AngioDynamics, Inc. (ANGO) Earnings Call Transcript & Summary

Thank you, everyone, for joining today. My name is [ Soren Merle ]. I'm an associate on the medtech team here at JPMorgan. It's my pleasure to have here on the call today, AngioDynamics' CEO, Jim Clemmer; and CFO, Stephen Trowbridge. [Operator Instructions] But with that, I'd like to hand it over to AngioDynamics.

Thanks, [ Soren ]. And thanks for the folks at JPMorgan for inviting us to the conference this year. So before I begin, let me remind investors that what you'll hear from us today are our expectations. These are forward-looking statements and most investors know of the risk and forward-looking statements. So please do your diligence, listen to what we say today. Understand, again, we can't always predict the future in an accurate manner. So do your best diligence as you look forward to invest. So let me tell you a little bit about AngioDynamics. If you look to our slide deck, you start on Slide 3. Our company is really going through what we're calling a very strategic transformation. And we're really leading that transformation through our portfolio as we think is most important for us to align what we can best do to deliver medical technologies that are innovative, that drive outcomes in patients that can be measured, and those outcomes change physician behavior. That's really why we're transforming our company through our portfolio. What we think we need to do is pursue larger addressable markets and make sure we have our resources aligned in the right areas. Well, you'll hear from us today is we've really done a really good job targeting the right areas to be in and aligning our resources. You're going to hear about a company that's also investing for our future. The bulk of our investments that you hear about are primarily in 2 areas: research and development and commercial expansion to make sure we can align our technologies to the market opportunities. So what you'll see, again, over time, this portfolio transformation has led us to 3 areas that we feel very strongly about and are worthy for investment. But as you move to Slide 4 in our deck, let me show you something else that's very important to us. If you look at the total addressable markets that AngioDynamics competes in, it has almost doubled or tripled in the last couple of years. A couple of years ago, in 2018, we competed in markets that were over $1 billion. Today, with our current portfolio, again, we've done one major divestiture of a 50-year-old business that we didn't think provide a strategic value to us. We've also done 4 small acquisitions, each of which have added to the total addressable markets that we have to compete in. So today, it's about $3 billion. And as you'll see from us, as you look through our portfolio expansion in our pipeline, this market really double again to over $7 billion in 2025. What's as or may be more interesting as well, not only these markets larger, they're growing more rapidly. The procedures that are being utilized to provide care utilizing devices like ours are being adopted by more and more physicians. So you've got larger markets with faster growth rates, a company like us who believes our innovative technology provide a difference. And that's why this is the backbone of our transformation. If you shift to Slide 5, we manage our company today in 3 different business units. We have a Vascular Access business, a Vascular Interventions business and an Oncology business. But really, as we look forward, we want our investors to look at our portfolio, really maybe in 2 different views. It might make sense to you that way. On the left side of this slide, it shows you the 3 areas, but we're going to focus our investment, and most of our investment in Auryon, AngioVac and NanoKnife. We'll talk more about those in a few minutes. On the right side of the slide, you'll see really our base technologies, our core businesses. Though they receive normal funding and investment, they're very well managed, and they're doing very well. For instance, a couple of years ago, our Vascular Access business was losing 5% to 7% of revenue each year due to competitive pressures. Well, today, we've grown, this will be our third straight year of growth in that business, very well managed. We've added some products in the pipeline. So if you look at AngioDynamics over time, we're going to really spend most of our time on the left side of the slide. Today, if you follow the guidance that we put out this year, the left side of the slide is probably only about 20% of the revenue that we'll generate. But if you look at a couple of years out, we believe that 20% will be a much higher ratio of our company's performance over time. So moving on to Slide 6. What's important as well, we're not just changing our portfolio. We're investing in our portfolio using 3 different methods. From the bottom that shows you M&A, which we've already done, and we'll talk about again. R&D that's very important, and something else that we call clinical and regulatory pathway expansion, which is enabling us to take our current science and technology, indication expansion is important as we can then get other organs treated or other applications for these technologies to grow and open up larger, faster-growing additional markets. So the 3 areas we'll talk to you about today are highlighted here. I'm going to talk about our Auryon, where we're concerned about keeping healthy blood flow from the heart and arteries, keep them clear and healthy and healthy blood flow to the heart with our venous thrombectomy products, our AngioVac products, and finally, expanding treatment and treatment options in oncology with our NanoKnife. So let me start with Auryon peripheral atherectomy. We made an acquisition of a company called Eximo Medical about 15 months ago. We didn't watch the atherectomy space for a while. We were very interested because of our areas in thrombus, keeping veins clear with AngioVac. We really saw this amazing technology that Eximo had