Boston Scientific Corp (BSX) 2004 Q1 法說會逐字稿

Welcome to the Guidant Corporation's first quarter earnings release conference call.

This call be being recorded.

Today's presentation will include forward-looking statements, including statements about financial results and product development.

Exhibit 99 to the company's 10-K describes factors that could cause actual results to differ materially.

The company does not undertake to update its forward-looking statements.

With us today are Ron Dollens, President and Chief Executive Officer, Keith Brauer, Vice President of Finance and Chief Financial Officer, Fred McCoy, President of Cardiac Rhythm Management, Dana Mead, President of Vascular Intervention, and Andy Rieth, Director of Investors Relations.

For opening remarks, I will turn the call over to Mr. Andy Rieth.

Please go ahead, sir.

Thank you, Steve.

And to those on the phone or webcast, I want to thank you for joining us this morning to review our first quarter 2004 performance and discuss our prospects as we look forward.

As you know, on April 6 we pre-released preliminary results for the quarter.

Today we will discuss our final results in greater detail.

As noted in today's earnings release, we are also announcing the discontinuation of radiation therapy products.

And Dana will speak to that in further detail.

Before we start, I have a couple of housekeeping items I'd like to share with you.

First, once -- we will once again provide slide visuals along with this webcast.

Additional supplemental financial information will be available on our web site at www.Guidant.com.

These data include reclassifications to reflect the discontinuation of radiation products, and later today, an archive of this webcast.

Number two, due to the number of companies reporting today we will try to keep our call to one hour in duration.

To that end, during the Q&A session, I'd appreciate it if questioners will limit themselves to a single question plus one follow-up.

And I thank you for that.

And finally, looking ahead for future scheduling purposes, we plan to hold our next mid-quarter update during the week of May 24.

As introduced earlier, with me today are Ron Dollens, Keith Brauer, Fred McCoy and Dana Mead.

After Ron's opening comments and observations, I've asked Dana and Fred each to provide more detailed update on their businesses, and then Keith will follow with a financial discussion of the quarter and comments related to future guidance.

As usual, after Ron summarizes, we'll open the phone lines for your questions.

Ron, I'll turn the call over to you now.

Thank you, Andy.

Appreciate that.

As we stated in the press release, sales for the quarter were $934 million, 9% growth year over year.

And as we also stated that was net of the $9 million of sales in our radiation business, as Andy said, is being discontinued.

The quarter was somewhat stronger than we had anticipated and above our guidance range.

And the growth was -- came from numerous sources.

One is, yes, we did get four percentage points of growth from exchange rate and a weak dollar, and our growth was also dampened by the US bare metal stent sales, which recorded $65 million and currently accounts for 7% of Guidant's revenue.

If we look at where the growth did come from, we experienced growth, really, led broadly.

In that if you look at the rest of the 93% of our product line without US bare metal stents, we see that that group growing at 17% year over year.

And as we look at individual product participation, you'll see that it was relatively broad.

Our gross margin for the quarter at 75.8% improved as we had projected, up 40 basis points from Q4, but also 30 basis points lower from the prior year.

The changing product mix is being accommodated well within the gross margin, even with the negative affect of the exchange rate, and as one looks at the affect of our hedging costs, cost us approximately 100 basis points in the quarter.

Keith will expand on that in terms of how we will continue to be resilient, really irrespective of how rate moves.

Our operating expense for the quarter were up year over year but flat from Q4.

And I'd also note that the operating expenses for Q1 included the last of the acceleration of our restricted stock program, which cost us three cents per share in the current quarter.

Going forward we expect operating expenses to remain flat throughout 2004, as was true going from Q4 to Q1.

We had mentioned last year, 2003, was a year of investment, which was actually true in that we spent, in 2003, $350 million more in operating expenses than we had the prior year.

And we stated that we would reap the benefits of that in 2004.

And as I stated before, we are planning for operating expenses to be flat sequentially throughout this year.

From a net income perspective for the quarter, it was 19% of sales on an adjusted basis for current operations.

And I would also identify that the co-promotion with the J&J Cordis transaction added two to two and a half cents a share in the quarter ,even though that transaction really was only for the last month.

I would also note, in that regard, we obviously feel very good about that both in terms of the capability building and the sustained relationship, as Dana will continue to talk about, but also the contribution to EPS.

We would also note, though, that we really were only in that competitive situation about half of the month that we were in the quarter.

So, it gives us confidence going forward but does not change our outlook in terms of EPS for the year.

If we think about the cardiac rhythm management products, they've had a great quarter with 19% growth across those products led by the world wide implantable defibrillators, up 22%.

Realizing that 80% of the ICDs happen within the United States, there was really very little help in that growth rate from exchange rate.

So the constant currency we, were also up 19%, which was our growth rate also in the United States.

World wide brady was up 13%, 8% on a constant currency basis.

We were up 3% in the US in dollars, up 7% in units.

If we look at the drug eluting stent program, we had a number of very important milestones for us.

And I will reiterate and Dana will reiterate the importance of it, really, in a couple regards.

One is, yes, that we meet the milestones in completing the enrollment of the feasibility trial for our second generation drug eluting stent, Spirit First.

That was important.

Also, initiating a confirmatory trial in Europe on our first generation product Future III was important.

The reason for the importance are, yes, those programs are going forward, but more importantly the information the capability and our understanding of certainty around the program is hugely important to us.

Dana will also give us some specific insights in terms of the IDE filing for US and the initiation of the pivotal trial.

And we -- to allow us to really ensure timely enrollment.

From a business development standpoint, as I mentioned earlier, we feel good about the co-promotion agreement, it's been well received by our organization and well received by by our targeted customers.

There's no doubt in my mind that we've gotten in front of some Cypher share erosion, and will continue to make progress in that regard.

As Andy said, we have made the decision to discontinue our radiation business.

If we look at the geographical results, we obviously had growth across all geographies.

Our business outside the United States has grown from being 31% of Guidant to 34% of Guidant.

And as a unit, they were growing at 20 % year over year and a constant currency basis 8%, with the US growing at 4 %.

We look at individual product contributions, a number of those.

I have mentioned the overall growth of 9%, and the implantable defibrillator leading that growth rate of the larger product lines, up 22%, with 80% of that business in the US showing also a very consistent growth rate of 19%.

If we look at the pacemaker business, as I mentioned before, worldwide up 13%.

Again, contributed significantly by the help of having the Renewal TR early in that product launch, and will continue to make a contribution for us.

The coronary stent business at $171 million, down 22% year over year, with the US end user metallic part of that business at $65 million dollars, as I mentioned earlier.

The angioplasty business, and Dana will expend some time in that regard, is interestingly robust at $117 million dollars, up 17% year over year, and as one looks at individual components such as guide wire, up 25% year over year, mostly on volume, then leads one to an expectation of either utilization or penetration rates increasing in the drug eluting stent segment of the market.

