Conformis, Inc.
Q2 2019 Earnings Call Transcript

Published: 4 Aug 2019

[Operator:]

Good afternoon. My name is Mei and I will be your conference operator today. At this time, I would like to welcome everyone to the Conformis Second Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.Before we begin, I would like to remind you that the management will make statements during this call that include forward looking statements within the meaning of Federal Securities Law, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.And statements contained in this call, that are not statements of historical facts, should be considered to be forward looking statements. All forward looking statements, including without limitation, statements about confirming strategy, future operations, future financial position and results, gross margin, product margin, operating trends, financial guidance, market growth, total revenue and revenue mix by product and geography, the anticipated timing of the limited launch of our hit product offering, the potential impact and advantages of using customized implants, business initiatives and transitions in our commercial operations are based upon current estimates and values assumptions.These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements, including those discussed in the risk factors section of Conformis public filings with the Securities and Exchange Commission.Accordingly, you should not place undue reliance on these forward looking statements. While Conformis may elect to update these forward looking statements at some point in the future, Conformis disclaims any obligation except as required by law to update or revise any financial projections and forward looking statements, whether because of no information, future events or otherwise. This conference call contains time sensitive information. And it's accurate only as of the live broadcast today, July 31 2019.I will not turn the call over to Mark agouti the company's President and Chief Executive Officer. Mark?

[Mark Augusti:]

Thank you Mei and welcome everyone to Conformis' second quarter 2019 earnings conference call. With me on the call today is our CFO Paul Weiner. During the call, Paul and I will share our prepared remarks at a variety of topics including our second quarter financial operating performance. Following the prepared remarks, Paul and I look forward to answering your questions.From a commercial perspective or us business delivered 5% revenue growth, which we believe to be an above market growth rate. Our international revenue declined 10% on a constant currency basis, which was an improvement over the rates of decline in previous quarters. We believe this improvement is due to the results of our two part strategy to open up new international markets and to work with German surgeons to better document their clinical decisions prior to surgery.The overall revenue growth rate in second quarter was 3%. Operationally, we realize the gross margin of 49%, which was in line with our expectations and demonstrating an improvement in gross margin from the prior quarter.As announced previously, we took significant actions in the fourth quarter of 2018 that were intended to optimize sales, marketing and administrative expense to achieve operational efficiencies, sharpened focus on new product development by prioritizing product segments with higher growth opportunities, continue opportunities to international expansion, as well as we streamline personnel to create a more focused organization resulting in a headcount reduction at the time.I'm pleased to report that for the second quarter 2019. And for the second quarter -- consecutive quarter, these actions resulted in significant expense reductions and this corresponding reduction in cash utilization. This performance, combined with our recent debt refinancing is consistent with our longer term plans to manage cash and expenses as we launch our new product platforms.Let me now turn the call over to Paul, for more detailed financial review. Paul?

[Paul Weiner:]

