NeuroMetrix Inc (NURO) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the fourth-quarter 2008 NeuroMetrix, Inc. earnings conference call. My name is Towanda and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will facilitate a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host, Mr. Joe Calo, Principal Financial Officer. Please proceed, sir.

Thank you. Good morning. 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 include 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 those forward-looking statements as a result of a number of important factors, including those set forth in our earnings release 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. Now I would like to turn the call over to Dr. Shai Gozani, our President and CEO.

Good morning and I would like to welcome you to the NeuroMetrix fourth-quarter 2008 conference call. I am joined today by Joe Calo, our Principal Financial Officer, and [Joe Arino], our Controller.

NeuroMetrix is a science-based medical device company advancing patient get through the development and commercialization of innovative products to eight physicians in the assessment, treatment and repair of peripheral nerve and spinal cord injuries and disorders and that provide regional anesthesia and pain control. Our goal is to develop into a diversified neurotechnology company focusing on the peripheral nervous system and spinal cord.

We sell our products in the US primarily through a direct sales organization currently consisting of 28 sales representatives that call on physician offices, including neurologists, physical medicine and rehabilitation physicians, orthopedic and neurosurgeons, endocrinologists, family and internal medicine physicians and other physician specialties. In the international markets, we sell our products through third-party distribution.

We announced yesterday that we reached a resolution with the United States Department of Justice and the Office of the Inspector General of the United States Department of Health and Human Services regarding the previously disclosed investigation into certain of the Company's past sales and marketing practices relating to the NC-stat system. This settlement resolves the government's investigation into these matters. Our comments on this matter are contained in yesterday's press release.

In this conference call, we will discuss the following topics. First, a review of our financial results for the fourth quarter, then an update on our neurodiagnostic business. We will then provide a brief international sales update. Following that, I will provide a detailed description of our products and R&D pipeline and then I will conclude by providing a review of our business strategy on a go-forward basis. I will now turn it over to Joe Calo, our Principal Financial Officer, for a review of our financial results for the fourth quarter of 2008.

Thank you, Shai. Here is a recap of our financial performance for the three and 12-month periods ended December 31, 2008. The three-month period being our fourth quarter of 2008. Total revenues for the fourth quarter were $7.2 million, down 27% from $9.8 million in the fourth quarter of 2007 and up 2% sequentially from the $7.1 million in the third quarter of 2008.

The fourth-quarter revenues included approximately $500,000 of revenues deferred from previous quarters due to backorders of the ADVANCE EMG module, which were fulfilled in the fourth quarter. Also previous quarters and previous year revenues have been recast to exclude revenues from discontinued operations resulting from our closure and sale of our DigiScope business as of the end of October 2008.

To further break down our revenues, consumable revenues totaled $6.2 million, or 86% of the total revenue. And medical equipment revenues totaled $1 million, or 14% of the total revenues. This compares to $9 million in the consumable revenues in the fourth quarter of 2007, or 92% and $826,000 of medical equipment revenues, or 8% of total revenues. Total revenues for the year ended December 31, 2008 were $31.1 million, a decline of 29% from $43.7 million of revenues in the same period of 2007.

During the fourth quarter of 2008, overall gross margins were 68% compared to 71% in the third quarter of 2008 and 73% in the fourth quarter of 2007. The gross margins for consumables was 71.5% in the fourth quarter compared to 72.6% in the third quarter and 73.1% in the fourth quarter of 2007.

Medical equipment gross margins for the fourth quarter were 46% compared to 38.1% in the third quarter and 70.6% in the fourth quarter of 2007. The decrease in the medical equipment gross margin compared with the same period of 2007 was due to a lower average selling price resulting from higher discounts. The increased discount was mainly a result of the ADVANCE system transition pricing for certain existing customers. Overall, gross margins were also impacted by the transition pricing of the ADVANCE system.

Total operating expenses, excluding cost of revenues, in the fourth quarter were $9.2 million, including a charge for an unexpected -- sorry -- including a charge for an expected settlement payment of $3.7 million to the United States Department of Justice and the Office of the Inspector General of the United States Department of Health and Human Services to resolve the previously disclosed investigation and a net gain of $131,000 resulting from the dissolution and deconsolidation of our previous joint venture with Cyberkinetics Neurotechnology Systems. This compares to a total operating expense for the third quarter of 2008 of $7.3 million and compared to total operating expenses of $9.7 million for the fourth quarter of 2007.

