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SI Bone INC (NASDAQ:SIBN)
Q4 2019 Earnings Call
Mar 09, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good afternoon, ladies and gentlemen, and welcome to the SI-BONE Q4 and full-year 2019 earnings conference call. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Carrie Mendivil, investor relations. Thank you.

Carrie Mendivil -- Investor Relations

Thank you all for participating in today's call. Joining me today are Jeff Dunn, president and chief executive officer; and Laura Francis, chief financial officer and chief operating officer of SI-BONE. Earlier today, SI-BONE released financial results for the quarter and full year ended December 31, 2019. A copy of the press release is available on the company's website.

Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements, including, without limitation, our examination of operating funds -- of operating trends and our future financial expectations, which includes expectations for hiring, active surgeons, new products, reimbursement decisions and guidance for revenue, are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements.

Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 12, 2019. SI-BONE disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 9, 2020.

And with that, I'll turn the call over to Jeff.

Jeff Dunn -- President and Chief Executive Officer

Thanks, Carrie. Good afternoon, and thank you for joining us. I'm pleased to welcome you to SI-BONE's earnings call to review our fourth-quarter and full-year 2019 results. Our progress in 2019 was marked by strong commercial execution that drove accelerating revenue growth.

Revenue for the fourth quarter was $19.8 million, up 27% compared to the fourth quarter of 2018. We ended the year with $67.3 million in sales, up 22% compared to 2018. We have now exceeded over 45,000 procedures performed by more than 2,000 surgeons worldwide. We are well-positioned for the future and continue to expect our revenue for full-year 2020 to be in the range of $80 million to $82 million, reflecting 19% to 22% growth over 2019.

As we enter 2020, we expect the progress and the investments we made during 2019 to pay dividends throughout this year. Starting with our sales force, we finished the fourth quarter with 56 reps in our U.S. direct sales organization. Of those 56 reps, 45 are mature reps who have been with the company for over 12 months.

During 2019, our direct sales reps had an average run rate of over $1.3 million. And for our mature reps, that figure was over $1.6 million. Our direct reps are further supported by clinical support specialists, or CSSs, who assist in case coverage. At the end of the fourth quarter, we had 51 CSSs.

Looking ahead to 2020, we are focused on increasing the productivity of our U.S. sales force and incrementally hiring both U.S. direct sales reps and CSSs as needed. We expect to end the year with around 66 sales reps as we add approximately 10 direct sales reps to large and underpenetrated territories over the course of 2020.

We also plan to further increase the number of CSSs, adding an equal number of new specialists throughout the year to support smaller and rapidly growing territories. This will bring our number of CSSs to 61 by the end of 2020. To support these expansion efforts, we have increased our number of U.S. regions from 10 to 12 by promoting two of our top direct sales rep leaders to regional sales directors.

At the core of our commercial strategy is our focus on driving iFuse procedure volumes. During the fourth quarter, our medical affairs team remained focused on training, educating and supporting surgeons. We ended the year with 539 active surgeons in the United States, which is defined as a surgeon who has performed at least one procedure in the last three months. While our team was focused on growing our base of active surgeons, they also were involved in increased utilization within existing active accounts.

Over the course of the year, we saw our average number of cases per U.S. active surgeon increase from 3.3 in the fourth quarter of 2018 to 3.7 in the fourth quarter of 2019. In 2020, we will work to continue expanding our base of active surgeons while further penetrating existing accounts. By the end of 2020, we expect to increase the number of active surgeons in the U.S.

to 625. There are three ongoing initiatives we are implementing that will help us grow our active surgeon base: first, to train new providers; second, to reactivate inactive surgeons; and finally, to continue to grow KOL support for iFuse. Our vision is that, eventually, every ortho and neurosurgeon will include the SI joint in their differential diagnosis of lower back pain. Our goal is for those surgeons to incorporate iFuse into his or her practice for patients suffering from SI joint dysfunction or degeneration or refer them to an iFuse-trained surgeon.

On to reimbursement, we made significant progress throughout 2019. Following the publication of the five-year follow-up results, Cigna established positive coverage for MIS SI joint Fusion in December 2019. The new policy specifies that coverage will be exclusive for FDA-cleared implants that are placed across the SI joint and intended to promote bone fusion. Cigna is the fourth-largest commercial health plan in the United States with 14.6 million members, opening a significant opportunity to treat these patients with iFuse.

