Artivion, Inc.

Greetings and welcome to CryoLife's second quarter 2020 financial conference 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 a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lynn Lewis from the Gilmartin Group. Thank you. You may begin.

Good afternoon, and thank you for joining the call today. Joining me today from Cryolife's management team are Pat Mackin, CEO, and Ashley Lee, CFO. Before we begin, I'd like to make the following statements 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 as 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 the press release that was issued earlier today. With that, I'll turn the call over to Cryolife CEO, Pat Mackin.

Hey, thanks, Lynn, and good afternoon, everyone. Thanks for joining. The second quarter of 2020 was filled with a number of challenges as COVID-19 disrupted many facets of our lives. I'm very pleased to report our team responded to these unprecedented challenges with incredible dedication and resolve. I want to thank our entire organization for their outstanding performance, and we have a lot to be proud of. As I will explain later in more detail, we were able to deliver a number of key objectives and initiatives and also deliver solid results. In Q2, we achieved total revenues of $53.8 million, which reflects a decrease of 24% versus the second quarter of 2019 and a decrease of 23% on a constant currency basis. Our revenue decline this quarter was largely driven by the results of the delay, in some cases cancellation, of procedures in April and early May in the various markets that we serve. As hospitals in these regions began resuming procedures starting in May, our revenue likewise began to increase. In April, our revenue was down 39% compared to April of 2019. Our May revenue was down 22% compared to May of 2019. And our June revenue was down 15% compared to June of 2019. While it is impossible to forecast with certainty how COVID-19 will impact our business in the second half of the year, We are cautiously optimistic that we will see continued improvement in our revenue performance for Q3 and Q4 compared to the comparable prior year period. We also anticipate that we will begin to see the benefit from recently launched or soon to be launched next generation Yotech products, as well as positive news on the regulatory approval front that should benefit us in 2021. Based on what we now know today, we expect 2021 to be a very strong year for car lines. Once I've provided some color on our performance for Q2, as well as our expectations for the remainder of 2020, Ashley Lee, our CFO, will review our second quarter financial results and liquidity in greater detail. I will then make some closing comments and open up the line for questions. First, I will update you on the status of key aspects of our business, starting with operations. Since our last update, fortunately, little has changed as our operations have continued to run at or near capacity with few, if any, disruptions. We've been able to further our growth initiatives, fund key R&D projects, execute on $100 million convertible senior note offering, which allowed us to repay our $30 million revolving credit facility and have more cash available for general corporate purposes. Moving on to revenue performance for Q2. All in all, Cryolite has weathered the COVID-19 storm well, due to in large part the fact the vast majority of our products are used in procedures that cannot be postponed at all, or that cannot be delayed for very long. As I indicated previously, revenue dipped sharply in April 2020, but then improved thereafter as Europe, Asia, and certain U.S. geographies resumed more procedures, including those in which our products are used. As hospitals and providers have learned more in their ability to deliver healthcare, even in the face of, and in some cases, a resurgence of the COVID-19 pandemic, We are optimistic that given the nature of our products, we can deliver solid revenue performance for the back half of 2020 and enter 2021 on very solid footing. Our commercial team has shown that they can continue to supply devices and support procedures, both in person and virtually, and employ creative solutions to ensure continued customer service and patient care. We expect their know-how and expertise will further solidify our excellent reputation with customers and strengthen our leadership position in aortic repair. We will also continue to diligently manage our expenses while strategically investing for growth now and when the pandemic subsides. On the manufacturing front, we've continued to avoid any significant supply chain disruption. And each of our three manufacturing sites are functioning at or near capacity. At each of these sites, we have safety protocols that we've implemented earlier this year remain in place. The slowdown in procedure also has allowed us to improve our Yotech inventory position, and we remain on track to have our second SOAR sewing supplier by the end of the year. As Ashley will further detail in his remarks, we remain in a position of financial strength. In June, we completed a $100 million convertible debt offering using some of the proceeds to repay our $30 million revolver. In addition to our encouraging revenue performance in the quarter, good expense management, and enhanced financial position, we made meaningful progress on several other initiatives. First, we made continued progress with our Yotech product launches. As of the end of the second quarter, we initiated the limited market release for Avito Open Neo and Ensign, and anticipate a limited market release for Enya in October. We also resumed the limited market release for Nexus. We anticipate full market releases for all three new Yotech products later in 2020 and as we move into 2021. As we mentioned on our last call, our teams are continuing to gear up to train physicians. We're building supply to support the full market launches of the three Yotech products, and we currently have sufficient Nexus inventory for the remainder of the year. Second, in May, we announced the initial enrollments of the ProLac 10A trial. which is our prospective randomized clinical trial to determine if patients with the onyx aortic valve can be maintained safely and effectively on Eliquis versus Warfarin. The trial is expected to enroll approximately 1,000 patients across 60 sites in North America. Enrollments occurred in the second quarter, notwithstanding the pandemic, as some institutions continue to enroll patients in important clinical trials, and patients did not need to have implant procedures to participate in the trial. As a result, if the trial meets its endpoints, we believe we can still achieve FDA approval for the use of a Pixaband with the Onyx Aortic Valve in 2024, and that the Onyx Aortic Valve will become the market share leader in the mechanical valve market, as well as take share from the existing bioprosthetic aortic valve market. And lastly, on the regulatory front, we remain on track before year-end to file our PMA for Perclod in the U.S. and our response to the Chinese FDA for Bioglue. With that, I will now turn the call over to Ashley for a detailed financial review of the quarter.