Q3 2024 MiMedx Group Inc Earnings Call
Speaker Change: The
Speaker Change: Please stand by the conference we'll start soon.
Speaker Change: The
Speaker Change: Good afternoon and thank you for standing by. Welcome to the MyMedics 3rd Quarter, 2024, operating and financial results conference call.
Speaker Change: At this time, all participants are an elicin-only mode. A question in answer session will fall before more presentation. As a reminder, this conference is being recorded. I would now like to turn the conference call over to your host, Mr. Matt No. Toriani, head of Investor Relations of MyMedics.
Speaker Change: Thank you, you may begin.
Speaker Change: Thank you, operator and good afternoon everyone. Welcome to the Mimetics Third Quarter 2020 for operating in financial results conference call. With me on today's call, our Chief Executive Officer Joe Capper and Chief Financial Officer Doug Rice.
has 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 mymedics.com
Joe will kick us off with some opening remarks in a summary of our operating highlights and does we'll provide a review of our financial results for the quarter and then Joe will conclude with some additional updates including a discussion of our financial goals. We will then be available for your questions.
Speaker Change: Before we begin, I would like to remind you that our comments today will include bullet-looking statements, including statements regarding future sales, operating results and cash balance growth. Future margins and expenses are product portfolios and expected market sizes for hard products.
Speaker Change: These expectations are subject to risks and uncertainties and actual results may differ materialies from those anticipated to many factors including competition, access to customers, the reimbursement environment, one for some circumstances and delays.
Speaker Change: Additional factors that could impact outcomes and our results include those described in the risk factor section of our annual report on Form 10 Tag and our quarterly reports on Form 10 Q.
Speaker Change: Also, our comments today include non-gap financial measures and we provide a reconciliation to gap measures in our press release, which is available on our website at www.mymedics.com.
Speaker Change: with that. I'm now pleased to turn the call over to Joe Capper. Joe, thanks, Matt, and good afternoon, everyone. It is my pleasure to welcome you to today's call as we provide enough faith on our business, which continues to move in a very positive direction.
Speaker Change: What if third quarter we once again achieved year over year top-waring growth and maintained an excellent operating margin. In spite of the challenges in the private office and associated care settings, due to the massive abuse of the Medicare reimbursement system being perpetrated in those sectors.
Speaker Change: We generate approximately 25% of our revenue from Medicare fee for service patients and the areas being impacted by this fraudulent activity.
Speaker Change: Based on feedback we have received during numerous recent interactions with relevant governing bodies we are confident that corrective action is on the near term horizon which we expect will restore good fiscal governance to this market.
Speaker Change: I will talk more later in the call about why we are optimistic that our tireless efforts to affect change or gain traction.
Importantly, despite these headwings, our business continues to flourish.
As you will recall, we achieved a significant structural transformation of the company in 2020-2023, which is now not only safeguarding the business as we navigate current disruptive reimbursement environment, but allowing us to execute our strategy from a position of financial strength.
Speaker Change: Based on our results is clear we have the right strategy in place.
Speaker Change: We've moved to Top Line and generated a solid operating margin in the quarter in which our business was under dress.
Speaker Change: That makes us very optimistic about our future as we expect such headwinds to dissipate in the coming year. I'll take a few minutes to discuss the highlights of the third quarter, and then update you in the progress we're making regarding our strategic priorities.
For the third quarter, Net Sales grew to year over year by $2 million or 3% to $84 million. Inline with the expectations we highlighted on our last call.
Speaker Change: and marking another solid growth quarter.
Speaker Change: I should also remind you that in the second half of 2020 sweet, we experience a significant growth which makes for more challenging comparisons for two, three and two, four of this calendar year.
Speaker Change: Gross Prophecy Morton was 82%.
Speaker Change: and Justin Ebedo was 18 million dollars or 22% of net sales in the quarter. We're presenting an increase of $600,000 over the prior year period.
I want to acknowledge the team for their outstanding work as we rapidly adjusted our operating cost structure in light of the challenges we are facing.
As a result, you were able to maintain a healthy operating margin.
We ended with $89 million in cash and increased of $20 million in the quarter.
521 to the call out.
Speaker Change: As a result of our death, we finally have seen earlier in the year and ongoing cash accumulation.
We have gone from incurring net interest expense of $1.7 million in 2,3 of last year to earning net interest income, a close to $300,000 this year, or a nearly $2 million per quarter positive cash swing.
which will help fund future growth initiatives.
