MiMedx Group, Inc. (MDXG) Earnings Call Transcript & Summary

Good morning, and welcome to the 2021 MiMedx Investor Day. Before we begin, please note that MiMedx is a health care company. And in light of the COVID-19 situation, today's event is entirely virtual. In addition, strenuous steps have been taken to ensure that all speakers and panelists today are kept as safe and free from harm from the virus as possible. In addition, please note that our presentation today will include forward-looking statements, including statements relating to future MiMedx sales or sales growth, future product development, future clinical trials, future biologics license application submissions, expectations regarding the potential efficacy of the company's products, estimates of potential market size, expected spending on clinical trials and research and development and the company's long-term strategy for value creation. Actual results may differ materially from those set forth in the forward-looking statements. We encourage you to review the cautionary statement included in today's presentation, which identifies certain of those factors, including the future sales are uncertain and affected by competition, access to customers, patient access to health care providers and many other factors. Clinical trials may be unsuccessful or have little or no statistical value. The company may change its plans due to unforeseen circumstances and that the future market for the company's products can depend on domestic and foreign regulatory approval of such products, which might not occur at all or when expected. The company describes additional risks and uncertainties in the Risk Factors section of the most recent annual report and quarterly reports filed with the Securities and Exchange Commission. Any forward-looking statements speak only as the date of this presentation, and the company assumes no obligation to update any forward-looking statement. Also, please note that a copy of today's presentation will be filed with the SEC following the Investor Day. As a reminder, our SEC filings, along with reconciliations of any non-GAAP financial measures utilized to the most comparable GAAP measures, are available in the Investors section of mimedx.com. [Operator Instructions] And now to begin the 2021 MiMedx Investor Day, every day, our amniotic tissue products address significant needs across large markets to make meaningful and positive impacts on patients' lives, we'd like to share with you a brief video that shows the true reason we at MiMedx do what we do. [Presentation]

And now it's my pleasure to introduce Tim Wright, the Chief Executive Officer of MiMedx.

Good morning, everyone, and thank you for joining MiMedx' first Investor Day meeting since 4 years ago. Today, we're going to cover off several aspects of our knee OA program, our business, our commercial business, which is thriving right now and also cover some of our underlying science that supports the mechanism of action research that we've been doing. As a placental-based company, we have been a pioneer in this space for over a decade, starting first in Wound Care. You'll see in Rohit's presentation today a movement into surgical recovery, which we will define and we will pioneer in that space as well. And then our move into musculoskeletal, which has been a long path but we're making progress there. Dr. Stein will cover off in great detail where we are and where we plan to go. Many of you have heard during earnings presentations the concept of a platform, a platform technology that has significant versatility and clinical utility is what gives us the promise that we can build out and move into larger markets over time. It is this particular technology where we're leading in placental science to really drive regenerative medicine. When you think about the application of placental science, first, it started with wound care. And we think that's $1 billion-plus market. But we also see the opportunity to move into surgical recovery and into Japan, geographic expansion into one of the third largest health care countries in the world. This more than doubles the opportunity from a market standpoint for the company. But the beauty of our platform, it allows us to move into unpenetrated markets and define new markets for the application since we understand the basic underlying mechanism of action and how that can be translated into clinical practice. As we move out further into '26, you see we're adding other countries in the European realm to add additional revenue sources. So the combination of these 4 areas in the '26 time frame allow us to play in a much, much larger market, $4 billion-plus. This is not even considering all the efforts to develop, register and commercialize our product for knee osteoarthritis. As you all know, osteoarthritis affects approximately 17 million to 18 million people today. By the time we launch this product, there'll be over 20 million patients in just the U.S. alone that will benefit from this treatment. This will be very disruptive. It will create a new treatment modality. Many of the programs today -- or many of the modalities today have limitations. They have their place for sure. Our ability to advance knee osteoarthritis will be covered today in depth by Dr. Stein. Now Michelle Massee will cover off mechanism of action work that we've been doing for the past decade. It gives us the underlying belief that there may be the potential for a disease modification aspect of our AmnioFix injectable product, micronized dHACM. Now you may say all placentas are created equal. Mother Nature spent 150 million years working on the placenta. It provides an environment for the fetus to grow, be nutritionalized and provides basic sustained life. This demode indication would be an exceptional indication for our knee osteoarthritis product. Now in our Phase III clinical trials, certainly, we will use WOMAC pain and function as primary endpoints. But we also have to consider as a secondary endpoint, disease modification. As you can tell from the arrows here and from the demode circle, we have not tried to overly define the value of this particular indication. But we know that there are over 20 million patients. So when you think about it, the utility of the product will depend on the status of the clinical trials or the outcomes of the clinical trials. Whether the patient gets dosed twice a year or 3 times a year, the pricing certainly will play into the total potential value of this product as well if it's used bilaterally or just unilaterally. Reimbursement will also be an important aspect as we develop this product. So in line with our clinical development, our health economics group will also be establishing, if you will, the pharmacoeconomic unique proposition. So the unique value proposition of MiMedx today and for tomorrow, its ability to execute on our placental platform technology. That execution is going to have to be driven by our R&D organization, our manufacturing team as well as our commercial organization. In effect, MiMedx has 2 pipelines. One pipeline focuses on the drug side of our business, the musculoskeletal indications. And we're in a strong capital position to develop our knee OA product. The second portfolio of importance is our ability to drive our vitality index through our product development team. The product development team, along with medical affairs, their sole objective is to bring new products to the market to every year for the sustainable future. This will support Rohit's growth in the commercial business and also allows us to expand the indications or applications of our products in the surgical recovery area as well as advanced wound care. Underlying all this will be researchers' continued pursuit of understanding the mechanism of action and be able to use that in translational research to make it practical in a clinical setting. From an operations standpoint, our ability to optimize the quality of our product, to improve our processes and scale for the future can be absolutely critical. On the commercial side, achieving double-digit sustainable growth is our objective. We can do that in a number of ways, which Rohit will highlight for you later on in the presentation. I'm very excited about moving into Japan, a very large market for us, while first-mover advantage there with outstanding labeling. And again, we're in a strong capital position to execute on these programs. Now today, just a quick rundown for you, what you expect to see. In the knee OA program, as you know, we had this profound result in the 190 patients. We lost a signal in the 256 patients. Dr. Stein will go through that in depth for you. The root cause analysis yielded there was a potency issue where the product hasn't aged, lost its potency over time. We'll go through that in depth with you. The good thing about this is the significant learnings that we've accrued from this and we know exactly where to go to correct that problem. We anticipate initiating our Phase III trials in the '22 time frame after extensive review with the FDA, when this would -- we anticipate filing a BLA application in late '25. From a cost standpoint, capital standpoint, an investment standpoint, these trials are going to cost us about $15 million per trial per year over the next 3 years. We're in a good position to be able to fund that. Now on the commercial side, we've demonstrated solid execution in our commercial business, supported by our medical education efforts by our medical affairs team. And in 2021, we anticipate sales growth to be 13% to 15%. The growth drivers here are geographic expansion, expansion into the market we're already in and organic development led by Dr. Harper's team, which he'll be discussing later on today in Rohit's commercial presentation. There's no substitute for sales execution. We built a marvelous sales and sales management team here over the last 2 years, and we're prepared for sustainable double-digit growth. With that as just a quick synopsis. I'd like to introduce Dr. Robert Stein. Dr. Stein joined us in August of 2020. Bob is an MB PhD. He received his training at Duke in anatomic and clinical pathology and is PhD in physiology and pharmacology. Bob brings to us 40 years of drug development experience across many therapeutic areas in many companies, both small biotech companies and large pharma companies. It's a real pleasure to have Bob on the team leading our effort in R&D. With that, I'd like to introduce Dr. Bob Stein.

Thank you, Tim. Good morning. Today, we're going to take a deeper dive into our results in the knee OA trial that we announced in September, and I look forward to introducing you to what we've learned. I'd like to start by pointing out that we have a very clear positive signal in that trial in the first 190 patients tested. We have both a clinically significant improvement in their condition and a statistically significant difference between the placebo and the active product in the first 190 patients. Now as Tim pointed out, there were puzzling results in that the next 256 patients studied, the difference between the saline arm and the micronized dHACM diminished or reduced. And we've defined over the last 2 months since that announcement the basis for that change between the first 190 patients and the next 256 patients. And we've demonstrated, to our satisfaction, that the problem is that the material that was injected, as it ages, becomes less potent. I'll show you some of the data that support that conclusion. We know how to fix this going forward and we will go forward. We plan to do 2 registrational Phase III trials beginning next year with the fixes in place. And we will still file a BLA in 2025 according to our plans in the latter part of the year. The other part of the results lets us have greater insight and makes our probability of success much greater than it would have been had we not learned these lessons in the Phase IIb trial that we've already conducted. Let me -- before I dive into the results, let me just give you a little bit of background about knee osteoarthritis. You can see a normal knee here, where the upper part is the femur and the lower part is the surface of the tibia. The cartilage forms a nice surface in-between those 2 bones that can both absorb shock and allow smooth motion. And if you look, that's caused by the structure of cartilage. There's a very specialized cell type called a chondrocyte, which elaborates matrix. And that matrix is able to retain water and have the load-bearing properties that allow your joint to function well. However, when you undergo trauma or inflammation, that cartilage surface can deteriorate as shown on the right-hand side. And this causes pain and irregular, friction-based motion that can further injure the joint. There are secondary changes in the bone that can result from that. And I myself spent about 5 years on that right-hand side before having both of my knees replaced in 2016 based on long life of running too much in worn-out shoes. But I wish I had, had our product in order to get me through that 5 years before I had my knees replaced. And I'll try to share with you some of why I wish I had that opportunity at the time that I was experiencing some of the symptoms and signs that we're going to talk about. First, let me tell you how the severity of knee osteoarthritis is measured because if you want to try to understand whether a person needs a joint replacement or understand the severity of the disease or understand whether a drug intervention is having a benefit, you need some way to quantify the severity of the disease. We use and the FDA favors an index called the WOMAC Index. This was developed by Western Ontario McMaster University, and it has 24 questions. 5 of them ask the patient about the severity of pain that they're enduring. 17 of them are about function and 2 of them are about joint stiffness. The FDA is most focused on the pain and function aspects. Each of these questions can be answered with a score between 0, which means no problem, and 4, which means severe. And so the WOMAC total can go from 0 to 96. 0 on the WOMAC is no problem, 96 is severe. WOMAC pain can go from 0 to 20 and WOMAC function can go from 0 to 68. So higher scores here represent more pain and less function. Our product that we've tested in this setting is called micronized dehydrated Human Amnion and Chorion Membrane or micronized dHACM. It's also been commercialized as AmnioFix injectable. We take the amniotic membrane, not the disc from the placenta, which is amnion and chorion. We have a special process called the PURION process that's proprietary. And this process, which you'll hear more about from Michelle Massee later is designed to preserve the important beneficial characteristics of the placental tissue and make it into a safe and effective and well-tolerated drug product. We then grind that material up into very tiny particles, which are about the size of 10 red cells next to each other. And that can be suspended in saline and injected through small-gauge needles. And that's what we've done in this setting. We inject the material into the joint space of the patient as much as you saw in the video that preceded my speech. One of the reasons that I got convinced that this product had potential was based on a study done by Dr. Kris Alden. It's a retrospective study, and we're very fortunate to have Dr. Alden with us here today, and we'll hear from him later in the talk. Dr. Alden studied 82 patients and 100 knees in those patients. And he injected them with our micronized material. And then he measured over the next 6 months shown on the X-axis, their function and pain levels in related index to the WOMAC called KOOS. The difference here is a low score is bad and a high score in the KOOS is good, whereas it's opposite in the WOMAC. But as you can see in these lines, patients had improved pain, better functions, better activity of daily life, better ability to perform sports activities. And Dr. Alden will be talking about some of his experience with our product later today. So let me tell you about our Phase IIb trial. This was begun in August of 2018. We studied 446 patients, which is a pretty large Phase IIb trial. They were randomized 1:1 to receive either 40 milligrams of micronized dHACM into the joint by injection, 1 injection or saline into the joint. We then measured their WOMAC at the baseline at 1, 2, 3 and 6 months in a blinded period. And the FDA had requested that we continue that for 6 months in an open-label format to test the safety and tolerability of the product. We did have a planned interim analysis after the first 190 patients. And when I talk about the 190 patients where we had a positive signal, that's after the complete 6 months observation. We enrolled the last patient in October of 2020, just a month after I joined. And we've been through now everybody in the study has been observed for the full 12 months. We're analyzing the data at the end of 12 months. But we announced the 6-month blinded data in September of this year. Now the results were both encouraging and puzzling. What I want to show you now is more detail about what we saw. In the upper left-hand panel, we're looking at the total WOMAC score. So this is on the 0 to 96 scale. And in this graph, what you're seeing on the Y-axis is the WOMAC total. And on the X-axis, the 0- to 6-month results in the scores that these patients reported. Placebo or saline is shown in red, and the micronized dHACM is depicted in blue. What you can see is there's a very clear separation between the micronized dHACM and the saline in the upper left-hand panel for the 190 patients. And you see that at 3 months, there's a statistically and clinically significant difference between the saline and the micronized dHACM. The p-value is less than 0.04. And very interestingly, if you go out to 6 months, there's an even greater clinical separation with an even greater statistical power. This p-value of less than 0.01 means that there's only a 1 in 100 chance that this difference could be accounted for just on the basis of random variation between the 2 populations. So that's a very encouraging result. Now if you look in the upper right-hand panel, you have the puzzling part of it. Now the saline still shows the same type of improvement, but we no longer see any difference between the micronized dHACM and the saline. As a consequence, in the lower panel, you can see that in the total of the 446 patients, the 190 plus 256, we lose the statistical or clinical significant difference between the saline and the micronized dHACM. So this, as I said, was very encouraging in the upper right and very puzzling in the rest of it. Now if we look at WOMAC pain, the FDA wants you to show that you have something that improves not only pain but also makes people have a better ability to function. We see the same type of pattern. In the upper left, the 190 patients show a very clear improvement in their pain both at 3 months and 6 months, again, with a single injection at time 0. They have improvement at 3 months, which gets even better at 6 months. And the statistical significance is again less than 0.01. So less than 1 in 100 chance that this is random. Again, the 256, following that, lose the difference between the micronized dHACM and the saline. And the 446 as a consequence loses the statistically significant and clinically significant delta. Interestingly, in the next slide, which looks at WOMAC function, very, very similar pattern, very clear positive study in the 190 patients followed by a clear loss of the delta between the micronized dHACM and the saline in the next 256 patients for a negative overall study. So we are highly encouraged by what we see in the upper right and highly puzzled by the rest of it. So what have we done in the 2 months since we talked about these results? We've done an extensive root cause analysis to try to understand what counts for this difference between the 190 patients in which we saw a positive result and the next 256 patients in which that result fades away. We look, first of all, could this be associated with the COVID-19 pandemic because the onset of that pandemic corresponds roughly with the divide between the first 190 and the next 256. However, when we look, we can't really attribute any of the differences to that particular onset of the pandemic. There was some delay incurred in running the study because of the difficulty in enrolling patients, and that may have an indirect effect on some of what I'm going to talk about subsequently. We also asked whether there is any difference in the clinical sites because the first 190 patients were done at 11 sites and the next 256 were done mostly at a different 8 sites, although there's a little bit of overlap. But detailed analysis by site does not explain the difference. We also look to see whether there might be any difference because some of the investigators used ultrasound to help position the needle for injection into the joint and some of the sites didn't and investigators didn't. But we couldn't attribute the differences to that variable either. Then we looked at patient demographics. So we asked whether the patients were different in their age distributions, whether they're different in their sex distributions or whether they're different in the severity of their knee osteoarthritis. And none of those things could account for the differences that we saw. And at the end of the day, we were given a hint by the fact that the saline results didn't change, but the micronized dHACM results did. And we looked at changes in the micronized dHACM that we were using to inject these patients. And this turns out to be the answer to what was the difference. The potency of the investigational product faded as it aged. And the material we used was made before the start of the study. So this is an example of the WOMAC total, looking at what you get as the product ages. On the Y-axis is the WOMAC total. On the X-axis is the result clinically for the 6 months of blinded observation. The red line you're seeing is the saline result. And this is the result with the micronized dHACM when the product was under 1 year old when it was injected into the patient. You can see the nice separation that we saw in the 190 patients. However, when you look at product that's 12 to 18 months old, you start to see a diminished difference; 18 to 24 months, even less difference. And at 24 to 30 -- or 30 to 36 months, you see that the difference is obliterated. And so this is a very clear indication that as the product ages, it loses its efficacy in the context of our clinical study. Now it turns out that when we look retrospectively at the stability of the product in those ages, we have 2 biochemical assays and a cell biology-based assay that we utilize to characterize the product. And this shows the 3-year stability of the product. The potency is on the Y-axis and the 3-year time course of measuring this potency is on the X-axis. You can see a clear diminished potency of the product as the product ages. Our biochemical assay show similar data. And this helps us understand what happened between the 190 positive and the 256 negative. So what have we learned about this micronized dHACM in knee OA? First of all, the micronized dHACM works to reduce pain and improved function in knee OA. Our study shows that it does that in mild to moderate osteoarthritis of the knee. Dr. Alden's study actually shows that it also works in moderate to severe knee osteoarthritis, and he can talk more about his own observations. We also learned that the product loses its potency. The investigational products potency reduces as it ages from the time of manufacture and that our proprietary biochemical and biological tests can detect this reduction in potency. And the best news is that we know from what we've learned how to fix this and it is fixable. So what else have we learned? In parallel with the work that we've been doing clinically, our research team has been trying to understand the mechanism of action of the micronized dHACM. And you'll hear more about that from Michelle Massee, who's participated in a lot of those studies. But we've learned some very important things. We've learned that micronized dHACM modulates cell function in a way that's central to maintaining healthy cartilage. Michelle will talk to you about the ability of the micronized dHACM to modulate the signaling of a pathway called the Wnt pathway, which has been demonstrated to be crucial to maintaining healthy cartilage and chondrocytes. We've also learned that it has components which interfere with NF-kappaB signaling, which is involved in many inflammatory reactions. And we've also studied it and learned that it has the ability to inhibit transforming growth factor beta signaling and transforming growth factor betas involved in driving many fibrotic processes. And these preclinical results and some of the anecdotal clinical information has raised the possibility that micronized dHACM may act as a disease-modifying osteoarthritis drug or a demode. It was a big advance when people learned that TNF-directed antibodies acted as DMARD or disease-modifying rheumatoid arthritis drugs that made a huge difference. It's not just treating signs and symptoms, but actually changing the course of the disease. And in this case, we'd be talking about either reducing the rate at which cartilage is destroyed or even allowing the build back of some cartilage. And you'll hear more from Michelle about why we think this may be a possibility for our agent. What's next for micronized dHACM in knee osteoarthritis? We will conduct 2 registrational Phase III trials of micronized dHACM in knee osteoarthritis beginning next year. Each of these will involve about 400 to 500 patients. The total cost spent over 3 years for each of these studies is about $15 million. We do intend to file a BLA in the second half of 2025. And we will use WOMAC pain and WOMAC function, the FDA's preferred co-primary end points. We'll also assess the ability of micronized dHACM to modify the progression of osteoarthritis as a secondary endpoint. And from the Phase IIb results that I've described, we've seen that we have an active agent. And we've also increased our chances of being successful going forward because we've discovered a possible pitfall that we will be able to avoid in the design and conduct of our future studies. So what are some of the things we've learned? From the retrospective evidence that Dr. Alden has generated and also Dr. Gellhorn, who is the principal investigator in our study, there is very good evidence that our product helps in people with mild to severe knee osteoarthritis. We've got the very clear positive signal from our own Phase IIb trial in the first 190 patients. We have the fact that micronized dHACM has been distributed to -- over 138,000 vials of this have been used clinically based on the fact that it was available before the end of enforcement discretion. And we have exciting insights into the mechanism of action that raised the possibility that not only can we treat pain and improve function but that we might be able to modify the course of the disease to delay or even obviate the need for knee replacements in some patients. Thank you.

