Bioventus Inc.

Thank you for standing by and welcome to the Via Ventus Incorporated 4th Quarter 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. To ask a question, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Mr. Dave Crawford. Vice President of Investor Relations and Pressure. Thank you. Please go ahead, sir.

Thank you. And good morning, everyone, and thanks for joining us. It's my pleasure to welcome you to the BioVentus 2021 Fourth Quarter Earnings Conference Call. With me this morning is Ken Reale, CEO. Ken will begin his remarks with a review of the quarter and his thoughts on the current market environment. Next, he will provide an overview of our 2022 priorities, and he will conclude with a brief comment on the hiring of Mark Singleton as our new CFO. I will then provide further detail on our fourth quarter results and lay out our 2022 net sales and adjusted EBITDA guidance. We will 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 may contain forward-looking statements that are based on the current expectations of management and of all 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 10Q 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 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 references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or 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 Investors Relations portion of our website at bioventus.com. Now I'll turn the call over to Katz.

Thanks Dave, and good morning everyone, and thank you for your interest in BioVentus. Before discussing our most recent quarter, I would like to reflect on what was a transformational year at BioVentus. I am extremely proud of the way that our entire organization rallied to strengthen our long-term outlook through a variety of actions. Last month, we celebrated the one-year anniversary of our IPO, which helped facilitate our acquisitions of Bioness and Misonics, allowing us to build out our three customer-focused verticals and enhance our scale. These acquisitions have enabled our transformation from a company that historically reported high single-digit organic sales growth to one that we believe can consistently deliver double-digit organic growth. The acquisitions also bolstered our commercial organization by adding over 200 sales representatives to our team. Throughout 2021, we delivered strong commercial execution and were resilient in our response to the challenging dynamics brought on by the pandemic. We exceeded our initial sales plans, increased our targets throughout the year, and generated 19% organic revenue growth. We couldn't have achieved this without our team's exceptional execution of the company's strategy. Thanks to their continued hard work and dedication, the outlook for BioVentus has never been more exciting, and we are looking forward to building on this momentum in 2022. I will now review our results for the quarter. Revenue increased 32% during the fourth quarter to $130 million despite some continued challenges from the pandemic. We encountered headwinds at both the beginning and the end of the quarter from elective surgical procedure delays in specific regions of the country impacting our surgical solutions vertical. As the quarter progressed, we saw the impact of hospital and physician office staffing challenges across all our verticals, as well as increased COVID rates among patients that forced delays in scheduled treatment. Despite these challenges and the fact that we were impacted by three fewer selling days, we delivered a strong quarter of 5% organic growth. Adjusting for the impact of three fewer selling days, growth for the quarter would project to 10%. With this as a background, I will now discuss sales performance across our three verticals in more detail. Across pain treatments, we saw double-digit revenue growth driven by continued market share gains for our single-injection Duralane therapy and our three-injection Jelson therapy. We remain well-positioned to take advantage of the shift towards single and three-injection treatments for osteoarthritic knee pain. Duralane and Gelson each represent roughly 20% share of the single and three-injection markets, respectively, with significant room for additional growth in the coming years for both therapies as they increase penetration. Meanwhile, our five-injection therapy, Suparts, maintains its leading share of approximately 40%. As the only company with a portfolio of HA products across single, three, and five injection therapies, we have held the number two share position in the HA market and look to become the market leader in the coming years. Turning to our surgical solutions vertical, formerly referred to as bone graft substitutes, We saw double-digit organic revenue growth despite the disruption in elective procedures I mentioned earlier. The launch of OsteoAmp Flowable, our injectable algraft bone graft substitute solution, continues to contribute to our momentum. Misonics contributed two months of revenue in the fourth quarter following the closing of the acquisition. and we saw a strong double-digit sales growth of Misonix bone scalpel compared to the same two-month period in 2020. At the end of the quarter, we received FDA clearance for the bone scalpel access handpiece. This handpiece provides surgeons with a new option to use in confined spaces during minimally invasive spine surgeries, enabling safe bone removal with maximum visualization. This device further strengthens our presence in minimally invasive spinal fusions, the fastest-growing segment of spine, and complements our already strong portfolio of bone graft substitutes, including OsteoAmp Fluable. We have commenced a limited market release for bone scapula access that has received positive feedback and plan to initiate a full commercial release in the second half of this year. Finally, we saw double-digit growth across our restorative therapies vertical, underpinned by our recently acquired advanced rehabilitation products and the Misonics wound therapy business. Our advanced rehabilitation business has continued to perform well since we acquired it last March. In addition, our Misonics wound business grew double digits for the two months post-acquisition compared to the same two-month period in 2020. Across our international segment, growth of 71% was enhanced by our Bioness and Misonics acquisitions, while organic growth of 9% was driven primarily by Duralane. our international HA presence, I am pleased to announce that during the quarter, we acquired CuraVisc, a three and five injection HA treatment to sell alongside Duralane in our international markets. While not as material as our other acquisitions, this was an important strategic acquisition that allows us to leverage and expand our significant market presence and customer base in HA therapy. Additionally, later this year, we expect to begin leveraging the international distribution rights we received through our investment in Trice Medical. As we continue to introduce new products across multiple regions and execute our go-to-market strategy, we see international expansion as a catalyst for revenue growth. Dave will give you a look at the guidance shortly. But as we look out to the rest of the year, market conditions are improving. And while delays in elective procedures have improved in recent weeks, we continue to see some impact from hospital staffing challenges. We expect some disruption over