Q2 2020 Vericel Corp Earnings Call
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Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to stand by thank you for your patience.
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At this time, all participants aren't in listen only mode. After the speakers presentation. There will be question and answer session to ask a question during that time you wouldn't be to press Star then the number one on your telephone keypad. Please be advised that today's conference is being recorded if you require any further assistance. Please press star disease.
No.
I would now like to hand, the conference over to your Speaker today, Gerard Michel Deerfield, Chief Financial Officer. Thank you. Please go ahead.
Thank you operator, and good morning, everyone. Welcome to Vericel second quarter 2020 Conference call. This goes for production results before Jim Let me remind you that on todays call. We will be making forward looking statement covered on the private Securities Litigation Reform Act of 1995, and all of our projections and forward looking statement.
Represent our judgment as of today.
These statements may involve risks uncertainties that coal could cause actual results differ from expectations.
Described more fully in our filings with the.
Which are also available on our website.
In addition, all forward looking statements represent our views only as of today and should not be relied upon as representing or.
Any subsequent big.
Please note that a copy of our second quarter financial results press release, it's available I mean Investor Relations section of our website. We also have a short presentation with highlights from today's call that can be viewed directly on the webcast for access on our website.
I will now turn the call over to Vericels, President and Chief Executive Officer Michelangelo.
Thanks, Gerard and good morning, everyone.
In light of the ongoing coping 19 pandemic, we're very pleased with our second quarter results, which exceeded our base case scenario from April across several measures, including revenue profitability and cash utilization.
Total net product revenues for the second quarter were $20 million, including approximately $15 million Macy net revenue in $5 million of Epicel net revenue as will discuss in more detail. So a very strong recovery as the quarter progressed. It could be 19 restrictions on elective surgeries were lifted across the country.
Tree.
Total revenues, which decreased 23% for the quarter declined approximately 78% in April and 32% me compared to the same periods in 2019 and increased approximately 29% June compared to June 2019.
Beginning in March we implemented several measures to ensure that we maintained our near and long term growth opportunities.
That we were in a strong position when we emerge from the initial Cobiz 19 restrictions.
In addition to continuing to manufacture meeting epicel and provide key support to surgeons and patients.
We also implemented appropriate reductions in discretionary spending across the organization in deferred non essential capital expenditures.
These actions allowed us to partially offset the decrease in revenue, thereby minimizing the impact on profitability and importantly allowed us to keep our talented workforce intact to ensure that we maintained operational readiness for what turned out to be a more rapid recovery elective surgeries than originally anticipated.
The reductions in expenditures together with the significant accounts receivable balance entering the quarter allowed us to Minimise cash utilization. We ended the second quarter with approximately $81 million in cash and investments and no debt compared to 70 million $9 million at the end of 2019.
So all in all we were able to deliver a solid financial performance for the second quarter in the midst of a very challenging environment.
In terms of product performance May see had a strong recovery in the quarter in terms of both implants, and importantly, biopsies, a leading indicator of future growth.
We estimate that only about 10% of elective surgical capacity was available in April with approximately 60% available in may and 80% available in June.
Macy implant biopsy volumes generally followed the available surgical capacity in April and May, but we saw strong rebound in implants and biopsies in June.
Macy implants, which declined approximately 84% in April and 37% made compared to the same periods in 2019 increased approximately 21% June.
Based on our historical biopsy conversion rates, we estimate that about a third of Macy volume in June was catch up of deferred cases, while two thirds of the business was from normal patient flow.
Overall, we estimate that nearly 50% of national surgical capacity was offline in the second quarter and 25% was offline in the first half of the year you may see revenue declined only 27% in the second quarter and 5% in the first half of the year.
Likewise will may see biopsies declined approximately 79% in April and 22% in may compared to the same periods in 2019 biopsies increased approximately 23% in June and the growth in biopsies that we saw in June continued through July.
We believe that this strong recovery for me see in outperformance versus available surgical capacity demonstrates not only the strong underlying demand for Macy's the that for a number of reasons Macy's well positioned to resume its growth trajectory. Despite the Kurt Cobain 19 headwinds.
First Macy procedures are performed on an outpatient based basis over 95% of the time in either a hospital outpatient surgery Center.
We're in ambulatory surgical center. So we don't expect me to be significantly impacted by restrictions focused on procedures that utilized inpatient hospital beds.
May see patients are typically young active and otherwise healthy individuals who are less likely to have risk factors associated with coded 19.
