德康醫療 (DXCM) 2007 Q4 法說會逐字稿

Good day, everyone, and welcome to today's DexCom fourth quarter and full year 2007 earnings results conference call. Today's call is being recorded. At this time, all participants are in a listen-only mode. Following today's presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. At this time for opening remarks, I would like to turn the call over to Mr. Terry Gregg, President and CEO. Please go ahead, sir.

Thank you, and good afternoon, everyone. I'm excited to give you an update for the full year 2007, and to go through our agenda, but we'll first start off with having Steve Pacelli, our Senior Vice President of Corporate Affairs go through a Safe Harbor statement. Steve?

Thank you, Terry. Some of the statements that we will make in today's call may constitute forward-looking statements. These statements reflect management's expectations about future events, operating plans and performance and speak only as of the date hereof. These forward-looking statements involve a number of risks and uncertainties. A list of the factors that could cause actual results to be materially different from those expressed or implied by any of these forward-looking statements is detailed under Risk Factors and elsewhere in our annual report on Form 10-K, our quarterly reports on 10-Q and our other reports filed with the SEC. We undertake no obligation to update publicly or revise these statements for any reason. Terry?

Thanks, Steve. I will give you a brief idea of the agenda today. We are going to go through the financial review. Jess Roper, our Interim CFO, is going to present the data. Next, commercialization update, followed by our partnership update, a development and regulatory update, remarks on our in-hospital, continuous glucose monitoring. We'll give you a brief preview and review of what we are doing on the reimbursement side and summarize and conclude the call. Jess?

Great, thank you, Terry. DexCom reported revenues of $4.6 million for the year ended 2007, compared to $2.2 million in 2006. Sequentially revenues increased 25% from the third quarter of 2007, and totaled $1.5 million for Q4. We added approximately 840 new customers during Q4. As of December 2007, we have upgraded over 1200 first generation three-day customers to our second generation Seven System. Sensor revenues were up 39% sequentially from Q3. A small portion of our Q4 sales -- excuse me, a small portion of our Q4 Sensor sales included first generation three-day sensors. We anticipate the sales of these first generation sensors to end near the latter part of the first quarter of 2008.

Cost of sales for the year ended 2007, totaled $12.7 million, compared to $11 million in 2006. The increase was primarily due to greater product sales and included additional fixed overhead spending. Our gross margin loss for 2007 was $8.1 million, compared to a loss of $8.8 million in 2006. Research and development expense decreased $3.3 million to $16.1 million for 2007, compared to $19.4 million in 2006. Changes in R&D expense included lower tooling, facilities, and share-based compensation costs. SG&A expense totaled approximately $22 million in 2007, compared to $21 million in 2006. The increase was primarily attributed to $3.5 million additional selling related costs as we incurred such costs for a full 12 months in 2007, compared to lower levels incurred throughout 2006 when we were building our sales force. The $3.5 million increase in selling-related costs was partially offset by $2.4 million in lower marketing costs in 2007.

Net interest income totaled approximately $800,000 for 2007, compared to $2.7 million in 2006. The decrease in net interest income was due to additional interest expense related to the $60 million in convertible senior notes that we issued in March of 2007. Our net loss was down slightly from the prior year and totaled $45.9 million in 2007, compared to $46.6 million in 2006. There was approximately $9 million of noncash expense relating to share-based compensation, depreciation and amortization in 2007, which was up from $8.6 million in 2006. We ended the year with $64 million in cash and marketable securities and working capital of $59 million. During the year, we invested $3.5 million in capital equipment and facilities to support our business. In January of 2008, we admitted our equipment line that allows us to borrow an additional $3 million for the purchase of equipment and other related items.

I would like to now turn it back to our CEO and President, Terry Gregg.

Thanks, Jess. As we near the end of the first quarter of 2008, we continued to be extremely pleased with the performance of the Seven, our second generation continuous glucose monitoring system. We believe the Seven is proving to be the industry-leading CGM product with noticeable performance benefits and greater ease of use for our patients versus our competition. We believe the Seven continues to create the positive experiences for patients and healthcare professionals that we need to build this emerging category.

Highlighting some key performance metrics for the fourth quarter, and full year 2007, as Jess mentioned, revenue grew 25%, sequentially from Q3 to Q4, and was up 113% from 2006, and adding approximately 840 new customers in the fourth quarter, we continued to see an increase in the number of new patients added in our key accounts. In addition, we have successfully upgraded over 1,200 of our existing customers from the STS three day to the seven day system, as of the end of 2007. We expect to continue to upgrade STS three-day customers during Q1 '08 as we look to discontinue production of the STS three-day entirely by the end of Q1 this year. Most encouraging for the long-term viability of the business was a 39% increase in Sensor revenues, quarter to quarter, and a 98% increase compared to the fourth quarter of 2006.

