M&A Announcement

Jan 20, 2021

Ladies and gentlemen, thank you for standing by, and welcome to the Haemonetics Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Olga Gayet, Director, Investor Relations. Please go ahead. Thank you, and good morning, everyone. Thank you for joining us this morning to discuss our agreements to acquire Cordova Medical. Will begin this conference call by providing remarks about the anticipated transaction, followed by a question and answer session at the end of this call. This conference call is being recorded and a replay will be available starting at 11 am Eastern Time using the link included with our press release. Joining me on this call today are Chris Simon, our CEO Stuart Strong, President of the Hospital Business Unit and Bill Burke, our CFO. Before we begin, I would like to remind you that today's discussion will include forward looking statements. Haemonetics cautions that these forward looking statements are subject to risks and uncertainties. Factors that could cause actual results to differ materially are referenced in the Safe and Harbor statement in our press release issued this morning and in our filings with the SEC. We do not undertake any obligation to update these forward looking statements. In addition, our discussion will include certain non GAAP financial measures. Reconciliations to the most direct comparable GAAP financial measures can be found in this morning's press release. And now, I'd like to turn the call over to Chris. Thank you, Olga. Good morning, everyone. I'll start by providing an overview of the rationale behind the transaction and the fit with our strategy. And I'll turn the call over to Stu, who leads our global hospital business and has deep experience in interventional cardiology and acquiring and integrating businesses of similar size and nature. He will discuss Cardiva's products and the markets they serve. Bill will go over the financials, and then we will open up for question and answer. I want to start by recognizing and thanking John Russell and his leadership team. We have admired Cardiva's progress as they have built an agile, fast growing company with a track record and a culture focused on innovation, product quality, patient care and customer service, values that we embrace at Haemonetics. The Cardiva acquisition is an important milestone that catalyzes our transition from turnaround to transformational growth. The transaction is aligned with our corporate strategy and consistent with our stated goal to pursue disciplined M and A in attractive adjacent hospital segments. Ardiva serves high growth profitable markets and is a leader in vascular closure devices with a promising pipeline. Their proprietary vascular closure technology strengthens our hospital portfolio in the attractive and fast growing interventional cardiology and electrophysiology markets. Adding these products to our portfolio is immediately accretive to our revenue growth and adjusted gross margins with attractive financial returns. This acquisition will expand our total addressable market opportunity for hospital from $1,000,000,000 to about $2,400,000,000 with a global presence powered by complementary sales organizations. We intend to build on Cardivo's momentum to realize the full potential of this product portfolio by driving penetration and utilization of VASSCADE MVP in electrophysiology, especially ablation procedures here in the U. S. In parallel, we will continue to grow market share of VASSCADE in interventional cardiology procedures, which usually require an arteriotomy. We can use Haemonetics' existing international channels to expand into other geographies outside the U. S. The transaction will also significantly bolster our ability to compete and innovate through our combined scientific, clinical and medical expertise. Together, we will drive an innovation agenda to advance the pipeline and expand our presence with TEG, while leveraging our G and A and infrastructure. I hope it's clear that we like the people, the products and the pipeline. Market adoption of SGAID has been rapid due to its unique and proven value proposition delivering significant health benefits for patients and clinical and economic benefits for clinicians and hospitals. This growth trajectory is supported by improved clinical outcomes and increasing number of patients with cardiovascular diseases and ongoing technological advancements in percutaneous interventional procedures. Cardiva's products complement Haemonetics' leading position in hemostasis management, and their presence in interventional cardiology and electrophysiology will help increase the reach and relevance of our products and diversify our business. Now, I'll turn the call over to Stu. Thank you, Chris, and good morning, everyone. I would also like to share my excitement about this acquisition and welcome Cardiva's team to Humanex. Our hospital team is driven to provide innovative diagnostic and therapeutic solutions that improve patient care. As the global market leader in viscoelastic testing, we've been dedicated to expanding our category leadership position with our hemostasis management portfolio, particularly in markets including trauma, cardiovascular surgery and interventional cardiology. Cardiva like Haemonetics is laser focused on their clinical customer and the patients they serve. The acquisition of Cardiva enables us to leverage our global hospital presence and significantly enhance our footprint in the interventional cardiology and electrophysiology space. Catheter based interventional procedures have transformed cardiovascular medicine. Today, the majority of these procedures involve accessing the vascular system through