Q1 2021 Surmodics Inc Earnings Call
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Excuse me, ladies and gentlemen, and thank you for your patience and holding the conference will begin momentarily. Please remain on the line I can thank you for your patience and holding the conference will begin momentarily. Please remain on the line.
And Oh.
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On the pad.
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Good day and welcome to the Robotics first quarter fiscal 'twenty 'twenty One earnings Conference call. Today's conference is being recorded at this time I'd like to turn the conference over to Mr. Tim Arens Senior Vice President of Finance and Chief Financial Officer. Please go ahead.
Thank you Stephanie good morning, and welcome to term out of fiscal 2021 first quarter earnings call before we begin I would like to remind you that during this call. We will make forward looking statements. These forward looking statements are covered under the safe Harbor provision of the private Securities Litigation Reform Act of 1995 and include state.
And it's regarding surmount ex future financial and operating results or other statements that are not historical facts. Please be advised and actual results could differ materially from those stated or implied by our forward looking statements, resulting from certain risks and uncertainties, including those described in our SEC filings for <unk>.
<unk> disclaims any duty to update or revise our forward looking statements as a result of the new information future events developments or otherwise.
We'll also refer to non-GAAP measures because we believe they provide useful information for our investors. Today's news release contains reconciliation tables to GAAP results. This conference call is being webcast and is accessible through the Investor Relations section of the semantics website, where the audio recording of the webcast will also be archived for future reference.
A press release disclosing our quarterly results was issued this morning and is available on our website after monarch Satcom and we'll now turn the call over to Gary Maharaj Gary.
Thank you Tim.
Morning, and welcome to the <unk> fiscal first quarter, 'twenty 'twenty, one or any of the goal do you.
Oh for this quarter I was pleased with our solid financial and operational performance as well as the progress we need and all of our strategic objectives.
My Thanks, and a huge shout out for the entire symbolics team, the dedication and perseverance and grit admirable by any standard.
During our first quarter, we made important progress in all of the strategic objectives for fiscal 'twenty 'twenty one.
As a reminder fail to.
And to continue building traction with sort of deal marching towards the PMA approval beginning with all final submission for the E. Second two of salaries of management of a robust product pipeline through product development regulatory clearances and clinical evaluation and feedback.
And to optimize cash flow from all of IV and medical device coatings offerings to support our strategic growth initiatives.
Starting with the deal on January 25th the the link 2021 virtual event, Dr. Ken Rosenfield, the principal investigator of the trains and study presented safety and efficacy for the surveil drug coated balloon.
And this late breaking session. The data demonstrated that sort of Vale was non inferior to the impact Admiral drug coated balloon and both the primary safety and efficacy endpoints. Despite the fact of the impacted by 75% more paclitaxel of onboard.
And theory from a benefit to risk viewpoint, it's a low dose of a powerful cytotoxic drug can produce similar positive outcomes for a patient and a higher dose of the same powerful cytotoxic drug and.
And then the benefits of risk profile of Cid was the low dose formulation of the drug and may represent a better clinical choice for that patient.
This is why we performed the first and still only as far as I'm aware of it pre market head to head pivotal multi center multi geography trial of its kind with.
And the Hydrus device. This does provide the strong clinical evidence to support the view of a compare.
Selling and therapeutic choice and any market, we're seeking regulatory approval for commercialization of this.
This is a significant achievement for a small organization. However, we had lots of hotels and we have many partners along this journey and I want to thank the entire tools. The audits so of LTE and the extended lodge transcend clinical trial team of physicians health care providers clinical research Department and research called needed for the.
And the conduct of is very difficult, but necessary trial and the midst of.
Both of the Paclitaxel debate and the COVID-19 pandemic and.
Especially I guess nine Covid national of principal investigators and the trials Gary Committee, we are well on our way and on plan.
Well, we're not yet done.
And regarding the PMA approval process.
After several meetings with the FDA, we now have clarity on the required long term mortality data and the process of submitting these data as part of the fall of PMA submission as.
As we've discussed in previous calls to ask the teen long term safety. The FTE is requiring and minimal threshold of mortality also caused by the status follow up data for patients for two years and the three years from the time of their treatment.
While I can't comment on the specifics of these requirements I believe we remain on track to receive the PMA both of the deals by the end of calendar 2021.
