美國雅培 (ABT) 2002 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the i-STAT Corporation first quarter 2002 earnings release conference call. At this time all participants have been placed on the listen only mode and the floor will be open for questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Bill Moffitt.

Good morning. Thank you for joining us for i-STAT's first quarter conference call. I hope that everyone has had a chance to review our news release this morning covering our first quarter results. As always after my introductory remarks I'll be happy to answer your questions. Certain statements in this presentation and during the question and answer period to follow may relate to future events and spec stations and as such student forward-looking statement within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company in the future to be materially different from the statements that I may make today. Your special attention is drawn to the section in i-STAT's annual report on Form 10-K for the year ended December 2001 entitled Factors That May Affect Future Results. And to additional factors that may be listed from time to time in the company's filings with the SEC words. This morning I'll discuss first quarter results and spend some time reviewing our plans for new product introductions that we think will significantly expand our market opportunity and provide additional fuel for growth over the next few years. In the first quarter, sales revenue of 14.4 million increased approximately 17 percent over prior year. Primarily on the strength of international cartridge volume and analyze ser volume. As previously announced in early April, we did incur significant charge to cost of goods sold in the quarter of 1.6 million dollars to write off certain cartridges in inventory and customer replacement cartridges that exhibited a higher than normal reject rate. As a result, gross margin for the quarter decreased slightly to 1.7 million as compared to 1.8 million in the first quarter of 2001, resulting in a net loss essentially flat the prior year. Now let me spend a couple of minutes on cartridge volume and provide you a clear picture of the growth that we are experiencing. First, as anticipated and discussed in the review of fourth quarter 2001 results, domestic cartridge volume was down sequentially from the fourth quarter and down in comparison to prior year as a result of the aggressive sales promotions that Abbott ran in 2001. One in the second quarter and another in the fourth quarter. These programs resulted in a pattern of quarterly domestic cartridge volume that is very skewed from historic trends and makes for difficult comparisons when attempting to analyze cartridge growth. However, even taking these sales promotions into account, domestic cartridge volume is growing at approximately 20 percent per year. Although this varies on a quarterly basis anywhere from up 33 percent to do you think 14 percent. As you know, high volume account closes are a key indicator for growth in the domestic market segment. Our team of sales consultants working with the Abbott organization is a key resource in the effort to convert hospitals from traditional approaches to blood analysis to our point of care model. In years past, with a team of six to seven sales consultants we were successful in closing anywhere from 10 to 15 or more high volume accounts per quarter. You will recall that about a year and a half ago we lost some of that team and have operated with three to four consultants for nearly a year now. As a result, high volume account closes have declined in recent quarters to an average of about seven per quarter. Indeed, during the first quarter we closed exactly an additional seven high volume customers. Perhaps more important, given the track record of success we have had with this team of consultants, since January we have hired six more consultants, with two more coming on board before the end of the second quarter, bringing our total number to 12. This will be the largest team we have ever had directed to this high volume account strategy. We also have a very strong sales following of accounts and believe as they come up the learning curve the number of high volume account closes will return to, if not exceed, historic levels. Thereby, driving increased growth in the domestic market. In the international market, we continue to experience solid growth. Cartridge volume as measured by shipments to Abbott's international distribution centers increased by approximately 22 percent compared to the same quarter a year ago. More important, cartridge volumes shipped to customers from those distribution centers increased by 33 percent. The fastest growing segments of the international market with significant volume are Asia, excluding Japan, where cartridge volumes shipped to customers grew by 50 percent in the first quarter. And Europe, which grew by 32 percent. Of particular note is the market in China, where our distributor, [Heal Force], now functioning as a sub distributor for Abbott continues to drive adoption in this emerging market. Cartridge volumes shipped to customers in China grew by 78 percent in the first quarter, compared to the same quarter last year, reaching an annualized rate of approximately 600,000 cartridges. As a result of this strong performance, Asia continues to be our fastest growing market segment and will likely surpass Europe as the second largest market in the world behind the U.S. by the end of this year. In Japan, where the vast majority of i-STAT volume flows through our long standing partner, [Fuso] Pharmaceuticals, cartridge volumes grew 30 percent and has now reached the rate of approximately one million cartridges per year. Moreover, the cartridge mix has shifted to approximately 70 percent blood gas or blood gas electrolyte combinations indicative of a shift in their efforts to gain broader adoption throughout all critical care areas, not just [Fuso]'s original target customers the dialysis units and emergency departments. This continued strong growth in the international market demonstrates the global applicability of our products. Moreover, we are only scratching the