created. It's a laser-based atherectomy device. But why it's different is what's important. So if you move with me to Slide 8, you'll see some reasons why this is very different. There's already a laser-based device that's been in the market for a while. And it's actually done a good job capturing probably 25% share in the U.S. of the procedures that are performed in atherectomy. But it also has its limitations. We feel that the folks at Eximo have done has created this Auryon device, taking some of those limitations into play and also creating new science where are the 2 most important aspects of our laser, which are the wavelength and the pulse. These 2 working in concert with each other enable us to deliver really high-powered laser pulses that can break down calcium to open up the arteries, also while protecting the vessel wall structure. It's really, really important. Today, as we've launched this product in September, we're launching with 4 different catheter sizes to enable access to different structures of the arterial [indiscernible]. We also have aspiration capability in 2 of our 4 sizes, which add instant restenosis capability to our product offering. If you switch to the next slide, on Slide 9, you'll see really a little scorecard that we put together to show what's different about our product. Again, we're entering a market that has a $550 million market already today in the U.S. It's growing at probably mid- to high single digits. You've got 4 really good companies that compete there today. One laser-based and 3 mechanical companies, and they all do a really good job in certain aspects of treatment of PAD. What we think is unique about Auryon is that it will work really in all different aspects of PAD treatment and giving physicians a new atherectomy tool in their bag. We can work in hard and soft classification above and below the knee and again, with instant restenosis capability and aspiration capability. We think our unique device is well positioned because we're going into a market with 4 really good companies in there today, we need to give people a reason to change and a reason to look. We think we're off to a really good start. We reported our Q2 earnings last week. We spoke about even this year with a new start at a formal launch in September, we already have over 80 lasers placed in the field at this point, and that we're getting those users comfortable with our product, getting them used to it and seeing our increasing case count happening each week. The next slide on Slide 10 really gives you what we're going to do from here, to make this great technology into a great business over time. We're really going to invest in these 3 different ways. Our commercial scale is important to us. When we acquired Eximo, it was really 14 amazing scientists and engineers in Israel, who developed the science and one commercial person in the U.S. We now have a commercial team of 30 people in the U.S., dedicated only to this device. Each of the people that we've added to this team have come from 1 of the other 4 companies and have experience in atherectomy. They have relationships with the key physicians, provide care in their cities, so adding to that commercial capability. We've added sales reps, marketing people and clinical specialists, they are to support our users in training and case performance. Over time, this commercial team will grow as we grow our capability to treat more people. Second, we think that clinical data is really important. The data that was provided when Eximo went to the FDA for their 510(k) was really, really highly compelling, providing great outcomes. It's what piqued our interest in this science initially. Well, we're going to continue to add data. We're sponsoring a PATHFINDER I Registry today, which is already 3 quarters enrolled by physicians who really want to test this science, test the outcomes and measure what it can do. Over time, we believe in data, we'll continue to invest with our physician partners to build a data set here around how the Auryon produces great outcomes. And finally, product development is important. We think that 2 areas exist today for us in this platform. First is expanding other tools around the procedure. So we'll be able to provide our sales reps and our physician partners other products in our bag to help with the procedure other than just the atherectomy catheter that we provide. So we'll add more revenue for procedure over time. And second, we think due to the unique science and how this laser works, we think there's good applications in other areas potentially. But we'll talk to you about that over time. But we're looking at potential coronary applications, maybe thrombectomy or potentially lead extraction. We'll pursue those work streams once we're pleased with the final work on the Auryon for PAD and for atherectomy. So we're really pleased with this product. We guided our investors at $7 million to $10 million this fiscal year, which started June 1 for us. And after the first 2 quarters, we reported $3.3 million of revenue. We're off to a really good start. We think we'll come into that guidance range that we suggested. We're really happy to have this device in our bag. So let me share with you our next important tool. It's our thrombus management platform. This is an area to us that's really important that we have a current device that's really special, and we're investing in the future. If you look at Slide 12 in our deck, what we wanted to show you was really the thesis behind why this is an area that's compelling for us to invest in on top of our current science. We think if you look at VTE as a disease state, made up primarily of 2 different areas, DVT, deep vein thrombosis and then severe cases of pulmonary embolism, and what's referred to as PE. So today, we think that the market we compete within this space is very limited and very small. There's some reasons why due to the uniqueness of our capabilities, but we'd like to launch some new products over time that enable us to compete