Thank you, Mark. And thank you all for joining us. We reported second quarter revenue of $19.6 million, representing an increase of 3% or $493,000 year over year on a reported basis. Excluding the negative impact and changes in foreign currency exchange rates of $149,000, revenue increased 3% on a constant currency basis. Revenue in the second quarter of 2019 and 2018 includes royalty revenue of $256,000 and $192,000 respectively, related to a patent license agreement.Second quarter product revenue was $19.3 million, representing an increase of $429,000 or 2% year over year on a reported basis and 3% on a constant basis. Sales of iTotal PS increased $1.2 million to $7.2 million or 19% year over year on a reported basis and 20% on a constant currency basis. Sales of iTotal CR, iDuo and iUni declined $1.2 million to $11.7 million or 10% year over year on a reported basis and 9% on a constant currency basis.iTotal PS represented approximately 37% of total product revenue in the second quarter of 2019, compared to approximately 32% for the same quarter last year. With the limited launch beginning in the third quarter of 2018. Conformis Hip System sales were approximately $500,000 in the second quarter of 2019.US product revenue increased $839,000 to $17.2 million or 5% year over year. US product revenue is driven by sales of our iTotal PS, which increased 19% year over year, offset by a 10% year over year decrease in sales of the base business product lines. Second quarter US product revenue represented 89% of total product revenue, compared to 86% for the same quarter last year.Rest of World product revenue was $2.1 million a decrease of $410,000 or 16% year over year on a reported basis, and 10% on a constant currency basis. Rest of World product revenue was affected primarily by reimbursement challenges in Germany.Turning to our view of our results across the rest of the P&L. Second quarter gross margin was 49% of revenue, compared to 48% of revenue for the same quarter last year an 100 basis point increase. The gross margin improvement was driven by cost reductions as a result of vertical integration and manufacturing efficiencies. As we stated during the last two earnings calls, we incurred some short term manufacturing costs during the final stages of offshoring, our software design manufacturing team to India, which we believe are now resolved.Due to this, we indicated that we expected our gross margin to remain relatively flat from the fourth quarter of 2018 through the first half of 2019 and returned to expanding our gross margin in the second half of the year. Total operating expenses decreased $4.9 million to $15.5 million, or 24% year over year. This decrease in expenses was driven primarily by reductions in personnel costs, marketing programs and patent litigation expense as part of the plan and now to the end of 2018 to reduce cash burn in 2019.Personnel costs in sales and marketing were reduced as a result of the reduction in the number of sales managers open positions, the conversion of direct reps to independent agents, and the reduction of certain marketing programs, personnel costs and research and development were reduce mainly due to the completion of certain software and product development projects in 2018 and the timing of product development projects in 2019. Additionally, patent litigation expense was reduced due to the settlement with Smith & Nephew.Net loss was $6.8 million or $0.11 per share, compared to net loss of $14.1 million or $0.24 per share for the same period last year. Net loss per share calculations assume weighted average shares outstanding of 63.3 million shares for the second quarter of 2019 compared to 59.8 million for the same period last year. Net loss in the second quarter included foreign currency exchange income of $398,000 compared to foreign currency exchange expense of $2.1 million in the same period last year.We had cash and cash equivalents and investments totaling $20.7 million as of June 30 2019, compared to $23.6 million as of December 31 2018. We had announced on June 25, that we secured up to $30 million in debt financing and $3 million in equity financing. The debt financing is comprised of a term loan of $20 million, of which we made it $3.4 million in additional cash after the payoff of our existing $15 million term loan and related costs. And the revolver line of credit for up to $10 million, which we have not borrowed against. We estimate quarterly interest expense of approximately $575,000 going forward.Excluding this financing, we were successful in reducing our cash burn during the quarter to $4.2 million, versus approximately $9 million to $10 million dollars in each of the quarters last year, excluding last year's financings and patent litigation settlement. Although we are pleased with our first half revenue performance, we are experiencing weakness in orders for the third quarter, including in the United States. Due to this, we are now estimating generally flat year over year product revenue growth for the full year.With that, let me turn the call back over to Mark to add additional color.

[Mark Augusti:]

Thank you, Paul. Look, as Paul just mentioned, we now expect to decrease growth for the second half of the year primarily due to denials of coverage for maintenance. And as issued a policy stating that Conformis total needs investigational experimental we believe that the policy was issued mistakenly as an attempt to limit pain for PSI with standard implants.We have submitted a complete clinical and health economic package set and regarding our knee arthroplasty results. This package includes a letter from Marcus, the American Association of Hip and Knee Surgeon supporting coverage of Conformis products and indicating that our products are not investigational nor experimental.While we cannot predict the ultimate outcome, we should note that we have had success in the past as we reported previously, in working with payers to adjust the policies. In addition, we anticipate three other minor headwinds for the second half; a slowdown of USCR demand in light of the cementless segment growth; continue OUS revenue declined due to reimbursement challenges in Germany, although at a slower rate; and moderately less hip revenue as we focus on the full commercial release and the rollout of new features based on the limited market release customer feedback.As noted in previous calls, we believe the market demand for cementless knees is accelerating at the expense of cemented CR knees. We remain confident that our new product pipeline will address this issue. However, the timing is set that we expect pressure on the core cement CR business throughout the remainder of this year. Our Conformis Hip System remains in limited market release as we finalize improvements for the system and seek regulatory clearance to those changes. We still anticipate full market release prior to year end, likely late in Q4. And therefore as previously stated, we do not expect to see a positive revenue impact from our Hip System until 2020.Clearly change in sentiment regarding our US business is disappointing. We believe this is a near term impact that is correctable and we hope we expect that our operational improvements, expense optimizations and refinancing actions we have successfully undertaken will allow us to continue to execute on our commercial strategy moving forward.With that I thank you and will open the call, operator, to questions.

[Operator:]

[Operator Instructions] Your first question is from the line of Ryan Zimmerman from BTIG. Your line is now open.

[Ryan Zimmerman:]

Great. Thanks for taking the question. Want to elaborate on what Aetna is saying to you to spare math, just about 3 million to 4 million sales in the back half of the year. And what is the mix of denials between the product category, is it all PS, is it all CR? Just maybe help provide a little more color there? Thank you.

