Alliqua BioMedical, Inc. (NASDAQ:ALQA)
Q4 2015 Earnings Conference Call
February 23, 2016 08:30 ET
Dave Johnson - CEO
Brian Posner - CFO
Nino Pionati - Chief Strategy & Marketing Officer
Brad Barton - COO
Janice Smiell - Chief Medical Officer
Chris Hamlet - Cowen & Company
Suraj Kalia - Northland Securities
Swayampakula Ramakanth - H.C. Wainwright
Good morning, ladies and gentlemen and welcome to the Fourth Quarter and Fiscal 2015 Earnings Call for Alliqua BioMedical Incorporated. At this time, all participants have been put in a listen-only mode. At the end of the Company's prepared remarks we will conduct a question-and-answer session. Please limit your questions to one question and one follow-up question. Please note that this conference call is being recorded and 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 and responses to your questions today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that can cause actual results to differ materially from those indicated, including those identified in the risk factors section of our most recent Annual Report on Form 10-K filed with the SEC and the most recent 10-Q filings with the SEC. As such factors may be updated from time-to-time in our filings with the SEC which are available on our website. We take no obligation to publically update or revise or revisit our forward-looking statements as a result of new information, future events or otherwise.
I would now like to turn the call over to Mr. Dave Johnson, the Company's Chief Executive Officer. Please go ahead, sir.
Thank you operator, and good morning everybody. Welcome to Alliqua's fourth quarter and of course our fiscal 2015 earnings call. I'm here in our Yardley, Pennsylvania office joined by key members of our management team. I have Brian Posner, our Chief Financial Officer, our Chief Strategy and Marketing Officer, Nino Pionati; our COO, Brad Barton, and our Chief Medical Officer, Dr. Jan Smiell. And of course, all of them will be here to answer questions at the end of the call. Now it happens that because this is a quarter call and a yearly call, we've got a lot to go through today. So both other members of my team will be taking part in some of the prepared remarks but in addition, let's go through the agenda and get going.
I'm going to start with some prepared remarks really as a high level summary of our fourth quarter financial performance, and then in-depth discussion of some business trends and developments since our last update. I'll then turn the call over to Brian who will discuss of course, financial results for the quarter and for the year in much greater detail and an overview of the company's guidance for fiscal year 2016. Brian is then going to turn the call over to Nino who is going to walk you through an update on our MIST Therapy Platform which I think all of you know we've purchased in May of last year. And then I'll be back to provide some additional color on our annual guidance by discussing the primary growth drivers in 2016 along with an overview of some of the strategic areas of focus and upcoming milestones. Of course, then we'll open it up for Q&A.
So let's get started with the review of the quarter. We reported total revenue of $4.8 million, up 187% year-over-year, and driven primarily by strong sales of our wound care products which were up 216% year-over-year. Our total revenue growth also benefited from strong growth in sales of contract manufacturing products in the quarter which increased 61% year-over-year. Revenue from our MIST Therapy products which we began selling in June was the primary contributor to our wound care products growth in the fourth quarter. But we also saw some considerable growth in an organic basis, particularly from our Sorbion franchise.
Now despite the strong revenue growth we've reported on a year-over-year basis, our fourth quarter sales came in at the lower end of our guidance for the period, and while within the range of guidance expectations sales were most impacted by inconsistency in the intra-quarter trends where we saw the month of October was strong, November was slower across all products in all geographies and we saw a solid sales performance return for the month of December. We also believe that our fourth quarter sales may have been impacted by activities we undertook this fall to enhance our selling organization.
Now to that point following the integration of Celleration, we identified a need to enhance the composition of the combined selling organization in order to best serve the wound care market with representatives that were both industry-tenured and experienced sellers of wound care products, and important to note, both disposables and devices. Our reps needed to be comfortable with each of our differentiated products in the portfolio from our dressings, to our skin substitutes, to our MIST Therapy products, and in particular the capital equipment that goes along with that.
