NeuroMetrix Inc (NURO) 2006 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the First Quarter 2006 NeuroMetrix Inc. Earnings Conference Call. [Operator Instructions] I would now like to turn the presentation over to your host for today’s call, Mr. Brad Smith, Chief Financial Officer. Please proceed, sir.

Thank you and good morning. Before we begin, I would like to briefly discuss forward-looking statements.

Statements we make in this call may include statements which are not historical fact and are considered forward-looking within the meaning of the Private Securities Litigation Act of 1995. Statements that are predictive in nature, that depend upon or refer to future events or conditions that include words such as “believe”, “may”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect”, “plan”, or other similar expressions are forward-looking statements. Any forward-looking statements reflect current views of NeuroMetrix about future results of operations and other forward-looking information. You should not rely on forward-looking statements, because our actual results may differ materially from those indicated by these forward-looking statements, as a result of a number of important factors, including those set forth in Item 1a, Risk Factors, of our annual report on 10-K for the year ended December 31, 2005 and other SEC filings. NeuroMetrix does not intend to and undertakes no duty to update the information disclosed on this conference call.

Additionally, on this conference call we may refer to certain non-GAAP financial measures such as non-GAAP adjusted net income and loss and non-GAAP adjusted diluted net income and loss per share. You can find a tabular reconciliation of these non-GAAP financial measures to the most directly comparable GAAP number in our earnings release on our website at www.neurometrix.com under the Investors tab.

I’d like to now turn it over to Shai Gozani.

Thank you and good morning. I would like to welcome you to the NeuroMetrix’s first quarter 2006 conference call. I’m joined today by Gary Gregory, our Chief Operating Officer, Brad Smith, our Chief Financial Officer and Nicholas Alessi, our Director of Finance.

I will start today’s conference call by providing you with a brief overview of our Company and products, as well as key highlights for our first quarter of 2006. I’ll then turn it over to Gary for a discussion of our key sales and marketing metrics and then Brad for a summary and analysis of our financial results.

NeuroMetrix is a medical device company establishing a new standard of care through the design, development and sale of proprietary products used to diagnose neuropathies, which are diseases of the peripheral nerves and parts of the spine. Neuropathies are frequently caused by or associated with diabetes, low back and other spinal disorders, and carpal tunnel syndrome (CTS), as well as a variety of other clinical disorders.

Our neuropathy diagnostic platform called the NC-stat System is used in over 3,600 physician practices and clinics, which represents approximately 10,000 physicians throughout the United States. Our technology enables a broad group of primary care and specialty care physicians to effectively, accurately, and objectively diagnose neuropathies in their office. Our customers are finding that their ability to diagnose neuropathies earlier and more accurately is impacting the way in which they manage their patients and make important therapeutic decisions.

We believe that the market opportunity we are addressing is at least $1.0 billion in the U.S. alone. There are now over 21 million people in the U.S. with diabetes and another 41 million people who are prediabetic. Neuropathies affect 60 to 70% of people with diabetes and can lead to pain, foot ulcers, amputation, and in the elderly a significantly increased risk of falls.

The early and accurate detection or confirmation of diabetic neuropathy and other neuropathies in people with diabetes leads to more effective patient management and treatment decisions, and ultimately, to more effective patient outcomes.

Low back and leg pain and CTS, which together account for over 10 million physician office visits in the U.S. alone, are also closely associated with nerve damage and effective clinical management of these conditions often requires early and accurate diagnosis of neuropathies. The NC-stat System is improving the way in which in thousands of physicians provide care for their patients.

Key highlights for our first quarter of 2006 include --

We generated revenues of $11.8 million, an increase of 74%, compared with the first quarter of 2005.

Our gross margin percentage was 75.6% in the first quarter of 2006, an improvement over the same period in 2005.

The number of customers using the NC-stat System and the usage of the NC-stat System continued to experience growth on a year-over-year basis in the first quarter of this year.

As I mentioned, we now have over 3,600 active customers and approximately 255,000 biosensors were used by our customers in the first quarter of 2006, which represents an 86% year-over-year growth in the quarter.

We have continued making progress on our next generation diagnostic platform and expect a product launch later in 2006. This product line includes important technological advances and captures clinical and market experience gained since the initial launch of the NC-stat. We believe this system is particularly suited for our continued expansion in both the primary care and specialty care markets.

I will now turn it over to Gary Gregory, who will outline our performance as reflected in certain key operating metrics.

