LeMaitre Vascular Inc (LMAT) 2013 Q4 法說會逐字稿

Welcome to the LeMaitre Vascular Q4 2013 financial results conference call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Mr. J.J. Pellegrino, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir.

Thank you, Chris. Good afternoon and thank you for joining us on our Q4 2013 conference call. Joining me on today's call is our Chairman and CEO, George LeMaitre; and our President, Dave Roberts. Before we begin, I will read our Safe Harbor statement. Today we will make some forward-looking statements, the accuracy of which is subject to risks and uncertainties.

Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, forecast, and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, February 25, 2014, and should not be relied upon as representing our estimates or views on any subsequent date.

Please refer to the cautionary statement regarding forward-looking information and the risk factors in our most recent 10-K and subsequent SEC filings, including disclosure of the factors that could cause results to differ materially from those expressed or implied. During this call, we will discuss non-GAAP financial measures, which include organic sales and growth numbers as well as operating income, excluding taxes from the Affordable Care Act.

A reconciliation of GAAP to non-GAAP measures is contained in our press release, announcing the quarter's results, and is available on the Investor Relations section of our website, www.lemaitre.com.

I will now turn the call over to George LeMaitre.

Thanks, J.J. Q4 2013 was a productive quarter. I would like to focus my remarks on the following headlines: Q4 sales grew 21% to a record $17.9 million, our fifth straight double-digit quarter. Q4 XenoSure sales grew 42% to a record $2.1 million.

In Q4, we opened an office in Melbourne, Australia, and we also hired our first Norwegian sales rep. And, finally, our fourth headline: in 2013, sales to China were $1 million and we plan to open a Beijing office in 2014.

As to our first headline, we posted record sales of $17.9 million in Q4 2013, a 21% improvement over Q4 2012 and our fifth straight double-digit quarter. Organic growth was 12% in Q4 as our newly acquired TRIVEX system added $1.1 million of sales. There are four devices which provided the lion's share of our organic sales growth in Q4: XenoSure, catheters, valvulotomes, and shunts.

Geographically, Europe and China led the way in Q4. Our Q1 guidance projects a sixth straight quarter of double-digit sales growth.

As for our second headline, XenoSure has become our growth engine, posting 42% growth and a record $2.1 million in Q4 sales. There are four reasons for this product success. Number one: XenoSure is used primarily for carotid endarterectomy, a procedure which often requires a carotid shunt. In 2013, we sold 28,000 Pruitt shunts and 49,000 XenoSure patches. These devices obviously enjoy significant synergy.

Number two: vascular surgeons increasingly prefer to patch carotids rather than just sew up the incision. Patching leaves a larger diameter artery which carries more blood to the brain. Number three: vascular surgeons increasingly believe that bovine causes less infection.

And, finally, number four: this is a simple match between a quality vascular device and a large vascular sales force. I hope you will pardon the analogy, but this has been like chocolate and peanut butter from day one. We estimate the worldwide patch market is $35 million and XenoSure has a 22% share.

We project XenoSure sales will grow 33% to $10.3 million in 2014, and has become our third-largest product line. We own XenoSure approvals in the US, Canada, and Europe, and plan to make 2014 submissions in China, Australia, New Zealand, and Korea. Bringing XenoSure to Asia and the Pac Rim is important because we believe the trend towards patching and bovine is global.

On the manufacturing front, the transition from Vancouver's XenoSure to Burlington's XenoSure is on schedule. In Q4 2013, we manufactured and implanted our first Burlington XenoSure and we are now scaling up production. We believe the transition will be complete in H2 2014.

As to our third headline, in January, we began selling direct to hospitals in Australia and Norway, the number nine and number three countries in terms of GDP per capita. We now sell direct-to-hospital in 19 of the 25 highest GDP per capita countries.

As you expect, hospital level pricing is strong in both Australia and Norway. Our new Oslo sales rep will be leveraging our European infrastructure in Frankfurt, while our newly opened Melbourne office will stock and ship devices.

If you have further interest in the details of our expanding footprint, we have inserted a slide into our corporate presentation on our website, which summarizes our 12 international distributer buyouts. We have generally acquired distributors at one time sales and have experienced significant post-acquisition growth. This has been a low risk way to boost sales growth.

As to our fourth headline, we plan to open an office in Beijing in H2 2014. We will not sell direct-to-hospital initially. Instead, this office will support our two current distributors and our two current products. We also anticipate receiving five more product approvals in China over the next three years. From a base of zero China sales in 2012, we were pleased to post $1 million of sales in 2013. And, while China sales will likely be choppy over the next two years, we are excited to be entering the third largest medical device market.

