Establishment Labs Holdings Inc (ESTA) 2021 Q1 法說會逐字稿

Greetings, and welcome to the Establishment Labs First Quarter 2021 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Raj Denhoy, Head of Strategy and Investor Relations. Thank you, sir. Please go ahead.

Thank you, operator, and thank you, everyone, for joining us. With me today are Juan Jose Chacon Quiros, our Chief Executive Officer; and Renee Gaeta, our Chief Financial Officer. Following their prepared remarks, we'll take your questions.

Before we begin, I would like to remind you that comments made by management during this call will include forward-looking statements within the meaning of federal securities laws. These include statements on Establishment Labs' financial outlook and the company's plans and timing for product development and sales. These forward-looking statements involve material risks and uncertainties, and the company's actual results may differ materially. For discussion of risk factors, I encourage you to review our quarterly report on Form 10-Q that we expect to file with the SEC tomorrow, and which will be available on our website at establishmentlabs.com.

The content of this conference call contains time-sensitive information, accurate only as of the date of this live broadcast, May 5, 2021. Except as required by law, Establishment Labs undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call.

With that, it is my pleasure to turn the call over to our CEO, Juan Jose.

Thank you, Raj, and good morning, everyone. I hope everyone is healthy and continues to remain safe. First of all, we would like to express our sympathy to everyone around the world suffering from the effects of the pandemic. We do business in more than 80 countries, including India, Thailand, Costa Rica and others that are currently experiencing a surge in cases.

We continue to support our employees and communities through this difficult time, and we look forward to improving conditions in these hard-hit areas over the next coming months.

Now turning to our business performance. 2021 first quarter revenue was $30.3 million, a new record for our company. First quarter revenue increased 24% over the first quarter of 2020 and was up 13% sequentially from the fourth quarter of 2020. Our singular focus on women's health in the superior aesthetic and safety profile of our Motiva platform continues to resonate in the marketplace.

With our strong start to the year and the significant momentum in our business, we are raising our full year guidance for 2021 to a range of $118 million to $122 million. This is a substantial upward revision from our previous guidance of $110 million to $112 million. This updated outlook represents growth of 39% to 44% over 2020. As always, and especially during the pandemic, we are going to be conservative with our guidance. Renee will provide additional detail on our first quarter performance and updated outlook in a moment.

Before I turn the call over to her, I'd like to provide an update on recent events as well as key initiatives underway at Establishment Labs. On April 23, 2021, the share committee of the European Commission published its final opinion on the safety of breast implants in relation to anaplastic large cell lymphoma, or ALCL. The report largely reiterates what has been concluded by other regulatory and scientific agencies around the world, namely that there is a causal relationship between textured implants and the development of ALCL. This has been found most significantly in implants with an intermediate to high surface roughness, which includes macrotextured and polyurethane-coated implants.

We developed our SmoothSilk Surface technology, which is classified under ISO standards as a smooth surface more than a decade ago to address issues that are now being recognized. With more than 1.6 million implants after more than 10 years of commercial implant sales, we have still not had a single case of ALCL reported with Motiva. And our post-market surveillance data continues to show a less than 1% reoperation rate due to capsular contracture.

As a company focused solely on the mission of improving women's health, we do not celebrate the conclusion that products from our competitors can be directly tied to a man-made illness. However, while we look forward to a future where the issues with legacy companies and products are no longer discussed, it is important that this industry acknowledge that certain classes of products are not safe. And with the evidence available, should no longer be used.

The rigorous science and clinical data behind Motiva sets us apart from the competition, and our strong sales results show that this message is resonating with surgeons and with women.

In February, building on our history of innovation, we provided a first look into Motiva Mia, our minimally invasive breast enhancement procedure made possible by a standardized technique using our proprietary tools in the Ergonomix2 Diamond implant. After our first cases in Asia in 2019, I am pleased to report that we recently completed enrollment in our 100-patient Motiva Mia IRB-approved study in Costa Rica.

