A lot of it is we’ve talked about we see opportunity to drive improvement in our gross margins. We’ve deployed teams to go after not only identifying initiatives, but starting to execute, but we started to do it kind of in small pilot areas. And what we’ve been able to confirm is that the value is there, greatest value being in some of the tissue tech sites that we have, but the expertise needed to execute on those initiatives is the same expertise that we need to help support the Boston restart plan and so we were not able to deploy as many resources against that effort as we had anticipated. And so that’s what’s causing the slower uptake versus what we had anticipated. So I’ll pause there on gross margins. And I can go into M&A if you want.
Richard Newitter: That was very helpful. Thank you.
Jan De Witte: Yeah. Richard, on your M&A question, I mean, clearly, M&A will continue to be a priority for capital allocation as part of our long range planning, though at this point, I would say we temporarily are tempering somewhat. And specifically at tissue tech, which I think is quite obvious given that management is very focused on getting Boston back. That said, we have our strategic game boards often, you don’t fully control the timing. So we are continuing to explore and then primarily on our CSS, our Codman Specialty Surgical sites, and specifically we say midsize store tuck in deals that meet our return on investment requirements are strategically, you know, fitting to our business and also fit within our financial discipline, which remains strong in the business.
Richard Newitter: Okay. Very helpful. Thank you.
Operator: And thank you. And one moment for our next question. And our next question comes from Steven Lichtman from Oppenheimer and Company. Your line is now open.
Steven Lichtman: Thank you. Good morning, everyone. Lea, just wanted to follow-up on gross margin. You talked about some of the near-term dynamics and the efficiency opportunities you see, I guess, certainly Boston, becomes less of a focus for the team. Can you give us your updated thoughts overall where you see gross margin tracking over the next couple of years? I mean, update if you could, on other drivers that you see, for gross margin, particularly now with you having more time in the CFO seat.
Lea Daniels Knight: Yes, Steve. Happy to take the question. So bigger picture or longer term. So, A, just to be clear, we’re not providing an update on any LRP guidance at this point. But to your point, I have taken, additional time to drill into the opportunities that we have to improve gross margin. I remain committed that there is value there for us to create, but it’s a lot to unpack. And so if you recall at Investor Day, we said there’s about a 300 to 500 basis point opportunity for improvement in gross margin over our LRP period. And it was coming from three primary places. Volume mix price was kind of one bucket. The productivity yield initiatives that I referenced earlier was kind of bucket two, and then footprint optimization was a third bucket that we had articulated.
And I would tell you the volume mix price is totally embedded in how we are driving revenue and bringing MPI to market. And so that still remains very viable. And as you saw, based on our results in Q3 in terms of the business outside of Boston that business is growing at our LRP day levels. And so as that continues to happen, as we bring MPI to market, we will realize that the gross margin improvements related to that. The second piece that I articulate around productivity yield, those are the areas where it’s a slower uptake, but the opportunity is still there. We will need to redeploy resources or accelerate the deployment of resources against those efforts in order to extract it. And so that’s what we’re looking at now to understand from a timing perspective, you know, when that happens and the overall magnitude.
So that’s how we’re thinking about it right now. And, you know, more to come. We’ll have an official update as we finish going through our LRP process.
Steven Lichtman: Okay. Understood. And then just a follow-up on, I don’t think we touched much on Aurora in the 510(k) filed. I think you gave some long term thoughts on the market opportune or the product opportunity for you guys in 2027. How are you thinking about sort of the ramp of that product as we go through 2024? Thanks.
Jan De Witte: So as we communicated in the past, right, the past couple of years, yeah, we’re limited release to learn in the case, of the Surgiscope, the 8 millimetre Surgiscope that has led to some upgrades to the product, and that’s a 510(k). We consider that 2024 is the first real commercial year where we have the product sets, we have the sales force and will start to go into the market. We’re not sharing projection or guidance yet on what we expect there, but definitely a different, a different rhythm, a different slope in terms of commercial opportunity and commercial thrive.
Lea Daniels Knight: This to point on that within Q3, we did see strong growth on our Aurora. It was it was up high double digits for the quarter. So some momentum building there.
Steven Lichtman: Great. Thank you.
Operator: And thank you. And our next question comes from Matthew O’Brien from Piper Sandler. Your line is now open.
Matthew O’Brien: Good morning. Thanks for taking the questions. Real quick, don’t you need the warning letter listed, at the Boston facility before you can submit the SurgiMend TMA?
Jan De Witte: Yes. And so that’s the reason why, after we get going, we’ll have the FDA in to audits, auditing linked to the warming letter and auditing to the pre markets audit for the PMA. So between say mid next year and end next year, there will be FDA audits in there.
Matthew O’Brien: Okay. But you need to have it lifted before you can submit. Got it. Okay.
Jan De Witte: Well, we can submit — we can submit — sorry, Matt, we can’t submit before the audits, but the FDA will only approve after successful PMA audit.
Matthew O’Brien: Lift to the warning letter. Got it. Okay. And then on the Boston impact. Can you — can I see that how a little bit more just in terms of — is that impact a gross impact or a net impact that includes positive offsets from the substitute products that you’re selling in kind of 10% to 15% of your cases?
