Strata Skin Sciences Inc (SSKN) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the MELA Science first quarter financial results conference call. Today's conference is being recorded.

This presentation includes forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995. These statements include but are not limited to our plans, objectives, expectations, and intentions of other statements that contain words such as expects, contemplates, anticipates, plans, intends, believes, assumes, predicts, and variations of such words or similar expressions that predict or indicate future events or trends, or that do not relate to historical matters.

The statements are based on current beliefs or expectations and are inherently subject to significant known and unknown uncertainties and changes in circumstances, many of which are beyond our control. There can be no assurances that our beliefs or expectations will be achieved.

Actual results may differ materially from our beliefs or expectations due to the financial, economic, business, competitive, market, regulatory, and political factors or conditions affecting the Company and the medical device industry in general, as well as more specific risks and uncertainties facing the Company, such as those set forth in its reports on Forms 10-Q and 10-K, filed with the US Securities Exchange Commissions.

Factors that might cause such a difference include, whether MelaFind achieves market acceptance, given the uncertainties affecting companies in the medical device industry, such as the Company, or any of these forward-looking statements, may provide to be correct. Therefore, you should not rely on any such factors or forward-looking statements. The Company urges you to carefully review and consider the disclosures found in its filings with the SEC, which are available at www.sec.gov and www.melasciences.com.

At this time I would like to turn the conference over to Dr. Joseph Gulfo, Chairman, President, and CEO. Please go ahead, sir.

Thank you very much, Keith. Good afternoon, and thank you for joining us for MELA Sciences' first quarter 2012 conference call.

I'm pleased to report that 2012 is off to a good start. We're in the early stages of commercial launch of MelaFind, which as many of you know is our breakthrough, noninvasive and objective, automated point-of-care system for use when a dermatologist chooses to obtain additional information for a decision to biopsy clinically atypical pigmented skin lesions with one or more clinical or historical characteristics of melanoma.

On today's call, I'm going to give a brief overview of our first quarter accomplishments, then turn the call over to Richard Steinhart, our Chief Financial Officer, for a review of the financials, and then open up the call for questions.

We're pleased to report the significant achievements we have reached in the first quarter. Most importantly, we announced that we have initiated our controlled and deliberate launch of MelaFind in the US, focusing on the North-East and in several key cities throughout Germany.

We introduced MelaFind at the American Academy of Dermatology meeting in San Diego in late March, where we collected over 200 leads, and the reception from dermatologists was overwhelming. While we are still in early days, MelaFind has now been put into the offices of a handful of clinicians, and early feedback has been encouraging.

We are continuing with our controlled and deliberate strategy in the current quarter, while we work with dermatologists to train and assist them in how to most successfully incorporate MelaFind into their practices.

As we move through the year, we plan to accelerate and broaden our commercial launch. Our goal is to place 200 systems in the US and 75 systems in Germany in our first year of commercial availability. Based on early feedback and high levels of interest, we remain on track.

Our training program is up and running. It's designed to be comprehensive without being onerous to the clinician. It is also designed to be convenient and efficient for the clinicians. The training is completed in the dermatologist's office, and on aggregate takes less than two hours.

There are two parts to the training -- when to use MelaFind, and how to use MelaFind. The when portion teaches about the intended use population, and can be taken online. Dermatologists may place out of the actual training portion of this section by passing a 20-question test. Otherwise, they proceed with the online course, which on average takes about 30 minutes. They then need to go back and take another 20-question test that they must pass in order for an installation date to be set up.

All dermatologists are required to take the how to use MelaFind portion of training, which is hands-on in their office. This takes about 30 minutes, and it's followed by a short written and practical test. Once this has been successfully completed, the system can be installed and is ready for use.

Now, the above describes the FDA-required training for all dermatologists prior to placement of a system. However, this is just one element of the training and education that we are providing. Our more significant collaboration and training efforts come after the system is placed. And these are designed for the purpose of ensuring the long-term success of our model.

