SI-BONE, Inc. Q2 FY2020 Earnings Call

Good afternoon and welcome to SI-BONE’s Second Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Matt Bacso from The Gilmartin Group for a few introductory comments.

Thank you for participating in today’s call. Joining me from SI-BONE are Jeff Dunn, President and Chief Executive Officer, and Laura Francis, Chief Financial Officer and Chief Operating Officer. Earlier today, SI-BONE released financial results for the quarter ended June 30, 2020. A copy of the press release is available on the Company’s website. Before we begin, I would like to remind you that management will be making statements during this call that include forward-looking statements within the meaning of Federal Securities Laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. These forward-looking statements are based on the current expectations and inherently involve significant risks and uncertainties.

Thanks, Matt. Good afternoon and thank you for joining us. I hope you and your loved ones are safe and healthy as our communities continue to be affected by the Coronavirus. Before we get into the details of the quarter, I want to take a moment to thank members of the healthcare community, all of whom are making extraordinary efforts to care for both COVID and non-COVID patients in these difficult times. Revenue for the second quarter was $14 million, with $13.2 million of revenue in the United States, down 14% and 12% respectively compared to the second quarter of 2019. The quarter started off as expected, with April revenues being materially impacted by the COVID-19 pandemic and the halting of elective procedures throughout the United States and much of Europe. Specifically, due to these unprecedented measures taken by state and national governments, revenues in April declined 85% compared to the prior-year’s period in 2019. However, May revenues, which we believe included a large number of rescheduled cases from late March and April, increased 6% compared to the prior-year’s period in 2019 as hospitals and medical centers across the United States and Europe resumed performance of elective procedures. In June, total revenues increased 42% as we saw a nice recovery to new cases but we believe also materially benefited from rescheduled procedures. When excluding our estimate of rescheduled cases in May and June, which we believe to be the best metric for COVID impact in those combined months, we estimate revenues would have declined over 10% compared to the combined May and June periods in 2019. We attribute this resilient performance of the quarter to the significant investments made in 2019 including sales force expansion, surgeon training and education, product introductions, and improved reimbursement. While this recovery exceeded our initial expectations following our first quarter earnings call, we’re keenly aware of the risks we face related to the potential for further shutdowns in elective procedures in high volume states like California, Texas, and Florida. Given this uncertainty, we do not view May and June's growth as an indicator of our likely performance in the third and fourth quarters, as both months materially benefited from rescheduled procedures. For the remainder of 2020, we will continue to operate the business under a heightened level of macro uncertainty but are working diligently to accomplish many of the goals we set out to achieve for the full year. While we feel we’re navigating the challenges of the current environment quite well, we’re continuing to drive our commercial priorities to strengthen our long-term growth opportunities. Driving iFuse procedure volumes is the focus of our commercial strategy. The three ongoing initiatives we’re implementing to help us expand the use of iFuse include training new providers, reactivating inactive surgeons, and continuing to grow Key Opinion Leader support for iFuse. As mentioned on the previous call, we continue to make progress in ramping up our Virtual Education for both our SI-BONE sales force and surgeon customers. Our Virtual Education series has been a very well-received program over the course of this pandemic. We have completed 12 programs to date and have an additional four programs planned through the end of August. The most recent webinar, titled novel SI joint fusion applications for adult spinal deformity, was attended by approximately 100 healthcare professionals and led by Dr. David Polly of the University of Minnesota. Given our rapid deployment of this virtual platform and accelerating adoption, the number of active surgeon users was 455 in the second quarter, despite the dramatic reduction in elective procedures in the quarter. We continued our portion of the many academic medical centers and we’re seeing the results of this initiative. As you may recall, our strategy was to use the Bedrock Adult Deformity initiative to spearhead this goal and theorize that the effort would lead to multiple surgeons doing not only Bedrock Adult Deformity cases but also sacroiliac joint fusion cases. Our push into teaching hospitals during the 2019-2020 academic year included SI joint fusion and Bedrock training of over 200 residents and fellows at approximately 50 academic centers, of which over 20 programs were first-time trainings by SI-BONE at these institutions. For example, following a major training program last October 2019 at the Mayo Clinic, numerous Mayo surgeons performed iFuse and Bedrock cases in the second quarter. In addition to the Mayo Clinic, Bedrock is now being used in over 20 academic teaching hospitals. During the quarter, we also continued to build on a significant reimbursement progress made throughout 2019 and into 2020. Specifically, in late May, we obtained a positive coverage policy from Aetna, adding approximately 22 million new covered lives. Additionally, we received a positive coverage policy from CareSource, which covers approximately 1.1 million people on Medicaid primarily in the Midwest and Southeast. Lastly, we added a timely new purchasing agreement with Surgical Care Affiliates, also known as SCA, a large ambulatory surgery center network accounting for more than a million procedures annually. SCA has 210 ASCs in 35 states, and approximately half have spine, neurosurgical, and orthopedic capabilities. The agreement with SCA offers individual centers a choice to obtain preferred pricing by using iFuse exclusively. We believe the agreement with Surgical Care Affiliates, in addition to the Surgery Partners agreement signed in November of 2019, enhances our efforts to sell to ASCs and further streamlines our strategic initiative with this segment of the market. On the clinical side, on May 20, Dr. (indiscernible) of the Scripps Health Center in San Diego enrolled the first patient in our SILVIA study. SILVIA is a prospective multicenter, randomized controlled trial for pelvic fixation using the iFuse Bedrock technique versus standard surgery in patients undergoing multi-level spine fusion surgery. To date, four subjects have enrolled and undergone surgery; we expect over 25 subjects to be enrolled by the end of the year. Study outcome data will not be available until 2022. That said, we’re encouraged by the adoption of the Bedrock procedure in the anecdotal clinical results and feedback from surgeons. We're also happy to announce that one-year findings from SALLY were recently published on June 15. SALLY is a prospective multicenter single-arm trial of iFuse 3D for chronic SI joint pain. The publication showed equivalent improvements in pain, patient function, and quality of life compared to prior iFuse studies. Moreover, the study showed improved physical function test, marked opioid cessation, and a high rate of radiographic fusion on CT scans at six and 12 months. Lastly, although NASS will be a virtual conference in 2020, we will once again be hosting a virtual surgeon panel the morning of October 8. We will provide additional details in the weeks to follow. To conclude, I would like to say we remain in constant contact with our customers, community, representatives, employees, and suppliers during this period. Although the depth and duration of the current challenges are difficult to predict, I believe our mid and long-term opportunity is substantial and our business is well positioned financially and organizationally to weather this pandemic. With that, I will now turn the call over to Laura Francis, our Chief Financial Officer and Chief Operating Officer, to provide more detail on our financial results.

