Artivion, Inc.

Greetings and welcome to the Artivian fourth quarter and year-end 2024 financial conference call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Elaine Morgan, from the Jill Martin Group. Thank you. You may begin.

Thanks, Operator. Good afternoon, and thank you for joining the call today. Joining me today from our TIVIANS management team are Pat Matkin, CEO, and Lance Perry, CFO. Before we begin, I'd like to make the following statements to comply with the safe harbor requirements of the Private Securities Litigation Reform Act of 1995. Comments made on this call that look forward in time involve risks and uncertainties in our forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements made as to the company's or management's intentions, hopes, beliefs, expectations, or predictions of the future. These forward-looking statements are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from 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 over to Artivion CEO, Pat Mackin.

Long year at Artivion as we achieved total constant currency revenue growth of 10% excluding per cloth. We also expanded EBITDA margins by 310 basis points, resulting in adjusted EBITDA growth of 32% year-over-year, enabling us to deliver positive results while making breakthrough progress on several key clinical and regulatory initiatives and further expanding our global footprint. We entered the new year with even greater conviction in our ability to execute our best-in-class, multi-pronged, PMA-focused pipeline and deliver sustained double-digit revenue growth while growing EBITDA at least twice the rate of constant currency revenue growth. Before reviewing the fourth quarter performance and our expectations for 2025, I'd like to provide an update on the previously disclosed November 24 cybersecurity incident. Immediately upon discovering that the threat actor had accessed our systems, we initiated business continuity plans, took action to take certain systems offline, and engaged external advisors to contain and remediate the incident. Due to our team's immediate response, we mitigated the threat actor's ability to adversely impact our systems and the short-term disruption to our business. While we effectively operated for the final few weeks of the quarter, we estimate the incident had a negative impact of approximately $4.5 million on our Q4 revenue. We are now back to operating at normal levels, However, our manufacturing facilities and tissue processing operations were not operating at a normal level from the beginning of the incident in late November through January. Although this has challenged near-term tissue and onyx supply, we do not expect this incident to meaningfully impact our business for the full year of 2025, and our 2025 guidance reflects that. Specifically, we expect our tissue revenues to be significantly lower than normal in Q1. the difference being recovered over the remainder of the year. As we've discussed previously, a significant portion of our tissue revenue comes from Synagraph pulmonary valves. In this case, our demand outstrips supply for these valves every quarter, and therefore we hold no inventory. Importantly, we continue to receive normal levels of donations and processed tissue throughout the period of the cyber incident, and therefore we do not anticipate any meaningful impact for the full year. However, the lead times associated with tissue that were in process or received during that time period will be longer than normal, resulting in tissues that would have been released in Q1 being released later in the year. Similarly, but to a lesser extent, our lead times for ONIX were temporarily extended, and as a result, we're expected to have some stocking distribute orders that would have occurred in Q1 to occur later in the year. Lance will provide additional details in his remarks on the impact of Q4 as well as the timing of our 2025 revenues. Now on to our Q4 results. From a financial perspective, our Q4 performance was driven by continued growth across our product portfolio as well as continued benefit from regulatory approvals and commercial footprint expansion in key international markets like Latin America. From a product category perspective, ONIX revenue increased 10% year-over-year on a constant currency basis as we continue to take market share globally with the only mechanical aortic heart valve that can be maintained at a low INR of 1.5 to 2.0. Based on feedback from the field, our recent market share gains, and the proven clinical benefits of the ONIX aortic valve, we maintain a strong conviction that the ONIX is the best-in-class aortic valve on the market and will continue to take market share worldwide. In addition, we are encouraged by significant new data that was presented at the Society of Thoracic Surgeons meeting at the end of January. The data, which also published in JAK simultaneously, which is the Journal of American College of Cardiology, showed that across 109,000 patients from the STS database, mechanical aortic valves had a statistically significant improvement in mortality compared to surgically implanted patients under 60. This is a significant opportunity for the onyx valve and gives us even greater confidence that we should be able to continue to double-digit growth for the foreseeable future. Also in Q4, our StentGraph revenues grew 8% on a constant currency basis in the fourth quarter compared to the same period last year, and is one of the areas more heavily impacted by the cyber incident, which Lance will cover in more detail in his section. Our StentGraph portfolio remains a key component to our growth strategy, and we're encouraged by our products, which are driven by our differentiated product portfolio, that are focused on complex segments of the stent graft market. Today, the products in our stent graft portfolio are primarily sold in Europe, where we leverage our existing direct sales infrastructure to create significant cross-selling opportunities across our unique aortic product offerings. Our pipeline consists largely of bringing some of these proven products to the U.S. and Japanese markets, representing significant growth opportunity. I will detail shortly our expectations for the impact of AMDS in the