Q3 2021 Vericel Corp Earnings Call
Excuse me. This is the operator today's conference is scheduled to begin momentarily.
So that time your lines will again be placed on music hold.
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Ladies and gentlemen, thank you for standing by welcome.
Welcome to Berry's sales third quarter 2021 conference call.
At this time all participants are in a listen only mode.
I would like to remind you that this call is being recorded for replay.
I will now turn the conference call over to Eric Barnes <unk> sales head of financial planning and analysis and Investor Relations. Please go ahead.
Thank you operator, and good morning, everyone welcome to <unk> third quarter 2021 conference call.
Scott our financial results and business highlights.
Before we begin.
Mind, you that on today's call, we will be making forward looking statements covered under the private Securities Litigation Reform Act of $19 95.
These statements may involve risks and uncertainties that could cause actual results to differ materially from expectations and are described more fully.
Our filings with the SEC.
We are available on our website.
In addition, all forward looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date.
Please note a copy of our third quarter financial results press release is available in the Investor Relations section of our web site.
We also have a short presentation highlights from today's call can be viewed directly on the webcast or accessed on our website.
I am joined on this call at garrison, President and Chief Executive Officer, Nick Coe Angelo.
And our Chief Financial Officer, Joe Mara.
I'll now turn the call over to Nick.
Okay.
Thank you Eric and good morning, everyone. Despite additional.
Additional COVID-19 headwinds in the third quarter the company delivered solid commercial and operational results and continued to generate topline revenue growth positive adjusted EBITDA and operating cash flow for the quarter.
The spread of the Delta Varian, and the resulting disruption to health care networks and patient behavior dynamics, clearly impacted <unk> revenue in the quarter. However, the key underlying growth drivers for <unk> remained very strong and episodes.
Another outstanding quarter with revenue growth of nearly 50% compared to the third quarter of 2020.
Importantly from a profitability perspective, the company generated positive adjusted EBITDA and operating cash flow for the fifth consecutive quarter as we continue to drive topline growth, while delivering sustained profitability and cash flow.
With respect to Macy revenue.
Just on historical seasonality patterns for the second half of 2021, we expected the typical sequential decline in the third quarter revenue and strong sequential step up in the fourth quarter.
During the third quarter, we saw a significantly greater decline in July than in recent years due to patients deferring procedures as the economy reopened and travel and vacations resumed.
While we assumed that we'd start to recapture some of those deferred cases later in the quarter. The expected improvement in the second half of the quarter did not materialize due to the delta variant resurgence in various regions of the country.
The impact on Macy activity was most pronounced in the areas of the country that had the highest COVID-19 case rates and some of our best performing territories are in those regions.
Importantly, <unk> biopsy growth as was the case in prior periods of COVID-19 disruption continued to outperform implant growth.
We estimate that as a result of the reopening dynamics and the Delta variance Serge we exited the quarter with a backlog of approximately 150 cases that would have converted to implants under normal conversion patterns, which equates to about $7 million in revenue.
We had similar levels of backlog during the initial COVID-19, lockdown in the spring of 2020, and again last winter and in each instance, we recaptured more than 80% of the backlog cases within one to two quarters.
We expect to recapture a similar percentage of the current backlog, although due to continued uncertainty regarding COVID-19 disruptions for the remainder of the year. We believe that this recaptured likely will be more gradual and that the majority of these cases will move into 2022.
Even so as Joe will discuss in more detail, we have seen an acceleration of macy orders in the fourth quarter and we expect the highest sequential growth in <unk> revenue from Q3 to Q4 since launch and record quarterly revenue to close the year.
From an operational standpoint, we're very pleased with the results that we've generated to date with respect to the key underlying growth drivers from AC which we believe support its long term high growth profile, we remain on track to grow the number of surgeons, taking biopsies by more than 20%. This year to approximately <unk> thousand 800, surgeons, which is.
Our key growth target for the year.
Biopsies per surgeon another key growth driver are projected to grow approximately 10% compared to 2020 and overall biopsy growth is expected to exceed 30% for the full year.
Looking forward to 2022, we expect continued double digit growth in biopsy surgeons and increase in biopsies per surgeon based on continued may see uptake in the return of more normal patient flow and normalization of biopsy conversion rates and the timing thereof.
With all of our key growth drivers expected to continue to progress in 2022 and with potential for backlog carryover. We expect an acceleration of may see growth in 2022, assuming that COVID-19 trends do not change materially.
