Q4 2024 MiMedx Group Inc Earnings Call
Good afternoon, and thank you for standing by.
Welcome to the MiMedx 4th Quarter and Full Year 2024 Operating Financial Results Conference Call.
At this time, all participants are in a listen-only mode.
A question and answer session will follow the formal presentation.
Speaker Change: As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. Matt Notarianni, Head of Investor Relations for MyBettings. Thank you. You may begin.
Speaker Change: Thank you, Operator, and good afternoon, everyone. Welcome to the MiMedx fourth quarter and full year 2024 Operating and Financial Results Conference Call.
Speaker Change: With me on today's call are Chief Executive Officer Joe Capper and Chief Financial Officer Doug Rice. As part of today's webcast, we are simultaneously displaying slides that you can follow. You can access the slides from the Investor Relations website at MyMedx.com.
Speaker Change: Joe will kick us off with some opening remarks and a summary of our operating highlights and Doug will provide a review of our financial results for the quarter and then Joe will conclude with some additional updates including a discussion of our financial goals. We will then be available for your questions.
Speaker Change: Before we begin, I would like to remind you that our comments today will include forward-looking statements, including statements regarding future sales, operating results, and cash balance growth, future margins and expenses, our product portfolios, and expected market sizes for our products.
Speaker Change: These expectations are subject to risks and uncertainties, and actual results may differ materially from those anticipated due to many factors, including competition, access to customers, the reimbursement environment, unforeseen circumstances, and delays.
Speaker Change: Additional factors that could impact outcomes and our results include those described in the risk factors section of our annual report on Form 10-K and our quarterly reports on Form 10-Q.
Speaker Change: With that, I'm now pleased to turn the call over to Joe Capper. Joe?
Thanks, Matt. Good afternoon, everyone.
Thank you all for joining us on today's call.
Speaker Change: I am very pleased to report that we had an excellent 2024, culminating with another strong performance in Q4.
Speaker Change: Full year revenue grew by 9% and as you will hear today our momentum remains strong and we expect 2025 to be another highly successful year for Mimetics.
Speaker Change: During Q4, we once again achieved solid year-over-year top-line growth, maintained an excellent operating margin, and continued to generate strong cash flow.
Speaker Change: We accomplished all of this in spite of challenges due to the much-discussed Medicare reimbursement issue and the associated above-average sales force turnover we experienced in select markets.
Speaker Change: I firmly believe our strong results would have been noticeably higher, but for these two issues.
Speaker Change: So let's take a few minutes to review the highlights of the fourth quarter and then I'll update you on the progress we are making on our key priorities.
Speaker Change: Q4 net sales grew year-over-year by approximately 7% to 93 million dollars. Another excellent growth quarter.
Speaker Change: Full year sales closed at $349 million, up 9% over the prior year. Gross profit margin was 82% in the quarter.
Speaker Change: Justin Ibañez, $20 million or 21% of sales in the fourth quarter and $76 million or 22% of sales for the full year, representing an increase of $18 million over the prior year.
Speaker Change: We ended the year with $104 million in cash, an increase of $16 million during the quarter.
Speaker Change: We continued with the market release of Heliogen, our first xenograft which is targeted in the surgical market.
Speaker Change: We began enrollment for a randomized controlled trial for epi effect and we continued our strong advocacy for regulatory and reimbursement reform.
Turning now to our strategic priorities.
Speaker Change: On prior calls, we consistently discussed our market approach in terms of three primary areas of focus.
Speaker Change: Since this strategy has delivered excellent results, we will continue to allocate our time and resources around these three primary objectives.
Speaker Change: I would add an additional strategic priority to the list for this year which is to capitalize on the opportunity presented through implementation of the pending LCDs.
Speaker Change: Make no mistake, we are poised to do just that and believe no other company in our space is as well positioned to grow share as MiMedx is based on the proposed guidelines.
Speaker Change: As a reminder, our top strategic priority is to continue to innovate and diversify our product portfolio.
Speaker Change: As discussed, the company has built a strong competitive advantage around our ability to develop and commercialize unique product configurations designed to meet explicit customer needs.
Speaker Change: We have introduced multiple new products in the last two years alone. First three received widespread market acceptance, and Heliogen, which is an early market release, is starting to gain traction.
