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

Good afternoon, and thank you for joining us today on the third day of the JPMorgan Healthcare Conference. My name is Caroline Borowski, and I'm a team member here at the JPMorgan team. It is my honor and pleasure to introduce you to Tim Wright, our CEO; and Pete Carlson, our CFO of MiMedx.

Thank you, Caroline, and I want to thank JPMorgan for the invitation to present here. First of all, I'd like to move quickly to the next slide. Everyone can take a look at our disclaimers here. Just please take note of the disclaimers and the cautionary statement. Obviously, it's a fairly raw thing for us to be doing. But there are forward-looking statements in here, I want you to be aware of that. Let's move to the next slide. MiMedx has been through a transformative year. And next year or 2022 will be an equally transformative year. MiMedx is a placental biologics company that has the capacity to transform medicine in certain indications. And also at the same time, this company has been transforming lives of patients that have serious untreated diabetic foot ulcers and venous leg ulcers. Now this transformational vision for us is pretty concrete. We take our platform technology, which is based on placental biologics. We've done a lot to understand the science there, and that was first applied in advanced wound care. The size of that market is a little over $1 billion in size here. Our strategy here, our business model is to migrate to higher totally addressable markets. This movement from advanced wound care into surgical recovery and then into Japan allows us to more than double the size of the addressable market for us to meet some of the unmet needs there. As you move further along Slide 5 here, you'll see that we go -- moving from $1 billion in market size up to $4 billion in market size by adding not only advanced wound care, surgical recovery and then Japan and other markets outside the U.S. We're still interested in countries like the U.K., Germany and Italy for our products. If we go to Slide 6. I want to just focus a little bit on the opportunity in knee osteoarthritis. We'll cover that in more depth later on in the presentation. But this is a very transformational move for us. If we're able to demonstrate in the clinic with 2 well-controlled trials, this product is efficacious in reducing pain as well as improved function in these patients, it will be -- I would consider that to be a blockbuster drug. Given the size of the market, we'll cover that a little bit later on. If we're able to capture an indication that would discuss disease modification, we move to the next slide, this disease modification indication would amplify the total market size, could be used in a variety of patients early on in patients. If we're able to establish that there is a soft tissue remodeling impact or characteristic here, it will be very, very transformational. It has an enormous potential and not only changing transformationally for this company, but also for patients' lives. If we go to Slide 8. I'll drill down a little bit into the knee osteoarthritis market. Today, there are approximately 19 million patients who suffer from different grades of knee osteoarthritis, whether it's Kellgren-Lawrence 1 through to 4. There are approximately 12 million patients that are candidates for hyaluronic acid injections. But there are multipliers here that I want to take you through. Obviously, setting up the right clinical trials, getting the right type of clinical results are going to be important for us. This is going to drive the product labeling. Outstanding product labeling to demonstrate this product can be used effectively in mild to moderate knee osteoarthritis is going to be actually a blockbuster for us. But also if we're able to demonstrate that a convenient dosing regimen that's efficacious, that allows you to unlock the potential of our micronized dHACM product will be absolutely outstanding. Also, the bilateral application, what I mean by that is injecting 2 knees, actually expands the size of that market as well. Certainly, a disease-modifying indication here would move us up in the treatment algorithm, again, adding more value here. Disease-modifying indication substantially amplifies the size of this market opportunity for the company. Moving on to Slide 9. In our Investor Day, and I hope many of you were able to attend the Investor Day that we did -- presented on December 9 in New York. We basically established the rationale for us moving forward in our Phase III trial. We believe that micronized dHACM has the potential to reduce pain and increase function. And it may have the potential to modify the disease progression. We plan to enter into a Phase III trials in 2022 and anticipate a BLA filing in late '25. [ We ] made a launch 10 to 12 months after that, after approval. Obviously, there are a lot of steps in here. I'll take you through some of that. But we believe today, we'll have to do 2 clinical trials to establish the clinical efficacy and safety