Good morning again. We're going to get started with this next event within the medical devices track at the TD Cowen Health Care Conference. We have executives from Establishment Labs joining us from Costa Rica, but I think most recently from the New York area. Thanks for making the trip up north, guys. We have the CEO and founder and then CFO joining us today. Gentlemen, thank you so much for being here live and letting us ask some questions. I know it's been a short time since the earnings call, but might as well take another bite at the apple. Huge, huge year for Establishment Labs in 2024, with FDA approval of Motiva potentially on tap. Just wanted to start off and ask if there...
It's only been a week since your earnings call, but any updates on the regulatory process or anything you can share, any incremental details you can share on how things are progressing with the FDA?
So we've been talking about this, you know, for quite some time, that we're very pleased with the collaborative approach the FDA has taken towards our PMA. And the level of interactions has been growing both in quality and frequency. Last Friday we received word from the FDA from the group that has been reviewing our manufacturing Module 3, that the review was fully complete, and that we should expect to receive dates from the inspection team very soon. So as you can see, we are making progress literally week to week. And in parallel, we're, you know, discussing many of the other aspects that would yield, you know, a full PMA approval.
That's outstanding. Excellent news. And just as we think about you getting through that FDA inspection, I think we've asked this question before, so I apologize for asking it again, but just I know there's a range of timelines, but it's the last box to check is our understanding of the FDA review process, and then how long does it take post-inspection on average, would you say? Or when should investors expect a final decision by the FDA? Maybe impossible for you to give us a specific timeline, but we're assuming a month or two.
Yes. I think the way to look at this is that, you know, we have been very careful not to endorse any dates or timelines, but at the same time, providing full transparency on our progress, and that's what we're doing today. You know, with the dates being confirmed, our team is fully ready. I mean, we've been practicing for this for quite some time. We've had some mock audits by former FDA inspectors just recently, you know, this year, we had two of the most important inspections from high vigilance authorities, including the MDSAP, which includes, you know, FDA regulations. So all of these, you know, have passed, and we've been recommended for certification renewals and what have you. So all of it is very positive.
It's, you know, it's for us, really the last bit of the process, because we have started, in parallel, discussions on labeling, and these discussions on labeling is what eventually leads to the final PMA approval. And, as we've said before, the fact that there is not going to be a panel derisks any other addition to those timelines.
Outstanding. Outstanding. I know you for competitive reasons you haven't kind of disclosed details on the build-out the commercial strategy for the U.S. launch, but you guys have talked about building some infrastructure in the U.S., and you have the U.S. launch of Flora ongoing, the tissue expander. But maybe anything to just maybe review what you've said publicly about the build-out to date, and like I said, one of the things I think investors are trying to balance is how much more investment do you need for this U.S. launch? I think some of those questions were put to bed as you've solidified the balance sheet, but maybe any help there or just details would be interesting.
Yeah, I think at least from our perspective, what we see is that, you know, over the last year and a half, we've made so much work to set up the operations necessary to be commercial in the U.S.. We are commercial in the U.S. today. We are, you know, invoicing tissue expanders. The Flora launch has begun. It is a controlled launch, you know, focused on centers of excellence. We are doing these things, and you know, to be able to do that, what we have done is create, you know, back office in terms of finance, in terms of commercial operations, everything is there. On top of that, you know, we're a commercial company in 85 countries. We are leveraging all of those assets to be able to support the U.S. launch.
So you know, what you will see us adding on top of the reps that we are having for the Flora launch, more reps as we get closer to approval and post-approval for the different targets of plastic surgery accounts.
Excellent. Wanted to just ask about the—I think we touched on this on the earnings call, just on the market dynamics in the U.S. You know, one of the incumbents, probably double-digit share owner, Sientra, is having some—has had some balance sheet issues, and they filed for bankruptcy. It seems like there could be some jump-off share in the augmentation market, but also in the tissue expander market. How big of an opportunity is that? I mean, just thinking about the timing of potential Motiva approval in the coming months, and with that jump-off share opportunity, is that a positive for Establishment Labs, or how are you guys thinking about it as you move into the launch phase for Motiva in the U.S.?