Thank you, Bob. Very impressive forensic analysis of what happened in our knee OA trial. I'm very convinced now that we're in a position where we've actually given what we've learned about this where we've actually improved the probability of technical and regulatory success leading to commercialization. I'm pleased to announce the next speaker is Michelle Massee. I first met Michelle 2.5 years ago with her research team and product development team at MiMedx. She was a tour de force then. She has over 15 publications along with their colleagues in research and product development and is our -- really our champion at understanding the underlying mechanism of action of our micronized dHACM product. So Michelle? Thank you.

Thank you, Tim. With this next segment, I'm going to be presenting a collection of data, which summarizes our current understanding of the science behind placental-based tissues. And with this data, we are pursuing a biologics license for knee osteoarthritis. As Dr. Stein alluded to earlier, we are proposing disease-modifying activity or the potential for disease-modifying activity by micronized dHACM in the treatment of knee OA through the regulation of 2 key pathways, NF-kappaB and Wnt beta-catenin. But before we get into mechanism of action, I want to set the stage with how we developed this hypothesis. The efficacy of our products is founded in the intrinsic properties of amniotic tissue in utero. The amniotic sac is comprised of the amnion and chorion membrane. It envelops the developing fetus over the course of gestation. And while this is a very dynamic tissue, probably the most unique and invaluable property is that it's considered to be immunologically privileged. So what does that mean? You can take tissue from a donor, transplant it into a recipient without the risk of rejection. Whereas with other tissues, they require harsh cleansing processes which strip away those antigenic components, ultimately what's responsible for the rejection response. Along with that, you're also stripping away all of the biologically active components from that tissue. Now that's not the case with amniotic tissue. All this required is a gentle cleansing process. And then we're able to lock in all of the inherent biologically active components to that tissue, making it the ideal starting material. Our proprietary PURION process is unique to MiMedx. And it was developed with the specific intent of retaining amniotic tissue in its most natural state. And that's exactly what we've done. So you can see from the histological sections below the amnion and chorion layers independently and then also the final configuration of dHACM, which is an amnion/chorion bilayer product. To date, we've detected over 300 regulatory proteins retained within our tissue. Again, this is directly attributable to the PURION process. We've taken those factors and we've categorized them into 5 key classes of regulatory proteins: inflammatory cytokines, inflammatory chemokines, matrix metalloproteinases, MMPs, inhibitors of those MMPs, protease inhibitors and tissue growth factors. When you recognize that this tissue supported the growth and development of a healthy baby, the ideal ratio of all of these factors is already built into this tissue. When you take a look at the relative proportions of these 5 key classes, now it makes sense as to why the biggest pieces of the pie are protease inhibitors and tissue growth factors. So I think tissue growth factors are likely self-explanatory in terms of their functionality. But I want to go into a little bit more detail on protease inhibitors. These are the inhibitors of enzymes responsible for the degradation or breakdown of the extracellular matrix. If we put this in the context of chronic wounds, elevated levels of these proteases are responsible for keeping that wound bed open, making that wound more susceptible to infection and ultimately leading to the chronicity of those wounds. Now if we put it in perspective of osteoarthritis, these -- or elevated levels of these enzymes are responsible for the breakdown degradation of the articular cartilage. That leads to that rough and uneven surface ultimately resulting in pain and loss of function we see with OA. So just to reiterate, we contain the highest proportions of tissue growth factors and inhibitors of these proteases. Now this -- the activity of proteases is going to be important when we later talk about disease-modifying activity. So keep that in mind. The next question was whether or not our product, dHACM, was retaining biological activity. We've definitely identified these proteins within the tissue. But after undergoing the PURION process, have they in some way been denatured? So to answer that question, we treated a variety of cells with dHACM. And we were able to demonstrate migration, proliferation and biosynthesis, biosynthesis meaning changes in protein secretion. This demonstrated that dHACM indeed retains biological activity or potency of this tissue through the PURION process. And then when you take a look at the cell types we tested, you see that they're integral to the healing cascade or soft tissue regeneration. So this very nicely supports our core wound care business. But it also begs the question, what other cell types, what other tissues, what other indications could benefit from this product. So this summarizes the data we've amassed up until this point. And this time line depicts an evolution of our understanding and also illustrates our dedication to publishing our findings in peer-reviewed journals. As we reviewed earlier, our early work focused on characterization, compositional analysis, what's in the tissue, basic biological activity, what can this tissue do. From there, we've been able to take a very targeted approach to expanding into new indications. And that's exactly what we've done with knee osteoarthritis. However, the application into knee osteoarthritis necessitated a change in form, but not function of the tissue. A micronized variation of this tissue of dHACM, a sheet product, has allowed us to inject it into a joint space. So an early study confirmed our hypothesis, demonstrating the benefit of micronized dHACM in the treatment of knee OA. In this animal model, we induced osteoarthritis through a medial meniscal transaction procedure. In this rat joint, we destabilized the medial meniscus, and that's the MMT procedure. 24 hours after surgery, we injected the joints of the rat with either micronized dHACM or a saline control treatment group. 3 weeks later, we imaged these joint spaces or these joints and we assessed them for onset of the disease and disease severity. What you see on the left is the saline control joint. The articular cartilage, which is that red band, is demonstrating severe symptoms of osteoarthritis. You see a significant number of erosions and lesions creating that rough and uneven surface. Now compare that to the micronized dHACM-treated group. The articular cartilage, again, that's the red band, is perfectly smooth. There are fewer erosions, no lesions, basically preserving that articular cartilage. This means that micronized dHACM is capable of regulating the molecular processes involved in disease progression. But identifying that underlying mechanism was unknown. So that was the premise for our next series of experiments. We mined that milieu of 300-plus regulatory proteins in dHACM or micronized dHACM. And what we identified, what we detected were inhibitors of the Wnt signaling pathway. This prompted us to look at the Wnt signaling pathway a little bit further, better understand the role of micronized dHACM in treating that pathway and the role of Wnt signaling in osteoarthritis. Wnt signaling is a critical pathway that is well controlled in order to maintain normal cell function. However, in the cartoon on the left, you see whenever the path is inactive or off, the Wnt signal is absent. There's a destruction complex within the cytoplasm, and it degrades a key transcription factor beta-catenin. And the pathway goes no further. Now compare that to the right-hand cartoon. The pathway is turned on or it's active, the Wnt signal is present. The destruction complex is inactivated and allows beta-catenin to accumulate. Beta-catenin is then translocated into the nucleus and induces downstream gene expression and protein secretion. Balancing this pathway is essential for homeostasis, balancing the off and on. When it tips in favor of on, that hyperactivity has been associated with disease progression, including osteoarthritis. This was also a particularly interesting target for us because as many of you may know, Wnt modulators, small molecule Wnt modulators have been the subject of previous disease-modifying therapeutics. So we wanted to investigate this further. We isolated the Wnt signaling pathway, and we're able to demonstrate modulation, down regulation of Wnt signaling. We took it a step further, and we turned on Wnt signaling in synoviocytes, the primary cell type of the synovium or the lining of that joint space, and also chondrocytes, the only cell type of the articular cartilage. With that pathway turned on, with Wnt turned on in both of those cell types, we then treated it with micronized dHACM. And we were again able to show modulation of Wnt signaling. There's an important distinction between these 2 systems we just discussed. In the second one, this is a challenged system. The Wnt signal was already turned on, it was hyperactive. And then we treated with micronized dHACM. This most closely replicates what's happening in a clinical setting. So these were very promising results. It's one thing to speak to the activity of our product, but it's another to see how cells are responding firsthand. And so that's what we're showing you in these images. These are synoviocytes in culture. And a hallmark of Wnt signaling is the accumulation of beta-catenin within the nucleus of these cells. That's what you're seeing on the left-hand side, the hyperactivity of Wnt signaling. You see that concentration of green dye within the nucleus of the synoviocytes. We've taken those same cells, and then we've treated them subsequently with micronized dHACM. That's the image you see on the right-hand side. What you notice is a complete disappearance of that beta-catenin concentration from the nucleus. That is confirming the results we saw in our in-vitro studies that we are indeed down regulating, modulating Wnt signaling. One more thing to point out. I had mentioned previously about small-molecule Wnt regulators and how they've been the subject of potential disease-modifying therapeutics, but they've been largely unsuccessful. So how does our product differ? Well, as we all know, osteoarthritis is multifactorial. And these small-molecule Wnt inhibitors are targeting that one specific pathway. Now micronized dHACM contains over 300 regulatory proteins. So we are targeting multiple aspects of this disease in order to be successful. One such pathway -- another such pathway that's regulated by micronized dHACM and recently uncovered through our scientific research at MiMedx is NF-kappaB. This is, again, a fundamental mediator of normal cell activity. And taking a balanced approach to managing this pathway is critical. This regulation, again, is going to lead and be associated with disease processes, including osteoarthritis. Similar to our approach with Wnt signaling, we turned on NF-kappaB. And then we were able to demonstrate inhibition at multiple points along that signaling cascade. Specifically in chondrocytes when we turned on NF-kappaB and then we treated with micronized dHACM, we found very interesting results, regulation of proteases that are involved in osteoarthritis. We demonstrated micronized dHACM can down regulate MMT -- MMP 13 activity and also aggrecanase. So let's circle back to the animal model I showed earlier, previously presented. We saw on the left-hand side, with the onset of osteoarthritis, significant degradation of that articular cartilage. That's likely attributable to an elevated level of these MMPs and these proteases. Now on the right-hand side, you see the micronized dHACM-treated joint. That articular cartilage is very smooth. Again, likely that is due to down regulation of NF-kappaB signaling by micronized dHACM. So today, we've walked through the basic characterization of our tissue. An early animal study that confirmed our hypothesis, that we have the potential for disease-modifying activity. And then through the identification of 2 key pathways involved in OA, Wnt beta-catenin and NF-kappaB. Based upon everything we've discussed today, you see that this product is not just a mask for pain. It's a method to harness the power of the amniotic tissue in order to regulate disease processes. Thank you. Tim?

