All right. Morning, everybody. Thanks so much for joining us. My name is Matt O'Brien. I cover med tech here at Piper. Extremely excited and privileged to have the SI-BONE team here with us today. We've got Laura, who's the CEO, and Anshul, who's the CFO of the company. Thank you so much for coming all the way across country.
Thank you.
At least the weather outside is really nice and warm, like San Francisco, so I don't want to get the conversation started off on the wrong foot, but I'm going to, so forgive me. Can we talk about the DOJ investigation? I've known you for a long, long time.
Yeah, yeah.
I've known Anshul here for a while, and, you know, we've always had, you know, very, you just have a high integrity level.
Yeah.
This DOJ investigation is just strange to see. Any more updates that you can share, or just how do we kind of ring-fence what's happened here?
So before we jump into that, if it's—if it's okay if I can give kind of a little bit of an overview.
Yeah, sure.
On SI-BONE, because I have gotten feedback from some investors that have said, you know, setting the table is at least helpful. So SI-BONE is a high-growth medical device company, and we're focused very specifically on the sacropelvic space. If you think about SI-BONE, you should think about a company that is actually creating categories. We go after a market that's around 500,000 procedures a year. It's over a $3 billion market opportunity, and there are three areas that we play in. Number one is an SI joint fusion. That's how we actually started the company, is an SI joint fusion. We're the undisputed market leader. We pioneered the space. We have over 140 peer-reviewed published papers in this area. We have the most knowledgeable sales force in the industry. We have professional education.
We focus on education specifically, and we do a lot of reimbursement support. So that's really how we started the business, and that's a couple billion of the market opportunity. The second area that we focus in is pelvic fixation and fusion. And so, as I said, really expanded. We're a multi-product platform at this point, focused on the sacral pelvic space and pelvic fixation. We have a product called Granite. It's a breakthrough device. It was our first breakthrough device that we developed. We have a New Technology Add-on Payment for that. It's used in multilevel construct procedures at the bottom of the long construct to provide a strong base at the bottom of the construct. And that's around a billion-dollar market opportunity.
We actually made significant strides in our product portfolio, developing a product this year called Granite 9.5 that's focused on the degenerative opportunity or shorter constructs, which is the majority of the billion-dollar opportunity. We just received word that we have a Transitional Pass-Through code that's going to go into effect on January 1st of 2025. A nice tailwind. Finally, launched a third product category for sacral insufficiency fracture. The product is called TNT. It's our second breakthrough device, applied recently for an NTAP for that product. And so that's a third market opportunity that we're going after. It's specifically sacral insufficiency fractures in the pelvis, and it's an area where patients typically are not surgically treated. Once again, think about SI-BONE as a company that is actually building categories.
And we're doing that. If you think about our financial profile over the last five years, we've grown at around 23% on average every single year. We're going to hit Adjusted EBITDA break-even in this quarter. Cash flow should be around 12 months behind in terms of getting to free cash flow because of our asset light model. So we think that we're a pretty unique company and doing some unique things.
Yeah.
Now.
Okay. Just to be clear, like, I was supposed to start there. You're not, like, changing the subject at all.
I'm not changing the subject.
Yeah.
But now let me address the question that you asked, right? And so we did receive an inquiry from the DOJ in October. It was a very broad inquiry that we received. It asks questions about meals, speaker programs, consulting with physicians. It's not unique to companies in our space. We do work closely with surgeons and physicians. Given that we are this category creator, what it means is that education is really important. Innovative products are really important. So we do work regularly with physicians. We have a very robust compliance program. Our spend is not out of the norm for anything that we're doing. We're going to cooperate with them. But that's what we know, thus far. But it's not going to change how we're doing things as a business.
We are, you know, addressing things in the appropriate way to make sure that we're identifying unmet clinical needs. We're training people appropriately, making sure that these are safe and effective procedures, and like I said, have a strong compliance program behind us.
Got it. And, to that point, I think your Head of Compliance has been there for about a decade now.
Correct.
No issues historically.
No.
You know, I think there may be some fear that, okay, you know, you've got this DOJ investigation. Maybe your selling programs may change a little bit. How can you be so confident that things won't change as a result of this?
I mean, we're in the midst of it right now, right? And so we're not changing the way that we're doing things. As I said, we work with surgeons to develop products. We work with surgeons to do training. And it can be peer-to-peer sorts of events or cadaver training or what have you. It can also be at a conference with a speaker that is talking about particular cases that they've done. These are all appropriate activities that you should be engaging in, especially with us, you know, leading in some of these areas where education becomes so important. So we're continuing to operate as usual, but we'll also cooperate with the DOJ and make sure that they get what they need.
