德康醫療 (DXCM) 2009 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the DexCom second quarter earnings release conference call. (Operator Instructions). Please note that this conference is being recorded. I will now turn the call over to Mr. Terry Gregg. Mr. Gregg, you may begin.

Thank you, operator. Good afternoon and welcome to DexCom's second quarter 2009 conference call. Joining me on the call today are Steve Pacelli, our Chief Administrative Officer and Jeff Roper, our Chief Financial Officer. I will ask Steve to present our Safe Harbor statement.

Thanks, 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 Form 10-Q and our other reports as filed with the SEC. We undertake no obligation to update publicly or revise these forward-looking statements for any reason. Terry.

Thanks, Steve. The agenda today is the establish one. We'll have a financial review by Jess followed by a commercial update of the quarter. We will then discuss our R&D pipeline, update you on our partnerships, and then move to a Q & A session. Jess.

Thank you, Terry. Following positive momentum from the first quarter, DexCom continued the trend and generated product revenues of $4.1 million during the second quarter of 2009 compared to $1.9 million the same quarter in 2008, an increase of 112%. Sequentially, product revenues for Q2 increased over 54% from the prior quarter. During Q2 we sold 1,925 systems representing an increase of more than 58% from the prior quarter. We also shipped 610 seven plus upgrade kits during the quarter following the launch of our third generation product in March 2009. Sequentially, our revenues were up over 34% from the prior quarter.

Total revenue for the second quarter of 2009 was $6.8 million compared to $2 million for the same quarter in 2008 and included $2.6 million in development grant revenue from our development and collaboration agreements. Cost of sales including both product and nonproduct totaled $7.8 million for the quarter. Product costs of sales totaled $4.6 million for Q2 compared to $3.1 million the same quarter in 2008 and our product gross margin loss was $515,000 for Q2 compared to $1.2 million for the same quarter in 2008. We have experienced an improvement in our negative margin primarily due to increased sales volumes in 2009.

Development costs of sales totaled $3.2 million for the second quarter of 2009 compared to $249,000 in 2008. The increase in development cost of sales was primarily due to costs related to our development of a hospital based continuous glucose monitoring system pursuant to our agreement with Edwards entered in to during Q4 of 2008. Sequentially, development of cost of sales for the second quarter increased by $1.2 million from Q1 primarily due to additional development efforts for a hospital-based continuous glucose monitoring system.

Research and development expense decreased by approximately $1.3 million totaled $3.5 million in the second quarter of 2008 compared to $4.8 million in 2008. As a reminder R&D costs associated with our development and collaboration agreements with Animas and Edwards are included within development cost of sales.

Selling, general and administrative expense totaled $9 million in Q2 of 2009 compared to $7.2 million in 2008. The increase was primarily due to additional marketing, customer service, sales and insurance reimbursement-related costs. Major components of increased SG&A expense included approximately $751,000 higher salaries and payroll-related costs, $411,000 higher commissions and $118,000 in higher temporary employee costs. Sequentially, SG&A expense increased by approximately $1 million from Q1 primarily due to additional customer service, sales commissions and insurance reimbursement-related costs.

As we've discussed during our earnings call held on May 6, 2009, in January of this year we a adopted retrospective accounting guidance that affects how we account for our convertible debt. For Q2 of 2009 and 2008 we recorded $1.2 million and $991,000 respectively of additional non-cash interest expense related to the amortization of the debt discount. We also recorded 713,000 of interest expense relating to the contractual coupon payments for each of the quarters ended in June 2009 and 2008. The impact of adoption of this recent accounting guidance to loss per share was an additional $0.02 and $0.03 per share for the quarters ended June 30, 2009, and 2008 respectively. Going forward we expect to record $1.2 million to $2 million of non-cash interest expense relating to the amortization of the debt discount on a quarterly basis through March of 2012.

