Q3 2023 Vericel Corp Earnings Call
[music].
Yeah.
Ladies and gentlemen, thank you for standing by walking through the various shows third quarter 2023 conference call.
At this time all participants are in a listen only mode.
I would also like to remind you that this call is being recorded for replay.
I'll now turn the conference call over to Eric Birge, very shall should vice president of finance and Investor Relations.
Thank you operator, and good morning, everyone.
Welcome to the Barrick Gold's third quarter 2020 conference call.
Financial results and business highlights.
Before we begin.
And remind me on today's call we will make forward looking statements covered litigation Reform Act of 1995.
These statements may involve risks and uncertainties that could cause actual results to differ materially from expectations described more fully in our filings with the SEC.
Sure available on our website. In addition, all forward looking statements.
Represent our views only as of today and should not be relied upon as representing our views as of any subsequent date.
Please note that a copy of our third quarter financial results press release is available in the Investor Relations section of our website.
We also have a short presentation on today's call.
We can directly on the webcast or accessed on our website.
Simon let's call that Varicella, President and Chief Executive Officer, Nick Coe Angela.
Chief Financial Officer, Joe Mark.
I'll now turn the call over to Nick.
Thank you, Eric and good morning, everyone.
Again todays call by discussing our financial and business highlights for the third quarter as well as our expectations for the rest of the year.
Joe will then provide a more detailed review of our third quarter financial performance and our updated 2023 financial guidance before opening the call to Q&A.
The company had another excellent quarter as we delivered strong revenue growth and record third quarter revenue continued profitability and positive operating cash flow and achieved significant milestones in the quarter, including securing commercial availability of Nexobrid in 19 states, which significantly expands the total addressable market for <unk>.
Our burn care franchise.
And completing the human factors validation study for the <unk> delivery program, which remains on track for commercial launch in the first half of 2024.
From a financial perspective total revenue for the third quarter increased 18% to approximately $45 6 million.
Which was ahead of our guidance for the quarter. We also continued to generate strong profitability as our gross margin increased compared to last year, and we delivered our 13th straight quarter of positive adjusted earnings and operating cash flow ending the third quarter with nearly $150 million of cash and investments.
No debt.
Through the first three quarters of the year total revenue has grown nearly 20% and we're raising our full year revenue guidance for the third time this year.
Importantly, as we look towards next year, we believe that we're well positioned to deliver higher total revenue growth in 2024 based on continued strength in the core Macy's business, the anticipated launch of arthroscopic Macy and accelerated Nexobrid uptake.
We also expect further strengthening of our profitability metrics and further expansion of our gross margin and adjusted earnings margin driven primarily by sustained strong revenue growth.
From a commercial perspective, Macy had another strong quarter with record third quarter revenue of $37 6 million representing.
The sequential quarterly growth over the second quarter, and 21% growth compared to the third quarter of 2022.
Macy's achieved a sustained high growth trajectory with five consecutive quarters of 20, plus percent revenue growth and 26% growth year to date.
Given these results and continued momentum to start the fourth quarter, we're increasing our macy revenue guidance and now expect more than 20% growth for the full year.
We also had a strong quarter with respect to the basic core growth drivers as we generated record third quarter highs for both Macy biopsies and the number of surgeons, taking biopsies we.
We expect this momentum to continue as we remain on track for another year of double digit growth in surgeons, taking macy biopsies.
With respect to our Macy lifecycle management initiatives, we announced this morning that we completed the human factors validation study for the arthroscopic Macy program and that we remain on track for commercial launch during the first half of next year.
As we discussed on our last earnings call. The Macy arthroscopic instrument kit is designed to treat smaller two to four square centimeter defects on the femoral condyle, which represents the largest addressable market opportunity for me.
This segment consists of about 20000 patients per year are approximately a third of the $3 billion addressable market for <unk>.
Our recent market research indicated that orthopedic surgeons be arthroscopic knee C. As a meaningful innovation in the cartilage repair market and that regardless of their current leasing usage surgeons expect to shift a meaningful share of their procedures. In this segment from alternative products and procedures to the Macy arthroscopic procedure.
We believe that the addition of an arthroscopic delivery option represents another significant growth driver for Macy's and will positively impact our overall business in the years ahead.
Before moving.
Moving on from Macy I wanted to address the ongoing commentary regarding the clip one weight loss products and their potential impact on the med Tech and other industries.