the femoral artery or femoral vein. These access site openings in the vessel vary in size depending on the procedure and usually require closure post procedure. In 2019 in the United States, there were approximately 5,200,000 catheter based coronary and peripheral procedures and 400,000 catheter based electrophysiology procedures, the latter of which generally require 2 to 5 access sites per procedure. While we consider the market opportunity to be large, it's still significantly underpenetrated. About 67% of coronary and peripheral procedures require femoral access and only about 54% of them actually use vascular closure devices. Despite the technological advances in tools for catheter based electrophysiology procedures, manual compression is still a primary method for vascular closure and requires 6 to 8 hours of immobilized bed rest, can be painful for the patient and costly for the hospital. Cartiva's products help address these issues. Their catheter based vascular closure system uses the existing procedural sheet to close femoral access sites and has demonstrated safety and efficacy in a wide range of patients. The Vasquez vascular closure system is designed for 5 to 7 French size or what we call small bore femoral, arterial and venous closure, generally used in interventional cardiology and peripheral vascular procedures. The Vascada MVP is designed for 6 to 12 French or mid bore multi access femoral venous closure generally used in electrophysiology procedures. One of the key advantages of this particular product is that it is the only closure device FDA approved for use following cardiac ablation procedures requiring 2 or more access sites within the same vessel. The use of Vascade MVP significantly shortens time to hemostasis, time to ambulation, time to hospital discharge eligibility, decreases the use of opioid pain medication and significantly improves the patient experience, while also contributing to cost savings as compared to manual compression. Vascade is the only marketed closure device to significantly reduce access site complications versus manual compression. Both devices include Cardiva's proprietary collapsible disc technology and a resorbable collagen patch. Cardiva has built a strong U. S. Commercial team that has delivered excellent results in a short span of time. From an innovation standpoint, Cardiva's pipeline will enable us to expand the number of addressable transcatheter procedures where their unique technology could be used and provide revenue upside in future years as our R and D and clinical teams work together bring these ideas to life. I'm looking forward to combining Cardiva's demonstrated commercial excellence and technical expertise in developing closure technologies with our track record of leadership in the markets we serve. We believe that together we have the right technologies and talent to enhance the hospital business unit's role as a growth engine for Haemonetics. Now over to you, Bill. Thank you, Stu, and good morning, everyone. As detailed in today's press release, the transaction has a total cash purchase price of $510,000,000 consisting of $475,000,000 at closing and up to an additional $35,000,000 in contingent consideration based on sales growth. The closing of the transaction is subject to receipt of applicable regulatory approvals and is expected to close in the Q1 of calendar 2021, which is the Q4 of our fiscal 2021. This acquisition is immediately accretive to our revenue growth and is expected to deliver about $65,000,000 to $75,000,000 of revenue or an estimated revenue growth rate in excess of 40% in our 1st fiscal year following the acquisition. This growth rate assumes continued recovery of the business as Cardiva's prior year results were impacted by the COVID-nineteen pandemic. The transaction is also immediately accretive to our adjusted gross margins, but it's expected to result in adjusted earnings per diluted share loss of $0.15 to $0.20 in our fiscal 2022 and become adjusted earnings per diluted share neutral in fiscal 2023. We plan to finance this acquisition through a combination of our cash, the existing revolving credit facility and a new $150,000,000 term loan. Following this transaction, our leverage ratio as calculated in accordance with the terms set forth in the company's existing credit agreement will increase from 1.3 at the end of our Q3 of fiscal 2021 to about 3.2. The acquisition is expected to deliver a rate of return on invested capital of 10% by year 5. We will continue to be disciplined in our approach to ensure adequate cash on hand and maintain a leverage ratio in accordance with the terms of our existing credit facility. Over the last few years, we have repurchased 4,500,000 of the company's shares for a total of $435,000,000 We do not expect to make additional share repurchases under the current authorization that expires in May 2021. Our capital allocation priorities remain unchanged and we continue to prioritize organic growth, followed by inorganic opportunities and share repurchases. And now we will open the call for Q and A. Our first question comes from David Lewis of Morgan Stanley. Your line is open. Good morning and thanks for taking the question. I guess a few strategic questions I want to start with and maybe Stuart, I'll start with you. I mean you were obviously at Telaflex as they proceeded to build out an interventional cardiology strategy first with vascular solutions and then with MANTA. But I guess the more direct question is, I don't think Teleflex acquires MANTA if they don't have vascular solutions. I think the question everyone wants to know is, why is Humanetics to better acquire this asset, right? They have no dedicated