We've also achieved important reimbursement enhancements for me. This year that are further bolstered an already strong reimbursement profile as a result of the expansion of United Healthcare's Medical policy to include patients with patella defects. The number of Unitedhealth care patella cases more than doubled through the third quarter of this year compared to 2000.
'twenty.
In addition, and it's ASC payment system final rule issued last week CMS determined that macys one of a small number of procedures that were added to the ASC covered procedure list last year that will remain on the list for 2022.
This determination was based on meeting the reinstated general standards, an exclusion criteria for the list as well as the fact that the routine procedures are largely performed in an outpatient setting and that advancements in clinical practice and less invasive techniques have contributed to allowing these procedures to be safely performed in an ASC setting.
While we have limited Medicare business. This determination is important in that certain commercial plans referred to the CMS rules and determining allowable sites of care. So that having may see on the ASC covered procedure list provides greater flexibility for our customers in selecting the preferred site of care for Macy procedures.
Finally, we're also making significant progress on our key lifecycle management program for the development of a custom arthroscopic delivery system, which we believe is another important step in our strategy of continuing to make me, even simpler and less invasive for surgeons and patients.
We believe that arthroscopic macy could be a significant mid term growth driver to further penetrating the $2 billion <unk> addressable market by increasing our physician targets beyond those that perform only open procedures and by increasing the number of procedures performed by current Macy surgeons.
We're in the process of finalizing the design of these instruments and we've received very positive feedback from key opinion leaders in the field.
We look forward to providing additional details on this important program in the near future.
Turning to our burn care franchise, we had another outstanding quarter for episodes, achieving 48% growth in revenue compared to the third quarter of 2020, and the fourth straight quarter with over $9 million in revenue, which has led to 77% revenue growth year to date for episodes.
We continue to see strength across the key growth drivers for episodes with significant increases in the number of burn centers, taking biopsies the number of patients treated with episodes and the number of grafts per patient.
Given the strong commercial performance, we believe that we're well positioned to deliver sustained penetration into our expanded addressable market as we continue to build the second high growth franchise into a more meaningful part of our overall business.
Turning to the Nexobrid BLA, we recently participated in a productive type b meeting with the FDA and there is agreement on the path forward to address the questions issues and information requests from the FDA.
The <unk> team is leading this next phase of work in partnership with Med wound and we currently are targeting a BLA resubmission at mid 2022, we remain very enthusiastic about adding nexobrid to our burn care franchise and look forward to potentially bringing this innovative product to the market as expeditiously as possible.
<unk>.
I'll now turn the call over to Joe to discuss our third quarter financial results and updated financial guidance.
Thanks, Nick starting with the income statement total net revenue for the third quarter increased 7% to $34 5 million compared to $32 3 million in the third quarter of 2020 and included $23 9 million of Macy revenue and $9 8 million of episodic revenue compared to $24 four.
And $6 7 million of Macy and episode revenue, respectively in the third quarter of 2020.
Total revenue for the quarter also included approximately zero point $8 million of revenue related to the procurement of Nexobrid by BARDA for emergency response preparedness.
The third quarter of 2021 total net revenue increased 38% to $108 6 million compared to the same period in 2020 with Macy revenue, increasing 24% to $74 2 million episodes revenue, increasing 77% to $31 8 million and $2 <unk>.
$6 million of revenue related to the BARDA procurement next spring.
As Nick discussed earlier Macys third quarter results were impacted by COVID-19 headwinds.
Additionally, when comparing third quarter Macy revenue to Q3 2020. It is important to keep in mind that the third quarter of 2020 was positively impacted by a significant catch up after the initial COVID-19 related lockdowns, which impacts the year over year comparison.
We estimate that approximately $5 million and 19 revenue in the third quarter of 2020 was it related to the cases that shifted from the prior quarter due to the initial COVID-19 related restrictions on elective surgeries.
So while making revenue was down 2% for the quarter on a reported basis. The underlying growth was over 20%. Excluding this estimated $5 million catch up in Q3 of 2020, which is more consistent with a year to date, making growth.
Gross profit for the quarter was $22 1 million or 64% of net revenue compared to $22 5 million or 70% of net revenue for the third quarter of 2020.
The reduction is primarily due to higher noncash stock compensation expense related to our higher share price and increase in manufacturing head count and our product mix.
