Bioventus Inc.

Good day, and thank you for standing by. Welcome to the BioVentus first quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require assistance during the conference, please press star 0. I would now like to hand the conference over to your speaker today. Dave Crawford, Vice President of Investor Relations.

Thanks, Daniel. Good morning, everyone, and thanks for joining us. It's my pleasure to welcome you to the BioVentus 2022 First Quarter Earnings Conference Call. With me this morning is Ken Reale, CEO, and Mark Singleton, Senior Vice President and CFO. Ken will begin his remarks with a review of the first quarter highlights and his thoughts on the current market environment. He will conclude his remarks with an update on the progress of our 2022 priorities. Mark will then provide further detail on our first quarter results and conclude with an update on our full year 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 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 Exchange Commission, including item 1A risk factors and the company's form 10-K for the year ended December 31st, 2021, as well as our most recent tape 10-Q filed with the SEC. You are cautioned not to place undue reliance upon 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 the 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 non-GAAP financial measures. Definitions and reconciliations of those non-GAAP financial measures 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 bioventus.com. Now I'll turn the call over to Ken. Thanks, Dave.

Good morning, everyone, and thank you for your interest in BioVentus. We are off to a strong start to the year and continue to build on our momentum. It was fantastic to see the activity, excitement, and interest for the new BioVentus at our booth during the recent American Academy of Orthopedic Surgeons, or AAOS, convention in Chicago, as we highlighted our expanded portfolio of Misonix surgical products, along with our peripheral nerve stimulation therapy acquired through Bioness, which complement our existing call points. Along those lines, we are extremely proud of the way that our entire organization continues to strengthen our long-term outlook. and we are looking forward to building on this momentum in 2022. BioVentus has continued to progress against our 2022 priorities. Cartahiel received PMA approval in March, and while market conditions last week forced us to cancel our initial funding plan to finance the pending acquisition, we are pursuing alternative financing options in evaluating the rational feasibility of the acquisition considering these financing alternatives. It is a difficult financing environment and our goal is to try and find a possible alternative that will maximize stakeholder value in the near and long term. We are also very proud of our performance during the quarter as we continue to execute on our strategic goals and drive growth despite a number of headwinds which included impacts related to the ongoing hospital staffing shortages, as well as Omicron-related challenges faced by our surgical solutions business in January. Moving to our results, revenue increased 43% during the first quarter to $117 million, including organic growth of 9%, despite some continued challenges from the COVID-19 pandemic. Across pain treatments, we saw double-digit revenue growth driven by continued market share gains by 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 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 market penetration. In addition, as you may recall, last year the AAOS highlighted that high molecular weight cross-linked hyaluronic treatments such as Duralane showed statistically significant improvement in certain knee osteoarthritis patients. Duralane possesses the highest molecular weight of single injection therapies available, which produces the longest residence time in the joint and an extended half-life, strengthening our competitive position within the HA market. 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 position in the HA market and look to become the market leader over the coming years. As many of you may already be aware, reimbursement for HA may soon shift from wholesale acquisition costs to average selling price in the coming months. Given the sales mix of our HA portfolio, we don't believe that this new pricing dynamic will fundamentally impact our overall growth opportunity. However, it is possible we may see some variability over the coming quarter or two as customers adjust their ordering patterns. Turning to surgical solutions, as I mentioned, Omicron related disruptions limited elective procedures early in the quarter, reducing growth to the high single digit range. These disruptions also impacted revenue from MySonics during the quarter. As a reminder, these disruptions only impact approximately 25% of our total business. That said, we were encouraged by the sequential monthly improvement that we saw over the course of the quarter and finished March strong. Despite the macro environment challenges, we continue to execute and innovate within Surgical Solutions. As an example, we are very proud of our progress with the launch of OsteoAmp Flowable, our injectable allograft bone graft substitute solution, which remains a contributor to our momentum in this vertical. Restorative therapy revenue generated double-digit growth underpinned by the Misonix wound therapy business and our advanced rehabilitation business, which has continued to perform well since we acquired it last March. Finally, our international segment grew 82% on a reported basis, driven by our Bioness and Misonix acquisitions, and 11% on an organic basis, driven primarily by continued strength in Duralame. Mark will discuss our guidance shortly, but even amid improving market conditions and elective procedure volumes, we continue to see some impact from the ongoing hospital staffing challenges where reports estimate there are nearly 400,000 fewer healthcare workers than before the pandemic. We expect these disruptions to continue over the next few months, but we believe that conditions will begin to trend towards 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 are off to a great start to the year, and remain focused on our execution across our key priorities for 2022. Our first priority is to achieve double-digit organic growth for the year through the continued strong execution of our commercial organization. During the quarter, we saw progress across all three of our key growth areas. In pain treatments, we continue to enhance our market access through contracting with payers and recently signed a new exclusive contract with Cigna for Duralane and as one of two providers for three-shot therapy, in our case, Gelson. Within surgical solutions, we have seen a strong reception to the initial rollout of our new bone-scaple access used in minimally invasive spinal surgeries. And in restorative therapies, our positive clinical trial results for TheraSkin have helped gain additional payer coverage boosting coverage to three out of the four largest commercial plans, which we will look to further expand. Our second priority is to complete the integrations of our recent acquisitions while delivering on our cost synergy commitments and leveraging our enhanced scale to accelerate sales. With the Bioness integration completed, we are making meaningful progress towards integrating Misonics. As a reminder, the integration is largely focused on corporate functions and manufacturing operations and requires minimal commercial integration. We remain on track for it to be completed next year and to deliver $20 million in cost synergies by the end of 2023. Besides the realization of cost synergies, our combined commercial teams continue to leverage our enhanced scale and customer relationships to accelerate sales growth. We already have seen initial wins from cross-training our Misonix sales team on our bone graft substitutes portfolio. Misonix's sales team has historically focused on urban and teaching hospitals, which differs from the BioVentus sales approach that is more focused on suburban hospitals. In recent months, we have made inroads into major teaching and urban hospitals and expect to further leverage these MySonics customer relationships. In addition, we recently hosted our first surgical solutions mobile lab event where we were able to introduce surgeons to the complete BioVentus surgical solutions portfolio. Our scale enables these enhanced training and marketing efforts to reach potentially new customers for our MySonics bone scalpel. Our third and final priority for the year centers on the potential acquisition of CardiHeal, which we believe is a revolutionary and game-changing device for multitudes of patients suffering from knee osteoarthritis and osteochondral defects. As I mentioned earlier in my remarks, on March 29th, CardiHeal received PMA approval from the FDA, and on April 4th, we exercised our option to purchase the remaining interest in CardiHeal. we are now exploring alternative options to finance this transaction. Given the increase in debt to finance Cartahiel, we will pause on further M&A activity until we return to the upper end of our targeted range of net debt to adjusted EBITDA of three to four times. We expect to achieve this by the end of 2023, primarily through increased EBITDA achieved through double-digit sales growth, and margin expansion, as well as free cash flow generation. It is important to note that we feel very strongly about the BioVentus business, our ability to drive double-digit growth for the foreseeable future and create meaningful stakeholder value. This is the case whether or not we complete the car-to-heal acquisition. In conclusion, we continue to build momentum as we execute on our growth strategy. and drive further market penetration across our three customer-focused verticals. I am confident we will deliver on cost synergies from our acquisitions and enhance our growth profile by leveraging scale and commercial infrastructure to deliver consistent double-digit growth. Now I'll turn the call over to Mark.