Artivion Inc

NYSE:AORT

Earnings Call Analysis

Robust Growth and Optimistic 2024 Outlook

In the fourth quarter of 2023, the company achieved impressive revenue growth in key product lines: On-X up by 19%, tissue processing up by 18%, BioGlue up by 11%, and stent grafts up by 8%, leading to 15% overall revenue growth. Geographically, Asia-Pacific and Latin America increased 19%, North America 17%, and EMEA 10%. Gross margin improved slightly to 65%. General, administrative, and marketing expenses rose to $50.3 million. The company incurred a GAAP net loss of $4 million but a non-GAAP net income of $4.6 million. Looking ahead, 2024 is expected to bring $382 million to $396 million in revenue, a growth of 8% to 12%, and adjusted EBITDA between $68 million to $72 million, denoting up to 34% growth. Free cash flow is anticipated to be positive despite a more substantial cash outflow in Q1.

Revenue and Profitability Surge Amidst Strategic Growth

Solidifying its stance in the market, the company recorded a robust 15% increase in revenue growth paired with an impressive 40% surge in adjusted EBITDA for the fourth quarter of 2023. The underlying drivers of this surge were revenue hikes across multiple product lines, including On-X which grew by 19%, and regional spikes with Asia-Pacific and Latin America each up 19%. Not just widening but also deepening its footprint, the company’s gross margin saw improvement to 65% in Q4, a gentle step up from 64% the previous year. This was fueled by strategic price adjustments and product mix that adeptly navigated through the inflationary tide affecting material and labor costs.

Expense Management and Profit Focus

Economics is as much about controlling expenditures as it is about revenue. The company's general, administrative, and marketing expenses did rise to $50.3 million from $38.5 million year-over-year, but this increase aligns with the company's scaling effort. Research and development costs, a key indicator of future growth commitment, were marginally reduced to $7.6 million. These financial manoeuvres culminated in a GAAP net loss of approximately $4 million, but from a non-GAAP perspective, a net income of $4.6 million illuminated the financial statements, pointing towards underlying operational profitability.

Forward-Looking Projections and Operational Guidance

As eyes turn to 2024, the company’s initial outlook is positive with an expected revenue range of $382 million to $396 million, translating to an 8-12% year-over-year growth. The adjusted EBITDA forecast promises a 26-34% leap from the previous year, highlighting efficient expense management and a robust margin expansion of 280 basis points. It's worth noting that the current guidance is slightly conservative compared to initial targets, but remains ambitious with a significant growth trajectory expected. The forecast is consistent with the company's strategy to balance strong EBITDA growth with necessary R&D investments, ensuring a sound financial structure conducive to future expansion.

Capital Structure Optimization and Cash Flow Confidence

Enhancing financial agility, the company has completed a comprehensive non-dilutive financing agreement, securing $350 million with a comfortable six-year maturity. This strategic move negates any imminent debt maturity issues and allows for flexibility in managing convertible debts. Notably, the company is not issuing official free cash flow guidance but is asserting confidence in maintaining positive free cash flow throughout 2024, despite anticipating a negative cash flow in Q1 due to seasonal corporate activities.

Innovative Product Development and Market Expansion

The fuel for future growth is already kindling with significant developments such as the promising 30-day PERSEVERE data for the Stent Graft business, showing potential for a 72% reduction in mortality. The On-X aortic valve line shows an 85% reduction in major bleeding, and proprietary SynerGraft pulmonary valves are set to push the momentum further. Expansion continues unabated through channel investments and regulatory approvals in Asia-Pacific and Latin America. It's clear the company is laying the groundwork for sustained long-term growth, and it expresses a confident outlook for its business moving forward.

Earnings Call Transcript 2023-Q4

[Operator]

Greetings, and welcome to the Artivion Fourth Quarter and Year End 2023 Financial Conference Call. [Operator Instructions] I will now turn the call over to Laine Morgan from the Gilmartin Group. Thank you. You may begin.

