Artivion at Oppenheimer Conference: Strategic Resilience Amid Challenges

On Tuesday, 18 March 2025, Artivion Inc. (NYSE: AORT) participated in the Oppenheimer 35th Annual Health Care MedTech and Services Conference, outlining its strategic priorities and addressing recent challenges. The discussion, led by CEO Pat Mackin and CFO Lance Berry, tackled the impact of a cyber breach on their operations while emphasizing the company’s growth prospects and strategic plans. Despite disruptions, Artivion remains optimistic about meeting its financial targets.

Key Takeaways

• Artivion experienced a cyber breach affecting Q1 results but is confident in meeting revised guidance.
• A $100 million convertible note due in July may be settled with shares if the stock price stays above $23.46.
• The company is focusing on organic growth and has minimal exposure to geopolitical and macroeconomic risks.
• The AMDS product launch is underway, with positive initial reception and ongoing training programs.
• Artivion aims for double-digit revenue growth and plans to double EBITDA this year.

Financial Results

The cyber breach disrupted Artivion’s tissue processing business, leading to deferred revenue from Q1 to later quarters. However, the company expects demand to remain strong and aims to restore normal operations by Q2.

Artivion’s $100 million convertible note, maturing in July, is likely to be settled with shares if the stock price is above $23.46. A $100 million delayed draw term loan facility serves as a contingency plan if the stock price falls below the strike price.

The company targets sustained double-digit revenue growth and plans to expand EBITDA at twice the rate of sales, aiming for net debt leverage in the "twos" range.

Operational Updates

The AMDS launch is progressing with approval received in December and sales activities initiated in January. Training programs for surgeons are in place, aiming to boost market penetration.

Artivion addressed concerns about FDA guidance on tuberculosis transmission in processed human tissue, indicating that their key product, the decellularized pulmonary valve, should not be affected.

The Onyx business has shown a 13% annual growth over the last eight years, supported by post-approval data and new findings highlighting a mortality benefit for mechanical valves in patients under 60.

Future Outlook

Artivion plans to leverage its commercial infrastructure to drive sales of new products, including AMDS, targeting the top 600 heart hospitals in the US, which account for 80% of the volume.

The company anticipates further gross margin expansion with the AMDS launch and aims to maintain a steady pipeline execution pace, releasing a PMA every two years.

Minimal impact is expected from tariffs due to domestic manufacturing, and FX hedging helps mitigate currency fluctuation effects on EBITDA.

Q&A Highlights

The impact of the cyber breach was addressed with specific guidance for Q1, with confidence in meeting revised targets. Artivion’s strategy includes focusing on top-line growth of 10% to 14% and doubling EBITDA, leveraging G&A and sales force efficiencies.

Expectations for the AMDS launch in 2025 are measured, with significant sales leverage anticipated by 2026 as the company targets key hospitals.

For further details, readers are encouraged to refer to the full transcript below.

Full transcript - Oppenheimer 35th Annual Health Care MedTech and Services Conference:

Suraj, Senior medical device analyst, Oppenheimer: Senior medical device analyst at Oppenheimer, pleased to have with us this morning, Pat Mackin, CEO, and Lance Berry, CFO of Artavion. Gentlemen, it’s a pleasure to have you. Do appreciate you taking the time this morning.

Pat Mackin, CEO, Artivion: Hey. Good morning, Suraj.

Suraj, Senior medical device analyst, Oppenheimer: So, Pantelands, let me just jump right in. Obviously, you guys have been on a nonstop for almost three plus years during COVID, beat and raise, beat and raise, beat and raise. And unfortunately, in Q4, there was a cyber breach that discussed some minor dislocation. Pat, we know the impact in Q4. Maybe you can talk about the remediation efforts and how should we think about Q1 specifically related to the cyber breach?

Lance Berry, CFO, Artivion: Yeah. Maybe so. I’ll take that one and let Pat jump in. I think first thing is just to think about how the business is operating today. You know, anything happening today is is working as normal.

