Q2 2022 Sientra Inc Earnings Call
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Welcome to the Centris Earnings Conference call. My name is Hilda and I will be your operator for today.
At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.
During the question and answer session, if you have a question, please press 01 on your touchstone phone.
As a reminder, the conference is being recorded.
I would now like to turn the call over to the center's general counsel, chief compliant officer Oliver Bennett. You may begin.
Thanks, operator. Good afternoon and welcome to the Cientra second quarter 2022 earnings conference call. I would like to remind everyone that in our remarks today, we will include statements that are considered forward-looking statements within the meaning of United States security laws.
In addition, management may make additional forward-looking statements in response to your questions.
Forward-looking statements are based on management's current assumptions and expectations of future events and trends, which may affect the company's business, strategy, operations or financial performance.
Actual results may differ materially from those expressed in or implied by the forward-looking statement.
The company undertakes no obligation to update or review any estimate, projection or forward-looking statement.
A detailed discussion of the risks and uncertainties that the company faces is contained in its previously filed annual report on Form 10-K , its previously filed quarterly report on Form 10-Q , and its quarterly report on Form 10-Q for the second quarter that ended June 30, 2022, to be filed with the SEC and available on the company's website at SEC.gov. I would also like to note that Cientra uses its investor relations website to publish important information about the company.
including information that may be deemed material to investors.
Financial and other information about Cientra is routinely posted as accessible on the company's investor relations website at www.cientra.com.
Today on our call we have Ron Meneses, Cientras President and Chief Executive Officer, and Wendy Schmidt, Cientras Chief Financial Officer.
I'll now turn the call over to Ron. Ron.
Thanks, Oliver, and hello, everyone.
Our eighth consecutive quarter of girls was fueled by record high reconstruction performance.
Continue strong commercial execution and your product launches.
This result was a validation of our strategy to focus on the reconstruction market with long term contracts, higher margins, and price stability.
Despite the headwinds that the medical device sector saw in Q2 21-22, we were able to achieve several key milestones this quarter.
We had revenue of $21.5 million, a 7% increase over second quarter of 2021.
Sales on our reconstruction channel grew over 23% year over year, far out facing the overall market growth and we added also 140 new hospital accounts.
We'll continue to see high reorder rates in our top-volume accounts at a rate higher than 80%, which gives us high confidence in driving performance in the second half of 2022.
while also growing augmentation market share despite a challenging market, reaching a record high in market share of 13% in the first half of the year.
We're able to accelerate the pace of adding new augmentation accounts in Q222, adding close to 160 new accounts.
Combined with our reconstruction gains, this led to the addition of close to 300 new accounts in a quarter, which is a record for Sientra.
We executed our new product launch strategy that we'll discuss at the R&D day back in spring.
In the second quarter, we'll launch our new 6-tab derma-span tissue expander, which gives CNTRE an additional product to bundle with hospital decision makers.
We also received FDA approval for a low plus profile brass implant, making Sientra the first and only U.S. manufacturer to provide 80 and 110 cc shelving plants.
The approval provides surgeons and patients with more choices to fit their aesthetic needs.
The pandemic caused quite a boom in the plastic surgery market, with augmentation being no exception, seeing record high procedural volume in 2021.
In the second quarter of 2022, the market has returned to 2020 levels.
The SCANTRA team though has done an excellent job navigating through this environment.
As a matter of fact, second quarter 22 revenues were approximately 92% higher than Q2 2019 prior to the pandemic. Thanks!
with our advanced technology, industry-leading safety profile, and innovative partnership programs with our plastic surgery customers.
We have been able to dramatically outperform the market and continue to grow our market share.
One of the factors behind our success has been our ability to partner with plastic surgeons.
We have helped drive patients into practice through initiatives such as the Seattle Academy.
She has been proven to grow annual revenue by 50% within the accounts that attend the program.
We'll also double our consumer brand awareness for the past two years.
growing at the highest rate in the category and putting us in the number two position amongst all brands.
In reconstruction, we have seen acceleration of orders by high volume hospital counts and the addition of new hospitals.
The acceleration for the second quarter was the result of investments that would be made back in the second half of 2021.
and revenue per account grew by 10% when compared to first quarter 2022.
