Sientra, Inc.
Q1 2018 Earnings Call Transcript

Published: 10 May 2018

[Operator:]

Good day, ladies and gentlemen, and welcome to the Sientra's First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference Tram Bui of The Ruth Group. You may begin.

[Tram Bui:]

Thanks, operator. In our remarks today, we will include statements that are considered forward-looking statements within the meaning of the 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 a quarterly report on Form 10-Q that the company will file with the SEC shortly. 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 Chief Executive Officer of Sientra. Jeffrey Nugent Thanks, Tim, and good afternoon, everyone. Joining me today is the key leadership team at Sientra. Patrick Williams, Chief Financial Officer, Senior Vice President and Treasurer; and Charlie Huiner, our Chief Operating Officer and Senior Vice President of Corporate Development and Strategy. As our recent press release highlights, Sientra's first quarter accomplishments are very strong. Our entire team was extremely proud of all that has been achieved and reflects the confidence that we have had for some time. And just to highlight those achievements, I want to emphasize those four in particular. First, our first quarter net sales are the highest in the company's history. Second, we have received full FDA approval at long last, to begin commercializing new products from our state-of-the-art manufacturing facility in Franklin, Wisconsin. Third, we've just launched Sientra's OPUS branded breast product at the recent ASAPS Conference for plastic surgery, one of the largest plastic surgery conference in the country, as well as the miraDry fresh enhanced protocol which has been a significant addition to the receptivity of that product. And last -- just last week, we completed a follow-on offering of common stock, for net proceeds of approximately $108 million, resulting in the strongest balance sheet also in the company's history. All of these position us to achieve our objective of becoming a leading global partner to aesthetic physicians. Before discussing our record, first quarter results, I would like to take some time to briefly comment on the recent FDA approval of our PMA supplement. For our U.S manufacturing facility, which represents an absolutely critical milestone for Sientra to reenter a significant growth phase as the new Sientra. As I’ve repeatedly emphasized and as many of us have, it was always a question of obtaining full FDA approval being a

[Patrick Williams:]

