Q2 2021 CryoLife Inc Earnings Call
Greetings and welcome to the Cryolife second quarter 2021 financial conference call. At this time, all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation. If anyone should require operator assistance for and the conference. Please press star zero on your telephone keypad. As a reminder of this conference is being recorded I will now turn the call over to Brian Johnston from the Gilmartin. Thank you and you may begin.
Thanks, operator, good afternoon, and thank you for joining the call today, joining me today from Cryolife management team are Pat Mackin, CEO and actually really CFO before we begin I'd like to make the following statements to comply with the safe Harbor requirements of the private Securities Litigation Reform Act of 1995.
Comments made on this call that look forward and time involve risks and uncertainties.
And Ts that are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
The forward looking statements include statements made as for the Companys or managements intentions hopes beliefs expectations or predictions of the future. These forward looking statements are subject to a number of risks and uncertainties estimates and assumptions that may cause actual results.
<unk> to differ materially from these forward looking statements additional information concerning certain risks and uncertainties that may impact. These forward looking statements.
And from time to time, and the company's SEC filings and impressed with the press release that was issued earlier today now I'll turn the call over to <unk> CEO Pat Mackin.
Thanks, Brian and good afternoon, and thanks for.
For joining.
And I'm pleased to report we had a solid quarter as of recently acquired and newly introduced products performed quite well even in the face of the pandemic.
And with the performance and progress of our business. We believe it is more meaningful to compare Q2 'twenty 1 results against Q2.2019 results because Q2.
2 of 2020 of performance was substantially impacted by COVID-19.
So when comparing Q2 of 2020, 1 against Q2 of 2019 performance our pro forma constant currency revenue growth was 6.6%.
This excludes TMR and both periods as we sold TMR and Q2 of 19.
And not in Q2 of 2021.
This revenue growth shows that our business momentum has returned and we are returning to growth.
Our Q2 'twenty 1 performance is even more impressive when you consider that cardiac tissue declined 7% and the quarter due to the inadequate supply of cardiac tissue valves.
That were affected by the previous mentioned Tris issue, which has now been resolved.
And the last few weeks, we confirmed with the FDA that the quarantine tissue are safe to distribute and as a result, we will not write off any of the $5 million of tissue that was quarantined as a result of the trust issue.
As a result of this positive news, we now have an extra quarter of tissue and we've begun working through our release process, which should have positive impact on tissue revenue going into the second half of 2021.
Given our confidence and our business notwithstanding the continued impact from COVID-19.
And on.
On our business, particularly outside of the U S. We are issuing guidance for the second half of 2021.
We are forecasting second half revenues will increase approximately 7% to 10% on a pro forma constant currency basis versus 2019.
This will exclude per Claude and the.
The result of the Baxter transaction.
What you'll end up with the full year revenues in 2021 between 296 and $300 million.
And.
And our performance through this quarter benefited, particularly from our new product launches and strength in our on X aortic valve business and the U S.
For example, and the second quarter of 2021 compared to the second quarter of 2000.
And 19.
And our a M D S increased 65%.
The Vito open Neo grew a 115%.
Inside grew 25%.
And on ex grew 17% each on a profile pro forma constant currency basis.
Nexus revenues grew 48% vs.
2020 on a constant currency basis as it wasn't available in Q2 of 2019.
I also wanted to highlight the outstanding growth of the Onyx aortic valve revenue in North America, which is the 25% increase.
Since our last call the number of people with Covid vaccines and EMEA has increased substantially.
And the number of hospitals operating on a more traditional work flow also continues to increase.
Both of these factors had led to further market normalization and improved on a sequential revenue.
Unfortunately, we are seeing an increase and outbreaks and various markets around the world due to the highly contagious Delta variant.
Well we.
And I foresee of returned to conditions like in 2020 or early 'twenty 1.
Certain areas of the U S as well as Europe are starting to experience renewed spike of COVID-19 infections.
And Latin America, and Asia Pacific continue experienced significant internet impact from COVID-19.
That said, while Covid may continue to be of headwind.