of micronized dHACM for the use in knee osteoarthritis. Please move to the next slide. When you look at our commercial business, our existing products, we've demonstrated our ability to push for above-market growth. It's driven by the ability of our products to transform therapies in the areas that we want to participate in. Our existing products are primarily in the advanced wound care space, but adding new products into this and expanding into different areas such as surgical recovery, that we'll drill down a little bit more in, adds another 2% to 3% in our growth rates. Additionally, the move into Japan and other international market's going to add 2% to 3% there. So this is how we capture this 11% to 14% overall growth that we're anticipating for our business. Slide 11, please. Now let me take you through the treatment transformation in our portfolio here from an innovation standpoint. On the upper left-hand side, you see that we have -- we're in some very large underpenetrated markets, the advanced wound care market. We're actually characterizing better the surgical recovery market where we're using our existing products today and new products that are in our pipeline to provide assistance with the surgeon in surgical recovery. So these could be in lower abdominal surgery, OB/GYN, et cetera. Also, our expansion into the international markets. Now Japan is a very attractive market for us. We think this is the single most largest market for us in the near term. We plan to penetrate that market much like we did as a pioneer in the treatment of advanced wounds in the United States. Now we're still interested in other markets where we have approval, such as the U.K. and Germany. We also think Italy is an attractive market for us as well. We're still working on our go-to-market strategies in those markets after we receive market -- after we receive reimbursement. So we'll update our investors later on in the year on that. But moving into the Japan market, we anticipate we will receive reimbursement midyear and be able to launch shortly after that. Our value proposition in each of these large unpenetrated market is quite clear. We have very strong customer relationships in the advanced wound care. As I mentioned, MiMedx pioneered this area. We think we can grow this 6% to 8%. On top of that, in the surgical recovery area, we're developing clinical evidence -- robust clinical evidence to demonstrate the efficacy and safety in this area as well. So those products, most product entries are being driven by our market development team and our product development team. So there's a big focus in our R&D organization on product development, taking advantage of the route of the 361 or the 510(k). Then in the international markets, particularly in Japan, we're working through our go-to-market strategy there. We think that adds an additional 2% to 3%. Now if we go to Slide 12, I'm very excited about 2 new products that are going to be launching midyear. First product is AMNIOEFFECT. This allows us to build products with varying size ranges. So anywhere from 9 centimeters to 20 centimeters. This product also has improved handling. I'm not going to get into the full composition of the product today, but it's going to be a nice addition to our portfolio here. Then on the right-hand side, we've developed a placental collagen matrix, which can fill an important gap that we lost during enforcement discretion. When that went away, we took one of our products away. This will be a product to replace that, that fully falls in line with the 361 criteria. Every year, we plan to launch 2 new organic products every year for the foreseeable future. Now if we move to Slide 13, I want to drill down a little bit more on Japan. We think this is an outstanding opportunity. We have been working -- once we received our approval last year, we've been working to secure reimbursement. As I mentioned earlier, we plan to be able to get that reimbursement sometime midyear. We've already initiated a comprehensive medical education with surgeons in Japan through the surgeon society there, and we planned operational our go-to-market strategy shortly after we gain reimbursement. The next stage of developed -- develop local evidence. Part of our approval there, we agreed to do a 75-patient study that will bring a lot of experiential use with our products in the Japan market. We plan to enter that market with a hybrid model, some direct and some use of distributor relationships there. Third stage of this, where we have reimbursement initiated, we'll also try to expand that reimbursement into other types of chronic ulcers. So that's part of our strategy there. We're going to take that local evidence that we generate to drive appropriate usage of our products and expand the market there. We also can use this as a platform for expanding our pipeline products into Japan through the regulatory process there. Now if we move to the next slide, I will turn the presentation over to Pete to cover some of the financial dynamics of our business.