Thanks, Jeff. As a reminder, with the exception of adjusted EBITDA all of our financial metrics are reported on a US GAAP basis. Additionally, we will continue referencing an adjusted EBITDA margin which we define as earnings before interest tax depreciation, amortization and stock-based compensation. Specifically, we're removing non-cash items for this non-GAAP measure. Again please refer to our supplemental financial information, earnings release and 10-Q for tables on GAAP and non-GAAP pro forma net sales and a full reconciliation of adjusted EBITDA to its GAAP counterpart. Before I go over our first quarter 2018 financial results, I wanted to open up with some comments on our cash position. Net cash and cash equivalents as of March 31, 2018 were $16.1 million compared to $26.6 million at the end of fourth quarter 2017. These balances do not include total net proceeds of approximately $108 million from the company's recently completed follow-on common stock offering nor the figures include $10 million of cash received as a result of the FDA approval milestone achievement, with our existing term loan credit facility that was funded in April. Our balance sheet is the strongest it is ever been and provides us with the necessary capital to invest and grow both the breast products and miraDry segments of our business. We are eager to begin deploying this capital over the next few years as we drive to a cash flow breakeven. As I review our first quarter 2018 results, I will provide additional color on where we expect each financial line item to trend for the balance of 2018. Consolidated total net sales for Q1 '18 were $14.7 million. On a GAAP basis an increase of 96% compared to total net sales of $7.5 million under GAAP for the same period in 2017. Total net sales increased 30% on a pro forma basis year-over-year compared to pro forma total net sales of $11.3 million in the first quarter of 2017. Within our breast product segment net sales totaled $8.5 million for the quarter, a 14% increase compared to $7.5 million for Q1 '17. Driven primarily by continued strong performance of both our AlloX2 and Dermaspan breast tissue expanders and record sales of our BIOCORNEUM scar management product. For the balance of 2018 we anticipate quarterly sequential growth in our breast products segment driven by implant manufacturing capacity ramp up and continued market traction of our expanders. Our miraDry business segment achieved net sales of $6.1 million in Q1 '18 representing a 112% increase versus Q4 '17 of $2.9 million. And on a pro forma basis, a 61% increase compared to Q1 '17 of $3.8 million. We are very pleased with miraDry's overall performance in both North America and international in the first quarter. Notably our newly hired and very experienced international team exceeded expectations on system placements, but achieved lower consumable sales to hire inventory levels within the distributor channel. Although we can see fluctuations in any given quarter we continue to expect a slightly higher mix of U.S sales versus international sales and higher system sales versus consumables for the balance of 2018. Gross profit for the first quarter was $8.6 million or 58% of sales compared to gross profit of $5.2 million or 69% of sales for the same period in 2017. This percent decrease is primarily due to the inclusion of miraDry, which currently carries a lower margin than our breast products segment. Breast products gross margin for Q1 '18 were in line with our expectations at approximately 70%, On the miraDry segment, the higher mix of international and capital sales in the current quarter further impacted our overall gross margin. We do expect to see a larger step up in gross margin percent for the second quarter followed by moderate increases as we move into Q3 and Q4 of 2018. As a reminder, our strategy in the near-term is focused on system placements as we expand both our U.S and international footprint. Still our overall consolidated gross margin percent is highly dependent on the overall mix of breast products versus miraDry as well as the components within miraDry. Operating expenses for Q1 '18 were $27.5 million, an increase of $10.9 million or 66% compared to $16.6 million of expense for the same period in 2017. Operating expenses in Q1 '18 were driven higher primarily by the inclusion of miraDry and a significant investment we made in its global sales and marketing teams. This investment included higher stock-based compensation as we issued new equity to miraDry employees as part of the acquisition as well as a significant equity refresh for employees on the breast products side of the business. The higher stock-based compensation expense will continue for the balance of the year due to this renewed investment in our employees and is contemplated across all operating expense categories. Moving forward, we would expect our research and development expense to slightly increase by quarter as we ramp up product pipeline investments in both segments of the business. On the G&A front, we expect the current expense levels to continue as it is important that we invest in our infrastructure to ensure it scales with our planned robust revenue growth, including international expansion with miraDry now part of our business. 1in terms of sales and marketing expense we expect these expenses to moderate slightly down in Q2 due to the timing of our normally scheduled sales events in the first quarter across a much larger sales force and from there remain steady. As a result of our managing our entire order to cash cycle, our cash balance in the quarter decreased by only $11 million. We expect to see a higher cash burn in Q2 as we right size our working capital including reducing our accounts payables and building of inventory for our relaunch. We expect to see cash burn to moderate down slightly in Q3 and then again in Q4 as our revenue increases. Net loss for Q1 '18 was $19.4 million or $0.99 per share on a GAAP basis compared to a loss of $11.4 million or $0.61 per share for the same period in 2017. Adjusted EBITDA for the quarter was a loss of $15.4 million compared to a loss of $9.3 million in Q1 '17. The year-over-year increase can be mainly attributed to the inclusion of miraDry. I'll conclude by noting that consistent with our previous comments at this time we will not be providing any financial guidance until we are fully reenter the breast implant market scale and have sufficient time to forecast near-term growth across both breast products and miraDry segments./ And with that, I'll turn the call back over to Jeff for closing remarks.

[Jeffrey Nugent:]

Thanks, Patrick. Since October 2015, the entire Sientra team has been determined to overcome each success of challenge stemming from our former manufacture. We have now closed the final channel 2 overcome each successive challenge stemming from our former manufacture we have now close to final chapter of our supply chain transition and position the company with a diversified portfolio of differentiated products to capitalize on a significant growth opportunities for each of our two core businesses. Our performance in the first quarter validated our move to become a more diversified global aesthetic company and again was the highest revenue quarter yet and see Andrew's history.

