愛德華生命科學 (EW) 2007 Q1 法說會逐字稿

Greetings, Ladies and gentlemen, welcome to the Edwards Lifesciences first quarter 2007 earnings conference call. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Mr. David Erickson, Vice President, Investor Relations. You may begin.

Welcome and thank you for joining us today. Just after the close of regular trading we released our first quarter 2007 financial results. During our call today, we'll focus our prepared remarks on information that complements the material included in the press release and financial schedules and allocate the remaining time for Q&A. Our presenters are Michael Mussallem, Chairman, CEO and Thomas Abate, CFO and Treasurer.

Before I turn the call to Mike, I would like to remind you during today's call we'll be making forward-looking statements that are based on estimates, assumptions and projections. These statements include but aren't limited to, our ability to achieve 2007 financial goals for sales, gross margin, net income, earnings per share and free cash flow, regulatory approval of new products in and competitive dynamics associated with our heart valve therapy product line, the continued adoption and sales of FloTrac and LifeStent, the timing and progress of the Resilient, Partner, and Evolution clinical trials, the market opportunity for transcatheter technologies and the impact on our results of foreign exchange and special items. Although we believe them to be reasonable, these statements involve risks and uncertainties that could cause actual results or experiences to differ materially from the forward-looking statements. Information concerning the factors that could cause actual results to materially differ from those in the forward-looking statements may be found in our annual report on Form 10-K and in other SEC filings which are available on our website at edwards.com.

With, that I'll turn things over to Mike Mussallem.

Thank you, David. First of all, announced today in a separate release, we're very pleased the FDA is determined we adequately addressed the concerns outlined in their February warning letter. As a result, they lifted the restrictions on our new product approval.

Turning to the quarter, we're very encouraged that critical care sales again grew in double digits. Even with this strong showing, our earnings fell short of our estimate for the quarter as the U.S. heart valve sales were below expectations. Also in the quarter, we continued to invest in our future, fueling important progress on our now technologies, quality systems, and customer facing resources. Additionally, we're pleased to have begun enrollment in our Landmark partner trial to evaluate the Edwards Safety and Transcatheter heart valve. This is a truly transformational technology that holds promise for the large number of patients suffering from advanced heart valve disease.

Now turning to the results. Total sales grew 2.9% to $264 million. Reported sales declined $10 million due to discontinued businesses, while benefiting by $5 million due to favorable foreign exchange. Reported sales for heart valve therapy grew 3.5% to $129.5 million, which included a $1.6 million negative impact from the discontinuation of mechanical valve and a $2.9 million contribution from foreign exchange. Our premium Magna and Magna with ThermaFix valves were the main contributors to our global growth in the quarter. Mechanical and porcine valves declined approximately 3% compared to last year and represent less than 5% of our total heart valve sales.

In the U.S., the first quarter sales were 2 to $3 million below our expectations, although we achieved our highest quarterly valve sales ever. We regained share in the larger aortic segment this quarter, however in the micro position, we did not.

Our premium Magna aortic valve grew in the high-teens and the recent edition of the proprietory ThermaFix tissue treatment is helping to improve Magna sales and income the value. In addition, we also launched our Perimount [Theon] aortic valve in the U.S. and are pleased to offer the increased durability of ThermaFix to our Perimount customers.

Although we lost share on the micro side, our Perimount valves are widely considered to be superior in terms of durability and hemodynamics, based on the substantial volume of published data. We'll be enhancing the ease of use of our micro offering with the launch of Magna Mitral, which is currently anticipated in the fourth quarter, pending FDA approval.

Global heart valve repair sales grew in the mid-single digits with growth driven by our premium disease-specific products, including the MC-cubed, IMR and Geoform rings. At SVS in January, we launched the Myxo, ETlogix micro repair ring in the U.S. The Myxo ring is the first mitral valve repair product designed to address a specific group of patients who are difficult to repair. We're pleased with its initial acceptance and expect continued strong adoption of all of our premium specific repair products throughout 2007.