Well, always having less competitors is a positive, so there's that. But I think, you know, we should think about what the real market dynamics are. It's a market of round, smooth implants, and you have three companies that have been offering pretty much the same.... The smoother, you know, surface of those implants dates back to 1962. That's really rare in med tech, and the patients have to put up with the consequences of that all the time.
So, you know, when we go to market, we go to market with a differentiated technology, with, you know, superior safety and aesthetic outcomes that, you know, have been proven now, not only with the data that we have released from our FDA trial, but also now for, you know, more than 3 million implants that are out there in 85 countries at 14 years. So I think that's the real market dynamics that we should be looking at, is that, you know, we will have the opportunity to provide better options to patients that haven't seen innovation for, you know, this century.
Just thinking about the loyal Sientra plastic surgeon base. I know you're not able to market Motiva to those surgeons, but any initial outreaches? I know it's only been a couple of weeks since that bankruptcy filing, but our understanding, which is broad checks, which arguably are anecdotal, but the 3-year data, top-line data that was presented last year, plastic surgery meeting, generated some even more buzz within U.S. plastic surgeons. I guess the 2-part question, how has that buzz evolved, and where do you think that lies here? I mean, the understanding and awareness of Motiva, imminent launch by U.S. plastic surgeons. Then second part is just the interest of loyal Sientra surgeons.
Have they been any of them reaching out to look for any consulting arrangements or just access to Motiva at some point?
So one of the great things of the clearance of the Motiva Flora tissue expander is that it allows us to, you know, be in contact with the plastic surgery community. We can talk to them, we can talk about, you know, Establishment Labs, how we innovate, you know, the contributions of being a true woman's health company in this space. Also, there are some really important technologies that are both in the tissue expander and in the breast implant, like the SmoothSilk surface that is a proprietary surface, was the subject of a Nature Biomedical Engineering paper by Dr. Langer and team. So all of these things can be part of that conversation.
Yes, in that conversation, one of the, I would say, more willing group of plastic surgeons are the ones that were initially interested in, you know, what appeared to them, to them be an innovative company. And that's what Sientra brought to them, you know, years ago. I think that with time, what was innovative, which were the textured anatomical implants that they brought to market, you know, were not in vogue anymore because of concerns of anaplastic large cell lymphoma. And then, you know, with round, smooth implants and only that, you know, you become more susceptible to the type of downturn that we saw in aesthetics last year, and hence the outcome.
Great. Raj, question for you. Thanks for that, Juan Jose. Just the EBITDA, getting to EBITDA positive territory in 2024. I think you guys have commented that that's regardless of whether Motiva is approved in the United States or not. U.S. Motiva revenues are not incorporated in the revenue guidance. But how should investors think about that EBITDA positivity? Will the U.S. launch impact that target or push it out, or can that U.S. launch you guys still hit that target with the U.S. launch on board, assuming that it plays out sometime midyear or beyond?
Yeah, I think it's important to note that we've made significant changes in the business over the last, five or six months, right? We've let go about 28% of the workforce. We've cut a number of programs. You saw the cash use in the fourth quarter dip significantly. So we have made some structural changes in improving and, and really, driving efficiency in the business. You know, the EBITDA targets to get the EBITDA positive by the end of this year, you know, the U.S. is a bit of a, of an unknown around that, right? Because as we've been talking about, the timing is, is the piece that, that we don't know. We're very confident in the approval, and we've talked about it coming this year, but when it comes, we, we simply don't know.
So as Juan Jose noted, we've been spending a lot in the U.S. We've been building infrastructure, preparing to be a commercial organization here. But as we get to that approval, there will be a step up in spending around commercial activity. So depending again, on where that fits, it could impact that EBITDA, that EBITDA metric, as we approach the end of the year. Importantly, though, the U.S., you know, when you think about the ASPs in the U.S., the gross margins will realize here, the period of time in which we are loss-making in the United States will be relatively short. But it's just, again, where that fits in that timeline is just we don't know at this point.
Right. Maybe just to follow up on the cash burn, you guys have done a great job, as evidenced by the fourth quarter results in bringing cash burn down. You solidified the balance sheet with private placement, you renegotiated some terms on a credit facility. But just maybe how it should have interesting about the cash burn. Similar question, without U.S. launch, and then when the U.S. launch could pick that up is our assumption. But seems like you're well funded to get through a period of profitability in the out years.
