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Organogenesis Holdings Inc (ORGO) Q4 2020 Earnings Call Transcript

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Organogenesis Holdings Inc (NASDAQ: ORGO)
Q4 2020 Earnings Call
Mar 16, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good afternoon, ladies and gentlemen, and welcome to the fourth-quarter 2020 earnings conference call for Organogenesis Holdings, Inc. [Operator instructions] Please note that this conference call is being recorded and that the recording will be available on the company's website for replay shortly. Before we begin, I would like to remind everyone that our remarks today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including the risks and uncertainties described in the company's filings with the Securities and Exchange Commission, including Item 1A, Risk Factors, of the company's most recent annual and quarterly reports. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date today.

Although it may voluntarily do so from time to time, the company undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website.

I would now like to turn the call over to Mr. Gary Gillheeney, Sr., Organogenesis Holdings' president and chief executive officer. Please go ahead, sir.

Gary Gillheeney -- President and Chief Executive Officer

Thank you, and welcome, everyone, to Organogenesis Holdings fourth-quarter 2020 earnings conference call. I'm joined on the call today by Dave Francisco, our new chief financial officer, who was appointed to the role in February and joins us after a long career at PerkinElmer. Now let me start with a brief agenda of what we'll cover today in our prepared remarks. I will start out with an overview of our revenue performance in the fourth quarter and a review of the key drivers of the impressive growth that our team delivered despite the challenging operating environment.

I'll then share a brief review of our operating highlights in the fourth quarter and year-to-date periods. And after my remarks, Dave will provide you with a more in-depth review of our quarterly financial results and the formal guidance for 2021 that we included in our afternoon's press release. And then we'll open up for questions. Let me begin with a brief review of our fourth-quarter revenue performance.

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We reported total revenue growth of 43% year over year in the fourth quarter, driven by 48% growth in sales of our Advanced Wound Care products and 17% growth in the sale of our Surgical & Sports Medicine products compared to the prior year. Our revenue results were well above our guidance and exceeded the high end of our preliminary revenue range announced on January 13. Our growth in Q4 reflected a continuation of the key drivers of our growth strategy and competitive advantages that we've talked about on each of our earnings calls over the last two years, including the investments that we've made to expand our sales force in recent years, the benefits of our comprehensive portfolio of products that address patient needs to treat wounds across all the stages of the healing process and the strong execution of our commercial strategy, focused on leveraging our products in multiple channels, new product introductions and brand loyalty. Let me share a little more color on how each of these longer-term drivers of growth contributed to the strong performance in Q4.

First, we've made significant investments to grow our team of direct sales representatives in recent years. We ended 2020 with 300 direct sales reps compared to 265 at the end of 2019. That's an increase of 13% year over year, and we prioritized this area of investment over the last three years. And as a result, the number of direct sales representatives have increased at a CAGR of 16% since the end of 2017.

Our fourth quarter and fiscal year revenue results clearly benefited from this investment that we've made to grow our direct commercial team over the last several years. Second, our strategy to broaden the reach of our products continue to bear fruit. We've been focused on expanding into new physician specialties, multiple sites of care and leveraging our research and development pipeline to increase the number of new product introductions. And there's no better example of our team's success in executing this strategy than the impressive PuraPly performance that the team delivered in Q4.

PuraPly sales increased 13% year over year in the fourth quarter, well ahead of the implied growth rate assumed in our 2020 revenue guidance, which calls for sales to decline approximately 50% year over year as a result of the anticipated pricing headwinds related to the change in reimbursement status for the sale of PuraPly products. This change impacted only PuraPly sold in the outpatient setting, which transitioned the product into the high cost bundle on October 1, 2020. We are proud of the results in Q4 as we believe it reflects the strong execution of the strategy to navigate the loss of pass-through status that we have been discussing with the investment community over the last two years. We've positioned the product differently this time coming off of pass-through with additional clinical data, additional sites of care, additional physician specialty, and we launched five new PuraPly product and line extensions in 2020.