In December 2019, Anthem published a policy update on MIS SI joint Fusion. Anthem now covers the procedure but only in the case of pelvic girdle trauma. While we do not consider this a full-fledged positive coverage policy, it is a step in the right direction. We will continue to work with Anthem ahead of their next review in September.

During the fourth quarter, we also received positive news on the surgeon payment front. In the final physician payment rule released on November 1, 2019, CMS increased the CPT code's national average overall surgeon payment by 27% to $915 from $720. The Medicare fee schedule was updated to reflect this new amount effective January 1, 2020. Many private payers set their payment amounts with reference to the Medicare payment typically 10% to 33% higher than the Medicare payment for a procedure.

We expect the process of updating commercial payer fee schedules and physician practice contracts to take some time, so the full effect of the payment increase may not be felt immediately. Collectively, we expect these reimbursement and payer wins from 2019 to support the expansion of iFuse in 2020. Turning now to our international sales opportunities. We returned to positive international revenue growth in the second half of the year and ended the fourth quarter with 12% growth.

Following sales force turnover in 2019, our German team ramped toward greater productivity over the course of the year. We also saw strong growth coming from the U.K. and our newer branch in France during the fourth quarter. Additionally, we continue to make progress expanding our portfolio of comprehensive sacropelvic solutions.

In December 2019, we were formally notified of the CE Mark certification in Europe for Bedrock. With these regulatory reviews complete, we launched iFuse Bedrock in Europe last month. Similar to our launch in the U.S., we are focused on gaining support from key opinion leaders at academic centers and creating a halo effect for our core SI joint fusion business. We also launched iFuse Bone in the U.S.

in December 2019. iFuse Bone is an enabling triangular technology for surgeons who are interested implant -- in implanting bone in conjunction with an iFuse procedure. We are also working to increase awareness with patients of sacroiliac joint issues as the leading cause of chronic lower back pain -- or a leading cost, excuse me. A survey of 1,000 women in 2019 revealed that eight in 10 are unaware of these issues after pregnancy.

On Wednesday, February 26, orthopedic surgeon Dr. Michael Moghimi and SI joint -- Buddy Jamie were featured on the Emmy Award-winning daytime television talk show, The Doctors. The Doctors show covers a variety of health and medical topics and has an audience of over 1.5 million people watching nationwide every day. Jamie and Dr.

Moghimi discussed how the iFuse procedure enabled Jamie to return to an active lifestyle after over a decade of postpartum pain due to sacroiliac joint dysfunction, frustration and misdiagnosis. Finally, before turning the call over to Laura, I would like to welcome Jeri Hilleman to our board of directors, serving as a director, as well as the chair of our audit committee. Her extensive experience as a public company CFO provides deep experience across public company leadership, capital raises and business development. With now -- with that, I will now turn the call over to Laura Francis, our chief financial officer and chief operating officer, to provide more detail on our financial results and our 2020 outlook.

Laura Francis -- Chief Financial Officer and Chief Operating Officer

Thanks, Jeff. For the fourth quarter of 2019, revenue increased 27% to $19.8 million, compared to $15.6 million in the fourth quarter of 2018. The increase in revenue during the fourth quarter was primarily driven by higher case volumes. U.S.

revenue increased 28% to $18.5 million, while international revenue increased 12% to $1.3 million compared to the corresponding prior-year periods. Gross margin for the fourth-quarter 2019 was 90%, compared to 91% in the fourth-quarter 2018. Operating expenses increased 42% to $26.3 million in the fourth quarter of 2019, compared to $18.5 million in the fourth quarter of 2018. Our operating loss for the fourth quarter of 2019 was $8.5 million, compared to $4.3 million in the fourth quarter of 2018.

Net loss was $9.1 million or $0.36 per diluted share for the fourth-quarter 2019 as compared to $5.3 million or $0.26 per diluted share in the fourth-quarter 2018. For the full-year 2019, revenue increased 22% to $67.3 million, compared to $55.4 million in 2018. U.S. revenue increased 23% to $61.8 million, while international revenue increased 4% to $5.5 million compared to 2018.

