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Greetings, and welcome to the Avinger First Quarter 2023 Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.
And I will now turn the conference over to your host, Matt Kreps. Sir, you may begin.
Thank you, Ali, and thank you all for participating in today's call. I'd like to welcome you to Avinger's first 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 March 31, 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 will include forward-looking statements within the meaning of federal securities laws, which remain pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical fact 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 filing 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 references 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 also available within the earnings release, which can be found in Avinger's website.
And with that, I'd like to now turn the call over to Jeff.
Thank you, Matt. Good afternoon and thank you all for joining us. During the first quarter and early part of the second quarter, we've made important progress in advancing our business and our mission of radically changing the way vascular disease is treated. In April, we received 510(k) clearance for our new Tigereye ST image-guided CTO-crossing catheter and have already initiated limited launch activities.
In January, we filed a 510(k) submission for Pantheris LV, our next-generation large vessel image-guided atherectomy system. And since that time, we've advanced the regulatory review process with the FDA, and continue to anticipate premarket clearance in the midyear time frame, providing the opportunity for two new peripheral product launches in the second half of this year.
Along with the introduction of our new Lightbox 3 imaging console in 2022, we believe the launch of these two new catheter systems in 2023 will fully build out our image-guided PAD product portfolio, allowing us to focus most of our R&D efforts on the development of our first coronary product application. Over the past several months, we've made significant progress on this initiative, advancing design candidates through the development process, gaining valuable feedback from coronary CTO specialists and preparing for our first animal studies later this quarter.
Based on our progress to-date, we believe we remain on track to file an investigational device exemption, or IDE, application with the FDA in the next nine to 12 months to allow for initiation of a clinical study in 2024.
While we made significant progress in our new product development activities, we also reported continued improvement in our operating metrics. During the first quarter, we increased gross margin by 6 percentage points, and sustained our efficient operating cost model. Driving significant improvement in adjusted EBITDA compared to the year ago period. While revenue remained flat compared to the prior year, sales productivity or revenue per sales had improved by more than 25%, as we delivered the same amount of revenue with lower sales headcount.
We continue our recruiting efforts to build our clinical sales force and have recently added two new clinical specialists with two more expected to join our team this quarter. In addition to expanding our sales team throughout the year, we are confident that the anticipated full commercial launch of our two new peripheral products in the second half of the year will provide new growth opportunities for our business, expanding the addressable market for our products and increasing usage occasions in existing accounts.
Our new Tigereye ST CTO-crossing catheter incorporates design upgrades to the tip configuration and catheter shaft to increase crossing power and procedural success in challenging morphology. It also incorporates design enhancements for ease of image interpretation during the procedure. Tigereye ST continues to provide the distinctive high-definition real-time imaging, user-controlled deflectable tip and faster rotational speeds introduced to the platform in 2021, all of which performed exceptionally well with our advanced Lightbox 3 imaging platform.
We've already initiated limited launch and expect to announce the completion of first cases with Tigereye ST this month. The limited launch period provides important benefits to fully appreciate the clinical capabilities of this exciting new device, and to prepare our clinical sales team for full commercial launch. If all goes according to plan, we expect to expand to full commercial availability in the third quarter of this year.
As mentioned earlier, we filed a 510(k) submission for our new Pantheris LV image-guided atherectomy catheter in January and anticipate FDA clearance in the midyear time frame. Pantheris LV is our new large vessel device that incorporates key design principles from our highly successful Pantheris SV device. Pantheris LV 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 and plaque management systems to the platform. Combined with our Lightbox 3 imaging console, we believe these design and innovations will streamline the atherectomy procedure, open additional case opportunities for our platform and expand the mainstream appeal of our image-guided approach.
Our 510(k) filing for Pantheris LV continues to advance through the regulatory review process. We've answered all open questions and provided documentation and additional testing requested by FDA, and have no open requests on our 510(k) submission at this time. While subject to change, based on the progress we've made to date, we anticipate FDA clearance midyear, which would allow us to initiate limited launch in the third quarter and provide the opportunity for expansion to full commercial availability in the fourth quarter of this year.
Within our existing product portfolio, our Pantheris SV small vessel atherectomy device continues to be a strong performer, delivering significant growth in procedures and revenue compared to the prior year. As discussed on past calls, 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.
