Sientra, Inc.
Q1 2017 Earnings Call Transcript

Published: 13 May 2017

[Operator:]

Good day ladies and gentlemen, and welcome to Sientra Incorporated First Quarter 2017 Earnings Conference Call. All participants are in listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder this conference call is being recorded. I’d now like to introduce your host, Mr. Nick Laudico. Sir, you may begin.

[Nick Laudico:]

Thanks operator. In our remarks today we will include statements that are considered forward-looking statements within the meaning of United States securities laws. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management’s current assumptions and expectations of future events and trends, which may affect the company’s business, strategy, operations or financial performance. A detailed discussion of the risks and uncertainties that the company faces is contained in its annual report on Form 10-K that the company filed on March 14, 2017 and the company will provide updated risk factor disclosures with company’s quarterly report on Form 10-Q to be filed with SEC this afternoon. Actual results may differ materially from those expressed in or implied by the forward-looking statements. The company undertakes no obligation to update or review any estimate, projection or forward-looking statement. With that said, I’ll hand the call over to Jeff Nugent, Chairman and CEO of Sientra.

[Jeff Nugent:]

Thanks Nick and good afternoon everyone and thank you for participating in today’s call. Joining me are Patrick Williams, our Chief Financial Officer, Senior Vice President and Treasurer; and Charlie Huiner our Chief Operating Officer and Senior Vice President of Corporate Development and Strategy. On our last call, we outlined our overall strategic vision of expanding beyond the $360 million North American breast augmentation market and into adjacent opportunities that would increase our total addressable market by four times to nearly 1.5 billion. This is based on the $300 million breast reconstruction segment which includes breast implants and breast tissue expanders, an additional $300 million in regenerative products, and an estimated $500 million international opportunity. We also outlined our planned priorities for 2017 and our longer term goal of becoming a leading diversified global aesthetics company. We are pleased to report that we continue to make progress on all of these initiatives as we move closer to our full commercial relaunch of new manufactured product, and return to our previously-held strong market momentum. First and most importantly, we made continued progress on establishing this high quality U.S. based manufacturing supply capability with preparations for FDA inspection of our facility well underway with continued confidence for approval as we’ve said before by year end 2017. Second, we continued the execution of precision controlled launch strategy, balancing demand with our remaining inventory while maintaining strong relationships with Board Certified Plastic Surgeon customers. And last, we expanded the market awareness in adoption of our newly acquired BIOCORNEUM and breast tissue expander products demonstrating a more diverse business mix and establishing new avenues for revenue growth. Let me first discuss our progress toward reestablishing high quality uninterrupted manufacturing supply, the most critical corporate objective for Sientra for the past 18 months. As we disclosed on our last call, we submitted our PMA Supplement to the FDA on March 13th, slightly ahead of plan, putting us one step closer to final approval of new commercial production and resupply. We’re continuing to work with our team and very experienced consultants, some of whom formally worked in significant positions for the FDA, to conduct our own internal mock audits and facility inspections in preparation for the FDA’s inspection. In parallel, we remain in active dialog with the agency and as previously communicated. We are on track and our expectation for approval again by the end of this year. Moving to current inventory management, we are executing a well orchestrated tightly controlled plan to manage existing inventory levels on our path toward full-scale manufacturing supply. Our field sales and commercial operations teams are working very closely together to track the status of each SKU and ensure that the Board Certified Plastic Surgeon customers active with us these past 18 months continue to have access to the breadth of our offering through both 2017 and into 2018. In parallel, we work with our partner Vesta, a Berkshire Hathaway subsidiary, to scale manufacturing of our highest demand SKUs ahead of FDA approval so that we can continue offer this broad portfolio as we ramp to full scale