The increase in U.S. revenue was primarily driven by higher case volumes. The lower growth rate for international sales was primarily due to softness in our German subsidiary in the first half of the year. Gross margin for 2019 was 90%, compared to 91% in 2018.

The change in gross margin was due to an increase in personnel and operations to support the growth of the business. This is in line with our expectations for gross margin to trend toward the mid- to high 80% range over the next couple of years.Operating expenses increased 54% to $96.5 million for 2019, compared to $62.5 million in 2018. The increase in operating expense was primarily driven by increased sales hiring, surgeon training, new public company costs, stock-based compensation and litigation expenses. Regarding litigation, we executed a definitive settlement agreement in January 2020 to settle all disputes related to the advertising fax case we mentioned in our third-quarter report.

We recognized a loss of $3.2 million in 2019, including $700,000 during the fourth quarter, which reflects the estimable costs the company incurred from settlement of the litigation. The reserve is recorded in our accrued liabilities, and we anticipate payment will occur in the third quarter of 2020. The operating loss was $36 million in 2019, compared to $12 million in 2018. Our net loss was $38.4 million or a loss of $1.55 per diluted share for 2019 as compared to $17.5 million or a loss of $2.20 per diluted share in 2018.

Cash and marketable securities were $93.1 million as of December 31, 2019. In the first quarter of 2020, SI-BONE completed a follow-on offering, raising net proceeds of $63.4 million after deducting the underwriting discounts and commissions. Turning to our outlook for 2020. As Jeff mentioned, we expect revenue to be in the range of $80 million to $82 million, representing growth of 19% to 22% over full-year 2019.

We expect U.S. growth to be between 20% and 23% during 2020. We also expect our international growth in 2020 to continue improving. Regarding the coronavirus, we are carefully monitoring the situation.

To date, we have seen an impact to our procedures in Northern Italy, which represents less than 1% of our sales. Of course, it's hard to say how the procedures will be affected if the disease becomes more widespread. Also, we have no suppliers in China and are not experiencing supply issues at this time. I'll now turn the call back over to Jeff for closing comments.

Jeff Dunn -- President and Chief Executive Officer

Thank you, Laura. 2019 was a transformational year for SI-BONE. We made significant investments that will add to the continued growth in 2020. Looking ahead in 2020, we are focused on continued commercial execution in the U.S.

and overseas, ramping up training and educational efforts and furthering our efforts on the reimbursement front. We are well-positioned for growth and look forward to what is ahead. I want to thank the SI-BONE team for their enthusiasm and hard work. We look forward to updating you on our progress.

With that, we will now open it up to questions. Operator?

Questions & Answers:


Operator

[Operator instructions] Your first question comes from the line of David Turkaly from JMP Securities. Your line is now open.

David Turkaly -- JMP Securities -- Analyst

Great. Thanks, and congrats on the quarter and all the progress that you made in '19. I know you mentioned Cigna and Anthem on the call. I was wondering, Jeff, if you might just give us an update on some of the other payers and where they stand and when you think you might hear from them.

Jeff Dunn -- President and Chief Executive Officer

Yes. So as I think you know, David, Aetna had posted -- and did last year at the same time, had a date of January 9 to post an updated policy. Last year, they actually were late and posted on March 15. So our expectation, and we've heard this sort of indirectly as well, is that sometime mid-month this month, we should see an Aetna update.

As to Anthem, that's still scheduled for the fall. And as you know, they've started to cover some cases under the new policy, but we don't expect anything to change in a significant way until potentially the September time frame. And I think, as I mentioned before, there's 112 payers that now cover. And there's 12 commercial payers, including the ones we've just talked about that do not cover.

So there's a spattering of others that are still being worked on around the country.

David Turkaly -- JMP Securities -- Analyst

Got it. And then the 3.3 to 3.7 per active surgeon update is great. I think it's a little above what we'd look for. But I guess just your thoughts on -- now that you've been at this for a while, should we expect that to continue? Could that improve? I guess, what your thoughts are, sort of, as you look at 2020, do you think that continues to rise?

