Cardiovascular Systems Inc (CSII) 2013 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter of 2013 Cardiovascular Systems Incorporated earnings conference call. My name is Caris and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this call is being recorded for replay purposes.

And I now would now like to hand the call over to your host for today, Mr. Larry Betterley, Chief Financial Officer. Please proceed.

Thank you, Caris. Good afternoon, and welcome to our fiscal 2013 first quarter conference call. During the course of this call we'll make forward-looking statements. These forward-looking are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and include statements regarding CSI's future financial and operating results, or other statements that are not historical facts.

Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those described in our most recent Form 10-K and subsequent quarterly reports on Form10-Q. CSI disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments, or otherwise.

We will also refer to non-GAAP measures, because we believe they provide useful information for our investors. Today's news release contains a reconciliation table to GAAP results.

I'll now turn the call over to Dave Martin, CSI's President and CEO, for comments.

Thank you, Larry, and hello, everyone. Before we begin we'd like to express our concern for everyone on the East Coast who are facing Hurricane Sandy today and its effects, including our investors, our finance industry supporters, our friends in medicine, and our employees. Our thoughts are with you during this difficult time.

Peripheral arterial disease, or PAD, affects 8 million to 12 million Americans. When treating it, physicians face a common under-diagnosed condition and complicating factor -- calcium. Calcium, even if it isn't visible through angiography, is present in about 65% of the 2.5 million people diagnosed annually with PAD. It can lead to poor outcomes and higher treatment costs when traditional balloon and stent therapies are used, including dissection, vessel wall trauma, and stent fracture.

Our next-generation Stealth 360 safely and effectively treats calcified lesions in the legs, and it's driving our accelerated revenue growth in the PAD market. Our technology is different from anything ever offered the patient with vascular disease, and is backed by a growing wealth of clinical data that supports our ability to effectively treat arterial disease -- in particular, disease complicated by calcium.

CSI uses a scientifically-proven orbital mechanism of action that protects healthy vessel tissue while removing even the most difficult-to-treat plaque throughout the leg. And it's cost-effective. We save money for physicians and patients by avoiding complications, reducing expensive lab time, and lowering added cost for ancillary technology such as stents. These benefits position our technology to be the primary therapy for treating PAD.

As we continue to make strides in the PAD market, we are also making progress toward expanding into the coronary space, which could nearly double our market opportunity. Calcium is present in nearly 40% of those treated for coronary artery disease, or CAD. The goal of our ORBIT II trial is to demonstrate that we can achieve similar results for CAD patients as we have for PAD patients.

As a company, our goals remain consistent -- to expand the use of our Stealth system as the primary treatment option for treating calcified arteries in the large and growing PAD market; build on our base of scientific data that supports the safety, effectiveness, and economic benefit of our products; and obtain approval for a coronary application which would allow us to address a large unmet need in treating calcified coronary arteries.

In the fiscal first quarter, we've made substantial progress on these goals. Revenues rose 25%. Stealth 360 revenues grew to 90% of total device revenues. Most of our customers are now converted to the new system.

Office-based lab revenues continue to grow at a double-digit consecutive quarter rate over the fourth quarter of fiscal 2012, demonstrating that the strength of our technology, supported by compelling clinical data, can lead us to long-term success in both the hospital and the office-based lab settings.

ORBIT II coronary trial is nearly completed, with only 32 patient enrollments remaining. We also continue to expand on our wealth of clinical data, with presentations at medical conferences supporting the safety and efficacy of our technology, and the dangers and complications of calcium in the peripheral and coronary arteries.

Now, Larry will provide more details on our financial results, and then I will come back for additional comments before we take your questions.

Thank you, Dave. For the first quarter of fiscal 2013 compared to a year ago, revenues grew 25% to $23.3 million. Combined Stealth and Diamondback device revenues were 88% of that total. More than 6,400 devices were sold in the quarter, bringing the life to date total sold to nearly 100,000.

Reorder revenues remain high at 96% of total revenue, compared to 94% last year. We added 34 new accounts compared to 41 in the year-ago period, as we continue to focus on Stealth conversions and driving adoptions in our key existing customers.