electrocardiology business. They have no dedicated EP business versus some others have multi 100 person sales channels there and the ability to bundle with large contracts of that committees. So why should Haemonetics own this particular asset? Yes. So first of all, I think immediately, as Chris said in his remarks, it expands our market opportunity from what we are today, which is about $1,000,000,000 David, to over $2,400,000,000 And that additional $1,400,000,000 is just in the U. S. Alone. So we could see additional growth outside the U. S. The products line up very well with where we're going as a hospital business unit already in the sense that we're moving in the direction through our efforts with TEG, which you know about. We're moving in the direction of doing more and more in the interventional cardiology and EP spaces. That's where Cardiva already is. So we think there's perfect synergy there with markets that they play in today versus the markets that we're in as well as where we're going in the future. Okay. And then does this mean, Chris, maybe a bigger strategic question for you. Does this mean on a go forward basis, are going to do increasing deals in interventional cardiology and in astrophysiology? Does this mean this is just a one off transaction or you have decided these are the end market channels that Haemonetics wants to be Yes. David, thanks for the question. I think as Stu has said, right, we're excited about what we're doing with our existing organic hospital business. The trajectory that we've been able to create with the hemostasis management franchise, TEGS specifically, compels us, right? And we've been on the hunt, as we've said from the outset, for inorganic opportunities that are complementary, close adjacencies, right? And we certainly think that interventional cardiology, electrophysiology, vascular closure specifically, is one of those close adjacencies. We would look to build out, to Stu's point, that the medical science, the fact that some of the leading companies, as you highlighted, are heavily focused on advancing the underlying therapy gives us confidence that this is an attractive growing market where we can deliver superior results. So yes, we will continue to look for opportunities in this space and other TEG adjacencies that we think are complementary synergistic, help improve our reach and our relevance. It may or may not be the same sales force. It might be our clinical team. It's definitely our medical and it's definitely our broader hospital business unit, which we continue to view as an important growth transition. Just last question and I'll jump back in queue. Stuart, the value for Cardiva was much more so on the EP side versus the IC side where there's a lot more competition. So on a go forward basis, to get to Bill's financial targets of 10% return, it's just got to be a triple digit revenue business. So what mix of business do you think this is EP versus IC sort of in year 5? And how do you balance commercial and clinical objectives in EP versus IC given that's kind of where the value is? Thanks so much. Yes. We continue to see the value on the EP side. That market is significantly underpenetrated with regard to the use of vascular closure devices. As I said in my prepared remarks, manual compression is typically the standard of care right now in those procedures. Other alternatives to that are a figure of h stitch, both have their challenges for the physician. So we continue to see the growth in the market as really being driven by the Vascade MVP device, which is the mid bore venous closure device. And we continue to see growth in not only penetration into the top 600 hospitals across the U. S, but also further growth of the adoption of vascular closure devices into procedures. So that's really what we're putting into our modeling is significant growth on the vascular closure side for EP. Thanks so much. Our next question comes from Larry Keusch of Raymond James. Your line is open. Thanks. Good morning, everyone. Just a couple of questions here. I understand the strategic rationale of essentially wanting to put more product that dovetails with tagging where you're going with that portion of the business. Could you talk a little bit about how you're thinking about the sales force and synergies there? Are you going to intend to run with 2 completely separate sales forces, TEG and Cardiva? Or are there cross selling opportunities? Just really curious about how you're thinking about this from the sales side. Yes, Chris, I'll take that and I'll ask for your comments as well. This is Stu. So we really see this as 2 complementary selling organizations. We think that we have strong clinical teams and potential to cross train our clinical teams to help pull through on each side. But on the sales side, we are expecting that we will run these 2 sales forces independent of each other, at least for the foreseeable future. Yes. Larry, if I could just pile on that. This is an asset, a company that we've paid close attention to for a while. As I said in my prepared remarks, have a lot of respect and admiration for what John Russell, Roger Owens, his extended team have been able to accomplish. This is a very good sales force that needs additional capital and oversight and support clinically and medically to do what they're already doing in a broader swath of accounts deeper into existing accounts. To Stu's point, we don't want to distract our own force from TEG. We're having some tremendous success there, even through COVID. And we're excited about the potential for both of these products in parallel. Our clinical representatives might be an interesting cross pollination opportunity to build our reach