If we receive, you know, donated art today, if we ship product out to customers, to invoice and bill, close our books, that’s all operating normal, basically, the way it did before the event occurred. The only real thing that’s left over is and we talked about this on our q four earnings call, is in our tissue processing business, donations continued normally throughout the whole event. We were able to keep processing. We were doing a lot of things manually, and it’s just gonna make the time frame from, you know, when we receive even a donation until we’re able to release that, is gonna be a lot longer than normal for things that occurred during that period of time. So, I think as you know, Suraj, there’s a good portion of our tissue business that is certain sizes and configurations that we sell immediately as soon as it’s available.

And so the result means that, you know, tissue that would have been released in q one, and been revenue is gonna get deferred into later quarters, you know, hopefully, mainly q two, but, you know, the rest of the year. And that’s just for creating a shift of revenue out of q one into later quarters. So we’re we’re confident the demand will be there, and it’s just a question of when we can release the tissue. Now, it’s unusual to help everyone with that. We just gave specific guidance for q one, to help everyone with with what the impact was, and try to be clear with people that we just view that as timing, and that that’s all.

Suraj, Senior medical device analyst, Oppenheimer: Got it. Lance, if I could push you on that, do you think consensus correctly reflects, at least implicitly any residual cyber impact?

Lance Berry, CFO, Artivion: Well, I mean, I said we gave specific guidance for Q1. So I mean, I think the consensus number is right at the midpoint of that. So, yeah, I mean, that that seem to be in line with what we told people we expected.

Suraj, Senior medical device analyst, Oppenheimer: Got it. Got it. Pat, Lance, again, you know, I know we were on the road not too long ago. And I think so forcing the $100,000,000 convert that was on top of investors’ minds and you guys talked about it. Unfortunately, the stock has pulled back.

Give us your updated thoughts. I think so it’s still June or maybe I’m forgetting, maybe July you’ll have that window open. Just kind of give us your updated thoughts. And part of the reason I ask is obviously with just the macro level drama of every day, right? How what are your thinking and how do you navigate this?

Lance Berry, CFO, Artivion: Yeah. So the the converts due in July and the strike price is $23.46. So if the stock price is $23.46 or higher, convert it’s the same number of shares to to convert. It’s, you know, 4,260,000.00 shares regardless of of price. So, we’ve been very clear that we would prefer to use shares to take out the convert to delever.

That’s our preference. And we filed an eight k as required back in December that said that shares is how we would settle the convert if it was in the money. So I think everyone should continue to expect that if the stock price is, you know, 23.46 or higher. And like I said, it doesn’t matter to us what the what the stock price is, you know, as long as it’s north of that. It’s the same number of shares.

If for some reason it drops below that as, you know, it’s it’s a things are a little volatile market wise right now. We do have a safety net. So our private debt that we put in about a year ago has a delayed draw term loan feature of a hundred million dollars. So if that was, you know, if if it dropped below $23.46 and we owed the hundred million dollars back in cash, we would just draw down the delayed draw term loan and and make that payment. So, you know, we’re we’re we’re in good shape either way.

You know, hope we can use shares, but if we can’t, it’s fine.

Suraj, Senior medical device analyst, Oppenheimer: Got it. Pat, you know, obviously, the the the number one question that is on everyone’s mind, you know, there were some other companies presenting this morning and I think so they were like, you know, there’s too much of uncertainty, right, overall and a decent chunk of your business is OUS. And obviously, we haven’t seen, you know, the future. And I don’t mean to ask you, with exact confidence how you see this play out, but help us understand, you know, how should we think about Artemian’s FX exposure, you know, if tariffs come into play, how should we think about any impact from that? Would you all need to move manufacturing somewhere or are you all relatively buffer from some of these macro level shocks, FX excluded, obviously?