With this part of profile in place, we begin aggressively evaluating potential candidates and selectively hiring well trained and qualified individuals over the last five months of 2015. Ultimately, we succeeded in bringing in 15 new selling resources to replace the underperformers and to establish the strong selling organization necessary to execute on our commercial goals. When one considers that we ended 2015 with approximately 46 selling resources, it is possible that this degree of turnover has impacted our commercial progress in the recent quarters but we feel strongly that enhancing our selling organization was necessary to position our business to leverage the opportunity our portfolio of differentiated wound care technologies provides.
Now stepping back from this issue, when we look at 2015 as a whole, we are still very proud of the progress that has been made in a short period of time. I think people forget that this is really only our second year as a commercial wound care company. And from a little business that I first saw that did $1.2 million the previous year, we finished 2015 with $15 million in reported revenue and over $19 million in revenue on a pro forma basis.
We completed our second acquisition in Celleration and integrated the two businesses. We raised $35 million of capital back in May. We have expanded the increased coverage on Biovance and MIST and launched our Ultra MIST product, and of course finally we gained two new GPO contracts. Wow, this is a lot of progress in 12 months. And we have continued this rapid pace of progress into 2016. And before I turn the call over to Brian for a detailed financial review, I'd like to take a moment to highlight and discuss just a few of the notable achievements that we've recently announced.
As an organization, we continue to focus on increasing access to our products in the marketplace by engaging with new distribution partners and GPOs. Of course for those of you who don't know what a GPO is, it's Group Purchasing Organization. We have already begun to see evidence of continued progress on one of these fronts in 2016. As we began the New Year by signing a National Group Purchasing Agreement with Health Trust for our Biovance product, which went into effect on January 1.
Also in January, we announced an upcoming partnership with Human Longevity Inc. or HLI, a privately held Genomics company based in San Diego, California. Pending the completion of HLI's purchase of Lifebank U.S.A. and several other assets from Celgene Cellular Therapeutics, we will retain our exclusive agreement for the commercialization of the existing pipeline of human placental based products. As a reminder, this pipeline currently includes both Biovance and Interfyl which we'll speak about a little later. Lifebank U.S.A. will also continue to serve as the procurer and supplier of the placental tissue for these products as well.
I am most excited about this new relationship with HLI because of the opportunity it will provide us to work collaboratively with the company's President and Co-Founder, Dr. Bob Hariri. Dr. Hariri has played a significant role in the development of stem cell based medical solutions. Most notably, Dr. Hariri was the first person to characterize pluripotent stem cells from the placenta. He is credited with the development of navel exclusive techniques for the extraction of stem cells from the placenta, and he is also the inventor and engineer of Biovance product. With his insight into his relationship to the placental tissue product space and to our portfolio in particular, hopefully you can appreciate and share my excitement in having the opportunity to work with him on our current pipeline of products and potentially future collaborative opportunities that leverage his development expertise in this industry.
At the same time, we are also pleased the Celgene, our largest shareholder, intends to continue to remain an important strategic partner for Alliqua after the closing of their transaction with HLI. Just last week we announced the appointment of Winston Kung to our Board of Directors. Mr. Kung currently serves as Celgene's Vice President of Business Development and Commercial Alliances, and holds a connection to our enterprise as the former Chief Business Officer of Celgene Cellular Therapeutics. His experience combined with his professional background in corporate development and healthcare investment banking makes Mr. Kung an excellent addition to our Board of Directors. And we hope to benefit from his strategic insight and guidance.
Mr. Kung is assuming the seat previously held by Perry Carson to whom we all wish a very happy retirement. Perry was an extremely valuable board member of the Alliqua Board for the last two and a half years, and we truly appreciate his guidance and his friendship.
In conclusion, the pending transaction will allow our three enterprises to maintain and further develop our strategic relationships, and we at Alliqua plan to continue to have customer engagement sessions at Human Longevity Inc. while simultaneously working with Dr. Hariri and his agile development team to explore new opportunities for potential collaboration.
Before I move to a broader discussion of our strategic focus areas for 2016, let me turn the call over to Brian for a more in depth overview of our financial performance, Brian.
Thank you Dave and good morning everybody. Total revenue for the fourth quarter of 2015 increased $3.1 million or 187% year-over-year to $4.8 million. Sales of the company's wound care products increased $2.9 million or 216% year-over-year to $4.3 million. Sales of our wound care products represented 89% of total company sales this quarter compared to 81% of sales in the fourth quarter of 2014.
