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spk12: Greetings and welcome to the Artivion fourth quarter and year end 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I will now turn the call over to Lane Morgan, from the Gilmartin Group. Thank you. You may begin.
spk01: Good afternoon, and thank you for joining the call today. Joining me today from Attivion's management team are Pat Matkin, CEO, and Lance Barry, 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 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. You can also find a brief presentation with details highlighted on today's call on the investor relations section of the Octavian website. Now I'll turn it over to our Octavian CEO, Pat Mackin.
spk06: Thanks, Elaine, and good afternoon, everybody. I want to start off our call today by welcoming Lance Barry, our new Executive Vice President and Chief Financial Officer. Lance most recently served as Executive Vice President, Chief Financial Officer, and Operations Officer at Wright Medical until the acquisition by Stryker in November of 2020. We are thrilled to have Lance join our team during this exciting time. I am confident his broad expertise and proven leadership in med tech will add significant value to Artivion as we enter the next phase of profitable growth. I'd also like to thank Ashley Lee for his many years of dedicated service to Artivion His contributions, no doubt, helped make Artivion the outstanding company we are today. Now on to our fourth quarter and full year 2023 results. 2023 was an outstanding year for Artivion, and I'm pleased to report that we achieved total company constant currency revenue growth just over 12% for the full year of 2023 compared to the full year of 2022. In addition to exceeding our top line growth revenue target, we achieved adjusted EBITDA growth of nearly 30% year-over-year, enabling us to deliver positive free cash flow while making strides in advancing our clinical programs and further expanding our global footprint. Our achievements throughout 2023 culminated in a particularly strong Q4 as we delivered constant currency revenue growth of 15% year-over-year, resulting in $93.7 million in revenue. Our performance was driven by improved revenue growth in our onyx business, which increased 19%, followed by tissue processing at 18%, bio glue at 11%, and stent grafts at 8% growth, each when compared to the fourth quarter of 2022, all on a constant currency basis. We've also benefited from the expansion of our commercial footprint through regulatory approvals across new geographies, especially in Latin America and Asia Pacific. Our strong top line performance led to $15.3 million in non-GAAP adjusted EBITDA in the fourth quarter, which is a 40% increase compared to the fourth quarter of last year. We expect our strong momentum in the fourth quarter to continue into 2024. From a product perspective, as I mentioned earlier, ONIX revenues increased 19% compared to the fourth quarter of last year on a constant currency basis, as we continue to take market share globally, and have the only mechanical aortic heart valve that can be maintained in an INR 1.5 to 2.0. We believe our valve is the best aortic valve on the market. Our market share gains each year and the recently presented results of the ONIX post-approval data, which showed an 85% reduction in major bleeding, clearly support our view. Tissue processing revenues increased 18% compared to the fourth quarter of last year on a constant currency basis. due primarily to pricing initiatives and the increase in volume of the ROS procedure. We expect continued double-digit growth in our tissue business in 2024, driven primarily by our significantly improved supply of our proprietary Synagraph pulmonary valve. And lastly, StantGraph revenues grew 8% on a constant currency basis in the fourth quarter compared to the fourth quarter of last year, driven by improved supply and strong performance in AMDS outside the U.S. We anticipate demand to remain strong through 2024 and beyond for our StentGraph products, which should sustain and continue our strong revenue performance. Our results were also driven by the continued progress we are making expanding into new markets. Through new regulatory approvals and commercial footprint expansion in Asia Pacific and Latin America, both delivered constant currency revenue growth of 19% compared to the fourth 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 continue to advance our clinical programs and show leadership in the aortic field with two late-breaking science presentations at the STS Annual Meeting in San Antonio. First, the full dataset from the AMDS Persevere Clinical Trial And second, the interim data from the Nexus Triumph Clinical Trial. First, in November of last year, we completed the trial enrollment of Persevere, our IDE clinical trial for PMA approval, which consists of 93 patients who've experienced an acute type A dissection. I'm pleased to report that the trial methods combined primary efficacy and safety endpoints, demonstrating a statistically significant reduction in all-cause mortality in the primary endpoint of major adverse events, as well as no occurrence of DANE, which are associated with increased risk for re-intervention and mortality. As a reminder, the adverse events called MAEs, which is the MAE endpoint for the ID trial, is based on historical control of patients with malperfusion. In this reference cohort, 58.2% of patients had greater than or equal to one major adverse event. The target goal in the trial from the FDA was a reduction in this endpoint to 40% of patients with greater than or equal to one MAE. The recently presented 30-day data at STS showed only 28% of the patients had greater than or equal to one major adverse event, representing a 52% reduction compared to the standard of care hemiarch procedure. As it relates to Dane tears, for context, Dane occurs up to 70% of patients following hemiarth repair without AMDS. Results from the full IDE dataset have shown there have been no Danes at all detected in any patients treated with AMDS, nor were there any Dane tears reported in DART study after three years of follow-up. Critically, the data up to 30 days also demonstrated a statistically significant 72% reduction of all-cause mortality, a truly revolutionary result. Second, the interim data from the NEXUS Triumph USID trial included 22 patient study participants, demonstrated a 9% mortality, no detected strokes, paraplegia, or renal failure in any patients treated with NEXUS aortic arch stent graft system. As of today, there have been 42 of 60 patients enrolled in the primary endpoint of the NEXUS trial, and it remains on track for approval in 2026. In summary, we're very excited about these two new data prints, which, assuming we exercise our option to acquire Endospan, should accelerate stent graft growth in markets where the products are currently approved. If these PMA processes proceed as we anticipate, we would expect PMA approval for AMBS in 2025 and Nexus in 2026. At that time, again, assuming we exercise the option for Endospan, these two products would significantly increase our addressable market opportunity. Lastly, on our R&D pipeline, our third-generation frozen elephant trunk used to replace the entire aortic arch called our SIBO LSA is in the final testing stages, and we currently expect to start the USID trial later this year. I look forward to providing additional updates on our progress in future calls. With that, I'll now turn the call over to Lance.
