Elutia Inc (ELUT) 2022 Q2 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Aziyo Biologics' Second Quarter 2022 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to Leigh Salvo, Investor Relations. Please go ahead.

Thank you, and thank you all for participating in today's call. Earlier today, Aziyo released financial results for the quarter ended June 30, 2022. A copy of the press release is available on the company's website.

Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Any statements contained in this call that do not relate to matters of historical fact or relate to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.

Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our public filings with the SEC, including Aziyo's annual report on Form 10-K for the year ended December 31, 2021, and such factors may be updated from time to time in Aziyo's other filings with the SEC, including Aziyo's quarterly report on Form 10-Q for the quarterly period ended June 30, 2022, to be filed with the SEC, accessible on the SEC's website www.sec.gov.

This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 11, 2022. Aziyo Biologics claims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements whether because of new information, future events or otherwise.

Also during this presentation, we refer to gross margin, excluding intangible asset amortization, which is a non-GAAP financial measure. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure is available in the company's earnings release for the second fiscal quarter ended June 30, 2022, which is accessible on the SEC's website and posted on the Investor page of Aziyo's website at www.aziyo.com.

And with that, I will turn the call over to Aziyo's Executive Chairman, Kevin Rakin.

Okay. Thank you, Leigh. It's a pleasure to be with you all today. I just want to take a moment and introduce Randy because we announced a couple of days ago that Randy has assumed the role of permanent CEO.

Just a quick background, Randy, he's a proven leader. I think you'll hear today is a very passionate guy, subject matter expert on Regenerative Medicine with a background having been CEO of Osiris, also President and CEO of the California Institute of Regenerative Medicine. Randy has created significant shareholder value over his career, great public company experience. So we feel very fortunate to have Randy on board.

Moreover, Randy has a history of the company, is one of the co-founders and he's been on our Board. But of course, being CEO is a different role, and you'll hear from him today about some of his excitement and vision for the future. I'm really pleased to build on our long-standing partnership. I've stepped up to being the Executive Chair. And we spent, I think it's fair to say a fair amount of time probably every day. We've been talking over the last 6 weeks.

I also want you to know on a personal level, I really appreciate how Randy has literally been on the road every week for the last 6 weeks, and you'll hear some of these findings over that time. So he has really hit the ground running and immersed himself in this job even while he was Interim CEO.

We have a terrific base business here at Aziyo, but we have felt that we could build a more compelling -- compelling vision for creating significant shareholder value on top of the base business or leveraging the space business, and that's what I think you'll hear today.

But let me make one last point as in my capacity as a shareholder. So going to the other shareholders out there, [high cap] our fund is one of the significant shareholders in the Aziyo. We've been involved in this company from the beginning. And we're determined to build value, but we're going to do that within the constraints we operate in.

So I want to be really clear that the debt refinancing we announced yesterday is a major step forward to strengthening our balance sheet. We have some other things in the works, but we are not going to do any kind of dilutive offering at this kind of share price that we're at right now.

And you'll hear within Randy's plans how we're going to work within -- within the constraints we have and the resources that we have.

So that's some introductory comments to set the stage. I'm going to pass the call on to Matt Ferguson, our CFO, who's going to give you some of the financial highlights before we hear from Randy.

Okay. Thanks, Kevin, and it's good to have you here today with us on this call. As Kevin noted, we're using a little bit different format here today. And so I'm just going to hit on a few highlights of the financials. And for additional details, I would refer you to the press release that we put out just about a half hour ago.

And so as we get into it, the main comments I wanted to make or the main points I would like to highlight. One is that for the second quarter, we had a really strong quarter overall from a top line growth perspective. We turned in 20% year-over-year revenue or net sales growth from our current products that is excluding the sales last year of a discontinued product.

And we really had significant contributions both from our Richmond, California based human tissue business as well as Roswell, Georgia, CanGaroo and cardiovascular business.

And really, with contributions all around, I would say that our most important growth drivers in the Q2, and I think likely to be the case in coming quarters and years, frankly, were CanGaroo and SimpliDerm. And I would just note that in combination, they actually grew 35% year-over-year in the second quarter. So really, really great performance in those parts of the business.

Beyond the top line revenue growth, I would just note more from a balance sheet and cash flow perspective. I'm very pleased that we were able to report yesterday that we closed the debt financing transaction that Kevin referred to. We've been working on that for quite some time, and I'm really pleased that we were able to partner with SWK Holdings on that.