I think an interesting highlight, and one that's important for us is the growth and the amplitude of the emerging therapies becoming 7% of Guidant, not dissimilar to where we are are with US end user metallic stents and the fact they're growing 34% year over year, causing them to continue to be more important as we go forward.

That was really led by two components.

One is that the treatment of peripheral vascular disease, up 31% in this quarter.

And endoscopic vessel harvesting up a very robust 49%.

So we have a -- continue to have a changing product mix, as we talked about before.

Implantable defibrillators increasing by four percentage points, up to 43% of Guidant in this quarter, versus the 39% of Guidant in Q1 '03.

And the decrease of our dependency on US stents.

Bare metal stents declining from 14% of the company to 7% of the company in the current quarter.

As I talked about earlier, that other 93% of the revenues growing 17% year over year.

We've, in the last few quarters, given you a little bit of insight in terms of what's happening in, in the stent business and we've outlined really three factors here.

One ends up being the change in the average selling price within the United States bare metal stents.

And those happen to be the green bars in front of you.

And what one has seen is really a very robust substantiation of, and stability around average selling prices only down 2% year over year.

Obviously a bit contrary to anything anyone would have predicted.

Also as we outlined, our US revenues, including not only the bare metal stents but also the agreement with J&J Cordis, both from a distribution and a co-promotion fee, one sees that the U.S. business, no U.S. business are almost identical in terms of the magnitude of its contribution to the corporation.

With that, let me hand it over to Fred McCoy, the President of Cardiac Rhythm Management.

Fred will give us some insight in terms of how that business progressed through the first quarter.

Fred?

Thank you, Ron.

Building now on Ron's comment, Guidant has had a very fine first quarter start to 2004 in cardiac rhythm management.

The quarter demonstrated outstanding execution, emergence of compelling new clinical evidence, solid growth in sales revenue, strengthening of the product line-up, and competitiveness of the organization.

In my brief comments here, we'll cover first quarter performance highlights, provide an outlook on the defibrillator market, and affirm key 2004 milestones.

Starting now with pacemakers.

We are pleased to report world wide sales revenue growth of 13%, to $180 million.

We would observe that this performance was delivered against world wide market growth of 10%.

Our growth exceeded that of the market both inside and outside the United States.

In February we launched the United States Guidant's entry into the CRT pacemaker market, the Renewal TR.

Our deliberate launch met or exceeded all of our internal goals for the first few weeks of commercial release.

Clearly, the experience of our field organization with CRT tools and techniques bolstered our performance.

We are also pleased to have had had new access to cases in which the use of a CRT pacemaker or a CRT defibrillator was to be determined late in the lead up to implant.

We now look forward to the full second quarter impact of this Renewal TR.

Further, we look forward to the positive impact in the United States in the second quarter of the newest Guidant pacemaker, the Insignia Ultra, which was launched in early April .

Moving now to defibrillator performance, Guidant is pleased to report world wide revenue growth of 22%, to $405 million.

In these same comparison periods, world wide market grew 19%, achieving just over $1billion for the first time in a single quarter.

Guidant year on year growth exceeded that of the market both inside and outside the United States.

Clearly field sales focus on execution played a vital role in the performance.

Additionally the product line-up was strengthened by further with the Reliance G defibrillator.

As we move now into the second quarter, the product line strengthens further with the anticipated mid-May full market US launch of the Vitality 2 ICD.

As we consider projections for the world wide defibrillator market, we would note that our own first quarter performance demonstrated increasing strength as the quarter progressed.

We would also note the positive results of the SCD-HeFT just reported on March 8 at ACC in New Orleans.

In our experience, both of these may translate positively in second quarter sequential market growth that is higher than that just seen in the first quarter.

Additionally, we expect another entrant into the CRT defibrillator portion of the US market, which should also bolster market growth dynamics.

While the year-over-year market growth comparison is challenged by a very strong 2003 denominator, we currently expect world wide year over year second quarter market growth in the mid to high teens.

We project Guidant's second quarter world wide defibrillator sales revenue growth year over year in the low double-digits.

However, looking through to the second quarter, to the second half of the year, it does appear that defibrillator market growth dynamics are strongly positive.

The first observation is that major positive clinical trial results, especially upon the publication of results in a major peer reviewed medical journal, have traditionally served to fuel the market.

The companion trial remains on track for publication, quite likely in the second quarter.

The SCD-HeFT trial results just announced may already be having positive market impact and may well achieve publication during the next several weeks or the next few months.

The next observation is that US public policy coverage process with the Center for Medicare and Medicaid Services regarding SCD-HeFT is already under underway.

This week, Guidant formally joined in support of the petition to CMS for full SCD-HeFT patient population ICD coverage.

Based on discussions with CMS, we anticipate that the remaining MADIT II population will be considered for national coverage during the same two time period as of that of the SCD-HeFT coverage deliberations.

While the timing of the decision itself is set by CMS, it does appear that the process is off to a fast start.

A final observation is that the market development remains a focused investment area for Guidant.

Through a variety of initiatives such as Advancement, the National Coalition For the Management of Left Ventricular Dysfunction and Guidant Reaches Out To Women, Guidant continues to advance awareness, adoption and action against the threats to health and life of sudden cardiac death and heart failure.

For these several reasons we anticipate that the 2004 second half defibrillator world wide market will exhibit fine sequential growth relative to the first half.

We remain of the opinion that 2004 world wide defibrillator market growth will be in the range of 20%.

As we look to our own execution deliverables, we represent that we are on track on all of our 2004 CRM key milestones.

The Renewal TR, now launched in the United States, has met or exceeded our launch performance metrics in this new to Guidant segment of the market.

According to our management action in the first quarter, we have now launched in the United States the new Insignia Ultra pacemaker.

Today we announced that we have achieved the target enrollment of 360 patients in the Decrease HF clinical trial.

That puts us on track for fourth quarter submission to the FDA for the US approval of our Renewal 2 and 4 CRT defibrillators.

In mid-May, coincident with the NASPE Heart Rhythm Society scientific sessions, we intend to proceed with full US market launch of the Vitality 2 ICD family.

We anticipate second quarter publication in a major peer review medical journal of the results of the companion trial.

We are on track for third quarter completion of enrollment in the Renewal 3 AVT clinical trial.

Later in the second half of year, we anticipate FDA approval of several important new Guidant left ventricular lead and lead placement solutions.

Finally, we announced that we have resubmitted to the FDA data in support of Guidant CRT defibrillator indications and labeling which flow from the companion trial.

In as much as this submission comes in light of recent clarifying discussions with the FDA, we feel quite reasonable in representing that would remain on track for fourth quarter US approval of this important indications and labeling enhancement for Guidant CRT defibrillators.

In summary, our performance and outlook in cardiac rhythm management is strong.

Our first quarter represents a return to the outstanding execution that we have come to expect.

