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

Joining us today for the AngioDynamics presentation. My name is Stephanie Piazzola, and I cover medical devices at Bank of America. Before we get started, I just wanted to introduce with us today is Jim Clemmer, President and CEO of AngioDynamics. And with that, I'll hand it over to Jim for the presentation.

Thanks, Stephanie. Thanks, Stephanie. Thanks to Bank of America for the conference today. Looking forward to taking a few minutes to share with you about AngioDynamics, our story of transformation and why we think we can add significant value to our stakeholders over the next number of years. So first, remember that everything I say here today are our plans and ideas of knowledge of the market and the things we'll do to affect increasing the value of our company. But there's no guarantee of everything I say will work. So you use your knowledge, understand the forward-looking statements to the best research you can. So why is AngioDynamics is a different company than we were a few years ago? And why will we be different a few years from now? Our transformation is baked primarily in the growth of our company through entering different markets. What we're trying to do is enter larger total addressable markets with products that have innovative features that drive patient wellness that can be measured by physicians, we believe those measured outcomes will drive physician behavior change. In some cases, we believe we have the opportunity to change standards of care along the way. So we're excited by this journey. We all know that as investors, you have a bunch of metrics you look at and understanding that total addressable market is important in the Med Tech industry and not just growing the markets we compete in, understanding they're also growing faster than they have been in the past. And we have products that have ways to interrupt those markets are important. That's our journey for AngioDynamics. We're transitioning from a diversified company to a focused growth and technology company. Now we're still a diverse company with a diverse portfolio. If you take a look at the slide in front of you, on the left side of the slide are the 3 areas we are focused on. We're calling it our Med Tech portfolio. It really is 3 platforms that we believe have opportunity due to the different nature of the products, how they can interact with physicians and treat patients. our Auryon PAD system, our AngioVac and AlphaVac mechanical thrombectomy systems and our NanoKnife, nonthermal interventional oncology treatment product. These 3 products are in the markets as we just talked about, much larger than we've been in the past and growing more rapidly we can. We also believe they have unique innovative features that can drive patient wellness and change physician behavior. On the right side of the screen, you'll see the bulk of our company. The quarter that we just presented, about 73% of that revenue was driven by the right side of the screen. It's historic in a lot of the products here, they drive cash -- positive cash flow for us and EBIT, but really areas that we'll do less investment in. They take less of our resources, but they're very stable businesses. We're good at these. Customers know us, they trust us for making products like our Vascular Access products. It's a business that's very well managed. They're actually growing in tough markets. Businesses like our EVLT vein lasers and our angiographic core catheters. These are good solid businesses. Over time, we've shown the ability to be active portfolio managers at AngioDynamics. We'll continue that. But for now, these products fit in well with our corporate structure and gives us the resources we need to invest. So let's take a few minutes to talk about the investments. The thrombus management category is near and dear to us, for a few reasons. First, we believe that the VTE treatment opportunities that exist are robust. We think that if you take a look at VTE, it's really when you make up DVT plus PE, you look at the venous thromboembolism market or VTE. We believe like others have said, it's about a $3 billion market potential. We've been in this market for a few years with our AngioVac product, which is really the most purpose-built, most complex product in the market to treat very high complex cases. It utilizes a reperfusion circuit to keep the patient's blood back in their body when we're removing mass clot burden in the severely compromised patients. The AngioVac product has been really well received. And the doctors who have used it has said, "Hey, guys, can you give us a handheld version that we could utilize in more cases and utilize it for more people and treat more folks," and that's what we've done with the new AlphaVac launch. So we've taken the AlphaVac down to a 22 French, still a large bore treating large clot burden. We just launched our 18 French AlphaVac version. You'll see the purpose-built handle allows physicians to have the torque to control they desire and the simplicity of design so they can treat the patient, get in and out with the clot burden that they seek to remove. We also have a volume limiting switch, reducing blood loss as a potential during the procedure, which is of high value to physicians. What's most important about what AlphaVac does, it opens up the market where we can play. We now can play in a much larger segment of this market than we could before. You've seen other good companies with other good products in this market grow substantially in the last few years because they have purpose-built products in these cases. Today, we're one of these companies. We believe that over time to around in our portfolio, we're going to want our 22 French products, our 18 French products that we just launched and the soon-to-come 14 French products. Really gives us the scope of what we need to treat anywhere in the anatomy that VTE is present. What's unique about our 18 French that we just launched, we think it's actually the perfect size, and so we need features we build into it will allow it and enable it to be a great PE device as well. So it's a product that we announced, the APEX-PE trial which would get under way this summer. So the FDA has approved the format of our trial. We're looking forward to following the product pathway that exists to get our product approval ultimately for PE as well as DVT. So we're very excited about the mechanical thrombectomy market. We're a major player today with our technologies. These are high-margin products that should grow at high rates over time. We're also building a business around the products. We'll expand our sales and our clinical coverage to make sure we can be a viable competitor in the markets that we serve, make sure we can take these products to market and grow our business over time. Our second area to discuss is the peripheral atherectomy market. 