Good day and thank you for standing by. Welcome to the Bioventus Inc. Third Quarter of Fiscal Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Dave Crawford, Vice President of Investor Relations. Thank you. Please go ahead.

Good morning, everyone and thanks for joining us. It's my pleasure to welcome you to the Bioventus 2021 third quarter earnings conference call. With me this morning are Ken Reali, CEO; and Greg Anglum, Senior Vice President and CFO. Ken will begin with a review of the quarter and the current environment and then provide an update on our recent acquisitions. Greg will then provide further detail on our third quarter results and update on our 2021 planning outlook. We'll finish the call with Q&A. A presentation for today's call is available on the Investors section of our website, bioventus.com. Before we begin, I would like to remind everyone that our remarks today 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 risk factors of the company's Form 10-K for the year ended December 31, 2020, as well as our most recent 10-Q filing to be filed with the Securities and Exchange Commission. You are cautioned not to place undue reliance upon any forward-looking statements which speak only as of the date that they are made. Although it may voluntarily do so from time to time, the company undertakes no commitment to update or revise the forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable securities laws. This call will also include reference to certain financial measures that are not calculated in accordance with generally accepted accounting principles, or GAAP. We generally refer to these as non-GAAP financial measures. Definitions and reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investors portion -- or Investor Relations portion of our website at www.bioventus.com. Now, I'll turn the call over to Ken.

Thanks, Dave. Good morning, everyone and thank you for your interest in Bioventus. As we enter the final months of a transformational year, the outlook for Bioventus has never been more exciting due to the exceptional execution of our growth strategy by our entire team. I'm encouraged by our commercial team's continued performance and resiliency as they delivered another quarter of double digit organic growth and continue to respond to the challenging dynamics brought on by the pandemic. As we work to integrate Bioness and Misonix, we remain steadfast on returning patients back to their active lifestyle. I will begin my remarks with a review of our results for the quarter before providing an update on our recent acquisitions. Revenue increased 27% for the quarter to $109 million despite some continued challenges from the pandemic, as we were able to more than offset these headwinds with strong execution across our growth initiatives in other areas of our diversified portfolio. We face some ongoing challenges from the pandemic, concentrated in the bone graft substitutes business as elective procedures were interrupted in specific regions of the country during the quarter. As we moved into October, we saw conditions begin to gradually improve and we currently expect to trend closer to a more normal environment by the end of the fourth quarter. Even with these challenges, we delivered an exceptional quarter of 14% organic growth. In order to give you a better sense of what the growth looked like against our pre-COVID levels, organic growth compared to the third quarter of 2019 across our three verticals in more detail. Across pain treatments, we saw double digit growth, driven by continued share gains for our single injection DUROLANE therapy and our three-injection GELSYN therapy. We remain well-positioned to take advantage of the shift toward…

Thanks, Ken. And let me add how encouraged I am by our team's success in the quarter as we continued to execute in a challenging environment while showing meaningful progress against our growth initiatives throughout the year. Let's begin with a review of our third quarter results. Revenue of $109 million increased 27% compared to last year. We saw a 14 percentage point increase from organic revenue, along with a 13 percentage point benefit related to Bioness. Although hospital utilization was negatively impacted by a new wave of COVID-related hospitalizations during the third quarter, we were able to deliver strong sales as we benefited from our diversified portfolio and the execution of our commercial teams. Our sales performance drove adjusted EBITDA of $21 million and adjusted diluted earnings per share of $0.25. Across pain treatments, we grew 24%, broken down by 21 percentage points of organic growth across our HA portfolio and a 3 percentage point contribution from our PNS products that we recently acquired from Bioness. PNS revenue grew double digits compared to the prior year under Bioness ownership. As Ken mentioned, we continue to capture market share in our DUROLANE and GELSYN products. Compared to the same period two years ago, DUROLANE revenue has more than doubled in the U.S. and has nearly doubled globally. In bone graft substitutes, revenue was impacted by increased COVID-related hospitalizations that reduced the number of elective procedures. As a result, revenue grew 4% but is up 35% year to date compared to 2020 due in part to the favorable comparison versus prior year which saw significant impacts from COVID. We estimate the impact from the disruption during the third quarter of this year to be approximately $2 million. Excluding this headwind during the quarter, growth would have been double digits, consistent with…

[Operator Instructions] Your first question comes from the line of Kyle Rose from Canaccord. Your line is open.

Great. Good morning, everybody and thank you for taking the questions. So congrats on a strong quarter here. Wanted to see if we could just touch first on the pain and joint preservation section here. I'm just wondering, obviously we saw some surges of the delta variant and I realize that that impacted your BGS business. But I'm wondering, over the course of the last 18 months and particularly in the Q3, have you seen a benefit there in your pain treatment, just as people might be pushing out total joint procedures, they might be getting more injections. Is that a dynamic that you're seeing here? Or is it really just solely reimbursement access?

