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spk05: Good afternoon. My name is Josh, and I will be your conference operator today. At this time, I would like to welcome everyone to the conformist fourth quarter 2020 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Before we begin, I would like to remind you that this call will include forward-looking statements within the meaning of the Federal Securities Law, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that are not statements of historical facts should be considered forward-looking statements. These statements involve material risk and uncertainty that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. including those discussed in the risk factors section of conformist public filings with the U.S. Securities and Exchange Commission. Accordingly, you should not place undue reliance on these forward-looking statements. Conformist disclaims any 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. This conference call will include time-sensitive information and is accurate only as of the live broadcast. today, March 3rd, 2021. I will now turn the call over to Mark Agusti, President and Chief Executive Officer of Conformis.
spk03: Thank you, and welcome everyone to our fourth quarter and full year 2020 earnings conference call. With me on the call today is our CFO, Bob Howe. Like many other medical device companies, Conformis was materially impacted by the effects of COVID-19 in 2020. We were hardest hit from last March through the second quarter, tipping to our lowest quarterly revenue number as a public company in the second quarter of 2020. We saw reason for optimism through the third quarter as elective procedures resumed fairly rapidly, and this carried into the start of fourth quarter. However, midway through November, we experienced a resurgent of the negative impacts of COVID across our business. Although hospitals were better prepared to handle the volumes of sick patients, elective procedures slowed again as hospitals redlined at near capacities with COVID patients and patients requiring emergency care. The number of CT scans slowed as did the number of book procedures. Though this pronounced impact was not as severe as it was in the second quarter of 2020, we again saw knee and hip procedures slow down for us dramatically. And this has continued into Q1. Although COVID infection rates have begun to subside, hospitals are still dealing with limited bed capacity and procedure volumes have not returned to 2019 levels. We believe that another COVID-related headwind has been orthopedic surgeons looking for shorter lead times between appointment booking and surgery because they have less overall demand for procedures right now. The result is that the lead time for personalized needs has worked against us as surgeons have been more likely to use another solution to fill up openings in their near-term schedules. In addition, it has been increasingly challenging to gain new surgeons because we believe that many have been deferring testing new technologies and products during these times. This has particularly made training new surgeons on our conformance hip harder than usual. Notwithstanding the effects of COVID, one thing that we believe has been reinforced over the past year is that we have the right strategy for growth. I would like to take a moment and update you on each of the elements of our current growth strategy. First, our grow our core cemented personalized knee business. We believe our knees are the best solutions for patients who need knee replacements and want to stay active. Our customer satisfaction scores remain high, Our published clinical results are strong and continue to be strong, and we continue to build and strengthen relationships with surgeons. COVID has slowed our progress of growing this business recently, but we feel there is a natural backlog of procedures building and patients will get more comfortable as vaccines become more widely available. We believe as elective procedure levels improve, this will directly improve our personalized core knee business. Number two is to grow our hip business. We're still in the very early stages of growth of our HIP business. While overall business was down in the fourth quarter in the year, our HIP business was up approximately 5% for the quarter and 26% for the year. In addition, in December 2020, we initiated our commercial launch of the Kadera Match HIP system. We expect our HIP franchise to continue to become a significant component of our revenue base over time, especially as surgeons further adopt new technologies, attend in-person training courses, and we launch our next STEM option in 2022. Number three, continue our R&D efforts and launch new and differentiated products. We are currently developing two products which we anticipate will move the needle for us. The most significant, of course, is our anticipated new standard knee offering, which is being designed to provide a lower-cost alternative to hospitals, outpatient surgery centers, and ASCs, while still taking full advantage of years of patient data collected through our unique business model. We are confident that the new knee will launch in the second half of 2021 and believe it will be a material game changer for us. We recently filed our 510K application with the FDA. The other noteworthy product is our cementless knee. Progress is being made there too. In late January, as you saw, we are partnering with Scythe Medical to use its technology to further strengthen this offering. We plan on the launch of this product in Q1 2022. Despite the negative impacts of COVID on our business, we made a strategic decision to continue investing in our R&D pipeline during the year, and we're excited about the portfolio of new products we plan to launch in the next few years. Indeed, we are in this position because