Q4 2022 MiMedx Group Inc Earnings Call

Speaker 1: we finished 2022 with a solid Q4, generating over 10% year-over-year net sales growth and an improving adjusted EBITDA. In fact, our fourth quarter net sales were our highest since the end of 2019. This strong finish to 22 has given us excellent momentum entering the new year. I believe with what we already have in place, the business can deliver consistent top-line revenue growth for the foreseeable future. Not surprisingly, I've been asked several times what it was about MiMedx that attracted me to the opportunity. So I thought I would start by addressing that question, then we will dive into specifics about the business and our direction moving forward. While there are many positive aspects about this company, I will highlight the three that are most compelling for me. The first was the company's best-in-class technology. MiMedx is a pioneer in the field of potential biologics. With an unmatched product portfolio, it makes a positive difference in the lives of an increasing number of people. Second was the quality of people I met prior to joining the company. And as I've gotten to know many of my new colleagues over the past few weeks, it is abundantly clear that we have a team of very knowledgeable and experienced people at every level of this organization. They understand the business and are as eager as I am to succeed. I am proud to be... And finally, it was important to me that the business was stable with significant opportunities for growth. MiMedx has a large and growing revenue base with opportunities to streamline operations and improve profitability. Some of that work, in fact, is already underway.

Speaker 1: Moreover, I believe this company has the ability to make opportunistic acquisitions or licensing deals that will enhance our growth profile. Let me shift gears and talk about the future and how we are focusing the efforts of the organization. Our success will be determined by how well we execute on three basic growth objectives. All company activity will stem from one of these three areas with resources being allocated accordingly. Our first growth objective is to build on our leadership position in the wound and surgical markets by enhancing our product portfolio or concurrently expanding geographically.

Speaker 1: We operate a highly profitable business approaching 390 revenue, which for top of it we can grow annually as double digits with the proper focus.

Speaker 1: As such, the majority of our resources and focus will be invested in our room and surgical business. We must execute wellness core business in order for my medics to be successful.

Speaker 1: On our last call, the company reported on progress we've been making in these areas.

Speaker 1: Specifically, in September , we introduced two new products to the US market.

Speaker 1: As people who are hiring, our Ford Quarter results make evident that we are all through a fast start with these new products.

Speaker 1: During these early months of the launch, we have seen widespread market acceptance, and we are exceeding our initial expectations. Additions like these to our already market leading product portfolio will serve to strengthen our brand and customer relationships, and expand the use cases for our products into more areas...

Speaker 1: where chronic and acute wounds are treated.

Speaker 1: We've also reported on the work being done in Japan in an effort to establish a presence in select markets outside of the US.

Speaker 1: While the requirements to get up and running in Japan have been a bit arduous, we've been making steady progress.

Speaker 1: We now have clearance and reimbursement for our product, and several hundred positions have recently been trained when it's used.

Speaker 1: I'm also pleased to say that we have started generating initial sales with our partner, Dunsley Medical.

Speaker 1: Our second growth objective is to develop opportunities in adjacent markets in addition to our development of a new ELA product.

Speaker 1: By way of update, after active engagement with the FDA over the last several months, we are pleased to announce that our registration of the OA study is now underway.

Speaker 1: This is the result of a tremendous amount of work on the part of our regenerative medicine team and our partner CRO, Nordic.

Speaker 1: Thank you to all those in the organization who got us to this exciting milestone.

Speaker 1: As a reminder, this is the first of two studies that will be needed in order for us to file a PLA.

Speaker 1: In this trial, we expect enrollment of approximately 470 patients.

Speaker 1: with three arms, a six month observation period, and six additional months of monitoring.

Speaker 1: We are pleased to be underway and look forward to reporting on our progress as appropriate. While the NEO-8 project is our largest investment for the possible entry into a new market, it is also our intent to look for additional opportunities in areas that are complementary to our wound and surgical portfolio, both organically and inorganically.

Speaker 1: Last year's licensing of the term Therapeutics IP estate being a prime example.

