Q3 2021 Orthofix Medical Inc Earnings Call
[music].
Good day, and thank you for standing by and welcome to the Ortho K Q3, 2021 earnings conference call.
At this time all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone if anyone should require assistance. During the conference. Please press Star Zero. Please be advised that today's conference is being recorded I would now like.
To hand, the conference over to <unk> Senior director of Investor Relations. Please go ahead.
Thank you operator, and good morning, everyone welcome to the third quarter 2021 earnings call. Joining me on the call today are our president and Chief Executive Officer, John <unk>.
Chief Financial Officer, Doug Rice.
Start with the Safe Harbor statement, and then pass it over to John.
During this call we will be making forward looking statements that involve risks and uncertainties.
Statements other than those of historical facts are forward looking statements, including any earnings guidance, we provide and any statements about our plans.
<unk> strategies expectations goals or objectives.
Busters are cautioned not to place undue reliance on such forward looking statements.
There is no assurance that the matter contained in such statements will occur. The forward looking statements. We will make on today's call are based on our beliefs and expectations as of today November five 2021, we do not undertake any obligation to revise or update such forward looking statements.
Some factors that could cause actual results to be materially different from the forward looking statements made by us on the call include the risk factors disclosed under the heading risk factors in our Form 10-K for the year ended December 31, 2020, and Form 10-Q for the quarter ended September 30.
2021 filed this morning November 5th 2021.
As well as additional SEC filings, we make in the future. If you need copies of these documents. Please contact my office at Ortho and Lewisville, Texas.
In addition on today's call, we will refer to various non-GAAP financial measures. We believe that in order to properly understand our short term and long term financial trends investors may wish to review these matters as a supplement to the financial measures determined in accordance with U S. GAAP. Please refer to today's press release announcing.
Our third quarter 2021 results for a reconciliation of these non-GAAP financial measures to our U S. GAAP financial result at this point I will turn the call over to John.
Thank you <unk> welcome everyone. Thank you for joining our third quarter 2021 results conference call on today's call I'll provide an update of our third quarter performance I will then review each of our strong progress we've made against each of our strategic initiatives before handing the call over to Doug who will provide our financial update.
I'll close with our perspectives on the balance of 2021 before opening the line for questions.
Starting with our third quarter performance total revenue in the quarter was $112 4 million growing about 1% over 2020 on both a reported and constant currency basis.
During the quarter, we experienced the negative impacts of hospital restrictions on elective and complex procedures and hospital staff shortages at each U S key geographies, namely the southeast mid Atlantic and South central regions.
Despite these COVID-19 challenges, we were able to grow relative to 2020 highlighted by double digit growth in both our global spinal implants and orthopedic businesses.
Our performance in the quarter was aided by our diversified portfolio that includes therapies and sites of service less impacted by Covid as well as our international footprint that includes areas beginning to recover from Covid restrictions.
Despite these disruptions in the third quarter, we made solid progress against all of our growth initiatives and remain confident in the investments we've made and will continue to make in product development commercial channel and operational excellence.
Now, let's turn to the performance of each of our product categories.
Starting with bone growth therapies, our PDT sales for the quarter were $45 2 million down 4% compared to the third quarter of 2020.
The decrease in the quarter was largely a result of increased COVID-19 related restrictions affecting complex overnight procedures, which are a large part of the patient population receiving bgg spine therapies.
These restrictions were a reversal of the positive trends we saw in the last quarter.
Decline in the quarter for spine procedures was offset by somewhat by 13% growth in our physio stim.
<unk> therapy for non union of long bone fractures.
Our commercial channel investments are yielding benefits in these non elective trauma segments.
Moving to spinal implants, which includes spine fixation and motion preservation revenue was up over 10% on both a reported and constant currency basis compared to 2020. This growth was primarily driven by U S. <unk> artificial cervical disc and international spine fixation sales.
In the U S gains were led by the M. Six described new driven by our continued success in attracting new users as a result of our ongoing education and training efforts.
Internationally growth was driven primarily by a mix of new distributors coming online and existing stocking distributors reinvesting following COVID-19 delays.
Turning to our biologics portfolio revenue was down 16% compared to 2020. The decrease was not surprising given that a large percentage of the procedures, where our biological products are used are complex elective procedures, requiring multi hospital stays and these procedures were impacted by the restrictions in key.
