Q3 2020 Anika Therapeutics Inc Earnings Call
Good evening, ladies and gentlemen, and welcome to <unk> third quarter 2020 earnings Conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
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I will now turn the conference over to Christian Go study Executive director of Investor Relations. Please proceed.
Thank you day Leanne good evening, everyone and thank you for joining US with me on the call today is Dr., Sheryl Blanchard, President and Chief Executive Officer, and like what Executive Vice President Chief Financial Officer, and Treasurer Annika.
During today's call Cheryl and Mike will review Anikas third quarter 2020 financial results and key business highlights, which were summarized in our earnings release issued today.
Copy of the earnings release is available on the Investor Relations section of our website at <unk> Dot com.
In addition, a slide presentation is posted on our website in the Investor Relations section under the events and presentations tab. We invite you to take a moment now to open the file and follow the presentation along with us.
Please turn to slide two.
Before we begin please remember that certain statements made during this conference call constitute forward looking statements as defined in the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations, including statements with respect to impact the COVID-19 pandemic on in these.
These statements are subject to certain risks and uncertainties the.
The company's actual results could differ materially from any anticipated future results performance or achievements Weve also see our SEC filings for information about factors that could affect our results.
Certain financial measures, we will discuss on the call are non-GAAP financial measures. We believe that providing these measures helps investors gain a more complete understanding our results and is consistent with how management views our financial performance. A reconciliation of these non-GAAP financial results to the most comparable GAAP measurement calculated and presented in accordance with the U.S.
GAAP is available under the quarterly results tab in the Investor Relations section of our website.
I will now turn the call over to our President and CEO Dr. show Blanchard Cheryl.
Thank you Kristen and good evening, we hope that everyone. Joining us on this call remains in good health, while we navigate continue to navigate the Colgate pandemic.
I'm happy to report that the third quarter showed positive momentum with continued gains in procedure rates and revenues relative to the colgan impact of levels, we saw in the spring and summer months.
And we are seeing top line synergies from our recent transformative acquisitions with Anikas legacy business I'm also very pleased with how the Ana. Good team has remained focused on execution, while successfully navigating the pandemic as we see elective procedures moving towards more normal patterns of activity.
Please turn to slide three.
As the integration of these businesses has progressed our value proposition is clear.
We are focused on creating and delivering meaningful advancements in early intervention orthopedic care.
Our strategic plan to focus on joint preservation has expanded our addressable market from $1 billion for Oh, a pain management to a much broader $8 billion addressable market that now includes faster growing segments of the orthopedic space, including sports medicine and extremities.
I remain uniquely focused on the joint preservation space, we are addressing significant surgeon and patient needs with a set of capabilities and technologies that leverage and complement each other to bring real value to the healthcare system and all of our stakeholders.
We believe that Annika is unique in that focus.
We are committed to investing in leading in high opportunity spaces within orthopedics, including osteoarthritis pain management regenerative solutions soft tissue repair and phone preserving joint technologies like.
By combining our ability to develop and offer new therapies across these key joint preservation spaces. We.
We can provide stole a unique solutions to our customers and leverage our commercial organization focused on the joint preservation orthopedic practitioner and patient.
We also partner with those physicians to understand what they need most to treat their patients and we work closely with them to collaboratively developed minimally invasive products that restore act of living for people around the world.
During this call we will share with you. The work we're doing to establish Annika as a horse and these are large and growing markets and why do you have a right to win within these high opportunity spaces.
In addition, we will share with you how we have successfully navigated the past several months during kobin, resulting in growth for annika. Despite the difficult situation in the world and industry have experienced since early this year.
Please turn to slide four.
Even in light of the cold and pandemic, we delivered strong revenue performance in the quarter with total revenue increasing 7% year over year.
This speaks to the success of executing on our strategic initiatives and the strength of our more diversified business.
