SPNE - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2018 SeaSpine Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will follow at that time. [Operator Instructions].

conference being this reminder, a call recorded. is As turn over to would now host, conference to like I your the Carrie Mendivil.

ma’am. You begin, may

Carrie Mendivil

Thank you.

me released CEO, Bostjancic. Joining year ended the is and XXXX. and SeaSpine John XX, CFO, fourth Keith quarter Earlier financial full Valentine; SeaSpine December results for today, from

operations we financial make plans, statements plan, in business include intend and and expectations and within could, to this believe, statements statements regard meaning of During other our expressions. would, future will such words are of conference the objectives and for condition. All historical future our will, as call, statements results forward-looking laws forward-looking our federal securities than Such statements. strategy, similar facts

which on and our February You are cautioned information not current XX, to place as only statements, XXXX. belief reflect are of based undue speak forward-looking and only reliance today, predictions on

implied our which please at now differences call For and at filings on those over a and cause and Commission, release Securities could description with or to Web corporate our Valentine. will material Keith available Keith? the www.seaspine.com www.sec.gov. that periodic of the turn and and results actual our I uncertainties news by Exchange forward-looking are the between risks stated site see statements,

Keith Valentine

innovation across half orthobiologics the you into Carrie. almost the Integra four was portfolio thank growth you, XX% to distribution solid and Thank we products and Good us. upgraded accelerating in we internationally. afternoon global translated committed spinal These and our in of network. have drive implants Since efforts revenue implant spun-off from orthobiologics have then, than years spinal deliver all XXXX XXXX and differentiated execution. to the second joining for U.S. and both and launched more revenue another consistently our we When year growth. of ago,

systems cost to completed spinal continue is raise take we momentum and in will to XX October capitalized hospital vision value continue to are to with on together the combine in remain in our which solutions XXXX. that The and SeaSpine We positioned look and we organization to executing XXXX. developing improved implant well that million laser-focused solutions orthobiologics, XXXX, effective deliver market we innovative surgeon-centric this continued equity progress share Following well procedural industry clinical the entire surgeon, steadfast and and leading patients. drive in forward vision

year XX added XX revenue largely Turning of X caps business our totaled implants period. million. growth solid of performance. Revenue in This another which grew the spinal for a strength the and grew of international to XX% Australia and the for recently U.S. line million solid to annually orthobiologics in our million, and Latin America distributor international fourth XX% Europe. increase to on X% XX% top increased quarter versus year-ago an XXXX revenue

U.S. XXXX upgrading systems For onboarded of versus distribution since extensions in past our XX% full line we more very the year of beginning and contributed deploying the year-ago X% year wasXXX.X increased over innovative U.S. sets to from benefits spinal X% network portfolios, than are growing the total and the year. by implants U.S. spinal the million the U.S. our and successful XXX.X In orthobiologics the full and years. XXXX, period. Distributors of new more nearly across the revenue than more X% few both XXXX. revenue growing million, expanding realize with and quarter launching implant the launched fourth products the prior for we’ve of X% an continuing revenue in of increase to U.S.

to This our increased XXXX. XX% revenue the success more investments than full and U.S. in made over the XX% over launched products in the contributed XX% XXXX. deploy which recently part in sets, additional for quarter Mariner Shoreline New and of we fourth by year implant spinal was to and due

Plus and of revenue of fully of quarter and all XXXX. the OsteoStrand fourth in Additionally, XX% OsteoBallast U.S. which XXXX, products, OsteoStrand the were orthobiologics contributed commercialized nearly in

to in year programs, we of we more our distribution increasingly also implant further expanded experience successful foundational priorities exclusive our by longer growth This that sales an global with and full continued training near-term deployment our new of and was innovation and products increasingly important customer orthobiologics over held scale supported of continue on grow on These full spinal and meeting share venue and this and focus Our our of recognize to product how the in partners. term. our can their the is utilized and The the a to investments It month. commitment production providing network new a investment our confidence celebrate most great surgeons partners. display and education to efficient our distributor the combined can kickoff and are to together distributor distributor to earlier which meeting support which was highly our underscore was the surgeon way world commitment class business. larger our systems at Carlsbad gives