Thank you, Michelle. When I first met the research team at MiMedx, after about 3 hours of going through their data and meeting the individuals responsible for research and development, they asked me, "Well, what do you want us to do?" I said very simply, "I want you to seek the truth around these multimodal sets of mechanisms." I have this idea that we can create a new biological class of drugs called placental biologics. I don't know if Michelle remembers that conversation or not, but these findings today represent an advance in our thinking and understanding of placental science. And we intend to use this to reshape ideas around regenerative medicine. I'm pleased to introduce our first key opinion leader. Dr. Strand is an adjunct clinical professor at the Division of Immunology and Rheumatology at Stanford School of Medicine. Since 1991, she has led a consulting practice offering pharmaceutical and biotech companies her expertise in clinical research and regulatory strategies. She has participated in the successful development of disease-modifying drugs, JAK inhibitors and rheumatoid arthritis, psoriatic arthritis and many other areas such as vasculitis and symptomatic therapies in osteoarthritis. She was previously a clinical investigator in a subspecialty practice in San Francisco for 6 years and a Senior Director of Clinical Research at 3 pharmaceutical biotech companies for over 6 years. What's amazing, in her spare time, she was able to author over 475 publications. She is a Fellow of American College of Physicians, Master of American College of Rheumatology and a member of the Cosmos Club. I've been trying to get into that club for several years. I doubt I'll make it, but she did. She has been a member of the Executive Committee of the International Outcomes in Rheumatology, Clinical Trials, Consensus Conferences since its inception, since 1992. With that, I'd like to introduce Dr. Strand.

Thank you very much. It's good to be here. And I wanted to just review briefly some of the information that you've already seen that makes me enthusiastic about the possibilities for this product. Next slide. So essentially, what we know is that the last patients completed this Phase IIb trial in October and the data was prepared for analysis since then. And the top line interim results which were performed several years before had demonstrated good efficacy signals in the first 190 patients, who were accrued before the interim analysis, but the subsequent 256 patients did not show this efficacy signal. And we had to understand this because it's an unusual finding in a trial and because there was clear evidence of positive efficacy in the first 190 patients. Further, the trial demonstrated excellent safety with no significant adverse events or serious adverse events that reflected use of micronized dHACM. So as you see below, the pre-interim analysis cohort of 190 demonstrated highly statistically significant improvements in WOMAC pain, p equals 0.0092 and function where p equaled 0.0093. Those are very excellent results in an OA trial. But you notice that in the post-interim analysis cohort of 256 and in the total trial, we don't see significant results. Next slide. So this is just to show you again the WOMAC pain scores that Dr. Stein showed you. These are different because they come directly from the data sets from the trial. And on the left is 190 patients, the pre-interim analysis cohort. You've seen nice differentiation between active in blue and placebo or saline in red. In the next box, over to the right, we see that, that differentiation is lost in the subsequent 256 patients. And that leads us to the bottom box, where we can see overall there is not a significant difference in the total trial population. Next slide. And this is a similar picture with WOMAC physical function, again, highly statistically significant results in the first 190 patients, which is not reflected in the subsequent cohort or the total trial. Next, so now these are the WOMAC total scores according to the product age. It's a rather dramatic demonstration of nice differentiation when the product is between 6 and 12 months of age, which is lost when the product becomes older than 12 and up to 18 months. And similar pictures of loss of differentiation or even better performance by the saline as a product ages, especially out to more than 30 -- up to 36 months. Next slide. So in summary, although the overall study didn't demonstrate separation of mdHACM from placebo or saline, the efficacy signal in the 190-patient interim analysis cohort was consistent with previously published studies and very encouraging. There's been a lot of learnings from the research and manufacturing advancements that have occurred and you've heard about some of them. And I fully believe that the clinical data we see from this trial will inform the design of future trials as 2 Phase IIb trials are planned. The team has fully evaluated these results. I think they have a good plan to move forward, as I said, 2 pivotal Phase III trials using WOMAC pain and WOMAC physical function as advised by FDA. And we know that patient selection will be important to know that they have moderate to severe osteoarthritis, but are not yet candidates for knee replacement. So MiMedx has learned much from this trial. And I think they will further refine the final product characterization. And we should be optimistic that we will see positive results from future trials with this product. Thank you.

Thank you, Dr. Strand. I think it's absolutely imperative that we get the perspective from a person with so many years of experience in conducting clinical trials and research particularly in osteoarthritic conditions. Now I'd like to introduce a precursor to our Q&A panel. Dr. Thomas Mick. Dr. Mick is a Board-certified sports medicine physician. He's also board-certified in psychiatry. One thing of note, he was on the U.S. Olympic team -- medical team this last Olympics, gained a lot of experience there. He's also had 20 years of academic experience and clinical practice particularly in the area of sports medicine. He's currently our Head of Medical Development, one of our medical directors. It's a real pleasure to introduce Dr. Kris Alden. You saw him in the video before. Dr. Alden is an orthopedic surgeon. He focuses on hip, knee, shoulder and reconstruction at Hinsdale Orthopaedic Associates in Chicago. Dr. Alden is a leader in the field of joint replacement and is active in orthopedic education and research. It's with real pleasure that I introduce both of these gentlemen along with Dr. Strand to lead up our Q&A panel. Thank you.

Thank you, Tim. Dr. Strand, thank you for that cogent and clear analysis of our Phase IIb data. Can you tell us what this means for mdHACM going forward?

Well, I think it means that we have good data to inform how to design the Phase III trials. We have data to suggest the adequate sample sizes so we can get statistically significant results. We also have some important data that will help us select the appropriate patient population. We want a responsive patient population and one that will be able to, shall we say, report benefit if it's offered by the therapy.

So Dr. Alden, I'm going to ask you the same question. But before I do that, we heard some very positive patient stories at the start of the program, a nice response to mdHACM. And also, you had a very positive results from your restricted [ case ] series. Can you speak to the performance of mdHACM in your patient population and also in your case series?

Sure. I was extremely excited to see the outcomes in the over 100 patients. But in addition to that, I also had a large subset of patients that weren't included in the study. And I was just very pleased with the patient satisfaction, the reduction in pain, the return to function and the overall activity levels that were significantly enhanced in a huge number of patients that I saw in my practice who underwent amniotic injections for the treatment of symptomatic knee OA. And the majority of the patients that I saw, by the time they get to me, they're already basically bone on bone. So they have -- a lot of them had exhausted a lot of the nonsurgical modalities that are currently available.

And so how do you see the Phase IIb trial illustrating what can be possible for mdHACM in the future?

I mean I know it was probably disappointing to not have statistically significant benefit in the 450 patients. But I also think the silver lining is that we're able to understand the properties of the material a little better, specifically shelf life or storage and things like that. So overall, I'm hopeful that a larger study with more available product will significantly show a difference.

Right. So another thing I wanted to bring up is the concept of a treatment gap. A lot of patients who would benefit from mdHACM live in what we call the treatment gap for knee osteoarthritis. So the treatment gap is those patients who failed typical conservative measures for knee arthritis but who aren't yet ready for a knee replacement or who -- for medical or personal choice reasons. Can you describe what's done for those patients who are in that treatment gap? What's done to improve their function and quality of life?

It's kind of a frustrating place to be, not just as a patient, but as a physician. So I think it's incumbent upon physicians now, orthopedic surgeons, particularly hip and knee specialists, to more closely risk-stratify patients. And I think previously, we hadn't done such a great job of doing that. Over the last 5 years, that has become a more mainstream concept to more closely monitor patients, particularly with the impact of bundled payments and Medicare systems such as BPCI. So we've now more closely risk-stratified patients. And obviously, there's significant interest in extending the lifespan of patients' native joints. So we're -- there's just -- unfortunately, there's just not a lot of great options, particularly injection options that are available. Our academy came out with a consensus statement saying that viscosupplementation probably is not a significant benefit yet. I still offer it because we don't have a lot of great options available for patients that are in that area where they can't have surgery for medical reasons or personal reasons or family reasons. So we're still looking for options available that we can offer to patients.

And Dr. Strand, you treat these patients as well. Can you talk about the treatment of the patient who lives in that treatment gap?

Yes. That treatment gap is exactly what we rheumatologists see in terms of patients with active and moderate to severe osteoarthritis. And we have intraocular injections such as glucocorticoids. Typically, they offer about a month of relief, but we don't give more than 3 or 4 injections in a year. There's also the intra-articular hyaluronic acid products that Dr. Alden just mentioned. But they're controversial. Some patients like them. Many patients don't find any relief from them. And so we are left with symptomatic benefits that are generally not adequate, nonsteroidals, of course, and even unfortunately, pain meds. And these patients have a major need, and we don't really have an adequate therapy yet. It shouldn't have to be a knee replacement as soon as patients are being limited by their -- in their physical activities because we can relieve symptoms such that they can go back to many of those activities, especially with a good exercise regimen. And it wouldn't be appropriate yet to advise everyone to go straight to a knee replacement. So this is a large population with a very important unmet need.

Yes. I was going to just ask you that. Is this a rare patient? Or is this fairly common? How do you assess that?

Well, we treat a lot of different arthritides. So -- but in the context of the OA patients that we see, which are many of our patients, this is the typical patient, a patient that is limited, but still has function and could probably continue for several more years before even considering a knee replacement.

Dr. Alden, the same question for you. Is this a common patient, a rare patient? What would you say?

I would say, extraordinarily common. So that's a vast majority of the patients that I see. By the time they get to me, they've already been told by their primary care doctor that they should consider knee arthroplasty. And I think it's just -- we don't have a lot of great options to offer those patients. 15 years ago, during my residency, we used to do diagnostic arthroscopy on those patients. We used to do arthroscopic washouts, debridements, those types of things. But obviously, we don't do any of that anymore. And so it's come down to, basically as Dr. Strand mentioned, nonsteroidal pain medicines, steroid injections, viscosupplementation as well as any other -- some other biological applications, but we're quite limited at this point.

Yes. So I myself am new to industry, but I've been treating patients with knee arthritis for 20 years. And one comment that both Dr. Alden and Dr. Strand have made is that there are not a lot of great options. It reminds me of William Osler. William Osler is the Father of American Medicine, one of the greatest physicians. And his comment about knee osteoarthritis was, when I see a patient with knee osteoarthritis coming into my office in the front door, I look for the back door. What he meant to say is that there's so little to do -- there was so little to do in his era. He didn't have joint replacements. But many patients don't want a joint replacement. Thank God, there are joint replacements, but it's not the first choice of a lot of patients, and it's a little bit early in the game for a lot of them, too. A product like mdHACM is godsend to this large group of patients. Could you speak to the difficulty of living with knee arthritis when you live in that treatment gap? Is it -- could you characterize it? Is it a small impact on the person's life? Is it a major one? What would you say?

Well, in general, I mean, hip and knee arthroplasty has revolutionized patients' ability to be mobile. It's enhanced quality of life, reduced pain scores and given people function back. So there's no question it's a wonderful procedure. But obviously, it's an invasive surgical procedure. And we know that patients who are delaying that intervention are going to be less mobile. They're going to have poor control of their diabetes or cardiovascular disease. They're going to be more inactive, prone to weight gain. So it's -- and then that becomes sort of a vicious cycle. So they live in this bubble where they're being encouraged to be mobile, but they end up being less active. They gain weight. They become less mobile. And it just sort of -- unfortunately it's sort of a spiral where the problem sort of feeds itself. It's just been -- it can be frustrating for the patient because a lot of them, obviously, would prefer not to take time off from work or family to have an invasive procedure. As good as joint replacements are, obviously, it's still a surgical intervention and there's an element of risk associated with it.

Especially for the patient with a physically active job, a construction worker, anybody who makes their living with their body, it becomes almost impossible to work. So Dr. Strand, could you comment on the difficulty of living with arthritis when it's not yet time for the joint replacement?

Well, I think it is as it's been described. You're really not able to do your job if you have a physical job. And even if you are sort of desk-based, you still can't do those activities that give you fun and enjoyment. And it's clearly associated also with weight gain because if your activity levels go down, it's very easy for the weight to go up, which just starts this vicious cycle. Furthermore, patients who are on pain and pain most of the time are not happy people. And they're not fun to live with, and they're not having a good life either. So I think that just by virtue of being able to give symptomatic benefit that may be more long-lasting is one thing. By giving symptomatic benefit that has the possibility of, shall we say, delaying the time to knee replacement or even possibly preventing it is a very promising idea. And I think it's something we've all been waiting for and we're hoping to find.

Right. So it's not a rare problem. And I wonder if you could comment on the trends in knee arthritis. Are they leveling off? Are they becoming greater? We hear a lot about the graying of the U.S. population. I assume that there'll be a greater need for this in 10 years than there is now.

I think the indications for knee replacement have expanded. I used to do high tibial osteotomies in residency and fellowship. We don't do those anymore. Knee replacements have become so fabulous that the age at which we're doing them now are patients that are younger and younger as well as older and older. So I've had patients in their 20s, 30s and 40s that I've had to do knee replacements on as well as patients in their 90s. So we're able to do these procedures in a wider number of patient populations. But at the same time, obviously, the 30-year-old, 40-year-old patient that's having a knee replacement is obligated to have a revision at some point in their lifetime. So we would love to delay the need for that type of intervention till someone is much older, 50s, 60s or 70s. And that speaks to that treatment gap that we're currently looking to resolve.

Right. I'm not -- obviously, not a joint placement surgeon. But the joint placement surgeons I work with always say, yes, the redos never go as well as the dos. It's not a small matter to have it revised in the future. And so those 20-year-olds who've had to get a knee replacement, they're -- ultimately, a very difficult revision is coming for them, which if you could delay the need for the first operation with mdHACM, that would be a great boon to that patient. So Dr. Strand, could you speak a little bit to the need for -- with regard to the aging of the U.S. population, will this become a more needed product over the next 10 years?

Absolutely. We see the incidence of osteoarthritis increasing. Not only that, but we also see that the age group expands so that we have younger, but also progressively older, but healthier patients who also are very active and want to remain so. So it's clearly a huge unmet need. It's also recognized by the FDA as an unmet need and a serious unmet need that needs to be addressed. So I think we've also learned from the osteoarthritis initiative, some 4,000 patients that have been studied over, I think it is now 5, 7 years in several sites, carefully that the progression of OA of the knee is highly variable. In some people, it will progress quite rapidly and they will become candidates for a knee replacement fairly quickly after onset of, shall we say, severe symptoms. But another group, more or less, takes a long time to progress, but needs relief, needs the ability to engage in their activities, social and physical. And I think that from that point of view, this need is expanding a long way. And we've got therapies that are being studied. But so far, we've only been able to offer symptomatic benefit, and that's clearly not sufficient.

Yes. So as my professors used to say, you're a prisoner of your patients. And so my experience will be different from Dr. Strand's and Dr. Alden's. But the Cleveland Clinic and Lenox Hill Hospital in New York, when I was treating these patients, when I reached the end of the rope of the typical interventions, physical therapy, cortisone, hyaluronic acid, really the only options I had at that point were water physical therapy and a rolling walker. And that is not a solution that anybody likes, but they're forced into this intervention because for one reason or another, they weren't going to do a joint replacement. No shortage of joint replacement doctors at the Cleveland Clinic or at Lenox Hill Hospital, but these individuals were not going to get a joint replacement. And I didn't have anything other than that. It's just such a common problem. And the opportunity to have an intervention like mdHACM is such a godsend for those patients that it can't be underestimated. And it's just -- in my estimation, it's just becoming more and more prevalent. And it's a large group of patients who are very limited, for whom there is little intervention from the nonsurgical side. And so with that, I'm going to pass it back to Tim and move on.