And I'd just like to give a big thank you to them who, I would say, really dug in deep and got to know our business extremely well. So I think their investment in the company is a real signal of their confidence in us and our business and it's a real validation of the value that we have here. And they were really just great to work with through the entire process there.

A little bit more about that transaction. Between the cash at closing and the next second tranche of that deal, which we expect will be available to us over the course of the next 12 months, as well as now being in an interest-only period for at least the next 2 years. So as a result, we will not be making quarterly principal payments on our outstanding indebtedness.

This deal will improve our cash position over that time by approximately $15 million over that 1-year period. And that includes an improvement to our cash position compared to Q2 on an apples-to-apples basis of about $4 million, but it's really more important about what it's going to do for us over time here.

So we see this deal as really just the first step in a real revitalization of our balance sheet. Again, as Kevin noted, where -- we are really -- our intent is really to avoid any kind of significant dilution -- and in addition to this deal, we have a number of other initiatives that are at somewhat earlier stages, but I think also have a very strong likelihood of closing that will improve our financial health and our balance sheet position and will support our ongoing operating plans, which you're going to hear a lot more about in just a minute or 2.

And then last, but not least, I would like to note that we are reconfirming our guidance on the top line for the year. Our net sales guidance of $47 million to $50 million for the year. And while we don't see short-term revenue as the real determinant of value here, I'm still pleased to report that the team is executing really, really well and our overall business is definitely tracking to our plan.

So with that, I will turn the call over to Randy.

Thank you, Matt. And it's a pleasure to join you all this afternoon, my first conference call with Aziyo, and I'm very excited to be here, and I'll share some thoughts on what I would say are initial observations of my time with the company.

So first, let's just get into it. I'll try to keep my comments pithy today. Aziyo today, this is, as you heard from Matt and you heard from Kevin, this is a very strong company with a very real business as a platform to build on.

So just looking at the numbers, we're talking in $47 million to $50 million in annual sales, growing in the mid- to upper double-digits. There's over 1,500 institutions globally that use Aziyo products on a day-to-day basis. So it's a very real base for which to build a powerful company on.

It also has the parts to be a fully integrated company. So we have research and development capabilities that have led to the creation of our proprietary products. We have strong manufacturing capabilities in our Roswell, Georgia facility as well as our Richmond, California facility, and we have a pretty remarkable commercial infrastructure.

And this is a point I'll be making a couple of times, but we have a commercial infrastructure that allows the work that we do in development and manufacturing to be more than a science experiment and in fact, develop real products that have real commercial utility and validity as we take them out into the marketplace.

And so what I -- one of the things that gets me so excited is that when I look at this. I see these great parts, and I see this base to a company, and I have to think that those parts can actually be assembled in an even better and more effective way to where those parts become an engine and the power that, that engine generates is more than its pieces.

And so what I thought we'd do today is I'd start out just sharing with you, what I've observed in my first 48 -- 45 48, whatever it is days on job. I have been -- as Kevin said, I have been out for most of that time. And during that time, I've been doing a tremendous amount of listening.

I have held over 50 individual meetings with all types of physicians that love and use our products and are evangelical about them, physicians that don't use our products because they have questions about them, our sales representatives, leaders from other companies in the space and with our Aziyo team. At all 3 of our Aziyo locations.

And during that time, 3 things have really become crystal clear to me. And I'm going to tell you these 3 things that are on the screen in front of you. And then I'm going to use a few slides afterwards to try to give you some meat on the bones is why I think these 3 things are true.

But first is we have exceptionally favorable market dynamics at play here. And that's not just to say that we have demand for our product, but we have a market dynamics, which makes the introduction of our products right now, unusually good.

Two, we have the ability to satisfy and meet this demand with best-in-class products. We can and we will do this. And we are uniquely positioned to do this. And I will say that this is one of those areas where my background and my experiences, I'm able to come here and kind of put my hand on the scale and really tilt this one in our favor, and I intend to do that.

And three, we have a great opportunity to leverage deep, meaningful strategic partnerships in order to grow efficiently and to grow quickly.

So I'm going to go in and I'm going to try to peel back the onion here on these 3 points a little bit more for you, but I'm going to do it using a specific example. So I'm going to be using only CanGaroo here for the majority of this vision. Keep in mind, we have 4 different components to our business beyond our device protection, our CanGaroo business. But I thought for brevity and clarity, I'll just use CanGaroo as a model for how this vision can work and just you'll be able to realize how it can translate into other pieces -- of our business in a second.

