Edap Tms SA (EDAP) 2008 Q4 法說會逐字稿

Good morning, everyone. My name is Laura and I will be your conference operator today. At this time, I would like to welcome everyone to the Edap fourth quarter and full year 2008 financial results conference call. All lines have been placed on mute, to prevent any background noise. After the speakers' remarks, there will be a question and answer session. (Operator Instructions). Thank you. I would now like to introduce Ms. Carol Ruth of the Ruth Group. Ms. Ruth, you may now begin your conference.

Thank you, operator. With us today from management are Philippe Chauveau, Chairman of the Board, Marc Oczachowski, Chief Executive Officer, and Eric Soyer, Chief Financial Officer.

Before we begin, I'd like to remind everyone that management's remarks today may contain forward-looking statements. These include statements regarding the Company's growth and expansion plans. Such statements are based on management's current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in these forward-looking statements. Factors that may cause such a difference include, but are not limited to, those described in the Company's filings with the Securities and Exchange Commission.

Now, I'd like to turn the call over to Mr. Philippe Chauveau.

Hello, everyone. Good morning. As in previous calls, let me begin by sharing today with you some highlights, of which there are four - one, sustained business levels; two, HIFU's regained growth; three, latest FDA progress; and four, our robust cash position.

Let me expand a little bit and say, first, our sustained business levels. We are cautiously optimistic on our continuous order flow in 2009, given the current uncertain business environment.

Second, HIFU's regained growth. During October/December 2008 and February -- January/February 2009, HIFU RPP's business has resumed its significant growth, both in revenue and numbers of treatments.

Third, latest FDA progress. The FDA's recent permission, allowing our USA HIFU clinical study to include a broader patient population and more participating sites, is very promising.

Fourth, our robust cash position. Our relentless focus on cash management and new cost reductions very critically allows us to self-fund all our current major strategic programs in the USA and worldwide. I cannot emphasize more this fourth point, by saying we have the cash.

I will now hand over to our CEO, Marc Oczachowski. Marc.

Thank you, Philippe, and thank you, everyone, for joining us on our fourth quarter 2008 earnings call.

To begin with, we are encouraged by our record revenue, generated by an increase in machine sales from both our HIFU and Lithotripsy divisions in the fourth quarter of 2008. As outlined in our press release, quarterly total revenue increased to EUR9m, up 28.4% year-over-year, following solid performance from our two divisions. Our strength during the most recent quarter further validates the growing acceptance and adoption of our HIFU and ESWL technology.

I also wish to mention that for the second consecutive year we achieved positive year-over-year total revenue growth. We are confident this trend will continue in the years to come.

After reviewing our fourth quarter 2008 performance in more detail, I will outline recent sales and marketing initiatives that we are implementing to stimulate continued HIFU sales growth, including our RPP, our revenue-per-procedure business, comment on our strong end-year 2008 cash position and discuss our 2009 outlook. Finally, I will provide a brief update on our US clinical trial.

During the fourth quarter 2008, we experienced strong revenue growth in both our HIFU and Lithotripsy divisions, highlighted by the 95.7% sequential increase in overall sales. Our sale of four Ablatherm-HIFU machines reflected anticipated fourth quarter seasonality for HIFU device sales. As expected, we successfully converted much of our third quarter 2008 backlog into revenue during the fourth quarter.

In addition, our Lithotripsy division performed exceptionally well, with the sale of 27 machines in the fourth quarter for a total of 49 devices sold in the full year 2008. This record number reflects the solid position of our unique ESWL product portfolio in the current lithotripsy market.

During the fourth quarter 2008, we saw a significant increase in our HIFU RPP business, and treatments were up 31% year-over-year. The RPP marketing action program that I discussed on the last earnings call has successfully driven further market penetration across Europe, as our customers have been responsive to the new programs and flexible sales offerings that complement our current business model. By providing quicker, easier and extended access to Ablatherm-HIFU, we have broadened our RPP customer base and validated our aggressive sales and marketing efforts, targeting both urologists and patients.

