AVITA Medical, Inc. (RCEL) Earnings Call Transcript & Summary

Good afternoon to everybody in the U.S., and good morning to those joining us from Australia. I'm Rudi Michelson of Monsoon Communications. Welcome, and thank you for joining us for AVITA's Investor webinar. AVITA CEO, Jim Corbett, is in Australia for the Sydney-Melbourne road show this week following last week's strong first quarter results. [Operator Instructions] Presenting today is CEO, Jim Corbett; and assisted by CFO, Sean Ekins. I'll now hand over to Jim.

Good morning from Australia. I am actually just fixing an echo problem, so one second. With that said, I am doing this webinar from Australia, and it's part of my investor cadence every quarter following our earnings release, I spend a week here in Australia between Sydney and Melbourne for the purpose of communicating with investors and potential investors as we -- as you know, trade on both ASX and NASDAQ, and we want to be able to meet with investors to answer your questions. Some of you may be new to the call. I'm going to begin by providing a big picture of who is AVITA. We are a regenerative medicine technology company. We sell a technology platform called the RECELL system. It's fascinating because what it does is we take the autologous sample from the patient. And we disaggregate it and suspend it in the cellular suspension -- an enzyme suspension. And then when it's in liquid form and cells are all free. So melanocytes, keratinocytes, fibroblasts, we suspend them in that solution and put it in a spray on applicator, prepare the wound and spray it on for treating that wound. And that is how we deliver the cells of skin for the skin graft. It's rather amazing. One of the biggest benefits is that uses dramatically less autologous sample from a patient. It's not well known that when you take a skin graft, you're taking it from someone else on the patient, and you have to also treat that location where you take it. So if it is significantly smaller, that is far better for the patient. What we found is that patients in our burn centers, and this is in our publications is that the patients who are treated using RECELL actually get out of the hospital, go home earlier and have less scarring. So this is an economic benefit for the treatment in the health care system. It's less burden on a patient because of a smaller sample and less scarring means your life is better going forward. So really it validates because that in the reimbursement system of the U.S. where we're currently marketing, they receive a fixed payment to treat the patients. And it's what they find is they pay over $6,000 of additional cost to use the RECELL System, knowing that the patient goes home earlier the hospital gets the benefit. So really an amazing technology. Our current U.S. indication is acute thermal burns. So I've described how this works, conceptually and now you can see how this works in practice. Number one, we take that patch of tissue. We put it in the RECELL processing kit after you disaggregate the cells and then we spray it on. And you can see on the right, on a cellular level, how this occurs. A macro look at where this indication is all about market access and how big of a market we can serve. We currently are selling in the burns market, and we get approved, we are approved for use of burns -- for burns use rather, in the hospital and in an outpatient environment through what's called a Transitional Pass-Through code. We currently are expecting approval of our PMA supplement for soft tissue repair and reconstruction, June 7. And that is the subject of an application in a clinical trial we did in the last 1.5 years or so, and that was submitted in December, and it has what's called Breakthrough Device technology designation. That designation carries with it a real-time review. Normally, in a PMA review, it's 180 days, but every time they ask you a question, they stopped the clock like a football game. And when you answer it, they start it again. And the real-time review, they ask us a question, we have usually 1 to 3 days to answer and the clock keeps running. So it's a very dynamic review. We're very, very late in the process. We're very confident about our June approval. We are also pending a vitiligo review, and that was submitted in June. It's a separate indication. For those of you who don't know, vitiligo is an autoimmune condition that results in loss of pigment and a completely different study. And in fact, it's not a PMA supplement derivative of the burns, but rather its own independent PMA, and then has some relevance, we'll discuss a little bit later in the call. We expect that approval approximately June 17. I get to those days because they're public dates, meaning 180 days is the regulatory requirement by the FDA for them, and they only come off the real-time review if there's a material deficiency. And in both of these cases, we have had no such material deficiency and we're progressing in a review in a very orderly manner. So we're really quite excited. We're going to talk a little bit on this call about the RECELL GO