Q3 2020 Tactile Systems Technology Inc Earnings Call
2020, <unk> earnings conference call protected medical.
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Under the company's prepared remarks, we will conduct a question and answer session.
No.
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Deleverage on the company's website for replay shortly.
Before we begin I would like to remind everyone that our remarks or responses to your questions. Today may contain forward looking statements that are based on the current expectations of management and in.
Inherent risk and uncertainties that could cause actual results to differ materially from those indicated including those identified in the risk factor section of our annual report on form 10-K, as well as the most recent since you falling out today with the Securities and Exchange Commission.
Such factors may be updated from time to time in our filings with the FCC, which are available on our web site <unk>.
We undertake no obligation to publicly update or revise our forward looking statements.
As a result of new information future events or otherwise.
This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these non-GAAP financial measures reconciliations of these non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP.
Our available in the earnings press release on the Investor Relations portion of our website.
I would now let's turn the call over to Mr., Dan Rivers Park taught medical is President and Chief Executive Officer. Please go ahead Sir.
Thank you operator, good evening and welcome everyone to our third quarter 2020 earnings call I'm joined on the call today by our Chief Financial Officer, Brad smoking weed.
Let me provide you with a brief outline of today's call.
I'm going to begin with a brief recap of our Q3 revenue result, before shifting to a more detailed update on how the COVID-19 pandemic impacted our financial and operational performance during the quarter.
I'll also discuss the activities that our teams have been focused on to help mitigate these impacts and continue to serve our clinicians and their patients.
Brett is going to discuss our financial results in detail and review our financial guidance for 2020, which we'd reinstated and updated in our earnings press release. This afternoon.
Following his remarks, well then share a few closing thoughts on our outlook before we open the call for questions.
So with that as a backdrop, let's get started.
For the third quarter of 2020, we reported total revenue of $49.1 million, which represented a decrease of 1% year over year on a reported basis and flat on an operational basis.
We experienced a strong recovery off the lowest Q2 20 as evidenced by our 40% sequential improvement over the prior quarter.
The decrease in total revenue was driven by sales and rentals of our flexi touch systems, which decreased 4% year over year.
This was partially offset by strong sales and rentals of our entre systems, which increased 26% year over year.
Well, we continue to experience significant business disruption as a result of the covert pandemic.
Our overall performance during the quarter exceeded our expectations.
Turning to a more detailed discussion of the ebbs and flows related to Covance.
Although we continued to see uneven performance across different geographies and sites of care. Overall, we were pleased to observe the several positive trends during the quarter.
The vast majority of our our top accounts were open.
Treating patients throughout the quarter and access to clinician prescribers has greatly improved relative to Q2.
We saw many clinicians and facilities continue to demonstrate progress and adapting to the new environment under coated and manage as best they can.
And most importantly feedback from our prescribers during the quarter indicated that they are experiencing strong demand as patients are returning to seek treatment.
Despite these positive trends, we saw that health care facilities continue to operate with constraints related to health and safety protocols adopted in response to Kobe.
As we found in our most recent October survey of our top accounts about 75% of those nearly 1400 surveyed accounts that were open reported that they were operating with constraints.
These constraints are impacting our business in two primary ways first.
Our practices have reported that they're seeing no shortage of patient demand their capacity to treat patients remains impaired.
With many clinics reporting that they are operating with fewer exam rooms, requiring additional time to clean and turnover rooms, and experiencing extended periods between patient consultations.
Second excluding V.A. hospitals, our call points of largely relaxed restrictions to enable rapid access to their clinicians.
However, many continue to restrict our sales reps from conducting in person patient demos.
Historically, our sales force conducted in person demonstrations with lymphedema patients at the clinic, providing them with the ability to try on our flexi torture entre systems and experience a brief treatment session.
The ability to experience the benefits provided by one of our systems first hand is an important event in the sales process as it engendered familiarity and conviction on behalf of the patient.
Well, we've seen meaningful recovery in business trends overall during the third quarter. We believe these social distancing and safety protocols remain a headwind as the U.S. recovery continues to seek traction.