As we look to the first half of 2008, we will continue to focus our selling efforts on approximately the largest 100 diabetes centers in the U.S. At this point, we continue to believe our sales force is appropriately sized at approximately 45 field-based individuals, however, as we look to expand our reach into additional diabetes centers in the second half of 2008, we may expand the size of the sales force slightly. Additionally, we may expand the size of the sales force based on the positive momentum we are beginning to see on the reimbursement front.

Finally, we are excited to report that recent clinical trial data related to our continuous glucose monitoring products will be presented at the scientific sessions meeting of the annual American Diabetes Association in June, 2000. Two of the studies include a study conducted in December of 2007, in which investigators concluded that patients could wear the Seven safely and effectively for up to 10 days, and a second study also conducted in December, where investigators evaluated alternate site sensor placement, including on the upper arm and hip, and concluded that our next generation sensor performed safely and effectively in these alternate sites. We have consistently maintained that an open architecture, whereby our Sensor technology is adaptable to multiple insulin delivery models represents the best interest of diabetes patients and DexCom.

To that end, in January of this year, we announced two separate development agreements, one with Animas Corporation and one with Insulet Corporation, to development integrated insulin pump CGM systems. In each case, DexCom CGM data will be displayed on the partner's pump, in addition to insulin dosing information, the patients will have access to glucose trend information, as well as high and low alarms, all in a single display unit. Our plan is to integrate DexCom's proprietary software and hardware design into the partner's durable equipment to enable wireless receipt of continuous glucose monitoring data by the pump, thereby eliminating the need for a separate DexCom receiver. Our partners will have primary responsibility for sales and marketing efforts related to CGM-enabled hardware. In each case, DexCom will maintain all revenue from sales of disposable CGM sensors for use with the integrated systems. We envision a Powered by DexCom branding and co-branding of these integrated systems and we believe this model will result in additional feet on the street without additional cost to DexCom.

With regards to patients and patient support, patients using the integrated system are DexCom patients for purposes of continuous glucose monitoring. DexCom will maintain responsibility for ongoing patient support, with respect to CGM, while each partner will be responsible for ongoing patient support with respect to insulin pump therapy. To remind you, these are nonexclusive relationships. DexCom will continue to market and sell stand alone CGM systems. Our partners will continue to market and sell stand alone pumps and all parties are tree to enter into similar relationships with third parties. With regards to timing of product availability, our goal in each case is to move rapidly to capitalize and integrate existing technology platforms to bring first generation products to market and follow quickly with next generation product iterations.

In our ongoing discussions with the Food and Drug Administration, we have confirmed that these combined systems will be premarket approved devices, or in our case, supplements to our existing DMA. As a result, DexCom will lead all regulatory testing, trials and filings related to the integrated systems with partner support. To that end, Animas will contribute up to $750,000 to DexCom to offset certain development, clinical and regulatory expenses in connection with the Animas integration. Each party remains independently responsible for maintaining appropriate regulatory approvals for their stand alone products. Our goal is to complete all development, clinical and regulatory efforts with at least one partner and be positioned to launch a first product during the summer of 2009, but as the regulatory process is uncertain, that timing could slip by several months.

Aside from insulin delivery, we continue to explore opportunities for continuous glucose monitoring to be used together with other diabetes drugs and devices to improve the convenience and effectiveness of diabetes management. We are currently participating in, or evaluating the use of CGM in studies with long acting [exenotide] inhaled insulin and insulin patches, among other technologies. Finally, we have recently become involved in a JDRF-sponsored research and development project with ultimate goal of closing the loop.

We have long held that the continual introduction of next generation products with improved performance and patient convenience are key to the development and the growth of the continuous glucose monitoring category. In November of 2007, we received FDA approval to add additional functionality to the Seven to enable patients to calibrate the system using any brand of approved blood glucose meter, and we launched this feature which we branded Open Choice in February of this year. We plan to offer an upgrade to existing patients in the second quarter of 2008. In January this year, we received approval to move manufacturing of our Sensor applicated subassembly to an outside vendor. We believe this will better enable us to scale Sensor manufacturing as demand increases and reduce manufacturing costs over time.

