Hey, everybody. Steven Lichtman, Medical Device Analyst at Oppenheimer, here. Welcome back to the Oppenheimer MedTech and Healthcare Services conference 2024. Very happy to have with us up next in the MedTech Vertical, AngioDynamics. With us today is AngioDynamics President and CEO Jim Clemmer. We're going to do this in a fireside chat format. If you do have any questions, please key them in. I will get them over to Jim. But with that, Jim, thanks so much for being with us today. You know, I think just to the lay of the land, you know, for those that don't know the story, Jim, you know, you've obviously embarked on a lot of changes in your portfolio over the last few years.
You know, can you sort of level set us and investors in terms of, you know, the state of the business, and how you're feeling about the portfolio overall as you look at your MedTech and your med device segments, as you look ahead here?
Sure, Steven. Thank you for the invitation today to tell our story. So, Steve, it was really in 2019 we decided to change our company, or really looking at our portfolio first. We had a diverse portfolio. When you're diverse, that's great because you do a lot of things. But we decided then we could do a few things really well to focus on those. So in 2019, you saw we made a divestiture. At the time, it was our largest single business, but it was non-differentiated products. It's a 50-year-old business, and we couldn't compete with really big people in this low gross margin, complex business. So it was symbolic of our transformation: exiting smaller businesses with smaller TAMs that are growing less rapidly and didn't really have science or technology or user outcomes they could measure being differentiators.
So later that year, we bought Eximo Medical, which today is the Auryon PAD system that we launched. That's a great symbol of our transformation and our journey. We got out of something that was non-differentiated into a market that we thought was ripe for disruption. The way that Auryon works to treat people with peripheral artery disease and treat those patients and give physicians a new tool to use is really, really amazing. So, Steve, that's part of our journey. That's what we'll continue to do. So now we're spending a lot of our time and energy transforming that portfolio even deeper. Last June, we divested a couple of assets that were non-core to us.
You may have seen three weeks ago, we announced the divestiture of our PICCCs and our midline business, again, an area that we were less interested in, dominated by one or two other really large players. Today, Steve, we have a good balance. A little over 60% of our revenue is coming from our med device platform, which has things in there like our ports, our microwave business to treat, you know, ablation, our angiographic catheter, some of the historic products that doctors know AngioDynamics for. Then really our MedTech portfolio, which is our Auryon for PAD, our venous thrombectomy business, and our non-thermal NanoKnife, solid tumor treatment. That's our future, Steve. We'll continue this transformation away from those medical device products with that stable base we have today and really invest our future into the MedTech business.
So what, what does that leave you now in terms of your sort of weighted average market growth, your sort of growth outlook as you look at those two segments? And where, when you look out over the next few years, you know, what does that, that updated med device portfolio look like for you from a growth perspective? And then, of course, you know, MedTech's a lot of different segments, but if you could sort of piece that together for us.
Sure. Yeah, this is great. So we still have a couple of pieces. You're asking a great question. We'll give our investors more detail soon. But two things. So the WAMGR that you're talking about, the weighted average growth rate, is important, but also the TAM. So a couple of years ago, 2019, our TAM was only about $1.3 billion for a company our size, the markets we competed in. So exiting small markets, getting into larger ones was important. Today, we think our TAM is about $6 billion. On the way to $8 or $9 in the next few years, opening up more expansion geographically and through indications of new organs we can treat. That's one. Then secondarily, as you mentioned, the weighted average market growth of these are very important, and they're faster.
The example I can give you today is we're entering the thrombectomy market. We just finished our APEX PE trial for AlphaVac. We expect to be on label by the end of June, hopefully in the U.S., our indication being cleared here for AlphaVac for PE. Then our European CE mark being granted as well in the MDR process. So you look at markets like that, Steve, that are opening up, as you know, very rapidly. A couple of other companies are doing a really good job growing in the mid- to high-20% range or so. So we think we'll help that and we grow faster when we enter those markets. So that's our future.
And, you know, so let's go. Yeah, I wanted to tick through these. So as we think about mechanical thrombectomy, you know, obviously some large competitors. Talk a little bit, if you could, about the recent past, maybe some lessons learned, because I think that, you know, that sort of AlphaVac performance to date hasn't been quite what you had hoped. And then what do you think changes that? Obviously, you know, the PE indication, I'm assuming, is going to be one of the big ones. But what changes looking ahead?