Sure. I'd like to get -- Pete, I'd like to get some questions from our investors or people attending the conference today. And we also want to thank the key opinion leaders here, very insightful. I do think the FDA does recognize the importance of this area and the ongoing research and clinical development in this area coupled with enhanced manufacturing practices in this area. That's one of the reasons we -- our product has a RMAT status that was created in March of 2018. Pete Carlson came to us in December of 2019 as our Chief Financial Officer and Executive Vice President. Pete had a 30-year career in public accounting. He is a CPA by training. He also has a broad experience with Fortune 50 companies as a Chief Accounting Officer. Pete brought a significant amount of subject matter expertise in the finance area as we work through our refiling of our financials and ultimately getting reestablished on NASDAQ. Pete, why don't you hit us with some questions?

Sure. The first one, Tim, is can we discuss the aspects of formulation or chemistry manufacturing and controls that will address the potency duration issue experienced in the post interim Phase IIb study.

Yes, that's a great question. Some of the things we're doing around formulation and all of our chemistry manufacturing controls are proprietary. I'd like for Dr. Stein to talk about our approach in general. But clearly, we know how to manage through this effort here, given what we found in our exploratory Phase II trial. And I think we're fortunate to observe this anomaly in our Phase IIb. So Bob, do you want to address the question?

Thank you, Tim. There is a number of learnings that we can build off of from the Phase IIb result. First of all, in the bigger context, we're going from Good Tissue Practice to Good Manufacturing Practice in the way we make our materials. And that will have quite a useful impact. We also have the ability to measure what's changing in our product, and that has told us how to fix it. As you pointed out, those fixes are proprietary, and we don't really want to share the specifics because of the competitive advantage, but I do feel confident that we can manage the conduct of the Phase III trials and not end up in the same difficulty that we encountered in the IIb.

Yes. Thank you.

Then a couple of related questions. One, do we plan to alter the PURION technology to improve the shelf life or release material on a just-in-time basis to maintain the efficacy at treatment?

Yes. We do not see any significant changes to our PURION process. It's a very well established process in our manufacturing and tissue engineering area. I do see that when you go from -- as Bob mentioned, Good Tissue Practices to GMP, there's a higher level of documentation that's going to be required. As you all know, the FDA not only going to be reviewing our clinical data, but they'll also be reviewing our chemistry, manufacturing and control data inside the context of a filing of a biologic license application. So we have a lot of effort. And I think we've communicated this to our investors for the last couple of years that -- how you're manufacturing these products is very important. And we are enhancing our activities around documentation control.

A follow-up question is on just the age of the material between the 2 subsets or cohorts we talked about. What was the age material in the first 190 patients versus the age of material for the second 256?

Yes. Bob has covered that off in his slides there. I'm sure you can summarize that again.

The material that was used, there was a desire to have it be as uniform as possible. It was made in 2 batches in 2017. So the first 190 patients had material that was less than 2 years from the time of its manufacturing to the time it was injected into the patients. There was a pause after the 190 before the enrollment picked up again, in part related to the onset of the pandemic. And the material that was used in the next 256 patients was substantially older. Most of it was between 2 and 3 years old. And so that, plus the addition of some patients to the study, dragged out the overall time frame. So the people in the second 256 had much older product.

Yes.

Tim, a question about getting into some of the science. What is known about the localization of micronized dHACM once injected and the joint is mobilized?

Yes. Well, clearly, that's a question for Bob or Dr. Mick or Dr. Alden. Yes.

The material is particulate, and it doesn't get taken up into the lymphatics or drained away very fast. The particles are made up of various biological macromolecules like collagen and aggrecan. And so they get broken down slowly. The growth factors and the other components in the particles leach out of them into the joint fluid and can influence local tissues. So I think that the duration of the product in the joint space is protracted and acts almost like a time release capsule of the active materials. Dr. Alden, perhaps you have some perspective?

I would say, once it's injected, I would tell patients, in general, if you don't feel an effect, it's a biologic response. It's not going to be like steroids. Steroid, you feel great when you're walking to the parking lot. But with this, there's going to be generally what I saw was more of a pain response, which is a sign that something is happening biologically. And that usually subsides within 24 hours after the injection, and then the biological response starts. So I would say that it's more of a biological cascade. And that cascade usually is fully present by at least 6 weeks if the patient is going to have a response.

And from the data we saw in the 190 patients, you can see that there is a response discernible at 3 months. And that response is greater at 6 months. So that suggests that some combination of the pharmacokinetics of the material and the consequent biological processes that Dr. Alden refers to occur over a very protracted period of timing confer benefit for a sustained period.

And I saw patients who would -- who saw a substantial benefit even up to 1 year after the injection.

As I said, we have the 6-month open-label observation. The last patient of the 446, who went through that entire 12-month period, happened in October. But we're very interested to see how long the benefit is persistent beyond the 6 months. Because what we have is at least 6 months' worth of benefit and may well be consistent with what you've seen clinically.

Tim, a follow-up actually, I think, for Dr. Alden himself, sort of sharing your experience, but the observations from those patients you studied. And ultimately, did you note a reduction in total knee replacements?

I would say there was a huge number of patients that had failed other injection options. And when the amniotic injections were available and I administered them to a large subset of patients, I saw a substantial clinical benefit, not just in terms of overall pain scores, but improvement in function. And that obviated the need not just for joint replacement or arthroplasty, but also arthroscopic procedures that obviously were not part of the overall aim of the study. But I certainly saw a large number of patients that, as I said, received benefit for up to 1 year and did not have any surgical intervention during that time.

Great.

My understanding is those were patients that you were considering for new replacement otherwise with moderate-to-severe osteoarthritis?

Correct. A majority of the patients that I saw were at that point where they were end-stage osteoarthritis. They had already been seen and evaluated by their primary care doctor. And those physicians, in general, had recommended some type of surgical intervention for them.

Thanks.

A question about the studies themselves. Or the next step, would the Phase III registrational trials be consecutive or overlapping? And when might you anticipate initial data?

Bob?

The plan is to conduct the 2 Phase III trials simultaneously or nearly simultaneously. There's not a reason to make them serial. That would drag out the time line quite a bit. And we expect that the enrollment should proceed pretty quickly as there's been described quite a number of patients in the treatment gap who would be subject to potential enrollment. We will design the study so that they're similar to the one that we've run. So there may be 6-month blinded data available in a reasonable time frame. We may do an interim analysis. Those details are still being mapped out in conjunction with Dr. Strand and the internal team.

Tim, then what is the status update of conversations with the FDA? And are they onboard with our strategy? And then to follow on to that, does the RMAT status allow for expedited time lines for BLA submission for knee?

Yes. We've had several conversations at the highest level in the FDA and with their senior folks 1 shortly after our September announcement of our -- we're very transparent, as you know, with our findings to what we knew at that time. We shared that the following day or the day after with the FDA, and they were very encouraging. They felt we were on the right path from a forensic analysis standpoint, and they look forward to reviewing the data in its completion. So they're waiting for us to come back to them, which we're scheduling those meetings now.

Okay. A question about really following on some of what was talked about by Dr. Mick with the panelist, the market size and the market opportunity. And can we characterize for that. We have not done anything to date overall?

Yes. For us right now to put a real fine pencil to it, to say that we can capture 1.5 million or 2 million patients in this large patient population of almost 20 million patients. We have a targeted package insert or a profile, a targeted package profile that we would like to design our Phase IIIs around so we can meet those -- meet that target, if you will. And again, as Michelle and Bob have both laid out is that meeting the WOMAC pain and function is 1 thing. But addressing this demode, if we have that in our product labeling, that would be just fantastic for patients and clinicians that are working with these patients. But to put a fine number on it right now, I don't think -- we've tried that. We've put a lot of effort into defining that and trying to be accurate around that. But I think needless to say, for our investors and for patients in this community. We have a patient population of 20 million patients that have -- that are unsatisfied -- there's an enormous opportunity.

Sort of a summary, I think this would be helpful for people. And some of this, I'll just state, but 1 of the questions is confirming sort of the approach on the trials. Yes, 2 knee osteoarthritis trials each about $15 million or up to $15 million. So that's $30 million total that we would look to incur over a 3-year period. So that is what we've said through this. And then a question gets to if the BLA filing for the dHACM 4, the knee isn't planned until late 2025. What step strategy is management taking to fix the product's potency and how long will it take to fix?

Well, we're well underway, and we've identified what the issue is. We're well underway with putting in place, if you will, corrective actions in there. So we're not -- it's not a process where we're delaying ourselves on that. Bob, you may have more concrete background that, but it's fair to say that we're moving quickly because we want to make sure as we move into Phase III, we definitely have this nailed down.

Yes. So I think we're making good progress. We're already working hard on implementing the solutions that we've come up with, and we will Phase IIIs next year. And as we've said, still filed BLA in 2025.

A couple of questions here. One, One about the plantar fasciitis trial, actually, do we think the age of the product affected the results of that trial?

Well, I'll let Bob comment on this. We haven't done -- we focused our efforts on really understanding the EOA given the significant unmet need of almost 20 million patients. We will conduct the same rigorous analysis in plantar fasciitis as well as the Achilles tendonitis trial. And as we've done before, we'll be transparent with our findings.

A question about whether there were any indications on the shelf life stability issue as we were marketing AmnioFix injectable, and then a subsequent question about amounts of the product and inventory and the product is there is no product in inventory, what's been fully addressed as part of the enforcement discretion. We do still make it for overseas use. So there is some manufacturing going on in the product. But again, the question on did we see any indications of the shelf life stability issue from marketing maybe even Dr. Alden's use.

Yes. Sure. I -- when you look at our pharmacovigilance database is designed to capture serious adverse events or some kind of quality issue there. We have a very, very low incidence of any kind of adverse event there. It never came up in our medical safety or through our sales representatives or medical size liaisons. So that was what was puzzling about this. It's isolated to this injectable product, our micronized dHACM product has no read on into our EpiFix flagship brand for skin substitutes. So -- but Dr. Alden, you may have some experience with that. Certainly comment.

Yes. I didn't see any significant local tissue adverse events other than paying at the site of the injection, which you generally subsided within 24 hours. And the patients who experienced severe paying that was a small number around 5%. I would say a majority of patients had mild or no pain.

I think the other part of that is that in the clinical practice, it really sits on people's shelves for 2 years. That's the first thing. The other thing to note is in our study, there was no evidence that the material became dangerous toxic or had increased side effect of an age. It merely lost its potency or had reduced potency, but there was no evidence that it became unsafe in any way, shape or form.

And I think also the patients in my study, we injected those patients over the course of probably I'm testing probably around 8 months. So the product really wasn't substantially sitting around.

A couple I'll give you together, Tim. One is, can we comment on the visual analog scale as an end point -- And I would note that the appendix of the materials that will be available later on our website does have that result from that trial. But can we comment on that as an end point, particularly for the next round of trials. And then separately, and the results of the 190 patient cohort be considered a pivotal study?

Yes. Certainly, the FDA is favoring WOMAC pain and function as primary endpoints, and they do stress the need for 2 co-primary endpoints. Bob you may want to address the out-of-favor status of VAS with our audience.

I think it's a good question. The field has evolved from the time the study was originally planned. The visual analog scale is a measure of the amount of pain experience, but it just has a look back of 24 hours. And so it's a very short type of observation window for a more chronic condition. And the field has shifted and Dr. Strand would certainly provide this input, too. to either some measure like us or preferably WOMAC at this point, especially for the older individuals. And WOMAC function are really what they're looking for. In the 190 patients that we looked at the 6-month time point -- We do see a trend towards the micronized dHACM providing a better impact on visual analog scale pain than the saline does, doesn't reach statistical significance, but there's a trend and had we had continued active micronized dHACM in the next 256 that might have pulled out to be statistically significant. But we focused on the WOMAC pain and WOMAC function because those are really the key indices that the agency cares about, and they're much better about telling you whether your patient has gotten better or not. And again, the VAS information is in our appendix.

Okay. And then the pivotal study for the $190 million.

Yes. That question has been asked before. I think it would be -- so the FDA would not probably grant us pivotal that as a pivotal trial. It doesn't say we should not that question to them. Our regulatory strategy is very consistent with what our discussions with the agency over the last couple of years. I also would say that our -- will become very important down the road. It behooves us given the clinical data results to press for an accelerated approval. And in that context, our MAT could be very valuable.

Question on dosing a little bit. How was the dose in the Phase II study determined the question or notes that most Phase II studies evaluate different dose levels to determine the best dose for Phase III. Did we do this?

Bob, do you want to take that?

That is an important question Dr. Alden study, I believe you used 100 milligrams. The study that was designed for the 2 be used 40 milligrams. This was based somewhat on anecdotal information that some of the patient experience reported by Dr. Gellhorn and others suggested that there was no really clear difference between 40 and 100. And at the time, the way it was being made, it was difficult to make enough material to do the study in -- We're going to address that. We will have to determine the most appropriate dose, and that will be part of our plan going forward.

Okay. You have a question on the -- about potency and how does that relate to the 5-year shelf life, particularly of our cheap product is this potency is impact the sheet product.

Yes. Certainly, Bob has spent a great deal of time focused on the potency relative to efficacy on both our injectable product. And also we -- it was smart for us to examine this phenomenon in our skin substitute product lines. Bob, do you want to give a short summary of that. I think that would be helpful for the audience.

Sure. The sheet products are regulated under a different set of FDA guidelines called 361 regulations. And in that setting, the products are presumed to have a 5-year shelf life. Our products are used to provide a barrier that provides an environment that enhances healing. And that barrier function is clearly maintained. The packaging for those is vacuum pact in their store dehydrated. The other aspect of it is that we know that they contain quite a number of growth factors and active protein components. Michelle spoke about some of that. And we've been able to determine that those components are there and still biologically active for sheet product that's been examined out to even 11 years old. So we are confident that the sheet products don't suffer from the same reduction in potency with aging that we encountered in the micronized product. It's also pretty clear that when you micronize something, you remarkably increase the amount of surface area to the volume, and that makes it much more susceptible to influences like oxidation and other things that can trigger reduced potency. So we're confident that what we learned about the micronized product doesn't read on to the sheet product. And it also helps explain why the company may have been a little bit slow to realize the duration of the micronized product may not be as long as the sheet product.

A question follow about the disease modification that Michelle talked about and Dr. Stein mentioned, can you imagine AmnioFix given at the onset of disease as a prophylactic measure?

That's a great question. I we got some folks here could probably be very helpful in that if you had a drug that had demonstrated disease-modifying characteristics, how would you think about using that drug on that biologic?

That would be a massive game changer. We know that steroids have been around for decades and decades, and they can be somewhat chondrolytic. So I generally use those in patients that are much older. But if there was something that could change the trajectory of the onset of symptomatic knee arthritis or at least reduce the time frame over which the disease develops, I think that would just be would just be big.

I agree. It seems to me that if you could reduce the loss of cartilage early or even restore some more normal carload surface you'd remarkably improve the load bearing and reduce the friction and the progression of the disease because some of it must be mechanical once you start having nice smooth surfaces to move over each other, you might reduce the secondary bony changes as well. And seems to me that the safety of this product would suggest that it would have great utility even employed in early stages of osteoarthritis.

It's like the Leaning Tower of pizza a little bit. Once the joint starts to produce that or valves posture, then it just it's sort of an accelerated time course over a period of months or years over which the near osteoarthritis develops and then accelerates? And then obviously, it becomes a vicious cycle where the cytokine responses and the inflammatory process just begins to pick up and then patients become more and more symptomatic.