Thank you, Tim. We'll start here on Slide 14 in the top half and talk about what we've seen so far this year. So these columns, working left to right, represent net sales as reported where you see good growth. But then if you remove the impact of that accounting revenue recognition transition that we've been talking about, adjusted net sales, you see that growth is 10%. That compares to 6% reported. But then there -- because of the 9 months, some of that is impacted by the loss of the product subject to the end of enforcement discretion. And so on the right-hand side, we've been providing people all year a view of what we refer to as the advanced wound care Section 361 portfolio. This is the part of the business that we call -- we also referenced as our continuing portfolio. And when you look at a year-to-date basis, for the 9 months, you see almost 16% growth. So this is our team, Rohit Kashyap, Kim Moller and their team out working in the field, even despite some of the COVID limitations we found, they've done a wonderful job working with the health care professionals and getting products in their hand. As we look to a full year view on the bottom part of this page, we've talked about a full year expectation of $253 million to $258 million for our net -- the adjusted net sales for 2021. And that -- and then if you peel back the onion and isolate again, just that advanced wound care Section 361, the number is $236 million to $240 million, which I'll use as a base here in a little bit. That $236 million to $240 million represents a 13% to 15% growth in that continuing portfolio from the prior year. So that is where you see the traction we've gained this year of all of the things we talked about being done in the commercial perspective. If you look at Slide 15, we're looking at a cash flow perspective. And this is sort of to help understand not only cash flow, but a little bit about where our profitability levels are. This slide takes a cash balance from the end of September and in the high-level view walks it to in the middle, the end of 2022, and at the right-hand side, the end of 2023. And what we're demonstrating here is as we work through the end of this year, we are expecting to be free cash flow neutral. Why is that happening? What's happened to our profitability? What happened is enforcement discretion ended. We lost about -- we lost revenue from products impacted by that. That represents about 13% of our total revenue, but we did not adjust our expense basis for strategic reasons. And that's why as we grow back through that lost 13% revenue, we're going to be more in a sort of breakeven level on a free cash flow basis. As we finish up that grow back and we're back at levels consistent with revenue prior to the end of the enforcement discretion, we get back to our more traditional positive adjusted EBITDA and positive free cash flow. And we've talked in prior presentations about our historical trends there. And you would put that in the low teens, low to mid-teens for adjusted EBITDA and low teens for the free cash flow. Additionally, while we -- that free cash flow neutrality in the next 12 months, if you will, does reflect investments in those clinical trials that Tim mentioned. So we're investing in the business. And we're not really using a lot of cash and we have cash on our balance sheet regardless. So as we have said, these 2 clinical trials, we think, will use about -- will total no more than $30 million, $15 million each. We would incur that over 3 years. And thus, we believe that through the end of this year, the base business will be cash flow neutral and we have sufficient capital to support these critical R&D efforts. The next slide takes us into a look into 2022. We provided this in a press release as well as this presentation. And here, we're going to talk about our annual revenue growth of 11% to 14%. It's the same 11% to 14% range that Tim talked about earlier. I will say within each year, the components are a little bit different. So while Tim talked about kind of over a multiyear basis, 7% to 8% impact or growth from our existing product portfolio, 2% to 3% from those 2 new products that Tim mentioned and 2% to 3% from our international expansion. That's the pattern we think we'll see on a collective basis over several years. In 2022, we still expect that same 11% to 14% growth, it's just most of it will be coming from those existing products. We have, as Tim said, a midyear expectation of launching the product in Japan, and then we'll be launching those other 2 products during the year. That launch pattern gives a quarterly trend that we talk about. But first, let me remind you that when we're talking about these growth percentages, we're doing it off of the advanced wound care Section 361 products only. That's the continuing portfolio. And the -- that number is what I said, the $236 million to $240 million in '20 -- that's what we expect for 2021. The quarterly breakouts are in the appendix to the presentation where you would see the trend and as well as the overall totals. What we wanted people to understand is that because of seasonality in the business and because of the impact of those new product launches and the Japan launch, the growth pattern is a little different on a quarterly basis. So we do actually expect growth in the first quarter to be more in the mid-single digits. And then you can see here how it builds out to the future quarters, ultimately to a high teens or 20% growth in the fourth quarter of this year. Again, always off of that advanced wound care only. From an R&D spending standpoint, it will increase. What we're showing here is our expected spend in 2021, so this most recently finished fiscal year. And we will end up spending more than that in 2022. And that's really what we're just reminding people, obviously driven by the clinical trials as well as some other activity we'll be ramping up, working on more product development that Tim talked about for the current portfolio. And then finally, from a gross margin basis, we've historically talked about a range. And we're just letting you know that we think it will be slightly lower here in 2022 as the impact from both some market dynamics and our product mix, particularly as we go into the surgical recovery, there's just a slightly lower gross margin on those products and then a little bit of impact potentially from the Japan. Again, we expect in 2022 or through the end of 2022 to be cash flow neutral, including the investments in those knee osteoarthritis trials that Tim talked about. Tim?

