Q4 2019 Earnings Call
Please standby.
Afternoon, ladies and gentlemen, and welcome to the fourth quarter 2019 earnings Conference call for organic Genesis Holdings, Inc.
This time, all participants had been placed and I'll listen only mode. Please on this conference call is being recorded and after recording will be available on the company's website for replay shortly.
Before we begin I would like to remind everyone that remarks today may contain forward looking statements that are based on the current expectations management and involve inherent risks and uncertainties that could cause actual results could differ materially from those indicated including there was gonna started he described in the company's filing with the Securities Exchange Commission, including our them one a risk factors at the company.
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10-K for the year ending December 31st 2019, which was filed this afternoon.
You are cautioned not to place undue reliance upon any forward looking statements.
Speak only as of the date night, although it is me voluntary do so from time to time the comedy undertakes no commitment to update or revise the forward looking statements, whether as a result of new information rather than or otherwise, except as required by applicable securities laws.
This call will also include references to certain financial measures that are not calculated in accordance with the generally accepted accounting principles or gap, which only refer to these as non-GAAP financial measures.
We conciliations out those non-GAAP financial measures to the most comparable measures calculated and present in accordance with the gap are available in the earnings press release on investors relations.
Now the website.
I would like general turn the conference over to Mr., Gary asking any senior.
Cannot Genesis Holdings, President and Chief Executive Officer, Sir you may begin.
Thank you and welcome everyone to Organogenesis Holdings fourth quarter 2019 earnings Conference call I'm joined on the call today by Tim Cunningham, Our Chief Financial Officer.
Let me start with a brief agenda or what will be covering during our prepared remarks today.
I'll start off with a high level overview of our revenue performance in the fourth quarter in fiscal year 2019.
After my remarks, Tim will provide you with a more in depth review of our quarterly and fiscal year financial results as well as an overview of our financial guidance for 2020, which we introduced today in our earnings press release.
Following Tim's discussion of our financial results and outlook I will then she has some thoughts on why we believe we're well positioned for solid long term growth in 2020, M. beyond and then we'll open it up for questions.
Our performance through 29 team has been very strong in our revenue on financial results reflect the solid execution of our commercial and operating strategies. This year. Our total revenue increased 35% in 2019, our gross profit increased 48% and.
And we reported strong improvements in profitability with our operating loss in our adjusted EBITDA loss, decreasing 43, and 50% respectively year over year.
Turning to or a review of the fourth quarter revenue performance, we reported total revenue growth of 17% year over year in the fourth quarter.
Driven by sales of our advanced wound care products of 16% and sales growth of our surgical and sports medicine products of 25% growth year over year.
We were pleased to deliver Q4 growth above the high end of the guidance range provided on our third quarter call in our fourth quarter performance was a strong finish two year, where we delivered better than expected drove an increase the midpoint of our full year guidance range in each quarter of 2019 offers here as a public company.
Our fourth quarter revenue growth performance reflects the continuation of the key drivers of our growth growth throughout 2019, the most important of which are the investments that we've made an expanding our salesforce over the last 24 months, where we've increased our direct sales team from approximately 190 at the end of two.
2017.
To approximately 265 at the end of.
2019, an increase of 39% over this period.
We've also expanded the number of independent agencies, we are working with and the surgical and sports medicine market to approximately 160 as at the end of 2019 up 78% from the end of 2017.
Sales of our pure apply products were key driver of growth again, this quarter with sales of 39.9 million compared to 28.5 million in Q4 last year or an increase of 11.4 million or 40% year over year, and we continue to leverage the strong demand for pure applied by growing the number a pure play customers.
In driving customer and clinician adoption deeper into existing per apply account.
We also continue to expand the number of organogenesis products our customers are purchasing.
Fourth quarter total revenue growth has also benefited from the sales of our commercially available amniotic products, which increased 21% year over year against a difficult growth comparison in the prior year period.
Our advanced wound care revenue increased 16% year over year in the fourth quarter. This growth is notable given the headwind from affinity being off the market specifically if you exclude the sales of affinity from Q4 2018, our fourth quarter advanced wound care growth would've been 28% year over year.
We also reported stronger than expected revenue growth in our surgical and sports medicine, this quarter, delivering 25% growth year over year more than double the rate of growth then the midpoint of our guidance heading into the quarter. This strong growth was fueled by our portfolio of differentiated orthobiologic products, including new cell for both.