inventory levels by the second half of 2018. Our goals are to have a diverse range of products available for surgeons beginning in 2018 while also having available the necessary product quantities to support the average order sizes typical in our industry. Our management team, sales force, and the entire Sientra organization are laser focused to ensure our transition from this precision control launch to full supply meets or exceeds the expectations of our Board Certified Plastic Surgeon customers. Now let me move to the progress we are making to further diversify and strengthen our offering of aesthetics solutions. The recent acquisitions of our best-in-class BIOCORNEUM scar management products and the established breast tissue expander portfolio have deepened our value proposition, diversified our revenues, and significantly expand our total addressable market. Both deals were natural adjacencies that leverage our current call points and we are starting to see the benefits as is reported in our first quarter performance that Patrick will go over in just a few minutes. In the first quarter we saw record BIOCORNEUM revenue and increased adoption of this unique best-in-class scar management solution. We have also just completed a rebranding effort for BIOCORNEUM to elevate the premium messaging and look at the product to more closely align with the Sientra premium image. Importantly, we have added serialized packaging in order to better track sold product in the marketplace and continue to drive professional adoption. We have continued to see strong demand for our breast tissue expander portfolio since we acquired the products in the fourth quarter of 2016. And we are encouraged by our physician customer reaction and the base we have for expansion into the reconstruction market. As part of our introductory launch, we have conducted extensive sales force training and have worked closely with surgeons to articulate the clinical benefits of the product through peer to peer educational events and hands on case training. These initial commercial activities have been deliberate and pace to ensure a proper level of surgeon training and excellent initial clinical outcomes before moving to a full-scale launch. From a product supply standpoint, we’re working with our manufacturing partner to ramp up production in order to meet the strong demand that we’re seeing and anticipated supply needs for a more comprehensive and aggressive launch in the second half of 2017. We remain on track to meet our supply objectives for the back half of this year and beyond and look forward to leveraging this unique technology to penetrate the nearly $300 million US breast reconstruction market. Finally, we just attended the American Society for Aesthetic Plastic Surgery or ASAPS meeting in San Diego where Sientra held a number of physician meetings and had a very strong presence throughout the event. Consistent with our active participation and leadership with the Plastic Surgeons Society since founding back in 2007. I continue to be impressed by the caliber of our sales force and their strong professional and personal interactions with many of the surgeons in attendance. One of my indicators of the strength of this relationship is demonstrated by the high percentage of customers and sales reps greeting one another with a hug, I call that my hug index. I also spoke directly with both active customers and those eagerly awaiting our relaunch and walked away with further confidence that our products and services continued to resonate in the marketplace. In sum, Sientra maintains a solid foundation to build from the aesthetics market as we move forward in 2017 and continue to the planning of our 2018 relaunch activities. My conclusion also is that the loyalty shown by our Board Certified Plastic Surgeons is a tangible indicator of our path forward. I’d now like to take just a minute to provide a legal update regarding the pending litigation with our former contract manufacturer. I’d like to reiterate our confidence in both our freedom to operate and the strength of our overall position. As a reminder, our former contract manufacturer has failed to fulfill a supply obligations beginning in the third quarter of 2015 with an inability to supply us with any product whatsoever. The supply agreement with them officially expired as of April 2017, just 1 month ago. We remain laser focused on advancing our supply chain with our new partner, Vesta again Berkshire Hathaway subsidiary through the execution of our committed timeline and plan to provide any material updates on this matter when appropriate. I’d like to now turn the call over to Patrick Williams for a detailed review of our first quarter 2017 financial results. Patrick?

[Patrick Williams:]

