CRY
#Yes, no.
So if you do the ---+ if you take the first three quarter actual and then take the guidance, that is why I talked about you're going to see ---+ at the low end of our guidance, you're going to see a 7% increase over Q4 of last year and a high end would be a 13% increase over last year.
That is a combination of a number of things.
It is the going direct in France, so we are going to get end-user revenue and profit as well as all the initiatives we put in place for tissue processing.
We basically started that work after the warning letter was lifted back in March.
And we started that initiative and it took a couple months to get things kind of turning.
And that takes about a 90 days because of the way the tissues are processed and the way it flows through your inventory.
So all the work that we did kind of in the spring and the summer is going to really come to roost in the fourth quarter on the tissue side of the business.
As we said, we were disappointed when we gave out guidance in the beginning of 2015 that our tissue margins really took a hit.
And as <UNK> said in his comments, I mean, a lot of that was due to all the quality of things we had to put in place: the consultants we brought in, some of the things that we changed really drove up our cost.
So we try to maintain our very high focus on quality, but the improvements we have seen in these initiatives we kind of kicked off in the March time frame.
So again, I will just go back on the margins.
So we saw a 37% margin in Q1.
38 ---+ this is on tissue.
38% in Q2, 44% in Q3.
Our forecast for Q4 is probably in the 47% range.
So we continue to seek ---+ that is almost 1,000 basis point improvement over 4 quarters and we expect to see that kind of throughout 2016 as well.
Yes.
Yes.
As <UNK> mentioned in his comments, we are seeing them ---+ there is actually very good unit growth on PerClot in primarily in the European market.
The challenge we are seeing in that market is really multiple competitors and prices coming down.
So the unit growth is being offset by the ASP declines from some of these aggressive small players, which, frankly, we don't ---+ longer term, the bigger market is the US.
And they are never going to show up in the US because of the barriers to entry from a clinical and intellectual property standpoint.
I would say both.
I think particularly on the PhotoFix side ---+ I just came back from the pediatric surgery meeting over the weekend and I received lots of favorable comments on this product.
So we're getting hospitals to reorder.
We are also opening new hospitals.
Also, the story on PhotoFix is going to evolve over the next 18 months, I would say, which is, as I said in the comments, we are going to be bringing on a larger product ---+ a larger sheet so it could be used in LVADs.
We're going to be getting the CE Mark so we can launch the product in Europe.
We are also expecting a couple of papers ---+ very positive clinical papers to come out in the next 3 to 6 months.
So that continued flow of new iterations is really going to have PhotoFix on, I think, a nice trajectory going forward.
So I don't think you have even seen the beginning of PhotoFix yet.
ProCol I think is similar, in that there is not as many drivers behind it.
But we continue to open new centers.
We continue to get reorders from centers.
And part of it is just getting the product out.
I think you know very well, <UNK>, in 2015, these value analysis committees ---+ you can't just show up with a product and have it bought the next day.
These things sometimes take a quarter to go through their committee before you can actually get the product on the shelf.
So we will again continue to see these new accounts come on board as well on ProCol.
Yes.
So we are going to be adding, all said and done, about 5 to 6 sales reps in total.
And on a quarterly basis, you're probably looking about $300,000 to $400,000 in incremental SG&A expenses.
Well, I think one of the things you get with John ---+ and obviously with my background as well.
I mean, we both have a lot of experience with big organizations.
I don't think that ---+ I think our sales force, if you look at the US, we have got probably 50 positions.
We are not looking at contracting that at all.
In fact, I think there is opportunity, as we talked about as one of the growth initiatives being M&A.
Anything that we acquire, we may or may not pick up reps along the way.
So we will definitely be looking at ways that we can increase the efficiency and the throughput of our sales organization.
That is something we are going to undertake.
And as it becomes something we want to share publicly, we will do that.
But at this time, I think you can just suffice it to say that we are always looking at things like that.
Yes.
So there's a couple points I would bring up that were in my comments.
We have talked about over the last couple quarters that the contracting IRB, just the process by which to get a site fully up and running, it is pretty daunting again in 2015.
So we have got 5 of the 15 up.
They are at various stages of the process.
I think the other thing that we kind of were a bit surprised by is some of the protocol requirements that as we discuss the protocol with the FDA and then once you put it into practice, there were a number of things regarding blood tests and imaging, where once we got into the throes of the trial, several clinicians just said, I am not going to put my patients through a CT scan at this point with contrast, particularly when they have got ---+ you are having an operation on their kidney and then you want to have them ---+ subjected to contrast.
That was an example of one.
The other one would be blood tests that you need a certain number of days in advance that just doesn't fit with their flow of the patient.
So we are going back to the FDA with some protocol adjustments.
And we think that those kind of, if you will, those kind of blocking points would tend to open up the flow as well as we are asking for 10 more centers.
So I think the combination of all those things, I think together ---+ taken together would put us in a good position to enroll this trial in 2016.
So again, we have got the benefit of time on our side regarding ---+ given the current injunction on PerClot, we certainly have a window of opportunity here to ---+ I don't want to take my time with the trial, but it is not like we got a gun to our head on the enrollment speed here.
