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spk05: Ladies and gentlemen, thank you for standing by and welcome to the Veracell Corporation Third Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. I would now like to hand the conference over to your speaker today, Nick Colangelo, Veracell's President and CEO. Thank you. Please go ahead.
spk00: Thank you, operator, and good morning, everyone. Welcome to Veraselt's third quarter 2020 conference call to discuss our financial results and business highlights. Before we begin, let me remind you that on today's call, we'll be making forward-looking statements covered under the Private Securities Litigation Reform Act of 1995. These statements may involve risks and uncertainties that could cause actual results to differ materially from expectations and are described more fully in our filings with the SEC, which are available on our website. In addition, all forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Please note that a copy of our third quarter financial results press release is available in the investor relations section of our website. We also have a short presentation with highlights from today's call that can be viewed directly on the webcast or accessed on our website. This morning, we reported record third quarter total net revenues of $32.3 million. Our strong revenue performance, which exceeded our expectations, was driven by Macy as the V-shaped recovery that started in June continued in the third quarter. MESI revenue grew 18% over the third quarter of 2019. We also reported the second highest quarterly epiCell net revenue in history and reported our first NEXABRID revenue related to the BARDA procurement for emergency response preparedness. Our strong revenue performance generated significant profitability in cash flow as we reported a gross margin of 70%, record third quarter net income of $3.6 million, and positive operating cash flow of $4.6 million for the quarter. With these results, we've generated growth in total revenues year-to-date compared to the same period in 2019, and the company has cash flow positive for the year through the third quarter, a great achievement given the significant challenges during this period. From an operational standpoint, in addition to announcing the first delivery of Nexabrid to BARDA and related revenue, We also announced that the FDA has accepted the Nexabrid BLA for review and assigned a PDUFA goal date of June 29, 2021. As those of you who were able to join us on our recent Analyst and Investor Day heard, not only is there a great deal of enthusiasm for Nexabrid among burn surgeon thought leaders in the United States, but we also have extensive pre-commercialization marketing and medical initiatives underway to support the planned NEXPRD launch in the second half of 2021 upon approval. As we approach the end of this challenging year, our third quarter results demonstrate the significant progress we've made in 2020 on several key metrics that give us confidence regarding the resiliency of our long-term growth profile and point to a strong fourth quarter and the potential for significant growth acceleration as we move into 2021. Before covering additional details of our commercial performance and expectations looking forward, I'll briefly cover our financial highlights for the third quarter. As mentioned earlier, total net revenues increased to $32.3 million, compared to $30.5 million in the third quarter of 2019, and included $24.4 million of MESI revenue. and $6.7 million of EPICEL revenue compared to $20.6 million and $9.9 million of MESI and EPICEL revenue, respectively, in the third quarter of 2019. Total revenues for the quarter also included $1.2 million of NEXABRID revenue related to the BARDA procurement for emergency response preparedness. Gross profit for the quarter was $22.5 million, or 70% of net revenues, compared to $21.2 million, or 69% of net revenues, for the third quarter of 2019. Total operating expenses for the quarter were $19 million, compared to $18.1 million for the same period in 2019. The increase was primarily driven by incremental employee expenses related to the Macy Salesforce expansion earlier this year. Net income for the quarter was $3.6 million, or 8 cents per share, compared to $3.5 million, or 7 cents per share, for the third quarter of 2019. Non-GAAP adjusted EBITDA was $7.6 million for the quarter, compared to $6.8 million in the third quarter of 2019. Finally, we generated $4.6 million of operating cash flow, and as of the end of the quarter, had $85.5 million in cash and investments, compared to $79 million as of December 31st, 2019, and no debt. Clearly, it was a very strong quarter for the company as we were able to grow total revenues despite the all-time high EPICEL revenue comp from the third quarter of last year and deliver similar levels of profitability and cash flow despite the additional investments we've made in our Salesforce expansions. We believe that this reflects both the strong underlying fundamentals of our business and the fact that the company continues to execute at a high level. Our third quarter performance was driven by Macy as we generated double-digit growth in revenue, implants, and biopsies and achieved a record monthly high for biopsies in September. To provide further insight regarding Macy's performance, this time I'll share how we view the underlying drivers of Macy performance and how they shape our outlook for the fourth quarter and for 2021 and beyond. As discussed in the past, there are three key levers that drive the growth of Macy. The number of surgeons taking biopsies, the average number of biopsies taken per surgeon, and the conversion rate of biopsies to implants. With respect to the number of surgeons taking biopsies, we reported on our fourth quarter earnings call last year that Macy's growth in 2019 was due in large part to an increasingly broad group of surgeons adopting Macy as a preferred treatment for larger symptomatic focal cartilage defects in the knee. This strong adoption was reflected by the fact that we had