AxoGen Inc. Q1 2023 Earnings Call
Yes.
Ladies and gentlemen, thank you for your patience. Please remain on the line. Your conference will begin momentarily again, we do appreciate your patience. Please remain on the line your conference will begin shortly thank you.
[music].
Good day, ladies and gentlemen, and welcome to the Axis.
Acrogen incorporated reports first quarter 'twenty twenty-three financial results all lines have been placed on a listen only mode and the floor will be opened for questions and comments. Following the presentation. If you should require assistance throughout the conference. Please press star zero on your telephone keypad to reach a live operator at this time it is my pleasure to turn.
The floor over to your host Ed Joyce director of Investor Relations, Sir the floor is yours.
Thank you Kat and good morning, everyone.
Joining me on today's call is Karen Saturday accidents, Chairman, Chief Executive Officer, and President and Pete Mariani, Executive Vice President and Chief Financial Officer.
Karen will discuss the quarter and our outlook for the year and people were provided an analysis on our financial performance followed by a question and answer session.
Today's call is being broadcast live via webcast, which is available on the investors section of the accident and website.
Following the end of the live call a replay will be available in the investors section of the company's website at Www Dot accident, Inc. Dot com.
Before we get started I would like to remind you that during this conference call. The company will make projections and forward looking statements, including our 2023 financial outlook timing of our BLA submission penetration of core accounts market out marketing opportunities with nerve repair applications associated with breast O&M in the surgical treatment of pain and new product timing of our.
<unk> renovations and balance sheet positions.
Forward looking statements are based on current beliefs and assumptions and are not guarantees of future performance and are subject to risks and uncertainties, including without limitation, the risks and uncertainties reflected in the company's annual and periodic reports et cetera hospital staffing issues regulatory process and approvals APC renovation timing expense surgeon and product.
Adoption and market awareness of our products.
Forward looking statements are representative only as of the date, they are made and except as required by applicable law, we assume no responsibility to publicly update or revise any forward looking statements.
In addition for a reconciliation of the non-GAAP measures, including adjusted and core adjusted core and active account numbers, excluding the impact of Avaya purchases. Please reference today's press release and our corporate presentation on the investors section on the company's website.
And with that I'd like to turn the call over to Karen Karen.
Thank you Ann and thanks to everyone for joining us this morning on the clock.
We're delighted to announce the first quarter revenue of $36 $7 million, representing an 18% increase from the first quarter of the previous year.
This marks the third consecutive quarter of solid commercial execution and revenue growth continuing on the momentum we established in the second half of last year.
We believe the steady progress is due to our ability to execute in an improved environment of a hospital staffing and surgical capacity.
We had a solid start to the year in terms of our focus on gaining deeper adoption or core inactive accounts.
As a reminder, active accounts are those that have ordered at least six times in the last 12 months and may still be in the early stages of adoption.
Core accounts represent more penetrated account defined as those with greater than $100000 in revenue in the trailing 12 months.
Core counts have increased to 350 this quarter, an increase of 23% year over year and 5% sequentially.
Approximately 60% of our revenue is derived from core accounts, which usually consist of at least one surgeon who has adopted the oxygen nerve repair algorithm for a significant portion of their nerve injury patients.
Our focus is on leveraging leveraging the success of these early surgeon adopters with our products to gain more cases within that account.
And to encourage additional surgeons to adopt our product.
We believe that our greatest opportunity for growth lives with deepening our penetration in our core counts for the treatment of traumatic injuries and additional planned nerve repair applications, including breast on map and the surgical treatment of pain.
The number of our active accounts increased to 994 in the quarter representing growth of 9% year over year and 3% sequentially.
Active accounts represent about 85% of our total revenue.
But at the top 10% contributing about 35% of revenue.
We ended the first quarter with 116 direct sales representatives.
Up one from the end of the fourth quarter and in line with 116 a year ago.
We believe our revenue growth can be driven primarily by increased productivity of our sales force and.
And we will evaluate and add additional sales reps as their territories approach targeted levels.
Our direct sales force is supplemented by independent sales agencies that represent approximately 10% of our total revenue.
Product and procedure innovation is a key strategic strategic pillar for our long term growth.
We look to provide leading innovative treatments for patients with peripheral nerve injuries.
Last quarter, we announced an expansion of our recent station technique for breast reconstruction <unk> nation to include a new techniques that can be applied for some patients to choose an implant based reconstruction.
As a reminder, our original recent station program was developed to provide sensation for patients receiving an autologous flap reconstruction, which represents roughly 20% of breast reconstruction procedures.
