Q3 2024 Anika Therapeutics Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to Ennecust Third Quarter earnings conference call. Following the presentation, we will conduct a question and answer session. Instruction will be provided at that time for you to two of our questions.
If anyone has any difficulties here in the conference, please press star zero for the operators assistance at any time. I would like to remind everyone that this call is being recorded on Thursday, October 31, 2024.
Speaker Change: I will now turn to call over to Matt Hall, Director, Corporate Development and Investor Relations. Please proceed.
Matt Hall: Thank you.
Matt Hall: Good morning and thank you for joining us for Anika's third quarter of 2024 conference call and webcast.
Matt Hall: I'm Matt Hall, Anicus Director of Corporate Development and Investor Relations.
Matt Hall: I joined Danica two and a half years ago in business development and have recently taken over investor relations responsibilities from Mark who exited the company earlier this quarter.
Matt Hall: I've spent more than 15 years in the healthcare and life sciences investment space and I look forward to engaging with our investors and analysts on the call today.
Matt Hall: Our Q3 earnings press release was issued earlier this morning, and it's available on our investor relations website located at www.anica.com As are the supplementary PowerPoint slides that we'll be used with discussion today.
Matt Hall: with me on the call today, our Dr. Cheryl Blanchard, President and Chief Executive Officer, and Steve Griffin, Executive Vice President, Chief Financial Officer and Treasurer.
Matt Hall: Please take a moment and open the slide presentation and refer to slide number two.
Matt Hall: Before we begin, please understand that certain statements made during the call today constitute forward-looking statements as defined in the Security Exchange Act of 1934.
Matt Hall: These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties.
Matt Hall: The company's actual results can defer materially, from any anticipated future results, performance or achievements.
Matt Hall: We make no obligation to update these statements should future financial data for events occur that differ from the forward-looking statements presented today.
Matt Hall: Please also see our most recent SEC filings for more information about risk factors that could affect our performance.
Matt Hall: In addition, during the call we may refer to several adjusted or non-gap financial measures, which may include a adjusted gross margin, adjusted EBITDA, adjusted net income, and adjusted earnings per share, which are used in addition to the results presented in accordance with GAP financial measures.
Matt Hall: We believe that non-gap measures provide an additional way of viewing aspects of our operations and performance. But when considered with gap financial measures and the reconciliation of gap measures, they provide an even more complete understanding of our business.
Matt Hall: A Reconciliation of these adjusted non-Gap Penantra Results. To the most comparable Gap measurements are available at the end of the presentation slide deck and our third quarter of 2024 press release.
Speaker Change: and now I'd like to turn the call over to our president and CEO Dr. Cheryl Blanchard.
Speaker Change: Thanks Matt and good morning everyone. Thanks for joining us. Please turn to slide three.
Speaker Change: Today marks an important day in the Anacostory, and I'll start by providing an update on our ongoing strategic review that has been focused on driving the most optimal capital allocation structure.
Speaker Change: Earlier today, we announced a series of strategic updates, all of which culminate in a renewed focus that Annika will have going forward. On our differentiated H.A. based products that serve the approximate $4 billion market of O.A. pain management and regenerative solutions.
Speaker Change: I'll be speaking more to our updated strategy, but now I'll take a moment to discuss the details of today's actions.
Speaker Change: First, we announce the simultaneous signing and closing of the sale of Arthur surface and our intent to sell park as medical.
Speaker Change: Second, we announced a restructuring and right-sizing of our operating expenses to support our more narrowly defined target markets.
Speaker Change: And lastly, we announce plans to reclassify our revenue to give shareholders a clear view of our value drivers.
Speaker Change: Let me take a moment to talk about Arthur surface in Parkest Medical.
Speaker Change: These decisions are the result of our previously announced company-wide strategic review to drive the highest total return on investing capital.
Speaker Change: As part of our robust assessment of our products, pipeline and market opportunities, and our experience operating these businesses in what has been a rapidly changing environment over the last few years.
Speaker Change: We concluded that the arts are surface and parkest medical portfolio of products would be better suited at another company.
Speaker Change: The expectations of these acquisitions have fallen short due to a number of factors, including unmatched commercial synergies, higher costs and complexities due to the changing regulatory requirements and the capital intensive investments needed to compete.
Speaker Change: At the same time, over the last four years, we've taken significant steps forward in our regenerative solutions and OAPA in portfolios.