[Jeffrey Nugent:]

We consider that definite traction. Throughout the quarter, we continue to successfully manage our gross Sientra plan inventory levels, and position the customer expectations while also continuing the positive momentum with our tissue expander products and driving record sales of our BIOCORNEUM scar management product. It has been established that it is the number one recommended -- professionally recommended scar management product in the country. We also demonstrated real traction on our miraDry strategy by running out our leadership team successfully enhancing our protocol, optimizing our global commercial infrastructure and launching our digital direct to consumer campaign, all while growing sales substantially in both the U.S and international markets. Overall, we are now well-positioned to continue executing on our commercial aesthetic strategy, the new Sientra is in a better position today to capture and drive market share growth and shareholder value than ever before. Following our successful follow-on equity offering, which generated net proceeds of approximately $108 million, we're also now well capitalized to execute on our strategic growth initiatives. It also demonstrated that our strategy, business model, and the tenacity and experience of our team resonated extremely well with a long list of investors. For that we appreciate their confidence. I also want to thank everyone within Sientra for their incredibly hard work and dedication to deliver on our promise to reenter the breast implant market stronger and more diversified than ever. I'm extremely excited to continue to build on our momentum across each of our business segments as we move into 2018 and beyond, relaunch our entire breast implant line at full scale, while realizing the potential of miraDry as well as deliver meaningful incremental value to our customers, patients, and shareholders. With that, I'd like to now turn the call over for Q&A.

[Operator:]

[Operator Instructions] And our first question is from Jon Block from Stifel. Your line is now open.

[Jonathan Block:]

Thanks. Good afternoon, guys. Maybe two or three for me, but Jeff or Charlie maybe you can elaborate a bit on how your breast PSCs are going to spend near time over the next couple of quarters? Previously, they had to be hyper focused on the current 600 board-certified that were receiving product. That’s got more flexibility going forward. So maybe you can talk about are the 600 still going to be the 2018 focus and then new docs in '19? If you can flush it out a bit, that would be great.

[Jeffrey Nugent:]

Let me put it this way, Jon. It's an excellent question. And that the focus going through 2018 it is a combination of expanding the share of market, share of use within those 600 practices that we're focusing on. So over the past two years, frankly, we have lost part of the share, now it's time to get it back. And it's not a binary decision because in addition to gaining more share from that top tier, we also are initiating penetration in that second tier because there are a number of extremely loyal surgeons who are very anxious to get back into our supply chain. So I hope that answers your question because it's not one of the other. It's an intelligent mix of being able to start moving to second tier which is actually beginning to happen right away, but we are going to expand that as our manufacturing facility ramps up and more products are available. Does that ..

[Charles Huiner:]

Jon, let me -- Jon if I could add …

[Jeffrey Nugent:]

Sure.

[Charles Huiner:]

… if I could add, this is Charlie. And to add to Jeff's point, one of the real benefits of our diversification adding expanders and BIOCORNEUM to the bag of our sales reps since call it two years ago, when we had really only breast implants as our primary detail. Is that -- it has allowed us to continue conversations with the second and third tier call it of our plastic surgeon prospects and continue to have conversations with them and to build relationships with them even when we didn't have breast implant supply to satisfy their needs on the breast implant side. And I can tell you we hear literally almost every day situations where we have sales reps out calling on reps who are so-called mentor or so-called Allergan doctors for breast implants and we're able to sell them BIOCORNEUM or we’re able to sell them tissue expanders and get them interested in those products. And it's really been a seeding strategy for us now to begin to once we do have resupply of breast implants already have a relationship. So I think just to add to Jeff's point, we have really been using the diversified portfolio to continue to have our reps detail other products in our portfolio and get those surgeon accounts ready for the breast implants upon resupply and that we scale up our supply.

[Jonathan Block:]

Got it. That’s very helpful color. Thanks, Charlie and thanks Jeff. And maybe a second, you went out and the capital raise was arguably a little bit more successful, you were able to upsize, and just curious is that allowed you to accelerate any of these plans? You got a really large TAM, Jeff that you’ve alluded to numerous times was the international breast opportunity. There is also maybe hitting the gas with marketing specific to miraDry to get at that very large opportunity. So does it help accelerate any of those plans over the next 12 to 24 months? Thanks guys.

[Jeffrey Nugent:]

It definitely does, Jon. And in addition, there's a key piece that I would like to stress and that is expanding our commitment to innovation. There's no secret that in the last 2.5 plus years we’ve been so focused on maintaining this precision controlled launch that we really haven't had the resources necessary to continue the innovation that we were known for earlier. And on both sides of the business and I would like to be able to explain this in greater detail, but to keep it simple now, we’ve an extremely talented and experienced, highly regarded innovation team at miraDry and that we have freed up one of the world's leading experts in breast implant development in our Sientra facility and are fine-tuning our pipeline priorities. So I can tell you that, that’s a key part of our growth. There's organic growth, there's M&A growth and we’re focused on making our existing business grow primarily through organic efforts. And that takes integration -- innovation.

