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spk09: Good day, and thank you for standing by. Welcome to the Aveda Medical's first quarter 2022 earnings conference. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Caroline Corner with Investor Relations. Please go ahead.
spk02: Thank you, Operator. Welcome to Abita Medical's fiscal first quarter 2022 earnings call. Joining me on today's call are Mike Perry, Chief Executive Officer, and Michael Holder, Chief Financial Officer. This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding the markets in which Avita Medical operates, trends, demands, and expectations for its products and technology, its expected financial performance, expenses on position in the market, and the impact of COVID-19 on its operations and its customers' operations. These statements are neither promises nor guarantees and involve known and unknown risks and uncertainties that could cause actual results, performance, or achievements to differ materially from any results, performance, or achievements expressed or implied by the forward-looking statements. Please review Evita Medical's most recent filings with the SEC, particularly the risk factors described in Evita Medical's S3 and 10-K filings, and in Evita Medical's quarterly report on Form 10-Q for the first quarter ended September 30, 2021, for additional information. Any forward-looking statements provided during this call, including projections for future performance, are based on management's expectations as of today. Avita Medical undertakes no obligation to update these statements except as required by applicable law. Avita Medical's press release with first quarter results is available on its website, www.avitamedical.com, under the Investors section, and includes additional details about its financial results. Avita Medical's website also has the latest SEC filings, which you are encouraged to review. A recording of today's call will be available on Avita Medical's website by 5 p.m. Pacific time today. Now I'd like to turn the call over to Mike for his comments and first quarter 2022 business highlights.
spk08: Thank you, Caroline, and thank you, everyone, for joining us today. We are encouraged by our recent commercial performance and remain extremely excited about the opportunities ahead with our pipeline indications. Here at Avita Medical, we are driven by our primary goal of commercializing our proprietary technology to enable healthcare providers to successfully address skin defects to save lives and improve quality of life for our patients. As we grow from treating burns to trauma to vitiligo to cell and gene therapy and to aesthetics and beyond, our focus is on delivering leading-edge therapeutic skin care restoration solutions to our patients. While the company was founded with Burns treatments in mind, our team is working to leverage our point-of-care autologous spray-on-skin platform across many markets and indications, and I'm very pleased to update you today on our latest developments. With that, I'd like to turn to our Burns business. I'm pleased to report that our commercial revenues were $6.9 million in the first fiscal quarter compared to $6.7 million in the previous quarter ended June 2021. Last Tuesday, the Centers for Medicare and Medicaid Services, or CMS, approved a medicals application for a transitional pass-through payment device category C code. that will provide separate payment for resale used in procedures that are performed in hospital outpatient facilities and in ambulatory surgical centers. The TPT device category code, which is intended to facilitate the adoption of new technology for Medicare beneficiaries by offsetting the cost of the device to facilities, will be effective January 1, 2022. This new code expands resell burn treatment to a new care setting with existing customers and lays a reimbursement foundation for our soft tissue repair indication that we are working towards. As a quick update on the product development front, at the end of June, we submitted to the FDA a PMA supplement application for our new version of the resell device with improved ease of use which we hope will allow us to approach our future markets more readily. We anticipate FDA approval in the first half of calendar 2022 and a commercial launch thereafter. The improved ease-of-use device will allow Aveda Medical to better address our burn outpatient market, facilitated by the new TPT code issuance, as well as our soft tissue repair indication, once approved. More specifically, the ease of use device allows for improved surgeon and staff handling by only requiring one set of hands in the sterile field, as well as a reduction in device handling steps by one third. We've been building our burns focused sales force for three years and believe we have the largest and most experienced burns dedicated sales force in the market. However, at this time, due largely to COVID, our sales force is selling into a system which is experiencing staffing shortages. Our surgeons rely