Total operating expenses for the quarter were $27 1 million compared to $19 million for the same period in 2020.
The increase in operating expenses was primarily driven by higher noncash stock compensation expense as well as the normalization of spend across all areas of the business as compared to the constrained spend in 2020 due to COVID-19 related factors.
Net loss for the quarter was $4 9 million or <unk> 11 per share compared to net income of $3 6 million or <unk> <unk> per share for the third quarter of 2020.
Non-GAAP adjusted EBITDA for the quarter was $4 3 million or 12% of net revenue compared to $6 8 million or 21% net revenue in the third quarter of 2020.
Finally, we generated approximately $4 million of operating cash flow in the quarter and as of the end of the third quarter. The company had approximately $119 million in cash and investments compared to $100 million as of December 31, 2020, and no debt.
Transitioning to our updated financial guidance for 2021.
Our previous guidance for Macy assumed that biopsy conversion rates and the timing of conversions would generally be in line with historical patterns or at least normalize by year end and a COVID-19 dynamics would not materially change those patterns versus prior years.
With the recent Covid impacts that Nick mentioned earlier, we exited the quarter with a backlog of approximately $7 million worth of cases.
Under normal conditions would have converted from biopsy to implant this year.
And given this disruption in the second half of the year. We now anticipate that conversion rates will not fully normalize until next year and that the majority of our incremental backlog will convert to new cases in 2022.
Based on these COVID-19 related dynamics, where update we are updating our macy guidance in 2021 being the low 20% growth range for the full year.
This change to our full year guidance, mainly reflects our updated expectations on the timing or calendar <unk> of when cases will convert to implant.
A decrease in underlying demand as demonstrated by our surgeon and biopsy growth.
Although COVID-19 headwinds remain we have seen an acceleration in main Macy's ordering patterns to start Q4, and our updated guidance for the fourth quarter implies what would be a sequential increase of over 64% from Q3 to Q4.
Which represents the highest sequential increase since the launch of Macy's and also would represent the highest macy revenue quarterly revenue to date.
With the majority of the incremental biopsy backlog now expected to convert to implants next year as well as the increases in the other key Mason growth drivers that Nick discussed earlier, we believe that this should allow for a further acceleration of amazing growth in 2022 with Macy's full year growth next year expected to exceed this.
This year's overall growth rate.
Moving to <unk>, our updated guidance now anticipates growth for the full year to be in the low 50% range with over $40 million in full year revenue.
This revised episode guidance represents a full year growth rate of approximately three times, our initial growth rate expectations to start the year and a further increase versus our most recent guidance as our year to date results for <unk> of approximately 32 million have already exceeded our full year results in any prior year.
Finally, we expect approximately $3 3 million of Nexobrid BARDA related revenue for the full year.
In total this brings our full year 2021 revenue guidance roughly back to where we started the year, which at that time did not assume significant headwinds from COVID-19.
We now expect total revenue in the $158 million to $161 million range, representing full year growth in the range of 27% to 30%.
Apart from 2020, which was more severely impacted by COVID-19. This would continue very strong track record of generating over 25% growth for the company each year since the launch of amazing.
With our updated revenue outlook, we now expect full year gross margin to be approximately 70% and full year adjusted EBITDA margin to be approximately 22% we.
We expect full year operating expenses to decrease to approximately $114 million slightly below our previous guidance of $115 million.
Importantly, our adjusted EBITDA guidance for the full year would essentially double our adjusted EBITDA of approximately $19 million in 2020.
Kevin strain that continued strengthening of the overall financial profile of the company.
And looking forward, we expect that both our gross margin and adjusted EBITDA margin will further increase next year as the company's profitability profile continues to progress.
This concludes our prepared remarks, we will now open the call to your questions.
You would like to ask a question. Please press star one on your telephone keypad.
We'll pause for just a moment to compile the Q&A roster.
Your first question comes from Ryan Zimmerman with <unk>.
Hi.
Hey, good morning, Thanks for taking the questions.
I wanted to ask first on Macy biopsies, a little bit I can appreciate the conversion dynamics kind of pushing into the next year.
But you guys were on track I think for greater than 50% growth in labs and in the first half of 'twenty, one now you're talking about maybe 30% growth for the year. So.
Can you just discuss kind of what you saw this quarter and then what your expectation really is on biopsies.
And fourth quarter based on based on your run rate for the year.
Yeah. Thanks, Ryan This is Joe I'll start and Nick can chime in so.