During the latest series, we received feedback from plastic surgeons who traveled in from around the world to participate in this journey of innovation. We hosted surgeons from Europe, Latin America and the United States. We continue to learn a tremendous amount during these early cases, and the feedback from surgeons is helping us refine and optimize the procedure.

Overall, I can tell you that our initial enthusiasm for Mia and its potential has proven more than justified. The time it takes to perform Motiva Mia remains very short, with procedures routinely done in less than 15 minutes. Because Motiva Mia does not require general anesthesia, patients are able to leave the clinic in under an hour, with many leaving in less than half an hour. Patients also report little, if any discomfort or pain with Mia, and are typically able to return to their normal daily activities in less than 2 days.

Aesthetic outcomes are excellent, with as much as a 3-cup size increase and very high satisfaction scores. We look forward to continuing our clinical work with Motiva Mia and plan to initiate our multicenter IRB-approved study in Thailand later this year. Motiva Mia has the potential to make breast enhancement appealing to many women who previously had not considered breast aesthetics. The positive feedback from surgeons who have used the technology supports our view that Mia will expand our total addressable market.

As a reminder, our initial estimate of the global total addressable market for Mia is 1.9 million procedures per year. The Ergonomix2 Diamond implant used in Mia received CE Mark in December. And I'm also pleased to report that we have filed for regulatory clearance in Europe for the tools that are part of the Motiva Mia system.

We expect to begin medical education and premarket activities with Motiva Mia in Europe before the end of the year. Motiva Flora, our novel tissue expander, received CE Mark in June 2020, and we are preparing for full commercial launch in Europe this summer. With an integrated RFID port, Flora has a significant improvement over the current standard of care. With the first of its kind, nonmagnetic port, Flora allows for MRI imaging during the time an expander is used after mastectomy. Beyond improvements in imaging, Flora also has the potential to improve women's health by changing the way women are treated for their cancer. The metal in currently available tissue expanders can be a limitation in the way radiation oncologists plan and deliver treatment. Many of the clinicians we are partnering with have noted that Flora could allow them to deliver safer and potentially more effective treatments to their patients.

We have several projects and studies underway to help define how Flora can improve radiation oncology treatments during this critical stage.

The clinical benefits that come from offering substantially better alternatives is an important part of our women's health mission. In many countries around the world, less than 10% of women have breast reconstruction after a mastectomy. Flora is one part of a long-term strategy to make breast reconstruction not only safer, but also to create a new standard of what we call aesthetic breast recon, with the goal to provide similar outcomes for breast reconstruction in aesthetic patients.

Flora could indeed be a game-changing solution. And we have a number of additional technologies under development in this area that I look forward to sharing with you in the future. Our clinical and commercial efforts in China are ongoing, and we continue to make progress in this regulatory process. Our plan is to launch Motiva in this important market in 2022.

Our regulatory time lines for U.S. approval also remain unchanged. More than half of our U.S. IDE study patients in the aesthetic cohorts have now reached the 2-year mark, and we continue to enroll patients in the reconstruction cohorts of the trial. I will now turn the call over to Renee.

Thank you, Juan Jose. The significant momentum we saw at the end of 2020 continued into this year. We saw strong growth again in sales this quarter to a new record level, and our operating expenses and cash are being managed effectively. Total revenue for the quarter was $30.3 million. Direct sales were approximately 42% of this total, while distributor sales, which can fluctuate based on changes in inventory levels and the timing of reorders, made up the balance.

From a regional perspective, sales in Europe comprised approximately 42% of global sales. Asia Pacific and Middle East was 31%, and Latin America made up the balance. Brazil, which is our single largest market globally, accounted for approximately 11% of total quarterly sales.

Our reported gross profit for the first quarter was $20.1 million or 66.2% of revenue compared to $15.5 million or 63.2% of revenue for the same period in 2020. Our gross profit this quarter also improved from the 54.3% reported in the fourth quarter of 2020. The year-over-year increase was due to the growth in revenue and better absorption as our production volumes increased. Average selling prices in the first quarter improved slightly from the year ago period.

