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8-K - FORM 8-K - ENDOLOGIX INC /DE/ | a55289e8vk.htm |
EX-99.1 - EX-99.1 - ENDOLOGIX INC /DE/ | a55289exv99w1.htm |
Exhibit 99.2
Endologix, Inc. Company5 |
ELGX Ticker5 |
Q4 2009 Earnings Call Event Type5 |
Feb. 18, 2010 Date5 |
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MANAGEMENT DISCUSSION SECTION |
Operator: Greetings, and welcome to the Endologic (sic) [Endologix] Incorporated Fourth
Quarter 2009 Earnings Conference Call. At this time, all participants are in a listen-only mode. A
brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a
reminder, this conference is being recorded.
It is now my pleasure to introduce your host Mr. Nick Laudico with The Ruth Group. Thank you, you
may begin.
Nick Laudico, The Ruth Group
Thanks, operator and thanks everyone for participating in todays call. Joining me from the company
are John McDermott, President and Chief Executive Officer and Bob Krist, Chief Financial Officer.
This call is also being broadcast live on the Internet at www.endologix.com. And a replay of the
call will be available on the companys website for 30 days.
Before we begin, Id like to caution listeners that comments made by management during this
conference call will include forward-looking statements within the meaning of Federal Securities
Laws. These forward-looking statements involve material risks and uncertainties. For a discussion
of risk factors, I encourage you to review the Endologixs annual report on Form 10-K and
subsequent reports as filed with the Securities and Exchange Commission. Furthermore, the content
of this conference call contains time sensitive information that is accurate only as of the date of
the live broadcast February 18, 2010.
Endologix undertakes no obligation to revise or update any statements to reflect events or
circumstances after the date of this call. With that said, Id like to turn it over to John
McDermott.
John McDermott, President and Chief Executive Officer
Thanks Nick. I would like to welcome everybody to the Endologix Fourth Quarter and Full Year 2009
Conference Call. Joining me on the call today is Bob Krist, our Chief Financial Officer who will
provide an overview of our financial results following my comments.
Our results in 2009 reflect the continued adoption of our innovative product line and the growing
acceptance of our unique approach to abdominal aneurysm repair. Over the course of the year, we
strengthened our sales force, entered new international markets, expanded our product portfolio,
added to our R&D pipeline, began generating positive operating cash flow and improved our balance
sheet.
Importantly, our sales representatives have demonstrated their ability to leverage the new
IntuiTrak delivery systems and the clinical advantages of anatomical fixation to gain deeper
product penetration. We also became the first and only company to receive FDA approval to run a
clinical trial for a fully percutaneous EVAR indication, which will further differentiate our
system and give us another competitive advantage in the marketplace.
We believe we have a unique opportunity to continue gaining share in the AAA market, while also
building our product portfolio to create a more diversified global company focused on aortic
disorders. In addition to giving you an update on the quarter, today I will discuss our strategy to
drive growth in 2010 and provide an overview of the significant investments in our sales force and
new product pipeline that will position Endologix for success over the next several years.
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Feb. 18, 2010 Date5 |
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First, Id like to give a brief update on our patent litigation with Cook. As you will recall both
of the subject patents were accepted for re-exam by the patent office and the case was stayed last
month. The patent office has just completed their re-exam and determined that the alleged claims in
one of the patents are invalid.
In the second patent, they determined that the claims are valid, however, this patent expired in
November of last year. The case is still presently stayed, but there is a possibility that well
need to litigate the surviving patent in 2010. We continue to believe the alleged infringement is
without merit and we will vigorously defend our position.
Turning now to our financial performance. For the fourth quarter of 2009, revenue increased 28%
year-over-year to $13.7 million. This was comprised of domestic revenue of $10.8 million, up 18%
year-over-year, and international revenue of $2.9 million, up 85% year-over-year. International
growth was driven by the continued rollout of IntuiTrak as well as the typical strength we see
internationally in the fourth quarter relative to the rest of the year. The total revenue for the
full year of 2009 increased 39% over the prior year to a record $52.4 million and we generated $5
million in operating cash flow.
