Q2 2023 Avinger Inc Earnings Call
Participants
Jeffrey M. Soinski; President, CEO & Director; Avinger, Inc.
Nabeel P. Subainati; VP of Finance, Principal Financial Officer & Accounting Officer; Avinger, Inc.
Swayampakula Ramakanth; MD of Equity Research & Senior Healthcare Analyst; H.C. Wainwright & Co, LLC, Research Division
Matthew Kreps; MD of IR; Darrow Associates Inc.
Presentation
Operator
Greetings, and welcome to the Avinger Second Quarter 2023 Results Call. (Operator Instructions) Please note, this conference is being recorded. I will now turn the conference over to your host, Matt Kreps, Investor Relations at Avinger. You may begin.
Matthew Kreps
Thank you, Paul, and thank you, everyone, for participating in today's call. I would like to welcome you to Avinger's Second Quarter 2023 Conference Call. Joining us today are Avinger's CEO, Jeff Soinski; and Principal Financial Officer, Nabeel Subainati. Earlier today, Avinger released financial results for the quarter ended June 30, 2023. A copy of the release is posted on the Avinger website under Investor Relations.
Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions in the Private Securities Litigation Reform Act of 1995. These statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements, including, without limitation, our future financial expectations are based upon our current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please see our Form 10-K and 10-Q filings with the Securities and Exchange Commission.
Avinger disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. Today's presentation will also include reference to non-GAAP financial measures such as adjusted EBITDA. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures is available within the earnings release, which can be found on Avinger's website. And with that, I'd like to now turn the call over to Jeff.
Jeffrey M. Soinski
Thank you, Matt. Good afternoon, and thank you all for joining us. The second quarter was an exciting time for Avinger as we received FDA 510(k) clearance for 2 innovative new devices, Tigereye ST and Pantheris LV, providing the opportunity for 2 important new product launches in the second half of this year, a first for Avinger.
We had good momentum in our business in the second quarter, increasing revenue by 8% on a sequential quarter basis and adding new resource to our sales team. We are confident that the introduction of these 2 new products will provide meaningful growth opportunities for our PAD business as we move through the second half of the year. Combined with our new Lightbox 3 advanced HD imaging console, we believe the launch of these 2 new catheter systems completes the build-out of our image-guided peripheral product portfolio, allowing us to focus most of our R&D efforts on the development of our first coronary product application.
By leveraging our proprietary image-guided platform, we believe we can redefine the market for crossing coronary CTOs, providing a superior, simplified and more certain solution for a challenging condition and providing Avinger's first inroads to the high-value coronary artery disease market.
We made significant progress on this initiative during the second quarter, advancing design candidates through the first stage of animal trials, incorporating valuable feedback from coronary CTO specialists and preparing for the next round of animal studies this quarter. With this progress, we believe we remain on track to file an investigational device exemption or IDE application, with the FDA in the first half of next year to allow for initiation of a clinical study in 2024.
While we made excellent progress on our new product initiatives, we also reported solid operating metrics. During the second quarter, we maintained gross margin at 30% and held to our efficient operating cost model, driving significant improvement in adjusted EBITDA compared to both the prior quarter and year ago period. Sales productivity or revenue per sales head remained strong for our existing team members. And during the quarter, we hired 4 additional clinical specialists to provide expanded case coverage capability in future quarters.
Let me take a few minutes to provide further updates on our 2 recently cleared peripheral products. We received 510(k) clearance for our new Tigereye ST high-speed CTO-crossing catheter in April and initiated limited launch in May. Since that time, physicians at 9 sites have completed more than 30 cases with the new system. We have sold catheters into an additional 5 sites and expect to support additional cases in both these and existing sites to complete our limited launch activities over the next month.
Based on the product reliability, clinical success and positive physician feedback from the cases completed so far, we've begun preparations training our broader sales team and building product inventory for expansion to full commercial launch later this quarter, consistent with the plans communicated earlier this year.