Again, it's not like you're the first in the ortho space to go through something like this, so.
Yeah.
Yeah.
Yeah. And I mean, more broadly, it's medical device, right?
Yeah.
I won't mention other companies' names, but, you know, there are a lot of them that are dealing with this.
Let's talk about more of the positives now versus that. Not that that's negative, overly negative, but Granite, $300 million category. You just talked about some large regional sales agencies that you signed.
Okay.
Can you talk about those agencies, why they decided to sign with you, what the opportunity is with those, those people?
So I think you're talking about our new TNT product, which is the $300 million market opportunity. So TNT, once again, is around sacral insufficiency fractures. There are around 120,000 patients per year that deal with sacral insufficiency fractures. If you think about the average patient, it's a Medicare population patient. It's heavily female. Probably around 80% of these patients plus are female. They're frail, osteoporotic bone, and they may have a fall or quite frankly, just get jostled in a car because the bone quality is so poor. So our TNT product that's here, that product is an anatomy-specific implant. And it's used in the sacral insufficiency fractures.
The goal is to adhere to the fracture across the SI joint and to immobilize the fracture and get the patient up and moving the very next day is the goal. So if you don't do that, around 25% of these patients have risk of mortality after 12 months. And so we feel pretty passionately about addressing this particular unmet clinical need with the product. And as I said, breakthrough device as well. And we recently applied for a New Technology Add-on Payment for that technology as well. And we'll know sometime this summer if it will be granted or not.
Got it. So what kind of contribution can we think about from that product, next year?
I think it's going to be a nice grower for us, and you got at the question of agencies and working with agencies, and there's two ways that we're really going to expand the market here. Number one is we worked with over 1,200 surgeons just in the third quarter alone, and the opportunity that we have here is to do cross-selling with that particular product, so physicians that are currently doing SI joint fusion, can they add in pelvic fixation? Can they add in sacral insufficiency fractures, so increasing the surgeon density or the number of procedures that these surgeons that we already have, getting them to do more of our procedures. The second way is to expand deeper into potentially other call points, so it's spine surgeons that we work with regularly that do these procedures.
It's interventional radiologists, which we've started to work with in 2024 on the SI joint fusion side. But then it's also general ortho trauma. And that's where we're seeing the distribution opportunity is working with these third-party agents that primarily call on general ortho trauma. We've had a really great experience by moving more into a hybrid salesforce over the last couple of years with Granite. We've started with a direct salesforce primarily, but now we've added on. We actually have over 200 third-party agents in the United States that we're working with right now that are helping to cover cases for us. The territory manager is still the quarterback for all of this, but they're working closely with the third-party agents in order to get access to these surgeons.
Getting back to your original question, it gives us a really nice opportunity to grow this particular market, both by increasing the number of procedures our surgeons are doing, and then number two, reach more surgeons with our hybrid model.
Okay. Got it. And then back over to Granite. Let me try to get this right for the first time today. But the 9.5, you said on the call it's surpassing the success you experienced with 10.5. What do you mean by that? And what are you seeing there?
It's just the pace of adoption is more rapid than our original Granite product plus our TORQ product as well. The Granite 9.5 product really opened up this opportunity. When we originally launched Granite, we were focused on the 30,000 deformity cases that occur in the United States every single year. Those cases have issues with fixation failure, screw loosening, rod breaking. Those 30,000 cases should all have pelvic fixation and fusion at the bottom of the long construct so that it stabilizes that construct. What Granite 9.5 does is it actually goes after an additional 100,000 procedures, and those are more your degenerative spine procedures. Those are the procedures that our surgeons, those 1,200 surgeons that we work with every single day, those are the procedures that they're doing in their practice. That's their standard procedure.
We have the opportunity with Granite 9.5 to not just address more scoliosis, long construct type cases, but more of your typical degenerative spine cases.
Got it. And that should be a pretty quick, you know, uplift, I would think. And then I'm assuming training's not too difficult.
Not at all.
For 9.5.
No. And it is different. SI joint fusion is a journey in terms of the educational process. It usually you have to help them understand the prevalence, the diagnosis, the treatment. Whereas there's a general understanding of the need for pelvic fixation and multi-level constructs, it fits perfectly into the workflow of the surgeon, and we have a better product solution, and you have the health economics with the NTAP and now the TPT.
Got it. Okay. Should we think about iFuse still as the biggest growth driver for the business? I think it gets underappreciated a little bit with all the new ones that you have coming out.