Yes. Let's move to the next slide here. In '21, I laid out at the last JPMorgan meeting, there were 9 to 10 absolute things we had to get done in 2021. We achieved the majority of those. As I covered off in the clinical trial, the Phase IIb trial on knee OA. We had a puzzling result there. We've done the root cause analysis there, and we're able to have full confidence in moving forward into a Phase III trial later on the year. This GMP compliance was an important initiative for us. We're implementing that across our 2 facilities. And one thing that was really important for me, one at this commercial area was to demonstrate, we got our mojo back in our sales organization. I think our sales team, sales management team, our MSLs, our field reimbursement did a fantastic job in a really bizarre year for everybody due to COVID and its variants. So the Japanese approval got that done. We did not pursue inorganic opportunities because we wanted to make sure we stood up our product development and research teams to begin a cadence of launching 2 new meaningful products every year for the foreseeable future. If we move to Slide 18, there's a quick synopsis of what we plan to do in '22. This is my report card for myself, if you will. And it allows us to stay focused as a management team and aligned around what are absolutely relevant for us to execute on. Let me just start with R&D. We'll initiate our Phase III clinical trial in knee osteoarthritis. We'll have meetings with the FDA to shape up the statistical analysis plan and our protocol for our Phase III trial. As I mentioned earlier, we're going to have to do 2 Phase III trials, we think, in this area to demonstrate clinical efficacy as well as safety. Now safety has been well established in all the trials we've done with these products. We have no concern about that. Now critical to our success and our ability to feed growth over this 3- to 5-year period and use that cash to fund other advances in our placental science program will be our ability to improve the product vitality index. I define that as simply new products generating revenue will be outsized versus our existing revenue base, will contribute new revenue as a percentage basis. Historically, we almost had a negative product vitality index. So we're correcting that with these new product launches in the subsequent product launches in later years. I mentioned GMP implementation. This is a very high standard for a company that started out GTP. It's almost a whole cultural shift. We've been making this a top priority for the past 2.5 years. We think we'll be able to leverage our cost base and get some efficiencies out there as we begin to optimize the quality program or quality metrics in our -- in R&D as well as in our manufacturing processes. This is going to position us well for scaling our process down the road. In the event we're able to demonstrate clinical efficacy and safety in our knee OA program, supporting that market will require us to scale our manufacturing process. Now on the commercial side, we have an outstanding sales management team in place. We have strong leadership there. We're going to be able to sustain this double-digit growth target that we have for ourselves. Panning into Japan is a big deal for us. It's 1 single large market, 126 million patients in Japan. There are 626,000 chronic leg ulcers there. We think we can treat about 100,000 there. We have very broad labeling in Japan. It's beyond DFU and VLU and pressure ulcers. So we're very bullish about what we can do in Japan and really impact the growth curve there and contribute to the overall business. Launching these 2 new products, AMNIOEFFECT and PCM, is just the beginning for the business as we march towards a robust product development production capability as well as in our clinical development operations being able to move forward with our knee OA study. Lastly, let me just summarize this quickly. We all know that there's a significant unmet need in knee osteoarthritis. By the time we get to the point where we're filing our BLA, 20 million people will have different severities of knee osteoarthritis. We believe, based on our recruitment of talent in our R&D organization, we've been able to uncover the native and multimodal therapeutic properties of our placental tissue. It's one thing to actually measure regulatory proteins and enzymes in your finished product. It's another thing to understand what role they play in efficacy and safety. The underlying mechanism is important for us to understand, and our proprietary tissue engineering, we're making upgrades to that. We're looking at different ways to actually improve the quality and gain new insights here and also in this disease-modifying potential of our product. The ability to modify tissue or cartilage here, remodel that tissue would be an absolute game changer in this knee osteoarthritis market. We have the talent. We've got the skill. We've got seasoned leadership to make it happen. So that will be the end of our presentation. I'd like to open this up for Q&A, Caroline.

