TELA - Earnings call transcript Q1 2020

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Operator

Good afternoon, ladies and gentlemen, and welcome to the TELA Bio's First Quarter 2020 Earnings Conference Call. At this time all participants are in a listen-only mode. A question and answer session will follow the prepared comments. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to Stuart Henderson, Vice President of Corporate Development and Investor Relations for TELA Bio.

Stuart Henderson

good and Lauren you, afternoon everyone. Thank TELA ended March today, Bio released quarter the for results XX, financial Earlier XXXX. A copy website. company's available on of the press release is the

Joining President Tony Brennan, call me and CFO. CEO; Nora Koblish, on today's and are

future identify we the you during conference that filings company's to projections differ forward review SEC, call, remind which future XX-K regarding without and actual and the cause make this looking limitation will the materially begin, statements I'd described company events. in Before to Forms factors to and with these company's you specific like results forward-looking the the We including those past events may that statements. XX-Q, or from encourage

the the These strategies, or and factors may of without impact operating statements include in potential, environment, capital performance. regulatory marketing limitation our resources, regarding COVID-XX product the pandemic sales business development, product

With that, to over I Tony. call will turn the now

Antony Koblish

everyone. good and Stuart, you, afternoon Thank

hospital want to to staff, greatly by healthcare dedication thanking your for pandemic. our I including begin lives. sacrifice contributions you heroic COVID-XX battle workers appreciate your We the and saving and as all community,

provide to a of remarks business. will Brennan results. initiatives to global business, on quarter position reviewing our impact want this review on I use crisis impact time on we various have addition today Nora then ourselves our taken with discuss And the for and will the results, of the our our I to start In continued to growth. quarter our first pandemic first of this

to the turn over call now I'll Nora.

Nora Brennan

everyone. hello, Thanks, and Tony

product the quarter by was the and The for financial expansion within our $X.X to increased organization XXXX. a press increased summary penetration of Please of XX% of from customer the new today increase our first earlier year-over-year for existing quarter first our for sales in accounts. driven refer to Revenue the commercial rise primarily results release issued million. of

procedures the volumes in XX% revenue year procedure year XX% pandemic. impacted and It prior the over the prior expected of the more period to of revenue Gross March XXXX to and obsolete and half factors prior from of to charge by year the of a and than in related increased quarterly the deferring the to percentage period. other revenue hospitals first to elective in in the the inventory. was revenue as second Total profit patients period decrease for revenue recognized quarter compared improved the excess increasing higher COVID-XX

The the and million of activities. first in period were XXXX. commission marketing due our of to costs compared higher benefits salaries, same $X.X the in increase quarter million $X expansion XXXX, a expenses sales was in Sales to result as and

the $X.X million quarter the of in a costs to operating were increase expenses as G&A was period The increased the due million compared primarily XXXX. with to in associated company. public same first XXXX, in $X.X

operations outside R&D to prior of of in $X.X compared payments, to the quarter of $X.X the year licensing million first expense. XXXX expenses reduced in in due were was reductions from and period million million to in $X.X the laboratory same were $X.X This XXXX, decrease the XXXX. period. development million level first Loss lower in the expenses, compared quarter in

XX%, of freeze. including and next a several months. reduction a the least fund X% short-term short-term our meet third-party second quarter investments. quarter, equivalents sufficient our conservation our in base XXXX and cash initiated $XX.X investments first operations existing requirements cash we business ranging for salary hiring reductions cash, be strategies from of all that capital plan the with temporary spending cash at for for XX to believe will ended We on million and employees, the today, Based We've and our resources to

to appropriate. to ongoing second quarter Based our continue surgical the revenue our will impact monitor of in restrictions procedures decline the the accuracy of predicted completed most compared spending and of from in on impact revenues will burn relative as XXXX COVID-XX expect the policies, as we on revenue of XXXX. shelter-in-place time, to to and pandemic be our extent our recent full we quarter the cannot our quarter At XXXX the full-year suspension cash with this We revenue and reasonable continue guidance. same on adjust

the now that, Tony. turn With over to I'll call

Antony Koblish

All to unprecedented time from pandemic. global of face right. an continues world The uncertainty this