These all contributed to our ability to drive strong sales performance in the fourth quarter. An important part of the PuraPly strategy over the last two years was to grow the PuraPly brand. And the improvement in the overall awareness of PuraPly and what it can do can't be overstated. PuraPly is better positioned in the marketplace today than at any point in years past.

Clinicians continue to value this product's differentiation, and we continue to see growth in the number of accounts utilizing PuraPly, aided in part by the strong sales of the five new product and line extensions introduced in 2020, four of which were launched just in Q4. Sales of our amniotic products were the third area of notable strength in Q4. The sales of amniotic products were the largest contributor to the company's growth again in Q4. Our growth strategy in the office is our fourth area of notable strength.

It's a continuation of what we've discussed on calls throughout 2020. We've been working for several years to penetrate the office market, primarily with channel-specific product offerings and more recently, leveraging the acquisition of our CPN Bioscience. We acquired CPN this past September, primarily for the access that CPN's physician office management solution provides, which further broadens our physician offering and accelerates our growth opportunity in the office channel. Finally, our fourth-quarter sales results benefited from better-than-expected sales of our Surgical & Sports Medicine products, which increased 17% year over year in Q4, well ahead of our guidance expectations.

Surgical & Sports Medicine sales growth was fueled by the early progress we made in targeting new physician specialties, including extremities and trauma areas which have been more resilient to the COVID-related headwinds compared to the more elective procedures that you see in this market. With respect to the overall operating environment that we experienced in Q4, we continue to see pockets of relative strength and improving trends as well as areas that continue to experience more challenging trends related to the COVID pandemic. By way of reminder, during the first wave of the pandemic, we didn't have as large an impact as other companies because of the mix of our business outside of the major metropolitan areas of the U.S. So as the second wave of the pandemic has hit those nonmetropolitan areas, we have seen and continue to see an impact on our business trends, specifically in the Surgical & Sports Medicine side of our business.

But despite the continued headwinds from COVID, we were fortunate that our commercial strategy resulted in broader diversification of our product mix -- of our revenue mix by product, by channel, by physician specialty and site of care, including the growth we've experienced in the office channel, all of which has contributed to having less exposure to the acute care and outpatient settings this past year. In summary, we are very pleased with our revenue performance in the fourth quarter, where we reported 43% sales growth despite the continued challenging operating environment. And we were also pleased with the significant improvement in our profitability in Q4 as evidenced by the 20% operating margins, positive GAAP net income and generating $25 million in adjusted EBITDA this quarter. These financial results were well ahead of our guidance ranges and reflect the underlying profitability potential in our business in the years to come.

Importantly, we are proud that we achieved these important profitability milestones well in advance of the stated interim period financial targets we've been discussing with the financial community over the last several years. We also generated more than $26 million in cash flow from operations in the fourth quarter. We further strengthened our balance sheet with an underwritten public offering of common stock, which raised approximately $60 million of net proceeds. And we used the strong cash flow from operations we generated in Q4, along with a portion of the net proceeds from our common stock offering, to pay down $29 million of our line of credit borrowings during the period, and we ended the quarter with more than $84 million in cash.

The material improvement of our financial condition during the second half of 2020 leaves us well capitalized to execute on our strategic growth initiatives going forward. Turning to a brief review of our recent operating highlights. In addition to the appointment of our new chief financial officer, David Francisco, we have made important regulatory and clinical announcements in the recent months, both of which are for ReNu, our cryopreserved amniotic suspension allograft for the management of symptoms associated with knee osteoarthritis or OA for short. On January 11, we announced that the FDA granted ReNu Regenerative Medicine Advanced Therapy designation or RMAT status.

Securing RMAT designation is a significant milestone for ReNu that not only underscores the potential impact of this therapy for knee osteoarthritis, but also provides us with key regulatory advantages including potential priority review of our BLA and potential ways to support accelerated approval of the license. On January 14, we announced the first patient had been enrolled in our pivotal Phase III clinical trial, evaluating the safety and efficacy of ReNu for the management of symptoms associated with knee OA. Together with the RMAT designation, this underscores the strength of our existing ReNu clinical evidence and its potential to address a largely unmet medical need. We look forward to leveraging our RMAT designation to work closely with the FDA to expedite the review of ReNu as the study progresses.

