Q4 2020 Organogenesis Holdings Inc Earnings Call
Please standby good afternoon, ladies and gentlemen, and welcome to the fourth quarter 2020 earnings Conference call for Oregon O Genesis Holdings, Inc. At.
At this time, all participants have been placed in listen only mode. Please.
Please note that this conference call is being recorded and that the recording will be available on the company's website for replay shortly.
Before we begin I would like to remind everyone that our remarks today may contain forward looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated including the risks and uncertainties described in the company's filings with the securities and exchange.
The commission, including item, one a risk factors of the.
The company's most recent annual and quarterly reports.
You are cautioned not to place undue reliance upon any forward looking statements, which speak only as of the day to day.
Although it would be voluntary voluntarily do so from time to time the company undertakes no commitment to update or revise the forward looking statements whether as a result of new information future events or otherwise, except as required by applicable securities laws.
This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP.
We generally refer to these not these as the non-GAAP financial measures.
We conciliation of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website.
I'd now like to turn the call over to Mr. Gary S. Gill Feeney senior organic Genesis Holdings, President and Chief Executive Officer. Please go ahead Sir.
Thank you.
Welcome everyone to Organogenesis Holdings' fourth quarter 2020 earnings conference call.
I'm joined on the call today by day Francisco, our new Chief Financial Officer.
Appointed to the role in February and joins us after a long career at Perkin Elmer.
So let me start with a brief agenda of what we'll cover today in our prepared remarks.
I will start out with an overview of our revenue performance in the fourth quarter and a review of the key drivers of the impressive growth of is that our team delivered despite the challenging operating environment.
I'll then share a brief review of our operating highlights in the fourth quarter and year to day periods and after my remarks, Dave will provide you with the more in depth review of our quarterly financial results and the formal guidance for 2021 that we included in our afternoons press release, and then we'll open up for questions.
Let me begin with a brief review of our fourth quarter revenue performance.
We reported total revenue growth of 43% year over year in the fourth quarter, driven by 48% growth in sales of our advanced wound care products and 17% growth in the sale of our surgical and sports medicine products compared to the prior year of.
Our revenue results were well above our guidance and exceeded the high end of our preliminary revenue range announced on January 13th.
Our growth in Q4 reflected a continuation of the key drivers of our growth strategy and competitive advantages that we've talked about on each of our earnings calls over the last two years, including the investments that we've made to expand our sales force of recent years the benefits of our comprehensive portfolio of products that address patient needs.
<unk> to treat wounds across all of the stages of the healing process and the strong execution of our commercial strategy focused on leveraging our products in multiple channels, new product introductions and brand loyalty.
Let me share a little more color on how each of these longer term drivers of growth contributed to the strong performance in Q4.
First we've made significant investments to grow our team of direct sales representatives. In recent years. We ended 2020 with 300 direct sales reps compared to 265 at the end of 2019, that's an increase of 13% year over year and we free up prioritize this area of the investment over the last three years.
And as a result, the number of direct sales representatives have increased at a CAGR of 16%.
Since the end of 2017.
Our fourth quarter and fiscal year revenue results clearly benefited from this investment that we've made the grow our direct commercial team over the last several years second our strategy to broaden the reach of our products continue to bear fruit we've.
The focus on expanding into new physician specialties multiple sites of care and leveraging our research and development pipeline to increase the number of new product introductions and there's no better example of our team's success in executing the strategy than the impressive pure apply performance that the team delivered in Q4.
<unk> sales increased 13% year over year in the fourth quarter well ahead of the implied growth rate assumed in our 2020 revenue guidance, which calls for sales to decline approximately 50% year over year as a result of the anticipated pricing headwinds related to the change in reimbursement status for the sale of pure play.
Products. This change impacted only pure of fly sold in the outpatient setting which transitioned the product into the high cost bundle on October one 2020, we are proud of the results in Q4 as we believe it reflects the strong execution of the strategy to navigate the loss of pass through status that we've been.
Cussing with the investment community over the last two years.
We positioned the product differently. This time coming off of pass through with additional clinical data additional sites of care additional physician specialty and we launched five new pure applied product and line extensions in 2020 the.
These all contributed to our ability to drive strong sales performance in the fourth quarter.
An important part of the pure play strategy over the last two years was to grow the pure apply brand.