We are working closely with dermatologists to assist them to use MelaFind the way in which it was intended, so that it provides comparable clinical results to those demonstrated in the studies to date; and importantly, so that it contributes to their office efficiency. This is the major focus for us in the first 12 months.

Interest in MelaFind in the US has been overwhelming. Anecdotally, we regularly receive phone calls and emails from dermatologists, asking for a system to be installed. We then appropriately screen and qualify these requests, which include in-office visits from our staff. Those within our initial target area are the priority, and we maintain a list of interested dermatologists outside our initial target area for the day, not long off, when we will be expanding outside.

The anecdotal stories that we are hearing are very positive. Initial usage is in line with our expectations, and we've not yet even begun to drive patient usage, so this is very encouraging. The manner in which MelaFind is being used, and the enhanced clinical decision-making that has been reported to us, is very gratifying. In a short amount of time we are aware of several cases in which the MelaFind information was considered instrumental in decisions to biopsy and not to biopsy.

One dermatologist had a lesion -- had a patient with a lesion on the forehead, brought to his attention by the patient. The dermatologist reported that it was very small, and his initial plan was to watch the lesion and check it again in the future, as it was benign-appearing to him.

With MelaFind in the office, he changed his approach. He used MelaFind, which reported out high disorganization, and the lesion was biopsied. The pathology results indicated this was a small melanoma in situ. The dermatologist told me that he would have missed that lesion that day, had it not been for MelaFind.

Another dermatologist reported to me that she had a teenage girl with five clinically atypical lesions on her leg, all of which reported by MelaFind to be low disorganization. She went on to say that in the absence of MelaFind she would have been hard pressed not to have removed the lesions and create five scars on the young patient.

Equally, from a practice efficiency and dynamics perspective, we have seen that patients enjoy the MelaFind experience, and from the staff perspective its incorporation into the typical workflow had not been difficult. We continue to optimize our messaging and training materials with each bit of fundamental feedback that we receive. We share these best practices across customers. We are now qualifying more potential customers and scheduling more placements.

Based on the strong interest at the American Academy of Dermatology meeting and the excellent early customer experience, we are in the process of hiring and training four additional salespeople to achieve our goals in the US. This is a very exciting time at the Company.

We've begun placing systems in Germany, and are qualifying more customers and scheduling more placements as well. The German reader study, which included over 200 dermatologists, has been completed. We will be working with the principal investigator in Germany, and statistician, on the analysis of the data, which will be reported when final.

Simultaneously, we are gearing up for several major conferences that are occurring in Germany in the upcoming months. In advance of this, we will be working with our customers and potential customers, much in the same way that we are working with them in the US.

The first priority is for MelaFind to be used appropriately for optimal clinical outcomes. The next priority is for MelaFind to be used in a manner that augments practice efficiency and dynamics. We are working alongside our early customers to optimize their experience, to ensure longer-term success when we broaden the launch.

Interestingly, a paper was recently published that summarized the results of the melanoma screening program in Northern Germany. The results showed that melanoma screening resulted in a 50% decrease in melanoma mortality, five years into the screening program.

Based on the documented success of early detection efforts in Germany, our initial customer experience and interest, and in anticipation of the demand we believe will follow from the dissemination of the results of the German reader study, we have hired and are presently training two salespeople identified by Quintiles. We expect to place an increasing number of systems in Germany in the upcoming months.

As reported earlier in the quarter, in order to support our strategy in Germany, we entered into a two-year agreement with Quintiles for commercialization support for MelaFind in the first quarter. Quintiles is providing individuals for us for customer service, sales, marketing, and management support, to supplement the commercialization and launch of MelaFind in Germany. Having the assistance of an organization that operates within our market has already proven to be invaluable. It did not take long, for example, for Quintiles to identify the two candidates that we have now engaged to join our sales team.

