TELA Bio Inc
For the period ended Sep 30, 2024. Filed Nov 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 8, 2024
TELA$0.82+5.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-13.
0001558370-24-012060
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0001558370-24-015050
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 112 previous paragraphs and 113 current paragraphs.
70 unchanged; 34 reworded; 7 added; 6 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 3 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
External Supply Constraints for Critical Surgical Supplies:* *Any disruptions to the supply of critical surgical supplies, including, for example, IV fluids, could lead to deferrals of elective surgical procedures, including those utilizing our products. To the extent that our current and prospective hospital customers experience significant shortages of these critical supplies, whether due to extreme weather events, labor or work stoppages, or other supply chain disruptions, we may experience reductions in procedural volumes that lead to lower sales volume for our products.
Current report
Sales and marketing expenses increased by $2.0 million, or 14%, to $16.5 million for the three months ended September 30, 2024 from $14.5 million for the three months ended September 30, 2023. The increase was primarily due to higher compensation costs, including increased severance costs, and additional consulting and travel expenses.
Current report
General and administrative expenses were $3.7 million for both the three months ended September 30, 2024 and 2023. The slight decrease was due to lower insurance expense, professional fees and compensation and benefits which offset higher software-related costs and banking fees.
Current report
Comparison of the Nine months Ended September 30, 2024 and 2023
Current report
Amortization of intangible assets was $0.3 million for both the nine months ended September 30, 2024 and 2023.
Current report
Gross margin decreased to 68% for the nine months ended September 30, 2024 from 69% for the nine months ended September 30, 2023. The decrease was primarily due to a higher charge for excess and obsolete inventory as a percentage of revenue.
Current report
Subsequent to September 30, 2024, we completed an underwritten public offering of 14,670,000 shares of our common stock, including the exercise in full of the underwriters’ option to purchase additional shares, at a price to the public of $2.25 per share and, in lieu of common stock to investors who so chose, pre-funded warrants to purchase 5,800,000 shares of common stock at a public offering price of $2.2499 per pre-funded warrant, which represents the per share public offering price for the shares of common stock less the $0.0001 per share exercise price for each pre-funded warrant. The offering resulted in gross proceeds of $46.0 million, before deducting underwriting discounts and commissions and other estimated offering expenses and assuming no exercise of the pre-funded warrants. The exercise of the pre-funded warrants, if any, is not expected to provide significant additional funding to us.
Removed paragraphs (6)
Previous report
Our business was directly impacted by the COVID-19 pandemic. We experienced volatility in demand for our products which primarily resulted from government and hospital restrictions, as well as patient health and safety concerns, decreasing the volume of elective procedures using our products. While procedure volumes have continued to normalize to pre-pandemic levels, we continue to monitor any lingering economic effects on labor and hospital staffing levels, procedural volumes and ultimately on our results.
Previous report
Sales and marketing expenses increased by $2.1 million, or 15%, to $16.7 million for the three months ended June 30, 2024 from $14.6 million for the three months ended June 30, 2023. The increase was primarily due to higher compensation costs as a result of our expanded commercial organization, increased travel and a marketing distribution fee which offset lower marketing expense.
Previous report
General and administrative expenses increased by $0.1 million, or 4%, to $3.6 million for the three months ended June 30, 2024 from $3.5 million for the three months ended June 30, 2023. The increase was primarily due to higher compensation costs and employee-related costs due to an increase in headcount and higher bad debt expense which offset lower professional fees.
Previous report
Comparison of the Six Months Ended June 30, 2024 and 2023
Previous report
Amortization of intangible assets was $0.2 million for both the six months ended June 30, 2024 and 2023.
Previous report
Gross margin was 69% for both the six months ended June 30, 2024 and 2023.
Reworded paragraphs (34)
Previous wording
We have also focused on evaluating and publishing clinical data on the effectiveness and safety of our OviTex products. To date, there have been over thirty published or presented works relating to these clinical findings, either by us or a third-party evaluating the OviTex product. In October 2022, the 24-month results of our single arm, multicenter post-market clinical study, which we refer to as our BRAVO study, were published in theAnnals of Medicine and Surgery. The BRAVO study was designed to evaluate the clinical performance of OviTex for primary or recurrent ventral hernias
Current wording
We have also focused on evaluating and publishing clinical data on the effectiveness and safety of our OviTex products. To date, there have been over thirty published or presented works relating to these clinical findings, either by us or a third-party evaluating the OviTex product. In October 2022, the 24-month results of our single arm, multicenter post-market clinical study, which we refer to as our BRAVO study, were published in theAnnals of Medicine and
Previous wording
using open, laparoscopic, or robotic techniques in 92 enrolled patients. The recurrence rate at the 24-month time point was 2.6%, and surgical site occurrences (“SSOs”) were observed in 38% of the study population. Of the enrolled patients, 78% were characterized as high risk for experiencing an SSO based on at least one known risk factor, which included obesity, active smoking, COPD, diabetes mellitus, coronary artery disease, or advanced age (≥75 years). The results also indicated that BRAVO patients experienced statistically significant and clinically meaningful improvements in their quality of life and perceived health based on patient responses to the EuroQol-5 Dimension (EQ-5D) health assessment and the validated 12-question Hernia-Related Quality of Life survey (HerQLes). In addition to the BRAVO study and other current clinical initiatives, we also commenced enrollment in May 2021 for our BRAVO II study, a prospective study evaluating the use of OviTex in robot-assisted ventral and inguinal hernia repairs.