We'll also add close to 140 new hospital counts this quarter.
which positions as well for strong second half and beyond in reconstruction.
The launch of Dermaspan 6TAB Tissue Expander, the continued clinical advantages of LOX2 expander at the foundation for strong reconstruction performance.
In addition, our sales team have done a great job focusing on spending more time within their reconstruction accounts to pull through the great access that our products have in every major GPO in the US.
We're also seeing growing interest in fat graft in the plastic surgery market.
validating the decision to acquire a novel phagophagy technology at the end of last year.
In our recent market research, we conducted with 100 plastic surgeons.
Over 70% of them expressed dissatisfaction with the current systems in the market.
Most of them are looking for a system with the clinical advantages that our frag rafting technology provides.
Importantly, over 80% of those that participated in the market research survey indicated that they would intend to try our innovative technology.
We expect the launch of our novel fat transfer technology next year should expand our camp by at least 25%. It will offer surgeons unique benefits to obtain safe, natural, predictable, and reliable outcomes.
We are extremely excited about Santa's near and long term future as we build a foundation for the upcoming years.
I will now turn the call over to Andy for financial information.
Hey, thanks, Ron.
Reviewing our Q2-22 financial results.
Cientra posted revenues at $21.5 million as compared to $20.1 million in Q2 of 21 and increased 7%.
Of note, we continue to see very strong performance from our reconstruction sector, which represented approximately 54% current period revenue.
Year-to-day 22 revenue of $42.9 million compares to $38.4 for 21, an increase of 11.7%.
Gross margin for Q222 was 59.2%, which is a strong performance as compared to 56% for the same period last year.
The key driver for gross margins is product and channel mix.
Q222 gross margins benefited from the continued expansion of our reconstruction business in the realization of our distribution center efficiencies.
Now that we have completed our distribution center move integration.
Our Q222 period included a write-off of the expired Legacy Dermaspan product.
Without the RIDL, which is a non-cash event, gross margins would have been 61% for the current period.
Finally, throughout 2021 and 2022, we experienced price stability across our entire product line.
Switching to operating expense.
The total GAAP operating expense for Q222 was $28.7 million as compared to $20.4 million in Q2 of 21.
Our Q2-22 GAAP operating expense included approximately $2.9 million of non-recurring severance and legal expenses.
and $3.5 million of other non-cash expenses.
taking these items into account.
Total non-GAAP operating expense for Q222 was $22.3 million as compared to $17 million in Q2 of 2021.
The increase is primarily investment in sales and marketing initiatives to support our future new product launches which includes our fat grafting product.
In addition, G&A expense.
increase due to the prior year completion of our ERP implementation, which now ships information system expenses from the balance sheet to the income statement in 2022.
Our current period non-GAAP operating expense of $22.3 million is significantly lower than our Q1 of $22 non-GAAP expense of $24.8 million and puts us within our non-GAAP yearly operating expense guidance of $90 to $94 million.
We expect to see continued improvement in non-GAAP operating expense performance going forward as we realize efficiencies and begin leveraging our infrastructure.
Year-to-date 2022 GAAP operating expense of $57.6 million compares to $42.3 million in 2021.
Year-to-date, 2022 non-GAAP operating expense of $47.1 million compares to $35 million for 2021 and, again, is attributed to current year investment and commercial activities to support new product launches.
and the shift in accounting treatment of our information systems expense.
Total gap loss from continuing operations for Q-22 was $18.2 million as compared to $18.5 million loss for the previous year period.
Adjusted EBITDA for Q222 was a $9.2 million loss.
as compared to a $5.1 million loss per Q2 of 21, again, attributed to our investment in our sales and marketing initiatives.
As revenues continue to increase, we expect to see improvements in our adjusted EBITDA.
as we realize operating deficiencies.
2022 year-to-date adjusted EBITDA was a $20.7 million loss as compared to a 2021 year-to-date loss of $12.4 million.
Switching to key balance sheet items.
From an operational perspective, we continue to see improvements in our operating cash flow.
Q2-22, cash used in continuing operations of $13 million, compares to $17.9 million used in Q1 of 2022.
The $5 million, or 27%, sequential quarter improvement is largely attributed to improvements in our working capital accounts.
Notably, decreases in accounts receivable of $3 million.