we remain committed to new product development. Number four, continue to monetize our intellectual property and find strategic licensing arrangements. This includes our striker relationships. which we believe validates the quality of our patient-specific instrumentation and of our delivery model. In addition, this partnership provides us with an accretive long-term supply agreement. We're near the end of the development process, and the submission is currently being reviewed by the FDA. This is the last significant step in the development process, and once regulatory clearance is received, we expect to be in a position to begin supplying Stryker. Of course, the timing of when we will begin initial shipments will be determined by Stryker. Taken all together, we believe we're on the right path, which leads me to one final update. Subsequent to year end, on February 17th, we closed on $85 million underwritten public offering. We were thrilled at the demand for the offering and are pleased with the new investors who are now connected to conformance, as well as those who increased their positions. We believe the quality of the investors that participated demonstrate the attractiveness of and the confidence in our strategy. This cash infusion is significant for us. We believe that it provides ample liquidity for us to execute our growth strategy. There are several significant areas where we intend to use this capital, and we believe putting the cash to use to grow business will build shareholder value that will more than offset the near-term dilutive effects. You can expect us to invest in R&D and new product development. In mid-2020, for example, we had to decide to keep either our new standard knee offering or cementless knee project on plan, despite both being essential to our long-term growth. We chose to focus on the standard need because, as I mentioned earlier, we expect it to be a game changer for us. This capital infusion should allow us over the next few years not to have to choose between too high quality and strategically important products for development. In addition to new product development, we expect to also make strategic investments to strengthen our sales and marketing efforts targeting the ASC space and to reinforce our efforts to aggressively protect our intellectual property portfolio. We also intend to get started with some long-term and game-changer projects. For instance, robotics is gaining interest across orthopedics. We have questions about the ultimate value of robotics and are not aware that any significant clinical results have been published which justify the incremental cost. While we currently believe that nothing is better than a personalized implant, this recent capital infusion will allow us to proactively evaluate how robotics might complement our personalized approach to arthroplasty. We feel we have a great vision for growth backed by a great team and a healthy balance sheet to make it all happen. Let me now turn the call over to Bob for a more detailed financial review of the quarter and the year. Bob?
spk06: Thank you, Mark, and good afternoon, everyone. There are a few financial topics I'd like to hit on, and I'll start with the recent updates to our capital structure and cash management. We finished the year with $28.7 million of cash and cash equivalents, which was up from the $26.4 million at the end of last year. As Mark mentioned, we are pleased with our $85 million of gross proceeds from our public offering in February. The offering was for just under 81 million shares at a price of $1.05 per share. We believe that this infusion eliminates any financing overhang that had been present. This is especially important due to the continuing unpredictable nature of the pandemic and how long it will continue to negatively affect our business. We continue to make good progress on our striker development projects. and we are still on track to achieve the last remaining milestone, which is contingent on receiving FDA clearance. Our application was received by the FDA in late January, and as a reminder, the last milestone payment is $11 million. In April 2020, we took out a $4.7 million loan as part of the Paycheck Protection Program. We believe we used the entire loan for eligible purposes as outlined by the U.S. Treasury Department, as all the proceeds were used to fund qualifying payroll expenses. Accordingly, we recently filed an application for forgiveness of this loan and continue to believe the entire amount will be forgiven. Lastly, and with respect to our term loan with Innovatus, we executed a new amendment to the agreement on March 1st that waives the revenue covenants for the remainder of 2021 and lowers the revenue amounts that must be achieved in 2022. We continue to enjoy a strong partnership with Innovatus and this new agreement acknowledges the uncertainty that COVID-19 has inserted into our industry. Moving to our financial highlights, I would like to review the key results that Mark did not cover. We reported fourth quarter revenue of $16.7 million, representing a decrease of 16% year-over-year on a reported basis and 17% on a constant currency basis. Fourth quarter product revenue was $16.5 million, representing a decrease of 16% year-over-year on a reported basis and 17% on a constant currency basis. Sales of our knee products were $15.9 million, representing a decrease of 17% year-over-year on a reported basis and 18% on a constant currency basis. Sales of our conformist hip systems were $0.6 million, an increase of 5% year-over-year on both a reported and constant currency basis. U.S. product revenue was $14.4 million, representing a decrease of 16% year-over-year. U.S. sales of our knee products were $13.8 million, a 17% decline year-over-year. Rest of world product revenue was $2.1 million, a decrease of 16% year-over-year on a reported basis, and 22% on a constant currency basis. For the full year of 2020, we reported revenue of $68.8 million, representing a decrease of 11% year-over-year, on both a reported and constant currency basis. 