Cardiovascular Systems Inc (CSII) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2014 Cardiovascular Systems Incorporated earnings conference call. My name is Tony and I will be your Operator for today. (Operator Instructions).

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

Thank you, Tony. Good afternoon, and welcome to our fiscal 2014 fourth quarter conference call. During this call we'll make forward-looking statements. These forward-looking statements 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 Form 10-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'll 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 turn the call over now to CSI's President and CEO, Dave Martin.

Thank you, Larry, and hello, everyone. We had a very successful conclusion to fiscal year 2014. Revenues during the fourth quarter grew 37% to $39.6 million. For the year, revenues grew 31% to $136.6 million.

Several noteworthy 2014 achievements helped drive our results. In the first half of fiscal 2014, we prepared the Company for a best-case scenario, FDA approval for our coronary device within the earliest possible window, and this is exactly what happened.

This was possible due to the execution of the CSI team and the excellent results of our ORBIT II trial, which evaluated the Diamondback's effectiveness in treating severely calcified coronary lesions. Specifically, trial results exceeded FDA-established endpoints by a significant margin, including freedom from MACE of 90% and procedural success of 98%.

Results continue to be impressive at the one-year mark, with freedom from target lesion revascularization of 95% in this very difficult-to-treat patient population. Economic outcomes were compelling as well, and showed a cost savings of $3,200 to over $4,000 per case when using our device.

The early FDA approval of our coronary device allowed us to launch the product before the end of calendar 2013, and in just over 6 months in a controlled launch with a small group of dedicated coronary sales professionals, we've seen adoption by key opinion leaders at major institutions, and we generated $5 million in device revenue, selling nearly 1,400 units.

In the fourth quarter we began preparing for a broader commercial launch, including cross-training of some of our PAD sales force to sell both coronary and peripheral products in their accounts.

And the implications are large. Think about, one, a representative in a small, no-travel territory, able to concentrate on sales, service and education; and that same representative representing two high-growth, high-margin, patient-outcomes-focused franchises. This facilitates our mission to create a new standard of care, and certainly services our goal of a highly profitable business over time.

In late March we launched our unique tibiopedal access device, the Low Profile 4 French sheath-compatible peripheral catheter, that allows physicians to treat patients in the small and tortuous vessels located below the knee through alternative access sites, including the ankle or the foot. It's another safe option for our device to go where disease goes.

The retrograde access allows physicians to treat a broader range of patients who may otherwise be facing amputation. In addition, use of smaller sheaths has been shown to reduce procedure and access site closure times. It also lowers radiation exposure, and that's the patient, staff and physician. It enables faster patient recovery and reduces complications from bleeding.

The demand has been very strong, and in fact comprises 5% of peripheral device sales in just the 3 months since commercial launch. Our tibiopedal access and coronary devices are examples of how our Orbital Atherectomy System is expanding the market for intervention and providing sustainable, attractive growth.

Larry will now provide details on our quarterly financial results, and then I'll come back to recap additional clinical and research activity before we take your questions.

Thank you, Dave. CSI performed very well in the fourth quarter. Compared to a year ago, total revenues grew 37% to $39.6 million, which exceeded our guidance range.

Device revenues were 88% of the total. We sold over 11,000 devices, bringing the life-to-date total sold to more than 157,000. Devices sold included 822 coronary units. Coronary device revenue totaled $3 million.

Reorder revenues remained high at 98% of total revenue, higher than 96% in the prior year.

We added 54 new peripheral accounts and 35 coronary accounts. The new coronary accounts are also peripheral customers.

Gross profit margin increased to 77% from 76% in the prior-year quarter. The gains stem from product cost improvements and higher production volumes. These were partially offset by a modest decline in average selling price of our PAD device. The decline was from higher office-based lab sales, which tend to have lower selling prices.

The gross margin was lower than guidance due to charges resulting from a product redesign during the quarter. Going forward, we expect engineering enhancement and increasing production volumes to continue to reduce unit costs.

In addition, we anticipate that sales of new products, like our coronary and tibiopedal access devices, which carry higher average selling prices, will help keep gross margin percentages in the upper 70s.

