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spk10: Good afternoon. Welcome to Establishment Labs' fourth quarter 2020 earnings call. At this time, all participants will be in listen-only mode. At the end of this call, we will open the line for a question and answer session, and instructions will follow at that time. If you require assistance, please press start and zero to reach an operator. As a reminder, this call is being recorded. I will now turn the call over to Raj Dinhoy, Head of Strategy and Investor Relations. Please go ahead.
spk05: Thank you, Operator, and thank you, everyone, for joining us. With me today are Juan Jose Chacon Quiroz, our Chief Executive Officer, and Renee Galleta, our Chief Financial Officer. Following their prepared remarks, we will take our questions. Before we begin, I would like to remind you that comments made by management during this call will include forward-looking statements within the meaning of federal securities laws. These include statements on Establishment Labs' financial outlook and the company's plans and timing for product development and sales. These forward-looking statements involve material risks and uncertainties, and the company's actual results may differ materially. For discussion of risk factors, I encourage you to review the company's annual report on Form 10-K, which we plan to file with the SEC tomorrow, and which will be available on our website at establishmentlabs.com. The content of this conference call contains time-sensitive information, accurate only as of the date of this live broadcast, March 10, 2021. Except as required by law, Establishment Labs undertakes no obligation to revise or otherwise update any statement to reflect events or circumstances after the date of this call. With that, it is my pleasure to turn over the call to our CEO, Juan Jose.
spk03: Thank you, Raj, and good morning, everyone. I hope everyone is healthy and continues to remain safe. Our fourth quarter revenue of $27 million represents a new record for our company. Fourth quarter revenue increased 11% over the fourth quarter of 2019 and was up sequentially 18% from the third quarter. Our strong results and recovery we saw over the course of 2020 are the latest evidence that we are moving beyond the pandemic and that the foundations of our growth story are very much intact. Our singular focus on women's health and the superior aesthetic and safety profile of our implants continues to resonate in the marketplace. We continue to grow our total global market share. In October of last year, we shared the 10-year post-market surveillance data of our Motiva implants. With now over 1.4 million implants worldwide, we continue to report a less than 1% complication rate in the key safety measures of capsular contracture and implant rupture. These results are at least an order of magnitude better than anything seen from the legacy competitor products in the international markets. As impressive as this data is, it speaks to something beyond just a competitive advantage. it should change how women perceive the safety of breast augmentation procedures. At Establishment Labs, we believe that this is not just possible, but likely. We believe that our data and aesthetic outcomes are quite literally game-changing. And as perceptions change and as new possibilities become available, the total addressable market could grow substantially. Another area where we are working to change perceptions is in the breast reconstruction sector. With one in eight women afflicted by breast cancer, being able to offer a substantially better alternative is an important mission for our company. In many countries around the world, less than 10% of women have browned the world, less than 10% of women have breast reconstruction after a mastectomy. One reason for this is that the historical focus of breast reconstruction has not been on achieving an aesthetic outcome. Our goal is not just to allow for safer breast reconstruction, but to create a new standard of aesthetic breast reconstructions where the patient's aesthetic outcome matches traditional breast augmentation. With an aesthetic outcome, we can have much more comfort with this important surgery. The planned launch of our floor at tissue expander is an important step in offering a better solution to these patients. 2020 was also an important year for Establishment Labs because it tested better solutions to these patients. 2020 was also an important year for Establishment Labs because it tested our company and showed that we can manage well during the most difficult times. We conserved cash and protected our people while continuing to invest in strategically important initiatives. We reduced spending at the height of the pandemic. but we did not reduce headcount with our customer-facing commercial team. Our balance sheet remains in great shape with $84.5 million in cash. Renee and her finance team manage our operating expenses and working capital well, and our cash balance increased in the fourth quarter. As impressive as this discipline has been over the last year, we are increasingly confident that the worst of the pandemic is behind us. And given the significant opportunities still in front of us, we intend to invest in our future. In manufacturing, just last week, we passed our annual audit under the MD SAP standard with no major observations. MD-SAP is a single audit program that covers requirements for US FDA as well as regulators in Europe, Canada, Japan, Brazil, Australia, and other jurisdictions. 