And given the symptomatic nature of their injuries, including chronic pain and loss of function. We believe that they are far less likely to deferred treatment compared to patients for other orthopedics procedures.
He also has a favorable reimbursement profile for both surgeons in facilities.
Finally, despite any restrictions on procedures. Our case management team is generally able to mean maintain normal functionality and work with surgeon offices and patients can move cases through the pipeline and scheduler rescheduled cases in a timely manner.
In terms of refilling the pipeline the recovery and biopsies also demonstrates the strong underlying demand for BC importantly, we continue to receive biopsies from new surgeons in the second quarter.
While the absolute number of Biopsying surgeons declined in line with biopsy volume the proportion of biopsies received from new Surgeons remained relatively steady and as I mentioned earlier the growth and biopsies that we saw in June continued through July.
We also saw strong recovery for Epicel in the back half of the second quarter, Epicel graft volume, which declined to 70% in April increased approximately 20% in may through June.
Compared to the same period in 2019, and Epicel biopsies increased approximately 6% in the second quarter compared to the second quarter of 2019.
Overall up sell revenue declined 7% for the quarter, but remains up 8% year to date.
Finally, we announced on June Thirtyth that the biologics license application for Nexobrid for the treatment of severe thermal burns was submitted to the FDA.
Assuming a standard review cycle, we'd expect marketing approval for Nexobrid in June 2021.
We're excited for the opportunity to bring nexobrid to the us market as we believe that it will change the standard of care for patients with severe burns and will significantly expand the addressable market for our burn care franchise.
I'd like to take a moment mounted thank all of our employees for their dedication and efforts and serving our patients and delivering a strong commercial and operational performance in the second quarter and for achieving the nexobrid be allay submission ahead of our internal timeline in the midst of very difficult circumstances.
Looking ahead, while the ongoing uncertainties related to covert 19, preclude us from providing full year guidance, we're confident in fundamental prospects of our business and I'll now share some perspective on our expectations for the third quarter and Gerard will provide additional details in a moment.
First we expect Macy revenue growth in the third quarter of this year over the third quarter of 2019, despite renewed restrictions on elective surgeries being implemented to certain states in regions of the country to date, we've not seen a decline in biopsy or implant activity that would suggest any significant postponement of.
Surgeries in those areas. Many of these restrictions pertain only the inpatient procedures that would utilize hospital beds overnight and therefore generally do not apply to patients treated with macy for the reasons that I mentioned earlier, we believe that Macy's well positioned and that may see patients will be able to receive treatment even in areas with covidien.
Teen outbreaks.
We also expect Epicel revenue in the third quarter to increase sequentially over the second quarter of 2020 into return to recent historical quarterly revenue levels seen prior to the cobot 19 disruptions in the second quarter.
Cobot 19 has created certain challenges in terms of Salesforce access to burn centers, while our reps resented lives can gain access to support cases, there are restrictions on in person sales calls given the high risk patient populations at those centers.
These restrictions obviously could create some headwinds for near term growth as our ability to work through the sales process with new centers, maybe more limited. However, the team's doing a great job working through this challenge is demonstrated by the results in May and June and our stated expectations for the third quarter.
Finally, we expect to receive recognize revenue in the third quarter in connection with that it was first delivery of Nexobrid under the BARDA procurement contract, which is scheduled to take place later this quarter.
I'll now turn the call overdue Gerard to provide more detail on our second quarter financial results in additional details on our expectations moving into third quarter. Thanks, Mick starting with the second quarter results total net product revenues for the quarter ended June Thirtyth, 2020 decreased 23% to $20 million compared to 20.
6.2 million in the second quarter 2019.
Total net product revenues for the quarter included 15.1 million of making that revenue and 4.9 million of Epicel net revenue compared to $20.8 million basing that revenue and 5.3 million of Epicel net revenue respectively in the second quarter of 2019.
Gross profit for the quarter ended June Thirtyth, 2020 was $11.4 million or 57% of net revenues compared to 17.1 million or 66% of revenues for the second quarter of 2019.
Total operating expenses for the quarter were $19.7 million compared to $37.3 million for the same period in 2019, which included $17.5 million upfront license payment to medical and for North America right for Nexobrid, excluding the 17.5 million to our license payment operating expenses.
Remained essentially flat as reductions during discretionary spend and variable cost reductions offset the cost increases associated with the Macy Salesforce expansion earlier this year.
