Ladies and gentlemen, thank you for standing by and welcome to MiMedx Fourth Quarter 2021 Operating and Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker, Mr. Jack Howarth, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator and good afternoon everyone. Welcome to the MiMedx fourth quarter 2021 operating and financial results conference call. With me on today’s call are Chief Executive Officer, Tim Wright; Chief Financial Officer, Pete Carlson; Executive Vice President and Chief Commercial Officer, Dr. Rohit Kashyap; and Executive Vice President, Research and Development, Dr. Robert Stein. Tim and Pete will provide a summary of our operating and financial results for the quarter. And at the conclusion of their remarks, Tim, Pete and Drs. Kashyap and Stein will be available for your questions. Before we begin, I would like to remind you that our comments today will include forward-looking statements, including potential timelines for our ongoing clinical trials and FDA submissions and approvals and expected market size for these products. These expectations are subject to risks and uncertainties and actual results may differ materially from those anticipated due to many factors. Actual timing and FDA approval will depend on a number of factors, including the results of our clinical trials, our interpretation of those results, the impact of COVID-19, actions by others that affect our timelines and other factors that the FDA deems important. Additional factors that could impact outcomes and our results include those described in Risk Factors section of our annual report on Form 10-K and our quarterly reports on Form 10-Q. Also, our comments today include non-GAAP financial measures and we provide a reconciliation to GAAP in our press release, which is available on our website at www.mimedx.com. With that, I am now pleased to turn the call over to Tim Wright. Tim?

Thank you, Jack. Good afternoon, everyone and thank you for joining us on the call today. ‘21 was a defining year for MiMedx. In ‘21, we advanced our understanding of our PURION process placental tissue, both scientifically and clinically. We delivered above-market double-digit growth in our continuing tissue and core commercial portfolio despite COVID and the impact of the end of enforcement discretion. We are well positioned to execute against our goals and objectives for 2022. We are innovating by introducing new purpose-designed and developed products. We are expanding into areas of surgical recovery and across the globe with our anticipated launch of EPIFIX in Japan. And we are advancing the body of scientific evidence to support expanded applications of our placental biologics platform. The unmet clinical need across the markets we address today is significant. 10% of the U.S. population have diabetes, with calculated annual cost exceeding $300 billion. A key driver of cost for patients with diabetes is lower extremity diabetic ulcers, which present a substantial financial burden to payers and a significant burden to patients. Patients with these lower extremity ulcers-based challenges with mobility, the risk of infection, the risk of amputation, decreased quality of life and a shortened lifespan, many of which are exacerbated to an amputation actually be required. It is estimated that up to 85% of amputations are avoidable with the adoption of best practices of treatment. Results of our recent peer-reviewed study clearly demonstrate that MiMedx is proprietary PURION-processed EPIFIX, it should always be considered as part of a best practice treatment regimen. When following these guidelines, EPIFIX was shown to provide better clinical outcomes by reducing major amputations, emergency room visits, inpatient admissions and readmissions, all with statistically significant p-values less than 0.0001. Not only was EPIFIX noted as a dominant treatment…

Thank you, Tim, and good afternoon, everyone. As Tim mentioned earlier, we had a great quarter in peeling the onion a strong year. This is the second full quarter following the end of FDA enforcement discretion in which the company is no longer able to market Section 351 products in the United States. As we have previously disclosed, these products represented approximately 13% of total sales in 2020 and the team is working hard to grow back into our pre-enforcement discretion revenue levels. We reported net sales for the fourth quarter of 2021 of $67.4 million, a $1.1 million decrease compared to the 3 months ended December 31, 2020, in which we recognized revenue of $68.5 million. Fourth quarter 2021 net sales included revenue recognized on the remaining contracts of $100,000 compared to $500,000 for the same period 1 year ago. As a reminder, these are the remaining contracts relating to the historical pattern of revenue recognition. Adjusted net sales, which exclude the cash collected on the remaining contracts, were $67.3 million for the 3 months ended December 31, 2021, compared to $68 million for the fourth quarter of 2020, declining 1%, a strong result given the headwind from our inability to sell or market the Section 351 products in the U.S. Sales of our tissue and cord products were $66.9 million in the fourth quarter compared to $59.3 million in the prior year, growing a double-digit 13%. Net sales for the full year 2021 were $258.6 million compared to $248.2 million, an increase of 4.2% versus the full year 2020. Adjusted net sales grew 7.1% to $257.6 million in 2021 versus $240.5 million in 2020. For the full year 2021, tissue and cord products grew 15% to $240 million versus $208.6 million in 2020, a year impacted by restrictions…

Thanks, Pete. In closing, I’d like to thank our MiMedx team for their exemplary contributions. Over the past 3 years, we’ve been rebuilding and securing the foundation of MiMedx. 3 years of innovating, expanding and advancing have redefined who we are and what we hope to do to transform medicine. We have made significant and necessary improvements to our infrastructure, processes and systems to support our robust growth strategy and invested heavily in our commercial organization as well as other essential sales enabling support functions. MiMedx is a unique business with a unique business model that begins with a unique miraculous organ, the placenta. Our placental biologics have the potential to transform medicine in patients’ lives today and tomorrow. We are well positioned to advance the understanding and clinical application of placental science across advanced wound care, surgical recovery, including most surgery, musculoskeletal diseases and sports medicine. From donation to innovation to commercialization, we aim to be unmatched and unrivaled. As always, I thank you for joining our Q4 earnings call, your interest and support are appreciated. Operator, you may now open the lines for questions.

