Okay, good morning, everybody. Thanks so much for joining us. We're very pleased to have with us today, Laura Francis, CEO of SI-BONE. My name is Matt Miksic. I cover medical devices here, in the U.S. at Barclays. You know, we have some topics to cover, but I thought, given that, you know, we don't currently cover SI-BONE, it might not be a bad idea for Laura to make a few remarks just to kind of provide an overview and frame the conversation.
Yeah, I'd be happy to. Thank you for the invite. Really appreciate it, and thanks to all of yous in that are in the room this morning. I'm Laura Francis. I'm the CEO of SI-BONE. I've been with the company for nine years. I joined in 2015, and at the time that I joined, SI-BONE was pioneering minimally invasive SI joint fusion. So first of all, what does that mean? You have two SI joints in your pelvis. They carry the weight from your upper body to your lower body, allow you to twist and bend. For women, they expand a little bit in pregnancy and childbirth as well. And it is actually the largest joint in the human body, and until SI-BONE started our business, there was no surgical solution for the SI joint.
So that's how the company started, with identifying this very significant unmet clinical need and developing medical device technology as well as a technique that very clearly works. We have worked with historically orthopedic and neuro spine surgeons, and they have done over 95,000 cases since the inception of the company. So we've really built on that. We went public in 2018, and I became the CEO of the company three years ago. And since I joined the company, or since I became the CEO of the company, we've really become a multi-product platform business that focuses on the sacropelvic space. We have three different procedure types that we work with, and we really had a breakout year in 2023.
We grew 31% in 2023 to approximately $139 million in sales. At the same time, we saw a pretty dramatic improvement in our operating leverage. We reduced our Adjusted EBITDA operating loss by almost 50% last year. So grew revenues 31%, grew operating expenses 4%. So that's the type of leverage we're getting on our business, and we have a very clear line of sight to break even at this point. So coming off of a terrific year, a lot of momentum going into this year, and we have talked about three different products that we'll be launching this year as well, that are gonna help us with that momentum to accelerate off of that momentum in these three different markets that we're working in currently.
We provided guidance for 2024 of 17%-19% growth. By the way, that's exactly the guidance that we provided a year prior-
Yeah, nice. Yeah.
- and did 31%. Our gross margins in the range of approximately 78%, and then our operating expenses growing approximately 9%. So continuing to see that operating leverage on the business. So I'm very excited for this year and what we can accomplish in building on the tremendous success from last year.
Okay. Well, that's a great overview and, and helpful. Yeah, I did notice that, that you got it to 18 and delivered 31. And so I guess the question is, do you really think that you'll be closer to 18 this year, or, I mean, maybe talk a little bit about, how you think about guidance and-
Yeah
What the potential flex is around that number.
Yeah. Well, as I said, our guidance philosophy didn't change between last year and this year. And what we really wanna do in 2024 is grow into the opportunity that we have, very similar to what we did last year. So, in particular, you know, our core business in minimally invasive SI joint fusion continues to grow. And just this past quarter, we have started to sell not just to orthopedic and neuro spine surgeons, but also to what we call interventional spine, which is anesthesiologists, physiatrists, and interventional radiologists. So it gives us the opportunity to more fully penetrate the SI joint fusion market with a number of different products. And there's actually new reimbursement. There's a new Category I CPT code that takes into consideration some different products. And we just launched a product called Intra.
It's a dorsal allograft product, bone allograft product, that fits nicely into this new code. So have the opportunity that's there. We also, our pelvic fixation business is a big growth driver for us. We have a product called Granite. Breakthrough Device Designation and new technology add-on payments of over $9,800 per procedure, and that's been a big winner for us. We just in January announced a Granite line extension. So historically, our Granite product has been targeting long constructs, so adult deformity cases, scoliosis cases, where the patient has an S-shaped spine. The new Granite product is targeting short constructs and that market is around three times the size of the adult deformity market.
