Q3 2020 MiMedx Group Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the my Medic third quarter Twenty-twenty financial results Conference call at this time, a participant lines on a listen only mode.
Biggest presentation there'll be a question and answer session to ask a question during the session you'll need to press star one on your telephone.
If you acquire any further assistance. Please press star zero I would not like the hand the conference over to your speaker today Hilary Dixon of my medics. Thank you. Please goes I had met him.
Thanks, a lot greater and welcome to today's conference call to discuss our third quarter Twenty-twenty financial results.
With me today, or Kenwright, Chief Executive Officer, and Pete Carlson Chief Financial Officer.
Additional members of senior management will also be available to answer your question.
Before we begin as a reminder, the company's common document trading on the NASDAQ stock market at the starter trading yesterday November 420, 20 under the ticker symbol M. D. S T.
Also on October 15th we filed our definitive cocky statement and announced that we will hold our 2020 and home made him. His shareholders on November 20th at 2020 at 10 am Eastern time, and a virtual only format.
The press release, reviewing our third quarter, 2020th financial or Salt was issued yesterday November 4th and he is available on our website.
I'd like to remind you that remark me 30 days call include forward looking statements that are subject to risks and uncertainty.
Actual results may differ materially we.
We describe some of those factors in our risk factors section of our 2019 annual report on form 10-K, and the second quarter of 2020 quarterly report on form 10-Q.
This call will also include references to certain non-GAAP financial measures.
We provide reconciliation those measures can emerge comparable gap measures and earnings press release on the Investor Relations portion of our website.
W. W. W Dot net dot com.
With that I'm pleased to turn the call over to my medical Chief Executive Officer temporary.
Thank you Hillary good morning, everyone. Thank you for joining us this morning.
The third quarter was a period of significant progress removed.
As we continue to execute <unk>.
I'm pleased with the many accomplishments in all areas of our business, including.
Or indeed supply chain and operations and commercial operations.
We continue to make meaningful.
Difference in the lives of patients and family suffering from chronic going to be <unk>.
We remain at the forefront of the patient care and treatment now within establish season executive team.
In place, we will we are well positioned to make deeper advancements in the large and expanding nuclear Margaret.
Well today's call I plan to.
Re caskey recent milestone sure highlights of our third quarter results and reiterate areas, where we're investing in the business to drive near term long term results.
I do want to express my deep appreciation.
Two or 700, plus employees and their families for their incredible ongoing commitment.
And dedication two minutes.
Mm exceptionally proud of our team's performance in Q3.
The 75000 for expenses.
We've done all this and maintained a.
We reported events averaged <unk>, 0.01%.
These are impressive statistics and again I'd like to thank the team for their commitment to quality and product integrity.
Seeing access to.
Two accounts improve has been a major hallmark of the business.
And yes, we are looking at this as a potential rebound to begin to normalize our field personnel in their accounts.
Overall, the businesses operating efficiently.
Over the past year, we build a capable and cohesive leadership team with industry domain expertise.
We made two critical hires in the third quarter Doctorow hit the cashier, who is our chief commercial officer, and Dr., Bob Stein, who leads our research and development efforts.
Approximately 90% of our senior leadership team is new.
Others High performance individuals have been put in new leadership positions with increasing responsibility.
We have a talented and dedicated employee base I can say with confidence that we're working to systematically transformed the business.
I'd like to take a few minutes to recap some of the recent announcements that we've made.
First I am exceptionally excited to reiterate that our common stock commenced trading yesterday November four this is a momentous occasion for us and represents a significant transfer transformation for the business not only for the business our employees, but also our shareholders.
So you this improved improves our trading liquidity allows us to have more interaction with the financial community and strengthens our ability to execute on our strategic objectives.
I again want to credit congratulate the entire paramedics organization and also thank our shareholders for their ongoing support second earlier. This week, we announced the addition of coverage for Epifix.
Many of you know MP fixes our flagship Amnion Korean brand.
This product was placed on.
On the formulary of the largest us commercial payer has.
He has a proven and medically necessary option the treatment of diabetic foot ulcers.
Coverage will begin December 1st.
Recently, we outlined key growth drivers for our core business and this additional coverage supports the tactics that we have outlined including.
Highlighting the clinical and economic value or.
Of our core portfolio.
And expanding patient and healthcare providers access to our products.
We believe that Epifix is the only end amniotic membrane product to receive coverage under this payers' updated commercial medical policy.
We expect the payers decision will be an important competitive advantage over time from a metrics.
As it facilitates access to every pixel and growing market for diabetic foot ulcers.
It's important validation and demonstration of the strength of our clinical data in the skin substitute market.