Thank you, Shai. I want to reiterate our thanks to each of you for joining our call today. As Shai has noted, we’re coming off another quarter that demonstrates the continued progress of our Company towards our objectives of establishing the NC-stat System as the standard of care and NeuroMetrix as the leading company in neuropathic diseases.

In Q1 2006, we expanded our customer count to 3,639 active customers, demonstrating a continued ability to secure and establish new customers across the primary care and specialty care segments. This represents active customer growth of 50% in the past 12 months alone.

Testing with the NC-stat System in the first quarter of 2006 grew year-over-year by 85.6% to 255,500 biosensors, compared with 137,600 biosensors in the first quarter of 2005. Through this performance, our average customer now delivers nearly $9,800 in annual biosensor revenue, based on our usage during the first quarter of 2006.

The distribution of our testing by our customer in the first quarter of 2006 is as follows - 68.5% of total testing was performed by our primary care accounts and 31.5% came from within our specialty care segment. Here, 52% of total testing within the specialty care segment came from the orthopedic market and 47.4% of testing within the specialty care segment were performed by other specialty care physicians, including those in occupational medicine, pain management, neurology, and podiatry.

Testing within the primary care market, which we define as internal medicine, family practice, diabetology, endocrinology, and rheumatology, grew by 128.2% year-over-year, illustrating our progress in this major market segment. Testing by all specialty care physician segments grew by 32.1% year-over-year.

So, to summarize, overall testing grew by 85.6% year-over-year to over 255,000 biosensors. This growth was manifested across all of our key market segments, which validates our continued progress in both the primary care and specialty care markets.

Of additional importance, new NeuroMetrix customers delivered annualized revenue of over $16,000 per account during Q1 2006, based on their usage. We’re pleased with this positive progression relative to previous quarters, as it demonstrates that our new customers continue to adopt our technology within their practice.

As a final note towards our progression in customer testing, testing for diabetic peripheral neuropathy (DPN) and low back and leg pain now represents approximately 55% of the total testing in the first quarter of 2006. This position, which is split roughly 30% for low back and leg pain and 25% for diabetic neuropathy, details the Company’s continued progression from our original foundation built on testing for CTS to our present position of allowing all physicians to test for and more effectively diagnose patients presenting with major clinical conditions such as low back and leg pain, diabetic neuropathy and hand and wrist pain with the NC-stat System.

On a related DPN clinical front, Lilly and Dainippon have been engaged in Phase III clinical trials for the DPN-focused drug, and several other companies are also advancing drugs through clinical trials. A U.S.-based biotech company recently announced positive Phase I results for a therapeutic agent using VEGF. The potential for these therapeutic agents further reinforces the market and clinical opportunities that exist for NeuroMetrix, both in the present and in the future.

On an organizational front, we announced our plans on the last earnings call to hire additional regional sales managers during the first part of 2006. At present, we now have 45 highly experienced regional sales managers who are trained and actively selling the NC-stat System across the U.S. market. We have built our strong field organization through a highly selective process, which positions the Company to effectively deliver our technologies and solutions to our expanding base of new and existing customers.

In addition, we also have approximately 500 independent sales agents on the front line who have been trained in selling the NC-stat System and are calling on physician practice groups to generate qualified leads for our sales team. This extension of our sales organization is a key component of our market approach, which allows us to better secure and services our customers.

In addition, we recently signed an agreement with Physician Sales and Services (PS&S) to act in a lead generation and service capacity for NeuroMetrix. PS&S is a national distributor, with nearly 700 reps selling a broad array of products to the physician practice market. While we’re in the very early stages of this relationship and recognize that we’re on the ground floor with regard to our launch with PS&S, we’re very enthusiastic about the potential for this relationship and what it can hold for our business.

On the international front, we continue to evaluate the international opportunity for the NC-stat System. Our goal for 2006 is to gain a more thorough understanding of the size of the market, the reimbursement environment, our distribution, and launch strategies. Assuming a favorable outcome of our analysis, we’ll consider the possibility of an OUS market launch in 2007. However, at present, we clearly remain highly focused on the significant U.S. opportunity.

As a final noteworthy reminder on the international front, we already received the CE Mark of Approval for the NC-stat System.

Finally, we’re very confident in our position as a market leader in this arena and look forward to reporting future Company developments as we continue to establish a new standard of care within the marketplace.

I’ll now turn it over to Brad Smith, who will discuss our financial results for the first quarter of 2006.

Thank you, Gary, and thanks to all of you for joining us on the call today.

