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Teleflex Inc. (NYSE:TFX)
Q3 2020 Earnings Call
Oct 29, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for standing by, and welcome to the Third Quarter 2020 Teleflex Inc. Earnings Conference Call. [Operator Instructions]

I'd now like to hand the conference over to your speaker today, Jake Elguicze, Treasurer and VP of Investor Relations. Thank you. Please go ahead, sir.

Jake Elguicze -- Treasurer and Vice President of Investor Relations

Good morning, everyone, and welcome to the Teleflex Inc. Third Quarter Earnings Conference Call. The press release and slides who accompany this call are available on our website at www.teleflex.com. As a reminder, this call will be available on our website, and a replay will be available by dialing (855) 859-2056 or for international calls, (404) 537-3406, passcode 4907865. Participating on today's call are Liam Kelly, Chairman, President and Chief Executive Officer; and Thomas Powell, Executive Vice President and Chief Financial Officer. Liam and Tom will provide prepared remarks, and then we'll open up the call to Q&A. Before we begin, I'd like to remind you that some of the matters discussed in the conference call will contain forward-looking statements regarding future events as outlined in our slides. We wish to caution you that such statements are, in fact, forward-looking in nature and are subject to risks and uncertainties and actual events or results may differ materially. The factors that could cause actual results or events to differ materially include, but are not limited to, factors referenced in our press release today as well as our filings with the SEC, including our Form 10-K, which can be accessed on our website. Additionally, during this conference call, you will hear management make references to the estimated positive or negative impacts as a result of COVID-19 during the third quarter of 2020. You'll also hear management make statements regarding intra-quarter business performance during the month of October. Management is providing this commentary to provide the investment community with additional insights concerning trends, and these disclosures may not occur in subsequent quarters.

With that, I'd like to now turn the call over to Liam.

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Thank you, Jake, and good morning, everyone. It's a pleasure to speak with you today, and I hope you're all keeping safe and well. Overall, considering the environment we are operating in, we are pleased with our third quarter performance as it reflected the expected improvement in trends across many of our global product categories, led by a faster-than-expected recovery within our Interventional Urology business, and continued strength within our vascular access product sales. While from a regional perspective, we saw particular strength within the Americas as the pace of recovery in the United States during the third quarter was encouraging. Quarter three revenues was $628.3 million, which was down 4.1% as compared to the prior year period on a constant currency basis but far better than the 12% decline we experienced during the second quarter of the year. The decline in year-over-year revenue is due to the impact of COVID-19, which we estimate caused a net negative impact of approximately $78 million, or approximately 12%. If we were to normalize for the negative COVID impact, we estimate that our underlying business grew by approximately 8% on a constant currency basis, consistent with our quarter two revenue performance. We also saw a significant sequential improvement within our adjusted gross and operating margins from the levels achieved during the second quarter. With our adjusted earnings per share of $2.77 in the quarter meaningfully exceeded our internal expectations. This reflects the continued recovery we saw as we moved through the quarter, coupled with prudent operating expense management. Before I go into more detail on our quarterly financial performance, I am happy to announce that during the month of October, we signed a definitive agreement to acquire Z-Medica, a market leader in hemostatic products. We are pleased to be able to deploy capital for a differentiated product portfolio that leverages existing Teleflex call points and is immediately accretive to our revenue growth rates, adjusted growth and operating margin profile and to our adjusted earnings per share.

Turning to a more detailed review of our third quarter results. As I just mentioned, quarter three revenue declined 4.1% on a constant currency basis and 3.1% on an as-reported basis. The decline in revenue was due to COVID-19, which we estimate had a negative impact of approximately $81 million across several global product categories. This was somewhat offset by approximately $3 million of additional revenue within our vascular access and other product categories, which experienced modestly higher-than-expected demand as a result of COVID-19. From a margin perspective, we generated adjusted gross and operating margins of 57.2% and 25.1%, respectively. This translated into a year-over-year decline of 140 basis points at the gross margin line and 190 basis points at the operating margin line. That said, we saw a sequential improvement of 330 basis points on both the adjusted gross and operating margin lines as compared to the levels we achieved in the second quarter. On a year-over-year basis, reduced sales volumes due to COVID was a headwind. However, it was partially offset by our cost containment efforts as we continue to tighten our belts where we deem appropriate in the current environment, balanced against continued investment to sustain our long-term growth aspirations. Adjusted earnings per share was $2.77, down 6.7% year-over-year but ahead of our internal expectations as the business continued to recover during the quarter.

When excluding the negative impact of COVID-19 had on our third quarter results, we estimate that our adjusted earnings per share would have grown approximately 13% as compared to the prior year period. Overall, I am very pleased with our financial performance as it demonstrates the resiliency of our diversified global product portfolio. Let's turn to a discussion on our quarterly revenue trends, which will be on a constant currency basis. The Americas delivered revenues of $375 million in the third quarter, which represents an increase of 0.4%. Growth within the Americas was driven by vascular access and respiratory products, which both saw elevated demand driven by COVID. In addition, Interventional Urology was a strong contributor as UroLift continues to be one of the fastest recovering procedures. However, there were offsets with declines in other product categories. We estimate that the Americas would have grown approximately 9%, excluding the impact that COVID-19 had on the region. EMEA reported revenues of $135.7 million in the third quarter, representing a decline of 7%. During the quarter, declines occurred across most product categories as increasing COVID infection rates negatively impacted procedures and results. Adjusting for COVID, we estimate an approximately 3% underlying decline for the region. Turning to Asia. Revenues totaled $68.2 million in the third quarter, which represents a decline of 14.2%. However, we estimate that we would have had positive constant currency revenue growth in the high single digits, if not for the impact of COVID-19. Additionally, during the third quarter, we began transitioning a distributor in Japan.

When normalizing for both COVID and the distributor change, growth in the region would have been closer to the low double-digit range, consistent with our longer-term outlook. And lastly, our OEM business reported revenues of $49.4 million in the third quarter, which was down 11.8% on a constant currency basis. As we anticipated, during the third quarter, our OEM business saw a lagged impact related to COVID relative to our other businesses. Investors familiar with Teleflex will be aware that our OEM business supplies medical companies with complex catheters and surgical sutures, and the quarter three impact reflects reduced orders from these customers, whose business is tied to non-emergent procedures. Excluding the estimated COVID-19 impact, the business grew roughly 28%, which includes a benefit of approximately 11% from the acquisition of HPC. As it relates to HPC, I am pleased to report that we remain on track with our integration efforts. Let's now move to a discussion of our revenue by global product category. Starting with vascular access. Due to growth within both our PICC and EZ-IO products, third quarter revenue increased 6.8% to $160 million. We estimate that COVID-19 positively impacted the growth rates of our vascular products during the third quarter by approximately 1%. Moving to interventional access. Third quarter revenue was $93.2 million, or down 13.5% as compared to the prior year period. The decrease was largely due to the delay in the recovery of certain non-emerging procedures because of COVID-19, along with the negative impact stemming from a catheter recall that occurred during the quarter. We estimate that the recall impacted our business negatively by approximately $4 million.