With that, let me turn the call over to David for a review of our financial results for the fourth quarter, our balance sheet and financial condition as of the end of the year and a review of our 2021 revenue guidance that we introduced in this afternoon's press release. Dave?

Dave Francisco -- Chief Financial Officer

Thank you, Gary. I'll begin with a review of our fourth-quarter financial results. Unless otherwise specified, all growth rates referenced during my prepared remarks are on a year-over-year basis. Net revenue for the fourth quarter of 2020 was $106.8 million compared to $74.6 million last year, an increase of $32.2 million or 43%.

Revenue from Advanced Wound Care products for the fourth quarter of 2020 was $93.6 million compared to revenue of $63.4 million last year, an increase of $30.2 million or 48%. Revenue from our sports and -- Surgical & Sports Medicine products for the fourth quarter of 2020 was $13.2 million compared to $11.3 million last year, an increase of $1.9 million or 17%. Revenue from PuraPly products for the fourth quarter of 2020 was $45.3 million compared to $39.9 million last year, an increase of $5.4 million or 13%. As of December 31, 2020, we had approximately 300 direct sales representatives compared to 265 at year-end 2019, and approximately 175 independent agencies compared to 160 at the end of 2019.

Gross profit for the fourth quarter of 2020 was $81.3 million compared to $54.3 million last year, an increase of $27 million or 50%. Gross margin for the fourth quarter of 2020 was 76% of revenue compared to 73% last year, an increase of 340 basis points year over year. The increase in gross profit resulted primarily from increased sales volume due to strength in our Advanced Wound Care and Surgical & Sports Medicine products as well as a shift in product mix to our higher gross margin products. Operating expenses for the fourth quarter of 2020 were $59.5 million compared to $56 million last year, an increase of $3.5 million or 6%.

The increase in operating expenses in the fourth quarter of 2020 was driven by a $2.7 million increase in research and development costs and a $0.8 million increase in general and administrative expenses compared to the prior year period. The year-over-year increase in R&D expense was driven by an increase in process development costs associated with the new contract manufacturer, an increase in product costs associated with our pipeline products not yet commercialized and an increase in the clinical study and related costs necessary to seek regulatory approvals for certain of our products. The year-over-year increase in selling, general and administrative expenses was driven by investments in additional head count, primarily in our direct sales force, and increased sales commissions due to increased sales as well as other selling costs, including credit card processing fees and royalties. Additionally, our fourth-quarter operating expenses included $0.6 million of restructuring expenses, specifically employee retention and other benefit related costs related to the company's restructuring activities.

There were no restructuring expenses in the prior year. Operating income for the fourth quarter of 2020 was $21.8 million compared to an operating loss of $1.8 million last year, an increase of $23.5 million. Fourth-quarter operating margin was 20% of sales, representing a year-over-year improvement in margin of 23 percentage points. Total other expenses for the fourth quarter of 2020 were $2.9 million compared to $2.6 million last year, an increase of $0.3 million or 11%.

The increase was primarily due to higher interest expense resulting from increased average outstanding borrowings under the 2019 credit agreement compared to the prior year. Net income for the fourth quarter of 2020 was $18.5 million or $0.16 a share compared to a net loss of $4.4 million or $0.04 a share last year, an increase of $22.9 million or $0.20 a share. Adjusted EBITDA was $24.9 million for the fourth quarter of 2020 compared to adjusted EBITDA of $0.8 million last year, an increase of $24.1 million. We have provided a full reconciliation of our adjusted EBITDA results in our earnings release, Form 8-K and Form 10-K, all of which were filed with the SEC this afternoon.

