Q3 2022 MiMedx Group Inc Earnings Call

[music].

Good afternoon, and thank you for standing by welcome to the my medical third quarter 2022, operating and financial results Conference call.

At this time all participants are in a listen only mode.

Question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

I'd now like to turn the conference over to your host today, Mr. Matt Notarianni head of Investor Relations for my medics. Thank you you may begin.

Thank you Latanya and good afternoon, everyone welcome to <unk> third quarter, 2022, operating and financial results Conference call.

With me on today's call, our interim Chief Executive Officer, Todd Newton, Chief Financial Officer P. Carlson.

Didn't wound and surgical Doctor Rohit, Cassia and President regenerative medicine, Dr. Robert Stein.

As part of today's webcast, we are simultaneously displaying slides that you can follow up.

You can access the slides from the Investor Relations website at Memetics Dot com.

Todd and Pete will provide a summary of our operating highlights and financial results for the quarter and Tom will conclude with some remarks about our micronize the hacking knee osteoarthritis clinical program.

At the conclusion of these remarks, Todd Pete Docter cashed up and Dr. Stein will be available for your questions.

Before we begin I would like to remind you that our comments today will include forward looking statements, including statements regarding future sales growth and future margin expected market sizes for our products and potential timelines for clinical trials and FDA submissions and reviews.

These expectations are subject to risks and uncertainties and actual results may differ materially from those anticipated due to many factors.

Actual results market sizes, finding an FDA review will depend on a number of factors, including competition access to customers unforeseen circumstances and delayed the results of our clinical trials, our interpretation of those results and other factors.

Additional factors that could impact outcomes and our results include those described in the risk factors section of our annual report on Form 10-K, and our quarterly reports on Form 10-Q.

Also our comments today include non-GAAP financial measures and we provide a reconciliation to GAAP measures in our press release, which is available on our website at www Dot memetics Dot com.

With that I'm now pleased to turn the call over to Todd.

Thanks, Matt and good afternoon to everyone.

With this thing my first call with you I will begin with my observations and assessment of our company.

And then we will move through our third quarter performance.

My first thing in my current executive capacity, which was now 57 days ago.

Our team.

We needed to combine the strength of this company, which is its products with people with a renewed focus on four key fundamentals.

One specific to deliver year over year top line growth that exceeds the underlying growth rate in the markets, where we elect to operate.

Next to focus on profitability and improve our operating margin year over year. So that we have the means to invest further in growth.

Then to ensure our R&D activities are prioritized productive in pursuit with a sense of urgency because the innovations from these efforts are the lifeblood of future growth and last manage our balance sheet with an attitude and mindset that cash and equity capital are both precious commodities.

And look these are the basics of success.

These are complicated, but admittedly they are not easy to achieve.

Now, let me tell you how I see our business.

Our commercial stage placenta derived products business, which we call wound and surgical.

<unk> successfully transitioned from being historically, a single vertical wound care business to a two vertical business by expanding the use of our technology and products to meet the healing needs within the surgical recovery setting.

Wound and surgical has a good future growth potential.

Very attractive gross margins and the potential to generate strong operating margins and cash flow. Additionally.

Additionally, wound and surgical has historically been a domestic business and this is soon changing with the upcoming launch of <unk> in Japan.

However in terms of our corporate expenses our level of spend is simply too high for the size of our business.

The profitability goal I have set for the management team is pretty straightforward we.

We need to gain more operating leverage.

And I have put in front of our leadership team to challenges because they have embraced and are now underway working to realize.

One is to improve our wound and surgical segment contribution margin to 30%.

Segment sales.

If we are able to do this combined with our targeted long term revenue growth rate. This business unit could be generating annual cash approaching $100 million by the end of 2023.

The second challenge goes back corporate overhead, we need to push our corporate expense as a percentage of sales down below 20%.

As a first step in bringing corporate overhead expense down in early October we restructured certain corporate support functions, which resulted in a reduction in our executive head count.

This initial small step will reduce annual corporate expense by nearly $3 million on an annual basis.