So let me just start off with some gross pictures. You can't have a biotech company without your requisite gross pictures. One of the questions that I get asked a lot is, why do you put a pacemaker inside of a pouch? What is it you're trying to prevent or keep from happening?

And infection grabs a lot of the attention in this space, and it's a real problem. But it's a problem that affects 1.5% to 3% of the cases. As you can see on the left, that's an example of what a bad infection would look like post-pacemaker implantation, right? And so this is a real problem. I'm not knocking the 1.5% to 3% infection rate.

And this is actually the genesis behind our CanGaroo RM offering, which is currently at the FDA right now on track under review by them. And this is our version of CanGaroo that has rifampin and minocycline added to the mixture, and we're very excited about that.

But that's really just the beginning of the story here because 8% to 13% of these procedures fail. And if you're a patient or you're an electrophysiologist, that's the number you really care about. How many times do I go to the operating? Have this not work? Because pacemaker implantation for the most part is not an elective procedure.

If you have heart block, you need pacing. And so when you look at some of these other conditions, erosion, this is literally where the pacemaker erodes through the skin, this happens frequently in patients with [thin skin] or hematoma.

So a small cut bleed underneath the skin becomes a real problem requiring [explantation]. We're just looking at the aesthetics pacemaker implantation. It was one of the things that sort of shocked me when I went out on the field, why is it you still see a pacemaker? Why can't we do better than that?

When you look at these different characteristics, you see a market that is totally ripe for innovation. And we have our first product coming out in this to address this, what I would call activity, which is the CanGaroo RM product. But we actually think that the base of our technology, the biological and regenerative base of our technology enables us to tackle these other products in a way that the current market leaders product, we think can't.

And so we're going to attempt to address not just the infection product but multiple products, and we think that's going to give us significant advantage in the marketplace.

So now let's take a look at these market dynamics that I've been alluding to. So the CIED market dynamics or [CID], fancy way we're saying pacemaker market dynamics are highly favorable for a few reasons. But let me sort of start out.

The pace -- or the pouch opportunity in the pacemaker market is about a $500 million opportunity in round numbers. It's about 500,000 procedures annually that are taking place. But those 500,000 procedures can significantly influence and largely control an $11 billion pacemaker market.

So there is a 20:1 leverage going on here. And we take look over on the graph on the right, and we actually see that starting to come true. So the market leader in both pacemakers and in the pouch market, they have their own -- they have their own pouch. And they've done, I think, a fantastic job at creating a market, and they're using -- and they've had tremendous success within their own field.

So these are our estimates of what's taking place based on some different published numbers. But if you take a look at that, the market leader currently has 60% market share within their own customers. But there's another 300,000 implantations going on where the pacemaker is supplied by other manufacturers that don't have access to a pouch.

Now there's a couple of things going on here. The first dynamic is those other pacemaker manufacturers do not want the market leaders pouch in their procedure. So they're highly motivated to come up with a pouch to keep -- to actually prevent erosion of their own market.

But we think given the slide I just showed you, we actually think we can turn this around. And we think with a pouch that not only can address infection but actually can also address some of the things that Regenerative Medicine is uniquely capable to address things like erosion, things like hematomas and lead fracture and all these other different things that we're looking at.

We actually think that we have the opportunity to have by far the dominant pouch and enable these other manufacturers to reverse this trend and actually take device share away from the market leader by putting a better pouch into their procedures.

And so when we look at this, we see a market that is just ripe and spring loaded for a great pouch. And that leads me really to this next point, which is -- since this market dynamic exists, we think we're positioned. We're in the best position to actually satisfy that market demand.

And let me show you why, right? So we're not new to this game. We're actually pretty darn experienced. And in this field, we've really developed our R&D capabilities as a platform. And that's really how I want you to be thinking about this as I go through it.

And this platform centers around 3 different dials that we have the ability to control and that we have domain expertise over. The first one of those dials is the material. So in this particular case, the CanGaroo case, initially, we're talking about porcine SIS or extracellular matrix, ECM as it's referred to.

But we have actually expertise with a whole lot of different materials. [Human-aid cellularize dermis], amniotic tissue, bone and so we can -- we have a pallet of different materials to choose from.

The next style we have in our R&D platform is activity. And with activity, what we're talking about in CanGaroo, we're talking about the ability of the product to allude an antibiotic in a product like ViBone. We're talking about cellularity. So we have the ability to change the activity of these different products.

