Q2 2020 Teleflex Inc Earnings Call
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Good morning, everyone. This is 10 green and I'll be your conference operator today at this time I would like to welcome everyone to the Twentytwenty.
Second quarter Teleflex incorporated earnings conference call all lines have been placed on how to do sell they'll be you've been at the appropriate time. Thank you.
Now I would like to trickle over its first presenter for today.
Treasurer, and Vice President of Investor Relations Mr., James would shake up Sir you may begin to upon frames.
Thank you and good morning, everyone and welcome to the Teleflex incorporated second quarter 2020 earnings Conference call. The press release and slides to accompany this call are available on our website at www Dot Teleflex dotcom.
As a reminder, this call will be available on our website and a replay will be available by dialing 8558592 056, well for international calls for 045373, 406, Passcode 1778 009.
Participating on today's call, our Liam Kelly, Chairman, President and Chief Executive Officer, and Thomas Powell Executive Vice President and Chief Financial Officer, Liam and Tom will provide prepared remarks, and then we'll open up the call Q in AG.
Before we begin I'd like to remind you that some of the matters discussed in the conference call will contain forward looking statements regarding future events as outlined in our slides we wish to caution you that such statements are in fact forward looking in nature and are subject to risks and uncertainties and actual events or results may differ materially the factors that could.
We will results were events to differ materially include but are not limited to factors reference in our press release today as well as our filings with the SEC, including our form 10-K, which can be accessed on our website.
Additionally, during this conference call you will hear management make references to what the estimated positive or negative impacts were as a result of covert 19. During the second quarter of 2020, you also hear management make statements regarding intra quarter business performance. During the month of July management is providing this commentary to provide the investment community.
With additional insights concerning trends and these disclosures may not occur in subsequent quarters.
That said I'd like to now turn the call over to Liam.
Thank you Jake and good morning, everyone. It's a pleasure to speak with you today.
Before I get into the details of our quarterly performance I'd like to offer my condolences to anyone who has been impacted by the group.
As well as my sincere thanks to all the healthcare workers, who put themselves at risk tobacco goals of 19 each day.
I'd also like to take a moment to recognize the teleflex employees around the world.
Past few months at these higher than normal and our employees continue to inspire me as they have stepped up in extra ordinary ways to ensure that we are able to provide our products to the optimum clinicians and patients need and most thank you.
Now onto our Q2 results.
When you take into consideration the global escalation of the covert 19 pandemic, we're quite pleased with our second quarter performance as it significantly exceeded our internal expectations and reflected improvements in underlying monthly revenue trends for the product categories most impacted.
By the postponement of non emerging procedures, most notably interventional urology interventional access and surgical.
Q2 revenue was $567 million, which was down 12% as compared to the prior year period on a constant currency basis.
The declining revenue is due to the negative impact from goal with 19, which we estimate posed a net negative impact of approximately $130 million are approximately 20%.
If we were to normalize for the negative cobot impact we estimate that we grew our underlying business.
By approximately 8% on a constant currency basis, our near the high end of our initially provided twentytwenty full year constant currency revenue growth rate range.
From an earnings per share perspective, like revenue, our adjusted EPS of $1.93 cents in the quarter also significantly exceeded our internal expectations.
This reflects the recovery we saw in monthly procedures as we moved through the quarter.
With prudent operating expense management.
Lastly at the ended the second quarter. We also commenced a workforce reduction plan, which will allow us to capitalize on programs designed.
To drive further long term profitability.
This latest effort is primarily focused on streamlining certain sales and marketing functions with any M&A as well as certain manufacturing operations within our OEM segment.
Turning to a more detailed review of our second quarter results.
As I mentioned quarter to revenue declined 12% on a constant currency basis, and 13.1% on an as reported basis.
The decline in revenue was primarily due to cold of 19, which we estimate had a negative impact of approximately $144 million across several global product categories.
It was somewhat offset by approximately $14 million of additional revenue within our vascular access and other product categories, which experienced higher than expected demand as a result over 90.
From a margin perspective, we generated adjusted gross and operating margins of 53.9% and 21.8% respectively.
This translated into a year over year decline of 380 basis points on the gross margin line and 340 basis points on the operating margin line as reduced sales volumes and unfavorable revenue mix impacted by coal which were major headwinds.
These headwinds were partially offset by our cost containment efforts as we continue to tighten our belts, where we deem appropriate in the current environment balanced with continued investment to sustain our long term growth aspirations.
Adjusted earnings per share was $1.93 cents down 27.4% year over year, but well ahead of our internal expectations as the business started to recover during the quarter.
And what I never like to see declines in year over year revenue and profitability I'm very pleased with our overall financial performance as it demonstrates the resiliency of the diversified global product portfolio, we have a bit over the past few years.
Next I thought it would be helpful to provide some context regarding how we sell coal that 19 impact our second quarter results.
During the second quarter, we estimate the covert 19 was a headwind to revenue across international urology surgical interventional access anesthesia and OEM.
Somewhat offsetting these headwinds were positive tailwind would in vascular access and other hospitals continue to have strong demand for those types of products.
Netting these two impacts we estimate that coal good was a 130 million dollar headwind or an approximate 20% detractor from our two Q revenue growth.
Importantly, we were encouraged that after a difficult April six key global business units impacted most negatively by coal would improve sequentially as we move through May and June.
Specifically interventions urology year over year revenue was down approximately 79% in April it was down approximately 30% in May and then down approximately 8% in June.
Turning to interventional access year over year revenue declined approximately 30% in April approximately 28% in May and then it was down approximately 2% in June.
And finally, our surgical business experienced year over year revenue declines of approximately 34% in April 31% in May and then approximately 21% in June.
As we anticipated and stated on our last earnings conference call as various state and concrete began to reopen interventional urology led the recovery.
But we also saw improving trends within interventional access and surgical as most hospitals have restarted non emerging procedures in earnest.
And while our business.
Our businesses have not yet to fully returned to normal we are encouraged by our trends into July which largely reflect further improvement in the business.
That said, while we view the latest trends as encouraging signs of a continued global recovery, we remain cautious as select conflict capacity has come under pressure in certain geographies as cobot 19 cases of reemerged.
As a result of the uncertainty associated with the scope and duration of over 19, we made the decision not to reinstate R 22000 financial guidance at this time.
Let's now turn to the quarterly results.
I will begin with a review of our reportable segment revenue and unless otherwise noted the growth rates I will refer to our on a constant currency basis.
The Americas delivered revenues of $312.5 million into second quarter, which represents a 16% decline.
Growth within the Americas was driven by vascular access and respiratory products, which both so elevated demand driven by cold.
