Q3 2024 Vericel Corp Earnings Call
Listen only mode I would also like to remind you that this call is being recorded for replay I will now turn the conference call over to Eric Byrnes, <unk>, Vice President of Finance and Investor Relations.
Eric Byrnes: Thank you operator.
Eric Byrnes: And good morning, everyone.
Eric Byrnes: Joining me on today's call are <unk>, President and Chief Executive Officer, Nick Colangelo.
And our Chief Financial Officer, Joe Mara.
Speaker Change: Before we begin let me remind you that on today's call, we will making forward looking statements covered under the private Securities Litigation Reform Act of 1095.
Speaker Change: These statements may involve risks and uncertainties that could cause actual results to differ materially from expectations.
Speaker Change: And are described more fully in our filings with the SEC.
In addition, all forward looking statements represent our views only as of today.
And should not be relied upon as representing our views as of any subsequent date.
Speaker Change: Please note that a copy of our third quarter financial results press release.
Speaker Change: In a short presentation with highlights from today's call are available in the Investor Relations section of our website.
Speaker Change: I will now turn the call over to Nick.
Thanks, Eric and good morning, everyone.
Nick Colangelo: The company had another outstanding quarter as we generated total revenue growth of 27% and record third quarter revenue of approximately $58 million, which exceeded our guidance for the quarter.
Nick Colangelo: This strong performance was highlighted by record third quarter, <unk> revenue and the highest step salt revenue in any quarter to date.
Nick Colangelo: We also delivered another quarter of significant margin expansion and operating cash flow is the company's profit growth continues to outpace our high revenue growth.
Nick Colangelo: Finally, the company achieved two very important regulatory milestones with the FDA approval of <unk> and the Nexobrid pediatric indication, which positioned the company for sustained high revenue and profit growth in the years ahead.
Nick Colangelo: <unk> had another solid quarter and was well positioned for a strong close to the year as the momentum and underlying growth drivers continued through the third quarter.
Nick Colangelo: We achieved record third quarter highs for Macy biopsies in the number of surgeons, taking biopsies driven by robust growth in both biopsy surgeons as well as biopsies per surgeon, which has become a meaningful growth driver for Macy's this year.
Nick Colangelo: The strength of these key growth drivers together with another quarter of significant increases in peer to peer programs, which more than doubled in the third quarter compared to last year and attendance at those programs, which is at the highest level at any time since launch.
Nick Colangelo: Administrative that surgeon interest in the core basic procedure remains extremely high.
Verathon, Vice President of Finance and Investor Relations.
Nick Colangelo: In addition, with the recent approval of ACR through Macy's now the only restored in biologic cartilage repair product approved for Arthroscopic administration.
Thank you operator, and good morning, everyone.
Joining me on today's call are <unk>, President and Chief Executive Officer, Nick Colangelo.
Nick Colangelo: The first May see Arthral case was successfully.
And our Chief Financial Officer, Joe Mara.
Performed a few days after we announced the approval and there has been considerable engagement and interest in <unk> from both current <unk> users and non users at training programs as well as our launch meeting at the orthopedic summit in September an important early indicator of the potential for <unk> to meaningfully.
Before we begin let me remind you that on today's call we will make some forward looking statements.
Private Securities Litigation Reform Act of 1995.
These statements may involve risks and uncertainties that could cause actual results to differ materially from expectations.
And are described more fully in our filings with the SEC.
Nick Colangelo: Expand utilization and sustain at Macy's high revenue growth over the long term.
In addition, Aqua looking statements represent our views only as of today.
Nick Colangelo: Turning to burn care.
Should not be relied upon as representing our views as of any subsequent date.
Speaker Change: Episode third quarter revenue was its highest quarterly revenue to date and we continue to generate significant episode revenue from <unk> settlement activity at previously dormant burn centers.
Please note that a copy of our third quarter financial results press release and.
In a short presentation with highlights from today's call are available in the Investor Relations section of our website.
Speaker Change: Nexobrid adoption continued to progress with more than 70 burn centers, completing PMT committee submissions and approximately 50 burn centers, obtaining PMT committee approval and placing initial orders since launch.
I'll now turn the call over to Nick.
Thanks, Eric and good morning, everyone.
The company had another outstanding quarter as we generated total revenue growth of 27% and record third quarter revenue of approximately $58 million, which exceeded our guidance for the quarter.
With the Nexobrid pediatric indication now in place more than a third of the pediatric burn centers have completed PMT submissions with several pediatric centers, placing initial orders.
This strong performance was highlighted by record third quarter Basi revenue and the highest upsell revenue in any quarter to date.
Speaker Change: Finally, <unk> recently received a category III CPT code, which is scheduled to be posted on the website on January one and go into effect on July one next year.
We also delivered another quarter of significant margin expansion and operating cash flow is the company's profit growth continues to outpace our high revenue growth.
Speaker Change: Overall, the company had an excellent third quarter and importantly, we remain on track to meet all of the key objectives for 2024 that we established at the beginning of the year, including sustaining high revenue growth for <unk> in the company.
Finally, the company achieved two very important regulatory milestones with the FDA approval of Macy, Arturo and the Nexobrid pediatric indication, which positioned the company for sustained high revenue and profit growth in years ahead.
High Revenue and Profit Growth in the Years Ahead.
Speaker Change: Establishing a second high growth franchise in burn care.
<unk> had another solid quarter and was well positioned for a strong close to the year as the momentum in underlying growth drivers continued through the third quarter.
Macy had another solid quarter and was well positioned for a strong close to the year as the momentum in underlying growth drivers continued through the third quarter.
Speaker Change: Securing FDA approval and launching <unk> in the third quarter and continuing to drive substantial margin expansion and profit growth.
We achieved record third quarter highs for Macy biopsies in the number of surgeons, taking biopsies driven by robust.
Speaker Change: I will now turn the call over to Joe to provide a more detailed review of our third quarter financial results and guidance for the remainder of 2024.
We achieved record third quarter highs for Macy's biopsies and the number of surgeons taking biopsies, driven by robust growth in both biopsy surgeons as well as biopsies per surgeon, which has become a meaningful growth driver for Macy's this year.
And both biopsy surgeons as well as biopsies per surgeon, which has become a meaningful growth driver for Macy's this year.
Joe: Thanks, Nick and good morning, everyone as.
As Nick referenced various al had an excellent quarter across all financial metrics with a record third quarter revenue and profit margins coming in ahead of our guidance for the quarter.
The strength of these key growth drivers together with another quarter of significant increases in peer to peer programs.
The strength of these key growth drivers, together with another quarter of significant increases in peer-to-peer programs, which more than doubled in the third quarter compared to last year, and attendance at those programs, which is at the highest level at any time since launch,
<unk> doubled in the third quarter compared to last year and attendance at those programs, which is at the highest level at any time since launch.
Joe: Total net revenue for the third quarter was $57 9 million, an increase of 27% versus the prior year.
Administrators that surgeon interest in the core Beachy procedure remains extremely high.
Joe: Macy revenue grew 19% in the third quarter to $44 7 million and remained on track for a strong fourth quarter and approximately 20% growth for the full year.
In addition, with the recent approval Basey are through this is now the only restarted biologic cartilage repair product approved for arthroscopic administration.
In addition, with the recent approval of Macy's Arthro, Macy's is now the only restorative biologic cartilage repair product approved for arthroscopic administration.