Jeff Dunn -- President and Chief Executive Officer

Well, I mean, all the investments we made in '19, whether that's in the sales force or getting more reimbursement or better payment out there that CMS announced, I think bring strength to those kinds of numbers as people are interested in doing the procedure and more focused on the procedure. And I think as they get more educated, they'll find more patients because if they're not looking carefully, they're not finding them. As to what that number might be, David, I'm sort of reluctant at this point to throw out a number, but we obviously see strength in the business. We feel very good about 2020.

Despite the absolute turmoil that all of us are seeing left and right in front of us with the oil situation and the coronavirus situation, we feel very good about the business.

David Turkaly -- JMP Securities -- Analyst

Thank you.

Operator

Your next question is from the line of David Lewis from Morgan Stanley. Your line is open.

David Lewis -- Morgan Stanley -- Analyst

Good afternoon. Jeff, just kind of a few clarifying questions here. Just, first, on the CPT code increase for physicians as well as Cigna, are you saying you have not seen an impact from those two dynamics, either the two? Or you are seeing an impact , and you would expect that impact to build across the quarters of the year.

Jeff Dunn -- President and Chief Executive Officer

The latter, David. We are certainly seeing an impact in interest, in buzz from both CPT and Cigna. I'm just saying that it's not -- as contracts have to be rewritten because all the commercial contracts have to get into place. As you know, we have a couple of thousand surgeons that have done the procedure, call it, 1,400-ish in the United States.

All those contracts need to, on the commercial side, be amended. And so I'm just not really sure that all those got done in the first week. And so I think the point is that it's going to take some time to do that. But I think it's just a general momentum that will come with that throughout the year.

David Lewis -- Morgan Stanley -- Analyst

OK. That's very clear. And then, Jeff, kind of related to this, if I think about your physician-targeted training growth trends for 2020. You kind of grew physician training by 20% in '18, 20% in '19.

You're forecasting low teens for '20. And I guess, just on the surface, when I think about Cigna and think about a very significant elevation in the CPT code, one would conclude that surgeon training actually would be consistent with the prior two years, if not even accelerate. So help me understand how you're thinking about surgeon training. Perhaps you're going to go back and try to reactivate surgeons, and that's a specific effort, but I would expect that number to be closer to 20% than 13%.

Help me understand sort of the commercial strategy for 2020 in light of that number.

Laura Francis -- Chief Financial Officer and Chief Operating Officer

David, I think -- this is Laura. You're asking a good question here. And if you look at what happened in 2019, we had an interesting situation where there were two factors that were driving the growth of our business. So No.

1 was the hiring of all of the sales reps, and there was a heavy emphasis on the hiring of the clinical support specialists. And what the hiring of all those clinical support specialists allowed our senior sales reps to do is to actually deeper penetrate their accounts. And so what we saw was a momentum with the best surgeons who were regularly diagnosing and treating patients which caused the increase from the 3.3 to the 3.7. And we do attribute that to the addition of all these clinical support specialists that allowed our sales reps to go deeper within their own accounts.

The second factor is obviously the training of additional surgeons, and we have put a pretty equal emphasis on both of those, a very heavy focus on training surgeons as well as ramping up the sales force. And so I think what we're trying to do is be conservative with that surgeon number, representing that we may see more of an increase in the number of procedures that are being done in order to make up that 19% to 22% growth, or we may see also that increase in the number of surgeons.

Jeff Dunn -- President and Chief Executive Officer

Let me just add, David. As an example, this past weekend, we had three different SI-BONE surgeon training/meetings across the country: one here in San Francisco, on Friday and Saturday; and then two in other locations. So the demand, even though some of the travel restrictions that are running around out there, is -- to do three trainings in one weekend is -- there's a lot of strength. And I think now that the CPT payment is more interesting, let's just say, we are continuing to see really good strength.

David Lewis -- Morgan Stanley -- Analyst

OK. So it sounds like maybe the physician training number is a little conservative, but the focus for 2020 is sort of depth over breadth.

Jeff Dunn -- President and Chief Executive Officer

I think it's both. But certainly, we think that there's opportunity -- I guess that we think there's opportunity in both for sure.

Laura Francis -- Chief Financial Officer and Chief Operating Officer

But we are -- over the -- with those numbers that you mentioned, we're going deeper into the accounts.

David Lewis -- Morgan Stanley -- Analyst

OK. And then, Jeff, just lastly, and I'll jump back in queue. Just can you give us an update, I know it's early, but just Bedrock enrollment trends, where you are in terms of enrollment number or a percent of trial enrolled? Thanks so much.

