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Sientra (SIEN) Q1 2019 Earnings Call Transcript

Motley Fool Transcribing, The Motley Fool
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Sientra (NASDAQ: SIEN)
Q1 2019 Earnings Call
May. 08, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, ladies and gentlemen, and welcome to the Sientra first-quarter 2019 earnings conference call. [Operator instructions] As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Mr. Neil Bhalodkar.

Sir, please go ahead.

Neil Bhalodkar -- Investor Relations

Thanks, operator. In our remarks today, we will include statements that are considered forward-looking within the meaning of the United States securities law. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current assumptions and expectations of future events and trends which may affect the company's business strategy, operations or financial performance.

A detailed discussion of the risks and uncertainties that the company faces is contained in its annual report on Form 10-K that the company previously filed, as well as any updates in its quarterly report on Form 10-Q that the company filed with the SEC today. Actual results may differ materially from those expressed in or implied by forward-looking statements. The company undertakes no obligation to update or review any estimate, projection or forward-looking statement. Today on the call we have Jeff Nugent, Sientra's chairman and chief executive officer; Paul Little, chief financial officer, senior vice president, and treasurer; and Charlie Huiner, chief operating officer and senior vice president of corporate development and strategy.

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With that, I'll hand the call over to Jeff.

Jeff Nugent -- Chairman and Chief Executive Officer

Thanks, Neil. Good afternoon, and thank you for joining today's review of Sientra's first-quarter 2019 results. I'm pleased to report that we achieved consolidated net sales of $17.6 million in the first quarter. That equates to year-on-year growth of 20%.

The quarterly performance was driven by strong growth in both our breast products and miraDry segments and represents a solid start toward our 2019 objectives. First, our breast products segment. Sales grew 14% year on year, to $9.8 million. I'm extremely proud of this result considering the category headwinds we faced related to media coverage of the regulatory actions in Europe early in the year that carried into the FDA panel meeting in late March.

In spite of these factors, our plastic surgery consultants stayed focused and demonstrated strong execution against their targets. I'm confident that we are well-positioned to continue this momentum in the quarters ahead. Sientra's ability to continue to take market share, continue to take market share, is being demonstrated with a strong traction we are achieving from our targeted consumer conversion programs. In the first quarter, our sales force generated sales from over 100 new breast implant accounts that had not placed an order with Sientra in 2018.

Our clinically supported, superior safety profile and industry-leading warranty is clearly resonating with both board-certified plastic surgeons and their patients. Our breast implant supply from Vesta continues to build, and we expect a steady ramp throughout '19, as we have previously guided. Our improved supply position has allowed us to roll out these new customer conversion programs, which we will continue throughout the year, and supports my continued enthusiasm for the share recapture opportunity, going forward. Additionally, we advanced our position in the $300 million U.S.

breast reconstruction market, as evidenced by the continued strong surgeon demand for our tissue expander products. The growth in these tissue expanders was driven both by deeper penetration within existing accounts, as well as a number of new hospital contract wins. Further, in mid-April, driven by our product development and regulatory teams' diligent efforts, we were very pleased to receive FDA approval for extra high profile, or XP, breast implants, adding over 50 new smooth and textured implant options. This approval fills an important gap in our reconstruction portfolio, and we expect demand for these new products, combined with continued recognition of the clinical advantages of AlloX2, to drive further penetration of hospital accounts in 2019.

We will introduce our extra high profile implants to plastic surgeons in a few weeks at the annual ASAPS Aesthetics Meeting in New Orleans as an important step in preparing to launch these products during the third quarter. And finally, last week the FDA released its decision following the breast implant panel held in late March. We support the FDA's conclusions to make enhancements to product labeling, patient decision checklists and the informed consent process, as well as to collect more comprehensive information about women's experience with breast implants. At Sientra, we are guided by science, and the scientific data has repeatedly confirmed the long-term safety and effectiveness of all Sientra implants.

This is the specific basis for establishing our category-leading 20-year warranty. We want women and their board-certified plastic surgeons to feel confident in their decision to select Sientra's FDA-approved breast implants for their augmentation and reconstructive surgery. Nothing is more important to us than patient safety, and we consider this to be a critical part of the Sientra difference. Sientra remains the only manufacturer of implants that limits its distribution to board-certified plastic surgeons and has done so since our FDA approval in 2012.

This was a standard recommended by a number of plastic surgeons at the FDA panel. As the conversion between plastic surgeons and patients increasingly focuses on safety, we expect the Sientra difference to become a more important factor in the implant selection process. We believe this will keep Sientra competitively well-positioned to continue to increase our market share in both the cosmetic and reconstruction segments in the United States, while we also prepare to take the Sientra difference to targeted international markets. I'd like to switch to provide an update on our miraDry segment.

miraDry also delivered a strong quarter, achieving net sales of $7.8 million and growth of 27% compared to year-ago period. In the first quarter, miraDry experienced the typical seasonality one would expect to see in capital equipment businesses, compared to the fourth quarter. Similar to prior quarters, miraDry international achieved stronger results than our U.S. business in the first quarter.

