Cryolife Inc (CRY) Q1 2021 Earnings Call Transcript

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Cryolife Inc (CRY -0.89%)
Q1 2021 Earnings Call
Apr 29, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to the CryoLife First Quarter 2021 Financial Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Brian Johnston from the Gilmartin Group. Thank you. You may begin.

Brian Johnston -- Analyst

Thanks, operator. Good afternoon and thank you all for joining the call today. Joining me from CryoLife's management team are Pat Mackin, CEO; and Ashley Lee, 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 that 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's intentions, hopes, beliefs, expectations or predictions for 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 those -- 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 press release that was issued earlier today.

With that, I'll turn the call over to CryoLife's CEO, Pat Mackin. Pat?

James Patrick Mackin -- Chairman, President, and Chief Executive Officer

Okay. Thanks, Brian, and good afternoon, everyone. Thanks for joining us this afternoon. As you can see from our results, our strategy is working and the recovery in our business is ahead of where we thought it would be at this time. As you will hear, our business does continue to be impacted by COVID-19, especially in Europe where we have a significant presence. But our business has remained resilient in the face of COVID-19 and continues to rebound, which we believe bodes well for the future. We've made substantial progress in the first quarter and continue to see demand build for our recently launched innovative aortic repair products. We also continue to invest in growth initiatives, including our R&D programs in clinical trials.

Despite continued headwinds from COVID-19, we achieved 7% revenue growth on a GAAP basis and 3% pro forma constant currency revenue growth for the first quarter of '21 versus the first quarter of 2020. When we last spoke to you in mid-February, the vaccine rollout was just beginning to accelerate in the U.S. Unfortunately, many countries in Europe were starting to experience renewed spikes in COVID-19 infections and were reimposing lockdowns, which continue to this day. We expressed a cautious outlook for the first quarter due to these factors, coupled with the anticipated decrease in tissue supply while we resolved the Tris saline issue that arose in the fourth quarter of last year. Fortunately, as the quarter unfolded and we experienced improved conditions in the U.S. as well as the positive impact from our new product launches, increased JOTEC inventory and less than anticipated impact from our tissue processing revenues, our Q1 2021 revenues were stronger than anticipated. For example, in the first quarter of 2021, AMDS increased by 67%. Nexus revenues increased by 87% and JOTEC revenues increased by 11%, all on a pro forma constant currency basis compared to the first full quarter of 2020 last year. In addition, in the first quarter, on a constant currency basis, we saw On-X revenues increased 6% compared to the first quarter of last year. On-X aortic valve revenues grew 16% in North America. As a reminder, the On-X aortic valve has a significant clinical advantage for patients over competitive valves. In that, it's the only FDA approved mechanically aortic valve that can run a lower INR from 1.5 to 2.0 rather than 2.0 to 3.0. As you've all seen, the U.S. made significant progress on the vaccine rollout since our last earnings call. And as a result, we've seen improved hospital management of COVID and some of these conditions have improved in the U.S. Unfortunately, the vaccine rollout in Europe has not been as good as it in the U.S., and there have been COVID-19 -- there has been a COVID-19 resurgence. Many European countries are back in lockdown. And Brazil, a growth market for us, is currently experiencing its worst impact from COVID-19. However, if as we hope, the vaccine rollouts and vaccine adoption continue to progress and conditions improve in these regions, we expect that pro forma revenue should accelerate later this year. Ashley will provide more commentary on our outlook in Q2 -- for Q2 later in the call.

