德康醫療 (DXCM) 2005 Q4 法說會逐字稿

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  • Operator

  • Thank you for standing by, and welcome to DexCom's fourth quarter results conference call. Today's conference is being recorded. At this time, all participants are in a listen-only mode. Following today's presentation, we'll conduct a question and answer session. Instructions will be given at that time for you to queue up for your questions. Now, at this time, I'd like to turn the conference over to Andrew Rasdal, Chief Executive Officer.

  • Mr. Rasdal, please go ahead.

  • Good afternoon and thanks for joining us. I'll let Steve Kemper, our CFO, start off with some initial remarks.

  • Steve Kemper - CFO

  • Hello, everyone. Thanks for joining the call. I just would like to repeat the Safe Harbor statement. We will be making forward-looking statements about our business and regulatory areas and other areas of the company, so please refer to our 10-K as well as all of our other SEC filings for a full discussion of the risk factors. Thanks, and I'll turn it back to Andy now.

  • Andrew Rasdal - President and CEO

  • Great. What I'd like to run through today here in terms of an agenda is first talk about our Short Term Sensor program, talk about the regulatory status, our clinical and technical development progress, and our preparedness for any potential commercialization. I'd like to spend a little time updating on the Long Term program, provide an overview of our litigation and intellectual property status. I'll then turn it back over to Steve and let him go in more detail through the financial results and then wrap up with a few closing comments and open it up for questions.

  • So, at this point, I'd like to start on the Short Term update. At this time, we have nothing material from the FDA regarding our PMA to report at this time. We still hope for a decision from the FDA regarding the approvability of our PMA for the STS by early Q2, as we have previously guided. Although we can't predict the FDA decisions, we remain very optimistic. Also, kind of semi-regulatory front, our request for a waiver for our STS to transmit in the mixed band.

  • Our frequency was granted by the FCC. We're thankful for the FCC's consideration and decision on the matter. We'd also like to take the time just to thank the folks. We're very appreciative of the effort by clinicians and patient advocacy group to help educate the FCC on the potential impact continuous glucose monitoring may have on people with diabetes.

  • From a clinical and technical standpoint, we had an article authored by our clinical investigators from our pivotal clinical study for our STS, which was peer reviewed, published in the January 2006 edition of Diabetes Care, a publication of the American Diabetes Association.

  • The article provides the full results from the study and highlights the potential clinical and economic impacts of continuous glucose monitoring. Obviously, we're all excited to have the article this early. Having a peer-reviewed article citing clinical outcomes related to continuous glucose monitoring will be very helpful to ours and others' future regulatory and reimbursement efforts, as well as ultimately providing our field force an important educational tool.

  • We've also submitted data from our seven-day trial to be considered for publication and presentation at the annual scientific sessions at both the ACE meeting and the American Diabetes annual meeting for 2006. We're still on track and intend to submit a PMA supplement for approval after and if the approval for our PMA for the STS is received. Since we've completed our 86-patient, 21-day study for the 70 STS last July, we've continued to make considerable technical process, we believe, that improves the performance and usability of the product. We may conduct a short, small registry to incorporate these improvements into the PMA submission when and if we submit that.

  • Based on conversations with patients and physicians in our ongoing trials, we continue to believe a seven-day Short Term Sensor may offer an even higher level of convenience and disease management and further differentiation for DexCom. We're excited. The acceptance of a seven-day sensor is very attractive to the company from a profitability perspective as we do not expect the seven-day STS to cost much more to manufacture, but do expect some pricing premium over the three-day, Short Term Sensor.

  • We had talked on our last call that we had initiated some feasibility studies to further explore what may be required for replacement claim labeling form the FDA. Towards the end of last year, we had completed, we enrolled 35 patients in five feasibility studies at three U.S. centers to evaluate the study design and sensor performance related to seeking replacement claim from the FDA. We believe we now have a better understanding of the sensor performance, and the studies required full replacement labeling.