spk17: Thanks, Pat, and good afternoon, everyone. Before I begin, I'd like to remind you to please refer to our press release published earlier today for information regarding our non-GAAP results, including a reconciliation of these results to our GAAP results. Additionally, all percentage changes discussed will be on a year-over-year basis, and revenue growth rates will be in constant currency unless otherwise noted. Revenues were 93.7 million for the fourth quarter of 23, 2023, up 15% compared to Q4 of 2022. Non-GAAP adjusted EBITDA increased approximately 40% from $11 million to $15.3 million in the fourth quarter of 2023. And after generating $5.8 million of free cash flow in the third quarter of 2023, we generated $7.4 million of free cash flow in the fourth quarter. Importantly, we were free cash flow positive for the full year 2023 and representing a critical milestone achievement for our tibion. As importantly, we expect that free cash flow will continue to be positive in 2024. From a product line perspective, onyx revenues grew 19%, tissue processing revenues increased 18%, bio-glue revenues increased 11%, and stent graft revenues grew 8% in the fourth quarter of 2023. On a regional basis, revenues in both Asia Pacific and Latin America increased 19%, while North America increased 17% and EMEA increased 10%, all compared to the fourth quarter of 2022. Gross margins improved to 65% in Q4, compared to 64% in the fourth quarter of 2022. This increase was driven by price increases in product mix, partially offset by inflationary impact on materials and labor. General administrative and marketing expenses in the fourth quarter were $50.3 million compared to $38.5 million in the fourth quarter of 2022. Non-GAAP general administrative and marketing expenses were $47.7 million compared to $41.9 million in the fourth quarter of 2022. R&D expenses for the fourth quarter were $7.6 million compared to $8.3 million in the fourth quarter of 2022. Other income expenses include $5.8 million in net interest expense and foreign currency translation gains of approximately $2.2 million. On the bottom line, we reported gap net loss of approximately $4 million, or 10 cents per fully diluted share, in the fourth quarter of 2023. Non-gap net income was $4.6 million, or 11 cents per share in the fourth quarter. As of December 31, 2023, we had approximately $58.9 million in cash and $312 million in debt. It is important to note that this does not contemplate the impact of our recently closed comprehensive credit agreement, which I will speak to shortly. And now for our initial outlook for 2024. We expect to continue building on our momentum, enabling us to achieve as-reported revenues in the range of $382 to $396 million. At current FX rates, the year-over-year impact on revenue is expected to be negligible. Therefore, this range represents revenue growth of 8% to 12%, both as reported and on a constant currency basis. With our continued top line revenue growth and general expense management, we expect adjusted EBITDA to be in the range of 68 to 72 million for the full year 2024, representing 26 to 34% growth over 2023, and 280 basis points of adjusted EBITDA margin expansion at the midpoint of our ranges. We expect gross margins to remain at levels similar to 2023. We expect to continue to drive significant leverage from our global sales force and G&A infrastructure. Additionally, R&D expense is expected to remain relatively flat as a percentage of sales. I would like to proactively note that our guidance range is below the 75 million that we originally targeted for 2024 at our March 2022 investor day. There has been no change to our commitment to drive significant adjusted EBITDA growth in 2024 as evidenced by our expectation for 30% year-over-year growth at the midpoint of our range, which is three times our midpoint top-line growth rate. We are driving this level of improvement while maintaining our investment levels in R&D as a percentage of sales. Driving strong adjusted EBITDA growth is a top priority, but not at the expense of the investments we need to make for the future. We feel that the strength of our underlying business, our longer-term growth outlook, and our balance sheet today validate this approach. In regard to our capital structure, we are very pleased to have recently closed a comprehensive non-diluted financing for $350 million of senior secured interest-only credit facilities with six-year maturities. The facilities include an initial $190 million term loan, a $60 million revolving credit facility, and an additional $100 million in unfunded delayed draw term loan that may be drawn to refinance our convertible bonds at any time prior to their maturity in July 2025. As a reminder, our convertible notes do not contain any financial covenants. The initial $190 million term loan and $30 million from the revolving credit facility were drawn at close, along with the use of some cash on our balance sheet to retire the existing senior secured credit facilities and pay related transaction expenses. Overall, this credit agreement, coupled with our strong financial performance, gives us flexibility with no near-term debt maturity overhang as we continue to evaluate the best options to address our convertible debt. We also intend to file a shelf registration statement on Form 3 with the SEC following the filing of our 10-K. We view this strictly as a matter of good corporate housekeeping and prudent considering the re-establishment of our WCSI status. As it relates to free cash flow, we are not giving formal guidance. However, we are confident in our ability to be free cash flow positive in 2024. The $16 million of incremental adjusted EBITDA at the midpoint more than covers the $5.7 million of additional interest from the new credit facility, which provides us room for working capital expansion to support the growth of the business while still being free cash flow positive. Finally, I want to make a few comments on quarterly cadence to assist you with your modeling. As it relates to revenue seasonality, the third quarter is typically our lowest growth quarter, particularly due to the impact of the European vacation season. Q1 is our most cash intensive quarter due to the payment of annual bonuses and due to normal activities such as sales meetings and industry conferences, which are heavier in the first quarter. Despite our expectations for free cash flow to be negative in Q1 because of these items, we still expect cash flow to be free cash flow positive for the full year of 2024. In summary, we are thrilled with our 2023 performance and are excited about the prospects of the business in 2024 and beyond. With that, I will turn the call back to Pat for his closing comments.
spk06: Hey, thanks, Lance. As you heard from Lance, we're extremely pleased with our 2023 performance and continue to deliver on our mission to build a world-class aortic company. We finished strong with 15% revenue growth and 40% adjusted EBITDA growth in the fourth quarter. We continue to expand our markets and meaningfully advance our clinical pipeline, positioning us well for long-term growth. We also executed non-dilutive capital structure, giving us a six-year runway with no financing overhang. Our strategy to deliver sustained, profitable growth is working, and we look forward to continuing the momentum we built in 2023 through 2024 and beyond. More specifically, our growth this year will be driven by the following. Number one, our continued growth in our Stancraft business, driven by the recent 30-day Persevere data presented at STS, showing a 72% reduction in mortality, and a 52% reduction in major adverse events compared to the standard of care literature control. Number two, continued market share gains for onyx, driven by data recently presented in Europe of 510 patients in our aortic valve, showing an 85% reduction in major bleeding. Number three, continued growth of our proprietary Synagraph pulmonary valve, driven by price increases, growth of the ROS procedure, as well as our ability to capture that growth from our efforts to improve supply. And fourth, our continued growth in Asia Pacific and Latin America from our channel investments and new regulatory approvals. So in conclusion, we are more confident than ever in our near and long-term prospects for our business. Finally, I want to thank all of our employees around the globe for delivering an exceptional year. So with that, operator, please open the line for questions.
spk12: Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. And you may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. Our first question comes from the line of Rick Wise with Stiefel. Please proceed with your question.
spk04: Hey, Pat. Hey, Lance. This is John on for Rick today. I just want to start off with AMDS. You had some really positive, strong data read out at STS recently, and I just wanted you to maybe remind us about just how clinically meaningful this is in the eyes of doctors, how the technology is performing in Europe today, and how we should be thinking about the U.S. opportunity as we look ahead to 25.
spk06: Yeah, I'll take that one. Clearly, this is a very exciting technology. I've been in the field in cardiac devices for 30 years and associated with a lot of breakthrough technologies. I've never seen one that actually has the patient benefit that we've seen in this device. I'll give you just kind of a background. An acute type A dissection is a very extreme disease state where patients are medevaced in, typically in the middle of the night. This trial was done in patients with malperfusion, which means they have kind of blood not flowing to the brain, to the kidneys, to the legs. This device in an FDA trial of 93 patients, which is the largest series ever done in acute type A dissection patients, showed a statistically significant reduction of 72% in mortality, that's death, right? So 72% more patients were alive. It also showed reduction in the major adverse events of strokes, People have required kidney dialysis and myocardial infarctions. So we saw a 52% reduction in those four major adverse events. So I think this is a, you know, really a light, it's truly a life-saving technology, and we're very excited. Our investigators are very excited about this. You know, it's about a $150 million market opportunity in the U.S. Obviously, we'll have to go through all the steps you have to go through in the adoption of a new technology. But we're all alone in the market. There's no other competitor. The competitor is a hemiarch, which is a surgical graft that's been done for 50 years. There's been no innovation. This is a highly patented, protected product. So we feel like this is a market that Artivian will own for a very long time, and we're super excited about getting it out to patients.
spk04: Thanks. That's helpful. And then just to follow up on the guidance, I understand the logic on adjusted EBITDA reinvesting in the business. Just curious, one, exactly what particular areas of focus are you reinvesting in, innovating in? And then on the revenue side, I noticed that in the fourth quarter, stents graphs on an organic basis were more like high single digits, and then the preservation tissue business was high teens. So just as we think about that into 24, Should we expect similar growth rates from those two or maybe find somewhere in the middle?