device. We don't really expect the approval in Q1. We actually expected January 1 because we plan to the 180-day mark will be June 30, and plus 180 days. So we're -- that is a big topic, and I'll cover it more during the call. Let's talk about our recent earnings release. Commercial revenue growth was 40% over the same quarter of the prior year. Let me put that in a bigger perspective for you. You may remember that we committed this year is going to quarterly guidance. Quarterly guidance plus annual guidance every quarter, updating the annual guidance. So; during this call, we had previously provided Q1 guidance of USD 10 million to USD 11 million. We achieved USD 10.5 million. So right in the middle of our guidance. So that for us is nearly exactly where we like it. That was 40% up over the prior year. At the same time, as we gave that guidance, we gave the guidance for the year for USD 49 million to USD 51 million for the year. So that on the top end was an excellent performance for us for the first quarter. We also previously guided to the expansion of our U.S. sales organization. Prior, we had 30 people in that organization calling on the 145 burn centers. Now with the soft tissue repair indication, our market opportunity goes up rather dramatically. And therefore, we've made a commitment to expand our sales organization from 30 to 70 people during Q2 and ahead of the approval to be fully trained, integrated into their new territories by June 1. As of today, we have filled all of the positions. My slide since 69, the latest news is 70. We're ahead of schedule. Our onboarding and training is ahead of schedule. The fact that we're going to get approval earlier than July 1 is going to enable us to begin promotion of the market for soft tissue repair earlier than prior presuming that approval on June 7. So this is a really great development. Incidentally, recruiting has been exciting for us. People for the different territories, frankly, we target individuals from certain experienced backgrounds in treating wounds in surgery and understanding our business that we have RECELL to promote to. And we had numerous candidates for every role. We fill the 6 new sales management roles. We went from 2 to 8 by March 1, and we've started making offers to the sales team on April 1. And here we are, May 15, and we're fully loaded and ready to go. So we are really -- we have an exciting team, we have an experienced team and we're ready for this launch. Vitiligo, that indication for those of you, you recall, autoimmune condition loss of pigment. We expect FDA approval around June 17. We need to pursue reimbursement strategically to have RECELL reimbursed in the office site of treatment. If you recall earlier, I described reimbursement in the hospital and in the outpatient environment. But for a patient who have vitiligo, they're not suffering from an acute injury. They're having their pigment transplanted essentially. And uses the exact same technique and RECELL System, and we have work to do to prepare for reimbursement that we expect to be able to achieve in 2025. In past calls, I refer to the importance of automation as the essential element to really expand adoption. As you recall from my explanation, you disaggregate skins manually. In the case of RECELL GO, it is a durable piece of equipment that we will provide to the hospital. They will -- the RECELL kit will be modified to create a cassette that will receive the tissue before it's disaggregated and the enzyme will be loaded into the RECELL GO device and you will press a button and the physician and staff can go about treating the patient while the disaggregation is underway. This changes about everything. It makes it so the training that currently is a burden to the hospital and occupies almost 50% of our sales time will go to basically 5 minutes. It is so easy we taught one of our Board members last week how to do it, and she did execute it in 1 minute. It was really kind of amazing. Of course, she has no medical background, trained medical professionals or anything like that, but she could operate the machine within that time frame. So really exciting. What does the change? It changes the training for the hospital, changes training for our sales team. It allows for physicians as we broaden to many different hospitals and many different users, the ability to use a RECELL while having to have some much new training. So this gives you the summary of where we are between -- with the soft tissue repair opportunity. Let's talk about the many synergies that exist here. First of all, soft tissue repair and burns. Bill burns up this way. There are 35,000 RECELL eligible patients per year in the U.S. market by looking at claims data that are -- that would be candidate to have RECELL treatment. 25,000 of them are in a burns center. 