Q2 2020 Establishment Labs Holdings Inc Earnings Call
Good afternoon, welcome to establishment lab second quarter 2020 earnings call. At this time, all participants will be in listen only mode. At the end of this call will open line for question answer session and instructions will follow at that time I would now I'll turn the call over to David Erickson, Vice President Investor Relations. Please.
Go ahead.
Thank you operator, and thank you everyone for joining us.
With me today, our Juan Jose <unk>, our Chief Executive Officer, and Rene Guy at our Chief Financial Officer.
Following their prepared remarks, we'll take your questions.
Before we begin I would like to remind you that comments made by management. During this call will include forward looking statements within the meaning of federal Securities laws.
These include statements on establishment labs financial outlook, and the company's plans and timing for product development and sales.
These forward looking statements involve material risks and uncertainties and the company's actual results may differ materially.
For a discussion of risk factors I encourage you to review our quarterly report on form 10-Q that we plan to file with the FCC Tomorrow and will be available on our website at establishment labs Dot com.
The content of this conference call contains time sensitive information.
You would only as of the data this live broadcast August six 2020.
Except as required by law establishment labs undertakes no obligation to revise or otherwise update any statement to reflect events or circumstances. After the date of this call.
With that it's my pleasure turn the call over to our CEO Juan Jose.
Thank you David and good afternoon, everyone.
I hope everyone is healthy and continues to remain safe.
I would specially like to acknowledge the employees.
Stat Lishman labs in our business partners worldwide.
Thank them for their hard work and dedication to our company during these difficult times.
It could be 19th endemic has impacted businesses around the world and ours is no exception.
As I stated on her last earnings call. This past quarter would be our most challenging of the year.
And it certainly prove to be that.
For the second quarter revenues were $10.5 million well below the 21.7 million reported in the same period a year ago.
Despite this tough quarter I am pleased to report that our business is recovering with the strength and resilience than we had hoped for.
And that we are issuing revenue guidance for the third quarter, which we believe will be between 18 and $21 million.
Equally important as a revenue in guidance.
As the condition of our business as we recover from the affects of could lead 19.
But to say that are a company isn't strong shape key regulatory approvals underway and we believe that we are on the trajectory to achieve pre pandemic growth.
We have taken this time to address budgets in headcount in a very meaningful way in the result is that we are doing more with less and have created efficiencies that should benefit us for many years to come.
During the second quarter, we use just $6.1 million to fund operations, giving us a cash position at June thirtyth of $86.4 million.
This puts us in the strong financial shape and gives us continued flexibility to manage your business going forward.
Which sales in the over 80 countries, we benefit from our geographic diversity. However, the effect of a global events such as this one means we are also subject to 80 different paths in speeds toward normalcy.
Generally speaking countries that face could feed earliest and dose we took aggressive steps to control the spread came back more quickly. Although some geographies have had to temporarily pause there full reopening.
Encouragingly, we saw improvement throughout the quarter increasingly in July as countries began to reopen shelter Im pleased restrictions were lifted elective procedures were seeing in various regions around the world as we reported last quarter for March sales were mesh will be impacted my could be night.
Team that's countries began to curtail non essential activities, including elective medical procedures in April most countries were shut down completely with only a handful of countries like Sweden, Germany, and Austria, continuing to perform surgeries at levels well below normal South Korea.
It was one of first markets to restart, but because a portion of their business derives from medical tourism. They have not yet returned to pre pandemic levels.
Were in Asia, Thailand, and Vietnam, where each lock down for approximately one month.
And while elective procedures were banned in public hospitals, they were still being performed in private settings in may activity increase as additional countries. We opened at a measured pace well be simultaneously adopted safety measures and you protocols to keep their patients in medical professionals safe.
France in Denmark started doing procedures again.
Switzerland business came back like strong as services were determined to make up for postpone procedures.
As we moved into June more countries continue to reopen and receive them operations.
Most regions of Australia, we're open for business almost all of Western Europe came back online and surgeons in some countries such as Spain reported strong volumes by comparison procedures in the UK throughout the quarter were greatly limited due to reallocation of private clinic resources by the NHS.