vary dictated March, and of the mitigate that part Beginning continue factors each dynamic address that to government the patients is the by remain need As and evolve virus. the multitude time, our lives, this to to for and based crisis of mandates of potential emergent guidelines, in significantly by a preserving impacts recovery hospitals space COVID-XX their began also spread and geography. middle of in and resources on treating

in change procedures elective has This focus delays world. in parts non-emergent caused many and the in of

areas some to beginning However country begun surgery ago in on elective few the are And weeks we in over moratorium that geographies. several their lift see of certain procedures. we understand have these past relative to volume to hospitals performing increase the in an weeks,

of and plastic Our reconstructive portfolio a postponed and for The hernia be as to deferred can and later surgeries. a these procedures repair, product reminder majority date. consists of

with eventually have and that challenges patients often time comorbidities with surgery. worsened health hernias other hernias will complex require and intervention. require However, And

that critical be also patient's and to of most surgeries procedures health, are rescheduled. expect we reconstructive cancel and the Plastic will our

and the a As procedures rebound from as back we pandemic recovers to online. anticipate elective come this result, country volumes our

company we time, stronger challenging the impressed position this to continue resilience by the be navigate of to our growth. and we our sustained team emerge As commitment for I as shared

safety on for data of lastly, our engagement - focused patients; quality products plastic third, the main fourth, PRS surgery. presentation the of ensuring organization; GPL recently implementation of caliber continued customers customers these developing and reconstructive rollout our our and and high second, the a awarded BRAVO driving contracts; of clinical including OviTex and areas; our during the of our commercial conservation first, capital; health the employees with the are priorities presentation Our and expanded

Turning health and of to safety the first our customers. our and employees

have our restricted. for as they distancing. mandates, physical employees to work work, remotely our measures employees guidelines practice protocols protect non-essential Following have continue we increased specific employees and with sanitizing implemented to To travel

developing our prepare protocols field employees reenter also they hospitals. for are We safety to based as

Zealand encountered partner Manufacturing continues be as operational And in facility at to-date shortages. supply service delays of our customers. New to our not or support an in we essential have and any

for we several the have as invest measures in Nora As taken discussed from quarter recover pandemic. ensure growth to second we our this to reduce earlier, spending driving can proactive we

and surgical procedures our visibility progress we to returning. gain continue make as invest our initiatives, primary in on strategic we'll monitor We to expenses and

focused Our and remains supporting customers strong on a commercial our developing team surgeon pipeline.

on to have solutions data. our with continuing operate effectively are product that to portfolio our teams clinical and We educate virtual surgeons allowed

We the surgeons. by XXX been over engagement have of in level these impressed reached successfully programs virtual have and

also increase throughout organization our to to commercial initiatives our supportive level that resources ensure have virtual training service to our of We our and customers. established team provides

build of high geographies and improve. to customers to place to volumes recruit pipeline continue service candidates potential in quality We a hospital when our surgery

first at and market our patients hernia in Clinically, shown first we patients months the a multicenter with studied, recurrence X% at a recurrence XX in study, prospective has which months. XX the rate on XX remain X% XX post track BRAVO,

the data next several data BRAVO we to plan the quarters. As to mature, continues provide over additional

providing interactions hospital awarded to us with were directors limited, COVID-XX, multiple while resource accounts, approximately engagement supply clinical systems chain contracts, access GPO Prior within recent to have X,XXX has improved with hospital in been we and weeks.

to back As online. hospitals come began

awarded have the on focused contracts leveraging laser and been OviTex our of we products. GPO remain to PRS that the adoption We drive OviTex

hospital of significant their remain cost portfolio facing technologies. challenges we repair provide natural savings many businesses this that they as We our also at economic customers relative crisis. to at appreciate our to are service through And product their competitive manage

experienced OviTex For with we programs. and plastic via surgery, new high launch products customers education our surgeon of and our are engagement virtual limited with reconstructive PRS the have continuing

We are as our collect continue on expand network to our working identify to feedback portfolio and product are additional product to opportunities. surgeries rescheduled surgeon

and this of new arising impact of PRS business both be leveraging adaptable and on the with predicted platform from continue OviTex extent reasonable on plan At the time, to evolving are pandemic Circumstances our the develop products. COVID-XX existing accuracy. uncertain. – cannot We to of OviTex rapidly COVID-XX our generations full be hernia technology

the month, hospitals interest with we especially to continue to want back outlook, Bio. to beginning for TELA afternoon in monitor our for on ahead COVID-XX to your for Looking and coming of elective actively again thank online your the closing, this come I progression time everyone In procedures.

