and good morning, everyone, and welcome to the Teleflex Inc. Q4 2020 earnings conference call. The press release and slides to accompany this call are available on our website at www.teleflex. Dot com. And as a reminder, this call will be available on our website and a replay will be available by dialing 855-859-2056 or for international calls, 404-537-3406, passcode 8, code 8,7,8,956.
Participating on today's call are Lien Kelly, Chairman, President and Chief Executive Officer and Thomas Powell, Executive Vice President and Chief Financial Officer. Liam and Tom will provide prepared remarks, and then we'll open up the call to Q and
A.
Before we begin, I'd like to remind you that some of the matters discussed in the conference call will contain forward looking statements regarding future events as outlined in our slides. We wish to caution you that such statements are, in fact, forward looking in nature and are subject to risks and uncertainties, and actual events or results may differ materially. The factors that could cause actual results or events to differ materially include, but are not limited to, factors referenced in our press release today as well as
our filings with the SEC, including
our Form 10 ks, which can be accessed on our website. Additionally, during this conference call, you will hear management make references to the estimated positive or negative impacts that COVID-nineteen had on our operations during the Q4 full year of 2020. You'll also hear management make statements statements regarding intra quarter business performance during the Q1 of 2021. Management is providing this commentary
to provide the investment community
with additional insights concerning trends and these disclosures may not occur in subsequent quarters.
With that said, I'd like to now turn the Thank you, Jake, and good morning, everyone. It's a pleasure to speak with you today. Before I get into the details of our quarterly performance, I'd like to once again offer my sympathies to anyone who has been impacted COVID-nineteen as well as my sincere thanks to all the healthcare workers who continue to put themselves at risk to battle it each day. I'd also like to take a moment to again recognize the Teleflex employees around the world. This past year has been challenging, but our team has done a tremendous job serving our customers and patients globally, overcoming obstacles to manufacture and distribute our products to the people that need them most.
Thank you. Now turning to our results. Considering the volatile environment we operate in, we are pleased with our 4th quarter performance as our business did better than we expected and trends continued to improve across many of our product categories and geographies. We saw better than expected sequential improvement from quarter 2 to quarters from quarter 3 to quarter 4. Despite a rising number of COVID-nineteen infections by COVID-nineteen.
Those being our interventional urology, interventional access and surgical businesses, as well as continued strength within our vascular access and other product categories. While from a regional perspective, we saw strength within the Americas as well as positive growth within EMEA and improving trends in Asia. Quarter 4 revenues totaled $711,200,000 which represents an increase of 2.3% as compared to the prior year period on a constant currency basis. Growth in the quarter was aided by 2 additional selling days, which we estimate contributed approximately 3 percentage points. Excluding the impact of the additional selling days, we estimate that our constant currency revenues declined approximately 1%.
The days adjusted declines reflect continued recovery progression relative to the 4% decline we experienced during the Q3 of the year and the 12% decline we experienced during the During the Q4, we estimate that headwinds associated with COVID-nineteen caused a net negative impact of approximately $61,000,000 or approximately 9%. If we were to normalize for the negative COVID impact, we estimate that our underlying business grew by approximately 11% on a constant currency basis or 8% when normalizing for the selling day impact. In addition to seeing continued sequential improvements in our constant currency revenue performance, during Q4 we also saw a significant sequential improvement within our adjusted gross and operating margins as compared to the 2nd and third quarters of the year. This improvement drove adjusted earnings per share, which our internal expectations. Lastly, I am happy to announce that on December 28, we closed the acquisition of Zmedica, a market leader in hemostatic products.
We are pleased to be able to deploy capital for a differentiated product portfolio that leverages existing Teleflex call points and is immediately accretive to our revenue growth rates, adjusted gross and operating margin profile and our adjusted earnings per share. Turning to a more detailed review of our 4th quarter results. As I just mentioned, quarter 4 revenue grew 2.3% on a constant currency basis and 4.4% on an as reported basis. The increase in revenue was driven by our vascular access portfolio, which saw some tailwinds in terms of COVID related purchasing and solid mid single digit growth of interventional urology and our other segment. From a margin perspective, we had generated adjusted growth and operating margins of 58% and 26.6%, respectively.
This translated into year over year declines of 120 basis points at the gross margin line and 50 basis points of the operating margin line. However, from a sequential standpoint, this represented an improvement of 80 basis points and 150 basis points respectively compared to quarter 3 levels. On the bottom line, adjusted earnings per share was $3.25 Overall, our financial performance in the quarter demonstrates sustained resilience of our diverse by global product portfolio, and it gives us confidence in our ability to achieve our long term financial objectives once we get past COVID-nineteen. Let's now turn to a discussion of our quarterly revenue trends, which will be on a constant currency basis. The Americas delivered revenues of $419,500,000 in the Q4, which represents an increase of 5% over the prior year period.
Growth within the Americas was driven by vascular access and respiratory products, which both saw elevated demand driven by COVID. In addition, interventional urology was a strong contributor as UroLift continues to be our fastest recovering procedure. However, there were offsets with declines in other product categories. We estimate that the Americas would have grown approximately 12%, excluding the impact that COVID-nineteen had on the region. EMEA reported revenues of $161,400,000 in the 4th quarter, representing growth of 4.1%.