In terms of the trends that we've seen by site of care prior.
Privately owned practices based in the outpatient setting pretty.
Particularly vascular clinics continue to lead the way in terms of recovery.
These clinician customers appear to have relatively fewer and less severe colgate related restrictions governing their approach to interacting with patients and sales reps as compared to large universities and health systems.
They also continue to demonstrate more entrepreneurial resourcefulness in terms of their approach to seeing patients with many extending office hours and even limiting vacation time.
Meanwhile, Hospital and health system based therapist to recovering more gradually as they tend to have more stringent restrictions covering their governing their activities, including constraints limiting patient volumes.
In the V.A. specifically many of the 170 VA hospital centers continue to redirect lymphedema patients to their network of over 700 community based outpatient clinics, where they commonly seen by primary care physicians.
Just on that dynamic is required our sales force to expand their focus outside of the VA centers and clinicians that they would traditionally call upon.
Across the board I'm pleased to report that our team is performing admirably, staying resourceful and adapting their approach to suit the current environment.
Our Salesforce continues to do an impressive job supporting and assisting our existing clinicians and their patients via virtual means where necessary, including conducting virtual product demonstrations.
From a patient training standpoint, we continue to see success with our expanded menu of patient training options, which we implemented last quarter in order to accommodate our patients desire to maintain social distancing.
In addition to traditional in home training, we're providing patients with out of the box instructional materials, including video tutorials and a quick start guide to help them easily familiarize themselves with the use of our systems and enable them to begin self treatment immediately.
We're also conducting patient trainings virtually.
Which has been exceptionally well received.
In our recent patient experience surveys virtual trainings earn satisfaction ratings that were consistent with our traditional in home training.
Our surveys also found that patients were equally as likely to recommend our products regardless of whether they received in home training or virtual training.
We view these result, as a positive sign an affirmation that we're continuing to ensure the best patient experience possible. Despite this necessary shift from our traditional patient training process.
And lastly in addition to supporting our existing clinicians and their patients. Our team has made impressive progress in targeting and engaging new clinicians to expand our prescriber base in part by leveraging virtual engagement.
During the third quarter, we developed an organized nearly 25 virtual education events, either independently or in partnership with key opinion leaders in our industry.
These educational events are focused on a variety of clinically relevant topics designed to inform various audiences within our universe of potential prescribers and health care providers.
Depending on the focus and intended audience at each event our sales team is tasked with inviting targeted clinicians and.
And then following up to obtain their feedback and explore how we might become a tool within their treatment Arsenal.
In comparison to our traditional in person events. We've found that clinicians are more inclined to attend virtual education programs.
In part because they are more convenient and require shorter commitment of time.
During the third quarter alone the events that we hosted through participation from over a thousand clinician attendees.
Year to date, we've had over 5000 attend our clinical education events more than double all of 2019.
Overall these events have received very positive feedback.
And we've seen evidence of new clinicians further demonstrating their interest and engagement.
Ultimately by leveraging these virtual education events in our account targeting activities. Our team has been able to drive strong increases in our base of prescribers, which has helped us partially offset the impact of co bid on clinic throughput and ready access to patients.
We believe this expansion of prescribers will support our longer term growth as the impact of Covance subsides, and our universe of uninhibited prescribers expands.
Stepping back Weve come a long way from the most impacted month of the cobot pandemic this past spring.
Even as cases continue to surge.
The third quarter, specifically, we were pleased to see essentially flat sales growth on a year over year basis, even after experiencing mid single digit sales declines in July.
Our team continues to demonstrate its ability to identify and execute innovative solutions to mitigate the challenges presented by the pandemic.
While continuing to provide world class service and support for our clinicians and patients.
And lastly, we believe the continued expansion of our prescriber base is perhaps our most notable accomplishment during the quarter and one that will bode well for the long term success of organization as the market environment continues to improve.
With that let me turn the ball to Brent.
Unpack, our third quarter financial results in greater detail and discuss our 2020 guidance, which we reinstated and updated in our press release this afternoon.