You'll recall the of substantial financial outcomes from our commercialization agreement with Abbott, including $45 million of remaining milestones. We expect payment later this month for the first component of this of $50 million milestone based on average receipt and review of the final with the clinical report.
And related materials that demonstrate the primary safety endpoint and the primary efficacy endpoint for the transcend clinical study will net.
Tim will provide more details and later in today's call on the fiscal 2021 financial impacts of this $15 million milestone payment.
The remaining $30 million milestone payment would be achieved upon approval of the falls to the <unk> by the FDA.
Regarding our product pipeline, we continue to move forward product and all three platforms within our pipeline. The first of these platforms as vascular drug delivery via our drug coated balloon technology of.
After the survey over the next product and our DCP pipeline using our proprietary technology is our Sundance Sirolimus coated drug for the.
The one for percutaneous key platform and.
Please announce the January we completed.
Enrollment and the swing for the human clinical trial for Sundance ahead of schedule.
<unk> enrolled 35 patients across eight sites in Europe, Australia, and New Zealand.
As a reminder of the primary safety and efficacy endpoints of the trial.
Positive freed up for major adverse events and perioperative debt of 30 days and late lumen loss of six months respectively.
We anticipate having six months results from this trial in early Q1 of fiscal 'twenty two.
We believe the Sundance has the potential to improve the treatment of arterial blockage below the knee, which left untreated can lead to amputation and eventually debt.
Our <unk> product and our pipeline is all the best EV fistula drug coated balloon six month data from all of that for US. The human study demonstrated the target lesion patency at 30 days and six months was 100% and 99%, respectively and only one re intervention that would require.
And within six months.
And the data, which the study showed no mortality and no device nor procedure related adverse events of 30 days and all patients mid teen functional arterial and venous fistulae or EPS for hemodialysis. We are quite pleased with these results and it strengthens our belief that the best ECB could be of safe and promising treatment.
The plan on using our ongoing learnings from Servier to guide us through the best regulatory and clinical strategy for all of next steps for the best.
We're currently completing the development of the full matrix of drug coated balloon sizes for best for use in future clinical trials and regulatory submissions.
The second platform of for our product pipeline is out of sublime radial access platform we.
We have already had all foods for clinical use of both the blind guide sheet with excellent positive feedback from the treating physician will continue to expand the clinical use and the product evaluation of the Sublime Guide sheath. So then we have substantial information on its performance in the broad scope of cases.
We have encountered some delays and the scale up manufacturing validation of all of the blind or one for re deal below the PTA balloon catheter.
<unk> is working diligently to get back and schedule.
Regarding all of a follow on offering the <unk> balloon catheter product, we are making progress and completing the development and expect to file for FDA of five thinkgeek clearance, which we will expect to submit in Q3 of this fiscal year.
We believe the developing these fleets of the current devices one quite challenging gives peripheral intervention of this another essential to the treat proximal vessels behind and above the knee by a radial access for all patients suffering and peripheral artery disease.
Finally, we received many questions about our exciting pumps thrombectomy platform. As a reminder, we received FDA clearance for Pons Thrombus retrieval system last September which gives the peripheral intervention and the innovative non surgical tool for treating arterial thrombotic conclusions.
Our team is working diligently and all the necessary product and the process validation and early manufacturing bills. So that we can have product for clinical use before the and the full fiscal year.
Turning to the IBD and medical device businesses.
The comments on the detailed financial performance shortly.
With regard to of a medical device business and the dramatic increase and COVID-19 cases and hospitalization and.
And our fiscal Q1, and many large metropolitan areas of the United States and in certain areas of Europe at for many hospitals to postpone or even cancelled numerous elective procedures.
Medical devices team has done a superb job of dealing with all of the difficult logistical and operational circumstances brought on by the 10 day, even as we continued to support our customers with the ultimate goal of providing essential services for patients.
Our IBD business had a great quarter strong demand for distributed and the jet product and microwave slide service product led to a 17% year over year revenue growth and delivered 53% operating margin.
In closing I'm proud of our continued execution of all of critical strategic objectives, while protecting our team's health and safety and meeting all of our partners and customers requirements.
While we can't predict when things will be back to a pre COVID-19 normal.
We continue to execute our strategic plan and the.