We'll be implementing further improvements as we continue to evaluate our cost structure and profitability.

We currently have two three research and development priorities.

First is to continue to introduce innovative products into wound and surgical such as to new products. We introduced in September .

And the second is to start as soon as practical a well designed and well controlled registrational clinical study for the use of our micronize product in the treatment of knee osteoarthritis or what I'll refer to today as knee OA I will speak more about the knee OA program status shortly.

As I review, our balance sheet. There is one very important aspect distress.

Our R&D pipeline, including the knee OA program and other gross growth initiatives, such as Japan do not require us to write any checks, we're making commitments that we are comfortable funding from existing cash and the anticipated cash flow, resulting from our wound and surgical business.

Therefore today, we do not foresee the need to raise capital to achieve our goals. We feel fortunate to have this financial stability at a time when the capital markets are volatile and many other companies are facing looming overhangs because of their need for additional capital.

Yeah.

So let's transition now to the third quarter.

We launched two new products in September Emil effect, and axial fill which we anticipate will bolster our momentum in the surgical recovery market.

With amnio effect, we've added a thicker tri layer puts central allograph to offer surgeons superior handling characteristics, including the capability to suture the allograft in place with sutures.

Which is often a need scene in a wide variety of surgical procedures.

Amnio effect offers users many of the same attractive handling properties as our CT based products that can come in many different sizes, including larger sizes.

For axial feel early user feedback has confirmed that the product is very versatile.

Can be applied as a particular, whereas he pays which makes it attractive for a wide range of complex surgical wounds are varying shapes depth or size and it's compatible with negative pressure wound therapy as well as hyperbaric oxygen therapy.

Also in September we received a positive reimbursement approval decision for our <unk> product in Japan for the treatment of refractory or hard to heal a lower extremity diabetic foot ulcers.

The posted reimbursement rate is very attractive and should support clinician adoption and use.

Since the reimbursement decision physicians in Japan are treated the first patients with SB fix over the next couple of months, our focus will be on generating physician awareness and education as.

As well as complete and country distributor contracted.

Japan represents a new and attractive addressable market that we estimate to be around $500 million in stocks.

Alex This is the first and only amniotic tissue product cleared for use in Japan, and we anticipate this market will be a good source of topline revenue growth starting in 2023, and a profitable standalone market accretive to our overall operating margins by 2024.

And now turning to our third quarter financial results revenues were softer in July and August as the easing of COVID-19 travel restrictions resulted in higher than normal seasonal vacation activity and a higher than normal seasonal impact then on procedure volumes.

These combined to negatively impact our product sales during the summer months.

But in September demand rebounded very well, indicating to us that July and August growth pause was temporary.

Overall third quarter sales grew by seven 3% over the third quarter last year, while wound and surgical sales grew by seven 6%.

So I'm going to turn now the call over to Pete to further discuss the quarterly results along with specifics of our segment reporting being introduced this quarter.

Thank you Todd and good afternoon, everyone. As a reminder, unless otherwise specified all results referenced in my prepared remarks are on a third quarter 2022 versus third quarter 2021 comparison basis.

Beginning this quarter, we are reporting financial results by specific business unit wound and surgical regenerative medicine and corporate and other.

This reporting methodology enables us to transparently transparently isolate the profit and cash flow generation of the wound and surgical business.

More clearly demonstrate the investments we are making in regenerative medicine to advance the knee osteoarthritis clinical program toward BLA registration.

And I liked the opportunity Todd as outlined for the company to reduce overall corporate expenses.

We are using operating income excluding the investigation restatement and related expenses as a consistent segment performance metric.

I believe our financial results and related trends are now easier to understand for two key reasons.

First the impact of the end of the F. D. A period of enforcement discretion for our section 351 products is behind us and no longer effects our year over year comparisons.

Second the new reporting structure provides greater visibility into our financial information cost and investments by our defined business units as we look to improve the profitability of the company moving forward.

Let me take a moment to walk through some of the specific details from what is included within each segment.

