Artivion, Inc.

Welcome to the Artivian third quarter 2023 financial conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I will now turn the call over to Lane Morgan from Gilmartin Group. Thank you. You may begin.

Thanks, Operator. Good afternoon, and thank you for joining the call today. Joining me today from Artivian's management team are Pat Matkin, 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 made as to the company's or management 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 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. You can also find a brief presentation with detailed highlights on the today's call on the investor relations section of the Tivian website. Now I'll turn it over to our Tivian CEO, Pat Matkin.

Hey, thanks, Lane, and good afternoon, everyone. I'm pleased to report we made outstanding progress on our goals this quarter. As you will hear today, the team has made substantial progress across the board in the third quarter, commercially, operationally, and financially. In addition to delivering top and bottom line growth, we also achieved clinical development milestones. As of today, we have two patients remaining to complete the enrollment in the Persevere clinical trial in October. Also, AMDS and Honest Clinical Study results were presented at EX, the European Society of Cardiac Surgery, that demonstrated unprecedented clinical outcomes. I'll detail these positive developments one by one, starting with our financial results. We delivered constant currency revenue growth of 12% year-over-year in the third quarter, resulting in $87.9 million in revenue. Our strong performance was led by improved revenue growth in our Stancraft business, which increased 22%, followed by Onyx 13%, Tissue Processing 12%, when compared to the third quarter 2022 on a constant currency basis. We're also benefiting from expansion of our commercial footprint through regulatory approvals in new geographies. Our strong top line performance led to $13.9 million in non-GAAP adjusted EBITDA in the third quarter. This is a 34% increase compared to the third quarter of last year. We expect our strong momentum in the first nine months to continue through the fourth quarter and into 2024. We're very optimistic about our future as we've ever been. At our investor day in March of 2022, we committed to delivering compounded annual double-digit constant currency revenue growth through 2024, also driving further operating leverage and adjusted EBITDA of $75 million in 2024. Again, we are reiterating our expectation to achieve these goals. Our commercial team is also executing extremely well. As I mentioned earlier, StentGraph revenues grew 22% on a constant currency basis in the third quarter compared to the third quarter of last year. driven by improved supply and strong performance in AMDS and Nexus. We anticipate demand to remain strong for the balance of 23 and beyond for our Stancraft products, which should continue to sustain our strong revenue performance. Additionally, Onyx revenues increased 13% compared to the third quarter last year on a constant currency basis. And we continue to take market share globally with the only mechanical aortic hard valve that can be used with an INR of 1.5 to 2.0 in the aortic position. We believe our valve is the best aortic valve on the market, and our market share gains each year clearly support this view. And finally, tissue processing revenues increased 12% compared to the third quarter of last year on a constant currency basis, primarily due to pricing initiatives. As you may recall, part of our organic growth story has been to expand into new markets. We have done that effectively and have successfully expanded our operations in APAC and Latin America. Through new regulatory approvals and commercial footprint expansion, APAC and Latin America delivered constant currency revenue growth of 21% and 22%, respectively, compared to the third quarter of last year. We expect these regions to be important growth drivers over the coming years as we continue to leverage our industry-leading product portfolio further into these regions. In addition to our strong financial performance, we made significant progress on our clinical programs. and saw extremely impressive data readouts for ONIX and AMDS at the recent European Association of Cardiac Surgery in Vienna. First, I'm extremely pleased to report that we've nearly completed the enrollment for PERSEVERE, which is our ID trial for the USPMA, consisting of 93 participants who've experienced an acute type A aortic dissection. At this point, we only have two patients remaining to complete enrollment in the trial. As a reminder, the combined primary efficacy and safety endpoints of this trial a reduction in all-cause mortality, new disabling stroke, myocardial infarction, and new onset real failure requiring dialysis, as well as the occurrence of gain tears, which are distal and aftemotic new entry tears, which are associated with increased risk for reintervention and mortality. Gain can occur in up to 70% of patients following hemiarch repair without AMDS and allows continued blood flow into the false lumen created by the dissection. Interim results of the PERSEVERE study, which is our FDA pivotal trial, have shown there have been no Dane tears detected in any patients treated with AMDS, nor were there any Dane tears reported in the DART study after three years of follow-up. As I will discuss shortly, clinicians have so far seen incredible outcomes with AMDS across these endpoints. Additionally, the FDA has granted us continued access for approval to continue our enrolling of up to 40 additional patients in the PERSEVERE study So physicians and patients in need can access this life-saving technology while we pursue regulatory approvals. Following the one-year follow-up period and assuming the trial meets its endpoints, we continue to believe that we should receive FDA approval for the AMDS device in the second half of 2025. In addition, our partner, Endospan, is making progress on its US IDE trial called TRIOMPH for its Nexus Aortic Repair Stent Graph System. As a reminder, the PMA will be based on the results of 60 patients in the chronic dissection arm of the trial. At this point, there are 41 patients enrolled out of 60 in the trial. Based on the current enrollment rate, the pivotal arm of this trial should enroll in the first half of 24 and after a year of follow-up and a year for regulatory review. This would put Nexus on track for approval sometime in mid to late 2026. To reiterate, If these PMA trials proceed as anticipated, we expect FDA approval on AMDS in 25 and Nexus in 26. At that time, assuming we exercise our option for RendaSpan, these two products would