U.S. BioGlu grew 7% on a constant currency basis compared to the same period last year. As a reminder, we received regulatory approval for BioGlu in China last quarter and will continue to work through some additional administrative steps to get ASCA to the hospital level. These steps are expected to take about six to nine months. Therefore, we expect to begin commercializing BioGlue in China in the second half of 2025. BioGlue has been a great product for patients for many years, and we are excited to be able to bring this technology to another large market and estimate that approximately 12,000 patients with acute type A dissections could benefit from BioGlue each year. Lastly, tissue processing. which was the area most heavily impacted by the cyber incident, declined 8% year-over-year on a constant currency basis in Q4. From a geographic standpoint, we continue to see results from our growth initiatives across Latin American and Asia-Pacific, primarily through new regulatory approvals and commercial footport expansion. Latin American and Asia-Pacific delivered constant currency revenue growth of 20% respectively in the fourth quarter and 26% and 11% for the full year. We continue to anticipate strong revenue growth for both regions over the coming years as we continue to leverage our industry-leading product portfolio in those regions. I will now turn to our product pipeline and our recent significant regulatory development with the AMDS HDE. Stated simply, the Humanitarian Device Exemption, or HDE, represents a significant milestone achievement for Artivion. For context, an HD is a marketing application for a product that has been designated a humanitarian use device. AMDS received humanitarian use device and breakthrough designations due to its intended benefit for patients in the treatment and diagnosis of a rare disease or condition which other comparable options currently exist. The HD allows for commercial distribution of AMDS in the United States prior to the receipt of any PMA. The HDE for AMDS was granted based on the full primary cohort 30-day data from the Persevere US IDE trial. The results from the IDE trial and the original DARTCH trial demonstrate superior clinical benefits of the groundbreaking nature of this technology. And we believe this HDE validates even further. Data from the Persevere trial, which completed enrollment in November of 2023, demonstrated statistically significant reduction in all-cause mortality in primary major adverse events. More specifically, the persevered area out to 30 days, the primary endpoint demonstrated a statistically significant 72% reduction in mortality and a 54% reduction in major adverse events compared to the current standard of care. Finally, the results of both these trials demonstrate no Dane tears in any patient treated with AMDS, including the now five-year data follow-up from the DART study. For context, Dane tears occur in up to 70% of patients following a hemiarch repair without AMDS. The elimination of Dane is an important clinical outcome as patients who experience a Dane will have worse clinical outcomes, including increased mortality, aortic growth, and reoperation. Since receiving the HDE, the one-year data from AMDS-Persevered clinical trial was presented at late-breaking sessions at the STS in Los Angeles in late January. Late-breaking data from our AMDS PERCEIVEL trial demonstrated sustained benefit of AMDS out to one year, with mortality in the AMDS group 50% lower than the reference cohort. There were also zero occurrence of DANE compared to the reference cohort, which could have a range of up to 70%. In addition, there were minimal new occurrences of stroke, renal failure requiring dialysis, or myocardial infarction. These data build on the positive findings from the 40-day readouts further supporting the life-saving nature of the AMDS technology. So we're very excited by the FDA decision to grant the HDE. It will now only enable us to begin selling the product ahead of the PM approval, but also the HDE stands to meaningfully benefit patient outcomes and save lives. Lance will cover the expected financial impact of the HDE in 2025, but I did want to cover some specifics related to the HDE and the product. There are three steps that each center will have to complete before implanting an AMDS as part of the AMDS launch process. First, each hospital will need to receive a site-wide IRB before implanting the AMDS, except in the case of an emergency use. Second, we will need to have AMDS approved by the Hospital Value Analysis Committee. Third, surgeons and their clinical staff will need to be trained on the device. Lastly, from a market perspective, for those of you familiar with HDEs, there is a limit of 8,000 devices that can be implanted annually. In the case of AMDS, this limit is larger than the total number of acute DeBakey Type 1 dissections that occur annually in the U.S. So from a practical standpoint, this limit is not an issue. So I'd like to update you on our pipeline. On AMDS, we are focused on securing our PMA. In Q4, we submitted our second PMA module for AMDS to the FDA and are currently working to complete some additional non-clinical benchtop testing. This testing is pursuant to recently adopted international standards by the FDA and is not related specifically to AMDS. To account for this additional testing submission as well as the FDA review time of this data, we are now anticipating PMA approval for AMDS in mid-2026. Importantly, given the HDE, we do not view this delay as having a meaningful impact on our ability to generate AMDS revenue in the meantime. Additionally, Endospan is expected to present its 30-day data from its U.S. and for its Nexus aortic stent graft system at the AATS annual meeting in early May. Assuming the data shows the initial trial endpoints have been met, Nexus remains on track for approval in the second half of 2026. Our strong financial, clinical, and regulatory performance in 2024 positioned us well for 2025 and beyond and reinforced our confidence that we can deliver sustainable double-digit revenue growth, drive EBITDA margin expansion, and grow adjusted EBITDA at twice the rate of constant currency revenue growth. With that, I'll now turn the call over to Lance.