We did experience a slowdown in our growth rate in the U.S. in the second half of 2009 due to
increased competitive activity. Specifically, one of our competitors launched new product and we
also saw other competitors more aggressively defend their business in reaction to the success of
IntuiTrak.
Our domestic sales reached a low point in October, but we have begun gradually increasing our
monthly case volumes in rebuilding our momentum. Weve seen good progress in November, December and
January and expect our 2010 first quarter domestic sales to grow sequentially. In 2010, our growth
will be driven by the introduction of product line extensions and continued productivity
improvements from the sales people we hired in 2008 and 2009.
The product line extensions, which we expect to launch in the second half of the year, will enable
us to address a wider range of patient anatomies. We have received very positive physician feedback
on these new products and expect our sales force to be able to leverage them to gain incremental
cases. We also plan a more aggressive expansion of our U.S. sales force. We finished 2009 with just
over 50 sales territories and plan to add an additional 30% more territories by the end of 2010.
Since our reps are present for every AAA procedure, our current large territory sizes make it
difficult for them to bring on board new customers and spend enough time in existing accounts to
achieve a good level of penetration. By adding more reps, we can decrease travel time, focus on a
smaller number of accounts per territory, and more effectively defend against competitive activity
when we start up a new customer. Weve already initiated the recruiting process and have identified
several talented and experienced candidates that we believe will have a positive impact on our
results. Our goal is to close 2010 with the majority of the new territories filled, adding reps
evenly over the course of the year.
Internationally, we expect to continue to benefit from the recent launches of IntuiTrak and
IntuiTrak Express with our European and South American distributors, our first full year in the
Chinese market and continued growth in Japan. In Q3 and Q4 of 2009, we shipped our initial
IntuiTrak stocking orders. And our distributors are now in the process of introducing these new
devices to physicians in their markets.
For the full year 2010, we expect total revenue in the range of 62 million to $66 million, which
represents 18 to 26% growth over 2009. Due to the timing of the new product launches and the
anticipated increased sales force productivity, our revenue growth may be weighted to the second
half of the year. Lastly, we will continue to support the collection and publication of data
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ELGX Ticker5 |
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Feb. 18, 2010 Date5 |
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demonstrating the clinical benefits of our products. This includes our recently announced PEVAR
clinical trial for which we received IDE approval during the fourth quarter.
There will be a total of 20 clinical sites enrolling patients in the trial, all of which are from
prestigious hospitals and institutions. We expect to enroll the majority of patients in 2010 and
anticipate approval around the end of 2011, early 2012. Upon FDA approval, Endologix will be the
first company to receive a percutaneous indication for AAA further differentiating us from the
competition.
With those comments, I would like to turn the call over to Bob Krist for an overview of our
financial performance. Bob?
Robert J. Krist, Chief Financial Officer
Thank you, John, and good afternoon to all. Today, I will provide an overview of our key financial
results and metrics for the fourth quarter and full year of 2009. Total revenue increased by 28% to
13.7 million in the fourth quarter and by 39% to 52.4 million for the full year driven by new
products, sales force, productivity improvement and international growth and expansion.
During the fourth quarter, the number of covered sales territories increased by 11% compared to the
fourth quarter of 2008, and average sales dollars per territory increased by 6%. During the full
year 2009, the number of sales territories was unchanged from 2008 with the average sales dollars
per territory up by 37%. We estimate that new products contributed about $500,000 of incremental
revenue in the fourth quarter and approximately $5.6 million for the full year. I do want to point
out that Powerlink XL and our suprarenal extensions were launched initially in the fourth quarter
of 2008. The launch of those products made our year-over-year revenue base higher than in previous
quarters.
For the full year 2009 incremental revenue from new products accounted for approximately 18
percentage points, or about half of the 37% domestic revenue increase compared to 2008.
International sales growth in the fourth quarter was driven by the stocking orders for IntuiTraks
market release in certain European and South American markets that John mentioned, as well as our
historical relative strength in the fourth quarter internationally.