surface of the global market opportunity for our products. Cartridge volume in the veterinary business also continues to grow to significant pace. This market now accounts for about six percent of our volume and grew 33 percent during the first quarter. Importantly, pricing in this market is very attractive. Analyzer volume in the quarter was strong with unit volume exceeding 1, 200 units. The i-STAT 1 our newest analyzer that runs both i-STAT cartridges and glucose strips indicated strong growth and represented approximately 50 percent of total analyzer volume. We're little seeing a number of customers upgrading from the older version of the i-STAT analyzer to this newest model, indicating not only their commitment to the i-STAT system but also their overall commitment to pursue improved functionality and standardization in their point of care testing platforms. This is key, because it demonstrates their desire to have a single platform for all point of care testing. This makes our install base of nearly 27,000 analyzers a tremendous asset. And one we will exploit through new product development. I'll come back to that in a few minutes. There's no question that Abbott sales promotions in 2001 affected prior period comparisons in the domestic market. But overall we continue to grow consistent with historic trends and the increase in growth we're seeing in international markets supports the view that point of care testing will be broadly adopted as a standard of care in critical care medicine the world over. Moreover, with our new product pipeline, combined with a doubling of our domestic consultant team, we fully believe we will accelerate growth. As I mentioned earlier, and as I noted in an earlier press release in April, we took a charge in the first quarter of 1.6 million dollars to write off some inventory and customer replacement cartridges that were exhibiting greater than normal rates of rejection or starrouts as they're called in the market. When the i-STAT analyzers quality system detects any abhorrent behavior in a given censor or cartridge no patient result is reported, rather asterisks or stars, if you will, appear on the analyzer screen rather than a result. Hence the term starrout. This is one of the key strengths of the quality assurance system designed into the i-STAT system. And helps ensure that only reliable patient results are reported. There's always a normal background run rate of such starrouts as the conservative nature of limits built into the quality system will reject otherwise good censors in the normal course of screening abhorrent censors. However, we have begun to notice a higher than normal rate of such starrouts. The source of the problem was identified and corrected and material being shipped today does not have this problem. But we still had inventory of product that could have exhibited the problem. Therefore, consistent with the high quality and low error rate we have brought to blood analysis, we elected to write-off that inventory. While this write off affected our gross margin and operating loss for the quarter, our first commitment is to the highest possible quality product for our customers and the patients they treat. During the first quarter we produced 3.2 million cartridges at a production cost per cartridge of $2.50. This represents a improvement in production cost even on a constant volume basis. Both the material and labor components of cost were lower than historic levels. While a number of factors contribute to this, the primary reasons are higher cavity count plastic molds which result in lower cartridge component costs and faster through put on our cartridge assembly lines. As our business continues to grow and cartridge volume increases we anticipate production cost per cartridge to continue to decline and our profitability to improve. Our worldwide average selling price in the quarter was $3.47. As you know, this is a function of our relationship with Abbott. End user average selling price, the price we would generate without the Abbott alliance, remains fairly flat in the U.S. at $4.46 per cartridge. So you can see on a business franchise basis our gross margin on cartridges sold in the U.S. is already about 45 to 50 percent and increasing as volume grows and we improve productivity and material costs. We expect this end user ASP to remain fairly constant over the coming quarters until the introduction of new products that we believe will sell at a premium in the market. Our manufacturing engineering and technology development staffs have been working together on a number of projects that we believe will result in greater productivity, improved product performance and higher quality for our customers. We have improved the quality of component materials, made significant design improvements in a number of the censors and are working on a number of other projects that will improve the overall quality of our products and operations. As in most manufacturing operations, much of this happens, quote, behind the scenes. But it is extremely important work that will continue to assure that we provide our customers with the highest possible quality and that the i-STAT system remains the platform of choice in the market. Now let me spend a few minutes reviewing our new product development programs. Obviously we own a significant asset in the form of the install base of approximately 27,000 analyzers, with customers demanding a single platform for all of their point of care testing needs, we believe that we are uniquely positioned to generate significant returns from investments in new products. Our customers are continually asking us to add new tests so they can consolidate more and more of their test volume onto the i-STAT system. Today, we are the clear leader in this rapidly growing segment of the IVD market and our proprietary market fabricated biocensor technology and continued investment in R&D have established a sustainable competitive advantage. Our business plan has been to target the critical care markets where the value of immediate blood analysis is the greatest our test mean new development has echoed that direction. But there are also opportunities for point of