Q1 2022 SI-BONE Inc Earnings Call
Good afternoon, and welcome to <unk> first quarter earnings Conference call. At this time, all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today's call.
As a reminder, this call is being recorded for replay purposes, I would now like to turn the call over to Matt <unk> from Gilmartin group for introductory comments.
Thank you for participating in today's call. Joining me are Laura Francis Chief Executive Officer, and onshore <unk> Chief Financial Officer earlier today Si bone released financial results for the quarter ended March 31 2020.
A copy of the press release is available on the company's website before we begin I would like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 90 95 any statements contained in this call that relate to expectations or predictions of future.
Events results or performance are forward looking statements. These forward looking statements are based on the company's current expectations and are inherently involve risks and uncertainties. These risks include the impact of COVID-19, pandemic will have on the ability and desire of patients and physicians to undergo and perform procedures using the companys products. The duration of the COVID-19, pandemic and whether the COVID-19.
Downtick will incur in the future.
Other forward looking statements include our examination of operating trends and our future financial expectations, such as expectations for hiring surgeon training and adoption active surgeons new products clinical trial enrollment.
And reimbursement decisions and are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements. Accordingly, you should not place undue reliance on these statements for a list and description of the risks and uncertainties associated with our business.
Refer to the risk factors section of our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission and Si bone disclaims any intention or obligation except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise. This conference call contains time sensitive information and is accurate only.
As of the live broadcast today May nine 2022, and with that I'll turn the call over to Laura.
Thanks, Matt Good afternoon, and thank you for joining us for today's call I'll provide a business update and onshore will provide additional detail regarding our financial results.
Before I cover our first quarter results I want to share the exciting news on Ice's bedrock granted our breakthrough product, which is intended to provide our Si joint fusion. In addition to sacro pelvic fixation for adult spinal deformity procedures.
At granite, which has been in development for a number of years combines the strength of a solid implant with the porosity of three D printed technology.
Granite is now awaiting FDA clearance, which we expect to receive this year.
We received breakthrough device designation for Ice's granite in November 2021, we're proud of this recognition, which has previously been extended to only a very select number of orthopedic technologies the.
The FDA agrees ip's granite will provide for more effective treatment of debilitating condition than the current standard of care for patients undergoing multi segment spinal fusion procedures. This.
This recognition further distinguishes us as an industry pioneer.
Focused on introducing disruptive technologies to improve patient outcomes.
As you saw from our announcement in late April CMS proposed a new technology add on payment or <unk> for Ice's granted the.
<unk> program is designed to recognize new technologies that provide substantial clinical improvement over existing therapies.
This end tap proposal is supported by the FDA breakthrough device designation for Ice's granted.
Once the end cap proposal was finalized and we have FDA clearance. It will allow Medicare beneficiaries timely access to this innovative technology, while providing incremental reimbursement to healthcare provider when using ip's granted as part of a multi segment spinal fusion procedure.
Preliminary based on the CMS proposal, the Avalon payment will be based on 65% of the per patient anticipated hospital cost of the case, including Ice's granted up to a potential maximum of approximately $9800.
We believe the benefits of Ip's granite differentiated technology.
Seamless surgeon workflow integration and potential for incremental reimbursement puts us in a strong competitive position.
Wow us to accelerate our growth and an attractive $250 million adjacent adult deformity market.
Now moving to our performance in the first quarter of 2022, we generated total revenue of $22 4 million representing growth of approximately 10% compared to the first quarter of 2021.
Despite significant COVID-19 disruption in January and February we were able to deliver the revenue growth due to a robust recovery in March in fact, we experienced the highest monthly procedure volumes in the company's history in the month of March.
We believe that the outpatient nature of our procedure with approximately 80% of our procedures being performed in an outpatient setting or at surgery centers combined with the solid execution by our dedicated field organization contributed to a rapid recovery in procedure volumes.
In terms of Covid impacts approximately 160 U S procedures were deferred due to on the <unk> in the first quarter of 2022.
This impacted revenue by over $1 $4 million in the quarter with the largest impact seen in January .
These are the procedures that were booked and then postpone but of course there are more procedures that were affected by COVID-19.