We're pleased to move up the European launch date of our next generation aortic valve, the Magna Ease to next month's AATS conference. The valve's low profile makes it simple to implant, which is an advantage to patients with challenging anatomies. Magna Ease builds upon Magna's best-in-class hemodynamics and includes our ThermaFix enhanced tissue treatment.

Japan, we received regulatory approval for a next-generation Perimount mitral valve and expect reimbursement on May 1. This represents the first new Perimount valve approved there in several years.

At the upcoming AATS conference, we'll continue to broaden our availability of our Edwards 1 program to help prepare surgeons for future technology innovations. Edwards 1 provides cardiac surgeons with exposure to innovative heart valve technologies, basic transcatheter training, endovascular skill simulation and education about the under-served heart valve patient population. The Edwards 1 program continues to generate strong surgeon interest.

Our heart valve therapy franchise continues to be an ideal growth platform. Edwards has built its leadership tradition in the heart valve market with superior product offerings and continuous innovations in valve technologies The timing of new product introductions will continue to influence our growth rate. In the interim, we're responding decisively to the current competitive environment on many fronts, including strengthening our sales resources.

In critical care, which represents more than 1/3 of Edwards overall revenues, first quarter reported sales grew 12.1%, which included a $2 million contribution from foreign exchange. Sales of FloTrac were the biggest growth driver this quarter with share gains in pressure monitoring products also contributing to results. Edwards is the world leader in disposable pressure-monitoring products and continued to gain share in the market.

The FloTrac system enables rapid intervention by providing clinicians with fast, easy and continuous measurement of cardiac output without the need for calibration. FloTrac is particularly valuable in monitoring surgical patients that would not traditionally warrant a Swan-Ganz catheter. While Swans are used to monitor patients undergoing cardiac surgery, FloTrac expands the application of hemodynamic monitoring to include other patients undergoing other major procedures, such as vascular, thoracic, and orthopedic surgery. We're just beginning to penetrate these new opportunities. Recently-completed clinical trials validated the performance of FloTrac in high-risk surgical segments and peer reviews of these studies are expected to be published in the second quarter.

In addition, further clinical investigations are underway to demonstrate the value of incorporating FloTrac in treatment protocols and we expect the first of the studies to be completed by the end of the year. We're planning several important enhancements, the FloTrac and the first of these will be released in the fourth quarter. For 2007, we remain confident in our ability to gag double our FloTrac sales and deliver a year of strong growth and critical care.

In Cardiac Surgery Systems, reported sales for the quarter declined 28%, largely due to last year's discontinuation of the company's Profusion products and the recent exit from the TMR product line. Cardiac Surgery Systems now consists of our research medical Cannula and Embolix technology, which grew 6% in the sixth quarter on a year year-over-year year basis. In March, we announced the sale of our TMR distribution rights and sales of this product were approximately $12 million in 2006. We remain committed to expanding our line of innovative specialty products for our cardiac surgeon partners and will focus preferentially on unique and minimally invasive technologies that advance the field of cardiac surgery.

Total reported sales of vascular products grew 11% this quarter. Once again, growth in this product line was driven by LifeStent, partially offset by a slight decline in the base business. During the fourth quarter, we began a substantial increase in our U.S. stent sales force and currently, we have 35 people and expect to reach our 40-person target next month. At the upcoming Euro PCR conference in May, the resilient data supporting our PMA submission will be presented. . We still expect to submit our PMA for an SFA indication in the second quarter. This submission will incorporate acute data from both the FlexStar delivery system as well as our longer stents. We continue to anticipate LifeStent's SFA approval by the end of the year.

We're pleased with the continued acceptance of our FlexStar self-expanding delivery system in the U.S. We plan to complete the full commercial launch of our FlexStar system in Europe during the second quarter. Together with our line of longer stents, we remain confident in our ability to double stent sales again in 2007.