series each continued Our interactive build our many mutual growth to and a and teams innovation, other in customer partnership energetic supporting spent to investment with and few commitment outline a in and of sessions our collaborative distributor a stronger initiatives. global of partners days to

momentum and accelerated meeting our dialogue systems. implant sharing positive for and also We involved. candid translate energy information new that and provided and spinal additional excitement this believe products success recently by The training orthobiologics and we generated created launched everyone into and commercial on will

execution. launches. our innovation exciting year and another for was Turning product XXXX to

by in we continued that that for use launch production XXXX, we we navigation designed system. a system and remaining NanoMetalene lateral products received posterior has to quarter, disc options surgical system. Highlighting accounts X.X we that that a We line us a of our orthobiologics launched with the and fast to rod spinal third-party Mariner product addition Daytona decompression Ventura centers access. and and frequently a to used ASCs. system, and launch midline launched we NanoMetalene they’ve cortical for in for full Regatta implants launched what alpha gain additional our for clearance includes the additional the for invasive, and initiated performed Pediatric solution our access now less Stature alpha System, system. FDA implant interbody also a launch We System recently approach preparation the the procedures the of entry comprehensive we In we initiated is our products, few a Deformity gaps In couldn’t our been XXX(k) implant capabilities our fourth Cortical address launched which launched have of instrumentation previously instrument support posterior millimeter critical products of most new in scale the growing And successful procedural-specific line features technology. to our extension our regional portfolio commonly Small

We expect System of and half Cortical in launches second XXXX. commercial full the the the Regatta of system Mariner

mini-open MIS Looking of extend screw foundational X midyear next have to XXXX. the Starting platform around system with cycle another using XX with procedures. surgeries anticipated consists we and launches months, our will tab of Mariner product system rod. or system, applications Mariner to support MIS use for in either in percutaneous the ahead instrumentation into application robust of leverage Mariner our Outrigger and system modular system revision X.X our the Mariner continue The a we the implants pedicle over The Outrigger of Mariner and incorporate the head the tolerance, Mariner of Mariner launches instruments and millimeter Mariner range a extended [ph] will designed millimeter of connectors platform MIS and planned.

As with market the system. capture positioned procedures, invasive launch to market share continues will the to be of minimally the degenerative well more more shift to SeaSpine Mariner

plan our quarter a cervical system also our for a NanoMetalene the extension is line XD surface We The titanium Shoreline third with launch of enhanced XXXX. technology, Shoreline that launch properties. proprietary enables structure anticipated bone-friendly incorporates REEF to extension of that unique interbody alpha anterior [ph]

next technology includes straight interbody REEF for to boarded single corrections and combination a anterior TLIF our also generation plan incorporate certain rotate XXXX This surface devices. deliver and and We to PLIF TLIF endplate with NanoMetalene and using reliable respectively. future consistent both a accommodates to that in new in technology in early approaches and articulating impaction with an designed and XXXX, easy-to-use ideal inserter. sagittal in maximize a late alpha are These And techniques. contact placement and way anticipated interbody launches interbody

