Q1 2021 TELA Bio Inc Earnings Call
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Ladies and gentlemen, this is the operator today's conference will begin momentarily until that time your lines will again be placed on hold thank you for your patience.
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Good afternoon, ladies and gentlemen, and welcome to the Tela Bio first quarter 2021 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded I would now like to turn the conference over to Hana.
Jeffrey from Gilmartin group.
Thank you Kathy and good afternoon, everyone.
Earlier today Tela bio released financial results for the first quarter 2021.
Copy of the press release is available on the company's website.
Joining me today on today's call are Tony publish president and CEO and Nora Brennan CFO.
Tony will begin the call by providing an overview of our operational highlights and then nor will provide a detailed analysis of our first quarter financial performance.
Before we begin I'd like to remind you that during this conference call. The company will make projections and forward looking statements regarding future events and.
Encourage you to review the Companys past and future filings with the SEC, including without limitation. The company forms 10-K, and 10-Q, which identify the specific factors that may cause actual results or events to differ materially from those described in these forward looking statements.
These factors may include without limitation statements regarding product development product potential regulatory environment sales and marketing strategies capital resources or operating performance.
With that I'll now turn the call over to Tony.
Thank you Hannah and good afternoon, everyone. Thanks for joining us today.
So we are off to a strong start in 2021 with $5 9 million and revenue for the first quarter.
This represents a year over year growth of 58% and sequential growth of three 7% compared to the fourth quarter of 2020.
As we mentioned in our Q4 2020 earnings call at the end of March we experienced COVID-19 headwinds and the beginning of Q1.
As the COVID-19 infection rates decline and we began to see and improvement and procedural volume in February and March and we realized our best month ever in March and it has continued into Q2.
And the first quarter demand for our <unk> product line increased throughout the quarter as the number of hernia procedures continued to rebound.
As we have seen throughout 2020, our overtaxed LPR products experienced the most growth.
Out of our <unk> product line for the first time and our history minimally invasive procedures using overtaxed eclipsed open hernia procedures on a quarterly basis.
The continued migration from open to robotic hernia procedures that we have been experienced experiencing is in line with what has been reported by the major surgical robotic provider.
It continues to develop and solidify our position and providing natural repair hernia solution as an alternative to plastic mesh.
Movement from open to Mis procedures is a bit of a double edged sword for us and the short term.
While we are pleased overtaxed has become a preference for many surgeons performing robotic hernia repairs overtax LPR does have a lower average selling price to.
Different and selling prices is strictly a function of size as currently most robotic procedures use a smaller piece of attacks than a traditional open hernia repair. However, we are noticing that the robot is being utilized for more complex hernia procedures, which should lead to the use of larger size alphatec products and ultimately <unk>.
Asps.
Long term, we believe this trend demonstrates our ability to become a major broad product portfolio player.
Turning our attention to Overtax Prs product for the quarter sales were up approximately 150% year over year, but down sequentially over the fourth quarter of 2020 based on our analysis of new and existing PRA accounts, we believe the pattern is emerging.
Many of the surgeons and our new accounts have been Trialing prs before committing to using it and additional procedures. This is evident with our plastic surgery customers, who perform reconstructive procedures as many preferred to evaluate how well <unk> performs during a three to six months post op period.
Based on our current understanding of how our new plastic surgeon customers Trialing Prs and the cadence of new accounts, we are expecting our prs revenue to continue to grow year over year as more plastic surgeons adopt the product.
We are beginning to see the broad adoption with Prs.
And with strength in April and May as a reminder, the fourth quarter of 2020 was robust in terms of signing up new accounts, which we believe we will harvest and make productive and Q2 and beyond.
On the commercial side access to surgeons and steadily improving new cities and regions.
Are still difficult to manage but overall, our access to surgeons and hospitals and during their office hours has increased we continue to target 48 territories by mid year, but we could increase this target if demand continues on this current trend as we mentioned during our fourth quarter conference call. We are adding sales territories that align with healthtrust accounts.
<unk>.
And on that front, we are making solid progress on adding health trust associated hospitals during the first quarter the hit rate for our new Healthtrust Reengagement program has improved and that being said I want to reiterate there is still work to be done.
Although we believe we are beginning to make good traction with many healthtrust accounts. It takes time from contract signing to implant implement and Colin Mentation.
We believe most of that most health trust accounts are becoming more open to new product evaluations as COVID-19 hospitalization rates recede.
Before turning the call over to Nora to review, our financial performance of the first quarter I would like to thank our participating surgeons and investors from making our key opinion leader webinar, a great success for those who could not attend this virtual event, we hosted two surgeon speakers, who discuss when and how they use <unk> for hernia procedures.
