Q3 2021 Surmodics Inc Earnings Call
Good day, everyone and thank you for standing by.
Welcome to the Sermonic third quarter fiscal 2021earnings Conference call. Today's conference is being recorded at this time I'd like to turn the conference over to Tim Arens Senior Vice President of Finance and Chief Financial Officer. Please go ahead Sir.
Thank you Ana good morning, and welcome to Surmount ex fiscal 2021 third quarter earnings call before we begin I would like to remind you that during this call. We will make forward looking statements. These forward looking statements are covered under the safe Harbor provisions of the private Securities Litigation Reform Act.
On 1995 and include statements regarding surmount ex future financial and operating results or other statements that are not historical facts.
Please be advised that actual results could differ materially from those stated or implied by our forward looking statements, resulting from certain risks and uncertainties, including those described in our SEC filings.
<unk> disclaims any duty to update or revise our forward looking statements as a result of new information future events developments or otherwise we will also refer to non-GAAP measures because we believe they provide useful information for our investors.
Today's news release contains reconciliation tables to GAAP result, This conference call is being webcast and is accessible through the Investor Relations section of this robotics website, where the audio recording on the webcast will also be archived for future reference.
A press release disclosing our quarterly results was issued this morning and is available on our website at Sermonic Satcom I will now turn the call over to Gary Maharaj Gary.
Thank you Tim.
Has been an exciting quarter filled with many important accomplishments we have these updates and developments to share with you on our strategic initiatives. In addition, we are pleased to announce in July the acquisition of <unk> medical and I will provide an update on this important acquisition and certain key milestones and timing related to the <unk>.
And the Venus Thrombectomy, Captisol, which is now and important and complementary product to our pounds arterial thrombectomy platform.
Let's begin with a summary of our third quarter financial performance.
During the quarter, we generated $23.9 million of revenue compared to $26.9 million and the year ago period.
Call that a respect this period last year included $6.7 million and revenue from the receipt of a $10.8 million CE Mark milestone payment from Abbott.
Excluding the impact of this milestone payment third quarter revenue grew 17% on.
Our performance was fueled by a second consecutive quarter of record IBD revenue as well as significant royalty revenue growth also as expected we reported a GAAP loss per share of 24 cents, which included the <unk>.
<unk> related acquisition costs, and and non-GAAP loss per share of 17 cents, Tim will provide additional details on our quarterly results, including the impact of the Vita ex acquisition and an update to our full year fiscal 2021guidance.
And I'm pleased with our financial performance this quarter I'm extremely proud of the significant progress we have made and executing on our key fiscal 2021 and objectives, which I'll remind you include first completing the final PMA submission flow surveil drug coated balloon.
Second advancing and expanding our robust product pipeline and third optimizing cash flow from our IBD and medical device businesses that few of our strategic growth initiatives.
Starting with surveil and I'm happy to announce that in June we submitted the fourth and final module of flow to avail PMA submission to the FDA.
As previously discussed our submission was delayed since the FDA requested mortality follow up data for patients at both 2 and 3 years from the time of treatment.
Following the agency's administered review of all filing they have informed us that our submission is complete and we have a filing prior to the end of June 21st.
While it may still be possible to receive the PMA for surveil approval by the end of December 21.
No appears to be a best case scenario, a several preapproval inspection visits have yet to be scheduled with the agency and the type of feedback we received during the process may also impact the timing we will have much more clarity by October.
As previously communicated following receipt of the <unk> P. M. A we expect to receive the final $30 million milestone payment from avid.
And while decisions related to <unk> launch timing ultimately to be made with Abbott. Our commercialization partner. We are pleased to receive their nonbinding estimate of order volume and support our U S commercial launch.
Moving to on Sundance D C D and.
And we remain on track to complete the 6 month patient follow up visits fall a swing first in human clinical study for Sundance below the knee sirolimus coated balloon.
At the end of Q4.
With respect to our vest EV fistula D. C. B, we have now completed the design and verification for the full matrix of balloon sizes for the base balloon catheter and.