[Dorothy Morgan, executive]

Good afternoon and thank you for joining the call today. Joining me today from Artivion's management team are Pat Mackin, CEO; and Lance Berry, CFO. Before we begin, I'd like to make the following statements to comply with the safe harbor requirements of the Private Securities Litigation Reform Act of 1995. Comments made on this call that look forward in time involve risks and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements made as to the company's or management intentions, hopes, beliefs, expectations or predictions of the future.These forward-looking statements are subject to a number of risks, uncertainties, estimates and assumptions that may cause actual results to differ materially from these forward-looking statements. Additional information concerning certain risks and uncertainties that may impact these forward-looking statements is contained from time-to-time in the company's SEC filings and in the press release that was issued earlier today. You can also find a brief presentation with details highlighted on today's call on the Investor Relations section of the Artivion website.Now, I'll turn it over to Artivion CEO, Pat Mackin.

[James Mackin, executive]

Thanks, Laine, and good afternoon, everybody. I want to start with our call today by welcoming Lance Berry, our new Executive Vice President and Chief Financial Officer. Lance most recently served as Executive Vice President and Chief Financial Officer; and Operations Officer at Wright Medical until the acquisition by Stryker in November of 2020. We are thrilled to have Lance join our team during this exciting time. I'm confident his broad expertise and proven leadership in medtech will add significant value to Artivion as we enter the next phase of profitable growth. I'd also like to thank Ashley Lee for his many years of dedicated service Artivion.His contributions no doubt help make Artivion the outstanding company we are today. Now on to our fourth quarter and full year 2023 results; 2023 was an outstanding year for Artivion, and I'm pleased to report that we achieved total company constant currency revenue growth just over 12% for the full year of 2023 compared to the full year of 2022. In addition to exceeding our topline growth revenue target, we achieved adjusted EBITDA growth of nearly 30% year-over-year, enabling us to deliver positive free cash flow while making strides in advancing our clinical programs and further expanding our global footprint.Our achievements throughout 2023 culminated in a particularly strong Q4 as we delivered constant currency revenue growth of 15% year-over-year, resulting in $93.7 million in revenue. Our performance was driven by improved revenue growth in our On-X business, which increased 19%, followed by tissue processing at 18%, BioGlue at 11% and stent grafts at 8% growth, each when compared to the fourth quarter of 2022, all on a constant currency basis. We've also benefited from the expansion of our commercial footprint through regulatory approvals across new geographies, especially in Latin America and Asia-Pacific. Our strong topline performance led to $15.3 million in non-GAAP adjusted EBITDA in the fourth quarter, which is a 40% increase compared to the fourth quarter of last year.We expect our strong momentum in the fourth quarter to continue into 2024. From a product perspective, as I mentioned earlier, On-X revenues increased 19% compared to the fourth quarter of last year on a constant currency basis as we continue to take market share globally and have the only mechanical aortic heart valve that can be maintained in an INR of 1.5 to 2.0. We believe our valve is the best aortic valve on the market, our market share gains each year and the recently presented results of the On-X post-approval data, which showed an 85% reduction in major bleeding clearly support our view. Tissue processing revenues increased 18% compared to the fourth quarter of last year on a constant currency basis due primarily to pricing initiatives and the increase in volume of the Ross procedure.We expect continued double-digit growth in our Tissue business in 2024, driven primarily by our significantly improved supply of our proprietary SynerGraft pulmonary valve. And lastly, stent graft revenues grew 8% on a constant currency basis in the fourth quarter compared to the fourth quarter of last year, driven by improved supply and strong performance in AMDS outside the U.S. We anticipate demand to remain strong through 2024 and beyond for our stent graft products, which should sustain and continue our strong revenue performance.Our results were also driven by the continued progress we are making expanding into new markets. Through new regulatory approvals and commercial footprint expansion in Asia-Pacific and Latin America, both delivered constant currency revenue growth of 19% compared to the fourth quarter of last year. We expect these regions to be important growth drivers over the coming years as we continue to leverage our industry-leading product portfolio further into these regions. In addition to our strong financial performance, we continue to advance our clinical programs and show leadership in the aortic field with two late-breaking science presentations at the STS Annual Meeting in San Antonio.First, the full data set from the AMDS PERSEVERE clinical trial and second, the interim data from the NEXUS TRIOMPHE clinical trial. First, in November of last year, we completed the trial enrollment of PERSEVERE, our IDE clinical trial for PMA approval, which consists of 93 patients who experienced an acute Type A dissection. I'm pleased to report that the trial met its combined primary efficacy and safety endpoints, demonstrating a statistically significant reduction in all-cause mortality and the primary endpoint of major adverse events as well as no occurrence of DANE, which are associated with increased risk for reintervention and mortality.As a reminder, the adverse events called MAEs, which is the MAE end point for the IV trial is based on historical control of patients with Malperfusion. In this reference cohort, 58.2% of patients had greater than or equal to one major adverse event. The target goal in the trial from the FDA was a reduction in this endpoint to 40% of patients with greater than or equal to one MAE. The recently presented 30-day data at STS showed only 28% of the patients had greater than or equal to 1 major adverse event, representing a 52% reduction compared to the standard of care hemiarch procedure.As it relates to DANE tears, for context, DANE occurs up to 70% of patients following hemiarch repair without AMDS. Results from the full IDE data set has shown there have been no DANEs at all detected in any patients treated with AMDS nor were there any DANE tears reported in DARTS study after three years of follow-up. Critically, the data up to 30 days also demonstrated a statistically significant 72% reduction of all-cause mortality, a truly revolutionary result. Second, the interim data from the NEXUS TRIOMPHE U.S. IDE trial included a 22-patient study participants demonstrated a 9% mortality, no detected strokes, paraplegia or renal failure in any patients treated with NEXUS Aortic Arch stent graft system.As of today, there have been 42 of 60 patients enrolled in the primary endpoint of the NEXUS trial, and it remains on track for approval in 2026. In summary, we are very excited about these two new data prints, which assuming we exercise our option to acquire Endospan, should accelerate stent graft growth in markets where the products are currently approved. If these PMA processes proceed as we anticipate, we would expect PMA approval for AMDS in 2025 and NEXUS in 2026.At that time, again, assuming we exercise the option for Endospan, these two products will significantly increase our addressable market opportunity. Lastly, on our R&D pipeline, our third-generation Frozen Elephant Trunk used to replace the entire aortic arch called ARCEVO LSA is in the final testing stages, and we currently expect to start the U.S. IDE trial later this year. I look forward to providing additional updates on our proprietary -- on our progress in the future calls.With that, I'll now turn the call over to Lance.