We believe this is partially due to the highly experienced international sales force we brought on board in early 2018, which has been able to leverage their experience to execute on the miraDry value proposition in those international markets. As we move forward in 2019, we remain focused on increasing miraDry's installed base, particularly in the United States, through sales and marketing initiatives that drive increased brand awareness for our proprietary noninvasive and uniquely permanent treatment. While miraDry demonstrated some initial breakout success in 2018, for the United States it was still very much a year of learning how to best engage with the end user and the aesthetic professional. As it relates to the patient demographic, in 2018 our market research initiatives clarified the miraDry consumer profile and how best to reach them.

Last year we utilized direct to consumer and co-op advertising pilots to test the most effective way to reach this target audience. In early 2019, based on the learnings from last year's pilots, we fully scaled our marketing efforts and kicked off our "No Sweat" global campaign and launched our new miraDry branding and go-to-market strategy. We are now placing cost-effective, targeted digital ads across highly trafficked and focused digital platforms, including Instagram, Facebook, Google and others, while leveraging social media influencers to build interest in miraDry, specifically. Similar to other successful aesthetic products and procedures, our awareness efforts are geared to having our targeted demographic begin to ask for miraDry by name.

This was confirmed in our market research that identified this cohort at over 15 million people. I'm encouraged by the metrics the commercial team is continuing to track. For example, our new miraDry website had over 1.1 million visits since it was launched in January. This compares to under 100,000 in the year-ago period.

The increase in high-quality traffic, which we define as website traffic that took the next step of finding a doctor on our website, is driving increased leads and referrals across our installed base. We have a significant number of our accounts that have indicated that over 75% of miraDry consultations result in a treatment, which is very encouraging. Further, patient satisfaction, which is critical, of those who have been treated with miraDry is nearly 90%, which is among the highest across the entire aesthetics category. This progress is driving physician testimonials and practice success stories that our capital reps are leveraging in their calling efforts.

And I also wanted to briefly mention our leadership transition which we described in our last call as a key aspect of my continued confidence in the proactive steps we are taking to build the miraDry business. Since being appointed General Manager of miraDry in February, Kirk Gunhus has brought increased discipline and accountability to the sales effort, with particular focus on the U.S. market while he continues to oversee international as well. He is working closely with his regional sales directors to improve the effectiveness of our capital sales approach, utilizing the same playbook that has worked so well internationally and with other similar business models.

While Kirk has been in his GM role for less than three months, he's making real progress and an impact, and I expect this to continue quarter by quarter, going forward. In conclusion, I believe the miraDry team is executing on all the right strategies to capitalize what is clearly a large, highly underpenetrated sweat and odor market. Compared to other approved sweat treatment products, we know that miraDry was the only treatment that provides a life-changing permanent solution for consumers bothered by sweat that also eliminates odor. miraDry has become a significant driver of new and incremental revenue to physicians' practices, and we continue to develop more case studies demonstrating the lifetime value of the miraDry patient at high-volume miraDry practices.

I expect our sales and marketing initiatives to have an increasing impact growing our installed base in the United States, as well as the advantage of increased consumable sales, which are at a higher margin level. The business is well-positioned to be a significant growth driver for Sientra this year and beyond. With that, I'll hand the call over to Paul, who will discuss Sientra's first-quarter financial results in greater detail. Paul?

Paul Little -- Chief Financial Officer, Senior Vice President, and Treasurer

Thank you, Jeff. As a reminder, with the exception of adjusted EBITDA, all of our financial metrics are reported on a U.S. GAAP basis. Additionally, we will continue referencing an adjusted EBITDA margin, which we define as earnings before interest, tax, depreciation, amortization, fair value adjustments and stock-based compensation.

Specifically, we are removing noncash items and/or nonrecurring items for this non-GAAP measure. Again, please refer to our supplemental financial information, earnings release and 10-Q for tables on GAAP and non-GAAP and a full reconciliation of adjusted EBITDA to its GAAP counterpart. Consolidated net sales for Q1 '19 were $17.6 million, an increase of 20%, compared to total net sales of $14.7 million for the same period in 2018. Within the breast segment, net sales totaled $9.8 million for the quarter, a 14% increase, compared to $8.5 million for quarter 1 '18.

The increase was driven primarily by the continued traction of our OPUS implant relaunch and strong performance of our tissue expander portfolio, partially offset by bioCorneum sales. Our miraDry business segment achieved net sales of $7.8 million in quarter 1 '19, representing a 27% year-over-year increase, compared to $6.1 million in Q1 '18. Gross profit for the quarter was $11 million, or 63.1% of sales, compared to gross profit of $8.6 million, or 58.5% of sales, for the same period in 2018. Changes in consolidated gross margin were driven by the overall mix between breast products and miraDry, as well as a geographic and capital versus consumable mix within miraDry.