Speaker Change: MDO effect continues to do well, growing at close to 20% year-over-year in the surgical market. An epi effect, which we launched in late 2020, continued to show significant strength in the private office.
Both products have received excellent physician feedback.
Speaker Change: as they have become integral parts of their quick care protocols.
Speaker Change: Additionally, we continue to make progress building our EpiFix business in Japan with sales nearly tripling in 2024.
Speaker Change: We now have most of the key opinion leaders and top DeSalle customers routinely ordering and using our product.
Speaker Change: Building on the success of these product introductions, we expect a similar performance as we move toward full market release of Heliogen, our first Xenograft.
Speaker Change: We are making good progress working through the mechanics of the early launch phase and expect Heliogen to be a meaningful contributor in 2025.
Speaker Change: Our second priority is to develop and deploy programs intended to expand our footprint in the surgical market.
Speaker Change: As we've discussed, this objective calls for a significant commitment to the production of real-world clinical evidence and scientific research.
Speaker Change: We now have multiple studies in flight, which are designed to support the use of our placental-derived allografts in a variety of surgical procedures.
Speaker Change: On previous calls, we highlighted publications which demonstrated the incredible healing properties of our proprietary technology.
Speaker Change: This clinical research and general awareness pieces have appeared in publications such as Nature and the New York Times.
Speaker Change: The potential for reduced scarring or adhesion formation through the use of Biomedics' proprietary technology
Speaker Change: as demonstrated in this research could enable accelerated and improved quality of healing leading to enhanced surgical and economic outcomes.
Speaker Change: Again, coupling these potential benefits with the tens of millions of surgeries performed in the U.S. each year, we believe the market opportunity could be massive over time.
Speaker Change: We firmly believe we are still in the very early market development phase for placental derived products.
Speaker Change: Our third initiative is to introduce programs designed to enhance customer intimacy.
Speaker Change: As a reminder, the primary focus of this initiative is to develop programs which improve relationships and ultimately lower our customer turnover.
Speaker Change: To strengthen the connection with our customers, we have undertaken a variety of initiatives aimed at institutionalizing customer-centric behavior.
Speaker Change: We continue to experience excellent adoption of MiMedx Connect, our new customer portal. We now have over 1,000 customers using the platform to perform functions such as insurance, verification, and product ordering.
Speaker Change: We are actively developing additional features designed to improve workflow and strengthen the bond between Leibniz Medics and their customers.
Speaker Change: We believe our commitment to this approach will lead to enhanced customer relationships
Speaker Change: improved net promoter scores, higher margins, and ultimately an increase in the average lifetime value of a customer.
Doug Rice: Now, let me turn the call over to Doug for a more detailed review of our financial results. Doug?
Doug Rice: Thank you, Joe, and good afternoon to everyone on today's call. I'm pleased to review our results with you all today.
Doug Rice: As a reminder, many of the financial measures covered in today's call are on a non-GAAP basis.
So please refer to our earnings release for further information.
Doug Rice: regarding our non-GAAP reconciliations and disclosures, including the reconciliation tables in the back of our press release that provide more detail regarding the adjustments made to calculate our non-GAAP metrics.
Doug Rice: I encourage you to review these materials alongside my comments today. As a reminder, unless otherwise noted, my discussion is on a continuing operations basis. For a full discussion of the impact of our discontinued operations, please refer to our most recent 10-K file today and 10-Q filings.
Doug Rice: Moving on to the results, our fourth quarter 2024 net sales of $93 million represented 7% growth compared to the prior year period.
Doug Rice: By product category, fourth quarter wound sales of $61 million grew 10% versus the prior year, while surgical sales of $32 million were up 2% as reported.
Doug Rice: Excluding the revenue impacts of Axiofil and of our dental product that was discontinued in late 2023, our surgical sales increased 6% in the fourth quarter.
Doug Rice: We saw significant contributions from many parts of the business in the fourth quarter, including solid double-digit growth year-over-year from our Effect product lines, EpiEffect and AmnioEffect.
Doug Rice: Robust growth from international and modest but ramping contributions from our Xenograft Heliogen, which is our first 510k cleared product.
Doug Rice: Our fourth quarter 2024 gross profit was about $76 million compared to $73 million last year. Our gap gross margin was 82% in the fourth quarter 2024 compared to 84% last year.