Fourth quarter wound care products revenue includes the contribution of sales of MIST Therapy totaling $2.5 million. MIST sales increased 18% year-over-year in the fourth quarter driven by the continued uptake of the UltraMIST System which was launched in May. Excluding the contributions from MIST in the period, fourth quarter wound care products revenue on an ap-organic basis increased 32% year-over-year. Sorbion was the largest contributor to our organic growth in Q4 increasing 133% year-over-year.
Gross profit for the fourth quarter with $3 million or 62% of sales compared to $778,000.00 or 47% last year. Gross profit on our wound care product sales was approximately 77% in the fourth quarter of 15. The increase in overall gross margin was driven by wound care products sales which comprise the greater portion of our revenue compared to the prior year period. We expect our total gross margin to continue to increase on a year-over-year basis as the sales of wound care products become an increasingly greater portion of our total sales.
Total GAAP operating expense increased $1.6 million or 25% year-over-year to $7.7 million this quarter. The increase in op ex in the fourth quarter of 2015 was driven primarily by higher compensation and benefits expenses related to increased head count compared to the prior year and to the incremental expenses related to the operations of our acquisition of Celleration. The increase in total operating expense was also partially offset by a reduction in the fair value of the contingent consideration liability related to our acquisition of Choice Therapeutics.
GAAP loss from operations for the fourth quarter of 2015 was $4.7 million compared to a loss of $5.3 million for the same period last year. GAAP net loss for the fourth quarter of 2015 was $4.2 million compared to a net loss $5.4 million for the same period last year.
Non-GAAP net loss for the fourth quarter of '15 was $4.8 million or $0.18 per diluted share compared to a non-GAAP net loss of $3.3 million or $0.21 per diluted share last year. A year-over-year increase in non-GAAP net loss was driven by the changes in fair value of the acquisition related contingent consideration and in the value of warrant liability offset partially by lower GAAP net loss and higher stock comp and intangible amortization expense compared to last year.
As a reminder, the company defines non-GAAP net losses as a reported GAAP net loss excluding income tax, expense or benefit, stock comp expense, one-time charges and other non-recurring operating costs and expenses, intangible asset, amortization, change in fair value of contingent consideration and change in value of warrant liability. Please refer to the reconciliation table included in our fourth quarter in fiscal year 2015 press release for additional details.
Now turning to a review of our financial results for the full fiscal year, total revenue for the fiscal year end of December 31, 2015 increased $10.3 million or 214% year-over-year to $15 million. Total revenue growth was driven by a 330% increase in revenues from our wound care products and approximately 20% increase in contract manufacturing revenues compared to the fiscal year 2014. Revenue from our wound care products in fiscal year '15 totaled $12.9 million or 86% of total sales compared to $3 million or 63% of sales in fiscal '14.
Total wound care products revenue increased -- included contributions from the acquisitions of Choice and Celleration which represented approximately $700,000.00 and $6.1 million respectively of incremental inorganic revenue this year. Excluding the acquired revenue from these two acquisitions our organic growth in wound care product sales was 103% year-over-year. Sorbion and Biovance were the two largest contributors to the company's organic wound products growth this year, increasing 208% and 235%, respectively, year-over-year.
Our gross margin was 60% in fiscal year '15 compared to a gross profit margin of 32% in the prior year. The improvement in total company gross profit margin was largely due to a higher concentration of sales from our wound care products which had average gross margins of approximately 77% in fiscal year '15. Our GAAP OpEx expenses increased $10.4 million or 38% year-over-year to $37.3 million. GAAP net loss for fiscal year '15 was $26 million compared to a net loss of $25.4 million for the same period last year. Non-GAAP net loss for fiscal year '15 was $17.3 million or $0.75 per diluted share compared to a non-GAAP net loss of $13.3 million or $0.91 per diluted share on fiscal year '14.