  • However, there are still no clear guidelines from the FDA for replacement claim, nor is there any clear predicate to study or device. However, we intend to file an IDE with the FDA for a replacement claim to start a study sometime after we've received a decision regarding the approval of our current STS PMA.

  • We are also currently enrolling a trial that allows us to collect data on and gain experience with patients using the STS Continuous for a three-month period, or 90 days of consecutive use. If fully enrolled, the study could have up to 400 patients at 20 U.S. centers. We have currently enrolled approximately 130 patients at seven U.S. sites, and we're gaining great wealth of both data and experience with the product, having people use it for much longer periods of time.

  • We've continued to prepare for potential commercialization should we receive FDA approval. It's our desire to launch the STS as soon as possible if we receive approval. Back in November, we hired Rod Kellogg as our Vice President of sales to build our field sales and customer service organizations. We've hired our first regional sales managers and are currently conducting interviews with potential sales representatives.

  • We're very pleased with the quality of potential candidates that have approached us, and we expect to have an initial field force in place when and if we receive FDA approval. We've also made some significant internal progress. We have installed the infrastructure, including the information technology systems required for us to receive, process, ship, build and service customer orders if we receive approval.

  • We've continued our focus through Q4 on process development and optimization of our manufacturing to allow us to reliably scale production if and when we receive approval. In the fourth quarter of '05, we made a significant investment in materials and supplies that would be required to build product if we received approval. We've streamlined and solidified the processes for working more effectively and efficiently with our key partners, such as AMI Semiconductors, who supplies our ASIC to us.

  • And, in Q4, we invested in numerous trial production runs to test and to validate our manufacturing processes to make reliable products. These products were essentially all consumed in vitro animal testing or human clinical studies during the same quarter to ensure consistent and reliable performance in the actual situation of in vivo use.

  • Related to our Long Term Sensor program, we continue make technical progress on the program. We continue to be pleased with the new innovations, especially the new biomaterials we mentioned on the last call, that we've made related to biomaterials that may improve performance. And we're currently evaluating the impact of these innovations on our G3 platform in animal studies, showing extended use. We plan to fully evaluate these potential improvements, as we've mentioned before, potentially including human feasibility trials outside the U.S. before enrolling any additional patients in our U.S. IDE that's currently open.

  • Clearly, as we continue to raise the level of performance by our STS platform, including demonstrating the ability of our short-term sensor to perform reliably over longer periods of time, we also raise both the internal and external expectations for the performance of our long-term sensor program.

  • Related to our current litigation with Abbott, Judge Sleet, the presiding judge in the case, held a scheduling hearing on the litigation on February the 23rd. He did not and has not ruled on our motion to dismiss the case. He did set a trial date for October of 2007, thus without any delays it would be approximately 20 months from now when we'd begin arguing the case in court.

  • We also filed are request with the U.S. Patent Office for the reexamination of all four patients cited by Abbott in their complaint. Based upon our legal counsel's analysis of these patents, we feel there is grounds for reexamination of those patents. However, there's no guarantee the U.S. Patent Office will grant our request for one or any of those for reexamination. We'd expect a decision regarding our request for reexamination in the next 90 days or less. If your request for reexamination is granted, we'll have more to say at that time about the possible outcomes and implications. In the meantime, we have filed another motion to stay the case based upon our request for reexamination.

  • Regardless, we refuse to be distracted from our passionate commitment to obtain approval for the short-term center and to make it available as soon as possible for people with diabetes who may benefit from this important new technology.

  • With that, I'd like to turn it over to our Chief Financial Officer, Steve Kemper, to comment a little more fully on the financial results from the quarter, as well as the year.

  • Steve Kemper - CFO

  • Thanks, Andy. As Andy mentioned, I'll go briefly through the financials, covering first the fourth quarter and then speaking about the full 2005 fiscal year. DexCom today reported a net loss attributable to common shareholders of 12.1 million fort he fourth quarter of 2005, or a loss of $0.48 per share, compared to a net loss of 4.6 million for the fourth quarter of 2004 for a loss of $1.98 per share for that period.