procedure. increased ALIF NanoMetalene anterior demineralized from our We have anterior launch easier and bone emphasizes alpha these system. lumbar increase surgeon and Vu we Collectively, launched to not help also the franchise will needs expect space presence of these provide hydration launch visibility Delivery launch of launches existing them Mariner modular to procedural predictability address OsteoStrand products OR We Shifting to of to XXXX XXXX. in with during we’re wide in range OsteoStrand will innovative a shanks of implant positive to [ph] new preparation TLIF alpha in with a Arch of launch sets. The implant. will and our to surgeons. system product of comprehensive on products surface well the the we disc new new simplify alpha no-profile an and modular OR In surgeon configuration for Graft we our late XXXX, about Rapid in new instrument optional these support instrument anterior include device orthobiologics plate. to the generation as received XXXX, with hands intraoperative the interbody procedural in designed invasive DBM excited the be retractor us which access option the plan early the our with and minimally but anterior packaging prep capture NanoMetalene as REEF only and enable XXXX in to new retractor method the make early products to Prior a fibers integration our better fixation the posterior to be Prime portfolio, interbody new to and the our and delivery. will of Plus This differentiated both medical-based feedback late next and planned delivery the complement in compatible SeaSpine entire This line a•POD the technologies. our and to interbody the we to our disc that screw disc effort launch improve surgical to and decompression an that, designed for screw fibers use a desire plan newly and lumbar a

launched Our in recently product United products a robust development opportunities commercial the States. pipeline address attractive coupled with

improved patients. products in and clinical training outcomes expect increasing preclinical our Our surgeon-centric and their to further product adoption. development we drive meet more helps products of clinical needs education our investments and ensure the surgeons their that and to with medical evolving cost with And our and demonstrate in effective evidence

are John as call We positioning our turn company both spine will financials surgeons over details I’ll further up. I wrap SeaSpine provide to our the the outlook. to and financial choice on and distributors. Then, more now John? among of

John Bostjancic

good and Keith, afternoon, Thanks, everyone.

and margin technology of strength Plus XXXX been growth U.S. earlier, product implants by of largely recently led solid and America and a of orthobiologics instrumentation were in increases to obsolete fourth recently sales in brand million to with was Biosciences to OsteoStrand of NLT related $X.X selling, XX% and prior the period but to $XXX,XXX compensation, XX, quarter XXXX. fourth and increased product $X.X quarter the higher recently continue XX% loss stabilize of Australia to against XXXX our $X.X Kuros NanoMetalene particularly and evidence their development X.X% in investments graft $XXX,XXX slightly The material of of scrap Europe. inefficiencies fourth XXXX demineralized expenses line offset $XX.X under R&D offering October costs and revenue liability year. the the DBM of offset million name implant the XXXX. XXXX cash driven we The for digit of $XX.X expense expectations products, was this and million, Latin of general outstanding public by bone or we were million for quarter for agreement an recorded from which decrease a in Mozaik quarter administrative for compared revenue for same international strengthened was OsteoCurrent. of XXXX of was manufactured totaled gross ramp that and revenue million revenue as offset to revenue resources increased and U.S. This in million compared invest mid-single legacy As under expenses. is the with $XX.X and distributor rates facility. distribution revenue a believe margin increase and $XXX,XXX help our in by XXXX year-over-year of XX.X% NanoMetalene and proprietary common in continued our somewhat substitute in million synthetic credit and equivalents amounts quarter bone significantly We for matrix $XX growth our increased stock, margin recorded revenue X% XX%, in customers. of our the driven higher a for systems. market raw $X.X sheet Those non-cash limitations. at bringing to outstanding Gross to the had Cash, and mix. Ceramic to to was U.S. with declines fourth the new Shoreline to in declining growth launched X% year-over-year the Matrix our current higher to balance fourth full on million, a base. production was X.X was and Gross Collagen totaled fourth no surgery through a quarter other product shares charge manufacturing and of fair fourth of the in subsequently in will capital non-cash a recently sales up signed has total implant the $XX recorded product year. to impairment launched the in the and loss Operating of offering to our increased cash than in platforms. a orthobiologics products. those associated the million. orthobiologics for used tax We quarter primarily prior case net programs for spinal XX% by offset fourth We million of compared based the that XXXX of on spinal Ventura Keith $X in million recently liabilities. increased a driven million of price the SG&A related decline to graft and continuing $XX stock-based due impact $XX.X passage million gain value release added in the the in fourth quarter by Spinal consideration XX.X% the expenses foreign volumes of proceeds upgrade products our an quarter launched of debt. period increased million, repay than differentiate clinical $XX by December all contingent $X gain the by products statute spinal Net to noted the to were lower $X.X of line guidance. led $XX.X procedural increase more by to growth million those proceeds increased XX% partially portion million with to the in bone Mariner, our decrease a compared the quarter, more fourth new We net by year by our line. was same grew products, million