During the quarter, EMEA benefited from a one time order of tracheostomy products and from the Xtribe selling days, the combination of which more than offset which represents a decline of 7.2%. However, we estimate that we would have had positive constant currency revenue growth in the mid single digits if not for the impact of COVID-nineteen. Additionally, during the Q4, we finished transitioning a distributor in Japan. When normalizing for both COVID and the distributor change, growth in the region would have been in the mid to high single digit range. And lastly, basis.
As we anticipated during the Q4, our OEM business saw a lag impact related to COVID relative to our other businesses. Investors familiar with Teleflex will be aware that our OEM business supplies device companies with complex catheters and surgical sutures and the quarter 4 impact reflects reduced orders from these customers whose business is tied to non emergent procedures. Excluding the impact COVID-nineteen had, the business grew roughly 1%, which includes a benefit of approximately 13% from the acquisition of HPC. As it relates to HPC, I am pleased to report that we remain on track with our
integration efforts. Let's now move to
a discussion of our revenues in the global product category. Starting with vascular access. 4th quarter revenue increased 16% to $182,500,000 We estimate that COVID-nineteen positively impacted the growth rates of our vascular products during the 4th quarter by approximately 5%. Key drivers of revenue growth included PIKS, which increased approximately 20% CVCs, which increased approximately 16% and EasyIO, which grew approximately 14%. Moving to Interventional Access.
4th quarter revenue was $106,700,000 or down 6.9% as compared to the prior year period. The decrease was largely due to the delay in the recovery of certain non emergent procedures because of COVID-nineteen, along with the negative began last quarter. We estimate that the recall and distributor issue impacted our business negatively by approximately 3,000,000 dollars We expect the impact from the recall to continue to linger for the next few quarters as we do not expect to be back on the with this product until September of this year, while the distributor inventory headwind should reverse and be a modest tailwind for us in 2020 1. When normalizing for the impact that COVID had along with the aforementioned headwinds, we estimate that underlying growth was in the high single digits, consistent with our long term growth outlook for the segment. In addition, we are pleased that MANTA grew 33% globally in quarter 4.
Now turning to to anesthesia. Revenue was $86,100,000 which is lower than the prior year period by 2.1%. The revenue decline was the result of lower sales of laryngeal masks and endotracheal tube products. We estimate that COVID had an approximate 1% negative impact in the quarter, implying flattish performance on an underlying basis. Since we closed the Zeegummedica acquisition just days before year end, its impact was immaterial on quarter 4 results.
Shifting to Surgical. Revenues declined by 5.7 percent to $92,300,000 driven by lower sales of our ligation portfolio. We estimate a 9% headwind from COVID during quarter 4, indicating recovery as compared to the estimated 13% COVID headwind in quarter 3. Moving to Interventional Urology. Quarter 4 revenue increased Urology.
Quarter 4 revenue increased by 5.3% to $93,900,000 which represents a new high watermark in terms of revenue dollars in any given quarter. On a year over year basis, the business faced a difficult growth comparison, while sequentially, it grew by 15% versus quarter 3. We estimate an approximate 28% COVID-nineteen related headwind during quarter 4. Notwithstanding the significant headwind on our growth in quarter 4, we are pleased with the path to recovery for this business unit and are also happy with the impact of the national DTC campaign, which is exceeding our expectations. Additionally, we are encouraged that we trained approximately 130 new urologists in quarter 4, moving to a cadence that is consistent with our expectations prior to COVID and a positive leading indicator for future growth.
And finally, our other category, which consists of our respiratory and urology care products, grew 6.1% totaling $98,100,000 We estimate that growth during the quarter was partly due to increased demand for certain humidification and breathing products resulting from COVID-nineteen, mainly in the Americas. That completes my comments on quarter 4 revenue performance. Turning to some recent clinical and commercial The strategic role of DTC is important as about half of the 12,000,000 men being treated for BPH believe prescription medications are their only solution. Overall, we view the 40 5 or higher post campaign versus pre campaign levels. Approximately 150% increase in visits to urolift.com during the campaign and direct response numbers that exceeded our internal projections by a wide margin.
Lastly, we note that Google search trends demonstrate a significant and sustained increase in response to the campaign. As such, we expect to continue the national DTC effort in 2021 and beyond. Turning to UroLift 2. We have completed the market acceptance test and received positive feedback across more than 100 procedures completed by 20 urologists. We have begun a full controlled launch.
The launch is controlled due to restrictive access caused by COVID-nineteen. This will ensure we don't disrupt growth in the
second half of twenty twenty We remain confident converting the UL to the corona
mine and we continue to expect to generate significant margin expansion as the revenue base is fully converted. Regarding Japan, we remain on track for reimbursement decision in 2021 and view the approximate $2,000,000,000 addressable market as an incremental growth driver that will be a positive catalyst for the foreseeable future. Overall, between Nationwide DTC, Japan rollout and the launch of UL2, we have multiple drivers
Recently, a comparative analysis of 2 function outcomes from curative studies and Medical Therapy
of Probiotic Symptoms trial was published in the peer reviewed journal European Urology Focus. The comparison reveals that UroLift is superior to BPH medical therapy in preserving erectile and ejaculate function and sexual satisfaction. Importantly, this study challenges the idea that medical treated
the most conservative treatment option for PDH.