[Lance Berry, executive]

Thanks, Pat, and good afternoon, everyone. Before I begin, I'd like to remind you to please refer to our press release published earlier today for information regarding our non-GAAP results, including a reconciliation of these results to our GAAP results. Additionally, all percentage changes discussed will be on a year-over-year basis, and revenue growth rates will be in constant currency unless otherwise noted. Revenues were $93.7 million for the fourth quarter of 2023, up 15% compared to Q4 of 2022. Non-GAAP adjusted EBITDA increased approximately 40% from $11 million to $15.3 million in the fourth quarter of 2023 and after generating $5.8 million of free cash flow in the third quarter of 2023, we generated $7.4 million of free cash flow in the fourth quarter.Importantly, we were free cash flow positive for the full year 2023, representing a critical milestone achievement for Artivion. As importantly, we expect that free cash flow will continue to be positive in 2024. From a product line perspective, On-X revenues grew 19%. Tissue processing revenues increased 18%, BioGlue revenues increased 11% and stent graft revenues grew 8% in the fourth quarter of 2023. On a regional basis, revenues in both Asia-Pacific and Latin America increased 19%, while North America increased 17% and EMEA increased 10%, all compared to the fourth quarter of 2022. Gross margin improved to 65% in Q4 compared to 64% in the fourth quarter of 2022.This increase was driven by price increases and product mix, partially offset by inflationary impact on materials and labor. General, administrative and marketing expenses in the fourth quarter were $50.3 million compared to $38.5 million in the fourth quarter of 2022. Non-GAAP general, administrative and marketing expenses were $47.7 million compared to $41.9 million in the fourth quarter of 2022. R&D expenses for the fourth quarter were $7.6 million compared to $8.3 million in the fourth quarter of 2022. Other income and expenses include $5.8 million in net interest expense and foreign currency translation gains of approximately $2.2 million.On the bottom line, we reported GAAP net loss of approximately $4 million or $0.10 per fully diluted share in the fourth quarter of 2023. Non-GAAP net income was $4.6 million or $0.11 per share in the fourth quarter. As of December 31, 2023, we had approximately $58.9 million in cash and $312 million in debt. It is important to note that this does not contemplate the impact of our recently closed comprehensive credit agreement, which I will speak to shortly. And now for our initial outlook for 2024; we expect to continue building on our momentum, enabling us to achieve as reported revenues in the range of $382 million to $396 million.At current FX rates, the year-over-year impact on revenue is expected to be negligible. Therefore, this range represents revenue growth of 8% to 12%, both as reported and on a constant currency basis. With our continued topline revenue growth and general expense management, we expect adjusted EBITDA to be in the range of $68 million to $72 million for the full year 2024, representing 26% to 34% growth over 2023 and 280 basis points of adjusted EBITDA margin expansion at the midpoint of our ranges. We expect gross margins to remain at levels similar to 2023. We expect to continue to drive significant leverage from our global sales force and G&A infrastructure.Additionally, R&D expense is expected to remain relatively flat as a percentage of sales. I would like to proactively note that our guidance range is below the $75 million that we originally targeted for 2024 at our March 2022 Investor Day. There has been no change to our commitment to drive significant adjusted EBITDA growth in 2024, as evidenced by our expectation for 30% year-over-year growth at the midpoint of our range, which is 3x our midpoint topline growth rate. We are driving this level of improvement while maintaining our investment levels in R&D as a percentage of sales. Driving strong adjusted EBITDA growth is a top priority, but not at the expense of the investments we need to make for the future.We feel that the strength of our underlying business, our longer term growth outlook and our balance sheet today validate this approach. In regard to our capital structure, we are