Operating expenses for Q1 '19 were $36.9 million, compared to $27.5 million in the year-ago period. The growth in operating expenses was driven by increased investment in sales and marketing, higher stock-based compensation and one-time consulting fees associated with Sientra's commercial initiatives. Adjusted EBITDA for Q1 '19 was a loss of $21.1 million, compared to a loss of $14.8 million in the year-ago period, reflecting increased investments in both segments. Net cash and cash equivalents as of March 31, 2019, were $62 million, compared to $87 million at December 31, 2018.

Cash burn is historically higher in the first quarter. However, for the remainder of the year we expect cash burn of $45 million, which includes potential miraDry milestone payments. In addition, this afternoon Sientra filed a shelf registration statement with the SEC for an aggregated amount of up to $150 million. This shelf provides the company with flexibility as it considers various capital-raising alternatives necessary to continue building and executing the strategic plan for our combined business segments.

I will now review our 2019 sales outlook which we introduced in our earnings release this afternoon. For 2019, we expect total net sales in the range of $79 million to $83 million, which represents growth of 16% to 22%, compared to revenue of $68 million in 2018. For breast products, we expect segment net sales of $44 million to $46 million, driven by continued share recapture of our OPUS gel implants at both existing and new accounts and another year of strong growth for our tissue expander portfolio driven by increased penetration of hospital accounts. For miraDry, we expect segment net sales of $35 million to $37 million, driven by solid growth internationally and acceleration of U.S.

capital equipment sales as our investments in brand awareness and market activation continue to take hold in the coming quarters. I'll now turn the call back over to Jeff for final closing remarks.

Jeff Nugent -- Chairman and Chief Executive Officer

Thanks, Paul. In closing, I remain very confident in our long-term outlook as a fully scalable diversified global aesthetic company. For the balance of 2019, we will focus intently on executing on our commercial strategies to deliver strong growth and drive value for our shareholders. With the FDA panel now behind us, I'm excited that the focus will now turn to the continued improvement of our breast implant supply, new product launches and the superior safety profile of our OPUS implants, all of which position us to recapture the market share in 2019 and beyond.

As for miraDry, this remains a very large, highly underpenetrated market opportunity where we are showing real traction in building awareness to drive capital placements in addition to increased utilization across the installed base. I want to thank our entire very talented and committed team for their day-in, day-out hard work and dedication. We look forward to driving forward to meet and exceed our objectives in establishing a high-growth, diversified global aesthetics leadership position. I'll now turn the call over to Q&A.

Questions & Answers:


Operator

[Operator instructions] Our first question is going to come from the line of Jon Block with Stifel.

Jon Block -- Stifel Financial Corp. -- Analyst

Two for me. I'll go one on each side of the business. First, to start, the breast implant market. Jeff, last quarter you called out sort of a slowdown in consultations due to some of the industry ongoing noise which I guess caused sort of a pause, let's say, in the marketplace.

So curious what you're hearing in the field. We're now, call it, a month and change removed from the panel. Is some of that patient hesitancy starting to thaw here in the U.S.? And then I'll go with a follow-up on miraDry.

Jeff Nugent -- Chairman and Chief Executive Officer

Sure. Thanks, Jon. It's a great question because earlier in the quarter there was a tangible pause, softness, whatever you want to call it, related to the actions in Europe, as well as increased media attention concerning safety issues, primarily related to ALCL. And what we have seen between then and now is that both physicians and patients are becoming less concerned, which means more confident, in the safety of both augmentation and reconstruction procedures.

Part of this is that they've been educated, and it's been very clear that the primary risk has been associated more with textured implants, particularly one brand from one of the manufacturers, that has been addressed by this transition, as we've discussed, from textured to a predominantly smooth implant. So net-net, that in addition to the aggressive recapture of previous Sientra users, has driven us to a very strong start to a year in spite of those headwinds. I hope that answers your question.

Jon Block -- Stifel Financial Corp. -- Analyst

It certainly did, Jeff. And I'll pivot, I guess, to go over to miraDry. Paul, obviously, the guidance very helpful. But specific to miraDry there is, call it, an implied deceleration in miraDry for the next nine months.

And just to quantify, the midpoint I believe implies for a 13% growth for the next nine months. I know this quarter's 27% growth was before the sales number really stepped up last year. But maybe if you can just talk about that implied deceleration and maybe, more importantly, how you see the growth rate for this large opportunity longer term where, arguably, you guys are certainly in the driver's seat with the technology.

Jeff Nugent -- Chairman and Chief Executive Officer

Well, I'll start and turn it over to Paul. But I think on balance, Jon, what we have seen is a combination of factors, I think one of which is the seasonality factor where Q1 in the capital markets category is quite soft. I think the other one has to do with the fact that we are, first, rolling out the new go-to-market strategy that was tested in '18, and this is still very early days in executing the plans that we validated late in '18. So I think that is the primary answer.