For that, we believe that more research like this publication consider UroLift as a first line therapy for treating BPH. Turning to an update on interventional access. Regarding the CTO PCI study that we mentioned on our Q2 earnings call, I am pleased to announce that we have completed enrollment for this study. This is a prospective single arm IDE study of 150 across 13 sites to evaluate the performance of the entire range of Teleflex coronary guide wires and specialty catheters in chronic total occlusion percutaneous coronary intervention procedures, which is the most demanding PCI environment. Once the study results are finalized, we anticipate updated labeling for our Guidewire and Specialty catheter products, which can address an estimated 100,000 CTO PCI procedures.
Overall, we continue to invest clinical and commercial catalysts that will help to sustain our upper single digit revenue growth aspirations in a normalized environment. Lastly, turning to EZYBLAZ. I am happy to update the investment community see a $100,000,000 initial market opportunity for EZYBLAS. We are increasingly confident in our ability to address this commercial opportunity with revenue likely ramping in early 2022. In addition, we believe there potential revenue synergy opportunities with ZMedica to leverage their sales reps as well as our channel strength across the healthcare and government On December 28, we completed the acquisition of ZMedica, an industry leading manufacturer of that is a classic Teleflex deal and a great strategic fit.
Investors familiar with Teleflex will be aware that we aim to invest in innovative products and technologies that can meaningfully enhance clinical efficacy, patient safety and comfort, reduce complications and lower the overall cost of care. Given their differentiated products and attractive end markets, we view the ZMedIC acquisition like that of Vitacare from a few years ago. Since we acquired Vitacare in 2013, we have more than doubled the sales, which are still growing in the healthy double digit range. One difference is that Zmedica is growing into a $600,000,000 addressable market, while VidaCare's addressable market was closer to $250,000,000 Regarding our long range financial targets, ZMedica only reinforces our ability to get to those goals and we remain committed to delivering growth and operating margins once we return to a more normalized environment. We plan to hold an Analyst Day event in the fall of this year, at which time we intend to provide updated long term financial goals and timetables.
This completes my prepared remarks. Now I would like to turn the call over to Tom for a more detailed review of our Q4 financial results. Tom?
Thanks, Liam, and good morning, everyone. Given the previous discussion of the company's revenue performance, I'll begin at the gross profit line. For the quarter, adjusted gross margin was 58%, a decrease of 120 basis points versus the prior year period. The decrease in gross margin was primarily due to COVID related impacts, including unfavorable product mix and higher manufacturing costs, along with a modest foreign exchange headwind. In total, we estimate that COVID negatively impacted our adjusted gross profit by approximately $44,000,000 in the quarter.
We continue to tightly manage discretionary spending to partially offset the reduced revenue and gross profit resulting from COVID. As a result of the efforts, we estimate that operating expenses were reduced in the 4th quarter by approximately $13,000,000 For full year 2020, we managed managed 50 basis points year over year. Continuing down the income statement. Net interest expense totaled $18,500,000 which is an increase of 10% year over year and reflects higher average debt balances versus the prior year period due to the acquisitions of HPC and KeyMedica. Moving to taxes.
For the Q4 of 2020, our adjusted tax rate was 10 point 1% as compared to 7.7% in the prior year period. At the bottom line, 4th quarter adjusted earnings per share declined impact from COVID of approximately $0.55 and a foreign exchange tailwind of approximately 0 point flow highlights. In 2020, cash flow from operations was flat as compared to 2019, totaling $437,100,000 We are pleased with this outcome given COVID headwinds and increased contingent consideration payments that flowed through cash flow from operations in 2020 as compared to 2019. Overall, as we exited 2020, the balance sheet remains in good shape. At year end, our cash balance was $375,900,000 as compared to $301,100,000 as of December 20 19.
Over the course of the year, we deployed more than $750,000,000 for external business development opportunities. We'll continue to balance our investments across both organic and inorganic initiatives to fuel our growth Zmedica financing, we net leverage ended 2020 at 2.98x, which remains well below our 4.5x covenant. Lastly, we have no near term debt maturities of material size. In summary, despite facing a challenging operating environment during 2020, the organization adapted quickly and executed well. We remain optimistic toward the future and expect a recovery beginning in the second half of twenty twenty one.
As such, we are reinstating financial guidance for 20 21. To begin, I'll provide a framework of key assumptions underlying our financial guidance. Our outlook contemplates COVID continuing through much of the first half of the year, with the second half of the year much closer to a normal operating environment. Our baseline assumption assumes that health care systems can manage through incremental COVID surges while applying past learnings to avoid widespread procedure shutdowns. It also excludes any material regulatory, health care or tax reforms as well as any future M and A.
Lastly, from a selling day perspective, we will have 2 fewer selling days in the Q1 as compared to the year ago period. We'll have one additional day in the 4th quarter as compared to the year ago period, and there will be no differences in the number of days during the second and third quarters. Interventional access, surgical and vascular access product offerings to be key contributors to our constant currency revenue growth during 2021. We also expect our interventional urology business to increase at least 30% over 20 20 levels. Additionally, ZMedica is expected to contribute $60,000,000 to $70,000,000 of revenue or approximately 2.5 points of growth.
Turning to currency. We expect foreign currency exchange rates will be a tailwind to revenue growth of approximately 2%. As a result, we expect our as reported revenue to increase between 10% and 11.5% over 2020. And this would equate to a dollar range of between $2,791,000,000 $2,829,000,000 Turning next to gross During 2021, we anticipate that adjusted gross margin will increase between 130 and 2.30 basis points to a range of between 58% 59%. We expect gross margin expansion will be driven primarily by a favorable mix of high margin products, primarily interventional urology as well as the acquisition of Zmedica, which will add approximately 50 basis points to gross margin.