U S. Covid affected geographies mentioned prior this decrease was partially offset by the increase in new customers driven by new distribution and strong early adoption of new technologies.
Lastly.
Moving to our global Orthopedics business.
Loans were up 14% on a reported basis and 12% on a constant currency basis over 2022.
The increase was primarily due to the rebound in the international markets from Covid restrictions and Reorders from international stocking to shareholders following Covid electric delays.
Turning to third quarter. We also saw a solid contribution from the <unk> limb lengthening system with over a 30% sequential growth over the second quarter of 2021, and encouraging physician training trends with over 180 surgeons trained since the acquisition of this technology platform.
Before providing an update on our key initiatives I want to share. How excited we are to have waned burst join our board of directors. He brings over 35 years of experience in U S and international finance from various diagnostics pharma and orthopedic businesses, Mr. Bruce bunch of its med tech career at Roche diagnostics, where he served in a number of.
They've roles, including CFO of North America from 1996 tours retirement in 2019, we are excited to add someone with his financial and business leadership experience and we look forward to working with him for years to come.
Now.
Moving to our first initiative product innovation and differentiation.
During the quarter, we made solid progress in our efforts to develop and acquire products and procedure solutions to address unmet needs in the marketplace.
Since January 2020, we have launched 23 spine and orthopedic products, which include expansion into key product categories during the quarter.
Within spinal implants, the expanded our firebird <unk> three the offering by launching new implant and instrument additions in this high growth market segment further improving our differentiated <unk> solutions designed to compress and stabilize the seek really our chart within biologics, we expanded our portfolio with a full market launch of our <unk>.
<unk> and.
An osteo conductive injectable scaffold to fill non structural bony voids or gaps during orthopedic fracture care, our trauma surgery applications I'll now touch on our second initiative underway commercial channel development for this initiative. We are focused on our U S channels for biologics spinal implants, orthopedics and working to.
These channels is dedicated and predictable as our BTT channel.
In Q3 are you a strategic channel partners, which we define as distribution partners they commit towards effects carry both hardware and biologics.
Over one third of our spinal implants, and biologics and Orthopedics U S revenue.
Revenue related to these strategic distribution partner, who has grown 9% when compared to the current third quarter as compared to third quarter of 2019, despite the getting mostly in the heavily impacted COVID-19 regions.
Our investment in these channels is ongoing we've made steady progress in this initiative to date.
Our final initiative is operational execution, given the recent regional accrued occurrences of COVID-19, our global supply chain remains our top priority. Our goal is to make our company as nimble as possible with efficient structures and processes that encourage product innovation.
Our success in securing the future supply of micro chips for our bone growth therapies devices in light of the continued disruption of global supply chain highlights the improvements we have made in our operational execution.
There will always be continuous improvement in operational efficiency, and we intend to adapt as needed to keep up with the changing macro environment and build value within orthopedics.
I am very pleased with our results in the quarter. Despite the return of COVID-19 in certain geographies, we've kept moving forward with our transformation laying the groundwork for long term growth and innovation, while maintaining operational execution.
Excited to build on that momentum as we approach year end.
With that I'll turn the call over to Doug to review our financial performance.
Thanks, John and good morning, everyone I will provide some additional details into our net sales and earnings results and then discuss some of our other financial measures because many of the financial measures covered in today's call are on a non-GAAP basis. Please refer to today's earnings release for further information regarding our non-GAAP reconciliations and disclosures starting with.
Revenue as John mentioned total net sales in the quarter were $112 million up 1% on a reported basis and on a constant currency basis, when compared to the third quarter of 2020.
In the U S. Total net sales of 86 million for the third quarter were down 4% over the third quarter of 2020, mainly due to hospital restrictions on electric procedures offset by U S. <unk> growth that John mentioned earlier International total sales of $26 million were up 25%.
Ported over the third quarter of 2020, reflecting the growth from our fit bone limb lengthening system as well as strong sales to stocking distributors.
Gross margin in the third quarter of 2021 was 75% compared to 76% in the prior year period. The decrease was primarily due to sales mix and a short term increase in electric procurement costs due to the global microchip shortage offset somewhat by decrease noncash inventory reserves for the full year 2020.