Clinical evidence, traditionally very important in the growth of our market, appears compelling.

The defibrillator market has and is expected to demonstrate solid year over year growth.

Further, we anticipate both excellent second quarter and second half sequential growth.

We continue to strengthen our Guidant product line-up in each product area.

Finally, this organization is exceptionally competitive.

Driven by each of these observations, we enthusiastically look forward to the second quarter and the second half of 2004.

Dana?

Thanks, Fred.

Guidant Vascular Intervention reported world wide revenue of $288 million, a decline of 10% from its prior year due primarily to the impact of drug eluting stents.

Excluding US end user stent revenues, the world wide VI business grew 10% year over year.

These results exclude $9.3 million of world wide radiation revenue.

As Ron mentioned, Guidant as made the decision to exit the radiation business and discontinued sales of the Galileo system for treatment of in-stent restenosis.

This decision was made due to the significant impact of drug eluting stents.

During a brief transition period, we will be closing our Texas facility and working with [Novus] Corporation to transition our customers to [Novus] radiation products.

We believe this decision will allow Guidant Vascular Intervention to focus on our broader product line and of course drug eluting stent development in clinical trials.

I would like to briefly review four key take aways from the first quarter, which I will expand on over the next few minutes.

The vascular intervention business, excluding US end user stent revenues, remains strong.

The US market trends we monitor, including drug eluting stent penetration, metallic stent market pricing, and share, continue to demonstrate our competitiveness and expected value creation in the word wide drug eluting stent market.

The Cypher co-promotion gas given Guidant immediate access to the drug eluting stent market and acts as as hedge, partially offsetting the impact of the drug eluting stents.

We continue to make steady progress towards achieving 2004 drug eluting stent clinical and regulatory milestones.

I'll begin with a brief update on our other vascular intervention products and OUS stent business.

Historically we have presented this data in aggregate, however today I'll try to provide additional color on each component separately, starting with other vascular intervention products, which include both our angioplasty systems and Cordis revenue.

Other vascular intervention revenue grew 18% year over year and equaled $138 million for the first quarter.

This number is slightly different than Ron reported because it does include Cordis.

This trend points to solid procedure growth and world wide interventional cardiology markets and demonstrates Guidant's continued competitiveness in these markets.

On an annualized basis, other vascular intervention products with Cordis revenue represent a profitable $500 million plus business.

The second component of this metric is OUS stent sales.

In the second quarter, Guidant maintained stent unit and revenue leadership in Europe and Japan.

As displayed, OUS stent sales are leveling off, primarily due to the increased competition in Japan.

Declines in Japan have been partially been offset by growth in our European stent business, which will be bolstered in the second quarter with the launch of the Multi-Link Frontier bifurcation stent system and the expected approval and launch of the Multi-Link Mini-Vision.

In total, other vascular intervention and OUS stent revenues equals $223 million in the quarter and represented 77% of world wide Guidant vascular intervention revenue.

Pleased to introduce to you two new products that will continue to support our other vascular intervention sales, as well as our OUS stent performance.

The Voyager Over-the-Wire coronary dilatation catheter has recently launched in the United States and the RX version is expected to be approved in the third quarter.

In US pre-market clinical evaluations, physicians have rated the Over-the-Wire Voyager superior to current leading competitors.

The Over-the-Wire segment still represents 45 % of the US dilatation market.

The RX Voyager European approval launch is expected later this quarter.

We're also in the process of launching innovative Multi-Link Frontier bifurcation stent in Europe.

This unique stent provides physicians with a new tool for addressing difficult to treat bifurcation lesions.

This technology reaffirms our leadership in stent design and delivery systems.

Let's now review the US stent market trends we routinely share with you each quarter.

As Ron alluded to, our metallic stent pricing has declined just 2% year over year, despite increased drug eluting stent competition.

This pricing stability was due to disciplined price stewardship and the competitiveness of our metallic stent products, led by the Multi-Link Vision.

Our metallic stent market share leadership continues to be solid.

In fact, our US market share increased from 50% in December to 53% in March.

We tagged US drug eluting stent penetration at 70% in March and 61% for the first quarter.

As expected, drug eluting stent penetration accelerated in the quarter as a result of increased Cypher availability and the [inaudible] Taxus launch.

As shown in this graph, we expect drug eluting stent penetration to increase to 74% in the second quarter and exit the year at approximately 78%.

This agressive view of drug eluting stent penetration is fully considered in Guidant's 2004 financial guidance.

Reported first quarter, world wide drug eluting stent revenue of $748 million continues to highlight the rapid and predictable development of the world wide drug eluting stent market.

On an annualized basis, the drug eluting stent market exited Q1 at approximately a $3 billion run rate.

Continued penetration and stable pricing gives us further confidence in our 2006 market projection of $5.8 billion world wide drug eluting stent market.

Now turn to the Japanese stent market.

As depicted here, we now expect the Cypher to be launched and reimbursed in Japan in the middle of the year, which is well ahead of our previously communicated and what I think many of you had thought in our assumption, of course, was a fourth quarter launch.

We expect penetration to be measured throughout 2004 and into early 2005.

Penetration will likely accelerate with entry of a second competitor in the back half of 2005 and the subsequent Guidant Cypher co-promotion.

Now I'd like to take a moment to update you on the Cypher co-promotion agreement that was announced in February .

Recall that this agreement gave Guidant immediate access to the drug eluting stent market in the United States.

In the first quarter the financial impact of the co-promotion agreement exceeded our expectations, and as Ron mentioned, was mildly accretive.

Beyond the financial benefit, this agreement is helping us to maintain our strong customer relationships and providing our sales and marketing organizations with important learning.

This learning and full market participation will prove invaluable as we prepare to enter the drug eluting stent market in 2006.

When you consider that we commanded 50% of the metallic stent unit share in March, and that we participated in selling 62% of the March drug eluting stent unit, Guidant was directly involved in selling 58% of all of US stent units in March, solidifying our strong presence in the [inaudible].

We continue to work diligently with Cordis to develop a project plan for Cypher on Multi-Link Vision stent delivery system technology.

We are currently exploring several paths and have several meetings scheduled with the FDA to finalize our approach.

However, until we have FDA agreement on a clinical and regulatory strategy, it would it be premature to provide an expected US launch date.

Finally, let me remind you that this strategic agreement also provides for Guidant to co-promote Cypher in Japan with terms similar to those in the United States when a competitive drug eluting stent is launched.

Now let's turn to to our drug eluting stent program.

This slide outlines our two everolimus drug eluting stent programs currently in clinical evaluation.

Our lead program continues to the Champion drug eluting stent system, which incorporates the Champion stent mounted on the Vision stent delivery system, a bioabsorbable polymer matrix, and everolimus.

The future clinical trials will provide the clinical evidence to support Champion approval and marketing in Europe, the US, and Japan.