Speaker Change: We continue with the market release of Helio Jim, which is the commercial name for the Bovine Drive, particularly in the prior earlier in the year.
We'd met with CMS, the MACs, and numerous congressional offices stored in the quarter to seek needed reimbursement reform in the private office and adjacent care settings.
Speaker Change: It is clear that they share our concerns and are working on correct action.
Speaker Change: and last, you may have read an excellent article about the benefits of post-hentant tissue that was published by the New York Times on October 10.
The amazing benefits of our products for full display. While my Netflix was not mentioned in the article by name, we were a major contributor to the piece and we're happy to help educate the public only incredible and they are still in properties of our products.
Speaker Change: I'm Furned Alphorst for teaching priorities.
As outlined on prior calls, our plan is focused in three areas.
First, we will continue to innovate and diversify our product portfolio.
As the discuss, the company has done an excellent job developing and commercializing you need to try to configure things designed to make explicit customer needs.
We have introduced four new products in the last two years alone.
The first three received widespread marketing acceptance, while in most recent product heel Eugene, is currently in its initial market release base.
Amel Effect continues to do growing at 29% year over year in the surgical market. An epi effect which we launched late last year continued to be shows significant strength in the private office.
Both products have received excellent physicians being back as they had become integral
Additionally, we continue to make progress building our epithics business into Pan, which posted another quarter of exceptionally high growth.
Speaker Change: We now have nearly 800 positions trained and are in over 140 attempts with top-death file customers ordering routinely.
and New Years' South for 2024, will likely grow nearly threefold from 2023.
We sometimes get the question, why isn't this business growing even more rapidly given the quality of your product?
As a reminder, it is first of its crime in Japan and it is a premium price product to the standard of care.
It's also important to understand that physicians in Japan will take a new consideration that the patient's co-pay will select and treatment.
Building on the success of these recent product introductions, we expect similar performance as we move towards full market release of Helio Jim, our first Enigre. We are making good progress working through the mechanics of the early launch phase, like the value analysis process.
and the product is successfully being applied in various surgical procedures.
We expect the Ogen to be a meaningful contributor in 2025.
Our second priority is to develop a particularly programs intended to expand our footprint in the surgical market.
In order to achieve this objective, we have made a significant commitment to the production of real-world evidence and scientific research.
We now have multiple studies in flight, which are designed to demonstrate support for the use of our percental drug, alicev and a variety of surgical procedures.
On last quarter's call, I highlighted our recent publication in Nature and Scientific Reports, which continues to receive very positive feedback.
Speaker Change: As a reminder, this study found that the use of my medicines for prior toary, for central-based aligraphs may function to interrupt technological progress and restore tissue from your stasis.
Speaker Change: The potential for reduced story for a teaching formation through the use of ameticist preparatory technology could enable accelerated and improved quality of healing, leading to enhanced surgical outcome.
Speaker Change: from improved functionality to superior cosmetic results.
Speaker Change: Again, hotly these potential benefits with the tens of millions of surgeries performed in the US each year. We believe the market opportunity could be massive over time.
Well, the heels of the major publication, we were asked to contribute to the article which appeared on the front page of the New York Times on October 10th. The headline read, quote.
Her face was unrecognizable after an explosion, a presenter that we sort it on quote.
While highlighting the many benefits of the central outgraphs for a variety of wound care and surgical procedures, the article chronicle the real world healing journeys of two individuals who had tremendous outcomes with mymetics products.
This was an excellent journal awareness piece with contributions for several commissions for using the Central Pitchue in a variety of links.
As the article states, quote, we searched his found placental deroghe graphs to reduce pain in inflammation. Heal burns prevent the formation of scar tissue and in ease around surgical sites and even restore vision and cold.
All of this is to say, we are likely to do in the very early market development phase or a percentile derived products.
In addition to research and awareness, it is critical that we continue to expand our product and service offering in order to build a stronger presence in the surgical environment.
Our third initiative is to introduce programs designed to enhance customer intimacy.
As a reminder, the primary focus of this initiative is the adult programs which improve relationships and ultimately lower our customer charm.
To strengthen the connection with our customers, we have undertaken a variety of initiatives in the institutionalizing customer-centric behavior.