But to the point of guidance short term versus the significant upside opportunity, we've identified the total addressable market as well over $3 billion and that we consider ourselves to be in a significant advantage position with the benefits of a single procedure, the high patient satisfaction level and the impact that it's making on an increasing number of professional practices. Paul, do you want to add to that?

Paul Little -- Chief Financial Officer, Senior Vice President, and Treasurer

I think just to reiterate, as Jeff mentioned, we're entering into really the next phase of our go-to-market strategy, and we think there's a good conservative range as we see the initiatives take place, Jon. Our $35 million to $37 million range represents about a mid-teens growth rate year over year, and we're confident with that level.

Operator

And our next question comes from the line of Richard Newitter with SVB Leerink.

Richard Newitter -- SVB Leerink -- Analyst

I've got one on breast implants and then one on miraDry. Starting with breast implants, thanks for the guidance range. I'm just wondering if it's safe to assume that the 25% breast implant growth guidance that you had provided last year for just the augmentation business, does that still stand? And if it does, is it safe to assume that that's kind of the growth implied at the midpoint of this guidance range that you provided?

Paul Little -- Chief Financial Officer, Senior Vice President, and Treasurer

I would say this, that when we gave the guidance in the last call it was all around the context of the impact of the FDA panel and what we were seeing obviously with our business. This range of $44 million to $46 million, which is 19% to 24% over consensus, that's for the entire segment, and we know the segment includes various product lines. So within that segment, breast products, specifically gel implants and tissue expanders, we expect them to grow at least 25%. So yes, we're still confirming what we told you last quarter.

And we're not calling it an outbreak and that's ok. We're giving total consolidated and we're giving, obviously, business segments. We're going to refrain now from giving individual product lines, going forward. So within that, those product lines are implants, are tissue expanders and bioCorneum, for instance.

Richard Newitter -- SVB Leerink -- Analyst

Got it. OK. Actually just one follow-up on the breast implant business. You had mentioned that you feel like the trend started to improve a little bit from the underlying market impact of the uncertainty related to the FDA panel.

Is that something that you noticed more kind of in the last few weeks? Or that's just a noticeable trend that you've been seeing since the panel kind of finished up? Maybe just a little more color around that. And then one follow-up.

Jeff Nugent -- Chairman and Chief Executive Officer

Sure. And that's one of the reasons that I'm very pleased with our ability to respond during all of this activity and confusion. I would say that the net perception from our plastic surgery consultants is that the concerns started to abate right around the time of the FDA panel, where there was more discussion, education with the surgeons, and that it's not surprising to note that the concerns had reduced more significantly within the larger, more established practices. And not only do they have more experience, but they have a greater volume of procedures.

So this is something that continues to ramp in the positive direction, and I think there are a number of people, in fact, the majority of people are very relieved and reassured with the output from the FDA, which further gives them confidence in their product selection and their ability to influence patients.

Richard Newitter -- SVB Leerink -- Analyst

Got it. And then on miraDry, maybe Paul, for you, if you could just tell us what the U.S./OUS. split was, approximately, that comprised the just under $8 million miraDry sales for the 1Q. And can you talk to us a little bit about the seasonality and the pacing for the remainder of the year, just as we fine tune our models within that $35 million to $37 million range?

Paul Little -- Chief Financial Officer, Senior Vice President, and Treasurer

Sure. The first quarter was fairly consistent with what we saw last year. It was about a 60% ex-U.S., 40% U.S.

Richard Newitter -- SVB Leerink -- Analyst

Great. And the pacing?

Paul Little -- Chief Financial Officer, Senior Vice President, and Treasurer

I would just look at this business as with the initiatives we're putting in place and the marketing teams, building awareness isn't overnight. So I would say this is probably a little more biased to the back half in terms of the growth opportunities in the business. It's a little also a bit of a chunky business. You have the Q1 seasonality issue of it.

Obviously, quarter 4 is always very strong in the capital equipment business. But the overall growth we should focus on, on that, and then cadence it if you like on, again, back half awareness driving placements and driving the consumables.

Operator

And our next question comes from the line of Margaret Kaczor with William Blair.

Margaret Kaczor -- William Blair and Company -- Analyst

So maybe just to start out with one of the things that may be helpful for the breast side of the business. Can you guys start with giving us a sense of the traditional sequential change that you would see in a market from Q4 to Q1, understanding this quarter probably saw a little bit more softness than historically? The real question is how much share do you think you were able to gain in this period and how that translates through the rest of the year.

Jeff Nugent -- Chairman and Chief Executive Officer

Well, I think that the reliable granularity is hard to achieve, but we believe that we are currently in the high single digit share position. And we've certainly identified the targets that we are confident that we are going to achieve. But the point is we are gaining share. And doing our research and understanding, particularly, Allergan as a competitor, that we know that we are taking share from them, even on the domestic side.

