Aziyo Biologics, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Azizo Biologics fourth quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to one of your speakers today, Hunter Cobby. Sir, please go ahead.

Thank you, and thank you all for participating in today's call. Joining me are Ron Lloyd, Chief Executive Officer, and Matt Ferguson, Chief Financial Officer. Earlier today, Ezeo released financial results for the fourth quarter and full year ended December 31, 2020. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meanings of the federal securities laws, which are made pursuant to the state-powered provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that do not relate to matters of historical fact or relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance, impact of COVID-19 on our business and prospects of recovery, expense management, expectations for hiring, growth in our organization, market opportunity, guidance for revenue, gross margin and operating expenses, commercial expansion and product pipeline development, expected future product launches and milestones, and expected results and performance of our partnerships and commercial products, including patient outcomes, are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of these risks and uncertainties associated with their writtenness, please refer to the Risk Factors section of our Public Violations with Securities and Exchange Commission, including our quarterly report in Form 10-Q for quarterly period ended September 30, 2020. This conference call contains time-sensitive information and is accurately only of the live broadcast today, March 1, 2021. ASEA Biologics disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. Also, during this presentation, we refer to gross margin, excluding intangible asset amortization, which is non-GAAP financial measure. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure is available on the company's earnings release for the fourth fiscal quarter and full year end of December 31, 2020, which is accessible on the SEC's website and posted on the Investor Relations page of the ASEO's website at www.aseo.com. And with that, I will turn the call over to Ron.

Thanks, Hunter. Good afternoon, everyone, and thank you for joining us. Today marks our second earnings call as a public company following our IPO last October. Undoubtedly, 2020 was an extraordinary year, but the ASEO team has continued to make meaningful progress on our mission to provide advanced regenerative medicine products to improve the outcome in patients undergoing implantable device-related surgery. Our products are designed to reduce the complications associated with implantable medical devices. We do this through our unique and proprietary platforms based on our deep understanding of the science related to the cells, growth factors, and the structural matrices that best optimize our tissue products. Our core product platforms address three primary markets, implantable electronic devices, such as pacemakers or defibrillators, bone repair and orthopedic and spine procedures, and soft tissue reconstruction. Additionally, we fulfill tissue processing contracts through our Richmond, California manufacturing facility. as a highly leverageable component of our business. In my prepared remarks today, I'll cover recent highlights and accomplishments, and to provide our current view of the market and priorities as we enter 2021. Matt will go into more detail on our financials and guidance, and then we'll open up the call for your questions. In 2020, we made considerable progress bringing to market multiple new products, including Ossigro-V and ViboMultable. We also advanced our pipeline products, most notably completing a feasibility study to achieve targeted antibiotic release for our kangaroo envelope and initiated new clinical studies to demonstrate the benefits of our products. We also expanded our commercial organization and strengthened our partnerships with leaders in the industry, such as Boston Scientific, Medtronic, and Biotronic. Late in the year, we expanded our channel reach through a breakthrough technology contract with Premier that granted access to our Kangaroo envelope to more than 4,000 hospitals and 200,000 other providers in the United States. We also broadened our leadership team, adding Matt as our CFO and Dr. Jerry Reedman as our CMO. And we added two new board members with deep experience in the healthcare sector, Maybel Jordan and Bridget Makes. And, of course, we completed our IPO, which secured the funds that will enable us to continue to disrupt the $3 billion regenerative medicine space. Turning briefly to our recent financial highlights, during the fourth quarter, the ASEO team once again rose to the challenges of the current environment, delivering revenue of $12.5 million, a 3% increase over the fourth quarter of 2019. and a 6% increase over the third quarter of 2020. Core product revenue was $10.3 million, representing a 10% year-over-year increase. For the full year, our core product revenue grew 17% year-over-year, quite an accomplishment considering the business challenges of COVID throughout much of the year. Turning to our business highlights, we finished the year strong and have recently announced meaningful progress on a number of key initiatives that give us even greater confidence in our market opportunity and our differentiated regenerative medicine portfolio. Starting with our products to address the market for implantable electronic devices, an opportunity we believe represents $600 million with around 600,000 procedures performed in the United States in 2019. We have recently met a number of important milestones. Our primary solution for device-related complications in this market is Kangaroo, the only commercially available biological envelope that forms a natural, systemically vascularized pocket for holding implantable electronic devices to regulate the healing response and stimulate the formation of healthy tissue. As a reminder, our go-to-market strategy includes a mix of direct sales and commercial partnership agreements with Boston Scientific and Biotronic, which adds support from their more than 1,400 sales professionals. This blended approach has served us well, especially throughout the past year, where hospital access was limited and we benefited from our partners' broad relationships and access to key medical centers. Our direct sales force has also remained productive, and we are encouraged by the recent progress made in onboarding new reps. At year-end 2020, our sales organization dedicated to this market included 28 reps. Our plan is to selectively continue to add sales headcount throughout 2021. With hiring targeted more heavily weighted towards the second half of the year, as we approach