Operating expenses rose 40% over last year, primarily from planned investments, including approximately $12 million related to the coronary commercial launch, clinical studies and new product development.

We also made investments in sales and marketing; expanded clinical and product development initiatives and medical education programs to continue to fuel PAD adoption. We believe these important investments will drive higher future revenues.

Additionally, expenses related to higher incentive compensation for performance achievement and earlier expansion of our coronary launch, caused operating expenses to be greater than guidance for the quarter.

Net loss was $9.6 million, or $0.31 per share, and compares to a loss of $6.8 million, or $0.28 per share, last year. The number of weighted average shares outstanding rose to 31 million from 24.2 million last year. This was due to the issuance of 3 million shares in our November 2013 stock offering, as well as the issuance of stock from debt conversions, employee stock plans and warrant exercises. All warrants have been exercised or have expired.

Adjusted EBITDA was a loss of $5.9 million compared to a loss of $4.3 million last year. The increase was from a larger operating loss, partially offset by higher stock compensation expense.

Excluding net expenses related to our coronary launch, adjusted EBITDA was positive for the quarter. At quarter end we had a cash balance of $127 million. We are primarily using our cash to fund our growth investments, including coronary launch initiatives, clinical studies, product portfolio expansion, education programs, and international expansion in the future.

In addition, we are building a new manufacturing facility and corporate headquarters in Minnesota to accommodate our growth. Progress payments and deposits for that facility totaled approximately $11 million in the quarter.

I won't discuss details of our full fiscal year 2014 results this afternoon, but would be happy to answer any questions you might have. And I'll turn it back to Dave for further commentary.

Thanks, Larry. CSI is committed to ongoing clinical science that gives physicians and patients the confidence that our innovative and cost-effective solutions are the treatment for calcified arterial disease.

Arterial calcium is an enormous underserved problem. Our orbital atherectomy technology provides cost-effective and long-term, durable outcomes for these difficult-to-treat patients.

During the fourth quarter we continued to advance our clinical initiatives. Enrollment is ramping in LIBERTY 360, and to recap, this study is evaluating the acute and long-term clinical and economic outcomes of our Orbital Atherectomy Systems in treating PAD. It's a landmark study, it's the first of its kind, and it compares orbital atherectomy to all other PAD interventional treatment options.

More than 300 patients have been enrolled to date and we expect enrollment to accelerate as more sites complete their internal review process.

We also began enrolling patients in our Coronary Orbital Atherectomy System trial, or COAST trial. This trial is taking place in the United States and Japan. This study is designed to assess the safety, efficacy, as well as the economic outcomes of our new Micro Crown. It's also designed to facilitate approval of our system in Japan, the second-largest atherectomy market in the world. Dr. Art Lee, North Florida Regional Medical Center in Gainesville, Florida, performed the first procedure for our COAST trial.

In February of this calendar year we released the one-year data from our ORBIT II study. Results continue to show a high freedom from MACE or adverse events, including an impressive 95% freedom from target lesion revascularization. In the first half of calendar 2015 we will have 2-year data to share with the medical community, and we're looking forward to this important milestone.

Coming back to our results, after reporting a particularly strong revenue quarter and year, I need to recognize our commercial organization, led by Executive Vice President Kevin Kenny, Senior Vice President Jim Breidenstein, and Marketing Vice President David Veino. Under their direction and that of their peers and the team at our Texas and Minnesota headquarters, CSI has developed and recruited a best-in-class group of commercial professionals.

Looking ahead, we plan to equip our sales and medical education teams with the products and the training to substantially increase their productivity. Commercialization of the coronary and tibiopedal access products gives our sales professionals devices that allow physicians to expand their endovascular practices; build market; allow new patients to access treatment, while reducing complications.

During the quarter we launched Project Evolve, our sales education program, to cross-train our existing peripheral sales force to sell and educate on our coronary device. Clearly, the benefits of this project will have a significant impact on CSI's results as we move forward.

As you're aware, 70% of our physician customers are interventional cardiologists. Our new hybrid representatives will now be able to approach their existing accounts with a treatment option for calcified lesions everywhere. We expect to have the majority of our sales force cross-trained by the end of fiscal 2015.