We now expect gross margin to be approximately 75% to 76%, which reflects the continued impact of the changes in our sales mix as well as an expected short term increase in microchip costs as a result of the global Microchip shortage.
Sales and marketing expenses in the third quarter of 2021 were 50% of net sales up from 48% in the third quarter of 2020. The increase was primarily a result of the timing of three major trade shows in the third quarter of 2021 that did not take place in person in 2020 as well as an increase in travel expenses.
As anticipated spending in the third quarter was more in line with our pre COVID-19 levels. In 2021, we still expect sales and marketing to approximate our year to date average of 48, 5% of net sales as travel and event spending has seen a return in line with historical spend and as we invest further in our commercial channel.
GAAP G&A expenses in the third quarter of 2021 or 15% of net sales right in line with the prior year period as a reminder, spending levels in the third quarter of 2020 reflected several cost savings measures, including 401, K match suspension of travel freeze and a pause in investment spending offset by succession related expenses in 2020.
GAAP R&D expenses for the third quarter increased to 11% of net sales up from 9% in the prior year period. The increase reflects spending to support new product development clinical studies <unk> integration expense as well as costs associated with our EU MTR compliance efforts.
We will continue to ramp up our efforts to drive organic innovation and differentiation.
To invest in clinical studies, such as rotator cuff and our <unk> two level indication study being continued spend to build a robust product pipeline in both spine and orthopedics as.
As a reminder, this is causing our R&D spending as a percent of net sales to significantly outpace revenue growth in the near term due.
Due to the timing of certain expenses, we now expect 2021, GAAP R&D expense to be approximately 11% of net sales, including an impact of about 175 basis points related directly to our <unk> compliance efforts.
Which we adjust within our non-GAAP financial metrics.
Adjusted EBITDA in the third quarter decreased to $11 $9 million or 11% of sales compared to $19 $7 million in the third quarter of 2020, driven by the investments we've made in R&D related to product development and clinical trials as well as increased spend in marketing trade shows as they return to in person.
Our Cogs are also increased with the changes in our sales mix and the expected short term increase in microchip costs. We mentioned all of these investments and temporary increases during our second quarter call. So the reduction in adjusted EBITDA is in line with our expectations now.
Now turning to tax we had GAAP income tax benefit for the quarter of $400000 or 14% of loss before income taxes as compared to GAAP income tax rate of 12% of income before income taxes in the same period of 2020, the primary factors affecting tax rate for the third quarter of 2021, where the financial expenses not <unk>.
Ignite for tax purposes related to the acquisition related re measurement as well as losses in certain foreign subsidiaries for which we did not recognize a tax benefit.
Our non-GAAP results, we continue to use 27% as our adjusted long term effective tax rate, which normalizes for acquisition related expenses certain law changes in operating losses that have no GAAP tax benefit.
For the third quarter of 2021, we reported GAAP loss of <unk> 11 per share as compared to GAAP earnings of <unk> 24 per share in the third quarter of 2020.
After adjusting for certain items and when normalizing for tax using our non-GAAP long term effective tax rate adjusted earnings for the third quarter of 2021 was <unk> 10 per share compared to an adjusted earnings per share of <unk> 31.
In the third quarter of 2020.
The decrease was primarily driven by the increased short term expenses due to the global Microchip shortage increased R&D spend to drive organic innovation and differentiation and increased travel and marketing trade show spend.
Regarding cash we continue to maintain a strong liquidity position with $83 million at the end of the third quarter of 2021 compared to $81 million at the end of the second quarter of 2021. We currently have no borrowings outstanding under our $300 million senior secured revolving credit facility.
We commenced repayment of the $14 million 2020, Medicare advance in the second quarter. The balance as of September 32021 is about $8 million, we still expect the repayment to be substantially complete by early Q2 next year.
Net cash provided by operating activities was an inflow of $6 $4 million in the quarter down $15 5 million compared to an inflow of $21 9 million in the third quarter of last year, primarily due to the recoupment of the 2020 Medicare advance.
Inventory investments this quarter and the savings in 2020 related to the cost reduction initiatives such as the 401K match suspension travel freezes in conferences only being held virtually.
