Earnings call transcript Q2 2023

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Operator

Good afternoon, ladies and gentlemen, and welcome to the TELA Bio Second Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded.

And I would now like to turn the conference over to Louisa Smith from the Gilmartin Group.

Louisa Smith

Thank you, Chris, and good afternoon, everyone. released for Bio XXXX. second TELA today, financial the results quarter Earlier copy is release the on A press website. available of the company’s

on Officer. Tony are Officer; Chief today’s and Officer me Operating Financial Executive Cuca, and Koblish, Chief and Chief Roberto Joining President call

I’d events. actual remind Product including you the without in begin, past and to the regulatory regarding We of limitation, call, from encourage cause this statements XX-Q, inflationary conditions, that forward-looking may statements. and potential, and to performance. various to development the and macroeconomic that annual make include, report and operating XX-K which on factors or those company’s resources with these the company’s including, marketing pipeline may identify and you banking limitation, company the projections like the future without statements differ product described we concerns, the specific instability or pressures during impact strategies, conference Form Before sales capital the opportunities. materially regarding SEC These results reports COVID-XX events filings future forward-looking factors recessionary pandemic, environment, review on quarterly may Form

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

Tony Koblish

Thank today quarter for XXXX Good everyone, earnings joining you, Louisa. for and thanks call. afternoon, us our second

to another pleased results quarter report execution. are and We of strong operational financial

to continue goals financial our hear, and key on will deliver initiatives. our you we As advance

the pandemic. of which towards we hernia so, sales, half first the COVID-XX that of the well procedures delayed demand seeing continued which representing second saw is tens solid sell. If high an up. $XX.X are as quarter of second million, Total XX% to a second in was the the elective may the of volume of quarter, and thousands environment happy sales report I significantly steps bodes we revenue growth surgery for procedure In year-over-year, during for addressing growth the strong improving reflect markets am we growth. which outpaced

the of provide progress call, and five the for drivers provide to we growth financial key I’ll to before your revenue update On this ask Roberto the making on I’ll refer as open the color always, our revenue results line on as afternoon’s Then factors. we an questions. with we are further that

through Let off now three and me than to access. begin group utilization GPO process which the agreements by burdens contracts committee a organizations. TELA go the surgeon to with streamline shelf room with These use administratively national products supply rather has access surgeons an our by process. right choose providing can OviTex purchasing the having

our a term recall, We COVID-XX pandemic four-year three HealthTrust which, the of the recently this GPO. entered into began products as Notwithstanding contract to of we the The headwinds, HealthTrust, first the served our extended original healthcare system. XXXX, in led demonstrate which just may began were value by extension years able with term as to renewal. of the to hospitals impacting significant was contract you

second Premier, on GPO was which effective contract became XXXX. October Our with X,

in hospitals. largest to second the country, us granted over GPO access the it As X,XXX

in Premier up and revenue an contributor our ramping made important QX, to we’ve progress is the with pleased it are We already performance.

sales alternative with over productivity. contractual factors: hospitals, and signed the sales means which Our leads X,XXX revenue This to with that dual product significant This category. we of recently our the in GPO system, most us biosynthetic a force only GPO highly to compliant as source is is structured offerings. contract third three cover force single compete representatives. in sales a two supplier our providing These access driving size more contracts together this

meaningfully been representatives figure the on have into and can opportunity. with we’ve of our those educate GPO only physicians the the in can greatest expanding the across this contracts convert In us give license represent, via order sales in the hospitals. contracts country, on GPO geographies targeting hospitals who force we access access call capitalize the to field to those size to sales we hunting that but

today, against XX reps. reps year-end of board reps the As of to XX have on target sales we XX

through the We they in all have so training representing continued of of products to our invest XX sales playbook our portfolio. our our in force comfortable are program that