spk06: Yeah, let me take the first one. I'll let Lance take the second one. So as far as the investments, you know, as we've said all along, we're building an aorta company, right? So you've seen a significant investment in AMBS and the U.S. FDA trial, Persevere, which you just heard about. We're literally starting, as that one's getting ready to get to market, we're literally starting our next generation of device to replace the entire aortic arch called Arcevo. We've been developing it for several years. It's a breakthrough technology as identified by the FDA. We will start that clinical trial this year here in the US and Europe. And then we've got some, you know, some technologies behind it. But as Lance said in his comments, we can do this in our P&L and not really hold, you know, increase our percentage of R&D as a percentage of revenue because we're growing the top line as well. We're being very pragmatic about being financially disciplined, growing the top line midpoint of our range 10%, bottom line 30%, and still being able to invest in innovation. So I think this is something that shareholders should like because we can deliver top line, bottom line cash flow and a pipeline. So Lance, maybe you can take that second question.
spk17: Sure. So, you know, the question was about stent graft growth and tissue processing growth and how those flow into 2024. So first on stent grafts, you know, I think the Q4, I would call that just kind of normal level of quarterly fluctuation on growth rates. For the full year, stent grafts grew in the mid-teens, and that's really how we think about that business going into for full year 2024. Again, you may see some variation quarter to quarter. On the tissue processing, we are benefiting from the price increase we took in second quarter of 2023 on our CineGraph technology. So we're benefiting from that and we began to see a little bit of the improved supply as well in the fourth quarter that helped that. So we may see you know, the tissue processing revenues be a little higher in the beginning of 2024 for the full year, you know, we think about that more, you know, kind of a double-digit grower as we've kind of talked about in the recent past.
spk15: Thanks for taking the questions.
spk12: Our next question comes from the line of Mike Mattson with Needham. Please proceed with your question.
spk10: Yeah, thanks. So I guess I'll just start with the financing, the new credit facility. So can you just tell us kind of where you'll be with regard to your leverage ratio, you know, following that transaction and where you kind of ended at the year last year in terms of EBITDA?
spk05: Yeah, go ahead, Lance.
spk17: Yeah, so I don't know it right off the top of my head, but, you know, we did $53.8 million of EBITDA at the end of this in 2023. And, you know, post-transaction, you know, you're really thinking about net debt of about $260 million. So, I mean, I guess we'll do the math on that real quick. Five point something, roughly, yeah. Yes, 4.8, you know, is where it is right now. And we think we'll get it you know, um, you know, the midpoint of the range and some cashflow will kind of get that approaching, you know, three and a half to three by the end of 2024. Um, so some really good progress there. I would point out that, you know, there are covenants in the new debt, but they're well above that, that level. And we actually have a favorable definition of EBITDA on their credit agreement. So per the actual credit agreement, that net leverage ratio is even less than what it is on an as-adjusted basis.
spk10: Okay, thanks. That helps. And then just on EMDS, obviously the data looked really good. Do you expect to have the FDA require a panel for that, or do you think they'll just approve without a panel?
spk06: We haven't gotten to that level of detail yet. I mean, I'm not going to opine on what the FDA is going to do. But obviously, I think the data speaks for itself, right? I mean, this is a super sick population with phenomenal results. So we're obviously going to work with them to get the technology out as soon as we possibly can. So panel or not, I can't really comment.
spk10: Okay. And then as far as our CVO goes, just the timing, I mean, so would that be, is that really more 2027 at this point, or could it be earlier than that?
spk06: Yeah, I think that's about right, probably late 2027. So we expect to get the, you know, the IV approved, you know, this year, and, you know, hopefully we'll, you know, can get some patients enrolled. But again, there's a lot of bureaucracy at the startup of a trial. So I think that's right. We feel like just the centers we have in this and the kind of the, a lot of these top centers were involved in the development of this technology and they're super excited about it. So I expect our enrollment to go pretty well, but there is a one-year follow-up and then you've got to go through an FDA, you know, PMA cycle. So, you know, there's some time of, you know, kind of the late 27 is probably a good timing for that.
spk11: Okay. Got it. Thank you.
spk12: Thank you. Our next question comes from the line of Suraj Khalia with Oppenheimer. Please proceed with your question.
spk20: Pat Lance, can you hear me all right? Yeah, we hear you fine. Pat, let me start out with a congratulations. I mean, you guys have consistently, even through COVID, probably one of the few that has consistently beat numbers every quarter. So congrats once again. I know, Pat, on AMDS, a number of questions have been asked. Pat, just for the audience again, can you size up the U.S. market? How do you define the low-anging fruit?
spk06: Yeah, so basically if you look at, you know, there's a number of different ways to kind of slice up the market. So we come up with a number of $150 million. The ASP on that device is going to be about $25,000. So there's about 6,000 acute type A dissections done in the U.S. So that's Really, you know, kind of the back of a napkin is the math. 6,000 cases, 25,000 advice, multiply the two together and you get $150 million. We've done market research with a number of physicians. You know, you can talk and you know some of the physicians that were in the trial. This is a very substantial technology. Again, as I said from an earlier question, I've not seen, you know, you see these heart failure trials where you're trying to get somebody to walk 12 more feet. You're talking about a 72% reduction in mortality. The mortality in the standard of care control group was 35% at 30 days. We were at 9.7. So that is a significant technology. And, you know, these are extremely sick patients that are medevaced in. It's an emergency, and this is life-saving technology. So we're very excited, and we've got a sales force. You know, BioGlu is used in aortic dissections. Our sales team sells the onyx valves and aortic repair. Our SIBO device is used in replacing the arch. So we are an aortic company. And this is kind of the first significant innovation in acute type A dissections in 50 years. So, I mean, I'm super excited about it and think this is really going to change a lot of lives.
spk20: Fair enough. Pat Lance, I'll just throw a bunch of questions your way and hop back in queue. Lance, for you, net ASP impact in the quarter? And for Q1, how should we think about the sequential move? Pat, for you, in terms of Onyx Mitral label, or just in terms of Onyx Mitral, I know the FDA process is behind us, but just kind of give us next steps and the status. Also, Pat, more generally, at this stage, at this point in time, do you think the portfolio is optimised? If not, what else needs to be done? Gentlemen, thank you for taking my questions and congrats again.
spk06: Sure. I'll take the first. I'll take the last two. I'll let Lance work on the number piece while I'm talking. So as far as the PROAC mitral, as we talked about last, I guess it was in the Q3, we ended up withdrawing the PMA because we missed our statistical endpoint, which is really, I don't want to get into the details around you know, the statistics of the trial. The fact of the matter is it's the largest body of evidence ever with a mechanical mitral valve. We just had a recent presentation at STS in January. There's nothing close from a significance and level of data. And the fact of the matter is the mitral business grew 20% in 2023, right? So people are recognizing the value of that. We're not off-label promoting it, but people are recognizing that you can actually lower than INR if that's the physician's choice. So maybe over to Lance, you can grab a couple of the other ones.
spk17: Yeah, so on ASP, I think, you know, without giving you an exact number on the total company, which can be kind of tough with different products, different mix in different countries, I think the things to highlight is obviously our tissue business benefited meaningfully from price. which we've talked about. We took a significant price increase in Q2 of this year. And so in Q1, we will still benefit from that and we'll annualize that in Q2. And then, you know, we have had some favorable pricing on Onyx in particular, I would call out, that we will have for a portion of the year as well. Other than that, you know, we're taking price increases, but not anything outside of the, you know, kind of normal rate running the business type price increases.
