Q3 2023 Elutia Inc Earnings Call
Greetings and welcome to the Lucia Q3, 2023 financial results call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I'll now turn to.
The conference over to your host David Carey of been partners you may begin.
Thank you operator, and thank you all for participating in today's call earlier today, We ship released financial results for the quarter ended September 30.
Great.
A copy of the press release is available on the company's website.
Before we begin I would like to remind you that management will make statements. During this call that include forward looking statements within the meaning of the federal Securities laws.
Pursuant to the Safe Harbor provision the private Securities Litigation reform.
<unk> and.
Any statements contained in this call that do not relate to matters of Baxter to meet your expectations of future events results or performance.
These statements, including without limitation those relating to our operating trends and future financial performance are based on our current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these statements.
Accordingly, you should not place undue reliance on these statements.
A description of the risks and uncertainties associated with our business.
Please refer to the risk factors section.
Fillings with the SEC, including Alicia <unk> annual report on Form 10-Q for the quarter ended September 32023 to be filed with the SEC accessible on the Sec's website at Www Dot Dot com.
These factors may be updated from time to time evolution other filings with the SEC.
The conference call contains time sensitive information is accurate.
The live broadcast to date.
2023.
Alicia disclaims any intention or obligation except for.
Required by law to update or revise any financial projections or forward looking statements.
Because of new information future events forever.
Also during this presentation, we refer to gross margin, excluding intangible asset amortization, which is a non-GAAP financial measures. A reconciliation of this non-GAAP financial measure most directly comparable GAAP financial measure its favorable financial results.
In the third quarter ended September <unk>, 2000 suite, which successful on the SEC website and posted on.
The investor page of the unusual et cetera.
Www Dot Alicia Dot com and with that I'll turn the call over to Ed We should CEO Randy Mills.
Thank you David and thank you all for joining.
Call today.
Last quarter <unk> was born and we are excited to tell you all about it.
Today, I'm going to discuss our very strong third quarter results and the significant progress we have made advancing our kangaroo RM FDA submission.
Matt Ferguson, our CFO is going to go over our financial results in detail.
And after that we're going to open the lineup for your questions.
But first since we.
We have so many new listeners on the call today I would like to start out by providing an overview of the Lucia so that everyone has a solid understanding and proper context in which to evaluate our business strategy and performance. We think that the more you know and understand the more you will like Lucia.
Sure.
Now.
As a CEO that has been doing this for more than 25 years.
I've come to realize that any great success first starts with a great team.
And over my past 25 years I can honestly say that the collection of people that I get to work with in and out on a daily basis for my greatest hits album of leadership teams.
And not just because they are remarkable people with remarkable pedigree's that have claimed to tremendous ego and attitude.
But because each of them shows up each day.
With a humble, but confident relentless Lucia first mindset and it is such a joy and honor to be a CEO with this remarkable team.
Alicia is a commercial stage company.
That is.
Working with us.
Set of proprietary platforms in both the Cie D or pacemaker and breast reconstruction space. So Kangaroo RM is our product line in the <unk> space simply learn in our product line that is primarily used in breast reconstruction and what we're doing is pioneering the drug eluding biometrics, where.
More about this today, but we believe the pilot we believe the drug Eluting biologics matrix.
Can solve problems unaddressed by available alternatives and we expect to launch our first of these kangaroo R&M in 2024 in Cancun Coram has the potential to be a real blockbuster, it's entering a market with all over $600 million in market opportunity.
And only one other competitor and from there we intend to leverage this drug eluting biologic platform into adjacent markets, such as neuro stimulators sleep apnea and drug pumps and so our mission here at a Lucia is this concept of humanizing medicine, so that patients can thrive without compromise and let me just.
Show you a little bit about what we think that means.
When you had planned medical devices serious challenges and problems.
Ken arise while medical devices have gotten more sophisticated over time, it's often that actual last mile of care, where our problem Ken developed so for example.