The operating environment improves significantly in the back half of the quarter as omicron continued to subside, which mark with March seeing fewer than 20 procedure deferrals.
We're encouraged by the pace of recovery in March and the continuing momentum in procedure volumes in April from new patient demand as well as the recapture of previously deferred procedures. Additionally, anecdotal feedback from surgeons suggest but the new patient funnel continued to grow indicating progress toward a more normalized operating.
<unk>.
Now let me provide you an update on our key initiatives as we look to extend our leadership position and drive durable long term growth.
Starting with sales infrastructure, our sales team remains an important driver of growth as we penetrate our core market and grow our presence in trauma and adult deformity. Our sales organization at the end of the first quarter of 2022 comprised of 154 individuals, including 88 territory managers and 66.
Clinical support specialists.
Additionally to support our expanding portfolio, we added two new regions in the U S for a total of 18 region.
The methodical expansion of our sales organization is crucial to ensure high quality support for our surgeons drive adoption and increase active search and engagement.
While we will continue to strategically add head count by investing in high quality reps to deliver strong and sustainable long term growth. We are also focusing on increasing productivity of our seasoned territory managers by adding to our bench of clinical support specialists.
Moving to surgeon engagement, we ended the first quarter with over 680 active surgeons, who performed at least one procedure in the quarter.
This represents 17% growth when compared to the prior year period.
Encouraged by the durability of our surgeon base, given the challenges with <unk> and the normal business seasonality in the quarter. This is a good leading indicator of surgeon interest in engaging with us and positions us to drive strong top line growth.
Our growing commercial footprint near universal coverage, and expanding product portfolio positions us well to accelerate surgeon engagement and activation as we progressed through the year.
We're also encouraged by the steady increase in adoption rate of surgeons, who have been trained on the simulator, which remains a valuable component and our surgeon training program.
As we move to a more normalized environment, we expect to use a combination of in person local training regional training and simulator training to drive surgeon engagement.
As part of our long term strategy to grow our active surgeon base, we continue to expand our academic programs to educate residents and fellows since.
Since inception of the program, we've held approximately 175 academic programs in the U S, resulting in the training of over 950 surgical residents and fellows.
In the first quarter of 2020% to 20% of all completed academic training events occurred in new academic centers and we trained over 110, new fellows and residents demonstrating the growing interest in our academic training initiatives.
Turning to products and solutions our portfolio expansion strategy has allowed us to grow the market for sacral pelvic solutions and extend our market leadership.
According to the 2021 market data from spine market, Inc. An independent third party provider of industry data, we increased our market share and fake or public surgical devices into the high 60% range confirming that our broad product strategy is resonating with our surgeons.
Since its introduction last year Ice's torque along with our flagship Ic's <unk> contributed to our market share growth by providing surgeons with a comprehensive set of surgical solutions for minimally invasive Si joint fusion.
We're pleased with the strong reception of Ice's torque, which consistent with the overall business has record procedure volume in March.
Additionally, we continue to methodically build traction in trauma and expect Ics torque to continue to be a tailwind as we accelerate the penetration into the pelvic trauma market in the second half of 2022.
Absent the successful commercialization of Ip's torque, we're excited to expand our portfolio with the addition of ICU bed rock granted.
Granite is a unique technology that builds on our experience since 2019 with the bedrock technique, which addresses surgeons desire to augment stability at the base of long construct used to treat adult spinal deformity wed.
We look forward to providing additional details once we launch the product.
On the clinical research front, we're at approximately 90% of target enrollment and Sylvia a two year perspective International Multicenter randomized controlled trial of two different methods for pelvic fixation and adult patients.
We expect enrollment to be completed shortly and anticipate the first follow up results in 2024.
Talking about our patient awareness initiative during the first quarter, we continued to make investments in direct to patient marketing.
These marketing programs are targeted at patients in chronic severe si joint pain who've been in conservative care for an extended period of time.
Our goal is to connect patients with surgeons in their area, who perform minimally invasive Si joint procedures.
Through a variety of channels, including search social and display.
We have deployed a number of campaigns and are continually optimizing to maximize surgeon referral volume our data driven approach enables us to focus our investment on the most cost effective programs.
We're pleased with our progress thus far based upon increased website traffic patient engagement and surgeon referral.