We continue to experience excellent adoption of my Medics Connect, our new customer portal, which provides a streamlined digital connection with our referring practices to perform functions such as insurance verification and product ordering.
You're actively developing additional features designed to improve customer work flow and strengthen the bond between my medics and our customers.
We have the gun executive customer feedback sessions around the country and our developing a comprehensive set of programs to embed a customer-centric mindset across the enterprise.
Our commitment to this approach will lead to enhanced customer relationships, improved net promoters scores, higher margins, and ultimately an increase in the average life time value of the customer.
Speaker Change: Now, let me turn to call over to Doug for more detail on our financial results. Then I will close with comments about the private office reimbursement dynamic and pull your guidance. Doug.
Doug Rice: Thank you, Joe. And good afternoon, everyone on today's call. Thank you for joining us. I'm pleased to once again share our results with you all today. As Matt mentioned, many of the financial measures covered in today's call are on a non-get basis.
So please refer to today's earnings release for further information regarding our non-gap or conciliations and disclosures that provide more detail regarding the adjustments made to calculate our non-gap metrics. I encourage you to review these materials alongside my comments today.
As a reminder, in what's otherwise noted, my discussion is on a continuing operation basis. For full discussions of the impact of our discontinued operations, please refer to our most recent 10K and 10K filings.
Doug Rice: Moving on to the results, our third quarter 2024 net sales of $84 million, represented 3% growth compared to the prior year period. As Joe mentioned in his remarks, this performance against the tough growth comparison in the prior year was marked by exceptional resilience and execution of our commercial team.
By product category, third quarter wound sales of $55,000,000 grew 8% versus the pariah period, while surgical sales of $29,000,000 were down 5% as reported.
Excluding the impacts of Axiofil and the sales of our dental products that were discontinued in the prior year period, our surgical sales increased 5%.
Speaker Change: Across these product categories, two of the standout contributors in the quarter were our AmnioEffect and EpiEffect products, along with initial, albeit modest, contributions from Heliogen, our new Xenograft product for surgical.
And finally, turning to our results by site of service, net sales growth in the private office grew 11% to about $25 million compared to the prior year quarter.
Speaker Change: Despite the ongoing challenges in the environment related to high-priced skin substitutes for Medicare fee for service patients, sales of EpiEffect remain strong, and our industry-leading commercial payer coverage continues to help us grow in this care setting.
Third quarter net sales in the hospital channel declined 3% compared to the prior year quarter to $46 million, largely due to the disruption created by the higher-than-expected employee churn we experienced in the second quarter and, to a lesser degree, year-over-year declines in sales of Axiofil in the quarter.
The hospital setting and expanding our footprint in surgical disciplines broadly remains a priority for the company, moving forward as we invest in generating a strong evidence base for use of our products in a wide range of categories.
Finally, third quarter net sales and other, which includes international, federal, and other care settings, grew about 9% to nearly $12.5 million. This growth was driven by a strong performance in our international business. In fact, our third quarter represented the highest level of international net sales we have seen in many years.
Our third quarter 2024 gross profit was about $69 million compared to $67 million last year.
Our gross margin was 82% in both periods as well. Excluding the incremental amortization expense from intangible assets acquired in our Heliogen transaction of roughly $400,000 in the quarter, our gross margins were up 30 basis points compared to the third quarter of 2023.
Speaker Change: Our third quarter R&D expenses were $3 million, or about 3% of net sales, roughly flat when compared to the prior year period.
Income tax expense for Q3 2024 was around $4 million, reflecting an effective tax rate of 31%. Although slightly higher for the quarter, we continue to expect our long-term, non-GAAP-expected effective tax rate to be about 25% going forward.
Speaker Change: Adjusted net income for the quarter was $10 million, or $0.07 per share, compared to $8 million, or $0.05 per share in the prior year period.
Third quarter of 2024 adjusted EBITDA was $18 million or 22% of net sales, roughly flat in dollars and as a percent of net sales compared to the prior year period.
Turning to our liquidity, despite this period of slower top-line growth, our expense discipline has allowed us to continue to demonstrate sizable free cash flow generation, which strengthens our balance sheet and provides us with a great deal of optionality to fund the business organically and inorganically in the future.
During the quarter, we generated free cash flow of $19 million, a $7 million increase over the same period in 2023.
In turn, our net cash balance is now at about $70 million, up from $50 million just last quarter, and more than double our net cash position at the end of the third quarter last year.
