SI-BONE, Inc.

Good afternoon, and welcome to SI Bones' second quarter earnings conference call. At this time, all participants are in listen-only mode. We will be facilitating a question and answer session toward the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Matt Baxo from the Gilmartin Group for a few introductory comments.

Thank you for participating in today's call. Joining me are Laura Francis, Chief Executive Officer, and Anshul Maheshwari, Chief Financial Officer. Earlier today, SI Bone released financial results for the quarter ended June 30, 2022. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meeting of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. These forward-looking statements are based on the company's current expectations and inherently involve risks and uncertainties. These risks include the impact of the COVID-19 pandemic will have on the ability and desire of patients and physicians to undergo and perform procedures using the company's products, the duration of the COVID-19 pandemic, and whether the COVID-19 pandemic will occur in the future. Other forward-looking statements include our examination of operating trends and our future financial expectations, such as expectations for hiring, surgeon training, and adoption, active surgeons, new products, clinical trial enrollment, and reimbursement decisions, and are based upon our current estimates and various assumptions. These statements involve material risks and certainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission. SI Bone disclaims any intention or 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 contains time sensitive information and is accurate only as of the live broadcast today, August 8th, 2022. And with that, I'll turn the call over to Laura.

Thanks, Matt. Good afternoon and thank you for joining us. For today's call, I'll provide a business update and Anshul will provide additional detail regarding our financial results. Before I cover our record second quarter results, let me highlight some recent wins for the company. At the end of May, we received FDA 510K clearance for iFuse Bedrock Granite, our breakthrough product that is intended to provide SI joint fusion in addition to sacral pelvic fixation for adult spinal deformity procedures. This clearance follows the earlier designation by the FDA of iFuse Bedrock Granite as a breakthrough device. In August, CMS published the final decision confirming the new technology add-on payment, or NTAP, of up to $9,828 for eligible cases using iFuse Bedrock Granite. The NTAP will be exclusive to iFuse Bedrock Granite and become effective October 1, 2022, for a period of up to three years. Based on the initial strong surge in reception, we're really excited about the potential for iFuse Bedrock Granite to accelerate our penetration into a highly synergistic $250 million adult deformity market. In mid-June, we received FDA clearance for expanded indications of IFUSE TORQ for pelvic fracture fixation, including acute, non-acute, and non-traumatic pelvic fractures. IFUSE TORQ was previously cleared for both SI joint fusion and fracture fixation. With this expanded clearance, we can now promote the use of IFUSE TORQ for treatment of patients with fragility and insufficiency fractures of the pelvis, which are fractures caused by low-energy traumatic events. We estimate this patient population accounts for $300 million of our $350 million market opportunity. We believe the expanded indication will accelerate our growth in the trauma market as IFUSE TORQ's unique osteointegration features will be an effective option to remobilize patients, many of whom have osteoporosis, who are suffering from fracture-related pain and disability, thereby improving quality of life while simultaneously reducing rehospitalization, which can provide cost savings to the healthcare system. We're confident that the clearance of IFEW's bedrock granite and the expanded trauma indication for IFEW's torque will complement our core market and be catalysts for strong future top-line growth. Now, moving to our performance in the second quarter of 2022. In the second quarter, we generated worldwide revenues of $25.6 million, representing growth of approximately 15% compared to the second quarter of 2021, and 14% growth over the first quarter of 2022. In the U.S., our revenue grew 18% in the quarter compared to a prior year period to a record $23.8 million, which was driven primarily by the robust demand for our procedures. We're pleased with the 23% U.S. procedure volume growth in the quarter, especially when considering that healthcare providers continue to navigate capacity and staffing issues due to the pandemic. We believe that the outpatient nature of our procedure, combined with the solid execution by our dedicated field organization, contributed to the robust volume growth. We exited the quarter with strong operating momentum, with June being the highest procedure volume month in the company's history. Additionally, anecdotal feedback from surgeons suggests that the new patient funnel continues to grow, indicating that we're progressing toward a more normalized operating environment. Now let me provide you an update on our key initiatives as we look to extend our leadership position and drive long-term durable growth. Starting with sales infrastructure, our dedicated sales force remains an important driver of growth as we expand our core market and grow our presence in trauma and adult deformity. Our sales force at the end of the second quarter included 85 territory managers and 76 clinical support specialists. In addition to growing our sales force to ensure high-quality coverage for our surgeons, we remain focused on territory manager productivity. We're confident that with the selective expansion of our sales force and improving territory manager productivity, we'll continue to support our surgeons and deliver strong top-line growth. Moving on to surgeon engagement, we ended the second quarter with a record 720 active surgeons. who performed at least one procedure in the quarter. In addition to surgeon growth, we're also encouraged by the high single-digit increase in surgeon utilization, which reaffirms that our healthcare provider engagement initiatives and our expanded portfolio offering is working. We believe surgeon adoption and improving utilization are strong, positive leading indicators of procedure demand for the rest of 2022 and beyond. Our expanding product portfolio positions us to accelerate surgeon engagement and activation as we progress through the year. We continue to experience a steady increase in adoption rate of surgeons who've been trained on the simulator, which remains a valuable component in our surgeon training programs. Moving forward, we expect