Avinger Inc . (NASDAQ:AVGR), a medical device company specializing in image-guided therapies, has entered into a strategic partnership with Zylox-Tonbridge to expand its market presence in the greater China region. The partnership includes a $15 million investment from Zylox and exclusive distribution and manufacturing rights for Avinger's devices in China. Avinger reported a total revenue of $1.9 million for the first quarter of 2024, with a gross margin of 18%.
Despite this, the company faced a net loss of $5.5 million and operating expenses of $5.4 million. The company's cash and cash equivalents stood at $7.2 million as of March 31st. Additionally, Avinger is advancing its coronary development program and plans to file an IDE submission with the FDA in Q3 2024 for its CTO crossing device.
Key Takeaways
- Avinger has formed a strategic partnership with Zylox-Tonbridge, granting Zylox exclusive rights in the greater China region.
- Zylox will invest up to $15 million in Avinger and will handle the distribution and manufacturing of Avinger's devices in China.
- Avinger's Q1 2024 revenue was $1.9 million with a net loss of $5.5 million.
- The company is extending its debt repayment from Q1 2024 to Q1 2027, with interest payments throughout this period.
- Avinger is progressing in its coronary development program, aiming to file an IDE submission with the FDA in Q3 2024.
Company Outlook
- Avinger projects achieving registration and manufacturing capabilities in China by the end of 2025.
- The company plans to commercialize products in Europe, focusing on Germany due to existing CE Mark certification.
- Avinger is exploring opportunities to distribute Zylox's CE-marked products in Germany.
Bearish Highlights
- The company reported a significant net loss of $5.5 million for the first quarter.
- Operating expenses were high at $5.4 million, which contributed to the net loss.
Bullish Highlights
- The strategic partnership with Zylox-Tonbridge opens a large market in China and provides a substantial investment.
- Avinger's advancement in the coronary development program indicates progress towards potential market expansion.
Misses
- Despite the partnership and development progress, Avinger's financials show a challenging quarter with a low gross margin of 18% and a net loss.
Q&A Highlights
- Avinger expressed optimism about its progress and plans for commercialization in China and Europe.
- The company is committed to completing the necessary testing for their CTO crossing system and filing with the FDA by the end of Q3 2024.
In conclusion, Avinger Inc. is strategically positioning itself for expansion into the Chinese market through its partnership with Zylox-Tonbridge, while also focusing on its coronary development program and potential commercialization in Europe. Despite financial losses in the first quarter, the company remains optimistic about its future prospects.
InvestingPro Insights
Avinger Inc. (AVGR) has made significant strategic moves to secure its position in the international medical device market. The partnership with Zylox-Tonbridge is a stepping stone into the vast Chinese market, which could be a game-changer for the company's scale and reach. While the company's financials reflect a challenging environment, it's important to look at the broader picture through real-time data and expert analysis.
InvestingPro Data shows that Avinger's Market Cap stands at a modest $6.12M, reflecting its small-cap status in the market. Despite the company's efforts to innovate and expand, it is important to note that it operates with a significant debt burden, which is a critical factor for potential investors to consider. The P/E Ratio (Adjusted) for the last twelve months as of Q4 2023 is -0.33, indicating that the company is not currently profitable. Moreover, the Revenue Growth for the same period was down by -7.51%, which might raise concerns about the company's ability to increase sales in the near term.
However, it's not all challenging news for Avinger. The company has seen a strong return over the last three months, with a 28.0% Price Total Return, which may signal a positive market reaction to recent developments, including the partnership with Zylox-Tonbridge. This uptick could be a sign of growing investor confidence in the company's strategic direction.
InvestingPro Tips highlight that Avinger is quickly burning through cash and that its short-term obligations exceed its liquid assets. These insights underscore the importance of the company's strategic initiatives to improve its financial health. Additionally, the company does not pay a dividend to shareholders, which is typical for growth-oriented medical device companies reinvesting profits into research and development.