Yes, Kyle. Good to hear from you. I would say what it's created more than anything with the pandemic is more choppiness. As we see ebbs and flows of elective procedures, that can create choppiness in their use of hyaluronic acid therapy, for instance. But as we've always said, as long as patients feel comfortable going to the doctor's office -- and even with the delta variant, that was the case. It was more of the elective procedures that were impacted due to hospitalizations of patients with COVID. We're in good shape with that particular product line. So from our perspective, it's really not reimbursement driven as much. I mean, our reimbursement strategy certainly aids in our market access strategy, more to our market penetration than anything. But it really comes down to access to physicians and we certainly did not see that get curtailed at all in the third quarter.

Okay, that's very helpful. And then you talked about some I guess early initiatives to help drive the Bioness acquisition. I think you talked about some pilots for using the existing sales force for PNS. And I'm just kind of trying to understand maybe when we should expect to see some of those cross-selling synergies really start to play out into this model. I understand it's still early days but maybe just help frame what that cross-selling tailwind should look like in 2022.

Sure, Kyle. I mean starting with peripheral nerve stimulation -- and our focus, as a reminder, is on post-surgical pain. We really view products like the StimRouter, our PNS device that we sell today, as being used in lieu of opioids and prescribing opioids for post-pain control, post-surgical pain control. So that initial pilot has gone quite well for us. There is a dedicated PNS team that we inherited from Bioness that does a fantastic job and works with our team in this pilot to generate leads. We do see that expanding to our more broad sales team in 2022. So we expect to see increased sales synergies, revenue synergies as we go through 2022. Now on the L300 Go, our focus and this is a pilot that just started, is gait disturbance post total knee procedure. And these are patients that have a weakened quadriceps muscle which is fairly common when you have osteoarthritis and you're rehabilitating from a total knee. Their device, the Bioness L300 Go, our device can restore that gait through a series of gyroscopes and stimulation of the muscle. So this initial pilot we're pretty excited about because it allows surgeons to prescribe this and get a patient back to walking normally more quickly than they normally would with the aid of the L300 Go. We would expect that pilot to continue here through the end of the year and into the first quarter but see more significant revenue synergies there as well, probably in more in the second half of 2022.

Okay, great. Thank you for the additional color here.

Thanks, Kyle.

Thank you. Your next question comes from the line of Robbie Marcus from J.P. Morgan. Your line is open.

Hey, guys. This is Alan [ph] on for Robbie. Just starting off with the kind of trends that you're seeing and sort of piggybacking off the question asked previously is that it seems like you guys are definitely holding in a little bit better than some of your other surgical and orthopedic exposed peers. And I would guess some of that's based on where you are kind of in the treatment paradigm. But can you just talk about why that might be the case, in your own view, why you're holding up a little bit better? In light of COVID-19 trends in third quarter, why you have so much more confidence in kind of this normalization over the course of 4Q when we're hearing some other peers talk about an extension maybe even into 2022?

Yes. Great question, Alan. And look, it starts and ends with our team and our people. We have a resilient, dedicated group at Bioventus. And that goes across our business from our sales team to everyone that supports our sales efforts. That dedication, coupled with our strategy, translates into what you're seeing today. Now to peel that back a little further, if we start with our joint pain treatments, our HA products itself, that is normally a first line of defense. And as we've talked about, as long as patients feel comfortable going to the doctor's office for treatment, we're in good shape with that therapy. We have excellent reimbursement. We're the only company with a single, three and five-injection. We've certainly seen the single injection through the pandemic continue to accelerate in usage. And we think with our DUROLANE product which is the highest molecular weight HA product on the market today, we'll continue to see penetration of market share with that product. The product is that good. And with GELSYN, our three-injection which is still a small, overall relatively small percentage of the three-injection market, we expect to see continued market share gains there as well. When you look at our other products, we are very diversified and broad. We cut across a large swath of orthopedics. We deal with thousands of orthopedic surgeons on a monthly basis. And that really lends that diversity to the balance and the growth that you consistently see from Bioventus. Even with advanced rehabilitation, we have seen terrific things from the Bioness team in that area where their call point is largely post-stroke patients with the gait restoration device I mentioned, the pilot, the L300 Go. And that's been a huge success this year. We continue to see good things from Exogen. And even with the headwinds with bone graft substitutes, we saw 4% growth when large areas of the country where we're highly penetrated curtailed elective procedures. And once again, that goes down -- and bone graft substitutes, to our strategy of being agnostic to spinal hardware, being able to work with every spine surgeon no matter what spinal implant they use and be able to offer a superior product and a very dedicated sales team that sells that product. So at the end of the day, as I started out, it comes down to our people, it comes down to our culture and certainly the ability to execute that type of strategy in a very diversified setting that we have.

Got it. And then, I guess just as a quick follow-up. When I look at kind of the Misonix portfolio, it does look like, correct me if I'm wrong, maybe a bit more interventional in nature. So how has that portfolio really held up? I would say that your updated guidance is roughly in line with what we were contemplating for Misonix. But just in terms of the recovery trends for that business and whether or not that's influencing your decision to cite the integration, it was kind of a quarter late after close. Thank you very much.

