Q1 2024 MiMedx Group Inc Earnings Call
Operator: Good afternoon, and thank you for standing by. Welcome to the MiMedx First Quarter 2024 Operating and Financial Results Conference Call. Until next time, all participants are in a listen-only mode. Question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Notarianni, Head of Investor Relations for MiMedx. Thank you. You may now begin.
Good afternoon, and thank you for standing by.
Speaker Change: I'll come to the <unk> first quarter 2020 for operating and financial results Conference call.
Speaker Change: Time, all participants are in a listen only mode.
Speaker Change: A question and answer session will follow the formal presentation.
Speaker Change: As a reminder, this conference is being recorded.
Speaker Change: I would now like to turn the conference over to your host Ms.
Speaker Change: So Matt Notarianni head of Investor Relations for me My medics.
Speaker Change: You may now begin.
Matt Notarianni: Thank you, Operator, and good afternoon, everyone. Welcome to the MiMedx First Quarter 2024 Operating and Financial Results Conference call. With me on today's call are Chief Executive Officer Joe Capper and Chief Financial Officer Doug Rice. As part of today's webcast, we are simultaneously displaying slides that you can follow. You can access the slides from the Investor Relations website at MiMedx.com.
Speaker Change: Thank you operator, and good afternoon, everyone welcome to the <unk> first quarter 2020 for operating and financial results Conference call.
Speaker Change: With me on today's call are Chief Executive Officer, Joe Capper, and Chief Financial Officer, Doug Rice.
Matt Notarianni: As part of today's webcast, we are simultaneously displaying slides that you can follow you.
Matt Notarianni: You can access the slides from the Investor Relations website at <unk> Dot com.
Matt Notarianni: Joe will kick us off with some opening remarks, and Doug will provide a summary of our operating highlights and financial results for the quarter. And then Joe will conclude with some additional updates. We will then be available for your questions.
Joseph H. Capper: Joe will kick us off with some opening remarks, and Doug will provide a summary of our operating highlights and financial results for the quarter and then Joe will conclude with some additional update he will then be available for your questions.
Matt Notarianni: Before we begin, I would like to remind you that our comments today will include forward-looking statements, including statements regarding future sales, EBITDA, free cash flow, and cash balance growth, future margins and expenses, and expected market sizes for our products. These expectations are subject to risks and uncertainties, and actual results may differ materially from those anticipated due to many factors. Actual results and market sizes will depend on a number of factors, including competition, access to customers, the reimbursement environment, unforeseen circumstances and delays, and other factors.
Joseph H. Capper: Before we begin I would like to remind you that our comments today will include forward looking statements, including statements regarding future sales EBITDA free cash flow and cash balance growth.
Joseph H. Capper: Future margins and expenses and expected market sizes for our products.
These expectations are subject to risks and uncertainties and actual results may differ materially from those anticipated due to many factors.
Joseph H. Capper: Actual results and market sizes will depend on a number of factors, including competition Act.
Joseph H. Capper: The customers the reimbursement environment unforeseen circumstances and delays and other factors.
Matt Notarianni: Additional factors that could impact outcomes and our results include those described in the risk factors section of our annual report on Form 10-K and our quarterly report on Form 10-Q, which we plan to file shortly. Also, our comments today include non-GAAP financial measures, and we provide a reconciliation to GAAP measures in our press release, which is available on our website at www.mimedx.com.
Joseph H. Capper: Additional factors that could impact outcomes and our results include those described in the risk factors section of our annual report on Form 10-K, and our quarterly report on Form 10-Q, which we plan to file shortly.
Joseph H. Capper: Also our comments today include non-GAAP financial measures and we provide a reconciliation to GAAP measures in our press release, which is available on our website at www Dot My Metics Dot com.
Matt Notarianni: With that, I'm now pleased to turn the call over to Joe Capper. Joe?
Joseph H. Capper: With that I'm now pleased to turn the call over to Joe Joe.
Joseph H. Capper: Thanks, Matt, and good afternoon, everyone. We thank you for joining us on today's call, as we are very pleased to report the results of another outstanding quarter. As we communicated on our last quarterly call, we expected the momentum we generated in 2023 to continue into the first quarter of this year, and that's exactly what happened. In fact, as you will hear, the business performed even stronger than we expected in Q1, with revenue climbing at a rate of 18% year-over-year.
Joseph H. Capper: Thanks, Matt and good afternoon, everyone. We thank you for joining us on today's call as we were very pleased to report the results of another outstanding quarter.
Joe: As we communicated on our last quarterly call. We expected the momentum we generated in 2023 to continue into the first quarter of this year and that's exactly what happened in fact as you will hear the business performed even stronger than we expected Q1.
Joe: Revenue climbing at a rate of 18% year over year.
Joseph H. Capper: On our year-end call a few months ago, we stressed the importance of the transformative steps we had taken in 2023 to establish a strong foundation from which we could build upon. That seems to be exactly what has happened.
Joe: What are you ready to call a few months ago, we stress the importance of the transformative steps we had taken in 2023 to establish a strong foundation from which we can build upon.
Joe: That seems to be exactly what is happening.
Joseph H. Capper: As a result of our leadership team's solid execution on our key initiatives, coupled with the debt refinancing completed in January, we are now operating with a much-improved balance sheet and profitability profile. This provides far greater flexibility as we seek to establish additional growth drivers and strengthen our market position while remaining highly focused on being a growth-oriented and profitable medtech business. Given our success improving the financial profile of the company in a relatively short period of time, I am confident we have the right strategy to create substantial value in the business, even in the face of the typical regulatory and reimbursement uncertainty any healthcare business encounters.
Joe: As a result of our leadership team's solid execution on our key initiatives coupled with the debt refinancing completed in January.
Joe: Now operating with a much improved balance sheet and profitability profile.
Joe: This provides far greater flexibility as we seek to establish additional growth drivers and strengthen our market position, while remaining highly focused on being a growth oriented.
Joe: Possible Med Tech business.
Joe: Given our success improving the financial profile of the company in a relatively short period of time.
Joe: I'm confident we have the right strategy to create substantial value in the business even in the face of the typical regulatory reimbursement uncertainty any health care business and calories.
Joseph H. Capper: As an industry leader, we will continue to endeavor to shape conversations in these areas. Rest assured, we are working proactively with the help of outside advisors to do just that. Later in the call, we will provide our initial thoughts on the proposed local coverage determination that was published late last week and why we think this is ultimately a positive development for MiMedx in the coming quarters and beyond. But first, we need to take a few minutes to discuss our outstanding first quarter results and update you on the progress we have made regarding our strategic initiatives.
Joe: As an industry leader, we will continue to endeavor to shape conversations in these areas.
Joe: Rest assured we are working proactively with the help of outside advisors to do just that.
Joe: Later in the call we will provide our initial thoughts on the proposed local coverage determination that were published late last week and why we think this is ultimately a positive development for <unk> in the coming quarters and beyond.
Joseph H. Capper: For the first quarter, net sales grew year-over-year by approximately $13 million, or 18%, to $85 million, marking another outstanding growth quarter. Gross profit margin improved to 85% for the quarter. Adjusted EBITDA was $19 million, or 22% of sales in the first quarter, representing an increase of $9.5 million over the prior year quarter.
Joe: But first we need to take a few minutes to discuss our outstanding first quarter results and update you on the progress we've made regarding our strategic initiatives.
Joe: Yeah.
Joe: For the first quarter net sales grew year over year by approximately $13 million or 18% to $85 million, marking another outstanding growth quarter.
Joe: Gross profit margin improved to 85% in the quarter.
Joe: Adjusted EBITDA was $19 million or 22% of sales in the first quarter, representing an increase of $9 $5 million over the prior year quarter.
Joseph H. Capper: We acquired certain assets from Telefile and established a distribution agreement with Viginity, paving the way for the introduction of our first Xenograft product. As previously announced, we refinanced our debt facility under more competitive terms in January, dramatically improving our financial profile. We ended the quarter with $48 million in cash after using $30 million to pay down our revolving line of credit and $5 million to complete the Telefio Regenity transaction, in addition to other Q1 cash obligations.
Joe: We acquired certain assets from televised establishing distribution agreements like the journey.
Joe: The way for the introduction of our first xenograft product.
Joe: As previously announced we refinanced our debt facility under more competitive terms in January dramatically, improving our financial profile.
Joe: We ended the quarter with $48 million in cash after using $30 million to pay down our revolving line of credit and $5 billion to complete the tela bio regenerative transaction.
Joe: In addition to other Q1 cash obligations.
Joseph H. Capper: And finally, we were pleased to be able to add two new directors during the quarter with the appointments of Tiffany Olson and Dorothy Pui, two highly accomplished individuals whose deep medtech expertise will make them valuable assets to the board moving forward. Additionally, as we disclosed in our proxy filing last week, Dr. Phyllis Gardner and Dr. Michael Giuliani will now be standing for re-election at our upcoming annual meeting. Phyllis and Michael played pivotal roles in shaping the direction of the company during particularly challenging times.
Joe: And finally, we were pleased to be able to add two new directors during the quarter with the appointments of Tiffany Olson and Dorothy.
Joe: Two highly accomplished individuals whose.
Joe: Med Tech expertise will make them valuable assets to the board moving forward.
Joe: Additionally, as we disclosed in our proxy filing last week, Dr. Phyllis Gardner and Dr. Michael Julia Ali will not be standing for reelection at our upcoming annual meeting.
Joe: Phil and Mike will play a pivotal role in shaping the direction of the company during particularly challenging times and we are incredibly thankful for their contributions over the last several years.
Joseph H. Capper: And we are incredibly thankful for their contributions over the last several years. Turning now to our strategic focus. On our last four quarterly calls, I provided updates on our progress executing on the following three primary growth drivers, which we laid out at the end of 2023. One, continuing to build on our leadership position in the wound and surgical markets by enhancing our product portfolio and expanding geographically. Developing opportunities in adjacent markets to create additional growth drivers.
Joe: Turning now to our strategic focus.
Joe: On our last four quarterly calls I provided updates on our progress executing on the following three primary growth drivers, which we laid out at the end of 2023.
Joe: One continuing to build on our leadership position in the wound and surgical markets by enhancing our product portfolio and expanding geographically.
Joe: Developing opportunities in adjacent markets to create additional growth drivers and three building a discipline around expense management rationalization and continuous process improvement.
