NeuroMetrix Inc (NURO) 2008 Q3 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Third Quarter 2008 NeuroMetrix Incorporated Earnings Conference Call. (OPERATOR INSTRUCTIONS)

I would now turn the presentation over to your host for today's call, Mr Joe Calo, Principle Financial Officer. Please proceed, sir.

Thank you Noella and good morning, everyone. Before we begin, I would like to briefly discuss the use of forward-looking statements on this conference call. Statements we make on this call may statements which are not historical facts and are considered forward-looking within the meaning of the Private Securities Litigation Reform 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 our earnings issued earlier today, "Item 1a Risk Factors" of our annual report on Form 10-K for the year ended December 31, 2007 and our other SEC filings. NeuroMetrix does not intend to and undertakes no duty to update the information disclosed on this conference call.

I would now like to turn the call over to Dr. Shai Gozani, our CEO.

Thank you, Joe and good morning, everyone. I would like to welcome you to the NeuroMetrix third quarter 2008 conference call. I'm joined today by Joe Calo, our Principle Financial Officer and [Joe Arino] our Controller.

NeuroMetrix is a science-based medical device company advancing patient care through the development and marketing of innovative device products that aid physicians in the assessment and injuries of peripheral nerves and that provide regional anesthesia and pain control. Our goal is to develop into a diversified neurotechnology company with a primary focus on the peripheral nervous systems. We sell our products in the US through a direct sales organization, which currently has 30 sales representatives. In the international markets, we sell our products through third party distribution.

In this conference call we'll discuss the following topics. First I will review our financial and operational performance in the third quarter. Then we'll provide you an update on our neurodiagnostic business. Third, I'll provide an international sales update. Fourth, I'll provide a product and R&D pipeline update and finally, I'll conclude with a review our business strategy on a go forward basis.

Before doing so, I will turn it over to Joe Calo, our Principle Financial Officer, for a review of our financial results for the third quarter of 2008.

Thank you, Shai. Here's a recap of our financial performance for the three- and nine-month periods ended September 30, 2008, our third quarter of 2008.

Total revenues for the third quarter of 2008 were $7.3 million, down 36% from $11.3 million in third quarter of 2007 and down 14% sequentially from $8.5 million in second quarter of 2008.

To further break down our revenues, consumables' revenues - previously labeled Biosensor revenues - totaled $6.7 million or 92% of our total revenue in the third quarter of 2008. And Medical Equipment revenues, previously labeled Diagnostic Device revenues, totaled $417,000 or 6.0% of total revenues. This compares with $10.1 of consumables' revenues in the third quarter of 89% and $900,000 of Medical revenues or 8.0% of total revenues.

Revenues for the DigiScope were $203,000 in the third quarter of 2008, or 3.0% of total revenues, compared with $270,000, or 3.0% of total revenues in the third quarter of 2007, a decrease of 25%.

Relating to our DigiScope operations, on September 30, 2008 we approved a plan for the closure of our facility in Columbia, Maryland and discontinuance of sales of DigiScopes and DigiScope-related services. The decision was made as part of our ongoing focus towards cost efficiencies in all areas of our business and our refocused efforts towards our core business, which is the sale of medical equipment to specialist physicians with peripheral nerve expertise.

Therefore, as of November 1st, we ceased all sales and support of DigiScope's products and related services. We plan to shut down the Maryland facility be the end of the fourth quarter of 2008. I'll further cover the financial impact of this event when I come to the expense and income of the third quarter.

Total revenue for the nine months ended September 30, 2008 were $24.9 million, a decline of 28% from the $34.5 million of revenues from the same period of 2007. During the third quarter of 2008, overall gross margins were 69%, compared with 70.7% in the second quarter of 2008 and 73% in the third quarter of 2007.

Gross margins for consumables was 72.6% in the third quarter of 2008, compared to 72.5% in second quarter of 2008 and 73.9% in the third quarter of 2007. Medical equipment gross margins for third quarter of '08 were 38.1%, compared with 58.8% in the second quarter of 2008 and 77.6% in the third quarter of 2007.

The decrease in the device gross margin's percentage compared with previous quarter and with the same period of 2007, were due to a lower average selling price resulting from higher discounts. The increased discounting was mainly a result of our introduction of the ADVANCE System and particularly related to the transition of existing customers to the ADVANCE System during third quarter '08.