spk06: Yeah, and then the other question you had, Suraj, was on the portfolio. I mean, we, you know, one of the things we've said is, you know, we did three acquisitions and one kind of distribution agreement with an option to acquire with Endospan with the Nexus device, you know, fairly quickly over the four or five year period. We feel like our portfolio is in excellent shape. And as I mentioned, you know, from an earlier question, You can see us going from the AMDS U.S. FDA trial to the Arcebo FDA trial, and then we got more stacked up behind them. So we really, you know, we do not need to acquire anything. We're very well set up from a portfolio standpoint. The only other point I would make on the pricing, and I've said this to, you know, a number of times, I mean, we did get some significant price increases on Syngraph pulmonary valves in 2023. And as that kind of, you know, asymptotes on itself at the end of the first quarter, you know, 23 was a year of the price for Synagraph, 24 is a year of the volume because we've had some significant yield improvements in our processing where we're going to potentially double our availability of those valves. And we sell every single one of them because of the significant growth of the ROS procedure. So, again, we feel very confident in that tissue business continuing to grow pretty significantly.
spk15: Thank you.
spk12: Our next question comes from the line of Jeffrey Cohen with Lattenberg Salmon. Please proceed with your question.
spk09: Hi, Pat and Lance. How are you?
spk13: Good. How are you?
spk08: Good. Thanks, Suraj, for segueing right into my first question, which is 59% on tissue forms. That's an all-time high for the company. Is that sustainable, or how should we think about that opening up in the tissue business for 24?
spk06: Well, as I just mentioned, Jeff, and I think it's, you know, so Lance commented on the pricing. We obviously had some significant increases on Synagraph in 23, which will still get some benefit in the first quarter. During that year, by working with some of our top surgeons, we've also seen significant yield improvements in our processing area, So, we think that that growth will continue because, like I said, we've almost doubled the availability of our pulmonary valves. And because of this rapid growth of the ROS procedure, we're literally selling every one that kind of comes off the line. So, the answer to your question is yes, it's going to continue.
spk08: Wonderful. I guess secondly for us, could you comment a little bit on some of the geographies out there? I know you call out Asia and Latin America at that 19% rate, but any specific geographies and how does that tie into specific product lines by geography or in geographies?
spk06: Yeah, every region grew double digits. Obviously, Asia Pacific and Latin America are smaller just in size. They're growing 20%. So, again, we're seeing double digits across all four of our regions.
spk08: Okay, got it. And then lastly for us, could you talk about Dane a little bit as far as the prevention of a tear in the structure and are clinicians and hospitals looking at that as a cost associated or it's just death period?
spk07: I'm not sure if I caught that, Jeff.
spk08: As far as Dane and its measurement and how it's being viewed by Yes.
spk06: Yeah, actually, you know, again, it's probably not a topic many people understand. I mean, I certainly didn't know what Dane was until we got into this specific area. So think about it this way. In the current standard hemiarch, where they actually, you know, I tried to make a plumbing analogy, right? You have a tear in the pipe. You've got to fix that little piece of pipe. So you take the bad piece out, you put a new piece in and you connect it to the old kind of connector, the old piece of the pipe. So now you've got a fully functioning pipe. That's what they do with a hemiarch. Up to 70% of the times, the connection you make ends up having a leak, which requires a re-operation and can lead to higher mortality. It's a real problem and it can happen like, you know, again, depends on where you're doing it, but 35 to 70% of the time they get a leak in the connection, which is a Dane. we don't see it at all with AMDS. Three years in the 50-patient DARTs trial and 93 patients in the Persevere trial, zero. So we're running the health economics on that, but re-ops and mortality for these patients, I mean, this is obviously a significant thing. And, you know, the FDA has been extremely interested in Dane and actually had it added as a primary efficacy endpoint.
spk08: Got it. Okay, that's super helpful. Again, thanks for the questions and fantastic readout on the year.
spk15: Thanks, Jeff.
spk12: Thank you. Our next question comes from the line of Frank Takinen with Lake Street Capital. Please proceed with your question.
spk03: Hey, this is Nelson Cox on for Frank. I'll just start maybe internationally as well. Can you refresh us on the current size of the sales force there and maybe thinking about the team size there throughout the year? Obviously, you've seen some nice growth there, but maybe just walk through your thinking there.
spk06: Yeah, we've talked about Asia and Latin America. When I started the company, we had one person in Asia and nobody in Latin America. We're now probably about 30 people in Asia and probably 15 in Latin America. We feel like Latin America is kind of where it needs to be. We may have a kind of onesie, twosies here and there. Asia, obviously, is a significant opportunity. And we'll continue to add to those regions, but we treat it somewhat like a venture capitalist, right? I mean, as we get products approved, for example, we've had some big approvals in Australia, then we'll add feet on the street. We've got approvals in You know, Hong Kong, we're direct there. We've had approvals in Thailand. We're direct there. We've had approvals in Taiwan. We're adding people there. So as we get the product approved, which is really just the incremental cost of the regulatory approval, if we see the size of that market makes sense and we just run an NPV, and then we'll add people. So it's really a gated, self-fulfilling, you know, a self-funding process that we go through. But Asia is the area that, you know, and we can pull that back. We can titrate that depending on, you know, our EBITDA requirements and commitments and what we see coming from an approval standpoint. Hopefully that helps you.
spk03: Yeah, no, that does. And then obviously I'll switch over to Onyx, obviously a strong quarter there. Can you maybe just talk a bit more about the competitive landscape, maybe just what you're seeing from the other competitors there? You can clearly continue to take share, but just curious what you're hearing out there from maybe their investments or lack thereof?
spk06: Yeah, so I'll talk about what customers are saying. As I mentioned, in November, or I guess October last year, we presented a 510 patient study, kind of the FDA post-approval trial on the low INR, which is a typical requirement. They want to see that your valve performs in the community as it performed in the kind of rigorous FDA trial. So 60 centers, 510 valves, we saw an 85% reduction in major bleeding. So we went and did some market research, talked to 100 cardiac surgeons. By the way, it's very unique research. I've done a lot of this over my career. We did research in competitive accounts, what we call competitive accounts, which have onyx share like less than 25%. And it shows that we continue to take share over the next three years and basically double our share. So this is a very meaningful new data set. um, we're excited about and our customers are excited about it and we're going to be going after it.
spk14: Awesome. Thanks guys.
spk12: Thank you. There are no further questions at this time and I'd like to turn the floor back over to management for closing comments.
spk06: Yeah. Well, obviously we appreciate everybody's time here. I mean, I'm, I'll be quick in my wrap up. Um, we're super excited about, uh, about 24. Um, We had this great persevere readout on AMDS with 72% reduction in mortality, 52% reduction in major adverse events. So we're going to be working with the FDA to get this technology here in the US. But we're also approved around in multiple countries in Europe, Canada, and Asia where we're going to use that data to continue to take care of patients and drive growth. I just got done talking about the ONIX post-approval trial of 510 patients. showing an 85% reduction in major bleeding, and we're going after share there. I talked a couple times about our price increases on Cinegraph as well as our efforts to improve supply, and we'll continue to see growth there, and we talked about Asia Pacific, Latin America. We're also advancing our pipeline. We're going to be starting the third generation frozen elephant total arch repair system called Arcevo LSA later this year. So we continue to build an aortic company and are excited about delivering for you again in 2024.
spk15: Thank you.
spk12: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Thank you. Thank you.