The team is continuing the process validation work on the base catalyst and will begin to design verification and process validation steps for the drug coated balloon and its entirety.
We have already received pre submission feedback from the S. D on the high level expectations regarding and pivotal clinical trial design and full of us and I'm happy to report that we are and general alignment with agency.
Next is our sublime radial access platform.
In June we received FDA regulatory clearance for sublime radial access or 1.8 P. T a dilation cats, though.
This is an important accomplishments since the sublime or 1.8 balloon catheter. So compliments also blake on for catheter flow and along with our sublime radial guide sheet provide the tools necessary for physicians to treat the entire lull and segment via radial access with all the supply system.
No have not just 1 but 2 different balloon platforms to treat patients suffering the consequences of P. M D.
And our radial axis.
Our team is currently working to complete the important and necessary manufacturing process validation off the supply, but when he balloon catheter, so which will enable us to begin clinical and product evaluations.
Continue to receive encouraging physician feedback on their recent clinical experiences using all the sublime radial axis guy cheat and or 1.4 balloon catheter.
In fact physicians, who have completed the clinical and product evaluation have and expressed an interest to continue.
Continue to access these products and use the supply and products based on their remarkable performance and benefits to their patients and practice.
Really excited about this level of interest and in order to facilitate their continued use and you have actually signed agreements with several clinics to sell these products directly to the clinic, even as we continue to build our clinical experience on.
On a side note the sublime radial guide sheet and radial and <unk> forecast as though it was successfully featured and 3 live cases at the recent new cardiovascular Horizons meeting in New Orleans and June.
Next is on pounds thrombectomy platform.
We completed product and process validation and fall pullets arterial system during our third quarter as planned.
In June the first patient was successfully treated it up on system and this procedure pounds was able to restore blood flow and the patient diagnosed with and occluded the superficial femoral artery without the use of thrombolytic. After 3 passes if the device, which removed approximately 30 centimeters of thrombus.
Since its first case, how it has been successfully used and 8 additional procedures as.
As we expected physician feedback has been encouraging with positive comments and the device's ease of use and ability to remove clot, resulting and restoration of blood flow to distill tissue beds and.
In addition to the progress at all pilots arterial thrombectomy system and these clinically property valuations and we have recently received a 5.10-K indication expansion for smaller vessels down to 3.5 millimeters.
This will allow us to extend the applicable treatment area to include not just femoral arteries, but and for popliteal arteries that as those below the knee within the size range. This widens the therapeutic range off the phone system.
We are continuously looking for opportunities that are synergistic with our technology platforms last month, we completed the acquisition of <unk> medical and.
V, Texas ravine and mechanical thrombectomy catheter is designed to remove large mixed morphology clots, commonly found in venous thromboembolism and confidence of our pons arterial thrombectomy device.
This acquisition strengthens our existing thrombectomy IP portfolio and provides us with opportunities to expand our thrombectomy platform to other vascular beds.
We will believe the Vita ex technology, which has already received both U S. I think a clearance and CE mark as meaningful advantages compared to existing devices and an exciting large and under penetrated market.
This technology was designed to be extremely intuitive and easy to use for efficiently removing large clock volume and beans.
We believe that the <unk> system with the appropriate approach to the market and the clinical development has the potential to become the essential market leader.
<unk> is not 1 of a small group of successful companies that has a portfolio of devices that can clear clots and both arteries and veins.
Our team, which now includes all of the T V. Techs employees is working to complete process and manufacturing validation assets for the revision system.
We expected these efforts to be completed and our second quarter of fiscal 'twenty, 2 which will then allow us to initiate clinical product evaluations.
Following the successful completion of these evaluations, we anticipate the Ruby and product will be ready for commercialization and the second half of calendar 2020.2.
Regarding our third strategic priority on medical device and IBD business segments. They continue to deliver solid performance, we continue to see strong growth and our serene coating technology, which essentially doubled from the year ago period, and helped us to little over a second consecutive quarter of royalty.
Revenue growth.