We have seen excellent validation of our business model, meaning dermatologists in the US are accepting of the initial upfront payment and the payment per use for the MelaFind card. In Germany we have offered the same model as in the US, but we have introduced another model, which is more of a revenue-sharing approach. It is yielding the same, or actually slightly higher, more per patient examination, as in the US.

Several customers in Germany have opted for this, while another potential customer may opt for the original model. It's too early for us to determine which model we would prefer -- will be preferred in a larger roll-out. However, we have learned that German dermatologists may prefer a cardless model, which we will be rolling out as well, later this year.

Operationally, we have readied our organization and we are confident that we have ensured a secure supply of MelaFind handheld devices for the next three years. In the first quarter we entered into a three-year expanded manufacturing agreement with our long-term supplier, Askion GmbH, for the production of MelaFind handheld device. Askion has built systems to support the initial launch of MelaFind and is currently building inventory for the continued commercialization effort.

From a marketing and customer interface standpoint, we have launched three new websites, melafind.com for both patients and physicians, as well as a new corporate website, melasciences.com. All three are mobile device-friendly, and all three are being translated into German. We have registered domain names for the German and European markets, for example, .de and .eu.

We are expanding staff and operations in a controlled and strategic manner to support our launch as effectively as possible, but at a pace that is on par with the launch, so as to prudently deploy resources and ensure long-term success.

Lastly, Melanoma Monday is next week, May 7. We are looking forward to the Opening Bell ceremonies, during which we will do our part to communicate the need for detecting melanoma at its earliest and most curable stages.

We are also hosting an analyst and investor briefing immediately after the Opening Bell, which will include a panel discussion and presentations from leading dermatologists who have already begun incorporating MelaFind into their practices. They will review the clinical utility of MelaFind and how they are using it, as well as the product's potential market opportunity. We hope you can join us, and for those of you cannot attend in person, we will be webcasting the meeting as well.

I will now turn the call over to Rich Steinhart, our Chief Financial Officer.

Good afternoon, and thank you, Joseph. For the first quarter of 2012, revenue was reported at $11,250, and gross profit for the first quarter of 2012 was a loss of $119,160.

Research and development expense for the first quarter was $2.4 million versus $2.6 million reported in the same period last year. The decrease in research and development expenses is primarily attributable to the reallocation of certain expenses to properly reflect commercial operations, and some reduced labor and material costs at our contract manufacturer, Askion, in Germany.

This decrease really doesn't tell the entire story, though. Functionally, R&D was actually up slightly over 2011. Since becoming a Company with a commercialized product, we are required to account for things a little differently. Expense items that we called R&D last year, are now the cost of goods sold; or they may show up in our G&A line. For example, some direct costs of building units now end up in cost of goods sold, where last year this was charged to R&D.

In addition, there were other activities that had been previously classified as research and development, but are now included as G&A items. If we take all this into account, or pro forma this, our research and development was actually up about 10% over last year.

General and administrative expense in the first quarter of 2012 was $3.2 million versus $2.4 million reported in the year ago period. This was a 34% increase, which was primarily attributable to our sales force in the quarter, and the production of marketing materials, and the cost of our marketing efforts in Germany.

Again, as I said earlier, if we were able to account for things as we did last year, general administrative expenses would only be up about 18%. But because we had to reallocate things this year, the increase was a bit higher.

Our net loss for the first quarter of 2012 was $5.8 million, or a loss of $0.19 per share, versus the reported net loss in the first quarter of last year of $4.9 million, or a loss of about $0.20 per share.

As of the end of the first quarter, the Company had cash and cash equivalents of $22.3 million.

I'd now like to turn the call back to Joseph for concluding remarks, and then we'll open it up for questions. Thanks, everyone.

Thanks, Rich. So, we're pleased to report the many achievements we have reached in the first quarter of 2012, most notably our commercial launch of MelaFind into the US and Germany. We're looking forward to the continued roll-out of MelaFind throughout the remainder of the year, and putting the device into the hands of an increasing number of dermatologists, and we'll continue with our deliberate and controlled approach as we work to optimize usage to ensure the product's long-term success.