spk18: Thank you. you you Thank you.
spk12: Greetings and welcome to the Artivion fourth quarter and year end 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I will now turn the call over to Lane Morgan, from the Gilmartin Group. Thank you. You may begin.
spk01: Good afternoon, and thank you for joining the call today. Joining me today from Attivion's management team are Pat Matkin, CEO, and Lance Barry, 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 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. You can also find a brief presentation with details highlighted on today's call on the investor relations section of the Artivion website. Now I'll turn it over to Artivion CEO, Pat Mackin.
spk06: Thanks, Elaine, and good afternoon, everybody. I want to start off our call today by welcoming Lance Berry, our new Executive Vice President and Chief Financial Officer. Lance most recently served as Executive Vice President, Chief Financial Officer, and Operations Officer at Wright Medical until the acquisition by Stryker in November of 2020. We are thrilled to have Lance join our team during this exciting time. I am confident his broad expertise and proven leadership in med tech will add significant value to Artivion as we enter the next phase of profitable growth. I'd also like to thank Ashley Lee for his many years of dedicated service to Artivion His contributions, no doubt, helped make Artivion the outstanding company we are today. Now onto our fourth quarter and full year 2023 results. 2023 was an outstanding year for Artivion, and I'm pleased to report that we achieved total company constant currency revenue growth just over 12% for the full year of 2023, compared to the full year of 2022. In addition to exceeding our top line growth revenue target, we achieved adjusted EBITDA growth of nearly 30% year-over-year, enabling us to deliver positive free cash flow while making strides in advancing our clinical programs and further expanding our global footprint. Our achievements throughout 2023 culminated in a particularly strong Q4 as we delivered constant currency revenue growth of 15% year-over-year, resulting in $93.7 million in revenue. Our performance was driven by improved revenue growth in our onyx business, which increased 19%, followed by tissue processing at 18%, bio glue at 11%, and stent grafts at 8% growth, each when compared to the fourth quarter of 2022, all on a constant currency basis. We've also benefited from the expansion of our commercial footprint through regulatory approvals across new geographies, especially in Latin America and Asia Pacific. Our strong top line performance led to $15.3 million in non-GAAP adjusted EBITDA in the fourth quarter, which is a 40% increase compared to the fourth quarter of last year. We expect our strong momentum in the fourth quarter to continue into 2024. From a product perspective, as I mentioned earlier, ONIX revenues increased 19% compared to the fourth quarter of last year on a constant currency basis as we continue to take market share globally and have the only mechanical aortic heart valve that can be maintained in an INR 1.5 to 2.0. We believe our valve is the best aortic valve on the market. Our market share gains each year and the recently presented results of the ONIX post-approval data, which showed an 85% reduction in major bleeding, clearly support our view. Tissue processing revenues increased 18% compared to the fourth quarter of last year on a constant currency basis. due primarily to pricing initiatives and the increase in volume of the ROS procedure. We expect continued double-digit growth in our tissue business in 2024, driven primarily by our significantly improved supply of our proprietary Synagraph pulmonary valve. And lastly, StantGraph revenues grew 8% on a constant currency basis in the fourth quarter compared to the fourth quarter of last year, driven by improved supply and strong performance in AMDS outside the U.S. We anticipate demand to remain strong through 2024 and beyond for our StentGraph products, which should sustain and continue our strong revenue performance. Our results were also driven by the continued progress we are making expanding into new markets. Through new regulatory approvals and commercial footprint expansion in Asia Pacific and Latin America, both delivered constant currency revenue growth of 19% compared to the fourth 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 continue to advance our clinical programs and show leadership in the aortic field with two late-breaking science presentations at the STS Annual Meeting in San Antonio. First, the full data set from the AMDS Persevere Clinical Trial And second, the interim data from the Nexus Triumph Clinical Trial. First, in November of last year, we completed the trial enrollment of Persevere, our IDE clinical trial for PMA approval, which consists of 93 patients who've experienced an acute type A dissection. I'm pleased to report that the trial methods combined primary efficacy and safety endpoints, demonstrating a statistically significant reduction in all-cause mortality and the primary endpoint of major adverse events, as well as no occurrence of DANE, which are associated with increased risk for re-intervention and mortality. As a reminder, the adverse events called MAEs, which is the MAE endpoint for the IV trial, is based on historical control of patients with malperfusion. In this reference cohort, 58.2% of patients had greater than or equal to one major adverse event. The target goal in the trial from the FDA was a reduction in this endpoint to 40% of patients with greater than or equal to one MAE. The recently presented 30-day data at STS showed only 28% of the patients had greater than or equal to one major adverse event, representing a 52% reduction compared to the standard of care hemiarch procedure. As it relates to Dane tears, for context, Dane occurs up to 70% of patients following hemiarth repair without AMDS. Results from the full IDE dataset have shown there have been no Danes at all detected in any patients treated with AMDS, nor were there any Dane cares reported in DART study after three years of follow-up. Critically, the data up to 30 days also demonstrated a statistically significant 72% reduction of all-cause mortality. a truly revolutionary result. Second, the interim data from the NEXUS TRIUMPH USID trial included 22 patient study participants, demonstrated a 9% mortality, no detected strokes, paraplegia, or renal failure in any patients treated with NEXUS aortic arch stent graft system. As of today, there have been 42 of 60 patients enrolled in the primary endpoint of the NEXUS trial, and it remains on track for approval in 2026. In summary, we're very excited about these two new data prints, which, assuming we exercise our option to acquire Endospan, should accelerate stent graft growth in markets where the products are currently approved. If these PMA processes proceed as we anticipate, we would expect PMA approval for AMBS in 2025 and Nexus in 2026. At that time, again, assuming we exercise the option for Endospan, these two products would significantly increase our addressable market opportunity. Lastly, on our R&D pipeline, our third-generation frozen elephant trunk used to replace the entire aortic arch called our SIBO LSA is in the final testing stages, and we currently expect to start the USID trial later this year. I look forward to providing additional updates on our progress in future calls. With that, I'll now turn the call over to Lance.