Now I would like to hand the call over to our President, Dave Roberts.

Thanks, George. I would like to provide a brief update on the two acquisitions we closed in Q3: TRIVEX and Clinical Instruments. Sales of TRIVEX in Q4 2013 were $1.1 million versus preacquisition sales of $600,000 in Q4 2012. Q4 TRIVEX growth was driven mainly by China, where sales increased to $600,000 from $100,000 in the year-earlier quarter. As you may recall, the Chinese regulatory approvals will lapse in the first half of 2014 and we anticipate re-approval in 2015.

On the bottom line, TRIVEX has already begun to contribute positive cash flow. In the second half of 2014, we plan to bring TRIVEX logistics and packaging in-house, which should further increase its profitability.

Turning to Clinical Instruments -- the Clinical Instruments acquisition -- related revenues are approximately 20% ahead of expectations. You may recall Clinical Instruments manufactures embolectomy catheters and carotid shunts, allowing us to build share in our second- and third-largest categories. Specifically, conversion of European hospitals to LeMaitre-branded shunts has accelerated following this acquisition. And the acquisition was the main driver of 12% shunt growth in Q4 2013.

On the operational side, we expect to consolidate the clinical instruments factory into Burlington shortly. This should eventually result in cost savings and margin improvement.

With that, I will turn it over to J. J.

Thanks, Dave. I would now like to say a few words about our gross margin, operating expenses, and guidance. Gross margin in Q4 2013 was 67%, down from 71% in Q4 2012, a result of higher production costs as well as sales mix. Our XenoSure startup manufacturing in Burlington and our continued operation of the Clinical Instruments facility, both negatively impacted margins, but our changing sales mix may be the more important point.

Sales to lower margin geographies, such as China and other export markets, totaled over $1.8 million from Q4, while XenoSure, which carries a 50% gross margin, continued to grow briskly.

In addition, lower margin European growth was once again higher than domestic sales growth. In total, this less attractive sales mix reduced our Q4 operating gross margin by 3% to 4% versus the prior year quarter. Going forward, we expect to close the Clinical Instruments facility shortly and Burlington-made XenoSure will ramp significantly over the coming weeks. Both of these will improve the gross margin.

With respect to sales mix, however, we remain bullish on XenoSure export and European sales. And they will apply some pressure on margins going forward. In summary, we believe our gross margin will recover to 68% to 69% for Q2, and then move into the 70% to 71% range for Q4 2014.

In Q4 2013, we posted operating expenses of $10.8 million, 13% over the prior year, driven by increased administrative costs and higher selling costs. In an effort to combat these higher expenses, we have planned a 10% workforce reduction.

This includes an approximate 20 person US [riff], which was completed in February; closure of the Clinical Instruments factory; and a potential international headcount reduction. We estimate 2014 savings of $2 million. This program may carry a one-time charge of $200,000 to $400,000.

In addition to the riff, we will be implementing a cost reduction program. I hope this background helps to clarify our 2014 guidance as lower operating margins in Q1 2014 are expected to improve markedly in the ensuing quarters. We are guiding Q1 2014 sales of $17.1 million, up 11% versus Q1 2013, and operating income of $600,000. We are also guiding full-year 2014 sales of $70.2 million, up 9% versus 2013, and operating income of $5.5 million.

Separately, we will be presenting at several upcoming investor conferences. Cowen and Company's 34th annual Healthcare Conference on March 3 in Boston; the 26th Annual ROTH Healthcare Conference on March 10 in Dana Point, California; the BTIG Inaugural Snowbird Medical Technology and Healthcare Conference on March 18 in Snowbird, Utah; the Benchmark Company one-on-one investor conference on May 29 in Milwaukee, Wisconsin; the Wells Fargo Healthcare Conference on June 18 in Boston; and the Canaccord Genuity 34th Annual Growth Conference on August 13 in Boston, Massachusetts.

With that, I will turn it back over to Chris for Q&A.

(Operator Instructions) Jason Mills, Canaccord Genuity.

(technical difficulty) filling in for Jason. Thanks for taking the questions. Just wanted to focus on gross margins for a moment. I fully appreciate that there will be some puts and takes in the near-term as you work toward improving manufacturing deficiencies, but the decline near the quarter surprised us a bit and just want to get a sense of where you feel gross margins will be after -- probably in a year or two after 2014. And, I guess put in other words, what would you consider to be the right gross margin level going forward?