2020 revenue includes $9.6 million of royalty and licensing revenue from the settlement and license agreement with Zimmer Biomet, which was recognized in the second quarter. Both revenue for the fourth quarter and for the total year were down from the prior year and below the expectations we had not only at the beginning of the year, but also at the start of the fourth quarter. Our revenue was challenged from COVID most of the year due to the volatility and reductions experienced in elective procedures. We were pleased to see a strong correlation to improvement in our business as elective procedures rebounded, particularly in the third quarter. We're working hard to ensure we are well positioned for when this happens in 2021. Our fourth quarter gross margin was 47% of revenue compared to 49% of revenue for the same quarter the prior year. The decrease in gross margin year over year was driven primarily by lower volume and canceled case inventory expense. For the year, gross margin was 49 percent of revenue compared to 47 percent of revenue in 2019, a 160 basis point increase, which is driven by the 9.6 million licensing revenue recognized as a result of the settlement and license agreement with Zimmer Biomed. Full year 2020 product gross margin was 43 percent of revenue compared to 47 percent in 2019, a 400 basis point decline. The decrease in gross margin year over year was again primarily due to lower manufacturing volumes and canceled case inventory expense. Operating expenses for the fourth quarter were flat year-over-year, and for the full year of 2020 were down 5%. We continued to maintain our investment in our R&D pipeline throughout the year, despite the headwinds on our top line, and we made selective reductions in marketing expenses, travel and entertainment, and other discretionary spending to minimize the impact on our cash burn. Last year, we began to build a presence in India to support our CAD manufacturing design activities, as well as for several other current or planned corporate functions, including regulatory, clinical, and software design development. This was done to attract top talent and to benefit from identified cost savings opportunities. We expect to continue to ramp our number of employees in India to support both our striker launch as well as the anticipated growth in our knee and hip product lines. The India investment will support our efforts to improve gross margin and is part of our long-range strategy to reduce the cost of our products. Lastly, I would like to provide some thoughts on our outlook. Last March, we suspended our practice of providing full-year guidance due to the heightened level of unpredictability and volatility caused by COVID. Although the environment has not stabilized enough for us to resume providing full-year guidance, we are in a position to provide insight into what we expect for revenue in the first half of the year. Historically, we see a drop in the first quarter compared to the preceding fourth quarter, as many health plans reset on January 1st. Add to that the continued pressure we experienced from elective procedures so far this quarter, we expect our first quarter product revenue to be in the range of $13 to $14 million. We believe this pressure will continue through the second quarter, but that we may see elective procedure volumes improve in Q3 as vaccines become more widely available. With that, let me turn the call back over to Mark.
spk03: Thank you, Bob. Without a doubt, 2020 was a challenging year. However, as I take a step back, I realize we have reason for optimism as we head into 2021 and beyond. First and foremost, we have a great team at Conformist that stood together through a very challenging year. We continue to work together positively and respectively and to support each other personally and professionally. We are battle-hardened and ready to win. We believe that we have the best and most differentiated knee and hip replacement portfolio in the world, and that our personalized products deliver optimal results for doctors and their patients. Our pipeline of new products is strong, including our new standard knee offering, which we believe will be a game changer for us, as I've said before, and will help us evolve our business model. Lastly, with the close of our stock offering a few weeks ago, we now have the capital flexibility to drive this growth strategy. We'd like to acknowledge and thank all of the conformance employees, consultants, advisors, customers, and shareholders. You help make conformance great. We believe that what we do is important and can be life-changing for patients. There's no value you can put on being able to be active without pain. We never take for granted and work hard every day our patients and our doctors. Thank you. With that, Bob and I are happy to take questions. I'll turn that back over to the operator.
spk05: Thank you. As a reminder, to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Robbie Marcus with JPMorgan. You may proceed with your question.
spk08: Thank you for taking the question. Hello. So I just want to try and pin down the commentary in second quarter as well. You know, we hear a lot of other medtech companies, it ranges from a conservative to a more optimistic outlook, and I think it's appropriate to stay conservative at this point. But do you think you could grow sequentially off of first quarter and by what sort of magnitude? And then second, how are you thinking about expenses going into 2021? I realize You probably held back on a lot of expenses. You want to invest in growth. How should we think about that, maybe in first, second, and if you could opine on the year at this point? Thanks.
