MiMedx Group Inc (MDXG) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2011 MiMedx Group, Inc., earnings conference call. My name is Karis, and I will be your coordinator for today. (Operator Instructions). As a reminder, this call is being recorded.

And I would now like to hand the call over to your host for today, Mr. Thornton Kuntz, Vice President of HR and Administration. Please proceed, sir.

Thank you, Karis. Good morning, everyone.

This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. These statements are based upon the current beliefs and expectations of our management and are subject to risk and uncertainties. Actual results may vary materially from those set forth in, contemplated by, or underlying the forward-looking statements, based on factors described in this conference call and in our reports filed with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2010, and our most recent 10-Q.

We do not undertake to update or revise any forward-looking statements, except as may be required by the Company's disclosure obligations and filings it makes with the Securities and Exchange Commission under federal securities law.

With that, I will turn the call over to Pete Petit, MiMedx Chairman and Chief Executive Officer.

Thank you, Thornton, and good morning. I appreciate all of you joining us for this conference call. We will go over with you our perspective on 2011 and give you some insights into what we see for the Company in 2012.

I have with me Bill Taylor, our President and Chief Operating Officer; Mike Senken, our Chief Financial Officer; Roberta McCaw, our General Counsel. John Daniel, the President of Surgical Biologics, is traveling on business for MiMedx today.

First, I would characterize our 2011 year as being extremely busy and very productive. We achieved many of the goals we set for the Company, but we did miss a couple.

I generally emphasize to our staff that I always want to know the good, the bad, and the ugly. We celebrate the good briefly, and then focus on the bad and ugly to figure how to make our necessary corrections. However, today, since you're shareholders, I'd like to focus on the good. We will devote some time to the disappointments we had and we will highlight our plans to deal with those issues.

First, let me discuss the most important issue for the Company in our stage of development, and that is having sufficient financial resources. During the year, through two product placements, we raised approximately $11 million. As has always been the case, I made personal investments in each of those offerings as I have done in all of our offerings since I stepped in as your Chairman and CEO.

In December, we completed a convertible debt offering and we raised what I hope to be our last must-do fund raise. We closed out that offering for $5 million on December 31.

At this point, the Company feels -- or the management of the Company feels very good that we have a chance of hitting adjusted EBITDA breakeven in our first quarter. We've discussed this with you previously. As we see things today, we still think that goal is achievable, but there is certainly a lot of work ahead of us to finish up the quarter with at least $3.6 million in revenues. To help with that arithmetic, that will put us at a $14 million a year run rate. That's a nice, robust revenue change from our revenues of 2010 and 2011.

The second most important activity during the year was the merger of Surgical Biologics and MiMedx Group. It was very fortuitous that Bill Taylor and I began to search for some additional products that matched our sales and distribution organization, and we became aware of the amniotic membrane tissue graft opportunity. We noted there was three small companies that were beginning to emerge in this sector. We were fortunate enough to find a premier company with the best intellectual property, track record, and management team just 10 miles from our corporate location here in the Atlanta area.

In my former businesses, over the decades we acquired 47 different businesses and made divestitures of 13 business segments. I would have to say that I've never seen a better match than Surgical Biologics and MiMedx Group. The timing was perfect because of what both of us were bringing to a new Company. The rest will be a very bright future, I certainly think.

And about once a week, I ask John Daniel, the President and one of the founders of Surgical Biologics, how he feels about what's transpired, and I still get a very positive response and a smile. So at this point, we're all very happy with the transaction.

The third most important accomplishment for the year was the introduction of Surgical Biologics' allograft to a number of new markets and in a number of new configurations. We were able to do that because the combination of the two companies brought additional management staff and expertise, and because of the attributes over amniotic membrane allograft which John Daniel and Randall Spencer were so involved in developing over the years.

I think I can safely say that when our grafts are tried by physicians in numerous disciplines, they give us very, very strong accolades. I don't think we've heard of one physician that was disappointed. Every day, more data and information comes to us and I become more convinced that amniotic membrane allografts will be a game changer for the way that numerous medical procedures are accomplished. It's truly a unique tissue with some amazing medical qualities, both cost-wise and medical-wise.

I could go on here for several minutes, but time will prove we're correct. We're managing an exciting medical breakthrough.

