Q2 2022 AVITA Medical Inc Earnings Call

Good day, and thank you for standing by and welcome to <unk>.

Medical fourth quarter 2021, and transition period July one 2021 to December 31, 2021 conference call.

At this time all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session.

Ask a question during this session you will need to press star one on your telephone.

Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today Caroline corner Investor Relations. Please go ahead.

Thank you operator, welcome to our BD medical fourth quarter 2021 earnings call. Joining me on today's call are Mike Perry, Chief Executive Officer, and Michael holder Chief Financial Officer.

This call will include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, all statements made on this call that do not relate to matters of historical facts should be considered forward looking statements, including statements regarding the markets in which a beta medical operate trends demands and expectations for its products and technology is expected financial performance.

Expenses and position in the market and the impact of COVID-19 on its operations and our customers' operations. These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results performance or achievements to differ materially from any results performance or achievements expressed or implied by the forward looking statements.

Please review a beta medical's, most recent filings with the SEC, particularly the risk factors described in the beta Medical's F. Three and 10-K filings and in our beta Medical quarterly report on Form 10-Q for the fourth quarter ended December 31st 2021 for additional information any forward looking statements provided during this call including projections for future.

Formats are based on management's expectations as of today Davita medical undertakes no obligation to update these statements except as required by applicable law.

I think the medical press release with fourth quarter and full year 2021 results is available on its website www dot davita medical Dot com under the investors section and includes additional details about the financial results will be the Medical's website also like the latest SEC filings, which you're encouraged to review a recording of today's call will be available on the beta medical.

Website by five PM Pacific time today.

Now I'd like to turn the call over to Mike for his comments and fourth quarter 2021 business highlights.

Thank you Caroline and thank you everyone for joining us today.

We're encouraged by our recent achievement of key corporate milestones, our corporate commercial performance as well as the exciting opportunities that lie ahead for being a medical.

Tara Davita medical we are driven by our primary goal of enabling healthcare providers to restore skin to save lives and to improve quality of life for patients as.

As we expand from trading burns into trauma to bid lie go to cell and gene therapy.

Fedex and beyond our focus is on delivering leading edge therapeutics skin restoration solutions to our patients.

While the company was founded with burdened treatments in mine our team is working to leverage our point of care autologous spring on skin platform across many markets and indications and I'm very pleased to update you today on our latest developments.

Total net revenue increased 37% to $14 million compared to $10 $2 million in the corresponding period in the prior year.

For the quarter ended December 31, 2021, our commercial revenues were consistent with our guidance at $6 9 million.

With that I'd like to highlight the recent progress that we've made with our clinical trials and the related commercial opportunities, we have with soft tissue reconstruction and the Lego.

In early January we announced completion of enrollment in our pivotal trial evaluating the resell system for soft tissue reconstruction two quarters earlier than recent guidance.

Enrollment in the soft tissue reconstruction clinical trial was led by a couple of prominent trauma centers and a few prominent burn centers, who are currently high volume accounts for a beta.

This mirrors, our understanding of the market opportunity and the overlap between the burns and trauma opportunities, which bodes well for the future commercialization of these indications.

Top line data are expected to be released for a soft tissue reconstruction trials during the second half of 2022 with FDA approval anticipated during the second half of 2023.

As a reminder, based on our internal estimates, we foresee a total addressable U S market opportunity for trauma and soft tissue injury, a $1 billion, which is approximately twice the size of the total addressable market for our byrne's business.

It's approved we anticipate leveraging our installed base of burn centers to treat traumatic wounds, especially those that present to burn centers that are co located with trauma centers. Furthermore, we plan to be selling the resale system to approximately 202 <unk> level one and.

Level II trauma centers, where we will approach plastic and reconstructive surgeons as well as traditional trauma surgeons, we plan to incrementally expand our sales force.

<unk> address this opportunity post approval.

We remain excited about our improved ease of use device, which was designed with considerable input from surgeons and users.

He's abuse device allows for improved surgeon and staff handling by no longer requiring a second pair of hands outside the sterile field.

And a reduction in device handling steps by one third, thereby providing significant time savings to surgeons and or staff.

We're pleased to share with you that the FDA has approved the pre market approval application or PMA for our new resell system with improved these abuse.

The U S launch is planned to commence in Q2 of this calendar year.

Our improved ease of use device will also allow being the medical to better address our burns outpatient market facilitated by the new transitional pass through payment or TPG code issuance.

The TPP code as indication agnostic. It will also apply to our soft tissue repair indication once approved.

This represents another meaningful step on our pathway to becoming the standard of care in acute wounds and provides further opportunity to extend our intellectual property estate.

We are additionally, continuing to further support development, our next generation automated in preparation device to produce spray on skin cells.

Turning to our pipeline vitiligo indication in December we completed enrollment of our pivotal trial for the use of the resale system for re pigmentation of stable, but a logo.

Topline data from our <unk> pivotal trial are expected to be released during the second half of 2022 with PMA approval and U S. Commercial introduction anticipated by the end of 2023 for those unfamiliar with the condition vitiligo.

Skin disorder characterized by deep pigmented areas of skin that appears white spots or patches, and which are primarily attributable attributed to an underlying autoimmune disorder in the patient.

There are an estimated 100 million sufferers of <unk> worldwide, including up to $6 5 million Americans.

Of those in the U S. We estimate approximately one 3 million stable with a Lego our target population, meaning that their underlying autoimmune disease is being well managed and that their disease is not continuing to progress.

Upon our internal estimates, we foresee a total addressable U S market for resale and vitiligo of $5 2 billion.

Last month for the first time resell was presented on podium at the.

Annual now we during 2022 conference to 650 in person participants and many others attending virtually.

Dr. Pearl Grimes director of the Vitiligo and Pigmentation Institute of Southern California, and Dr. John Harris, Professor and Chair Department of Dermatology at the University of Massachusetts Medical School.

Umass Memorial Medical center discuss the latest approaches to creating bit of Lago melasma and other disorders of pigmentation.

Harish resell as a potential treatment for <unk>, along with multiple cases from outside the United States and provided an overview of our vitiligo study design.

Since its presentations took place we have experienced a very nice uptick in interest from the dermatological community.

Looking ahead to March our team is excited to participate in three key annual meetings, taking place in Boston, namely the Global <unk> Foundation, our GBS annual scientific symposium.

The skin of color Society, and the American Academy of dermatology or AAD meeting.

Of note there are 10 sessions featuring bitter legault.

<unk> is a market increase from last year as JAK inhibitors from Pfizer, Abbvie and insight and the resale system have stimulated substantial interest.

As a reminder, JAK inhibitors are primarily focused on controlling the underlying autoimmune disease that causes the white patches.

The JAK inhibitors will increase the total pool of stable <unk> patients available for re pigmentation with resale.

In addition to completing our enrollment in our pivotal soft tissue and bit of LIFO trials Viva medical recently establish proof of concept for novel treatments and skin rejuvenation and an epidemic licensed looser.

In partnership with researchers at the Houston Methodist Research Institute or <unk>, MRI preclinical data demonstrating successful proof of concept was achieved when impairing resell for harvesting and delivery of skin cells with <unk> patent.

RNA technologies to reverse age the skin cells prior to delivery.

Personalized cellular level skin rejuvenation is an area of significant interest for consumers with a total addressable market of over $15 billion more than $3 million of aesthetic procedures are farm are performed annually.

<unk> in the United States with approximately 1 million people undergoing face lips and various tightening procedures each year.

In partnership with scientists at the Gate Center for regenerative Medicine at the University of Colorado School of Medicine, we achieved preclinical proof of concept for our novel Therapeutics.

To treat recessive dystrophic Epidermolysis <unk>.

Or are Deb patients with Ardeb have a mutation in their call.

781, gene, which leads to severe skin fragility, resulting from their skin cells and the ability to produce the protein needed that normally secures the epidermis and dermis to one another.

Derma license, but lotze R. E T cells have been successfully corrected and reverse differentiated into <unk> into induced pluripotent stem cells or Ips CS.

And then forward differentiated Ips CS and applied them.

Clinical model as spray on skin cells successfully regenerating skin that is free of the coal 781 defect.

Recessive dystrophic epidermolysis below.

Is rare.

Currently incurable disease and leads to chronic wounds.

Subtypes, and an increased risk of squamous cell carcinoma or death.