Speaker Change: These include launching integrity last year, formulating a near-term or genitive pipeline around our highly differentiated high-F technology.
Speaker Change: Bringing Hilefast into focus with the expected launch by 2020-6, and overcoming hurdles to significantly progress and go all towards an NDA filing.
Speaker Change: Together with our board, we've decided to narrow our focus and allocate our resources, both financial and human capital. On the highly differentiated H.A. based products that we will deliver the strongest and highest probability of improved shareholder returns.
Speaker Change: In addition this morning we announced the reduction of our workforce to a more optimally fit the needs of our updated strategic focus on H.A. products.
Speaker Change: As a result of this restructuring, the sale of Arthur surface and the planned investor of Parkest Medical, we expect global headcount to reduce from approximately 325 to about 225.
Speaker Change: Our team is ready to take on the value-building opportunities that lie ahead for the business, our customers, and the patients they serve.
Speaker Change: Lastly, beginning in the fourth quarter, we will delineate our revenue between our commercial channel and our OEM channel.
Speaker Change: In the Commercial Channel, Anika has full responsibility for sales, marketing and pricing of products.
Speaker Change: Through our commercial leaders, direct sales representatives, and independent distributors.
Speaker Change: Conversely in the OEM channel, Anacos responsible for development and manufacturing of products governed by long-term agreements, but does not control sales marketing or pricing.
Speaker Change: Over the last four years, we have been working to drive growth in the products that we sell through our Anika Controlled Commercial Channel globally.
Speaker Change: This is included in Hans Regulatory Support for Geographic Expansion, developing and launching highly differentiated products and investing in sales and marketing operations.
Speaker Change: Since 2021, excluding Parkinson Arthur service, these investments have resulted in 18% annual growth of products sold through Anacost commercial channel. And in 2024, we expect to deliver 16% growth at the midpoint of our guidance.
Speaker Change: We've proven the ability to deliver growth in the H.A. focus products that we sell through our commercial channel, and this represents one of the largest shareholder value opportunities in both the short and long-term.
Speaker Change: Please refer to flag 4.
Speaker Change: Turning to this quarter, we have key updates on the major milestones we highlighted in our last call for integrity, policy, how-of-fest, and single.
Speaker Change: Let me first start with integrity. As a reminder, integrity is our H.A.B. scaffold for rotator cuff and other tenor pairs. And we're incredibly pleased with its performance early into the full market release.
Speaker Change: I've talked about a unique structure, design, and instrumentation before. All benefits and features that we continue to hear echoed back to us as exceptionally valuable from the surgeons.
Speaker Change: Integrity is going really well. Let me discuss some of the proof points.
Speaker Change: We grew the total number of surgeries in the third quarter by greater than 40% sequentially as we completed nearly 200 surgeries. In line with the guidance shared at the end of the second quarter.
Speaker Change: Consistent with prior trunds, 20% of the surgeons using integrity were new to Anika in the last 90 days.
Speaker Change: Since the initial launch of integrity in late 2023, more than 500 surgeries have been performed, and were encouraged to see the number of new customers being attracted to Anika's regenerative products.
Speaker Change: Integrity competes in a U.S. tendon augmentation market, which is estimated to be more than $220 million annually, and grew about 13% in the second quarter of 2024.
Speaker Change: We expect continued strong growth in the fourth quarter, and again anticipate about 40% sequential growth in surgeries.
Speaker Change: Our updated 2025 guidance, which Steve will discuss in a moment, reflects continued growth of this increasingly important regenerative solutions product.
Speaker Change: While integrity's core technology and instrumentation are strong, we recognize the need for robust clinical data to support our expansion into key international markets, including those under EUMDR and to bolster our U.S. marketing efforts.
Speaker Change: We expect to be ready to begin enrollment in our Prospective Multicenter post-market clinical follow-up study by the end of this year.
Speaker Change: The study won role 100 subjects with both 26 and 52 week follow-ups.
Speaker Change: We also have smaller post-market follow-up studies on going that we expect to yield data in 2025.
Speaker Change: With a strong commercial pull of integrity and adoption accelerating, we're also advancing this technology platform with a near-term regenerative solutions pipeline to further accelerate our growth in our commercial channel.
