers during our market evaluation. These were not easy layup cases. Rather, the pounce was challenged by a broad spectrum of clot complexity, occlusion length, vessel tortuosity, and calcification. Specifically, within these 20 patients, 55% of the treatments were for chronic or acute on chronic clot. 15% had moderate to severe vessel tortuosity. 57% of them had underlying arthroma in addition to clot. and the average lesion length treated was approximately 11 centimeters, with a max of up to 30 centimeters. While cases with acute clot represented 25% of procedures, it is fair to say that these physicians took an all-comers approach in terms of case complexity and clearly did not save their easiest cases to evaluate Pounce. The Pounce thrombectomy system achieved 100% technical process, success in this Houston Man series, meaning that in a single treatment session, the device successfully removed clot from the target lesion and restored blood flow to the patient's limb in each of the 20 cases. Additionally, the data showed that no adjunctive thrombectomy devices were required to remove clot, and 95% of these procedures were able to avoid the use of thrombolytics within the target lesions. We are extremely excited by these results, which provide validation to our mission of providing interventionalists with an efficient and effective thrombectomy device that is capable of treating a wide range of clots, including emboli, without aspiration nor capital equipment. I'd like to take a quick moment to share with you two physician stories that demonstrate the powerful impact of our products on the patient's lives. In a recent case, a physician in Baton Rouge, Louisiana, used our pound thrombectomy system to treat a 46-year-old patient suffering from acute limb ischemia. This patient experienced a rapid onset of cold and numbness in her right leg that caused her to fall to the ground. And diagnostic imaging showed significant emboli occlusion of three of her major leg arteries. At the time, the physician was not familiar with the Pounce device, so he first attempted treatment with two cycles of ultrasonic catheter-directed thrombolysis for 48 hours, which showed minimal angiographic improvement. He then used an aspiration thrombectomy device to clear out as much of the acute thrombus, but was unable to clear the more challenging clot. The somatic territory manager happened to be in the cath lab during this procedure, and the physician decided to try the Pounce thrombectomy system for the first time. Following an on-spot service, the physician was able to quickly clear the three vessels with three separate deployments of the Pounce device. After exhausting other non-surgical options, Pounce helped the physician successfully treat the patient and likely saved her leg. without having to resort to further TT administration or refer her to open surgical embolectomy. The physician, as you can imagine, was quite impressed, even as a first-time user. In another case, this time involving our sublime radial products, the patient was recently brought to the cath lab with a non-healing wound and contractures in the right lower extremity and an occlusion of the right iliac artery. Diagnostic angiography showed substantial occlusion in the arteries of both the right and left legs. Now, because of these multiple conditions, neither femoral arteries were accessible, so the only viable site for the physician to treat the patient's left leg was the right radial artery, which was also occluded by significant disease. Using our low-profile, high-french sublime radial guide sheet, the physician was able to navigate through the occluded radial artery and gain access to treatment, and then using the sublime radial PTA catheter, which is 2.5 meters long, he was able to successfully cross and treat both above and below the knee arteries. Angiography showed significant lesion reduction and excellent flow to the foot. Now, I know all this sounds very technical, but what is not captured was the audible emotion that was exhibited by the cath lab staff following this case. Because of multiple comorbidities, this was a patient who, without the excellent skills of the physician, and specifically the long working lengths of our sublime radial devices, could have likely lost their leg. If you can't tell, I'll just say it. A better future for patients and their healthcare providers has already been created by these devices. It's just now our job to evenly distribute the success. Moving on to Pound's venous thrombectomy, which enables physicians to safely separate large and mixed morphology clots from the vein wall and rapidly extract it without removing the device from the patient. Our process and manufacturing validation efforts are on track and nearing completion, and we are in the process of building product for use in clinical product evaluations in the fourth quarter. Our team has already initiated early commercialization activities for our Pounce venous thrombectomy device, which is already in front of the value analysis committee process in several hospitals. This is a very encouraging sign that physicians believe in the potential merits of the device even before using it and are eager to use it. While not material to our second quarter revenue, I'm excited to see our customers and their patients benefit from our product. While still early in our commercialization efforts, these first few months support our expectation that we will generate modest but meaningful and growing revenue associated with the adoption, utilization, and sales of Sublime and Pound's products through the remainder of this fiscal year. In the coming quarters, I look forward to sharing more about our learnings and expectations on these devices. Turning to our food strategic objectives to drive top-line revenue growth and optimize cash flow from our IVD and medical device coatings offerings. Both our IVD businesses and our medical device coatings offerings delivered 8% year-over-year growth. It should signal to you our discipline and continued commitment to delivering strong operating results from our core businesses. I remain confident in the ability to continue to generate meaningful cash flow contributing to our growth initiatives. Our team has delivered solid first-half results, and we have similar expectations for the remainder of this year. Delivering on our long-term goal of consistent and robust revenue growth starts with executing our fiscal 22 strategic objectives. We're pleased with the progress we've made during the second quarter and look forward to sharing more during the second half of our fiscal year. I'll now turn the call over to Tim to provide the details on our second quarter fiscal 2022 results and full year guidance. Tim?