Gross margin improved to 75% for the fourth quarter and for the full year, driven by new products
and an overall lower cost per unit sold. The sequential improvement in gross margin in the fourth
quarter was a result of lower inventory reserves, compared to the third quarter, and the
realization of lower cost of goods sold in the Japanese market.
In the third quarter of 2009, we have increased our reserves to account for potential unsold
inventory of the companys previous Visiflex Delivery System in advance of the launch of the
IntuiTrak Delivery System internationally. The lower cost of good sold in Japan was the result of a
reduction in the cost of the Powerlink Graft Material, a benefit we had realized domestically in
the prior year.
We achieved excellent leverage of the operating expense line in 2009 up just 6% year-over-year.
This was despite the fact that in the later part of the year, we initiated a significantly
increased rate of investment in new product development. This increase in research, development and
clinical expense will continue throughout 2010, as we invest in new product programs that will
enhance our current product platform and expand our addressable markets. Our increased commitment
to R&D together with our investment in the PEVAR clinical trial could result in up to a 70%
year-over-year increase in R&D spending. John will discuss those R&D programs in more detail in his
closing remarks.
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Endologix, Inc. Company5 |
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The increased expense in sales and marketing in Q4 was primarily focused on our expanded presence
at the VEITH symposium in November, where we received encouraging physician feedback on our
anatomical fixation clinical results, presentations on the use of IntuiTrak in percutaneous AAA
procedures and the preclinical results with our new fenestrated device to treat patients with short
neck and juxtarenal aneurysms.
Also in the fourth quarter, we filled three additional sales territories, bringing the total filled
territories at year end to just over 50. Earlier, John described our plan to increase the number of
sales representatives by about 30% over the course of 2010. The overall cost of this investment is
about $400,000 per territory, per year so roughly a $3 million investment in 2010.
General and administrative expenses were well controlled in 2009. G&A was lower for the full year
by approximately $900,000 and 10% compared to 2008 and was up in the fourth quarter over prior year
by about 2%, however that included some 250,000 in legal fees related to the Cook matter.
In 2009, we dramatically improved our financial position. We have a much improved balance sheet now
with more than $24 million in cash on hand at December 31, a newly established $10 million line of
credit and no outstanding bank debt. And as you know, we generated positive cash flow in each of
the last three quarters of 2009. Accounts receivable days outstanding averaged 53 days, including
both domestic and international accounts and was 53 days at quarter end. Inventory turnover was at
2.4 turns at the end of the quarter, which is a 33% improvement over inventory turn over at the end
of 2008.
Turning to guidance for the full year 2010, we are expecting revenue in the range of 62 to $66
million an 18 to 26% increase over 2009, and we expect to achieve positive earnings per share on a
GAAP basis. Our EPS guidance assumes planned investments in sales force expansion, research and
development, and clinical initiatives and excludes the potential impact of litigation, acquisitions
or other business development transactions.
And looking to the first quarter of 2010, we expect domestic revenue to grow sequentially over the
fourth quarter of 2009. Based on the timing of new product launches and continued improvement in
sales force productivity, the majority of our growth in 2010 may be weighted to the second half of
the year.
Our goal over the next few years is to increase revenue by 20% or more per year and generate
sufficient cash flow to fund our continued investments in the sales force and research and
development. We will also leverage our strong balance sheet to make selective investments in
innovative aortic technologies that will further strengthen our new product pipeline.
In summary, we feel very good about the financial foundation we now have in place to support the
future growth of the company in 2010 and well beyond.
With that, Ill turn the call back to John.
John McDermott, President and Chief Executive Officer
Thanks, Bob. In summary, 2009 was a pivotal year for Endologix. We introduced our new delivery
systems IntuiTrak and IntuiTrak Express, which simplify the delivery and deployment of our
Powerlink device and give us the lowest profile system in the U.S. to treat patients with large
neck aneurysms.
We improved and expanded our sales force in the United States and expanded it in new international
markets, allowing us to introduce anatomical fixation and our innovative products to more
physicians.