Any fusion in the spine and extremities and new she'll for tendon and ligament and other soft tissue injuries and as expected new she'll sales benefited from the improved capacity, we discussed on our third quarter call surgical and sports medicine growth. In Q4 also benefited from a significant investment we've made in a number of independent agent.
Sees over the last two years and this investment continues to pay dividends in driving significant revenue growth and increasing our overall market share.
And with that let me turn the call over December to review, our financial results in the fourth quarter in fiscal year 2019, as well as more detailed review of our 2020 guys Tim.
Thank you Gary I will begin with review of our fourth quarter financial results.
Unless otherwise specified all growth rates referenced are my prepared remarks on a year over year basis.
Revenue for the fourth quarter of 2019.
74.6 million compared to 63.6 million for the fourth quarter of 2018, an increase of 11 million or 17%.
Fourth quarter revenue results came in above the high end of the guidance range provided on our third quarter earnings call.
Revenue from advanced wound care products for the fourth quarter 2019 was 63.4 million.
Compared to revenue of 54.6 million for the fourth quarter of 2018, an increase of 8.8 million or 16%.
The increase in advanced wound care.
Net revenue was primarily attributable to additional sales personnel.
Sure apply regaining pass through reimbursement status for the two year period effective October Onest 2018.
And the continued growth in the adoption of our amniotic products. Despite the suspension of affinity sales beginning in the first quarter of 2019.
Revenue from advanced wound care products represented 85% of total revenue in the fourth quarter of 2019 compared to 86% of total revenue in the prior year period.
Revenue from surgical sports medicine products for the fourth quarter of 2019 was 11.3 million.
Compared to 9 million for the fourth quarter of 2018, an increase of 2.3 million or 25%.
The increase in surgical sports Medicine revenue was primarily due to the expansion of our salesforce and penetration of new and existing customer accounts.
Revenue from surgical sports medicine products represented 15% of total revenue in the fourth quarter compared to 14% of tone total revenue in the prior year period.
Revenue from pure applied products for the fourth quarter of 2019 was 39.9 million compared to 28.5 million in the fourth quarter of 2018, an increase of 11.4 million of 40%.
Revenue from pure pipe from pure applied products represented approximately 53% of total revenue in the fourth quarter of 2019 compared to 45% of total revenues fourth quarter of 2018.
As of December 30, Onest 2019, we had approximately 265 direct sales representatives compared to 215, our year end 2018.
And approximately 160 independent agencies compared to 130 at year end 2018.
Gross profit for the fourth quarter 2019, with 54.3 million compared to 46.1 million for the fourth quarter of 2018 and increase of 8.2 million or 18% growth.
Gross profit margin for the fourth quarter of 2019 was 73% of revenue.
Appeared to 72% for the fourth quarter 2018.
The improvement in gross profit margin resulted primarily from a more favorable product mix in the fourth quarter of 2019 and volume based manufacturing efficiencies.
Operating expenses for the fourth quarter of 2019 were 56 million.
50, 50.6 million for the fourth quarter of 2018, an increase of 5.4 million or 11%.
The increase in operating expenses in the fourth quarter of 2019 as compared to the fourth quarter of 2018, Vice driven primarily by higher selling general and administrative expenses, which increased to 52.4 million compared to 47.5 million in the fourth quarter of 2018, an increase of four point.
9 million or 10%.
The increase in selling general and administrative expenses is primarily due to.
Additional headcount mainly hiring in our direct salesforce.
Higher sales commissions as a result of higher revenue.
And increased marketing and promotional expenses for our products.
R&D expenses for the fourth quarter of 2019 with 3.6 million.
Compared to 3.1 million in the fourth quarter 2018, an increase of point $5 million or 18%.
The increase was primarily due to additional headcount investment at clinical programs and our product pipeline.
Operating loss for the fourth quarter of 2019 was 1.8 million compared to an operating loss of 4.5 million for the fourth quarter 2018, a decrease of 2.7 million or 61%.
The improvement in operating loss in the fourth quarter 2019 was driven by the combination of 18% increase in gross profit and only an 11% increase in operating expenses compared to the prior year period.