received biopsies from approximately 1,400 surgeons in 2019, which represented 25% growth over 2018. Despite the significant challenges resulting from the pandemic over the course of this year, we still expect the number of surgeons taking biopsies to grow to around 1,500 surgeons in 2020. Of particular note, the 27 expansion territories added this year had by far the highest growth rate in the third quarter in terms of adding new surgeons that had never previously taken a MACE biopsy. This supports our Salesforce expansion strategy to increase the reach and frequency on our high volume cartilage repair target surgeons and gives us confidence that we'll return to a similar rate of growth in surgeons taking biopsies in 2021 as we saw in 2019. In terms of the average number of biopsies taken per surgeon, third quarter rates were already back to 2019 levels. Looking forward into 2021, we'd expect biopsies per surgeon to increase from current levels, which, when combined with our expectation for an acceleration in the growth in surgeons taking biopsies, sets Macy up for a very strong 2021. Finally, given the expansion of our surgeon base and the current environment, we're very pleased that the biopsy conversion rate has remained within the historical range, and we expect that to be the case for 2021. Turning to epi-cell, we've seen steady monthly epi-cell volume since May, and this trend is carried into the fourth quarter. This is the first full year with our new FSL Salesforce structure, which includes both sales representatives and clinical support specialists. And we believe that this new structure has helped maintain our momentum despite the challenges throughout the year. As we expand the Salesforce next year in anticipation of the NexaBridge launch, we believe that we'll have the right scale and structure to drive another leg of growth for FSL as we target additional centers that we believe could become FSL users in the years ahead. Finally, as discussed in detail during our recent Analyst and Investor Day, we believe that the addition of Nexibrid to our burn care franchise will create a unique strategic market position for VeriCell and enhance the company's leadership position in burn care by having highly innovative products for both the debridement and wound closure phases of the burn treatment pathway. Given that we'll be targeting a much larger segment of hospitalized burn patients than with EpiCell alone, The addition of Nexibrid will triple our burn care addressable market to over $300 million in the U.S. The expansion of the addressable market supports a broader commercial footprint, which we believe will drive both Nexibrid uptake and increase epi-cell penetration as we build a larger share of voice and expand our presence in the burn care market. So we're very excited to have an opportunity to bring Nexibrid upon approval to the market in the United States in 2021. We believe it will be a meaningful contributor to our growth in 2022 and beyond. To wrap up, I'll spend a few minutes discussing the current operating environment and our expectations for the fourth quarter. While we're not in a position to forecast exactly how the recent rapid increase in COVID-19 cases could impact Macy in the second half of the fourth quarter, we can say that to this point we have not seen any change in the trends in Macy biopsies, new case activations, or scheduled surgeries as a result of the effects of the pandemic. Barring widespread reinstatement of restrictions on elective surgeries, as we've previously discussed, we believe that Macy's well-positioned to return to its prior growth trajectory, even in a challenging COVID-19 environment, given the profile of potential Macy patients, the outpatient nature of the surgery, and its favorable reimbursement status. As support for this view, although there was a spike in COVID-19 cases in states including Florida, Texas, and California in the third quarter, Macy growth rates in those states actually outperformed the national average in the quarter. That experience, together with our market research with surgeons around the country regarding expected practice dynamics during times of increased COVID hospitalizations, has helped calibrate how we're thinking about Macy performance in the fourth quarter. Our outperformance in the third quarter certainly increased our expectations for Macy in the fourth quarter, and all key metrics point to the normal seasonal dynamics in terms of a significant sequential step-up in Macy volume from the third to the fourth quarter. As I mentioned earlier, EpiCell has been performing consistently well since May, and that trend continued into October. We also expect the second shipment of Nexibrid to BARDA later this month, which should generate around $1 million in revenue for the company in the fourth quarter. We're closely monitoring the evolving COVID-19 dynamics, and absent a market change in current conditions in the second half of the fourth quarter, our expectations have increased, and we now expect to be able to achieve double-digit product net revenue growth in the fourth quarter. Together with the Nexabrid revenue related to the BARDA procurement, This would generate total net revenue growth and positive net income and cash flow for the full year in 2020. Our company executed exceedingly well during the third quarter, as we generated stronger than expected financial results, drove strong commercial performance for Macy and Epicel, and achieved important milestones towards our goal of attaining marketing approval of Nexavirt in the United States. Our third quarter results demonstrated the strength of our business across several measures, and while uncertainties related to COVID-19 remain, we're highly confident in the underlying fundamentals of our business, and we remain on track to deliver strong revenue and profit growth in the years ahead. This concludes our prepared remarks. As a reminder, the presentation is available on our website, provides additional highlights of today's call. Now I'd like the operator to open the call to your questions.