Right.
Thanks, Dan.
Total revenue in the third quarter decreased 1% on a reported basis to $49.1 million compared to $49.6 million in the third quarter of 2019 tone.
Total revenue growth was flat year over year on an operational basis.
As a reminder, our operational revenue growth excludes the impact of the U.S.C. 842, accounting standard, which favorably impacted our revenue in the third quarter of 2019.
Sales and rentals of our flexi touched systems accounted for 90% of our total revenue in the third quarter of 2020.
Compared to 92% in the prior year period.
Third quarter 2020 revenue by payer was 70% commercial 16%, Medicare and 14% V.A. compared to 72% 12.
12% and 16% respectively in the third quarter 2019.
Turning to the rest of the PML third.
Third quarter gross profit decreased $400000 to $35 million compared to $35.4 million last year.
Gross margin was 71% of sales in the third quarter of 2020, consistent with the same period last year.
Third quarter operating expenses increased $1 million or 3% to $33.2 million compared to $32.2 million last year.
The increase in operating expenses was primarily driven by higher reimbursement general and administrative expenses, which increased $2.6 million or 26% to $12.6 million compared to $10 million last year.
This increase was driven by increased occupancy costs depreciation expense.
Legal and professional field fees and compensation expense in our reimbursement and corporate functions.
The increase in operating expenses was partially offset by a decrease of $1.2 million or 6% in sales and marketing expenses and to a lesser extent, a decrease of $365000 or 25% in research and development expenses.
Operating income in the third quarter of 2020 decreased $1.4 million or 44% to $1.8 million compared to $3.2 million in the third quarter of 2019.
Income tax benefit in the third quarter of 2020 was approximately $750000 compared to income tax expense of approximately $930000 in the third quarter of 2019.
The change in income tax expense and benefit was primarily due to a change in our effective tax rate, which was attributed to a change in projected taxable income, including proportionately higher tax benefits for stock based compensation as compared to the same period last year.
Net income for the third quarter of 2020 was $2.4 million or 12 cents per diluted share compared to $2.4 million or 12 cents per diluted share for the third quarter of 2019.
Weighted average shares used to compute diluted net income per share were $19.7 million and 19.6 million for the third quarters of 2020 and 2019, respectively.
Third quarter, adjusted EBITDA was approximately $6 million compared to adjusted EBITDA of $6.4 million in the third quarter of 2019.
As a reminder, we have provided a reconciliation of certain non-GAAP measures to non-GAAP measures in our earnings press release.
September Thirtyth 2020, cash cash equivalents and marketable securities were $42.2 million compared to $45.2 million at December 31, 2019.
We had no outstanding borrowings on our $10 million revolving credit facility at quarter end.
We continue to believe that our balance sheet and financial condition leaves us well positioned to fund our growth strategy.
Let me now turn to a review of our updated 2020 guidance, which we provided in our earnings release. This afternoon.
For 2020, we expect total revenue in the range of $184.9 million to $186.9 million, which represents a decline of 1% to 2% year over year compared to revenue of 189.5.
Again in 2019.
As a reminder, in connection with the adoption of assay 842, our full year 2019 revenue included approximately $5 million of rental revenue related to operating leases, which will not contribute to the company's revenue results going forward.
Excluding the contribution to full year 2019 revenue from our adoption of AMC 842, a 2020 revenue range reflects year over year growth of approximately zero percent.
So 1% on an operational basis.
We have included a reconciliation table detailing the projected 2020 GAAP revenue growth rate to the projected 2020 non-GAAP revenue growth rate in our earnings press release this afternoon.
Turning to the PL for full year 2020, we expect our gross margin to be in the low 70% range.
And our adjusted EBITDA margin to be in the range of 7% to 8%.
This adjusted EBITDA range assumes depreciation and amortization expense of approximately $2.8 million.
Stock based compensation expense of approximately $11.6 million.
And for the purposes of calculating earnings per share, we expect our fully diluted weighted average share count in 2020 to be approximately 19.5 million shares.