[Jonathan Block:]

Okay. Thanks for your time, guys.

[Jeffrey Nugent:]

Sure.

[Operator:]

Thank you. Our next question is from Kyle Rose from Canaccord Genuity. Your line is now open.

[Kyle Rose:]

Great. Thank you for taking the question. So I just wanted to -- maybe you can talk about the miraDry business. I mean, obviously, you had came in well above what we were expecting. And I guess, just from a high-level, I mean, was that the pace of the quarter-over-quarter growth of Q4 to Q1, you’re kind of in line with what you were expecting? Did anything surprised you as far as how quick the business you turn back around in the Q1? And then just overall I understand that you're placing more capital. The expectation is to expand the capital footprint, but then how should we think about the utilization over I guess the back half of this year and then moving towards 2019?

[Jeffrey Nugent:]

Patrick, you want to handle that?

[Patrick Williams:]

Sure. Yes, its Patrick, Kyle. So it really comes down to the large investment we made on the commercial -- the global commercial team for miraDry. And that's the benefit primarily you're seeing in the Q1 results, right? We expanded -- we probably almost 3x size the sales force since we’ve taken it over in July of 2017. When you combine that with the things that have been brought over from the leadership team that was [indiscernible] CoolSculpting essentially that playbook along with a new fresh protocol, all of that -- all that stuff together helps drive what you saw in Q1. Certainly we hope to build the momentum in Q1 into Q2, Q3, and Q4 and to what you're saying before is that there is a huge opportunity here. And so as we've been going through and looking at how we want to place capital equipment that is always been the main focus for us in the short-term. We saw some overperformance in capital as I mentioned in my prepared comments on the international side, that resulted a little bit in the downward pressure on the gross margin. That’s just purely a mix issue. And as we said over time to get to your point on utilization, the capital of today is the consumable of tomorrow. We are now kicking off some of these digital brand awareness campaign much like we did before, CoolSculpting and ZELTIQ where we saw very good traction on that. I think the good news here is that we are doing it much sooner because we have a much better understanding and it is a similar playbook. So we will hold off on giving any sort of discrete utilization metrics, but we definitely believe we’re in the very early innings here. Building brand awareness among patients is key and the market data certainly said that’s the case.

[Kyle Rose:]

Okay, great. And then I wanted to just go back to kind of dug tail off one of Jon's questions and just I’m going to -- I understand that it's still early, a month since the approval. But when we think about the tier 1 physicians, maybe the 600 physicians you’ve maintained relationships with over the precision controlled sales process. And I going to start looking at tier 2, maybe just frame out how big that tier 2 physician or account that work looks like? I mean, is it another 600 accounts? I think you back up to the 1,400 accounts that you worked with historically. How do we think about that, that next level of account growth?

[Jeffrey Nugent:]

Well, second tier is approximately 1,400 plastic surgeons. And that -- as I probably implied, our focus is going to be primarily on tier 1. And as I said to increase the share of practice, but this is going to spread over most -- very transparently. It's going to take us well into 2019 to be able to bring a substantial number of those tier 2 physicians back up to full capacity. So the underlying principle here is when I started up a number of manufacturing facilities in the past and there's no such thing as 0 to 60 times. It takes time to be able to ramp up and that we’re putting a significant amount of effort resources into being able to do that. And as we gain additional supply, we will expand our efforts in that second tier. Does that answer your question?

[Kyle Rose:]

It does. Thank you very much.

[Jeffrey Nugent:]

Sure.

[Operator:]

Thank you. Our next question is from Margaret Kaczor from William Blair. Your line is now open.

[Margaret Kaczor:]

Hey, good afternoon, guys. Thanks for taking the question.

[Jeffrey Nugent:]

Hi, Margaret.

[Margaret Kaczor:]

First one for me is just a follow-up on your commentary on the front end, Jeff, where you had talked about maybe selling outside of traditional board-certified plastic surgeons for the breast products. So, first, what drove you to make that decision? Second, how do you manage the sales to both of those two categories board-certified and outside of that does this mean anything per volume or a price as you move beyond just the traditional channel?