Our total revenues for the first quarter of 2006 were $11.8 million, compared with revenues of $6.8 million for the first quarter of 2005, representing an increase of 74%.

Looking at the breakdown of revenues, our biosensor revenues totaled $10.3 million or 87% of total in the first quarter of 2006 and our diagnostic device revenues totaled $1.5 million for the first quarter of ‘06 or 13% of total revenue. This compares with $6.0 million in biosensor revenues in the first quarter of 2005 or 88% of total revenue and approximately $800,000 of diagnostic device revenue in the first quarter of 2005 or 12% of revenue.

This increase in revenues is a result of the increase in the number of active customer accounts, as we’ve discussed, the growth in average revenue per account and the expansion of our sales force.

During the first quarter of 2006, our overall gross margin was 75.6%, compared with 73.2% in the first quarter of ‘05. Looking at our gross margins by revenue type, our biosensor gross margin percentage was 74.9% in the first quarter of 2006, compared to 73.3% in the first quarter of 2005.

The average selling price (ASP) was relatively unchanged from period to period at approximately $35 per biosensor and keep in mind that approximately 3 to 4 biosensors are used per patient. The cost of certain biosensors decreased from 2005 to 2006 and the gross margin was also impacted by the mix of biosensors sold.

Our device gross margins for the first quarter of 2006 were 80.3%, compared with gross margins of 73% in the first quarter of 2005 and this increase is primarily due to an increase in the ASP of our devices. We continue to work effectively with our two outside manufacturers, Parlex for our disposable biosensors and Sunburst EMS who we transitioned our diagnostic device manufacturing to in the fourth quarter of 2005. And on a go forward basis, we expect gross margins to be roughly in the same range that they’ve been over the past several quarters.

Total operating expenses in the first quarter of 2006 were $9.1 million, compared to $5.7 million in the first quarter of 2005. The increase during the first quarter was driven by the expansion of our sales force, but also was impacted by the recognition of $737,000 in non-cash stock-based compensation expense, largely resulting from the adoption of FAS 123R in the quarter.

Interest income for the first quarter of 2006 was $294,000 versus $176,000 for the first quarter of 2005 and the increase resulted primarily from increased [inaudible - background noise] but also higher investment balances.

Net income on a GAAP basis in the first quarter of 2006 was $147,000, compared to a net loss of $596,000 in the first quarter of 2005. Excluding stock-based compensation expense of $737,000, non-GAAP adjusted net income was $885,000 in the first quarter of 2006, compared with a non-GAAP adjusted net loss of $520,000 in the first quarter of 2005.

Our basic and diluted net income per share was $0.01 in the first quarter of 2006, compared to a basic and diluted net loss of $0.05 per share in the first quarter of 2005. Excluding non-cash stock-based compensation expense of $737,000, non-GAAP adjusted basic and diluted net income per share was $0.07 in the first quarter of 2006 and was a loss of $0.04 in the first quarter of 2005.

I’d like to now shift over and focus on our financial position as of the end of the first quarter. Our cash, cash equivalents and short-term investments totaled $32.4 million as of March. That compared with $32.3 million as of the end of 2005.

During the first quarter of 2006 we had negative cash flow from operations of approximately $235,000, in large part due to the payout of year-end sales commissions and bonuses. And there were proceeds from the exercise of stock options of $550,000, offset by an investment that we made in capital equipment of roughly $140,000 during the quarter.

Working capital was $36.1 million at the end of March ’06, compared with $34.7 million as of year-end 2005. And the large increase in working capital was due to increases in AR and inventories resulting from the growth in our business. Our total assets were $44.6 million as of the end of March, compared with $42.9 million at the end of 2005.

Our DSO was 39 at the end of March 2006 compared with 40 at the end of 2005 and our inventory turn was approximately 4.0 compared with 4.4 for 2005, due to our decision, strategically, to increase our inventories from two months to three months. And consistent with our prior quarters we reported on, as of the end of March 2006 we had no long-term debt on our balance sheet.

We’re pleased with our financial performance for the first quarter and with that, I would like to turn it back over to Shai Gozani.

Thank you, Brad. We are very pleased with our first quarter of 2006 performance and consider it further validation of the in-office neuropathy diagnostic markets.

Our neuropathy diagnostic solution is rapidly becoming a standard of care throughout the marketplace. The NC-stat System has FDA clearance of “Standard Instrumentation for the Performance of Nerve Conduction Studies, which serve as the Gold Standard method for evaluating neuropathies. The NC-stat System meets or exceeds the most stringent technical specifications for this type of medical instrumentation”.