Thanks, Jeff. First quarter total revenue of $14 million decreased by 14% compared to the prior-year period, U.S. sales of $13.2 million, which accounted for over 94% of total revenue in the quarter, declined 12% compared to the corresponding prior-year period in 2019. International revenue of $800,000 declined 36% compared to the corresponding prior-year period, and as Jeff discussed, U.S. case volumes were significantly impacted by the reduction in elective procedures in the month of April, followed by a gradual reopening of hospitals and surgery centers in May. We ended the quarter with 62 direct sales reps and 54 clinical support specialists, retaining all members of our U.S. sales force during the first full quarter of the pandemic. We believe their strength will be essential in the recovery that follows. Gross margin for the second quarter of 2020 was 85% compared to 90% in the second quarter of 2019. The decrease in gross margin was primarily due to certain labor and overhead costs charged directly to the cost of operations when run at sub-optimal capacity during the second quarter of 2020 due to the impact of COVID-19. Gross margin was also impacted by higher inventory overhead costs due to increased cost of operations as we continue to scale. Lastly, gross margins were impacted by an increase in inventory write-offs in the second quarter of 2020. Operating expenses decreased 3% to $22.1 million in the second quarter of 2020 compared to $22.9 million in the second quarter of 2019. The decrease in operating expenses was primarily driven by pre-emptive steps taken to reduce discretionary spending in response to COVID-19. In addition, we reversed $600,000 of accrued litigation expense following the final claims resolution process associated with the TCPA class action settlement. These decreases were partly offset by higher employee-related costs and stock-based compensation due to higher headcount, mainly from sales hiring. As mentioned in our first quarter, we retained our employees and continued forward with all major new products and initiatives to ensure a robust return of the business. However, we also took pre-emptive steps to curtail spending until there was more clarity on the extent and duration of the impact from the pandemic. The cost-saving measures included implementing hiring restrictions, eliminating discretionary spending, reducing executive salaries, reducing capital expenditures, reducing the use of outside contractors, reducing non-essential marketing expenses, and delaying certain clinical research projects. Given the current fluid situation, we have implemented a dynamic forecasting process for the third quarter. On a bi-weekly basis, we’re evaluating our revenue, operating loss, and cash. We will continue to take a thoughtful approach to ensure a return to revenue growth while protecting our bottom line and cash. Our operating loss for the second quarter of 2020 was $10.1 million, compared to $8.1 million in the second quarter of 2019. Our net loss was $12.5 million or $0.44 per diluted share for the second quarter of 2020 as compared to $8.7 million or $0.35 per diluted share in the second quarter of 2019. Cash and marketable securities were $137.7 million at the end of the quarter. Based upon our current operating plan, we believe that our existing cash and marketable securities will enable us to fund our operating expenses and capital expenditure requirements. To further strengthen our balance sheet and cash flow, on May 29, we successfully refinanced our debt with a five-year $40 million term loan with favorable terms including three years without principal payments, minimal covenants, and a lower cost of capital. Due to the current environment and heightened level of uncertainty surrounding the COVID-19 pandemic, we remain unable to estimate the magnitude or duration of specific impacts on our business. And for that reason, we will not be providing financial guidance at this time. That said, we have sufficient inventory, our supply chain dynamics are well in hand, and product flow remains in good shape. As a company, we’re well prepared operationally, financially, and strategically to navigate through this unprecedented period. I will now turn the call back over to Jeff for closing comments.