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Lastly, we improved our balance sheet and cash position to ensure that we have ample resources to
continue building the business in 2010 and beyond. In 2010, well increase the number of sales
territories by almost 30% and work hard to drive improved productivity from existing reps. Outside
the U.S., we expect continued solid growth as our products gain traction in market acceptance.
Before we open it up to questions, Id like to take a moment to share with you our longer-term
vision to diversify our product portfolio and expand our addressable markets. We see a substantial
opportunity to leverage our technology platforms and the clinical success of anatomical fixation in
the treatment of abdominal aortic aneurysms. This includes moving up the aorta to treat patients
with short aortic necks and juxtarenal aneurysms as well as the rapidly growing thoracic market.
The strength of our balance sheet and the continued generation of positive cash flow will allow us
to make these investments to enhance our current position and open up new market segments.
As you could see from our Q4 spending, weve already started making these investments, and expect
to fund these programs with internally generated cash flow. Specifically, were investing in the
following five new product programs.
First is a new Powerlink line extensions plan for the second half of this year. They will enable us
to address a larger patient population and gain more of a physicians AAA procedures.
Second, our PEVAR clinical study could position us as the only company with a percutaneous
indication, which will enable us to proactively train physicians on this emerging technique. Third,
were working on a low profile AAA device, which will expand the EVAR market and strengthen our
position as an innovator in the category. The new device includes the design features to optimize
percutaneous procedures and complements our PEVAR investment.
Fourth, over the past year, weve been developing a new fenestrated device to treat patients with
very short aortic necks and juxtarenal aneurysms. These are the most difficult to treat abdominal
aneurysms and the segment of the market that is currently not served with existing devices. Weve
presented the preclinical data on this new device at the VEITH Symposium in November and have
received very positive physician feedback.
In 2010, we will continue to invest in the development of this product and hope to do our first
human implants by the end of this year. Lastly, were in the early stages of developing a new
device for the treatment of thoracic disorders. While this is a longer-term project, it will allow
us to leverage our technologies and sales force investment to enter into a rapidly growing market
segment.
Overall, we believe we have a solid plan in place to build upon our progress in 2009 and drive
continued revenue growth in 2010 and beyond. We will continue to make strategic investments in our
sales force and new product pipeline to support market share gains and build Endologix into a
diversified, global company focused exclusively on aortic disorders.
With that, Id like to open the call to your questions. Operator?
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QUESTION AND ANSWER SECTION |
Operator: Thank you. [Operator Instructions] Our first question comes from the line of Tim
Lee with Piper Jaffray. Please proceed with your question.
<Q Timothy Lee>: Hi, guys. Good afternoon. Thanks for taking the question. In terms of the
new sales force adds here for 2010, how quickly should we think of their productivity? Is there
are these completely green reps that are coming in new to the medical device technology? Or can we
see fairly quick turnaround or quick return on those investments?
<A John McDermott>: Tim, none of them would be new to the medical device technology. The
profile of the reps that were hiring are all experienced vascular device reps or clinical
specialists. So they will all have had some time in market, either in AAA directly or more commonly
what were doing is hiring reps from other cardiovascular companies with several years experience.
Having said that, if they dont have any AAA experience, it does in our experience take six to nine
months for them to really become what I would say productive. As we add more territories and the
territories get smaller. The good news is that these new reps will, for the most part be dropping
into markets where there is some activity already. So theyre not going to be starting with a zero
base of business. And in our experience, that helps them get traction faster. But I would use, just
as a general rule of thumb, kind of this six to nine month range of limited productivity, and then
they start to kick in more actively after that. So the folks that we hire in 2010 will add some
cases, particularly at the latter part of 2010, but really start to have more of an impact in 2011.
<Q Timothy Lee>: All right. John, I guess what Im trying to reconcile is your total
revenue outlook here for 2010. When you kind of take the underlying market growth that you will get
some productivity out of the expanded territories. Are the competitive forces that, I guess, how
pressing are the competitive factors that are coming to play, because that, particularly on the low
end of your revenue outlook, it seems fairly conservative. Am I thinking about things the wrong way
on that, or?