10,000 of them exist in Level 1 and 2 trauma centers. So we have been configured to only call on the 25,000 burn patients that are in the burn centers. These last few years of AVITA's early commercialization. When we get soft tissue repair, we merged the sales team into one to treat acute wounds. And they will call on the 145 burn centers and about 1,000 Level 1 trauma centers. Now it happens that upon approval of soft tissue repair, 50% approximately, of the burn centers are level 1 trauma centers, and we will immediately be able to promote the use of RECELL for the broader indication. This is our core synergy. Secondly, and perhaps even the biggest synergy is that the inpatient reimbursement codes and DRG for burns applied directly in the same to soft tissue repair. Secondly, outpatient Transitional Pass-Through code used that exists for burns, applies for soft tissue repair. So we're launching into a market that's substantially bigger then burns because the market we're going into is approximately 110,000 to 120,000 patients per year. You add that to the 25,000. And then of course, the 10,000 patients we haven't been calling on will now be in our call pattern for our sales team. So we expect very quickly to start penetrating that additional burns opportunity, which mathematically, 30% of the market. So the synergies are completely aligned. Someone says, well, what types of things do you treat with soft tissue repair. And really, there's a range of things. It's a very broad indication. And as you can see on the screen, the overwhelming is the fasciotomy and degloving, which is basically where the skin gets disconnected from the vasculature and the skin dies and then you need to cut away the skin and reconnect it and regraft it. Necrotizing skin infection is the same type of treatment. Both of those are what I call the doctor, they're treating what the doctor does. The doctor causes the treatment by cutting it away and then there has to be a tissue graft associated with that. Then on the other side are the acute wounds, and those are things the doctor fixes. And there's a flap donor site abrasion like rash. There's crush from a big trauma or an amputation. Now all those these become less and less likely in fact, in the aggregate, a tremendous number of different types of indications. So you just heard me describe all of this and now you can see it in visual, the furnace market, the soft tissue market have great synergies. The burn procedures, we have 300 surgeons trained already who are -- some of them, both burn and trauma surgeons and they exist in that 50% of the burn centers are already Level 1 trauma and we're commencing our activities to prepare the Level 1 trauma centers with our sales activities of today. So eligible procedures are nearly 150,000. So that is just depending on where you want to take your multiple because one of the phenomenon is now just a subtle thing, is that in burn cases, sometimes you use 2 or 3 RECELL kit provision. Most likely in the soft tissue market, it will be closer to 1 on average. So in some respects, the real market opportunity is expanding approximately 5x from what we have currently been following on. And this is just one of those rare moments where you have a new, best-in-class transformative technology and treatment that is proven clinically and into clinical research. It's proven by its market adoption, our $34 million last year in revenue was all in the burn market in the U.S. and it's reimbursed. So this almost never happens in this type of order. Of course, I'm giving you the information faster in the slides, but to reemphasize all these, the next step for us is really to get to the value analysis committee of these Level 1 trauma centers. And by doing that, we enable our opportunity to open up new accounts. So over the next year, we're going to go from 145 and make progress to be in all 1,000 over the next 1 to 2 years. So really a lot to do with a lot of opportunity for our technology to help patients have less tissue use for their autologous sample. It will help them leave the hospital soon. It'll help them have less scarring, and it will bring RECELL to more patients and make a real difference in the quality of their care. A moment about vitiligo. Take a look at the right side picture. The approval we expect is rather awesome because what we're demonstrating is that we can transplant pigment. Technically, when I earlier mentioned that the FDA reclassified our PMA supplement as a PMA, it became rather obvious because what they were saying is we're not treating a wound because we're not. What we, in fact, do when we do RECELL for vitiligo patient is we do a dermabrasion at the site of the lesion and that would be a stable vitiligo segmental, with stable segmental vitiligo patient. Stable means that the loss of pigment is not expanding. You do a dermabrasion, you take the autologous sample, you create the RECELL spray and the dermabrasion allows the tissue to accept and receive those keratinocytes, fibroblasts and most importantly, melanocytes which are the pigment cells. That's how it works. That market opportunity is somewhere 5x the size of our current market. So it is a big place to go. That said, site of service reimbursement is a task to the company to get published in the next 2 years. As such, none of our forward revenue projections include nor are necessary for us to