Lea Daniels Knight: Just, Ryan, if I could just — I’m sorry. One other clarification or just a final point on that. So that’s with respect to Boston. The one other thing, is with respect to our 510(k) submission for clearance, in the US for CereLink because that submission occurred prior to any official government shutdown, our understanding is that timeline will remain unpacked. So that we won’t see an impact from that either. If we had submitted it post the government to shut down, then we would be at risk. But our understanding is at this point, we our timeline for that is still, tracking to what we communicated.
Ryan Zimmerman : Thank you, Lea.
Operator: And thank you. And one moment for our next question. And our next question comes from Craig Bijou from Bank of America Securities. Your line is now open.
Craig Bijou: Good morning, everyone. Thanks for taking the questions. I wanted to ask on CereLink. So you started the relaunch in, I guess, like a couple international markets. So, Jan, maybe just talk a little bit about kind of the strategy and when you’ll get to a full international relaunch. And then I know it’s been asked before, but, you know, how to think about any contribution from either the international launch or US launch and how it could potentially ramp once it’s fully launched, both here and outside the US.
Jan De Witte: First, on the international asset, you’re correct. So end of the third quarter, September we launched several countries, Canada, South Africa, the [nordic] (ph) countries. The priority is very much determined by two factors. One, there’s the timeline of the local regulators, which go from very short to reasonably short. And then second, there’s a couple of basic logistics assumptions there. In the month of October, we’re relaunching several other in the countries, Southern Europe, a bit of Eastern Europe, UK is going on. Switzerland is going on. And so every month, yeah, over the next two, three months, we will be bringing on more countries in Europe. And that brings us to January when, when we move as should start to be launched in [March] (ph).
Again, from the question on ramp up, what we picture is a ramp up, yeah, comparable to the first year of the severance launch in 2021, 2022, where in the first 12 months, we were 12 months on the market before we recalled, we sold, yes, almost $12 million, so roughly $1 million a month. And so we model, in function of that ramp up in 2021, 2022.
Craig Bijou: Got it. That’s helpful. And then on the on the Boston facility, wanted to see, I understand the process there, but wanted to see, have you had any additional, or incremental conversations with the FDA on your plan. And if not, do you plan to recognizing that you guys have already set out the plan with the third party. But just wanted to see if there’s going to be any other additional conversations that you expect with the FDA?
Jan De Witte: So, the short answer is yes. So remember where we, in end of July, got this warning letter, we responded to that warning letter within two weeks with our plan to address those issues and the broader holistic plan. We got a confirmation from the FDA that they are aligned with this, and this goes back to some of the dates that the FDA has put down like doing that external audit before March 31st next year. We also had a telephone call with the FDA to make sure that [indiscernible] each other well plus, we shared, some of the external companies we’re using and will use for that external audit. So we wanted to have that aligned with the FDA in which they are fully aligned. As of that point, every two, three months, we do send updates to the FDA. So we keep them informed on the major stages of progress and main actions on the Boston facility.
Craig Bijou: Great. Thanks.
Operator: And thank you. And one moment for our next question. And our next question comes from Richard Newitter from Truist Securities. Your line is now open.
Richard Newitter: Hi. Thanks for taking the questions. I was wondering if I had just asked on SurgiMend. We’re getting close to the FDA, I think providing feedback on the clinical addendum that you had filed for that product. What can we expect to come out of that? And is there anything in there that could potentially delay timelines for that.
Jan De Witte: So expectations, I think we communicated we submitted in July that [indiscernible] and there’s some further information that’s being shared. We expect, early next year to get, feedback and the goal of that clinical part of the PMA. Now what we tried to explain last time is that the critical path for the PMA becomes the pre-market inspection of the Boston facility, which can only happen when the factory and the commercial is fully up and running. And so we expect that the market audits to happen either end of 2024 or early 2025, which leads us to PMA approval in the first half of 2025.
Richard Newitter: Okay. And then, second question, can you just bridge us between the gross margin from 2Q to 3Q, just one more time. I just want to make sure I have all of the components right there — to get there. And then also, any comments on M&A, just and capital deployment given the space and valuation compression over the last few months. Thanks.
Lea Daniels Knight: Yeah. Happy to take the question. And so let me provide a couple of data points. So as we look at our gross margin was 64.6% for the quarter, it was down about 250 basis points from kind of internally where we had been tracking. And that’s made up of three elements. First, the Boston return has a direct impact on margins and that was about 60 basis points. But then we also saw an acceleration of growth internationally that was higher than we had anticipated and that did have a negative margin impact coupled with some — within the US, some product mix dynamics that also had a negative margin impact. And that was about, 90 basis points together. And the remaining 100 basis points is driven by kind of the slower uptake on productivity improvements that we had anticipated.
So that’s the dynamic that played out in Q3 relative to what we were expecting. As we move into Q4, we’ll see a couple things. One, we won’t have the Boston return repeat. Right? So that 60 basis points comes back. We also would expect to see more normalized kind of, revenue mix growth dynamics, between international, US and some of the product timing that gave rise to negative margin dynamics should alleviate. So that should come back as well. What likely won’t come back in the Q4 timeframe is the net improvement in productivity initiatives that we had outlined, so that will likely continue to be a gap. And that’s why we’re now calling a moderate decline year on year, full year 2023 versus full year 2022. As I characterize kind of the nature of that net productivity, uptake or slower uptake.