As a reminder, Tigereye ST is a low-profile 5 French system designed to cross chronic total occlusions, or CTOs, which are completely blocked arteries, in the peripheral vasculature, both above and below the knee. Tigereye ST spins at speeds up to 1,000 RPM and provides real-time, high-definition OCT imaging during the procedure, providing valuable information for the physician to guide treatment and help them stay in the true lumen during crossing, which is highly beneficial for the patient.
Tigereye ST has a user-controlled deflectable tip to precisely direct the catheter during treatment and incorporates multiple design upgrades in the tip configuration and catheter shaft to increase crossing power and procedural success in challenging morphology. It also adds design features to aid in image interpretation during the procedure and performs exceptionally well with our advanced Lightbox 3 imaging platform.
Tigereye ST limited launch cases have already contributed to the growth of our CTO business in the second quarter, and we're excited about the potential for this innovative new product to be a significant growth driver as we expand to full commercial launch through the back half of the year.
In June, we received our second 510(k) clearance in the quarter with the FDA clearance of our new Pantheris LV image-guided atherectomy system. We developed Pantheris LV with the objective of streamlining the atherectomy procedure, opening additional user and case opportunities for our platform, and in combination with our Lightbox 3 imaging console, expanding the mainstream appeal of our image-guided platform. Pantheris LV builds on our success with our Pantheris SV small-vessel device, incorporating several design features from this system for larger vessel application. The Pantheris LV device is designed to treat vessels 3 to 7 millimeters in diameter and is ideally suited to treat lesions in the SFA and popliteal arteries, above and behind the knee, where the majority of PAD procedures are performed.
Pantheris LV incorporates a proprietary design for plaque apposition without the need for a balloon and operates at significantly higher rotational speeds than our current large-vessel offering. It also introduces enhanced guidewire management and plaque management systems to the platform. We initiated limited launch for Pantheris LV this month and expect to gain case experience in up to 12 clinical sites in the coming months.
As with Tigereye ST, the limited launch period provides important benefits to fully understand the clinical capabilities of the new device, gauge product performance and reliability in a real-world clinical setting, and prepare our clinical sales team for full national launch. If all goes according to plan, we expect to expand Pantheris LV to full commercial launch in the fourth quarter of this year.
We look forward to updating you on our continued clinical experience with these 2 new products and are excited about their potential to positively impact our revenue as we expand both products to full commercial launch in the second half of this year.
Our advanced and highly portable Lightbox 3 imaging console continues to receive rave reviews from physician users and is the perfect complement for our new high-speed catheter systems, allowing catheters to spin at higher speeds without image degradation. While we continue to support the larger installed base of our legacy L250 platform, Lightbox 3 is now responsible for approximately 25% of our case volume, providing significant upside opportunity as we expand penetration of this platform.
Lightbox 3 is being used to efficiently engage with new accounts as well as provide upgrade opportunities in existing accounts. While most Lightbox 3 procedures are performed on a portable console brought in by our clinical support team, we sold 3 Lightbox systems in the second quarter.
Our best-in-class Pantheris SV small-vessel atherectomy device continues to deliver exceptional patient outcomes and continues to be a strong market performer for Avinger. Pantheris SV is primarily used to treat patients with below-the-knee lesions, many of whom suffer from critical limb ischemia, or CLI, the most severe form of PAD. Safety is of paramount importance when treating lesions within these very small 2- to 4-millimeter diameter vessels. And in CLI cases, clinical outcomes can determine whether the patient will be able to avoid amputation.
The real-time imaging and precise control provided by Pantheris SV allows physicians to precisely target the disease while avoiding damage to the arterial vascular structures, safely restoring blood flow for limb preservation and minimizing or avoiding adverse events or future re-narrowing of the vessels. Pantheris SV is now responsible for approximately 50% of our atherectomy case volume, and we are excited to extend design features that have driven success with this device to the above-the-knee market with our new Pantheris LV system.
The unique and compelling benefits of Pantheris SV have inspired our IMAGE-BTK post-market clinical study designed to evaluate Pantheris SV for the treatment of below-the-knee lesions in a real-world clinical setting. We continue to build the clinical data set at the 12 months post-procedure study endpoint and expect to complete patient enrollment this quarter.