All of the accounts added this quarter were Stealth accounts. Our Stealth 360 customer base grew 17% from the fourth quarter to nearly 800 accounts. Stealth now comprises more than 90% of our total device revenues. Device usage in Stealth accounts increased over the fourth quarter of this year and is nearly 40% greater than our overall usage per account.

Other product revenues increased to $2.8 million from $2.1 million, primarily due to increased Asahi wire sales. Gross profit margin was 77%, consistent with the prior year quarter and the fourth quarter of fiscal 2012.

The positive effect of Stealth's higher average selling prices and greater production volumes were partially offset by the increased mix of Stealth 360 sales, which currently have a higher unit cost than the Diamondback devices, and by additional costs for the ramp-of CSI's second manufacturing facility in Texas for additional future capacity. We expect engineering enhancements to Stealth and increasing production volumes to reduce unit costs in the future. However, costs incurred to prepare for our coronary launch may offset these gains in the near term.

Previously, we had indicated that the 2.3% medical device tax would be included in our cost of goods sold, beginning in January 2013. After further evaluation, we now expect that it will be included in SG&A expense.

As planned, operating expenses rose 33% to $23.2 million, primarily due to advancing the ORBIT II clinical trial, a larger clinical staff, competitive enhancements to sales and marketing, and expansion of medical education programs to drive adoption. All of these investments are geared toward generating higher revenue growth.

Net other expense was only $4,000 due to a $388 gain from valuation changes in a conversion option asset associated with our convertible debt. The resulting net loss was $5.2 million, or $0.26 per share, compared to a loss of $3.9 million or $0.22 per share last year. The number of weighted average shares outstanding rose to 20.4 million from 17.5 million last year. The increase resulted from our equity offering in the fourth quarter and the issuance of stock from our employee stock plans and warrants.

Adjusted EBITDA, calculated as loss from operations less depreciation and amortization in stock-based compensation expense, was a loss of $3.2 million compared to $1.4 million loss last year, with the increase being driven by a higher operating loss.

We finished the quarter with over $32 million of cash. Repayment of our term debt began in July 2012 at $400,000 per month. No draws have been made on our $15 million receivable line of credit.

I'll now turn it back to Dave for further comments.

We'd now like to review some of the progress we made on the clinical front during the first quarter and highlight key conference presentations both by CSI and other leaders in the field.

Our ORBIT II coronary trial is nearing completion. We now have only 32 patients remaining to complete enrollment. CSI and the FDA have agreed to a modular PMA submission. To date, Modules 1, preclinical, and 2, manufacturing quality system, have been submitted to the Agency and are currently under review. Our PMA application will be completed upon submission of Modular 3, which includes ORBIT II clinical data. We anticipate that this will occur in early calendar 2013.

Based on results in treating calcified lesions and small arteries, and severely calcified coronary arteries, in our ORBIT I study, our orbital technology may be well suited for removing calcific and fibrocalcific plaque in coronary lesions. With moderate to severe calcium present in nearly 40% of patients treated annually for CAD, a coronary application would open up a large underserved market opportunity for CSI, estimated to exceed $1.5 billion annually.

Regarding clinical studies, key data was presented at both TCT and VIVA in October. At the TCT conference, the latest findings in conquering arterial calcium were unveiled. Key takeaways from the event include -- a data analysis approximately 19,000 patients strong, presented by Dr. Philippe Genereux, demonstrated that moderate to severe calcification is associated with worse outcomes after drug-eluting stent use, including a significantly higher occurrence of death and adverse events. Despite advanced stent technology, moderate to severe calcium remains a real treatment challenge, and new therapeutic approaches are needed.

Dr. Jeff Chambers presented preliminary results from our 50-patient ORBIT I coronary feasibility trial, showing that using CSI's orbital atherectomy technology to treat calcified coronary arteries before stenting, achieved procedural success and compelling long-term clinical outcomes.

In the late-breaking data session of VIVA, Dr. Tony Das, Cardiology and Interventional Associates, Dallas, Texas, presented data from our CONFIRM study series demonstrating that the Company's minimally-invasive orbital atherectomy system is a safe and effective treatment for PAD.