Our I V E business delivered its second consecutive record setting quarter with revenue of $7.1 million growing 12% versus last year's fiscal third quarter.
These core product offerings and technology offerings have continued to generate strong operating performance and cash flows which has been an important source of funds fueling our other strategic growth initiatives and.
Clothing, we all firing on all cylinders and I've made exciting progress across all our strategic objectives I wonder off on my heartfelt. Thanks, So a team for their tireless dedication to our cause we've been quietly but consistently building a portfolio of amazing products that will create significant long term share.
And the value.
And I believe all you have and exciting future and many growth catalysts in front of us Tim.
Thank you Gary.
Today's call I will provide an overview of our third quarter operating performance discuss financial implications of the recent <unk> acquisition and provide our updated outlook for full year fiscal 2020.1.
Revenue for the third quarter of fiscal 2021 declined 11% to $23.9 million.
Which was favorable to our expectations.
The prior year period as you recall included several favorable and unfavorable impacts that should be noted when evaluating their current performance. The prior year quarter benefited from $6.7 million of revenue recognized from the $10.8 million and CE Mark milestone payment achieved under our surveil distribution and.
And the agreement with Abbott excluding.
Excluding the impact of this milestone payment revenue grew 17%. Additionally.
Additionally, you will recall that it was a year ago quarter that saw a significant unfavorable COVID-19 impact on our revenue.
Medical device revenue declined 18% to $16.8 million and exceeded our expectations.
As previously mentioned the prior year period included the CE Mark milestone revenue.
And in vitro diagnostics business grew 12% to a record $7.1 million just exceeding last quarter's revenue.
I believe performance was driven by favorable order timing for our distributed energy and products as well as microarray slides development projects.
Our third quarter royalty and license fee revenue totaled $8.8 million down $3.6 million from the prior year period, primarily as a result of the prior year impact from the CE Mark milestone payment.
License fee revenue under the avid agreement totaled $1 million and the third quarter of fiscal 2021, compared to $7.6 million and the prior year quarter.
Royalty revenue increased 63% to 7.8 million and in the third quarter compared to $4.8 million and the prior year quarter.
Our third quarter fiscal 2021 royalty revenue growth benefited from an easier prior year comparison that was unfavorably impacted by reductions in procedure volumes due to COVID-19.
And the third quarter of fiscal 2021, we continue to see broad based underlying growth and our royalties portfolio Inc.
Clothing, and our serene hydrophilic coatings, which essentially doubled compared to the prior year period Serene now accounts for greater than 1 quarter of our total royalty revenue.
Product revenue of $12.1 million and the third quarter was essentially flat compared to the prior year quarter.
And our medical device business product revenue was $5.5 million down, 5% or 270000, due to softness and legacy balloon catheter sales, which were impacted by a product replacement matter for 1 of our contract manufactured products.
This was offset in part by strength in our coatings reagent sales.
Our in vitro diagnostics business reported product revenue of $6.6 million up 6% or 370000, due primarily to favorable order timing up year on year for distributed energy and products.
R&D services revenue of $3 million was up 20% or 500000 compared to the prior year period as our IBD business continues to benefit from increased customer development project opportunities.
And our medical device business, we saw modest growth and R&D services revenue.
Product gross margins were down in the quarter at 58% as compared to 63% and the prior year quarter.
Gross margins were unfavorably impacted by $730000 and charges and our medical device business related to the previously mentioned product replacement and matter for 1 of our contract manufactured products. This was offset in part by the favorable impact of revenue mix with a shift to relatively higher margin product.
Lines.
R&D expense included and the cost of clinical and regulatory activities was 51% of revenue or $12.2 million for the third quarter.
Down, 8% or $1.1 million compared to the year ago period.
As expected surveil related costs declined including transcend clinical study costs.
SG&A expense and the third quarter of fiscal 2021 was 33% of revenue or $7.9 million and increase of 470000 or 6% compared to the year ago period.
Personnel and other investments to support product development and our strategic initiatives contributed contributed to the expected increase.
Our medical device business reported an operating loss of $2.5 million and in the third quarter compared to operating income of 530000 and the year ago period.