As we saw in this quarter and last, there will be fluctuations in gross margins. We continue to believe the best way to gauge our progress is on an aggregate basis over time, and we remain comfortable with the gross margin in the low 60% range for the near term.

SG&A expenses for the first quarter decreased approximately $850,000 to $18.1 million compared to $19 million for the first quarter of 2020. SG&A in the first quarter was consistent with the level reported in the fourth quarter of 2020. Our R&D expenses for the first quarter decreased $150,000 from the same quarter a year ago to $4 million. R&D expenses were down approximately $400,000 from the fourth quarter due to timing of clinical trial and other expenses.

Total operating expenses for the first quarter was $22.2 million, a decrease of approximately $1 million from the year ago period. The decrease this period was due to the timing of expenses of several projects.

Net loss from operations for the first quarter was $2.1 million compared to net loss of $7.7 million in the year ago period. Our cash position remains strong at $78 million as of March 31, compared to $84.5 million on December 31.

As Juan Jose noted earlier, we are raising our sales guidance for 2021 to a range of $118 million to $122 million from the previous range of $110 million to $112 million. This new range represents annual growth of 39% to 44%. As we look down the rest of the P&L, we continue to expect to see spending levels increase as we prioritize investment in a significant number of development and commercialization programs we have underway.

Strengthening our product portfolio and preparing for entry into new markets to drive future growth remains our top priority. However, while operating expenses tied to these new programs will increase, we expect a number of cost efficiency programs we have implemented over the past year have become permanent. This increased efficiency as well as our strong revenue growth should result in our cash use continuing to trend down from pre-pandemic levels, even as we increase strategic investments.

Overall, we believe our company remains in a very strong, competitive and financial position. I will now turn the call back over to Juan Jose for concluding remarks.

Thanks, Renee. We are off to a very good start this year. The record revenue we generated in the first quarter and recent developments in our industry show again that ESTA is on the right path to be the leading company in breast aesthetics and reconstruction. However, we are not satisfied with just taking share within the current breast implant market. We are focused on fundamentally changing the patient journey in breast aesthetics and reconstruction through innovation, science and technology.

Motiva Mia has a real potential to transform breast aesthetics. And the launch of Motiva Flora this year will mark our entry into the breast reconstruction segment, where we see an opportunity to improve outcomes for the millions of women diagnosed with breast cancer each year.

As perceptions change and as new possibilities become available, the total addressable market for our technologies could grow substantially. I want to close by noting that with operations in over 80 countries around the world, we are mindful in these times that things remain unsettled and challenging for many. I want to thank the entire Establishment Labs team for their dedication to our mission of improving women's health.

I will now turn the call over to the operator for your questions.

(Operator Instructions) Our first question is coming from Josh Jennings of Cowen.

Congratulations on another record quarter. I wanted to, Juan Jose, just follow-up on your comments on the share report and was hoping you could help us understand the path forward from here with international regulatory decision, the potential for individual countries to digest this year report and put forward any type of regulatory decisions or restrictions? Are there any processes that are ongoing in any regions? And what should we -- how should we expect this year report -- results to play out over the next 12 months?

Yes. Thank you, Josh. Actually, the most important thing from the SCHEER report is that it is now public information that there's a causal relationship between texture breast implants and ALCL. So physicians in the European Union, now that they have that at hand, they need to use that information when informing patients about the potential risks of those devices. It also means that in the future, there may be patients who think that if they have not been properly advised by their physicians, they can take action against them.

What goes from here is basically moving to another side of the European Commission that basically provides for legislative action. But at the same time, individual health authorities can take their own decisions ahead of time. So it's not -- I don't think it's going to happen in the very short term. But to us, the most important thing is that we continue to prove the safety of Motiva implants is unparalleled, and more and more women worldwide are asking their surgeons not to use texture devices. So I think the trend is clear, away from thread texture devices and into smooth implants. And when someone is choosing a smooth implant, definitely, the most advanced technology is Motiva.