The past nine months, we have received multiple regulatory clearances announced strong clinical data for two exciting new product, even as we manage our core businesses optimize cash and capital allocation during the worldwide pandemic, while the as much yet to be done and highly confident of we are well positioned to deliver <unk>.
<unk> growth and shareholder value over the long term.
I will now turn the call of an attempt to provide more details on our fiscal first quarter 'twenty one results.
Thank you Gary during today's call I will provide an overview of our first quarter operating performance. While we are not providing fiscal 2021 financial guidance. At this time I will provide comments on the revenue impacts associated with our surveil drug coated balloon distribution and development agreement with Abbott vascular include.
Including the revenue recognition associated with the achievement of the $15 million transcend clinical report milestone, which we expect to receive later this month.
Revenue for the first quarter of fiscal 2021 declined 1% to $22 3 million compared to $22 6 million and the prior year, our medical device revenue declined 7% to $16 2 million as the business face continued headwinds from the exploration of our Gen for coating patents and COVID-19.
Our in vitro diagnostics business grew 17% to $6 1 million driven by strength and demand for our distributed antigen and microarray slides surface products.
Our first quarter of royalty and license fee revenue totaled $9 3 million down 800000, or 8% from the prior year period, primarily as a result of the impact of the expiration of our fourth generation hydrophilic coating patent and lower procedure volumes due to COVID-19 royalty.
The royalty revenue declined 11% to $7 $9 million and the first quarter compared to $8 9 million and the prior year quarter and the first quarter of fiscal 2021, our royalty revenue experienced unfavorable but expected impacts related to the expiration of our fourth generation hydrophilic coating patent and COVID-19 of them.
Approximately 900000 and 400000, respectively.
Which was partially offset by continued growth and our next generation serene coating royalties.
Our surveil distribution and development agreement with Abbott vascular generated license fee revenue of $1 3 million and the first quarter and was flat as compared to the year ago period.
Product revenue of $10 1 million and the first quarter was up slightly compared to the prior year quarter and our medical device business product revenue, which was down 9% to $4 6 million benefited from our recent distribution partnership with Cook medical for on <unk> and on April and catheters, which was offset by lower order volume for our coding region.
And as our customers manage inventory levels that had been previously increased to minimize potential supply chain disruptions due to COVID-19.
In vitro diagnostics product revenue grew 12% to $5 5 million compared to $5 million and the prior year period, driven by increased demand for our distributed vantage and products and and microarray slides surface products.
R&D services revenue of $2 9 million was up 15% of our 370000 compared to the prior year period and your IBD business has benefited from increased customer development project opportunities and revenue from our medical device R&D service offerings was consistent with the prior year the.
Medical device business reported an operating loss of 600000, and the first quarter compared to an operating loss of 420000 and the year ago period.
The device operating results were unfavorably impacted by lower gross profit offset by lower operating expenses, driven primarily by lower transcend study costs.
The IGT business grew operating income by 24% or 620.
The $3 2 million and the first quarter operating margin grew to 53% up from the prior year's quarter, 50% as we benefited from strong top line growth and margin expansion.
Product gross margins were down and the Carter at 63% as compared to 68% and the prior year quarter.
Product gross margins were unfavorably impacted by lower medical device reagent product revenue, partially offset by favorable leverage and IBD revenue growth.
R&D expenses, including cost of clinical and regulatory activities was 49% of revenue for the first quarter as compared with 54% and the year ago period.
R&D expense was $10 9 million for the first quarter down, 10% or $1 3 million as compared with the year ago period, driven primarily by a decline and sort of rail related costs, including transcend.
SG&A expense and the first quarter of fiscal 2021 was <unk> 7 million for 32% of revenue compared to 31% of revenue and the prior year period.
G&A expense was essentially flat with the year ago period.
Now turning to income taxes for <unk>.
According to income tax expense of 170000, and the first quarter compared to income tax benefit of 250000 and the prior year period, both periods reflect the impact of taxable income for the full year and the U S. Non tax benefitted amortization and operating losses and Ireland.
On the GAAP basis diluted earnings per share was the loss of <unk> and the first quarter as compared with earnings of <unk> and the prior year quarter on a non-GAAP basis diluted EPS was earnings of <unk> and the first quarter versus earnings of <unk> and the prior year quarter.