During the fourth quarter 2008, we continued driving demand for our minimally invasive prostate cancer treatment through our ongoing correspondence with the HIFU community. This momentum is continuing into the beginning of 2009, with a significant year-over-year increase in RPP treatments during the first weeks of the year, as we remain confident in the growing adoption of our RPP business model. We are also seeing increased Ablatherm-HIFU adoption as a result of our aggressive sales and marketing efforts in new markets.

During the fourth quarter 2008, we installed the first Ablatherm-HIFU machine at Muljibhai Patel Urological Hospital, MPUH, in Kheda, India, and Centro Medico Puerta de Hierro Hospital in Guadalajara in Mexico. Our entrance into both countries highlights Edap's growth potential, as we expand into two big markets in the world, and our ability to further expand HIFU programs outside of Europe.

The first HIFU treatments completed in India and Mexico were successfully performed, with no complications, and more patients are scheduled to receive treatment in the coming weeks. India especially is a particularly important market for Ablatherm-HIFU, as physicians demand access to the latest innovative technologies that address the growing number of prostate cancer cases among the country's 1.15b population.

We also secured new opportunities for our business in Latin America, with the recent approval for Ablatherm-HIFU in Brazil. We are currently working globally, with our distribution network in Brazil, to target clinical sites that are offering the technology to patients with localized prostate cancer.

During the fourth quarter and into the first few weeks of 2009, we have continued to focus on increasing physician adoption of Ablatherm-HIFU. We had a very strong presence at both the French Association of Urology meeting and the European Association of Urology annual conference. These events provided us with an excellent forum to demonstrate the benefits of HIFU to the urology community, present extensive clinical results, facilitate peer-to-peer interaction among urologists and hold product demonstrations of Ablatherm-HIFU.

We also recently held the annual French HIFU Club meeting, where more than 50 French Ablatherm users discussed their experience in using our HIFU robotized approach, while discussing the technology's clinical superiority.

The increasing support for HIFU among urologists at these conferences, in addition to the French Association of Urology's recent publication, further validates HIFU's position as the new standard of care for the treatment and management of localized prostate cancer.

As of today, more than 18,600 prostate cancer treatments have been successfully performed worldwide, using Ablatherm-HIFU, at 218 [foreign sites]. Based on the success of these dedicated urology conferences and the growing adoption of HIFU to address prostate cancer, we anticipate that our marketing actions will increase the number of patients benefiting from our technology.

At December 31, 2008, we had a total of EUR15m, or $20.8m, in cash and cash equivalents. While we are fortunate to have a strong cash position during uncertain and difficult economic times, we are aware of the need to conserve our resources, to mitigate any impact on our business resulting from broader economic issues. To ensure that we remain well-funded to implement our long-term growth strategies, we are focused on managing our cash and controlling expenses.

Also, we are confident that our robust cash position and innovative technology strongly position us within the current macro environment and effectively execute our strategic business objectives, including the extension of Ablatherm-HIFU in Europe, completion of the US ENLIGHT clinical trial and the advancement of our deep project pipeline.

Turning to our clinical development strategy, we are encouraged by the FDA's recent permission to amend our requested protocol amendments for the US ENLIGHT clinical trial. These changes are aimed at broadening patient inclusion criteria, including the addition of three new participating HIFU sites, which could potentially accelerate patient streaming and enrolment. Implementation of these amendments is pending approval by each participating site's Institutional Review Board, or IRB, and we are working aggressively to submit the new documents to all IRBs.

We plan to work with participating sites in the US to optimize and adapt the communication and marketing programs, targeting potential patients for the ENLIGHT study, including adaptation of the recent protocol changes. We look forward to completing the US clinical study, using the amended protocols. Pending the successful completion and positive outcome of the study, Edap's priority remains bringing this minimally invasive therapy to US patients with localized prostate cancer.

Continuing to 2009, we are encouraged that our current backlog will contribute to sales figures in the first half of the year. Despite our optimism, we are well aware that in the current economic environment things can change rapidly, and therefore management remains cautious in our outlook. While we will continue to work to drive increased revenues, we also focus on cost control initiatives, to ensure the Company remains well-funded to execute our long-term growth strategy.