SI joint fusion is at the core of the business, if that's what you're getting at. We have iFuse 3D, we have TORQ now. They're all named with iFuse in them, and then we actually have our Intra product, which is primarily used by interventional. The core of the business is the SI joint fusion business. I believe SI joint fusion is the fastest growing market, you know, in the spine slash interventional spine space, and we're the undisputed market leader, so benefiting significantly from that continued growth. The penetration is still, our estimate is still less than 10% in that space. A lot of opportunity to grow there. With that said, Granite has been a very strong contributor to growth as well in pelvic fixation.
And we're in such early days with the pelvic ring fractures or sacral insufficiency fractures. But we're really just in beta launch right now with the TNT product. We won't do full launch until the first quarter of 2025. But we really like what we're seeing so far in that third product too. So we just have a broader portfolio addressing sacral pelvic needs. We're the leader in each of these spaces, creating these categories. And then the surgeon density I'm really excited about too for 2025. How do we have this incredible asset working with, you know, 1,200 surgeons just in the last quarter alone. How do we work with them not just on SI joint fusion, but pelvic fixation and sacral insufficiency fractures?
Got it. Got it. And, Anshul, I wanted to make sure I included you in the conversation. So maybe we'll do some short-term kind of, you know, discussion here or questions. But, you know, Q3, how big of an impact was the hurricane on your business? I know you came up a little bit short, not much, but a little bit short on the top line in Q3. Was that the delta really related to the hurricane?
Yeah. So on from a Q3 perspective, it was a strong quarter. We grew 19% on the top line. We were near adjusted EBITDA break-even. We had $700,000 of cash usage in the quarter. So it was a strong quarter. And this was despite the hurricane impact, which our best estimate was there was about $150,000 worth of deferral of cases that happened. And you could probably double that to have the impact of cases not being booked in those specific markets that were impacted by hurricanes. So that was sort of the quantum of impact that the hurricane had. But more importantly, beyond just the strong metrics that we had, from an execution standpoint in the third quarter, what was equally exciting was the KPIs that we track to demonstrate the momentum in the business. You had another quarter of double-digit active physician growth.
You know, we added 150 active physicians in the quarter. Your productivity per territory grew 20+% in the quarter to close to $1.8 million. So that was very encouraging as well. And the number of docs that we added and the number of docs that are doing multiple procedures also grew really well in the quarter. The number of docs doing multiple procedures grew 35%. So to Laura's point, the density focus is starting to play out as the portfolio starts to get more and more into the market. So that sets us up really well for 2025 as well.
Got it. Okay. And I want to get into that 1.8 million figure in a second. But, you know, what kind of headwinds did you see early in Q4 from IV solutions? And then the second hurricane, you know, how impactful was that? And then, you know, low back pain doesn't really go away. I wish it did. I have it. Why wouldn't these cases just be postponed and then pushed into early next year or Q2 of next year?
Yeah. So when we talked about this on our earnings call, our underlying assumption was we were seeing case deferrals mostly on the deformity side. These are cases that are six, seven-hour cases, heavy uses of IV in those cases, and they're very concentrated at academic institutions. So we had sites of service that were either exclusive one source provider for IVs or being more thoughtful about the IV allocation. And we were seeing deferral of those cases. You're correct. This is just timing. Most of those cases come back on the books. Our assumption a few weeks ago was most of these cases will get deferred to 2025. Now, what we have seen since then is some of these cases have actually come back on the books, in the fourth quarter itself. So that's number one.
Number two is for those that are now still being deferred into 2025. We're seeing an opportunity to offset that impact by just the strong demand that we're seeing in the business, both across Granite 9.5, TORQ, the momentum of interventional. So we feel really good about ending the year stronger than what we had anticipated even a few weeks ago.
Oh, that's great to hear. Okay. I mean, that kind of dovetails into the last question. Lots of numbers here. I'm sure you're the finance guy, so you can handle it. So Q4, you know, sequentially, you know, you get to increase the midpoint of the range. You know, you see the, sorry, you see the sequential increase, but the midpoint of the range is more than what we've seen historically from you, Q3 to Q4. It's not dramatic, but, you know, you have some of those headwinds in a bigger organization. Like, you know, are those offsets enough to really get to that midpoint of the range? It seems like you're kind of saying here, yeah, we feel good about that.
Yeah, we feel really good about that, for a few reasons. One, when you think about all the training work we did in the first half of the year, you're starting to see the impact of that in active physician growth in the second half of the year. It generally takes some time for them to start getting active. So we feel good about that. So that's number one. Number two is Granite truly started to roll out in the third quarter. So being able to see the impact of 9.5 in the fourth quarter and then beyond sets us up well. TNT is still in the early phases of launch as well, but we should be able to see a benefit from that given the traction we're seeing from the surgeon population there as well.
