Artivion, Inc.

Greetings. Welcome to the CryoLife fourth quarter and year-end 2019 financial conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Should anyone 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, Lynn Lewis, from the Gilmartin Group. Please go ahead.

Thank you. Good afternoon, and thank you for joining the call today. Joining me from Cryolife's management team are Pat Mackin, CEO, and Ashley Lee, CFO. Before we begin, I'd like to make the following statement to comply with the safe harbor requirements of the Private Securities Litigation Reform Act of 1995. Comments made on this call that look forward in time involve risks and uncertainties in our forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements made to the company's or management's intentions, hopes, beliefs, expectations, or predictions of the future. These forward-looking statements are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from those forward-looking statements. Additional information concerning certain risks and uncertainties that may impact these forward-looking statements is contained from time to time in the company's SEC filings and in the press release that was issued earlier today. With that, I'll turn the call over to Cryolife CEO, Pat Mackin.

Thanks, Lynn, and good afternoon, everyone. Thanks for joining. On today's call, we'll discuss fourth quarter and four-year results, including progress we're making on our key pipeline products, supply chain headwinds, and our 2020 objectives and financial guidance. Before we begin, I'd like to discuss the positive developments that took place in the quarter that are not only readily apparent by reviewing our fourth quarter financial results, which were affected by supply chain headwinds. We believe that we're at the beginning of a multi-year period over which we'll expect to deliver multiple new product introductions and see market expansion of previously approved products. Our pipeline is one of the most compelling reasons to consider Cryolife as an investment, as it has the potential to increase our growth rate and our addressable market opportunity at the same time. In early December, we received CE Mark for Enya, our next-generation thoracic stent graft, and EnSyde, the first and only off-the-shelf thoracal abdominal stent graft with interbranch technology. We believe the enhancements designed into these next-generation products provide us with highly competitive and comprehensive stent graft offering. We also announced our collaboration with Endospan, which provides us with immediate distribution rights in the EU to the Nexus product. the only off-the-shelf endovascular graft approved for the repair of both dissections and aneurysms in the aortic arch, a global market that could exceed $1 billion once regulatory approvals are achieved. Nexus complements our Yotech portfolio of endovascular aortic repair products and will allow us to cross-sell these products. In addition, we received FDA authorization to commence the PROACT-10A clinical study. a prospective randomized trial to determine if patients with the onyx mechanical aortic valve can be maintained safely and effectively on Eliquis rather than Warfarin. If we hit the primary endpoint of this study, we expect that our mechanical valve business will be positively impacted as physicians will choose the onyx mechanical valve over others due to the significant positive patient benefits of Eliquis over Warfarin. Finally, we entered into collaboration with MySonics, under which Misonics will have exclusive US commercialization rights for Neopatch, our amniotic membrane tissue product, to treat a broad range of indications outside of cardiac and vascular surgery. I'll have more on each of these topics later in my comments. Moving to our fourth quarter financial results. Total revenue for the quarter was 69.7 million, reflecting year-over-year growth of roughly 4% on a non-GAAP constant currency basis. We recorded strong onyx and cardiac tissue revenue growth in the quarter. However, the continued supply constraints with our Yotech products, which we addressed on prior calls, and the lack of supply for our TMR handpieces push our overall revenue growth slightly below our expectations. If we'd been able to meet the demand for Yotech products and sell TMR handpieces, our financial results this quarter would tell a different story. The good news is we expect these issues to be transient, and demand for our innovative product portfolio remains robust. Turning first to Onyx, revenue increased 18% on a gap and non-gap constant currency basis, driven by the strength from aortic valves, which were up 17% in the quarter. Revenue in North America grew 5%, while OUS markets grew 45%. For the full year, ONIX revenue grew over 12% on a GAAP and non-GAAP constant currency basis. We anticipate ONIX revenue growth to remain in the high single, low double digits, and we expect to continue to take market share. Switching gears to Yotech. Excluding the OEM business, Yotech revenue increased 4% year over year on a non-GAAP constant currency basis during the fourth quarter. an increase of 10 percent year-over-year on a full-year basis, and this is even despite the headwinds we face with supply. We've been addressing our Yotech supply issues by hiring and training additional sewers in Germany. I'm pleased to announce that our Yotech manufacturing capacity has increased 39 percent since we initiated these efforts, and we expect this capacity to continue to expand throughout the year as we hire and train additional personnel. In addition to increasing our internal manufacturing capabilities, we are working to secure additional external capacity through a contract manufacturer, which we anticipate onboarding in the second half of this year. As a result of these efforts, we expect supply to increase meaningfully over 2020. As such, we anticipate year-over-year growth trends for Onyx products to accelerate throughout the year, as supply improves and as we launch Enside, Enya, and Evita Open Neo later this year. Moving to our tissue business, we reported solid performance in revenue in this area, which was up 6% for the fourth quarter and 5% for the full year. This was led by our cardiac tissue valve business, which generated 12% in the fourth quarter versus the fourth quarter of 2018. We continue to experience strong demand for our pulmonary tissue valves, which we believe stems from a renaissance in the Ross procedure, as well as improved availability of pediatric heart valves. Revenues for our vascular tissue business were down 1% year over year for the fourth quarter due to ongoing supply