Joe: Total burn care revenue in the third quarter grew 66% to $13 2 million well ahead of our guidance.
The first Macy Arthur case was successfully port performed a few days after we announced the approval and there has been considerable engagement and interest in ACR through from both current users and non users at training programs as well as our launch meeting at the orthopedic summit in September.
Joe: The outperformance was driven by record quarterly episode revenue of $12 2 million with the increased scrap volume primarily due to considerably higher grafts per order.
Joe: Importantly, based on our higher share of voice in the burn care market, both new and dormant episodic counts have contributed a meaningful portion of episodes nearly 30% growth on a year to date basis.
An important early indicator of the potential for <unk> to meaningfully expand utilization and sustain Macy's high revenue growth over the long term.
Turning to burn care.
Joe: <unk> revenue grew sequentially to $1 1 million for the quarter as we continue to add new ordering centers and a number of centers regularly using extra brand increases.
Episodes third quarter revenue was its highest quarterly revenue to date and we continue to generate significant episodic revenue from <unk> settlement activity at previously dormant burn centers.
Joe: The company's substantial revenue growth translated into significant margin expansion with gross profit of $41 7 million or 72% of net revenue an increase of 480 basis points compared to 2023, which also represents a record quarterly gross.
<unk> adoption continued to progress with more than 70 burn centers, completing PMT committee submissions and approximately 50 burn centers, obtaining PMT committee approval and placing initial orders since launch.
With the Nexobrid pediatric indication now in place more than a third of the pediatric burn centers have completed PNT submissions with several pediatric centers, placing initial orders.
Margin outside of our seasonally high highest fourth quarter.
Joe: Through the third quarter. The company has generated gross margin of 70% an increase of 450 basis points versus the prior year.
Finally, <unk> recently received a category III CPT code, which is scheduled to be posted on the website on January one and go into effect on July one next year.
Joe: Total operating expenses for the quarter were $44 1 million compared to $35 7 million for the same period in 2023.
Overall, the company had an excellent third quarter and importantly, we remain on track to meet all of the key objectives for 2024 that we established at the beginning of the year, including sustaining high revenue growth for base in the company.
Joe: The increase in operating expenses was primarily due to development and commercial launch activities from ACR throw increased head count and related employee expenses as well as additional marketing initiatives that helped drive a significant increase in physician engagement across both franchises.
Stablish and a second high growth franchises burn care.
Securing FDA approval and launching <unk> in the third quarter and continuing to drive substantial margin expansion and profit growth.
Net loss for the quarter narrowed to 0.9 million or <unk> <unk> per share compared to $3 7 million or <unk> <unk> per share in the prior year.
Speaker Change: I will now turn the call over to Joe to provide a more detailed review of our third quarter financial results and guidance for the remainder of 2024.
Joe: In addition, the company has generated positive net positive GAAP net income on a rolling 12 month basis and importantly, we remain on track for positive GAAP net income for the full year.
Joe: Thanks, Nick and good morning, everyone.
Joe: As Nick referenced varicella had an excellent quarter across all financial metrics with a record third quarter revenue and profit margins coming in ahead of our guidance for the quarter.
Joe: Adjusted EBITDA for the quarter increased 84% to $10 million or 17% of revenue an increase of over 500 basis points versus the prior year as we continue to drive very strong bottom line growth.
Joe: Total net revenue for the third quarter was $57 9 million, an increase of 27% versus the prior year.
Joe: Maintenance revenue grew 19% in the third quarter to $44 7 million and remained on track for a strong fourth quarter and approximately 20% growth for the full year.
Joe: On a year to date basis, adjusted EBITDA has more than doubled to nearly $24 million.
Joe: Finally, the company generated over $10 million of operating cash flow and ended the third quarter with $151 million in cash restricted cash and investments and no debt.
Joe: Total burn care revenue in the third quarter grew 66% to $13 2 million well ahead of our guidance.
Joe: The outperformance was driven by record quarterly episode revenue of $12 2 million with the increased scrap volume primarily due to considerably higher grafts per order.
Joe: Notably our cash and investments balance has remained consistently in the $150 million range throughout the year.
Joe: As the company's strong financial and cash generation profile has allowed us to completely self fund the investment in our new manufacturing facility to support the company's future growth.
Joe: Importantly, based on a higher share of voice in the burn care market, both new and dormant episodic counts have contributed a meaningful portion of episodes nearly 30% growth on a year to date basis.
Turning to our financial guidance for the full year, we are maintaining our total company revenue guidance of 238 million to $242 million or 20% to 23% total revenue growth.
Joe: Which implies fourth quarter revenue of 76 million to $80 million.
Joe: In terms of our profitability guidance based on the company's financial performance and year to date and expectations for a strong fourth quarter, we are increasing gross margin guidance to 72% and <unk>.
Joe: Adjusted EBITDA margin guidance to 22% for the full year compared to the prior guidance of 71% and 21% respectively.
Joe: Overall 2024 is setup to be another very positive year for the company with another year of high top line growth as well as significant margin expansion and profit growth ahead of our initial expectations.
Joe: As we look ahead to next year, we believe that the durable growth in our core portfolio together with our recent product launches positions the company to sustain strong topline and bottomline growth.
Joe: And deliver a meaningful inflection in our cash generation given significantly lower capex as we complete the construction of our new facility early next year.
Speaker Change: I will now turn the call back over to Nick.
Nick Colangelo: Thanks, Joe the Companys performed extremely well to date.
Nick Colangelo: 2024, and as we move into 2025 and beyond we expect the momentum across our business to continue.
Nick Colangelo: While we're still very early in the Bcl two launch we're seeing substantial interest and engagement with both previous macy targets as well as the incremental 2000.
Nick Colangelo: High volume Arthroscopy surgeons that are now part of our 7000 target surgeon base.
Nick Colangelo: As I mentioned earlier the first <unk> was performed within days of approval and surgeons have already performed rescheduled dozens of ACR through cases to date importantly surgeon feedback has been very positive with respect to the potential patient benefits noted by surgeons and our market research is the ACR to.
Nick Colangelo: Procedure offers less invasive treatment option, requiring smaller incisions, which may result in less post operative pain and overall faster postoperative recovery for patients.
Nick Colangelo: We're very pleased with the launch of D and given that the <unk> instruments target the largest segment of the lease the addressable market representing approximately 20000 patients per year, we believe that Macy's through we will have a meaningful impact on overall <unk> utilization and potentially bolster its current high growth trajectory.
<unk>, providing a significant potential upside growth opportunity for the company in the years ahead.
Nick Colangelo: We also continue to advance the <unk> development program.
We remain on track to submit an NDA in the first half of 2025 and expect to initiate the phase III clinical study in the second half of the year.
Nick Colangelo: A potential <unk> ankle indication represents a substantial longer term growth drivers from AC with an estimated addressable market of $1 billion.
Nick Colangelo: That would enable the company to expand into other orthopedic markets.
Lastly, we'll be moving into our new facility early next year and plan to begin commercial manufacturing with Macy's at that site in 2026.
Nick Colangelo: The new facility is designed to meet both U S and global manufacturing requirements, which provides strategic flexibility for the company to potentially commercialize <unk> outside the United States. We're.
Nick Colangelo: We're initiating an evaluation of the market opportunities and regulatory requirements in several U S geographies as we continue to expand our long term growth and value creation opportunities for the company.