Joseph H. Capper: Building a discipline around expense management, rationalization, and continuous process improvement. I am incredibly pleased with the progress the team continues to make in these areas, which has fueled our success. Given the evolution of the business, we have refined our plan for 2024 and will provide updates around the following growth initiatives. First, we will continue to innovate and diversify our product portfolio to maximize growth. It has become increasingly clear that all of the sectors we serve within the wound surgical markets are benefiting from the products we have brought to market.
Joe: I'm incredibly pleased with the progress the team continues to make in these areas, which has fueled our success.
Joe: Given the evolution of the business, we have refined our plan for 2024 and will provide updates around the following growth initiatives.
Joe: First we will continue to innovate and diversify our product portfolio to maximize growth.
Joe: It has become has become increasingly clear that all of the sectors. We serve within the wound and surgical markets are benefiting from the products, we brought to market over.
Joseph H. Capper: Over the last 18 months, we have introduced three new holograms, two geared toward the surgical market, and they'll affect an axial fill, and one for the private office at the effect, the launch of which continues to exceed our expectations.
Over the last 18 months, we've introduced screened him out of grass.
Joe: <unk> geared toward the surgical market amnio effect and extra Phil and one for the private office that'd be affect the launch of which continues to exceed our expectations.
Joseph H. Capper: All three products have been met with widespread market acceptance, and we have received exceptional feedback on the clinical benefits being derived from each. In fact, during the first quarter, we once again grew in all sites of service due in large part to the success we are experiencing with these products. And, of course, we continue to have success developing our EpiFix business in Japan, where our sales grew by 146% in Q1, albeit off of a low base. We remain confident that this market will continue to develop into a meaningful contributor over time. This leaves me with two overriding themes to expect from us going forward.
Joe: All three products had been met widespread market acceptance and we have received exceptional feedback from the clinical benefits being derived from each.
Joe: In fact, the when the first quarter. We once again grew in all sites of service do you want large parts of the success, we are experiencing with these products.
Joe: And of course, we continue to have success developing that'd be fixed business in Japan, where our sales grew by 146% for Q1, albeit off a low base. We remain confident that this market will continue to develop into a meaningful contributor over time.
Joe: This leaves me with two overriding themes to expect from us going forward.
Joseph H. Capper: Number one, we need to continue to innovate products designed to meet emerging customer needs. This is a proven competitive advantage we must leverage. As we have experienced, our customer base will readily adopt a product when it hits the mark.
Joe: Number one we need to continue to innovate products designed to meet emerging customer needs.
This is a proven competitive advantage we must leverage.
Joe: As we have experienced a customer base will readily adopt the product when it hits the mark.
Joseph H. Capper: Number two, the organization has a strong core competency for introducing new products into the various market segments. With this in mind, we hope to introduce as many as three more products over the next 18 months, one of which will be our first xenograft product. This is a good segue to our second area of focus, which is to develop and deploy programs intended to expand our footprint in the surgical market. One of the rationales for suspending our knee OA program last summer was to redirect resources to better capitalize on opportunities in various surgical settings.
The organization has a strong core competency at introducing new products into the various market segments.
Joe: With this in mind, we hope to introduce as many as three more products over the next 18 months, one of which will be our first beta unit graft product.
Joe: This is a good segue to our second area of focus.
Joe: Which is to develop and deploy programs intended to expand our footprint in the surgical market.
Joe: One of the rationales for suspending our knee OA program last summer was to redirect resources to better capitalize on opportunities in various surgical settings.
Joseph H. Capper: There are tens of millions of surgeries performed in the U.S. every year, many of which could benefit from the use of our products. While increasing our surgical presence has been of strategic importance, this year, we are ramping up our clinical and marketing investments and refining this focus in select surgical settings where evidence is mounting as to the efficacy of our product. We added and will continue to add resources to our Medical Liaison Group to improve our support in target areas. We are partnering with key opinion leaders to publish on outcomes in markets like neurosurgery for craniotomy. Dermatology, Primo Surgeries, and Colorectal Anastomosis
Joe: There are tens of millions of surgeries performed in the U S. Every year, many of which could benefit from the use of our products.
While increasing our surgical presence has been on strategic importance. This year, we are ramping up our clinical and marketing investments and refining this focus in select surgical settings or evidence is mounting.
Joe: As for the efficacy of our products.
And we'll continue to add resources to a medical liaison a group to improve our support in targeted areas.
Joe: Partnering with key opinion leaders to publish on outcomes in markets like neurosurgery for Craniectomy Jeremy.
Joe: Dermatology promoted surgeries and colorectal anastomosis.
Joseph H. Capper: We are excited to fund these activities with the firm belief that the future for growing our footprint across a variety of surgical procedures remains bright, particularly as the body of real-world evidence for a wide range of applications continues to grow. And, of course, with the upcoming launch of our first Xenograft product, we will soon offer a more enhanced portfolio of solutions where such products may be more appropriate for various reasons. As a reminder, this is a 510K-cleared, bovine-derived collagen matrix particulate that is indicated for the management of moderately to heavily exuding wounds and to control minor bleeding.
Joe: We are excited to fund these activities with a firm belief that the future for growing our footprint across a variety of surgical procedures remains bright.
Particularly as the body of real world evidence for a wide range of applications continues to grow.
Joe: And of course with the upcoming launch of our first xenograft product. We will soon offer a more enhanced portfolio of solutions for such products, maybe more appropriate for various reasons.
Joe: As a reminder, this is a five 10-K.
Five 10-K cleared.
Joe: Line derived collagen matrix, particularly that is indicated for the management of moderately into heavily exuding wounds as it could.
Joe: Troll minor bleeding.
Joseph H. Capper: We expect to be ready for a soft launch of this product in the third quarter, with full market release later this year. Our third initiative is to introduce programs designed to enhance customer intimacy. You might wonder why this is of such importance that it rises to the level of one of our three most important strategic initiatives. The answer is simple.
Joe: We expect to be ready for a soft launch of this product in the third quarter with full market release later this year.
Joe: Our third initiative is to introduce programs designed to enhance customer intimacy.
Joe: You might wonder why this is of such importance that it rises to the level of one of our three most important strategic initiatives.
Joseph H. Capper: We want to lower our customer charge. In our markets, customer turnover is high relative to other industries, which impacts margins. We believe we have an opportunity to change this and build a much stickier association to an expanded customer-centric offering, thereby increasing the lifetime value of each customer. This will not be easy, especially when dealing with non-contracted, price-sensitive markets.
Joe: Answer is simple, we want to lower our customer churn.
Joe: In our markets customer turnover is high relative to other industries, which impacts margins.
Joe: We believe we have an opportunity to change this and build a much stickier association to an expanded customer centric offering, thereby increasing our lifetime value of each customer.
Joe: This will not be easy, especially when dealing with non contracted price sensitive markets.
Joseph H. Capper: However, we plan to implement a series of interconnected initiatives designed to improve customer intimacy, embedding it into the DNA of the organization. To that end, during the first quarter, we were excited to launch MiMedxConnect, our new customer portal, providing a far more streamlined digital connection with referring practices, with many enhanced features and more in development. We are experiencing significant customer acceptance and enrollment, in excess of our initial early adoption project.
Joe: However, we plan to implement a series of interconnected initiatives designed to improve customer intimacy embedding it into the DNA of the organization.
Joe: To that end during the first quarter, we were excited to launch my medics connect our new customer portal, providing a far more streamlined digital connection with referring practices with many enhanced features and more in development.
Joe: We are experiencing significant customer acceptance and enrollment.
Joe: So far in excess of our initial early adoption projections.
Joseph H. Capper: Before I turn the call over to Doug, I want to again provide a quick update on ActioPhil and our path forward. As you will recall from previous communications, the FDA has taken a position that because Axiophil is manufactured as a particulate... It is more than minimally manipulated and therefore subject to regulation as a Section 351 product for biologic drugs. As you will also recall, we followed the FDA's request-for-designation process at their suggestion. In response to both the pre-RFD and later the RFD, the agency maintained the position that AxioPhil is a 351 product. And they went out of their way in both responses to tell us why...
Joe: Before I turn the call over to Todd I want to again provide a quick update on actually with Phil and our path forward.
Joseph H. Capper: The 510K pathway is also not appropriate for access bills. This was all the more confusing since, in February, the FDA issued a 510k clearance on a nearly identical human tissue derived particulate product prior to sending our RFP response. There are now three nearly identical products in the market. One has a 361 designation, one has a 510 pay clearance, and Axiofil, which is being classified as a 351, requiring the most time-consuming and expensive path to approval.
Joe: As you will recall from previous communications. The FDA has taken a position that because actually it feels manufactured as a particularly.
Joe: It is more than minimally manipulated and therefore subject to regulation as a section 351 product for biologic drugs.
Joe: Okay.
Todd: As you will also recall, we followed the fda's request for designation process at their suggestion.
Todd: In response to both the pre RFP and later the RFP. The HFC maintained the position axial Phil is the $3 51.
Todd: They went out of their way in both responses to tell us why.
Todd: Five 10-K pathway is also not appropriate for access to them.
Todd: This was all the more confusing sits in February the FDA issued a five 10-K clearance on.
Todd: On a nearly identical human tissue draw particular product prior to sending our RFP response.
Todd: There are now three nearly identical product in the market. One has a 361 designation one has a five 10-K clearance and actually a pill, which is being classified as a $3 51, requiring the most time consuming and expensive path to approval.
Joseph H. Capper: Our only available means of further appeal was to file a legal claim in federal court, which we filed in March, given the arbitrary and capricious manner in which the FDA is regulating these lifetime products. Because of the administrative nature of these proceedings, we expect the process to take a year or less, at a cost estimated to be in the six figures.
Todd: Our only available means for further appeal was to file a legal claim in federal Court, which we filed in March given the arbitrary and capricious manner in which the FDA is regulating these lifetime products.
Todd: Because it'll be administrative nature of these proceedings.
Todd: Expect the process to take a year or less.
Todd: Cost estimated to be in the six figures.