The impact on the recall will continue to linger for the next several quarters as we do not expect to be back on the market with this product until September of 2021. When normalizing for the impact that COVID had on these product lines, we estimate that underlying growth was in the low single digits. Turning to Anesthesia. Revenue was $75.7 million, which is lower than the prior year by 14.4%. The revenue decline was the result of lower sales of laryngeal masks, regional anesthesia and airway management products. We estimate that COVID had an approximately 10% negative impact in the quarter, implying mid-single-digit declines for the business on an underlying basis. Shifting to Surgical. Revenue declined by 12.3% to $82.2 million, driven by lower sales of our ligation and instrument product lines. We estimate a 13% headwind from COVID during quarter three, indicating recovery as compared to the estimated 30% COVID headwind in quarter two. Moving to Interventional Urology. Quarter three revenue increased by 11% to $81.8 million. We estimate an approximate 29% COVID-19-related headwind during quarter three. Notwithstanding the significant headwind on our growth in quarter three, we are pleased with the path of recovery for this business unit and are also happy with the early impact of our national DTC campaign, which is exceeding our expectations. Additionally, we are encouraged that we trained 120 new urologists in quarter three, moving to a cadence that is consistent with our expectations prior to COVID. And finally, our other category, which consists of our respiratory and urology care products, grew 0.5%, totaling $86 million.

In large part, we estimate that growth during the quarter was due to increased demand for certain humidification and breathing products resulting from COVID-19. From a monthly perspective, we note that September outperformed July and August when normalizing for the distributor termination and the product recall within our interventional business. Furthermore, as we have progressed through the first few weeks of October, we continue to see additional modest improvements as compared to last October. That said, due to the significant resurgence of COVID cases globally, and when normalizing for selling days, we expect to see a modest improvement in the constant currency revenue performance during quarter four as compared to the decline of 4% we achieved in quarter three. Tom will provide more details later. That completes my comments on quarter three revenue performance. Turning to some recent clinical and commercial updates. Starting with UroLift. The response to our national DTC campaign is exceeding our expectations. The strategic role of DTC is important as about half of the 12 million men being treated for BPH believe prescription medications are their only solution. Thus far, we are tracking well against the target to generate six times the number of impressions from the regional campaigns in the year ago period. Web traffic has increased over 150% since the launch and another encouraging metric is that multiple urologists are now motivated to get trained on UroLift as a result of patient requests due to the campaign. In addition, while there was likely a nominal impact on quarter three results, we expect the momentum for the campaign to continue building into quarter four and early next year as we turn down the advertising full strength starting in early September.

Turning to UroLift two. Since the FDA clearance on July 31, we have begun a market acceptance test and received positive preliminary feedback, including the streamlining of the delivery device triggering mechanism and the reduction of waste. We are also increasing manufacturing levels for the product ahead of the full commercial launch slated for early in 2021. Lastly, regarding the UroLift ATC. We know that the market acceptance test is well under way, and we have received very positive feedback, which indicates that the device is delivering on the intended benefit of enhanced tissue controls when treating challenging anatomies such as obstructive median lobe. Taken together, we see these efforts as helping to build momentum as we seek to further expand our leadership position in BPH. Turning to the next slide on key commercial updates. We recently received an expanded indication for EZ-IO as the device can now be used for up to 48 hours when our alternate intravenous access is not available in both adults and pediatric patients, 12 years and older. While we do not expect a material sales uplift from this label expansion, we are always looking to improve our portfolio based on clinician feedback, and this is a prime example of those efforts. Lastly, I'd like to provide the investment community with a few more details of the Z-Medica acquisition we announced last night. In mid-October, we entered into a definitive agreement to acquire Z-Medica, an industry-leading manufacturer of hemostatic products.

Under the terms of the agreement, Teleflex will acquire Z-Medica, for an upfront payments totaling $500 million and up to an additional $25 million upon the achievement of certain commercial milestones. As part of the transaction, Teleflex will also be acquiring certain tax attributes that are expected to result in future tax benefits. We value these tax attributes at approximately $40 million, which we considered when arriving at our purchase price. Z-Medica's hemostatic technologies are helping reinvent hemorrhagic control with cost-effective efficient bleeding control solutions being adopted by markets worldwide. The company offers three main brands: QuikClot, Combat Gauze and QuikClot Control+, which utilize the proprietary technology consisting of gauss impregnated with calin. The technology activates and accelerates the body's natural clotting ability. Z-Medica's products currently focus on the trauma surgery, EMS, military, emergency departments and interventional segments with opportunities to expand into additional indications over time. Teleflex's strategy is to invest in innovative products and technologies that can meaningfully enhance clinical efficacy, patient safety and comfort, reduce complications and lower the overall cost of care. The acquisition of Z-Medica enables Teleflex to leverage strength in the hospital, EMS and military call points with the differentiated products that complement our EZ-IO and EZPlas product portfolio. We are excited to announce this acquisition given its above company average revenue growth capabilities as well as its above company average gross and operating margin profile.

Pending the receipt of certain regulatory approvals, the transaction is expected to be completed during the fourth quarter of this year. As we look forward, the transaction is expected to contribute between $60 million and $70 million of revenue and between $0.07 and $0.15 of adjusted earnings per share in fiscal year 2021. Beyond 2021, we expect the acquisition to deliver a high single-digit revenue growth profile and further accretion to adjusted earnings per share. On EZPlas. After our recent meetings with the FDA, we determined to proceed with the BLA submission rather than an EUA. We continue to work closely with the agency in determining the timing of that submission. Overall, we continue to invest organically in clinical and commercial catalysts that will help to sustain our revenue growth aspirations in a normalized environment. We will also look to augment those internal efforts through the deployment of capital for inorganic growth opportunities, such as Z-Medica. That completes my prepared remarks.

Now I would like to turn the call over to Tom for a more detailed review of our third quarter financial results. Tom?

Thomas Powell -- Executive Vice President and Chief Financial Officer

Thanks, Liam, and good morning, everyone. Given the previous discussion of the company's revenue performance, I'll begin at the gross profit line. For the quarter, adjusted gross profit was $359.6 million versus $380 million in the prior year quarter or a decrease of approximately 5%. Adjusted gross margin totaled 57.2% during the quarter, which is a decrease of 140 basis points versus the prior year period. The decline in gross margin was primarily due to COVID-19-related impacts, including lower sales volumes and higher manufacturing costs, along with a foreign exchange headwind. The volume impact was significant for the quarter as the adverse revenue impact from COVID-19 tended to skew toward higher gross margin products, including Interventional Urology, interventional access and Surgical. In total, we estimate that COVID-19 negatively impacted our adjusted gross profit by approximately $59 million in the quarter. We continue to tightly manage discretionary spending as a means to partially offset the reduced revenue and gross profit resulting from COVID-19. And as a result of the efforts, we estimate that operating expenses were reduced in the third quarter by approximately $22 million. While we expect the actions taken to continue to deliver opex savings through the remainder of the year, by far the largest quarterly opex reduction was realized in the second quarter. Adjusted operating profit during the third quarter of 2020 was $157.6 million, and this compares to $175.3 million in the prior year or a decrease of approximately 10%. Third quarter operating margin was 25.1% were down 190 basis points year-over-year, driven primarily by the gross margin decline. And while our adjusted margins were down in the third quarter as compared to the year ago period, we are pleased to see the sequential improvement in both gross and operating margins from the lows we experienced during the second quarter.