Yes.
And the majority of countries in Latin America were locked down for most if not all of the entire second quarter.
Because Brazil is our single largest market I wanted to provide some perspective about business conditions. There no doubt you've seen so the headlines and images depicting a very serious situation in that country.
In our Hearts go out to its citizens as they continue to combat compete 19.
Phil is a very large country with many states in each one is handling this pandemic independently.
While the country was essentially closed during the quarter in elective surgeries prohibited some procedures were still being performed.
Some of the larger metropolitan areas have now reopened and while they are procedures are currently running at about half the normal rate surgeons. There tell us that they are reserving space for expected resurgence off procedures. Once restrictions are fully lifted we remain optimistic the Brazil.
Seem to worst of the pandemic in that business. There is on a solid path to recovery.
As we manage your way through what we hope is the worst of this crisis, we're very focused on getting or business back to previous performance levels. We believe prospects for both near term longer term growth are compelling.
Plastic surgeons will over the world are reporting strong interest in a static procedures from new patients and many are working evenings and weekends to meet this new demand.
Some surgeons have decided to workover holidays were take shorter summer vacations in order to make up for business last year and Lockdowns.
Because of this some surgeons are reporting that current surgery volumes are running above year ago levels.
We're also continuing to see surgeons adopt online tools to conduct patient consultations overall I would characterize plastic surgeons level of optimism and outlook for their business that's quite positive.
From an anecdotal patient perspective, we've heard about instances, where woman either unable or unwilling to traveled to summer I read directing the money that they would have spent on vacation to pay for plastic surgery procedures, including breast enhancement.
And with social distancing recommendations and work from home arrangements. Some woman may find this time as an ideal opportunity to recover from a procedure in the comfort of their own homes.
As we manage your business an estimated future sales, we view direct market sales as one of the best indicators of real time trends and during the second quarter. We saw a steady increase of direct sales each month in June direct market sales in Europe were above the revenue.
These recorded for either January or February in equivalent to the same month last year.
This gives us confidence that business conditions are returning to preclude levels and that there are patients are rescheduling or procedures.
Overall, we ended the second quarter encouraged that so many procedures had started to return.
Monthly progression during the second quarter combined with what we see so far in the third quarter has given us sufficient confidence to provide third quarter sales guidance, if we achieved that target.
It would be nearly doubled the sales we reported for the second quarter as we look beyond Q3.
Current trends continue we expect we can returned to pre pandemic sales growth rates.
The long term fundamentals of our business remains strong.
In their expectations of where the business is heading have not changed establishment labs has the most comprehensive portfolio of buying engineered smooth implants worldwide backed by a robust body of scientific evidence demonstrating the unique safety profile of Motiva implants are innovation and commitment.
The woman's health resonate very strongly with plastic surgeons and their patients which is why we have been able to gain market share for the years and why we believe we can continue to do so even during these times stylish maps has been investing heavily in digital initiatives to forge stronger.
Okay, and more cost effective connections with our plastic surgeons customers and their patients.
We are investing a considerable amount of effort to help plastic surgeons improved their practices adapt to the current environment learn about innovations in the field and link them with patients.
Initial online consultations between patients and surgeons are quickly, replacing face to face consultations than we are offering tools and resources to help facilitate the educational process.
Likewise.
[music] badge online training programs and seminars have attracted many new surgeons, who are using this time to further educate themselves and increase their knowledge of the latest innovations in breast implant technology. During the second quarter, we conducted nearly 40 webinars and that variety of topics with many attract.
Several hundred registrants across our geographies.
We are also using digital tools in increasing or social media presence on multiple platforms to help educate patients and strengthen motiva brand awareness among women were making a long term decision to invest in themselves.
Customize digital tools, we can help woman and we're interested in breast is static procedures become more educated about the unique attributes of our product portfolio and.
In some geographies, we can connect them with plastic surgeons using a surgeon facility locator web searches and social media activity pertaining to breast augmentation research have continued to be strong during these times.
With our Motiva interactive platform, we are now able to support the patients journey as she can Ducs research help answer questions and provide educational information customized towards specific areas of interest.