With that I'll turn the call back to Dan for some closing remarks Dan.
Dan.
Thanks, Brent are.
Our updated revenue guidance range implies a modest return to growth in Q4 on a year over year basis, and our decision to reinstate guidance today reflects our incremental confidence in the improved stability of our business as we enter the fourth quarter.
Clinic capacity and our reps access to patients remains inconsistent as a result of the dynamics I discussed earlier in my remarks, we continue to be impressed by our team's ability to help offset these impacts by supporting our customers and expanding our pool of prescribers import.
Importantly, with over 42 million in cash and no debt at quarter end, we remain well capitalized and well positioned to continue investing in our business even in the face of future kobin related headwinds.
Given our strong balance sheet condition, we remain focused on investing strategically in our business as we continue to pursue the relatively untapped 5 billion dollar market opportunity for lymphedema in the United States.
Specifically, we will continue investing in our commercial organization, while identifying opportunities to help them focus and succeed with respect to their two most important responsibilities.
Educating clinicians and introducing new patients to our potentially life changing therapies.
With an eye on our longer term market development efforts we.
We will also continue to invest in key areas, including clinical evidence and clinical education that will position us to further increase the awareness Olympic DEMA and establish the clinical benefits of our technologies with clinicians payers and patients in the years to come.
Through our continued execution and strategic investment tacked on medical is focused on returning as quickly as possible to our long term track record of strong sustained growth and improving profitability.
Before I open the call for questions I'd, just like to share that it's been a real pleasure to work alongside the exceptional team here at tacked on medical during the last several months.
Im incredibly proud of the dedication and entrepreneurial spirit our team shown in the face of the most challenging circumstances allow.
Along with their clear passion for improving the lives of the people we serve at.
I'd also like to thank our customers and shareholders for their support and those on this evening's call for their interest in tact on medical.
Operator, we'll now open the call for questions.
Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad.
If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
We ask that you limit yourself to one question and one follow up.
If you would like to ask additional questions. We invite you to add yourself back into the queue by pressing star one.
First question comes from the line of Margaret Hazard with William Blair. Please proceed with your question.
Hey, good afternoon, everyone. Thanks for taking the questions.
First one for me just because I got to hit it on the fourth quarter were now through October we're saying some bigger waves Im sure you guys still kind of guidance that assumes things get better so.
What's the potential likelihood of something close to July scenario or a change truly getting better and then kind of a similar aspect on the bullish side does that guidance assume any change in terms of underlying environment for patient visits or physician through what are some of the new accounts you guys have Matt.
Yes, thanks for the question Margaret.
You know I think.
For Q4, one we were happy to be able to provide a little bit more color as far as the range and what we expect and I think some of that comes largely from.
Some of the.
Familiarity that were starting to gain with the circumstances I think we're finding ourselves in we.
We do continue to survey our pay our customers as we mentioned in the most recent one in October I.
I think reflected much of what we had been seeing as we exited Q3 and that's largely that most of our customers. We're open for business again.
As I mentioned in the in the prepared remarks, the the throughput, which we've spoken about I think even back in Q3 continues to be something that that we're finding some balance and I think the one of the keys was the fact that while virtually all of them are open about three quarters are declaring that they are still per.
Forming with some operating constraints.
And I think that.
We've seen continued improvement in Q3, which is kind of what we'd call for a kind of progressive improvements from the mid single digits down of July.
We're pleased to actually see a little bit better than that which allowed us to finish flat, meaning yeah. We were a little above last year in the back half and I think that.
Those are those are the variables I think have put us in a position where we think we can provide some guidance again I think the the patient demand is also the encouraging one along with the fact that the.
Prescriber pool, expanding as a result of some of these education events are the offset that that we think kind of can fill some of the gap.
Where some of our current prescribers just haven't quite gotten back to their normal volumes yet. So I think it's just a couple of points of color Mike as Brent if he has anything he wants to add yeah, I would say hi, Margaret sprint by the way.