Fairfield net loss for the quarter ended June Thirtyth, 2020 was $8.3 million or 18 cents per share compared to $19.8 million or 45 cents per share for the second quarter in 2019 inclusive of a $17.5 million license payment for Nexobrid.
Non-GAAP adjusted EBITDA loss was $3.5 million for the quarter compared to positive adjusted EBITDA of $1.8 million in the second quarter 2019.
Turning to the third quarter.
We advanced our guidance on our standard biopsy conversion model, which projects and plans based on biopsies received an historical conversion rates and then adjusted the output to take into account key coated 19 related factors.
While biopsies work down 25% in the second quarter June biopsies were up 23% robust trend closer to the underlying organic growth, we expect that prior to opening night team, which as Nick mentioned continued into July.
Although there are fewer biopsies from the second quarter to convert into third quarter can plan. We expect this will be partially offset by the backlog of biopsy, but normally would have converted to implant from first half of year, but didnt do to covert 19 restrictions and willing fed convert in the third quarter.
Overall, we expect 80% of our Q3 volume will come from normal patient flow and approximately 20% of our volume will will be from cash up from the first half of 2020.
A second factor impacting our model is the impact of elective surgery restriction on overall surgical capacity.
As Nick mentioned recent restrictions are more targeted and new one and method had less impact.
I have an impact on may see relative to earlier restrictions, we assume that for the balance of the year. There will be an evolving set of regions and hospital systems, which have targeted restrictions in place, but these restrictions will have only a limited impact on elective surgery capacity, including Macy procedures.
With these assumptions in mind, we expect may see growth through improved from the 23% decline in the second quarter, but at least mid single digit growth for the third quarter, we expect at least a $1 million sequential step up from the second quarter and felt revenue, which represents a returns will be average level. We saw in Q4 2019.
Q1, 2020 prior to covert 19 disruptions in the second quarter.
We also expect to recognize approximately $1 million in revenue and connect with the first delivery by medical and on an existing BARDA procurement contract, which is scheduled to take place later this quarter with another purchase in the fourth quarter at that same level and the remaining purchases spread it across 2021.
Gross margins in the quarter are expected to be at least equivalent to Q1 of this year or approximately 63%.
Operating expenses will absorb a full quarter of a larger macy salesforce and with higher revenue. We will also see proportional increases in our variable SGN expensive leading to an approximate $2 million increase from Q3 relative to Q2.
As of June Thirtyth, we had approximately 81 million buyers of cash and investments, which was down slightly from at the end of the first quarter, but fill up $2 million from the end of 2019.
Looking ahead, we expect net net cash flow to remain relatively neutral for the second half of a year under most scenarios that completes my financial review I'll now turn the call back over demand.
Thanks, Gerard as I mentioned earlier, we're pleased with the second quarter results in light of the current environment and low uncertainties remain we expect our business to further strengthen in the third quarter. We're also looking forward to working with the FDA during the Nexobrid BLE filing in review process as we seek marketing approval for Nexobrid in the us in 2021.
That concludes our prepared remarks as a reminder, the presentation available on our website provides highlights of today's call and now I'd like to terminate.
The operator to open the call to your questions.
As a reminder to ask a question you will need to press Star then the number one on your telephone keypad.
So what's during our question press the pound key please standby, while the compiled acuity roster.
Your first question you from the line of Rhianna Zimmerman with the BTI Jane.
Hey, Thank you thanks for taking the questions. This morning. So I wanted just follow up on the commentary about the third quarter and the patient flow that you expect adding into third quarter. I think Gerard you said about 80% will be normal patient flow and 20% is catch up but I'm. Just curious if you can elaborate a little bit.
On those metrics and kind of how you came to that only because I.
I guess that because the question that people may have is our those 80%.
In any way being made up from patients that just didn't show up necessarily in the second quarter in so to parse out very.
Some of those dynamics in the third quarter in terms of biopsies that we know or loss versus new patients and in those spaces that are being made up.
I'll stop there and legit elaborate.
Sure so.
Yeah.
We have as you know a bit of visibility there into the back end of our pipeline because of the biopsies the comments and if we look at the biopsy that came in handy. Okay that we know we have.
Sitting in liquid nitrogen at the moment.
We can predict how much should have converted.
Very end of the first quarter in the second quarter, we know those that Didnt convert we don't know exactly which one should have converted but at the law of large numbers those that did not convert.