[Mark Augusti:]

Yeah, Ryan? Great question. This is Mark. And that's a frustrating thing and why we think it's incredibly an incorrect policy. They're actually just denying Conformis. They're not even getting into the product or anything. So as far as our advisors and we're aware of this first time, payers ever actually just denied a company by name versus a products. And again, we just think this is snafu, it's incorrect.We are aware that they're reviewing the policy this month as we speak. And I would just reiterate again, we're hoping that we'll see a change or at least get some answer, no later than sort of mid-September. But yeah, it's disappointing, because it's just Conformists, if you will.

[Ryan Zimmerman:]

Okay. Helpful. And then international, you've left international comps that have been week, particularly with reimbursement in Germany. So I am just curious are the reimbursement levels in Germany getting worse than they were previously or is there something else that's causing kind of a continued deceleration in international business?

[Mark Augusti:]

Yeah, no. And let me -- and I've talked about this before, so I'll just reiterate it again, because it's a little convoluted. But this all started if you remember on partials and that was sort of a different thing, because there was a massive change about the reimbursement rate in partials. And that impact was, I'm going off memory here, but I want to say it was about $4 million, give or take. And that was one that would annualize out and we talked through all that.The problem was that if you look at our total business, it wasn't about reimbursement rate change Ryan. It was about medical necessity and frankly not reimbursing based on medical necessity by the firm called MDR, which is an acronym over in Germany. Yeah, Ryan, excuse me, MBK around after the surgery. So that's why we're not really annualize out. So initially, it was very sporadic. It's gotten a little worse, each quarter as that is done, but it's lessened and that's why we're seeing the decline. But it's not really an annualizing out. It's just a continued sort of construct that the MBK is doing on the medical necessity of our products.And as I said in my comments, we actually are working out with surgeons up front to demonstrate the medical necessity, prior to surgery. And that has had some limited success. So we've kind of slowed this this down, if you will. But it's still going to be a headwind, in my mind for the foreseeable future.

[Ryan Zimmerman:]

Okay. I'll let some others ask questions and hop back in the queue. Thank you.

[Operator:]

Your next question is from the line of Josh Jennings from Cowen. Your line is now open.

[Josh Jennings:]

Hi, good evening, gentlemen. Thanks for taking the questions. I just had a follow up on the Aetna issue. It looks as if the policy was reviewed last September. And it's currently being reviewed again now. I guess, why had it announced picked up? Do you have any sense recently versus over the last nine or 10 months?

[Mark Augusti:]

Yeah, Josh. So it's a really good question. So as you know, we had a pretty strong Q4 and Q1, and as a medical device manufacturer, we don't have really good visibility to this. Because, this is on the hospital side. And as a result, we didn't really kind of feel it, we tried to recalling exactly when the policy first came was until kind of after the new year that we sort of became aware of it, my recollection is right. But -- and we started the process, but we didn't really see an impact on our end. And it's really been in the last sort of 60 or so days that we've seen kind of this hit.And don't forget, we saw this phenomena with Cigna, right. If you recall, when this happened, and we were able to effect the change, but it takes them a quarter or more to operationalize kind of what their policy is.So they may the medical guys may make a policy determination, but then operationally each organization is a little different about how they roll it out, how effective they are and actually communicating it. And the only thing I can attribute it to is that it took a little while for them to put the wheels in motion. But then when they did and as we've seen like they've gotten pretty good compliance nationally.And the other thing about this is, which is disappointing to us is by our math are like the third, by our understanding, they're like third largest commercial player. So this is a bigger impact to us than it was previously. But again, I want to be confident in that. We have a great product performance, clinical reputation, we've got a dossier that we stand behind, we provided at Aetna. I'd like to believe that I can't predict the future that the right decision will be made here in the short term.But at this point we had -- we want to talk about this and we're going to do the best we can with our advisors to make it where it is and that it was incorrect. And like a said, we believe it was an incorrect determination that they came to, without looking at our data set, because they did not look at any of our actual clinical total replacement published papers than they have all the relevant papers on them now.

[Josh Jennings:]

Great. And then just a follow up if I may. Reading through the document of Aetna's it doesn't look like they are referencing customized implants as being the iTotal, they're referencing some other patient specific instrumentation or other customized implants, which is a little bit confusing. But is that your read as well that way you're stating that you think that this is just confusion on the Aetna's part and these policymakers'?