Principal investigators for the study have recently presented updated interim results at major clinical conferences in the U.S. and Europe. Clinical outcomes from IMAGE-BTK continue to be outstanding. Commenting on his presentation at the LINC Symposium in June, Dr. Michael Lichtenberg, Chief Medical Officer and Director of the Angiology Department and Vascular Center at Klinikum Arnsberg, said Pantheris SV shows enormous promise for the treatment of PAD in challenging below-the-knee anatomy, backed by real-world data in patients in Rutherford Class 3 through 6.
We have seen tremendous outcomes for patients at 6- and 12-month follow-up at this point in the IMAGE-BTK study with 96% freedom from TLR and 93% patency at 12 months and 100% freedom from major adverse events across enrollees. As compared to restenosis rates as high as 70% using balloon angioplasty, these type of results support OCT-guided directional atherectomy as an excellent option to address vascular disease in the arteries below the knee.
In addition to the exceptional safety and durability of patient outcomes data discussed by Dr. Lichtenberg, luminal gain or the opening of the vessel for blood flow has been equally impressive in the study. On average, the 41 patients treated at this point in the study began with a 94% stenosis or blockage of the target vessel. This was reduced by 73% to a blockage of only 25% following treatment with Pantheris alone and reduced further to a blockage of 9% following the optional use of adjunctive therapy such as an angioplasty balloon, representing a 90% reduction in stenosis overall.
These clinical results are unprecedented in the treatment of advanced disease in below-the-knee vasculature, emphasizing the value of our proprietary approach, which combines the safety of image-guided therapy with the targeted luminal gain of directional atherectomy. We currently have 46 patients enrolled in the IMAGE-BTK study and anticipate achieving our 50-patient target enrollment this quarter. Patients will be followed to the 12-month endpoint of the study, and we expect to continue to release interim results as additional data becomes available in the coming months.
As we look to the future, we're excited to bring the benefits of our image-guided platform to the large and growing coronary artery disease market. Our first product application targets development of a superior image-guided solution to the complex, expensive and uncertain procedures currently used across chronic total occlusions in the coronary arteries.
By leveraging our proprietary technology platform, we believe we can redefine the standard of care in this market with the first and only fully integrated image-guided system for crossing coronary CTOs. Our coronary CTO development program focuses on low-profile catheter designs that combine real-time OCT guidance with precise control and steerability to facilitate an integrated approach and allow a larger number of physicians to safely and efficiently cross coronary CTOs.
Like our peripheral catheters, our coronary devices will incorporate a precise measurement capability to help physicians properly size balloons or stents prior to placement, which is critical for optimal outcomes. An image-guided coronary CTO-crossing device with diagnostic capabilities such as we are developing would access existing reimbursement codes, both for the therapeutic procedure and for coronary OCT diagnostic imaging, immediately upon FDA clearance. This is a key distinction from PAD codes.
We believe that an OCT-guided catheter designed for crossing efficiency, combined with an immediately available attractive reimbursement scenario, provides the opportunity for a highly compelling economic value proposition. Having largely completed our peripheral R&D efforts, we are now primarily focusing development activities on this coronary initiative. We have made significant progress and gained valuable feedback through the evolution of our design prototypes through our key opinion leader advisory board.
We successfully completed our first round of animal studies this past quarter and are preparing for a second round of animal studies at a top KOL center next week. Based on our experience to date, we are even more excited about the potential for this groundbreaking product to change the standard of care for the treatment of coronary CTOs. And we believe we remain on track to file an IDE application with the FDA in the first half of next year to allow for initiation of a clinical study in 2024.
We made tangible progress across several fronts over the past quarter, securing FDA clearance for 2 strategically important peripheral products and advancing both devices to limited launch, building our revenue base and expanding our case coverage capability with new sales hires, and making substantive progress on the development of our first coronary product application. At the same time, we continue to carefully control operating expenses and deliver significant improvement in adjusted EBITDA performance.
As we look to the back half of the year, we're excited to expand our Tigereye ST and Pantheris LV devices to full commercial launch, broadening the appeal of our product portfolio and creating new usage drivers for our platform. We will continue to leverage our new Lightbox 3 imaging console to drive new account activity and grow our user base and look to make strategic investment in our commercial field presence to increase case coverage capability as we move through the remainder of the year.