As of December 31, 2015, the company had $26.1 million in cash and cash equivalents compared to $16.8 million at December 31, 2014. The increase was largely due to net proceeds from the issuance of common stock of $32.2 million and net proceeds from long-term debt of $14.2 million offset by cash used in operating activities of $21.6million and $14.9 million used to fund the acquisition of Celleration during the year end in December 31, 2015. Net cash flow used in operating activities for the twelve-month period included approximately $4 million of expenses and other obligations related to the Company's acquisition of Celleration.
Turning to a review of our financial guidance for fiscal year 2016. For the fiscal year ending December 31, 2016, we expect total revenue of $22 million to $24 million, representing growth in the range of approximately 46% to 60% year-over-year on a GAAP basis. This guidance represents a 15% to 25% growth year-over-year over the proforma revenue of $19.1 million for the twelve-month period ending December 31, 2015. The proforma revenue of $19.1 million assumes that the company had owned Celleration for the full twelve-month period ending December 31, 2015.
Now for modeling purposes, we expect the following, contract revenue to report flattish growth year-over-year, growth margin expansion driven by the continued makeshift of total revenue towards our wound care products, cash op ex in the range of $7 million to $8 million per quarter and lastly, we anticipate our weighted average shares outstanding for the fiscal year 2016 to approximate $28 million to $29 million.
With that, I would like to turn the call over to Nino to provide an update on our MIST Therapy platform, Nino.
Thank you, Brian. Let me take a few moments to share with you what had us so excited about the potential opportunity ahead for the UltraMIST and MIST Therapy Technology we acquired seven months ago. We continue to believe this technology is truly differential within the wound care space. With compelling therapeutic and economic reasons for increasing the option and utilization among practitioners in the years to come.
From a therapeutic standpoint, MIST offers the wound care practitioner an effective advanced wound care therapy that can be integrated within traditional wound treatment techniques to accelerate the wound healing process in a wide variety of wounds. These and other therapeutic benefits are validated quite an impressive body of clinical evidence that includes a meta-analysis and 18 clinical studies of which eight are randomized control trials. In addition to the compelling reasons why we believe in the superiority of the MIST Therapy procedure, we feel equally confident in the strength of our second generation platform, UltraMIST as well.
UltraMIST brings numerous advancements over its predecessor, specifically in improved ergonomics and an overall ease of use. The fact that you may have read in our recent press release, our UltraMIST System recently received an award for its innovative design from the Chicago Athenaeum Museum of Architecture and Design and the Metropolitan Arts Press. We believe that the advancements offered by UltraMIST will contribute to lower procedure and turnaround times and importantly early user feedback supports our belief that the improve ergonomics and ease of use features make the UltraMIST a welcomed addition to wound care facilities who have adapted the technology for the first time and in facilities that have used MIST in the past and who have recently upgraded to UltraMIST.
Finally from an economic perspective, MIST receives favorable reimbursement as a procedure and is covered by six of eight MACs representing 85% of all Medicare beneficiaries in the United States. The therapeutic benefits of MIST Therapy include an acceleration of the healing process which means MIST also have the potential to provide additional savings for the wound care facility by reducing time to healing.
With that, I'll turn the call back to Dave.
Thank you, Nino. So now I'd like to discuss some of the assumptions supporting our 2016 revenue guidance and the initiatives we have underway that are setting us up for growth in 2017 and beyond. 2015 was in many ways an invaluable experience for our executive team, and our 2016 guidance reflects what we believe are realistic expectations for the business this year. Our growth in 2016 will be driven primarily by the following contributors; one, improving productivity of our selling organization, and two, growth in our major wound care products of MIST, Biovance and Sorbion.
Now, beginning with salesforce productivity which is our first driver. As I discussed earlier, we ended the year with 46 selling resources. However, we have implemented the enhancement of our selling organization in recent months. So there is a material portion of our organization that has recently joined the team, and candidly the more tenured reps on the team have only been selling our whole portfolio of products for the better part of six months. We have more than doubled our sales footprint over the past year and we have enhanced the members of the team in recent months.
Further, we are executing a plan to insure that these selling resources are able to achieve strong performance that we are expecting. We are confident that the strong team of selling resources we have in place today will drive improving commercial progress over the course of 2016.