With respect to Macy's, we do not expect a blip one or any other weight loss product will have any negative impact on basic performance. As we've noted previously <unk> patients are typically young active in otherwise healthy patients seeking to get back to the physical activities. They enjoyed prior to experiencing the ability.
Knee pain caused by their cartilage injuries.
Typically they see patients have relatively lower <unk> the average BMI for <unk> patients in the summit pivotal study was approximately 26 and the average BMI from AC patients treated in the U S. In 2020 is approximately 28.
Both of which are below the BMI level indicated for use of a glib one product in patients without other weight related comorbidities.
So a typical macy patient would be eligible for treatment with the <unk> product.
In addition, typical Macy's payer policies require that patients have a BMI of 35 or below to be eligible for treatment with Macy's that we specifically excluded patients with high BMI from our Macy addressable market of 60000 patients per year.
So to the extent that the use of <unk> products allows more patients to be eligible for macy treatment. These products would actually serve as a tailwind for me see utilization.
Turning to our burn care franchise, we reported total third quarter revenue of approximately $8 million.
<unk> had a solid quarter with revenue in line with our expectations for the quarter.
Average grass for patient remained strong in the third quarter, although a slightly lower proportion of biopsy patients moved onto treatment with episodes due to patient health related issues.
With respect to <unk>, we're very pleased to have worked successfully with the FDA to ensure that this important product is now commercially available to treat severe burn patients in the U S.
<unk> launch activities are well underway with the first patients treated soon after the product became available in the U S. Our commercial and medical teams continue to focus on supporting PMT Committee approvals to enable burn center accessed and executed training.
Training burn surgeons and their staffs and supporting the initial cases that burn centers that are treating their first patients.
While year to date PMT Committee submissions at our target centers remain on track despite the manufacturing related delay.
TD around the ultimate timing of product availability did cause a number of centers to be deferred or delayed nexobrid training and PMT committee approval processes as such we have been focused on restarting. These activities in the fourth quarter and reestablishing the strong momentum that we had had ahead of the planned launch in June.
Although we expect this to have some impact over the first few months of launch Nexobrid already has gained PMT committee approval in a number of additional hospitals over the past month.
Based on the continued enthusiasm for Nexobrid in the burn care community, we believe that <unk> will be well positioned for a very strong year in 2024 and will make a significant contribution to our revenue growth next year, enabling our burn care franchise to become a second high growth franchise for the company in 2024 and beyond.
I'll now turn the call over to Joe to discuss our third quarter financial results and our updated financial guidance.
Thanks, Nick and good morning, everyone Star.
Starting with the income statement total net revenue for the quarter was $45 6 million and was comprised of $37 6 million of maintenance revenue seven $4 million of episodic revenue is zero point $6 million of initial stocking revenue for Nexobrid.
Total revenue grew 18% in the third quarter and has increased 19% on a year to date basis.
Representing a significant acceleration in total revenue growth for the company versus the prior year.
From AC third quarter revenue grew 21% versus the prior year and three quarters of the year Macy revenue increased 26% versus the same period last year as it has resumed its high growth profile with now five consecutive quarters of 20 plus percent growth.
Total burn care revenue was $8 million in the third quarter, which increased versus the prior year for the second consecutive quarter with a meaningful contribution from <unk> in Q3.
Gross profit for the quarter was $30 6 million or 67% of net revenue, which increased compared to both the prior quarter and the prior year.
The three quarters of the year, our gross margin was 66% an increase of approximately 160 basis points compared to 2022.
In addition for the second consecutive quarter of revenue growth pull through to gross margin was approximately 80% as we continue to see the expansion of our key profitability metrics.
Total operating expenses for the quarter were $35 7 million compared to $32 million for the same period in 2020 to.
The increase in operating expenses is primarily due to higher sales and marketing expenses and research and development program costs.
Net loss for the quarter was $3 7 million or <unk> <unk> per share compared to $6 6 million or <unk> 14 per share for the third quarter of 2022.
non-GAAP adjusted EBITDA for the quarter was $5 4 million, which grew 64% versus the prior year and importantly, we have now generated positive adjusted EBITDA each quarter for more than three years.
The company generated approximately $7 2 million of operating cash flow in the quarter and ended Q3 with approximately $149 million in cash restricted cash and investments and no debt.