heavily on their experienced nursing staff and high turnover and early retirements are impacting resale procedures. In response to this situation, we have prioritized our training and education efforts and hope to see improvement in procedure rates as the pandemic continues to abate. Our commercial focus is on driving utilization and broadening penetration within our footprint of over 100 hospitals and over 250 trained physicians. Revenue from our top 20 accounts increased approximately 7.7 percent in fiscal Q1 over fiscal Q4, driven by growth in the top five accounts, which saw 18.3% growth. Our top five accounts have been less impacted by the staffing shortages being larger and with dedicated burn staff, which has enabled our growth here. It's clear that nursing training has a tremendous impact on a hospital's ability to perform procedures, and the nursing staff therefore has a substantial influence on the use of resale. While we are continuing to train physicians, we are approaching our training efforts with a strong focus on advanced practice providers. Training includes local, regional, and national events for both surgeons and their staff. In addition, in the last quarter, we have held almost 550 hands-on trainings in the field, and we are currently performing approximately 200 in-hospital training sessions per month. Last weekend, we presented 10 abstracts at the ABA Southern Region Burn Conference, the largest ABA region and the largest U.S. burn conference next to the annual ABA meeting in the spring. The presentations covered topics such as small burns, pediatric burns, and topics of integration of resell into practice such as synergistic combinations with resell, and health economics. Additional, later this week, we will have two resale presentations at the Northeast Region Burn Conference. Interest in resale remains high, and despite the pressure on procedure rates, we are completing cases and delivering on our mission to save and improve patients' lives. In the first quarter during Hurricane Ida, a family suffered Severe burns when their gas grill they were using due to power outages exploded. The pregnant mother, her husband, and their toddler were all burned. The family was taken to University Medical Center in New Orleans, where they were treated by three different surgeons. All were successfully treated with resale. Today, I'm very pleased to tell you that all family members are recovering successfully. and the mother who suffered burns to her legs is able to climb the stairs to her third floor home and to carry her toddler. While a commercial focus to date has been in burns, another area of important impact for us is injuries not originating from burns. The reopening of the economy and the corresponding increase in accidents meant that in our fiscal fourth quarter and first quarter, enrollment in our soft tissue reconstruction trial materially accelerated. This trial involved injuries such as the resection of necrotizing soft tissue infections and the gloving injuries, which are wounds that commonly present at the same trauma centers where we're currently treating our burn patients. If you recall, we had our first patient in this pivotal trial enrolled in March 2020, and we saw slow enrollment for the first year due to the pandemic. Today, we have 19 of the 20 planned sites up and enrolling, with 58 of 65 subjects enrolled to date. In October alone, we enrolled 10 new subjects spanning broad geographies. Since the close of the June quarter, a resounding 40% of the required 65 subjects have been enrolled. Assuming current trends continue and allowing for the typical slowdown in clinical research during the holiday season, we now plan to complete recruitment by Q1 of 2022, well ahead of our last update. With a six-month follow-up for patients in this trial, we're aiming for an approval by the end of 2023. As a reminder, based on our internal calculations, we foresee a serviceable addressable market, or SAM, for trauma and soft tissue injury of $450 million. Patients presenting with a requirement for skin grafting and resell, whether for burns, trauma, or other skin repair, are routinely treated by the same surgeons within an institution. We plan to address this market through our existing hospital accounts and with the addition of 220 Level 1 and Level 2 trauma centers. After we have U.S. FDA approval, we plan to quickly leverage our existing trauma and burn center sales relationships to launch into trauma and acute wounds, and we will incrementally expand our sales force to address this opportunity. Moving on now from burns and trauma to our continued progress in vitiligo. For those unfamiliar with the condition, vitiligo is a skin disorder characterized by deep pigmented areas of skin that appear as white spots or patches and which are primarily attributed to an underlying autoimmune disorder in the patient. There are an estimated 100 million sufferers of vitiligo worldwide, including up to 6.5 million Americans. Of those in the U.S., we estimate approximately 