spk03: Why don't I take the expense piece, and then you can think, because I do think there's a chance for Q2 sequential. I'll let you look at the numbers. So, Robbie, it's a really good question, and if we take them in reverse order – We plan on giving more color on our thoughts about expenses and opportunities for growth going forward, especially probably on the first quarter call, but potentially even before that. So we're still in the throes of doing that. We do not materially expect to change our expenses just at this point, but we are going to look for targeted opportunities to support the sales and marketing efforts to our product launches. So we're starting to put those plans together, which this capital infusion allows for, as well as we're pretty excited about some projects that were sort of on the drawing board that we can bring in and potentially bring in more revenue into our long range plan. But we want to be able to answer that with more color for you. And so we need a little bit of time to be more thoughtful about how that's gonna roll out. So we expect that there would be some potential for incremental spend. especially starting sort of in second quarter and through the half. I mean, but we haven't started spending those money certainly right now and don't expect to change that, you know, immediately. Bob, why don't you?
spk06: Yeah, thanks. Yeah, I mean, I think there is, like Mark mentioned, I think there is opportunity because we still have time. As you know, we've got a lead time with scans. So, you know, if scans start returning, I think there is the opportunity to grow sequentially. You know, right now our guidance is it's going to be similar. You know, it all depends how quickly things kind of turn around with scans.
spk03: I mean, clearly growth rate, right? Because the comparison versus 2Q, Robbie, just to make sure we're all talking the same thing. But I think your question implicit, I want to make sure, was that the dollar value would grow from Q1 to Q2. And we do sort of see that. There's no doubt that there's been a decline in procedure volumes. And let's just all remember that January and February 20 were actually strong months for us, and I think for the industry overall. So we have seen sort of a flattening, if you will, of where procedure volumes are at, and as we get into the second quarter, I do think there'll be opportunity for sequential dollar volume growth, and clearly the growth rate will be improved over prior years, for sure.
spk08: Yeah, no, I definitely meant dollars. I certainly hope the year-over-year growth rate is a positive number. Maybe just to put a finer point on it, you did $15.5 million in OpEx in fourth quarter. How do we think about what that looks like in first quarter? And then last for me, with the new knee product, how do we think about that layering in to 2021 sales? Thanks.
spk03: Why don't you do the knee one? I'm not sure how much guidance I want to give, but you gave general thoughts about the op-ex. The knee is critical for us. Obviously, we have to get the clearance and then we have to execute and do that. I think that's the biggest opportunity for unknown. If we sail into good procedure value and vaccines are out there and things are good and we don't have hiccups in execution, I think that we'll materially change what we call our orders rate and where we're at because it's targeted and we think we've got the right value proposition for the growing ASC space. I can tell you that there's a lot of excitement and activity. We're working every day with surgeons in anticipation of this launch and where we want to go. I don't know that we're ready to tell you exactly how much color and detail we'll give for you, but that is a key source of growth for us. The real thing is, like anything else with any new product, is the execution rate and the ability to penetrate and train and get people up and running. That's going to be a little unknown for us because there's variables there. in the second half, like, when can the traction start? Like, I think implicit in your question is, could we see it in Q3 or is it more of Q4? And there's just, you know, it just depends, right, on where we execute those things. And I think we definitely should start to see stuff in Q4. There's a chance for some Q3. And what I like is that we're, you know, as we just disclosed, we're in front of the agency now. So that gives us the opportunity to be at the leading edge of the second half timeframe that we've given, which gives us more of 2020 to get traction with the new product, Robbie. If we can, you know, again, it's all about execution, but until we have that clearance and we get to the market, it's, it's still a little uncertain.
spk08: Great.
spk05: Thanks for taking the questions.
spk03: All right. Thank you.
spk05: Thank you. Our next question comes from Josh Jennings with Cowens. You may proceed with your question.
spk02: Hi, thank you. This is Eric on for Josh. I just want to touch on your announcement from January around the supply and development agreement with Sites Medical. I was just wondering when we could hear updates on development progress from that partnership. And also, I just want to make sure that incorporating the technology from Sites isn't impacting your timelines for the cementless knee offering.