I would just remind you that.
Even though weve provided guidance certainly we don't have a crystal ball in terms of the impact of coal bed.
And so you know current spikes or additional spikes that you know maybe aren't on our radar certainly may provide some incremental headwinds to the guidance, we provided but based on where we're at right now.
The some of the fog is lifted and feel good about the guidance that we put forth for for the remainder of.
2020.
Okay.
Very helpful. So, let's maybe moved in virtual events that you guys put up some pretty big numbers in terms of question on Sundays.
And just I think 5000 number I heard over the course, the irrs so that yeah, well, let's talk about that both had an impact on 2020 and the ability of your.
Our sales reps to be able to hit all of these new potential account. So how should you commercialize around them, particularly as we enter 2021.
As I assume these should be bigger drivers as you go into next year. Thanks.
Yes so.
The virtual professional education has probably been one of the bigger wins for US. This year I think the marketing team and clinical team did a fantastic job of pivoting and making sure that we had the ability to produce really good scientific presentations and I think thats really a testament to why we're getting such good attendance.
It's not just about the convenience factor that it's easy to log into a zoomed from someone's home than having to go to a physical event either across town or across the country, but you know.
We continue to see really good draws because the quality of the presentations I think has been commensurate with the kind of interest that we've been able to generate.
We had in Q3, we posted about 25 events about one fourth of those were hosted by key opinion leaders. So these could be vascular surgeons radiation oncologists and the likes that presented based on their experience here is what you're looking at here.
How to diagnose here some of the scenarios. There is a lot of pictures of different kinds of patients. They talk about what the underlying premise is for one patient versus another and associate the visual component and I think that those that are attending it are finding it very very helpful.
The other three quarters of those were hosted by.
Our in house, what I'll call talent, but those are clinicians that happened to be on staff and share. Some of the same kind of educational content and I'm really of the mind that this has been such an important driver for us because it's helping us expand our way into new prescribers and Weve talked so much about this is a market driven.
Elements story, we still believe that the majority of patients. We can help have still not been recognized or treated. So this is an important part of expanding the universe of prescribers and while it doesn't necessarily show up yet on the top line, we know that it's filling the gap of those that are active prescribers, but not.
Able to see as many patients and Thats why.
As we commented on I really believe as the pressures of coal bid subside that having a broader roster of prescribers is going to serve our recovery to growth very well.
Okay, great. Thanks, guys.
Yes.
Our next question comes from the line of Matthew O'brien with Piper. So it seems your question.
Afternoon. Thanks for taking my questions I guess just to follow up on the on Margaret's question.
Maybe if you can just in terms of the increase in the face of prescribers can you give us a sense for how much bigger is it is it 20%, 30% bigger than you kind of came into the year and then how did you. How do you think about covering all those new prescribers DD more sales reps and are they have a higher volume prescribers are those the ones.
You really been targeting and then see come onboard or is it just more of a mix across the the volumes spectrum.
Yeah. Thanks for the question Matt.
As far as the number of prescribers I don't think we are ready to start to disclose numbers on new prescribers, but.
It's been meaningful clearly as we see the the throughput down as much as double digits with our current base. This has been an important.
Contribution to to our results.
As far as who is participating in what kind of activity are they able to generate you can imagine these are not the highest prescribers. Initially so typically when you get a new prescriber.
More often than not they are going to want to prescribe one or two patients that we've helped them identify that maybe they've missed or that they've seen recently and our familiar with our options and based on what they've heard and learned though often give us one or two patients and see how they respond as were able to demonstrate good outcomes.
It becomes a much more regular part of their Arsenal. So these are typically.
Prescribers that are going to be lower volumes initially like most that would come on but we would certainly expect like other prescribers as they continue to see the successes of pneumatic compression on their on their patients that they can be the you know the growth sources of the future I think another example is.
On the VA side.
Because we've seen the movement to community based outpatient centers instead of the VA centers now these patients are often being trialed through a primary care physician. So intentionally we hosted a an event targeted specifically to the primary care docs it was a bit more basic introductory.