Doug Rice: Excluding the incremental acquisition-related amortization expense from intangible assets of roughly $2.2 million in the quarter, our gross margins were 84% flat compared to the fourth quarter of 2023.
Doug Rice: Moving into 2025, with anticipated higher surgical sales and other sales mix changes, we expect our gap gross margin to be 81 to 82 percent and our non-gap gross margin to be 82 to 83 percent.
Doug Rice: Turning to our operating expenses, selling general and administrative expenses, or SG&A, were $61 million in the fourth quarter, compared to $54 million in the prior year period.
Doug Rice: This increase was primarily related to higher commissions from increased sales and also reflects incremental spend associated with an adjustment we made to commission rates during the year, partially offset by certain spending efficiencies in G&A.
Doug Rice: Also, please note that beginning this quarter and moving forward, we will be breaking up our sales and marketing, or S&M, expenses from our general and administrative, or G&A, expenses.
Doug Rice: Today's press release has a quarterly look back at these expenses for 2023 and 2024 to assist with modeling.
Doug Rice: We expect 2025 sales and marketing and G&A expenses to be relatively flat compared to 2024.
Doug Rice: Our fourth quarter R&D expenses were $3 million, or about 4% of net sales, up 38% compared to the prior year period, driven primarily by increased costs associated with our ongoing epi effect RCT, as well as additional spend related to future products in our pipeline.
Doug Rice: Based on increased investments in clinical and economic evidence, together with increased trial enrollment, we expect 2025 R&D to be approximately 5%.
Doug Rice: Income tax for Q4 2024 was about $4 million, reflecting a GAAP effective tax rate of 34%. Although slightly higher for the quarter due to timing,
Doug Rice: Our full-year GAAP effective tax rate came in at about 27%, and we continue to expect our long-term non-GAAP effective tax rate to be about 25%.
Doug Rice: Our fourth quarter gap net income, inclusive of the results of our discontinued operations, was $7,000,000 or 5 cents per share compared to the previous quarter.
Doug Rice: to Gap Net Income of $53 million or $0.32 per share in the prior year period. Recall in the fourth quarter of 2023, we recognized a one-time income tax provision benefit of over $37 million, which was the primary driver of Gap Net Income in the prior year period.
Doug Rice: Adjusted net income for the quarter was $11 million or $0.07 per share compared to $11 million or $0.04 per share in the prior year period.
Doug Rice: Fourth quarter 2024 adjusted EBITDA was $20 million, or 21% of net sales, compared to $21 million, or 24% of net sales in the prior year period.
Doug Rice: Turning to our liquidity, our ability to continue to grow profitably and maintain a high EBITDA to cash flow conversion rate has dramatically improved the complexion of our balance sheet over the last two years.
Doug Rice: During the fourth quarter, we generated free cash flow of $19 million, a $9 million increase over the same period in 2023.
Doug Rice: In turn, our net cash balance is now at about $86 million, up from $70 million just last quarter and more than a 150% increase in our net cash position compared to the end of 2023.
Doug Rice: Looking back on the full year, we are pleased with our 2024 results, which featured 9% top-line growth, an adjusted EBITDA margin of 22%, the refinancing of our balance sheet with incremental borrowing capacity, and free cash flow generation of $65 million.
Doug Rice: The fluidity of the situation around Medicare reimbursement over the last several months has required us to plan for numerous scenarios and could require us to be nimble in our approach and planning throughout the year. Obviously, we will continue to revisit expectations as the year unfolds.
Doug Rice: Longer term, we believe we can deliver top line growth in the low double digits, particularly as we continue to drive our business deeper into the surgical suite while still generating robust profitability as measured by an adjusted EBITDA margin above 20%.
Doug Rice: We are not, nor do we plan on, providing quarterly guidance for the foreseeable future. However, for modeling purposes, I want to provide a few reminders about the nature of our business.
Doug Rice: Revenue is typically lowest in the first quarter of the year, highest in the fourth quarter, with quarters two and three roughly similar.
Speaker Change: The same pacing holds true for our Adjusted EBITDA as the first quarter exhibits a combination of lower revenue and elevated expenses, typically resulting in a lower Adjusted EBITDA margin, which builds over the course of the year. I will now turn the call back to Joe.
Thanks, Todd.