Pantheris SV provides tremendous benefits to physicians treating lesions within these very small 2 to 4 millimeter diameter vessels. 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, which can lead to adverse events and a re-narrowing of the vessel, or restenosis, with conventional approaches. We are documenting the excellent clinical results physicians are achieving with this unique and highly differentiated device in 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 by the third quarter of this year. We are excited to share expanded outcomes data with the broader clinical community in the coming months with principal investigators for the study in the U.S. and Europe, scheduled to present updated interim results at major clinical conferences in the second and third quarter.
In addition to these efforts in April, we announced the presentation of clinical data from our groundbreaking INSIGHT trial at the prestigious Charing Cross International Symposium in London by Dr. Arne Schwindt, a vascular surgeon and one of the leading enrollers in the study. As a reminder, INSIGHT is an IDE study designed to evaluate the safety and effectiveness of Pantheris for the treatment of in-stent restenosis or ISR when a previously implanted stent becomes occluded.
The highly positive results from this study form the basis for a 510(k) application to the FDA to add a specific ISR indication for Pantheris. Based on the strength of the data the FDA provided clearance to add this indication in November 2021 with Pantheris becoming the only directional atherectomy device approved for use in the treatment of ISR, a significant and challenging problem for thousands of patients every year.
Key outcomes data presented from the INSIGHT study include 82% luminal gain or increase in the channel for blood flow following the procedure. 93% freedom from target lesion restenosis at six months post procedure, 89% freedom from target lesion restenosis at 12 months post-procedure, zero amputations for the six and 12 month patient cohorts, a 0.96 mean ankle brachial index or ABI at six months from a baseline of 0.69 pre-procedure and a 71% improvement in the Rutherford class score a measure of disease severity at six months.
These are remarkable results, which speak volumes to the safety and efficacy of our catheters in a high risk, difficult to treat patient population. Dr. Schwindt noted the results from the INSIGHT trial support Pantheris as a frontline treatment option for ISR with the best combination of efficacy and safety in this patient cohort as compared to any other statistically significant dataset produced by alternative technologies. Again, demonstrating the ability for real-time imaging combined with precisely controlled therapeutic catheters to make a clinically significant difference in the lives of PAD patients.
As we look to the future, we’re excited about the progress we are making in the development of our first coronary product application, targeting a superior image guided solution to the complex, expensive and uncertain procedures currently used to cross chronic total occlusions in the coronary arteries. By leveraging our proprietary technology platform, we believe we can redefine this market with the first and only fully integrated image guided system for crossing coronary CTOs, and by doing so, provide a transformational value opportunity for Avinger.
Our coronary CTO development program focuses on low profile catheter designs that combine real-time OCT guidance with precise control and steerability to facilitate nano-grade approach and allow a larger number of physicians to safely and efficiently cross coronary CTOs. Similar to our peripheral catheters, our coronary devices will incorporate a precise measurement capability to help physicians properly size balloons or stents prior to placement critical for optimal outcomes.
Perhaps most exciting from a business perspective, an image-guided coronary CTO crossing device with diagnostic capabilities would access existing reimbursement codes both for the therapeutic procedure and for coronary OCT diagnostic imaging immediately upon FDA clearance. We believe that an OCT guided catheter designed for crossing efficiency with the need for fewer support devices and less contrast media usage combined with an attractive reimbursement scenario, provides the opportunity for a differentiating and highly compelling economic value proposition.
As we focus our R&D efforts on this initiative, we’ve made significant progress in our development program. In recent months, we’ve had multiple interactions with members of our Clinical Advisory Board made up of highly experienced interventional cardiologists in the fields of coronary CTO crossing and intravascular imaging. And through those interactions we gained valuable feedback for the evolution of our design prototypes.
We are making final preparations to evaluate our leading design candidates in a first round of animal studies this quarter as we work towards our goal of filing an IDE application with the FDA within the next nine to 12 months to allow for initiation of a clinical study for this revolutionary new device in 2024.
I’ll close my opening remarks today by reiterating the three strategic areas introduced on our March call to drive growth of our peripheral business. First, increasing case coverage capability and catheter utilization in our core geographic areas through the expansion and training of our clinical sales team. Second, leveraging our new Lightbox 3 imaging console to drive new account activity and expand our user base. And third, completing the regulatory approval process for our two new peripheral devices in preparation for commercial launch in the second half of 2023, which we believe will broaden the appeal of our product portfolio and create new usage drivers for our platform.