Our net loss increased to $15.3 million for the second quarter of 2009 compared to $15 million during the same quarter in 2008. Our net loss for Q2 of 2009 included $4.4 million in non-cash expense centered primarily in share-based compensation and expensive or convertible debt discount relating to the adoption as described previously. The loss per share for the quarter was $0.33 based on 45.8 million in weighted average shares outstanding during the quarter. We ended the quarter with $52 million in cash, restricted cash and marketable securities and we had working capital of $37.5 million dollars. I would now like to turn it back to our president and CEO, Terry Gregg.

Thanks, Jess. As you might expect, we were extremely pleased with our performance in the second quarter of 2009. Again highlighting some key performance metrics for the second quarter, total product revenue grew approximately 54% sequentially from Q1 2009 to Q2 2009 and was up 112% compared to the second quarter of 2008. We sold 1,925 starter kits for the SEVEN PLUS in the second quarter amounting to a 58% increase in starter kit sales compared to Q1 2009 and up 81% compared to the second quarter of 2008. Finally, we were pleased to see an increase of approximately 34% in sensor revenues quarter to quarter which is, of course, key to our success over the long term. The launch of the SEVEN PLUS has been extremely well received by patients and healthcare providers and we believe CGM is a category that is on the cusp of a major transition and will play an increasingly critical role in diabetes management in coming quarters.

At the annual scientific sessions meeting of the American Diabetes Association in June there were over 40 presentations and posters demonstrating the importance of CGM not only in the ambulatory market but in the hospital sector as well. In particular, we were extremely excited by a late breaking poster analyzing data comparing CGM use by MDI patients versus CGM use by pump patients concluding there is no difference in clinical outcome. This something DexCom has been saying for some time. With the newer analog insulins and pens available today, the real key to reducing glycemic variability is utilization of CGM, not the method of insulin administration.

We are also pleased to see full year data on the JDRS study on continuous glucose monitoring presented at the ADA. You'll recall that the JDRS CGM trial was the first truly independent study examining the efficacy of CGM in patients with type 1 diabetes over a year-long period. The primary goal was to demonstrate sustained improvement in glycemic control including avoidance of hypoglycemia during a full year of CGM use. Previously published six months results' demonstrated that CGM both improves A1c and reduces incidents of hypoglycemia for patients over 25 years and for all patients who utilize CGM regularly. Results at the one year mark showed that A1c reduction was sustained both in patients who entered the study with an A1c at or above 7% and in those patients who entered the study with an A1c of less than 7%. Perhaps more exciting was the fact that the incidence of hypoglycemia fell significantly in both groups leaving investigators to conclude that patients utilizing CGM frequently are able to significantly reduce episodes of hypoglycemia without an increase in A1c.

As we look to the balance of 2009, we stress that continued improvement in our back office systems and processing capabilities will be critical to our ability to scale as a top business priority for us. We recognize that the customer's experience is paramount. As evidenced by our performance in the second quarter, we believe we have made tremendous progress in terms of how our back office operates. However, we're still functioning largely on a manual basis and to put it bluntly, we're busting at the seams in our back office. So what have we accomplished during first half of the year and what lies ahead?

First, we've achieved much better coordination on the front end between our field sales organization and our back office processing group, particularly with respect to the identification, collection and coordination of required patient documentation. Next, we have gained tremendous experience working with our contracted payors and our DME suppliers to streamline the process for submitting and processing of required documentation. That said, we need to continue to push for progress on the reimbursement front, particularly in terms of the adoption of more liberalized coverage policies for CGM which will not only ease the burden on our back office, but will make the technology available to more patients.

We also need to continue to push to add direct reimbursement contracts for DexCom. At this point we feel we have appropriately mapped existing processes and procedures across all customer facing areas including new sales, reorders, benefits investigation and claims processing. We have validated those processes that are working well and have identified and prioritized required changes. Where needed, we expect to implement process change over the coming quarters. We believe we are taking critical steps today to improve the system before we seek to automate it. At the same time we have identified IT needs which will be implemented to support our processes once they have been streamlined likely towards the latter part of this year. We may also explore opportunities to outsource portions of the claims processing, billing and collection functions to the extent economically justified while always retaining our core focus on the customer.