[Jeffrey Nugent:]

Well, its -- that’s a great question. And we’ve recommitted and our -- I can imagine ever changing the commitment that we have and the breast surgery and surgical products to board-certified or board eligible plastic surgeons. That is a very large stake of the ground. What presents us with a challenge in terms of how to balance that with the expanded market that we now have primarily in dermatology with miraDry as well as BIOCORNEUM and as well as other products. So we're currently intentionally keeping these two business segments relatively autonomous and beginning to take advantage of some of the synergies, but as far as the target markets are concerned, we are not going to change. And what’s really interesting here is that there's a significant number of plastic surgeons including many of our own who have expressed interest and who have already bought miraDry. And that does not contradict our commitment to board-certified only surgeons.

[Patrick Williams:]

So, Margaret, it's Patrick. I just wanted to -- I think just to be very clear with what Jeff said at the end there, we are only -- we did not change our original pieces of selling only to board-certified plastic surgeons on our breast products, the implants. So I know there was a word in there that said something about eligible, that's how we refer to them as well. That is not going into a non-board-certified plastic. So once again, Sientra committed to only selling implants to board-certified plastic surgeons.

[Jeffrey Nugent:]

And expanders.

[Margaret Kaczor:]

Okay, got it. Thanks. And then as we look at your breast sales force, the original Sientra sales force, everyone had termed them. How are you structuring you quotas as you guys look to relaunch? Is it pure revenue, is it regained accounts growth in existing accounts, any kind of additional clarity would be helpful there along with where you expect to see kind of --- I don’t know with implants per rep, per [indiscernible]. What kind of metrics should we be looking at there?

[Patrick Williams:]

Yes. So it's Patrick again. So we are still doing as Jeff highlighted because of the continued what I would call precision controlled selling strategy as our manufacturing ramps up. We are still really just hitting a number of revenue for them. As we move beyond and supply starts clearing up, and you'll see the more traditional year-over-year growth metrics in terms of quotas that you'll start putting out there. But for now we're were really just in that same old mode of precision controlled selling as we move to '18. We will give more color on this as we get into '19 and better understand it. On the other products like an AlloX2, which is our expander line in Dermaspan, of course, in BIOCORNEUM. Those are more on a growth of year-over-year, sequential growth is in the four, but it's still a little bit of a hybrid model for now on the quota and as we get more clarity and supply, we will be in a much better position to get more to the historical way people would think of it. In terms of metrics, we think about it in terms of productivity per rep. They’re probably hitting around a $1 million right now across all of our product lines on the breast products and a good rep should be getting close to the $1.5 million and so and that’s something we will be measuring internally and obviously trying to better understand how we get more productivity out of the products we have.

[Margaret Kaczor:]

Got it. And I’m going to sneak one more in, if I can. On the miraDry side, when we were at ASAPS, some [indiscernible] there might be some back order. There is so much in that and frankly it sounds like that there's maybe some back order. Can you verify for us there. And then if you talk about from the cross-selling opportunities, a couple of quarters ago. Have you guys moved forward with those or that’s still an opportunity going forward.

[Patrick Williams:]

I think on the cross-selling side, it's really -- it has not been a high priority for us. It will become more of a priority as we move to the rest of the year. We want to make sure there is a very positive handoff between the two sales forces. As we get more comfort with the fresh protocol and more commercial experience, and then of course as the breast product reps are out there and starting to reengage all these customers that they haven't spoken to in sometime or meeting all their needs. So we're not in a rush for that at this point, but it's definitely something we are focused on. In terms of the back orders you know a smart gentleman by the name of Keith Sullivan once said a back order is a great thing. When it drives demand out there and I will just say that we had a strong quarter in Q1 and we're happy to meet any demand that comes out of it from Q2 to Q4, and Q3 and Q4 and so forth. Next question?

[Operator:]

Thank you. Our next question is from Richard Newitter from Leerink Partners. Your line is now open.