spk17: Thanks, Pat, and good afternoon, everyone. Before I begin, I'd like to remind you to please refer to our press release published earlier today for information regarding our non-GAAP results, including a reconciliation of these results to our GAAP results. Additionally, all percentage changes discussed will be on a year-over-year basis, and revenue growth rates will be in constant currency unless otherwise noted. Revenues were 93.7 million for the fourth quarter of 23, 2023, up 15% compared to Q4 of 2022. Non-GAAP adjusted EBITDA increased approximately 40% from $11 million to $15.3 million in the fourth quarter of 2023. And after generating $5.8 million of free cash flow in the third quarter of 2023, we generated $7.4 million of free cash flow in the fourth quarter. Importantly, we were free cash flow positive for the full year 2023, representing a critical milestone achievement for our tibion. As importantly, we expect that free cash flow will continue to be positive in 2024. From a product line perspective, onyx revenues grew 19%, tissue processing revenues increased 18%, bio-glue revenues increased 11%, and stent graft revenues grew 8% in the fourth quarter of 2023. On a regional basis, revenues in both Asia Pacific and Latin America increased 19%, while North America increased 17% and EMEA increased 10%, all compared to the fourth quarter of 2022. Gross margins improved to 65% in Q4, compared to 64% in the fourth quarter of 2022. This increase was driven by price increases in product mix, partially offset by inflationary impact on materials and labor. General administrative and marketing expenses in the fourth quarter were $50.3 million compared to $38.5 million in the fourth quarter of 2022. Non-GAAP general administrative and marketing expenses were $47.7 million compared to $41.9 million in the fourth quarter of 2022. R&D expenses for the fourth quarter were $7.6 million compared to $8.3 million in the fourth quarter of 2022. Other income expenses include $5.8 million in net interest expense and foreign currency translation gains of approximately $2.2 million. On the bottom line, we reported gap net loss of approximately $4 million, or $0.10 per fully diluted share, in the fourth quarter of 2023. Non-gap net income was $4.6 million, or $0.11 per share in the fourth quarter. As of December 31, 2023, we had approximately $58.9 million in cash and $312 million in debt. It is important to note that this does not contemplate the impact of our recently closed comprehensive credit agreement, which I will speak to shortly. And now for our initial outlook for 2024. We expect to continue building on our momentum, enabling us to achieve as-reported revenues in the range of $382 to $396 million. At current FX rates, the year-over-year impact on revenue is expected to be negligible. Therefore, this range represents revenue growth of 8% to 12%, both as reported and on a constant currency basis. With our continued top line revenue growth and general expense management, we expect adjusted EBITDA to be in the range of 68 to 72 million for the full year 2024, representing 26 to 34% growth over 2023, and 280 basis points of adjusted EBITDA margin expansion at the midpoint of our ranges. We expect gross margins to remain at levels similar to 2023. We expect to continue to drive significant leverage from our global sales force and G&A infrastructure. Additionally, R&D expense is expected to remain relatively flat as a percentage of sales. I would like to proactively note that our guidance range is below the 75 million that we originally targeted for 2024 at our March 2022 investor day. There has been no change to our commitment to drive significant adjusted EBITDA growth in 2024 as evidenced by our expectation for 30% year-over-year growth at the midpoint of our range, which is three times our midpoint top-line growth rate. We are driving this level of improvement while maintaining our investment levels in R&D as a percentage of sales. Driving strong adjusted EBITDA growth is a top priority, but not at the expense of the investments we need to make for the future. We feel that the strength of our underlying business, our longer-term growth outlook, and our balance sheet today validate this approach. In regard to our capital structure, we are very pleased to have recently closed a comprehensive non-diluted financing for $350 million of senior secured interest-only credit facilities with six-year maturities. The facilities include an initial $190 million term loan, a $60 million revolving credit facility, and an additional $100 million in unfunded delayed draw term loan that may be drawn to refinance our convertible bonds at any time prior to their maturity in July 2025. As a reminder, our convertible notes do not contain any financial covenants. The initial $190 million term loan and $30 million from the revolving credit facility were drawn at close along with the use of some cash on our balance sheet to retire the existing senior secured credit facilities and pay related transaction expenses. Overall, this credit agreement coupled with our strong financial performance gives us flexibility with no near-term debt maturity overhang as we continue to evaluate the best options to address our convertible debt. We also intend to file a shelf registration statement on Form 3 with the SEC following the filing of our 10-K. We view this strictly as a matter of good corporate housekeeping and prudent considering the re-establishment of our WCSI status. As it relates to free cash flow, we are not giving formal guidance. However, we are confident in our ability to be free cash flow positive in 2024. The $16 million of incremental adjusted EBITDA at the midpoint more than covers the $5.7 million of additional interest from the new credit facility, which provides us room for working capital expansion to support the growth of the business while still being free cash flow positive. Finally, I want to make a few comments on quarterly cadence to assist you with your modeling. As it relates to revenue seasonality, the third quarter is typically our lowest growth quarter, particularly due to the impact of the European vacation season. Q1 is our most cash intensive quarter due to the payment of annual bonuses and due to normal activities such as sales meetings and industry conferences, which are heavier in the first quarter. Despite our expectations for free cash flow to be negative in Q1 because of these items, we still expect cash flow to be free cash flow positive for the full year of 2024. In summary, we are thrilled with our 2023 performance and are excited about the prospects of the business in 2024 and beyond. With that, I will turn the call back to Pat for his closing comments.
spk06: Hey, thanks, Lance. As you heard from Lance, we're extremely pleased with our 2023 performance and continue to deliver on our mission to build a world-class aortic company. We finished strong with 15% revenue growth and 40% adjusted EBITDA growth in the fourth quarter. We continue to expand our markets and meaningfully advance our clinical pipeline, positioning us well for long-term growth. We also executed a non-dilutive capital structure, giving us a six-year runway with no financing overhang. Our strategy to deliver sustained, profitable growth is working, and we look forward to continuing the momentum we built in 2023 through 2024 and beyond. More specifically, our growth this year will be driven by the following. Number one, our continued growth in our stent graft business, driven by the recent 30-day Persevere data presented at STS, showing a 72% reduction in mortality, and a 52% reduction in major adverse events compared to the standard of care literature control. Number two, continued market share gains for onyx, driven by data recently presented in Europe of 510 patients in our aortic valve, showing an 85% reduction in major bleeding. Number three, continued growth of our proprietary synegraph pulmonary valve, driven by price increases, growth of the ROS procedure, as well as our ability to capture that growth from our efforts to improve supply. And fourth, our continued growth in Asia Pacific and Latin America from our channel investments and new regulatory approvals. So in conclusion, we are more confident than ever in our near and long-term prospects for our business. Finally, I want to thank all of our employees around the globe for delivering an exceptional year. So with that, operator, please open the line for questions.
spk12: Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. And you may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. Our first question comes from the line of Rick Wise with Stiefel. Please proceed with your question.
spk04: Hey, Pat. Hey, Lance. This is John on for Rick today. I just want to start off with AMDS. You had some really positive, strong data readout at STS recently, and I just wanted you to maybe remind us about just how clinically meaningful this is in the eyes of doctors, how the technology is performing in Europe today, and how we should be thinking about the U.S. opportunity as we look ahead to 25.
spk06: Yeah, I'll take that one. Clearly, this is a very exciting technology. I've been in the field in cardiac devices for 30 years and associated with a lot of breakthrough technologies. I've never seen one that actually has the patient benefit that we've seen in this device. I'll give you just kind of a background. An acute type A dissection is a very extreme disease state where patients are medevaced in, typically in the middle of the night. This trial was done in patients with malperfusion, which means they have kind of blood not flowing to the brain, to the kidneys, to the legs. This device in an FDA trial of 93 patients, which is the largest series ever done in acute type A dissection patients, showed a statistically significant reduction of 72% in mortality, that's death, right? So 72% more patients were alive. It also showed reduction in the major adverse events of strokes, People have required kidney dialysis and myocardial infarctions. So we saw a 52% reduction in those four major adverse events. So I think this is a, you know, really a light, it's truly a life-saving technology, and we're very excited. Our investigators are very excited about this. You know, it's about a $150 million market opportunity in the U.S. Obviously, we'll have to go through all the steps you have to go through in the adoption of a new technology. But we're all alone in the market. There's no other competitor. The competitor is a HemiArch, which is a surgical graft that's been done for 50 years. There's been no innovation. This is a highly patented, protected product. So we feel like this is a market that Artivian will own for a very long time, and we're super excited about getting it out to patients.
spk04: Thanks. That's helpful. And then just to follow up on the guidance, I understand the logic on adjusted EBITDA reinvesting in the business. Just curious, one, exactly what particular areas of focus are you reinvesting in, innovating in? And then on the revenue side, I noticed that in the fourth quarter, stents graphs on an organic basis were more like high single digits, and then the preservation tissue business was high teens. So just as we think about that into 2024, Should we expect similar growth rates from those two or maybe find somewhere in the middle?