Reduction in inventories of 1.4 million.
and an increase in customer deposits of $2.9 million.
We expect to see a continued improvement in our working capital accounts driven by focused efforts to decrease accounts receivable days outstanding.
and by optimizing our inventory months on hand.
Cash at the end of Q222 was $25 million and total debt before any adjustments for discounts and issuance costs was approximately $83.4 million.
Turning the guide.
Macro headwinds have worsened through 2022 and continues to have a broad impact on overall consumer spending as recession concerns loom.
The aesthetics market has seen some impact in the first half of the year.
It's difficult to say how long these trends will persist at this time.
We continue to gain share in our respective markets and have done a good job navigating in a difficult economic environment.
But given these headlines, we are taking a more cautious stance.
We are adjusting our full year revenue guidance to a range of $90 to $95 million.
down from prior guidance of $93 to $97 billion.
The new guidance reflects growth of 11 to 18 percent as compared to sales of 80.7 million in 2021.
That concludes my prepared remarks. At this time, I'll turn the call back to the operator for Q&A. Operator.
Thank you. We will now begin the question and answer session. If you have a question, please press 01 using your touchstone phone.
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Once again, if you have a question, please press star and then 1 using your touchstone phone.
We have a question from Alex Nowak from Craig Hellam. Please go ahead.
Great. Good afternoon, everyone.
We met in San Diego at the end of April and also we spoke on the Q1 earnings call in May. I think macro wasn't a factor. It really wasn't even considered a concern at the time. It was also thought that the pandemic boom would continue in August . So I'm just curious, when in the quarter did this thought process change? When did it ultimately, the macro concerns that we see every day in the headlines, when did that start to impact sales? Was it real late in the quarter? Just help me out there.
Thanks, Alex. It was in the beginning of the quarter. We started seeing some things in uh...
probably late April , and really softening. The first quarter this year was lower than the first quarter last year. We didn't see anything crazy. Then acceleration of softening augmentation late April through May and June , and a really slow down at that time. And I mean, really major slow down. Now, keep in mind, Alex, a lot of the A accounts and B accounts that we have are still very busy.
What we're seeing is the middle of the road accounts are really dropping in volume. And the overall market then is back to 2020 levels from the market's perspective.
Okay, understood. And then the other big priority for the company is improvement to profitability. If I go back and look at 2021 OpEx compared to this year, it looks like this year OpEx has expanded almost 20 million or 30% growth. Now I know there's a couple one-time lineups in there and some ad backs, but now sales is coming in closer to a 10 to 15% growth range. So maybe help us bridge to the profitability, which I think is the key message I want to keep looking for.
Sure, let me jump in. Yeah, let me jump in on that one.
So let's think in terms of the model in terms of how we're put together. One of the key elements obviously, you know, we've got revenue, but then we have gross margin. Gross margins are now looking in low 60% in terms of our mix versus 55% last year. Going forward, we expect to see continued strong performance in the low 60s as we get into 2023 with the launch of fat grafting. We expect fat grafting.
especially performing in the recon space, to perform at 70% plus gross margins, similar to our tissue expander, biosec, etc. That's going to be a big plus, so we're going to expect to see upward pressure and gross margins into 23, moving from low 60s to mid 60s. A key is operating expense. As we've discussed previously, we went through quite a bit of expansion in terms of 2021, a lot of infrastructure work.
annualized obviously is 88 million which is below our non-GAAP operating guidance of 90 to 94 million. We expect to go into 2023 at 80 million or less possibly 86 million next year as we move past these one-time not repeatable expenses and start optimizing our sales force. As we said before we have the right commercial team in place to handle what we want to do in 2023. We don't expect to see ads
So we expect to see some very good performance next year. And as we said before, our magic number to get the cash flow neutral, cash flow break even plus is 135 million revenues.
and how we're going to get there. It's not just going to be our current product offering. It's going to be the launch into fat grafting in Q1 of 2023. And we will continue to add new products as we've talked to in terms of product launches this year and other products we can bring in similar to a bio corneum product that's performing between five and $10 million in terms of annual revenue at 70% gross margins, which is actually a distribution product. So.
We feel we have a pretty strong path to that 135, but that's the magic number to get us the cash flow breakeven.