Other regulatory bodies in other countries outside of the European Union may want to take decisions also based on that report, but we don't have any indication yet as to which ones or when they would do so.

Great. And then I wanted to follow up just on the U.S. IDE trial for Motiva, to your follow-up data or follow-up for the entire primary augmentation cohort and revision cohort -- excuse me, revision augmentation cohorts could be in hand before the end of the year. Can you just help us understand the potential paths of releasing that data to the public and potential to submit to the FDA on 2-year data?

Yes. Thanks, Josh. So we have now half of our patients that have passed the 2-year mark in our aesthetic cohorts. We're very happy with our follow-up rates, and that's been quite a challenge to do so during the pandemic. But the fact that we were able to move to virtual consultation quick enough and get the approval from the FDA for that has definitely helped to keep those numbers where we want them. So we certainly want to share our data. And we will have, this fall, all of our patients in the aesthetic cohorts at the 2-year mark. But we have to be mindful to keep the regulatory propriety. And at the same time, we want to be as open as we can. We are the company who's always sharing data. We recently released our latest post-market surveillance report with 1.6 million implants at now more than 10 years and keeping the same trend as we have had in the past. But we'll keep you updated as we get closer to that 2-year mark.

Our next question is coming from Ross Osborn of Stephens.

So I wanted to ask a couple on Mia. Just as the company continues to generate clinical and consumer data related to Mia, how do you envision positioning that benefits of Mia relative to traditional augmentation surgery in the marketplace without undermining or cannibalizing traditional breast augmentation procedures? And then just kind of going off of that, what are some of your learnings to date? And do you envision Mia being utilized in reconstruction procedures? Or does the delivery technique and implant placement limit adoption in cases of highly radiated tissue post-mastectomy? And then are there any inherent limitations that preclude the use of Mia in recon?

Yes. I'll try to answer all of those. So we just finished our 100-patient series. And I just reiterated what we spoke about in our Investor Mia event. And that is that this procedure has the potential to truly transform breast aesthetics. We sized that market at 1.9 million patients per year. And one of the interesting things there is that half of those patients are new patients, patients that would not go for traditional breast augmentation. But definitely, there's the other half, which are patients that have the awareness, are interested in the traditional breast augmentation. But when they see Mia, they appeal to that procedure and the benefits of it, no general anesthesia, the fast recovery, less pain, a procedure that takes less than 15 minutes, going back home within 30 minutes after the procedure is over, all of that is very appealing.

So I think it's more of a case of positive cannibalization because they will be upgrading the procedure. So we would take that all day long. Now when it comes to breast reconstruction, at this point, Mia is designed for aesthetics. Do I see a path for minimally invasive in breast reconstruction? Definitely, yes. But Mia is designed and will be an aesthetic procedure.

Okay. That makes sense. And then if I may, just on the competitive landscape, with the changes in the environment, are you seeing any more direct price-based competition? Or is there just simply a lack of less focus by competitors? And then are you seeing any -- I guess I would just be curious to hear your view on the use of ultrasound as a competitive threat to the use of SS, RFID tech longer term?

Yes. The importance of our safety profile, I think, is shining every day as awareness levels among patients increase. So to us, that is perhaps the biggest driver to convert new surgeons, especially during this time of the pandemic, where it's actually pretty difficult to go and do a face-to-face visit and medical education is still mostly online. The most important thing for us is being patient-centric, that there are things that we do with our implants that others cannot. So to give you an example, the fact that our implants are RFID-enabled give the power to women to fully verify after the operation exactly what implant they have received. In many geographies, this is a very important thing, and it's called women's empowerment, the fact that they have full control over that decision and they can verify it.

So I think many companies may look at that as a positive and may seem to find other ways of achieving that goal. At the FDA panel on breast implant safety, the FDA expressed its concern over the fact that most women don't know what devices they have in them. And that's why the RFID enablement is so important. So we continue to work on our next-generation of RFID technologies. What you saw in Flora already is a great improvement, the fact that we were able to use our RFID technology and get rid of all metals and magnets in a tissue expander. That's going to have an effect in protocol. It's going to improve women's health. And that's where we are about.

