Q3 2020 SI-BONE Inc Earnings Call
Good afternoon, and welcome to EPS Eyeballs third quarter earnings Conference call.
At this time, all participants on a listen only mode.
We will be facilitating a question and answer session towards the end of today's call.
As a reminder, this call is being recorded for replay purposes.
I would now like turn the call over to Matt back So on the Gilmartin group for a few introductory comments.
Please go ahead.
Thank you for participating in today's call.
Joining me are Jeff Dunn, President and Chief Executive Officer, and Bar, Francis Chief Financial Officer, and Chief operating officer about $5 earlier today, It's I've been released financial results for the quarter ended September Thirtyth 2020, a copy of the press release is available on the company's website before we begin I'd like to remind you that management will make statements. During this call that include forward.
Looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Act of 95 any statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements. These forward looking statements are based on the company's current expectations.
Inherently involve significant risks and uncertainties. These risks include include the impact the COVID-19 pandemic will have on the ability and desire of patients and physicians to undergo procedures using the i. fuse implant system. The duration of the call that 19 pandemic and whether the COVID-19 pandemic won't recur in the future.
Other forward looking statements include without limitation, our examination of operating trends and our future financial expectations, such as expectations for hiring surgeon training and adoption active surgeons new products clinical trial enrollment and reimbursement decisions are based upon our current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by those forward looking statements will prove accordingly, you should not place undue reliance on these statements for a list and description of the risks and uncertainties associated with our business. Please refer to the risk factor section the most.
Recent quarterly report on form 10-Q filed with Securities Exchange Commission on August 4th 2020, I say bone disclaims any intention or obligation except as required by law to update or revise any financial projections or fight or forward looking statements, whether because of new information future events or otherwise. This conference call contains time sensitive information.
Okay and is accurate only as of the live broadcast today November 2nd 2020, and with that I'll turn the call over to Jeff.
Thanks, Matt Good afternoon, and thank you for joining us before we get into the details of the quarter I want to take a moment to again. Thank members of the health care community in a central employees, who continue to work diligently through Cobra Dark gene well the world cautiously return to normalcy.
In accordance with our pre announcement on October <unk> total revenues for the third quarter was a record $20.4 million.
26% increase compared to the third quarter of 2019.
This is the first time in our company's history, where we have exceeded $20 million of revenue in the quarter.
During the quarter. We also surpassed 50000 excuse procedures performed by more than 2200 surgeons worldwide.
As an organization, we continue to execute at a high level, which is reflected not only revenue growth, but also our ability to control expenses and manage operating losses.
As we were forced to adopt during the early days of the pandemic one of the most impactful initiatives that has increased surgeon utilization rates and reduce costs has been the rollout of the affordable simulator surgeon training system.
<unk> innovative training platform eliminates many of the barriers that we historically had to overcome prior to the COVID-19 pandemic.
Medical Affairs team can now trained surgeons on demand bypassing the cadaver lab, which eliminates radiation exposure.
EPS and shortage.
Additionally, there were no trouble requirements on the part of the physician and wraps, which significantly reduces overall costs and logistical planning well. This has been a positive for the company from an efficiency perspective. The key driver has been the positive reception from the surgeon community.
Specifically, we trained over 100, new surgeons during the quarter using this new system.
Which was well ahead of our expectations as well the versatility feedback capability and male female and Dysmorphic are not anatomy options combined with the ability to train on several relevant procedures has been extremely well received.
The number of children trainings is ramping and we expect just remarkable capability will attract many more surgeons in the future. We're targeting approximately 7500 surgeons in the United States of which 1500 have been trained and completed a procedure. So we have a long way to go even New York City.
Yes, Dick reception of our simulators over the last 90 days I mean, easy, which surgeons can be trained it has allowed us to more effectively target new surgeons and reengage with inactive surgeons as a result, we plan to add up to a total of 25 training simulators by the end of 2020.
One.
Oh virtual education series, that's also been a very well she program over the course of the pandemic most notably in July we hosted Dr., Gary Dick's, Merrell and brain spine and pain.
The program on SRT joint diagnosis infusion attracting over 100 attendees to date, we have completed 38 programs and have an additional four programs plan through the end of 2020.
On October Eightth, we hosted a surgeon panel in conjunction with the North American spine Societys annual meeting featuring Dr., Peter Wayne from the Yale School of Medicine, Dr., William Tobler from the Mayfield brain and spine clinic, Dr. Brock aside from Panorama, orthopedics and spine and Dr. Robert.
Slide from Scripps Health.