I'm going to leave my comments specific to pacemakers and breast reconstruction here, but for example device migration. So in a pacemaker that's implanted into the chest wall can literally migrate down the chest wall, putting tension on the leads and actually causing lead failure. You can have a hematoma formation or a lot of blood and bleed.
<unk>.
After implantation the device can literally erode through.
The skin of patients and startup.
Selling itself out of the body.
Infection can develop this as a problem, both with pacemakers and especially in breast reconstruction and then lastly, there is this concept of pathological fibrosis <unk> contracture.
And when we look at our primary markets pacemakers and breast reconstruction, we see some pretty remarkable procedure failure rates seven new 11% procedure failure rates in pacemakers wealth jumped 20% failure rates in breast reconstruction and this doesn't have to be the case and so this.
Is what we are looking to solve.
At Alicia.
The Lucia is breaking silos.
That are leading to the development of great solutions. So when a pharma company sees a patient with one of these problems.
They see a company that needs the drug when a device company that sees a patient with one of these problems. They see it come to that needs a device a biologics company see the patients that need a biologic, we actually just see the patient.
By breaking down these historical silos that have existed.
We can actually create great solutions solutions that are greater than the individual parts and that's where we have to have developed this concept of the drug eluting biologics breaking down the silos between pharmaceutics biologics and devices, allowing patients to thrive without compromise. So how do we do that well.
We start by a great base biological material extracellular matrix or <unk>.
<unk>, our dermal matrix in our cases that that provides the necessary structural support plus the biological response that reduces inflammation and fibrosis, we combine that with a specific therapeutic payload that gives us strong powerful pharmaceutical activities such as antibiotics.
In our case and we have technology that allows for those antibiotics to be delivered over a sustained release profile and you put those things together and you end up with a drug eluting bio matrix, which gives durable structural integrity enhanced surgical site healing targeted therapy therapeutic delivery that.
All remodels into the patient's own healthy tissue and it's over so there's nothing left to be rejected there's nothing left to be expelled there's nothing left to be explant. It and so we're super excited about that and we think we can own this space.
We spent a lot of time and we've spent a lot of money developing this technology and so therefore, we've also created lots of layers of protection around it. So over 40 issued U S patents exclusive licensing agreements for the technology, including specialized manufacturing facilities and most recently.
Proprietary product release assays that relate to you.
Meeting regulatory requirements for how you might introduce these types of drugs on onto them onto market. All of this is in service of creating value by protecting this platform that we've developed so with that let me turn my remarks over to the specific products. So.
Our Q, our two product platforms are simpler to arm, which is used in the breast reconstruction space Kangaroo, which is used with our cardiac implantable devices, such as peacemakers and internal defibrillator. So again simple <unk> and breast reconstruction, let me start first with a little bit of background.
On the role of a bio matrices in breast reconstruction. So unfortunately about 13% or one in eight women are going to develop some form of invasive breast cancer and that's going to lead to a mastectomy 151000 times a year, that's going to require reconstruction and that's in the.
U S alone, there's basically two procedures.
We're breast recon, how breast reconstruction is done that uses a biometric seat.
One of them is this procedure called the sub pack trial.
And in this procedure.
The implant is placed underneath the pectoralis muscle and in that case, what you end up with is a gap between the inferior margin of pectoralis muscle.
In the chest wall and that gap needs to be spend with a biometric.
The other is called pre factual and in this case, you actually kick the implant instead it directly on top of the pectoralis muscle and in this case, you really need a bio matrix to keep it one for moving around either from side to side or falling down in Q from preventing this phenomenon of erosion, which we've.
We've talked about before where the device can wear against the <unk> of the patient it is being implanted two now.
<unk> is the market leader in this space in this technology has been around for a very long time, it's been around for over 25 years.
But in that time, the science has advanced and it has advanced quite significantly.
This algorithm product, which was developed by live cell ultimately was acquired by Abbvie in 2020 as part of the Allergan acquisition, Abbvie Deemphasize marketing, Alabama and that created an opening for simpler terms and that opening for simpler derm allows surgeons to try it and when they.
Did they loved it because we believe it's superior technology.