Turning to a brief review of our financial results over the 12 months ended December 31, 2020. Net revenue for the full-year 2020 period was $338.3 million compared to $261 million last year, an increase of $77.3 million or 30%. The increase in net revenue was driven by a $73.9 million increase, or 33%, in net revenue of Advanced Wound Care products and a $3.4 million increase, or 9%, in net revenue of Surgical & Sports Medicine products. Net revenue of PuraPly products for the full-year 2020 period was $147.3 million compared to $126.8 million last year, an increase of $20.5 million or 16%.

Gross margins for the full-year 2020 period was 74% compared to 71% last year, an increase of 330 basis points. And our operating margin for full-year 2020 was 8%, up more than 19 percentage points year over year as compared to the operating loss we reported for the full-year 2019 period. Net income for the full-year 2020 period was $17.9 million or $0.16 a share compared to a net loss of $40.5 million or $0.44 a share last year. Adjusted EBITDA of $36.9 million for the full-year 2020 period compared to adjusted EBITDA loss of $18.2 million last year.

Now turning to the balance sheet. As of December 31, 2020, the company had $84.8 million in cash, approximately $30 million of available borrowing capacity and $84.8 million in total debt obligations, of which $15.1 million were capital lease obligations. Compared to $60.4 million in cash, approximately $5 million of available borrowing capacity and $100.6 million in total debt obligations, of which $17.5 million were capital lease obligations as of December 31, 2019. Net cash increased $24.4 million for the full-year 2020 period and was driven by $42.5 million of cash provided by financing activities, $6.8 million of cash provided by operating activities and partially offset by $24.8 million used in investing activities.

Turning now to a review of our 2021 revenue guidance. As detailed in our press release this afternoon, we introduced our fiscal year 2021 revenue guidance for the 12 months ending December 31, 2021. The company expects net revenue of between $390 million and $405 million, representing an increase of approximately 15% to 20% year over year as compared to net revenue of $338.3 million for the 12 months ended December 31, 2020. The 2021 net revenue guidance ranges assumes net revenue from Advanced Wound Care products of between $362 million and $375 million, representing an increase of approximately 23% to 27% year over year compared to net revenue of $294.6 million for the 12 months ended December 31, 2020.

Net revenue from Surgical & Sports Medicine products of between $28 million and $30 million representing a decrease of approximately 31% to 36% year over year as compared to net revenue of $43.7 million for the 12 months ended December 31, 2020. Net revenue from our sale of PuraPly products of between $139 million and $147 million, representing flat to a decrease of approximately 6% year over year as compared to net revenue of $147.3 million for the 12 months ended December 31, 2020. In addition to the formal revenue guidance, we would like to provide a few considerations for investors to bear in mind when evaluating our growth expectations for fiscal year 2021. This additional color is intended to help the investment community better understand the assumptions supporting our revenue expectations for 2021.

First, the largest contributor to our total company net revenue growth in fiscal year 2021 will be sales of our amniotic products, which, at the midpoint of our full-year range, assumes amniotic growth of approximately 43% year over year in 2021. Second, we expect sales of our non-PuraPly non-amniotic products, which collectively form the group called PMA and other, to increase at the midpoint of the range, approximately 20 -- excuse me, 18% year over year in 2021. Third, we expect to see steady improvement in COVID-related headwinds as we move through 2021. However, our guidance for the full year reflects stronger year-over-year growth in the first half of 2021 as compared to what the guidance reflects for growth in the second half of 2021.

This is driven primarily by two factors. One relates to 2020, the other relates to an assumption in our guidance for 2021. Specifically, given the strong performance in the Advanced Wound Care business in 2020, we expect to see our year-over-year growth trends in -- over the second half of 2021 moderate as we lap the 56% growth we reported over the second half of 2020. While we expect an operating environment in the second half of 2021 to benefit growth trends in our Surgical & Sports Medicine business, our 2021 revenue guidance assumes a significant headwind to sales in our Surgical & Sports Medicine business related to the expiration of the FDA's grace period for enforcement of the existing regulatory criteria for products under Section 361 HCT/P, which is scheduled to occur on May 31, 2021.