And then lastly, engineering. And engineering sort of comes down to the configuration and the features, whether it had holds in it or it's designed to capture a device or has a putty form or a fiber form or all these different kinds of things we can do.

And by combining these 3 different dials we can create all kinds of different products. And we have created all kinds of different products. So just a real quick example. As I mentioned, sort of our ViBone product line, that's a combination of from a material bone mixed with from an activity standpoint, mesenchymal stem cells, engineered into a putty-type matrix.

CanGaroo RM is obviously looking at human -- or I'm sorry, porcine SIS mixed with 2 antibiotics configured into a pouch to hold a pacemaker. And so you can see, as we sort of move on from this, we can reconfigure these things kind of in any way we want. So we could take a SimpliDerm, which I alluded to in some of my comments, has, I would say, unacceptably high or breast reconstruction has an unacceptably high post-surgical infection rate of about 10%.

So we could take the antibiotic elution technology that we have from CanGaroo and actually introduce it into our SimpliDerm line.

So between these different things, we're able to mix and match. But we don't leave it there because I would say if we left it there, we would have a science experiment. And but what we have is this fully integrated company. And part of that fully integrated company is a commercial team that's able to actually take these products out into the marketplace and introduce them into commerce and into sales and into contracting and get them through value-added committees and into formularies and on the shelves and deal with reimbursement.

And that significantly changes our position when we go to negotiate partnership arrangements with other companies because we validated not just the scientific need, but the actual commercial utility of the product.

And so that's something, obviously, I'm very passionate about, and I'm very excited about. This is, again, one, given my background great market demand, can you build it? Given my background, I have a tremendous amount of confidence that we have what it takes in order to build these products, and we will build the best products in each of the markets that we go into.

So then moving on. We look at -- in this model, we were talking about pacemaker CID market at a $500 million market. But that for us is really just the beginning of this market. Because when you start manipulating these 3 dials and you start being able to effectively move into other markets, $600 million breast reconstruction market, which is currently sitting with a 10% infection rate. We think we can go into that market with a superior product.

Sleep apnea, neuromodulation, we have this facility in Richmond, which enables us to do great things like cartilage re-surfacing. There's a tremendous amount of market opportunity for us to go into.

And one of the things that I'll say is when I talk about these kinds of things, it seems like a great idea, Randy. It also seems like a tremendous amount of money from an R&D standpoint.

A lot of what we're talking about, given the existing platform we have is actually pretty low hanging fruit, things that we can do with inside the 510(k) pathway or the [361] pathway or some combination of those. So we actually have a pretty fast and pretty efficient pathway to creating some best-in-class market product or best-in-class products on the market, protected with a pretty strong -- actually, a really strong intellectual property portfolio of patents around this technology.

Okay. So I'll summarize here and get on to taking questions. So we believe and we're very excited about the favorable market dynamics that currently exist. Given those market dynamics that exist, we really firmly believe that we can build best-in-class products to satisfy them and we intend to use strategic partnerships going forward in order to efficiently and quickly capture those markets.

So you're probably saying, great, Randy, what are you going to do next? Well, a couple of things. One is we're going to have and focus our commercial team on continuing to engage our key opinion leaders to continue to validate the innovations that we make.

Obviously, the CanGaroo RM regulatory review process is top of mind for, and we're going to keep working on getting that done. Generate additional clinical and I would say, nonclinical data as well to support our proprietary product franchises. When we say best-in-class, we want that to be evidence-based.

Build out a product pipeline. So we're not going to show it obviously here today, but you will soon see from us a more robust product pipeline that starts connecting some of these dots that I'm alluding to.

And then lastly, engage in -- engaging some robust commercial discussions over strategic partnerships that we can then leverage and help us with market adoption efficiently and quickly.

So its been in 45 days, it's still early. You may want to ask me a whole lot of questions. I don't have great answers to you yet. That's okay. I'll do my best.

But with that, I want to thank you for listening and turn the call over to the operator and get to your questions.

(Operator Instructions) Our first question comes from the line of Josh Jennings with Cowen.

Randy, it's great to congratulations on taking the CEO seat formally. Nice start this quarter under your belt. I wanted just a couple of follow-up questions. I know it's still early with you being in a leadership position. But just in terms of the clinical data pursuit to support your franchises, we should we be thinking about funding trials at centers? Or are you talking about funding major randomized controlled trials to support the CanGaroo RM launch? And SimpliDerm and other products will come out of the pipeline? Or just how should we think about this clinical data accrual that's going to come?