Okay, that's helpful. Thank you. And then maybe speak to how to get to the new revenue guidance. I know Q2 is typically the best season. Malady a quarter out there 3 comes in at the lowest Q4 somewhere in the middle. So maybe speak to the cadence over the next 2 quarters here where you're thinking. Especially given the macro backdrop.
Yeah, I'll share the market, Alex. The market is really weird in the second quarter, but right now the market looks, at least from the first month, the market looks flattish versus second quarter. And usually I think you all know that third quarter is always the lowest market. So the market dropped in second quarter, stays flat, looks like at least from the month of July for the market. The market is acting very, very different. The great thing is, and I tried to mention that on my prepared remarks.
is that we have had extremely high reorder rates from our current customers. Our current customers drive, and I break them in a way through ease, drive over 95% of our revenue, and they are reordering over 80% for both recon and augmentation right now. Now, what's happening, those in the Cs and Ds are really ordering less. They dropped that volume because they have less demand for the augmentation, not the recon.
If you actually look at recon looking just compared to the first quarter this year is actually up 10%.
So they were 10% higher volume just in one quarter and then the augmentation is down 7%. So we're seeing that you know within our current structure we have not lost customers and you heard me say we added more customers. It's just augmentation side is slow. So that's why this quarter our split between aug and recon was 54 to 46. Recon was 54%.
Okay, understood. Thank you.
Thank you. Our next question comes from Brandon Vasquez from William Blair. Please go ahead.
Hi everyone, thanks for taking the question. I wanted to first focus on some of your macro commentary and try to get a little bit more detail there to understand what's going on. Can you talk about where you're kind of seeing a slowdown and more specifically is it patients that are that are kind of pushing back and they're not comfortable with the cost of the procedure anymore, so they're in the funnel or the patient's just not even coming in the funnel anymore?
Just trying to understand kind of where the headwind is coming from from a macro perspective to understand maybe when some of that can get resolved.
Yeah, the patient are coming in, the patient's getting calls, they're just not executing. So if you look before the pandemic, before 2020, it used to take 40 to 44 months for a patient to go from thinking about breast augmentation to actually getting surgery. Last year it went to 20 months. And now we're seeing this as going backwards to thinking patients call the office, meet with the doctor, thinks about it. And I think the patient, like a lot of us, are thinking, what's going to happen in the next six to eight months from a possible recession.
and that's what it is. They're really delaying, putting down the decision on that. Now, I want to be very clear, our A and B accounts that drive quite a bit of our volume, they do not go down. They are going as a flat versus a first quarter, flat versus Q4. It's just the one that the surgeons that have the middle of the road. Again, it's augmentation.
Reconstruction, very different story, acceleration of the market, acceleration of more surgeries. The patient is really coming back and a lot of, 100% of offices are open for reconstruction.
Great. Thanks. And then in terms of the new accounts, you guys obviously are making great traction there, which is encouraging. Can you just remind us what – how long did it usually take one of these new accounts to open? Trying to get a better sense of what kind of contributions you can expect. Maybe it's a little difficult in this macro environment, but what would you usually expect – and you opened almost 300 new accounts here or over 300 new accounts. When do you think they can start to ramp and really meaningfully contribute to top line growth?
Yeah, Brandon, it is four, let's break the two apart, 140 new reconstruction accounts. And as I said before, it takes about four to six months. So whatever, all the accounts we added, the 140 recon accounts that we had in the second quarter, we'll probably be Q4, when we start seeing really the revenue coming in. All the accounts we saw in the second quarter are really from the latter part of 2021. It takes four to six months. That's why the acceleration of adding new accounts is critical. For augmentation, the cosmetic side of the business, we had 116 new accounts, which is the best quarter ever. Think about that.
It's a challenging market. We had 116 accounts. We're actually accelerating our share. We're titering 14 shares by the end of the last quarter, sorry, the last month of the quarter. So we're accelerating our share growth. What we don't have is the winner or back this year, which we had last year. So we continue adding our accounts. Now, there's been a drop on the volume, the amount of the first order from those accounts, because they're reflecting what's happening in the marketplace. In the meantime, the reconstruction side
The new accounts are coming in 24% higher than old accounts from the new accounts in 2021. And the new accounts for augmentation are lower. So we're doing exactly what we need to do is add new accounts, same store sales are down because of the market. In the meantime, the only way to combat that is add new accounts. And that's where our commercial team is doing extremely well in the last three, four months.