As you can imagine, this will be powerful for productivity and our mission to expand accessibility in the needy peripheral vascular disease and coronary vascular disease market for improved vascular outcomes.

Now, I'll detail our financial outlook for the fiscal 2015 quarter ending September 30.

Revenue is expected to be in the range of $39.5 million to $40.7 million, representing year-over-year growth of 33% to 37%, including $5 million of coronary revenue. This range reflects the typical slow procedure volume during the summer and the potential impact of transitioning a portion of our peripheral sales representatives to the combined coronary and peripheral sales model, as well as the timing of our national sales and education meeting.

Gross profit is anticipated to be 77.5% to 78%.

Operating expenses should increase 4% to 5% compared to the fourth quarter of fiscal 2014, primarily for our broader commercial launch of the coronary product, as well as growing enrollment in our clinical studies, product development, and the timing of sales meetings and conferences.

Net loss is expected to range from $10.3 million to $11 million. This equates to a loss per share of $0.33 to $0.35 based on 31.3 million average shares outstanding.

In closing, we're excited about our progress, including several factors that give us confidence that we can maintain momentum going forward.

Specifically, we'll continue to execute to the following -- building on the excellent results from our controlled rollout of the coronary device and broadening our commercial launch; our peripheral business is high-growth and on a pro forma basis is profitable, so you can imagine, continued success developing our new coronary franchise makes the prospects for a contribution and growth in profitability over time, excellent; conducting rigorous clinical studies that demonstrate the safety and effectiveness of our technology; and, investing in the development of innovative, market-expanding products and technologies.

These continued investments will enable CSI to maintain its leadership and market-expanding position.

That completes our prepared remarks. Operator, we're ready to take questions.

(Operator Instructions). Brooks O'Neil, Dougherty & Company.

Congratulations. So, I was just curious -- I think I heard Larry talked a little bit about the gross margin, but I was distracted. Could you -- it looked like it came down just a little bit sequentially; and I'm curious, what were the factors that drove that?

Yes. We had a redesign of a product during the quarter, and -- resulted in us writing off some inventory. It impacted the gross margin about 0.5%.

Okay. Great. That's very helpful. And then, I understand you didn't talk about it in the prepared remarks, and it probably suggests there isn't a lot to say, but can you give us any update on the CID from the Western District of North Carolina?

Yes. We're continuing to cooperate and clarify what document requirements are needed, and that is progressing. We're generating documents -- nothing really further to report. It -- as we've said before, this will take some time to resolve, but we're cooperating fully and moving it forward.

Sure. Could you just talk a little bit about your plans for the headquarters, and how you're thinking about that facility in the context of your longer-term growth plans?

Sure. We really are looking forward to that. Things are progressing, and I look forward to reuniting the Company -- we're spread out a little bit here -- beyond headquarters and annexes. And we've got demonstrated capabilities, not only in manufacturing but in medical education.

That new headquarters is going to reflect those capabilities and our continued excellence. We're going to manufacture there. We're going to train physicians there. We're going to train employees there. And R&D, which now has a robust short-term, medium-term and long-term queue, is going to benefit from being in the headquarters as well.

You wouldn't want to tell us anything about that queue that you just alluded to, would you?

Well, a little bit. We do believe that allowing patients in need to access intervention is happening right now. Right now we've got -- I'll give you two examples of situations, one in Florida, where this morning a physician used our new pedal device -- treated three tibial vessels -- the three vessels in the calf.

That patient was miserable; was in one of the 2 million-plus patients in the United States alone, who had non-healing wounds. That patient was able to get free flow to the foot.

The procedure took place at about 7.30 or 8.00 in the morning. That same patient -- because it was a small-access 4 French with our device -- only our device could have been used -- was dismissed from the hospital at 10.00 a.m. That's extraordinary; could not have happened but for our technology and the confidence that physicians have in our clinical evidence and our training programs.

Now, that same practice over the course of 4 years has had a four-fold increase in vascular disease encounters and angiograms. At the same time they've treated more patients in their community, they've had a lowered incidence, as a raw number and percentage, of complications. One measures amputations. They've got annual amputations down from over 25 or about 25, to under 3. That's a Florida hospital.