I'm encouraged as we continue to see elective surgeries come back in most markets, although like other companies that serve the elective surgery spaces. We do expect continued lumpiness over the next several quarters due to kobin.
While we know that in office injection procedures appear to lag the rebound in elective surgeries. We're also seeing some nice top line synergies with the combination of the three legacy businesses and are leveraging new products across the new annika.
As a reminder, the vast majority of our products are used in want of children's requirements. The first is office based procedures for the away pain management injectable side of the business and the second is in surgical settings, including hospital, Oh, ours, and ambulatory surgery centers or ASV.
We anticipate hospitals will continue to face challenges to fully open up to elective surgeries with the ongoing dynamic kobin environment.
We are encouraged by the recovery of electric procedures in the A.S.C., an office setting which were at about 90% of pro forma historical level in the <unk> and worried about 75% to 85% in the office based procedures in the third quarter.
Our surgical products are primarily used in yes, he setting which puts us in a strong position to continue our positive momentum going forward in fact, our joint preservation revenues increased 77% sequentially from Q2 to Q3, showing strong recovery in demand for our surgical products.
Our integrated U.S. commercial team continues to sell our expanding portfolio with over 30 sales professionals and over 150 distributors rounding out our hybrid sales model in U.S.
With the completion of the last seven product launches our product portfolio. Now includes the six sports medicine extremities products launched in Q3 as well as the taxes that franchise expansion with the launch of the small bone cannulate instrument to access smaller joints.
Importantly on the clinical trial side, we are pleased to announce that we enrolled and treated the first patient in the single pilot study.
Think golf is our single injection ironic assay to steroid combination to treat away pain.
We also resumed enrollment in the Hyalofast phase three trial pilot.
Hi, with passes our hyaluronic acid based scaffold for single stage cartilage regeneration.
As a reminder, both trials were caused in March due to the pandemic.
We are optimistic that the clinical trials will continue but want to caution that the uncertainty that the cobot environment brings could affect our clinical trial enrollment rates and therefore completion timing.
Additionally, cingal and Hyalofast obtained regulatory approval in Israel, and Orthovisc is now registered in Estonia, and France with launches to follow in those geographies.
We continue to look forward to pursuing both of these potentially game changing products in the U.S. markets based on our positive commercial experience with internationally.
Finally, we received we recently issued a press release announcing the five 10-K clearance of our bone sparing risk motion total arthroplasty system to treat pain associated with arthritis at the wrist, which is a great accomplishment for the company.
The risk motion system was developed by the legacy Arthur surface team to add to the clinical and commercial success of the motion preserving rest motion Hemi arthroplasty implant that we currently sell today.
Our new total risk product provides a unique solution to preserve west joint Kitimat is better known as dark throwers ocean, but active people wished to retain.
This product category comes from the acquired Arthur surface business and is a great example of the differentiated solutions they've developed over 20 years and the continued engagement of that team.
Please turn to slide five.
We continue to add talented and experienced team members to Annika. This quarter. The company is now a combination of legacy Annika executive talented leaders have joined Annika through the acquisitions of Parkinson Arthur surface and recently added industry veterans I.
I am very pleased that Mike Levitz joined and it got in early August the CFO.
Mike brings over 20 years of public company financial experience to Annika and has helped deliver significant increases in enterprise value and operating performance at several medical technology companies.
We also added Ben Joe this to lead sales marketing for the Americas, then has an orthopedic industry veteran with great experience in product branding marketing portfolio management and driving sales growth from his 10 years with Zimmer biomet meeting their foot and ankle and upper extremities businesses.
Additionally, we were delighted to expand our board of directors with the appointment of Jack Henneman, and Steve Richard as independent Directors in September.
Jack joins Anikas Board following a 25 year career in the health care industry, including Executive management roles at Integra Life Sciences, and Newlink Genetics Corporation.
Steve brings a breadth of global leadership experience gained in multiple industries throughout his 30 plus year career, including his current role as chief risk Officer, and Chief audit executive at Becton Dickinson and company.