<A John McDermott>: No. The lower end of the guidance is really primarily a function of
the anticipated timing for the introduction of the new products. We do think that those will be an
important contributor to the year, and since they are going to be second half weighted and we dont
have those approvals yet, we thought it was prudent to guide a wider range, given the fact that we
cant really predict that timing. We do still anticipate productivity gains, but there is a more
competitive intensity. That being said, we still have unique advantages with our device in
anatomical fixation, so we expect to grow.
<Q Timothy Lee>: And then just one last one, if I may. Just in terms of the some of the
competitive actions. What exactly is it that they are doing to kind of block you guys out of the
lab?
<A John McDermott>: Well, I would say that the majority of the competitive activity that
we faced in 2009 was really primarily related to the Gores introduction of their 31-millimeter
device. Weve done a fair amount of analysis to really try to isolate the different competitive
forces, and its clear to us that, thats where we had the greatest impact. Now as I mentioned,
weve seen good progress that affected us kind of in the August through October timeframe and then
in November, December, and January we started to regain our momentum and kind of rebuild our base.
So the other competitive activities are just there digging in a little deeper, when we used to be
in the hospital, they didnt really pay much attention to us, now they do. So thats but there
isnt really anything really unique or special about those activities, I would say the majority of
the impact in the second half of last year was more related to the introduction of that new
product.
<Q Timothy Lee>: Great. Thank you.
<A John McDermott>: Youre welcome.
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Operator: Thank you. Our next question comes from the line of John Putnam with Capstone
Investments. Please proceed with your question.
<Q John Putnam>: Yeah. Thanks very much. I was just wondering, youre talking about a $3
million incremental increase I guess in sales and marketing expense to open up these new
territories. Is that on top of, lets say the 26.5 million of 2009 or John, will it be even a
greater amount than that?
<A John McDermott>: No. Think of that as incremental to what we spent in 2009.
<Q John Putnam>: Okay. All right.
<A John McDermott>: John, that is the direct cost related to those additional, that 30%
expansion.
<Q John Putnam>: Okay. And we ought to think of it as being kind of even over the four
quarters?
<A John McDermott>: Yeah. We plan to add those territories kind of gradually, sequentially
over the course of the year.
<Q John Putnam>: Okay. And I guess the other question is R&D hopped up here in the fourth
quarter to 2.1 million, but I hear youre saying basically it will be at around 11 million for the
year, up from about 6.5, is that calculation correct?
<A John McDermott>: Yeah. What weve budgeted on the R&D line is the two primarily drivers
there are the PEVAR clinical study, and then the increased investment in the different programs
that I just mentioned. So were forecasting an increase in the R&D investment line item of about
70% for 2010.
<Q John Putnam>: Okay. And congratulations actually on getting the FDA approval on the
PEVAR, but how big a trial is that going to be, John?
<A John McDermott>: So its the study has 150 pivotal patients, and when you add in the
roll in patients to that, the total is about 210. It will be done at 20 different sites across the
U.S. About a little over half of those sites are actually new customers to us. So it is a pretty
big initiative. Were collaborating with Abbott on that. Were using Abbotts closure devices in
the study. We expect our first patient in that trial to be enrolled at the end of this month or in
March and then take about a year after that to enroll. And the trial has a 30-day follow-up,
because its primarily focused on the closure as opposed to the device which has already been well
studied, which is why we are targeting approval by the end of 2011, first part of 2012.
<Q John Putnam>: Okay. Great. And one final question. Where do you think gross margins go
over the year, John?
<A John McDermott>: We expect them to remain relatively stable in the mid-70% range.
<Q John Putnam>: Great. Thanks a lot.
<A John McDermott>: Youre welcome.
<Q John Putnam>: Thanks, John.
Operator: Thank you. Our next question comes from the line of Shawn Fitz with Stephens, Inc.
Please proceed with your question.