Moving to the balance sheet, we continue to have a strong cash position and no debt and the first quarter, we began with $61 1 million of cash and short term investments and used for $3 million of cash and operating activities. During the quarter, we paid $1 3 million for capital expenditures as of December 31, 2002.
<unk>, we had cash and short term investments totaling $53 9 million, our current cash and investment balances provide adequate capacity to support our strategic growth initiatives.
Turning now to the revenue impacts associated with our surveil drug coated balloon.
Gary discussed we successfully achieved the transcend clinical report milestone.
Under the surveil distribution and development agreement with Abbott vascular we estimate the revenue associated with this $15 million milestone payment, which again, we expect to receive later this month to range between 11, three and $11 6 million and fiscal 2021.
Of which approximately $10 5 million will be recognized in Q2 for.
Furthermore, we estimate the full year fiscal 2021 license fee revenue associated with the surveil agreement, including the clinical report milestone to range between 16 and $17 million.
Operator. This concludes our prepared remarks, we would now like to open the call the questions.
Yes.
Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad. If you use the speaker phone. Please make sure. Your mute function is turned off the law you signaled for weaker equipment again, you May press star one to ask a question. Our first question comes from Mike Matson with Needham and company.
Yeah. Good morning, Thanks for taking my questions.
I guess I wanted to start with surveil so.
I know you gave some some timing there around and when you think it could be a per foot I guess my question would be do you expect Abbott to launch this thing kind of immediately upon approval or do you expect some kind of lag there in terms of between when it's approved and when they ultimately launch the product.
Yeah, Mike Thanks for the question.
One thing to keep in mind today is.
We got this trials of the podium the results of the volume probably faster than many of the trial. So the.
The linked presentation was literally.
Just a couple of days after we had seen the the breadth of the data we have seen the high level of data.
Earlier than that so we have not.
Both we and Abbott.
<unk> vintage digesting the results and the quite pleased both.
Both partners and so we have not had any detailed discussion on launch timing yet I suspect.
I don't know this but I suspect for competitive reasons, they may want to keep some of that.
Close to the of hip, but when we have a better idea of the <unk>.
The launch window, and we may choose to say something of that point, but really we haven't gone into any detail with the commercial team.
Okay. Thanks, and then you mentioned with the pounds thrombectomy product that you expect it to.
And being a clinical use before the end of the fiscal year.
Assume that that's the clinical use for.
The the sort of us.
Due diligence both on your part and potential partners part of.
For you sign the deal is that right and the.
Does that mean that debt.
Likely be fiscal 'twenty, two before we see and kind of the agreement there distribution deal there for power.
Excellent.
And I'll, let Tim talk to the latter of the two fiscal 'twenty two impact.
Yes, so typically and this is just the broad brushed.
Personally and as the last 30 something is.
I'd like to see at least a 100 clinical uses and the broad swath of.
Keith types, and then that way, we really have shaken the product on and understanding how it's best for US what cases, it's the most successful and so having that data on the oil belt, we believe dramatically increases the the.
And the book value when we say Hey, we've got something we actually have data to prove it versus mainly of regulatory approval and <unk>.
On tonight's slide so so definitely however, long it takes to get that level of Keith's feedback I think that losses for us the value of the device dramatically and that will lead us into I'd say of at least the first quarter of fiscal 'twenty two to get the the case series of events.
Alright, Thank you Gary it Mike it's a good.
Great question and I would guide you to fiscal 2022.
Just for the benefit of folks listening in the call and this isn't unlike what we did with Telemark and what the other one for <unk> PTA balloon catheters, which ultimately found distribution agreement signed with Medtronic and Cook. So we're taking a similar page out of the playbook.
Okay. Thanks.
Yeah.
And then just my final question would be on the royalties headwinds can you just remind us.
Is this going to be largely through after fiscal 'twenty, one or is that kind of spill into fiscal 'twenty two.
Youre welcome.
Yes.
Patent exploration to absolutely. So I appreciate the question. The Gen. Four patent exploration, we will work our way through that this fiscal year 2021, and it will become a tailwind in 2022.
And just for folks modeling purposes, as they think through the $3 million headwind that we've communicated with regard to the Gen. Four patent exploration, we have we have realized about a 900000.
Dollar impact here this quarter I would just say probably at a simple way to think about this is the remaining $2 1 million would be pro rata over the next three quarters.
Okay. Thank you.
Youre welcome.
Yes.
