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Wednesday, August 7, 2019

AxoGen Q2 conference call

Operator
Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instruction] our first question comes from Richard Newitter with Leerink Partners. Please state your question.
Richard Newitter — Leerink Partners — Analyst
Hi. Thanks for taking the questions. Karen and Pete, I was hoping maybe we could just start off with, guidance. I appreciate that the quarter came in toward the low end, you’re at low end year range, but maybe you could just keys out for us. What exactly it is being delayed by productivity gains and what gives you kind of visibility into, I guess the future productivity contemplation that you have in your guidance for the back half that this is the right range. It feels like productivity and sales force related issues have kind of made a little bit challenging to forecast the business.
So, help us understand what’s contemplated in your guidance in the back half, maybe even between the third quarter and the fourth quarter. What exactly led to the delays and what gives you confidence that you have visibility into the back half and for the new full-year target. Thanks.
Karen Zaderej — Chairman, Chief Executive Officer, and President
Sure. Thanks, Rich. So, we’ve demonstrated that as you take these territories and make them smaller and more geographically dense so we can generate both better productivity and high growth in those territories. And that’s what we’re looking to replicate across more metropolitan areas. At the same time, we’re taking some of the geographically diffuse cities and moving those to independent agencies. So there is some moving pieces in both geography and our percents of revenue to make these changes happen. We see that as a strong footing and platform for continued long-term growth.
The transition, if you looked at our original guidance, was that we would remain flat. We see the — productivity has remained relatively flat with our direct reps, and we’ve not seen the uptick that we expect to see — that we would originally hope to see in the full year, but we think it’s a timing thing. Because as we look back at territories that we’ve done this previously, we do see how they come up when you give that good concentration allowing the reps to focus. And just from a practical matter, you can see how that would happen in that it reduces driving time for the rep, they’re not driving out to cover a trauma case that might be five or six hours from their house, instead they are focusing on the territory on the high value accounts or are close to their home where they can spend more time and having better touch points with their surgeons so that we don’t lose surgeons during their wait period and we can continue to drive penetration in those accounts.
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