Speaker Change: For our first project, we've partnered with a leading team of surgeons and expect new shapes, sizes, and configurations for integrity to begin to hit the US market in 2025. With additional H.A. Driven Innovation, leveraging our high-affer-genitive platform to come in the midterm.
Speaker Change: Let me now shift to the other product that is key to the midterm plans within our regenerative solutions portfolio.
Speaker Change: The Breakthrough Device Hile Fest, our single stage off the shelf, regenerative cartilage repair solution.
Speaker Change: We've made important progress on our plans to bring Hylophast to the US market and we remain on track with our modular PMA filing plan.
Speaker Change: I'm excited to announce that the first module of the PMA, the GMP module, was filed with FDA on Tuesday of this week. With that done, our focus has progressed to the preclinical module, which we expect to file by early 2025.
Speaker Change: We then look forward to filing the third and final module, the Clinical Module, later in 2025.
Speaker Change: We were made on track to launch Hylifast in the US by 2026 targeting a growing estimated $1 billion market with expected revenue contributions later that year.
Speaker Change: Our investments in integrity, the near-term regenerative pipeline and our commercial channel will lay the foundation of fully capitalized on the significant opportunity.
Speaker Change: Lastly, I'll provide an important update on Singal, and our efforts to bring this game-changing product to the United States.
Speaker Change: We've made real progress in addressing important hurdles on our path to filing the NDA.
Speaker Change: In April of 2023, Annika held a tight-seem meeting with FDA, which led to an advice letter this pastlet April.
Speaker Change: The letter included positive feedback and new challenges that were actively addressing. On the positive side, we received further confirmation that the single-clinical data is a review issue and not a filing issue.
Speaker Change: As a reminder, our clinical studies have hit the endpoints with the FDA set forth for us of demonstrating superiority to each of the two active ingredients in single. The steroid triumsonalone hexacidinide and hyaluronic acid.
Speaker Change: In the Type C meeting, the FDA requested a proposal on our Bioclosed One Study Design.
Speaker Change: The FDA has since changed their longstanding approach on the Erisis Bayon material needed for the study.
Speaker Change: Now requiring a wrist span to be manufactured using CMC information from the NDA holder, rather than label information, as previously guided, and that is consistent with the 505B2 pathway.
Speaker Change: I am pleased to report that we have acquired the Aristospan NDA. This significant achievement addresses that recent FDA hurdle, allowing us to source reference drugs for the bio-quivalent study and request a new type-see meeting to finalize that protocol.
Speaker Change: The FDA had also directed us to complete additional non-flinical testing on Monovis, our HA used in Singal, as a result of the FDA designating the HA in Singal as a drug. I'm also pleased to report progress on that topic.
Speaker Change: The Bat Non-Cornical Testing will begin in Q1 of 2025.
Speaker Change: For those investors who are new to the anarchist stories, these actions have cleared many of the hurdles that have been raised by the FDA for the filing of single in the U.S.
Speaker Change: And because of the progress to date, we remain more committed than ever to bring this revolutionary pain management therapy to the approximate $1 billion U.S. dressable market.
Speaker Change: We plan to provide updates as soon as we have clarity from our final Type C meeting with FDA.
Speaker Change: By executing the strategic shift to focus on our core, how ironic acid-driven products and pipeline, we are positioned to drive shareholder value by capitalizing on our best near-term and long-term value-building opportunities.
Speaker Change: Looking ahead, we see three phases to creating shareholder value through our Anacod Control Commercial Channel.
Speaker Change: First, we'll increase revenue within our commercial channel by launching near-term regenerative products and continuing international commercial execution for ortho-visc, monovisc, single and high-lifast.
Speaker Change: Second, medium term growth will accelerate with the US introduction of Hylifast, allowing Anika to compete directly in this attractive market.
Speaker Change: And lastly, Singol will enter the US market as a next generation non-opioid OAPAIN product with an estimated $1 billion market opportunity.
Speaker Change: Both St. Goll and Hilophast leveraged our core HA technology offering greenfield opportunities that can transform our company's value. I'm excited about the path ahead that put us more in control of our destiny.
Speaker Change: I will add that we will of course continue to support our partners at the Constitution our OEM channel.
Speaker Change: As they make investments that will help realize the full potential of our clinically differentiated products.
Speaker Change: The update to our guidance for U.S. O.A. Pain Products sold through J&J Medtech is reflective of a more competitive and price-sensitive market.