Our second generation of drug eluting stent, which is currently being evaluated in the Spirit First feasibility trial, features the Vision stent and stent delivery system, a durable polymer matrix and everolimus.

Assuming a positive outcome, the Spirit First trial will support initiation of both our CE and US pivotal trial.

As we announced earlier this month, we achieved a significant milestone in our Champion drug eluting stent program with the enrollment of our first patient in the Future III clinical trial.

Future III will eventually enroll 800 patients, [inaudible] 3 to 1, Champion versus Zeta stent.

This trial is designed to provide additional safety performance data to support OUS market launch of the Champion.

The first cohort of the study, which will represent 120 patients, 90 of which will receive the Champion drug eluting stent, will be enrolled over the next few months.

Enrollment has begun in a few targeted sites and will be expanded to more sites in the coming weeks.

We'll update you when enrollment of the first Future III cohort of 120 patients has been completed.

The Champion CE timeline documents our current regulatory and clinical expectations that result in Champion European approval.

As previously communicated, our base case, which is consistent with Guidant financial guidance, has us entering the European drug eluting stent market in the first quarter of 2005.

Future III initiation is a strong endorsement of our drug eluting stent programs progress to date.

The start of the trial signifies our confidence in and the support of our outside clinical advisors in the safety and efficacy of the Champion product.

This confidence is a function of enhanced drug eluting stent capability and extensive development and characterization of the Champion drug eluting stent system, coupled with the good results of the Future I and Future II clinical trials.

Over the past year we've taken a number of important steps to build our drug eluting stent capability to include the establishment of a focused drug eluting stent business unit staffed with pharm experienced management, development of a close and collaborative working relationship with Novartis, and regular consultations with leading experts in the fields of drug delivery and vascular [histology].

We have also made significant progress with the development and characterization of the Champion eluting stent system.

We have successfully integrated the Champion implant with our best in class Multi-Link Vision SDS and manufacturing of the entire system, including the stent, is now done entirely by Guidant.

Further, we have conducted an exhaustive battery of testing on the [inaudible] and in animals, all of this was done to confirm clinical outcomes and satisfy ourselves that we truly understand the Champion product.

Based on third party advisor feedback, we believe this preclinical program is the most extensive and comprehensive of any drug eluting stent program today.

The application of the vigorous approach to product development does take time, but also gives us increased confidence in the Champion product.

Now let's quickly review the status of our durable polymer drug eluting stent program that is being reevaluated in the Spirit family of clinical trials.

As we announced earlier this month, we completed enrollment in the 60 patient Spirit First feasibility trial on April 1st.

This time line graphs key 2004 milestones for our durable polymer Vision based drug eluting stent.

As noted, we expect six month followup to the Spirit First trial, if positive, to support commencing enrollment of both the Spirit CE and US pivotal trials in the fourth quarter of 2004 or in the first quarter of 2005.

Finally, I want to update you on our long list of 2004 drug eluting stent milestones.

We continue to progress with our product characterization work that will support the Champion CE third module submission near the end of this quarter.

As a result of recent discussions with our European notified body, we have elected to include three month product stability data instead of one month data, reformat the filing for the [inaudible] authority, and include additional testing on larger stent sizes rather than supplement the filing with this data at a later date.

While the inclusion is of this data will delay the filing by several weeks, this gives us additional confidence in a rapid predictable approval time and will guarantee that we have a broader range of stent lengths and diameters available at launch.

These same recent discussions with European regulatory bodies continue to support utilizing the excellent Future I and Future II results as the clinical evidence for CE approval.

We now plan to file our IDE for Future IV in June .

Recall that our IDE submission will be supported by the complete Novartis toxicity package currently under review by the FDA as part of an active Novartis submission for Certican.

The IDE filing will start the review process that will lead to an expected Future IV US pivotal trial initiation in July .

We have decided to slightly delay our IDE submission in order to include data on additional sizes and diameters, a justification to treat multi-vessel disease in the trial, and add access to additional manufacturing sites.

These measures are designed to facilitate a swift IDE approval and subsequent Future IV enrollment.

We expect Future IV four month data on the first cohort of 120 patients, as I mentioned earlier, 90 of which will receive the Champion drug eluting stent, to be available in late 2004.

We also expect the Future First six months -- excuse me, the Spirit First six month data to be presented by year end.

Finally we expect to initiate our Spirit CE and IDE trials near the end of 2004 or the beginning of 2005.

Summary, our vascular intervention business excluding end user stent sales continues to be competitive.

Our US metallic stent shares have strengthened and our co-promotion agreement with J&J is mitigating the impact of accelerated drug eluting stent penetration and continues to strengthen our [inaudible] program.

Our drug eluting stent program remains on track and our confidence increases as we achieve additional everolimus milestones.

I would like to now turn the call over to Keith.

Keith?

Thanks, Dana.

I'd like to now complete the first quarter financial review by discussing our results for the quarter.

Sales, as Ron discussed, were $934 million, and increased by 9% versus the first quarter of 2003.

This excludes $9 million in sales from the discontinued radiation business.

As you have seen, the rate added $33 million to revenue compared to the first quarter of last year.

The impact to gross margin was reduced by strategic hedge losses recorded in costs of goods sold.

The impact to income was reduced even further by the increased translation of international operating expenses.

The resulting net impact for the quarter was penny per share benefit.

In the last few weeks, we have seen a strengthening of the dollar, especially against the Euro.

If these rates hold throughout the year, we would expect less of a positive impact to sales.

However, the corresponding loss in hedges would also decline and we would continue with minimal impact to earnings from foreign exchange.

Our gross margin of 75.8% is within our historical range as well as the guidance we gave last November .

The total of research and development and sales and administrative expense of $453 million was flat with the fourth quarter 2003, and includes the impact of the final restricted stock accelerated vesting expense recorded during the quarter.

Adjusted income from continuing operations also excludes $25 million, after tax, of purchased in process research and development charges primarily related to the purchase of AFX, Inc., announced during the quarter.

Reported and adjusted earnings per share from continuing operations were 48 and 56 cents respectively, as compared to 51 and 60 cents in the prior year.

Net income was $139 million for the quarter and compares to net income of $93 million in the first quarter of 2003.

Taking a look at our key balance sheet metrics.

Our net cash balance increased $67 million in the first quarter versus the fourth quarter of last year, and reflects the usual first quarter impact of payments for taxes, accrued bonuses, as well as share repurchases and business development investment activities.

Our accounts receivable balance decreased by $23 million from the fourth quarter of 2003.

Our total days outstanding of 79 days increased 1 day due to a higher mix of international sales.

Our US DSOs, on the other hand, improved by 1 day from the fourth quarter.

Our inventory levels have remained fairly consistent, increasing just $13 million since year end.

However, our average inventories have increased for the current quarter versus the prior quarter as a result of our decision to increase inventory levels of our cardiac rhythm management products for business continuity purposes as well as inventory buildup in preparation for the launches of the Insignia Ultra and the Vitality 2 in the United States.

