Vericel Corp

NASDAQ:VCEL

Earnings Call Transcript 2020-Q1

[Operator]

Good morning. Ladies and gentlemen, and welcome to the Vericel Corporation First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference call over to Vericel’s Chief Financial Officer, Mr. Gerard Michel.

[Gerard Michel, Chief Financial Officer]

Thank you, operator, and good morning, everyone. Welcome to Vericel’s first quarter 2020 conference call to discuss our financial results. Before we begin, let me remind you that on today’s call, we will be making forward-looking statements covered under the Private Securities Litigation Reform Act of 1995, and all of our projections and forward-looking statements represent our judgment as of today. These statements may involve risks and uncertainties that could cause actual results to differ from expectations and are described more fully in our filings with the SEC, which are also 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 first 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.

I will now turn the call over to Vericel’s President and Chief Executive Officer, Nick Colangelo.

[Nick Colangelo, President and Chief Executive Officer]

Thank you, Gerard, and good morning everyone. First and foremost, our thoughts go out to those affected by the COVID-19 crisis and we’re especially thankful to healthcare workers across the country for their critical efforts in the treatment and care of COVID-19 patients. We’d also like to thank all of our employees for their dedication and commitment to ensuring that our customers and patients with knee cartilage and severe burn injuries have access to our products in our complete clinical case support.

We entered 2020 with a great deal of momentum and had a very strong first quarter across a number of financial and operational measures. While our MACI business has been impacted by the restrictions on elective surgeries that were put in place in mid-March, the fundamentals of our business remained very strong. Total net product revenues increased 22% to $26.7 million in the first quarter, marking the twelve straight quarters of record revenues for the reported quarter. Based on first quarter cases that had been scheduled as of mid-March, MACI revenue growth was in line with our strong fourth quarter growth rate and was on track to exceed our initial 2020 revenue growth guidance. Despite the fact that cancellations due to elective surgery restrictions reduced MACI Implant volume by more than 9% for the quarter, MACI revenue still grew 22% compared to the first quarter of 2019.

Epicel also had delivered another strong quarter with revenue growth of 22% compared to the first quarter of 2019. As Gerard will cover in more detail in a moment, we also delivered another quarter with significant gross margin expansion and positive operating cash flow. In response to the COVID-19 crisis, we’ve implemented a number of measures to ensure that we maintain our near and long-term growth opportunities and that we’re in a strong position when we emerge from the current situation. We continue to manufacture MACI and Epicel to maintain a significant safety stock of all key raw materials. And at this time, there’s no indication that any supply chain interruptions will impact the company’s ongoing manufacturing operations.

We’ve also updated our 2020 operating plan and implemented measures to significantly reduce operating expenses and materials purchases, suspend hiring outside of our handful of remaining MACI representatives, differ non-essential capital projects and maintain flexibility for additional expense reductions if necessary. These actions have allowed us to keep our talented workforce in tact to ensure that we maintain operational readiness for the anticipated recovery in elective surgeries.

As previously reported on April 2nd, due to the continued uncertainties resulting from the impact of the COVID-19 crisis, the company has withdrawn its previously announced 2020 financial guidance. However, I’d like to share some perspective on our current view of the second quarter in light of the fact that several states have recently announced plans to lift restrictions on elective surgical procedures. Of course, our view is predicated on states opening up elective surgeries according to current plans, and our view could change if this doesn’t occur or based on other developments as this fluid situation evolves. Based on the recommendations of the American College of Surgeons and the United States Surgeon General, 45 States that issued orders or guidelines suspending elective surgical procedures by April 3rd.

We estimate that only about 10% of the U.S. population indicated for MACI use resides in States that allowed elective surgeries in April. We’re encouraged that many States have recently announced plans to resume elective surgeries. And as of today, approximately 60% of the population indicated for MACI use reside in States that are planning to allow elective surgeries in May and we expect that number to be over 80% by June 1. While there are many other factors that will influence the ultimate recovery for MACI and other elective surgeries, we believe that the recovery for MACI using Q1 2020 as a base roughly track these trends. We expect that all States will be allowing elective surgical procedures by early in the third quarter, although the precise timing and shape of the recovery curve remains uncertain.