2020 has also validated our focus on making digital part of the fabric of our company. With our Motiva Edge online programs, we trained thousands of plastic surgeons in 2020 and attracted many new potential customers through our best-in-class digital training and educational resources. On social media, we have built a commanding presence with our message of women's health and improved safety and aesthetic outcomes. We have more than 10 times the social media engagement of our closest competitors. This level of engagement allows us to support a patient's journey as she conducts research and helps us provide answers customized to her specific areas of interest. Our marketing team is also focused on initiatives to leverage our online presence to provide valuable insights into women's decision-making as they seek breast aesthetic procedures. This level of digital-based activity is unmatched in our industry. As challenging as the last year has been for all of us, are strong financial results and the resiliency in our business makes us even more confident that we will have continued strong growth for the foreseeable future. Given the momentum which has carried over from the fourth quarter, we are providing guidance for the full year 2021 of $110 to $112 million. This represents growth of 30 to 32% over 2020. Renee will provide more detail on our financial results and our outlook in a moment. Before I turn the call over to her, I want to provide an update on several near-term initiatives. On February 9th, we hosted a virtual meeting showcasing the significant development work we have done on MotivaMia, our minimally invasive breast enhancement procedure. Along with strong investor and industry participation, we had over 100 plastic surgeons tune in, and the feedback has been outstanding. A minimally invasive breast enhancement procedure that can be done in less than 30 minutes without general anesthesia and with no visible scars has been a goal for decades in our industry. And with Mia, we feel we have developed a system that matches that goal and one that is simple to perform, reproducible, and safe. We have learned a tremendous amount in our early series of cases. The learning curve for Mia is very fast, with all surgeons able to reduce their procedure time by 50% after performing only three to four procedures. Procedure times fell to as low as just 13 minutes. Recovery is also very fast. with patients discharged in our initial series in as little as 28 minutes, and back to work in less than two days with little pain or discomfort. MotivaMia opens up breast enhancement to many women who previously had not considered breast surgery, and we view this technology as expansive to the overall market opportunity for breast aesthetics. Based on our proprietary market research conducted with over 4,000 women around the world, our initial estimate of the global market size for Mia is 1.9 million procedures a year. This market expansion will increase the total addressable market from $1.5 billion with traditional breast implants to more than $5 billion with Motiva Mia. The Ergonomics II diamond implant used in MIA received CE mark in December and we are now advancing with the regulatory process for the tools that are part of the MotivaMIA system. We continue to define our commercial strategy and we will share more detail in the near future. Our Ergonomics II round implant was also CE marked in December. The Ergonomics II platform builds upon our successful Ergonomics implant which has become our best-selling and most premium offering in Europe and Asia Pacific. The features of this innovative new product, including enhanced mechanical properties, advanced chemistry, and improved ergonomics, we believe will result in even greater patient satisfaction. As it is so feature-rich, we expect Ergonomics II to command the price premium over ergonomics. Our early experience in Latin America with Ergonomics II implants has been very positive. We are on track to begin early commercial activity in Europe with Ergonomics II over the summer. Flora, our novel tissue expander, received CE mark in June of 2020. Renowned centers for breast reconstruction in Europe have used Motiva implants for years. and are looking forward to pairing them with the Flora Tissue Expander and the unique features it offers, including our proprietary smooth silk bioengineered surface. With an integrated RFID port, Flora will be the only MRI compatible tissue expander on the market, which is a significant improvement over the current standard of care. Pre-marketing activities are underway in preparation for a broad commercial launch in Europe over the summer. and we are already in contract discussions with several hospital accounts. Our clinical and commercial progress in China continues, and we are moving toward launching in this important market in 2022. Our regulatory timelines for U.S. approval also remain unchanged. More than half of our U.S. ID study patients in the aesthetic cohorts have now reached their two-year post-op anniversary. I will now turn the call over to Renée.