Yeah, so we learned a lot since we launched AlphaVac. So we also learned too, the product is probably best designed for PE. We thought when we developed it, we'd have areas that can be used outside of PE, and there are. And people are using it today in some of those indications and applications. But we think PE is the ideal space for it. And our APEX study, we think, proved it to us and to the caregivers that were part of that study. You know, the study was actually completed very rapidly, which was ahead of our expectations when you got two other good competitors in that space today. But I think what we saw, whether some of the design elements we built into the AlphaVac, were really well received by physicians who utilized them.
We found that not only was the safety and efficacy of the product there that we intended it to be, but we learned a lot about how they could navigate through the tortuous pathway, the anatomy that you're trying to get to, to treat patients with PE. Also, how quickly they could do the procedures in a safe manner, get patients breathing again and stable very quickly. They could actually do more procedures in a given day, given some of the aspects and things that we designed into it, not needing a wire to switch her over, things like that. So, Steve, we learned a lot. We're really, really excited about what we can do when we get that AlphaVac PE approval on a global basis.
Then we'll also see in the second half of this calendar year, the first two of our product iterations that we've developed to add on to AlphaVac to make it more appealing to users, based upon the feedback that we received during the APEX trial.
So what does that mean? The changes mean for your potential on the DVT side? What's your sort of confidence there in particular?
Yeah, so, so really good question. So again, we think AlphaVac is intended really for PE. We'll really treat the large vessels that we can get into. It's a large bore device with that unique funnel tip that can pull clot in in a safe and effective manner. So looking at PE now, you're looking at a different part of the anatomy. You usually want to access smaller vessels. And what we've learned in the last couple of years from users using our Auryon to treat PAD is the way that the laser energy disrupts for PAD, we're talking about plaque or calcium, we can disrupt hard or soft plaque or calcium and then aspirate it safely out of the body. Well, we've also learned that there's a high level of interest in using this in a venous application to treat DVT. So that's our intention.
We talked to our investors about us launching a venous version of Auryon soon. That'll be larger catheters than we have today to treat the larger arteries, larger veins, than we treat arteries today. So, Steve, we're still in that developmental time frame of developing the product, finishing the development work, then getting the clinical studies done to get on label. But we think we'll have a unique device then that can compete really effectively in that DVT space because we'll have a safe way to aspirate clot out, but also disrupt that clot. We think the Auryon method, mechanism of action, with the way that the laser energy can be delivered to that clot, protect the vessel wall, but disrupt and remove that clot will be really special and give users another option in that space instead of just using aspiration only.
So, Steve, that's a really important part of our growth going forward to be a player in the venous space in both DVT and PE with two unique devices.
To be clear, because, you know, in the past, you've certainly talked about Auryon relative to small vessels, but it sounds like you're talking broader than that now with Auryon and DVT, not just in a sort of small vessel indication. Is that, am I reading that right?
Yeah, you know, we still think it's intended really better down in the smaller parts of the anatomy, smaller vessel. But, you know, you look at today, we have four sizes in the Arterial System. It really goes up to about a seven French size, which is really a little smaller than we think is ideal for venous applications. So when we finish our development and launch our product, you'll see sizes higher on the French scale, maybe a 12, 14, 16 in that range. We think that are ideal to help treat the venous anatomy. So a little larger than we have today on the arterial side, but we think still really special to get into that smaller vessel anatomy in a proper and safe manner.
In the interim, I guess first on data and visibility, when will we start really seeing Auryon data in this indication?
So I think it'll be a little while until you see Auryon data in this indication. We'll finish our R&D development work, as I said, then we'll embark on our study protocol to work to get on label for this application. So you'll start to see data. So you're probably still about 18 months-24 months out from that process happening. More importantly, on the sooner side, soon we'll get to share with you our APEX-AV study on the PE side for AlphaVac. We're excited to share that data later this calendar year to show what we did with our APEX-AV trial for PE on AlphaVac.
So AlphaVac will be sort of focused on this new PE opportunity for you guys. On DVT, I guess we should be thinking about this being an AngioVac story for the near term, or how should we be thinking about, you know, DVT for you guys until Auryon comes and maybe update us on sort of AngioVac dynamics?
Yeah, so we'll still play and give, give physicians the tools that we have. AngioVac and AlphaVac together can be used for DVT, and they are used today for some of that. But we think really the Auryon version will be ideal to get deeper in that lower anatomy with the unique aspiration capability combined with the, the disruption mechanism of our laser. So, Steve, today we'll give options to physicians to do. But our AngioVac and AlphaVac are more large bore devices. And there's a couple of other products on the market today that are really good at what they do. So we think Auryon gives us a better way to enter that DVT space, really compete against another product with a really, really great format. The other product is really good, and they'll do really well.