The webinar was attended by over 50 investors and analysts and highlighted the underpenetrated opportunity for minimally invasive surgery, that's like your infusion as well as what the future might hold for the procedure.
Webinars also address the potential for the bedrock platform to treat patients suffering from cattle spine deformity.
We have also continued our progress with residents and fellows programs at Rush you see yourself.
Deaconess, Boston University and other academic medical centers. This brings the total number of academic medical center training programs to approximately 50, which resulted in the training of over 200 trained residents and fellows.
It's also important to note that 20 of these major academic centers are now using bedrock.
We're also engaging and projects to scale the business, which more recently have included automation initiatives involving purchasing and hiring.
We will continue this focus in 2021 with projects and automated sales order processing and field inventory management.
The goal of these projects is to enable us to scale the business more efficiently leading to profitability as revenues grow.
We could not have accomplished our Q3 results with or without widespread reimbursement coverage for minimally invasive aside your infusion in the United States, where we now have approximately 300 billion public launch on August 19th Medica and.
Excuse me.
Opted in high fuse exclusive coverage policy based on the strength of our clinical data compared to other solutions for minimally invasive pests I joined fusion better.
Amedica is one of the largest commercial payers in Minnesota with an estimated 1.1 million covered lives overall reimbursement has turned into a tailwind for the company with broad coverage across the United States, including 35 coverage policies exclusive to the high teens family of products.
Lastly, we completed a follow on offering in October yielding net proceeds of $71.9 billion. We believe that the proceeds from this offering combined with our cash and marketable securities of $132 billion.
We have had we had at the end of the third quarter will allow us to continue focusing on driving sustainable growth specifically, given the improved reimbursement landscape, including expanded insurance coverage from private payers.
As well as the 27% increase in surgeon pain, but we believe we're in a unique position to expand the market for minimally invasive sorry join fusion we.
We estimate the U.S. market in 2019 was a little over a $100 million with the potential to be over $2 billion per year in the future.
As the current market leader, we will be the beneficiaries of market expansion and to capture this opportunity we plan to invest in a number of growth initiatives in 2021, we.
We intend to grow our field salesforce leverage our simulators to train surgeons and best in patient awareness expand product offerings and Secry secret iliac joint fusion.
Obama and deformity and engage in process improvement and systems initiatives to scale the business to profitability.
Well the majority of these investments will be made in 2021, it's important to know that they will be systematically introduced throughout the year. As a result, we do not anticipate these investments investments, having a material impact on our 2021 revenue forecast.
To conclude we are pleased with our third quarter record revenue performance and 26% growth in the face of COVID-19 challenges. Our sales team continues to operate normally but we remain cautious about the second half of the fourth quarter, given the uncertainty surrounding flu season and the resurgence.
A COVID-19 cases, however, we believe our recent results support the underlying momentum in our business from improvements in the reimbursement landscape and post IPO investments in the business that will carry into next year with that I will now turn the call over to lower Francis our Chief Financial Officer.
Our chief operating officer to provide more detail on our financial results.
Thanks, Jeff.
Third quarter total revenue of $20.4 million increased 26% compared to the prior year period.
You Es sales of $18.9 million, which accounted for approximately 93% of total revenue in the quarter.
Increased 27% compared to the prior year period.
International revenue of $1.4 million increased 9% compared to the prior year period.
[noise] monthly revenue trends were more evenly distributed throughout the quarter with July being our strongest month driven by additional rescheduled cases from the second quarter of 2020.
We believe that we ended September with a more normalized backlog. We also believe backlog contributed mid single digits to growth in the quarter.
We ended the quarter with 59 direct sales reps and 57 clinical support specialists.
Weve accelerated our hiring of field personnel and are aiming to finish the year at 63 to 66 direct sales reps.
And 58 to 61 clinical support specialists.
Additionally, we ended the third quarter of 2020 with a record 567 active surgeon up from 455 in the second quarter of 2020.
Gross margin for the third quarter, 2020 was 87% compared to 90% in the third quarter 2019.
The decrease in gross margin was primarily due to an increase in inventory write off and higher cost of operations to support the growth of the business in the third quarter 2020.
Operating expenses increased 5% to $26.5 million in the third quarter 2020.
Paired to $25.1 million in the third quarter of 2019.
Costs increased due to higher employee related costs and stock based compensation due to the higher headcount mainly from sales hiring.
We also made additional investments in research and development for our new product launches planned for 2021.
The increase was partly offset by the reduction in general and administrative expenses in the third quarter 2020.
