Strata Skin Sciences Inc (SSKN) 2013 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to MELA Sciences first-quarter earnings call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions). As a reminder, this 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 and 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. These statements are based on our 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 assurance that our beliefs or expectations will be achieved. Actual results may differ materially from our beliefs or expectations due to 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 and Exchange Commission. Factors that may cause such a different include whether MelaFind achieves market acceptance or becomes commercially viable. Given the uncertainties affecting companies in the medical device or industries such as the Company, any or all of these forward-looking statements may prove to be incorrect. Therefore, you should not rely at 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 at www.melasciences.com.

I would now turn the call over to Joseph Gulfo, President and CEO of MELA Sciences. Please go ahead.

Thank you. Good afternoon and thank you for joining us for MELA Sciences' first quarter of 2013 conference call. We have now completed our first year on the market having begun our controlled, deliberate, and staged product launch in March of 2012. I'm pleased to report that we have established a significant and steadily growing base of customers throughout the US and Germany and have begun shifting our focus to system usage, which is key to sustainable business success.

We continue to hear from MelaFind dermatologists about the positive clinical experiences and benefits that they are having. As many of you know, MelaFind 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 am going to give a brief overview of our first-quarter accomplishments and 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.

Cutting to the chase, the fourth quarter was our best to date with recognized revenues of $144,000 and cumulative deferred revenues of approximately $392,000. Most importantly, usage revenue as a percentage of recognized revenue was 36.2%, up from 24.6% in the fourth quarter.

We ended the quarter with 138 signed user agreements, 126 of which were installed and 12 pending installation. We had over 140 customers that are either evaluating the user agreement or that we consider highly interested and were actively considering acquiring MelaFind.

When we launched MelaFind, the first of a kind gamechanger product for melanoma detection, we estimated that we would sign up dermatologists for 275 system placements before achieving significant national footprints. Although we fell short of that estimate, we achieved a significant national US footprint after just 12 months on the market. In fact, we have placed MelaFind systems within 75 miles of over 63% of the US population. This was a critical goal of Phase 1 that now enables us to commence Phase 2 of our launch. That is, significant PR and efficient advertising efforts to drive patient awareness to facilitate and greatly augment system usage.

We learned quite a bit in the first 12 months that gives us great confidence for the next 12 months. One of the things we learned is that the manner and quality of system placements are critical success factors. We moved to a strategy of selecting practices that will establish a total office commitment from the start. And more intensive practice initiation and training is taking hold as we continue to see more substantial utilization from the outset, which grows with time.

We will continue this practice moving forward.

Importantly, we successfully raised capital in the first quarter, strengthening our balance sheet so that we can focus on building our business, strategic marketing efforts, and increasing utilization in the field.

Eight significant achievements in the first quarter include one, the very successful American Academy of Dermatology meeting during which a poster on new MelaFind data was presented. MelaFind data were highlighted at 10 podium presentations, as well. We experienced tremendous traffic at our exhibit with over 650 dermatologists engaging us to learn more about MelaFind, 350 of whom received in depth demonstrations lasting 10 to 15 minutes on average.

We also hosted 10 meetings in our exhibit between media and key opinion-leading dermatologists, which resulted in placement commitments from three of the top five professional trade magazines, three of the top 10 women's interests health magazines, and one of the top three health websites.

Two, we had a very successful meeting in Frankenville, Germany with 76 in-depth demonstrations lasting 15 minutes, on average. We conducted a MelaFind workshop during this major meeting that featured two MelaFind presentations from key opinion leaders. 110 dermatologists attended the workshop.

Three, also in the quarter, we signed an extended supply agreement with Askion for MelaFind handheld units to be placed in 2013.

Four, usage across all customers is similar to that observed in the fourth quarter. However, we will have observed increased rates organically by several practices, and in general, usage from the day of placement is higher. One practice in particular has used MelaFind an average of twice per day every weekday over the four months since its installation. This dermatologist told us that she is convinced it constitutes the best medicine that she can offer patients, and we are working with her to optimize the integration of MelaFind throughout her practice at her request.

Many other customers have made similar requests, and we are beginning to work with them. Our dermatologist customers continue to tell us that their patients are increasingly presenting to their practices asking about MelaFind and identifying dermatologists who have MelaFind from the MelaFinder, our dermatologist locator tool that is found on melafind.com.

Five, we established dermatologist customers in Belgium, Austria and Switzerland.