Jack in single serve as incredible advisors for Annika and have joined at a pivotal time as we continue to execute on our strategy and propel the company toward a period of more rapid growth.
Our enhanced team along with continued progress building out in it 'cause infrastructure sets us up very well for continued success in the current environment and moving forward.
Today, we are pleased to share with you our high level, new product development roadmap shown on slide six.
In February we've taken a close look at the three legacy businesses and the technologies and capabilities they bring to bear.
We have spoken to our surgeon customers that with our surgeon Advisory board looked at the unmet needs and mapped out and initial new product development roadmap for Annika. This.
This refreshed roadmap includes products that range from disruptive innovations to gap fillers.
The addition of these meaningful products will ensure we are carrying a fully competitive bag in the joint preservation space, while simultaneously advancing early intervention or you take care.
In the near term, we will focus our R&D efforts on developing new kit configurations, new soft tissue fixation products and extremity products such as our recently cleared total resolution following.
Following this we will start to leverage our core capabilities such as our how you're on a gas based regenerative solutions platform across the combined business to create great products targeted around tissue repair.
This road map will include product development through both internal R&D activities as well as inorganic opportunities.
We will continue to refine and develop a meaningful new product pipeline from which we expect to launch a steady cadence of high opportunity products over the coming years.
As you look at the slide you can see what we plan to focus and earn the right to win in our newly expanded $8 billion addressable market.
On the left away pain management will continue to figure prominently in our strategy as we partner with JJ Mitek for sales and marketing of our visual supplement products in the U.S. and continue to expand that business in international markets.
Oh, a pain management, new product development roadmap will continue to focus on single our novel third generation Bisco supplement therapy that combines hyaluronic acid and a steroid.
Thank God commercially available now in over 30 countries outside the U.S. and we continue to progress with additional geographic expansion, while we focus on moving to approval in the U.S. This product is a very meaningful therapy for patients with knee osteoarthritis with a global market opportunity of over a billion dollars.
Moving to the next column, we show our regenerative solutions, new product development roadmap.
The state's includes meaningful products to treat patients that have had their lives impacted because of cartilage damage and injuries to bone and multiple orthopedic soft tissues a.
Our regenerative therapies product development work will leverage the significant hyaluronic acid technology platform and expertise. The annika has built over the last 25 plus years.
We remain excited to advance our development program for Hyalofast, our game changing single stage cartilage repair therapy in the U.S.
We currently sell Hyalofast in over 30 international markets, where it has been growing strongly in fact, we're seeing nice traction selling hyalofast in combination with the legacy Arthur surface and parking portfolios, including our nano FX nano fracture instruments used to perform second generation Microfracture procedures.
Also in this category relative to bone repair we are working on additions to the tactics that franchise a product that addresses insufficiency fractures to include procedure and anatomy specific kits.
We also view rotator cuff repair as a critical space for us and we're doing work to develop a comprehensive rotator cuff strategy that will build out a platform to treat these pathologies, including combining regenerative materials, such as hyaluronic acid with a delivery model. This.
This again speaks to the strength of bringing these businesses together and finally in this section we have work ongoing around surgical augmentation of other orthopedic soft tissues, which rounds out a total market opportunity of a billion dollars in the regenerative solutions area.
The third area of focus is soft tissue repair using more traditional sports medicine technologies. This.
This area includes portfolio gap fillers and novel products for soft tissue fixation, including suture anchors and instrumentation for rotator cuff repair.
Resolvable sutures procedural kits and deeper penetration into the hand, and wrist foot and ankle and in general extremities there.
Just focusing extremities markets aligns well with our strength in the other areas of the combined annika portfolio and for the Q3 launches of six new sports medicine products.
As part of the soft tissue repair portfolio, we're planning to launch our next two new products from the legacy Park. Its business that are primarily used for rotator cuff repair.