Ultimately, the pace at which elective surgeries resume will depend on how state and local government policies evolve over the coming months, the readiness and ability of individual facilities to resume elective procedures and the willingness and ability of patients to return to the clinical setting. In any event, we believe that there are a number of factors that position MACI for a strong recovery as elective surgeries resume as evidenced over the past couple of weeks when we saw an increase in MACI orders after states announced plans to lift elective surgery restrictions.

Starting with site of care, MACI procedures are performed on an outpatient basis over 95% of the time and can be performed either in hospital outpatient surgery center or an ambulatory surgery center, or ASC. Historically, MACI procedures have been split roughly equally between hospitals and AFCs because ASCs generally have been less involved in the treatment of COVID-19 patients. We expect that they’re positioned to more quickly resume elective procedures.

To date cases scheduled in May and June have maintained the historical 50:50 mix indicating that at this point the recovery is relatively uniform across the two channels. However, to the extent that ASCs open up to a greater degree that hospitals in certain areas, MACI can be moved to an ASC as was the case for a handful of MACI procedures in March. From a clinical perspective, typical MACI patients present with large symptomatic focal cartilage defects that will not heal with the passage of time. These patients have knee pain that severely limits their activities and impacts their quality of life. While there are a number of factors that will impact the pace at which patients returned to the clinical setting, we believe that a large percentage of these patients ultimately will seek treatment for their cartilage injuries.

The median age of MACI patients in 2019 is about 33 and generally these are active and otherwise healthy individuals, who are less likely to possess the risk factors associated with COVID-19 that may cause concern and keep each patients in older demographics from seeking elective medical care. As a reminder, MACI is reimbursed under a medical benefit that requires a prior authorization. And for that reason, we’ve focused over the past few years on building a world-class case management team. During this period of restricted of elective surgeries, our case management team has remained actively engaged with patients, physician offices and payers. The volume of cases moving through the approval and scheduling process is encouraging. We have a rich pipeline of cases ready to be scheduled as surgeons reopened their practices.

From a surgical capacity standpoint, elective surgeries are a critical source of revenue for hospitals, AFCs and orthopedic practices. We believe that most hospitals and AFCs intend to expand operating room availability when restrictions on elective surgeries are lifted, and that orthopedic practices and surgeons intend to increase procedure volumes to make up lost revenue. MACI is well positioned in this environment, in that it has a favorable reimbursement profile for surgeons and facilities, and reimbursement concerns should not limit utilization of MACI.

As we reported on our fourth quarter earnings call in February, the sales force expansion for MACI was largely complete before we began to see evidence of a COVID-19 slowdown and we’re filling the remaining few positions although at a pace designed to coincide with the resumption of elective surgeries. During this period, our sales representatives have not only completed comprehensive training and business planning, but they remain engaged with our customers. Our representatives have continued to provide field-based case support as needed in compliance with applicable government and facility rules. Many orthopedic surgeons are connecting with patients via telemedicine and our representatives are supporting those surgeons through virtual sales calls that include impactful digital MACI content.

Additionally, our reps are coordinating with our case management team, which continues to work with surgeon offices and patients to move cases through the pipeline and to reschedule or prepare to reschedule existing cases. Despite limited face to face interactions, this has been a productive time for our sales representatives and they’re well positioned to resume a full set of normal activities when conditions allow.

While Epicel should be less directly impacted by COVID-19 given the critical nature of severe burn injuries, April orders were modestly lower than our typical monthly range. While this is consistent with a nationwide reduction in trauma admissions due to various shelter-in-place restrictions, we often see large fluctuations in orders in graph volume from month to month. We have not seen any material change in Epicel biopsy volume since mid-March, as we often know, short-term trends are not very informative given the small number of Epicel patients treated in a typical quarter.

I’d also note that not only have biopsy levels remained within the typical range, we also believe that the expanded Epicel sales force is starting to have an impact as we’ve recently received biopsies from burn centers, where we had no activity for several years, which bodes well for the continued long-term growth for Epicel.

Turning to NexoBrid, due to shifting priorities related to the pandemic, BARDA has not yet finalized the emergency stockpile delivery plan for NexoBrid, but remains a potential for the first delivery to occur in 2020. But at this time there’s no confirmed date and we’re operating under the assumption that the majority, if not all deliveries will occur in 2021.

We continue to target a BLA submission to the FDA in mid-2020 and assuming a standard review cycle, we would expect approval one year later. We’re very excited for the opportunity to bring NexoBrid to the U.S. market as we believe that it will significantly expand our burn care addressable market. Approximately 40,000 burn patients are hospitalized in the U.S. each year and most of these patients require some level of debridement. We believe that NexoBrid represents a roughly $200 million annual opportunity, which would triple the size of our current burn care addressable market.