Six, we secured national broadcast appearances and discussions of MelaFind on three of the top five television networks, which included CBS This Morning, The View, and Fox & Friends, as well as aired regional media broadcasts in 26 regional markets, 11 of which were in the top 20 dermatology markets. These broadcasts showcase new dermatologists adopting MelaFind into their practices.

Seven, we have several clinical success stories. This time I will highlight several from Germany. Two melanomas were found during the MelaFind lecture to 15 patients at a new MelaFind dermatologist office. 12 of the patients agreed to have MelaFind used during their examinations. Another case, a patient who was reluctant to have a lesion on her lower abdomen biopsied, the MelaFind results helped the dermatologist convince the patient of the necessity for biopsy and the lesion was, in fact, a melanoma.

Eight, the rollout of two additional pricing models to increase patient access and simplicity for the practices, which I will now explain in greater detail.

As you know, we launched with and still offer the per-session model for which we charge $50 for up to five lesions per patient session in full analysis mode. The $50 also includes five spectral mode evaluations and 10 clinical camera uses. We are now offering in addition to the per session model a per lesion model which was developed at the request of many customers and after we observed that the average number of lesions per patient analyzed in the per session model was approximately two lesions.

We have already seen a meaningful increase in the number of patients upon whom MelaFind is used in practices that have switched to the per lesion model. We charge $12.50 per lesion, and we assume that on average two lesions per patients will be examined. This alleviates the dermatologist's concern about charging a patient upward of $100 to only analyze one or two lesions. Many customers did not want to switch from the per session model. These are practices that have determined the price point of an entire MelaFind session that their patient base is comfortable paying.

All customers have the flexibility to modify their model choice in the future if they want.

The third model is a fixed monthly fee for unlimited use per month, which we are discussing with several health systems and large integrated practices.

Also in the first quarter, we have begun to switch customers away from a physical medium or card to an electronic medium. This is much simpler for the customers who no longer need a separate card for each patient and much more economical for us because it eliminates our disposable costs. Practices are built in arrears based on usage. They submit payment at the end of each month in order to receive an electronic code that enables the system to operate for the next month. We feel that being flexible and responsive to the dermatologists and patients is always a good practice, and we believe that the flexibility offered by the new pricing models will help dermatologists use MelaFind optimally and facilitate greater practice-wide usage as we now focus on this as our main goal in year two.

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

Good afternoon and thank you, Joseph. I want to start by setting the context of our first-quarter 2013 results compared with our first-quarter 2012 results.

Remember, the first quarter of 2012 was our initial quarter with MelaFind on the market. We had just started commercial operations by placing a handful of units in market last year. Fully two-thirds of last year's first-quarter results were recorded as if we were still a research and development company. This is the last full quarter in which we need to make adjustments for direct comparison purposes. Beginning in March of 2012, we realigned expenses to properly reflect commercial operations and have continued with this approach.

Total invoicing to our customers in the three months ending March 31, 2013, was approximately $244,000, resulting in about $144,000 of revenue being recognized, an increase of approximately $89,000 in deferred revenue reported as of March 31. Total deferred revenue at March 31, 2013, rose to approximately $392,000. This is compared to $28,000 in invoicing, $11,000 of recognized revenue, and $17,000 of deferred revenue for the same period in 2012.

Just a reminder about recognized and deferred revenue. As we have discussed many times in the past, we established contracts with multiple elements of delivery and must defer a significant portion of our placement fee, despite the fact that we generally do receive the entire cash payment at installation. As a result, deferred revenues reflect the time recognition of the installation fee revenue over the term of the user agreement, which is usually two years.

Correspondingly, the cost of revenue was $[1.080 million] compared to $130,000 in the same period in 2012. The current quarter represents a full three months of commercial activity, including three months of depreciation for nearly all 126 MelaFind systems installed in the field.

Research and development expenses for the first quarter were $1.3 million versus $2.4 million reported in the same period last year. The decrease in research and development expenses is primarily attributable of the realignment of certain expenses to properly reflect commercial operations and reduce research and development expenses at our contract manufacturer, Askion, in Germany.

Selling, general and administrative expenses were $4.3 million for the first-quarter 2013 versus $3.2 million reported in the same period last year. Virtually the entire $1 million increase is a result of increased marketing and sales expenses in both the US and Germany. For example, Company-wide we had 26 people in marketing and sales during the first quarter of 2013 and seven people in the same function in the same period 2012, the overwhelming majority of whom were field-based sales and practice support people.