We or that reached have six training recent less. system revise continue result in to of most and the improve months profitability hires with our breakeven our cohorts

of the compelling have compared important low development to show. important that of older our impressed an double-digit the exhibited studies and Surgeons results from growth our Another are ability our exceptionally revenues technologies. factor X.X% figures The in played recurrence OviTex rate of is of share that to products underlying their with study role clinical take OviTex continued data. our BRAVO in competitive

our support consideration continuously growing and initiating data their OviTex. studies and physicians We’re in set to of patients

procedures. in enroll study, the BRAVO used robotic We data patients our II effectiveness also when continue to in which of OviTex captures on

to use systems quarter are we use and and physicians patients with of continues great general robotically treatment BRAVO that recent data in implanted most expect robotic from grow results study of hernias the II As of surgical which be in the surgery in of OviTex available, making decisions. for XX% will

over desire in found hernia to XX% solutions. more prefer natural plastic would and In permanent a In recently we significant study that that matters. for requiring expertise had strong in permanent prepare option the who A innovative repair a highlight of study hernias consumer we for there consumers a mesh that surgeon among conducted, showed data, concern addition natural mesh was subsequent synthetic of surgery. and we more clinical using treatment also collecting consumers behavior study the interest

or natural confidence all OviTex for product future to TELA’s and at study optimize that respondents impressive top choose this patients’ mission results repair more critical their surgeries. we’ve of in surgeon very encourages current of both important restoration with decisions tissue indicative innovations their preservation. a of patients doctor The data healthcare surgeon or are set the soft care. medical in for to The important considered in supports be and heart are serve of the and XX% role of collected desire to Additionally

We’ve assemble strive in hernias that in activities. already through range points XXX(k) surgery. our OviTex in this soft our or external business to do several our for through new surgeries and The development portfolio. internal announced the products use expansion XXXX, and last OviTex larger products minimally two the We and ventral for including incisional call product a factor invasive is efforts R&D resorbable tissue drive reconstructive clearance LPR long-term to market. LTR current plastic of We of product and configurations on leverages and

tissue and ready meets the restoration that patients. and offerings of to solutions soft varying developments preservation and delivers committed needs We is announcing look TELA commercialization. creating as to broad a for become portfolio portfolio and they future next-generation surgeons forward

execution Continued growth an improving sales procedure these in factors environment. value drive five and create the for will particularly owners, of company its meaningful and

half optimistic strong a where today. second highly delivering are are We about given we

turn With Roberto financial call quarter for results. our to that, I’ll the on over more details third

Roberto Cuca

Thanks, Tony.

quarter mentioned sequentially the As XX% million. Tony second first XX% and for quarter revenue over year-over-year increased earlier, the $XX.X to

XX% During the year-over-year second grew quarter, OviTex and PRS XX%. grew revenue

amounts sold ongoing efforts. of driven second quarter within quarter not as for goods redeployment inventory well reserved expiration was within as second the or the quarter. for product quarter purchased whether by management in cost the was our and inventory within XX% expected showing sold of strong quarter, margin purchases the of by driven as actually and as was dynamic This slightly well inventory inventory the the lower-than-expected Gross

the was our particularly The was Sales $XX.X increase of expenses and same roles. expansion in count customer-facing million the expense in as in and XXXX. organization, of compared consulting marketing million period increased quarter commercial employee-related XXXX higher costs to of costs to higher and second mainly additional the in compensation $XX.X due result our to a head travel due

administrative $X.X the second to to in period. of expense same in compared in $X.X same period R&D was to million in million in of quarter million expense $X.X XXXX second of in XXXX million $XX.X year Loss compared operations and last prior General $XX.X from the the the year. million second quarter was XXXX $X.X quarter the was compared period XXXX. in million the

in was after in cash $XX.X in mid-April. a conducting offering compared equivalents with million $XX.X $XX.X quarter in loss the in second quarter the We the of same and cash public XXXX million XXXX. Net to period second million ended

remainder expect revenues the to growth year million, $XX XX% to XX% to million of $XX of XXXX, over full we representing year to continue range XXXX. be Regarding full in of the the

turn the call to I’ll now for remarks. closing back Tony

Tony Koblish

Roberto. Thanks,

quarter. all First, team I’d who deliver like the excellent another to thank helped on TELA

and XXXX thrilled share we’re in drive with tissue the lends of the start continue coming together restoration new the our factors will five competitive preservation of in to catalysts market year. with expand capture periods, coming momentum exciting are The to top-line a our itself we and believe and synergies technologies. believe soft some growth, all position for portfolio strong and to remainder the We that

result market of strategy offering initiatives. the early but a on balance dynamic to of is it. sheet I’ll April, by well As the support still opportunity simply are our in $X finish strategic we and is our capitalizing days growth suited are we saying a in billion-plus working, our and

Chris Chris, to open ask go line for questions. your the I’ll now ahead.