spk05: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ryan Zimmerman with BTIG.
spk03: Hey, thanks for taking the questions. Congrats, Nick. You're like a one-man band today. I was hopping between calls, so I apologize if I missed this. But I guess I want to put a finer pointer on kind of the strong growth for Macy in the fourth quarter. I think the street's modeling about mid-single-digit growth right now. But, you know, certainly based on your commentary and the commentary for double-digit product growth, it would suggest something a little bit higher, assuming, you know, EpiCell kind of holds at its current levels. So, you know, one, is my thinking around that correct? And then, two, you know, any commentary to put a finer point and kind of your expectations are amazing.
spk00: Well, yeah, I do. I think your thinking around that is correct. Obviously, you know, you can kind of look at the product revenues from last year, which in total were about $39.4 million. So, you know, if... you just apply double-digit growth to that and then back out the current epi-cell run rate, then I think you get to that answer with respect to MACEI.
spk03: Understood. Okay. So just, you know, you laid out kind of the drivers for MACEI, you know, and what has, you know, the number of surgeons, the biopsy rates and conversions. But just, you know, looking at it from a different perspective, Particularly in the third quarter, given that you saw such an uptick in biopsies, I mean, if you could bifurcate a little bit kind of what drove that in terms of the addition of the sales force or the new heads in the sales force versus physician adoption versus, say, you know, patient demand that may be coming in from some of the marketing initiatives that you've been doing. I'd love to just understand it from maybe that perspective relative to kind of the drivers of the underlying growth that you talked about previously.
spk00: Well, you know, I guess I would start by saying, you know, we saw pretty consistent performance among our surgeon segments that we discussed on our analyst day and then across all of the regions. So, you know, very pleased with sort of the breadth of the performance. We did mention that, you know, in the new 27 territories, there was the highest level of growth in terms of bringing on new surgeons who had never taken a Macy biopsy before. And again, that supports the rationale for why we expanded the sales force to make sure we had appropriate reach and frequency on these surgeons. One thing we did talk about on our last call was sort of the, you know, the fact that we expected the majority of our volume in the third quarter to be essentially new patient flow. So we said maybe 20% would be sort of quote unquote catch up. And for that, for us, that's a little, really has two components. Number one, you know, there were cases at, you know, in late March and April that were canceled and there were, you know, some cases, probably less than 5% of third quarter volume related to cases that were previously scheduled being canceled and then rescheduled. You know, kind of on the theoretical front, you know, we said, hey, just based on historical averages, we would have expected a certain number of biopsies to convert to implants, and that was a little lower. So the rest of that, you know, call it 20% catch-up in the third quarter related to biopsies that normally would have converted in the first half. But that was really sort of a July-ish, maybe early August phenomenon. And by the time we got to September, the age of the biopsies were pretty much comparable to the age of the biopsies converting to implants in 2019. So, you know, really that supports our growth outlook going forward. It's really mostly driven at this point or almost exclusively driven now by new patient flow.
spk03: Okay. Appreciate the call. I'll hop back in, Keith. Thank you.
spk05: Your next question comes from Danielle Antalfi with SVB Lyrinc.
spk06: Good morning. Thank you so much for taking the question. Nick, just to push a little bit on, and I appreciate you're not getting 2021 guidance specifically right now, but just as you look at where consensus is, you talked about growing rates of biopsies at physicians and growing utilization. I think if I heard you correctly, So even qualitatively, can you help us think about how to think of Macy growth as we head into next year, given the moving parts, you know, the easy comp and Q2? I mean, there's a lot of moving parts. So maybe you could talk to sort of some of the metrics that you're able to talk about and give us a sense of how this could shake out.
