Sientra Inc (SIEN) 2019 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to Sientra's Fourth Quarter 2019 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker, Mr. Oliver Bennett. Please go ahead, sir.

Thank you, operator. Good afternoon, and welcome to the Sientra Fourth Quarter and Full Year 2019 Earnings Conference Call. I would like to remind everyone that in our remarks today, we will include statements that are considered forward-looking statements within the meaning of United States securities laws. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current assumptions and expectations of future events and trends, which may affect the company's business, strategy, operations or financial performance. A detailed discussion of the risks and uncertainties that the company faces is contained in its previously filed quarterly report on Form 10-Q and annual report on Form 10-K that the company will file with the SEC in the next few days. Actual results may differ materially from those expressed in or implied by the forward-looking statements. The company undertakes no obligation to update or review any estimate, projection or forward-looking statement.

I would also like to note that Sientra uses its Investor Relations website to publish important information about the company, including information that may be deemed material to investors. Financial and other information about Sientra is routinely posted and is accessible on the company's Investor Relations website at www.sientra.com.

Today on our call, we have Jeff Nugent, Sientra's Chairman and Chief Executive Officer; and Paul Little, Chief Financial Officer, Senior Vice President and Treasurer.

I will turn the call over to Jeff. Jeff?

Thanks, Oli. Good afternoon, everyone, and thank you for joining us today. 2019 was another pivotal year of strong performance, demonstrating consistent growth and strategic transformation for Sientra as we made real strides toward our goal of becoming an aggressive world-class global aesthetics company. Q4, in particular, was an exceptional quarter as we achieved record net sales in both our business segments, both Breast Products and miraDry.

I'd like to start by highlighting a few of the significant accomplishments and how these position us for 2020 and beyond. Most importantly, Sientra achieved record total net sales in the fourth quarter of $23.2 million or an overall growth of 22% year-on-year. The record net sales is in both Breast Products and the miraDry segments. For the fourth quarter, total Breast Products sales grew 22% year-over-year to $12.8 million. For the full year 2019, breast implant and tissue expander sales grew 25% in an overall market that we continue to estimate is flat. That's further evidence that Sientra continues to make sizable share gains. We saw a continued strong growth in augmentation procedures as well as record growth in our tissue expander businesses as well.

Further during '19, approximately 50% of our implant and expander business came from the reconstruction procedure segment, and we believe this reflects what our go-forward mix will continue to look like. This momentum reflects the advantages of our superior product portfolio as well as our continued ability to benefit from Sientra's new customer conversion programs and the increasingly deeper penetration of our existing accounts. The success of our marketing programs and our best-in-class plastic surgery consultants support our continued confidence in the market share recapture opportunity going forward. We also achieved the advantages related to our vertical integration through our acquisition of the OPUS breast implant manufacturing operations in Franklin, Wisconsin, which we announced and completed in November of last year. The strategic financial and operational benefits of having a turnkey vertical operation cannot be overstated. Owning this dedicated class III FDA-approved site enables us to accelerate improvements to our product development, manufacturing yields and resulting margins, all while maintaining the highest quality and safety standards in our peer group. The results to date are exceeding our expectations as a result of the increased experience and capabilities that we have brought inside of the company and the corresponding increased sense of urgency and discipline that they have brought with them. It complements our ongoing R&D efforts that are enabling Sientra to increase our speed to market for both new innovative solutions and support for new international opportunities. And finally, as we look ahead, we expect to increasingly benefit from the economies of scale as our production continues to ramp up. Importantly, we remain very focused on strengthening our capital structure and are pleased to announce that today, we raised $60 million through a convertible debt financing with Deerfield Management. This infusion of capital provides us with enhanced financial flexibility and the necessary capital to execute on our strategic initiatives as we continue on our path to aesthetics market leadership and cash flow positive.