As I explained in our last call, our near-term plan is to accelerate revenue with three key initiatives. First, the commercialization of our five new aortic stent and stent graft products in Europe. These are AMDS, Nexus, our next-generation JOTEC products, E-nside, E-vita OPEN NEO and E-nya. Second, the continued expansion into Asia Pacific and Latin America. Third, near-term regulatory approvals in major markets. This includes PerClot PMA, PROACT mitral PMA and BioGlue in China. I will walk you through an update on each of these initiatives, starting with a review of our five new aortic stents and stent grafts. First, AMDS is the world's first artery modeling hybrid device used for treatment of acute type A aortic dissections and we remain very optimistic. As I noted earlier, during the first quarter, we posted $1.3 million in revenue, an increase of 67% on a pro forma constant currency basis over the first quarter of 2020. This growth continued or occurred despite the regional lockdowns in Europe through a good portion of the quarter. We also continue to secure marketing authorizations in select markets around the world, which with additional regulatory approvals we expect to secure, positions us very well for further increases in AMDS, particularly when the pandemic dissipates in these key markets. Second, Nexus posted revenues of $408,000, an increase of 87% on a constant currency basis compared to the first quarter of 2020.

We believe these resident results would have been better for Nexus as well as for other products if not for the renewed lockdowns and travel restrictions in Europe. For example, we had several Nexus cases scheduled during the first quarter that will reschedule as a result of the latest spike in infection rates. We still continue to see Nexus cases scheduled for the upcoming weeks and months, and remain optimistic regarding the prospects for this technology. Third, E-nside is our newest device in our portfolio to treat thoracoabdominal aneurysms with endovascular stent grafts. Our revenues for this product line, which include E-nside and the extra design portfolio grew 48% on a constant currency basis when compared to Q1 of 2020. Fourth, E-vita OPEN NEO is our newest product in our frozen elephant trunk category. This is to treat dissections and aneurysms of the aortic arch. Revenues from this product line, which include E-vita OPEN Plus and E-vita OPEN NEO, grew 30% on a constant currency basis compared to Q1 of 2020. Fifth, regarding E-nya, we expect to resume our market release later in 2021. We expect demand for these five products to build as vaccinations and vaccine adoption accelerates as well as the market adoption for these products continues. In addition, we expect to benefit from improved JOTEC inventory resulting from our own internal efforts and the onboarding of a second source selling supplier.

Moving to our next initiative, International expansion in Asia Pacific and Latin America through new regulatory approvals for existing products as well as expansions of our commercial footprint in these regions. These efforts are beginning to pay dividends despite the pandemic. Our revenues in Asia Pacific increased 11% on a pro forma constant currency basis in the first quarter of 2021 compared to the first quarter of 2020. Unfortunately, in Latin America, Brazil continues to be severely impacted by COVID-19 and our business in that region is disproportionately weighted in Brazil. We anticipate that growth will accelerate in both these regions as the pandemic subsides, and we gain additional marketing authorizations in both Asia Pacific and Latin America.

Our third initiative is gaining three near-term regulatory approvals in major markets. More specifically, we expect to be submitting PMAs for PerClot and PROACT mitral in the second half of 2021 as well as continuing to pursue China FDA approval for BioGlue. That, if approved, should help accelerate revenue in 2022. On this initiative, the first program is the PMA for PerClot.

We will be submitting for both open surgery and laparoscopic indications across multiple specialties as well as for large-scale manufacturing capabilities. We are on track to submit our PMA to the FDA in Q3 2021. Second, we expect to submit our PMA in mid-2021 for regulatory approval for a lower INR label for the On-X mitral valve. This is similar to our INR label for our On-X aortic valves. If this new label is approved for the mitral valve, patients with the On-X mitral valve will be able to be maintained on lower doses of Coumadin compared to patients implemented with other mechanical valves. For example, the current standard of care is Coumadin with an INR rate from 2.5 to 3.5 and we'll be going after a label of Coumadin for INR levels from 2.0 to 2.5.