And it also recognizes the significant differentiated value of our portfolio.
We will continue to inform decision makers and payers and providers and helped elevate the standard of care for millions of patients.
Let me take a moment to just highlight the agency for healthcare research and quality data.
As you know this was published in February of 2020 as I noted previously.
Yes, Indeed independent report was intended to help healthcare decision makers, whether the patients or clinicians healthcare system leaders policy.
Policymakers cinema.
And among others make well informed decisions and thereby improve the quality of healthcare services.
I believe the record accomplish this objective and served as a critical validation of our clinical evidence and one of the key factors leading to the attainment of the additional coverage by view us as largest payer the.
The findings of the HR Q report noted that in the medical Medix products review have.
Statistically significant results.
In that way, we are conducting a randomized controlled trial way.
Against many applications.
Additionally, there was a head to head study that resulted in superiority claim for us.
These studies also demonstrated the low risk applies.
As I indicated this report.
Serves to inform payers in key decision makers.
There is no other amniotic product that has received coverage by despair.
It's important to note that more clinical evidence will be needed in the future.
The nice continuity of care that we've been able to take advantage of.
This new innovation importantly is open access to other customers. It gives our salesforce the opportunity to target new accounts and new care settings.
Feedback from the launch has been very positive we plan to highlight this at the symposium on advanced wound care. This week through November six.
As a pioneer in the development of placental tissue technology, a metrics is constantly improving our knowledge of placental science.
And the market access access teams are well positioned to support our field sales efforts in this effort.
Growth will come from key initiatives, including.
Exceptional.
<unk> execution by our sales organization investments in medical Education for example, key offending speaker programs at full science Playathons and work on it by our health policy team.
Our salesforce size and productivity are key elements in this strategy as well.
In a pronounced engagement at important meetings will be important.
Putting the right people in the right places will ensure that we have access to market demand.
We will scale our efforts appropriately to address the clinical need across a variety of care settings in a wide range of applications now.
Let me transition to R&D. This is led by Dr. Stein.
We're investing in medical education to support our current Salesforce object closer genitals.
We will highlight art political and economic evidence of our portfolio products, which is substantial.
We will drive <unk> disease state of awareness across the care continue.
And we will continue to support our publication strategy, whether that be on the safety and efficacy of our product or their economic value.
Yes.
This positioned us to benefit not only in the support of our BLE products.
But also benefits us long term with a favorable cost profile control of our manufacturing process and allows us to ensure high quality controls.
In summary.
We're gaining momentum.
Physician in revenue recognition methodology on our.
Are reported results.
Net sales for the third quarter of 2020, where 64 $3 million, primarily recognized on an AD shifts basis.
Included in this amount is $1 million of cash collected related to sales made prior to the revenue recognition transition.
We refer to these as the remaining contracts.
Net sales for the third quarter of 2019, $88 9 million, primarily recognized on a cash receipt basis.
Included in this amount is a benefit of $21.4 million, resulting from the transition in revenue recognition that occurred in that period.
By adjusting net sales, which excludes impacts of the company's transition and revenue recognition and cash collected on those remaining contracts.
Okay and profitability could be impacted.
We are focused on growing our business and Tim mentioned some of the strategies and tactics to do that.
That being said the sequential recovery seen in the third quarter is a reflection of hard work across the company parts.
Particularly throughout our commercial organization.
I appreciate the support and dedication across the entire nomex team to support our physician customers to help us make a difference for patients and their families.
Gross margin in the third quarter of 2020 was 84.0% compared to 85.1% in the third quarter of 2019.
Management continues to make good progress in resolving open matters in the notes to the financial statements and this quarter's 10-Q provide the latest updates.
Research and development expenses were three $4 million for the third quarter of 2020 compared to two $7 million for the third quarter of.
2019.
Consulting fees related to the company's clinical research efforts pro this increase.
As Tim noted, we completed enrollment and are two key active trials during the quarter.
The company expects these costs to increase over time.
As we invest an additional clinical and scientific research, including clinical efficacy and economic data.
Spin families.
Now, let me review our cash position.
As of September Thirtyth 2020, the company had approximately $109.6 million of cash and cash equivalents compared to $69.1 billion as of December 31 2019.
Cash and cash equivalents net of debt were $62.0 million at September Thirtyth 2020, compared to $3.4 million at December 31, 2019.
Our healthy cash position gives us the financial flexibility to invest in initiatives that strengthen our core business.
Celebrated the generation of knee cartilage.
Our research indicates a damn your faith is a superior and say for treatment for Neo a then both cortisone and H I injections.