Thank you so much, Tim. So in your presentation, you led with the company as a transformational biologics company. Could you please highlight your business model, including across advanced wound care and surgical recovery markets?

Yes, I'd love to. Let me -- I think this is a business model that we've been working on. And it all starts with our platform. Our platform allowed us to move an understanding of the basic underlying mechanism of our placental tissue. Advancing the science there has allowed us not only to pioneer in the advanced wound care space but has allowed us to shift into surgical recovery, we'll characterize and define that market more. As you saw in my slides earlier, that adds at least the size of the advanced wound care market. So it more than doubles our participation in these larger markets where there's clearly an unmet need in some surgical procedures. We've identified 63 use cases in the surgical recovery area. Now we're not going to participate in all those use cases, but our product development team is geared towards developing products that serve an unmet need in surgical recovery, whether it's OB/GYN, whether it's Mohs surgery. It's a very attractive market there. Over 800,000 Mohs surgery procedures done a year. We think we can probably garner about 100,000 of those with our existing product line. We don't need to innovate there anymore. What we do need to do is focus on payer reimbursement in that section there. So our business model is clear. We take the platform. We apply new applications or new indications. We started with advanced wound care, move to surgical recovery, expanded into different geographic regions, and then continue to drive new indications and new applications in large unmet medical needs.

Great. And kind of going off of that, can you provide a little bit more detail on what makes your products so different from your competitors?

Yes. I think there are 3 things. Number one, how you recover a placenta, how you tissue reengineer the placenta and how you make sure that you have a safe product through terminal sterilization. So our proprietary process called PURION process is an engineering technology. We have focused on that clearly in this, and I think this differentiates our product line. Look, all placentas come from the same place, but how you actually manufacture and process the placenta to retain the bioactive proteins and enzymes in that is crucial to its efficacy and its safety. I think we have a highly differentiated manufacturing process and technology around that. And we're going to continue to refine that or get to PURION 2.0 here as we move out throughout the year. The other thing that I think is important here is data. How we surround our products with appropriate data that demonstrates the clinical efficacy, also the safety as well as the economic advantage of using our products in a particular application or an indication. The -- particularly in the wound care space, I think historically, there wasn't a great deal of robust randomized clinical trials. MiMedx did a fine job of taking this seriously and putting together clinical studies that demonstrate the efficacy and safety. We've taken to another level now given our orientation about being a company that is led by the science and led by the clinical data, by adding on health economic data. This is absolutely going to be critical as we want to continue to go deeper and deeper into the payer environment to get more and more reimbursement for our products. It's that reimbursement is critical for patients. It's also critical for the providers. We plan to do that. So that's the 2 big things, I think, that differentiate our products. And lastly, it's not a product thing, but our products sold in the hands of our salespeople and educated by our medical science liaisons, I think, is a huge differentiator as well.

Thank you. So I think it's fair to assume that the wound care market is misunderstood. What are you doing to change that?

