Artivion Inc (AORT) 2009 Q4 法說會逐字稿

Greetings and welcome to the CryoLife fourth quarter and year end 2009 financial 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, Steve Anderson, President and CEO for CryoLife. Thank you. Mr. Anderson, you may begin.

Good morning, everyone. This is Steve Anderson, the CEO of CryoLife, and I would like to welcome you all to our earnings conference call for the fourth quarter and fiscal year of 2009. With me today is Ashley Lee, the Company's Executive Vice President, CFO and COO.

This morning we announced our results for fiscal year 2009. We were very pleased to announce record revenues of $111.7 million and record operating income of $14.5 million. The fourth quarter represented the 12th consecutive quarter of profitability for the Company and the third consecutive year of profitability. Considering the economic environment that we have been operating in for the past two years, I'm pleased with this performance.

The agenda for today's call is as follows. Ashley will discuss the fourth quarter and the yearly operating results in detail. He will bring you up to to date on our progress on the potential acquisition of Medafor. I will discuss the CE Mark approval for BioFoam in Europe as well as milestones reached in the perspective European study and the market launch of BioFoam in Europe in January. I will also discuss the timing of the IDE PMA for BioFoam in the US. After my comments have concluded, Ashley will return to give you some financial guidance for the rest of the year. When Ashley has completed his guidance comments, I will return to make some comments directly to the Medafor shareholders who are listening to this call. If there is time left after my concluding comments, we will open up the call for questions. At this time, Ashley will discuss this morning's press release.

Thanks, Steve. To comply with the Safe Harbor requirements of the Private Securities Litigation Reform Act of 1995, I would like to make the following statement. Comments made in this call which look forward in time involve risk and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements made as to the Company's or Management's intentions, hopes, beliefs, expectations or predictions of the future. Additional information concerning risk and uncertainties that may impact these forward-looking statements is contained from time-to-time in the Company's SEC filings, including the risk factor section of our Form 10-K for the year ended December 31, 2009, which we expect to file by end of this week, and in the press release that went out this morning, a copy of which is contained on the investor relations portion of our website.

This morning we reported our results for the fourth quarter and full year of 2009. We set an all time quarterly revenue record of $28.6 million in the fourth quarter of 2009 and an all time four year revenue record of $111.7 million. These amounts were 12% and 6% higher than the corresponding periods in 2008. Our cash and marketable securities balances increased to $35.1 million at December 31, 2009, an increase of $12.4 million compared to December 31 of 2008. Currently our cash and marketable securities balances stand the at over $35 million. We also purchased $4.8 million of Medafor common stock during the fourth quarter of 2009 in early 2010, and this amount is not included in our cash and investment balances.

Net income for the fourth quarter of 2009 was $2.4 million or $0.08 per basic and fully diluted common share. Excluding a pretax charge of $377,000 related to a reduction in workforce in the fourth quarter, net income and fully diluted EPS would have been $2.6 million and $0.09 per share. This compares to $21.7 million or $0.78 per basic and $0.76 for fully diluted common share for the fourth quarter of 2008. If we had recorded 2008 income taxes at our comparable 36% effective tax rate, net income in the fourth quarter of 2008 would have been $1.7 million and fully diluted EPS would have been $0.06.

Net income for the full year of 2009 was $8.7 million or $0.31 per basic and fully diluted common share. Excluding the pretax charge of $377,000 related to a reduction in workforce in the fourth quarter, net income and fully diluted EPS would have been $8.9 million and $0.32. This compares to $32 million or $1.15 per basic and $1.13 for fully diluted common share for the full year of 2008. If we had recorded 2008 income taxes at a comparable 40% effective tax rate, net income in the full year 2008 would have been $8.1 million and fully diluted EPS what have been $0.29. See our press release issued this morning, a copy of which is contained on the investor relations portion of our website for a reconciliation of these nonGAAP net income and diluted EPS numbers to the corresponding GAAP numbers.

We saw a significant improvement in our cardiac business in the fourth quarter of 2009 compared to 2008. Cardiac revenues for the fourth quarter of 2009 increased 14% compared to the corresponding period in 2008. The increase in fourth quarter compared to the prior year was primarily due to a 10% increase in unit shipments. We believe factors contributing to the cardiac improvement include our customers return to more normal purchasing patterns, our efforts in physician training, including the Ross Summit and monthly Aortic Allograft workshops, the efforts of our new cardiac specialists technical representatives and increased shipments into international markets.