And so here we are sitting on this one $6 billion opportunity to improve outcomes in breast reconstruction with our products simpler term that is simply a great product that superior handling characteristics.
It comes ready to use pre hydrated and sterile because we've gotten really good at understanding biologics remodeling. We are a product that is designed to lower pro inflammatory macrophage and TNF Alpha response, which leads to lower fibrotic response, which.
Which we know has a direct and positive effect on things like capsular contracture and surgeons can see these results for them themselves.
We market this product through a very effective distribution network. So we have a highly trained group of proprietary distributors.
That have market.
I've taken this product.
Into the surgical suite and we have recently augmented that with the addition of CN truck Sandra is the number three player in the breast reconstruction space and have 23% of this $1 $6 billion market. They are adding fifth or that this partnership to add 50.
New reps and you can really start to see that our performance with this product really speaks for itself. So for the quarter simpler terms up 44%.
It's crossing the $10 billion annualized run rate.
Yeah.
And we're just at the front end of actually seeing <unk> contribute to this performance. So we're super excited about this product and where it can go both with our own proprietary network and with the addition of <unk> marketing.
Now, let me turn it over to our Kangaroo product line.
[laughter] Kangaroo is our biologic envelope that helped stabilize pacemakers and internal differentiators that is the only biologic.
The envelope on the market and the biologic material that ECM helped support wound healing by decreasing inflammation and fibrotic response. It's also the only envelope on the market of any variety that can actually hold these larger subcutaneous implantable defibrillators, which are becoming quite popular.
Particularly in in younger patients the market dynamics here are worth understanding. So this is a $600 million market in the United States alone and it only has one other player.
What we've done here and this is something we've been working on strategically is we have singularly focused our sales team to be able to go after this.
We've also strengthened our distribution arrangement by creating a great partnership with Boston Scientific and this has created for this quarter. This has created our sales growth, which have gone up 11%.
And as Matt will talk about.
Uh huh.
On actually substantially lower.
Cost of selling so how did we do this well we did it sort of three things. One is we did a strategic partnership with let me medical this partnership with La <unk> radical actually allowed us to take our our sales team and focused them directly and solely.
The Kangaroo envelope. The second thing we did was we made some leadership changes in the commercial organization and what we put in more places where were putting people.
That really understood this technology and understood the science behind the technology and the benefits that that translates to patients and then thirdly, they went and developed stronger partnership with Boston scientific and.
And that all led to greater usage.
And that's more customers, gaining a greater appreciation for the benefit of using a biological envelope and that becomes important as we are.
Set up to introduce our next generation Kangaroo RM, so kangaroo RM.
As our next generation product that has all of the benefits of our biologic plus. The addition of powerful antibiotics rifampin and minocycline for what we think is a more complete a more complete option. We don't view. This as a me too product in this market space, let me be really clear.
That we view Kangaroo M. That's what will be the clear superior product and we are not alone without our market data.
And our market research shows that 88% of tire X users say that they will switch to a biologic envelope. Once introduced provided that it has the antibiotics rifampin and minocycline. So we're really excited about that and when you look at.
These market dynamics, it's not hard to be excited so sort of understanding. This on one hand, you have tier acts on the market Medtronic has done a great job with this product growing sales to what we estimate to be somewhere between 250 and $300 million globally.
They really just done a great job.
Demonstrating the need for an antibiotic alluding pouch on the other hand, you have Boston scientific Abbott and bio tronic that don't have a pouch. So when kangaroo RM gets approved it will be the only other antibiotic pouch and a $600 million market, it's kind of like a game of music.
Chairs you don't really want to be left without a pouch when the music stops and so that's why we believe upon approval Kangaroo RM is an extraordinarily valuable asset for US the question is.
Is it going to get approved so let me hit that question head on.
We are in the process of obtaining FDA approval for Kangaroo program. So a little bit of history. Here, we received what's referred to as a not substantially equivalent our NSE letter from the FDA.
This previous March now important to note is that this review was satisfactory with the exception of four items that is to say the FDA completed their review of the entire 500 10-K in the entire product.