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<Q Shawn Fitz>: Hey, good afternoon. Thanks for taking my questions. John, if we do circle
back around to some of the new products that could kick in for you all this year. Could you maybe
provide a little more detail specifically about what those are in the pipeline? And then maybe just
a little bit more clarity in terms of just book-ins as we think about when those might actually be
in the marketplace or in your sales forces bag.
<A John McDermott>: Yeah. Shawn, I dont want to provide too much detail in terms of the
specific products just for competitive reasons. I dont want our competitors to know exactly what
these products are designed to do. What I can tell you is that it will they will effectively
enable us to treat some anatomies that are more difficult for us to treat today. So if you think
back to the introduction of Powerlink XL that was a segment of the market, where we didnt have a
product. These are similar devices to that only more line extensions, not, the large neck segment
of the market was about 15% of the market. These arent that big of an opportunity. We estimate
theyre more in the five to 10% incremental procedure range for us. But theyre basically products
that will allow us to treat more patients than we can with the current system.
In terms of book-ins for timing, its a little difficult to predict with the FDA. These devices do
not require clinical data, and we have already been in discussions with the FDA. We dont have
approvals for the devices yet, but were I would say that the risk of approval is relatively
low, but the absolute timing is still somewhat uncertain. Its difficult for us to predict. The PMA
supplements typically have 180-day review times, but they can happen as fast as 100 days, or they
can take all the way to 180. So you end up with kind of a two to three-month swing there in terms
of potential timing. So its a little difficult to predict exactly when well get those approvals.
We have target dates, obviously for those submissions, and we know when we think those are going to
go in, but how long is it going to take the agency to complete the review is more difficult for us.
<Q Shawn Fitz>: Okay. So John, if I understood you, these line extensions could open up
five to 10% of the market that you all feel like youre not able to address in a comfortable
fashion? Is that the right way to think about it?
<A John McDermott>: Yes. Thats the right way to think about it. The way to kind of
calibrate that with the current product line is, I think that our device is currently very well
suited to treat about 80% of the current EVAR patients. And with these extensions, its going to
get us closer to 90%. There will still be a few select patients with certain iliac-related
anatomies, where we wont be ideal. Now we have customers that use our device 100% of the time. So
the device can certainly, it can be used, but just if we want to be balanced and talk about what
were optimized for, this just broadens the range to be able to comfortably treat about 90% of the
EVAR market.
<Q Shawn Fitz>: Okay. Okay. Great. And then, John, just as we think about percutaneous
EVAR, I guess our conversations with clinicians indicate that there are some percutaneous EVAR
procedures being performed now. Could you maybe talk about where you think the marketplace is now?
And then maybe as we think about this over the longer term, next three years or so where it could
go in terms of kind of procedural mix?
<A John McDermott>: Yeah. I our estimate, and this is there is no hard data on this,
so this is a bit anecdotal just based on our own interactions with physicians and kind of a more
informal sampling. We think that its about 15, 10 to 15% of the current EVAR procedures are done
percutaneously. Now that is in part limited by the size of the currently available devices. So one
of the current limitations to percutaneous is the profile of the devices. What its really started
to enable this more from our perspective is with IntuiTrak, as you recall the design has an
integrated sheath. So were already nine French percutaneous on one side of our procedure, compared
to all of our competitors who have to do bilateral groin incisions. So were already 50%
percutaneous. So the device is kind of uniquely positioned there.
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There is about 30 peer-reviewed articles that talk about the clinical and patient benefits for
percutaneous, but I think the other and even more significant limitation to the expansion of that
technique in the market is, the fact that because none of the devices are on label, there are no
formal training programs where physicians can go and get trained on the technique. So thats why
weve decided to do this. If we get the percutaneous indication, then well be in a position to
proactively train physicians on the technique. Once that happens, I would expect that 15% of the
market to grow. Over a three to five year period of time, I cant think of a reason why the market
wouldnt evolve to 50% percutaneous.
<Q Shawn Fitz>: So John, those 15% of the procedures being performed percutaneously, do
you think your mix of those procedures is what again?
<A John McDermott>: Well, I think our mix is fairly relative of our market share. I dont
think we technically, a physician can still do a percutaneous procedure with the other devices.