Operator

come you. first Instructions] Sarcone [Operator Thank from question Michael will And our Jefferies. of

open. is line Your

Michael Sarcone

question. and afternoon taking the Good for thanks

update you of on maybe have first strong that how Just hernia of an there? for also you on drive the be to that about the sales, guess, conversion addressing can stands, visibility growth? talked maybe procedures start, just give so potential us backlog that and to you size I what mentioned kind And – the and backlog could where it you comment you this in step

Roberto Cuca

is Sure, Michael. Roberto. This

or So that data quarter we the total procedures is, market number mapped out period, backlog month the this we calculated pre-COVID-XX, per is by trajectory have hernia so we of the the estimated a procedure. expected or given population-based way on used have

the population backlog. beyond So the of COVID-XX and the post the there curves calculated be of actual two reported those at we much growth the to growth essentially beginning shouldn’t area procedures between estimate then really looked and

thinking with a know you’re they rate. the unless same we’ve cut that and procedures estimated roughly executives that at in procedures. rate hospital said that We backlog higher we things the on who occasion, doing don’t XXX,XXX the And into down consult couple with past, of approach way, or procedure said industry than as dig then checked pre-COVID-XX you a our and

rate of there recent we beginning yet, we’re we’re the of least quarters, of but into the that more up slow backlog. most don’t recent So and periods. rate It’s procedure think gone sort think to that the at has we that down over accretion couple

Tony Koblish

that grow in COVID the penetration Michael, period. over into, of plenty which so for the do Yes, demonstrated of to low our we’ve market years there’s so is ability us couple our to last

a long will actually So of allows a it’s for years, us, if the do for couple backlog us. time. procedure over It and period that help harvest increasing next advantageous volume nothing unwinds to benefit is this us of which but

Michael Sarcone

procedures that I And guess do pre-COVID quick a on one. just versus levels? stand today follow-up Where

Roberto Cuca

that a were pre-COVID. estimated year So ago, we about to around procedures XX%

and guessing XX% somewhere pre-COVID We’re XX% they’re levels between now. of

Michael Sarcone

queue. me, the just and and Thanks hop one Okay. in back I’ll more for

through about disruption? your account One on wins some this? to are competitive more competitors ability you given the of Can seeing or capitalize is your working talk you disruption. And conversion more

Tony Koblish

Sure. take Michael. one, Yes, I’ll that

the product in an is for to And And it’s most plastic used XXX%, pretty old-school product bit the a procedures what base a complicated older. think in a user It’s question terms first-generation I not it’s been So I ab material. most say of tends that’s bit and wall older, biologic but in he’s reconstruction. of consider long as well. the then the – hernia in much certainly reconstructive skew niche around And to would time. procedures,

are found across quite are and U.S. spread have we accounts the patchy. the So

about procedures, So between estimated right, to although two it come the is volume revenue is those those and patchy when be procedures infrequent, $XX in. million

the a all little benefited but from not we think, much. that So situation, bit, I

now. for both the I suture, right? and product hernia or done our procedures hernia reputation bit our of universal XX% polymer On And being whether has of resorbable are robotically XX% reinforcement. being are being It’s right little side, product, procedures robotically of permanent of think done our reinforced a the a with laparoscopically.

technology. are used more that being our product ab think being older, known a for complex more we’re So is biologics, given used biologic inguinals, to product these another they for hiatals, before wall. reach And surgeons first-generation that that’s probably as simple product our older will across pure and tied ventrals I generation broadly reach

to So yes, we are picking and a going up but there, be here big not some conversion. it’s

I think a actually we and of in are piece much marketing the functioning wider market.

sticking reps comes plan our trade-off of where in procedures is our the for the we up. every Most that’s And want of to to as these think be. territory durability. our for to long versus I other directing our business the grow knitting is we situation time, to the evaluate sticking that the to preference our chase trade-off and haul,

in have we again, there happen size has then that have all well, when we up given keep where it, our just doesn’t rep replacement, time chasing we now. And to need footprint a Michael. we get and the a that And the versus is a access And of match contract, a that’s think that executing the recalled we way product as about mind situation have is a there. right be the