Current wording
Surgery. The BRAVO study was designed to evaluate the clinical performance of OviTex for primary or recurrent ventral hernias using open, laparoscopic, or robotic techniques in 92 enrolled patients. The recurrence rate at the 24-month time point was 2.6%, and surgical site occurrences, or SSOs, were observed in 38% of the study population. Of the enrolled patients, 78% were characterized as high risk for experiencing an SSO based on at least one known risk factor, which included obesity, active smoking, COPD, diabetes mellitus, coronary artery disease, or advanced age (≥75 years). The results also indicated that BRAVO patients experienced statistically significant and clinically meaningful improvements in their quality of life and perceived health based on patient responses to the EuroQol-5 Dimension (EQ-5D) health assessment and the validated 12-question Hernia-Related Quality of Life survey (HerQLes). In addition to the BRAVO study and other current clinical initiatives, we also commenced enrollment in May 2021 for our BRAVO II study, a prospective study evaluating the use of OviTex in robot-assisted ventral and inguinal hernia repairs.
Previous wording
Our OviTex products have received 510(k) clearances from the U.S. Food and Drug Administration (“FDA”), which clearances were obtained and are currently held by our exclusive contract manufacturer of these products, Aroa. In April 2019, our first OviTex PRS products received 510(k) clearance from the FDA, which clearance was initially obtained by Aroa and is currently held by us. In March 2023, we received an additional 510(k) clearance for our OviTex PRS Long-Term Resorbable device, which is currently held by us. We have also engaged in discussions with the FDA regarding an Investigational Device Exemption (“IDE”) protocol to study the safety and effectiveness of our OviTex PRS product for an indication in breast reconstruction surgery. We have also commenced a retrospective clinical study evaluating the effectiveness and safety of our OviTex PRS products.
Current wording
Our OviTex products have received 510(k) clearances from the U.S. Food and Drug Administration, (“FDA”) which clearances were obtained and are currently held by our exclusive contract manufacturer of these products, Aroa. In April 2019, our first OviTex PRS products received 510(k) clearance from the FDA, which clearance was initially obtained by Aroa and is currently held by us. In March 2023, we received an additional 510(k) clearance for our OviTex PRS Long-Term Resorbable device, which is currently held by us. In May 2024, we received clearance of a Special 510(k) related to minor changes to our OviTex PRS Permanent and Short-Term Resorbable devices. In October 2024, we received approval from the FDA for our investigational device exemption application relating to the study of the safety and effectiveness of our OviTex PRS product in implant-based breast reconstruction. We continue to evaluate and finalize the clinical study protocol and anticipate additional FDA interactions related to such to support a pre-market application to obtain an indication for OviTex PRS for use in breast reconstruction.
Previous wording
We also continue to expand our service offerings and diversify our supplier base as we continue to create a soft tissue preservation and restoration portfolio, including through the development of complimentary solutions in our indications such as atraumatic mesh fixation devices or surgical wound management and infection control. In September 2023, we entered into a distribution agreement with Advanced Medical Solutions Limited, a company registered in England, to be their exclusive distributor of their LiquiFix Hernia Mesh Fixation Devices (LiquiFix FIX8™ and LiquiFix Precision™). In March 2024, we announced the full commercial launch of LiquiFix in the U.S. We previously co-developed and commercialized our NIVIS Fibrillar Collagen Pack (“NIVIS”), an absorbent matrix of Type I and Type III bovine collagen designed to manage moderately to heavily exudating wounds and to control minor bleeding, in partnership with Regenity Biosciences. In March 2024, we sold our distribution rights to MiMedx Group, Inc. in exchange for an initial $5.0 million payment and additional future payments aggregating between a minimum of $3.0 million and a maximum of $7.0 million based on net sales of NIVIS during the first two years following its launch by MiMedx Group, Inc. We continue to assess additional strategic partnerships with medical device companies whereby we may enter into distribution, product development and/or licensing agreements for new products complimentary to, or related to, existing and future products in our distribution channel.