However, this was more than offset by declines in other product categories. We estimate the Americas would have grown approximately 8%, excluding an estimated 24% impact of coal with on the region.
Importantly, as we progressed throughout the second quarter interventional urology saw sequential improvements from efforts in May and then from May into June with a positive momentum largely carried forward into July.
While we are encouraged by this recovery we are cautious due to the recent outbreak and reduced non emerging procedure capacity in states, including Texas and Florida.
EMEA is reported revenues of $131.6 million in the second quarter, representing an 8% decline like the Americas growth drivers included vascular surgery businesses, which benefited from elevated demands related cost 90.
However, like the Americas growth as the product categories was outweighed by declines elsewhere adjusting for coal, but we estimate approximately 1% underlying gross for the region.
Turning to Asia revenues totaled $67.1 million into second quarter, which represents a decline of 7.8%.
However, we estimate that we would have had a positive constant currency revenue growth in the low double digits consistent with our long term outlook for the region chief not for the impact of coal with 19.
And lastly, our OEM business reported revenues of $55.8 million into second quarter are 70 basis point decline on a constant currency basis.
As we anticipated during the second quarter, our OEM business saw a lag impact related to cope with.
Our other businesses.
Investors familiar with Teleflex will be aware, our OEM business supplies device companies with complex catheters, and surgical sutures and the Twoq impact reflect reduced orders from these customers, whose business is tied to non emerging procedures.
Excluding the estimated coal at 19 impact the business grew roughly 25% which include the 16 Venice present benefit from HPC.
As it relates to the acquisition of HBCD integration efforts are well underway and I'm very pleased with how the business is performing under our leadership.
Let's now move to a discussion on our revenues by global product category.
Consistent with my prior comments regarding our reportable segments commentary on global product category growth will also be on a constant currency basis.
Starting with vascular access.
Due to the growth within both our central venous catheter, an easy I O products Q2 revenues increased 8.8% to $164.9 billion, we estimate that covert 19 positively impacted the growth rates of our vascular products during the second quarter by approximately 5%.
Moving to interventional access second quarter revenue was $82.6 million.
Which is lower than the prior year by 20.3%.
The decrease was largely due to the delay in the performance of certain non emerging procedures because the covert 19, we estimate that underlying growth was in the mid single digits adjusting for an approximate 24% cobot 19 headwind.
Turning to anesthesia Q2 revenues were $64.9 million, which is lower than the prior year by 23%. The revenue decline was due to lower sales of laryngeal mask. Some regional anesthesia products, we estimate the covert had an approximate 22% negative impact in the quarter.
Shifting to surgical revenue declined by 28.4% to $67.3 million driven by lower sales of our look like Asian portfolio on instruments.
We estimate a significant 30% headwind from coal would during Twoq. However, as we stated earlier, we have seen sequential improvements on a monthly basis since April levels.
Moving to interventional urology Q2 revenue decreased 40.9% to $40.1 million.
We estimate an approximate 58 million dollar cobot 19 related headwinds during twoq.
Unfortunately, the cancellation of elective procedures impacted this product line more than any other in our portfolio.
That said because the euro the procedures primarily performed in an outpatient.
Lower acuity setting we envisioned that you're live we one of the first types the procedures that wouldn't be performed once the United States began to reopen and that's exactly what we've seen would sequential improvements from April to May may to June and from June into July and finally, our other category, which consists of our.
Virtually on urology care products grew 5.4% totaling $91.4 million.
In large part we estimate the growth.
During the quarter was due to increased demand for certain humidification inbreeding products, resulting from cobot 19.
If we were to exclude the estimated benefit from Cobot 19, we estimate that the other categories would've been down slightly as compared to the prior year period.
That completes my comments important to revenue performance turning to some clinical and commercial updates.
Our body of clinical evidence for you or that continues to expand during the second quarter with data from two studies presented at the age you weigh Twentytwenty virtual signs event and data from another study published in the Canadian Journal of Urology.
The first 30 presented at the way Twentytwenty virtual signs event in May with a meta analysis of patient sexual function following treatment with your live system versus medical therapy. While the second study was an analysis comparing patient outcomes from the large real world retrospective study to those found in the.
Lift pivotal trial and the post our urinary retention products.
The results from the first study compared sexual function outcomes of 849 sexually active men, who received daily treatments with another buffer bypass the reductase inhibitor either alone or in combination and 190 men from combined clinical studies of the Euro system.
At 12, 24, 36 and 48 months.
Results from the analysis showed that patients treated with your lips system experienced significant improvement in a january function and erectile function at 12, and 24 months post treatment.
Patients also reported significant improvement in overall sexual satisfaction through 48 months post treatment.
In contrast.
None of the medical therapies significantly improved patient direct tight our objective three function at any time point and some therapy significantly reduce functions.
Additionally, the euro this system significantly outperformed all three medical therapies across all time points at preserving patient trajectory function.
Only patients who received yearned assistant reported significant improvement in overall satisfaction in sexual life.
The second study compared patient outcomes from the large real world retrospective study to those pounds in the lift pivotal trial and Pollstar urinary retention trial, which studied catheter dependent BPH patients.
Results from analysis showed patients from all groups experienced similar absolute IP address scores at all time points following treatment with euro system.
Analysis also revealed equivalent safety profile, among non yearly retention and urinary retention patient groups from the real World study.
When compared to corresponding groups in control studies.
Finally, the real results indicated the majority of retention patients became catheter independent at the end of the studies.
Lastly, a study comparing patient experience of those treated with your lips system to door to receive tissue ablation by a steam injection was published in the Canadian Journal of Urology.
The study compared 53, non retention patients from to U.S. sites.
Early post operative results showed positive differences for patients treated with your lips system compared to resume including better sexual function outcomes net interference in daily activities and higher patient satisfaction.
We continue to extend our body of clinical evidence, which should help to get the fast followers onboard with your lift which is quickly becoming the standard of care at the leading minimally invasive surgery to address a massive global market opportunity.
Turning to the next slide on key commercial updates.
We received FDA clearance for the year lift advanced tissue controlled our HTC system.
This is an instrument that optimizes you are the for the treatment of obstructive medium mill.
We plan to old a market acceptance test for this product in late 2020, and while we estimate that between only 5% and 10% of the market haven't obstructive median low this enhancement demonstrates our commitment to invest in R&D to expand our leadership position in BPH.
In addition.
As we began to see a recovery in the performance of non emergent procedures at the second quarter progressed, we made the decision to launch our pilot National DTC campaign in early July building and success of our regional DTC efforts. The National campaign will run from July to December.