In conclusion, we are pleased with the overall strong sales performance of our HIFU and Lithotripsy divisions in 2008. With a strong emphasis in RPP treatment during the fourth quarter and into the first quarter of 2009, we are confident that treatment volumes will continue to ramp up as our sales and marketing initiatives gain momentum. We continue to make progress on our US ENLIGHT clinical trial and expect enrolment to accelerate as a result of our amended protocol.

For those who are planning to be in the Chicago area from April 25 to 30, I will be attending the American Urology Annual Conference and welcome you to stop by to see our booth and meet our extended team.

I will now turn the call over to Eric, who will review our fourth quarter 2008 financials. Eric.

Thank you, Marc, and good morning, everybody. I will now discuss our fourth quarter and full year 2008 financial results.

Total revenue in the fourth quarter of 2008 increased 28.4%, to EUR9m or $11.8m, compared to EUR7m or $10.3m for the same period in 2007. Our fourth quarter results were in line with our expectations and reflected the anticipated conversion of a strong third quarter 2008 backlog into equipment sales across both our HIFU and Lithotripsy businesses.

For the full year 2008, total revenue was EUR23.1m, or $33.9m, compared to EUR22.3m or $30.8m for the full year 2007. Total revenue reflected an increase in lithotripsy sales to historical growth levels.

HIFU sales increased in the second half of the year, following slower activity in the first two quarters of 2008. Fourth quarter 2008 revenue for the HIFU division was EUR3.4m or $4.5m, an increase of 13.9%, compared to EUR3m or $4.4m in the same period of 2007, and up 79.5% sequentially. The fourth quarter was our strongest three-month period in 2008. We sold a total of four Ablatherm-HIFU systems during the quarter.

Full year 2008 revenue for the HIFU division totaled EUR9.2m or $13.5m, compared to EUR9.3m or $12.9m during the full year 2007. As Marc noted in his comments, a strong up-tick in RPP treatments during the fourth quarter 2008 and into the beginning of 2009 gives us confidence that our RPP action program and strong project pipeline will continue to drive sales in 2009.

Fourth quarter 2008 revenue for our Lithotripsy division was EUR5.6m or $7.3m, a 39.2% increase from EUR4m or $5.9m during the same period last year. In the fourth quarter 2008 we sold 27 lithotripsy machines, including six Sonolith I-Sys systems. In addition to the strong fourth quarter 2008 revenues, we experienced healthy growth in full year 2008 Lithotripsy revenue, to EUR13.9m or $20.4m, up 6.2% compared to EUR13m or $17.9m for the full year 2007.

Higher revenue and growth led to increased gross profits, to EUR3.3m or $4.3m in the fourth quarter 2008, compared to EUR3m or $4.4m for the fourth quarter 2007. Full year 2008 gross profit was stable, at EUR9.1m. And gross profit margin was 36.7% and 39.5% in the fourth quarter and full year 2008, respectively.

Fourth quarter 2008 operating expenses were EUR3.7m or $4.9m, including the US FDA ENLIGHT clinical trial for Ablatherm. Fourth quarter 2008 operating expenses were similar to the fourth quarter of 2007. Excluding the ENLIGHT clinical trial costs, which totaled EUR2.2m for the full year, our total operating expenses for the full year 2008 were EUR11.6m or $17.1m, down 2.2% year-over-year, primarily due to lower G&A expenses in 2008 and non-recurring expenses in 2007.

Fourth quarter 2008 operating loss was EUR0.4m or $0.6m, compared to EUR0.7m or $1.1m for the year-ago period. Our reduced year-over-year operating loss was attributed to higher machine sales. Excluding the US clinical trial expense, the fourth quarter operating results were a positive operating income of EUR0.1m. And full year 2008 operating loss was EUR4.7m or $6.9m, compared to EUR4.1m or $5.6m for the same period 2007. Excluding, again, the EUR2.2m expense for the US clinical trial, our full year operating loss was EUR2.5m, or EUR0.2m narrower versus the year-ago period.