[Mark Augusti:]

Agreed. And I want to be clear this is our belief. And if you read it, just like you have, and we've looked at it, there is the deal's study for instance, the site wasn't even a performance study, it was a PSI, they had nothing to do with Conformis.

[Josh Jennings:]

Right.

[Mark Augusti:]

Then one of the studies they represent was a partial knee study and had nothing to do with total knee. Another one they references are our color study, which is our study, but it's a health economics study. And it's a positive study, and they acknowledge it's a positive study, but they nevertheless then come through a convoluted, torturous thing at the end of this broad policy that it's investigational and experimental.And again, we believe it's because they were referring to PSI, and not with use with standard implants, and got confused and in really don't understand it. So we're working to correct that and make them aware of our actual iTotal studies and the quality of the work behind that.

[Josh Jennings:]

And then just it's the only their websites, it's the next review for this policy is July 11. So this year, but that's only about nine months or so after their last review, historically, they've reviewed between 12 and 18 months, is the shorter review period driven by your work in terms of getting them to recognize this. Is that your understanding or is that …

[Mark Augusti:]

No, I wouldn't want to comment on that. The only thing I can comment is we've been told, and we have a belief that they actually are indeed reviewing it, but I'm not going to try to speculate what motivated the review on their behalf. It's within their typical review thing, but they have confirmed through conversations with other third parties that are working as advisors to us, that the review is indeed occurring. So that is good news in our mind, that is. But I'm not going to speculate as to what motivated their review.

[Josh Jennings:]

Okay. And then just one last one for me off of the Aetna issue. Just on iHip. Can you just walk us through again, how we should be thinking about the launch here? I guess, most importantly, how long for the limited launch lasts? It sounds like through the end of this year? And then can you help us think up through the, I guess more fuller commercial launch in 2020? When that starts? And how you expect that rollout to progress? That will be super helpful, just from thinking about that revenue line item. Appreciate it.

[Mark Augusti:]

Yeah, sure, Josh. And as we have said all along, we target the second half, it's turning out to be late in the second half. But we -- just let me set that. First up the limited release has been very good for us, we've gotten a lot of good feedback, we have a lot of still enthusiasm, excitement about our product and our team is really excited for the launch. But we found some really good opportunities to upgrade and do some things as we move forward with full commercial launch.So we've made the decision better to do that work get it right and launch towards the end of the year versus rushing to do it here in the third quarter. Plus some of this stuff on the improvements are going to require FDA submittal, we believe that will sure be a short review and shouldn't be problematic. But again, no one would ever want to predict what will happen when you're doing a review with the agency.So we have some of those traps to still run. But if all things move forward as projected, we should do our first surgeries in the month of December. And then we would look at a slow ramp up through 2020. And we're not going to give further color on that obviously as we go forward, but you would expect the ramp up and you can see what we've done even in limited release.And then we'll think about that. But that's why we've said in the comments that the real opportunity for growth from the hip is more in 2020. And probably moving towards the back half of 2020 as the ramp accelerates

[Josh Jennings:]

Understood. Thanks a lot.

[Mark Augusti:]

Okay. Thanks Josh.

[Operator:]

Your next question is from the line of Kyle Rose from Canaccord. Your line is now open.

[Kyle Rose:]

Great, thank you very much, gentlemen. So I'm going to circle back on Aetna here and just follow up. I guess, is it fair to think that the 3 million to 4 million is really are not that important, 3 million to 4 million, but the adjustment to guidance is split over the back half of the year pretty evenly?And then I guess, what I really want to understand is, is the adjustment to guidance only related to Aetna or how much adjustment to guidance is specifically related to the change in the Aetna reimbursement. I guess, I'm just trying to understand is I do have territories and regions that are over-indexed to more Aetna customers. So you just got physicians were saying I'm just going to stop billing Conformis overall and then we'll circle back when this is resolved.And I guess maybe a little more color there, specifically around what you're seeing from more effective regions and physicians.