Total other expenses net for the fourth quarter of 2019 were 2.6 million.
Compared to 4.8 million for the fourth quarter of 2018.
Decrease of 2.2 million or 45%.
The largest driver of the decrease in total other expenses was 2.1 million noncash loss on the extinguishment of debt related to the write off of unamortized debt issuance costs upon repayment of affiliate debt, which impacted the fourth quarter of 2018.
Results, but did not impact our results in the fourth quarter of 2019.
Net loss for the fourth quarter of 2019 was 4.4 million.
Four cents per share compared to net loss 9.3 million or 12 cents per share for the fourth quarter of 2018, a decrease of 4.9 million a 52%.
The adjusted EBITDA income for the fourth quarter of 2019 was 836000 compared to an adjusted EBITDA loss of 133000 for the fourth quarter of 2018.
We have provided a full reconciliation of our adjusted EBITDA results in our earnings release form 8-K, and form 10-K, all of which were filed with the Securities and Exchange Commission. This afternoon.
Turning to a brief summary of our fiscal year results.
Specifically for the 12 months ended December 30, Onest 2019.
Revenue for fiscal 2019 was 261 million compared to 193.4 million for fiscal year 2018, an increase of 67.5 billion or 35%.
Revenue from advanced wound care products in fiscal year, 2019, which 220.7 million compared to revenue of 164.3 million.
Fiscal year 2018, an increase of 56.4 million of 34%.
Revenue from advanced wound care products represented 85% of total revenue for fiscal year 2019, consistent with the prior year period.
Revenue from surgical sports medicine products at fiscal year, 2019 was 40.2 million.
Compared to 29.1 million for fiscal year 2018, an increase of 11.1 million a 38%.
Revenue for surgical sports medicine products represented 15% of total revenue for 2019 consistent with the prior year period.
Revenue from pure pure applied products in fiscal year, 2019 was $126.8 million compared to 69.8 million for fiscal year, 2018, and increase of 57 million or 82%.
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Revenue from pure applied products represented approximately 49% of total revenue in fiscal year 2019, compared to 36% of total revenue fiscal year 2018.
Gross profit fiscal year 2019 was 185 million.
Compared to 124.6 million for fiscal year, 2018, an increase of 60.4 million or 48%.
Gross profit profit margin for fiscal year, 2019 was 71% of revenue.
Great to 64% of revenue for fiscal year 2018.
Operating loss of fiscal year, 2019 was $29.5 billion compared to an operating loss at 51.6 million for fiscal year 18, a decrease of 22.1 million a 43% decrease in operating loss in fiscal year 2019 was driven by strong operating leverage as gross profit increase.
48%, partially offset by operating expenses these increasing 22%.
Total other expenses net for fiscal year, 2019 were 10.8 million compared to 13.2 million for fiscal year 2018, a decrease of 2.3 million or 18%.
Net loss for fiscal 2019 was 40.5 million a 44 cents a share compared to a net loss of 64.8 million a 94 cents a share for fiscal year 18, a decrease of 24.4 million or 38%.
Adjusted EBITDA loss of fiscal year, 2019 was 18.2 million compared to an adjusted EBITDA loss of 36.2 million for fiscal year, 2818, a decrease of 18 million or or 50%.
Turning to the balance sheet.
As of December 30, Onest 2019, the company had 60.2 million, a cash and 100.6 million a debt obligations of which 17.5 million were capital lease obligations compared to 21.3 million a cash at 59.3 million a debt obligations.
Of which 17.7 million were capital lease obligations as of December 31, 2018.
The net change in cash of approximately 39 million for the 12 months ended December 30 Onest.
2019 was driven by 78.7 million of cash provided by financing activities.
Offset by 33.5 billion of cash used in operating activities and $6.2 million of cash used in investing activities during the period.
Turning to review of our 2020 revenue guidance, which we introduced in our earnings released this afternoon.
For the 12 months ended December 30, Onest Twentytwenty the company expects net revenue of between 273 million and 277 million representing growth at the midpoint of the range of approximately 5% year over year.
The 2020 net revenue range assumes revenue for advanced wound care products of the between 229 million at 231 million representing growth at the midpoint of arranged properly approximately 4% year over year.
Revenue for the surgical sports medicine products of between 44 million and 46 million representing growth at the midpoint of the range of approximately 12% year over year.