Primarily due to the accrual of estimated settlement costs of the TCPA class action lawsuit, a $2.5 million <unk> third quarter 2019.
Our operating loss for the third quarter, 2020 was $8.7 million compared to an operating loss of $10.6 million in the third quarter 2019.
Our net loss was $9.5 million or 33 cents per diluted share for the third quarter 2020, as compared to a net loss of $11.3 million or 46 cents per diluted share in the third quarter 2019.
Cash and marketable securities were $132 million at the end of the third quarter.
To further strengthen our balance sheet, we completed a follow on offering with net proceeds of $71.9 million in October of 2020.
Based upon our current operating plan, we believe that our existing cash and marketable securities will enable us to fund our operating expenses and capital expenditure requirements.
While encouraged by the rapid recovery in our business and growth in the third quarter, we remain cautious about the fourth quarter given the uncertainty surrounding flu season, and resurgence of COVID-19 cases, and its potential negative impact on EPS fees and hospital globally.
It's also important to point out that the fourth quarter of 2019 was our strongest growth corridor as a public company at 27%, making for a difficult comparison year over year.
With those caveats, we are reiterating our full year 2020 guidance range of $73 million to $74 million representing growth of approximately 8% to 10% over 2019 revenue.
I'll now turn the call back over to Jeff for closing comments.
Thank you Laura and closing our confidence in the opportunity in front of us for the business and for shareholders is stronger than ever.
With the additional funding we are putting in place an accelerated investment and growth plan.
Most importantly, it will help us achieve our mission to help many more patients direct to patient initiatives increased surgeon training additional field sales personnel to educate and support the surgeons new product development and automation and scaling initiatives are the five key focus points of aren't best.
From strategy.
With reimbursement broadly established in the U.S.. We believe that now is the time to invest in substantial growth in our market and as the market leader, we and our shareholders will be the beneficiaries of that market expansion. Thank you for joining the call today, we will now open it up to questions operator.
Thank you Sam.
Yes. Good question you need to press Star then one of your telephone to withdraw your question. Please press the pound Sterling.
Our first question comes from the line of David Lewis with Morgan Stanley. Your line is now open.
Good afternoon. Thanks for taking the question just a few quick ones from me maybe.
Sure I'll just start with you on resurgence and I think your comments are pretty much on par with what most companies have suggested here into the fourth quarter I Wonder if you could help us out a little bit with you saw another in November with kind of October trends relative to September and we appreciate resurgence is likely to be a factor, but has resurgence been a factor yet in terms.
How you think about your your your business here in the fourth quarter.
Thanks, David.
You know obviously, we just finished the month of October from a general perspective, you know we did talk about resurgence.
It's very similar to where we saw a hot spot.
In the third quarter, where you can see you know certain cases that that will be a cancelled.
But then they try to pretty quickly get back online and so in terms of what weve seen starting into the fourth quarter or the fourth quarter has started out in a way that's very similar to what we saw in terms of trends in the third quarter.
Okay and are you comfortable saying if October was a sequential improvement relative to September.
So what.
What I'm, saying is that right.
Justin.
Okay.
What I'm, saying, where there was a consistent.
And we even I didn't even make a comment in my pre stated remarks, where we talked about in fact from the perspective of the cadence in the third quarter July actually was the stronger month compared to August and September and the reason.
For that was we do believe that we worked through all of the remaining backlog of.
Those cases during that month.
And so yeah, we saw more of a normalized business in August and September and continue to see those trends into October Jeff any other comments from you.
I would just add that you know, we're continuing to see strength in the U.S., we have David specifically to your question.
Have we seen any resurgence where.
We've seen a little bit in your Oh, we really haven't seen anything that the U.S. to speak up.
Okay, very very clear from from my perspective.
And then Jeff look the equity offering you.
You may have surprised some rights you had a pretty good balance sheet and you raised a lot more money, so you're well capitalized and.
Let me describe some areas, where you're putting that money to work surgeon training simulators, but if you could quantify some of those investments and appreciate they won't hit 21, but I think about.
You, adding maybe 15 people to the commercial organization in and Twentytwenty I mean could we be talking about a situation where that that type of number doubles or triples, you get at 30 or 45 people to the commercial organization.
In 2021, I know you gave us the simulated number but just sort of curious how the commercial reps could expand and then one quick one for Laura and I'll jump back in queue.
Well I mean, as Laura said, you know we see this year alone and they will get up to you know sort of 63 66 reps and then up to 58 to 61.
Clinical support specialists, we do see David a significant increase Uh huh.
