TELA Bio, Inc.

Good day, and thank you for standing by, and welcome to Telebio Third Quarter Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to introduce your host for today's call, Craig Hadadzic. You may begin.

Thank you, Justin, and good afternoon, everyone. Earlier today, Telebio released financial results for the third quarter of 2023. A copy of the press release is available on the company's website. Joining me today on today's call are Tony Koblish, President and Chief Executive Officer, and Roberta Kuka, Chief Operating Officer and Chief Financial Officer. Before we begin, I'd like to remind you that during this conference call, the company will 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-Qs, 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, product potential, the impact of various macroeconomic conditions, including the COVID-19 pandemic, recessionary concerns, banking instability, and inflationary pressures, the regulatory environment, the introduction of new products or product enhancements by us or others, including those which may be perceived to negatively impact the demand of our products now or in the future, sales and marketing strategies, capital resources, or operating performance. With that, I will now turn the call over to Tony.

Thank you, Greg. Good afternoon, everyone, and thanks for joining us today for our third quarter 2023 earnings call. We are pleased to report another quarter of strong financial results in operational execution. Revenue in the third quarter was 15.1 million, growing 35% year over year. Notably, this was the 11th successive quarter of 35% growth or greater driven by continued market share gains and increased surgeon adoption of the Ovitex product portfolio. PRS growth was especially strong, up 46% year over year, notably driven by the launch of the long-term resorbable version of Ovitex PRS, which includes specific design features aimed at enhancing the clinical utility of Ovitex PRS for surgeons and patients in plastic and reconstructive surgery. In addition, our hernia portfolio continues to perform, with Ovitex recently becoming the most implanted biologic hernia repair mesh in the United States, reflecting the growth recognition of the clinical utility of the product for this application. Today, I'll review with you the progress we've made on the five factors that combine to drive our growth. Roberto will provide a more detailed review of our financial results and then I'll make closing remarks before opening the line for your questions. I'll start by discussing Salesforce size and individual sales representative productivity together as they had a joint impact on our Q3 revenue. As of today, we have 79 commissioned sales reps with our goal being to end the year with 75 to 80 filled positions. Of these 79, 55 have been in their roles for at least six months. During our second quarter earnings call, we had 75 reps of which 50 had at least six months tenure. The newness of a third of our reps at our last call was the result of turnover in the second quarter affected by new regional managers who we have hired at the end of last year and who identified opportunities for upgrading talent in certain territories. While 35% organic growth is outstanding, we believe it would have been even higher but for the transition of territory responsibilities in the second quarter. That said, I am pleased to report that the newer REFs are quickly progressing along the learning curve and their productivity ramp is consistent with our standard six months to break even profitability metric. Therefore, we anticipate the impact of REFs turnovers to be meaningfully lower in Q4. Additionally, we have taken the following steps to accelerate the productivity of our newer reps and our sales performance in general. First, we rolled out intensive PRS sales training to ensure that all our reps are comfortable selling the product compliantly and effectively. This additional training added to the availability of the Ovitex PRS long-term resorbable should help all our reps, particularly those with less than six months' experience on the job. We've implemented two supplemental incentive programs in the fourth quarter further to drive increased performance through the remainder of this year and into next. The first incentivizes those reps already on track to achieve their quotas to further outperform. The second provides a boost to those reps who might be short of quota but who have the potential to contribute incrementally more. These steps are already helping us to properly return to over 35% growth as anticipated. and should set us up for a strong 2024 performance. Moving on to the third factor driving revenue growth, GPO access. Expansion within existing GPO contracts is on track and efforts to add additional GPOs and IDNs are going well. TELA has contracts with three national group purchasing organizations that enable enhanced and more efficient access to hospitals and surgeons throughout the country. These GPO contracts are critical to TELA's commercial strategy and provide the opportunity for surgeons to use the Ovitex product right off the hospital storeroom shelf without requiring approval from hospital administrations. The first of our three GPO contracts is our long-standing relationship with Health Trust, with whom we re-signed a four-year renewal. The second contract is with Premier, with whom we've now had a full year of implementation as it became effective on October 1, 2022. Premier is the second largest GPO in the country, giving us access to over 4,400 hospitals within its extended network. Lastly, our most recent GPO relationship offers us a dual source contract in the biosynthetics category. There's tremendous upside opportunity for TELA within these three contracts, as well as from new contract opportunities, and we look forward to providing updates as our access further expands. Our first factor is the range of complementary products in our portfolio that enables us to leverage the existing sales force and call points across the soft tissue reconstructive space. We have launched four products so far in 2023. The first two, the large size Ovitex LPR for use in minimally invasive surgeries and the Nibus Fibrillar Collagen Pack are gaining market share with different levels of surgeon familiarity to leverage by our sales force. The third, Ovitex PRS Long-Term Resorbable, launched in the third quarter and has taken off quickly given surgeons' prior knowledge of the product line and interest in the new performance characteristics. Finally, and most recently, we are in the process of launching the LiquiFix Hernia Mesh Fixation Devices, LiquiFix 8 and LiquiFix Precision. These products, which are indicated to fix mesh to tissue inside the body and to close the peritoneum, The membranes surrounding the abdominal cavity have been marketed in Europe under the brand Liquiband 6-8 and represent the first product of its kind to be approved for sale in the U.S. We believe that this product line allows our sales force to call on surgeons in a technology space where they are comfortable and will increase access to additional surgeons, eventually opening opportunities to also discuss the benefits of Obatex in other areas of their hernia practice. Regarding our fifth factor, clinical data, we continue to collect data both prospectively and retrospectively for our hernia and PRS products respectively. We're proud of the performance of our products and we'll expand our data sets through, for example, our BRAVO2 study, which measures the effectiveness of Ovitex products when implanted robotically. I'd like to now address the question that has been top of mind with investors. That is, what is the potential negative impact of GLP-1 agonist drugs on the markets that Tela serves? Specifically, if patients lose weight on these medicines, how might that affect the rate of hernia repair and plastic and reconstructive surgeries? With regard to the latter, much PRS is used in plastic and reconstructive procedures that we believe are both unrelated to weight loss and on account of weight loss. With regards to hernia, we have consulted with general surgeons in this space who collectively have identified four potential ways in which GLP-1s may, in their opinion, actually increase the need for hernia repairs. First, an important contraindication for surgery in general and hernia repair specifically is morbid obesity. Patients who lose weight could become newly eligible for repairs that a surgeon might previously have advised against. Second, A risk factor for hernia is physical activity, and to that extent, it would be reasonable to expect more need for hernia repairs with weight loss. Third, obesity can conceal existing hernias, in particular, umbilical hernias, and weight loss can reveal the need for these repairs. Finally, GLP-1s are apparently associated with acid reflux conditions, which could necessitate hiatal hernia repairs in response. Although these examples indicate the potential for GLP-1s to increase the need for hernia repair, the real takeaway is that we do not expect GLP-1s to meaningfully reduce hernia repair rates in any reasonable scenario. With that, I'll now turn the call over to Roberto to review our financial results and outlook.