Mentor is a little bit difficult, in fact, quite difficult, to be able to pinpoint. But we're confident that we're approaching high single digit market share today and with an upward trend.

Margaret Kaczor -- William Blair and Company -- Analyst

OK. And then maybe to follow up a little bit on the guidance and the implications within there, understanding that you're not breaking out between the businesses. But you guys mentioned saying maybe some sort of improvement following the FDA panel and the feedback from the panel. So are you assuming still some sort of impact and a headwind in your guidance this year from a market dynamic? Or are you assuming that it comes back relatively quickly?

Paul Little -- Chief Financial Officer, Senior Vice President, and Treasurer

Well, we're within our assumption, Margaret, that the mortgage market is going to be relatively flat. And if you noticed, ASPS and ASAPS released their '18 data, which kind of minus 1% to plus 4%. So this is a share situation. The market will be flat.

We took share Q1. We'll take share Q2, and it will accelerate as we go into this year and next.

Margaret Kaczor -- William Blair and Company -- Analyst

OK. Great. And then in terms of miraDry, I think one of the things that would be helpful to understand is the profile of the accounts that you guys have added in the last year and then the folks that you're targeting, going forward. I don't know if you can share any differences in utilization patterns for those newer accounts and what do you guys think you need to do or are you even targeting some of the larger clinic chains for miraDry.

Jeff Nugent -- Chairman and Chief Executive Officer

Well, there's several things we're doing, Margaret. I think one is from a very practical standpoint we've identified high-potential markets. And like with anything, there's an 80-20 relationship in terms of where the combination of demographics, the strength in our sales and service organization are. And the example I like to use is Miami.

I love Miami. It has a high sweat index. We're going to New Orleans next week; high sweat index. And I'm not trying to be trivial here, but we've identified where the highest opportunities are and we're deploying accordingly.

So we're not trying to tackle the entire country right now, but we're going in a much more focused way with a much more, with more confidence in the approach that we're taking. And when you look at some of the indicators, and we've got much more granularity on our dashboards. And the things that impress me the most are a significant number of our accounts are seeing an over-70% conversion from consultation to procedure, and that is spreading pretty aggressively. And like I said in the prepared remarks, I always put focus on customer satisfaction index, and we've done extensive work on follow-up reports from those patients.

And we've all been involved in aesthetics for a long time, and that satisfaction index is at the highest level within the entire aesthetics category. That just gives me a lot of confidence that we're improving practices, as well as we're improving significant life-changing benefits to the people who make this choice.

Charlie Huiner -- Chief Operating Officer and Senior Vice President of Corporate Development and Strategy

Margaret, this is Charlie. I'll just add, because I think the end of your question was are we beginning to profile and see traction at some of the larger accounts like medical or aesthetic spas. And I'll just say you can imagine the combination of Kirk and Keith from their Zeltiq days and Paul from his days at Syneron, we're very well versed with what you can get by getting scale at some of these larger accounts. And I can just tell you that we are having good discussions and promising discussions with some of those larger accounts based on some of the very specific direct to consumer and awareness programs.

You can imagine that when they start to see miraDry out there and when some of these big chains start to see miraDry and awareness of that gets out there, we can begin to attract some of those larger opportunities. And we are beginning to see that, and we expect that we may see that going forward this year and into coming years.

Operator

And our next question comes from the line of Chris Cooley with Stephens.

Chris Cooley -- Stephens Inc. -- Analyst

Maybe just one and one for me as well. First, on the breast business, I was really impressed with the 14% here in the quarter and I realize it was a challenging environment. Could you just maybe provide some additional color about the 100 additional accounts that you shipped to during the quarter that weren't participants in '18? Help us kind of get a better understanding of the profile of those practices and which types of procedures you're getting this initial entree there. And then I've got a follow-up as it pertains to miraDry.

Jeff Nugent -- Chairman and Chief Executive Officer

I think it's a combination of hospital accounts, particularly related to the reconstruction category which is growing very nicely. But I think, in general, what we have done over the last several years in the supply constrained environment we've had is that we've maintained relationships with a number of these previous customers who haven't bought from us in at least a year. So it's part of what our plastic surgery consultants have been tasked with, and that's keep these relationships open. And at the end of the day, decisions are made according to a number of different criteria, one of which is physicians' confidence in the relationship they have with the representative.

And I have to tell you that after nearly four years here, in fact, over four years including my time on the board, that I'm convinced that we have the highest-quality sales organization in this category and within most of the categories I've been involved in. So in any event it's maybe a long-winded answer but relationships, being able to share the Sientra difference, which increasingly is being based upon the superior safety profile that we have that we've confirmed through a number of different sources and is becoming much more recognized and accepted.

Chris Cooley -- Stephens Inc. -- Analyst

Understood. I appreciate the additional color. And then just switching gears to miraDry, help us think a little bit maybe -- I guess what I'm really struggling with a little bit on is in the United States I understand you refocused on the high sweat index markets, those markets with a higher ROI. But is there a longer sales cycle here to really drive growth? Or alternatively, just help me kind of think about what the real gating factors are there for that capital type of a placement.