Speaker 1: And finally, our third objective will be to build a corporate discipline around expense control, rationalization, and continuous process improvement in order to ensure our growth becomes more profitable over time.

Speaker 1: On our last call, my predecessor, Ty, detailed his objectives to drive operating leverage.

Speaker 1: Specifically, the company has goals to improve the room in surgical segment contribution margin to release 30% of segment net sales and to get corporate expenses as a percentage of sales to below 20%.

Speaker 1: An important step in this process was to augment the team with the experience and leadership Ricky Whitlow brings as our new Chief Operating Officer. Ricky has an extensive background in the human tissue space and in her relatively short time here is already establishing disciplines within our operations team that will improve production yields.

Speaker 1: and help transform the way we bring products to market. I've had success creating value at prior companies by establishing a process of consistently identifying growth drivers for the business.

Speaker 1: If we stay focused and execute well in these three areas of business.

Speaker 1: I believe we will continue to build on this franchise, have the opportunity to create tremendous value, and once again establish my medics, if not only the leader in our space.

Speaker 1: one of the most highly regarded healthcare companies in the market.

Speaker 1: I look forward to reporting on our progress in each of these areas.

Speaker 1: Hopefully this gives you a sense of what we need to my medics and hopefully you to share my excitement for the future.

Speaker 1: Now let me turn the call over to Pete who will recap our Fort Quarter and full year results.

Speaker 2: Thank you, Joe, and good afternoon, everyone.

Speaker 2: and good afternoon everyone. As a reminder...

Speaker 2: Unless otherwise specified, all results referenced in my prepared remarks are on a fourth quarter 2022 versus fourth quarter 2021 comparison basis.

Speaker 2: We ended 2022 with strong commercial and operational momentum and reported our highest level of quarterly net sales since the fourth quarter of 2019.

Speaker 2: On an adjusted net sales basis, our fourth quarter results represent the highest level we have seen since 2018.

Speaker 2: We are proud of these results and expect our momentum to continue going into 2023.

Speaker 2: For the fourth quarter, we reported $74.4 million in net sales compared to $67.4 million.

Speaker 2: As you know, virtually all our net sales come from our wound and surgical segment, which delivered $73.6 million, reflecting growth of 10.6%.

Speaker 2: The strong performance is a testament to the dedication of our commercial team and our leading product offering, including our recently launched products.

Speaker 2: Further, this result is despite the continued unfavorable competitive environment in the private physician office setting.

Speaker 2: The quarter reflects strength across our wound and surgical end markets, and the team remains focused on bringing more new products to the market in support of future top-line growth, both organically and otherwise. Gross profit was $60 million.

Speaker 2: compared to $56.7 million. Gross margin in 4Q was 80.7% compared to 84%.

Speaker 2: This margin level reflects production variances, primarily from lower production levels, and is below our expectations going forward. We have several initiatives underway focused on improving our gross margins in wound and surgical.

Speaker 2: selling general in administrative expenses or SG&A were $50 million compared to $53.1 million.

Speaker 2: The current quarter included increased commissions on higher sales and the impact of severance associated with restructuring activities.

Speaker 2: These were more than offset by lower compensation, principally due to year-end settlement adjustments, and also reflect the impact of cost reductions taken during the quarter.

Speaker 2: As we previously noted, headcount reductions late last year are expected to reduce SG&A costs by more than $5 million on an annual basis.

Speaker 2: Our research and development expenses were $5.4 million compared to $4.6 million.

Speaker 2: We saw increased R&D expense in both of our segments. The higher spend came primarily in regenerative medicine related to preparation activities for our knee osteoarthritis clinical trial, which is now underway. Investigation restatement and related results were an expense of 3.5 million people.

Speaker 2: 2.2 million dollars.

Speaker 2: adjusted EBITDA with $7.3 million or 9.8% of net sales compared to $3.6 million or $5.4% of net sales.

Speaker 2: I want to now briefly discuss results for the full year and will remind you that 2021 included sales of products impacted by the end of the FDA's period of enforcement discretion on May 31, 2021.