With that I'll now turn the call over to onshore to provide more detail on our financial results.
Thanks, Laura good afternoon, everyone.
First quarter 2022, total revenue was $22 4 million representing growth of approximately 10% compared to the prior year period.
U S revenue was $20 4 million, increasing 9% compared to the prior year period.
In the first quarter U S procedure volumes grew 14% compared to the prior year period.
International revenue was $2 1 million, increasing 24% compared to the prior year period led by strong performance in France and continued recovery in the UK.
Gross margin for the first quarter of 2022 was 87% compared to 89% in the prior year period grew.
Gross margin in the first quarter was impacted by anticipated mid single digit decline in ASP.
Due to procedure mix inside of service mix.
Higher freight costs as well as an increase in cost of operations to support the growth of the business.
Operating expenses increased 22% to $36 3 million in the first quarter 2022.
As compared to $29 8 million in the prior year period.
On a sequential basis. This represents a little over 1% increase compared to the fourth quarter of 2021.
The year over year increase was driven by the planned sales force expansion.
Research and development investment scaling of operating infrastructure higher travel costs and an increase in stock based compensation expense associated with the increase in head count.
As we continue to invest across our strategic initiatives, we expect operating expenses to sequentially increase at a modest pace throughout the year.
Our net loss was $17 4 million or 52 cents per diluted share for the first quarter of 2022 as compared to a net loss of $12 2 million or <unk> 37 per diluted share in the prior year period.
As of the end of the quarter, our cash and marketable securities were approximately $137 million.
And long term borrowings, while approximately $35 million.
Moving to guidance, we are encouraged by the pace of recovery in March and the continuing momentum in April however.
However, we remain cognizant of the near term macro uncertainty and the potential risk to health care infrastructure in elective procedures for future Covid searches as.
As a result, we are currently maintaining our 2022 total revenue guidance of approximately $106 million to $108 million.
Representing growth of 18% to 20% compared to full year 2021.
We expect the gross margin to be in the mid 80% range for fiscal year 2022 based.
Based on our site of service mix and product mix.
Cost of instruments, Unimplanted, especially for new products as we ramp up volume and depreciation of instrument trays based on investments in 2021 and expected investments in 2022.
With that I will turn the call over for questions operator.
Ladies and gentlemen of course more comment at this time. Please press. The Star then the one key on your Touchtone telephone. If your question has been answered or you wish to move yourself from the queue. Please press the pound key.
Our first question comes from Craig Bijou with Bank of America.
Good afternoon, guys. Thanks for taking the question.
Yes.
We're starting with the Grace.
The group guidance for the year, and obviously you kept it flat but.
But I think it implies 21, if I'm doing the math correctly, 21% growth for the rest of the year. So.
Basically I guess wanted to understand the cadence throughout the year and also what gives you the confidence that you will see that accelerating growth.
And then start there.
Thanks, Craig.
So I think onshore was going to give a couple of comments on that particular question. Yes. So correct. Thanks for the question as you think about.
Our performance in the first quarter.
We're really encouraged by the strong rebound in the procedure volumes.
Across our solutions in March.
And as we looked at April some of those trends continued and even the anecdotal feedback that we heard from surgeons is the patient funnel continues to grow and even preliminary bookings that we're seeing in early may are very very encouraging.
But as we think about it on a macro level you've got some of the overhang of hospital staffing and you also have this maybe if it's a lot lower but a remote risk of health care infrastructure being impacted by future Covid surge is so as we looked at our guidance for the rest of the year. If we wanted to get a couple more.
Months under our belt and thought it would be prudent and deliberate in the near term to hold guidance, where it was.
The systematic issues unwind.
We feel pretty good about our growth trajectory on a sequential basis for the rest of the year combination of the investments that we've made all through last year.
Except that we've had with torque of core market growing as well as the potential that granted gives us in the back half of the year. So overall those are the things that get us excited as we look at.
Q2 and beyond.
Okay. Thanks, you add onshore and then.
Just on operating expenses.
It looks came in a lot higher than we were expected or higher than we were expecting in Q1, and just wanted to understand how much of that was some of the added costs.
Inflationary costs.
And then how should we think about.
How should we think about.