Looking forward, we expect sequential margin improvement to continue during the fourth quarter. Net interest expense totaled $16.4 million, which is a decrease of approximately 14% versus the prior year. The decrease in interest expense primarily reflects reduced average interest rates associated with our variable rate debt, partially offset by higher average debt balances versus the prior year period. Moving to taxes. For the third quarter of 2020, our adjusted tax rate was 7% as compared to 10.3% in the prior year period. The year-over-year decrease in our third quarter adjusted tax rate is primarily due to a favorable mix of taxable income versus the prior year period as well as a higher benefit from stock-based compensation as compared to the prior year period. At the bottom line, third quarter adjusted earnings per share decreased 6.7% to $2.77. Included in this result is an estimated adverse impact from COVID-19 of approximately $0.60 as well as a foreign exchange headwind of approximately $0.09. Turning to select balance sheet and cash flow highlights. For the first nine months of 2020, cash flow from operations totaled $241.5 million as compared to $289.2 million in the prior year period. The decrease is attributed to larger contingent consideration payments, partially offset by favorable changes in other working capital driven by higher accounts receivable collections. Overall, the balance sheet remains in good shape. At the end of the third quarter, our cash balance was $347.5 million versus $553.5 million at the end of the second quarter. During the third quarter, we repaid nearly $285 million of revolver borrowings and restored revolver availability to the full $1 billion. Net leverage at quarter end was approximately 2.6 times. The acquisition of Z-Medica is projected to increase net leverage by less than 3/4 of one turn and net leverage pro forma the acquisition remains comfortably below our 4.5 times covenant. Our intention is to finance the purchase of Z-Medica through revolver availability. However, we may choose to permanently finance the acquisition through a future notes issuance.

Lastly, we have no near-term debt maturities of material size. Given the continued uncertainty surrounding the impact of COVID-19 pandemic on business operations, we are not reinstating financial guidance at this time. However, we will provide the following directional expectations for the fourth quarter. Looking ahead, we continue to expect further sequential improvement in our constant currency revenue performance as compared to what we achieved in the third quarter. However, due to the resurgence in global COVID-19 cases over the past seven to eight weeks, we expect our constant currency revenue growth to be only modestly better than what we achieved during the third quarter. This expectation of a modest fourth quarter improvement excludes the benefit of two additional selling days that occur in the fourth quarter of 2020, which we estimate would add approximately 3% of additional revenue growth during the fourth quarter. And this expectation also excludes any benefit from the acquisition of Z-Medica as the closing date is not yet determined.

And that concludes my prepared remarks. I would now like to turn the call back to Liam for closing commentary. Liam?

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Thanks, Tom. In closing, we delivered solid third quarter results as our diversified portfolio showed continued expected improvement relative to our quarter two results on both the top and bottom line. Excluding the impact of COVID, we see our underlying business performance is encouraging and very much in line with our initial expectations. We continue to view the resurgence of COVID globally, combined with the willingness of the more vulnerable population to get procedures done as the primary wildcards impacting recovery. While the next several quarters still have elements of uncertainty, we remain confident in our ability to execute as we head into 2021 and are optimistic in our long-term prospects. We, as an organization, will continue to focus on serving our hospital customers and working with our key stakeholders. We will manage the business prudently while staying focused to capitalize on the long-term potential of our global product portfolio. In closing, I want to thank all of our employees who continue to manufacture, distribute and support products that are required in the fight of COVID-19, focusing on meeting our commitments to patients, clinicians, communities and shareholders.

That concludes my prepared remarks. Now I would like to turn the call back to the operator for Q&A.

Questions and Answers:

Operator

[Operator Instructions] We have our first question from David Lewis of Morgan Stanley. Please go ahead.

David Lewis -- Morgan Stanley -- Analyst

Good morning and thanks for taking the question. Liam, it's pretty clear that the business visibility has declined a bit since sort of our conference in September. And I sort of -- if you can, I want to isolate what you think those factors are? Because it sounds like this happened several weeks ago, not just the last 48 hours. So, would you say this is just the lack of improvement in hospital census in the U.S.? Is it international markets, specific international markets that are weaker or the OEM business that perhaps had an early benefit that didn't have follow through? But I think given these issues probably have gone on for several weeks versus several days. I want to sort of isolate what particularly you think is the business weakness. And then Tom, I just want to be clear on the guidance, we should be thinking sort of low single-digit organic declines in the fourth quarter. And then I had just one quick follow-up.

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Okay, David. So, first of all, I think that our underlying business is actually performing very well. If you look at the third quarter, we grew by 8% with a couple of headwinds in there beyond COVID and that 8% excludes COVID. So if you were to look at our underlying business performance, we're closer to the 9%, excluding the Langston recall and excluding the go-direct in Japan, which will have longer-term benefits for us. My thinking over the last number of months hasn't changed to be totally frank with you, although I am seeing COVID getting worse. When I attended your conference, I think that I was pretty clear that although some of our peer companies were expecting a recovery in quarter four, we did not expect that recovery until early in 2021, and nothing has changed in my thinking around that. Before Tom actually comments on quarter four, I think it's important that I share with you and the investment community are thinking for revenue growth in the fourth quarter. Many of you familiar with Teleflex will know that we've been seeing, as I said, for the past couple of months, that we expect the recovery to be early 2021 rather than the fourth quarter, and we continue to believe that could be the case. And as I said, David, nothing has changed in my thinking. But however, because of the significant rise in infection rates globally, we are more cautious now on the pace of the recovery as even compared to a few months ago.

In formulating what we believe would happen in the fourth quarter, we projected forward the modest year-over-year constant currency revenue growth improvements we saw in October for the entire quarter. What we did not factor in was an increase in elective procedures, increased volumes of patients as a result of DTC, nor did we factor in a second shutdown in relation to COVID, which we think is highly unlikely. We did take into consideration, as a difficult comparable against quarter four, last year, where we had a pretty good quarter. And we believe this to be a balanced position and therefore, concluded that we would see modest improvement in Q4 constant currency revenue growth as compared to Q3, excluding the billing days. And of course, then the billing days will add approximately 3%. So, it's really -- David, I think what we're seeing in the end markets globally, the uptick in COVID that we're seeing in places like France, Spain, Italy, Australia, Southeast Asia and in the key market of the United States. And I have to say, I was really encouraged by the performance of our U.S. business in the third quarter, where we've turned in North America to a positive growth of 0.4%, and that would have been even better if you were to exclude those that one time Langston recall. So, -- but I'll let Tom comment on the fourth quarter.