Fourth quarter 2008 net income was EUR3.6m or $4.7m, or EUR0.37 per diluted share, up from a net loss of EUR2m or $3m, or EUR0.22 per diluted share, in the fourth quarter 2007. The year-over-year increase included a non-cash gain of EUR3.5m, to reflect the adjustment of our convertible debt and outstanding warrants to fair value.

Full year 2008 net income was EUR1.6m or $2.3m, or EUR0.17 per diluted share, compared to a net loss of EUR5.4m or $7.5m, or EUR0.59 per diluted share for the same period last year. The year-over-year increase included a non-cash gain of EUR6.7m, again to reflect the adjustment of our convertible debt and outstanding warrants to fair value.

I've already discussed in previous earnings calls financial market conditions may regularly affect the fair value of our convertible debentures and result in significant adjustments to our financial accounts. However, these accounting adjustments do not impact the Company's cash position.

At December 31, 2008, we had total cash and cash equivalents, including short-term treasury investments, of EUR15m or $20.8m, compared to EUR14.1m or $19.8m at September 30, 2008.

To reiterate Marc's earlier emphasis, we are fortunate to have a robust cash position during these uncertain economic times, to invest in the growth of our product portfolio, advance our US ENLIGHT clinical trials and continue the innovation of our HIFU technology across multiple pathologies.

During the fourth quarter 2008, we achieved positive cash flow of EUR0.9m, including the EUR0.6m FDA clinical trials expense. Our positive cash flow during the fourth quarter 2008 was primarily attributed to the fourth quarter increase in machine sales and the favorable currency valuation of the US dollar against the euro.

With that, I would like to hand the call back to the operator, to answer any questions you may have. Operator? Hello?

Hello?

Operator?

Yes, sir. Would you like me to prompt for questions now?

I guess so, yes.

Excellent. (Operator Instructions). And I see your first question comes from Matt Dolan. Your line is open.

Hi, guys. Good morning.

Morning, Matt.

Good morning.

Good morning, Matt. How are you?

Good, thanks, Marc. First question. You touched on the economy a bit. Can you give us maybe a little bit more of an idea of how things are looking here, in 2009? What does the backlog specifically look like, as you enter the year, those devices that you didn't clear by the end of Q4?

Actually, we are pleased to start the year with again a strong backlog. So basically, if your question was about the crisis and the current economic environment, the answer would be that we -- according to the backlog that we have, which is from the beginning of the year of about 11 lithotripsy machine on backlog for lithotripsy and one for Ablatherm. With, as mentioned during the conference call, the growth on the RPP business, which is significantly up from last year, we don't really feel any changes due to the environment. The only thing would maybe be a shorter visibility.

Okay. But you'd say the backlog, in terms of size, is similar?

Yes. The backlog is quite strong and -- that we have, again, from the beginning of the year, taking into account that we expect to convert the major part of this backlog into sales for Q1.

And are the conversions taking the same time or have the sales cycles extended a bit?

Again, it's about the same. There is no real significant change, except probably the visibility.

Okay. On the RPP side, I think you said -- maybe this will be repetitive, but I think you said the procedures themselves, or HIFU treatments, were up 31%. What's the RPP business doing, performance-wise? And do you expect -- given the climate, do you expect RPP to become a bigger proportion of your business, going forward?

Again, the RPP growth on Q4, as compared with Q4 the year before, was about 31%. So it's back to significant growth, thanks to the marketing and sales initiatives that we've taken the end of last year. And we are continuing to see that at the beginning of 2009.

And that's volume or revenue?

That's volume, which is close to revenue as well. Volume and revenue are quite linked.

If I look on your P&L, it says EUR1.3m sales of RPP and leases, versus EUR1.2m year-over-year.

That's for the 12 months. When I say 31%, it's Q4 only. Remember that we've got a kind of plateau at the middle of last year and we are back to growth at the end of last year.