This represents an orphan indication with $25 to 50000 patients in the United States and a total addressable U S market or Tam estimated at $850 million.

So while I've just provided you with updates on our pipeline indications. We have also continued our progress in burns.

Our sales force, which we believe is the largest and most experienced burns dedicated sales force in the market remains focused on driving utilization and broadening penetration within our footprint of over 100 hospitals and over 250 trained physicians.

In the face of nursing and staffing shortages, we continued to prioritize training and education efforts with advanced practice providers, who have a tremendous influence on the use of resell.

Training includes local regional and national events for both surgeons and their staff in the last quarter, we held almost 600 hands on training in the field and we are currently performing approximately 200 and hospital training sessions.

Per month.

Moving to our recent progress with reimbursement or transitional pass through payment or CPT payment device category sic code.

Effective January one 2022.

As a reminder, the sic code intended to facilitate the adoption of new technology for Medicare beneficiaries by offsetting the cost of the device to facilitate the facilities.

Provide separate payment for resale.

And procedures that are performed in hospital outpatient facilities and in ambulatory surgical centers.

<unk> code lays a reimbursement foundation for our soft tissue repair indications as well as expands resells burn treatment to a new carrier setting with existing customers.

We have commenced the initial steps of our pilot launch at key sites to ensure coverage with commercial carriers and we will proceed with a broader nationwide launch in mid 2022.

Interest and resell remains high and despite the pandemic and staffing driven pressures on procedure rates, we're completing cases and delivering on our mission to save and improve patients' lives.

We continue to hear moving stories in the media regarding the use of resale for the treatment of Burns. One recent story came out of Chicago, highlighting Dr. Josh Carson's patient.

Dr. Carson recently treated as a seven year old boy with resale following a house fire, which burned to 18% of his total body surface area Dr.

Dr. Carson discussed using resell instead of a traditional skin graft.

The boys Burns.

And was impressed with the results.

Since early February . This story has received a significant amount of coverage on the Fox network and in Newsweek.

Dr. Jeff Carter was also interviewed regarding his pregnant patient.

Who was treated with resale following almost 40% of our total body surface area being burned when a propane grill exploded outside her apartment complex.

This story was recently featured within the Louisiana State University Health Education network.

On science acts.

And these articles Dr. Carter states using spray on skin, we've been able to cut recovery times in half by accelerated healing.

This means less suffering less risk for complications and infections and significant savings for both the patients and the state at least $9 million of savings over three years.

With that I'd like to now I'll walk you through the growth drivers we see ahead.

First we continued to drive forward on provider engagement and education, whether in person or virtual or discussions have progressed from whether or not to use <unk> sell to a focus on optimizing the use of resell as well as training and refining the expertise.

Support staff.

With the pandemic lifting we're set.

Sing a tangible excitement around live meetings and peer to peer trainings, we see face to face interaction as a robust driver for burn surgeon adoption and with the <unk> annual meeting coming up in April were very excited to engage in these comp.

<unk>.

Second our commercial team will be continuing to drive penetration into our burn center accounts.

Our vac approved and what we believe is a critical mass of burn centers and with that we are focused on penetration within those accounts.

We have shown that our strategy of driving into smaller burns results in overall broad resell usage too.

To underscore our approach today over one third of resale procedures involve burns that are less than 10% total body surface area or <unk>.

And these smaller burns represent about three quarters of all burned admissions.

In the outpatient setting with our C code in place we've commenced our pilot launch and we're gearing up for a broader nationwide launch mid this year as explained earlier.

We also anticipate growing our commercial presence in Japan.

To that end resell very recently received <unk> approval of the Burns indication in Japan.

And we will commercialize this indication in partnership with Cosmic Tech and then the three company.

The next step, causing the tech will be meeting with the Japanese Ministry of health Labor and welfare or MH L. W. For reimbursement review, which we anticipate will occur in the June timeframe.

Cosmo Tech will launch to burn customers currently thereafter.

Once we have <unk> in soft tissue data from our U S. FDA trials caused by Tech, we will seek regulatory approval and reimbursement for those indications in Japan.

Our third growth driver as progress with our pipeline indications as mentioned earlier, our soft tissue reconstruction and <unk> clinical trials have completed enrollment and we expect topline data to be released in the second half of 2022 with submission of PMA supplement by the.

End of the calendar year, we anticipate entering entering the market in the second half of 2023 with both indications.

Looking further out and again as mentioned earlier, our skin rejuvenation and <unk> licensed Llosa preclinical work has achieved proof of concept. Our next goal is to review the GOP data requirements to submit an IND application for <unk>.

Your first in human treatment.

Once timelines are clear.

We'll update you accordingly.

In summary.

Despite some continued pressure on burn procedures and pandemic interruptions, we have continued to execute effectively on our business objectives and have achieved several key milestones.

We anticipate some continued staffing headwinds in the near term.

Pleased how our team has responded driving advanced practice training and keeping resale front and center in the minds of burn care practitioner.

Finally, and looking further ahead.

Natural progress in our clinical trials for <unk> in soft tissue trauma.

Select a groundswell of interest in.

Yes.

Potential of these large market opportunities.

With that I'll now turn it over to Michael for details on our financial performance in the quarter Michael.

Thank you Mike and.

In our fourth quarter, ending December 31, 2021, total revenue increased 35% to $6 9 million compared to $5 $1 million in the corresponding period in the prior year.

Increase was largely driven by broader utilization among our customer base as well as deeper penetration within individual customer accounts.

Gross profit margin was 88% compared with 84% in the corresponding period in the prior year.

Higher gross margin was driven by increased production at our Victoria facility lower shipping cost and the extension of our shelf life.

Total operating expenses increased 42% to $14 8 million compared to $10 $4 million in the corresponding period in the prior year the.

The increase in operating expenses was primarily driven by higher noncash share based compensation cost.

Cost with ongoing development of our next generation automated skin preparation device pre commercialization planning for resale launches and soft tissue reconstruction and <unk> as well as increased hands on professional education and training events.

Higher noncash share based compensation cost in the current year were due to the reversal of a previously recognized expense for Unvested awards related to the resignation of an executive officer in the prior year.

Increased hands on professional education and training events was driven by reduced COVID-19 related travel restrictions.

Net loss increased 52% or $2 9 million to $8 $5 million over the $5 6 million recognized in the corresponding period in the prior year.

The increase in net loss was driven by higher operating expenses as described earlier, partially offset by higher revenue during the year.

non-GAAP adjusted EBITDA loss increased by 13% or <unk> 7 million to $6 $5 million over the $5 8 million recognized in the corresponding period in the prior year.

And our transition period ended December 31, 2021, which covers from July one through December 31.

Total revenue increased 37% to $14 million compared to $10 $2 million in the corresponding period in the prior year.

Retail commercial revenue revenues were $13 8 million, while resale revenues associated with U S Department of health and Human services Biomedical Advanced research and development authority within the office of the assistant Secretary for preparedness and response or BARDA.

Point $2 million.

Revenues.

Associated with BARDA were attributable to our services over the vendor managed inventory for resale units purchased in the prior year.

Gross profit margin was 86% compared with 83% in the corresponding period in the prior year driven largely by the extension of our shelf life and lower shipping cost.

Total operating expenses increased 7% to $27 million compared to $25 3 million in the corresponding period in the prior year.

The increase in operating expenses was primarily driven by ongoing development of our next generation automated skin preparation device.

Pre commercialization planning for resale watches and soft tissue reconstruction and did a lego as well as increased hands on professional education and training events.

These higher costs were partially offset by certain one time professional services to establish the company as a domestic filer with the SEC. Following completion of the Athena corporate groups re domiciliation to the United States and severance cost associated with a former executive.

<unk> incurred in the prior year.

Net loss decreased 9% or $1 5 million to $14 4 million compared to the $15 9 million recognized in the corresponding period in the prior year.

The decrease in net loss was driven by higher revenue during the year, partially offset by higher operating expenses as described above.

non-GAAP adjusted EBITDA loss decreased by 17% or $2 1 million to $10 4 million compared to $12 5 million recognized over the corresponding period in the prior year.

Moving on to calendar year 2022 guidance, we project total commercial revenues of approximately $30 million, an approximate 20% increase year over year, excluding BARDA revenues.

As we emerge from Covid and increase adoption and use of the resale system.

In calendar year 2022, we expect to realize approximately 300000.