Thomas Powell -- Executive Vice President and Chief Financial Officer

Yes. So I think, Liam, you touched on the key points. In the third quarter, we -- our constant currency growth was down 4.1%. As mentioned, if you were to exclude the benefit of the extra shipping days and the Z-Medica acquisition, we expect the fourth quarter constant currency growth to be only modestly better than that. So not to cite a specific number, but we're not thinking there's going to be a significant improvement on the constant currency growth from Q4 -- excuse me, from Q3 to Q4.

David Lewis -- Morgan Stanley -- Analyst

Okay. That's very, very helpful. And just two quick ones for me and I'll jump back in queue. Just Liam, UroLift, that business continues to improve. Can you help us isolate the impact of DTC is having on the underlying business just because given the COVID headwinds, it's kind of hard to see. But do you feel like we're getting DTC momentum from third to fourth? And then just Z-Medica, look, interesting market, very profitable asset. Help us understand how you were thinking about valuation and returns. Thank you so much.

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Yes, absolutely. So on UroLift to start with, obviously, great seed return to growth. It grew by 11% in Quarter three. As I said earlier, we have not, in our Quarter four thinking, built in an uplift from DTC. Are we happy with the way the DTC is going? Absolutely. It's going really, really well. Patient response is above expectation, 150% increase in our web traffic. We're actually getting now urologists coming to us looking to be trained on the UroLift because patients are turning up to their practice asking about it. This isn't market research, David. But in this quarter just gone, I had conversations with 28 urologists. 27 out of 28 told me that they had patients come into their practice and asked them about UroLift in direct response to what they had seen on either a TV or a web campaign. So we're very encouraged by that. Regarding the Z-Medica acquisition, let's start at the strategic element that we always look for. Does it fit within Teleflex? Yes. The call point is right where we wanted to be, EMS and trauma. Does it have IP? Yes, very strong IP that runs out to 2033. Are there synergies available because we're putting it into our portfolio?

Absolutely. Has it got excellent clinical efficacy? Yes. 150 clinical papers written about it, and it's a very sticky product, growing into a market that's a $600 million market globally with an opportunity to expand overseas. With regard to the valuation, the few of the key metrics that we looked at, obviously, the multiple on revenues, it's in the mid-7 based on forward revenues. But if you exclude the tax attributes, it's just around seven times. And then more importantly, from an EBITDA perspective, in the high teens of 2021 EBITDA and in the lower teens, if you go into 2022. We would consider this a scale acquisition similar to Vidacare. We really like the accretion in this. It's accretive to our top line growth. It's accretive to our gross margins and immediately accretive to our longer-term op margin goals, and it exceeds our internal cost of capital by year four -- by the end of year four. And again, a good benchmark for us, as you know, that's what we try and set ourselves up to is to get to that above our internal cost of capital by year four, and our internal cost of capital is in the very high singles, just to be clear.

David Lewis -- Morgan Stanley -- Analyst

Thank you so much.

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Thank you.

Operator

Your next question comes from Lawrence Keusch from Raymond James. Please go ahead.

Lawrence Keusch -- Raymond James -- Analyst

Thanks. Good morning, everyone. Liam, I'm wondering if you can -- just coming back to your lift, I guess, two questions on this. How are the trends in procedures progressing when you think about those that are done outside of the hospital versus inside of the hospital? I'm curious if that's continuing to creep upwards. And then how are you thinking about the fourth quarter in terms of the underlying growth for UroLift, when you sort of exclude the two selling days? Are you thinking that you will still continue to get sequential improvement in your growth, particularly as the DTC kicks in? And then I got a couple of quick questions on Z-Medica.

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Okay, Larry. So in regarding to UroLift and your first question about the side of service, we have continued to see a shift from the hospital to outside of the hospital, in particular, to the office settings. That has moved by around 4% points that have moved from the office to -- pardon me, from the hospital to the office. In relation to the recovery, there's also a striking difference in the recovery within the office setting and in the hospital setting. We see the office sitting being quite positive in the third quarter compared to pre-COVID levels, and the hospital setting is still under the pre-COVID levels from a UroLift procedure. So, that's obviously being compounded by the fact that procedures are being moved to the office environment. Regarding moving to the fourth quarter and looking at UroLift in the fourth quarter. As you will be aware, Larry, UroLift has got a significant -- had a significant achievement last year. It grew 54.4% last year, so they've got a really tough comp as they head into the fourth quarter. Notwithstanding that, if I look at it sequentially from an absolute dollar perspective, as we go from Q3 to Q4, we would definitely -- our expectation would be to see an increased dollar value going from Q3 to Q4. And as I said in my earlier comments, Larry, it's very hard to forecast the absolute impact of DTC in the COVID environment. So, we haven't really built in an expected impact of DTC into the fourth quarter, just given the uncertainty around COVID. Now having said that, the DTC campaign is going exceptionally well. We will definitely be on track to get multiple of the 60 impressions that we got last year, when we did our 18 regional DTCs. As I said, our web traffic is up 150%. The number of patients that are actually going to our DocFinder and coming to our call center. I'm not going to tell you the number, Larry, for competitive reasons, but I can tell you, it's very encouraging what we're seeing happening out there with the DTC.

Lawrence Keusch -- Raymond James -- Analyst

Okay, terrific. And then on Z-Medica, I mean, obviously, the valuation is what it was and probably commensurate for a company with that sort of high single-digit growth. But what -- how are you thinking about the durability of that growth and sort of why is it durable, I assume, up in that high single-digit range? And then the other component of the question is just how are you thinking about sales and cost synergies for the asset and what's built into the deal model? Thanks.

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Yes, Larry. So, great question. So, from a growth perspective, first of all, these end markets are growing in the 4%-ish range, 4% to 5%. So, for just turning up, you're actually getting some nice growth, which also helps. The size of the markets are also encouraging. The overall market is about a $600 million market globally, $150 million in the EMS, over $300 million in trauma and $125 million in the Interventional. We also have an opportunity and built into our model to do some further clinical work to expand it into cardiac in the future, which will actually expand that market even more. Also, right now, the revenue is predominantly generated within North America in that 80% to 85% of the revenues in North America. So, we believe that expansion overseas is a significant opportunity for us in utilizing our channel, which, as you know, is a key part of our strategy. The asset will do about $50 million or $60 million last year. We'll do $60 million to $70 million this year. And I think a point that shouldn't get lost on the investment community is that the gross margin of this asset is in the low 80s, so it's a nice opportunity for us to continue our margin expansion. And also, it shouldn't be lost at the op margins without synergies, which are accretive to our longer-range goals for up margins. And we should be able to generate about, approximately $10 million of synergies by year three with this asset, which will also help to expand the op margin. And that, combined with the growth, makes this a very exciting acquisition for us. And I would really look at this, Larry, as another Vidacare. Faster growth, great margins and also us being able to take synergies and continue to expand it overseas and into different areas.