significantly increase our addressable market opportunity. At the recent EX meeting in Vienna, two of our products were featured in late-breaking presentations. First, interim data from the AMDS Persevere clinical trial which is a 30-day combined primary endpoint for data in the first 52 out of 93 patients that were enrolled, showed clinically meaningful reduction of all-cause mortality in primary major adverse events. As a reminder, the safety endpoint for this ID trial is based on litter controls for patients with malperfusion. In this reference cohort, 58% of patients had greater than or equal to one major adverse event. The target goal of this trial was a 31% reduction to reach 40% of patients with greater than or equal to one major adverse event. The data in the 52 out of 93 patients that were presented at EX showed that 21% of the patients had greater than or equal to one major adverse event. That's a 64% reduction. We're incredibly pleased with the very positive interim results which have demonstrated the life-saving nature of AMDS, including a statistically significant reduction in mortality, renal failure causing dialysis, and myocardial infarction. We expect this data will drive AMDS device adoption and hence revenue growth in markets where AMDS is currently approved. Second, data from our 510-patient Onyx heart valve low INR post-market study with a mean follow-up of 3.4 years showed a statistically lower composite primary endpoint of thromboembolism, valve thrombosis, and major bleeding. These results were driven by an 85% reduction in major bleeding and a 73% reduction in all bleeding. This data reflected an improvement in outcomes compared to the original ONIX low INR pivotal arm, which showed about a 63% reduction, first published in 2014. This is the basis of our current low INR label. With these data, we are increasingly confident in our ability to gain further market share globally with ONIX. It's the only mechanically aortic heart valve that can be maintained in an IR of 1.5 to 2.0, which is backed by recommendations from ACC, the American College of Cardiology, and AHA, the American Heart Association, guideline for patients with valvular disease. Finally, I want to let you know that we are discontinuing our pursuit of the lower RNR indication in the U.S. for onyx mitral valves. As we previously reported to you, while the trial did not show an increase in thromboembolic or valve thrombosis event rates, it missed its primary non-inferiority endpoint. After several discussions with the FDA, in which they informed us it would require additional clinical data to consider the indication for approval, we've determined not to invest in the significant time and resources it would take to secure the additional data. We previously stated that securing PMA approval for low INR indication for the onyx mitral valve was not critical for us to achieve our growth objectives that we've communicated. Furthermore, I'm pleased to report that our onyx mitral valve business has increased 18% year-to-date compared to the same period in 2022. We believe this is partially due to the compelling clinical results for patients in the trial who've been treated with the onyx mitral valve and were being maintained at a lower INR. Based on the positive data from this trial, we do plan to seek change in the existing guidelines for use of warfarin in connection with the onyx mitral valve. as we did with the onyx aortic valve. I want to thank our investigators and subjects who participated in the trial. Before I turn the call over to Ashley, I'd like to take a minute to talk to you about the impact of the GLP-1 receptor agonist class on medical device stocks. Right now, investors are trying to determine what the impact these drugs will have on medical procedures. Over the past couple of weeks, myself personally and our team have met with over 25 cardiovascular epidemiologists, preventive medicine cardiologists, cardiac and vascular surgeons regarding the potential impact of this class of drugs on the disease states that we treat, specifically aortic valve disease in patients under 65 and aortic dissections in aneurysms. Based on the clinical data published to date, as well as the extensive research into risk factors of these diseases, Our research indicates that GLP-1s will not have any impact on our incidence rates of these diseases we treat and the corresponding addressable market opportunity. We've included two slides, slide 11 and 12, in the presentation included in our investor relations section of our website that summarize our research. More specifically, regarding aortic valve disease, the patient population we treat are under the age of 65. The primary risk factor basically is linked to a pre-existing condition for those patients that have a congenital valve malformation called a bicuspid aortic valve, which make up about 60% of the patients that we treat. Further, there are very large studies with over 100,000 patients that have shown there's no relationship between obesity and aortic stenosis or valve replacement in ages under the age of 65. Based on our conversations with key opinion leaders and based on the significant data stemming from these studies on the matter, GLP-1s will have minimal to no impact on the incident rates of aortic valve replacement surgery in patients under the age of 65. Similarly, for aortic dissections and aortic aneurysms, the primary risk factors are pre-existing conditions for those patients with these disease are familial or connective tissue disorders such as Marfan's, high blood pressure, smoking, and high cholesterol. Similarly, these very large studies for aortic aneurysms and dissections have shown no relationship to obesity. Further, GLP-1s have minimal impact on blood pressure. Based on our conversations with key opinion leaders and based on the significant number of studies on the matter, GLP-1s should have minimal impact on the incident rate for aortic dissections and aneurysms. Furthermore, even if this category did have some minimal impact on our adjustable markets, you must keep in mind that the largest growth opportunities for Artivion over the next several years is the introduction of our novel stent graft technologies in the U.S. and Japan. and other developed markets around the world. And in those markets, we are starting from zero. So, in conclusion, we do not feel GLP-1s will have a meaningful impact on the incident rates of the disease states that we treat. And even if they did have some minor impact, the new adjustable markets that we are eventually moving into provide ample opportunity for us continuing to develop, delivering double-digit growth on the top line for many years. With that, I'll now turn the call over to Ashley.