Speaker Change: As you have just heard, we had another solid quarter. Net sales were $93 million, up 7% in the quarter. Gross profit margin was 82%. Adjusted EBITDA was $20 million, with 21% of net sales in the quarter.
Speaker Change: We added another $16 million to our cash balance, continued the market release of Heliogen, began the RCT for EpiEffect, continued to invest in research designed to validate the use of our products in various applications, and we advocated for much-needed regulatory and reimbursement reform.
Speaker Change: Let me now turn to the latest on the proposed changes to the Medicare reimbursement system for the private office and adjacent care settings.
a topic which we have discussed on numerous occasions.
Speaker Change: Shortly after our last call, Xanax announced their intent to implement the proposed LCDs on February 12th, 2025.
Speaker Change: After the new administration took office, an executive order was signed which called for a 60-day delay on the implementation of any new policies.
Speaker Change: The new Skin Substitute LCDs were included in this order and the implementation date is now April 13, 2025.
Speaker Change: Based on feedback from our outside advisors and activity within the new administration, we deem any further delay as highly unlikely.
Speaker Change: As key members of the new team are named, not surprisingly, the LCDs are a priority topic on which they are being briefed.
Speaker Change: We also know that this topic has come to the attention of the newly formed and high-profile Department of Government Efficiency, which was established in part to seek out and eradicate wasteful spending just like this.
Speaker Change: With the total Medicare spend in the private office and associated care settings running in excess of $1 billion per month, we can't imagine continued delays in the implementation of corrective solutions.
Speaker Change: We also believe it is highly likely CMS will take steps to modify the pricing methodology for skin substitutes within the physician fee schedule later this year.
Speaker Change: And of course, the government has ramped up enforcement, which we expect will continue to increase.
Speaker Change: We are prepared for the eventual implementation of the proposed LCDs and believe MIMETICS is poised to gain share as a result.
Speaker Change: During this period of transition, we can expect potential confusion in the market as positions change, ordering patterns and practices, and patients migrate to alternative sites of care.
Speaker Change: Given this potential for short-term disruption, we are hesitant to project expectations with much specificity.
Speaker Change: However, we do not see a scenario in which the implementation of the LCDs does anything but bolster MIMETIC's business.
Doug Rice: For now, as Doug just outlined, we are comfortable with full-year revenue growth rate guidance in the high single digits.
Doug Rice: with higher growth rates in the back half of the year and with the obvious caveat that April 13th is the go-live date for the LCDs.
Doug Rice: We also expect our full year adjusted EBITDA margin to be above 20%.
We will continue to revisit expectations as we learn more.
Doug Rice: Importantly, our expectations of the long-term prospects of the business are incredibly high.
Doug Rice: Post the implementation and enforcement of the new LCD guidelines, we anticipate resetting top-line growth to the low double digits.
Finally, I want to share a few closing thoughts.
It's now been two years since I joined the company.
Doug Rice: As a practice, at the end of each year, I'd like to take a look back on what we set out to accomplish, an inventory on what we did accomplish.
Doug Rice: And, of course, I just shared what we intend to accomplish moving forward.
Doug Rice: The company was on quite a different trajectory two years ago.
Since then, much has changed at MiMedx.
Doug Rice: I stated then that our mission was to transform the company into a highly focused, growth-oriented, profitable medtech business.
Doug Rice: Since that time, we've restructured parts of business, rationalized expenses, and implemented productivity improvements, which have dramatically enhanced our financial profile and significantly altered the course of the company in many positive ways.
Doug Rice: We have also spent a fair amount of time working with numerous stakeholders to reshape and modernize both the regulatory and reimbursement aspects of our industry.
We believe these efforts are getting results.
Doug Rice: As our industry evolves to incorporate and improve regulatory structure and fiscal accountability, products will need to demonstrate effectiveness in order to compete the market.
Speaker Change: I believe no other company is better positioned than MiMedx to excel in such an environment, given our market-leading technology, which is supported by well-powered clinical evidence.
Doug Rice: In short, our best days are right in front of us.
Doug Rice: In closing, I would like to sincerely thank our talented team of dedicated individuals.
Doug Rice: for a great finish to 2024 and for all that you do for the thousands of people who rely on our products each and every day. With that, I would like to open the call to questions. Operator, we are now ready for our first question. Please proceed.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.
Thank you.