And the improvement in the overall awareness of pure apply and what it can do can't be overstated pure play is better positioned in the marketplace today than at any point in years past clinicians continue to value of this product differentiation and we continue to see growth in a number of accounts utilizing pure apply aided in part by the strong.
Sales of the five new product the line extensions introduced in 2024 of which were launched just in Q4.
Sales of our amniotic products, where the third area of notable strength in Q4. The sales so of the amniotic products were the largest contributor to the company's growth again in Q4.
Our growth strategy in the office is our fourth the area of notable strength. It's the continuation of what we've discussed on calls throughout 2020, we've been working for several years to penetrate the office market, primarily with channel specific product offerings and more recently leveraging the acquisition of our C. P N bioscience.
We acquired CPN. This past September primarily for the access that Cps physician office management solution provides which further broadens our physician offering and accelerates our growth opportunity in the office channel.
Finally, our fourth quarter sales results benefited from better than expected sales of our surgical and sports medicine products, which increased 17% year over year in Q4, well ahead of our guidance expectations.
Surgical and sports medicine sales growth was fueled by the early progress we made in targeting new physician specialties, including extremities and trauma areas, which have been more resilient to the COVID-19 related headwinds compared to the more elective procedures that you see in this market.
Respect to the overall operating environment that we experienced in Q4, we continue to see pockets of relative strength and improving trends as well as areas that continue to experience more challenging trends related to the COVID-19 pandemic.
By way of reminder, during the first wave of the pandemic, we didn't have as large an impact as other companies because of the mix of our business outside of the major metropolitan areas of the U S.
So as the second wave of the pandemic has hit those non metropolitan areas, we have seen and continue to see an impact on our business trends specifically in the surgical sports medicine side of our business.
But despite the continued headwinds from Covid, we were fortunate that our commercial strategy resulted in broad addressed the diversification of our product mix of our revenue mix of byproduct by channel by physician specialty and site of care, including the growth we've experienced in the office channel all of which has contributed to having less exposure to.
The the acute care and outpatient settings this past year.
In summary, we are very pleased with our revenue performance in the fourth quarter, where we reported 43% sales growth. Despite the continued challenging operating environment. We were also pleased with the significant improvement in our profitability in Q4 as evidenced by the 20% operating margins positive GAAP net income.
<unk> and generating $25 million and adjusted EBITDA This quarter. These.
These financial results were well ahead of our guidance ranges and reflect the underlying profitability potential in our business in the years to come.
Accordingly, we are proud that we achieved this important profitability milestones well in advance of the stated interim period financial targets, we've been discussing with the financial community over the last several years.
We also generated more than $26 million in cash flow from operations in the fourth quarter.
We further strengthened our balance sheet with an underwritten public offering of common stock, which raised approximately $60 million net of printing of net proceeds and.
And we used the strong cash flow from operations, we generated in Q4, along with the portion of the net proceeds from our common stock offering to pay down $29 million of our line of credit borrowings during the period and we ended the quarter with more than $84 million in cash.
The material improvement of our financial condition. During the second half of 2020 leaves us well capitalized to execute in our strategic growth initiatives going forward.
Turning to a brief review of our recent operating highlights in addition to the appointment of our New Chief Financial Officer, David Francisco, We have made important regulatory and clinical announcements in the recent months both of which are for renew our cryo preserve amniotic suspension allograft for the management of the.
Symptoms associated with knee osteoarthritis or OA for short.
On January 11th we announced that the FDA granted renew regenerative medicine advanced therapy designation or arm at status.
Securing our mad designation as a significant milestone for renew that not only underscores the potential impact of this therapy for knee osteoarthritis, but also provides us with key regulatory advantages, including potential priority review of our BLA and potential ways to support accelerated approval of the license on <unk>.
Any worry 14th we announced the first patients had been enrolled in our pivotal phase III clinical trial evaluating the safety and efficacy of renew for the management of symptoms associated with knee OA.
Together with the <unk> designation this underscores the strength of our existing renew clinical evidence and its potential to address of largely unmet medical need.
We look forward to leveraging our army designation to work closely with the FDA to expedite the review of renew as the study progresses.