Our next question is coming from Anthony Petrone of Jefferies.

Congratulations on a strong quarter. I've a couple on just volumes generally that you're seeing and then a few on Motiva Mia. Just on volumes, is there a way to sort of quantify how much is actually coming from a relatively higher level of discretionary spending? We're hearing on the refractive side, for instance, that there is a level of discretionary spend from a key demographic where there was just lower spend through the pandemic, and it's being allocated elsewhere. So is that something that you think is going on in aesthetics? And then there's -- the other side of that, of course, would be the issues with textured implants. And so how much of a benefit are you seeing as well from the exit of textured implants from select regions around the world? And then I'll have a quick follow-up on Mia.

Sure. Thank you, Anthony. I think it's important to note that unlike most global medical device companies were not in the United States. So when you're talking about discretionary spend, I think that's largely probably more U.S.-focused at the moment. So we're not necessarily seeing a direct impact of that. But we're still seeing strong response to our implants and the safety data behind them. So I think our volumes and our sales in both direct markets and distributor markets continue to see that our message is resonating with patients and with plastic surgeons.

And then the -- again, the follow-up on share gains from exits from competitors. Is there a way to sort of think about that for 2021? And how that progresses? And then real quickly on Mia. When you think about the EU launch in '22, just trying to get a sense of the spend ahead of that, how much will be allocated to feet on the street versus marketing push? And how should that progress in the P&L in 2021, ahead of that '22 launch?

Yes. I think the actions that our competitors are taking are some way sort of a logical response to the innovation gap that we have in the marketplace and that we've opened up, and we will continue to penetrate. With one of our major competitors sort of pulling out of the market, we're more confident as ever that we're down the right path and that we've got the best technology. So I think that's where we're focused, and we're discontinuing the message, both with medical education and social media involvement.

Our next question is coming from Amit Hazan of Goldman Sachs.

This is Phil on for Amit. Can you guys hear me okay?

Yes.

Awesome. First, I was hoping you guys could talk about the intra-quarter kind of dynamics. Sorry for the short-sided question. But just interested what you guys saw within the quarter exit rates for the month, obviously, confidence in the forward given the guidance increase above the beat in the quarter? But I'm interested what you guys saw intra quarter? And then maybe if you could layer in with that, what you're seeing from different regions, especially those that are still being notably impacted by COVID?

Yes, certainly. We do have variability within the quarter as we do sort of any quarter and largely still impacted by various restrictions that are happening due to the pandemic. But it seems as though most countries are sort of able to work through that and either work through temporary lockdowns and suspension. I think when we think about guidance, we're obviously balancing the strength and momentum that we saw during the quarter, but also with that, still lens of the fact that we're in a lot of countries that are still handling the pandemic on a daily basis. So that's what we're focused on, and we're very comfortable with the guidance that we've provided.

Great. That's great. Maybe I'll stick with you, Renee, since you answered that one. On the OpEx side, my ears perked up for the cost efficiency programs that you were talking about. I'm hoping you could delve a little bit deeper into that and then also sort of talk broadly about your thoughts on profitability time lines versus prior given some of these permanent cost savings?

Yes, certainly. I think from the pandemic, we wanted to institute things like travel and really sort of focus on the core business, where do we want to see the best return on investment? And for us, it was a great learning experience. And we are certainly taking some of those learnings and making them permanent as to how we operate more remotely, more online. It was always sort of a foundation of our business, but we've ramped that up, and that ultimately just does mean the cost efficiencies. Some of the in-person stuff is critical to our organization and will come back as permitted by travel restrictions or in-person gatherings. But I think when you think about the core of the business, we really took an internal mindset and thought about how do we run this business more efficiently because we do know that we're going to have to have investments in strategic opportunities, and we would much rather focus our dollars on that.