<unk> had four remaining items that they wanted to fix before they would grant approval. Two of these items were purely administrative and we feel really confident that we can address the other two were related to a quality control test one the FDA wanted us to develop an accelerated version of what's called an in vitro elution tests or this is worth.
The drug after manufacturing the product you test to make sure that the drug.
Re leases from the product in a controlled and appropriate way. The second thing the FDA wanted us to just generate some data to show that this assay wood.
Reproducible, yet at least 80% of this drug off the product importantly, the FDA requested no changes to the design of the product where it safety or anything like that so what we did was we went out and we actually met with the FDA and we wanted to understand their needs because we wanted to be completely responsive with them actually we met with the FDA.
Twice, most recently, a pre submission meeting, but I'll I'll get to that in a second.
The R&D team then went off and created this new test methodology that the FDA wanted and we believe we've done that we believe we have.
A data package, that's fully responsive fda's request and actually in doing so have generated some brand new IP. So this is this is at the heart of what the FDA wanted it's called a drug in vitro drug Elution test as I said after manufacturing you basically take the product you put it into a beaker of water.
And you watch how fast this drug <unk>.
Lutz off of the device and into the surrounding water now.
What the FDA was actually looking for here.
Wasn't to see how it occurs naturally but what do you. If you wanted was an accelerated form. So this was the first version that we had where we only had 75% of the drug eluted by 48 hours. Now. This is because this is what the product was designed to do the FDA wanted to see though was for manufacturing quality control purposes. They wanted to see.
To be able to develop an accelerated matching.
<unk> for this test, where we could use non physiologic conditions and see if we can reproduce really get the drug off of the device faster and so that's what the team did they develop this new methodology by changing the ph in surfactants and agitation in optimizing the temperature, it's not an end and they did it and they get it solidly so not only.
We have 93% of the drug off against the 80% threshold, but we actually have well over 80% off within the 24 hour period. So we're really excited with this.
With this data packages to generate so what's left to do well. What we did was we took that that new method and we validated is one of the things. That's required obviously, if you go to spin anything like that to the FDA, we validated that to make sure. It was reproducible and robust and then we took that to the FDA. We recently held a pre submission meeting with the FDA.
We previewed.
This approach with them.
So that we could we could show them. The data that we were attending to submit and we were really encouraged by how that meeting went so whats left is we're now in the process.
Packaging up and re filing our 10-K in the fourth quarter and more specifically.
In December.
That submission is focused just on the four remaining items keep in mind. The rest of this five 10-K has already been reviewed by FDA and found to be acceptable and we anticipate a decision on can grow them in the first half of 2024, but it's it's it's suffice it to say, we feel very very confident and very comfortable.
<unk> about where we are in this process, we've taken a very deliberate approach in order to satisfy fda's very specific requirements and we believe.
We've done that so with that I'm going to turn the call over to Matt who will talk a little bit of our financial results and then we will open up the call for questions.
Okay. Thanks, Randy.
So as.
<unk> heard from Randy This is really been a seminal quarter four Lucia.
Both from an operational and a strategic and from a financial point of view.
First and foremost in this quarter, we announced two significant transactions two major transactions the.
The first of those with the divestiture of our ortho biologics business unit.
And that was really important because it.
First and foremost it streamline the business at.
It allowed us to focus on really what's important strategically for the company going forward.
But it also brought in cash so it brought in an upfront $15 million and we'll use that to fund operations and to fund growth will also use some of it to pay down some debt and then there is also an earn out associated with this transaction. We're in the coming years, we can generate up to $20 million based on the sales of.
The of.
Of the acquiring company so.
So that was the first of the two transactions on the heels of that transaction that actually enabled us to execute on a private placement financing and so right. After we signed.
Find the ortho biologics divestiture, we went out and we brought in.
Handful of new investors, who anchored on important private placement transaction for us, where we sold stock and warrants and the the.
The transaction brought in $10 $5 million upfront.
Sale of stock and it also importantly had warrants attached to that not warrants that are going to hang out there for a long long time, neither warrants that are cash exercise only.