It's worth talking about another center in the Midwest, who was treating, in 2008, about 250 patients that -- about that many peripheral vascular encounters, is what they call them. That moved over the course of 4 years to over 1,100.

So, during that same time where they expanded access to the community of patients in need in that area, they also had a decline in major and minor amputations, down to less than 1%.

So, increased treatment and access for the patients; lowered cost and complications for those same patients. It's a great recipe, and it's enabled by our technology and clinical proof.

So, that was a long-winded answer, but it was worth it because of -- especially with this morning's case, I wanted to make clear where we are. And I think, if we look at the peripheral vascular market, and it's kind of stuck at, or has been over time, in that under 1 million vascular interventions, despite 2.7 million annually being properly diagnosed with peripheral vascular disease -- it's our technology and proof that will get that over 1 million interventions over time, which better matches the need in the United States.

That's great. Last thing -- I was just curious if you could touch on the competitive environment. Anything you're seeing out there in either the PAD area or the coronary area that is worth talking about?

Yes. We're excited by the investment and -- in adjunct therapies. Once you clean out the major impediment to a good result, calcium, with our device -- ours is the primary therapy -- we do think that drug therapies might be promising. There's some indication to say that adult stem cells might have a role. We think we're uniquely positioned to be part of that solution, and that's part of our active R&D queue in fact.

Great. Thank you very much.

Mike Matson, Needham.

I guess I wanted to start with another competitive question. There's been some M&A in the atherectomy space. We've seen Boston Scientific buy the Bayer interventional business, and then Volcano buy AtheroMed.

And I was just wondering what your views are on those products. How do you think those do in the real hard, calcified lesions? Do you think that they're competitive at all? And then, do you think that having those technologies in the hands of larger companies will make them any more competitive than they would have been on their own?

That's a great question. Thanks for asking it. Yes, atherectomy's a broad and sometimes confusing category.

The way the device technology works -- the way the device interacts with the anatomy -- is so important for the clinical and economic result. Our mechanism of action -- our orbiting sander leaves the healthy native artery intact, but removes that complicating factor, calcium. We're the only ones that can do it.

So, I think some of the other technologies, while interesting, and perhaps in the hands of a larger competitor might seem compelling -- I think just looking at the SilverHawk experience, ev3 to Covidien, now in the hands of Medtronic -- they are not sharing the growth, market expansion, and the demonstrative impact on outcomes that we've delivered over the last 5 years. The mechanism of that device is completely different, starting with the fact that it doesn't discriminate between healthy tissue and disease.

So, our mechanism, safe to the native artery and producing these results, is really, really important. So, we see that activity as well, but unfortunately it won't expand the market for better treatment options for patients.

Okay.

Ours will.

And just to clarify -- I mean -- so, you don't think either of those companies' products, atherectomy devices, are all that useful for the real calcified lesions?

Yes. They don't discriminate between healthy tissue and plaque. Development, I'm sure, is always ongoing, and there's certainly room and plenty of disease for people to treat. So, the category could have another player. But right now, the CSI Diamondback 360 is the only one that leaves the native artery intact, removes the plaque, and has proven results both on durability and a positive economic outcome.

Okay. Then just on the tibial pedal product, you mentioned it was 5% of your business this quarter, I think, or at least in peripheral. So, I'm wondering, how much of that 5% do you think is incremental versus cannibalizing some of the other products that you otherwise would have sold for those cases?

Yes. It's a great question. There's probably a little mix of both. I think some physicians were making it work with our longer device. So, this is another option, and I think we'll continue down the path of 4 French, really small access, and therefore safer devices, including radial -- a radial device in the near future.

So, I think there's some cannibalization. It's not clear, the mix right now. But what is clear is that the thirst for new access points and for safer procedures is large, and we're going to supply that over time. This is just the first device to meet that need.

Okay. And then finally, you are sitting on a decent amount of cash and I was wondering if you have any plans with regard to M&A yourself, given we've seen some other activity in the peripheral space.

And I'm just wondering, is your intention to really remain pretty tightly focused on the atherectomy space or do you have any intention of becoming a broader player, either in coronary or peripheral, as we've seen companies like Spectranetics do?