And why do they avoid polypropylene mesh and certain situations. The webinar was very informative and I invite all of you who did not attend to go to the events page on the Investor Relations section of our corporate website to view a recording of the webinar.
With that I will turn the call over to Nora.
Thanks, Tony and Hello, everyone.
And fair to our press release issued earlier today for a summary of our financial results for the first quarter of 2021 after commenting on our financial results I will also provide an update to our financial guidance for the remainder of 2021.
Revenue for the first quarter of 2021 and increased 58% year over year to $5 9 million, while we experienced significant year over year revenue growth, we did experience increased volatility and demand for our products with COVID-19 cases, and hospitalizations increase in January and.
Volatility lessons and February and more so in March 2021, gross profit as a percentage of revenue was 59% from the first quarter in line with the first quarter of 2020.
Sales and marketing expenses were $6 3 million and the first quarter of 2021 compared to $5 3 million and the same period and 2020 day.
This increase was mainly due to higher compensation and benefits and commissions from additional sales personnel offset by lower travel and consulting spend.
G&A expenses were $2 8 million and the first quarter of 2021 compared to five and the same period and 2020. This increase was primarily due to higher compensation and benefits and higher stock based compensation expense.
Offset by decrease and bad debt expense.
R&D expenses were $1 7 million for the first quarter of 2021 compared to 900000 and the same period and 2020. This increase was due to higher development costs and higher compensation and benefits loss from operations was $7 3 million and the first quarter 2020, one compared to $6 five mines and the prior year period.
Net loss was $8 1 million and the first quarter, 2020, one compared to $7 2 million and the same period and 2020 we.
We ended the first quarter of 2021 was $65 8 million in cash and cash equivalents compared to cash cash equivalents and short term investments at $46 7 million and the first quarter of 2020.
Now turning to the outlook for 2021, we are confirming our revenue guidance and the range of 27 million to $30 million representing growth of 48% to 65% over the prior year period, we will continue to assess the current environment and provide updates on our quarterly calls as continued uncertainty relating to the dynamic.
Environment with the COVID-19 pandemic could materially impacted protection.
And I will turn the call back over to Tony.
Thank you Nora.
For those who have not yet read through the 8-K, we filed this afternoon and Nora has decided to pursue a new direction.
On behalf of everyone and Tela bio and our board of directors and want to thank norm for her many contributions during her tenure with the company, including her strong leadership through Tela bio with IPO and follow on offering nor are we really appreciate your dedication and and wish you all the best and your future endeavors.
And now with that.
Kathy let's.
Open it up for questions. Thank you.
At this time in order to ask a question you will need to press star one on your telephone keypad again that is star one.
And your first question is from Matt O'brien from Piper Sandler.
Hi, This is <unk> on for Matt. Thank you so much for taking the questions.
And so first starting on Q2 trends I know youre, not providing actually quarterly guidance, but you said that April and May were a little bit stronger and doing well can you just add any more color on that.
Some recent college resurgence and are you still seeing from pressures from COVID-19.
And also are we starting to see some of those newer accounts and start to contribute.
Yeah. So thanks for that question.
I'm going to I'm, just sort of going to go through.
A bit historical from the start of Q1 through to where we are today.
I'm not going to get into month by month numbers I don't want to fall into that habit, but I'm going to give you some color right. So when you look at Q1.
Almost 80% of Q1 sales came in and February and March. So January was a really tough month.
And then and we expected that right. So on our last earnings call I said that.
And we expected a tough start to Q1 based on the end of Q4 and it was really concentrated for us in January.
But february snap back fairly well and March was exceptionally good.
And that has continued into April and through the start of May and so I think we're looking at a situation where all of the work that we've done to get stronger during COVID-19 is starting to pay off.
And we stockpiled a heck of a lot of new accounts right. If you look at.
The new accounts stockpiling from back to Q3 of 2020.
We had 46 new accounts.
<unk>, seven and Q4, and 2020 and 40 and in Q1 of 2021 and now all of these accounts haven't started contributing yet.
But it's a heck of a good stockpile and theyre going to start contributing we're seeing that.
And start to happen March April may and so we're very bullish about our ability to step up and keep the business growing.
So I think we just were at that point now, where we're going to start to see all the moving parts and elements that we put in place start to work.
Great. Thank you that's Super helpful. And then just one more from me on Tele lives can you just speak a little bit on the clinician conversion youre seeing from that and.
And is that sorry, and it translates to top line or is it still too early to tell.
Well I mean, all of that new account work that I just mentioned.
There is no other way that that happened other than tell alive right.