spk01: Thank you, Juan Jose. Establishment Labs closed 2020 with significant momentum. Not only did we see strong sequential growth in sales this quarter to a new record level, we controlled operating expenses and managed our cash position effectively. I'd like to thank the team for helping keep Establishment Labs in a very solid financial position. You can find additional details about our fourth quarter financials in our earnings press release and our Form 10-K, which we plan to file tomorrow. Total revenue for the quarter was $27 million. Direct sales were approximately 49% of this total, while distributor sales, which can fluctuate based on changes in inventory levels and the timing of reorders, made up the balance. From a regional perspective, Sales in Europe comprised approximately 45% of global sales, Latin America was 29%, and Asia Pacific Middle East made up the balance. Brazil, which is our single largest market globally, accounted for approximately 13% of total quarterly sales. Both direct and distributor sales in Latin America have rebounded and were up year over year. Our reported gross profit for the fourth quarter was $14.6 million, or 54.3 percent of revenue, compared to $16.4 million, or 67.5 percent of revenue, for the same period in 2019. The year-over-year decrease was due to the timing of certain one-time expenses related to inventory obsolescence and scrap. As a reminder, we only report GAAP results and do not exclude these types of expenses from our results. Collectively, these items reduced gross margin by approximately 6 percent in the quarter and 2 percent for the year. Importantly, despite these charges, gross profit increased on an annual basis in 2020 to 62 percent from 61.3 percent in 2019. Average selling prices in the fourth quarter were consistent with the year-ago period. While there will be fluctuations as we saw in this quarter, we continue to expect an upward bias in gross margins over time. Total operating expenses for the fourth quarter were $22.7 million, an increase of $1.9 million compared to $20.8 million in the same period a year ago. SG&A expenses for the fourth quarter increased $1.1 million to $18.2 million compared to $17.1 million in the fourth quarter of 2019. The majority of this increase resulted from insurance costs and investment in digital transformation systems. Our R&D expenses in the fourth quarter increased $900,000 from the same quarter a year ago to $4.5 million. This increase was due to the timing of clinical trial expenses and increased investment in several development projects. Strengthening our product portfolio to drive future growth remains a top priority, and we will continue to be disciplined and focused in our research and development investments. Net loss from operations for the fourth quarter was $8 million compared to net loss of $4.4 million in the year-ago period. During the fourth quarter, we generated $3.1 million in cash, and from a balance sheet standpoint, our cash position remained strong at $84.5 million as of December 31, compared to $81.4 million on September 30. The increase this quarter was primarily the result of strong working capital management. As Juan Jose noted earlier, we are providing sales guidance for 2021 of $110 to $112 million, representing an annual growth of 30 to 32%. As we look down the rest of the P&L, we expect to see spending increase as we prioritize investment in the development and commercialization of a significant number of programs we have underway. However, while operating expenses tied to these new programs will increase, we expect a number of cost efficiency programs we implemented over the past year will become permanent. This increased efficiency, as well as our strong revenue growth, should result in our cash use continuing to trend down from pre-pandemic levels, even as we increase strategic investments. Overall, we believe our company is in a strong competitive position, the business fundamentals are sound, and we remain very optimistic about the potential for our new products to contribute to growth in 2021 and beyond. I will now turn the call back over to Juan Jose for concluding remarks.
spk03: Thank you, Renee. We are off to a very good start this year. The record revenue we generated in the fourth quarter in our progress over 2020 showed again that ESTA is on the right path. in that it is within our grasp to be the leading company in breast aesthetics and reconstruction there is no other company in our industry innovating like we are or with our commitment to women's health the field is wide open for us but we are not satisfied with just taking share within the current breast implant market by transforming the patient journey in breast aesthetics and reconstruction we can expand the markets for products Mia has a real potential to change the perception and accessibility of breast aesthetics, which could make our addressable markets much larger. The launch of FLORA this year will begin a concerted push by us into the breast reconstruction market, and we see opportunities to significantly improve outcomes for the millions of women diagnosed with breast cancer around the world. The next 18 months will be exciting, but so the next 10 years. We recently appointed Raj Dhanohoy as Head of Strategy and Investor Relations. Many of you know him from his 20 years as a medical device analyst, most recently as a recovering analyst at Jefferies. We are excited to have him join the team. I also want to thank the entire Establishment Labs team for their dedication to our mission of improving women's health. The last year has not been an easy one, but the team continues to perform at a very high level, and I could not be more proud. With that, we will turn the call now over to questions.