Now we're also very busy conducting clinical trials on our allograft. It takes a while for these trials to get started because of the approvals that are required. However, many of these trials will not be of an extended duration because results are very evident, particularly when the graft is used externally. So these things are progressing very quickly under the leadership of Dr. Don Fetterolf.

At this point, we're very focused on the opportunities in wound care and orthopedics. However, we have clinical trials ready to began in GYN surgery and plastic surgery. We have other trials under way now in several areas of wound care.

Now let me take a moment to highlight some of the things about our management team. During the year, we added two key executives to our group. In April, we brought Frank Burrows in as our Vice President of Global Marketing. Frank spent most of his healthcare career involved in wound care, related therapies, and devices. He's had a significant influence on our ability to quickly assess these particular opportunities and our entry into these markets.

In addition, we brought Dr. Don Fetterolf to our group on a full-time basis as the Chief Medical Officer. Don had been consulting with us, but having him full time is a very needed addition. Don was previously involved with me at Matria Healthcare for six years. Don gives us the abilities and expertise to publish our clinical -- to manage and publish our clinical studies and, more importantly, to interface with the health plan community relative to our reimbursement issues.

Let me make a comment about our intellectual property. I think we've previously mentioned that when we surveyed the status of the allograft amniotic membrane tissue sector, we determined that Surgical Biologics was the best positioned organization by all measures. However, one of their key strengths was intellectual property. They had filed a number of patents, and patents that we viewed as having a substantial amount of strength relative to protecting their Purion process, which is very key.

What they do has made a major difference in the logistics of creating allografts that are shippable and storable at room temperature and have a five-year shelf life. That is unlike most of the others in this particular area.

We've taken some initiatives recently to let a number of potential, and I emphasize potential, industry participants know and understand the patents we have filed. We expect some of those patents to issue before the end of 2012, and we just want everyone to know and understand that we will be aggressively pursuing our intellectual property rights.

Let me mention one other thing that I think is important to us over the next several quarters. We will be stepping out during the month of March and doing what is called a non-deal road show, meaning we will be visiting with some potential institutional investors in New York and Boston, probably, and determining their interest as becoming shareholders in MiMedx Group.

Probably the way that would be achieved is through a secondary offering, but we want to get the Company in front of these institutional investors, let them understand clearly what we're doing, and then at that point we'll get some answers in terms of what we should do and shouldn't do and their interest in becoming shareholders in the Company. I think that will give management some great insight into what we need to do in the near future here, and then we can report back to you in a few weeks in terms of what we determined we should do in terms of doing a secondary offering, stepping up to other exchanges, and reverse stock splits, et cetera.

Before I hand it over to Bill, let me mention one other thing. The strategic vision in MiMedx is to become the world's experts in amniotic membrane tissue grafts and other usages of the tissue. This is a worthy goal for shareholders and, most importantly, the patients who will use our tissue in the future.

We're excited about what we're doing. We've had a good year in 2011. 2012 started out with a bang. And I'm going to let Bill fill you in on some of the details that he sees from an operating standpoint. Bill?

Thanks, Pete. Good morning, everybody.

As Pete mentioned, last year was an incredibly busy year for MiMedx. By combining our forces with Surgical Biologics, we've transformed MiMedx Group from a biomaterial device company into a market-leading regenerative biomaterials company with both device and tissue platforms.

Our focus now is on our new tissue technologies, and it's really paid off this past year. We were able to increase our tissue revenue by more than four times the 2010 revenue, a rate that is still accelerating.

Besides being a year of tremendous growth, 2011 was a year of integration and consolidation. Because of the challenges and slow pace of the U.S. submission process, we made the decision to reduce the expenses related to CollaFix and HydroFix. As a result, we made several staffing and expense reductions. We closed the Tampa office and we consolidated all of our operations into Kennesaw, which is where Surgical Biologics was located. The reduction and consolidations provided in excess of $1 million in savings annually.

On the commercial side, we rolled out several new product offerings in 2011. We had our nationwide EpiFix wound care allograft launch earlier in the year. And it was followed by our nerve and tendon wrap launch, and later in the year our limited launch and early this year our full launch of AmnioFix injectable allograft for sports medicine applications, which is generating some great results for some very common issues like tennis elbow, golfer's elbow, plantar fasciitis, and so forth. We'll talk a little bit more about that later.