This will lead to significant clinical benefits for patients. We believe that this approval for our mitral valve will enable us to take significant market share in the mechanical mitral heart valve market, similar to the market share gains we've experienced with our On-X aortic valve. Third, as it relates to regulatory approval for BioGlue in China, the NMPA, which is the Chinese equivalent to the FDA, has recently requested additional data that may require additional testing. This request for additional testing makes it unlikely, in our view, that we can receive approval for BioGlue in China during 2021. We continue to have discussions with the NMPA and we'll provide an update on our approval time line when we have further clarity. This potential delay does not meaningfully impact, in our view, our accelerating near-term revenue growth opportunity as I described earlier. In addition to our progress on these initiatives, we also continue to make very good progress on our midterm pipeline with key products that are currently in U.S. clinical trials are ones for which we expect to start in the U.S. clinical trials later this year.

These three trials are PROACT 10A, Nexus and AMDS. We continue to make significant progress on the enrollment in our PROACT 10A trial. Our prospective randomized clinical trial to determine if patients with the On-X aortic valve can be maintained safely and effectively on Eliquis versus warfarin. We currently have 51 sites qualified and beginning enrollment, 38 sites are actively enrolling and over 235 patients currently participating in the study. Feedback from surgeons and patients participating in the trial remains very positive. Despite the pandemic headwinds and assuming the trial meets its endpoints, we believe we can still achieve FDA approval by late '24, early '25. If we successfully obtain such an approval, we believe the On-X aortic valve will become the market share leader in the aortic valve market in patients under the age of 70. In addition to the PROACT 10A trial, our partner, Endospan is making great progress on its U.S. IDE trial for the Nexus device, and that trial is known as Triomph. Finally, we are on track to submit our IDE for our recently acquired AMDS device in mid-2021, which if submitted then, would put us on track to begin our AMDS clinical trial by year-end. If these trials proceed as we expect, we anticipate FDA approvals for PROACT 10A, AMDS and Nexus by late '24, early '25, which will give the company an additional $1 billion in total addressable market at that time.

With that, I'll now turn the call over to Ashley.

David Ashley Lee -- Executive Vice President, Chief Operating Officer, and Chief Financial Officer

Thanks, Pat, and good afternoon, everyone. Total company revenues were $71.1 million for the first quarter, up 7% on a GAAP basis compared to Q1 of 2020 and up 3% on a pro forma constant currency basis compared to Q1 of 2020. Revenues came in ahead of our quarterly guidance due to the improving procedure volumes in the U.S. and better-than-anticipated revenues in Europe despite the pandemic.

On a year-over-year basis, in the first quarter 2021, aortic stent and stent graft revenues increased 31%, reflecting an improved JOTEC inventory position, the addition of the AMDS in September of 2020 and the acceleration of adoption of Nexus in the EU. On-X revenues increased 7% and BioGlue revenues increased 7%, reflecting improving procedure volumes in the U.S. Tissue processing revenues decreased 11% due to the Tris saline issue discussed on last quarter's call and the impact of COVID-19. On a pro forma constant currency basis, aortic stent and stent graft revenues increased 16%. On-X revenues increased 6% and BioGlue revenues increased 5%. Performance in each of these product lines was adversely affected by the COVID-19 pandemic. On a regional basis, first quarter 2020 revenues in Europe increased 25%. North America was flat. Asia Pacific increased 11% and Latin America decreased 40%, all compared to the first quarter of 2020.

On a pro forma constant currency basis, revenues in Europe increased 12%, North America was flat, Asia Pacific increased 11% and Latin America decreased 38%, all compared to the first quarter of 2020. Our gross margins were 67% for the first quarter of 2021 and 66% for the first quarter of 2020. G&A expenses in the first quarter were $38.6 million compared to $39 million in the first quarter of 2020. The first quarter of 2021 includes acquisition-related and other nonrecurring charges of $1.5 million, primarily related to fair value charges related to the Ascyrus acquisition. First quarter interest expense of $4 million includes approximately $2.3 million of expense related to our term loan B, $1.1 million related to our convertible debt and approximately $600,000 in amortization of debt origination cost. Other expense in Q1 includes $1.9 million in realized and unrealized foreign currency translation losses.