We’re also making important investments for our future with the expansion of our proprietary technology platform to the larger coronary artery disease or CAD market with a defined goal of filing an IDE application with the FDA for our first coronary device in the next nine to 12 months to allow for the initiation of a clinical study in 2024. Despite a challenging economic environment, we’ve made tangible progress against each of these goals in the first part of this year, while driving continued improvement in operating results. We look forward to reporting our continued progress against these initiatives throughout the year.
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 and then I’ll return for Q&A. Nabeel?
Thank you, Jeff. Total revenue for the first quarter of 2023 was $1.9 million compared with $1.9 million in the first quarter of 2022 and $2 million in the fourth quarter. As Jeff mentioned, sales productivity increased as revenue remains stable with lower sales headcount during the quarter. We are currently hiring additional field sales people to increase selling activities and expand case coverage capability in key markets.
Gross margin for the first quarter was 34%, notably improved from 28% in the year ago quarter and stable with the fourth quarter. Operating expenses for the first quarter were $4.9 million compared with $5.2 million in the year ago quarter, and $4.5 million in the fourth quarter. Net loss and comprehensive loss for the first quarter was $4.6 million compared with $5.1 million in the first quarter of 2022 and $4.2 million in the fourth quarter.
Adjusted EBITDA as defined under our non-GAAP financial measures in this press release was a loss of $3.9 million compared to a loss of $4.6 million in the first quarter of 2022 and a loss of $3.8 million in the fourth quarter. A copy of the reconciliation from net loss to adjusted EBITDA can be found in today’s press release, which is also posted on our website at avinger.com under the Investor section. Cash and cash equivalents totaled $10.4 million as of the end of the quarter.
At this point, I’d like to turn the call back to Jeff for Q&A.
Thanks, Nabeel. We’re excited about the recent Tigereye ST clearance and initiation of limited launch, as well as the progress we’re making towards regulatory approval of Pantheris LV providing the opportunity for two major new peripheral product launches in 2023.
Our clinical studies continue to provide irrefutable evidence of the clinical advantages of our image guided approach with KOL physicians spreading the news through podium presentations at major clinical conferences, and we’re making tangible 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 it can advance the standard of care for millions of patients. And by doing so, fulfill our mission of radically changing the way vascular disease is treated.
At this point, we’d be happy to take your questions.
Thank you. [Operator Instructions] Thank you. Our first question is coming from Swayampakula Ramakanth from H.C. Wainwright. You may proceed.
Thank you. This is RK from H.C. Wainwright. Good afternoon Jeff and Nabeel, hope you guys are doing good? So just to start off thinking about the ISR data that you brought recently – update on the ISR data. How is that being utilized in detailing the product and have you seen any increase in adoption once the data is out?
Yes. Thanks, RK. As we – not only is the data powerful, but the addition of the actual indication certainly makes a difference enabling our sales force to directly market and support our device for use in ISR. As you may know the only other directional atherectomy devices, the Hawk devices marketed by Medtronic are actually contraindicated for ISR. So by delivering a very high safety profile in the treatment of ISR and avoiding interference with stent struts, we enable physicians to provide a very large amount of luminal gain to restore blood flow without of course damaging the stent or damaging the tissue.
Our luminal gain, even prior to utilization of a balloon or any adjunctive therapy is 60%, over 80% when you use any adjunctive therapy compared to a laser, which is the predominant atherectomy modality used for treating ISR currently where we estimate around a 30% luminal gain following use of their device alone.
So Pantheris really delivers against this challenging population. It’s a great way for our reps to go in, show the data, talk about the indication and get trial in a new account because treating these ISR patients is very challenging. The stent struts light up wonderfully under OCT and physicians can clearly and easily see the value in their very first cases of the real-time imaging. So that primarily is how it’s used. It’s a way for our reps to engage with new users. It’s a usage occasion as a way in and especially something that can happen quickly with our Lightbox 3 imaging console and of course, our available Pantheris catheters to just accelerate the adoption cycle and the engagement level with new accounts. It’s also a way to add usage occasions with existing accounts or bring on new users with existing accounts.