I will now turn the call back to Joe. Joe?
Thanks Doug. As you have just heard, we had another solid quarter. Net sales were $84 million, up 3% in the quarter and in line with the expectations we highlighted last quarter. Gross profit margin was 82%.
Adjusted EBITDA was $18 million or 22% of net sales in the quarter.
We have another $20 million of cash. We continue to market the release of Heliogen, our first LenoGrav product.
Let me now revisit the reimbursement saga in the private office and adjacent care settings, a topic which has dominated the chatter in the industry and has caused massive abuse of the Medicare Trust Fund as well as disruption and dislocation in the market.
If you have been following the story, you know that multiple bad actors are using intricate schemes and unethical business practices to exploit a relatively loose regulatory and reimbursement environment for Medicare payment of placental-derived advanced skin substitutes.
Speaker Change: While I remain frustrated that this behavior has been allowed to persist for so long, I now have renewed hope that a fix is on the horizon based on our recent interactions with CMS, the MACs, and Congressional staff.
Last quarter, I shared that CMS payments for skin substitutes increased from approximately $1.5 billion in 2022.
to $4 billion in 2023, and that we were anticipating the spend to climb even higher given the rate at which these improper business practices have been metastasizing.
It turns out that our concern was spot on.
Speaker Change: We recently learned that the CMS spend for skin substitutes in the private office and associated care settings is now running at a rate north of $1 billion per month. Let that number sink in for a minute.
Medicare is now paying that amount every two weeks.
The only thing that has changed is the way certain companies are gaming the system.
Speaker Change: Given the magnitude of the problem and the rate at which it is escalating, it has caught the attention of both Congress and CMS.
Based on these facts and our read of conversations with government officials, we believe the question is no longer if, but when and in what form a correction will take place.
We now believe the most likely scenario is that the LCBs will be implemented in a somewhat modified format from what has been proposed.
with the pricing methodology to be addressed shortly thereafter.
Speaker Change: The government has also ramped up enforcement and we should expect that to continue and grow.
Speaker Change: As we have shared, we continue to have a fair amount of success minimizing the disruption to our business caused by these unethical business practices.
Speaker Change: To that end, I am pleased to report we are taking up the bottom of our full-year revenue growth rate guidance from mid to high single digits, as discussed on last quarter's call, to just the high single digits.
Speaker Change: We also expect our full-year adjusted EBITDA margin to be above 20%.
This assumes the LCDs are not implemented in Q4, which is a reasonable expectation at this point.
Again, we see the implementation ultimately as a net positive for Lymetics, but until CMS provides a definitive path forward, we have to plan for continued disruption.
Importantly, our excitement about the long-term prospects for the business remain high.
Post the reimbursement correction, we are anticipating resetting top-line growth to the low double digits with a strong adjusted EBITDA margin profile above 20%.
Speaker Change: In closing, I am very proud of my colleagues and would like to again thank the entire group of extremely dedicated professionals here at MiMedx who remain committed to delivering for the thousands of people who rely on our products each and every day. With that, I would like to open the call to questions. Operator, we are now ready for our first question. Please proceed.
Thank you. We will now be conducting a question and answer session.
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One moment, please, while we pull for questions.
Speaker Change: Thank you. Our first question comes from the line of Chase Knickerbocker with Craig Hallam Group. Please proceed with your question.
Good afternoon, guys. Thanks for taking the questions. I'm going to start, I guess unsurprisingly, on kind of the reimbursement dynamics here. So you kind of spoke to the confidence that you guys have.
of kind of, you know, that confidence level. And I think just specific, my question is specifically on the LCDs.
You know, you had said slightly changed are still in a format and of a certain structure that does solve this high ASP kind of loophole problem that is in the market, you know, in the near term where this isn't something where we're waiting until, you know, January 1st, 2026, you know, for a solution. Thanks.
Yeah, Chase, the big difference is what we learned over the quarter. That's kind of what's driving our change in tone and our more bullish attitude towards a pending correction. We've met with CMS on multiple occasions, we've met with MACS.
We've met with multiple congressional staffers and even throughout the quarter we could see that the the storyline evolving and we met with various stakeholders. There is an incredible sense of urgency to get some correction in place.
given the spend level and the rate at which the spend is escalating. As you know, they can't tell us specifically as industry participants what they're going to do and when they're going to do it.