Revenue from the sale of our pure pipe products of between 118 million and 120 million.
Representing an eight representing a decline at the midpoint of the range of approximately 6% year over year.
In addition to the formal revenue guidance, we introduced in this afternoon's press release, we would also like to provide a few additional considerations would evaluate when evaluating our growth expectations for fiscal year Twentytwenty.
First the largest contributor to our total company net revenue growth in fiscal year, Twentytwenty will be sales of our amnion products, which we expect to grow approximately 25% year over year.
Sales of any on products represent approximately 23% of revenue in 2019.
It's approximately 25% growth expected Twentytwenty, we expect amnion products will represent approximately 27% of total company net revenue in fiscal year Twentytwenty.
Second we expect sales of our remaining non pure apply non amnion products, which we collectively call pmeight and other to increase nine approximately 9% year over year.
Sales of Pmeight and other products represented approximately 28% of revenue fiscal 19.
And with approximately 9% growth expected in 2020, we expect that Pmeight other products will represent approximately 29% of total company net revenue for fiscal year 2020.
Third the midpoint of our fiscal year 2020, net revenue guidance is assumes pure applied sales decline approximately 6% this year, which reflects our expectation that pure applies sales increased 10% to 12% year over year for the first nine months of 2020.
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And decrease approximately 40% to 45% year over year in the fourth quarter of Twentytwenty. Following the transition to the high cost bundle beginning on October Onest Twentytwenty.
Fourth I'd like to remind investors that our business experienced a significant quarterly seasonality each year with Q1, Q4, representing our smallest and largest revenue quarters respectively.
Over the last three years, our first quarters revenues have ranged from approximately 18% to 22% of total annual revenue.
We're twentytwenty, we expect Fercs first quarter revenue to represent approximately 21% to 22% of full year Twentytwenty net revenue.
Finally, as if we have done following our quarterly earnings reports over the last year, we filed our updated investor presentation. Prior form 8-K. This afternoon.
This version of the corporate presentation includes our updated financial targets for the periods of 2018 through 2021.
And from 2022, and beyond which we've referred to as the and term and longer term periods respectively.
One of the items I would like to call out specifically is our expectations for revenue growth during the interim period, which is a CAGR in a low teens over this three year period.
We are confident in our ability to drive this cagar and while we're not giving formal guidance for 2021 on today's call.
We thought it would be helpful to share some key assumptions supporting low teens CAGR.
Target.
So for illustrative purposes.
Starting with a base year fiscal year 2018 to revenue of approximately $193 million are 13% growth Cagar would imply revenue of approximately 280 million in 2021.
This 280 million would imply CAGR of roughly 14% for sales of non pure applied products roughly 11% for sales of purified products over the period.
The low teens growth CAGR, we expect over the interim period will be driven primarily by sales of non sure apply products led by our strong portfolio of amnion products were solid growth coming from our Pmeight and other products as well important importantly, this illustrated.
Example shows that sales applied products will contribute meaningful to our total company growth over this period, where we expect an 11% CAGR, which includes the impact of pure apply transitioning to the high cost bango beginning in the fourth quarter of Twentytwenty.
With that I'll turn the call back over to Gary Gary.
Yes, Thanks, Tim.
And as I mentioned 2019 was a very productive year for organogenesis.
And it was the direct result of the hard work and strong execution of our team.
Our focus commercial strategy resulted in 35% revenue growth this year, driven by a strong adoption and utilization of our comprehensive and differentiated product portfolio and solutions for both advanced wound care and our surgical sports medicine market.
We've also made notable progress towards our goal of continuing to develop our new product pipeline enhancing our portfolio of clinical evidence and to improve our overall profitability profile.
As we look forward to fiscal 2020, we're very confident in our ability to continue to drive strong performance.
2020 revenue guidance calls for growth of 5% to 6% over the next year. Despite the anticipated headwinds from pure applies transitioned into the high cost bundle in the fourth quarter.
Total revenue company revenue growth will be driven primarily by strong sales of our portfolio of non pure applied products, which together, we expect will increase approximately 16% in 2020, we expect our amnion products to drive the majority of this growth, but we also expect solid growth from RPM and other products as well.