in this much larger market for DVT and eventually PE when we seek an indication there, will allow us to open up that expandable market, allow us to compete for more business in these cases. Well, that sounds good, but how is that going to happen? And why? Let me first show you on Slide 13 really what happens today? What are the treatment options of spectrum that exists today for caregivers to utilize? On the far left this slide, you'll see simple drug treatment for less severe cases of DVT or clot, moving up the scale to a lytic-based catheter device, one of which we have with our Uni-Fuse* and Uni-Fuse+ platforms. And then moving through the complex, moderate complex case where different options exist for treatment, to the far right to our AngioVac, which is probably the most complex tool in the market today. It enables clinicians and physicians to really treat highly complex clot cases with severe clot burden in a manner that allows the patient to get free of clot and to be safe during what could be a difficult procedure. So today, we're at -- there's 2 ends of the spectrum on the slide you see here. But we'd like to enter the middle space over time. So if you move with me to Slide 14, you'll see really how we're going to do that. So today, we think, again, this market is worth about $3 billion potentially with PE and DVT together. And as this right side of the slide will show you, today, we're in the simple cases on the bottom with our Uni-Fuse* catheter, and then larger cases at the top, higher complex case with our AngioVac, but we're missing that gap in the middle. So the slide will show you what we announced last week, is that we plan to launch this calendar year, our new off-circuit, multipurpose mechanical aspiration device that will enable our users to treat the bulk of those DVT procedures that we believe exist in that moderate complex space. That's really important to us because we think it will be a great treatment option. We also think that physicians globally have become to adapt mechanical thrombectomy as a trusted treatment platform. And they're going to utilize mechanical thrombectomy more often than they had in the past. Some of that's based upon the good outcomes that other competitive devices are producing in the field today. There's some good options out there that other companies have produced. We think when we launch ours, we're going to give physicians another really good option to choose from, that not only will we -- take probably some share in the space, we also think growth in this space overall will occur with good companies like us and the others, offering good options for treatment. And we think mechanical thrombectomy will grow as a treatment choice for DVT and PE over time. Let me share with you on the next slide why AngioVac is different. This is our current product in the space, and it's very unique. There are 2 important design elements that AngioVac really important and special. First is the vortex funnel tip that enables even a large bore cannula, such as the ones that we utilize to [ become larger more ], but it opens up inside the vein structure, enables us to get really nice vessel wall coverage and pull mass clot burdens from the vein out of the body. It's really, really important. So the vortex funnel tip is important as well as the fact that AngioVac will work with a perfusion circuit, which allows the physicians to reinfuse the patient's blood back into their body during this complex and sometimes risky procedure. So we think it enables a physician to go after a severe clot, pull a severe clot out and keep the patient healthy during and post-procedure. AngioVac has shown double-digit year-over-year and quarter-over-quarter performance as physicians trust this device as a really great tool in that arsenal. And since we've engaged with more physicians with this device, many of them have asked us over the past year or 2, hey folks, can you take the beauty of AngioVac off circuit though, take it off the perfusion circuit that enable us to have a handheld device that we can control, then maybe we can utilize in some of those moderately complex cases. And that's really what we're introducing this calendar year. So with our research and development team, guided by our key physicians, we're going to launch the product this year, which will have the vortex funnel tip, some other AngioVac unique features that's offered today with a new set of features as we provide them an off-circuit tool that allows the physician to use their skill and their talent to utilize how they'll use the AngioVac device, how they'll utilize the mechanical aspiration capability of the device to pull large clot burden in the moderately complex space. So we're really excited to enter that market this year. And if you look at Slide 16, what you'll see from us is this is really a platform device over time, and a platform in this thrombus management area. As we launch the new version later this year, we'll also iterate new versions from there, smaller sizes to enable us to get into other parts of the body to go after more and more cases of DVT and ultimately, applying for and hopefully, seeking an indication for pulmonary embolism. We think what we'll have is a really important tool that will enable those physicians to treat DVT and PE over time and enable our company to take advantage of this really fast-growing large market, utilizing the best design elements of AngioVac with new user-developed design elements with our new product. Again, it's powerful, it's user-controlled, and it's very versatile. We think we have really great device. And over time, we look forward to sharing it with you. What we plan to do is to file for our 510(k) in the first half of calendar year '21, we expect approval and commercial launch in the second half of the calendar year. And as time goes by, we'll give you more details. So thanks for listening on thrombus. I'd like to pass now to Steve Trowbridge, our CFO, who'll walk you through our Oncology and NanoKnife platform.