time. I also support have as overcome I confidence this commitment team our to business the of want for to continued strength we to our challenging the our in mission. fundamental community thank healthcare our

continue will our are positioned and long-term. on deliver We the achieve optimistic we success in sustainable initiatives remain well I that and to growth our

our to the it turn I'll Lauren and questions. now to over open operator call back up

Operator

Raj Jefferies. with [Operator Instructions] comes Our from first Denhoy question

line Your open. is now

Raj Denhoy

could maybe I ground with as bit of seeing you're could if what in has was appreciate as and April, terms progressed it the for so back? What start that in maybe and you most things quarter a described. was poor and quite us April procedures got recovery probably coming I then bad companies you how of But in just how

Antony Koblish

Raj. Sure,

for the believe very started at progressed, April comparison in improve the the volumes. that thus far to I'd to surgical as has XX% somewhat say and at least in slow decline saw April level We So May. and least continued improved month pre-COVID-XX in we

the So And in pre-COVID far range, for be but May, in are say week. compared more doing we I we better. the XX% early, may it's I'd like to mean first

Raj Denhoy

what by imagine maybe one you've contract how despite exploiting right? contract could right? your their it Right, GPO sort on institution. push the thing surgeons adoption wasn't when the any was had of adoption that the about certainly who and So you steady within right, product the would helpful. having there sales I driving that surgeons technology because the people that - of already that's couldn't seen not recently, guess had seen it Have has have I wins been product? progressing, new been So growth, access

Antony Koblish

think what said are - off, I I'll second related. have finish I so and Yes, first question should your to

complex PRS continue be if ventrals out. would cases are look will we're doing lead I complex seeing to say at So us more - side, hernia right done. we the cases So right? also procedures, now, you to doing continue be We're the the on that

is lead that So view will - us ventral and complex out. our PRS

VIP usage either up to those of start So time cranked out. in the using have surgeons. think products. the we're I And time, success with we spend of many because gaining tremendous our We with to commitments hours we've to unique And expand that's or a virtual these have had meetings, and surgeon product two programs. they

places in already things online and where May, seen bit. So the we've new little some open in come customers products those of have cracked use early a

starting I all April April, many or can would we're commentary work, the means street from but scrubs, or no that surgeons VIP just doing color touched perspective most zoom in process in we've the a that appeared I half, week maybe starting all like they're say, a They're they somewhere hospital. to a us. so, to of say right. so this through surgeons things be see clothes they're last do to day's of by Recently, home the in offices rest week of and their for in the some they're full

cases, some to patients see cases. certainly again. some do maybe starting to cases, They're emergency simpler starting They're emergent

as to surgeons the starting program to home a in base bit from operations migrate So through see we're hospital. they VIP their little of this

everything. think I a yes, of little bit So it's

pleased you see I to come ventral legacy. base and as seeing and April, May come towards mostly we're in PRS business new to complex start complex, starting very online. surgeons, look that probably the online, as again, And oriented more think we're at we're PRS ventral

Raj Denhoy

operating helpful. much to very at those? reductions, have roughly cut $X.X those where Nora levy appreciate for been And million. cost quarters into last you expenses I that's you, maybe couple you And guys $X.X can Great, do how million, but lastly have of looking just actually are take expenses you

Nora Brennan

XX% in our talked So, think expenses we we between when through and variable XX%. Raj, time, last went I

so going are down commissions So cutting where just from that's is come sales. - naturally lower our exactly we're to

or whatever But also had some we we costs spending we there's had did. can remove, some we that around variable consultants that

QX. same And entire So we to we previous that's quarter for the through and salary also on we that the really put QX, closed in cash organization. mentioned the where out conserve levels reductions QX

Antony Koblish

a just on Raj that. Yes, little color of bit

try goal our to trying So operating to we is sales in cut for out lose balance equation. the QX expense. QX, in of Whatever the to we're

backwards been in our that go we not target. cash do has So that consumption,

Operator

with O'Brien Matthew from comes Piper question Sandler. next Our

Your line is now open.