Of revenue related to BARDA.

This places the company in a good position for realizing revenues from new indications and soft tissue reconstruction in vitiligo, which we anticipate will be approved in the second half of 2023.

With that we thank you for your attention and now I will turn the call back over to the operator for your questions.

Thank you as a reminder to ask a question at this time. Please press Star then one on you touched on telephone to withdraw your question press the pound key please standby what we compile the Q&A roster.

Our first question comes from Josh Jennings with Cowen Your line is open.

Hi, good afternoon, thanks for taking the questions.

It's been great to see this flurry of positive updates for the last couple of months.

I was wondering just wanted to ask a question on.

Recent trends in <unk> I know you talked a little touch a little bit on it on the call and just how that's impacting 2022 revenue got it and how we should be thinking about that kind of cadence of.

Revenues throughout the course of calendar 2022.

And then just within that kind of implied 20% revenue product revenue growth.

Our assumption is that most of that's coming from just the core burn franchise in that outpatient parenting and in Japan are just going to get up and running in the back half, but any help there just thinking about contributions for outpatient in Japan that you have baked into your guidance.

Thanks, Josh.

Talk to you I appreciate your questions.

Recent trends.

And.

Certainly.

On impact on what we have.

Projected.

Guidance relative to growth.

Going forward that said we are anticipating.

Much less impact.

Impact from Covid.

So this includes really an abatement of Covid.

That said also the nursing staff situation.

That is continuing to rotate rotating nursing staff.

National shortage we.

We anticipate will continue.

Not really.

Has us continuing our training.

A very high rate.

So.

That's all baked in regarding outpatient and Japan.

Your second part of your question.

I would agree those are more intended to start kicking in in the second half of the year.

Also.

Just to remind you regarding Japan, while we do have <unk> approval.

In around the June timeframe.

Cosmic <unk> our partner in Japan will be meeting with BMA Charles W. Two established reimbursement.

And.

And then there'll be able to kick off their sales.

So we don't anticipate a whole lot of revenue from Japan in calendar 'twenty two.

Thanks for that.

And final question is just on <unk>.

New resell device that was approved.

How is your internal team thinking about this.

New device driving stronger utilization rates.

U S burn centers.

Increasing.

Stronger early adoption rates in the outpatient arena.

Or should we be thinking about really.

Some of the pipeline indications, where this new device and the ease of use will really kick in particularly in those capable of lag of once that's approved.

Thanks, Ken Josh Good question.

We anticipate that well number one where we're extraordinarily excited.

By the ease of use machine that is now approved so.

From that perspective.

Generally I would say, we're getting a level of.

And if there was something new that we can talk about.

<unk>.

It's a value there.

Regarding really driving.

Revenues.

This is more of a longer term.

<unk> value proposition for the company.

We will certainly drive some.

In the outpatient setting.

In the second half of this calendar year.

But where the real Bang is going to come in is going to be when we achieved the soft tissue.

Vacation and reimbursement.

There's going to be a lot of use there.

Relative to the outpatient setting.

This ease of use device.

Will be very good because you won't need that secondly, Pat second pair of hands.

And outside of the sterile field.

Excellent and then last question just on soft tissue indication.

And just the potential.

Pricing of the pumped with with off label utilization and involved a number of centers.

Planning on focusing on for the trauma centers and in those centers.

Centers that also have burn units.

How many what percentage do you think is currently using we sell off label and soft tissue cases.

In front of approval is there a chance I know youre not mark if you're just not marketing the indication, but it's being used off label.

How much experience will the trauma surgeon community have with <unk>, so that kind of prime the pump for that launch thanks a lot.

Thanks, Ken Josh.

Relative to.

Priming, the pump and having off label use.

I would say that our.

Kols, especially those who are further advanced.

And the use of resell.

I would estimate that's probably 10% to 15%.

Have been using it.

Off label situation to treat.

Soft tissue.

<unk> wounds.

Yes.

This is primarily in the context of those centers and Thats about half.

The.

Approved burn centers.

136 or so.

After that Mark co located with level one level two trauma centers.

We'll be adding an additional 220.

A little one level two trauma centers, when we launch soft tissue but of course.

Those centers arent.

Utilizing the product currently it's really.

Those burn centers that are co located.

The trauma centers.

Great. Thank you.

Pleasure.

Our next question comes from Ryan Zimmerman with <unk>. Your line is open.

Alright, congrats on the Echo John's sentiments a lot of progress has been made recently and let's see.

I guess, a follow up to Jonathan's question and Mike.

It's clearly theres trauma cases, and Theres burn cases, the two are different but I guess, where is the line and begin there because.

Our all burn cases considered part of trauma.

Maybe just help us kind of think about those.

Those types of cases, a little bit more I appreciate the color on the physician base.

That's my first question.

Just ask the second question upfront, which is the gross margins were fantastic this quarter and I'm curious kind of from you. Michael is kind of what your expectations are around gross margin durability as we move into this year.

Thanks, Ryan I'll take your first question.

On.

Trauma.

Yes.

And it really trauma and burns.

When we think about it we can group them into acute wounds.

And.

From that perspective.

The the burns are being.

Treat it now with refill.

And there are some that are being treated.

Some trauma cases that are being treated.

But again.

As.

As I answer Josh is question if I understood your question.

There is going to be a.

A nice overlap when we do get the indication and we can actually promote.

Two trauma.

In the burn unit.

Well as <unk>.

220.

Level, one level two trauma centers.

But broadly group those into acute wounds and it's really on <unk>.

Artificial regulatory.

Concern where.

<unk> has carved out as a special.

Acute.

Hugh.

<unk> indication.

Mostly because of the complications of ventilation injury.

Mike.

So thats the situation there I'll pass it over to Michael to talk about gross margins.

Thank you Mike. So we were in fact very pleased with our gross margins, which we received.

<unk> achieved rather.

This past quarter at 88% and then for the six month period at 86%.

We've been working really hard the team has on lowering our shipping shipping costs and they've done a great job doing that going forward. We would we would look for those cost to more stabilize.

<unk>.

Lower 80% range.

We rollout our ease of use device that will initially have a shorter shelf life.

Which we will improve over time, so again, we're looking for that to stabilize in the lower <unk>, 80% range.

Okay. That's helpful. And then if I can just sneak one in.

You're switching to the resell to point out if you want to call it or the next generation device kind of midway through this year is there any type of pacing or dynamic when you think about potentially inventory in the field that may actually get burned down a little bit no pun intended.

As you transition that new product in the field and considerations for kind of the pace in within your guidance there.

Yes, that's also taken into consideration in the gross margin guidance.

Gabe.

We've also been focused in addition to shipping cost.

On.

Working on burning down the one point out of inventory.

Long with the.

The commercial teams thoughtful rolling out of the two point out.

So that's something that we're very much looking to.

Optimize and be efficient towards and that again falls into the guidance that I gave you.

Yes.

Okay. Thank you.

I'll hop back in queue.

Thanks Ryan.

Our next question comes from Lyanne Harrison with America <unk>. Your line is open.

Hi, Mike Hi, Michael Thank you for taking my questions can I.

Scott I.

I guess the transition as you guys spent original resale.

We sell T point.

The.

In terms of the engine.

The result from the resale is it the same.

Irrespective of which which device.

Yes.

The end result is exactly the same.

John Yes decrease the steps as I mentioned by a third and increased.

Enhance the user experience.

Okay. So is the expectation.

Launch we sell to that.

Eventually youll.

Hi, J J population.

Move towards is that using that product.

Correct, yes.

Yes that is.

Thank you.

Thank you and with all of the training that is being conducted at the moment is that I've been niches being trained.

We sell to.

Yes.

Not yet.

Primarily they are being trained on what is currently available.

That will be transitioning though.

And just.

Just a ton of training.

To the nursing staff continuing to turnover.

As they turn over there also it's not like you get.

A turnover and.

Therefore.

Two three months. This is really it's a number of weeks and then they turn over again.

So it's a constant training.

Okay. Thank you.

If you could provide some color, obviously and with B cell death.

For pediatric Ben.

Can you give us some color on the trends you're seeing in terms of the split of procedures between.

Pediatrics and good morning.

Sure.

Pediatrics, while we have the indication now and we can promote to.

Pediatric centers.

The centers that.

Which is by and large the majority of them.

Which treat both adults and children.