The vascular business continues to do well. Vascular revenues for the fourth quarter and full year of 2009 increased 11% and 10% respectively compared to the corresponding periods in 2008. These increases resulted from a 9% and 10% respective increase in unit shipments for the fourth quarter and full year 2009 compared to the comparable periods in 2008. Surgeons continue to see the benefits of using our preserved vascular tissues, especially for the prevention of amputations of lower limbs and in actively infected surgical sites. We believe that this will continue to be a very attractive market for us and we believe that we have significant room for growth in this particular business.

Product revenues, which consist primarily of BioGlue and HemoStase, increased 12% in the fourth quarter of 2009 compared to the fourth quarter of 2008, and increased 7% in the full year of 2009 compared to the full year of 2008. The increased year-over-year primarily reflects the growing usage of HemoStase in cardiac and vascular surgical indications in the US and cardiac vascular and general surgery indications in many markets outside of the US.

HemoStase revenues for the fourth quarter and full year of 2009 were $1.9 million and $6 million.

Total preservation services and products gross margins were 61% and 62% for the fourth quarter and full year 2009 respectively. Margins in the fourth quarter of 2009 increased sequentially from 60% in the third quarter of 2009 due to BioGlue being a larger part of the revenue mix in the fourth quarter. This compares to 64% for both the fourth quarter and full year 2008. For the full year, we expected to see a decrease in gross margins due to higher per unit tissue processing costs and increasing HemoStase cells which carry a lower gross margin than our recent aggregate gross margins.

Preservation service gross margins for the fourth quarter and full year 2009 were 39% and 42% compared to 45% and 46% in the corresponding periods in 2008. Product gross margins for the fourth quarter and full year 2009 were 82% and 83% compared to 82% and 84% in the corresponding periods in 2008.

General, administrative and marketing expenses for the fourth quarter of 2009 were $12.6 million compared to $12.3 million for the fourth quarter of 2008, and were $50 million compared to $48.8 million for the full year of 2009 and 2008. The quarterly and full year 2000 amounts include the $377,000 charge for the previously mentioned reduction in force. G&A and marketing expenses for the full year 2009 increased primarily due to marketing expenses, including personnel costs, advertising, physician education and training, and promotional materials to support current revenue growth in our efforts to increase our preservation service and product offerings.

R&D expenses were $1.4 million for each of the fourth quarters of 2009 and 2008. R&D expenses for the full year of 2009 were $5.2 million compared to $5.3 million for the full year of 2008. R&D expending in 2009 primarily focused on BioFoam and SynerGraft tissues and products. Refer to our SEC filings for detailed discussions of factors affecting our results of operations including our Form 10-K that we plan to file by the end of this week. And now I'll turn it back over to Steve.

During December, we completed the initial phase of our prospective European study for BioFoam when used to seal parenchymal tissues, which is liver and spleen. Clinical results were analyzed for the first 31 patients enrolled showing an average mean time to hemostasis of less than two minutes and an adverse event rate within reported percentages per liver surgery. To date, BioFoam has been used in more than 50 patients at three clinics in France, Germany and the UK. We anticipate adding a fourth center in Germany in February and should reach our target enrollment of the 70 patients for this study in May of 2010. BioFoam has proven itself to be a highly effective hemostatic agent.

BioFoam was commercially launched in the European community in January at the Company's yearly sales kickoff meeting of our direct sales forces as well as distributors that was held this year in Rome. The launch will focus initially on our direct sales forces that are in the UK and in Germany in an effort to leverage the clinical experience gained in the prospective study sites. We anticipate that we will realize the first sales of BioFoam, other than for use in the clinical study, some time this month.

During feasibility animal testing of BioFoam, it was found that it was effective in controlling bleeding at systemic cardiovascular blood pressures. Following additional preclinical testing, we expect to submit a CE Mark application for this expanded clinical use of BioFoam in cardiovascular surgery to our European notified body in the fourth quarter of 2010. Management believes that the market for BioFoam addresses-- for cardiovascular surgical use in international markets is about $100 million.

Using BioFoam for cardiovascular indications has various advantages for the patient and the doctor. First of all, BioFoam is more viscous as compared to other products and tends to stay where it is placed on the tissue. Second you can see where it is in the wound. Third, and most importantly, it is biodegradable in about six months whereas some other products may take up to two years to biodegrade.