Moving to adjusted operating margin. During 2021, we anticipate that adjusted operating margin will increase between 110 between 26% and 27%. The increase in adjusted operating margin will be sourced from the gross margin in nature, as well as further strategic investments into UroLift and MANTA. Additionally, the acquisition of Z ZMedica is expected to provide a modest tailwind to year over year operating margin expansion. Given the relatively higher OpEx cost structure of Zmedica versus Teleflex, operating margin accretion from Zmedica will be less than the 50 basis points of gross margin accretion.
That takes me to our adjusted earnings per share outlook for 2021. And this slide serves as a bridge from our full year 2020 adjusted EPS result to our full year 2021 adjusted EPS outlook, beginning with 2020 adjusted EPS of $10.67 From an operating standpoint, in 2021, we project additional earnings between $1.58 $1.06
per share to increase approximately 15 percent. Our 2018 EPS guidance also assumes
the following. Foreign exchange is planned at recent spot rates for key currencies, including a full year euro to dollar exchange rate of 1 point $2 $5 We now project ZMedica to contribute between $0.21
in 2021.
The increase in the ZMedica accretion is due to the change in our planned approach for financing the acquisition, which we now believe can be done through
a final
to interest. In 2021, we expect interest expense to range between $63,000,000 $65,000,000 The year over year reduction in interest expense is expected to contribute between 0 point dollars and $0.19 of earnings accretion if you were to exclude the incremental financing costs versus Medica. Moving to taxes. During 2021, we project that our adjusted tax rate will be in the range of 13.5% 14% and
tax. The projected year over year increase in the other tax
rate to result of a greater mix of just taxable income, resulting from year lift growth and certain tax benefits that we do not expect to reoccur in 2021. Additionally, our assumption is that 2021 windfall benefit from stock based compensation is at a reduced level versus the atypically high level realized in 2020. We estimate that weighted average shares will increase to 47,700,000 for full year 2021, which is dilutive by approximately
$0.10
of continued COVID impact into 2021, I'll highlight some considerations regarding quarterly expectations. As I mentioned previously, our outlook is predicated on the assumption that COVID will continue to cause disruption during the first half of the year, with a particular negative impact during the Q1. Additionally, the Q1 of 2021 has 2 fewer selling days as compared to 2020. As a result, at the midpoint of our guidance ranges, we expect to realize 22% of full year as reported revenue and approximately 19% of our full year adjusted earnings per share during the Q1 of 1. And that concludes my prepared remarks.
I would now like to turn the call back to Liam for closing commentary. Liam?
Thanks, Tom. In closing, we delivered solid 4th quarter results as our diversified portfolio showed continued improvement relative to the 2nd and third quarters of the year on both the top and bottom lines. Excluding the impact of COVID, we see our underlying business performance as encouraging. And while the next several quarters still have elements of uncertainty, we remain confident in our ability to execute in 2021 and our our business. We have several revenue drivers including UroLift, MANTA, ZMedica, PIX, VidaCare, EZPLAZ and HPC to name but a few.
We will manage the business prudently while staying focused to capitalize on the long term potential of our global product portfolio. In closing, I want to thank our 14,000 employees around the world who continue to manufacture, distribute and support products that are required in the fight of COVID-nineteen and who came together exemplifying our culture and core values by staying true to our purpose to improve the health and quality of people's lives. As an organization, we remain well positioned to create value for all our stakeholders. That concludes my prepared remarks. Now I would like to turn the call back to the operator for Q and A.
Your first question comes from David Lewis with Morgan Stanley.
Just one on guidance and then a follow-up for Liam on urology. So Tom, just 2 little small things on guidance here. Your top line obviously kind of a little lower in the street, but you're bracketing the street in the bottom line. I'm assuming that reflects FX and ZMedica. But can you just sort of bridge us there a little bit because it certainly reflects some opportunity on recovery?
And then what are you assuming in terms of recovery here as we head into March now that we're at the end of February? And then a quick one for Liam.
Sure. So as we built out our plan for 2021, our assumption is that we see levels in the marketplace in the first and second quarter, somewhat similar to what we saw in the Q4. And then we expect to follow that with a recovery beginning in the Q3 back to what we'd consider more normalized procedure levels and revenue growth rates. And then maybe just help me on the first part of the question again.
Sorry, Tyme. Just you're kind of guiding below the street in the top and in line with street in the bottom, and I'm assuming that's more FX and the Cmedica financing, but obviously, it reflects a lot of room on earnings. I just want to see if you could bridge us there a little bit and make sure that's
accurate? Well, I think that is the way to look at it that as we look at the guidance, it does FX, ZMedica into our guidance as well as some of the other factors that we've talked about.
And I think, David, if I just could add a couple of one comment on the top line guidance. We took a fairly prudent approach, we believe, to our guidance. September now seems like a long time ago, but when we identify the potential risk, the increase in COVID cases, that had an impact in quarter 4. And in hindsight, that was the correct call. Now we were a little bit on an island back then, but most of the uncertainty still remaining, we have been thoughtful as we look at our 2021 guidance.