Turning to our transcatheter valve programs. As we announced last month, we received conditional approval from the FDA to initiate our Partner trial, the pivotal clinical trial of our Edwards SAPIEN transcatheter aortic heart valve technology. I'm pleased to report we're making good progress and have already begun enrollment. We expect 3 U.S. sites to have IRB approval by the end of the month. As planned, we recently submitted the requested additional follow-up data from our U.S feasibility study to the FDA, which should allows to expand the trial beyond the initial 8 sites and 40 patients. We don't expect the FDA's review of this data to interrupt the trial enrollment.

As a reminder, Partner trial is intended to treat patients judged to be high-risk for conventional open heart surgery. Within the high-risk patient population, there are patients who are high risk but operatable and there are patients who are considered non-operatable. Our two-arm trial will accommodate both groups and direct patients to the most appropriate arm. The surgical arm of the trial will be 350 patients of which 175 will be SAPIEN patients and 175 will be control patients. The medical management arm will be 250 patients, 125 SAPIEN, 125 control. The primary end point for both arms of the trial will be mortality at one year with secondary end points of valve performance and quality-of-life indicators. Initially, all of the SAPIEN valves in the Partner trial will be delivered, transfemorally using our Retro Flex delivery system.

As planned, we recently completed enrollment in our U.S. feasibility study of the Asundra transapical delivery system. We remain hopeful to gain FDA approval to add Asundra to the Partner trial during the third quarter this year.

During the quarter, we introduced our Retro Flex 2 delivery system in Canada and are very pleased with its performance. Retro Flex 2 further enhances the ease of use benefits of Retro Flex 1 by adding a customized a-traumatic tip to enable clinicians to more easily and a navigate across the native stenonic aortic valve. We will be seeking regulatory approval to add Retro Flex 2 to both our U.S. and European trials.

In Europe, we remain actively engaged in pre-commercialization activities in anticipation of receiving our CE Mark by the end of the year. We're continuing to train interventional and cardiac surgeon teams using advanced simulation training, case observation and proctoring in order to expand the number of available reference centers. In addition, we're making progress in securing reimbursements in key European countries.

With more than 400 transcatheter implants to date, Edwards remains the clear leader in this transformational field and we look forward to responding on further progress at upcoming clinical meetings, including Euro PCR.

Our Monarch system has demonstrated an excellent safety profile and ease of use in feasibility studies. During the first quarter, we completed enrollment of our 60-patient, Evolution 1 feasibility study. Updated information including follow-up data on a significant portion of the study population will also be presented at Euro PCR. As a result of our continued enthusiasm for this technology, we will initiate our Evolution 2 follow-on troll in Europe and Canada later this quarter. Data gathered from Evolution 2 will measure clinical and quality-of-lifer end points. In addition, the study would facilitate European reimbursement and commercialization efforts and also help support a U.S. pivotal trial, that could start as early as next year.

At the Euro PCR meeting in Barcelona next month, Edwards will be sponsoring several clinical presentations. A number of our innovative technologies will be featured, including updated data on our Edwards safety and transcatheter valve, our Monarch and Mobius transcatheter repair technologies and updated data from our RESILIENT trial. In addition, we're planning to host an informal analyst reception is reception during the week and details on this will be available soon.

As we announced in February, Edwards received a warning letter resulting from an FDA inspection of our Irvine facility last year. The warning letter related to elements of our quality system, including complaint handling, documentation and quality systems training. In March, we submitted our written response to the letter and had a very productive meeting with the FDA. As announced today, the FDA has formally notified us that our response to the letter adequately addresses their concerns; consequently, the FDA will not defer approval of pending pre-market submissions or export certificates for Edwards products. We have been very focused on promptly resolving the issues identified in the warning letter and are pleased with the FDA's conclusion. Edwards is committed to continual improving in our quality systems and making substantial investments to make those systems best-in-class.

Now, I will turn the call over

Thank you, Mike. Recorded earnings per share for first quarter was $0.54 compared to $0.73 the prior year. Excluding special items from the prior year, our first quarter 2007 non-GAAP EPS was $0.50.