Material than it would have been for the advanced vascular surgeon, but I think that you know trying to match up the right kind of content with the target prescribers is one of the things that's led to some of the success.
And Matt its Brian.
Yes.
Oh I was just going to answer the second half of your question, we talked about sales force hiring.
Productivity so.
I'll just give you a quick a quick rundown. So we finished September thirtyth I'd just over 250 sales reps out in the field, we are targeting to get to 260, which would be an AD of roughly 20% 28 reps in 2020, which is our communicated goal and so.
So we continue to invest in our commercial organization and we're thankful that our balance sheet allows us to continue to do that so.
Very helpful. Thank you and then as the follow up and I'm not sure. If this is for Dan or for Brett, but can you just talk a little bit about the ASCII touch strength that we saw in the quarter was really really good and I may have missed it you said in the prepared comments and then.
Brent again, trying not to look too far into into the future, but the street's modeling some pretty healthy growth.
21 offer 20 night numbers do you feel comfortable that with this prescriber, increasing with base kind of stabilizing that you could put up really good future growth back quickly or are you know our investors. They are sort of the street getting a little bit ahead of the recovery, we should expect that attack that as we look into next year. Thank you.
Yes, Matt Hey, it's Brent so, yes, you're right we did have a.
A really strong quarter.
With the entre product so onto it was actually up 26% or $1.3 million year over year in Q3, a faster recovery relative to entre was seen in the vascular clinics, which helped drive that kind of nice entre performance.
And just to keep in mind that vascular docs, primarily see patients with lower extremity lymphedema and a higher portion of those lower extremity patients receive our entre products versus the upper extremity patients.
And just an important note that Medicare was actually also up.
Quarter over quarter.
In Q3, a Medicare was up 30% or $1.8 million and just as a reminder, Medicare patients typically are required to try our entre 651 device before they become eligible for flexi touch so I think that.
In combination helped drive pretty strong performance in that Entre line.
And then just asked to answer your question relative to 2021 work, where we're just getting our feet wet with reinstating 2020.
Guidance so.
Our commentary is that we expect to return to growth in Q4, which we also reiterated that that was our expectation and goal coming out of our second quarter call though.
Right now we're not at a position to be able to provide much 2020 and 21 expectation so.
Very fair thank you.
Yes.
Our next question comes from the line of Brian Zimmerman with BTG. Please proceed with your question.
Great. Thank you and congrats on the better recovery I think then.
To.
Maybe just start with the V.A., a little bit Dan and brand.
Last quarter, we left and we are having some challenges that the reps getting into the hospital sites that are being pushed to the clinic. So how has that.
Change or how has how has that played out in the third quarter and kind of what are your expectations. There in that channel in terms of.
Getting back to those hospital sites for your sales reps.
Yes, thanks for the question Ryan.
So I think the news on VA is there's not a ton of news.
We havent seen much change in posture.
Over the last few months since Corbett said in I think just for all the listeners to remind VA took a pretty swift posture change once cobot was introduced and redirect it all their patients at least those outpatient that we would typically see to those outpatient centers and that's really where they continue to be seen I think.
Just.
Some specifics on Da's performance it was down a million dollars over prior year same quarter, but we were up 50% versus the second quarter. So I think you know while we didn't get are just going back to the 2019 levels.
Was pretty pleased to see that it even recovered faster than our overall business, which moved up 40% since second quarter to third quarter and I think some of that has to do with we're getting better acclimated add how to call on those see box as I mentioned, we've had some educational events targeted a bit more to.
To the earlier prescribers, meaning primary care physicians and I think.
With the addition of some efforts to try and recover that business I think those have been primarily the drivers.
Okay. That's helpful. And then just as a follow up for me.
Go back to second quarter, and you surveyed the accounts I think they dated or clinics, Dave that patient throughput was down.
Even as they opened I think that was consistent with what you saw through this quarter, but what are the implications of that in the patient base I mean as they wait for share are you seeing more severe cases kind of bill you did call out the fact that the Manhattan Wayne So does that create an opportunity for maybe more advanced patients or.