The remaining 80% of breast reconstruction procedures, our implant based.
We believe that this new <unk> technique developed in collaboration with pioneering breast reconstruction surgeons can currently be applied to an incremental 10% to 15% of breast reconstruction patients.
We've seen strong surgeon interest in learning this technique and are well on our way towards our goal of training at least 20 surgical teams this year.
Today, we're also pleased to announce new innovation in our nerve protection portfolio.
The category of nerve protection covers a wide range of nerve injuries, including compression crash and complex traumatic injuries, where the nerve remains intact.
We also it also involves protecting the coaptation sides with nerve transactions.
We believe that the diversity of these entry types and their anatomical locations presents some unique challenges.
Optimizing outcomes for these patients requires targeted solutions to adequately address specific aspects of the injury and healing process.
Guided by feedback from surgeon experts, we've identified certain unmet needs in nerve protection and are developing new technologies to address them.
The first of these advances is Axa guard H J plus nerve protector.
Happy to announce that we received five 10-K clearance in April of this year.
<unk> H J plus builds upon the success of our existing Asgard protector and add new proprietary design features.
This new protector featured higher Amit alginate gel on an ECM based material.
In the short term healing process, the gel layer enhances nerve gliding and AIDS in minimizing soft tissue attachments.
Base material is remodeled to form a new long term protective tissue layer.
In addition to these benefits the configuration and handling characteristics of <unk>, <unk>, plus or optimize based on surgeon feedback to address challenging nerve protection application, such as cubital tunnel revisions and neuro trauma near major joints, where nerve mobility is critical.
We believe this addition to the <unk> portfolio improves our access to this nerve protection category.
Additionally, we continue to see the need and strong surgeon interest for a resorbable nerve protection product that provides temporary protection and tissue separation during the critical phase of healing for non transected nerve injuries. This application was previously addressed by <unk> soft tissue membrane.
We're currently developing a replacement solution to address this important market opportunity and expect that will that this will further strengthen our position in nerve protection.
We look forward to updating you on this new innovation in the coming quarters.
Turning to our new production facility I am happy to report that we're on track with our transition plans to the APC in Dayton, Ohio. This summer. This state of the art facility will provide capacity to meet our expected sales growth and support the BLA for advanced nerve graft.
This new facility will be included in our submission of the BLA for advance which is also proceeding on schedule and we expect to submit it by the end of 2023.
Following that we anticipate receiving approval in 2020 for a BLA approval will complete the regulatory transition of advanced nerve graft from a 361 based product to a $3 51 biological product and importantly, we believe events would be designated as the reference product, which would in turn provide 12 years of.
Data exclusivity with regard to potential biosimilars.
We continue to build market awareness of nerve repair with health care providers and through our direct to patient initiatives.
Particularly for breast and pain applications.
Our marketing initiatives are designed to engage patients and direct them to our recent station and rethink pain website. These websites are aimed at educating patients and raising awareness about the potential benefits of nerve repair procedures.
In addition, patient resources are available for locating surgeons skilled in these advanced techniques, particularly for those undergoing mastectomy and reconstruction and for individuals suffering from chronic neuropathic pain.
Our surgeon education programs on nerve repair remain a top priority for accidents and continue to generate interest in the surgical community.
Our education initiatives encompass a wide range of learning events, including hands on best practices training educational conferences and presentations aimed at surgical residents at the end of Q1, we surpassed our goal of training at least 75% of this year's class of hand, and Microsurgery Fellows.
Moving on to updates on our growing body of clinical evidence.
We remain devoted to developing clinical quality clinical evidence to demonstrate the safety performance and utility of our nerve repair solutions.
At the end of the quarter, we've reached a total of 220 peer reviewed publications across extremity trauma.
All over in pain.
Our focus on providing high quality data to support the benefits of allograft over alternative peripheral nerve repair technique.
<unk> is a top priority as we've discussed in the previous quarter. Our recently published comparative effectiveness meta analysis study has been generating significant interest from our customers.
To summarize this paper analyzed 35 peer reviewed studies and compared the meaningful recovery rates between allograft autograft and conduit.
The authors found that allografts had comparable efficacy to autograph and both sensory and motor nerve time for both short and long gas up to 70 millimeters.
Without the well documented morbidities associated with harvesting and autograph nerve.
Additionally, the study compared Medicare procedure cost and found that allografts and autograph operating costs were comparable in both the outpatient and inpatient setting.