Driving medical device operating performance was lower revenue that was partially offset by lower operating expenses as the prior year quarters operating results benefited from the $6.7 million of revenue recognized from the CE Mark milestone payment.
Our IBD business grew operating income by 4% to $3.4 million and in the third quarter operating.
Operating margin was 48% down from the prior year quarter's 51% on lower gross profit from a shift and revenue mix on strong sales of our distributed damage and products.
Okay.
Now turning to income taxes, we recorded income tax expense of 780000, and the third quarter and fiscal 2021.
Compared to income tax benefit of $1.3 million and the year ago period.
The current quarters tax expense reflects strong year to date pre tax results, including the receipt of the $15 million.
Clinical report milestone payment from Abbott.
Both periods reflect the impact of taxable income for the full year and the U S. Non tax benefitted amortization and operating losses and Ireland.
On a GAAP basis, we reported a loss per share of <unk> 24 cents and the third quarter and fiscal 2021, which includes <unk> <unk> per share associated with the <unk> acquisition related costs compared to diluted earnings per share of <unk> 18.
And the prior year quarter.
On a non-GAAP basis, we reported a loss per share of <unk> 17 cents and the third quarter versus diluted earnings per share of <unk> 21, and the prior year quarter.
Moving to the balance sheet we.
We continue to have a strong cash position and the third quarter, we began with $70 million of cash and investments and generated $2.8 million of cash from operating activities.
During the quarter, we paid 900000 per capital expenditures as of June 32021, we had cash and investments totaling 72 million and no debt.
Next I will discuss the financial implications related to our July 2nd the acquisition of <unk> medical.
This acquisition reflects our strong financial position and our ability to utilize our balance sheet to accelerate our long term growth strategy.
The upfront cash payment of $39.9 million was funded with cash on hand, and $10 million from our $25 million and line of credit.
Following the acquisition, our cash and investments totaled approximately $42 million, which provides adequate capacity to support our strategic growth initiatives.
Purchase accounting is preliminary.
We expect the majority of the purchase price to be recorded as developed technology and tangible assets.
Further we estimate amortization expense for the acquired intangible assets to be approximately $2.4 million on an annual basis.
Pretax acquisition related costs totaled 460000, and in the third quarter of fiscal 2021, and we expect to record a similar charge and the fourth quarter.
Overall, the impact of amortization expense and acquisition cost to earnings per share for the full year fiscal 2021 is expected to be a reduction of approximately <unk> 11 per share.
In addition, our updated full year outlook includes our expected R&D expense to continue to support fiscal 2021 activities, including manufacturing and process validation to further advance the <unk> venous clot removal product.
Looking forward, we expect the acquisition to begin generating product revenue and the second half of calendar year 2022.
Further our estimate suggests at low to mid single digit U S market share is all that is necessary for the <unk> acquisition to be accretive to our non-GAAP earnings, which we expect to occur beginning in the second half of fiscal 2023.
Turning now to our outlook for 2021 as Gary mentioned, we have refined our fiscal 2021 guidance include the <unk> acquisition.
We now expect fiscal year 2021 revenue to range from $103.5 million to $105.5 million.
This outlook includes between 16 million and $17 million of license fee revenue associated with the Abbott Surveil agreement.
Our guidance reflects growth and royalty revenue of mid to high single digits year over year.
For the full year SG&A is expected to grow and the low double digits and.
And R&D spend is expected to be consistent with the prior year.
In addition, we expect the full year impact of income taxes to range from $1.5 million to $2 million of tax expense.
Our fiscal 2021 revenue outlook excludes revenue associated with the achievement of the final surveil milestone payment upon PMA.
Surveil product sales or surveil profit sharing revenue.
We expect fiscal 2021 diluted GAAP EPS and a range of a loss per share of <unk> 10 cents to earnings per share of <unk>.
Our GAAP EPS guidance reflects higher tax expense and approximately <unk> 11 from <unk> amortization expense and acquisition costs.
We expect non-GAAP diluted earnings to range from 16.