Now some people might say it's a little bit conservative to expect the recovery in the back half of the year, but I would prefer to be conservative right out the gate. And to your point, if we show to be overly conservative, that should also have an impact not only on revenue, but on earnings per share for
sure. Okay.
No, you were go
ahead Tom.
If you just think about that EPS bridge, when we look at the components of our growth, the growth is really coming from the strength of the operating performance. If you kind of bundle up the change in interest, taxes, shares and foreign exchange, they come pretty close to a wash. And then obviously, you have a $0.25 pickup from ZMedica. So really, as you think about what's driving that, it is the underlying performance of the business with the non operating items being close to a wash in the aggregate.
Okay, super helpful. And then Liam, just coming back here to urology and NeoTract here. The COVID adjusted number for the Q3 is something around sort of 30%, which is obviously a little lower than you saw in the second and third quarter. I appreciate there's a lot of noise in these numbers with COVID. But if I think about sort of that 30 percent -ish number for the 4th quarter, then I also think about the adding benefit of DPC offsets by resurgence.
How should I think about that 30% adjusted number relative to 40%, 45% numbers we saw in the 2nd Q3? Just help us understand underlying momentum and how you see that business into 'twenty one? Thanks so much.
Yes. So
your math is good. Ex the impact of COVID, it grew by at 33%. And we were really pleased with the performance of UroLift. You got to put it in the context of what happened in the Q4, David. We saw new variants of COVID, we saw COVID cases rising.
We saw product. And I think it had a really tough comp too versus the prior year. If you remember last year, we grew quite aggressively in the Q4. I think it was up 52% in Q4. So coming up against a tough comp, I think that was also a factor.
And my own view on this is that with the rising cases, I would have expected UroLift to miss our interest in the UroLift. I believe that it didn't do so because of the offset of the DTC, which supplemented that. So I think we're in a pretty good shape with UroLift in regards to the recovery, and we feel really confident of where we're at with it.
Your next question is from Larry Kehrlich with Raymond James.
Good morning, Larry.
Good morning, Liam.
So I guess just coming back to UroLift and I know you guys talked a little bit about the philosophy on the 2021 guide overall. But maybe again talk about how you're approaching the guide for UroLift in 2021, that 30% plus, how you're kind of thinking about the cadence of that and what's assumed in that for revenues out of Japan? And then I had one other one.
Okay. So I'll start with the revenues of Japan, Larry. The revenues out of Japan are minimal in our guide for UroLift. We do still anticipate that we will get a reimbursement decision as we head into Q2, Q3 and therefore be generating revenues in Japan, but it's fairly minimal within our current guide. What we would expect to see, Larry, and as you heard from Tom's prepared remarks, with the cadence of revenue in Q1, that would lead you to the overall company revenue being that minus 1%, minus 2% -ish in Q1 because we've seen a rising number of cases after the holidays in January that continued into February and UroLift would be in a similar bucket.
So the growth that we had in Q4 should be a little bit less in Q1, then you should see a continued recovery as we go into Q2 and Q3 and Q4 thereafter. The UroLift product does have an easier comp in Q2, but every medtech company has an easier comp in Q2. So I think the rubber will really hit the road, if I can use that expression, when we get into Q3 and Q4 and we begin to ramp back up, COVID cases should be subdued, the vaccine should be rolled out at that stage and we should at that stage then begin to ramp back up. And I think given that the product was flat year over year pretty much in 2020 to get in excess of that 30% growth back in that would also indicate that it's 30 percent growth on 2019 as well, Larry. So, or in excess of 30% growth versus 2019.
Okay. Thank you. That's very helpful. And then just the other quick question here is just on EZ Plads. You reiterated that $100,000,000 plus market and it sounds you went back and took another look at that opportunity and still coming out in that range.
I suspect that and correct me if I'm wrong that you're probably thinking about this as a late, 2021 FDA clearance. How do you see that revenue starting to impact 2022? How does that develop? And should we be thinking about military orders being potentially lumpy and you develop the civilian market at the same time?
Yes. The beauty about doing a BLA submission Larry is that you get access to both civilian and military market. Now we'll start with the military in 2021 for sure because as you know they helped us develop the product. A normal BLA submission is 9 months approximately we're on a fast track. Now the FDA never tell you when the fast track ends.
And again, in the area of prudence, we have incredibly modest revenue in the Q4 of 20 cadence, it's a $100,000,000 market, the military is $25,000,000 So in 2022, we'll be focused on that military market. And we would and again, I always caution investors, don't expect the military to place a $10,000,000 order right out of the gate. It will be significantly less than that. But as we develop the market and as they roll it out through special ops, through the military, then we can pivot to the civilian market. And actually the biggest part of the civilian market, Larry, is air ambulances, because of the requirements for space and the adaptability of EZ Class to that environment.
And that's also something that was quite encouraging when we really looked at this market that it's really 2 big segments and then the rest are smaller segments. So it's easier for us to focus. So that's how we see it ramping as we go through '21 and into 'twenty two.
Okay,
terrific. Thanks guys. Appreciate it.
Thanks, Dari.
Your next question comes from Shagun Singh with Wells Fargo. Great.
Thank you so much for taking the question. One on guidance and one on MANTA. With respect to guidance, can you let us know what you're assuming for backlog in that guidance? By our math, it could be about 9% of sales. And I'm sure some of it may flow into 2022.