very pleased to have recently closed a comprehensive non-dilutive financing for $350 million of senior secured interest-only credit facilities with 6-year maturities. The facilities include an initial $190 million term loan, a $60 million revolving credit facility and an additional $100 million in unfunded delayed draw term loan that may be drawn to refinance our convertible bonds at any time prior to their maturity in July 2025. As a reminder, our convertible notes do not contain any financial covenants.The initial $190 million term loan and $30 million from the revolving credit facility were drawn at close along with the use of some cash on our balance sheet to retire the existing senior secured credit facilities and pay related transaction expenses. Overall, this credit agreement, coupled with our strong financial performance gives us flexibility with no near-term debt maturity overhang as we continue to evaluate the best options to address our convertible debt. We also intend to file a shelf registration statement on Form 3 with the SEC following the filing of our 10-K. We view this strictly as a matter of good corporate housekeeping and prudent considering the reestablishment of our [indiscernible] status.As it relates to free cash flow, we are not giving formal guidance. However, we are confident in our ability to be free cash flow positive in 2024. The $16 million of incremental adjusted EBITDA at the midpoint more than covers the $5.7 million of additional interest from the new credit facility, which provides us room for working capital expansion to support the growth of the business while still being free cash flow positive. Finally, I want to make a few comments on quarterly cadence to assist you with your modeling. As it relates to revenue seasonality, the third quarter is typically our lowest growth quarter, particularly due to the impact of the European vacation season.Q1 is our most cash-intensive quarter due to the payment of annual bonuses and due to normal activities, such as sales meetings and industry conferences, which are heavier in the first quarter. Despite our expectations for free cash flow to be negative in Q1 because of these items, we still expect cash flow -- to be free cash flow positive for the full year of 2024. In summary, we are thrilled with our 2023 performance and are excited about the prospects of the business in 2024 and beyond.With that, I will turn the call back to Pat for his closing comments.

[James Mackin, executive]

Thanks, Lance. As you heard from Lance, we're extremely pleased with our 2023 performance and continue to deliver on our mission to build a world-class aortic company. We finished strong with 15% revenue growth and 40% adjusted EBITDA growth in the fourth quarter. We continue to expand our markets and meaningfully advance our clinical pipeline, positioning us well for long-term growth. We also executed a non-dilutive capital structure, giving us a 6-year runway with no financing overhang.Our strategy to deliver sustained profitable growth is working, and we look forward to continuing the momentum we built in 2023 through 2024 and beyond. More specifically, our growth this year will be driven by the following: number one, our continued growth in our Stent Graft business, driven by the recent 30-day PERSEVERE data presented at STS showing a 72% reduction in mortality and a 52% reduction in major adverse events compared to the standard of care [ literature ] control. Number two, continued market share gains for On-X driven by data recently presented in Europe of 510 patients in our aortic valve, showing an 85% reduction in major bleeding.Number three, continued growth of our proprietary SynerGraft pulmonary valve, driven by price increases, growth of the Ross procedure as well as our ability to capture that growth from our efforts to improve supply. And fourth, our continued growth in Asia-Pacific and Latin America from our channel investments and new regulatory approvals. So in conclusion, we are more confident than ever in our near and long-term prospects of our business. Finally, I want to thank all of our employees around the globe for delivering an exceptional year.So with that, operator, please open the line for questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Rick Wise with Stifel.