And to 31 per share.
Operator. This concludes our prepared remarks, we would now like to open the call to questions.
Thank you and if he would like to ask a question. Please signal by pressing star followed by the 1 on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. Once again net of star 1 to ask a question and we'll pause for just a moment to allow everyone an opportunity to signal for questions.
Okay.
And we'll go first to Mike Matson with Needham and company.
Hi, good morning, Thanks for taking my questions.
I guess I wanted to start with surveil so.
Sounds like you're now expecting the approval to be a little later than you thought before but I guess, what I was wondering is if you have any feel for timing of when you could start to see revenue once you get the PMA and then.
What does that order pattern and gonna look like from Abbott is there going to be kind of a large upfront.
Stocking order and subsequent orders is it going to be more distributed you know on it.
Smoothly over time.
Sure and I'll turn I'll turn the second part of that question Mike over the time, you know, we we had to.
The data on a significant them on the patients of 3 years, which resulted in us getting it and as I said prior to date was 621.
Typically this process is about 180 days, but the clock stops for quest and so.
By the end of September early October we will have the what I'd call. The 90 day feedback from the FDA about the substantive review of the file.
And so then we'll understand a little bit more what our questions. They have what food analysis. They may 1 and so while it's not out of the questions. I mean 6 months from 621 is still December.
Highly unlikely, especially having they have to do a 3 preauthorization inspections and 3 different countries are for this product where he manufacturer and so so it's unlikely and that is why we wanted to make sure I understood. Why we still are targeting I think it's more responsible for us to look at the.
Second fiscal quarter.
The second thought really depends on all commercialization decisions with our partner Abbott.
On it.
Primarily because the question becomes whether you take the risk and before you have the PMA in hand, and then develop the launch from that or do you take a risk.
Do you wait for that to take a risk before this.
This dip positives and negatives on both which will have to clearly without part and the Abbott will guide that decision. The issue. There is it will take us.
3 to 4 months to really fulfill and opening order to get on manufacturing machine up and running so.
Let's say the P M and I'm, making this up here just for the purposes of and discussion, but let's say the PMA was February of 'twenty, 2 and then we get the binding order from them. It could take 3 to 4 months for us to fulfill that for them to then do their launch quantities are if they decide to do it in October and Noah.
Remember based on the initial FDA feedback that would shorten the timeframe. So there's a little bit of a window that and so Tim I don't know what the other comments you have in terms of the periodicity and so forth.
Right. Thank you for the question Mike and.
And Gary you did a nice job on framing up expectations that you know I'll just I'll just add a little color Mike the discussions that we've had with Abbott.
Similar to the discussions that we had the last time, we had our earnings call, which is the anticipation for a launch would occur at some point following PMA approval and we're not at Liberty to provide any more detail than that but Abbott certainly does appreciate and understand that it takes time to get the manufacturing engine started.
And to deliver on their initial stocking orders I think that speaks to your second part of your question on the order pattern. So what we've received from Abbott as their forecast to support the commercial launch 1 would expect that there would be continued orders following that.
I would think that at some point here in 2022, we will be able to provide a bit more detail and context, but at the time here and we'll need to respect confidentiality with our partner.
And the final thing I'll say is we were excited and pleased with what we saw and the forecast.
Okay, great. Thanks.
And then and I wanted to ask 1 on the colectomy product so.
You now have 2 products and your portfolio.
It sounds like the Tech do you expect that to potentially be commercialized under the existing 5.10-K and CE Mark is that right and then you.
You know, maybe just talk about the future indications there for things like stroke and pulmonary embolism and.
I guess, which product would be used for for each of those if you know at this point.
Sure you know we started working well.
With vertex and the diligence and May have mentioned, a labor day, 1 and 2020. So they had not received CE Mark no FDA clearance at that point and so it was it was serendipitous.
He would be able to achieve during the diligence period, which makes it a terrific for us so given the current indications, yes that there are sufficient to support our commercialization in Europe and in the U S and as you know this market is very competitive and sort of clinical development I mean vertex is on 19.