Headwind and the months to come and we believe that our revenue performance and the second half of this year will be better than the first half of this year.
Ashley will provide more commentary on our outlook for Q3 later in the call.
Okay.
Before moving on to provide a broader recap of our second quarter progress I wanted to provide some more color on our announcement this morning.
We do knock on the sale of our pure cloud product lines of Baxter.
Per clock is an outstanding product, but as you know most of the addressable market opportunity for per of clot is outside of our customary call point and cardiac and vascular surgery.
From a strategic standpoint divesting per clock allows our commercial channels to remain.
And focused on selling our expanding portfolio of cardiac and vascular surgery products focused on Eric aortic repair and simultaneously it improves our cash position to strengthen our balance sheet.
As a result of this transaction Baxter will take over distributing and semi manufactured per cloud outside the United States.
And we will sell Cryolife manufactured protocols for approximately 2 years post U S approval of per clock, while Baxter transfer as part of lot manufacturing from us to another manufacturer.
We will continue to pursue the U S PMA approval for per club on Baxter's behalf.
Under certain under current assumptions.
Expect clerk per cloud to be approved and the U S and the second half of 2020.2.
And we will generate revenue in 2023 and 2020 for on the product we manufacture for Baxter.
It should contribute to our go to the growth rate.
As a result did investment of this product line has a clear strategic benefit and <unk>.
And we have our revenue growth and 23 and 'twenty for.
Moving on to review of our progress and the second quarter.
As I explained on our last call our near term plan is to accelerate revenue growth with 3 main initiatives.
Our first initiative is to commercialize our 5 new aortic stent and stent graft products in Europe.
This includes the a M D S. Nexis, our 3 next generation Eurotech products inside of Vito open Neal and and yet.
Our second initiative is to continue expand and Asia Pacific and Latin America.
And our third initiative is to secure regulatory approvals in major markets for per clot in.
And the U S Pro Act mitral in the U S and Basel and China.
I will walk you through and update on each of these items going forward.
Starting with the review of the commercialization of our enhanced portfolio of new aortic stent and stent grafts.
First with a M D S.
And this is the world's first aortic remodel.
Arch remodeling hybrid device used to treat acute type a aortic dissections and we're very optimistic about the performance of this device.
As I noted earlier during the second quarter, we posted revenues of $1.6 million, which was an increase of 65% on a pro forma constant currency basis over the second quarter.
Order of 2019.
This growth occurred despite regional Lockdowns in Europe, where we have a majority of our AMD of sales.
We also continue to secure marketing authorizations and key markets around the world, which with additional regulatory approvals, we expect to secure position us well for further increases in the Mds revenues, particularly.
Particularly as the pandemic dissipates and these markets.
Second next is posted revenues of 451000, and an increase of 48% on a constant currency basis compared to the second quarter of 2020.
Nexus was not approved and the second quarter of 19.
We believe these revenue results would have been better.
Texas as well as for our other products if not for the renewed COVID-19, Lockdowns and travel restrictions and Europe during a portion of the second quarter.
We continue to see Nexus cases scheduled for the upcoming weeks and months and remain optimistic regarding the prospects for this technology.
Our third device and side is our newest device and our profile.
Or for the treat Thoracoabdominal aneurysms with Endovascular stent grafts.
Our revenues and this product line, which include inside and Xtra design grew over 25% on a constant currency basis, when compared to Q2 of 2019.
The fourth category is the Vito open and Neil This is our newest product and the frozen elephant trunk.
Non category, which is used to treat dissections and aneurysms of the aortic arch.
Revenues from this product line, which include the of Vito Open plus and if you don't open the L grew 115% on a constant currency basis compared to Q2.2019.
The fifth device and yeah.
We are currently and early.
These stages of our limited market release, and expect to move to a full market release later in 2020.1.
We expect demand for these 5 products to continue to build as the number of people are vaccinated as well as market adoption for these products increases this.
And this will accelerate and Europe as the pandemic exhort the subsides.
In addition, we expect.