maintain a high 50% rate of growth over -- in that range, over the next 3 to 5 years. So vitiligo on top of that. So really an exciting opportunity, but requires a lot of market preparation. Really, '23 -- 2023 is a great year for AVITA. It's an inflection year. We will increase our rate of growth in real terms, absolute dollar’s value, we will grow our company just at midpoint by 50%, nearly 47% at the midpoint of guidance. And in fact, be on pace next year to grow at a much higher rate. Soft tissue repair expands our market opportunity hugely, and we have in our pipeline vitiligo. RECELL GO is a great enabler, backup imagine. When we want to go -- right now, 50% of our selling time is training, that goes to something like 10%. And that affects the hospital staff, allows us to go to more hospitals. That's what RECELL GO does now. In the dermatology office, a dermatologist doesn't have time to spend 30 or 45 minutes to decide for themselves. He or she doesn't have to do that. They take a sample, put it in RECELL GO. And leave the room, go treat 4 or 5 other patients and come back, it's ready. They do the dermabrasion, they treat the patient. Our international expansion is completely dependent on RECELL GO. When we go to countries around the world to expand our market. We're going to be looking at the reality that either they would have to train the way we train in the U.S. today or either we would provide it or they would provide it, and yet we're splitting the revenue and margin. That's not a good economic model. RECELL GO changes the model completely. We won't require that level of training and ongoing support. So one of the things -- one of the other items I've guided to is a description of our international expansion and the strategy by the end of this year, I can give you a really soft big picture view of how that works. It really works considering 3 elements. Element one is size of population of the country we go to, the health care system that they have and can they support, the type of treatment RECELL is used in, and economics, is that country's economic health strong enough to support the treatment of these patients to be able to pay for it. Now I can rather simply tell you that's a 20 to 25 country population, and they sound very obvious when I say them, it's Australia, it's Japan, it's the United States, it's most of Western Europe. Now how we come to those. Some of those we partnerships, some of them may be big enough opportunities where we justify in AVITA subsidiary. We'll have all that laid out for you by Q4. So a little overview, '23 versus '22. As I mentioned earlier, a 40% growth over prior year. And we described that always in commercial sales. So commercial sales were at $10.458 and as such, we're still remaining in a very strong cash position with nearly $80 million. So we have sufficient capital to execute our strategy. We have a high growth momentum already building in the burn market. And we're going to gain 30% size of the burn market in the coming quarters, then we'll have RECELL code and make it grow faster and the same for soft tissue repair. So we're in a very strong place. So to look -- to kind of reemphasize, going forward, our Q2 guidance delivered during the call is $10.7 million to $11.7 million. This is all before the soft tissue repair launch. And effectively, that although we're clearly going to start being able to promote in June. The fact of the matter is our guidance, we don't know that. So therefore, we've kept our guidance right where it belongs, which is focused on the burn market for Q2. Our annual guidance was affirmed. This is prior our USD 49 million to USD 51 million, remains intact. So we're on schedule as far as our forecasted revenue growth. The milestones are the PMA supplement for soft tissue, the PMA supplement vitiligo and the submission for vitiligo by June 30. Incidentally, it has breakthrough device designation. Therefore, we're planning on 180 days. I happen to know we have just completed the validation in the comparable to RECELL in the last few days and we are on pace for that submission June 30. So we are really excited about our progress, and we see a lot of upside going forward. So looking back this, just a full summary. Our burn continues to grow. We have a slightly slower quarter in the first quarter, not attributable to any third-party matter. We expect that to pick back up, particularly, already we are in level 1 trauma centers focusing on those 10,000 burn applications, which we have indication for. So that is what our sales team is doing in the early days of their expansion. Soft tissue repair, 5x expansion of our total market opportunity. Vitiligo is our pipeline, look for 2025 to be our reimbursement time and when commercial revenues really began and become material. RECELL GO becomes the fulcrum. It will help in increased adoption in burns, increased adoption in soft tissue, it will enable international launch, and it makes vitiligo markets possible. So this is a big picture outlook for our company for the next 3 to 5 years. With that, I think we're ready for questions.

