8-K: Avinger Reports Flat Revenue, Advances Coronary Product Development and Secures Strategic Funding

Avinger, Inc. announced its first quarter 2024 financial results, reporting flat revenue year-over-year, while highlighting progress in coronary product development and a new strategic partnership.

Summary

• Avinger reported first quarter 2024 revenue of $1.9 million, consistent with both the previous quarter and the same quarter last year.
• The company's gross margin was 18% for the quarter, down from 20% in the previous quarter and 34% in the first quarter of 2023.
• Operating expenses increased to $5.4 million, primarily due to increased sales headcount and expenses related to the Zylox-Tonbridge transaction.
• Avinger's net loss for the quarter was $5.5 million, compared to a $5.0 million loss in the previous quarter and a $4.6 million loss in the first quarter of 2023.
• Adjusted EBITDA was a loss of $3.9 million, consistent with the first quarter of 2023.
• The company had $7.2 million in cash and cash equivalents as of March 31, 2024.
• Avinger initiated Phase III verification and validation studies for its coronary CTO-crossing system, with an IDE submission anticipated in the third quarter of 2024.
• A strategic partnership with Zylox-Tonbridge was announced, including a $15 million equity funding agreement, with $7.5 million funded in March 2024.
• Avinger exchanged $61 million of Series A preferred stock for $10 million of new Series A-1 preferred stock with no liquidation or dividend preference.

Sentiment

Score: 5

Explanation: The document presents mixed signals. While there is progress in product development and strategic partnerships, the financial results show a decline in gross margin and an increase in net loss. The company is still in a growth phase with significant risks, but the strategic moves are positive.

Positives

• Avinger has commenced Phase III verification and validation studies for its coronary CTO solution.
• The strategic partnership with Zylox-Tonbridge provides access to the greater China market and potential for cost-efficient manufacturing.
• The exchange of preferred stock and extension of debt payments improves Avinger's financial position.
• The company is continuing the full commercial launch of Tigereye ST and a limited launch of Pantheris LV.

Negatives

• Gross margin decreased significantly to 18% compared to 34% in the first quarter of 2023.
• Operating expenses increased, contributing to a larger net loss of $5.5 million.
• The company continues to operate at a loss, with a $3.9 million adjusted EBITDA loss.
• Revenue remained flat year-over-year at $1.9 million.

Risks

• Avinger is dependent on a limited number of products.
• The company faces risks related to the outcome of clinical trials and regulatory approvals.
• There are risks associated with the adoption of Avinger's products by physicians.
• The company's ability to successfully develop new products is uncertain.
• The company is dependent on the success of the Zylox-Tonbridge partnership.
• The company's ability to achieve revenue growth and increased sales productivity is not guaranteed.

Future Outlook

Avinger anticipates filing an IDE application for its coronary CTO-crossing system in the third quarter of 2024 and expects the Zylox-Tonbridge partnership to facilitate entry into the greater China market and improve manufacturing efficiency.

Management Comments

• We are excited to commence Phase III verification and validation studies for our innovative coronary CTO solution in preparation for filing an IDE application later this year, said Jeff Soinski, Avingers President and CEO.
• We believe that our proprietary image-guided approach has the potential to offer superior, simplified, and more predictable clinical outcomes for crossing chronic total occlusions in the coronary arteries, redefining this large and underserved market, while immediately accessing established reimbursement codes for both coronary CTO-crossing and OCT-diagnostic imaging following clearance.
• We recently began a new strategic partnership with Zylox-Tonbridge, a dynamic leader in the peripheral interventional market in China, providing strategic equity funding and opening a proven commercial channel for Avinger products to enter the robust and growing greater China market.
• The strategic relationship also provides the opportunity to partner with Zylox-Tonbridge to develop a more cost-efficient manufacturing structure to support the growth of global sales and improve gross margin.

Industry Context

Avinger's focus on image-guided, catheter-based systems for vascular disease aligns with the trend towards minimally invasive procedures. The partnership with Zylox-Tonbridge reflects a growing interest in expanding into the Chinese market, a key growth area for medical device companies. The development of a coronary CTO-crossing system addresses a significant unmet need in the cardiovascular space.

Comparison to Industry Standards

• Avinger's revenue of $1.9 million is relatively low compared to larger medical device companies, such as Medtronic or Abbott, which report billions in quarterly revenue.
• The gross margin of 18% is significantly lower than the industry average for medical device companies, which often exceeds 50%. For example, companies like Intuitive Surgical and Stryker typically have gross margins above 60%.
• The adjusted EBITDA loss of $3.9 million indicates that Avinger is still in a growth phase and not yet profitable, which is common for companies in the development stage. However, established companies in the medical device sector typically report positive EBITDA.
• The strategic partnership with Zylox-Tonbridge is similar to other medical device companies that seek to expand into the Chinese market, such as Boston Scientific and Johnson & Johnson, which have established partnerships and manufacturing facilities in China.
• Avinger's focus on image-guided technology is a differentiator, but it needs to demonstrate clinical efficacy and market adoption to compete with established players in the vascular space.

Stakeholder Impact

• Shareholders may be concerned about the decreased gross margin and increased net loss.
• The strategic partnership with Zylox-Tonbridge could be viewed positively by shareholders.
• Employees may be impacted by the company's financial performance and strategic changes.
• Customers may benefit from the new products and technologies being developed.
• Suppliers may be affected by changes in manufacturing and supply chain strategies.
• Creditors may be reassured by the extension of debt payments.

Next Steps

• Avinger will continue Phase III verification and validation studies for its coronary CTO-crossing system.
• The company plans to submit an IDE application for the coronary CTO-crossing system in the third quarter of 2024.
• Avinger will work with Zylox-Tonbridge to expand into the greater China market and develop a more cost-efficient manufacturing structure.

Key Dates

Keywords

Avinger, Vascular Disease, Medical Device, CTO, Coronary, Peripheral, Atherectomy, Image-Guided, Zylox-Tonbridge, Financial Results