Highlights include that CONFIRM is the largest atherectomy dataset ever for PAD. More than 3,100 patients with 4,700 lesions were treated by over 350 physicians in over 200 hospitals. The study shows that CSI's orbital atherectomy system safely removes plaque and calcified lesions with 99% freedom from perforation and 98% freedom from distal embolization.

Results demonstrate improved lesion compliance, with a low mean inflation of less than 6 atms for adjunctive balloon therapy; and finally, safe and effective results similar to those achieved in hospital settings were demonstrated in the office-based lab settings.

On the publication front, 12-month results from our CALCIUM 360 study were published in the Journal of Endovascular Therapy in August. CALCIUM 360 is a prospective, randomized, multi-center study of 50 patients, 64 lesions. It compares one-year safety and efficacy of CSI's Diamondback 360 atherectomy device followed by percutaneous transluminal angioplasty, or PTA, versus PTA alone, to treat calcified infrapopliteal lesions in patients with critical limb ischemia.

Based on the study results, the Diamondback 360 system provides a significantly higher rate of freedom from major serious adverse events, at a rate of 93% compared to 58% for PTA alone.

I will now share the outlook for the second quarter of fiscal 2013. As a company, we are actively investing in science, our commercial organization, and medical education, to accelerate and drive our next stage of growth in the PAD market, and in preparation for a potential coronary market application. These investments will increase operating expenses somewhat in the near term, but result in attractive revenue growth and profitability long-term.

Specifically for the quarter ending December 31, 2012, we anticipate revenue to be in the range of $23.5 million to $24.5 million, representing year over year growth of 19% to 24%. CSI's gross profit as a percentage of revenue should be similar to the first quarter of fiscal 2013.

Improvements in the Stealth 360 component costs and utilization of our second manufacturing facility in Texas will be offset by the cost to prepare for the coronary launch. We expect operating expenses to grow 4% to 5% over the first quarter of fiscal 2013 as we continue to invest in the ORBIT II trial, physician sales education, and a coronary market launch. Operating expenses include about $4 million for the ORBIT II trial and coronary market preparation.

We anticipate interest and other expense to be about $300,000, excluding the effect of conversions or valuation changes related to our convertible debt. The resulting net loss is expected to be in the range of $5.7 million to $6.3 million, or loss per common share ranging from $0.28 to $0.30. This assumes $20.7 million average shares outstanding. Again, this excludes the potential effect of conversions or valuation changes related to our convertible debt.

To conclude, with unique technology backed by a wealth of science and facing a large market opportunity, this is a very exciting time for the Company and our shareholders. We're making great strides in securing our business success for the future.

Thank you for participating in today's call. And now, Operator, we would like to take questions from the participants.

(Operator Instructions). Danielle Antalffy, Leerink Swann.

You guys had a great quarter and your guidance for next quarter really trumps what we had. I just wanted to maybe get a little bit more color from you guys -- what exactly is going right there? Is it the marketing development initiatives? Is it driving higher utilization at the existing centers? What exactly is happening that is sort of improving the outlook, at least versus what we had modeled?

Thanks, Danielle. Yes, we are driving utilization rates up in all of our targeted account bases -- top 50, top 200 office-based labs. And there's three things driving it. One is, the technology works. The orbiting mechanism is fantastic for solving a problem, the problem of calcium, which is the enemy of good -- a good clinical outcome, and a good economic outcome. So, the technology works, and the Stealth has been a smash hit, even better than we expected when we launched it broadly about a year ago.

The second thing that's working is management. We've invested in new management. Kevin Kenny and Jim Breidenstein come with great experience, experience to scale, they're here to scale, and they're really activating the most important resource in the Company -- people.

And then the third thing is, we've invested in medical education and we've really made great strides there. We're doing some really neat things for the physician operator. We're highlighting our unique ability to treat calcium where it is in the patient, and that's in the tibial arteries. We're showing them new access points, like minimally-invasive access points from the foot or the calf, which are just great.