Current wording
We also continue to expand our service offerings and diversify our supplier base as we continue to create a soft tissue preservation and restoration portfolio, including through the development of complimentary solutions in our indications such as atraumatic mesh fixation devices or surgical wound management and infection control. In September 2023, we entered into a distribution agreement with Advanced Medical Solutions Limited, a company registered in England, to distribute their LiquiFix Hernia Mesh Fixation Devices (LiquiFix FIX8™ and LiquiFix Precision™). In March 2024, we announced the full commercial launch of LiquiFix in the U.S. We previously co-developed and commercialized our NIVIS Fibrillar Collagen Pack, (“NIVIS”) an absorbent matrix of Type I and Type III bovine collagen designed to manage moderately to heavily exudating wounds and to control minor bleeding, in partnership with Regenity Biosciences. In March 2024, we sold our distribution rights to MiMedx Group, Inc. in exchange for an initial $5.0 million payment and additional future payments aggregating between a minimum of $3.0 million and a maximum of $7.0 million based on net sales of NIVIS during the first two years following its launch by MiMedx Group, Inc. We continue to assess additional strategic partnerships with medical device companies whereby we may enter into distribution, product development and/or licensing agreements for new products complimentary to, or related to, existing and future products in our distribution channel.
Previous wording
competitive advantage by allowing us to secure an exclusive supply of ovine rumen at a low cost. Ovine rumen, the forestomach of a sheep, is the source of the biologic material used in our OviTex and OviTex PRS products. We use biologic material from ovine rumen because of its plentiful supply, optimal biomechanical profile and open collagen architecture that allows for rapid cellular infiltration. Our OviTex products are manufactured by Aroa at their FDA registered and ISO 13485 compliant facility in Auckland, New Zealand. We purchase product from Aroa at a fixed transfer cost as a percentage of Aroa’s cost of goods sold, and, with the exception of our recent IHR-dedicated products, equals 27% of our net sales of licensed products. This revenue sharing arrangement allows us to competitively price our products and pass along cost-savings to our customers.
Current wording
We have a broad portfolio of intellectual property protecting our products that we believe, when combined with the proprietary manufacturing processes associated with our products and our know-how, provides significant barriers to entry. Our intellectual property applies to our differentiated product construction and materials. In addition, we believe our exclusive manufacturing and long-term supply and license agreement with Aroa creates a competitive advantage by allowing us to secure an exclusive supply of ovine rumen at a low cost. Ovine rumen, the forestomach of a sheep, is the source of the biologic material used in our OviTex and OviTex PRS products. We use biologic material from ovine rumen because of its plentiful supply, optimal biomechanical profile and open collagen architecture that allows for rapid cellular infiltration. Our OviTex products are manufactured by Aroa at their FDA registered and ISO 13485 compliant facility in Auckland, New Zealand. We purchase product from Aroa at a fixed transfer cost as a percentage of Aroa’s cost of goods sold, and, with the exception of our recent IHR-dedicated products, equals 27% of our net sales of licensed products. This revenue sharing arrangement allows us to competitively price our products and pass along cost-savings to our customers.
Previous wording
We market our products through a single direct sales force, predominantly in the U.S., as augmented by a smaller number of sales representatives and distributors in certain European countries. We have invested in our direct sales and marketing infrastructure to expand our presence and to promote awareness and adoption of our products. As of June 30, 2024, we had 96 sales territories in the U.S. We believe we can enhance the productivity of our sales force by improving customer segmentation and targeting, implementing and further refining our proprietary training programs, leveraging support from our medical education and medical affairs functions to drive physician awareness, education and clinical understanding of our products, and utilizing engagement analytics to support further product development and enhancement opportunities. Additionally, we have contracted with three national group purchasing organizations (“GPOs”) covering our OviTex and OviTex PRS products and plan to continue to contract with additional GPOs and other integrated delivery networks (“IDNs”) to increase access to and penetration of hospital accounts.
Current wording
We market our products through a single direct sales force, predominantly in the U.S., as augmented by a smaller number of sales representatives and distributors in certain European countries. We have invested in our direct sales and marketing infrastructure to expand our presence and to promote awareness and adoption of our products. As of September 30, 2024, we had 75 sales territories in the U.S. We believe we can enhance the productivity of our sales force by improving customer segmentation and targeting, implementing and further refining our proprietary training programs, leveraging support from our medical education and medical affairs functions to drive physician awareness, education and clinical understanding of our products, and utilizing engagement analytics to support further product development and enhancement opportunities. Additionally, we have contracted with three national group purchasing organizations, (“GPOs”) covering our OviTex and OviTex PRS products and plan to continue to contract with additional GPOs and other integrated delivery networks (“IDNs”) to increase access to and penetration of hospital accounts.