Also, EpiFix last year received the American Podiatric Medical Association seal of approval after a very lengthy peer review process. So, that was a very big point for us last year.

We expanded our independent sales agent and distributor network during the year. We added several new specialized groups in wound care, spine, and orthopedics.

On the clinical side, we have -- several retrospective case studies have been written up now regarding the very incredible results of our allografts in nerve and, in particular, wound care applications. We have these in white-paper form and we hope to have many of them published this year.

In addition to that, we've initiated or are preparing to initiate, in some cases, multiple RCTs, randomized controlled trials, clinical trials, for -- clinical studies for EpiFix and AmnioFix. These include spine applications, chronic wound applications like venous ulcers, diabetic foot ulcers, as well as surgical applications in the GYN surgical area and carpal tunnel surgeries.

On the reimbursement front, our Chief Medical Officer, Don Fetterolf, has done an incredible job driving our reimbursement efforts. EpiFix is being reimbursed on a regular basis in many private-pay situations, and as we announced in the fourth quarter, we also received our C code, which allows for passthrough payment in hospital outpatient and ambulatory surgery centers. We're now in the process of working through all the regional Medicare plans now to obtain the coverage determinations now that we have our C code.

On the regulatory front, we've also had several very positive events in 2011. First of all, Surgical Biologics was audited by the FDA earlier in the year, and they passed with a clean audit report. No 463 was generated, so it was very good.

We've also made progress internationally with our tissue. And even though our revenue internationally is small, we have sold into or are getting very close to selling tissue into a little over half a dozen countries.

We've received additional 510(k) for HydroFix also and for various sizes and for our Ortho Shield product last year.

Although we remain very optimistic about our CollaFix technology, last year we continued to have challenges with the FDA with respect to CollaFix where it just seems like the agency continues to change its submission requirements. At least in Europe, though, while timing was a challenge last year, the system was certainly more predictable than the U.S., and our efforts paid off as we received our first CollaFix CE Mark as we announced in January of this year.

In our current configurations, our tissue allografts are regulated differently than medical devices. I've talked about that in previous calls as well. So as you know, that allows for more predictability and it accelerates our speed to market for new tissue configurations.

As we've also discussed previously, tissue is regulated under Section 361 of the Public Health Service Act, provided that it is not more than minimally manipulated and is promoted for homologous use. So again, that means that there are no 510(k)s or PMAs necessary to legally market this tissue, provided we follow that 361 regulation.

With respect to our operations and our tissue processing, I want to highlight a very key milestone that we passed several weeks ago. Surgical Biologics now has distributed over 70,000 amniotic allografts. This is a tremendous number to have distributed without any adverse events associated with our grafts. That's a significant number.

Now our processing team continues to handle the increased demand very well. They continuously improve the process and the efficiency of our process. This record is a testament to the special nature of our amniotic tissue and to the proprietary Purion process that was developed by Surgical Biologics' John Daniel and Randall Spencer.

In terms of our placental donations, we really ramped up 2011 by about 2.5 times the previous year, and we did that with basically the same donor hospital pools we had in 2010. Now in late 2011 and early this year, we have expanded into several new hospitals that we project will provide sufficient volume through our entire 2012 forecasted year.

We've also just recently signed a contract with a company that is going to help us expedite our expansion of hospital recovery outside of Georgia so that we can secure our supply well into 2013 and beyond.

Last, I just want to share one other success story with you that I've shared with a few people. We had a patient who was confined to a wheelchair because of the wounds on both feet. And neither of those wounds would heal at all, and he'd been in the wheelchair for several months.

His physician had applied a dermagraft to one foot and then our EpiFix to the other. And after several weeks, the wound with EpiFix was completely healed and the dermagraft one had very little change and was not healed. The patient was so excited about the results that he basically hugged our rep, gave her a nice thank-you note with some money in it, and turned to the doctor and demanded the doctor put EpiFix on his other wound so that he could get out of the wheelchair and walk again.

So we get case studies like this on a very routine basis. And in a few short months, we expect to have some clinical study data, some RCTs, that are going to more formally detail these amazing results we're getting on our case studies. And we'll be able to share and publish those results when they become available.

So with that, I'll turn it back over to Pete.

Bill, thank you. I think you've put a lot of things in perspective.

Let's turn the discussion now over to our financial results and Mike Senken. Mike?