  • The per-share numbers are not directly comparable, due to the relatively low level of common shares outstanding in 2004 that was prior to the conversion of our preferred stock that happened around our IPO.

  • Research and development expense, excluding stock-based compensation, increased 7.7 million to 10.7 million for the fourth quarter of 2005, compared to 3.1 million for the same quarter in 2004. As we are still a development-stage company, our R&D includes manufacturing, clinical and regulatory, as well as development and engineering.

  • The increases primarily related to a 6.2 million increase in our manufacturing expenses and a 1.5 million increase on the development side. Included in the manufacturing-related costs were 5.7 million in higher material procurements to support our repeated use study that Andy mentioned, as well as for materials received in preparation for volume production. Again, as we are a development-stage company, we are still expensing all of our materials.

  • The 5.7 million material expense includes approximately 2 million in materials and supplies that were on hand at the end of the year, as well as the recording of a $2 million loss on firm purchase commitments for some electronic materials scheduled for delivery in early 2006.

  • This purchase commitment is related to an initial quantity of some on-order electronic materials that we currently do not plan on recovering in our initial sales. These costs should decline rapidly as we scale our manufacturing operations. The 1.5 million in higher development expenses are primarily associated with increased compensation as we continue to build up our R&D team and for design costs related to the design of production tooling and fixtures.

  • Our SG&A expenses, including stock-based comp, increased 1.1 million to 1.5 million for the fourth quarter of 2005, compared to 440,000 for the fourth quarter of 2004. The increases here were in two main areas. Approximately 300,000 in initial sales and marketing expense, where we had none in 2004, and approximately 400,000 in public company expenses - insurance and legal, board expenses, accounting, Sarbanes-Oxley, that sort of thing.

  • Stock-based compensation expenses for the quarter increased 12,000 to 316,000 for the fourth quarter of '05, compared to 304,000 in '04. These costs were related to our pre-IPO stock options, and, as you know, this treatment will change when we adopt the new FAS-123R as of January 1 of this year.

  • Our interest income increased approximately $500,000 in the fourth quarter of 2005 compared to 2004 as we earned interest on the cash balances raised during our IPO. For the fully year, DexCom reported a net loss of 30.8 million for 2005, compared to a net loss of 13.9 million for the full year in 2004. The loss per share was $1.63 for 2005, compared to a loss per share of $7.51 for '04. Again, those figures are now directly comparable, due to the accretion and later conversion of our preferred stock. We did provide a pro forma disclosure, as in the past, in the notes to our financial statements, that provide additional clarity, so please refer to our 10-K for additional discussion on that.

  • R&D expense, excluding stock-based comp for the year increased 13.3 million to 25.5 million for 2005, compared to 12.2 million for 2004. The primary drivers of this increase were, again, 7.7 million in higher manufacturing expenses, 3.7 million in higher development expenses and 1.9 million in higher clinical and regulatory expenses. As we scaled our operation, these value-added areas, after the completion of our pivotal trial and it's the middle of our first PMA to the FDA.

  • Included in the higher R&D spending were about 6.4 million in material procurements, most of which hit in the fourth quarter, as discussed earlier, and 3.4 million in higher compensation expenses, as we continue to build our capabilities. About 1.2 million in tooling and featuring design costs and $1 million in higher clinical and regulatory, primarily related to our STS pivotal trial. As mentioned earlier, about 4 million of the materials expenses reflected in our R&D expense are either on hand or on order.

  • SG&A expenses, excluding stock lease comp increased 3.7 million to 5.1 million for the full year of 2005, compared to 1.4 million of 2004. As with the quarter, the full-year increases are related to initial marketing expenses of about 1.4 million for 2005, where we had none in 2004, and 1.2 million in increased expenses related to operating as a public company.