I’ll now turn the call over to Gerard to provide more detail on our first quarter financial results and additional details on our overall financial position and COVID-19 response plan.

[Gerard Michel, Chief Financial Officer]

Thanks, Nick. Starting with first quarter results, total net product revenues for the quarter ended March 31, 2020 increased 22% to $26.7 million compared to $21.8 million in the first quarter of 2019. Total net product revenues for the quarter included $20.3 million of MACI net revenue and $6.4 million of Epicel net revenue compared to $16.6 million of MACI net revenue and $5.2 million of Epicel net revenue respectively in the first quarter of 2019.

Gross profit for the quarter was $16.8 million or 63% of net revenues compared to $13.2 million or 60% of net revenues for the first quarter of 2019. Total operating expenses for the quarter were $21.8 million compared to $16.5 million for the same period in 2019. The increase in operating expenses was primarily due to an incremental $1.9 million of MACI and Epicel sales force expenses, a $0.6 million increase in non-sales force related salaries, a $0.6 million increase in patient reimbursement support services and a $0.9 million increase in stock-based compensation expense.

Vericel’s net loss for the quarter was $4.7 million or $0.10 per share compared to $2.8 million or $0.07 per share for the first quarter of 2019. Non-GAAP adjusted EBITDA loss was $0.7 million for the quarter compared to $0.4 million in the first quarter of 2019. As a reminder, we announced on April 2 that we have withdrawn our 2020 financial guidance due to the uncertainty regarding the impact of COVID-19.

As of March 31, we had approximately $83 million of cash and investments. We also have approximately $24 million in accounts receivable, the majority of which will be collected over the coming months and help fund operations during this period of period of constrained MACI revenue. We recently updated our operating plan for the year and put expense reduction measures in place that will reduce cash utilization by at least $20 million under all scenarios with optionality to reduce further if needed. As Nick mentioned, the updated plan includes a reduction of discretionary operating expenses across the organization, a suspension of hiring outside of the MACI sales force, deferral of non-essential capital expenditures and reducing material purchases and inventory levels.

We will begin to rebuild inventory levels and initiate capital projects that are on hold once we have more certainty about the overall recovery from the current COVID-19 situation. In the short-term, variable costs will drive savings of around $0.25 per every dollar in lost revenue with those savings evenly divided between cost of goods sold and some expenses. Additionally, as a result of cuts to discretionary expenses, other SG&A costs will be reduced by approximately $1.5 million in Q2 compared to Q1, and remain at that level for the remainder of the year. In the downside scenario, we have identified additional expense reductions and are striving to maintain maximum flexibility.

MACI volume has historically followed a very seasonal pattern, where volume surges towards the end of each year, specifically in December. We have a highly trained and talented workforce that is sized to meet that peak demand. It is difficult to predict, however, whether this year seasonality will follow typical patterns or peak demand levels will occur earlier given that pent up demand may drive high volumes when elective surgery restrictions are broadly rescinded across the nation. To ensure that we’re prepared for peak demand, we have not made any structural changes to our workforce, although, we have paused new hires outside of the few remaining MACI representatives.

That completes my financial review. I’ll now turn the call back over to Nick.

[Nick Colangelo, President and Chief Executive Officer]

Thanks, Gerard. Despite the uncertainty caused by the COVID-19 crisis, we remain highly confident in the fundamental prospects for our business. There’s significant underlying demand for MACI given its unique benefits. And while we can’t predict exactly when strong growth will resume, we’re confident that we’ll return to our prior growth trajectory. Epicel is a critical product to treat hospitalized severe burn patients for whom there is often no other alternative. Underpinning these products, we have a dedicated and talented team that has accomplished amazing things during these difficult times. In addition, we have a strong balance sheet which will allow us to weather the range of scenarios that we think are most likely to occur. Finally, I wanted to thank our shareholders for their support during these uncertain times.

That concludes our prepared remarks. As a reminder, the presentation available on our website provides highlights of today’s call. Now I’d like the operator to open the call to your questions.

[Operator]

[Operator Instructions] And your first question comes from the line of Ryan Zimmerman from BTIG.

[Ryan Zimmerman, BTIG]

Great. Thank you. Can you hear me okay?