In summary, scaling our back office remains one of our key challenges that will take focus and persistence for us to resolve. However, unlike the primary challenge facing our business this time last year, namely reimbursement or lack of there, which was a challenge or lack thereof which was a challenge by action requiring multiple third party players to resolve scaling our back office infrastructure is a challenge that is entirely within our control and, fortunately, I've lived through this type of scaling challenge while at mini med. We will persevere and I believe we will ultimately gain recognition of DexCom as best in class for customer care in diabetes management.

Moving to our R&D pipeline. We have long maintained that the continue introduction of Next Generation products with improved performance is key to the long-term success of our business. We are currently in late stage development of our fourth generation short-term sensor and we expect to complete a pivotal trial for this product later this year or early next year and file a PMA supplement with the FDA shortly thereafter. Our goal is to incorporate improvements into this generation sensor to enhance performance and ease of use for our patients. We expect this sentencer will provide our patients with improved [interferent] blocking including an improvement in acetaminophen blocking. We expect the enhanced membrane system will reduce the intermittent interference that patients sometimes experience during the first night of the sensor session and provide the patient a greater accuracy over the full sensor session. We expect this sensor will have a faster warm-up time as compared to the SEVEN PLUS and, finally, we have designed this new sensor to be suited for large volume production which we believe will greatly improve our gross margins as we scale our business.

We are also in the early development stage of a fifth generation short-term sensor. We expect our fifth generation platform to incorporate certain features and attributes currently found in our in-hospital sensor. As a reminder, our in-hospital sensor is being developed in collaboration with Edwards Lifesciences and is a blood dwelling sensor designed specifically for the critical care market. Published data relating to the in-hospital system, although limited, has shown this sensor to be extremely accurate and capable of blocking a wide range of interfering substances. With our fifth generation ambulatory product we expect to translate certain technology from the blood-based hospital sensor in to a subcutaneous sensor. We believe this will create not only the best in place ambulatory glucose sensor, but will also be an ideal candidate for subcutaneous sensing in the hospital outside of the critical care setting.

Moving on to our partnerships. We continue to make great progress in our collaboration with Edwards Lifesciences relating to the development and commercialization of a hospital-based continuous glucose monitoring system. I mentioned previously the wealth of coverage for CGM at ADA not only for ambulatory use, but for use in the hospital setting as well. In fact, a common theme at the ADA was the belief that the (inaudible) and (inaudible) sugar trials could have both significantly benefited from CGM. Unfortunately, today there is no methodology other than utilizing traditional fingerstick measurements for monitoring glucose levels and controlling hyperglycemia in the hospital.

We believe we are still on track to complete our development efforts and clinical studies over the next several months to enable us to support Edwards in seeking regulatory approval and launching our first generation product in Europe before year-end. We continue to make steady progress on the development of integrated insulin pumps, CGM systems with our pump partners, Animas Corporation and Insulet Corporation. You'll recall that in January of this year we expanded our relationship with Animas outside the United States. As we work with our team on the development of an OUS product, it became evident that a single global CGM enabled pump offering would best meet the needs of our patients. In order to accomplish this, however, we are required to make certain modifications to our transmitter in order to comply with regulatory requirements outside the US. As a result, we recently amended our agreement with Animas to provide for the development of a modified transmitter to support a global CGM enabled pump launch by Animas in exchange for which Animas has agreed, among other things, to accelerate a portion of the regulatory approval milestone payment upon completion of the modified transmitter. In spite of this change we believe we are on track to complete all development, clinical and regulatory efforts on these joint development projects to enable us to launch first generation products during 2010. However, as you are well aware, the timing of the regulatory process is uncertain.