Initially did not differentiate at all between adults and pediatrics.

So we've really already taken that into account in current revenues.

So there may be a small bump on the pediatric only hospitals.

Previously we couldnt promote.

But most of that is already baked in.

Okay. Thank you and just one last question for me is can you give us some guidance.

Operating costs.

Paul.

2022 calendar year.

Michael.

Yes, you bet so.

As you know from our earnings release.

The script.

If you.

Exclude.

BARDA revenues year every year, we're expecting roughly a 20% increase in.

As I look at operating expenses I would say that the increase in operating expenses would be roughly commensurate with that.

And as you might imagine that's largely driven by research and development given the.

The clinical trials that will be intensifying its been a while ago and soft tissue as well as continued other pipeline and work with our next generation device.

So that will be the larger of our three main expense categories.

<unk>.

The second category that would increase.

It would be sales and marketing as you would imagine we're continuing to grow.

As well as.

Turning to prepare for.

Additional commercialization activities down the road with vitiligo and soft tissue.

And then lastly, you have.

G&A expenses.

Which would increase.

And a more minor way.

Great. Thank you very much.

Thanks, Leann thank you.

Our next question comes from Matthew O'brien of Sandler Your line is open.

Thanks for taking the questions, maybe just a follow up a little bit on Josh. The first question on 22.

The resale revenue.

Basically a little bit of growth out of your exit rate for 'twenty. One so Mike Im wondering if youre just assuming the headwind the.

Nursing side.

If you face it all year or are you assuming that it starts to abate a little bit in the back half of the year because again, there's not a lot of growth off of that exit rate in Q4.

Yes, I realize that that growth rate of 20%.

Modest and while it does not assume any major new headwinds from Covid. It does assume that the nursing shortage will not be fixed.

In this calendar year, and I think thats pretty much the consensus.

In the medical community.

Okay. Thanks for that.

Turning to trauma.

Can you just is there a specific.

Trade show or something like that where we should expect that topline data and then can you just talk maybe a little bit more about the next steps. After we see the data in terms of getting the approval kind of middle of next year, and then how reimbursement ties into all of that.

Sure.

Yes for soft tissue.

We are anticipating that topline data in the second half of this calendar year. There is no specific.

Meeting that were targeting for the announcement.

We will announce it as soon as its available and then will be submitting in so far as process.

There'll be the submission of the PMA.

For soft tissue.

And.

Then it goes into panel track 180 day review cycle.

That's 180 FDA days, so whenever they ask US a question the clock goes on hold so generally bake about nine months into there.

With the back and forth.

And that allows us the second half of 2023.

For approval.

Launch and.

We do anticipate that.

The launch is going.

<unk> to be.

Let's say relatively.

Smooth.

And we anticipate vitiligo, it's going to be smooth as well, but.

The point of call.

Is completely different in <unk>, whereas in soft tissue trauma.

It's acute wounds.

<unk> based.

Basically in the same area.

And we've got a lot of physicians that are already.

And those burn centers that are co located with level one level two trauma centers relative to the rollout.

So hopefully that gives you a little bit of color did that answer your questions.

Yes, that's really helpful last one for Michael holder, just just to follow up on the last question on.

On Opex.

Pretty good cash position, but theres just a lot going on at the company can you talk about cash needs, obviously, youre not going to do anything this year, but just.

The positioning of the company as we head into into all of these launches second half of next year, and then into 'twenty four as well.

Yes, you bet great Great question. So Fortunately, we do have a very strong cash position.

SaaS of $100 million.

If you look at.

The cost that we plan to expand.

Leading to the commercialization of <unk> in soft tissue reconstruction.

And you exclude <unk>.

Cost associated with our cell and gene therapy programs.

Half.

Ample amount of cash that we would not need to do additional fundraising.

Prior to reaching cash flow breakeven according to our plans, but having said that.

As a best practice, we would always like to keep.

At least say one five times, our cash burn on hand.

Is it good business practice, so we do anticipate that we will need to and we want to fund raise at some point in the future.

But we're not pressed to do that anytime soon.

Did that could occur.

Any any time between now and the next couple of couple of years.

Got it thank you so much.

Matt I just wanted to add one additional comment.

Came to my mind, well, Michael was speaking and that is for the soft tissue reconstruction.

It's the same reimbursement.

<unk>.

Basically the same code that would be utilized there. So that's another advantage.

The soft tissue reconstruction indication has.

Got it okay very helpful. Thank you both.

Thanks, Matt.

Thank you and as a reminder to ask a question at this time. Please press Star then one on the telephone.

Our next question comes from Shane PON Raj with Morningstar. Your line is open.

Yes, Hello, Thanks for taking my questions.

Just thinking about the sales trajectory for bands with commercial revenue in the last three quarters.

Roughly flat at around $7 million in your guidance sort of suggests a similar rate for the next four quarters.

When I think about approval for pediatric only centers.

And for outpatient re sell too.

Japan launch.

They're all great updates, but.

It doesn't seem like you think this will significantly contribute to the top line.

Is that fair to say and if so do you think base will become meaningful down the track.

I think that.

Im going to start with the response.

And then I'll pass it over to Michael holder.

But from my perspective, the answer is yes that these are going to have a small impact in 2022 down the line there.

We're definitely going to have a substantially material impact as we move forward Michael is there anything you'd like to add to that.

Yes basically.

Wholeheartedly agree with that.

Just to be clear, whereas commercial revenues have been relatively flat the last three quarters.

We are projecting as we come out of Covid.

20% growth.

As Mike said.

We are expecting a small impact from the various factors you mentioned in 'twenty two but in 2003, we are expecting those two to really help us with our revenue.

Its growth rate and so we would look although we haven't provided guidance, we would look for our revenue growth rates to to increase.

Materially in 2003.

Yes.

But for calendar 'twenty, two if you're guiding $30 million.

So to just over $7 million per quarter, you've talked about like the staffing shortage limiting sales but.

Is there anything else that you can maybe point to which is weighing on sales at the moment.

No.

It's really the reopening of the hospitals and while we're seeing that.

Occur.

Happening.

I would say at a slower pace.

Then.

We would.

Generally like to see of course.

But they are the.

The hospitals are really being.

I would say slow at changing their procedures and they are lagging.

Behind.

The various.

How the various regions in the United States are stopping they're masking rules.

For the vaccinated that is.

And changing their restrictions.

Yes, yes, yes.

Really all of that.

That I see there.

Okay noise and so it sounds like you're a lot more positive about soft tissue reconstruction.

Sort of.

Sounds like that's really overtaken vitiligo as your big break and where you're most confident in is that fair.

You characterize like what would you characterize that too when you compare the two and mainly because it's more adjacent to the <unk>.

That's going to be.

Oh, sorry.

Keep going.

Thank you guys.

Okay shape.

Yes, it's really because of the adjacency to burns.

The reimbursement that's basically in place.

And number of surgeons that do both burns as well as <unk>.

Soft tissue reconstruction.

We do anticipate.

Easier transition to <unk>.

Daffing up where we currently have.

Field salespeople.

And just really increasing that whereas the vitiligo as such.

Substantially larger.

Business opportunity and top line revenue growth opportunity for us, but we don't have established.

Reimbursement there were very poor.

Positively inclined.

Excited about the indication.

But.

It'll be the usual.

New indication new reimbursement.

New point of call.

Going through and getting that done we're doing as much as we can.

Preapproval to be ready.

But it takes time.

Actually.

<unk> launched.

And and get rolling.

Getting the hockey stick on that.

Yes understood thanks very much.

Thanks Shane.

Thank you.

Our next question comes from John Hester with Beth Your line is open.

Good afternoon Michael.

Earlier in the call you spoke about.

Constant oil just a quick Google search Loyola.

Can you tell us a little bit more about that center.

Of your top users or would you push for them.

You use a mark and.

What sort of growth as I sort of how many kids using these goes versus more like a one off.

Yes.

Was.

Number one <unk>.

A center that does use resell on a on a regular basis.

They're not our top center.

<unk>.

Okay.

They do a reasonable volume rare.

Relative to.

Projections, we have not given any guidance relative to center by center projections.

Projections so.

Really can't answer that.

Probably could follow up with a bit more detail offline.

This discipline purposeful talk louder.

Later in the day, thank you very much.

Thank you John .

Thank you.

Showing no further questions at this time. This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

[music].