The second half of the year is also a critically important time in the development of our first coronary product application, as we continue to gain valuable learning on our design approach and complete Phase II design selection and Phase III verification and validation over the coming months to prepare for an IDE application with the FDA in the first half of next year. We look forward to reporting our progress against these initiatives throughout the year. And at this point, I'd like to turn the call over to Nabeel Subainati, our Principal Financial Officer and Accounting Officer, to take us through the financial results. I'll then return for Q&A. Nabeel?
Nabeel P. Subainati
Thank you, Jeff. Total revenue was $2.0 million for the second quarter of 2023 compared with $1.9 million in the first quarter of 2023 and $2.1 million in the second quarter of 2022. Sales productivity for our existing team members remained strong during the quarter, and the company hired 4 new clinical specialists to support expanded case activity in future quarters.
Gross margin for the first quarter of 2023 was 30% -- for the second quarter of 2023 was 30% compared to 34% in the first quarter of 2023 and 31% in the second quarter of 2022. Operating expenses for the second quarter of 2023 were $4.3 million, down from $4.9 million in the first quarter of 2023 and $4.4 million in the second quarter of 2022, as the company maintains an efficient operating expense structure. With the receipt of 2 FDA clearance notifications in the second quarter, the company has substantially completed its peripheral R&D programs and is redirecting its R&D activities to focus on the development of its coronary CTO-crossing device.
Net loss and comprehensive loss for the second quarter of 2023 was $4.2 million compared with $4.6 million in the first quarter of 2023 and $4.2 million in the second quarter of 2022. Adjusted EBITDA, as defined under non-GAAP financial measures in this press release, was a loss of $3.4 million, improved from a loss of $3.9 million in the first quarter of 2023 and a loss of $3.7 million in the second quarter of 2022.
For more information regarding non-GAAP financial measures discussed in this press release, please see non-GAAP financial measures below as well as a reconciliation of non-GAAP measures to the nearest GAAP measure provided in the tables below. Cash and cash equivalents totaled $7.1 million as of June 30. At this point, I'd like to turn the call back to Jeff for Q&A.
Jeffrey M. Soinski
Thanks, Nabeel. We're excited about the recent Tigereye ST and Pantheris LV clearances, the first time we've had 2 devices cleared within a single year. We're well into our limited launch with Tigereye ST and off to a good start with Pantheris LV and expect to move to commercial launch for both products in the second half of the year. Our clinical studies continue to provide irrefutable evidence of the clinical advantages of our image-guided approach, with KOL physicians detailing superior outcomes achieved with our devices through podium presentations at major clinical conferences.
And we're making definitive progress on the development of our first coronary product application, which we believe provides the opportunity to redefine a large and underserved market with a highly differentiated solution that can advance the standard of care for millions of patients and provide a transformational value opportunity for Avinger. At this point, we'd be happy to take your questions.
Question and Answer Session
Operator
(Operator Instructions) And we do have a question come from RK from H.C. Wainwright.
Swayampakula Ramakanth
A couple of quick questions. So if we look at the trajectory of revenues over the last, say, 6 quarters, they have been around the $2 million mark, give or take. So with these 2 new products that would get into full launch later this year, early next year, how do you see growth from here? Obviously, there are a few things which are adding to it as well, including additional sales personnel.
Jeffrey M. Soinski
I think you hit on a very important point in your question. And the number of sales personnel and especially clinical support personnel that we have in the field directly relate to our ability to support case volume and drive revenue. We had a reduced number, as you know, of sales heads in the first quarter. We've added, since the beginning of the year, 6 new salespeople, bringing our total sales head count at the end of the second quarter kind of back in line with where we ended the fourth quarter of '22.
We expect to continue to make strategic investment in this team as we move through the back of the year, of course, being cognizant of our cash utilization as well as being cognizant of time and resource available for proper training to get those folks up to speed. So we were very pleased with the amount of productivity that we received out of our existing team members, which was actually higher than the year ago period in the second quarter. And as we -- and I'll tell you, I've been extremely impressed with the quality of the hiring and how quickly our new clinical specialists are coming up to speed. So we think they'll be in a position to contribute to revenue in the second half of the year. So sales heads and continued training and development of our sales team, especially our newer folks, as well as making strategic investment in a reasonable way through the back half of the year will contribute to the growth in the second half.