Jeff Dunn -- President and Chief Executive Officer

We have opened up a -- I don't have the exact number in front of me, David, but something like, I think, at least a half a dozen sites across the country. Enrollment is still very early because those contracts are -- take time to negotiate, but we have very firm targets as to how many people will we enroll this year, and the team is comped based on those enrollments to make sure that they get done. So I think we've shared with you and the rest of the community that we've had 40 academic center trainings and so the Bedrock cases being on all over the place, and the clinical interest of 20 sites is certainly in sight, let's just say. There's greater strength than 20 sites to go into the clinical trial.

David Lewis -- Morgan Stanley -- Analyst

Great. Thanks so much.

Jeff Dunn -- President and Chief Executive Officer

You are welcome.

Operator

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

Kyle Rose -- Canaccord Genuity -- Analyst

Great. Thank you for taking the questions and congrats on a strong 2019. So I'm wondering if we could just talk a little bit about the sales force. I appreciate the commentary regarding under -- overall productivity and then underlying productivity of the mature reps.

But maybe just help us talk about some of the momentum from the later -- the latter cohorts. I mean you made some big hiring momentum in 2019. You're talking about adding another 10 reps in 2020. How have you seen the productivity curve trend with these latest cohorts? And then any expectation when you think about guidance this year for disruption in promoting some of your better sales reps to management and splitting territories and things of that sort? Could you just help us understand what's contemplated from a productivity standpoint?

Jeff Dunn -- President and Chief Executive Officer

Yes. I'll let Laura comment on some of that, but I would start with I don't expect there to be any disruption whatsoever from these promotions. These people are very much working managers in the sense that there's a dozen of them across the country. I think we have a tremendous system in place in the field with plan reviews.

And we've created a ratio with increasing it to 12 so that the managers don't have too many reps. We are very much on track on the hiring piece. So I don't expect any disruption there, Kyle. And I'll let Laura comment sort of on some of the productivity numbers, the $1.3 million and the $1.6 million, but we feel pretty good about the thing actually playing out how we had planned it with the CSSs and the productivity, but let me turn it over to Laura for a bit.

Laura Francis -- Chief Financial Officer and Chief Operating Officer

The way that we were looking at this from the beginning, we did say that we consider a mature rep to be somebody that had 12 months of experience with us. And with our model of trying to add in clinical support specialists and various other things, training that we were doing with our sales force, what we are trying to do is really accelerate that, but what we really found is that it is taking around 12 months to really start to ramp up those completely new territories and senior sales reps. And so when we place a new senior sales rep, we estimate that we can get $100,000 to $200,000 out of them within that first year, but then we see significant growth thereafter. The second year is more in the $700,000 range, the third year more in the $1.4 million range is where our models are showing us we're at and what historical data is actually telling us.

So we do have to make the initial investment in order to make that happen, but the good news is we made a substantial investment in 2019, and we think that it puts us into a terrific position for 2020 to significantly increase our sales and get the productivity out of those people and then to continue to do that with 10 new territories in 2020.

Kyle Rose -- Canaccord Genuity -- Analyst

Great. That's very helpful. And then you talked about some new products and new indications. I think Jeff mentioned iFuse Bone.

Are there any other new products we should be thinking about from a launch standpoint in 2020?

Jeff Dunn -- President and Chief Executive Officer

We are working on two major product efforts. They're very much late this year, early next year. We have been -- we're very far along in the development, I should say, of both of those products, and think they will help our efforts not just in the SI joint space but in the adult deformity and the trauma space. So there's some cross products that we think are potentially best in breed.

And as I think about it, Kyle, when we entered the SI joint space, there really was 50 years of no invention, in my mind. In the lower part of the adult deformity space, I think that there was pretty modest invention solving that pelvic side of the things in the last 50 years. And I think in the trauma space as well, over the last 50 years, there has been, let's just say, modest invention, and we think we will advance all three of those areas by early next year.

Kyle Rose -- Canaccord Genuity -- Analyst

OK. And then just the last question, and I'll hop back in, is just -- when you think about the gross margin profile of the company and your average selling prices, I mean, have you noticed any difference as you're going to a broader account base? You've got 800 -- or 539 active users now going to go to 625 in 2020. How should we be thinking about pricing assumptions on a go-forward basis?