Thank you. Our next question comes from Brooks O'neil with Lake Street capital markets.
Good morning, guys can you hear me okay.
Gary loud and clear Brooks.
So the only thing going faster than your product development efforts are is the speed at which Tim read the script on this call. So.
Congratulations.
On your progress I have a couple of questions first I'm just curious if the FDA shows any sensitivity to the reality that there are lead the Medtronic Admiral on the market.
Two of our spread Paclitaxel wantonly, while you have a superior product with 75% less paclitaxel, which seem to be.
Something that through all doctors and investigators into.
To the last year.
Yes.
And so first of all the impact of advice clinically.
We've not seen any.
Clinical outcome based safety issues the Paclitaxel the beat the obviously the.
A broader issue in terms of long term mortality signals.
Showing up between sometimes between years, two and year three of the treatment.
But.
And my point is.
Less is more if youre getting to see impact, it's not impactful right of that part of it.
So so.
<unk> doses of the Paclitaxel and on these drug coated balloons are not oncology tie doses, but.
And frankly, if it will be if I can get the same.
The similar outcomes with a low dose of such a powerful drug I think that's always the better but I'll stop short of saying or implying that the impact of device is not safe and just the therapeutic window of having a low dose drug and to me just makes sense for the better.
And the way, we think about it to us.
Technology development all of it builds on the prior generation right. So we're glad to see devices like the for this generation of the ECB and Europe.
Devices like the like the impact at Morro and the.
And as tower, Reits and electronic devices come to market and even the Boston scientific range of because then it gives us the ability to build upon their technology BS and continue to improve the device.
The FDA.
Usually it with.
As delta them.
You stand alone on the safety safety is something that you could look comparatively but the key and interest as it should be the bunch of devices safety pretty much by itself.
No I haven't answered the question, but at least give some kind of way yeah I.
Dan and I appreciate all of that context. It makes total sense for me so here's another question.
And obviously tremendously impressed with your pipeline of of.
Products and and opportunities that you.
You've laid out and I was hoping you might handicap for us the <unk>.
And one or two or three that you think maybe beyond the surveil offer the greatest long term opportunities for share buybacks.
Yeah.
And so.
That's a good and the challenging quest in the.
The the three platforms have different reaches and time and impact and so.
The the PMA is the just long term cannon balls as we call them right. I mean, you have to have the patients to get through it I think what's particularly pleasing is the base technology platform of our drug delivery really appears to work and work well for a low dose of the drug.
So what that means for <unk> is exciting.
<unk> remains one of the keeping the agency of the EV fistula for renal dialysis remains one of the biggest headaches for the economic viewpoint of the United States for Medicaid.
The amount of re treatment and need just the dialogue. These patients. So I think it helps us feel even better about the best platform.
We're quite excited about Sundance.
The clinical team.
Kudos to them.
Finishing that enrollment.
Earlier, the plan and so we're excited to unwrap how Sundance.
The forms and does that and again, it's safety, but you get some mile the indication of efficacy, especially since youre doing up for.
Follow up angiogram and these patients so that'll be exciting because.
The critical limb ischemia is.
Nothing really works.
And and having more devices and technologies that can actually help those patients. We think is pretty exciting. So those are the two very large and the addressable market is right there.
The.
Radial access platform as the.
As a business of sleep I mean, it's a suite of product that will take some time to develop.
But if he had the vision debt.
Within the next five years, let's say.
And this is just the vision right every OBL right, we'll have better patient care better patient satisfaction and much better economics, if the did the majority of the prestigious via radio so while the adoption curve.
And it takes some time those products of positioning for us for when that adoption does occur we're well positioned with the suite of products. The health of that and then pounds for the market has been.
Really favorable to what's.
Thrombectomy devices by the which is not why we're doing it and we think the current generation of devices.
<unk> improved, but theres still some pretty big gaps to close and thrombectomy notwithstanding the current devices. So.
Mike My short answer is.
And it's a good thing to look at the perspective of the mics.
If we had one product of one of these product I think people would be like Wow, you've got something special and counter intuitive sometimes when you have three really amazing platform. It seems the psychologically dilute people, let's say, okay. They've got three things and they'll want to think of that would be good I would say any company would give their right.
And to have one of our platform. So I am excited about all three for different reasons and the portfolio.