We think the Auryon DVT version will be significant when we launch it.
Can you give us an update from your perspective on the PE opportunity, how big you think this market is, how data I know there's data coming, you know, you know, from some competitors as well could play a part in developing this market?
So we would agree with, I think, data I've seen from the other competitors in the space. We think globally it's about a $6 billion-$7 billion market combined, the VTE market of DVT and PE together. And we think, again, it's probably less than 10% penetrated today with the products that the other folks have in the market or the product that we have on the market. So there's so much opportunity for market development, getting people moving from lytic-based therapies as a frontline option to these mechanical interventions that we have as, as a first tool, frontline safe option to treat PE. So I think over time what you'll see from us when we get our PE indication for AlphaVac will be used probably in areas where doctors have tried it before, want to use it because of the unique design elements we have.
We'll probably take a little share from other products because our product is unique. We'll also, I think, expand that opportunity to get physicians over to this side of the fence to use these mechanical interventions as a frontline tool and be part of that aspirate, part of that acceleration of care shifting from lytics or drug-based therapies to the mechanical interventions that we all offer. So, Steve, I think this has a long runway for years to come because this market is so robust. And these tools are good. The other players and us have a really good set of tools here that are safe and effective. I think we can really grow this market for years to come.
Shifting to Auryon and atherectomy, you know, can you give us sort of an update on the state of that opportunity, where you're at in terms of that growth curve? And you talked on the last quarter call about, you know, a little bit of reimbursement pushback. Maybe if you can update us on that as well.
So we did. We saw last summer, really when Aetna came out with a kind of a pre-authorization, new set of guidelines for a lot of their patients that they serve to be looked at differently for some of the peripheral vascular diseases that were treated in the space. So I think Aetna really started that pre-auth slowdown that we saw. I know other companies have talked about it maybe more deeply than we have, but we did see it. I still see it today. We've talked publicly. It's gotten a little better. So we think it's actually slowed down some of the care from getting delivered. But over time, it's gotten better. If you go from September till now, it's less of a hurdle than it was. You know, these folks are sick patients. People with PAD need to be treated.
Auryon is a really safe and effective tool. There are other ones that are safe and effective. People need treatment. Steve, that's been a little bit of a hurdle the last six or so months. I think it's gotten a little better. Over time, Auryon's going to take share in this space and also expand this space, give people a new tool to use, an atherectomy tool where maybe in the past they had not. The safety and efficacy of Auryon is being supported by data that we've helped generate or a lot of physicians have generated on their own because it's so special and interesting to them. The data is really compelling how Auryon works. Steve, over time, you'll see from us continued growth in the space. We'll continue to take share of how the product works.
You'll see us also launch new versions of Auryon as we did in January with our Auryon XL catheter, which now gives a radial approach option to physicians who'd like to use that approach and to the body and the wrist area instead of the lower anatomy, getting patients in and out faster. In some ways, they believe in a safer manner for recovery. So we'll be able to compete for more business as we add new products on. And then finally, Steve, we're also shifting our interest in growth away from the OBLs and more to the hospital business. We've taken more share there lately. You'll see the ratio of our business shifting as higher ratios being done in hospital, as more and more hospitals are approving the Auryon system and bringing it in-house. That's important for us today and even over time.
Back to the application I talked to you about, over time when we get our DVT product, we love having that Auryon system already there in the hospital. We think it could be used for PAD, DVT, and at one point, potentially coronary atherectomy as we'll look to get on label to treat coronary atherectomy. So Auryon's a really important growth profile product for us today and for years to come.
In the current atherectomy indication, you know, how should investors think about that growth outlook for Auryon over the next few years? I mean, I know you've made some shifts in terms of your focus and really trying to drive more utilization rather than just placing more systems. You know, can you give us sort of a sense of, you know, how investors should be thinking about growth in that segment of Auryon?
Yeah, you know what? What we'll do now, we talked to our investors, try to be clear, we placed a lot of systems the first three years it was out there. There's a high level of interest. Placed over 300 lasers in the first three years. There still is a lot of demand for the product. At the end of each quarter, we look back on what we placed. You're going to see us place brand new lasers still every quarter because there's new interest in the product. But we're also moving some now. We've seen some places who have a laser on site that didn't utilize it to the level we thought they would. We're going to make sure we utilize our assets to the best level of efficacy for us and our investors.
So you'll see some of that shift occurring, but also you'll see also our expansion happen globally. So by the end of June, we also expect the MDR cycle to be done and Auryon to get its CE mark and approval so we can then start to utilize Auryon beyond the U.S. revenue that you've seen in the first 3 years or so, get more global revenue at the end of this fiscal year and into FY25 and beyond for us. So we've got a couple of different levels, how we'll grow Auryon with our current user base, new users, then global expansion for years to come.