[John McAulay, analyst]

Hey Pat. Hey Lance. This is John on for Rick today. I just want to start off with AMDS. You had some really positive strong data readout at STS recently. And I just wanted you to maybe remind us about just how clinically meaningful this is in the eyes of doctors, how the technology is performing in Europe today? And how we should be thinking about the U.S. opportunity as we look ahead to '25?

[James Mackin, executive]

Yeah, I'll take that one. So clearly, this is a very exciting technology. I've been in the field cardiac devices for 30 years and associated with a lot of breakthrough technologies. I've never seen one that actually has the patient benefit that we've seen in this device. And I'll give you just a kind of a background, right? So acute Type A dissection is a very extreme disease state where patients are Medevac in typically in the middle of the night. And this trial was done in patients with Malperfusion, which means they have kind of blood not flowing to the brain, to the kidneys to the legs.This device in an FDA trial of 93 patients, which is the largest series ever done in acute Type A dissection patients showed a statistically significant reduction of 72% in mortality, that's death, right? So 72% more patients were alive. It also showed a reduction in the major adverse events of strokes -- people had required kidney dialysis and myocardial infarctions. So we saw a 52% reduction in those four major adverse events. So I think this is a really -- it's truly a life-saving technology, and we're very excited. Our investigators are very excited about this.It's about a $150 million market opportunity in the U.S. We'll have -- obviously, we'll have to go through all the steps you have to go through in the adoption of a new technology. But we're all alone in the market. There's no other competitor. The competitor is a hemiarch, which is a surgical graft that's been done for 50 years. There's been no innovation. This is a highly patented protected product. So we feel like this is a market that Artivion will own for a very long time, and we're super excited about getting it out to patients.

[John McAulay, analyst]

That's helpful. And then just to follow up on the guidance. I understand the logic on adjusted EBITDA reinvesting in the business. Just curious, one, exactly what particular areas of focus are you reinvesting in innovating? And then on the revenue side, I noticed that in the fourth quarter, stents grafts on an organic basis were more like high single digits. And then the Preservation Tissue business was high teens. So just as we think about that into '24, should we expect similar growth rates from those two or maybe find somewhere in the middle?

[James Mackin, executive]

Yeah. Let me take the first one. I'll let Lance take the second one. So as far as the investments, as we've said all along, we're building an aorta company, right? So you've seen a significant investment in AMDS in the U.S. FDA trial PERSEVERE, which you just heard about. We're literally starting as that one is getting ready to get to market, we're literally starting our next generation device to replace the entire aortic arch called ARCEVO. We've been developing it for several years. It's a breakthrough technology as identified by the FDA.We will start that clinical trial this year here in the U.S. and Europe. And then we've got some technologies behind it. But as Lance said in his comments, we can do this in our P&L and not really hold -- increase our percentage of R&D as a percentage of revenue because we're growing the topline as well. So we're being very pragmatic about being financially disciplined, growing the topline midpoint of our range, 10%, bottom line, 30% and still being able to invest in innovation. So I think this is something that shareholders should like because we can deliver topline, bottom line, cash flow and a pipeline. So Lance, maybe you can take that second question.

[Lance Berry, executive]

Sure. So the question was about stent graft growth and tissue processing growth and how those flow into 2024. So first on stent grafts; I think the Q4, I would call that just kind of normal level of quarterly fluctuation on growth rates. For the full year, stent grafts grew in the mid-teens. And that's really how we think about that business going into -- for full year 2024. Again, you may see some variation quarter-to-quarter.On the tissue processing, we are benefiting from the price increase we took in second quarter of 2023 on our SynerGraft technology. So we're benefiting from that, and we began to see a little bit of the improved supply as well in the fourth quarter that helped that. So we may see the tissue processing revenues to be a little higher in the beginning of 2024. For the full year, we think about that more kind of a double-digit grower as we've kind of talked about in the recent past.

[Operator]

Our next question comes from the line of Mike Matson with Needham.

[Michael Matson, analyst]

Yeah. So I guess I'll just start with the financing, the new credit facility. So can you just tell us kind of where you'll be with regard to your leverage ratio following that transaction and where you kind of ended at the year last year in terms of EBITDA?