Your ability to leverage operating expenses throughout the year I heard your comments onshore sequential improve.
Improvement.
Just want to understand.
Operating leverage opportunity in 'twenty two.
Sure happy to take that as well correct. So on the first quarter, our opex year over year was was.
It was high but when you think about it.
Sequential basis compared to <unk> it was up 1%.
And there's a few things when you think about it from a year over year standpoint, we've made significant amount of investments in our commercial and operating infrastructure throughout last year. So you've got some of that impact playing out in Q1 from an annualized cost perspective, you have.
Got some of the investments on the R&D side growing as well as we think about the new product launches that are upcoming.
And the third piece is our.
Our investments and scaling operations, if you look at our Q.
We got an additional site in Santa Clara in the second half of last year and we're also making some investments are on the software side to actually build operational scale to support our revenue growth. So some of those are flowing through the P&L as well and then you layer on some of the.
We don't know if its transitory or not but some of the high inflation aspects of freight and travel costs. That's also flowing through Q1 and.
And if you think about the cadence of our Opex look at look at what we did last year right you had about.
Sort of 10% growth in Q2 versus Q1, and then sort of a flat lining and then an increase again in Q4, we believe that that cadence from Q1 out to Q2 Q3, and Q4 is the right way to think about it.
Got it great. Thanks for taking the questions.
Our next question comes from drew renovated with Morgan Stanley .
Hi, Laura on onshore thanks for taking the question.
Just maybe to go to gross margins for a moment and I appreciate it onshore U.
You mentioned some puts and takes your gross margins for the year, but can you just help us think through if we look at it on a year over year basis. I think it was 250 basis point compression. There can you just help us bucket kind of what was actually investment in sets first macro just trying to get a better sense of.
Maybe whats investment versus just.
Factors that you can't really control necessarily.
Sure. So when you think about our gross margins again sequentially. The gross margins were in line on a year over year basis Theres. A few things that are that are impacting gross margin one is.
Jeff.
The shift in the product in spite of service mix, which is having an impact on asps.
We've historically talked about mid to low to mid single digit ASP impact when you compare Q1 over Q1.
AFC contribution went from sort of in the teens to 20% so that has an impact.
On the ISP from a procedure perspective, you've also got the impact of the investments in instrument trays that were making.
As regards to talk both for competitive conversions and in trauma.
That playing through as well.
Got the additional expenses associated with the facility expansion that I just talked about.
And then you've got the.
The higher inflation impact as well from freight and also when you think about the cost of instruments and implants, especially for the new products as we wrap up volume those costs tend to be a bit higher so you're seeing some of that flow through the P&L.
As well so thats on the gross margin side, but what we've been focused on is.
<unk> are high high industry, leading gross margin, but also derisking our supply chain to ensure that we have the supply of the instruments and implants drive the topline growth, especially as we look at the back half of 2022 into 2023.
Got it.
If you go back to Craig's question on sequential growth, but.
Hi.
It sounds like Theres still some puts and takes but you're maybe cautiously optimistic and recovery.
Any reason to think that.
Heading into the second quarter of this year that you wouldn't be able to post sequential growth similar to what you did in 2021.
I think we feel really strongly about the future for the business Q2, Q3, and Q4 and all the things that onshore highlighted and the fact that we anticipate that we will have.
Sequential growth throughout the rest of the year.
And.
And that we've seen COVID-19 receding at this point all of that is encouraging for us and <unk>.
And with all of the investments that we just talked about in the business.
That bodes well for us to with the investments we made over the last 12 months and our sales force. The investments we've made in training surgeons, new product with with TORC has been in the market now for approximately 12 months.
Still just scratching the surface on trauma, although nice penetration already in minimally invasive Si joint fusion.
We have granted on the horizon that we're really excited about as I mentioned.
And and then some of the direct to patient work that we mentioned to all of those things gives us a lot of confidence about the business for the rest of the year.
On guidance, what we wanted to do was to just remain conservative this quarter and grow into it a little bit.
Thanks for taking the questions.
Thanks drew.
Our next question comes from Karl roles with Canaccord.
Great. Good afternoon. Thanks for taking the questions. This is <unk> on for Kyle I wanted to maybe start with the top proposal you had mentioned at the top of the call Laura.
