Artivion, Inc.

Good day, ladies and gentlemen, and welcome to the Artivian 3Q 2022 Financial Conference Call. All lines have been placed on a listen-only mode, and the floor will be open for your questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Sam Benzinger from the Gilmartin Group. Sir, the floor is yours.

Good afternoon, and thank you for joining the call today. Joining me today from our Jivian'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 and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements May it add 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 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. Now I'll turn the call over to Artivian CEO, Pat Mackin.

Hey, thanks, Sam. I'm pleased to report that our solid business momentum continues as we've now delivered our fourth consecutive quarter of strong constant currency top-line revenue growth. Constant currency total revenue growth was 11% compared to Q3 in the first nine months of 2021. Further, we remain on track to deliver on each of our commitments we made at our investor meeting in March. For the third quarter, we saw top-line growth across all of our product categories. More specifically, on a constant currency basis compared to Q3 of 22 versus Q3 of 2021, onyx grew 19%, tissue processing grew 13%, bio-glue grew 9%, and stentgrass grew 7%. For the first nine months of the year on a constant currency basis, stentgrass are up 22%, Onyx is up 14 percent, tissue processing is up 10 percent, and BioWu is down 4 percent, all compared to the first nine months of last year. Regarding BioWu, we have secured derogation and derogation extensions that will allow us to continue selling in virtually all European countries through year end, by which time we believe we should have the CE mark. In the third quarter, while our derogation extension requests were pending, it was unclear if we'd be able to continue to sell BioGlue into the UK and France in Q4. As a result, we estimated an additional 1.5 million in orders in Q3 that we believe typically would have been placed in Q4. Fortunately, in October, we received these derogation extensions, by which time the Q3 orders for BioGlue to those countries has already been fulfilled. Therefore, we expect BioGlue's contribution in Q4 to reflect this increase in the Q3 orders. If customers had not made these increased buyable purchases in Q3, our total revenue growth in the third quarter and the first nine months of the year would have been 10%, both on a constant currency basis compared to the prior year. Our success on all these fronts has reinforced our confidence that we can deliver on our three growth initiatives we outlined in our investor day in March, which we continue to believe will drive double-digit constant currency revenue growth through 2024 and beyond. As a reminder, our three initiatives are as follows. First, we will drive continued growth in onyx in our aortic stent grafts. Second, we continue to benefit from our investments in our commercial channels and new regulatory approvals in Asia Pacific and Latin America. And third, we will drive growth in 23 and beyond through PMA approvals in the U.S. for per clot and the onyx project mitral low INR indication. As mentioned previously, ONIX revenues grew 19% on a constant currency basis in the third quarter of 2022 compared to the third quarter of last year, driven by strength in the U.S., where revenues grew 21% compared to last year, and in Europe, where revenues increased 25% compared to last year, both on a constant currency basis. For Stentgrass, revenue in the third quarter increased 7% on a constant currency basis compared to the third quarter of last year. Even though our year-over-year growth in stent graph revenue was down sequentially compared to the second quarter, year-to-date growth at the end of the third quarter stands at 22% on a constant currency basis. Our next initiative is to expand our presence in Asia Pacific and Latin America through new regulatory approvals and commercial footprint expansion, which also remain on track. I'm pleased to report they are continuing to execute very well on this strategy as demonstrated by the third quarter constant currency revenue growth of 25 percent and 22 percent in Asia Pacific and Latin America, respectively. We continue to expect these regions to be important growth contributors over the coming years. Regarding our third initiative, we remain on track to receive regulatory approvals for the low INR label of the onyx mitral valve and for per clot by the end of the year. If the low INR label is approved, we believe we will take significant market share in the U.S. with the onyx mitral valve, just as we've done and continue to do with the onyx aortic valve. If per clot is approved by December 31st, 2022, we will receive a $25 million payment from Baxter for that milestone under our divestiture agreement, and we'll begin to generate revenue for supplying per clot to Baxter for approximately two years thereafter. In addition to our progress on each of these initiatives, we continue to make progress on the AMDS clinical trial. For AMDS, we have 11 patients enrolled in our PERSEVERE trial, which is a non-randomized clinical trial in up to 25 U.S. centers, 100 patients who have been experiencing acute type A dissection. The combined primary efficacy and safety endpoints for the trial are the reduction in all-cause mortality, new disability and stroke, myocardial infarction, and new onset renal failure requiring dialysis, as well as re-expansion of the true lumen of the aorta. We now anticipate completing a full enrollment in the first half of 2023. Following a one-year follow-up period of so many trials meets its endpoints, we anticipate that we should receive FDA approval for the AMDS in early 2025. In addition, our partner, Endospan, is making good progress on the USID Triumph trial for its Nexus aortic arch stent graft system. In that trial, there were approximately 29 patients already enrolled and treated, and a total of 40 patients enrolled and approved for treatment. Endospan estimates trial completion in June of 2023 and a PMA approval in 2025, again, assuming the trial's endpoints are met. To reiterate, if these PMA trials proceed as anticipated, we anticipate FDA approval for AMDs and Nexus in 2025. At that time, assuming we exercise our option for Endospan, These products would increase our addressable market opportunity by an estimated $900 million. Regarding PROACT-10A, while we were obviously surprised and disappointed by the termination of the trial, as recommended by the Data Safety Monitoring Board, our number one priority is always and will be patient safety. I'd like to put into perspective what the impact of stopping the PROACT-10A trial means for Artimion. If PROACT-NA had been successful, we would not have seen any revenue impact associated from the positive trial outcome for another three years if the trial had remained on schedule. Despite the termination of the trial, our current year revenue guidance and the three-year revenue outlook we presented our AMS day has not changed. Second, we believe, as many KOLs believe, that our mechanical aortic valve is the best in the market. Our aortic valves have taken market share every year since we acquired Onyx, and we do not expect that to change. No doubt a positive trial outcome would have been beneficial in accelerating the pace of our market share gains for the aortic valve, but we fully expect the onyx valve business to continue to grow with or without a positive trial result due to its superior clinical benefits and indications over competitors. Third, our growth drivers remain unaffected, and our pipeline is poised to add more than a billion dollars in the addressable market by the time Proactin-A would have been completed. We therefore still have the opportunity to substantially grow our revenues and earnings. Finally, there are positive financial implications from shutting down the trial. The majority of the $10 million we expected to spend on Proactin-A in each of the years 23 and 24 will now largely be redirected to offsetting the impact of inflationary pressures, enhancing cash flows and EBITDA. Clinical trial setbacks are unfortunately an inherent part of innovation, and our product portfolio exemplifies many successes as we continue to do so. We will continue to prioritize and support innovation as we seek to develop products and improve the lives of patients around the world. With that, I'll now turn the call over to Ashley.