Thank you. [Operator Instructions] Our first question comes from Carl Byrnes with Northland Capital Markets. Please proceed.

Hi. Thank you. Thanks for the questions and congratulations on the progress. I am just wanting to know if you can drill down a little bit in terms of the increase in R&D given the anticipation of new product development, two per year. And then also the timing of the inception of the pivotal Phase 3 trials for knee OA?

Pete, do you want to cover that?

Yes. Carl, good to talk to you. We will see an increase in those expenses. They have been artificially low in the past couple of years. We did think they would be higher this year, but the way the trial schedule played out, it wasn’t the increase we thought. We haven’t given specific numbers, but it’s certainly going to increase as we go through 2022, how much is a little dependent on the timing of some of the aspects. But this is an important investment in our business. And we are focused on making sure the team has the right resources to do the work they need to do.

This is Bob Stein, Carl. We do plan to initiate our Phase 3 knee OA program in the second half of the year, and we anticipate being on time in the BLA filing in the late part of 2025.

Got it. Great. That’s helpful. I am going to cheat a little bit and just squeeze one more question. It looks like in terms of the advanced wound care products on an adjusted basis, you were up 15% year-over-year for the full year, up 13% for the quarter year-over-year and up 7% sequentially. With respect to the sequential increased 7%, was there any seasonality or any uniqueness in terms of, I wouldn’t say, buy-in, but anything that would have translated there? Thanks.

Rohit, I think that would be a great question for you to respond to.

Carl, while Rohit is getting his phone ready, it’s Pete. There is seasonality and even between the third quarter and the fourth quarter, there – similar to people waiting until their co-pays are paid up in the first part of the year, we do think there is a little bit of activity at the end of the year. So, in the fourth quarter people electing procedures when they – but while their co-pays are all used up, so…

Pete, I can handle it.

Go ahead, Rohit.

Thanks for that. I had some phone issues. But Carl, that’s a great question, like as Pete mentioned, we do see some seasonality from Q3 to Q4. And it’s related to, like Pete said, as people have met their deductibles for the year, there is a run towards getting some of the things that they might have ignored done. We also saw that coming out of Q3 into Q4, Q3 was – at the beginning of Q3 was impacted definitely by the Delta, a variant of the virus. And then we saw that we had more robust access in Q4. So, those were the contributing factors. And also, we continued to build momentum in our execution as we – it’s more and more of our team. We had a big bolus of hiring done in the first half of the year. We also trained our salespeople in the first half of the year. So, it takes a good six months for them to become more and more productive. And we also started picking up that pace towards the end of the year. So, all of those are contributing factors to what I would think is a pretty good robust set of results in Q4.

Thank you. Very helpful.

Our next question comes from Swayampakula Ramakanth with H.C. Wainwright. Please proceed.

Thank you. This is RK from H.C. Wainwright. Good afternoon Tim, Pete and Bob. So, just trying to understand the guidance so that you would have – you would expect 11% to 14% growth over the net sales of $240 million. So, what’s the push and pull on this number? And how should we think – I mean, you already gave us the guidance between quarters or through the year. But I am just trying to understand the range.

RK, this is Tim. I am going to let Rohit address that.

Yes. RK, good question again. In terms of the overall guidance of 11% to 14% and the flow throughout the year and the quarters, I think the beginning of the year is impacted by these insurance resets. So typically, we get out of the gate a little bit slower in Q1, with that impact as we had already answered in the prior question. As we think about what are the drivers for growth in our business. We have talked a lot about innovation and the expansion into Japan. Both of those things start impacting the business in Q3 and Q4. And as a result, they have – the growth rates that we expect in the second half of the year are significantly higher. And overall, the combined effect of that is the 11% to 14% of growth.

Okay. Thank you. Tim, I apologize if you already discussed this during the commentary because I got late onto this call. Talking about Japan, is there anything that you can add in terms of certainty of when you would have a decision from them? And then I am just going to throw in a quick question to Bob. On the knee OA, I heard that you are planning to start this program for sure, but in the second half, what is required of your team to get done so that you can get this BLA? And – I mean, sorry, not BLA, the study and get the enrollment started in the second half?