Right. Improved patient outcomes in our area of expertise, vascular intervention, is the primary mission. That may take us other places. We are wide open. We've got great capability here, and for a company our size, [kind of] unique assets, like regulatory; we've got a research department now, and we're phenomenal at development. Commercialization is a demonstrated success capability.

So, we're open for those things that are maybe a little more raw. We're open to IP. We're open to develop things. And the focus would be on those things that would deliver -- help us deliver a superior clinical and economic outcome. So, we're open. And we recently are on the verge of committing to corporate development in a more robust way.

So, I think our offense, and ability to get those feelers out there to look at some of the assets, is going to improve over time. And yes, we've looked at some of the assets that have come across other desks as well. So, we feel like we've been tapped in, and we'll continue to improve our ability to tap into opportunities going forward.

All right. That's all I have. Thank you.

Margaret Kaczor, William Blair.

Just a couple for us here. You guys talked a little bit about expanding the portion of sales reps that are selling coronary. So, how many of those reps were selling in the past quarter versus the next quarter?

Yes, Margaret. We just -- you're talking about the hybrid reps that sell both products?

Yes.

Yes. Yes. We just started training those last quarter, so we went into this quarter with about 30 -- into this first quarter. We're going to continue to train those in tranches as we go through the year, so the majority will be cross-trained by the end of this fiscal year.

I mean, to that point, then, shouldn't we expect sales to accelerate really, I guess, more materially as the year goes on, just based on that sheer number of reps that are going to be selling into that channel -- who are cross-selling (inaudible)?

Yes. We'd expect coronary revenue to continue to grow. We are still doing a measured approach, though, because we are still certifying physicians. The reps that get trained are going through a very rigorous training and certification process. They get proctored by the reps and the doctors. So, it's not opening the floodgates, but it's a nice measured approach that we expect to continue to grow and increase growth.

And is that kind of -- I guess the back half of 2015, when we see more of the expense leverage go through, as you take this on into cross-selling?

Yes. I think that's fair. There are some -- it is costly to cross-train everybody. It takes them out of the field for a while. So, it is a process. But you should be able to start to see some leverage as we progress through the year.

Okay. And then, in terms of the clinical outcomes, how are those coming in now versus maybe when you originally came out towards the end of December? Has there been a change in kind of the rate of successful completions, or of complications compared to that ORBIT II trial?

So, you're talking about coronary -- no, we -- I'll tell you what, one part of the success -- we've been ahead of plan almost by every measure; actually, by every measure.

Starting with outcomes, we did take a close look at those first 100 cases. We modified our physician training and cemented in some of our physician training mechanisms and employee training mechanisms to make sure that we could ensure that result over that time. We've kept our controlled rollout process in place. And so, the outcomes have been dynamite.

So, we've got a lot of satisfied users. And that validates being controlled on -- in the forward quarters as well, and we think we'll get continued growth in revenue; but alongside that, we'll continue with the real positive outcomes in a difficult-to-treat patient population.

Okay. And last one for me -- can you talk about the peripheral number? Obviously another good number this quarter. Was it the new kind of Low Profile device that really expanded the market for you guys, or is it really more the market growth? And any kind of clarity on market growth would be helpful. Thank you.

Are you talking about our peripheral products, our new products, and that new anatomy -- traditionally, arteries below the knee just weren't treated. The technology wasn't there to allow the physicians to do it safely and routinely.

And that's just the opposite now, with our devices. Physicians are opening up their practices, where they'd previously just treated the SFA, and now they treat routinely below the knee. And below the knee is unfortunately prolific with calcium. And now, not only are they able to do it through the traditional access point, the groin, but now they can access through the foot and the tibial artery.

So, that revenue is sticky; it's exciting; it's got a direct connect to market expansion, and it's got a direct connect to a better outcome for the patient. Does that answer your question?

Yes. And then, I mean, just broadly in peripherals as well, what is the market growing? Is it really growing in the mid-20s? How is that shaking out?

Not for everybody. I think overall, blended, it's probably in that 8% range. I think you've seen some of the vascular results from the big companies. They're growing 0% to 2%. Some of the smaller companies, with products that meet the need, are growing larger than that.