So really nice opportunity that we're already cleared for in pelvic fixation, and we'll be launching that product officially in the second quarter of this year. And then the third area that we're focused on is pelvic trauma, and very specifically, sacral insufficiency fractures. These typically are older patients, poor bone quality, and very similar to our original SI joint fusion business. They're treated conservatively, they're treated with rehab, and we have a surgical solution for them. So getting back to guidance, which was your question, what we're doing is we have these new product opportunities that we wanna grow into and see the acceleration of the business versus baking all of that in. So very similar to the philosophy that we had in 2023. Let's see the growth from those new business opportunities and then progress throughout the year.
Got it. So more of a base business guide?
Correct.
Yeah, that makes a lot of sense. You know, and maybe talk a little bit about penetration. You sketched out about 500,000 procedures for these three markets. If you could talk a little bit about where are you in terms of-
Right.
Do you think, in terms of penetration?
Right. So let me talk about the primary SI joint fusion market first. So our best estimate is that there are around 280,000 potential patients per year that are out there. Last year, that market, if you, we have around 70% of the SI joint fusion market. So if you do those numbers in the US, there were a little over 20,000 procedures in the US last year, so still less than 10% penetrated. And as I said, I think that we have a big opportunity to continue to build off the momentum in the existing business, and then also a new opportunity here, on the interventional side. So that's the first area.
The second area in pelvic fixation, we're really replacing products that have historically been used there for pelvic fixation, with a new technology, a better technology, not just fixation, but fusion at the bottom of these constructs. And so we do believe that in long constructs, there's around 30,000 procedures, and we have the opportunity to be the standard of care in that area for fixation and fusion. And then this new Granite line extension, another 100,000 cases, very much an untapped opportunity. And then finally, the trauma opportunity is around 60,000 cases per year. Still a very small part of our business. I do think that this new product launch toward the end of the year is gonna be really important to capturing that market opportunity.
And then also, we should have some published data on a clinical study that we've been conducting called SAFFRON, which, given that this is a new procedure, historically, these patients have not been treated. The clinical data is gonna be really important.
Okay.
So long story short, a minimal penetration in these very large markets where we are the market leader in those, those spaces.
Okay, and minimum penetration even in your most mature market, if you wanna call it that?
Correct.
So, you know, growth, as with many, you know, many small companies, and I still think of you as a small company, in this musculoskeletal space, driven by, you know, reps and rep strategy.
Mm-hmm.
Maybe talk a little bit about, you know, how your, you know, growth is driven by that, and whether some of these new specialties require, you know, specialized reps. Are you getting some leverage out of your field force? How is that working?
Yeah. We have an incredible field force and sales leadership as well. So our sales leadership is headed up by Tony Recupero. He's been in the industry for 20+ years. He's well known in this industry. He was the VP of Sales for Kyphon when they went from zero to $250 million. We're getting closer to that top end at this point. But they really understand, our sales leadership really understands what it takes in order to build out a business like ours. And so this year we have 82 territory managers. These are direct sales reps, and it's been very important for us to have direct sales reps, because once again, when you're identifying these unmet clinical needs, you have an educational sale that you're making here.
Our territory managers are the key to helping surgeons understand the anatomy, the prevalence of the concern, the diagnosis, as well as the treatment of it. We got very significant leverage on our sales channel in 2023. So we grew sales rep productivity from around $1.1 million in 2022 to $1.6 million in 2023. How did we do that? First of all, just seeing this inflection of the business, number one, is really important. But number two, it was we're actually selectively using distribution or more specifically, third-party agents in order to cover cases, especially some of these Granite cases, the long construct cases. A typical SI joint fusion procedure takes 45 minutes.
It's one of the simplest procedures that a surgeon is going to perform, whereas adult deformity procedures are one of the most complex, and they take around six hours in total. So what our commercial leadership has done is develop this hybrid model where we're using direct sales reps, but also third-party agents to provide support. And then in addition, we have junior clinical support specialists that support as well. So it's given us the opportunity for pretty—first of all, to continue to grow our surgeon base. We actually worked with over 1,600 surgeons last year. It was really amazing, and over 1,100 just in the fourth quarter alone. So reaching out and increasing the number of surgeons that we're working with is really important, but at the same time, we've got this huge leverage on our sales channel.