Importantly, we believe this applies only to our NuCel and ReNu products. Pending additional clarity on the continued ability to sell these products in advance of receiving BLA approval, we have elected to issue our 2021 guidance assuming no contribution from the sales of ReNu and NuCel products beginning June 1, 2021. This represents a headwind to growth over the last seven months of 2021 of approximately $18 million. Finally, with respect to expectations around financial performance in 2021, we expect to report GAAP net income and positive adjusted EBITDA for the full fiscal year of 2021 period.

In addition to our formal financial guidance for 2021 -- in addition to our -- sorry, excuse me. We are providing some considerations for modeling purposes. For the full-year 2021 period, we expect gross margins of approximately 75%; total GAAP operating expenses to increase approximately 22% year over year, inclusive of growth investments and the normalization of the 2020 GAAP operating expenses; total interest and other expenses of approximately $9 million; noncash D&A of approximately $9 million; noncash stock comp of approximately $3 million; and a weighted average diluted shares of approximately 128 million shares. With that, operator, I'll turn it back to you.

Questions & Answers:


Operator

Thank you, sir. [Operator instructions] And our first question will come from Matt Miksic from Credit Suisse.

Matt Miksic -- Credit Suisse -- Analyst

Good evening. Thanks. Thanks so much for taking the questions.

Gary Gillheeney -- President and Chief Executive Officer

Thank you.

Matt Miksic -- Credit Suisse -- Analyst

So much to focus on here, talk about and really there's a lot of mostly good things happening, but I'll focus in on just a couple. And congrats again on a really strong finish here. And it's just great to see things kind of working or moving in the right direction. So maybe if you could talk a little bit about -- I appreciate the color on growth by sort of major business as you think about '21.

If you could maybe provide any similar color on runway for growth in the physician's office and what that looks like maybe in terms of round numbers or directionally magnitude of growth? And what's some of the other types of care or channels look like, just to sort of give us a sense of how this all comes together to deliver this 15% to 20%. And then I have one follow-up.

Gary Gillheeney -- President and Chief Executive Officer

Sure. Thanks, Matt. Thanks for the question, and I appreciate your comments. So we don't really provide direct guidance on sales channel.

Our stated goals for the office was to be at about 50% of our Advanced Wound Care revenue, and we're moving quite nicely toward that goal. But we do expect to see strong growth in the office. In the second half of the year, we do see some demand starting to reemerge in the outpatient setting. So that's also going to be helpful for us down the road where we'll have growth in HOPD and the office.

And what was interesting and exciting in our Surgical & Sports Medicine business unit in Q4 and even for the year, but mostly in Q4, is the additional sales in the, what we call the extremity areas, which is more trauma, foot and ankle surgery, where more of our regenerative medicine technologies can be sold in that channel, quite frankly. Even more so than the spine area, which we also have a significant part of our revenue in the Surgical & Sports Medicine. So all of those areas right now are looking positive from a growth perspective. But the office will certainly be a strong component of our growth, particularly with the acquisition of CPN, which entrenches us a little more and gives us more access to more of those customers in that channel.

Matt Miksic -- Credit Suisse -- Analyst

That's great. And I'm sure some other folks have a follow-up on those trends and topics you just mentioned, but I'll just ask one question, if I could, around EBITDA. And you sort of delivered, obviously, a very strong top line growth in the back half. And I'm sure that was a contributor to some of the very strong 23%, 24% second half EBITDA margins.

You mentioned positive EBITDA in '21. Can you give us any other color as to how to think about that, either front-half, back-half or full-year expectations?

Dave Francisco -- Chief Financial Officer

Yes. So we're not breaking it down by quarter. But I will say, you're absolutely right. What we saw in the back half of the year was very, very strong growth, 57%, Q3.

43% in the fourth quarter. So obviously, that growth has generated a lot of flow through. And so our expectation, we tried to give you some guidance on the key components that would go down to net income and EBITDA. And so hopefully, that will help build out your models.