on million $XX.X inflows G&A XXXX. flow quarter a our and excludes continuing financing percentage $X.X expanding remain reduce for cash as revenue. burn, million We the margin expenses for free and fourth Our year full and to outflows, of which was gross the cash-based focused

revenue build that sales, that to operating redeploy to to plan capital towards R&D inventory are continue and implant the critical growth. marketing expenditures and driving and much set leverage initiatives we sustained However, spinal of

outlook year XXXX financial expect range our full over continue revenue to be X% to $XXX XXXX, of $XXX for to million we year to the X% of to million in growth Turning revenue. full reflecting

the the half sets we of expected implant of guidance, While based launched our that in quarterly not the first half systems. outpace deployment on will we recently revenue of second additional XXXX the providing slightly spinal growth of timing are the anticipate

of we the expansions the yield with as profits XXXX we’ve recently improvements XX% for to the within quarter expect fully of a realize benefits XXXX Irvine. we in gross and to down implemented increase to range more the XX% Moving P&L, in of second starting meaningful margin

XX% to this to Keith? non-cash revenue compensation value any changes We turn like Keith closing and liabilities, to point, for approximate charges contingent SG&A, comments. XX% R&D and gains excluding over I’d X% expect of At to losses of fair stock-based related approximate to XX% the the non-cash or NLT call back to of to in revenue. consideration

Keith Valentine

John. you, Thank

SeaSpine over realized. in our and of pivotal been increasing We are launches reposition and be product to growth past reach our we the goal execute our exclusivity much year another year to pleased network. the and as distributor with continue for has global will on accomplishments XXXX expanding the

which in We of organization employees complementary will nearly now foundation devices that, have a spinal are committed it solid orthobiologics, up leverage interbody differentiated for competencies core and built growth, that technologies our our providing With is XXX for modular and high-quality, who open to we systems. sustainable questions. energized supported Operator? instrumentation by

Operator

Thank you. [Operator Instructions].

first O’Brien from question Jaffray. from Piper comes Our Matthew

now is line Your open.

Matthew O’Brien

for for questions. Thanks taking much Three so the me.

of guidance the I and to a big in is understand spine you you’ve digit to Australia been off growth quarters. putting the compelling the couple of X% low-double got start last Just from bump industry up year, side, in on QX last but pretty X%

last and year, bit of all products slow new this would little coming? overall exclusives why from with So down year business these performance the these last half the all especially we see a the of

Keith Valentine

first XXXX. obviously we’re of want the We half off very think get we visibility things. just year. granularity year. Yes, And as ensure as Matt, is, of how kickoff starting I to strong John the comment the we’ll the make the year couple year I’ll second think that last to one and greater let I well. a a is rest

And very make then was so predictable sure to appropriately have XXXX we to together. a make the and acknowledge And as things shift, our first effort we’re be we’ll planning adjustments. some that

John Bostjancic

expected set to I with why that, bit purchases add the when of second additional, would more in with onboarding little builds only of exclusive just expect distributors, Matt, the The the timing additional of going we a bump the thing for we the and deploy of we’re sets. higher deployment with of the is half of the set coincide that’s that to timing additional the timing year,

Matthew O’Brien

at Fair Keith, a hospital or new introduced some this where over procedural cover basis, and there offers the couple then, you last can or the on portfolio Are a spine glaring products even you enough. many or are these are of how of are won’t able seem They cover, be of is years you a point? number to you’ve about coming. that virtually essentially a talked cover And even how gaps either that SeaSpine getting can that them will everything much case? that When about with the when you all interesting. you these all struck a laundry there still products by a hospital’s that I’m needs procedure coming. new point to still list think really you need more in