Turning to our financial guidance based on our strong results through the first three quarters of the year and our outlook for Q4, we are increasing our full year total revenue guidance for 2023 to 192, five to $197 $5 million an increase compared.
Our prior guidance of $190 million to $197 million.
This represents the third time this year that we are raising our total revenue guidance driven by increased revenue expectations for both of our franchises.
Starting with Macy's, we now expect full year revenue of $160 million to $164 million with growth in the low 20% range for the full year, an increase versus our prior guidance of $159 million to $163 million.
<unk> results were ahead of our prior guidance for the third quarter and our updated Q4 guidance of approximately $54 million at the midpoint also represents an increase versus our prior guidance for the fourth quarter.
Overall this may see outlook outlook represents a significant increase versus prior year growth rates and our initial expectations to start the year.
For burn care, which includes both episodic and next to Brandon. This is our first opportunity to update our burn care revenue guidance since <unk> became commercially available in late September.
As a reminder, our prior guidance assumed that <unk> would not be available until 2024 and under that scenario. We assumed that we would recognize approximately $1 million of BARDA related revenue in Q4 of this year.
With the commercial availability of Nexobrid in the U S. We now anticipate only commercial revenue and we do not.
Any BARDA procurement revenue this year a change from our prior guidance.
We now expect full year growing payer revenue of $32 five to $33 $5 million versus our prior guidance of $31 million to $34 million.
This updated guidance represents an increase in burn care revenue of zero point $5 million at the midpoint, even after removing the $1 million of BARDA related revenue for Nexobrid.
With this updated guidance the midpoint represents approximately $8 5 million in burn care revenue in the fourth quarter.
We are also maintaining our profitability guidance and expect gross margin to be in the high 60% range and adjusted EBITDA in the mid teens percentage range for the full year.
Overall, we are very pleased with our third quarter performance and encouraged by the start to the fourth quarter as.
As we look towards 2004.
We look towards 2024, we anticipate a higher total company revenue growth rate with continued strong execution on our core products as well as the anticipated contributions of arthroscopic Macy and Nexobrid.
In addition, we expect a significantly enhanced our P&L profile in 2024 with anticipated increase in both increases in both gross margin and adjusted EBITDA margin next year.
This now concludes our prepared remarks, we will open up the call to your questions.
In order to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
And your first question comes from the line of Ryan Zimmerman with BP AIG. Your line is now open.
Hey, guys nice quarter, thanks for taking our questions.
I'll ask both my questions upfront.
Nick if you can just elaborate a little bit you talked a little bit about kind of the cadence and kind of commercialization of next brand.
For the end of the year and then into next year, but I'm just kind of wondering if you could elaborate a little bit on kind of how youre thinking about.
You've got some stocking revenue I think the third quarter and how youre thinking about kind of revenue fourth quarter, and then just the pace at which you're getting through some of these TNT committees to help us kind of think about sales and next for next year and then I have a follow up on the cartilage side.
Sure.
Yeah. Thanks, Ryan. So appreciate the question so I'll start and Joe can add some commentary as well in terms of how we're thinking about next year, but.
I would just start by saying that first of all.
Fantastic work by our cross functional team to be able to work with the FDA to secure commercial availability in the U S that doesn't happen by accident and it was just a tremendous accomplishment for the team to be able to do that.
Our original assumption was that product would be available for many wound at the end of June and obviously all of our pre commercial activities were geared to that launch date in Europe. Our activities essentially include training the burden burn centers.
And identifying and gaining commitment from surgeons to kind of shepherd the product through the PMT Committee approval process, and then of course, providing materials for surgeons.
To be able to do that so.
We certainly had a lot of momentum as we were moving towards that June date, when we had sort of the manufacturing related delay.
<unk>, obviously, we continued with our activities, but not surprisingly burn centers as I mentioned.
Some of them delayed or deferred sorted the PUC PMT committee process or or sort of postpone training until there was clarity around.
Product availability. So obviously last week of September product became available we restarted those efforts.
In earnest and as I mentioned on the call. We've secured a number of PMT committee approvals since that time, and I would say from our sort of goals the things that we control, which again includes.
Identifying those champions gaining commitment from them and then doing the PMT Committee submissions.
<unk>.
Tober, we're actually ahead of our commercial plan in that regard. So our team has done a good job in terms of kind of getting to where we need to be on our 90 target.