spk10: Ladies and gentlemen, if you'd like to ask a question, please press star then 1. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes from Anthony Patron with Jefferies. Your line is open.
spk04: Thank you, and good morning, everyone. Congratulations to Raj on your new role, and congratulations to the team on a very strong year. I hope everyone is doing well and staying healthy. Maybe to begin, Juan Jose, a couple on you mentioned physician training virtually in 2020. Certainly a lot of companies shifted from physical meetings to virtual training, but it sounds like the number of surgeons onboarded last year notably increased. So maybe just a little bit of detail on How many surgeons were trained virtually last year? And what is the historical conversion rate from training to active Motiva users that you've seen maybe pre-pandemic and how that's trended during the pandemic? And I'll have a couple of follow-ups.
spk03: Yes, of course, Anthony, and thank you. It was very important for us to prove that we could shift our medical education platform, Motiva EDGE, from just in person to online that quickly. So that resulted in, I think the latest number was over 18,000 attendees for the year in our medical education platform online, of which thousands of those were new contacts for us. Of course, it's difficult during the pandemic to follow up in person with many of them, but we are looking forward to the situation improving so that we can begin doing business with many of them. As the year evolves, I think you're gonna see us doing more in person than now, but I guess what we have been able to prove is that the online medical education can also be a very powerful tool for training and for attracting surgeons that don't know yet about our story of innovation and improved safety and aesthetic outcomes. Very glad to see the development with, I would guess, this hybrid type of medical education, and I think it's going to help very much when we move into new things like MEA and breast reconstruction.
spk04: One follow-up for you, JJ, and a quick one for Renee on guidance. One would be just a quick update on U.S. studies. Obviously, a lot of studies in 2020 were delayed due to COVID, so maybe just an update on timing there and Actually, we think about a Motiva and Mia launch in the U.S. Would those come simultaneously, just considering the unveiling in February? And the quick one for Renee on guidance would be how much is baked in for flora, and is there any way to estimate what you've baked in for backlog recapture? Thanks. Thanks.
spk03: So perhaps we can begin with the FDA. So we were very happy that we finished the enrollment in the aesthetic cohorts back in August of 2019. So, you know, the clock is ticking with that group, which represents 80% of the U.S. market. We've been progressing with the follow-up. You know, most of that happening through a virtual consultation that was a pre-approved with the FDA, so we are looking forward to the two-year mark for all of those patients. We believe we are well on track with the aesthetic indication. As we have mentioned before, with breast reconstruction, there were a lot of challenges during the pandemic, so that cohort is delayed, but we continue to make progress, and we hope to be able to give you some news in the near future.
spk01: Yeah, thanks, Anthony. And then also on 2021 guidance, you know, this is our initial view. We are certainly balancing the strength that we've been seeing from the, you know, continued uncertainty within the pandemic. We're balancing both sort of timing of those product launches that we've talked about, you know, coming this summer, but also some of the deferral recapture because, you know, not all patients can get in. There are still restrictions in certain countries. So, We, you know, we are seeing continued momentum and the outlook on our business remains very good. And we're definitely continuing to capture global market share.
spk04: Thank you. Congratulations.
spk10: Our next question comes from Josh Jennings with Cohen. Your line is open.
spk02: Hi. Good morning. Thanks for taking the questions. And echo Anthony's congratulations on a strong end to 2020, and it sounds like momentum has continued in the first quarter here. Two quick ones, or two not quick ones, two questions, sorry. The sheer report, I think there was a committee meeting in Europe earlier this month or beginning of the month. Any takeaways that you've heard from that plenary session and on the safety of textured implants? And are there any other regulatory decisions on textured implants that could hit in 2021 in other geographies outside of Europe?