Now turning to our second driver of 2016 revenue growth, the growth on our major wound care products of MIST, Biovance and Sorbion. Beginning with MIST which currently represents our largest product by revenue contribution, as Nino discussed in detail just a couple of minutes ago, from where we stand today with the insight that we have gained with having incorporated MIST Therapy into our portfolio of products over the last seven months we continue to feel confident that we have acquired a truly unique and therapeutically important product, and likewise, we continue to feel good about the long-term commercial potential of this franchise.
Regarding Biovance product line, we continue to remain excited about the ultimate adoption opportunity despite the adoption headwinds that we faced in the market environment that has changed dramatically. Our confidence is supported by the progress we are seeing in trialing, in adoption, in coverage and payment for this innovative skin substitute product. I'll speak more about our Biologics opportunity longer term in a few moments but we were excited about the potential growth impact we will have from Biovance in 2016.
And finally, we continue to be pleased with the performance in the Sorbion franchise. Since we entered into this licensing agreement in 2013 while the overall market opportunity for Sorbion is comparatively smaller than that of MIST and Biovance products, Sorbion represents a validation of our ability to seek out unique technologies that resonate with the needs of wound care practitioners.
Now while these items will drive our revenue growth in 2016, you should also expect to hear from us on a number of additional strategic objectives as we focus on the continued development of our platform of innovative Biologics technologies. First, as I discussed, we continue to be bullish about Biovance and we expect it to be an important contributor to our revenue in 2016; two, we also expect to launch Interfyl connective tissue matrix product on a limited basis in second half of 2016.
And with that let me quickly turn the call over to Janice Smiell, our Chief Medical Officer who will take a moment to provide you with an overview of the Interfyl Technology and why we think it's an excellent addition to our portfolio in the second half of the year. Jan?
Thanks Dave, Interfyl or as Dave mentioned it was previously referred to as CTM, Connective Tissue Matrix, is indeed a placenta connected tissue extra cellular matrix. It will be available in both particulate and flow label. Like Biovance, Interfyl is a human tissue product, however, it does have a different function than Biovance.
As you might remember, Biovance supports wound healing as a lone cover or what the FDA refers to as having a barrier function. Interfyl is regulated as a 361 human tissue product when it's promoted for use as replacement or supplementation of damaged or inadequate integimental soft tissue. That means that it can fill soft tissue void or correct soft tissue defects even where vital structures like bone, nerve or tendon are exposed.
So essentially, Interfyl is performing the function of the extra cellular matrix and it does indeed have the same bio-chemical components found in all connected tissue cellular matrices. The function of a connected tissue matrix, the function of Interfyl, is in the realm of mechanical and structural support in soft tissue. It supports the movement of cells through it and the attachment of cells to it. It is by no means of static matrix structure. It is elastic and is responsive to signals, both mechanical and bio-chemical from the local micro environment that are guiding the repair or rebuilding the damage or missing soft tissue.
Interfyl is designed to complement Biovance in the approximately $700 million advance homecare market by offering an ideal treatment option for the deep, irregular and tunneling wounds that cannot be easily treated with sheath format of the tissue products.
I will be happy to answer any questions you have on Interfyl after Dave's closing remarks but I will turn the call back to Dave now.
Thanks Jan. Okay, in addition to our progress with Biovance and Interfyl, as I mentioned earlier we couldn't be more encouraged with the HLI opportunity and the additional pipeline of growth opportunities coming from new products in what remains still the fastest growing segment of the wound care market. We believe we have a great partnership in place and we will make sure that we take advantage of that.
In addition to the activities related to the continuous expansion of the Biologics platform I also wanted to reinforce that we remain committed to pursuing potential inorganic growth opportunities for the company. When we started this business, part of our strategy has been to pursue strategic transactions to expand our product portfolio and enhance the company's growth profile. These transactions include acquisitions like Choice and Celleration but have also included less capital intensive deals in the form of license and distribution agreements like our deals for Biovance, Interfyl and Sorbion product lines.