Yes. Thanks, Josh. So -- we currently have 2 different studies that are ongoing right now. We have a HEAL study and recon study, which are generating data. We will start to get readouts on those, and I think that you can expect to see data from both of those in the second half of this year.

So those things are up and running. With regards to SimpliDerm I think you're dead on. We see tremendous opportunity in the SimpliDerm market, particularly with AbbVie''s acquisition of the AlloDerm product, we think there's a big market there to take.

And we also think there's a big market there to improve on -- and so we'll be designing some studies there going forward, but we don't have those built into the formula yet sufficiently for me to comment on them.

Understood. Just wanted to also ask about the strategic partnership route. I mean you have a number of strategic partnerships in play with the Bone Matrices unit. And we should be thinking about commercial partnerships more extensive for SimpliDerm or we're across the board or even more stronger strategic partnerships with CanGaroo distribution as well. Any other hints you can provide in terms of that strategy?

And just a follow-up on that, I think one of the elements of our understanding of the potential to boost out your revenue growth, is some tuck-in M&A. And you guys just signed that credit facility. Just how should we be thinking about tuck-in M&A opportunities over the next 12 to 36 months as well?

Yes. No, Josh, two great follow-up questions. So with regards to -- with regards to different types of partnerships, we obviously have been very successful in the orthopedic side of the house.

Again, SimpliDerm -- SimpliDerm a pretty interesting -- interesting beast in that -- we've actually had a lot of success with our commercial team running the distributor model there. And that's working pretty well, and it's simple. It's nice and that's working pretty well, and it's simple. It's nice and clear and clean.

And financially, it's pretty advantageous for us. And so I think we like the idea of expanding that model on the SimpliDerm side, but I would say probably not to start there with a major commercial partnership.

Where I think I see the most prominent opportunity is on the cardiovascular and CanGaroo side of the house. So I wasn't in my seat for a couple of days. Before I started getting calls from people I've had relationships with historically asking basically, was I really going to go and build these great Regenerative Medicine products in the space. And if so, can we talk about -- we talk about partnerships for them.

And so we have (inaudible) to start part with, and I don't want to be in any way dismissive of those. We have a great relationship with Boston Scientific, which is specific to product in -- for the CID market within the United States or current products within the field within the United States.

And then we have another more nonexclusive partnership with Biotronik. And like I said, both of those partnerships, we think, are very good. We also think, though, the dynamic of this space says that if you're in the CIED space, you know you need a pouch. And there's a lot of pressure to basically make sure that you have a chair before the music stops.

And so it's a big -- it's sort of a big world out there, and we have a pretty big canvas on which to paint particularly when you think about modifications. We can make to these -- to these products. So that's -- I think that gives you sort of a good idea of our thinking around partnerships.

And your last question with regards to M&A, I think it's something opportunistically, we would seek in time. Josh, but I'll tell you right now, we have more opportunity in front of us. We're drinking from a firehose. And -- and we are laser-focused on getting that.

We see a market that needs our products. If we build those products, we think they'll be taken up. And we see a path to get that done through partnerships. And so we're going to kind of keep our eye focused on that, for right now. If something too good to be true comes along, well, maybe it is and but we'll certainly take a hard look at it, but we're focused on organic right now.

Our next question comes from the line of Matthew O'Brien with Piper Sandler.

This is Simran on for Matt. Randy, first off, congrats on the new role.

I guess if we can just start off with the Q2 performance, maybe you guys can 35% growth in the core business. Maybe you can parse out kind of growth driven by CanGaroo, growth driven in SimpliDerm, just performance of each of those business lines? And how the noncore business kind of trended during the quarter?

So I'll sort of start by putting a little color around this question, I'll turn it over to Matt to give the good financial CFO answer to this question, Simran that you're probably more interested in.

I would say, first I'm not a big fan. I'm just going to say it. I'm not a big fan of core, noncore. We make very serious products that go into patients who depend on the quality of our work for their lives. And there is no part of that, that we don't take very seriously. And I know those were our terms, not yours. But there's something I think going forward, you can look for us to drop from our [lexicon].

We -- they are all our children, and we certainly love them all. They might have different growth trajectories. They might have different sales cycles and customer base, some B2C, some B2B.