Thanks, Pete.

For the period ended December 31, 2011, the Company recorded revenues of approximately $7.761 million, as compared to $789,000 in revenue for the same period in 2010.

The increase in sales revenue was driven by sales of our amniotic tissue platform, which were approximately $7.5 million, with the balance of the revenue from sales of our HydroFix platform.

The $7.5 million in amniotic tissue revenue represents a $5.8 million increase over 2010 pro forma product revenue of $1.7 million. The increase in product revenue reflects the complementary nature of the merger of MiMedx and Surgical Biologics that closed on January 5, 2011, where Surgical Biologics contributed a leading-edge technology with superior efficacy, safety, and savings to the healthcare system, with MiMedx bringing a sales and distribution network and management infrastructure that could be leveraged to drive rapid growth.

Consistent with previous earnings calls, I will take you through the GAAP income results, which will then be followed by a summary of our adjusted EBITDA numbers, which excludes all non-cash related expenses and is a better reflection of our cash burn.

The net loss for the year was approximately $10.194 million, or a loss of $0.14 per diluted common share, as compared to the reported net loss of approximately $11.420 million, or a loss of $0.19 per diluted common share for the 12 months ended December 31, 2010. The reduction in net loss of approximately $1.226 million was mainly due to increased sales volume, somewhat offset by investments made in sales and marketing costs and several one-time nonrecurring items that I will discuss shortly.

Overall, gross margin for the year was approximately 59.4%, as compared to a negative gross margin of approximately 218% for the prior year. The gross margin improvement was due to increased sales volume. We expect gross margins to continue to improve as production levels increase, as we fully absorb fixed costs related to manufacturing and quality assurance-based overhead, including staff, facilities, and other support costs.

Research and development costs for the year were approximately $2.603 million, as compared to approximately $2.753 million in 2010. The decrease of approximately $150,000 is the result of the completion of product development activities for the HydroFix and CollaFix platforms, somewhat offset by continued investments in animal studies in support of regulatory clearance efforts for both device platforms. R&D spending for 2011 also included additional staff, added as a result of the merger with Surgical Biologics, and increased investments in scientific studies focused on amniotic tissue.

Selling, general, and administrative expenses were approximately $11.764 million, as compared to approximately $6.848 million in 2010. Over 50% of the increase represents costs associated with Surgical Biologics, including existing staff added through the merger, as well as one-time acquisition-related costs for legal and audit fees. We also added sales and marketing support in areas such as wound care and orthopedics as we continue to build a network of distributors and third-party sales representatives.

With reimbursement of the amniotic tissue platform as the key hurdle to overcome in delivering accelerated near-term revenue growth, we invested heavily in building an organization focused on working with payors on approving reasonable reimbursement levels. This investment includes the hiring of a Chief Medical Officer that Pete referred to earlier, as well as the establishment of a reimbursement [heartline] working with an outside service provider.

Incremental costs were also incurred in the launch of our EpiFix wound care, our AmnioFix nerve wrap, and our AmnioFix injectable offerings.

Also contributing to the increase in SG&A expenses was an increase of $668,000 of amortization expense tied to the merger with Surgical Biologics, as well as a $488,000 increase in costs related to share-based compensation expense and a one-time charge of over $400,000 to reacquire the exclusive licensing rights related to the sales and marketing of amniotic tissues for the orthopedics market.

Other expense declined approximately $454,000 in 2011, due to lower financing expenses related to the beneficial conversion feature of our debt offerings. It should be noted the beneficial conversion expense related to the $5 million senior secured promissory note closed in December of 2011 will result in a significant charge and other expense on the income statement over the next 24 months as we amortize that discount over the full two-year term of the note.

Beginning with our first-quarter 2011 earnings call, the Company began reporting an adjusted EBITDA result. Our adjusted EBITDA is earnings before interest, taxes, depreciation, and amortization, with the additional adjustment being share-based compensation, which is a non-cash expense included in our selling, general, and administrative expenses. Included in today's press release is a supplemental disclosure which reconciles our reported net income to adjusted EBITDA.

In an attempt to align management and investors' goals, our management incentive plan places an extremely high value on achieving and then growing positive adjusted EBITDA. As the Company failed to reach breakeven EBITDA in the third quarter of 2011, which was our plan, no management bonuses will be paid out related to 2011 results. The reason for the shortfall was due to the lower-than-expected revenue, which was primarily the result of the delay in regulatory clearance for the CollaFix platform.