On the bottom line, we reported GAAP net loss of $3.1 million or $0.08 per fully diluted share in the first quarter of 2021. Non-GAAP net income was $1.4 million or $0.03 per share in the first quarter. Additionally, GAAP and non-GAAP earnings includes the pre-tax loss of $1.9 million or approximately $0.04 per share related to foreign currency translation losses. Reconciliations of GAAP to non-GAAP income and EPS are included in the press release that we issued this afternoon. Adjusted operating income was $7.2 million for the first quarter of '21 compared to $2.7 million for the first quarter of 2020. Adjusted operating income reflects add-backs of amortization expense and acquisitions and other related charges to operating income.

As of March 31, 2021, we had approximately $57.1 million in cash, $320 million in debt and the full $30 million available under our revolving credit facility. Adjusted EBITDA for the first quarter of '21 was $11.4 million compared to $7.4 million for the first quarter of 2020. Gross leverage, as defined by our credit facility stood at 6.3 times and net leverage stood at 5.2 times. Please refer to our press release for additional information about our non-GAAP results, including a reconciliation of these results to our GAAP results. Regarding the tissue situation that we discussed on our last call, our further testing establishes that the $5 million in quarantine tissue is safe to be implanted in patients. We have notified the FDA of these results and we hope to be able to release this tissue later this year. And now for our outlook. Continued uncertainties regarding COVID-19 variants in vaccine rollout and adoption, specifically in Europe, make it difficult for us to predict long-term results.

Recall that approximately 55% of our revenues are generated in North America and the remainder are generated overseas, the majority of which is in Europe, where we are introducing our new products. Given the potential for meaningful impact to procedure volumes internationally relative to Q1 and specifically to our new product launches in Europe, we will not be issuing full year 2021 guidance at this time. Due to these factors, we believe -- we continue to believe that COVID-19 will adversely impact Q2 performance in potentially later quarters. With that said, our expectation is that Q2 revenues will be between $71 million and $73 million. If COVID-19 vaccine metrics continue to improve and the overall environment normalizes, we expect improvement in top line growth in Q3 and Q4. Regarding our ongoing investments designed to fuel future growth, we intend to continue to invest in our commercial channels, particularly in Asia and Latin America as well as in our R&D pipeline. We believe that we will be able to fund these investments through our ongoing operations and that we can comfortably make these investments and service our debt without having to raise additional capital.

I'll turn the call back to Pat for his closing comments.

James Patrick Mackin -- Chairman, President, and Chief Executive Officer

Thanks, Ashley. In closing, as you've heard this afternoon, despite the global pandemic, our business continues to perform very well. That is without question due to the outstanding efforts of our employees around the world and our leadership team. Going forward, we are optimistic that the rollout of the various vaccines around the world will continue to improve and market conditions provided that the vaccine acceptance continues and improves. When procedure volumes return to previous levels, we believe we'll be better positioned to realize the commercial potential of our products. Even though we're not providing formal full year '21 financial guidance, we do believe that when the pandemic subsides and vaccines are more widely available and accepted, we'll be in a better position to deliver double-digit year-over-year revenue growth.

We have several catalysts in 2021 that we do not have in 2020. As explained earlier, we have three initiatives that will drive growth in the period over '21 to '23. First, in 2021, we should see continued growth over five new aortic stents and stent grafts: AMDS, Nexus, E-nside, NEO and E-nya. Second, in 2021, we anticipate further upside from our investments in our channels and new regulatory approvals in Asia Pacific and Latin America. Third, in 2021, we are filing our PMAs for both PerClot and the On-X mitral valve. All of these catalysts are -- is our expectation to continue to deliver on the operational goals I've outlined previously, supported by our strong financial position makes us optimistic regarding our ability to drive accelerated revenue growth as the pandemic subsides. So in summary, we will continue to work diligently to strategically invest for growth, mitigate operational risk and manage our expenses. The first quarter once again demonstrated the resilience of our product portfolio and the effectiveness of our strategy to focus on aortic repair. Based on how our products and our organizations performed over the last year, I'm more confident in our business and prospects than ever before.