[Lance Berry, executive]

Yeah. So I don't know [ it right off ] top of my head, we did $52.8 million of EBITDA at the end of this that in 2023. And post transaction, you're really thinking about net debt of about $260 million. So I mean, I guess, do the math on that real quick?

[Michael Matson, analyst]

5 point something roughly, yeah.

[Lance Berry, executive]

Yes, 4.8 is where it is right now, and we think we'll get it -- the midpoint of the range and some cash flow, we'll kind of get that approaching 3.5 to 3 by the end of 2024. So some really good progress there. I would point out that there are covenants in the new debt, but they're well above that level, and we actually have a favorable definition of EBITDA in the credit agreement. So per the actual credit agreement, that net leverage ratio is even less than what it is on an as-adjusted basis.

[Michael Matson, analyst]

Okay. That helps. And then just on AMDS, I mean, obviously, the data looked really good. Do you expect to have the FDA require a panel for that or do you think they'll just approve without a panel?

[James Mackin, executive]

We haven't gotten -- Mike, we haven't gotten to that level of detail yet. I mean, I'm not going to opine on what the FDA is going to do. But obviously, I think the data speaks for itself, right? I mean this is a super sick population with phenomenal results. So we're obviously going to work with them to get the technology out as soon as we possibly can. So panel or not, I can't really comment.

[Michael Matson, analyst]

Okay. And then as far as our ARCEVO goes, just the timing, I mean, so would that be -- is that really more 2027 at this point or could it be earlier than that?

[James Mackin, executive]

Yeah, I think that's about right, probably late '27. So we expect to get the IV approved this year and hopefully, we can get some patients enrolled. But again, there's a lot of bureaucracy at the start-up of a trial. So I think that's right. We feel like just the centers we have in this and the kind of the -- a lot of these top centers were involved in the development of this technology, and they're super-excited about it. So I expect our enrollment to go pretty well, but there is a one-year follow-up and then you've got to go through an FDA PMA cycle. So there's -- it's some time -- kind of late '27 is probably a good timing for that.

[Operator]

Our next question comes from the line of Suraj Kalia with Oppenheimer.

[Suraj Kalia, analyst]

Pat and Lance, can you hear me all right?

[James Mackin, executive]

Yeah, we hear you fine.

[Suraj Kalia, analyst]

Pat, let me start out with a congratulations. I mean, you guys have consistently even through COVID, probably one of the few that has consistently beat numbers every quarter. So congrats once again. I know Pat, on AMDS, a number of questions had been asked. Pat, just for the audience again, can you size up the U.S. market? How do you define the low hanging fruit?

[James Mackin, executive]

Yeah. So basically, if you look at -- there's a number of different ways to kind of slice up the market. So we came up with a number of $150 million. The ASP on that device is going to be about $25,000. So there's about 6,000 acute Type A dissections done in the U.S. So that's really kind of the back of a napkin is the math. 6,000 cases, $25,000 a device, multiply the two together and you get $150 million. We've done market research with a number of physicians, and you can talk and you know some of the physicians that are in the trial.This is a very substantial technology. Again, as I said from an earlier question, I've not seen -- you see these heart failure trials where you're trying to get somebody to walk 12 more feet. You're talking about a 72% reduction in mortality. The mortality in the standard of care control group was 35% at 30 days. We were at 9.7%, so that is a significant technology. And these are extremely sick patients that are Medevac in.It's an emergency, and this is life-saving technology. So we're very excited, and we've got a sales force. BioGlue is used in aortic dissections. Our sales team sells the On-X valve in aortic repair. Our [indiscernible] device is used in replacing the arch. So we are an aortic company, and this is kind of the first significant innovation in acute Type A dissections in 50 years. So I mean I'm super excited about it and think this is really going to change a lot of lots.

[Suraj Kalia, analyst]

Fair enough. Pat, Lance, I'll just throw a bunch of questions your way and hop back in queue. Lance, for you, net ASP impact in the quarter. And for Q1, how should we think about the sequential move? Pat, for you. In terms of On-X mitral label, any -- or just in terms of On-X mitral, I know the FDA process is behind us. But just kind of give us next steps and the status. Also Pat more generally, at this stage, at this point in time, do you think the portfolio is optimized? If not, what else needs to be done?