And then on MANTA, could you comment on the lawsuit that was filed by Central Medical, relating to the Mist sales milestone and payment by Teleflex following the merger. Anything you can share with respect to your positioning, the size of the milestone payment, and next steps towards the resolution? Thank you for taking the questions.
No, absolutely. I'll start with the guidance question. So our total revenue guidance of 10% to 11.5% does have assumed in it a COVID recovery compared to prior year, but not a backlog or a bolus of procedures coming back other than that in the back half of the year. It's really difficult for us to estimate what that backlog would look like, Chagun, and also difficult for us to assess whether geographical recovery. I still think it's going to be led by the geographical recovery.
I still think it's going to be led by the Americas and Asia. And I think that Europe is definitely going to be the laggard. The socialist healthcare system and the way they're rolling out the vaccine right now does not appear to be as aggressive as we see in other parts of the world. Regarding the Essential Medical lawsuit that you mentioned, yes, we're aware of it clearly because and we are confident that we have acted appropriately and believe that the suit is without with the MANTA product and you're familiar that with the MANTA product and you're familiar that we've invested heavily behind MANTA with both clinical evidence and sales and marketing resources. And the product a key revenue driver for Teleflex and performed well in the midst of the pandemic, growing over 30% globally in 2020 and growing by almost 90% in the key North American market.
And our plan this year is to continue to convert over 8% approximately of the large bore market this year. And with regard to the question on the milestones, I mean, there are contingent payment milestones contemplated in our financials, and the total milestones is the matter of this dispute. But as I said, we'll fight it fairly
vigorously.
Thank you so much. I'm all set.
Okay, thanks.
Your next question comes from Matt Taylor with UBS.
Hi, guys. Thanks for taking the question. So the first one I wanted to ask was, since we're coming up here on the launch of UroLift in Japan and you've given some parameters about the TAM at a high level and number of urologists, things like that.
I was hoping you could be
a little bit more granular about the things that you can control in the rollout, like the pace of training, especially given we're still in a little bit of a COVID environment? How quickly should we see that uptake given the constraints that you have and the investment focus that you have?
So what we've done, Matt, is that we have already preceded the market with market development specialists in Japan, and we continue to engage. We've identified the top 20 urologists. We pre COVID, we actually had a U. S. Physician that spoke Japanese in the country doing some peer to peer training.
We also ran a virtual BPH summit and had a number of these 20 Japanese urologists. We will I always akin to Reagan's triple down economics, but this is a trickle down urologist in Japan where we train at the top of the tree and these 20 are key that we've identified in order then to roll it out to the other urology practices. And we have to do a mandated collection of data as part of our reimbursement. So we will be doing that in the Q4 to gather that information. And we're really enthusiastic and we have the other thing that is within our control, Matt, is to add additional
sales reps. Now we think
the timing is going to work out really, really well for buyers quite well now and they're starting to roll out the vaccine. So we think as we get into Q3, Q4, when we will be requiring access to train, we think the timing is going to work out pretty well for us and give us pretty broad access to the individuals we want to train. So we feel pretty good about the groundwork we've done to date and we feel pretty good about the identification of the urologists that we need to train. And there is a heightened level of knowledge about the UroLift because a lot of these Japanese urologists are very linked to the U. S.
Urology Association. So there is a heightened awareness of the product's availability and a Thanks, Liam. I just have one follow-up. As we move into the next couple
of Thanks, Liam.
I just have one follow-up as we move into the next couple of years. Are we going to see a similar pace of training of urologists in Japan as we've had in the U. S, like a couple of 100 a year? Can you talk about those plans in the intermediate term?
Yes. So just remember, there aren't as many urologists. So you would imagine it's going to be a little bit less. So you're and also the market is a little bit smaller. And there are specialties in urology practice in Japan.
So if you take the 9,000 urologists, you'd have to imagine that about 5,000 or so are in the specialty we want to. So that is less than half of what you data, that's what I would expect, the similar cadence. But so if we train 400 to 500
in the U. S, you'd expect to train half of
that once you ramp up in Japan.
Your next question comes from Richard Newitter with SVB Leerink.
This is Erin on for Rich. Just a quick one, potentially you guys mentioned for the main focus for capital deployment would be M and A. I was just wondering if maybe you could share some color on what kind of areas you're focusing on and sort of should we expect any larger deals or the classic tuck ins?
So Aaron, first of all, as Tom said in his commentary, I'm really we had a brilliant 4th quarter from the point of view of cash generation and deleveraging. So we're down below 3 times again on a net leverage basis. The type of assets, first of all, the strategic element of our M and A strategy, our assets that fit within one of our existing channel portfolios are in a line space. I mean, we really like the cath lab, for example. So if we were to move into the neurovascular or peripheral vascular space in that similar call point, that would be something that would be attractive.
We also like technologies that have IP. ZMedica that we just closed, the IP runs out to 2,033. So we like protected businesses. We look for assets that have a clinically differentiated product portfolio. We look for assets that create value in healthcare economics or in synergies in that respect.
We also look for products that are sticky, what we would call sticky, that get used over and over again. And again, in the interventional space, in the vascular space, in the anesthesia, emergency medicine space, in the men's health space and in the surgical space. So I think that's the beauty about Teleflex is we are looking in a broad area of places. So that's why we're able to find these assets. Environment.