And just following on that one, Renee. OpEx down year-over-year with 25% top line growth. Maybe just a little bit of a comment on where you see OpEx trending from here? I'd have to imagine with all these strategic investments, that it's going to be up on a dollar basis moving forward. But just some guidance around there would be helpful.

Yes, certainly. We are going to expect to see spending levels increase as we prioritize those significant investments. And we think about the commercial launches that we have coming up and the new market entries that we have coming up, and that's where we're going to focus that spend. So we're pleasantly surprised with -- not surprised, but pleasantly happy with the results that we had for the quarter and like to see that come through and how -- like I said, the behaviors of the company, where we're spending the dollars? How we're using our money more efficiently? I'm just super proud of the team as a whole.

That's great. If I can say just one more in on the Mia front. I'm interested what the discussions with the FDA have been like with how positive the progress has been on the Mia front with the IRB in Costa Rica and the progress in the European front from a regulatory standpoint? What have those discussions been like? And what's sort of the current plan for submitting the Diamond implant? Is that potentially going to be in conjunction with the original Motiva approval like we saw with the CE Mark?

So our conversations with the FDA are focused on the current trial. And remember, we're continuing to enroll into reconstructive cohorts of the trial, and that's what we will continue to do so until we get our PMA approval. Thereafter is when the time line for Mia will begin, including with the Diamond implant.

Our next question is coming from Matt Taylor of UBS.

So the first one I wanted to ask is I know you reiterated the time lines for U.S. and China. I just wanted to dig in a little bit there, 2 questions. One is, in the U.S., do you have any updated thoughts about whether the FDA will accept 2-year or 1 -- 3-year data? And then from the point that you get approval in each of these countries, maybe just outline how much of a ramp you would expect? How long that would take? Just help us think about some of the future years in our models for U.S. and China?

Yes. Thanks, Matt. I think the most important update is on the bifurcation strategy between aesthetic and recon, and how the FDA has expressed comfort with that strategy. So we feel very confident on that. And to us, that is the most important thing because it is the fastest way to enter into the U.S. market, having aesthetics ahead of reconstruction. So we're continuing to follow up with the patients. We will have our 2-year data set this fall. And thereafter, we will continue the conversation with the FDA about using the combination of data or going with traditional guidance of 3 years.

On China, we have continued to make progress. We have finalized testing, and we feel confident about our 2022 time line for going into China. So I think from the perspective of growth, it gives us so many things going for the next few years because we have not only the -- our entry into breast reconstruction that is going to happen first in Europe and then moving into other geographies around the world. We have China coming up. We have Mia coming up. And thereafter, we have the U.S. market entry. So I think it just gives a multiplicity of growth drivers for the coming years. I think the speed at which we can affect those, it's probably one of the questions that everyone has. But we're still in the pandemic, and we're still dealing with the fluidity of that. So definitely trying to work all of that out at the same time.

Okay. All right. And then I was hoping -- I know you're in a lot of countries, and we know some of the hot spots. But maybe you could give us some specificity on which of the countries? Or what percentage of your sales is in areas where there's still pressure versus ones that have really opened up? Anything like that to help us think about how things could further improve through the year?

Yes. I mean certainly, our largest market is Brazil, came in at about 11% of our revenue for the quarter, and that one gets a lot of headlines. But they're still doing surgeries and protocols have been put in place, and we're watching it. So that country continues to perform and even saw growth. I think we saw growth across all regions, which was nice to see even if we've got some hot pockets that are going through temporary lockdowns or restrictions on things. And so we're sort of juggling that. I think also our distributors are thinking about that as they think about momentum through the back half of the year and how they're doing their orders and where they're seeing the demand come from. So overall, we continue to take share gains and march forward, even though we are managing through different pockets within Europe, Asia Pacific and Latin America that each country sort of is managing the pandemic individually.

Great. And maybe I could sneak one more in. You talked about the competitor exit is really validating your strategy and had a lot of investor questions on this in terms of how much additional share in dollars that can be up for grabs with Allergan's exit. Could you give some updated thoughts on that? And whether any of that is contemplated in your guidance?