Yeah. So on that front, what we've talked about is, again, if you look at the $50 million private placement we, we did at the beginning of this year, along with where we ended our cash balance of last year, we have approximately $90 million of cash on the balance sheet. And we've talked about using less than $48 million this year. So we feel we're in a very good position to continue to fund the business as, as we've guided to this year. But then on the U.S., the piece around that is that we've also amended our credit facility. So when we do get U.S. approval, we get, we unlock access to an additional $25 million of cash from our, our partner, Oaktree. And then when we achieve certain, revenue milestones, there's a potential another $25 million we could access.
So there's another $50 million that comes available on FDA approval. We might not need it, you know, depending on how we continue to progress with our efficiency, but should we need to fund the U.S., we have additional capital that is supported. And so when, again, one thinks about the cash flow, you know, there is a step-up in the cash available to us, you know, on FDA approval.
Thanks for that. Last week, your team issued 2024 guidance, revenue guidance of $174 million-$185 million, mid-single-digit to low double-digit revenue growth, and that's exclusive of any U.S. Motiva contributions. Maybe just kind of walk us through some of the drivers of that outlook in terms of... I think there were some concerns heading into the call and earlier this year, that with the market dynamics internationally, with some of the distributor ordering patterns, that that guidance could be either more flattish or maybe even decline, and you guys wiped those concerns away. But what's giving you the confidence that you can have growth with the core OUS business?
China clearly is one driver, but anything else you can share with us just on your confidence on distributor ordering patterns and just market recovery would be helpful.
Yeah, I think what we see is that, you know, during the period in the second half of last year, plastic surgeons around the world saw, you know, patients postponing procedures, less patient coming to first consultations. And, you know, we were, of course, not ready entirely for this, because we came from a period in which throughout all of 2022 and the first half of 2023, the number one complaint we got was we didn't have enough product in market, or mix of product was not always available in the right place at the right time. So we worked towards being able to fulfill all of that demand. So, you know, when this happened, we had to, you know, prepare to a new reality.
But, you know, what we've seen is that plastic surgeons are now talking about, you know, patients who had postponed procedures now confirming new dates, new patients coming into their practices, and that's what's driving the recovery. Also from our distributors, some of them went through a period in Q3 and Q4 in which their orders were very small, and now they are making orders again. So all of that is contributing to the recovery. We think the recovery is, you know, going to be over time. It's not going to be all at once, but we believe that, you know, the numbers that are reflected in the guidance are also reflected of the recovery in the market.
Great. And just to focus on the China launch for a minute, you guys have been clear that any initial orders will be spread out over the... or stocking orders be spread out over the course of the year. But maybe talk about some of the pre-launch activities that you and your distributor collaborated on in China. Saw a couple of headlines come out, just trying to dig into some of the plastic surgery meetings in China last year. But now that you have approval, some of the early launch activities as well. But just how and maybe similar question to the U.S., any just high-level color on the buzz that's been generated by the Motiva approval and then that launch.
So, Chinese plastic surgery community has, you know, been waiting for this for literally years. You know, because their peers in Hong Kong, Singapore, Japan, Taiwan, had access to these technologies, and they didn't. Before the pandemic, about 25% of our patients in South Korea came from China, and they came not to pay less, to actually pay more. So that gives you an idea of the level of awareness, both in the plastic surgery community and also women in China about Motiva. Our launch was very well crafted between tier one and tier two cities. So when you think about our initial orders in the next 2-3 quarters, they are set to fulfill, you know, that demand in these different locations in tier one and tier two cities.
We're going to be working more and more with our partner there. We have an exclusive distribution partner, the same one that we have in Hong Kong and South Korea. So we need to support the medical education, and we give them access to our marketing assets. But, you know, in market, they have to do the work. They have to do the investments, just like they've done in Hong Kong and in South Korea so successfully. With regards to the U.S., since you know, you asked, I think, you know, same thing.
A lot of plastic surgeons have received a lot of communication from their peers OUS, so we see same level of excitement, and now that we can talk to them a little more, I think it's going to be very similar to what we've seen also in China.
And just on the competitive dynamics or just the launch in, maybe for China, can you just remind investors just who plays in China right now? I believe Mentor has shared leadership, one who plays. And then also, is it mostly a smooth implant market? And the reason I ask is maybe just to, I'll ask a follow-up, actually, just to not burn you with a multilayered question. Let me just. The competitive dynamics in China, where the share leadership is, and is it a textured or smooth market right now?