In summary, CGM continues to demonstrate a positive impact on patients' lives not only by keeping patients continuously informed of their glucose trends, but by assisting them in behavior modification that improves their glycemic variability profile. So what does the future hold for DexCom? During the year we've added two true healthcare visionaries to our Board of Directors, Dr. Jonathan Lord and Dr. Eric Topol. We were pleased to learn recently that Dr. Lord and Dr. Topol were both named to Health Spotters Future Health 100 list. This is a list of the 100 most creative and influential innovators working in healthcare today. We believe the vision and leadership these individuals bring to DexCom will help transform our business in the coming years.

As you know, today we are solely focused on the type 1 patient, largely a result of our limited resources. Yet we believe we are just scratching the surface with respect to the addressable market for CGM. For example, at a recent meeting in Colorado presenters identified CGM as a more important tool than SMBG in type 2 patients that are currently on insulin noting that the ability to see trends is much more important in this group than single point measurements. We believe there may be an application for CGM as diagnostic for drug titration in type 2's. We believe CGM may someday supplement, if not entirely replace, A1c as the basis for quantifying successful diabetes management at the quarterly checkup. We believe CGM may someday replace the oral glucose tolerance test for diabetes diagnosis, particularly gestational diabetes. Finally, as we are ultimately a sensor company, we believe that in time we will measure analytes other than glucose using our core sensing technologies. Thank you. We'll now open it up for our Q&A.

Thank you. (Operator Instructions). Our first question comes from Tom Gunderson from Piper Jaffray. Please go ahead.

Hi, good afternoon. On the accelerated ramp that you're seeing in sales, you focused a lot on back office and I'm sure as that bottleneck is opening up you're seeing more flow through there, but on the other end on the sales end, Terry, are you at a point where you need to start adding to that sales force or will that stay stable through the end of the year?

Tom, the way we look at it right now is we think it's going to stay stable towards the -- till the end of year. We will look at it again as we look at insurance coverage and we certainly, as I've asked the sales force and we've recently hired Rick Doubleday as our VP of Sales and given his 15 years plus experience in the device side of diabetes he's well versed as well, we still have not, in our opinion, penetrated each of the current accounts that we call on to the level that we would want to expand. There's plenty more mining to be done in our existing call points at this point in time. Add to that we still in our -- to be able to leverage the sales force with our partners both Animas and Insulet, we believe that that will provide us with more than enough coverage through the end of the year.

Got it. And then the second question is you've been in various stages of development over the last couple, three years and sales have just started to become a little bit more predictable. Do you have any sense either from your mini med days or from what you're seeing now of any summer seasonality either higher or lower?

Yes. The third quarter is always the challenge. People go on vacation, both patients, educators, physicians. So I always historically and it certainly was the case back in the mini med era where we always kind of held our breath throughout the summer season getting through July and August, particularly if you have -- well, we're not faced with this yet, but particularly if you have an international component. Half of Europe takes off in July, the other half in August. Since we don't have that much revenue yet in that sector, we're not going feel as much, but we're watchful of it. I think on the other side of it you still see the increased demand and every place that we go, every Congress we attend, it's all about CGM and the broader utilization by an increased group of practitioners and patients. So I think they kind of balances out, so I think they kind of balance out.

Okay. That's it for me, Terry. Thanks.

All right, Tom.

Our next question comes from Ben Andrew from William Blair. Please go ahead.

Good afternoon, guys, just a couple things maybe on the cost of goods side first. You made some progress in the quarter and Jess, you gave some details on. Terry, can you kind of characterize how much further you can go with the current generation product and where you might kind of roll out on gross margin as you get ready for [gen 4] and then what sort of magnitude of a change would you expect with that version?

I think that's a great question and I'm looking at Steve Pacelli to answer it.