As a result, days cost in inventory increased twelve days versus the prior quarter.

However, this level is consistent with our other competitors who participate in the cardiac rhythm management market.

As we noted in our press release this morning, our guidance for the second quarter is sales of $910 to $950 million, and earnings per share of 54 to 60 cents.

This reflects key assumptions around the major product lines and their markets that Fred and Dana walked you through earlier.

There are a variety of drivers for this guidance range.

These include, first, the affect of a new competitor entering the cardiac resynchronization therapy market.

Second, continued drug eluting stent penetration in the United States stent market, which negatively affects our metallic stent sales but will be partially offset by the benefit from our Cypher co-promotion agreement.

Thirdly, the affect of a drug eluting stent introduction in the Japan stent market.

And lastly, maintaining stenting discipline.

We are giving an earnings per share guidance range slightly wider than our typical range to account for the variability in these assumptions.

Using a hypothetical scenario to illustrate what revenues in the middle of the range might look like, we expect low double-digit growth in world wide implantable defibrillators year over year for Q2, as Fred described earlier.

This, plus slight growth in revenue for pacemakers, other vascular intervention and emerging therapies, should offset declines in world wide stents and generate total revenue near the middle of this guidance range.

Variability in these items moves us higher or lower within the range.

Thus for the full year 2004, our guidance remains unchanged.

We expect sales in the range of $3.75 to $3.95 billion, with earnings of $2.40 to $2.55 per share.

I thought it would be helpful to give you an idea of how our full year guidance plays out through the year.

This slide illustrates how the year could look if viewed by first half and second half performances.

The first half estimates are generated with our first quarter actuals and the mid-point of our Q2 revenue and earnings guidance.

If you assume our second half revenue grows 5% to 7% sequentially, you reach the full year consensus revenue estimate at the middle of this range.

By the way, this compares to our recent second half sequential growth rate performances of 4% to 15%.

This revenue growth would be driven by the following.

An acceleration in the implantable defibrillator market due to the publication of the companion and SCD-HeFT clinical trials, as well as increased reimbursement expected before the end of the year.

In addition, co-promotion revenues and growth in pacemakers and emerging therapies will help offset decline in world wide stent.

With a gross margin estimate range in the upper half of our historical range, as we previously guided, as well as flat spending in the second half of the year as a result of our disciplined, focused approach to spending, you reach earnings in the range of $1.27 to $1.39 per share for the second half of 2004.

This range is consistent with our full year guidance of $2.40 to $2.55.

Given this scenario we remain confident our current 2004 guidance range is appropriate.

I'll now turn the call over to Ron for some closing commentary.

Let me limit the commentary so we have time some questions, but I would just build on Keith's comment that the guidance we provided is consistent with, I think, reasonable market assumptions, competitive launches and a changing product mix within our own organization.

We feel the same about the gross margin that we have outlined as a potential.

I think as one looks forward, the real drivers end up falling in two camps.

One is, what will be the affect of a publication of the companion trial and the SCD-HeFT trial, and how much lift happens in the second half of the year.

The gut half piece of that, obviously, had not been in our original thoughts, and as we, as Fred said, we saw acceleration happening in this first quarter, the latter part of that as that publication -- as that word was disseminated to the marketplace.

So we think it provides as a sufficient basis for optimism and surely does make the guidance reasonable.

In terms of this DES program, as I outlined and Dana outlined, that passing many of these challenging hurdles is probably the greatest statement that we've got a greater level of assurance in terms of that program being competitive than at any time that -- where we've had that program.

So with that, let me stop the commentary and open it up to questions, please.

Thank you, sir.

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We'll go first to Mike Weinstein with JP Morgan.

Thank you.

And good morning.

Let me just get a couple items of clarification if I could.

And hopefully this will be rapid fire.

On the CRM side, on the ICD side, if you could just clarify exactly when you're assuming that since you received their approval for the devices in your assumptions for your own ICD sales for the second quarter.

Two, if Fred could just give us some better insight into why the companion publication has slipped a little bit and he's obviously confident that's going to recover sometime soon but maybe some insight into why that may have slipped.

And then, most importantly, on the drug eluting stent time lines.

If, just, -- Dana, just to understand, with the decision to include the three month stability data instead of the one month as well as the additional sizes for European approval, you're still saying that despite that decision to include the additional data that your time line assumption of getting approval in the first quarter of next year with the upside of the fourth quarter of this year is unchanged.

Thanks.

Mike, there's a spread.

I'll handle the first of those two -- or, I'm sorry, the first two of those three questions.

First of all with regard to St. Jude.

Sounds, listening to them, could be any day now but we've modeled it at NASPE and along the lines they've talked about is when they would enter the market.

And then with regard to companion, I would say the major peer reviewed publication is on a bit of its own timeline.

And that process behind the scenes has been going very well with them.

Publication date has been delayed beyond what we had originally expected but nevertheless we feel pretty confident that'll land here in the second quarter.

And on the European stent side, Mike, what you said is correct.

The fact that we're going to be adding some additional data to that filing actually has us landing from an approval time in the same period of time that we originally contemplated.

So our base case guidance is first quarter of 2005.

And we still have an upside scenario of fourth quarter 2004.

And then Dana, with your commentary around the IDE filings for Future IV, your expectations on when you would start Future IV in the US and then what that means for your timeline?

Future IV, we're saying in the US will be July.

And really, I think, as you consider the overall long term timeline and when you would expect a US approval, there are so many variables that feed into that.

I think about about a few of them.

Number one would be the Future IV enrollment rate, how quickly are we able to enroll, how quickly are we able to adjudicate the data?

We do have a totally automated data capture system that we're going to be using in this clinical trial for the first time in the United States, which we think will help with that.

And then of course, the major variable is FDA approval time.

The Champion is the fourth drug eluting stent that will go through that FDA process.

So I think we'll clearly benefit from our learning of observing these other processes.

And of course the FDA will have extensive drug eluting stent experience by that time.

Additionally, as you might remember, at the FDA's request, we're doing a US only pivotal trial, which we believe will have the opportunity to potentially positively impact approval timing.

However, as we just noted, we do expect to initiate Future IV approximately six weeks later.

Six weeks later than we previously planned.

And so as we move forward, Mike, and gain greater visibility through achieving these milestones, both clinical and regulatory milestones as we move forward, I think we'll be able to better predict when in the first half 2006 an FDA approval would be most likely.

That said, as we step back from all this, we've never been more confident with the Champion technology, certainly indicated by the start of Future III.

Not only bringing that to positive clinical results but also to potential in the market, and that continues to increase as we achieve some of the milestones.

Our next question comes from Adam Galeon with Credit Suisse First Boston.

Hi, thanks.

Fred, can you give us anything you can on conversations with CMS regarding the the Narrow QRS MADIT II's?