And and as such we we think that amnio fix will likely gain F. D. A approval and eventually become a widely used potentially frontline treatment for neo way.
If we're correct and this didn't mean that M. You'll just as potential revenue for the knee away an indication alone could amount to well north of a billion dollars.
I do believe that our Amniofix injectable product.
Is having very.
Powerful impact pain and.
Function in the osteoarthritis earlier studies.
After all have supported that and our ongoing study looks very promising at this stage, we were able to enroll the entire intended patient population into that study a little bit early.
And the reason for that even in the face of Covidien slowed down enrollment for a while.
Is that our dropout rate is much lower than we had anticipated.
Our study was designed for anticipated, 10% dropout rate in our actual dropout rates only been 3%.
And that allowed us to accrue the number of patients. We believe we need to see a statistically and clinically significant difference.
Slightly smaller sample size.
Hi, good size study, though it's over 460 patients that have been enrolled.
And the.
Why the endpoints will be available in the.
Second quarter of next year, and the 12 month blinded observation period will be completed before the end the year. So.
So thats going to allow us to start to have dialogue with the FDA under the rig.
Regenerative medicine advanced therapy designation.
And to begin to plan our phase three studies. So we're quite pleased he asked about it as an intervention.
And there will be additional data that will describe.
Described at the appropriate time, although not in the.
I believe its benefits.
Repair benefits patients and benefits the company so EOD, we're executing against the need.
To grow our core business. We're also executing under the leadership of Bob Stein.
Our phase phase to be phase three trials in the muscular skeletal area of which in the future I would like to be able to be in a position to provide a very robust update.
Thank you very much.
Thank you.
Okay, we do.
Recognize the need to increase our field forces in as Tim said, we are focused on having the right people in the right places.
As we put the resources out to distribute our product.
So we while we don't have the quantification and are not sharing that at this time rest assured that we are.
Always focused on the resources, we have in the field.
Distributed in the product and I will also go back to another thing Tim said about the resources around those sales representatives.
With our medical liaison or market access reimbursement.
Resources.
All are helping get the word out and facilitate the transactions with our customers.
Thank you.
Correct when you you've talked about.
Ford if you see how does that.
And additional wins that you have talked about here on the call. How does that get you in terms of covered lives in the area and are there still are significant.
Wins to be gotten there.
That's a great question.
I'd like.
I'll take that question and certainly I.
GRI with you the.
The Medicare has always enjoyed.
Higgins asthma.
Thank you.
And Ernie.
Yeah, Ernie it's P. Carlson. Thank you for your questions. What I would know relatives of covered lives is with this we're well over $300 million and covered lives.
Yeah. Thank you.
Thank you.
Thank you and.
And our next question comes from Brian thin from fend capital.
Your line is now open.
Hey, guys. Congrats on some of the the reason when's here somebody's insurers.
I guess I had two questions. The first question was on kind of quarter to today. If you guys can you have any commentary on on you.
Q for sales.
And then.
On the commercial side.
You guys are very dominant in some geographies and other geographies you must have a presence.
Wanted to kind of understand sort of how how row hit is addressing that.
Going forward here and kind of what the plans are to to get more reps since in certain areas.
Brian and thank you for the.
The comment on the quarter and the.
I'll start with the first question Rove it couldn't add his thoughts on that about a quarter to date, and then get that you're saying it into the geography.
Then in the right places that haven't talked about.
We haven't talked it externally and don't plan to at this point and talk about sales on an interim basis during the quarter.
Tim talked about and I mentioned, we we are seeing beginning to see things stabilize.
But we also know that.
We're in uncertain times.
Mean shutdowns occur outside the U S and we just we don't know where things are going to go here in the U S.
But again I would go back to the beginning to see stabilization and accounts and access and I'll, let ROE hit give his added thoughts on that.
Thanks speed and that's an excellent question because we ask that question.
So every day in terms of business stabilization.
In progress.
Continue to see some.
A substantial recovery, but there are still some and.
Ship sit down to it during the course of the quarter and.
Didn't expect sightseeing some of that as we go forward as to.
The patients and inefficient accent access to tap indicators.
And then also odd access to those facilities, where they'd be it won't get on a private office. So hospital it just sometimes essential.
Out of that.
That we've been nimble, especially over the last quarter to adjust that that fixed.
The leading market platform.
Platform and growing body of evidence in clinical research.
We are definitely focused on operationalizing our strategy, we feel we are well positioned for the future.
In addition to the comments rotated made on our sales organization.
I wanted to just add to that to build on top of that our strong market access team they've been able to deliver on.
On contracts.
And on payer coverage.
Very important.
Medical education team.