Thank Jeff. I will now provide a commentary on our first quarter 2017 result and greater detail can be found in our earnings release issued earlier today and our 10-Q, which will be filed later today. Also for the first time we have added a supplemental financial information reference to our Investor Relations website with useful historical data. As I mentioned on our last call, we will now begin referencing in adjusted EBITDA margin, which we define as earnings before interest, tax, depreciation, amortization and stock-based compensation. Specifically we are removing non-cash items for this non-GAAP measure. We believe this metric is a better proxy for measuring the success of high growth organization that can experience fluctuations in working capital on a quarter-to-quarter basis and provide a better metric to track our profitability over time. Please refer to our supplemental financial information and earnings release for a full reconciliation of adjusted EBITDA to its GAAP counterpart. The following results with the exception of adjusted EBITDA are all reported on a U.S. GAAP basis. Total net sales for the first quarter 2017 were $7.5 million, compared to total net sales of $1.5 million for the same period in 2016. As previously mentioned, the current quarter increase was driven by the lifting of the voluntary hold on the sale and implanting of all Sientra devices manufactured by our former manufacturing contractor between October 2015 and March 2016. Additionally, sales increased in the quarter due to our acquisition of BIOCORNEUM and Specialty Surgical Products breast tissue expanders completed in the prior year. In terms of product mix, breast products accounted for 78% of our total net sales in Q1, 2017 and BIOCORNEUM, our scar management product accounted for 19% of total net sales in Q1 2017. As Jeff mentioned this quarter, this was a record quarter for BIOCORNEUM sales. As a reminder, I would like to reiterate that we expect our breast product sales to remain steady in similar to 2016 levels through our precision controlled launch leading up to resupply. As we have previously stated, we remain on track to have full scale inventory levels in the second half of 2018 following PMA approval of the Vesta facility, followed by the typical new manufacturing ramp up leading to subsequent supply chain optimization. I would also like to remind you that we expect utilize nearly all of our most popular SKUs ahead of our full-scale market re-launch. Consequently, we will prioritize manufacturing of these SKUs to avoid any potential back orders as we come back into the market. We still expect the sale of products from a breast tissue expander portfolio to continue to grow at a steady rate each quarter throughout 2017 as we ramp up manufacturing capacity and our sales team penetrates further into the market. We still expect sales of our BIOCORNEUM product to continue to grow throughout 2017 as well. Gross profit for the first quarter 2017 was $5.2 million or 69% of sales compared to gross profit of $700,000 or 48% of sales for the same period in 2016. The increase in gross margin was primarily due to a decrease in reserves for inventory obsolescence, a decrease in fixed overhead as percentage of net sales, offset by an increase in the non-cash inventory purchase accounting adjustment recorded from our acquisition of Specialty Surgical Products. Excluding this adjustment, gross margins in the first quarter of 2017 would have been approximately 72%. As we continue to sell through our existing inventory in 2017, we expect the gross margin to remain around 70% for the full year. Operating expenses for the first quarter of 2017 were $16.6 million, an increase of $3.9 million compared to operating expenses of $12.7 million for the same period in 2016. These operating expenses in the first quarter were driven primarily higher by selling costs from higher sales volume. Net loss for the first quarter of 2017 was $11.4 million, compared to $11.9 million for the same period in 2016. Net cash and cash equivalents as of March 31st, 2017 were $58.8 million compared to $67.2 million at the end of the fourth quarter 2016. We remain focused on maintaining a level of cash, sufficient to running our business with the flexibility to move opportunistically in the global aesthetics market. As a reminder, we recently put in place a $15 million secured line of credit, which we have begun drawing down on to support our working capital need and still have access to an additional $5 million secured credit facility. Adjusted EBITDA for Q1 2017 was a loss of $9.3 million versus a loss of $11.1 million in Q1 2016. The year-over-year improvement can be mainly attributed to the lifting of the voluntary hold on the sale and implanting of our Sientra devices manufactured by our former manufacture contractor between October 2015 and March 2016. Given that we remain in market precision control launch mode, and are still awaiting FDA supplemental approval we will not be providing full revenue and profitability financial guidance at this time. I will now turn the call back over to Jeff for final closing remarks.