Matthew O'Brien

were we then, a Few anticipating hear you provide didn't or modeling? And to from something can than back gross there I there I the what with softer think than in the mix wide PRS, shift a half you this me, of March. slowdown anticipating lighter were between But something we’ll Nora, the bit just gross as guys again, in little that? margins as and else split start were know being was margin came given we that little led I the far QX OviTex basically were of

Nora Brennan

No, so question, the first will Matt. I answer

So OviTex I X% think for and that OviTex about about XX% mix between was PRS PRS. and for

with systems and we additional respect excess it our we limited staying so launch launches and management. inventory. again done our So respect with on – implemented our gross management, managed inventory around inventory obsolete around margins really better arms it's again, PRS, to some as to we've but With on We've job XX%. a says get this

So, life. managing months our to that renewable polypro as polymer XX XX now at to that's of just products, up get months have months. It's because right on mentioned we before, we've the shelf XX

Matthew O'Brien

side helpful. focus and the what's forward? same with as think and a as on I near going as or or year - it on aggressively side beyond big push of bit a attention given kind Tony, close on maybe to plastic with of on strategy it you established the guys you going leads is is more his the given addressed given of you COVID are side be, not they That not a on, of how far here, competitors But hernia market lot that already next paying out should kind what's the term business, and going next lead breast the little that's to going into still more as little maybe this. the Okay going year on more next the question maybe what's and my of of

Antony Koblish

actually I right. at QX, a Yes, as think to sales, our percent PRS you're see uptick in in ratio of an going least

through, work procedure the we in As shift types.

So arena in firmly I after complex ventral we're go service going in be I that's the PRS be arena. the what think say. we're to would and be And - to more going and of

I we've to previous call. towards think to hiatal in it's seen a more going service. big shift simple of I don't we've think and as likely which see be our discussed you're inguinal

come the I don't think way back as mean you're going soon. to see I those

ventral, may way looking simpler this emergent the infection, the required, may The at has comes well, of nature going first. come we're pain, removal a have back, the polypropylene be you then procedure. likely And more out. mesh think it I are is suffering, last right you going back have are also mesh so an procedures. to These to as the those to PRS given come complex,

has as webinars we a virtual program, then, side, virtual starting I which the run many touched as we So just through think series, we're VIP started much PRS in June We've day. And May, on to a going this ventral crack already process KOL that where early block full open surgeon of possible. end surgeons.

get We and have on do interact our are hernia. on our to a hour KOL, focused hour, surgeons KOLs. every presentation Those OviTex with mostly we

So I a approach is PRS think complex we're be where is ventral. of needed we've basically, that allow and got us to going service which to here balanced

Matthew O'Brien

backlog for just How given to was market be you And the of just over a these get moving the are new over and months it. it last then products, there through helpful. customers some this of seeing part is the the to to on really they're strategy Okay, backlog - four share guys clinicians to five that's surgery going one on how for - really, add going to is is your your year? big last be going challenging to to trying busy maybe, be to of five year

Antony Koblish

in we're to like, not them part going Well, is a It's tour surgeon to our me. I fully it to amazing permanent going had. doing have repertoire. and VIPs to And make bringing we're of replace of you think the that like the virtually we've surgeons done going to keep volume

to think rigs testing within many, we're it's that do very to our an our team. what and need and data hour we to realizing is two many technology and I labs impressive see our But I our and can more hours. think

a coming month of The this four a be points management the done. we team, surgeons by full what have management day at we not got doing can month, every team calls. can some and last Q&A full day. is But on doing get can a The are of would have XX% good and a these month. with we five On and VIPs at were here four interaction height like more process or five usual they

our the through for highly So, for absolutely think the to be using perfect the I selling screens, our management allows way. in to ability think have telling in team, involved the story throughput and process

and how team And wind got understand And to we're sales and go the touch about surgeons team, fine to what us. sure and running committed with savings. the getting is our to to this cost product feel, is if where logistics we having up can it's that's then make innovation