Laura Francis -- Chief Financial Officer and Chief Operating Officer

We are a premium-priced product. At the present time, our product is, on average, around 10% to 15% higher than other companies. And so -- and rightly so given the amount of work that we've done in this space, the amount of education that we put in, the clinical data that we have and so on. But with that said, we do look at our ASPs, and given our strong gross margin profile, we want to make sure to continue to penetrate the market and grow with it.

And so on the average, our ASPs have been declining by a couple of percent a year. We expect for that to continue to occur over time, and that's what we have built into some of our assumptions and why we give that additional color around gross margin.

Operator

Thank you. Your next question is from the line of Craig Bijou from Cantor Fitzgerald. Your line is open.

Craig Bijou -- Cantor Fitzgerald -- Analyst

Thanks, guys. Good afternoon. Thanks for taking the question. Wanted to just start with the guidance in 2020 and recognizing that it is still early, and there are -- just from a market perspective, there are a couple of factors.

But you sequentially grew throughout 2019. You have a number of pretty good growth drivers coming in 2020, at least in our view, and the guidance suggests growth that steps down slightly. Obviously, it's not a big step down. But just wanted to get your thoughts there.

Is there anything else that we should be considering when thinking about how your guidance has lined up for 2020?

Jeff Dunn -- President and Chief Executive Officer

Yes, Craig, I mean, I think you and the investors on the call know that during 2019 that we were -- except for this last quarter, the fourth quarter, we were pretty much on the number all through the year. We obviously were, in the fourth quarter, ahead of the consensus number. We, I think, are very confident in the -- or I shouldn't say we think. We are very confident in the business.

But we certainly want to be ahead of the number going forward. There's nothing that we see as significant headwinds other than this general coronavirus issue. And so we, as you, don't exactly know how that's going to play out. Hopefully, they'll all be over in 60 days or at least dissipated in the next 60 days.

Just as a matter of color on that, we have some lost some cases in Italy. It's a small portion of our -- a very small portion of our business. I just talked to a surgeon, and in some places, they're asking the surgeons not to travel to conferences like at Stanford and NYU and a few other places. That may -- the first thought I had was, well, is that a negative or is that a positive that they're going to be home more because they're not going to Brazil to the Global Spine conference or those kinds of things.

So I think that -- I would just finish with I think both Laura and I and the rest of the executive team feel very good about the business, all the growth drivers, all the execution. We feel in a great place on the balance sheet. From a balance sheet standpoint and an execution standpoint, we are really not seeing, to date, any effect from the coronavirus in the U.S. Of course, that could change, but I think the guidance is prudent.

And at the same time, we feel very strong about the business.

Craig Bijou -- Cantor Fitzgerald -- Analyst

Great. That's helpful. And maybe, Laura, on -- obviously, 2019 was a significant investment year for you guys, added a lot of salespeople and clinical support specialists. At least on the clinical support specialist side, I don't think you're probably going to add as many.

But just want to understand how we should be thinking about operating leverage and the spend for 2020.

Laura Francis -- Chief Financial Officer and Chief Operating Officer

2019 was very clearly an investment year for the company, and there were two reasons for the investment. One was just the amount of momentum that we had from reimbursement and then also the capital in order to really capture the opportunity. And so what we were doing is we have been very careful about spend in 2018. We have an interesting business where, in 2018, we got to the point of where we were almost breakeven from an operating income perspective just by very closely managing spend with 90-plus percent gross margins.

But the desire to accelerate the growth rate required the sort of investment that we made in 2019, combined with the capital in order to do that. So we really put our foot on the gas in 2019, and you can see how our growth rates have accelerated from that. 2020 is a little bit of a different year. I would say it's the year where we're going to digest a lot of the investments that we actually made.

So if you think about, for example, those investments that we made in sales reps and clinical support specialists, let's assume that, on average, one of those people came on to our staff in the middle of the year. So you'll have six months of expense on average from those hires. You now need to absorb the full expense in the year 2020. So that's a lot of where you're going to see the increase in spend.