spk03: Yeah, thanks, Josh. So just to remind everyone, the Scheer Committee is basically a committee from the European Commission that focuses on safety across the European Union. They began looking at the safety of breast implants last year. They issued a report during Q4 that was clearly associating textured breast implants with breast implant associated ALCL. So definitely this is something that we have been talking for many years at establishment labs. One of the reasons for our success is our proprietary smooth silk surface that allows for less inflammation and less capsular contracture. To date, we have had no cases reported of ALCL. And when we think about what can happen in the future, definitely across the globe, regulators are looking at the safety of texture devices. And we do expect to see a report from Shear later this year. It's hard to know with the pandemic exactly when they will be able to finalize that, but definitely our expectations is that it will happen this year, that they will give the final recommendations of their report. We are seeing, you know, other regulatory agencies acting across the world at different speeds, but, you know, one thing is for clear, you know, texture breast implants are not the future of this industry. and we're happy to be part of the future with our proprietary technologies.
spk02: Great. Great. Thanks for that. And my follow-up is just thinking about the future launch of Motiva in the United States. What can establishment do today and in the coming months and quarters or year in front of the U.S. launch in terms of – creating Motiva awareness within the plastic surgeon community. I mean, clearly the FDA data set will be a big deal for the, in terms of sentiment towards Motiva, but in other channels or other strategies that establishment is considering in terms of creating the buzz and just awareness of Motiva in front of the approval and the launch. Thanks for taking the questions.
spk03: Yeah, of course. We have to be very mindful of not doing pre-marketing activities. The FDA does frown on those. But at the same time, our job is to continue to put out in peer-reviewed journals the evidence, the science behind our technologies. But also, you know, there's been more and more independent and sponsored peer-reviewed studies that have been coming out, and I think we will do so We will see more in the future. I think also there's an awareness globally that there are new technologies out there by establishment labs, and those can impact positively patient outcomes. So I think the plastic surgery community in the U.S. is well aware that something is going on, and as we get our clearance from the FDA, we will be very happy to engage with them and get them to use our products quickly.
spk02: If I could just follow up, any incremental thoughts on a potential flora launch in front of Motiva approval in the United States? Thanks, thanks again.
spk03: Yes, so for our tissue expander Flora, which is the only MRI compatible tissue expander with an integrated valve, You know, we expect to submit a revised 510K in the first half of this year, and we will update you on the progress on when we do receive approval. And, of course, that gives us the optionality of launching that tissue expander ahead of the breast implant approval. But, you know, it's too early to tell you about what will happen, but we will definitely update you on the different milestones leading to that.
spk02: Understood. Thank you.
spk10: Our next question comes from Chris Cooley with Stephen. Your line is open.
spk06: Thank you. Good morning. I appreciate everyone taking the questions, and I'll also utter everyone else's prior sentiments here. It was a phenomenal performance in an extremely challenging year. If I could, let's go back and just revisit from my first question your commentary around the reconstruction marketplace. Clearly, better clinical outcomes, but I'm curious about how you achieve a more augmentation or aesthetic outcome for those patients. And I guess I'm just trying to go farther afield here. Do you ultimately envision Motivamia being used in these cases, or do you also envision some type of ADM being brought on board at some point in time as these women not unfortunately have extremely radiated tissues there? So, you know, traditional implant just doesn't really work as well. So I just would appreciate any additional call you could provide on the complete suite that you think you'll have to bring to bear here in that segment and how you would achieve a more aesthetic outcome. And I've got a quick follow-up.
spk03: Yeah, thank you, Chris. The rates of access for women in breast reconstruction globally are quite low. In some markets, they can be single digits. And part of it is awareness of good options and good outcomes in breast reconstruction. Our plan is to transform breast reconstruction over the next decade by using technology and advanced techniques to bring about what we call an aesthetic breast reconstruction, which is to bring outcomes that are closer to those of aesthetic patients. There was a publication, independent publication last year in PRS Open Journal regarding the use of Motiva ergonomics implants in a hybrid breast reconstruction. If you go to that article and you look at the outcomes, it is hard to think that those are not aesthetic looking outcomes. And that's exactly what we are looking for. We are looking to take some of these initial results with our products and make them into a standard so that they can be used by surgeons worldwide. By democratizing this level of outcomes, we believe more women will be willing to have a reconstruction procedure. But we are not only looking at that, we're looking at early detection so we can help these women ahead of time before it's too complicated to get a good outcome. And of course, you know, Flora is our first technology that is uniquely suited for breast reconstruction. As we expand our technologies, you'll see us bringing other products to market. And as I said, our plan is to transform breast reconstruction just like we've done with breast aesthetics before.