care testing outside the immediate confines of the critical care market. The prothrombin time test used to monitor patients on Coumadin therapy is one example. On the conference call last quarter I reviewed the market potential for this test. Today I want to give you some further insight into our market launch plans. As you know, we have submitted a Five 10-K application to the FDA for authorization to market our prothrombin time test. Recently we were asked for some further information and points of clarification and have submitted that data. While there can be no assurance, we are operating under the assumption we will get clearance to market some time during the early summer. We are prepared to commence initial market launch beginning in the July/August time frame. At the same time, we're also working on a different cartridge format for this prothrombin time test that will more easily facilitate use in the outpatient setting. We are developing a cartridge that will require only 25 micro liters of blood or about one half a drop as compared to the standardized stat cartridge used today that requires about two drops of blood. This makes finger stick acquisition of the sample much easier and the new design is so blood can be applied directly from the finger into the cartridge without the use of an intermediary device such as a capillary tube or syringe. We anticipate availability of that cartridge format around the end of the year. Therefore, pending approval, we will launch the prothrombin time test into hospital-based clinics providing Coumadin monitoring services to patients this summer and more broadly to the outpatient clinics around the end of the year with the availability of the smaller sample volume cartridge. The market for the prothrombin time test is approximately 75 million tests and we anticipate pricing the product around five to six dollars per test. That could translate into a 350 to 400 million dollar market opportunity. Another coagulation test is in development. It's the Kaolin ACT. You're aware we launched a Celite ACT test a little over a year ago. They're used to monitor patients on Heparin therapy in cardiovascular surgery unit and cath lab. While the market's response to ACT test has been very positive and customers are anxious to evaluate this test, further consolidating testing to a single platform, a number of our customers have indicated they cannot use the i-STAT ACT until both versions are available. We are in final clinical trials for the Five 10-K submission of the Kaolin ACT and expect to submit the application around mid summer. We will be ready for market launch as soon as approval is received. On the conference call last quarter I reported that we had commenced our first external alpha site clinical evaluation for our first cardiac marker test, the Troponin I. I indicated that initial data from the study confirmed that the i-STAT Troponin I test had sensitivity equivalent to main frame laboratory instruments on the market today. I am pleased to report that first clinical study has now concluded and reaffirmed that initial data. The i-STAT Troponin I is equivalent in sensitivity to traditional laboratory systems. But will offer the customer the immediacy of results of the i-STAT point of care platform. Currently no other point of care system for cardiac markers has this requisite laboratory grade level of sensitivity. We believe that we will initiate Five 10-K clinical trials later this year and are on track to submit this test to the FDA early next year. Assuming we stay on that schedule, we will be prepared for market launch in the first half of 2003. Our market research confirms significant customer demand for a laboratory quality point of care test for Troponin I. This is the key test in diagnosing myocardial infarction in the emergency department. And today there are approximately 30 million Troponin I tests performed in the market but the number is increasing rapidly. Although we have not made a final determination on price, our initial market research supports a premium price compared to other i-STAT cartridges. One that we expect will generate significantly higher profit margins. We expect this to be another 300 to 400 million dollar market opportunity. We are also in the process of organizing the project and initiating work on our second cardiac marker, the CKMB test as it's called. While it's a bit early to predict when we might have this test available, we generally believe that we should be able to complete the project within a year or so from its initiation. As we get further into the development cycle, I will update you and discuss the market opportunity in more detail. So let me quickly recap the new product pipeline for you. Number one, the prothrombin time test currently in the FDA awaiting clearance with a third quarter launch anticipated. Two the Kaolin ACT now in clinical trials with Five 10-K submission anticipated this summer. And three, our first cardiac marker Troponin I, the first clinical study confirming laboratory quality with Five 10-K clinicals later this year and launch anticipated in the first half of 2003. In summer, our growth continues at historic rates and we're taking steps to accelerate market penetration, both through traditional resources to promote high volume adoption of i-STAT's point of care testing platform and through the expansion of our test menu. Our leadership position is clear and the customer's preference for our single point of care testing platform is evidenced by the success of the new i-STAT 1 analyzer. Our install base of 27,000 analyzers and the global acceptability of the product underscores the value of our technology and product platform. Somewhere around the world an i-STAT cartridge is used every two and a half seconds. We have started an irrevocable shift in the market and one that will drive improvements in patient care and shareholder value. Moreover, on a consolidated basis our business franchise is profitable. And as volume grows, we believe we will generate even greater profitability and increased shareholder value. Now, I'd be happy to answer any questions you may have. And Holly I'll turn it back over to you.