Okay, that's great color. And when you say third-party agents, those would be folks who maybe are supplying another part of the case, like the pedicle screws and the-
That's exactly right.
Which really means, I mean, I hate to name names, but, I mean, that kind of boils down to J&J, Medtronic, and, and Stryker, K2, I guess are the three folks-
Well-
Who are in those long, long construct deformity cases.
Well, we're working with over 170 agents at this point, and you are correct, that what we do is we engage different agents in each market, and they typically... Let's say, let's go back to an adult deformity procedure. They're in the case, they are selling the hardware in that particular case, and so they're just bringing in this new disruptive technology, and we split commissions between our direct sales rep and between the agent. And so it gives us a tremendous opportunity, and it's also an opportunity for them to just increase the value of the OR visit they're making.
Sure. Yeah, and for folks wondering about sort of the exclusivity of reps,
I don't know if it's you or me.
I'm not sure either. But for those folks wondering about exclusivity, you know, this is a product that these other companies don't have, as you said. It's kind of a disruptive-
Yeah.
It's a disruptive product. And just-
Well, yeah, I mean, it's highly unusual to have a breakthrough device or 510(k) cleared products, and there's literally just a handful of them. We were able to get that Breakthrough Device Designation, number one, and then number two, the New Technology Add-on Payment typically comes with that Breakthrough Device Designation, so it has a significant economic advantage as well.
Okay. And without breaking out a picture of the spine here and having an anatomy lesson or anything like that, you know, for folks, I think this is sort of represents the anchor in what's a pretty complicated and long-
Right.
-fusion construct.
Yeah. If you think about a scoliosis case, the patients literally have an S-shaped spine. And so typically, what the surgeon is doing is they want to just straighten the spine, and they use pedicle screws and rods. We do not sell that product. Those tend to be commodity products. They're highly price-competitive products. So what we do is we come in, and we provide these new products, in this case, the pelvic fixation and fusion product that has the breakthrough device and the new technology add-on payment. So we actually work pretty collaboratively with spine companies, as a sacropelvic solutions company.
Okay. And so maybe, again, along the lines of distribution and how you're gonna growing into these new opportunities, what's your expectation for sort of rep support? I don't know if education is as big a part of pelvic fractures, insufficiency fractures, or, you know, is that also gonna be an area where you can leverage folks who are in a trauma, you know, hospital?
Yeah, the trauma opportunity is an interesting one in that the patients, as I said, typically aren't treated or they're treated with just rehab. And what I mean by that is that the patient can't just go home, right? If you have a pelvic ring fracture, think of your grandmother, she's not able to get up and get around. She can't make food for herself. She can't get to the bathroom. She can't bathe, all of those things. So she ends up in a facility. And so our goal is actually for those patients to be treated and be able to get up and go home and just go about the business of life and have mobility.
The patients are seen by a number of different types of surgeons, so they're seen by typical orthopedic and neuro spine surgeons, which is our primary call point. They're also seen by general ortho trauma surgeons, and they're seen by interventional radiologists, which, as I had just said, is a new call point for us. In terms of the general ortho trauma, we do think that distribution is going to be important to reach those particular surgeons because it is a different call point for us. But we see the opportunity to work with distributors very similar to what we've been doing on the pelvic fixation side.
Okay. So whereas some folks might say, boy, trauma can be kind of a tough market because you have to have reps willing to sit in their car and eat fast food until 3:00 A.M. and wait for cases at these large-
That's right.
Something like that.
That's right.
This is a bit of a different trauma market.
It is different. First of all, it's not high-impact trauma, so it's not, you know, 1:00 A.M., you're going in and having to put together somebody that's been in an automobile or a motorcycle accident. But we do think to reach that trauma call point, and we've been working with some of the tier one or level one trauma centers and some of the key opinion leaders in the space, so learning a lot about the products, about the solutions, and about how to approach general ortho trauma surgeons.