That's really helpful. Gary I really appreciate that so let me ask one last question so I.
No I'm not I'm not asking you the agree with this or disagree with this but my own personal view is that as surveil gets launched and some of these other things get launched that the revenue.
Growth rate is going to accelerate dramatically, it's sort of biotics. So my question is philosophically.
And that happens should we expect you. The continues to invest 30 40, 50% of revenue in R&D or do you think the R&D levels, we will either stay flat or begin to shrink some of these things come through the pipeline. Thank you very much for taking my questions.
Sure.
The way I look at the percentage as a derivative of what work needs to be done and product development and.
Right now because.
The high revenue ramp hasn't started and some of these pipeline of activities. So I would expect it to.
Go down just because of the absolute number of things we can work on.
Is that the incentives obviously and.
And so therefore that debt ratio percentage.
Clearly would go down, but I want to bring back too.
One thing if we have an opportunity to start on other aspects of those platforms or I should say, if we have and opportunities to accelerate with our experienced COVID-19 and some of these platforms, we wouldnt hold back.
Of.
And our ratio of percentage number.
Tim will release, the funds and what you can do it but I don't see anything of that quite frankly, it would be very hard for of the mid teen debt rate.
And with the revenue we expected.
And it's a great question.
And Gary is precisely right and this one.
Kind of look.
We will.
Excuse me here, we will continue to fund the appropriate opportunities and.
Really increases the percentage of the.
The R&D spend compared to revenue is and the funding of of pivotal clinical studies that we've seen for surveil.
There is potential and our future growth may be finding and pivotal studies for of <unk> and for Sundance.
That remains to be determined but remember.
And the case of Surveil, we found ourselves in a position, where we're able to secure significant upfront license fees and milestone payments for the technology and that makes good business sense.
Gary and I pre pandemic had established kind of of point of view in terms of what investors could expect longer term and we commented on and EBITDA margin of 25% or greater and I think we've commented on that beginning in fiscal 2022, we haven't changed that perspective, clearly the Pam.
<unk>.
It creates a little bit of Fogginess with regard to that but I think folks can expect from us is that we're going to be delivering double digit topline revenue growth over time, and we're going to be expanding the margins and we think these technologies high value technologies and products.
And expanding margins can lead to significant long term shareholder value creation, and and we will find those things that we think believe provide the greatest opportunity to help us with that endeavor.
Absolutely makes sense will you send us a copy of your prepared remarks, so we know what the heck you said.
Absolutely.
Thank you.
Thank you just a quick reminder, if you'd like to ask a question you May Press Star One now our next question comes from Jim Sidoti with Sidoti and company.
Hi, Good morning, and can you hear me.
Hear you loud and clear Jim.
Great. Thank you so it's been about two years since the.
And the meta analysis from Doug.
Good set of came out and kind of turned the world upside down for you guys.
Looking back now how do you think the this is actually going to be a positive for you going forward because of the data that you presented last month.
Okay.
No.
The safety issues.
And really Jim.
The long term versus just more drug and even without the paclitaxel debate and the concerns of the long term one.
We still believe less is more when it comes to fall for drugs like back of the fact, so but as far as the.
The safety issues I think you all saw the the FTE the sweep and data was published.
Earlier, this year and the suites at the utility.
And they looked at.
The two and I think the average follow up of $2 for nine years on that trial and really the hazard ratio of the difference between non drug and drug didn't show any statistical significance and the FDA actually respond and probably clean the led us to the editor and the New England Journal I think it was early Jan.
And retool of that publication and Andrey for Dr.
Andrew Fob and up to the Zale and Mr. Malone.
The responded to that and as far as of the Paclitaxel debate. The FTE was pretty clear as I said a couple of things one is.
The current product going through the approval process will have the bring long term data.
And as an example, the name.
And also said they will be looking to see carefully monitoring the data as these data of the vintage of the day to get some two five years to three five years I believe that data I don't know this will demonstrate no no statistical the different signals and will give the SDN and <unk>.
80 to unwind this process.
Cause.
The signal seems to show up between years, two and three.
I believe that the is looking for the for data. That's now beyond three years of demonstrated that these devices the say so.
And as far as being of benefits in the marketplace.
We have that with the with all the facts of the actual debate.
Ends up being the psychology, and the mind of the customer who are of treating physicians of.
