Sientra (SIEN) – Implant Expansion

Sientra (SIEN), a name I previewed this morning in Conversations, is a medical device company that operates through 2 segments: Breast Product, where it offers silicone gel breast implants for use in breast augmentation and breast reconstruction procedures, and miraDry, which is a non-surgical device for the permanent reduction of underarm sweat and odor.

Let’s kick things off with the company’s miraDry segment, which continues to underperform. In its last earnings release, the company said that sales fell by 54%. Management has indicated that they remain open to strategic alternatives for this business, and from the post-earnings notes, would be a welcome addition to investors as it would portray Sientra as a pure-play breast product company.

Now, with the company deciding to shift its focus away from miraDry and toward it Breast Product segment, it has been paying off. The Breast Product segment drove the majority of top-line upside in the prior quarter, with revenue of $22.6M , an increase of 40% Y/Y and 17% Q/Q. It also beat the $16.8M the Street was expecting.

SIEN added over 100 accounts in the Q4 and over 400 for the full year 2020 and expects additional share gains from higher utilization across its broader account base.

Canaccord Genuity analyst Kyle Rose, in his post-earnings note, said that while it can be hard to get competitive share information from Allergan and Mentor, it’s clear the company’s recent focus on the breast segment has been validated by strong, sustainable momentum and continued clear signs of share-taking with full-year growth of 18.6% despite the pandemic impact on elective surgical procedures. Looking forward, they see no signs of momentum slowing as the company guided breast segment revenue to growth of 27-35% in 2021 and +30% for the Q1.

Speaking of not slowing, Stifel analyst Jonathan Block noted in his post-earnings note that Sientra is still in only ~1,800 Plastic Surgeon augmentation accounts with the overall opportunity at 6,000+. For reconstruction, management noted that the company still only has a presence in 16% of the 3,500 reconstruction hospitals. Said differently, in the stores in which Sientra has a presence, market share appears closer to ~40-50%, which may prove to be a leading indicator of where trends can go over time as more doors are opened. On the international front, Sientra is recognizing revenue in Japan (albeit small right now with $1.7M in 2020), and Health Canada expected to announce an approval decision sometime this summer.

Doc Takeaways

Finally, on March 31st, Stifel was out again after hosting a number of doctors/physicians at their “Doc Day.” The individual that I want to focus on is Dr. Larry Fan, a board certified plastic surgeon at a solo private practice in downtown San Francisco. According to Stifel, 90% of his procedures are cosmetic-focused, covering a wide spectrum of both surgical and non-surgical services.

Practice Trends – After re-opening his practice in summer 2020 following the COVID-driven spring shutdown, Dr. Fan’s practice saw demand for aesthetic services (both surgical and non-surgical) come back at an even greater level than pre-pandemic. Momentum in his practice has continued to grow in Q1, with February (which is typically slow post-holiday season) being one of their busiest months ever. Encouragingly, Dr. Fan’s appointment book is full looking ahead, with the earliest consultations available 6-8 weeks out from now.

Breast Augmentation – Dr. Fan performs approximately 200 breast augmentation procedures per year and around 20 breast reconstruction procedures. His silicone implant market share currently stands at 70% Sientra, 25% Allergan and 5% Mentor. The note mentions that his overweight exposure to Sientra has been driven by their high quality implants with the best blend of strength and performance. Speaking about the market on a whole, Dr. Fan believes Sientra will continue gaining share over the next five years.