With that let me turn the call over to David for a review of our financial results for the fourth quarter, our balance sheet and financial condition as of the end of the year and a review of our 2021 revenue guidance that we introduced in this afternoon's press release day. Thank you Gary I'll begin with a review of our fourth quarter financial results.
Unless otherwise specified all grades of the growth rates referenced during my prepared remarks around of year over year basis.
Net revenue for the fourth quarter of 2020 was $106 8 million compared to $74 6 million last year net increase of $32 2 million of 43%.
Revenue from advanced wound care products for the fourth quarter of 2020 was $93 6 million compared to revenue of $63 4 million last year, an increase of $30 2 million of 48%.
Revenue from our sports in search of surgical and sports medicine products for the fourth quarter of 2020 was $13 2 million compared to $11 3 million last year, an increase of $1 9 million or 17%.
Of note from pure play products for the fourth quarter of 2020 was $45 3 million compared to $39 9 million last year, an increase of $5 4 million of 13%.
As of December 31, 2020, we had approximately 300 direct sales representatives compared to 265 at year end 2019, and approximately 175 independent agencies compared to 160 at the end of 2019.
Gross profit for the fourth quarter of 2020 was $81 3 million compared to $54 3 million last year, an increase of $27 million of 50% gross margin for the fourth quarter of 2020 was <unk> 76 per cent of revenue compared to 73 per cent last year, an increase of 340 basis points of year over year the <unk>.
Increase in gross profit resulted primarily from increased sales volume due to strength in our advanced wound care and surgical sports medicine products as well as the shift in product mix to our higher gross margin products.
Operating expenses for the fourth quarter of 2020 were $59 5 million compared to $56 million last year, an increase of $3 5 million or 6%.
The increase in operating expenses in the fourth quarter of 2020 was driven by of $2 7 million dollar increase in research and development costs and the <unk> 8 million increase in general and administrative expenses compared to the prior year period the year.
The increase in R&D expense was driven by an increase in process development costs associated with the new contract manufacturer an increase in product costs associated with the pipeline products not yet the commercialized and an increase in the clinical study and related costs necessary to seek regulatory approvals for certain of our products. The here.
The increase of selling general and administrative expenses was driven by investments in additional head count primarily in our direct sales force and increased sales commissions due to increased sales as well as other selling of costs, including including credit card processing fees and royalties.
Additionally, our fourth quarter operating expenses included <unk> 6 million of restructuring expenses, specifically employee retention and other benefits related cost related to the company's restructuring activities.
No restructuring expenses of the prior year.
Operating income for the fourth quarter of 2020 was $21 8 million compared to the operating loss of $1 8 million last year, an increase of $23 5 million fourth quarter operating margin was 20% of sales representing in the year over year improvement in margin of 23 percentage points.
Total other expenses for the fourth quarter of 2020 were $2 9 million compared to $2 6 million last year, an increase of <unk> 3 million or 11%. The increase was primarily due to higher interest expense, resulting from increased average outstanding borrowings under the 2019 credit agreement compared to the prior year.
Net income for the fourth quarter of 2020 was $18 5 billion of <unk> 16 cents a share.
Moving to a net loss of $4 4 million or <unk> of share of last year, an increase of $22 9 million or 20 cents a share.
Adjusted EBITDA was $24 9 million for the fourth quarter of 2020 compared to adjusted EBITDA of <unk> 8 million last year, an increase of $24 1 million.
We have provided a full reconciliation of our adjusted EBITDA results in our earnings release form 8-K, and form 10-K, all of which were filed with the SEC. This afternoon.
Turning to a brief review of our financial results over the 12 months ended December 31st 2020 net revenue for the full year 2020 period was $338 3 million compared to $261 million last year, an increase of $77 3 million from 30%.
The increase of net revenue was driven by of $73 9 million increase of 33 per cent and net revenue of the advanced wound care products.
The $3 $4 million increase of 9% and net revenue of surgical and sports medicine products.
Net revenue of pure play of products for the full year of 2020 period was $147 3 million compared to $126 8 million last year, an increase of $20 5 million or 16%.
Gross margins for the full year 2020 period was 74 per cent compared to 71% last year, an increase of 330 basis points and our operating margin for full year 2020 was 8% up more than 19 percentage points year over year as compared to the operating loss reported for the full year 2019 period.
Net income for the full year 2020 period was $17 9 million of 16 cents a share compared to a net loss of $40 5 million of 44 cents a share of last year.