Whether the less is more because of the path of the actual debate the make any sense.
Yeah, Yeah I agree.
Okay Alright.
And you commented that.
The royalty revenue was off.
And the.
The December quarter.
And part due to the slowdown and procedures.
I know it's still early.
And the March quarter, but now that the vaccine is out and.
And in case, you seem to be on the downswing of you heard any anecdotal data of that.
The procedures of started to come back.
And so Jim.
We're actually not hearing a whole lot right now in terms of any significant.
Changes from what's what's happened here in December we're going to stay tuned obviously, it's pretty important.
But it just tells you the nature of this the.
This virus hit.
It seems like sometimes we might have and under control and then all of a sudden we get the spikes and can influence the ability to perform.
For farm procedures and treat these patients some of the things that we have heard our debt certain regions of the country tend to be more impacted than others.
I guess like the rest of the world, We're all waiting to see kind of the effect of the vaccinations and and how it can help the economies recover and as well as.
And I'll allow patients to seek treatment and then be and are positioned to be treated by their physicians and.
And the proper care setting. So so we will be talking more about this unfortunately I think as we go through the year.
Okay and then on the.
The income statement of SG&A was actually down from the.
For the December quarter, or pretty much flat from year over year.
I was a little bit surprised of that I thought that the.
The increased spending.
Is that something that you expect to happen and the.
The back half of fiscal 2021.
I think there are clearly a couple of things that impacted the SG&A spend here in Q1, notably it was more on the comp side of things.
And so and timing of some of the hiring activities I would expect that we will probably.
And of a ramp up here Q3 and for perhaps a bit here in Q2, I would I would remind.
<unk> folks set back in November and highlighted that we expected somewhere in the low double digit expense growth and on the SG&A line.
Wouldn't walk that back quite yet I think it will be somewhere around there. So.
So that's where I would guide you.
Okay, and then last one for me.
Another very strong quarter for the IBD business.
Is that due to COVID-19 testing and debt.
Sustainable.
It absolutely is not as a result of serology test for Covid testing and.
And I think Gary and I have been.
Pretty pretty vocal over the last few years about what a gem of debt.
And the business that is and how it's been punching its weight growing at a multiple to the market the market for immunoassay and grow about 3% annually.
Youll notice that the IBD business throughout the course of <unk>.
Rolling four quarters Youre going to have a couple of quarters that are exceptionally strong and then a couple of quarters of perhaps or are more modest.
I will I will guide you and continue to guide you until otherwise debt. It's a business that we expect mid to high single digit revenue growth.
Okay.
Alright Thats it for me thank you.
Thank you Jim.
Thank you again the star one if you'd like to ask a question. Our next question comes from Mike <unk> with Barrington Research.
Hey, guys good morning.
Can you speak to just what you see is and sort of the and I don't know if its the right way to address this.
Sort of total addressable market.
Some of the kind of turmoil true market opportunity, but when you think about what you guys are trying to do and radial access and some of them back to me is the way to size up.
What you guys feel or are the opportunities for both of those platforms.
Absolutely why don't we start with pumps and arterial.
The way to think about this market here is to think about the number of patients who present with the with class and are treated either medically or with the endovascular procedures, and I think and the assets approaching 200000 patients annually.
And from what I understand on the Endovascular side. There is there is probably somewhere around about 100000 cases, and which patients are treated either with catheter directed thrombolysis or with the mechanical or aspiration type technology to remove the clot.
And these devices range anywhere from maybe 702.
About 3000, I think somewhere around the 2500 range is probably not a bad way to think about it. So that gets you to a total addressable market.
Of about 400 million.
On a global basis, so im giving you some numbers that are U S and just and essence multiplying by two to get to a global view so.
It is.
It's a very interesting and.
A market that we view as being.
Sizable and having the potential to grow because of the penetration and bringing new technologies to the market. So one that is very exciting I will tell you that with regard to other clat removal technologies, and notably for deep vein thrombosis or pulmonary embolisms youll find that the market has much higher self.
Prices for those devices anywhere from 6% to $11000 and you'll see in terms of the number of cases.
And they can be larger than what you'll find on the arterial side, so really really strong addressable markets and other indications and we like what we see what the addressable market with regard to arterial clots.
So Mike moving onto of radial access.
And over 600, almost 650000 cases that are performed annually above the knee.