In the last call, what we talked about with.
Through the first half of the year, we had seen roughly 50% or more when you look at that year to date biopsy growth and I think as we.
I would also say that on the last call. We talked about may be kind of in that 30% plus range on revenue. So there certainly was a bit of a disconnect as we were seeing the biopsies come through in the first half of the year and that was compared to 2020, which obviously had some COVID-19 impacts in the first half of the year. When you look kind of more broadly what we're saying is on a full year basis.
Now, we expect biopsy to be over 30% for the full year.
And I would say in the third quarter, we did see some disruption in the health care systems, but biopsies were kind of close to what we saw in the prior quarter and I would say if you look kind of at the first three quarters of the year and you compare those to 2019, which is probably a cleaner comparison you see growth rates.
Over 30% across all of the.
All of those quarters. So you kind of put that together and I think that gives you a sense of where we are year to date and also the 30% gain what we expect on a full year.
Okay.
And then.
<unk> is becoming a more material portion of the business I think you think back a few years and that's why it wasn't the case, but now the growth rates have become pretty material.
So Nick as you think about episode next year in a normalized environment.
Do you think about the growth rate that can sustain four and FSL like product that you are now seeing such growth from.
Yes, Thanks Ryan.
So obviously this has been just an outstanding year for episodes and as we continue to focus on sort of the growth drivers of increasing the number of biopsies and grafting burn centers treating more patients and maintaining that higher utilization of grafts per patient that will form the basis for.
Or the growth going forward so.
I think it would be sort of silly to say, we would expect 50% growth year over year, but we certainly expect episodes to continue to grow.
As we sort of broaden the user base and then have deeper penetration into those centers. So we're not prepared at this point to give guidance for next year, we will do that sort of early next year, but we certainly do expect continued growth for episodes in the years ahead.
Okay I'll hop back in queue. Thanks for taking my questions.
And your next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann.
How are you.
Hey, Jeff Good morning, Jeff.
So a few for Marin.
So firstly could you talk about.
United and petrology facts and.
Give us a sense of what percent of your revenues that may be or how large patient pools.
Yes, so as we mentioned earlier this year, Jeff we did.
The health care did expand its medical policy to include <unk>.
<unk> cases.
And the way we sort of.
Wanted people to sort of think about that as you know United healthcare is the largest commercial payer in the U S rate representing about 15% of commercial lives.
And I think what we've said is basically the approval rates now for United cases for <unk> are basically on par with other plans in non patella cases, so I think you can kind of just.
At a high level think about what percentage of our business would be United well if it covers through.
They're the largest payer covering 50% of covered lives that's probably a good proxy.
In terms of how to think about our portion for the portion of our business that is represented by United Healthcare now be at a hotel a case or about patella case.
Okay got it and could you talk a little bit about the.
<unk> to us.
The ritual and would that be.
Class two filing and what would you expect as far as Sean.
From the surgeon shelter would you would you expect that to turn into a majority of.
Of cases or.
Maintaining the minority.
Well I.
I think it's a little premature to sort of forecast what percentage of the cases would be done arthroscopic Lee versus through the mini Arthrotomy I think taken a step back. This is another step on the path that.
We are taking with this franchise, where when you moved from Carter seldom Acu took a highly invasive procedure immediate less invasive.
Over the past couple of years, we've had.
Basically sizing tools available for more uniform.
Sort of defect debridement and then in.
Implant and that sort of has become very popular and then of course arthroscopic as a less invasive potentially even simpler procedure. Just continues on that journey and you see this in the industry often right. When you take these highly invasive surgeries turn them into minimally invasive surgeries and that's that's what fuels the growth so.
That's the path we're on last year, we talked about the fact that first thing you want to do is be able to demonstrate.
That you don't impact cell viability through arthroscopic delivery, we've been able to do that through our feasibility studies and demonstrate that you can meet minimum cell number and other release criteria for four macy when it still delivered arthroscopic Lee. The next part of the project is sort of designing instruments.
And we've been working very closely with a group of our Kols on instrument design over the course of this year and we expect to kind of.
Finalize the design of the instruments by the end of the year, whether it's a class one or class II device will depend on whether the disposables or reusable. That's a question we're still considering.
And so we're very pleased with with the prospect of a.
Arthroscopic delivery method, obviously as we as I mentioned theres sort of two dimensions to that one is theres certainly are surgeons.