The first new offering will be resorbable suture anchors used to attach soft tissue to bone and will round out our suture anchor portfolio. So that we can be fully competitive in these cases.
The second product is a reason usable suture pass are also used in rotator cuff repair procedures.
These product additions provide enhanced access and traction any over $2 billion soft tissue addressable market.
The final area of our new product development roadmap includes bone preserving joint technologies with products that address areas of unmet needs, where the disease process is further progressed and an implant is needed [noise] he's.
These products will span multiple joints, including a shoulder handgun or elbow and the foot and ankle.
It's the algae comes from the legacy Arthur surface business and includes partial joint and checked resurfacing implants, and minimally invasive and bone sparing implants that will allow patients with further away progression.
Or the ability to live actively this.
This is the category, where our recently cleared with motion total Lucky plus you system sets a launch that is planned in 2021.
Bohn preserving joint technology is an expansive area of opportunity for Annika with a total addressable market of over $4 billion.
As described our new product development roadmap will allow and I've got to create and deliver meaningful advancements in early intervention orthopedic care to patients near term. Our pipeline is focused on joint preservation implant and fixation solutions and mid to longer term opportunities are in the joint pain management and regenerative solutions areas.
All are incremental to our business with truly innovative products.
All of these areas represent large and faster growing orthopedic market opportunities well, we will continue to partner with physicians to develop minimally invasive products that restore active living for patients around the world.
We expect the revenue from the opportunities I've just described to provide substantial incremental business for annika inline with our stated five year strategic goals of doubling our revenue with double digit top line and EBITDA growth.
I will now turn the call over to Mike to review, our third quarter results and then I will wrap up with some additional comments on the quarter before opening the line for questions Mike.
Thank you Cheryl.
I'm very excited to be joining me on a good team got such a pivotal time in the company's growth and I look forward to our future success together.
If you would please turn to slide seven.
Total revenue for the third quarter of 2012 increased 7% year over year to 31.7 million.
Revenue growth was driven by $11.7 million in orthopedic joint preservation and restoration revenue.
Which rose 11.2 million from the prior year primary.
Primarily due to the acquisitions of Arthur surface and park is medical in the first quarter of this year.
We are pleased that these revenues recovered significantly on a sequential quarter basis from the initial cobot impact that Cheryl.
Approaching pre kogut pro forma levels as procedure volume increased our integrated sales team gained traction and as we introduce new products.
This growth more than offset lower joint pain management revenue.
As we mentioned on last quarters earnings call we.
We had expected that orders from JNJ Mitek Mark.
The markets and distributes our monovisc and Orthovisc products in the United States.
Would be lower in the second half of 2020 as a result of the cobot impact and Marchex related ordering pattern.
We expect mitek to continue to manage their inventory levels in the fourth quarter as they work to fully address the impact of coated by the end of the year.
Also as expected while down year over year due to coated our royalty revenue from our July recovered, notably on a sequential quarter basis.
As patients returned to doctors' offices and end user sales of Monovisc and Orthovisc rebounded from the initial covidien.
As a result of the strong growth of our joint preservation and restoration sale as well as the unfavorable impact of coated bar on the ordering by our joint parents' joint pain management distributors, our revenue mix diversification accelerated notably in the third quarter.
With joint pain management, representing 58% of Anikas total revenue.
That's down from 93% of revenue in the same period last year.
Further revenue from JNJ Marchex represented 48% of total revenue in the third quarter, that's down from 71% in the same period last year.
While we're pleased with the recovery of procedure volume across our product lines.
In the third quarter.
We expect kobin related volatility to continue that's impacting our visibility into revenue trends.
Therefore, we are continuing to suspend our <unk>, our financial guidance through the remainder of 2012.
Our product gross margin in the third quarter was 55%.
Thats compared to 80% in the third quarter of last year.
But the decrease due primarily to the unfavorable 15 point impact.