Thank you very much.
Thank you. Our next question comes from John Block from Steve Hall. Please go ahead.
Great. Hey guys, good evening. Maybe the first one, I know this has been asked maybe a couple of times, but I just want to circle back so I'm clear. Yeah, I think there were sort of a bunch of yellow lights or flashing signs on the augmentation market.
Throughout the quarter the second quarter I know from our checks, but you know the lowering of the guidance Is that all attributable to augmentation or did recon? Maybe get a little choppy, you know with some of the COVID surges we saw Towards the latter part of the quarter June etc. So not expecting, you know an exact dollar amount But maybe you could just talk about the slightly lower guidance in the context of you know What's attributable to aug or aug and recon?
Yeah, John , it was really all I blame and all recon is accelerating recon the market, the first quarter, we don't have the second quarter data yet we have, we'll get IQ data coming up in the next few weeks.
But we've seen acceleration as we speak today a couple of major networks came on board with Siantra. It's happening daily and it's not just a hospital, one or two hospitals. A network of hospitals are coming on board with Siantra. So that is not the case of reconstruction. Market's healthy. We're more than double plus performance and reconstruction. It is augmentation. I don't think in any forecast, in any predicted, I think you heard me say in the last six months.
I see the market augmentation going back to normal growth, one to 3% single digit growth versus last year. We did not think it would go backwards to 2020. Now keep in mind, 2020 was not a horrible year. There was about a month and a half of 2020 when not much was going on because of March, April pandemic. But it snapped back like crazy in Q3 and Q4. And Q3 of 2020, the market went crazy, so it did Q4. We're right back on that year today versus 2020. So augmentation really didn't.
that drove us to assess our guidance for the next four or five months. We need to know where the market is going to go, the market is going to go back. We outperformed by far the market, the market is negative three plus...
and 30% plus our revenue for August negative low single digit numbers. So we've completely outperformed the market and obviously if you follow our two main competitors they had major negative numbers in the US, revenue numbers in the US for second quarter. So in the meantime we had a positive 7 not exactly number 1 and that's due to augmentation. The reconstruction is going to do well and as you heard from Andy is really going to help drive our margins.
drive cash generation here the next five, six months, get us ready for the launch of our novel fat grafting technology. We have extremely high expectations. We've seen some beautiful things and great data already on the clinical data. And we're ready to manufacture. I was in Wisconsin yesterday. We're ready to go, starting manufacturing within the next 60 days. And we'll be ready to roll it out in the beginning of 2023. We'll be ready to roll it out in the beginning of 2023.
Got it. Perfect. Very helpful. And actually, Ron, your answer touched on a couple of areas where I wanted to go. So it'll ask a two parter with the next question. Clearly, you took share in all year over year. You just gave some stats there, mark it down 30%. You guys download single digits. The share sequentially seemed up, but maybe flattening out a little bit. You know, we'd love your long term thoughts on where you can go augmentation share wise. Again, I think you said 13% in one age.
you know, where can that go longer term? And then Andy, you gave some really helpful statistics on the GMs for fat grafting, I think you should accrete it to corporate, maybe around 70%. Maybe just help us bring that down the P&L. In other words, you're going to be leveraging the sales force, just the contribution margin from fat grafting, even out of the gate in 2020 2023 should still be pretty darn healthy when we think about, you know, leveraging the current infrastructure. Maybe you could just bless if I'm thinking about that correctly. Thanks guys.
And John , I will first pass it over to Andy. Yeah, right now, on the first month, this last month of this quarter, we got close to 14% share for augmentation. We have not seen the data yet, like I said, for recon should be coming up in the next few weeks. We expect to finish the year at least mid-teens in August with a little above mid-teens and higher than that in reconstruction because of the acceleration we've seen with our new hospitals being added as we speak.
assembly in Franklin, Wisconsin. We built that site for capacity, where we have capacity to grow our implant business well into 2025, but also take on a product such as this, the work final assembly on site in Wisconsin. So that's not any net increase in expense from the perspective of facilities or CapEx really. In terms of incremental labor to do so, much less expensive to actually work that through out of Wisconsin than a third party.