Thank you, Laura. Before closing, I want to thank our team at SI-BONE for their efforts and strength through these difficult times. I'm incredibly proud to be part of this team and believe that we will come out of this period even stronger as a company. I also believe that our laser-focused leadership in the sacropelvic space is a huge opportunity, and our current initiatives and plans we have laid out for the next three to five years will help us to capture that opportunity. While the immediate future is unclear, I’m confident that SI-BONE is well positioned to navigate these challenging times. The underlying fundamentals of our business remain strong. As we continue to do our part to battle this pandemic, we remain fully committed to support our patients, customers, and our communities. Stay safe and thank you for joining us. We will now open it up to questions.

[Operator Instructions] Our first question comes from David Lewis with Morgan Stanley, your line is open.

Good afternoon, thanks for taking the question. So, Jeff and Laura, a few for me. They're all kind of iterations on a theme. But your tumor recovery was very strong relative to peers and even others who also see this rescheduling dynamic you refer to; I mean they were generally 85% of normal in June, we're 50% above normal. So I’m just kind of curious as you think about the business relative to let's say spine companies, what do you attribute that dynamic to?

Hi David, I think it's a combination of things. I mean, I just think as you know, in Q1, we were firing on all cylinders. All the things were working in the business from sales to reimbursement to reimbursement payment. And I just think that our fundamentals continue to be strong; and certainly, as you know, we had a lot of cases canceled and being down 85% in April, a lot of those cases got pushed out. But I think we feel great about the business, the strength of all pieces, the product adoption, and the amount of surgeons that are interested in training even during COVID times. And I think it's just going to carry forward into the future.

I was just going to say there may be a couple of other things that had an impact. So the fact that the majority of our procedures, we estimate around 80%, are outpatient procedures. We think that we probably benefited from that; and then we talked about Telehealth and how our surgeons incorporated that into their practices so that they would continue to feed the pipeline. Finally, ambulatory surgical centers and a focus there have been helpful too.

Yes, and we heard from some companies, David -- we heard other companies say lately that surgeons alone during this crazy time -- we took the exact opposite tack. We said, let's go engage the surgeons; they have lots of time, let's do training. Let's help them get up to speed on how to do Telehealth and how to diagnose patients so that you can cue up these patients as best you can. Clearly, you can't do physical exams, but there is a lot you can do. So we took a pretty proactive approach across the board.

Okay, very helpful. So clearly, there's underlying demand in the business. We saw that in the fourth quarter, first quarter, and it sounds like there's underlying momentum here kind of adjusted for COVID here in the second quarter. So Jeff, I guess looking forward, can you give us any help on how July trends were? Obviously, probably not 40% like you saw in June, but how should we think about how the business trended in July relative to sort of pre-COVID growth that was kind of 25% to 30%?

Yes, other than getting in those specific numbers of July, David, we certainly expect to see sequential improvement in Q3 over that down 14% number in Q2. I think it's early to tell what that exactly is going to look like. But certainly, we expect to see sequential improvement. And going into Q4, I guess my concern is, normally Q4 jumps up dramatically. Obviously, there are some macro issues that I think all of us are unsure of, and will we see that same push-up in Q4? So, we expect improvement in Q3 and in Q4, we're a little more cautious around are we really going to see that bigger jump-up?