They actually expire 30 trading days after we.
Receive.
FDA clearance for Kangaroo R M.
So as Randy talked about we expect that to happen in the first half of 2024, and so when that happens that should translate to another $16 million of cash that we receive.
Basically on the same terms as the original financing so very exciting. This together. These two transactions really put us into a great position and allow us to really focus on operations and executing against our strategy and.
And we have already been executing against that strategy in the third quarter as Randy mentioned, we had great commercial from performance great operational performance, we grew revenue to $6 $1 million and now this is on a new presentation basis, which which really <unk>.
Presents the company.
Just based on continuing operations, so $6 1 million in revenue that's up from the prior year, but importantly, when you drill down on that you look at simple derm growing 44% year over year Kangaroo growing 11% year over year, and then even more importantly than that when you look at the efficiency of that commercial execution, we can see that a year.
[noise] ago to generate the revenue from the third quarter of 2022, we actually used 76% of that revenue as are we.
We spent 76% of that revenue to generate this year third quarter of 2023 that number was down to 46%. So just a dramatic change in terms of the efficiency of the operations and how much it's costing us to generate those top line results and we expect that to continue to to improve as we move forward.
Overall operating expense declined by $1 $7 million, a big chunk of that was in our sales and marketing like I just talked about but we also saw declines in general administrative and R&D expenses. So really all parts of the business are operating effectively and efficiently.
From a gross margin perspective, we were at 62% for the quarter. So.
Again, the financial profile of the company really has improved much more of a high margin high growth company. When you look at just the proprietary products that we are we are operating with now that 62, 2%.
If you look at the two main categories Kangaroo and simple derm Kangaroo was at 66% simpler derm at 54%. So we're really pleased with both of those areas, but we also see opportunities to continue to improve those numbers over time.
And then.
Just touching on cash for a little bit I talked about the transactions that we completed in the third quarter. Both of those really will make a big difference in our cash position. We ended the quarter at $14 5 million in cash and that was up from $9 3 million at the end of the second quarter. So that's a $5 $2 million increase.
So that reflected the $10 $5 million that we brought in from the financing.
That by a cash burn of approximately $5 $3 million, which was in the range of what we were expecting.
And that does not yet include the benefits or the proceeds from the ortho biologics divestiture, which just closed.
Just last week so I'm.
Looking forward, we do expect cash to increase again as we move through the fourth quarter into the year and we'll have the ortho biologics divestiture, which will add to our cash balance will have a cash burn as we transition the business into this this new operating profile it will probably be about the same as what we.
We burned in Q3, so in that $5 million range, but then we expect to see that cash burn number come down as we move through 2024.
And overall, we feel like we're really well positioned to kickoff the coming year in great shape, so to sum up.
We dramatically strengthened our balance sheet through these transactions that we executed on during the quarter, we saw tremendous topline growth from our proprietary products Kangaroo in simple term and we're also really seeing the benefits of the expense control measures that we've been putting in place over the last several quarters, but when you look at our our operating expense profile and our margin profile.
We're really starting to see those results show up in <unk> and black and white. So we're.
We're very much looking forward to continuing to execute on this strategy and we're looking forward to reporting on our progress in the coming quarters.
With that I'll turn it back to Randy before we take questions.
Alicia is born.
And as you can tell like all proud parents, we like to talk about it as a great company and we think it's in a great position executing firing on all cylinders growing at 26%. We've got we think a great future.
<unk>, our first drug Eluting biologic, which we expect on the market in the first half.
Of next year and lastly, we have the team and resources to get this job done and so with that I'm going to turn the call over to the operator and thank you all for joining us today.
Thank you and at this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
For a start to if he would like to remove your question from the queue. So participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Our first question comes from the line of Ross Osborne with Cantor Fitzgerald. Please proceed with your question.
Hey, guys. Congrats on the progress thanks for taking my questions.
So starting off maybe just on.
On the new.
Rebranding and Alicia.
Now, 100% focused on CAGR in Suffolk, Derm offering have.
Have you seen this shift in focus affect your sales force mindset, yet to further push kangaroo.