All of this helps us generate more informed sales leads in a cost effective manner.
Now for not date on or product pipeline. This month marks to halfway point into two year endpoint of the protocol for the aesthetic cohorts in their multivitamin plant us I'd clinical trial.
We're looking forward to this time next year, when we will begin collecting that data for submission to the FDA.
Trial sites have adopted virtual consultation protocols in patient follow ups are continuing as part of the monitoring phase of the trial.
We're very eager to introduce or Motiva line of buying engineers from the surface implants to the largest breast implant market in the world.
As we reported last quarter could be 19 has impacted the piece of enrollment into the construction cohort of our U.S. trial. Nonetheless, we have continued to activate new trial sites in during the quarter, we successfully completed enrollment into revision reconstruction sub cohort.
The other large market opportunity for Motiva product is China.
We are making progress with our regulatory submission and recently passed the latest round of testing.
The regulatory backlog caused by could be 19 did impact our timeline and we now expect to receive approval during the first half of Twentytwenty do.
We remain committed to our Chinese market entry as it represents one of the largest and most dynamic opportunities in the world for breast aesthetics.
Turning to Motiva AMEA, our minimally invasive breast augmentation procedure clinical cases have resumed recently in Asia.
Patient outcomes have been promising and the surgical technique is continuing to be fine tune.
We have submitted an application to initiate it patient series in Thailand, we'd oversight from an eye or B, which we expect to being in next month.
We believe there is a large number of woman who could be interested in the less invasive augmentation procedure that we provide safety profile similar to occur in multibillion blends the introduction of an innovative technology like EMEA has the potential to grow the total addressable market for breast aesthetics and contribute.
Meaningfully for long term growth strategy.
During the second quarter, we received a CE mark for him Motiva floor at tissue expander, which extends our presence into the breast reconstruction market.
But its proprietary integrated our if I'd board and proprietary smoot silk by engineered surface floor. It represents a most advanced breast reconstruction technology available to oncologists plastic surgeons and their patients.
Early patient experience has just begun in their pre marketing activities are underway in preparation for a broad commercial launch in Europe early next year.
In the U.S. after careful consideration, we decided to withdraw or five 10-K application for flora and focus our efforts on advancing the application for our next generation tissue expander with features that we believe will offer at better match with the leaders reconstruction techniques being used by U.S. surgeons our goal is to.
Submit the five 10-K in 2021.
Overall, we are excited to be able to enhance the standard of care with our differentiated patented technologies and we look forward to being able to address an estimated 225 million dollar global breast reconstruction market.
We continue to make progress with the regulatory approval for our Motiva ergonomics two platform and we're now expecting a CE Mark in Europe. Later this year establishment lapse launch the concept of an economic implant back in 2015.
And it has now become are best selling and most premium offering in many markets, including Europe and Asia Pacific.
We are looking forward to promoting the new features of this platform, including enhanced mechanical properties advanced chemistry and improved ergonomics.
Just today, we announced our agreement to transition from a distributor model to a direct salesforce in Italy.
This is consistent with similar actions, we have made over the years to build closer relationships with plastic surgeons and fully controlled the sales and marketing process in key markets. We believe this region is showing solid improvement from the effects of could lead and we have a high degree of confidence in its continued weak.
As the fifth largest breast augmentation market globally. It is a large an important geography that will be improved by implementing a direct sales model.
In conclusion, while we continue to invest in or future by developing and bring to market innovative technologies advancing digital initiatives and expanding our business excellence program across the organization. We are also aggressively controlling operational expenses and reducing or cash burn.
When they will provide greater detail about this in a few moments, but in Q2, we successfully lowered operating expenses by 27% compared to Q1, and we'll continue to exercise spending discipline throughout 20 twins.
These actions are making establishment labs, and even stronger company that will come out of this pandemic well position for continued growth and success with that I'd like to turn to coal over to Renee to discuss the financials in detail Renee.
Thank you Juan Jose.
Although our sales were impacted by Koby 19, this quarter, we maintain control of our overhead expenses and believe we remain in a very solid financial position overall.