Even in the midst of COVID, it's amazing to me how we're able to get some work done. And we were able to close the eMedica in the midst of COVID and now we're down below 3 and that will be even further reduced as we move through this year. So we have got firepower and we are always looking and we continue to look right now.
Okay, great. Thanks. And then just another quick one on MANTA. You mentioned it grew over 30%. Could you just maybe talk about some of the trends you're seeing in that with that particular product?
And then maybe what is kind of expected in 2021?
Yes. So if you look at 2020, we converted just over 5% of the market and we're contemplating converting 8% of the market approximately in 2021. So that's the cadence that we and that's in the midst of COVID. I mean the trends we're seeing is it's being adopted pretty heavily in TAVR procedures. Almost 90% of our cases today are still done in TAVR.
And that's the area we're focused on. It's a $200,000,000 to $300,000,000 market opportunity and we continue to ramp it up and we continue to have sales resources allocated to it. We're also planning to do some clinical work to on the product and there are some enhancements that we also want to do on the product to make it even better than it is today. So all in all, we're really encouraged by the progress that we're making and we expect to continue to make progress in this year and into next year. This will be a multi year growth driver for Teleflex.
And as we convert that market, we've a long runway ahead of us to convert.
Great. Thanks so much.
Thanks, Aaron.
Your next question comes from Anthony Petrone with Jefferies.
Thanks. A couple on UroLift and then I'll have one on Zmedica. On UroLift, I'm just trying to get a sense of the totality of backlog that's building. Liam, mucovid is still running through, so that's a pressure point. And on the demand push side, you have DTC.
And so I'm just wondering if you can quantify the backlog of procedures that are building. And then as we look at the past couple of quarters, is there anything to note on the competitive side? Are you seeing anything competitively from some of the other devices out there of note? And then I'll have a follow-up.
Yes. So first on your backlog question, in the Q4, we started to now it's included in our assessment of the COVID impact, Anthony, just to be clear. When we assess the COVID impact, the next COVID, it grew by 33%. Included in that are procedures above the base rate calculation on the year before 2019. So quarter 4 cancellations above that base rate, if you were to put a value on it, is around $4,000,000 So that might give you an indication of that backlog that those canceled procedures should come back at some stage when things free up.
And those are procedures that were booked. The patient was due to have the UroLift procedure done. And then either the day before or on the day they canceled the procedure, one would have to assume because of concern over COVID. So that's the best benchmark I can give you in that regard. Just what was
the other part of your question, Anthony? I apologize.
The other part was on competition. Anything of note that you've seen out there?
No, nothing to report really. The same competitors are in the marketplace. I mean, we have now crossed the 250,000 patient mark that have been treated with the UroLift,
which is a big milestone for us.
The other big milestone for us was it was an all time high revenue in the Q4. We've never hit that revenue. And to hit that in the midst of a rising COVID pandemic where situation got a lot worse to me is very encouraging. So nothing to report new on the competitive front, Anthony.
And then the follow ups would be 1 on UroLift again would be, can you remind us on medical management, the study you referenced today? How many patients do you actually think could shift to UroLift in the medical that are currently medical management today? And then on ZMedica, there's 3 verticals trauma, EMS and interventional, where do you think you'll see the most synergies at the revenue line with the existing Teleflex infrastructure? Thanks.
So first on your UroLift, the number of men on medical therapy, of the total 12,000,000 men in America, 1,500,000 of them have stopped taking the medical therapy and that's our target market of 6,000,000,000. But there are another 7,000,000 men in America that are taking the drug therapy. So it's a significantly bigger market and that takes the addressable TAM from $6,000,000,000 to $30,000,000,000 if we were able to attract all of those individuals as well. So that will give you the size of the scale. With regard to your question on the synergies or where we'll be able to leverage Zmedica from a call point, For definite, the military and EMS call point is a really strong call point for us and ZMedica have an exceptionally strong trauma call point.
So the synergies between the two companies is excellent in the strength of the now call point. And then just consider that Anthony that we have EZ Plaz that we just submitted from a BLA coming down the pike behind that really strong sales channel. So that's what fills us with enthusiasm and we're quite encouraged with what we can do in that space.
Thanks again.
Cheers.
Your next question comes from Matthew O'Brien with Piper Sandler.
Good morning. Thanks for taking the questions. I guess, Liam, the thing that's going to get most people's attention this morning is the revenue guide for 'twenty one. If you're taking out ZMedica, it's kind of 6.5% percent to 8% growth on a constant currency basis. And you've had easy comps and I understand there's still some COVID impact.
Can you break down a little bit what you're expecting from maybe a volume perspective this year, where that's kind of below trend line as far as what people are expecting out of Teleflex from an organic growth rate? Or are there other areas where you're trying to be I know you're trying to be conservative, but more conservative than others? It seems like UroLift might be one of those areas. Just any kind of color you can provide on that kind of organic guidance that you're providing for the full year would be helpful.
Matt, so thank you very much for the question. And it really comes down to when do you assume that you're going to see COVID recovery from COVID. Now we could have been more aggressive in our guidance and assumed that we would begin to see recovery from COVID in Q2. If we had I don't think it's anything to do with volume versus price versus all the other components, Matt, quite frankly. It's all down to COVID and it's all down to the assumption that you make on COVID.