And in the field sales force compared to this year.
Uh Huh, we wouldn't to raise the money if we didnt really feel it was time to step on the gas so.
I'm, a little reluctant to give out an actual number its or like giving out the <unk>. The guidance right now for 2021, but suffice it to say the accelerated plan as we call it.
Calls for a pretty aggressive hiring.
More more regions.
And.
You know significant investment there so.
We are going to be a pretty aggressive on the rep side as well as the product pipeline as well as we mentioned getting up to 25 simulators and.
Oh Wow.
We've continued to see on the simulator side.
Tremendous strength and interest from the from the surgeons into October.
So we're we're hyper encouraged with the.
Oh, the bookends of sales reps and training Oh, and then you know we are going to layer in.
No more direct to patient.
Capabilities next week was actually going to start some some test market TV ads that we've been testing on radio and are encouraged by that so we think those three things sort of set up all together to really have a great 2021.
Okay, and just last from me I'll jump back in queue largest I mean, I know it's early but.
Annualize your fourth quarter number I get something in the low ninetys and youve been showing some sequential momentum in the business. So I look at street consensus for next year in sort of 94 ish range, which came much about frankly, the annualized rate in the fourth quarter, if I assume sequential improvement.
Any comments you'd be willing to cut off from 21 in terms of where where the.
The street fits or frankly any parameters on 21, we should be thinking about for our models. Thanks. So much.
Thanks, David we're obviously looking very carefully at the fourth quarter of 2020, and you know the the way that our business works is there is some seasonality in the business and and typically the fourth quarter is the largest quarter and then we normally see a little a little bit.
That.
To have a decline into the first quarter a jump up into the second to relatively flat third quarter and then another jump into the fourth quarter and so our intention is to to provide more guidance on our next call.
Because we really would like to see where this fourth quarter ultimately ends up but we are we are bullish on the business. We're seeing all of the investments that we made in the business continued to drive strength even in this difficult environment, we are going to be making additional.
Investments.
With the proceeds from the offering.
As I said in my prepared remarks, we we don't expect for that to have a significant impact on 2021, but we think that all of the investments that we made especially in 2019 given that it takes around 12 months for our salespeople to become productive that that those are going to to.
The bearing fruit for us on next year.
Thank you. Our next question comes from the line of Bob Hopkins with Bank of America. Your line is now okay.
Hi, Thanks, and good afternoon, I'm so sorry.
I apologize for the the short term oriented follow up but it's a unique environment. We're in here. So it sounds like in the third quarter that.
You know July was the best month.
So that implies that you know to get to the the Q4 guidance you do need to see some kind of nice some nice improvement from from current trends to get to the midpoint of that Q for it.
Implied guidance that you're giving is that is that correct.
No and it actually doesn't and if the in my prepared remarks, we grew by 26% in the corridor and as I said that if you took out the growth that we saw from rescheduled cases that growth accounted for mid single digit.
So so let's say with without those rescheduled cases, we ran approximately at the 20% range in terms of our growth for the quarter, just new cases, and the guidance that we provided is anywhere from 11% to 15% growth for the fourth quarter in order to get to the numbers that that.
We provided.
So we as I said, we continue to to see trends that are similar starting into the fourth quarter and yeah. We are we are cautious because of because of coal that but the underlying business is performing quite well.
So you're you were talking about similar in terms of year over year growth I was thinking more in terms of sequential revenue dollars I'm sorry.
No year over year growth is what I'm, referring to okay. Okay.
And Bob most Oh said that most of that those rescheduled cases were in July there was almost no rescheduled cases that are effective August and September and so you know.
If you take that sort of mid digit mid single digit.
Call it 5% ballpark ish and take it off the 26% you can.
You can sort of figure out.
The math there so September for our targets in September we're still very good months, but there was a little chip in June and July.
Got it and Jeff How's How's bedrock doing relative to your expectations and your thoughts on continued momentum with that product.
Were extraordinary extraordinarily bullish we've said publicly Bob that word more more than we are in 20 academic institutions.
That's sort of a base number.
We are we are seeing.
Yes, great interest in that whole thing Weve done cases, you see yourself and Mayo and and.
The numbers continue to be ahead of our expectations, we're not going to break out the numbers right now but.
The two pieces of that as we've talked about both the trickle down effect.
Getting us into these academic centers as well as some revenue from that both of those things are ahead of our expectations. So we expect great things from bed rock in 2000 or 21.
As we've talked about the product pipeline.
There is more coming in that area, which we think will.