But our read on the situation is...
They're spending an awful lot of time on it, and it has gotten everybody's attention.
So yes, I am more confident as I sit here this quarter versus last quarter that there is change coming.
I don't know exactly how.
and the LCDs will be modified, but I do believe that they will be implemented in some way, shape, or form. And the reason I believe that is not because anyone is telling me it's coming, it's because it's the mechanism they have at their disposal to address this problem, and everybody agrees that they need to address the problem.
Speaker Change: Got it, thanks.
Speaker Change: Maybe shifting gears over to the surgical business. Can you kind of help us quantify, you know, is the majority of kind of that impact year-over-year the shortfall from dental and an axial fill? Was it axial fill? And then how how quickly do you think you can fill that hole with Heliogen from here and kind of do you have any kind of early kind of model? How are you monitoring success early in the launch of Heliogen there with your reps?
Speaker Change: surgical being around
Negative 5% to a grower.
5% in Q3, that's the...
and Barry Tushnet
quite some time, depending on the institution, you have to get a sponsor.
Within the organization to represent you as you go to value analysis And then you have to get yourself on the agenda, and then you have to get it to value So those things could take a while and you have to work through cycles The good news there is we're getting very positive feedback as we work through that process also
Speaker Change: and other clinicians who are using the product in various case studies. We're getting great outcomes and tremendous feedback. So it will take a little while to soften the beach and build momentum for the product, but we're pretty confident that this thing is going to be a well-received product like the other products we launched over the last two years.
So the other thing I would just add to what Doug said about
and the actual field number. We highlighted, excuse me, the surgical number, we highlighted the fact that we no longer have dental, and we were sort of.
Speaker Change: neutralizing the axial fill portion of this. But there was some disruption in the business with turnover that we had highlighted on the last call so I don't want to...
Joseph Capper, Matthew Notarianni, Matthew Notarianni, Matthew Notarianni, Matthew Notarianni,
Speaker Change: We did it. I think the commercial team did an excellent job.
Speaker Change: are recruiting very experienced people from all different parts of healthcare. And we're already starting to see those new folks get in and gain some traction. So I didn't want to leave that part out. Yeah, Chase, one other thing, just as you're kind of ticking in time, we talked about the dental impact. You'll recall last...
Q3 was the last time buy for that product, so it's about $1.4 million in the quarter. So that hopefully helps you with the math.
Yeah, great, and you had said
Joe, you know, you expect material contribution from Heliogen in 2025. I mean, do you think it can fully, you know, kind of...
Kim, do you think Heliogen can be at, you know, say 2023 kind of axial fill levels next year, kind of fill in the gap in that product and then just last for me? I would have also expected that, you know, sales rep turnover to really impact the physician office as well and, you know, much better growth there than we had anticipated. Can you just give us some, you know, additional detail, you know, is that largely driven from EpiEffect, just kind of how you kind of outperformed our expectations in that in that market segment this quarter? Thanks. Yeah, definitely EpiEffect, especially in regions that weren't impacted by.
the chair in the sales organization. So much, you know, doing very well with that product. What was the other part of your question? I forget already.
Just on, like you had said, material, you expect Heliogen to be a material contributor in 2025, you know, can it be at the 23 level of axial fill, for example, to kind of fill that hole in 2025?
Yeah, tough to say right now. As you may recall, when...
We had a negative designation on actual filth from...
FDA, we had kind of a multi-pronged approach to how we would counter that. One would be...
Speaker Change: We would dispute the finding.
that Axiophil is not a Section 361 product. We would launch a product like Heliogen.
a GeneGraph 510-K Regulatory Pathway which we had done. And then third, we would pursue a 510-K on a axial field light product. And we had to start that process. We just completed our pre-SOP meeting with the agency. So that will continue. I think...
Actually, I think the Heliogen, from what we're hearing, definitely...
can be a backfill for a portion of the Axiofil usage, probably not 100% of it. So it's hard for me to say, yeah, gee, we're going to do everything that Axiofil did. It might just take a little bit of time. But the good news is we're getting excellent feedback on the product.
Great. Thanks, guys.
Speaker Change: Thank you. Our next question comes from the line of Ross Osborne with Cantor Fitzgerald. Please proceed with your question.
Hi guys, thanks for taking our questions. Starting off, you have a decent cut to SG&A sequentially. Is this a new base to grow off of, or should we expect some more cuts in the fourth quarter and start to 25?