Turning to miraDry. This segment continued to demonstrate robust traction and delivered another record quarter, growing net sales for quarter 4 by 22% year-on-year. That's to a total of $10.4 million for the quarter. Sales continued to be well balanced across geographies, with a continued 50-50 split between North America and international. The mix between capital and consumables also remains close to 50-50, with record U.S. system placements and continued growth in bioTips. We ended 2019 with a global installed base of approximately 1,600 consoles, of which 40% are in North America and 60% are in international. In the U.S., as measured by our newly deployed fresh connect system, which automatically captures real time usage information, we've experienced a steady increase in the utilization of our miraDry systems through the second half of 2019, and it continues to remain strong so far in Q1 2020. This is a significant sign of increased and improved traction. In 2019, we focused on building awareness for miraDry. And only noninvasive -- it is the only noninvasive permanent solution for the sweat-bothered category, a significant advantage. Our market research demonstrated that our target audience is roughly 66% women, aged 24 to 44. And following these insights, we've rebranded miraDry with stronger messaging and targeting to that specific age group and demographic. We're pleased to say that in '19, we were able to drive almost 3 million people to miradry.com and generated over 100,000 leads for our accounts. Our practice development managers are continuing to train our accounts on both digital and social media, front dress -- front desk training to help bring consumers into the practice for professional consultation and treatment. We expect our marketing to continue to increase both these leads and conversions for our accounts through 2020. And looking ahead, we remain focused on leveraging that significant value that we have built into the miraDry brand.

Turning to the team. We added world-class talent to Sientra during the prior year, including the appointment of Kirk Gunhus as General Manager of miraDry. And most recently, we've expanded his role to Senior VP of Global Sales responsible for both business segments. We also announced the appointment of Caroline Van Hove to the Sientra Board of Directors in January of this year also. Caroline brings deep commercial and aesthetics industry experience, and her experience and insights will be valuable as we work towards driving continued growth and value creation. We're very excited to have her on our team. I also want to emphasize that throughout this year of significant transformation, we've continued to strategically invest in R&D, innovation and commercial initiatives to drive long-term growth. As an organization, Sientra is committed to providing a unique portfolio of safe and effective products that help our medical professionals deliver life-changing benefits, unique life-changing benefits to their patients around the world.

Finally, I want to acknowledge the impact of the current global coronavirus outbreak on all business and particularly ours. Paul will expand on this in greater detail as part of our outlook discussion. First and foremost, our hearts are with those impacted, and our #1 priority is keeping our teams, partners and patients as safe as possible.

To date, we have not seen any real impact on the Breast Products segment. It is premature to really be able to give any kind of advice in terms of the impact in that group. We have begun to see an impact on the miraDry segment, which derives approximately 50% of its revenue from markets outside of the U.S. and particularly from the Asia Pacific market that while this is still very early stage and difficult to predict the 2020 guidance that Paul will provide includes our current best estimate of the impact on our business this year, noting that this continues to be ever-evolving and very dynamic. While we can't currently predict how long and to what extent this situation will last, we remain confident in our overriding strategy.

Going forward, we are taking mitigating actions and every precaution to help ensure that the safety and wellbeing of our employees, customers and their patients will remain safe.

With that, I'd like to turn it over to Paul and revisit later during the Q&A session. Paul?

Thanks, Jeff. As Jeff mentioned, Sientra achieved a record fourth quarter and saw strong growth across both of our segments. We achieved record total net sales of $23.2 million, which equates to a 22% year-over-year growth. For the full year 2019, we grew sales 23% to $83.7 million, above the high ends of both the original guidance we provided last May and the updated guidance we provided in September. Net sales for the Breast Products segment totaled $12.8 million in the fourth quarter 2019, a 22% increase compared to $10.4 million for the same period in 2018. Net sales for Breast Products in full year 2019 were $46.4 million, a 25% increase compared to full year 2018. As Jeff mentioned, this growth was primarily driven by continued market share gains from Sientra's new customer conversion programs and deeper penetration of existing accounts.