Compressed a lot of people.
And continued momentum momentum in adult deformity.
As well as trauma and base aside George fusion still we think the vast vast majority will be up our revenue because I joined fusion, but it's been a just a great addition to the company's portfolio.
When does the incremental pipeline visibility come by Jeff.
The the first product Oh will come in the first half Bob.
But midway.
Probably closer to the early part of Q2.
And the second product line or will be launched in the earlier part of the second half.
Over the year.
So.
There's a good cadence there to roll those out Oh God.
Oh.
Both of those things are very much on track.
Okay.
Thanks very much.
You're welcome Thanks, Bob.
Thank you. Our next question comes on the line of call Rose with Canaccord Genuity. Your line is now open.
Great. Thank you very much for taking the questions.
So I just wanted to ask just more of a general question just given you increased the war chest with the recent financing.
Obviously, you know you're you've been executing well from a trend perspective, just trying to understand how we should think about and the return on investment from the incremental investments you're going to make I know you. Jeff you talked about maybe laying the ground work in 21 for you don't realize gross and 22, but I'm just should we expect to see an acceleration from these growth levels is it going to.
Allow you to sustain the current growth levels for a longer period of time.
Just.
From a high level, how you view that those investments and then secondarily.
I'm from a sales rep perspective, one of the areas we see.
You smaller companies, sometimes you a struggle or have a hiccup is when they make material investments or expansions in the sales organization, you're dividing territories, adding I'm just a lot of humans at the same time, how do you expect to make sure that you manage through that process and maybe don't realize some of those issues that that some of the predecessors in the space have.
Yeah. So so there's really two questions there call. Thank you.
The first question at a high level is I think most people do or.
If I can be bold should think about us as a sort of 25% growth company you know.
In the fourth quarter last year, we were 27% growth we were 26%. This this last quarter you know you could take out a little bit, but if there wasn't cold we probably would have been at 30%. So at a high level. We are thinking about all these investments that's the direct to patient investments.
The surgeon training investments the salesforce investments in the product investments.
Estimates so that we could get from a 25% growth company.
Two or you know call it a 35% growth company.
Exactly when that happens too is the question now as we said earlier you know some of these things and you know as you know it takes time with the sales force or the simulator training stuff is going better than we had expected you know we'll get into guidance next year, but at a very high level given how.
Big opportunity years, Oh, absolutely sure we are about the opportunity.
The whole goal of this this investment strategy just to create a friction for more frictionless growth environment and and as we've talked about that goes with it.
You know, making sure the surgeon payment is there so they're happy with that making sure that the coverage is there. So we don't have to spend four hours, making sure. They can get trained very easily instead of getting on a plane to go someplace else that good trade within a few days, making the whole process simpler and easier and that obviously.
Comes with more products, so that they can do more things more effectively and we just philosophically believe that that if you create a more frictionless environment for the surgeons. Because this is a big market that you can grow the market overall and that we will.
We will be.
Be the beneficiary is there and so we're really thinking about these things whether whether that happens later later next year or into 22, but it's really how do we how do we make these investments and grow the market at a higher growth rate in the future and so that's philosophically.
Where we are in that.
Oh.
And your second question I didn't write it down.
Just around your <unk>, the the with the expansion of the sales organization.
In 2021, just your thoughts about managing through that to make sure there's no potential pickup or slowdown in growth in the interim.
I don't think we could have a better guy at the helm or gal at the helm and Tony Recoup Roe.
I think that you know as you know Tony grew that type one sales rep.
Sales team basically doubled it every single year for multiple years.
I think we probably knows how to do that is senior management team, including the VP of sales of U.S. toward Walmart hits.
Hysteria Vice President many of them were a kyphon they understand the sensitivities the importance of supporting our current sales team, making sure the right financial incentives are there. The when you when you do have territories that get changed that we put in financial.
Protection for some period of time or overrides with those kinds of things and manage that like we care about every single sales reps in the field and we do because there.
There are powerful terrific very talented group and so I have tremendous confidence and Tony and his management team to work through that and I think as well.
The sales team in the field understands that.
In our discussions with them are very frequent that we're trying to grow the overall business, how do we get to 300 million 400 million $500 million Submarket.
And they know that this is coming it's not some secret we don't surprise people.
And so our confidence level, there is really really quite quite good.
Thank you very much for taking the question.
You're welcome.
Thank you. Our next question comes from the line of Dave Turkaly with JMP Securities. Your line is now open.
Great. Thanks, you called out faster adoption of high fees three D.