Thank you, Jim. And good afternoon, everyone. Thanks for joining us. Jim has been walking through the transformation that AngioDynamics is currently engaged in and how we're looking to find high-tech solutions that provide patient outcomes and provide benefits to patient outcomes. And then do that by getting into high growth and very large markets. And we focus so far, through Jim's talk, on Auryon and our PAD solution and then thrombus management and our AngioVac solution. The third piece that we think will really drive our growth going forward is NanoKnife. And so if you move to Slide '18, I want to talk a little bit about irreversible electroporation, which is the technology behind NanoKnife. And then I want to describe how we're going to use NanoKnife to continue that transformation moving into very large, high-growth markets, focusing on technology advantages and then using those things that Jim talked about early on, R&D as well as clinical and regulatory pathway expansion to help facilitate the growth in this space. So if you look at Slide 18, we want to talk a little bit about the mechanism of action of NanoKnife and what makes it so unique from other options that are out there. As opposed to using extreme heat or cold to try to get an ablative effect, NanoKnife uses IRE or an electric field that is created through a number of probes, between 2 and 6 that then create this electric field, any tissue that is subjected to the electric field created by NanoKnife ends up becoming decellularized. So the cells within that electric field will die by the creation of nano-size pores in the cell membranes. Now the cell death is very gentle, if you will. It's less traumatic than using extreme heat or cold. And then the cells that die are removed through the body's normal process. So this nonthermal decellularization will allow the tissue that is subjected to that electric field to revascularize. So if you move to Slide 19, we talk a little bit about why this is important. So I mentioned that this is nonthermal, and it's less traumatic than other thermal options. One of the biggest things that come out of this technology is that critical structures, such as blood vessels, bile ducts and nerve endings remain patent in the ablation field. So the cells are killed, the cells are removed by the body's normal processes but the critical structures remain patent and the treated tissue can revascularize. Well, in a number of situations, what that does is it gives physicians an option to treat patients that they may not have otherwise had the ability to treat with other modalities. And in a number of scenarios, it will preserve the quality of life. And that's going to be very important when we talk about some of those other markets that we want to move into with NanoKnife, particularly prostate, and we mentioned that on our earnings call a week ago. So if you look to Slide 20, let's talk about some of the markets that we think we can get into. So currently, you know that we're involved in the DIRECT study to study NanoKnife to treat pancreatic cancer. And early on, this is where the market told us, there was a huge unmet need and that the technology of NanoKnife and the mechanism of action had a role to play in treating pancreatic cancer. We started our DIRECT study, as we talked about, we're very committed to continuing to collect that data to support the use of NanoKnife in pancreatic cancer. But if you look at the slide, pancreatic cancer makes up only about 5% of overall cancer cases. So we think it's very important. We think Nanoknife has a role to play. But more than anything, getting into pancreas is a beachhead for the NanoKnife platform. Very similar to Auryon, very similar to AngioVac, NanoKnife is a platform that can go into a lot of other use cases, and that's one of the things that we want to explore. We currently have a prostate safety study IDE that we're engaged in, that we've talked about. And if you look here, prostate is about 3x the size of the market that pancreas is. So we think prostate is going to be the next place to go into, and we look forward to telling you more about that. But if you move into Slide 21, you'll understand why we think it is so important to move into prostate. Over 191,000 patients are diagnosed with prostate cancer in 2020. Now a large number of those will have some aggressive disease. So therefore, they need to go right to a radical treatment. That could be a radical prostatectomy, it could be radiotherapy. But there's a very large amount of patients, and we've heard this before, men will die with prostate cancer and not from it because very often, prostate cancer is a slower-moving disease that doesn't metastasize as much. And a lot of those patients are put into, pick whatever euphemism you want, whether it's active surveillance, watchful waiting, basically means we're not going to do anything. Over the course of the last several years, doctors have been clamoring for another option, and this is where we're hearing that NanoKnife may have a role to play in terms of focal therapy. Focal therapy can bridge that gap from active surveillance to the radical. And so if you remember the mechanism of action that we talked about, what makes NanoKnife unique, critical structures are spared, things like nerve endings and bile ducts. So a treatment with NanoKnife has the opportunity to eliminate a lot of those side effects that are terrible quality-of-life side effects that patients can undergo if they have a radical prostatectomy. It also allows for the revascularization. So as we talked about that, you're maintaining additional treatment options after NanoKnife treatment. So it fits in, we think, in that area, right in between active surveillance and the radical, we look forward to proving that. We're going to be going to the FDA, going through some of the regulatory process, but we're hearing from our physicians, much the same way that we did with pancreas, that NanoKnife absolutely has a role to play, and we can use it as a platform to get into some of those larger markets. So if you move to Slide 22, we are talking about NanoKnife. Currently, it's product, it's on the market that has a general indication for the ablation of soft tissue. We're