Operating expenses in the fourth quarter of 2008, not including the cost of revenues and excluding the settlement charge of $3.7 million and the net gain of $131,000 resulting from the dissolution of the joint venture, decreased by $1.6 million when compared with the third quarter of 2008, and decreased by $4.1 million when compared to the same period of 2007. These operating expense reductions are mainly a result of our expense control efforts, including the reduction of our workforce in the second quarter of 2008.

The GAAP net loss in the fourth quarter of 2008 was $4.1 million, including the settlement charge of $3.7 million and a write-down of our investment in Cyberkinetics of approximately $274,000 due to what we consider to be an other-than-temporary decline in the market value of this investment, a gain of $352,000 resulting from the sale of our DigiScope business and a net gain of $131,000 resulting from the dissolution of our joint venture with Cyberkinetics. In comparison, the net loss in the fourth quarter of 2007 was $2.1 million.

The net loss for the 12 months ended December 31, 2008 was $27.7 million, including a $5.8 million charge for the impairment of goodwill relating to the DigiScope business, an anticipated payment, settlement payment of $3.7 million to the government, a write-down of our investment in Cyberkinetics of $2.5 million and a loss of $6.6 million resulting from the discontinued DigiScope operations. This compares to a net loss of $8.4 million for the 12 months ended December 31, 2007.

Basic and diluted net loss per share was $0.30 in the fourth quarter of 2008 and this included a negative impact of $0.27 per share for the anticipated payment of the government to resolve the investigation and a positive impact of $0.03 per share from the gain related to the discontinued DigiScope operations. The basic and diluted net loss per share in the fourth quarter of 2007 was $0.17 per share. Basic and diluted net loss per share was $2.02 for the 12-month period ended December 31, 2008, including a negative impact of $0.42 per share for the goodwill impairment charge from first quarter '08 relating to the DigiScope business, a negative $0.27 per share for the anticipated payment to the government, negative $0.18 per share for the write-down of the Cyberkinetics investment and a negative $0.48 per share resulting from the loss of discontinued operations compared to the basic and diluted net loss per share of $0.66 in the 12 months ended December 31, 2007.

Turning now to our financial position as of December 31, 2008. Cash and cash equivalents -- cash, cash equivalents and short-term investments totaled $19.8 million as of December 31, '08 compared with $21.6 million as of September 30, 2008. This represents a decline of $1.8 million during the fourth quarter.

The current cash balance of $19.8 million compares to $29.7 million as of December 31, 2007. The use of cash of $9.9 million was primarily driven by the net loss from operations adjusted for other non-cash items, the paydown of accounts payables and other liabilities during the year, the purchase of fixed assets and partially offset by the reduction in the accounts receivable and the release of some restricted cash of about $1.1 million.

Working capital was $21.6 million as of December 31, 2008 compared with $33.3 million as of the year-end 2007. The decrease in working capital was primarily due to the decreased cash and investments balance of $9.9 million and a decrease in accounts receivable of $2.1 million, partially offset by the investment in inventories of $200,000.

Total assets were $31.4 million as of December 31, 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, the write-down of the investment in our Cyberkinetics -- write-down investment in Cyberkinetics, write-down of our other intangible assets, the impairment of certain fixed assets related to DigiScope, the decrease in accounts receivable and partially offset by the investment in inventories.

DSO decreased to 46 days in the fourth quarter compared with 54 days in the third quarter and compared with 55 days in 2007. Our inventory turn rate per year was 1.8 times in the fourth quarter of 2008 and it compared with 1.3 in the third quarter and compared with 2.5 for the year ended December 2007. The decrease in inventory turn from our last year-end is due to our investment in the inventories for the ADVANCE product, which was introduced commercially during the second quarter of 2008, as well as a decrease in unit sales during the year 2008.

As of December 31, 2008, there was no long-term debt on our balance sheet other than a capitalized lease obligation of about $82,000.

To summarize our fourth-quarter 2008 financial performance, revenues totaled $7.2 million. We incurred a net loss of $4.2 million and we ended the fourth quarter and our year 2008 with $19.8 million in cash and cash equivalents. This concludes the financial update portion of the conference call. I would now turn the call back over to Shai.