Capital expenditures were $3 million in the quarter compared to $3 4 million in the prior year period, due primarily to the timing of spend for instruments to support our future growth plans.
We now expect capex to be in the $19 million to $21 million range for 2021.
The decrease over prior guidance is due to the timing of the deployment of instrument sets and the implementation dates.
Certain projects.
Consistent with our decreased operating cash flow, our free cash flow, which we define as cash flow from operations minus Capex was $3 4 million inflow during the quarter, which was down from an $18 $5 million inflow in the third quarter of 2020.
As anticipated our free cash flow has decreased significantly in 2021 compared to 2020 due to several items, including the repayment of the Medicare advance additional investments in our sales channels and product innovation to support our future growth and the spinal kinetics final milestone payment as well as increased spending on the EU MTR.
Compliance efforts I'll now turn the call back over to John.
Thanks, Doug looking to the remainder of 2021, we remain highly focused on our three near term growth drivers, including <unk> pit bone and our comprehensive spinal interbody portfolio.
To provide a quick update on each of these growth drivers.
With the <unk> artificial cervical disc demand for <unk> innovative motion preservation technology continues to grow as evidenced by over 1000 U S. Surgeons. We have trained since launch in 2019 and recently surpassed milestone of 60000 global <unk> implants, we remain confident that our ability.
<unk> to attract and onboard new surgeons as well as support expanded utilization by existing surgeons will allow us to expand the market and take market share to drive growth for the foreseeable future.
From a U S indication expansion perspective, we are progressing the <unk> two level clinical trial, which remains on track sites are actively enrolling and we expect to continue to initiate additional sites for both the <unk> investigational and concurrent ACF control study arms were also recently kicked off a real world evidence study.
<unk> that will access over 3000 patients and bolster our body of clinical evidence in support of <unk>.
The second key near term growth drivers Pitbull we.
We have made quick progress in commercializing the <unk> system with a third quarter revenue contribution of $2 million as compared to 800003rd quarter of 2020.
Early demand has been strong with over 180 surgeons trained since the acquisition. The majority of whom are located outside the U S. A key differentiator and growth opportunity for <unk> is its adult and pediatric labeling which no other individually limb lengthening solution has.
In early September we announced the first U S pediatric patient implanted with Fitbit.
For the femur and tibia.
Given the current limited options available for pediatric surgeons and the clinical performance of the <unk> system.
We expect to see accelerated adoption and use as more surgeons are trained.
The third key near term growth driver is our technology, leading interbody portfolio. Overall, we believe we have one of the most comprehensive antibody portfolios in the industry with technology offerings offerings spanning peak PTC and now <unk> printed titanium materials.
All three D printed titanium designs incorporate our innovative nano based technology and optimize design prosper and surface that allows bone to grow into and through the device.
We are seeing accelerated adoption of these technologies with strong performance of our Forza XP expandable Cliff T lift cage, and our new construct many titanium <unk> printed cervical interbody product, which we expect to see continued focus in the future.
In addition to a number of exciting near term growth opportunities. We also have slipped high priority segments of our business that we believe will drive growth over the medium and long term periods.
First is expanding our commitment to the bone growth stimulation market.
Second is the expansion of the fit phone technology platform from limb lengthening to spinal deformities third is our spinal fixation platform expansion in the areas of post your cervical mris entercom support and deformity correction.
Last is the focused expansion of our biologics portfolio offering.
I want to highlight two key updates on these initiatives.
The progression of our <unk> portfolio as part of our EJ, a partnership and the launch of new biologics.
<unk>.
As announced during the second quarter, we entered into a partnership with <unk> to commercialize our portfolio of stimulation devices in the U S.
As part of this we recently submitted a PMA application to the FDA for the approval of a cell stem bone healing therapy.
Low intensity pulse ultrasound product for the healing of fresh fractures and non union fractures.
Upon approval this will expand our bone growth therapies portfolio and complement our current pump technologies that focus on nonunion fractures in spinal treatments positioning us as a leader in regenerative bone healing technologies. The initial market release is expected during the second half of 2022.
Within biologics our goal is to have a comprehensive offering of biologic products and solutions for surgeons to use with our spine and orthopedic procedures.
With the recent additions of focus Mg set bone void pillar and fiber fuse trip, which we launched in partnership with MTF biologics.