We continue to move forward on our IDE for BioFoam use in liver resection surgery in the United States. We expect to start patient enrollment of our approved IDE study in the second quarter of 2010. The Department of Defense has funded this project for about $5.4 million over the past three years of development and we anticipate applying for additional funding for the 2010 appropriation of $800,000. We expect that funding from DOD grants will be sufficient to support about 90% of the IDE approval process. Management believes that the potential US market for a liver resection sealing indication is about $80 million.

BioGlue, HemoStase and BioFoam will form the basis of a technology platform for hemostatic agents that will provide the Company with potential markets that approach $900 million. This hemostatic product portfolio will provide a significant growth engine going forward. That concludes my comments, and now I'll turn the call back over to Ashley for his financial guidance for the rest of the year.

Thanks, Steve. We expect another record year of revenues and operating profit for 2010. We expect total revenues for the full year of 2010 to be between $118 million and 123 million, which includes between $1.5 million and $2.5 million related to funding received from the Department of Defense in connection with the development of BioFoam. We expect tissue processing revenues and BioGlue revenues to each increase between mid-single and low double-digits on a percentage basis in 2010 compared to 2009, with HemoStase revenues increasing significantly more than that on a percentage basis.

Although during 2010 we expect to pay cash for income taxes at a rate somewhat closer to our effective income tax rate of 41%, we believe that we will continue to generate significant operating cash flow during 2010. We expect earnings per share of between $0.36 and $0.40 for 2010. Our earnings guidance contains general expenses associated with business development opportunities, but does not include significant expenses associated with specific targets such as Medafor or potential changes in the value of the Medafor derivative. Depending upon our course of action and the ultimate result of those actions, such as a proxy contest or the completion of an acquisition, we could incur expenses or changes in the value of the derivative that could materially affect our guidance.

There also are a few items that I would like to comment on that I believe could be positive developments for the Company in the future. As Steve mentioned earlier, we expect to begin enrolling patients in our BioFoam IDE a little later this year under an FDA approved clinical trial. This will be the first step in getting a commercial approval to distribute BioFoam in the US.

We are still optimistic that we will get approval to sell BioGlue in Japan. Progress continues to be made on this matter.

We have successfully completed our large animal studies for the use of ProPatch in our FDA cleared SynerGraft process tissue patch for use in general surgery indications and specifically hernia repair. We are making plans for a human clinical study and ramping up efforts to secure a commercialization partner in general surgery. We plan to be at the Hernia Society meeting in Orlando in March to gauge interest in ProPatch.

We continue efforts on the business development front to find complimentary products or companies that we can acquire to leverage our existing infrastructure and sales force to deliver more value to our shareholders. In connection with that, I'd like to update you on our proposal to acquire the remaining outstanding shares of Medafor. We believe that a combination of Medafor with CryoLife could create a significant amount of shareholder value for both Medafor and CryoLife shareholders. We believe that their MPH technology has tremendous untapped potential and that a combination of Medafor with CryoLife would enable the technology to reach its full potential. An accelerated development and rollout of the technology would require a significant amount of resources, including financial resources and extensive distribution network and an experienced management team, resources that CryoLife currently has.

Last week, Medafor sent a letter to its shareholders indicating that they were declining our offer to enter into discussions regarding our proposal to acquire the remaining shares of the company, including our offer to discuss any relevant information that they had that would support evaluation that was different from what was reflected in our proposal. We responded in a letter to Medafor's Board of Directors this past Tuesday that we remain committed to meeting with them to discuss our proposal and any other information that they had that could potentially support a higher valuation. However, in the event that they continue to decline our meeting request, we will evaluate all options that are currently available to us, including calling a special shareholders meeting, initiating a proxy contest, or launching a tender offer and we'll act accordingly. That concludes my comments and I'll turn it back over to Steve.

I would like to make a few comments to the Medafor shareholders that are listening to our conference call today. As Ashley said, we think that a combination of CryoLife and Medafor provides an excellent opportunity for shareholders of both companies. We believe Medafor's technology has a great deal of promise but that the company faces a number of significant challenges that will keep it from maximizing this potential, challenges we don't think it can address on its own. We have made a proposal to Medafor because we think we are strong in areas where Medafor is weak and that we can help Medafor overcome its challenges. The Medafor Board's present stance of not even talking to us denies Medafor shareholders of the opportunity to even explore the possibility of a business combination with CryoLife.