You can find additional details about our second quarter financials in our earnings press release, and our form 10-Q, which we plan to file tomorrow.
Total revenue for the quarter was $10.5 million with direct sales comprising nearly two thirds of this amount.
Distributor sales, which can fluctuate based on changes in inventory levels and the timing of Reorders made up the balance.
Year over year decline was the greatest and distributor sales and well every region was affected by Lockdown Latin America was the most impacted.
In our direct markets Latin America once again the region hit most heart.
As mentioned earlier, the second quarter saw a steady increase in direct sales. Each month. This was most pronounced in Europe, where revenue in June was above revenue recording for both January and February.
Our performance in July gives us further confidence about our Q3 2020 guidance, we're providing and the strength of our recovery.
From a regional perspective sales in Europe comprised 60% of the global sales Asia Pacific Middle East was approximately 27% in Latin America made up the balance.
Brazil, historically, our largest single market accounted for 8.6% of sales this quarter compared to 14.5% of sales in the year ago period.
This quarter, Germany was our strongest individual country accounting for 14% in sales.
Our reported gross profit for the second quarter was $7.2 million or 69.1% of revenue as compared to $13 million for 60% of revenues for the same period in 2018.
The year over year increase with the benefit of geographic mix, greater operating efficiencies and enhanced manufacturing planning capabilities.
As a result of our operating efficiencies and to reflect current forecast at the ended the quarter, we adjusted inventory production levels, resulting in the elimination of approximately 70 manufacturing positions.
Total operating expenses for the second quarter were $16.8 million, a decrease of $5.6 million or 25%.
Compared to $22.4 million for the same period a year ago.
I see any expense this quarter declined $4 million to $14.4 million as compared to $18.4 million for the second quarter 2018.
Over half of this decrease resulted from our actions to control expenses and our commitment to preserve cash and a portion of the savings will continue throughout the rest of the year, specifically, we decreased the number of in person marketing events lowered compensation expense or head count reductions and reduced or eliminated other discretionary expenses and as sales were lower.
So to where sales commissions.
R&D expenses for the second quarter decreased $1.6 million from the same quarter last year to $2.4 million.
While we continue to invest in research and development to strengthen our product portfolio and derived future growth, we've narrowed the scope of our efforts.
In addition, a portion of the decline was due to the timing of clinical trial expenses and a co lead 19 related reduction in U.S. I'd.
Net loss from operations for the second quarter was $9.6 million compared to net loss of $9.4 million in the year ago period.
During the second quarter, we used $6.1 million to fund operations compared to $6.8 million in the first quarter of 2000 $27.1 million <unk> second quarter 2018.
From the balance sheet standpoint, our cash position remains strong with $86.4 million as at June thirtyth compared to $93.6 million on March 31st.
As part of our transition to a direct salesforce in Italy, we have purchased our Italian distributor as customer relationships with plastic surgeons and inventory. The total cash consideration for this asset purchase was approximately $1.1 million.
Importantly, with the termination of our distribution relationship the remaining accounts receivable balances have been collected the net impact of these transactions on our financials wasn't minimal.
In conclusion I'd like to provide some additional perspective to help you think about the second half of the year.
Overall, we're continuing to closely monitored at Cobiz impact on our business.
As described last quarter, we've already taken decisive actions to align our expenses with the current operating trends.
These actions are specific targeted and designed to drive greater efficiency, while still adequately investing in our product pipeline and strengthening our digital initiatives.
If necessary, we had the ability to make further adjustments as conditions warrant.
Taking all of this into consideration, we expect operating expenses for Q3 to be sequentially higher just as they had been in the third quarter. Historically, however, they are projected to be below the Q1 level overall, we remain on track to reduce our planned 2020 expenses by 20%.
As you heard from one who they describe our business is on an upswing and we believe our company is well positioned to address the changing market dynamics presented by this global pandemic.
Nevertheless, we remain diligent to monitor our expenses as we continue the path forward towards cash flow breakeven and profitability.
I now turn the call back over to upon Jose for some concluding remarks.