1.3 million have stable vitiligo, our target population, meaning that their underlying autoimmune disease is being well managed and that their disease is not continuing to spread. On October 22nd, the Global Vitiligo Foundation and the online community my-vitiligo-team hosted a public webinar on clinical trials for patients with vitiligo. As a proud sponsor of the GVF, our trial was featured and we've been very pleased with interest levels. Today, all 15 sites are up and running and eight of 23 subjects have been enrolled. We continue to plan for completion of enrollment at the end of this calendar year and approval in 2023. To support the vitiligo opportunity, our products team is developing a new fully automated version of the resell system tailored for the dermatology setting. Dermatologists see high volumes of vitiligo patients, and this version of resell will automate some steps and specifically the skin scraping step to make best use of physician and nursing staff time. Work progresses in our collaborations with the University of Colorado Gates Center for Regenerative Medicine and Epidermolysis Bullosa, or EB, and with the Houston Methodist Research Institute for rejuvenation. Both groups have preliminary proof of concept experiments ongoing. The work to date gives us confidence that the methods developed will yield successful proof of concept in animal models by the end of this calendar year. I'd now like to walk you through the growth drivers we see ahead. We continue to drive forward on provider engagement and education, whether in person or virtual. Our discussions have shifted from whether or not to use Resell, and today our focus is on optimizing the use of Resell, as well as training and refining the expertise of support staff. Our commercial team will be continuing to drive penetration into our burn center accounts. We are VAC approved in what we believe is a critical mass of burn centers, and with that, we are focused on penetration within those accounts. We have shown that our strategy of driving into smaller burns results in overall broader resell usage. To underscore our approach, today over one-third of resell procedures involve burns that are less than 10% TVSA or total body surface area, and these smaller burns represent about three quarters of burn admissions. On November 2nd, CMS published the 2022 Medicare outpatient prospective payment system with payment going into effect in January of 2022. Based on this, A C code will be assigned to resell, which we anticipate will cover the cost of the device for all Medicare patients. We plan to then commence a pilot launch at key sites to ensure coverage with commercial carriers before proceeding with a broader nationwide launch in mid-2022. Our pipeline initiatives are continuing to move forward. More specifically, we are excited about progress within our vitiligo trial, which should complete enrollment at year-end, as well as our soft tissue trial, which now has 58 of 65 patients enrolled, with the uptick driven by the recent increase in trauma-related accidents. We continue to be optimistic about our preclinical pipeline work in epidermolysis bullosa and rejuvenation, and we are on track to demonstrate proof of concept by the end of the calendar year. We are determining our future steps and path forward with the FDA. Our next goal is to review the GLP data requirements to submit an IND application for first in human treatment. And once timelines are clear, I will update you accordingly. Moving to our last growth driver, We plan to broaden our geographic footprint over the coming years. Cosmotech, our commercial partner in Japan, has revised its approval strategy to focus on burns initially based on Japanese Health Authority or PMDA feedback. The Japanese Health Authority is working through a backlog of applications, and we have been advised to expect approval in the first half of 2022. Upon approval, Cosmotech will meet next year with the Japanese Ministry of Health, Labor, and Welfare, or MHLW, to present resale for reimbursement review, which we anticipate will occur in June. Cosmotech will then launch to burn customers shortly thereafter. Once we have vitiligo and soft tissue data from our U.S. pivotal trials, Cosmotech will seek regulatory and reimbursement approval for those indications as well. In summary, despite continued pressure on procedures, largely due to recent hospital staffing challenges, we have made substantial progress across our business. While we anticipate continued staffing headwinds in the near term, I'm pleased with how our commercial team has responded, driving advanced practice training and keeping resale front and center in the minds of burn care practitioners. Finally, and looking further ahead, the substantial progress in our clinical trials for vitiligo and soft tissue trauma reflect a groundswell of interest in and the potential of these larger market opportunities. With that, I'll now turn it over to Michael for details on our financial performance in the quarter. Michael?