And the early part of second quarter, we were delighted to see the publication of an additional peer reviewed paper comparing all payer facility procedure costs for both allograft autograft repairs.
This comprehensive retrospective study included over 1300 nerve repairs from the Premier database between 2018 and 2020.
The authors findings were consistent with the conclusions of the meta analysis, where they noted that there were no significant difference in procedure costs, when comparing autograph and allograft repair in either the outpatient or inpatient setting.
Additionally, and importantly for resource constrained hospitals. The authors concluded that Oh, our time was significantly shorter for allograft repairs and both out and inpatient settings.
Turning now to our outlook in todays press release, we reiterated our full year guidance with 2023 revenue in the range of $154 million to $159 million were pleased with the start of the year and look forward to continuing to execute on our plan.
We continue to expect that gross margin will be reduced with the transition to the company's new processing facility and expect gross margins will return to approximately 80% by the fourth quarter of 2023.
Now I'll turn the call over to Pete for a review of financial highlights.
Thank you Karen revenue this quarter was $36 $7 million, an 18% increase over the first quarter of 2022.
Growth was driven by increases in unit volume up 10% as well as 4% increases in both price and changes in product mix gross profit for the quarter was $30 million as compared to $25 5 million for the first quarter of 2022 gross margin was 81, 7% for the first quarter.
Compared to 82, 1% in last year's first quarter.
Total operating expenses in the first quarter increased 1% to $37 3 million compared to $36 8 million in the prior year. The increase in total operating expenses was primarily the result of increased compensation costs.
Sales and marketing expense in the first quarter increased 3% to $21 6 million compared to $20 9 million in the prior year. The increase was primarily due to other service costs.
As a percentage of total revenue sales and marketing expense was 59% compared to 67% in the first quarter of 2022.
Research and development expense increased 6% to $6 $7 million compared to $6 3 million in the prior year product development expenses represented approximately 56% of total R&D in both the current and prior year and includes spending in a number of specific programs, including the.
BLA for advanced nerve graft and innovation.
And innovation across our product portfolio.
<unk> clinical expenses represented approximately 44% of total R&D in both the current and prior year and includes spending in support of our various clinical programs as a percent of total revenue research and development expense was 18% in Q1 compared to 20% in the prior year General.
And administrative expense decreased 6% to nine.
$9 million in the first quarter as compared to $9 6 million in the prior year. The decrease was primarily due to lower professional services and bad debt expenses and partially offset by an increase in net compensation G&A as a percent of revenue was 25% in the quarter compared to 31%.
The prior year.
Net loss for the quarter was $7 1 million or <unk> 17 per share compared to net loss of $11 5 million or <unk> 27 per share in the first quarter of 'twenty two.
Adjusted net loss was $4 $1 million or approximately <unk> 10 per share in the first quarter compared to a loss of $8 5 million or.
Or <unk> 20 per share last year.
Adjusted EBITDA loss in the quarter was $3 8 million compared to an adjusted EBITDA loss of $7 $4 million in the prior year.
The balance of our cash cash equivalents and investments on March 31, 2023 was $44 1 million compared to a balance of $55 million at the end of Q4.
The net change includes capital expenditures of $3 3 million related to the construction of the company's new processing facility in Dayton, Ohio, and seven 6 million of other cash burn, including $7 2 million of items typically.
The items that typically occur in the first quarter, including bonuses sales meetings and awards and insurance premiums. Excluding these first quarter payments, we had less than $1 million of other operating burn in the quarter.
We anticipate spending one seven to $2 $7 million to complete the APC facility, primarily in the second quarter. We also expect our operating cash flow to continue trending towards breakeven driven by leverage over our fixed cost infrastructure and our focus on thoughtful.
Operating expense management, we believe this trend combined with normalized capital expenditures will allow us to maintain our strong balance sheet position, providing ample support as we continue our path to profitability.
Lastly, today, we reiterated our full year revenue guidance in the range of $1 $54 million to $159 million. We also continue anticipate that gross margins will be reduced with the transition to the company's new processing facility and expect gross margins will return to approximately 80% in the fourth quarter of <unk>.
2023.
We are pleased with the momentum and continued strength of our execution this quarter, including strong top line growth and solid gross margins. We believe we have built a solid foundation based on innovation and clinical evidence that will drive our long term sustainable growth.
At this point I'd like to open the line for questions.
Thank you the floor is now open for questions. If you do have a question. Please press star one on your telephone keypad at this time.
If your question has been answered you could remove yourself from the queue by pressing one again, ladies and gentlemen that star one to ask a question. Please hold while we poll for questions.