[music].

Good day and thank you for standing by welcome to see if he doesn't medical fourth quarter 2021 and transition period July 1st 2021 to December 31st 2021 conference call.

At this time all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session.

Ask a question during the session you will need to press star one on your telephone.

Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today Caroline corner Investor Relations. Please go ahead.

Thank you operator, welcome to our BD medical fourth quarter 2021 earnings call. Joining me on today's call are Mike Perry, Chief Executive Officer, and Michael holder Chief Financial Officer.

This call will include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, all statements made on this call that do not relate to matters of historical facts should be considered forward looking statements, including statements regarding the markets in which a beta medical operate trends demands and expectations for its products and technology, it's expected financial performance.

Expenses and position in the market and the impact of COVID-19 on its operations and its customers operations. These statements are neither promises no guarantees and involve known and unknown risks and uncertainties that could cause actual results performance or achievements to differ materially from any results performance or achievements expressed or implied by the forward looking statements.

Please review a beta medical's, most recent filings with the SEC, particularly the risk factors described in the BD Medical's F. Three and 10-K filings and in our beta Medical quarterly report on Form 10-Q for the fourth quarter ended December 31st 2021, or additional information any forward looking statements provided during this call including projections for future.

Formats are based on management's expectations as of today I think the medical undertakes no obligation to update these statements except as required by applicable law.

I think the medical press release with fourth quarter and full year 2021 results is available on its website www dot davita medical Dot com under the investors section and includes additional details about the financial results will be the Medical's website also like the latest SEC filings, which you're encouraged to review a recording of today's call will be available on the beat on medical.

Website by five PM Pacific time today.

Now I'd like to turn the call over to Mike for his comments and fourth quarter 2021 business highlights.

Thank you Caroline and thank you everyone for joining us today.

We're encouraged by our recent achievement of key corporate milestones, our corporate commercial performance as well as the exciting opportunities that lie ahead for medical.

Para Davita medical we are driven by our primary goal of enabling healthcare providers to restore skin to save lives and to improve quality of life for patients as.

As we expand from trading burns into trauma to the <unk>.

Oh to cell and gene therapy.

With Fedex and beyond our focus is on delivering leading edge therapeutics skin restoration solutions to our patients.

While the company was founded with burn treatments in mind, our team is working to leverage our point of care autologous spray on skin platform across many markets and indications and I'm very pleased to update you today on our latest developments.

Total net revenue increased 37% to $14 million compared to $10 $2 million in the corresponding period in the prior year.

For the quarter ended December 31, 2021, our commercial revenues were consistent with our guidance at $6 9 million.

With that I'd like to highlight the recent progress that we've made with our clinical trials and the related commercial opportunities, we have with soft tissue reconstruction and the logo.

In early January we announced completion of enrollment in our pivotal trial evaluating the resell system for soft tissue reconstruction two quarters earlier than recent guidance and.

Enrolment in the soft tissue reconstruction clinical trial was led by a couple of prominent trauma centers and a few prominent burn centers, who are currently high volume accounts for a beta.

This mirrors, our understanding of the market opportunity and the overlap between the burns and trauma opportunities, which bodes well for the future commercialization of these indications.

Topline data are expected to be released for a soft tissue reconstruction trials during the second half of 2022 with FDA approval anticipated during the second half of 2023.

As a reminder, based on our internal estimates, we foresee a total addressable U S market opportunity for trauma and soft tissue injury, a $1 billion, which is approximately twice the size of the total addressable market for our byrne's business.

It's approved we anticipate leveraging our installed base of burn centers to treat traumatic wounds, especially those that present to burn centers that are co located with trauma centers. Furthermore, we plan to be selling the resale system to approximately 220 level, one and <unk>.

Level, two trauma centers, where we will approach plastic and reconstructive surgeons as well as traditional promise surgeons, we plan to incrementally expand our sales force to promptly address this opportunity post approval.

We remain excited about our improved ease of use device, which was designed with considerable input from surgeons and users.

Abuse device allows for improved surgeon and staff handling by no longer requiring a second pair of hands outside the sterile field.

And a reduction in device handling steps by one third, thereby providing significant time savings to surgeons and or staff.

We're pleased to share with you that the FDA has approved the pre market approval application or PMA for our new resell system with improved these abuse.

The U S launch is planned to commence in Q2 of this calendar year.

Our improved ease of use device will also allow being the medical to better address our burns outpatient market facilitated by the new transitional pass through payment or CPT code issuance as.

As the CPT code is indication agnostic. It will also apply to our soft tissue repair indication once approved.

This represents another meaningful step on our pathway to becoming the standard of care in acute wounds and provides further opportunity to extend our intellectual property estate.

We are additionally, continuing to forbid lease support development. Our next generation automated in preparation device to produce spray on skin cells.

Turning to our pipeline vitiligo indication in December we completed enrollment of our pivotal trial for the use of the resale system for re pigmentation of stable, but a logo.

Topline data from our <unk> pivotal trial are expected to be released during the second half of 2022 with PMA approval and U S. Commercial introduction anticipated by the end of 2023 for those unfamiliar with the condition <unk> is.

A skin disorder characterized by deep pigmented areas of skin that appears white spots or patches, and which are primarily attributable attributed to an underlying autoimmune disorder in the patient.

There are an estimated 100 million sufferers of bit of Lago worldwide, including up to six 5 million Americans.

Of those in the U S. We estimate approximately one 3 million have stable vitiligo, our target population, meaning that their underlying autoimmune disease is being well managed and that their disease is not continuing to progress.

Upon our internal estimates, we foresee a total addressable U S market for resale and vitiligo of $5 $2 billion.

Last month for the first time resell was presented on podium at the.

Annual now we during 2022 conference to 650 in person participants and many others attending virtually.

Dr. Pearl Grimes director of the Vitiligo and Pigmentation Institute of Southern California, and Dr. John Harris, Professor and Chair Department of Dermatology at the University of Massachusetts Medical School.

Umass Memorial Medical Center discuss the latest approaches to treating vitiligo melasma and other disorders of pigmentation.

Harriss shared resell as a potential treatment for <unk>, along with multiple cases from outside the United States and provided an overview of our vitiligo study design.

Census, presentations took place we have experienced a very nice uptick in interest from the dermatological community.

Looking ahead to March our team is excited to participate in three key annual meetings, taking place in Boston, namely the global <unk> Foundation or GBS annual scientific symposium.

The skin of color Society, and the American Academy of dermatology or AAD meeting.

Of note. There are 10 sessions, featuring <unk>, which is a market increase from last year as JAK inhibitors from Pfizer add.

Insight and the resale system have stimulated substantial interest.

As a reminder, JAK inhibitors are primarily focused on controlling the underlying autoimmune disease that causes the white patches.

Fact of the JAK inhibitors will increase the total pool of stable vitiligo patients available for re pigmentation with resale.

In addition to completing our enrollment in our pivotal soft tissue and bit of LIFO trials of EDA Medical recently established proof of concept for novel treatments and skin rejuvenation and epidermal licensed looser.

In partnership with researchers at the Houston Methodist Research Institute or <unk>, MRI preclinical data demonstrating successful proof of concept was achieved when pairing resell for harvesting and delivery of skin cells with HMA arise patent.

The RNA technologies to reverse age the skin cells prior to delivery.

Personalized cellular level skin rejuvenation is an area of significant interest for consumers with a total addressable market of over $15 billion more than $3 million of aesthetic procedures at our farm are performed annually.

<unk> in the United States with approximately 1 million people undergoing face lips and various tightening procedures each year.

In partnership with scientists at the Gate Center for regenerative Medicine at the University of Colorado School of Medicine, we achieved preclinical proof of concept for our novel Therapeutics to treat recessive dystrophic epidermolysis below.

Or are Deb patients with Ardeb have a mutation in their call.

781, gene, which leads to severe skin fragility, resulting from their skin cells inability to produce the protein needed that normally secures the epidermis and dermis to one another.

Epidermis licensed Bilotta or E. B cells have been successfully corrected and reverse differentiated into <unk>.

Two induced pluripotent stem cells or Ips CS.

We then forward differentiated Ips CS and applied them in a preclinical model as spray on skin cells successfully regenerating skin that is free of the coal 781 defect.

Recessive dystrophic epidermolysis below.

It is rare.