Thanks, Renee before we open it up for questions I want to express my gratitude to our plastic surgeon customers business partners for their ongoing commitment to establishment labs in revision to transform this industry and improve woman's health.
We continue to adjust our strategies in this fast changing environment, we are committed to emerging stronger by gaining market share.
Turning to market the latest technologies, maintaining strong expense control driving system wide efficiencies and strengthening our reputation with plastic surgeons and their patients I'm confident that we are in the solid financial position.
We have a strong and adaptable team and that our best days are still ahead with that I will turn to call over to the operator for the QNX.
Thank you as a reminder to ask a question you need to press star one on your telephone so John Your question press the pound key please stand by what we compile the kuni roster and once again that is star one if you'd like to ask a question and our first question comes from Raj Denhoy from Jefferies. Your line is now open.
Hi, good afternoon.
Let me start the well first of all open rooms doing okay, but I also wanted to start would be.
Revenue guidance for the next quarter.
Yes.
Double from what you did here in the second quarter at 21 million, sorry, I guess I'm curious your level of confidence in that outlook and in particular, given the bakery is appropriate and kind of yemen's ebbs and flows of that sounds like Europe is doing well for you but are you know how much conservatism have you baked in.
Good I look we after the third quarter here.
Yes, Thank you Rob.
I think that's yeah, that's a really fair question.
The monthly progression that we have seen during Q2 combined with what we have seen so far in Q3 has given us enough confidence to be able to estimate.
That guidance that we gave today of $18 million to $21 million.
What we see is it resurgence in many markets, especially in Europe and Asia Pacific.
Not only.
Late procedures, but also new consultation taking place.
What do we see as well is that many women who normally a decidedly year would have traveled abroad for their vacation are deciding to stay at home and are finding it very convenient to go up.
Under this procedure. So we think that it's a it's it's actually a good time to be able to do this and we feel very confident on the.
The guidance that we have given today.
That's fair.
Maybe just one follow up you mentioned the U.S. trials, you're halfway through and you'll be collecting data about a year from now you know there's still it's I guess some debate on whether two years of data is going to be sufficient.
To receive FDA approval, but it does sound like you're going to be submitting with to your data. So does that represent any sort of updated thoughts on what it's going to take to get approval are going to United States.
No actually does not.
What do we are saying is that are trial endpoint is 24 months and we will reach that in August of 2021 and at that time will begin to collect the data for submission to the FDA.
Of course, you know we are very satisfied with the progress that we have are making India steady cohort and also did we were able to close one of the reconstruction so cohorts with enrollment so.
The decision of two versus three is not a decision that.
Is based on current situation I think you know there will be time for a conversation with the FDA about the power of the data. The result, and don't forget that that three year guidance for data is still there.
Okay very good thank you.
Hey, Rush and thank you and our next question comes from Josh Jennings from Cowen. Your line is now open.
Hi, Thanks, good afternoon, and it's great to hear about these recovery trends.
I wanted to your first question for Renee.
You called out the two thirds of second quarter sales were.
From direct the direct sales force can you remind us of what that ratio typically isn't there were there any nuances in the quarter just on the distributor side.
Clearly, we imagine that they were not stocking inventory, but it and then what does your guidance suggest for distributor sales in third quarter.
And that so yeah change.
Sure Josh. Thanks, Thanks, a question and I hope all is well on your side.
Yes, certainly direct sales are normally around that 50% Mark So we definitely saw.
Higher percentage this quarter and as a result investing in all of those direct markets and certainly Europe was pronounced.
Region for those direct sales no as we think about.
Q3 in Q4, certainly the distributor sales.
Those orders are coming through and so that'll be a higher.
Percentage of sales expected going forward because.
That's just how the orders come through and obviously those orders are usually larger bowl quarters will set of.
The direct markets, where we thought we see smaller orders on a per surgery volume that indicates sort of real time trends.
Great. Thanks for that and then and a follow up Juan Jose on this ergonomics to you had some comments on the on the in your prepared remarks.
But it.
Maybe under appreciate I, just wanted to sort out.
Any help you can give us the outlook for when it comes due in 2021 in terms of supporting strong growth.