Although we failed to achieve our goal, significant improvement was achieved in reducing the negative EBITDA as compared to prior year. Adjusted EBITDA was a loss of approximately $6.320 million, as compared to a loss of $8.250 million in 2010, which is a $1.930 million improvement over prior (multiple speakers). The improvement was primarily driven by the increase in revenue.

Assuming we achieve our first-quarter revenue goal, we should be adjusted EBITDA breakeven for the first quarter of 2012. Our adjusted EBITDA goal for 2012, assuming we hit our revenue goals for the year, is a positive $5.8 million.

Turning now to the balance sheet and consolidated statement of cash flows, as of December 31, 2011, we had approximately $4.112 million in cash on hand, as compared to approximately $1.341 million as of the end of 2010.

In 2011, we successfully completed a private placement, which began in the fourth quarter of 2010, and raised in total over $6 million, with $3.7 million of the total raised in 2011. We also closed in late December 2011 a $5 million senior secured convertible debt offering with a total of 13 investors, including Pete's participation.

Accounts receivable as of December 31, 2011, was approximately $1.892 million, as compared to approximately $162,000 as at the end of 2010. The increase was driven by our increase in sales reps.

Reported inventory as of December 31, 2011, was approximately $713,000, as compared to approximately $112,000 as of December 31, 2010. The increase was solely in our amniotic tissue platform and was driven by increased demand.

Equipment purchases totaled $486,000, as compared to $152,000 for the prior year, with the increase the result of the consolidation of facilities into Kennesaw, Georgia, that Bill Taylor referred to earlier.

The investment was somewhat offset by a $250,000 economic development grant from the state of Georgia. The grant is contingent upon the Company adding a number of jobs and spending a certain amount on operations over a period of four years beginning in 2011 and ending on December 31, 2014. The Company has recorded the grant as a contingent liability, and is included in our reported other liabilities on the balance sheet.

Current liabilities as of December 31, 2011, of approximately $7.917 million includes $3.815 million in earn-out liability related to the acquisition of Surgical Biologics that will be paid for in MiMedx stock in April of 2012. It is a non-cash related liability.

Current liabilities, excluding the non-cash current portion of the earn-out liability, were approximately $4.732 million; the total current assets as of December 31, 2011, at approximately $6.882 million. The resulting current ratio, excluding the non-cash earn-out liability, is 1.45.

Additionally, there is approximately $1.296 million in a convertible note held by Pete that is not due to be paid until December 31, 2012, and can be extended for an additional 12 months for a one-time fee of 5% of the face amount, or $65,000.

Long-term liabilities include an estimate of the earn-out liability for the Surgical Biologics merger agreement in the amount of approximately $4.255 million that is due to be paid in MiMedx stock in 2013 based upon a formula that includes the achievement of an estimate of 2012 revenue of our amniotic tissue platform.

Also included in long-term liabilities is the senior secured promissory note at a discounted amount of approximately $2.745 million, which is net of unamortized discount of approximately $2.263 million. This discount will result in additional reported interest expense for the term of the note on an effective interest basis. The significant discount is due to the assumed vesting of the 2011 tranche of contingent warrants included as part of the offering with an exercise price of $0.01, which were assumed issued as of 12/31/2011 for reporting purposes.

Stockholders' equity as of December 31, 2011, was approximately $11.9 million, as compared to approximately $6.101 million as of December 31, 2010.

Net cash used by operating activities for the year ended 2011 was approximately 660 -- $6.665 million, which is a $1.5 million improvement as compared to the year ended 2010 cash used by operations of approximately $8.158 million. Cash required for working capital in 2011 was approximately $233,000 on a revenue increase of almost $7 million. We anticipate cash required to fund working capital will increase due to the growth goals previously discussed.

And one final note, our headcount as of December 31, 2011, were 47 full-time employees, five part-time employees, for a total of 52. That represents a total headcount decrease of three when compared to the beginning of the year headcounts immediately following the merger with Surgical Biologics.

With that, I'll turn the call back over to Pete.

Thank you, Mike. I'm going to try to summarize what Mike said in just a minute.