A $4.8 million of non cash acquisition accounting related expenses.
The unfavorable cobot impact on revenue mix and manufacturing volumes.
Research and development and ask DNA expenses together totaled $21.1 million in the third quarter.
That's up from $11.7 million in the same period of last year, reflecting the acquisitions of Arthur surface and purchase as.
As well as expenses to support future growth, such as clinical trial costs incentive compensation and investments in our commercial and related support organizations.
Please note that total operating expenses also included a $4.2 million charge in the third quarter.
Due to an increase in the estimated fair value of our contingent consideration liability associated with the acquisition of the park is and Arthur Sir.
As a reminder, this liability is remeasured each period until its paid.
And the increase this quarter is primarily due to the passage of time higher than expected revenues during the quarter and a reduction in market based borrowing rate.
As a reminder, we had a similar charge in the second quarter driven by the same favorable operating done yet.
Also related to this contingent consideration as Sheryl mentioned, we were pleased to receive five 10-K clearance.
The FDA for our risk motion device subsequent to quarter end.
This clearance triggers a 5 million dollar payout for the Arthur surface acquisition agreement.
And that was paid in the fourth quarter.
Our net loss for the quarter was $6.4 million or 45 cents per diluted share.
Compared to net income of 9.2 million or 64 cents per diluted share in the third quarter of last year.
Excluding the non cash charges discussed earlier, we achieved adjusted net income of $800000 or five cents per diluted share.
Adjusted EBITDA.
Was $4.9 million compared to $14.9 million for the same quarter of last year.
The decrease in profitability was primarily due to the unfavorable coded.
As well as investments supporting our future growth.
As a reminder, adjusted net income adjusted net income per share and adjusted EBITDA are non-GAAP measures. Please refer to the reconciliations of these measures to the corresponding GAAP reported figures and our third quarter press release in the investors section of our website.
Lastly, with regards to our financial position.
America ended the quarter with just under $125 million in cash in investing.
As a reminder, in April we drew down $50 million on our outstanding credit facility.
I think the liquidity in light of coping 19th.
Based on performance recovery and stabilization of our business through the pandemic thus far.
We paid $25 million or the outstanding principal amount of the credit facility during the third quarter.
While we remain focused on controlling costs. We're also balancing that with reinvesting to support growth and long term profitability consistent with our strategic objectives.
We believe the long term fundamentals of our business remains strong and we are well position navigate this period of uncertainty.
I will now turn the call back over to show.
Thank you Mike please.
Please turn to slide eight.
Our performance in the third quarter underscores the resolve of our leadership team and the strength depth and diversity of our product portfolio propelling This organization forward.
We're very pleased to see procedure volumes trending toward free coas level and are energized to position the new annika to continue to provide products across our new more diverse product portfolio by integrating the strengths that each legacy company bring to the table.
Our strong financial position and continued investment in R&D with our unique focus on joint preservation, and then expanded 8 billion dollar total addressable market positions us to address large and higher growth segments within the orthopedic market.
This along with leveraging our commercial teams focused on the joint preservation call point will be our growth catalyst into the future our expanded and talented team will continue to focus on delivering value to all of our stakeholders and we look forward to sharing our successes with you through future discussions.
Please turn to slide nine and we're now ready to take your questions. Thank you.
Well now begin the question and answer session.
Just join the question queue Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request. If you are using a speakerphone. Please pick up the handset before pressing any keys.
To withdraw your question. Please press Star then too.
Our first question is from Jim.
Jim Sidoti with Sidoti.
Your line is open.
Hi, Good evening can you hear me.
We can hi, Jim.
Good good glad you all doing well.
We do so.
Just go through the revenue in the quarter, a little bit if you break out the.
Revenue from the acquisition your core revenue was about 20 million compared to about 30 million.
A year ago, I don't think procedures were down 50% from a year ago. So.
Is that because some of the.