Currently incurable disease and leads to chronic wounds and in some subtypes and an increased risk of squamous cell carcinoma or death.

This represents an orphan indication with $25 to 50000 patients in the United States and a total addressable U S market or Tam estimated at $850 million.

So while I've just provided you with updates on our pipeline indications. We have also continued our progress in burns.

Our sales force, which we believe is the largest and most experienced burns dedicated sales force in the market remains focused on driving utilization and broadening penetration within our footprint of over 100 hospitals and over 250 trained physicians.

In the face of nursing and staffing shortages, we continued to prioritize training and education efforts with advanced practice providers, who will have a tremendous influence on the use of resell.

Training includes local regional and national events for both surgeons and their staff in the last quarter, we held almost 600 hands on training in the field and we are currently performing approximately 200 in hospital training sessions per.

<unk>.

Moving to our recent progress with reimbursement or transitional pass through payment or CPT payment device category C code became effective January one 2022.

As a reminder, the sic code intended to facilitate the adoption of new technology for Medicare beneficiaries by offsetting the cost of the device to facilitate the facilities.

<unk> separate payment for resell used and procedures that are performed in hospital outpatient facilities and in ambulatory surgical centers.

The new code lays a reimbursement foundation for our soft tissue repair indications as well as expands resells burn treatment to a new carrier setting with existing customers.

We have commenced the initial steps of our pilot launch at key sites to ensure coverage with commercial carriers and we will proceed with a broader nationwide launch in mid 2022.

Interest and resell remains high and despite the pandemic and staffing driven pressures on procedure rates, we're completing cases and delivering on our mission to save and improve patients' lives.

We continue to hear moving stories in the media regarding the use of resale for the treatment of Burns. One recent story came out of Chicago, highlighting Dr. Josh Carson's patient <unk>.

Dr. Carson recently treated a seven year old boy with resell following a house fire, which burned to 18% of his total body surface area Dr.

Dr. Carson's discussed using resell instead of a traditional skin graft.

To cover the boys Burns and was impressed with the results since.

Since early February . This story has received a significant amount of coverage on the Fox network and in Newsweek.

Dr. Jeff Carter was also interviewed regarding his pregnant patient.

Who was treated with resale following almost 40% of our total body surface area being burn when a propane grill exploded outside her apartment complex.

This story was recently featured within the Louisiana State University Health Education network and on Science acts.

And these articles Dr. Carter states using spray on skin, we've been able to cut recovery times in half by accelerated healing.

This means less suffering less risk for complications and infections and significant savings for both the patients and the state at least $9 million of savings over three years.

With that I'd like to now I'll walk you through the growth drivers we see ahead.

First we continued to drive forward on provider engagement and education, whether in person or virtual.

Our discussions have progressed from whether or not to use <unk> sell to a focus on optimizing the use of resale as well as training and refining the expertise of support staff.

With the pandemic lifting we are sensing a tangible excitement around live meetings and peer to peer trainings.

We see face to face interaction as a robust driver for burn surgeon adoption.

With the.

The annual meeting coming up in April were very excited to engage in these conversations.

Second our commercial team will be continuing to drive penetration into our burn center accounts, we are vac approved and what we believe is a critical mass of burn centers and with that we are focused on penetration within those accounts.

We have shown that our strategy of driving into smaller burns results in overall broad resell usage.

To underscore our approach today over one third of resale procedures involve burns that are less than 10% total body surface area, our TB assay and these smaller burns represent about three quarters of all burned admissions.

In the outpatient setting with our C code in place we've commenced our pilot launch and we're gearing up for a broader nationwide launch mid this year as explained earlier.

We also anticipate growing our commercial presence in Japan to that and resell very recently received <unk> approval of the burns indication in Japan.

And we will commercialize this indication in partnership with Cosmic Tech and then the three company.

The next step caused <unk> will be meeting with the Japanese Ministry of health Labor and welfare or MH L. W. For reimbursement review, which we anticipate will occur in the June timeframe.

<unk> Tec will launch to burn customers currently thereafter.

Once we have <unk> in soft tissue data from our U S. FDA trials caused by tech will seek regulatory approval and reimbursement for those indications in Japan.

Our third growth driver as progress with our pipeline indications as mentioned earlier, our soft tissue reconstruction and <unk> clinical trials have completed enrollment and we expect topline data to be released in the second half of 2022 with submission of PMA supplement by the.

The end of the calendar year, we anticipate entering entering the market in the second half of 2023 with both indications.

Looking further out and again as mentioned earlier, our skin rejuvenation and that <unk> licensed with low preclinical work has achieved proof of concept. Our next goal is to review the GOP data requirements to submit an IND application for <unk>.

Your first in human treatment.

<unk> timelines are clear I will update you accordingly.

In summary.

Despite some continued pressure on burn procedures and pandemic interruptions, we have continued to execute effectively on our business objectives and have achieved several key milestones.

We anticipate some continued staffing headwinds in the near term.

I'm pleased how our team has responded driving advanced practice training and keeping resale front and center in the minds of burn care practitioner.

Finally, and looking further ahead.

Substantial progress in our clinical trials for <unk> in soft tissue trauma reflect a groundswell of interest in.

And the potential of these large market opportunities.

With that I'll now turn it over to Michael for details on our financial performance in the quarter Michael.

Thank you Mike.

Our fourth quarter ending December 31, 2021.

Total revenue increased 35% to $6 9 million compared to $5 $1 million in the corresponding period in the prior year. The increase was largely driven by broader utilization among our customer base as well as deeper penetration within individual customer accounts.

Gross profit margin was 88% compared with 84% in the corresponding period in the prior year.

Higher gross margin was driven by increased production at our Ventura facility.

Lower shipping cost and the extension of our shelf life.

Total operating expenses increased 42% to $14 8 million.

Impaired to $10 $4 million in the corresponding period in the prior year the.

The increase in operating expenses was primarily driven by higher noncash share based compensation cost.

Higher cost with ongoing development of our next generation automated skin preparation device.

Pre commercialization planning for resale launches and soft tissue reconstruction and <unk> as well as increased hands on professional education and training events.

Higher noncash share based compensation cost in the current year were due to the reversal of a previously recognized expense for Unvested awards related to the resignation of an executive officer in the prior year incur.

Increased hands on professional education and training events was driven by reduced COVID-19 related travel restrictions.

Net loss increased 52% or $2 9 million to $8 $5 million over the $5 6 million recognized in the corresponding period in the prior year.

The increase in net loss was driven by higher operating expenses as described earlier, partially offset by higher revenue during the year.

non-GAAP adjusted EBITDA loss increased by 13% or <unk> 7 million to $6 $5 million over the $5 8 million recognized in the corresponding period in the prior year.

And our transition period ended December 31, 2021, which covers from July one through December 31.

Total revenue increased 37% to $14 million compared to $10 $2 million in the corresponding period in the prior year.

Retail commercial revenue revenues were $13 8 million, while resale revenues associated with U S Department of health and Human services Biomedical Advanced research and development authority within the office of the assistant Secretary for preparedness and response or BARDA.

Point $2 million.

Revenues associated with BARDA were attributable to our services over the vendor managed inventory for resale units purchased in the prior year.

Gross profit margin was 86% compared with 83% in the corresponding period in the prior year driven largely by the extension of our shelf life and lower shipping cost.

Total operating expenses increased 7% to $27 million compared to $25 3 million in the corresponding period in the prior year.

The increase in operating expenses was primarily driven by ongoing development of our next generation automated skin preparation device.

Commercialization planning for resale watches and soft tissue reconstruction and <unk> as well as increased hands on professional education and training events.

These higher costs were partially offset by certain one time professional services to establish the company as a domestic filer with the SEC following completion of the <unk>.

These are corporate groups re domiciliation to the United States and severance cost associated with a former executive employee incurred in the prior year.

Net loss decreased 9% or $1 5 million to $14 4 million compared to the $15 9 million recognized in the corresponding period in the prior year.

Decrease in net loss was driven by higher revenue during the year, partially offset by higher operating expenses as described above.

non-GAAP adjusted EBITDA loss decreased by 17% or $2 1 million to $10 4 million compared to $12 5 million recognized over the corresponding period in the prior year.

Moving on to calendar year 2022 guidance, we project total commercial revenues of approximately $30 million, an approximate 20% increase year over year, excluding BARDA revenues as we emerge from Covid and increase adoption and use of the retail system.