We view that as our catch up pool that we know about alright, and we're predicting that about 20% 20% of third quarter numbers will come from that catch a pull and that will almost fully exhaust not quite the property fully come close to full exhausting VAT catch up tool.
Going forward after that we think the normal biopsy flow in conversion flow, it's going to normalize and therefore looking into the fourth quarter. For example, we think we'll probably 100 just normal for has been slow at about the same growth we're expecting in the third quarter just to give you a little bit of.
Light as to what's going to happen a little later in the year based on the model that we're not assuming that there's a dramatic increase in biopsy catch that we're not looking for a big tidal wave a biopsies to catch up that might happen, we're not baking that into our forecast. We don't think thats Prudence. We think things are going to just kind of get back to normal we'll get a catch up out of the biopsies that already occurred.
And then things are going to kind of gets the more steady state thereafter.
Nick I don't want to add as Eric.
I think it coach as well thanks.
That's very helpful and and just lastly, you talked about.
Surgical capacity I think it was around 10% April 16% may it isn't just what is what do you estimate in for capacity into July.
Yes.
Good question.
We see members all over the place.
90% Nick would you say is where we are roughly I think thats fair I mean, I think obviously the practices are up and running whether they're seeing as many patients as they normally would like the commentary would suggest maybe not quite as many on the other end the patients. They are seeing our you know the symptomatic patients set for instance, in our case are more likely to and.
Moving on to surgery, so it's a bit of moving fluid situation, but I think that sort of accurately captures it.
All right I'll stop there thanks for taking my question.
Thanks Ryan.
Your next question based on the line of Danielle Antalffy fine with Us and CB Leerink.
Hi, Good morning, guys. Thanks, so much for for taking the question and congrats on delivering a pretty good quarter.
Good.
And you're right.
After the pre announcement you sort of cited two things that make their sallie you need in this recovery one of which was the patients are actually young guys. Do you don't have as much of the dynamic patients peering coming to the hospital because.
Because of coal bed, but the other thing was that you have to these patients from that consent perspective, you can track them through the system and I was just wondering how many patients you how consent from at this point in order to follow up with them and help move then through from biopsy to procedure. That's my first.
Okay. So there's two components there one is.
On patient gets a biopsy if they do consent for us to contact them before there's any communication from the physician's office of intent to treat.
Those we can reach out and contact and checking how're you doing you still have pain.
Remind them that we have their biopsy, telling a little bit about may fee. That's one factor. There is another set of patients where the physician's office actually.
Indicated that there was an intent to treat.
And those weaken.
Very much shepherd through the system and those are the ones that we were very rapidly we're able to catch up as we said it will probably going to about 70% or some of those by the end of this quarter.
And then the set that we have consent from that's less of a.
Really the shepherd improve but more and ability to remind them that we have their biopsy or not.
We're not doing very well.
The reps know how many biopsies came for predictor doctors. So they can also follow up directly.
Under compliant.
Matter of course.
But I think that the the patients that were activated that were some indication haven you'd like to look into.
Reimbursement et cetera, those are the ones that we can really get that rescheduled very quickly I think we've done a.
Frankly, the teams and a great job.
Okay. That's great. Thanks for that and then my second question is around Nexobrid and.
Now that that's becoming closer to a reality sort of how you guys are thinking about it.
Revenue contribution perspective, because I will say I would I was thinking more about it leveraging nexobrid beget epicel into more centers, but it sounds like nexobrid itself might be a pretty meaningful product can you talk a little bit about the launch strategy of Nexobrid and also how it will be complementary.
I guess I would say potentially guys sales synergies of Epicel, that's the right way to think about it. Thank you for much.
Yes, Thanks, Danielle will just too.
Just to clarify so there are two components to the revenue.
From Nexobrid. The first one Gerard mentioned that the procurement under the BARDA contract, we expect to recognize revenue starting this third quarter.
And with another order in the fourth quarter and the remainder in 2021, so thats one source of.
Nexobrid revenue and in total that would be about 1 million. This quarter next and then the remaining 3.8 or 9 million next year. So thats one component in terms of.
The commercial contribution revenue contribution from Mexico grid, obviously, we would have done the deal. If we didn't think it could be a substantial contributor to our burn care franchise as I.
I think youve seen in our corporate presentation, we believe the addressable market for Epicel is about 100 plus million dollars and the addressable market for Nexobrid is 200 plus million dollars based on the number of hospitalized patients in the U.S. each year, which is about.