really going to focus on expanding those indications and then getting reimbursement. The economics are also very important as you move into oncology treatments. With respect to expanded indications, we've talked about our DIRECT study, we're going to be continuing to focus on that for extending an indication to treat pancreatic cancer. And then we expect that prostate is the next use case that we will go into, engaged in the FDA regulatory process. With respect to reimbursement, we've been very pleased with the process and the progress we've been able to make on the reimbursement front. We announced in 2018 that we received ICD-10 codes, which were in-hospital facility payments related to the treatment of pancreas and liver cancer, specifically with NanoKnife. And we were really pleased last year to talk about the CPT III Code, which is for physician payments that we've secured with the help of Society of Interventional Radiology and the Society of Surgical Oncology together. It's an organ-agnostic code, so it's just for the treatment -- for the use of NanoKnife. And then what we announced in our last quarter call was following on from the 21st Cures Act that now that CPT III Code has had payment assigned to it in the patient -- in an outpatient setting. And we think that this is very similar to what you're going to see happening in a lot of the OUS markets in -- where prostate is being treated in an outpatient setting. And so having this reimbursement in place as we continue to work for the expanded indication means that we're parallel pathing this as we go into some of these larger markets. And we're taking a very coordinated approach between our sales, of course, our R&D as well as our clinical regulatory and medical affairs teams. So if you move on now to Slide 23 and Slide 24, one of the last things -- we talked about -- I'm sorry, not the last one. We talked about the growth drivers for this business, Auryon, AngioVac and NanoKnife, and we certainly think that those are the 3 products and the 3 platforms that are going to be driving growth for AngioDynamics in the long term. But we also have a lot of great businesses aside from those three. And a great example of that is our Vascular Access business. Now Jim mentioned this earlier in his presentation, historically, if you go back 5-plus years, Vascular Access was a tough business for AngioDynamics. We were going backwards. We had some technology gaps. We were competing against very, very well-capitalized competitors in a very tough market. The current team that Jim has brought in has really turned that business around. And now it's a strength of ours. As we talked about last quarter, in our second quarter, our Vascular Access business grew 5%. We've been filling the technology gaps. It's been running well, and it's been providing a great foundation and some stability even through the COVID pandemic for us. So we're really pleased with the way that, that business is being managed. It's very important to us, although we don't talk about it in the same way as we do Auryon, AngioVac and NanoKnife, in terms of growing our business and driving the top line growth over the long term, it provides a solid foundation and it provides a lot of flexibility, and it facilitates for us, a lot of those investments that we need to make that we've talked about today to get into those large, fast-growing markets. So if you move on now to Slide 25. We'll talk a little bit about the financial highlights. Certainly, we've completed our first half. We just had our second quarter conference call last week. We were very pleased with our performance. Even in light of the ongoing COVID pandemic, our team has done a great job in terms of driving revenue growth. We had $72.8 million of revenue in Q2, representing close to 5.1% growth now for the first half of our year. And doing it in a way that is also maintaining profitability. So we're in investment mode and we're in investment mode in the middle of this pandemic, and we've been able to walk that pipeline of hitting the revenue growth, facilitating investments in our growth drivers but not blowing up our P&L or our balance sheet. So you see that we've hit about 3% -- $0.03 so far for the first half of the year, and we've generated cash, ending the quarter with about $58 million of cash in the bank, up from where we were when we started this fiscal year. And we also paid down $10 million of debt from our credit facility subsequent to the end of the second quarter, really to show the strength that we've had in our business, the strength that we've had in our cash generation and the confidence that we have in our business moving forward. At the end of our first quarter, we came out with our guidance for the full year. We were expecting somewhere between $278 million to $284 million on the top line and adjusted EPS of 0 to 5. Now we held that guidance coming out of our second quarter. We acknowledge that our first half performance has actually been pretty good. It's actually been a little bit above expectations that have been set externally when you think about where our guidance is, we're still keeping an eye on COVID. It's out there. There's no doubt about it that there's increasing cases here in the U.S. There's increase in cases worldwide. We want to see how our third quarter comes out. We're taking a close eye on January and February results. But when we did come out with that guidance, we, of course, built into that an expectation that there would be a COVID impact. As opposed to what we saw in March and April, we didn't expect that we would see across-the-board shutdowns in this country or outside the world. But that there would be impacts in localized geographies based upon what they're seeing at that time. And that's exactly what we've seen. So we expect that to continue through the balance of our fiscal year, but all of that is factored into the guidance that we gave at the beginning of the year that we're still holding to now. So we've been very pleased with our performance so far. The quarter was good, both from a top and a bottom-line perspective, and we look forward to continuing to talk to you about our performance as we move into the back half of our fiscal year. Jim?