and relevance. But we like what they're doing. We're going to continue to fund it to deliver fully against the potential that we see. That is a build on what they've already begun to accomplish here. Okay, very good. Two other ones. Just in terms of just thinking broadly across the business, Chris, if the growth rates for Cardiva remain robust, it won't take long until you've got a business that is the size of your whole blood business or certainly larger, certainly going to have a very different growth profile. Does this transaction now allow you to start thinking about how you might ultimately shape the portfolio with your existing assets? And then second quick question, maybe for Bill, is just on the earn outs. Just curious of that $35,000,000 what's the algorithm for the payment there? What revenue thresholds do they have to reach and over what period of time? Thanks. Yes. Thanks, Larry. So as we've said in the prepared remarks, this is fully on strategy for us. We are come up on my 5 year anniversary with the company. I feel very strongly that we can declare success on the turnaround, which included powering through, surviving and then some levels even advancing through COVID, right? This is the next era for us transformational growth assets like this have to be core to our portfolio, organic and inorganic alike. And that gives us latitude to continue the portfolio renewal that's already been underway. As you know, we divested some assets earlier, in our fiscal year that just aren't part of our future. We will continue to evaluate the portfolio in that light, freeing up resources, freeing up capital to invest in exciting assets like this one and our own organic growth through our innovation agenda. So we're excited about that. I'll let Bill answer your question, but I'll start him off by telling you that with the possible exception of John Russell, nobody will be happier than Bill and I to pay those earn outs when they come. Over to you, Bill. Yes, Larry, the earn out is pretty simple. It's a $35,000,000 total that can be earned over a 2 year period, and it is incremental dollar for dollar in year 1 for revenue over a certain baseline. So revenue growth over a certain baseline. Okay. And you don't want to give us the baseline? No, not yet. Okay, great. Thank you. Our next question comes from Anthony Petrone of Jefferies. Your line is open. Great and good morning. Congratulations on the deal. Maybe a couple for Stu and then I'll pivot to Chris and Bill. And maybe Stu just looking at the S-one that was filed, the documentation has some growth rates that were certainly hyperbolic in the 50% range. Obviously, we had COVID. So I'm just kind of wondering as you look out for the business over the next 3 years with the normalized sort of growth profile is for the business for internal forecasting on the Cardiva side. And then the TAM numbers, there's a few in the documentation. Just want to confirm that the global TAM is something around $2,500,000,000 And then I'll have a few follow ups for Chris and Bill. Yes. I'll take the TAM question first and then I'll back up and talk about the growth profile, if that's okay. So We're looking at it, but TAM, in the U. S. Alone of about $1,400,000,000 for the combined two products, Basc8 and Basc8 MVP. That's again just in the U. S. And then we believe that TAM is just shy of that outside the U. S, about $1,200,000,000 Now most of what we've put into our modeling is growth here in the is continued growth here in the U. S, but we do expect opportunities to launch in OUS markets as well. As it relates to the growth profile that Cardiva has, they've had a 40 plus percent CAGR in their growth previously, and we expect to continue to drive growth in that range going forward for next year. I don't want to give any further guidance beyond that, but we do expect that we'll continue to see that significant growth. Great. And then for Chris and Bill, the first one would just be on timing as it relates to the broader portfolio and just where we are in the COVID cycle. And so maybe a little bit on the timing rationale for this transaction and what it speaks to in terms of sort of the underlying sort of health of the business, whether that be in plasma, hospital or blood? And then I will just have one margin question for Bill. Anthony, thanks for the question. All of our underlying forecasts and assumptions remain intact, right. We're leaning into the recovery, obviously watching a set of metrics that we've talked about talk about a bit more on February 2, as far as to the quarter that just passed. But from our vantage point, this is about the longer term strategy that we've been talking pretty much since I joined the company. As I mentioned, we've been paying close attention to Cardiva. We really like this space, interventional cardiology, electrophysiology, vascular closure within it. We watched what the team had accomplished and just felt like opportunistically, this was the right opportunity for us at the right time and feel quite confident in our ability to grow it and add to it with the existing leadership as part of the team going forward. So there's a lot to be excited about here. The timing was opportunistic, which is par for the course for what we hope will become programmatic M and A as that next lever of growth for us beyond what we're already doing organically. That's helpful. And pivot to Bill real quick, I will hop back in. The business is gross margin accretive. I think the S1 has a 71%, 72% gross margin. And then you mentioned in the press release of 3.2x pro form a ratio. Is that ideal enough to continue an accelerated pace of deals? And should we expect an accelerated pace of deals post this