I know myself, I got bowlegged and then you redistribute how you put the weight on the other compartment that isn't damaged -- And all of a sudden, that's starting to go and having OA and 1 knee makes you much more likely to progress in the other De because of, again, redistribution of weight bearing. So I think if you could intervene early, that would be great.

Question following up a little bit on sort of the market size and your slides had some numbers on them overall, and we can come back to that maybe in a minute. But somewhat following up, I think, on what Dr. Stein was just talking about, maybe what do people see, including Dr. Alden's perspective on the incidence of, say, bilateral application of it because we know that key factors and how big the market is, it's not how many patients, but how often they might get it? Is it twice a year or once a year? And then would they be doing it in 1 year, both.

Yes. I think we should rely initially here Dr. Alden's experience and probably Dr. Mix, you're -- I saw obviously, significant number of patients that came in to see me for their knee, hip and then shoulder as well. So I actually used it in all 3 joints. And of course, bilateral someone with no symptomatic knee arthritis is also more prone to have it in the other knee in the same or similar pattern.

Yes, they doesn't go one-to-one, but it's more likely than not. If you've got new others and 1 you'll have it in the other.

Yes, certainly in the literature that bears that out. And I think it also goes back to this question of prophylaxis. If for treating 1 knee, 2 should you be treating the other knee as a prophylactic measure. And we would have to bear that out in the clinic in a controlled trial. But the beauty of this biologic is it has a fantastic safety profile. And we have a lot of retrospective data some of yours, some of Dr. Gellhorn, but the amount of experiential use with this product over the past 8 years has been substantial. It's -- So everything leans towards safe and effective drug therapy here, how that gets used on a daily basis, I think will drive the market potential of this. If you're dosing 2 knees, depending on your pricing, the dosage and administration schedule, we will break that out in our Phase II or Phase III. Are we going to be dosing twice a year or 3 times a year? And does it make a difference in the dosing regimen based on the severity of the disease.

Okay? Additional comments, Bob?

I do want to say 1 thing about that. What usually prevents the early intervention with the drug is either safety issues or pricing issues. And this is extremely safe, first of all, based not only on our smaller clinical studies, but based on the very large amount of use that has been experienced before the end of enforcement discretion. And the pricing of this is not like $100,000 a year for a biologic that might otherwise make you reluctant to use it early on. And it's very clear that if you have 1 bad knee, it accelerates the progression in the other because of shift in weight bearing. That's even 1 of the clinical trial settings. You pick overweight people with 1 bad knee, and you know that they're going to have progression in the other knee more rapidly and you track that need. So I think that there would be -- if we have the disease-modifying activity, which we are optimistic about, not proven, but optimistic, I think it would be very interesting to look at how it would impact patients if applied earlier.

Tim, a question I think, might be for Michelle. You talked about a strong scientific foundation. The questioner wonders what else we might be looking to learn and where can that take us?

Sure. Well, certainly, Michelle would have some insight on that question.

Well, I think as I mentioned, osteoarthritis is multifactorial. And so we're not aiming to target 1 single pathway. We're not just looking at wind signaling. So we looked at end of -- There are also significant number of other pathways that are involved in those same disease processes. And so as of right now, we're looking at those. We're investigating those further. In the lab currently, we're also working on explant studies and developing additional animal models to further understand the mechanism of action.

Yes. Again, I think this mechanism of action research is very important, but the utility and versatility of micronized dHACM, I think it's been demonstrated retrospective. And we have to do this in clinical trials, too, but there's no reason why we can't expand the therapeutic indications for this into hip and also with your experience and shoulder partial label tears, I think, could be very beneficial in these patient populations as well. So we have to study those.

An interesting question here, Tim. What exactly is lost to cause loss of potency, so getting sort of into some of the underlying aspects. I think that's a tough question to answer.

Well, it's a relatively straightforward question. It's so straight quarter. I'll let Dr. Stein answer.

Thank you, Tim.

So as we've discussed, there are over 300 components to this mix. And we haven't got the information 1 particular component is responsible. And as Michelle pointed out, this is a multifactorial disease process, and a number of these components are likely to have a beneficial impact. We do have some things that we measure where we can see the loss of potency over time or a time-related reduction in potency. We have a number of ideas that support individual components for modulating some of the important biological processes. It's been clearly demonstrated that the wind signaling pathway is important for chondrocyte health. You don't want too much, which is usually what you have in osteoarthritis, but you can't completely shut it off because that also has problems it generates. The NFCP beta pathway is mediating a number of the inflammatory situations accelerate or exacerbate osteoarthritis. It's known that certain things like leukin beta are involved in triggering the changes in chondrocytes, which make them secrete the proteases that break down the matrix. And so we have a number of those assays that we have up and available I don't want to go into the specifics beyond that because it's a significant competitive advantage that's come out of our Phase IIb studies and out of our laboratory studies that help us know what to do next.

A couple of questions on the sort of the impact of improvement in the WOMAC scores, how we might characterize it. One specifically from 1 question or is on a percentage basis, how much do the scores improve for the treatment and placebo groups. And Bob, I know you had a chart up that had actual on the aging when you talked about it, but it was a meaningful percentage and -- and then the other question more qualitatively is how would you characterize the overall improvement for that first group of 190 patients? And how would you compare that to the port.

I'll let Dr. Mick to comment.

First of all, there is a significant improvement that these patients experience with salient also. That's not unusual to Arco. They've used an injectable intervention in knee osteoarthritis, shows a strong placebo effect and there have been lots of attempts to try to limit that placebo effect, a lot of which has really worked very well. However, the delta we see between that saline response and the micronized dHACM response is not only statistically signal is a difference. It's a clinically significant difference. And I believe really a meaningful change for patients. I'm going to invite both Kris and Tom to talk about that. And I think that it's the final score that people end up with. It's a little bit correct me if I'm misstating it.

We used the Q score in our study, and we saw an improvement in crew Q scores, different subsets, but we saw between a 68% to 110% improvement, and that improvement was maintained for up to 6 months, which was the duration that we follow. The patients saw that improvement extend up to even up to 2 years.

And would you feel that the WOMAC improvements that we saw were likely to result in meaningful changes for the clinic patients subjective experience?

Absolutely. Yes.

There's a concept of the MCID or the minimal clinically important difference. And people debate about what that number can be for WOMAC. But somewhere in the 10% to 15% range is considered a positive MCID, positive minimally clinically important difference to that 10x fast.

Great. Tim, a question about with the employee getting access to employees, actually. So with rapid growth of new entrants and biotechnology. How has the company fared in competing for the level of employee confidence that will be needed for our success.

That's a fantastic question. The talent we've been able to accumulate particularly in our scientific areas has been outstanding. What's why? Why would -- how could we compete with some of the other biotech companies in that? I think to me, this represents a significant opportunity to create a new class of biologics -- And for a scientist, that can be a pretty cool experience to participate in the creating a new class of biologic. Also, in Michelle's area, they've rapidly expanded the talent there. Bob has been able to -- we were able to recruit Dr. Mick here from the Cleveland Clinic. He has substantial experience in this area. So it's -- that's just not been a handicap for us. I think part of it is our story and our ambition to create this new class of drug.

Okay. And our last question. Tim, our last question is where are we with the KOA program, then the user authorized program? And what are the key next steps?

Yes. I'm going to let Bob address that because he wanted to say something about the talent, too. And I'll let you go ahead and discuss that. I didn't answer the question on KOL.

I will.

Okay. So I did want to say that we also were able to recruit Dr. John Harper, who you'll hear from later, and he's a leader in the field, and we are very lucky to be able to have him join us. And then the other thing I'd like to say is that Tim became the CEO in, I think, May of 2019, and he's recruited not only into the R&D functions, but across the entire management team. I think you've replaced 19 of the people who are in those top roles in that time frame. -- and the colleagues that I was able to join, I think, are extremely high quality. I've known you for 20-plus years, and it's what you brought that was 1 of the attractions to join the company. So I did want to point that out. And then with regard to what's next and where are we in our knee OA program. We have a very clear, strong positive signal looking at the 6-month data for the 190 patients. We did lose that signal in the next 256, and we understand why that happened and we know how to fix it. And we will progress the program. We will start 2 Phase III trials in 2022, and we're still on track for filing a BLA in the second half of 20 -- So I'm very optimistic about that. And in addition, we have a number of reasons to be optimistic about it having not only the ability to improve the pain and function situation for these patients, but perhaps just change the course of their disease. -- and either slow it down or perhaps even reverse it. So we're very excited about that. Bob, in the rheumatoid arthritis area, as you already recall, the HUMIRA, the indication for HUMIRA was symptomatic relief. Once they determined that it had this disease-modifying characteristic, HUMIRA sales exploded. Well, it's use became game changing for people not only with rheumatoid arthritis but inflammatory bowel disease. It has many other indications now. And it means that instead of just feeling a little bit better while your joints get deformed and you eventually become wheelchair bound, you actually have a chance of not ending up there. And that's the same thing we hope that this product will be able to bring to people with osteoarthritis.

One comment on the disease-modifying agent with rheumatoid arthritis. Those are not benign medicines. And as a joint surgeon, we worry about patients coming off them and restarting them during that perioperative period. So I think 1 of the key differences within amniotic injections, you wouldn't have that substantial side effects of those types of medicines.

Thank you for adding that. Look, we're coming to the end of our R&D session. At the end of our Q&A. Again, I'd like to thank our key opinion leaders and the entire R&D team for their preparation of this -- We're going to take a 5-minute break. And during that break, you'll be able to view another video, and then we'll come back and I'll preview the commercial side of our business. Thank you. [Presentation]

What we hear mostly a sense of gratefulness that their wound has healed, allows them to go back to work. It allows them to be a productive person to support their family. Our commercial business has gone through a total relent in the industry. I'd like to introduce Dr. Rohit Kashyap. Rohit has a PhD and biomedical engineering. He brings more than 20 years of experience in the medical device space. He has a proven history of performance in growing businesses and moving into new markets and new geographic regions. Dr. Kashi will present the market, the opportunities that we have our distinct value proposition and our growth strategy. Along with Dr. Kashyap, Dr. Stein mentioned Dr. Harper early on in -- We're very fortunate to have Dr. Harper join us. Dr. Harper is a PhD biochemist. He has a significant amount of experience in this whole area, starting out at LifeSolutions in this industry. Dr. Harper has over 40 peer-reviewed publications and book chapters. So with that, I'd like to introduce Dr. Rohit Kashyap.

Thank you, Tim. Watching those videos, it's amazing the impact our products have on patients like Cynthia and Dodo. But what's also true is there are millions of patients who unfortunately don't have access to these products. It's our commitment to build awareness and education in the market brought in the. The next hour, I want you to walk away with these 3 key messages. First, at MiMedx, we are creating and participating in several. Second, MiMedx has a strong value proposition with which it can compete and win in these markets. And third, which delivers an impressive growth rate of 11% to 14% for years to come. So let me start first by discussing Historically, MiMedx has competed in the advanced wound care market. This market is made up of leg ulcers, presales Unfortunately, only a small fraction of these patients actually end up getting treated with these advanced therapies. So there's tremendous opportunity for penetration in this market. In addition to penetration, there are a couple of other growth drivers for this market. One is the demographics with the aging population, it leads to more wounds. Secondly, pacing, again, which results in more wounds, more complex patients than needed to be treated. These 3 factors combined a growth rate of about 7% annually. Over the next 5 years. And MiMedx as a market leader is well positioned. But we started off this day today by talking about our placental tissue as a platform. And what that does is opens up new markets for every market. So what is surgical recovery. First and foremost, we believe this market has the potential to be as large, if not larger, than the wound care market. Over the last decade, we have shipped about 2 million graphs. A vast majority of these graphs have been used for wound a small fraction of these 2 graphs have been used by surgeons to address complications of surgery. This is for really complex patients as well. When we use these products, it typically came back with 3 broad teams for which they use these products. One, it's tissue doing something like a ligament repair, where they're using this tissue to help with the -- augmenting the healing mechanism for that. Second, using the barriers for vocal cards that would be a perfect example. And also for surgical closure, this could be an amputation or it could be using it to prevent an anastomosis section or something along those lines. The identified based on these clinical outcomes that they desire, about 60 different procedures that could be treated. We settled on about 20 out of those procedures that we would target initially. The criteria for choosing this 20 was based on the number of complications, the applicability of the product portfolio we had and how it would fit into the economic model as it exists today, well positioned in order to penetrate this more than $1 billion market opportunity. We do know that in order to serve this market, we need to do is continue to build our portfolio. So we are developing products that are well suited for surgical applications, remembering that our portfolio was initially developed to treat wound care. And secondly, provide more confidence to surgeons that they can get the better outcome that they're seeking. As we all know, patients all around the globe have very similar challenges. They have challenges in wound healing. They have complications with surgery. Unfortunately, for patients outside the U.S., for the most part, they don't have availability of amniotic tissue. And that drives the third market opportunity for us, which is international expansion. And while we are looking at the whole international expansion over the years, our first Japanese market is very attractive because it's 1 of the 3 largest health care markets in the world. Secondly, we have been able to get regulatory approval for our product in the Japanese market. This happened in the middle of 2021. And third, we are on the way of procuring reimbursement to generate meaningful revenue in the near term. We expect this reimbursement to be available in the middle of 2022. So what is this market in Japan that we are targeting initially? Our primary focus will be the chronic legger amputees, RTs and ulcers that are cases on the lower extremities. We believe that we can target about 100,000 wounds. And based on the anticipated reimbursement, based on the size of the wound, based on the number of applications that would be needed to heal the wound, we anticipate that initially, the market opportunity for us is about $0.5 billion. But based on the approval we have, we have the ability to expand beyond these lower extremity wounds. We're able to expand that market opportunity for us as well. We are really excited about this opportunity as we look forward. Later in the day, you will hear from this. Obviously, with today's environment and challenges of travel, we weren't able to entice and ask Japanese call to be here with us. with time differences, it would be hard to do this live as well. But we were fortunate that we have a recording from Dr. Teruyoshi. Dr. Teruyoshi is a Professor of Plastic Surgery at Kobe University, He is 1 of the most well-recognized voices in wound care and regenerative medicine in Japan. He has more than 600 publications to his name and several of them are English Journal publications. He serves as the Chairman of the society in Japan for Food Care and Podiatric Medicine as well as the surgical wound care society. So I'll turn it over to Dr. Teruyoshi.