Is there any target.
Turning faster are ahead of our head.
So thanks Ross.
Further question.
We absolutely have seen.
A shift in mindset because of focus recall that prior.
Two our deal with Amit, we actually add that sales force split.
Between our cardiovascular product line in our in our bio envelope product line Kangaroo and those are very different call points theyre very different procedures and surgeries.
And that's one of the reasons, we think the <unk> deal is really so transformational for us as it takes a great product and it is.
In the hands of a company that's been nominal at marketing that kind of product and they're doing a great job with it and we love that partnership.
It reduced our top line a little bit, but it's only the only actual reason you see the sales overall not growing higher its just because of the way we're recognizing that revenue.
<unk>.
But that's been a great.
Right move for us in cardiovascular, but as you said Ross what it's done is it's allowed this sales force too.
Really focus up online.
On Kangaroo.
And the new leadership, there has helped as well so right. So we have we have Kimberly Mulligan, who has gone in there and.
Former.
Former Medtronic person that's been with US now for the last 14 years.
Really understands technology, its actually has a Phd from wake Forest.
In regenerative medicine.
And understand the systems really well and has created a collaborative relationship with Boston scientific and with others.
And you're starting to see that product move, but you're starting to see it move.
Because we are selling on the science and the technology of the biology.
And we think that creates exactly the right messaging going into the launch of Kangaroo RM keep in mind, we're going to be going up against.
Synthetic.
Our polymer that's releases antibiotics.
We will have the ability to offer all the benefits of the biologics. So yes, we do think that that move has has created focus and that focus is exactly why you are seeing this growth really resurgence of can grow and it couldnt happen at a better.
Todd.
Okay sounds great and then going off of that and looking at Opex, yet it sounds like burn should improve from here.
Any R&D does get approved how should we think about the size of your sales force added watch next year or are you expecting Boston or others to increase their support.
Well we are planning.
So launch Kangaroo RM are now we're open minded and that could change.
<unk>.
Depending on what other strategic offers there are but I'm going to tell you that has to be really really good offers.
Because we think we have a product that's worth to us hundreds of millions of dollars and that's not something we're going to let go.
Let go off for cheap the other thing is we have extreme confidence and this salesforce. So.
I can't emphasize this team thing enough.
We have the right leadership in place that right leadership has the right understanding and background and messaging in place.
Kimberly has that sales team firing on all cylinders and the message works take that and you pair it with 88% of higher X users want to be Kangaroo our end users.
And yes, we're going to put some we're going to put some additional resources into the sales force.
Ahead of launch, but we actually think that can be money.
Well spent.
Sounds great. Thanks for taking our questions and congrats on the progress.
Thanks.
Okay.
And our next question comes from the line or Frank <unk> with Lake Street Capital markets. Please proceed with your question.
Great. Thanks for taking the questions and congrats on the progress maybe I'll start with just following up on Ross's point about the commercial strategy post Kangaroo R. M. Clearance can you just talk about maybe I know I heard your comments around 88% of directs users mentioned that they would likely switchover to the kangaroo RM product, but maybe talk.
Where do you think you can take share most easily obviously at the Medtronic Medtronic sale on that side, but then Abbott and Boston have big opportunities as well, but maybe the medtronic are more familiar with the benefits of an envelope. So maybe just talk through where you think you can take the most share and.
And how you expect that to play out throughout next year.
Thanks, Frank So I think one of the great things about this market and really the surface that Medtronic started medtronic created awareness around the need.
For the product and again this is our estimate but based on our estimates.
It appears that Mark that Medtronic is close to 100% penetrated.
With their pacemaker.
Users.
With.
With tire X and yes. It is true that that group is is already.
<unk> made the switch at 88% of them would like to as we said wed like to become Kangaroo users. So thats certainly fertile hunting ground.
But they only have a third of the market roughly.
In rough numbers and so there is there is this other completely wide open white space, something like $400 million to $450 million.
A market that is currently not being addressed by anything and that's that's probably because they're being serviced by the Abbott and <unk>.