<unk> centers that we are initially focused on and so I think the cadence essentially places us in October and early November where we originally planned to have been in <unk>.
In July and early August so kind of pushed it out a little bit obviously.
And just to finish up at that time, we had said.
We would expect sort of the meaningful portion of <unk> revenue coming in the back half of the year as those.
Activities continue to unfold.
So that's what we said, we think we'll be pretty well positioned for 2024 going forward.
Yes very helpful.
Please Joseph please sorry, yeah, just to add I think that kind of hit the key points in terms of how we are thinking about an exit rate, but just maybe to frame that a bit on kind of your question on cadence.
Maybe transitioning from Q4 into next year so.
For this year, we raised guidance kind of in both franchises.
I think it's important to understand kind of the exit rate, which I think is part of your question on the burn care side. So as Nick talked about we are in a different place than we were last quarter in Q4 and now in the back half of the year end exit rate. So in our prior guidance again assumes commercial availability wouldn't happen until 2024 and <unk>.
And assuming that the BARDA revenue so as Youre thinking about 2023, it's important to remember that that millions of BARDA revenue comes out and it's essentially replaced by the commercial revenue that comes back in <unk> in the back.
Really the last quarter.
And so I think as you think about the last quarter of the year for Nexobrid in kind of that revenue and the cadence into next year essentially the way we look at it it's really been launched in Q4 given that this was announced in late September there was some stocking revenue in Q3, but that's really kind of ended a month in.
By the time it gets.
From kind of our three PL, the specialty distributors to hospitals and ultimately their patients and given those activities are restarting, we really think about kind of Q3 and Q4 in total so I would say kind of the way we're thinking about it is we're probably kind of in a range of about $1 million number as we think about Q.
Three in Q4 collectively and that's probably how we think about an exit rate into next year that gets you to the Q4 kind of a similar revenue range at Q3, and then again just to reiterate what Nick said as we move into next year.
To start the year, we assumed a mid year launch and really the vast majority of our revenue would have been in the second half of the year. So if you kind of think about where we are now I mean thats very much in line with I think expectations haven't really for essentially one quarter and I think sets us up really well for 2024.
In terms of 24, obviously, we would expect.
As we get into the year to start to see that number start to increase and we're not giving specific guidance for for an exit rate at this point, but as we've talked about company level growth at a higher level certainly that the next branch growth is going to drive we think the burn care to be kind of high growth as a franchise. So we do think that would be a significant driver.
And then lastly, just on <unk>, because I think it's important.
It's just that kind of maybe help.
Think about it from an investor and analyst perspective.
We think about the uptake on <unk> over the next few quarters and a framework. It really is kind of comes down to a couple of key aspects. So one we think about the burn center the burn center adoption. So.
As a reminder, we're targeting about 90 of the 140 centers to start and we would expect that that would increase during the year next year and we get a significant portion of those through PNT and then a meaningful subset of those will actually place orders and then the second piece is really just thinking about the patient opportunity. So as a reminder, our Tam.
Around 30000 patients on an annual basis. So if you break that down by center, it's probably about 200 patients per year in each center. It's around 15 per month. So ultimately our adoption as we think about kind of our cadence next year is going to come down to how many burn centers and what's the penetration within those centers. So it's obviously.
Just literally a couple of weeks or a few weeks at our launch. So it's very early days, but I would expect that to start to give some updates on those metrics as we move into next year.
Okay.
Sarah Thank you.
Just on the accelerated growth next year I can appreciate.
A lot of that is coming from next so Brad.
Driving the company's overall growth I just wanted to be clear about your comments make sure Theres No misinterpretation you guys are exiting right now above 20% on Macy's.
And you have the arthroscopic product coming to market next year.
Just to be clear, you're not expecting growth next year, specifically within macy to accelerate over the 20 plus percent.
That youre seeing this year.
Yes, So I think at this point always talked about as a total company growth.
Alright, iterate and clarify so we're saying if you look at our guidance this year.
Kind of just under that 20% range.
Based on kind of the momentum we have and then the addition of Nexobrid in arthroscopic Macy, we can be at that 20% plus as a company next year.
I will say on Macy and as we've kind of talked about we've had a ton of momentum this year and kind of the key indicators.