Nick Colangelo: Overall, we believe the company is well positioned not only for a strong close to 2024, but also to deliver a unique combination of sustained high revenue and profitability growth in 2025 and beyond based on the strength of our core portfolio. The recent launch of ACR through and continued progress on the other long term.
Nick Colangelo: Growth initiatives.
Speaker Change: This concludes our prepared remarks, we will now open the call to your questions.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Speaker Change: Withdraw your question. Please press star one again please.
Speaker Change: Please standby, we compile the Q&A roster.
Speaker Change: And our first question will come from Ryan Zimmerman from <unk>. Your line is open.
Speaker Change: Good morning.
Speaker Change: Thanks for taking my questions Congrats on a really nice quarter.
Speaker Change: I guess I wanted to start with Nexobrid because.
Speaker Change: It's getting off the ground this year.
Speaker Change: And some decent expectations.
Speaker Change: Next a brand in the next year as it normalizes.
Speaker Change: <unk>.
Speaker Change: More routine of our product versus having to go to the PMT processes. So.
Speaker Change: Yes, Joe I know you are not going to give guidance for 'twenty five but conceptually.
Speaker Change: I guess can you just talk a little bit about kind of the drivers.
Speaker Change: For growth next year kind of where you see.
Speaker Change: Next our bread potentially settling into a rhythm or when do you see it settling into a rhythm.
And whether or not <unk> is really an accelerant or a sustainable kind of driver of comp may see expectation.
Speaker Change: Yes, so Ross I'll kind of start there.
Speaker Change: Maybe maybe kind of just talk a little bit about the framework from a guidance perspective.
Speaker Change: For 24, and then kind of how we're thinking about 25.
Speaker Change: So.
For 24, I think we've been consistent kind of all year.
Speaker Change: In our framework and I think as we think about Macy, we think thats still very much on track.
Speaker Change: 20% to around 20% growth on a full year basis. This year, so that hasnt changed.
Speaker Change: As we move into 2025, I would say kind of the way we're thinking about from.
Speaker Change: From a company perspective kind of thinking about the framework for next year.
Speaker Change: Haven't given specific guidance at the company level or at the product level.
Speaker Change: As of yet, but we have pointed out that we do expect another year of strong growth, we've talked about kind of being in the 20% plus range. So I would say just kind of more as a framework as we move towards next year I think the right starting point as we think about 25 is really to think about the total company growing at a similar range is.
Where are we where we started this year and kind of the range. We're in from a growth perspective, so what does that mean kind of across the franchises.
Speaker Change: For Macy's, obviously, the leading indicators have been extremely strong this year kind of throughout the year biopsies have been strong it's driven by surgeons and biopsies per surgeon. The initial feedback on Macy art row as Nick talked about it has been very strong.
Speaker Change: But I think as we think about next year, probably the way we're thinking about Macy to start is just based on our strong leading indicators in their core growth drivers and I would kind of say a modest contribution from ACR throw we think macy can kind of be in a similar growth rate next year, just thinking about it that way and maybe just to kind of round.
Speaker Change: 25.
Speaker Change: I think on burn care.
I think from a <unk> perspective, I think our expectation at this point, we're three quarters ended the year kind of getting into our first year launches I think as we move into next year I think at this point we'd expect.
Speaker Change: <unk> progression kind of each quarter on <unk>.
Speaker Change: And from an <unk> perspective, probably more typical growth. This year has been a little bit kind of outsized from a growth perspective, so I still think burn care will have.
Strong growth next year, but probably more in line with the company growth.
Speaker Change: And then lastly, I would say kind of on both Macys <unk> Brad.
Speaker Change: We don't want to get ahead of ourselves, but there's certainly potential to outperform kind of the starting point here, if macy or throw kind of the impact is greater than we initially assume it may come faster and then similarly from an <unk> perspective, it really comes down to we've had a lot of penetration in terms of total <unk>.
Speaker Change: Centers, but in terms of the centers really using it more regularly and kind of moving our our centers kind of up the segment chain, if you will back or potentially lead to <unk>.
Speaker Change: Faster faster growth of an expert side, but we're not going to assume that out of the gate on our throw or <unk> as we think about 25.
Speaker Change: Okay.
Speaker Change: That's very helpful.
Speaker Change: And Nick.
Speaker Change: Turning to Macy's throw for a minute.
Speaker Change: We heard it was and I could be wrong on this we heard of a standing room only.
<unk> conference in Vegas are about a week or two after may see Arthral got approved.
Speaker Change: And so certainly a positive data point in terms of investors excuse me a surge in interest.
Speaker Change: Can you talk about when you talk about record biopsies, you talk about biopsies for certain.
Speaker Change: What are.
Speaker Change: Are you seeing from those 2000 or so doctors that are incremental right now as we get going.
And the second part of that is are you seeing an uplift in your existing Macy customer base as a result of our throw or do you expect that to be more of a driver than say new physician adoption as it gets going.
Speaker Change: Yeah, Hey, Ryan thinks it's a great question and when we kind of talk about macy or throw and have in the past and we really think about obviously we had.
Speaker Change: Kind of our current or prior Macy's 5000 targets and then adding the new too.
Speaker Change: Surgeons are.
Speaker Change: And as we think about segments within those kind of broader groupings you have current Mesa users from the 5000 targets.
Speaker Change: One bucket of then principally kind of looks at <unk> as a hotel or Patellofemoral joined APA.
Option for patients others, do that plus femoral condyles until we kind of look at.
Speaker Change: The surge in segments in that way and then you have kind of an opportunity for non Mesa users out of those prior targets and then the new 2000 surgeons and I would just say of the first few dozen cases that I referenced earlier, we actually have surgeon.
Speaker Change: Surgeons, who have either performed order have scheduled.
Speaker Change: <unk> procedures out of all four of those buckets. So we think that's a great leading indicator.
Speaker Change: As I've said on prior calls.
Speaker Change: Certainly the low hanging fruit as our previous targeted to have biopsies that haven't yet converted that are amenable to the arthroscopic approach and of course, when we had Dr van fees.
Who is on our website. He did the first case the week, we announced the approval.
Speaker Change: Obviously that was a previously scheduled case previous biopsies that he was able to perform the arthroscopic knee procedure with so that's those are the ones that are going to be easiest and as we've talked about.
Speaker Change: Have that pool of unconverted biopsies for for the year that each rep can go out and talk to them.
Speaker Change: The surgeons about <unk>.
Speaker Change: But as I mentioned, we've also had non leasing users from our original targets and then.
The new.
Speaker Change: 2000 targets, where surgeons have actually taken biopsies and scheduled cases, so again, we think thats a great sort of early leading indicator for the potential that <unk> can have as we move forward.
Thank you.
Ryan: Thanks Ryan.
Speaker Change: Thank you. Our next question comes from Richard <unk> from <unk> Securities. Your line is open.
Speaker Change: Hey, guys. Thanks for taking the questions and congrats on the quarter.
Speaker Change: Maybe just a first question here following up on.
Speaker Change: Ryan just I might have missed it you might have said it when you were answering them, but with respect to the <unk>.
Speaker Change: A portion of the market, where you may see our throw giving you better accessibility.
To the lesion sizes telephone Merle.
Speaker Change: I'm, sorry down the several condyle rather.
Speaker Change: Are you seeing those dozens of initial cases getting used in in that seemingly expansionary segment of the market.
Speaker Change: Is that kind of what.
Speaker Change: What you would've expected to see.