Some of the.
We are mitek buying in June.
Push pulled some of that revenue into the second quarter.
Can you comment on pricing.
Jim This is Mike I'll answer that question.
So you're.
You're correct that this is related largely to order timing.
As.
That said on the last earnings call.
Mitek it kept their order flow steady ended the second quarter and therefore, the impact of co bid on their purchases from from Annika I did not really reflect cobot until the third quarter as it related to their purchases from us as a reminder, remember the revenue from Mitek is split between a combination of their purchases from US and then also.
The royalty piece that they pay us for sales they make the end customers and so as.
As I think it was said on the last quarter. We expect the second half of this year to have lower revenues from Mitek as a result of their ordering patterns in 2020, but as as I as I said, a little bit ago, we expect that to be resolved by the end of the year as they're continuing to adjust their inventory levels. It's workovers.
Sure as we go into the fourth quarter.
In terms of the change year over year.
Gains year over year was largely driven by the volume that.
That you saw there and then I just described pricing was not as big of an impact of volume was much more significant and I think the pricing comments are things that I think the JNJ mitek would speak to more than we would but I would say that from understanding our trends. It really looking at the volume is the important piece. There we did say that sequentially, we saw a nice.
[noise] recovery from the second quarter to the third quarter within the MITEQ business the joint pain business.
Associated with the luxury of end user sales that we saw there.
So you're saying there could be some some more.
Inventory rationalization in the fourth quarter, but it'll be probably Q1 before they get back to their normal purchasing level.
Yeah right Yeah, that's that's correct and that's consistent with what what was said on the call last quarter. It really is a first half second half.
Impact and we expect that impact that we saw in the third quarter. We'll continue on the purchases that we might take makes from us and we have a really good relationship with them and so we're really looking towards you know getting through cobot, together and managing managing that out so that.
You know we can continue to grow this business together.
So if we look at the business longer term you did about 115.4 215 million in 2018.
Is there any reason why an add.
And I'm not going to pin you down to or to that's still out but is there any reason why your annual sales should get back to that level.
The next year or so.
Hi, Jim I would just say you know obviously, we're not talking about guidance, but in terms of direction.
Company laid out strategic targets of doubling the revenue by 2024 and also driving double digit profitability.
That's exactly what we are focused on we have not changed our focus one bit.
So you know I think it's fair to say that.
In many ways kind of a new Africa because historically.
Historically and you saw that in the composition of the revenues a year ago, 93% of the revenue came from joint pain, a joint pain management part of our business.
And now back down to 58% this quarter I'm, you know and so a significant part of our business is coming from the joint preservation and restoration, which we saw nice nice growth from in the quarter and you know, we're very excited about where that got installing the daryl.
Carol mentioned procedure volumes are increasing faster in the surgery setting.
Surgery center setting than they are.
Sorry, and you know that places, where you might get your shots or business elements and so we see a little bit about dynamic playing out as well, but in terms of growth in the business. Yeah. I mean, we are very focused on our long term targets.
And so there's no fundamental change with the relationship with my Coke So one.
Once the noise from coal would dissipate there's no reason why that should get back to that.
Lease where it was in 2018 it sounds like to me.
Yeah, I think that first of all.
They continue to be very good sales and marketing partner for us with these products there they're very dedicated to these products. It's a certainly in a very important part of their business and our our good relationship continues and we see them being appropriately focused on this.
No again, we're not giving guidance because of Kobe, which I know you understand Jim.
But we remain bullish on this business along with them.
Okay, and then last question on R&D now that you're starting to ramp up the.
The trial.
Good to know.
Do you expect those costs you know.
Again, I know, you're not going to give guidance, but directionally should we model those costs kicking up.
As we go to the next three or four quarters.
Yeah, Jim without giving without giving guidance and obviously, we're going to we're going to give you guidance as soon as we can and as you know, but directionally, yes Ana.