They are all very important, very high-quality products. And so going forward, they're all core to me. With regards to breaking them out, Matt?

Yes. Well, Simran, I think that's a good question. We're really pleased with what we saw from CanGaroo and SimpliDerm and that led us to one at least break out the growth rate for those 2 highly proprietary products as a group and really pleased to see 35% growth there.

Clearly, as you pointed out, our contract manufacturing business and the other products that go into that noncore line. We have seen really nice growth for multiple quarters there. And that business, a lot of great people contributing to that, and that part of the business is really going well.

In general, for the second quarter, it seems like kind of a long time ago now, but thinking all the way back to April or so that we started off well. And I think we had a good steady consistent performance throughout the quarter.

I think it was a pretty clean and predictable period for us. So I hopefully got to most of your question there, if there's anything I missed or like Randy or me to follow up on, please let us know.

No, that was perfect. And then I guess switching gears to RM specifically, lots of excitement there. Is it -- so it sounds like it's still on track for approval in the second half. I guess, could you maybe provide some color on what your discussions with the FDA are looking like at this point?

And then I guess, to follow up to that, what's the commercial strategy here? Are you able to start selling RM sometime in Q4? And then -- is there any pricing power that you can leverage?

Yes. Those are great question. So my, again, limited short-term involvement with this -- with the RM product specifically and after meeting with the regulatory and the development teams. I'll just tell you my takeaway from it.

I think we have a product that is going through the review process well and is going to be reviewed. But I'll also tell you, I've now been around this industry for a long, long time, and I've worked with the FDA, and we have a review right now that's going through 2 agencies, were involved 2 agencies, [CDRH and Drugs].

And so I just wouldn't handicap and really wouldn't get into whether it's this quarter or next quarter or the sometime next year. And I'll say also because for our new way of thinking, it's -- we're thinking about this company differently. We're not thinking about this company in terms of incremental revenue growth. We're thinking this company in transformational revenue growth, but actually goes perfectly with sort of your last point. With the right strategic partners and importantly, with the right strategic partnership in place, these kind of questions fall away and become sort of less important on what day in the quarter do we start selling or can we [eke] out a little bit more.

So we're thinking about this in a more transformational way driven more by partnerships, where and you guys to get used to it where we look more like a biotech company. And hopefully, we start thinking about our valuations with a B on it in terms of market cap instead of with an M on it. But -- yes.

Okay. Perfect. And then if I could just squeeze one last one in here. I guess, for Matt. You guys have $25 million in the debt financing, and it sounds like there are opportunities to secure additional funding. I guess, can you provide a bit more color on your capital allocation priorities and how that I guess what that looks like over the next 12 months in terms of deployment?

Yes, Simran, again, really good question. And it may be a little early to get into a great amount of detail in terms of the next 12 months. But what I can tell you is that the deal that we announced yesterday is a really important one for us. It does bring cash onto the balance sheet immediately, and it does still leave open the availability to do an additional working capital based debt facility up to $8 million. So that's something that we'll be working on in the near term.

This is a business that has a really a manageable burn rate [in] our EBITDA for the last quarter was only about -- our EBITDA loss is only about $5 million. Our cash usage from operations was below that.

So we feel like we're in good shape. We are working on a number of other things, which I can't comment yet on in detail, but as we mentioned in the prepared remarks, our goal is to avoid going back to the equity markets and avoid dilution in a significant sort of way, and we think we've got some really good opportunities to do that.

So I guess, in part, my answer would be stay tuned. We think we'll have more to announce before (inaudible).

Our next question comes from David Rescott with Truist.

Randy, congrats on formally tipping into the new role here.

I want to start just on some of the commentary you made around partnerships in CanGaroo and the CIED market overall. You mentioned that there's a 60-40 split between the -- where the market leader as it relates to the kind of number of percentage of IPI EV envelopes going into these products versus the overall market around 5%.

So my question is what I guess do you think is the biggest driving factor on that meaning -- is my guess is that some of the reimbursement, the way that some of the reimbursements are up and the dynamics that they have by being maybe able to bundle some of these products. That's not something that you necessarily would be able to do, given that you're going through this partnership. (inaudible), -- so I'm wondering what -- how you think about the partnerships that you currently have as it relates to addressing the CIED pouch market with CanGaroo?

And in its current state, do you believe that maybe what you've seen thus far with the partnerships, whether or not they need to shift around at all as you think about going into market with CanGaroo?