Yes. Thanks for the question and it is an important one. So we are not guiding further out into the future than I have already given you. I am telling you sort of a 68% to 69% in Q2 and then getting up to 70% or 71% of Q4 of this year, but not going beyond that.

But, as I mentioned, the mixed piece of the equation is pretty important and it has become sort of a 3% to 4% drag versus prior year and sort of what you have seen in prior quarters, looking backwards a year or so.

So that piece is something to watch. It is driven by XenoSure growth, which has a 50% gross margin that is driven by sales to China, particularly TRIVEX box sales to China. And it is driven by continued European sales growth in excess of domestic sales growth. So to the extent that those trends continue, they will continue to push negatively on margins.

Okay. Great. And what was your domestic organic growth profile in 2013 and what opportunities do you see for US growth in 2014 and beyond?

Sure. The Americas for Q4 was 8%, Jeff. And, for the year, it was 8% as well. I definitely feel like the strength in the business is coming internationally and it feels like we have invested a lot of money in setting up all these international subsidiaries. And potentially you could say we have put more reps overseas than we have put in the US. So potentially we could boost the growth in the US that way.

One nice thing that happened to us recently, and it starts April 1 -- which isn't in this script, but I would definitely like to focus on -- is we are getting into GPOs. We signed our first GPO with Premier. And on that GPO, we have the biological patch, XenoSure, as well as our Dacron and PTFE, and that starts April 1; that will start to contribute. So we are looking forward to having that help our growth, much like it has helped our German growth, where about 60% of our sales are now through GPOs.

All right. Great, thanks for taking the questions.

(Operator Instructions) Jan Wald, Benchmark.

Nice quarter. Maybe you can go a little bit more into the close margins. It seems as if US sales will probably ramp, but not as much as international sales. So there is going to be a fairly constant, would you say, pressure on the international -- on the gross margins because of the international sales growth? And how, then, are you going to improve gross margins over the next -- I guess, next year, which is what you guided to?

So yes, Jan, if those trends continued ad infinitum, yes, that would be true. I would imagine at some point you start to go back to sort of tit-for-tat, like we have seen historically, when one geography does better and then the other takes over and vice versa. Nonetheless, in terms of immediate improvements, I guess I would say we will be closing the Clinical Instruments facility, which is probably going to operate through sort of the April timeframe or so.

And when we get that closed, I think that will give a nice -- a little boost to the gross margin line. Maybe sort of 1% or so, in that range. There is a second item on the list of to-dos to improve gross margin, which is called ramp up XenoSure production.

So as you recall, we started training and creating and building patches here in Burlington that we have previously been purchasing. And that project is making good progress and I think we will be ramping that up pretty quickly in the coming weeks and months.

And, to the extent that we do that, that will help gross margin as well because we won't have all the training, the startup costs going directly through the P&L. They will be going into inventory onto the balance sheet. So those two things should help a lot. And then don't forget every year we get nice price increases, particularly in the US and, to a lesser extent, in Europe, and so those price increases generally help 1% to 1.5%, maybe, on the gross margin line year over year.

Jan, just to follow up -- this is George -- a little bit on the XenoSure piece. I think the big, good thing here is that we are finally getting gaining control over the means of production for the XenoSure patches. We never had that. It was always just a price that was handed to us by the folks in Vancouver. And so now that's over with and when we really do get full control of it, my guess is, somehow, we're going to get the margin of this device up.

Although I think it will take some time. I don't think it will happen in the 2014 period or even in the beginning of 2015. But I think, over time, you will see us, as always, pretty aggressively attack the cost base on that product line, which is -- by then, it will be the second-largest product line in our bag. So it is nice to have control over that and we have never had control of it ever since we began distributing it in 2009.

Well, that is good to hear. You mentioned -- in the back of my mind was a question as to whether or not the US market was penetrated or fully penetrated or close to fully penetrated. So you are not going to see the growth in the US market. You don't feel that the US market is penetrating or close to it yet.

No. And, remember, we have 15 different devices, so there's -- maybe the max market share in the US is the valvulotome at about 60% units. But you got plenty of room in other categories. So, no, I do not think that is true. It is true that more recently we struggled in the US versus -- the numbers in Europe are extraordinary right now. Organic growth rates for the past four quarters in Europe have been 19%, 25%, 23%, and 28%, so we are just on fire over there and, of course, it carries a lower margin and I think we are all feeling that right now.