Our net loss for the first quarter of 2013 was approximately $6.5 million or a loss of $0.17 per share versus the reported net loss in the first quarter 2012 of $5.8 million or a loss of $0.19 per share.

As of the end of the first quarter of 2013, the Company's cash and cash equivalents were $21.6 million.

In the first quarter, we were successful in raising capital to strengthen our balance sheet. Even so, we continue to be focused on expense control. We constantly look to balance the need to invest in building our market opportunity with a strong focus on controlling cash expenditures.

I will now turn the call back to Joseph for concluding remarks, and then we will open it up for questioning.

Thanks, Richard. We're pleased to report the many achievements we have reached in the first quarter of 2013. Our goal in the first 12 months of the launch was to turn a company into a business, and we're now focused on turning a business into a successful business.

The principal driver of this will be system usage.

Tomorrow, May 1, we are sponsoring a Melanoma Awareness Day, one week prior to the American Academy of Dermatology's Melanoma Monday disease awareness campaign. 60 of our practices have signed up to participate in our event, during which we will provide free MelaFind use to them. The goal is to encourage all patients to go into their dermatologist's office for a yearly skin exam assisted with MelaFind. The practices that have signed up for the event have made their patients aware of this through various marketing campaigns, and we have created a special webpage listing the practices at which the MelaFind program is available.

May 1 also signifies the kick off to the 2013 sun season where skin care, beauty, and wellness campaigns are heavily concentrated on skin cancer awareness. We have been very focused on getting MelaFind a high level of exposures during this prominent time in the media in order to drive patients into their dermatologist's office, asking about MelaFind.

We recently became aware of a patient who visited a very well-known MelaFind dermatologist. She was in the office for a cosmetic procedure. The dermatologist decided to use MelaFind on a questionable lesion and after reviewing the MelaFind output decided to perform a biopsy. The results came back that the lesion was a melanoma in situ, a very early-stage melanoma, and the dermatologist was able to remove the melanoma in its entirety leaving the patient cancer free. The patient was relieved to find out not only that the dermatologist caught her melanoma when it was in its most curable stage, but that she would only be subject to a small little scar instead of a large scar that could be the result of a melanoma getting any deeper.

This patient was willing to tell her MelaFind story on camera, and this will air on major television network the first week of May.

You may have seen already and you will continue to see throughout the next few months, some of the many articles and editorials about MelaFind in magazines, including Self, Prevention, Redbook, and Allure. Collectively, MelaFind will appear in 14 of the top 20 women's interest/beauty/health magazines, resulting in approximately 21.6 million impressions over the next couple of months. There will be other nationally-targeted efforts to drive patients into dermatologist offices via radio news releases and consumer-related articles appearing in suburban and community newspapers, as well as daily papers in the top 100 markets. These efforts will start appearing in May and proceed through June and July, thus continuing the MelaFind message throughout the sun season.

Additionally, we have executed in-market efforts in key regions to generate awareness of MelaFind from a broadcast, print, and social media perspective.

In May, we will be launching a targeted patient campaign on WebMD, the number one source for consumers and patients seeking out information when forming opinions on wellness matters and making decisions about what actions they will take to improve their everyday health. Our campaign is designed to be response-driven across targeted areas of our website that will expose MelaFind to engage patients and guarantee that they connect with www.melafind.com/patient in just one click. We expect 2.6 million impressions for the duration of the three-month program.

Also in May, we will be exhibiting at the German Society of Dermatologist meeting in Dresden, Germany. We will also be conducting a MelaFind workshop at that DDG meeting.

We believe that the external patient awareness efforts, combined with the in-office education programs and practice integration protocols that are currently being implemented, will significantly change the complexion of our business in the second and third quarters.

The critical objectives for the next six months are to call patients to action to seek out more information about melanoma and skin health and ask their dermatologists about MelaFind. We have great confidence in our plan and believe that successes will be demonstrably seen at many practices. Word of mouth, peer-to-peer education, and sharing of best practices will also continue to accelerate the pace of usage and drive our business throughout the year and beyond.

With respect to what you can expect over the next 12 months, we envision ending 2013 placing additional systems at practices that will have more robust usage from the date of install in the US, Germany and neighboring countries. We expect revenues increasing in a choppy but generally upward-sloping fashion with usage revenue increasing as a percentage of recognized revenue and actually exceeding placement revenue.

As we have discussed, the success of our business resides in system usage, which we are now focusing on intently. I would like to illustrate what usage means for our business.