spk00: Well, yeah, thanks, Danielle, for the question. And I would say that I appreciate your acknowledgement that we're not going to give 2021 guidance right now. You know, what we're trying to do is say that, you know, obviously we are expecting the reference back to sort of the growth rate in new biopsying surgeons that we saw in 2019 over 2018. We had talked about that being pre-COVID disruptions, sort of a good baseline growth for the company going forward, and that was sort of the mid-20% range. Our commentary now is that we expect to get back towards those levels in 2021 in terms of the growth rate. That combined with additional biopsies per surgeon, I think, gets you to a point where you can kind of look at consensus and say, does it seem to make sense from a Macy perspective?
spk06: Okay, yes, that actually makes a lot of sense. Okay, thanks for that. And then just to follow up on MexiBrid and FSL and maybe talk a little bit more. I know FSL is pretty, you know, I don't know if solvable is probably the wrong word, but jumps around quarter to quarter. There's not a lot of visibility there. So, Is this something that could also help drive more visibility into the FSL business or more consistency, maybe? And can you talk about how you're going to leverage having Nexagrid in the sales rep bag to drive higher FSL sales? Thanks so much.
spk00: Yep. Well, I would... echo or reiterate what I said in the prepared remarks that this is the first full year with our new Salesforce structure where we have both sales reps and clinical support specialists, and we do think that is having a positive impact of the business. As you noted, FSL typically has been extremely variable, but we're seeing pretty consistent monthly performance, and so our commentary around that for the fourth quarter is that What we saw in the third quarter seems to be sort of progressing or moving right into the fourth quarter as well. And so, you know, I think that gives you a sense of where we think EpiCell will be for the fourth quarter. In terms of moving into next year, you know, we intend to sort of run the same playbook on Salesforce expansion ahead of the next separate launch as we do for Macy or have done for Macy previously. And that is, you know, we'll bring in, the manager-level folks at the beginning of the year. We plan to add seven new clinical support specialists and sales reps sort of ahead of the launch, you know, a quarter or so. And so, yeah, we expect certainly, you know, we focus now on call it, you know, 70 or 80 of the top burn centers, and there's 140 or so in the country. with Nexabrid will be broadening that reach, and we certainly do expect that it will help to increase utilization and penetration for EpiCell.
spk06: Thank you.
spk05: Your next question comes from the line of Kevin Degeter with Oppenheimer.
spk01: Hey, guys. Thanks for taking my question. Nick, maybe you can just talk a little bit about capital structure as we go forward here with a business that looks like it's essentially sustainably profitable, pretty healthy balance sheet, pretty low cost of debt options out there as well. So you have a lot of potential levers to pull. So maybe you could just prioritize for us sort of internal investments versus external business development, M&A, versus you know, potential, you know, share buyback and other structures for reinvestment of capital.
spk00: Got it. Yeah, I think, you know, we will continue as we've always done to look at external opportunities that, you know, would allow us to expand our sports medicine or burn care franchises or If we find, you know, new opportunities that have a profile in new cell therapy verticals like our current products, in other words, highly innovative, concentrated call points, good financial profile, you know, we look at those as well. And we'll continue to do that. Those, as you know, on the business development front are more sort of sporadic opportunities, so we'll continue to look. But we have a pretty high hurdle, and, you know, those will happen when it makes sense for us. In terms of internal investment, you know, obviously we have lifecycle management initiatives that are underway. You know, we're always sort of upgrading facilities and looking at, you know, capacity expansion plans over a five-year plus five to ten-year period. So, there may be capital requirements there over time as we continue with these very high growth rates. I would say we certainly have not ventured into the share buyback territory yet, but, you know, obviously we'll think about all those parameters as we move forward.
spk01: And maybe just following up on that topic, you know, with regard to, you know, manufacturing, you know, infrastructure, can you remind us as to, you know, how you think about, you know, what type of run rates, particularly with regard to Macy, you know, make the discussion about, you you know, upgrades, expansion, or perhaps geographic, you know, diversification of the manufacturing infrastructure, you know, timely discussions, kind of, you know, when does that, you know, sort of threshold or run rate on Macy kind of make that informative?
spk00: Yeah, we've talked in years past, and it's probably been a couple years now, about sort of the capacity here. And again, you know, we've essentially doubled our volumes or more since, you you know, over the past couple years since we've launched Macy. And so, you know, we certainly, you have to look out, you know, three to five years and say, where do you think you'll be and when do you need to start making those strategic moves? And so, you know, we're at a point where we're looking out three to five years and saying, you know, where are the pinch points in terms of capacity? Obviously, our December volumes are so high, typically double any other month in the year, and that creates certain capacity constraints that we need to navigate around. And so I would just say that while we have adequate capacity for the next three to five years or so, three years, call it, you need to get ahead of it. So we're looking at that now, different alternatives, et cetera.