And our first question comes from Chris <unk> from Nephron go ahead, Chris.
Thanks, and congrats on a nice quarter guys.
I wanted to follow up on the guidance. So you delivered high teens growth now three quarters in a row adjusted for Avaya as the midpoint of the guidance range implies about 11% growth over the balance of the year.
Walk through the thought process. There is there any reason we shouldn't expect revenue growth to stay at a higher level was there anything you felt was unusual about the strength here in <unk>.
Nothing unusual we're really pleased with the progress that we've made look this is the first quarter I think we've had good execution.
We will continue to see how things move we typically have a seasonal.
<unk> in the second quarter, we expect that we'll continue to see that but let's let's get another quarter under our belt before we think.
Adjusting guidance.
Okay Fair enough and then Karen would love to hear some more about the new H, a plus product how you size that opportunity how those injuries are being treated today and the extent to which this is cannibalistic of the existing portfolio or something you think is a new opportunity.
Yeah, we're really excited about it.
Jeremy J plus product and this really comes out of the deep knowledge that we have about the problems that surge in space and so while it's not an expansion of our total addressable market as we started to continue to work with surgeons. We just recognize that there are ways that we can provide some enhanced support for some of the more.
LNG in cases, especially.
Especially if you think about in trauma, where you have a fracture adjacent to a joint and it's really a major joining us bending are moving and extremity you need that nerve to glide freely while it's going through the healing process and post that healing process and if it doesn't glide.
And get tethered or sort of locked down in a spot that can impact mobility. It can impact pain and it can impact a functioning of the nerve itself with compression rate, reducing the signal signaling of that nerve and so so we set out to solve that problem and in consultation with a number of leading surge.
<unk> really think that the ALJ plus provides an ideal option for those surgeons today does it cannibalize our product they could use Axa guard in those applications. So there is some use of <unk> applications, but what we found was that there were more likely to use a fat pad or again, a surgical technique to try and protect.
That nerve because they were so concerned about gliding.
So this helps to continue our penetration it doesn't expand the total addressable market, but helps us continue to expand our penetration into those procedures.
Great. Thank you.
Okay.
Thank you and our next question comes from Mike Sarcone from Jefferies Go ahead, Mike.
Thanks, Good morning, Karen Pete and Ed and thanks for taking my questions. Good morning.
Good morning.
So just just to follow up on <unk> question can.
Can you talk about how youre thinking about for the H eight plus the financial contribution from this product and can you touch on any changes you might have an economics do you get an ASP lift for this.
There is a modest ASP lift lift.
As a premium to our current Axa guard product.
So it.
It also provides some larger sheets so that there is.
The higher ASP product that provides a larger area, where they might have in the past had to have used to or felt there wasn't just quite big enough. So we've expanded the range of the product and also theres a slight price premium.
Got it. Thank you that's helpful. And then could you just touch on how things are trending so far through two to just what the operating environment and end customer demand.
And then just separately you had pretty impressive core account growth.
And <unk> can you talk about what youre seeing or any benefits from the meta analysis that was published late last year and you've got an increasing amount of data coming out that shows cost for allografts are comparable so maybe just touch on how that's factoring into.
Rep conversations and demand.
Yes, I'll start with the meta analysis.
<unk> has been first of all we were really pleased with that data felt it was a very high quality paper and impactful paper in terms of the report showing that allograft autograft clinically.
The same.
And yet without the downside morbidities of what an autograph can cause.
And with frankly surprising for many surgeons that an allograft performed in the very long gaps the same as an autograph and in some of the mixed and motor at some of the more challenging cases, and so this has been a very influential tool to help our reps as they are working with surgeons in there.
In their adoption process to help them move along the curve to start to expand into again long gaps and mixed and motor nerves and so we've seen some nice uptick and in both of those categories.
That contributed somewhat to our mix as well as surgeons are starting to move into.
Again, expanding their algorithm that helps us to continue to drive penetration into our core accounts that again, our first priority is to go deeper in the accounts, where and working with our reps to go both deeper with our trauma surgeons, but also expand those planned cases.
Of breast, Oh, MF and the surgical treatment of pain and all of those we think will contribute ultimately to rep productivity. So.
Bottom line I would say that's been our plan, we're working the plan and it's having the impact we want to see so we're going to keep doing that we think the meta analysis as well.
Super impactful Theres still a lot of surgeons, who haven't read it or know about it yet so that's part of the work that our reps will continue doing through our through the summer here.
Okay. Thank you.
Yes.