Previous wording
The vast majority of our revenue to date has been generated by the sale of our OviTex products. Our revenue increased by $1.6 million, or 11%, from $14.5 million for the three months ended June 30, 2023 to $16.1 million for the three months ended June 30, 2024 and by $6.3 million, or 24%, from $26.4 million for the six months ended June 30, 2023 to $32.7 million for the six months ended June 30, 2024. Our net loss increased by $1.8 million, or 17%, from $10.8 million for the three months ended June 30, 2023 to $12.6 million for the three months ended June 30, 2024. Our net loss decreased by $4.6 million, or 20%, from $22.8 million to $18.3 million for the six months ended June 30, 2024 due to the gain on sale of NIVIS. We have not been profitable since inception and as of June 30, 2024, we had an accumulated deficit of $339.2 million. We expect to incur losses for the foreseeable future.
Current wording
The vast majority of our revenue to date has been generated by the sale of our OviTex products. Our revenue increased by $3.9 million, or 26%, from $15.1 million for the three months ended September 30, 2023 to $19.0 million for the three months ended September 30, 2024 and by $10.2 million, or 25%, from $41.5 million for the nine months ended September 30, 2023 to $51.7 million for the nine months ended September 30, 2024. Our net loss decreased by $0.6 million, or 5%, from $11.0 million for the three months ended September 30, 2023 to $10.4 million for the three months ended September 30, 2024. Our net loss decreased by $5.1 million, or 15%, from $33.8 million to $28.6 million for the nine months ended September 30, 2024 due to the gain on sale of NIVIS. We have not been profitable since inception and as of September 30, 2024, we had an accumulated deficit of $349.5 million. Starting in the third quarter of 2024, we implemented certain cost-cutting measures which are expected to result in reduced operating expenses in future periods. However, we expect to incur losses for the foreseeable future.
Previous wording
Our business, results of operations and commercial operations have been impacted by macroeconomic conditions, including the COVID-19 pandemic, as well as, to a lesser extent, inflationary pressures, fluctuations in foreign currency in the jurisdictions in which we operate, banking instability, monetary policy changes and geopolitical conflicts. These factors have and may continue to impact us in the following ways:
Current wording
Our business, results of operations and commercial operations have been impacted by macroeconomic conditions, including the COVID-19 pandemic, as well as, to a lesser extent, inflationary pressures, fluctuations in foreign currency
Previous wording
Cost of revenue primarily consists of the costs of licensed products, charges related to excess and obsolete inventory adjustments, royalties and costs related to shipping. We purchase product from Aroa at a fixed transfer cost as a percentage of Aroa’s cost of goods, which, with the exception of our recent IHR-dedicated products, equals 27% of our net sales of licensed products. The initial term of our Aroa License terminates on the expiration of the last patent covering bovine and ovine products, with an option to extend for an additional ten-year period. We expect our cost of
Current wording
Cost of revenue primarily consists of the costs of licensed products, charges related to excess and obsolete inventory adjustments, royalties and costs related to shipping. We purchase product from Aroa at a fixed transfer cost as a percentage of Aroa’s cost of goods, which, with the exception of our recent IHR-dedicated products, equals 27% of our net sales of licensed products. The initial term of our Aroa License terminates on the expiration of the last patent covering bovine and ovine products, with an option to extend for an additional ten-year period. We expect our cost of revenue to increase in absolute dollars as, and to the extent, our sales volume grows. Any delay in volume growth, whether due to macroeconomic pressures or otherwise, could lead to additional charges to excess and obsolete inventory.
Previous wording
In March 2024, we entered into an asset purchase agreement with MiMedx Group, Inc. to sell certain assets related to NIVIS Fibrillar Collagen Pack Device (“NIVIS”). These assets mainly included our existing inventory of NIVIS, with a net carrying value of $0.8 million, and certain intellectual property rights to sell NIVIS, with no carrying value. We transferred control of the nonfinancial asset group in March 2024 and recognized a gain of $7.6 million on the consolidated statement of operations and comprehensive loss during the six months ended June 30, 2024. At each reporting date, we assess the constraint of variable consideration and record increases in the transaction price in the period that the estimate of variable consideration changes.
Current wording
In March 2024, we entered into an asset purchase agreement with MiMedx Group, Inc. to sell certain assets related to NIVIS. These assets mainly included our existing inventory of NIVIS, with a net carrying value of $0.8 million, and certain intellectual property rights to sell NIVIS, with no carrying value. We transferred control of the nonfinancial asset group in March 2024 and recognized a gain of $7.6 million on the consolidated statement of operations and comprehensive loss during the nine months ended September 30, 2024. At each reporting date, we assess the constraint of variable consideration and record increases in the transaction price in the period that the estimate of variable consideration changes.