We continue to see opportunities to enhance the company's organic growth profile in this environment. They continue to range in size and scope but all potential deals are evaluated through the lens of both the incremental growth opportunity and most importantly, the opportunity to enhance the shareholder value. In some reports we have not included inorganic growth opportunities in our 2016 revenue guidance we continue to see interesting ones and look forward to sharing our progress in this area at the appropriate time.
And in summary, as I look back at 2015 we were successful in accomplishing many of the strategic goals that we set for ourselves at the beginning of the year including the successful completion of acquisition of Celleration. We realize that we still have a great deal of work to do on our business from an execution standpoint but we feel confident that we have made some great strategic progress and have identified the areas where we need to remain focused in order to best position ourselves to drive continued growth in shareholder value.
On that note, thanks everybody for participating in the call. Operator, if you would like to open this up for questions and answers.
Thank you. [Operator Instructions] Our first question today is from Chris Hamlet from Cowen & Company.
Thanks for taking the question guys and thanks for the update on a bunch of these products. I will just start off on these selling initiatives. It sounds like you have 46 reps in place and it is going to be a year to build the momentum here now that structurally it sounds like things are moving in the right direction. Are you looking to add to that 46 this year or is that kind of the number that you feel is best positioning you for the long term, so I will start there and follow up with a product question.
Yes, absolutely. Hi Chris, Good morning. So, we have 46 -- just want to clarify, we have 46 resources, 38 of those are actually account representatives the rest are sales managers, corporate accounts and that's how you kind of get to 46 so just from a point of clarity. And Chris, we think we got the right number right now in fact, we now believe we got the right number and the right people on board to be able to take the business forward so we see no further investment in 2016.
Okay. Sounds good. And then just thinking about, you know that CTM product, Interfyl. How big of a market opportunity do you believe it could be compared to Biovance and maybe where could it be differentiated on the reimbursement front or does it going to have to go through the same back channels?
So, let me turn that over to Nino and then I will come back and make a couple of comments for us.
Yes, hi Chris. So we are right now based on the smart track data which in general a lot of us have subscribed to. This segment of the market is kind of the new segment that's evolving but it's pegged at about $38 million as of the end of 2014 growing to about a $107 million in 2019. But there are parts of this product because part of its injectable and part of it's a particulate as Jan said and that kind of crosses over into the Amniotic space as you know so it's kind of hard to peg an exact number but in totality it competes in that $10 million - $100 million segment of which the injectable piece is about $38 million today. Just lots of opportunities you can imagine in that market.
And Chris, just to finish off on your question on reimbursements, we will be moving down the reimbursement timeline but the truth is that this mostly a surgical product so this is going to sold in 95% surgical applications in soft tissue, think of foot and ankle surgery is a good example, think of those kind of spaces which of course, is under a DRG program and would not need reimbursement.
Okay. And then that makes sense and lastly any update on the Biovance MAC coverage. Anything you might be able to comment on what might happen in 2016 there?
So not much has changed, you know we only spoke last November, so not really an awful lot has changed in the environment, we continue to believe that there are a couple of other MAC's taking a very hard look to moving to a more open policy like the Novotas [ph] of the world but there has nothing in formal that has come out yet. So that's really kind of where it is at this stage.
Okay, fair enough. Thanks for taking the questions.
And now we will take a question from Matt Hewitt from Craig Hallum.
Good morning everyone, this is actually Dillon on for Matt. Thanks for taking the questions. Piggybacking off of Chris's question with the salesforce productivity, just wondering where you guys -- where is the talent coming from? Are they device people or biologic people or are they coming from smaller companies, larger companies, just looking a little bit more granular there?
Yes, good morning Dillon, let me pass it over to Brad.
Yes, good question, good morning. So, it's really both. I mean we find talent in both of those segments so we keep looking for the right profile, if you look at our cellular organization as Dave segmented it, we doubled the size of our sales force back in July with the acquisition of Celleration. We then moved in to cross training those individuals in July and then deployed them out to their territories. We gave those representatives the opportunity and the shot at it but as you might imagine, not all were comfortable or successful. Some of the ones that had just been selling capital or single product may have struggled to sell a total portfolio. Those selling a total portfolio may have struggled in selling capital. So we actually quickly, proactively to enhance the composition of the talent, we now feel we have the right people that's behind us and we are looking forward to Q1.