And then much more modest investments in other areas of the business. So general administrative expenses shouldn't be growing significantly. R&D, we're going to continue to incrementally invest based on the new products that Jeff mentioned. As well as the SILVIA Bedrock study that was mentioned previously, those are going to go into R&D.

And then sales and marketing, as we said, around 10 sales reps hired, plus 10 CSSs hired, so some more incremental, adding 20 people this year versus 40 last year into the field.

Craig Bijou -- Cantor Fitzgerald -- Analyst

Got it. That's very helpful. Thank you for taking the questions.

Operator

Thank you. Your next question comes from the line of Kaila Krum from SunTrust. Your line is open.

Kaila Krum -- SunTrust Robinson Humphrey -- Analyst

Hey, guys. Thanks for taking our questions. So you mentioned 2020 is kind of a year to digest some of the investments of 2019. So I guess, how do you think about sort of 2021 and growth going forward? I mean, is it fair to assume that the growth could accelerate off of this 2020 guidance you provided? Just any additional thoughts there would be helpful.

Jeff Dunn -- President and Chief Executive Officer

Well, I'll let Laura also share her thoughts. But Kaila, as know, we think we're -- we penetrated the market, along with the competitors out there, less than 10% of the market. So in the base business, we think there's an awful lot of running room for an awful lot of years. And with the things that we now have in place, we think '21 and '22 in that area will continue with great growth, particularly of an Anthem and an Aetna, come through prior to '21.

And then I think the second part of that is, as we pour some more products into the mix in '21, in early '21 or late '20, we'll see how those uptakes are on those products. But we feel quite confident that we've come up with some things that I think will help us in '21 and '22 as a company on top of the very underpenetrated, still, base business. So of course, adding more sales reps and training more surgeons is a part of that equation, but those other fundamental additions around reimbursement and products, I think, give us great confidence in the outer years.

Laura Francis -- Chief Financial Officer and Chief Operating Officer

I think the only other thing I'd to add to that, Kaila, is if you look at the average run rate for our direct sales reps right now, we're at around $1.3 million of productivity per year. And with 56 territories and 51 of them that have clinical support specialists within, we feel that a target for an average territory is $2 million with a senior sales rep plus a clinical support specialist. So there's this combination of continuing to hire on the sales side, both the sales reps and the clinical support specialists, but it's also growing that productivity of the sales reps as well. And so it's that approach.

And the reason why is to continue to accelerate the growth rate that we've been experiencing, number one; but then number two, over time, having that vision to profitable growth.

Kaila Krum -- SunTrust Robinson Humphrey -- Analyst

Great. That makes a ton of sense. And then you guys mentioned you launched iFuse Bone in the U.S. in December.

Can you just talk about sort of how you view that opportunity, how meaningful that could be this year, how that sort of increases your average procedure value? Any additional color would be helpful.

Jeff Dunn -- President and Chief Executive Officer

Yes. I'd make a couple of comments, Kaila. It is not a huge introduction. You didn't see us make some big press release over it.

You certainly will see press releases on these other products that I've alluded to late this year, early next year. What's behind that is really our strategy around enabling technologies as opposed to a base product. And no different than decorticator, where we've penetrated competitors' businesses with that enabling technology, Bone is the same kind of thing. It allows us to go to those surgeons who say I want to put in bone in conjunction with your product.

I love the product, but I really have been taught in medical school that putting in bone is a good thing. The positive side of that is it's incremental business. The other positive side is it uses the exact same instrument, so we didn't have to spend money on new instruments. It uses the four-millimeter implant, which was -- and it's the same triangular shape.

There's certainly business we're garnering. And I guess the final item is we expected more of those cases to potentially be two implants and one bone, and we are seeing some surgeons actually putting in three implants and a bone. So it's early on the play there, and it's not a huge part of our business, so I don't think you should factor that in, in some important way. But it is an incremental strength as we, I think, have, by far, the best suite of enabling technologies on top of the best product in the market competitively, I think, without question.

So --

Laura Francis -- Chief Financial Officer and Chief Operating Officer

And I think the only addition that I would have is we were talking about the ASP earlier in the discussion. When we think about those technologies, it's partly to ensure that we have all the enabling technologies that our surgeons are looking for to make sure that they choose SI-BONE over any other solution that's out there, but it also is a way of helping to maintain the ASP as well.