And we're doing that in some cases in labs that are mobile. We've got a cadaver lab setting that has gotten a great response in the early five months of that setting, from vascular surgeons, which is a key targeted audience of ours. So, those three things, among others, are really working -- technology, management, and medical education.

That's really helpful. Thanks. And then as we think about the outlook, sort of, beyond next quarter, I mean, is this sort of a sustainable revenue growth level, in your opinion? Or -- I mean, are you ready to say that yet?

We're not ready to say that, but we are optimistic that those three key features, we could still, there are still great gains to be made. Unfortunately, there's a great expanse of calcium in the tibials in particular -- everywhere in the body, in fact, including the coronaries, as we found out with the major TCT panel presentation from Dr. Gregg Stone. He tapped into 19,000 CRF patients. A small company like us -- we could never afford to tap into a database like that. And the 19,000 patients is from years and years of research with drug-eluting stents, paid for by industry.

And CSI was the benefactor on Tuesday night at the TCT, as they presented that the prevalence of calcium in the coronary arteries is much higher than people thought, and that the implications are severe, including an accelerated death rate for those patients with severe calcium, as well as more adverse events. So, we'll continue to investigate that and bring that awareness forward as we go.

And then one more question, if I could. Can you talk about your penetration of the vascular surgeons -- what percent of accounts, or I guess revenue, is in the vascular surgeons versus interventional cardiologists? Thanks so much, guys.

Thanks, Danielle. For vascular surgeons it's a relatively new focus for us. As we've said before on calls, seven out of ten of our current customer base are cardiologists who do both coronary and peripheral cases. There's a wonderful synergy there for our product pipeline, our coronary product pipeline. But two out of ten walking into our medical education programs that we piloted in May, and continue to expand right now -- two out of ten were vascular surgeons.

That audience is -- they see the patient. They see patients with severe calcified arteries. They are absolute experts in the anatomy, and we're having a great experience in the early going here, I'd say five or six months, really focusing on that call point. And they're part of the growth drivers. But we haven't broken out specifically what their contribution is to the growth, or to overall sales.

Ben Andrew, William Blair.

So, talk a little bit more about ORBIT II. You said you had 32 patients left. How long do you think that takes to enroll, and when should you be able to present data and then file for approval with FDA on that?

Yes. So, there's a couple of pieces of good -- of news, some of it very good. So, we've chosen a modular approach. We've broken up the massive expanse of the submission into three parts, two of which we've completed. In October -- in September we submitted Module 1 and in October we submitted Module 2. The team here really hustled to put a quality submission in.

Module 3 is the final piece. It does require us enrolling the 32 remaining patients. We think that we can do that certainly within this quarter; maybe in the next few weeks. And we'll submit that early next quarter.

Once that submission's in, it's -- for an average company, in the eyes of the FDA in terms of evaluating a PMA, it'll be 274 days till clearance. We've got a number of reasons to be optimistic that we'd be different. You know, one of them is the ORBIT I which we completed and the FDA's taken a good look at.

Two is, they did take a look at the first 50 patients of ORBIT II.

And three is, we submitted Modules 1 and 2 here, so they're just waiting on number 3. So we're doing everything we can to make sure that we're better than average -- that average of 274. So, that's the timing, and we feel that was the best approach that would give us the best chance to get out there in the market with a great product.

And as you think about the device utilization in the quarter the -- it looks like it's ticking up a little bit per account. Is that something -- I mean, your guidance reflects kind of steady to slightly improved performance there. How far do you think you can move that needle, just in the peripheral space, say over the next 12 or 24 months? Is that a thing we can -- it can improve by 10%, or is this kind of the rate we might expect?

Well, on the go-forward there's a massive expanse of calcium; and we're the benefactor of new sites, now, for patients to be treated. We're a big believer in this office-based access for the patient in need. It's great.

And while we stumbled a year ago at the outset of some of these shops opening up, we've really turned the corner on pleasing the physician owner and making sure that our device is there for the patient who needs their calcium to be treated.

So, we're optimistic that we can grow. We haven't given forward guidance; but our ability to execute, I think, especially targeting top accounts and top office-based labs gives us a chance to -- you know, to grow nicely over time.