On the strategic role DTC is important as about half of the 12 million man being treated for BPH lead prescription medications are there only solution.
Regarding the timing.
Our regional digital DTC efforts indicated strong patient engagement in June along with positive sentiment from clinicians both of which gave us confidence into July launch.
While it's still fairly the initial patient response is very strong with significant increases in coal volumes and web traffic spikes to your lift dotcom versus the week prior to launch.
Physician feedback is also has also been very positive.
Indeed euro lift is leading the way BPH and this is the first time in recent years that a BPH brand is reaching patients directly in a meaningful way.
Additionally.
We submitted the euro lift to for five 10-K FDA approval at the end of the second quarter, and lastly, I would like to congratulate the interventional urology team and surpassing.
200000 patients treated with your lift.
This is a significant milestone with DTC Andy you at approximately 2700 drought just trained and major market launches scheduled over the next few years, we've only scratched the surface increasing the approximate 100 million man globally estimated to have BPH.
Turning to some clinical updates within our interventional business unit.
We recently began enrolling for a prospect of single arm I'd study targeting 150 patients across approximately 15 sites within the U.S.
To evaluate the performance of Teleflex carton reside Mars and specialty catheters in chronic total occlusion percutaneous coronary intervention procedures.
The study will evaluate the performance of the entire range of Teleflex complex Pcr products.
In chronic occlusive coronary disease, which is the most demanding PCIA environment.
We view BTI at the high growth space within the interventional cardiologist segment, and we will continue to invest in areas that will improve our weighted average market growth rate overtime over.
Overall, we continue to invest in clinical and commercial capital that will help to sustain our upper single digits revenue growth aspirations in a normalized environment.
That completes my prepared remarks now we'd like from the call over to Tom for more detailed review of our second quarter financial results Tom.
Thanks land and good morning, everyone.
Given the previous discussion of the company's revenue performance I'll begin at the gross profit line.
For the quarter adjusted gross profit was 305.8 million versus 376.6 million in the prior year quarter or a decrease of approximately 19%.
Adjusted gross margin totaled 53.9% during the quarter.
Which is a decrease of 380 basis points versus the prior year period.
The decline in gross margin was primarily attributable to covert 19 related impacts, including unfavorable product mix lower sales volumes and higher manufacturing costs.
The next impact with significant for the quarter has the adverse revenue impact from cobot 19 tended to skew toward higher gross margin products, including airlift surgical and interventional access.
In total we estimate that cobot 19 negatively impacted our adjusted gross profit by approximately $100 million in the quarter.
Because of the reduced revenue and gross profit, resulting from cobot 19, we continue to look for opportunities to help mitigate the earnings impact while at the same time maintain teleflex his ability to rapidly rebound, what's not a merchant procedures recover.
As such operating expense reductions tend to be focused on categories that are non revenue generating and our discretionary in nature, including savings from meetings travel and management variable performance based compensation.
As a result of the efforts we estimate that operating expenses were were reduced in the second quarter by approximately $35 billion.
While we expect the actions taken to continue to deliver opex savings to the second half of the year by far the largest quarterly benefit will be realized in the second quarter.
Adjusted operating profit for the 123.9 million as compared to 164.7 million in the prior year or a decrease of approximately 25%.
Second quarter operating margin was 21.8% were down 340 basis points year over year, driven by the gross margin declines and loss of operating leverage partly offset by the reduction in operating expense.
For the quarter net interest expense totaled 15.5 billion, which is a decrease of approximately 24% versus the prior year quarter.
The decrease in interest expense, primarily reflects reduced interest rates associated with our variable rate debt.
Partly offset by higher average debt balances in the second quarter 2020 versus the prior year period.
During the quarter, we took steps to further improve our liquidity by issuing 500 million of eight years senior notes at Ford a quarter percent.
The proceeds obtained from a note issuance were used to repay revolver borrowings.
Moving now to taxes.
For the second quarter 2020, our adjusted tax rate was 15.8% as compared to 13.4% in the prior year period.
The year over year increase in our adjusted tax rate is primarily due to less benefit from stock based compensation as compared to the prior year period.
At the bottom line second quarter adjusted earnings per share decreased 27.4%.
To $1.93.
Included in this result is an estimated adverse impact from covered 19 of $1.18 as well as a foreign exchange headwind of approximately four cents.
Now I'd like to discuss our recently introduced workforce reduction plan.
During the second quarter 2020, we committed to a workforce reduction plan designed to improve the profitability by streamlining certain sales and marketing functions in our EMEA segment and certain manufacturing operations within our OEM segment.
We estimate that will occur aggregate pretax restructuring charges of between 10 million and 13 million.
Consisting primarily of termination benefits, which will also result in future cash outlays.
We expect that most of these charges will be incurred prior to the end of 2020.
What's the plans are fully implemented we project annual pretax savings of between 11 million and $13 million and we expect the savings will begin in 2020.
I will also provide a summary of all of our ongoing restructuring and cost savings programs.
Including the latest workforce reduction plan savings across all programs are expected to be between 59 million and 72 million.
Approximately one half of the savings are expected to be realized in 2020 in 2021 and the remaining one half over the period 2022 through 2024.
As such we have good line of sight to Nonrevenue dependent margin expansion the foreseeable future.
And this also adds to our confidence that our prior l. RP financial targets of 6% to 7% revenue growth.
60% to 61% gross margin and 30% to 31% operating margin remained the right goals for teleflex.
And the question is only when not if we achieve them.
Turning quickly to select balance sheet and cash flow highlights.
For the first half of 2020 cash flow from operations totaled 134 million as compared to 157.3 million in the prior year period.
Or a year over year decrease of $23.3 million.
The decrease is attributed to a $10 million pension contribution made in the first half of 2020 and what's not made in the first half of the prior year.
$54 million increase in first half 2020 contingent consideration payments versus payments made in the first half of 29 team.
Overall, the balance sheet remains in good shape at the end of the second quarter, our cash balance was 553 million versus 406 billion at the end of the first quarter.
That leverage at quarter end was approximately 2.6 times, providing comfortable headroom when compared to our covenant, which requires that we stay below four and a half times.
Lastly, we have no near term debt maturities of material sites.
And that concludes my prepared remarks, I'd like to now I'll turn the call back over to Liam for closing commentary.
Thanks, Tom.
Before closing I'd like to make you aware of a matter that will be disclosed in our 10-Q filed today in June we began producing documents and information responsive to a civil investigation demand received by one of our subsidiaries near product from the U.S Department of Justice through the United States Attorney's office for the Northern District of Georgia seeking documents Andy.