But I like to spin it as a good thing. The reason we are sitting here with a 21% reported growth rate in Q4 is because of what is going on in Europe as well as the acquisitions.

And, I guess, your SG&A spend was a little bit higher than we anticipated this -- should we expect that to continue or were a lot of one-time things in there, like training, stuff like that.

Yes. SG&A was up a little bit in the quarter. I think some of that is here to stay and some of that is going to go way. We had incremental amortization from the recent acquisitions that brought SG&A up. And we probably had some other items that are more one-time-ish.

Compensation-related items and maybe some outside service-related items, some recruiting items, things like that that will go away fairly quickly. So I am going to say half of that incremental increase is going to be around for a while and half of it should fade away pretty quickly.

Okay. And I guess my last question is, in terms of meeting your revenue projections, are you anticipating having to make some more acquisitions than you already and how should we understand sales for this year? Is it organic? Does it require acquisitions? What is necessary to meet guidance?

Right, Jan. So that 70.2% that we are giving you for the year is assuming no more acquisitions. That is just the products we have right now plus the stuff that we might internally launch, as you expect. If we do acquisitions, we will come back to you guys with a press release and we will likely bump guidance.

Joe Munda.

Congrats on the quarter. Real quick here, George, you focused on Europe and what is going on there. What is going on there and why is it ramping so much faster than the US?

Right. I mean, first, you can say we put a lot of resources into this and you guys hear us on the call going direct in Spain, in Denmark in 2011, going direct in Switzerland, and, let's call it, Canada is international in 2013. You got Norway this year. You got Australia. These international markets have gotten a lot of focus from us and we have got a lot of small bases that we are growing rapidly. So that is a big piece of it.

The number of sales reps has gone up by four over the last five quarters over there, and it has stayed the same in the US as well as Japan. That's a big piece of it. Probably the center of it all right now, Joe, though, is that XenoSure grew 83% in Q4 over in Europe and it grew 23% in the United States and the Americas. And so, as a result, you are still knee-deep in the middle of this XenoSure boom over in Europe and, to a certain extent, it slowed down to something resembling more normal growth rates in the US.

On top of all of that, and we said this a bunch of times, this is just us refocusing our assets over in Europe away from the stent grafts, which we finally got rid of in the middle of 2011. So this is finally all working out as we thought it would and it is nice to enjoy the growth rates.

Now, George, what exactly is driving greater adoption in Europe? That is the crux of -- why there are they adopting your products so much faster than here in the US?

I would generally say that there is more open virgin territory over there, and also that the XenoSure launch was two years later in Europe than it was in the United States. And when I say more open virgin territory, remember we were working through distributors, particularly Switzerland, Spain, Italy, Denmark, let's call it.

And those distributors were selling many devices for many other companies and they were not paying attention to our products. When we finally got them out of there and we became the sales force in those countries, it was almost like -- in Spain, it was almost like no one knew our products and we were just going in brand new.

Okay.

So lots of virgin territory and XenoSure -- you are in the heart of the XenoSure good times over there. And at 23% in the US, it is a little bit less right now.

Okay. And, George, in your prepared remarks and the statement you put out, 85 reps, up four year over year. Any indication of where you're going to be at the end of 2014? I mean, the number that you guys are putting up for the year for 2014 as far as guidance is concerned is a nice growth number. And I'm just wondering how you get there and how many reps is it going to take you to get there?

Not too many more. We are thinking 90, about.

Okay. And would the bulk of that being in Asia Pac is an emphasis (multiple speakers)

You know, I feel like you won't get any sales reps, per se, in China, even when we open up the office. So a couple in Australia seems possible. Filling in in Europe seems possible. But as we have talked about a lot here, maybe sprinkling them back here in the United States as well. But there is only five net gains so they won't go too many places. But, yes.

Okay. And, George, I guess this is for you and for J.J. As far as R&D is concerned, I know you guys went out, you bought -- you made a couple acquisitions; that was nice. But I recall, I think, at your analyst day, you guys also spoke about emphasizing the need to increase R&D and develop your own products. I am just wondering what the environment is internally as far as R&D and the resources you are devoting towards that, going forward.

Sure. Well, at the end of Q4, we had 13 product development engineers -- and that is up by about one body from the year before, Joe. So we are growing a little bit. Resources are fine. We are excited about that. The five launches that we talked about, or the five things that we are working on pretty heavily right now, we are in the middle of a bunch of changes with our core valvulotomes.