[Mark Augusti:]

Right. So Kyle, that's very insightful, because this is a point I want to get across. First, I want to remind everybody, look, we've been through this before and we got it done in 2017. Again, I can't predict the future, but I'm confident our clinical data is strong and we'll get to the right answer here. But as I said in '17, and I think in '19, the problem with this is very unfair, it's unfortunate this has happened.But it does create kind of that annoyance factor with their surgeon. So you can look at it as market share, for instance, and say they're 14%. And then you can also say, of the commercial payer, right. And then you can say, they're more regional in certain areas, which all is true.The problem is if you're a surgeon, you don't really want to be bothered by all this, right. And if we're being singled out, as long as we're still being singled out, if you're a surgeon on the margin you're probably just going to say, you know what, we're going to wait until we get this fixed, because my office doesn't want to deal with this annoyance and we'll come back. We have certainly plenty of surgeons that fight for us and go through surgery appeals, we have patients that love our technology and fight for us.I know I'm not going to say it's a normal case. But I know of instance, where a patient has actually been successful on appeal of Aetna. It just creates a big challenge and unfortunately, I think we got in this situation through just an incorrect application of what they're trying to do with the medical policies. And we're going to work very hard to get this fixed. But it ends up being a bigger issue beyond even just Aetna thing, because it can be an annoyance, but it's not with everybody, like I said, some patients and some physicians still fight with us.And I can't stress enough, it's hard as device companies we don't get that payer and reimbursement information. So until we hear it from our surgeons and other stuff or we can read stuff online about positive, but until we start to get that very hard to know exactly what's going on and we're going to work behind scenes to do things a little differently to get better market intelligence on the front of it, because, obviously we don't want to go through this. But it's disappointing because of all the commercial work we've done in the last 46 quarters, all the operational stuff we've done, we had a pretty good Q4 and Q1 and our Q2 is pretty good as well. But we, looking back now, we can see that probably Q2 could have potentially been better, if not for this policy change.And it's clear that Aetna, in the last however many months has institutionalized this, and it's created this head with that's why we've issued the guidance that we have. And hopefully we'll get this, like I said, resolved here through this review, that's coming up.

[Kyle Rose:]

Okay. And then just to follow ups there. I guess, when you think about the change in guidance to your point, you did have a pretty good Q1 maybe a lot a little bit on the on the table in Q2, it was kind of starting to impact a little bit.How did you think about contemplating guidance for the second half of the year, specifically, what assumptions did you pull in? I mean, did you look at the contribution of Aetna historically and then just strip out all revenues, because I'm just trying to understand what makes you comfortable that flat year over year, is the right number? And then number two is any impact that the change in the revenues are going to have, as far as gross margin guidance and burden guidance for the year?

[Mark Augusti:]

Okay. Thanks, Kyle, for the question. So, as you know, we do have visibility, let's say two months out based on scans and orders that come in. And based on that, we see weakness in the third quarter by about $1.5 million dollars, which matches up to about where we see Aetna's percentage in the private market, and therefore, percentage of our revenues potentially.And then looking at seasonality with fourth quarter being the strongest, then applying the headwinds that we have from Aetna came up with an analysis of a bit over $2 million weakness in the fourth quarter related to these types of issues.So how does that affect gross margins? We have decreased -- we're still working on the cost reduction initiatives. We do see still an increase in gross margin in the second half of the year, over what we've talked about in the first half of the year. The question is, with the decrease in revenue, how much does the overhead absorption impacts gross margin that to be seen. But we do expect still an increase in gross margin in the second half of the year over what we have experienced that 48% 49% in the first half of the year. So we should be in the, I would say in or around the low 50 in the second half of the year.

[Kyle Rose:]

Okay, great. And then switching to something a little more positive. You put out a press release a few weeks ago talking about some partnership in the ambulatory surgery center. Arena. I just wondered if you could just talk a little bit more about what that opportunity is. And then also kind of how you see the ASD market now and where you see that evolving over the next several years? And then I'll hop back in queue. Thank you.

[Mark Augusti:]

Yeah, no, great question. So I guess I'll comment on that. We just got the information, as I'm sure you did on the CMS new proposed role. So regarding outpatient total joint surgery or arthroplasty.So firstly, we're pleased to do the partnership in the region, it's good opportunity explain to people this wasn't a partnership around any type of volume of purchase commitments, which is kind of old thinking, if you will, this is a partnership about working together to identify opportunities for Conformis to be able to utilize them as a resource to help the surgeons that we have there interested in moving to lower cost sites of care and do outpatient surgery, as well as potentially doing a bundle.And we've already had on Friday, our first national webinar with regional training, our sales force around the linguistics, the methodology, things like that. And we've got another webinar scheduled as well. So we'll do that.So we'll look at, we'll look at those things, as we continue to educate and go through the opportunity with our patient joints. And we think this is the right move, because we've got the best business model. And it's clear that the market's moving towards that. And you can see what's happened with, obviously with CMS actually looking to move patients to outpatient as well.Is that it, Kyle?

[Kyle Rose:]

Oh, no. Yeah. Thank you very much.