Yes, and I think, Dillon we are getting these, in the perfect world, there's more than just where they come from as background too as an example, we are finding that people who just worked for a large company who don't understand the entrepreneurial environment, they are having some struggles at times in some smaller companies so there is more than just their background or the types of products. There is also kind of where they have been from, as the type of environment, so to Brad's point they are really coming in a lot of different areas.
Okay, that's very helpful. Thank you, and then I will follow up with respect to MIST. I think this is for Brian and Nino if I can get your commentary that would be great to. Just digging into the customer mix, could you split out the 2.5 million with respect to what percentage is coming from new customers and which is coming from existing customers that are utilizing more.
Yes, Good morning Dillon, this is Brian. Don't have that kind of information readily available. Again I think one of the big focuses we have and maybe Nino can interject is going deeper into the accounts we have, getting greater utilization. There is a significant amount of potential revenue there so yes we are focusing obviously on getting new accounts. But I think a real effort for us and a good ROI is focusing on existing accounts and getting greater utilization. Nino?
And, if you look at our business overtime the good news is that we continue to grow the number of accounts, so if you look at the accounts at the end of 2015 versus 2014, we have an increase in number of accounts of approximately 70 which is good and that's a combination of rental and new equipment and at the same time if you look at the mix of our business, its primarily an applicator business, 70:30 ratio which means we are growing our applicator business along with that. So we are going deeper in existing accounts and we are opening up new accounts.
Perfect and one last very quick. Jan can you update us on the Biovance R&D with respect to enrollment and do you still expect a read-out in Q3?
So you are referring to our Diabetic foot study right? Ok, yes for those of you may not remember we have an ongoing randomize control trial in Diabetic foot ulcers and we are anticipating a complete enrollment of 60 subjects and we are looking to get their by the end of third quarter this year. We have an end point of twelve weeks complete healing and so we are hoping that we will be able to get some data out of it at the very end of the year and a publication next year.
Thanks for taking the questions.
And moving on, we will hear from Suraj Kalia from Northland Securities.
Thank you for taking my questions. So I guess let me start out -- I missed this on call. Can you give us a color on MIST, the contribution in this quarter -- what is the written off of the typical [ph] expectations, and just -- if you could just give us some of the market dynamics and also the implied contribution for FY '16 guidance?
Yes, I think Suraj you were breaking up there but I think I understand your question. So, I think a couple of points on this therapy. First of all, I start with we actually had a very good year. To Brian's point, we grew the business at 17% year-over-year, it was a combination of both applicators but we also had very good systems year which of course is a great predictor for continued revenue drivers in the following year and in this case 2016. Really in Q4 itself, November -- for some crazy reason, November just fell out and it was really across every product category and MIST had the greatest hit just because it's our largest product line, really nothing more to say than that. The contribution of MIST Therapy continues to be the largest in our portfolio. December was a very positive month, we bounced back. So October was a very positive month, December was a very positive month. It seems like a lot more people took longer thanksgiving than they had in the past and so, we continued to be very bullish on it but that generally gives you an overview of our thoughts on this therapy Suraj. Did I answer the question?
Yes. For fiscal 2016 how would you characterize what you guys are saying and whatever is embedded contribution from MIST?
Hi Suraj, good morning, it's Brian. This is obviously a significant part of our current revenue and a significant part of our guidance. It being over 50% of our 2015 revenue obviously for us to grow we have to grow MIST and again we have some good leading indicators with the systems increase which we expect to lead to increase in applicator sales. Again, additional system sales and in due accounts, rentals, so on and so forth. So it is a significant part of our guidance but there is also projected increases in Sorbion and Biovance. While we shouldn't lose track of that, we are still a suite technology, suite of advanced human care technology but yes, MIST is a big driver.
I think Suraj, real quick, think of it as 50% MIST Therapy and 50% rest of products and I think you are not going to be too far off.
And finally Dave, in accounts of your sales reps how do you -- what do you think is the optimal productivity given that you're making in '16 [ph]. Thank you for taking my questions.