As we think about the framework for next year, it's probably pretty similar as we think about core may see the surge in growth continues to be strong biopsy kind of layer in price. So I think we're set up for another solid strong year on Macy and then kind of on the <unk>.
Talked about we anticipate a first half launch probably more likely Q2 is a better place to start and I would also say kind of given the sales cycle component on Macy's by the <unk>.
Heightened start seeing kind of biopsies and they are throw usage, you're probably looking at kind of later in the year or Q4 now all that being said, we expect another very strong year and may see but we're not giving specific growth rates. Its at the company level just to answer your question yes.
No I appreciate that Joe I wanted to make sure. It was clarified. Thank you. Thanks for taking the questions guys.
Brian.
And one moment before the next question.
Your next question comes from the line of Mike <unk> with Leerink Partners. Your line is now open.
Hi, everyone. Thanks for taking my question I guess first just on the manufacturing standpoint on next to Brandon can you provide any additional color on your expectations of supply continuity for that product and then some of the recent geopolitical concerns that have emerged since the start of <unk>.
And then is that part of revenue I mean should we be taking that and so that's the start of 2024.
And then I have a separate follow up on maintenance.
Yes, so I'll start and Mike Thanks.
So obviously, we have been monitoring.
Ongoing war in Israel.
<unk> been in close contact with med wound.
At this time, obviously manufacturing operations continue and we've actually received deliveries during October after this.
Tuition began so for for the time being.
<unk>.
The supply.
Issues are under control and we continue to receive product, but obviously, we're going to continue to monitor this.
Yeah, and just on the on the BARDA piece I would say again, we don't expect that in Q4 as I talked about given the priority is now commercial product.
I would not bake that into next year, that's not our assumption Bart the stockpile is starting to expire so at some point it may make some sense to replenish, but yes, I think we'll get more visibility as we get into next year, but at this point I would not bake that into our assumptions.
Got it really helpful. And then just on the Macys side just wanted to clarify in terms of your preliminary revenue growth Diamond dynamic comments for 2024.
So is it fair to say that that does consider some additional contribution from the arthroscopic maintenance side.
Yes, no. It definitely got I think we're just when I was talking to the major components, we think of kind of the core growth drivers that extend into this year based on what the business is doing this year and then what were the launch around mid year, it's probably more like Q2, we're just saying what the sales cycle. It will probably take really good back half until.
Arthroscopic Macy's starts contributing but we certainly do expect it to have an impact in 2024.
Perfect. Thanks very much.
Thanks, Mike.
Yes.
And one more for the next question.
Your next question comes from the line of Jeff Cohen with Ladenburg Thalmann. Your line is now open.
Alright, and just in general how are you.
Good morning.
Thanks for taking our questions could you talk a little bit about.
G instrument kit for arthroscopic ratio as far as well.
We will be in an assembly and manufacturing.
Every of those kitchen, and then maybe talk about the.
The surgeon audience itself and the opportunity for opening up additional surgeons in centers based upon the approaches.
Yes, Thanks, Jeff I'll take it.
So.
First of all the kit those instruments that you can see on our website, our disposable instruments that will be made available to surgeons.
We obviously have an implant kit currently that is used and so.
Over time, the idea would be to try to integrate all of the instruments, whether it's an open the R&R through procedure. So.
It's relatively straightforward I think the team has done a great job in designing a set of instruments that are really appealing to those surgeons in terms of opening up additional surgeons as we've talked about in the past.
We currently have about 5000 surgeons that we target and that was based on.
Our sales force sizing exercise and targeting exercise, we did back a few years ago.
We were able to acquire CPT code data on cartilage repair procedures and open procedures and obviously find the intersection of high volume cartilage repair surgeons that did open procedures. We know there's a segment of essentially arthroscopic only surgeons out there at the time, we had data on about <unk>.
5000 surgeons that did.
Ed.
Cartilage repair activity, but.
We didn't have open procedure data on it so there.
There is probably half of those that fall into a category of doing high volumes of cartilage repair and.
The commercial team is actually doing this exercise now to identify.
How many of those call. It 2500 high volume no open data surgeons.
Should become targets for us so we haven't locked in on a number yet my guess is it's probably 1000 to 2000, new targets that we will be calling on and just as a reminder, the market research says that both surgeons that currently utilized <unk>.
We'd expect to do more procedures or ship procedures to arthroscopic Macy and then of course. The other component is surgeons that do arthroscopic procedures not currently using may see would be the other part of that growth opportunity for us.
