Mike Levitz: Sure, George, this is Mike. Yeah, we recorded the impairment charge based on a reassessment of the trajectory there coming out of the fourth quarter. As you know, the fourth quarter is always the biggest quarter in orthopedics. We had a number of new products. And so the key question that we wanted to see in 2023 is what’s the acceleration of new products compared to how are the more mature products doing? And what we found is that the more mature products were more challenged than we had wanted them to be and hoped that they would be and so that drove a revisiting of the valuation of the assets. The assets were originally valued back when the acquisitions happened at the beginning of 2020, just before COVID. And so once we went through that revaluation process, that’s what led to the impairment charge.
So we are seeing nice growth of these new products, even early days, but not enough to offset the slower growth than expected in the more mature products. And so that’s part of what Cheryl talked about in terms of driving focus and that’s why we’ve taken spending down to focus on those areas where we have the greatest opportunity and that’s why we’re able to drive such significant growth in the bottom line here as we go into 2024.
George Sellers: Okay, got it. Great. Thank you all again for the time.
Operator: Your next question comes from the line of Mike Petusky from Barrington Research. Your line is now open.
Mike Petusky: Hello, good evening. So Mike, I feel like you’ve answered this question about 85% of the way, and I’d love to get the other 15%. If you set aside the three new products that you guys have some hope for in JPR, will the rest of the business at the lower end of your guidance, does the rest of your business grow at all in 2024? Or do you assume sort of flat or worse performance in the legacy part of JPR?
Mike Levitz: Hi, Mike. Yeah, our guidance for 2024 is really driven by the new products. There is some contribution for the more mature products, but the key growth drivers that’s reflected in our guidance are the new products. What’s reflected in our range for 2024 is we have taken action to reduce spend and that can have an impact on sales and so we’re just watching that because, as Cheryl said, we’re prioritizing the bottom line over the faster growth in the top line and specifically there in joint preservation and around the more mature products and so, that’s something we’re going to watch and continue to balance.
Mike Petusky: I want to make sure that I understood what you just said. You said contribution. Are you saying there is a contribution to growth, meaning, more than flat from the legacy JPR in 2024?
Mike Levitz: Yeah, Mike, there is a contribution. One of the things that I’m balancing here is that when we talk about the contribution of the new products, the new products are principally launched in the United States. So there’s an international component that I’m weighing just in how I answer the question, but the primary growth driver in the United States are the new products. There is some variability that you can get in the international business where we don’t — we aren’t able to launch the products as quickly because of MDR requirements.
Mike Petusky: And Cheryl, I think I want to, and forgive me because I know you’ve tried to explain this, but I just want to make sure I understand. So Integrity, you sort of say, hey, we’re getting interest. We continue to be really enthusiastic, but we’re sort of holding back. Could you one more time sort of walk me through exactly what the — is there an issue in terms of the way you’re delivering this product? Can you just talk about what the holding, essentially the catalyst for the holding back is? Thanks.
Cheryl Blanchard: Absolutely. We very purposely in each of our product launches in the years that I’ve been here have done limited market releases in order to get feedback from a limited group of surgeons. Some of them are the designing surgeons that we work with primarily around the instrumentation and delivery system, surgical technique, elements like that. With Integrity, we took a very specific approach around designing a surgical technique that had ease of use, arthroscopic instrumentation, and fixation. The regenerative patch itself is doing great. And again, from a patient perspective, we’re hearing great things clinically. Also from the patch perspective around its manipulatability under arthroscope in wet conditions, its strength, its regenerative capacity in terms of the patient outcome, we always know when launching a new system that there are going to be tweaks that you want to make to the instrumentation and before we do a build that will allow us to go out to the full market, we want to make sure that those tweaks are complete and so that is what we’re doing right now.
We’re absolutely on track for doing it. There were minor tweaks that we got feedback on. They’re being implemented. And then we’ll do a much larger build, inventory build around that so that we have the inventory with the finalized instrumentation ready to go about midway through the year. My commentary about intentionally limiting is because we are feeling such a pull from the market with the limited group of surgeons that have been doing this. The word is out. The surgeons that have seen this product in training and at meetings like the academy are chomping at the bit to get it in their hands. And so we just want to make sure that those tweaks are done on the instrumentation, and then the full inventory build that we do around that full market release incorporates those.
So it is all on track. It is all as planned and it is sort of the normal way that we like to do a good, robust product launch here.