And is there some type of a bogey you'd be willing to share with us here this evening as to a number when we think about install base in the U.S. or growth in the install base, I guess, even off of '18, that would be helpful for us to just kind of frame out before we start driving consumable sales off that market opportunity?

Jeff Nugent -- Chairman and Chief Executive Officer

Well, I think the best way to answer that I think is, frankly, a significant factor in convincing the new accounts to believe in the credibility of the miraDry potential. And we've put an enormous amount of focus on developing references and that our sales reps, as well as our practice development reps, are sharing the range of successful placements that are exceeding our expectations. So it again goes back to translating the model that Kirk had developed in the international arena to the U.S. market and being able to significantly increase the positive references that we have physicians, frankly, all over the country that are exceeding their expectations, exceeding their ROI targets, as well as seeing the extremely high levels of patient satisfaction.

So this is a developing story that is supported by some validated experience, and that's helping this as much as anything. But let's just go one step further and that as people are aware of the problem, which is quite debilitating when people get to the point where excessive sweating and odor affects their self-confidence, and to be able to see the advantages that they get with a simple one-time procedure, and we have initiatives that are already being deployed that are making it easier for the patient to make that choice, the combination of all of these things is really starting to come together.

Operator

And our next question comes from the line of Alex Nowak with Craig-Hallum.

Alex Nowak -- Craig-Hallum Capital Group LLC -- Analyst

Jeff, now that the FDA ruling has passed, there's been a lot of noise, particularly, with Allergan's implant. So does that give you any increased leverage out here when trying to convince a plastic surgeon to switch over to your offering? And this is kind of a hard question to answer, but I know you just said to a prior question you are taking share from Allergan. But is the guidance assuming the share shift accelerates later in this year because of all the noise that Allergan has faced?

Jeff Nugent -- Chairman and Chief Executive Officer

Well, it's hard to predict how this is going to play out, because again remember that right now we're strictly talking about domestic U.S. business and not recognizing the significant changes that they've seen internationally. So it's a U.S. market contest, if you will.

And that I'm not going to criticize anyone, but the choices between the alternatives are so clear in favor of Sientra. And I've got a number of anecdotal examples of this and it's very difficult to quantify them. But we have such loyal surgeons out there that have continued to regard the OPUS brand product line as the superior solution. And the number of people who have told me that, particularly in a case where their wife, their daughter, a close friend, when they need a procedure they have a strong tendency to select Sientra.

And that's all part of the strategy of taking share by elaborating the extensive warranty, the documented safety superiority, etc., etc. So it's a multifactorial answer, and I struggle to make it as crisp as I'd like. But the surgeons understand this, and part of our challenge now is to expand that awareness as we increase our supply chain to be able to serve the new, previously unserviced practices.

Alex Nowak -- Craig-Hallum Capital Group LLC -- Analyst

OK. Understood. That's helpful. And actually staying on that, just any update on plans to move your breast implant products outside the U.S.? As you said, clearly there's a new vacuum forming there with Biocell getting pulled from the market.

Jeff Nugent -- Chairman and Chief Executive Officer

I think it's best to just describe it this way, that we've identified the highest opportunity markets outside the U.S. We've initiated regulatory approvals in those high potential markets. That we have, I think, significant advantages with an existing distribution network outside of the United States with a fairly extensive miraDry network that is part of the company, and that we're committed to begin that expansion beginning in 2020.

Alex Nowak -- Craig-Hallum Capital Group LLC -- Analyst

OK. Understood. And then just last question from me. Obviously, a lot more focus from investors here recently on the cash burn and the need for capital.

So just based on the burn this quarter, it looks like you have roughly two to three quarters of cash left. So Paul, obviously you mentioned the shelf, and we all saw the news there. So is it fair to think we should expect to see something here relatively soon? And is debt an option here with the current burn? Or is the focus really on some sort of equity raise?

Paul Little -- Chief Financial Officer, Senior Vice President, and Treasurer

That's fair. I'd just say we're going to look at our balance sheet, and right now we know it provides us with enough capital to get through this year. We also have leverage on the balance sheet. Obviously, by filing the shelf today it gives us even more flexibility to address our needs.

So we are evaluating all the opportunities. We're going to be prudent to figure out how we're going to fund both these businesses. But I think we have plenty of flexibility, and that shelf today provides more of it.

Operator

And our next question comes from the line of Kyle Rose with Canaccord Genuity.

Kyle Rose -- Canaccord Genuity -- Analyst

A first question is just, appreciate the guidance on the breast side. Obviously, this year is off to a great start. You talked about the 100 accounts. You also got approval of the new implant styles I think sooner than expected.