Overall gross margins were also impacted by the introduction and customer transition of our ADVANCE System and by a 13% gross margin on the DigiScope revenues, compared to 48.5% in the second quarter and compared to 25% in the third quarter of '07.

Total operating expenses, excluding the cost of revenues, in the third quarter of 2008 were $12.9 million including the asset impairment and restructuring charge of approximately $5.0 million. Compared to total operating expenses in the second quarter of 2008, of $9.5 million and compared to the total operating expenses of $12.2 million in the third quarter of 2007.

Operating expenses in the third quarter, excluding the asset impairment and restructuring charge, decreased by $1.9 million, compared with the second quarter of 2008 and decreased by $4.3 million when compared with the same quarter of 2007, mainly as a result of continued cost reduction efforts, including a reduction in our salesforce or workforce in the second quarter of 2008.

The GAAP net loss in the third quarter of 2008 was $7.9 million, including an asset impairment and restructuring charge of approximately $5.0 million and a write-down of our investment in Cyberkinetics of approximately $170,000, due to what we considered to be an other-than-temporary decline and market value of this investments. In comparison, the net loss for the third quarter of 2007 was $3.6 million.

The net loss for nine months ended September 30, 2008 was $23.6 million, including the asset impairment and restructuring charge of $5.0 million, a goodwill impairment charge of $5.8 million in the first quarter and a write-down of $2.2 million of our investment in Cyberkinetics. And that compared with a net loss of $6.2 million for the nine-month period ended September 30, 2007.

Basic and diluted net loss per share was $0.57 in the third quarter of 2008, including the impact of $0.37 per share for the asset impairment and restructuring charge and the write-down of the Cyberkinetics investment. The basic and diluted net loss per share in the third quarter of 2007 was $0.28 per share.

Basic and diluted net loss per share was $1.72 for the nine-month period ended September 30, 2008, including the impact of $0.36 related to the asset impairment and restructuring charge in the current quarter, $0.42 per share for the goodwill impairment charge from the first quarter of '08 and $0.16 for the year-to-date write-down of the Cyberkinetics investment. This compared to a basic and diluted net loss per share was $0.49 for the nine months ended September 30, 2007

Now turning now to our financial position as of September 30, 2008, cash and cash equivalents and short-term investments totaled $21.6 million as of September 30th, compared with $22.8 million as of the end of June 30th. And this represents a decline of $1.2 million during the third quarter. The current quarter cash of $21.6 million compares to $29.7 million as of December 30, 2007.

The use of cash was primarily driven by the net loss from the operations adjusted for non-cash items, including such things as the asset impairment and restructuring charge, investment write-downs, stock-based compensation expense, depreciation/amortization expense and was partially offset by the reduction of accounts receivable.

Cash used in operations during the quarter was $1.2 million after adjusting for all of these non-cash items. Cash used in operations for the nine-month period was $9.1 million after adjusting for all the non-cash items. This includes a decrease of accounts receivable of approximately $1.7 million, investment in inventories of $1.0 million and a decrease in accounts payable of approximately $1.1 million. We also had $1.0 million of cash that became unrestricted during the first quarter of 2008, as a result of favorable re-negotiation and extension of our facility's lease.

Working capital was $25.4 million as of September 30, 2008 compared with $33.3 million as of the year-end 2007. The decrease in working capital was primarily due to decreased cash and investment balances, of $8.1 million and a decrease in accounts receivable of $1.7 million, offset partially by the investment in inventories of $1.0 million and a $1.1 million reduction in accounts payable

Total assets were $36.1 million as of September 30, 2008, compared with $56.4 million at the end of 2007. The decrease is mostly related to the decrease in cash and investments, the write-off of goodwill, a decrease in accounts receivable, and partially offset by the investment in inventories.

DSO remained relatively unchanged at 54 days for the quarter, compared to 55 days in the second quarter and compared to 54 days at end of the year, end of 2007.

Our inventory turn rate prior year was 1.5 in the third quarter, compared with 1.6 in the second quarter of 2008 and compared with 2.7 for the year ended December 2007. The decrease in inventory turn from our last year-end is due to our investment in the inventories of ADVANCE, which was introduced commercially during the second quarter and as well as the decrease in unit sales during the first there quarters of this year.

As of September 30 2008, there was no long-term debt on our balance sheet other than a capitalized lease obligation of about $9,000.