Lawrence Keusch -- Raymond James -- Analyst

Okay. And just to be clear, the $50 million to $60 million in revenues that you referenced in the $60 million to $70 million, that's 2019 and 2020? Or is that -- what's the right way to think about that?

Liam J. Kelly -- Chairman, President and Chief Executive Officer

That's 2020 and 2021.

Thomas Powell -- Executive Vice President and Chief Financial Officer

So, the numbers that Liam referenced are 2019 numbers for the $50 million to $60 million, and the $60 million to $70 million is what our expectations are for 2021.

Lawrence Keusch -- Raymond James -- Analyst

Got it. Thank you for the clarification.

Operator

The next question comes from Richard Newitter of SVB Leerink. Please go ahead.

Richard Newitter -- SVB Leerink -- Analyst

Hi, thanks for taking my question. Maybe just to start off, looking ahead into next year, some of the catalysts that you have, you mentioned one EZPlas, the BLA pathway now. Can you just maybe give us a sense as to what your anticipated timing is with that regulatory pathway? And then also, if you could just touch on timing for UroLift Japan and just what's going on with MANTA underlying trends. And specifically, the fact that, that's maybe in certain types of procedures that are getting done in a more virgin fashion. Can you give us any sense of how you think that trajectory might play out into the fourth quarter and into 2021 relative to some of the other parts of your business that you seem a little more cautious on?

Liam J. Kelly -- Chairman, President and Chief Executive Officer

So, I think that with regard to UroLift Japan, nothing has changed since our last update. We believe that we will get the reimbursement in Q2, and we'll be generating revenue in Q2, Q3 of 2021. So nothing has changed there in regard to UroLift in Japan. Regarding the BLA, we've made really good progress, Rich, with the FDA. At one stage, we were considering an emergency use authorization. I think the military involvement in this was very helpful to us. And now we believe we'll have a BLA submission. Do we feel more confident now that we will generate some revenue in 2021? Yes, we do. The timing of the BLA is still to be ironed out with the FDA. And once we get the BLA, then we are on a fast track, and it is very dependent on when they will approve that. But I feel quite encouraged that we will have the EZPlas on the market at some stage in 2021. With regard to your question on MANTA, the MANTA performed really well in North America in the third quarter return to growth in around that 20% mark in the third quarter in North America, and we're very encouraged by that. We -- it is a product that gets us access into the hospitals and clinicians are very keen to use the product because it reduces the time to hemostasis. And in today's environment, when you're trying to get more TAVR cases through the cath lab, that is very, very helpful. So, we see MANTA being one of our key drivers as we go into 2021. One of many, I'd like to point out, Rich. So we've got the UroLift, we've got MANTA, we've got UroLift Japan. We now have Z-Medica. We have EZPlas coming on stream. So, we have a lot of catalysts for growth as we go into 2021, and it's very encouraging. We just want to get out the other side of this call, but -- and just on your comments that we're more cautious than we were, I would say, Rich, we're not. We're equally cautious as we were a couple of months ago. We just don't expect to see the recovery that -- the recovery from goal within Q4. We expect it to be in early 2021, and nothing has changed in our thinking around that. But thank you for the questions.

Richard Newitter -- SVB Leerink -- Analyst

Got it. And just on that last one, if I could follow-up, though, in the last part on 4Q. So, I guess what I'm hearing is you left some things that could be incrementally positive relative to what's in your internal outlook like DTC benefit. But you're also being cognizant that surgeries are occurring in the U.S. and then more formidably internationally. So maybe we should just view that you haven't necessarily seen that impact on elective procedures or hospital trends yet because October was trending better than the third quarter trend. But you're going to leave any incremental benefit beyond October? Or actually, you're dialing in the potential that things take a step back, and that's why the improvement isn't bigger in 4Q?

Liam J. Kelly -- Chairman, President and Chief Executive Officer

So, I think the way -- it's a great question, Rich. I think the way we look at it. Look, September adjusted was minus 2% roughly, and we saw a sequential improvement in the first few weeks of October. And actually, the first few weeks in October were pretty much flat year-over-year. But despite this positive trend in October and given the rising cases in COVID and the tougher comps, we still expect modest improvement in Q4 versus Q3. We haven't built in, as you said, the DTC. Maybe we're being overly conservative. But this is as clear a picture as we have right now. And if the recovery continues in Q4, as we haven't built in, Teleflex is going to benefit from that and we'll accelerate. If we go into a second lockdown, which I don't expect, it'll be worse than we expect. But I think we're trying to, Rich, take a balanced and prudent approach to the fourth quarter. And what we see in front of us right now, as I said a few times, my crystal ball is cloudier than it's ever been with two months left to go in a quarter. But I'm encouraged by what I saw in October, Rich, to be candid. We're up against a really tough comp in the last two months, and we have not built in a continued improvement in recovery. We've basically taken what we've seen in October and prorated that into the last two months of the quarter. Now if it continues to recover, it will be better. There's no doubt about it.

Richard Newitter -- SVB Leerink -- Analyst

Got it. And just, Liam, just to be clear, the 4Q guidance that you provided, that was all excluding any contribution from Z-Medica, correct?

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Yes. I mean there are things that will help us, Rich. So, Z-Medica being one that you point out, FX should work in our favor. That will help us. If procedures start to come back a little bit better, that will help us. So, yes, you're correct. We did not include Z-Medica. And also, we've got two additional billing days in the fourth quarter, which should add about 3%. So, there are green tubes out there and nice opportunities. But we don't -- as we sit here right now, we want to be absolutely as candid as we can with the investment community.

Richard Newitter -- SVB Leerink -- Analyst

Thank you.

Operator

Next question is from Shagun Singh of Wells Fargo.

Shagun Singh -- Wells Fargo -- Analyst

Thank you so much for taking the question. So, just a point of clarification there on Q4. So, should we expect you to be positive in Q4 with the addition of the two extra selling days? And then a couple of questions on UroLift. I believe you did start seeing the first set of patients come in, in September and October. Are you willing to share with us what kind of volume lift you're seeing from this initiative? And then as we think about Q4, and thank you for all the color there, you do have a full quarter of the national DTC initiative that you said you haven't dialed in, six times the ad impressions year-over-year. And on an underlying basis, year-to-date, you have been delivering about 40% year-to-date. So, is that a reasonable floor to expect for Q4? Thank you.