Listen, I think you start-off on productivity with salesforce from my standpoint for a longer term when you say what's maximum productivity for a rep in this business. There has been a rule of thumb, I've said this I'm sure on other calls about a $1 million a rep. I still don't think that's crazy, I think that makes an awful lot of sense in our space as well. And so, when you look at 38 account reps, and let's take the mid-range for our guidance for next year at $23 million, you can get to that number pretty quickly. And so, we still think we have a lot of work to allow our reps to grow within the space. Because we finished of the year from a productivity standpoint of all reps in the field and we are not increasing reps this year, our sales force productivity will increase somewhere between 15% to 25% not unlike our guidance. So that's what we are striving to be able to do.
Thank you for taking my questions.
[Operator Instructions] Our next question is from Swayampakula Ramakanth from H.C. Wainwright.
Good morning Dave, good morning Brian. How are you doing?
Okay, doing good.
Couple of quick questions. First question is a bit of clarification, when you reported $6.1 million for MIST in 2015, is that what Alliqua recognized from the sales for the seven months? Because the quarterly numbers are quite different
Yes, it's is $6.1 million for the seven month period we own the company on a proforma basis full year Celleration is about $10.1 million.
Okay, all right. And then -- so if you think that 10.1 as a pro forma number and then if you take your 22 to 24 for 2016 it doesn't seem much of a growth there. I mean, I'm getting something correctly [Cross Talks] because this percentage is coming from MIST.
Yes, RK, I think the way to look at this is, let's put this into perspective, we're building off of a base from $19.1 million and if you take the mid-range of our guidance, we're increasing the business by $4 million in 2016. And out of that $4 million we've set approximately -- somewhere approximately 50% of that is MIST and 50% of that is the rest of the business. If you back into that you're looking at a pretty darn good 20% type growth or more in MIST Therapy. So I think that when you look at it that way, I think it's a good way to put it into perspective on the kind of growth we're looking at for MIST next year.
Okay. And then now that in the second half of this year you will be getting ready to commercialize Interfyl, what have you learnt from commercializing Biovance that you could apply to Interfyl when you're ready to get started there?
Now that's a really good question. So first of all, I think it's very important to distinguish there is a very big difference between the two which I mentioned a little earlier RK and that is Biovance, the vast majority of Biovance sales are in a reimbursed environment and quite frankly, even when you look at a Biovance being used in hospital or a DRG environment, if -- no physician really wants to start the regime of care with a product that a patient cannot get in the outpatient because it's a longer regime. With Interfyl, this is a generally at least, it's a surgical procedure done in hospital and so the entire reimbursement climate will not be one of the great barriers that we have here. And so the biggest learning is, we're excited to be able to bring out a product that doesn't have that same reimbursement issue. We think we've got -- we've created some differentiation. And quite frankly, it could allow us to work through some additional partners in other verticals that we don't concentrate on today and rather than bringing our salesforce in too many places this maybe an interesting strategy in 2016. So just some thoughts around Interfyl.
Okay. And then the last question from me is, regarding gross profit, obviously the gross profit from product sales is good, it's about 77% but it's being pulled drastically by the contract manufacturing sales. Do you think at some point, Dave, you might really think about that part of the business and understanding the impact of how burdensome it is to carry it, that you might have to strategize something different for that segment.
RK, really good question. I think I did mention on a previous call, our contract manufacturing business is clearly not the strategic part of where this company is going. I think in the early days of the company it served us well on a number of fronts, but today that pluses and minuses is starting to change the way and so we have said that we are looking at strategic options on what we can do with our manufacturing facility, and clearly moving forward, this will be a product-focused orientated company.
Thank you. Thank you for taking the questions.
And that does conclude our question-and-answer session today. Mr. Johnson, I'll turn the conference back to you for additional or closing remarks.
Thank you, Kim. And everybody thanks so much for taking part in our call today. We're proud of so much of the progress we had in 2015 but at the same time we recognized we've got a lot of work to do in 2016. This team is energized around doing exactly that. So thank you, we look forward to giving you progress reports after the first quarter. Thanks Kim, thanks everybody.
And that does conclude our conference today. Thank you all for your participation.
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