Yes. RK, this is Tim. The reimbursement approval in Japan is certainly going to be predicated on the ability of the government to process our application. We don’t really have any additional information. We still feel that midyear approval around reimbursement is certainly feasible. But we also have to consider that COVID may impact the government’s ability to process our application. So, if we get any updates on that, obviously, we will get that out. Bob, do you want to address RK’s question around clinic?

Yes. Hi RK, it’s Bob Stein. Before we initiate the Phase 3, we will need to meet with the FDA to go over our Phase 2b trial results. And also, we want to share with them our protocol design for the Phase 3, so that we get their buy into what we plan to do. And we will continue to work on addressing the issue that led to the fading of potency over time with the investigational product and we believe we have that well under control.

Okay. Thank you very much gentlemen. Thanks for taking all my questions.

Take care. Thank you.

[Operator Instructions] Our next question comes from John Vandermosten with Zacks SCR. Please proceed.

Hey, good evening everyone. First question is on the recent study you guys put out on lower extremity diabetic ulcer and the demonstration of cost effectiveness there. Are there any other indications that merit this kind of study because it certainly seems to make a strong argument for – in addition to the benefits of the patient, there is also an economic argument to make, any other work that you or others might do there? And are there indications to help make the case to physicians?

This is Tim. I think this whole area of wounds that do not heal, these chronic wounds. So, this happened to focus on DFUs. The other area could be venous leg ulcers. And I think this is what the agency for healthcare and research – some of their commentary around there is a lack of clinical – strong clinical work in this area as well as health economic work. So, I think the whole field of wound care would benefit from the approach that we have taken to combine the – looking at the clinical efficacy and safety as well as health economic outcomes. I think that’s where all this is headed and we are committed to generating data, not only efficacy data, but this economic type of data.

Okay. Yes. Thank you, Tim. And another question on your targets for growth this year. There is a couple of components to it. There is, I guess the base same-store sales or same product sales component of it, and then there is the regional expansion and then new products on top of that. How would you break down that 11% to 14% into those categories? And obviously, some of that is second half weighted. I am not exactly sure where you are with sales right now for the two new products you announced if that’s going to start in 2Q. But how would you break that down as we look at that 11% to 14%?

Pete, you want to break that down?

Okay. Yes, John, it’s Pete. Good afternoon. What we have talked about is over the course of several years, those pieces are 7% to 8% growth in the existing products, 2% to 3% from these two new products we are introducing this year and then 2% to 3% from the international expansion. That’s how you get to the 11% to 14%. As Rohit said, a lot of the growth – or the impact of both the new products in Japan is in the back half of the year. So, those – that ratio we have does not – is not necessarily this year’s ratio. You would certainly get to the lower end of those ranges for both Japan and the new products. And on the upper end, if not above the range on the existing products just for this year, given their second half – the midyear to second half impact of the revenues.

Okay. I mean, it almost seems like maybe that mid-single digit number you gave in the first quarter will kind of continue through as the same-store sales and then the other additions will kind of add on to that perhaps as you get to the 20% target for the 2Q?

Not exactly. Because of that seasonality, there is an odd – well, growth you wouldn’t think would be seasonal. There is just more opportunity to grow even the existing business as the year progresses. It is not as distinct in the first half, second half as things like those new products. But I would think that the mid – it would be more high-single digits across the year.

Okay. Very good. And last one for me is on just the COVID restrictions. It seems like in recent days, even that a lot of the restrictions have kind of fallen off. And I was wondering if there is any observations that you have made so far in sales and marketing activities as a result of that change?

Well, certainly, the restrictions are lowering. I am going to let Rohit give you his perspective since he is interacting with our folks on the ground every day.

Thanks, Tim. And that’s a great question. When we keep a close eye on this, I think as we began this quarter in January, obviously, these restrictions are pretty high for the peak of restrictions we have seen during the course of the last at least 12 months. And as things have developed and you hear it in the news every day, those restrictions have come down, improving the access for both patients and for our sales teams to be in front of customers. We still see pockets where these restrictions are high. For example, in VA hospitals and things like that, and in pockets and specific ZIP codes, but we adapt to them. One of the great things is that we have adapted through the last 2 years of having to live through it. And our business model, which serves a continuum of care across the three care settings of a hospital, the wound care clinic as well as the private office allows us to approach patients in balance where we might see them during those different phases of access issues and so on. So, we have adapted our business model and are flexible in being able to address the needs of the market accordingly.

Okay. Thank you, Rohit. That’s good. That’s all for me.

Thank you.

Ladies and gentlemen, there are – we have reached the end of the question-and-answer session. I would like to turn the call back to Tim Wright for any closing comments.

Well, I certainly do appreciate everyone joining. Your continued interest is important. I think we are off to an exciting 2022 and look forward to continuing dialogue with our investor base. Thank you.

Thank you. This concludes today’s conference. You may now disconnect your lines.