spk06: Thank you. I appreciate all the additional call there. And then maybe just for my follow-up, Rene, if I may, When we think about the year, and I appreciate it's early on and a number of moving parts here, but it does seem like there will be some fairly significant needs for investment this year, not only from a working capital perspective, but also just in terms of just traditional sales and marketing expense. Could you maybe just help us think a little bit about maybe first half versus second half, just any kind of granularity that you could provide there about how we should think about this ramp up in the spend from the company's perspective in anticipation of these really exciting new launches here come summertime. Thank you so much.
spk01: Yeah, sure, Chris. You know, it's a great question, and we're obviously factoring in all of the different exciting programs that we have going on here. How does that look with regards to those product launches and rolling out the new advancements that work in technology that we're going to bring to the space, but also how you know, balancing where we're at with our own internal strength and what we're still seeing with the pandemic. So, you know, I wouldn't necessarily say first half and second half, you know, I'm not going to give sort of quarter by quarter breakdown. We will see spend increase and would probably expect that as we roll out some of those additional programs over the summer, the spend would align with that. So we're super excited about how we've come out of the pandemic. the strength that we're seeing and how our products are resonating with patients and plastic surgeons. I think as we look forward through the rest of the year, we really want to make sure that we're investing strategically to execute on those new milestones.
spk06: Thank you.
spk10: Our next question comes from Matt Taylor with UBS. Your line is open.
spk08: Hi, thank you for taking the question. So I wanted to start and ask one about this continued momentum that you called out in Q1. I was hoping you might be able to be a little bit more specific. You mentioned that there's some countries where people are still having trouble with access. I know you're in 80 countries, so I don't expect you to go through all of them, but could you give us some flavor on where things are going better versus still slow and how you've imputed that into the initial guidance here?
spk01: Yeah, certainly. You know, you're right, we're in over 80 countries, but obviously, you know, the top set of those drive a big chunk of our revenue and we have to be mindful of sort of what's happening in Europe. We've seen some great response there and hopefully the vaccine rollout continues and actually increases in momentum. I think as we also look towards countries like Brazil, which for us is oftentimes the leading country, they're seeing an increase in case volumes right now after coming out of their summer and their carnival season. where some regional governments have recommended deferrals of nonessential surgical procedures. So we're weighing in all of those factors and sort of watching it, you know, daily or weekly just to see what happens. I think, you know, as countries open, vaccines roll out, that's always positive for us, but we're still in that interim period right now where we're just trying to, you know, provide patients with vaccines implants and procedures where we can, but in some cases those are still restricted in our larger countries as well.
spk08: Okay, great. And, you know, one of the recent developments that could be really positive for you is Allergan's exit from a number of the OUS markets, and I was hoping you could provide some commentary there in terms of how quickly you might be able to capitalize on some of that or just framing that opportunity for us.
spk03: Yeah, thanks, Matt. I think, you know, this action is in some ways a logical response to the innovation gap that has opened up in the market. But, you know, we have to be mindful that it really began, you know, over two years ago when there was the global recall of Allergan's textures products. And, you know, the international market at that time was, you know, majority textured and of that Allergan had a, you know, a good portion of it with their textured devices. So the shift away from Allergan really began over two years ago. Many of those users shifted to other textured devices naturally. So that's why we are so adamant about our medical education, about evolution from textured devices to smooth devices. And if it's gonna be a smooth device, an advanced bioengineered smooth device like ours. In saying that, you have to be mindful that we are taking market share from the rest of the competitors, including Allergan, and also that in many markets we are moving into a leadership position. So I think in a market where you don't have Allergan, our leadership position could be even stronger. So that's probably one of the most important takeaways from us strategically. And, you know, I think we we are confident that, you know, we can continue taking market share organically. And on top of that, add the new geographies like China and the US, where we still have Allergan as a competitor.