40000, and the numbers of patients, who who might benefit from Nexobrid. So we believe we haven't obviously issued any forecast or guidance around the product, but we certainly believe it could be and will be a meaningful revenue contributor to the company.
Thank you.
Your next question is on the line of Chad Messer with Needham and company.
Great. Thanks, Good morning, Thanks for taking my questions.
Historically sort of pre kobin, what's the timing from NIE to average I know, it's going to vary but meaning lead time from from biopsy too.
Implant in India cases, where you get conversion.
Yes.
It actually is compressed for about a year and a half ago Phil.
Recently, but it's about four it's about four months. So I don't know if it's meaningfully well too soon to start with meaningfully changed peer post kogan, but four month is the medium.
Okay.
That's helpful and then on.
On your Opex guidance, we're going to 2 million.
Obviously, you have some sort of discretionary things you're able to pull back on and as sales go up you'll you'll put those in place.
Would you characterize.
That guidance for up 2 million in Threeq use as a return to a normal run rate or are there.
Other things that may be held back on and or perhaps other seeing.
Better you're playing catch up with.
I think for the for the foreseeable future for the next few quarters I would say about is probably at normal run rate.
There's not a lot of dramatic things to catch up on.
Uh huh.
Thank you and.
Just on Epicel I'm.
I'm trying to understand here I know you referred to.
It's an inability of Salesforce to you know for example access the sites during the cobot locked down but.
It seems from an end user demand level.
Gear burns or that kind of thing.
That would just be less impacted by by Kobin patient that has a very severe burn it needs to be be treated for it.
You can't put that all so maybe try to help me understand.
Is this something to do it the way sales are recognized as a product that's kept on the shelf and they had to restock or how could it be so.
Clinical when in I don't know made maybe people just gotten must accidents during a lock down but how could it be so so cyclical man.
This wouldn't be the kind of procedure that that could be restricted.
Yes, so chat I'll take that one.
Number one.
You know our strategy for Epicel up to 100.
Twentyish burn centers in the us.
Pretty active in the typically around 40, a year. So part of our strategy for Epicel is obviously to broaden and deepen penetration in the burn centers across the country and just to clarify my comment was you know there could be some headwinds around access incentives were not that active now just because.
Sales calls are relatively restricted from a case support standpoint, there's essentially unsaid unfettered.
Access we're at.
We could be at the biopsies, but obviously certainly at the surgeries.
Our clinical support team is there and then during to take down procedures and so on so when it comes to.
Patients, where we have a biopsy and they're moving on to surgery access is not an issue at all would I was referring to is the aspect of our growth strategy in terms of.
Penetration at centers, where epicel had not typically been used and in those cases, it's a little harder to do sort of just cold sales calls.
In this kind of environment. So that was it but obviously we saw great strength from Epicel in May and June there is no backlog of patients with with Epicel for the reasons. You stated that these are critically ill patients and so.
We saw good growth in Q1 up 22% we saw good growth in May and June So we still expect.
Epicel.
To do well going forward.
Yes, I appreciate that clarification I was just wondering if you had any.
Reason why there would have been why there would have any drop off in April for example on was or were there just fewer burn patients or were.
Repeated burn patients being treated it would seem like if you were if you had a severe burn in April we have to treat.
Yes, Chad you actually right if there's a severe burn they have to be treated there are two component or three things going on here. One is there's so much normal variability small numbers than it's ever it's really hard forever us to be definitive about when there's a big spike up or down but the driver was.
Second thing is we did hear from some reps that yes, there are fewer industrial accident. We also heard from other reps. It doesn't seem like the seeing much difference that was hard for us to be definitive answer.
Whether that was the driver now, we certainly couldn't get reps into facilities as friendly as we otherwise.
And the reps are very very important in helping to identify epicel type patients, which patients with most benefit from SFL. So that it's unlikely that didnt have an impact the lack of access whether or not a drop in industrial accident was also big factor or not.
Certainly feasible, but we clearly can't be share sure because we didnt get a consistent feedback from reps orphan surgeons, we talk to.
Okay, Yes, understood I get it smaller numbers probably difficult to pin down.
You know be doing to this in July, but congrats again on positioning yourself well for this recovery.
Alright, thank you.
Your next question is from the line of Kevin Degeeter with Oppenheimer.
Hey, guys. Thanks for taking my questions. This morning.
[noise] Nipping Gerard.