With respect to pure apply specifically our guidance for the year calls for sales to decline approximately 6% pipe, primarily driven by lower ASP for the products sold in the hospital outpatient setting beginning in Q4 importantly, we believe we're better positioned to navigate the transition to the high cost bundling.
For 2020 compared to impure apply last transition to the high cost bundle in the first quarter of 2018, we have a targeted commercial strategy informed by the value valuable experience from 2018 and more importantly, the profile of organogenesis is significantly different than it was at the end of 2017, including.
Both our pure applied business and the multiple drivers of growth we have in the rest of our business.
With respect to how our pure apply businesses different today, we have leveraged pure applies reimbursement status over the last two years by growing the number of pure apply customers driving customer and clinician adoption deeper into the existing pure apply accounts and we've also continue to expand the number of organogenesis products are pure apply customers per.
Yes.
We now offer more pure applied products in line extensions at prices that are below the high cost bundle amount.
And with planned new products in line extensions over the first nine months of 2020, we expect to be even better position with our offerings by Q4 of this year.
We have a strong portfolio of club clinical evidence comprised of three clinical publications today five more publications expected in the next 12 months.
None of which were available to support our sales efforts with clinicians the last time the product came off pass through.
And perhaps most importantly, we have significantly increased the percentage of a pure applied business serving customers outside of the hospital outpatient channel primarily as a result of our execution of our office based strategy in the clinical benefit benefits of our product.
We've also have a significantly larger direct salesforce, which totaled 265 direct sales reps at the end of 2019 compared to 190 at the end of 2017, which we expect to drive strong sales across our entire portfolio of products.
We also expect to benefit from the contributions of a larger distribution infrastructure and our sales in sports Medicine business, where we ended 2019 with approximately 160 independent agencies compared to just 90 at the end of 2017.
And finally.
Use me as it relates to other levers of incremental growth in 2020, specifically, we expect contributions from the sales of affinity when that product reentered the market by the end of the second quarter of 2020.
In summary, we are confident in our ability to drive solid growth performance in 2020 and beyond.
We have a strong commercial strategy and our continued success in executing the strategy will result in strong adoption and utilization of our product solutions for the advanced wound care and surgical sports medicine markets.
In addition, the strong commercial execution, our strategic growth plan also prioritize the areas of operational progress continued development of our new product pipeline and improvement of our profitability profile.
Importantly, we are committed to delivering on our mission to provide integrated healing solutions that substantially improve medical outcomes, while lowering the overall cost of care and we look forward to speaking with the investment community in the future and we appreciate your interest in organogenesis.
With that operator ill turn it back to you.
Thank you Sir.
If you like to ask a question. Please signal by pressing star one on your telephone keypad isn't a speaker phone. Please make sure. Your mute function is turned off to allow you stainless recharged equipment.
We do assets you limit yourself to one question and one follow up.
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For our question first question will come from Matt Miksic.
Credit Suisse. Your line is open.
Hey, good afternoon, thanks for taking the questions.
Hey, Matt.
Right so.
So nice job on the getting to the high end range and.
Helpful Guide and color for 2020.
Gary I was wondering if you could maybe flush out some of the comments you made about.
And I guess this plays into your thinking on the trends for pure applied for 2020, but the line extensions you mentioned some of which are placed into low cost bundle.
Would you be implemented over the next few quarters, just that strategy and how you see that.
Really helping to soften the blow of the pass through.
Changes in the back half of the year and then.
A follow up.
Sure.
Fortunately the overall business of the pure play brand is just stronger being on the market for five years.
Significant clinical adoption now a lot more clinical.
Information and data is available so we've added north of 20% of new pure apply accounts same store sales of the pure apply customers have increased over 17% and we're seeing and this is part of our portfolio strategy that sales of our non pure.
Apply products to our pure apply customers have increased close to 30%. So as we continue to expand our portfolio with line extensions and additional sizes are under the bundle. We expect that that the product will continue to sell well in all sites of care.
So when we first came off pass through we had virtually no clinical data we expect to have eight clinical publications by the time, we come off a pass through which we only had one size of pure apply in the office, which is a major focus for us with pure apply will have five sizes for that office.
That will be size than priced appropriately reimbursement in the office space setting will be improved when we come off pass through this time than last time, and we do have those line extensions.
Pure apply XT.
We also have affinity coming back online, which is a major component.