Speaker Change: Maybe just elaborate on that a little bit and I'm sorry, If you had said that when you were answering the last question I might've missed it.
Speaker Change: Yeah, Hey, Thanks, Rich yeah, no I didn't address that far but as I mentioned.
Speaker Change: On prior calls so the entire BC.
Speaker Change: Our <unk> instrument.
<unk> is designed for two to four square centimeter defects on the femoral condyles those are the most common defects rep.
Speaker Change: <unk> represented about 20000 of the 60000 patient Tam or above a $1 billion a year.
Speaker Change: And typically with the open procedure.
Joe: Certainly the low hanging fruit as our previous targets, who had biopsies that haven't yet converted that are amenable to the arthroscopic approach and of course, when we had Dr. <unk> band fees.
Speaker Change: Either patella defects.
Or the larger femoral condyle defects were kind of the go to.
Speaker Change: Defect four macy and it doesn't mean, we didn't have surgeons doing.
Joe:
Joe: <unk> on our website you did the first case the week, we announced the approval.
Speaker Change: AC procedures for those smaller defects, but we had a much smaller penetration.
Joe: Obviously that was a previously scheduled case previous biopsies that he was able to perform the arthroscopic knee procedure with so.
Speaker Change: Compared to say patella or large defects and so that is the opportunity for us to get a deeper penetration into the largest part of the Tam and then yes. That's of course, where the initial cases are going because the instruments again they come in pairs of.
Joe: Those are the ones that are going to be easiest and as we've talked about we have that pool of unconverted biopsies for for the year that each rep can go out and talk to there.
Speaker Change: Two three or four square centimeter cutters candles.
Joe: Surgeons about.
Joe: But as I mentioned, we've also had non beta users from our original targets and then.
Speaker Change: And the implant device and so that's exactly the size and the initial locations, but we've also seen surgeons and again, we're just kind of in the early days.
Joe: The new.
Joe: 2000 targets, where surgeons have actually taken biopsies and scheduled cases, so again, we think thats a.
Speaker Change: Doing not only femoral combo cases, but other areas are busy as well and of course that could open up even.
Joe: Great sort of early leading indicator for the potential that <unk> can have as we move forward.
Speaker Change: Router utilization.
Very helpful and maybe just I know youre not giving.
Speaker Change: Thank you.
Ryan: Thanks Ryan.
Speaker Change: Special 'twenty product guidance, but similar to kind of the way you parse out some of the considerations and we used to think of starting points for revenue can you can you do the same down the P&L.
Speaker Change: Thank you. Our next question comes from Richard <unk> from <unk> Securities. Your line is open.
Richard: Hey, guys. Thanks for taking the questions and congrats on the quarter.
Speaker Change: It's a great.
Joe: Maybe just the first question here following up.
Speaker Change: Great profit.
Speaker Change: Inflection that we're seeing in the business continuing in 'twenty four.
Ryan: Ryan Yes.
Speaker Change: Maybe I missed it you might have said it when you were answering them.
It looks like that should continue into 'twenty five but anything you want to call out as we refine our models for next year.
Speaker Change: With respect to the portion of the market, where you may see our throat, giving you better accessibility.
Speaker Change: <unk>.
Speaker Change: The lesion sizes the patellofemoral.
Speaker Change: And maybe if you feel comfortable putting aware consensus forecasts sorry. Thank you.
Joe: What.
Joe: I'm sorry down.
Yeah, No I appreciate the question rich.
Joe: Several condyle rather.
Joe: Are you seeing those dozens of initial cases getting used.
Speaker Change: I would say, it's probably too early to get into specifics on next year, but I would say a couple of things so one.
Joe: In that <unk>.
Joe: Expansionary segment of the market is that kind of what.
Speaker Change: Obviously the performance this year, whether you look at individual quarters kind of year to date.
Joe: What you would've expected to see maybe.
Speaker Change: Maybe just elaborate on that a little bit and I'm sorry. If you had said that when you were answering the last question I might have missed it.
Speaker Change: Full year is trending from a margin perspective, when they were looking at gross margin and adjusted EBITDA has been very strong and I generally say, probably a bit ahead of our expectations and ahead of our schedule for kind of getting up the curve there. So.
Speaker Change: Yeah, Hey, Thanks, Rich yeah, no I had addressed that far but as I mentioned.
Speaker Change: On prior calls so the entire BC.
Speaker Change: I think as we think about 2025 I would say, we just wanted to be a little bit mindful of that I mean said differently.
Speaker Change: Our <unk> instrument.
Speaker Change: <unk> is designed for two to four square centimeter defects on the femoral condyles those are the most common defects.
Speaker Change: I would not assume we're going to see the same kind of year over year expansion as a starting point on either gross margin or.
Speaker Change: At present about 20000 of the 60 patient Tam or above $1 billion, a year and typically with the open procedure.
Speaker Change: Or the adjusted EBITDA margin next year.
We will start to see some of that depreciation and whatnot in the buildings start to play its way through the P&L and that's more to get into for next year, but those are some of the considerations.
Speaker Change: Either patella defects or.
Speaker Change: Or larger femoral condyle defects, where kind of the go to.
Speaker Change: Defects four macy and it doesn't mean, we didn't have surgeons doing base.
From an overall P&L perspective.
That said I would say when you look at gross margin, we're kind of at or ahead of our what was essentially a mid to long term expectation of 70%. So that is certainly great to see and I think that's something we think we can certainly continue to improve upon and from an adjusted EBITDA perspective, I think we're tracking nicely there as well I think we're well set.
Speaker Change: Basic procedures further smaller defects, but we had a much smaller penetration.
Speaker Change: Up to kind of make progress and kind of hit our mid range targets of 30% plus.
Speaker Change: What it means for next year, we will probably start out with I would say that kind of rate expectations for that to continue to increase but at a lower rate.
Speaker Change: At a lower rate on a year over year basis to start the year I would also say.
Speaker Change: I guess on those two I would say at the appropriate time, we'll probably think about updating some of those long term targets. Obviously, we're kind of at the 70% for example on gross margin are 70% plus.
Speaker Change: Doing not only femoral condyle cases, but other areas are busy as well and of course that could open up even.
Speaker Change: Broader utilization.
Speaker Change: We will update that at the right time, I'll, just broaden it a bit as well and just say as we move to next year. The last couple of years for US we've talked about and I think we've experienced that inflection from a profitability perspective on the P&L, but as we move to next year I think there's a couple of other important dynamics, which has won this year, we're expecting to be GAAP net income pas.
Speaker Change: We obviously expect to build on that next year, so that would be something that I think it will be very important as we move into next year and beyond and then we referenced that in the prepared remarks, but.
Speaker Change: From a kind of a financial profile and cash generation perspective, we did want to point out.
Speaker Change: Self funded our entire facility, primarily this year, but over the last few quarters essentially once we get into early next year that will be behind us. So in addition to kind of the P&L metrics that we're obviously very focused on as well as the topline I think the cash generation should signet will significantly improve in 'twenty five and beyond.
Speaker Change: And so that's something I'd say, we're focused on as well.
Speaker Change: Okay. Thanks, a lot.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Mike Kratky from Leerink Partners. Your line is open.
Speaker Change: Hi, everyone. Thanks for taking our questions.
Speaker Change: Maybe another one on <unk>.
Speaker Change: How is the early wave of Macy Arthur procedures that are being done are scheduled guided your outlook both for <unk> and 2025, just in terms of one the portion of implants that are going to be done arthroscopic Lee and then.