And Larry, you talked about the quarter coming up for gross margin, but it -- should we expect gross margin to go down over the course of this year as you bring up the new facility, even though you're ramping south? Or can you generally hold this level, and maybe increase it? Thanks.

Yes, I think we'll be making some cost improvements, and of course increasing volumes eat up a lot of overhead. But we are preparing for coronary certification of our Texas facility and that product launch. So those costs will probably offset any improvements that we make. But we expect to remain where we are, probably for sure above 75%.

Jose Haresco, JMP Securities.

Good afternoon and congratulations on a good quarter.

Thanks, Jose.

Thanks, Jose.

Couple of questions. Just touching on ORBIT II again, could you talk a little bit more in terms of the kind of costs associated -- preparing for that launch? I mean, now that you're done with this trial, should we expect the R&D numbers to -- the growth of the R&D spend to stabilize while you're going through the other review process? And what kind of investments are you going to be making, perhaps on the SG&A side, as you prepare for that panel meeting, the launch, in call it early 2013 -- 2014 -- calendar 2014?

Yes. We would expect as you said, the ORBIT II costs will start coming down. We do have some additional studies that we'd like to do -- some follow-on coronary studies.

And then, of course, we've talked before about LIBERTY 360, a pretty extensive PAD study that will come in and take up some of the expense that we save. But then it'll probably migrate more towards the SG&A side as we put more costs into the market preparation. So, I'd say the $4 million we talk about for next quarter for the coronary -- that will probably be fairly consistent through the rest of the year.

Okay. Got it. Can you -- touching base again on, does the current quarter in the face of -- it seems like the three things that you had mentioned -- the investments in management, the emphasis on medical education, and -- are really working out. Are you going to be embarking on some new projects as you start to look into the remainder of the year, or are you step up -- see a step-up in those activities? How shall we think about leveraging the successes you've seen so far, across the rest of your (inaudible) base?

Yes, that's a great question. Well one of the opportunities that's opening wide is our unique ability to access tibial arteries and access through the foot -- access these arteries. It's great for the patient. It's patient-centric. The physicians can do it. Only our wispy, hair-like device can access through those small arteries, and only our device can treat that calcification there, and there's just a massive expanse of it.

So, there's a whole product pipeline associated with making the procedure easy for the physician and then making it more suitable for this access point. So, that's one parlay.

Two is now that we've piloted some medical education and we're measuring that, and the ROI on that, certainly there's ways to improve that, improve our followup, and make sure that we're following that good, specific, on-the-day training, with the follow-up and support that the physicians always need back in their hospitals.

And then in terms of the clinical data, we're getting -- CSI's getting a ton of attention for both our peripheral work and our coronary work. It was really neat to see at the TCT the enthusiasm of the Gregg Stones and the Mark Reismans talking about getting the old band back together, and really hungry for a new mechanism for calcified patients.

And I think even they were surprised when they did a new filter on a very large database, that the prevalence of calcium was as big as it was, and that it directly related to outcomes -- in fact, poor outcomes. For the severely calcified patient, the outcomes were significantly different, and increased for death, adverse events, and reintervention. So, we've got a real opportunity to solve a big -- not only in the peripheral but in the coronary to come.

Last question. What are you seeing in the competitive environment? Are you seeing pricing pressure stabilize? Is it the same? What's your expectation, if you start to think about the rest of the year?

You know, the -- well, the team's executed nicely and featuring our unique assets has helped us stay steady ASP over the course of years now. And certainly the improvements in the technology -- the -- backing our technology up with proof sources on the clinical front will allow us to be more stable over time.

So, we expect more of that to come. We'll continue to invest in science and technology. So, in terms of pricing, if that's your question, we expect that to be stable over time.

Ben Haynor, Feltl.

As -- in terms of other product revenue, we see that start ticking up as a percentage of total revenue over the past year or so. Is that something where you expect that trend to continue, as in stay closer to 14% of total revenue as opposed to drop back down to 12%?

Well, maybe I'll talk about the capability of that technology, and then Larry'l talk about the numbers.