Meaningfully bolstered our portfolio, which we believe will not only support the topline growth of our biologics segment will also help drive incremental pull through of our spine and orthopedics hardware offerings.
Now shifting to guidance for the full year 2021, we now expect top line revenue to be in the range of $460 million to $464 million, which accrue <unk> approximately $1 million.
FX headwinds since our last guidance update this range assumes modest seasonality disruption due to the continued COVID-19 impact throughout portions of the U S and certain European markets. We now expect our adjusted EBITDA to be in a range of $57 million to $58 million and our adjusted earnings per share.
As expected to be between 71, and 75, using a non-GAAP long term tax rate of 27%.
Despite an increase in COVID-19 pressure on procedures across the business that we've experienced we continue our transformation concentrating on executing against not only our short term, but long term goals of providing physicians with innovative products and solutions to care for their patients.
We made significant progress already and expect to continue to do so in the last quarter this year and beyond.
In closing and with enduring gratitude I would like to thank our worldwide team for all their hard work resiliency adaptability and commitment to delivering our patient centric mission.
With that I'd like to transition to the question and answer session. Operator, Please open the lines.
Thank you and as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or has T. Please standby, while we compile the Q&A roster.
Okay.
Your first question comes from Mathew Blackman with Stifel.
Good morning, everybody. Thanks for taking my questions.
I have three questions maybe to start.
<unk> on the quarter.
Way to quantify how much COVID-19 impacted <unk> results.
Also a way to maybe tease out how much of that headwind was volume based versus let's call it mix headwinds.
Hey, Matt This is John Thank you very much the question but.
What we look at as far as the volume basis.
Being the same macro environment that everyone else has in the marketplace and those volumes.
Are basically in the mid to single mid to high.
A double digit rate.
So single digit rate excuse me and so with that we.
We bring our technology forward in that area and we adapt as far as whether it's a side of application for those procedures. We saw restrictions greater in the hospital on large multi level procedures, which impacted not only our biologics that are bgc's PTT business and long term, but in the ASC or the same day surgery activity you saw more volume increase.
There so it's a mixed story between type of procedure and.
And the Covid impact.
Alright, I appreciate that and I don't know if youre willing to comment on sort of how October played out but if so how does that split with what's sort of baked into the <unk> guide as we think about COVID-19 headwinds.
And so the persisting.
Staffing headwinds and then how should we think about.
FERC procedure recapture cadence does it.
Fourth quarter or will it bleed into the first half of 'twenty 2022, just help us think through that and then just one follow up on that product.
Yes, let me start with the Covid impact that we saw Covid impact August and September we believe peak towards the back half of September.
And started to come.
<unk> and <unk>.
October was supposed to deal with it and we're going to see it through the fourth quarter and how it impacts herself.
No as an accommodation to abuse forward.
When it comes to.
Procedural reallocation.
We know that those larger cases, those multilevel cases those more.
Revision cases are out there those patients want to be cared for the surgeons want to do those cases and take care for those patients in our hospitals want to provide those cases, so we know they're out there how they come back into will be dependent upon how open the hospitals are and Thats also regional discussion because there we highlighted there were certain regions in the U S that are being more.
Heavily impacted in the third quarter. We're also seeing some other dynamics as far as lifting and some of the northern states. It some more reemergence of Covid. So.
B a region by region.
By case basis, the good news in the international markets that we've seen more of a level setting.
More of a stability of those Covid cases, and so we're seeing a little bit more predictable business in international markets. So as we look forward in the quarter.
We've accommodated through those dynamics are in our view.
Alright, I appreciate that and I'll sneak this last one in can you just remind us of the opportunity.
Asphalt market opportunity with its outstanding.
About it primarily 23 and 2023 and beyond what kind of impact did it have on segment growth. Thanks. So much appreciate it.
Thank you mat sales Tim.
We booked at we looked at market in the U S around $100 million of the market opportunity and we will launch this in the second half of 2022 based on all the variability will deal with the FDA. That's our predictions as far as <unk> is the FDA works, but I think we have to get submission going in and so how we look at that as far as if a portfolio for us.
Very strong distribution channel with BTT and as we highlighted in our remarks, we saw an uptick in physio stim, 16% in the quarter dealing with nonunion care.