Thank you, the floor is now open for questions. If you do have a question or a comment, please press the numbers 1 followed by 4 on your touch tone phone. If at any point your question has been answered remove yourself from queue by pressing the pound key. We do ask when you pose the question pick up the hand set to provide optimum sound quality. Please hold while we poll for questions. Our first question is coming from Fred Tony of [Med Cap Partners].

Good morning, Bill. If we looked at the numbers relative to -- if we looked at our pro forma basis taking out Abbott or the payments have you to make to Abbott what would your gross revenues have been for the quarter and can you translate that into a bottom line number for us?

Let me try to give you some visibility to that. Obviously without knowing exactly what Abbott's end user prices are on instruments and connectivity systems, it's difficult for me to tell you exactly what the business would have been. When we do our quarter ending reconciliation with Abbott, we certainly know what the cartridge end user sale prices are because it's part of the formula for the profit, revenue share a year. However on the analyzer side and connectivity side, data management systems, we don't necessarily have that data available. So let me start by saying, one way to look at it is to look at what the ASP is on the cartridge in the U.S.. $4.50. The end user. We know the end user ASP around the world is reasonably similar to that. Let's assume for rounding off purposes that it's $4.40 and we know in the quarter we sold 2.7 million cartridges, if you just do the math on that, that will give you what total cartridge volume would have been. We sold a -- cartridge revenue, I'm sorry. We sold 1200 analyzers and analyzers roughly in the market are -- you think of them as around 3800 to 4200 dollars apiece. And data management systems and so forth generally speaking, Fred, that's another million and a half, two million per quarter. And that also includes some of the other support materials like control solutions and that sort of thing. I did not in real time keep the addition there. But that will give you some visibility to what it looks like. .

So on a gross basis --

But bottom line, the only additional expense you have to add in to our current P&L expense would be obviously some sales and marketing expense. And I would say that what we spent in this quarter on sales and marketing -- let's see, what was it? -- about 2.3 million and I would tell you you would probably add another, probably add another two million on top of that.

If you weren't selling through Abbott?

Correct.

So if I do the math right, it looks like 11.9 plus 4.8, plus a couple million for data management. 18 and a half to 19 million, is that in the ballpark for gross revenue, if I just add up the numbers we talked about?

That's probably in the ballpark, yes.

That's simple. Thank you.

Thank you. Our next question is coming from [Sunjay Jane] Of Donald Company.

[SUNJAY JANE]: Question about the sales and marketing that you just mentioned, you acknowledged in the past that you would be building it up for whatever reason. I see it's dropped down from the first quarter of last year to this year, why do you think that's happened? Why have you been building up your sales and sales team. Is it just an anomaly in this quarter?

It's not actually an anomaly. At the end of every year or let me say it differently. Our consultants that assist Abbott in the promotion of point of care are compensated in part on a variable basis, a results basis, if you will, commissions. If you want to think of it that way. And we make an accrual for that throughout the year we pay it out on a quarter basis, run an accrual pool if you will. The pool got a little heavy we reversed out some of the accrual as a normal accounting process. That's all that's happened in Q-1. So the actual expenditure in Q-1, without the reversal of part of that accrual is right at the level of last year. Now, having said that, we have added, as I said, six of these sales consultants in the last few weeks, months, and you will, next quarter, beginning the second quarter begin to see that expense show up for sure. And we also are recruiting for a couple of other key positions in the medical affairs area and in the marketing area. So you will begin to see this sales and marketing line grow throughout the rest of the year.