I'll start with wound and surgical this reflects virtually all current product sales.

<unk> sales generated from the upcoming launch of <unk> in Japan will be reflected here.

I will note that revenue and related costs from the domestic sales of section 351 products. So prior to the end of enforcement discretion in 2020 one a.

0.3 per cent increase.

This increase reflects growth of our wounded surgical products and the surgical recovery market, including the early results from the recent launches of amnio effects and axial Phil.

Gross profit of $55.5 million increased by $2.6 million.

Gross margin was 82.0% compared to 83.9%, reflecting lower production levels.

Selling general and administrative expenses were $53.5 million compared to $46 $3 billion.

This change reflects increased commissions on higher sales to sales agents and compared to the COVID-19 related travel restrictions in place throughout 2021.

Higher travel expenses in the current quarter.

Additionally, the current quarter includes net severance experience associated with our former CEO and consulting expenses related to market assessments conducted as part of the company's strategic planning process.

A research and development expenses were $6 million, an increase of 36%.

This increase spans both are wound and surgical and regenerative medicine business units with investments in clinical research efforts connected to our knee osteoarthritis clinical trial program.

Along with higher development and testing costs, primarily related to the launches of amnio affect an axial Phil.

Investigation, restatement and related expenses decreased slightly to $3.0 million compared to $3.2 million.

Net loss was $8.4 million compared to a net loss of $2.3 million.

Adjusted EBITDA was a loss of $724000 compared to a gain of $7 million.

As of September 30th 2022, the company had $73.2 million of cash and cash equivalents.

Compared to 87 $1 million as of December 31, 2021.

And $272.5 million as of June 30th 2022.

We continue to expect to be free cash flow neutral for the full year 2022.

And importantly, I want to reemphasize that we remain well capitalized to invest across the business, both eluned and surgical and in regenerative medicine without the need for external financing.

Looking to revenue outlook, we expect fourth quarter net sales to be between $73 million and $76 million.

Which reflects year over year growth in a range of 8% to 15%.

For the full year 2022 this.

This would result in net sales between $266 million and $269 million or growth of 11% to 12% over 2021 net sales of our continuing portfolio of products.

In closing we believe this financial reporting by business unit underscores the company's cash flow generation potential provides visibility into the investments we are making in the business.

And highlights the potential opportunities we have to achieve the profitability objectives Todd outlined.

I will now turn the call back to Todd tab.

Thanks Pete.

On our Niue program. We are currently actively engaged with the FDA soliciting their input.

Recent activity has included the following first.

B R mass meeting to seek FDA input on some important protocol questions, we had for our upcoming Registrational trial, particularly around patient dosage.

We also submitted.

Clinical protocol for our next Registrational steady for F. D. A review.

And we filed to chemistry manufacturing and control or otherwise called CMC amendments with the FDA that further described in detail the root cause related to these days to be steady read out in our proposed corrective actions to prevent the issue of potency loss over time, there was experienced in the <unk> study from Ricker.

Bring in this next proposed clinical studies.

So where are we currently.

We are at this moment in addressing FDA comments on the Registrational studied protocol.

In parallel our team is also working through several other readying activities, such as steady site selection and preparing investigational product.

All with the aim to begin patient enrollment as quickly as possible.

It is certainly our desire to have this study's first patient enrolled and treated this calendar year, but that may not be feasible.

Timing is subject to the Fda's review of our responses to their comments and as we work through this dialogue, we will have a better sense of wind enrollment and start in any event priority number one for us is to lock down the southern protocol.

Management and our board continued to believe are Neo a program is worthy of this continued focus and investment.

Micronize to hacking product is shown clear signals of efficacy in the treatment of neat.

And while our phase two the study did not meet its primary endpoints. We saw this signal of efficacy and the first 190 patients treated and we saw this signal and real world practical practice clinical practice from back when the product was on the market.

Over a quarter million vials were sold over a period of more than a decade prior to the end of enforcement discretion.

And a number of satisfied.

Physicians, who used the product in their daily practices like.