Okay. And going forward, do you expect more centers to shift towards RPP, in order -- in an effort to avoid a big capital outlay upfront?

Yes. Again, that's -- in the business of prostate cancer, our RPP model is the wider and broader model that is well adapted to most of centers. There are few centers that will be having a sufficient in-house volume of patients to justify the investment in the equipment and RPP remains, I would say, the largest part of the hospital need and capacity.

Okay. On ENLIGHT, when do you expect these new protocol adjustments to be implemented at your US clinical study sites? And with that, do you have any updated expectations for when enrolment could be completed?

Actually we are, as I said earlier, now implementing the new -- the supplement. I mean the IDE supplement that we've got from the FDA and we need to go through the IRBs again. So from one hospital to the other it may vary a bit, but we are expecting to have this fully implemented within a maximum of two months. And that will definitely increase the pace of training and recruitment to our sites.

And when do you expect to fully enroll the study, then?

I won't give a detailed date on that, but we are on track for an FDA approval and -- submission and approval for 2012, as we said earlier. We are still on track.

Okay. And on the expense side, it looks like in 2008 the study itself was about EUR2.2m. What do you expect the rest of the enrolment to cost you?

Well, as we've said earlier, we believe the total cost of the project until completion will be approximately $15m. Obviously, most of it will be spent during the recruitment and treatment phase.

Yes.

Which we mostly did here.

Okay. Very good. And finally, on I-Sys, I think you filed that over 90 days ago. Have you heard back from FDA and when do you think you could have a 510-K clearance there?

And as you said, we have submitted the file at the end of last year and we are processing with the FDA now and working on the file with the FDA. And as it is an ongoing FDA process, we cannot further comment on that, but we are on track for a normal 510-K approval process.

Okay. Very good. Thank you, guys.

Welcome.

Thank you, Matt.

Your next question comes from the line of Mark Wayneling. Your line is open.

Gentlemen, I've got a couple of questions to ask, actually following up with what was said by Mr. Dolan as it relates to your FDA follow-up. Part of your ENLIGHT trial includes doing 200 cryotherapy procedures. And my question to you on that is if cryotherapy, which it is, is already an approved FDA procedure and it's also covered by insurance companies, what incentive is there for patients to go through the trial using cryotherapy and wouldn't that be a significant drag on the timeframe?

I don't get clearly your question, Mark.

The question is with -- cryotherapy is still part of the ENLIGHT trial, is that not correct?

Absolutely, it's correct.

And so my question is, based upon the fact that cryotherapy is already an approved procedure in the United States, what incentive is there for a patient to go through the trial that takes a lot longer and is already covered by insurance to go through the trial of the ENLIGHT trial. Why would a patient want to do that, if they can already get cryotherapy done by way of an approved process by the FDA and payment by the insurance company?

Well, you have to remind that the cryotherapy centers that participate in this study are different from the HIFU centers or other centers that participate in the study. So cryotherapy patients that participate in the study are actually normal cryotherapy patients that are, as you said, reimbursed because it's an approved therapy. That's why that's the comparative arm of the study. So there is no particular incentive. That's just normal cryotherapy patients.

So, from a timing standpoint, you're still in line on the cryotherapy side as well, is that what you're saying?

Well, what we're saying is that they are normal cryotherapy patients. And as we've said earlier, we are working on specific plans to increase this cryotherapy arm of the study and we have a number of action plans to do so, including discussions with the FDA which we cannot disclose for the time being because we are still discussing with the FDA, but that's part of our plan.

So you will in fact be done by 2012?

Yes. That's -- we are still on track for this deadline.

Okay. Next question. Looking at revenues that I pulled from your 20-F of 2008, you have a revenue stream that ranges from a low of EUR18.4m to I guess this year is the high of EUR23m. So you've got, give or take, a EUR5m -- EUR4.5m to EUR5m differential in revenues. From a growth standpoint, obviously most investors are not going to consider that growth. Do you see significant sustained growth from this point forward or should we expect more of the same type of growth that you've shown for the last five or six years?