[Nick Colangelo, President and Chief Executive Officer]

Yes, we can.

[Ryan Zimmerman, BTIG]

Okay, thank you. So Nick, Gerard, I appreciate the color that you gave. If I follow your commentary about state restrictions, I think it would suggest maybe about a 40% to 50% reduction in MACI revenue in the second quarter. One, I guess if I’m following your analysis, one, is my math directionally correct there? And then two, and this is just one question and a two-parter and then I have a follow-up, but two, how do you think about the ability to recoup those loss procedures in the second quarter? Can you, say, recruit 100% back?

And then my second question is just around biopsies as a leading indicator. So our doctors telling you to prepare biopsies ahead of kind of plan returns to elective surgery. And if so, what are you seeing from that perspective? Thank you.

[Nick Colangelo, President and Chief Executive Officer]

Sure. So, Ryan, you’re very good at math. That’s directionally correct. In terms of – we do think it will roughly follow states opening up in terms of surgery. Obviously, it’s a little bit hard to predict when individual institutions will open up. But we’re using kind of that population based metrics as kind of a guideline for our own internal projections. In terms of recovering the lost business, there’s probably two parts of the pipeline to look at it and this kind of touches upon your third question.

In terms of orders that were placed and there was clearly intent to treat, whether those were canceled or they kind of got piled up and never got scheduled, I think we covered most of those because those patients were motivated, ready to go. Of course, there’s always the question of unemployment. Are some patients fearful about coming back into the clinic? I mean, most of these patients are younger, healthy, sort of hoping that’s not that much of a dynamic, but one never knows, but I think the bulk of that will recover.

In terms of biopsies, patients who did not get a biopsy, which feeds the early part of the pipeline. I would think that those patients also, if they needed a biopsy for diagnostic arthroscopy, they’re in pain, so they should probably be coming back at some point as well. The pace of that is difficult to predict. Obviously, this is a very unique event, so difficult to look at any past precedents. But we’re hopeful that the bulk of the business eventually will be made up. That’s certainly the mindset of orthopedic surgeons, various surveys we’ve seen. I think the bulk of things will be caught up eventually, but I’m really not in a position to kind of put a number to it.

[Ryan Zimmerman, BTIG]

All right. Thank you.

[Operator]

Your next question comes from the line of Kevin DeGeeter with Oppenheimer.

[Kevin DeGeeter, Oppenheimer]

Hey, good morning, guys. Thanks for the update, really granular, appreciate that. Do you have any perspective perhaps anecdotally as to how to quantify the potential reduction and sort of number of patients presenting into burn centers just given lower employment engagement level and lower trauma levels? I mean, you touched on – qualitatively in your prepared comments, but at least anecdotally, can you try to kind of quantify what you’re seeing in the burn center?

[Nick Colangelo, President and Chief Executive Officer]

Yes, Kevin. This is Nick. So, as we mentioned in our prepared remarks, we just wanted sort of to give as much color as possible on this call about what we’re seeing. And again, the variability of Epicel given the small number of patients were treated, it bounces all over the place from month to month. I think we’ve been discussing and people have been commenting on the fact that, yes, with less industrial activity and less traumatic trauma admissions that what might that do to sort of the flow for burn patients and other trauma businesses. But as we mentioned since mid-March, we haven’t seen any difference in sort of the typical range of biopsies we get. So, we can’t attribute anything we see at this point to any impacts from COVID-19 with respect to Epicel.

[Kevin DeGeeter, Oppenheimer]

Great. And I appreciate that. And then maybe just following up a bit on Ryan’s kind of, sort of line of thinking, recognizing there aren’t any great precedents for what the experience collectively we’re working through. But how does one thing about the lag time between when an ambulatory center gets the green light to reopen to the chain of events, confirming an appointment, preparing MACI, what’s kind of – is there a good historical precedence thing about lag time when you sort of have a sudden change in physician scheduling and patient appointment staging?

[Nick Colangelo, President and Chief Executive Officer]

So, Kevin, I’ll just sort of speak to our situation specifically. We’re, I believe, somewhat unique in that. As we’ve talked about, we have a significant case management team. And during this time period they certainly have remained engaged with patients and surgeon offices to the extent they were open to continue to move cases through the pipeline. So, in our nomenclature, once the prior approval is secured and it’s really just a scheduling issue, we call it ready for order. So we have a pipeline that’s been maturing over these past several weeks and they’re essentially ready to go as soon as the surgeon’s office opens up. We have our standard, two-week need to know date ahead of when they want to schedule the surgery and we can go. I actually do think that’ll be a little different than some other dynamics, where you don’t have such a strong level of case management for other orthopedic procedures.