Previous wording
Revenue increased by $1.6 million, or 11%, to $16.1 million for the three months ended June 30, 2024 from $14.5 million for the three months ended June 30, 2023. The increase in revenue was primarily driven by an increase in unit sales of our products due to our expanded commercial organization, which resulted in the addition of new customers, increased penetration within existing customer accounts and growing international sales. This growth was partially offset by a decrease in average selling prices caused by product mix as the share of smaller-sized units increased. In addition, we estimate that additional forecasted revenue was negatively impacted as a result of two external cybersecurity events, each of which reduced surgeries at certain facilities during the quarter. During the three months ended June 30, 2024, we sold 4,410 units of OviTex as compared to 3,428 units of OviTex during the three months ended June 30, 2023, a 29%
Current wording
Revenue increased by $3.9 million, or 26%, to $19.0 million for the three months ended September 30, 2024 from $15.1 million for the three months ended September 30, 2023. The increase in revenue was primarily driven by an increase in unit sales of our products, which resulted in the addition of new customers and growing international sales. This growth was partially offset by a decrease in average selling prices caused by product mix as the share of smaller-sized units
Previous wording
increase in unit sales volume. Additionally, we sold 971 units of OviTex PRS during the three months ended June 30, 2024 as compared to 820 units during the three months ended June 30, 2023, an 18% increase in unit sales volume.
Current wording
increased. During the three months ended September 30, 2024, we sold 4,767 units of OviTex as compared to 3,426 units of OviTex during the three months ended September 30, 2023, a 39% increase in unit sales volume. Additionally, we sold 1,293 units of OviTex PRS during the three months ended September 30, 2024 as compared to 896 units during the three months ended September 30, 2023, a 44% increase in unit sales volume.
Previous wording
Cost of revenue (excluding amortization of intangible assets) increased by $0.7 million, or 17%, to $4.9 million for the three months ended June 30, 2024 from $4.2 million for the three months ended June 30, 2023. The increase in cost of revenue was primarily the result of an increase in products purchased to support demand from our higher unit sales and a higher charge for excess and obsolete inventory.
Current wording
Cost of revenue (excluding amortization of intangible assets) increased by $1.4 million, or 31%, to $6.0 million for the three months ended September 30, 2024 from $4.6 million for the three months ended September 30, 2023. The increase in cost of revenue was primarily the result of an increase in products purchased to support demand from our higher unit sales and a higher charge for excess and obsolete inventory.
Previous wording
Gross margin decreased to 69% for the three months ended June 30, 2024 from 70% for the three months ended June 30, 2023. The decrease was primarily due to a higher charge for excess and obsolete inventory as a percentage of revenue.
Current wording
Gross margin decreased to 68% for the three months ended September 30, 2024 from 69% for the three months ended September 30, 2023. The decrease was primarily due to a higher charge for excess and obsolete inventory as a percentage of revenue.
Previous wording
Research and development expenses decreased by $0.2 million, or 8%, to $2.3 million for the three months ended June 30, 2024 from $2.5 million for the three months ended June 30, 2023. The decrease was primarily due to lower study and development costs which offset higher compensation and benefits.
Current wording
Research and development expenses decreased by $0.3 million, or 13%, to $2.1 million for the three months ended September 30, 2024 from $2.4 million for the three months ended September 30, 2023. The decrease was primarily due to lower study and development costs which offset higher compensation and benefits.
Previous wording
Other income decreased by $0.6 million, or 65%, to $0.3 million for the three months ended June 30, 2024 from $0.9 million for the three months ended June 30, 2023. The decrease was primarily due to lower interest income as a result of lower cash balances.
Current wording
Other income decreased by $0.2 million, or 40%, to $0.3 million for the three months ended September 30, 2024 from $0.6 million for the three months ended September 30, 2023. The decrease was primarily due to lower interest income as a result of lower cash balances.
Previous wording
Revenue increased by $6.3 million, or 24%, to $32.7 million for the six months ended June 30, 2024 from $26.4 million for the six months ended June 30, 2023. The increase in revenue was primarily driven by an increase in unit sales of our products due to our expanded commercial organization, which resulted in the addition of new customers, increased penetration within existing customer accounts and growing international sales. This growth was partially offset by a decrease in average selling prices caused by product mix as the share of smaller-sized units increased. In addition, we estimate that additional forecasted revenue was negatively impacted as a result of two external cybersecurity events, each of which reduced surgeries at certain facilities during the quarter. During the six months ended June 30, 2024, we sold 8,267 units of OviTex as compared to 6,278 units of OviTex during the six months ended June 30, 2023, a 32% increase in unit sales volume. Additionally, we sold 2,174 units of OviTex PRS during the six months ended June 30, 2024 as compared to 1,588 units during the six months ended June 30, 2023, a 37% increase in unit sales volume.
Current wording
Revenue increased by $10.2 million, or 25%, to $51.7 million for the nine months ended September 30, 2024 from $41.5 million for the nine months ended September 30, 2023. The increase in revenue was primarily driven by an increase in unit sales of our products due to our expanded commercial organization, which resulted in the addition of new customers and growing international sales. This growth was partially offset by a decrease in average selling prices caused by product mix as the share of smaller-sized units increased. In addition, we estimate that additional forecasted revenue was negatively impacted as a result of two external cybersecurity events, each of which reduced surgeries at certain facilities during the second quarter of 2024. During the nine months ended September 30, 2024, we sold 13,034 units of OviTex as compared to 9,704 units of OviTex during the nine months ended September 30, 2023, a 34% increase in unit sales volume. Additionally, we sold 3,467 units of OviTex PRS during the nine months ended September 30, 2024 as compared to 2,484 units during the nine months ended September 30, 2023, a 40% increase in unit sales volume.