Okay. Thanks, and then one more quick one.
Joe could you comment I'm not looking for guidance on margins, but you did have a nice beat in Q3 any commentary on some of the overall inflationary pressures have been diminished to a certain degree.
Yes, I would just say.
We're kind of focused on that on that gross margin and the margin expansion. So certainly kind of be at the higher revenue growth I think kind of helps us we're seeing higher margins, we're seeing higher pull through.
So I don't think certainly a lot of that is kind of baked in already and I think we're just trying to manage kind of margins effectively so nothing new to call out that adding additional pressure I just think.
Our focus right now from a team perspective to do what we can grow the top line, but also enhance those margins this year and into next year and you talked about in the prepared remarks.
Got it thanks for taking our questions.
Thanks, Jeff.
The next question.
Yes.
And your next question comes from the line of Sam will Rogacki with <unk> Securities. Your line is now.
Hey, guys. Thanks for taking the questions just to start off just wanted to ask a clarifying one on nexobrid with the presumed contribution in <unk>, that's still largely expect it to be.
Stocking revenue and at what one how long do you think.
Stocking can can be a driver of revenue and when should we think about sort of procedural revenue taking over is that first half 'twenty for a comment anything.
Yes.
I think as Joe mentioned, we're kind of product was shipped from our Cardinal our three PL to the specialty distributors to last couple of days of the quarter. So it's essentially one quarter of <unk>.
Activity in this year the stocking essentially is done once once that initial stocking happened right. They think about sort of obviously, there's kind of three main distributors. They have different locations. They think about sort of.
Sort of uptake at hospitals, and so I'd say, we're kind of through that phase.
And now it's really just as Joe mentioned kind of getting through getting the PMT Committee approval. It's getting the initial orders getting initial patients treated that then turns into reorders.
That's how we build our model going forward so.
I'd say again as we ramp up through the fourth quarter and get these hospitals on board, we will start to see some initial utilization revenue and then that kind of feeds into Q4 and the uptake that we're talking about.
Okay. That's helpful. Thanks, and then.
Arthroscopic should we be thinking about any price component in terms of.
That adding to revenue growth.
Next year.
Yes, I'd say.
Again, you know are the main components of our revenue on Macy's is really the implant itself right and so we've.
Taken typical price increases as we've talked about.
Each year, and we would expect to do that again next year.
I think having an innovative instrument set will help shape sort of the price increase that we would take.
And then we're still sort of in the process of.
Determining sort of inch.
Instrument.
Revenue opportunities as well that obviously would be like our biopsy kits currently where it contributes a little bit of revenue, but it is not kind of the main driver for for the Macy's business.
So then just I guess and then also early days here, but as we think about an ACO or sort of the medium term what's.
Albeit a reasonable expectation for the mix between traditional sort of opened ourselves.
Arthroscopic revenue mix or implant mix and maybe the better way to frame it over call. It like in the next few years here.
Yes that is a good question and you're right. It is early days I think it's important is as Joe mentioned that assuming a Q2 launch and given the revenue cycle. One. The initial question is going to be.
Do surgeons kind of look at it prospectively.
Maybe I'll take a step back as we said earlier.
We expected to complete the human factor study in the third quarter and great job by the team getting that done we expect as we said publicly to submit the prior approval supplement by the end of the year that's typically.
By statute, a six month review period, although they try to get them done within.
In a shorter period of time, so that's what kind of gets you to sort of that.
Later latter portion of the first half of the year for.
The anticipated approval and launch.
The first question will be do surgeons kind of look at it prospectively in other words now the instruments are available as patients come in I'm going to identify patients with.
Two to four square centimeter defects on the femoral condyles, and then you're kind of into the.
Typical sort of revenue cycle that and when you go from biopsy timing for going from biopsies to implants, which again kind of point you towards the back half of the year and when we think may see arthroscopic could start contributing as you move out.
Into the sort of mid term years I think.
It will still.
To be determined kind of exactly what that mix looks like.
If you look at sort of the addressable market as we mentioned a third of the defects fall into that sort of arthroscopic eligible category.
And the rest.
Kind of fall into sort of the more of the open opportunities be it patella defects or larger defects et cetera. So.
I think that sort of put some bounds around what you might think over time it could end up being.
Great. Thanks for taking the questions.