[Kevin DeGeeter, Oppenheimer]

Great. And then maybe I can sneak one last one in. Business development, is that even a priority in this environment? And to the extent that it is in terms of potential in licensing or acquiring of assets, are you seeing any change in potential seller behavior in light of some of the economic stress that exists more generally in the community?

[Nick Colangelo, President and Chief Executive Officer]

I don’t know. I’ve seen the change in seller behavior. I can’t say that conversations really haven’t been terribly disruptive. Maybe takes a little bit longer for calls to go back and forth because we’re all dealing with a new normal. But we continue to look at things, we don’t feel any greater pressure to not do something or do something.

[Kevin DeGeeter, Oppenheimer]

Great. Appreciate the comments and keep up the good work.

[Nick Colangelo, President and Chief Executive Officer]

Thank you.

[Operator]

Your next question comes from the line of Chad Messer with Needham and Company. Mr. Messer, your line is open.

[Nick Colangelo, President and Chief Executive Officer]

Chad, you may be on mute. Operator, maybe we can come back to Chad.

[Operator]

Yes, sir.

[Nick Colangelo, President and Chief Executive Officer]

I think he can get back in the queue.

[Operator]

Okay.

[Gil Blum, Needham and Company]

Sorry.

[Nick Colangelo, President and Chief Executive Officer]

Well, there we go.

[Gil Blum, Needham and Company]

This is Gil on for Chad. I apparently was still on mute. Muting has been an issue these days. Yes. So, Nick and Gerard, thanks for taking my question. So just a quick one here. It seems from your previous guidance that maybe the MACI market has already passed its bottom considering you’re seeing an increase in orders with the states opening. Is that the right way to think about this?

[Nick Colangelo, President and Chief Executive Officer]

Maybe just repeat the question for me.

[Gil Blum, Needham and Company]

Yes. Do you guys feel that we’ve passed the bottom of the MACI market considering that we’re seeing an increase in orders?

[Nick Colangelo, President and Chief Executive Officer]

I think – all right, so have we passed kind of the nadir of the slowdown due to the COVID restrictions? Yes, I think so. It’s directly related to state executive orders, shutting down elective surgeries and well over 90% population were under those types of orders. And as we stated heading towards a 60% open, then perhaps 80% open next month. So we definitely have passed the nadir.

[Gil Blum, Needham and Company]

Okay. Kind of a related question, you guys are seeing some regionality here. I mean, comparing how many MACI orders are happening, let’s say, in Florida versus the Northeast?

[Nick Colangelo, President and Chief Executive Officer]

Well, yes, I mean, the shutdown are closely followed executive orders. And the opening up is – the increase is closely following the executive orders as well in terms of states opening up. It’s not a perfect correlation, but it’s pretty close.

[Gil Blum, Needham and Company]

All right. And maybe kind of a more general COVID question. Do you believe that because of the more sedentary lifestyle that people have had to go through the past few months, you might see an overall impact on incoming orders, people are not running as much or walking as much.

[Nick Colangelo, President and Chief Executive Officer]

Yes. Most of our patients, it’s been a chronic repetitive injury over time. On the margin, like, there’ll be a few single-digit percentage, where it was an acute injury, yes. I do think that’s the case for a lot of other sports medicine things, rotator cuff tears as an example, that type of thing, yes. Wherein ACLs, more often than not as an acute injury, but most of our patients it’s not an acute injury.

[Gil Blum, Needham and Company]

All right. Thank you for taking my questions and congrats on a good quarter.

[Nick Colangelo, President and Chief Executive Officer]

Thank you.

[Operator]

Your next question comes from the line of Danielle Antalffy with SVB Leerink.

[Danielle Antalffy, SVB Leerink]

Thanks so much for taking the question. Just a question, Gerard, for you on the reduction in spend, I mean, you have a pretty strong balance sheet. It feels like you with the spend reduction, you’ll be in very strong position, but just want to confirm that and also get a sense of sort of how long to think about this production in spend lasting, because it sounds like you’re talking about a relatively steep recovery curve. So just want to get some more thoughts there.