spk01: Great. Thanks for taking my questions.
spk00: Okay. Thanks, Kevin.
spk05: Your next question comes from Jeffrey Cohen, Lattenberg, Thalman.
spk04: Hi, Nick. How are you? Good, Jeff. Thanks. So I wanted to ask you about if you could discuss a little bit about plans for Nexabrid as far as the launch in the U.S. and, you know, kind of the Venn diagram on overlap with EpiCell you talked about. bringing in some managers and some support sales launch. Can you talk about kind of go-to-market strategy as far as current centers, which are already being serviced, as well as opportunities for new centers and how you see that overlap out there?
spk00: Yeah, and I would point folks on the call to our Analyst and Investor Day presentation where we covered, you know, the Salesforce expansion plans, the pre-approval sort of medical and marketing initiatives and so on. I would say, Jeff, the current activities kind of fall into three buckets. You have disease state awareness ahead of a product approval, and that campaign was launched at the American Burn Association meeting this past year, virtual meeting, and that will continue ahead of launch. We have obviously brand development that is ongoing right now, and then of course market access. initiatives as well. So all three of those buckets were sort of laid out by Roland on our Analyst and Investor Day call. And it's kind of the typical sequence of events you do ahead of launch. And so there's a lot of those activities. Once you know the BLA has been filed for review or accepted for review by the FDA, that you kick those initiatives off. So we're deeply engaged in all of those activities. In terms of the Salesforce expansion, we currently have one national sales director, and, you know, 11 sales reps and clinical support specialists. So, you know, as you think about getting towards 20 sales personnel, you know, that's a little difficult for one person to have that many direct reports. So, we'll have a structure that, again, is much like our Macy's structure in terms of we'll have two regions with two regional managers, and then essentially 11 territories and then that are supported by both reps and clinical support specialists so we think that's about the right number to call on the burn centers which is the next part of your question which is sort of you know right now as I mentioned we probably focused on the top 80 burn centers out of the 140 in the country because those are the centers that typically see sort of the catastrophic burn patients like the epi-cell patients are. So not all the burn centers routinely will have epi-cell appropriate patients. So we do focus on sort of the upper end of that. As we've talked about before, virtually all of the 40,000 hospitalized burn patients across those 140 centers are going to need some sort of debridement. And so Nexibrid will allow us to focus our efforts on a broader set of the burn centers And as I mentioned in my prepared remarks, we certainly expect that will provide opportunities to increase epi-cell uptake in those centers that don't currently use the product. So we do think there will be a lot of synergies there in terms of the Venn diagram portion of your question.
spk04: Okay, got it. And then secondly for me, I just wanted to review and go back to – your Q4 commentary that Ryan has some questions about. You talked about double-digit growth for Macy for fourth quarter, double-digit annual growth, correct?
spk00: Yeah, what we said was double-digit product growth. So our current commercial products for the fourth quarter, you know, and that are certainly our expectations have increased based on our Q3 performance. but double-digit product growth for MESI and EpiCell combined. So, you know, last year the products were at about $39.4 million, so you can sort of do the math from there. Okay.
spk04: And then one more question, if I may, lastly on Nexabrid. In the near term, the next four quarters, you would anticipate the barter procurement to continue at current levels, called approximately $1 million? Yes.
spk00: Yes. So we have 1.2 in the third quarter. We said about $1 million in the fourth quarter. And then I think there's about 3.8 million left for next year that, yes, we've suggested you spread over the four quarters.
spk04: Perfect.
spk00: And just one last point just around that. You know, in terms of our pre-launch activities, you know, we do just remind you that we do have the next study ongoing. So there will be Assuming all of those sites are up and running, you know, about 33 centers in the country that will have experience with Vexibrid at launch. Perfect. Thanks, Nick. Okay, thank you.
spk05: Your next question comes from Kayla Crum with Truist Securities.
spk07: Hi, guys. Thanks so much for taking our questions. So first, you know, I think that something a lot of companies are talking about is just learning how to be sort of more efficient with virtual training going into next year. And so I'm curious, you know, are there any sort of cost efficiencies you guys think will stick heading into 2021 that perhaps, you know, we may not have otherwise considered?