Pat Mackin, CEO, Artivion: Yeah. So, you know, I know that’s been, you know, all over the news and has created a lot of choppiness in the market. I mean, as it stands today, and again, I can’t, you know, talking about future scenarios aside, as the stands today, we’re extremely well positioned. We basically make everything in The USA, except for our our StentCrafts in Germany, which we don’t sell any in The US. So any of the current tariffs that have been contemplated really have zero impact on our company.

Suraj, Senior medical device analyst, Oppenheimer: Got it. Got it. Pat, AMDS obviously has been dominating client conversations. You’ve also talked about AMDS on the calls and you’ll have had an HDE for a little short period right now. So as you look for IRBs and to get the ball rolling, any initial feedback you could provide in terms of the training it’s needed, proctoring, feedback, you know, just kind of how how you’ll seeing it versus your earlier expectations?

Pat Mackin, CEO, Artivion: Yeah. Yeah. So this is a refresher for everyone. We got approval, you know, in that December. Took a couple weeks to go through the internal r and d closeout process, which you have to do.

So we were basically ready to ship, yeah, AMDS by the end of the year. So, you know, let’s call it a January ’1 start. We had our sales meeting in kind of the January. We presented the one year data at STS at the January. And we’ve got, you know, with the reps and managers in The US, we’ve got, you know, 60 feet on the street, And they’re super motivated, and we’re out actively engaging with accounts as we speak, working with the IRB, getting through value analysis committee, and then getting surgeons trained.

So, you know, our first our first surgeon training is coming up on Friday. We’ve got a number of surgeons attending that. It’s a pretty simple training as we’ve talked previously. You know, this technology is just basically adding the AMDS at the end of the standard of care operation, which takes about five minutes. So we do have a we do have a one day training program, which involves didactics, you know, tabletop models as well as some cadaver training.

But we can train surgeons at their sites, so it’s not gonna be a, you know, a limiting factor, in the rollout of the product. You know, I think it’s you know, I think we’re off to a good start. We’ve got a lot of excitement from customers, a lot of excitement from our commercial team. But it’s just we gotta go through the process. So, you know, I think we’re we’re, you know, optimistic as we see things rolling out now.

Suraj, Senior medical device analyst, Oppenheimer: Got it. Pat, I’ll just ask this client question. You know, it says, I I presume in your eight k’s as an example of this risk in Jan twenty twenty five, the cedar, FDA issued two final guidance documents directed at the reduction of risk of transmission of tuberculosis in process human tissue, the guidance which is low, we believe this guidance is if implemented as written could significantly reduce the supply of safe implantable human tissue. So maybe you can just kind of give us your updated thoughts on this risk, you know, just in terms of, you presumably have mentioned, in your Yeah.

Pat Mackin, CEO, Artivion: I mean, you know, we we deal with, you know, regulatory bodies all the time. So this is not not uncommon. I think in this particular circumstance, there were some new guidance documents that came out. There was a lot of pushback from ATB, which represents all the tissue providers, also from a lot of the surgeon societies. So, this is kind of in frankly, is in limbo right now.

They extended the implementation by ninety days. And, you know, we’ll see what comes out next. But, I think this is, we remain to you know, we want to be cautious in as we put out these, you know, fully transparent in our disclosures. But I think this one is not, you know, at least on the surface, doesn’t seem to be like a big deal at this point. I think the other big thing is our our most important product in that segment is the decellularized pulmonary valve.

And decellularized pulmonary valves should fall out of this guidance. So, you know, we’ll wait to see, but it’s more it’s more kind of, in the sausage making kind of state right now. So I can’t really comment more than that.

Suraj, Senior medical device analyst, Oppenheimer: Got it. Okay. Pat, obviously, you came on board. You acquired Onex. It is, you know, just delivered to what you had originally said.

Talk to us in terms of your latest thoughts about going upstream, I. E. Higher in age. You and I have had multiple conversations on the SAVR versus TAVR dynamic and low risk. And I think so you’ve gone on record saying, you know, if we start going upstream, I.