Liked it enough to publish their clinical results with.

With the benefit of ongoing FDA interaction on our path forward, a leading clinical research organization, helping navigate our registrational trials and an increase scientific understanding of our product. We believe our micronize product for neo will prove to be a significantly undervalued asset.

But it will also take this time to prove this.

We just need to run a well controlled study.

Our micronize behalf from product has the potential to address this significant unmet need and help a large and growing patient population and also has the purdue potential to produce substantial value for our shareholders.

Are closed in a moment for Q&A, but first a final comment about our wounded search for business.

We believe this business has strong fundamentals and.

And we are developing a pipeline of ideas to further grow our product offering and we have a dedicated commercial organization, helping expand the use of <unk> products and various settings across the country.

And soon this will include Japan.

However for over two years, especially in the wound care of private office setting we have seen a reimbursement environment characterized by poor rule, making and for enforcement that is allowed to competitors to aggressively promote financial incentives to physicians in return for using their products, especially when the competitors products are not on this vms.

<unk>.

This lacks reimbursement environment has had an impact on our market share in the private office setting since our products are on the CMS priceless.

CMS had previously fifth fourth proposed rules to change private office reimbursement to take effect at the beginning of 2024.

Just yesterday CMS announced plans to hold a town hall meeting in early 2023 to further discuss these proposed rules and the feedback from the community.

At this point, we still expect new rules will take effect in 2024 for the private office.

And look there are aspects of the CMS proposal, we were not in favor.

We're pleased to learn yesterday CMS was still considering feedback.

However, we have strongly advocated CMS needs to take steps to promote fair competition and reimbursement, including the immediate.

Publishing of all skin substitute products.

Their price list, we are hopeful the new rules when published will address this yes. So it would re levels of private office Plainfield, and positively impact our competitive position in this important private office side of service.

Of course as with any new rule.

There's always uncertainty.

We have been and will continue to be engaged with CMS in order to ensure our feedback is considered as part of any final rule.

In closing, we believe our wounded surgical business.

Has strong fundamentals and are noteworthy reason to own magnetic stock today. This is a growing profitable and cash generating business.

We recognize the work we have to do to reduce corporate expenses as a percentage of sales in those efforts are already underway and.

And lastly, we have sufficient capital human and financial to execute our business plans.

With today's results and changes in our financial reporting structure, we hope investors will be able to more transparently understand and evaluate our business now and in the future.

With that operator would like to open the call up for questions.

Thank you we will know conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Confirmation told me indicate your mind isn't your question Q.

You May press start to if you would like to remove the question from the queue for.

Participant she doesn't speak real equipment, it may be necessary to pick up your handset before pressing to star Keith Once again, that's star one at this time, one moment, while people far first question.

Our first question comes from Anthony Patrol at Missoula. Please proceed.

Thanks, and I hope everyone's doing well I think maybe I'll start with the four Q implied guidance and shift over to Pete and in a couple of follow up questions on on reimbursement in the announcement last night from CMS Pete.

<unk> on the on the guidance for four Q, 9% to 15% is wider.

Then we've seen in the past and obviously a number of puts and takes implied there several new products launched inclusive of at the fixed now having.

Reimbursement approval in Japan axiom fill in any effect are out there on the other hand, there's you know headwinds we've been hearing about all color in the way of staffing.

Staffing headwinds in particular, both in the inpatient and outpatient settings, certainly in the physician office setting as well.

So how should we be thinking about what get you to the high end of the range.

At 15% versus the low end of the range and I'll have a follow up question again on reimbursement.

Hi, Anthony good to hear from you.

You decided the factors really that drive.

<unk> drive us through the range Uhm.

Certainly the.

Ramp up and start in Japan, and how how successful we can be here and the remainder of the fourth quarter. Once we've launched who's going to be one of those factors.

We have seen the product and youth and that's great.

That's.

Have some uncertainty to it as to how I could put us up in the range.

The continued opportunity with the two new products.

And then you know you've got a you've got a holiday period.

And traditionally the fourth quarter has higher volumes, particularly given people trying to get procedures done is there.