the next few months, but we are optimistic that conditions will begin to more closely resemble a normal environment in the second half of the year. Now I'd like to update you on our 2022 priorities. As I highlighted earlier, we accomplished a great deal in 2021 with discipline, focus, and execution across our key priorities. And we'll maintain the same rigor in executing our three priorities for 2022. Our first priority is to maintain double-digit organic growth through the continued strong execution of our commercial organization. We see three areas that are expected to deliver double-digit organic growth. Pain treatments, including hyaluronic acid and PNS, peripheral nerve stimulation, driven by share gains across Duralane and Gelsyn and growth of Curavisc internationally, and continued growth of our P&S business. Surgical solutions, including our bone graft substitutes as our hardware agnostic strategy drives penetration into new accounts. Keeping in mind we only have 5% market share today and plenty of runway for growth. And while recognizing that it isn't contributing to organic growth for the majority of the year, MySonics will allow us to leverage our scale to achieve further market share gains and enhance its historic double-digit growth rate. Our second priority focuses on completing the integrations of our recent acquisitions, delivering on our cost synergy commitments, and leveraging our enhanced scale to accelerate sales. We recently incorporated Bioness into our IT system the last significant milestone in the integration process and now turn our attention to Misonics. Over the past few months, an internal team has developed our integration plan, leveraging the valuable experience from the Bioness process. We expect to be substantially completed with the integration of Misonics by year end. and remain on target for our projected $20 million of cost synergies by the end of 2023. Besides the realization of cost synergies, our combined commercial teams continue to pilot opportunities to leverage our enhanced scale and customer relationships to accelerate sales growth. As I highlighted last quarter, we initiated two sales pilot programs to utilize our call point access and further increase Bioness growth. We saw positive results from our successful pilot centered around our L300GO product for patients suffering gait disturbance following total knee replacement surgery. As a result, we are educating our broader sales team to further leverage their relationships with orthopedic surgeons. The second pilot explored accelerating PNS revenue by using our existing sales force for lead generation. Based on the results of this pilot, we are moving forward and hiring additional sales representatives in our pain treatments vertical that will be solely focused on our PNS products. we anticipate that these products will contribute to our double-digit growth in both the near and mid-term. In addition to these successful pilots, we recently received FDA 510K clearance for our next-generation StimRouter Plus neuromodulation system. The new system provides the same clinically proven long-term pain relief while significantly improving the patient's control and user experience, and also has enhanced battery life. With the MySonics integration underway, we have recently initiated programs to enable deeper penetration within our customers across surgical applications in spinal fusion, neurosurgery, and wound treatments. The first will leverage the existing customer relationships that the respective BioVentus and MySonic sales forces maintain. These two sales forces have approximately 500 customer relationships each, but there is relatively little overlap due to our relatively small market penetration today, roughly 10 accounts in total. Already, we have cross-trained the entire Misonic sales team on our bone graft substitutes portfolio to leverage their customer relationships. Also, we have trained select members of our indirect sales force on our Misonic surgical products and plan to implement a more extensive rollout in the second half of the year. Through the early stages of implementation, we are already seeing this approach pay dividends as our sales teams have been able to utilize their relationships and cross-sell incremental products to an account. The second MySonics program engages our Exogen representatives to sell MySonics' wound products into the office setting. MySonics has focused on the hospital wound center call point in the past, but due to the pandemic, more wound-related treatments have shifted to the office setting. We are leveraging our relationships with podiatrists by utilizing our existing exogen call points in the office setting to offer MySonics' wound treatment therapies to patients suffering from debilitating wound conditions, such as diabetic foot ulcers. Our third and final priority for the year centers on the pending acquisition of CardiHeal, which we believe is a revolutionary and game-changing device for multitudes of patients suffering from knee osteoarthritis. As I mentioned last quarter, there are still steps remaining for CardiHeal to gain PMA approval. But in the meantime, we are preparing to finance the potential acquisition with additional debt. As a reminder, CartiHeal fills a significant unmet need for surgeons in the treatment of patients with cartilage defects and knee osteoarthritis and has a demonstrated superiority through a randomized controlled trial to the current surgical standard of care. Demonstrating superiority, particularly in orthopedics, is a high bar and one that speaks to the strong merits of the CartiHeal device. While we don't expect the acquisition to drive material growth during the first years post-launch, we anticipate Cartahiel will be a significant driver of growth in the midterm as private payers increasingly approve reimbursement based on its clinical superiority and economic attractiveness. Before turning it over to Dave, I want to express how excited we are to bring Mark Singleton on board as our new Chief Financial Officer. During our search, we were focused on finding a candidate who has demonstrated the ability in a global medtech organization to drive revenue growth as well as consistent operating leverage, both organically and through value-creating M&A. Throughout his time at IBM, Lenovo, and most recently over the last seven years at Teleflex, Mark has partnered with leadership to consistently deliver improved operating results and integrate acquired assets. Mark's ability to effectively manage operating spending and increase financial discipline and accountability will help us to drive expanded operating margin leverage as we continue to grow organically and enhance our portfolio through M&A. Mark brings robust experience in our industry and will be a strong cultural fit with our executive team and all of BioVentus. Lastly, I would like to thank Greg Anglum for his financial leadership during his time at BioVentus and wish him the best in the next step of his career. In conclusion, we continue to build momentum across our business as we execute on our growth strategy and drive further market penetration across all three customer-focused verticals. I am confident we will deliver on our cost synergies from our acquisitions and enhance our growth profile by leveraging our scale and commercial infrastructure to deliver consistent double-digit growth. Now, I'll turn the call over to Dave.