10-Q: Avinger Inc. Reports First Quarter 2024 Results, Secures Strategic Partnership

Avinger Inc. announces its Q1 2024 financial results, highlighting a strategic collaboration with Zylox-Tonbridge and a private placement.

Summary

• Avinger Inc. reported a net loss of $5.5 million for the first quarter of 2024, compared to a net loss of $4.6 million in the same period last year.
• The company's revenue remained relatively flat at $1.86 million, slightly down from $1.89 million in Q1 2023.
• Gross margin decreased to 18% in Q1 2024 from 34% in Q1 2023, primarily due to increased production costs and decreased production levels.
• Operating expenses totaled $5.4 million, with research and development expenses decreasing to $1.1 million and selling, general, and administrative expenses increasing to $4.4 million.
• Avinger secured a strategic collaboration with Zylox-Tonbridge, including a $7.5 million private placement and a licensing agreement for the Greater China region.
• The company's cash and cash equivalents stood at $7.2 million as of March 31, 2024.
• Avinger believes its current cash and financing activities will be sufficient to fund operations through the second quarter of 2024.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While the strategic partnership and financing are positive, the financial results are weak, and there are significant risks related to the company's ability to continue as a going concern. The decrease in gross margin and the increase in net loss are concerning.

Positives

• Avinger secured a strategic collaboration with Zylox-Tonbridge, which includes a $7.5 million private placement and a licensing agreement for the Greater China region.
• The company extended its interest-only period on its loan with CRG through December 31, 2026, providing some financial flexibility.
• Avinger amended its lease agreement, extending the term by one year to November 30, 2025, providing stability in its operational space.
• The exchange of Series A preferred stock for Series A-1 preferred stock resulted in a $1.9 million gain.

Negatives

• Avinger reported a net loss of $5.5 million for Q1 2024, an increase from $4.6 million in Q1 2023.
• The company's gross margin decreased significantly to 18% in Q1 2024 from 34% in Q1 2023.
• Avinger's revenue remained relatively flat year-over-year, indicating challenges in sales growth.
• The company's cash and cash equivalents of $7.2 million may only be sufficient to fund operations through the second quarter of 2024.

Risks

• Avinger has incurred losses and negative cash flows from operations since its inception, raising substantial doubt about its ability to continue as a going concern.
• The company may need to raise additional funds in future equity offerings, which could cause substantial dilution for existing stockholders.
• There is no assurance that Avinger will be successful in raising additional funds or that such funds will be raised at prices that do not create substantial dilution.
• The company is subject to the minimum liquidity requirement of $3.5 million under its loan agreement with CRG, which may be difficult to maintain.
• Avinger's stock is subject to delisting from Nasdaq if it fails to meet the minimum stockholders equity requirement.
• The company is monitoring the general economic conditions on global supply chain, manufacturing, and logistics operations, which may increase production and operating costs.
• The company is dependent on a single financial institution, First Citizens Bank, which could adversely affect its ability to access cash and cash equivalents if disruptions occur.

Future Outlook

Avinger expects its revenues to increase in 2024 due to the introduction of new products, investments in sales personnel, and easing hospital capacity issues. The company believes its current cash and financing activities will be sufficient to fund operations through the second quarter of 2024. However, the company will need to raise additional funds through future equity or debt financings in the near future to meet its operational needs and capital requirements.

Management Comments

• Management believes that its cash and cash equivalents of $7.2 million at March 31, 2024, together with debt and other financing activities and expected revenues from operations will be sufficient to allow the Company to fund its current operations through the second quarter of 2024.
• Management believes that the data from VISION allows us to demonstrate that avoiding damage to healthy arterial structures, and in particular disruption of the external elastic lamina, which is the membrane between the outermost layers of the artery, reduces the likelihood of restenosis, or re-narrowing, of the diseased artery.

Industry Context

The medical device industry is highly competitive, dynamic, and marked by rapid technological development and product innovation. Avinger's strategic collaboration with Zylox-Tonbridge and focus on new product development, including coronary CTO devices, are attempts to address these challenges and expand its market reach. The company's focus on minimally invasive procedures aligns with broader trends in healthcare towards less invasive treatments.

Comparison to Industry Standards

• Avinger's gross margin of 18% is significantly lower than the industry average for medical device companies, which typically ranges from 50% to 70%. For example, companies like Medtronic and Abbott often report gross margins in the 60-70% range.
• The company's operating expenses, particularly selling, general, and administrative expenses, are high relative to its revenue, indicating potential inefficiencies in its cost structure. Companies like Boston Scientific and Stryker, which are larger and more established, have better economies of scale and lower SG&A expenses as a percentage of revenue.
• Avinger's reliance on a single financial institution and its need for additional financing are also points of concern compared to larger, more financially stable competitors.
• The company's strategic collaboration with Zylox-Tonbridge is a positive step, but its success will depend on the execution of the licensing agreement and the ability to commercialize products in the Greater China region. This is a common strategy for smaller medical device companies to expand their market reach, but it also carries risks related to regulatory approvals and market acceptance.

Related Party Transactions

• The company entered into a Securities Purchase Agreement with Zylox-Tonbridge Medical Limited, a wholly-owned subsidiary of Zylox-Tonbridge.
• The company entered into a Securities Purchase Agreement with CRG to exchange all outstanding shares of Series A preferred stock for Series A-1 preferred stock.
• The company entered into Amendment No. 9 to the Loan Agreement with CRG.

Stakeholder Impact

• Shareholders face potential dilution from future equity offerings and the risk of delisting from Nasdaq.
• Employees may be affected by potential cost-cutting measures or restructuring if the company fails to secure additional financing.
• Customers may experience disruptions in product availability or support if the company faces financial difficulties.
• Suppliers may face payment delays or contract terminations if the company's financial situation worsens.
• Creditors face the risk of non-payment or restructuring of debt if the company becomes insolvent.

Next Steps

• Avinger will focus on commercializing its new products, Tigereye ST and Pantheris LV.
• The company will work to regain compliance with Nasdaq listing requirements.
• Avinger will continue to develop its coronary CTO crossing devices.
• The company will seek to raise additional capital through future equity or debt financings.

Key Dates

Keywords

Avinger, Zylox-Tonbridge, peripheral artery disease, atherectomy, Lumivascular, private placement, strategic collaboration, medical devices, financial results, Nasdaq