Elutia Inc

NASDAQ:ELUT

Earnings Call Analysis

Elutia Anticipates Strong Market Penetration with CanGarooRM

Elutia is poised for a robust market entry with CanGarooRM, a product aimed to disrupt the $600 million drug-eluting envelope market dominated by Medtronic's TYRX, which brings in $250-$300 million in sales. With internal research showing high adoption potential, Elutia's non-pacemaker production positions it as a neutral competitor appealing to various brands. The company expects clearance in Q2 and estimates CanGarooRM could generate $100-$150 million in sales with 70% gross margins. Elutia has also seen a 38% year-over-year growth in its SimpliDerm product, expanding its network and partnerships. Overall, net sales modestly increased from $23.8 million to $24.7 million in 2023, while the gross margin slightly declined from 63% to 58%.

Introduction of CanGarooRM Marks a New Chapter

Eyes are on the anticipated clearance and launch of CanGarooRM, a product developed to enhance the fit of biologic scaffolds for pacemakers, promising to reduce inflammation and offer better integration into patient tissues. A survey showed strong acceptance, with 88% of electrophysiologists ready to use CanGarooRM upon availability, signaling the potential for significant penetration into the $600 million market. The company expects to capture a portion of the direct competitors' sales, estimating gross margins around 70% and projecting that CanGarooRM could add between $2.5 billion to $5 billion in company value.

FDA Clearance on the Horizon for CanGarooRM

Recent interactions with the FDA have been favorable, reflecting confidence in the clearance of CanGarooRM by the second quarter of 2024. This optimism is supported by the FDA requiring no new data for approval and the company's careful engagement with the regulatory body to ensure compliance and mitigate any potential for delay.

Continued Growth with SimpliDerm

Also contributing to the optimism is SimpliDerm, a product designed for breast reconstruction post-mastectomy, which exhibited a robust growth rate of 38% in the past year. The company is actively developing an extension of this line with SimpliDermRM, while maintaining performance through proprietary channels as well as through the Sientra sales channel.

Financial Highlights Show Positive Trajectory

The company reported net sales of $24.7 million in 2023, up from $23.8 million in 2022, and a focus on proprietary products resulted in a 19% year-over-year growth rate. Even though a partnership for distribution resulted in lower revenue recognition due to a transfer price arrangement, the overall impact at the operational level was seen as beneficial. The company ended the year with cash reserves of $19.3 million, strengthening with a potential $16 million cash inflow from warrant exercise, post-CanGarooRM clearance. While adjusted EBITDA showed a decline from $22.9 million in the preceding year to $14.6 million in 2023, the management remains optimistic about future financial improvements.

Strategic Execution on Product Rollouts

A strategy for a phased launch of CanGarooRM has been outlined, with a soft launch expected in the third quarter to manage hospital formulary inclusion, supply preparations, and sales team expansion, followed by a full-scale launch aimed at building on the growth trajectory seen in the previous year.

Expecting a Bright Future

The company is energized about the near-term prospects and is actively preparing for multiple value-adding catalysts, including the CanGarooRM launch and further development of the drug-eluting biologic platform, with more products in the pipeline. Both CanGarooRM and SimpliDerm are poised for growth in 2024, with SimpliDerm expected to maintain its impressive growth similar to 2023's 38% rise.

Concluding Thoughts

The company's executives are focused on capitalizing on the significant opportunities ahead, particularly with the launch of CanGarooRM, while continuing to nurture the growth of existing product lines like SimpliDerm. The future looks promising as resources and strategies are aligned to maximize the potential of these key assets.

Earnings Call Transcript 2023-Q4

[Operator]

Greetings. Welcome to Elutia's Fourth Quarter and Full Year 2023 Financial Results Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Matt Steinberg with FINN Partners. Thank you. You may begin.

[Matt Steinberg]

Thank you, operator, and thank you all for participating in today's call. Earlier today, Elutia released the financial results for the quarter and full year ended December 31, 2023. A copy of the press release is available on the company's website.

Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws which are pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that do not relate to matters of historical facts, or relate to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements include, without limitation, those relating to our operating trends and future financial performance are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties 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 public filings with the SEC, including Elutia's annual report on Form 10-K year ended December 31, 2023, to be filed with the SEC, accessible on the SEC's website at www.sec.gov. Such factors may be updated from time to time in Elutia's and other filings with the SEC.

The conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 7, 2024. Elutia disclaims any intentions 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. Also during this presentation, we refer to gross margin, excluding intangible asset amortization, which is a non-GAAP financial measure. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure is available in the company's financial results release for the fourth quarter ended December 31, 2023, which is accessible on the SEC's website and posted on the Investor page of the Elutia website at www.elutia.com.

And with that, I will turn the call over to Elutia's CEO, Randy Mills.

[C. Mills, executive]

Thank you, Matt. I am super excited to be with you today and to share the story of Elutia. Our mission, humanizing medicine so that patients can thrive without compromise. We're going to talk about that word compromise today and what that means, particularly with our flagship product that we're in the process of getting ready to launch, CanGarooRM. But what we're really trying to do is we're trying to take away those instances in patient care where patients and physicians are forced to choose between 2 options when in fact, we could actually give them both.

So Elutia is a commercial stage company. We have 2 proprietary product platforms, CanGaroo, which is for our pacemaker and internal defibrillator space and SimpliDerm, which we use in breast reconstruction. But more importantly, and I think what a lot of people are on the call today, we are pioneering the drug-eluting Biomatrix to solve some of the most complex problems that exist. I'm going to be giving an update in this, and I'm super excited to do it where we're going to be talking about our regulatory progress that we've made. We're really excited about that. We're really excited about moving on and launching this product.

So that's -- let's just jump right into it. For the year, we had an exceptional year. We had a transformational year at Elutia. And I am -- I couldn't be more proud of this team. Our commercial teams kept their eye on the ball, delivered 3.4% growth in CanGaroo and a stunning 38% growth in SimpliDerm, all the while we were making these rather significant strategic shifts within the company, but everybody kept focused and kept their eye on the ball and really did a beautiful, beautiful job commercially and operationally.

From a development standpoint, as many people on this call know, we submitted our 510(k) premarket notification in December. The FDA accepted that application, and that review is progressing really pretty much exactly the way we expected. We have not had any request for any new data. We've had some requests for clarification. But we are looking squarely at a clearance decision expected in the first half of 2024. And we believe actually this is really going to be a May-June timeframe. But from us, from our standpoint, where we are everything is, we believe, right on track.

In preparation for that launch, we have established a strategic advisory committee to help us prepare and get the most value out of CanGarooRM launch. CanGarooRM is a very transformational event. We think this is a transformational product for the company, and we need to make sure that we're able to position it in a way such that we can realize, not just the most value for the product, but the most value for the company. So on that end, we've established a strategic advisory committee that really has the best been there, done that minds from the space. We're talking about leading executives from the pacemaker and implantable defibrillator space. People that have led significant marketing and commercial launches of sophisticated biologic products. Obviously, business development is in there, as well as reimbursement and hospital penetration. So a really first-class group advisers to help us make sure we get this launch right.

And then lastly, one of the things that I'm very proud that we do at Elutia is execution. And we continue to execute -- we announced last year that we divested our orthobiologics business, but the group handling that kept our eye on the ball and actually closed that divestiture, bringing in gross cash proceeds of $14.6 million. So thank you to the team all around for an exceptional year.

Just a quick overview on what we do. So Elutia is developing the drug-eluting biologic really to reduce and remove the complications that exist at the device-host interface. And so when a surgeon implants device into a patient that's going to be there for a long period of time, there were a number of complications that arise quite predictively, things like device migration, erosion of the device through particularly thin skinned patients, obviously, infection and pathologic fibrosis which can lead to things like capsular contracture.

And when you look at the 2 markets that we're in, pacemakers, we're seeing complication rates here, 7% to 11%; breast reconstruction, at a stunning 20%. So we think this is an area where we can go and add really significant value and improve outcomes for our patients. So how do we do that? Well, we do that with the drug-eluting biologics, again, which is able to solve these problems without compromise. We don't think a patient and a physician should have to decide, hey, should I go with the device that offers pharmaceutical payload and drug efficacy or should I go with the natural biologic that will remodel into the patients own natural tissue and have a lower fibrotic response? we look at that and we say, both. Both should be the answer.