[SUNJAY JANE]: The other question was related to accounting. A lot of the manufacturing costs are denominated in Canadian dollars and most of your revenues come in terms of U.S. dollars, I believe, worldwide. How do you -- do you take any action to hedge against the currency things?

No, we don't. Frankly, we haven't seen the need to. The Canadian dollar has actually gone in our favor, if you will, over the years.

[SUNJAY JANE]: Thank you?

Once again, if you have a question or comment press the numbers 1 followed by 4 on your touch tone phone at this time. Our next question is coming from [Benner ulrich] From U.S. Warburg.

It's actually Jeff Beachham from [UBS]. What were the drivers behind your strong international cartridge sales? Can you give us any color on that?

I think it varies a bit from market to market. In Europe Abbott has a direct and sales marketing organization. And in the last several months they have been reorganizing that group a bit, providing some additional training and providing some additional focus, if you will. And I think that has helped rekindle the sales effort in the European market. And sales, as you see, are up very nicely there. If I turn now to Japan, the vast, vast majority of all sales transactions in Japan still go through [Fuso] Pharmaceutical, our old partner of record. You have heard me say or certainly others in the call have heard me say over the years that we have been disappointed how [Fuso] had positioned the product initially. Originally their primary market was the dialysis clinics in hospitals free-standing and they positioned the product as a electrolyte analyzer, if you will, for those units. We have been working with [Fuso] Over the years to get them to sell the product more broadly, to train their salespeople on how to approach critical care markets outside of those. And we're getting some traction there. If you were to look at a graph of [Fuso]'s cartridge volume over let's call it the last three years, you would see a definite inflection point that started about three-quarters ago. So we are starting to see some good growth in the market in Japan now. We're obviously pretty excited about that. The market in China, very different. In China, this product is providing some testing capability where none existed before. It is also being sold into larger urban hospitals in China, just as we would here in the U.S., for a point of care application, immediate results. It's got tremendous traction. The sub distributor of Abbott there is a company [Heal Force] That was our original distributor before the Abbott alliance and they have continued to do a tremendous job there. That's really -- the markets in Latin America are essentially not growing, not growing that fast. And that usually has more to do with currencies and the economies and so forth than anything else.

Any guidance for international sales going forward?

I look forward it to it continuing at this strong rate.

Following the rate down, can you provide any guidance for the build back-up?

The buildup will occur as it has started already obviously through Q1 and Q-2. It's not that huge a buildup. And it's certainly within the normal capacity of our plan to add that incremental volume. So we're fine today with inventory.

Thank you.

Thank you. Our next question is coming from Al [Kildonny] Of Pacific Grove.

Good morning. I was hoping you could help me reconcile some of the numbers we've talked about this morning. You mentioned that sort of your yearly growth rate is about 20, that we can expect about 20 percent a year, at least I think in terms of cartridge volume. Then in 2001, I think we talked about or you've talked about on the call on a pro forma basis, sort of revenues in the 80 million dollar range. And now in Q1 it looks like it's 18 and a half to 19 million. I'm just trying to -- I'm wondering if 20 percent, if the 20 percent number is achievable this year, given the situation with Abbott and does that in itself apply a significant step up from the 80 million pro forma that you talked about last year?

First of all, the 20 percent number I was talking about was cartridge volume, right? So I don't want to mix the numbers up too much. The 20 percent growth rate we're seeing right now in the U.S. is cartridge volume. In the pro forma basis on the P&L, of course as Fred Tony asked you have to work back through that. The only thing I would tell you about Q1. Is that Q1 is typically, in terms of the quarters through the year, Q1 is typically not that big a quarter. And it usually is because it comes on the heels of a reasonably strong fourth quarter. In this case, the fourth quarter was especially strong, because of the aggressive sales programs that Abbott ran. So I would tell you that Q-1 is normally not that big a percentage of the year anyway.

Okay. And then secondly, related to gross margin, obviously there was the hit that you indicated before in the quarter. Even without that it looks like gross margins are still in the low 20 percent range. Are we in a place where we can sort of think about a normalized gross margin or what it should or could look like, say, for the year?