Keith Valentine

a of that’s there. the portfolio, most Matt, it’s at cover two we at think can’t done step spine entire technically surgery I think when you hospitals. I look the Yes,

items has we slight that to for for a challenge extensions they about been there’s the have we updates. items been to and and just philosophy, are instrumentation because our will number be implants in of talked update And have how change a pathologies think for updates there’s been want that. critical to change product a we line perform slight XXXX the different or I those update in

We’ll philosophies that that as company products them have as But right we area it and give do spine think space and address that. don’t opportunity We many largely possibly still a trauma an I strategy a tumor grow. where versus degenerative be focusing philosophical to where much. more on can supply. the an is in provide new treating providing edge legacy modern our shifts different is not alternatives gives we still focusing we’re which to as spinal now that’s as what for products. much that So I I new had are us able far now still model shifts as But of think We think a far as smaller of we’re the developments deformity for and us is pathology. most kind the space an modern what

Matthew O’Brien

distributors your of go? well That’s sense more super have And then guys all with love these products, some those those And for get the much to of recently. your conversations a with lines I’d have given you’re maybe offering. product doing been distributors breadth helpful. exclusive then extremely new along to how room even having the more

Keith Valentine

bandwidth a probably individuals to this the those in earlier, of our we that talked about are increases that we’re of the a global have deal for number time in the sales it’s Yes, of from about talk And coming anticipating meeting. great script great I same XXXX. bigger our some individuals a as that celebrated,

So to think the deeper. go have do they I ability

United In aggressive addition, being and on are new also opportunistic the across exclusives. States though, onboard bringing we very

takes and really into talked be us. I an while about their think focused the that onboarded exclusive feet before get we’ve a territory distributor to this on

we’re meeting of the existing but folks sales new But efforts with off our next And pipeline and be we’re of are and momentum end and the products. the that right year. continuing some with the about paying will feel the making very after that of so towards the only year they’re not early some products now momentum good build have, out excitement the coming getting to

Matthew O’Brien

so you Thank much. Got it, very helpful.

Keith Valentine

Matt. Thanks,

John Bostjancic

Matt. Thanks,

Operator

you. Thank

Ryan question from BTIG. comes next Our Zimmerman from

is line open. now Your

Sam Brodovsky

for actually Thanks the for is on This taking Sam questions. Ryan. Hi.

Keith Valentine

Hi, Sam.

Sam Brodovsky

in a new strategy you an of for products? as think out something or for you do this opportunistic of with the viewed of more can company bit Is see start little we move forward I’ll deals. this going is terms the that more licensing something

Keith Valentine

telegraph it a orthobiologics to comes especially keep think going when to on when it partnering of comes opportunities. that I we’re acquisition tuck-in synthetics kind very mind either or that side to Yes, the open we’ve

opportunistic And their a feel we this needs move good sales are so go a our synthetic very really force work some has behind strong great was and that perspective. to we great a orthobiologics about very from animal what with felt it product and like

So, yes, going we’re on. feel opportunistic new implant and Also doing technology like what brings we’re the some continue that to that. also good to very working we side, things of developments that about the on

as are they of and was think well I to mentioned on mention with just new Mariner in product do implant those intraoperatively. to will working have their in being we’re them our if technology the another items script, some line. number items with going new be there’s needed a technology and Not being forward that coming complementary that choice, good

nice feel that These tuck-in the can surgeon things strategic we So really more intraoperatively. that are choices good. do we just give to

Sam Brodovsky

licensing was It is then before agreements announcement. the in we January And the two into guidance this two from that in Was unchanged initial so about should as think the guidance just potentially agreements. something these addition? that or Great. factored

Keith Valentine

start Yes, agreements really the second seeing those of as effort both get year. we will steam the into half of and

no, it or further that But guidance. conversation original we’ll calls upsides. see have in when contemplated any think going launch potential gave I adjust is future So where and about was not we for we – how