Expect to benefit from improved Yo tech inventory, resulting from our own internal efforts and the onboarding of the second source sewing supplier.
Moving to our next initiative international expansion and Asia Pacific and Latin America.
This will be done through new regulatory approvals for existing products as well as expansion of our commercial footprint.
And as regions.
Our revenues and Asia Pacific increased 3% on our and our revenues and Latin America decreased 5%.
Both of them on a pro forma constant currency basis, and the second quarter 'twenty, 1 compared to the second quarter of 19.
We feel that these results were hampered in both regions, but the continued impact of COVID-19 and anticipate.
Print and the growth will accelerate as the pandemic subsides and we gain additional marketing authorizations and both APAC and Latin America.
Regarding our third initiative, we continue to make progress on achieving 3 regulatory approvals in major markets.
More specifically, we expect to submit PMA for per client and product mitral this quarter.
While continuing to pursue the Chinese FDA approval for bio glue.
For per clock, we intend to submit in Q3, 2021 and our PMA for approval for open surgery as well as laparoscopic indications across multiple specialties as well as for large scale manufacturing capability.
Similarly, we also expect.
And to submit in Q3, 'twenty, 1 our PMA submission for our low INR label for the on X mitral valve the.
This is similar to a lower INR label for on X aortic valve as a reminder, the onyx aortic valve is of significant clinical advantage for patients over competitor of valves that is it's the only FDA approved mechanical aortic.
Now that can run on lower Inr's from 1.52, 0.0, rather than the standard of care to point out of 3 point out.
If our new label is approved patients with on X mitral valves will be able to be maintained on lower doses of cumin and comparative patients implanted with the other mechanical valves.
The.
And the on X mitral valve would be at 2 point out of 2.5 versus all competitive valves, which would be at 2.5 to 3.5.
This will lead to significant clinical benefits for patients. We believe this approval of our on X mitral valve will enable us to take significant market share like the market share gains we've experienced with our on X aortic valve.
Lastly, as it relates to regulatory approval for biogas and China.
We remain actively engaged with N M. P E and look forward to providing an update on our approval timeline and when we have further clarity.
And our view approval of bio glue, and China does not meaningfully adversely impact of accelerating near term revenue growth opportunities I described earlier.
In addition to our progress on these 3 initiatives. We also continued to make very good progress on our mid term pipeline with key products that are currently and U S. Clinical trials are ones, which we expect to start U S. Clinical trials later this year.
These 3 products are proactive on a nexus and E M D S.
We continue.
To make significant progress on the enrollment of our proactive and a trial a prospective randomized clinical trial determined if the patients with on X aortic valves can be maintained safely and effectively on eloquent versus the warhead.
We currently have enrolled 360 patients in this study.
Feedback from surgeons and patients.
Participating on this trial remained very positive.
Despite the pandemic headwinds and assuming the trial meets its the endpoints. We believe we can still achieve FDA approval for this new indication by late 'twenty for or early 'twenty 5.
If we successfully obtained such non approval, we believe the on X aortic valve should become the market share leader and the aortic valve market for.
It's under the age of 70.
In addition to the proactive and a trial our partner and the span continues to make good progress on its U S. IDE trial for nexis known as the tree on the trial.
As for a M. D. S. We're on track to submit our I D and Q3, 2021, which if submit it would put.
Put us on track to begin our <unk> clinical trial by year end.
If these trials proceed as we expect we anticipate FDA approval for proactive and a a M D S and nexis by late 'twenty for early twenty-five which would give the company and additional $1 billion and market opportunity at that time.
With that I'll now turn the call over.
For patiently.
Thanks, Pat and good afternoon, everyone.
Total company revenues were $76.1 million for the second quarter of 42% on a GAAP basis compared to Q2 of 2020 and.
And the 35% on a pro forma constant.
On a currency basis compared to Q2 of 2020.
Revenues came in ahead of our quarterly guidance due to improving procedure volumes and the U S and Europe and as vaccination rates increased and lockdowns ease during the second quarter.