And of course, I think you can see by our results over time this quarter that we are the absolute leader in growth for the vascular space. And that's because we're routinely accessing anatomy that had disease but just couldn't be accessed routinely and safely by the doctor.

So, ours is a market expansion story, and we really do believe that we can serve our mission by allowing the millions of patients who are suffering right now in a very ineffective, difficult on them and their families way -- we can -- just like those two practice examples, we can expand the market while lowering cost and complications. So, it's a really, really motivating story for the team there.

Great. Thank you.

Jose Haresco, JMP Securities.

First of all, congratulations on another outstanding quarter. Just a couple housekeeping items. Larry, what was the other revenue in the quarter?

The dollar amount is about 11.5% of total revenue.

Yes. Is that a [fully] fair percentage in terms --

$4.7 million, absolute dollars.

Okay. Is that 11% to 12% still a fair number for the remainder of the year, or do you expect it to tick up in its growth rate?

No, I think it's going to flow with the device usage with the current product set. But as Dave said, we are enhancing our efforts to be able to look at other technologies, so it's possible we could add something to the bag. But with our current product set, that's a reasonable level.

Okay. With -- could you give us an update on your hiring plans? I know in addition to cross-selling, or training your sales force to cross-sell, you're also contemplating expansion of that sales force. So, where are we in that process, and when do we expect that hiring to be done by?

We're expecting overall, right now, probably increasing by about 25 sales representatives over the next couple of quarters. As we go through our cross-training process and see how the market evolves, that could change. We could refine that. But right now, that's about what we anticipate.

Okay. As we -- you added a lot of new accounts on the coronary side -- I believe 35 coronary accounts. Is that right?

That's correct.

Is that a fair number to model going forward, given that you're expanding your -- essentially expanding your sales force in coronary, or should we expect -- is there some reason we could expect those new account adds to slow?

Yes. It'll -- we had a really, really good quarter from that regard. I'd say on average that's probably a reasonable quarterly number. It might start a little lower and grow during the year.

Okay. I guess, lastly, on potential upcoming data, do you guys know if there's going to be anything at TCT later, in a few weeks?

We won't quite have our 2-year ORBIT II data ready then. It'll be more just past the turn of the year. So, for us, the next milestone -- we think that 2-year ORBIT II data's going to be exciting and received very well. But it won't make it in time for TCT this year.

Okay. Great. Thank you very much. Congratulations again.

Jan Wald, Benchmark.

Great quarter. Congratulations. I have a couple of questions. Just going back to the sales force a little bit, you're expanding the sales force in a way by having hybrid folks. It seems to me that that might be -- it might in some sense de-focus the effort, because you're going after a peripheral customer and the coronary customer with the same sales person.

In your experience, are they the same individuals, or is it because you're at the same institution that you can get the synergies that I guess you're expecting to see?

That's -- it's a great question. And in the absence of shrinking the territory and the span of control, could be distraction.

But we've got multiple synergies. One, it's the same wonderful mechanism; two, seven out of ten of our physicians do both coronary intervention and peripheral intervention in the same week, at the same hospital; and three, we will shrink territories.

So, we won't let the span of control be so large that it's hectic. We will provide focused service for the most part in non-travel territories, and we think that's going to be a real force multiplier for delivering physician training and hospital support, and it'll deliver efficiencies, including continued great patient outcomes.

Okay. And next question, I guess -- in terms of your economic analyses that you're doing, I know you've already done economic outcomes, and you've shown some pretty nice savings. The studies that you're going to do, going to look at cost-effectiveness of the procedure, or don't you have enough long-term data to do that yet?

Well, on the peripheral side, LIBERTY 360 will collect a lot of data, including economic and some comparative cost-effectiveness data. On the ORBIT II, we've got acute proof of economic efficiency, and we'll continue to track economic data over time. As you know, the most expensive thing that can happen is a reintervention.

So, as those patients age, and age without the need for reintervention, I think our long-term economic prospects on the coronary franchise look great. And we're equally as confident given the wealth of data we've got on the peripheral side, and what that's shown economically, that LIBERTY 360 will be another proof point for economic outcomes over time.