We brought on 22 new reps.
And in 2020, basically two to strengthen and COVID-19 was at its peak at that point and.
Most of the work that they were able to do.
It was due to tell alive, so we had a situation where roughly.
40, 40% of our reps that haven't been around.
Very long.
<unk> and 2020 are doing about 20% of our revenue and then we also have 40% and the reps.
These are the ones that are a little bit more established and around a little longer they're running anywhere on an annualized run rate basis between 500, and a $1 million or higher than $1 million and so both of those groups of reps are very much benefiting.
From that tell alive.
Program and that's really been the only mechanism that we've had especially for our Prs plastic surgery products right I mean that those those we just.
Through open for launch.
And Q3.
More and more aggressively or more fully and so we're only a couple of quarters into and you're starting to see that step up start to materialize. So all of that really has been.
Driven by the televised program, we've put about 200 surgeons through tell alive.
And the productivity that comes out of that has been has been excellent as detailed by all of those metrics.
Thank you.
Your next question is from Anthony Petrone of Jefferies.
Hi, and good afternoon, everyone, congratulations Nora and and good luck on the transition.
Maybe.
Uh huh.
No problem.
You know as we look at.
This year as we go through GPO contracting just wanted to kind of revisit GPO contracting mhm and sort of how that transition will continue to play out through the year in terms of additional GPO contracts, a but of the GPO contracts that are currently in place.
And how we should be thinking about onboarding of new facilities to existing Gpus, and then as we look outward this year and perhaps into next how many additional GPS.
Or are out there that could be onboard and and all of a couple of follow up questions.
Yes, so we are in.
Health, where and two modes right now Anthony we're in Health Trust and implementation mode and we're in IGN.
Road right. The other big GPO contracts I think are further out.
The request for.
Participation et cetera is going to come and the future. So so everything that we've been doing here.
And is really focused on healthtrust and the Ibms health.
Health Trust has been a bit of a struggle for some of the year last year because of COVID-19.
They've literally stopped and started.
A couple of times as as COVID-19 has heated up and and cool down and I think I think we're getting through that right. I think as you look at what COVID-19 does to the business I think we're in a mode now where we're not worrying about hotspots and all that much anymore.
I told our team our job is to grow exceed our numbers.
No matter, what the situation throws at US right, we're done with the whole COVID-19 as you know.
As a filling up the ICU beds and affecting <unk> as we have to find a way.
And I think the last phase of COVID-19 impact.
He is on the supply chain and their willingness to look at new stuff and so I think we're just starting to see that.
And get better and better so even with all of that stuff going on.
We are running about 40% of our total unit sales.
In Q1 have come from and Healthtrust accounts, and that's with a pretty limited ability.
And to drive and those.
And those those dialogues right.
Look at our IV and situation right for all four of our five top and are growing right and they are growing pretty nicely, 15% to 25%.
And our top five.
And.
Contain.
A mix of different GPO and <unk> that they are associated with right Anthony So it would be.
<unk> idea and they tend to roll up to one or maybe more than one GPO. So we're having excellent success at the idea and level, which I think is going to help set us up for a.
When they're busy and the premier and.
And the resource group contract comes into play they are not there yet, but as long as we're knocking down these idms and healthtrust and.
Counts I think we have plenty plenty of open open geography, and turf to work with to have an excellent year. So that's the way we're looking at it right its healthtrust and its and its audience wanted to that's helpful.
Couple of quick follow ups and I'll hop back in queue here one on on.
And the Bravo data.
Later surround and Bravo data being out there.
Ongoing 100 patient study and again record low recurrence rates.
Yes for hernia safety data just wondering how Bravo data.
And is being received and the marketplace and what sort of feed.
Feedback are you getting is it resonating and then the last one of course for me just I want to just cleanup I guess the head count commentary did you see Tony that by the end of this year. The target is for 48 reps and if so what would be the cadence of adding those reps as the year progresses. Thank you again, yeah yeah.
So let me I'll take the second piece first so.
It's interesting I think our thinking is evolving a little bit right. So.
I think we're going to start to think and talk about a combination of things and our commercial organization right. The first is going to be the rep count right. We're running right now I don't know about 40 somewhere about 43 reps or so.
And then the clinical development specialists right almost the missiles right.
This group I think is emerging to be quite important for us we were running four or five of those clean Dev specialists.
And now we just put offers out we're gonna be staffed up.
At about eight.
So we may wind up trading a little bit right, where there may be a little bit of a trade between reps and clinical development specialists, because the Clinton Dev specialists there are super important on the Prs side for us and as we're starting to see success and growth there.