Information pertaining to communications with and certain rebate programs offered to a single near track customer in relation to the Geo jades investigation of that customer.
Subsequently in July DRG advises that it had opened an investigation under the symbol false claims act with respect to near tracks operations broadly in addition to the customer investigation.
We maintain policies and procedures to promote compliance with the anti kick back statute false claims act and other applicable laws and regulations.
While the company intends to cooperate with the government investigation and request for information, we will vigorously defend our programs practices and conduct which we believe our local and in accordance with industry best practices and standards.
We Canada. This time recently predicted duration scope of the outcome of this matter.
In closing, we delivered solid second quarter results as our diversified portfolio help the dampened the impact coal with had during April and procedures have started to improve month over month in May June and into July. However, it remains difficult to predict the shape and duration needed to measure the path.
Recovery.
While the next several quarters, we'll have elements of uncertainty we remain confident that our long term underlying fundamentals remain solid and we still see great opportunity over the long term to serve our key constituents.
We as an organization will continue to focus on serving the vast majority of hospitals the remain open for procedures.
I'll also monitoring closely those select regions that are temporarily shutdown.
We continue to adapt our business and opportunistically shift towards a greater emphasis on digital tools for internally as well as with our customers.
We will manage the business prudently, but staying focused to capitalize on long term potential of our global product portfolio FLIR.
I would like to finish by again thanking all our employees, who continue to manufacture distribute and support products that are required by the cobot 90, focusing on meeting our commitments to patients clinicians communities and shareholders.
That concludes my prepared remarks, now I would like to turn the call back to the operator for Q in eight.
Thank you Sir at this time in order to answer your question. Please press Star then the number one in your telephone keypad.
We also request for limits. Your question. So one question in a follow up question per person.
We have additional questions. Please three answering to Q again that is star one on your telephone keypad.
And your first question comes from Mr., David Lewis of Morgan Stanley. Your line is now open Sir.
Good morning, and thanks for taking the question just Liam to two for me. This morning. The first question. Obviously your surrounds the most important debate, which is near track.
So couple of questions. There you did near track grow year over year in July and there are a couple of trends sort of the vet out in July one would be resurgence did you see an impact of resurgence and then obviously the DTC campaign began so was there any impact from resurgence or any benefit from DTC and as I started did near track grow in July and then a quick follow up.
Okay, David Thank you very much for the question.
Covered the knee attract trends that we so obviously, we saw big decline in April down, 80% down 30% in May and then weeks. We saw continued improvement in June we were down 8%.
As we went into July we continued to see positive momentum with the your lift product and I am pleased to report that it did turn green in in July.
As we continued to see practices reopened we did see practices closed in certain geographies and it's really county by county in certain geographies in particular in Texas, and Florida, what to counterbalance that you had practices in New York, New Jersey and in in Pennsylvania reopening solely because.
The counter balance with regards to your question on the DTC is almost too early to see an impact of DTC as of yet and have patients schedules, but we did see significant foot traffic on the test that we ran we actually have to.
Increased the number of people that we had in the call center, taking the calls and we saw and a significant uplift in the traffic that went to your lift dot com as a result of the initial DTC. It is early days, David but very positive signs for Europe product.
Okay. So you will accrue despite resurgence in July and the impact of DTC, probably is more impactful later in the quarter. It it sounds like and then I'll just ask my last one fairly I'm, just most peers arent, giving a cobot 19 impact you did it implies organic growth kind of seven seven <unk> percent, but not a very challenging comps. So there was like several points momentum acceleration just as you look at.
Crusher business broadly care in the second quarter on an underlying basis, where do you think that source of strength of the unmet improvement was most focused.
Thanks, so much.
Thanks, David and I would just like to make a comment that we gave that level of detail and clarity to the investment community and to give you more transparency into the business and how we saw the cobot will impact us as we went through the quarter I think that the momentum came in in a few areas, we continue to take and.
Underlying business within interventional urology and the Euro lift obviously continues to perform well.
Zcolo, but we would estimate that the euro lift was grew at around 44%. So good solid performance from newer that X cobot.
Obviously, the OEM business underlying without the acquisition performed very very well.
And he many eight was slightly underperformed underperformed, but there was a distributor order that moved out within the quarter. So if I took that into account there was actually.
Reasonably pleased with the EMEA performance as well and of course, our vascular business continues to grow and take share as is our interventional business. So it was pretty broad based David but those are the main drivers.
Great. Thanks, so much.
Thank you.
Your next question comes from low recurrence of Raymond James Sir Your line is now open okay. Thank you and good morning, everyone.
Liam you, you've obviously learned a lot about the business resiliency during the pandemic.
So I'm curious how are you thinking about sort of the durability of growth into the future and are there areas that you've you know sort of now been able to see where you where do you think you might be able to actually invest more.
To either continue that growth rate or perhaps even accelerated.
Yeah, I think Gary and I think that yes, we have learned a lot about your ability of a broad based portfolio that is not overly exposed to.
Two procedural volume.
Clearly areas for accelerated growth in investment in the future will be around the euro live product.
As I said in my prepared remarks, we've only scratched the surface of penetration and we.
With the Euro lips to fight 10-K, no submitted as.
Once we get that approved we will be able to continue our progress in Japan, we are doing our clinical trial in France.
We see an opportunity.
Further down the Pike in China, and we've only scratched the surface in North America.
We still have only train 2700 out of the 12000 urologists that are in the United States. So significant growth in the American expansion overseas beyond that you will have heard on the call today that we continue to invest in clinical evidence broadly not be beyond even the interventional urology business unit newer live product.
With the CTO trial that we announced that we're proceeding within the interventional, we think that's an opportunity to expand the market potential of our product through an additional 70000 cases about seven or 8% of PCIA cases.
Our our in that that CTO area. So we think thats, a nice opportunity and also we will be.
Continuing to invest behind our penetration into picks in particular in North America and continue to take share within that portfolio.
Those are broadly the areas, where we see investment into future and DTC. It's very early days, Larry but if DTC does what we think it can do I see no reason why that wouldn't continue over a multiyear period.
Okay. So so it sounds like you're feeling.
Confidante, then in the durability of the growth of the company as as you come out of code Red and and and so that's that sort of.
Question, one be and then and then perhaps for Tom.
You know again, if if I just sort of think about Liam response here and the opportunity to do more investment I know you talked about the how RP objectives. There are still sort of the right goals for the company but.
How should.
Should we think about how about margins you know, perhaps taking a little bit longer to get those objectives. If you have opportunities to invest.
And I guess the second part of that question is just as you think about the cost savings.