Joseph H. Capper: In the meantime, we will continue marketing the product, which, as a reminder, has an amazing safety and advocacy record. In addition to fighting the good fight for continued access to Axiofil as a 361 product, our mitigation plan calls for the submission of a 510K application for human tissue-derived product later this year. This product will have characteristics similar to Axiofil and the 510K product I referenced earlier. And, as mentioned, because axial fill revenue remains immaterial to our overall performance, we believe the launch of our xenograft particulate could offset most, if not all, of any potential revenue loss if we ultimately fail to reach a resolution to keep axial fill on the market.
Todd: In the meantime, we will continue marketing of the product.
Todd: As a reminder has an amazing safety and efficacy record.
Todd: In addition to fight the good fight for continued access to axial Phil as a 361 product our mitigation plan calls for the submission of a five 10-K application or human tissue derived product later this year.
This product will have characteristics similar to axiom, Phil and the 500 10-K cleared product I referenced earlier.
Todd: And as mentioned because axial fill revenue remains immaterial to our overall performance. We believe the launch of our xenograft, particularly could offset most if not all of any potential revenue loss. If we ultimately fail to reach a resolution to keep actually will go on the market.
Joseph H. Capper: Above all else, we hope this proceeding will shine a light on the need for regulatory clarity in the skin substitute market. Regulatory, clinical, and commercial stakeholders should all be aligned in providing patient access to safe and efficacious solutions in a reasonable and consistent manner. That may ultimately result in a transition toward an increased regulatory burden for many human-derived outgrafts, like a 510K clearance, which is a far more reasonable pathway than a 351A, at a resolution we would support. Now, let me turn the call over to Doug for more detail on our financial results. Doug?
Todd: Yeah.
Todd: Above all else, we hope this proceeding will shine a light on the need for regulatory clarity for the skin substitute market.
Todd: Our regulatory clinical and commercial stakeholders should all be aligned and providing patient access to safe and efficacious solutions kind of reasonable and consistent manner.
Todd: That may ultimately result in a transition toward an increased regulatory burden for many human derived allografts like five 10-K clearance, which is a far more reasonable pathway.
Todd: 351 approval.
Todd: And resolution, we would support now let me turn the call over to Doug for more details on our financial results Doug.
Douglas C. Rice: Thank you, Joe. And good afternoon to everyone on today's call. Thank you for joining us. I'm pleased to once again be sharing another strong quarter of results with you all today. As a reminder, and as Matt mentioned, many of the financial measures covered in today's call are on a non-GAAP basis, so please refer to today's earnings release for further information regarding our non-GAAP reconciliations and disclosures. Additionally, as a reminder, during the fourth quarter of 2023, we bifurcated our GAP financial reporting to reflect the current and historical results of our recently disbanded regenerative medicine segment as discontinued operations.
Douglas C. Rice: Thank you Joe and good afternoon to everyone on today's call. Thank you for joining us I'm pleased to once again be sharing another strong quarter of results with you all today.
As a reminder, and as Matt mentioned many of the financial measures covered in today's call are on a non-GAAP basis. So please refer to today's earnings release for further information regarding our non-GAAP reconciliations and disclosures. Additionally, as a reminder, during the fourth quarter of 2023, we bifurcated, our GAAP financial reporting to refer.
Douglas C. Rice: The current and historical results of our recently disbanded regenerative medicine segment.
Douglas C. Rice: Discontinued operations Accordingly.
Douglas C. Rice: Accordingly, my comments today on our first quarter 2024 results are made on a continuing operations basis and exclude the historical cost of the Regenerative Medicine Business Unit, which was suspended beginning in Q2 2023. For a full discussion of the impact of these discontinued operations, please refer to our most recent 10-K and 10-Q filings.
Douglas C. Rice: Accordingly, my comments today on our first quarter 2024 results are made on a continuing operations basis and exclude the historical cost of our regenerative medicine business unit, which was suspended beginning in Q2 2023.
Douglas C. Rice: For a full discussion of the impact of these discontinued operations. Please refer to our most recent 10-K and 10-Q filings.
Douglas C. Rice: Moving on to our top-line results, our first quarter 2024 net sales of $85 million represented 18% growth compared to the prior year period, reflecting our sixth consecutive quarter of double-digit top-line growth. Q1's performance demonstrates our continued momentum following a very strong 2023 in which we grew the business by 20%. Turning to our results by site of service, we continue to see growth across all of them, with a particularly strong contribution in the private office.
Douglas C. Rice: Moving onto our topline results of our first quarter 2024, net sales of $85 million, representing 18% growth compared to the prior year period, reflecting our sixth consecutive quarter of double digit top line growth.
Douglas C. Rice: Q1's performance demonstrates our continued momentum following a very strong 2023 in which we grew the business by 20%.
Douglas C. Rice: Turning to our results by site of service, we continue to see growth across all of them with a particularly strong contribution in the private office. We also saw good growth in the hospital setting, which as Youll recall was quite strong last year driven by the sales of two of our newer products amnio effect and actually will fail.
Douglas C. Rice: We also saw good growth in the hospital setting, which, as you'll recall, was quite strong last year, driven by the sales of two of our newer products, AmniOfect and Axiofil. Those products continue to grow in the first quarter of this year, albeit against more difficult comparisons. Our other sites of care, which include International, the VA, and other sites, were also strong in the quarter.
Douglas C. Rice: Those products continued to grow in the first quarter of this year, albeit off a more difficult comparisons.
Douglas C. Rice: Our other sites of care, which include International D E and other sites were also strong in the quarter.
Douglas C. Rice: Beginning this quarter, we will provide our revenues by product pack, specifically our wound products, which include EpiFix, EpiCord, and EpiEffect, and our surgical products, including AmnioEffect, and also our new Xenograft product that Joe mentioned, recently acquired through our agreements with Telebio and Regenity. In light of evolving industry dynamics, the sales of many of our same products are across multiple sites of service, and our changing strategic priorities lead us to believe that this breakdown, by comparison, provides a more consistent and meaningful view and enables us to report our commercial progress more effectively.
Douglas C. Rice: Beginning this quarter, we will provide our revenue by product.
Douglas C. Rice: Specifically, our wound products, which include that'd be fix every court and that the effect in our surgical products, including Amnio effect and also our new xenograft product that Joe mentioned recently acquired through our agreements with tela bio and regenerative and.
Douglas C. Rice: In light of our evolving industry dynamics the sales of many of our St products are across multiple sites of service and.
Douglas C. Rice: Changing strategic priorities lead us to believe that this breakout by comparison.
Douglas C. Rice: It provides a more consistent and meaningful view and enables us to report our combined commercial progress more effectively.
Douglas C. Rice: Our first quarter 2024 gross profit was $72 million, compared to $59 million last year. Our gross margin was 85%, reflecting a roughly 200 basis point improvement from the first quarter of 2023. Gross profit was favorably impacted by higher sales levels, and our gross margin for the first quarter benefited from a more favorable product mix compared to the prior year. Based on our expected product mix, we expect that our gross margins will modestly decline relative to Q1 over the remainder of 2024.
Douglas C. Rice: Our first quarter 2024, gross profit was $72 million compared to $59 million last year.
Douglas C. Rice: Our gross margin was 85%, reflecting a roughly 200 basis point improvement from the first quarter of 2023.
Douglas C. Rice: Gross profit was favorably impacted by higher sales levels and our gross margin for the first quarter benefited from a more favorable product mix compared to the prior year.
Douglas C. Rice: Based on our expected product mix, we expect that our gross margins will modestly decline relative to Q1 over the remainder of 2024.
Douglas C. Rice: Turning to our operating expenses, Selling General and Administrative Expenses, or SG&A, were $55 million, or 65% of net sales in the first quarter, compared to $52 million, or 73% in the prior year period. We remain committed to achieving solid operating leverage as we grow the top line, even as our SG&A spend on a dollar basis will likely increase as we pay higher commissions as a result of higher sales, as well as increased stock-based compensation expenses.
Douglas C. Rice: Turning to our operating expenses, selling general and administrative expenses or SG&A was $55 million or 65% of net sales in the first quarter compared to $52 million or 73% in the prior year period.
Douglas C. Rice: We remain committed to achieving solid operating leverage as we grow the top line, even as our SG&A spend on a dollar basis will likely increase as we pay higher commissions as a result of higher sales as well as increased stock based compensation expense.
Douglas C. Rice: Due to the timing of certain expenses in Q1 and continued sales growth, we expect SG&A as a percentage of revenue to decline moderately for the remainder of 2024. Our first quarter R&D expenses were $3 million, or about 3% of net sales, roughly flat compared to the prior year period. We continue to expect our R&D spend to modestly increase on a relative basis compared to 2023, to mid-single digits as a percentage of net sales.
Douglas C. Rice: Due to the timing of certain expenses in Q1 and continued sales growth, we expect SG&A as a percentage of revenue to decline moderately for the remainder of 2024.
Our first quarter, R&D expenses were $3 million or about 3% of sales.
Douglas C. Rice: Definitely flat compared to the prior year period.
We continue to expect our R&D spend to modestly increase on a relative basis compared to 2023 to mid single digits as a percentage of net sales.
Douglas C. Rice: We mentioned last quarter that some of this R&D spend will be driven, in part, by investments in data generation for our products, and specifically..., a robust trial for the epi effect that we expect will confirm the utility we are seeing in the marketplace as an important wound care solution.
Douglas C. Rice: We mentioned last quarter that some of this R&D spend will be driven in part by investments in data generation for our products and specifically.
Douglas C. Rice: On a robust trial for F. The effect that we expect will confirm the utility we are seeing in the marketplace is an important wound care solutions.
Douglas C. Rice: Gap income tax expense for Q1 2024 was $2 million, reflecting an effective tax rate of 21%, compared to a negligible amount in Q1 2023. Our effective tax rate, as compared to statutory tax rates this quarter, was favorably impacted by stock-based award vesting. By comparison, our income tax expense in Q1 2023 was negligible due to valuation allowances. As a reminder, we will continue to use a 25% long-term adjusted effective tax rate to report adjusted earnings.
GAAP income tax expense for Q1, 2024 was $2 million, reflecting an effective tax rate of 21% compared to a negligible amount in Q1 2023.
Douglas C. Rice: Our effective tax rate as compared to statutory tax rates. This quarter was favorably impacted by stock based awards vesting.
Douglas C. Rice: Parison our income tax expense in Q1, 2023 was negligible due to valuation allowances.
Douglas C. Rice: As a reminder, we will continue to use a 25% long term adjusted effective tax rate to report adjusted earnings.