Yes, Ben. I mean I think what we've spoken to publicly in the past is that kind of under our current sensor configuration we can get to reasonable gross margin, positive gross margin upwards of kind of 60% on the disposable side. To go north of that is where we start looking at needing the gen 4 high volume mass production-type sensor gen 4 and beyond but, yes, I think you'll see in the coming quarters, assuming revenue continues to increase at a decent rate, you'll see us cross over that gross margin threshold and begin to add some contribution from the gross margin side.

Is that something that can happen yet this year?

We believe, so yes.

Okay. And as you think about I mean kind of dovetailing with Tom's question, as you think about the sustainable rate, was there something about this quarter that made it an outlier because it was obviously a significant uptick in the 34%. How badly did you strain the back office getting there and if we think about a Q4 rate, could it be materially above this or is it something where Q3 is sort of flattish or down a bit and then Q4 steps up again?

Well, we don't give guidance, as you know, on a future basis, but I think my comment that we were busting at the seams is indicative of the challenge of the second quarter. We had no ramp ability, Ben, if you think about it. Back in the old days we had about two to three years to get things kind of organized. This this came upon us very quickly and we continue to struggle. As reimbursement, this being the reimbursement, I think that we can continue to expand from a standpoint but right now the expansion is in more bodies and we'll do that. As Jess mentioned, some of the increase in the SG&A, temporary bodies being hired as well. That's not something that I want to continue to do. I think once we utilize the information technology that is available to us, be sure that we implement it in an appropriate fashion, this thing is much more scalable than what we're experiencing now.

So as we look at Q3 and Q4, Q4 historically in the durable medical equipment business has always been the biggest quarter for a variety of reasons. Meeting their deductible and flex spending plan, so on, so forth. So we'll kind of weather through. Again, I've stated even from last year sequential growth is what the expectation is and without predicting what Q3's going to look like, certainly we are anticipating that we'll continue to see some type of sequential growth. Will it be the delta out -- the same kind of delta we saw Q2 to Q1? It's hard to predict, but overshadowing that is what I call the summer doldrums. So we'll see but, again, I don't want to mislead you or guide you inappropriately.

No. And just one brief follow-up and I'll jump off, was bottle neck to back office and you've got a big kind of pent up demand from patients that you haven't been able to satisfy or are you sort of regulating that inflow to the system so you're not disappointing patients? Thanks.

No. We're regulating the inflow so we're not disappointing patients. I think the challenge is if you look at the wide variety of the payor system where you have some that we can process quite rapidly because they have more liberal coverage, United Healthcare or Aetna as an example have more comprehensive, so we have a better understanding of what the documentation is required, you go to the other end of that paradigm and you get somebody that like the Blue Cross/Blue Shield member network which requires a lot of documentation and so everybody is getting processed in a timely fashion. It's just trying to understand what those requirements are and addressing them in an efficient manner, but we're not putting anybody in a situation where they can't get product.

Great. Thank you, Terry.

Our next question comes from Bill Plovanic from Canaccord Adams. Please go ahead.

First could you talk about attrition rates? Has there been -- obviously there was an uptick in product revenues but are you seeing any decline in interest rates for existing patients?

We've never commented on that to date and it's still always a difficult number, metric for us to get our hands around because there's all different kinds of utilization depending upon the number of boxes of sensors that we send out and right now our focus, to be honest with you, has been on the front end of the process and to do the back end to really begin to analyze that. We have recently hired somebody out of the diabetes industry as a senior person in the CRM portion of our business to begin to do that analysis, but I wouldn't have an answer for you right now.

Okay. Talking about the back office, it sounds like you're going try and start automating as you get the fourth quarter. Is that a fair assumption?

Yes. The latter part of this year, Bill. I think one of the challenges -- I'm sorry. One of the challenges that we go through is looking at what is it that we need to automate? It's quite easy to say we have all of these systems that we acquired when we -- in our ERP system, but we did not and we are in the process of turning them on. We don't want to waste a lot of money and time to automate something that's inefficient. So we're spending a lot of basic almost manufacturing style environment looking at tack times and things, transfer of information, pieces of paper in order to automate it once rather than multiple iterations of that and I think we've got a good idea. Now it's a matter of looking to implement those in a stepwise fashion.