Non union carriers, so we look at that as far as a portfolio and it's another piece of that activity, where we've got the fresh fracture as well as non union care.
Thank you so much.
Your next question comes from Anthony Petrone with Jefferies.
Yes.
Thanks, and I hope everyone's doing well first question will be just sort of a macro question. Then I'll go on a couple of product specific questions.
And so maybe just kind of going through John the themes of this quarter, which certainly is still a delta but also staffing shortages.
At hospitals, and then supply chain, if we could just kind of go over those three headwinds you spoke on Delta, maybe a little bit deeper on staffing shortages. We're hearing a lot about that this quarter and then anything on the supply chain of note that may or may not be impacting.
The fix and then I'll have a couple of product specific questions.
Sure. Thanks Anthony.
Yes, we talked about the delta side of it but we are still in delta.
Covid Delta and we see that we see.
You see more hospitals opening up and they are gradually coming back but key thing is that the surgeons are there. The patients are there in the hospitals want to basically to care for these patients provide kevin as patients. So that that will come most of those people do not go away.
They're not getting better in their own so they are out there and how they come back in over the next month two months into it.
2022, depending on how those dynamics play out regarding the staffing shortages, we believe they're real.
To give you a real life.
Congress point, we had one of our very high volume surgeon and visiting us and he said buying back to doing the number of cases I was before however, I don't know how long that's going to last because I'll start at seven a M. In the morning, and where it typically would end at three in the afternoon. It now takes me until eight PM to finished dose so essentially burned through two shifts of staffing to do.
What he used to do and that's an anecdotal but the fact is those type of things. We're hearing that the cases are there. The patients are there and there is a willingness to do those.
Staffing shortage, who also comes into that many of them Theres transport ability in some of those that staff those nurses, who can go local <unk> and basically go to different parts of the country, where they can make money and basically take different lifestyle, we're seeing that as well play out in different parts of the country as well.
Regarding supply chain.
We focus on that as far as with not only microchips will be highlighted but all the other materials, we deal with and all of US make sure we have adequate supply and so we've actually increased our inventories attached to make sure that when the cases come back we will have all the adequate products.
Basically address any needs that are put in front of US. We've also spent time working with our sales teams basically mapping out where those might occur. So the supply chain can adapt and make sure they're correct products or are there and appropriate for those surgeries.
That's helpful. Maybe just a quick follow up on staffing I mean, if there's any if you could use the your own crystal ball I mean, how long do you think that particular headwind last thing is it is it transient or is it maybe perhaps a couple of quarters and then on on product specific questions just six it looks like another.
Record quarter.
Maybe maybe just a little bit on.
The specific Q over Q dynamics with.
Six in terms of adoption.
And then anything you can share as it relates on the IV for the two level indication.
And then I'll hop back in queue. Thanks.
Yes.
Crystal ball and staffing as far as it's so regionally variable I will tell you that.
We track it.
There is also we saw it.
Hearing from some of the some of the hospital systems that some of the people who've taken early retirements and those will have to fill the funnel with new nurses and hospital staff not just nurses, either though because it comes down to.
Turnover in rooms, and things of that nature that basically you have to find staffing for so they are they are struggling with it and theyre doing a great job trying to accommodate for it for sure.
I can't tell you, where its a quarter or two quarters I'll give you.
Point that we have in the U K.
It was published.
Looking for 70000, new nurses over the next four years, so they're trying to basically refuel that in that that's an.
<unk> process. So we map all of those things that we look at it but right now the cases are being done and I think that's part of the reason why some of the systems are being a little stressed out there regarding <unk>, we stayed on the continual cadence.
As far as.
Continual cadence as far as <unk> and what it looks like is it.
We continue to attract new surgeons, we continue to track surges that basically want to do <unk> for all of its features it's the only device out there that has six degrees at natural motion compression ability and so it comes down to it's unique and it's naturally appealing to a surgeon to it looks like the natural disc. So we track those surgeons.
We also.
Once a surgeon uses that we track whether they become users in fact is on multi cases.
We track that as well so we're seeing a good lift in those that become not only the first time users, but also continue to use that product.
<unk> has been nice because we've been able to use not only in the hospital on same day surgery, but also an ASC environments and Thats helped us basically continue through the COVID-19 environment on the two level two level study, we're making good progress at adding really key sites to that.