And so Steven Black 1 of the world's foremost venous thromboembolism experts presented at the American venous Forum earlier this year.
And we believe we'll need after we complete that process validation both in Europe and in the U S to continue that clinical development, because that data will be important and the competitive environment for ASO apart and then down the line.
On the second thing is you.
You know going for DVT claim with the U S. F D will be important as well right now we have a claim of the ability to remove clot from veins and I know, they're very subtle differences 1 is and acute condition claim and 1 is a claim of.
Mechanically removing clot so eventually to be fully competitive we want to make sure we get that claim but that's what the clinical development will facilitate.
The second thing is what we really liked about the ravine system. That's also what we liked about our pounds. This market has got a lot of complicated products that are used and high end academic physics.
Interest where rent is ever present at every case, what we saw you know what and pounds, the doctor Bacharach and down and Sioux Falls South Dakota.
You know he wouldn't pullout complicated devices, but even pull out the pounds and that's what we saw and the same thing for the venous side and the ravine and system you don't have to be highly specialized with a rep holding your hand to use the system and that's what we see the power of it.
And so the intellectual property that we have from this and pounds. We believe will help us both and P and stroke, we have already started and the R&D team would be Mad for me, saying this but really just broad brush concept development and problem definition for 4 P. E. So I wanted to give them.
And for that to percolate I would hope to see viable concepts come from that in fiscal 'twenty, 2 stroke, maybe a little bit for the further down the line because we want to really secure the wind for pounds and reviewing at this point.
Okay, great. Thank you.
Thanks, Mike.
We'll go next to Brooks O'neil with Lake Street capital markets.
Good morning, guys a lot of detail you provided we really are presumed all of that and just have a couple of questions.
First could you just give us your current sense of the Paclitaxel sentiment.
Both in terms of clinical use and in terms of.
And what you're hearing and seeing from the F D. A.
Sure Tim you, maybe I've looked at the recent IMS data as well so I'll pass it on to you, but what you know about recent publication, which included authors Ramon Vogtle and and Peter Schneider.
And at least to me put the seal on it I mean, it it's really now.
And overwhelming evidence in favour of Paclitaxel and in my opinion, and even if you threw away half of it it would still be overwhelming I I can't comment on how the FDA is viewing this and what they will do to unwind the label. It it's really a legal issue.
But I'm hopeful that it would be around the time, when our part and the Abbott to law and so that would be that'd be wonderful and I believe there's been some bounce back and market to use but I I'm not up to speed on the recent IMS data and Tim I don't know if you've looked at that recently, though.
Yeah, Gary on there.
As also maybe I'll just step back for a moment and provide brokers with a little feedback here I think the initial pad data.
And was published here recently, I think and in June and I'm not sure where it was presented Gary you might know, but it was published and the Endovascular Today June edition and it is a retrospective study. So it's more of the observational data, but we just continue to keep seeing more and more data that supports.
The view that there are there is no signal and.
And so I think and this particular study.
The observational study looked at about 160, 170000, Medicare patients and followed them up for almost 3 years and there's there's just no different I think you know this data and what the FDA has said previously is going to be important for them too.
To to make decisions, hopefully favorable decisions and and not so distant future with regard to the restrictions that are in place that being said the IMS data the data that we're seeing and what we're hearing anecdotally suggests that there's greater uptake of paclitaxel coated devices. We've heard other companies that have paclitaxel devices on them.
<unk>.
Represent on their earnings calls that they're seeing growth and uptake and theyre paclitaxel coated devices that bodes well for the industry and.
And the IMS data that Gary refers to really speaks only to U S hospitals, but we've seen that trending higher over the last several quarters and its over $45 million per quarter and again thats only the U S Hospital system, So I think and the U S. We could be looking at the market getting to about $200 million right now on all of the day.
Ada looks good and what we're seeing on the sales trends and what we're hearing from.
Other companies that have these devices, all bode well for paclitaxel coated devices.