Doug Rice: Ross, this is Doug. Our SG&A remained fairly consistent from Q2 to Q3, and I would expect it to sort of stay on that zip code in the near term.
Speaker Change: Thank you.
Well, I don't know that we're highlighting any specific manufacturing initiatives. We've talked about just general expense discipline across the board, and we spent a lot of time talking about that last year. There was a fair amount of process improvement work that was implemented in operations. We cut in some major technology.
A majority of that has been implemented, but I would say
Doug Rice: that the team has...
Doug Rice: Halleloo
More of a culture of ongoing process improvement that will always be looking to lean out the cost structure where there are opportunities to do so. I can't point to any major issue that I would want to highlight with you, but I would just say in general that institutionalizing a discipline of operational cost control, I think the team has done a very good job of achieving that.
Speaker Change: Okay, got it. Congrats on the progress and thanks for sharing your questions.
Thank you. Our next question comes from the line of Anthony Patron with Mizuho Securities. Please proceed with your question.
Hi guys, you have Brad Bowers on for Anthony today. Appreciate you taking our questions. I'm going to jump on a few topics here, but just kind of I guess staying on the P&L, you know, I kind of expected an R&D step up, you know, maybe in the back half of the year it sounded like there was some RCT initiatives.
I just wanted to kind of hear if there were any projects that were either pushed out or canceled or how we should think about R&D progression here. And maybe just extrapolating a bit, you know, is there anything that you had heard from CMS that, you know, some of the additional studies weren't needed? You know, I just know that some of the data was
Speaker Change: We're not hearing anything from CMS that studies like this are not going to be needed and we do have a major RCT in flight for epi effect. I think it's fair to say that that's
slide in a little bit. There's competition to get these studies enrolled. We feel really good about about where we are. Enrollment is underway. We have all sites selected.
But it's probably fair to say that some of that spending will manifest itself more.
in the fourth quarter and first quarter of next year.
Speaker Change: But we don't expect R&D as a percent of revenue to materially change over time.
Speaker Change: Yes, we have to run these studies.
But, frankly, we've always run studies, and we have multiple studies in flight at any given time, maybe not to the magnitude of spend.
It is required for an RCT, but, you know, I don't I don't think it's going to material change. Don't you want to add anything? I would say just over the next several quarters. You could expect some of these things to ramp up from a half a point, maybe all the way up to a point and a half, but the end of next year is the relative level of.
increased investment in the R&D line.
Speaker Change: Great. And maybe touching on, you know, kind of margin outlook, I appreciate you guys giving some of the puts and takes here for 2025 and totally understand, you know, not guiding there yet. But, you know, just thought it was interesting that you're...
Speaker Change: Outlook for this year, as well as your outlook for out years, both call for adjusted EBITDA margin above 20%. Now, obviously, already there right now, which is impressive in and of itself, but just wanted to kind of hear about how we should think about cadence and further progression, and kind of one of the drivers of that, you know, is it something like a revenue uplift that'll get maybe the next leg, or if there's other, you know, maybe low-hanging fruit.
Speaker Change: It's a good question. I think...
Speaker Change: We're built to scale. I think the more we sell, the more we're going to leverage the bottom line. And with the way our gross margin as well as our EBITDA margin
is structured, it gives us a lot of optionality on kind of when and how and where.
We're always looking for the right places to invest, but at 20 plus percent, we feel good about our cash flow and liquidity and ability to invest both organically and inorganically.
Yeah, my experience running a tech business is of this size.
I'm always pleasantly surprised at the amount of margin accretion or leverage you get with scale. And so the fact that we started to see it so soon is a really positive sign. So I can't peg a number for you, but I would expect margin accretion with scale.
Speaker Change: Please see the complete disclaimer at https://sites.google.com
That's great, and if I could get a last one in here. You mentioned inorganic, you know, I know Heliogen was one of those inorganic opportunities, so just wanted to maybe give you an opportunity to hear about, you know, just what the Salesforce experience has been with Heliogen, you know, kind of the first foray into Xenographs. I know that we had talked in the past about, you know, this may have been a product that was, you know,
The customers were kind of asking for us So just wanted to kind of hear about how this product, you know Has maybe opened any doors or you know If there's any flow through to some of the other products and really just have launches going and thanks again for the question
Yeah, absolutely. I think it will open up doors, right? It's a product that's used in slightly different procedures. I was personally with customers a few weeks ago, and I know this is anecdotal, but had several physicians just raving about the effectiveness of the product and how they're starting to use the product. So I think it's just working through the process.
getting through value analysis, getting the product through pricing and then having more awareness built in various parts of the market. But we're pretty pleased with where we are with it.