Canada has been a company that is focused on R&D and innovation and that's going to continue you're going to see in R&D spending as a general numbers today, both on the traditional pay management side, but also with the R&D roadmap.
You can see a lot of the new areas, where we're making investments.
On the clinical trials front as Sheryl said, we've now just begun you know kind of moving forward with those now is cope with this you know.
Settling in a little bit I'm moving on with those clinical trials and so those costs are going to be coming into our numbers.
That's going to be impacting the number you know as we go forward, but broadly speaking.
Nothing in what we're talking about is different than the historic direction and investment as an innovation company nor in mind and they are in line with our double digit.
EBITDA growth targets as we come out of 24.
All right and then I guess I lied I have one more are you satisfied with the size of the sales force, where it is or do you as where these new products do you think youre going salespeople as well.
Yeah. That's a great question first I'll tell you.
We're really bullish on this business and feel like that investment that we made with the acquisitions and really kind of bringing together the sales forces from all three legacy companies. You know we talked about the fact that that that was really a transformative move that was was going to.
B and investment for the company, but it investment that we will have to pay off as we scale. The sales line and our ability to really drive into that focus called point of the joint preservation clinician that we call on so.
No what will continue to obviously to to look at all of the metrics as we run the business, but we feel like we are well positioned with a really strong commercial team right now to continue to drive an awful lot on the topline and especially as we launch a lot of the new products that we've announced in the last.
Couple of quarters and that we've got in development coming out here probably over the next six to eight months.
All right. Thank you.
You're welcome.
The next question is from Mike Petoskey with Barrington Research Your line is open.
Yes, good evening.
So sure like Oh, hi on those.
Those four columns were essentially lay out the global market opportunity are there are there areas, where you guys are more inclined to sort of internally developed a.
Products and solutions.
Sort of inorganic I mean are there biases and certain of these categories, where you say hey, we got we sort of got to buy our way in there, but but here, we really feel like we have a you know an opportunity to develop.
Special things.
Can you talk about that a little bit.
Absolutely Yeah, I'll tell you a couple of things if you focus in on the regenerative solutions column for a second we definitely plan to leverage. The you know 25 plus years of expertise that Annika has invested in developing out the hydronic asset base.
Bio materials technologies for that for those region Med solutions that said, we're not you know we're continuing to look at at at New technologies from an opportunistic perspective that could represent bolt on opportunities that could represent adding another regenerative platform. We're open to.
The the inorganic exploration piece of that also and then on the soft tissue repair and the bone preserving joint technologies pieces. Those are really areas of expertise and technology platforms and manufacturing capabilities that we acquired on the soft tissue repair side. Your park is medical and on the bone preserving join.
Technology side true Archer surface. So while we will be focused on our internal capabilities. There we definitely have a.
Interest in continuing to build out in the hand interest in the foot and ankle in extremities in general and so we will continue to look at inorganic opportunities in some of those areas also.
Perfect.
Can you just remind me and maybe a few other people.
Talking about this how many how many patients I think on Hyalofast I think it's 200, you're looking to enroll but on the conference call what what's the.
Patient target and if I'm wrong on Hyalofast. Please correct.
Yeah, it's around that number on hyalofast.
And.
I'm trying to find the exact number because I don't want to give you a wrong answer.
The thing the thing that I can comment to you on the single pilot trial is that it's really more focused on a bigger or placebo and T.H. arm.
That kind of addresses the needs that the FDA put in front of us. So that's that trial design is really focused on making sure that we drive that piece of the those pieces of the study arm.
Right what did that was that six six months 12 months like I can't recall with yeah <unk>.
Again with the original timing for that was that the entire study would take about a year, but that was pretty covance. So again, we're not giving guidance on that timeline right now simply because we just at this point in time don't really have a sense of what enrollment rates are possible because of cold bid.
Sure would you mind, giving a sense of when that initial patient like was that.