And so that's why we've developed the drug-eluting biologic that provides all of those benefits of an active pharmaceutical payload, but on a regenerative scaffold that enables it to regenerate in the patient's own healthy tissue.

So let's get into CanGaroo and CanGarooRM. So a little bit of a landscape of overview here from a commercial standpoint. Each year, there are about 500,000 CIEDs. This is a term of use for pacemakers and internal defibrillators, that are placed in the patients in the United States alone. When you look at that market space, Medtronic has 40% approximately of that space. Boston Scientific and Abbott have another 50% and then Biotronic, a distant fourth at about 10%. But this is a really -- some really interesting market dynamics that this sets up because only one of these players actually has an antibiotic-eluting pouch and that's obviously Medtronic, but all of them have really, really significant pacemaker business.

And so we started about Medtronic a little bit and their product, TYRX. So TYRX was actually developed by the Tyrex Company, back in the early 2010s. It is a synthetic polymer envelope that, as it dissolves in the body, it releases antibiotic. And this product took a while a develop, but it eventually got -- it's got its clearance from FDA in 2014. And shortly after clearance, Medtronic was able to acquire this product for about $200 million. Again, this is in 2014 numbers, and they have since just knocked it out of the park. So they've grown this product to about $250 million to $300 million, by our estimates, and they've really done a great job.

They really got 2 things here. First, they were able to have a foresight, paid $200 million in 2014 when there was no market for this technology, they have to create the market. The second thing that they did was they actually proved out that this market could exist and that's the value proposition to physicians and particularly electrophysiologists about local antibiotic delivery really worked. These physicians liked the idea of having a local antibiotic resin with their surgery so that they don't have to worry about a postoperative infection. But Medtronic did a great job here.

But TYRX isn't a perfect product. And that's why we developed CanGarooRM. TYRX does a really great job eluting antibiotics, [indiscernible] and minocycline. But it doesn't have any of the benefits of the biologics. Like I said it's a polymer that dissolves in the body. We like the idea of using biologics scaffold because -- for a couple of reasons. One is a biologic scaffold around the pacemaker fits and forms really like a glove. It gives the physician great fit and feel, there's less information -- inflammation, therefore, there's less pathological remodeling, changes out easier and that's better for the patient in the long run. And it all remodels into the patients own tissue.

So again, this was an example where we looked and said, there is an opportunity where a patient and a physician are having to make a compromise and we can remove that compromise. We can help patients thrive without compromise, and we've done a pretty good job of that with CanGarooRM. We went out and we talked to electrophysiologist about this concept. It was stunning. 88% of electrophysiologists, and these are TYRX users, 88% of electrophysiologists that used TYRX would start using CanGaroo once the product became available, 88%. And we think that gives us a really, really great opportunity to move into the $600 million market and actually have some really great penetration.

So back to our market, our favorable market dynamics slide here, sort of the payoff of this. So when you look now, you overlay the drug-eluting envelope on top of this. You have Medtronic sitting there with TYRX, right? And they do about $250 million to $300 million in TYRX. And then you have Boston, Alet and Biotronic, and they don't have a couch between them. Now here's what we found was really [indiscernible]. We started doing our own internal market research. 50% to 75% -- and it's probably more like 70% to 75% of TYRX is actually used on non-Medtronic pacemakers. So a lot of TYRX is going on to a Boston Scientific or an Abbott pacemaker.

And we think when you sort of -- when you look at this altogether, this does 2 things. One is it creates a great opportunity for us to go out and launch this product. We are viewed kind of like Switzerland here. It doesn't matter whether you're Boston or Abbott or Biotronic, if you're going to ask them whose drug-eluting envelope would you rather have in your case, Elutia's or Medtronic's, they're going to say Elutia every single time. Why? It's simple. We don't make a pacemaker and Medtronic does. And so that's a real great opportunity for us to go out and take this really low-hanging fruit of $70 million, $75 million TYRX sale.

But really 60% of the market that's essentially uncontested right now in this space. But if you also look at it from the company's point of view, you're talking about a plug and play product here. It could do $100 million, $150 million we're estimating. Gross margins in the 70%. There's no additional selling costs, right, because these players are already in every one of these cases anyway. And so you do the sort of the math on that, you're dropping something like $90 million a year to earnings. Look at their PDE, somewhere between 25 to 60, then you're talking about a product that could add $2.5 billion to $5 billion in value to these companies.