We plan to provide updates on our progress, system placements, and usage patterns, when we are further into the commercial launch and have reliable, extrapolable, and meaningful data for such purposes.

In conclusion, we are confident in our people and the power of our strategic plan, and we continue to execute with passion and with purpose. We'll now open up the call for questions.

(Operator Instructions). Scott Gleason, Stephens.

Congratulations on the early commercialization success you guys have seen. I guess, just to start off, Joe, can you talk a little bit about the workflow as far as you've seen it from kind of the early adopters? You know, just in terms of how they communicate MelaFind to the patient -- you know, who actually does the actual -- who actually implements the MelaFind system? Is it the doctor? Is it typically their physician assistant? Just kind of how, from start to finish, when the patient walks in the door, how the workflow kind of works?

Sure. So, what we're seeing initially is that the patients are not walking in the door asking for it. All right? Actually, I was -- just had dinner tonight -- I'm in Germany. I just had dinner tonight with the first customer here in Germany, and he told me he had a number today, and one of them came in just for MelaFind.

So, I had expected -- and I fully expect, once we start driving utilization, to have more of that -- to have people coming in explicitly for MelaFind or asking for it. What we're seeing initially, because we really aren't focused on driving usage -- we're actually seeing the dermatologist, during the exam, introducing the patients to MelaFind.

And that surprises me very favorably, that they're taking the time. And it's not disrupting their flow. It's not a very lengthy conversation. They're able to quickly communicate to the patients the reason they want to do this; and the patients do it.

And so, then, what the dermatologist does is indicate which lesions he'd like the nurse -- he or she would like the nurse or physician's assistant to perform MelaFind on. Sometimes the patient is brought to a different room. Sometimes the MelaFind is brought into that room. We're seeing a mix of both. The dermatologist then goes to another patient or two, comes back with the result, and makes the decision in reviewing the data with the patient.

So, pretty much what I've been saying, is happening. What I am very surprised about is, we're getting the usage we thought we'd get in the initial period, which I'm very happy about. But we're seeing that the first time the patients are being introduced to MelaFind, virtually all the time now in this phase, is when they're with the doctor in the exam room. And I've said multiple times, that's not a model I want to rely on, because I think that the doctors are very, very busy, and we need the patients to be requesting MelaFind.

So, the very fact that they're doing that -- communicating the potential benefits of MelaFind so quickly, and able to have it not hinder their practice -- is very, very encouraging to me. And I expect that pattern to change, Scott. I expect that once we do start driving patients to the office, it'll even be more facile.

Okay. Great. And just for my follow-up, can you guys talk a little bit about where you are from a manufacturing capacity standpoint? Maybe how many instruments right now you guys have in inventory, and then, you know, how many you have kind of the capacity to build on a monthly basis right now?

Yes. So, we've not discussed those numbers. What we've made sure we have is a secure pipeline for the next three years with our contract with Askion. We -- as I've said previously, publicly, we had ample capacity for the first year. Capacity is driven by the number of manufacturing controlled chambers we have, the number of shifts that are employed, and the amount of testing to be done.

So, at -- right now, we have -- and we have had -- I've said this for the last couple of months -- the capacity for the first year. We are actually now working on broadening that capacity for going forward.

And as I've said previously, it's very scalable. It's with additional chambers and adding a shift. The other thing we're working on is reducing manufacturing time. By reducing manufacturing time, you reduce cost and you increase capacity. So, we're working on those things right now. But we have all the capacity we need for the first year.

Caroline Corner, MLV.

Thanks for the update today. My first question is, you mentioned you're still confident you'll be able to place 200 systems in the first year post-launch. Can you just walk us through how we should model a placement? Are we looking at something that will be highly back end loaded, as you kind of figure things out at the front end? Or do you think after the first few months we should see just a -- kind of a steady growth?

I think it's -- I think it would be -- I don't -- I hate to use the term, back end loaded. Yes, it will escalate with subsequent months.