Perfect. So talking about adoption, if you can provide us some commentary on the Tigereye ST because obviously this was recently approved and I believe you have an ongoing limited launch at this point? And also what or when should we expect the launch to become a full launch?
Yes. So as you know, we very recently received our FDA clearance just within, I guess, last week we announced the FDA clearance. It seems like longer than that, but we’ve been ready to go and preparing our launch activities or for our launch activities as we waited for the approval. So the same week that we got the approval, we kicked off the limited launch with our sales team. We’ve initiated training programs with the reps and clinicals who will be supporting our limited launch accounts.
And we are now in the field a, trying to get catheters into the limited launch accounts, but also supporting our first cases with the Tigereye ST. So we expect to announce very soon within the next couple of weeks the initial results from our first cases with Tigereye ST. We will add accounts throughout the quarter with the objective to be in about 10 limited launch sites. And once we've done a certain number of cases and provided the opportunity for us to get a better understanding of the clinical capabilities of the device, and very importantly prepare and train our sales team as well as provide clinical experience to our sales and clinical support team during this period, then make the decision and the announcement to proceed to full commercial availability which, again, we're early in the limited launch process. But we anticipate that the expansion to full commercial availability should happen early in the second half of the year in the third quarter.
Okay. And then on the LV product, on the Pantheris LV product, what – do you have a regular dialogue with the FDA? And in terms of expectations for that product, how – now that some of your sales force has gained experience, is that launch going to be more smooth than the previous ones? Any expectations or comments on that?
Yes. So we are going through really on a very standard review process with FDA. As you know, we filed the 510(k) submission early in the year, early in January. We've had the typical informal as well as formal requests for questions and request for information. We have provided all documentation and additional testing provided or requested by FDA at this point, and we have no open requests currently.
So we're hopeful that we're nearing the end of the process. Obviously, there could be a request for additional information only in that area limited to where they've asked before. But we feel we've provided very comprehensive responses supported by data and are hopeful that we will receive the clearance within the time frames that we've always anticipated in that midyear time frame.
And so based on that expectation, we are doing the same thing we did with Tigereye ST and starting to prepare to initiate a limited launch very soon after clearance. So our expectation, of course, a lot of this is out of our control is that we will be in a position to initiate limited launch in the third quarter of this year. And because there are – the atherectomy market is a larger market with more usage occasions, we think that we can move pretty quickly through that process. Of course, we do limited launch to ensure that the device is operating in the real-world clinical setting as we expect it to, to gain experience, really understand the device and prepare our team. And so if everything goes according to plan, we would expect that our Pantheris LV would be ready for expansion to full commercial availability, hopefully, early in the fourth quarter.
What's exciting about Pantheris LV is that it builds on the great success that our clinicians have had with our Pantheris SV, our small vessel device. It eliminates the need for a balloon to provide apposition even in these larger 3 to 7 millimeter vessels, which does streamline the atherectomy procedure. It spins at much higher speeds. Our current large vessel device spins at 1,000 RPM. The Pantheris LV is designed to spin it at rotations up to 3,000 RPM. So really designed to do a good job in tough and challenging lesions and mild to moderate calcium.
It also is a device that brings a lot of other efficiency to the platform. It has a new guidewire management system. It has a new plaque management system. So there's a lot of improvements in this device that are all designed not only to provide a great clinical outcome as all of our devices do but to streamline the procedure and kind of broaden the mainstream appeal of our platform.
So a lot of excitement in the sales team and certainly internally here, we've had a lot of good input and advice from our peripheral clinical advisers in the development of that product, and I think we're well positioned for Pantheris LV to make a strong difference in the growth of our business. They're very, very excited. I'm very excited personally to get this product out in the market.
Thank you. Thanks for taking all my questions, Jeff.
Thank you, RK.
Thank you so much. We have reached the end of our question-and-answer session. So now I will hand the call back over to Mr. Soinski for closing remarks.
Well, thank you very much for joining our call this afternoon. We appreciate your interest in our company, and look forward to reporting our further progress as the year advances. Have a good afternoon.
Thank you. And this does conclude today's conference. You may disconnect your lines at this time, and we thank you for your participation.