spk03: Thank you, Mike. Total revenue for the three months ended September 30, 2021 was $7 million, an increase of $2 million, or 39% over the $5.1 million reported for the same period in 2020. The increase was largely driven by broader utilization among our customer base, as well as deeper penetration within individual customer accounts. Gross profit margin for the three months ended September 30, 2021 was 85% compared to 82% reported for the same period in 2020. Higher gross margin was driven by lower shipping costs and increased production at our Ventura facility. Total operating expenses for the three months ended September 30, 2021 was $12.3 million, a decrease of $2.7 million, or 18% over the $14.9 million reported for the same period in 2020. The decrease in operating expenses is primarily attributable to lower stock-based compensation and higher costs in the prior year related to the EBITDA Group's redomiciliation to the United States, along with severance costs associated with a former executive. This was partially offset with higher travel costs in the current year due to fewer COVID-19-related travel restrictions. Lower stock-based compensation was driven by higher share-based compensation expenses in the prior year associated with certain performance milestones being met. Net loss for the three months ended September 30, 2021 was $5.9 million, a decrease of $4.3 million, or 42%, over the $10.2 million loss recognized during the same period last year. The decrease in net loss was driven by the lower operating expenses described above and higher revenue during the three months ended September 30, 2021. As of September 30, 2021, the company had $60.4 million in cash and cash equivalents and $49.5 million in short-term and long-term marketable securities, as well as no debt. Moving on to guidance for our second fiscal quarter, we expect total revenue in the second fiscal quarter to be approximately $7 million. This guidance reflects the anticipated impact of hospital staffing challenges as well as uncertainty with the pandemic. I would also like to announce that the company will change to effective December 31, 2021, a calendar year basis for financial reporting. With that, we thank you for your attention, and now I will turn the call back over to the operator for your questions.
spk09: Thank you. As a reminder, you'll need to press star 1 on your telephone to ask a question. To withdraw your question, press the pound key. Our first question comes from Josh Jennings with Cowan. Your line is open.
spk04: Hi, this is Eric for Josh. Thanks for taking the question. I was hoping to touch on guidance for fiscal 2Q. You're expecting $7 million now, and we're almost halfway through the quarter. I was hoping if you could just talk about the trends that you're seeing through October and early November here that is driving your guidance, and then what is baked in for the remainder of the year?
spk08: I'm going to toss that one over to Aaron. our chief commercial officer to respond to. Erin?
spk00: Sure, sure. There's a lot of things that are going on in the market. Some are seasonal, which we anticipate, and some are kind of relating to the staffing challenges. So typically in the fall, we see a seasonality, right? And so we're just coming out of that seasonality where you see a bit of a depression in terms of procedures. And then you see it kind of usually in the November-December timeframe really starting to pick up. So November, December, January is very high, and then the several months of July is also quite high. So we have seasonality and kind of coming out of that. And then, as I mentioned, into the holidays, we certainly see kind of an uptick in terms of procedures. We have at the end of our year a rebate scheme where we often see customers kind of buying up at the end of year for the rebates. On the flip side, though, we are dealing with some staffing challenges, nursing staffing challenges. And just to kind of get into that a little bit more, what we're encountering right now is there are burn procedures ongoing. Many burn procedures are getting rescheduled to odd times, such as night times or weekends. There's a lot of what we're calling traveling nurses going around covering kind of the gaps and at times or at times there's just not the necessary staff needed. So a lot of surgeons are not comfortable doing a resell procedure without someone there on staff that has done many, many procedures before. So, you know, we're there trying to fill in the gaps and do a lot of training, but at the end of the day, we can't provide care. And, you know, there's just certain times where the surgeon wants to have someone there that's on their team that has done a case before. And that we're running into some challenges. And so that is kind of the two dynamics that are kind of contradicting, I guess, each other.
spk08: Thanks, Erin. Does that answer your question, Eric?