E. Artivion starts going upstream in age, the TAM for Onyx could double. Give us your updated thoughts. You know, what are you seeing in the in the marketplace? Is this more drawn out?

Are you seeing some tectonic plate shifts already happening?

Pat Mackin, CEO, Artivion: Yes. I think you’ve been involved with Onyx since we acquired them. And we’ve grown that business 13% a year over the last eight years. We continue to take market share. You know, as you know, we just had this post approval data come out about a year ago, and we feel like we could continue to take share in the mechanical segment.

The newest piece of information is this huge dataset that was presented at STS and 109,000 valves showing a mortality benefit to mechanical valves versus bioprosthetic valves in patients 60. That that is a huge opportunity for the company. And, you know, you’re very familiar with the valve space. It’s not just the surgeon, so we’re gonna have to get the you know, we’re gonna have to educate the referring cardiologist, which will take some time. But, I mean, I you know, one of the questions we we we, you know, continue to get, you know, early on was about, you know, TAVR, you know, sneaking into our area.

And the data on that continues to come out and does not look good in, TAVR in patients 65. And now we’re seeing data where, you know, tissue valves don’t look good in patients 65. So we just need to get the word out, but it it really provides our kind of next wave of growth for Onyx for kind of years to come. I mean, I think this is a huge opportunity for the company, to exploit the the clinical the proven clinical advantage of Onyx in patients 65.

Suraj, Senior medical device analyst, Oppenheimer: Fair point. And, Pat, you know, obviously, you’ll have, so Onyxx is a lot of it’s sort of, you know, well oiled machine right now with some call options. Understood. AMDS, you know, let’s say next year we start kicking into high gear and the next, stop after AMDS, should we think about EndoSpan, in terms of Nexus and you guys acquiring EndoSpan in maybe early twenty seven? Is that the next stop, you know, on this, EBIT expansion journey?

How should we think about that? And when we could

Pat Mackin, CEO, Artivion: Yeah. I mean, you know, if if you look at, you know, our pipeline, I mean, this is a you know, it’s kind of a well thought out pipeline. Right? It goes from from AMDS to NextEvas to our SIBO to our branch stroke of abdominal. So it just you know, it’s got a every every two years, a PMA spits out.

You know, we’ve got a big data readout coming, on endo span Nexus, in, you know, five weeks or so at ATS. The pivotal cohort for the TRAUMF trial will be presented at ATS out in Seattle. So that’s the the 60 patient chronic dissections, which is gonna be the evaluation for the FDA, PMA. So right. I haven’t seen the data.

So, I mean, as soon the data is good, they’ve got then have to get FDA approval. And if we you know, the data looks good and they get approval and we decide to acquire them, it would probably be in that q one of twenty seven time frame.

Suraj, Senior medical device analyst, Oppenheimer: Would we, Pat, to push you on that, looking at the data of Triumph, would we have a reasonably good idea how Artkivian would lean after the data? I guess what I’m trying to get at is would there be some clear markers where people like, you know, damn, this data is

Pat Mackin, CEO, Artivion: going to

Suraj, Senior medical device analyst, Oppenheimer: work with the done deal?

Pat Mackin, CEO, Artivion: Yeah. Let’s just be clear about the transaction. Right? The the the deal was struck that EndoSpan has to get FDA approval. That triggers my option to acquire.

So, you know, you could use, one one could surmise if there’s really strong data that comes out in early May that Artivion possibly will acquire them, but you’re not gonna know until we buy them. I’m not gonna I mean, you can call me the next day, and I’ll say, yeah. The data looks great. We’ll let you know after they get PMA approval. Right?

Yeah. It’s just I’m just being straight with you.