Yes.
So we ---+ <UNK> basically gave you the full-year R&D number.
So you can take the first three quarters for 2015 and look at what he gave you for guidance.
And you can pretty much figure out what Q4 is going to be.
No.
I don't think so because if you follow my comments about the trial, we would consider ---+ we would see a significant ramp in 2016 on the actual enrollment of the trial.
So you are going to see the R&D ---+ if you look at this year's number, we expected heavy enrollment this year.
And we have backed that number down because of the reasons I just said.
And so you are going to basically see that heavier enrollment and expense in R&D going into 2016.
Yes.
Again, there is never a ---+ it is not like we sit down and plan these types of things out.
I think there was a number of factors that went into that decision.
Frankly, I wasn't real thrilled with the sales performance for the first half of the year.
And that basically was one of the catalysts.
And I wanted to get more seasoned and experienced leadership on the commercial side.
So part of it is when we're already and part of it is when your candidate's ready.
So I think when those two lines crossed is when we made the move.
No.
Look, I am not going to get into comment about specific employees on our earnings call.
I mean, Dave was a long-term loyal employee of the Company and we just made a decision to go in a different direction.
So that's it.
Not really.
I don't think we have had really any ---+ we have had some over the last ---+ before John got here, we'd had some attrition, but I don't think we have really had any.
Again, John is a very, very seasoned, a strong leader.
A very seasoned, well respected ---+ so I would expect to see the sales team kind of rallying behind him as he gets to know the folks and leads that group.
No.
I will let <UNK> comment, but I think, on a big picture, I mean, 2015 ---+ there were a number of things ---+ and I made the comments in my closing remarks.
There were a number of things that happened in 2015 that we don't expect to repeat in 2016.
There were a bunch of severance ---+ there have been a number of changes at the senior executive level, at the Executive Chairman level, and we don't expect those to repeat in 2016.
We also had the injunction and some little litigation that, again, was a big number in the first part of the year we don't expect to repeat itself.
So again, there is a lot of ---+ and those were in the comments ---+ there was a lot of kind of one-time things this year that we don't expect to repeat themselves.
So I don't know, <UNK>, if there's anything ---+.
Yes.
Just one other comment I will make, too, that we have had several open positions over the last couple of quarters that ---+ for a variety of reasons that we will probably talk about in the future, we have just been delaying in filling a lot of these positions.
So we have had the benefit of that, too.
And along with not filling those positions, we have had reduced travel and support expenses, too.
So there are a lot of factors that are going on that are causing G&A to be not as smooth as you would expect to see on a quarterly basis.
I think the other thing, Jeff, I would comment.
I have been here a year and you never know when you come into a new company what the culture is from a financial discipline and a ---+ how strong the controls are around people's budgets and these types of things.
I can tell you that the finance organization here is very strong.
They have got excellent budgeting and tracking mechanisms.
I know on a monthly basis every one of my direct reports and their entire organization how they are tracking; every one of my people are below their spending.
So it is a very disciplined culture around spending.
And I don't want to be ---+ like I say, penny wise and pound foolish.
We need to spend the money to drive the growth of the business, but we have got very strong controls and financial discipline in place.
Yes.
I know, Jeff, you have been around us a long time and there is no ---+ the soup making is sometimes a messy business.
And we have obviously looked at a number of different opportunities.
And I think the most I could say on that topic is that we are encouraged because there are lots of opportunities.
But we are being very disciplined and we are doing our homework.
We don't want to get into a situation where we acquire something and wish we hadn't.
So when we decide to acquire, we're going to have very strong conviction around what it is going to mean for our business and we will be able to share with you what it will do for us and why we are doing the deal.
And again, I think this ---+ again, once again, shows that the discipline and we are not just going to go off and do acquisitions because we have got the financial wherewithal to do it.
We're going to do smart acquisitions and you guys will be the first to know when we do one.
Yes.
Thanks.
Again, I appreciate everybody joining this morning.
And while I said it in the beginning, I wasn't real pleased with the top line.
I think this is a inflection point for the Company.
We have been kind of eating the French revenue with kind of a zero for the first three quarters.
Now we have got a direct team in place.
We will be driving top-line revenue and margin improvement in that geography going forward.
I just got back from Japan, where we launched the new indication for BioGlue there in our most profitable market.
We have also got, I think, some very encouraging data coming out on PhotoFix and that will continue to ramp.
And I think the other one, the kind of the ---+ hopefully the surprise story here for everyone is the turnaround of the tissue business.
We told you after the warning letter got lifted that we are going to go back in and do a lot of work on tissue and improve supply as well as improve margin.
And we are doing it.
So to get a 1,000-basis-point improvement in margin from Q1 to Q4 I think is a pretty impressive accomplishment.
And we think that will continue into 2016.
So 2016 is set up to be pretty good.
And then at the tail end of it, we are working overtime here on the M&A side.
And we see lots of things we like.
And like I said, we have spent some money, but you should feel good about it because we are being disciplined about it.
And we are going to try to get the right things for the Company going forward.
So I am encouraged about 2016 and look forward to speaking with you guys all at the next quarter call.