  • Our stock-based compensation for the year was up 1.3 million to 1.8 million for 2005, compared to 449,000 in '04. Again, these will change going forward as we implement FAS-123R.

  • Interest income increased approximately 1.5 million for '05 as we invested the proceeds of our IPO and as short-term interest rates continued to rise.

  • We ended 2005 with a very strong balance sheet, including 50 million in cash and equivalents, so the proceeds from our IPO are essentially sitting in the bank at year end. Our cash usage from operating activities from the year was about 22.5 million. That includes our $30.7 million loss, so as you can imagine, we had fairly large payables at year end. The annual loss also includes 2.7 million in non-cash charges for depreciation and amortization. Our cash flow from investing activities other than the purchase and sale of securities related to our cash management program included about 4.7 million in purchases of property, plant and equipment, as we significantly increased our manufacturing capacity.

  • As you know, we continue to believe that our vertical integration here at DexCom allows us to scale very quickly for launch and be able to capture upside demand, should it develop. That's it for the prepared financial comments, and I'll turn it back to Andy Rasdal now for the wrap up.

  • Andrew Rasdal - President and CEO

  • Great. I'd just like to wrap up as we sit here looking into 2006, we're obviously anxiously awaiting a decision from the FDA on the approvability of our Short Term Sensor, STS, PMA. In the meantime we're developing the capabilities to transition from a purely development company into a more commercially focused organization.

  • We've made substantial progress in preparing our manufacturing of our STS to potentially do that in higher volumes if and when we receive approval. We've hired a very senior, experienced sales leader, are busy building the sales, marketing and customer service organization. Our expanded repeated use trial is giving us wider exposure to a great number of diabetes centers, endocrinologists, diabetes education for patients, and as a result giving us more experience and feedback related to the product real-time.

  • Still, we've continued to keep focused attention on our future pipeline. We understand that to be important to growing a franchise. We still plan to submit for regulatory approval of our second generation seven-day STS once we receive an answer regarding the approval of our first PMA. We believe we a better understanding of the sensor performance, and a study designed to seek replacement claim labeling from the FDA, and intend to file an IDE sometime after we receive a decision on our first STS PMA as well.

  • In the end, we're all real excited, committed to effectively introducing our STS products for people who have diabetes if and when we receive approval from the FDA. So that's the end of the company's prepared comments. We'd be happy to take a couple of questions.

  • Operator

  • [OPERATOR INSTRUCTIONS].

  • Our first question will come from Wade King, with Montgomery & Company.

  • Wade King - Analyst

  • Hi, guys, can you hear me?

  • Andrew Rasdal - President and CEO

  • Yes.

  • Wade King - Analyst

  • Thanks for the update. A couple follow-up questions, if I may. Number one, you mentioned a couple of things as relates to the buildup of your sales force in the event you get an approvable letter near term. Can you give us any idea in addition to the lead person to head up the sales effort, as to the numbers of sales reps you've hired to date?

  • Andrew Rasdal - President and CEO

  • Sure. I won't be specific on any numbers. We have our sales guys - as we indicated, we have hired our first team of regional managers, and they are in the process, as we said, of conducting interviews and finalizing candidate selection.

  • Wade King - Analyst

  • Okay, maybe I can ask just a follow-up related question. Is it a reasonable assumption to figure that you would have up to 20 reps in places to [purpose in] the sales force infrastructure by the end of March, or early April?

  • Andrew Rasdal - President and CEO

  • The timing of FDA approval, if you get approval, is always a bit uncertain. It's a bit of a balancing act. As we've said previously, it's our intent to be in a position to launch when and if we receive approval with 20 to 30 people totally in the field. I think that would consist of managers, sales representatives and we've always spoken about clinical educators or specialists to also help support the product on a technical level.

  • Wade King - Analyst

  • Okay, very good. You mentioned the priority of investments that you've made to date as relates to preparing for production launch. Could you give us an idea of whether you have actually started to accumulate finished goods at the company in terms of your production based on all these investments, or is that something that is in the hopefully near future?