And with that, I'll turn the call back over to the operator for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question is from Mike Matson of Needham.

David Joshua Saxon -- Needham & Company -- Analyst

Yes. Ashley, this is actually David Saxon for Mike. I appreciate all the color. I guess my first question is just on second quarter guidance. Can you just kind of talk us through what that implies? I guess from a geographic perspective, Europe I think you said was up 12% pro forma. Does that -- does Europe improve from here? And I think you said North America was flat. So just given the increasing vaccines in North America, do you think volumes improved there? And then I have a couple of follow-ups.

James Patrick Mackin -- Chairman, President, and Chief Executive Officer

Yes. I would say that -- I mean, there were two things in the first quarter that we kind of highlighted to folks. One was the Tris tissues issue that we had and that clearly impacted -- that's mostly a North American product, so that clearly impacted the first quarter in the U.S. So while the vaccine rollout improved in the U.S. and we saw a good return for some of the other products in the U.S., our tissue business was heavily weighed on in the first quarter. So we -- as Ashley made a comment in his remarks, we've done all the testing on the tissue. We haven't -- we've submitted that to the FDA and we haven't heard back yet. So I think the U.S. is in better shape than it was in the first quarter. I think the part of our guidance, it shows sequential growth from Q1, but you've been -- you've seen the news what's going on in Europe. So Europe actually performed extremely well. We grew double digits as a business in the face of all these resurgences and continued lockdowns. So we're anticipating growth in the second quarter. The question is, I think I have been proven a number of times trying to predict what's going to happen as it relates to COVID is kind of a dangerous business. So we're showing sequential growth. Hopefully, it will improve from there, but I think it's a fair estimate about what's going on, particularly we're still heavily weighted in Europe both from a revenue standpoint as well as that's where all of our new products are. So it's like a double whammy. If Europe slows down, it slows down the overall business.

David Joshua Saxon -- Needham & Company -- Analyst

Okay. That's helpful. And then, yes, I did have a question on E-nya. You mentioned you'll resume a market release later this year. I guess, before that happens, are there any major projects or tasks that need to be done before you do that? Or are you pretty much just kind of finalizing that launch before you go full launch?

James Patrick Mackin -- Chairman, President, and Chief Executive Officer

Yes. Typically, when this is -- in 30 years of doing this, typically, what we do is a -- we start with a limited market release and start to roll the products out. And we'll go through that phase. And then if we're happy with how that goes, then we'll ramp it up into a full market release. So we're not waiting on any approvals or anything like that. It's really just -- we're going through the limited market release and then move into the full market release.

David Joshua Saxon -- Needham & Company -- Analyst

Okay. And then if I could just squeeze a last one in. Just AMDS. I think you said $1.9 million in the quarter, correct me if that's wrong. But I guess my question is, how is the sales force doing with that? I mean, with -- given it's just such a high margin product, is -- are there incentives in place to push that? Or -- and then also, how are they balancing that with the rest of the portfolio?

James Patrick Mackin -- Chairman, President, and Chief Executive Officer

Yes. So we did $1.3 million in the quarter and that was 67% pro forma constant currency growth over Q1 of last year. So a couple of things I would add on this. So we have approval in every country in Europe. We have approval in Canada. We're getting selective approvals in markets in Asia and Latin America that recognize the CE mark. Given that the majority of where this opportunity is, was under severe lockdowns in the quarter, the fact that we grew 67% say something about the product. Because it's not just -- I mean, the lockdowns are one thing, but trying to launch new products in a lockdown when people are having a hard time moving across regions and the like. So I think it's a great product. And as these vaccines roll out in Europe continue and even in Canada, we will see the acceleration of AMDS. We're also going to be getting some more markets approved throughout the year in Asia and Latin America.