spk03: No, Eric, hey. Hi, and thank you for the question. Yeah, we should probably clarify that as well. We have been working with Sites for a while. It just wasn't until we reached certain milestones or or retired certain technical risks that we felt comfortable it was time to make more of a public announcement around that. That's been the lead technology that we had been working on for a while. To be clear, everything was consistent about announcing that and consistent with what we're saying about Tementless launching by Q1 of 2022. Nothing changes there, and as we progress that program, certainly we'll provide more updates. We recognize, as we've been very transparent, that cementless is an important and growing segment in total knee arthroplasty, and the nice thing about the capital raise is it sort of shores up and reinforces our ability to continue to pursue that, and potentially we're exploring even potentially you know, if there's opportunities to increase that timeline. But, you know, we just are not working on that. We're also in the throes of finalizing, obviously, the AFC&E. So, you know, more to come on that. But I just want to clarify that there was nothing new or you shouldn't take anything into interjecting any risk in that announcement. We've been working with sites all along, and that was always part of the program.
spk02: Understood. Thanks for clarifying that. And then looking at your opportunity internationally, we saw your recent I total approval in Australia. Are there any other markets that you think we could see regulatory progress or approvals in the near term?
spk03: Yeah, we're actively pursuing a couple other markets. We've talked about that, particularly some of the larger markets in Asia. So I would think you'll see those announcements as they happen. We put a goal out there to, you know, to, improve the growth rate of our international business. It, you know, unfortunately due to the reimbursement changes have been a headwind for a while. And for people that follow us, we've talked about that. So the key to getting international growth turned around, you know, is COVID to settle down, but then it's to get these new markets opened up. And what I like about the Australia announcement is it just shows that we are actively pursuing this. We've talked, you know, the target markets we've targeted, we're, we're going after. So, yeah. Yes. You can expect more to come.
spk02: Great. Thank you for the questions.
spk05: Thank you. Thank you. Our next question comes from Stephen Lickman with Oppenheimer & Company. He may proceed with your question.
spk04: Thanks. Hi, guys. Mark, with the striker launch expected to come here in the coming months, what are your thoughts as to what percent of strikers U.S. needs could potentially be used in conformance to PSI, you know, as you look at over the next few years?
spk03: Well, first off, Steve, let me be clear. Hopefully, and we expect that we should be able to get FDA clearance in, quote, the coming months, but I just want to reiterate, it's up to our partner to decide the commercial execution, and I don't ever want to speak for them. So, that's up to them, but I am very much willing to talk about percentage. This model, we think we've got a best-in-class surgery-in-a-box model for total knee arthroplasty. We've got the best jigs that execute this and the best software. As I've said publicly, I think the partnership with Stryker and Quality Company validates that, and we're excited to be able to help them achieve a vision of that for their triathlon implant. You're asking a really good question. What percentage? There's models out there that suggest by 2024, 40% of total knee arthroplasty could be done in an outpatient setting. So, you know, you tell me. I don't know what that penetration will be in strikers' hands and with their marketing effort. I'd like to think they'll put as much effort behind it as they've done with robotic surgery and everything else. The other thing, Steve, that I'd like people to recognize is nothing about the agreement limits the triathlon in a box to the outpatient surgery center. Clearly it's most effective there because of all the issues we've talked about with sterility resources and space resources. But this absolutely could be done inpatient as well. And I think in the environment we're in, all of us that are players in this are looking for validated and efficient delivery models and solutions that they cost out of the system, help make a more predictable procedure, and those types of things. And that's what our software knee-in-a-box does. So, you know, it just depends on the assumptions you make about penetration for and ramp rate of outpatient knee surgery, the penetration of PSI to that site of care, as well as some, you know, assumption around the penetration of of that delivery model into the inpatient site of care. So I don't want to hazard a guess, but I'd be disappointed if it wasn't more than 5% or 10%, let's say, if I had to put something out there. And I think we've put some ideas out there of what we think it could mean to us for revenue by 2024. That's helpful, Collin.
spk04: Thanks, Mark. You also, you mentioned the difficulties in launching a new product, you know, like HIP during COVID. Just wondering what you're hearing on the ground in terms of receptivity of the product and your thoughts in terms of sequential ramp, you know, once COVID, you know, obviously hopefully starts moving into the rear view mirror.