Sure. Thanks, Steve. Again, folks, thanks for joining us today. Again, we wanted this chance to explain to you our company. When we say we're in a transformation, we think our actions have spoken more loudly than our words. We're not afraid to shift our portfolio, to divest assets that don't fit on where we're going, and to invest in assets that we believe in very deeply. So you've seen again, we are investing in R&D, clinical and regulatory expansion and M&A. We think these 3 things together, combined with the innovation and technology we currently have today, will drive patient outcomes that work, outcomes drive change of behavior with physicians. And that's the AngioDynamics that we are today. So thank you for joining us and [ Soren ], if there's any questions, I'll turn it back to you.

Thanks, Jim. And Stephen, that was a great overview of the company. [Operator Instructions] So I'd like to just start off here with the peripheral business. So you just recently launched the Auryon System in September. And from what I can hear so far, it's been a pretty successful launch. You're on track for $7 million to $10 million in that first fiscal year. So help me understand some of the market dynamics here. You have highlight a $550 million market, but only about 23% of that or so is exposed to the laser component. So what do you think growth rates can look like for the Auryon system going forward? And where does that come from? Does it come from the conversion of mechanical into laser? Is it share capture? You've also mentioned that a lot of the existing accounts have a Spectranetics system, if I am pronouncing that correctly already. So is your strategy here to target those competitive accounts or look for new accounts? And what is that conversion looking at that feedback you're getting so far?