So I think it's a great product. The other thing that's really nice about the product is it fits perfectly in the portfolio. So if you think about when our reps call on a heart surgeon, this device is put in by heart surgeons. Those heart surgeons use our On-X aortic valve. They use our On-X mitral valve. They use BioGlue. They use our NEO frozen elephant trunk. They use AMDS. So it's just more and more people to see and a really significant opportunity to cross-sell across the aortic procedures that we've talked about. So I think that the cross-selling and pandemic subsiding and getting more markets, I mean we think AMDS is going to do extremely well going forward.

Operator

Our next question is from Suraj Kalia of Oppenheimer & Co.

Suraj Kalia -- Oppenheimer & Co. -- Analyst

So Pat, a bunch of questions, and forgive me if some of these had been mentioned, just jumping around between two calls. So PROACT 10A, Pat, the current enrollment numbers and are you all still on track for E-nya is equal to greater than 500 by end of 2021?

James Patrick Mackin -- Chairman, President, and Chief Executive Officer

Yes. So we did 234 and 235 right now unenrolled. And we've got 51 centers signed up and 38 kind of activated. So we're still kind of going through that, bringing all of our centers up to being able to enroll. Yes, I think 500 is well within reach for this year. In fact, I'm hoping we do better. We've had a couple of really big centers come online very recently. So I do think 500 is well within reach.

Suraj Kalia -- Oppenheimer & Co. -- Analyst

Got it. Pat, the PROACT mitral, remind us again when are we going to see data on that? Then the structural dynamics with the low INR two to 2.5, walk us through what you would consider as the low-hanging fruit for the taking.

James Patrick Mackin -- Chairman, President, and Chief Executive Officer

Yes. So it's -- the great thing is we have a proxy for this, right? We have PROACT aortic. So you guys -- I mean, you know the story, right? So we run a trial where we show you can use a lower INR. And it's actually more dramatic in the mitral position. Since that's a low-pressure valve, you have to run a patient's INR at a higher level, so 2.5 to 3.5, which carries with it a significant amount of bleeding. So the fact that you can drop down -- and again, we have to wait till we see what approval, what label we get from the FDA, but we're submitting that PMA this summer. But a two to 2.5, I mean I've had surgeons tell me, first of all, it's a great valve. It's the best mechanically mitral valve in the market before we get the label change.

Number 2, if you can run a patient between two and 2.5 instead of 2.5 to 3.5, what surgeons tell me is like it just gives me peace of mind. Like why wouldn't you do that? I mean, if you can lower the risk of bleeding for a patient, I mean, it's kind of a no-brainer. So I think the combination of the fact that we have a great valve and we'll be the only ones with an FDA label, assuming we get the approval for a two to 2.5 versus a 2.5 to 3.5, you've already seen this movie played out. We've taken significant market share with our aortic valve and we continue to think we'll do the same with the mitral valve. The first part of your question about when will it be presented, obviously with COVID, we actually want to get this -- we always try to time this to when the approval is going to be. I think it's lining up like STS in January next year because if we submit the -- it's a PMA supplement, which is typically a six to 9-month time frame.

We should get that approved in the first half of 2022. And so we try to line it up, so it's close to -- ideally, you'd like to go into STS and have an approval in your hand and you could have the late breaker at STS in the end of January and then come out with an approval rate soon thereafter. The other beautiful thing about this is this is the same product our reps are carrying in their bag today. It's the same consignment that's already on the shelves. All we have to do is change the label. So we came up with new marketing brochures, we changed the label and our reps are well versed at selling these types of products. So again, I think this is a real opportunity for the company with a great product.

