Gary Maharaj: I mean, typically – yes, I mean, to really compete well you eventually need a minimum of 50 people, right? You can go up from there. But getting to that 50 and making sure you have the — we want to be on the conservative side of sales capacity utilization, right? You always continue to grow always fund that. And we also have to look at our sources and uses of cash and our debt levels and our senior debt repayment level. So a lot of things come into play there. But yes three years from now you would — to be able to support that market growth you have to have a critical mass to play in that market effectively. So — and big thing for us continues to be as we model is what we call the territory managers’ contribution margin.
We look at gross margin from a territory offsetting selling costs in that territory. So it’s not an operating margin thing, but it’s a gross margin which basically tells us gross margin is paying for the selling efforts and selling expenses. And so that’s a nice way to look at how we will look at scaling up over time.
Q – Mike Petusky: Okay. Very good. Well congratulations, obviously 2023, a huge pivotal year. Congratulations. Thanks..
Timothy Arens: Thanks Mike.
Gary Maharaj: Thank you.
Operator: Our next question comes from Jim Sidoti with Sidoti & Company. Please go ahead.
Q – Jim Sidoti : Hi. Good morning. Thanks for taking the questions. Just to follow up on the sales force. Can you tell us what number, or how many sales folks you had at the end of the fiscal year?
Timothy Arens: I think we have it in the remarks. I think it’s 2023, Jim.
Q – Jim Sidoti : You ended with 2023. Okay. And so it sounds like you might add a few as the conditions determine now, but you’re not expanding it in a big way in fiscal 2024.
Gary Maharaj: Not at this point. As I said, we will selectively seed. We have an incredible sales organization. And so when we’re adding we’re looking for really first top-tier talent, and top-tier talent that’s willing to stretch. Our competitors have salespeople for like five accounts, right? We have salespeople for 50 to 100. So they have to be able to stretch and they have to come from a great pedigree of success. So we want to keep getting the top-tier talent and seeding them. We’ll add as we grow, but again not intending to double it. And the big thing is when we do launch Pounce Venous and we feel the uptake of that product, we may decide to add some more but that’s later in the year and clearly within the constraints of what we’re saying in our cash guidance.
Q – Jim Sidoti : Okay. All right. Now switching over to Abbott. Can you just lay out what are the milestones that have to happen for Abbott to launch the device? And is there a chance it gets pushed out, a little longer? Or maybe is there a chance that it happens, a little bit sooner than you indicated so far?
Gary Maharaj: Yes. And again, I’ll repeat what I just said. Some of the bandwidth we have given the launch there with Abbott is, respecting the confidentiality of the contract of when they launch. But as you can imagine, they’re professionals at this type of launch and they’re doing all of the appropriate preparation of the ground fertilization and the appropriate seeding, because I suspect when they go they really go with a very specific launch plan and trajectory. So, really our job is to help them with technical information that they are able to use to train their team and to make sure we have high-quality product delivered on time to their docks. That’s really, our role in it.
Timothy Arens: Yes. I would say Jim, too we’re confident in the time frame that Abbott provided in the first half of calendar year 2024. And you can imagine there could be reasons, why they would get out earlier. And you can also imagine that there are reasons, why maybe they would kind of move that more towards the second half of that time horizon. So, we’ll just ask you to stay tuned. There will be more on that. I’m sure everyone will see it when Abbott launches it. And we’re here to help support and make sure they have what they need from us, so that they can effectively get out into the market with SurVeil.
Gary Maharaj: Yes. Basically, we can’t talk about it. That’s the [indiscernible]
Q – Jim Sidoti : All right, all right. Can you talk about whether it’s strictly limited to the US or if it will be launched worldwide?
Timothy Arens: Yes, we can certainly address that question. I think we’ve described this over the last several quarters. They are going out US. So what we’ve described in our guidance, what we’re talking about in terms of the launch all pertain to the US, market. We have nothing to add OUS at this point Jim.
Q – Jim Sidoti : Okay. And then in terms of Surmodics, income statement, if you look your R&D expense topped out around $50 million in fiscal 2022. It ended this year around $46 million $47 million. You expect it to tick down to closer to $44 million next year. Do you think it will continue to remain around these levels maybe come down a little bit? Or are there any major projects, you expect to invest in in the next couple of years?
Gary Maharaj: We do have to our R&D is really focused on winning in the market segments we have identified. And that does include the Venous market. And keep in mind we’re entering several huge markets this year. I mean the Pounce — the venous market is larger than the arterial market as a generalized statement. And so to compete with the big guys there and their products, we have to maintain some level of R&D to continue to win and launch those products. We do have some early-stage programs that we’re looking at. So some of them involve more venous we’ve got the venous segment and pulmonary embolism. And actively, the one thing I would say, is you’ll see next week at the VEITH meeting again Professor, Ramon Varcoe is presenting our two-year data on Sundance Sirolimus BTK.
Now Professor Varcoe presented the LIFE-BTK trial data, two weeks ago at the TCT meeting in San Francisco, which is an absorbable stent eluting an olimus drug. And so when you look at our two-year data and I encourage we will send a press release on that, what I hope is recognized is that we do actually have incredible drug delivery technology in Surmodics. Our issue again is one of being cash constrained to get ready for an IDE much less to run a pivotal trial, we will be actively looking for partnership opportunities to help us with that. We can’t go that alone as much as you stay tuned for the data being presented. Again, this is a two-year data right? Stay tuned for what our two-year data looks like with any of the BTK device that’s been done.