Yes. I would think, personally, that the (inaudible) you would be able to generate would be pretty nice. And I guess, if you were to generate that, when do you think you would be able to generate that kind of information and put it in your sales pack?

Well, on the coronary side, we're -- which -- we've got a MACE trial that tracks adverse events out there in the -- kind of, the non-Diamondback community.

And that's going to be a great baseline. It's going to support some of the data that's been uncovered and presented at recent meetings, including last year's TCT, regarding the adverse events, complication and costs related to calcium, and the incidence of. So, that MACE trial, I think, will be a great baseline and will continue to support what we think about calcium. And then we'll be able to compare that to ORBIT II as it ages.

And ORBIT II was a -- that was a tough trial. That was a PMA trial, and very rigorous. And so, the ageing of that trial, I think, will present a great opportunity for key opinion leaders and scientists to get on the podium at various meetings and in various publications to prove that a lack of complication and improved durability really pay for the system and for the patient.

And my last question, on a completely different topic -- if I heard you right, you're going to have a brachial device -- a device that you'd be able to implant using the brachial artery.

Yes.

Do you see that as generating additional patients or providing ease of use for the physician, and probably better patient satisfaction? How do you see that being added to your toolbox?

Yes. So -- and it's really exciting. If you read some of the publications and some of the physician prognosticators, the incidence of radial access -- a small hole in the arm -- just for coronary interventions right now is growing rapidly. And so, you get a device like ours, that fits right into that queue and that trend -- I think will help accelerate that.

One prediction in a recent medical journal predicted that in less than 5 years over 50% of coronary interventions will be through a 4 French access site, primarily through the arm. So, we're going to lead an exciting trend that centers on patient safety and choices for the physician.

That same benefit can be brought to the legs. Our ability to access through the foot or through the calf is really exciting. There's a lot of -- I wouldn't even call them side benefits, but the fact that you can use ultrasound to visualize your intervention in the legs, and limit the use of contrast for these sick patients; limit the use of radiation for physician, patient and staff.

It's got a cost component, but the most exciting thing is the complication and exposure rate. Right? So, you just start walking those down, and there's a strong reason for the continued trend in small access and alternative access to the groin. We're going to be a real part of it -- a leading part of it.

And have you made public a timeline for this, or not yet?

We haven't made public a timeline for our radial device. We have not.

Okay. Thank you very much; and again, great quarter.

Ben Haynor, Feltl.

I know it's early days for coronary, but I was wondering if there's any trends that you've kind of picked up on in some of these [early] utilization. And maybe a couple docs starting out with it, and now it's three or four docs -- any commentary that you could provide there?

Yes. A couple of exciting things. In an account where -- there's a predicate device called the Rotablator. It's out of patent; it's 20 years old. But it's what people were trained on and familiar with. On the surface, when we first meet someone, they can mistakenly say, hey, they're the same. So, why would I be interested in this?

But the awareness -- the excitement around understanding that our mechanism is completely different, not only is fun the first day of the case, because the case is -- in just seconds of sanding, you could turn a very complicated -- which would have been a hair-raising case, into a simple case. All of a sudden you're back to par, so to speak, after 30 seconds of sanding and eliminating the calcium. And that translates to the usage.

So, in accounts where there might have been two specialists who handle the complicated coronary cases that were prolific with calcium, there might have been two in a practice of 14 interventionalists that did those cases, and they may have used the Rotablator. We've got examples where there's now nine and ten people keeping those cases and using the Diamondback 360.

So, it's truly an easy-to-use device. The mechanism is unique and has never been offered before. And so, we're seeing more use in difficult cases, and that's exciting. You know, (inaudible) from Mount Sinai and some of these institutions are becoming great training sites, and that's the fun of it.

And we think it marries nicely with our ORBIT II, with the 100 patients we tracked in the first part of the commercial experience, and that's why we've got a lot of optimism about the contribution that we can make over time in this coronary franchise.

Yes. Ben, when we look at our coronary accounts, even though they're at various stages of adoption, some very early in the process, the utilization is still almost twice that of our peripheral accounts. So, it's good solid adoption in those accounts.