Who only do open procedures, but do high volumes of cartilage repair and so that obviously.
Could open up part of the addressable market for Us and then.
There is certainly our current <unk> users, who may identify additional patients we believe that would be the case.
When an arthroscopic.
Alternative delivery is available so we're excited about it.
We'll provide more details early next year as we continue to.
Proceed with the project.
Okay got it and then lastly could you talk about any activities and the ongoing activities outside the U S.
For either of the two products as far as any channel onshore agreements in place.
Yes so.
We're principally focused as you know Jeff on the USB C. When we acquired this business years ago was was approved in the EU very challenging market for these advanced cell and gene therapies.
Would have required some manufacturing changes to our plans here in the U S, which we werent going to sort of impact U S production for those opportunities.
We think more broadly.
Down the road as we continue to expand capacity, we certainly can design facilities in clean rooms to meet sort of European requirements in that may allow us to go back to Europe.
So again I think the U S market by far dominates the opportunity for basi.
And same thing for episodes.
Because of the shelf life of that so if we were to go outside the U S. We would essentially have to build a manufacturing facility in whatever geography that would entail.
And so I think it's fair to say at least for these two products that we will remain focused on the U S market, which again provides the greatest opportunity.
Perfect. Thank you for the commentary.
Okay. Thanks, Jeff.
Your next question comes from the line of Danielle with SPD layer.
Yes, hi, good morning, everyone. So much for taking the question.
Question I appreciate youre, not going again 2020 guidance, but.
Talking about Macy biopsy growth rate, 30% plus this year.
Yes.
Why is that not the right way to think about Macy's for next year are there some other dynamic.
At play here I appreciate the conversion rate, but as long as the conversion rate that they're getting material materially worse.
And you've got the backlog, maybe arguably the conversion rate could be better.
Is that the right way to be thinking about the growth outlook in 2022, and then I have one follow up.
Yes, so good morning, I'll start Daniels to Joe So I think.
We're not really ready to give guidance on 2022, as you've alluded to but I think.
Kind of broadly speaking, we certainly talked about in the prepared remarks, we expect continued double digit growth in the number of surgeons, which is a key driver we expect the biopsies per surgeon to also increase.
We do expect a normalization of the biopsy conversion rates and do have that backlog moving into next year. So certainly I think.
Broadly speaking, we're kind of in the.
<unk> this year in the low <unk> on a full year right now based on kind of where we're ending the year. So I think directionally I mean, these kind of pieces are pointing us to higher a higher growth rate, but the absolute number it's kind of hard to say, but certainly biopsies will also be part of it is.
As we think about 2022.
Okay. That's helpful.
Question on sort of where we are in that and I know this is probably.
Probably unfair given the fact that we're dealing with COVID-19 related headwinds.
Maybe it's been on the market now for several years.
Just curious about Nick if you could sort.
Sort of frame what inning, you think we are in the market.
And I ask this because.
Discussions about seasonality in Q3.
When a product is still pretty early in the adoption phase you usually not dealing with seasonality as much. So just curious about what you can say on where we are in the macy one thanks so much.
Yeah. Thanks Danielle.
We certainly believe.
That we remain in the early innings, maybe it's the third inning, rather than the second as we used to say, but.
As you think about the growth drivers for the company and we focus obviously on increasing Biopsied surgeons as the primary growth driver as we've expanded our sales force. This is.
The first full year that we've had our expanded sales force in place and.
We expect it to increase those biopsies surgeons as we said by 20% up to 1800, and if you look back to 2019 as we often talk about we're at that point, we were in our third year of launch.
Relative to our initial 3000 targets and even in that year, we had grown 25% in terms of the biopsies surgeons and grown to about 50% penetration and even more on accumulative basis. So we think there is still years of growth on biopsy surgeons ahead.
And then the other dynamics that we talked about we expected will then kind of become the dominant growth drivers and that's increasing biopsies per surgeon, which.
Absent any COVID-19 disruption.
<unk> have full schedules, so if youre getting more biopsies per surgeon, it's because they are identifying more.
Patients that they believe are good candidates for episodes and again, we will see growth versus last year. This year, we expect more growth next year in that to continue as well and then.
Conversion rates once they normalize post COVID-19, we expect to increase because.
<unk>.
Sort of more experienced or higher volume surgeons, certainly have a higher overall biopsy conversion rate, so putting all that together and knowing that theres no like competition coming down the Pike, we expect years of growth for <unk> going forward.