On NanoKnife, can you sort of let us know where, where you guys stand in the clinical trials and when we could see data and overall sort of the next steps in the regulatory process, for, for labeling there?
So, Nano, we're really excited. Our PRESERVE study, which is intended to prove that NanoKnife can be a safe and effective treatment option for men with intermediate risk prostate cancer. We completed the enrollment in our PRESERVE study last July. We talked about that with our investors since then. The PRESERVE study requires us to wait 12 months to follow up each patient that's been treated. We have primary and secondary endpoints that are important to us, looking to control, you know, the local reoccurrence of that tumor that we treat. We also want to make sure we can also then measure the quality of life aspects to the men who've been treated to reduce maybe some of those side effects that are undesirable with other treatment options.
So, Steve, again, we're a few months away from completing that 12-month follow-up for all of the patients that were in this study. When we get that data and compile it, we'll do two things. First, we'll compile it and submit it to the FDA to go towards our indication, approval, and expansion that we expect later this calendar year or early next calendar year. Then also, we want to share that data collectively. We think there's a lot of opportunity for physicians who have interest in focal treatment but haven't maybe found the right tool or right device.
We think that what NanoKnife does and how it works, where we can deliver that energy to that tumor, treat that tumor, leave it intact, not disrupting, you know, the process of taking the tumor out for these men with intermediate risk, giving them that option to be treated in a different manner. We think there's a benefit for the caregivers and a benefit for the patients. What we'll do is educate both. We'll do a lot of patient and caregiver education as to why NanoKnife should be considered as a focal treatment option for those men that fall into the intermediate risk category. And again, Steve, that's a large group. We think about 300,000 men are diagnosed annually in the U.S. alone of some form of prostate cancer. We think about 40% of them fall into this intermediate risk, a Gleason 3+4 or 4+3.
That's a lot of patients we can help. We think it gives us a really good level to start our educational process, start treating these people in a new manner. So, Steve, we're excited. We think it's about a $700 million U.S. market and over a $2 billion global market when we get on label and get access to these patients.
Shifting down the P&L on gross margin, you know, you've talked a little bit about, you know, we had some weakness in the gross margin and you're looking at obviously push that higher in the coming years. Some of it, you know, mix in terms of MedTech vs. Ded device, but you are also making some manufacturing shifts, you know, to fully outsource. Can you talk about where you're at sort of in that particular journey and, you know, how you're managing sort of the risk potentials as you make those shifts in the manufacturing base?
Yeah. So, Steve, there are three aspects to our gross margin improvement program. You touched upon each of those. So number one is the normal shift we'll get over time as our revenue from MedTech grows, becomes a larger percentage of revenue here. You've seen when our, when Steve Trowbridge gave guidance, our MedTech revenue is in the mid-60%, our med devices in the lower 40%. So overall, just as that MedTech revenue grows faster, we'll have a mix shift that occurs the next couple of years that brings it up, number one. Number two, the divestiture of some of the lower growth, lower margin products like our PICCs and midlines, they're actually below our corporate average, even below the med device average of gross margin. Those coming out of our mix also will help us mix up a gross margin.
Finally, just throughout the last couple of years in our New York-based manufacturing where the company was started 35 years ago, we couldn't get access to enough employees from the COVID effect. We never got our full staff back to help us produce the products at the rate we need to, to serve our customers. So we tried to do everything we could do. We had other costs hitting us. You know, as you know, raw material, subcomponent, transportation, sterilization costs up double digits. So at some point, we couldn't pass those on to our customers at the rate we absorbed them. So we made the decision and we announced in January to close our two New York-based manufacturing facilities and move our production there to other providers who are already partners in our supply chain that we know well.
They're already validated and qualified as suppliers in our supply chain. Over time, Steve, we'll take out some of the kind of fixed overhead costs we have in that supply chain, able to remove that and have that hit our gross margin in a positive manner about two years from now, mix up. So all three together, better mixed with MedTech, better mixed by eliminating some of the low device products, then our operations team working towards a global supply chain solution. All those will have an effect together to move gross margin up.
And on that, I apologize if I missed it, but on that last point on the shift, when do you anticipate that being completed?