Speaker Change: <unk> again, just kind of the degree to which you could see any uplift from macy procedures overall.
Speaker Change: Yes, I'll start and then Joe can.
Jump in as well so as we mentioned the surgeon interest.
Speaker Change: Obviously reasons is very strong.
Speaker Change: And we have had as we expected sort of the low hanging fruit as I mentioned as surgeons, who had these biopsies that are amenable to arthroscopic procedures and then converting those cases essentially doing the larger Scott Mclean instead of open.
Speaker Change: So.
Speaker Change: Most of those are cases that I think you could say likelihood of going forward in the fourth quarter.
Speaker Change: Probably some more incremental as we have seen surgeons again kind of get pretty enthusiastic about it. So we had said that we knew we would end up doing some cases this year.
Speaker Change: But given the dynamics of the launch in September.
Speaker Change: I guess I noticed two I would say at the appropriate time, we'll probably think about updating some of those long term targets. Obviously, we're kind of at the 70% for example on gross margin are 70% plus.
Obviously, each surgeon who's in that bucket of two new surgeons and then those who had.
Speaker Change: <unk> biopsies for <unk> in the past, that's all prospective business and as we've talked about the median time for biopsies to converge is about four months and Thats why we have said consistently that we would see kind of the bigger impact from ACR through in.
Speaker Change: We will update that at the right time, I'll, just broaden it a bit as well and just say as we move to next year. The last couple of years for US we've talked about and I think we've experienced that inflection from a profitability perspective on the P&L, but as we move to next year I think there's a couple of other important dynamics, which has won this year, we're expecting to be GAAP net income.
Speaker Change: In 2025 and beyond so lots of momentum as Joe mentioned in the core business. We expect to have some incremental obviously as we get into 'twenty five ACR through exactly how quickly that in flex I think remains to be seen but we certainly based on the initial.
Speaker Change: Some positive we obviously expect to build on that next year. So that would be something that I think it will be very important as we move into next year and beyond and we referenced that in the prepared remarks, but.
Speaker Change: From a kind of a financial profile and cash generation perspective.
Speaker Change: Enthusiasm.
Speaker Change: Did want to point out we self funded our entire facility primarily this year, but over the last few quarters and essentially once we get into early next year that will be behind us. So in addition to kind of the P&L metrics.
Speaker Change: It's just the obvious right.
Speaker Change: Less invasive surgery, as we talked about surgeons and patients expect.
Speaker Change: That theres less postoperative pain.
Speaker Change: For postoperative recovery or overall recovery and so.
Speaker Change: We're obviously very focused on as well as the topline I think the cash generation should signet will significantly improve in 'twenty five and beyond so that's something I'd say, we're focused on as well.
Speaker Change: That's what's driving a lot of enthusiasm.
Speaker Change: And just just to chime in briefly on the.
Speaker Change: And <unk> and kind of a guide as well so I think as we've talked about on Macy's.
Speaker Change: Okay. Thanks, a lot.
Speaker Change: Thank you.
Speaker Change: I think another strong quarter in Q3, I think we're set up well.
Joe: Thank you.
Speaker Change: Next question comes from Mike Kratky from Leerink Partners. Your line is open.
Speaker Change: At that 20% kind of growth for the year.
Speaker Change: From a Q4 perspective, I'd say, they're kind of right place to start I may see is $68 million in Q4, approximately $68 million that kind of gets you to that 20% on a full year basis.
Mike Kratky: Hi, everyone. Thanks for taking our questions.
Mike Kratky: Maybe another one on <unk>.
Mike Kratky: How is the early wave of Macy Arthur procedures that are being done are scheduled guided your outlook both for <unk> and 2025, just in terms of one the portion of implants that are going to be done arthroscopic Lee and then.
Speaker Change: And just on that kind of on a question.
Speaker Change: It's not that's really based on the strong leading indicators and really what would be typical seasonality. So that's.
Mike Kratky: Two again, just kind of the degree to which you could see any uplift from macy procedures overall.
Speaker Change: Thats based on just kind of a trend we've seen throughout kind of macys history, there with the step up in Q4. It is not based on a significant kind of uptick in ACR throats. So that's not really the driver of Q4 guidance and then just quickly on the on the burn care side just to round out Q4, obviously, a great third quarter.
Speaker Change: Yes, I'll start and then Joe can.
Speaker Change: <unk> as well so as we mentioned the surge in interest for <unk>.
Speaker Change: Obviously reasons is very strong.
Speaker Change: And we have had as we expected sort of the low hanging fruit as I mentioned as surgeons, who had these biopsies that are amenable to arthroscopic procedures and then converting those cases essentially doing the margins Scott Mclean instead of open.
Speaker Change: Particularly on <unk>, which is great to see.
Speaker Change: Well really throughout the year.
Speaker Change: I'd say from a guidance framework perspective, I think we've been pretty consistent on this we don't typically raise our guidance based on one quarter or a prior quarter of episodes performance just because it can vary so much quarter to quarter and just as a reminder for example, even in the second sorry in the first quarter, we had $11 million of episodic revenue.
Eric Burns, Unknown Executive, Joseph Mara
Joe: So, you know, most of those are cases that I think you could say likely would have gone forward in the fourth quarter.
Joe: So.
Joe: Most of those are cases that I think you could say likelihood of going forward in the fourth quarter, probably some more incremental as we have seen surgeons again kind of get pretty enthusiastic about it. So we had said that we do.
Joe: probably some were incremental as we've seen surgeons again kind of get pretty enthusiastic about it. So we had said that we knew we would end up doing some cases this year, but given the dynamics of the launch in September and
Speaker Change: The following quarter, we did not change our guidance.
Joe: Do we would end up doing some cases this year.
Speaker Change: In the following quarter was $7 8 million. So I think that's a good example of kind of holding of our framework is certainly appropriate and we continue to believe that's the best approach just because it's a difficult product that predict on a burn care side. So.
Joe: But given the dynamics of the launch in September.
Joe: Obviously, each surgeon who is in that bucket of 2000, New surgeons and then those who had.
Speaker Change: In terms of Q4 on the burn care side I would say, it's still early in the quarter and episodic clearly remain very difficult to predict but.
Joe: Taken biopsies for <unk> in the past, that's all prospective business and as we've talked about the median time for biopsies to converted is about four months and Thats. Why we have said consistently that we would see kind of the bigger impact from ACR through in.
Joe: That's all prospective business, and as we've talked about, the median time for biopsies to convert is about four months, and that's why we have said consistently that we see kind of the bigger impact from Macia Arthro in 2025 and beyond.
Speaker Change: At this point, it's probably trending closer to Q2, which was in that call. It seven $5 million to $8 million range. I think it was about $7 8 million, so that would point to burn care trending to around $9 million in Q4. So as we think about Q4 and closing the year. We think we're set up for a very strong close but kind of our framework.
Speaker Change: In 2025 and beyond so lots of momentum as Joe mentioned in the core business. We expect to have some incremental obviously as we get into 'twenty five VCR throw in exactly how quickly that in the flex I think remains to be seen but we certainly based on the initial.
Joe: So lots of momentum, as Joe mentioned, in the core business.
Joe: We expect to have some incremental, obviously, as we get into 25 Macy Arthro, and exactly how quickly that inflects, I think, remains to be seen. But we certainly, based on the initial enthusiasm, and it's just obvious, right? It's a less invasive surgery, as we talked about, surgeons and patients, you know, expect.