To summarize our third quarter of 2008 financial performance, revenues totaled $7.3 million. We incurred a net loss of $7.9 million, including an asset impairment and structuring chare of $5.0 million, was related to the shutdown of our DigiScope operations and $170,000 write-down of our Cyberkinetics investment. And we ended the third quarter of 2008 with $21.6 million in cash and cash equivalents.

This concludes the financial update portion of the conference call. I will now to turn it back over to Shai Gozani.

Thank you, Joe.

First, there's an update on the neurodiagnostic business. In the second quarter we generated revenues from our neurodiagnostic products of $7.1 million, which was down 36% from the same quarter last year. The breakdown was $400,000 in medical equipment revenues and $6.7 million in consumables revenues.

Medical equipment sales consisted of both NC-stat and ADVANCE devices and related accessories.

Consumable sales consisted entirely of our nerve-specific electrodes, which we formally labeled as Biosensors.

NC-stat sales were mostly into primary care physician practices, while ADVANCE sales were directed at specialist physicians with peripheral nerve expertise. This market includes neurologists, physical medicine and rehabilitation physicians, neurosurgeons, orthopedic and hand surgeons, and pain medicine physicians.

During the last quarter, our active customer count, which is a 12-month look-back at accounts actively utilizing NC-stat or ADVANCE Systems, decreased by about 150 accounts to approximately 5,300 physician practices and clinics as of the end of the third quarter, 2008.

The average consumables usage per customer doing the third quarter of 2008 was down about 10% from the prior quarter. However, we are encouraged by early results, which suggest that consumables usage by ADVANCE customers is higher than for NC-stat customers. However, it remains to be seen whether this pattern holds up beyond the early ADVANCE adopters.

We believe that our revenues in the third quarter of 2008 were down from the same period in 2007, primarily due to reimbursement uncertainty surrounding the use of the NC-stat System, the reduction in our direct salesforce from about 50 to 30 field sales representatives in the second quarter of 2008 and the termination of our independent sales agency relationships during the second half of 2007.

As an update on the NC-stat reimbursement environment, the American Medical Association, or AMA, formed a workgroup in early 2007 to examine reimbursement coding for nerve conduction studies. The finding of this workgroup were originally presented at the AMA CPT Editorial Panel Meeting, the Editorial Panel at its February 2008 meeting.

At that meeting, the Editorial Panel approved a Category III code describing nerve conduction studies performed with preconfigured electrode arrays. These are the type of electrodes which must be used with the NC-stat system. However, the AMA did not publish any new Category III CPT codes for nerve conduction studies on July 1, 2008, which is when it published its new list of Category III CPT codes.

Then, during its recent October 2008 meeting, the CPT Editorial Panel again considered nerve conduction testing as an agenda item. At this meeting, the Panel voted on whether to create a new Category I CPT Code for nerve conduction studies that were performed with preconfigured electrode arrays. Following its procedures, the Panel will release the outcome of this vote when the minutes of the meeting are finalized and approved, which should be in early 2009.

Participants in the AMA CPT process must strictly adhere to confidentiality requirement and therefore, until the AMA CPT Editorial Panel finalizes and publishes its positions in early 2009 we cannot comment further on the outcome of the October 2008 meeting.

We continue to believe that nerve conduction studies have an important role in the primary care and will actively support the family and internal medicine physicians currently using the NC-stat to optimization their clinical care of patients. However, until our primary care customers obtain reimbursement clarity, we expect limited new sales of NC-stat Systems within this market.

We are now focusing on our medical equipment sales efforts on specialist physicians with peripheral nerve expertise. Consistent with that strategy, we launched the ADVANCE System into the neurology, physical medicine, rehabilitation, neurosurgery, orthopedic and hand surgery and pain medicine markets in late May, following it 510(k) clearance by the FDA.

ADVANCE is a comprehensive platform for the performance of traditional nerve conduction studies and needle electromyography procedures. We are encouraged by the acceptance of ADVANCE within these markets. Over 140 systems were placed with new and existing NeuroMetrix customers in the third quarter of 2008.

We also recently started shipping EMG needles in connection with our ADVANCE needle EMG module that was on backorder in the third quarter. So, in future quarters, consumables revenues will include more than just the nerve-specific electrodes.

Now as an update on international sales, we continue to make progress marketing through third party distribution into the UK orthopedics surgery market. We are pleased with the product's reception in our distribution partner's sales pipeline, despite the lengthy sales cycle that is part of selling into the UK market because of the National Health Service process.