[Unidentified Analyst:]

Hi. This is Jamie in for Rich. Just a couple of quick questions. I guess, I will start with miraDry sales force just an housekeeping. Could you guys confirm where you ended the quarter, I think on the last earnings call, you had said you were at about 22 capital reps and 15 consumables. Does that sustain and kind of where do you see that ramp is progressing from a hiring perspective throughout the rest of the year?

[Patrick Williams:]

Yes, this is still numbers, Jamie. It's Patrick again. We used 22 and 15, you’re always going to have a little bit of open territory here and here. We’ve hired a lot of people quickly. And so as we’ve always said, there might be a little bit of hire turnover at the beginning. So I would say if you look at an entire quota we are not running, add a full 22 for all 90 days in the quarter. But that is a good number to use for now for the balance of certainly Q2, Q3 and Q4. W1ill we add more capital reps as we move into '19? It's still a TBD [ph]. If we place enough systems especially in some of these large metros, you can see us starting to break out some of those city, so that the sales reps have more face time and less drive time. And then the consumable reps are TDM, it's a little easier to forecast or model those, because that’s really a byproduct of the number of accounts they’re servicing, and we like to keep them right around 30 to 35 accounts per rep. So we are good for this year but going into '19, those are the things you can expect.

[Unidentified Analyst:]

Okay, great. And then I know you had said that, of course the capital placements is a little bit stronger this quarter on the international business. And historically you’ve kid of said its a 60-40 split between U.S., OUS, is it fair to assume that that’s more 40%, 60% U.S to OUS this quarter? And then reverting back to that 60-40 for the remainder of the year?

[Patrick Williams:]

It wasn't quite that much of a swing, but we definitely saw a little bit more in a capital side on international. As I said in my prepared comments, the other part of it though is that we have less consumables on the international side. So as we brought on the new team really candidly in late January and they started getting out into the field. They did see especially with the distributors that there was quite a bit of consumable inventory. And so they’re working through that right now. And so I still feel good about the overall numbers we gave you, in terms that 60% capital, 40% of consumable and same thing U.S versus international. To your point, it was a little bit, less than 60% on the total U.S contribution this quarter, but so directly down from that 60%. But we would expect it, if you look at the full-year which should probably get back to the original numbers.

[Unidentified Analyst:]

Okay, great. And then if I could just squeeze in one last question here with respect to new offering that you guys did and the cash position that you guys now are going to have going forward, where do you guys plan to most aggressively invest in the business with these proceeds?

[Jeffrey Nugent:]

Well, I think the basic priority is to be able to execute on the growth plans that we’ve been developing over the last year and half plus that we have significant opportunities and as we begun to share with you. On both sides of the business and that they require different investments, but we are trying to keep balance between the two segments. But there's no question that we're going to invest where the return is the greatest. So, I guess, that is the fundamental criteria that we want to use. And that -- that is -- it has given us essentially everything we need to be able to deliver on the promise that we've been talking about with Sientra over these past several quarters. It seems this is -- so we’ve been talking about. Talking about when we are going to get FDA approval, when we're going to be able to start showing traction on miraDry, and that -- and we’re looking at this first quarter as a very strong start to what we’re going to be able to do and progress on.

[Unidentified Analyst:]

Great. Thanks. That was helpful and congrats on the first quarter.

[Jeffrey Nugent:]

Thanks, [indiscernible]. Thank you.

[Operator:]

Thank you. Our next question is from Anthony Vendetti from Maxim Group. Your line is now open.

[Anthony Vendetti:]

Thanks. Just a follow-up on the cash, since you raised maybe little more than you’re expecting, is your burn rate, Patrick, going to be around the same that you’ve been at or now that you have more cash or you’re going to try to accelerate some of the programs that you have right now?

[Patrick Williams:]

Yes, I think we’re pretty good way. We are going to see a little bit more cash burn as I said in my prepared comments as we go into Q2, but I think on average as we've been telling people that $12 million to $13 million a quarter is not unreasonable. That’s sort of an average burn I would call it for the entire 2018. We are obviously lighter in Q1 and we expect to catch up a little bit in Q2. And then it'll moderate down from that. So we are probably exiting around a $10 million burn in Q4. The reality is it really a situational we're just getting back right with on both the breast products side and we have one quarter down under our belts for miraDry. So we have the dry powder now. That if want to be opportunistic and we see a reason to do it, we will absolutely do that. But all that’s going to do is get us to a higher revenue number quicker which means more cash generation quicker, right? So, people will have to have faith in this management team that we've done it before and that we will be good stewards of how we invest that money but we certainly brought the cash on to invest in [indiscernible] business.

