Integra LifeSciences Holdings Corporation (NASDAQ:IART) Q3 2023 Earnings Call Transcript

Robbie Marcus: Good morning. Thanks for taking the questions. I wanted to start with 2024 and how we should think about the recovery of the lost sales from the Boston products. And one clarification, is the $15 million headwind off of the reported 2023 or ex, you know, what you would have done without the recall. And how do we think about lost sales and the recovery there? You’ll have been off the market for a long time. This is a highly competitive market. Doctors will likely have moved on and tried other devices. How do we think about the ability to regain share? Is it 25%, 50%, 75% of the lost sales. And how long do you think that’ll take?

Lea Daniels Knight: Yeah. So, Robbie, I’ll start with just framing kind of what the $15 million relates to. And so really just to ground you, if you take a look at our, the guidance that we provided going back to April. So the full year basis, what we thought the business is going to be, you apply the growth factor that we assumed as part of our Investor Day in terms of how we projected the business to grow. The $15 million is off of that. So that’s how to think about, you know, the impact that we characterize from Boston in 2024. And then I’ll let Jan talk maybe some of the questions around getting back into the market.

Jan De Witte: For Robbie, as I also touched when with, I think, Matt’s question, if you look to our Boston portfolio. The portfolio we were building share. And so getting back in the market is first getting back to where we were and then getting beyond that. In terms of getting back to where we were say, mid 2023. That’s where our sales force, is planning in and assuming it will take them one year to get back to where we were and then continue to build that share beyond. As I indicated, based on the merits, all those exceptional products that we’re making in [indiscernible].

Robbie Marcus: Great. And if I could just squeeze one more in, as you think about your forecasting, your modeling, it looks like CereLink is moving back a little bit in the US. How conservative should we think about that $15 million and is that something that may move around or down as we move through next year? Or is that a number you think will not move any lower? Thanks a lot.

Lea Daniels Knight: So, are you asking about CereLink. So, CereLink we are anticipating an early Q1 launch. I think, what we’ve said in the past in terms of, as you think about the size of that business and once we’ve relaunched in all markets for monitors, we’d expect the business to be kind of back at the run rates we saw previously, which is about $12 million annually. So that’s CereLink. The $15 million impact that I characterized earlier to your first question was specific to kind of Boston based product portfolio and the impact to that portfolio as a result of coming back into commercial distribution in the mid to late Q2 timeframe. So that would be kind of independent of CereLink. So I’m not sure if I missed part of your question in there.

Robbie Marcus: No. It’s okay. Thanks a lot.

Operator: And thank you. And one moment for our next question. And our next question comes from Ryan Zimmerman from BTIG. Your line is now open.

Ryan Zimmerman : Good morning. Thanks for taking the questions. I want to talk about the Tissue Technologies business for a moment, if I could. You guys did 6.7% organic growth, ex-Boston. If I’m not mistaken though, you know, you estimate the markets are growing at 7% to 9% from the Analyst Day. So help me understand. I mean, even if we remove Boston, is the market getting worse in the third quarter? Is that spillover from Boston? And just how you think about your growth in tissue ex-Boston relative to the market?

Lea Daniels Knight: Yeah. So, maybe I’ll start and then, we can have a Jan chime in. So and thank you for the question Ryan. So again, if you think about from a tissue tech perspective, we saw, in Q2, ex-Boston, we saw that business grow at about 3.8%. And we knew at that time that we had even though we had that’s the ex-Boston portfolio. There was some distraction in the sales force as they were, you know, part of the efforts to manage the recall. And we had anticipated that growth would accelerate into Q3 as we started to reposition the sales team, which is exactly what we saw happen. Right? So that growth accelerated from 3.8% to what we, we talked about which is the 6.7%. To your point, it’s not quite at the LRP kind of rate, but I think a lot of that has to do with the fact that, again, for Q3, we were still in the process of repositioning, developing our substitution strategy, executing on that.

And so I don’t know that we were necessarily hitting on all cylinders from the absolute beginning of the quarter to the end, but I think the clear momentum pickup that we saw in Q3 versus Q2 illustrates what we have — the potential that this business has in terms of what we can drive and deliver in growth. And as we look out to Q4, we would expect that to continue, such that on a full year basis, we would expect, again, ex-Boston to be in that kind of 7% to 9% range that we communicated at Investor Day. And I know there was a second part of your question. I don’t know if I answered that fully Ryan.

Ryan Zimmerman : Yeah. No. Thanks, Lea. Is this kind of how you think about the growth and the impact. As you’re remediated in Boston, we all can see kind of what the growth is ex-Boston, but what kind of spillover impact does that have in the other businesses? I mean, you would think that’s SIA’s acquisition is growing to 100%. So clearly, it’s making up for some of the losses on Boston. But can you grow at or above market rate ex-Boston with everything going on there? And that’s kind of the point of that question.

Jan De Witte: Yeah. So sort of maybe go a bit deeper, Ryan. So one, when you said 7% to 9%, definitely our best strategy, and therefore, Boston, is a growth creative dryer within that mix. Right. So the comeback next year, we’re further put that portfolio into the right mix. That said, when we look at the rest of the portfolio, our A-Cell, MicroMatrix, Gentrix, Cytal, I mean, very strong, I mean strong double-digit growth that we continue to deliver there. Demand for Integra Skin is strong. Part of that is substitution, yeah, [from matrix] (ph) away. So we when we look at the portfolio and how it performed for third quarter we feel good with that portfolio, we feel good with the markets. Of course, we’re missing the Boston products. And like Lea said, July from a sales perspective, they were still very much chasing to understand the inventory, and drive the recalls, back from the field. That’s, as of August, that came a lot more back to us tomorrow.

Ryan Zimmerman : Okay. That’s very helpful. Yes. And then the follow-up question, just to be clear, because I think there’s some fears out there that, and this is a potential what if, but if there is a government shutdown later this year, does that impact the ability of the FDA to come into your facilities? And so just to kind of be clear, can you just very specifically walk us through kind of what’s required to get the Boston facility, given the green light to proceed as normal to manufacture again. Do you — is it just external third party reviewers that the FDA need to come in at any point, it’d be helpful just to understand that more specifically.

Jan De Witte: So the short, Ryan, is that the FDA does not have to come in. So the requirements from the FDA is that when we decide that we’re substantially complete with the remediation, we bring in an external auditor. Okay. We’ve shared that name of that company with the FDA. They’ve approved of that. So they will come in, do the audits, we assume that given all the preparation we’ve done, this will be a satisfactory audit. We decide on our own terms to restart the factory. The only thing that the FDA wants is that we sent or shared that audit report with the FDA. But there’s no go or check, by the FDA. Before we start the factory or start shipping again, certainly.

Ryan Zimmerman : Okay. Very, very helpful, Jan. Thank you.