Thank you.
And your next question comes from Sam <unk>.
<unk> with <unk>.
Alright, thanks, Sir Thanks for taking the question I'll just ask two on the sales force here start with start within Macy side of the business.
We'll be curious to hear how you think about the newer reps there in terms of.
Where they are relative to peak productivity and then sort of more broadly how you think about peak productivity for that side of the sales force after some of the.
Productivity gains that were made last year with some of that.
New tools introduced there.
Yes, I'll take that Sam and Joe you can add any additional commentary but.
We have made comments since.
Expanding our sales force, we had a larger sales force expansion in 2020 going from 49% to 76 reps and throughout even this disrupted period starting back in Q.
Q3 last year, we had mentioned that that cohort of sales reps actually we're sort of leading the country in terms of growth in new biopsies and implants to surgeons, which is what you would expect when you are bringing sort of highly experienced sales reps on board and that continues to be the case.
So we're very pleased with that expansion and quite frankly, I think by the time, we get to the end of next year. We will we'll be looking again to say are there additional targets and would.
Further expansion potentially be be justified, but that'll be sort of a next year activity. As you know we when we expanded a couple of years, where last year. We expected this expansion glasses for for a few years. So.
So feeling really good about sort of their contribution to date when you think about the productivity per rep.
You had gotten to about $2 million per rep in.
2019 as.
As we expanded we said that would fall back to sort of the lower end of the range of about $1 7 million, which is where we were back in 2017, but then.
Absent Covid would have expected to exit 2020 sort of out of $2 million run rate.
And that got pushed out because of COVID-19, but we expect it will sort of be back there this year or at the end of this year as we exit 2021, and you can just kind of look at consensus estimates with 76 territories. If you are.
Around $150 million in Macy revenue, then you are kind of right back to that sort of productivity level of a couple million dollars per rep and if we don't expand further for met and continue to grow at the rates that we expect obviously the productivity per rep will go up from there.
Great and then just on the FSS side of the business as is.
Sorry, if I missed this but any updates there in terms of how the where we're at in the expansion of sales force and how we should think about that moving into 2002. Thank you.
Yeah. So.
We talked sort of at the end of last year on our Investor day about sort of the full expansion plans ahead of a nexobrid launch.
At that time, we had about seven territories for clinical support specialists and ultimately.
Ahead of the Nexobrid launch, we would expect to be more than that.
Low twenties range.
With about call it 14 territories or 12 territories and.
The clinical support specialists and the management team given sort of this super strong ramp with episodes.
<unk> added a few positions.
Over the course of the year and we're up to about.
Seven territories six clinical support specialists couple of management.
Leaders and so that's kind of where we are now and as we progress through next year and the timing of a potential Mexico launch becomes clearer we will complete the expansion ahead of that.
I think it will be roughly in the range that we contemplated further but of course, we'll take a look at that.
Thanks for taking the questions.
Hey, Thanks, Tim.
Your next question comes sway at the cooler with HC Wainwright.
Thank you.
Good morning, Joe.
Couple of quick question RK.
The first one.
Actually I really appreciate snack for explaining some of the issues.
That you folks face because of the COVID-19.
Especially clubs for Macy's.
And those comments you said some of your best performing areas that.
That impacted by the pandemic.
During the third quarter, so any commentary on those specific areas how there.
What what are they experiencing in the fourth quarter now.
Yes, well I think as.
As we as we have both experienced and kind of discussed it. This morning, and they were kind of two ends to COVID-19 disruptions.
Sort of the summer and throughout Q3, right. One was sort of this reopening Diane dynamic as the economy reopens and folks were traveling and so on and so kind of a patient driven sorted determination on timing of sort of when they would go in for a Bac surgery.
Again, we expected that once that sort of waned you'd kind of have a recaptured but that's exactly sort of when the delta variant.
<unk>.
Obviously, the southeast southwest parts of the Midwest and West and so.
That's kind of what drove sort of the dynamics. We described earlier I would say from a patient perspective.
That's probably.
I think probably mostly come and gone I think patients make individual decisions and it's hard for us to sit here and opine.
On that I'd say from the other aspect which is.
Where there are restrictions on either.
Health care system.
Wide basis or individual institutions, we certainly saw some of that as was widely reported.
In the third quarter, So you had either.