Speaker Change: Is $58 million on the Macy's side, and 9 million in the burn care side of course, there could be some variability, but we think that's the right place to start.
Joe: <unk>.
Understood Super helpful color. There. So I appreciate that maybe one quick follow up episode is definitely been a really positive surprise.
Joe: It's just the obvious right.
Joe: S invasive surgery, as we talked about surgeons and patients expect.
Joe: you know, that there's less post-operative pain, faster post-operative recovery or overall recovery. And so, you know, that's what's driving a lot of the enthusiasm.
Joe: That theres less post operative pain faster postoperative recovery or overall recovery so.
Speaker Change: Do you expect that the Nexobrid launch has kind of helped you drive additional engagement there and do you expect that that is a trend that could be more durable in 2025 and beyond.
Joe: That's what's driving a lot of enthusiasm.
Joe: Yeah, just just to chime in briefly on the on 4Q and kind of a guide as well. So, you know, I think as we've talked about on Macy, you know, I think another strong quarter in Q3.
Speaker Change: Yes, that's a great question.
Joe: Yes.
Joe: A chime in briefly on.
Joe: And <unk> and kind of the guide as well so I think as we've talked about on Macy's.
Speaker Change: Said, even since last year.
Speaker Change: When we were first getting ramped up with next bridge that we've definitely seen pull through and no meaningful contribution to episode growth.
Joe: I think another strong quarter in Q3, I think we're set up well.
Joe: I think we're set up well, you know, kind of still at the 20% kind of growth for the year.
Joe: At that 20% kind of growth for the year.
Joe: You know, that's from a Q4 perspective, I'd say, you know, the kind of right place to start on Macy is 68 million in Q4, you know, approximately 68 million, that kind of that gets you to that 20% on a full year basis.
Speaker Change: The <unk> selling activities in either new or dormant burn centers.
Joe: From a Q4 perspective, I'd say, they're kind of right place to start I may see is $68 million in Q4, approximately $68 million that gets you to that 20% on a full year basis.
Yes, it's been a meaningful contributor probably as much as nexobrid itself for the year and.
Speaker Change: So we expect that will continue as we move into 2025 and I think we mentioned on our last earnings call that we had.
Joe: And just on that kind of on the question, you know, that's not that's really based on the strong leading indicators and really what would be typical seasonality.
Joe: And just on that kind of on a question.
Joe: That's really based on the strong leading indicators and really what would be typical seasonality. So that's.
Speaker Change: Realigned probably on the earlier side to both expand the number of.
Joe: So, you know, that's, that's based on just kind of the trends we've seen throughout kind of Macy's history there, you know, with the step up in Q4, it is not based on a significant kind of uptick in Macy Arthro. So that's not really the driver of Q4 guidance.
Joe: Thats based on just kind of a trend we've seen throughout kind of macys history, there with the step up in Q4. It is not based on a significant kind of uptick in macey. Our throats. So that's not really the driver of Q4 guidance and then just quickly on the on our burn care side just to round out Q4, obviously, a great third quarter.
Speaker Change: Bird care reps and ensure that all of them are selling both products now if you recall when we first launched <unk> just because the training requirements on a peso are pretty.
Joe: And then just quickly on the on the burn care side, just to round out Q4, you know, obviously a great third quarter, particularly on epicel, you know, which is great to see and perform well really throughout the year.
Speaker Change: Pretty steep that we kind of had a group kind of an overlay configuration, where.
Speaker Change: Particularly on <unk>, which is great to see.
Speaker Change: He has to perform well really throughout the year.
Speaker Change: The next hybrid reps were calling just on the <unk> accounts.
Joe: You know, I would say from a guidance framework perspective, you know, I think we've been pretty consistent on this.
Speaker Change: From a guidance framework perspective, I think we've been pretty consistent on this yes, we don't typically raise our guidance based on one quarter or a prior quarter of episodic performance just because it can vary so much quarter to quarter and just as a reminder for example, even in the second sorry in the first quarter, we had $11 million of Epistyle revenue and.
Speaker Change: With the long term vision that we would at some point have all of our reps selling both products and we implemented that in the third quarter.
Joe: You know, we don't typically raise our guidance based on one quarter or a prior quarter of episode performance, just because it can vary so much quarter to quarter.
Joe: And just as a reminder, you know, for example, even in the second, sorry, in the first quarter, you know, we had 11 million of EPSIL revenue and the following quarter, you know, we did not change our guidance and, you know, in the following quarter was 7.8 million. So, you know, I think that's a good example of kind of holding your framework is certainly appropriate. And we continue to believe that's the best approach just because it's a difficult product to predict.
So long story short, yes, we expect that the cross selling opportunities will continue to to help out so as we move forward. It is and it's really been great. I mean, obviously, even based on the guidance Joe just mentioned.
Joe: Following the quarter, we did not change our guidance.
Joe: In the following quarter was $7 8 million. So I think that's a good example of kind of holding of our framework is certainly appropriate and we continue to believe that's the best approach just because it's a difficult product that predict on a burn care side.
It'll be up close to 30% for the year. So good strong performance for episodes.
Speaker Change: Awesome. Thanks, guys.
on the burn care side, so.
Speaker Change: Thank you.
Joe: You know, in terms of Q4 on the burn care side, I would say still early in the quarter and at the cell, you know, clearly remain very difficult to predict. But, you know, I think at this point, it's probably trending closer to Q2.
Joe: In terms of Q4 on the <unk> care side I would say, it's still early in the quarter and <unk> clearly remain very difficult to predict but I think.
Speaker Change: Our next question will come from Josh Jennings from TD Cowen Your line is open.
Josh Jennings: Hi, good morning, Thanks, Nick and Joe Congratulations on another strong quarter.
Joe: At this point, it's probably trending closer to Q2, which was in that call. It seven $5 million to $8 million range. I think it was about $7 8 million, so that would point to burn care trend to around $9 million in Q4. So.
Speaker Change: Wanted to just ask about May see biopsy bank.
Joe: which was in that called seven and a half to eight million range. I think it was about 7.8 million. So that would point to burn care trending to around 9 million in Q4. So as we think about Q4 and closing the year, we think we're set up for a very strong close. But kind of our framework is 68 million on the Macy side and 9 million on the burn care side. Of course, there could be some variability, but we think that's the right place to start.
Speaker Change: You referenced one of the first procedures.
Biopsy that was taken prior to approval is my assumption, but we.
Joe: We think about Q4 and closing the year, we think we're set up for a very strong close but kind of our framework.
Speaker Change: What are you seeing some some of that pent up demand flow through with kind of chemo combo biopsies as you headed into them ACR through approval and.
Joe: $58 million on the Macy's side and $9 million of burn care side of course, there could be some variability, but we think thats the right place to start.
Speaker Change: I mean any sense of how that could.
Speaker Change: What that pent up demand looks like in the biopsy bank.
Speaker Change: Understood Super helpful color. There. So I appreciate that maybe one quick follow up episode is definitely been a really positive surprise.
Speaker Change: Yes so.
We did have a number of surgeons and I believe we talked about this on our last call roughly 100 ish surgeons that either were involved in sort of the design of the instruments in development in the human factor study and the voice of the customer labs following the submission.
Speaker Change: Do you expect that the Nexobrid launch has kind of helped you drive additional engagement there and do you expect that that is a trend that could be more durable in 2025 and beyond.