There may be a way to leverage more productivity into the reps that we have with these clinical development specialist they can cover big geographies that can use zoom.
They can get on planes.
We have them working the whole country, where they are needed. So I think there's a little bit of refinement and not much and.
And our model.
But so I think when we're thinking about sales force build out yeah. We wanted to get to 48 reps. It maybe 48, plus six or it may be a little less on the rep side, plus eight or 10 on the clean Dev side. So the ratio is going to be.
And the total number may be similar I think we're going to wait until midyear Anthony and then we're going to see how we come out of Q2.
Feeling great about where we are with Q2 at the start the strength of the exit cut.
Coming out of Q1 and.
And is persisting, which is terrific.
And.
And I don't think we're going to be shy right I think we're going to invest.
If we if we feel that it's the right thing to do.
Might put a few more reps down on the ground as we go through the rest of the year I don't have an exact number for you yet, but I can't say with and a higher clinical development specialists right. We're at eight now I wouldn't be surprised if we were 10 or 12.
By the end of the year, so it's going to be some combo.
Thank you again.
Thank you.
Yeah.
Your next question is from Dave <unk> from JMP Securities.
Good evening, and I will be sad to see you go.
Tony and and press release, you mentioned, the mesh litigation and Kols event.
One of the dogs had done a survey.
So the 94% of customers would prefer synthetic option like.
<unk>. So I'm just curious to get your updated thoughts there did anything new occurred we've just kind of highlighting that that's sort of a day.
Tailwind for you and the year.
Yes, I have some new information and that means.
Sadly and stubbornly the litigation just installed due.
<unk> backlog of COVID-19.
Our contacts have indicated that really not too much progress has been made but I feel that.
And that the market is slowly shifting right I mean that survey work with nice and surveys a survey it's sort of told us what we're feeling and already when we talk to surgeons, but what we did is we had our data team.
Start to look at all of the sources.
W stage for all the different types of products and.
As of the last cut that we looked at whether it's <unk> DRG data or what have you.
It's straight up plastic polypropylene mesh seems to be down about 15% and natural repair and I'll say natural repair products such as ours biologics resorbable synthetics are up so at least in that market data.
And I forget about surveys and the data it probably has a wider better look it looks like we're at the very beginning.
Of and increasing interest and natural repair.
Straight up plastic polypropylene, so we're going to keep an eye on that <unk> and DRG data and just look at the raw numbers and I think that will tell the story going forward right. It takes a while for this for this phenomenon to kick in.
But make no mistake, it's being driven by patient and it's being driven by.
And the publicity such and such as it exists today. So that's a trend we're going to take keep our eye on and it should continue to improve.
We're also seeing it and our business right.
Our LPR.
Product line.
Frank and 51% of our hernia units went in either through the robot or Laparoscopically and.
That's all that's all stuff that is less complex and.
That's a great sign for us having a broad product range right. Our goal is to be very compatible with the robot and our goal is to be able to replace any product.
And any procedure anywhere and any hernia with a natural repair solution and so if you look at sort of our internal trends with LPR and the 51% and you look at that 15% across the.
Across the national landscape.
I think I think it's happening it's slowly happening.
We will keep an eye on it Dave.
And I appreciate.
And at that and maybe just a quick follow up maybe for nor.
And I get the guidance reiterated this quarter was strong it was almost what we had for second quarter and we know this and good it's got the weird comp from COVID-19 last year.
So as we're looking towards the back half and know and hope, hoping that COVID-19 is sort of a.
Non event.
So we view that as somewhat conservative and I think.
Given the trends Youre seeing and.
Even the mis and robotics.
I think theres, a chance that you could even do better than that and the back half of the year. Thank you.
Sure. Thanks for the question Dave sure.
And we certainly think that we could do better but it is to be conservative and where we're at now again until we get better clarity with respect to the hospitals.
Hi chain and telephone and I think we are we're going to stay at this level at this point.
Yeah, I think plenty of value added.
Yes, I agree we will reevaluate at the end of at the end of Q2, I think there's a lot of wood to chop between now and then so.
And if we're setting ourselves up for success and I realized Anthony I never answered. The Bravo question. So I'm just going to say a couple of words on that yes.
The Bravo data.
Is excellent and it's highly differentiating right until the whole thing is out of two years I think that it's just not going to have.
The full power.
And by the end of this year, we will have everything out.
At two years.
We've put in the one year data as an interim we put that into a journal and we're waiting to hear back.
So once we get that published will be able to flash that one year data very thoroughly.
Everywhere and and then we will do the same thing.
And once we're through the two year data, but right now the Bravo data looks really really good.