issues, but increased from 9.1 million in the third quarter to 9.4 million in the fourth quarter, primarily due to improved supply of long saphenous vein. Our initiative to improve the supply of vascular tissue is starting to ease in our vascular tissue supply business. BioGlue was flat on a constant currency basis compared to the fourth quarter of last year, but up 5% on a constant currency basis for the full year of 2019. We submitted our application for a regulatory approval to the Chinese FDA in February of last year and believe an approval could take up to two years, which puts a possible approval in 2021. Regarding our US per clot trial, enrollment is complete. However, we had a small fire that caused some minimal damage to our pilot manufacturing lab in late Q4. The minor damage caused approximately a three to six month delay to our previously announced timeline. Therefore, we now expect to submit the PMA to the FDA in the second half of 2020. Regarding TMR handpieces, we are still awaiting FDA reinspection of our contract manufacturer's facility. We hope to have these hand passes back on the market in the second half of 2020. As we look to 2020, we expect our product pipeline to begin to contribute to our top line and the core business to perform well. This year, we expect to fully launch the EU three next-generation Yotech products and Nexus. We will also initiate the PROACT 10A trial in the U.S., and we'll continue to invest in our sales channels in Asia and Latin America. During the first quarter, we'll be building inventory and training our customers on our next-generation Yotech products. As we move into the second quarter, we expect to commence limited market releases for Enya, our next-generation low-profile thoracic stent graft for patients with aortic disease, followed by a full market release during the third quarter. Our previous thoracic stent graft, the Evita 3G, was predominantly used in conjunction with our Evita Open Plus frozen elephant trunk, and our extra-designed thoracobdominal stent graft. Enya features a new delivery system that addresses significant challenges of low-profile TVAR devices, which is high deployment forces. This improvement, as well as other product enhancement, gives us a significantly more competitive offering that will allow us to gain market share in the European thoracic stent graft market. As one of the most versatile grafts on the market, Enya is the perfect complement to N-Side, are recently approved off-the-shelf thoracal abdominal device. Similar to Enya, we expect the limited market release of Enscyde to be in the second quarter, followed by a full market release in the third quarter. Many patients with thoracal abdominal disease are either treated with risky invasive open surgical procedures, which are characterized by lengthy hospitalization periods and prolonged recuperation, or with custom-made stent grafts, which can take up to 90 days to manufacture. Ensight is the only off-the-shelf pre-cannulated thoracal abdominal stent graft with inner branches. And Ensight eliminates the waiting period experienced by approximately 70% of patients who typically would require a custom-made stent graft. We anticipate receiving CE mark approval for the Evita Open Neo, which is our next-generation frozen elephant trunk, in the first quarter of May 20. This will be followed by a full market release in the second half of the year. we will update you on important developments regarding its approval status. Turning to Nexus, we conducted a limited market release in the fourth quarter of 2019, and we'll be gradually introducing the product through a broader market release throughout 2020. As a reminder, Nexus is utilized in the last frontier of endovascular aortic repair, the aortic arch. And its deployment in the arch is one of the most sophisticated procedures being performed today. As such, we are investing in the appropriate time and effort to ensure that surgeons are adequately trained to deploy the product. There's a great deal of excitement in the marketplace for this technology, and the case schedule is building nicely. Our initial experience with the product has been very positive, and we're confident that Nexus will be a solid contributor in our product portfolio. As the most comprehensive and technically advanced aortic stem graft portfolio, our Yotech products address the entire aorta from the aortic valve to the iliac arteries. We believe the addition of Nexus, Avita OpenNeo, Enya, Ensign, along with the rest of our aortic repair portfolio, provides us a significant cross-flowing opportunity through our 90-person European direct sales force. Switching gears to Onyx. With the recent FDA approval of PRO Act 10A, our next step is to conduct an investigator meeting with the 60 participating centers. We expect to begin enrollment in the next couple of months and anticipate enrollment to take approximately 18 months. The trial will enroll 1,000 patients at up to 60 centers in North America. If the trial is successful in proving the aortic valve, that aortic valve recipients can be maintained effectively on Eliquis, we believe that Cryolife will become the market share leader in the mechanical valve segment while simultaneously taking share from existing bioprosthetic aortic valves. Such an indication has significant potential to accelerate our onyx business, and based on our market research, could increase the addressable market opportunity for onyx to greater than $600 million. We will continue to invest in our Asia Pacific and Latin America sales channels, and over the next couple of years, we expect to double the number of salespeople in these regions. Finally, before I turn the call over to Ashley for his review of the financial results, I'd like to announce a new initiative that we have begun in response to feedback that we've received from our shareholders, the broader investment community, physicians, and employees. That is, given the evolution of the company after the acquisition of Onyx and Yotech, we should consider rebranding the company. As such, over the next nine to 12 months, we will devote considerable effort to developing a new brand with the intent of launching by the end of the year. The new brand will better represent to all of our key constituents who we are and what we do. We believe the timing of this change made sense as we expect our pipeline to continue to deliver a series of new products that will further transform the company in the years to come. I will now turn the call over to Ashley, who will provide further detail on the fourth quarter, full year 2019 results, as well as our 2020 guidance. Ashley.