We're in all three fiber and <unk> PTA balloon catheter often used and the vast majority of these cases are done and they're conducted using the femoral access approach.
And going radial is of very small penetrated opportunity today, youre looking probably low single digits in terms of penetration.
I'll, just I'll remind folks that on the coronary side, it's about about 40 ish percent of cases, and the U S. Today to treat coronary vascular disease.
Through of radial access approach so the thinking here Theres a lot of advantages as Gary was describing the patient safety and less lots of law and Laura rate of infection.
For the patient it's more comfortable procedure, they get discharged earlier, they get to go home quicker.
For the health care setting, it's better economically, especially in an OBL setting and they can get the <unk>.
<unk> through the procedure and get them discharge and continue to treat additional patients. So there is benefits all around and we are and the.
Early.
And things of this baseball game, if you will.
It's quite attractive, but as Gary mentioned, it's probably a little bit longer term. It is going to be probably five years to build out that penetration and we will require additional devices to really be able to capture more penetration. So those are things that we're working through it dramatics.
But both markets are quite attractive and quite large.
Okay and.
These are my words, not your words, but it's not unreasonable to think that.
Incremental revenues from for.
Both of these.
Platforms could start as early as fiscal 'twenty two correct.
That is that's how we're thinking about and Mike I would say those are words.
Okay fair enough.
Got it.
Yes.
And then I may have missed this at all or are you may not have spoken to it but it is there is there any commercial progress.
To relate.
In terms of the some of the early of five five.
The 10-K.
Approvals I guess I'm talking mostly about the.
The balloon catheters and telemarketing and is there anything to say there in terms of actual revenue generation and any progress you can talk about there.
Absolutely and my prepared remarks, which.
Which and notably has been maybe the spoke a little too quickly. So it might have been missed but I did call out within the product revenue one of the drivers and the med device business.
Was in fact.
The sales of our <unk> for <unk> PTA balloon catheters to Cook.
Both Coke and Medtronic are still and the process of bringing those products to market and we like what we're seeing.
I'll tell you that back in about a year ago. At this time I think we kind of commented that the expectation for the first full year of launch could be somewhere between a half a million and of $1 million per product.
Unfortunately, we saw ourselves in the midst of the pandemic and as their customers who are looking to launch products.
I would probably.
Suggest that it's probably not.
A bad idea to look at the potential for this fiscal year has been somewhat similar to what I previously commented and I do see however longer term debt. These products could be looking at somewhere between maybe of $1 million and $1 5 million or maybe not dependent on the product in terms of revenue to surmount ex on an annual basis. So.
Again, we need a little bit more time and traction with regard of the partnerships to get a better perspective in terms of how longer term and how sticky the performance will remain but we like what we see today.
Okay, Great and then was there any temptation of on your guys part too.
<unk> tried to put some guidance.
Out there given that.
There is definitely a feeling that the between the vaccine and cases falling off and maybe this is.
More understandable going forward and more of a positive outlook.
Is there any chance I guess, let's say next conference call, where you guys say.
And sort of got our arms around what we think is the the lay of the land here and what kind of.
We're going to initiate sort of more formal guidance.
And that would be that would be ideal Mike.
I certainly can't promise anything, but what I will tell you is I believe that we've provided.
And some pretty clear color in terms of how to think about the business both from a royalty perspective as well as the survey of license fee revenue that we recognize each quarter and also on expenses. So I think there's there's enough color on the expense side and some of the larger revenue streams to help for.
Appreciate and understand how to think about the business this fiscal year.
But like you I, certainly hope that will be and our position here to provide guidance at some point in fiscal 2021.
And for US usually when you have multiple revenue streams that gives you a smoothing function to provide guidance and <unk> <unk> our revenue streams of <unk>.
Distinct but they don't smoothed each of the actual increase of your abilities. So that's one of the reasons, we chose not to give guidance but.
Our bias would be when.
Tim and I have the clarity you could provide it.
Fair enough alright, well guys congratulation on all of the progress. Thanks.
Thank you Mike.
Thank you there are no additional questions at this time I'd like to now turn it back to our presenters for closing remarks.
Well, thank you and thanks for joining us and our first quarter earnings call and please stay safe everyone and until the next time. Thank you.
Thank you ladies and gentlemen. This concludes today's presentation you may now disconnect.
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