Of our amnion strategy will which will help absorb some of the pure apply ASP decline and we have pure for us and later in 2021, we have transacted. So the brand itself is stronger it's well positioned and the additional products that that I just mentioned will also help.
Sure and just to maybe.
I understand is it.
Those products and I don't know is 60 or some of these others on occurs cc per square centimeter bases will fit into an economic.
Slot that works for these centers, whereas if you were for example, we continue to price all of these lines no matter whats the size or.
The current price per square centimeter that it would for some of those some of those accounts.
Move away from using pure play in a given case or.
Or to come to you and look for a much bigger price concessions.
That is that kind of in a high levels sort of some of the strategy that you're describing.
It is in the outpatient center for sure.
Those additional sizes in prices that I mentioned.
We will fit under the bundle, but what's also helpful is in the office based setting where pass through you know is not impacted that's ASP plus six the products in the sizes are also priced appropriately.
So the value proposition in the office is also better than it was last time. So you have both of those dynamics, but yes, our products fit in both.
That's helpful and it's complex strategy I appreciate the color and then the follow up just was on some of the.
The amnion products, so new shield.
And I apologize if I missed it but just your.
Where do you want comes to supply there.
And sort of what steps and hoops hurdles, you need to sort of get through too.
Sort of get get affinity capacity to where you want it to beat it back in the market at the end of Q2.
Sure I'll start with new shield. So we solve the new she'll capacity issue right at the end of Q3 and has been building inventory and we have significant number of months of inventory today. So new shield is back at full capacity and we now have our entire salesforce selling new shield.
Which was not the case in the first half last year regarding affinity we do have our new manufacturer.
In Tampa validated and is doing.
Providing runs.
As we speak so were very confident that by Q2, and we expect to be ramped up by the end of Q2 from a capacity standpoint, and then we'll launch and expect to get to historical run rates of affinity by Q4, but we're feeling very confident in our affinity manufacturing.
Situation right now.
Thank you. Our next question comes from Richard Newitter.
SVB Leerink your line is open.
Hi, Thanks for taking the question hi, Thanks for taking the questions.
Just.
In two on the on your longer term guidance chart.
The update rather to the to the interim and longer term I guess on the interim.
First.
Because it's a CAGR on the revenue side when you say adjusted EBITDA margin single digit percent loss, how are we supposed to interpret that.
On on a percent basis for each of the each of the years.
Tim you want to handle that.
Yes, yes.
So the way I would interpret that rich, we're not giving formal guidance for 2021 I think if you look at.
You know, what we're seeing a single digit loss.
I'd point you are.
Right by the end of the three year period, 2021 will be half of what last year. So 2009 human loss 18, if you do the math will be so sub.
10 million on a loss.
On a on a dollar basis.
That's right yeah.
In 2021, Okay, and then and then we ramp that got it so single digit percent losses as kind of a target for 2021, and that's kind of how we should look at the percentages as R&D as a percentage revenue as gene as a percent of revenue by 2021, Thats, how we should interpret that yes yep. Okay helpful.
And then just 2022 plus the long term goal.
That's also something that obviously you don't hit in 2022, correct. This is something that.
Sometime after 2022, you aspire to get to correct.
Yes, I mean that we update this model every quarter pretty much. So you know as we get closer that will get a little bit more refinement, but I'd say given its to begin to your 2020, it's more our aspiration of our goal where we're going to get the company too.
And.
You know, it's our longer term model works from longer term for us starts in 2022.
Thank you. Our next question comes from Ryan Zimmerman of be TRG. Your line is open.
Great can you guys hear me okay.
Yes.
Alright, Congrats hi, congrats on the quarter and then appreciate all the commentary for 2020, just a follow up on Matts earlier question on the components of guidance.
Yes, the pierpoint economics are certainly.
Claire.
On the other products, particularly with Abney X. I think Matt was talking about as you talked about a little bit carry on new Sheldon an affinity but on the pmeight and other products can you just give us a little more color on kind of what those drivers are maybe at a product level that you're thinking about for 2020 that certainly helps you get to achieve here. Your 2020 guidance and then I will follow.
Thank you.
Sure I'll start and then Tim you can can jump in with some of the.