Speaker Change: However, I want to highlight that our product still holds the market-leading position in the US and Jane has committed to work to establish stronger market access that will result in more stabilized output in 2026.
Speaker Change: and with that, I'll turn it over to Steve.
Steve Griffin: Before I review the quarter, I'll briefly discuss the Arthur surface transaction.
Steve Griffin: Today we signed and closed on the sale of our first service for an estimated $10 million. $7 million through a promissory note payable over 10 years, and approximately $3 million subject to sales milestones and customary networking capital adjustments.
Steve Griffin: In the coming weeks and months, our team in the Bible managed a necessary processes to ensure some good handover.
Steve Griffin: Additionally, we announced the planned debes to ensure a park is medical.
Steve Griffin: Further disclosure will be provided when required. Piper Sandler is managing this process.
Steve Griffin: We announced a planned corporate restructuring to better align our resources, following the exit of our surface and parkous medical, and our renewed focus on HA products.
Steve Griffin: In the third quarter, we recorded a one-time non-cash impairment of Arthur's surface assets for approximately $27 million.
Steve Griffin: We also expect to incur three to five million dollars from corporate restructuring activities in the common quarters.
Steve Griffin: Starting in the fourth quarter, we expect to move historical results of our thirst surface and parkest medical into discontinued operations.
Steve Griffin: As Cheryl mentioned, starting in the fourth quarter, we will classify our revenue into two new categories, our commercial channel and our OEM channel.
Steve Griffin: I'll provide details, historic results and projections for these channels after discussing the third quarter results.
Steve Griffin: My third quarter remarks are based on our historic sales categories, OAPAIN, Joy Preservation, and NONORS APEDIK, consistent with our operations during the quarter.
Steve Griffin: Now let's review the third quarter results.
Steve Griffin: Please refer to slide five of the presentation.
Steve Griffin: Anna Kajanaray did $38.8 million in total revenue in the third quarter. Down $2.7 million from the same period in 2023.
Steve Griffin: This decline was driven by lower revenue from our J&J Medtech partner and softness in the Arco Service and Sports Medicine businesses.
Steve Griffin: which we announce the sale of and our intention to sell respectively.
Steve Griffin: This was partially offset by growth in our international OAPA and Hyderonic acid based for generative solutions.
Steve Griffin: Revenue in our largest product family, OAPain Management, decreased 2% in the third quarter to 24.4 million dollars, primarily due to lower US sales from J&J, which face lower volumes and competitive pricing pressures.
Steve Griffin: Despite reduced market access and lower pricing, Monovisk and Orthomisk remain market leaders in the U.S.
Steve Griffin: While these results were below expectations and impacted full-year sales and profit forecasts.
Steve Griffin: We are aware of J&J's actions to stabilize sales and increase market access.
Steve Griffin: Offsetting the Jane J results, International OA Pain Sales grew by 7% with year-to-date international sales up 14%.
Steve Griffin: Our international sales team and distributors have gained market share with Monovis, Orthivist and Singal, benefiting from geographic expansion in the new countries compared to last year.
Steve Griffin: Next, moving to joint preservation of restoration, which includes art for a surface, parkous medical, and our regenerative solutions portfolio.
Steve Griffin: Revenue decreased 11% in the third quarter to $12 million, driven by softness in Arthur's surface and parkous.
Steve Griffin: Offsettingness for generative solutions including integrity grew 17% year over year.
Steve Griffin: Integrity performed well with over 40% sequential growth in cases, in line with our prior guidance and remains on track to be a key contributor in the fourth quarter and 2025.
Steve Griffin: Lastly, not only the pediatric revenue decline 24% to $2.4 million and is down 11% year to date.
Steve Griffin: Just decline a lines with our prior guidance and is driven by lower sales of mature products.
Steve Griffin: Gross margin in the quarter was 4% down from 60% last year, primarily due to a $23 million impairment from the Arthur surface transaction.
Steve Griffin: A just-tick gross margin, excluding this impact, was 65% down from 66% last year, mainly driven by lower change a royalty income for monobiskin or the risk in the US.
Steve Griffin: Operating expenses in the third quarter, total $29.4 million, including 4 million in impairment charges related to the Arthur surface transaction.
Steve Griffin: This is down $3.2 million from 2023. To do it one time expenses in the prior year and cost reduction efforts.
