TELA Bio, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Telebio First Quarter 2023 Earnings Conference Call. At this time, all participants are now listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. And I would now like to turn the conference over to Louisa Smith from the Gil Martin Group. Ms. Smith, please go ahead.

Thank you, Chris, and good afternoon, everyone. Earlier today, Telebio released financial results for the first quarter of 2023. A copy of the press release is available on the company's website. Joining me on today's call are Tony Koblish, President and Chief Executive Officer, and Roberto Cuca, Chief Operating Officer and Chief Financial Officer. Before we begin, I'd like to remind you that during this conference call, the company may make projections and forward-looking statements regarding future events. We encourage you to review the company's past and future filings with the SEC, including, without limitation, the company's annual report on Form 10-K and quarterly reports on Form 10-Q, which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include, without limitation, statements regarding product development and pipeline opportunities products potential, the impact of various macroeconomic conditions, including the ongoing response to the COVID-19 pandemic, recessionary concerns, banking instability, and inflationary pressures, the regulatory environment, sales and marketing strategies, capital resources, or operating performance. With that, I'll now turn the call over to Tony.

Thank you, Louisa. Good afternoon, everyone, and thanks for joining us today for our first quarter 2023 earnings call. I'm pleased to report the TELA team delivered another outstanding quarter with revenue of $11.9 million growing 45% year over year. Our hernia and PRS products both posted impressive gains, even though elective procedure volumes have still not returned to 2019 pre-pandemic levels. However, we are seeing evidence of procedures trending in the right direction. As I've been doing in our recent earnings calls, I'll take a few minutes to update you on our progress on the five factors that drive our revenue growth. I'll start with GPO access. TELA currently has contracts with three national group purchasing organizations, Health Trust, Premier, and a third whose name we aren't permitted to share. Combined, these GPOs provide TELA with access to more than 50% of the hospitals in the United States. Health Trust was the first GPO to onboard Obatex in 2020, but this unfortunately coincided with the outbreak of the COVID-19 pandemic. Although this slowed uptake, the GPO was sufficiently impressed with our performance that they have now renewed our contract for a four-year term, expanded from the initial three-year term. The premier agreement, our second GPO win, became effective in October of 2022 and contribute incremental new volume in the first quarter, which offsets the cost of discounts to existing customers that adversely impacted revenue in the fourth quarter of 2022. Finally, the third GPO with whom we entered into an agreement in mid-February provides a dual source contract in the biosynthetic category that places us in competition with only a single other vendor. Although we've been able to achieve significant growth even without extensive GPO access, these agreements should greatly streamline the process for a surgeon to adopt our products with a resultant uptake in Ovitex utilization across a variety of hernia and abdominal wall procedures. The second factor we focus on is Salesforce size. To fully capitalize on the hospital access we have attained through our GPO contracts and leveraging our continued track record of recruiting and training sales reps to become productive contributors within six months, we are targeting ending this year with 75 to 80 total reps. This is from a base of 61 at December 31, 2022. And as of today, we have 72 reps on board. We remain confident that we will be able to achieve and potentially exceed this goal with strategic hiring of additional experienced sales reps. We expect one of the primary uses of the proceeds from our recent capital raise will help us further accelerate this growth in our commercial organization more generally. Third, we remain committed to expanding our portfolio of complementary soft tissue restoration and preservation solutions as evidenced by the addition of three new product lines in the first quarter. In January, we launched NIVIS Tribular Collagen Pack. NIVIS is an absorbent matrix of type 1 and 3 bovine collagen designed to manage exudating wounds and control minor bleeding. These collagen types have been shown to stimulate cellular activity and contribute to new tissue development. In February, we announced the launch of two larger configurations of the Ovitex LPR device that are designed specifically for use in minimally invasive procedures. repairing ventral and incisional hernias. We've previously noted that surgeon preference is shifting with more doctors treating hernias using minimally invasive techniques. In the first quarter, 43% of Ovitec's uses were in robotic procedures and 20% were implanted laparoscopically. And finally, in March 2023, we announced the 510 clearance of Ovitec's PRS long-term resorbable for plastic and reconstructive surgery. This product is intended for implantation to reinforce soft tissue where weakness exists in patients requiring a soft tissue repair or reinforcement in plastic and reconstructive surgery. It also complements the existing Ovitex PRS portfolio with a third product configuration that expands its clinical utility. We expect another significant use of the proceeds from our recent capital rates will facilitate these R&D efforts, leading to additional complementary soft tissue restoration and preservation products channeled through our growing sales organization to the ultimate benefit of our customers and their patients. Our R&D pipeline is robust, and we will continue to invest in developing innovative technologies and design advancements to our current product portfolio. The fourth factor driving growth is our portfolio of clinical data. One of the reasons we've been able to convert physicians to the use of Ovatex is the extensive set of clinical data that we and the independent investigators have generated examining the performance of our products in a wide variety of hernia and abdominal wall procedures. We remain focused on expanding this clinical data, including through our active enrollment of patients into both our BRAVO-2 study, measuring the efficacy and durability of Ovitex when used in robotic hernia repair, and our PRS retrospective clinical study, assessing outcomes of our Ovitex PRS patients who had previously undergone breast reconstruction. And finally, the fifth growth factor we focus on is sales reps' productivity. As I mentioned above, our newest cohort of reps continue to reach profitability in under six months. A more recent driver of this productivity is our focus on training reps to sell both Ovitex and Ovitex PRS products into their accounts. As I've described before, those customers that buy both categories of products from us buy more on average than the sum of separate accounts that buy only one or the other product. That is, the sum of one and one is not just two, but something more like three or four. The faster we can get our reps comfortable in selling across the product lines, the more productive and profitable our growing sales force can be. As I referenced earlier, a couple of weeks ago, we went to the equity capital markets and raised over $46 million in net proceeds. We expect to invest these resources in the five factors that drive our growth and most immediately into the continued expansion of our sales force. We grew revenue 45% year-over-year in the first quarter, and we aim to maintain at least this level of growth over the remainder of the year. I'm pleased to say that these new resources position us well for continued achievement this year and beyond. With that, I'll ask Roberto to review our financial results for the first quarter.