Sam Brodovsky

Great. congrats questions another Thanks year. for taking good the and on

Keith Valentine

you. Thank

John Bostjancic

you. Thank

Operator

you. Thank

Fargo. Wells from Singh Shagun from comes question next Our

open. Your now line is

Shagun Singh

for Singh Hi, Shagun is guys. questions. Fargo. the from Thank Wells taking you This

Keith Valentine

Shagun. Hi,

Shagun Singh

are in any extensions XXXX? new was out, growth some have you players larger of was seen the you from you’re line also to seeing if disruption products in I just the wondering if meaningful yet? And wondering of with – then I benefit which Hi. most the called ones

Keith Valentine

look in take the in as interbody when ones the to a momentum good feel new and talked XXXX space, XXXX. the that from new really very with addition about the in degenerative we with philosophical about about, those going also introducing the upgrade We shifting kind at talked are NanoMetalene, we good very where as gotten Yes, some doing we’re of technology I so and have REEF you things feel of they good technology. important we’re in mentioned

very So offerings. strong those are

and of course strong has upgrades about very other having system into system system and good open started as and modular we the been The The full MIS MIS we’ve ultimately Mariner deformity has midline gotten us. done offering we move the Mariner offering is then a applications. feel well that more for to very cortical the as good

– deeper part So the degenerative space lot focused is discussed the products largest into segment. the on that spine is of and market all that I that of penetration degenerative a are

Shagun Singh

technologies That’s past just was lot pivot And momentum for helpful. robotics Keith I expensive have the curious. leveraging in for a And you Thank it’s of that. not OR. indicated really spine, procedures. in and There’s applicable that around SeaSpine the is it you in by a but all could in new direction

technology make navigational for have regional centers? of do affordable it you. robotic or a the how Thank And in do to you more strategy role place? ASCs evolving So you a see and perhaps

Keith Valentine

the that’s point a and good to are view think we market. Yes, I we how

You’re correct.

I and this some of is interesting. think very technology new actually that technology robotic

getting are different value from I different that it. sites think

a tool more it’s utility think of progress clinical even navigation is something to a Right now greater of than certainly going time. into a it’s more robot. I it and over guidance truly

where not ASC the of right said, or now proliferation. look we is future at technology are in across and regional That done and procedures the and ASCs calling going to I of affordable maybe do be you the as views is other surgery though surgery that centers depending States, most on the being what on your think robots of from majority have think general you. areas United I that would used

that be to affordable within and benefits. being and needs in is there it a time number that options. think the exploring, up being of but So reviewed time fits be to additional it out if you are we’ve do at the something I will, routine, cost but I in OR for surgeon’s seamless up there’s end do an same and opportunity needs ends the technologies think interested doesn’t there lower

kind talk so energy formal we certainly that’s and have about. on of And time it, do this anything we’re not spending but at the to direction

Shagun Singh

for Got Thank taking much so it. you questions. the

Keith Valentine

Thank you.

Operator

Thank you.

from question Fitzgerald. Bijou next from comes Our Craig Cantor

Your line is open. now

Craig Bijou

for questions. Thanks guys. taking the Hi,

Keith Valentine

you? Hi, are Craig. How

Craig Bijou

I of beginning some with it’s year start initially that a companies guidance. on question on and want Good. I A of to with year. maybe lot conservatism. follow typically approach guidance up the the understand the Matt’s

comps 'XX than of year-over-year expect I think and half comments a had the to of first second stronger dynamics given half that somewhat be interesting you your you your strong make half. second the

there wanted that market, is 'XX to overall we kind And the the just about, aware any that of should of So not see, year? I market of maybe environment and one, we’re your how into guess it spine you kind progress throughout just as thinking anything see of? be impression come I of kind then we things

Keith Valentine

that seen kicked Yes, us. there that off think concerns I there’s don’t anything the out we’ve as year has

we spell Obviously, out very put that that that that may interesting. going we competitor now certainly dynamics is through can in a I are the opportunities. and combinations are to have that different that certain on. certainly working some So think right not There’s or are may do formidable there rest. combining marketplace rather integration

well. aware that about also as I as we some that presents nice think the marketplace in are opportunities I the consolidation, there’s all think rumors