Furthermore, the diagnostic accuracy and clinical utility of the NC-stat System has been demonstrated in 13 published peer reviewed articles, all in well regarded clinical and scientific journals and over 20 abstracts presented at leading clinical conferences, which includes the annual meetings of the American Diabetes Association (ADA) and the American Academy of Neurology (AAN).

The NC-stat has also been used in FDA registration trials for pharmacologic agents and in large-scale epidemiological studies encompassing thousands of patients sponsored by the National Institutes of Health (NIH), the National Institute for Occupational Safety and Health and the Centers for Disease Control and Prevention.

It is for all these reasons that the NC-stat has become a standard of care in the evaluation and management of patients at risk for neuropathies.

I will conclude by highlighting the significant progress we have made since our IPO in July of 2004 --

Our quarterly revenues have grown from $4.8 million in the second quarter of 2004 to $11.8 million in the first quarter of 2006.

We have demonstrated revenue growth in each quarter since our IPO.

We have transitioned the Company from losses to profitability.

Our customer base has grown from 1,924 accounts at the end of the second quarter of 2004 to over 3,600 accounts at the end of this past quarter.

Biosensor usage has grown from approximately 81,000 sensors in the second quarter of 2004 to over 255,000 in the first quarter of 2006.

We have developed a best in class S&M team to address the large market opportunity for the diagnosis of neuropathies.

We have launched new and improved biosensors and have advanced product development efforts in many other areas, including a third generation device.

In summary, we are very proud of our accomplishments since becoming a public Company. We look forward to keeping you updated on our progress as we continue to build the standard of care and ultimately expand into additional diagnostic and therapeutic solutions. We believe that we are establishing NeuroMetrix as the premier brand in the assessment of neuropathies, with the added goal of ultimately treating neuropathies.

As we transition to the Q&A session, I would like to note that we are pleased to discuss the first quarter of 2006 business details and relevant metrics. However, we do maintain a policy of not providing specific guidance on future financial performance. We look forward to your questions.

Thank you, sir. [Operator Instructions] Bill Quirk of RBC Capital Markets.

Yes. Thanks and good morning, guys.

Good morning, Bill.

Hey, Shai or Gary, you mentioned how many active reps were onboard currently. I think the number was 45. What was that number at the end of the first quarter?

We exited the end of last year with just under 30 representatives. So, through the course of Q1, we ramped from that count of 32 to 45 that we have today. We hired during the quarter, trained them and they’re all out now actively selling the technology the market.

Understood. And then secondly, if we think about the new relationship with PS&S, should we think about the terms, i.e., the residual commission on those leads as being pretty similar to what we currently have with the other independent agencies that you work with?

That’s correct.

Okay, great. And then, secondly, it’s actually color on the market segments. It looks to us like your accounts burned down a nice bit of inventory in the quarter. I guess, first off, can you confirm that?

The position of the accounts through the course of the quarter, we were pleased with the fact that, as you know, Bill, our accounts really don’t hold a great deal of inventory. There’s no logic in their doing that. But the growth in testing that we saw in Q1 certainly forces customers to utilize what they have on their shelves and then reorder.

Okay, yes. I was going to say secondly, presumably you just tend to see follow-through with the order patterns there for the second quarter, I would think. Lastly, Brad, you mentioned it - I’m sorry I missed it - but outside of the price increase at the beginning of the year for the NC-stat device, were there any price increases initiated during the quarter on the biosensors?

No. The pricing on the biosensors has been essentially static.

Okay, so it’s safe to assume, then, that the list price is a little more sticky than initially expected, given that we’re seeing kind of this continued nice and northward migration with respect to gross margins on the device?

Yes, good assumption.

Okay. Thanks very much, guys. Congratulations on the quarter.

Thank you, Bill.

Thanks, Bill.

[Mark Richer]of Jeffries & Co.

Hi guys, this is Mark in for Ryan. A couple quick questions on the R&D side. R&D expense was higher than we modeled. I assume this is due to new drug delivery, new neuropathy products. Can you just give us a little bit more clarity on these two initiatives?

I think it’s probably more timing of hires and spending on R&D, Mark, than any specific change in our plans. We definitely are continuing to invest in all our ongoing projects. We don’t really have any specific updates, vis-à-vis the drug delivery platform, other than its continuing. We’re getting good momentum in that project, but really nothing specific to report different than past quarters.