[James Mackin, executive]

Sure. I'll take the first -- I'll take the last and I'll let Lance work on the number piece, while I'm talking. So as far as the PROACT Mitral, as we talked about last -- I guess it was end of Q3 -- we ended up withdrawing the PMA because we missed our statistical endpoint, which is really -- I don't want to get into the details around the statistics of the trial. The fact of the matter is it's the largest body of evidence ever with the mechanical mitral valve.We just had a recent presentation at STS in January. There's nothing close from a significance and level of data. And the fact of the matter is the Mitral business grew 20% in 2023, right? So people are recognizing the value of that. We're not off-label promoting it, but people will recognize that you can actually lower than INR if that's the physician's choice. So maybe over to Lance, you can grab a couple of the other ones.

[Lance Berry, executive]

Yeah. So on ASP, I think without giving you an exact number on the total company, which can be kind of tough with different products, different mix in different countries. I think the things to highlight is obviously our tissue business benefited meaningfully from price, which we've talked about. We took a significant price increase in Q2 of this year. And so in Q1, we will still benefit from that and we'll annualize that in Q2. And then we have had some favorable pricing on On-X, in particular, I would call out that we will have for a portion of the year as well. Other than that, we're taking price increases, but not anything outside of the kind of normal running the business type price increases.

[James Mackin, executive]

Yeah. And then the other question you had, Suraj, was on the portfolio. I mean -- one of the things we've said is we did three acquisitions and one kind of distribution agreement with an option to acquire with Endospan with the NEXUS device fairly quickly over the 4-, 5-year period. We feel like our portfolio is in excellent shape. And as I mentioned from an earlier question, you can see us going from the AMDS, U.S. FDA trial to the ARCEVO FDA trial, and then we got more stacked up behind them. So we really -- we do not need to acquire anything.We're very well set up from a portfolio standpoint. The only other point I would make on the pricing, and I've said this to a number of times, I mean we did get some significant price increases on SynerGraft pulmonary valves in 2023. And as that kind of asthma totes on itself at the end of the first quarter, '23 was a year of the price for SynerGraft, '24 is the year of the volume, because we've had some significant yield improvements in our processing, where we're going to potentially double our availability of those valves, and we sell every single one of them because of the significant growth of the Ross procedure. So again, we feel very confident in that tissue business continuing to grow pretty significantly.

[Operator]

Our next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question.

[Jeffrey Cohen, analyst]

Thanks, Suraj for segue right into my first question, which is 59% on tissue forms. That's an all-time high for the company. Is that sustainable or how should we think about that opening up in the tissue business for '24?

[James Mackin, executive]

Well, as I just mentioned, Jeff, and I think so Lance commented on the pricing, we obviously had some significant increases on SynerGraft in 2023, which will still get some benefit in the first quarter. During that year, by working with some of our top surgeons, we've also seen significant yield improvements in our processing area.So we think that that growth will continue, because, we -- like I said, we've almost doubled the availability of our pulmonary valves, and because of this rapid growth of the Ross procedure, we're literally selling everyone that kind of comes out off the line. So the answer to your question is yes, it's going to continue.

[Jeffrey Cohen, analyst]

Wonderful. And I guess, secondly for us, could you comment a little bit on some of the geographies out there? I know you call out Asia and LatAm at that 19% rate, but any specific geographies? And how does that tie into specific product lines by geography or in geographies?

[James Mackin, executive]

Yeah. Every region grew double digits. Obviously, Asia-Pacific and Latin America are smaller, just in size. They're growing 20%. So, again, we're seeing double-digits across all four of our regions.

[Jeffrey Cohen, analyst]

Okay, got it. And then lastly for us, could you talk about gain a little bit as far as the prevention of a tear in the structure? And are clinicians and hospitals looking at that as a cost associated or it's just death period?

[James Mackin, executive]

I'm not sure if I caught that, Jeff.

[Jeffrey Cohen, analyst]

As far as DANE and its measurement and how it's being viewed by -- yes?