We also have, as you mentioned, 2 new products that we'll be launching into full commercial launch. We expect later this quarter in the September time frame to proceed to full commercial launch for Tigereye ST. And then we expect in the fourth quarter, once we get a certain number of cases under our belt and have an opportunity to train our team, to expand in the fourth quarter for full launch for our Pantheris LV large-vessel atherectomy device. So again, 2 growth drivers as we move through the back of the year, but especially as they're fully available to us, hopefully, with a larger sales team as we go into 2024.
At the same time, we're continuing to use our Lightbox 3 to engage with new accounts, kind of showcase some of the new catheter capabilities and as a platform to drive our higher-speed catheters with no image degradation, which we think is very exciting. So all of these factors together, I think, will continue to drive good growth opportunity for the company.
As you know, the third quarter really for every company in our space is typically a lower seasonal quarter. But I think we're positioning the company very well for growth as we kind of move through the next 4 quarters. Then of course, on top of that, we're setting up a very large future opportunity but down the road with our coronary program.
Swayampakula Ramakanth
Thanks for that detailed answer. Regarding how the third quarter could be a slow quarter, so given that, what's your confidence with these new folks coming on board? And 2 beta launches going on at the same time, how confident are you that against that seasonality, the company can still perform and grow beyond $2 million in revenue?
Jeffrey M. Soinski
Yes. So I think we have the pieces in place, right, with the incremental revenue from the Tigereye ST launch, continued revenue from the limited launch of Tigereye in August as well as revenue because all of our limited launch activities, we sell the product. None of this product is placed or a product that's given for free, so that does provide incremental growth opportunities that we expect could offset kind of the typical seasonal softness in the third quarter.
But it's about keeping our people in the field, keeping them engaged, bringing our new people up to speed, which I feel and has been reported to me and observed that all of our new hires are completely capable of supporting cases independently now. So I think we have the building blocks in place to drive the revenue growth, and all that really comes from our case volume since, as you know, the vast majority of our revenue is in our disposable volume.
Swayampakula Ramakanth
During your kind of comments, even now you're careful as to not specify the dollar amount per salesperson. Is this -- is it possible for you to give that number? Because I'm just trying to understand because you said it comes -- it's back to where it used to be, but I don't know what that number is. Or is this strategic that you don't want to say it?
Jeffrey M. Soinski
That's fine. I think I could share with you. So typically, our revenue per head is around 100 -- of sales head, including sales management, is about $100,000 per head. When you look at our -- even though we made the new hires during the second quarter of '23, if you look at the average headcount, including the new hires during the quarter, that would be about 20, just given the timing of their hiring, so that averages right about that $100,000 a head. The reality is the new people really contributed very little to revenue during the second quarter because they're in their training period and onboarding period. So our existing folks delivered revenue of over $110,000 per head during the quarter, which was -- is a substantial improvement versus the year ago period.
Of course, all of this really needs to roll up into the total number for the quarter. But we like to see that kind of continued improvement in efficiency and productivity for our sales team as they have more and more tenure. And I'm confident based on the quality of the hires we have here that we'll continue to drive -- and the new activity we have going on that we'll continue to drive that increase in sales productivity per head as we go through the back half of the year.
Swayampakula Ramakanth
One last question from me. J&J this morning talked about their new ablation catheter. Have you guys looked into it? And what sort of competition is that? Or is it not something similar to what you're offering?
Jeffrey M. Soinski
RK, I haven't seen that news yet. So I will take a look and share any thoughts we have on it.
Operator
Thank you. There are no other questions from the lines at this time. I would now like to hand the call back to Jeff Soinski for closing remarks.
Jeffrey M. Soinski
Thank you, Paul, and thank you all for joining our call this afternoon. We very much appreciate your interest in our company and look forward to reporting our continued progress as the year advances. Have a good afternoon.
Operator
Thank you. This does conclude today's conference. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.