Does that have any potential as you see it to meaningfully shift to commercial adoption curve at all is there may be some potential upside in the second half of this year with pull through or will that be a bit more measured in terms of the potential pull through from that top.
And of course appreciating that clearance is still it's still Patrick yes.
Yes, thanks for the questions, Brian and we are really excited about the expansion of the portfolio to include granted and the fact that we received breakthrough device designation from the FDA.
And we're also proud of the recognition.
That's only been extended to a very select number of orthopedic technologies. So it really does distinguish us as an industry pioneer that is focused on introducing disruptive technologies that are shown to improve patient outcomes.
We've been developing granite the implants and the instruments for a number of years.
And the implant combines the strength of a solid implant with the porosity of <unk> printed technology <unk>.
Technology.
We pioneered that with the launch of <unk> back in 2017, So we're using a lot of what our engineering and our product teams have learned in that area to create this breakthrough technology.
So we actually.
Granted as a unique technology, it's building on the experience that we've had with our bedrock technique addressing surgeons desire to augment stability at the base of long construct and its used in treating adult deformity.
And so it is intended to provide our Si joint fusion. In addition of Sacro pelvic fixation for those sorts of procedures.
Given that we've been.
Working with the bedrock technique for a long time, we understand the biomechanical forces on the Si joint.
Increased 50% to 150% based on a single or multi level fusion of the lower spine.
And what bedrock granite was developed to do is to address more common sake or perl. The complications that are associated with these long construct surgeries and specifically foundational fixation failure after adult spinal deformity correction.
There is literature, that's out there that reports the traditional <unk> AI pelvic fixation methods have lembo pelvic surgery.
Failure fixation failure rates as high as 30% due to screw loosening and fixation fracture and that revision surgeries occurring over 20% of the cases and so bedrock granted is offering surgeons.
Not only a robust stabilization, but also an si joint fusion option to improve patient outcomes.
I think the other thing that may be important to note is we have an existing user base of more than 300 surgeons, who have performed a bedrock procedures. Since 2019. So we're really optimistic about the potential for Ips granite and we believe the benefits of the differentiated technology the seamless surge.
Workflow and the potential for the incremental reimbursement really puts us in a strong competitive position.
And I think as we've said previously we think it will accelerate the adoption extend our growth in what we believe may ultimately be a $250 million addressable market. So if we think about the 2022 impact which was where your question originally.
<unk>.
We're being measured about the contribution of Ice's granite right now because similar to what I said earlier to drew what we'd like to do is see.
Our business grow into that development, but we are very excited about the potential opportunity this year.
That's very helpful. I appreciate the color there Laura and then maybe if I could just a second question on backlog I think if my notes are right I had three to four months of backlog you guys had mentioned on the Q4 call is that may be improved or what are the dynamics around that considering the growing funnel. You had also mentioned as well just trying to get a sense of.
How that's being worked through both in the Q1, but also for the rest of the year.
Yeah. Thanks, Thanks for the additional <unk>.
Question on that and we did talk about three to four months of backlog.
And we did see a lot of cases deferred in the back half of 2021 in early 2022.
And.
Some of those we think may have been rescheduled in the first quarter, but we do believe that many of them also will be rescheduled over the next few months.
And.
If we think about the deferred cases, the overall volumes over the last two years have been impacted by patients who have yet to be diagnosed or they've been diagnosed but if not scheduled their surgeries yet.
We do still know that patients were cautious in differing health care.
During this uncertain time, so we do believe that this could be creating a shadow backlog, which could impact us favorably when the environment normalizes more fully.
But we've not included that sort of revenue.
Backlog in our guidance, because we can't quantify it and really don't think it would be prudent to speculate on it as potential pent up demand for.
For cases that could convert.
I think probably the most important thing to say is that this is a significantly underpenetrated market right. Now we believe that they are close to 280000 patients annually, who could benefit from the procedure. So at a fundamental level as patient awareness continues to grow in a variety of different ways.
Does that also sets us up to drive strong growth as we progress through 2022 and beyond.
Great. Thanks again.
Thank you Brian .
Our next question comes from David risk awkward truth.