Douglas C. Rice: Our first quarter gap net income from continuing operations was $9 million compared to a net loss of $2 million in the prior year period. Adjusted net income for the quarter was $10 million, or $0.07 per share, compared to a loss of $3 million or $0.03 per share in the prior year period. First quarter 2024 adjusted EBITDA was $19 million, or 22% of net sales compared to an adjusted EBITDA of $9 million, or about 13% of net sales in the prior year period.
Douglas C. Rice: Our first quarter GAAP net income from continuing operations was $9 million compared to a net loss of $2 million in the prior year period.
Douglas C. Rice: <unk> net income for the quarter was $10 million or <unk> seven per share compared to a loss of $3 million or <unk> <unk> per share in the prior year period.
Douglas C. Rice: First quarter 2024, adjusted EBITDA was $19 million or 22% of net sales compared to an adjusted EBITDA of $9 million or about 13% of net sales in the prior year period.
Douglas C. Rice: Turning to our liquidity, our first quarter cash and cash flow are typically impacted by revenue seasonality, as well as customary compensation and other seasonal cash outflows. In the first quarter of this year, we also repaid the $30 million borrowing under a revolving credit facility that we had drawn on as part of our refinancing earlier in the year, and we made a $5 million payment to Telebio related to our product portfolio expansion into Xenografts with Rigidity Bioscience.
Turning to our liquidity, our first quarter cash and cash flow are typically impacted by revenue seasonality as well as customary compensation and other seasonal cash outflows in the first quarter of this year. We also repaid the $30 million borrowing under our revolving credit facility that we had drawn on as part of our refinancing earlier.
In the year, and we made a $5 million payment to tela bio related to our product portfolio expansion and the zena grass with regenerative biosciences.
Douglas C. Rice: As a result of all this, at the end of Q1, the company had $29 million of net cash. And we continue to demonstrate solid free cash flow conversion with $5 million of free cash flow during the first quarter compared to an outflow of $5 million in the same prior year period.
Douglas C. Rice: As a result of all this at the end of Q1, the company had $29 million of net cash.
Douglas C. Rice: And we continued to demonstrate solid free cash flow conversion with $5 million of free cash flow during the first quarter compared to an outflow of $5 million in the same prior year period.
Douglas C. Rice: I will now turn the call back to Joe. Okay?
Douglas C. Rice: Now I'll turn the call back to Jeff.
Jeff: Thanks, Doug.
Joseph H. Capper: As you have just heard, we had another outstanding quarter, once again exceeding expectations. Net sales were $85 million, up 18% in the quarter. Gross profit margin increased to 85%. Adjusted EBITDA was $19 million, or 22% of net sales in the quarter.
Jeff: As you've just heard we had another outstanding quarter once again exceeding expectations.
Jeff: Net sales were $85 million up 18% in the quarter gross profit margin increased to 85% adjusted EBITDA was $19 million or 22% of net sales in the quarter.
Joseph H. Capper: They came through in all types of service. We financed our debt and acquired the rights to commercialize our first unit of product. Now let me turn to the Local Coverage Determinations, or LCDs, that were proposed in unison by all seven of the Medicare Administrative Contractors late last week, in effect creating the equivalent of a national coverage policy. Similar to last year's proposal, the new LCDs call for a utilization cap of four skin-substitute applications per case.
Jeff: The game grew in all sites of service refinanced our debt and acquired the rights to commercialize our first you need to have product.
Joseph H. Capper: And importantly, this year's proposal allows for additional applications based on medical necessity in instances when a patient's wound needs more help achieving closure. The proposed LCBs also, again, significantly limit the number of products approved for reimbursement at 15, based on published, non-biased clinical trials. Well, the non-approved product list specifically prohibits reimbursement for nearly 180 other products currently on the market. There will be a comment period which will end on June 8th, and the LCDs will be finalized and go into effect sometime thereafter, likely not later than October 1st if they follow the same timeline as last. What does this mean for MiMedx? Two of our products, including our flagship EpiFix product, are among the 15 approved for reimbursement. Unfortunately, the effect is not on the list due to a lack of sufficient published evidence to date.
Jeff: Now, let me turn to the local coverage determinations or LCD that were proposed Eaton unison by all seven of the Medicare administrative contractors fleet last week in effect, creating a the equivalent of a national coverage policy.
Similar to last year's proposal the new LCD is call for a utilization cap of four skin substitute applications per case.
Importantly, this year's proposal allows for additional applications based on medical necessity in instances when a patient who needs more help achieving closure.
Jeff: The proposed LCD also again significantly limit the number of products approved for reimbursement at 15.
Based on published.
Jeff: Non biased clinical evidence.
Jeff: Well the non approved product specifically prohibits reimbursement for nearly 180 other products currently on the market.
Jeff: It will be a comment period, which will end on June eight and the <unk>.
Jeff: LCD easily finalized and go into effect sometime thereafter.
Jeff: Not later than October 1st if they follow the same timeline as last year.
What does this mean for my Max.
Jeff: Two of our products, including our flagship at the fixed products are among the 15 approved for reimbursement.
Jeff: Unfortunately, the effect is not one of the list due to a lack of sufficient published evidence to date.
Joseph H. Capper: This is simply a matter of time. Even before the recent announcement on these LCDs, we had committed to funding and designed highly powered randomized controlled trials for Effingham, which will soon be underway. Additionally, we have been building a strong body of real-world evidence since market introduction. As such, we will engage directly with the MACs and CMS in order to ensure the most expeditious paths qualify for coverage. If implemented as proposed, or even in a slightly modified format, these LCDs will certainly cause some level of disruption in the market, at least in the short term.
Jeff: This is simply a matter of timing.
Jeff: Even before the recent announcement on E. L. C. DS we had committed for funding and have designed highly powered randomized controlled trial for etsy effect, which will soon be underway.
Jeff: Additionally, we have been building a strong body of real world evidence since market introduction.
Jeff: As such we will engage directly with the Max and CMS in order to ensure the most expeditious path to qualify.
From coverage.
Jeff: If implemented as proposed or even at a slightly modified format.
Jeff: <unk> LCD will certainly cause some level of disruption in the market.
At least in the short term.
Joseph H. Capper: However, given the balance of our business portfolio, our commitment to evidence-based medicine, and our much improved financial profile, I believe we are better positioned than most to navigate the changes and expect us to benefit in the longer term under this new reinforcement structure. The bottom line is that something clearly had to be done. The blatant abuse of the payment system and the cost inflicted on the Medicare trust fund have gotten way out of hand.
Jeff: However, given the balance of our business portfolio, our commitment to evidence based medicine and a much improved financial profile I believe we are better positioned than most to navigate the changes.
Jeff: And expect us to benefit in the longer term under this new reimbursement structure.
Jeff: The Bottomline is that something clearly had to be done.
Jeff: The blatant abuse of the payment system and the cost inflicted on the Medicare Trust fund has gotten way out of hand.
Joseph H. Capper: We've been fairly vocal about the need to clean up the bad behavior in this market for some time while ensuring continued access to much-needed healing solutions. We will continue to provide input, as this will most likely be an evolving situation. In terms of guidance, we will not be making any changes at this point, given what has been communicated, or not because of the potential disruption associated with the proposed LCDs. We would have been able to raise guidance based on the outstanding quarter we just had. And we believe that
Jeff: We've been fairly vocal about the need to clean up the bad behavior in this market for some time, while ensuring continued access to much needed scaling solutions.
Jeff: We will continue to try to provide input as this will most likely be an evolving situation.
In terms of guidance, we will not be making any changes at this point given what has been communicated.
Jeff: Were it not for the potential disruption associated with the proposed LCD, we would've been able to raise guidance based on the outstanding quarter, We just had.
Jeff: And we believe.
Joseph H. Capper: When everything is finalized with the LCDs, MiMedx will be in a strong position to compete and grow our share in the market for advanced wound care products. We will keep you informed as we learn more. Importantly, these LCDs do not affect the efforts and strategy underpinning their surgical discipline, which we think has a bright future with a large and growing addressable market, particularly as we expand our product portfolio. In closing, I would like to congratulate and thank the entire MiMedx team for delivering another excellent quarter.
Jeff: When everything is finalized with the LCD.
Jeff: <unk> will be in a strong position to compete and grow our share in the market for advanced wound care products. We will keep you informed as we learn more.
Jeff: Importantly, these lcd's do not affect the efforts and strategy underpinning our surgical business, which we think has a bright future with a large and growing addressable market.
Jeff: Particularly as we expand our product portfolio.
Jeff: In closing I would like to congratulate and thank the entire <unk> team for delivering another excellent quarter.
Joseph H. Capper: I am confident we will navigate any potential changes in the market and continue to stay focused on helping to improve the lives of the many people who are treated with our products. With that, I would like to open the call to questions. Operator, we are now ready for our first question. Please proceed. Thank you.
Jeff: Confident we will navigate any potential changes in the market and continue to stay focused on helping to improve the lives of the many people who are treated with our products.
Speaker Change: With that I would like to open the call to questions. Operator, we're now ready for our first question. Please proceed.
Speaker Change: Thank you.
Speaker Change: Well be conducting a question and answer session if you'd like to ask a question at this time. Please press star one from your telephone keypad.
Operator: If you would like to ask a question at this time, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Speaker Change: A confirmation tone will indicate your line is in the question queue do.
Speaker Change: You May press star two if he like to withdraw your question from the queue for.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Operator: One moment, please, while we poll for questions. Thank you. Thank you. And our first question comes from the line of Chase Knickerbocker with Craig Hallam. Please proceed with your question.
Speaker Change: One moment, please while we poll for questions.
Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you and our first question comes from the line of Chase sticker rocker Craig Hallum. Please proceed with your questions.
Chase Richard Knickerbocker: Good afternoon, guys. Thanks for taking the questions.
Chase: Good afternoon, guys. Thanks for taking the questions.
Chase Richard Knickerbocker: First, for me, you know, we saw a little bit of disruption in the wound care market last fall when the LCD was first released. What are you hearing from customers? And kind of how are you guys thinking about how the market's going to react to this? And then, particularly, around the epi effect? Do you expect any kind of change in physician behavior as far as adoption goes with that product, considering it's on the not covered list as it sits today?
First from me, we saw a little bit of disruption in the wound care market.