Speaker Change: Our first question comes from the line of Chase Knickerbocker with Craig Hallam Capital Group. Please proceed.
Good afternoon. Thanks for taking the questions
Speaker Change: Just first for me, specific drivers in wound in Q4, that line item was quite a bit better than we were modeling. Was there kind of a recovery in epi effect growth? Was there faster than anticipated recovery in those territories that had that sales turnover earlier in 2024? Maybe just a little bit of color there.
Speaker Change: Chase, good to talk to you. This is Doug. It was our highest quarter since 2018. Superb.
Speaker Change: Proud of the way our sales team continues to execute and certainly feels better than our third quarter But like Joe said it international was a big catalyst for us The effects products that I mentioned in my script amnio effect and epi effect Were certainly factors and in our growth during the quarter
Speaker Change: and just specifically in Woundug was there any you know drivers to call out in the quarter that kind of improved sequentially?
Thank you.
No, I don't think so.
I think we've touched on...
on the ones that we mentioned in the script.
Speaker Change: Got it. And then just on 2025, as far as what guidance assumes, can you give us a little bit of a look into what your assumptions are for wound and surgical growth?
Speaker Change: Yeah, as both Doug and I talked about, right now, we're thinking at least high-sync digits across the board, not breaking out meter one individually.
Speaker Change: Douglas Rice, CFP®, is the director of Profile Investment Services and the host of the Golden
Speaker Change: with the implementation of the LCDs in April. The short answer is because we don't have a model to point to.
Speaker Change: Likely, there is going to be a fair amount of disruption and dislocation in the marketplace.
Speaker Change: No one is better positioned than us to benefit from that, so we do believe we will benefit from it. However, we have to kind of wait and see as we work through it, but it should be interesting.
Speaker Change: Yeah, agreed. And maybe on that front, you know, there's certainly a lot of noise out there kind of around the LCDs.
Speaker Change: You noted that your guidance assumes implementation. Any more specifics you can give us just around conversations you've had kind of enforcing your confidence? And then second on that front for Doug, can you just help us quantify a little bit on what you kind of assume for impact?
Speaker Change: from a benefit perspective from the LCD and kind of how you see that phasing in through the year.
Speaker Change: He didn't like my answer on the upside. So, first part of your question, Chase.
We do not anticipate any further delay.
Speaker Change: a kind of a good housekeeping rule on the part of the new administration. And we're told that this is not uncommon when new administrations take office. They put a delay on any pending new policies.
Speaker Change: until they have a chance to get folks in place to take a look at them. LCDs were included in that, and not just the skin cell LCD, but other LCDs. So we don't see any indication of further delay based on input from our outside advisors.
We are pretty confident that it will happen.
Speaker Change: And just from a flow-through perspective, with sort of the covered list being typically lower ASP products, we expect...
Speaker Change: Higher volumes this year to support the products that we have that are on
Speaker Change: the covered list and so as a result I think the biggest
Speaker Change: financial impact will be on our gross margin line as we...
Speaker Change: look at sales mix that largely has lower ASPs. We will benefit, however, from...
Speaker Change: higher throughput and higher volumes to cover some of our fixed manufacturing costs, but generally that's the biggest line. But we continue to invest in our sales force and invest in evidence and the LCDs won't change that.
Got it. Thanks, Joseph.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Ross Osborne with Cantor Fitzgerald. Please proceed.
Ross Osborne: Hey guys, congrats on the quarter and thanks for taking our questions. Starting off with Heliogen, would you refresh us on how you're thinking about that revenue opportunity and what level of contribution to growth you're begging into the Guide for this year?
Speaker Change: We have not broken out any numbers on Heliogen yet simply because it's in its very early stage of launch and market prep. It takes quite some time to run through value analysis committees.
Speaker Change: get the product contracted in place, and that's ongoing, so to date the contribution has been nominal.
Speaker Change: and we think it's going to be a much bigger contributor in 2025, but not something that's material enough to break out at this point. So we'll see. If the thing gains market acceptance, we might start talking a little bit more about it numerically.
Speaker Change: Turning to your sales force, you caught up with Attrition. How have hiring plans gone since then? What are your thoughts on 25?
Speaker Change: Yeah, look, I think the commercial team did a nice job, especially recovering from the above average turnover we experienced mid-year.