For those interested in a deeper dive into Avinger's financial health and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/AVGR. Readers can utilize the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, gaining access to a total of 9 InvestingPro Tips that provide a more comprehensive understanding of Avinger's financial and market position.
Full transcript - Avinger Inc (AVGR) Q1 2024:
Operator: Greetings and welcome to the Avinger First Quarter 2024 Results Call. At this time, all participants are on a listen-only mode and a question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this call is being recorded. I will now turn the conference over to your host, Mr. Matt Kreps. Sir, you may begin.
Matt Kreps: Thank you. And thank you all for participating in today's call. I'd like to welcome you to Avinger's first quarter 2024 conference call. Joining us today are Avinger's CEO, Jeff Soinski, and Principal Financial (NASDAQ:PFG) Officer, Nabeel Subainati. Earlier today, Avinger released financial results for the quarter ended March 31, 2024. 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 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 and expected timing for commercial launch of products and filings within the FDA 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 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. Thank you.
Jeff Soinski: Thank you, Matt. Good afternoon, and thank you all for joining us. Along with continued progress in our peripheral business, we had two exciting events in the first quarter that will provide significant new opportunities for Avinger as we move our company forward. In March, we announced a strategic partnership with Zylox-Tonbridge, which opens a pathway for the introduction of our image-guided devices to the vast and growing greater China market. During the first quarter, we also made exciting progress in the development of our first coronary product, initiating Phase 3 verification and validation studies for our proprietary CTO crossing device as we prepare for filing an IDE submission with the FDA later this year. Starting with our new strategic partnership. Zylox-Tonbridge is a fully integrated medical device company and a leader in the peripheral vascular and neurovascular markets in China. Since their founding in 2012, Zylox has developed and launched 36 products into the greater China interventional markets. They maintain a state-of-the-art manufacturing facility at their headquarters in Hangzhou, China, and are certified to the ISO 13485:2016 international quality standard. Under the terms of an equity financing agreement, Zylox will invest up to $15 million into Avinger through the purchase of preferred and common stock in two tranches. The first $7.5 million tranche was funded in March. The second tranche, $7.5 million equity investment, will be funded upon achieving key milestones, including successfully registering Zylox as a manufacturer of Avinger's products with the US FDA and Avinger achieving $10 million in aggregate revenue over four consecutive quarters. Under the terms of a license and technology transfer agreement, Zylox has exclusive rights to distribute and manufacture Avinger's proprietary image guided devices in the greater China region, including mainland China, Hong Kong, Macao and Taiwan. We are supporting Zylox in their regulatory process as they prepare for registration of the Avinger products in China. Following regulatory clearance, Avinger will sell products to Zylox for their initial product launch until such time as Zylox has established their own manufacturing capability and gained regulatory authorization for manufacturing Avinger products for the China markets. Sales of Avinger products in the Zylox territory will be royalty bearing to Avinger. With more than 130 employees in sales and marketing and an extensive distribution network, Zylox is extremely well qualified to distribute Avinger products in the greater China region. Once Zylox has established their manufacturing capability and been successfully registered as a manufacturer of Avinger’s products with the US FDA, we will have the option to source finished product from Zylox on a cost plus basis. We believe this could provide the opportunity for Avinger to reduce cost of goods sold, improve gross margin, and reduce facility and related overhead expense in the future. Our collaboration with Zylox is off to a great start, and we're excited about the strategic benefits this relationship brings to Avinger, strengthening our balance sheet, providing a pathway to vast new markets, and creating the opportunity to improve our gross margin and cost structure over time. Now turning to our coronary development program, we are very excited about the progress we are making in the development of our first coronary device, an image-guided CTO crossing system based upon our proven technology platform, which we believe provides the opportunity to redefine a large and underserved market. Following an extensive design and development process and multiple rounds of animal studies and cadaver heart studies with KOL physicians, expert in coronary CTO crossing and OCT intravascular imaging, we have completed Phase 2 design selection