spk04: That does. That's great. Thank you. And then maybe if I could ask one more, just on the vitiligo trial, you have eight of 23 subjects enrolled. Just thinking about any headwinds that we could have towards the end of the year in terms of scheduling, just where's your confidence that that's going to make the enrollment goal? Is that all 15 sites are up and running and that's going to accelerate? Is there any read-through from your soft tissue enrollment as things pick up that perhaps that would somehow apply to your vitiligo trial? Just trying to understand where those additional patients are going to be picking up. Thank you.
spk08: Yeah, so we have a number of patients in the queue that are being evaluated, and for specific detail on that, I'm going to pass it over to Andy Quick, our Chief Technology Officer.
spk06: Andy? Thanks, Mike. Thanks, Eric, for your question. So, You know, soft tissue and vitiligo are different because with vitiligo, we can drive recruitment. We have mentioned, I think, before our multimedia, online, et cetera, recruitment effort, including radio. That has enabled us to fill a pipeline. So beyond the eight who are enrolled today, eight more are scheduled, and an additional 10-plus, have met the criterion and are in process of consenting and scheduling. So obviously that puts us over the 23, and that's really the basis for our confidence. With soft tissue, you know, it's more of a waiting game for someone to turn up with an injury.
spk04: That's helpful. Thank you, guys. Thanks, Eric.
spk09: Thank you. Our next question comes from Matthew O'Brien with Piper Sandler. Your line is open.
spk05: Oh, thanks so much. Just a quick clarification for Mike P. The commentary about soft tissue being Q1-22 enrollment completed, but then the approval by the end of 2023, is that calendar or fiscal? I just want to make sure I'm clear on that. That's calendar. Calendar, got it. Okay. And then just to follow up a little bit on Eric's question on this dynamic about staffing shortages and you know, these strange times where some of these cases are scheduled. I'm just wondering, you know, when do you think some of these issues may abate a little bit more? Is it really Delta variant driven? So maybe it continues here in this fiscal quarter and then less so next calendar year? Or is this something that may be a headwind for, you know, for the next, you know, several quarters?
spk08: You know, it could last longer. I'm not sure if it's going to be several quarters, but I really don't believe that it's specifically the Delta variant. It's really the dynamic of what's happening relative to vaccination requirements and some nurses not necessarily wanting to take the vaccination, as well as, as Aaron mentioned earlier, these traveling nurses, they're getting paid substantially more than the regular nursing staff. And then the regular nursing staff are either becoming traveling nurses or taking early retirement because they just don't see the viability or the fairness in the situation. Anything you would want to add to that, Aaron?
spk00: No, you know, I think that's unfortunately, yeah, we don't have a crystal ball. I agree with you. It's not necessarily Delta related. I think the nurses are just burnt out. I think, you know, it was interesting on the BTIG on Ryan Zimmerman's call this morning, right, that some have just, you know, they're being lured away to other industries. Some of them have felt that the, you know, nursing is just not for them. You know, at the last week's Southern ABA, the average nurse age of a burn nurse is 59, right? So that's much older. And so some of them are retiring. And also nursing is a specialized field. So it takes, you know, six to 12 months to kind of, you know, really kind of do a preceptorship and get specialized in that particular area to really be kind of to excel. So, you know, I think there's just so many variables. I hope it doesn't last a long time and things kind of settle down. But, you know, I certainly don't think it's going to, you know, be.
spk05: It's not going to go away in a quarter for sure. Okay. But to be clear, though, you guys aren't losing accounts. You still have those accounts. They're just not able to use your product as often. Okay. Okay. And then I guess, sorry, just one more quick one. On the outpatient side, you know, certainly great to see the pass-through update. Just wondering if you can give us a sense for how impactful that could be to the business, you know, as we enter calendar 22. Thanks so much.
spk08: Sure, Matt. So the TPT code is very valuable to us, especially in the long run. In the short term, It really has to do with the adoption curve. And as we've said many times, the surgeons start out on larger burns and in combination in full thickness burns with a mesh split thickness skin graft. It's at the end of that adoption curve that they go to the smaller wounds and burns that could be treated in the outpatient setting. So initially, with only burns approved at this point, the impact is going to be relatively modest. But as we get soft tissue approved, that's really going to be a very important component of our revenue. So, Erin, anything to add on that?