Turning to sales, we are revising our 2007 total recorded sales guidance to between a 1.70 billion and a $1.110 billion, primarily as a result of the TMR product line divestiture this. This revised range also includes minor adjustments in critical care and heart valve therapy sales guidance. For heart valve therapy, we now expect total annual sales of 520 to $530 million. In critical care, we're raising our sales guidance to 385 to $395 million for the full-year. In cardiac surgery systems, we now expect total annual sales of 55 to $60 million, which takes into account the discontinuation of our TMR product line. Lastly in vascular, we continue to project sales of 85 to $95 million for the year. All of these projections and foreign currencies remain at the current level. For the second quarter 2,007, we're projecting total sales of 270 to $280 million.

For the first quarter, our gross profit margin was 64.7%, compared to 63.7% in the same period last year. The 100 basis point approvement over last year was due to a more profitable product mix led by the strength of Magna and FloTrac. This was partially offset by the negative impact of foreign exchange and investments and quality systems. For 2007, we continued to expect an improvement of 100 to 150 basis points which, excludes the TMR gross profits which, is now reflected in other areas.

First quarter SG&A expenses were $98.6 million for the quarter or 37.3% of sales. Compared to 35.9% in the year-ago. The $6.4 million increase, versus last year was due primarily to higher sales related spending across our key product line, as well as a $2 million impact in foreign exchange. For 2007, we expect SG&A as a percentage of sales to be approximately 37% as we continue to invest this year. R&D investments grew $1.6 million to $28.8 million, or 10.9% of sales in the first quarter. R&D was higher than last year, primarily reflecting additional spending on our transcatheter valve program. For 2007, we continue to expect R&D investments to be approximately 11% of sales.

Net interest expense of $200,000 was lower than the same quarter last year, resulting from lower interest expense and our declining average debt balance and higher interest income earned on our U.S. cash balances. For 2007, we expect net interest expense to remain at approximately 200,000 per quarter.

For the quarter, we earned net income of 1.3 million. This income was related to two favorable items impacting this line. An investment gain associated with a technology partnership, and the impact of selling our TMR product line. For the remainder of 2007, we will continue to record in other income a benefit of approximately $1 million per quarter from the TMR earnout. This is expected to substantially offset the reduction in gross profit that resulted from discontinuing this product line. As a result of this benefit, other income for the remainder of the year will be minimal.

For the first quarter, our reported tax rate was 25.6%. For 2007, we expect our rate to remain at approximately 26%.

When compared to the same quarter last year, foreign exchange rates positively impacted first quarter reported sales by $5.7 million. At current FX rates, we estimate an approximate $10 million benefit to the full-year sales.

Free cash flow generated during the quarter was $22.5 million, which we define as cash flow from operating activities of $36 billion, minus Cap Ex of $13.5 billion. For 2007, we expect free cash flow of 160 to $170 million.

During the first quarter, we repurchased approximately 500,000 shares of common stock for $25 million.

Turning to the balance sheet, long-term debt at March 31 was $225 million. Net debt at the end of the quarter was $44 million, a decrease of $9 million from the fourth quarter. Including receivables and our asset-backed securitization program, days sales outstanding for the quarter was 69 days, inventories were comparable to the prior quarter.

Finally, we estimate the second quarter diluted EPS will be between $0.56 and $0.58 and now estimate the full-year between $2.23 and $2.31 per share.

And with that, I will turn it back over to Mike.

Thanks, Tom. For 2007, we remain focused on raising the growth of our core heart valve business by increasing our sales resources and introducing several innovative new products. We expect these efforts to become increasingly larger contributors to our growth. FloTrac and LifeStent products are driving current growth and will continue to do so for the next several years and we're actively engaged in pre-commercialization activities are for the safety and transcatheter aortic valve introduction in Europe.