On a year over year basis, and the second quarter of 2021.
And actually you were the extent instant raft of revenues increased 60%, reflecting increased procedure volumes and improve do you took the inventory position and.
The addition of the a M D S and September of 'twenty, and 'twenty and improve the adoption of Nexus and the E U.
On X revenues increased 46.
Percent bio glue revenues increased 44% and tissue processing revenues increased 22%, reflecting the improving procedure volumes relative to the second quarter of 2020.
On a pro forma constant currency basis the.
The art extent and stent grafts the revenues increased.
39%.
On X revenues increased 43% and body of Blue revenues increased 40%.
On a pro forma constant currency basis compared to the second quarter of 2019 on.
On X revenues increased 17% the ore.
Arctic sense and stent graft.
And as increased 11%.
Tissue processing revenues increased less than 1%.
And bio glue revenues decreased 1%.
On a regional basis second quarter, 'twenty, 'twenty, 1 revenues and EMEA increased 65%.
With America increase.
For the 30%.
Asia Pacific increased 13% and <unk>.
Latin America increased 133% all compared to the second quarter of 2020.
On a pro forma constant currency basis revenues in EMEA increased 47% North America increased 29%.
Asia Pacific increased 13% and Latin America increased 130% all compared to the second quarter of 2020.
Our gross margins were 66% for the second quarter of 2021, and 67% for the second quarter of 2020.
G&A expenses and the second quarter.
For $48 million compared to $32.3 million and the second quarter of 2020.
The second quarter of 2021 includes acquisition related and other nonrecurring charges of $3.4 million.
Primarily related to fair value charges related.
To the E M D S acquisition.
Second quarter interest expense of $4.9 million includes approximately $2.4 million of expense related to our term loan b.
1 point and $1 million related to our convertible debt.
Nonrecurring interest of 8.
Related and $35000 related to the extension of our term loan b and revolving credit facility and approximately $500000 and amortization of debt origination cost.
Other expense in Q2 includes $1.4 million and realized and unrealized foreign currency translate.
Hundreds and games.
On the bottom line, we reported GAAP net loss of approximately $2.2 million or 6 cents per fully diluted share.
Non-GAAP net income was $4.8 million or 12 cents per share and the second quarter.
And Additionally, GAAP and non-GAAP earnings.
Earnings include the pretax gain of $1.4 million or approximately <unk> <unk> per share related to foreign currency translation gains.
Reconciliations of GAAP to non-GAAP income and EPS are included in the press release that we issued this afternoon.
Adjusted operating income was.
It was $9 million for the second quarter of 'twenty, and 'twenty, 1 compared to $1.7 million for the second quarter of 2020.
Adjusted operating income reflects add backs of amortization expense acquisition related charges and other nonrecurring charges to operating income.
At June 32021, we had approximately $55 million and cash $319 million and debt.
And the full of $30 million available under our revolving credit facility.
Adjusted EBITDA for the second quarter of 2021 was $12.8 million.
Compared to $6 million for the second quarter of 2020.
Gross leverage as defined by our credit facility stood at 5.3 times and net leverage stood at 4.5 times.
These metrics do not include the proceeds from the sale of per Claude.
Please refer to.
Our press release for additional information about our non-GAAP results, including a reconciliation of these results to our GAAP results.
And now for our outlook as Pat mentioned, we're now providing revenue guidance this quarter due to the increased confidence and our business.
Our new product launches the M D S Nexus.
E Vita open neo and inside are all performing well.
We operated the first half of the year without of normal supply of tissue due to the attrition issue and that issue has now been resolved.
We also expect to see improved performance for Asia Pacific and Latin America, and the second half and as the pandemic subsides.
As a result, we are forecasting a second half to be up approximately 7% to 10% on a pro forma constant currency basis, and 21 versus 2019, which excludes per club.
Resulting in full year 2021 revenues of bits.
<unk> 296 and.
$300 million and a euro USD exchange rate of 1.2.
We also anticipate revenues for the third quarter to be between 71 and $73 million.