2.5 years ago, we bought a company called Eximo Medical. And Eximo Medical really having device a really unique purpose-built laser that they thought could disrupt the $600 million atherectomy market here in the U.S., we think they're right. We bought that business, their laser is really, really special. How it works, what it does is what makes it special. Uses a 355-nanometer wavelengths, uses pulse opportunities to break down significant clot burden in the vessel wall while not damaging the vessel wall. This product can be used to treat above and below the knee as well as instant restenosis patients. We believe it has the ability to disrupt the current market we play in with 4 really good competitors out there today, 1 historic laser competitor and 3 mechanical competitors. They have done a good job serving this market. But we believe we can grow this market very rapidly as we've shown already. We've done over 15,000 treatments in about 1.5 years since the product has been launched. We're taking market share. We believe today, we have over 5% of the market. During -- not easy to do when you launch during COVID, but we did because the product is so special. We've also built a business around this product. It's now 70 people dedicated this business, most of which are selling and marketing, many of which are clinical support people supporting our customers when they use the product. You'll also see during the course of this calendar year, a lot of data that's being generated by our physicians come to market. Highlighting how and why Auryon can and will be used by more and more doctors over the years. We've given you guidance for growth this year. We've raised that growth twice over the course of the year based on the great growth we've had. We look forward to ending our Q4 which I'll remind our investors, AngioDynamics is blessed or cursed to have a unique fiscal year, which ends on May 31. So we'll be happy to share with you our Q4 results in mid-July. And we'll give you guidance for next year on the Auryon product. But watch how we'll grow this product. We also believe Auryon is a pipeline where the science will enable us to spin off other opportunities over time based on our R&D pipeline, given to PAD atherectomy today, arterial atherectomy tomorrow and maybe even other areas like coronary treatment or venous thrombectomy based upon how this science works and why it's so special and powerful. So we're really pleased with the growth of Auryon. And finally, I'll take the last few minutes, talk about our NanoKnife. NanoKnife is a very unique and special product. It's a nonthermal device made to break down tumors. So we're really looking at the solid tumor market. What makes it special is the mechanism of action of how NanoKnife works. It's tiny electrical pulses that can penetrate the cell wall of a tumor, allow the cell to die actually naturally and not damage surrounding tissue or vasculature structure surrounding where we're trying to treat. So NanoKnife is very special. We have the direct study underway right now, trying to treat Stage III pancreatic cancer and show how effective it can be in treating this very delicate organ and tough to treat diagnosis. We believe we'll be very successful with the DIRECT study. But really what DIRECT has done has enabled us to open up other markets to look at where we can use NanoKnife and penetrate other opportunities for growth. The prostate market is a really large market that we believe NanoKnife is ideally suited to based upon its science and mechanism of action. Today, about 0.25 million men in the U.S. are diagnosed with prostate cancer. We believe about 100,000 of them, 40% of those diagnosed candidates could be opportunities for treatment. They fall into what we call intermediate risk in the prostate area. We believe that how NanoKnife works. It could be the ideal pathway to treat them with a focal treatment option, instead of full gland treatment, reducing some of the risks and side effects of full gland treatment. We want to reduce the opportunities for men to continue to have the side effects of incontinence or impotence that are usually associated with other treatments in the market today. So the PRESERVE study has been launched. We've already had our first patients enrolled in the PRESERVE study. We are really, really proud and pleased that the Society for Urological Incontinence have supported our study. And doctors Arvin George and Jonathan Coleman are our lead PIs, people that are really excited to add the study up and share with you how this product can work. So over time, you look at the company here at AngioDynamics, that's changing as we speak, coming from a diversified bucket of medical device products to a focused technology company. If you take a look at what we've achieved over the last year or so during a tough environment, we've been able to raise our trajectory to each of you, show you that we'll grow. I'll refer you back to our 3-year numbers we gave last July at our Innovation and Science Day. You can refer to that in our website, you'll see a 3-year projected revenue model in there. You also see that we're going to grow our gross margin over time, as our product mix benefits through this mix of our tech products becoming a higher and higher ratio of our revenue over time. And over time, you'll also see challenges that we've all faced in the marketplace based on COVID, how we're clearing the hurdles on our supply chain issues and things that have been kind of hurdles we had to clear this year. Getting our production rates up, the levels we'd love to be to service our customers, getting us back on track, getting gross margins up throughout some of the headwinds that we've absorbed through the COVID period. So AngioDynamics is a company in transformation. We are becoming a full-service Med Tech company, higher growth and higher gross margin over time. We look forward to sharing our story with you as we move along. Thanks today to Bank of America for the invitation to the conference.