MiMedx Group, Inc. (NASDAQ:MDXG) Q4 2022 Earnings Call Transcript

Joe Capper: Yes. I think — and Pete, you can elaborate on this. I think after EPIFIX in Japan, we’re expecting some contribution, but it’s not material this year. We’re really looking at this year as kind of a developmental year to get that business up and running. As I mentioned in my prepared remarks, things have moved a bit slow, but we’re making progress. We’ve had our first couple sales into our local partner, and there’s been sales from the local partner to end users. We’ve got a lot of physicians trained on use of the product. So, we — and we’re putting additional resources in country to support our partner. So, we’re taking all the right steps. We’re pretty excited about it. But it’s hard to kind of say where that’s going to go in €˜23. And frankly we won’t know even what the outlook for €˜24 will be until the latter part of this year.

Pete Carlson: Joe, that’s correct. I think, you’ve covered everything there. We’re just excited about the reception we continue to see from practitioners on the market and are pleased that the product is getting into the market and it applied on patients as we speak.

Joe Capper: And then your other question, Anthony, was about reimbursement, nothing new since that January meeting. Best guess is we probably won’t hear anything until proposed regs are published in the middle of the year, probably around July timeframe. And then I think there’s usually a comment period associated with it. And then there’s final regs at the end of the year. I just think kind of — might have mentioned to you when we first talked. This company is on the right side of this, right? When you are using financial incentives to convince a physician to use your product, it’s just not what the regs are intended to guide towards. So, I think I’m very comfortable with this company’s behavior. And I think as this sorts itself out, we are on the right side of it.

Pete Carlson: Anthony — this is Pete. The one other thing to remember is we are talking about revenue that is about 28% of our business. So, in addition to being on the right side of this, it’s a portion of our overall portfolio, but not — by no means the dominant portion.

Anthony Petrone: That’s helpful. I’ll hop back in.

Operator: Our next question comes from the line of Carl Byrnes with Northland Capital Markets. Please proceed with your question.

Carl Byrnes: Great. Thanks for the question and congratulations on the results and the progress. With respect to the gross profit margin, which I believe averaged 80.7% in the fourth quarter, was cited as being negatively affected by lower production levels. Can you be a little bit more specific on what was affecting the production levels, and when you might expect them to return normalized levels? Thanks.

Pete Carlson: Carl, it’s Pete. Good afternoon. We are looking for that to turn here in 2023, including in the first quarter. How far it turns, immediately versus later in the year is yet to be seen. A part of this has been frankly employee based as well as efficiency based. We have had some turnover and we are not getting — we have not recently had the efficiency out of our production process that we historically have seen or desire. As Joe mentioned, we have new leadership in the team. And that’s helped us bring a refreshed focus on these initiatives. The team has worked hard in the fourth quarter and even after the end of the year in identifying opportunities for improving those margin and our production activities, and we’re excited about that.

Carl Byrnes: And then just a follow-up, unrelated but on the physician segment. Are you seeing patients being displaced or warehouse in the physician segment? So, are they potentially going to other segments for treatment? Is that a factor here amid the reimbursement uncertainties? Thanks.