Yes. I think I'd just reiterate what we've talked about before. In the international market, Allergan was mainly selling their macrotextured devices. And they pulled those off the market a couple of years ago. So most of the market share gains to be done with those textured breast implants has been taking place over the last couple of years, and we've been definitely beneficiaries of that. But we take market share from other competitors from J&J, from other companies in Europe all the time. So we're just focused on market share gains from wherever we can get them. And part of those are coming from patient awareness and patients telling surgeons that they don't want textured devices. And when it comes to nontexture devices, they definitely -- their first choice or job would be to make it Motiva. I think that the main thing, and we've said this before, again and again, is that they chose to stay in the 4 markets where they don't compete with Establishment Labs. And that is a testament to our work and eventually, we'll get to those markets and do the same thing.

Our next question is coming from Marie Thibault of BTIG.

Congrats on a very nice quarter. I wanted to ask, I guess, there are 2 follow-ups to questions that have been asked earlier. Some of the commentary on China, obviously, a very exciting growth driver, and we know that it's a premium priced, very large market opportunity. I wondered if you could help us start to think about that? And how you might approach that market? Whether you'll work with the distributor? Whether you'll plan to target patients through kind of digital means? We just sort of want to get a better understanding of what that could mean in the next couple of years in terms of thinking about our forecasts.

Yes. And China is an exciting opportunity for Establishment Labs. Before the pandemic, in other countries of Asia, like South Korea, many of the patients using Motiva came from China. South Korea was 30%, but we also have data coming out of Japan. And now that we are in Taiwan, in Thailand, many patients were coming from China to receive Motiva implants. So we know that our product does very well with the Chinese consumer. So the opportunity comes from the fact as well that the Chinese consumer is going into aesthetics mostly through digital means, and that awareness that we can create can be very powerful in speeding up our market share gains in that market. I think that already outside of China, we have proven that we have the most engagement by far with patients on social media. So that's a really good precedent for what can happen in China.

When it comes to our pathway to market there, as we have said, we continue to make progress with product testing, and we continue to stay with our regulatory target for 2022. We have mentioned before that we see China as a hybrid play for us. And we have a great partner for that market, and we will work with that partner to be making the best, not only of the direct-to-surgeon, but also going direct-to-consumer in many different ways.

Okay. And then maybe a follow-up on the SCHEER report. Obviously, great to see them finalize that report. I'd love to hear kind of the impact to the other parts of the world. But I think I recall, big markets like Brazil, that are meaningful to your revenue, still do a lot of macrotextured, if I recall correctly. So maybe you can detail for us what kind of impact the SCHEER report might be having globally?

Yes. I think the SCHEER report, number one, and this is something that everyone should remember. The SCHEER report is about creating a scientific report on the safety of texture devices as it relates to ALCL. It is not there to make policy. The policy then goes to the individual health authorities and to the legislative European Commission. So for us, it is just, again, more and more evidence that many patients will be moving to smooth implants because of things like this, and also surgeons will have to deal with the potential consequences of not properly informing patients of the risk associated with certain of their choices. We certainly do think that certain devices should not be in the market. But outside of Europe, it's going to take additional time for certain countries to realize that they have a problem as well.

So I don't know how long that's going to take in Brazil. Australia has already done a lot of their work. They've been banning many macrotexture devices over the last 24 months, and they continue to do so. So again, it's quite some work, I think, for the regulatory bodies because they have to manage a lot of expectations. And in the case of Brazil, they also do have local manufacturers, and that is also a consideration that we need to have.

Thank you. At this time, I'd like to turn the floor back over to management for any additional or closing comments.

Yes. Thank you for joining us on today's call. We look forward to providing our next quarterly update in August, and please stay safe.

Ladies and gentlemen, thank you for your interest in Establishment Labs. You may disconnect your lines or log off the webcast at this time, and have a wonderful day.