Thanks for the the comments with regard to.
Surgical capacity utilization I guess on are unrelated question are you seeing similar type of seasonal slowdown here in July and August that we typically associated with our travel and vacation for many surgeons.
In short our.
Sorry, just going away at kind of similar rates and does that have any impact on how we should think about seasonality effect here.
I think it's really tough to use pack seasonality patterns.
This year everything's kind of out the window.
Well, what we're seeing we've baked into the guidance that we've shared.
That was going to make that point I had given that obviously, we said we expect revenue to increase this third quarter versus last.
Year third quarter, and I think that.
As dry just mentioned sort of captures all them the dynamics that that we normally take into account.
Got it no fair enough and the follow up on the questions with regard to you.
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Commercial channel for for a burn centers.
Can you just walk us through how you're thinking about.
Yes timing of.
Prelaunch activities for for Nexobrid will those you know begin in earnest really in the new year or should we think about some of those in the second half and.
As you think about a product like like Nexobrid that does have a different.
Hi that selling profile that epicel.
Yes.
In a world, where you're perhaps cove it remains a real issue or particularly the burn center setting.
Yes, how are you thinking about Ah, yes strategies here, perhaps where there's a need to use more remote.
And perhaps even digital sales and marketing and the impact that could have on a go to market strategy for for next spread.
So I'll just start with sort of the commercial activities you know the cadence is pretty.
Pretty standard in terms of you know there's payer.
Development activities brand development activities disease state awareness et cetera, and we've already rolled out the first parts of that which is around disease state awareness interestingly at the meeting. This year, we ended up doing digitally and and actually there was a top five abstract next bridge was one of those.
And that was delivered virtually.
By Dr. Hickerson. So you know things are happening just been in a more virtual world. So our cadence.
We've already begun disease state awareness the brand activities pricing studies.
Payer access development et cetera, we'll all be happening.
In the fall this year and through launches would typically be.
Be the case, so so thats pretty standard.
In terms of yes, it different product, but again these are hospitalized severe burn patients so clearly in our wheelhouse.
There will be a different sort of distribution model where.
Likely to be hospital pharmacy dispensed versus manufactured here and and shipped to the burn centers, but.
These are centers that were in typically anyway.
And I don't think Theres sort of a big Hill decline in terms of our ability to effectively commercialize the product.
And what's a pretty concentrated set of burn centers Gerardo no. If there's anything you want to add to that.
Okay.
Great. Thanks for taking the questions.
Alright, Thanks, Kevin.
Your next question just on the line of Jeffrey Cohen with Ladenburg Thalmann.
Hi, Nixon Gerard how are you.
Oh Delta.
Sure sure Sthree, either one or two touch probably sort of firstly could you talk about the margins a little bit.
You did it go to million better than what we thought for.
For Q2 and.
I guess talk about you produce normalized for which you probably a confirmatory from Q2, and so start back or just kind of literally increase over Q3 Q4 to 21.
Yes, I think we're going to get back.
The margins really.
Obviously are heavily driven by volume.
We gave guidance that we thought.
Our operating margin basis that we see things flex.
Such that there would be kind of a 25%.
Change on the marginal revenue dollar.
Downwards as as volume decline and we're going to see of roughly the same thing.
Going forward going the other direction.
We've guided that we should expect to see margins around 63%.
And this coming quarter.
And then I think that we'll continue to increase I'm really looking past years and look whatever whatever volume revenue number you saw the past years, you can probably use that pickup what what margins you should expect to see going forward on the gross profit line.
On the operating expense side operating margin, yet, but for owner, but an extra about $2 million a quarter now with this full salesforce, but if you kind of plug that in your organic and look at past years to estimate what our operating margin should be.
Okay got it and the second question as far as BARDA goes.
Just like.
The contracts coming earlier.
Your commentary last month I, just wanted to kind of check there are more in line with.
Probably because I'm not sure was your.
Now what we what we said last month earlier.
In the year was that.
No. We are hopeful of things will come in this year, but we asked investors and analysts not to make it into their model because we're not a direct.
Party.
To that contract and we don't want to put.
Put put out statements, but put things the models and we don't have direct control I.
I think metal on metal one has done a phenomenal job managing a relationship with BARDA BARDA.
BARDA had to postpone the procurement for obvious reasons there their hands were rather fall with other matters as we all know.
And I think metal one is managed to get to affirm schedule in place.
With BARDA and we're confident they'll execute on that.