Great. That's what I was thinking but and glad to hear you say that so secondly, I just wanted to ask a little bit about the core business I have a sense that patent expirations have affected business and Pat.
Patent transitions I guess, maybe have affected the business can you just refresh my memory on where you're at with regard to core patents and the base business.
Yeah, absolutely. So the patent issue that you're referring to Brooks is the expiration of the patent expiration of our Gen..4 patent family and I think folks might recall, we had about a $5.5 million unfavorable impact and fiscal year 2020 going into fiscal 2021 week.
Guided to about a $3 million impact and we're happy to announce that that impact that headwind is complete I think we've had about $1 million impact here over the course of the year and it's really a testament to our business development team working with our customers and continuing to sign agreements.
And to provide continued access of the important technology for their products.
No.
And in fact and in the quarter here I think Gary and I, both mentioned that the royalty portfolio grew about 63% every element of that patent portfolio or whether it was serene and our most recent generation of hydrophilic coatings or Gen..4 Gen..3 every single.
Patent family saw year on year growth and again thats coming from what I would consider to be more of a depressed quarter and Q3 of 2020, given the pandemic impact on procedures, but we are very happy to see that performance.
It was broad based across all different patents and we're seeing it across all different categories of devices that leverage our coating technology, So again really great quarter and part of our business development team.
Great.
Let me just ask you I'm kind of curious as you have broadened and deepened the product pipeline.
As you're thinking about whether you would ever self distribute and these products or product families changed or are you still.
And I totally committed to partnering and the.
Sales and distribution side of the product development pipeline.
Well given the recent sublime experience I was actually pleasantly taken the back you know their rules are legal rules of how much evaluation product you can provide to physicians and clinics and then beyond that time.
You can't continue to provide free product for clinical evaluation. So the fact that a couple of these clinics said look we.
It's product exchange on a practice, we'd like to continue using it we were compelled to find a way to continue that but we first experienced this a couple of years ago with our Telemark product and willfully. We just had to wait we didn't have the systems and processes to facilitate that so we have to wait until we found.
On the strategic partner I think we will carefully evaluating all of these books, because we have to think through.
And what will create long term shareholder value. So now we're happy to providing the product and the selling agreement and also getting the clinical and much more clinical data from the product and its use and its use and different types of cases, so well look at that and the coming months here, but I'll I'll say it.
It's a good problem to have to think through how we'll have to see how pounds and you know the heavy hit those like Townsend and Venus and roofing go as well as we anticipate that nonetheless, I will say this.
Generation revenue subsequent to evaluations can only enhance the value either to us on a strategic partner. So it's either way to where it was flowing all the way we want it.
Yeah, that's great.
1 last question, maybe for Tim and that is.
I know you're not ready to provide guidance for 2020.2 I know, there's a lot of moving parts, but as you.
Is there any way you can help us think about what the impact of surveil could be using basic assumptions about what youre seeing of market size now penetration et cetera in terms of how it might impact your revenue and profit next year.
Assuming things come along more or less the way, we think they are going to.
Brooks, it's a great question and Im sure Youre not the only 1 that has that question top of mind well all I can tell you is Gary and I are firm believers in the guidance and longer term guidance that we've provided here just recently again, which is double digit top line growth.
And other than that I'll ask you to be patient I'm hopeful that we'll be able to share more here in the coming quarters.
But we remain excited about the partnership and clearly we were excited to see the forecast from Abbott and.
And I think it's all I'll say is I find it to be meaningful.
Yeah, Alright, that's good thanks for giving me all that color and congratulations on continued progress.
Thank you Brooks.
We'll go next to Jim Sidoti with Sidoti <unk> Company.
Hi, Good morning can you hear me.
Hear you loud and clear Jim.
So I guess, you don't have any plans to share that.
Those are initial estimates on that with us today.
And I wish we could Jim, but we will have to remain silent on that for the moment.
Look forward, though as I mentioned to share and more news on this during the coming quarters. So again, just asking for some patients. We are we wish it were.
Other wise, but we will respect the confidentiality of our agreement.
Okay. So the 1 question for me.
You look at your pipeline spot.