I'm going to make a comment about the accounting GAAP reporting changes that have occurred over the last eight years. It's gotten to the point, as you sit through an audit committee meeting and meetings with our auditors here, that it's extremely complicated not only on the P&L side of things, but also now on the balance-sheet side. And a lot of the things that Mike had to state there are related to the non-GAAP reporting changes that, frankly, I won't comment on what they do to the confusion, but all public companies are facing this kind of issues, and we try to make it as clear to you as we can.

But basically speaking, your profit and loss statement should be reviewed on the basis of non-GAAP adjusted EBITDA. That gives you a good idea of what, frankly, the profit and loss statement used to do eight and 10 years ago. There's so many non-cash charges dropped into the income statement at this day and time, I think most analysts will take a good hard look at the adjusted EBITDA.

Now on a revenue basis, we'll continue, I think, as we move through the year, to show robust revenue increases quarter over quarter and certainly year over year. The only thing that's really holding us back on the revenue side is the reimbursement issues.

Any new product that is launched today, and it's been that way for quite a long time, is going to face the reimbursement issues associated with health plans beginning to just say no, quote-unquote. They see something new; the doctor writes it up, submits it; it's new, they're going to say no, we're not reimbursing for it. So you go through a period of time where you present the clinical information to them. You do what you can. And if you're not very proactive, you can't just say to hospitals and doctors' offices, well, you figure it out.

We're involved in developing the clinical studies, the random-controlled trials, the white papers, et cetera, and Don Fetterolf, our Chief Medical Officer, is very active in sending information out, calling and talking to other chief medical officers of the health plans, et cetera, to move the reimbursement issues along.

So, we've given you our quarterly revenue goals for 2012. We stated in the press release they're clearly goals. We're not at the stage where we can forecast this Company's revenue growth and therefore EBITDA growth accurately enough to be able to call it a forecast. So we'll present them to you as goals, and at this stage, it looks like we're on target here for meeting -- or coming so very close to our 2012 first-quarter goals.

So with that, hopefully that helps you a little bit understand some of the issues that Mike deals with in terms of presenting our financial statements and what they mean and what they don't mean.

Let me open the call up now to questions and answers.

(Operator Instructions). Nathan Cali, Noble Financial.

Congratulations on the growth and the progress on the platform. Just wanted -- had a couple of questions. Is there any guidance on your retention rate as far as the customers that are getting your product and switching over?

Nathan, our competitors are a couple of small companies, and we tend to, once we pick up on the fact that they are in with the customer, a physician or a hospital, we tend to take the account. It's been pretty straightforward. Because our product has such logistical advantages as well as clinical advantages, we tend to take the account. So from that standpoint, retaining accounts once we open them up has just not been an issue for us.

Bill, have you got anything to add to that?

No, we're still early in our growth phase. I think that's something that we're going to be -- as the quarters move on, we'll have a better active measurement of the active -- or of the retention rate of our clients.

But I can tell you anecdotally, generally once we get doctors and physicians, surgeons, using our tissue, I haven't heard of any issues where they've just stopped unless there's a reimbursement issue, and we usually generally work through those fairly quickly, too. So, haven't heard of anything that would be negative on that front yet.

Nathan, the real issue for us here in the next six months, and it will take that amount of time to work through and bring down the reimbursement barriers, is reimbursement.

If a hospital or a clinic begins to use a product, the physicians are enthusiastic about it, and they begin to have some reimbursement headaches, they'll slow down or stop. And that's why it's so important for us to have this major focus on reimbursement.

As I've done in the past in my previous companies, I know the importance of reimbursement. We had departments set up within our previous companies that that's all they did was interface with the health plan community and straighten out reimbursement issues.

Is there any fee goals with respect to reimbursement on where you guys may be at the end of the year, as far as from where you're at now?

Well, our experience is it takes about six months of fairly intense focus and activity, and then the barriers will come down.

The Blue Cross Blue Shields one by one will fall and start reimbursing, and then the Aetna, CIGNAs. We're already getting paid by some of those. And it will vary from region to region in the country. And it's just a one-off thing that has to be worked very diligently. And we have Dr. Don Fetterolf focused on that and our reimbursement group is focused on it.

And it's just a -- I call it a war. You go through six months of this war, and then it's over with. And so, I expect as we get through the year, the reimbursement barriers will start falling.