Michael Sarcone

helpful. you. Got really it. That’s Thank

Operator

Takkinen come of from will question Street next Frank Our Lake Markets. Capital

Your line open. is

Frank Takkinen

hoping start questions. the Thanks on Great. taking to one with Was GPOs. for

be of I’m little HealthTrust hoping from was could you specific about the to I understanding of more was bit in aggregate what but versus in growth growth challenging, think kind driven going talked calls, talk outside a three GPOs GPOs? previous composition of it’s you’ve revenue. about

Tony Koblish

Yes.

think revenue perspective, HealthTrust high percent a XX% GPOs. from I to at to So we now these approaching revenue from XX% from our is revenue of of went of mid-

GPOs. we IDNs at new system really have into into And are the renewal. three also process all right? implementation and new say. HealthTrust would given GPO we the non-GPO – the the is I growth a approaching XX%, executing this systems. first they’re So But story our is the universe, about getting stronger really, priority strong entire within for and real point, So across footprint, the is also that But

So we sectors. doing very active and in both well are

year see take maybe are rest us organization since in implementations of and the to days pickup the the big and going bureaucratic we’re really we’re this three. large. going opportunity They’re are through these And through think this next beyond, a I think within GPO year early rest of quite all these is to systems. and I

to as about five So from a there’s for the significantly our one ago here grown we’ve the a just haul GPO harvest long measured factors. us lot for But of year one from now. to as

Frank Takkinen

That’s of that little recently. helpful. as I versus half hernia a been in a in maybe then like the hernia sounds had growth it. Got expectations but PRS. bit, hernia back PRS the And know of year, little outpacing has the been it stronger for bit

year? versus close are you trying growth to from how thinking understand guys just So about as you hernia PRS out the

Roberto Cuca

Sure.

OviTex year-over-year. that, grew So to though, year-over-year. PRS of XX% that quarter. grew A second from growth lot number do lower XX% had PRS with last year’s

million, PRS quarter second year just revenues which were and the of So $X.X was ins the reasons. highest quarter for outs PRS year last for

a on So comp the it growth tough was perspective.

for that, grower will do half. certainly to expect PRS the it’s we for the second that that overall larger return likely So notwithstanding being and likely a year that

Frank Takkinen

one last Tony. then go And okay. Well, Sorry, ahead,

Tony Koblish

are put both on Said strong, to to going it. just be a point

Frank Takkinen

me. last Perfect. for one And then

back profile good see be XX%. for margin, gross margin we hit the year? gross about the On of to half How thinking that should the

Roberto Cuca

how we order. gross bump margin out, on So around will depending we as pointed

we actually, buy buy in take purchased we which inventory, we for when to product of or quarter destruction quarter. all we or inventory build a exploration that charge reserve potential inventory, it So the for any the subsequent when that in

do So expect as and little ordered we as amount but bit the up been far down. inventory some two the of a between this them, quarters smoother year of that bumping we have as

between quarter So achieved the the quarter. XX% to that second it’s XX% in we the somewhere saw going the that and be first in we

Frank Takkinen

Okay.

the progress. congrats good. for questions Thanks and the on Sounds taking all

Operator

next Thank question. our moment you. One for

Sandler. of Our of line come O’Brien Matt will next question from Piper the

Your line open. is

Unidentified Analyst

questions. for the thanks And Matt. for on Phil quarter. our great Congrats taking is this on Hey,

back as think XX% the to to guess For us relates about decision wide? this understand the guidance, you implies of I help can the keep starters, XX% range to it I it growth half. in

So gets what the of just understand that you and range? help bottom us top to

Roberto Cuca

Sure.

you the fourth some reasonably fourth over some third on the we’ll for third COVID-XX it is that up the and see for frankly, taking fourth uncertainty So to steps still to acceleration that quarter impact achieve the or XX% in the to the from half around and quarter lagging the quarters. to large, be range is wider some the there could range year, XX% but And is and its a the third.

the we’ve ourselves give to range. kept room, So just it same at

Unidentified Analyst

guess here I And multi-partner a helpful. That’s GPO. on

going do currently As COVID I think think penetrate where about are account HealthTrust now, And on how and color third believe tailwind ability And into contract during GPO, meaningful impacted where where April any versus currently GPO? X. to that that you stands? account your I on first to? a you do first just them started penetration be with you that can get with which then think still that Is that it the to

