Artivion, Inc.

Greetings. Welcome to the CryoLife first quarter 2021 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 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, Brian Johnston from the Gilmartin Group. Thank you. You may begin.

Thanks, operator. Good afternoon, and thank you all for joining the call today. Joining me from Cryolife's management team are Pat Mackin, CEO, and Ashley 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 that are 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 for 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 these 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 Krylov's CEO, Pat Mackin. Pat?

Hey, thanks, Brian, and good afternoon, everyone. Thanks for joining us this afternoon. As you can see from our results, our strategy is working, and the recovery in our business is ahead of where we thought it would be at this time. As you will hear, our business does continue to be impacted by COVID-19, especially in Europe, where we have a significant presence. But our business has remained resilient in the face of COVID-19 and continues to rebound, which we believe bodes well for the future. We made substantial progress in the first quarter and continue to see demand build for our recently launched innovative aortic repair products. We also continue to invest in growth initiatives, including our R&D programs and clinical trials. Despite continued headwinds from COVID-19, we achieved 7% revenue growth on a GAAP basis and 3% pro forma constant currency revenue growth for the first quarter of 21 versus the first quarter of 2020. When we last spoke to you in mid-February, the vaccine rollout was just beginning to accelerate in the U.S. Unfortunately, many countries in Europe were starting to experience renewed spikes in COVID-19 infections and were reimposing lockdowns, which continue to this day. We expressed a cautious outlook for the first quarter due to these factors, coupled with the anticipated decrease in tissue supply, while we resolved the tryst saline issue that arose in the fourth quarter of last year. Fortunately, as the quarter unfolded and we experienced improved conditions in the U.S., as well as the positive impact from our new product launches, increased geotech inventory, and less than anticipated impact from our tissue processing revenues, our Q1 2021 revenues were stronger than anticipated. For example, in the first quarter of 2021, AMDS increased by 67%. Nexus revenues increased by 87%. and Yotech revenues increased by 11%, all on a pro forma constant currency basis compared to the first full quarter of 2020 last year. In addition, in the first quarter, on a constant currency basis, we saw Onyx revenues increased 6% compared to the first quarter of last year. Onyx aortic valve revenues grew 16% in North America. As a reminder, the Onyx aortic valve has a significant clinical advantage for patients over competitive valves. in that it's the only FDA-approved mechanical aortic valve that can run a lower INR from 1.5 to 2.0, rather than 2.0 to 3.0. As you've all seen, the U.S. made significant progress on the vaccine rollout since our last earnings call. And as a result, we've seen improved hospital management of COVID, and some of these conditions have improved in the U.S. Unfortunately, the vaccine rollout in Europe has not been as good as it is in the U.S., and there's been a COVID-19 resurgence. Many European countries are back in lockdown, and Brazil, a growth market for us, is currently experiencing its worst impact from COVID-19. However, if, as we hope, the vaccine rollouts and vaccine adoption continue to progress and conditions improve in these regions, we expect that pro forma revenue should accelerate later this year. Ashley will provide more commentary on our outlook for Q2 later in the call. As I explained in our last call, Our near-term plan is to accelerate revenue with three key initiatives. First, the commercialization of our five new aortic and stent graft products in Europe. These are AMDS, Nexus, our next-generation Yotech products, N-Side, Evita Open Neo, and Enya. Second, the continued expansion into Asia Pacific and Latin America. Third, near-term regulatory approvals in major markets. This includes per-clot PMAs, Proact Mitral PMA, and Bioboom in China. I will walk you through an update on each of these initiatives, starting with a review of our five new aortic stents and stent grafts. First, AMDS is the world's first artery modeling hybrid device used for treatment of acute type A aortic dissections, and we remain very optimistic. As I noted earlier, during the first quarter, we posted $1.3 million in revenue, an increase of 67% on a pro-forma constant currency basis over the first quarter of 2020. This growth continued or occurred despite the regional lockdowns in Europe through a good portion of the quarter. We also continue to secure marketing authorizations in select markets around the world, which with additional regulatory approvals, we expect to secure positions as very well for further increases in AMDS, particularly when the pandemic dissipates in these key markets. Second, Nexus posted revenues of $408,000, an increase of 87%. on a constant currency basis compared to the first quarter of 2020. We believe these results would have been better for Nexus as well as for other products if not for the renewed lockdowns and travel restrictions in Europe. For example, we had several Nexus cases scheduled during the first quarter that were rescheduled as a result of the latest spike in infection rates. We still