Chase: Last fall when the LCD was first released.
Speaker Change: What are you hearing from customers and kind of how are you guys thinking about how the market is going to react to this and then particularly around the effect.
Speaker Change: Do you expect any China change in physician behavior as far as adoption goes with that product considering it's on the non covered lives as it sits today.
Speaker Change: Okay.
So the first part of your question is what we're hearing is it's kind of early on chase too have heard too much but let me just start by saying.
Joseph H. Capper: So the first part of your question is what we're hearing. It's kind of early on, Chase, to have heard too much.
Joseph H. Capper: But let me just start by saying this is a change that we welcome, even if there is some potential short-term disruption. As we've mentioned, we've been advocating for change in this market segment for some time, and frankly, we see this as a step in the right direction. Reimbursement changes are typical in healthcare. I've lived through them several times in the past, and we will navigate through this.
Speaker Change: This doesn't change that we will even if there is some potential short term disruption.
Speaker Change: As we've mentioned we've been advocating for change in this market segment for some time and frankly, we see this as a step in the right direction.
Speaker Change: The reimbursement changes are typical in healthcare I've lived through them several times in the past and we will navigate through this I strongly believe that when the dust settles there will be more upside than any potential downside for my medics.
Joseph H. Capper: I strongly believe that when the dust settles, there will be more upside than any potential downside for MiMedx. If you look at the market today, approximately 60 to 80% of the private office volume is going to the nearly 180 products that are no longer going to be permitted to be reimbursed. So that's a lot of share; it's frankly up for grabs.
Speaker Change: You look at the.
Speaker Change: The market today, approximately 60% to 80%.
Speaker Change: But office volume is going to the nearly 180 products that are no longer going to be permitted to be reimbursed. So that's a lot of share. It's it's frankly up for grabs.
Joseph H. Capper: As far as the epi effect is concerned, I said during my comments that it's really a matter of timing. We have been working for some time to put in place a randomized controlled trial on that product. As is our habit, when we get a marquee product that comes to market, we like to invest in evidence to prove efficacy. That trial will start to enroll patients in June.
Speaker Change: As far as App the effect is concerned.
Speaker Change: During my comments, it's really a matter of timing.
Speaker Change: We had been working for time for some time to put in place a randomized controlled trial on that product as is our habit when we get to our marquee product that comes to market.
Speaker Change: Like to invest in and the evidence to prove efficacy that trial will start to enroll patients in June.
Joseph H. Capper: So even before the comment period is over, we're going to have a trial well underway. Clearly, that will be communicated to the MACs and to CMS. So we can't predict if and when, but we're pretty confident that we're taking all the right steps to ensure that the effect remains in the market. So, again, on the other side of this change. This is a good thing. The industry will have cleared a major uncertainty, which I believe is an overhang on value today. And as an industry, it will just be a much more attractive investment thesis, but that's your business. You'll determine that.
Speaker Change: So even before the comment period is over we're going to have a trial well underway clearly that will be communicated to the Max and CMS. So we.
We can't predict if and when but we're pretty confident that we're taking all the right steps to ensure at the effect remains in the market.
Speaker Change: Again on the other side of this change.
Speaker Change: Yeah. This is a good thing the industry will have.
Speaker Change: Cleared a major uncertainty, which I believe is overhanging value today and it will just as an industry will just be a much more attractive investment thesis, but that's your business yet.
Speaker Change: You'll you'll determine that.
Joseph H. Capper: Look, I see this across the board as a positive. As we learn more, if it requires us to make adjustments, we'll make adjustments. If you look at the balance of our current business portfolio, if you look at the changes that have been made to the business over the last year, and the much improved balance sheet financial profile, I think you'd be hard-pressed to find a company that's in a better position to navigate this than us.
I see this across the board as a positive as we learn more we will.
If it requires us to make adjustments, we'll make adjustments.
Speaker Change: If you look at the balance of our current business portfolio. You look at the changes that were made to the business over the last year, a much improved balance sheet and financial profile.
Speaker Change: I think you'd be hard pressed to find a company that is better positioned to navigate this than us.
Yeah.
Chase Richard Knickerbocker: Yeah, and as we kind of think about kind of that long-term kind of benefit that we, you just kind of talked about a couple of times in your prepared remarks and just in that answer there as well, how do you guys kind of quantify that benefit? I know you just said kind of 60 to 80 percent of that private office volume is in those non-covered products. Could we dive in a little bit deeper there and kind of help us quantify what that volume is from a numbers perspective?
Speaker Change: Yeah, and as we kind of think about kind of that long term kind of benefit.
Speaker Change: You just kind of talked about a couple of times in your prepared remarks, and just didn't answer there as well how do you guys kind of quantify that benefit I know you just said kind of 68% of that private office volume is in those non covered products can we dive down a little bit deeper there and kind of help us quantify what that volume is from a numbers perspective, and then obviously.
Chase Richard Knickerbocker: And then obviously, you would certainly expect that to come to the, you know, 15 products that are on the covered list and maybe speak to your kind of competitive positioning there as far as how you're positioned to potentially, you know, grab the majority of that share that becomes available.
Speaker Change: We certainly expect that to come to the 15 products that are on the covered listen maybe speak to your kind of competitive positioning there.
Speaker Change: As far as how you are positioned to potentially granted the majority of that share that as it becomes available.
Joseph H. Capper: Yeah, difficult to quantify the available market at this point. As you can imagine, a lot of that market's dollars are due to inflated pricing. And then my guess is there's a certain level of overall utilization. So when new regulations are put in place, I think you're going to see a much smaller dollar TAM, but probably a slightly smaller volume TAM as well. As far as, hard to quantify at this point.
Speaker Change: Yeah, it's difficult to quantify our available market at this point as you can imagine.
Speaker Change: A lot of that market.
Speaker Change: Towers are due to inflated pricing.
Speaker Change: And then my guess is there's a certain level of open the utilization.
Speaker Change: When new regs are put in place I think youre going to see.
Speaker Change: As you know much smaller dollar Tam, but probably at a slightly smaller volume Tam as well.
Joseph H. Capper: I think importantly, even before we launched at the effect, we were picking up share in the private office as some of the other competitors were moving the product on the ASP price list, and some of the rebating and discounting, some of that behavior was starting to slow down a little bit. So that was likely driving some of our performance as well as just better execution within the sales organization. Look, there's – I think you'd be hard-pressed to find a product on that list that has as much evidence and as much market acceptance as our products, in particular EpiFix.
Speaker Change: As far as so hard to quantify it at this point.
Speaker Change: Importantly, even before we launched at the effect, we were picking up share and private office as some of that.
Speaker Change: Other competitors will move into product on the ASP price list and some of the rebating or discounting some of that behavior was starting to slow down a little bit.
Speaker Change: That was likely driving some of our performance as well as just better execution within the sales organization.
Speaker Change: Yeah.
Speaker Change: I think you'd be hard pressed to find a product on that on that list that has as much evidence and as much market acceptance as our products and particularly after the fact, so we feel real good about where we are today and the opportunity moving forward.
Joseph H. Capper: So look, we feel really good about where we are today and the opportunity moving forward. But again, I would say, look at it from a macro level. A very good thing for the industry to get this behind us.
Speaker Change: I would say back up look at it from a macro level very good.
Speaker Change: I think for the industry to get this behind us.
Speaker Change: Yeah.
Speaker Change: Okay.
Chase Richard Knickerbocker: And then just quick, just one more on kind of the impact here, and then a question on kind of the epi effect trial. If we kind of look back to the fall, there was some kind of impact on those that were on the not covered list. Do you think there's a chance that you guys could kind of pick up the volume as people kind of adjust their behavior ahead of time to make this going effective?
Speaker Change: And then just a quick.
Speaker Change: One more on kind of the impact here and then a question I have had the effect trial.
Speaker Change: If we kind of look back to the fall there was some kind of impact on those that were on the not covered lift do you think there is a there's a chance that you guys can kind of pick up in volume as people kind of adjust their behavior ahead of time I'm just going to affect US and then just to go on the timing for that trial, how long would you expect it to take to get results and then Dino exam.
Chase Richard Knickerbocker: And then just to go on the effect timing for that trial, how long would you expect it to take to get results? And then do you know exactly kind of how that conversation would go with CMS on, you know, when you could get on that covered list, assuming this is effective? Yeah.
Speaker Change: Kind of how that conversation would go with CMS on.
Speaker Change: You could get on that covered let's assuming that goes effective.
Joseph H. Capper: Yeah, we will start those conversations almost immediately. And it will be in our comments, and when we have an opportunity to meet with them, we'll talk about it. We're committed to funding the entire trial. I believe it's going to last somewhere around a year, but there'll be points along the way where we will get interim readouts. So we'll have good data along the way. The trial will likely produce four or five published papers, so it'll put a lot of good evidence into the literature.
Speaker Change: Yeah.
Speaker Change: We will start those conversations almost immediately.
Speaker Change: And it will be in our comments and when we have an opportunity to meet with them.
Speaker Change: We'll talk about it.
Speaker Change: We're committed to funding the entire trial.
Speaker Change: I believe it's going to last somewhere around a year, but there'll be a points along the way we will we will get interim readouts.
Speaker Change: We will have good data along the way the trial will likely produce four five published papers. So it'll produce they don't put a lot of good evidence into the literature.
Chase Richard Knickerbocker: So, you know, we feel pretty good about it. And again, this is a commitment that is not new for us. We've been doing this. Long before my time here, Chase, the company was committed to evidence-based medicine.
Speaker Change: So we.
Speaker Change: We feel pretty good about it and again this is a commitment that is not new for us we've been doing this as a practice of the company.
Speaker Change: Wonderful my time here at <unk>. The company has been committed to evidence based medicine.
Speaker Change: Okay.
Joseph H. Capper: Got it. Thanks, Joe. Thanks for the questions, guys.
Speaker Change: Got it thanks, Joe Thanks for the question Scott.
Operator: Our next questions come from the line of Brooks O'Neill of Lake Street. Please proceed with your question.
Speaker Change: Our next question is coming from the line of Brooks O'neil with Lake Street. Please proceed with your question.
Brooks O'Neill: Good afternoon, guys. I appreciate all the comments on the LCDs. Obviously, it's a moving target here, but one thing I'm just a little curious about is, if I'm listening sort of to the nuances of your comments, you expect any potential disruption in the short term to be negative for MiMedx. I'm just curious.