Steve Griffin: This lower expense profile also reflects a full quarter of benefits from the Q1 2024 cost actions.
Steve Griffin: The company remains on track to deliver $10 million in cost savings from these initiatives, excluding additional cost actions on-house today.
Steve Griffin: The net loss for the quarter was $29.9 million, compared to a net loss of $6.6 million in the prior year.
Steve Griffin: A just-it-net loss was $3.8 million in the quarter, and was down from an adjusted net income of $3.3 million. Primarily due to lower revenue in certain tax items in the quarter.
Steve Griffin: Anacod generated $5.4 million in a just-of-the-de-bidda for the quarter. Up $700,000 from the prior year, as cost savings from the Q1 restructuring efforts, offset lower revenue.
Steve Griffin: The adjusted EBITDA margin was 14% down 1.2 quenchily due to the lower US OAPE management revenue.
Steve Griffin: Now, turning the cash on liquidity.
Steve Griffin: We generated $5 million in operating cash flow this quarter, down from $6.5 million last year, primarily due to lower revenue.
Steve Griffin: You're today, we've generated $3.8 million in operating cash flow.
Steve Griffin: Capital expenditures were $800,000, up $100,000 from the prior year.
Steve Griffin: We're investing in our mass-choose its manufacturing facility to support higher-expected output of OAP and regenerative solutions products.
Steve Griffin: As previously communicated, we initiated a 10B51 stock repurchase plan in May.
Steve Griffin: By the end of the third quarter, we had purchased 5.3 million in common stock.
Steve Griffin: We are on track to complete the initial $15 million share we purchased planned by June 2025 as committed.
Steve Griffin: We ended the third quarter with 62.4 million in cash and no debt.
Steve Griffin: Now on Slide 6, I'll update our full year financial outlook for 2024 and provide guidance for 2025 and beyond.
Steve Griffin: As mentioned earlier, starting in the fourth quarter, we will separate our revenue into products sold to our commercial channel and our OEM channel.
Steve Griffin: To help investors reconcile the updated guidance, we have included 20, 24 guidance for both our historic product family view and the new commercial and OEM view.
Steve Griffin: For 2024, we expect revenue growth, a 14 to 19% in the commercial channel, compared to $36.1 million in 2023.
Steve Griffin: Growth is driven by integrity and geographic expansions in the International OAP Management Market.
Steve Griffin: In our OEM channel, we expect 2024 revenue to decline by 8 to 10 percent, compared to $84.6 million in 2023.
Steve Griffin: This includes revenue from our U.S. Monobiskin or the Dispartner, J.J.
Steve Griffin: This updated forecast reflects our revised guidance based on updated commercial pricing and competitive market dynamics.
Steve Griffin: Going forward, Arthur surface and part of Smedical are expected to be reported in discontent operations.
Steve Griffin: For 2025 and beyond, we expect double-digit revenue growth in the commercial channel, up 12 to 18% in 2025 and 20% to 30% annually in 2026 and 2027.
Steve Griffin: This growth is driven by the strength of the integrity, portfolio and continued international sales of OAP Management Products.
Steve Griffin: Our assumptions include modest revenue contributions and Q42026 from the anticipated US launch of Hyal of Ast with growth continuing into 2021.
Steve Griffin: In our OEM channel, we anticipate the 12-18% revenue decline in 2025. Primarily due to the updated forecast for US sales of a weight-payment management products through J&J.
Steve Griffin: Disreflex in the return pressure from reduced market access and lower pricing expected in 2025.
Steve Griffin: We expect stable to modestly lower revenue from the OEM channel in 2026 and in 2027, as Monoviskin worth a disc stabilized in the US late next year.
Steve Griffin: Currently, US single revenue is not included in our forecasts. We will update investors as we receive FDA feedback.
Steve Griffin: Now, I'm turning to profitability.
Steve Griffin: For 2024, we expect total company adjusted even to be between $16 and $18 million. Factoringen Lower US OA Pain Management revenue.
Steve Griffin: This excludes one-time restructuring charges, transaction expenses, or potential impacts from discontinued operations classification in the fourth quarter.
Steve Griffin: More details on all of these items will be shared in the fourth quarter earnings release.
Steve Griffin: For 2025 and beyond, we expect to just the DBTDOM margins and the low double digits, excluding expenses from the parkest medical sale and Arthur surface transition services agreements.