Previous wording
Cost of revenue (excluding amortization of intangible assets) increased by $2.0 million, or 24%, to $10.1 million for the six months ended June 30, 2024 from $8.1 million for the six months ended June 30, 2023. The increase in cost of revenue was primarily the result of an increase in products purchased to support demand from our higher unit sales and a higher charge for excess and obsolete inventory.
Current wording
Cost of revenue (excluding amortization of intangible assets) increased by $3.4 million, or 27%, to $16.1 million for the nine months ended September 30, 2024 from $12.7 million for the nine months ended September 30, 2023. The increase in cost of revenue was primarily the result of an increase in products purchased to support demand from our higher unit sales and a higher charge for excess and obsolete inventory.
Previous wording
Sales and marketing expenses increased by $6.2 million, or 22%, to $34.2 million for the six months ended June 30, 2024 from $28.0 million for the six months ended June 30, 2023. The increase was primarily due to higher compensation costs as a result of our expanded commercial organization, increased travel and consulting expenses, additional employee-related costs due to an increase in headcount and a marketing distribution fee which offset a decrease in marketing.
Current wording
Sales and marketing expenses increased by $8.2 million, or 19%, to $50.7 million for the nine months ended September 30, 2024 from $42.5 million for the nine months ended September 30, 2023. The increase was primarily due to higher compensation costs, including increased severance costs from a third quarter reorganization, additional travel and consulting expenses, additional employee-related costs due to an increase in headcount and a marketing distribution fee which offset a decrease in marketing expenses.
Previous wording
General and administrative expenses increased by $0.3 million, or 5%, to $7.5 million for the six months ended June 30, 2024 from $7.1 million for the six months ended June 30, 2023. The increase was primarily due to higher compensation costs and employee-related costs due to an increase in headcount which offset a decrease in professional fees and insurance.
Current wording
General and administrative expenses increased by $0.3 million, or 3%, to $11.1 million for the nine months ended September 30, 2024 from $10.8 million for the nine months ended September 30, 2023. The increase was primarily due to higher compensation costs and employee-related costs due to an increase in headcount which offset a decrease in professional fees and insurance.
Previous wording
Research and development expenses increased by $0.2 million, or 3%, to $4.7 million for the six months ended June 30, 2024 from $4.6 million for the six months ended June 30, 2023. The increase was primarily due to higher compensation costs due to an increase in headcount which offset lower study and outsourced development costs.
Current wording
Research and development expenses decreased by $0.2 million, or 2%, to $6.8 million for the nine months ended September 30, 2024 from $6.9 million for the nine months ended September 30, 2023. The decrease was primarily due to lower study and outsourced development costs which offset higher compensation costs due to an increase in headcount.
Previous wording
In March 2024, we entered into an asset purchase agreement with MiMedx Group, Inc. to sell certain assets related to NIVIS. These assets mainly included our existing inventory of NIVIS, with a net carrying value of $0.8 million, and certain intellectual property rights to sell NIVIS, with no carrying value. We transferred control of the nonfinancial asset group in March 2024 and recognized a gain of $7.6 million during the six months ended June 30, 2024.
Current wording
In March 2024, we entered into an asset purchase agreement with MiMedx Group, Inc. to sell certain assets related to NIVIS. These assets mainly included our existing inventory of NIVIS, with a net carrying value of $0.8 million, and certain intellectual property rights to sell NIVIS, with no carrying value. We transferred control of the nonfinancial asset group in March 2024 and recognized a gain of $7.6 million during the nine months ended September 30, 2024.
Previous wording
Interest expense increased by $0.2 million, or 5%, to $2.7 million for the six months ended June 30, 2024 from $2.5 million for the six months ended June 30, 2023 due to an increase to the variable component of our interest rate.
Current wording
Interest expense increased by $0.1 million, or 3%, to $4.0 million for the nine months ended September 30, 2024 from $3.9 million for the nine months ended September 30, 2023 due to an increase to the variable component of our interest rate.
Previous wording
Other income decreased by $0.5 million, or 41%, to $0.8 million for the six months ended June 30, 2024 from $1.3 million for the six months ended June 30, 2023. The decrease was primarily due to lower interest income as a result of lower cash balances.
Current wording
Other income decreased by $0.8 million, or 40%, to $1.1 million for the nine months ended September 30, 2024 from $1.9 million for the nine months ended September 30, 2023. The decrease was primarily due to lower interest income as a result of lower cash balances.