Okay, so just the last question I'll jump back in the queue, Jeff. You talked about this from in the June period, but do you have the sense here in July or going forward, what that mix is right now between rescheduled patients and new patients? Meaning have you largely exhausted those rescheduled patients from April and May, so now you have a decent sense of that de novo demand and how does that new patient funnel look? Thanks so much.

Yes, you're welcome. So I think most of the rescheduled cases are behind us. As I think we stated, the Q2 number would have been down about 10%. If you look at the basic cases, so I think we've mostly exhausted it. I think it's a question of, in our business anyways, keeping the funnel full. All this Telehealth work and all this surgeon education work and the fundamentals, I think will help us. But the direct answer is I think we've exhausted most of the rescheduled cases.

Our next question comes from Bob Hopkins with Bank of America. Your line is open.

Hi, this is Kyle (indiscernible) on for Bob. I might have missed this in the answer to David's question, but I just want to make sure I understand this. So, in June, you had a massive backlog of cases and in May as well, but just wanted to understand kind of what the new demand looks like in July. Should we expect that you'll see a pretty significant drop in July or should we expect that July is starting to get a little bit closer to these -- growing again? I just want to make sure I understand that, and I just have one quick follow-up as well.

Well, maybe I can provide a little bit of response. And it's really reiterating what you said to David Lewis. So what we really focused on Kyle is May and June and we do have information about cases that were canceled due to COVID from the second half of March and all of April. We don't necessarily know which cases were rescheduled and when they were done, but we're making an assumption that a lot of those cases that were on our radar that were in backlog that were canceled, that they did come into the mix in May and June and possibly some in July. And so, the information that Jeff gave, I think is the best information that we can give to you is that if we took out what we believe to be rescheduled cases for the month of May and June, the new cases would have been around 10% down compared to a year-ago, May and June. And so hopefully that gives you some information on at least where we were in May and June. That said, with the strength coming out of Q2, and based on what we're seeing through July, we would expect to see sequential improvement in Q3 revenues versus Q2.

Got it, that's helpful. And I just wanted to have one quick follow-up, as we think about the things that have been going well for the company on the coverage side and the physician fee increases, I just wanted to think about ask you to kind of help us with understanding, when would you expect to start seeing a real benefit from improved commercial coverage and that increased physician fee? Do you think that will start to manifest in growth? Or I mean obviously, it's very difficult to tell with the way things have been going with COVID. But just wanted to understand if you expect there to be a real impact from that as we move forward in the next few quarters?

Well, Kyle, I think as we all have talked about in the past, it takes about, patients have to go through six months of conservative care. So for instance, Aetna is the latest plan to come on board after Cigna earlier. And so it does take six months unless they have good documentation that is already in place that they've been going through the conservative care inside of that six months window. So I think we're starting to see the cases. I think that will accelerate later in the year. The big one that's still sticking out there is Anthem; we’re told that they are meeting in August and will publish in September. But we've heard that before, and all about timing. And so in this COVID world, not everything gets done on time. But if that happens that will certainly potentially help in 2021.

Got it. Thanks so much.

You're welcome.

Our next question comes from Kyle Rose of Canaccord. Your line is open.

Great, thank you very much, and congrats on a strong quarter here. So I wanted to touch on maybe a little bit move away from COVID just for at least one question here. But you talked a lot about the ASC opportunity, the preferred agreement with the Surgical Care Affiliates. Maybe just help us understand what that can mean for the business going forward. And then maybe what impact you can have on driving that forward and then also, what that means for pricing?