Excellent. That's very helpful. And then, finally, any update you can provide on any outside-the-US regulatory activities you might be undertaking other than the COAST study?

Yes. We're being very methodical about building a platform for both European and Japanese introductions. We talked about the COAST trial, and we really think we're on a fast track for approval with the Japanese ministry. All the while, we'll be able to get our second-generation device approved in the US -- that Micro Crown. We're really optimistic about that.

But in Europe -- we've made several trips over to Europe. We've identified some management for Europe. We're going to start with proving clinical and economic outcomes in a select few accounts. Those accounts would have physicians who ultimately would be our trainers.

So, we think that we'll get approval perhaps in fiscal 2015, but we're not really looking for measurable revenue at all, really, until 2016. So, we'll take a methodical approach, starting with patient outcomes, and then we'll move that into a real healthy, sticky, healthy-margin business.

Excellent. That's all I have. Thanks a lot, gentlemen.

Danielle Antalffy, Leerink Partners.

Congrats on a great quarter. I just was trying to -- following up on an earlier question, on the peripheral side of things, and market growth, trying to get a sense of the runway that's left here. Where do you think atherectomy is today as a percent of procedures? Any sense of that?

That's a tough one. We don't track it.

Okay.

So, you -- as a percent of overall procedures, we don't know. And I think some of the companies who've got atherectomy quote-unquote offerings -- they don't divulge it, so it'll be hard for anyone to get.

We do know it's -- we know the anatomy in which it's growing the fastest. Because of us, clearly, atherectomy is super-high-growth in calcified lesions everywhere, particularly small-vessel. And that's easy for us to see. And we also know that, really, no one else is there. So, it's pure market growth and it's primarily all CSI.

It's probably in that 15%-plus range of procedures, Danielle.

Oh, okay. That's helpful. So, lots of runway left.

And then two followup questions. Number one -- we've obviously seen, now, pretty good data on the drug-coated balloon side from Medtronic. How do you think drug-coated balloons fit into the PAD treatment paradigm going forward? Obviously not -- you know, a few years, or a year or so away from the US market; but just curious what you're -- how are you guys thinking about that?

We're really optimistic about adjunct therapies in the role of pharma, in providing a better result. I think one of the --a couple of the studies that have been out -- one, the below-the-knee Medtronic study, which I think was stopped before it was finished. And the results of the Bard Lutonix study -- as opposed to expectations, it does show the limitations of delivering that drug on a balloon.

Uh-huh.

A high-pressure balloon -- it has limitations. We think that it'll provide some benefit; but there might be opportunity to improve on the delivery system, and therefore the ultimate outcomes. So, we're excited about the investment and the possibilities.

Okay. And last question for you guys -- with the Low Profile device, how many accounts -- how many of your peripheral accounts do you have using that device at this point?

About 150. About 150 are using that device and starting to use those new access sites.

And has that been increasing procedures overall at those accounts, or is it they're replacing other procedures?

No, those are -- it does two things. One, it can make a very difficult case easy. For example, a chronic total occlusion is very difficult from above, but it's real easy from below. But it also allows you to bring in those patients who have been suffering with non-healing wounds, who you might not have considered before for treatment, and then all of a sudden, now it's wide open.

And like the patient this morning, with Dr. [Sangiliyan] in Florida -- that patient comes in; new access point; three-vessel revascularization; free flow to the foot; leaves the hospital at 10.00 a.m., and now have -- has great prospects for wound healing and a whole different life.

Okay. Thanks so much.

That concludes today's question-and-answer session. I would now like to turn the call over to Mr. Dave Martin, CEO, for closing remarks.

Thanks, everyone, for joining us today. We remain committed to helping physicians conquer the most difficult disease states, including arterial calcium, given the complications it presents for the millions who suffer from PAD and CAD.

Our strong fourth quarter and fiscal 2014 sales results demonstrate that a growing number of physicians agree that our technology helps improve patient outcomes for this very sick population. We look forward to updating you next quarter.

Ladies and gentlemen, that concludes today's conference call. Thank you so much for your participation. You may now disconnect, and have a great day.