Speaker Change: 2024, and that had a lasting impact throughout the rest of the year. So I think they've done a really nice job getting the team back up to speed and you know obviously turnover has come back to a more normalized rate.
It's always disruptive when it happens.
Speaker Change: Because, as you know, this is a non-contracted business and it tends to follow some of the sales. A portion of it will tend to follow the sales personnel, they can tend to another company. But we're in real good shape. We're at near full strength of where we need to be as we enter the new year. So we feel pretty comfortable about it.
Thanks for taking our questions.
Sure
Thank you.
Our next question comes from the line of Anthony Petrucci.
Jones, with the Legal Security.
Please proceed.
Speaker Change: Hey, you've brought it down for Anthony. Thanks for taking our questions.
Speaker Change: I just wanted to kind of hear, you know, what you expect to happen kind of on the day, you know, that there is this change over that this is finalized, maybe assuming it is as proposed.
Speaker Change: Obviously we've been preparing from an inventory standpoint so we're comfortable that we'll have plenty of product to meet demand. The first team has a variety of tactical contingency plans in place depending on you know
Speaker Change: how these things are rolled out. There's still a few unanswered questions about specifically things like how are non-DFU or DLU loans going to be reimbursed or are you just going to stick to the products on the list or are other products going to be?
Speaker Change: So there's a little bit of unknown still, but it doesn't matter how it's rolled out. We're prepared to excel in any scenario.
Speaker Change: That's helpful. And then maybe just to push on the DOJ topic, you know, as I understand it, you know, this LCC would do a good job of cutting back on some of the waste, but, you know, maybe some of the actual building practices would still be ongoing, but this seems to fit right within the wheelhouse. So I wanted to kind of hear what your conversations are and maybe what the path is to...
Speaker Change: you know, pare down some of that excess spending and really let the good actors, such as memetics, you know, kind of shine in this market. And again, thanks for the question.
Speaker Change: Yeah, I think we've been pretty vocal about our advocacy for reform. It's just not healthy. A, from a taxpayer standpoint, from a patient perspective, and just the healthcare industry in general. This is an issue that's past its time to be cleaned up. And I know that...
The folks at Medicare and the MACs have spent...
Speaker Change: awful lot of time trying to figure out the best way to address this.
So...
Speaker Change: If I were them, I would not let this ultimately get into the hands of DOJ. I'd be out in front of it. And I think they have a plan to be out in front of it. But look, I think bringing up DOJ is important because any further delays...
frankly, run
Speaker Change: right in the face of what at least this administration has publicly said it's trying to do and that is identify root out fraud, race, and abuse. Now we can debate which one of those three words best describes what's been happening in the skin substitute market but it's certainly
Speaker Change: It's certainly one of those three areas and it's a wild overspend as we've outlined in the past. It's grown more than 20-fold at least a five-year period. So it's, again, it's past its time to be addressed and I think there's a lot of good people inside that have been trying to figure this out.
Appreciate it.
Thank you.
Speaker Change: Our next question comes from the line of Brooks O'Neill with Lake Street.
proceed.
Thank you. Bye.
Speaker Change: Good afternoon, guys. Thanks for taking my questions. I'm curious just
Speaker Change: There's a variety of what I might call legal matters that are sort of outstanding. I put in that category
the Axiophil matter with the FDA.
Speaker Change: the surgenic suit related to employee turnover and IP related matters
You know sort of
Speaker Change: I guess we'd call it the plethora of knockoffs that are available in the marketplace as we speak.
Speaker Change: If you could just give us a sense for where you think you are in those three areas, that would be a great help.
Thank you.
Speaker Change: Yes, folks. I appreciate you bringing it up. So let's just talk about legal matters in general for this company.
Speaker Change: Several years ago, this company was spending a lot of money on legal matters.
Speaker Change: We joked that it was a law firm that happened to be in the medtech business But there was a lot of legacy legal issues that the company was spending an awful lot of its capital on in a defense perspective
Speaker Change: The three things you just talked about, axial bill, surgenics, and IP-related issues, we're playing our offense on all of those. They're cases that we have decided to proceed, in all cases, to protect our business.
with Axial Filt. Again, as a reminder,
Speaker Change: We felt like the company was not being treated in a consistent fashion. There are three nearly identical products in the marketplace, Axial will be one of them.