Deductibles November before their reimbursement deductibles get reset in January we think that trend is going to continue this year. So we're comfortable certainly within the range I think the new products and then any reimbursement noise that could come through our the the top.

And the bottom factors relative to the range.

Thanks, I appreciate that and follow up on on reimbursement Todd you mentioned, the the update from CMS last night public.

Published last night that they're not gonna finalize their proposal.

On that terminology for skin substitutes.

Specifically in the physician office setting maybe just the level set can you sort of a recap what percentage of wound care is physician office.

As a percent of that total number four my medics and then the follow up would be just.

Recapping if the proposal went through what does that represent in the way of a headwind.

And where do you think ultimately we can settle out because it does look like C. M. S's acquiescing here to an extent so any any additional color there would be helpful. Thanks.

Yeah, Anthony I'll answer your first question and then the second part I'll, let Dr cash to address the private office business for my medics today is roughly a third of the of the wounded surgical businesses.

Call. It a small third probably more like 30% versus 33%, but anyway, it's about a third of our business and darker ketchup take the other.

I think with the thanks Anthony.

With the unknown surround reimbursement, it's hard to quantify the impact and on the business going forward.

As Todd mentioned.

In the current environment and without a strength of evidence that that sense of the product portfolio, the feel confident that and and a new reimbursement environment, they would be able to navigate it.

Effectively.

Based on what we have been in the past so we continue to work on.

On those elements in there you can do to work with CMS to give them feedback around the current reimbursement and how it's impacting the business today and how it should be in the future it via confident of being able to adjust that strategy, obviously part of the market.

Which is the outpatient.

Outpatient, but the wound care clinic side is reimbursed under.

A similar type of format and that'd be it.

Proposal cause slow right now in the private market and be able to continue to grow that business in that space. So we expect that should that there'd be no big surprises in the absolute amount of reimbursement. So we should be able to navigate that space effectively.

That's helpful and just just a quick follow up there and I'll hop back in it did it seem to be pretty vague and.

In terms of the comment period and when they're Gonna open that up is there anything more you can sure there is this.

Sort of a one two event, where they begin the common period and and it and <unk> and we get an update into two Q or is that window, perhaps a little bit wider.

We know almost as much as you do in terms of it that they haven't been any more clarification on.

It'd be noise that they plan to have that comment period in town Hall.

In early 2023, and subsequent to that they would give us more feedback.

I would expect that any loot changes would still fall into the next calendar year as a result of that but what is the.

Milestone date in terms of communication to the broader.

Industry in the physician community <unk> comments at the we don't have much clarity on that as well in terms of timing.

Okay. Thank you.

Our next question comes from RK with HD Wainwright. Please proceed.

Thank you uhm, Thanks, Todd paid in cash.

Yep.

For the updates.

To take.

Alright.

Charge of Mavericks.

And and do you know.

The operation ongoing operations.

You managed statements and.

You put us.

Mandate to the management by asking them to improve the operating margin something more than surgical business.

Okay Goodbye 30 per cent.

If that's right or not but.

So if so from <unk>.

<unk>.

At a higher level.

What are the areas, where do you think that $300 per month can come.

You know.

To get get to your mandate.

Okay. Thank you for the question.

I would say this I'm really thinking about this.

And in terms of execution.

Thinking about this.

All in terms of making decisions to advanced the business with a sense of urgency.

And so.

You know I was always told that if you want to make $2 you Gotta make one dollar first.

And I know that sounds like it doesn't it says Stacy obvious.

Is duckett cash if and I have talked about the wound surgical business.

We think it can become more profitable than 30 per cent, but we need to start with 30% and so the four priorities that we laid out today are all about growth and also about improving profitability and capital discipline and that's really what I'm focused on here in these in these first 60 days or so.

What I think I'll continue to be focused on for.

The next one.

Okay. Thanks for that and then on the on the App to fix lunch and in Japan.

Mostly just.

This launch of us.

I'm being worked on.

Quite a bit of time waiting.