additional development milestones with our pipeline program of adding antibiotics to Kangaroo. As noted earlier, the breakthrough designation with Premier, which significantly expanded the market for Kangaroo in the United States, became effective December 1, 2020. We are pleased with our early progress in obtaining contracts within Premier accounts and now have several new ordering accounts as a result of this partnership. We look forward to the valuable contribution this relationship can make in broadening our reach, as it enables us to accelerate our commercial traction and gives Kangaroo additional validation for the value and safety it offers patients. We recently announced three more exciting developments for Kangaroo. First, we received CE mark approval in January to update the label instructions for Kangaroo to include hydration with the antibiotic gentamicin. This approval is important in that it further differentiates kangaroo as the only natural biologic envelope on the market to also include the potential to reduce post-op infections with an antibiotic solution. We are very pleased to now be able to deliver this enhancement to European customers and patients. In addition, we were delighted to complete the product design for the next generation kangaroo envelope. In this effort, we partnered with Cook Biotech to advance the platform, which will be enhanced by adding the antibiotics rifampin and minocyclin. We remain on track to achieve manufacturing validation, followed by data collection through in vivo and in vitro studies. We look forward to updating you with our progress. our goal remains to prepare the kangaroo with antibiotic data for FDA submission in Q1 2022, with product launch anticipated in the second half of 2022. On the clinical front, we recently announced the first patient enrolled in a study to investigate the biologic and clinical effects of adding envelopes that are placed around cardiovascular implantable electronic devices, or CIDs, at time of implantation surgery. The HEAL study is a multicenter study in the United States of 100 patients who previously went implantation of a CID with a kangaroo envelope, Medtronic's Tyrex, or no envelope, who have had their implants for at least a year and are returning for a change-out or revision procedure. This study focuses on identifying characteristics of soft tissue healing around the implant using tissue biopsies taken at time of change-out or revision procedure for patients treated with or without an envelope at time of device implantation. We believe this study has the potential to validate the significant contributions that our kangaroo envelope can provide to patients. Now turning to our next product group and market, the orthopedic and spine repair market, an estimated $2 billion market opportunity with approximately 1.5 million annual orthopedic and spine repair procedures using bone repair materials. Our product platform in this market consists of Fibrocell, Vibone, and OsteoGroVe. In January 2021, one of our partners in this market, Surgiline Holdings, announced the commercial launch and first completed surgery using Vibone Moldable, which we supply to Surgiline. In addition, we continue to work with our partner Medtronic to expand fiber cell revenues by generating additional data on the product's performance characteristics. And lastly, our third product group of market, soft tissue reconstruction. We estimate this to be a $500 million market opportunity with roughly 100,000 procedures annually using human dermis. Complications arrive when native tissue is not substantial enough to repair the area from the original procedure. Our SimpliDerm product is manufactured through a patented process that decellularizes, enables the product to be more closely resembled natural occurring tissue. We are working on building product awareness and clinical evidence, as well as expanding market access. Effective today, March 1st, SimpliDerm will be on contract with the Health Trust Purchasing Group. Health Trust member facilities represent more than 1,600 hospitals and health systems across the United States. We are continuing to see strong growth of this product through our direct sales organization and distributor partners, and physician customers are providing positive feedback on the performance of this offering. In summary, we've made substantial progress advancing our core product platforms and pipeline, while in parallel driving top line growth. Turning to our contract manufacturing business, where we offer tissue processing for a range of third party healthcare companies, we began to see the benefit in the fourth quarter of several new contracts. And as a result, expect this business to return to stable, more predictable growth. Overall, contract manufacturing, while not a core part of our business, has the potential to positively augment our growth. It is also quite efficient as it leverages available capacity in our manufacturing facility and contributes positively to our bottom line. The additional revenue is also a good source of capital to further drive growth in our core product platforms. As we enter 2021, we believe we are poised for another year of strong growth across all product lines. Although the start of Q1 has presented challenges due to COVID and extreme weather across much of the country, these headwinds appear to be dissipating, and we are optimistic about improving macro environment as we move through the year. We're very excited about the milestones we recently achieved and our potential for sustained revenue growth that can result from our on-market and pipeline products. We believe that as we continue to penetrate our target markets and realize returns on our investments in new technologies and an expanded commercial presence, we'll see those initiatives benefit growth in our core products. Our priorities are unchanged, and as such, we will remain focused in 2021 on, first, the development of our next-generation Kangaroo product, Second, continue to launch new and enhanced orthobiologic products. Three, generating additional clinical data for core products. Four, expanding our direct sales organization for Kangaroo and SimpliDerm. And finally, continuous for opportunities to add synergistic products through partnerships or acquisitions. In summary, we've been able to accomplish quite a bit in a very short period of time. and we're very confident we can continue to build on that momentum. Moreover, we believe we are continuing to advance our vision to establish our differentiated and proprietary products as the standard of care for treating patients undergoing a wide range of implantable device-related procedures. With that, I will now turn the call over to Matt to provide a review of fourth quarter results and outlook for 2021. Thanks, Ron.