It's a premium implant price any sense or can you give us what type of premium.
For economics to will hold and then also just on the.
Reconstruction side I.
I think at the symposium last year over in Italy, We heard some surgeons talk about just the benefits of ergonomics.
Systemically.
And on the safety side, and recon procedures and pairing ergonomics too with floor may be.
Driver in terms of the ability to penetrate that recon market internationally next year.
But maybe you can share some thoughts there thanks for taking the questions.
Yeah. Thank you Josh great to hear from you.
So.
We're super excited about ergonomics too because ergonomics.
Your original concept has been such ahead in so many different places around the world that concept of an implant that is comfortable that fuel soft like real breast tissue is really made an entry into the entire aesthetic market.
And we are happy to see as well that is starting to be used.
In very good ways in do we construction market.
Just recently, an article was published on Prs plastic and reconstructive surgery Journal.
By one of the most prestigious groups in Europe for breast reconstruction and they were talking about you know the differences that they can get into final result, with an ergonomic and plan. This paper was completely independent and done by.
The hospital in again in Belgium.
So what's different about ergonomics too it has much more enhanced.
Mechanical properties.
And it has a more advanced chemistry and debt yields improved ergonomics. So definitely that's going to command a higher price point, but do we believe that these features are going to do the same debt ergonomics did a few years ago. When we launched ergonomics in 20 pick.
Scheme, and we did so at a differentiated price point most people because of the commodity.
Aspect of the business at the time thought that we were crazy to ask where that premium these days.
It seems that most people oh, okay with it because patients are asking for it. So this will be an implant that will require a lot of push in social media digital channels. So that woman understand the benefits that they can get with this implant so definitely.
We think that this is going to be a major revenue driver.
Definitely in the countries where we.
I have been so successful with ergonomics.
But you know the speed at which we achieved that is a different thing, but definitely I can tell you both for statics reconstruction and for so many of the reasons why people love our current ergonomics implants, we feel very confident about ergonomics too as we get closer to the.
Product launch.
Which will most likely happen first in Europe, given the progress that we're having with our regulatory timeline. We will update you on what type of premium are we talking about.
What type of rollout or are we going to do it's still a little bit too early to talk about that but we are definitely excited about it Josh.
Excellent and just to follow up just on the recon side with their economics to me is that a channel.
Economics.
In Oregon, Ergonomics helped drive implant penetration in the recon when they become side.
Well, we think that now that we have the Florida tissue expander that is the only tissue expander that is an MRI compatible out there.
And with the proprietary Smithfield surface data, you know with ergonomics implant, whether the traditional ergonomics or the second generation, it's going to be a.
Great choice for surgeons, who are trying to help patients in breast reconstruction.
Great. Thanks again.
And thank you and again, ladies and gentlemen, if you'd like to ask a question that is star one again like to ask the question that is star one and our next question comes from amid has gone from Goldman Sachs.
Let's now open.
Oh, Thanks, Hey, good afternoon.
I wanted to start by asking the question about you kind of the topline prospect that you outlined versus some of the expected expense guidance you outlined in particular, it kind of strikes me Youre encouragingly seen some good trends here and maybe getting back to pre cobot levels is back in.
In our visibility here, but at the same time, you are making some pretty significant you know expense cuts, obviously, some very difficult ones I'm sure with the headcount cuts in particular, it's I'm wondering if that suggests that you're going to operate more cost efficiently. When you get back to that normal topline or are you.
Anticipating a rebound in expenses, specifically like head count that are.
And now being.
Now now kind of being implemented here more recently.
Yes, thanks, and that I hope all is well with you certainly you know we take head count reductions very seriously and protecting all of our employees. So we want to make sure that we're making the right decisions not only for today, but the teacher and I think that when you think about you know what happened in the last four to five.
Month with the pandemic has really allowed us to really definitely think about how to run the business more efficiently I think it's one of the positive notes that have come out of this pandemic and looking at companies how they run their business and we've done the exact same thing thinking about not only travel and where we're extending that stuff that also head count do we have to right size.
Isn't the right dynamic to be able to make sure that we continue to.