Speaker Change: Yes, that's a great question.
Speaker Change: <unk> said, even since last year.
Speaker Change: <unk> to the FDA. So there were clearly call. It 100 ish surgeons, who had participated in this.
Speaker Change: When we were first getting ramped up with next bridge that we've definitely seen pull through and now meaningful contribution to episode growth from the <unk> selling activities in either new or dormant.
Speaker Change: And so.
Speaker Change: Ill.
Speaker Change: As you would expect some of the early procedures are coming from those who are familiar with it. We obviously also have biopsy trends middle forms with the size and location of the biopsies so for.
Speaker Change: <unk> centers and yes, it's been a meaningful contributor probably as much as nexobrid itself for the year.
Speaker Change: So we expect that will continue as we move into 2025 and I think we mentioned on our last earnings call that we had re.
Speaker Change: A biopsy is essentially taken in 2024.
Speaker Change: Which had not yet converted and we're amenable to arthroscopic administration again based on the size and location.
Speaker Change: Realigned probably on the earlier side to both expand the number of.
Speaker Change: Bird care reps and ensure that all of them are selling both products now.
Speaker Change: We're able to arm our reps with.
Speaker Change: The surgeons and patients that they could have a discussion.
Speaker Change: Youll recall, when we first launched <unk>, just because the training requirements on that Fasola pretty.
Speaker Change: <unk> would it be appropriate for ACR through so.
Speaker Change: I would say, though that its not we obviously couldnt promote or through approach until it was approved.
Speaker Change: Pretty steep that we kind of had a group kind of an older way configuration, where.
Speaker Change: The Nexobrid reps were calling just on the <unk> accounts.
Speaker Change: So there wasn't a whole lot of discussions kind of ahead of the approval ward or moving towards it as you referred to it was really once we got approval under armed to go out and have those discussions with the surgeons about the approach.
Speaker Change: With the long term vision that we would at some point have all of our reps selling both products and we implemented that in the third quarter.
Speaker Change: So long story short, yes, we expect that the cross selling opportunities will continue to to help out to sell as we move forward and it's really been great. I mean, obviously, even based on the guidance Joe just mentioned.
Excellent and then thanks for that and just wanted to get an update on where you see pricing and how to think about.
Speaker Change: Price increases in 2025 and kind of within that.
Speaker Change: It'll be up close to 30% for the year. So good strong performance for <unk>.
Speaker Change: Just remind us the incremental.
Speaker Change: Awesome. Thanks, guys.
Speaker Change: Revenues from from ACO, Whats really instrumentation in those cases, sorry for the multipart question here, but I also just wanted to ask about.
Speaker Change: Thank you.
Speaker Change: Our next question will come from Josh Jennings from TD Cowen Your line is open.
Speaker Change: Just to review.
Speaker Change: The commercial thrust to taxes.
Josh Jennings: Hi, good morning, Thanks, Nick and Joe Congratulations on another strong quarter I wanted to just ask about the may see biopsy bank.
Speaker Change: 2000 high volume arthroscopic orthopedic surgeons.
Speaker Change: And just to make sure that there is.
Speaker Change: You guys feel well equipped and positioned to maintain that kind of farming of your current accounts and hunting doses theres, new microscopic that new arthroscopic campus.
Speaker Change: You referenced.
Speaker Change: The first procedures.
Speaker Change: Obviously, there was taken prior to approval is my assumption, but we.
Speaker Change: You're seeing some some of that pent up demand flow through with kind of semi will come down with biopsies.
Speaker Change: Thanks.
Speaker Change: So I'll just start with.
Speaker Change: Kind of the general Macy pricing, we typically take a mid to high single digit price increase each year.
Speaker Change: Headed into the ACR through approval and.
Speaker Change: Any sense of how that could.
Speaker Change: Kind of what that pent up demand looks like in the biopsy bank.
And we will expect to do that in 2025 as well in terms of the ACR through instruments. We do those are disposable instruments. So unlike an open procedure, where we have an implant kit that we basically provide to the surgeons and then we have to actually kind of process that sterilize et cetera.
Speaker Change: Yes so.
Speaker Change: These are disposable instruments that we sell to the surgeons.
Speaker Change: In the ACR through.
Speaker Change: Yes.
Speaker Change: Paces, and so youll see kind of what.
Speaker Change: In our 10-Q previously as the biopsy kits as a line item for me.
We will also now include the instrument revenue that we generate there as well again compared to sort of the reimbursement for the J code from AC pales in comparison, but we are charging for instruments.
Speaker Change: In the May see Arthur increases.
Speaker Change: So.
Speaker Change: I think the last base, Nick let's just already equipped in terms of Oems or the other so the last piece of that is we are definitely planning early next year to kind of do a refresher on sort of sales force sizing.
Speaker Change: You might recall kind of pre COVID-19 each year, we basically increased the size of the.
Macy's sales force post launch in 2017, so we did it in 17 18 and 19 and then for 2020, we actually engaged <unk> associates.
Speaker Change: Pretty comprehensive.
Speaker Change: Assessment and that's when we went from roughly 48% to 75 territories.
Speaker Change: Pretty big expansion.
That has served us well to date.
Speaker Change: This intervening period, we have as I've mentioned before added territory development representatives in some of the larger volume.
Speaker Change: Territories.
Speaker Change: And we did that again this year to kind of help.
Speaker Change: With the volume in those territories, but we will be kind of refreshing that for the very reason you mentioned, which is to make sure. We have kind of the appropriate reach and frequency based on the interest we're seeing in ACR throw in.
Speaker Change: And again, if we end up expanding it.
It kind of run the same playbook that was very productive for us we've often mentioned that each year that we expanded the sales force rep productivity actually went up in terms of revenue per rep.
Speaker Change: And so there is a playbook we follow do that so we'll we'll do devaluation early next year and then to.
Speaker Change: To the extent, we want to increase the sales force will do that sort of in the back half of next year and enrolling into.
Speaker Change: 2026.
Speaker Change: Excellent. Thanks, so much.
Speaker Change: Thank you and.
Speaker Change: And our next question will come from Caitlin Cronin from Canaccord. Your line is open.
Speaker Change: Hi, Thanks for taking the questions and congrats on a great quarter.
So with RSO.
Speaker Change: Again, increasing your surgeon base as you noted after reaching about 50% penetration from the previous space I guess, just with this larger base to think that Theres a limit to the penetration you can reach with macy longer term or if you have.
Speaker Change: A number that you are targeting there.
Speaker Change: Well.
Speaker Change: We've kind of said we've got two data points I guess, one is prior to the larger expansion that I just mentioned in 2019, we had about 3000 surgeons at that time.
Speaker Change: The last year in 2019 that we had reported data.
Speaker Change: Increased biopsy surgeons by 25%.
To about 1400 that particular year.
Speaker Change: Accumulatively it was greater than that of the original 3000 targets.
Speaker Change: So we're around 50% and then we expanded to 5000 surgeons.
Speaker Change: Over the course of last year into this year, we were approaching that 50% Perm.
Speaker Change: Penetration rate again, and now we're expanding with 2000 more as we've said.
Speaker Change: We expect that dynamic will continue where we will.
Speaker Change: Relatively.
Speaker Change: Rapidly I think get to the kind of the.
Speaker Change: 50% penetration and we would ever kind of run the experiment to get to a terminal sort of penetration.