spk00: The only other thing I would say is of our serviceable, addressable market, the $260 million, $60 million of that is for burns underneath 10% total body surface area, which outpatient is a big chunk of that, right? So with COVID, it's a little murky in terms of how many are inpatient versus out because a lot of them have transitioned more so heavier to outpatient. But that's kind of the size of the segment that we're running after that TPT will help us with.
spk08: Got it. Thank you. Thank you, Matt.
spk09: Thank you. Our next question comes from Leanne Harrison with Bank of America. Your line is open.
spk10: Good morning, all. Thank you for taking my question. I'm just going to follow on from the conversation that was previously had about the nursing staff and trying to understand if, you know, the approval or launch of Resell 2.0 will help alleviate, I guess, some of that nursing staff issues, particularly with, you know, ease of use and reduction in the handling of the device.
spk08: Yeah, thank you, Leanne, for your question. I think that the new device will help somewhat. Certainly one only needs a single pair of hands in the sero field, and as I mentioned, it's cutting down the number of steps by approximately a third. That said, there, you know, are still, you know, still issues relative to burn nurses that are qualified, that have experience in doing the procedures and having the burn surgeons comfortable that they have staff that are going to accurately utilize the device and have been trained sufficiently because generally the surgeons like to take the initial skin sample as well as do the spray-on, but they try to dedicate the other elements of the resell procedure to other practitioners, nurses, and advanced care specialists.
spk10: Okay, thank you. And just one more question on the Japanese market. So obviously some delays there with respect to approvals. Can you give us an indication of the size of the Japanese market if you break it down in terms of burns versus the other indications so that we can just get a handle of how we think revenues might ramp up over time?
spk08: Sure. Let me start off and then I'll pass it over to Aaron. But generally, as a rule of thumb, we generally look at the Japanese market as one-tenth of the U.S. market. So you can look at that on indication by indication and, you know, take our numbers and calculate it that way. Erin, any additional that you would talk about there about Japan?
spk00: So, Leanne, we're going to have an updated corporate deck on our website in about half an hour that has a funnel for Japan for the burn segment on there. And just to give you kind of a bit more data on there, that's correct. There's about 10% of the size now. So there's about 6,000 patients that have severe burns, meaning they're admitted and they may require grafting. And they're saying that there's about 1,400 patients that they'll be targeting with resell. And so that's kind of the size of the population that Cosmotype will be going after to begin with. But what we don't know is kind of what the reimbursed price will be. But again, that will be on the updated deck that will be posted on our website in about half an hour. Right. Thank you very much.
spk07: Very helpful. Thank you.
spk10: You're welcome.
spk09: Thank you. As a reminder, if you would like to ask a question, press the star, then the one key on your touchtone telephone. Our next question comes from Brooks O'Neill with Lake Street Capital. Your line is open.
spk07: Good afternoon, everyone. I'm hoping you could just amplify a little bit. Obviously, when I think about the burn business, burns are happening. I assume the patients are getting treated. So in some ways it comes down to a question of, Are we going to do an old-fashioned, you know, skin graft, or are we going to use resell? And are you saying that the phenomenon you're seeing out there is that the nurses and doctors are opting for sort of the old-fashioned treatment now because they don't really know how to use your system? What are you seeing out there?
spk08: Yeah, it's Brooks. Thanks for the question, first of all. It's really, it's not the surgeons. The surgeons are, yes, there's a number who are retiring as well as a number who are moving from one center to another. But that's not really of substantial impact. What is, is the nursing staff. And when a physician or burn surgeon feels that they don't have the right competency in the nursing staff, they will opt for a split thickness skin graft. And because that's what they're taught, that's what the nurses know how to do. And to be honest, there's not a whole lot that the nurses necessarily need to assist with in the procedure as opposed to the aftercare. where the nurses are really involved in the old model, if you will, with a skin graft. So does that answer your question?