[Mark Augusti:]

You're welcome. Alright, thanks.

[Operator:]

Your next question is from the line of Amir Bashar from Oppenheimer & Company. Your line is now open.

[Amir Bashar:]

Hi, thanks for taking my question. This is Amir filling in for Steve. My first question was regarding Aetna again. And the question is, back in 2017, you obviously had the denials of coverage by Cigna that ultimately got reverse of the guys mentioned previously. Can you just like walk us through the data, you are able to provide Cigna. And if you'll be taking that same approach, this time with Aetna?

[Mark Augusti:]

Well, look, every approach is tailored towards right thing. In the case of Cigna, we had the data that we had at the time, and we explain the market, we explained the difference between PSI with the standard implant, and a custom implant, we talked and the fact that you use by necessity, USPS [ph] guys are the custom implant, there is no other way. And there's no other expense around that as well as we walk through kind of the longer term outcomes we had.The big thing is, of course, as you know, we have broad coverage with Medicare, we have all the FDA clearances with the same indications of use that standard implants have. And that the reality is as far as we know that no review is ever done every time, any orthopedic company puts out another new arthroplasty product. And this was about prior authorizing knee surgery, not about making medical decisions about the implant. And that at the end of the day, as our -- as the support from office indicates, it's up to the surgeon and the patient in consultation between those two parties decide what's the best approach to knee surgery.And that this is what we're doing is knee surgery. And that is very persuasive argument. And it worked well, in the case of Cigna. Now, we'll do the same thing with Aetna, but we'll do it with another year and a half or so of data and more peer reviewed published studies than we had in 2017, actually close to two years now.So again, I can't predict the future. But we're very confident about the outcomes of the technology we have, I view this as a short kind of two quarter blip, which is very unfortunate for us, given all the work we've done to get to where we are, and what we have going forward. But I'm really confident that we'll get to the right place. We've got great opportunities with our hip and the launch, we've got contemplated there, as well as the things we continue to do with our other product launches, our identity launch, our cementless knee work as well as the move towards outpatient total joint surgery.So it's an unfortunate bump in the road, but it's very correctable.

[Amir Bashar:]

Got it, great. And just following up with one more question my side, would you be able to update us on your commercial build out efforts? Last quarter, you talked about a targeted 10% increase in feed on the street this year? Are you guys still tracking to that 10%?

[Mark Augusti:]

Yeah, we're still targeting that, we're not at that target yet. We've obviously continued to work out for performers and do that we're also recruiting for overall global commercial sales leader, which is an exciting opportunity for us. So that continue -- distribution in the US continues to be an important thing to us. And as we said, in the past, we are really excited about the opportunities that the hip launch gives us because it moves us towards being a full total joint company.

[Amir Bashar:]

Okay, great. Thank you. Appreciate it.

[Mark Augusti:]

All right, take care.

[Operator:]

Next question is from the line of Ryan Zimmerman from BTIG. Your line is now open.

[Ryan Zimmerman:]

Hey, guys, just a quick follow for me. Mark, you indicated that to 2Q could have been better this quarter. Do you have any sense for what that denial amount was in the quarter related to Aetna? Thank you.

[Mark Augusti:]

So I said like, once we realized this was happening we think it probably could have been better. And we didn't have any kind of way to go back and look at. I will tell you we have done some of our own internal confidential surveys, which are a statistician would probably say far from high scientific, but again, we don't have -- we don't do prior authorization ourselves, we don't have the data, right. But we went back and servers, all of our agents and a few of our customers and tried to estimate it.So once we realized we saw the weakness in scans, if you will. So we do have sort of some internal estimates internally. We're not going to kind of say exactly what those were. I don't think that there's no doubt that I think the good guidance is in line with it sort of tracks as market share as we look at kind of what's going forward, not as much so much in 2Q, but pulling that way when you do the math.

[Ryan Zimmerman:]

Okay. All right. Thank you, Mark.

[Operator:]

Yes, sir. [Operator Instructions] There are no further questions at this time and I turn the call back over to Mr. Mark Augusti.

[Mark Augusti:]

Okay. Thank you, operator, appreciate it again. Thanks for your attendance, appreciate your questions. And again, I just want to reiterate, obviously it's disappointing blip in the road. But I feel very confident that ultimately correctable and I look forward to the opportunities we have in front of us with, as I said, our new product launches and some of the other work that we're doing. So thank you.

[Operator:]

Thank you, presenters. This concludes today's conference call. Thank you all for participating. You may now disconnect. Have a great day.