spk03: Yeah, yeah. So it really has put a crimp on, you know, the willingness and ability to, to do these things. But having said that, we have adopted some virtual technologies and we've done virtual trainings and webinars. I can say that we're very excited. We just did a Florida-based medical education in-person course with also virtual attendees and we trained north of 20 surgeons in that, which is pretty good in-person numbers for this environment. We're actually having a discussion with our advisors later this week to really sort of think about when can we turn the gas on. Because you've got to remember, right, many of our physicians have now gotten their vaccines, right? So the vaccines are permeating. We're seeing travel restrictions. People are getting more comfortable. So the question for us is – you know, what's going to be the level playing field? Where are things going to level out? Are surgeons going to want some type of virtual education or something more local without the travel? Or are we going to get back to, you know, the tried and true method of peer-to-peer and where we're at? And unfortunately for new products, it's, you know, we think the peer-to-peer thing is really important. And so we've really got to make that happen and continue to support that, but then have the ability to supplement that. with virtual, so we'll do that. And I think once procedures level and this gets out, I really do think we can get back to sequential growth in our HIP. As I said in my prepared comments, it's a critical component of growth for the company. And we love the model that we have. We love the plan to add more STEM options so that we can continue to increase our addressable market within the HIP replacement market. But this headwind of training is a real thing that we have to just push through.
spk04: Got it. Just lastly, Bob, gross margin in 21, just sort of directionally, if you could, how should we be thinking about it as one Q and then sort of full year relative to what you guys did in the back half of 2020 at that, I guess, 46%, 47% range?
spk06: Yes. I mean, I'm probably not comfortable at this point with full year, kind of like on the revenue piece of it, but Q1, I can give you some color, right? Not that we have the numbers, but I would say we came in at 40 total gross margins. Product gross margin was 46 for the fourth quarter. Given the decrease in volume sequentially, that will pull that number down. I would have to say it's probably... you know, 43 to 45, 46, in that range, all depending on, you know, we have canceled cases and inventories. That's a little hard to predict, but it's probably in that range based on that volume. That's the color I'd give you on that.
spk04: Got it. Makes sense. Thanks, guys.
spk05: Thank you. Our next question comes from Kyle Rose with Canaccord. You may proceed with your question.
spk07: Great. Thank you for taking the question. I just want to ask a little bit more about what you're seeing with respect to the market in the Q1. I understand the commentary with respect to guidance. I appreciate that. But you do have a lead time as far as scans coming in. So maybe just help us understand maybe how the scan trends have trended through the first eight weeks, the first two months of the quarter, and what that's kind of telling you on a week-over-week, month-over-month basis when you think about – entering the Q2, just trying to understand how we should think about that quarter-over-quarter dynamic here.
spk03: I'll give you more of my thoughts around Q1. I think Q2, you're giving us a little too much credit about our scans aren't that far out, a little crystal ball. There's a couple things going on. First off is what we've seen and why it's been harder to truly predict our business through our old models is that the pace of rescheduling is serious. And you think about reschedules, it's not as easy as it used to be because these patients are clear, they're COVID clear, they've got the negative test, they've got the other stuff. And then all of a sudden, you know, they go to reschedule and it puts more burden on the healthcare team. It's different. It's not as easy as it used to be. So the pace of rescheduling has changed. So what that means, Kyle, is usually our scheduled backlog, which we do have, as you point out, visibility to, is very, very predictable, and it's gotten not crazy crazy, but less predictable on the margins, so it's been hard. What I will tell you is we've been pretty actively, like I'm sure everybody, and you guys as well, looking at volume of elective surgery, not just orthopedics, but elective surgery across healthcare. We've looked at office visits and tried to look at in-person visits versus telehealth, and the problem with orthopedics is you can't really do a surgery without an in-person visit, because they have to assess the knee and assess the patient physically, so it's possible, but it's not tried and true, and many surgeons don't feel comfortable. So when we look at those numbers, they're down versus Q1 2020, because don't forget, January and February are actually pretty good months. They work for us, and they work for the industry. So the simple fact is, we fundamentally have a position that actual knee arthroplasty volumes in the US are certainly not back at 2019 levels in Q1, because they're just not. We've got through the first eight weeks of 2021, all the reports are suggesting those metrics on visits and elective procedures are down 15% to 25% per quarter. I see it as kind of 20% to 25%. March is unclear to us, but it looks like March is going to continue. There is no doubt, as we talk to our surgeons, that their schedules and their backlogs are reduced and lighter because plenty of patients have put off surgery. And it's particularly new patients. The new patient volume is down. They've put off surgery or they're waiting. So Q1 is going to be challenged, and thus why you see our stuff. And I think it's going to be an industry thing, personal view. As far as Q2, it's still uncertain. I haven't seen anything to suggest, and it's not like we have a great crystal ball to check that will materially change, but I do think it's the opportunity to exit Q2 stronger than we go into Q2 because you've got the summer months, you've got vaccine, continue to grow. We just heard the administration talk about having every adult vaccinated by May, right? So if those types of things start to happen and we can get the wary patients back, then we have a chance to come up off this floor that I think we're at in procedure levels and continue to, you know, get growth back in new patient demand. So that's what we're seeing. And, you know, I think if you track our performance, you know, we've been slightly worse because we've talked about primary only and our portfolio is more at risk than, you know, we don't have revision and we don't have other stuff like that. But we haven't been that far off. the market with you just do the analysis of where the market's been. And I think, I think that, you know, that's what we're seeing for Q1 as well. And don't forget Q1 also was impacted by what, like at least three days, but potentially a whole week of weather related stuff. And it goes back to reschedule there. It's hard to reschedule all that business in the COVID environment. So that's really an impact from an industry perspective for Q1 arthroplasty.