Hey, guys. Thanks for taking the questions first from US kind of a two part question I just wanted to first clarify what you are what Q1 end of that as far as the direct rep, count and whether or not that was maybe sequentially down from Q4, but then the second part of that just on rep productivity no you've talked in the past about how.
It's maybe a four to five quarters.
Between win.
<unk> reached the productivity curve or get towards the upper end of that productivity curve.
And I think maybe Q1 and Q4 of last year had some pretty big Rep hires and so as we think about them ramping up the productivity curve. How do you think about those reps contributing toward the guidance.
You said that so far this year.
Thanks for the question. So two parts to the question first the number of reps, we did increase the number of reps during the quarter.
So we had 85 reps.
Territory managers.
At the end of Q4, and we finished with 88.
Reps. So so three additional reps there and then last year. We finished with 65 clinical support specialists and we ended with 66. So we did increase overall in both of those areas.
And we do intend.
Intend to continue to add to our sales force and.
In order to drive the growth.
Our reps in terms of productivity you are correct that that is a very important.
Metric for us this year given the increase in the number of reps that we've had over the last couple of years.
We will be looking at increasing that number so.
A typical rep in a territory a territory manager can do approximately 1 million and a half of business per year.
And then starts to run into challenges with case coverage and surgeon engagement and that's one we'll typically add in a clinical support specialist.
And when you add in that support specialist, we can get up to approximately $2 million a year and at that point then we typically will split a territory and so we are below those levels currently and so what we're doing is we are continuing to focus on.
Productivity increases while also.
<unk>.
Selectively increasing the number of reps and territories.
Okay. That's helpful and then I apologize I guess I misheard, the direct sales rep number wrong.
Yes.
More on the active account base could you provide any color here I know this can kind of be lumpy around on a quarter to quarter basis, but within the quarter I guess could you maybe highlight whether or not there was.
Any maybe increase in the number of ads.
Whether or not there are some just rolling off from prior year, and then really how we should think about that trending.
Trading through the remainder of the year. Thanks.
Yes. So we finished last year with 600, approximately 690 surgeons in this quarter. We finished with $6 80. So there were a few less surgeons between Q4 and Q1 I will tell you that that is a normal pattern for us from a.
Ah seasonality perspective, and actually we're pretty happy with that.
Number of active surgeons in the first quarter given the extent of this disruption from.
Covid, especially earlier in the quarter.
And so if you look at it year over year, it's actually.
An increase of approximately 17% in the number of active surgeons between Q1 2022 versus Q1 2021.
And so this in fact is a measure that we're quite happy with here that despite the disruption in the quarter. We saw we were able to retain most of those surgeons and if you look at it year over year grow at a good clip.
I would also add that we're seeing.
Really good traction with reactivation of previously trained surgeons as well thats been a focus for us too. So we are seeing good progress there, which is also very encouraging for us.
Okay, great. Thanks for taking the questions.
Thank you.
Our next question comes from David Saxon with Needham.
Hi, good afternoon, and thanks for taking my questions.
Maybe ill start with the adult deformity in the slides it looks like your recycling with that $250 million.
Memory serves that's up from $200 million previously so.
Just be curious to hear it.
Has to do primarily with the <unk>.
Coming in later this year potentially.
Otherwise or if you are.
Thinking about kind of the volume part of the equation any differently.
Yes, it's a little bit of both so what we've been doing is really digging into this market a little bit further and and then what we're trying to do is to actually do a very basic calculation based on the number of implants that we think are going to be used in those particular cases, so it's take.
<unk> long construct cases, how many cases go all the way to the sacrum.
In total deformity cases.
And then where do we think spinal pelvic fixation will occur and then what number of implants are they actually going to be are going to be used so I would say that as opposed to the end tap.
Coming into play.
What was more important here is really just digging into the numbers and tweaking the numbers both in terms of.
How many long construct cases go to.
Two the sacrum and then also how many.
Implants are going to be used.
I will say, though at the point in time that we received the breakthrough device designation that we received the end tap that.
We were pretty excited by receiving both of those because.
It's a point in time, where where our team thought about the impact of that in tap. It does have implications for how many surgeons and how many hospitals are interested in adopting this technology and being early adopters of the technology and so what.