You have heard the 1.5%, but there is also Mills and the hydro and I won't bore you with the details on that. But those are variants on our valvulotome.

We are working hard on a flow monitoring system on our shunt. We are working on a biological graft. We have got some catheter product fill-ins as well, and then I am forgetting the fifth one. And then we are working on the AnastoClip platform. We have always felt like there are a couple easy fixes to the AnastoClip. So those would be your five devices that you are working on in 2014.

And you will get -- some of them will launch in Q1 and some of them won't launch until very deep into Q4. But that is the direction of the R&D department. I would call them singles and doubles and fixes the existing platform, generally speaking.

I was wondering, is there another XenoSure somewhere in there?

Well, we keep mentioning this biological graft product. It is a long way out. It is a long regulatory road to hoe. But something like that might be a sort of sister item to the XenoSure, but it is a long way away. And it is basically -- right now, we are selling a patch made out of biological material. This would be selling a tube somehow made out of biological material.

Okay. And then, J. J. -- thank you for that George. I'm sorry. J. J., some housekeeping items. CapEx for the year as well as operating cash flow.

CapEx for 2013 was about $2.4 million or so. And what was your other question?

Operating cash flow.

So it depends on how you want to define that. Cash was down $1.7 million in the year and so net income was about $3.2 million. And cash from operations was about $1.5 million. And then, with the CapEx and the acquisitions, that was about high 5s -- $5.8 million, $6 million of investing, and then maybe a little bit under $1 million of financing stuff, and it gets you down to $1.7 million.

EBITDA was $8 million.

I'm sorry. What was -- EBITDA was $8 million?

Sorry. EBITDA would be $8 million if you go up to $5.5 million for next year. I think EBITDA was $7 million this year, Jay, something like that?

Yes. $7.5 million or so.

$7.5 million, Joe, for EBITDA.

Okay. Okay. That's helpful. I guess that covers everything except -- and I hate to harp on this, but I know you spoke a lot about gross margin here. So J.J., let me get this correct here. Basically, the move from Vancouver to Burlington, as well as the other two acquisitions, that is going to be Clinical Instruments --

Clinical Instruments, yes.

Yes. And that is what is impacting the gross margin, but we -- the typical of past acquisitions that you guys have made. It seems like those things work through your system and the gross margin should return to the normalized 70% level. Is that what I am understanding?

Sort of. Yes, those are generally true statements, although the timing varies. The Clinical Instruments piece should help you sooner rather than later, and the XenoSure piece will sort of come in and out in terms of help, and it will be a little bit chunky on the XenoSure piece. But, yes, we will help you over the medium-term and probably in the short-term as well. But there is a larger piece, Joe, which is the mix has changed.

Yes.

So to the extent that we sell to China and to the extent that we sell more export and/or more capital equipment, to the extent that Europe does better than the US -- those are all things that have dragged down the margin and probably will continue to over the coming quarters.

Jason Zhang, Edison Investments.

I have a couple questions. One, George -- and J.J., I guess, both of you can answer. The 12% organic growth, if you divided it between volume and price, what is the split there?

Sure. About 30% of that comes from price, Jason, and about 70% of that comes from unit growth. And the actual unit growth number for Q4 was 10% year-over-year unit growth.

Okay. Do you expect that to be another trend for this year? I know that the price increase is pretty healthy and I assume what you are talking about is still from the US.

Sorry, Jason. Could you pose that question just one more time?

Right. I said, the price increase is pretty healthy and (inaudible) is as you expect, that would be the trend for 2014. And also the question is whether the majority of the growth -- of the pricing increase that is actually from the sales in the US.

Right. In answer to any of your question, yes, it generally comes from the US. I would say we put across about a 4% price hike in the US and it is more sort of like 1.5%, 2% over in Europe. So yes, it is more of an American phenomenon and our revenues come 66% out of the US and 33% OUS. So there is one item.

And then you asked, does the proportion stay the same of pricing increase versus unit growth, and generally, over these phone calls the last three or four years, it has been roughly 30% price hike and 70% unit growth. I haven't really dug into what the 2014 number is like, but I would say, for the purposes of discussion, we could say, yes, it seems like that proportion would hold.

Okay. The next question is, I remember during the analyst day, you don't expect the Obamacare implementation or anything that is going on will impact your business, and now you have the Q1 numbers guidance there. And that probably doesn't have anything related to that, or have you seen something in the marketplace that may help you -- make you take some account into that? Changes because of the implementation of the law.