So we are really, really -- we are really, really excited about CanGarooRM coming to market, but we also understand its value and we'll have the discipline and the patience to methodically roll this thing out and take it to market and launch it so that we get the greatest value for both the product and the company.

Okay. Now let's move on to our clearance and our clearance strategy and activities. So we filed -- as you guys know, we filed this 510(k) December 18, 2023. We did that after meeting with the FDA at a presubmission meeting. The interactions since that, that we've been having with the FDA have actually been very positive and they're going exactly as we thought. As we've stated on this call a number of times, we expected we were going to be asked questions, and we haven't asked questions. Fortunately, they've all been really of the clarification variety. And importantly, the FDA has asked actually for no new data in this. So we believe we are in really, really good shape here, as I said, lining up for what we think will be a favorable clearance decision in the second quarter of May-June timeframe if you're scoring at home.

And we are, therefore, internally preparing accordingly for the launch of this product in the second half of the year. That's why we have a Strategic Advisory Committee. We're also doing work with reimbursement, getting ready to get on value-added committees, pulling up manufacturing and all of those other things.

And then just as a reminder, we're not done with the pacemaker space. We actually expect to get approval in indications like neurostim, Parkinson's and sleep apnea and the like. And so there is a bigger future here for CanGarooRM than just the pacemaker market. But we're going to make sure we don't triple the goal line here, we're going to do our best to do that.

Okay. Turning now just quickly to SimpliDerm. I will not bore you guys going over breast construction 101 again. Just to point out, this is a really huge market with a really big unmet medical need. There's about 151,000 mastectomies in the United States each year that are of the variety that require breast reconstruction. That's where we come in with our SimpliDerm products.

And so we look at how this is going here. And SimpliDerm, we think, it's just simply a great product. It has better handling characteristics. It is prehydrated. What that means is it actually comes to the surgeons, they open it up, and it is ready to go. It's already moist. It doesn't require soaking or anything like that. It's also sterile. This is a product that's been terminally sterilized, and we've been able to demonstrate that it invokes a lower inflammatory therefore, fibrotic response. So the surgeons that use this product, love this product and they keep using them. So that's why we've seen growth of this product quarter after quarter after quarter. And this year being no exception, 38% growth.

So we distribute this product 2 different ways. One is through our own proprietary network of distributors. The other is with Sientra, which owns 23% of the breast reconstruction place. And between these 2, they are crushing it. So we see really, really good things ahead for SimpliDerm going forward. Our end goal here is to obviously combine our RM technology with this base scaffold of SimpliDerm and create SimpliDermRM to be able to go after and help those women who experience postoperative infections following breast reconstruction.

With that, I will inhale, take a breath and turn the call over to our Chief Financial Officer, Matt Ferguson.

[Matthew Ferguson, executive]

All right. Thanks, Randy. Exciting stuff, and we really are excited about all of the the progress being made in CanGarooRM and SimpliDerm and all of the value-driving catalysts that we see in the near future and continuing for the medium to long term here at Elutia.

As a financial update, I'm just going to touch on a few of the highlights. We provided a lot of information in our earnings release, and we are aiming to file our 10-K tomorrow. So there will be tons more there as well. But just hitting on a couple of the highlights here. Our net sales were $24.7 million for 2023, modestly growing from $23.8 million in 2022, but that performance actually masks what really is going on underneath, which was the really significant growth of our proprietary products, CanGaroo and SimpliDerm.

If you just look at those 2 growth was about 19% year-over-year. And what was going on in cardiovascular, which as you probably recall, we've partnered with LaMaitre Vascular as the exclusive distributor in the United States for that. So for most of 2023, we were selling at a transfer price for that product, roughly half of end user pricing. So while we're selling similar amounts of the product, we're not generating as much revenue. So that affects the optics of our top line. It also affects our gross margin, but at the operating level, it's actually a positive thing for us. And it also has allowed us to really focus on the 2 main growth drivers for the company, which has been a very positive thing overall.

As an adjusted gross margin, as I mentioned, I mean, look like it's down a little bit year-over-year, 58% versus 63% on an adjusted basis. And again, we provide a reconciliation in the earnings release and our presentation online. Really pleased with the operational performance for the company, and we actually see room to continue to see those numbers grow as we go into 2024.