These forecasts are based on the current and anticipated state of COVID-19 around the globe.
And the forecasts.
And that's taken into account the fact that approximately 55% of our revenues are generated in North America and the remainder of generated overseas.
Even though we have seen significant improvement and the U S and Europe regarding the impact of COVID-19 on our business, New COVID-19 restrictions and then.
Restrictions and Lockdowns are being implemented.
And COVID-19, and remains a significant challenge and Latin America and Asia Pacific.
And finally, the guidance reflects the fact that we generated over $1.8 million and per clock revenue and the first half of 2021and.
And per cloud revenues and the second half of 2021 will be minimal.
And the extra is taking over distribution of S semi manufactured per Claude under the transaction, we just consummated.
Regarding our ongoing investments designed to fuel future growth, we intend to continue to invest and our commercial channels, particularly in Asia Pacific and Latin America, as well as and our R&D pipeline.
And as.
We believe that we will be able to fund these investments through our ongoing operations and that we can comfortably and make these investments and service our debt without having to raise additional capital.
I will turn the call back over to Pat for his closing comments.
Thanks Ashley.
So in closing as you've heard this afternoon.
And bubble of pandemic, our business performed quite well during the second quarter.
I once again and give the credit to the outstanding efforts of our employees around the world.
Going forward uncertainty regarding the impact of the Delta variant and uncertainty about continued vaccine adoption and make it difficult difficult to predict the impact on our business over the at least the next couple of quarters, but.
What I can say with confidence that our product offering of second to none and the treatment of aortic disease.
When the pandemic largely subsides and the procedure volumes returned to normalized levels, we expect exceptional products to the live to deliver double digit growth on a year over year basis.
We have several catalysts in 2020, 1 that we do not have and 2000.
And in 'twenty and as I explained earlier, we have 3 initiatives that will drive growth between 'twenty, 1 and 'twenty for first and.
And 'twenty 1.
We should see continued growth and our 5 new aortic stent and stent grafts, a M D S Nexus and side Mio and and yes.
Second we.
We also anticipate further upside from our investments and our channels and new regulatory approvals and Asia and Latin America.
And third.
And we'll be filing our PMA for both per clock and the on X mitral valve.
All of these catalysts and our expectation to continue to deliver on these goals I've outlined previously.
Supported by our strong financial position.
Asian leave us optimistic and confident as ever about the future of our prospects.
With that said I'd like to turn of open the line for questions and turn it back over to the operator.
Thank you we will now be conducting a question and answer session.
If you would like to ask a question. Please press star 1 on your.
On the keypad, a confirmation tone will indicate that your line is and the question queue. You May press star 2 if he would like to remove your question from the queue.
For participants using speaker equipment and may be necessary to pick up of your handset before pressing the star keys, 1 moment. Please while we poll for questions.
Our first question is from Mike Mattson with need the Needham and co. Please proceed with your question.
Yeah, Hi, Pat and Ashley This is David Saxon on for Mike Thanks for taking the questions.
And my my first 1 is just on the per club sales for Baxter.
As I understand.
It it's going to be about $19 million upfront for you and so just wondering how you're thinking about prioritizing that as that kind of be mostly for paying down some down and some of your debt maybe doing some smaller M&A or kind of reserved for any potential milestones.
And they'd have coming up like some of these deals.
Cyrus.
Yes, so I mean, regardless of where we put the cash I mean, we do I think the latter of the last comments you made we've got 2 milestones coming up 1 for free.
For Cyrus, which was $10 million once we get the IDE approved.
And we just talked about we're submitting the ied actually this weekend.
So we're anticipating that that idea of will be approved and the in the second half of this year. So that's obviously 10 million of it and then we've got of 5 million dollar of milestone for Nexus.
Once they enroll 50% of their trial.
We don't anticipate that happening public.
For another until outside of the 2021 but that would be.
Hunk of the first upfront.
Okay.
Oh, Okay got it.
And then.
I mean, you you've talked about the the lower INR label for on X Mitral I was just wondering if you can help.