Waiting for the reimbursement to come through.

And now that we have any embarrassment and your audit cause acute into lunch.

Even though Vietnam meaningful to have onions to talk about.

How is how is it working.

Working through alright in terms of.

In terms of getting the launch itself and also <unk>.

Sort of.

Operational.

The that you do it in Japan is it the same.

<unk> <unk>.

That'd be all for you and then you have symptoms of rebates and whatnot are.

The different and I'm trying to understand you know how fast can you get.

Get to the stage, where you can actually start predicting.

Future quota sales.

Good question I don't think I'll I'll turn it over to Doctor Cashman.

Good afternoon again, that's a great question.

Again.

You are very pleased with the reimbursement the way to establish in the absolute value.

Reimbursement that as well.

And the <unk> started out approach of how we can commercialized in Japan, because in the absence of reimbursement, we weren't able to make progress in terms of making having a sales channel in place which is in the form of a distributor. So we end the changes.

Finalizing that before we can commercialized product in the meantime, we have been very focused and trying.

Trying to.

<unk> the market and what I mean by that is we are working with.

Significant kols over there.

Physicians who have used.

The product both for V. L U N D F U cases.

Feedback from those cases has been positive so that gives us confidence that.

Both the profile of patients.

Of wounds that we are targeting and the outcomes we expect.

You'll be positive and at drive adoption of a product once we are ready to.

Launch it fully.

Fully in the marketplace.

And our approach.

Two launching it is.

And some of its basic but not too complicated but in Japan.

The key element is.

We have just spoken is that this is the first of its kind biologic amniotic product to be launched in Japan and and.

As a result of it we have the obligation is relative responsibility to make sure that we can educate the market and as a result, we we are having any focused on that for the first few quarters.

<unk> channel, but also to medical education.

In terms of doing that generating some local evidence that cases can be shared.

Market based as well that would be in heavy emphasis.

So while the revenue guidance that'd be just outline includes some contribution from Japan.

As we expect to be commercial in queue for we do expect that the.

The revenue back in 2023, there'll be meaningfully, but the overall corporate go with them I won't be able to expect me to quantify the amplitude of that but we expect that to be.

Ah could contribute to growth and subsequently is after that as well.

Perfect. Thank you very much thanks for taking my questions I'll step back and get back into shape.

Our next question comes from car Burns with Northland Capital. Please proceed.

Thanks for the question Uhm, turning this five seven and understanding that the procedure volumes for lower in July and August .

They can sense and probably some scheduling issues with providers.

But then sales off and rather increase since September would you characterize the environment now as being more normalized argued believe that there's still a bit of a warehousing of procedures that would reflect pent up demand that might fall into the fourth quarter bolster the four corner and possibly even spill over into the first half of the next.

Here thanks.

Yeah, and I'll live Dr. Ketchup comment about what he is being seen and been seeing or hearing anecdotally, but.

I think we will talk about the fourth quarter of course, when we get there but.

What we have so far I believe been experiencing in October is more a continuation of what we saw in September and and that was more of a return to normalcy.

July and August .

Always vacation.

But this year.

Vacation impact was greater than normal I think in September we saw a more of a return to normalcy and we were already on a good growth trajectory before we got to July and August is reflected in Pryor reporting on.

The basis of just the advanced wound care product portfolio.

So September .

Return to normalcy, and I think we can choose to do that.

Here early in queue for but.

Succotash, if you have any thing else and go where you want it.

Mmm no I think taught you.

Answered the question of good afternoon call.

Q for typically is a stronger quarter, it's but.

But it's very hard to.

Mm differentiate that the growth coming from Q T to queue for between what's as a result of the pent up demand our patients that have gone on sale in Q3 versus what's just the normal cyclic nature of.

Growth in there so.

So we can continue to monitor that compared to a market checks as we see that growth.

But the asking what I would call and what thoughts as described at the.

What is a normal pace.

In Q4.

That's not necessarily April two in depth.

<unk>.