And your gross margin commentary and I was just wondering.
Is that everywhere now and then could you also comment.
On any impact that might have had on SP or anything else Manhattan NSP Uh huh.
Given where we stand with Cove it today. Thanks.
No worries you want to take this one.
Yes sure so.
We have seen a very strong uptake of bi fuel three D. I talked about it from the perspective of the gross margin in particular, because we did have some write off.
I fuse inventory and.
Quite frankly, we were originally planning for approximately 90% I use three d. sales, 10% Ifyou sales and it's closer to 95.
Hi, so there's been even a more successful rollout of that product and then we had anticipated.
In terms of ASP, if it doesn't have a really significant impact on ASP.
So it's it's it's been a good transition of the business.
And I guess as a quick follow up you know at your NASS event, you know the doctors are talking about.
Oh pelvic fixation failure rates back out provisions and the like and I guess I would just like to get your thoughts sort.
Sort of where that stands today, because we heard a couple of different numbers from a couple of different people, but it.
It certainly seems like the competitive devices have more issues. Thanks a lot.
Well I think you have to break it down Dave it into the different areas. You know that's probably join fusion Oh, our revision rates that are published out there on the first 11000 cases and as you know we're over 50000 cases.
It was a little over 3%, most most revision rates in spine or over 10%.
More currently with IPH use three d.
Because of its prosody and its characteristics the learning curve.
In a more seasoned sales force.
Our our revision rates are running a little more than 1%.
So you know.
Some of the competitive products.
I I can't imagine that there is there are with those kinds of rates you know they have nothing published but I think it has to do with the tremendous ferocity of the product it's fusion capabilities I and so I think that the compared to the competitors and this I joined fusion Ah that's very.
Very very positive when you move to and I think you're referring to Bobby slack.
Talked about some of the breakage levels of the revision rates at the bottom of adult deformity and that the I. SSG study.
Which is the.
Really some of the top I guess, it's about 30 top surgeons that are very very very focused on clinical evidence. The revision rates, we're running a something like 27, or 29% and I think with bedrock that.
You know with a 30% increase in.
In stabilization.
Uh huh.
No, we're very confident and I think the surgeons are very confident that that those revision rates Oh, we're adult deformity cases, it's going to go down so.
I think all of your talk to surgeons and.
You know it's.
Like putting the foundation of the bottom up a flagpole with people, but a really good one you're going to you're going to not have a LIBOR kind of action at the bottom of flagpole. So it gets very natural and I think.
It's it's having a very positive effect a real time, we're investing in the Sylvia study.
Where we're now over 25, Oh patients enrolled in that study and and we're trying to get to 50 Oh.
Or maybe even by the end of the year I don't know I don't think we'll get there, but but we might so we're investing in that clinical evidence because a we think clinical evidence is the foundation of of almost everything.
Thank you.
You're welcome.
Thanks, David.
Thank you.
Next question comes from the line of Brandon Folkes with Cantor Fitzgerald. Your line is now open.
Hi, Thanks for taking my questions and congratulations on a great quarter.
Maybe first and I apologize if you did.
Onto this ad.
And then.
Reimbursement did they provide any feedback in terms of why you were not included in the policy updates and then my second question I saw somebody Francis maybe can you talk a little bit about your potential for direct to patient marketing. Thank you.
Sure.
So on the anthem piece.
As we talked about Britain.
We certainly expected them to do something not because they told us what they told surgeons and and so I guess, they just didn't get to it whether that was a covert thing or or dragging their feet. I don't know we have had communication that it's under review and.
No it will be it's going to be reviewed in the future I don't know, whether that's Q1 or Q2 or Q3 next year.
Reluctant to even say Oh I have a very good feeling we've been told what the timing is but I'm I'm reluctant to say given that they missed.
Missed deadlines, even though they've communicated I think you know with 115 payers in the United States and 300 million lives, we'd have to look by that.
You know we grew at 26% and we can't control that anymore. The clinical evidence is spectacular and there's no earthly reason why they shouldn't be covering and I think it's just a question of time and.
No I know that.
Were not involved but I know, there's multiple patient lawsuits against the anthem.
And we hope that they come to the right decision to help these patients.
As to the direct to patient initiatives.
We're early on in that.
We do think that that it's oh, when we when we've gone out and talked to a lot of patients.
And done some homework, we think that there's a huge number of patients out there, but there is really a lack of understanding out there.
Among the broad population of two or 300 patients a year that there is a really good solution.
And so I think the we're optimistic about the direct to patient initiatives.
We're gonna pilot starting on TV.