Patient enrolled in July.
In the last few weeks or.
When did you realize it's the yeah. The the patient actually the trial. We started in September so that first patient was enrolled in September.
Gotcha.
Okay, and then I guess just in terms of and I don't know how close you are to.
People too.
To this but just in terms of the last three four weeks.
[music].
Sort of the elevated spikes in coal bed across most of the country have you guys heard anything either from a S C.
You know.
Your sort of plug in or or somebody office space docs.
You know about any changes in how they're seeing patients or you know, how how they're sort of allocating their time.
Yeah, I think in general.
What we're hearing.
Is that.
The certainly the ask these are coming back the fastest but we are also hearing that there are you know as parts of the country are impacted by co head that things will shut down temporarily you know as things Spike so certainly.
To ask these are coming back as fast this but are still kind of at risk for continued bumpiness I would say because of coated and then be in office injectable procedures have just come back.
More slowly than the assay. So again I I said sort of the assay recovery. We're seeing is that about 90% and the in office injections are ranging more between 75% to 85% of pre coven numbers.
And then maybe this might be more for Mike but.
Mike as you guys think about sort of longer term gross margin just based on your current product portfolio, and assuming sort of a normalized environment and sort of a.
Unusual accounting related to.
The M&A I mean, you.
Can you guys get back to the mid mid upper Sixtys or what's what's the longer term reasonable gross margin target for you guys based on sort of your current product portfolio under normalized conditions.
Hi, Mike sure so.
If you look at the numbers for the quarter, we had a gross margin of 55% and we said that about there was a 15 point unfavorable impact of the acquisition related accounting and that acquisition accounting accounting related to the inventory fair value step up the amortization of the developed technology intangibles and so on.
So if you take out the is the acquisition related and do more of an apples to apples as to historic levels that would be around 70%.
And you know as you know I'm I'm new to the story here I've only been on board for three months now, but you know as I look at the historic transcripts I believe that it's been said in the past that 70% was more of the normative gross margin that the company had talked about but I you know I really.
You know I can't comment further than what the company has said before but I would say that we now have the joint pain management and joint preservation products in our mix. Obviously Cove. It is you know, creating all sorts of interesting impacts as we've described.
And I think we'll all be happy when we're through that but even in the midst of coated our gross margin. This quarter was yes.
At 70% when you exclude the the acquisition related accounting. So you know I don't think that.
But that's all I'm not all that different from where the company is talking about.
And Mike I've got those those clinical trial number for you I'm just saying all pilot study is scheduled for 231 patients in total and the Hyalofast trial is 200 patients just to give you the update.
So last question so on Hyalofast a previous management.
I mean, the enrollment for this thing has been several years.
Can you talk about strategically and again I know, it's a covert environment, so where everything just harder but.
Strategically I you know I have you guys thought about no ways, that's sort of on the block and sort of.
Get that trial sort of fully enrolled and Don.
Yes in fact, we had a.
Thank you a plan to.
To do that and coven hit so we we change the protocol expanded the number of sites and move ahead implementing a number of international sites that would have allowed us to significantly increase enrollment rates and it wouldnt did all that and we literally right the cobot head.
Though our unfortunately, our plans to just get the thing are all in a in a very timely manner were interrupted by cope and again you know we started enrollment in that trial, but we've got a number of international subs lined up that we expanded too and so I am not.
Any guidance on timing for that at the present time simply because of the covert dynamics. It's just difficult to know how quickly we will be able to enroll even at health international sites.
Okay, all right very good thank you.
You're very welcome thanks, Mike I have a good night.
This concludes the question and answer session I'd now like to turn the conference back over to Cheryl Blanchard for closing remarks.
Thank you for your time today, everyone. We look forward to updating you as we continue to deliver progress on our strategic initiatives have a great evening and please stay well.
This concludes today's conference call you make disconnect your lines. Thank you for participating and have a pleasant day.
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