  • Andrew Rasdal - President and CEO

  • I think that would probably be a more appropriate comment in the future, after we receive approval.

  • Wade King - Analyst

  • Okay, very good. And last question, please, thanks for the update on all the activities as relates to the additional filing you would hope to make, assuming you gain approval for the Short Term Sensor. Can you tell us, are there additional claims you hope to include in a follow-up PMA application for the Short Term Sensor beyond the increase from three to seven-day labeling? Are there also additional claims you'll be seeking in any follow-up application?

  • Andrew Rasdal - President and CEO

  • I think we are - obviously, with conducting a study that may include up to 20 centers and 400 patients, there's a good pool of data that may support a number of different claims coming out of it. There are things that we've been very specific on on why we conducted the feasibility trials. It's our desire and intention to seek replace claim labeling from the FDA. We obviously have to get such a study designed, approved and conducted successfully, and we've always spoken that at some point we would like to seek a clear indication for pediatric under-18 usage as well.

  • Wade King - Analyst

  • So, once again, I appreciate that detail, but in the expectation of the almost immediate follow-up to the initial decision from the FDA on the Short Term Sensor with three-day labeling, when you submitted a follow-up soon thereafter to that decision, heedfully, will there be additional things other than a seven-day claim that you'll be seeking?

  • Andrew Rasdal - President and CEO

  • Not knowing exactly what the labeling that will come out from the FDA at this time, the first filling would support seven day.

  • Wade King - Analyst

  • Okay, guys, thanks for the update.

  • Andrew Rasdal - President and CEO

  • You bet.

  • Operator

  • Our next question comes from Tom Gunderson, with Piper Jaffray.

  • Tom Gunderson - Analyst

  • Boy, it's all about timing for the FDA, isn't it? Wade asked the key questions. I'll just cross those three off and ask my last question, and that is, Andy, any discussion between you and the FDA that would help us - any new news that would help us understand whether or not there's going to be a panel review or not?

  • Andrew Rasdal - President and CEO

  • Nothing material from us and the FDA. We think at this point we're really just awaiting a decision. As we've said previously regarding panel, we had not and have not been notified about a need for us to go to panel for this device. But the FDA only has an obligation to notify you if and when you're going to panel. They do not have an obligation to tell you you're not going to panel, nor would I expect us to ever hear such a thing formally. So we've not been notified to date of the need for that, but, again, we can't formally rule that out.

  • Tom Gunderson - Analyst

  • Okay, thanks. You guys were fast and brief. I'll be fast and brief. Thank you.

  • Andrew Rasdal - President and CEO

  • Thanks, Tom.

  • Operator

  • Our next question is of Ben Andrew, William Blair.

  • Ben Andrew - Analyst

  • Good afternoon. Maybe it would be helpful to talk a little bit more about the activities in the fourth quarter on the manufacturing side, and you went through that pretty quickly, I think, Steve, in terms of the amount of materials that you guys brought tin and how much of that you went through in the fourth quarter in testing versus how much may kind of be in the Q. I think it was 2 million. Is that right?

  • Steve Kemper - CFO

  • Yes, I can give you a little bit more information on that piece. Our manufacturing expenses for the quarter were 7.7 million higher than in the previous year, and the R&D spending included 6.4 million in material procurement, of which 2 million was on hand at the end of the year, and 2 million was related to a loss on purchase commitments. That is materials coming in in the early part of 2006. So essentially about 4 million remains out of the 6.4.

  • Ben Andrew - Analyst

  • Okay, so you went through about 2.4 million in manufacturing and increased expense in the fourth quarter. That 2 million related to these - is it electronic components that you don't expect to be using? Were they for the LTS, was that STS?

  • Andrew Rasdal - President and CEO

  • Yes, these are electronic components that we had a commitment on that we'll support some initial launch quantities for us. We expect as we ramp up our manufacturing operations for those costs to decline rapidly.