Suraj, Senior medical device analyst, Oppenheimer: Got it. No. Fair enough. Fair point. Lance, obviously, you all have given guidance for FY ’25 but, you know, if we all talk about, you know, some of the general higher level non company specific uncertainties, how do you see specifically related to OpEx leverage in 2025?

You know, what are the levers you can pull on that because EBIT expansion is obviously a key part of your LRP strategy?

Lance Berry, CFO, Artivion: Yes. So, so far, we really haven’t seen anything that causes us any concern about our ability to continue to drive EBITDA margin expansion. And it’s some of the things that Pat’s already talked about. I think at a high level, you know, the two things that clearly on people’s minds are, you know, FX and tariffs. Right?

So, you know, as Pat said, you know, from a tariff standpoint, basically, everything we sell in The US, we make in The US. And then we don’t really have any large, like, OUS supplier type risks, you know, in the manufacturing processes. So we don’t see that as a big concern at the moment. And then FX, I mean, obviously, impacts the top line in in raw numbers, but we’re pretty well hedged with our, you know, German manufacturing. So it doesn’t have a a significant impact on EBITDA.

So those two big things that obviously could be creating concerns for for other companies aren’t a big concern for us. So as we look at it right now, you know, our big three things that are gonna drive EBITDA margin expansion, which is, you know, continuing to leverage G and A, continuing to leverage our sales force, which is kind of a unique opportunity that we have, and then adding a third leg to the stool this year, which is gross margin expansion from mix with AMDS launch in The US. Those things are all still intact, and we don’t see any of the current macro environment things changing that at the moment.

Suraj, Senior medical device analyst, Oppenheimer: And, Lance, going back to AMDS. Right? You just mentioned that one of the themes that your you and Pat have talked about on the road and on calls is the inherent leverage. You don’t need to hire a new Salesforce to sell AMDS. Lance, if I could, let’s say 2025 is a wash, right?

At what point, let’s say tomorrow you’ll start AMDS sales? Is it four quarters, six quarters before we should start thinking about sales leverage or sales rep productivity starts picking up and we start you know, getting a feel of how that flows through.

Lance Berry, CFO, Artivion: Yeah. We we talked about for 2025, we’re telling people to, you know, keep, expectations in check where year one of a launch, and, obviously, we’re gonna be doing whatever we need to do to make sure that that launch goes as good as it possibly can. I think as we move into ’26, you know, I’m not gonna, you know, nail quarters down for a year that I haven’t even given guidance for, but I think in full year ’26, we definitely should see that benefit in the numbers.

Suraj, Senior medical device analyst, Oppenheimer: Got it. And the, you know, how many 600 or so accounts that seems to be the initial low hanging fruit that you all would be targeting the way we at least that you all have talked about in the past?

Pat Mackin, CEO, Artivion: Yeah. I mean, the, you know, the way we kind of break this up, there’s a there’s about a thousand heart hospitals in The US that do acute type a aortic valves that can use kind of our product portfolio. 600 of those represent 80% of the volume. Right? So with with 50 reps on the ground, we cover those 600 pretty pretty well.

So that’s kind of our primary focus is that first six hundred.

Suraj, Senior medical device analyst, Oppenheimer: Got it. Pat, I know another thing that you all have talked about top line growth, let’s say 10% to 12%, fifteen %. Your goal is to grow EBIT much faster over time, generate organic cash flows, pay down debt. And I believe, and Lance, please correct me if I’m wrong, eventually get to net debt leverage like in the twos or some somewhere in that ballpark. Maybe I’m screwing that up.

Help us understand your updated thoughts. Obviously, you have the company specific, but now the macro environment is also might have caused you to tweak some of that thought. Love to get your you guys’ updated thoughts in terms of how you’re seeing that strategy or or the goal play out?

Lance Berry, CFO, Artivion: Yeah. So again, just maybe to reframe at a high level what we tell people. We don’t have formal long range plan targets out there. But what we’ve said is, you know, we think we can grow the top line double digits for an extended period of time, for for years, and that we can continue to drive EBITDA margin expansion and grow EBITDA at twice the rate of sales for years. And the reason we can do that is the underlying dynamics of, you know, our differentiated products, the markets they’re in, and our pipeline.