I just wondered kind of how that changes your thoughts as far as going out and maybe capturing incremental customers and/or dollars in those accounts. And then secondarily, on the recon side it sounds like some of those 100 accounts came from more on the recon space. Can you maybe talk to us about where you're at with respect to contracting from an implant perspective? And then also attachment rates with respect to expanders and implants, how much of those sales are you capturing on both of those?

Jeff Nugent -- Chairman and Chief Executive Officer

Charlie, can you handle that?

Charlie Huiner -- Chief Operating Officer and Senior Vice President of Corporate Development and Strategy

Sure. Let me try to take those sequentially. So we're obviously excited to get the approval of our extra high profile implant. I don't know whether we'd say it was ahead of schedule, because you never can tell with the FDA, but we're pleased that we got that approval.

As Jeff mentioned, it definitely fills a gap in our recon portfolio. And frankly, this is something we've been talking about now for a number of quarters, which is we have a very active product development program that is focused on getting us to at least par, if not above par, with the rest of the market in the United States. That includes breast implants. It includes tissue expanders, which we feel we already have a leading brand of tissue expanders.

So again, we feel very good about this approval. It puts us in good shape for continued growth within breast reconstruction. I just want to clarify. When we talked about those 100 new accounts that hadn't purchased implants from us in 2018 but did purchase in Q1 2019, while there were some hospital accounts in that, a lot of them were previous customers who hadn't bought from us for 12, 18, 24 months on the cosmetic side.

So it's really across the board. Our team, given our improving supply position, specifically went out to, in a sense, regain some of those lost accounts, and we were very effective at doing that in the first quarter. And we expect to continue to be good at that in the quarters to come, which really reflects the range that we provided in terms of guidance for our breast implant business.

Kyle Rose -- Canaccord Genuity -- Analyst

Great. I appreciate the color there. And then just one follow-up question is when I think about kind of the last 24, 36 months, obviously the more recent 12 months has been really about getting the inventory back and integrating Miramar. But you've also been acquisitive, piece by piece building a broader aesthetics company.

So when you think from a high-level perspective, are there any gaps from a product perspective that you'd be looking to fill? For me, I kind of think about tissue on the recon side. But I'm just wondering where your priorities lie from an M&A standpoint, how you kind of see the market as an acquirer.

Charlie Huiner -- Chief Operating Officer and Senior Vice President of Corporate Development and Strategy

And I'll take that one, Kyle. Good question. Look, there are opportunities that certainly come our way, and we've talked about having on the breast side two really nice markets, with breast reconstruction and cosmetic augmentation, in the U.S. and now, as Jeff mentioned, internationally.

I can tell you we're going to continue to look at adjacencies that might fill in some of our portfolio for those two market segments. But you can imagine and I can tell you that our focus, we have more than enough opportunity with the portfolio we have and a really nice product development pipeline that we're working on that we feel very good about organic growth and what we can do with this business, certainly over the next three to five years.

Operator

And our next question comes from the line of Jacob Hughes with Wells Fargo Securities.

Jacob Hughes -- Wells Fargo Securities -- Analyst

I just had a quick question, two questions on breast implant side. One is, and I joined late, so apologies if this was answered. But where are you on supply if demand does accelerate here beyond your core SKUs? And secondly, I guess if you could just answer that, I'll come back and ask my second question.

Charlie Huiner -- Chief Operating Officer and Senior Vice President of Corporate Development and Strategy

Again, as we talked about in our prepared remarks around supply and as we've been consistent really over the last six months, we are seeing improvements on a daily basis. We feel confident in the supply we're getting from our partner in Wisconsin right now. We certainly included that as it relates to the calculus of our guidance, and we feel very comfortable with the supply in terms of having sufficient supply to meet our guidance. Now as we've also talked about, this is going to happen sequentially over the quarters of this year.

This is a steady supply scale, as we've been talking about, and that's what we expect to happen through the rest of this year into early next year. So again, guidance does integrate our supply situation, and we feel very confident with the supply we're getting and how that informs our guidance for the year.

Jacob Hughes -- Wells Fargo Securities -- Analyst

OK. And then, Jeff, I guess just a little bit more granularity on the guidance. I think on the last call you said procedure volumes were down in the first quarter and that might bleed into the first half. So what level of conservatism do you think is embedded in the guidance that you provided today?

Jeff Nugent -- Chairman and Chief Executive Officer

Can you repeat that? It wasn't clear on this phone. I apologize for asking you to repeat it.

Jacob Hughes -- Wells Fargo Securities -- Analyst

I was just saying that on the last quarter call you talked about first-quarter procedure volumes were down and that might continue into the first half. So with the guidance today, what level of conservatism do you think is embedded in that?

Jeff Nugent -- Chairman and Chief Executive Officer

Well, I think, as I answered in a previous question, the whatever you want to call it, the reduction or somewhat of a pause that we experienced in the earlier part of the first quarter is returning. And as I mentioned, it's more pronounced in the larger, more established practices. That there are a number of countervailing factors that go into this forecast, not the least of which is the overall net demand from patients and the concerns on safety, which have largely been ameliorated. I have not seen much uptake in the media as a result of the FDA's conclusions, and I would expect that, frankly, it is not as newsworthy as it was before.