to leverage our simulator training along with in-person local training and regional training to drive cost-effective surgeon engagement. We also continue to expand our academic programs to educate residents and fellows. Since inception of the program, we've held training events in approximately 200 academic facilities in the US and trained approximately 1,100 surgical residents and fellows. In the academic year ended June 2022, we trained approximately 500 residents and fellows, demonstrating the growing interest in our products within academic facilities. Additionally, education on bedrock and iFuse bedrock granite are now integral elements to each training. We're encouraged by the steady increase in these previously trained fellows and residents converting to active surgeons as they begin practicing. Turning to products and solutions, we're pleased with the strong performance of iFuse Torque, which delivered record revenue in the quarter. The strong uptake of IFUSE TORC in the last 12 months reaffirms that our portfolio diversification strategy is resonating with our surgeons. With the expanded indication, we're excited about the potential opportunity and trauma for IFUSE TORC to treat sacral fragility and insufficiency fractures, which are currently estimated to have an incidence of approximately 120,000 injuries per year in the U.S., most of which are currently not treated surgically. This fragility fracture market is of strategic importance since over 75% of patients with this condition are initially treated with bed rest and have over a 25% one-year mortality rate. With the indication on label, we've increased our targeted sales and marketing efforts to engage and educate trauma surgeons and believe trauma provides a huge growth opportunity for the company. More to iFuse Bedrock Granite, we're pleased with the strong initial reception for this unique solution that combines the strength of a solid implant with the porosity of 3D printed technology. iFuse Bedrock Granite was developed to address the surgeon's preference to augment stability at the base of long constructs used to treat adult spinal deformity. With an increasing user base of more than 300 surgeons who have performed a Bedrock procedure since 2019, We're optimistic about the adoption of iFuse bedrock granite. We also believe there'll be a subset of surgeons who will want to use some combination of our products to get two points of fixation across the SI joint on either side, resulting in broader portfolio penetration and higher procedure ASP. The differentiated technology, the seamless workflow integration, and the exclusive NTAP for a period of up to three years provides a significant competitive advantage as we expand our presence in the adult deformity market. On the clinical research front, in June we completed enrollment in SILVIA, a two-year prospective international multicenter randomized controlled trial of two different methods for pelvic fixation in adult patients undergoing long-construct spinal fusion. We anticipate the results for the primary endpoint in 2024. Consistent with our focus on clinical evidence and with the expanded IFUS torque indication in place, we're in the process of initiating the SAFROM study, a prospective randomized controlled trial of surgery using our IFUS torque device versus non-surgical management in patients with stable but debilitating sacral fragility or insufficiency fractures. This landmark trial will enroll up to 120 patients at up to 20 sites across the U.S. were targeting enrollment completion by the end of 2023, with early results available in late 2024. Moving to health economics and reimbursement, CMS recently posted the calendar year 2023 proposed rule for hospital outpatient and ASC payments. While preliminary, the current proposal would increase calendar year 2023 facility reimbursement for minimally invasive SI joint fusion procedures performed in ASCs and hospital outpatient settings by approximately 28% and 35% respectively. Today, 80% of our procedures are performed in an outpatient setting or at surgery centers. As our procedures continue to move to ASCs, the potential higher reimbursement in 2023 could serve as a tailwind to demand and also allow us to maintain our pricing in these sites of service. In addition, in June, the American Medical Association posted its decision to add a new category three CPT code, or T-code, to describe SI joint procedures using interpositional products, more commonly referred to as dorsal allograft procedures. The AMA determined that in order to report CPT27279, the code used to describe lateral eye fuse procedures, a transfixing device must be used, additionally, If the implant does not cross the SI joint and the trajectory is different from a lateral or transiliac approach, then the new T-code must be used. As a result, starting January 1, 2023, dorsal allograft procedures, which have no long-term evidence demonstrating durable outcome or radiographic evidence showing fusion, can no longer be reported as 27279 for reimbursement purposes. A recent multicenter retrospective study of 37 patients published in July highlighted that SI joint stabilization involving placement of standalone structural allografts using a dorsal approach has demonstrated complications, including persistent or recurrent postoperative pain, implant malpositioning, structural failures, and lack of joint fusion, further substantiating the AMA T-code division. Talking about our patient awareness initiatives, In the second quarter, we further optimized our direct-to-patient outreach campaign, resulting in higher website traffic, patient engagement, and surgeon referrals. Specifically, our find-a-doctor locator metrics continue to hit new records each month in the second quarter. We view the find-a-doctor metric as a leading indicator of patient engagement and potential future demand. As a reminder, these outreach programs are targeted at patients in chronic severe SI joint pain, who have been in conservative care for an extended period. Our goal is to connect patients with surgeons in their area who perform minimally invasive SI joint procedures using our products. Before I turn it over to Anshul, I'd like to provide an organizational update. In July, Jeff Bertolini joined us as our Senior Vice President of Operations and Technology. Jeff, who was previously at NuVasive as the Vice President of Sales Operations and Logistics, has over 25 years of experience in life sciences and medical device industries. Given our expanding portfolio, Jeff's experience will be invaluable to optimize our supply chain and drive operating efficiencies to ensure we maintain industry-leading growth margins. With that, I'll now turn the call over to Anshul to provide more detail on our financial results.