A focus for us and so we will continue to add sites and we will continue to basically enrolled not only the study patients with <unk>, but also the ACF.
Patients that were doing to collect a database that will have a material used in the future.
Yeah.
Your next question comes from Jeffrey Cohen with Ladenburg Thalmann.
Good morning, Thanks for taking the questions.
Follow up to <unk> question on timing.
<unk> six study, which will look like or what's your current anticipations for us.
The filing and a commercial launch.
Thanks, Thanks for question Jeff.
We initiated that study in late July and its a traditional prospective randomized study it's in the four to five year window.
With the accelerated enrollment, which we are basically putting good energy behind so as we map. It out we can look at it in that range as far as a four to five year horizon before there I will note that.
Do more.
Multilevel cases throughout Europe, and Thats part of a real world real World evidence plan that we put together and are highlighted so we're going to track those patients in Europe and also bolster our <unk> with the real world evidence because we have great results.
Europe as well and so we look at it on a standard basis and this is one of those items, we want for future.
Future benefit and we're going to continue to put stakes in the market with current indications, we have and do well there.
Fantastic and some of the studies some of the enrollment is coming.
The U S as opposed to the U S will see a breakdown.
All of the enrollment for the U S. E. Two level is coming from the U S. We have bolstered our second study of real World evidence, where we're going out to collect data that patients that have already been already been.
<unk> treated with <unk> outside the U S. The FDA allows us to bolster that IDE study with real world evidence.
Does it impact our study at the two level study per se, but it just bolsters, our our overall portfolio of clinical evidence for <unk>.
Got it that's helpful and then.
So you did.
Submit the PMA for that so and what does that look like as far as timing.
Yes, we did submit a PMA submission to the FDA and as we highlighted.
Projected to be in the market.
In 2022 and that's.
Typically PMA submissions have anywhere from 180 day window to basically be reviewed and approved or basically reviewed and good sets of questions avoiding any.
Secondary questions. It can be six to seven months from now to have the approval.
Putting to a second round of questions it could be three months longer than that.
Got it and then lastly for me could you talk about.
External fixation, specifically, how those channels look for you.
Europe, and how the outlook looks there.
Just on external fixation, it's one of the real strong points for our orthopedics business and specifically in the U S into Europe.
I will tell you right now there's 12 searches being trained on external fixation in our building at our skills lab today yesterday to date.
And keen interest in external fixation in a couple of different areas one in the foot and ankle area specifically for charcoal.
Most of those charcot patients get external fixation.
In Europe, it's a little different for us not only in those patients, but also in our broader trauma application and so we would use our T L extra rings in and lengthening deformity activities. We also use our galaxy product for external fixation and we proceed utilize those so there's a galaxy shoulder in a galaxy ankle.
And those those are very attractive.
Procedures for surgeons in Europe, and other parts of the world and so the team in.
In Europe. This year is really excelling that external fixation area.
Got it thanks for taking our questions.
Thank you Jeff.
Your next question comes from Jim Sidoti with Sidoti and company.
Hi, good morning, and thanks again for taking the questions first one is with regard to distribution you did a really good job today laying out all the new products you have in the.
Spine fixation, and biologics and stimulation, but can you talk a little bit about what changes you've made over the past 12 months to 18 months on distribution.
And how that's been impacted by Covid, and where do you think that's going.
Over the next couple of years.
Jim Thanks for the question.
Distribution channel is one of our key investment areas and drive areas, Let me break it down a little bit as far as U S and O U S. In the U S.
We're looking to bring in strategic distributors and we're looking to bring in not only in our spine business our orthopedics business.
Strategic distributors or those that commit to orthopedics to use both our fixation products and our biologics products and in doing so we invest.
We invest in specific regions initially, but we're growing both broadly for all regions. The U S for strategic distributors.
That those those people, we build an organization, where we want to build more and more of their volume being committed to orthopedics and so we had we track. It we attracted by daily basis. We've had we had two of them in here this week and we're looking to basically.
<unk> engaged and there is a continual effort for not only the spine leadership, but also the.
Orthopedics leadership in the U S outside the U S.
Please.