In calendar year 2022, we expect to realize approximately $300000 of revenue related to BARDA.

This places the company in a good position for realizing revenues from new indications and soft tissue reconstruction and <unk>, which we anticipate will be approved in the second half of 2023.

With that we thank you for your attention and now I will turn the call back over to the operator for your questions.

Thank you Andrew.

Reminder, to ask a question at this time. Please press Star then one on you touched on telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.

Our first question comes from Josh Jennings with Cowen Your line is open.

Hi, good afternoon, and thanks for taking the questions.

It's been great to see this flurry of positive updates for the last couple of months.

Was wondering just wanted to ask a question on.

Recent trends in <unk> I know you talked a little touch a little bit on it on the call and just how that's impacting 2022 revenue got it and how we should be thinking about that kind of cadence.

Revenues throughout the course of calendar 2022.

And then just within that kind of implied 20% revenue product revenue growth.

Our assumption is that most of that's coming from just the core burn franchise in that outpatient permanent.

In Japan, our <unk>.

It's going to be get up and running in the back half, but any help there just thinking about contributions for outpatient in Japan that you have baked into your guidance.

Thanks, Josh.

I've talked to you I appreciate your questions.

Recent trends.

And.

Certainly.

And impact on what we have.

Projected guide.

Guidance relative to growth.

Going forward that said we are anticipating.

Much less impact.

Impact from Covid.

So this includes really an abatement of Covid.

That said also the nursing staff situation.

That is continuing to rotate rotating nursing staff due to a national shortage we.

We anticipate will continue.

Not really.

Has us continuing our training.

At a very high rate.

So that's all baked in regarding outpatient in Japan.

Your second part of your question.

I would agree those are more intended to start kicking in in the second half of the year.

Also.

To remind you regarding Japan, while we do have <unk> approval.

In around the June timeframe.

Cosmic <unk> our partner in Japan will be meeting with BMA Charles W. Two established reimbursement.

And.

And then there'll be able to kick off their sales.

So we don't anticipate a whole lot of revenue from Japan in calendar 'twenty two.

Thanks for that.

Final question is just on new resell device that was approved.

And.

How is your internal team thinking about this new device driving.

Stronger utilization rates at.

U S burn centers.

Increasing or stronger early adoption rates in the outpatient arena.

Or should we be thinking about really.

The pipeline indications, where this new device and the ease of use will really kick in particularly in those capable of lag of once that's approved.

Thanks, Dan Josh Good question.

We anticipate that well number one where we're extraordinarily excited.

By the ease of use.

Machine that is now approved so.

From that perspective.

Generally I would say, we're getting a level.

And if there was something new that we can talk about.

<unk>.

It's a value there.

Regarding really driving.

Revenues.

This is more of a longer term.

Value proposition for the company.

Will certainly drive some.

In the outpatient setting.

In the second half of this calendar year.

But where the real Bang is going to come in is going to be when we achieved the soft tissue.

Vacation and reimbursement.

There's going to be a lot of use there.

Relative to the outpatient setting.

Ease of use device.

We'll be very good because you wont need the second pack second pair of hands.

And outside of the sterile field.

Excellent and last question just on soft tissue indication.

And just the potential.

Pricing of the pumped with with off label utilization and involve the number of centers that youre planning on focusing on for the trauma centers and those.

The centers that also have burn units.

How many what percentage do you think is currently using we sell off label and soft tissue cases.

In front of approval is there a chance I know youre not mark if you're just not marketing the indication, but it's being used off label.

How much experience will the trauma surgeon community have with <unk>, so that kind of prime the pump for that launch thanks a lot.

Thanks, Josh.

Relative to.

Priming, the pump and having off label use.

I would say that our.

Kols, especially those who are further advanced.

And the use of resell.

Yeah.

Estimate, that's probably 10% to 15%.

Been using it.

Off label situation to treat.

Soft tissue.

<unk> wounds.

Yes.

This is primarily in the context of those centers and Thats about half.

The Abi approve burn centers.

136 or so.

Half of them are co located with level one level two trauma centers, we will be adding an additional 220 level.

Level, one level two trauma centers, when we launch soft tissue but of course.

Those centers arent arent utilizing the product currently it's really.

Those burn centers that are co located.

The trauma centers.

Great. Thank you.

Pleasure.

Our next question comes from Ryan Zimmerman with BG. Your line is open.

Alright, Congrats let me Echo John's sentiments a lot of progress has been made recently and it's nice to see.

I guess, a follow up to Jonathan's question and Mike.

It's clearly theres trauma cases, and there is burn cases, the two are different but I guess, where is the line and begin there because.

Our all burn cases considered part of trauma.

Maybe just help us kind of think about those those types of cases, a little bit more I appreciate the color on the physician base.

That's my first question.

I'll just ask the second question upfront, which is the gross margins were fantastic this quarter and I'm curious kind of from you Michael kind of what your expectations are around gross margin durability as we move into this year.

Thanks, Ryan I'll take your first question.

On.

Trauma and.

And it really trauma and burns when.

When we think about it we can group them into acute wounds.

And.

From that perspective.

The the burns are being.

Trade it now with resale.

And there are some that are being treated.

Some trauma cases that are being treated.

But again.

As.

As I answer Josh is question if I understood your question.

There is going to be a.

A nice overlap when we do get the indication and we can actually promote.

Two trauma.

In the burn unit.

Well as an additional 220.

Level, one level two trauma centers.

But broadly group those into acute wounds and it's really on <unk>.

Artificial regulatory.

Concern where.

<unk> has carved out as a special.

Acute.

Hugh.

Indication.

Mostly because of the complications of ventilation injury and alike.

So thats the situation there I'll pass it over to Michael to talk about gross margins.

Thank you Mike. So we were in fact very pleased with our gross margins, which we received.

Achieved rather.

This past quarter at 88% and then for the six month period at 86%.

We've been working really hard the team has on lowering our shipping shipping costs and they've done a great job doing that going forward. We would we would look for those cost to more stabilize.

<unk>.

Lower 80% range as we rollout our ease of use device that will initially have a shorter shelf life.

Which we will improve over time, so again, we're looking for that to stabilize in the lower <unk>, 80% range.

Okay. That's helpful. And then if I can just sneak one in.

You're switching to the resell to point out if you want to call it or the next generation device kind of midway through this year is there any type of pacing or dynamic when you think about potentially inventory in the field that may actually get burned down a little bit no pun intended.

As you transition that has been new product in the field and considerations for kind of the pace in within your guidance there.

Yes, that's also taken into consideration in the gross margin guidance.

Gabe.

We've also been focused in addition to shift on shipping costs.

On.

Working on burning down the one point out of inventory.

With the.

The commercial teams thoughtful rolling out of the two point out.

So that's something that we're very much looking to.

Optimize and be efficient towards and that again falls into the guidance that I gave you.

Yes.

Okay. Thank you.

I'll hop back in queue.

Thanks Ryan.

Our next question comes from Lyanne Harrison with America, Jeff Your line is open.

Hi, Mike Hi, Michael Thank you for taking my questions.

Scott I.

I guess the transition as you guys original resale.

We sell two point.

The.

In terms of the engine.

The result from the <unk> is it the same.

Irrespective of which which device.

Yes.

The end result is exactly the same.

John Yes decrease the steps as I mentioned by a third and increased.

Enhance the user experience.

Okay. So is the expectation.

Launch we sell to that.

Eventually youll.

Hi, J J population.

Move towards is that using that product.

The easier to use product yes.

Yes that is.

Okay. Thank you.

Thank you and with all of the training that's been conducted at the moment is that other niches being trained for.

We sell to.

Not yet.

Primarily they are being trained on what is currently available.

And that will be transitioning though.

And just.

Just a ton of training.

To the nursing staff continuing to turnover.

As they turn over there also it's not like you get.

A turnover and.

There for.

Two three months. This is really it's a number of weeks and then they turnover again.

So its constant training.

Okay. Thank you.

If you could provide cloud deeply with me.

For pediatric then.

Can you give us some color on the trends you're seeing in terms of the split of procedures between.

Pediatrics and adults.

Sure.

The pediatrics, while we have the indication now and we can promote to.

Pediatric centers.

The centers that.

Which is by and large the majority of them.

Which treat both adults and children.

Initially did not differentiate at all between adults and pediatrics.

So we've really already taken that into account in current revenues.