Would you classify them as resistant, compliant, anything you can there?

And then also, can you give us our thoughts on the value of measuring pulmonary edema as an adjunct to CRT?

Sure can.

With regard to Narrow QRS MADIT II's, the one thing we have clarified with CMS is that'll go through the same deliberations as the SCD-HeFT, it'll be a part of the same timelines.

And indeed, CMS had said early on, after the coverage decision of last year that they would take a look at the Narrow QRS MADIT II's in light of the SCD-HeFT data, and so this is very consistent with that.

I would therefore anticipate that the timeline for a decision on this is through 2004, with the decision, we currently predict, somewhere by the end of 2004 or so.

Second question was with regard to pulmonary edema in the presence of heart failure, we think it's a good idea to provide the trajectory of patients in the presence of heart failure.

We have a few solutions in that regard ourselves.

Pulmonary edema is an interesting way to go about it.

Noted that one of key competitors has put a lot of stock in that particular approach.

I will say it's complicated process.

It's a complicated bit of research and development.

And then it's complicated from a clinical and then, indeed, adoption standpoint.

And so while I think it's overall an excellent idea, it's something that we as an industry are going to be growing into over time.

That is, being able to tell the trajectory of patients in the ambulatory setting with regard to heart failure.

The next question comes from Rick Wise with Bear Stearns.

Good morning, everybody.

Couple questions.

First, when you're looking at the second quarter and giving us your regular guidance range, can you quantify the impact of a couple things?

You're excluding radiation, what you would have assumed, and maybe quantify the impact of the competitor launch in stents in Japan, just to give us a sense of sort of an apples to apples thought.

I'll do my best with that.

Obviously radiation will be excluded.

I think you understand that by just combining, kind of, our total sales and [Novus'] sales for the quarter that that business continues to climb, really for two reasons.

Drug eluting stents are used to treat in-stent restenosis and there's less in-stent restenosis, and we believe both of those trends will continue.

As far as the Japanese market.

As you can imagine, that market is in a huge amount of flux right now.

We do believe that for the first quarter, we were the market leader.

However, near the end of the quarter, as you heard from Boston, we think we're pretty much in a tie in March for market share leadership.

But as you know, you have had two local competitors come in, Goodman as well as Terumo, and then you've also got the advent of the drug eluting stent being launched in mid-year.

So it's really hard to predict exactly what's going to happen in that market.

Our financial guidance certainly contemplates us losing share in business throughout the year.

We do have the opportunity in the second half of the year to have a number of products approved.

The Zeta, potentially the Pixel, and even near the end of the year, the Vision.

We think those will help make us more competitive.

We do believe, like I know Boston noted in their call, that the J&J rollout will be slow in Japan because of a number of logistical reasons from a distribution system, et cetera.

But Rick, to your first question.

The guidance would have been about $10 million dollars higher than without the brachy coming out.

Follow up for Fred, if I could.

Fred, are your fourth quarter execution issues fully resolved?

They certainly seem to be.

Second, SCD-HeFT, do you expect to see full coverage, if that's a likely case, and what are you all planning there?

And just in terms of looking at the, you know, the shape of the first quarter, did you see acceleration in ICD market for your business growth throughout the quarter, sort of especially after that SCD-HeFT data, did you see acceleration in the last two, four weeks?

Thank you very much.

Sure, Rick.

With regard to Q4 execution, we would represent that we believe that our field sales execution challenge the fourth quarter have been very appropriately addressed in the first quarter.

In fact, we're very proud of our field organization for the performance that they achieved in the first quarter.

With regard to SCD-HeFT and full coverage for that population, that seems to be warranted by the science.

The physician scientists that we've spoken with post-trial are most interested in making sure that that science is honored with full coverage for the SCD-HeFT population.

That having been said, I have observed as one looks at the little bit of the traffic that flows along, people are very tempted by those subgroup analyses that are done on a post-op basis.

We, as a company, don't subscribe to that.

Certainly they don't stand up in comparison to the results of a prospectively defined end point having been hit in a well controlled randomized clinical trial.

So we're in support of the full patient coverage for SCD-HeFT, and then of course reaching back to MADIT II for full patient population coverage in MADIT II as well.

And then finally, with regard to acceleration, we did notice the acceleration coincident with ACC.

I can tell you as well that the first couple of weeks of March that led up to that were indeed a bit stronger than we had seen in February as well.

And that's why we represent the updraft in the market, particularly in the United States, as having been a second half of the first quarter phenomena.

Thank you very much.

We'll go to our next question with Dhulsini De Zoysa with Fulcrum Global Partners.

Good morning.

I was wondering, Dana, if you would remind us on the drug eluting stent programs, what data we should be looking forward to through the rest of this year and maybe the first half of next year?

Okay.

Let's start with -- at PCR, and some of this hasn't been finalized yet, but there's an expectation that the 30 MACE data would be available on Spirit First, as well as Future II one year data, that I believe Dr. [Grube] may also be presenting.

Really, I think the key data that we should look forward to, though, will appear in the -- near the end of the year, and there will be two pieces of data there.

You will have the six month follow-up on the Spirit First feasibility trial that we completed enrollment on April 1.

We expect to have that available in the fourth quarter.

That will follow either fall at TCT or potentially, at the AHA.

And the second piece of data that may be interesting to people will be that first cohort of 120 Future III patients at 4 months, and that data will really confirm, we believe, what we've seen so far in the Future I and Future II data.

I think if both sets of those data are promising, which we expect them to be, I think we'll have a very strong confidence that we've got two very viable drug eluting stent products that we expect to bring forward into commercialization.

So I think those are really the two key pieces of data throughout the year.

And then really into the next year, we'll be into pivotal trials on the second generation product as well as potentially getting some of the early data out of the Future IV trial.

Okay, Dana, did I hear you correctly that the 120 parent cohort might -- we might see the four month data this fall?

Yes, by the end of the year.

Okay.

And then is there anything that, additionally, you'd like to -- you can say about the bioabsorbable stent program.

Beyond yesterday's release, I mean.

Well, no, we feel very good about all of the bioabsorbable stents.

Yeah, I'm sorry.

Okay, I thought you were talking about bioabsorbable polymer, talk a little bit more about Champion.

No, no.

Yeah, the fully bioabsorbable stent, what I can say about that is that we continue to make good progress there.

And the fact that we hit that milestone and completed the acquisition of Biovascular Solutions should make you feel good that the early research into that product looks good.

So we have figured out how to manufacture it, how to put it on a delivery system to feel comfortable to bring it in to animals.

We have a unique manufacturing site set up for it and feel very good about the additional progress there and remain bullish on the potential for a fully bioabsorbable stent program in the future.

Okay thank you.

Our next question comes from Tao Levy with Deutsche Bank.

Hi you guys, it's Tao.

Just two quick questions.

Dana, have you seen any market share losses in any of your ancillary VI products since the Taxus launch, and I guess more specifically, thus far in April?