One of those products has...
Speaker Change: A designation is a 361, one is a 510K, but we were told Axiophil has to...
Speaker Change: be treated as a biologic drug and go through those drug-like trials. It didn't make any sense to us, right? It wasn't the biggest revenue generator for us, but it's precedent-setting, and really, frankly, it's an opportunity to have the conversation with the agency about what is the best regulatory pathway
Speaker Change: for these products. And, by the way, we're in favor of...
Speaker Change: more stringent regulatory burden like a 510k type of process versus 361. I think it's better for the industry I think the fact that these are categorized as 361 products is at least half the problem we're having with these skyrocketing prices in the private office. These products are just too easy to drop into the marketplace.
Speaker Change: The only thing new there is that that case has been reassigned to a new judge and that judge has already said.
Speaker Change: a hearing date, which I believe is for the latter part of March.
Speaker Change: I'm not 100% sure what it is, but I think it's the second part of March. That's a good sign. That's a good sign that the process is moving. So we'll get clarity on that at some point, and then hopefully that will spur a conversation with the agency on what is the best way to handle these types of products. But certainly, there has to be some level of consistency.
as well.
We're going through the process of...
of depositions, etc., collecting evidence.
but there's nothing...
Speaker Change: really knew to report on that case, but again, that was all about protecting
Our business company was
Speaker Change: was rated in a very brazen fashion and we think it constitutes anti-competitive behavior so we're taking steps to protect the business.
Speaker Change: Not surprisingly, with the proliferation of so many skin substitutes in the marketplace, we've discovered cases, many cases, where people are trapping on our intellectual property rights. So, again, we need to protect our portfolio. We've already asserted one case in court, and there's been several communications with...
Speaker Change: Other companies that are clearly violating our intellectual property. So we'll pick them off one by one and either It will serve as a royalty stream where these these products will be removed from the market at some point in the future That is our firm belief
Speaker Change: Great, that's very helpful. I'll just say I'm looking forward to getting past this regulatory nonsense and moving to a more orderly situation in the marketplace. I think that'll be later this year.
Speaker Change: This is the first sector of healthcare that I've been in where there's no clinical evidence required to bring a product to market, there's no pre-market clearance, and you get to set your own price. What in the hell could have gone wrong?
Great.
Well, it'll get better, I'm pretty sure.
Speaker Change: Yeah, well, and it'll be a really nice industry once we kind of migrate through these maturation phases.
Speaker Change: Thank you. Our next question comes from Linus Carl Burns with Northland Capital Media.
Speaker Change: Thanks for the question and congratulations on your progress. I'm wondering if you can comment a bit more on epidemics in Japan which was up 3x year-over-year. You know what's what's driving that? Is it number of docs trained? Can you point that out a little bit? Or provide a little more detail on what's happening in Japan? All good, thanks.
and select the right distributor, get reimbursement for the product.
train the doctors, have the doctors
and then begin the reorder process.
Speaker Change: Clearly, when you're in a new market like that, you're going to target the largest home care docs as key opinion leaders, and the team did a very effective job of doing that. So, you're seeing high growth off of a very low base, but it's a contributor.
Speaker Change: You know, originally, we had talked about this as being a fairly big TAM, but frankly, we don't know what the TAM is yet. It depends on how well the market develops.
Speaker Change: whether or not there's pushback. And also as a reminder that pushback around reimbursement also as a reminder...
Speaker Change: The product is priced in the market at a point that is much higher than their current standard of care. So, you know, they have to get sold on there and they have to really see the results. But we're, you know, we're definitely happy with the progress.
Speaker Change: would have loved to see it be a bigger contributor but that's not a knock on the team that's just a knock on the fact that it takes a while to prep a market like this when you're when you're creating everything from ground zero.
Speaker Change: Carl, this is Doug. I would also add, just from a grouping or categorization perspective, that our other category that you're looking at does include international, but it also includes a few other care settings. So it wasn't just international that drove that growth.
Got it. Thanks so much.
Thank you.
Speaker Change: Thank you. There are no further questions at this time. I'd like to pass the call back over to Joe for any closing remarks.
Joe Capper: Thanks, operator. Appreciate you guys being on the call today and your continued interest in the company. We will talk to you in a few months. That concludes today's call. Thank you.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.