and have advanced our development program to Phase 3 in the product development process. Pending successful completion of the required verification and validation testing, we anticipate being in a position to file an IDE submission with the FDA in the third quarter of this year, to allow for initiation of a clinical study following approval. Crossing chronic total occlusions in the coronary arteries can be complex, time-consuming, and have high failure rates. By leveraging our proprietary image guided technology, we believe we can provide physicians with a superior, simplified, and more predictable solution for crossing coronary CTOs with the need for less radiation exposure and contrast media usage. Our coronary system features a low profile, 4 French catheter design that combines real-time OCT guidance with precise control and steerability to facilitate nano-grade approach, which we expect to significantly reduce procedure times and improve crossing success rates. Like our peripheral catheters, our coronary device incorporates a precise measurement capability to help physicians properly size balloons or stents prior to placement, which is critical for optimal outcomes. We think our solution can accomplish this with less reliance on specialty wires, support catheters, recanalization devices, and reentry devices, while also limiting X-ray radiation exposure and usage of iodine-containing contrast dye, which can pose various health risks. We are confident our combination of onboard image guidance and precise control within the vessel will support a robust safety profile during clinical practice. We believe our coronary CTO crossing device will present a highly compelling economic value proposition. Reducing crossing time, contrast media usage, and the need for certain accessory devices would result in significant cost savings for the hospital system. In addition, our coronary system would not only access existing high-value reimbursement codes for CTO crossing, it would also access existing codes for coronary OCT diagnostic imaging immediately upon FDA clearance. We think this makes great sense from both a clinical and business perspective, and we're excited to provide further updates as we advance this revolutionary product to IDE filing later this year. During the first quarter we also continued to make progress with our peripheral business. Our new sales representatives and clinical specialists have completed their onboarding and are gaining clinical proficiency with our devices as they build their sales pipelines and advance new accounts and users through the sales process. Our new Tigereye ST CTO crossing device, launched in the second half of last year, continues to increase market penetration and support the growth of our CTO business. And we continue to gain valuable clinical experience with our new Pantheris LV large vessel atherectomy device as we prepare for commercial expansion later this 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?
Nabeel Subainati: Thank you, Jeff. Total revenue was $1.9 million for the first quarter of 2024 compared with $1.9 million in the fourth quarter of 2023 and $1.9 million in the first quarter of 2023. Gross margin for the first quarter of 2024 was 18% compared to 20% in the fourth quarter of 2023 and 34% in the first quarter of 2023. The change in gross margin primarily reflects lower production activity during the quarter as we continue to optimize inventory levels while conserving cash expenditures. Operating expenses for the first quarter of 2024 were $5.4 million compared to the $5.0 million in the fourth quarter of 2023 and $4.9 million in the first quarter of 2023. The increase in operating expenses primarily relate to the increase in sales headcount and expenses related to the Zylox-Tonbridge transaction, which Jeff had discussed earlier, and other corporate activities. Net loss and comprehensive loss for the first quarter of 2024 was $5.5 million compared with $5.0 million in the fourth quarter of 2024 -- 2023 and $4.6 million in the first quarter of 2023. Adjusted EBITDA as defined under our non-GAAP financial measures provided in today's press release was a loss of $3.9 million compared to a loss of $4.3 million in the fourth quarter of 2023 and a loss of $3.9 million in the first quarter of 2023. For more information regarding non-GAAP financial measures, please see the non-GAAP financial measures and reconciliation of non-GAAP measures to the nearest GAAP measure provided in the tables in today's press release. Cash and cash equivalents totaled $7.2 million as of March 31st. In March of this year, CRG Partners, the primary holder of Avinger debt and preferred equity, exchanged its Series A preferred stock with an aggregate liquidation preference of $61 million for new Series A-1 preferred stock with a value of $10 million. The new Series A-1 preferred stock is convertible at a conversion price of $3.66 per share and carries no liquidation preference or dividend preference. Additionally, CRG extended principal payments on Avinger's debt from the first quarter of 2024 to the first quarter of 2027, with interest payments occurring during this time. At this point, I'd like to turn the call back to Jeff for Q&A.