A combination of distributors and also our subsidiaries and so we continue to invest in our subsidiaries. Those are company managed areas and those are the large areas in Europe and so we continue to invest in distribution sales reps in those areas as well as distributors to go to different parts of the world that we may not want to set up a subsidiary so distribution.
<unk> is an area, where we have our sales management keenly focused on it and bringing talent that can basically sell a broader portion of our broader range of products.
And as Covid helped you add or has that been more of a headwinds we've got some distribution.
Okay.
Covid has been I would say neutral, it's plus or minus.
Distributors that are have an ongoing business that may not be 100% satisfied with where they're at it may be a little bit slow to change as far as in a COVID-19 environment, because they have a situation and don't want to jump to a new situation, where they'll have to bring in new products and convert.
Their business, but at the same time it gives us more time to talk to those individuals.
That relationship and to build trust with those individuals because this is a it's a long term process of bringing a distributor into your organization.
We have a seasoned and experienced team they have great relationships throughout the industry and so we're working on those building those relationships and making those conversions.
Daily and monthly basis.
And then the last one for me is on <unk>.
Strategic investments.
You're calling out.
Several million dollars a year strategic investments can you just remind me.
Exactly what that is is that new shopping for new deals or what else is involved in that.
We have both an organic and inorganic strategy and I highlighted some of the key features on the organic side as far as building it is.
Spine business and also in the orthopedics business.
On the external side as far as inorganic we look at we look at technology, we look at tuck ins and stated previously that we were not looking for bigger deals because we couldnt consume them, but actually we are expanding our view basically looking for mid sized deals and that can basically complement our existing portfolio and bring channel with it.
Well.
And similar question with Covid has that process been been hindered or ours.
Possibly more people likely to sell as a result of Covid.
I think in the first year there are people that they have managed a little bit.
I don't think Thats. The case right now I think that the valuations are quite high and people are very proud of it I think it does allow.
New time to work with these companies and.
Basically get to know them and then they actually want to mature their companies are a little more right now before they transact, but at the end of the day, it's variable and we have a great team that looks at these deals.
Diligence on these deals and so we combine that with our commercial teams and also in house product teams and we have a good process going here and we look forward to be active in that space.
Alright, thank you.
Your next question comes from David <unk> with JMP Securities.
Thanks, Good morning.
The 100 million you mentioned for our sales team I was just curious is.
Is that fresh fractures, and then unions or can you segment that at all.
It is fresh fracture and non union and its with like us with ultrasound.
So that's your view of sort of the ultrasound market as it sits today correct. So the addressable market is probably much larger but that's sort of your guests are maybe what would exiting is doing.
Yes. Thanks for thanks for raising that we think that the whole BTT market is actually has areas.
The potential to expand and so that's the reason why we're investing here.
The sales team is focused ultrasound fresh fashion non union, but we think that market is a highlight as $100 million will expand.
If you think about the dynamics in today and part of the reason we had a lift in our physio stim as it is non operative it's done.
The office and so some.
Some of those cases may have gone back to be revised.
And the or now it's a good opportunity to do it go ahead and try the ultrasound before you go back to the operator, So I think we're seeing some traffic there and.
From a from a fracture standpoint, and avoid the second surgery for a patient and it's good opportunity for them to seek a firm fusion and that fracture.
And when you think about <unk> first ultrasound.
I guess.
Will your PMA or would there be data that you could maybe not apples to apples, but look at sort of how those devices are that maybe they're very similar I don't know the answer to that but.
What are your thoughts there.
The energy source is very different and Panther is a very proprietary process.
Process that we face there.
Or decades, and so it is it is our mainstay is we have all of our clinical data in spine, we have or not.
Our nonunion data and so we're not going to steer away from that at all of that is part of that debt robust portfolio we have.
The sales team with ultrasound is going to be folks that fresh fracture and basically put us in that market to expand our portfolio not only self statement. There is other technologies out of the EG licensing.
The license agreement that we have to offer opportunities to explore as well.
Thanks, a lot.
Thanks.
At this time there are no further questions I will now turn the call back over to John <unk> for closing remarks.
Yeah.
Thanks, operator, thanks, everyone for joining the call I appreciate your interest in learning more about orthopedics and the progress we're making.
With that I'll close the call and thank you very much have a wonderful day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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