Well, when I first came here, people described, including the FDA, described the wound care market as Wild Wild West, and I tend to do agree with them. It was relatively unregulated. It was misunderstood because there weren't enough really robust clinical trials to actually demonstrate it could be effective in this indication or the trials were maybe not as robust as they should be. But I think this is where MiMedx plays a role in leadership in the industry to demonstrate through clinical trials, let the clinical data fall where it may but we need to do robust clinical trials. And this is what's going to separate us from other companies in this space. So I believe that the misunderstanding about how these product works, we're addressing that in our research and R&D group. We have a very, very active publication strategy where we're doing the research, we're doing the translational research to understand the mechanism of action much better, understanding what proteins play a critical role in driving the efficacy. And why are these products so safe. We know that the placenta is immune privileged, but why? Why is that? So we're really digging down. And I think this is what, if you will, the new MiMedx is all about. It's generating the data. So you can dispel any misunderstandings about how these products work and where they fit in the, if you will, the treatment practice in particular indications.

Thank you. So you recently announced results from your Phase IIb knee osteoarthritis study. Can you tell us a little bit more about what you round out, what you learned? And what the next steps are that you can take?

I think we discovered a great deal about the properties of our product and how it behaves. First of all, the number one thing we discovered in the first 190 patients, this biologic -- placental biologic really works. The p values there were very, very profound. The puzzling thing about that in the second cohort, 256 patients where we lost a signal. We've identified what that is. We've learned that this product loses its potency over time. As it ages, it loses its potency. What did we learn out of that? We have to make sure in our clinical trials that all patients are being dosed with product that is 2 years or less. Now we're working on a permanent fix for that because we largely think this is an oxidative process and there's moisture in that vial. So we're going to fix that part of that. But in the mean term, as we crank up and get ready for our Phase III clinical trials, we're going to make sure that we build product and distribute that product in the clinical trial is less than 2 years old. So I would say that we are fortunate as a company to discover this potency issue and this aging issue or the stability issue in our exploratory Phase IIb versus discovering that in a Phase III pivotal trial. So we're very, very fortunate that we uncovered this early on so we can make the necessary corrections so we can replicate the 190 patient population data that we saw in our Phase IIb, we can replicate that in Phase III. The other thing -- you know what the other thing we learned is we have a really smart R&D organization that did the appropriate forensic analysis around this and got to the root cause.

Great. Thank you. And now could you maybe highlight for us a little bit about the key primary endpoints that you'll be seeking as part of your Phase III study protocols that you proposed? And when we should be expecting those studies to start?

Yes. Caroline, that's a great question. The FDA is going to require 2 primary endpoints. We plan to use WOMAC-Pain and WOMAC-Function as the 2 primary endpoints. Now we're going to be reviewing with the FDA a secondary endpoint as well. And that endpoint is going to be disease modification. We feel this is very important. Why? What makes us believe that there -- why we have this driving hypothesis around that? It's based on the research and the animal models that we studied in a meniscal surgery model or tear model. We found that there was actually evidence of tissue or disease modification or remodeling of the tissue there in that animal model. So we're going to discuss that with the FDA. The way we would measure that would be through an X-ray where we had staged the person to get their baseline X-ray and throughout the trial, we've continued to measure that. The other part of that is, I think, we prefer using MRI in this patient setting, but we have to discuss that with the FDA. But those are the primary endpoints, and what we are -- our best thinking right now is that the disease modification indication would be a secondary endpoint.

Great. Now moving on a little bit to the financials and such. Pete, maybe you could go a little bit through the expectations for the 361 product growth in 2022 and beyond? And if you could provide a little bit more if you're planning to launch new products, that would be great as well.

Sure. Thanks, Caroline. We, again, are looking at 11% to 14%. So double -- sustainable double-digit growth, as Tim mentioned. Over multiple years, that will reflect not only revenue from our existing products, but also revenue from these new products we're launching this year. Tim talked about our AMNIOEFFECT product and our placental collagen matrix or PCM product. The final driver, again, something else happening this year is launch in Japan. Over the multiyear period, we view that existing product base driving 7% to 8% growth annually, again, over multiple years, those new products, 2% to 3%; and then the international expansion 2% to 3%. Beyond that, as Tim has indicated, we're looking to continue to launch 2 new products each year. Those would be incremental on top of that 11% to 14% growth. So that's how we think about the growth going forward. Again, 2 new products this year in our 11% to 14% numbers. To the extent we're able to deliver on those additional new products, that's additive growth.

