Good afternoon, ladies and gentlemen, and welcome to the Third Quarter 2020 Earnings Conference Call for Organogenesis Holdings Inc. At this time, all participants have been placed in a listen-only mode. Please note that this conference call is being recorded and that the recording will be available on the Company's website for replay shortly.

Before we begin, I would like to remind everyone that our remarks today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the Company's filings with the Securities and Exchange Commission including Item 1A of the Company's most recent annual and quarterly report..

Thank you, and welcome, everyone to Organogenesis Holdings third quarter 2020 earnings conference call. I'm joined today on the call by Henry Hagopian, our Interim Chief Financial Officer. Now let me start with a brief agenda of what we will cover during our prepared remarks today.

I'll start with an overview of our revenue performance in the third quarter, including the improving business trends we experienced during the quarter and the areas of our business that have performed extremely well despite the challenging operating environment.

After my opening remarks, Henry will provide you with a more in-depth review of our quarterly financial results and the formal financial guidance we included in this afternoon's press release, as well as a summary of our balance sheet and financial condition. And then, we will open up the call for questions.

Let me begin with the review of our third quarter revenue performance. We reported total revenue growth of 57% year-over-year in the third quarter driven by 66% growth in our Advanced Wound Care products and 9% growth in our Surgical & Sports Medicine products compared to the prior year.

Our revenue results were well above expectations and exceeded the high end of our preliminary revenue range announced on October 14th. Our growth in Q3 reflects the continuation of the key drivers of our growth strategy and competitive advantages that we've talking about on each of our earnings call this call.

The investment we've made to expand our sales force in recent years, the benefits of our comprehensive and differentiated portfolio of products that address patients need to treat wounds across all the stages of healing and strong execution of our commercial strategy focus on leveraging multiple channels, new product, introductions and brand loyalty..

Thank you, Gary. I will begin with a review of our third quarter financial results. Unless otherwise specified, all growth rates referenced in my prepared remarks are on a year-over-year basis. Net revenue for the third quarter of 2020 was 128 million, compared to 64.3 million for the third quarter of 2019, an increase of 36.5 million or 57%.

Third quarter revenue results came in above the high end of the preliminary revenue range provided on October 14th. Revenue from Advanced Wound Care products for the third quarter of 2020 was 90 million, compared to revenue of 54.3 million for the third quarter of 2019, an increase of 35.7 million or 66%.

Revenue from Advanced Wound Care products represented 89% of total revenue in the third quarter of 2020, compared to 85% of total revenue in the prior year period. Revenue from Surgical & Sports Medicine products for the third quarter of 2020 was 10.8 million, compared to 10 million for the third quarter of 2019, an increase of 0.9 million or 9%..

Thank you. And our first question will come from Matt Miksic with Credit Suisse. You may proceed with your question..

This is Vik filling in for Matt. Thanks so much for taking the question. I have two questions. The first one is that the rising COVID cases throughout the U.S. Again, can you see any sort of impact in your position office channel strategy in the last couple of weeks? I guess and then I'd a follow up..

This is Gary. Hi, Vik. We haven't seen a decline at all consensus in the office setting. There has been -- at the end of Q3, we did see a slight decline in access to the outpatient Wound Care Center.

Though we know maintain virtual contact with all our customers, we haven't seen an impact on sales in the outpatient setting, either at this point, but we have seen a trend of some outpatient centers starting to limit access..

And I guess one follow up, if I could. You spoke about to PuraPly trends in the quarter. I was just wondering, if you could kind of help us learn what you've seen the past couple of weeks with the past-through having expired? And how that expiration of past-through was impacting your larger product sizes thus far? Thanks for much..

Sure. There is still a little early to tell, but what we did see is, we didn't see the decline in PuraPly revenue in Q3, that we had seen in the past. We're just six to seven weeks prior to the expiration of pass-through we would see a decline. We did not see that decline. So that was important and encouraging.