So we feel really good about the setup coming into the fourth quarter, and it's playing out really well for us in the fourth quarter, and even when you go beyond that, it sets us up well for 2025 and beyond because a lot of these tailwinds that we have in the business throughout this year will continue into next year because these are secular, from a demand perspective and from a rollout perspective.
Got it. Okay. I didn't realize how little time we have left. A lot of discussion came up, Laura, about Intra versus TORQ and what you're seeing in that among clinicians there. What are you seeing? And are they still defaulting to TORQ because it's such a good product?
They have been. The interventionalists are primarily using TORQ, and we recently talked about our STACI study. So we did a prospective level two trial with interventionalists using TORQ, 110 patients enrolled. No, the first data that you get is the safety data. So no serious adverse events associated with that particular study. So we're pleased. And that's where we saw the initial traction with interventionalists is actually with our TORQ product. With that said, there were definitely some headwinds in 2024 with the Intra product, and I would say in general, the 27278 dorsal allograft procedures, a lot of questions around reimbursement. We're starting to see that stabilize. At least that's what we seem to be looking at in the market at this point, that the procedures are being performed, that they're being reimbursed.
There's actually a proposal to increase the reimbursement for the facility effective January 1st, 2025 for 27278 by 30%. It'll be similar to the 27279 procedure for lateral procedures. Our Intra product, we think it is a terrific product, and we're seeing more and more adoption of that product, especially in office-based labs as well as in surgery centers as well. It's more of a percutaneous, minimally invasive procedure that's really good for that site of service as well as for the interventional spine physicians too. We have a lot of opportunity to expand our SI joint fusion business, in interventional and being the market leader focused on education. It's playing very well for us.
Okay. Understood. And that's great. Anshul, maybe last question here in the last minute. This is another Matt O'Brien long one, but, you know, great, great improvement in EBITDA in Q3. You know, I think for the full year, 2023, you had a $16 million improvement in EBITDA year-over-year. 2024 is $11 million. Should we expect something similar to that type of improvement next year or those levels next year or with all these investments that you're making in the business, could it be even a little less than that?
Yeah. So similar to our top line growth, really happy with how the P&Ls played out. You know, we saw a 94% improvement in year-over-year adjusted EBITDA near break-even in the third quarter. That gives us a lot of confidence in getting to break-even in the fourth quarter and also for full year 2025. Now it's going to be back half loaded in 2025. You're going to have some seasonality play out there. But, you know, from a medium-term and a long-term perspective, we are confident that revenue growth rate will continue to outpace OpEx growth rate. Now, is that going to be one and a half times? Is it going to be two times? That's going to be dependent on the investments in the business with timing of new product launches, the marketing activity around that, and training activity as well.
but we feel really good about the expansion, the addition of dollars, but also expansion of EBITDA margin going forward at a really good clip.
Got it. Got it. Okay. Well, I think I've taken us over here a little bit, so we'll have to end there. Laura, Anshul, thanks so much for all the feedback. Really do appreciate it.
Thank you, Matt.
Thank you, Matt.
Thanks everybody.
Bye. Okay. Let's go ahead and get started. Thanks everybody for being here. My name is Chris Raymond. I'm one of the Senior Biotech Analysts here at Piper Sandler. Very pleased to introduce our next presenting company, which is iTeos Therapeutics. We have with us on stage Michel Detheux, who's the president and CEO, and also Carl Mauch, who heads up the IR and corporate communications function. Also in the audience, we have Matt Gall, who's the CFO. So, just for, I think everybody pretty much knows the drill here. This is a fireside chat presentation. So it's meant to be informal, participative. If you guys have any questions in the audience, just raise your hand. I'll make sure I get it asked and answered.
So, we have a lot of questions left to delve into, but Michel, maybe for the folks who might not be familiar or initiated into the story, give us a sense of the setup and you know, the value proposition going forward, and then we'll dive into all the programs and the questions.
Yes. Hi, good morning everyone. iTeos is a company which has developed a very unique expertise in tumor biology to identify relevant targets and develop differentiated assets. Today, our most advanced program is a TIGIT antibody, which is partnered with GSK. We signed a deal worth of $2 billion in 2021 to move this program forward. Today we have one phase three ongoing in high PD-L1 non-small cell lung cancer and two phase two ongoing in non-small cell lung cancer and adenocarcinoma. On top of that, we have several programs targeting the adenosine pathway, with an A2A receptor antagonist and ENT1 transporter. We'll present some data on the A2A receptor antagonist next week at ESMO IO.
Okay. Excellent. Well, maybe let's just dive into, maybe what's top of mind first and foremost is, belrestotug, which is your anti-TIGIT antibody. So, you know, before we get into the specifics of the program, the anti-TIGIT space, as a pursuit has seen some failures.