Sure, I know that Boston commented quite a bit about being up 34% in March with their US -- I'm sorry, 45% and 34% for the quarter.

And that they were seeing that in April .

If you look at our own numbers, Tao, we were up 21% year over year in the United States in the quarter.

We didn't see much change with that.

If you look at March we basically were selling about the same rate that we were earlier in the quarter.

It would not surprise me, however, if that market is growing at a faster rate when you consider drug eluting stent penetration increasing up to 70%, and all those patients basically being [pre-dil].

So -- and you've also got Boston physically in a lab for all those procedures.

And human nature says that they'll get more [inaudible] during that period of time.

So I think that our business is stable there.

We may not be growing quite as fast as the market.

However, one thing we did mention is, in the third quarter of this year we expect to have the RX Voyager available.

And we believe that will be an incredibly valuable product for us.

And as the metallic stent market decreases around the world the dilatation market is becoming more and more important to us.

So I think you'll see a renewed focus from Guidant to gain back some share there.

Okay, and Dana, can I get the European and Japan stent numbers.

I think you'll just need to follow-up and get those specific things from Andy.

He'll be happy to share those.

Okay.

Thanks.

Our next question comes from Robert Faulkner with Prudential Equity Group.

Thanks.

Good morning.

Wonder if you could talk a little bit about ICD, CRTD pricing and I wonder if you can give us any indication of whether conventional and CRTD units grew at different rates or the same rate in the US this past quarter?

Sure, Rob, I'll be happy to handle that.

First of all, with regard to unit growth, CRTD units have been growing year over year at a rate much faster, as you know, than the tachy market overall.

First quarter was no different in that particular regard.

Would make the observation that the first quarter of 2004 versus the first quarter of 2003 had 4% price erosion in the United States.

And so you can tell on the other side of these numbers is pretty healthy unit volume growth.

So those would be the facts that we would bring forward.

I would not describe the pricing situation and the market to be substantially different than it has been in the past.

In fact I would describe, if anything, that more competitive space seems to be emerging in the market as the market growth picks up as new entrant comes in with CRT defibrillators and as a result of that, I do expect this to moderate.

Okay.

Great.

And I guess I was referring to although I didn't say it, sequential growth for CRTD versus conventional.

Are you still seeing a significant disparity there?

To the substance of your question, CRT as a percent of the total -- CRT difibrillators as a percent of the total mix is continuing to go up sequentially, although that sequential growth is slowing down somewhat.

Okay.

Good.

All right.

I'll leave it there.

Thanks.

Okay.

We'll go next to Dan Lemaitre with Merrill Lynch.

Hey, everybody, just one question.

You know, there's quite a disparity debate going on about market share tight now in the US on stents and I this it's confused by 180,000 stents going out the door and only 40% of them being booked.

Can you maybe provide some clarity as to if you have gotten a lot of stents back or if in April here, if that in fact has happened so that there is a swap out of inventory going on out there?

What's your best assessment as to market share on a run rate basis right now?

Sure, Dan.

First part is, we have not received any stents back.

And our stent inventories are very consistent with where they've been historically and we feel very comfortable about that.

As you remember, we self-corrected our stent inventory right before the Cypher launch last year, where we reduced our inventory, realIy, about 50%.

And we continue to be at that level and are very comfortable with the level where we are right now.

As far as what's actually happening in the market, as you can imagine, we're right in the middle of a major launch.

And we're in a euphoria of a launch from the Boston side.

And the I think, really, what we need to do is let this launch play out.

And then I believe accounts will settle in and make decisions on how they move forward with their product choice for drug eluting stents.

We would challenge, a little bit, Boston's assumption they have 70% of the market. bit Boston's assumption they have 70% of the market.

We think that's a little bit aggressive.

Probably closer to 50/50 or 60/40, we think, of actual implant share is what's happening in the market.

We also feel very good about the impact of the alliance with J&J.

We've taken a hard look at accounts where we have strong relationships and J&J does.

And in those accounts, we have greater than 50% share.

So I think the real key to this will be what happens in May and June when we're through this peak period that they're experiencing in their launch.

And I think as you can look back at all of our product launches, we had the peak periods at 45 to 60 days, where we had our highest market share that we were ever able to obtain.

So we need to see if they're able to attain that.

I think what accounts will do is they'll step back and they'll make decisions on which product they're going to go forward with and that will take place in the next kind of four to six weeks.

Okay, great.

Thanks.

I'll stop.

You know, Dan, this is Ron.

Building a little bit on Dana, exactly what Dana's observation was and you've been associated with business long enough, but you get this job done in 45 days and it really ends up being your top share, at least on the vascular intervention side.

So it will be truly interesting to watch this play out over the following two months.

Okay.

Thank you.

Dan, you been watching the Pacers series at all?

That's cruel, Ron, that's cruel.

We'll go ahead and take our next question from Bob Hopkins with Lehman Brothers.

Hi, thanks.

Just a quick question for Dana and one for Fred.

For Dana, could you just go into a little bit more detail on the six week delay for the IDE approval here in the US and talk maybe specifically about the remaining gating items with the FDA and what needs to happen there?

You know, for example, do we have -- do we know the exact time yet that it takes for the polymer to break down?

So just any amount of detail there would be helpful.

Then just for Fred real quickly, I might have misheard, but you gave your assumption for the market '04 and you gave guidance for Q2.

Did you give guidance for Guidant's ICD business in 2004 from a growth rate perspective?

That's it.

Thanks.

So, Bob, thanks for the question.

You know, I didn't say what Guidant would do during 2004.

We need to see, early going, how the US competitive landscape shapes up relative to the new entrant in CRT defibrillators.

We would anticipate that, you know, 20% or so, or in the 20% range market growth in 2004 that Guidant would be at a rate slightly below that.

That's consistent l what we've represented all along.

And we would again, reiterate slightly.

And as far as IDE, the delay, Bob, it's really a conscious decision we're making.

We could have filed that IDE earlier, but in order to have the exact product inclusion that we want in the trial, as well as to have some other issues with the FDA ironed out exactly how we would like to have them, which we believe will help expedite both enrollment as well as approval down the road, we decided to add some of this additional data that would give us more confidence about which items will be included.

What we could have done is we could have supplemented the IDE over time, but we think the FDA would prefer us to just come forward with the full package initially and we think that's just a better strategy overall.

We have no concerns about the polymer issues.

We have done extensive preclinical work with this.

I think the FDA feels very good about what we've shared with them already.

We have a meeting later this month to share additional data with them.

And so there's very little outstanding, if any, animal data we need to bring forward.

This is really product characterization work and making sure that we go forward with a complete package with the FDA with the goal of getting a 30 day turnaround on the submission.

And then to reiterate what you said earlier, you are comfortable, or you remain comfortable with the first of half of 0'6 US launch for Champion?

Yes.