Speaker 2: impacting not only net sales but also our profitability metrics.

Speaker 2: Net sales for the full year 2022 were $267.8 million compared to $258.6 million in 2021, an increase of 3.6%.

Speaker 2: excluding products impacted by the end of enforcement discretion.

Speaker 2: 2022 net sales growth was 10.5% compared to the $240 million in 2021.

Speaker 2: You can also see this growth in our wound and surgical segment, which had net sales growth of 10.9% for the full year 2022.

Speaker 2: Gross margin was 82% for the full year 2022 compared to 83.3% in 2021, again reflecting the impact of production variances.

Speaker 2: We had R&D expenses of $22.8 million in the full year 2022 compared to $17.3 million in 2021 as we increased our efforts on new product development and on our new osteoarthritis

Speaker 2: SG&A for the year 2022 was $208.8 million compared to $198.4 million in 2021.

Speaker 2: That loss for the year ended December 31, 2022, was $30.2 million compared to a loss of $10.3 million in 2021.

Speaker 2: Investigation, Restatement, and Related Expenses totaled $12.2 million in 2022 compared to $3.8 million in 2021, which included recoveries from our Teno program.

Speaker 2: Finally, adjusted EBITDA in full year 2022 was $3.9 million compared to $18.7 million in 2021.

Speaker 2: On a segment basis in 2022, Wounded Surgical had a segment contribution of $66.7 million for 25.2% of segment net sales.

Speaker 2: and regenerative medicine had a segment loss of $15 million.

Speaker 2: Additionally, SG&A expenses in corporate and other were $62.9 million or 23.5% of net sales.

Speaker 2: As of December 31, 2022, the company had $66 million of cash and cash equivalents compared to $73.2 million as of September 30, 2022, and to $87.1 million and is now collecting more than $ cotton.

Speaker 2: as of December 31, 2021. The sequential decline in our cash and cash equivalents was driven primarily by changes in working capital, including the annual payment of certain insurance premiums, along with the cash consideration associated with the term therapeutics agreement we announced in December .

Speaker 2: Based upon our current position and expectations for the business, I want to re-emphasize that we remain well-capitalized and do not proceed in the EEP for external financing.

Speaker 2: Looking ahead, our goal is to deliver low, double-digit percentage growth in net sales.

Speaker 2: While we have seen solid demand for our products in the hospital outpatient, hospital inpatient, and wound care clinic settings,

Speaker 2: The challenges associated with the reimbursement environment in the private physician office site of service have weighed on our business, and we expect this to continue during 2023. Joe will touch on the latest developments as we see them in this segment of the market.

Speaker 2: From a profitability perspective, as you heard us say on our third quarter call in November , and as Joe indicated earlier, we are focused on our goals of improving our wound and surgical segment contribution margin to at least 30% of segment net sales.

Speaker 2: reducing our corporate overhead so that the corporate and other SGNA expense as the percentage of sales is below 20%.

Speaker 2: In summary, our fourth quarter financial results were strong led by commercial execution driving our top line results.

Speaker 2: and we are making progress to position the company for sustainable profitability.

Speaker 1: I will now turn the call back to Joe. Joe? Thanks Pete. As you have just heard, we've finished the year with a strong board quarter, during which we recorded quarterly revenue growth of over 10%. Continued to roll out our two new products in the US. And set the company in a course to drive greater efficiency and expense rationalization.

Speaker 1: Already in 2023, we have got our business up and running in Japan, added experience, leadership over operations, and initiated our Registration Need OAS Study.

Speaker 1: Before I open the call for questions, I wanted to comment on one additional item.

Speaker 1: Reimbursement in the private position office setting. As Pete mentioned, our business continues to face headwinds in this segment given the current reimbursement environment.

Speaker 1: which has created very well-sided competitive landscape.

Speaker 1: Specifically, it appears some participants are using what I would describe as a loophole in the current system to provide sizable financial incentives to physicians who use their products.