So that’s at a high level. We’ve told people, and, you know, one of the first big things is to get AMDS that makes the double digits, you know, a lot easier, and that’s kind of the first of these pipeline products to fall. And so that’s occurred. So really and we’ve talked a little bit about how some of the the things that are creating anxiety for people, in in a lot of businesses aren’t directly impacting us right now. And so, I mean, if there’s something new tomorrow, we’ll have to reassess that.

But, the things that are creating a lot of uncertainty for a lot of companies aren’t really creating a lot of uncertainty for us at the moment. And therefore, we we I mean, we’re not reassessing anything. I mean, we we think our plan is good, and intact, and we’re just focused on executing it.

Suraj, Senior medical device analyst, Oppenheimer: Fair point. Fair point. Pat, I know we are gonna be up on time shortly, but, Pat, what is the one thing that, you know, obviously, I’ve seen you for, what, almost seven plus years now, eight years coming up. What would you say is one thing that TheStreet is not fully appreciating? I mean, valuation, I understand.

Okay? I’m just saying the key from key fundamentals perspective about Artkavian, overall that the street is either not understanding, not appreciating, or not digesting it.

Pat Mackin, CEO, Artivion: Yeah. I would say it’s probably the the the chassis we have in place to drive, you know, and and what Lance talked about, the the leverage, the you know, I don’t think there’s a lot of companies out there. I think when you step back and say, you know, how many companies are growing double digit top line, twice as fast bottom line, expanding gross margin, delevering, increasing cash flow, and have four PMAs in the pipeline and don’t need to raise any money. I think that it’s it’s looking and putting that all together, with a fairly derisked pipeline. I mean, most of our products in the pipeline already have data generated that is larger than the US FDA trial is gonna be.

So you have a super derisked pipeline, and we’ve we’ve pretty much been doing it. So, before we got the new product. So I think, you know, just continuing to do what we’re doing. So I think it’s just a it’s a very unique model that I I don’t think people if they sit down I mean, I joke with Lance that, you know, if you give us ten minutes and let Lance show you five slides, you’ll be interested in the company.

Suraj, Senior medical device analyst, Oppenheimer: Pat, if I again, just, wrapping it up, what would you say is as we exit, let’s say, the first half of the year, right? What would you say is and this might be a little unfair, forgive me for this. One metric where you would say, guys, keep an eye out for this. We know the cadence of products. You’ve very clearly articulated it over the last year and a half.

What would you say is the one metric you would say, guys, keep an eye out for this? Because investors’ attention span is short. Right? And you need something to clearly show all of this is playing out. What would you say?

Is it gross margin or is it EBIT margin expansion?

Pat Mackin, CEO, Artivion: So I think Look. I I realize people have short attention spans. I mean, we we gave guidance, you know, in the February that was 200 basis points higher than we’ve given previously. It’s, you know, it’s 12 to four or 10 to excuse me, 10 to 14% with a midpoint of 12. So, I mean, we we give yearly guidance.

I mean, breaking stuff down into quarters, you know, we had a cyber attack we talked about in the fourth quarter that we’ve having to kinda work through the system in the first quarter. So, I mean, measure us on how we do this year. We told you we’d grow between ten and fourteen and double our EBITDA. Measure measure us on how we do this year.

Suraj, Senior medical device analyst, Oppenheimer: Got it. Perfect. Gentlemen, always a pleasure. Congrats on all the progress and, you know, hopefully, the street catches up to what the fundamentals are, and we do appreciate your time this morning. Thank you so much.

Pat Mackin, CEO, Artivion: Thanks, Raj.

Suraj, Senior medical device analyst, Oppenheimer: Thanks, Raj. Thanks, everyone.

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