Yes, Alan. It's continued to hold up. I would say like a lot of elective procedure-based technologies, it's had some headwinds in certain parts of the country like we saw with our bone graft substitutes. But that's balanced by their wound business which is less related to elective procedures. So they're a balanced portfolio as well, having a foot in both elective surgical procedures in spine largely and then in wound treatments as well. So that team has continued to execute and grow that business, so we're pretty excited about that. And once again, see tremendous synergies there with our combination in bone graft substitutes, both technologies, the BoneScalpel, as well as our bone graft substitutes being agnostic to spinal hardware. We see the ability to execute with a combined sales team and penetrate the market more quickly than we are that both companies are doing solo today. And then with the wound products, we'll continue to sell to the wound centers and the hospitals but add in our office call point there as we go forward with the wound products where a lot of wounds with the pandemic are being treated in the office which offers a great opportunity for expansion of their wound business.

And our next question comes from the line of Robbie Marcus with J.P. Morgan. And our next question comes from the line of Drew Ranieri with Morgan Stanley.

Hi, thanks for taking the questions. And I'm sorry if I missed this but just with Bioness now in the bag, Misonix has closed, just how are you thinking longer term about the gross margin -- or the growth profile of Bioventus and the margin profile going forward?

Yes. Look, when we look at opportunities like this, Drew and thanks for the question, number one, it has to drive accretive growth. And our goals are consistent double digit growth in our business. And certainly, we look at both Bioness and Misonix as technologies that have a lot of that growth profile left in them to drive that consistent double digit growth that is accretive to Bioventus. As far as the margin profile, largely those are in line with what we've done historically. We certainly look at that very carefully when we do any M&A and understand what the margins are, what increased volume can do to impact margins and certainly what reimbursement looks like as well and what that can look like in our hands margin-wise as we move forward. So both of those areas, accretive growth and margin, are critical components. And certainly Bioness and Misonix check both those boxes for us.

Got it. And then just on international, I know that it's only roughly 10% of total sales but growth continues to be strong heading out of international. But can you talk more about some of your initiatives, again, since you've added to the portfolio? Maybe go into a little bit more detail about your go-to-market strategy? And would you -- can you put any framework in place of where international could be in the next 12 to 24 months as a percent of your total sales?

Well, as we mentioned, Drew, today it's about 10% of our revenue and that's below average compared to our peers. And certainly that's something we think with a broader portfolio with Bioness and now Misonix, we can leverage. We are direct -- we have direct sales organizations in Canada, the U.K. and Germany and a terrific international office in Amsterdam. And we think we can leverage those qualities, those attributes, that infrastructure that we have to grow international hopefully at a faster clip than our double digit growth. And we do see that happening over the course, not just the next 12 to 18 months but certainly over the coming three, four, five years. And I would see international, I'm not going to put a prediction out there on the percent of revenue but I would see it certainly climbing above the 10% that it is today. We see that kind of opportunity. Keeping in mind that both, Bioness and Misonix, did not have direct selling organizations, went through largely distributors. So the combination of our direct organizations, our international infrastructure will allow us, we think, to continue to penetrate markets more fully than both Bioness and Misonix were able to. So that certainly will lead to enhanced growth, growth that will probably be above what the total company growth will be. So we're pretty excited about that. We also see the APAC region of the world as another opportunity for us and we'll be looking at that more closely as we go forward and taking advantage of opportunities there as they come forward.

And then just one last question, just on DUROLANE for a moment. You called out it's the highest molecular weight and I think coming out of AAOS, there was maybe some positive podium presentations or discussion about high molecular weight HA. But what's been the feedback from clinicians after hearing that data? Are you seeing that in the field? Thank you.

Yes, Drew. It's a net positive. The AAOS comments on HA coming out of the meeting in September were an improvement, we feel and I think others would agree, over the somewhat tepid attitude toward HA back when they last reviewed this in 2013. Now despite that, the HA business overall has continued to grow at 3% to 5%. But the fact that DUROLANE is the highest molecular weight and they certainly correlated strong clinical results with high molecular weight HA, of course DUROLANE was not called out. But we know based on our data that it is the highest molecular weight and this is peer-reviewed data. We feel very good about that position. We feel very good about DUROLANE's ability to continue to penetrate the single injection HA market. Keeping in mind, it's only been on the market for four years today, it's about 20% of the single injection market and we think we can double that share over the coming years. If we use SUPARTZ as kind of a predicate for that which has 40% of the five-injection market, we think we can get there with DUROLANE in the years to come. And we're very excited about that and certainly the impact it has on patients and their osteoarthritis pain which continues to be a growing demographic trend.

Thank you. And I'm showing no further questions. So with that, I'll turn the call back over to CEO, Ken Reali, for any closing remarks.

Thank you. Thank you all for your continued interest in Bioventus. While we continue to execute well in this uncertain environment, we remain committed to creating shareholder value. I am confident in our growth strategy and in the ability of our diversified market-leading portfolio to sustain double digit organic growth while successfully integrating our recent acquisitions. Have a great day.

This concludes today's conference call. Thank you for participating. And you may now disconnect.