Suraj Kalia -- Oppenheimer & Co. -- Analyst

So Pat, I'll just throw out all my questions and hop back into queue. So first, Pat, PerClot and mitral. What are your expectations in a panel? That's one thing. The second thing, Ashley, for you, BioGlue's contribution was very healthy in the quarter, right, at 90%, 95% gross margins. The composite gross margins also, there was an uptick. How sustainable are these moving forward? And third, Pat, maybe for you. Pat, I look at the numbers. I look at consensus for FY '21 and then for FY '22. You guys are obviously hampered with lack of proctoring in Europe just given travel -- everything you mentioned. It almost comes across you guys have been over conservative and you should easily blow past these consensus numbers.

James Patrick Mackin -- Chairman, President, and Chief Executive Officer

Yes. So let me list down 1, 2, 3. I'll go first and then Ashley, and then I'll come back to the last one. So the first one on the FDA on the PMA submission, so PerClot is a full PMA submission. Again, I'm not the FDA, but based on the level of risk of that product, I would handicap highly that that is not going to go to a panel. It's a clean trial. We hit the endpoint. It's safe. It's effective. I just -- I don't see that going to a panel. And we'll be -- we're hopeful that it will move through quickly because it's a very clean package. PROACT mitral is a PMAS. It's a supplement to the original mitral PMA. So that will not go to panel. That's going to be a normal kind of review cycle as a supplement. So that's the first question. Maybe, Ashley, you can take the second question on gross margin.

David Ashley Lee -- Executive Vice President, Chief Operating Officer, and Chief Financial Officer

Yes. So Suraj, as you know, we don't give formal gross -- I mean, guidance on gross margin. But with that being said, we believe that we do have some incremental opportunity to improve margins as we go throughout the year. A couple of the key drivers of that, and you noted one of them, we had strong performance from BioGlue. On-X was also strong, especially in North America, where the business grew 16%, and it's obviously a higher-margin product here in the U.S. And the third thing is is that a lot of the growth in Q1 was driven by the new product launches, and then Pat spoke about five of them and four of them being the AMDS and E-nside and NEO. The gross margins on those products are higher than the corporate average. And as a result of that, you're seeing a benefit to the gross margin line in Q1 versus Q1 of last year. But like I said, I think that we had incremental opportunity to improve gross margin as we go throughout the year.

James Patrick Mackin -- Chairman, President, and Chief Executive Officer

Yes. And then your third question on saying, I mean, basically, we have a opportunity to beat the current consensus out there. Yes, I mean, look, I'm actually very pleased with how we performed in the first quarter. I mean, coming into the quarter, Europe -- both the U.S. and Europe were kind of raging with COVID. The U.S. has really done a great job with the vaccine and we saw a big resurgence in the U.S. Now we were a little bit handicapped, as we had said in the last call, with this kind of tissue issue. I mean if our tissue -- we hadn't had that issue in Q4, we would have grown probably in the 5% to 7% range even with the pandemic still raging in Europe. We also have gotten positive news back on Tris from the testing.

The testing has came out kind of flawless, but we're waiting to get the green light from the FDA. So that's another potential upside for us. Look at the performance of our new aortic stents and stent grafts in Europe, 87% growth in Nexus, 67% growth in AMDS. These are pro forma constant currency. This isn't comparing to some like easy number. We're growing our thoracoabdominal stent graft business percent. We're growing our frozen elephant trunk business 30%. And that's in a pandemic. I mean every country in Europe -- and again, I don't know how much people are paying attention, but every country in major country in Europe lockdown just like they did a year ago. So what we have said is, as Europe kind of gets back on track with the vaccine, we agree with you. I mean, we think we're very well positioned. And hopefully, it's this quarter. This is the last kind of COVID corridor in Europe and we start to see a return to significant growth in the second half, which is exactly what we said in our comments. It's all over the place. Operator, is there any calls there?

Operator

Sorry, Pat, you cut out for a moment there.

James Patrick Mackin -- Chairman, President, and Chief Executive Officer

I'm sorry. Yes. I don't know how much you heard, I don't know what happened with the line there.

Operator

Okay. I think we missed the last couple of sentences.