[Foreign Language]

Thank you. We share the same excitement as him about the Japanese market. Having talked to you about the large underpenetrated markets, I want to talk next about the MiMedx value proposition. ASH, we became the market leader in the U.S. what MiMedx has done is created a customer-focused ecosystem that allows us to serve the patients and the health care providers that use our products with our proprietary technology and the products that are based on the technology. You heard about that already from Michelle and others. So I won't touch on that. At the same time, as we have the leading products, what we also have is the largest body of evidence that supports the outcomes that we get with those products. And I'll touch on that briefly. But it's not sufficient to just have products and evidence. What you also have to do, especially in markets that are underpenetrated is to create a level of awareness and education. With a focus on that we partner with key opinion leaders to deliver peer-to-peer education. And on an any given year, we treat we inform and educate about 2,000 clinicians annually. Beyond that, base for our therapies as well as the best trained sales and support team that is available for these providers whenever they need in ordering and treating more goods. I'll talk about all of these elements in a little bit more detail next. Again, I mentioned we have the largest body of evidence, but what really matters is the quality of the evidence. And what I'm happy to say is the agency of health care research and quality recently published a study, which evaluated 250 publications from 70-plus skin substitute companies trying to see the quality of the evidence in those studies. We identified 22 studies that met their quality standard for to be considered an RCT. Only 12 of those studies had low risk of those studies were formed -- So you can see we have the largest body of good evidence, but also quality evidence. This evidence spans the spectrum of spectrum of wounds from DFU to VLU and it's very effective as we have discussions in broadening the access for patients as we discuss it with payers access. But in today's health care environment, resales the clinical evidence, what you also need is economic evidence. What people are looking for is evidence that your products are also saving the health care costs in the system. With a view to that, a couple of years ago, we decided to do a retrospective analysis on the Medicare database for diabetic. In this first-of-a-kind study and analysis, what we found was, one, we confirmed our clinical evidence. The data showed that when using our product, EpiFix, there was a 71% reduction in minor amputations. These are amputations below the ankle. At the same time, there was a reduction -- in fact, there were 0 major amputations. This would be any amputation above the anchor. Besides confirming the clinical evidence, it also showed that we saved cost almost to the tune of $3,000 per patient. These were ancillary costs in addition to the product cost that people incur when going through treatment. This could involve revisits to the emergency room to the hospital and so on. This data is very powerful and we continue to use that in confirming and working with more payers in order to get broaden the coverage for patients. In addition to our clinical evidence, we have the largest access and scale in order to serve the market. The access 100% coverage with our GPO customers and contracts. It also covers 300 million covered lives. And we are able to do that and address the needs of about 4,000 clinicians. Besides that, we have a well-trained sales team, a sales and support team of more than 300 people. This team is targeting physicians across that spectrum of the different care settings. In addition to that, we have support in a key area that when they are going to use the product, the burden of cost isn't passed on to the patient, for example, or their own practice when they do that and having that confidence that they can deploy those products effectively. I'll then now switch gears and talk about an executable plan for growth. Like I had mentioned earlier, the first part of that strategy is how do we grow in the wound care market. This relies on strong commercial execution and expanding the access for patients in Wound Care. We know we have the leading portfolio with EpiFix and -- and other various combinations of those products. At the same time, we have scale across the different sites of care. We serve patients in hospitals, patients in wound care clinics and patients in private offices as well. So we can have the foundational elements that we can leverage to drive growth going forward. What's our focus there? First, -- We want to target points of aggregation based on strong analytics where patients present themselves, which cars are the patients covered for in those settings so that we can be educated in how we approach those customers. Secondly, like I mentioned, we are training our sales team. The focus of that training is being able to sell value. We can compete just based on features and benefits of our products, but we have an even stronger value proposition, the impact that has had on patients' lives with the clinical evidence, the impact on the health care costs. Those are the things we want to compete with. Like I said earlier, we want to educate the market and build awareness through our medical education programs, and we continue to be committed to that. We also see opportunity for launching new products in this market to expand the opportunity. As well, there's a need for services especially in the area of reimbursement support and continue to enhance that, making it easier in order to do that. And last but not the least, we want to expand our reimbursement coverage. I'm sure you're asking a question with 300 million lives covered, how do you expand that further. The way you do that is a lot of that coverage can be based only on 1 or 2 wound types. So how do we expand that to another on time? We have to generate the clinical evidence and economic evidence to convince the payers to cover those ones. Secondly, you can also lower the threshold that's required in order for the product to be used. And again, we try to work with payers in order to convince them that that's how they can actually -- by providing the therapy early overall reduce the cost of care, and that's where the economic study fits in. So with all of those things in mind, we expect that we'll continue to grow the wound care market and continue to build on our strong market leadership. Surgical recovery is a little bit different. It's in market development mode. We are creating this market. We know we have a product portfolio, but at the same time, we also know that there are several unmet needs that surgeons need from our portfolio, things like how does the tissue handle in a surgical procedure whether it's a minimally invasive procedure or it's an open procedure. And we want to make sure that we give them those options and the ability to treat all of those patients. When thinking about healing, they want to make sure that the way the tissue incorporates leads to functional healing. The quality of healing needs to be better. And we continue to evolve our product in order to serve those needs. And surgery, 1 of the biggest rigs is infection post-surgery. Therefore, as we think about future platforms and our current platform, -- We want to incorporate antimicrobial properties that can help get to that better outcome and avoid the risk of infection post surgery. As we go on and executing our strategy, our focus is to expand our reach in the OR as we create this market. A key part of expanding that reach will be to continue to partner with agencies that give us that broader access. At the same time, we are focusing on training both the agencies and our direct sales team on the procedural level on these different procedures, the 20 or so procedures that I identified when sizing the market. These procedures are spread across various specialties. We want to make sure we are partnering with we have with the key opinion leaders in each of those specialties in order to deliver education as we go forward. You will hear shortly about the new product launches that meet the unmet needs that I just referred to. And lastly, we want to make sure that we can generate specifically the clinical and economic evidence to support our penetration of the surgical recovery margin. You'll hear about a recently published study, which is in MOS, which really showed really powerful and strong results when using our tissue instead of the standard of practice of using either a flat or a skin thickness -- split thickness skin graft, the outcomes, which are really remarkable. And lastly, I want to talk about our market entry strategy for commercial success in Japan. In the near term, we are focused on making sure that we can procure reimbursement in Japan. We are currently working with the Ministry of Health in order for our application to be completed for reimbursement. Once the application is done, it goes to a clinical expert panel. And once it's reviewed, buy that panel where the societies have a voice as well. We then would take that application from the expert panel. It would go to the counsel that would provide reimbursement. We expect this procedure process, sorry, to take the first -- first half of 2022. At the same time, while we are focused on procuring reimbursement, we also focused on educating the market. In fact, later this week, -- We will have a training program where 200 clinicians will be educated on the use of EpiFix. I'm really pleased to see the enthusiasm of the physicians where 200 of them signed up to attend this training at their own cost. That bodes a good signal for things to come. We plan on having several list of these training sessions in the next year. In addition to that, as we go forward, we want to establish treatment path. So once the product is importable in the market, we will be targeting a set of key customers who can start using the product and get a good body of local evidence that we can generate on that basis. In addition, we are continuing to expand the KOL group that we have. You heard from Dr. Teruyoshi, -- He is a key champion for us. There are other doctors as well that we have partnered with. But as we get more and more clinicians educated and as we build the awareness, we'll expand the KOL group, which is pivotal in developing any market in Japan for my experience. And then in the years to come, we want to achieve scale. What that means is expanding reimbursement beyond DFU and VLE, making sure that we have the optimal structure in our sales team and for commercial success. -- and, at the same time, being able to launch new products as we go ahead. All of these factors together, I believe gives us a very good strategy, which is really executable to deliver above-market growth in the markets we compete in. We believe we can generate 11% to 14% growth rate. This above market growth will be driven by product and market expansion. And with a view of talking about products, I want to turn the next section over to John Howarth.

Good morning. Thank you, Rohit. Large, underpenetrated market opportunities in wounds and in surgery, you heard this from Rohit. And as the placenta, the placental tissues, we believe are a platform for innovation in regenerative medicine. Our research and development teams couldn't be more excited to continue innovating on placental tissues to develop a very robust product pipeline that is designed to consistently yield 2 to 3 product launches per year. Now in order to do this right, you have to look at the unmet need. You have to look at the problems to be solved. We don't just invent products because we think they're interesting. We want to solve a problem that surgeons have. And when you look at complex -- when you look at unmet needs or undermet needs in wounds and in surgery, it usually always centers around the patient. Patients that have underlying conditions, such as obesity or they may be smokers or diabetics. They may also be cancer patients, and they may have undergone chemotherapy. All these conditions put them at risk of poor healing. And that's because these metabolic changes in their body, the state they're in, put them at an imbalance. And the healing process is a very orchestrated cascade that involves growth factors and inhibitors, and there's a balance. And if this system is thrown out of balance, wounds do not heal properly. Now secondly, there's the wound. And in wound healing, the wound can be very, very complex. The wound can be large surface area and shallow or it could be very deep with complex geometries, can also involve tunnels where certain technologies can't get in to address the wound that needs to be healed. In surgery, the complex patient also undergoes healing issues when balonastomosis or e-vascular anastomosis, any time tissues are sown back together. The healing of those anastomosis are also impaired by the patient's inability to heal. But I think more importantly, the reconstructive surgeon has difficulty reconstructing patients who have complex healing disorders. And reconstructive surgeons observe a strategy called the reconstructive ladder. And that basically is you take the least invasive approach to heal a wound as you can. And as that reconstruction becomes more and more complicated, so does the reconstructive strategy. And many patients that are compromised, the complex patient, are not good candidates for these very complex reconstructive procedures. So we believe that the products we're developing can help lower the complexity of the reconstruction in these patients and give the surgeons tool that allows them to reconstruct these patients successfully. Now in addition to developing new products based upon placental technologies, we're also looking at technology on either side of the wound healing cascade or the continuum to make our product more successful. It might also involve after care, how these wounds are taken care of after our products are applied. These are outside of our expertise, but those are the areas that we're looking to acquire new technology. These are examples of the first candidates in our pipeline that I'll show you, that are nearest term, that address the unmet needs that I talked about. First of all, AMNIOEFFECT is a membrane product similar to EpiFix and AmnioFix, but it's processed differently, making it thicker and able to be more robust used in surgery inside the body. So that's one. Secondly, the placental collagen matrix is made from the placental disk, and it's a placental extracellular matrix that is particulate and can be used in complex wounds that have areas that are difficult to reach with conventional products. And then finally, we're going to see single-layer amnion, which we believe is going to be very effective in large surface area wounds that can be addressed with a membrane product. These are going to be the nearest term products that you're going to see sometime next year, early to mid next year. AMNIOEFFECT is -- has been, again, processed so that it handles -- it's thicker than our EpiFix and AmnioFix and it will hold a suture and allow -- it allows surgeons to anchor it within the body. And it's going to be a very interesting new tool for the reconstructive surgeon to reconstruct wounds in the operating room. And the placental matrix, I mentioned, the particulate is going to be a very effective way to reach hard to reach wounds and also is going to potentially be a platform upon which we will build an antimicrobial version. And again, both of these, we believe, are platform products, iterations and innovations on these 2 platforms, we believe are going to lead to further product introductions in the future. Clinical evidence is not only important for getting surgeons to use a product, but it's also for reimbursement and convincing that these products are significantly important to be reimbursed by insurance companies. I want to give you an example of a paper that was published very recently led out of the University of South Florida involving Mohs surgery. And I know that many of you, including myself, have had skin cancer and some of you have had the Mohs procedure. The Mohs procedure is a procedure by which significant margins around the skin cancer have to be taken in order to make sure that the cancer doesn't recur. This leaves a significant tissue defect. In many parts of the body, these large defects can be closed by incisions or closed primarily and this is fairly low on the reconstructive ladder. But as you get into cosmetically sensitive areas where skin is very tight and can't be brought together primarily. It has to be closed by 1 more aggressive procedure, which would either be split-thickness skin grafts, which involves a donor site or a rotational flat to cover that defect. And in both of those strategies, patients that are complex just are not really good candidates for those, even as simple as they might be. This is a paper looking at patients with Mohs surgery around the face, areas that are cosmetically sensitive, and there were 142 pairs of patients that were paired using the propensity score, which basically means pairing up a treated -- a person treated with standard of care, which is the split-thickness skin graft or a flap versus one that's treated with EpiFix and controlling for all the other variables between these 2 patients so that they can be adequately compared as far as their outcomes are concerned. 142, 143 propensity matched pairs. And that study showed that in terms of experiencing complications, there were 29% of the split that the split-thickness skin graft or flap group that experienced complications whereas only 2% of the EpiFix Group experienced complications. And likewise, with terms of cosmetic results, the skin graft, the autologous tissue group experienced significantly more cosmetic complications and reoperations revisions as well as infections and surgical re-interventions. Now this is another clear example of how our product allowed surgeons to move down from autologous tissue transfer all the way down to secondary healing with EpiFix, which is down on the reconstructive ladder, and for patients that have a hard time healing, this is a big advance and a big advance for the surgeon to be able to reconstruct these Mohs defects. Large unpenetrated markets a growing pipeline to address these matters and growing evidence, we believe it really positions us for success in our base business. Thank you. Tim?

Thank you, Dr. Harper. Any time a CEO comes into a company and realizes they have to make decisions around their management team. They're always looking for impact players. I view Rohit and John as impact players that work exceptionally well together. And this is going to be a key part of the formula for continuing to grow this business. We can do this in a way that is predominantly organic. And as we mentioned, historically in some presentations or earnings calls, there's an opportunity to selectively make licensing activities as required. If it enables EpiFix, EpiCord and the other products we're developing to become more efficacious. I'd like to move into our Q&A panel today. We have a very robust group of key opinion leaders Dr. Tettelbach will lead the Q&A session. Dr. Tettelbach is our Chief Principal Medical Officer and a Head of our Medical Affairs. With him today, from the left to right, Dr. Das. Dr. Das is a Board-certified colorectal surgeon as well as a general -- Board certified and general surgery as well. He's a native of Houston. Dr. Das graduated Summa cum laude from Rice. He got his medical degree from Yale, and he followed up with his surgical training at Harvard. Really an exceptional background. We're glad to have him here. In addition, we have Dr. Caroline Clarke. Dr. Clarke is a Board-certified plastic and reconstructive surgeon and is a graduate of Baylor College of Medicine and integrated -- where they had an integrated residency training program at the Texas Medical Center. Additionally, she's fully trained in aesthetic surgery with special interest in facial rejuvenation, breast and body contouring. Her passion for improved patients' quality of life is very consistent with MiMedx overall philosophy and culture about how we go about addressing unmet patient needs. We're very aligned with Dr. Clarke in this regard. Dr. Labovitz is an Associate Dean Clinical Education and Graduate Placement and Professor at the College of Podiatric Medicine Western University of Health Sciences. He's originally from Washington, D.C., graduated from Cornell University majoring in nutritional biochemistry. He is doctor a podiatric medicine degree from Temple University of Podiatric Medicine and completed a 3-year residency in foot and ankle surgery at the Botsford General Hospital in Michigan. After 10 years in private practice, Dr. Labovitz came to the Western University to help establish a college of podiatric medicine. He served as the Medical Director of Foot & Ankle Center from 2011 to 2019. It's a great pleasure that we have this outstanding group of key opinion leaders. And with that, Dr. Tettelbach I'd like to have you take over the Q&A.

All right. Well, thank you. Thank you, Tim. Well, I want to actually thank all of you for joining us today out of your busy schedules to give us insights and discuss certain topics. So Dr. Das, I think we'll start with you. We had a lot of information here on the surgical recovery market and how this tissue -- placental type tissue is being used in closure and augmentation and as a barrier. So could you explain to us a little bit about your practice and maybe how you have brought this tissue in and to solve certain problems within your practice and how you're deploying it?