spk07: Yes. I mean, I totally get the way the world works out there. It just seems a little surprising to me, given, you know, the obvious benefits of resell and, you know, for the patient. And, frankly, from a clinical perspective, it seems, to be a huge improvement over the old approach where we're putting less trauma on the body of a already traumatized patient. You would think that that would be a direction we want to go even in an environment like we've been in the last year or so.
spk08: Yeah, you're absolutely right. You know, let me transfer the call over to Aaron to give you a little bit more detail that she's getting from our field force. Erin?
spk00: Yeah, so it's unfortunate because I think it's – so when you look at our top 20 accounts or the accounts that are bigger accounts that have dedicated burn teams, that they've got a higher chance of having someone there that has experience with retail because they're not – they've got that dedicated team. That's when we're seeing that – we're seeing – the strong growth in our top 20 accounts because they have that stable team and they're always having someone there that's familiar with resale. When you look at kind of the smaller accounts that have rotating teams or that they have someone in there, the surgeon just doesn't want to try something new. They're nervous to try something new because resale is still perceived as new in many of these accounts without having staff that's familiar with it. And I think there's just some nervousness there.
spk03: Sure. And this is Michael. Yeah, just to put this in perspective, I would say that this has impacted our caseload certainly less than to the degree of 10 percent, maybe 5 to 7 percent. So, in the overall scheme of things, it hasn't made a tremendous impact. We spent a lot of time describing this qualitatively, but its overall impact is not that terrific.
spk07: Great. Then I was going to ask you just a little bit about how big an opportunity do you see in the outpatient market? And I think Mike Perry made a comment that the TPT pass-through payment will facilitate reimbursement for soft tissue. And I'm just curious for a little extra color on sort of what you're seeing there.
spk08: Sure. So the C code that CMS has approved and that will go into effect in January of next year, January 1st, is actually indication agnostic. So when we look at traumatic wounds and individuals presenting to trauma centers with relatively small wounds that can be treated in the outpatient setting, yet they do require skin grafting, that's where this C code is really going to give a bump to our revenues.
spk07: Great. Makes total sense to me. And then just one final one. We've talked over the last year or so about the opportunities in cell and gene therapy, but I'm just Since I'm not really a scientist, can you just talk a little bit about some of the things you see as exciting opportunities for the company in that broad area?
spk08: Sure. So, you know, number one, we've started with an orphan disease insofar as correcting genodermatosis or genetic diseases of the skin, inborn errors. And we started with epidermolysis bullosa. And that is moving along well. And we anticipate having preclinical proof of concept that in general, to generalize from EB, that utilizing the resell system, we can take genetically modified cells, skin cells, and use the spray-on technology to create new skins. and that would be newly corrected skin, right? And there are a lot of other diseases in addition to EB, and that's generally a negotiation with FDA as to how many orphan diseases does one need to actually show clinical proof of concept in to get a broader label than just the ones that you've studied clinically. And that's, you know, there's generally they want you to study, you know, three, four various, I would say, gene mutations to show that, you know, the platform that you're utilizing is robust enough. And then it opens up another, you know, these genodermatoses, another billion-dollar opportunity. Um, just for the, yeah. And then rejuvenation, uh, where we're using, um, RNA telomerase, um, that, that is, you know, assuming, you know, we, we get our proof of concept and we do believe that we're, you know, almost there. So it's working well. Uh, we are getting telomerase into the skin cells and, you And if that comes through, obviously, that's a multi-billion dollar opportunity. And we'd be looking at, just to describe how we would develop it, we would be looking at a real indication beyond rejuvenation to start and get the safety data. Solar elastosis, for example, where there's skin damage due to a lot of sun and sunburns and those types of things. There are other indications as well. But we would go into a real disease as opposed to just wrinkles and people who are looking to look younger. generate the safety data, and then move as Botox did. And Aaron headed up marketing at Allergan for Botox, Juvederm, Latisse. So we've got, you know, a pro sitting right here. And everything's looking good. So I have to say I'm very, very
spk09: um excited about the opportunities ahead sounds big thank you very much thank you brooks thank you our next question comes from john hester with bell porter your line is open
spk01: Good afternoon, Mike. Just a quick question perhaps for yourself and Aaron. Just in relation to the hospitals, I mean, you talked a lot about the nursing shortage there. How much of a focus are the hospitals putting on correcting the problem, or is this something that's, I mean, you said it's not going to go away in a quarter or two, but, you know, is this a focus area for them, do you think?