Tony Koblish

ups even only implementation Phil, period, I HealthTrust, days know, we’re during COVID revenue and the would right? the XX%, known had, the given HealthTrust of bunch early to XX, So made shareholders. systems don’t time, about whole of of penetration, coming And we very in a downs is XX% got terms say of out and as probably of XX% still months pandemic. XX with with HealthTrust. we of I up

HCA are only into We of haven’t HealthTrust. that yet. implemented we There many other and really really systems the touched have HealthTrust under partially shareholders component

of just in with rest the think all HealthTrust. of whether four part in others but there’s HealthTrust of tenant, there, all it’s I run a a the us lot component with So ceiling are the of a to bigs, work well, HCA year stewards, of heck as for a that not

like source for to feel us. of growth a great that’s I be So going

raw start was there by of and terms and triple April or nothing instruction dollars, has didn’t third GPO their until in really which The design. implementing essentially from gone so, to roughly we

grow GPO third for the lot a a well. heck to So of as us room in of there’s

We then of Premier in very there. are largest the second the just early side, starting very become And along nicely. that’s revenue. out And on already we’re And coming source that’s our stages.

We are last grown very, that’s well very Premier, in end since of year. underpenetrated but very the

and see GPO at may than the days very perhaps all think really contribution shoot I and executing we’re good slower given to fronts, the So up it’s growth the very here, part to aren’t that in optimistic strong rate a that we’re advantage raw reps with, and going that’s do little us on what at a we’re to and GPOs. to of But It right you’re bullish going a well. that shoot IDNs and early we’re putting fact lot systems the work for in piece of as take we’re places dollars up.

Unidentified Analyst

Thanks so much. helpful. Very

Tony Koblish

Thanks, Phil.

Operator

question. you. next One our Thank please moment for

Our Turkaly Securities. from will next of question JMP come David

Your line is open.

David Turkaly

might Hi make the evening. just trends and/or on as anything that, you pricing, or might Tony, that strong on contributed mix I business comment side either a to like either in was. good ASPs hernia being side sheets as seen have wonder it of the the if you’ve larger from

Tony Koblish

Yes. Hernia side was volume.

out. not since taken We these a price we’ve products have increase rolled

Our with for offer value good with tremendous complete pathway GPOs. proposition engage contracts. systems. of for more is we clinical and a believe patients and and have value win want some a to array this we until to very We superb There’s data strategy is that performance a the right

it going crippling much the pricing we’re where keep is discounting that So we’re and either. GPOs showing then isn’t the at to pretty our

happy. and savings everyone is and a from require the that by huge price do GPO discounting fair cost level doable very product the priced We’ve are list not

going that for So to stick now. we’re with

into to future. been validating it’s I bit on still growth. – clinical a It for some mean we plus the access, on line hovering bit and that’s in now. $X,XXX, it’s minus and data increase have we’re a ASPs and And technology, not But the take pretty minus to now, steady. around think It’s for $X,XXX, us, people us. it’s or approach the PRS. lot might best doesn’t think anxious about our price for hernia situations plus or little little listen are it’s driving where getting We top our

here big has long changed an It’s spectrum. go. It’s which raw is it’s really there nothing that’s the So just implies not this not or perspective, just just which pieces making from consistency, across a good or thing ASP the for growth haul.

David Turkaly

Thanks out aware that know Great. looking a competitor labeling breast. that’s PMA for there that. for for on there’s specifically you’re I

you on So think I’m how couple of that if in view curious what coming in the if you next Do that thoughts that that years? is just your PRS are landscape? occurs, do

Tony Koblish

designed game. program So IDE We into animal going, right? own to some are completing of have we’re process us our the large in models get that the

retrospective We of we fit retrospective with studies. one amount are good us the or anything the retrofit which array or allow have an that of decision situation surgeon-engaged into studies after emerges of will whatever other. collection that wide IDE and to solid, collecting data, clinical a a cure size data, And FDA way from include programs continued

we’re part this FDA we decision. based chosen the so moving can and like pathway the breaks on given all it whatever activities the feel fits an now, Right in happens those the menu from game, intend our with with dialogue do choose exactly is pick Dave, what to time. have to decision. is we and And what forward, nature Dave? best how we that best figure we’ve of that chaotic be out So sense over to makes of it what

David Turkaly

Great. Thank you.