Individuals there were no state wide restrictions like there were back in 2020, but you certainly saw individual health care systems, where individual institutions, either pausing elective surgery for some period of time or restricting the number of elective surgeries that surgeons can do in those facilities.
So that was clearly happening sporadically around the country.
And for the most part I think those have pretty much.
Been resolved so we don't expect to see too much of that is.
In the fourth quarter, but again, we can't sit here and predict what happens over the next couple of months.
Okay. Thank you for that.
If.
If I heard it correctly.
You said there is a backlog of approximately $7 million sitting now, which you think could.
Could be spread more in today.
I'm guessing, it's first quarter or something.
This first quarter of 'twenty two.
Generally first quarter is one of the vehicle quarters.
Right and I was trying to look at it historically, if I'm looking at these numbers correctly.
So.
You would think.
The backlog.
We will take the first quarter of 'twenty to look better than what it has been historically.
And so our task is Joe So I would say.
At this point I would say, it's probably difficult to predict exactly how those cases kind of flow through certainly I think we are thinking about first half and certainly in the first quarter as part of that.
But again I think as we get.
Into the guidance conversation next year, I think we'll have a better sense in terms of the seasonality, but I think in general.
I think it's the right way to think about it it's probably first quarter and likely second quarter based on kind of what we've seen before and it really just depends on when.
When and how things normalize.
From a healthcare perspective, any COVID-19 perspective as well.
Okay. Thanks for that Joe One last question for you.
You said.
During the third quarter.
2020, there was a $5 million catch up.
So.
In fact, it is impacting the year over year.
Metrics.
Can you comment on the what was the catch up amounts during the fourth quarter of 2000.
We are better prepared going into this quarter.
Sorry can you repeat the last part I know you are asking about the $5 million catch up but can you just clarify the question for me what was the catch up in the fourth quarter of 2020, if there was some.
No I think what we were talking about was it.
The third quarter of 2020, when Youre looking at that when we're looking at the third quarter of 2021, our current results. When you compare that to the third quarter of 2020, we were saying that that had some impact of kind of that V shaped recovery, which is really impacting across the metrics across the business, including the revenues for Q3.
And that year over year comparison, so it was more about Q3 of 2020.
Yes.
I got that but I was just trying to see if you.
<unk> identified any anomaly in the fourth quarter of 2020.
Yes, so RK.
We have a slide in our accompanying presentation on slides slide six it kind of gives you the recovery periods for <unk>.
Not only initial surge in the spring of last year, but what we saw over the winter this year and sort of the the difficult part in answering your question is it wasn't just the fourth quarter sort of activity right. We mentioned on our call that the last two weeks of December.
Didn't sort of have the cases schedule is as they might have in the past and that sort of drifted into January and early February. So you didn't have kind of a clean break.
Of quarters to say hey, it all the second surge ended in December and what happened in the first quarter of 2021, so it's a little hard to kind of pinpoint it with that degree of accuracy given it across the quarters and years.
But I think to Joes point, we expect this recaptured it to happen in the first half of the year and it's a little hard for us to opine when sort of individual patients are going to decide that they want to move forward.
Okay. Thank you very much thanks for taking my questions.
Thanks RK.
Our next question comes from the line of Chris Cooley with Stephens.
Thank you good morning, I appreciate you taking the questions.
If I may let me just briefly.
Briefly.
AC shortfall in the quarter.
Fully appreciate.
<unk> headwinds.
That was there.
But I'm curious if you've seen anything underline. This additionally, specifically I'm, referring to maybe changes in physician practice protocols I know, we've seen some coalition shift to more of a bias.
In favor of single versus multiple use on HSA.
Im curious if youre seeing any subtleties like that in terms of the way that physicians are thinking about.
Addressing these patients either from a staging perspective or pulling them through the process that might have made this a little bit more pronounced because I think daniel's.
Prior question again, just seasonality at this stage of the game just trying to get make sure we fully understand what's what's behind all the numbers in the <unk> and the <unk> and I have a quick follow up thanks.
Yes, Thanks, Chris I'll, just start with sort of what we see from a physician patient perspective, and then Joe can kind of revisit the seasonality question.
As I mentioned there were you know theres kind of I guess at least two dimensions to sort of the COVID-19 impacts one is <unk>.
Physician based <unk> institution based and from a physician perspective, we haven't seen any sort of impact on physician enthusiasm for <unk> and I think thats reflected in.