spk08: Okay, great. That's, that's a good way to think about it. And that that dovetails into my kind of last follow up here. We talked about your leadership positions, you have intermittently given some color on market shares in certain geographies, relatively high numbers. Could you update us on a few of those and where your shares are today? Help us think about how your shares could gravitate higher over time based on your differentiation.
spk03: Yeah, I think that we plan to give a good update on international markets and the market share position that we have in them. But I can tell you, just to give you some ideas of how good we've been doing, in countries where we launched last, like Thailand and Taiwan, we went literally from zero to being on par with the market leaders in those markets. And that shows you how quickly we can grab market share. I think we have a good blueprint these days about going into a market and using medical education and patient education to quickly gravitate, you know, the market towards us. I do believe, though, that, you know, in the international market, you can think of establishment labs as well underway to a market leadership position.
spk08: Okay, great. Thanks, JJ.
spk03: Thank you.
spk10: Our next question comes from Amit Hazan. with Goldman Sachs. Your line is open.
spk07: Hi, all. This is Phil on for me. Thanks for taking the questions, as always. I wanted to circle back on the MEA event that happened earlier this year and ask if you all can sort of detail the steps and the timeline that are ahead to performing commercial procedures in Europe. Obviously, just one of the three elements approved today and the clinical steps that are still ahead.
spk03: Yeah, of course. So, just a reminder, a minimally invasive augmentation, the concept includes no general anesthesia, fast procedure, quick discharge of the patient, and quick recovery times. In the series that we performed in Costa Rica, we were also able to prove a quick learning curve for surgeons, and that is fundamental to that timeline. We were very happy to see the CE mark for the Ergonomics II diamond breast implant, that is part of the Motiva MIA system. We are now expecting an approval of the tools that go with the Motiva MIA system, and we're talking about the balloon that is used to create the space through a very small incision, and also the Motiva injector so that we can safely deliver that diamond implant through that very small incision. For us, the approval of another group of patients in the Costa Rica series is very important, so we are taking that group to 100 patients, and procedures are happening week to week, and we are progressing towards that end. Once we get the approval from the European Notified Body in the second half of this year, we will begin pre-market activities, which will give us the optionality of launching early in 2022. So of course we are super excited about these possibilities in our market research. A significant amount of the opportunity lies in Europe and we do believe that it proved that this concept that was born as more like a way to adapt our technology to Asian patients has now proven to be a very appealing option for women who are not thinking about traditional breast augmentation but who are probably not as happy as they could be with their breast shape or size.
spk07: That's great. Thanks so much. My second one, there was a specific comment in the Raj announcement of joining the team about helping to create value as you expand into new areas of aesthetics. Maybe it's for you, Juan Jose, or maybe for Raj as well to opine. Interested in what the implication of that was and how you see Raj's role for the company. Thanks so much.
spk03: Yes, of course. We're very fortunate to have Raj join the team. As we think about the future of the company, I think that you have to understand what is it that we bring to aesthetics. And I think what we bring that is different is that angle of women's health. And we will continue to work towards that end. We always say that we are doing this initially in breast aesthetics and reconstruction, but as the opportunities come to us, we will be very mindful of what fits that angle of women's health. There are many things out there, many interesting technologies. We continue to work through our rich pipeline internally, but at the end, we'll do what is best for the company and the shareholders. Thanks, Juan Jose.
spk10: Our next question comes from Marie Thibault with BTIG. Your line is open.
spk09: Great. Thank you for taking the questions this morning, and I'll add my congrats to the list here. A very strong quarter, and congrats to Raj as well. I wanted to start here with the new Ergo 2 implant. I'm expecting that launch this summer here in Europe. Could you give us a sense of the price and premium you're hoping to attach to that product and how we might expect adoption with existing Motiva users to sort of roll out? Is that something that you expect to pretty much replace their current ergonomics use? Would they be using it in specific cases? How do you see that being rolled out?