I'll take the first part, and then I'll let Laura talk about pricing a little bit. I think so much about medical devices these days, Kyle, is making things as frictionless or as easy as possible, because as we all know, it's not the easiest business. So you have to knock down these issues and whether it's reimbursement or reimbursement payment, you want to get to a frictionless kind of place, and I think the same thing applies in our thinking around ASCs. If a doctor calls up and says, I'm in Texas, in Houston, and I got two cases that I can't put on, the sales rep can say, well, there are four ASCs in the Houston area that are prepped and have techs that are trained how to do the radiographic work here, and you can take it to this one or this one or this one. And so it's really about us creating on a corporate level, frictionless opportunity to have these cases happen. And so the thinking, the biggest ASC group in the country is Tenet; we have an agreement with them on a corporate basis and that extends down to the ASCs. And then these other two that we talked about are in the top five ASC groups. But it's with the quest to try to make it easy for the surgeon. So if they have a patient, they can just go to work and help the patient, and they get paid a reasonable amount, and it's not a hassle. And so I think that that strategy is pretty straightforward. Not easy to do, and as to the referral part of that, I talked a little bit about that. But just making these surgeons aware as these agreements come up and a particular region or whatever city it is, to say, now if you can't get into the hospital or it's jammed or your patient prefers to do it in ASC, these five ASCs in the Dallas area are open for business and happy to have that if they ask.

We have been talking about this the last few quarters, Kyle. So we have assumed that we would continue to see an increase in the number of cases that went over to the ASC. Jeff also even mentioned on the call that the agreement with SCA offers individual centers a choice to obtain preferred pricing by using iFuse exclusively. So our goal has been definitely to drive volume increases; we think that this is a $2 billion market opportunity, and it's less than 10% penetrated. And so what we're really looking to do is to expand as quickly as possible, both exclusively for our own products but also expand into the untapped market that's actually here. So we would expect that ASPs will continue to move downward, but at a clip that continues to put us in a position where we have industry-leading gross margins while also continuing to accelerate our revenue growth.

Okay, great, that is very helpful. And then also just want to touch on just overall case mix. You talked about some of the great penetration you're making in the academic medical centers on the back of Bedrock. Have you really seen Bedrock start to impact numbers here? Are we seeing any change in your implants utilized, the types of cases? Just trying to see overall case mix.

I guess what I'd say Kyle is we're still not prepared to break out Bedrock numbers at this point. As you know, we're pushing into the adult deformity space as well as the trauma space. We may do some of that next year more specifically; I will tell you that I think we're very pleased with the penetration into the academic centers now that we have more than 20 academic centers where Bedrock cases are happening. And as I mentioned earlier, at places like Mayo, it's not just one surgery; it’s an adult deformity surgeon that we penetrated, it's more like a handful of surgeons that are engaged with SI-BONE on both Bedrock or either Bedrock or iFuse cases. So stay tuned on the numbers, but I will say that we think the strategy is spot-on and working how we want it. I think with some of the product introductions we have coming up over the next 12 months or less than that, I think the pieces will all come together even better.

That's very helpful. And then just one quick housekeeping thing, I just want to make sure I heard it correctly. Did you say the number of active surgeons in the quarter was 455? And then just wanted to understand your plans to get reactivate some of the maybe inactive surgeons that may have gone quiet during Q2 and just kind of how that's trended when we think about the recovery from June into July?

Yes, I mean obviously the June numbers were very strong. We would expect those 455 numbers to be a sort of lower point, and clearly June, as I said, and July going forward, we expect those numbers to ramp back up. I had surgeons in April, who called me and said, Jeff, is there any teaching or consulting I can do because I don't have much to do. And so, it's not a surprise, and I think the number of active surgeons went down from, I think it was in Q4 that we had something like 539 and have it go down in the COVID quarter. But we would expect that to continue to climb with all the training we've done and lots of new surgeons getting trained and the Bedrock initiative. So I guess we're pretty optimistic over the next year about improving that number.

Thank you for taking the questions.

You're welcome, Kyle.

Our next question comes from David Turkaly of JMP Securities. Your line is open.

Thanks. I guess this one would be for Jeff, given that you called out Texas, Florida, and California today on the call, and I'm just curious, have you seen any further hospitals in those areas choosing to defer elective procedures? And if so, any color around are you expecting that to happen, has it happened, and sort of how prevalent do you think that could become or not?

Hi, David. We've seen some temporary, more temporary situations in some of those places where they closed down but they seem to mostly have opened up. First, it starts -- I should back up and say it starts with a rumor we hear, okay, this hospital in Houston is going to close down and I get an e-mail; and then three days later, you hear, okay, they stopped elective procedures. And then a week later you say, okay, they've got it together, and they are opening up now. This is obviously a very dynamic fluid situation. Obviously, the physicians in these hospitals have learned to treat COVID better. But as we all know, some of these hotspots have very high capacity numbers or percentages in their ICUs. I think we're going to continue to see some of that ebb and flow for a bit; obviously in June, it didn't have an overall effect. But I can certainly tell you that there were places where we were scrambling to figure out where to do that surgery or it may have gotten delayed even. So I think this is going to go on until we have a vaccine for the next probably through Q1 is my guess, but my guess is not much better than anyone else's.