Whether that's bent up demand or that that's just the normal trajectory Q4, SP mentioned is driven a lot by pushy.

Procedure of growth as a result of deductibles being mat and people wanting to get their procedures done.

Period before they either one a new insurance plan on your deductible kick in starting January 1st so.

Thanks, that's very helpful.

I have a next question comes from John Vander most of the tax. Please proceed.

Good evening, everyone cannot follow up on <unk> guidance questions. I was wondering how you break down the increase over the prior year. When you look at products that have been around since 2021, and then the new product launches that that recently went out how do you.

Break it down to those different components.

John It's D. We haven't provided that that's all that's all included in those pieces.

If you go back to some things we've talked about over the last year. So we've given people a view of over a multi year period, how the existing portfolio concludes or contribute to our growth pattern versus the new products in versus the the growth.

<unk> outside the U S or geographic expansion too.

When that 11% to 14% range over a recurring number of years, the 2% to 3% was focused on these new products in 2% to 3% on the international expansion.

Again, that's over a multiyear period, so within a quarter or years those numbers will move around.

That's the only thing we've said relative to that and it's rubbing indicated what we've talked about here the 73 million to $76 million incorporates.

Anything or existing portfolio, the two new products here in the U S and launch.

Launch in Japan.

Okay.

And I also wanted to follow up thank the gap and also I wanted to follow up on that.

Comment you made about free cash flow I think I heard you say it might be neutral for the year and it looks like you know we're already down over 10 million did I hear that correctly.

Oh, you did free cash flow neutral as to what we've talked about really over the last coming out of the third quarter of last year that was what we talked about kind of through the end of 2022 being free cash flow neutral Rimmer.

Remember the fourth quarter goes have higher volumes uhm, you're right. When you looked at the trailing 12 non through the nine months of the free Cashflow number uhm, which as we define it is adjusted EBITDA less the capital expenditures and patent cost.

But it really it was just a way to say, we're going to be sort of cats breaking.

Breakeven and that kind of proxy for cash flow.

So yeah, that's what we said and you're you're thinking about it correctly.

Great well that's impressive is based on where you are today for the cash though.

I just wanted to see if you could share any of the details of the clinical protocol for us for the for the knee osteoarthritis.

Efforts.

Maybe top line kind of big picture.

The details on that.

Yeah, I think we can give you a little bit of color on on that.

Why don't I turn that over to doctors signed to give us an overview of those.

Hello, welcome for the <unk>.

Anticipated Registrational trial that we're working hard to get started.

Looking at our dosing.

Patients with either saline or 40 or 100 milligrams of <unk>.

And.

We will be looking at.

The impact that has on the level of pain, and then put it in function it's six months.

Other aspects of the protocol, we're still in discussion with the F. D. A to make sure. We have an agreed upon protocol that we think will.

Demonstrated utility and safety of our product.

Okay, great. Thank you.

Thank you at this time I would like to turn the call back over to Mister <unk> closing comments.

Well. Thank you operator in closing I'd just wanted to reiterate this quarter. We we accomplished a lot of achievement. So I think we can build upon.

The two new products had.

Good showing into a couple of weeks in September when they were in the market I think we feel optimistic about these moving forward as well as our ability to continue to innovate with new products Japan.

Japan represents a really important opportunity for us and an exciting opportunity as the first amniotic product into this market as Dr cash you've talked about.

And we are close to being ready to start.

Our registration will study for neo way and that's going to be an exciting time.

We have to work through some opening comments of course with the F D. A.

There is no denying though that we need to be more profitable and we're working on that we have goals in place. We now have to develop the detailed plans to realize those goals in that process process as in.

Place right now to be able to do that and then we look forward to reporting back to your shareholders and investors.

In the near future as we take on these initiatives and with that I just would thank you for your interest in my medics.

And did you have any questions about today's call or the information that we released please contact Matt <unk>.

At the you contact information as described in the press release today. Thank you very much thank you up or.

Thank you. This does conclude today's teleconference. Then we have to ask you may disconnect. Your lines at this time and have a great day.

[noise].