[Operator Instructions] I'll now hand over to Shaun Ekins to run the Q&A.

Thanks, Rudi. Jim, this question comes. It's -- there seems to be some confusion regarding earnings per share in AUD and USD. Can you clarify as to whether you report in both currencies?

Yes, there is -- there was some confusion. There was S&P -- Bloomberg summary of our earnings. And we only report in U.S. dollars. And unfortunately, there was a table comparing our U.S. dollar performance to Australian dollar analyst report. So when you compare them, you were comparing U.S. dollars to Australian dollars. We've issued a clarification of that, but we only issue in U.S. dollars, and I refer you to our 10-Q and our recent earnings release, which are in U.S. dollars.

Next question is, your gross margins have improved. Can you let us know how we should be thinking about this in the future?

I can. We have a very strong cost position and we constantly are thinking about how we can leverage that. And let me give you a couple of examples. First of all, approximately half of our cost of goods is fixed overhead and building that we assemble kits in. So as we double units over the next 12 to 18 months, that will result in a 25% reduction in our cost. And when we double again, you can see in the horizon that would be entirely in our expectation, that would lower our cost another 12.5%. So that's one thing. And that is, of course, going to push us strongly into the high 80s or allow us to maintain it, should we enter international markets and have a lower average selling price. Second, and not insignificant is how this RECELL GO is going to transform our cost of packaging and shipping. So we've eliminated cold chain package and we ship in a temperature-controlled package, which are no longer required to do, which lessens the waste that we have in our packaging and shipping, and that's a big deal. Secondly, the RECELL GO cassette, which is a disposal common kit that's approximately 70% smaller than the current package we currently ship in the ease of use. Now that, again, reduces all of our packaging materials, and we've gone through recycle almost fully in terms of those types of packaging materials, and that lowers the cost. It also helps us be much more environmental friendly and really help work towards our company ESG goals. In the RECELL GO, the RECELL GO cassette is made of recyclable material. So really, we're doing -- we're able to do both here. We're able to reduce cost fundamentally through volume because of our large fixed overhead relatively -- relative to our -- is going to be stable. We're also able to reduce our packaging material, which has double benefit at lowest cost and it contributes to less waste into the environment. And in the design of the cassette going to a recyclable material also makes it environmentally friendly and is lower cost as it turns out. So I think our gross margin is really in a good place. I think our internal ESG initiatives are really going to come to fruition during the next 1 to 2 years.

Jim, our next question is, Japan revenue for Q1 increased to over $1 million. Are you able to provide reasons for the increase? And how should we be looking at it in the future?

I can. Now we're in a good place with Cosmotec. But 1 of the dynamics of the Japanese market is that from a legal sales point of view, let's keep that simple. We sell to them when we do that, that's our recognized sale. In their case, they recognize a sale upon use because in their bid sales model, they keep inventory at the hospital, but they own it. And so what you saw in first quarter was an expansion of accounts they were opening and them building inventory to support that advancement. So -- I mean, that increase in new accounts. So I think we wouldn't expect that $1 million to be the standard each quarter, actually, that is an inventory expansion to accommodate the business model in Japan. So we do expect a good strong quarterly utilization in Japan, which we're experiencing. And we'll be reporting replenishment of that inventory on a go-forward basis. There was a defined number of hospitals that treat burn patients in Japan and Cosmotec is in a substantial majority of them. So we won't see that big of an expansion of their inventory position I think anytime soon, I think we'll see replenishment.

This question is on Japan as well. When can we expect updates on Japan time lines for soft tissue, vitiligo and RECELL GO? And there's the second part, I'll ask you after that.

Okay. We are in conversation with Cosmotec about that very issue. And one of the -- we're reaching a new so to speak, business agreement and business process with them as both companies are getting more active commercially, and there's more things happening where, in this case, they need to submit for expanded indication for soft tissue. And they need to submit for vitiligo expansion on that same indication. So we wanted to send them, and it's the Japanese PMDA wants fully adjudicated data, so to speak, which means we wanted to wait until we got through the FDA process where the FDA reviewed our data, found it to be acceptable and consistent and no follow-up items that are outstanding, all those sorts of things. We have a deliverable over the next 30 days to deliver them both packages of data. They have a deliverable within a short time afterwards to project a submission date. And I believe I should be in a position to project a submission date by our next quarterly conference call. And when I could do that, we will be able to project approval and launch date in Japan for those 2 indications. RECELL GO, we are -- and part of our development program was to develop the testing protocol so that we could submit it to PMDA. And we also wanted to develop that design of RECELL GO such that it passed the electrical standards of the European MDR, which covers European countries and later this year will cover Australia and the U.S., of course. And we are doing the testing that is required for the Japan submission. So some time in Q4 when we have final inventory, which we'll be building for the U.S. launch, we'll be sending them our test data along with some test units for them to test against some Japanese standards that are better performed by them, and we'll get a submission date for RECELL GO. So all of that is in process. And I think there's a good future -- a really great future in a longer term for Japan, very solid in the burns indication in the next couple of years. But I don't have an estimate yet on submission date and submission approval, but I will. I think by the next conference call, they will have had time to consume the data to create submission plan, and we'll have that calendar.

Perfect. You actually answered the second part of the question in that, so that's good. The next question I have is in regards to RECELL GO. When will it be fully integrated into the sales and implemented?