In miraDry, we also delivered another record quarter, achieving net sales of $10.4 million or 22% growth year-over-year. In full year 2019, net sales were $37.3 million, a 20% increase compared to full year 2018. miraDry growth was driven by continued momentum in both system placements and consumables as well as Sientra's cost-effective global marketing and brand awareness initiatives launched in early 2019.

Gross profit for the fourth quarter of 2019 was $14.2 million or 61.3% of sales compared to gross profit of $11.4 million or 59.7% of sales for the same period in 2018. Gross profit for the full year of 2019 was $50.7 million or 60.6% of sales compared to gross profit of $41.3 million or 60.6% of sales for 2018.

In terms of our organizational efficiency initiative, we remain on track to reduce annual pretax operating expenses by approximately $10 million in 2020 and another $5 million in 2021. Importantly, savings from this program to date are tracking in line with our expectations. Based on our progress to date, we remain confident that these actions will create a simpler and more cost-efficient operation, enable us to create significant value over the long term. Excluding $1.1 million of restructuring charges related to Sientra's organizational efficiency initiative, operating expenses for the fourth quarter 2019 were $32.4 million compared to $35.7 million of operating expenses for the same period in 2018, while still achieving a 22% year-over-year revenue growth in the quarter.

Net loss for the quarter 2019 was $20.2 million or $0.41 per share compared to a net loss of $24.6 million or $0.86 per share for the same period in '18. Net loss for the full year was $106.8 million or $2.63 per share compared to a net loss of $82.6 million or $3.25 loss per share in full year 2018. On a non-GAAP basis, the company reported an adjusted EBITDA loss of $14 million and $72.8 million for the fourth quarter and full year 2019, respectively, compared to a loss of $19.4 million and $60 million for the fourth quarter and full year 2018, respectively.

Turning to cash. Net cash and cash equivalents as of December 2019 was $80 million compared to $121 million as of September 30, 2019. Uses of cash in the quarter included a $14 million upfront payment and $5 million of working capital investments associated with our manufacturing acquisition in Franklin, Wisconson.

Taking the impact of coronavirus into consideration, we expect to achieve full year 2020 total net sales of $94 million to $98 million, which represents growth of 12% to 17% compared to sales of $83.7 million in 2019. In Breast Products, we expect net sales of $55 million to $57 million. In miraDry, we anticipate net sales of $39 million to $41 million. This is a dynamic situation, and we are monitoring it closely and staying in tight coordination with our sales team and physicians. We will provide financial and operational updates if our 2020 outlook changes as a result of the coronavirus impact to the company.

I will now turn the call back over to Jeff for any concluding remarks. Jeff?

Thanks, Paul. Let me close by saying that I'm incredibly proud of Sientra's achievements in 2019. It was a year of important progress as we advanced our goal of becoming one of the leading providers of products in the worldwide breast augmentation and reconstruction markets. We've solidified our position as an industry leader with vertical integration, added top talent to our team and continued to grow miraDry. I'm confident that these accomplishments position Sientra for market leadership and strong results in 2020 and beyond. We're monitoring the coronavirus issue extremely carefully. And I am confident that we will manage this real challenge as successfully as we have managed all the past issues over the past several years. The Sientra team is one of the strongest and most resourceful I have ever had the experience to work with. This team is battle-tested and exceptionally well qualified to professionally overcome anything that we find in front of us.

With that, let's open up the line for Q&A. Operator?

(Operator Instructions) Our first question will come from Alex Nowak with Craig-Hallum.

I know this is an ongoing situation here. And I just want your help with how to think about the current guidance. So I mean when you say you're assuming the best current estimates for miraDry breast products, help us out there from the guidance. So we're hearing reports that APAC sales could be kind of down all over the place in Q1. Are you assuming APAC business is going to be down in the 50% range for miraDry?