Got you realized during during Covidien, you're running more efficiently I know you said you know some of that we'll we'll start to come back at you start spend but is there are there cost savings here that that you can.
Have that are more durable as you look out in time.
Okay, well as you know certainly as we think about the investment for the future in margins.
Yeah, I would just first say with regard to the margins will reinforce the point that we believe the 60 61 gross margin 30 31 operating margin are the right targets that we believe this business has got the capability to get there and and to continue to drive margin expansion. The real question for US is is the timing and.
Component of that margin expansion is related to mix and a key component of the mixes as airlift. So as that business continues to perform.
And we see a better trajectory will get a better view towards the timing related to to getting to those those margin targets as we think about investment.
You know will balance.
Growth with margin objective sand will continue to look for ways to drive efficiency. So we can fund the investment, but we don't see is.
A major investment that's taking us away from those targets in fact, what we see as we invest behind your lift is a very good margin story. It's one of our highest gross margin approved creating margin opportunities out there. So we see that as a potential opportunity to continue to drive margin expansion through investment I would say with the cost savings.
Lot of what we've taken out this year is related to.
If you think about we're holding open positions in fact recruiting is difficult during this timeframe.
We've got T. any we've got some reductions in management compensation. So as we think about going to the future a lot of those costs will come back into the system.
I would say that you know as we look at whats durable in the cost saving certainly the new.
A new organizational restructuring will drive some permanent savings.
But a lot of what we've taken out this year as far as cost reductions our costs that we expect put back for the most part into the system as we get into 2021.
Okay terrific. Thanks, guys appreciate it.
Thanks Art.
Next question comes from Mr., Richard Newitter of Yes, VB Leerink, Sir your line is open.
Hi, Thanks for taking the questions. The first one on.
Euro at then the July recovery comment.
I'm just curious.
Where you are seeing resurgence.
Oh cases, and I think you said that there were some shutdowns is is that actually.
From a supply side that the providers are shutting down or is it more on the patient side, there's a lot lower willingness to go on seek out treatment. After that just basically they get it feel for how in office and if the base and all the time hospital setting procedures might potentially fair during.
Saying.
A more informed.
And and understood kind of a virus situation and do we actually see the same kind of impact that we saw the first go around so if you could answer that within the context of July that would be helpful. And also just indicate how much is backlog work down versus new offices.
To generate growth thanks.
Thanks, Richard the question.
From what we see the it's really the provider closing down.
In particular foundries in state based on instructions from the the state itself.
And what we have seen in our research and we did a a research of our customer base and what we have learned from that is the customers are patients actually feel quite comfortable going to all three sites of service because the procedures, it's such a short procedure one hour minimally invasive.
And I think it's important that you don't need a general anesthesia. So there's no.
Aerosol gas being introduced to the patient while they have the procedure. It some light Mccain are maybe even a block whichever they decide to use.
And what we've seen is that patients have been.
Comfortable going to all three sites of service with a procedure what surprised me in all transparency is the willingness of a patient to go to the hospital and they felt as confident going to the hospital as they did feel going to the office in the C that to me was a little surprised but beyond that we're very encouraged by the flow through.
Two of patients.
That have gone through through the hospital I spoke to a CEO of a big system recently and and he is concerned that if patients don't go to the hospital that there will be a bigger healthcare issue and we actually coined the phrase is in that might raise does this person sprays even cone.
The pandemic he was call it the Pan Didnt I Didnt have this procedure didnt have that procedure and that individuals concern was that as I said is going be a longer term impact that people don't go to the hospital, but encouraged by the the the the willingness.
To attend did have you were procedures.
Okay.
Thanks for that color and then I just want to make sure I'm kind of it. Thank you for all the qualification Oh your best attempted to qualify and co that I'm getting to about a pick the just under 7%, 16.6% organic kind that growth growth rate for QQ you back out about a point the half contribution for the.
Inorganic PDP component.
What am I am I thinking about that correctly and then two I think you had mentioned that there might have been some.
Some orders that were pushed out so maybe if you could quantify how much that that impacted the quarter and would that have lifted that organic growth rate assuming it's correct. Thank you.
Yes, youre, given a bit too much credit for the M&A rich so our organic growth would have been higher than that and on the orders that were pushed out. It was in Europe. It was in the region of about $3 million to $4 million you should.
That's what was pushed out into Q3.
Bye bye some distributor orders I mean, I think if you just step back and look at our overall growth I think you know in the first quarter ex the impact of coal, but we grew just over 8% second quarter. We grew at at 8% and I would also like to remind the investment community that we have two additional days in quarter four.
Sure.
As a catalyst in the back half of the year, and obviously, having convened with the DTC in euro lift our fastest growing because we also see that as a catalyst in the back half the year and we're very encouraged to see viewer live product turn green in July.
Thank you very much of the questions bankrupt.
Next question comes from Shagun Singh.
Wells Fargo. Your line is now open.
Thank you so my question.
I was wondering what do you think July trends imply for Q3 could you achieve you know flattish growth in Q3 year over year and do you still expect normalization in Q4, and then I have a follow up.
Again, thank you very much further question I think as we go through July were priced we're quite encouraged with the notable modest improvement that we've seen across the board in July for overall overall businesses.
I would not like to mislead the investment community to say that the over for Teleflex is a hole in the first few weeks of July isn't a positive growth state because we're not it is still a negative but a better a better outcome than we had seen.
It's really difficult for me to give guidance beyond in even in the third quarter should go now we've pulled our guidance for the full year I, just because of the uncertainty around coal, but but I will tell you that I and management feel a lot better.
Here as we sit here today in the back ended July is we did when we started the back end of April on on our first quarter earnings call them, we feel much more confident than to do this beginning to look more like an V shaped type recovery rather than anything else rather than you.
I would also say that income in consultation with.
Ceos of hospitals, they have robust plans should there be a second wave to work to try and prevent what happened in the first wave in with the cancellation of procedures, because as I said earlier.
Of the ongoing impacted we'll have four people.
And that's really helpful. And then just as a follow up on the national by the DTC campaign.
Our checks it suggested that volume lift could be in the range from about 20%. So.
You know is that a firing would give then you know what you've seen in some of the Bdcv dinner and then.
Just wondering what discussions you're having with urologists, so that they can be strategically prepared for the additional patient flow. When it occurs thank you for taking the questions.
Yes, so we had to abroad outreach to urologist before we began the DTC.
What we normally ask of urologists is up to have some flex capacity within their practice, so that as we as patients click on our website our call our call center that we can direct them to urologist with capacity a key point is that a patient needs to have a call back from a clinician in.