Speaker 1: at the expense of the Medicare trust fund. Using financial incentives for physicians to differentiate a sale is expressly prohibited by Medicare regs. It goes without saying, we do not engage in such practices. And as you can see on slide 16, all of our products are on the ASP list.

Speaker 1: Products that have historically not been on the ASP list are the ones being used to create financial incentives to positions.

Speaker 1: Those of us who have been around health care for long enough know that eventually CMS closes these blue poles.

Speaker 1: To that end, we have been actively engaged with the agency, highlighting this untoward behavior and offering our perspective and recommendations throughout this process.

Speaker 1: In mid-January, we participated in a CMS-hosted town hall meeting on the topic and provided subsequent written comments.

Speaker 1: We will keep you up against the issues we have learned more.

Speaker 1: So in summary, it is abundantly clear to me that MiMedx is an outstanding business.

Speaker 1: with an incredible line of products that make a positive difference in the lives of thousands of people every day.

Speaker 1: We have a highly skilled team that is extremely passionate about delivering these life-changing solutions.

Speaker 1: We have a revenue base that is growing at a healthy clip, approaching $300 million with margin improvement efforts underway. And we have a product pipeline rich with opportunity.

Speaker 1: Given the solid foundation I have to work with.

Speaker 1: I am truly excited to be at MIMEDICS and enthusiastically embrace this opportunity.

Speaker 1: I look forward to working with the entire MiMedx team.

Speaker 1: I can tell they generally share my believe excitement about our path forward. I'd also like to thank Todd Newton.

Speaker 1: who did all you could ask during his time as interim CEO .

Speaker 1: As a result of Todd's efforts, I joined a company with positive momentum and a bright future ahead.

Speaker 1: all of Todd's efforts, I joined a company with positive momentum and a bright future ahead. With that, I would like to open the call to questions.

Speaker 1: Operator, we are now ready for our first question.

Speaker 3: Thank you. Again, at this time, we'll be conducting a question and answer session. If you would like to ask a question, please first star one on your telephone key bag. A confirmation toll will indicate your line is in the question queue.

Speaker 3: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker 3: And one moment please, I'll be poll for questions. And our first question comes from the line of Anthony Petrone with Mizzouho Group.

Speaker 4: Please proceed with your question. Thanks, and good afternoon, and again, Joe. Congratulations on your appointment and congratulations on the team on, you know, a new start here to the year. Or maybe Joe, just to kick off, you mentioned some high-level comments.

Speaker 4: several weeks into the CEO role. You know, maybe just as you think of the broader strategy staying focused on Wound Care for One and then building out the surgical applications portfolio for two.

Speaker 4: how the priorities may or may not shift on those two M market channels specifically. And then maybe your renewed, your fresh look on development. Obviously we have the NEOA initiative, but how do you sort of view deeper pipeline initiatives for MiMedx?

Speaker 1: Then I'll have a couple of follow-ups. Thanks. Yeah, so Anthony, thanks for the question. I think we need to back up a little bit. My approach initially with the company is to...

Speaker 1: more formalize the strategic planning process and cycle, put more structure around it. And as we do that...

Speaker 1: ideas will flourish from that or stem from that. And then we'll start to build out a Corp Dev pipeline both internally and externally. I think you get to now on the head with a little care and surgical business that offers the kind of financial profile that this business does and the growth potential.

Speaker 1: That warrants a lot of focus.

Speaker 1: and that's what pays the bills. And I think there's tremendous opportunity there. So my initial thoughts is that's where I will have most of my focus. And then we'll look to see if we can eventually migrate from a wound care company to a wound management company and start to offer some other capabilities in and around our product portfolio, both product line extensions, new products.

Speaker 1: and potential adjacent species. As far as a fresh look at development, I really don't have anything new to offer today to be candid. I think we're closing out our first month here, and it's been, you know, quite a learning curve.

Speaker 1: I can tell you that everyone I talk to both inside this company and outside this company are incredibly passionate about the entire portfolio.