Higher level of pneumatic compression in this channel over the next quarter or two as you kind of work that demand down back to normalized levels.
I think that remains that's a really good question I think it remains to be seen the answer's, probably perhaps but.
I think there is a plenty of a Q available and if you're a vascular surgeon, we're actually seeing the fastest recovery.
They have a pretty broad mix of patients they are seeing some or surgical candidates as well. So I think they are interested in seeing the full mix certainly serves their business well.
But I think the good news that we've been focused on is simply the patient demand.
Seems more than adequate to fill their their days and I think that as they continue to expand capacity those patients that we can help will continue to grow and in the meantime, I really cant understand I really think it's very important for us to continue to expand this pool of prescribers and.
Again, while.
I think we will have a headwind for you know.
Some near term foreseeable future I think the fact that we're finding additional prescribers is going to be an important part of our ability to recover.
As we get beyond some of the cobot headwinds and and also to to recognize more of these unrecognized patients to date.
Okay Fair enough. Thank you for the question.
Our next question comes from the line of Chris Pasquale Guggenheim. Please proceed with your question.
Hi, This is Chris Hartstein on for Chris Special color. Thanks for taking the question.
Are you able to parse out what percent of Threeq volumes consisted of previously deferred treatments and do you expect the continuation of this dynamic that you work through your patient backlog in Fourq you. Thanks.
Thanks, I have a follow up.
Hi, Chris Brent on here.
And as it relates to your question on Q3 now.
No we haven't Oh, we.
We haven't disclosed the kind of profit patient mix for for Q3 ball volume so difficult to comment on that particular point, but continue to see strong.
Strong patient demand.
You know from from those that are interested in seeking treatment for lymphedema and so that's a that's a positive for us.
Currently being impacted as Dan said by patient through throughput, but are encouraged to see the recovery from the patient side for sure.
That's good to hear as a follow up so historically the current opex at a rate consistent with your topline growth, but given the size of the ones that you have opportunity you've invested throughout the downturn as you look at the next year do you expect opex to grow in London sales or the investments you've made this year you spend at a rate below that.
Yes, it's great question. So a couple of variables that are out there and by the way this Chris as Brent again, a couple of variables are out there we continue to invest in our commercial and sales marketing line of business. So there is a fairly sizeable opportunity that's in front of us just by evidenced by the.
The Tam that exist or the 5 billion dollar market share opportunity out there. So we're going to continue to take advantage of that so I think what you'll see is continuing investing in sales and marketing ability to leverage some of the other categories out there so think of it in GNS and reimbursement we've we've made the.
Primary investments in both of those categories. So we'll continue to spend but there will be leveraged that we'll continue to get out of those areas and I think Dan commented.
The on the Q2 call that there might be an opportunity to to step up our investment.
On a small scale.
R&D over the course of the next several years.
But continuing to drive.
Increasing leverage through 2000 and.
21.
Thanks, and can you provide an update on when you plan to publish the pair of head and neck studies and are you still on track to apply for new at an echoed early next year.
So.
There have been a couple of studies that have been published this year, thus far for head and neck.
In March there was one in and actually publish in head and neck 205 patients describing the improvement statistically significant as they were in the ability to improve swallowing reduce pain improve the ability to breeze and even perform daily activities. Then there was the RCT or.
The randomized clinical trial that we revealed in June.
That was hosted are done by Vanderbilt in Southern Illinois University that one was published in supportive care in cancer and it compared advanced pneumatic compression, namely flexi touch to standard of care that too has statistically significant improvements in swell in reductions in swelling in pain and the ability to swallow.
These are as I've said many times. These are not cosmetic issues. These are real patient issues that were trying to solve as far as.
How 21 will play out I think 21 will very much be a positioning ourselves.
To get the kind of reimbursement in place that will allow us to kind of lead into this even more aggressively.