Speaker Change: Thank you.
Thank you.
Thank you. Our next question comes from the line of Carl Burns with Northland Capital Markets. Please proceed with your question.
Carl Burns: Thanks for the question, and congratulations on the results. I just had a curiosity, going back to reimbursement and given the sense of urgency around CMS and the LCDs, do you think that there's any potential that there would be an adoption of reimbursement on a square-centimeter basis? And then I have a follow-up as well. Thanks.
Yeah, I don't know. I can tell you that several industry
participants, including us, have recommended.
a new pricing methodology very similar to what you just stated.
I am hopeful that CMS is taking that under consideration. Likely that would not manifest itself until
Speaker Change: Next year's new proposed position fee schedule, as you may recall, these are typically proposed in July and final
Speaker Change: schedules are published around about now you know early you know early November is the typical time frame implemented in January so because we're mid-cycle and nothing has been proposed which means people didn't have a chance to comment on it
We're likely not going to see anything in the final rule. So a change like that will probably, at earliest, take place sometime next year. We have recommended it. We're hopeful. We think it's a more sound way to price these products. One thing is for sure, they have to come off this ASP methodology.
Speaker Change: The fact that these products are too easy to bring to market under Section 361, Q codes are way too easy to get issued, and then you get to set your own price?
They are the factors that have contributed to the mayhem that we're now experiencing in the marketplace. I don't know, you know, bizarre set of circumstances.
Super low barrier to entry, you get to set your own price, so what could possibly have gone wrong? Well, we're looking at it. But I am very hopeful, Carl, that that is the case.
Great, that's helpful. And then just a quick follow-up out of curiosity, how does the Helogen launch differ from other product launches in this segment or similar? I mean, whatever you can add there would be very helpful. Thanks so much.
Speaker Change: I would say it's very similar to the way we've rolled out products in the surgical environment in the past. It's a process, it takes time to work your way through.
Speaker Change: you know on a
Yeah, another nice benefit to that that acquisition was we were able to establish a relationship with Virginity Manufacturer of the product. So we already have a development agreement in place for them and have already identified Additional products we would like them to develop
that we would ultimately commercialize. So a lot of benefits coming from that albeit relatively small acquisition.
Great, thanks, and congratulations once again.
Speaker Change: Thank you.
Thank you. Our next question comes from the line of Brooks O'Neill with Lake Street Cabin Markets. Please proceed with your question.
Brooks O'Neill: Thank you.
Speaker Change: Hey, good afternoon, guys. This is Aaron on the line for Brooks. Thanks for taking our questions. Most of mine have been addressed already. I'm just sort of curious on how MiMedx Connect has sort of developed since last quarter. I know you sort of mentioned a little bit in your prepared remarks, but maybe any additional details there or just anything additional that you're planning in the future would be very helpful. Thanks, guys.
Speaker Change: Yeah, I would just say that adoption continues to increase at a rate above what we had anticipated. And feedback from customers are that it is a major enhancement to workflow within their practices. So that's excellent to hear. And then based on...
customer feedback. We are developing additional capabilities.
to integrate into the platform. Concept here being, you know, the more we can do for them, the more we become part of their workflow, the more difficult it is to replace us, right? That's just logical, that we're trying to create more value with our overall service offering.
Nothing specific in terms of capabilities that I can highlight for you today, but just in general, we have a lot in the queue.
Great, no, that's super helpful. That's gonna do it for me. Congrats on the strong quarter, guys.
Speaker Change: Thank you.
Thank you. There are no further questions at this time. I'd like to turn the call back over to Joe for closing comments.
Thanks, operator. I appreciate you all being on the call today and appreciate your interest in the company. We're going to go ahead and call that a wrap. That concludes today's call. We will talk to you at the end of our next quarter. Thank you.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: La Panola Thank you for watching!
You are bringing me great joy, The days of our intervals are like the wonders of nature I encourage all you young children In learning to be quiet on one hand, and on the other When you speak softly you are bringing me great joy
Speaker Change: [music]