Yes, it's a good question, [ Soren ]. Right away, I think we've actually been contacted by a lot of users who are interested in this technology. Technology isn't a secret. People have seen the outcomes that have produced during its period to the IDD to receive the 510(k). The data is very compelling. So we're not targeting any one of those 4 areas. We're really getting asked by our physician partners to show our technology. I think there's early adopters. There are going to be more people who've already adopted the Philips' Spectranetics product, they're used to a laser in their treatment portfolio, and they were looking for a newer product. And again, I think our product does some things that maybe that product doesn't do. So I think early adopters are going to be there. But really, I think over time, the uniqueness of this device, how it does what it does, it's going to be applicable to any physician that really wants to treat PAD with the unique device. So over time, we're going to see -- we think we'll be successful in a couple of ways: one, the science is compelling; two, it's a great market already; and three, the market is growing. More and more people are getting treated using atherectomy procedures to treat PAD. Those 3 things all happen together. We're continuing to invest in data in the business and to grow this platform over time. So we think it's a really great business for us.

Okay. So I want to move also into AngioVac, a pretty exciting product you have here. So there's a lot of data being generated, showing the benefits of aspiration over catheter-directed lysis, I'm sure you know. But our estimates, what we've seen is that aspiration is only about 10% of the market so far when it comes to peripheral artery disease. So a couple of points here. So how is AngioVac differentiated from existing players in the market that are going after the venous opportunity specifically, Penumbra and [ Aria ] are 2 examples that have expressed interest here, but they faced some headwinds and getting some conversion from catheter-directed to aspiration. So what's your strategy here? And what's your thoughts on why you're targeting this market specifically?

So good. I'll try in, [ Soren ], I'll let Steve finish. Again, we're in this space today. The AngioVac device is so unique and so special. Again, we're able to get those severe clot cases where people have severe acute disease and have really great outcomes. And then being engaged in our physician partners, they're the ones that have asked us, hey, guys, this thing is really amazing. Can you take it off circuit for us? Give us access to that, as you said, rapidly grow the market. And we'll give credit. I mean, the other companies have done a really nice job. Penumbra and [ Aria ] have developed some good tools. We think it has gained a lot of physicians to gain confidence in mechanical thrombectomy as a treatment tool. So I agree with your thesis. We believe, too, that more and more physicians over time will grow this market and treat people with mechanical devices like this, we also believe when people see the design and how our device works, that will compete really well against those other good companies in the space and do really, really well. Steve, any other comments?

Yes. Jim mentioned the dynamic where physicians are becoming more comfortable using mechanical interventions to go after clot. And we see that as a big driver of this market. We think this is one of the most exciting markets out there in medtech right now. So we agree with you. But there was the original dominance of catheter-directed thrombolysis but we all know some of the drawbacks of systemic thrombolytics being put into the body. So seeing this dynamic where physicians are becoming more comfortable using mechanical interventions, we think is driving the overall market. And to a certain extent, it's rising all boats that are in that harbor. Now that being said, we also think that there is some elements of AngioVac that really do set it apart from some of the other competitive products that are out in the market today. There's 2 elements that Jim talked about that make AngioVac, in its current form, differentiated from those other products. And it's the funnel tip that we have that allows us to go after a tremendous clot burden, and then it's being on circuit. So the simultaneous reinfusion of the blood and avoiding blood loss, which is one of the problems that some of those other competitive technologies are always trying to solve. It's always a trade-off. If you're going to do a mechanical intervention, you want to go ahead and get the clot, but you're running the risk of some blood loss. AngioVac creates that simultaneous reinfusion and with that circuit, minimizes that blood loss. And that's what sets us apart. And that's why we're able to really carve out a niche in that very complex right atrium case that Jim was talking about earlier in our presentation. And we feel AngioVac has a lot of runway to continue to grow that area of the market. Now that being said, we heard from our physician partners who have said, we really like the funnel tip. We like the way that it works. We like the idea that you're focusing on trying to minimize blood loss. We'd love to see that in an opportunity that's off circuit. And so that's what we talk about with our multipurpose mechanical product that we intend to launch in calendar '21. We're going to take some of those real unique benefits of AngioVac, the funnel tip and then put it on a mechanical aspirator, that will address some of those other opportunities that are out there that we think are better than what the competitive technologies have and focusing on blood loss. You're not going to be able to eliminate it the way that you can with the circuit but by giving our physicians the control and having designs that are aimed at that blood loss, we think it will carve out a nice space for us in that very large middle section, very similar to the way that we have in that complex area.

And is there an opportunity here to expand into the arterial space as well? Or is that too different from a product specification standpoint to move into?