Next week I think it's November nine.
In a few cities and we delayed that because of the election, the elections and the cost in many cities, particularly swing states cities or political ads, but we're going to test that measure the heck out of it but we think it's or the time. Its now you have a good coverage of the patient can go.
So your Doctor and knows there's a lot of surgeons that they can go to a spinoff of time from these direct to patient initiatives they call us or they call. The call center that we have set up.
And and they asked you know.
Where do I go in and we give them.
Multiple choices in in any area.
And we're hoping that that goes well and we'll talk about that more in the future.
Great. Thank you very much.
You're welcome.
Thank you. Our next question comes from the line of Telecom with <unk> Securities. Your line is now open.
Great. Thanks.
Thanks for taking our questions you guys mentioned I think in response to a kyle's question that we should think about fiberlan as a 25% growth company going forward. So I mean, it's 25% sort of the low bar and what we should tick.
I would expect from a guidance perspective in 2021, and I just want to make sure I'm clear on that comment and then I have a follow up on the training simulators.
Yeah, maybe I wasn't clear Kayla, Oh, I think we're at what sort of a 25% kind of growth company now no you know if there's cobot resurgence in the fourth quarter.
Who knows exactly but you know where the 27% in the fourth quarter last year and 26% in the quarter that we're talking about Q3 of this year I think of US is sort of in the range of a 25% growth company now and are there through the investments there were talks.
Thing about is how do we improve that growth rate or in in quarters in the future.
And Kayla, if you think about what we did since we went public the first quarter that we were a public company we grew by 13%.
We obviously made significant investments in the organization and in in some way similar to to what we were doing at the time that the company went public certainly with the hiring of people in the sales force the training of surgeons, although now with the simulator. It gives us the ability to train a lot more surgeons more wrap.
Thirdly, inefficiently, new product development, we were working on reimbursement, which really is not much of an issue for us any longer. So you know as Jeff said, we grew from that 13% of first quarter, we were public growth perspective to 27% in Q4.
2019, and so the question for US is how do we continue to grow beyond that point in time or beyond that that percentage and we really know how to do it what what's what's.
Where we're at as a business and a big reason why we didnt raise the additional financing is with the challenges that we have with reimbursement. The it was a little more difficult to predict exactly what was going to happen. When we placed a new sales were up there there were certain sales reps, where they were able to.
To perform and and hit the ground running very quickly when they entered a territory. There are others, mainly due to reimbursement whether it was the size of the payment for the coverage that was in that particular territory.
We had variability in how those sales.
Sales reps were able to perform and what we're seeing now that we have the strong reimbursement that we do is we see this reproducibility.
The puts the sales rep into the into the field that sales rep is going to start by developing relationships with surgeons getting those surgeons to training getting them to their first case and ultimately getting them regularly diagnosing and treating patients.
And so what you can do and you know your model really shows. This is how do we continue to to grow the business with that sort of Oh process in front of us and it's it's partly the hiring of additional sales people in training Surgeons and then part of that is just grow.
During the productivity as well so it really gives us the ability to say you know how much do we want to put into this business in order to drive future growth and accelerate growth beyond where we're at currently.
Okay that makes a ton of sense and then I guess just a couple on the training simulators.
I mean first you know can you talk about sort of the cadence of how these simulators will be rolled out in 2021, it sounds like they'll be kind of scale throughout the year I'm pretty evenly, but just want to make sure I'm clear on that and then you mentioned hiring more reps, but I imagine you know these simulators add some layer of efficiency to the business. So I guess.
How big do you think your salesperson ultimately needs could be longer term just in order to address sort of the broader opportunity again with those efficiencies in mind. Thank you.
I'll take the first question I'll give lower than second so the simulators or will the plan is to roll them all out in Q1 and a bit into Q4 and in Q2, so no they're not going to be scattered keyla. We're early investing on those things so.
I'm 90, plus percent sure that we will have them all out in the field by the end of June at the latest.
So.
Yes, that's the first question I think Lori you want to take the second around service sites as a service and from a sales rep standpoint.
Yeah, and I think he'll tell you where you were getting at efficiencies in the business. So when we train surgeons that the sales rep is definitely involved but primarily involves our professional education organization and so what this does is there.
There there around 6000 surgeons in the United States and that our target for us that have not yet been trained and so what this allows us to do with the simulator is is to more rapidly train those surgeons in terms of the productivity of the sales force, we still look at it in a very.
Similar way, however, so its and its with just a.