The actual numbers, so RPM a products and grow as the general market grows and as our commercial infrastructure grows. So fortunately, our PVA products Apligraf and Dermagraft, specifically have commercial insurance coverage with over 1500 commercial payers and then.
The Doctor office, that's an extremely valuable asset to have so as we get a stronger reach in the office and as the market expands generally those products grow very nicely with the market in our commercial expansion. So they're strong support for our growth.
They also anchor a lot of our customers as well we have a significant number of our customers that by more than one of our products and many times.
May products or the anchors to those customer accounts, so Tim I don't know if there's any more color you can add sure.
I mean that the fair revenue components from a product perspective in that Brian our APA graph dermagraph.
Matrix and pure force.
Apple gravity helpful. Thanks, APA graphs, the biggest component Dermagraft second biggest today for this year.
In that bucket.
That's very helpful. I appreciate that and then Gary.
No no one's asked about the wound care market dynamics that I'd love to just step back for a second.
There's multiple players in the space.
I'd love to get your sense for kind of where some of your competitors are at an what you're seeing and and just overall market growth rates I think would be very helpful for everyone. Thank you.
Sure I.
I mean, we're seeing the overall advanced wound care market growing in the 6% to 7% range.
Some estimates are a little higher the skin substitute sub segment that we plan.
Is growing double digit as well around 10% historically has grown about 15%.
So we're still seeing that growth in enjoying that growth.
For us what's interesting is if you if you look at the advanced wound care market about 17% represent the biologics space, where skin substitutes play.
About 54% or more the advanced dressings and Antimicrobials.
Hydrocolloids and others, what we're seeing is that our pure apply product, which is obviously a skin substitute is starting to eat into that market as well, which is helping to drive.
Our growth so we're still very excited about the market and its growth.
If you look at these dynamics within the market, we still haven't seen much of a change as a result of some of the consolidation in some of the other issues that have going on in the market.
We're starting to see a little bit more on messaging an advertising from one of our competitors, but we're not seeing a large commercial investment feed on the ground. We're not seeing strong commercial date excuse me clinical data coming out for any products that have been recently announced.
So we're feeling pretty comfortable with the market right now.
Thank you I gave you like to ask a question. Please press Star then one telephone keypad.
Our next question comes Steven Lichtman.
Oppenheimer and company your line is open.
Thank you hi, guys.
Yes.
Gary you you've you provided a lot of detail relative to pure apply in the work you guys have done.
Q2 softened.
After pass through goes away I'm wondering.
How you're thinking about how that franchise will grow after we anniversary the pass through going away going away and I understand you're not giving 21 guidance, but just generally how you think about the potential there over the medium and long term.
Sure.
Well pure apply still has a long way to go as it relates to market penetration on the beauty of the product as well and that is available from from head to toe.
The product indicated for all wounds, except third degree Burns. So we see the product continuing to grow double digit.
Once we get past this pass through decline and were working off of a similar normalized basis, but it will be a double digit grow or for the foreseeable future. If you think about pure apply you know there's so many additional physician specialties that have been.
Exposed to the product.
So I mean, we see pure apply used.
Most surgery on the crown of the Skoal.
As well as the bottom of the foot for DFE you. So the market for that product is significantly different.
Than it is for some of the other skin substitute.
Great. Thanks, and then just secondly, obviously in 2019 you.
Spanned adult the salesforce and distributor relationships significantly as as you think about.
2020 strategically it will that be it will this be another year of doing that or will we see you transition I know in your slide deck, you talk about pursuing.
Today and in licensing will we see that the slowdown in terms of the addition on this Pete on the street in more for you guys looking to put more product in the bag.
Well I, both actually we expect to expand our direct salesforce again in 2020.
Our goal is to get.
300 to 310.
Is where we expect to be and yes, we have several potential.
The acquisition of products that we would like to add to the bag. We we don't have anything finalized, but we're looking at several opportunities and want to continue to expand the product portfolio and if you think about some of the other additional pipeline products, we have like translate which is a burn product.
When we launched our product we'd also be launching a burn franchise. So we won't be the only product that we would like to have in the bag. So if we're going to enter that market, we want to enter that market in a very strong.
Fashion and with some diversification in the portfolio. So we certainly want to add more products to the bag as we do want to add more reps on the street.
Thank you that does conclude a conference for today. Thank you for your participation.
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