We completed a pivotal trial in December of 2007 for a third generation continuous glucose monitoring system. Results across all trial sites showed performance equivalent to the Seven and we believe the data set is sufficient for filing a DMA supplement. However, we elected to delay filing a PMA supplement as our analysis determined that our Gen 3 Sensor as built for the pivotal trial is 10% more expensive to build, due to increased labor and materials while offering only incremental performance gains over the Seven. Our continued R&D efforts during this quarter have resulted in the development of a modified Gen 3 sensor with improved performance and convenience without added costs. We expect to complete a small additional clinical trial in early Q2, with a PMA supplement filing to follow quickly thereafter.

We are also preparing to file a PMA supplement with the FDA, which will add additional functionality into our Data Management Two software, including the feature to allow our customers to update their receiver firmware over the Internet. Internationally, we continue to pursue a CE mark for the Seven and to that end we are currently working with a notified body in Europe to review our quality systems and assist us in obtaining a CE mark. We expect to submit our technical file in the second quarter of 2008 and we hope to complete our ISO audit during the their quarter of this year.

We attended both the study group on artificial insulin delivery, pancreas, and eyelet transplantation meeting in Australia in January and the first international conference on advanced technologies and treatments for diabetes meeting in Prague last month, where we met key opinion leaders in diabetes from around the globe. We have identified the principal investigators who we will work with to conduct a clinical trial in Europe later this year and the protocol is currently under development. We expect to start this trial sometime after the European Association For the Study of Diabetes Meeting in Rome later this summer. Finally, we are pleased to report that we have completed the buildout and have successfully transitioned a large portion of our operations into our new corporate headquarters and expect to complete the move of our manufacturing operations during the second quarter of this year.

I would like to move on to the in hospital continuous glucose monitoring project. We continue to make tremendous progress in the development of a system to address the critical care market. As we estimate approximately 45% of U.S. hospitals have or are in the process of implementing tight glycemic control protocols to reduce mortality and morbidity in their postsurgical patients. We recognize the need to increase our efforts in this key area for continuous glucose monitoring. At the recent Society For Critical Care annual meeting with over 4,000 attendees, the consensus was that tight glycemic control is the new standard of care in the ICU. As recent studies have shown, however, the major challenge is the detection of hypoglycemia, requiring numerous additional bedside fingerstick measurements to avoid.

We believe that our hospital blood glucose monitoring system solves this challenging with programmable measurements as frequently as five minute intervals and preset alarms to detect both hypo and hyperglycemia, similar to our commercially ambulatory system. We are extremely pleased with the results of our latest feasibility trials, in which we have been able to demonstrate prospective accuracy in a porcine model with 100% of data points meeting the ISO standard for therapeutic use. We expect to continue development efforts, culminating in a pivotal trial and a regulatory submission before the end of 2008. This would enable us to commercialize a first product in the second half of 2009. We believe the most efficient means of commercializing our in-hospital system is through an established partner with experience in the critical care market. To that end, we have initiated numerous discussions with a number of potential business partners about opportunities to participate in the design, development, and commercialization of our system.

On the reimbursement front, we are pleased to note that we are beginning to see momentum build in both the adoption of coverage policies for CGM by third parties and in their willingness to enter into contracts with DexCom to cover CGM. We are also pleased to note that [hic fix] codes covering the three components of our Seven System became effective on January 1st, 2008. We continue to receive unsolicited reports from patients and physicians of favorable individual coverage decisions and our own reimbursement organization is working to build upon these experiences to push for coverage with private payors. We have also recently implemented a pilot program with a third-party claims negotiation and processing organization and expect to leverage this relationship to help our patients navigate the reimbursement maze.

Our mission in 2008 is to continue to educate the private payer community on the role of CGM in assisting patients to better manage their glucose excursions, for both hypoglycemia and hyperglycemia. The Juvenile Diabetes Research Foundation sponsored randomized reimbursement trial was fully enrolled at the end of 2007, and we continue to participate in this key critical study. We believe JDRF intends to release an interim six-month data set during the summer of '08. We continue to see reimbursement as one of the key challenges to achieving wide spread adoption of CGM and reiterate that the reimbursement process as we all well know, takes time, patience and perseverance.

In summary, we believe we are on the cusp of a major transition to the understanding of the significant consequences of excessive glycemic variability. Not only in patients with diabetes, but also in non-diabetes patients, experiencing stress hyperglycemia. The key thought leaders from around the world are cautioning that even a single spike of glucose results in an increase in oxidated stress, and a cascade of proinflammatory agents physiologically. Continuous glucose monitoring is the only tool that can identify glycemic variability and allow patients and healthcare providers to utilize treatment modalities pharmacologically and mechanically to help patients stay between the lines. A1C is a surrogate market but not a very good one. Two patients with identical A1Cs can have far different glycemic profiles but without continuous glucose monitoring, it goes undetected.