We've also signed additional agreements with distributors based in Mexico and another covering Brazil, Argentina, Chile and other markets in Latin America. We also have agreements pending or are in active negotiations with distributors covering additional international markets in Europe as well as in the Far East.

As for our product pipeline update, we recently received 510(k) clearance for our Universal Electrodes. These individually placed electrodes enable nerve conduction measurements from essentially any nerve and location. Pending final manufacturing ramp-up, we expect to market these electrodes for use with ADVANCE in the fourth quarter of 2008. We are developing additionally universal series electrodes as well as other types of electrodes.

We are encouraged by the progression of our novel nerve localization system, which we have now branded as ASCEND, which we believe will be used to provide regional anesthesia, pain control, and to treat certain types of neuropathies. We expect to file with the FDA a 510(k) submission this year as well as early next year. We are hoping for a commercial launch into the regional anesthesia and other peripheral nerve specialist markets in the second half of '09, pending regulatory approvals and production ramp up.

Our R&D pipeline includes early stage device development programs in intraoperative nerve exploration and monitoring, peripheral nerve regeneration and autonomic neuropathy detection.

To conclude with an overview of our business strategy as we go forward, our strategy as four elements. The first is that we are actively supporting the over 5,000 US physician practices using the NC-stat System. We will work to bring clarity to reimbursement for nerve conduction studies using the NC-stat through our efforts with the AMA and by discussions with federal and commercial insurers. Through this we hope to eventually stabilize our core NC-stat business.

Second, we are seeking alternative US markets for the NC-stat that are not dependent on third party reimbursement, such as in industrial screening and wellness applications. Through this, we also hope to stabilize our core NC-stat business.

For growth, we are focusing our medical equipment sales efforts for ADVANCE and our proprietary pipeline products, such as ASCEND, on specialists with peripheral nerve expertise, primarily consisting of neurologists, physic medicine, rehabilitation physicians, neurosurgeons, orthopedic and hand surgeons and pain medicine physicians. We believe that these markets, in the aggregate, are currently of a significant size and poised for expansion.

Finally, we are expanding our international presence for NC-stat and ADVANCE and our pipeline products. We also view international sales a growth opportunity.

With that I'll conclude and we'll take any questions. Hello? Hello? Can you please --?

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Jeffrey Frelick with Lazard Capital.

Thank you. Shai, maybe just give us a sense regarding the 140 ADVANCE placements. What was the mix between new customers and existing customers?

I would say about two-thirds to 70% was existing specialists transitioning from NC-stat to ADVANCE and the rest were new customers, not previously NC-stat, users.

Okay and then when do you kind of anticipate, I guess, the bulk of the NC-stat conversions to be complete?

We're converting them over time, Jeff, so we would expect that process to continue for really probably through the balance of 2009.

Okay and then was there any geographic bias towards the placements? I guess did all the 30 reps contribute to the placements in the quarter?

It was fairly uniform. Obviously some territories have a higher concentration of specialists using the NC-stat for a variety of reasons. So those had a higher rate of transitions. At the same time, because some territories had fewer NC-stat customers there were more targets for new ADVANCE customer. So there was some heterogeneity, but, on the whole, I would say it was fairly uniformly distributed.

Okay. Thanks. I'll jump back in the queue.

Sure.

Shawn Bevec, Susquehanna - SIG

Good morning, guys, this is actually Shawn in for Dave. There's a question about the -- is there a timeline for when the minutes are going to be published by the AMA?

Yes, sure. Typically the minutes are published about a month or so before the next meeting, so if you just work backwards from that meeting, which I think the next meeting is very early February, so we would expect the minutes to come out in early January.

Okay and I guess if there was some positive news in there for you guys, would that not take effect until January of the following year then?

So any new codes that would be approved at the October meeting, Category III codes and again, there was no vote on Category III, but those would be published in January and effective in July of 2009. The Category I codes would be effective January of 2010.

Of 2010. Okay, thank you.

Sure.

Jeffrey Frelick, Lazard Capital.

Oh, great, thanks. Shai, you mentioned that there were -- that ADVANCE consumable usage was, I guess, the early read a little higher than NC-stat. Can you give us a sense how many nerve conduction studies per month ADVANCE customers are performing?