Yes. Thanks, David. Boy, you hit one of the things sort of right on the head with regards to bundling, contracting, inventorying the products where we have more of a sales agent type relationship under our current partnerships, really -- I mean, I wouldn't even say disadvantages, it almost sort of takes the product -- in a lot of cases, just almost completely out of the game. It goes to our commercial team. They are remarkable at what they can do and what they can overcome.

But we would -- a lot of those really massive barriers fall away if the agreements would be differently. And I think there's good reason to believe that will happen.

Okay. That's helpful. And then I guess, as it relates to the guide for the year, I mean, obviously, strong acceleration in CanGaroo and SimpliDerm if I look at kind of the growth in the back half of the year and the 14% growth in Q1, 20% growth in Q2, excluding the FiberCel product. It definitely looks, I think, a little maybe conservative.

So just wondering how you're thinking about the cadence at least given some of the acceleration you've seen with CanGaroo and SimpliDerm thus far, how you're thinking of at least the cadence in the Q3?

And then what maybe if at all, any type of conservatism is built into the full year, especially if we should think about maybe the new CanGaroo RM product contributing maybe in Q4?

Yes. So David, I think right now, 45 days into it, I have seen a company that is really strong. I've seen a company that's firing all in our cylinders. But 45 days into it, I don't think I have the confidence yet to -- I just don't know enough in order to change guidance.

And I'll also just say stylistically going forward as we get to know each other. I am far more of a point to the scoreboard at the end of the game kind of guy, then I am sort of (inaudible) before or during the game. And so I just don't know enough to do anything to comment on guidance and -- and even if I did, I'm not sure I would.

Okay. Maybe just one last one. I know that the commentary, at least for the term loan, I think, as we said, operational metrics -- financial metrics by September 2023 that are contingent on drawing on those additional $4 million term loan.

Just wondering, if at all, I know you've probably gone the specifics around what those are, but just wondering if at all, you could comment maybe on what we should be thinking about? Or maybe what kind of the operational or financial metrics that you guys were thinking about when you look out to that 3Q 2023 time frame?

Yes. I think that's probably in my camp, Dave. The -- I think the intent is very much that, that second tranche will be available to us, both from the point of view of SWK and ourselves.

Specifically, the operational metric is the clearance of CanGaroo RM and the financial metrics have to do with gross profit at levels that are really not much higher than where gross profit sits today.

So we'll have -- we'll have more details out at some point, we'll have an 8-K kind of spilling out the full details of the loan, but that's the gist of it, and we fully expect that second tranche to be available to us sometime in 2023.

Our next question comes from Ross Osborn with Cantor Fitzgerald.

Congrats on new role, Dr. Mills. So looking at 2Q revenue, could you maybe parse out growth from higher utilization at existing accounts at accounts versus adding new accounts during the quarter?

Boy, I sure can't but -- but maybe Matt can or maybe I can, I don't know.

Ross, I can speak to it a little bit. We certainly look at that internally. And I can say that we saw contributors from both of those elements, both new accounts as well as utilization within existing accounts. I would say without getting into the exact numbers, which I don't have right in front of me, but we got more of a contribution from existing accounts than from new accounts.

And I think that speaks to the stickiness of our products with our customer base and is a good indicator of an overall healthy business.

Great. No, that's exactly what I was looking for. (inaudible) Clarity. And then maybe just one more on OpEx, SG&A stepped up a little bit sequentially. Could you just walk through some of the drivers there?

And then maybe how we should think about the cadence for the balance of the year?

Sure. Again, I can speak to that. Q2, we did have a little bit of a bump in some of our OpEx. Some of that was noncash stock-based comp, which is not too much to be concerned about. We did also have some things that I think were more transitory in terms of we have the transition in the CEO seat, which had some expense that went along with it that probably will, in fact, spill over into Q3.

And we -- we have had some higher legal expenses, other G&A-type expenses, that I think will probably come down over time as well.

So I think Q2 is probably not a bad indicator for maybe where we'll be in the current quarter and perhaps even into Q4, but we're definitely looking hard at all of our discretionary spending and making sure that we're managing our business judiciously.

Sounds good. Congrats again on the progress.

That concludes today's question-and-answer session. I'd like to turn the call back to Randy Mills for closing remarks.

Thank you very much. I appreciate you all listening. I look forward to getting out on the road and seeing and meeting you all at upcoming events as they unfold. We'll be setting out a list of those. And I hope you have a great day. Bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.