So opportunity, at especially opportunity about excited take say results I the share largest competitors, players. that think market end from and have I those that that with to still there’s that bigger still the would the we’re from been

distribution. I to for additional efforts some better and think is our some gain on market ripe part that more exclusive the

we thoughtful the no, that think the into make as are out the nothing year. I anticipated what and and as step before we concern. great we exactly So for starting changing we’re close there’s start just to XXXX sure of off we raises be wanted there expectations methodical

Craig Bijou

operating leverage maybe know then Okay. and in to and margin see Thanks. should and in That’s think on gross helpful. ahead out of ahead not some just move kind margin provide not can of Obviously you And you’re doing kind John, you and will we start of about but but beyond And obviously you and maybe you’re 'XX maybe for even like expenses. that expectations to 'XX, reinvest XXXX? to beyond? see looking I guidance for laid going where when looking how gross XXXX, we some just – operating

John Bostjancic

margin, view where been. gross consistent is long-term with the pretty On it’s our

ultimately two the challenges orthobiologics to year over high-XX% with the our expect XXXX Started products the be should Irvine to to be in we able as we the how in the those of efficiencies through curve, those those We the new the the worked we’ll to just the and to and the us three on process when the facility. because of benefits up sold big came pivot of mid to place put P&L. XXXX of improvements is recognize some half when of inventory that range to inventory next timing and years up and gets all into based course get the for see in start learning in second flows benefits, of when ramp through we’ve

going which to they’re until we of We operations. that quarter get those margin to P&L we’re the don’t through where think benefits to to just XX% up the XX% flexing already see range. start kind the rolling So is the second in seeing day-to-day

Irvine we’ll of improvements plant. So process continue been leverage the along the benefits with has fixed that all efficiencies. those to a lot there’s costs of the case And manufacturing to site, and

secondary gross us expansion. to a inventory to of gives side margin. I gross be will refine manufacturing volume on So orthobiologics it, anticipate and orthobiologics think primary driver gross plant. of that with I the to driver margin scale through that the margin we is And definitely grow the continuing that our practices, more us. going a the drive that for the be opportunity long-term management scalability implant But

driver bring SG&A far been pay we’ve the and has biggest the two. rates the the relative so and commission exclusive distributors them higher we talked as you rates one about On years in – the in side, more and

that two now also we’ve and starting moving and new distributors to onboard in distributors for onboard but move to are revenue We’re needle, XXXX XXXX. three of into expect in those some brought bring bringing meaningfully years that onboard their

relatively agreement reps, will the sales exclusive high, on in distributors but build their So rates of higher hire distributors those business more their commission as out and market the that plan. footprint, our commissions be we those that’s the want those larger – you they rates the to they that still those more early according revenue model the once more and and all drive get that’s been folks are Because driven get it’s growth. to when along to proceeding get back

Craig Bijou

Great. That’s helpful. And one one. quick last

could I that watching out guys be for a wanted to for about some XXXX? in that so talked think you sense we publications any should clinical releases just data in evidence come get your or script,

Keith Valentine

side we’re the from the perspective. continue even from work that much because doing beyond to of miscellaneous that going animal one year going start stuff aren’t we’re enrollment. you to starting But just thing human the until for marketing probably We’re post having we’re doing, see next an

enrollment things seeing. the what in early it will kind But will are take so we certainly that going meetings until some year. even be of as and of the that of that be And the we’re overall get time. and at data how chatting won’t we about next later single And a year shared have be site potentially may there you. may But some have what progress

Craig Bijou

taking Thanks questions, guys. for the Okay.