So there may be a small bump on the pediatric only hospitals.

Previously we couldnt promote.

But most of that is already baked in.

Okay. Thank you and just one last question for me is can you give us some guidance.

Operating costs.

<unk>.

2022 calendar year.

Michael.

Yes, you bet so.

As you know from our earnings release.

In the script.

If you exclude.

BARDA revenues year every year.

<unk> roughly a 20% increase in.

As I look at operating expenses I would say that the increase in operating expenses would be roughly commensurate with that.

And as you might imagine that's largely driven by research and development given the.

The clinical trials that will be intensifying, what's been a lago and soft tissue as well as continued other pipeline and work with our next generation device.

So that will be the larger of our three main expense categories.

<unk>.

The second category that would increase.

Would be sales and marketing as you would imagine we're continuing to grow.

<unk> as well as.

Turning to prepare for.

Additional commercialization activities down the road with vitiligo and with soft tissue.

And then lastly, you have.

G&A expenses.

Which would increase.

And a more minor way.

Great. Thank you very much.

Thanks Liana. Thank you.

Our next question comes from Matthew O'brien with Sandler Your line is open.

Thanks for taking the questions, maybe just a follow up a little bit on Josh just first question on 22.

The resale revenue.

Basically a little bit of growth out of your exit rate for 'twenty. One so Mike I'm wondering if you're just assuming the headwind on the.

Nursing side.

Sure.

Face it all year or are you assuming that it starts to abate a little bit in the back half of the year because again, there's not a lot of growth out of that exit rate in Q4.

Realized that that growth rate of 20% is as modest and while it does not assume any major new headwinds from COVID-19 . It does assume that the nursing shortage will not be fixed.

In this calendar year, and I think thats pretty much the consensus.

In the medical community.

Okay. Thanks for that.

Turning to trauma.

Can you just is there a specific.

Trade show or something like that where we should expect that topline data and then can you just talk maybe a little bit more about the next steps. After we see the data in terms of getting the approval kind of middle of next year, and then how reimbursement ties into all of that.

Sure.

Yes for soft tissue.

We are anticipating that topline data in the second half of this calendar year. There is no specific.

Meeting that were targeting for the announcement.

We will announce it as soon as its available and then we will be submitting in so far as process.

There'll be the submission of the PMA.

For soft tissue.

And.

Then it goes into panel track 180 day review cycle.

That's a 180 FTA days, so whenever they ask us questions. The clock goes on hold so generally.

About nine months into there.

With the back and forth.

And that allows us the second half of 2023.

For approval.

Launch and.

We do anticipate that the.

The launches.

Going to be.

Let's say relatively.

Smooth.

And we anticipate vitiligo, it's going to be smooth as well, but.

The point of call is completely different for <unk>, whereas in soft tissue trauma.

It's acute wounds.

Basket.

<unk> in the same area.

And we've got a lot of physicians that are already in.

And those burn centers that are co located with level one level two trauma centers relative to the rollout.

So hopefully that gives you a little bit of color did that answer your questions.

That's really helpful last one for Michael holder, just just to follow up on the last question on.

On Opex.

Pretty good cash position, but theres just a lot going on at the company can you talk about cash needs, obviously, youre not going to be doing this year, but just.

The positioning of the company as we head into into all of these launches in the second half of next year, and then into 'twenty four as well.

Yes, you bet great Great question. So Fortunately, we do have a very strong cash position.

<unk> of $100 million.

If you look at.

The cost that we plan to expand.

Leading to the commercialization of <unk> in soft tissue reconstruction.

And you exclude <unk>.

Cost associated with our cell and gene therapy programs.

We have.

Ample amount of cash that we would not need to do additional fundraising.

Prior to reaching cash flow breakeven according to our plans, but having said that.

As a best practice, we would always like to keep.

At least say one five times, our cash burn on hand.

Is it good business practice, so we do anticipate that we will need to and we want to fund raise at some point in the future.

But we're not pressed to do that anytime soon.

Because that could occur.

Any any time between now and the next couple of a couple of years.

Got it thank you so much.

Matt I just wanted to add one additional comment that.

It came to my mind, well Michael was speaking.

That is for the soft tissue reconstruction.

It's the same reimbursement.

Process.

Basically the same code that would be utilized there. So that's another advantage.

Scott.

Soft tissue reconstruction indication has.

Got it okay very helpful. Thank you Bob.

Thanks, Matt.

Thank you and as a reminder to ask a question at this time. Please press Star then one on the telephone.

Our next question comes from Shane PON Raj with Morningstar. Your line is open.

Yes, Hello, Thanks for taking my questions.

Just thinking about the sales trajectories of bands with commercial revenue in the last three quarters.

Roughly flat at around $7 million in your guidance sort of suggests a similar rate for the next four quarters.

When I think about approval for pediatric only centers.

Reimbursement for outpatient Rachel to Japan.

Japan launch.

They're all great updates, but.

It doesn't seem like you think this will significantly contribute to the top line.

Is that fair to say and if so do you think based on will become meaningful down the track.

I think that.

Im going to start with the response.

And then I'll pass it over to Michael holder, but from my perspective. The answer is yes that these are going to have a small impact in 2022 down the line.

They are definitely going to have a substantially material impact.

As we move forward Michael is there anything you'd like to add to that.

Basically I would just wholeheartedly agree with that and just just to be clear, whereas commercial revenues have been relatively flat the last three quarters.

We are projecting as we come out of Covid.

20% growth.

As Mike said.

We are expecting a small impact from the various factors you mentioned in 'twenty two but in 2003 were expecting those two to really help us with our revenue.

Both rate and so we would look although we haven't provided guidance, we would look for our revenue growth rates to to increase.

Materially in 2003.

Yes.

But for calendar 'twenty, two if you're guiding 30 million.

So to just over $7 million per quarter, you've talked about like the staffing shortage limiting sales but.

Is there anything else that you can maybe point to which is weighing on sales at the moment.

No.

Sure.

It's really the reopening of the hospitals and while we're seeing that.

Occur.

Happening at.

I would say at a slower pace.

Then.

We would.

Generally like to see of course.

But they are the hospitals are really things.

I would say slow at changing their procedures and they are lagging.

Behind the.

The various.

How the various regions in the United States are stopping they're masking rules.

For the vaccinated that us and changing their restrictions.

Yes.

Yes, yes.

Really all of that.

That I see there.

Okay.

And so it sounds like you're a lot more positive about soft tissue reconstruction.

Sort of.

It sounds like that's really overtaken vitiligo is a big break and where you're most confident in is that then would you characterize that like what would you characterize that too when you compare the two and mainly because it's more adjacent to the <unk> operate in.

Oh, sorry.

Keep going.

Thank you guys.

Okay shape.

Yes, it's really because of the adjacency to burns.

And the reimbursement that's basically in place.

And number of surgeons that do both burns as well as.

Soft tissue reconstruction.

We do anticipate.

Easier transition to <unk>.

Staffing up where we currently have.

Field salespeople.

And just really increasing that whereas vitiligo as such.

Substantially larger.

Business opportunity and top line revenue growth opportunity for us, but we don't have established.

Reimbursement there were very poor.

Positively inclined.

Excited about the indication.

But.

It'll be the usual.

New indications new reimbursement.

New point of call.

Going through and getting that done we're doing as much as we can.

Preapproval to be ready.

But it takes time.

Actually.

Get launched.

And and get rolling.

Getting the hockey stick on that.

Yes understood thanks very much.

Thanks Shane.

Thank you.

Our next question comes from John Hester with Beth Your line is open.

Good afternoon Michael.

Earlier in the coal you took the job.

Constant just a quick Google search Loyola.

Can you tell us a little bit of a bit more about that center.

Of your top users or would you push for them.

You use a mark and.

What sort of growth as I sort of well how many kids Tonight using these goes versus more of a one off.

Yes.

Was.

Number one <unk>.

A center that does use resell on a on a regular basis.

They're not our top center.

<unk>.

They do a reasonable volume rare.

Relative to.

Projections, we have not given any guidance relative to center by center projections.

Projections so.

Really can't answer that.

Probably could follow up with a bit more detail offline.

This one perhaps we'll talk later.

Later in the day, thank you very much.

Thank you John .

Thank you.

Showing no further questions at this time. This concludes today's conference call. Thank you for participating you may now disconnect.