Liam J. Kelly -- Chairman, President and Chief Executive Officer

So, I think, Shagun, you're correct. We're very encouraged by the underlying performance of all of our businesses and UroLift is no exception. The underlying performance has been fairly consistent at 40%. We have not built in the DTC into the fourth quarter. Quite simply, Shagun, because it's very hard for us to determine where the patient came from, when they go to the urology practice. And because of the uncertainty in relation to the COVID -- increase in COVID cases around the United States. With regard to the sharing on the DTC initiative. For competitive reasons, Shagun, and I don't think it would be wise for us to share many of the specifics. But I can tell you that the number of patients that are actually clicking and calling our call center is very encouraging. If every one of them, and that's -- it's not going to happen. But if every one of them turned into a procedure, that would be quite encouraging for us as an organization. And as we go into the fourth quarter, as we said earlier, we declined by 4% in the third. But we expect a modest improvement over that. And then we expect to pick up another 3% from billing days. FX should work in our favor, if it stays where it is today, and that's where we see the fourth quarter landing.

Shagun Singh -- Wells Fargo -- Analyst

I got it. That's helpful. And then if I could just ask a question on 2021. I think you just mentioned that you expect next several quarters of uncertainty related to COVID. What does that mean for 2021? Consensus is looking for about double-digit growth in 2021 versus 2019. I believe it's still below pre-COVID levels. So, what is your reaction to that? And then on the margin side, how should we think about it? And when do you expect to get to your LRP goals? Thanks for taking the question.

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Thanks, Shagun. Well, we would have to answer the most part of that question, we would have to get out the other side of COVID, but there's so much uncertainty out there with COVID. Are we encouraged by the underlying performance of our business? Absolutely, we are encouraged by the underlying performance of our business. Do we think we have a number of catalysts for growth? Yes. Have we just add another one today? Yes, we've added Z-Medica. Do we believe that once we get back out the other side of COVID that Teleflex will be in a strong position? Yes. With regard to our longer-term goals, are they the right goals for Teleflex? Absolutely, they are. And nothing has changed in my thinking on that either. They are the right goals for Teleflex, and it's not a question of if we get to them, it's a question of when. But in order to give the investment community clarity on that, we need to come out the other side of COVID. We need to have a vaccine or a fall-off in the level of the condition to such a level that consumer confidence is high and the hospitals are able to get a higher throughput of patients, even though everyone was expecting at the beginning of this COVID crisis that there would be almost like a super boom in Q4 where hospitals will put on extra capacity. We haven't seen that in October. And I don't think we're going to see it in November and December. And I don't want to predicate the fourth quarter on a super boom of procedures coming back into hospitals because, quite frankly, I can't see it happening.

Shagun Singh -- Wells Fargo -- Analyst

Thank you so much.

Operator

Next question is from Anthony Petrone with Jefferies. Please go ahead.

Anthony Petrone -- Jefferies -- Analyst

Hi, good morning, everyone. I hope everyone is doing well and staying healthy. Two questions for you, Liam, and then I have a follow-up for Tom. The first two questions are on UroLift. And I'm wondering if you could just give us an update on total urologists trained to date. By our math, it's about 2,800 or so, maybe a touch higher than that. And then ultimately, when you look at the pool of 12,000 neurologists in the U.S., maybe just to refresh on with the peak target penetration and there is a quick one also on UroLift would be anything on the DOJ investigation. And then I'll ask the follow-ups.

Liam J. Kelly -- Chairman, President and Chief Executive Officer

All right, Anthony. So, on DOJ, absolutely no update on that. And I would advise the investment community not to expect an update for a number of quarters as they're still focused on that single practice. With regard to the number of urologists, Anthony, we've changed -- your math is pretty good. We're in or around 2,900 of the 12,000 trained. And what's very encouraging for me is that we trained 120 urologists in the third quarter, which is right back to our normalized run rate, pre COVID of training urologists. And I genuinely -- well, I know that the DTC is helping with that because we know urologists are coming to us because their patients have come into their office, asking them about UroLift. The other part of your question regarding the 12,000 urologists. How many do we need to train? What's the magic number? In our research, as we broke down our champions, what we've discovered as a champion the average urologist sees 75 BPH patients. So, what we've discovered is, what do you see 50 unique BPH patients a month or whether you see 150 unique BPH patients a month. You have the same opportunity to become a champion. And the champion is the urologist, those six procedures are more than a month. So we have to train all of the -- pretty much all of the 12,000 urologists to get this 100% penetrated. And that's what makes it so exciting, Anthony, is because it's such a big opportunity. As we train more urologists and we make this standard of care for BPH, it is a massive market for us to grow into.

Anthony Petrone -- Jefferies -- Analyst

Great. And then that's helpful. And then the two follow-ups real quick here. We noticed that just the APAC trends, 2Q to 3Q actually decelerated. Again, the view is that they're a little bit ahead of the curve with COVID. So, maybe just to touch on what actually happened in APAC in 3Q. And then Tom, just in terms of the last slide on the deck for the margin outlook, the total pre-tax savings, $85 million to $98 million is the overall target. I think you exiting 2019, there was $26 million of that was realized. So, maybe just an update on where you guys sit on realizing the expected savings from restructuring. Thanks again.

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Yes, Anthony, I'll take the APAC one. Obviously, APAC was impacted by our decision to take the Japan Business Direct. So, if you normalize for that, it was about 11%. If you normalize for COVID, it was in the very low double digits, but about 11% slight degradation, and that was really driven by an increase in COVID cases in India and Southeast Asia, and a resurgence in Australia. We're a little bit unique, I guess, in so far is that, we are more exposed to Australia. It's a bigger part of our APAC business than it would be for other companies and similar to India. So those are the key drivers for APAC. And I'll let Tom answer the other part of the question.

Thomas Powell -- Executive Vice President and Chief Financial Officer

Well, sure. On the restructuring programs, I'd first like to just say that despite the COVID outbreak, the program still continues to track toward plan and schedule. So we feel very good about that. In fact, one of the initiatives that booked up we're going to be able to realize some savings earlier over the next couple of years than was previously expected. In total, the savings are $85 million to $98 million, as you mentioned. About 25% of those were realized by the end of 2019, and then we expect to realize a fairly significant amount in 2020 and 2021, a little less in 2022 and then a fairly substantial amount in 2023. So as far as the cadence, we're going to -- of what's remaining, you're going to see about half of that realized in 2020 -- excuse me, 2020, 2021 and the rest in the next three years, if that helps.

Anthony Petrone -- Jefferies -- Analyst

Thank you. Thank you.

Operator

We have our next question from Matt Mishan of KeyBanc. Please Go ahead.

Matt Mishan -- KeyBanc -- Analyst

Liam, just on Z-Medica, can you take a step back and explain why the technology is differentiated versus competitive products and the clinical evidence that's driving the growth?