Within the 24 48 hours and then another key factor the need to have the appointment scheduling within that call. It four to six weeks.
It's very early days for is to assess the impact on the uptick should loon.
I wouldn't doubt your methodology, you've been you've been pretty accurate in the past with what you've done so I'm not I don't want to go there, but it's too early for us to make a real determined assessment dollars.
We would know more after occurrence another quarter of continuous DTC and the DTC campaign will run from July assuming that there isn't the second significant resurgence in coal will run from July through to the end of this year and that is our intention and the initial launch also children.
Was limited in so far as we focused on two of the for cheap television channels that we we were going to focus on that just to test our call center and I'm really glad we did that because the volume upsurge was such that we need to add additional resources that call center.
I would also say that the feedback from the patients who have seen that the ad and.
And the urologist community has been incredibly positive.
Thank you so much.
Your next question comes from Mr., Matt Taylor will you be yes, Sir your line is no.
Hi, Good morning, Thank you for taking my question.
So the first one I wanted to ask because you talked about these underlying growth rates X coated in the second quarter that were encouraging I guess could you talk about how you estimate there because I imagine that's pretty challenging are you continuing to see those kind of strong high single digit underlying growth rates for the comes.
You through July.
So the I'll cover the July growth rate and I'll ask Tom If you don't mind to cover the methodology he's probably.
Better oil to do that so the growth rate for July for overall company.
Improved so defacto I think we could conclude that the overall growth rates were at least consistent.
Q2.
So that that's the to answer your question on the growth rates in July obviously, there's a lesser impact of covert in July so when would anticipate if that is the case your growth rate overall as a company should improve now again as I said earlier and I want to mislead the investment community were not as an overall company in positive growth yet through the first.
Few weeks in July but.
But it is an improving trend and Tom if you wouldn't mind covering our intelligence.
So just to talk about big picture approach and there were certainly nuances by each business unit, but essentially we began with our original budget and forecasts projections.
And then we adjusted for known deviations. So for instance, we took a look at the trends prior to the outbreak of covert how we're performing versus our projections. We also took a look at changes in competitive dynamics, whether there was an issue where we could take share our we're giving up share we looked at programs that got canceled the events that were cancel.
CLA programs, our postponed and.
Quantified that took a look at other items, such as back order status and changes their distributor ordering patterns.
Patients from customers talking about pushed orders and so essentially no. It was a trend analysis adjusted for for known activities.
And the difference between the budget adjusted for those activities with all the attributed cobot now we recognize the methodology wasn't precise but we want to do as an organization better understand what we thought the impact of killed it was and we thought as the investment community, we would share that information with you as well.
Right Okay.
And then I was hoping you could spend of minutes on the.
DLJ investigations do you think that it's going to impact the trends in the contract. It sounds like it started with one customer, but it so little bit broader now.
Are you seeing any commercial impact from that.
So as you can appreciate Matt very early days and limited what we can say at this time I I don't believe we will have seen any commercial impacts no.
As you're probably aware these things tend to go on over a period of time.
So I would expect that situation to stay as it was.
As it progresses, we will obviously provide further updates as and when appropriate.
I just want to say, Matt I want to reiterate that we maintain policies and procedures remote compliance within to kick back Sajid false claims act and all other applicable laws and regulations and we will cooperate with the government investigation and any request for information. We will also vigorously defend our programs our practice.
And our conduct which we believe our lawful an important industry best practices and standards.
Right, Okay, alright, thank Liam I want some other jump and appreciate it.
Mike.
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Thank you. Your next question comes from some nice you will send us Keybanc. Sir your line is now open.
Thank you very much.
How coordinated is the DTC campaign with Euro Urologist partners in the various regions and it just seems like the business you may be driving for for for those partners could be could be very positive. How do you see that relationship and channel evolving for you guys going forward.
So obviously, we have a wonderful relationship with the urology community.
Sometimes one would be concerned when you run the DTC campaign mass that you could obstetric customer now obviously, we would never wish to do that so we have communicated broadly, but urology community about the campaign and and.
Our goal is to improve patient outcomes I think our urologist goals are to improve patient outcomes, we counted improve patient outcomes unless they know about the best procedure for benign prostate hyperplasia. So I think it's a real partnership I think the urology community are supportive of what we do have we know there supported from the feed.
Back that we've gotten from them I think it's really good for patients that it's good for the has ecosystem because.
It will reduce the overall cost increase demand with BPH, if they're on pharma. The crossover point is two to four years, whether it's an organic generic are a branded product.
So therefore I think this is a good practice for the overall ecosystem.
Raises awareness and gets great patient outcomes with no sexual dysfunction with the best treatment on the marketplace for BPH.
Okay, and then and then Liam just just to switch gears a little bit.
Today, we are in a slower growth type environment exiting 2020 and into 2021, you know what do you think that means for for M&A more more broadly and what do some of the more attractive assets kind of do in that kind of environment.
So I think that.
As we head into 2021.
My theory would be the opposite would be the case from a growth perspective, because we'll be in a real you'll have much easier comparable as you go through Q1 in Q2.
And and I was originally thinking that you would get a bolus of additional procedures in the back half of this year.
We'll wait and see if that actually happens that may not happen until you get into 2021, just with some of the resurgence is as it impacts on M&A I think that from an M&A perspective, especially for companies like Teleflex, our strategies towards M&A won't change, we're looking for new innovative technology.
We really like technologies that are obviously single use that have great patient outcomes that have great healthcare economics argument that expand our growth and margin profile as an organization than that at the end of the day improve patient outcomes. So.
I don't think it's going to make a big difference for companies like Teleflex and the assets were looking at and obviously at the end of this quarter, our balance sheet as Tom outlined with in really good shape, where we're at 2.6 times net leverage.
And I think I think the M&A environment as we see a positive recovery to covert.
Should spell opportunity for companies like Teleflex.
Thanks.
Thanks, Matt.
Your next question comes from Sir Anthony Petrone Jefferies. Sir Your line is now open.
Hi, Thanks, and I hope, everyone is doing well in Spain healthy.
Two questions on on Euro lift just two follow ups here and then a quick ones on amount on either class and so just on your list. It can you provide the update on number docs trained.
Can you know what percent of clues fronts.
Coming from drug therapy, Liam you mentioned the study obviously benefits versus drug therapy, and that's the waters coal the draw from so now what is the what is the update there on patients coming from drug therapy the euro.
And then ultimately where does that go I mean, how big can euro with the inner BPH.
Setting and then on the follow ups assets.
Okay, and the and we're all well thank you and I hope all is well you as well.