[James Mackin, executive]

Yeah. Actually, it's a -- again, it's probably not a topic many people will understand. I mean, I certainly didn't know what DANE was until we got into this specific area. So think about it this way. In the current standard hemiarch, where they actually -- I tried to make a plumbing analogy, right? You have tear in the pipe. You got to fix that little piece of pipe. So you take the bad piece out, you put a new piece in, and you connect it to the old kind of -- the old piece of the pipe, so now you've got a fully functioning pipe.That's what they do with a hemiarch. Up to 70% of the times, the connection you make ends up having a leak, which requires a reoperation and can lead to higher mortality. It's a real problem, and it can happen. Like, again, it depends on where you're doing it. But 35% to 70% of the time, they get a leak in the connection, which is a DANE. We don't see it at all with AMDS. Three years in the 50 patient DARTS trial and 93 patients in the PERSEVERE trial, zero. So we're running the health economics on that. But re-ops and mortality for these patients, I mean, this is obviously a significant thing. And the FDA has been extremely interested in DANE and actually had us added as a primary efficacy endpoint.

[Jeffrey Cohen, analyst]

Got it. Okay. That's super helpful. Again, thanks for the questions and fantastic readout on the year.

[Operator]

Our next question comes from the line of Frank Takkinen with Lake Street Capital. Please proceed with your question.

[Nelson Cox, analyst]

Hey, this is Nelson Cox on for Frank. I'll just start maybe internationally as well. Can you refresh us on the current size of the sales force there and maybe thinking about the team size there throughout the year? Obviously, you've seen some nice growth there, but maybe just walk through your thinking there.

[James Mackin, executive]

Yes. We've talked about Asia and Latin America. When I started as a company, we had one person in Asia, nobody in Latin America. We're now probably about 30 people in Asia, probably 15 in Latin America. We feel like Latin America is kind of where it needs to be. We may have a kind of onesie twosies here and there. Asia obviously is a significant opportunity and we'll continue to add to those regions, but we treat it somewhat like a venture capitalist, right? I mean, as we get product approved -- products approved, for example, we've had some big approvals in Australia. Then we'll add feet on the street. We've got approvals in Hong Kong, we're direct there. We've had approvals in Thailand, we're direct there. We've had approvals in Taiwan, we're adding people there.So as we get the product approved, which is really just the incremental cost of the regulatory approval. If we see the size of that market make sense and we just run an NPV and then we'll add people. So it's really a gated self-fulfilling -- self-funding process that we go through. But Asia is the area that we can pull that back. We can titrate that depending on our EBITDA requirements and commitments and what we see coming from an approval standpoint. Hopefully that helps you.

[Nelson Cox, analyst]

Yes, no, that does. Then obviously I'll switch over to On-X. Obviously a strong quarter there. Can you maybe just talk a bit more about the competitive landscape? Maybe just what you're seeing from the other competitors there, you can clearly continue to take share, but just curious what you're hearing out there from maybe their investments or lack thereof.

[James Mackin, executive]

Yes. So I'll talk about what customers are saying. We just -- as I mentioned in November, or I guess October last year, we presented a 510 patient study, the kind of the FDA post-approval trial on the low INR, which is a typical requirement. They want to see that your valve performs in the community as it performed in the kind of rigorous FDA trial so 60 centers, 510 valves. We saw an 85% reduction in major bleeding.So we went and did some market research, talked to 100 cardiac surgeons, by the way, it's very unique research, that -- and I've done a lot of this over my career. We did research in competitive accounts, what we call competitive accounts, which have On-X share like less than 25%. And it shows that we continue to take share over the next three years and basically double our share. So this is a very meaningful new data set. We're excited about and our customers are excited about it and we're going to be going after it.

[Operator]

Thank you. There are no further questions at this time. I'd like to turn the floor back over to management for closing comments.

[James Mackin, executive]

Yes. Obviously, we appreciate everybody's time here. I mean I'll be quick in my wrap up. We're super excited about 2024. We had this great PERSEVERE readout on AMDS with 72% reduction in mortality, 52% reduction in major adverse events. So we're going to be working with the FDA to get this technology here in the U.S., but we're also approved around in multiple countries in Europe, Canada and Asia where we're going to use that data to continue to take care of patients and drive growth.I just got done talking about the On-X post-approval trial of 510 patients showing an 85% reduction in major bleeding, and we're going after share there. I talked a couple of times about our price increases on SynerGraft as well as our efforts to improve supply, and we'll continue to see growth there and we talked about Asia-Pacific, Latin America. We're also advancing our pipeline. We're going to be starting the third-generation Frozen Elephant total arch repair system called ARCEVO LSA later the this year. So we continue to build an aortic company and are excited about delivering for you again in 2024. Thank you.

[Operator]

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.