Speaker 1: These products are just amazing. When you hear things like change my life, thought I was never getting better. You know, this product is delivered from God. I mean, these are the kind of things that I'm hearing in the first month. It tells you that we're really onto something with this company. And I know the company.

Speaker 1: room for improvement. So it's hard not to get ridiculously excited about the current product portfolio.

Speaker 4: Well, that's very helpful. Maybe I'll two quick ones. I'll throw them out there. One will be on the 10% outlook for 2023. And maybe how should we be thinking about epi-fix in Japan within that context?

Speaker 4: specifically, so maybe just an update on contribution, epifix in Japan. And then the last one will be on reimbursement and wound care and the physician office setting. Obviously, there's some literature out there on LCD proposals.

Speaker 4: The company has their recommendations. Anything you can add on any new literature from LCD Max.

Speaker 4: post January .

Speaker 1: And with that I'll get back in the queue. Thanks. Yeah, I think Pete you can elaborate on this. I think that's a fix in Japan. We're expecting some contribution, but it's not material this year We're really looking at this year It's kind of a developmental year to get that business up and running as I mentioned about prepared remarks things have moved a bit slow But we're making progress. We've had our first couple sales into our local partner

Speaker 1: and there's been sales from the local partner to end users. We've got a lot of physicians trained on use of the product, and we're putting additional resources in country to support our partner. So we're taking all the right steps. We're pretty excited about it, but it's hard to kind of say where that's going to go in 23. Frankly, we won't know what the outlook for 24 will be until the live part of this year.

Speaker 2: Joe, that's correct. I think you've covered everything there. We're just excited about the reception. We continue to see from practitioners on the market and are pleased that the product is getting into the market and applied on patients as we speak.

Speaker 1: And then your other question Anthony was about reinforcement. Nothing new since that January meeting. Best guess is we probably won't hear anything until proposed regs are published in the middle of the year, probably around the July timeframe. And then I think there's usually a comment period associated with it and then there's a file regs.

Speaker 1: at the end of the year. I just think, my dimension to see you when we first talk.

Speaker 1: This company is on the right side of this, right? When you are using financial incentives to convince a position to use your product, it's just not what the regs are intended to, you know, the guide towards. So I think I'm very comfortable with this company's behavior and I think as this sorts itself out, we're on the right side of it. So, I think I'm very comfortable with this company's behavior and I think as this sort of thing, I think it's just not what the regs are intended to.

Speaker 2: Anthony, the one-on-the-thing to remember is we're talking about revenues that is probably about 28% of our business. So in addition to being on the right side of this, it's a portion of our overall portfolio but not that by no means the dominant portion.

Speaker 3: That's helpful. I'll hop back in. Our next question comes from the line of Karl Burns with Northland Capital Markets. Please receive a question.

Speaker 1: All right, thanks for the question and congratulations on the results of the progress. With respect to the growth profit margin, which I believe averaged 80.7% in the fourth quarter was cited as being negatively affected by lower production levels. Can you be a little bit more specific on what was affecting the production levels and when you might expect them to return normalized levels?

Speaker 2: Now Carl, speak good afternoon. We are looking for that to turn here in the in 2023, including in the first quarter. How far it turns immediately versus later in the year is yet to be seen. Part of this has been frankly employee-based as well as efficiency-based. We've had some turnover. As you saw over it, it works the best delivery in the first ten years.

Speaker 2: and we are not getting, we have not recently had the efficiency out of our production process that we historically have seen or desire. As Joe mentioned, we have new leadership in the team, and that's helped us bring a refreshed focus on these initiatives. The team has worked hard in the fourth quarter and even after the end of the year in identifying.

Speaker 5: and the physician segment. And so, are they potentially going to, you know, other segments for treatment? Is that a factor here amid the reimbursement of certainties? Thanks.

Speaker 1: I don't think so. I don't think the way you've voiced the question, I don't think so.

Speaker 1: What's hard to know is how much of this is potential overutilization because of financial incentives and how much of it is just a share that we're not capturing because we're not participating in that.

Speaker 1: in that game, if you will.