Interestingly enough, in China, the market leader, J&J, with their Mentor brands, has been pushing for many years, some of the same implants that are no longer in use in the United States, textured anatomical implants. So we think this is a mistake, a disservice to, you know, to women in China. But at the end, a large part of that market also still uses round, smooth implants. I think our product really cuts through the middle of that with updated technologies, better safety outcomes, and that's what we're gonna be doing because they hold about 70% market share there, which is something that we have seen in other markets around Asia before we came in. And in each one of those markets, after three, four years, we have taken a leadership position.
So now, you know, the battle comes to China, and we are ready for it because we have really made a blueprint of how to gain market share against this competitor in the Asian market.
Just on ASPs, China and United States, two very attractive markets for pricing in the breast implant industry. Have you guys disclosed pricing dynamics or what type of premium Motiva could secure in China or the U.S.? Maybe throw both of those in there.
Well, the first thing I think is super important for investors is to understand that China is our highest ASP distributor market in the world, with the highest gross margins for us. The U.S. will be the highest ASP market for Motiva in the world, and with the highest gross margin. Already with Motiva Flora, we are recognizing revenue on each tissue expander we sell in the U.S. at more than three times to what we do for an equivalent tissue expander in Europe. So it is significant. We have always done matrix pricing. We think it creates the right dynamics. We don't make people pay more for safety, but we have different price points, you know, for Motiva, which kind of like are reflective of the aesthetic options that they can get.
What we see is a lot, a lot of women choose to upgrade to Ergonomix or eventually to Ergonomix2, and that's very positive for us in terms of ASPs, gross margins, and that's what's going to drive, you know, our move to become a profitable company.
Another, maybe premium price product in your portfolio outside of Ergonomix, Ergonomix2 is the Mia minimally invasive platform, and you guys have had some success with your deliberate launch strategy in 2023. But maybe, and you gave us an update on some of the demand and some new centers that were in the pipeline to become partners in multiple geographies internationally. But I guess thinking about the 2024 guide, anything to share just on Mia contributions and this-- I mean, we're clearly expecting Mia to be a growth contributor year over year. But anything you can share, just hard metrics on the Mia launch in 2023 outside of the center details that you provided and what's baked in the guidance of 2024.
Before letting Raj speak to the guidance, I think people haven't really digested what a game changer Mia is. Mia completely transforms the aesthetic space for breast because it creates a different experience. I mean, these women are walking into a center and then leaving 90 minutes later, 1-2 cups up. A scalpel never touches their breast, and that's why that same day, they're going back to their, you know, daily lives, minus the exercise, and they're having an amazing experience and a great aesthetic result. So, you know, when we think about what we'll be doing this year is moving from 17 centers to more than 70 centers. Already, you know, we are in the process of onboarding or begin onboarding 35 centers in the first half of this year.
We have 16 that, you know, are close to signature, and we'll be adding them later. But, you know, the dynamics are very positive. And remember, these clinics are making an investment. They're paying, you know, at least $100,000 in terms of, you know, practice development and medical education so that they can get certified for the Mia experience. And all of that shows you the level of commitment. This type of business model has never existed before in breast aesthetics or breast reconstruction, so it is a significant shift in terms of the market dynamics.
Yeah, I mean, in terms of the guidance, you know, we are. It's still early to break out Mia. You know, I think it's important to note that Mia really launched last year, right? And in Europe in the second half of last year. So, we're still in that learning phase, but, you know, but it along with, you know, you think about the other contributors this year, China, Flora in the United States, Mia, these incremental contributors, that's all baked into our guidance this year.
Maybe a more appropriate follow-up on the Mia platform for post FDA approval for Motiva, but just the potential pathway. I think we've been thinking Mia could be filed under supplemental PMA. I don't think that that has been kind of fully established with the agency yet, clearly without U.S. Motiva approval on hand. But is that the right way to think about the potential regulatory pathway for Mia in the United States? And then also, any thoughts on how Mia could get approved in China, where it would seem to be a very attractive product for that market as well.