But David, all of this kind of colors how we're thinking about things as well as I said with the strengths coming out of the second quarter. Based on what we're seeing through July, we're expecting sequential improvement in Q3 revenues versus Q2. But given the environment and uncertainty, we don't necessarily think that we'll experience as strong of a sequential increase in Q4 versus Q3 as we would in a typical year. So while things look good today, we're definitely approaching the second half with what we'd call cautious optimism.

Got it. Thanks for that. I guess I would just echo David; it's nice to see that you were pretty resilient even versus a lot of your peers. I guess it's a second question, just can you remind us that the trauma indication, I think you're planning on sort of doing some education in the second quarter. I guess just what are the plans? What are the goals there?

Well, we've gotten regulatory clearance for fractures and there is a pretty good-sized initiative within the company to go and push into the trauma space. We viewed it as a very interesting opportunity. So you will see some things as I mentioned earlier on the product side that affect all three areas of our business, the base SI joint fusion business and the adult deformity business and the trauma business. So you're going to see some enhancements in all areas. The investments we're making are coalescing all around that strategy to own the whole sacropelvic space, including trauma, and there's a bunch of different indications that we’re working toward and we'll work towards in the future with the agency.

Thank you.

Our next question comes from Kaila Krum of Truist Securities. Your line is open.

Great, hi guys. Thanks for taking our questions and all the details that you guys gave on the quarter. So I think you said it makes sense that we would see a sequential improvement into the third quarter. So just to be clear, is it fair for us to assume that something better than a 10% decline would make sense in the third quarter?

Hi, Kaila. I think that's a fair statement.

Yes, we're thinking about it from the perspective of the year-over-year but also quarter-over-quarter as well, Kaila. So given that we're at $14 million for this quarter, we would expect some improvement in the next quarter as well.

Got it. Okay, great. Thank you. That makes sense. I wanted to talk about what you guys have seen from a training perspective in recent months; I mean is there a way to quantify the level of surgeon engagement that you've been able to have? And procedure volumes broadly have started to recover, are you seeing new surgeons take the time to incorporate iFuse or Bedrock into their practices? Just to be curious what you're seeing specific to new surgeons?

Yes, we’re seeing that, Kaila. And we'll get back to talking more, I think specifically about that in the future. The rollout of our local radiation-free training system, as we talked about, the timing could not have been better. We have started to roll that out. We've started to do multiple trainings with that locally, so surgeons don't have to fly and go stay in hotels. The reception for that training system has been quite positive. There are a few improvements we're making, but those will be completed in short order. I think that that whole training system of being able to say to the doctor, hey, listen, I can bring the training system to the conference room in the hospital or to your office or to the lobby and train you on a system with the instruments on both iFuse fusion cases and with adult deformity, and the surgeon can do it pretty quickly, instead of spending a day to fly to Chicago makes the whole package attractive to those physicians. This is really just starting to happen in the last couple of weeks. It's in its infancy, but we think it will be a competitive weapon. More importantly, because we're trying to grow the market versus compete with most of the people out there with competitive products, we think it will help grow the whole market, which has really been our goal for quite a long time.

Got it. And then just one last one for me, it sounds like there are a lot of procedures that have been rescheduled, but just, I mean, how are you guys feeling about sort of the funnel of new patients, the ability to diagnose a pipeline of patients into the second part of this year and into next? Thank you.

I think we're feeling pretty good about that. So it's very much a focus of Tony Recupero’s and his both sales and marketing team and our medical affairs team from a training standpoint. So, we’re going as we've intimated to do some acceleration around our direct-to-patient work. We're not quite ready to talk about that in detail, but we've started and we'll start slowly in the near future to pump that up because we are confident the patients are out there. It's a question of, as I said earlier, expanding this thing, and it's not last year, as you know, we did 6,400 cases or so in the U.S., and we absolutely believe that it's well over a couple hundred thousand patients a year. So it's about getting to those patients, getting people to understand what the sacroiliac joint is, helping physicians do differential diagnoses and expanding the market there and getting that pipeline really in great shape.

Thank you guys.

You're welcome, Kaila.

Our next question comes from David Saxon of Needham. Your line is open.