[Jeff Nugent:]

Thanks, Patrick. As we hope we’ve articulated we are pleased with our start to 2017 and we are precisely where we had expected to be. Our plan to achieve comprehensive full-scale manufacturing is on track and we are diligently preparing for the pending FDA inspection of our facility ahead of anticipated approval by the end of this year. I want to acknowledge the strong partnership and team based approach that we have established with the best organization in Wisconsin. We’ve made good initial progress, I repeat initial progress, in diversifying our revenues, leveraging our recently acquired products to penetrate new markets and add value to our Board Certified Plastic Surgeon customers and we continue to evaluate attractive adjacent assets that complement our core portfolio, strengthening our professional relationship advantages, as well as having the strongest team of frontline sales representatives in this category. We remain confident in our ability to continue executing on these initiatives as we look forward to getting back to our previous market share position and beyond and U.S. breast implant market while significantly expanding our total addressable market opportunity. In summary, our confidence is based on three important factors. one, we remain on track with every one of our key objectives; two, the Sientra team has passionately proven its ability to perform at an exceptionally high level while continuing to scale up with new hires. And three, our relationships with our Plastic Surgeon customers remain as strong as ever as we continue the unique and exclusive partnership with only Board Certified Plastic Surgeons. With that I’d like to turn the call over to questions and answers.

[Operator:]

Thank you, ladies and gentlemen [Operator Instructions] And our first question comes from the line of Margaret Kaczor from William Blair. Ma’am, your line is now open.

[Scott Schaper:]

Hi, guys. This is actually Scott Schaper on for Margaret. Thanks for taking the question. My call is actually dropped right [Audio Gap]

[Jeff Nugent:]

So it sounds like he dropped as well. Sounds like there is some issues with the phone so we will move on to the next one operator and hopefully we get Scott back on.

[Operator:]

Yes sir, our next one is Jon Block from Stifel. Sir, your line is open.

[Jeff Nugent:]

And looks like he dropped.

[Patrick Williams:]

Jon, are you there? Unfortunately, there appears to be a communications issue here.

[Jeff Nugent:]

It is a pretty big one. I’m getting text operator from other people saying they’re not able to get in. So let’s try Brooks O’Neil.

[Operator:]

Would you like me to go on to the next participant?

[Jeff Nugent:]

Yes, please.

[Operator:]

Okay. And our next participant is Brooks O’Neil from Lake Street Capital. Your line is open.

[John Godin:]

Hi, guys. This is John Godin on for Brooks. Can you hear me okay?

[Jeff Nugent:]

We hear you fine.

[John Godin:]

Cool. Thanks for taking question. I guess just first if you can maybe go over some high level takeaways that you got from the ASAPS conference as well as maybe some feedback you’re getting from surgeons on the BIOCORNEUM product as well as kind of the rebrand? Thank you.

[Jeff Nugent:]

Well in general, my reaction to the reception that we received in San Diego was the strongest I’ve seen and reinforce the points that we made in the discussion that our entire company has very special relationships with a number of the most influential plastic surgeons. There are lot of ways to measure that, demonstrate it, not the least of which is just the close openness that we have with them that they’ve remained loyal during this period of precision control launch and they continue to offer us advice in terms of meeting our objectives as well as a number of other things. And I wasn’t trying to be -- I wasn’t trying to be [cute] by any means but when I see sales representatives as well as a number of the key managers here being met with very emotional greetings including hugs that tells me that we have a very special relationship with these people, which further translates to an indicator of success on our path forward. That’s the most meaningful part to me. We had a very large footprint at that meeting and I would say that it was certainly one of the top two or three at the session. And it does just generally reinforced the kind of warmth and commitment that we’ve seen for a long time. To your question on BIOCORNEUM, that’s something that as Patrick indicated has really ramped aggressively, that our sales efforts in explaining the advantages of BIOCORNEUM particularly in connection with the surgical procedures that we represent. Again it is just very encouraging and that still at a Phase 1 level of expansion. Some of the additional strategies and initiatives that we’ve just recently introduced at that meeting have not yet kicked in and I’ve seen hundreds of these kinds of situations and if we could demonstrate this kind of penetration and level of acceptance prior to really bringing in the product as a clear Sientra part of our portfolio that tells me that this has a long way to go. I’m very encouraged by both the acceptance and the reports back and not just from the plastic surgeons themselves, but also directly from the patients. So we’re quite confident that we made a very good decision in bringing that inside. Did those answer your questions?