Brooks O'neil: Good afternoon, guys I appreciate all the comments on the LCD is obviously itself.
Brooks O'neil: A moving target here, but one thing I'm just a little curious about is if I'm listening sort of to your the nuances of your comments you expect.
Brooks O'neil: Any potential disruption in the short term to be a negative.
Brooks O'neil: For my medics and I'm just curious.
Brooks O'neil: Why do you think that.
Joseph H. Capper: Well, Brooks, I'm sorry if I communicated that to you. I think it's going to be a potential disruption for the industry. If it changes behaviors to the point where it impacts us, I think we're... in a much better position to navigate through that. I don't see it as much of a near-term threat or, frankly, a mid-term or long-term threat. Mid and long term, it's obviously a plus-plus, as I indicated, as to the way we view it.
Speaker Change: Well Brooks I'm, sorry, if I communicated that to you I think it's gonna be potential disruption for the industry.
Speaker Change: If it changes behaviors to the point, where it impacts us.
Speaker Change: I mean, we're.
Speaker Change: In much better position today.
Speaker Change: To navigate through that I don't I don't see it as a much of a near term threat or frankly, the midterm or long term for our mid and long it's obviously.
Speaker Change: Plus plus as I indicated and we view it.
Joseph H. Capper: We didn't change our guidance because there are some unknowns, right? We still have to work through this process and see what ultimate form this takes and when it is ultimately... So that date has not been determined yet, and again, we don't know what the final format is going to look like. This may be tweaked somewhat before it's actually implemented. So I think the prudent thing to do is just say we're not changing guidance at this point.
Speaker Change: We didn't change our guidance because there is some unknowns right we still have to work through this process.
Speaker Change: And see what ultimate form this tanks and.
Speaker Change: When it is ultimately.
Speaker Change: Enforced or rollout so that day is not been determined yet and we don't again, we don't know what the final format is going to look like this may be tweaked somewhat before it's actually implemented.
Speaker Change: So I think the prudent thing to do is just say, we're not changing guidance at this point and as I indicated in our prepared remarks.
Joseph H. Capper: And as I indicated in our prepared remarks, given the way we came out of the shoot at the beginning of the year, had it not been for this, we would have tweaked the guidance up a little bit.
Speaker Change: Given that when we came out of the chute in the beginning of the year had it not been for this in all likelihood be with a treatment guidance up a little bit.
Brooks O'Neill: Yep, all that makes sense. Okay, I want to shift gears.
Speaker Change: Yep, all that makes sense, okay. I wanted to shift gears. Obviously you commented about the opportunity you have on the surgical side of the business and your excitement about.
Brooks O'Neill: Obviously, you've commented about the opportunity you have on the surgical side of the business and your excitement about, you know, pursuing growth opportunities there. Can you talk just a little bit about some of the near-term things you think are big opportunities for you and then Curious? Obviously, I know there's a big market for xenografts, but that's a little bit of a departure for MiMedx relative to history. And just talk about some of these alternate, I'll just call them alternative source products, just recognizing that many of them are not human-derived products. So, how big of an opportunity do you see, and what do you think is your path to go after?
Speaker Change: Pursuing growth opportunities. There can you talk just a little bit about some of the near term things you you think a big opportunities for you and then.
Speaker Change: I'm curious, obviously I know, there's a big market for Zeno grabs, but that's a little bit of a departure for for my dad.
Speaker Change: Relative to history.
Speaker Change: Let's talk about some of these alternate.
Speaker Change: That's called the I'll just call them alternate source products, just recognizing they many of them are not.
Speaker Change: I mean, they're not human derived.
Speaker Change: Product, so how big an opportunity do you see in sort of what do you think is your path.
Speaker Change: To go after that.
Speaker Change: Yeah.
Joseph H. Capper: Based on market data available to us, it looks like the xenograft and synthetic portion represent a little bit more than half of the skin submarket, and then the amniotic products are probably in the 43% to 45%, which is really the only place we play today. So it opens up a lot more opportunity for us. So your question about it's not something that we've done in the past. Same channel though, Brooks.
Speaker Change: Based on market data available to us it looks.
Speaker Change: Xenograft and synthetic portion I represent a little bit more than half of that skin sub market and then the.
Speaker Change: Embryonic products are probably in the 43% to 45%.
Speaker Change: Which is really the only place we play today.
Speaker Change: So it opens up a lot more opportunity for us. So your question about it's not something that we've done in the past seen channel though.
Joseph H. Capper: Right, right. It's the same commercial channel, and there are cases where we don't win because, for one reason or another, a hospital prefers to use non-human derived tissue. This gives us something in the bag to compete in those instances. Look, we clearly believe in and will continue to develop in the production of Additional Human Derived Tissue and Placental Derived Tissue because we see the results of it. We know it works. We know it's far superior to anything else out there. But you have to have offerings for different needs, so this is a step that we're pretty excited about.
Speaker Change: Right.
Speaker Change: It's the same commercial channel and there's cases, where we don't win because for one reason or another hospital prefers to use non human derived tissue. This gives us something in the bag to compete.
Speaker Change: In those instances.
Speaker Change: Well, we clearly believe and we will continue to develop in.
Speaker Change: In the production.
Speaker Change:
Speaker Change: Additional human derived tissue in central track tissue, because we see the results and we know it works we know it's far superior to anything else out there.
Speaker Change: But you know you have to have offerings for different needs and so this is a.
Speaker Change: We're pretty excited about.
Brooks O'Neill: Absolutely, that makes sense. And what just popped into my brain, and this will be my last question, is obviously, I think there are some international markets where xenografts are favored or have a strong position. So just talk a little bit about what you see and what your plans are for attacking the international market.
Speaker Change: Absolutely that makes sense and it just popped into my brain and this will be my last question is.
Speaker Change: Obviously, I think there's some international markets, where zeno graphs are favored or have a strong position. So just talk a little bit about what you see and what your plans are for attacking the international market.
Joseph H. Capper: Yep, you're exactly right. It gives us... Another arrow in the quiver internationally; some of the markets are much more difficult to penetrate with only human dry tissue. As you know, we're having success in Japan, but it's taken us quite some time to develop that market, and we're starting to pick up some steam there. I indicated that we had a nice growth rate, albeit off of a relatively low base, but we continue to enroll more physicians, and physicians continue to repeat order the product, which is really, really good to see. So we expect that to continue well, and there are other international markets that we're starting to look at, but it's too early to report on, but clearly, this gives us more opportunity as we look to develop.
Speaker Change: Youre exactly right it gives us.
Speaker Change: Another arrow in the quiver internationally.
Speaker Change: Some of the markets are much more difficult to penetrate with only a human derived tissue as you know we're having success in.
Speaker Change: Japan, but that's taken us quite some time to develop that market and we're starting to pick up some steam there I indicated that we had a nice growth rate, albeit off of.
Speaker Change: A relatively low base, but we continue to enroll more physicians and physicians continue to repeat ordering the product, which is really really good to see so we expect that to continue to grow and there is other international markets that where we're starting to look at but too early to report on but clearly this gives us more.
Speaker Change: Opportunity as we've looked at developed markets abroad.
Brooks O'Neill: Absolutely. Great quarter. Great job, Joe. So excited to follow what you're doing. Well Brooks, we're glad to have you.
Speaker Change: Absolutely great quarter, great job Joe.
Speaker Change: So excited to be.
Speaker Change: Following what Youre doing.
Speaker Change: Well Brooks, we're glad to have you.
Speaker Change: Thank you.
Speaker Change: Thanks.
Operator: Our next question is from the line of Anthony Petrone with Mizzou Hill Group. Please proceed with your question.
Speaker Change: Our next question is from the line of Anthony Petrone with Mizuho Group. Please proceed with your question.
Anthony Charles Petrone: Thanks for taking the questions. Congratulations, too, on the really strong performance.
Anthony Charles Petrone: Alright, thanks for taking my questions Congrats to Ron.
Anthony Charles Petrone: The strong performance of.
Anthony Charles Petrone: One Q here out of the gate. Maybe back to LCD, and I'll have a follow-up on xenograft. Actually, Phil, on the, um, I guess when we look out, you're breaking out U.S. physician office now, you did 30 a little over 30 million in the quarter. Now how much of that U.S. physician office today is EpiFix and EpiCord versus EpiEffect. You know, so just looking at what's on the covered list versus the non-covered list in that 30,000,001-Q-U.S. Physician Office Number, and then I'll have a couple follow-ups.
Anthony Charles Petrone: <unk> out of the gate.
Anthony Charles Petrone: Back to LCD and I'll have a follow up on <unk> Phil.
Anthony Charles Petrone: On the.
Anthony Charles Petrone: I guess, when we look out you're breaking out U S. Physician office now you did 30 little over $30 million in the quarter, how much of that U S physician office today is.
Anthony Charles Petrone: That would be fixed and that would be core versus at the effect.
Anthony Charles Petrone: So just looking at what's on the covered less versus non covered list.
Speaker Change: And that 30 million <unk> U S physician office number and then I'll have a couple of follow ups.
Joseph H. Capper: Anthony, I'll just start by saying thanks for the congratulations; we're super pleased with the way we started the first quarter. With regard to the private office mix, we really aren't breaking out individual products, but it's clear since we launched EpiFX at the beginning of Q4 that it's certainly a big contributor to the growth in our private office space. And if you go back and look at Q2, Q3, we were growing in the private office with FD6.
Speaker Change: Yeah, it's subject to talk about it.
Speaker Change: Anthony I'll, just start by saying thanks for the congratulations.
Speaker Change: Excuse me Super pleased with the way we started the first quarter with regards to private office mix, we really arent breaking out individual products, but clearer since we launched it.
Speaker Change: The effect at the beginning of Q4 that it's certainly a big contributor to the growth in our private office space.
Speaker Change: If you go back and look at like Q2 Q3, we were growing in private office with was that we think so you can see you can go back and calculate the delta but it's.
Joseph H. Capper: So you can see, you can go back and calculate the delta, but it's. The portfolio of products continues to grow in that sector, and we think that we're well positioned to continue to do so. And again, as I indicated, we're going to work real hard to make sure that the effect is accessible as well.
Speaker Change: Yeah.