No. It is premature to make that kind of an estimate at this stage. What we're trying to do is indicate what we're beginning to pick up in the Asia Pacific market. And like we're seeing with so many different businesses, this is such a rapid realization that we're not prepared to make any more significant estimates at this time. We're watching this very closely, that I think it's certainly primarily a miraDry situation. I think as we indicated, that is we're not beginning to see any real impact on the breast side, but certainly from an international, primarily, Asia Pacific standpoint, we're just beginning to understand what that impact is. I think one of the pieces of that is that we're still seeing continued procedures, but we're seeing postponed demonstrations for new systems purchases. But again, this is a real time monitoring process. And as we're sitting here on this call, I'm getting texts updating us on a daily basis. I hope that answers your question, but it is very premature to go any more detail than that.

No. And I get that, and I understand you obviously have limited visibility there. Just to go off a piece you mentioned there. In just the last week or so, is the implant team in the U.S. having any sort of issue getting into either existing accounts or new accounts just because the centers are closing up and saying we're only allowing the central staff in?

On the breast side of it?

On the breast side in the U.S., right.

Yes. The U.S. breast side, I've spoken with a minimum of 50 of our top plastic surgeon partners. And they are all admitting that there's very little, if any, impact that they're seeing, number one, in their scheduled procedures. And you have to understand that within the breast category, it was pretty much down the middle between reconstruction and augmentation that there is more discretion on the augmentation side with much less discretion on the reconstruction side. I could give you a lot more information that involves the priorities that are existing within hospitals, and that's not just the U.S. but international as well. And as recently as late yesterday, I'm continuing to get the signal that they're just not seeing any real impact in breast surgery on either side. And as you indicated, this is ramping very quickly. The story today is very different than it was 10 days ago. But even with that fast pace, we're just not getting the kind of confirmation that it's impacting the breast product segment.

Okay. Understood. And then just staying on breast for the guidance, what are you assuming from an underlying market growth? Are you assuming a flat market like last year when we had all the news around breast implants? Or would you expect that market to actually grow a little bit this year irrespective of -- without assuming coronavirus impact, of course?

Without the impact of that, we were assuming back to a single-digit business. And as you know, Alex, our whole growth strategy is on taking share. So the market was flat last year, and we grew substantially. So we're assuming it was low single digits, even in 2020 before CV-19.

So our base assumption continues to call for continued market share gains and that we're, again, watching this closely. And to Paul's point, the reconstruction segment has traditionally grown slightly higher than the augmentation side, but we're still trying to figure this out. And right now, we just don't see a clear picture to adjust any of our expectations on the breast side.

Our next question comes from Margaret Kaczor with William Blair.

Maybe just to follow up and ask it a slightly different way. When we compare the miraDry guidance relative to at least the estimates that we have and The Street estimates, it seems like maybe it's $3 million to $5 million below what we had initially expected going into this quarter. So can you guys highlight how much of that is related specifically to COVID? And then give us a sense of how much of that change within that is U.S. versus OUS or systems versus consumables?

Yes. Thanks for the question, Margaret. What we're calling out now is what we're seeing today. We're not trying to anticipate the entire year. So half our business is ex U.S., 1/3 of miraDry sits in Asia Pacific. We have better visibility, 2 months into this quarter. So what we're really calling out is what we're seeing so far without trying to anticipate the entire year, if that makes sense. And right now, we're not breaking out the components. We believe what we're seeing -- we believe everything that we're seeing that's impacting the guidance is related to coronavirus. Given where we ended so strong in the fourth quarter of last year, the momentum is very strong. And we're also seeing -- we've booked up our fresh connect systems to the accounts. We have about 181 accounts now that we have active access to the states. And we're actually seeing an increased utilization from all the activities we did last year. So in the first 2 months of this year, we actually are seeing utilization, which implies that procedures were happening, but depending on -- regardless of what might happen on the console sales. So I hope that -- does that help with the question?