But we wanted to be sure that there was some indication there. There is -- it is a big step-up in growth investments for the year as well. So we are expecting to continue to invest in the commercial resources and have a big expectation around spend around clinical expenses as well. So we think there's long-term opportunity for that 20% EBITDA.

But I think we got there a little faster than we anticipated just based on that growth in the back half.

Matt Miksic -- Credit Suisse -- Analyst

Is it -- if I could just ask, is that mean you sort of -- as you see continued strong growth here in the front half, maybe is it the right way to think about if expenses catch up, investment maybe catches up to some of the momentum here in the front half. And then as you mentioned, back half, you're facing tougher comps, maybe not quite as much, obviously, pop as we saw in the back half of next year. Is that the right way to think about sort of leverage and spend front half, back half?

Dave Francisco -- Chief Financial Officer

Yes. Again, I mean, I think we don't want to be providing quarterly guidance at this point. But I would say that your expectations around growth are correct given the comps that we saw in the back half of last year versus the comps from the first half.

Matt Miksic -- Credit Suisse -- Analyst

Fair enough. Thank you. Thank you very much.

Operator

Our next question comes from the line of Ryan Zimmerman from BTIG. Your line is now open.

Ryan Zimmerman -- BTIG -- Analyst

Great. Thank you. Good afternoon, Gary. Good afternoon, Dave.

Thanks for taking the questions. A really masterful performance in 2020 in spite of the environment. So I guess the big question I think many are asking is around the guidance. And I appreciate all the color you gave, but particularly around PuraPly guidance and the expectation for that to grow kind of in the mid-single-digit range in spite of what you did in the fourth quarter.

I mean when we think about kind of the line extensions and what you could do, maybe just get your thoughts, Gary, around kind of volume and unit growth this year in spite of the reimbursement changes that are taking place.

Gary Gillheeney -- President and Chief Executive Officer

Well, sure. So I think our Q4 performance, which was really strong. And obviously, Q4 is our strongest quarter, generally. And PuraPly benefited from some of the disruption we had in our amnion manufacturing.

So it's a tough comp. Going forward, we do expect unit growth for sure with PuraPly. We have three months of headwind relating to going into the bundle for our larger pieces. So there is some ASP headwinds there.

So we've got to overcome those headwinds. We'll do it with additional volumes. We'll do it with our five new additional line extensions and new products. So the unit growth will help offset any sort of ASP decline that we would normally see coming off pass-through, and still overcome -- the fourth quarter of last year was very, very strong for us.

So that would be a comp in there as well that we have to overcome. So we think collectively, keeping PuraPly flat to slightly down is good performance. But we -- it's early days with the four products we launched in Q4. Right now, they're trending nicely.

If they continue to do well, we'll be pretty confident in that guidance.

Ryan Zimmerman -- BTIG -- Analyst

OK. And as far as the enforcement discretion, will we hear about that potentially before that would go into effect? Or help us understand maybe what the range of outcomes could be. I appreciate the conservatism to take it out of guidance for 2021 particularly in the back half. But maybe just the range of potential outcomes that we could see as a result of that.

Gary Gillheeney -- President and Chief Executive Officer

Yes. So number one, we will not take the product off the market unless directed. So that's the first, I think, important thing. I think the FDA, and though I'm not an expert in the FDA.

But the FDA cannot give you authority directly to keep selling because they're requiring all of these products to have a BLA license so they can't -- I don't think there's a mechanism for them to actually say, yes, you can stay on the market. They can certainly tell you, you have to come off the market. That's certainly an action that they can take. So we think they're managing this through the enforcement and selective enforcement where they see risk.

So I don't think anybody is going to get a letter that says you can stay on the market. I don't believe that authority exists with the FDA. I think the likelihood is, based on the risks of the product, which is the safety profile of the product and where you are in the BLA process or IND process, will dictate whether or not you'll fall under that enforcement arm. So unfortunately, there's not great clarity on, yes, you can stay on.