Theyre just more difficult.
<Q Shawn Fitz>: Okay.
<A John McDermott>: So weve got an advantage in that 15% thats done today, but the real
advantage will come when were in a position to proactively train physicians on the technique.
Thats really whats going to drive that transition in the percutaneous market. That together with
the introduction over time of lower profile devices, one of which were excited about our new
program there. We think the combination of a lower profile device plus percutaneous indication
gives us a pretty powerful combination.
<Q Shawn Fitz>: Okay. And then, John, just back to kind of the competitive environment
that you all are participating in. It sounds like since October you guys have picked up some
momentum. And I guess, Im just trying to understand in order to hit your hurdle of growing
domestic sales sequentially in the first quarter, is there anything heroic that has to happen kind
of relative to what youve historically seen in March in order to deliver on that objective?
<A John McDermott>: Nothing that would fall into the heroic category, no. Now its just,
its just blocking and tackling. The way we think about it is, we had a bite of cases taken out of
our base, and were rebuilding that base now and showing good incremental gains. We monitor that
daily and weekly case volumes, and were seeing good progress and getting a lot of good anecdotes
from the field about bringing on new customers. As I mentioned, about half of the PEVAR clinical
study sites are new customers. We havent really even realized any of the value there, because
those most of those sites are still in their IRB and contract process. So there isnt any the
first quarter growth sequentially in the U.S. is not a big stretch.
<Q Shawn Fitz>: Okay. Thanks for your time guys.
<A John McDermott>: Youre welcome.
Operator: Thank you. [Operator Instructions] Our next question comes from the line of Larry
Haimovitch of Haimovitch Medical Technologies. Please proceed with your question.
<Q Larry Haimovitch>: Wow. Thats a mouthful, isnt it?
<A John McDermott>: Hey, Larry.
<Q Larry Haimovitch>: Hey, John, congrats on the great year youve had. A couple of
questions on the percutaneous approach, which Im very intrigued with. Could you clarify what the
French size is, when you talk percutaneous, because different people talk different sizes when they
talk percutaneous. Im curious what youre referring to?
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Endologix, Inc. Company5 |
ELGX Ticker5 |
Q4 2009 Earnings Call Event Type5 |
Feb. 18, 2010 Date5 |
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<A John McDermott>: Right. So our device, the IntuiTrak device fits in a 19 French
introducer. Most of the time when you hear people talk about French size, theyre talking about the
introducer size. So the system is 19 French introducer, or ID, internal diameter, but the outside
diameter of the device, or the OD is really the most important measurement, because thats what the
blood vessel sees. And our system has 21 French OD. On the ipsilateral side or the close side of
the procedure and on the contralateral side, we go through a 9 French introducer.
<Q Larry Haimovitch>: John, isnt that size too large to call it true percutaneous? When
you talk percutaneous, are does that mean that there is no cut down that that is strictly like
an angioplasty procedure or a stenting procedure, where you dont have to do a cut down, youre
just strictly going into the vessel with all the introducers and everything else you do, because
that sounds large to me. Im surprised we can talk percutaneous at that size.
<A John McDermott>: Yeah. And thats where the nuance comes in, because it is different
than what youd see in a cath lab type of perc procedure. It is fully percutaneous through the
skin, but what they do Larry, is they actually have what they call a pre-close technique. So they
use a suture-based closure device, which actually get placed at the beginning of the procedure. So
they can land sutures in the puncture of the vessel. They perform the procedure and then they slide
knots down on those sutures at the end. Its called a pre-close technique and its done typically
with two different devices, the Abbott Prostar XL or some physicians choose to use the Abbotts
they use bilateral ProGlide devices. Both of those devices are actually are going to be used in our
clinical studies. So its not percutaneous in the way that youre historically think about it. Its
percutaneous with the use of a pre-close technique.