About the size of that opportunity and I know the.
On ex aortic valve has a pretty high gross margin of at least and the U S. So on should we expect something similar to 2 of the gross margin profile of the aortic and Onyx.
<unk>.
Yeah, so the the mitral.
Mitral valve is of similar profile to the works from a gross margin standpoint, and the U S. It's around 90%.
The second part is that the mitral and kind of.
On the overall market opportunity and this is I think being conservative and we're just talking about and mechanical valves.
And that it's probably about a $40 million.
The acidity at 90% gross margin for us.
There's also an opportunity and as we've seen with the Onyx aortic where we actually.
Cannibalized tissue surgical valves pumps, and we haven't even use those numbers and the in the math to come up with the $40 million. That's just kind of the the mechanical mitral opportunity we have to go after.
And once we get this product approved and out and all of the markets.
Okay. That's helpful. And then I guess last for me I mean, it sounds like the tissue issues are resolved. So how should we think about preservation services Inc.
And the back half thanks, so much yeah. So it was.
It was actually very positive because if you if you think back to the beginning of the year.
And we call it the good news for us.
Of course this quality issue.
And we worked through all of the testing.
The submissions and the the tissues at the highest level of quality we expect.
So what.
Is it getting the here, we said where do you like and a write off $5 million.
And by the summer or we're going to have a bunch of extra tissue and the freezer.
And it turns out of it was very positive and the like I said, we're not writing off any of that tissue and we have an extra quarter of tissue kind of in quarantine and the freezer right now so now it actually shifts.
To a kind of processing and getting the the tissue out going through all of our quality process.
And also some procedures.
So we've got a lot of tissue and we just got to get it out the door. So I can't tell you exactly how it's kind of flow.
But we feel pretty bullish over the next 12 months that tissue.
We'll have a kind of a tailwind to it and compare to what you saw on the first half.
Great.
Great. Thank you and congrats on the quarter.
Thanks.
Our next question comes from Cecilia furlong with Morgan Stanley. Please proceed with your question.
Hey, good afternoon, and thanks for taking the questions Pat and wanted to just start on on X gene and the U.
Recently over the past few quarters could you talk about what youre seeing on an underlying basis and this more and the mechanical heart valve market Onyx, specifically, if you could just provide more color in terms of really what's driving that growth that you've seen over the past few quarters.
Yeah, Hey, Cecilia and thanks for the question I've had on opportunity and.
And I think when we last spoke I mean, I was out and a.
30 of the top cardiac centers and the last 6 months and I can tell you..2 are 2 of person at every institution and I, probably talked to more than 100 surgeons to a person. They they all believe and the Onyx kind of you know it's the anticoagulation.
<unk> of lower lower coagulation story, where the.
And what are the only valve that can have less cumin and today and we're the only valve it's looking at and studying the use of eloquent, so which is kind of a groundswell of around it and and literally every center I go to where either bringing on new users and those centers, we're actually bringing on brand new accounts.
So it's just to continue.
And you'd kind of momentum and I think it's the combination of.
The the story of its and the guidelines.
And having the only ones with the low INR.
And I think of lot of people are paying attention to this trial, which we've now enrolled 360 patients and so I think it's hard to pin down exactly what it is but it's obviously been.
Continued very strong growth over the last you know.
Several quarters.
Okay got it and just in terms of <unk> guidance as well and I recognize there are lot of moving parts, but could you provide a bit more color in terms of what you contemplated and just from the geographic standpoint Americas versus the other.
The biographies that are still kind of undergoing a COVID-19 issue. Thank you.
Yeah, I mean, the 1 of the things that I think we've all learned and the last 18 months of its this is this is clearly a moving target and it's a very kind of dynamic world.
And we obviously had a at a nice nice Q2, we've got a lot of momentum.
And you talked about we put up 6.7% growth.
Even with or without a quarter's worth of tissue.
On the particularly impacted our cardiac tissue. So we feel that that's positive. Obviously this delta of Varian has started heating up even in the last week.
We put these forecast together with kind of what.