So if we were to be more aggressive and we were going to assume we were going to see a recovery in Q2, as I've heard some of our peers that they have, it would be a more robust revenue story and therefore a more robust earnings story. As I said, the question I think David asked, we've tried to be a little bit more prudent and perhaps a little bit more conservative. We still see it's going to be quite choppy as you go through Q1 and Q2. And don't forget, the COVID cases in January early February were much worse than they were in December late November. And so that's the gating factor, Matt, is your assumption on when COVID is going to recover.
And if you look at it and sometimes people want to go back to 2019. And if you look at the back half of twenty nineteen compared to 2021, we're back in that normal long term guidance range for Teleflex in the back half of 'twenty one versus 'nineteen. And again, it's all about the assumption. If you assume you're going to recover in Q2 and be aggressive, your revenue is greater. If you assume the back half of the year, your revenue is going to be a little bit less, but you have some conservatism built in.
And obviously, we'll update the investment community as when we get to Q2 our Q2 earnings release as to what we've seen in that quarter. And if it's better, good for investors, great for Teleflex and so on and so forth.
Got it. And then as a follow-up, and I'm going to go a little off topic. I know there's a lot of NeoTract and MANTA and Ziplash questions. But you're spending quite a bit of money on MDR. It looks like about $10,000,000 this year.
And I know you're a U. S. Story right now, but I'm just curious with that spend, if OUS growth just because others can't spend as much and be as prepared as you are, could be an area of potential upside as we get into 2022, 2023 and 2024? Just strategically, with all the investments you're making on the MDR side, is that an area that could surprise some folks as far as upside goes in a couple of years?
So I think what you might see happening, Matt, is that the requirements for MDR are significantly burdensome on on companies. And what you might see is it be particularly burdensome on small companies. Now there are a lot of smaller medtech companies in Europe that I think are going to be struggle they're going to struggle to continue to comply with MDR and they have to meet the same standards naturally enough as a larger company like Teleflex. So 2 things are either going to happen. I think those individuals will either decide that they don't want to be in particular spaces anymore, which will create opportunities for the larger companies or you'll see consolidations and M and A opportunities to buy up some of these smaller organizations within Europe.
And as you know, Teleflex is a serial acquirer and we will look to take those opportunities as they arise.
Thank you.
Your next question comes from Matthew Mishan with KeyBanc.
Great and thank you for taking the questions.
Hey, Matt.
Hey Liam, Just 2 really on EZ plus and could you give some context on the complexity of the BLA for EZ plus and why it took several years to get through it? And kind of what have you kind of worked through with the FDA that would give you confidence for approval in a reasonable timeframe? And then as a follow-up to that, I'll just ask, I mean, it's for ZMedica and EZ Plus, would they share the same sales force? And how are you thinking about kind of ramping that sales effort?
Yes, absolutely. So first of all, I'll answer the last part of it first. They will share the same sales force, Matt, and we are combining the ZMedica and the Teleflex sales force together. And that gives us an opportunity to have an even stronger sales force in this channel in order to help us accelerate both ZMedica, both and VidaCare and EZPLAZ when it becomes available. The time that it took for the BLA submission, Matt, was really driven by the fact that this was unchartered waters for both the FDA and for Teleflex.
The FDA had never previously approved a biologic of this nature. So it was uncharted territory for them and for us. And therefore, it took a significant amount of time for them to get through their assessment as we fed them information because to their credit, they worked with us. They allowed us to submit partial information as part of the BLA submission. So that's what allowed us to And finally, we got the submission done in January.
And finally, we got the submission done in January. Now why I would think that it should take less than the 9 months is number 1, we're on a fast track and number 2, they've had all the clinical data and given us the feedback on the clinical data. We've already given them a significant bolus of test data before we submitted the final BLA submission. So they've had a significant amount of data from us. So therefore, that should help in their assessment and they have also been very cooperative in working with us and the reasonable timeframe less than the 9 months to get this approved.
Your next question comes from Mike Matson with Needham and Company.
Good morning. Thanks for taking my questions. Hey, Mike.
I guess I have a question on EZPLAZ. So I know there's a lot of folks on the BLA and the U. S. Opportunity, but is there any international opportunity for this product?
There is, Mike. Now, in the military, the $25,000,000 is the majority of that is in the U. S. And the but there is a portion overseas. And of course, the civilian market is a global number.
So that $100,000,000 is a global number, not just a U. S. Number. And again, it's the same criteria overseas. It's the air ambulances and the military.
But as most people would be aware, the U. S. Military is one of the more active and larger military organizations on the planet, and therefore, it commands a a significant portion of that $25,000,000 addressable market.
Okay, got it. And then, I wanted to ask about your PIK business. It used to get a lot of attention, but given some of the newer growth drivers hasn't been getting as much. So are you still taking share in that market? Has there been any sort of changes in the competitive dynamics there?
Business
in the quarter grew to almost 20%, Mike. So we continue business in the quarter grew almost 20%, Mike. So we continue to take share and we continue to be really thoughtful as we grow that business because of our coding technology that allows us to take share from the competitors there. And in a very short period of time of 3 years, we've moved from being the number 3 player to being the number 2 player, and we continue to grow aggressively in that space.
Okay, thanks.
I'm showing no further questions at this time. I would now like to turn the conference back to Jake Elguis.
Thank you, operator, and thank you to everyone that joined us on the call today. This concludes the Teleflex Incorporated 4th