Well, our average NC-stat customer is doing about three to four patients a month or thereabout. Obviously there's a wide range and we're seeing -- again, there's a wide range of usage, but it was 50% to 100% higher than that for the ADVANCE customers.

But again, I'd just point out that this is potentially an early adopter effect. And obviously the customers are transitioning from NC-stat to ADVANCE are easily -- and the early customers are some of our best customers, so we'll have to wait and see how that plays out, but they're doing several, two-to-three patients a week versus one patient a week.

Okay and then what about the -- maybe just give us a sense of the selling cycle of ADVANCE versus NC-stat on the selling cycle?

It's a longer selling cycle, selling to particularly the neurology and physical medicine part of the target market for ADVANCE. Obviously those physicians, some of them have equipment already, so we have some more traditional type of competitive situations. They have a lot of specific needs and expectations for the equipment that'll have to be worked through and also, we don't -- we're just developing our brand recognition within the neurology and PM&R markets. So that's all very new to us.

So we're definitely seeing a longer sales cycle and building out of our pipeline in that part of the market. Whereas before it might be a few calls to close a transaction, now we're looking at a number of additional calls as well as additional information and other factors. So it definitely has stretched out and it is important that we develop a robust pipeline as we exit 2008 and go into 2009.

Okay. Is there an evaluation period where they're putting in the ADVANCE and they want to use if for a week or two or whatever?

Yes, we don't -- we have historically not done that and are trying to maintain that position. Our competitors often do allow for various types of evaluation periods. So we'll have to work around that and potentially address that, if that's the norm in the market. Thus far we've not really had to utilize that. But again, is it somewhat the norm in this market, particularly, again, and with respect to neurologists and PM&R physicians and so we'll have to keep a close eye on that and potentially offer that on a select basis if, again, that's necessary.

Okay and then maybe just a question for Joe. Can you give us a sense of expectations going forward, maybe for the spend?

For the spend, well, we expect that the spending has come down quite a bit and we expect that that will continue --well, not continue to come down. We expect that we'll be pretty much flat through the rest of this year and going into 2009. We will see some savings due to the closedown of the DigiScope, which should give us, I don't know, about $1.0 million to $1.3 million in the next year, compared to this year.

And then just lastly, the filing again for the ASCEND?

Yes?

Was that year-end, before year-end '09 or?

Yes, so, Jeff, it's a multi component system. One of the components we expect to file definitely by the end of the year, the second component hopefully by the end of the year, if not by the end of the year then early in '09. We would be hoping to get through the regulatory process by -- obviously a lot of it will depend on some of the FDA's review. But, hopefully, as we get into the second quarter of '09, we should be in a pretty good position with respect to the regulatory timeline, but that is, of course, pending the FDA's review and we'll have to see that as it develops.

What are the different components?

Well, there are two pieces to it. There's a stimulator piece and there's a detector piece and it's probably too detailed to go into right now. We'll think, on future calls, in other words, we'll provide more detail on the technology. But it basically has one element which stimulates that nerve and another element that detects the response from the nerve and they're distinct and they actually even potentially go to two different parts of the medical device branch with the FDA.

Okay. All right. Thanks, guys.

Sure.

Sure.

Ted Huber, Deerfield Management

Hi gentlemen.

Hi Ted.

Hi Ted.

On this $500,000 in deferred revenue, was that all EMG needles? I noticed you have a fair bit of deferrals on the balance sheet. I was wondering what all that is.

Actually, Ted, that was related to the backlog of our EMG module. But the actual revenue was actually the consumables and device revenue and all revenues that we find on the orders for our ADVANCE EMG order.

So you were placing systems or selling systems out there, but because you couldn't deliver the needles yet you decided to defer that revenue rather book it? Is that (inaudible - multiple speakers)?

We couldn't deliver the EMG module --.

The EMG module?

The EMG measurement equipment part of ADVANCE.

Right and the accounting rules have us defer the total order.

Okay. So you can deliver the EMG, now, it sounds like component and that's all going to be cleared fourth quarter?

That's correct. That's correct.

And all the rest of the deferred revenue on your books, what does that relate to? Is a good (inaudible - multiple speakers).

We have deferred revenue that's related to communication hub and our docking station. We defer revenue on each of those that are delivered and its amortized over a three-year period, which is the period of our normal service with customers.