We knew at the time and we wanted to come out and give guidance for the for the full year and with the second half.
You already know the first half.
And so that being said we tried to take into account everything we knew knowing that the things we started learning and the last few days, obviously starting out a little more negative. So I think we've got a pretty good.
Pretty.
And then and we started having a good second half.
And if things go crazy and I know.
And I don't have a crystal ball like anybody else.
I'm not sure what this next what's the fall of going to look like with this with this delta of variance. So I think we feel pretty confident with the forecast we put out there and given what we know today.
Pes facility and this.
This is actually the the the.
Only the only thing that I would add to that too is that I mean.
If you look back at our business historically, the third quarter has always been down sequentially compared to the second quarter and a lot of it is due to the you know the heavy holiday season, and that we experience in Europe and.
And there's no reason to think that the that we won't see something similar to that this year and and and as you've seen and the last 3 years, we always follow that sequentially with the very strong fourth quarter. So the the there was another consideration that we factored into our guidance.
Great. Thank you for the color.
Okay.
Yeah.
Our next question is from Suraj Kalia from.
And from open high net income.
Please proceed with your question.
Good afternoon, and Pat Ashley can you hear me all right.
Thanks, Raj, yes, because the fine yeah sure. So let me start out Pat Ashley Congrats.
Once again, a great quarter.
Pat I know you talked about the Delta variant and maybe it could be a little more specific geographically.
Are you seeing any.
Initial signs of.
And the Delta Varian impacting any of your dreams sessions or U S.
Yeah, It's it's and this is the part I've mentioned Suraj, it's literally like a day.
Day to day situation of I'll give you. An example, I I got an email from our country manager and Spain, where they started locking down and they started pushing off elective cases, we had of Nexus case that was scheduled with the Procter the had to get canceled.
So it absolutely is affecting the Procter Inc.
2 days ago, I got a message from somebody about of hospital in Florida that has more and more patients and they're in the hospitals and they had and January right. So it's just it's just like the you know every day, there's new news that comes in and I will say that the this.
Particularly the U S. Instead of of the household names that have done a great job managing.
Covid and I think they will continue to do so even and there will be some hotspots and you've you know where they are and and Missouri has been of hotspots, Florida has been a hotspot.
We're also seeing you know we have a lot of growth expectations, and Asia Pacific and Latin America, and those places are still getting hit pretty hard Australia is locked.
Tim of leaves just locked down on.
Brazil has had a tough go there, but particularly in Europe.
So we saw the issues in the U K and the quarter, we saw and issues and Spain in the quarter on and I can't predict what the Delta there and it's going to do but.
But we're obviously you're still putting up numbers, it's just not I guess the way to think about it it's like we're running with the.
You know of weight on our back and we're not fully on tethered at this point, where we can do all of our cases and nothing gets canceled there's been tons of cases moved and canceled.
For.
The COVID-19 impact type things.
Got it.
Let me move on to my favorite topic, which is proactive any sort of 100 and.
25 patients and rolled into Q2.
More specifically pad is the any center concentration in terms of enrollment.
Yeah, we've we've.
And that's a good question we've had.
I'm not going to name the the center just because it's not appropriate but we we've had.
And 1 center, and particularly which is a.
1 of the highest profile and the in the country if not the globe.
<unk> has been on a massive and roller they've done extremely well and a lot of this gets to kind of of the logistics of the trial and this is different and most trials as we've talked about this is not a.
Trial.
And where you actually enroll patients into surgery and then they do the case and this is going back and and we of 30000 patients.
And that are available to be and this trials of got on on X valves.
So a lot of it is just going and finding those patients getting them consented, bringing them in and we've had a handful of centers who have done an excellent job.
We just sent out 31000 letters too.
Existing on X patients to see if they are interested in participating in the trial. So we're learning as we go we're having lots of investigator meetings.
But we're expecting the momentum for this trial I think even to pick up from here.
Okay.
Job I'm asking you if you're at the Liberty to talk what is the average age of an on X patients and.
Growth in either arm and proactively.