Only, yes, you have to get off. And then it's just managing and monitoring the enforcement activity. Now we have requested a meeting from the FDA to try to get more clarity and more understanding of how they're viewing our products and, quite frankly, all products. And we haven't -- we don't have confirmation of when that meeting is.

It's a type C meeting, I believe, which requires them to meet with us within 75 days. So hopefully, when we meet with them, we will get some more verbal clarity. But we won't leave there with a letter that says you can stay on. Hopefully that was clear.

Ryan Zimmerman -- BTIG -- Analyst

OK. Very helpful. No, very helpful. And then if I could squeeze one last in.

ReNu, I understand, I appreciate the enforcement discretion impact from that. But bigger picture, where are we at in the process for ReNu? Remind us kind of where you are as it relates to a potential BLA. And when do you think you could have that on the market more broadly with the proper reimbursement in place. And potentially, could we hear some clinical data updates this year as well? Thank you.

Gary Gillheeney -- President and Chief Executive Officer

Sure. So we expect to complete the enrollment in the first half of 2022. We expect to complete the study in the first half of 2023. And then submit in 2023 our filing and then the FDA would have that probably for at least a year, which takes you out to 2024.

And this obviously assumes that we're only having to do one trial. If we're -- if it's deemed that we have to do a second trial, it could extend that time out nine to 12 months. But it implies a 2024 approval with a 12-month FDA review based on our schedule right now.

Ryan Zimmerman -- BTIG -- Analyst

Thanks for taking the questions.

Gary Gillheeney -- President and Chief Executive Officer

Sure, Ryan. Thank you.

Operator

Thank you. Our next question comes from the line of Richard Newitter from SVB Leerink. Your line is now open.

Richard Newitter -- SVB Leerink -- Analyst

Hi. Thanks for taking the question, and congrats on managing through a challenging year the way you guys did, Gary, David.

Gary Gillheeney -- President and Chief Executive Officer

Thank you.

Richard Newitter -- SVB Leerink -- Analyst

So two for me. One -- the first one on Affinity and then a follow-up on ReNu. Starting with Affinity, Gary, you've said in the past that demand has outstripped your ability to supply that product. Can you maybe just give us an update on where you are on capacity and manufacturing there.

Are you able to satisfy all the demand that's in the marketplace as of this quarter? Or how should we be thinking about that moving through the year?

Gary Gillheeney -- President and Chief Executive Officer

Sure. So the answer is we're not able to support all of the existing demand today. We did increase our capacity in Q4 last year. That capacity improvement didn't come until the end of December.

We were hoping to get it earlier. So we are enjoying that additional capacity in Q1 this year. And we're in the process of getting to the next level of capacity. We probably won't see that until April, May time frame.

So we'll start to see some improvement in capacity in the second quarter. Our goal is to get to two and a half times the capacity we had in 2020. We expect that to happen in the second half of the year. So we won't get there until the second half of the year.

So that is our goal. We think at two and a half times the capacity, we'll start to make a strong dent in that demand. But as we continue to introduce the product around the country, we think that demand will continue to grow. And we believe we need to get even above the two and a half times going forward in 2022.

Richard Newitter -- SVB Leerink -- Analyst

Got it. And then on ReNu, I think you have said in the past that you're expecting a data readout for the 12-month Phase II trial. One, is that still on track? How will we hear about that? Will we hear about that and what form?

Gary Gillheeney -- President and Chief Executive Officer

Yes. That 200-patient study was published -- if you're talking about the 200-patient study.

Richard Newitter -- SVB Leerink -- Analyst

Yes. With the 12 months, is that going to -- OK. So that -- what data are we expecting in 2021 from the Phase II or any additional data?

Gary Gillheeney -- President and Chief Executive Officer

Sure. So just recently, the 12-month data was published just recently. Obviously, as you know, the six-month data was already published though that 12-month data was just recently published. We expect, by the end of this year to getting close to completing our interim analysis of 50% of the patients.