The attributes of our tissue graft are so evident once people begin to look at the studies, and we're creating studies as fast as we can, more studies, it's not much of an argument. The key is it's cost effective. We reduce costs associated with caring for these patients significantly over our competitors. We have logistical issues that are some major advantages to our competitors. So we should have an easy time of it, but today, reimbursement, nothing is easy. You just have to take it a step at a time.

And if I could just briefly add here, too, Nathan, since we have so many different applications for our tissue, the reimbursement focus is in multiple areas.

In the area that Pete was describing that we should be able to work through in another five or six months is specifically related to EpiFix and in chronic wound care. We've got our C code there; we filed for our Q code. We expect to have the review panel on the Q code or J code coming up. I think it's in April or May, so we do expect to get some positive results there whereby the end of this year we will have that Q code for EpiFix.

We have a number of other initiatives relative to other applications that we need to get some data out of these clinical studies that we described that will help bolster our efforts in some of the AmnioFix and some of the other areas for reimbursement. But the biggest opportunity in the short term is certainly going to be in the wound care side with EpiFix.

Would you guys do any -- I've just got a couple more questions, and then I'll get back in the queue. Would you guys do any head-to-head studies with your main competitors on EpiFix?

Absolutely, we are. Actually in one of our RCTs right now, we will be doing a comparison with published data with one or two of our competitors.

Once that study is complete, we will actually be doing a direct comparative effectiveness study with at least one of, if not both, of [applograft] or dermagraft. That's a follow-on study that we will do as soon as this first one is done. And from everything we've seen so far, we feel very confident that we'll show very well there.

Any idea when that data may become available?

Our first -- we're doing a venous study and a DFU study. Both of them are basically starting to enroll patients right around now.

And they have a surrogate point where we're going to have the four-week data. So we should start getting some data from both of those studies that basically mimic the dermagraft and [afragraft] PMA studies. We'll start getting some data points off of those surrogate endpoints in the next two or so, 2.5 months. And then, shortly after that we'll start the direct comparative effectiveness study.

There's an annual wound care meeting being held in Atlanta in mid-April, and we'll have a strong presence there and hope to be announcing some of these results at that wound care meeting.

And then, how are your reps, would you say, are strategically focusing on penetration and taking market share?

Well, as you know, I think, we've got sales rep groups -- independent sales reps that get paid straight commission. We have a number of those in wound care. We also have dealers that take actual title to the product.

They are all focused across this country, and we've gotten pretty good coverage now across the country on opening up physician practices, clinics, and hospitals, whether it's in wound care or surgical procedures. And of course, those groups will vary depending on their expertise and experience, whether they're wound care focused or orthopedics or surgery focused.

And then, just one last question. On AmnioFix, can you just talk about the application there on nerve repair and what type of procedures you may be using that in?

Yes, we've had a lot of procedures now in carpal tunnel. We have a number of surgeons that are using it there.

One in particular, he tells us that in about 15% of his cases or so, he actually has to go back in for a secondary surgery because there is scar tissue buildup and it limits range of motion. It has several issues. And he's, on these revision surgeries, put AmnioFix in there and he got some really good results, enough so that he's actually contemplating using it prophylactically on his regular surgeries.

That's one area there. We're also seeing it used on, for instance, in Achilles tendon. If there's a tear on the Achilles tendon, then it would wrap the tendon to prevent scar tissue buildup and so forth there, and help provide growth factors to help heal the site.

Had a few other minor rotator cuff injuries that we've been getting the usage on as well. So we're really (multiple speakers) -- also been used prostatectomies to wrap the nerve bundle there to prevent ED issues and incontinence issues. We've got some very good preliminary case study results there. That's another area we're looking at possibly doing a clinical study on to determine the actual improvement that it's creating.

And a lot of inquiries from plastic surgeons (multiple speakers) lot of interest there. And dermatology.

Thanks a lot again for taking the questions.

(Operator Instructions). Bruce Conway, MiMedx.

I also want to applaud the progress you've made this year. I think that acquisition was just outstanding, and kudos to you and Bill Taylor.

I wonder if you could comment on the injectable market a little further. I have friends with tennis and golf elbow, and I'd like to know -- hear a little more about that and maybe like when it would become generally available.