Yeah, I'd have to I'd have to get pull that back for Ya actually pulling out of the data on.
I mean on the Onyx.
Oh, yeah yeah.
If you don't actually pull that for you the new youre going to ask.
About 45 about 45% of the patients have had the valve less than a year.
Got it.
55% of had it more than a year.
Got it.
1 question final question for you, Pat and 1 for Ashley and all plugged.
Yeah, Yeah, all of them together, so perhaps your comments about on X being the market leader for patients less than 70 years of age.
That caught my attention because that means you're looking at more than tripling your heart valve market.
More specifically Pat can you square.
Both of your comments.
With the push by tower companies and true moderate E S and asymptomatic, yes, that's for you Pat actually the gross margins for a bit shy of for estimates.
And even though of perks losses was included it just kind of help us flush out.
And as we look forward.
For Q3, Q4, and once part of cloud is completely out how should we think about gross margins gentlemen, congrats once again and thank you for taking my questions.
Yeah, I'll go and I'll take your question first of all right. So you know we've.
We've done of buying a bunch of market research on and my comment was around.
Assuming the proactive on a trial.
Gets approved and when you enroll the trial, we do the 2 year follow up and it gets approved.
Obviously, if that happens.
The market research that we have done shows that there's a big group of patients between kind of 60 and 70.
Currently.
There's a kind of a and in the guidelines even there is a kind.
You have to make a decision between a bioprospecting for Oliver of mechanical valves and.
Our market research shows that as you get closer to 60 of much higher percentage of patients would opt for on on X valve with eloquence.
And as you move up to 70 of that number would come down, but we still would be taking share.
From.
Tissue valves of up to the age of 70, so it's not saying that you know everyone under the age of 70 is going to get on on X with eloquence of saying.
If you looked at all of the patients under 70. If this trial gets approved we would be the market leader in that segment.
Okay.
And then actually you want to take as a gross margin question.
Yes.
And she did too.
Point that the the margins for the quarter were a little bit lighter than we even anticipated, but but the what was driving that is we routinely evaluate our inventory and and our obsolescence and this quarter was a little bit higher than it normally is the other thing is as we had some.
So on and you're factoring efficiency and efficiencies that that hit the P&L and the second quarter of this year not indicative of any.
The recurring issues, but we just had a few manufacturing inefficiencies that made their way into Cogs and the second quarter and if you look at the second half of the year, we think of our gross margins.
And maybe in the 67% of 67 and a half per cent range give or give or take a few basis points on either and depending a lot on like a geographic and product mix.
Yeah, I think the other thing I would add to that just from a commercial standpoint is we we have rebuilt.
We had built up some inventory for.
And kind of waiting for regulatory approvals and.
And then the pandemic hit so when your volumes drop off by 30, 40% for a quarter.
You have the stuff that will expire on and so I think all I think we are seeing a little bit of you know.
A ripple effect of.
Kind of the pandemic and some of the write offs on stuff expiring just from us.
The the demand went down when we had our normal supply playing out so I think that will reverse going forward.
Okay, operator any other questions.
Mr. Mackin there are no further questions at this time.
For I'd like to turn the floor back over to management for closing comments.
Yeah, well first of all thanks, and thanks again for joining the call and as you heard from the call you know, where we are I think of a really strong quarter, both from the top and bottom line. Our new products are delivering the trust issue has been resolved for submitting 2 P M as.
The.
Pro Act mitral as well as the Oh per clock this quarter.
We're submitting the IV for a M D S. This quarter.
For today's enrolling Nexus is enrolling so the pipeline is really starting to take stride here and we've got the true sushi resolved, we're not going to write off 5 million, we know of an extra quarter worth of tissue.
And you could get out the door. So I think all and all of whom I'm pretty confident about the the second half and.
Notwithstanding this delta variant, which none of US know, how that's going to play out. So we're charging forward and look forward to the keeping you updated on our progress. Thanks again for joining.
This concludes today's teleconference.
Both of you may disconnect your lines at this time, thank you for your participation.
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