Adjusted EBITDA of $36 9 million for the full year 2020 period compared to adjusted EBITDA loss of $18 2 million from last year.
Now turning to the balance sheet as of December 31, 2020, the company had $84 8 million of cash approximately $30 million available borrowing capacity and $84 8 million of total debt obligations of which $15 1 million were capital lease obligations compared to $60 4 million of cash approximately 5 million of of the bill of the available.
The capacity at $100 6 million of total debt obligations of which $17 5 million of capital lease obligations as of December 31, 2019.
Net cash increased $24 4 million for the full year 2020 period and was driven by $42 $5 million of cash provided by financing activities $6 8 million of cash provided by operating activities, partially offset by $24 8 million used in investing activities.
Turning now to a review of our 2021 GAAP revenue guidance is detailed in our press release. This afternoon, we introduced our fiscal year 2021 revenue guidance. The 12 months ending December 31, 2021, the company expects net revenue of between $390 million and $405 million, representing an increase of approximately.
The 15% to 20% year over year as compared to net revenue of $338 3 million for the 12 months ended December 31 2000.
20.
The 2021 net revenue guidance ranges assumes net revenue from advanced wound care products of between $362 million of $375 million, representing an increase of approximately <unk> 23 per cent.
The 27% year over year compared to net revenue of $294 6 million for the 12 months ended December 31 2020.
Net revenue from surgical and sports medicine products of between 28 and $30 million, representing a decrease of approximately 31% to 36% year over year as compared to net revenue of $43 7 million for the 12 months ended December 31 2020.
Net revenue from sale of pure play products of between $139 million and $147 million, representing flat to a decrease of approximately 6% year over year as compared to net revenue of $147 3 million for the 12 months ended December 31 2020.
In addition to the formal revenue guidance, we would like to provide a few considerations for investors to bear in mind, when evaluating our growth expectations for fiscal year of 2021.
This additional color is intended to help the investment community better understand the assumptions supporting our revenue expectations for 2021.
First of all the largest contributor to our total company net revenue growth in fiscal year 2021 will be sales of our amniotic products, which at the midpoint of our full year range assumes amniotic growth of approximately 43% year over year in 2021.
Second we expect sales of our non pure applied non amniotic products, which collectively form the group called the PMA and other to increase at the midpoint of the range of approximately 20, excuse me, 18% year over year in 2021.
Third we expect to see steady improvement in Covid related headwinds as we move through 2021, However, our guidance for the full year reflects stronger year over year growth in the first half of 2021 as compared to what the guidance reflects for growth in the second half of 2021.
This is driven primarily by two factors one relates to 2020 of the other relates to an assumption in our guidance for 2021.
Specifically given the strong performance in the advanced wound care business in 2020, we expect to see our year your growth trends in the over the second half of 2021 moderate as we lap the 56% growth we reported over the.
The second half of 2020.
While we expect the operating environment in the second half of 2021 to benefit growth trends in our surgical and sports medicine business. Our 2021 revenue guidance assumes a significant headwind to sales in our surgical and sports medicine business related to the exploration of the Fda's Grace period for enforcement of the existing regulatory criteria for products under section 361.
T P, which is scheduled to occur on May 31, 2021.
Importantly, we believe this applies only to our new sell and renew products pending additional clarity on the continued ability to sell these products in advance of receiving BLA approval. We've elected to issue our 2021 guidance assuming no contribution from the sales of renew and new cell products. Beginning June one 2021. This represents a headwind to growth over the last two.
Seven months of 2021 of approximately $18 million.
Finally, with respect to expectations around financial performance of 2021, we expect to report GAAP net income and positive adjusted EBITDA for the full fiscal year of 2021 period in.
In addition to our formal financial guidance for 2021. In addition to our view of two sorry excuse me.
Providing some because the rate considerations for modeling purposes for the full year 2021 period, we expect gross margins of approximately 75% total GAAP operating expenses to increase approximately 22% year over year inclusive of growth investments and the normalization of the total 2020 GAAP operating expenses total interest and other expenses of approximately nine.
Noncash DNA of approximately $9 million.
Noncash stock comp of approximately $3 million and a weighted average diluted shares of approximately 128 million shares with that operator, I'll turn it back to you.