It's still going to fluctuate a bit. The guidance I would give you there, Al, is that in the first quarter cartridge volume, as I noted, was down from prior year. And cartridge volume carries today about a 25, 28 percent margin or so. Let me get an exact calculation here for you. And analyzer volume, which was particularly strong, is on a cost plus 50 basis, as you know. So that carries a 33 percent margin. If you look at our ASP on cartridges, overall worldwide that which we do with Abbott, let me do a little bit of quick math. Yeah, cartridge margin was 27 and a half percent. So about 25, 28, that's where it sits. So the analyzer number is pretty fixed. It's at a slightly higher rate so as cartridges and analyzer volumes shift around quarter to quarter you'll see some fluctuations, but I think you'll pretty much this kind of margin rate for the next couple three-quarters, until new products.

Okay. And then finally I don't know if you provided this breakout earlier, but what was the cartridge breakout between international and U.S.?

The U.S. cartridge volume was a million 780,000. That includes 162,000 to the veterinary distributor, because that's all in the U.S.. and international cartridge volume was 910,000.

Thank you.

Thank you, our next question is coming from Clark Lehman of Logos Partners.

I'm still -- you guys are talking about growth. Looks like the cartridge volumes were down year over year?

Yes, that's what I said. The cartridge volume this quarter.

But this quarter gets to the next question gets to the next quarter. The company's volume is not up 20 percent.

No, what I was trying to do, if you graph this out, what I was trying to do was provide some guidance on what the underlying true run rate or growth rate of cartridge volume is given the fact that the way these sales promotions have shifted around customer ordering patterns it is somewhat difficult to see. For example, in the fourth quarter of last year, cartridge volume was up 33 percent.

So they're still up in the first quarter. I can see that.

So if you normalize that back out, it's at about a 20 percent run rate. That was the guidance I was trying to provide.

So you would expect to see that number in the June quarter?

I would expect to see an increase. However, if you go back to the June quarter of last year, it also had one of those aggressive sales programs in it. So I think the quarter that's going to stand out for you is actually going to be the third quarter, because the third quarter last year was down significantly. So I think you're going -- that's the reason I tried to provide that guidance. I think you're going to see the cartridge volume in Q-2 is going to be up and you're going to see it even on a percentage basis over prior year, but last year's second quarter was a strong second quarter. I think you're going to see the cartridge volume, if it holds its traditional norm in the third quarter, will be up significantly over prior year. Simply because last year's third quarter was very weak in comparison.

What kind of discussions are we having now with Abbott regarding your long-term relationship?

Obviously it would be premature for me to comment on anything there. When we have something to say or disclose we will.

Are you having discussions now or not?

I think it's important to understand the two companies are constantly talking about operating matters, as well as strategic matters.

Thank you.

Thank you. Our next question is coming from Gary Markoff of Sullivan Smith Barney.

What are you essentially acknowledging by increasing your sales force here?

I think, Gary, the key acknowledgment here is if you look back through the years '98, '99, 2000, you will see that this consulting team really promoting point of care at high volume accounts had stepped up from closing anywhere from six or seven to eight accounts per quarter in the '97 time frame, '98 time frame, to by '99, 2000, we were running in the 14, 15, 18, 19 per quarter. And we had six or seven of these folks and they were well trained, well experienced. As you know about a year and a half ago we lost about half of them. And we operated through most of last year with three or toward the end of the year four of these sales folks, consulting folks, and as a result the number of high volume closes fell. And it fell down to about seven per quarter on average, just like it was in the first quarter. So I mean it's an absolute one-to-one correlation, with a number of these people we have on board and the number of high volume closes. So it makes nothing but sense for us to add additional resource in this area to support Abbott in the sales and closure of high volume accounts because high volume accounts drives this business. And so the real underlying premise here is that there's a direct correlation between the number and quality of these people we have, the number of high volume accounts.

You're bringing them on pretty fast right now. So can you define what a high volume close equals right now?

We think of a high volume close as any customer that out of the blocks commits to use at least 15 to 18,000 cartridges per year. And we've got a funnel of some 40 or 50 such accounts that are in the mill. And we believe that obviously by adding back this resource we are going to be able to capitalize on that significantly so.