So I expect the reluctance to dissipate, going forward. But again, I think that given that safety remains an important factor in product selection and overall confidence in undergoing these procedures that the Sientra advantages, what we call the Sientra difference, includes the fact that we have a demonstrated superior safety index that is also covered by the significantly improved warranty that goes along with it. So the combination of a number of these things I think are going to offset whatever remaining reluctance is still out there. But net-net, I think the combination of all these factors gives us confidence that we are going to continue to at least meet the guidance that we've just put out.

Paul Little -- Chief Financial Officer, Senior Vice President, and Treasurer

And Jacob, it's Paul. You might have missed it earlier. We did give our conclusion that we think the market is going to be relatively flat this year. But we're very confident we took share in quarter 1 and we're going to take it in quarter 2 and we're going to take it for the rest of the year.

So our confidence lies in our initiatives to take the share even with the flat market, in case you missed that earlier.

Operator

And our next question comes from the line of Kyle Bauser with Dougherty & Company.

Kyle Bauser -- Dougherty and Company -- Analyst

In your market research, I know you've characterized the addressable miraDry opportunity in the U.S. as 15 million people and 10,000, or so, aesthetic practices. Of those practices, you talk about how you've broken those out into tiers. And how large of a sales force do you think you need to capture the top tiers over, say, the next 12 to 24 months, or so?

Jeff Nugent -- Chairman and Chief Executive Officer

Well, we think we've identified a sufficient coverage. And again, it's targeted against the highest potential market territories, and that we have essentially two groups in the field. One is focused on new capital equipment sales, and we're currently in the low 40s in terms of the sales force aimed at capital sales. But we also have a large force of practice development managers that are there to get them started and to train them in the protocol in the method that we found to be most successful.

So we believe that we've got sufficient coverage at this stage and that based on our benchmarking with similar companies, and it goes back to I think one of the points we made earlier, that one of the opportunities to decrease burn is increase productivity from the sales force we already have. And that's what we're beginning to see. Does that answer your question?

Kyle Bauser -- Dougherty and Company -- Analyst

Yes. Got it. That's helpful. And then can you talk a little bit more about the Slice innovation lab and activities there? Back in November you submitted the PMA Supplement for the ultra-high profile implants which we just saw the approval of last month.

But can you provide any color on other enhancements you're working on or submissions you've made recently or just any activities there?

Charlie Huiner -- Chief Operating Officer and Senior Vice President of Corporate Development and Strategy

Let me take that. This is Charlie. And I'll just say that the XP project which was approved was, I would call it, the first of what should be an ongoing list of projects coming out of Slice, some of which we can talk about, some of which we can't, to be fair competitively. But we have made mention of the fact that we are working on next generations right now of our tissue expanders, and that's happening at Slice.

I can also tell you that we're beginning to bring surgeons into that facility to give us direct feedback on, again, not only existing devices on the market, but what they believe and what they think that patients will appreciate by way of next generation. So those are things that I can't really talk about right now. But you can imagine that we are, we see a big opportunity. We're very focused on the breast aesthetics markets worldwide.

And to the point Jeff has made, we expect to be a leading player in this business, and we're investing in R&D to take us there.

Operator

Thank you. And this does conclude our Q&A session for today's conference. I would like to turn the conference back over to Mr. Jeff Nugent, chairman and CEO, for any further remarks.

Jeff Nugent -- Chairman and Chief Executive Officer

Thank you very much, operator. I'll just conclude by thanking all of you for your interest in Sientra. We have been through a series of challenges, but I am so proud of this organization and our ability to overcome every challenge we face. And Sientra is in a much stronger position, frankly, than at any time in its history.

So I look forward to continuing to share positive results. And having given guidance for the first time, our objective is to at least meet. And you have to understand that we are motivated to exceed wherever possible. So again, thank you very much for joining us.

Operator

[Operator signoff]

Duration: 59 minutes

Call participants:

Neil Bhalodkar -- Investor Relations

Jeff Nugent -- Chairman and Chief Executive Officer

Paul Little -- Chief Financial Officer, Senior Vice President, and Treasurer

Jon Block -- Stifel Financial Corp. -- Analyst

Richard Newitter -- SVB Leerink -- Analyst

Margaret Kaczor -- William Blair and Company -- Analyst

Charlie Huiner -- Chief Operating Officer and Senior Vice President of Corporate Development and Strategy

Chris Cooley -- Stephens Inc. -- Analyst

Alex Nowak -- Craig-Hallum Capital Group LLC -- Analyst

Kyle Rose -- Canaccord Genuity -- Analyst

Jacob Hughes -- Wells Fargo Securities -- Analyst

Kyle Bauser -- Dougherty and Company -- Analyst

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