Whether Medafor's management likes it or not, the reality is that CryoLife's 11% stake in Medafor, the two companies are business partners, and we will assert our rights as their largest shareholder. Medafor's difficulty this securing working capital is a good illustration of a weakness we can help the company to overcome. Over the last two years, Medafor's management has attempted to secure more working capital in order to access better cash flow. This has been very difficult for management to accomplish because of the financial environment in the United States and the illiquidity issues facing the company.

Medafor has been further hindered by a going concern letter issued to the company in September 2009 by KPMG, Medafor's auditor, in connection with their 2008 audit of Medafor. A letter like this is issued by an accounting firm when they feel that the company may not have the capital resources to survive for the next 12 months. Both of these situations have negatively affected management's ability to adequately fund the company.

We, on the other hand, currently have over $35 million in cash. We also have a line of credit with GE Financial for $14.5 million. That gives us a significant amount of working capital with which to operate our combined companies and invest in their future growth. We are also aware that in the recent past, Medafor's management has been paying some of its vendors and consultants with stock because of their cash flow restrictions. This has further diluted your stock position in your company. As a matter of fact, Medafor had $7.5 million in outstanding common stock in 2005. We believe that close to 21 million common shares have been issued as of the end of 2009. That's almost a three fold dilution of your ownership position with little or nothing to show for it.

If you had a share of Medafor stock in 2005 that was valued at $2 a share, this same share is now worth $0.73 as a result of this continued dilution, all other things remaining neutral. As the largest shareholder of Medafor stock, we're going to take the steps we have to take to end this practice of indiscriminate stock dilution. We do not want our stock position diluted and we will be discussing this issue with your senior management.

Medafor's disregard for its shareholders is also evidenced by the fact that your CEO, Chief Financial Officer and Chief Technical Officer and the Vice President of Sales do in the live in the Twin Cities. I was disappointed to learn that two of Medafor's officers live in Pennsylvania, one lives in Colorado and one lives in Maryland. When they travel to the Twin Cities, and the company, and therefore, its shareholders must pay for airline tickets, all meals and other expenses. These are unnecessary expenses for a small company like Medafor.

I've started my own Company from scratch and I know from experience the importance of having Management on site every day, watching, learning and improving for a small company to be successful. Absentee landlords don't work, and as the largest shareholder in Medafor we want this practice to stop immediately. As evidence that management is not executing effectively, let me point out that Medafor has existed for ten years and only has one significant product, Arista. Arista was designed and patented to be a product platform. Management has not implemented a program to develop any significant additional products.

CryoLife started as a one-product Company 25 years ago, focused on cardiovascular reconstructive surgery. We have brought several products across multiple product lines to market and all of them were developed or invented in our research laboratories. In order to maximize the potential of Medafor's MPH technology platform, we have already negotiated an exclusive consulting agreement with Dr. James Drake, one of the inventors of Medafor's MPH technology. In the event we are successful in acquiring control of Medafor, Dr. Drake will be working closely with our staff to develop additional products using the MPH technology platform.

We're ready to move the MPH technology forward and we're hopeful that you will give us the opportunity to do so. We are asking that you contact your board of directors and your senior management to let them know what your feelings are about our proposal to combine the two companies. At this time, we'll open up the call for questions.

Thank you. (Operator Instructions) Thank you. Our first question is coming from Mr. Matt Dolan from Roth Capital.

Hi, guys, good morning this Matt Dolan. Let's see-- so looking at your guidance for the year you're looking at mid-single to low double-digit growth for both preservation and BioGlue which requires an acceleration in growth rates that we saw for both these segments in 2009. Can you walk us through some of the challenging issues like inventory destocking and pricing that you experienced in 2009 and how you're expecting these to improve to achieve your guidance in 2010?

Yes I think some of the destocking issues that you were refer to were really more evident in the early part of 2009 and as the year went on, Matt, we saw those issues kind of resolve themselves and we believe that our customers returned to a more normal purchasing pattern as the year went on. So that bodes well for both of those businesses with tissues and BioGlue as we move forward into 2010.

From a-- the pricing question that you had, we saw pricing pressure really start to develop in late 2008 and into 2009 and we continue to see that throughout 2009. I think those are issues that we as the industry are going to have to deal with going forward, but it really hasn't hurt our ability to continue growing our business as evidence with what we saw in the fourth quarter and based on what we're seeing early so far this year in 2010. We're optimistic that we are going to be within the range of guidance that we've provided for.