Previous wording
As of June 30, 2024, we had cash and cash equivalents of $26.5 million, working capital of $36.1 million and an accumulated deficit of $339.2 million. As of December 31, 2023, we had cash and cash equivalents of $46.7 million, working capital of $54.8 million and an accumulated deficit of $320.9 million.
Current wording
As of September 30, 2024, we had cash and cash equivalents of $17.3 million, working capital of $27.3 million and an accumulated deficit of $349.5 million. As of December 31, 2023, we had cash and cash equivalents of $46.7 million, working capital of $54.8 million and an accumulated deficit of $320.9 million.
Previous wording
In March 2024, we sold our distribution rights for NIVIS Fibrillar Collagen Pack to MiMedx Group, Inc. in exchange for an initial $5.0 million payment and additional future payments aggregating between a minimum of $3.0 million and a maximum of $7.0 million based on net sales of NIVIS during the first two years following its launch by MiMedx Group, Inc.
Current wording
In March 2024, we sold our distribution rights for NIVIS to MiMedx Group, Inc. in exchange for an initial $5.0 million payment and additional future payments aggregating between a minimum of $3.0 million and a maximum of $7.0 million based on net sales of NIVIS during the first two years following its launch by MiMedx Group, Inc.
Previous wording
Based on our current business plan, we believe that our existing cash resources will be sufficient to meet our capital requirements and fund our operations for at least the next 12 months from the issuance of this Quarterly Report. Cash used in operating activities over the remaining interim periods of 2024 is expected to decrease primarily due to the combination of our forecasted growth in revenue and constraint of operating spend, however, we can provide no assurance that our expectations will be achieved. If these sources are insufficient to satisfy our liquidity requirements, we may seek to sell common or preferred equity or debt securities or enter into a new credit facility. In November 2023, we entered into a new Equity Distribution Agreement (the “2023 Equity Agreement”) with Piper Sandler & Co. (“Piper”) in connection with the establishment of an at-the-market offering program under which we may sell shares of our common stock, from time to time through Piper as sales agent, in an initial amount of up to $50.0 million. No sales were made under the 2023 Equity Agreement during the six months ended June 30, 2024. If we raise additional funds by issuing equity or equity-linked securities, our stockholders would experience dilution and any new equity securities could have rights, preferences and privileges superior to those of holders of our common stock. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. We cannot be assured that additional equity, equity-linked or debt financing will be available on terms favorable to us or our stockholders, or at all, including as a result of market volatility stemming from macroeconomic conditions, including those related to banking instability, monetary policy changes, increasing interest rates or other factors. If we are unable to obtain adequate financing, we may be required to delay or reduce the current development, commercialization and marketing plans for our products.
Current wording
Based on our current business plan, we believe that our existing cash resources, inclusive of the proceeds received in the underwritten public offering described above, will be sufficient to meet our capital requirements and fund our operations for at least the next 12 months from the issuance of this Quarterly Report. Cash used in operating activities during the remaining interim period of 2024 is expected to decrease primarily due to the combination of our forecasted growth in revenue and constraint of operating spend, however, we can provide no assurance that our expectations will be achieved. Starting in the third quarter of 2024, we implemented certain cost-cutting measures which are expected to result in reduced operating expenses in future periods. To the extent that these sources are insufficient to satisfy our liquidity requirements, despite our recent cost-cutting measures, we may seek to sell common or preferred equity or debt securities or enter into a new credit facility. In November 2023, we entered into a new Equity Distribution Agreement (the “2023 Equity Agreement”) with Piper Sandler & Co. (“Piper”) in connection with the establishment of an at-the-market offering program under which we may sell shares of our common stock, from time to time through Piper as sales agent, in an initial amount of up to $50.0 million. No sales were made under the 2023 Equity Agreement during the nine months ended September 30, 2024. If we raise additional funds by issuing equity or equity-linked securities, our stockholders would experience dilution and any new equity securities could have rights, preferences and privileges superior to those of holders of our common stock. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. We cannot be assured that additional equity, equity-linked or debt financing will be available on terms favorable to us or our stockholders, or at all, including as a result of market volatility stemming from macroeconomic conditions, including those related to banking instability, monetary policy changes, increasing interest rates or other factors. If we are unable to obtain adequate financing, when needed, we may be required to delay or reduce the current development, commercialization and marketing plans for our products.
Previous wording
During the six months ended June 30, 2024, we used $25.1 million of cash in operating activities, resulting from our net loss of $18.3 million, non-cash charges of $3.7 million and the change in operating assets and liabilities of $3.1 million. Our non-cash items were comprised of the gain on sale of NIVIS of $7.6 million offset by stock-based compensation expense of $2.2 million, our excess and obsolete inventory charge of $0.9 million, depreciation and amortization expense of $0.5 million and noncash interest expense of $0.3 million. The change in our operating assets and liabilities was primarily related to changes in inventory and accrued expenses and other current liabilities partially offset by increases in accounts payable.