And the Boston Scientific's in the Biotron ex those reps certainly don't want to be bringing a medtronic product in there, but it's not that the need for the product doesn't exist not like Medtronic.
Electrophysiologist or doing some sort of high risk procedure that requires about antibiotic envelope. It's really more of a we think a market a market dynamic thing and that's why we're so excited about introducing this product yes, we can go after 88% of that.
The of the direct users this $400 million to $450 million opportunity out there that nobody is addressing and you kind of think where the Switzerland in there and can go in and and and actually.
Be quite effective at taking.
Taking a lot of that market relatively uncontested.
Got it that's helpful and maybe.
Stay on the CAGR of our EM team for now the.
Talk us through any any clinical strategy you may be thinking through do you think you need to run some sort of clinical trial to.
Show the benefits of the drug Eluting.
Pouch or is it a well known enough the Thai Rexes study that's out there maybe just kind of talk through that strategy and how youre thinking about at this point.
Sure.
First Frank we are a science based science first company.
So we have done a number of.
<unk>.
Clinical programs, we are also planning for the initiation.
Of of a few trials once Kangaroo RM has approved to continue to show out that.
Prove out that.
Clinical benefit we think perhaps the biggest area to show differentiation actually centers around the biological components of it versus the infectious components of it.
Recall that that.
That directs.
That tire X study required.
Thousands of patients show a relatively small.
A benefit an infection.
We look at the overall procedure failure rate and think that there is actually an opportunity where a biologic can go and make and make a big difference. So I know Michelle and her team.
With clinical has a number of studies.
Planned for it and again, that's how we intend to market not just <unk>.
But all of our products.
<unk> evidenced based company.
Okay, and then maybe a last one from me switching over to simpler term how.
How should we think about a steady state growth rate in that business clearly, it's growing very quickly right now, but a couple of moving pieces with Sandra Sandra partnership coming online. So I was hoping you could talk through some of the moving pieces and how we should think about the growth rate in that line.
Sure.
So.
This simple term.
We actually have two different distribution channels for simply aren't proprietary.
The distributor.
Network, which which we've been working with them.
Developing now for some time and they are knocking the cover off the ball.
They are they are doing have been doing and continue to do an absolutely phenomenal job for us we've augmented that recently, we see entre and I think it's important to appreciate the magnitude of what's the answer brain right. So they have.
About 23% of the reconstruction market, that's about a $1 6 billion dollar ADM market.
For us that 50.
15th brand new reps that are working on this product and we're talking about where we are right now relatively small numbers.
And so they have started.
Contributing to the third quarter, they actually were in a prelaunch state theyre starting to ramp up with our launch activities.
Now they have the ability to contribute in a very meaningful way for the growth of this product and right now we like what we're seeing as it relates to next year.
I would say, we're kind of in a wait and see mode.
They have the potential.
You know.
Not to not.
Grow it in the way we have been growing and are growing at more sort of in the orders of magnitude.
Kind of kind of realm.
What we're hoping to see.
Yeah, maybe maybe one thing to add to that Randy I would just say that in the third quarter. You know the 44% growth that we saw in the third quarter that that was fantastic. We were thrilled with that but really most of that was driven by our own.
<unk> sales network district distributor sales network and so we're starting to see some.
Material contributions from the <unk> partnership we.
We saw more later in the quarter than we did earlier in the quarter and I think it's safe to say that we'll see an even bigger contribution in Q4.
Where that could go next year I think it is an open question, but we are really optimistic about what that can do we're also really optimistic about what we can do even just with our own distributors.
And we think we'll see benefit from both so when we think about.
44% growth that we saw in the third quarter that that's been that's really been a bright spot for us almost every quarter.
If anything I would see that accelerating if we go into next year, it's hard to put a number out right now but but.
We don't see that tapering off we see that continuing to grow that.
Similar penetrates at least through next year and probably longer than that.
Got it okay. That's helpful color. Thanks for all the answering the questions and congrats on all the progress.
Thanks Frank.
And we have reached the end of the question and answer session and this also does conclude today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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