Steve Griffin: The 2025 guidance reflects a lower operating expo expense profile from our restructuring actions, offset by anticipated lower US-OA pain management revenue.
Steve Griffin: The 2025 Ajayath Adivita includes investments in our regenerative solutions portfolio, so do our commercial channel.
Steve Griffin: These investments cover expanding our commercial team, completing clinical trials for HALIFAST and integrity, and developing new integrity and high-tech technology line extensions.
Steve Griffin: The estimated net impact of our regenerative solutions portfolio is approximately $14 million in 2025 and in 2022.
Steve Griffin: These investments will help bring integrity to market and prepare for the anticipated Hylifast launch by 2026.
Steve Griffin: The Care O8 Pain Management Business.
Steve Griffin: and Compassing Both US and International Sales, continues to deliver strong, evit-dom margins and remains highly cash-genitive.
Steve Griffin: Looking to 2026 in Dionne, we expect improved EBITDA margins from the US launch of HALIFAST, which will increase commercial channels sales.
Steve Griffin: As sales grow, we anticipate stronger bottom line contributions, leaving to EBITDA margin expansion.
Steve Griffin: Our 2025 through 2027 EBITDA guidance excludes single bioquivalent expenses.
Steve Griffin: We will update investors as we receive clarity from the FDA on next steps in timing.
Steve Griffin: with that, Cheryl, I'll turn the call back to you. Thanks, Steve.
Speaker Change: The results of our strategic review represent an important pivot for Anika.
Speaker Change: The sale of Arthur's service in the planned-evester Parkest Medical, Mark is strategic shift towards our regenerative solutions and OAP management products, including the commercialization of the past and single in US.
Speaker Change: First, we've ramped up integrity in the U.S., achieving a 40% increase in new surgeries this quarter with over 20% of surgeons new to Anika.
Speaker Change: Second, we filed the first module of our three-part PMA for Hylifest in the U.S., on track for Market Launch by 2026.
Speaker Change: Third, we've made significant progress with sing-all by acquiring the Rista span NDA, allowing us to start the necessary remaining studies for FDA.
Speaker Change: We've also updated our revenue classification for better visibility into our commercial and OEM channels, reflective of how we will manage our business and build value.
Speaker Change: And lastly, our updated margin guidance sets a new baseline for Anika.
Speaker Change: Our OAP management business continues to show strong double digit 20% plus EBITDA margins and our investments in the commercial channel and R&D for regenerative solutions promised long-term shareholder value.
Speaker Change: Our team's successful execution on challenges and opportunities, the integrity launch, global success of our high-f technology, upcoming high-lifast launch, and the potential of single to redefine OAP management in the U.S., all represent significant growth and value creation for our shareholders.
Speaker Change: and with that we'll open up the line for questions. Operator, please proceed.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session. Should you have a question? Please press the star, follow by the one on your touchstone phone. You will hear a prompt that your hand has been raised.
Speaker Change: Should you wish to decline from the polling process, please press the star, followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first questions.
Speaker Change: and your first question come from Jim Sedody from Sidody and Co. Please go ahead.
Jim Sedody: Good morning, a lot of changes to digest here so start out quick one, then not on orthopedic revenue.
Speaker Change: Well that'd be now part of the Commercial Channel going forward.
Speaker Change: No, that's a great question, Jim. Though that's going to be part of the OEM channel, it represents sort of a long-term agreement somewhere to that of our J.J. relationship. The Naut North of Petick and J.J. will be the primary equivalence of the OEM channel.
Jim Sedody: Okay, so that's included in that 76-78 million for 2024.
Jim Sedody: Brett.
Brett: Okay, and can you give us any guidance on gross margins in 2025?
Brett: Under a new, restated basis, I mean, I probably will wait till we get through some of the work that's going to require to separate out the Arthur surface and park as before we do it. I think it's a little preliminary to do it because it's not something we've got prepared.
Brett: We're giving the event a hug so I think that should help you get there.
Speaker Change: Okay, you mentioned continued investments in Salesforce for the commercial channel. Is that something that...
Speaker Change: You wait until you get the products approved for or if that's something you start right away.
Speaker Change: Hi, Jim. Thanks for the question. Yeah, I would tell you that, you know, over time, even as we've been going through this strategic assessment and running these processes.