Sure. I'm grateful to answer that question. I think it speaks to the placental allograft as a platform for regenerative medicine. So I think one of the blue sky opportunities is in surgical oncology, reconstructive surgery. And in my practice, I practice the full gamut of colorectal surgery from things as simple as nerve stimulation for fecal incontinence to transgender reconstruction with colonic vaginal position grabs to radiated fields with rectal cancer and advanced reconstructive opportunities there in the perineum. And I got very turned on to regenerative medicine very early in my career because I had a resident who is one of the lead researchers in platelet-rich plasma. When I saw the effects of platelet-rich plasma and the fact that it could change and effectively immunomodulate away from a fibrotic healing response to a regenerative remodulatory healing response that was more robust. I was turned on to the idea, and I was looking for a platform technology or a platform biologic derivative that would offer an immuno-privileged concept the ability to, again, shift that domain of healing away from fibrosis, which we've been focusing on incorrectly for the history of surgery and actually create a regenerative outcome for the patient. One of the difficulties and one of the reasons I think there's such an opportunity is unlike a more traditional or conservative wound care approach where there's a 1 or 0 approach from open or closed. This is a degree in which we have to operate, where we use risk mitigation techniques. And I think placental tissue acts as a wonderful risk mitigator for our higher-risk patients or radiant fields.

And you've seen that anecdotally, maybe in your clinical practice, you've seen that outcome improve?

Quite obviously. As an example, at major medical centers and major cancer centers, our radiation followed by an abdominoperineal resection for very, very low rectal cancers or highly invasive rectal cancers is often staffed in a multi-surgeon clinic with a fundamental reconstructive surgeon or a plastic surgeon who is present and will do the case with you at the same time. Looking at the -- at many databases, including the Medicare database, they were -- it was a question as to whether you needed the extra surgeon or whether you need a secondary procedure because there is a comorbid condition and also we're doing a major operation for a long period of time. In my APR experience, I've never had to have a secondary closure. I've been able to close primary radiated wounds without dehiscence and get that patient to postoperative chemotherapy without any wound dehiscence, without any further wound care or advanced therapies while using the placental allograft in the operating room.

So I agree. I think part of what you mentioned is that construct or delivery matrix, which makes a big difference versus where your early experience, you were mentioning the ARP. So this is like a step up from that and actually has advantages.

Exactly right. But I think it's very important that we have an appropriate match up of cell signals and structure. And in a placental platform, you have those 3 components that you can give to a radiated wound bed for appropriate closing.

Right? So I'm going to go to Dr. Labovitz. So you're as a dean and you're charged with teaching residents and about advanced therapies, and we're here discussing these placental-derived tissue products. And you've seen the advantage of these. You've been -- we'll talk about one of the papers that you've been co-author on and the next one that's coming up. But in my mind, there's being a practicing wound physician myself, there's barriers that we run into allowing us to use this. So what -- could you -- do you have a view on this or insights that...

Sure. Yes. I think the biggest barrier we have is most of the diabetic foot care has done as an outpatient. And when it's done as an outpatient, unlike the operating room, where you can just apply the graft relatively easily, we go through the pre-authorization process. And working with the insurance companies is really, I think, the largest barrier we face. MiMedx has done a great job trying to help us through that process, but it still takes significant staff time and dealing with staff time and extra support for this has been a significant barrier.

Yes. So I think we mentioned today having 3 million lives covered and working on being one of the most broadly covered commercial and Medicare products out there is something we have worked for. But there's other things that get in the way. I think the mentality and maybe you agree or disagree of, it's an expensive product, and it -- I could do something else for less. So I think you've had some insight on -- we published this paper in July talking about the benefits of this class. So we have -- as a company, we have proven or take it upon ourselves to prove actually that this is a class of treatment products that actually has incredible impact and favorable outcomes. But now there's the economic side of this. So maybe you could give us a little bit of your insights being the author on this up-and-coming paper and the data that we have -- some of the data, we can't say it all, but some of the data that we've seen prior to publication here.

Well, I think to take a step back, what you were mentioning is that first study, which is really the groundbreaking study that started this process. Trying to work with those insurance companies when you're told no or you can't use it at certain times. When you know that's the best thing, yes, we have other products, they may cost less, but do they work? And when we know we have a product that works and is beneficial, we want to use it. Our first study showed decreased amputation rate, like you heard from Rohit, but we also showed decreased readmission rates and decreased emergency department visits. Those are 2 of the largest cost drivers in the diabetic foot. So if we can eliminate those cost drivers or mitigate those cost drivers significantly, like we're showing we can with advanced therapies, it's a tremendous change in the playing field. Our upcoming study really, I think, takes it one step further and shows how valuable it is. It really links the financial and clinical outcomes together. And that's where all the payment models are looking at what the insurance companies want to do. So if we can link those effectively, then we have really a good way to collaborate with the insurance companies and expand what we're doing. The data that they're seeing these preliminary outcomes really shows 97%, 99% cost effectiveness, improving the quality of life, the quality adjusted life years for the cost of the product. And when we do that, we show its value. And that's over a 5-year period. So we show with significant morbidity, mortality in these diabetic ulcers we can show true value in what we're doing. And the other products out there can't do that.

Yes. Well, thank you very much. So Dr. Clarke. Now you're plastic surgeon your practice is a little -- is unique in how you are deploying the product. Maybe you can tell us a little bit about your practice and what strategies you've approached to why you've adopted it as well and maybe some examples of where you've been using it.

Sure. One of the benefits, but also challenges in my practice is that my patients are always somebody else's is patient too. So I work a lot with my colorectal surgery colleagues, the dietary, neurosurgery, orthopedic surgery, cancer surgeons. And so all -- and trauma surgeons, all of those patients look very different and have different things that they bring to the table that are going to be a problem. And the first step in becoming a good surgeon is recognizing a patient that you shouldn't operate on. And one of the big benefits of this product is that the AmnioFix and AmnioCord have been able to transition patients who I couldn't offer surgery to do patients that I can have a success with. And the first patients that I tried these products in were patients that I thought had 100% complication risk. There was no doubt in my mind, either a wound dehiscence or a seroma or some leak or whatever. And I thought, well, if they don't have a problem and we use this that's pretty good evidence just in my hands. And so whether I'm dealing with the wound, I'm trying to get to the operating room or managing the incision, I'm looking for reasons why this is going to fail. And how do I overcome that? So do they have nonattrition, Are think going to get radiatio? Have they had radiation? Do they have some sort of autoimmune deficiency? Do they use nicotine? Have vascular disease? Something that's going to tie my hands from having a successful surgery, especially at the very top of that reconstructive ladder, where there are 12-hour procedures. And sometimes these patients just can't tolerate that. So do I have an alternative? And traditionally, if patients have a couple of hits, if there are 2 things working against them. I'm pretty much decidedly going to add some placental-based allograft product, whether it's AmnioCord or AmnioFix depending on the wound and what needs to be covered. I think you were probably alluding to specifically the paper that we published on the lower extremity that I 100% thought was getting amputated and that's a devastating thing to tell your patient and their orthopedic surgeon who refer them. We didn't have anything else to offer this guy with exposed hardware and exposed fracture. And truly, the AmnioCord got him a full closure in 12 weeks and somebody with diabetes and vascular disease, that's pretty much unheard of, not to mention infected and exposed hardware. So I think in patients that you don't have anything else to offer, it's a really great tool. But then in patients you expect to have a complication if you can minimize that or mitigate that by employing these products with your closure and then all of the other adjunctive things that you have available, that's sort of how I pick.

Yes. So as that case that you mentioned actually was a spin-off of -- we did another study out of the Arizona Burn Center with Dr. Mark Matthews. And it was very interesting because it was basically looking at the reconstructive ladder, we had patients being recruited prospectively over 12 months into this study, and we published this last May in surgical science, where these folks were actually at 1 point, by an attending, put on the OR schedule for an extremity amputation, and that's what triggered an evaluation. So they evaluate -- they were evaluated by certain criteria when they were -- made the criteria, they were brought in treated with these placental-based products. And these were deep wounds, limited flaps. So it was very limited in what the -- how far up the reconstructive later can go. And there was a 92% limb preservation rate, which -- this is amazing. I mean it basically supports the VICI driver data that show that basically points to lower extremity diabetic ulcers that 50 to 80 plus percent of these can be avoided when you actually apply the right tools and multi-specialties to it. So I think there's also one other case. You mentioned that maybe you could comment on it. You do -- with the breast reconstruction or using tissue expanders you -- in this instance, you may be taking the tissue or putting pressure on the tissues where it may compromise blood flow or things that you'd be concerned with incisions, but you've also adopted or even transformed your way of thinking, transformation is kind of a key word here, but to sort of transform how you think what you can do with certain situations now that you have this product, maybe you could?

No, exactly right. Everything in plastic surgery is based on blood supply. So if there's a poor blood supply and low oxygenation, things are going to fail. And that's what we're thinking of from the moment we meet with the patient. And the angiogenesis properties of these grafts has really made it so that I don't have to worry quite as much when I'm looking at struggling tissue. Previously, I would not do a tissue expander for a patient that had a nipple-areolar that looked to be jeopardized. We would scan them, look at the blood flow. And if that looks compromised, you don't do anything. And now I have a way to either protect it a little bit and sort of help that tissue recover or wait for my tissue expander, but also get them to that point a lot faster and still save the architecture and anatomy of the nipple-areolar, which is truly what makes the breast a breast. And so if you lose that, you really lose the top notch reconstruction that you previously could have offered them. And it's been hugely helpful in getting them recovered faster and restored faster.

Yes. So yes, that's amazing. So I think I want to come back to you, Dr. Das, it's -- you're one of the early adopters really, I think, of bringing in and utilizing this tissue and you've had successes. We all hear successes here. Well, part, I think, of success is getting our colleagues to adopt using this. And that in itself can be a struggle. So what have you done or what are your thoughts on how that can be overcome or you have achieved getting other folks to adopt it in your field?

So one of the ways that data always rains. And that's wonderful. But by the same token, I've used a combination of data, there are some retrospective studies that are small in nature but are very, very impressive in the sense that they are able to reduce our risk of anastomotic leak and by wrapping the anastomosis in placental-based tissues. And one of the things that I think is very remarkable about that is, although it's small in size, the signal was very true in risk mitigation, which is what my peers are very concerned about. The other thing we've done is in highly difficult scenarios, for example, where we have something like a fistula in the body where as an abnormal connection between 1 area to another, you have a complex issue of poor blood supply, extreme infection rates and also an issue of pressure difference. All 3 conspire to keep fistula rates at 50% to 70% success rates. So those -- that's very poor in surgery. We usually like something around 99% or almost 100%. We like in or out. And so one of the things we've done is augment our fistula closure rates and have driven that percentage up into the 90s with reliability and reproducibility of technique. And so that's something that I think has been able to be bought in. So to your question, I think if we look at both increasing the broadness of data and also looking at problems that are actually very difficult to solve. And even if we made an incremental impact, think about how massive that would be. We just talked about DFUs and a $3,000 cost savings. But if we were able to prevent 1 anastomotic leak, that would be $0.25 million cost saving.

Yes. So yes, so that in itself, it would be an interesting evaluation or analysis of Medicare data. But the -- as you mentioned, it's kind of interesting that we're here today talking about how we need more surgical data. So I think you're right. I mean, that's all -- everyone is in agreement on this, that we need to be doing more of this to allow the drive to improve patient outcomes, save cost on the health care system. So really, these products hit all of these in the sense of benefit for everyone involved in the medical system.

No question. I think there's an element for education as well. Just talking about how successful we've been in these markets, I think it's fantastic.

Well, I want to thank you all. I mean, this has been a great discussion and there's a lot of insight in pointing to what we -- what the needs are and what we've been doing in favorable impacts. So I want to hand back off to Tim and thank you for giving us the time to host this forum.

It was fantastic. Thank you very much. Your insights into the appropriate application of our technologies, I find really fascinating. And to me, it's really your experience and our ability to work together to fully appreciate where we can really be helpful in these surgical procedures or in advanced wound care. I think we've come to the point where we're going to take some questions from the audience, which is our first R&D Q&A was very robust, and I'm hoping we see the same thing here, Pete.

I think so. The first couple are starting about Japan and outside the U.S. When are we expecting the reimbursement decision from Japan? And then what do you expect the commercial staffing requirements to be? And how quickly will they be in place?

That's a great question, Pete. Again, like I mentioned in my talk, in Japan, we expect reimbursement to become available in the middle of 2022. Obviously, there are several steps to that process. The first step is completing your reimbursement application. We are in that phase right now with the Ministry of Health. It advances from there to go to a clinical expert panel. And we feel like we have a good case based on our regulatory approval and the support from the various societies at the expert panel. And from there, it goes to the council that establishes reimbursement. They all meet at regular intervals and keeping that time line in mind. We expect that the process will be completed by midyear 2022. Obviously, there are some unknowns with the COVID. We have lived in this time where the best historical example don't always provide the best guidance looking at it in the near term. But every indication we have got is we are working on that time line. Your second question was with regards to our approach and staffing in Japan. We feel very confident with the target market opportunity and the market entry strategy that we have that with our partners in Japan through KOL relationships, we can educate the marketplace, which is a critical component of any entry strategy. At the same time, we are in the process of establishing our commercial model. that includes our direct presence as well as our partners, which will help us serve that market effectively. And we'll have more to share in that -- with that over time.

A follow-up question goes beyond Japan. What are our plans regarding European expansion?

Go ahead.

Thanks. Again, like I said, the challenges for our patients, whether they're in Europe and Japan are the same. So there's a similar need in Europe for patients for these products. We actually can have one-off sales in Europe right now in some markets. But our focus to have a systemic market entry. And we are working closely towards that approach in the U.K. market, in Italy and in Germany. We are focused on those high-value markets where we can have the most impact. We have to -- and similar to in Japan, procure reimbursement, each of those countries have different pathways and how you get that. So we continue to work through those. And we think over the next couple of years, we will again start generating revenue. But if you step back and think as one consolidated market with similar dynamics because competing or participating in Italy is very different than participating in the U.K. One market that is large in scale and has a good singular path for commercialization, that's why we chose Japan as the first primary focus.

It was a good decision based on the dynamics and the opportunity. One of the operative words that you laid out with systematic. Systematic and thoughtful approach to expansion outside of Japan or outside the United States because it gets down to resource allocation and where we think we can penetrate the market. And Europe is not a homogenous environment for us to operate.

Tim, the next question is about the surgical recovery market. What are some examples of procedures we will be targeting and will we need additional sales reps or a different sales force.

Yes. Certainly, Rohit has thought through this, and we've done an extensive amount of research over the past 10 months or so into this area. I think we've got this well calibrated where we want to go. And I also -- Rohit, I'll let you take this question, but I also would like to get some perspectives from our surgical panel here and podiatry panel as well more applications for our surgical strategy.

Absolutely. So I'll just answer the commercial question and give our honored KOLs, the opportunity to share the kind of procedures that they use it for. As far as the commercial go-to-market strategy is concerned, we do not anticipate creating a new team for that. We have our direct team, which we can have -- which we are training and equipping them with procedural training in order to capture this market opportunity. We currently partner with several agencies, 50-plus agencies. We plan on expanding that reach by partnering with more agencies depending upon the specialties and the wounds -- sorry, in the procedures that we are targeting and we will be able to successfully penetrate the market that way. But maybe I'll have the panel comment on some of the procedures that they use and surgical recovery that they could share.

We haven't heard on -- you mentioned podiatry, but we didn't really talk about procedures themselves, surgical. Maybe Dr. Labovitz can give us a little input on how it's used or some of the areas that the applications are.