So, for instance, we planned -- you know, we started March 7th, was our first placement. And we lost a whole week for the AD meeting. So, in March we only had, you know, how many days of operation? Yet, we placed the handful of systems we wanted to place. So, we planned in March to place a handful. Placed none in April. We didn't want to place any; we wanted to work with the systems and the doctors, and then to start placing again in May; more in June; more in July.

I think you'll see a leveling off in the -- more, the last half of the year. So, it will be more loaded to the last half. But it's not back -- to me, back end loaded means that you're going to put out 50% of them in the last month, and that's certainly not the plan.

Okay, thanks. That's helpful. And then, a look at the revenue line of $11,000. You said you placed a handful of systems in March. In previous conversations you'd said it was about $7500 cost to the provider to place the systems. How are you billing the patients, and how is that placement fee kind of amortized for the doctors, just for modeling purposes?

Sure. Rich, would you (inaudible)--?

Yes, sure. Let me take you through that, Caroline. We only recognize a small portion of that up front -- recognize, essentially, the sale price of the consumables that go with the unit -- the accessories, if you will -- the camera; things like that. And the balance of the -- of that installation fee is then amortized or recognized over the period of the contract, which is two years. The cards are not sold to the patient directly, but they're sold to the physician. And so, we're able to recognize that revenue when we sell that to the physician and he pays for it.

And Rich, in the initial install, as part of the first payment, there is a supply of cards included.

Yes. We -- yes. That's right.

So, it's not surprising, Caroline, that with only -- I don't even know how many days of active, on the market, in the quarter. Right? Because we started on the 7th. We had the AD meeting in there. We didn't really have a lot of active days of commercialization.

Dalton Chandler, Needham & Company.

Congratulations on your first commercial revenue.

Thank you, Dalton.

I wondered if you could comment with regard to usage, what you're seeing in terms of the number of exams per day or per week, or whatever period you'd care to give.

Yes. As I said earlier in the call, we certainly will provide that, once we have what I would consider reliable, extrapolable, and meaningful data for you. What I -- though, I don't have reliable, meaningful, extrapolable numbers right now.

What I can tell you is that it's matching what we modeled internally. We did not think, for example, on day one, we would get one an hour. Okay? We thought that that would ramp. You know, usage would ramp, and it would start at a level below that. We've seen that.

We've also seen that it is very -- it is actually advertising-dependent. So -- customer I just had dinner with, placed an ad and had a lot of usage after the ad placement. A few weeks after the ad placement, dropped off a little to the level we expect, actually, at this stage.

So, the two things I can tell you -- it's what we expected, given our internal modeling, and given the fact that we're not driving usage. And when we have seen a customer drive his own usage, it responds very, very well. That's about all I really can say. I'm trying to keep it qualitative on the usage.

Okay. And then, just on the sales reps, you talked about hiring two in Germany. How many do you have in the US now, and how do you see that ramping through the year? And I think you do have some now, but there was no sales and marketing expense in the quarter.

So, we've had -- our director of sales and marketing is in the field, and basically has been functioning as a sales rep. And the national sales manager, who has been in the field, and has been functioning as a sales rep. So, we launched with two in the field. In Germany we launched with a country manager, who actually was functioning as a sales rep.

So, right after we got back from the AD meeting and we had over 200 leads, I authorized hiring four sales reps. We hired one, and we've identified three others we're bringing on and training. In Germany we've already hired two and they're in the process of training. They actually just spent the day at Askion yesterday, being trained on the technical side of things, and I'll be training them tomorrow on the medical side. So, we're moving.

We, again, launched with one in Germany and two in the States. Now we've expanded to four in the States and -- I'm sorry, six in the States and three in Germany. I think what we modeled having by the end of the year is up to as many as eight in the US and five or six in Germany. And I think that looks pretty good. You know, I think we're -- I think that that will fit the bill.

I'm sorry, was there another part of that question?