The kind of.
Biopsied surgeon growth that we've seen and expect to continue to see and Thats really the best barometer of physician interest in this product which is great.
Again, there were some institutional issues that they have to navigate around rate when theyre institutions, either sort of pause or limit the number of elective surgeries as things were really flaring up in what was arguably.
A pretty significant as we all know delta variant surge. So so that is out of the physicians control as well. So so no impact sort of from a physician enthusiasm perspective from from our standpoint, I will say the other piece of the dynamic is sort of patient behavior dynamics that we.
You referenced and I will say that we.
As we talk and have sort of surveys with our key opinion leaders I think they struggled in the third quarter and even as early as may to sort of get patients to come in and have surgery as patients were finally able to sort of.
<unk>.
Come out of the restrictions the general restrictions travel and.
And do the things that people like to do.
I think it was much more dominated by.
By patient behavior and choices of when they want to have their surgery than anything to do with surgeon. So I agree with you.
And the underlying premise of Daniels question, which is kind of remarkable that.
We're coming into our fifth year since launch and Youre still seeing this kind of uptake among surgeons and enthusiasm it's great.
I think given that we now have 5000 surgeons that we think are great targets.
We think it's going to continue to grow from a surgeon perspective, so all in there and Joe you can kind of comment on sort of what this growth and surgeons in biopsies mean for our outlook next year and going forward, Yes, I think to the earlier question certainly with the underlying growth drivers are still there. We think this can continue to drive growth.
During 2022 and beyond we talked about that a bit earlier and I think just back on kind of the seasonality and the next question that I.
Thank you were referencing Chris and Danielle just to make sure we answer that.
Look back historically on Macy's I mean, it's been pretty consistent in the fourth quarter kind of in that 35% plus range.
In terms of the mix of business and if you look at the guidance I think it's pretty similar to that as well. This year. So I think there is just from a seasonality perspective, just the way kind of physician and patient behavior, even pre COVID-19 and then in the Covid. We are still seeing that uptick in the fourth quarter. So at this point I think just given some of that kind of <unk>.
<unk> patient behaviors as well as some of the kind of reimbursement dynamics that play at the end of the year, we are still seeing that seasonality and still expect that certainly for the foreseeable future.
I appreciate all that color and then just very briefly for me. This call's gone over an hour now, but just curious on the Nexobrid resubmission targeted now for mid year next year 2022.
Just curious if you could provide any additional color there around your confidence in the resubmission.
The thing else that has to be done between now and that filing Tom I apologize if I missed that earlier, but just wanted to see if we could gain some additional insight there. Thanks again.
Yes, no worries Chris.
As we talked about on our last call that we're really sort of four things that need to occur prior to potential nexobrid approval one is the.
The FDA.
Ask for some additional CMC info. So we're obviously in the process with meta wound of providing that additional CMC information and integrating it into our revised CMC module.
For use in the Resubmission, so that Intel's work of kind of generating the data putting it into a package and so on and so that work has been ongoing and continues.
The inspection issue related to CMC issues that.
FDA restrictions at the time.
We believe those have eased and that they are now.
Ducting CMC spec inspections in Israel in Taiwan, and that's something we'll discuss with the FDA. Upon Resubmission, that's a little premature at this point, but we do know that those inspections outside the U S are now occurring.
The FDA also.
Referenced observations on their GNC DCP inspections, and so we are in the process of reviewing additional details that study sites too.
Respond to the Ftes questions and then finally a.
Our routine safety update is being or will be put in.
In place.
Prior to that as part of the Resubmission. So those four elements are all moving forward again had a productive meeting with the FDA agreement on how we were going to plan to respond to their questions and so now.
That work is being done and completed and then will be assembled into.
The Resubmission package and submitted at this point.
Our anticipation is by mid year.
Thank you.
Yeah.
And we have no other questions in queue at this time I would like to turn it over to management for closing remarks.
Okay, well I just wanted to say thanks to everybody for your questions and your continued interest in the company.
Overall and despite the COVID-19 challenges.
The company continues to execute well throughout the year.
We expect another as we mentioned year of significant topline revenue growth margin expansion and operating cash flow driven by both of these high growth franchises. So given our strong financial profile portfolio of innovative products in large addressable markets. We believe the company is really well positioned for sustained.
Long term growth. So thanks again for your questions and have a great day.
This does conclude today's conference you may now disconnect your lines.
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