Yeah, we announced the shift the first week of January. So we're underway to the transition as we speak. So our teams are working with our other supplier partners to move some of that production to our supplier partners. So we announced it in January, Steve. We said it would be a 24-month process. So we'll update you guys and our investors along the way, along that journey. And during that process, you'll see maybe small incremental steps in gross margin, but really most of those costs will become more clear at the end of that 24-month journey. We can identify some of those costs, close the plants, take some of that structural cost out, and move forward. So that's why we mentioned in that call that in FY 2027, you'll see full year profitability be affected and be positive.
But you won't have to take the hit the whole time until then. You'll see some of that profitability hit at the end of FY 2026.
Should investors, how should investors think about other potential divestitures? Is that something that's sort of active in your mind and you'll continue to look to do that, or were these a couple of unique opportunities and it'll sort of quiet down from, from here?
So a couple of things at once, Steven. Today, we've got a strong balance sheet. I think a year ago, some investors looked at us and said, Wait a minute. We had $50 million of debt, $30 million of cash. At a bad time for that, for a small cap company when the markets were uncertain and people weren't sure what we could do. Today, we have $80 million of cash in that range. We got zero debt, more than enough cash we need to run our company, operate the company. Today, we're not looking to spend any of that cash on acquisitions.
I just described to you some of the really interesting things we have in our, in our network going forward for the next couple of years that we'll spend our money, invest internally in the R&D and the clinical and regulatory process to open up those expansions. So we don't see a lot of cash being utilized there. And finally, as far as divestitures, we like the portfolio we have today. We're always going to have a mix of med device and MedTech, probably never be an exact clean company as some of our competitors are. Over time, you may see something else come and go. We have some good assets here and sometimes we get inbound interest.
For now, I want to take a little bit of a timeout, let investors take a deep breath, take a look at our company, let us be transparent about our company, let them understand where we are today and where we're going because I think there's a disconnect. So I've got to tell the story better. And then when we do that, Steve, we'll look at portfolio pruning again. But today we have a good portfolio. The assets that we really didn't think were best suited for us are now in somebody else's hands. We've got a good portfolio and a good mix that we can grow our med device and our MedTech business. And oh, by the way, Steve, too, look back in the last couple of years how we've grown internationally faster than the U.S. That's never happened in Angio over the years.
We've got a great international team that's now opening up access to these markets in a better way. So we think we have a good mix of the product, Steve. I don't think you'll see a lot of other movement in our product portfolio mix. It got us to where we are today and we think we got a strong portfolio.
When you think about that med device portfolio now, just going back to the question from earlier, with what you have now, including international, what is sort of that growth profile? And then what kind of synergies does the remaining product lines provide with your MedTech portfolio in terms of just, you know, access to customers?
Mm-hmm. A good point. So I think the last time we publicly commented, we said about 1%-3% to expect for our med device business to grow. Maybe the end of this quarter or the end of the third, the fourth quarter, Steven will update that for our investors. But we think that one to three is a good range people should expect. Now you can do a little math there. We just divested some of our slower growth assets. So maybe over time we can look at how we can accelerate that. But we've got good assets in that med device space. Those are good in their core. We got good teams that support them, support our customers that use them. But over time, there's sometimes some synergies, but not a lot.
So we think over time where we're really trying to go to, you look at even NanoKnife, we sell a microwave thermal ablation tool and NanoKnife a non-thermal ablation tool. And there is some synergistic crossover. You know, we, we hope that every OR would have one of each of our tools next to each other as a treatment option, but not everybody does. And over time with our NanoKnife approach to prostate cancer, a lot of our future interest is to the urology community and helping to serve these urologists who want to treat these men with intermediate risk cancer. And a lot of those folks don't have a need for another tool. So probably as we get going, each of these three tools can stand alone, but different than kind of the med device products that were part of the synergistic selling aspect in the past.
Okay. We're out of time, but I just want to wrap up on one thing relative to PE, in terms of what we should be expecting here over the next six months or so. Will we see data from you guys before potential approval or how, if you could just lay out sort of the visibility timelines on APEX and PE in the near term?
Perfect. So I think, Steven, what you'll see is right about when we expect APEX to be approved, so that May, June timeframe. You look at how the FDA cycle works, we're expecting, you know, a June area, probably a time we would expect an indication approval. We think that's also a good time to give people access, transparency to the data that we've submitted. I think the data will be really strong. So expect to see something from us soon. I think that June timeframe would be a great time. There's a couple of conferences that are really important to us and our customers. So we think that makes a lot of sense. We'll probably have an announcement soon with more detail, but I think that makes sense, Steve. We want people to see this data.
Perfect. All right. Well, we'll leave it at that. Jim, thanks so much for being with us today. Thanks everyone for joining us. Hope you have a great rest of the day.
Thank you, Steven.