[John Godin:]

Yes, that’s very helpful. Thank you.

[Patrick Williams:]

So just for everyone on the call or maybe not on the call, we’re having some issues that looks like it’s system wide with other folks as well. Let me give one more number that someone said they were able to reach on. So the international calling number that’s on our press release with 765-507-2612 and you can use the same conference ID of 15029000. It looks like Jon Block might be back on. So why don’t we switch over and see if we can get him on Q&A, operator?

[Operator:]

Jon Block, your line is now open.

[Jon Block:]

So maybe just a small handful of questions. The first one I just want to make sure I ask sort of the news intra-quarter on the ALCS cancer scare with an implant, just curious on your thoughts if it’s impacting the overall market, just from a high level. And then some of the news reports it seem to be more prevalent in textured versus smooth implants, curious if that’s causing any shifts in demand that you see out there in the marketplace?

[Jeff Nugent:]

Jon this is Jeff. And to date we have not seen any measurable change in the demand between smooth and textured. And bringing up an issue that is still very poorly understood and as you know, we’ve been working very closely with both of the association’s ASAPS and ASPS and we’re actually proud of the input and analysis that we’ve been able to provide. Work is continuing to better explain the instances and the causes and right now, there are absolutely no conclusions as to what the cause of the factors are. The thing that we want to emphasize and it’s not just Sientra, but it’s the experts in the field, both academic as well as the member representation groups, is that this is such a low level of incidence that we want to stress two things, one is that it is such a low incidence level, it’s very regularly treated and it’s something that is being explained in more detail by plastic surgeons in advising their patients of this level of risk prior to undertaking any surgical procedure. I hope that answered your question, but we can talk about this for some time.

[Jon Block:]

Just to shift gears for a second, on the most recent call J&J alluded to Mentor and possibly losing some share there. I think Allergan has come out with some product refreshers over the past, maybe two, three, four quarters, so we just curious to get your thoughts on your competitors and how you see the market unfolding, clearly that will be more important in 2018 which you guys are fully up and running but maybe you can comment, Jeff or Patrick, on the product portfolios on the other two guys out there and how do you see market share shifts going on?

[Jeff Nugent:]

That’s a great question Jon. And it’s one that we pay a lot of attention to. We have significant respect for both of our competitors and it’s very obvious that Allergan is making a significant commitment in the broader category of aesthetics. The recent acquisitions of LifeCell and ZELTIQ particularly has changed their profile dramatically. And while they’re doing a lot of the right things in my experience, particularly during the integration stages of large acquisitions like that there is -- there are opportunities for advantage, because they are still just recently, I believe today, announced a organization change including ZELTIQ, so there is -- and I’m not criticizing anyone because I’ve done this myself a number of times, just the integration factor alone translates to opportunities for Sientra. On Mentor side, I think that there still remain some question in terms of their commitment to aesthetics and I think that there are several other factors that I wish I could share with you today, but there are studies ongoing that will much more accurately compare the advantages and disadvantages of these three major competitors, but it’s consistent with our goal of expanding dramatically into a stronger leadership role within this overall aesthetics category by defining aesthetics beyond implants alone.

[Jon Block:]

Okay. And last one for me. Patrick, I think this is coming your way. Just couple of things 1, BIOCORNEUM did better than I thought in the quarter. And I think last call you alluded to sequential growth throughout the year, so just making sure that we’re sort of starting from maybe a slightly higher starting point, if its sequential growth is still intact throughout the year. And two, very helpful on the supplemental, consistency is great, so just on that adjusted EBITDA metric for the year, how should we think about that cadence throughout 2017, just from sort of a more of an OpEx standpoint? Thanks guys.