Okay on top of that we start in the summertime adding cartridges just from the prothrombin time?

Yes in the summertime we'll add the prothrombin time. The ACT, Kaolin version, which will also help the sales of the Celite version, should be third, fourth quarter. And obviously we're very excited about Troponin I which is coming along just incredibly well. As a result we believe that product is going to be on the market the first half of next year. That will be definite premium price to what you see today on an i-STAT cartridge. And I think the most exciting part as I said in my remarks, this is absolute laboratory grade sensitivity. Exactly what the emergency department needs when it's on the i-STAT hand-held.

You also said on the prothrombin time you said it was the Coumadin test?

That's the prothrombin time.

These are going to come out at $5 to $6 a test?

That's what we believe the price should will come to the market at.

Should raise the ASP?

Should come up a little as the product gets to the market.

Do you have any pricing power with the cartridges right now?

Abbott has the pricing authority on the cartridges it's in both our interests that we optimize the price in the market because it's a split revenue formula.

If you were to have the entire company back in your hands, would you imagine that a price hike would be available to you?

Yes.

Want to give us a sense about what that could be?

I can't tell you if there were a particular percentage that we believe right now. But what we do know, I think, is that we are -- we have such a good solid position in the market, you know this product has been on the market coming up this October ten years, and the prices have never been raised. I can't think of another product in the medical community that's had no price increase in a decade.

Sounds like it's time for one?

I couldn't agree more.

Thanks, Bill.

Our next question is from Phillip [Swaggonheim] Of Broadband Capital?

I have just a couple of questions. First thing, prothrombin time ACT/Troponin I, who owns the IT on all of these?

I-STAT.

Abbott labs has no rights to any of the IP?

They don't own the intellectual rights; we do.

Are you impressed it's an obvious question but I'm trying to get a feeling, Abbott labs has basically met their minimum requirements every time and only met their minimums, correct?

They did meet the three year milestone, yes.

But they haven't exceeded them dramatically?

No, that's fair.

And it seems that you're -- I'm just trying to put two and two together, it seems that you're also compiling your own sales force that could eventually do that job.

There's no question that the sales, the consultants that we have to generally promote point of care and help Abbott in this endeavor should be able to accelerate the high number of closes but that's of course the structure we had as an independent operating company before the Abbott alliance. So yes, absolutely F the company were to return to independent operations, they would form the basis of our new sales organization.

Okay. So just so I can get an understanding because we've alluded to this on the last call and now this one, we have I guess until the end of the year to give them notification of termination of the five-year agreement?

The contract requires us to give them at least a one-year notice. And the contract expires on December the 31st, 2003. So if we wanted to terminate the contract at the end of that date, we would obviously have to give them notice by the December 31, 2002.

But you can do it prior to?

Yes, we're required to give them at least that notice.

Now, I remember back when you originally entered into this conversation with Abbott labs, that there were other suitors that were looking at i-STAT at that time. Have you been able to or have you been contacted by any of those people now that it's sort of out in the open that there's the potential of the termination?

I think it would be inappropriate for me to comment on anything specifically there. I think what I can tell you, though, is that this is one of the fastest growing segments in the in vitro diagnostics industry. As such, obviously there's a lot of interest in a platform like i-STAT that has an install base of 27,000 analyzers, has an eight to one market share lead over anyone else in the market.

Thank you.

Mr. Moffitt, I'll turn the floor back over to you.

Okay. Great. Thank you Holly and thank you everyone for joining us today. We appreciate obviously your continued interest in the company and before we end the call let me just reiterate a couple of key points. There's no question that Abbott sales promotions in 2001 affected prior period comparisons in the domestic market. But overall we are continuing to grow consistent with historic trends and the increase in growth we're seeing in the international market supports the view that the point of care testing platform that i-STAT offers will be broadly adopted as a standard in critical care medicine. Our strong analyzer sales in Q-1, the number of customers that are upgrading to that for a single platform obviously give us strong encouragement for future opportunities. I-STAT is well positioned to take advantage of opportunities existing in the point of care market and we will continue to leverage our leadership position. Thank you for joining us this morning. Have a great day?

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Have a lovely day.