  • Ben Andrew - Analyst

  • But the 2 million, I think you said you don't expect to recover them. Was that that language? There was 2 million of components that you didn't expect to utilize early in the launch, and it sounded like you were writing those off, or what was that?

  • Andrew Rasdal - President and CEO

  • Yes, it's 2 million of materials that we don't plan on including in our initial pricing with the customer.

  • Ben Andrew - Analyst

  • I guess I don't understand what that means, and it's probably me, but does that mean that you're not going to be able to sell that eventually, or you're not going to sell it in the timeframe you originally thought you would sell it in, so you have to expense it?

  • Andrew Rasdal - President and CEO

  • We'll be able to sell - we believe we'll be able to receive approval to sell those components, but like anything, initial purchase of special electrical products, it may be a little more expensive upfront.

  • So we expect to recover some portion of those, and maybe all of them, but the accounting treatment right now assumes that we won't.

  • Ben Andrew - Analyst

  • Okay, so is it like a window in which you would have had to assumed you would be able to expense it, or to utilize it, otherwise you'd expense it later?

  • Andrew Rasdal - President and CEO

  • Yes.

  • Ben Andrew - Analyst

  • Okay, and then the 2 million - so the increased activities, can you share with us what your current capacity is if you had to start selling tomorrow for the STS?

  • Andrew Rasdal - President and CEO

  • We haven't shown anything related to capacity at this point. If we receive approval, again, it's always been our intention to launch very shortly thereafter, and I believe we'd be in a position to do so.

  • Ben Andrew - Analyst

  • Okay, and I don't think I know the steady guidance from you guys for the year, but can you give us any thoughts on what manufacturing expense or R&D expenses and SG&A could be for either the first or the year. And I know that depends on FDA, but just kind of what your take is at this point?

  • Steve Kemper - CFO

  • Yes, we're not, and are not, providing specific financial guidance on revenue or expenses. In the fourth quarter of '05, we made a level of investments, especially in our materials and our manufacturing processes, that we believe is representative of being ready to support the initial launch of our product should we receive FDA approval. So we'd expect as we move into the first and second quarter that as we start to scale, related to revenues, our operations expenses will become more efficient, but that would be offset initially, at least, by additional investment on the sales and marketing side.

  • Ben Andrew - Analyst

  • Of course, and, last question, Andy, in terms of next timing step for FDA, is there a hard deadline that you expect in terms of a reuse cycle? I thought there was a date coming up here shortly for the 180 Cycle Clock?

  • Andrew Rasdal - President and CEO

  • There probably is, related to the dates, but, again, the FDA can keep to their own calendar, and so we don't have any exact hard date that we're planning to have a decision yea or nay. As you know, we've always guided in general, PMAs take about a year, plus or minus some timeframe, and that puts us out towards the beginning of Q2, and I think we've been pretty consistent with that in the past. But there's no gate that we expect they're going to give us an answer one way or the other.

  • Ben Andrew - Analyst

  • Okay, thank you.

  • Operator

  • Our next question comes from Sara Michelmore with Cowen.

  • Sara Michelmore - Analyst

  • Good evening. Thank you. I guess looking a little bit longer term, Andy, I know you want to have about 20 to 30 support people in the field at launch, but could you give us an idea in terms of just over a one to two-year period where you'd see that sales force size moving to?

  • Andrew Rasdal - President and CEO

  • Bigger, I hope. That's always contingent upon adoption and revenue growth and [tracked] to profitability. I the ink that follows a pretty standard mode. If we get strong traction and the product is what we and patients hope it is, and we're able to grow revenues, then we will continue to divide up territories and hire additional reps based upon the need to better service and to drive adoption to new segments of the population. But I can't predict what that would be, like I say, hopefully much bigger.