It does. It sounds like it's maybe a little bit more system side, that's maybe the unpredictable bit of this. Whereas consumables and the disposables, you guys are continuing to see strong growth in and, hopefully, we'll see that pass throughout the year. And so maybe I can follow-up on that because the utilization increases. You guys referenced first half of '19, second half of '19 and then going into '20, especially in the U.S., how durable are you guys seeing those? Can you give us any metrics over kind of the same-store sales within that, i.e., you're continuing to see that progression with the accounts that have grown or continue to grow and should continue to grow in (inaudible) for the system?

Thanks for the question. With the fresh connect, the 181 accounts we're seeing last year, at -- about a 21% growth year-over-year, for starters that were -- accounts that were in within that time frame. So we're seeing a nice 20% growth, 21% growth for those. So again, I think what we're going to see here is now we're going to have a better chance for the first time as kind of we've always had tip cells as kind of a leading indicator. Now we have utilization, if you figure out what's really being pulled through. So that's giving our first view into what we actually are seeing that's happening on a real time at the account level.

Okay. That's helpful. And then just kind of last one, and this one's maybe a little bit bigger picture strategic. Taking up the impact of COVID-19, can you guys just kind of simply synopsize the impact of new product launches this year in the various product segments and maybe specify the new marketing operations initiatives that you guys have internally, I guess, the top 3 drivers of growth.

Well, we're still on track, and we've indicated that we've got a rather robust flow of new products, including larger sizes, sizers, and a number of things that have been unavailable until we've been able to scale up our new manufacturing facility. So I think, like I said in my comments, that's speeding the flow of new products to market, some of which we've been able to share with you and others that we'll elaborate on in more detail as we get closer to launch dates. So yes, I think -- and Margaret, we've talked about this before, we've been a bit hamstrung based on the capacity available at our facility. But it's another clear example of the advantage of being able to own it now with a greater sense of urgency. These things are going to come off at a faster clip. So right now, I've got to be careful exactly what I say, but we're happy to share more of that with you later.

And that can occur throughout 2020. Just to be clear?

Yes. That's right.

Our next question comes from Kyle Rose with Canaccord.

So I just wanted to -- if we could talk about the breast side for a little bit here. Just maybe help us understand what your guidance for 2020 contemplates just with respect to new account additions versus going deeper into existing accounts? Just trying to understand, I mean, obviously, the low single-digit market growth in '19, you delivered magnitudes of that. How do we think about share taking in 2020?

That's a good question. Yes, last year, if you realize, we grew the breast business 25%. We grew the implant and expander business 32%. And it was a combination of both going deeper within accounts now that we have product and broader with new accounts. We picked up roughly 400 new implant customers back in 2019. It is going to be more of the same in 2020. It's, again, it's -- we sold the 2,000 accounts in our peak, so now we're looking at maybe 1,200. We're not even back to the 2,000 accounts we used to sell to back to '15. So we're going to continue to go after the new accounts through our marketing programs, our product differentiations. And we're also two-pronged. We've got our reconstructive strategy, which is we've identified the GPOs and IDNs that we're going after. And the amount of effort this team has been making, some of these take 6 months to a year to actually get on board. But the augmentation and reconstruction side are quite unique in what they're doing. And the recon strategy, obviously, is led by contracting team, but it's led by the Allox2 PRO and the Dermaspan tissue expander, which gets us into the hospital, which gives us the carryover of the expander -- sorry, the implant. So when we get in there with the expanders, we're seeing a really nice pull-through on the implant side of the business. So I'm going to say it's a little more of the same this year, deeper and broader with obviously more initiatives on the marketing side, which we're going to try to experiment with this year and try to actually drive patient acquisitions to the doctors' practices, whether it's through digital marketing or other -- or patient education to the doctor. We are going to try to drive patients to these doctor practices and pilot programs. So we're going to up the marketing programs a bit this year in addition to just actually making it a sales-only, I think, a sales-only effort.

And again, part of that is more aggressively introducing a loyalty program, both for our existing customers as well as new customers because at the end of the day, we pay a lot of attention to our competition. And we believe that there are vulnerabilities with both Allergan and Mentor that, I think, a loyalty program we've already demonstrated is going to make a difference. One thing I want to add as well, and I think we covered it, but if we didn't, I want to make sure that in spite of all of this price competition out there, we are holding our ASP constant. And I think that's an indicator of the premium position and credibility that we have across the Sientra brand.