Well, presuming that everything goes as we plan, first thing we planned is June 30. And June 30 sounds like a date. What it really was an extraordinary effort by our whole regulatory quality, manufacturing product development, program management team to develop the product, get it tested and have it validated that it can disaggregate that tissue consistent as it is currently done. So it sounds like a date. It's an extraordinary performance by our team over the last 6 months. And now we're moving to manufacturing the supply chain and commercial launch topics. I can tell you rather simply, and I'll have greater detail by the time of our next call, but our current intent is to have production inventory in place at the time of approval. And it will be our objective that during 2024, we convert our U.S. supply completely to the RECELL GO kit. And that means that we want to help our customers adopt the RECELL GO device as quickly as possible, and we will remove any possible barrier I can think of to enable that because we know adoption of RECELL GO will mean more patients get treated, who need it. We know that the hospital staff will benefit from RECELL GO by not having to get trained and retrained as their staff transitions. We know we will get better sales productivity from our team who don't have to day-to-day perform as much annual training. So we know that this is a transformative technology. So our objective will be to launch as quickly as possible. And in international markets in '24, we will only launch RECELL Go. We will not launch the existing RECELL.

The next question is, can you provide a brief summary about the 2 new Board members and what value they will add to the company?

Well, I can. First of all, Bob McNamara is a career CFO professional. And you can look at his past and he has been CFO of multiple companies, public and private. He's got extensive experience as an audit chair. And when we did our search, we explicitly we're looking for an individual of Bob's experience and know-how and his ability to help us frame not just our audit committee, but help us with all the related functions that are derivative of having a financial executive of his acumen. So that's what he brings. At the same time, we were looking also for a commercial executive, and Cary Vance is a multiple time CEO of the public and private companies. And what that brings to our Board is that experience -- as CEO, you have to deal with so many different issues, that balancing the priorities, building the culture of our company, Cary is going to be very helpful with that. In the short time, he and I have talked about that quite a lot because what drives company's success is our people and our culture and our focus on execution. And the spirit to core that gets created by that treating of the patient and the success that comes from doing a great job for the patient. And so Cary really helps us think about that and will help contribute to the Board in that type of way, I'm sure, among others.

The next question is, can you confirm that the Q1 expenses don't push back the estimated Q1 2025 profitability, excluding international vitiligo launches?

I can confirm that. In fact, there's 2 elements to that. If, for example, we had hired slowly, and we were not ready when soft tissue repair comes, we would actually burn more cash ramping up the team to take advantage of that opportunity. So this is actually over the longer horizon of 2 or 3 years, the less use of cash. Remembering that we look at an individual salesperson or field team because that includes our clear to specialists because they're vital to our strategy and support of the customer, and they are commissioned as well. So they are a different part of our sales model. They -- having them productive on day 1, 5 kits per month, gives us a contribution margin -- breakeven for each one of them. So if for each one of them, when they get to 5 a month, we've -- we're into contribution margin positive. So the -- being ready really contributes to that Q1 2025 cash flow, crossover. Now one thing we left, which I'm confirming is when we gave that guidance prior, we were crossover, we had approximately USD 30 million in reserve at that time. So -- and again, that is subject to what we do with the vitiligo channel internally or externally. And any other unknown investment we might consider between now and that time.

And next question is, with the added sales team members, what is your projected cash burn rate for Q2, 3 and 4 if you're able to address it on the call?

I think right now, we have not guided to that. You can see and estimate by -- in our financials that we've disclosed what our cost position in us. We're not substantially changing what we're investing over time. We had some onetime costs in Q1 that are not relevant to the forward extrapolation. We also started the sales hiring, and we're able to do it faster and earlier and that pushed Q2 up a little bit. We still think Q3 is the kit ratio of expense to revenue, and it will begin declining after that. The logical question is, how long does it take for a rep to get to 5 per month. And the answer is we have experience with that, with the burns indication. It was harder than it was -- will be down because at that time, we were a completely new product. going into all new accounts with very little commercial approve. We now have thousands of patients that have been treated by RECELL. We have hundreds of physicians who have used it, and we have been -- so we have a lot to work with. That crossover is a month’s question, not a year question. So it does have some variability, but we see Q3 is the peak and quarter-by-quarter, that will improve.

The next question is, is the full year 2023 revenue guidance, $49 million to $51 million, is it inclusive of potential sales in the soft tissue indication in Q3 and 4?

It is. Absolutely, is inclusive of that expansion.