Again, we are pushing our models and the future growth of the Company, which is again HIFU. But in the current environment, you would agree that it is extremely difficult to give any forward-looking statement in terms of rate of growth for the years or even months to come.

With the exception of the accounting change to show earnings this year, previously the only time that Edap has ever shown a profit was in selling technology to another company in exchange for cash and stock in that company. I guess this question would be directed to Philippe. Has the Board of Directors ever considered a change in the business model? Apparently, from an historical standpoint, the only time that Edap really has made money outside of an accounting change is when you were selling technology to another company in exchange for their stock and cash. Has there been any thought by the Board of Directors to perhaps reviewing the business model?

The Board of Directors, which happened to meet again yesterday and follow this business on a consistent basis, have fully endorsed the current business model. And let me just correct you by saying, while it made a small profit, if you look at Q4 2008, we actually made an operating income if you exclude the well planned in advance and funded separately FDA trial. So we're on track to grow the business at a limited, possibly, pace from what you call growth, but there is no change of direction from the Board, who fully support A, the strategy, two, the business model and three, the management.

Okay. Well, that's all I've got.

Thank you, Mark.

Thank you Mark.

Your next question comes from the line of [Dean Robinson]. Your line is open.

Gentlemen, I have a few questions. Can you hear me?

Yes.

Number one. How many shares were issued in lieu of paying interest to bondholders? And when will the bondholders receive these shares, and are there any restrictions on them?

For the last quarter, a total of 300 -- approximately 320,000 shares were issued for payment of interest. What was the second part of the question, please, Dean?

When will the bondholders receive these shares and are there any restrictions on them?

No, they are fully tradable shares.

Okay. Next question. You announced on May 15, 2008 that Sloan Kettering is a participating site in the US HIFU trials. Have they done any procedures and how many, or why not?

They are -- Memorial Sloan Kettering Hospital in New York is indeed part of the trial and they got all their IRB completed. They have not done so far any patients, but we are looking forward to seeing some patients screened and then scheduled, thanks to the recent permission we've got from the FDA that will make the potential recruitment easier.

Last question. According to your March 25, 2009 press release, you say that HIFU is a standard of care. The technology is first rate as well. And my question is to you why aren't you doing more business? There appears to be a difference between what you say and what you do.

Actually, we say -- and that was taken from the recent publication from the French Urology Association stating and giving HIFU the status of standard of care treatment for primary care and salvage patients of prostate cancer. And since the paper was publicating and since the recent marketing and sales initiatives we've taken, we've seen a growth back on the RPP model with a 31% growth in the end of the year, which is continuing at the beginning of the year.

So, again, we are moving forward and growing the HIFU business through the RPP. And this standard of care status was not given by us, but it was given first by the French Urology Association and probably will be confirmed by other urology associations all over the world.

I guess, Dean, to complete the question is that there is no question that HIFU has gained the status of standard of care from a clinical standpoint. This is what we see in every medical congress and urology congress. What we are trying to do now is to turn this clinical standard of care into a business standard of care status and the RPP program obviously will help us achieve this goal.

Okay. Thank you. I have no further questions.

Thank you, Dean.

Your next question comes from the line of [Jonathan Schwartz]. Your line is open.

Hello, gentlemen, and congratulations on the fourth quarter. I wanted to -- am I still on?

Yes, you are.

Hi, Jonathan.

Yes, sorry. I wanted to see if I could get a little bit of a feel for whether there has been any change in the type of patient. First of all, I assume that, unlike in North America, the overwhelming majority of patients in Europe are coming through referrals from urologists rather than men who've just found this on the Internet and made a decision by themselves.

So I'm wondering whether there's been a change in the type of patient, in other words whether there are more patients who are choosing this over other means not because they're too old to have surgery or because it's a salvage type of treatment, but because they are just plain vanilla localized prostate cancer patients and they have chosen this over surgery. Are we seeing any shift of that sort or do you even have that kind of knowledge? I don't know whether you'd really know.