Speaker Change: Right, but as I said cumulatively, it's typically more than you see in any particular year. So.
Speaker Change: So we expect the same kind of dynamic and as we've mentioned.
Speaker Change: Growth in biopsy surgeons will continue to be an important growth driver for the company over the next several years.
Speaker Change: Great and then just on trains at the salary with the dormant accounts re engaging with Epistyle, how many have reactivated and how many burn centers are now actively using the product.
Speaker Change: Well, that's kind of it's typically in a.
Speaker Change: The year is not done obviously.
Speaker Change: And we.
Speaker Change: We have said in the past that.
Speaker Change: 140 burn centers as kind of a subset that routinely treat kind of episodic patients and often.
Speaker Change: Even if you are in the credit burn center those patients will be transferred to some of the larger centers because.
Speaker Change: Smaller ones don't necessarily routinely see or treat these kind of catastrophic burn patients. So I think in the past we have said in any given year, we can get biopsies from 70 to 80 of those burn centers because not all the patients end up being treated because of health issues or patient expiry.
Speaker Change: Routinely you'd have.
Speaker Change: Roughly 40%.
Speaker Change: 40% to 50.
Centers that would would end up.
Speaker Change: Ultimately treating the patients so I don't think thats markedly changed yet.
Speaker Change: But there's obviously opportunity to do that is as we move forward.
Speaker Change: Okay.
Speaker Change: Great. Thanks, so much.
Speaker Change: Okay. Thank you thanks.
Speaker Change: Thank you. Our next question comes from Jeffrey Cohen from Ladenburg Thalmann <unk> co. Your line is open.
Speaker Change: Alright.
Congrats on the strong quarter, just one question for low industry.
Speaker Change: Welcome home about.
Speaker Change: <unk> location.
Speaker Change: <unk>.
Speaker Change: Or throw in the training of doctors out there or what are you finding as far as learning curve or a lesson learned.
Speaker Change: <unk> talked.
Speaker Change: Talk about how that may play out in the future for our ankle as well. Thank you.
Speaker Change: Well thanks, Jeff.
Speaker Change: As was the case with Macy's open procedures.
Speaker Change: The training is often done online and.
For the <unk> submission, we submitted online training materials.
Speaker Change: So for those who are really experienced both with BC and arthroscopic procedures, which are a lot of the surgeons.
Speaker Change: They don't really have to do any additional training if they don't want to so it's not sort of like a bottleneck you have to work through now of course, we do like we did at the orthopedic summit.
Speaker Change: And I appreciated the comments of standing room, only because it really wasn't a demonstration kind of in the middle of.
Speaker Change: The center, but we also had training labs, there so surgeons could come and do cadaver labs and practice do an ECR through and so often surgeons will do that we have examples of a case that was scheduled for Tuesday, the Friday before the Rep goes down.
Speaker Change: On a cadaver knee and then they go into the surgery. We also have models that we.
Speaker Change: To provide surgeons a model need where they can practice.
Speaker Change: Not on a cadaver knee, but on the model will be that example of that.
Speaker Change: Rd model being used to train the surgeon before they went in to do their first procedure. So.
Speaker Change: Online cadaver training.
Using the already model are the ways that surgeons can training before they do their first procedure.
Speaker Change: Got it and would you expect to follow a similar pathway for ankle.
In terms of the administration.
Speaker Change: Right now obviously, we're kind of working with the FDA on and getting prepared to submit an IND and start the study in the second half of next year.
Speaker Change: We don't currently have Macy arthroscopic instruments developed for that study. So it will be kind of a traditional administration.
As they're treating anchor cartilage defects now certainly that is something over the course of the clinical study that we could follow the same playbook.
Speaker Change: That ends up being sort of a preferred route of administration for <unk> ankle procedure.
Speaker Change: Got it okay perfect. Thanks for taking our questions nice quarter.
Speaker Change: Thanks, Jeff.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question will come from spy him a cooler Ram <unk> from H C. W. Your line is open.
Speaker Change: This is RK from Pennsylvania.
Speaker Change: Most of my questions have been answered just a quick question.
Speaker Change: A high level so.
Speaker Change: As we.
Okay.
Speaker Change: So growing in the market.
Speaker Change: Just trying to understand how we should start thinking about.
Speaker Change: Synergies on the operating margin.
Speaker Change: Especially.
Speaker Change: Our total gains adoption.
Speaker Change: <unk>.
Speaker Change:
Speaker Change: Can that happen.
Speaker Change: Early or is this going to be a little bit of a long long term gain from here.
Speaker Change: Yes, so good morning, Arkansas, Joe I'll start on that one.
Speaker Change: I think as we kind of think about the outlook in the 25 and beyond.
Speaker Change: I think the real advantage share with our throw is.
We have significant built in synergy already right. So there's no change to that kind of field force.
The same number of territories to start as Nick said, we will take a look and make sure we're kind of.
Speaker Change: We haven't kind of the right reach and frequency et cetera, but from a kind of a margin P&L perspective.
Speaker Change: Nothing Theres nothing really.
Significantly different from an <unk> perspective versus an open case, so as we talked about there is actually some degree of revenue. So there's a bit of a topline contribution when physicians are they purchasing instruments. There are some additional costs.
Speaker Change: They are pretty minor and the cost of goods sold side by.
Speaker Change: Good.
Speaker Change: I wouldn't think of that kind of impacting where we're going from a P&L perspective.
Speaker Change: I think again, having a topline revenue to <unk>.
Speaker Change: Port.
You kind of add to the total is helpful. But I don't think that will be hugely material with a small number relative to the cost of implants.
I think we're kind of well set up with our throw in that shouldn't impact our kind of long term outlook.
Speaker Change: Thank you thanks for taking the question.
Okay.
Speaker Change: Thank you.
And our last question will come from Ryan Zimmerman from <unk>. Your line is open.
Speaker Change: Hey, sorry, just a quick follow up.
Speaker Change: I don't think I heard anything just on the fourth quarter implied guidance is there any contribution or impact from either the hurricanes or the IV shortages that are impacting particularly Macy's procedures. If there is.
He was irrigation used for those cases.
Speaker Change: Yes, hey, thanks, Ryan So to date, obviously, it's something the industry and we are monitoring to date kind of from an implant perspective, we haven't seen any impact.
Speaker Change: Macey open procedures are pretty low.
Speaker Change: IV fluid procedure, so, especially compared to things like rotator cuff surgeries or or ACO et cetera, So I haven't really seen that.
Speaker Change: Could there be a case of <unk> hospitals that.
Speaker Change: In short supply and Theyre trying to manage it.
Speaker Change: No.
<unk> will use a little more fluid than an open case and could one of the Arthur cases.
Speaker Change: Okay converted over to an open case sure but to date, we're not really seeing any impact at all on that.
Speaker Change: On the employer side.
Speaker Change: I appreciate it.
Alright, Thanks Ryan.
Speaker Change: Thank you and I am showing no further questions from our phone lines and I'd like to turn the conference back over to Nick Colangelo for any closing remarks.
Nick Colangelo: Just wanted to say thanks again for your questions and your continued interest in the company.
We had a great third quarter, we're excited to deliver a strong finish to the year and continue with our high growth momentum into 2025. So we look forward to providing further updates on our next call.
Nick Colangelo: Thanks, again and have a great Dave.
Speaker Change: Thank you for participating in today's conference. This does conclude the program and you may all disconnect everyone have a wonderful day.