<Q Larry Haimovitch>: Okay. And then one other question and Ill jump back into queue,
John. And that would be when you when we think about percutaneous procedures in AAA what Ive
always thought was the real attractive part about it is, is that perhaps at that point you could
draw a cardiologist, interventional cardiologist into the mix and now really broaden your customer
base. A, do you think thats true, John? And b, if thats the case how would you propose to address
the interventional cardiologist when you get a percutaneous label?
<A John McDermott>: Yeah. The first part is, I think that the possibility exists. I think
if you talk to interventional cardiologists this is a more time consuming procedure. So I dont, my
personal belief is, this is not going to attract the interest of the masses of interventional
cardiology. It will certainly attract the attention of some, but I dont see it becoming the next
new thing that interventional cardiologists want to do. Thats my personal bias.
<Q Larry Haimovitch>: Yeah.
<A John McDermott>: So thats how I would, I believe that our focus and the procedures
will over the next several years still be largely driven by vascular surgeons. If you look at the
mix of physicians in our clinical study, about 15% of the physicians in the trial are
interventional cardiologists and the rest are vascular surgeons. And the majority of published
literature thats been done on percutaneous EVAR has actually come from surgeons.
<Q Larry Haimovitch>: Okay. So you bottom line is you dont expect to be addressing
that many interventional cardiologists when you get a broadened label for percutaneous?
<A John McDermott>: Well, I think we will selectively, but I just dont personally expect
there to be a big sea change in terms of a migration in from interventional cardiology. Well have
to see. I might be being a little bit conservative here. We already do procedures with some
interventional cardiologists and there is a few that do them exclusively percutaneous. So thats a
natural for them. But given the nature of the procedure and the time requirements and also the
follow-up requirements in these patients, my personal bias is I just dont think its going be
widely adopted by
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Endologix, Inc. Company5 |
ELGX Ticker5 |
Q4 2009 Earnings Call Event Type5 |
Feb. 18, 2010 Date5 |
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interventional cardiology, but well see once we are in a right now there is no device with a
percutaneous indication. So it goes back to having the indication and being able to proactively
train. Well see what kind of interest we get from that physician set.
<Q Larry Haimovitch>: Okay, John. Thanks very much.
<A John McDermott>: You bet.
Operator: Thank you. Our next question comes from the line of John Putnam with Capstone
Investments. Please proceed with your question.
<Q John Putnam>: Yeah. Thanks very much. In the third quarter, I think of 2009 you had a
big stocking order internationally. Can you give us an idea of what the situation was in the fourth
quarter? I think it was about $500,000 wasnt it in the third quarter?
<A Robert Krist>: John, this is Bob. No. It was not that large. It was the stocking
order to our new distributor in China, and it was in the order of magnitude of 200,000.
<Q John Putnam>: Okay.
<A Robert Krist>: And the number in the fourth quarter was a little bigger than that, but
not dramatically so.
<Q John Putnam>: Okay. And can we, should we expect sequential growth in international on
a quarter-to-quarter basis?
<A John McDermott>: Well, John, the our international sales are historically more
weighted toward the second half.
<Q John Putnam>: Okay.
<A John McDermott>: So sequential, if you go back and look at the historical international
shipments, they tend to be more heavily weighted to the second half.
<A Robert Krist>: Yeah. I think in fact in more recent years more than 30% of
international revenues have been Q4. So its a little bit loaded in that Q4 number.
<Q John Putnam>: Okay. Great. Thanks very much.
<A Robert Krist>: Youre welcome.
Operator: Thank you. [Operator Instructions] It appears there are no further questions at this
time. I would like to turn the floor back to management for any closing comments.
John McDermott, President and Chief Executive Officer
Okay. Thank you, everyone, for joining us on the call today and for your support and interest in
Endologix. We look forward to updating you on our first quarter conference call in April.
Operator: Thank you. Ladies and gentlemen, this concludes todays teleconference. You may
disconnect your lines at this time. Thank you for your participation.
www.CallStreet.com 212-849-4070 Copyright © 2001-2010 CallStreet | 11 |
Endologix, Inc. Company5 |
ELGX Ticker5 |
Q4 2009 Earnings Call Event Type5 |
Feb. 18, 2010 Date5 |
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