We're investing in our future. We continue to aggressively pursue innovative new platforms, as well as strengthen our talent and invest in infrastructure to prepare us for accelerating growth. For 2007, we remain focused on achieving our previously stated financial goals, which include generating total sales between 1.075 billion and $1.125 billion, increasing our gross profit margin from 100 to 150 basis points, delivering non-GAAP net income growth of 12 to 14% and generating free cash flow of 160 to $170 million. With that, I will turn it back over to David.

We suspect some of you might be joining other conference calls shortly. In order to allow everyone a chance to ask a question, we ask you that limit your questions to one each plus one follow-up. If you have additional questions, please re-enter the queue, and we'll answer as many as we can during the remainder of the hour.

Thank you. (OPERATOR INSTRUCTIONS) Our first question is coming from Michael Weinstein with JPMorgan.

I guess my first question would relate to the valve business. You made the comment that you think you gained share this quarter in the aortic position but lost it in mitral and which, you know, seems to suggest that once we get Magna mitral approved you think you're going to gain back share. The first part of that would be can you give us anything to quantify that or give us a better view on you why think you gained share or aortic but lost at mitral?

I think, thanks for the question, Mike. A couple of things. First of all, in the aortic position, we think most of what we experienced and actually, I think, the same is true, too, of a lesser extent in mitral, but we're still experiencing year-over-year share loss in the aortic position but we haven't -- we don't feel like we lost any share. Matter of fact, probably bottomed out and started gaining some back in the aortic position this quarter. It's still in the growth rate, if you will. I think for the most part there seems to be an issue that's being highlighted by some of our competitors around ease of use, and so we're feeling that in the mitral position to some extent. We feel like we have the superior mitral valve in terms of hemodynamics and in terms of durability. But ease of use doesn't really get addressed until we get to the mitral Magna product.

A lot of what your launches in the last few years have done is allowed to drive a mixed shift toward premium price products. Can you give us a sense right now ahead of the launch where you're going to break down your growth between units and price?

I think this quarter we have most of our growth came from units and so there was in only a small amount of our growth actually that came from price this quarter and I would suspect that would be the case throughout 2007. Is that your question, Mike?

Yes, exactly.

Okay.

All right, I'll let others jump in here thanks.

Thanks, Mike.

Thanks, Mike.

The next question is coming from Dhulsini de Zoysa with Cowen and Company.

Thanks, Mike. I was hoping you could give us some general sense of market forces, particularly tissue versus mechanical, U.S. versus overseas. I think you just gave the price unit breakdown for yourselves. If you could, whether you're still expecting 7 to 11% for the year for the overall market and then by segments.

Okay. Well, let me take a shot of this. Overall we don't think the dynamics of the heart valve market have changed much over time there. There is far more mechanical share outside of the U.S. than there is inside the U.S. I think the mechanical share, O.U.S., must still be close to 40% and so our opportunities are richer there, and there is still more mechanicals in the mitral position than there is in the aortic position. So, what that does from a competitive dynamics point of view, it makes the opportunity substantial on the mitral side, one of the reasons why we find mitral Magna particularly attractive in the U.S. And there is a rich opportunity both still in aortic and mitral positions outside of the U.S. I don't know, does that answer specifically enough?

I would have loved some numbers.

Well, I can dig it out. I can tell you, Dhulsini, nothing has really changed substantially since the investor conference. I can try to get the details in terms of the exact split on tissue versus mechanical and get those back out to you.

That would be great. Thank you.

Thanks.

Our next question is coming from Amit Bhalla with Citigroup.

Hi, thanks for taking the question. I was hoping, Mike, you could give us more color or numbers around FloTrac and LifeStent in the quarter.

Okay. Yes, first on FloTrac, you know, this has been, was another nice quarter for us. I think our sales were somewhere in the $6 million range for the quarter, we're very much on this trajectory to double sales. We generated about $15 million worth of FloTrac sales in 2006 and we said we're going double it. What we're seeing is a nice trend of where we're seeing disposable usage of it goes along with our monitors which, is an encouraging sign for the future.