spk08: Oh, yes, definitely. Definitely. You know, we're hearing about it in other contexts as well. It's not just with the resale platform. It's, you know, overall there is a problem with a shortage of nursing staff and hospitals are, you know, really running their nursing staff to the bone right now. And we're hearing a lot about it in the general news media as well as from other companies. Aaron, anything else that you would want to add to that?
spk00: Yeah. I mean, and I think Andy might have something as well. It's just, it's not definitely not burn specific or retail specific. It's across the board and it's not even nurses. It's other support staff as well. It's janitorial administration. It's, it's just a overall, you know, shortage across, you know, all resources and, you know.
spk08: Yeah. And, and a lot of it is, is burnout of those individuals who, worked through the pandemic, didn't get a break, and then, you know, finally see that, you know what, life's just, you know, not worth this job, and they're rotating out. So it's something that the hospitals are going to have to deal with. It won't be an overnight correction, but I'm sure it will correct. Andy, anything to add?
spk06: Yeah, we had the privilege of a keynote presentation by the president of the American Nursing Association at last week's southern region of the ABA. They held their annual research meeting. And the ANA is also taking an active role in combating this issue. Part of it is, you know, engaging with hospitals to make sure there's clear understanding that a that it's not the case that a nurse is a nurse is a nurse is a nurse. Nurses are specializing, and the ANA is working on an accreditation program specifically for burn nurses. So that will help, and they're engaged on Capitol Hill to make sure that their voice is heard with respect to what's needed to improve the situation. So there's really a lot of work ongoing from a number of different angles to remedy the situation. Thanks, Andy.
spk08: Okay. John, did that answer your question?
spk01: Yeah, yes. I mean, to the extent, you know, it just sort of more or less confirms that it's going to be a little while before, you know, you have this, and then you've got to retrain the new nursing staff, and then you still have the issue there, as Erin sort of alluded to earlier, that, you know, doctors don't want to use resell device devices where they're not supported by nursing staff or they don't have vast experience in it. So that's sort of going to continue to be an issue for a couple of quarters, I would have thought. Yes. Just had a quick question from Mike Holder, if I may. Michael, just in relation to the sort of follow-up on your earlier scripted comments, just with the allocation of expenses there, particularly in relation to R&D, That sort of 3.4 number for the quarter, is that about right for the rest of the year, do you think, or is that likely to increase, decrease, or how are you thinking about it?
spk03: Yeah, thanks for the question. We actually would expect that to increase somewhat as we launch into the actual clinical trials for soft tissue and vitiligo, so that number will be going up somewhat for the balance of the fiscal year.
spk01: Okay, that's fine. And just in the footnote there, you've talked about the share-based compensation. You've amalgamated that line into the other expenses. I mean, did that sort of follow the trend from the prior year in that all that expense pretty much falls into the September quarter?
spk03: No, I would say that it's spread out throughout the year. I don't have those numbers in front of me But it just depends largely on when we hit various goals that are triggered in the stock compensation plan. So, again, that will vary by quarter.
spk01: Great. Thank you very much. That's all from me. Thank you. Thanks, John.
spk09: Thank you. And that's all the time we have for questions. This concludes today's conference call. Thank you for participating, and you may now disconnect.
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