Right. I mean, I hope I didn't say that I didn't think Obamacare would ever affect us, because, clearly, it is the biggest piece of healthcare legislation in the last 40 years. So it is going to have a big impact on us in a long-term, Jason, in my opinion. But, in the short run, we haven't seen it affect us that much. We don't think.

Okay.

But, to be clear, Jason, we paid $650,000 in taxes towards the Affordable Care Act tax last year, in 2013.

Right. But, again, you pay that every quarter, right?

Yes. Yes. And we will say, except for the financial results of the business, we haven't seen Obamacare affect our business. If you extracted Obamacare, the taxes we paid, operations income would have grown 45% Q4 to Q4.

Chris Lewis.

First, I am not sure if you typically break this out, but what is your 2014 guidance assumed for TRIVEX in clinical? I guess I am just trying to get to organic growth rate for your 2014 guidance.

Right. Gosh, you know what, we don't break it out by product line. I do feel like we have been pretty aggressive about trying to feed you guys organic growth numbers, and so the organic growth rate that we think we see, given all the FX, et cetera, is 7% in Q1, J.J., and 6% for the year, Chris.

Okay. Great. And then for the TRIVEX side of the business, can you remind us which portions of that product line go off the market this year in China and the timing for those products?

Sure. So the capital equipment went off the market January 15, as we expected. It lapsed. And in June, the disposables lapsed. So you can expect some amount of sales of those disposables right before it lapses and we think, as per the plan that has always been in place, we will get those re-approvals sometime in 2015.

Okay. So just looking at the 2014 revenue guidance, then, it seems like maybe a little choppy with that and China -- so it may change the normal seasonality of the business a bit compared to other years. How should we think about revenues trending from quarter to quarter?

Right. I think this is a big piece of understanding LeMaitre in the 2013 to 2015 period. You have to understand, in 2014, even though we are going to set up an office in China, sales should be lighter in China this year than they were last year because the big capital equipment approval lapsed January 15, as we all expect it to. So we put a lot of revenues into Q4 2013, which probably won't reappear in 2014.

I think the big piece of understanding it -- and that is why we do focus on the choppiness of the Chinese revenue. Is that an answer to your question, Chris?

Yes. That's great. Thanks. And then, you mentioned the cost reduction program and the headcount reduction. Can you just provide some more detail on that? What was behind those decisions and how does that land in the operating leverage expected this year?

Right. So it was pretty broad-based. There was 21 in the US that have been let go, and then -- we're sort of wrapping in this factory closure as well, where there is another 10 or 11 employees. And there should be or may be a few Europeans as we go forward here.

This is just -- we haven't done this in a long time, but it is just a response to when we see our revenue line getting sort of out of kilter with the expense this year. This is one of the things we will do. We are pretty committed.

I think we feel like we are the guys who gross sales 10% and we are the guys who grow operations income by 20%. And so, as we look down the pipe at 2014, we started thinking this is probably something we should do sooner rather than later. And so the riff is behind us in the United States and the plans are all set and done for the factory closure and that will happen presently here.

Okay. Great. And then, on XenoSure, you mentioned submission is expected this year in Australia and China. When can we expect approval for that product in those markets and how does that expand the market potential for that product over time?

Right. So the approvals for New Zealand and Australia, I think, will happen relatively quickly. Maybe New Zealand you get this year; maybe Australia you get next year. I feel like China and Korea are much longer gestation periods and maybe you are talking two years on those guys, post submission. How it affects it -- China is the number three medical device market in the world. So I think it is pretty clear you want to be on the market there.

We haven't really even gone into what the projections on the revenues there would be, but Pac Rim, Asia, will be a bigger and bigger slice of what LeMaitre does. Right now, it is already about 8% of our sales. And, maybe as we get China up and going, it becomes a bigger chunk of what we do.

Larry Haimovitch, HNTC.

I don't have any questions at this point. So many great questions have been asked. I have been enjoying all the questions and answers, and I am just going to say congratulations and keep up the good work.

Thanks a lot, Larry.

It looks like there are no further questions at this time.

Okay. And, Chris, does that mean we're going to conclude the call here? Is that where you're going?

Yes. It does look like that. I was just wondering if you had any final remarks you would like to make before I do that.

I think we are all set from our side, Chris.

All right. Thank you. So ladies and gentlemen, that does conclude today's conference. Thank you all for your participation. You may all disconnect and everyone have a great day.

Thanks a million, Chris.