Alphatec Holdings, Inc. Wells Fargo 21st Annual Healthcare Conference

Thanks for being here. Thanks for having us.

Yeah. Thanks again for having us, Ross. I think as you look at how we came out of the quarter, in the first half, I think volumes were 20% in the first half, maybe a little bit north of, and that feels really good for us in terms of the consistent volume number of procedures that we're seeing in the space, and I think the confidence that it gives us going into the second half. Clearly, that's underpinned by a level of surgeon adoption that's in the low 20% range as well, so increasing the net number of new surgeons who are doing procedures with the company growing, and that really is the underlying engine of the business.

First half at 20% plus, I think our guide implies high teens in the second half. I think we like the setup from a procedural volume standpoint going into the second half of the year.

Not particularly. I think as we did some of that math earlier this year, I think we sized our exposure to that population, low single digits percentages. So we just don't think that we're that exposed, I think as we've gone through the year, haven't heard really any noise around that, I think that would then suggest our math earlier in the year was probably correct.

Well, if you look at the company's history, I think really how our thesis is, we create clinical distinction, meaning we help surgeons do better surgery. When we do that, we will compel a surgeon to adopt the procedure. I think part of our distinction is in the proceduralization of the experience, meaning we do not sell piece parts. Obviously, that is how you sell and how you create the economic relationship with the hospital. What we are trying to do is create procedures that surgeons can choose to use to treat a pathology in a patient.

Surgeons will think of the patient, understand the pathology, and then ask themselves, "What procedure will I use to treat that pathology?" If we can architect a procedural approach, we are more likely to get more of that revenue share of that procedure, as well as we are higher likelihood of actually creating a procedural experience that delivers a better outcome over time. When you do that, you are going to attract surgeons, and those surgeons will adopt those procedures. When you do that, you can ultimately attract the right sales talent to support that surgeon adoption. When I tie that back to what we are seeing, which is strong volumes and strong surgeon adoption, I think you come to the conclusion that the thesis is working.

Well, if you kind of look at where we are in terms of surgeons who have adopted Alphatec procedures, you would probably come to the conclusion that we are between 25% and 35% penetrated. At that rate, you could grow your surgeons at a 15%-20% clip for a number of years and only get half of the potential surgeon adoption that is available to you. I think there is plenty of years ahead of us of opportunity to continue to grow the number of surgeons who adopt the procedures that we provide.

Mm-hmm. As you know, when we look at our surgical revenue, we think about procedural volume, which we've kind of pitched at 20%, and the other half of that equation is the revenue per procedure, which in the second quarter declined year-over-year by about 2.7%. Really, I would say two dynamics going on there. One of those dynamics is mix related, and the other dynamic is really a biologics attachment rate. If you look at the history of the company and the history of our revenue per procedure growth, we've grown substantially over the last number of years. This year, coming into the year, what slowed was our biologics attachment rate, and so we really have not expanded the attachment rate of biologics to our procedures beyond what it was kind of exiting last year.