James Patrick Mackin -- Chairman, President, and Chief Executive Officer

Okay. Yes. I agree with Suraj, that we're growing significantly. We're growing double digits in Europe in a pandemic. Imagine what happens when the vaccines get rolled out and we actually get back to kind of normal there.

Operator

[Operator Instructions] Our next question is from Jeffrey Cohen of Ladenburg Thalmann.

Destiny Hance -- Ladenburg Thalmann. -- Analyst

This is actually Destiny on for Jeff. I noticed some commentary around the TMR hand pieces. And I'm just wondering how is that situation going? And when should or could we expect revenue to be at more normalized levels? 2021, 2022? Any color would be super helpful.

James Patrick Mackin -- Chairman, President, and Chief Executive Officer

Yes. I mean the good news on TMRs, we've gotten clearance from the FDA. So that was obviously the biggest holdup that we had. We're now working with our supplier that supplies us those hand pieces and ramping them back up, which is proving to be somewhat challenging during a pandemic. So I think we'll have better visibility on kind of what that will look like, probably later this year. But we even said when we announced -- we have gotten the approval back, that we weren't expecting anything meaningful until the second half of the year. So we can probably give a better update at the next call.

Destiny Hance -- Ladenburg Thalmann. -- Analyst

Okay. Got it. And then, Ashley, perhaps I missed this. Did you break out preservation services between cardiac and vascular?

David Ashley Lee -- Executive Vice President, Chief Operating Officer, and Chief Financial Officer

We did not. We had indicated in our last conference call that we were going to be combining those into one single line item going forward.

Destiny Hance -- Ladenburg Thalmann. -- Analyst

Okay. For BioGlue in China, what additional testing are they looking for? Are you able to discuss that at any further detail?

James Patrick Mackin -- Chairman, President, and Chief Executive Officer

Yes. We're not going to give that level of detail. Just I mean, this is normal in an approval process that you submit, they ask questions, you submit information, they come back with more questions. This is a normal kind of a back and forth in an approval process. What they've come back with at this point and what they've asked for is testing that's going to take us. It's not -- we're not redoing a clinical trial, but it's both potentially animal and bench top testing that could take more than a couple of quarters, which is why we're saying we don't think we're going to be able to get inside of 2021, but we're not going to get into the details of exactly what the testing requirements are for the Chinese government.

Destiny Hance -- Ladenburg Thalmann. -- Analyst

Got it. Yes, I know the regulatory process there can be a little hard to predict. So I guess any feedback is helpful. I think that does it for me. All my other questions have already been answered.

Operator

We have reached the end of the question-and-answer session. And I will now turn the call back over to Mr. Mackin for closing remarks.

James Patrick Mackin -- Chairman, President, and Chief Executive Officer

Yes. And thanks for joining the call. And as I said, I mean, I think Suraj's question sums it up well. I mean, we're actually very bullish, but for the kind of resurgence of COVID in Europe. We're showing sequential growth in Q2 and we -- hopefully, this is our kind of last kind of COVID quarter, and we can kind of get back to normal in the second half of the year. As I said, we've got a bunch of catalysts that we didn't have in 2020. AMDS, Nexus, E-nside, NEO, E-nya, our investments in Asia Pacific and Latin America as well as our coming right around the corner as our PMAs for PerClot and PROACT mitral. So we're very bullish on the accelerating growth here at the company. And as soon as we can kind of get out of this COVID overhang in Europe and Brazil, I think you'll see the growth improve significantly. So I appreciate your attention on the call and look forward to our next update.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

Brian Johnston -- Analyst

James Patrick Mackin -- Chairman, President, and Chief Executive Officer

David Ashley Lee -- Executive Vice President, Chief Operating Officer, and Chief Financial Officer

David Joshua Saxon -- Needham & Company -- Analyst

Suraj Kalia -- Oppenheimer & Co. -- Analyst

Destiny Hance -- Ladenburg Thalmann. -- Analyst

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