We did introduce some new sizes of PuraPly and we've also accelerated our office growth strategy with PuraPly. So, both of those are doing well. The office strategy sale of PuraPly is doing well. Our XT line extension in the office is doing extremely well.

And the new sizes that we're introducing under the bundle to absorb some of those larger wounds are also doing well. So, those are the positive trends that Henry had alluded to..

Thank you. Our next question comes from Ryan Zimmerman with BTIG..

Maybe Gary, just to start on the CPN Biosciences acquisition, can you talk about the longer-term rationale for that acquisition? And is it around the physician management component aspects of that business? Or is it on the products that you can offer maybe expanding some areas that we previously weren't in? And also just get your thoughts there and I have follow-up..

Sure, it's really more the access of additional accounts for us and the ability to reach even beyond the office, all the way to the home eventually, where we see a lot of the wounds moving. So, it's more of an access opportunity for us so that access generates additional product sales.

And they also have some first in line, Advanced Wound Care products that we don't have. So that also gives us an earlier introduction to patients, which will enhance our ability to sell our other products. So, we expect that our products as well as their products will be pushed through that, that channel.

And it does offer us the ability to stay connected to those customers on a daily basis, until there's also a greater share of voice for Organogenesis within that channel and it's a more efficient way to communicate in the cell in the office channel..

Okay, that's very helpful, and then maybe, Henry, for you. Amniotic served showed really strong margin performance this quarter, it seems like -- and based on your guidance for the fourth quarter, I would suggest that that's just continue.

If you can kind of help us with the puts and takes there as you think about the margins longer term, maybe as PuraPly left and past dynamics are left. How can we think about margins, especially as amniotic is just driving such improved margin performance? Thank you..

We don't guide on our margin by product, but we feel very confident that the trends we have experienced here in Q3 will continue..

Understood, thank you..

So maybe a little more color, Ryan, So clearly PuraPly coming off a pass through has some ASP implications for the for the bundle. But in the office, we have a little bit of margin there.

But our other products to your point, our amniotic technology and our line extensions of PuraPly will help offset that margin, define that you would naturally get for those largest pieces in the bundle set..

Okay, that's helpful color. Thank you, Gary..

Sure..

Our next question comes from Steven Lichtman with Oppenheimer & Company. You may proceed with your question..

Thank you. Hi, guys. Gary, just wanted to touch base on Affinity, just given the extraordinary growth you're seeing in Advanced Wound Care and amnions in particular.

Any color you can provide on how much what we're seeing in the near term has been sort of pent up demand, prior to being able to sort of re-launch in the first half of this year versus some of the expansion that you talked about with new customers? And what is that runway like that you see as an expansion into new customers in the office channel?.

Sure. So, from -- yes, there was some pent up demand for the product in Q2 because we did have some existing customers back in 2018. But the growth, the majority of the growth is from our existing customers that had not used Affinity and the expansion of the customer base.

So one of the advantages of our amniotic technology is we're really expanding the market, and we're doing that with our amnion. But what we've also experienced in the offices, all brands are growing in the office, not just Affinity. So, that gives us confidence that we are expanding the market.

We're doing that by adding customers and folks who haven't perhaps use some of the advanced modalities that we have now..

Got it. Thank you.

And then just a follow-up on NovaCor, can you talk a little bit about the timing of that launch? And how you think that that will move further add to the momentum in your amnion business?.

So, our expectation is NovaCor, would be launched sometime in Q4 of next year. So, one of the challenges we have with launching NovaCor is the same manufacturer that manufactures Affinity. And as I said, on a number of calls, you know, we're continuing to ramp up our Affinity manufacturing each quarter.

It's one of the execution challenges we have ahead of us, but it also takes up some of the capacity for NovaCor. So, it really depends on how long Affinity continues to grow at the pace that is growing, but right now we're projecting Q4 of '21 for the launch, and we do expect it to be a significant growth driver for the Company in the future..

Thank you. At this time, we are currently showing no remaining participants in the queue, and we are currently showing no remaining questions in the queue at this time. That does conclude our conference for today. Thank you for your participation..

Thank you very much..