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Yes, absolutely, Matt. And there are multiple clinical papers written on at the 75 peer reviews. And really, it comes down to some of the key factors. If you look at some of the human data, 88.3% successful hemorrhagic control success rates are right up there. And if you look at the military did one of the combat goals, higher success rate of achieving hemostasis at 89% for the -- and 100% for the second application compared to standard goals. So, you're looking at 89% and 100% hemostasis compared to standard goals at 0% and 13%. And again, in the area of blood loss in trauma, significantly, less blood loss after packing was seen, and this is the QuikClot plus where you can actually put it internally and obviously, reduction in blood loss. And there is also an external new study on radial axis that shows shortening the hemostasis by 94 minutes compared to TR band. So, it's really hemostasis and time that is the focus of the clinical peer reviews and the product outperforms the standard of care that is used today in the market and is being adopted rapidly in EMS and trauma centers around the United States, in particular, and we want to expand that overseas.

Matt Mishan -- KeyBanc -- Analyst

Okay. Excellent. And then just the last one. How are you accurately measuring the COVID impact on your business?

Liam J. Kelly -- Chairman, President and Chief Executive Officer

So, I'm actually going to ask Tom, if you don't mind, to answer that. Because Tom has been working with the finance team and the business units to work through that.

Thomas Powell -- Executive Vice President and Chief Financial Officer

Okay. Well, let me walk you through it. We will admit it's not a perfect estimation. But we, as a business, wanted to understand the impact so that we could understand our trends and spend quite a bit of time focusing on that. And so I'll share with you our approach. So, essentially, we began with the budget. And then we made adjustments for known deviation from the budget, plus or minus trends versus budget prior to COVID to see how different businesses were performing, changes in competitive dynamics, canceled programs and events and CMA programs. We also looked at back order status and any changes there that could impact the results. We look at distributor ordering patterns as well as even customer communications regarding order pushouts. And so we used all of this data to come up with kind of a number of adjustments that we attribute to COVID. And then the difference is essentially, from budget was attributed to the COVID impact here, net of all of these adjustments. And we used some other approaches to try and go it around and just validate that. As for margins, once we had established the revenue impact, we could then apply our variable manufacturing costs. We included COVID-related manufacturing increases, whether it was social distancing, PP&E, attendance status, etc. And we made adjustments for such factors such as sales commissions as well as the opex cost savings initiatives. So, that was our approach. I think we've taken a really hard look at it. But recognize that it isn't a perfect science, but rather, our best estimation of the impact. I hope you find it helpful.

Matt Mishan -- KeyBanc -- Analyst

Understood, and thank you for the detail.

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Thanks, Matt.

Operator

Next question is from Matt O'brien of Piper Sandler. Please go ahead.

Drew Stafford -- Piper Sandler -- Analyst

Hey, good morning, guys. This is Drew on for Matt. Thank you for taking the questions. I wanted to follow-up a little bit on the Z-Medica transaction. Obviously, congrats on getting your hands on pretty -- some pretty interesting products there. Maybe you could speak to a little bit on the potential sales force efficiencies. It seems like they could be pretty meaningful. And then, how long will be the process of training your sales force before you can roll it out to the vast majority?

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Yes. So, we actually see the sales force synergies as the synergies that Teleflex brings because of our channel into the EMS space. So, if we look at that, we have a very strong sales organization that sells the EZ-IO, sells laryngeal mask, sells a whole plethora of products into that EMS and military call point, and we have very strong relationships with the military, which is, as you can see from their cosponsor of EZPlas as a product to get it into the marketplace. So, we see that really as an opportunity for us to accelerate the growth into that key call point. And then thereafter, to expand within the other areas of trauma. As I said in -- earlier in the call, in the total synergies by year three, we expect in the region of about $10 million. That comes from a variety of areas and is an opportunity for us. But we want -- this is a growth asset, and our thinking here is that we will continue to invest behind this in the channel into the future in order to ensure that we will have more salespeople on the ground in the combined organization than we did as Z-Medica as a stand-alone, and we will also look to expand into our channel overseas. We also have a direct call point into some of these key areas overseas and opportunities there to expand this portfolio. So, it's a very nice acquisition, high single-digit growth, great margins, both on the gross and operating margin, great clinical data and very long IP. So, it's well protected and growing into a $600 million market.

Drew Stafford -- Piper Sandler -- Analyst

Okay. That's very helpful. And then my follow-up is, on the performance in your other category, I think that includes your respiratory business, which benefited from COVID early on. I mean it looks like you kind of returned to flat this quarter. Is the right way to think about that, that some of the tailwinds from COVID early on are starting to die down? Or is there the potential for that to pick up a little bit again as the severity of the current COVID outbreak? Thank you.

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Yes. So, what you'd expect that would happen is as you get over the increase in the curves of COVID as we did in Q3, exactly as you pointed out, Drew, you would anticipate that those businesses will get back to more normalized levels. As you head into Q4, and as you see COVID beginning to increase again, you would expect that both our respiratory and our vascular businesses would benefit from that increase. Normally, we would anticipate that respiratory would benefit from a strong flu season. My own view is that the flu season this year is irrelevant because of COVID and hospitals will protect themselves to have supply of these products in the fourth quarter in case the resurgence continues and in case that we go into a second lockdown. And I don't think we're going to go into a second lockdown, Drew. I think that hospitals have really learned how to treat patients with COVID. And they're also segregating areas in the hospitals, if not entire hospitals, to move COVID patients to them so they can continue to conduct procedures even in the midst of a second COVID outbreak.

Drew Stafford -- Piper Sandler -- Analyst

Thank you.

Operator

Next question is from Matt Taylor of UBS. Please go ahead.

Yang -- UBS -- Analyst

Hi, guys. This is Yang [Phonetic] in for Matt. I'll just ask one question in the interest of time. It's kind of a high-level one, but I'm just wondering when do you expect the operating environment can get back to normal on the other side of COVID? For example, after a vaccine is widely distributed? I realize the pathway there is pretty lumpy, tough questions, but I'm just kind of curious about your thoughts there. If we can achieve 75% herd immunity with a vaccine, can business trends return to a pre-COVID level potentially even before that or one or two quarters after that? Just wanted to give you high-level thoughts on that.

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Well, if you look at quarter three, what we saw was things begin to turn back to normal until we saw the upswing in COVID cases starting in Europe and then spread to North America. So, we were in quarter three, as we went through it getting to -- especially the first couple of months of quarter three, and then you get into the third month of quarter three, and we saw COVID cases begin to rise again. I think that the answer to the question is, first of all, get out beyond COVID in Q1, Q2 next year, then get a vaccine. And I think it's also a little bit psychological that people feel that there's a vaccine out there. So, therefore, they will feel more comfortable going back and getting procedures done, and they won't be as concerned about a second or a third wave as it would be probably at that stage. So, I think the vaccine is key. I think that the virus itself weakening and managing it better is also key as we go into the first half of 2021. And I would be very hopeful that if we get through the first half of 2021 and early in 2021, we'll begin to start to come out the other side of this COVID pandemic and have a vaccine available and begin to return to some sense of normalcy. But again, my crystal ball is as clear as yours is right now. Everyone's crystal ball is a little bit murky.