  • Sara Michelmore - Analyst

  • Okay, and with that 20 to 30-person field force, my guess is that you'd focus on some of the large centers that obviously have big patient numbers. And I'm just wondering, in terms of the centers that you'd target, how many of those today could you estimate that you have existing relationships with, just from doing clinical trials and some of these other projects you guys have been working on? How much of a head start do you have there with some of those influential decisionmakers?

  • Andrew Rasdal - President and CEO

  • Well, I think that one of things that certainly changed in the environment in the last four or five months from our perspective is we always felt we would be third into the marketplace and a follower, and I think with the status of the two other people playing in that environment, if we receive approval in a timely manner from the FDA, we may be the first to really commercially launch a product is our intention. And so the thing that changes, I think, because of that, we're likely to have access to these big centers where we haven't had a presence commercially. And, as you know, the field of Continuous, there's an awful lot of momentum and interest behind it, and so I really think all of the key centers have expressed their interest.

  • We've worked in a number of those, and I don't know the exact number offhand, so I won't quote it, through clinical studies or discussions with them about appropriate clinical trial designs. So I think the biggest thing that's changed is we have the ability perhaps to get to these big centers fairly early in the experience of continuous glucose monitoring and establish DexCom as a foundation for that and get their feedback early and make the required improvements.

  • Sara Michelmore - Analyst

  • Okay, that's helpful. And, lastly, just on the subject of reimbursement, if you could just update us on your thoughts there and what you think the plan would be, assuming that you're able to get a timely approval here on the product.

  • Andrew Rasdal - President and CEO

  • Yes, sure. I think it's where it always - we continue to build some of the expertise in house. We've always felt there are a number of things required for reimbursement for the category of continuous glucose monitoring. The first for us will be approval, and then I think significant adoption into the ranks so that we prove that this is a useful and reasonably adopted technology so that payers can pay attention. And then it's the normal thing, the support of advocacy groups. You're probably aware of the JDRF initiative related to a closed-loop system, the first being to get continuous glucose monitors first available, which means approved, and second is accessible, which in my mind means reimbursement, and they are putting a lot of their weight and thoughts behind this, which is I think good news for all of us in the category.

  • And then to always have good peer-reviewed outcomes in related publications. I think we're in a very strong position now with the publication in Diabetes Care of our first pivotal clinical trial. We have the data from our seven-day and subsequent trials. As we said, we submitted to the scientific sessions of ACE of ADA and hope for publication and we'll continue to lend that data related to outcomes for Continuous not only to our efforts to seek reimbursement, but that can be leveraged by other parties seeking reimbursement as well.

  • Sara Michelmore - Analyst

  • Okay, that's very helpful, Andy. Thank you.

  • Operator

  • Our next question is from William Plovanic with First Albany Capital.

  • William Plovanic - Analyst

  • Great, thank you, good evening.

  • Andrew Rasdal - President and CEO

  • Hey, Bill.

  • Steve Kemper - CFO

  • Hey, Bill.

  • William Plovanic - Analyst

  • Just I think there's been some question out there in terms of the whole RF signal. Just my question stems around you've got the waive from the FCC on the first generation. Is that different with the second generation? Do you have to fully redesign the product? That's my first question.

  • Andrew Rasdal - President and CEO

  • Nope.

  • William Plovanic - Analyst

  • So then any generation of product you would bring out falls under that waiver.

  • Steve Kemper - CFO

  • That's correct.

  • Andrew Rasdal - President and CEO

  • That's correct, of either the Short Term or the Long Term implantable.

  • William Plovanic - Analyst

  • Fantastic. Secondly, just as you look at commercialization of the product, compare and contrast what you've seen with the player that's received first approval out there, Medtronic, and kind of what their strategy has been and what your strategy may be and how those are different?

  • Andrew Rasdal - President and CEO

  • I think, and I only have limited visibility, if any, to Medtronic MiniMed's true strategy. It would appear from what we can discern that they have launched in a very controlled manner into small, limited number of centers to collect data and feedback and move forward. It would be our intention not to limit launch just to a handful of centers. Obviously, we want to work methodically through them, but it wouldn't be a matter of just launching to 10 or so centers and doing that. We're really running our large repeated use trial where it may have up to 20 centers and 400 patients, depending on how long it takes to get approval to continue to gain that kind of data and that experience and support reimbursements efforts and so forth out of that data.