Okay. Great. And secondly, on -- with regard to your $2 million in costs savings, maybe you can give us some commentary on where you've been able to make these cuts?

They were throughout the organization. Specifically referring back to the reduction in force and related savings, we really took a comprehensive look at all of our operations and despite the fact that we had a very, very good year in 2009 and expect another in 2010, we want to make sure that our business is running as efficiently as possible. So we took a thorough look at our entire business. And there was really-- if there's probably one area more than others, it was probably the tissue processing area and the manufacturing areas, but there was really no area within the Company that was untouched by the process that we went through.

That's helpful. And a two part question on Medafor. Assuming they remain unresponsive, can you elaborate on your plans and the timeline of those plans as you continue to pursue this acquisition? And secondly on a broader basis, how important is hemoStase to your long-term growth potential in your view?

I'll answer the first question first. We have stated publicly in the letter that we sent to their board earlier this week and in our comments earlier today that we have options available to us. But first and foremost, we would like to enter into discussions with them about our proposal to combine the companies, and that would be our first preference. But again in the event that we are not successful in doing that, we have outlined that we do have some options that are available to us, including calling a special shareholders meeting, launching a proxy fight and potentially a tender offer. We have no set timelines for any of those particular options but we're going to evaluate all of them and when we act, the public will know. Your second question again?

The long-term growth potential that HemoStase adds to your-- how important is HemoStase to your long-term growth potential?

Well we certainly think it's a very, very good technology. We think it's got a ton of potential and-- as evidenced by the fact that we made a proposal to combine our companies. But as we've stated in the past, we continue to look at other opportunities to grow our business. We have a lot of products in development right now that we think are going to be coming to fruition over the next two to four years and we continue to look at other business development opportunities even as we pursue Medafor at this time, we continue to look at other business opportunities. So we think that the growth prospects are good with Medafor and even without, we continue to look at ways to continue growing our business.

We're looking at HemoStase as a product platform, not just a product, but a product platform. And Dr. Drake, with whom we have that exclusive agreement, has always been very bullish on his ability to create many new products using that basic technology, and we'd like to get started on that as quickly as possible.

Okay, that's very helpful. Thank you for taking the questions.

Sure.

Is there no more?

Our next question is coming from Mr. Greg Brash of Sidoti & Company.

Steve and Ashley, thanks for taking my call.

Hi, Greg.

Just want to clarify one more on Medafor, if this thing-- deal doesn't end up going through, you should -- there shouldn't be any issues with your ability to distribute the product and it should still be your option to renew when the deal ends, assuming you keep hitting the minimum purchase agreements, am I correct on that?

That's correct. Our current agreement runs through the middle of next year, and assuming that we continue to meet our purchase requirements, which we have done to date, then the agreement would renew for another three years.

Okay. Then on BioGlue, I wasn't-- don't know if I messed it, if you broke out unit verse ASP growth quarter?

If you look at the fourth quarter compared to the third quarter first, we were up about 12% sequentially from the third to the fourth quarter. Year-over-year, we were up about 4% in the fourth quarter compared to the fourth quarter of 2008 and a lot of the growth in the fourth quarter of 2009 compared to 2008 was ASP driven as opposed to unit driven.

Okay. Just curious, some of the trends you saw last quarter with BioGlue, less off label use, competitive pressure, possible curtailing use of surgical sealants, has that improved at all?

Any information that we have about that is really anecdotal. What we really saw in the fourth quarter was just a renewed focus on BioGlue and going back to our customer base and reminding them of the benefits of the product. And it's really just sales effort that really got the result in the fourth quarter and again we expect to see continued growth into 2010.

Okay. And just regarding your tissue processing margins, I guess when can we expect that to start to improve again?

We think that as we go into 2010, that tissue processing and gross margins could be under a little bit more pressure, but we expect -- but not significant, but we expect that by the middle of the year, that should start stabilizing and in the latter part of this year, we think that there's actually a little bit of room for improvement in tissue processing gross margins.

And then the other thing to consider in the aggregate about overall gross margins, is that HemoStase carries gross margins of between 55% and 60% then as that continues to become a more significant part of our business that's going to have a little bit of an effect to put a little bit of downward pressure on overall gross margins. But again, all of that has been already accounted for in the bottom line guidance that we gave for 2010.