Although we'll continue to learn more, either sooner or later, as we go through these milestones.

Great.

Thanks very much.

We'll go next to Glenn Reicin with Morgan Stanley.

Good morning, or good afternoon, folks.

Couple questions.

Can you give us a little bit of an outline, what you expect in terms of the J&J agreement for the remainder of the year?

I am a little bit confused.

You said this quarter is a $21 million dollar benefit but you really only had a month of benefit, I think you mentioned.

So I'm just trying to get a taste of what you are expecting for the remainder of the year.

Sure, Glenn.

First of all, the $21 million dollars would also include the existing agreement we had had in place prior to this alliance.

Sure.

So my question includes both.

Right.

So we have both of those in there.

And it is complicated to describe exactly how this agreement works, and it's really because of the structure of the tiers, the different commissions and how that's calculated over time.

You are right that what we booked in the first quarter was really based from the 24th of February through the end of the quarter.

And so we would expect, as Ron mentioned, it was accretive to the two and a half cent this quarter.

We had given you guidance earlier of four to six cents for for the year and I think that's clearly going to happen and should be higher.

A lot of it will tend to be what happens when this market share settles out.

We believe we have had had an impact.

Might not be quite as visible today but I think over time you'll see we're having a strong impact in this field.

So just indulge me a little, if end user sales this quarter were $65 million and then I just use your share estimates and we assume it declines to $50 million in Q3, what's your best guess, give or take five, ten million bucks, what's your best guess in terms of domestic total reported stent sales for Q3?

What are you assuming in terms of share?

Well, first of all, our share, in the metallic segment, we would expect to stay stable or continue to grow.

It did grow quarter over quarter.

As far as our expectatations with the Cypher share in the market, as I mentioned earlier, we think it's somewhere between 50/50 and 60/40 right now. 60/40 Taxus, Cypher.

We think that that share will normalize somewhere at least at where it is in the Europe range, which is somewhere around 50/50.

But our expectations are higher than that.

So, you didn't answer the question.

Which part didn't I answer?

Just what do you expect in terms of revenue from the third quarter, domestically?

What are we expecting total?

We just won't give that detail.

Glenn, also, this is Ron.

I think one of the things that add as little bit of complexity to this is that that co-promotion fee that we obtained on the agreement essentially has the no -- the only expenses associated with it end up being our sales commission expenses.

And so if we look at its contribution, it essentially all falls to IBT, net a relatively modest amount.

So, it ends up playing as a much higher sales number as what ends up being recorded.

Just as you think, if we said, as we identified, we got two to two and a half cents a share, obviously after tax, for one month's worth of participation.

And then you work that back in terms of what the equivalent sales level would be, then it says that's pretty heroic.

Now, we always give the addendum that we attained half of that in a marketplace that didn't have the competition.

So all of that is there.

What we have said previously was that four to six cents accretion during 2004.

Obviously it's going to be a number that is higher than that.

We gave an upside that it could be kind of 16 to 20 is cents.

And you know, we're not in a position to buy into that this early in into --

But Ron, would I make you feel very uncomfortable if I just took $20 million and multiplied that by three for the next quarter?

Yes.

Again, this $20 million incorporates the distribution, the OEM situation we have from a catheter perspective, Glenn, and obviously that, if anything, is flat to declining.

And so it's only an increment of that $20 million.

I would say, and I'd give you some visibility of close to half of that.

It's only an increment of that that is really the co-promotion fee, which is almost all IBT.

Now remember, again, only half of the time did we have a competitor in that scenario.

Right.

Okay.

I think I know where you are headed.

Also, a question on the Future III.

I guess I was the last one to realize this.

I did not know this was -- that you separated this in two cohorts.

What -- why did you do that ,and are you going to do the same with Future IV?

We are not going to do the same with Future IV.

Future III, the reason we did it was that we could have more data earlier to help us support our launch in Europe.

So how does that -- so this is not a regulatory issue, this is a marketing issue.

Absolutely.

We don't believe we need this trial for any regulatory purposes.

As we've said, our discussions with our notified body, as well as a third party review that they commissioned, gives us great confidence that Future I and Future II will support CE markets.

Okay.

So I am going to ask you one tough question, another tough question.

In the original Cook study in the United States, you enrolled patients incredibly fast.

I forgot, it must have been like six weeks.

So my question is the following.

Number one, why would would it take a couple months to accrue, you know, 100 and some odd patients for a European trial?

And number two, could we expect that same kind of timetable for Future IV enrollment.

First of all, I think the reason why Future III will be a little bit slower is just because of the product needs, that we have to do all the characterization work in order to file the IDE and file our third module submission.

We will free up a lot more product after we go through that process over the next month, so you'll see a significant acceleration in Future III.

In Future IV, one of the reasons why we're delaying this IDE a little bit is that we're able to add additional manufacturing sites by waiting for this four to six weeks, which will give us much more product for enrollment.

Now obviously there are other choices for this, and you have to convince the patient to use an investigational product when there are two drug eluting stents on the market.

That's one of the reasons why we're working with the FDA and we feel fairly confident we'll get from them the ability to treat multi-vessel disease rather than just the single vessel with the drug eluting stent.

And so, we're trying a lot of different ways to look at how to expedite.

We're also looking at unique incentives for the accounts to help with enrollment, and remember we're going to have 90 sites in the United States.

Just contrast that to what Medtronic's doing, where they only have 30 sites up in the United States.

So we're trying to do everything possible to expedite that enrollment.

And can we assume all 90 sites will be up and going by the same the IDE is granted.

No, but we will have most of them approved to open, and so we will be able open them faster than we would have if we had started the IDE in three weeks from now.

Okay.

So at the end of the day what are we thinking?

Three months?

Two months?

We're just going to have see what happens with it.

If you look at trials like Deliver, you look at Taxus, et cetera, those were a full three months and ten days approximately.

Little over 100 days.

This will roll somewhere in that range.

May not be quite as fast but we're going to do everything possible to make it happen.

Thanks, folks.

Yeah, Glenn, I would summarize, I think, and I think Dana did it very well, but it says what we're trying to get included in these filings is being prepared to launch the product in the sizes and the lengths and with the volumes that we think are going to be required for us to be competitive.

That's where our primary focus ends up residing.

Perfect.

Thank you.

So with that, let me thank everyone for joining us today.

We obviously feel good about where we are in terms of the think the tachy market is an interesting transition stage for us going forward.

We feel good about what we've been able to do in term of the drug eluting stent progress.

And there are sufficient milestones to keep giving people visibility in that regard.

We'll continue to manage the organization so that we will be able to meet the guidance as we will outline to the marketplace.

So as Andy mentioned earlier, we will have a mid-quarter call, and as any of this changes, we'll look forward to sharing that with you.

Thank you so much.

Thank you.

Once again, everyone, that does conclude today's teleconference.

We do appreciate your participation and you may disconnect at this time.