You know support our product pipeline all of the future growth and be more streamlined not systems et cetera, and so head count is a consideration in there and we certainly don't want to make sure you know make decisions that are in line with not again not only decisions for today, but for the future. So we would expect that weve right sized our head count.
Accordingly for what we expect for for now and into the future you know we commented a little bit about.
Changes in head count with specific to manufacturing, where we made a decision at the end of the quarter to change the manufacturing levels. There and obviously that is something where you know in future quarters, we needed to continue to ramp up production and we can certainly add those headcounts backend as necessary, but again just for production.
Okay. That's great color and then kind of near term. If you think about the Threeq you guide and maybe just a second half of the are generally we'd love to hear your thoughts on both the UK in terms of just any insights you might have as to when the NHS restrictions could be mitigated or what you're seeing there and then back to Brazil.
Just how much of a rebound is implied in the third quarter seem kind of question if you're assuming restrictions there are going to be further lifted.
In the near term or are you, taking a more conservative approach on on that country.
Yes. Thank you.
With regards to UK. The latest news is that you know some of the centers that were taken over in the way by NHS.
You know for could be patients have started to give time for.
Different the static surgeons to be able to do their procedures, but this is just starting.
It's going to take some time to get to any level of normalcy, India static market in the UK, Although we think that.
There was quite a backlog of patients in that market when it comes to Brazil.
We said during our prepared remarks.
You know the situation.
Overall is not improving however, plastic surgeons anesthetics surgery centers have found a way to get you know patients into the operating room do it safely. These people are advertising how safe there. They're consultation is how safe you know there.
Sure there procedure.
Can be and as a result, we see many patients in metro areas being able to duties.
However, we are careful about you know what we can see in Q3 in Brazil, I think all of Latin America, which would be in the same.
Trend that a recovery is taking place, but it's going to be a slow one in Latin America indefinitely for Brazil.
That's great color. Thanks, so much.
And thank you and our next question comes from Maria the bulk from P.T.I.E.G. Your line is now open.
Thanks for taking the questions and I hope you and while I appreciate all the.
Detailed commentary on the various regions.
One on Italy in particular, how that major market is recovering from Kosovo and whether there are any near term dynamics, we should be taken into account as you transition let direct.
Selling approach there.
Thank you Mary.
Great to hear from you the situation, Italy has improved a lot remembered that was kinda like the first country in Europe that got hit heavily by could lead.
Some regions of Italy, especially the more industrialize north was one of the worst areas in all of Europe. However, since Dave reopened it's become very busy for plastic surgeons there.
We had a word.
Timeline to.
Without could lead do the Italy.
Integration of the business earlier this year, but when these things happen, we decided that we would do it at some other time and I think the fact that we're doing this now tells you how confident we are up the recovery in Italy, So definitely.
We think that despite the conditions in Italy, just like in Germany, Scandinavia, France, and Spain have much improved.
There's still some areas of Europe, where you know theres a lot of progress to be made like the UK or Russia, but so far we think that you know the core countries Continental Europe really back online.
That's great great to hear I guess my follow up could you remind us what's changing with the floor at tissue expander. The next Gen version that your readying for U.S. submission and 2021.
Yes, absolutely.
There was a trend coal creek pectoral breast reconstruction U.S. and it has become.
The most important trend I would say.
In breast reconstruction and.
Deep have configuration of the tissue expander, it's very important there. So that is a change that we think is important to include and there was also.
You know a self calibrating, our if I do find there that we think giving the complexities hospital settings in U.S. would help nurses and other personnel be able to do the expansion phase of the.
Of the breast reconstruction.
Which more ease.
Remember, we you know we have gotten the CE mark for our floor tissue expander and also are getting approvals in other geographies. So this is purely a strategic move.
Perfect. Thank you so much.
And thank you and this is all the time, we have for questions today I would now like to turn the call back over so Juan Jose Chicago careers for closing remarks.
Okay.
Thank you for joining us on today's call. We look forward to providing our next quarterly update in November have a very good rest of the day and please stay healthy.
Ladies and gentlemen, this concludes todays conference call. Thank you participating you may now disconnect.
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