Thank you.
One moment for the next question.
Your next question comes from the line of George <unk> with Stephens, Inc. Your line is now open.
Good morning, Thanks for taking the question and congrats on the quarter.
Maybe sticking with.
A question on the arthroscopic delivery option you touched on some of the.
Regulatory timeline pieces I'm, just curious from a from a commercialization perspective.
You touched on some of the arthroscopic only surgeons, maybe 1000 to 2000 target range with that.
Imply.
A few extra sales reps need to be hired or how should we think about some of the <unk>.
Commercial investments ahead of ahead of launching that arthroscopic delivery option.
Yes, just from a kind of a head count perspective, we would anticipate adding.
A relatively small number of support reps.
And specialists to support the rollout, but again nothing that would change kind of the margin profile that Joe has been alluding to so sort of like when we expanded our burn care.
Franchise to support the launch of <unk>.
Somewhere kind of in a similar range.
Call it a dozen folks over the course of the year.
Okay. That's really helpful. And then maybe switching to that burn care franchise.
No it's still fairly early days with the Nexobrid rollout, but.
Could you just give us any any color on maybe some initial indications of what the cross selling opportunity or the pull through at the cell.
Might look like.
Yes, we.
Mentioned on even the second quarter call once we had the.
The initial group of <unk> only reps in place that we had actually received biopsies and orders from.
What we kind of refer to as dormant or naive episodic centers, because again, we have nexobrid reps and theyre talking not only about Mexico, but episodes, well and that continued into the third quarter. So.
As you noted it's early days.
We did kind of fill our remaining couple of nexobrid positions.
Recently once product availability was clarified and so we really haven't had the full force out there yet so I think time will tell but there's absolutely no doubt that part of our strategy was.
And having a larger footprint.
And both the <unk>.
<unk> only initially.
And then the next big reps Theyre going to be talking about both products and we would absolutely expect that pull through would continue.
Okay. That's really helpful. Thank you all again for the time.
Thanks George.
On the line for the next question.
And your next question comes from the line of Arthur <unk> with <unk>. Your line is now open.
Hey, good morning, Nick and Joe This is Arthur on for Archie Congrats on another strong quarter.
Most of my question has been asked.
Just a quick one on macy.
For when were looking beyond the.
As our scope.
How could you give us some more color on the future new productive.
In the end coal for Macy's.
Is there any more color on the exact timing for studying the study.
Yes. Thanks.
So as we've talked about previously we think obviously the <unk> ankle opportunity is kind of the as you sort of a long term vision.
Strength in our core current indication layer on arthroscopic knee see kind of mid decade, and then potential equal indication towards the end of the decade.
It just gives Macy's really really long runway with <unk>.
No near term competition. So we're pretty excited about that opportunity. The initial steps there as Ed mentioned previously is that there is some preclinical work.
That needs to be done.
But that work is ongoing and we would expect that potentially towards the end of 2024.
We may be in a position.
After discussions with the FDA to initiate that study or or some time.
Early 2025.
Okay.
Oh, great. Thanks for taking my question.
Okay. Thank you.
And we have no further questions at this time I will now turn the call back over to Nick Colangelo.
Okay, well. Thank you very much and just in closing I just wanted to kind of reiterate that at this point. The company continues to operate at a very high level across the entire business as.
As we have delivered strong financial results and achieved significant milestones throughout 2023, and we believe we're very well positioned for a strong close to the year.
Even stronger year in 2024 from a revenue perspective, as we mentioned total revenues grew nearly 20% through the first three quarters of the year. We expect total revenue growth to increase in 2024 based on continued strength in our core products as well as the anticipated contributions of <unk> and <unk>.
From a profitability perspective, we delivered sustained positive adjusted earnings and operating cash flow each quarter for more than three years, and we expect further strengthening of our profitability metrics and margin expansion in 2024, driven by sustained high revenue growth.
Obviously, we're starting from a very strong financial position with $150 million in cash and investments and no debt. So overall really excited to deliver a strong finish to the year and look forward to continuing our momentum in 2024 as we the company remained focused on continuing to deliver on our long term strategy to bring.
<unk> innovative products to even more patients and drive significant growth and profitability in the years ahead. So look forward to providing further updates on our next call. Thanks, again and have a great day.
This concludes today's conference call. Thank you for your participation you may now disconnect.
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