Our goal is to be the industry leader. We believe our technology is the most accurate over time, and has demonstrated the shortest lag time when compared to capillary blood and is today the only glucose sensor to be approved for up to seven continuous days of use. Finally, and again, we believe as much as ever, that CGM will play a critical role in the future of diabetes management, and will be a growing and profitable business for DexCom. Thank you.

Thank you. (OPERATOR INSTRUCTIONS). We will go first to Thom Gunderson with Piper Jaffray.

Hi. Good afternoon, guys.

Hi, Tom.

I just want to make sure I understood this right, are you -- Terry, did you say that you are moving from a focus on the top 50 centers to the top 100?

That's correct.

And how long do you expect that to last before that expands out further?

Oh, we will look at it through first half of '08 and then look at what we need to do from an expansion standpoint. I would also say, Thom, that during that time frame, we are also completing our commercialization agreements with both J & J Animas, which by the end of this year, they will have some 200 people in the field, as well as additional work with Insulet and they will have somewhere close to 50 to 60 individuals in the field by the end of this year. So we really get the benefit of that, obviously, in that endeavor, although it's not an integrated product, we are certainly -- their teams are talking about the utilization of CGM along with their pump therapy, even as we speak.

Got it. So they are not going to wait to market until middle of '09, they will get going later this year?

And quite frankly, our team members out in the field are already doing some informal co-marketing regardless of what management says.

What a surprise! And then help me out with manufacturing. You are going to have the -- you will have all manufacturing in your facility integrated in Q2 but then you've got a second vendor choice that you can do as volumes ramp up?

No. What that means is on the sensor side, we will relocate everything. We've got FDA approval to do all of the sensor manufacturing, all parts. The transmitter, the sensor and the receiver. Our goal has long been to use the experience of one of our largest vendors in order to do the receiver portion --

Oh, okay.

That dealt with the electronic equipment. We will outsource that.

Okay. And then last minor question, I suppose for Jess, is cash burn in the quarter was?

We have been averaging about $10 to $11 million per quarter.

Okay.

We have fluctuated as low as $9 million.

Okay. So 35 to 40 for the year is what we should expect, '07?

In '07, we were in the $40 million range, but we haven't given guidance on 2008.

Want to?

No!

Okay.

Nice try, Tom.

All right, thanks, guys.

We will go next to Sara Michelmore with Cowen & Company.

Can you talk a little bit at least in terms of the sequential plans here. You have two quarters under your belt where you have seen reasonably consistent quarter-to-quarter sequential growth. I know you don't want to talk about exact numbers but qualitatively, do you feel like we can comfortably model continued sequential quarterly increases for the revenue line?

Yes.

Okay.

If we can't, I shouldn't be here.

Okay. In terms of assembly, you are almost through this upgrade cycle here. Has that at all been time consuming in terms of the sales focus here? Should we think of you guys as having a little bit more sales resources coming out of that or was that something that you handled without distracting other sales/commercials part of business.

No, I think it was something that we handled without any issue with regards to the sales force. I think it was, you know always when you have a program like that, Sara, you are going to get a little pushback from some of the patients who will want to wait, in order to have the products in their hands rather than going ahead and knowing there will be a download available. I think our sales folks did an excellent job convincing patients that it would be better to have the product now and it would be simply be an Internet download at a later point. I think we did a good job in that category.

Okay. In terms of the R&D trajectory here, should we think about you spending about the same in absolute dollars that you did last year, or should we assume that that number is going to be up?

I -- I can't give you any guidance on that from the standpoint -- we are comfortable with what we have been spending on R&D.

Okay. And the big projects are obviously in terms of dollar amounts are the hospital glucose monitoring and then the surgeon. Is that the way to think about the incremental dollar costs for you, the large --

I would say that as -- yes. To the one side it certainly the IBBG program, but I would also say on the ambulatory sensor, we are already in humans with our fourth generation sensor, and we are in animals with our fifth generation sensor. Okay.

So I believe in strong iterations of developmental cycles, and so we are going to continue to pursue that strategy. Okay. Wonderful. And I think that's it for me for now. I will get back in the queue. Thanks.

Thanks, Sara.

We will go next to Ben Andrew with William Blair.