Thank you and our next question comes from Ryan Zimmerman from <unk> go ahead Ryan.
Good morning.
Thanks for taking my questions, Karen and Pete.
Hey, good morning.
Just a couple of questions for me.
Just to touch back on some of the guidance on the seasonality I mean, if I look at sequential growth.
And if you could help me understand I mean streets kind of looking for about 7% increase in the second quarter. Historically, we have seen in kind of more normalized market environments more of a double digit increase in second quarter.
And so I just want to understand is there any seasonal dynamics that you want us to be aware of or should we expect a more normalized market environment as we move through the balance of the year.
Yes, I think we're moving into a more normalized environment I think the pace of that is still open for question I think we're.
And that's why we're just going to continue to be measured we're pleased with what we ended up doing in the first quarter lets continue to see how that goes where we're entering or we have entered the spring and summer.
Trauma season, where we typically see an increase in <unk>.
Trauma procedures.
We think that hospitals like we've talked about and you've probably seen from other hospital reports are dealing with their staffing issues, but they are still in a place where not only ours are at full capacity not all <unk> are able to be opened and so for that reason, we just continue to be measured in how we.
Thank the pace of this might go.
But that's that's the only thing that causes us to cause some measurement and our outlook the rest of it all of the data that we're seeing.
The progress that we're making across the business I think is really positive for us and I think we're just really well positioned to continue to execute as things continue to improve in hospitals.
Understood. Thanks for that and then just.
Karen I heard you say that independent agents are now 10% of sales that's kind of ticked down through the years and I think before it was maybe 12% and even before it was a little bit higher so.
As that comes down.
Help us understand kind of what you're thinking in terms of that contribution for independent sales agents, maybe over a longer a longer term period and.
In conjunction with that.
How to think about the rise in growth of productivity within your direct sales force. Thanks for taking the questions.
Sure.
So we've been at about 10% for several years on.
And an agent, but you are right in our original.
Lay out of our sales team, we had a higher reliance on on independents, and we made a strategic choice that we wanted to make sure that we had the highest trained reps in operating rooms, working with surgeons to help them.
The address their nerve challenges in and really understand the applications of the technology and so we made some moves where we move to predominantly direct reps in all key.
Metropolitan areas, but we have increased our number of very small agencies to help our rep productivity. So we have.
Independent agencies in more distant locations, where there might be a trauma is trauma is geographically everywhere, it's very diffused it's not concentrated.
So we have independent agencies, and there's more distant technology.
Site of care to make sure that there is still some support for trauma in those locations and so if I do a forward looking.
Projection I think the 10% really puts us in a good spot our independent agencies actually are growing.
But there in terms of their revenue.
But their footprint is still pretty.
Pretty much smaller than what our direct team is but they do aid in our productivity of our direct sales team. So we have several things that we're doing to continue to increase productivity, we do expect productivity to grow on our apps.
With our direct reps.
We are one thing is looking at those territory structures and making sure that they're not spending time on things that are not productive to our sales process, including driving to distant sites. That's one component. Another component is looking at that going deeper in those core accounts that inherently improves our rep productivity.
And in doing that we also bring in more planned cases, so planned cases improve rep productivity emergent procedures, it's very hard for a rep to be and if you look at other sales teams.
Trauma reps tend to be a little lower on the productivity side, because they can't plan out multiple weeks and worked with developing a surgeon because they don't know the trauma that's going to happen.
Two days from now they only know the trauma, that's going to happen tomorrow, and so are the trauma repair that's going to happen tomorrow. So by mixing in both planned cases with our trauma and focusing on the core accounts, we see a path to continuing to improve our rep productivity over time.
Thank you.
Okay, ladies and gentlemen at Star one to ask a question. Our next question comes from Kyle Ross from Canaccord go ahead Kyle.
Great. Thank you for taking the question.
So a lot's been asked but the one thing I want to talk about is just overall.
Price mix trends that you're seeing I mean, it's been awhile since you really probably level set.
I guess expectations are or revenue mix.
Pete I heard the comment in the prepared remarks about price and mix were up 4% driver of.
Upside in the quarter. So how should we think about one the sustainability of price trends at least as we move through this year and then two can you maybe kind of walk through what the difference in mix is in the benefit you're seeing there. Thank you.
Sure.
To clarify we had 4% in both in both price and mix and so price.
We always think about this as sort of low to mid single digits and it's I would be more measured as I think about price in the future quarters, I think 4% was a good price impact for the quarter.
But I think we come up on an annualized price increase here soon so that could moderate a bit.