Okay. And regarding BioFoam, seems like you're going to start shipping products in Europe within the next month. Just curious what you have included in your guidance from BioFoam and are you going to be breaking that out on future conference calls?

We haven't included a lot in 2010 for BioFoam. We're very early in the launch and don't want to give out specific guidance, we want to see how the role out goes, we're very optimistic about it. But that's all included in the protect revenue guidance that we gave for 2010.

Okay, just one final for me. I think you mentioned you bought 4 .8 million shares of Medafor. Just curious what was the total dollar amount?

That was the dollar amount.

Okay.

Yes, that was the dollar amount.

Thank you.

Thank you. Our next question is coming from Mr. Raymond Myers with Emerging Growth Equity.

Thanks and congratulations on the progress.

Hello, Ray, how are you?

Hi, doing well. First you didn't touch upon your progress with the -- getting the extended shelf life for SynerGraft. Where does that stand?

We're still currently in discussions with the FDA right now. We've had discussions with them, they've requested some more data, so that's an ongoing process and we really don't have a definitive timeline as to when we can expect that.

We did find about 30, I believe, valves that we had been stored in research that had been stored for five years. And they were processed with the SynerGraft process. And so we are in the process of accumulating that data and testing all of those valves. So that report that will be sent to the FDA as soon as that work is done, it will be very comprehensive and it should answer all of their questions and concerns.

Great and there's reason to believe that after five years that they are still in fact viable?

Yes.

Good, good. And Ashley, you made a mention that you did expect to get BioGlue Japan approval at some pont. Can you put a little time frame around that?

I don't want to put a time frame on it, Ray. We continue to make progress. We continue to remain optimistic that we're going to get an approval. With any luck, it could potentially happen this year. But then again it might not. But from the progress that's being made, we continue to remain optimistic that we're going to get an approval. And we had not included anything in our guidance associated with the potential approval there.

Good. And then Steve, I wanted to compare your comments about the hemostasis time for BioFoam in the liver recession study. This time you said less than two minutes. In November, you said that 19 patients had been tested and successful hemostasis in under one minute. Has there been a change?

Really hasn't changed, we just have more patients that we're looking at. I think we now have 50 patients and it just depends on how serious, how big, rather, the laceration is or how big the removal of a tumor is. So it's changed a little bit but it's still very, very good. That's a very vascular organ and to be able to do it that quickly is very positive.

Right. And help us to understand what that means, one minute or two minutes, as compared to what? My understanding is that currently it's almost impossible to stop the bleeding.

Yes. It's very hard to suture an organ, I understand, and we have seen films here that were taken during the procedures in Europe. And it's very effective and really pretty instantaneously stopping copious amounts of blood flow, so we're very positive about that product and the doctors that have used it are very positive about it.

Right, good. I just wanted to put that into context. And then your current sales force, how big is that now?

What do you think?

Roughly 50.

About 50.

So roughly flat?

Yes, about 50.

Yes, okay, good. And then just commenting on Medafor, I understand that it's a great platform and hopefully you-- the parties can come together on that. But it seems like we've got an awful lot of focus on Medafor. And there are other hemostasis technologies out there and I would imagine for the amount of money that you're contemplating spending on Medafor that there are other alternatives. I hope we are pursuing those simultaneously?

Ray, as I mentioned earlier, we are obviously focused on Medafor and a potential combination with them but referring back to a comment that I made earlier, we continue to pursue other business development opportunities. Our pursuit of Medafor is not interfering with that process and we continue to move forward.

And so by middle of next year, if you were to go with another technology, you could walk away from the Medafor contract without any obligation?

Well, again I'll reiterate that we would prefer to enter into discussions with Medafor and about our proposal to combine with that organization. We think that it could create a lot of value for both Medafor shareholders and CryoLife shareholders. And we've demonstrated that we're committed to doing that. I guess from a factual standpoint, we could walk away at the middle of next year but we have no plans to do that.

Okay, great. Sounds like the cards are in your hands. Thank you.

Thank you. At this time there is no further time for questions. I'll turn the floor back over to Mr. Anderson.

Thank you for joining us today and we look forward in talking with you again after the completion of our first quarter.

Thank you. This concludes today teleconference. You may disconnect your lines at this time. Thank you for your participation.