Well, we've got our Auryon product that's on the arterial side. And so we're focused on atherectomy on the arterial side. Now as Jim had mentioned, we do think that the Auryon product will provide a platform to move into some other areas. We're not focusing on that right now. We think that we've got to make sure that we hit our 7% to 10%, and we hit those growth targets that we put out there for atherectomy. But you could look at the Auryon laser platform is moving into potentially coronary at some point. It's also an opportunity to look into a thrombus removal that could be on the venous side, it could be on the arterial side.

Great. I had a question come in from an investor in Auryon. So you mentioned some complementary products that would go alongside. Are those something you'd be internally developed or along this kind of string of M&A you've had recently?

Maybe a little bit of both, but ultimately, probably most will come from the outside. It may be M&A. It may also be licensing opportunities that exist with external products. These are some things we've looked at we're doing in some evaluation now. There's some good tools out there, some good providers that won't have the market access that we'll have. We can utilize some of the tools, maybe through M&A or licensing and give those products the market access they deserve and give our sales reps a chance to expand our usage with each case that we provide.

Great. So I just want to step back here, I guess, and look at strategy of AngioDynamics as a whole, you classify yourself as a growth company, and that's kind of a bit of a strategic reset, so to speak, recently. But you're also in an interesting position where you're free cash flow positive for most years with the exception of a COVID year and you've had a pretty steady cadence of tuck-in M&A here, primarily technology acquisitions. So how should I think about this reset and your strategy? You have some exciting pipeline opportunities that's coming up. I'd assume there's some significant expenses associated with that. What are the areas of focus for capital allocation going forward? Or is there a situation where these investments are big enough that you might see some capital raises in the cards here?

Yes. So [ Soren ], as you saw this past quarter, we think we've done a good job of balancing the continued investment in our business. And we talked to you about even R&D. If you look back a couple of years ago, we spent $25 million or $26 million in R&D. This year, we talked about it last week, at our quarterly results, we're going to be at the higher end of our guidance, nearly $40 million this year. That's nearly a 50% increase in R&D. We trust our process. We've also added really good regulatory and clinical support teams to help support our technologies. So we're investing in our businesses, also investing in commercial footprint. Again, the Auryon team going from one commercial person to 30 today. So we're making the investments necessary to drive the growth that our investors will expect over time. But again, our company started off as kind of this department store of vascular widgets. We don't want to be that company anymore. We've got some great technologies here, and we're trying to make it clearer for investors to understand where we're going. That's why by highlighting these 3 unique platforms with Auryon, AngioVac and NanoKnife, we think the bulk of our investors can follow us, follow our growth there, yet still manage the P&L. We still run a mature operating company. We haven't [ paid down ] a strong balance sheet. We don't see the need to have to raise more capital in the future. We don't see -- we wouldn't have to go out and raise capital. We have a debt instrument today. We just paid down some debt, as Steve said, at the end of December. So we think we're in really good fiscal shape. We have a good balance of investment and we're still generating profit and cash for investors.

And you asked how should you think about -- sorry, you asked how should you think about Angio in this transformation as a growth company. And I think you should think about it as a growth company, but as a disciplined growth company. Now discipline doesn't mean that we're cutting back or we're cutting any corners or we're not making the necessary investments. We are. And one of the things that we've talked about throughout the course of this fiscal year, even in the context of COVID, finding ways to make sure that we're hitting those investments in our growth drivers. And we're going to continue to do that. But we've got those other products like the VA business, like our core business, that do provide cash and they provide some additional capital for us. So as Jim mentioned, we don't see today the need to go out and do any external capital raises. We feel that we can fund all of the investments that we want to make because those are the ones that we're making, we're not cutting back at all. We're making the investments that are necessary. We can fund those through internal operations and the cash that we can generate through our current portfolio. So it's a nice combination. I think you should think of us like a growth company the same way that any other growth company is going to make those investments is going to be looking out for the long term, trying to drive growth in the short, medium and long term. But we're doing it in a way that we're being disciplined and maintaining that balance sheet and that P&L that Jim talked about.

Great. Thank you, guys. Unfortunately, we're running up here at the top of the hour, but I appreciate your time, and thank you, everyone, for joining today.

Thanks, [ Soren ]. Appreciate it.

Thank you, [ Soren ].