[Gerard Michel, Chief Financial Officer]

Yes. Just qualitatively, we’re very confident in our liquidity position, the cash we have in the balance sheet, the AAR. So we have no concerns about a cash crunch at all, in any scenario. We’ve modeled quite a few different scenarios. In terms of the timeframe, what we’ve tried to do is be flexible. If we need to put more cash reductions in place that would be kind of the worst to the worst scenario we’ve modeled. We can do that quickly. We don’t think that’ll be necessary.

We really want to make sure, as we don’t leave any business on the table, and that means we have to need to have the reps ready to support the position. The manufacturing team ready to go. And that’s our focus right now. Could we be wrong, could it be - we’re not wrong or could it be a lowercase scenario where things come back in the fourth quarter and there is X percent shut down and more modest thing for a period of months perhaps. But we’re prepared for all of those likely scenarios.

[Danielle Antalffy, SVB Leerink]

Got it. Thank you for that. And then just the sales force ads that you implemented here, how are you keeping those reps sort of engaged during this time and do you expect it to change? I guess the bigger question is, do you expect it to change their ramp to productivity at all given that there might be a procedure backlog worked down that these reps aren’t really a part of? Just how do we think about this significant rapid expansion coming at a time where procedures have slowed down significantly? And that’s all for me. Thanks.

[Nick Colangelo, President and Chief Executive Officer]

Yes, I’ll take that Danielle. So, obviously the expansion of the MACI sales force was a key strategic initiative for the company and was essentially complete by the time, as I mentioned in my prepared remarks that we started to experience a slowdown. I will add that the team did again a great job. We had a very, very strong first quarter. Obviously, the prior questions were can you manage your way through a significant sales force expansion without disruption. And I think we demonstrated, yet again, we could do that. So great work by the team.

As I mentioned in my remarks, there is a lot of activity going on. First of all, we had an extensive training program, so this was the time they would be sort of in their home training. They come in for in-office training and all of that’s happened and it happens virtually.

They also – we have a lot going on with our KOLs, right? So they don’t have quite as much to do during this period. So there’s a lot of interaction generally in virtual sales calls with customers. But also teaching opportunities with our KOLs for our sales force, we have a speaker series every week that’s going on. So, and then a good amount of time to put their business plans in place. So I actually think there’ll be better prepared than they might otherwise be to get out there and ramp it up once they hit the ground and the offices opened up.

[Danielle Antalffy, SVB Leerink]

Thank you so much.

[Operator]

Your next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann.

[Jeffrey Cohen, Ladenburg Thalmann]

Hi, Nick and Gerard, I hope you’re doing well. So two questions in particular from MACI. We were wondering about physician engagement and also customer engagement and the type of feedback that you’re getting from training your physicians and along with that trying to tease out implants versus biopsies as far as getting back online and coming back online. I know you’re more emphasize on the outpatients versus inpatients, but how might that look from our standpoint and would you expect that procedures potentially come back at greater than 100% rate. I mean, we’re hearing about that more recently on ortho and cardiac that physicians may be doing cases six days a week or evenings? Thank you.

[Nick Colangelo, President and Chief Executive Officer]

Yes. So I’ll start just on the engagement questions as I just mentioned and talked about during the prepared remarks. There has been a lot of engagement with our surgeons during this period of time. It’s happening virtually. So for instance, instead of hosting an ad Board at AAOS in person, we had a virtual ad board. As I mentioned, we have a speaker series that goes on and then we have all of the obviously day-to-day interactions with surgeons that you would expect from a seasoned sales force. So we think that’s been a relatively productive time for our reps.

As I mentioned, in terms of the biopsies and so on, I think we talked about the fact that we expect implants first of all to sort of mirror states reopening elective surgeries. So we expect a nice bounce back there. We agree that in general, as we stated in our prepared remarks. We expect that additional OR time will be available and that orthopedic practices will be working to sort of makeup that lost revenue, whether it’s more cases per day or six or seven days per week.

So yes, we do think that dynamic will occur, but there is a whole bunch of moving parts, right? So there’ll be some institutions that are doing that. There’ll be some places that open at different times than others. So netting it all out it’s not a straight forward exercise, but we do think that the majority of the business will come back, can’t exactly determine the period of time. And we think it will be sort of a rolling opening not only state-by-state, but institution-by-institution as well.