Just a few more questions. Going further into the automation, you'd mentioned that you're trying to improve the speed with which you're able to process information with payors. Is there a sense that some payors are going start adopting more liberal policies and what exactly is the conversation? How do you improve that process so that the turn time is sped up going forward?

Yes. I think there's a couple positives. Number one, we mentioned a year along data set from the JDRF trial that identified not only the patients above 7% entering in a reduction, but also those less than 7%. I think as more information becomes available, then that's a prospect randomized independent trial, that's kind of hard to refute at the payor level. We've had some positive tech assessment reviews of this technology as a category and those will ultimately get implemented throughout the system. That just takes time and that's the other factor.

If we look at these times of devices that have preceded CGM as a category, ultimately people begin to embrace them more aggressively and as a result of that, they begin to diminish their requirements for justification of coverage, and I have to give JDRF a lot of credit in their outreach in that they continue to call on the payor system, as do we, and trying to update them on the value proposition of using CGM and the ultimate goal of reducing healthcare costs, particularly in the US.

Okay. And last question, you had spoken briefly about the collaboration with Animas. Is there any update regarding the work you're doing with Insulet?

I just would categorize it that both technical teams are racing ahead. The situations are a bit different between the two organizations because the two products are a bit different and so some of the challenges that I mentioned in the terms of the transmitter are not the same type of challenges because the Insulet uses a PDM for programming. So we've got a little bit different situation there. Again, we have an exclusive agreement with Animas OUS and, therefore, we're not bound with Insulet under the same type of criteria. So I would just say that both of them -- we have plenty of bandwidth with both of the organizations and our goal is to launch product on their behalf as soon as possible.

Okay. Thank you very much for taking the questions.

(Operator Instructions). Our next question comes from Shawn Fitz from Stephens , Inc. Please go ahead.

Hey, thanks. Terry just a quick commentary on your ADA conference. There's obviously a lot of clinical buzz revolving around CGM. Could you maybe describe to us how the data from the ADA is beginning to change really how the clinical community approach is monitoring and whether or not you're seeing some of that clinical buzz begin to manifest itself on your demand side of the equation?

Yes. Shawn, it's, again, you always come up with such great questions and there's really two factors that we've seen play out here. With all of the press for CGM at ADA I think you're now getting to another level of practitioner where they're beginning -- I don't want to say wake up -- but they're beginning to understand better that this isn't just a product for only those that really aggressively have their patients manage their diabetes. So that's one factor. I think the second factor is the realization that glycemic variability can be controlled regardless of the route of administration of insulin and I think that's probably an even bigger factor that we're seeing out there.

What I've been trying to do is spend a bit more time in the field with our sales force and I will tell you that when you start talking about how patients on MDI can benefit, it is almost an epiphany to some of these physicians who are aggressively managing patients but they tend to, in their term, aggressively manage them with pumps and you start talking about these outcomes and that and it's like you know, I didn't really think about that, but that makes perfectly good sense. So I think we're beginning to see some of that where there may be a lot more patients that are addressable utilizing MDI. I mean they outnumber the pump patients by about 2-1 these days. So I think that's also being embraced. And I think thirdly, and most recently just last month that at this Colorado meeting that I mentioned, during the SMBG session of the meeting it was more about CGM. Now there was a CGM session as well, but one of the key opinion leaders stood up and actually showed a slide and had a person said SMBG and then had a person with a sign on their chest that said the end is near and made the statement that for insulin using type 2 patients CGM should be the standard of care because you're not getting a lot of worthwhile information from single point measurement in the type 2 population.