So with with regard to the training obviously, we had trains just shy of 120 urologists in Q1.
As we went into a Q2, we trained again just shy of 70 urologists no just to give you little bit of context around that Anthony we only train seven neurologists in April because most of them are shows.
So you can appreciate that as we've gone through May and June we've we've ramped back up to near normal training regimes on urologist, and we're getting access to urology practices to train neurologists. So that's been a real positive for us.
That's helpful. And then just on you know capture from drug therapies and is there any way to sort of determine where that is at this point.
The the straight answer Anthony is there isn't.
It was much in the early days, we're running the pivotal trial I don't think it's changed that much around 70% of our patients either come from the drug dropout or the drug category and I don't believe anecdotally when I talk to urologist and when I hear from the interventional urology team. They tell me that hasn't changed much over the time.
Not helpful. In real quick just yeah, the month of rule out anything new there and easy Plas BLA submission just as it relates the timelines and.
How cold it has impacted that thanks again.
Certainly Anthony so manta again that was obviously impacted by by the Colbert.
Just to give you some context manta in our key American North America. It declined by almost 40% in April but then in it.
May and June turned positive so as we started to get access to the hospitals again and continues with that positive trend through July so I'm quite encouraged by what's happening there.
With regard to easy plants, we've had a couple of phone calls with the.
The defense.
And and the FDA, we have not as of yet had that face to face meeting that should happen in this quarter, just because the coal would we have been able to even set it up digitally.
The department of defense.
Once you get access to the product and they were having conversations with those with the FDA around the approach we might take two or an emergency use authorization is a first step before BLE. So more to come on that Anthony as we get more information on us, but I think it's positive at least likely this positive that the.
Martin defense or pushing for emergency use authorization to get the product to the troops.
Okay. Thanks again.
Thank you.
Your next question comes from Chris Cooley.
Hey, thanks.
Your line is now open.
Thank you good morning, I appreciate you taking the questions I'll just cost more to poster session.
When we look at the year lift offering here in the second half of the year you obviously have the T C.
Lateral cupboard into this year with National DTC campaign scheduling.
I know you don't get generally comment or product specific level the tail, but.
So the out of the realm of the possibility of during the year alone could still see swap.
Modest growth trajectory in 2020 before building momentum into 2021.
And then on bigger picture scale.
Little bit understood.
Talked about a reduction in force a couple select markets, but.
As we've looked at this last really three four months with coded my team Im curious.
What more durable learnings you've taken away in terms. So just how you operate.
Do you think will make teleflex a more efficient.
Business going forward not so much as for the head count reduction, but maybe how you go to market. Thank you how your source on a raw materials side, but just kind of curious what things are being put in place now that we'll see as a benefit potentially in 21 and beyond those things hopefully start to normalize again. Thank you.
Thank you Chris.
So first of all on the Euro lift I don't want to go into too much detail on on what we expect for the full year, obviously, we pulled guidance under so much variability with coal, but it's hard to see that.
But I I mean, you know the great saying is that every journey begins with the first step on our first step is to get this to a positive.
Growth in July.
So it has turned very modestly green.
In the in the first few weeks of July which were encouraged by and that gives us encouragement that we should have for sure positive growth as we go into Q4 and begin to then bounds into 2021 on a more normalized level of good solid growth because.
Every dollar that we grow on euro lift as we all know is a good dollar for teleflex because the margin profile on it.
The thing I would say is that we're also having the UL to submitted for five 10-K at the end of June that should help US then what our margin profile as we get into 2021 as we roll out the UL two to the urologist.
With regard to the reduction enforce the reduction in force from a sales American perspective in Europe is really focused on growth.
What we're doing is were reapplying resources into our faster growing assets like the euro left like interventional access portfolio like our vascular portfolio.
And I think that is a work that we're doing to drive growth within within the the business and also right size that organization.
For that growth.
Our long term learnings.
I think there are a few I think we've seen an organization that has worked incredibly well an incredibly adaptable incredibly efficient.
With that without being in an office environment. We have engaged with customers that are very high level. We ran a full BP hedge summers into your live product virtually we attended virtually the way we did virtual trainings amount on the interventional business.
And we have on some of our go direct at that we work through we have done some virtual due diligence on some of those smaller as we've gone through to the global crisis. So I think a reduction in our overall t. a knee on a longer term basis and on our cost of office space is something that will happen.
And also less wins, we can make our sales organization a lot more efficient by eliminating windscreen time and using technologies to get them in front of a customer virtually so a lot and earnings in a lot of changes that I think will be positive offers in the longer term to drive keep driving our topline growth as efficiently as possible.
Thank you.
Thanks.
Next question comes from Mr. Matthew O'brien.
Pipe of Sandler Sir your line's now.
Thank you good morning, and thanks for taking my question.
You know re I'm just a you know continue down the airlift path and started to come to go down this way, but you know you said going into the are you thought you would grow about 25% in that franchise. You know the first couple of quarters on an adjusted basis, what a better well ahead of those levels.
What is what are you seeing in the in the marketplace. That's getting your above what you kind of thought going into the year again on an adjusted basis are you seeing docs that are now attracting a lot more patience to their facilities as a result of having your left available omnivere that dynamic going on anything along those lines to really point.
And then as you're rolling out you're allowed to.
Probably late this year into next year, how do you do that successfully without disrupting.
The business with that with the detail in the likely will have an oh.
Absolutely, Matt I'll take the latter part of it first if you don't mind do you all to roll out.
The reason that we believe that it's not going to cause any disruption is that it is.
Works very similar to the Euro one looks like the UL one as a cartridge system, but has all the advantages of you wouldn't with great patient outcome and is easier to use.
It only takes five cases first to train urologist to move them from a UL.
One to the UL to that is.
About.
Left his work in urology half was to convert them. So I can't I don't believe it's going to be disruptive for all of those reasons and there is an advantage to teleflex to the adoption of the UL tunes is an advantage the urologist.
Urologist, we get the great patient outcomes, they've always got no sexual dysfunction, not great idea that score so on to afford but it will also reduce their carbon footprint in their clinical waste. So if there any urology office practices. It will make their practice that little bit more profitable for them.
With regard to the actual growth rate look we're very encouraged by the growth rate I think that.
Traditionally we've been relatively conservative right out of the gate with our projections for the you're live product and I think most people thought that 25% was a little bit conservative also but notwithstanding that I think we the reason were normally conservative is because we're moving from the early adopters of the fast follower and what we've seen is the fast followers.
Our now adopting the technology at a quicker rate than we had originally considered.
And as long as we can continue that great work on momentum I think that will be positive.