Okay and then just generally how we should potentially think about your R&D spending going forward?

We are typically targeting around something along the lines of 10% revenue would be R&D spending. Obviously it depends on timing of hires and various projects, clinical studies and so forth, but that has typically been our target and that’s our broad expectation going forward.

Okay, perfect, and then on the stock-based comp expense, can you just help us, give us a little bit of guidance there, going forward, on what we can expect or model?

Yes and Mark, just to back up a little bit, the R&D number, if you’re looking at our reported GAAP number, that includes the effect of the adoption of FAS 123R. So, in terms of the expenses, $737,000 in the quarter; on a go forward basis it is difficult to predict. That includes both the effects of FAS 123R in addition to the effect of the expense on certain grants issued to outside consultants, which have to be mark-to-market each quarter. So that can vary from quarter-to-quarter and we had over $100,000 of expense in the first quarter relating to those grants.

Okay and then just going forward, just general guidelines?

The general guideline, going forward, is you can expect to see something on the order of at least $600,000 a quarter, as we go forward. But you know it’s going to depend upon the number of grants. That’s based on what we know today. It’s going to depend on the number of new grants and a number of other factors. It can vary pretty significantly, quarter-to-quarter.

Okay, thanks, and then the last question. Can you just provide a little bit more of visibility on the timeline for the launch of the new NC-stat?

We continue to expect it to launch in the latter part of this year, but really are not providing further indications at this point.

All right. Thanks.

Juan Sanchez of Punk, Ziegel & Co.

Good morning, guys.

Good morning, Juan.

I just have one question. In terms of the trends of the sales [inaudible - highly accented language] if now this is more difficult to stock a new device to a new doctor, if it’s been more difficult to keep out the number of biosensors that these doctors are using? Or you haven’t found any changes with respect to the last six or 12 months, in terms of your ability to actually easily introduce devices to new accounts?

Juan, I can’t comment on what the rest of the market is encountering, but I can certainly tell you that our performance, as detailed through the numbers, shows that our ability to approach, penetrate and drive utilization in the market remains very robust. And I would add that we have not seen any challenges on that front, outside of what has been our historical and our biggest constraint has historically been manpowered to not only sell the technology but then install it and drive appropriate utilization.

We’re in 3,600 practices, but there are 75,000 out there in our target market. So we are, in many respects, just getting started and have not seen any slowdown in adoption from either a new customer or utilization perspectives.

So basically then for the [inaudible] demand to the new reps is going to be similar to the ones that you have demanded from the current ones, right?

Yes. I would say that’s a very safe statement, Juan.

Okay. That’s great. Thank you very much.

You’re welcome.

Thank you, Juan.

Dave Turkaly of WR Hambrecht.

Thanks. Congrats on the PS&S news. In general, can you just give us a little bit of color of how that deal is structured and what kind of an impact it might have on your margins? And Gary, maybe, I know you’re pretty intimately involved with your direct reps today. Are you bringing on any other people to kind of manage this or is that going to fall as part of your responsibility now? Thanks.

The structure of the relationship is the same as our others, so it will have no foreseeable margin impact and it is dropping into our model just as all of our other distribution relationships have. So that’s certainly a good-news data point for us.

Regarding the organization, we’ve ramped up and we have 45 direct fields, so that will enable us to integrate the addition of PS&S as a strong resource to our Company in a very linear manner. We have an individual who’s in charge of managing distribution today and our business partnerships and if we need to, we’ll expand the resources. But right now we do not foresee the need to. The biggest one was staffing up the direct sales organization, which we’ve done, and we’re now ready to roll.

Okay and then just thinking back, with the reps, the distributors you have today, I think there was a commission up front and then on the ongoing basis. Will these PS&S people get some, is that the same structure exactly?

It is. It is. So we’re pleased that we’re able to enter into a relationship with PS&S and the market later with the same approach that we’ve done with the rest of the market.

Excellent. And then I think you mentioned on the call the doc testing, the annualized number. What was that number?

The analyzed value per account is $9,800 per account and that’s for all accounts. Our new customers are coming in at over $16,000 dollars per account.

And then, as we just think about some of the bigger users out there, I think you’d once mentioned that there’s some places tested at over 20. Any kind of color, I mean, is there big users, maybe top ten, where they’re trending at now?

Our goal remains one a day for every account and the patient population certainly supports it. 11% of all patients who present to an internal medicine or family practice physician office have either low back and leg pain and hand and wrist pain, not to mention those who present with diabetes and diabetic neuropathy and other neuropathic conditions. So one a day, a test a day, or a patient a day is a very, very foreseeable number and that’s our goal for each and every account.