Yang -- UBS -- Analyst

Okay, thanks. It's very helpful.

Operator

Next question is from the Dave Turkaly of JMP. Please go ahead.

Dave Turkaly -- JMP -- Analyst

Great. Thanks. Liam, I'm not trying to beat a dead horse here, but you mentioned France, Spain, Italy, Australia and the U.S., the case increases. I'm just curious if anecdotally you've seen any evidence of elective deferrals happening in any of those areas currently. I know what happened in the past. But I know there's more cases, but I'm just curious, are you seeing that currently today?

Liam J. Kelly -- Chairman, President and Chief Executive Officer

So, I mean the key market here is the United States. And if you look at the United States, and if you look at pre COVID and after COVID, and our best benchmark really is the UroLift business. The state that -- and I'm looking at the bigger states now where you carry a lot of your volumes that are still below pre-COVID levels are Massachusetts, New Jersey, South Carolina. Those that are rebounding back very strongly and are above that. Our North Carolina, New York and Illinois, as three examples. So, what you've got is a mixed bag. So in the United States, we haven't seen the deferral of those procedures. But what we have seen is in places like India and indeed, in Australia, in the third quarter, we saw the deferral of some procedures in hospitals pushing them back. So yes, we did see it in some of the geographies. It will be interesting to see now what we will see in places like France and Spain. I think what they're going to try and do is keep patients flowing through the hospitals because the bigger human tragedy here could be people not getting procedures and therefore, having a very bad outcome in the future because they didn't get the critical procedures that were needed because they were afraid of COVID. So, I think that's a bigger human tragedy in the making if we don't keep our hospitals open and keep patients flowing through them. And I think the other thing that you're seeing, as I said earlier, is that patients feel more confident going to the office and the ASC than they do in the hospital, and we're seeing, especially with UroLift, the office setting doing quite well compared to the hospital setting, getting back to above pre-COVID levels in the office, is entirely within the United States. I hope that answers your question as accurately as I can.

Dave Turkaly -- JMP -- Analyst

No, it's great. And that's it for me. Thank you.

Operator

Next question is from Mike Matson of Needham. Please go ahead.

Mike Matson -- Needham -- Analyst

Thanks. Just on UroLift two, can you give us your latest thinking on the impact to margins and growth, if any, of the product and then the timing to when you're fully converted to UroLift two?

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Yes. So, the margin one is spread -- is still the same. It will move the UroLift margins from the mid-70s to high 70s. You should think about it, at getting about 4% full points on that business. And last year, that business did about $300 million. We'll begin to roll out early in 2021. I think that it's easy for the urologist to adopt us. The early indications that we have from our pre-market work has been really, really positive. The docs really like the way the product works. It's easier to use, same grade, outcomes same, easier to use and same visibility, same everything. I'm really glad we took our time to change the visibility factor on this because it's coming back as a real positive feedback from the urologist. So, as we begin to roll it out in 2021, as we get into 2022, we should be able to have a large portion of the North American market converted.

Mike Matson -- Needham -- Analyst

Okay. And then just on the OEM business. You mentioned this lagged impact because of the customer kind of destocking or whatever that's occurring, but is that largely over, do you think? Or would that continue into the fourth quarter?

Liam J. Kelly -- Chairman, President and Chief Executive Officer

So, I think we'll definitely see an improvement in the OEM business in the fourth quarter. What happens there, Mike, is obviously, we make products for other companies, branded companies, all of which you will know and you probably cover a large proportion of them. And what we've seen is as their elective procedures fall off, then there was a lag to them placing orders in our OEM business, and we expected this to happen. This is not unexpected. We knew OEM was going to be impacted by COVID a quarter later than the rest of our businesses. What you -- what we've also seen is some of these key companies destock as they're shoring up their capital and making sure that they're managing their free cash flow. So, we've seen some of them destock. You can only do that for a certain period of time. So, I would expect to see our OEM business begin to pass to recovery in Q4.

Mike Matson -- Needham -- Analyst

Great. Thank you.

Operator

Next question is from Chris Cooley of Stephens. Please go ahead.

Chris Cooley -- Stephens -- Analyst

Good morning and thank you for taking our question. I'll just ask one at this point. But Liam or Tom, I'd appreciate, if you could provide some additional color on the fourth quarter. Not so much in terms of what you excluded like Z-Medica, the extra selling days. But what you contemplated in that guide from the perspective of a hospital and most notably the U.S. hospital. Curious if you're assuming heavier inventory carries through calendar year-end improvements in throughput in terms of procedure growth to the extent that it's there, just kind of some of those exogenous variables would like to get your perspective zone.

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Yes, Chris, thank you for the question. What we did was we looked at what we saw in October, and we pretty much projected that into the remainder of the year, and we did not assume an uptick in procedures. We did not assume a procedure recovery. And we may be too conservative here, but we do not anticipate getting back to pre-COVID levels in Q4. We still think that's going to be in early 2021. Now October, for the first four weeks of October, looked pretty reasonable. I mean we were pretty much flat in the first few weeks of October. We do come up against a tougher comp when we get into November and December. Chris, you'll know that, for example, the UroLift grew by 54% last year, and our overall business performed very well in the fourth quarter of last year. So we took that into consideration. We did not anticipate a further lockdown. We anticipate that we would see COVID being well managed. We had seen, in the month of October, the upswing in the COVID cases. So, that initial upswing was in our thinking when we laid out what we expect to happen for the fourth quarter. So, those are the things we included and those will be excluded. And of course, we excluded DTC. We included -- we excluded the billing days, and they'll add about 3%. We excluded FX. That should help us. We excluded -- I'm sorry, I'm going back to the exclusions rather than the inclusions, Chris, but we did also exclude Z-Medica that hopefully we'll close in the fourth quarter.

Chris Cooley -- Stephens -- Analyst

Thank you. Congratulations.

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Thanks, Chris.

Operator

There are no further questions at this time. I will now turn the call over to Jake for any closing remarks.

Jake Elguicze -- Treasurer and Vice President of Investor Relations

[Operator Closing Remarks]

Duration: 75 minutes

Call participants:

Jake Elguicze -- Treasurer and Vice President of Investor Relations

Liam J. Kelly -- Chairman, President and Chief Executive Officer

Thomas Powell -- Executive Vice President and Chief Financial Officer

David Lewis -- Morgan Stanley -- Analyst

Lawrence Keusch -- Raymond James -- Analyst

Richard Newitter -- SVB Leerink -- Analyst

Shagun Singh -- Wells Fargo -- Analyst

Anthony Petrone -- Jefferies -- Analyst

Matt Mishan -- KeyBanc -- Analyst

Drew Stafford -- Piper Sandler -- Analyst

Yang -- UBS -- Analyst

Dave Turkaly -- JMP -- Analyst

Mike Matson -- Needham -- Analyst

Chris Cooley -- Stephens -- Analyst

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