transaction? Thanks again. Thanks, Anthony. So it's Bill. Hey, so we made it clear that our capital allocation priorities are still intact, right, with organic growth and inorganic opportunities, followed by share repurchases. So we are seeing we've been under leveraged for a while in the 1 to 1.5 range for I think as long as I've been here at Haemonetics. So this does push us up to 3.2% after the deal is closed. We have certain leverage ratio that we have to abide by in terms of our credit facilities. We are allowed to under that existing agreement, we're allowed to jump up to 4 times, but we have to that's a time of closing of a deal, but we have to get it back within 12 months to within 3.5. So we do have some flexibility still to do deals. I would also say that once our business returns to the normal level of EBITDA that we have, that we've seen over the past few years, that, that leverage ratio will continue to go down and our capacity will continue to expand. Okay. So I think longer term, we'll continue to drive down that leverage ratio, which will give us more opportunities on the M and A front or share repurchase. Anthony, it's Chris. If I just get back in, because I want to be very clear about this, right? It's, this is a sizable acquisition in terms of the dollar amounts involved here and the potential represented. Our first, second and third priority with regards to inorganic growth is going to be delivering fully against the opportunity that we see here and that Stu has outlined in his prepared remarks. So, yes, we want to be opportunistic. I think our ability to earn back capacity will happen faster than some might predict, and that gets us back in the market at an appropriate time. But in the near term, we're going to be fully focused on properly assimilating this business, building on what they're doing all along the way and fully delivering against that 10% 5 year ROIC. Thank you. Our next question comes from Mike Matson of Needham and Company. Your line is open. Yes. Thanks for taking my questions. I guess first, can you comment on whether or not Tardiva has a large bore closure device in the pipeline? Hey, Mike, Chris, I'll take that. At the moment, there's not a large bore closure device in their product portfolio. So we consider the 2 devices to be what we call small bore and mid bore, but there's not currently a large bore product in the portfolio. In the portfolio, but what about is that something you would intend to develop or factor in your market opportunity numbers? We want to continue to fuel the pipeline, Mike, for Cardiva. And we are working on some things, but I'd prefer not to share anything further than that at the moment. Okay. Now that's fine. And then how does the trend toward radial access affect the business, particularly on the IC side? I know it's been pretty widely adopted in the coronary side, but there are signs that it's going to be more widely adopted in peripheral. I know a number of companies are working on radial access products within peripheral. Is there an opportunity to develop a radial access closure device or is that just not? No, we're not really we're not looking in the radial access area. These products are used for closure of some of the access, whether it's either on the arterial or venous side. And we're staying in our lane with regards to that. We recognize that about 30% or 35% of procedures on the arterial side are done through the radial. But if we look at venous access, which is where electrophysiology procedures are done through, that is typically done through a mid bore opening and you just can't do that in the radial because of some of the devices that are being used for ablation procedures. They truly have to go through the femoral vein. So as I said to answer an earlier question, that's where we see the majority of the growth coming from is the venous side through electrophysiology procedures. Okay, thanks. And then just one more on the international opportunity. It looks like they haven't Tardiva hadn't really gone outside the U. S. So do the economics of a product like this work in places like Europe with more socialized medicine systems? We're looking at that. We want to make sure that we understand the opportunity in Europe. There are cost pressures over there, so there's some economic challenges. But we also know that there are devices foreclosure being sold in Europe that are getting a premium in the market. So we do want to look at that market as an opportunity for us for the future. Okay, great. Thank you. Hey, Mike, if I can just comment on that as well. I think Stu characterized it exactly right. But it is a $1,000,000,000 plus, dollars 1,200,000,000 by our initial estimates, TAM. We do have CE Mark, which gives us kind of a running start. The economics, as you point out, are really the pivotal But I also go back and I look at what Cardiva has already done with the RESPECT and the AMULATE trials, where there's a compelling health economics argument. And it's not dissimilar to the health economics argument we've advanced for our TEG product, for example, where I think we have been successful in Europe and in Asia, the larger markets in Asia, getting that those points across. So it's not a major factor. When we look at value drivers, it's kind of on the list, but down a ways. But I think there's upside there and we're going to explore it. It's an area where I do think to an earlier question was asked, what makes us a natural owner? Our international infrastructure is a potential asset to be deployed with this asset to kind of drive a faster ramp than might otherwise have. Caffington is a standalone company. Okay, great. Thank you. Our next question comes from Dave