Understood. Okay. So in terms of these new ADVANCE Systems that are going out there, I now you talk a bit about what you're selling. But it would be helpful if you could quantify the type of revenue stream you expect when you place an ADVANCE System. I'm sure it varies, but what's kind of the target number you're looking for when you either sell or place a system?

Well, we're looking for -- sort of go back to when NC-stat systems were being sold and relatively unencumbered by some of the lack of clarity that we're currently experiencing with reimbursement. We were generating approaching $10,000 of consumables revenue per account per year.

Yes.

And that is sort of the target that we'd like to attain with ADVANCE Systems and feel that because of the characteristics of these customers, they are specialists, they have high volumes of patients, the systems, as a traditional nerve conduction, the LEMG. Again we hope that it'll have less reimbursement confusion. We can work back towards that kind of level.

Now the distribution of consumables revenue will be somewhat different. It won't be all the nerve-specific electrodes, but a combined other types of electrodes, needles and so forth. But that is kind of the generalized target for the business and we did see that with the NC-stat in the 2006, early 2007 timeframe.

Since ADVANCE has broader functionality, and as you point out, includes the EMG. Why couldn't the revenue stream be larger?

Well, the products aren't necessarily at the same -- they're not at the same price level as the nerve-specific electrodes. There's also some competition in the market, so there are more pricing constraints.

Fair enough and can you remind us of what the gross margin is expected to be on the suite of ADVANCE products once you kind of get out of this ramp up phase?

We don't really have a specific guidance on that. I mean, we do feel like, and I think we've noted this previously, that gross margins are probably going to come down from the levels that we've see previously for consumables, which have typically been in the 72, 73. 74% range, currently I think 72.6%. So -- and that relates primarily to the fact that there's competition. There are some alternatives and so forth, so I don't have a specific answer for you yet, Ted, but we do expect lower gross margins.

We still believe that its attractive medical device gross margins, but not quite the levels that we've seen in the past. Obviously we hope to make up for that in increased volume.

So by attractive med-tech margins, does that mean kind of at least in the mid-60's or?

I think, again, it's a lot of hypothesizing to get there, but I think that's conceivable. But again, I cautioned that we have to see how this all plays out. We have to see what the competition does and so forth.

Sure.

I think it's a possibility, but I think it's premature to make a definitive statement on that.

Fair enough. On the international side, could you tell me what the sales were in the quarter?

It's still fairly small, I'd say under $100,000. We're just getting up to speed. In the process, we're getting distribution deals signed. We have benefitted from the fact that some of our competitors have been acquired and as a result, some of the international distribution has opened up.

The reimbursement process, particularly in the UK market, which looks like a very attractive market for us, is just a very, very long timeline because the customers have to get pre-approved by the National Health Service and that could take six to 12 months. So we still haven't see really substantive revenues there.

But I do think, as we get into 2009, we'll start to see it contribute more, but at this point it's still very early. We're really just selling -- we're selling units in the UK through distribution to customers. Most of the other markets, it's really just distributors getting their inventory ramped up.

Now what we have seen is that, when they became aware of ADVANCE, they tend to prefer to sell ADVANCE. And so that's slowed things down a little bit, as they've been waiting to get their ADVANCE inventory. But I think, as we get into 2009, we should start to see a more significant and substantive international contribution on a regular basis.

Okay, fair enough, and just a couple last financial questions. How's your cash invested?

The cash, actually, right now it's all in cash and cash equivalents. It's pretty much in money market accounts.

Okay and then do you have any kind of a poison pill in place, Shai, and how do you -- or how do you think about offers if they come? You're trading at well less than cash value now. I mean, someone could (inaudible - background noise) cash on (inaudible - background noise).

We do have a poison pill, Ted, we put in place in early '07.

Yes?

And so I think obviously the Board would have control over the process. As far as how we would, the Board would obviously be required to consider any legitimate offer and go through its process if that occurred.

Okay.

Our focus is on executing our strategy, getting the Company back to growth and delivering these current products, ADVANCE as well as the pipeline products, to our physicians. But everything else will work out.

Can you comment on whether or not you've seen any you've seen any interest from suitors?

I don't think it'd be appropriate to comment on that at this time.

Okay. That's it for me. Thank you.

Thanks, Ted.

(OPERATOR INSTRUCTIONS) And I am showing that you have no further questions at this moment.

Okay. Thank you very much. Thank you for attending our third quarter 2008 conference call. We look forward to updating you during this quarter and then talking to you again early in 2009. Thank you very much.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.