Great. That's very helpful. And then when I think about the guidance this year, does it contemplate any new OUS countries with the breast side? And then from a manufacturing perspective, you talked about it gets you more control over efficiencies in costs. Can you just help us understand where you were at both from an inventory availability standpoint and just kind of that efficiency program?

Yes. That's fair. Thanks for the question. Internationally, there's no numbers right now contemplated in ours, although we're still -- we filed October of '18 for Canada, we've got some very good feedback, actually. So we are still anticipating approval sometime this year. At this point, I've got nothing into the model for that. And we're working on some stuff outside of Asia Pacific, which we could -- in Asia Pacific that we can announce once we're ready to announce it. In terms of -- the second question was...

It's on manufacturing.

Oh, manufacturing, I'm sorry, I apologize. Manufacturing, it's actually ahead of schedule on the integration. So in terms of the work we're doing to integrate that into our business, there has been 0 disruptions in manufacturing from the day we took possession of that facility. In terms of our round implant supply, back orders ended last year for rounds. We're going into this year with a robust supply around shape as we're building up as we focused on rounds most of last year, and now we're moving into the shape. We're going to be hesitant on how much shape we build until we really see how much of the shape market is there, given its texture, although we have a superior texture across our competitors. But our supply situation is -- we're not -- we won't be talking about it this year, if that helps on implant. So we're very happy with where we are. We're very happy with the progress that's been made at the Franklin facility.

Our next question comes from Richard Newitter with SVB Leerink.

A couple here. The COVID-19 commentary. I guess can you parse out for us a little further what exactly you are or not assuming in terms of impact in the U.S.? In other words, are you right now mostly just assuming OUS impact? And then from a timing standpoint, what -- are you assuming there is an impact in the first quarter and second quarter or for the entire year? So if you can answer regionally and then timing-wise, what is exactly factored in?

Well, Rich, I think you consume at least as much of the media that we do. And that's a huge question that people are trying to figure out, and it changes daily. What we're trying to do is share the information that we have. And that we're not assuming best case, we're not assuming worst case. I don't want to overreact, and I don't want to underreact. But right now, we're looking at this, certainly extending through the second quarter. Beyond that, we just don't know. And like I said, the primary impact is going to be on the international front, and particularly on miraDry. And again, it's not an all or nothing proposition. What we're seeing is treatment procedures are continuing to progress. Japan is a good indication of that. Systems sales are running into more resistance right now. We're beginning to see some minor impact, relatively minor impact in the U.S. but there's still no indication that breast is going to be affected. I don't know how else to answer this because we've got a lot of very smart people, and perhaps maybe some not so smart people who are trying to make a guess in terms of what to expect. We just don't know. And we're trying to be as transparent as we can be. And as we learn more, we're certainly going to update this as we learn it.

And we are anticipating it to be across both, I guess, U.S. and non-U. S. The split, right now, it's probably geared more towards ex U.S. And then, again, as Jeff said, we're not anticipating that to continue for the entire year. We just don't know. So we're forecasting what we see today, given we're faring up into the quarter. But at that point, we're not anticipating this thing just dragging out the entire year. We have to see it, same as Breast business. We like what we're seeing right now in the quarter. At the same time, we don't know if this thing continues to drag out and what the implications are for Breast longer term. Breast procedures are booked so far out, people are finishing up those procedures. We'll know rather in second quarter where the season starts. And we just -- like in Breast, we're not seeing it today.

I'd like to reinforce that. That's true.

Okay. So just to summarize, a little bit more capital on the miraDry side, a little more on the miraDry side altogether, a little more capital within miraDry. And then there is some U.S. impact factored in but mostly, it's an ex U.S. factor in your guidance, at least. And then with respect to timing, it's not confined to 1Q, there is an impact that's assumed for 2Q. But beyond that, you haven't necessarily done and dialed anything in. Is that a fair summary?