Thank you, Sir if you'd like to ask a question. Please signal by pressing star one on your telephone keypad.
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And our first question will come from Matt <unk> from Credit Suisse. Your line is now open.
Hey, guys. Good evening. Thanks, Thanks, so much for taking the questions.
So so much.
The focus on here to talk about because it really gives us a lot of.
Mostly good things happening that all focus in on just a couple.
And congrats again on a really strong finish here in Italy.
Great to see things kind of working off of moving in the right direction. So.
Maybe if you could talk a little bit about.
Appreciate the color on growth by sort of major business as you think about 'twenty one.
If you could maybe provide any similar color on on.
Runway for growth in the physician's office.
What that looks like maybe in terms of round numbers are directionally in the magnitude of growth in what some of the other sites of care of channels look like just sort of give us a sense of how this all comes together.
To deliver the 15 to 20, and then I have one follow up.
Sure.
Thanks, Matt.
Thanks for the question.
Your comments, so we don't really provide direct guidance on sales channel.
Our stated goals for the office was to be at about 50% of our advanced wound care revenue and were moving quite nicely towards that goal, but we do expect to see strong growth in the office.
In the second half of the year, we do see some demand starting to reemerge in the in the outpatient setting.
So that's also going to be helpful for us down the road, we will have growth in <unk> and the office.
And what was interesting and exciting in our surgical sports Medicine business unit in Q4, and even for the year, but mostly in Q4 is the additional sales in the what we call the extremity areas.
Which is more trauma foot and ankle surgery, where more of our regenerative medicine technologies can be sold in that channel of quite frankly, even more so than the spine area, which we also have a significant part of our revenue in the surgical sports medicine. So all of those areas right now are looking.
Positive from a growth perspective, but the office will certainly be a strong component of our growth.
Particularly with the acquisition of CPM, which entrenches us a little a little more it gives us more access to more of those customers in that channel.
That's great I'm sure for other books of the follow up on those trends in the topics you just mentioned, but I'll just ask one question if I could around.
And EBITDA and you you sort of delivered obviously being very strong.
Top line growth in the back half and I am sure that debt was a contributor to some of the very strong 23, 24% of second half EBITDA margins.
You mentioned positive EBITDA in 'twenty, one can you give us.
Any other color as to how to think about that either front half back half of full year.
The expectations.
Yeah, So we're not breaking it down by quarter, but I will say, you're absolutely right. What we saw in the back half of the year was very very strong growth, 57% in Q3 dollars 43 in the fourth quarter. So obviously that growth of generated a lot of flow through and so our expectation and we tried to give you some guidance on the key components that go down too.
Net income and EBITDA and so hopefully that'll help the build out your models, but we wanted to be sure that.
So the indication there there is it is a big step up in growth investments for the year as well. So we are expecting to continue to invest in the commercial resources and have.
The big expectation around spend around the clinical expenses as well so.
We think theres long term opportunity for the 20% EBITDA, but I think we got there a little faster than we anticipated just based on that growth of the back half.
Is it if I could just ask is that mean you sort of.
As you see continued strong growth here of the front half maybe is it right way to think about it expenses catch up investment maybe catches up to some of the momentum here in the front half and then as you mentioned back half you're facing tougher comps, maybe not quite as much of.
The pop as we saw in the back half of next year.
Is that is that the the right way to think about sort of leverage and spend front half back half. Yeah again, I mean, I think we don't want to be providing quarterly guidance at this point, but I would say that your expectations around growth of correct given the comps that we saw in the back half of last year versus the comps from the first half.
Fair enough. Thank you David Thank you Gary.
Thank you Matt.
Thank you. Our next question comes from the line of Ryan Zimmerman from <unk>. Your line is now open.
Great. Thank you good afternoon, Gary Good afternoon, Dave Thanks for taking the questions really.
Mr. Paul Masterful performance in 2020 in spite of the environment. So I guess the big question I think many of our asking is around the guidance and I. Appreciate all the color you gave but but particularly around <unk> guidance and the expectation for that to grow kind of in the mid single digit range. In spite of what you did in the fourth quarter.
When we think about kind of of the line extensions and what you could do maybe just get your thoughts Gary.
<unk> kind of volume and unit growth this year.
In spite of the reimbursement changes that are taking place.