So, and then screen to virtual with this approach. nimble, to ourselves agile, we're being going continue based flexible, dedicate

the reps all Not of are we going in know get hospitals, our to that. back

then and in service come flow really hour, screens at X.X behind our very, be our and the to crank through logistics. help So team provide think hour have that covered OR we've and and cases FaceTime. this things the onto get I sessions based Thing can integrated clinical presentation hour, already possible the we one are could through very the sophisticated us development development half room. clinical We're in looking operating emerging can we which in best out screen specialist get out reps

So that’s way I committed that. be that’s a and to sometime think in spend to time our could we’re place going for model solely the choose to here

that to everything other any GPO. The for can thing the I CRDs HealthTrust do in market and supply VCRDs in movement and terms is share just described of we chain

back. they most now or Now through so they disappeared on went or furloughed redeployed either but away month us coming the are last they they were

So we’re programs for virtual as starting to well. do them these

chain getting this. in So on is supply now

surgeons now We forget, they around This Don't savings. offer have to And as well. and help tailored us where think proposition. we cost us implementation help props organize we of for messaging drive that's can spot cost dental. going sweet our them value and highest to tremendous virtual value and I because complex program PRS for is the the offer savings

straits, And solution can right nice now. are if hospitals we for be financial a dire in very them,

So, we're speed, aligned stronger this and better more pulling emerge interaction. a volume toolkit efficiency out that's terms to to the and business with continue with stops from this in of

Operator

comes Our Kyle next of from question Canaccord. Rose

line Your now is open.

Kyle Rose

of standpoint. guess much over how the and expect some then of those And do how access the course the continuation in just just from I accounts here just accounts, recovery in in were June? to with questions. HealthTrust guess trend an guess, kind prior in work a to the contract May of and the a utilization help upfront, then you the and of wanted I you I little So to I able

Antony Koblish

QX that basically so one as we a in started bit, maybe were the so. weeks we got to of HealthTrust in a Yes, we HealthTrust closer or so implementation. we on maybe QX, hospitals. had little ground five to By were I'll XX of account okay, the grip real about XXXX, X, We XX loosen end as month, right. just we implementation had started had February you they

spent of meeting a the first really that the So to process short month the that's time, was lot know getting of people. a and amount very

the thing a time. sign of we made progress in So I it's and Right, on fairly decision with A team. the out team new short intact, the were we to entire a organization. and our train out excellent lot that good XX that of of our keep made accounts were reductions. to we've is, think is the going stronger, they that very guess that I or come sales so part heck reps the commercial then retained the that we sales other of But brought period we

been surgeon the So to in addition day. they've interactions, every training all

around seal So training time we training get they're type hospitals their running. this well, is to them where a up trying Not while hopefully give maybe can business them rare downtime. there's and as while running

degree where team, a VIPs So HealthTrust. on program and came a decent commercial and are, the were those focus high of HealthTrust our those reps of been so lot of accounts in a far, that our have percentage lot hired the of training surgeons of geographies through key

so critical to like then via that offer process can be this said, we And presentation that and cost to and is I innovative the as to phase I supply chain, the that time. savings start organize our of think track groups next surgeons the continue that down going a products help process

we have reopening think momentum a lab. I So the very the at good here building shot of as

Kyle Rose

the same - there maybe in them opportunity, look just the have like getting that year? appreciate you about at the of And the opportunity back better starting helpful. see XX historically just that's percentage states the states you're you lie the they're back to might the the like QX that as both started schedule. the as QX. exiting very far basically incremental half for versus look And you productive question on then I the what maybe when cases, a mean, here when know, context, you procedural become that standpoint. of the to what revenue far maybe you to in where is were Yes, as get from Any accounts as I moratoriums, have, in the color. and then HealthTrust lift think

Antony Koblish

Yes.

a growth - I I have the two - program are future centered that drive strong, have been us, and historically South, virtual Oklahoma, growth, VIP strong, for our excellent of basically. which good around think in tremendous of prospects look, one not but I opportunity have the where lot these means a is think was Texas, have we HealthTrust for think also place Southeast the been So are well. as markets we Florida to general,

of I this a think being the complex is cases PRS available these piece is for Johnny-on-the-spot way we ventral key and look at consignment.