Thank you, Joe. So to start with an update on our neurodiagnostic business, in the fourth quarter, all of our revenues came from our neurodiagnostic products and that was $7.2 million, which was down 27% from the same quarter last year and the breakdown, as Joe noted, was about $1 million for medical equipment and $6.2 million in consumables.

The medical equipment sales consisted of both NC-stat and ADVANCE devices and their associated modules. Consumable sales consisted primarily of our nerve-specific electrodes, which we previously described as biosensors, but also now included are UNIVERSAL electrodes and EMG needles.

The NC-stat sales were mostly into primary care physician practices. ADVANCE sales by contrast 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 utilizing the NC-stat or ADVANCE system, decreased by about 140 accounts to 5189 physician practices and clinics as of the end of the quarter. As well, the average consumable usage per customer during the quarter was down about 11% from the prior quarter.

We believe that the revenues from our neurodiagnostic products in the fourth quarter of 2008 were down from the same period in 2007 primarily due to the reimbursement uncertainty surrounding use of the NC-stat system, as well as a reduction in our direct sales organization from about 50 to 30 field sales representatives in the second quarter of 2008.

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 findings of this workgroup were originally presented at the AMA CPT 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, which are essentially our nerve-specific electrodes such as are 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 when it would normally publish its list of new Category III codes. Subsequently, at the October 2008 meeting, the CPT editorial panel again considered nerve testing as an agenda item.

We recently commented on reports that, at that meeting, the CPT editorial panel decided to establish a Category I CPT code for nerve conduction studies performed with preconfigured electrode arrays, such as are utilized with the NC-stat system. So we are encouraged by this direction and believe that this CPT code, when issued, could streamline the process for obtaining reimbursement for nerve conduction studies performed using the NC-stat system.

The amount of reimbursement from Medicare that physicians will receive under this new CPT code when it is issued remains to be determined. Further, medically appropriate indications for this code may be defined through local and national Medicare medical policies. In this respect, we are encouraged that multiple Medicare fiscal intermediaries have already determined that nerve conduction studies performed with the NC-stat are a covered service for one or more clinical indications. We do expect that the operational characteristics of the NC-stat business will change when physicians begin utilizing the new code in 2010.

We believe that per-study reimbursement could decrease, which could necessitate a concomitant reduction in nerve-specific electrode selling prices. However, we also believe that specific reimbursement codes and more favorable payer policies could lead to increased medically appropriate utilization. As such, we look forward to the opportunity to stabilize and eventually return the NC-stat business to growth.

We believe that nerve conduction studies have an important role in primary care and it will actively support the family and internal medicine physicians currently using the NC-stat to optimize their clinical care of patients. We continue to believe that the annual primary care nerve conduction testing market opportunity in the US is several hundred million dollars and potentially larger if widespread testing for diabetic neuropathy is found to be clinically and economically valuable. However, until the primary care physician -- until primary care physicians achieve reimbursement clarity, we do expect limited new sales of NC-stat systems within this market.

We are currently focusing our medical equipment sales efforts on specialist physicians with peripheral nerve expertise. Specifically, we are actively marketing the ADVANCE system, which received FDA 510(k) clearance in May of last year, into the neurology, physical medicine and rehabilitation, neurosurgery, orthopedic and hand surgery and pain medicine markets through our direct sales organization.

ADVANCE is a comprehensive platform for the performance of traditional nerve conduction studies and needle electromyography procedures. As of the end of the fourth quarter of 2008, 6% of our active customers were using ADVANCE. We are encouraged by the market reaction and customer feedback and have gained important insight into certain product enhancements that we believe could accelerate adoption.

Moving on now to international sales. Although our international sale revenues -- our international revenues are currently limited at about $35,000 in the fourth quarter, we continued to make progress building our international distribution network, which we believe will eventually lead to more substantial revenues. In the fourth quarter, we signed agreements with distributors providing coverage in Korea, Taiwan, Germany, Belgium, Netherlands and the Middle East, as well as expanded our UK coverage to include both the orthopedic and neurology markets. We have also initiated the registration process for the ADVANCE system in China and Japan.

Now to continue with an update on our product pipeline. NeuroMetrix's core mission is to develop and market products in three clinical areas related to the nervous system. The first is diagnosis and monitoring of peripheral nerve and spinal cord dysfunction. The second is the delivery of anesthetic and therapeutic agents to peripheral nerves in the spine and the third is neural stimulation to promote repair and regeneration of peripheral nerves and the spinal cord. These three areas have a common core scientific theme, which is the measurement modulation and repair of neural conduction.