Okay. And I wanted to-
I think it's you.
Thanks. Thanks. Yes, it is me.
'Cause it's when you start to talk.
Yeah, I'm not sure what I can do exactly.
Yes
... except to maybe stop talking. I'll make my questions quick. Maybe talk a little bit about, sort of the need for cash, the level of consignment inventories in the field.
Right.
A little bit different from, you know, much different than a, like, a spine or an orthopedic business, where there's lots of sizes-
Yeah
... and trays and sets. Maybe talk about your use of cash or need for cash.
Yeah, great question. So we ended the year with $166 million in cash, and we burned less than $1 million in our fourth quarter, and moving very rapidly toward break even. So we feel like we're in a terrific spot in terms of our cash position. You're also right that a lot of people think of us as a, quote, "spine company." I've said this a million times, it doesn't really matter, but we're not a spine company. We're focused on the Sacropelvic space. We do work with spine surgeons, but that's really where the comparisons end there.
Also, you mentioned the capital model for us is, you know, let's take those adult deformity cases that I was talking about, where we're in the OR with other spine reps that are bringing in pedicle screws and rods. They'll typically bring in 100,000+ instruments and trays into those cases. It's typical for us to bring something more like, you know, $15,000 of instruments into a case like that, and we're making about the same amount on that case as the spine company in the case. So we're very different. If you really dig into our company, what you're gonna find is we're really focused on identifying unmet clinical needs. We're developing innovative products around those unmet clinical needs.
We have high-quality clinical data, over 125 peer-reviewed, published papers that are out there. Reimbursement, we had to learn a lot about reimbursement, building out the SI joint fusion space. And so we've become experts in this space to help our hospitals understand how reimbursement works for our various procedures, and then just having this incredible asset in our sales force as well. It really differentiates us from other companies that are out there.
Okay. Yeah. No, I remember that, that long journey through-
Yeah
... reimbursement to establish, you know, what you're now benefiting from.
Yeah, a lot of scars from that. But also an incredible amount of knowledge that we are applying in all of these areas, because surgeons and hospitals, what's happening is that their payments, their reimbursement payments, are typically going down every single year, and the cost of solutions are tending to go up. And so what we're trying to do is make sure that we're always thinking about the economics of our solutions, and patient outcomes being absolutely of the utmost importance.
Sure. And on the category, I get a quick question. Any thoughts on the potential importance of enabling technology, which has become such a strong theme elsewhere in med tech and surgery?
What we try to do is just be compatible with the solutions that are out there currently. We’re agnostic on enabling technologies, and our core market in minimally invasive SI joint fusion, as I said, it’s one of the easiest procedures that a surgeon is doing, so we don’t typically see navigation or robotics being used in those cases. In the case of pelvic fixation with adult deformity procedures, the majority of those, we’re gonna see navigation, some robotics as well. Trauma, typically not seeing enabling technologies. So our goal is to really stay agnostic on whatever the surgeon is interested in using, that they can use our products with it.
Okay. Yeah, that makes a ton of sense. And I guess, you know, in a larger case, it's someone else's enabling technology that'll be driving the vast majority of that case. You'll be delivering on that sort of smaller end.
Right.
If the case, you know, maybe was... And I hate to end on this, so I won't. I was gonna ask another question just on, you know, it's easy to do, but it was hard to establish as a market.
Yeah, yeah.
You know, which is just, I think, a fact.
I think it's—Once again, we talked about the things that were difficult about building our business. One was reimbursement, and we became experts in reimbursement. The other is the educational side, and there's not a lot of innovation in the markets that we're in at this point, enabling technologies being the exception. That's really where you see some innovation. But what we're doing is something where we're identifying these unmet clinical needs, and so the focus on education that we needed since the inception of the company is really built into our culture at this point, and it allows us to create these solutions that can help patients that otherwise are not being properly treated.
Okay. Well, with that, we're at time. Thank you so much for coming.
Thanks for the time, Matt. I appreciate it.
A pleasure speaking with you.
Thanks, everybody.