[Jeffrey Cohen, Ladenburg Thalmann]

Got it. And on the one more question for training or adding physicians that are doing cases going forward, have you been able to train new physicians or have you seen some inbound interest as far as new physicians or existing physicians, additional physicians and existing centers interested in further training?

[Nick Colangelo, President and Chief Executive Officer]

Yes, so we - obviously we expanded the sales force and that was due because we expanded our target audience. And so as part of the sort of rollout and expansion, each rep obviously has the target list with contact info and are easily able to contact physicians. As I mentioned, they happen to have a little more time on their hand, because they’re not doing the procedures that they normally would do. So they’re clearly, we’ve have a whole marketing and sales campaign around engaging even with the new targets, let alone our established customers. So that part is moving forward as one might expect.

And then in terms of we do have new surgeons doing their first MACI procedures this quarter as well. So I think, I wouldn’t say - I mean, everybody missed out on opportunities at AAOS and other industry events to sort of capture new patients and develop new relationships. But we feel pretty good about, where we are and the productivity of the sales reps during this time. And again, we’re bringing on a good number of rooms on average, have close to a decade of experience in sports medicine with existing relationships. And so we don’t think it’s a big stretch to kind of maintain those relationships and keep people engaged with MACI.

[Jeffrey Cohen, Ladenburg Thalmann]

Perfect. Thanks for taking the questions.

[Nick Colangelo, President and Chief Executive Officer]

Okay. Thank you.

[Operator]

Your next question comes from the line of Swayampakula Ramakanth with H.C. Wainwright.

[Swayampakula Ramakanth, H.C. Wainwright]

Thank you. This is RK from HCW. Thank you, Nick and Gerard for this very descriptive call. I have a couple of high level questions. In general, what’s the time gap between a biopsy and the surgery especially in the case of MACI, and in these pandemic conditions, what impact does the lapse of time have on the injury itself? That the physician and our patient decide that they injury requires more than what MACI can help it.

[Nick Colangelo, President and Chief Executive Officer]

Okay, sure. RK. I’ve been saying for quite a few years now. That’s kind of the median time between a biopsy and an implant about six months. It’s actually on a little bit shorter now. It’s probably getting closer to four months. We just kind of rerun the numbers recently. But that’s the typical time period. Of course there are some that take up to two years to turn into an implant.

In terms of the lapse of time let me just pause there. Anyone who was scheduled for surgery or it was going through the payer approval process, we think they’ll come rapidly back as soon as the docs are able to fit them in.

In terms of the lapse of time and impact on the patient, these are the types of injuries that don’t go from MACI type patient to profoundly osteoarthritis knee in a quick time period. So I don’t think we’ll lose anybody because they’re no longer they’ve gone too far and they’re too severe for MACI. MACI has a pretty broad label, so I don’t think that’ll be a factor at all.

[Swayampakula Ramakanth, H.C. Wainwright]

Thank you. That’s great. Then another high level question, so as a management team, what have you learned from this experience such that some of these lessons you could utilize in case when we get into a larger or a wider epidemic situation? Not that I really wish for, but just in case a second wave hits us. Some people are worried about how can you kind of walk around the situation if possible at all?

[Nick Colangelo, President and Chief Executive Officer]

Yes, I think Gerard touched on that a little bit, but I would say what we’ve learned is we have a really talented workforce, who have continued to support our patients and work hard to advance the business. As Gerard mentioned, we’ll build a plan and we have built our operating plan around the fact that we could see another wave come at some point later in the year or next winter and hopefully collectively we’re able to as a society, sort of manage it in a better way rather than complete shutdowns. But as we said, we have the financial flexibility to manage any range of scenarios that we believe are likely to occur down the road.

One of those scenarios is you see another outbreak sometime next winter during normal flu season. So we’re certainly prepared as a company to deal with that. But we certainly hope that is not the case.

[Swayampakula Ramakanth, H.C. Wainwright]

Thank you. But thanks for the, for the additional color.

[Operator]

[Operator Instructions] I am showing no further questions at this time. I would now want to turn the conference back over to Nick Colangelo.

[Nick Colangelo, President and Chief Executive Officer]

Okay. Well, I just wanted to say thanks again to everybody for joining us on the call today and stay healthy and safe.

[Operator]

Ladies and gentlemen, this concludes today’s conference. Thank you for participation and have a wonderful day. You may now all disconnect.