Good afternoon, Terry.

Hi, Ben.

A couple of quick things. Gross margin impact of the manufacturing and the facilities move, anything we should be looking for there or on the SG&A side?

We did disclose that we had some additional fixed overhead costs. Right now, we do have two facilities, so that has increased the cost for the product.

Okay. And will that then normalize after what point?

That would normalize as we gain -- as we scale the economy of our production. We intend to look at options on our prior headquarters facilities and potentially sublet that out.

Okay. So you haven't done that yet, though?

We have not done that as of today.

Okay. And then if we think about the U.S. -- excuse me, the international market, Terry, you talked about the CE process there. How do you think about distribution and kind of scale of that opportunity in, say, '09, 2010?

Yes, well, certainly in '09, we will launch the product in that domain. We've got certain centers that, we won't be in all 27 countries of the EU. We are going through the reimbursement strategy now, understanding what that's going to require. We do have target accounts already set up, given my previous experience, I'm currently in the process of interviewing a key individual that I have been previously associated with to handle our international experience, and distribution. So I would look to -- we've got a couple of different ways to go, as you know, the current relationship with our partners is U.S. only. We can learn to expand that, given their distribution thrust, particularly, obviously, J & J and/or alternatively look at a more traditional distribution with distributors that are certainly well known to me.

Sure, sure. Okay. Just a couple of other quick topics. You mentioned the JDRF trial is fully enrolled, and hopefully they'll see a data set out on an interim basis over the summer. Can they make ADA in your view, or is this more of a WADE likely target?

That's a good question. I was just with Aaron Kowalski, who is the Director of Research. Their goal is possibly to talk about it at ADA, but until the data is in, and they have had a chance to analyze it, my guess is probably a little bit later.

Okay. Yes.

They are shooting for ADA.

It sounds like it will be tight. And then under reimbursement process, I mean, we have had obviously, the movement on hics fix, you have the lot of the anecdotal evidence. You've got the JDRF trial pending. What do you think the blow-by-blow will be assuming the JDRF data are positive as we go into the back half of '08 and '09, and when we can get a national policy and, in fact, is that what you are looking for?

That is what we are looking for, clearly. We currently have signed contracts. I can't disclose to you, because of the relationship of the contracts who they are, the payors, they are regional payors. I think we are continuing to expand that. But I would expect, as I have stated previously, that we have the opportunity for a national payer to possibly issue a coverage decision later this year. In '08. And then, of course it becomes a domino effect.

Right. Right. Okay. Great. That's encouraging. And then the hospital product, anything you can tell us about what you are seeing with the performance of the product and kind of what the form factor, other details as you flush it out here through the animal testing that you can disclose?

Yes, I mean, it -- when we did our last model -- I mean, we were absolutely 100% in the A region of the Clark Air Grid.

100%?

100%. We were totally within the requirements for therapeutic use, as is established by the Food and Drug Administration, and what that means, quite literally, is rather than trend and tracking that we have with the ambulatory sensor, this is therapeutic use that physicians and healthcare providers could make insulin adjustment decisions based on that data. That said, it's in a -- it's a small number. We will be back into humans later this month. Again, on a prospective basis. So we couldn't be more thrilled with the outcome of what we are seeing in these clinical trials and really significant progress made in this particular sector.

Have you seen 100% region A before, Terry, in your experience?

No.

I have not, so that's surprising. And then anything you can say about Gen 4 and 5 in terms of changes on the ambulatory product or other performance parameters, is it implementing some of the things from the hospital, is there any crossover there? What are the directional changes you are looking at?

Yes. We look at it in two different -- they cross over to each other from a standpoint, things that we learn about in the ambulatory sensor, with respect to membrane technology, which we really are exquisite with, in order to reduce noise, that's been one of the reasons we are able to go out seven, now ten days if you look at the trial that's going to be presented at ADA. We understand the membranes quite well. We have been able to leverage that over to the hospital side, because there's obviously a large number of drugs administered in the ICU. We are able to demonstrate lack of significant drug interference. On the same side, looking at development work from our ibbg, in order to get those kind of Clark Air Grid and MARD, there's some configuration that we will go back to the ambulatory side. Right now they are both driving each other from the third generation is more membrane related, and the -- I'm sorry, fourth generation and the fifth generation is both membrane and electrochemistry related.

Great. Very helpful. Thanks, Terry.

We will hear next from Bill Plovanic with Canaccord Adams.

Good evening.

Hi, Bill.