On the mix piece.
I think the thing to understand is a year ago, a lot of the scheduled cases or planned cases I can we're talking about the more elective cases and breast on my math.
We are being deferred in the early part of the first quarter in those.
Came back in.
In the late first quarter and through the rest of 2022, so we're seeing a mix impact not only from the breast <unk> bin.
Back in a more normalized trend line, but we're also seeing.
<unk>.
A trend towards longer advanced graphs in trauma, so mixed and motor usage and some of that is obviously all of that is supported by the meta analysis and so we're seeing a trend towards the long longer advanced graphs, both in trauma.
And breast <unk>.
Okay, and then just to be clear it is when you say mix.
Yes.
Primarily longer lengths of Vance youre, not seen different utilization trends amongst like Axa garden nerve protector in the nerve wrap or or some of the other other products there.
It's really about advance.
More advanced units, you know Vance used to be more around 50% of our revenue in <unk> was the remaining 50, that's been trending up right. So it's a <unk>.
<unk> is getting closer to that 60% range in our mix and again, that's supported by law.
Longer advance units used in trauma as well as breast anal math.
Okay, great. Thank you very much for taking the questions and just to just to finish that when I think about the expectation I don't expect that same mix impact for the remaining quarters of the year I do think that normalizes because that those planned cases were beginning to normalize.
Q2 through Q4 of last year.
Okay.
Okay. Thank you and the next thank.
Thank you Sir and the next question comes from.
Dave Shirk away from GMP Securities go ahead, Dave.
Thank you and good morning.
Peter I think I heard you correctly.
How are you guys I think I have to say that the.
Facility in Dayton has 1.7 to $2 seven in the last speaker. Please I wanted to confirm that that's complete that that that that ends the capital expenditures.
That facility and then what is the normalized capex range per accident.
This is Ben.
Yes, I think first of all you're right.
Something less than $3 million to get it done primarily here in the second quarter, there could be a few things trail off into Q3, but we're coming to the end of that.
It was about $3 million or less than $3 million to go.
And then thinking about normal capex on an annualized basis of sort of $3 million to $5 million.
For us and that would be for a full annualized year.
This year, our Capex is more focused obviously on the Dayton facility without a lot of additional.
Capex in the plan.
Think about it as three to five.
Annualized year.
Thank you for that and then maybe just a follow up on the new product.
I think people were trying to sort of get their hands around the size of sort of the Axa Guard protector.
You know what these products are doing Canada, I don't know if theres any way to sort of ballpark us in terms of what.
What percent of the mixes.
<unk> or.
How often are you using in advance with that product just trying to again get some understanding of what this could mean for you guys.
Yeah.
So obviously a ban is the biggest portion of our revenue.
There are cases, where in advance is used either with a connector or protection both.
Sometimes as a protection for the for the injury site, sometimes is it coaptation protection.
And then it's also used.
Actually frequently along for these non transected nerves.
In the in the market for trauma.
There is a sizable number of non transected nerves were.
They don't end up being able to there's no need for an advanced at all yet they're still.
Damage or contusion, a crush to the nerve and they need to do something to protect that in Europe . So when we look at the overall we've talked about there are 700000 traumatic nerve injuries that are repaired almost 300000 of those are non transected nerves, where there needs to be some sort of protection and.
As I mentioned before while we play in that with our <unk>. What we found is that there are places that they really need something with this gliding layer and so we think it really helps to continue to expand our penetration into those areas, where they need to protect non transected nerve.
We're a major joint if you asked about characterizing our existing sales of course advances the majority are.
Of our sales <unk> protector and connector.
Our.
The majority of the split of the rest <unk> nerve cap is still much smaller and I'll, let you do some math to figure that out but that but it does allow us to continue to expand our protection business, which we think has a lot of application for these traumatic injury.
Great. Thank you.
Yeah.
Thank you and our next question comes from Ross Osborne from Cantor Fitzgerald go ahead.
Yeah.
Rafi you on mute.
Alright, Thanks, a lot.
Alright.
Okay.
Sure.
Ross.
Alright, let's move on.
That seems to be our last question I'd like to now turn it back to Ken on Saturday for any closing remarks. Thanks Scott.
Want to thank the accident team, who remain very committed to our mission of improving nerve function and quality of life for patients with peripheral nerve injuries were.
We're very happy with our current progress we remain focused on ensuring our long term success and I want to thank everyone for joining us this morning and have a great day.
Thank you. This does conclude today's conference. We thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
Mhm.
[music].