spk06: Yeah, let me take the first one. I'll let Lance take the second one. So as far as the investments, as we've said all along, we're building an aorta company, right? So you've seen a significant investment in AMBS and the U.S. FDA trial, Persevere, which you just heard about. We're literally starting, as that one's getting ready to get to market, we're literally starting our next generation of device to replace the entire aortic arch called Arcevo. We've been developing it for several years. It's a breakthrough technology as identified by the FDA. We will start that clinical trial this year here in the US and Europe. And then we've got some, you know, some technologies behind it. But as Lance said in his comments, we can do this in our P&L and not really hold, you know, increase our percentage of R&D as a percentage of revenue because we're growing the top line as well. we're being very pragmatic about being financially disciplined, growing the top line, midpoint of our range, 10%, bottom line, 30%, and still being able to invest in innovation. So I think this is something that shareholders should like because we can deliver top line, bottom line, cash flow, and a pipeline. So Lance, maybe you can take that second question.
spk17: Sure. So I think the question was about stint costs. growth and tissue processing growth and how those flow into 2024. So first on stent grafts, you know, I think the Q4, I would call that just kind of normal level of quarterly fluctuation on growth rates. For the full year, stent grafts grew in the mid-teens, and that's really how we think about that business going into for full year 2024. Again, you may see some variation quarter to quarter. On the tissue processing growth, You know, we are benefiting from the price increase we took in second quarter of 2023 on our CineGraph technology. So we're benefiting from that, and we began to see a little bit of the improved supply as well in the fourth quarter that helped that. So we may see, you know, the tissue processing revenues be a little higher in the beginning of 2024. For the full year, you know, think about that more, you know, kind of a double-digit grower as we've kind of talked about in the recent past. Thanks for taking the questions.
spk12: Our next question comes from the line of Mike Mattson with Needham. Please proceed with your question.
spk10: Yeah, thanks. So, I guess I'll just start with the financing, the new credit facilities. Can you tell us kind of where you'll be with the regard to your leverage ratio, you know, following that transaction and where you kind of ended at the year last year in terms of EBITDA?
spk05: Yeah, go ahead, Lance.
spk17: Yeah, so I don't know it right off the top of my head, but, you know, we did $53.8 million of EBITDA at the end of this, in 2023, and, you know, post-transaction, you know, you're really thinking about net debt of about $260 million. So, I mean, I guess we'll do the math on that real quick. I point something roughly, yeah. Yeah, 4.8, you know, is where it is right now. And we think we'll get it, you know, the midpoint of the range and some cash flow. We'll kind of get that approaching, you know, three and a half to three by the end of 2024. So some really good progress there. I would point out that there are covenants in the new debt, but they're well above that level, and we actually have a favorable definition of EBITDA on the credit agreement. So per the actual credit agreement, that net leverage ratio is even less than what it is on an as-adjusted basis.
spk10: Okay, thanks. That helps. And then, you know, just on AMDS, I mean, obviously the data looked really good. You know, do you expect to have the FDA require a panel for that, or do you think they'll just, you know, approve without a panel?
spk06: We haven't gotten, like, we haven't gotten to that level of detail yet. I mean, I'm not going to opine on what the FDA is going to do. But obviously, I think the data speaks for itself, right? I mean, this is a super sick population with phenomenal results. So we're obviously going to work with them to, you know, get the technology out as soon as we possibly can. So panel or not, I can't really comment.
spk10: Okay. And then as far as our CVO goes, just the timing, I mean, so would that be, is that really more 2027 at this point or could it be earlier than that?
spk06: Yeah, I think that's about right, probably late 27. So we expect to get the IV approved this year, and hopefully we can get some patients enrolled. But again, there's a lot of bureaucracy at the startup of a trial. So I think that's right. We feel like just the centers we have in this and kind of the A lot of these top centers were involved in the development of this technology, and they're super excited about it. So I expect our enrollment to go pretty well, but there is a one-year follow-up, and then you've got to go through an FDA, you know, PMA cycle. So, you know, it's some time of, you know, kind of the late 27 is probably a good timing for that.
spk11: Okay. Got it. Thank you.
spk12: Thank you. Our next question comes from the line of Suraj Khalia with Oppenheimer. Please proceed with your question.
spk20: Pat Lance, can you hear me all right? Yeah, we hear you fine. Pat, let me start out with a congratulations. I mean, you guys have consistently, even through COVID, probably one of the few that has consistently beat numbers every quarter. So congrats once again. I know, Pat, on AMDS, a number of questions have been asked. Pat, just for the audience again, can you size up the U.S. market, how do you define the low-anging fruit?
spk06: Yeah, so basically if you look at, you know, there's a number of different ways to kind of slice up the market. So we come up with a number of 150 million. The ASP on that device is going to be about $25,000. So there's about 6,000 acute type A dissections done in the U.S. So that's really, you know, kind of the back of a napkin is the math. 6,000 cases, 25,000 advice, multiply the two together and you get $150 million. We've done market research with a number of physicians. You can talk and you know some of the physicians that were in the trial. This is a very substantial technology. Again, as I said from an earlier question, you see these heart failure trials where you're trying to get somebody to walk 12 more feet. You're talking about a 72% reduction in mortality. The mortality in the standard of care control group was 35% at 30 days. We were at 9.7. So that is a significant technology. And, you know, these are extremely sick patients that are medevaced in. It's an emergency, and this is life-saving technology. So we're very excited, and we've got a sales force. You know, BioGlu is used in aortic dissections. Our sales team sells the onyx valves and aortic repair. Our SIBO device is used in replacing the arch. So we are an aortic company. And this is kind of the first significant innovation in acute type A dissections in 50 years. So, I mean, I'm super excited about it and think this is really going to change a lot of lives.
spk20: Fair enough. Pat Lance, I'll just throw a bunch of questions your way and hop back in queue. Lance, for you, net ASP impact in the quarter? And for Q1, how should we think about the sequential move? Pat, for you, in terms of Onyx Mitral label, or just in terms of Onyx Mitral, I know the FDA process is behind us, but just kind of give us next steps and the status. Also, Pat, more generally, at this stage, at this point in time, do you think the portfolio is optimized? If not, what else needs to be done? Gentlemen, thank you for taking my questions and congrats again.
spk06: Sure. I'll take the first. I'll take the last two. I'll let Lance work on the number piece while I'm talking. So as far as the PROAC mitral, as we talked about last, I guess it was in the Q3, we ended up withdrawing the PMA because we missed our statistical endpoint, which is really, I don't want to get into the details around you know, the statistics of the trial. The fact of the matter is it's the largest body of evidence ever with a mechanical mitral valve. We just had a recent presentation at STS in January. There's nothing close from a significance and level of data. And the fact of the matter is the mitral business grew 20% in 2023, right? So people are recognizing the value of that. We're not off-label promoting it, but people are recognizing that you can actually lower than INR if that's the physician's choice. So maybe over to Lance, you can grab a couple of the other ones.
spk17: Yeah, so on ASP, I think, you know, without giving you an exact number on the total company, which can be kind of tough with different products, different mix in different countries, I think the things to highlight is obviously our tissue business benefited meaningfully from price. which we've talked about. We took a significant price increase in Q2 of this year. And so in Q1, we will still benefit from that and we'll annualize that in Q2. And then, you know, we have had some favorable pricing on Onyx in particular, I would call out, that we will have for a portion of the year as well. Other than that, you know, we're taking price increases, but not anything outside of the, you know, kind of normal rate running the business type price increases.