In LifeStent, we continue to feel like we're on track. Our quarter, let me think if I know what the number is. I think we're around 5 to $6 million worth of sales of LifeStents this quarter. As a matter of fact, I'm quite sure that was the range where it was. Once again, I think we're on the trajectory to double sales, so we're pleased to start the introduction -- of FlexStar going toward and we sold $16 million last year and would expect to do $32 this year.

To follow up on the valve, can you talk about how many sales reps you have in the valve segment now and what kind of productivity you're seeing from them? I think with prior quarters you said that -- you talked about the valve sales reps increasing in and helping to offset the competition. A little color there would be helpful. Thanks.

You know, I may not give you the exact detail you're looking for, Amit, for competitive reasons but we said in the past there are 50-plus people in the U.S. sales force. We made additions to sales force in the U.S. and outside the U.S., that probably equated to a 1million, $1.5 million in heart valve sales growth that we realized in the quarter, and we'll probably do some more of that going forward, maybe a similar amount. And rather than detail out exactly how many people, I will leave it at that, if that is helpful.

So that means a $1.5 million of added revenue benefit? Because of the sales rep ads?

No, that is $1.5 million of additional expenditure. That's SG&A. It will happen previously and will happen in the future. The way we look at this, these are going to be sales and marketing investments that will have a relatively faster turn.

Okay, thanks.

You're welcome.

Our next question is coming from Glenn Reicin with Morgan Stanley.

Hi, folks. Actually can you just give us the price mix volume trends in valves for the quarter and also give us the hemofiltration number for the quarter?

Okay let's try and do the volume first, Glenn, for the quarter. Unit growth globally for heart valves was 2%. So the price is a small part of that, right, just a small number and can you back into the rest of it. Hemofiltration, I don't know. I can look and see what the growth number was. Do you want the absolute or -- .

Absolute's fine.

Yes, I think someone's getting it. I think it's about $9 million, Glenn.

Okay. And that's up how much?

How much growth is in that number?

Yes.

Around a 20% growth rate for that.

Okay, two clarifying questions. The 2% volume, is that better? I thought we didn't get much in way of volume growth in the fourth quarter. I am wondering if that is correct.

I think that is right. It is a little bit better, Glenn.

Okay, and then I want another clarification, on the $1 million payment for the sale of TMR rights, is that neutral to the bottom line or is that accretive to bottom line for the quarter and year?

You know the payment, Glenn s more related to the purchase price gain or loss. What happened in the quarter is that we have an earn out that's related to it, and that in combination with the gain on the transaction, pretty much came out neutral at the bottom line. Very close.

Going forward to the $1 million per quarter is that better than break even?

It's designed exactly, with a little bit of upside to break even for us to on the bottom line. But remember that it will have an impact to be a missing piece from sales and gross profit, but then we get the catch-up there in the other income line.

That goes away next year?

Those go away next year. The way to think on it is basically neither dilutive nor accretive.

Right, helps you transition this year. Thank you.

You got it.

Our next question is coming from Timothy Nelson with Piper Jaffray.

Hi, guys, turning to the repair business, the first quarter in a long time seems to me you had single digit repair growth number. Can you talk about that, both U.S. and internationally, what is going on there?

Yes, you know it's a good question, Tim. Interestingly enough, we had a spectacular repair quarter last year, and I think more of this growth rate here, only in mid- single digits opposed to the double digits is around that. Overall, we see similar trends in both the U.S. as well as Europe and Japan where we're getting strong growth out of the new functional rings and that growth rate is quite substantial. But it's off a small base.. We're seeing almost 50% there, and these functional rings account for about 20% of the overall volume. Maybe that gives you some sense of what is going on. Overall, we're not concerned about the repair business, we would expect it to bounce back to the typical, sort of more like 10% growth rate.

So U.S. and O.U.S growth rates are comparable this quarter?

Let me try to get something exact for you. Hold on a second.

