Bioventus Inc.

Good day, and thank you for standing by. Welcome to the BioVentus, Inc. third quarter of fiscal year 2021 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. If you require further assistance during the conference, please press star zero. I would now like to hand the conference over to your speaker today, Dave Crawford, Vice President, Investor Relations. Thank you. Please go ahead.

Good morning, everyone, and thanks for joining us. It's my pleasure to welcome you to the BioVendus 2021 Third Quarter Earnings Conference Call. With me this morning are Ken Riali, CEO, and Greg Anglum, Senior Vice President and CFO. Ken will begin with a review of the quarter and the current environment, and then provide an update on our recent acquisitions. Greg will then provide further detail on our third quarter results and update on our 2021 planning outlook. We'll finish the call with Q&A. A presentation for today's call is available on the investor section of our website, bioventus.com. Before we begin, I would like to remind everyone that our remarks today contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the Securities and Exchange Commission. including item 1A risk factors of the company's form 10-K for the year ended December 31, 2020, as well as our most recent 10-Q filing to be filed with the Securities and Exchange Commission. Your caution not to place undue reliance upon any forward-looking statements which speak only as of the date that they are made. Although it may voluntarily do so from time to time, the company undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities laws. This call will also include reference to certain financial measures that are not calculated in accordance with generally accepted accounting principles for GAAP. We generally refer to these as non-GAAP financial measures. Definitions and reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the investor relations portion of our website at www.bioventus.com. Now I'll turn the call over to Ken.

