Jim Corbett: We’re not really thinking much that way at this point, primarily because we’re really in the nascent stage of our international strategy. We’re just so early that the priority is to establish RECELL first, and we’ll be doing that. And that will take some time. So I don’t — it isn’t a priority to strengthen that portfolio. In fact, what we’re finding is the distributors that we’re considering, including the one we did sign with in Europe, all have a broader portfolio already, which helps the — helps them sell more RECELL. So I think at the moment, this is a domestic U.S. strategy.
Chris Kallos: Sounds logically. Thanks for that. Thank you.
Jim Corbett : Thanks, Chris.
Operator: Thank you. One moment for questions. Our next question comes from Madeleine Williams with Wilsons. You may proceed.
Madeleine Williams: Hi, Jim. Hi, David. Thanks for taking my questions.
Jim Corbett: Hi, Madeleine.
Madeleine Williams: In regards to going back to, I guess, the bottleneck with launching into the trauma centers. I mean how much color do you get of what the process, ongoing process is like and whether you’re going to be able to get that uplift in the second half, just taking into account the guidance that you’ve given for the first quarter and then obviously full year guidance.
Jim Corbett: Well, Madeleine, I think it’s a good question. I think we’re largely through the consequence of the more consequent — the more complex value analysis committee process because we’ve started them and we continue to start more and they’re coming out. The new accounts are coming out of the process and we started new ones. So it slowed us a little bit in the fourth quarter, but not much. And but we do note that it is different and it is more complex. But what comes with that is a much bigger market with many more patient indications and many more possible treatment candidates. So I think right now we’re, probably after this call, you won’t hear much about VAC other than we’re progressing really well and we’re hitting our targets for the year. And I’ve mentioned that we expect to add nearly 200 new accounts for the year. And we’re on a good pace here in the first quarter to make that happen.
Madeleine Williams: Yes. Okay. That’s great color. And just in regards to, I guess, in translating that access into sales, I mean, I know there’s some crossover with the surgeons utilizing in both burns and then sort of more trauma surgeons. But are they sort of already aware of being able to utilize RECELL? And is the discussion in terms of the difference between RECELL and RECELL GO already happening?
Jim Corbett: Well, the difference between RECELL and RECELL GO, first of all, the output of the 2 of them is the same. But since we don’t have FDA approval, we’re not discussing RECELL GO with customers at this moment. That we have to wait for approval for. I don’t think that will be a big challenge for them. We’ve done private focus groups with them to talk about how we’re going to introduce the product. It’s going to be a, I think the word is a wholesale conversion of our business model. So all customers will — who want to use RECELL will do so with a RECELL GO durable and use the RECELL that. So it will be a conversion that we execute during Q3.
Madeleine Williams: Okay. That’s really helpful. Thanks.
Operator: Thank you. [Operator Instructions] Our next question comes from Lyanne Harrison with Bank of America. You may proceed.
Lyanne Harrison: Yes. Good morning Jim and David. If I could come back to the conversations you’re having about RECELL GO, I know you mentioned that it hasn’t been launched yet. But if I think about rest of the world, how familiar is the rest-of-the-world surgeon community familiar with RECELL currently as it is? And how should we think about the rate of adoption there? And then secondly, with the PolyMedics training, did you also have them trained on RECELL GO so that they’re ready to go when the launch occurs in May?
Jim Corbett: Got it. Okay. Let me make sure I line them all up. There is, across Europe and Australia and Japan I’d say good to moderate familiarity with RECELL already. That said, we were not commercial in anywhere but Japan during this time. So I think we’re introducing RECELL into a market where most are going to be new. Now with respect to RECELL GO and let’s just take Europe first, we are launching RECELL the — it’s called RECELL 1920, which is the standard system in Germany, Austria and Switzerland now. And when RECELL GO gets its CE mark through the MDR, which we expect sometime in the third quarter, they will converge. So some distributors and some customers in Europe, depending on when we signed a distributor may see RECELL for the first time in the RECELL GO configuration and not have ever seen the original RECELL or not have used it.
So I think it will be a matter of timing on that level. And no, we didn’t train PolyMedics on RECELL GO. That will be something we’ll do when the product is approved.
Lyanne Harrison: Great. And then if I think about gross margin, so obviously, well, for this quarter, you had a material improvement in gross margin. I guess that you talked about for 2024, you mentioned, you guided to 85% gross margin. Is there any reasoning why you don’t think you could maintain that high watermark of 87% going into ’24, particularly given you’re increasing your volumes over that period?
Jim Corbett: Yes. It’s a good question. So first of all, just to be precise, I didn’t exactly give guidance of 85%. We’ve been operating in that territories or my words. And I want — and there’s a reason I’m emphasizing that. Our margin with PermeaDerm will be 50%, not 85%. On RECELL, we will very likely be in that 85% range. And you may have captured during the call that we’re making some investments in our manufacturing operation, rather substantial, frankly. And that couple of margin points makes a little bit of — it does make a little difference when you completely rehab the facility. So our cost structure has gone up a slight bit on the one hand. And on the other hand, we will be introducing into our mixed gross profit, a 50% gross profit product.
Lyanne Harrison: Okay. Great. Thank you. And one last question for me is on operating costs. So in 2023, we saw 43% in operating costs, which pretty much is in pace with your revenue growth over that period. Should we expect that again for 2024? Or do you expect some operating leverage, particularly towards the second half of ’24 given that you mentioned you might get acceleration of revenues there?
Jim Corbett: I’m going to have David jump in on this one.
David O’Toole: Yes. We don’t see that same sort of percentage in 2024. We are expanding our sales force. So from a sales expense standpoint, there will be an increase. But the R&D expense is not going to increase by 43% again, as well as G&A is not going to increase either. So there will be leverage, as you indicated, as our revenue accelerates at the — towards the end of the year and the second — the third and fourth quarter, you will see a decrease as a percentage in operating expenses when compared to revenue.
Lyanne Harrison: Right. Thank you very much. That’s all I had.
Operator: Thank you. I would now like to turn the call back over to Jim Corbett for any closing remarks.
Jim Corbett: Well, thank you very much to all of you for joining our call today. We look forward to our next earnings call to announce our progress in Q1. Looking forward to hearing from all of you soon. Thank you.
Operator: Thank you for your participation. You may now disconnect.