Operator

our moment for question. next please you. One Thank

Our Canaccord Rose of next question Genuity. will of come from Kyle the line

is line Your open.

Unidentified Analyst

Kyle. is couple a George on for of have questions. Hey this I

So the reps. concerning first one

XX adds So half bit towards maybe little And you like in have into? the cadence rep What about a looking XXXX. currently. of how territories you’re to think that – what reps of terms you expand noted about we should back on then

Roberto Cuca

This George. here. Sure. is Roberto Thanks,

XX to goal at being we of as by at get obviously, we it that I beginning to them the bring to XX reps, in of some will XX that the for So year, as point we year, – – to XX of get difficult although end reps reps the not exit. said the should our XX today, new to will out be is us

we get we be beyond to talked that we also recruit may to fits if more we the XX. here; that five just like be fact not XX reps about the XX. be willing to than needing that it’s identify that would would feel We’ve to good So go

the rate at XX the feel before hiring over. have year, not get that if bit beyond end that getting to far confident same and the to about continue we’ll we pretty but a so could we So XX close of pretty

Tony Koblish

to What George, hired I add too, or Yes. have I’ll have been now, that week so that approximately $XX of that is million the the seven in last so. or think we just

were not in for And the of we’re XX So Roberto footprint. here. reps as second And over strongly this to GPOs capable lay for three going bulk high where half really beyond, the maybe the out XXs it’s But think where the hiring strong generally the the said, very really have look reasons. we It’s to we’re productivity almost the of competitive all year. speaks even at country point. the that having that’s be we the the much quarter. I in very And more forward reps impactful to

and we’re So heading the the productivity of optimistic half beyond. are second and the headcount that in for very both factors five rep direction right the

Unidentified Analyst

product. question Awesome. long-term on would then just my the Great. And be resorbable other

to in Just because something of kind product? the have be will in product, distribution negotiated the the that later. included And of strategy? is OviTex that Or based of is terms where are that current GPO of then you at that rollout

Tony Koblish

the a got we job We’ve done contracts of clearance. the after nice updating XXX(k)

XX to product about We the out rolling users. are early in of the process

what that far. We’re into weeks about so we seeing process. really And we’re like two

experience we great contributor the and quarter. a going should third second in in a to think this an an position be at it’s some point beyond. be perspective from and I to inventory perspective in turn half wide the open And

immediately, to strong I LTR we So contribution from say. forward almost look would PRS

Operator

for moment Michael next question. of One from Sarcone Jefferies. have you. our please we follow-up And a Thank

Your line is open.

Michael Sarcone

Hey, for taking the follow thanks up.

Really one Just question one, XXXX. for last about a me.

mentioned days fronts building you your through XXXX. XXXX, it’s very contract, GPO products through rep plus you’re on early new the out So out plus you’re in all base still rolling

of new of full year that three base products. look XXXX, all have of benefit full a I a year GPOs when the the full and you’ll and to then larger So of year rep

So there increase guided higher versus an your million $XX absolute million than any Is reason you’re dollar $XX for absolute expecting XXXX million to basis of comply why XXXX? higher is on than prior increase that $XX XXXX, be should year. dollar it that million $XX to the in

Roberto Cuca

would haven’t But provided of we XXXX may to for as hire in what we XXXX guidance the what add So continue well. on effect is you I described yet. – that to reps XXXX

So potential we’ll new growth XXXX. but that feel those also from XXXX, to reps from reps the growth continue additional in annualize in

low We in think as there’s we a talk these of for opportunity. about lot as being So us markets. digits the single far share unit

So possibility lot of us. for a there’s

Michael Sarcone

Okay. Thank you.

Tony Koblish

Michael, thank you.

Operator

like the back for call. Thank now you. the Mr. today’s turn Q&A And Koblish would this will end Kolish? I to session conference to Tony for remarks. closing

Tony Koblish

time. next you see we’ll Hi,

Operator

Thank This all participating. for concludes today’s you call. conference

a pleasant have day. You disconnect, may and now

TELA Bio (TELA) 9 Aug 232023 Q2 Earnings call transcript