Kaila Krum -- SunTrust Robinson Humphrey -- Analyst

Makes a lot of sense. Thanks, guys.

Jeff Dunn -- President and Chief Executive Officer

You are welcome.

Operator

Thank you. Your next question comes from the line of David Saxon from Needham. Your line is open.

David Saxon -- Needham and Company -- Analyst

es. Hi, Jeff and Laura. Thanks for taking the questions. In your prepared remarks, you talked a little bit about going out and reactivating inactive surgeons.

So I was just wondering, how quickly do you think you can do that? And how big of an opportunity is that?

Jeff Dunn -- President and Chief Executive Officer

Well, the surgeon pie has about 7,500 in ortho and neurosurgeons in the United States. Of -- and Laura, do you remember exactly --

Laura Francis -- Chief Financial Officer and Chief Operating Officer

So 1,400 surgeons in the U.S. have been trained and treated at least one patient, and 539 surgeons actually performed a procedure in the fourth quarter. So you have around 900 surgeons who weren't active in that last quarter of the year. So David, it's a good question, and the opportunity is pretty significant.

It is difficult to sometimes flip a switch and get them reactivated right way. It depends upon what -- where they're at currently. There are some surgeons that are doing multiple procedures a month. There are other surgeons that are doing procedures once a year.

If you take the surgeons who are once a year and you get them doing them four times a year, for example, you can relatively quickly increase sales from those surgeons that are sporadically active. If you're taking a surgeon that's been inactive for an extended period of time, those are a little bit more challenging. So for example, there may be a surgeon who has significant Cigna coverage and was not performing procedures but decided to start after the Cigna decision in the fourth quarter. What we would probably need to do is bring that surgeon back, train the surgeon, and then that surgeon would have to start diagnosing patients and performing procedures, which the period of time to do that is usually a good six to nine months.

So that's the way that we think about inactive surgeons, and it's definitely a focal point and could be a very significant growth opportunity for the company. The other comment I was going to make is there were surgeons that, with the previous surgeon payments, were not necessarily interested in performing procedures. But with that increase of 27%, we are hearing from surgeons that they're interested in coming back and performing the procedure as well. So that's another opportunity to get some of those surgeons that have been inactive as well as surgeons who had never been trained or performed a procedure.

David Saxon -- Needham and Company -- Analyst

Great. That's helpful. And then on Bedrock, what kind of revenue assumptions are baked into guidance? And then can you give some color on what percentage of Bedrock accounts go on to do stand-alone iFuse procedures? Thanks so much.

Jeff Dunn -- President and Chief Executive Officer

Yes. We have not put a huge amount of Bedrock into the forecast. It is going along, David, exactly how we had hoped from an exposure standpoint into the academic centers. If someone had asked me, would we get into 40 academic centers with Bedrock, I would have said, well, that's probably a stretch.

And so we're quite pleased with the penetration. We haven't, as you know, and all of you know, broken out those particular numbers and don't intend to anytime soon. So I don't know if you want to add anything to that, Laura, but --

Laura Francis -- Chief Financial Officer and Chief Operating Officer

No. Bedrock is doing exactly what we had hoped to it would do, and that is there is a focus on the SI joint as a pain generator coming from key opinion leaders, and it's helping to drive our core business.

David Saxon -- Needham and Company -- Analyst

Great. Thanks so much.

Jeff Dunn -- President and Chief Executive Officer

You're welcome.

Operator

Thank you. I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Jeff Dunn, president and CEO.

Jeff Dunn -- President and Chief Executive Officer

Great. Well, just a thank you very much. I know it's been a challenging day for everyone across the world, and I appreciate you joining the call, and thank you very much for your support. Have a great evening.

Operator

[Operator signoff]

Duration: 53 minutes

Call participants:

Carrie Mendivil -- Investor Relations

Jeff Dunn -- President and Chief Executive Officer

Laura Francis -- Chief Financial Officer and Chief Operating Officer

David Turkaly -- JMP Securities -- Analyst

David Lewis -- Morgan Stanley -- Analyst

Kyle Rose -- Canaccord Genuity -- Analyst

Craig Bijou -- Cantor Fitzgerald -- Analyst

Kaila Krum -- SunTrust Robinson Humphrey -- Analyst

David Saxon -- Needham and Company -- Analyst

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