So the only other point that I'll touch on here or a couple of other points I'll touch on here, adjusted EBITDA, which really allows us to cut through a number of the noncash and nonrecurring and discontinuing operations within the company. We had adjusted EBITDA of $14.6 million for 2023 compared to $22.9 million for the year. So that reflects not just the revenue growth but also really, really good expense control that we had over the course of the year. And we would see if we continue to scale, we would see those numbers also continuing to improve going forward.

And then last but not least, from a cash perspective, we ended the year with $19.3 million in cash. That reflects the proceeds from the divestiture of our orthobiologics business that Randy mentioned previously. So we feel like we're in good shape there. But on top of that, as you probably also recall, we did a financing in Q3 that had cash exercise warrants attached to it. Those warrants now are significantly in the money to the tune of about 150%, and they expire 30 trading days after the clearance of CanGarooRM. So that's not only a similar event for us from a strategic perspective, but it also will be the trigger for bringing in about $16 million of additional cash, is our expectation.

So that's the overall picture from a financial perspective. We feel like '23 was a really strong year for us, and we expect to see that continuing to improve going forward. And before we turn it over to your questions, I would just say that from a strategic point of view, we feel like we're really well positioned for growth. We have multiple value-driving catalysts in the near future, first and foremost, the clearance of CanGarooRM, which will lead to the launch of the product, and we're really excited about all the plans that are coming into place there, and then the continued development of our drug-eluting biologic platform with additional products in the pipeline.

So with that, I will turn it over to you and your questions. Thank you.

[Operator]

[Operator Instructions] Our first question is from Frank Takkinen with Lake Street Capital Markets.

[Frank Takkinen, analyst]

Congrats on the progress and appreciate all of the background on CanGarooRM market. I was hoping to start by following up on some of the FDA interactions. I was curious if you're comfortable divulging any more about some of the requests they made. I heard loud and clear that they were not new data requests, which I think is most important to understand, but anything else you can divulge? And then maybe bridge us to the expectation of a May-June timeframe and how you got to that estimation.

[C. Mills, executive]

Yes, Frank. So basically, no, but we're not going to go too much into the details of the questions. That is not for a lack of transparency. It's actually centered around some of the intellectual property that we have in the technology that's -- you can imagine super important to us.

What I can tell you about the questions are, is they were the clarifying variety, right? So they were also completely contained within the scope of what we have responded to FDA from the NSC letter. So they had only -- we only had 4 issues. We provided them the data for that. So none of the questions were outside of that. So they're not -- that's good. They're not doing anything else there.

And then the questions, as I said, we're all sort of, of this clarifying variety. We submitted to them a pretty substantial package. When we answered these questions and you have validations and all kinds of other scientific reports, we submitted to them a pretty substantial package. So within that, as you expect -- as we expected and as we we've said actually on our last call, we fully expected them to ask some of these types of questions. We knew what they were, we would have answered them ahead of time. But they've asked us these kinds of questions about, tell us more about this method or submit us this underlying report for this or that, like that kind of that kind of stuff. As I said, really importantly, they didn't say, this isn't sufficient. You're going to need to provide us more data. We had no requests for any additional data there.

With regard to the timeline we make, that's me being really conservative, the May-June timeframe, and I don't mean just conservative in telling the Street our expectations. The most important thing for our company right now is to get this clearance over the goal line. And so we have a very positive and interactive relationship right now going with the FDA. Our R&D teams are back and forth with them on a collaborative basis. The idea is to make sure the FDA has exactly what they want before we tell them to go and it's a race for the last 30 days.

So we're not going to do anything to save off a week or 2 weeks here or there that would in any way jeopardize that. So I'm being really conservative. I'm being really -- we're being really careful, very methodical, but it's the most important thing for us right now. And so in my view, that's the only responsible way to behave.

[Frank Takkinen, analyst]

Got it. That's helpful. That makes sense to me. And then maybe extending on some of the comments you made around the committee you put in place for under -- trying to understand how you're going to launch the product and whatnot. How quickly could you have supply up and running? And should we assume it's more of a limited launch in the second half and then a full launch in '25? Or how do you think about that assuming it's cleared in the May-June timeframe?