On a per system basis, including all-in costs for manufacturing, shipping, and training, usage on just six lesions, that is only three patients each with two lesions, on average per weekday at $12.50 per lesion is more than enough to achieve breakeven on an all-in system cost basis over a two-year period. Six patients on average per weekday on the per-lesion model, or 12 lesions, result in breakeven within 12 months of a placement. And 18 lesions or nine patients on average per weekday gets us to breakeven in eight months.

We have several customers who are using MelaFind upwards of some of those levels on their active MelaFind days currently. So we believe that this level of average use per weekday is within reach as we now roll out tactics designed to augment usage.

Said another way, under the per lesion model, if MelaFind were used on two patients per weekday across just 200 systems, we would see 5 times the monthly revenue run rate that we observed in the first quarter. This would represent an impressively positive trend.

It also demonstrates the leverage and promise of the per-use model. Interestingly, one of our customers has been using MelaFind at this level per weekday since the day she obtained it. She told us that she considers MelaFind a standard of care and wants this instituted more widely.

Another goal by the end of 2013 is to significantly reduce our manufacturing costs, further improving margin. We have several functioning prototypes, and significant progress is being made.

In conclusion, we are pleased with the manner in which our plans are becoming reality. We remain committed to our goals of changing this terrible disease and building a robust and successful business. We are confident in our people and the power of our strategic plan, and we continue to execute with passion and purpose.

Lastly, as many have you may be aware, Monday of next week is Melanoma Monday. We will be at NASDAQ with two leading dermatologists who are MelaFind customers to ring the opening bell. We will follow that with an investor and analyst briefing from 10.00 AM to 11.00 AM at which the clinicians will talk about their experience incorporating MelaFind into their practices and answer questions from the investment community. If you are interested in attending, please email lynn.pieper@westwicke.com. Her full contact information can be also found in our press release.

We will now open the call for questions.

(Operator Instructions). Josh Jennings, Cowen and Company.

The first question is just in terms of -- and I missed the beginning part of the call, so excuse me, Joe, if you went over this, but in terms of the timing of installs from the time of the signed agreement, can you just walk us through the steps in terms of the average time it takes from a signed agreement to the installation?

It's taking longer lately because we need to schedule virtually the entire practice. Initially we would have that done in two weeks. Now it is maybe taking four weeks, maybe a little bit more because we want that total practice commitment, and we want the whole staff there.

We also then install the way we initiate the clinical -- sorry the commercial -- the customer is that we then are with them for at least two days, and we encourage them to schedule patients. But we need more time for their marketing programs to their patients to start scheduling patients to come in for our -- the initiation process. So they typically line up a good number of patients while we are there with them, and that is that full entrenchment process.

And then they are commercial and being billed the day we leave. So we are -- so Josh, in moving away from what we were doing as we needed to build the medical evidence that the product was doing everything we say it does in the commercial setting when we would give the 25 free cards, in moving away from that and doing an intensive introduction over a couple of day period, the lead time from signing a contract to activating the customer has grown longer. However, with much better results. They are using it at a higher level from day one, and we are generating revenues from it from day three, basically.

Great. And in terms of the 138 MelaFind systems that you have undersigned user agreements currently, what are the expectations for having them installed?

The 12 -- I know -- they were 12 outstandings?

At quarter end, yes.

At quarter end. Josh, I could put you on mute and find out if they've all been installed yet, but they usually get installed quickly.

So I missed that before. So after the end of March 31, installed 126 before?

We had 126 installed on March 31, 12 pending installation. And, again, I don't have the numbers handy, but I'd be surprised if most all of them haven't been installed yet.

I am sorry, so the 126 MelaFind systems, I probably missed the introductory of the call --

Yes. And --

That would be in the 138 signed user agreements.

Yes, let me just check my numbers, please hold on. Let's get precise here. 138 -- 126 were in the field; 12 pending installation as of March 31, okay?

Great. And then if you look at -- so your backlog right now is around 140 dermatology practices that you have -- that you are in close contact with in terms of potentially signing an agreement.

Yes, these are practices that we have regular contact with -- the next meeting we show up. They come to the booth again. Typically that's when we see them sign after they've been talking to us for a while. But yes, these are practices that many have agreements, that they've gotten that serious that they are talking to their partners about it. Others are just indicating to us that they want one, and they are thinking about it more in timing and discussion.

And can you just comment on that backlog of potential customers, where that's been and where you are now, especially since March in AAD and some other meetings you've attended this year?