Yes. There was no sales and marketing expense.

It's included in G&A, Dalton.

(Operator Instructions). Greg Chodaczek, First Analysis.

Just a couple of quickies. Most of my answers were -- or, most of my questions were already answered. Joseph, what is the goal right now, once a MelaFind has been in an office and has a mature customers? Is it one an hour? Is that the goal?

One an hour is the goal that I said -- you know, by -- when a system is mature, the market research tells us they expect that once an hour, they have the dilemma. Is this atypical lesion something I need to worry about? That's what the market research says.

So, that's what I said that -- we'll know that it's appropriately integrated and being used optimally, when that market research number is hit. Now, we all know, you know -- often, the market research doesn't match reality. So, we keep a close eye on that. But that's how we came up with that number, and that's what I'm looking forward to. But not immediately. You know. We didn't expect that immediately. But that's what I'm hoping for. And we'll see what happens.

And they see five to ten patients an hour. Excuse me, Greg. I'm so sorry. Yes. As the market research also showed, dermatologists are very busy. They see five to ten patients an hour. So, we think we can -- we think we'll see that. And stay tuned.

And I know this question will probably be answered on Monday; but for a practice where a nurse or physician assistant is actually doing the scanning, I'm assuming the dermatologist points out which lesions they want scanned, and the nurse will do that. Is that how that's working?

Yes. The -- that's right. The dermatologist has to do the whole body exam and identify the clinically atypical lesions. They are the ones that are trained on the -- when to use MelaFind. And, you know, just -- under the supervision of a dermatologist, the staff can do a number of procedures. You know. Staff does a lot of procedures in dermatology. And in this case, they typically do operate MelaFind.

John Sullivan, Leerink Swann.

Congrats on your first commercial revenues.

Thank you.

A couple of -- yes, a couple of quick questions. You mentioned you're contemplating some additional payment models in Germany. Can you talk about how they might differ, and why you would be contemplating these different models?

So, in Germany we had a number of customers tell us that, [gee], they'd be more comfortable with a revenue-sharing, because they actually don't know what the payment might look like from their patient. This is -- this approach is new to them.

So, we did the revenue split with them, and actually we're getting a little bit more than the 50 per card we're getting here in the States, so that's worked out quite well. We're just in the process of signing a customer who, no; he likes just paying the flat fee. And that tells me he's going to charge quite a bit more than two times that fee, right?

So, I think it's -- you know, we can be very responsive to the customer. I think it's one of the great parts of the way we price this, and the flexibility we can show. And then we'll see -- you know, John, we'll see what works best, and we'll see once we have the broadening word of mouth in Germany as we have in the States, you know, how well -- whether we need to offer different models. Right now, it's very easy to do.

I did mention earlier about the card and cardless system. In Germany, they seem to prefer - a number of customers have told us they'd prefer if we had an external drive rather than the individual cards. Now, it's music to our ears to hear that, because it's exactly the direction I talked about going in the States, because -- but we first wanted to show the US physicians that this is a useful tool for them. And once they got convinced of that, and it was beneficial for their patients and their practice, they would be, you know, ready -- what I would call -- for a more sustained commitment.

In Germany -- apparently, you know, German doctors are accustomed to using technology to help them in this effort. So, the whole -- the reason of the card, to show that this was a risk-sharing, and they only need to acquire what they use, is -- seems to be less important. But we have a number of docs in Germany, you know, the early ones, who like the card. And yes, they would like to see us move to it. But, as I said, these are things that I've talked about in the past.

Understood. And then can I just ask one more question? Can you just -- disregarding the capability of the system, can you just update us on the library -- the size of the library of lesions against which you're comparing lesions that you're interrogating for insight?

Sure. So, the MelaFind classifier is fixed. FDA has approved -- let's call it frozen, okay? Has frozen -- the FDA has approved the performance of that frozen classifier. So, the system does not self-teach. Right? So, the lesions that it is exposed to in the field, do not contribute to any sort of evolution of it in real time.