So we have not had yet a pre-sub meeting with the FDA regarding the Ergonomix2 platform, of which you derive the JOY programs and also Mia. But we will do so shortly after we get the PMA approval. All of our air time right now is dedicated to the approval of Motiva. However, we have talked about this with our regulatory experts, and they do think that the pathway is a supplement, and that on top of that supplement, we will then get the tools necessary for the Mia procedure cleared, you know, by the FDA. So that seems to be the path, but we will have more information after we have a sub. But we absolutely believe that this is transformational also here in the United States.
Already, you know, when we talk to U.S. plastic surgeons, half of their questions are about Mia... So there's a lot, a lot of awareness and interest in this procedure. I mean, you've seen minimally invasive transform so many surgical specialties, and plastic surgery is ready for this.
Thanks so much. Another question on the OUS market is, I mean, it is fragmented. Many, I guess, regional breast implant manufacturers have some share in different countries. We're seeing Sientra maybe not maybe, maybe going away in the United States. Are there other breast implant players that have challenging cash positions or capital requirements that could create some jump ball share opportunities in any specific markets? Just thinking about 2024 and 2025, and you guys have done such a strong job penetrating most of the markets that you that you've launched me into.
Yeah. If you look at the international market and you blend in all of these markets, right now, you can see pretty much a third of those markets are currently, you know, under Mentor, a third of those market under us. And then there's a third that goes to this group of companies that mostly sell on price, that they have, you know, a copy of technologies that are, you know, been existing for some time. So they tend to, you know, basically fight for a group of customers that is okay with that type of a business model. So there are opportunities always, and you see them. For instance, there's a French company that recently filed for bankruptcy, and they're in that process.
But, most likely, you know, those customers will come from one of the other copycat companies. I think as we see more and more innovation, though, more plastic surgeons are moving to the innovation. I think that's a natural dynamic because they see that people that are doing those things, they get priced at a higher level, and they get more traffic. So that's the important thing for us to focus on that.
You guys have, you know, put out this trajectory or you guys are both confident, your team is confident that Establishment Labs will drive towards $500 million in revenue, in the out years. There are numerous growth drivers that we've talked to about over the years, but also in this discussion. Maybe the question is really just any updates on timeline for that $500 million target. I think you guys are clearly uber-confident that you'll get there. Maybe it's pushed out a little bit from the initial timeline you guys set, but any just updated thoughts on that $500 million guidance target?
I think what we have done is added a target next to it because that target was a pure growth target. Since then, I think, you know, the world has changed quite a bit. You know, price of capital is different. So I think right now we are talking to get there as a profitable company. So if that happens six months later or nine months later than, you know, the initial 2026 date that we gave to, you know, I think the investor community will be fine with that, as long as we are profitable and we get there in the right way. But when you look at, you know, like what a Mia center can do, if, you know, if a Mia center does 285 procedures a year, we recognize $1 million in that clinic.
You know, when you think about the number of centers that are coming, then you can see, you know, how on top of everything we've done so far, plus China, plus the U.S., plus breast reconstruction around the world, and, you know, Mia, you can definitely drive towards that.
Maybe the last question before we hit the top of this half hour is, I mean, there are other pipeline products that are in development. Maybe any highlights? You unveiled a couple at the grand opening of your new manufacturing facility down in Costa Rica last year, but maybe just a review for investors. What else is in the pipeline outside of what we've talked today, and what maybe at the top of your list?
Yeah, we have many things in our pipeline. We showed you guys last year about GEM. Basically, it's the minimally invasive approach for buttock augmentation. It's called GEM, as in, Gluteal Ergonomic Modeling. And this indication has been growing in the number of procedures per year. You know, two years ago, it was 500,000 procedures globally. Last year was 800,000. So it tells you that there's a demand for them, but the options right now are not safe. You either go for, you know, BBLs, fat grafting, all the implants, and all of those seem to have high morbidity and even mortality around them.
So, what we are creating is a minimally invasive approach, so this can be done safely without general anesthesia in less than 20 minutes, and our first group of patients in the IRB trial is, you know, doing very well. We're going to add more patients to that initial trial, and this should give us all the information necessary. And remember, what we are using is the Mia platform, only some adaptations to it. So the regulatory path to it is basically based on the clinical information that we are gathering today.
Outstanding. I think that's a good place to stop, but also the clock is showing we have to stop.