And we'd probably have a readout of the Phase III trial, the interim data in Q1 of next year. So those are the key dates at this point. The publication of the 12-month study of the 200-patient study, and then the readout of our 6-month interim data or 50% interim data in Q1 of next year of our pivotal study.

Richard Newitter -- SVB Leerink -- Analyst

OK. That's helpful. And just on ReNu, can you help us size -- or help us think through the way you're thinking about the market opportunity. How, once available, you would potentially commercialize and what the target market would be and the opportunity there.

Gary Gillheeney -- President and Chief Executive Officer

So we see the market, which is primarily hyaluronic acid today, of being about a $2.4 billion market. So our 200-patient study that we have completed, and as just mentioned, the 12-month data was just published, was a 3-arm study. One comparing it to one of the market leaders in hyaluronic acid. And obviously, we demonstrated superiority at six and 12 months to one of the market leaders.

So we think that with approval and with reimbursement that we would have a significant share of that market. And we'd compete very well with some of the larger competitors in the space today in that hyaluronic acid space. So large market, large potential for the product, if approved, and subsequently, if reimbursed.

Richard Newitter -- SVB Leerink -- Analyst

Got it. Thanks. Very helpful. Thank you.

Gary Gillheeney -- President and Chief Executive Officer

Sure. Thank you.

Operator

Thank you. [Operator instructions] Our next question comes from the line of Steven Lichtman from Oppenheimer and Company. Your line is now open.

Steven Lichtman -- Oppenheimer & Company -- Analyst

Thank you. Hi, guys, and congratulations. I wanted to ask on the amnion business. The guidance for 2021 speaks for itself.

I'm wondering what you are seeing competitively. How you're feeling relative to competitive efforts. And are we seeing just also a significant expansion, again, in the overall use of amnions in the marketplace, given the strong guide that you talked about today.

Gary Gillheeney -- President and Chief Executive Officer

Well, we certainly see an expansion of amnion technology. It continues to be the largest growth technology in the skin subspace. We even see that same growth in the auto biologics space in our Surgical & Sports Medicine business. So amnions are clearly expanding the market and growing.

Our product, Affinity, is the only living amnion in the space, so it's a bit unique. So from a competitive perspective, we don't see any product out there that's really challenging it from a technology perspective. And the efficacy that we're hearing from the field is very strong for the product as well. So we feel really good about that.

I think just generally, you're seeing more activity from some of the competitive companies. And I think that will continue to expand the amniotic space as well.

Steven Lichtman -- Oppenheimer & Company -- Analyst

Got it. And then just as a follow-up for the pipeline. I apologize if I missed this. But on Novachor, can you talk a little bit more about expectations there and what that adds through your amnion portfolio?

Gary Gillheeney -- President and Chief Executive Officer

It's a significant product for us. We believe it will be a significant product for us. Its impact this year will not be material. We're expecting to launch that product at the very end of this year.

So the revenue impact won't be until 2022. And just to remind everyone that it's the same manufacturer that makes Affinity will make Novachor. That would be the most efficient way to make it because you're basically creating Novachor as part of the process of processing the amnion. But because we have capacity constraints with Affinity, we don't want to take any time or any capacity this year away from Affinity to create Novachor.

So we have that issue from a manufacturing perspective. But we do expect to launch it at the end of the year. And it is unique. It will be the only living chorion product, and that's a product we might launch in multiple sites of care, which we think will also give it additional growth opportunities in addition to the product itself has different properties, which make it more useful.

And in some ways, have a greater utility for certain types of wounds.

Steven Lichtman -- Oppenheimer & Company -- Analyst

Thanks, guys.

Operator

[Operator signoff]

Duration: 44 minutes

Call participants:

Gary Gillheeney -- President and Chief Executive Officer

Dave Francisco -- Chief Financial Officer

Matt Miksic -- Credit Suisse -- Analyst

Ryan Zimmerman -- BTIG -- Analyst

Richard Newitter -- SVB Leerink -- Analyst

Steven Lichtman -- Oppenheimer & Company -- Analyst

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