It's still going to net north of 70% gross margins. Now as you lever into operating expense, the exact same sales team will be putting this in their basket in terms of calling on the same recon accounts.
So we're not adding heads from a sales perspective. In terms of regulatory, etc., this is already FDA cleared. So the work we're doing this year in 2022 in terms of additional studies is to support our commercial side, to support additional papers, to support our marketing efforts.
So we will really lever what we see in gross margins in 2023 is going to drop down to contribution margin. So that's going to be a big adder for us. And you should expect the same from other products that we actually bring into our wheelhouse.
Perfect. Very helpful. Thanks, guys.
Thank you. Once again, for any questions, please press 01. The next question comes from Chris Cooley from Stevens. Please go ahead.
Good afternoon and thanks for taking the questions.
A two-part P&L question for Andy first, and then a bigger picture question for Ron. Andy, I'd appreciate it if you called out the early completion of the distribution center integration in the first quarter, and that we were going to see the lift here in the 2Q. Or are any of you ready for it? Good boy.
X, the issues there, a little bit north of 61 percent in a quarter, which is a step up sequentially, obviously, versus the 1Q. I was hoping you could help us take a look at that and parse out mix versus the improved cost structure, really just trying to get at that baseline of the cost structure as we go into the second half and hopefully start to see some volume pick up. And then very similarly, through the middle of the P&L, looking at it now, it looks like you have about two-ish.
million left in the non-recurring 8.5 to 9 million that you were targeting for the year. Should we just think about that radically over the back half, or is that more skewed to one of the quarters? And I've got a bigger picture question thereafter. Thanks for the clarity.
All right, so let me start with the gross margins. Where we sit today, we feel very good in terms of our distribution center costs. We started in Santa Barbara back with about a 6% expense effect on cost of goods sold. Call it 6% tax rate. We saw that increase somewhat as we worked through integration in the back half of 2021. We saw that increase somewhat as we worked through integration in the back half of 2021.
So, and into Q1 of 2022, we really started seeing the pickup. So where we sit today right now, we've taken two to three points out of gross margin just on distribution center from worst case of second half of 2021. And we're sitting where we expect to be right now in terms of efficiencies. We've now flushed them through. When we look at 61 percent.
That's representative of our current mix of 54% reconstruction, 46% AUG. Depending on how that mix goes forward, we'll determine where 61% goes, where it's 61, 62, or 61 down to 60 if AUG resurges again. But as we go into 2023, the addition of fat grafting and so on is going to be upward pressure again to take it to the next level, let's say low 60s to mid 60s.
That's that part and
Second part of the question, remind me again. Just the non-occurring expenses through the middle of the P&L through OFEX, I think you had targeted about $8 to $9 million for the year, and it looks like you've got about $2 million if I'm doing the math right and left approximately. I just was curious if that's one quarter or if that's radically through the back half of the year. Yeah, that $2 million remaining will be, I would say, evenly mixed in the next two quarters. And that you're going to see on our P&L in terms of our commercial.
I'll squeeze one other quick one in here. Ron, you talk about, and Andy both, you both were talking about the fat graft offering, obviously helping kind of reposition the company and provide an incremental growth driver as you look ahead into 23 and beyond. Clearly, those procedures are accretive to margin. Just curious though if we are seeing an economic slowdown rolling down the augmentation market right now.
your thoughts on a premium type procedure.
on a price point in terms of just consumer receptivity to that type of an offering as we come into next year.
Maybe a little bit less subtly, are you comfortable that that will really be a driver next year and enable you to hit your cash flow targets as you think about accelerating the growth in the margin profile?
Yeah, Chris, if you look at this, where's the biggest use of fair grafting right now? It's reconstruction.
60 to 80 percent of surgeons that are reconstruction use fat grafting.
There's one product, it's the leading product, and there's less than 30% satisfaction with that product.
So we'll be able to penetrate that market. We're ready in the hospitals as our team are ready promoting and going to go straight in minute. The first place we're going to go is a hospital account that we already have access. We are ready in negotiations with GPOs about our fair grafting system.
The second part is augmentation. A third of surgeons that do breast augmentation use fat grafting.
And a lot of times they use phagrafting because they're not, they're not only using 30% and they're not happy to current systems. Again, we'll be able to go into those accounts and talk about our phagrafting.