spk06: Yeah, and then the other question you had, Suraj, was on the portfolio. I mean, we, you know, one of the things we've said is, you know, we did three acquisitions and one kind of distribution agreement with an option to acquire with Endospan with the Nexus device, you know, fairly quickly over the four or five year period. We feel like our portfolio is in excellent shape. And as I mentioned, you know, from an earlier question, You can see us going from the AMDS US FDA trial to the ARCEVO FDA trial, and then we got more stacked up behind them. So we really, you know, we do not need to acquire anything. We're very well set up from a portfolio standpoint. The only other point I would make on the pricing, and I've said this to, you know, a number of times, I mean, we did get some significant price increases on Syngraph pulmonary valves in 2023. And as that kind of, you know, asymptotes on itself at the end of the first quarter, you know, 23 was a year of the price for Synagraph, 24 is a year of the volume because we've had some significant yield improvements in our processing where we're going to potentially double our availability of those valves. And we sell every single one of them because of the significant growth of the ROS procedure. So, again, we feel very confident in that tissue business continuing to grow pretty significantly.
spk15: Thank you.
spk12: Our next question comes from the line of Jeffrey Cohen with Lattenberg Salmon. Please proceed with your question.
spk09: Hi, Pat and Lance. How are you?
spk13: Good. How are you?
spk08: Good. Thanks, Suraj, for a segue right into my first question, which is 59% on tissue forms. That's an all-time high for the company. Is that sustainable, or how should we think about that opening up in the tissue business for 24?
spk06: Well, as I just mentioned, Jeff, and I think it's, you know, so Lance commented on the pricing. We obviously had some significant increases on Cinegraph in 23, which will still get some benefit in the first quarter. During that year, by working with some of our top surgeons, we've also seen significant yield improvements in our processing area, So, we think that that growth will continue because, like I said, we've almost doubled the availability of our pulmonary valves. And because of this rapid growth of the ROS procedure, we're literally selling every one that kind of comes off the line. So, the answer to your question is yes, it's going to continue.
spk08: Wonderful. I guess secondly for us, could you comment a little bit on some of the geographies out there? I know you call out Asia and Latin America at that 19% rate, but any specific geographies and how does that tie into specific product lines by geography or in geographies?
spk06: Yeah, every region grew double digits. Obviously, Asia Pacific and Latin America are smaller just in size. They're growing 20%. So, again, we're seeing double digits across all four of our regions.
spk08: Okay, got it. And then lastly for us, could you talk about gain a little bit as far as the prevention of a tear in the structure and are clinicians and hospitals looking at that as a cost associated or it's just death period?
spk07: I'm not sure if I caught that, Jeff.
spk08: As far as gain and its measurement and how it's being viewed by Yes.
spk06: Yeah, actually, you know, again, it's probably not a topic many people understand. I mean, I certainly didn't know what Dane was until we got into this specific area. So think about it this way. In the current standard hemiarch where they actually, you know, I try to make a plumbing analogy, right? You have a tear in the pipe. You've got to fix that little piece of pipe. So you take the bad piece out, you put a new piece in and you connect it to the old kind of connector, the old piece of the pipe. So now you've got a fully functioning pipe. That's what they do with a hemiarch. Up to 70% of the times, the connection you make ends up having a leak, which requires a re-operation and can lead to higher mortality. It's a real problem and it can happen like, you know, again, depends on where you're doing it, but 35 to 70% of the time they get a leak in the connection, which is a Dane. we don't see it at all with AMDS. Three years in the 50-patient DARTS trial and 93 patients in the PERSEVERE trial, zero. So we're running the health economics on that, but re-ops and mortality for these patients, I mean, this is obviously a significant thing. And, you know, the FDA has been extremely interested in Dane and actually had it added as a primary efficacy endpoint.
spk08: Got it. Okay, that's super helpful. Again, thanks for the questions and fantastic readout on the year.
spk15: Thanks, Jeff.
spk12: Thank you. Our next question comes from the line of Frank Tackenden with Lake Street Capital. Please proceed with your question.
spk03: Hey, this is Nelson Cox on for Frank. I'll just start maybe internationally as well. Can you refresh us on the current size of the Salesforce there and Maybe thinking about the team size there throughout the year, obviously you've seen some nice growth there, but maybe just walk through your thinking there.
spk06: Yeah, we've talked about Asia and Latin America. When I started the company, we had one person in Asia and nobody in Latin America. We're now probably about 30 people in Asia and probably 15 in Latin America. We feel like Latin America is kind of where it needs to be. We may have a kind of onesie, twosies here and there. Asia, obviously, is a significant opportunity. We'll continue to add to those regions, but we treat it somewhat like a venture capitalist. As we get products approved, for example, we've had some big approvals in Australia, then we'll add feet on the street. We've got approvals in Hong Kong. We're direct there. We've had approvals in Thailand. We're direct there. We've had approvals in Taiwan. We're adding people there. As we get the product approved, which is really just the incremental cost of the regulatory approval, if we see the size of that market make sense and we just run an NPV, and then we'll add people. So it's really a gated, self-fulfilling, you know, a self-funding process that we go through. But Asia is the area that, you know, and we can pull that back. We can titrate that depending on, you know, our EBITDA requirements and commitments and what we see coming from an approval standpoint. Hopefully that helps you.
spk03: Yeah, no, that does. And then obviously I'll switch over to Onyx, obviously a strong quarter there. Can you maybe just talk a bit more about the competitive landscape, maybe just what you're seeing from the other competitors there? You can clearly continue to take share, but just curious what you're hearing out there from maybe their investments or lack thereof.
spk06: Yeah, so I'll talk about what customers are saying. We just, as I mentioned in November, or I guess October last year, we presented a 510 patient study kind of the FDA post-approval trial on the low INR, which is a typical requirement. They want to see that your valve performs in the community as it performed in the kind of rigorous FDA trial. So 60 centers, 510 valves. We saw an 85% reduction in major bleeding. So we went and did some market research, talked to 100 cardiac surgeons. By the way, it's very unique research. I've done a lot of this over my career. We did research in competitive accounts, what we call competitive accounts, which have ONIX share like less than 25%, and it shows that we continue to take share over the next three years and basically double our share. So this is a very meaningful new data set we're excited about, and our customers are excited about it, and we're going to be going after it.
spk14: Awesome. Thanks, guys.
spk12: Thank you. There are no further questions at this time, and I'd like to turn the floor back over to management for closing comments.
spk06: Yeah, well, obviously, we appreciate everybody's time here. I mean, I'll be quick in my wrap-up. We're super excited about 24. We had this great persevere readout on AMDS with 72% reduction in mortality, 52% reduction in major adverse events. So we're going to be working with the FDA to get this technology here in the U.S., but we're also approved around in multiple countries in Europe, Canada, and Asia where we're going to use that data to continue to take care of patients and drive growth. I just got done talking about the ONIX post-approval trial of 510 patients showing an 85% reduction in major bleeding, and we're going after share there. I talked a couple times about our price increases on Cinegraph as well as our our efforts to improve supply, and we'll continue to see growth there. And we talked about Asia Pacific, Latin America. We're also advancing our pipeline. We're going to be starting the third generation frozen elephant total arch repair system called Arcevo LSA later this year. So we continue to build an aortic company and are excited about delivering for you again in 2024.
spk15: Thank you.
spk12: This concludes today's teleconference. You may disconnect your hands at this time. Thank you for your participation.
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