So you're beginning to hear more and more of that and that will migrate beyond just the endocrinology level down to the internal medicine who have high insulin practices and treat a fair number of patients afflicted with the disease. So you're just getting that spreading of the word about the utilization of CGM.

So, Terry, if we kind of dovetail with that thought process and think a bit over the horizon, can you get where you want to be from a demand standpoint by strictly focusing on the clinical community or is there a patient awareness strategy as we think about this longer term that you all have to attack as well?

Well, you always have the patient strategy. I believe the tipping point to CGM will be driven by the patient awareness and the patient demand. Right now we're still at the push portion of it and what I define that as we go call on the clinicians, we call on the educators. They're driving that message to the patients, but the patients are getting much more aware of the technology. There will be a point, and I suspect it's in 2010, that patients will begin to demand the therapy because they are very well educated. They spend a lot of time on the Internet learning what's new in diabetology and what can improve their lot in life and I just think there's a lot of public awareness.

I think the other companies in this space are doing a lot in terms of making CGM as a category, making patients more aware of the utility for it in some form or another all the way to artificial pancreas project that everybody's engaged in in this space. So I just think there's a ground swell that is coming, but at a point we've updated our web initiative directly to the patients on several occasions now and will continue to focus that activity. You're not going to see us on television, but there are other DTC programs that I think will be beneficial, primarily focused on media that is directed to patients with diabetes.

Okay, Terry. Thanks. Last question here, in the analyst community we have a tendency to focus on the integrated CGM opportunity maybe to the exclusion of the in-hospital opportunity. With that being said, it seems like Edwards kind of reiterated their time lines recently on their conference call with the intention of having something on the market in Europe by the end of this year. How significant is their go-to market strategy going to be, Terry, do you think with the first generation nonintegrated product? Is this something they aggressively take to market or do they sit back and wait 12 to 18 months until they have an integrated product?

Well, no. I think that when you say sit back, I think they want to get this product, this stand alone product, in the hands of the key opinion leaders who will drive awareness. Remember, if you look back over the last 18 to 24 months in this whole debate over the utilization of "intensive glucose management in the ICU" which has really been a misnomer. I mean it hasn't been intense glucose management. It's been intense use of insulin which in many of these [BSNI] sugar or the [bicep] trial caused in the case of the biceps they stopped because of a higher incidents of hypoglycemia. Now they come back and say even if we measured sugar we'd have something to measure hypoglycemia more effectively, probably wouldn't have stopped the trial or the trial outcomes would have been more efficient. I think Edwards wants to take that message into the hospital sector and really get that into the hands of those key opinion leaders so that they can demonstrate. Remember, Shawn, we have not had that clinical ability.

All of our studies have been somewhat limited as we have driven them for product approval purposes. I think you get even a handful of key opinion leaders globally with the product and they're going to have a much different outcome. Obviously the integrated product which is what we call [gen 2] is something that will have the full marketing force of Edwards some time in -- scheduled for some time in 2010 but I think this is important for them to begin to seek those things and I would even throw out kind of the comment there's been this, we'll call it debate, with regards to the types of commercial fingerstick measurement devices in the hospital and their inaccuracy that FDA and ISO have called into question, I mean that just bodes so well for our product with Edwards because we are significantly more accurate than a commercial meter in the hospital sector. So they looked at that as a great selling opportunity as well as begin to drive utilization of CGM in that sector.

All right, great, Terry. Thanks again for your time and congratulations on the continued progress.

Thanks, Shawn.

We have no further questions at this time. Mr. Gregg, do you have any closing remarks?

I do. We believe that CGM will continue to become the standard of care for monitoring glucose and in certain situations it will replace fingerstick measurements. These are not just our words. These are the pronouncements of some of the key opinion leaders in the field of diabetes. DexCom is well positioned technologically to lead this transformation. These are very exciting times for DexCom. Thank you.

Thank you, ladies and gentlemen, this concludes today's conference. Thank you for participating. You may all disconnect.