And we expect it to getting to finish off strong and some other good news is Bravo too, which is going to be a redo of that study, but focused on robotics and.
Finally, we're through the COVID-19.
<unk> startup phase and.
And we're very very close to starting to enroll patients. There. So we're pleased that we're going to round out our clinical data quite well with full two year and then that robotic study is just demonstrating further commitment to all things robotic with with our hernia platform.
Thank you.
And your final question is from Kyle Rose of mechanical wood.
Great. Thanks for taking me.
Questions and nor congrats.
We will Miss you.
A lot's been asked but I guess kind of want to start big picture, because and the last question.
You talked about the percent going through LPR and robotics, So I guess two.
Two part question is talk about the backlog that you see developing and the market. If there is a backlog and what are your hospital and your clinical partners talk and they're just when we think about the delayed procedures, obviously youre seeing in your business a shift towards the more of those simple procedures like <unk>.
And Mr. Using the LPR. So I'm just I'm just trying to understand if.
If we see more of a normalization come and the backend and the back half of the year are we going to see this consistent flow of these LPR robotic type procedures and add on some of the big bigger more complex AB wall procedures and trying to understand what that mix might shift like towards the second half because that would imply maybe some some revenue acceleration and as well.
And that's purely on price and yes, that's a very very interesting question. So look I.
I'll go back to the start of what we what we were trying to accomplish when we first launched it.
Natural repair Antiplastic hernia platform right we.
Wanted to be broad we wanted to have a range that could do anything and hernia and I think we have that and we're gonna and believe it or not there's way more we can do with it we're going to put out new products over the next few years as well.
And that are going to help accelerate the breadth and the totality of our capability, which is good but our initial starting point was moderate to complex ventral and that's where we wanted to start that's where Bravo wants it and we wanted to prove ourselves and these horrendous difficult comp.
Located contaminated whatever those words are to describe these difficult AB wall procedures, and I think by and large we've done that and we continue to do that we have a very very superb value proposition and those procedures compared to any other product Bravo, one really really back that up.
So step one is in and motion I'm not going to say, it's complete because.
With more contracting and more access and more reps and more everything thats going to grow.
Step two was always from the beginning to leverage all of that experience and goodness and the performance of the product if we can handle those procedures.
And we could make our product and easy to handle and implant as plastic then we should be able to start to chip away at the simple or procedures and its always been the plan to set up to have that natural repair alternative and so we're in the very early stages of starting to see that happen.
And the LPR has been a catalyst for that for sure.
And four five sizes, we need more sizes right, we need to keep bumping out.
And the product portfolio that earmarked for the robot because we're learning we're figuring it out what we have to do to be as easy and simple to use as plastic.
And no one else can do that with a biologic or natural repair product, but we can so so we're we're sort of in the third or fourth and the third inning, maybe on the moderate to complex, where and the first inning on the simple and the breadth, it's going to be driven and pulled through by the robot and by all of the product and data.
Additions that we're developing to focus on the robot. So yeah. I mean, it's working right. The plan was a two step plan from the beginning that's what we're operating against and and we see it happening so.
Yes, we're feeling pretty good about where we are with that the other factor Kyle that.
That's really interesting is that I think prs is going to help hernia. So when we meet with these ideas and GPO and even health trust. They want to talk about Prs first right, that's where the massive cost savings exist.
Up until Q3 Q4 of last year were like now we're in limited release, we're learning, let's talk about hernia first we'll get the Prs eventually and and and.
That isn't exactly where they wanted it started right. So now it's the opposite we're saying all right youre interested and Prs and let's talk about Prs, let's get that moving we will lead with that if we have to and thats going to help us get hernia on the shelf and it should work Synergistically, we haven't even seen net.
To kick in yet, but I think thats going to start to happen as well down the line right. Just the just relative weighting of each of our product lines in terms of cost savings and and value proposition.
Great. Thank you very much for taking the question.
Thanks, Dan.
And there are no further questions I will now turn the call back over to Tony for free.
Closing remarks.
Alright, Thank you Cathy and thank you everyone for jumping on.
So.
We were experiencing improving sales trends.
Last quarter and bleeding into the start of this quarter.
We believe that we're just going to stop focusing on on COVID-19 and.
And get on with meeting and beating our numbers.
The last remnants I think that we're seeing are there supply chain opening up so let's just hope that continues that's going to do nothing but help us. So we are optimistic about the future.
We believe us.
Detailed here that we are well positioned to take advantage of all of these improving trends and and thanks for your interest and the company and stay tuned that day.
Still to come.
Thank you ladies and gentlemen. This concludes today's conference call you may now disconnect.
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