The and the accelerators to that that have helped us get it there are the investments we've made the investments we've made in the sales force in Q4, rather than waiting to Q1 and the investments that we continue to make behind DTC and product innovation and the investments we continued to.
To make behind.
Clinical.
Papers.
In order to bring the technology to a broader base of urologist than we have today.
But we still only for health.
Such a large market you know we've done at the sensitive with some 200000 cases out of 100 million men.
Right now that's very helpful commentary, Liam I, just wanted to pivot over to vascular access for a bit here. That's an area that has benefited from co bid, but you have a lot of really unique differentiated products within that franchise. So.
Do you think Kogut is something that actually is eliminated the the uniqueness of all those products. It could actually supercharged that that franchise to some extent over the next couple of years or do you think you may as things kind of level off or are we come out of this thing you make space a little bit of a revenue headwind.
You know because people you're not seeing as many cobot patients et cetera.
Yes, so the main benefactor of in the vascular business unit of the covert pandemic was our CBC franchise and as you know Matt were market leader I think we have close to 90% market share in North America on central venous catheters, because of our coding technology because of its impact on it.
Affections within patients in hospitals.
The area that we traditionally have been growing is in our pick portfolio because of our coating technology now there's an interesting dynamic going on in the midst of covert.
The dynamic is we have increased demand for cbcs, because they're more patients intensive care units. The other dynamic is we're not able to convert as many customers that we had traditionally because we can't get access to hospital in the midst of cold. So as you come out and things start to normalize you'll see two things you'll see the CV.
See growth get back to more normalized levels, you know in that call at Fourish percent, but you'll also see picked growth start to pick up all in all Matt It should be a modest headwind for as rather than a tailwind because our CBC franchise is just so much bigger than our pick franchise, but a modest headwind.
As it normalizes I also believe what you will see in the latter half of the year, though is you will see hospitals.
Making sure that they have enough CVC kits in case, the second wave that the managed through it so we might not see the headwind until 2021 and by that stage. The other areas of the businesses that were negatively impacted but more than offset as with the with the weaker comps in spring in particular in Q1 in Q2, So that's how I see it.
Looking out over the next 18 months color.
Got it very helpful. Thank you so much thanks, Matt.
The.
Next question comes from Mr., Mike Matson Needham and company. Your line is no concern.
Great. Thanks, Thanks for taking my questions I guess I just have to so first with OEM business here. It looks like you had a pretty big negative impact on coal that but I'm. Just wondering if there's any kind of a potential for some lag there as your your device.
Customers sort of maybe go through from de stocking you know if the their inventory levels ended up higher than in the second quarter and then we've got another sort of de stocking related question I know that carrier business. Overall distributors are much smaller part of your revenue now, but do you have any feel for the amount of inventory.
Those distributors now thanks.
Yeah, Mike. Thank you pretty much of the questions I'll start with OEM and underlie question. So what we saw with our OEM business as we went through the quarter. We saw a positive growth in April and May for the OEM business and then we saw negative 13% in June.
To have a total quarter of a negative about 0.7 of a percent and that was definitely the light that hit us in June.
Now as we've gone through July.
I would say the negative lag of 13% has improved its again I don't want to mislead anybody that is it in the green territory in the same ways, you're lift is but the negative like has been less so we always expected there will be a delay with OEM because as you point out thats the nature of the business.
So I think that that's that's what's happened with the OEM business as we looked at our distributors and again I'll start with the tracings for the distributors.
I also always look at the tracings as you know to understand what's happening with our with our our business overall and the tracings for our end customers through the first half the year almost exactly mirrors. The results that were seeing in our and our published results so that that means.
That it's aligned and what we saw in the quarter is it was a very very modest and increase in inventory, but very modest market. It you could almost see it is neutral sales in versus sales out in the quarter.
Okay makes sense. Thank you.
Your next question comes from Mr., Kristen Stewart of Barclays. Many airlines now open.
Hi, everybody I'm, sorry, thanks for all the level detail they try it on the call I really appreciate it.
Just wanted to go back to this neo track disclosure in the 10-Q I appreciate there being practice and I'm talking about it so how does the filing.
Just a couple of questions here I guess, what gives you the level of comfort that this won't have any of that discussion cannot before but I guess I'm just struggling with the.
The level of confidence I won't really have a commercial in Pakistan.
I'm just kind of curious as to why it's just a single customer I just never really seen this stuff for and you know is is there any way to kind of put into context the size of the single customer in terms of.
A larger customer and what's really the risk as well that the spills into additional customer arrangements.
Because it's always kind of Ben what are the key I.
I guess not the I guess, one aspect of the benefits of Myalept has always been them one at a reimbursement on benefits all that so I'm just concerned that maybe there's something with the rebates or the reimbursement on aspects around that obviously, the clinical benefits other products stand for itself and as always.
Then out there you talked a lot of clinical data, but I'm just kind of concern that adds as your competitors may get out there in use this as a marketing.
Talking point, there might be some impacts from a commercial form points, I guess, I guess, where Murray getting Canada mobile confidence that will have a more meaningful impact from commercial standpoint. Thanks.
So so.
First of all and again as you can appreciate Chris and it's very early days and were fairly limit what we can say in disclose but I, it's pretty unusual at least in my experience for for companies to use this type of the scenario the marketing to against another company and I think that would be.
We've seen as positive by any of the regulators in authorities. The other thing I would say is that the the attorney General's office.
Does not have responsibility for reimbursement that's a separate organization.
Noninterest reimbursement and reimbursement is really based on the time this bent on the procedure and the overall cost of the procedure and the benefit of the procedure gives to the patients.
My comments and commercial impact, we're really on the basis that.
This will take a longer period of time for four for the information flow between us and the attorney General's office, a two to truly have a better understanding if there is any commercial impact, but I I would be very thoughtful not to link.
The disclosure to what happens on a reimbursement level for a product like this there to completely separate topics.
I think that would be at a top line to walk Kristen.
Okay any anything just in terms of the sizing of this customer has a very large customer is there risk that you have some things could fall in terms of other customers within the area.
Just kind of odd that it's just one single customer that would be focused on.
I think this is a very specific focus by that office, but I don't want to go into details on one for to get customer another to be honest.
Okay, that's fair enough.
Okay. Thank you. Thank you very much appreciate the questions.
Thank you very much at this time I would like to turn back the line to Mr and shake out Louis Sir Your line open.
Yeah. Thank you operator, and thanks to everyone that joined US on the call. Today. This concludes the Teleflex incorporated second quarter 2020 earnings conference call have a nice deck.
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