Yes. That's a good summary.

Okay. If I can follow-up on gross margin. The two questions on gross margin that I have are just in light of some of the comments you just made on mix shift, right. If there's a little bit more of a potential kind of U.S. bias in revenue, and potentially more within miraDry to the consumable piece, if it's capital that might be seeing -- bearing a little more of the brunt of the COVID-19 impact. What could that mean for the gross margin trend in 2020? And the second factor there, of course, is the manufacturing component. So just remind us what we should have been thinking about before COVID-19 with respect to your manufacturing impact on gross margin. And how these new mix shift dynamics might impact the trend?

Right now, on margins, I would assume the same for '19 into '20. I mean, again, it's -- the overall business on miraDry, depending on the mix, I would -- if you have your models out, I would assume it's relatively flat year-over-year.

Okay. So gross margin looks similar in 2020 based on your current forecast situation as it did in '19?

Yes. I had said it'll be about 60% to 61% for the full company on consolidated basis. Nothing has changed on that right now from what I see.

Okay. And maybe one last one here. Just from a macro standpoint, can you just remind us how breast implant -- the breast implant industry generally has fared in prior macroeconomic downturns? I know it's too premature to say we're headed to one, but just remind us on how that business holds up when growth and the macro outlook slows?

If you go back to '07, if you look at between an injectable, the toxins and fillers and implants. Implants for the first in, last out; toxins were the last in, the first out; and everything else in between. So it was like a capital equipment company that, I think, sells a lot of the pain. The doctors only buy what they need. In this business, they're not stocking anyway, it's obviously procedure growth for the patients. And a lot of people kept their new appointments, but it felt that before the other noninvasive procedures of aesthetics. Does that help?

Yes.

And Rich, just one other point to that, and that is we need to understand the split between augmentation and reconstruction. That the increase in the reconstruction category, much less discretionary, and that has historically maintained a healthy call volume that I would expect to continue. But at the end of the day, it's a mathematical equation in terms of how that mix splits. So yes, it's not a straightforward answer, I apologize.

But we're 50-50 recon-aug, so one can argue is that we are a little more protected from a downturn on that side of the business.

Certainly compared to 4, 5 years ago.

Yes.

Our next question comes from Jon Block with Stifel.

A couple of financial questions and then maybe one bigger picture. But Paul, on OpEx, some really good progress in the quarter, your highest revenue quarter for '19, your lowest OpEx quarter for '19. When I look forward is the $10 million OpEx opportunity on the restructuring, how do we think about that? In other words, is it off the full year $140 million-ish OpEx number or of the $130 million run rate that arguably you exited?

I think the best way to look at it is if you look at -- we don't give all the details. If you look at the consensus right now, almost everyone has is at about $135 million in 2020, coming off $140 million this year. The $10 million in savings is really more biased to quarters 2, 3 and 4 because we still have a lot of integration work, where people are still on-premise, still working, doing their jobs. But it's more biased. So I look at that $32 million and say, it's probably a little under, just given timing. We're not going to do $32 million in the first quarter. But it's not far off what the average will be for all 2020.

Okay. Very helpful. And then maybe just a follow-up, an important one, just so maybe we're all sort of level set correctly. The cadence to the guidance. In other words, when I look at 2019, about 21% of your full year revenue was derived in the first quarter, roughly. I'm guessing we should expect it to be lower this year due to the COVID impact being what we, I think, all hope is most acute in 1Q '20. Is there anything, Paul, that you want to lay out in terms of the gating or the cadence to 2020 revs?

Not yet. I mean, obviously, the first quarter is always weaker -- lower, not weaker, lower for the miraDry side and consoles, as you have a big normally fourth quarter console. Rest, it's not one of your bigger quarters. Obviously, number quarter 2 is the biggest picture. So in terms of mix, it's probably going to be very similar of a mix in terms of percentage. I mean quarter 2, across the board, is still your -- traditionally your biggest quarter. And then it's followed by quarter 4, assuming -- I would assume a similar cadence, yes.