Okay. And as we discussed a little bit already, reimbursement approval in Japan is expected to be a next major catalyst. Could you maybe provide any more color as the timing and potential start of the business in Japan as well as the potential size of the market opportunity?

Caroline, we see that happening in the middle of this year. We -- our product was approved. The regulatory approval for the use of the product was approved in the middle of 2021. And there's a process to go through with a different body within the regulatory organization to get that reimbursement and pricing set. It's taking a little bit longer, partially COVID and partially their biannual calendar, but we expect that to happen in the middle of this year, and then we would launch shortly after that. We think of that product -- and Tim, you've talked about this a little bit, but we think of that product is -- or that market at about $0.5 billion right now, growing to about $700 million over the next few years. So it's a wonderful opportunity for us. We're excited about what our team has done to lay the groundwork, and we're excited about what we'll do, how we'll be able to launch and have an impact on health of a whole new population.

It's not unrealistic in the '22, '23 time frame, given the size of that market for us to be able to penetrate to grow sales in the $8 million to $10 million range in that time frame. And then as you move on out 4 years or so, I think it's more like a potential of $40 million to $50 million in sales there. We got to validate that when we get in the market. But that's why we find this such attractive. When you look at the size of the business, it would be a major contributor for us at relatively good margins.

Awesome. And I realize it might be a little early to ask for your 2022 outlook. But given your comments at last month's Investor Day, what could we expect for top line and bottom line growth in 2022 and beyond, given new product launches, global expansion and potential pipeline launches as early as 2027?

Sure. Thanks, Caroline. And we did actually go ahead and provide outlook in today's presentation for revenue in 2022. We see that as 11% to 14% growth. We see that growth coming off of -- or we're measuring that growth off of our continuing portfolio, which are the net sales for what we've called advanced wound care and Section 361 products. In 2021, we estimate that to be $236 million to $240 million in total. And that's where we think the 11% to 14% growth will come off of. The drivers this year will be different than the driver -- the proportion of the drivers will be different. So much of the growth this year will be coming from existing products, plus the current year impact of those product launches and the current year portion of what Tim talked about for the Japan sales. So those are the -- that's what we're thinking on a revenue standpoint. And as I've said, that 11% to 14% is sort of a beyond growth and the components kind of change year-to-year as to what's driving the growth. Then what -- while we haven't given bottom line guidance, we have given a perspective on a couple of those pieces in gross margins and in R&D spending. But overall, we've talked about being essentially cash flow neutral on a free cash flow basis through the end of 2022, as we grow back into the expense base, we purposely and strategically left in place even after the end of enforcement discretion. And then as we get into 2023 and certainly going forward, we return to the normal profitability growth we've seen over these last 2 to 3 years from this operating metric of adjusted EBITDA and look to grow that profitability level even more.

Caroline, I do think that Omicron is out there lurking. We all know about that. I think that we've learned a lot on how to manage through that with our sales organization and other parts of our company, but it's still out there lurking. We all know that. And I think our ability to adapt has been demonstrated here, particularly in '21. So it gives me confidence that we'll be able to navigate through pretty well in '22.

Great. And actually going off of that, realizing we're coming up on time, so one last quick question. What is your current cash position? And are you well funded for the anticipated start of the Phase III program and the development of the rest of the pipeline?

Caroline, the answer to that is yes, we are well funded. Our cash balance at the end of September, the end of the third quarter was $91 million. Again, over these -- from that date through the end of 2022, we expect to be cash flow neutral, including spending on the free cash flow neutral, including spending on the clinical trials. And then we would get back to generating positive cash flow and being able to even have extra to invest as needed. So we have the $90 million on the balance sheet, plenty to fund these clinical trials. And we'll ultimately be generating cash again as we get into the year after this year.

Great. Thank you. Well, thank you very much for taking the time today to talk about your story and updates, and thank you all for joining us today.

Thank you, Caroline, and thank you, JPMorgan. We appreciate the opportunity to present.

Yes. Thanks, Caroline. Stay well, everyone. Thank you.