[C. Mills, executive]

Yes. So right now, our -- and we are -- right now, we are -- but I can't emphasize this enough. Right now, we are exactly on track with where we thought we would be. And so right now, we are looking for a soft launch or a limited launch, particularly in the third quarter. Most of that has to do with getting into hospital bags, getting through hospital back, on formulary, pulling up supply, although we have a pretty good manufacturing team that's ready to go with this. But really doing the underlying things that we need to do to get the launch right. Most of it has to do with reimbursement getting on formulary.

We'll also be expanding the sales team as well during that time, they'll be training and the like associated with that. So that's largely third quarter. Our expectation at this point right now is going through the fourth quarter, we would be -- we'd be taking the training wheels off and be ready to go.

[Frank Takkinen, analyst]

Got it. That makes sense. And then maybe just transitioning for my last one, talking about SimpliDerm. Great to see that continue to grow at an impressive clip. How should we be thinking about a growth expectation in that line item for 2024?

[Matthew Ferguson, executive]

I can speak to that a little bit, Frank. I think we are continuing to see SimpliDerm show really strong performance, even if we're going through in the current quarter. As you are aware, we have our distributor in that space. Sientra is doing some restructuring right now. We actually have seen them continue to perform well, even through that process, and we are optimistic that they'll come out of that even stronger than they were when they went into it.

So we really expect that we can continue to see the same type of growth that we saw in 2023, continue in 2024 as we move forward. Yes. I mean I would -- color commentary to that a little bit, Frank. We -- obviously, the net news came out, we thought about it, and so it will be interesting to see the script. We haven't seen an effect. They've done a nice job with their team, but still the bulk, the vast majority of our product is sold through our own line, but both of them have been performing really, really, really well. So we are excited and stoked about how CanGarooRM has performed -- or SimpliDerm. I got a lot of CanGaroo on my mind. How SimpliDerm is performing right now, too.

[Operator]

Our next question is from Ross Osborn with Cantor Fitzgerald.

[Ross Osborn, analyst]

Congrats on the progress. It's shaping up to be a to be a very transformative year for the company. I think we're at some guidance. Apologize for the background noise, traveling today. But starting off, the CanGaroo number for the quarter came in a little bit below where we were expecting and realize the story is really all about RM this year. But anything to call out from a market standpoint there?

[C. Mills, executive]

No. I mean we've -- we have shifted our focus now from CanGaroo to CanGarooRM. We still have our sales reps and our accounts in place. But CanGarooRM -- is it a successful product if it's doing anything like what CanGaroo does. This is a product that literally needs to be an order of magnitude or more bigger than that. So while our reps are crushing it, from an internal marketing standpoint, from an internal leadership standpoint, we have really focused our energy now on the product they're about to sell.

And we haven't seen any softness in the underlying market for [indiscernible]. In fact, I was blown away that -- we did a restructuring at the beginning of last year and we essentially cut the commercial team in half. And at that time, we thought if we hold 60% of our sales together there, that would be really impressive. Well that team, not only did they hold it together, that's the most revenue we've ever had in CanGaroo. And it's just a -- it's a tighter, leaner but far more focused group of really incredible professionals, and I cannot wait to give them the product that, frankly, they deserve to have and let them just go tear it up.

[Ross Osborn, analyst]

Okay. Sounds great. I'm glad to hear it. And then maybe one more, but on SimpliDerm. That continues to exceed expectations. At what point does it make sense to put more resources to that asset to reach its full opportunity, 2025 story once you get RM out?

[C. Mills, executive]

We think it's a great product, too. We're not holding anything back from it. It is performing really impressively and it's continuing to perform really impressively. We are in active work from an R&D standpoint on developing SimpliDermRM and we continue to have our own proprietary sales channel and the Sientra sales channel. It's kind of -- we actually feel really good about that product and how it's working. And if -- we used to say, they're really small numbers. The numbers are getting a little bigger and the growth rates stayed high. So we're pretty excited about that. But we're not holding back from it, Ross.

[Ross Osborn, analyst]

Okay. Sounds great. Congrats on the progress. .

[Operator]

We have reached the end of our conference call. You may disconnect your lines at this time, and thank you for your participation.