We've had a wonderful relationship with Asahi. They make the best wire in the business. We beat out Abbott Vascular, who handles their technology to wire technology in the coronary. We beat them, and we distribute that technology in the peripheral space. They've got great product that allows the physician to access tibial arteries and calcified arteries in the most atraumatic way. In addition, we're working with Terumo, and they've got a great entry kit and some -- also some very low-profile, small, atraumatic devices. And these three companies are congealing to put on some of the medical education events, which is just great.

So, on the strength of our sales force and execution, but also the technology, and the partners that we're choosing, I think, are just right for the patient in need at our call point.

Yes, Ben. The other revenue was 12% of total revenue in the quarter, and that's probably a reasonable level with this product set. You know, it varies a little bit quarter to quarter, but that's fairly reasonable amount.

Sure. And then I assume, once you get the coronary approval in terms of access points, you'd see the same advantages with the radial access versus femoral with your product?

Yes. Radial access, or access through the arm, might be an opportunity for coronary. You know, but kind of the great news is if the problem's in the foot and you can access the foot, it's the shorter runway. So, it's pretty good. But, yes, certainly low-profile devices, you'd be able to use all the -- you know, the small 4-French -- you know, super-small access points. Just watching the physicians operate through these access points in the foot or in the calf, for example, and then seeing them just apply pressure with their finger for a minute to close the hole -- it is so patient-friendly. We couldn't be more excited about it.

Okay, great. And then one last quick one. The number of new customers dropped down a little bit from the kind of 40 range that we've been accustomed to. Is that just kind of a one-off, or is that something we should expect going forward?

I think there's two things happening at once. One is, we're entrenching in the larger accounts. You know, we're doing that because we want to go where the patients are and the volume is, and we've got a great story now to go back into some of these accounts where there was doubters, with physicians two, three, or four -- with the scientific data, the new technology, and make some gains in high-volume accounts.

The new accounts, I think, are going to continue to come from these office-based labs. We see the trend continuing. It's great for patients. Patients can get treated earlier. They can get treated outside the hospital in a local office. And we've observed, and in fact we've studied the work that's done there, and the clinical studies from the office-based settings shows that a patient can get an equally effective treatment in the office as they can in the hospital. Which I think is great for a company like CSI, who wants to offer their technology to patients in need.

We've said, Ben, that we'd average about 40 per quarter. When you look back, in the fourth quarter we did about 49 new accounts, so it was a little higher. This quarter was a little lower. But overall about 40 a quarter's reasonable.

That makes perfect sense. That's all I had. Thank you very much, guys, and nice quarter.

James Terwilliger, The Benchmark Company.

A couple of quick things. First of all, thanks for taking my questions. Second of all, great revenue number here in the quarter, and great guidance for next quarter. I think we've already discussed that.

I wanted to go back a little bit in terms of your coronary trial. And just to make sure I'm on the same page, 33 patients remaining. It's a 3-module submission and you've already submitted Module 1 and Module 2. You expect to submit Module 3 -- did you say early next quarter?

Early in 2013. So, in that January to March quarter.

Okay. And so, then, if -- with 274 days, we should expect -- or hopefully we would get regulatory approval in the first half of calendar 2014. Is that -- am I on the right timeline?

Or earlier. If we're average, it'll be about 270-something days after the time we submit the last piece of the module. We really think that we've done everything we can to be better than average. We're, of course, hoping for clearance in calendar 2013, the back half of it, and the revenue to go with it. That would be great. But as we all know, it's a window, and you could be right.

I just want to make sure from a high level. The 274 days would come down to approximately three quarters, give or take. Would the FDA -- they won't comment on Module 1 or Module 2. They will probably get back to you on all three modules at the same time, or --?

No, and I think one of the advantages of it is, they'll issue questions to us to answer as they read it. So, we wanted to get the work started. And we've got, I think, the best quality and regulatory team in the industry here in the building, and there's plenty of proof sources for that.

Just as a bragging point, we had another on-site FDA inspection here in the last 60 days and there were no findings, which is extraordinary for a small company; but testament to the dedication here of the team.