spk07: Okay. I appreciate that. And I want to, Ask a follow-up to Robbie's question. When you think about new products this year, you launched Cordero Match towards the end of last year. You've got the ASC&E coming in the second half. You've got the striker relationship at some point this year. How should we think about contribution from new products in 2021 and And then I'll ask my second question now as well. You talked about robotics and exploring opportunities there. Can you just kind of let us know what that means? I mean, are you going to launch your own robot? Are you looking to partner with others? What does that mean?
spk03: Yeah, I'll spend more time on that because that's the fun stuff. But look, the first thing is I don't think we're prepared to tell you exactly where that is. Give us a chance to get some of these FDA clearances and move forward. And I think we owe you know, some thoughts about how we'll talk about that and how we'll talk about uptake of new products, and we'll come back to you on that with a more thoughtful answer. We certainly haven't modeled, but I don't think we're ready to give that level of detail color. And, you know, we've got a wide target here. You know, I'm very, very bullish about what we're doing with our ASC&E. I hope the fact that we've submitted the dossier to the FDA gives you the sort of proof point that, wow, they really have made progress on this and it's real. So there's a lot of good stuff there, but we still have to execute, we still have to get the clearance and get going commercially. And don't forget, for conformance, this is a world change. Our surgeons are really, really excited We know that we're on the right track because there is growth in the ASC, but, you know, surgeons need to see and touch and feel, and they're asking a lot of good and interested questions, and we have to execute on that. Robotics is a real interesting question. I mean, clearly, as a smaller company, the idea that conformists, you know, and frankly, probably certainly even more capital-constrained smaller company, the idea that we could be a You know, a leader on robotics, I think, wouldn't have made strategic sense, and so we didn't choose to pursue that. I've said publicly that we want to be, you know, a best-of-fast follower and see how it plays out. As I said in my prepared remarks, it's not clear to me that there is a clinical and health economic rationale here. I mean, I understand the hypotheticals, but they're not there yet. There's no doubt that, you know, hay has been made with the marketing of it, But we're about the ASC, and we're about outpatient. And my view is, at least today, other than certain places that can afford it, most of the robotics is being targeted to the inpatient. So the question for us, and what now this capital raise allows us to do, there's a lot of different technologies and potential partners out there. There's a lot of advancement. So the question we're asking ourselves is, what is the right way to think about how we can complement our approach and pursue robotics through, you know, likely through partnerships and development opportunities. And so we're going to proactively look at that. I mean, you know, we've always thought and felt that, you know, a really neat solution would be a robotic personalized solution so we could replace jigs and the cost associated with that and have real-time interoperative planning and whatnot. So we're going to, you know, use the capital that we've got on hand now to actually, you know, explore that. And so we'll, you know, as always, as we think about what that program might look like, if we're, you know, going to change R&D spend in any material way, we'll talk about that. We're going to be prudent. And as well as soon as we're, you know, thinking about something or ready to discuss something and, you know, we'll put it out there as part of our new product roadmap. Great.
spk07: Thank you for taking the question.
spk03: Thanks, Kyle. Good questions. Appreciate it.
spk05: Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to Mark Augusti for any further remarks.
spk03: Okay. No further remarks. I just want to appreciate everybody for attending the call. Appreciate the questions. Thank you, operator. That concludes our call.
spk05: Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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