Speaker Change: The portfolio of products continues to grow in that sector, and we think that we're well positioned to continue to do so and again as I indicated we have worked real hard to make sure MP effect.
Speaker Change: As accessible as well.
Douglas C. Rice: Yeah, the only thing I'd add, Anthony, is this kind of second quarter launch of EpiFact and EpiFix. I mean, as Joe mentioned in the PreparatorMark flagship product, it's head and shoulders above the rest of the portfolio.
Speaker Change: Ed entities.
Speaker Change: During the second quarter of launch it that'd be effect in that'd be fixed I mean, as Jim mentioned in the <unk>.
Speaker Change: Third remarks flagship product is head and shoulders.
Speaker Change: The rest of the portfolio.
Douglas C. Rice: That's helpful. And then, Joe, helpful in quantifying 60 to 80 percent of the activity, let's say using a base year of 2022 or maybe even 2023. You know, within those non-covered products, you also mentioned that, you know, there's some over-utilization and some pricing in that number, when I think you look at that 2022 Medicare number that was north of a billion dollars. So is there any kind of rough estimates on what you think has been out there in terms of over-utilization? and Premium Pricing just to kind of level set what we think was in that 1.1, 1.2 billion, CMS 2022 number for U.S. Physician Office for Skin Substitute Products.
Speaker Change: That's helpful and then Joe helpful on quantifying here, 60% to 80%.
Speaker Change: The activity, let's say using a base year of 2022 or maybe even 2023.
Speaker Change: Within those non covered products you also mentioned that.
Speaker Change: Over utilization and some pricing.
Speaker Change: In that number when I think you'll look at that 2022.
Speaker Change: Medicare number that was north of $1 billion.
Speaker Change: So is there any kind of rough estimates on what you think has been out there in terms of over utilization and.
Speaker Change: And premium pricing just to kind of level set.
Speaker Change: We think was in.
Speaker Change: That $1, one $1 2 billion.
Speaker Change: <unk> 2022 number four U S physician office for skin substitute products.
Anthony Charles Petrone: Yeah, that was 2022. Lord knows what 2023 will look like.
Speaker Change: Yes that was 2022 word nose with 23 looks like.
Speaker Change: We haven't seen that number yet so my guess is that much higher.
Joseph H. Capper: We haven't seen that number yet, so my guess is that it's much higher. I can't bifurcate the two, volume versus price. I would say the majority of it's probably price. This, based on what we have seen in the marketplace, I just put the cautionary comment out there that you take the price equation out, it's probably, logically, there's, Anthony, there's some over-utilization, right? Because I've seen it in every... every part of health care that I've ever been in. When the economic incentives are that overwhelming, people do some crazy things.
Speaker Change: I can't.
Speaker Change: Bifurcate to volume versus price I would say majority of it is probably price. This.
Speaker Change: Based on what we have seen in the marketplace.
Speaker Change: I just put the cautionary comment out there that you would take the price equation out it's probably.
Speaker Change: I think logically Anthony there's some over utilization right because I've seen it in every.
Speaker Change: Every part of health care than I have ever been in when the economic incentives are that overwhelming people do some crazy things.
Anthony Charles Petrone: And then just on that prior authorization extension. It doesn't appear that it's overly onerous for clinical evidence. You know, are you thinking that could be a major hurdle? And then the last one, I'll just sneak in.
Speaker Change: And then just on that prior authorization extension it doesn't appear that it's overly onerous for clinical evidence.
Speaker Change: Are you thinking that can be a major hurdle.
Speaker Change: And then the last one I'll just sneak in when we look at Zeno graph coming in and actually you Phil.
Anthony Charles Petrone: When we look at xenograft coming in and axiophil, you know, basically, under the warning letter at the moment. I think the Axia fill number you guys quoted leaving last year was roughly around five million. Is that number still right and how much? Do you offset that with the addition of xenograft? Yeah, just numerically, Anthony, we'd...
Speaker Change: You know basically.
Speaker Change: Under the warning letter at the moment I think the actually fill number you guys quoted exiting last year was roughly around $5 million is that number still right and how much do you offset that with the addition of xenograft. Thanks.
Douglas C. Rice: Just numerically, Anthony, we sort of ring-fence that as less than 5% of our total revenue in terms of axial fill contribution. And I'll let Joe respond to the sort of clinical evidence requirements that we expect around
Phil: Yes, just numerically Anthony we've sort of ring fence that is less than 5% of our total revenue in terms of actually Phil contribution.
Speaker Change: Okay.
Speaker Change: Well it could.
Speaker Change: I'll, let Joe first of all on to sort of clinical evidence requirements.
Speaker Change: But we expect around.
Speaker Change: The proposed LCD is yes, I don't I don't see that as a burden needing to get some.
Joseph H. Capper: Yeah, I don't see that as a burden needing to get some, you know, pre-auth for medical necessity, or at least, I don't know if it's going to be a pre-auth, but documentation around medical necessity to navigate audits, etc., etc., and get payment. I just don't see that as overly burdensome for those cases where it will be appropriate.
Joe: For medical necessity or at least I don't know if it's going to be a pretty often documentation around medical necessity to navigate audits et cetera and get payment.
Speaker Change: I, just don't see that as overly burdensome.
Speaker Change: For those cases, where.
Speaker Change: It will be appropriate and then your other question about.
Anthony Charles Petrone: And then your other question about axial fill and xeno. Yeah, what does the xeno graph bring in from a forward 12-month standpoint? Yeah, we're not putting out that projection yet. But I will tell you that I feel pretty good about it, the mark, and the work that's been done by the market development team. We like the position of the product, and we think it's going to be fairly well accepted. And look, I would go back and say, this company has launched three products in the last 15 months.
Speaker Change: Actual films email.
Speaker Change: Yes.
Speaker Change: What does <unk> bring in.
Speaker Change: From a forward 12 month standpoint.
Speaker Change: Yes.
Speaker Change: Putting up that projection yet I will tell you that I feel pretty good about it.
Speaker Change: Mark the work that's been done from a market development team.
Speaker Change: We like the positioning of the product and we think it's going to be fairly.
Anthony Charles Petrone: All three products have been pretty darn successful. So we may not be perfect at everything, but the commercial organization has a fairly well-tuned muscle around launching new products. So I feel highly confident that we'll have a level of success with this product as well. And Axial Filled hit some headwinds early in 2023 when this started to come out, when we started to deal with it. So I would imagine that, had I not been dealing with this, throughout 2023, that product would be much larger than it is today. So we feel pretty good about it. And we talked about other steps we're taking to mitigate any potential loss of revenue there.
Speaker Change: Fairly well accepted and I would go back and say this company has launched three products in the last 15 months.
Speaker Change: All three products have been pretty darn successful so.
Speaker Change: We may not be perfect and everything but the commercial organization is a fairly well tuned muscle around launching new product and so I feel highly confident that we will have a level of success with this product as well and axial Phil.
Speaker Change: Hit some headwinds early in 2003, when they started to come out when we started to deal with this.
Speaker Change: I would imagine had I not been dealing with this all throughout 2023 that product would be much larger than it is today. So we feel pretty good about it and you know we talked about other steps, we're taking to mitigate any potential loss revenue there.
Speaker Change: Thank you again.
Speaker Change: Okay.
Operator: Our next question comes from the line of Carl Byrnes with Northland Capital. Please proceed with your question.
Speaker Change: Our next question comes from the line of Carl Byrnes with Northland Capital. Please proceed with your questions.
Carl Edward Byrnes: Thanks for the question and congratulations on the quarter. Most of my questions have been answered around the LCD in terms of the 60 to 80 percent that would be up for grabs. I got the follow-up question there, kind of looking at the players in the space, do you see any potential for some of the companies to end up in financial struggles where they may be desirable M&A candidates to tuck under and blow out their infrastructure? Is that something that's been contemplated? Yeah, I don't think I would.
Carl Edward Byrnes: Thanks for the question and congratulations to acquire most of my questions have been answered around the LCD in terms of the 60% to 80% that will be up for grabs I guess a follow up there is kind of looking at the players in the space do you see any potential for some of the companies too.
Speaker Change: Financial struggles where they may be desirable M&A candidates, the tuck under and blow out your infrastructure is that something thats being contemplated thanks.
Joseph H. Capper: Yeah, I don't think I would comment too much on that, Carl. Look, I'm not going to wish misfortune on other people.
Speaker Change: Yeah, I don't think I'll comment too much on that Karl will come not going to witness misfortune on other people.
Joseph H. Capper: I would say that I feel a lot better from an opportunity standpoint where our financial profile is today versus one year ago when we were dealing with the same type of issue. So, we'll see what happens. You know, there may be opportunities, but I think it's too soon to talk about them.
Speaker Change: I would say that I feel a lot better.
Speaker Change: From an opportunity standpoint, where our financial profile is today versus one year ago.
Speaker Change: When we were dealing with the same type of issue so.
Speaker Change: We will see what happens.
Speaker Change: There may be opportunity, but I think it's too soon to talk about it.
Speaker Change: Fair enough. Thanks.
Operator: Our next question is from the line of... R.K. from H.C. Wainwright. Please answer their questions.
Speaker Change: Our next question is from the line of.
Speaker Change: RK from H C. Wainwright. Please proceed with your question.
Swayampakula Ramakanth: Thank you. Good afternoon, Joe.
RK: Thank you.
RK: Afternoon, Joe.
RK: One quick question on LCD.
Swayampakula Ramakanth: One quick question on LCD. Is this something that's going to be reviewed every so often or annually, and if, for some reason, you know, you're unable to convince these folks because you won't have the data in hand by the time it gets reviewed, you know, how soon can that get reviewed again if they're really required to see final clinical data?
RK: Is this something thats going to be reviewed every so often annually.
RK: Q.
RK: For some reason.
RK: Hum.
Speaker Change: Unable to come in.
Speaker Change: These folks.
Speaker Change: Because you won't have the data in hand by the by the time I'm sorry.
Speaker Change: At the time it gets reviewed.
Speaker Change: Yeah.
Speaker Change: How soon can that get you in the game.
Speaker Change: G&A required to.
RK: The final clinical data.