Sales rep in a territory, we think that they can do approximately a million and a half of business and then with a sales rep plus the clinical support specialists. They can do around 2 million a business and the bottlenecks are there's there's two different bottlenecks and one one is just covering case.
It is because we do have a either a wrapper clinical support specialists and pretty much all of our cases. The other one is just.
Surge in coverage and making sure that that the sales reps have the the bandwidth in order to cover it be the surgeons, who are performing the procedure is in their particular territory. So when we when we think simplistically about a business.
Our business and the size of the sales organization, we usually think about a business where you know, let's say, we're doing 200 million of business. What we would have as 100 of our sales reps are with that size the business and they would be supported by 100 clinical support specialists.
The only other thing I'd add just to give you some flavor Carolyn and others on the simulators is we're not only training surgeons and I've talked about a new surgeons I've talked about you know the the challenge of.
You know getting a surgeon on a on a on a plane. These days getting a surgeon owner or on a plane and taken to doing and how far it are there there are.
Office.
We're also seeing a significant number of what we would call inactive surgeons getting trained with this new simulator was very difficult to predict how that would be received but.
You know.
A something like a.
30, 40% of the surgeons that are.
Being trade with the simulator or are coming out of.
An active surgeons, so they've gotten used to it or maybe they didn't have coverage, maybe they didnt like the pricing or the payment whatever it is so there's the field team the medical affairs team is.
He is very focused on a significant number of surgeons out there who are not reactive group and can we put up a very good number in Q3 on active surgeons, but we've trained a lot more than that and so getting those people back and active.
It is also a major initiative in addition to trading lots have been surgeries.
Okay.
Thank you.
Next question comes from the line of David Sasson with Needham. Your line is now open.
Hi, Jeff and Laura Thanks for taking my questions I, just had a follow up on the simulators.
You noted you trained over 100 docs on on the simulators you have in the field now I was just wondering how many is that and how should we think about you know this incremental 25 simulators in the field and from a training perspective into the.
Pool 7500 docs.
Yeah I mean.
We.
Lets say less than a handful out there now so you know.
I don't think that we are ready to put out guidance for a number of active surgeons are surgeons trained.
EBIT for 2021, but obviously going from a less than a handful to you.
25, and so there'll be a couple of good reserve.
In transit et cetera, et cetera, but we plan on pushing those simulators out into the regions.
And adding to the medical affairs team to.
Help with the training out in the field so oh.
Math wise, you could do a little bit him out there and.
In October we saw continued momentum with the simulator. We don't we don't think it was a hey, let's go this is pretty cool and all of a sudden there was this big blip in.
In Q3, I think we're going to see continued momentum.
With the training and we have seen that in October already.
Of course, you know as we've talked about you know just because you train a surgeon that doesn't mean that the patients coming in and getting on getting their surgery right away because of the policies that are out there because patients have to have six months a conservative care.
They're not going to and it has to be documented it takes time and pets back to Kayla question. You know our push is to get those things out there as soon as possible given manufacturing lead times, but push them into the first half of next year. So perhaps we could see some benefit.
In the back half of next year.
So in a significant way.
Great Yeah that's.
That's helpful and then just a question on.
Imbursement or to the dock.
Fees.
The the proposed conversion factor I think is set to decrease and I. If I was looking at it correctly. The rvs for US I joined fusions are kind of flattish. So just I know you are making a ton of investments for next year. How are you thinking about that reimbursement dynamic gili.
Do you think these you know.
<unk> will impact the growth trajectory at all.
I don't think so at all I think it's all relative on I think surgeons.
Right and I know all of your talk to Surgeons I think third ones think very highly of the procedure or the patients do well the clinical studies back that up and I think.
I.
We've talked about I haven't heard and I don't think lowers heard or.
Anyone say hey, the payments are too low this year since since a change on January onest and.
A few dollars here or there doesn't make any difference I don't think of a big picture.
It's a it's more than it is in the right geography.
No money wise and well have to see how.
How it plays out but I don't think it makes any difference whatsoever.
Great. Thanks, so much and congrats on the quarter.
Thank you very much.
Thank you. This concludes today's question and answer session I would now like to turn the call back to Mr. Don for any further remarks.
Great just a quick thank you for everyone for joining obviously.
Obviously, a very good quarter, we're very pleased with how the team worked.
Together to to power through this thing and the recovery and we are very excited about all the growth initiatives. We put in place that we think we have a great plan.
Now for the rest of the year and into 2021 so.
A good rest of the day and again thanks for joining.
Thank you Sarah.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
We want to have a great wall.
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