Yes, good afternoon, Jeff and Laura. Thanks for taking the questions. First, just on reimbursement, great to see the Aetna policy during the quarter, and it sounds like Anthem could be next month. Just wondering if you can provide an update on kind of how you're thinking about additional coverage policies over the next kind of six to 12 months. I know you've talked about there being a kind of six-month lag before you see a benefit; but just wondering if the use of Telehealth shortens that curve at all?

Yes, so the Anthem one, you never know, David, as you know, Anthem opened the crack, I think it was in January or maybe it was December where they said they're going to cover SI joint fusion. But only for, I think, or help me.

It was in the event of pelvic girdle trauma.

So I think with the Anthem, with Aetna going and Cigna going, we were cautiously optimistic about Anthem, but we've been disappointed before. So we'll know when we know in September and you'll know a few minutes later if we put our press release. As to other payers, there's really only about six to 10 other payers in the country that matter, and they're mostly smaller with the exception of one, which is Humana, and that's mostly government business. Humana is supposed to come up and stand for review and publish in December. Then there's some like for instance Medica in Minnesota, where they're one of the three big payers in Minnesota besides Blue Cross and one other. I think we'll know about that one in the next couple of months or so. So there's a handful of smaller ones. As to the six-month lag in Telehealth, I still think there's a lag there because it's about getting the patients into six months of conservative care. It's not just a diagnostic issue that's getting them into physical therapy or getting injections. I still think we're going to see some lag on that. But I feel overall on the reimbursement side that the surgeons are very pleased with the amount of covered lives we have, which is almost 300 million covered lives and we just have a few to go. Given all the things we're working on with new products and with expanding the market, I look at that as a little less important with the exception of the few things that I just mentioned.

Okay, that's helpful. And then second one for me, just on the sales force. I'm sorry if I missed this, but do you still have the hiring freeze in place? And how should we think about hiring for the balance of the year? Thanks so much.

Yes, we do not have a hiring freeze in place any longer. We have resumed hiring salespeople. As I said in my section, we’re using what we're calling a dynamic forecasting process, given how fluid things are right now. What we're trying to do is really understand what's going on from a revenue perspective, what's going on with the pipeline and then where our expenses and our bottom line and our cash. In those areas where we see significant demand, Tony and his team have begun to hire again in the field. There are really two areas that we focused very heavily upon all throughout the pandemic, and number one is the support of our sales force. We made very significant investments as you're all aware of over the last 18 months since we went public. In our sales force, we have built an extraordinary group of people, and what we wanted to do was support them through this process. That's what we did through the second quarter. We think that the strength that's there is going to help us to really have a robust return to the business as the pandemic continues to subside. The other area that we really focused on was continuing from a product development perspective. You can see that in our financials as well in that we continue to put the foot on the gas in those areas, while being careful in some of the more discretionary areas of spend. In terms of your question about what can you expect through the end of the year. As I said, we're actually taking this every couple of weeks at a time. So we wouldn't necessarily want to give out updated guidance at this point in time, but we’re hiring again and we're being careful about what we're doing, and it's based upon where we see opportunity.

Great, thank you.

You're welcome.

And our next question comes from Brandon Folkes of Cantor Fitzgerald. Your line is open.

Thanks for taking my questions. Let me just tackle the COVID issue from a bit of a different angle. Have you seen some of the procedures that you thought would come back in Q3 to Q4 or that were perhaps in the pipeline later in the year being pulled forward into June and July? Are you seeing any bolus of surgeries being brought forward in anticipation of a second wave in markets that may not as yet be as hard-hit as perhaps your Texas's or your Florida's? Thank you.

Yes, Brandon, I think it's an interesting theory. But I don't think it's really happened. I think the fear of people going into hospitals in these days is still out there to some extent; although, if you talk to most physicians, most are working. So I don't think that they're being brought forward into June and July. I just don't see it. Laura, I don’t know if you heard anything.

While we've actually asked the question of the people in the field because we had heard this more from a Wall Street perspective, and our people in the field had not heard anything like that, Brandon.

You're welcome.

There are no further questions at this time. Please proceed with any closing remarks.

Okay, well just thanks for everyone joining. Hope everyone's healthier and their families are healthy and continue to stay safe. As we talked about, I hope you all can join us at the NASS Virtual Surgeon Session. I think it'll be interesting like last year, and again, thank you for your support, and I'll talk to you soon. Have a good evening.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect. Everyone have a great day.