I think the obvious ulcers that you talked about, the diabetic ulcer, the venous ulcer, I think, is a big one, especially with the size of the market. Venous disease is so much more prevalent than we teach or give credit to. And the number of venous ulcers is only going to expand. The market size will only increase with the aging population. So venous ulcers is really a big focus. And there's a real high recurrence rate. So more and more data out there to see how this works and impacts the recurrence rate would be huge and a really valuable piece to learn. But there are many orthopedic procedures we do with image blood flow and defects that we have after trauma. We could really expand what we're doing with trauma patients like you were mentioning before, defects, pressure ulcers, especially deep tunneling ones. So a lot of the new products that we heard about with commercialization should be really valuable to us.

The -- also soft tissue structures, tendons, things like that, that with repair and tears.

Prepare those, the repair of the ligaments I mean all of these could really help enhance the angiogenesis in some of these difficult tissues, calcaneal fractures, especially lateral incisions, have a real high dehiscence rate, same with Achilles tendon ruptures. A lot of fibrosis in those areas with bad blood flow. So it's a prime area where we know we're going to have complications or we should be expecting them to some extent. And really, this could help prevent that.

Tim, a science question. We've detailed key cellular pathways involved in cartilage and KOA. Similarly, are there pathways involved in scarring that dHACM acts on?

Yes. Well, that's a very good question. And certainly, our understanding of this can be elucidated with John. He's, I would say, been studying this for the last 25, 30 years.

Yes. Well, I mean, the answer is yes. Obviously, some of the key factors in fibrosis and scarring, one of the main growth factors involved is TGF-beta. And our team has looked at the effect of genes that are stimulated by TGF-beta expression and the effect of the dHACM product on it. And genes such as alpha smooth muscle actin, which is causes fibroblast to become somewhat like smooth muscle cells and cause them to contract. We've shown that if you stimulate alpha smooth muscle actin with TGF-beta that the dHACM product will, in a dose-dependent way, inhibit that. Next would be connected tissue growth factor, which is involved in laying down more collagen by fibroblast. We have a very similar effect with the dHACM on that inhibiting the TGF-beta stimulation of connective tissue growth factor. Plasminogen activator inhibitor is one of the inhibitors that Michelle talked about this morning that is involved in modulating enzymes that if you inhibit it, then fibrosis builds up, and we've shown that the TGF-beta stimulates it, micronized dHACM or excuse me, the dHACM sheet will inhibit it. And then finally, elastin, very similar. So these 4 gene products that are stimulated by TGF-beta are modulated by the dHACM product. And we're continuing today also, I should say, the EpiCord product has a very similar effect in some cases, but we're looking very closely at that as well as other genes that are related to fibrosis and scarring.

And you're also looking at how these particular pathways to communicate with each other.

Exactly. I think someone made the point earlier, all of these processes are very tightly regulated and connected. And the connectivity is really important because I think efforts to treat different conditions with isolated growth factors or isolated inhibitors really continues to throw the system further off balance is the tissues bring in the ratios that are needed to bring it back into balance if it's out and balance. So I think our approach is the rational one.

John, I would say the findings in the real-world study in Mohs, which confirm the cosmetic outcomes as well, cosmesis outcomes also very encouraging and suggestive of what you just discussed.

Absolutely. And I think that when we talk about granulation formation, granulation is your leads to scar formation. And if it's in the face or other areas where the scan is really tight, then that leads to a cosmetic abnormality. So I think that could be one of the reasons why we had such a favorable cosmetic outcome in these patients.

Tim, a question on the sales force and is it rightsized principally to focus here in the U.S.? Is the sales force rightsized? Do we see further expansion over the next year?

Yes. Well, we get that question a lot about the size of our sales force. Rohit explained our philosophy around that. And I would just want to make one point is that, our sales force is one thing. We have a very strong sales organization, very strong sales management team. But it's the ecosystem that Rohit described earlier in his presentation, which I think is a critical differentiating characteristic of how we run our commercial business.

Yes. As far as the scale of the sales force, it's a question you ask yourself every 6-month interval that is your scale the right scale. And the way we have approached it is a bottom-up analysis. We start by identifying which are our targets, using data to guide us in that and we look at our Tier 1, Tier 2 targets based on the procedures we want to target both in wounds as well as in surgical. And then expanding beyond that and saying, if you're going to go to Tier 3 targets, what is it that the coverage model that we need. With the current size and scale, we feel we are well situated to deliver the growth that we have. And like I said, we will look at it again as we approach the next 6 months horizon to see where the investments are? And we've been fortunate in the last 15 months that I've been with the organization that when I have come up to Tim and Pete asking for adding people in the right spots in order to support the growth of the business that we've been able to do so.

A question about the -- let's first, I think, in the commercial side. So talking about market growth relative to the growth patterns that you've talked about, Rohit, can you kind of give your perspective on market growth and compare and compact that to what you were talking about for the company?

Yes. So we think about historically, the market that we've competed in, which is the wound care market, the growth expectation over there is around 7%, while we are confident that we'll be able to drive 11% to 14% growth with market expansion as well as with innovation and new product launches. So to get to a growth there, which might be almost twice the size of the base growth rate of the market. We are very proud that we can accomplish them. There's every reason to believe that we can do that, as Tim started off this morning indicating that we anticipate 13% to 15% growth this year. That gives us confidence going into the years coming up that we can continuously deliver those levels of growth.

Tim, a question about inorganic growth opportunities, parameters, timing. It came up a little bit during the talks, but what your thoughts there or the company's thoughts there, including about funding?

I think it's just good company hygiene to make sure we have an active business development capacity to keep canvassing technology changes. New technology is introduced. Our criteria is real simple. If it enables EpiFix or EpiCord or AmnioFix or AmnioCord to improve patient outcomes we're all over it. I think that just putting a product in the bag of our sales representatives is not the right thing to do for them. And it just goes back to the old way of doing things in this particular space, in my opinion, is it moves closer to just a transaction with the physician or the health care system. We want more than a transaction. We want active dialogue about the appropriate use of our products. If we have something that can augment that, we'll go down that path from a licensing standpoint. John, you and I have had many discussions about this in the past. But I think your perspective is really valuable here as yours Rohit.

I view it. Our product is very robust in many very austere wound situations. But I believe that the proper preparation of the wound bed reduced in the bioburden, understanding the viability of the oxygenation of the tissue, just the preparation debride getting ready, I think is very critical to, I would say, consistent performance of our products. So as wounds vary, patients vary a lot. And it's difficult to do things one way unless you do it the right way for the product going in.

Well said. A couple of questions on the new products. When we launched the 2 new products that were talked about today? Also a question on what's the frequency? Is that just -- is this it? Or is this something you're going to look to continue to do? And then how do they factor into that 11% to 14% growth rate.

I'm like a man on fire. When it comes to product development. And when I've tasked the organization to do is every year, we need to see 2 substantial new products generated from our product development machine. We have the people in place to do it. We have the capital to do it, and we will do it. John, you may want to.

Yes. I mean I mentioned in my presentation, my goal is to continuing to build a very vibacious pipeline with 361 products, 510(k) products, things that we can see on the near-term horizon. So that we can endeavor to have 2 to 3 products per year. And I think that for the sales -- from the standpoint of the sales force, and Rohit probably has more to say about this. Two significant launches per year is about right for a sales force so that they can continue selling the existing portfolio, but then build a story around the new products. Otherwise, it gets too crazy on an annual basis. You say Rohit?

You're absolutely right. And it's a lifeblood for every commercial organization is that's what gets them up every day to go in front of the customer to have something new to talk about, right? It gets stale otherwise. So we're excited about the energy and you being on fire about making sure that the organization can deliver 2 new products annually, and we welcome the opportunity to have success with that in the marketplace. Peter briefly touched on that aspect of how does this -- yes, these products, at least the ones that we've outlined are included in our 11% to 14% growth outlook. But as we think about other products that come to the market as well as Tim briefly talked about inorganic additions that might come, those would obviously add to the potential growth of the company.

I'm also on fire about a few other things, Pete. Creating a culture around evidence-based medicine. I know everybody that we brought on board feels the same way. This is now the time to generate the scientific data, the clinical data to support an evidence-based approach to these applications.

I think a follow-up to that, Tim, is the aspect of the Mohs that was talked about today and understanding what that represents in our current portfolio and how to think about that as an opportunity.

Historically, our products were used in Mohs, in certain areas of the country. We did not have the clinical data, which goes back to this evidence-based approach to supporting our products. We did not have the clinical data to support that. With this publication, I think we do have the ability to go and pursue reimbursement for those products. Dr. Tettelbach was -- has been intimately involved. And if you will, working with our health policy group to lay out the reimbursement rationale for this particular setting. I don't know if you have any more comments on that, but I think this could be a very attractive area.

Yes. I mean we've had feedback from, let's say, payers that now that we have this data, that this data actually can be submitted with claims. And with medical necessity as part of the justification. So before we never even had that type of feedback where they were willing to even address that until the data is available. So this really just opened a whole new door back to where we were. Historically, we can be utilized in the space again and have that growth that is desired.

Tim, the final question is, what are the factors behind our confidence in the 11% to 14% growth?

Well, I think, Rohit, did an exceptional job of laying out the rationale, it gives us the confidence that we can do this. I think it starts with the leadership of the commercial organization. As I said before, when you rebuild an organization, you're looking for impact players. Rohit has hired an impact player and Kim Moller, our National Sales Manager. She's absolutely phenomenal. We have an existing very strong infrastructure below her. And this shift from selling value and creating a real promise around our brand, I think, has been exceptionally important here. Obviously, the new product introductions, the market expansion into Japan will -- gives us confidence that we can do that. And by the way, getting approval for our product -- flagship product, EpiFix in Japan was no easy task here. And I really credit our regulatory team and our clinical ops team working with the regulatory body in Japan. They were very stringent on us. They came and inspected our manufacturing facility twice. We had significant interaction with the KOLs, which I think will prove to be very important as you launch a product. Rohit has assured me that we are on target for growing this business this way. The beauty of this is that cash that we generate from there. When we move out another 18 months, that cash can really fuel other things that we want to do. And it's a very unique model when you have a biotech-like company with our drug portfolio. Then you also have a MedTech 361, 510(k) portfolio as well. To be able to fund that, self-fund that research and development is a critical and I think it's a unique characteristic of MiMedx. Rohit, I went on for a long time about that, but that was the last question. Do you have anything else to comment to close us down for this particular setting?

No. Like I said, I have -- you already spoke on my behalf and you said they have extreme confidence. I'll reassure the group that we have extreme confidence that we can get to that 11% to 14%. Again, it goes back to the key messages I started with. We have really exciting opportunities to track down and chase down. We have the value proposition to succeed in those markets. And then we have the strategy. We have a commitment to developing new products, commitment to expanding the market opportunities and a commitment to generating evidence and partnering with key opinion leaders like the ones you just heard from and others that are out there gives us a lot of confidence that we can achieve that 11% to 14% growth.

Yes. Fantastic. I'd like to thank the panel again for your -- all your time and the preparation to come here and visit with us. Your insights are absolutely phenomenal. And I look forward to working with you and your other colleagues to expand this surgical realm of our -- and benefits of our products for patients. Thank you very much. This ends the Q&A session here. I think it was equally as robust as the one we had for our R&D section. I appreciate everyone who presented and the preparation around that. Now I'd like to move, like I said, no Investor Day be complete without a quick financial review, and we'll close down the day. With that, I'd like to introduce Pete Carlson, Executive Vice President and Chief Financial Officer.

Thanks, Tim, and good day, everyone. Today, I want to start talking about 2021 revenue and where we are and where we expect to be for the year. The top half of this chart shows you the actual results, 9 months, year-to-date comparative between 2021 and 2020. On the left-hand side, you see our reported numbers, and that's where you see the 6% growth. But the middle chart or the middle graph reflects the growth removing the accounting transition impact that we've been talking about now for a couple of years, and that's a 10-plus percent growth. And then as we think about going forward and you look at that part of the business that's recurring, what we've referred to as this Advanced Wound Care Section 361, you see that, again, on a 9-month basis, 2021 to 2020, it increased at almost 16%. And that's that execution that Rohit talked about that solid execution by the commercial team as well as this expansion into the surgical recovery area. The bottom half here talks about the -- where we expect to be in -- for the calendar year, and this is an update from the prior guidance or outlook that we had provided where we said we thought annual revenues in 2021 would be $245 million to $255 million at the adjusted net sales level. We're now saying that as we're sort of at the top or over that range with an expected outcome of $253 million to $258 million. That includes about $16 million, $17 million of sales in the U.S. of the Section 351 products are micronized in particulate that we've been talking about all year. So that leaves you with an estimate for, again, calendar 2020 of that recurring business of $236 million to $240 million. I also wanted to remind people about our expectations really on cash flow going forward here in the near term. And this is a chart from the left to right, takes you from a cash balance at the end of September of $91 million out to the following 2 year ends. As I mentioned last month in our earnings call, we expect that the business will be cash flow neutral for the next 12 to 15 months on a free cash flow basis. And you see that here in the 2 -- first 2 bars after the dark blue. And this essentially is as we grow back into the revenue stream pre enforcement discretion, we will get back to that profitability. But over the next 12 to 15 months, we've made this strategic decision to leave those field forces that Rohit talked about in the field to support the growth expectations we have. As you go into 2023, we do expect that the business will return to that more historical level of not only revenues but also of profitability and free cash flow generation. The other thing I would remind everybody again, as we talked about earlier this morning that there are these 2 clinical trials where we plan to do. We think each of those trials are about $15 million and that those costs would be incurred over a 3-year period. Thus, we -- as I talked about, over the next 12 to 15 months, cash flow neutral and then growing revenue levels back to that consistent with what they were before enforcement discretion. The adjusted net sales range for 2021 calendar year of $253 million to $258 million does reflect what Rohit just reminded us of the 13% to 15% growth this year in those advanced Wound Care Section 351 continuing sales. Cash flow neutral, as I mentioned, and we will be updating the investment community on other financial expectations as -- when we present at the JPMorgan conference in early January. But I'll remind you, our existing cash levels are sufficient to support these R&D clinical efforts we've talked about today. Tim?

Thank you, Pete. It's been a fantastic day for my management team, and I want to thank again the efforts of our key opinion leaders to make the meeting and to provide us their insight into the application of our products in their particular practice. I use this particular graphic to represent the universe of options that we have when you have a placental biologics platform that MiMedx really pioneered. The utility and versatility of our products is pretty amazing. And the safety profile is unparalleled. I would like to close with a few comments, starting with -- starting with my talented team. We have a very skilled and seasoned leadership team in place. In the next level, we have the same passion and capacity to perform. Execution, flawless execution is exceptionally important for now since we have our plans in place to move forward. As I mentioned, this placental biologics platform represents for us a very, very substantial platform to generate new products in the future, whether those are on the drug side of our business or on the 351 or 361 or 510(k) side. It gives us the flexibility across many therapeutic applications, and it also drives us into larger and bigger or if you will, bigger markets. Today, we're going to close just with a simple comment around the EOA opportunity. As I mentioned earlier, we didn't quantify this for you today simply because. We do think it's a blockbuster product given the epidemiology here and how that is growing. This has the potential to transform not only this particular company, but also transform the lives of patients, and that's why we're here. With that, I want to say thank you, and we'll see you at the JPMorgan conference. Many thanks.