Lots has been asked. Two follow-ups. Just in terms of blocking and tackling on the reimbursement front, I know you can't give names. Are you willing to give, like, number of lives covered at this point in terms of contracts signed just to give us a yardstick to measure by?

Well, I'm reluctant to do that, obviously, from some competitive reasons. I will just say that we have made great progress. We have -- although still regionally based and we need to understand that, but it is moving in a very positive direction.

Okay. And then I think in the past you have given us a feel for the number of sensors placed or sold in the period. I just wonder if you would be willing to share that data with us again.

I'm not sure I have done that in the past. I'm getting a lot of shaking of the heads around the table, so I'm -- no. No. They are telling me no. So --

Okay. Then in terms of the upgrade, I believe when we -- we last talked, it was, I think $150 roughly per system. Is that going to continue in the future?

Well, we are trying to get all of these upgrades done in the next 30 days, basically. So at this point, we are winding that down. My -- my goal here is to be out of STS three-day production by the end of this month.

I guess the question on top of that is, a little over 1200 of the 4300 on the three-days have been replaced. It doesn't seem like the other 3,000 or so you sound very optimistic that those are going to switch over or is that kind of the push in the month of January -- or in the first quarter, we will see more of those in kind of a bigger number as we -- as we end out?

Yes, Bill, this is Steve. You hit it right. The number that we released today was as of 12/31. We will obviously give another update. We continued to make a big push here in the first quarter and we will wind that down by the end of this month, but we will give another update, kind of an aggregate. As we've indicated previously that we'd like to get some more metrics on the business and we would be able to do that in first quarter call.

Okay. That's all I had. Thanks so much.

Our final question will come from Mimi Pham with JMP Securities.

Hi, good afternoon. Going off of Sara's question on sales growth in 2008. Do you think you can keep this sequential sensor growth rate in the high 30s and the new patient adds at the 700 to 900 range per quarter through '08?

We don't give those projections, Mimi. I can only tell you that as reimbursement broadens, that we obviously feel that that's the number one barrier to adoption. So it will be contingent to some degree, we are seeing good positive movement in that but I would hate to predict not knowing exactly what the reimbursement landscape is going to look like as we go forward this year.

Well, can you comment, does that sound conservative or is that probably like a --

Mimi, I can't really comment. You have to make your models based on available information, and don't put me in a situation where, I see it in print and I have to live up to that expectation.

Okay. On the critical care product, can you give us a ballpark per pricing -- per day pricing. I'm assuming something premium to the $8 per day for the Seven.

Yes. It would be premium to $8 a day for the Seven. We haven't even talked about pricing with our potential partners at this point. So it would be -- I think it's in feasibility stage, and we haven't vetted that through exactly what our costs would be and therefore, what our end pricing would be.

Okay. And then is there a way to give us a sort of ballpark number of patients you think you are reaching, potential patients you think you are reaching at these 50 centers that you concentrated on. I'm trying to get a sense of 6,000 patients you've had so far that purchased the STS, what that penetration is.

Well, you know, we kind of set the standard that they had to have at least somewhere north of 1500 patients, type I patients at a particular center to call it one of our key target centers and obviously that ranges from that number to well beyond that, if you look at some of the centers that we call on, Jocelyn as an example or some of the other larger centers. So I don't think we have a total population of patients within those centers that we currently have identified.

Would you characterize the next 50 centers that you are going after to be similar in terms of patient size?

Yes, they would typically now be in -- what I will call less -- areas where they are not as concentrated. The goal here has been spend as much time to train the physicians. Obviously, we think that we have done an excellent job of that, not only domestically but quite frankly when we were at the Prague meeting, we were the darling of the meeting but also I think even more important than that was the concept that glycemic variability is becoming such a common term and so from that standpoint, that message is now resonating from the key opinion leaders. We need to get that out to really the rank and the file who treat the bulk of the disease. And so they are at less than those -- well, I will call it the real urban centers. We don't want our sales folks spending a lot of windshield time driving from one location to another. So we will expand it when it makes sense.

Okay. Thank you.

And, gentlemen, I will turn the conference back to you for closing remarks.

Well, again, great year. We're running hard in the first quarter. I'm very pleased with the performance of the company, and I look forward to updating you at the close of the first quarter of 2008. We're making a huge impact in the way patients are being treated. We're making a huge impact in the way physicians are better able to help their patients avoid some of the negative aspects and clinical applications of excessive glycemic variability and I look forward to keeping you informed. Thank you.

That concludes today's conference call. Have a pleasant day.