spk00: Yeah. And, you know, we obviously have been – employing a number of virtual tools. So on our analyst day, Roland covered, you know, in particular for Macy, sort of a number of the, and this really falls into the peer-to-peer sort of category and how surgeons are interacting with their peers in these times. And so we've certainly been using platforms like Doximity, ViewMedi, which is where they go and watch surgical procedures. Doximity is more like a LinkedIn for the surgeon community. We mentioned that we'll be making significant investments in something called KOLCAST. And again, these are all peer-to-peer initiatives that that surgeons are using, and we've had a tremendous response and tremendous success in using those during the second and third quarter. So, we'll certainly plan to continue to do that, and what it does is allow us to maintain a bit of a lower cost structure as we've had this year. you know, we'll see how travel resumes. We're sort of planning that it might get back to normal by the middle of next year. And in the meantime, we'll continue to engage those highly effective virtual tools.
spk07: Great. Okay. And then, you know, I think obviously you guys have proven an ability to scale your sales force with Macy and do it effectively. I mean, is there anything that you call out that you know, maybe you've learned from or can use as you guys scale up your burn sales force as well. Thank you.
spk00: Yeah, well, I appreciate that. We, you know, first of all, this past year, we expanded the Macy sales force, you know, for the fourth straight year. This was a bit more of a significant one. And so, you know, this one for Macy is intended to last us at least two or three years. So, you know, and we have been effective in how we've done that. And, you know, there's certain dynamics, you know, around the Macy business where, you know, we kind of have a playbook where we hire the managers at the end of a given year, hire the reps in the first quarter of that year. They do their sort of home training, field training, and then come into home office training and hit the ground running on the first day of the second quarter. And that involves extensive training and preparation, and that's why we think we've been effective in our Salesforce expansions. We'll do the exact same thing for EpiCell. There will be opportunities, obviously, not only for home training and virtual home office training, but also to be out in the field during the surgeries and gaining that field experience as well. All of the learnings that we've had from Macey that have led to our successful expansions will be applied to the EPICEL expansion as well. And we've been, just to be clear, you know, we started 2019 with five reps and one clinical support specialist. So, for EPICEL, you know, we're now up to seven reps and four clinical specialists. So, we've doubled the EPICEL sales force and, you know, certainly have done well and have not seen any disruption. You know, as last year was our third year in a row of double-digit growth for a product that's been on the market for 20 years.
spk05: Thank you. Thank you. Your next question comes from RK with HC Wainwright.
spk02: Thank you. Good morning, Nick. Congratulations on a great quarter. Most of my questions have been answered, but I just have a couple of them. I know you gave a lot of metrics today. around the leading indicators for May C. I just want to see if you can give a little bit more color. As far as the biopsies are concerned, you said by the end of 2019, you were talking about 14,000 biopsies. So at this point, year to date, You know, could you give us roughly what the number of biopsies you have gotten so far?
spk00: Yeah, let me just correct you. What we said was there were 1,400 surgeons who had sent in biopsies in 2019. And, you know, we've not given out, you know, specific biopsy numbers, but I think, you know, when you look at... You can get there on your own by looking at the revenues in 2019. You know, the average price per the implant is known, so that gives you a rough implant number. The conversion rate, we've said, is, you know, sort of mid to high 30%, so you can sort of do the math to get to the number of biopsies in 2019. And we do expect some biopsy growth in this year, even with the market declines that we saw in Q2.
spk02: Great. Then just one quick question on the financials. In terms of gross margin, by end of 2019, there was actually... 300 basis point expansion on your gross margin last year. Obviously, this year, because of what we are facing, there's been actually a decline in there. But do you expect the fourth quarter to help you revert that and at least get it flat to 2019 or even better maybe?
spk00: Yeah, well, certainly in the fourth quarter, as you know, it's our highest volume quarter by far. And so the margins tend to be pretty high in that time. And so, yeah, I think it'll be, you know, roughly in line with last year. So that, you know, we're very pleased with that, obviously, given sort of the second quarter results.
spk02: Thank you. Thanks for taking my questions, and I'll talk to you soon.
spk00: Great. Thank you.
spk05: There are no questions at this time. Mr. Colangelo, do you have any closing remarks?
spk00: No. I would just like to say thank you very much for participating in our call today. We appreciate the interest and look forward to keeping you updated on our continued progress. So have a great day. Thanks.
spk05: This concludes today's conference call. You may now disconnect.
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