Okay. Yes, as it turns out, the U.S. growth rate was mid- single digits and the Europe growth rate was slightly lower. You're looking at the U.S. is more like 6 and the global like 4.

Okay. And the overall heart valve business, U.S., international?

In terms of growth rate?

Yes.

Let's see. I think, I'm thinking they comparable here. So global heart valve growth in the U.S. was a little less than global growth.

Okay.

Okay.

All right, thanks.

Positive but a little less.

Good, thanks.

You're welcome.

Our next question is coming from Rick Wise with Bear Stearns.

This is actually Gil Gabay for Rick Wise. Good afternoon. I have a bigger-picture question regarding cardiac surgery systems. So we're seeing a pattern of business being done in the invested way. Is that a business that Edwards is thinking about divesting with completely or are the parts in it right now, pieces staying within a company longer-term.

Yes, thanks very much, Gil. We're committed to expanding this business. We didn't find the profusion business had a very attractive future and so we have been selectively doing divestitures and we have done that over a substantial period of time. We didn't think TMR was going to have the kind of future we were looking for. What we're committed to do is to expand the line of products more preferentially toward the unique and minimally-invasive technologies that we think are going to be important to cardiac surgery in the future.

Okay. So, is this -- are those businesses that you're trying to organically grow or maybe you're thinking about, you know, adding to?

We looking at both, Gil.

Okay. Thank you very much.

You're welcome.

Our next question is coming from Glenn Novarro with Banc of America Securities.

Thanks, guys. Two questions. One on this stent side, if I remember correctly, I think your revenues for LifeStent 4Q was about $5 million and so, obviously, better in 1Q, but I would have thought the ramp would start increasing a lot faster than what you did and I look back at my notes and looks like you said in the fourth quarter you expected to have 30 reps on board by the end of 1Q and that looks like it will be in the next month or so. So, is there something happening in the stent market today that is allowing, making the ramps slower than what we would have thought? That's question one. Then can you give me an update on where you are with the share buyback. How much shares are left in the buyback. Thanks.

Okay, let's talk about the stents. Yes, we're just up a little bit in Q1 over Q4. So, we were in the -- we were's little over 5 in Q4 and we're more on the 6 range or so in Q1. We would have expected it to come up a little bit faster. We also would have expected our hiring to be a little further ahead. You correctly identified that, Glenn, although our target was 40 reps, not 30. Part of this is we're just being selective in terms of adding the reps because it's so important to have high-quality people. And that probably have some impact on the ramp, but overall, we're still very pleased with how well this stent is being differentiated versus competitors. We don't expect it to be an issue going forward and as we said, we expect to be at the 40 person level next month. I will let Tom answer the other question.

Sure. Glenn, in regards to shares remaining in existing approved programs, we have over 2 million. 2.2million shares, but I would encourage you we generally don't think of that as a limitation. We have not had any resistance to approvals in this area. So if we were to be more aggressive, I don't think we would have an issue.

Okay, great, thanks, guys.

Thanks, Glenn.

Our next question is coming from David Zimbalist with Natexis Bleichroeder.

All right, thank you. As it relates to FloTrac, can you talk about what you're seeing in different markets in terms of is it penetration of hospitals into multiple areas or are you still essentially growing your hospital accounts more aggressively than placements per hospital and what, you know, at what point do we start to see, start to see penetration in a given hospital start to ramp up?

Okay, David, let's see if I can answer your question. You know, first of all, we're seeing pretty balanced growth. Actually the similar kind of sales growth in Japan, the U.S. and Europe. Which speaks well of Japan. It just tells you what the uptake is, given the difference of the size of the market opportunities. Where we're gaining and I would very much say we're still in the -- working with the early adopters, where we're finding most of our success at this point is, these applications we're -- for doing the hemodynamic monitoring in the major procedures like vascular, thoracic, and orthopedic surgery, and that's where we're seeing our gains. We continue to see the long sales cycle, so it takes us six, seven months from when we begin an account conversion until we gain one, but we're optimistic about the way this is going and we like the size of this market as well. We think it's going to provide us growth for some time. Does that get out your question?