It also sounds like -- I mean, the rotator cuff is a similar issue that aging athletes have to face. And it sounds like on the rotator cuff, this is a repair that can be made for a minor issue as opposed to a full tear. Could you just comment on those?

Bruce, I'll dive in. I'll start with the rotator cuff first. Our amniotic tissue is not a structural tissue.

So for a major tear, using the amniotic tissue to perhaps wrap over the repair after it is done with a primary repair would be appropriate, but not to use it as the primary repair. It doesn't have the strength characteristics to do that. So it's really just a matter of being a barrier and helping protect from scar tissue and having the healing properties that it has in a rotator cuff situation.

On the sports medicine side, we're going through and really doing a pretty thorough market analysis on that right now, but as you can imagine, it's a pretty large market. We're finding some very early, very strong results for golfer's elbow, tennis elbow, plantar fasciitis. We've got a great case study that we've got video on now where we had a construction worker that couldn't even hold a cup of coffee because of issues with his tendinitis, and a few weeks after being treated with our AmnioFix injectable, back to full force, full mobility, no limitations. That's just one example.

We've got runners that have had plantar fasciitis, same kind of results.

When we get a little bit more specificity on the market size, we'll bring it to you. But as you can imagine, there are many, many applications that are being treated by steroids, being treated (multiple speakers) by PRP, when simply just getting -- being inactive for a period of time won't fully heal those situations. Those are the ones that we're targeting.

Sometimes just laying off a tennis game for six or eight weeks can help some of the minor situations, but some of the more significant ones require some other kind of intervention. And with steroids, multiple applications of steroids, all you're doing is treating the pain associated with inflammation.

So, one of the things that is real critical, too, that you have to remember here is that we need to stay within our limitations of tissue, the 361 tissue. So we have to promote it for homologous use, which, as we've talked about before, is for anti-scarring properties for membrane -- that does anti-scarring, anti-inflammation, and anti-immunogenic. Down the road, there may be opportunities where we can develop other configurations that would be a device-like product, but those are a bit farther down our pathway right now because we've got so many opportunities on the tissue side right now.

So I think that answers your question. But we're very excited about that sports medicine opportunities, and as we get more detail behind it, we'll share it with you.

Thank you.

Chris Mellon, Mellon Strategic Consulting.

I just wanted to say that I have several friends who are surgeons, one of whom is already an investor in MiMedx and runs a surgical center here in Pittsburgh. And I'm sure many people on the phone call have similar sorts of contacts.

If you could e-mail us when it becomes available, treat us like part of your medical audience and not just send us financial quarterly statements, which don't help these guys, but at least I wanted to extend the offer as you get white papers or if you did a short one pager on comparing our product versus dermagraft, the progress we're making, whatever, I'll be more than happy to pass that along to Dr. [Embrillia] and others I know who have professional interest in the field. Another doctor who is one of the senior people in OB/GYN in UPSC.

Chris, thank you. Don Fetterolf did a mailing a few weeks back to 130 medical directors of health plans across the country. Probably that letter and included with that were several of the white papers that we've developed.

That might be something we can get out to some shareholders. I might put out an inquiry as to who would like to have that, and then get it come back to us, and then we'll mail that out because there's a lot of information in that document, along with those white papers that Don and some other physicians have created.

Well, to the extent that you have things that are appropriate for people who are actually active surgeons and run surgical centers and might get better clinical results, I'd be delighted to convey what you have to them.

I hadn't thought about the power of our shareholder group in terms of our sales activities, but I'm getting ready to use it, so thank you.

Thank you, Pete.

(Operator Instructions).

All right. If there are no more questions, we'll wind up the call. It's been, I think, a pretty productive almost hour. Hopefully, a lot of information that we've tried to convey to you has clarified things.

We'll be back to you here in the weeks ahead with probably some thoughts on how the Company steps up to the next level in terms of our shareholder base, hopefully how to attract some very qualified institutional investors to the Company and begin to put us into a different ball game from that standpoint.

But I can assure you, your management team is working extremely hard, a lot of hours being put in. Every day, there seems to be some new opportunities for us. We've got an exciting tissue to commercialize and exciting things are happening with the patients that we see using this tissue are going to be beneficial to, of course, the patients as well as us in the years ahead. So thanks very much for your interest, your support, and your confidence in the management. We will be in touch. Thanks.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a wonderful day.