Turkaly of JMP Securities. Your line is open. Great. Congrats, guys. To date myself here a little bit, it's been a while since I covered some of the closer companies when they were standalone. But I'd love to get your thoughts on the IC side of sort of where the suture based products like the Perclose and some of that collagen like AngioSeal, where those stand today? And then if you would be willing to comment on I'm imagining these are premium products, but any comment on ASP would be helpful. Yes. We don't share ASP, but I'll comment on the market and you're exactly right. Your memory serves you correctly. Terumo has a product called AngioSeal, Avid has Perclose and Cardinal has a product called ExoSeal. So there are products on the PCI side. One of the things I'll point out is there are no currently approved closure devices for the venous side for electrophysiology procedures that require multiple access sites. And in these procedures, typically what you see is 3 to 5 access sites in the same vessel during these procedures. There's no one else that has the indication for the closure of multiple sites within the same vein. So although there is competition on the arterial side for coronary procedures, we feel like they have a strong value proposition on the electrophysiology side. Great. Thank you for that. And I wonder if just as a quick follow-up, you mentioned the sales force keeping kind of intact. If you comment on sort of the size there, because those are certainly some big players. I'm just curious, obviously, as a private company, I'm sure they're a little smaller. But either the size of the stands today, where you might bring that, let's say, over the next couple of years for the sales force for this area? Thank you. Yes. They've built out a strong team on the sales and clinical side at Cardiva. They have over 100 people in the field at the moment. So they've expanded significantly over the last 18 months or so. And we want to continue to fuel that growth and expand appropriately as well as bring our resources to bear. As Chris mentioned in his remarks, we have a very strong clinical team at Haemonetics and we think there's an opportunity for some cross pollinization and some pull through opportunities where we could help leverage the 2 clinical teams and our medical affairs department. Thank you. Our next question is a follow-up from Anthony Petrone of Jefferies. Your line is open. Just two quick ones. One would be just kind of going back to the margin question, Bill. You don't state there's any synergies to get to the 10% ROIC target. So when we think about where the Cardiva operating margin profile is heading, I would assume it would be accretive to the corporate average. And if so, are there any cost synergies baked into that number? And then maybe for Stu, Chris and Bill, just on valuation, We don't have the forecast going forward, but it looks to be in the high single digits on a sales multiple. Maybe just a little bit of a comment on the process. Was it competitive and just thoughts on the dual track? Thanks. Thanks, Anthony. So let me be clear on the operating margin. So we're not going to give exactly when the margin becomes accretive to our overall operating margin because that would mean I have to tell you what the operating margin is like for Haemonetics prior to the acquisition. But it would it's going to take multiple years for us to get to a number that is accretive. It doesn't happen in the 1st 2 years, obviously, when we're talking about $0.15 to $0.20 of EPS dilution in our 1st fiscal year and about neutral in terms of EPS in the 2nd year. And then on our way to get to the 10% ROIC, I think if you did the math, you'd find that you'd be close to being positive or accretive to our overall operating margins. And then in terms of the synergies, we have to remember, this is a strategic acquisition for us, not a synergistic play. You've heard Stu and Chris talk about all the products and markets and some of the commercial overlap that we intend to see. But on the big cost savings here is on the public company cost avoidance, right? So this was headed down this Cardiva was headed down the IPO path and those costs don't need to be incurred now. And in addition, Chris also mentioned, if we move internationally, we can leverage our international infrastructure. But the same is clear across the organization, right. Obviously, we have a strong infrastructure in all the back office functions. We intend to utilize that. Right. And just kind of was the process competitive? Thanks. Yes. Let me comment, Anthony. I think Bill covered it well. We won't talk about the nuances of process. This is an attractive asset and it's commanded the appropriate attention as they were moving forward towards IPO. From our vantage point, it's exactly as Bill talked about. We're excited about revenue growth and product based profitability over time. They were pursuing an IPO. The opportunity cost avoidance is not trivial. We do think this is a better outcome in terms of making good on the full potential of the product and the pipeline. There are infrastructure, medical, clinical, international selling leverage opportunities, the G and A, for example, that they would have had to add to be a public company. And you know us, right? We're not going to be wasteful. We look at this as an opportunity to further improve our own leverage ratios internally in terms of G and A cost, etcetera. But this is a revenue play for us and we're not going to do anything to compromise the growth trajectory and the long term profitability that comes with this gross margin. Thank you. There are no further questions. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.