It does. Are you -- any plans to grow the sales force in the area of critical care out or at a significant sort of specialty sales people for FloTrac?

We have done two things. We have started making editions to the critical care sales force. We've also diverted resources away from the core business, to more focus and become FloTrac specialists. At this point, we have a substantial piece of our critical care sales force that has indeed focused on FloTrac and we'll keep making nominal additions there. The profitability of this initiative is quite good.

Okay. And you -- operating profitability.

That's right.

Thank you.

Thanks, David.

Our next question is coming from Amit Bhalla with Citigroup.

Thanks for taking a follow-up. Question for Tom. Can you just quantify what the options impact was in the quarter and if you could possibly break it out by line item.

Oh, geez. I thought we got away from that this year. It will take me a second here.

Well, I think if you were to compare it to the prior-year quarter, it really is not -- is in a substantial, there really much change, Tom? I don't think so.

I do think in total -- can you -- you're talking about the impact on the P&L by line-item.

Or if you just have the total dollar amount would be fine.

You know, I don't have that in front of me.

Okay.

Let me see If I can get it before the call is over.

Okay, a follow-up on Partner's trial, how many patients were enrolled so far?

In the Partner trial? We have our first few patients enrolled. We expect that we're going have three accounts in the U.S. that are going be rolling here with IRB approvals before the end of April.

Okay, one last question, just so I understand the dollar impact from competition for the valve business, you said the U.S., or the valve business was 2 to 3 million below expectations?

That's right.

Is that correct? Is that the actual dollar amount the competition effected you or the dollar amount that competition played a role higher than that?

No, I would say that is the difference from our expectation. So if you go back to, it depends on how you want to look at it. If you want to look at it quarter-over-quarter or year-over-year.

It wasn't an additional 2.2 to $3 million. It was that we were looking to regain share and that did not happen.

Okay. Thanks.

Our next question is coming from Glenn Novarro with Banc of America Securities.

Just two quick questions. On the share buyback, you say you have 2 million shares left in the repurchase. When do you think you will get through that repurchase? Is that on target? Is there a plan to get through that this year or maybe help us when you a plan to get that done?

That would be sort of like giving guidance on how many shares I'm going to buy.

Okay, just trying. Maybe give us a sense of what the last repurchase started and when it was done.

If you look, you know what I would say, if you're looking for a run rate, we're probably not far off of a run rate in the first quarter.

Okay.

It's a little bit higher in the fourth quarter but pretty consistent if you go back a couple of years and look at some exceptional quarters. I would say that's not far from the average. We spent $25 million in the quarter. At that rate alone, we would be at $100 million.

Okay.

And we bought 500,000 shares.

Okay.

Extrapolation of that.

Okay, good for me. Lastly, the last time that Edwards had an issue in the valve market, you had to go back a couple of years ago when MedTronic had come into the market and it kind of lasted 12 months. Nonetheless, you went off and started an aggressive sales force. You started a very aggressive marketing campaign. Is there anything on tap today to change the marketing message? The physicians from Edwards and is there -- I guess you already talked about the sales force increase, but anything you're going to put in place today to kind of reaccelerate the business?

I guess the short answer, Glenn s we're taking this very seriously and we're going to attack this with a tremendous amount of energy and vigor. Last time around, there were really three things that we did and your memory is right on target. One is we made sales force additions, two is, we did far more direct head-to-head comparisons from a marketing perspective and three, we got new products approved. And we're going to probably go back to that exact same formula, Glenn, and do all of those, which I think will make a difference. Again, I don't want to tell you exactly what we're going to do here on the sales and marketing side for competitive reasons but it's that general formula.

Okay, thank you.

(OPERATOR INSTRUCTIONS) Mr. Erickson, there are no further questions at this time.

Thanks, everybody, we appreciate your continued interest in Edwards and Tom and David and I are welcoming additional questions you have by telephone.

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