I suspect 21, we'll continue to show growth in head and neck, but I don't think it will be a material driver of our growth in 21, I think it is going to be more a 22 factor and we think that some of the things that we're going to be doing to position ourselves with some of the key payers likely to come late 21 as opposed to the early part of.
That year.
Our next question comes the line of call Bob Dougherty and company. Please proceed with your question.
Hi, Good evening denim brand thanks for the update here.
Maybe I'll stick to the head and neck opportunity and in particular the RSC.
He.
It came out in June.
Of course, not the demonized increases after radiation therapy, which is when the patients were enrolled in this trial.
And as you've outlined that Theres, a clear benefit when using flex it touch, but I suppose I didnt fully appreciate the observation in the paper that.
Limped de not many times as president at the time of cancer diagnosis before treatment.
And it seems like there earlier.
Let the deem that address the better of course, so is there an opportunity to capture these patients earlier in the treatment paradigm, maybe you already have our AR and made it a future trial enroll earlier or is the key focus really just post radiation treatment.
So I think it's really good questions.
I think first of all it's worth noting that while we speak about head and neck I think the whole oncology space is a broader an important one for us. So I wouldn't just limit I think our enthusiasm to where we can help patients to head neck the whole.
Breast cancer survivor.
Patient pool, along with other cancers.
All can result in some kind of lymphedema I think as it relates to head neck, you're on to something and we've I've spoken to some practices, where they are actually trying to recognize it earlier in the benchmark. They are trying to establish what's the baseline for a patient immediately post surgical.
Even before they perhaps demonstrate symptoms and in doing so on their ongoing follow following of the patient it's easier to identify lymphedema symptoms earlier and I think we all know like most disease states certainly a chronic one like this the earlier one can intervene.
The more likely they are going to be able to.
Limited from becoming.
More severe so.
This is a really important one and I think that as we continue to demonstrate in a mass evidence.
We're optimistic that we'll be able to get other oncology programs to start to look for some of the markers for lymphedema earlier in their care cycle and I think those things can certainly lead to managing the disease more effectively.
Got it that's helpful. And then secondly on the same paper I noticed adherents add to the twice daily regimen was was low basically most patients who are in the treatment arm only use flex touch once per day not twice yet the results are still highly significant so I'm just.
Curious what the solution here as it is once per day okay.
Or can that time per treatment be reduced or is education to improve patient compliance to twice per day.
The more important issue just kind of curious how you're thinking about this thank you yeah I would say, we don't have a horse in the race on how many times, we want them to use it what we want to do is make sure that the use of it is effective and produces the results. So you know part of the reason that we started out with smaller numbers is to start to understand a bit more about the diner.
Amex, who responds et cetera, and then it allows us I think to shape broader studies with a bigger in to make sure that we've learned enough. So we can actually ask the follow up rate questions.
Examining what's the right number of treatments per day I think is the kind of thing among others that would probably get shaped in a subsequent protocol based on the learnings from some of these pilot studies.
Right makes sense, okay, great. That's helpful. Thanks for taking my questions.
Yep. Thanks, Scott.
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Good afternoon, Dan and great. Thanks, much for taking my question wondering if you could just update us on the status of the TTM lawsuit if possible.
Sure happy to do that Mike. So I will tell you that there hasn't been a lot of new news since our Q2 update probably the biggest.
Update is on September eight we actually filed a motion for partial summary judgment. So there's two things that are pending judge decision at this particular 0.1 is.
They they meaning the plant plaintiffs back in May.
May actually put in a motion to dismiss our counter claims and then on September Eightth, we filed that motion to to for partial summary judgment. So those are the two things that are actually pending.
Decision by the Judge you know right now no change in the outlook relative to when it goes to trial. So we're expecting a trial date sometime in late Q1. Early Q2, So think of April or May of 2021, and obviously as you might expect.
We think the claims are without merit and we continue to vigorously defend them. So.
That's the update on the key Tam lawsuit.
Okay very helpful that meeting I think.
You bet. Thanks, Mike.
This does conclude our conference for today. Thank you for your participation and have a wonderful day.
Thanks, everyone.
Okay.
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