Actually, we are definitely seeing some changes in the patients as they are getting more and more informed through the Internet or through the different communication ways. And patients, as you were probably thinking about, are looking for what is preserving their quality of life, as they are being detected earlier in their age and earlier in their stage of prostate cancer as well. This is a change among the patients. And again, all our initiatives to create more awareness is to again inform the patients about the different alternatives that they could be benefiting from, including HIFU.

But there is also a change from the urologists' standpoint, with old publications and [the publications] that we are currently seeing among the urology communities agreeing on the side that patients are, in most of the cases, over treated using surgery. And they are getting back more and more to watch/waiting, or what they call now active surveillance, which is a way to control the disease of the patient. And HIFU may definitely play a role into this active surveillance, being probably in the future the active part of it.

Very interesting. And has this affected in any way your marketing efforts? Has there been any more effort put into public relations? Has there been more concentration in the big markets, as opposed to some of the work that's been done to open new markets, which obviously is important, but I presume it's expensive to go to India and go to Mexico and so on?

So, has there been -- the real question is, is marketing pretty much stable or has there been a change in emphasis? Has there been a change in the number of people actually doing it? Is the marketing effort roughly the same in terms of people and cost, or have there been any changes in it?

We are -- as I said a little bit earlier, we are continuing to really focus our efforts to both patients and urologists because, again, they are the two main parts of the decision in the treatment of this localized prostate cancer. So we are focusing efforts, in terms of resources and in terms of financial resources as well, into creating awareness among patients and creating more adoption and acceptance among the urology community.

Right. And is the budget roughly the same for marketing outside the United States?

It's about the same, which is sustainable since the beginning of 2007. Remember, we increased our marketing program at the end of 2006, to boost -- to introduce and boost the RPP program, and since then the marketing effort has been quite sustained at a similar level, a little increased but --

And you'd expect it to be at roughly that level going forward?

Yes, we will keep pushing on this side.

Yes. Generically, how long does it take to get a 510-K approval, without reference to our particular case? What's typical for that?

The typical -- again, there is no real standard of that. Typical I would say is between six months and one year.

How far into it are we now?

We've been submitting the file at the end of last year in December.

Right. And just two more questions, if I may. Where is the growth coming from, primarily? One would assume it's coming from the large markets, France, Germany and so on, but is that the case? Is there a significant increase in number of treatments in France and in Germany?

Well, definitely the growth has been coming from the markets where we have been active in the earlier times on the RPP business, which is obviously Germany, Italy and France. In addition to this growth through increased penetration of HIFU, we also have growth from geographic extension, as Marc explained, with the opening of the Indian market or the Mexican market, and the geographic expansion is also playing a role in this growth.

Right. Yes, I assume that after the first location in each of these countries there's -- is that true? Is there a case? Is there a relatively near-term prospect for additional locations in each of those countries, in India and in Mexico, in the large countries?

The idea was indeed to open those countries and others as well, and the idea is to start a strong program of promotion into those countries, to continue growing the business in those countries. So, definitely, that was the first step into those new countries. And the idea is to continue and grow those countries and also others, and continue expanding our business in new countries and new territories.

Do we have an office, then, in India? Do we actually have a physical presence, somebody from Edap in India, in Mexico, or is it served from Lyon?

No, we use in those countries distributors.

I see.

And we have area sales managers that are heading up our network of distributors.

Right, I understand. And last question. Is there any -- I'm sure you've thought about this. Is there any way to reduce the dilution from PIK payments? I guess it's obvious the only way to do it is to spend cash, which I presume that you don't want to do and with good reason, or to raise money on better terms than we are getting on those PIKs. Is there some kind of -- is that something you think about?

Well, first of all, and that's something we are fully aware about and we are fully aware of the concern about the dilution impact of the PIK shares. As you know, first of all - how shall we call that - it was made fully clear from the inception of the convertible debt that the cash proceeds were to be used primarily to advance the clinical trials in the US and not for interest payments. And that's why the debenture contracts provide for this payment in kind option.

