TELA Bio, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Telebio fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Louisa Smith from the Gilmore Group.

Thank you, Michelle, and good afternoon, everyone. Earlier today, Telebio released financial results for the fourth quarter and full year 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-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 products potential, the impact of various macroeconomic conditions, including lingering effects of 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 TELA's fourth quarter and full year 2023 earnings call. Today, I'd like to cover two main topics, how we did in the just completed quarter and year, and how we've laid the foundation for even greater performance in 2024. Our fourth quarter was very strong, and I'm delighted to report that we have never been better positioned for success in our history, as you will hear today. As a result of our outstanding Q4, we entered 2024 with considerable momentum, which is reflected in our guidance. Fourth quarter revenue was $17 million, up 13% sequentially from the third quarter, and 46% over the fourth quarter of 2022. I'll note that this is the 12th consecutive quarter we've had at least 35% year-over-year top-line growth, with an average growth rate over those 12 quarters of 49%. In the fourth quarter, we sold more than 5,000 pieces of Ovitex and Ovitex PRS combined, and PRS now accounts for approximately one-third of our total revenue. PRS revenues grew 75% year-over-year versus 34% for the hernia products, and we expect this pattern to continue given that PRS is the more recently launched product line. When we last spoke to you in November, we described several initiatives we had launched to increase sales productivity after we experienced some disruption in the third quarter. Specifically, we rolled out updated continuous training programs for our new reps, more intensive training on OVTEC's PRS for all reps, and incentive programs targeted at those reps who appeared to be falling short of quota, as well as those who are on track to surpass it. We believe these programs are part of what helped us achieve record revenues in the fourth quarter So we are going to continue the training and over quota incentive programs while adding a new incentive target, targeting balanced selling across our product lines. As we've described to you in the past, accounts that buy both our hernia and PRS products tend to be more than twice as valuable as accounts that only buy one or the other product. That is, one plus one doesn't equal two. It comes to something more like three or four. Leveraging the new PRS training we've launched We are going to start incentivizing reps to sell both products, providing greater compensation to those who succeed in doing this. We expect this initiative to be a real contributor to revenue growth in 2024 and beyond. One big difference in 2024 from last year is that we are beginning the year with essentially the full complement of reps we expect to end the year with. Our goal last year was to grow to a field sales force of 75 to 80 reps, and we achieved that and beyond. expanding from 61 reps we exited 2022 with to 86 reps and eight assistant reps at the end of 23. As of the end of February, we had 86 reps and six assistant reps. We plan to remain at these levels throughout 2024, perhaps adding a few opportunistically with some of the assistants likely converting to full reps over the course of the year. What this means is that the variability in our rep count is not likely to negatively affect sales in 2024. And from a productivity perspective, more than 75% of our reps have been with us for six months or more, which remains the average for a rep to reach breakeven, or the point where they are covering their own variable costs. We expect we will continue to see turnover in 2024, although at lower rates than in prior years and with little expected negative impact. Our focus for the year, then, is not on recruiting, but on training and improving the productivity of the reps we have on board. Playbook 90 remains the cornerstone to these efforts, supplemented with the additional more intensive training described earlier. I am actually speaking to you today from our national sales meeting where we have rolled out two significant new product offerings for our sales force, to promote. Earlier today, we announced the full, formal U.S. commercial launch of two LiquiFix products we have licensed exclusively from our partner, Advanced Medical Systems. These are the LiquiFix Fixate Laparoscopic and LiquiFix Precision Open Hernia Mesh Fixation devices. The first is indicated for minimally invasive femoral and inguinal hernia repairs and for approximation of the peritoneum. while the second is indicated for open inguinal and femoral hernia repairs. Both products have been available and successful in European markets for more than three years. We're really excited about the opportunity to bring LiquiFix to the U.S. because it is the only FDA-approved PMA product that affixes mesh and approximate tissue with liquid anchors, reducing the use of intrusive mechanical tacks, sutures, or staples. The two LiquiFix products are designed to minimize the risk of mechanical tissue trauma. As we've often said, we want to create a portfolio that drives growth, increases awareness, expands market share for products across our entire hernia franchise, and demonstrates our commitment to improving all aspects of hernia repair. We believe LiquiFix will do just that by offering greater utility for surgical mesh in inguinal hernia repair by enabling mesh fixation to sensitive areas such as the triangle of doom and the triangle of pain, regions in the groin where other penetrating fixation methods could result in vascular or nerve injuries and cause chronic pain. We also introduced our reps to Ovitex IHR, our new Ovitex inguinal hernia repair product, a next-generation soft tissue repair platform designed specifically for inguinal hernia repair. Just like our other Ovitex devices, Ovitex IHR uniquely utilizes layers of sheep room and reinforced with just enough polymer suture for added strength. And of course, all Ovitex devices are designed to leverage a patient's natural healing response, facilitate tissue remodeling, and optimize strength. Ovitex IHR will be available in three configurations, two anatomically shaped and one rectangular, all of which are specifically designed for inguinal hernia repair via robotic and laparoscopic approaches. Tela remains committed to the future of robotics and minimally invasive surgery with Ovatex, and we're taking many steps this year to advance the recognition of our products as the first choice for minimally invasive hernia repair. We expect to formally launch Ovatex IHR in the U.S. in the second quarter of 2024. I also wanted to elaborate on our announcement yesterday of the sale for $8 to $12 million in total cash consideration of our distribution rights to our NIVIS regular collagen pack, a wound care product co-developed and designed to tell us specifications with Regenity Biosciences. NIVIS represents an innovative, high-quality wound healing product, and we expect it to perform even better as part of a portfolio of its acquirer. As part of the consideration, we received $5 million upfront and we retain an interest in seeing that it succeeds in the form of additional future payments totaling between $3 to $7 million based on net sales of NIVIS over the next two years. The cash contribution from this divestiture strengthens our financial position and puts us on an even more solid path to profitability. I'll now turn the call over to Roberto to review our financial results and 2024 outlook.