We are encouraged by the progression of our novel nerve localization system called ASCEND, which we believe will be used to provide regional anesthesia pain control and to treat certain types of neuropathies. ASCEND has two components -- a precision nerve stimulation device and a nerve signal detection device. We filed a 510(k) on the signal detector in December and expect to file on the stimulator shortly upon completing electromagnetic compatibility testing.

Nerve localization procedures with ASCEND will be performed with two types of consumables -- a hypodermic stimulating needle and our UNIVERSAL electrodes. Most procedures will acquire one needle and one UNIVERSAL electrode. We are sourcing custom-designed stimulating needles from Technomed Europe, a leading international provider of various types of needles.

There is limited data available on the US and international market for stimulation-based nerve localization equipment and consumables. Based on a variety of sources, including surveys of physician practice habits, we estimate that the existing market is between $50 million and $100 million. More importantly, we believe that the market opportunity could be considerably larger if new technology improves on the procedure and makes it accessible to a greater number of physicians for a wider range of peripheral nerve and ultimately spinal cord indications.

We are hoping for commercial launch of ASCEND into the regional anesthesia and certain other peripheral nerve specialist markets in the second half of 2009 pending regulatory approvals and production ramp-up. Our current thinking is to initially launch ASCEND into about five major markets using a dedicated group of specially trained sales managers, primarily drawn from our existing sales organization. After gaining feedback for about -- after gaining about six months of detailed product experience and feedback, we expect to stage a broader rollout. Whether that is accomplished through our existing physician office salesforce and expanded ASCEND-only salesforce, third-party distribution or some combination of these channels remains to be determined.

We recently announced the acquisition of certain technological and intellectual property assets from Cyberkinetics Neurotechnology Systems. The acquired assets include all of Cyberkinetics' rights and regulatory filings for the Andara Oscillating Field Stimulator, or OFS, for treatment of acute spinal cord injury. This is an investigational device designed to stimulate spinal cord repair and restore sensation.

In connection with the acquisition, we also dissolved our joint venture with Cyberkinetics to develop and commercialize a therapeutic product for peripheral nerve injury and acquired certain of the technological intellectual property assets of Cyberkinetics that contributed to this joint venture. We will continue this program internally.

We also acquired development and commercialization rights to certain derivatives of pharmacological agent 4-aminopyridine that may be useful in the treatment of central and peripheral nervous system injury and disease.

The addition of the Andara OFS stimulation platform to our product pipeline has the potential to diversify our business and help us become a leading neurotechnology company. The device is presently under review by the FDA under a humanitarian device exemption, or HDE, for the treatment of acute complete spinal cord injuries, which affect about 4000 people annually in the United States. If approved by the FDA, we expect the Andara OFS device to have a selling price of between $25,000 and $50,000. Our expectation is that we would develop a small specialty sales team focused on the 100 largest spinal cord injury centers in the US.

The FDA has posed additional questions as part of their HDE review and may require further clinical studies before granting marketing approval. We are presently in contact with the FDA to discuss the status of the HDE and to determine the next steps in the review process. Concurrently, we also plan to explore international regulatory pathways, including in the European Union.

One of the assets we acquired from Cyberkinetics was the right to several proprietary 4-aminopyridine, or 4-AP derivatives, developed and studied by scientists at the Purdue University Center for Paralysis Research, as well as their collaborators at other universities. 4-AP has demonstrated efficacy in enhancing neural conduction after spinal cord trauma, as well as in demyelinating diseases such as multiple sclerosis. However, the clinical use of 4-AP may be limited by side effects. The proprietary 4-AP derivatives included in this acquisition may address some of these limitations.

We have already identified a lead compound from among the portfolio of 4-AP derivatives included in the acquisition and we are in the process of conducting safety testing required for an IND submission and a Phase I clinical trial. Based on preclinical work, we believe that our lead compound has clinical potential for treating spinal cord injuries and multiple sclerosis. Therefore, we are exploring the creation of a spin-off company to develop this and related compounds and intend to pursue non-dilutive funding from state/corporate partnerships and other sources. In developing this business opportunity, we believe we can create value for NeuroMetrix and its shareholders.