Bob pounds, and Youre going to have the tax you know and in that way.
Our day to go on.
And the next 12 months.
And when you go out and talk to strategics.
Can you talk to these products.
Or do you talk to them.
Individual products and good day. These 3 things go to 3 different parts.
Yeah, I don't see.
It's hard to tell I mean, if a strategic has a white space that encompasses.
Radial access and thrombectomy that could be I think that's highly.
Unlikely I think given the how hot the thrombectomy spaces.
You know that maybe 1 strategic and the the radial access space is a real sleeper however, and.
You know you have to believe that 5 years from now the majority of procedures will be done regionally and if if you if you drink that water the strategics with vision and we'll see this is a quite an important positioning moved from them, but right now and it's hard to tell.
And.
And inside of the strategic portfolio planning of our strategic and sorry for the redundancy. So I didnt combination or individually, we expect that the values wouldn't be that different.
And when you're talking on the strategic do you consider.
On the size of the strategic distribution, when you're making the deal I mean would you take a slightly lower rate.
From a partner with a much bigger sales force than you would with a small apartment.
Well, yes and to be clear we are not.
Not strategic.
Strategic too I'll say want to talk to us a I've as I've said, Tim and I have informed our teams keep keep that zone and keep the blinders on and generate the clinical.
Data, Tim usually has and he's very sophisticated financial modules that tells us, which weighs up and any deal and I know Tim likes to get to a market share sensitivity and.
Sort of the water line for US day, but I don't feel on the comment on that.
No I was just going to thank Tim for help and share.
On a little context here that might better position, our potential partners and their negotiations with us So I think and what we remain silent on that but what I will tell you I'll just feed off and Gary's response, yes, we look at on a number of important criteria, we do our diligence on partners and we look at things more whole.
<unk> in terms of what the overall value creation is and and we understand that sales force is provide and bring a lot of value to the thesis, but the technology and its advantages it's differentiation ease.
He's abuse safety profile all of those things are really important and we want to make sure that from a dramatic shareholders' perspective, we're capturing the value that we deserve for the investments that we've made and the platform. So we will talk more about this but today will remain a little bit quiet on some of the negotiated and things that we look at.
I'll just add.
We feel a portfolio and I don't know, how investors and and and the strategic see it but.
But our portfolio is incredibly valuable.
With the addition of ravine and pounds and.
You look at the comparable companies, who have products of this elk and now we have to go generate clinical data and demonstrates that but these are not <unk>.
And 5 million dollar product lines.
I don't I don't believe they even and $50 million product place I think there's substantially more valuable and that so just didn't know that we intend to keep the ball high and any falloff negotiation because with this clinical data we know what we got.
Yes, Gary.
He's referring to revenue.
Yes, yes.
Yeah. Thanks, Tim.
And last 1 for me.
Do you think the portfolio and it's pretty set right now or will you continue to go out and look at acquisitions and expand it further.
Well as you know Tim will comment a little bit on this 1.
Behind the scenes, we have a very active corporate development program, we look at Tim I would say a half a dozen serious ones.
It will take a few per year and we're very very <unk>.
Picky on what we look at as I said I mean, we started with vertex over 10 months ago. That's what it took to really get that deal done and make sure. It was the right deal for our shareholders. So clearly.
Yeah, Tim and I have set and the past we went to a balance sheet not to be a static indicator of performance.
But to be used as a dynamic tool for growth, making sure. We have the buffer to continue to run the business. So the short answers are we will continue to scan for complementary our high value technologies.
Technologies and all companies.
Yeah.
Alright. Thank you Gary I have nothing to add I think that you are you articulated that.
Accurately and well.
Thanks.
Sure.
And once again, if you'd like to ask a question that is star 1 at this time.
Okay.
And it looks like there are no further questions in queue at this time I'd like to turn it back over to you for any additional or closing remarks.
Thank you everyone for joining us on our food fourth quarter earnings call and be safe out there. Thank you.
And that concludes today's conference. Thank you for your participation you may now disconnect.
Okay.
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