Well sure. So I think our Q4 performance, which was really strong and obviously Q4 is our strongest quarter generally.
And share applied benefited from some of the disruption we had in our amnion manufacturing so.
It's a tough comp.
Going forward, we do expect unit growth for sure with pure apply.
We have three months of.
<unk> relating to going into the bundle for our larger pieces. So there is some ASP headwind headwinds there. So we've got to overcome those headwinds will do it with additional volumes well, we'll do it with our five new additional line extensions and new products.
So the.
The unit growth.
The offset.
Any sort of ASP decline.
That we would normally see coming off of pass through and still overcome the fourth quarter of last year was very very strong for us so that would be of comp in there as well that we have to overcome so we think collectively keeping pure apply flat to slightly down.
Good performance, but we are.
It's early days with the the four products, we launched in Q4.
Right now theyre trending nicely.
If they continue to do well.
We will book.
Pretty confident in that guidance.
Okay.
And as far as the enforcement discretion.
We hear about that potentially before.
That would go into effect or help us understand maybe what the range of outcomes could be I. Appreciate the conservatism to take it out of guidance for 2021, particularly in the back half, but but.
Maybe just the range of potential outcomes that we could see as a result of that.
So the number one we will not take the product off the market unless directed so that's the first I think important thing.
I think the FDA and all of them.
I'm not an expert in the FDA, but the FDA cannot give you 40 directly to keep selling because they are requiring all of these products to have a BLA license. So they can't.
I don't think there is a mechanism for them to actually say, yes, you can stay on the market. They can certainly tell you you have to come off the market and Thats certainly an action that they can take.
So we think the managing this through the enforcement and.
And selective enforcement, where they see risk. So I don't think anybody is going to get a letter that says you can stay on the market.
I don't believe that debt authority exists with the FDA.
I think the likelihood is based on the risks of the product, which is the safety profile of the product and where you are in the BLA process.
The IND process.
You know, we will dictate whether or not you will fall under that enforcement arm.
So unfortunately theres not great clarity on yes, you can stay on only yes, you have to get off.
And then it's just managing and monitoring the enforcement activity.
Now we hope we have requested a meeting from from the FDA to try to get more clarity.
And more understanding of how they are viewing our products and quite frankly all products.
And we haven't we don't have confirmation of when that that meeting is.
It's the type C meeting I believe which requires them to meet with us within 75 day. So.
Hopefully when we meet with them, we will get some more verbal clarity, but we won't leave there with the letter that says you can stay on.
Okay Alright.
Very helpful hopefully that was clear.
No very helpful. And then if I could squeeze one last then.
Renew.
Understand I appreciate the enforcement discretion.
The impact from that but but.
Bigger picture.
Where are we at in the process for renew remind us kind of.
Kind of where you are as it relates to a potential BLA in and when do you think you could have that on the market more broadly with the proper reimbursement in place.
Essentially.
Could we hear from clinical data updates.
The Sierra as well thank you sure.
We expect to complete the enrollment in the first half of 2022.
We expect to complete the study in the first half of 2023.
And then submit in 2023, our filing and then the FDA would have that probably for at least the year.
Which takes you out to 2024 and this obviously assumes that we're only having to do one trial.
If we are.
If it seem that we have to do a second trial that could extend that time out of nine to 12 months.
But it implies a 2020 for approval with the 12 month FDA review based on our schedule right now.
Got it thanks for taking the questions sure Ryan Thank you.
Thank you. Our next question comes from the line of Richard <unk> from SBB Leerink. Your line is now open.
Hi, Thanks for taking the question and congrats on managing through the challenging here of the way you guys did.
Gerry David Thank.
Thank you.
So.
From you.
The first one on the affinity and then and then the follow up on renewed starting with the affinity Gary.
You've said in the past debt the dim.
Man.
Your ability to supply the product.
Could you maybe just give us an update on where you are on capacity and manufacturing there.
Total satisfying all of the demand that's in the marketplace.
As of this quarter or how should we be thinking about that moving through the year sure. So the answer is we're not able to support all of the existing demand today.
We did increase our capacity in Q4 last year debt capacity improvement didn't come until the end of December we were hoping to get it earlier. So we are enjoying that additional capacity in Q1 this year.
We're in the process of getting to the next level of capacity we have.