Jeff Soinski: Thanks, Nabeel. We're excited about our new partnership with Zylox-Tonbridge and the rapid progress we're making in the development of our first coronary product. We're encouraged by the outstanding clinical outcomes we see physicians deliver with our peripheral devices and cath labs across the country every day and we appreciate the dedicated efforts of our team as they remain committed to our mission of radically changing the way vascular disease is treated. At this point, we'd be happy to take your questions.
Operator: [Operator Instructions] We have a question on the line from Swayampakula Ramakanth from H.C. Wainwright. Your line is live.
Swayampakula Ramakanth: Thank you. Good afternoon, Jeff and Nabeel. A couple of quick questions. The first one is on the new partnership that you're talking about with Zylox-Tonbridge. So, I just like to understand when do you anticipate commercialization of product in China, how long do you think that they would take to get products registered so that they can start commercializing the stuff, which you are producing here before they're able to manufacture themselves over there?
Jeff Soinski: Thanks for the question, RK. So yes, we are very, very pleased with how quickly and how engaged Zylox is in not only building their internal manufacturing capability but also developing all of the documentation required to support the registration of our products in China. We actually got a little head start on that as we were finalizing our agreements. And so it is a priority, both in their organization as well as our organization. Now, they control the timeline and there's as much out of their control as well given that the Chinese regulatory system, just like the US FDA will move at their own pace. However, based on our projections, we expect that it is realistic that registration could be achieved by -- prior to the end of 2025, and we expect that the manufacturing capability at Zylox can come online and be validated within that timeframe as well. So again, a very productive and focused effort that we think can bear fruit in 2025.
Swayampakula Ramakanth: Okay. So as you're waiting for the product to be commercialized in China, we are also talking about products that can be commercialized in Europe. So since you have the CE Mark there, is it easier to get started now there? Or how does that work in China -- I mean in Germany, sorry.
Jeff Soinski: Yeah. So in Germany, we, as you know, currently market our products under CE Mark, and we also distribute our products in other markets as well. But our primary European market is Germany, given the reimbursement structure and the relationships we have with certain KOL physicians. So we don't see an opportunity for incremental revenue with our products beyond the growth that our team is focused on driving in Europe. However, there are certain products that Zylox has that they have -- that have CE marking, which we have the ability to engage with them to see if it would be suitable for us to distribute those products into our existing accounts in Germany. The timeframes on that would not require a new regulatory registration. But we are prioritizing getting them up to speed and their regulatory clearance efforts underway for China and also developing their manufacturing capability, which we see as the larger opportunity.
Swayampakula Ramakanth: Yeah, yeah. Understood. And then in terms of what you're doing here in the US regarding the IDE submission that you are anticipating, especially for the CTO crossing system in the third quarter, what else needs to get done for you to submit that application?
Jeff Soinski: Yeah. So really, just the basis of an IDE submission would require that you complete your Phase 3 verification-validation testing, which would include DVT and Deval testing. We have a final design, and we're in process on that full suite of biocompatibility testing, having the clinical study design and your initial sites identified as well as the -- as well as any [GMP] (ph) animal studies that are required. And so we're in that process now really on all of those things. As you know, we completed design selection at the end of 2023, so we've been into this now for most of this year and feel that we are in good shape. Obviously, we have to complete all the testing and get the results -- the desired results, and that could impact timing, but based on what we know now, we feel like we're in good shape to achieve our objective of filing in the -- prior to the end of the third quarter.
Swayampakula Ramakanth: Okay. Fantastic. Then, thank you very much. Thanks for taking all my questions.
Jeff Soinski: Thank you. Thank you, RK.
Operator: Thank you. As we have no further questions in the queue at this time, I will hand it back to Mr. Soinski for any closing comments you may have.
Jeff Soinski: Thank you, 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 further progress in the coming quarters. Have a good evening.
Operator: Thank you. This concludes today's call, and you may disconnect your lines at this time, and we thank you for your participation.
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