are And a continue to we've can. aggressively we always we're pushing and program it. this drive rationally we consignment that to So is had, where going

versions We have of consignment. multiple

the via consignment directly agreements have to hospitals. We

We have consignment. rep

We have we provisional consignment, hospital product I take them in, that for provide it any mean way a can product availability will take in. to

a that our XX% I very have May. to of consignment, in and And know of the be high I mean good for in we're flavor in, sales as think product XX-ish Usually, going QX. more consignment shipments percent, growing the so a reloading a came QX sales, going shelves which or that been percentage that future. large sign it's shipments come from some is probably of type and in - out

in So, be and is to provide PRS help and arena. hospitals our patients key, ventral the be I think complex consignment and going to services there for that products us to to

Operator

Securities. Our question Dave JMP Turkaly last comes with from

line Your open. is

Dave Turkaly

said or reps wondering, may have then out have may you would was the I quarter? be hospital of number not you to accounts of and on willing You actual it the the comment coming have changed,

Antony Koblish

me help Nora. out Yes,

Nora Brennan

we the of them end And territories. with XX XX up filled. at ended QX, So about of about were

building we're added pipeline a right already to more, Tony think on we I the may good So one but a phase. as now. how reps earlier April, of into But freeze think we're mentioned, understand about hiring be going I

with So XX QX territories. we ended

Antony Koblish

XX here. get we mean, from to I I think Yes, can

you have know that the If in circle reps we have we place of saw we contact with. soft that

with recruited start this reopening. that about hopefully having We are conversations have stopped we'll We've through process this process continue and never recruit dates recruiting. in regions align candid will and particular to

in confidence gain to continue on gain we certain regions, we’ll in build reps out? new bringing as So confidence the

Dave Turkaly

curious [indiscernible] had to whether get And mean, quarters, we I'm the accounts, closer just one I said more Thanks. another may do updated hear was you expect understand the any of when And these spoke active them on to hear exactly of I data some in they when then, and that's coming update? we color very VIP during the specifically, about or you events. - be might how commented you solid. but bit

Antony Koblish

the or and XX Yes, at at QX data X so update you after have two some XX-month We'll odd cut so, what XX get yes think patients so. do year? years. BRAVO, on in the time XX another the or we’ll after point

the be QX data that’s solid will in cut continues and when in-house, I that think will it be uninterrupted. So next

far product. to going we As arena. as our important use presenting effect been data very a BRAVO on very had And to the the on where a to It’s a discussion. are data I have gaining commitments a of it, this centerpiece virtual tours. it think we VIPs these of We had in moderate applicability conversations lot about of good the present complex

here first. exactly this So that emerging lines up with are the cases

positive. it’s So been very

drafted for meetings within including been data abstract, that six various postponed. accepted various at a this robotic or it’s been think series cuts have five, of cancelled BRAVO, abstracts I got These have We've meetings.

this the surgeons here efficiently. it force best to approach on trying present out we're hands and our out the into data So, figure and to sales get of how

One it this interim and then approach to just take cut, submit the as journal. up is to and write be paper, going a

So this soon. underway. already process fairly submit we is And will

So hopefully, out we that can get the data via mechanism.

strong, big is ventrals it's focus I thing on can a is out. of make get out on taking and a This data competitive piece, that data and approach continue we to think to how just with going products we're that their the we bridges recurrences compared we particularly very continue any important. helping of that to this meetings data, are the patients. to It's advice burning other helpful but get super we're present And in start. can logical and with sure to to the complex coming the work us The terms do have the not of

very, in focused very on data the out and So way, getting the possible we're aggressive best the circumstances. given

Operator

you. does Tony back call turn for like today's the any that closing Koblish, I question-and-answer would now And session. to remarks. Thank conclude to

Antony Koblish

We call. really appreciate the All right, attending in thank you your everybody this company. for interest

confident of committed and a feel how this of done will impressed things. that I've out out been of our evolved I lot we come very like worked are We've all reacted come and with we stronger We hope stronger. good will I team has hard. and this

our development remote of of fashion. programs, our continues All work in a all

to our interact with in we a And customers way. positive continue

and of a you. track next keeping to Our think We time. everybody high hospitals And Thank we'll is add us, we goal helping cost really performing savings service. can be with you clinical and of products. we talk lot appreciate to

Operator

concludes you gentlemen, and for and may call. your conference now this participation today's Ladies Thank disconnect. you

TELA Bio (TELA) 13 May 202020 Q1 Earnings call transcript