[Anthony Vendetti:]

Okay. And then on the miraDry business, have you finished rolling out all the new miraDry fresh protocol to all the machines or was that still in more progress. And if so, where are you at in that process?

[Patrick Williams:]

As of two weeks ago, when I asked Keith Sullivan where your are at? He said that we're at about 90% in the U.S. rolled out. So I will stick with that number for now, because I haven't spoken to last weeks. But it actually moved a lot quicker than I thought it would across those installed. We had 400 plus systems installed in the U.S. The team did a very nice job of rolling that out very quickly. So kudos to our sales force out there and kudos to the R&D team as well as the manufacturing team that got everyone put together, miraDry actually get the sound quickly.

[Anthony Vendetti:]

And is -- I know Keith is the Interim General Manager or temporary General Manager. Is there a search for a permanent General Manager for the miraDry business at this point or everything is just where it is now and that's so as status quo.

[Jeffrey Nugent:]

No, this is Jeff. And that we have been conducting a very aggressive search. And we understand that the criteria and qualifications of someone who can drive this business at the level of growth that we expect. So there are very few who are going to be able to frankly accomplish the kind of results that Keith have. So I would expect that, over the next several months we will -- come to a final decision. And as we do, we will share it with you all.

[Anthony Vendetti:]

Okay, great. And then just on the sales -- so you have tough, I know you had on the miraDry you have and domestically you have the numbers you gave us. Internationally you have about 15, is that right?

[Patrick Williams:]

That’s correct.

[Anthony Vendetti:]

Okay. And then on the breast implant side, are you still at around 40 sales people?

[Jeffrey Nugent:]

That’s approximately correct. And that part of this is as we increase the supply and implement the demand, marketing programs that we already have in place, that we will selectively add additional PSCs. in the highest opportunity territories.

[Anthony Vendetti:]

And Jeff, I don’t know, ensure the sales force is pretty excited about have any approval on getting back out there to go beyond the 600 and we address the 1,400 or so. What’s been the early sort of feedback you’ve been hearing in terms of being able to reengage customers that you had to cut back due to the limited supply/

[Jeffrey Nugent:]

I will start. Two part answer. The first one is virtually in fact everyone in the company is beyond excited, relieved and confident that with this final FDA approval that we’re going to be able to make the plans that we've been working on for the past two years. What happened is quickly as quickly as possible. The sales force itself, I have to be careful about the language I use in answering that. But these people are so pumped up. This is what they’ve been waiting for, virtually two years to be able to get the FDA approval as well as the materials and now most recently the financial resources, to be able to let them drive this business at a level that exceeds our highest point back in 2015. And I don’t want to go into much detail, but as you know back in 2015 we approached a 15% market share, And a corresponding share price that we believe is a conservative relatively to our current expectations. But it's all based on the confidence and the reinforcement that they’re the best-in-class in terms of partners with their plastic surgeon customers.

[Anthony Vendetti:]

Okay, thank you very much.

[Patrick Williams:]

Anthony, this is Charlie. Just a follow-up because I think you also asked about the sort of beginning level of acceptance and excitement from customers given our announcement on the FDA and relaunch. And I think, I guess, we couldn’t have timed it any better. Yes, it was maybe the late three or four months from what we were hoping in terms of the FDA approval. But in terms of the actual timing of FDA approval is coming right before the ASAPS meeting. We could not have timed that any better. We were able to launch in the ASAPS with both the news of the FDA approval as well as launching our platinum 20 best-in-class warranty as well as being able to discuss the benefits of our 10-year relative clinical data. And when you come into a show like ASAPS, with triple threat like that and you have an opportunity right then to get feedback immediately from the surgeons. We certainly had a very lively booth presence at ASAPS in addition to, of course, hosting dinners, educational dinners at ASAPS, and there were a lot of really good discussions had and certainly having been here four years ago and seeing the kind of buzz that Sientra generated back four years ago when we were at that, call it 15% market share level on the cosmetic side, it felt very similar in terms of a buzz and the excitement in our booth, in at our dinners, discussions between not only on the management level but at the rep level. Certainly and again its early here, but certainly starting to hear surgeons saying hey, guys I’m so pleased you’re back. I can't wait to start to give you all of my business again and again. I don't want to overstate it, but certainly those discussions are happening and now again handoff to our field to continue to nurture those relationships that they’ve been nurturing over these last two years. So that we can phase this out from a supply standpoint, which is really the strategy that we talked about.

