Sientra Inc., of Santa Barbara, Calif., reported gains in both its breast products and Miradry segments during its fourth-quarter earnings call after the close of the market March 11. For his part, CEO Jeff Nugent noted that the company had experienced record total net sales in the fourth quarter of $23.2 million, representing growth of 22% year-on-year.
However, the company provided full-year 2020 guidance for 12% to 17% growth, which William Blair’s Margaret Kaczor said was below her organization’s 22% estimate, “though the shortfall is largely a result of negative impacts from COVID-19.”
She went on to note that even though the company just had experienced two strong quarters, COVID-19 could have a material impact on results, particularly with Miradry and possibly in the breast augmentation business. “Management tried to estimate its impact on the call though the range of outcomes remains wide, in our opinion,” she wrote.
During a call on the results, CFO Paul Little noted that half of its business is ex-U.S., and one-third of Miradry sits in Asia-Pacific. “[W]e believe everything that we're seeing that's impacting the guidance is related to coronavirus.”
Kaczor had started the year expressing confidence in the company, which preannounced its results in January. She noted that the third-quarter results “raised the bar,” but the company had shown stability. Also of note, the company had good news about Miradry, which had growth of 21%, exceeding expectations from the preannouncement. Miradry treatment is the first and only FDA-cleared solution intended to permanently reduce underarm sweat, odor and hair of all colors.
“Most importantly, management highlighted that it is seeing utilization improvements in accounts within the Fresh Rewards program, with continued sequential increases in the first two months of the year,” Kaczor wrote.
The company has hopes for the product. Anthony Vendetti with Maxim Group asked about R&D spend and whether company was eyeing improvements for Miradry. Little replied that spending has been concentrated on the breast side, at least in terms of pure development.
“There is some minor work being done on Miradry, on new indications. But as we mentioned in the last year, a lot of our efforts right now on the Miradry side is to execute against underarm sweat. That's where the market is right now, and that's where most of the efforts are,” Little added.
Despite the news with COVID-19, Nugent highlighted the full-year breast implant and tissue expander sales, which grew 25% “in an overall market that we continue to estimate is flat.” These figures emphasize that the company still is making big share gains.
For her part, Kaczor emphasized that the company continues to perform on its organizational efficiency initiatives, lowering fourth-quarter operating expenses by about 9%, excluding restructuring costs, “while still delivering 20%-plus top-line growth.” In addition, management reiterated its guidance to lower operating expenses by another $10 million and $5 million in 2020 and 2021, respectively.
Management appeared confident on this front as well. “Based on our progress to date, we remain confident that these actions will create a simpler and more cost-efficient operation, enable us to create significant value over the long term,” Little said.
The quarter also saw the acquisition of the Opus breast implant manufacturing operations in Franklin, Wisc., which the company wrapped up last November. It made the purchase from Lubrizol Life Science. The deal was worth $20 million in cash and up to 607,442 shares of Sientra stock. At total of $14 million was payable in cash at closing. The balance will be paid in a $3 million cash payment in 2021 and a $3 million cash payment in 2023.
On the same day the results were revealed, the company said it had closed a $60 million convertible notes financing with a fund managed by Deerfield Management. Sientra intends to use the proceeds for continued investment in its commercial activities, strategic growth opportunities and general corporate purposes.
“If shares are converted, we estimate approximately 30% dilution to today’s shareholders,” wrote Kaczor. “Overall, while potentially more dilutive than we would have hoped, we believe the capital raise should remove concerns of financing for the foreseeable future, allowing the company to focus on execution on growth initiatives.”