So to summarize our business strategy, it has five elements as follows. First, we are actively supporting the nearly 5000 US physician practices using the NC-stat system. We'll continue to 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 stabilize our core NC-stat business and then work towards growing this business again.

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. Consistent with this goal, we recently signed a distribution agreement with Edwards Medical Supply. Edwards is the country's leading provider of medical products and services to healthcare professionals at the workplace. They are a medical supplier to over 6000 employers who provide medical care and attention to more than 10 million employees.

For growth, we are focusing our medical equipment sales efforts on ADVANCE and eventually our proprietary pipeline products, including ASCEND and Andara OFS. We market these products to specialists primarily consisting of neurologists, physical medicine and 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.

Fourth, we are expanding our international presence for anti-stat, ADVANCE and our pipeline products. We view international sales as a growth opportunity. And finally, we are developing the 4-AP derivatives we in-licensed from Cyberkinetics potentially by launching a spin-off company. With that, we conclude our presentation and would be pleased to take questions.

(Operator Instructions). Juan Sanchez, Ladenburg.

Good morning, guys. My question is -- you've previously (technical difficulty) for the quarter. (technical difficulty), what is your legal (technical difficulty)? And the second question is (technical difficulty) the ADVANCE (technical difficulty). But how good of a customer is the average (inaudible) when it comes to biosensor usage?

Juan, we don't have a good connection with you, but I think I heard the questions though and so I'll answer them as I understood them and obviously follow up if that is not accurate. On the question of legal fees, clearly with the resolution of the government investigation, we do expect our legal fees to stabilize. They have been coming down in recent quarters as well.

For the fourth quarter, Juan, the legal fees declined about $700,000 from the third quarter to about $250,000 and they declined about $1.4 million from the fourth quarter of last year.

So we do expect them to reach more typical levels. Obviously, in the first quarter, there is some ramp-up activity related to these matters and -- in the first quarter, I should say, there is some ramp-up activity related to these matters. But going forward, it should be more typical legal types of legal fees.

The second question I think you were asking was to try to characterize the ADVANCE customers in terms of their utilization of consumables. Currently, they do appear to be higher users of consumables than a typical NC-stat customer. And that is encouraging. However, obviously, these are early adopters and we have to see whether that is, in fact, characteristic of ADVANCE customers on a go-forward basis. I think it is a little too early to draw any definitive conclusions.

Thank you very much.

(Operator Instructions). Erica Selin, Stanford Group.

Good morning. I was hoping that you could provide a little bit more clarity on how many of the devices sold were NC-stat and how many were ADVANCE? It sounds like ADVANCE is doing rather well. We would just like to get some more granularity if we can.

The numbers actually were -- it was about -- between new ADVANCE systems and transitions of existing NC-stat -- of existing NC-stat customers to ADVANCE was probably about 60%, 65% ADVANCE and the rest were NC-stat.

Okay, that's helpful. And also with all these projects going on, it looks like they can have some good opportunities. But how should we look at the R&D spend in 2009? It seems like it would have to go up (technical difficulty) a measure?

Well, the Andara OFS device is really a regulatory project at this point. Cyberkinetics had gotten it to the threshold of commercialization and it really is -- the issue there primarily right now is to work through the HDE process. If the FDA does require additional clinical work, that would have to be addressed through the R&D budget and we will have to determine that based on the discussions with the FDA. But at this time, there is no specific R&D spend associated with Andara.

As far as the peripheral nerve injury device that was the topic of the -- or the focus of the joint venture, that is really going to be captured within our existing R&D budget and then as well, of course, as ASCEND, which was part of our R&D budget.

The 4-AP derivatives development, that is something that we will have to -- is not reflected, of course, in our R&D budget and we are looking for sort of external funding sources for that, either state or government type funding or in particular, looking at corporate partnerships as a mechanism to fund that.

Okay. So as far as any expansion in the budget to do those, we would expect something to offset it as well?

Definitely on the drug development side. The one area that could grow the R&D budget would be additional clinical studies for Andara. I don't think it would be a dramatic increase in our R&D budget, but it would require some additional clinical studies. I don't want to speculate on the amount at this point because, obviously, that depends on how large a study would be required. Typically, HDE devices, by definition, the threshold for approval is demonstration of safety and then probable benefit. It is not a PMA threshold. So the studies are typically much smaller and shorter in duration. So obviously, the associated expenses are lower.

Okay, well thank you very much. That is helpful.