There's many reasons for that, and let me explain. If you were to do that, each customer would be basically a clinical trial site and, you know, we'd have to have IRB approval and the whole bit for that. Because FDA did not approve a method, right, and CE did not approve a method; they approved a performance profile of a system.

Point number two, you want to train a system -- we trained MelaFind on biopsied lesions that were read by four premier dermatopathologists in the US. Okay? So, there are papers that speak to, you know, how difficult it is to read and interpret these early melanomas. The last thing you'd want to do is have a system that is trained by individuals who were not as expert in reading a melanoma. So, I wouldn't want to do it, even if logistically you could do it.

But what are we doing? We are working on enhanced algorithms to improve the performance of MelaFind. Now, I already know that's possible, because in selecting the classifier that we applied in the clinical trial and got approved, we didn't select the most specific classifier. We selected the one we selected, because it's much more important not to miss, than it is to -- than specificity. Right? So we selected one -- we had several that actually didn't miss in the series of blind tests leading up to the pivotal trial, and I selected the one with the lower specificity, actually, because I wanted the cushion on the upside for the sensitivity.

So, I already know we have -- let's call it, smarter algorithms. So, the team is working on even other ideas to improve the algorithms. And we do definitely want to have various iterations of the product, and versions, you know, 2.0, 3.0, 4.0. But the -- it's a long-winded answer. And the short answer to your question is, it doesn't learn in the field; doesn't learn in the customer's office. It learns as we teach it. And we are teaching it more. The database is 10,000 lesions, 600 melanomas.

Dalton Chandler, Needham & Company.

Yes. Well, first of all, just a follow-up to that. I assume if you wanted to improve the algorithm, you would need to go back to the FDA to do that. What would that process be? Would it be an amendment? Would you have to do a new trial, or what's your expectation?

Yes. It would be -- it would likely be a PMA supplement. I haven't talked to the agency about that yet. The question would be, would a new trial be needed, or would -- we've quarantined the pivotal trial database, okay? So, we don't use those lesions. They've been quarantined.

Question, could you write a protocol and apply new algorithms to that quarantined database? So, these are things I haven't explored with FDA. So, the least onerous approach would be that. The most onerous would be repeating the study. And those are the two -- actually, those are the two extreme ranges, I'd say, Dalton.

Okay. And the last question is just, what are you telling people who call in unsolicited, asking for a system?

We thank them. We get their information. We tell them that they will be contacted. And they are. We keep them -- we respect them and keep them interested, even if they're outside our initial target market area. Those that are within the target market area actually get a visit, and we send someone in to talk to them about what it means, and what it would mean for the practice and whatnot, and see their level of interest. And then we prioritize the placements.

It was interesting, Dalton, at the American Academy of Dermatology meeting. We've -- I think we've done a very good job of publicizing our intentions, because more often than not at our exhibit, when someone out of our target market area would come to the booth, they would lead off the conversation -- Look, I know you're not coming to, you know, X city in Y state immediately. But when you do, I'm interested.

So, I think -- and as you know, that was very important to me, because I don't want to frustrate the dermatologists. So, I think we did a pretty good job at letting them know what our initial plans are.

And ladies and gentlemen, this does concludes today's question-and-answer session. For closing remarks, I turn the conference back to Dr. Joseph Gulfo.

Well, thank you, Keith. Well, I just want to reiterate that, based on the early results, we're very, very pleased. This is a very exciting period for us. I think we achieved many things in the first quarter, and we look forward to continuing to working with the dermatologists. First thing is that they have the right clinical outcomes. The second thing is that they do it in a way that is beneficial for their practice. And from that platform, and based on peer influence, good peer experiences, we will broaden, and we look forward to doing that.

So, thank you very much for participating in the call, and we look forward to giving you more updates in the future.

Thank you. Ladies and gentlemen, this does concludes today's conference. We appreciate your participation. You may disconnect at this time.