spk03: Yes, thanks Marie. So back in 2015 when we launched the first generation of the ergonomics device, that came at a premium of about 50% over a round smooth silk device. And most people thought that doctors would not pay for that premium. The important thing for us is that we were able to educate patients on the benefits of the ergonomics device ahead of them visiting a plastic surgeon. So that made them less price sensitive because they were able to see the value in the ergonomics device. The comfort, the softness, the tissue-like qualities of that implant are very appealing to many women. So they found themselves in a situation where they were willing to upgrade and pay for that premium. I think a similar thing may happen with Ergonomics 2. But remember, this doesn't happen overnight. Surgeons have to try the device. Patients will come back with their views on the Ergonomics 2 device. I can tell you from our early experience that patient feedback is extremely positive. So we do expect to see a similar process of adoption in which patients push surgeons to upgrade their procedures to the ergonomics to the right. So hopefully a few years from now, we will be able to tell you that that is our number one offering. And we certainly expect that.
spk09: Okay, great to hear. I think, JJ, you mentioned that on the MEA symposium, there were over 100 classic surgeons who tuned in. Any surprising feedback from that group? Anything that kind of took you by surprise?
spk03: Yeah, probably the amount of surgeons that called our sales rep saying, you know, how fast can I have it? I think that was probably the most important takeaway from that part is that, yeah, of course, plastic surgeons have been thinking about this for decades. It's a logical outcome. can we do a minimally invasive augmentation safely, quickly? Can we make it through a reproducible technique? And I think that's what we've been able to create with MIA. We have now expanded the IRB series to 100 patients. We hope that we can continue to prove what we have seen with the initial 30 patients. We are also looking at the longer-term outcomes with the patients from Japan. So all of that together, you know, creates a really good atmosphere for a potential product launch in early 2022.
spk09: Okay, perfect. Last one from me then. You gave us some nice numbers around the split between direct and distributor. Sounds like it was almost about half-half this quarter. I'm wondering if there's anything to look to in terms of lumpiness from the distributors this year, any sort of cadence we should be thinking about, and then any change to your outlook in taking some of your markets direct. I know in the past that you've taken various countries direct, so whether we should continue to expect that here in 2021.
spk01: Yeah, you know, the results from the year and even the last quarter, you know, especially the back half of 2021, was pretty consistent with what we've seen and how we expect it to sort of go going forward. You know, that 50-50 split on direct versus distributor is where we will likely be, you know, fluctuating quarter to quarter, but that's where we're at. And until we really see, you know, geographical expansion into China and U.S., that's what we're predicting for the future.
spk09: All right. Very helpful. Thank you again.
spk10: Our next question is a follow-up from Anthony Patron with Jeffrey. Your line is open.
spk04: Thanks. Just a quick one on MEA pathways clinically. I'm just wondering when you consider the IDE secured for in the original U.S. study, is that the same sort of protocol we should be expecting? In the original U.S. study, it's 750 patients. I'm just wondering if that's sort of the size and sort of makeup between revisions and augmentations, so we assume a similar study approach, or will it be a PMA supplement to that original data? Thanks.
spk03: Yeah, thanks, Anthony. Just a reminder that motiva mia at this point is for the aesthetic indication only. Regarding U.S. potential approval pathway, Our initial thoughts regarding this are of a PMA supplement, so that's how we plan to approach it. It's a little bit early to be having those conversations directly with the FDA, but I think when the time comes, we would like to confirm with them that that's the appropriate pathway for MEA. But there are many good reasons, including what we have done in other high vigilance countries with Mia, and that could be a good precedent for what we do with the FDA. Thank you.
spk10: That is all the time we have for questions today. I will now turn the call back over to Juan Jose for closing remarks.
spk03: Thank you for joining us on today's call. We look forward to providing our next quarterly update in May. We wish you a very good day and continued good health. Thank you.
spk10: Ladies and gentlemen, this does include the program. You may now disconnect.
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