Okay. That's helpful and then lastly from me.
Yes over the.
From a ryan's questions or whether it's just circle around you talked about Q3 Mercier futures in whole or mid single digits that that call. It 10 million or let me move bump in the Macy site pursuant to your.
You're thinking comes from a catch up pool and the percent that's coming in more of a normal expansion with it.
But theoretically.
Catches up with you in Q3, or certainly Q4 as well.
Yes, so that.
Yes, the at least.
Mid single digit growth that we expect to see and makes the over the same period the prior year.
We said that 80% of that we think there's going to be from normal patient flow.
And then 20% of that will be basically patients that were delayed from.
The second quarter, but otherwise should have come in.
Yes, just on the sort of.
Magnitude or absolute dollar value of that I mean, Q3, Macy revenue was I believe around 22.
Point 6 million or something like that and so you know obviously, that's the starting point from last year upon which to bake the increase for Q3 this year.
Sure, but I guess I guess the question is out of the.
The 20 from the pool, how much of the you know pool based on historic So do you think the itself.
I think by the end of the third quarter most of that catch up pool will have been completed right that was Gerard point that you know we expect just based upon sort of biopsies to date through July plus what we expect going forward for Q3 in the remainder of the year.
That we would see sort of a similar level of growth that we're projecting for the third quarter in the fourth quarter and by definition that essentially means that you know the pool is essentially exhausted but.
Okay, and we're back they basically back to back back the more organic growth from normal patient flow.
Yep.
Okay. That's super helpful. Thanks, Nick Ministry.
Okay. Thank you.
Again to ask a question. Please press Star then the number one.
Your next question based on the line of that flying them tackling Rama kind with H.C. Wainwright.
Okay. Thank you and good morning.
Nick and.
Most of my questions have been answered, but a couple of them.
On the episode growth for the third quarter, that's your stating a book and million dollars. So so.
Increase what.
I'm, just trying to understand the confidence behind that behind that that so good.
Yes on million dollar increase over Q2, a bit of this year.
And you know what.
The company, we all know that Epicel.
It's highly variable in it.
Frustrating for anyone trying to put models out.
But what we're looking at is orders in hand, and biopsies in hand, and then obviously, we need to make certain assumptions about you know it's one one variable that really of fat variable is you know it's hard to predict how many patients will pass away before they can be treated but we kind of take an average number there and then we pick a middle the road number for the back ended the quarter, Chris We just don't have.
That visibility to very ended the quarter.
So we're using the fact that hand, and then plugging kind of average rates for the back end of the quarter.
That's how we do it.
Okay.
Okay.
[laughter].
That's helpful.
We're talking about suddenly assemblage.
Could you give us the the person dates changing biopsy commotion come and see that you saw in the second quarter list as the first quarter.
It's a very good question and.
It's a difficult question to answer because conversion rates really are we don't know what the conversion rate is for any particular quarter to were about two years past. It yes. The cohorts have to age over time now we looked at the model.
What happened this conversion rates or all the different quarters in the back that the path. They all drop somewhat but good implants for an occurring.
Catchup occur as they pop up a bit now.
You know for any particular cohort it might be a few percentage points down that a few percentage points up.
Overall, putting aside this coated world they haven't moved very much in the last couple of years.
But yeah they've dropped.
Maybe three or four percentage points in the quarter, and then and then pop and right right back up for the recovery, but that'll be a temporary dynamic, but I think again by the time to get to the fourth quarter will have worked its way through.
Okay. So that's the symptom is.
No question.
You you seem to have almost three quarters, but when you buy them. It with a sense that you know you have an ideal for the third quarter looking so what's the hesitancy in I'm talking for that yet itself.
Well, that's simple none of us know, what the future halt and I think.
Yeah.
Could it come October could we find out about we're right back close to where we were.
In April I don't think so, but it's certainly not outside the realm of profitability.
And so we don't want to.
Put forward a degree of confidence in the future that I don't think anybody should have at this point.
I think we're very confident in the fundamentals of our business, we can't control the overall environment out there and as we all know that can kind of change on a dime.
Pretty much it.
But thank you Doug thanks.
To folks so.
Yeah, No further questions I will turn the call back over to the speakers for any closing remarks.
Great well, thanks, again, I just want to thank everybody for joining us this morning.
For your questions and for your continued interest in supporting the company. So.
Stay safe and have a great day. Thanks.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participating you may now disconnect.
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