Current wording
During the nine months ended September 30, 2024, we used $34.1 million of cash in operating activities, resulting from our net loss of $28.6 million, non-cash items of $1.6 million and the change in operating assets and liabilities of $3.8 million. Our non-cash items were comprised of the gain on sale of NIVIS of $7.6 million offset by stock-based compensation expense of $3.3 million, our excess and obsolete inventory charge of $1.6 million, depreciation and amortization expense of $0.7 million and noncash interest expense of $0.5 million. The change in our operating assets and liabilities was primarily related to changes in inventory and accounts receivable partially offset by increases in accounts payable.
Previous wording
During the six months ended June 30, 2023, we used $22.8 million of cash in operating activities, resulting from our net loss of $22.8 million and the change in operating assets and liabilities of $3.9 million, offset by non-cash charges of $3.8 million. Our non-cash charges were comprised of stock-based compensation expense of $2.4 million, our excess and obsolete inventory charge of $0.7 million, depreciation and amortization expense of $0.4 million and noncash interest expense of $0.3 million. The change in our operating assets and liabilities was primarily related to increases in accounts receivable and inventory partially offset by increases in accounts payable.
Current wording
During the nine months ended September 30, 2023, we used $29.8 million of cash in operating activities, resulting from our net loss of $33.8 million and the change in operating assets and liabilities of $1.9 million, offset by non-cash items of $5.8 million. Our non-cash items were comprised of stock-based compensation expense of $3.8 million, our excess and obsolete inventory charge of $1.0 million, depreciation and amortization expense of $0.6 million and noncash interest expense of $0.4 million. The change in our operating assets and liabilities was primarily related to increases in accounts receivable and inventory partially offset by increases in accounts payable and accrued expenses and other current and long-term liabilities.
Previous wording
During the six months ended June 30, 2024, cash provided by investing activities was $4.8 million consisting of proceeds received from the sale of NIVIS of $5.4 million offset by $0.6 million in purchases of property and equipment.
Current wording
During the nine months ended September 30, 2024, cash provided by investing activities was $4.6 million consisting of proceeds received from the sale of NIVIS of $5.4 million offset by $0.7 million in purchases of property and equipment.
Previous wording
During the six months ended June 30, 2023, cash used in investing activities was $0.3 million consisting of purchases of property and equipment.
Current wording
During the nine months ended September 30, 2023, cash used in investing activities was $0.4 million consisting of purchases of property and equipment.
Previous wording
During the six months ended June 30, 2024, cash provided by financing activities was $0.1 million, consisting primarily of proceeds received from the exercise of stock options and from the issuance of common stock under the employee stock purchase plan partially offset by the payment of withholding taxes related to stock-based compensation to employees.
Current wording
During the nine months ended September 30, 2024, cash provided by financing activities was $0.1 million, consisting primarily of proceeds received from the exercise of stock options and from the issuance of common stock under the employee stock purchase plan partially offset by the payment of withholding taxes related to stock-based compensation to employees.
Previous wording
During the six months ended June 30, 2023, cash provided by financing activities was $46.2 million, consisting primarily of $46.4 million in proceeds received from the sale of our common stock partially offset by the payment of withholding taxes related to stock-based compensation to employees.
Current wording
During the nine months ended September 30, 2023, cash provided by financing activities was $46.2 million, consisting primarily of $46.3 million in proceeds received from the sale of our common stock partially offset by the payment of withholding taxes related to stock-based compensation to employees.
Previous wording
On May 26, 2022, we entered into the MidCap Credit Agreement with MidCap Financial Trust, as agent and certain lender parties thereto. The MidCap Credit Agreement consists of $40.0 million in a term loan. Upon closing, we used a portion of the proceeds to repay borrowings under a previous credit facility and intend to use the remaining proceeds to fund operations and other general corporate purposes.
Current wording
On May 26, 2022, we entered into the MidCap Credit Agreement with MidCap Financial Trust, as agent and certain lender parties thereto. The MidCap Credit Agreement consists of $40.0 million in a term loan. Upon closing, we used a
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
in the jurisdictions in which we operate, banking instability, monetary policy changes and geopolitical conflicts. These factors have and may continue to impact us in the following ways:
Current report — wording carried from elsewhere
portion of the proceeds to repay borrowings under a previous credit facility and intend to use the remaining proceeds to fund operations and other general corporate purposes.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
We have a broad portfolio of intellectual property protecting our products that we believe, when combined with the proprietary manufacturing processes associated with our products and our know-how, provides significant barriers to entry. Our intellectual property applies to our differentiated product construction and materials. In addition, we believe our exclusive manufacturing and long-term supply and license agreement (the “Aroa License”) with Aroa creates a
Previous report — wording carried elsewhere
revenue to increase in absolute dollars as, and to the extent, our sales volume grows. Any delay in volume growth, whether due to macroeconomic pressures or otherwise, could lead to additional charges to excess and obsolete inventory.