The other part of what's happening through next year, it's still growing very, very fast is to use.
of fat grafting the body. It obviously is taking fat from parts of the body you don't want and using the parts of body you want.
For example, blood ox enhancement, that's still a very fast growing area. The other part is using as a facial filler.
If you look at the ASBS data...
more and more surgeons growing extremely rapid to use the fat grafting as a facial filler. Now that's a humongous market for us to get in sometime next year, but there'll be the third or fourth market beginning in because that would give us time to get more clinical data to support our product. Not just support, the product already has broad indication to use anywhere in the body to do fat grafting. But it's just to be able to talk to those surgeons and discuss here's the data, here's the clinical data.
So the area they want to enter first, reconstruction, is growing fast. And the area they're going to go last are areas that you may have that concern. But remember, the price point right now is lower than a brass augmentation. You're not talking about $8,000, $9,000, you know, whatever a surgeon charges the patient. And then within reconstruction, it's reimbursed. So that's kind of where we're seeing the next two years for our fat graft technology.
Thanks, appreciate the additional color.
Thank you. As a reminder, if you have any questions, please press 01. The next question comes from Mr. Kyle Bowser from Lake Street Capital Market.
As a reminder, if you have any questions, please press 01. The next question comes from Mr. Kyle Bowser from Lake Street Capital Market. Please go ahead.
Great, thanks for taking my questions and all the updates here. Maybe I'll just ask both my questions up front. I'm just juggling a couple calls here. Given the evolving product portfolio, best-in-class warranty, et cetera, have you seen increased pricing pressure, heightened competitive dynamics from your peers out there?
And then secondly, what's the latest headcount for sales reps and how do you anticipate this evolving over the next, I guess, couple of years that you continue to launch new products and expand your reach within the
And then secondly, what's the latest headcount for sales reps and how do you anticipate this evolving over the next, I guess, couple years as you continue to launch new products and expand your reach within the plastic surgery suite? Thank you.
Kyle, our average ASP has gone up for both augmentation and reconstruction.
We've done a lot of great innovative programs to accelerate the addition of new accounts. As I said before we had a hundred and sixty new ARG accounts. That's a best ever quarter for our team adding new accounts. We actually have even higher expectations for the team the next six months. So we see within our own data our ASP is going up for both ARG and RECOG. We also heard one of our competitors has increased pricing.
So the prices are not going down, they're going up. One of our competitors increased pricing double-digit, and that is creating a lot of upset customers, going from zero increases in the last two or three years to double-digit increase.
It actually has opened incredible doors for us to walk in and have conversations with those customers.
And we have flipped several accounts because of those conversations.
So that's where you actually no price downwards, price are going up for us without an official price increase and our competitors are really taking a huge price increase which is actually a benefit for us right now. And your question about sales team, as Andy stated next year with fat grafting and that's where we upgrade and expanded our sales and marketing team this year and it was in preparation not just for the launch of our...
low plus profile plus One more tissue expander, derma span 6-SAB. This is really also getting ready for next year. We did analysis What do we need the next 24 months? So you have the relationships, you have people in place So FAG rafting launches are ready to go So I see us being flat to slightly down in regards to overall budget for commercial And you know, it depends on kind of how the products will add in the next two years But from where we have right now the launch of FAG rafting next year the launch of Alox2 Pro
Remember we're waiting FDA approval for all X2 Pro. That would be also most likely end of this year beginning next year And that will be the same sales team really no changes in that group for 2023 so looking at 56 sales representatives and seven reconstruction managers plus seven sales managers
Got it. Really great color here. Congrats on this success and I'll jump back into here.
Really great color here. Congrats on this success and I'll jump back to Q here. Thank you.
Thank you. And at this moment, we have reached the end of the question and answer session. Do you have any closing remarks?
I just want to say thank you for everyone. I appreciate it. We have an incredible opportunity for Santa for the next 6 to 12 months. From leveraging our higher margin, high opportunity reconstruction to the launch of products next year. Two critical products.
that will really take Sientra in a different area from expanding use within the OR with FAG rafting and obviously with AllX2Pro really improving patient care and patient outcomes next year. So thank you everyone. Appreciate it. Have a good afternoon.
Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.
Well.