Thanks, Dave. Good morning, everyone, and thank you for your interest in BioVentus. As we enter the final months of a transformational year, The outlook for BioVentus has never been more exciting due to the exceptional execution of our growth strategy by our entire team. I'm encouraged by our commercial team's continued performance and resiliency as they delivered another quarter of double digit organic growth and continue to respond to the challenging dynamics brought on by the pandemic. As we work to integrate Bioness, and my sonics, we remain steadfast on returning patients back to their active lifestyle. I will begin my remarks with a review of our results for the quarter before providing an update on our recent acquisitions. Revenue increased 27% for the quarter to $109 million despite some continued challenges from the pandemic as we were able to more than offset these headwinds with strong execution across our growth initiatives and other areas of our diversified portfolio. We faced some ongoing challenges from the pandemic, concentrated in the bone graft substitutes business as elective procedures were interrupted in specific regions of the country during the quarter. As we moved into October, we saw conditions begin to gradually improve, and we currently expect to trend closer to a more normal environment by the end of the fourth quarter. Even with these challenges, we delivered an exceptional quarter of 14% organic growth. In order to give you a better sense of what the growth looked like against our pre-COVID levels, organic growth compared to the third quarter of 2019 across our three verticals in more detail. Across pain treatments, we saw double-digit growth driven by continued share gains for our single-injection Duralane therapy and our three-injection Gelson therapy. We remain well-positioned to take advantage of the shift towards single and three-injection treatment for osteoarthritic knee pain. Sterilane, which was the last single injection product launched four years ago, now represents roughly 20% share of the single injection market. Our ability to increase our share is driven by multiple factors. First, our market access strategy of working with private payers is fueling growth as we further augment the strong reimbursement for the therapy. Second, Duralane has the highest molecular weight of single injection therapies available, which produces the longest residence time in the joint and an extended half-life. Notably, the American Academy of Orthopedic Surgeons recently released updated clinical practice guidelines stating certain knee osteoarthritis patients showed statistically significant improvement from high molecular weight treatments. Like Duralane, Gelson represents an opportunity to further expand our share. Jelson also experienced significant double-digit growth for the quarter and has demonstrated continued share gains. Third, our five-injection therapy, Suparts, continues to maintain its leading share position of approximately 40%. While Duralane and Jelson are below this share in their respective categories, there is significant room for additional growth in coming years for both products as they increase penetration in their respective markets. As the only company with a portfolio of HA products across single, three, and five injection therapy, We have now consistently held the number two share position across the entire category and look to become the market leader in the coming years. Turning to our bone graft substitutes vertical, we saw mid single digit growth despite the interruption and elective procedures I mentioned earlier. Helping fuel our momentum has been the recent launch of OsteoAmp Flowable, our injectable allograft bone graft substitute solution, which can be used for a variety of procedures, including minimally invasive spinal fusions, the fastest growing area in spine. We are excited by the initial market reaction and feedback from surgeons, and we continue to see bone graft substitutes as a double-digit growth opportunity. Finally, we saw double-digit growth across our restorative therapies vertical, bolstered by our advanced rehabilitation products acquired as part of the Bioness acquisition. Additionally, we initiated a pilot to utilize our call point access and Salesforce to further accelerate Bioness double-digit growth. The pilot focused on our L300 Go product for patients with gait disturbance, leverages our Salesforce's relationships with orthopedic surgeons to prescribe the L300 for individuals who receive a total knee replacement but experience thigh muscle weakness during their rehabilitation. Additionally, our legacy Exogen business grew mid-single digits organically during the quarter. This performance benefited from growth in our international region, which faced an easier comparison in the third quarter, given the impacts of the pandemic in the prior year. Across our international segment, growth of 39% was enhanced by our Bioness acquisition, while organic growth for the quarter was 11%. With close to 10% of our sales coming from international regions, our mix of international sales is below peers. As we introduce new products across various regions and execute against our go-to-market strategy, we expect to see international expansion as a catalyst for future growth in the near and mid-term. Now let me update you on our recent acquisitions. In the third quarter, Bioness contributed $11 million of revenue and continues to track ahead of our expectations. Revenue was strong across both advanced rehabilitation products and peripheral nerve stimulation, or PNS. The integration of Bioness continues to progress as planned, with several key milestones having been completed. we are realizing planned synergies and reached break-even profitability at the end of the third quarter. As we look ahead to next year, we have identified specific synergy targets and see Bioness contributing positive EBITDA. Our timeline for full completion of the integration remains the first quarter of 2022. In addition to the financial benefits, BioNest is providing us valuable experience as we prepare to begin the integration of Misonics and look to further develop integration as a core competency of BioVentus. In addition to the L300 Go opportunity I mentioned earlier, we also began a pilot for PNS utilizing our existing sales force. We are encouraged by the initial results And while a small piece of our portfolio today, we see P&S as a meaningful mid-term growth driver for our overall business. Turning to the recently announced closing of our Misonics acquisition, we are excited to welcome the Misonics team to BioVentus and for Stavros Bizi-Giannakis and Pat Beyer to join our board of directors. I am also pleased to welcome Sharon Klugowitz, who has served as COO of Misonics and will report to me as part of our executive team and the role of Senior Vice President of Quality and Regulatory Affairs. The completed transaction creates a high-growth medical device company with a $15 billion total addressable market and the ability to gain significant market share utilizing our nearly 500-person sales force across our three verticals. The combined business allows us to go deeper with our customers across surgical applications in spinal fusion, neurosurgery, and wound treatments. The deal also furthers our strategy of accelerated revenue growth through acquisitions that leverage our existing infrastructure. We are confident Misonics will drive substantial shareholder value, as it is expected to be accretive to our organic growth profile while generating $20 million of cost synergies by the end of 2023. While we were waiting to clear the regulatory hurdles for the acquisition to close, we assembled an internal integration team and coordinated with the leadership at Misonics to develop our integration plan and timeline. We will kick off the integration of Misonics in the first quarter. While both Misonics and Bioness provide us with immediate catalysts for growth, Our business development activity is also focused on ensuring BioBentis is positioned to maintain double-digit organic growth in the midterm. Last quarter, I spoke to you about the opportunity we were evaluating on whether to preserve our right to exercise our option to purchase CardiHeal. As we announced in late August, after extensive evaluation, we placed $50 million into escrow as a deposit. We plan to finance the remaining portion of the potential acquisition of CardiHeal with additional debt. While there are still steps to take for CardiHeal to gain FDA approval for their Agilecy implant, Our due diligence strengthened our belief in the $1.3 billion addressable market opportunity and that it will be a high-quality addition to our portfolio. In coming to our decision, we discussed the merits of agility with over 600 healthcare professionals. In addition, we engaged over a dozen private payers to understand the reimbursement landscape for this unique therapy. Throughout these discussions, there was consistent feedback that agility fills a significant unmet need for surgeons in the treatment of patients with cartilage defects and knee osteoarthritis. Likewise, medical directors of private payers expressed a willingness to support reimbursement for agility based on the strength of the clinical data, which demonstrates superiority to current surgical standard of care. While we are excited about the opportunity for Agilecy to receive FDA approval and to acquire Cardi-Heal in the second half of next year, we don't expect the acquisition to drive material growth until a few years after launch, as private payers steadily begin reimbursing Agilecy. We will continue to provide updates on the status and timing of the potential acquisition as we gather new information on the approval. While NA remains a meaningful part of our long-term growth strategy, and we continue to build new relationships, we are currently highly focused on successfully integrating Bioness and Misonics. In conclusion, we continue to build momentum across our business. execute on our growth strategy, and drive further market penetration with our HA and bone graft substitutes products. I am confident we have enhanced our growth profile with the acquisitions of Bioness and Misonics and will leverage our commercial infrastructure to deliver consistent double-digit growth while ensuring we deliver on our cost synergies. Now I'll turn the call over to Greg.