Well, it is growing. More and more people are hearing about MelaFind, coming over and listening to it and requesting information and then requesting visits and then engaging with the sales reps and activity. So that list is growing. And most of the signed contracts come from people on that list. Every now and then there is a sporadic person who comes along, got to have it.

Now the other reason that we are being more selective, okay? So we're talking to doctors about telling them we want your whole practice committed to this. We want to start working with your practice marketing people in advance of a full training and things like that. So no longer can a lone wolf, a partner of four, just grab a MelaFind. It takes -- we've then got to go in and meet the other partner, other partners, rather, and what not. But we really believe that pays off, really being more selective. We're not saying no. We're saying we need to engage the whole practice first. So that's also part of it.

So you commented that under the provision models, if your centers were treating two patients a day with two lesions each being evaluated by the MelaFind, that you would see a 5x incremental uptick in the revenue run rate, seen it in Q1. Do you think you can get there by the end of this year? When can we get there in terms of that level of utilization?

Well, we certainly are going to try. I mean that's what we are in the middle of now. That's why I'm -- we're so happy to have that national footprint, which is the main qualitative goal of the year so that we can now take advantage of a sun season. We wanted to be able to go national with all of this PR and these other things that I just went through in great detail on, so that we can really, really, as I say, change the complexion of the business and their habits of usage.

So yes, moving on average every one to two uses per weekday, right? So for the whole month. That is certainly our goal, and we are hitting it extremely hard right now. We can hit it hard right now because, again, we have that national footprint.

Greg Chodaczek, First Analysis.

Just a couple of quickies. Could you explain the difference from -- these are my terms, not your terms -- but a power user derm from a derm that is barely using it? What are they doing differently? Is it the clients? Is it the location? I am just trying to figure out why there is such a difference.

Okay. I know the practice who bought one, never used it. Why? The price was so low and he is so IN, he just has to have the latest technology. Right? So at some point, I'm going to ask him for his back because I want to put it with someone who is really going to use it a lot. Right? So that is the one extreme.

The other extreme, I don't want to be giving out too many numbers over here, but we have a few practices recently using it a tremendous amount. And I want to watch those numbers continue. We've not seen that before. We've not seen people using it a lot and then tapering off, but before I start talking about a couple of -- a few power users, I want to be careful.

So the most experienced user, a guy from Germany, he is using it -- I don't want to quote numbers, but --

No, you don't have to quote numbers. I'm just try to figure out how is that derm selling it much better than the other derm.

Yes, we have definite evidence -- and [Claudia], you can speak up during this -- that when practices use most -- no one is using all the tools we give them -- when they use the tools we give them, they get significant usage off the bat. So I know of a practice that mails out the tear sheets I have shown everyone that I meet with to all several thousand patients. They have a MelaFind introduction when you are on hold, the hold music. They offer full body exams with MelaFind to the patients when they check in. And no surprise, they are using MelaFind a lot.

I think I told the story last time, but it bears repeating. And again, I think I want to just give a general point here. We are now focused -- now that we have that national footprint -- we are now focused on making all of these tactics happen and also having the patients primed for it and even asking for it. So we haven't done things to really drive the usage, and now we're focusing on it. So that's why I'm quite excited.

But I remember a practice that I went down to myself. There was a big media push. I went down, and the exam room was pretty sterile, and I put up one of our posters. And they did -- they did the TV segment and what not. And then I remember going back a couple months later because they did a lot of patients. They got their technology results back. We went back down, and they caught a number of melanomas, and we were going through all that. And then I started talking about okay, now they were convinced, and they wanted to implement them widely in their practice. And I told them some of these techniques. And one of the doctors who -- she made the point that she runs two exam rooms at once. And the exam room where the MelaFind poster is, the patients ask for MelaFind. In the exam room where the MelaFind poster isn't, nobody asked for MelaFind.

So sometimes it's that simple, Greg. Sometimes it's that simple.

Other doctors, we have others, we have a doctor in particular who came up to me at the AD meeting, she is convinced she has used it enough that this is in her words, standard of care. I want to use this. I need help with my staff.

So we are now -- as part of this push, we are going to help go and help with the staff. So sometimes we are hearing that there is legit -- we expected this -- that is all the practice integration stuff.

Other times it's, come on, you have got to meet us at least halfway, put up the posters. So we are going to be addressing all of this now very, very aggressively frequently at the invitation of the doctors, and even when we are not invited, we are going to be in there and really making sure these tactics are employed. So the next -- certainly this quarter and next quarter, I think we're going to see a very, very significant change in the complexion. And I'll be able to answer your question even more about which tactics are working best, actually.