  • William Plovanic - Analyst

  • Great, that's all I had. Thank you very much.

  • Operator

  • Our next question comes from [Caroline Corner] with Montgomery & Company.

  • Caroline Corner - Analyst

  • Hi, thanks for taking my question. I have a question first of all about the RF technology. Taking a look at some of the other diabetes care sites, and there's a debate it seems between infrared and RF communications, and with your technology is it possible to use them on airplanes?

  • Andrew Rasdal - President and CEO

  • Yes, we believe so, and we've tested to quite a number of requirements for interference and so forth with all of the regulatory filings.

  • Caroline Corner - Analyst

  • So any kind of interference from airplanes, cell phones, et cetera, you haven't found anything that would be a problem for diabetics using the system?

  • Andrew Rasdal - President and CEO

  • Not that we're aware of at this time, and of course it's one of the reasons that we felt it was most appropriate for this to file into the mixed band, which is a frequency set aside for the FCC for devices like this.

  • Caroline Corner - Analyst

  • Okay, great. And then just a follow-up question about sales force hiring. You said that reps are approaching you to sell the product once you've got approval. Are any of the reps coming from other diabetes companies, and if so, are you running into problems with do-not-compete clauses?

  • Andrew Rasdal - President and CEO

  • It wouldn't, I think, probably be appropriate for us to pre-identify folks, but our criteria for hiring people in the field are first and foremost a demonstrable track record of nothing but the highest level of performance in not only their current role, but previous ones, strong diabetes-related experience, realizing that with the exception of one company, there is no other commercially marketed continuous glucose monitor. So I don't foresee a lot of conflicts, as this will be perhaps one of the first of its kind.

  • Caroline Corner - Analyst

  • Okay, great, thank you, guys, for my questions.

  • Operator

  • [OPERATOR INSTRUCTIONS].

  • We'll next go to [Frank Tudor] with [Mirror Gazette].

  • Frank Tudor - Analyst

  • Hey, guys, quick question on the marketing strategy. Have you guys considered taking this into hospitals for continuous monitoring, and also how could that possibly play a role in getting reimbursement a little quicker?

  • Andrew Rasdal - President and CEO

  • Sure, we, like probably a number of other people, have read all of the recently, rapidly evolving literature on potential to improve outcomes with people in the hospital by more closely monitoring their glucose. There's some good data, obviously, related to people both with and without diabetes who may benefit from better glycemic control post operatively or post-traumatically, and I think we'll have more to say in the future, but clearly that's an opportunity.

  • We see the potential to leverage our platform into the future with that, and, second, obviously, anything which shows reductions in length of stay has significant financial impacts, and I think certainly from an economic standpoint may be a faster, more understandable argument for reimbursers.

  • Frank Tudor - Analyst

  • Have you guys already considered a trial or designed one, and if so, timing of that?

  • Andrew Rasdal - President and CEO

  • I'd prefer at this point - I won't make any comment about the status of that program, other than to say that we remain highly engaged in that and I think what we've always done at DexCom is if and when we have successfully conducted a series of trials that we think are meaningful and representative, then either us or our clinical investigators will speak to those. That's the most credible approach.

  • Operator

  • And, with that, there are no further questions. I'd like to turn the conference back to Andrew Rasdal for an additional or closing remark.

  • Andrew Rasdal - President and CEO

  • Great. Well, we appreciate everybody's attendance and participation today, and as I said earlier, we're just anxiously await, as Tom noted, a decision from the FDA and hopefully in a favorable light being able to get on and hopefully be able to begin to help people suffering from diabetes in earnest with what we hope is an important new innovation for them.

  • Thanks, and good evening.