Speaker 1: Piction itself over time will have a better feel for, and I think we'll start to gain more shape.

Speaker 6: Got it. Great. I'll hop back in the queue. Thank you.

Speaker 3: Our next question comes from the line of Swayampakula Ramachand, with HC Wainwright. Thank you for seeing us.

Speaker 7: Thank you. This is RK from HC Vain RISE. A couple of quick questions from me in the wound and surgical business, trying to build a portfolio of new

Speaker 7: how did the new product do for the year, and what sort of products should we be thinking of in the coming year, in 2023?

Speaker 2: Okay, it's Pete, what I would.

Speaker 2: very happy to tell you is the new products did quite well in 2022 and really met our expectations for the year. The team did some great work, even with some of the delay from what we might have thought the initial launch date was. So we have a lot of good momentum on these products coming into 2023. As it relates to products for this year, I would certainly highlight the success of 2021.

Speaker 2: the opportunity that the turn transaction reflects for us and a reminder there's two pieces to that. There's frankly intellectual property of state that we have access to now, we have a license of the information and the antimicrobial aspect.

Speaker 2: as well as a product that they have in development and in front of the FDA that we would have a commercial license opportunity once that approvals in place. Do you know anything you'd add on the new products from? Yeah, I would just say, Mark, from my perspective, a new guy coming in, I'm trying to assess various parts of the business.

Speaker 1: When you have a commercial team that can take two new products and move them into the market as rapidly as this team did, you are in a pretty good spot. A lot of times commercial teams that don't operate as effectively stumble with new products. So what does that tell me? And I'm going to temper my own enthusiasm for you. It tells me…

Speaker 7: that there's a lot more I can do with this commercial organization. There's a lot more this sales and marketing team can do. Sanjay Gupta talking about ability to do a lot more, you also highlighted expansion geographically. So when you say that,

Speaker 7: Are you talking more within domestic geographies, or are you also talking about international geographies?

Speaker 1: Well, really both, right? We have underpenetrated regions of the US will look to add resources as appropriate if the business warrants. But really what we're talking about there is the initial focus in Japan. As we add more structure around our strategic planning process.

Speaker 3: potentially other countries will emerge as targets of opportunity. Thank you. Thanks for taking all the questions. Our next question comes from the line out, John Rennem Austin with Zach. Jennifer Seville, gateway. Okay.

Speaker 8: Good evening, Matt, Pete, and welcome aboard, Joe. Let me start out with a question on Japan and kind of continue the theme on here. And, you know, as you said, that's one of your areas that you expect to grow in. Now that you've got a foothold in the country, what other products might be appropriate for that market, and is that something that you'll think you might do now that you have the infrastructure in place?

Speaker 8: Yes, it's really too early for me to answer that question. It's a good one. And again, I think as we go through evaluation of various opportunities, we'll look at that. But I can't give you any more color in that today. Okay. And then I had a question for you Pete on R&D. You know, now that we kicked off the...

Speaker 2: generative medicine segment.

Speaker 2: We've talked about those trials, individually those trials being somewhere in the $20 million, maybe $25 million cost level, and that cost is going to be incurred over a multiyear period. For this first trial, it will be principally 2023 and 2024 with some of that front-loaded. Okay, got it. Yeah, that makes sense.

Speaker 8: And then on the two trials that you're going to run for KWA, are they going to go, is there going to be any overlap there? Are you going to wait until you analyze the first one? And then perhaps talk with the FDA before starting the second. How do you think that will run in between the two of them? The second trial would be a trial we would

Speaker 2: We reach a point where that's ready and the other, this first trial is still going on. We'll make an assessment and yes, it's possible they could overlap. But again, the gating factor is more about the interaction with the FDA and our preparation for that regarding the chemistry, manufacturing and the tools process for the product itself.

Speaker 8: Okay, I know that's some good detail there. And last question for me is on the growth that you expect. You know there are a few different components of growth, organic product growth, international sales, and new products. How do you break that down among those three components? Certainly, the predominant driver is our existing book of business.