And so we should be able to see -- when did you start doing that, in beginning of this quarter, or is it something that is implementing over this quarter so we'll see a little bit of that in next quarter's numbers but more of it in Q3? Not that you are giving guidance, I'm just asking the question.

Yes, so that is why I use the word organically in my script that before doing things, we actually started seeing some doctors. And I think it's the better selection, and I think it is a commitment from minute one. So we're certainly doing some, but this intense effort I just talked to you about, we are timing them for a kickoff on Melanoma Monday.

Okay.

So --

That's fair.

Yes.

And then, do you truly need a doctor to have an aha moment to push this on their patients? It's a tool that helps them. I know everyone wants to make money, but do they truly need something to help them diagnose a patient where they say, you know, I need to use this --?

I think by and large we do. I know of a practice, the guy is using it, and he is not charging his patients yet. He wants to amass his own clinical experience with it before he starts charging. I think he's close. So that's an extreme where someone is basically doing his own clinical trial.

But yes, Greg, I really believe -- you take a Hippocratic oath. You have a M&D. You've got to be convinced you are helping your patients. And that was what this whole real first year was about, getting the proof, if you will, in the commercial setting that MelaFind is performing the way the clinical study said it was. So I believe it is going to be less and less of that Missouri-type attitude. You know, show myself. But it's certainly there. And I think it should be. I absolutely think it should be. So I don't -- I encourage that.

And are the power users, the $50 users, are they the onesie, twosies?

It is actually a mix.

Okay.

Stay tuned. More on that. Hold on. I had a conversation -- do you think it's a mix?

Per guest, yes.

Yes, right now it's a mix.

Okay. And if I look at the placements or the installs, I want to make sure I get the right term here, the installs from what you did in Q1 2013 compared to Q4 2012, based on my numbers, it went down a little bit. Is that strictly because you are being more choosy and the length in time for installation has changed based on what you have found?

Yes. Look, once we got national, we were not slaves to a number. So we wanted to always do what's right for the business, and what's right for the business is that more selectivity and that is exactly right. The placements went down, but the quality of the placements was vastly different.

And I'm not looking for numbers going forward, but there is, based on having 26 sales reps, there's only a certain amount you can do every quarter based on being selective.

No, no, we don't have 26 reps, by the way.

26 people in sales.

Yes, sales and marketing.

Yes, right, sales and marketing and technical support, Greg. It's not just sales reps.

So we have eight territory managers, six practice support managers, so that is 14 in the US and three technical basically installers in the US. So that is 17 people, and then in Germany I would say five.

Right. And then there are a couple of people here in the office in the marketing group, as well. So it's not just field-based --

Yes, and customer service. Right.

Yes, not all of them are in the field.

What I expect is that as this campaign shows success, the people we already have on the line will be the next, being selective, will be the next customers. So I think success is going to beget success.

Scott Redmond, Redmond Asset.

I was wondering as people go through the education process, how do they know that they are getting better at diagnosing melanomas?

With MelaFind?

No, just a first-year medical student is probably going to do worse than a dermatology resident. Is there a way to track their skill in that aspect of medicine as they improve?

The only way to do that is to do a study, right? So I think they have an aha moment when they maybe do a biopsy and they are surprised it was a melanoma and they are shocked. And like wow, I better biopsy more. I think you hear that. You hear that from doctors out there.

One measure that doctors do talk about is their biopsy ratio, so the ratio of biopsies they perform to melanomas they find. That's really an efficiency argument, but speaks nothing to whether or not they are missing melanomas.

So it's not easy to measure what they are doing. So often when they have a melanoma that they find and they realize they examined that lesion a year ago, they get worried that they realize they've got to lower their threshold. So it's more empirical. And an average resident sees only 12 early-stage melanomas through his entire residency. So they don't get much feedback.

And I am currently showing no further questions at this time. I will now turn the call back over to management for further remarks.

Okay. Thank you, operator. So having achieved in the first year many things, many learnings, we know what's the optimal way to install a system. We responded to the customers, and most important, now having a significant national platform, we can do what we always knew we needed to do to really drive the business. And so we are very, very excited to start this effort. It is extremely well-timed with the Melanoma Monday activities, and we encourage you to stay close and watch, and I expect big things to happen.

So thank you very much.

Thank you, ladies and gentlemen. That does conclude today's conference. You may all disconnect, and have a wonderful day.

Thank you.