[Patrick Williams:]

So on the BIOCORNEUM, we had a really strong quarter and so I guess I would say we’re still comfortable with that steady -- there could be a little dip going into Q2, because you always wonder about what the orders look like as you go into Q2, especially if you got some orders towards the end of the quarter in Q1, but there was a lot of focus on our sales force to sell that product. The new re-branding that we launched at ASAPS was very -- was accepted very well by the physicians everyone likes the new packaging. And then for us on the serialized tracking that Jeff mentioned before it does add a little bit of additional traceability monitoring for us to ensure we can continue to track that product and gets into the channel. So I guess, long way of saying, if it does get down I wouldn’t expect to it to be much Jon, but we do expect to continue to kind of grow throughout the quarter. So there might even a little bit time between Q1 and Q2. On the OpEx standpoint, we had decent OpEx in the first quarter I think you should expect kind of similar levels may be getting a little bit better here and there as we go out to the rest of the year, but generally speaking I would say that those OpEx levels are little higher in the quarter, most notably on some G&A standpoint that we had as we go through some of the legal stuff but it could -- it will start settling down little bit as we get to the back half of the year so I think we were about 16 million of total OpEx in Q1, 2017 and we should see that number come down slightly as we exit the year and may be around 10% or something.

[Operator:]

[Operator Instructions]. And our next question comes from the line of Margaret Kaczor from William Blair. Your line’s now open.

[Scott Schaper:]

Hey guys Scott Schaper on for Margaret. Thanks for taking the question. Can you hear me okay?

[Jeff Nugent:]

We can. See if you last more than five words this time.

[Scott Schaper:]

Nice to be heard. I have been talking to myself for close to 30 minutes now. So it sounds like the ASAPS feedback was strong from what I heard, I hopped back on the middle of Jon’s questioning but Jeff, maybe talk about your plan or your strategy for the relaunch as you await approval for manufacturing. Is there something already in motion that you guys have talked about or perhaps are best about trying to create a sense of demand or will it be more gradual whether that’s promoting the clinical data little bit more than you have in the past or increasing touch points with your customers as you get closer just give us an idea what the strategy here while in the interim, while you are waiting for manufacturing ability to come back online.

[Jeff Nugent:]

Sure. I think that the best answer is we’ve been very heavily focused on the optimal way to re-enter the market in a much stronger position that we don’t plan to be going out softly. We want to make this a statement of our confidence in the future of Sientra but I want to make sure that you all understand that while we’re already manufacturing products in our new facility and building up in inventory prior to final inspection and approval that will give us the ability to expand our service levels to existing Sientra customers and begin to expand the number of customers we serve. And like with anything else as production capability, planning values, efficiencies and so forth grow over relatively short period of time. As Patrick has said many times, we are going to ramp our way up to be in a more full position in the back half to what we believe will be able to meet full demand. So another way to say that is that we will not be in a position to meet the full demand that we’ve identified until somewhere mid-to-back half of 2018. I can’t give you any more details on that because that would be giving away very confidential information, but we don’t expect to do anything meekly here that is going to reflect the confidence and aggressiveness that is now a real part of Sientra. I know I didn’t give you the kind of information that you’re looking for, but that’s the best I can do right now.

[Scott Schaper:]

No, it’s helpful. Did you guys say how much expanders were in the quarter, do you say that Patrick?

[Patrick Williams:]

We didn’t say that, but I figured someone might ask, but yes I think they did well for us in the quarter. So we’re not breaking out all those numbers, but I would say I think as part of the 7.5 million we delivered you can see with the BIOCORNEUM which we did. The breast tissue are a combination of the expanders and the implants, but I would say kind of consistent to what I’ve seen in the Wall Street models, our number might have been slightly above what the people have in Wall Street models, but we’re very happy with the performance.

[Scott Schaper:]

Okay, but so a similar question to the BIOCORNEUM and having that be the line in the same start the year. I mean if you -- if we expect I mean, if we assume that the implant revenue was kind of range bound in the $5 million range, that would imply that the expander revenue was a little bit over $1 dollar, is that -- are you comfortable with that being the low point of the year and growing sequentially from there or is my math off there?