In the same manner, we got this document submitted. You wouldn't believe the amount of paper that we sent out of this building. But we'll be able to get questions back sooner and respond to those questions on a modular basis too. So, there were a lot of advantages, we felt, to going with the modular approach as opposed to waiting for all of it at the end, one large document.

No, I think it's great, and I commend you for doing this modular approach. I'm very excited about that. I'm going to move on to -- you talked briefly on the medical device tax, and that's something we should be including in SG&A. Is that correct?

Yes. Before, James, I had indicated we thought it was going to be part of cost of sales and gross margin, but we've done some more evaluation of that and it looks like it'll now be part of SG&A.

And so, just a back half -- everyone's doing a little bit different, and I love getting the different comments from each different management team, because it does seem like there's a lot of confusion, not just with the election, but how this whole (inaudible) goes into effect January 1st. Should we be looking at total revenue with 2.3% of that, and include that in the SG&A expenses? Am I thinking about that correctly?

Yes. For our revenue profile, it would unfortunately be calculated based on primarily total revenue.

And I've heard, if companies are losing money, there might be any type of benefits, but that's not something that's out there. Is that true, Larry?

We can continue to hope.

And then last question for me. I'll jump back in queue. When you -- and I know this is a 30,000-foot question, but when you get FDA approval how quickly to launch? And it seemed to me like you would be really well-positioned to launch. Can you talk anything about how quickly you would launch -- what any type of launch plans would look like? Would you have to ramp up any type of sales and marketing?

And it would also seem to me that in a lot of these high-volume hospital accounts, you'd already be well positioned. So, I know that was about four questions in one, but if you could just talk a little bit at 30,000 feet about what you think the launch would look like? And with that, I'll jump back in queue. And thanks again for my questions. And great revenue growth number, guys. Thanks.

Yes. We're obsessing all over those same questions. There's a ton of synergies, because the device, the plaque morphology, the small vessels; the fact that we've got a 120-member footprint out there; and we've got significant revenue and traction in some of the largest coronary interventional labs in the country.

So, we're war gaming. You know, we've got the chess pieces out and we're looking at synergies. One thing that we can say is, we'll stay home with the clinical work and the procedural steps to success. We will use a stair-step approach to have a real quality launch, one account at a time. We won't be racing out to go everywhere. What we'll want to do is do it right, in those accounts that were with us in the trial, of course; and those other accounts beyond that, that are high-volume, and we can gain great access to.

So, it'll be a staged approach. And we're spending a lot of time, and actually some of the investment that you see in the forward quarters is enabling us to prep for that, whether it be cross-training or setting up those synergies so that when we get the good news we can act on it quickly in those first few weeks.

Great job, guys, on the revenue numbers, and take care, guys. Thanks for taking my question.

Jose Haresco, JMP Securities.

Just a quick follow-up question. Given that it is a -- you expect to have the data for ORBIT II in -- you know, call it early calendar 2013, do you expect to be able to talk about something about that trial in either EuroPCR or TCT next year?

You know, I lost you on the last half of that sentence, Jose. Would you mind repeating it?

Oh, sure. I was saying -- wondering, do you expect to present any data on ORBIT II at either EuroPCR or the TCT conference next year?

Oh, yes. TCT should be great. Ideally, in advance of that, the ACC in March, we should be able to highlight the prevalence and the mortality and morbidity of calcium. So, we've got an active strategy that includes both publication and podium to get the word out in advance of clearance; and then once we're cleared, to market the product specifically we're very anxious to do that as well.

It was pretty exciting for all of us and a lot of the doctors to see that data come out at the TCT. That was unexpected, to be able to tap into a reservoir of 19,000 coronary interventions to see what the incidence of calcium were. So, I think, actually, that database will birth a lot of presentations, publications, over time. And I don't think people will wait on that, because it's such an unmet problem, and we may have a very good solution for that.

At this time there are no further questions in queue, and I would now like to hand the call back over to Dave Martin for closing remarks.

We continue to drive top line progress, continue to expand our PAD business, and apply our technology to a coronary application. We are excited about our future potential. Thank you again for joining us today, and we look forward to updating you on our progress next quarter. Thank you.

And ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a wonderful day.