Dave Turkaly, SIG.

Thanks. Do you have the number of biosensors that were actually used in the quarter? It may be in the release, but I didn't see it.

Yes. The number of biosensors was --

168,000.

168,000, which was down about 11% from the prior quarter. And that was due to fewer customers, as well as lower utilization per customer as they continue to be sort of hounded by the reimbursement uncertainty.

One of the reasons -- we are kind of getting away, Dave, from on a go-forward basis -- we're happy to report the number. The one consideration is, as you move into ADVANCE, you have got a broader array of consumables that the customers will use. In addition to the nerve-specific electrodes or biosensors, we have the UNIVERSAL electrodes, other accessories, needles and so forth. So the consumables utilization is a good metric for NC-stat. It is not quite as accurate a metric for ADVANCE. And I think probably consumables purchases in dollars is going to be a better indicator for the ADVANCE customer going forward. So we will have to address that on a go-forward basis. Maybe we'll just report it for NC-stat and speak to revenue for ADVANCE.

And the difference that noted between ADVANCE, the UNIVERSAL electrodes, are they typically sold -- is that a discounted version of your prior kind of NC-stat electrodes or is it a similar ASP?

Well, no, the UNIVERSAL electrodes are a considerably lower ASP. They are much more -- they are positioned much more closely to in between, I would say, nerve-specific electrodes and the really low cost commoditized electrodes that typically are characteristic of the neurology and physiatry.

But what I was referring to there is actually ADVANCE customers' use of biosensors is higher than the average NC-stat use of biosensors. So I was doing a like-to-like comparison there, but my caution was that those are, obviously, early adopters of ADVANCE and sort of our best specialist customers moving from NC-stat over to ADVANCE, so I don't want to draw any definitive conclusions about their utilization of biosensors until we have got more quarters of data.

Got it. And then you mentioned that there are several intermediaries that are covering the tests today. I think those are the Medicare intermediaries that you are referring to. Have any of them placed a limit on the indications or are they paying pretty much across the board and I guess in general your thoughts on what that level looks like today?

Well, most of them have not placed constraints on the clinical indications. At least one has stipulated that NC-stat is approved for a covered service for carpal tunnel syndrome. That was their initial indication and not necessarily for other applications. Of course, carpal tunnel syndrome is far and away our most common application as well, so that is a good agreement there. But with the one exception, I don't think there are constraints on the clinical indications, but I am not 100% certain of that.

As far as the amounts, we don't really track those anymore, so some [fiscal] intermediaries are paying under the conventional codes, 95000304. Some are paying under miscellaneous code 95999 and when they do it under 95999, there is a wide -- I understand there to be a wide variation in the reimbursement.

So I think the important takeaway is that I believe that in every instance where they have looked at the NC-stat, they find it to be a covered service either under traditional codes or in miscellaneous codes, again, for a least one or more clinical indications. And I think that is encouraging as one looks forward to having a single standardized code for the NC-stat, which I think could provide a lot of clarity.

Great. Thanks.

(Operator Instructions). Robert Littlehale, JPMorgan.

Good morning. How should we look at the Cyberkinetics joint venture from the day it was conceived until now in terms of the significance to NeuroMetrix's benefits? Obviously, there has been some write-downs associated with that relationship. Can you sort of frame it a little bit for us in terms of how you sort of view it?

Well, I think the joint venture had a lifetime of a little under a year. It was formed early in 2008 and obviously, we brought it to a close end of '08 or early '09. I think it was very successful in getting us into the peripheral nerve injury arena. Cyberkinetics sort of -- fairly soon after we launched the joint venture or at least six month afterwards -- had to put all their energy or most of their energy into focusing on the Andara spine project and therefore, most of the work that was being done was being done at NeuroMetrix. So I think we have got good momentum from the joint venture to continue the project internally and so from that perspective, I consider it a successful program. Obviously, it is at a very early stage. We are just developing a prototype device and initiating -- hope to initiate in the near future safety studies with that device. But in terms of giving us momentum behind that application, I think it was very successful.

Thank you.

At this time, there are no further questions in queue. I would now like to turn the call back over to Shai Gozani for the closing remarks.

Okay, well, thank you very much. Thank you for your participation today and we look forward to updating you during the course of the year. Thank you.

Thank you for joining today's conference. That concludes the presentation. You may now disconnect and have a great day.