Of course, there is a dilution impact and unfortunately we cannot satisfy everybody in the matter, but of course we've got the support of the majority of our shareholders to use this payment in kind option. And all the more we are totally convinced that this is the best decision in the interest of the Company and the shareholders, given the current financial and economic environment.

And you were mentioning the possibility of raising money with [debt issuance]. But as you know, in the current financial markets, the option of raising money for a micro cap like this is absolutely non-existent for the time being.

Yes, I understand.

So we strongly believe that the utmost priority is to ensure the Company the more robust possible cash position, to weather the current financial and economic storm. And given the lack of visibility on how and when the crisis will evolve, we'd better prepare for the worst and take all possible actions to maximize the Company's sustainability. And this will be our agenda until we have a better and reliable visibility, which nobody has for the time being, and because again we believe, obviously, that's the best ultimate interest of the Company.

I agree with you. I voted for it, so I agree with you. I just -- it's just something that's a matter of concern. But I agree with you and I guess for the foreseeable future there's not much to do about it. But we have a right to pay in cash, I presume, if the Company is --

Of course, of course. And as soon as we have a better visibility on activity and cash, we may elect for cash payment again, but for the time being -- and we have to make sure that we preserve the maximum of cash position and that's why we have elected to pay in shares.

I agree. It's a wise decision. Thank you very much.

Thank you, Jonathan.

Thank you, Jonathan.

Thank you.

Your next question comes from the line of [Ron Wildmann]. Your line is open.

Thank you. Good morning, gentleman.

Morning, Ron.

The sun is finally coming up, thank you. Anyway, I've got a couple of questions here. And I guess I really want to know how important the FDA trials here are in the United States. And what's the management rationale for using a medical doctor who's not a physician and doesn't really have any previous trial -- FDA trial experience? Wouldn't it be more logical to use a physician that has the rapport and has put a trial through the FDA?

Actually, I understand that you are speaking about our Medical Director, John Rewcastle. And we've been taking the decision to work with John because he has an extensive experience and expertise in prostate cancer. He's been working in the prostate cancer industry for the past few years. And we believe and we continue believing that he is the right person to lead the clinical trial in the US for the Company.

Okay. All right.

There is no rationale out there to show that a medical urologist would be doing better. And actually, he's been doing extremely well in the past few months and since he joined the Company in managing the trial, in getting new permission for IDE supplement that we just published recently about, and he is doing a great job. He's putting a lot of effort and I give him my full confidence.

Okay, fine. I do have a brother that is a doctor and I know how doctors are -- it's a very closed society and they trust their peers, so that was the reason for my question.

Absolutely, and I completely agree with you. They trust their peers but they also sometimes disagree and have some conflict of interest with their own peers as well, which is not the case with John.

Okay, I understand. Secondly is, this may be something that is unique to France, but why doesn't the management of the Company and the Board of Directors purchase more stock in the Company? Is there restrictions in France that maybe there's not elsewhere in the world?

Well, that's -- this question of buying back shares has been already brought in previous occasions, and let me recall that we have no plans for such a buyback program and for actually two main reasons. The first and most important one is that, as was already discussed, the Company's priority is to take all possible actions to preserve and maximize its cash position, given the lack of visibility on how long the current financial and economic crisis will last. In this context, of course we can't use our cash to buy back shares.

In addition to this cash management concern, you're right, the legal constraint for us to comply in the same time with both the US market regulation and the French corporate clause makes such a buyback program very difficult to implement, if not impossible.

Yes, I understand and I certainly agree with conserving cash. I also agree with the more invested management in the Board of Directors are, the more it helps the stock and the overall Company.

Well, be sure that we care about the stock price of course, as a normal management would do.

Thank you very much.

Thank you Ron.

Thank you very much, Ron.

I would now like to turn the call over to Mr. Philippe Chauveau. Mr. Chauveau, please proceed.

I presume that there are no more questions, so I would like to conclude by closing this conference call. And thank you very much for those who listened, as well as those who listened and asked questions. And on this basis, I would say, for a few other separately on the phone, as we follow through from this day or we talk to you at the next conference call.

Thank you and goodbye.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you and have a great day.