Joseph H. Capper: Yeah, the first part of your question about whether or not we're going to be dealing with something like this annually, clearly there's a reset on the physician fee schedule annually. It has a well-known cycle, proposed rules in July sometime, usually final in November time frame-ish, and then implemented thereafter. So we'll be part of that cycle from a pricing standpoint. However, coverage determinations typically aren't reset every year. Clearly, Medicare and MiMedx are dealing with, frankly, a runaway cost issue in this category because of all the bad behavior out there. People who are taking advantage of loopholes and overbilling the system.
RK: Yes. The first part of your question about whether or not we're going to be dealing with something like this annually clearly there is a reset on the physician fee schedule and has.
RK: As a well known cycle proposed rules.
RK: In July some time easily filing in November timeframe ish and then.
RK: Implemented thereafter, so will be part of that cycle from a pricing standpoint.
RK: Coverage determinations, typically arent reset every year.
RK: Clearly.
RK: They are Medicare and the Macs are dealing with them.
RK: Frankly, a runaway cost issue in this category because of all the bad behavior out there people were taking advantage of loopholes.
RK: And over billing system. So these are steps I believe that theyre, taking specifically to attempt to address that.
Swayampakula Ramakanth: So these are steps, I believe, that they are taking specifically to attempt to address that. And this might not be perfect, Markay. It might have to go through some iterations before it settles down. But again, as I said a couple of times, this is pretty good for us and pretty darn good for the industry, pretty good for the Medicare Trust Fund, and for patients who are on the hook for copays when they're being charged well in excess of what they should be charged for a skin substitute. So all this is good, and it's really good for the industry to clean this mess up.
RK: And it might be it might not be perfect arcade might have to go through.
RK: Some iterations before it settles down.
RK: But again as I said a couple of times this is pretty good for us.
RK: And pretty darn good for the industry pretty good for the Medicare Trust fund and for patients who are on the hook for co pays.
RK: When they're being charged well in excess of what they should be charged for a skin substitute solutions. So all this is good.
RK: And it's really good for the industry to clean this mess up.
Joseph H. Capper: Okay, thanks for that. And then, in terms of the Xenograft product, which you're bringing on board, I know you said you could not come up with the guidance for the next, you know, for Anthony's question regarding forward 12 months, but in general, how, you know, when you bring in a product like this, how long does it take to integrate itself into your commercial structure in such a way that it can become meaningful, and also maybe even better than what Axofil was doing, you know, which was like less than 5% or around 5% of your revenue run?
Speaker Change: Okay. Thanks for that and then.
RK: Tons of.
RK: The xenograft product.
RK: When you onboard.
RK:
RK: Okay.
RK: I know you said you cannot.
RK: Come up with the guidance for the next.
RK: For answering this question regarding forward 12 months, but in general.
RK: When you bring in a product like this how long does it take to integrate itself.
RK: Into your commercial structure.
RK: In such a way that it can become meaningful.
RK: So maybe even better than what <unk> was doing just like level less than 5% of around 5% of your 11 million.
Joseph H. Capper: Probably too soon for me to provide color there. Let's wait until we get the product in the market and see what kind of acceptance we have. As I indicated, I have little to no doubt in the organization's ability to get the product into the marketplace, but we will wait and see what kind of acceptance it has. I suspect it will be a well-received product based on what we know so far, so I'm pretty optimistic about it.
Speaker Change: Probably too soon for me to provide color there, let's wait till we get the product in the market see what kind of acceptance we have.
RK: As I indicated I have little to no doubt in the organization's ability to get the product into the marketplace, but.
RK: Wait and see what kind of acceptance it has.
RK: I suspect it will be well received product based on what we know so far.
RK: I'm pretty optimistic about more to come on that.
Swayampakula Ramakanth: Perfect. Thank you. Thanks for taking my question. I appreciate it.
Speaker Change: Perfect. Thank you thanks for taking my call. Thanks RK.
Speaker Change: Got it.
Operator: Our final question comes from the line of John Vandermosten with SACS. Please proceed with your questions.
Speaker Change: Our final question comes from the line of Jon Vander, mostly with sacks. Please proceed with your questions.
John D. Vandermosten: All right, thank you, and good afternoon, everybody. I'll start out by just asking about the preparations that are required before you start selling the Regenity Xenograft product. What do you need to do before that gets into the hands of your salespeople?
John D. Vandermosten: Alright, Thank you and good afternoon everybody.
John D. Vandermosten: So I'll start out with just asking about the preparations that required before you start selling their virginity senior grass product what do you need to do before that gets in the hands of your sales team.
Joseph H. Capper: Well, as you know, it was a developed product with 510K clearance in place, and there was a certain amount of work that had been done from a clinical perspective as well. So we had a good running start when we acquired it. Pricing, GPO contracting, training, et cetera, et cetera.
John D. Vandermosten: Well as you know it was to develop a product with a five 10-K clearance in place and there was a certain amount of work that had been done from a clinical perspective as well so you know.
John D. Vandermosten: We had we had a good running start when we acquired it.
John D. Vandermosten: Pricing GPO contracting.
John D. Vandermosten: Training et cetera, et cetera, a lot of that's been underway.
Joseph H. Capper: A lot of that's been underway. So when we talk about kind of a soft launch in early Q3, we're pretty comfortable with that time frame. And that, then you start to, once you put the product in the market, you'll learn a little bit, you'll make adjustments, et cetera. And then you'll move more into a full launch phase a little bit later in the year.
John D. Vandermosten: So when we talk about kind of a.
John D. Vandermosten: Our soft launch in early Q3, we're pretty comfortable with that timeframe and Thats. When you start to once you put the product in the market youll learn a little bit to make adjustments et cetera, and then you'll move more into a full launch phase a little bit later in the year.
Joseph H. Capper: And your new platform to, you know, your new sales platform that you announced a few weeks ago, is that going to, do you think that'll help accelerate the penetration of the product to your customers?
John D. Vandermosten: And your new platform too.
John D. Vandermosten: New sales platform the announced a few weeks ago is that gonna do you think that will help accelerate the penetration of the product to your customers.
Joseph H. Capper: It's hard to say if that will drive it, but I think we're excited about that just because, from a practice workflow standpoint, it's a much improved tool. And so when I talk about driving higher levels of customer intimacy, using technology is one good way to do it. And so we're pretty excited about that just from an overall process improvement standpoint. I don't know that it drives a new product like this, but I think they're probably a little bit different.
John D. Vandermosten: Okay.
John D. Vandermosten: Hard to say if that that will drive it I think we're excited about that just because from an.
John D. Vandermosten: Our practice workflow standpoint, it's much improved tool and so when I talked about driving higher levels of customer intimacy using technology is one good way to do it and so we're pretty excited about that just from an overall process improvement standpoint, I don't know that it drives.
John D. Vandermosten: A new product like this I think there are probably a little bit different.
Joseph H. Capper: Yeah, I would say MiMedx Connect is certainly a terrific tool that puts our customers' hands on, but it's mostly focused on wound care center and private office environments versus hospital environments.
Speaker Change: Yes, I would say my metals connector certainly.
Speaker Change: Terrific tool that puts our customers hands on but it's mostly focused in wound care center and private office environment versus a hospital environment.
John D. Vandermosten: Got it. And you, you know, when you look forward to, I guess, you know, incremental unit sales, do you think that that'll come from better sales productivity per salesperson, or do you think additional headcount will drive that incremental unit sale?
Speaker Change: Got it and you know.
Speaker Change: When you look forward to I guess incremental unit sales do you think that that will come from better sales force productivity per sales salesperson or you think additional head count will drive that are the incremental unit sale.
Joseph H. Capper: These are when you scale an organization, a sales organization, it's both. You know, you're looking for improved productivity. We talked about this, I think, on our last call.
Speaker Change: Even though when you scale an organization sales organization, it's both.
Speaker Change: You are looking for improved productivity, we talked about this I think on our last call the productivity per sales FTE is up dramatically year over year.
Joseph H. Capper: The productivity per sales FPA is up dramatically year over year. In 2023, revenue grew by about 20%, which was 100% volume driven. And if you look at Salesforce productivity, that was probably nearly double that because we were doing it with fewer FTEs. So yeah, as you scale, you should get improved productivity, and then obviously, you're going to look to continue to resource your organization opportunistically, where there's opportunity.
Speaker Change: We.
Speaker Change: 2023 revenue grew by.
Speaker Change: About 20%, which was a 100% volume driven and if you look at Salesforce productivity that was probably nearly double that because we were doing it with less ftes.
Speaker Change: So yes, we are.
Speaker Change: As you scale, you should get improved productivity and then obviously you're going to look to.
Speaker Change: Continue to resource the organization Opportunistically burgers, where theres an opportunity, we'll we'll continue to invest.
Speaker Change: Got it and regarding the after your first trial and the costs related to that are those already baked into both the previous guidance that you provided on the R&D side for.
John D. Vandermosten: And regarding the epi effect trial and the costs related to that, are those already baked into the previous guidance that you provided on R&D? Yes, John.
Douglas C. Rice: It's a really good question, but while we had a modest spend in Q1 at 3% of the top line, we would expect for the full year for that to go up to mid-single digits. So, you know, rolling north of 3% in Q2 and certainly in the back half of the year as that trial and other activities get underway. Great, thank you for taking the question.
Speaker Change: For costs they are John.
Speaker Change: A really good question, but while we had.
Speaker Change: Modest spend in Q1 at 3% of topline we would expect.
Speaker Change: For the full year.
Speaker Change: Pick up to mid single digit so.
Speaker Change: <unk>.
Speaker Change: Rolling North of 3% in Q2, and certainly in the back half of the year is that trial and other activities to get underway.
Speaker Change: Okay, great. Thank you for taking the questions.
Operator: Thank you. At this time, I will turn the floor back to management for closing remarks.
Speaker Change: Thank you.
Speaker Change: Thank you at this time I will turn the floor back to management for closing remarks.
Joseph H. Capper: Thanks, Operator. I appreciate all the questions today, guys, and appreciate the support for the company. We're going to go ahead and wrap up the call, and we'll talk to you next quarter. Thank you.
Speaker Change: Thanks, operator appreciate it appreciate all the questions guys I appreciate the support for the company. We're going to go ahead and wrap up the call and we'll talk to you next quarter. Thank you.
Operator: This will conclude today's call. Thank you for your participation. You may now disconnect your lines at this time.
Speaker Change: This will conclude today's call. Thank you for your participation you may now disconnect your lines at this time.