[Anthony Vendetti:]

Okay. That’s good color. Thank you.

[Patrick Williams:]

Yes.

[Operator:]

Thank you. [Operator Instructions] And our next question is from Brooks O'Neil from Lake Street Capital. Your line is now open.

[Brooks O’Neil:]

Thank you. Good afternoon. I have a couple questions. First, I was hoping you might tell us a little bit about what you’re seeing from the competitive response on both sides of the business? Competitive environment, I guess is maybe a better way to think about it. So we have a sense for what’s happening in the marketplace. Thank you.

[Jeffrey Nugent:]

Brooks, let me try to summarize that. We paid very close attention to our competitors and that -- and I will not criticize anyone, but we view them as having elements of vulnerability that we are prepared to take advantage of and take share. That there have been some recent developments at Allergen, I’m sure you’re aware, this week that are still playing out. But we have a strategy and a number of tactics that we believe are going to aid us in that objective. And mentor continues to be mentor and I would rather not get into any further description of what that means.

[Patrick Williams:]

Maybe just …

[Brooks O’Neil:]

Any comments on the miraDry side?

[Jeffrey Nugent:]

Well, I would say, yes. I would love to and I that Patrick is panting wishing he could talk about it, but miraDry is a substantial unique alternative to other solutions for excess sweating and odor. And that’s primarily Botox. And as you know there are a number of pharmaceuticals under development, under Dermira and [indiscernible]. And that we don’t underestimate those, but at the end of the day logic tells me that consumers are prone to secret solution where they’re won and done as opposed to having repeat treatments over a lifetime and one of the things that stands out to us is that a year's treatment of Botox roughly 3 applications is approximately the same amount of investment as it would take to have the miraDry procedure you never have to worry about it, again. So I’m not saying that we are not paying attention to them, we are. But the fundamental advantage of a one and done treatment it has gotten a significant reinforcement that many, many suffers would much prefer a one and done and be done with it.

[Brooks O’Neil:]

Great. That’s very helpful. I assume because of the success of the common stock offering that you suspended or terminated the ATM, but could you tell us the status of that, just so we now?

[Jeffrey Nugent:]

Patrick you want to answer that?

[Patrick Williams:]

Yes, we are not using the ATM and no foreseeable need to use the ATM. We have enough money to get us free cash flow breakeven like we said.

[Brooks O’Neil:]

Okay. And then, thirdly, I’m curious if you could just talk a little bit -- obviously, there were three changes possibly minor to the breast implants manufacturing process that I think ultimately cause some delay in the approval. Just curious what those changes were of a consumer facing, are they cost reduction. Help us to understand sort of what was going on there, so that we can kind of think about the future?

[Jeffrey Nugent:]

I can answer that. And that the very minor changes that were made were put in place as a -- frankly an improvement in safety and that may have been enough of a rationale. It also brought the process and the ingredients up to category standards and that frankly, Brooks, the FDA had a little trouble understanding that [indiscernible]. That’s all it was.

[Brooks O’Neil:]

There you go. Thank you very much and congratulations on all you've accomplished.

[Jeffrey Nugent:]

Appreciate it. Any further questions?

[Operator:]

Thank you. At this time, I’m showing no further questions. I'd like to turn the call back over to Jeff Nugent, CEO, for closing remarks.

[Jeffrey Nugent:]

Thank you very much, operator. I will just be very brief and I want to emphasize again the number of major accomplishments during this quarter. And for those of you who have been following us, I want to thank you for your continued interest in Sientra and the belief and the potential to grow this and to create shareholder value that we have spend a great deal of time identifying and that we look forward to sharing the growth that we already have planned and our progress on meeting those objectives. So, again, thank you very much for your attention to Sientra.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.