continue to see Nexus cases scheduled for the upcoming weeks and months and remain optimistic regarding the prospects for this technology. Third, N-Side is our newest device in our portfolio to treat thoraco-abdominal aneurysms with endovascular stent grafts. Our revenues for this product line, which include N-Side and the extra design portfolio, grew 48% on a constant currency basis when compared to Q1 of 2020. Fourth, Evita Open Neo is our newest product in our frozen elephant trunk category. This is to treat dissections and aneurysms of the aortic arch. Revenues from this product line, which include Avita Open Plus and Avita Open Neo, grew 30% on a constant currency basis compared to Q1 of 2020. Fifth, regarding Enya, we expect to resume our market release later in 2021. We expect demand for these five products to build as vaccinations and vaccine adoption accelerates, as well as the market adoption for these products continues. In addition, we expect to benefit from improved Yotech inventory, resulting from our own internal efforts and the onboarding of a second-source sewing supplier. Moving to our next initiative, international expansion in Asia Pacific and Latin America through new regulatory approvals for existing products, as well as expansions of our commercial footprint in these regions. These efforts are beginning to pay dividends despite the pandemic. Our revenues in Asia Pacific increased 11% on a pro forma constant currency basis in the first quarter of 2021 compared to the first quarter of 2020. Unfortunately, in Latin America, Brazil continues to be severely impacted by COVID-19, and our business in that region is disproportionately weighted in Brazil. We anticipate that growth will accelerate in both these regions as the pandemic subsides and we gain additional marketing authorizations in both Asia Pacific and Latin America. Our third initiative is gaining three near-term regulatory approvals in major markets. More specifically, we expect to be submitting PMAs for Perclot and Proact Mitral in the second half of 2021, as well as continuing to pursue China FDA approval for BioGlu. That, if approved, should help accelerate revenue in 2022. On this initiative, the first program is the PMA for Perclot. We will be submitting for both open surgery and laparoscopic indications across multiple specialties, as well as for large-scale manufacturing capabilities. We are on track to submit our PMA to the FDA in Q3 2021. Second, we expect to submit our PMA in mid-2021 for regulatory approval for a lower INR label for the onyx mitral valve. This is similar to our INR label for our onyx aortic valve. If this new label is approved for the mitral valve, patients with the onyx mitral valve will be able to be maintained on lower doses of Coumadin compared to patients implanted with other mechanical valves. For example, the current standard of care is Coumadin with an INR rate from 2.5 to 3.5, and we'll be going after a label of Coumadin for INR levels from 2 to 2.5. This will lead to significant clinical benefits for patients. We believe that this approval for our mitral valve will enable us to take significant market share in the mechanical mitral heart valve market similar to the market share gains we've experienced with our onyx aortic valve. Third, as it relates to regulatory approval for BioGlu in China, the NMPA, which is the Chinese equivalent to the FDA, has recently requested additional data that may require additional testing. This request for additional testing makes it unlikely, in our view, that we can receive approval for BioGlu in China during 2021. We continue to have discussions with the NMPA and provide an update on our approval timeline when we have further clarity. This potential delay does not meaningfully impact, in our view, our accelerating near-term revenue growth opportunity as I described earlier. In addition to our progress on these initiatives, we also continue to make very good progress on our mid-term pipeline with key products that are currently in U.S. clinical trials or ones for which we expect to start in U.S. clinical trials later this year. These three trials are PROACT-10A, NEXUS, and AMDS. We continue to make significant progress on the enrollment in our PROACT-10A trial. Our prospective randomized clinical trial to determine if patients with the onyx aortic valve can be maintained safely and effectively on Eliquis versus Warfarin. We currently have 51 sites qualified and beginning enrollment, 38 sites actively enrolling, and over 235 patients currently participating in the study. Feedback from surgeons and patients participating in the trial remains very positive. Despite the pandemic headwinds and assuming the trial meets its endpoints, we believe we can still achieve FDA approval by late 24, early 25. If we successfully obtain such an approval, we believe the Onyx Aortic Valve will become the market share leader in the aortic valve market in patients under the age of 70. In addition to the PROACT-10A trial, our partner Endospan is making great progress on its USID trial for the Nexus device, and that trial is known as TRIOMPH. Finally, we are on track to submit our IBE for our recently acquired AMDS device in mid-2021, which, if submitted then, would put us on track to begin our AMDS clinical trial by year-end. If these trials proceed as we expect, we anticipate FDA approvals for PROACT-NA, AMDS, and NEXUS by late 24, early 25, which would give the company an additional $1 billion in total addressable market at that time. With that, I'll now turn the call over to Ashley.