[Patrick Williams:]

I think that’s fair. I think the math you just did about $1 million on expander for Q1 was fair and that’s consistent to what we outlined on the last call and then you might have missed it just because of all the phone problems I know we’re having, but we got a question, do you expect BIOCORNEUM to track above your strong Q1 performance? And my comment was of course, we would like it to do that, but I think conservatively we would say, if that were to retreat just a tad in Q2 that wouldn’t be the end of the world, it could have some timing there. But we would expect certainly Q3 and Q4 to continue to grow from the levels you just saw in Q1. So it was a good quarter for us all the way around and a lot of positive momentum coming at ASAPS and I think if I were to throw in an analogy in there from since you got to do hug index, I get to do an analogy as well. The Sientra is a proven brand much like my Los Angeles Lakers and we’ll be back and we’re just going to rebuild through this process and that we’ll be back to our old days of glory here in the short time.

[Scott Schaper:]

The hospital contracts you guys have been talking about the AlloX2 product is potentially or hopefully able to break some of these existing contracts because of the data that’s been presented. Have you seen that happen yet? If so, to what extent and if not, what gives you the confidence that will continue to be the case?

[Jeff Nugent:]

We started to see some very positive reactions, but I want to emphasize the fact that this is still at a very early stage and part of this reflects the quality of talent that we are bringing on to the Sientra team. We do not make hiring decisions quickly, we hire people with the appropriate experience, credibility, relationships, and all the above. And I mentioned in my remarks that we are we’re moving forward while we are adding to the resources and particularly the staff here at Sientra to prepare for what we know is going to be a more intense level of operation. So specific to the reconstruction area we have the right person and team to be able to go in and fight for those contracts. We are -- have identified and in the process of bringing on the appropriate marketing expertise as well as the other skill sets that are going to be important for making rapid progress and what we’ve also said is a significant remaining category for us to make progress in. So I think that covers your question as best we can right now, but even though we’re pleased with the initial results in the quarter this is just the beginning. And we’re not expecting success without putting in the right resources that are necessary to get them.

[Patrick Williams:]

And to be clear just sort of -- share clarity on this, we did hire a Director of national accounts to focus on the reconstruction side and dealing with the hospitals and they’re laying out the plan now, not just GPOs but some of the independent networks, the IDMs that we’ll be going after in the contracts and the RFP process and everything else. So we’re putting the resources in that area and we’ve had some preliminary meetings and I know myself, Charlie and Jeff have been very impressed with the action plan that he has put together thus far.

[Scott Schaper:]

Okay. And maybe I’ll just sneak in one more. In terms of acquisitions, and I apologize if I’m making you guys repeat stuff, but you guys have been involved in smaller products that you could add to the bag and maybe you guys talked about it, what are your thoughts on how big those could potentially be? Suppose, so I guess the question is at what scale would an acquisition or does an acquisition become difficult to integrate with the current sales force?

[Jeff Nugent:]

Well, I think the best way to answer that is that we have a number of objectives that include transformational moves. In other words, particularly by expanding the definition of aesthetics it opens up a number of additional categories, both products as well as companies that have a unique advantage in those categories. So what you’ve seen are couple of relatively small, call them tuck-ins, but very strategic tuck-ins. And as we move forward, our appetite is increasing and we have very specific criteria both from product contribution as well as financial return on investment. And I’m not trying to obfuscate your question, but the reality is that we’re prepared to make even larger M&A decisions.

[Operator:]

I’m showing no further questions. And now, I’ll turn the call back to you management for any further remarks.

[Jeff Nugent:]

I just want to reiterate we’re delighted that you all could join us on the call today. We feel very good about the progress that we continue to make in the first quarter. And I repeat that we are exactly where we said we would be with some upside in terms of the plan we put together well over six to nine months ago. So again thank you for your interest in Sientra. We look forward to talking with you further, have a great day.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. This concludes today’s program and you may all disconnect. Everyone have a great day.