Okay. Jeff, you mentioned you guys are holding price with your Breast Products division. Just maybe how is the competition trying to fight back your taking share? Is it strictly price on their end? Is it bundling? Is there anything notable to call out between one of your competitors versus that of the other?

Yes. John, the best way to answer that is that the normal pricing aggressiveness is continuing. But what we're seeing is that mentor continues to be at the very low end, and we continue to take market share away from them. Allergan has given more importance to be able to gain back market share with whatever it takes. And as you know, a major advantage they have is this bundling. So what we're seeing is increased price reductions, either implemented through increased advantages in bundling or straight outright implant pricing. But in spite of that, you step back and look at the share that we're taking, mid-30% share growth and that we're keeping our ASP constant, which is a significant message all by itself. But they're just getting more aggressive, and we know that. And they've got issues that they're dealing with that we've discussed before.

Our next question comes from Anthony Vendetti with Maxim Group.

I just wanted to talk a little bit about the R&D. You're spending about $3 million to $4 million a quarter. You mentioned some of the new products coming out. But can you tell us kind of where most of that R&D is focused? Is it mostly focused on extensions in the Breast Products segment? Or are you looking for improvements in the miraDry system or something that complements that?

Yes. I'd say most -- in terms of pure development, most of the spending right now at this point is on the breast business side but also in R&D. We have our regulatory in there, which now there's a post-approval study, which we've increased the spend on last year to get better retention rates on the patient side. So it's kind of -- again, there's R&D development in there and some clinical in there, the clinical is simply the post-approval studies. There is some -- obviously, some minor work being done on miraDry, on new indications. But as we mentioned in the last year, a lot of our efforts right now on the miraDry side is to execute against underarm sweat. That's where the market is right now, and that's where most of the efforts are. And then on the breast side, we've talked about a few of them for larger sizes, gel sizers and a few other elements that we can talk about once they get launched. But most development today is in breast implants.

Okay. And then just based on completing the acquisition of the OPUS manufacturing operation. Are we going to see most of that impact in 2020? And what should that impact look like? Is that a margin impact? Or how should we look at that?

Yes. I mean there's 2 ways to look at it. One is from a -- just a -- actually operational efficiency standpoint. But we're not putting in purchase orders, and having to manage it on a 90-, 120-day terms. We can decide at our decision when we shuffle around between our product lines. So the speed to actually develop and make what we want is at our discretion, speed to market for some of our R&D work we can get there. Just a pure flexibility standpoint from not going to a third-party to actually do it ourselves. It's hard to quantify, but it makes our day-to-day life easier, even just from managing working capital levels better. In terms from a cost standpoint, we -- I was clear last year that the first year of this thing, it -- the costs were going to be impacted overall on consolidated Sientra. That's why we called the margin impact about 200 to 300 basis points impact, which I think mostly everybody has built into their models for this year. We believe by 2021, the cost structure on a cash basis will get back to what we were paying. But when you sit on Sientra's level market inventory, I'll be selling through that into 2021. So the real, real impact on margins, I think most people have anticipated is 2022 and forward, but the benefits from owning it are real today. Flexibility, speed to market and just managing our destiny, which we really couldn't truly do, especially when you're sitting on 600 SKUs, you didn't have that flexibility working with our third-party manufacturing partner.

Ladies and gentlemen, thank you for participating in today's question-and-answer session. I would now like to turn the call back over to management for any further remarks.

Yes. Thank you, operator. We appreciate everyone's attention and interest in Sientra. We are very pleased with the results that we've shared with you today. We understand that there are some headwinds that we believe that we are particularly qualified to deal with and that our commitment to you is to give you updates as transparently as we possibly can. So with that, thank you all very much, and have a great rest of the day. Thank you.

Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.