What what that's going to give to our sites of service thats going to allow Medicare beneficiaries timely access to the granite technology and it's going to provide incremental reimbursement to the facility. When granted is used as part of a multi segment spinal fusion procedure.
While it is preliminary based on the CMS proposal the add on payment is based on 65% of the difference between a hospital's payment and the per patient anticipated cases cost, including granted and it can be up to a potential maximum of approximately $9800. So we believe that.
This development is going to be significant to our surgeons, we believe it's going to be significant to our sites of service and.
And we think it may have implications for the rate of adoption, what we originally anticipated versus how we're thinking about it now.
Okay. That's super helpful. And then just on tour.
It's been just over a year since you launched that.
So I think like most of the revenue contribution has been mostly from primary Si joint fusion procedures. So just wondering how youre thinking about the continued rollout in the back for the rest of this year.
Does trauma revenue contribution start to build or is it still going to be mostly primary equity infusion.
Until maybe 2023.
Yes, yes. Thank.
Thank you, David and I think Thats another great question.
The low hanging fruit really for us always was the minimally invasive Si joint fusion applications for our torque.
Technology and really if you think about the conversation that we're having here we have our core product with ICU three D.
Introduced torque last year, we're going to be introducing granted this year and it really is our portfolio expansion strategy that we have going on right now and it's really allowing us to two to live this.
<unk>.
A vision that we have of owning the secret pelvic solutions market and and so <unk> was a big part of that.
The trauma applications are the largest market that's here for for torque and we are in fact, making quite a bit of investment. There. Currently so it's the torque trauma market is an adjacent market. Our best estimate is that it's.
Currently $350 million of additional market opportunity for us with pelvic ring fractures.
And really the alternative right now for these patients is using traditional trauma screws or sacral classy, but in most cases.
These patients are on bed rest and so we think that torque is filling a gap for these patients who have experienced these pellet green fractures. So it's.
Right now there is an education process thats going on with trauma surgeons.
And.
And we've already made the investments in this particular area. If you look at our 10-K from 2021, which youre going to see a significant growth in inventory significant growth in fixed assets, which primarily is our trades that are out there and so.
We have.
Provided the solutions and it really gives us another opportunity. In addition to what I talked about in adult deformity to grow our business, but in this case in trauma.
Great. Thanks, so much and congrats on the quarter.
Thank you.
Our next question comes from Ross <unk> with Cantor Fitzgerald.
Hi, Thanks for taking my question and congrats on the quarter.
Maybe just one for me with regards to your direct.
<unk> activities are there any quantitative result that you could share or is that maybe at least directionally relative to the last quarter.
We have not been giving spin.
Specific metrics, although as you may guess, it's really all about the metrics from our internal perspective.
As I said, our focus here with the direct to patient initiative is.
They are the patients who have been in conservative care for an extended period of time.
And how do we make sure that those patients are aware of an alternative.
<unk> ICU.
And so when we when we look at the different measures, we're using digital marketing initiatives for our direct to patient initiatives and so we look at our website traffic we look at the engagement that the surgeon.
The patient is.
No.
The work that they're doing on our website at may be engaging in our pain quiz, but we most mostly focused on our find a doctor function, where we actually are referring patients to our surgeons.
In order to follow up directly with them. So so we have a series of different measures, where we can really try and understand what the return on investment is with these different patients.
And so we're pleased with what we're seeing so far and what we're doing right. Now is we're trying a number of different campaigns and then we're shifting.
Resources, depending upon where we have the highest return on investment.
Got it thank you for the additional color there and congrats again on the quarter. Thanks.
Thanks Ross.
And I'm not showing any further questions at this I'd like to turn the call back to Laura for any closing remarks.
Well. Thank you I really appreciate all of you joining the call today and I hope.
Adequately shared with you the momentum that we're seeing in the business that the operating environment is continuing to normalize and we are really excited about the opportunities for the rest of the year, we have a diverse portfolio and we think it's going to drive higher surgeon engagement engagement and it's going to accelerate our growth.
Well the only other comment I'd make is onshore and I will be attending the upcoming bank of America, and UBS Investor conferences. This month and so we hope to see many of you in person. Thank you and goodbye.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a full day.
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