Probably won't see that until April may timeframe.
So we'll start to see some improvement in capacity in the second quarter. Our goal is to get the two five times the capacity we had in 2020.
We expect that to happen in the second half of the year. So we won't get there until the second half of the year.
So that is our goal.
We think at two five times the capacity.
We'll start to make a strong debt in that demand.
But as we continue to introduce the product around the country. We think that demand will continue to grow and we believe we need to get even above the two five times going forward in 2022.
Got it.
And then on renew.
I think you had said in the past debt Youre expecting data readout for the 12 months.
Phase III trial.
One is that still on track how will we hear about that.
Will we hear about debt.
For one day.
That 200 patient study was published.
If youre talking about the 200 patient study yes.
With the 12 months of that going to okay, so sort of that.
What data are we expecting.
2021 from from the phase two or any additional data sure. So it just recently the 12 month data was published just recently, obviously as you know the six month data was already published though the 12 month data was just recently published.
We expect.
By the end of this year to.
Getting close to completing our interim analysis of 50% of the patients who would probably have a readout of the.
The of the phase III trial of the interim data in Q1 of next year.
So those of the key dates at this point the publication of the 12 month study of the 200 patients.
The study and then the readout of our six month interim data or 50% interim data in Q1 of next year of our pivotal study.
Okay. That's helpful. Thank you and just on the new can you help us size it.
Help us think through the way you are.
Thinking about the market opportunity.
How once available you would potentially.
Commercialize it and what's the target market would be and the opportunity there.
So we see the market, which is primarily halleran of gas of today being about a $2 $4 billion market.
Yes.
So our 200 patient study that we've completed and as just mentioned the 12 month data was just published.
The three arm study one comparing it to one of the market leaders and Hello, Roderick asset and obviously, we demonstrated superiority of six and 12 months to one of the market leader. So we think that with approval and with reimbursement that we would have a significant.
The share of that market and would compete very well with some of the the larger competitors in the space today.
That <unk> asked the space of large market large potential for the product if approved and subsequently if reimbursed.
Got it thanks very helpful. Thank you sure. Thank you.
Thank you.
Like to ask a question. Please signal by pressing star one on your telephone keypad, if youre using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow up.
Our next question comes from the line of Stephen Lightman from Oppenheimer <unk> Company. Your line is now open.
Thank you hi, guys and congratulations.
Wanted to ask on the am beyond on business.
The guidance for 2021 speaks for itself.
I'm wondering what you are seeing competitively.
How you are feeling relative to two competitive efforts and are we seeing just also a <unk>.
Difficult expansion again in the overall use of ambience in the marketplace you know given the strong guide that debt.
Net debt you talked about Tibet.
Well, we certainly see an expansion of amnion technology continues to be the largest growth technology in the skin sub space.
We even see that same growth in the ortho biologic space on our surgical sports medicine business, so amnion or clearly.
Expanding the market and growing.
Our product affinity is the only living the amnion in the space. So it's a bit unique so from a competitive perspective.
We don't see.
Any product out there that's really challenging it from a technology perspective and the <unk>.
Efficacy that we're hearing from the field is very strong for the product as well so we.
We feel really good about that I think just generally you know youre seeing more activity from some of the competitive companies and I think that will continue to expand the amniotic space as well.
Got it and then just as a follow up of the pipeline.
And how does if I missed this but on Nova core can you talk a little bit more about the expectations, there and what that adds to.
To your to your Ami on portfolio.
It is of significant product for us we book and we believe it will be of significant product for us its impact this year will not be material.
We're expecting to launch that product at the very end of this year. So the revenue impact won't be till 2022, and just to remind everyone that the same manufacturer that makes affinity will make novacor.
That would be the most efficient way to make it because you're basically creating novacor is part of the process of processing the amnion.
But because we have capacity constraints with the affinity we don't want to take any time or any capacity.
This year.
Away from affinity to create novacor. So we have that issue from the manufacturing perspective, but we do expect the launch it at the end of the year and it is unique it will be the only living chorion product.
And that's a product we might launch in multiple sites of care, which we think will also give it the additional growth opportunities. In addition to the product itself has different properties.
Which make it more useful and somewhat in some ways have a greater utility for certain types of wounds.
Great. Thanks, Gary.
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Thank you.
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Yes.