And what’s that dollar amount that you come up with, with one a day? Is that $15,000?

That’s over $30,000.

Over $30,000, okay. And the last one for Brad - congrats on getting drafted by the Jets yesterday. I think they making it into a receiver though, but congrats on the quarter.

Thank you, Dave. You often point that out and I appreciate that.

And it shows Brad’s dedication that after being a high draft choice he’s here still banging away with us today.

I will not disclose the terms of that relationship.

Excellent.

Thank you, Dave.

Thanks, Dave.

[Operator Instructions] Oliver Marty of Columbus Circle Investors.

Great, thanks. Regarding PSSI, could you just go into a little more detail in terms of when the agreement was announced, how many of their reps are going to be involved, talk about how the training is going to go, etc?

We’re in the process of launching the relationship as we speak. We did not do a formal market announcement on the relationship, but they have a broad team of close to 700 representatives. They’re manned by a direct sales management team and we’ll be training their sales force on, in essence, a region-by-region basis. So we’re pretty excited about what it holds for us and it certainly is an expansion of our current distribution network.

So there’s been no real impact yet. It will emerge as we progress through the course of the months and years ahead, but it certainly does expand our organization and they are very, very capable of what they do and so it holds a lot of promise.

And why now, as opposed to a year ago or later? What’s the decision to make that relationship now?

I think the biggest driver is our own capacity. With our direct sales team we look to not only have them accrue new customers but drive utilization. And our distribution network that we had in place was more than capable of meeting the needs of our team of what was 8 and 10, 16, 22 and 30 and now its 45. We need more feet on the street working with us so that we can create a powerful force in the market for not only ourselves, for our customers and for our business partner. So the time is right and we’re really pleased about that relationship.

If you started to see a significant ramp in the referrals, I assume you would look to add more direct reps, but I assume right now, at 45, you guys are pretty good?

That’s a very safe assumption.

Okay. Thanks very much.

You’re welcome.

Harris Hall of Singular Research.

I just wanted to get a little housekeeping item on the 3,600 customers. What was that up from? What was the customer gross from Q1 ’04 or ’05?

The number from Q1 ‘05?

Q1 ‘05 was 1,900.

2,400.

Oh, I’m sorry, 2,400

It was slightly over 2,400 accounts.

Okay, great. All the rest of my questions have been answered. Thanks.

Thank you.

Thank you.

Edward Hull of Aurion Capital Management

Hi there, guys. I have a quick question. Are you guys looking at other distributors to establish relationships or are you going to be with this particular distributor for a while?

Well, we certainly view the relationship with PS&S as a long-term strategic partnership for both our Company and for theirs and hopefully if fulfills all of our mutual objectives. I’m confident it will. In terms of other distributors, we continually evaluate the opportunity to appropriately add additional resources to our Company and give them the chance to work with us and win together.

So the question is an ongoing one and every quarter we evaluate where we stand with our current network and do we need more business partners. Our commitment to our business partners is very strong and so we support them as well as any other manufacturer and therefore we’ve got to make sure we have the resources in place to meet the market growth that they can bring to our Company.

Yes. I have a follow-on question to that. So you added approximately 13 new reps and you had like 32, going to 45. How many of those existing 32 reps are going to have be pulled “off the line” that help with the relationship?

Well, the beauty of it is that we’ve now -- every time we further expand our organization, what we’re in essence doing is shrinking their geographic coverage and the number of accounts that they cover. And so in Florida we used to have a guy who covered five states.

Now we have many representatives in Florida and therefore adding an additional 15 PS&S reps to work with him in that marketplace is really not a significant challenge for us. So we’re really prepared and it’s not as if we’re pulling reps off and putting it towards the PS&S relationship. We’re just tightening up the NeuroMetrix regional managers’ geographic focus, their focus with their business partners in their accounts. I hope that answers your questions.

Sure. Okay, thank you.

You’re welcome.

[Operator Instructions] And at this time, I’m showing we have are no further questions.

Well, thank you very much. We appreciate you joining us on our first quarter 2006 conference call and we look forward to keeping you updated as we progress through the year. Thank you and good morning.

Thank you.

Thanks, everyone. Have a good day.

Ladies and gentlemen, thank you for your participation in today’s conference call. This does conclude your presentation and you may now disconnect. Have a great day.

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