Speaker 2: And now, as you think about existing book of business, that includes these two new products we launched in 2022. So that's going to be a predominant driver. New products are a driver as well as the growth in Japan and other countries. So they're all pieces of it. We're pleased with the way the team has performed domestically, again, 10 plus percent growth year-over-year.

Speaker 2: driven by the new products, driven by our work and the surgical recovery application, and just driven by the team's efforts, working in some tough environments in that private office setting. So we're pleased with that and look for that to continue.

Speaker 3: Great. Thank you for taking my questions. Our next question comes from Anthony Petrone with Mizzougo Group. Please proceed with your question.

Speaker 4: Thanks, appreciate that. Just a follow-up on some of the proposals MiMedx has out there as relates to the physician office reimbursement.

Speaker 4: just kind of thinking of a scenario here. In other words, if there's acceptance on other products having to secure a tissue reference group letter.

Speaker 4: you know, from FDA and that all there should be uniformity that all of these skin substitute products.

Speaker 4: should be on the Medicare SP list.

Speaker 4: You know if that sort of is accepted and plays out What is the potential for some of these products to drop out of market A?

Speaker 2: And what would be the upside for EPI fix if the mnemetics, you know, proposals are adopted. Thanks. Anthony is Pete and I think we are hitting on a good point there and I'll speak a little bit personally. But this is a view we talk about internally.

Speaker 2: which is, as all the companies that are in the space are required to meet regulatory burden that includes things like obtaining a tissue research or reference group letter of clarification to your product is 361.

Speaker 2: and going through the associated FDA inspections, we do think there are companies that will not want to make the effort to meet those burdens. And so yes, we do think there could be some companies that might drop out of the market.

Speaker 2: When that starts happening is hard to tell. The TRG requirement is sitting in front of proposals with some LCDs. As you know, we have that for our sheet products, our core FE6 line, and that's 90% of our portfolio in the private office settings. So we're...

Speaker 2: we feel comfortable there. But you are, I do think you've hit a good point where the regulatory burden as it becomes more concrete, there will be some products and thus a potential tailwind for ourselves.

Speaker 1: So Pete, we do grow in this segment, right? We grow in this segment today. We just don't grow as fast as we do in other segments. So when price is not the issue, when we're competing on clinical efficacy, we win. And to the extent that we level this playing field, we will win more often.

Speaker 1: So, the peak point that will equate to some upside for us. It's hard to quantify that because again, you have to take into account that some of this may affect the over-realization.

Speaker 1: it will equate to some upside for us. It's hard to quantify that because again, you have to take into account that some of this may affect the overrealization. Yes, I agree with that.

Speaker 3: Thanks again. Hey, Darin, next question comes from Paul Bergens with Northland Capital Markets. Thank you for the follow up question. Pete, you touched on this with respect to the term in licensing program. Can you just remind us when the Purdue Faction date is?

Speaker 5: on Flex AM, which is the Bovine College and Powder product, and then also unrelated but quasi-related. Any comments or thoughts in terms of potential tuck under acquisitions, they could augment the wound and surgical segment as well.

Speaker 2: Carl, I'll start with your first question and let Joe talk about the second. You know, there's no date to reference relative to approval, receiving approval from the FDA on the 510K submission from TURN or by TURN for the Flex product.

Speaker 1: It's the normal back and forth with the regulator asking questions. So we don't have any timeframe to share. As far as adjacent, too soon to start talking publicly about, I think the most important message to you guys is it's a focus point. We've formalized the planning process and we've put...

Speaker 3: a corp bed group together within the company. So really it's getting, it's laying the groundwork. Great, thanks so much. And we have reached the end of the question in our assessment. I'll now turn the call back over to the CEO , Joe Capra, for closing remarks.

Speaker 3: Thanks, operator. Thank you, everybody, for your questions and for your interest in the company. Look forward to talking to you in a few months. That concludes today's call. Thanks again. This concludes today's conference, and you may disconnect your line at this time. Thank you for your participation.

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