Speaker Change: We have been taking a very careful look at what we think the commercial channel needs to look like to continue to drive the 18% cagor that we've seen happen historically.
Speaker Change: and many of those investments have been made for the time being we will continue to make those investments largely focused on direct sales reps.
Speaker Change: As we go further into next year, I mentioned that we'll have some additional kind of short-term product launches that are new shapes sizes and configurations for integrity.
Speaker Change: We've got some other stuff in the works that I'll give more detail on going forward and then high-lifasccoming. So as we continue to build those products, we will continue to build the direct sales.
Speaker Change: Profile of what that commercial channel looks like, and those things are incorporated in that future guidance that Steve provided.
Speaker Change: Okay, but just so I'm clear now, the commercial channel, the primary products will be the single international products, the how fast and integrity. So those are going to be the three primary products of that channel or what else are you going
Speaker Change: Yeah, it's all the OUS products, which is Monovis, Gorthy Vist, Singol, Highlifast, really are the main drivers for the OUS business that will be in that commercial channel. And in the U.S.,
Speaker Change: It'll be the entire regenerative channel, so that includes today, tactusette and integrity, and then the future product launches in the region space.
Speaker Change: Okay.
Speaker Change: Okay, and it sounds like...
Speaker Change: You think you'll be able to get through this transition and still be able to at least be cash on neutral.
Speaker Change: and Michael Levitz.
Speaker Change: All right, that's it for me, thank you.
Speaker Change: Thank you.
Speaker Change: and your next question comes from Mike Pittowski from Barrington Research. Please go ahead.
Mike Pittowski: A sort of the sorry if I misocessed the revenue associated with the vested Arthur surface business.
Speaker Change: We haven't necessarily broken down. I'm not revenue is the fight. All right. Yeah, but it's probably around 25, just north of that in terms of total annual revenue.
Speaker Change: Okay.
Mike Pittowski: I understand this was before your time, but do you guys by any chance have? I know you paid 60 million cash. You have any idea what the burnout that you all paid and for that asset ended up being. I mean, that ended up being something like all in close to 80 total, meaning 60 plus 20, or do you have that figure of handy by any chance?
Speaker Change: I do have the figure handy. I think it's around 77 million total.
Speaker Change: Okay.
Speaker Change: Um...
Speaker Change: and any champion you guys are willing to provide what the...
Speaker Change: sort of project because you're projecting out EBITDA margins for 25 and beyond. I mean, you're the sense of, you know, as a standalone that J&J US away business, what's the, you know, if it were segmented, what those margins are, I mean, can you, can you at least confirm, you know, north of 20% north of 25% of the standalone?
Speaker Change: Sure, we can't necessarily break out that one customer, but we do, you know, I did provide some guidance here to think about how much of an investment we're making in our regenerative business and I share that that investment is roughly $14 million. So when you do the math to kind of look at our guidance and then think about what the remainder of the businesses that's our OAPane, or the Visman of this Concingal.
Speaker Change: You end up in a position where it's, you know, strong 20 plus percent margins. And as I mentioned, highly cash generative.
Speaker Change: So it still represents an important element of the company. And I think Cheryl's remarks highlight it well, which is, will continue to support our OEM customers.
Speaker Change: including Jay and Jay because it's an important piece of the company, but really the growth element of the business is going to come from the commercial channel.
Speaker Change: and I guess relative to the Marcus ass that that's remaining to be sold. I should assume sort of something.
Speaker Change: sort of like Arthur's surface. I mean pretty modest relative to what you modest pro-seeds relative to what you age for the asset is up there.
Speaker Change: We're literally just announcing it today, so we'll begin the process of having discussions in publicly here and we'll share more when we have time to share more.
Speaker Change: Oh,
Speaker Change: and the last question for me, the global headcount 325 to 225, that sort of is all inclusive of Arthur surface parkists.
Speaker Change: All of it.
Speaker Change: It is, it's our service partners and some additional reductions that were made.
Speaker Change: Yeah, of course.
Speaker Change: Alright, that's all I got to think.
Speaker Change: Thank you, Mike.
Speaker Change: At this time we have no other questions, please proceed.
Speaker Change: and the
Speaker Change: Ladies and gentlemen, this concludes the conference. You may now disconnect your lines.
Speaker Change: and the