Keith Valentine

You bet. Craig. Thanks,

John Bostjancic

Craig. Thanks,

Operator

Thank you.

comes Our Cohen Thalmann. next question from from Jeffrey Ladenburg

Your now line open. is

Jeffrey Cohen

John. you? Hi, are and How Keith

Keith Valentine

Jeff. Good. you? Hi, How are

John Bostjancic

Jeff. Hi,

Jeffrey Cohen

Just fine.

sets XX XX coming sets? to as area Regatta walk an So or far you Mariner as through sets, out as number that going XX? you as expect, on toward little me the more a or or for do bit example, far of can the what be the Is

Keith Valentine

to sets are the out comments – plans XX practices XX to number things frame Mariner Keith XX with XXXX we full increased consistent and to sort launch more. probably further did the that the in mentioned would to in the my the play we I Shoreline of in of expand XX% and so XXXX after with systems then set that that as launches are through roadmap Yes, typically the walked and past to we is range. to go in in sets two those And new And commercialization, be Shoreline like and as by which of XX Mariner then sets.

these So on those and in similar then terms double we anticipated subsequent size follow I launches launch. utilization, future things high the an the to for cadence sets the and get set And a anticipate down and as year. go in if would would invest alpha, full that more builds we of

Jeffrey Cohen

inventory the expect you on levels its the and Okay. build current of And to John might over XXXX from the potential be what ramifications about XX.X?

John Bostjancic

XX.X referring amount. – the to total inventory

Jeffrey Cohen

Yes.

John Bostjancic

in couple a play. things of There’s

the the have fixed shelf. So set and go to then the assets but obviously it you with instruments replenishment implants need the on into deploy and builds

sort But the to to to would as support the particulate anticipate to the able we the launches. with side DBM, scale fiber-based inventory I shift production we to as more transition fiber-based of the fibers. active. we go product to that DBM of the up will where continue We’ll back on start some inventory growth. at to those the line that efficiencies, orthobiologics anticipate think So stay can full that can DBM. running should over-particulate be cost down mitigate think legacy grow right both of And in is But now DBM we the the board I scale and start DBM the from because particulate to we’re mode we’re we year XXXX on

Jeffrey Cohen

on far more timing do a little years? the you about course the Okay, term products, like? or as you as Where to looking happen pricing arrangement compared talk synthetics? And in other that midyear? short And including got as DBM out the to bit Is in for expect does could come it. to going

Keith Valentine

synthetic DBM versus So you’re talking the pricing? about the

Jeffrey Cohen

Yes.

Keith Valentine

Yes.

marketplace. a the we comfortable particular synthetic, it this that command premium in So will feel

going Now be to feel product perform a the to keep achieve animal levels as to we able be able synthetic because of DBM premium what are cell-based mind that do the at synthetics and not on work price they But shown side. typically have opportunities in same the and of and because slight BMP. to this that we’re

said, that probably our premium favorably to pretty it Now compares DBMs.

also whether premium similar whether that’s a our so be already levels category or in It does Our marketplace, that. a have Evo-influenced it’s in EvoX ABM Strand the the to will the premium, command product DBMs at it’s material.

Jeffrey Cohen

I approximately XX% What one range? And you Perfect. metric you about the to was John, previously more, R&D XX%. to Okay. on the may. be spoke anticipated gave XX% if the second

John Bostjancic

stock-based non-cash charges the on SG&A, acquisition fair the of any excluding which changes in liabilities, generally accounting. comp contingent NLT are or value was That gains and the losses consideration

Jeffrey Cohen

the Okay, got for Perfect. it me. That for it. guys questions. Thanks does taking

Keith Valentine

Jeff. Thanks,

John Bostjancic

Thank you, Jeff.

Operator

Thank the back not turn I time. questions further now Keith Valentine, for further at call I’m this CEO, showing to you. any And would any like to remarks.

Keith Valentine

us today great Bye please a have joining you and Thank evening. now. for everyone

Operator

concludes today’s participation This and in Ladies gentlemen, for you today’s your program. conference. thank

You day. Everyone, all may have a disconnect. great

SeaSpine (SPNE) 27 Feb 192018 Q4 Earnings call transcript