STAAR Surgical Co (STAA) 2007 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you so much for standing by, and welcome to the STAAR Surgical Q4 '07 results conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded today on Thursday the 6th of March, 2008.

We'll now turn the conference over to Mr. Doug Sherk of the EVC Group. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. This is Doug Sherk, with the EVC Group. Thank you for joining us this afternoon for the STAAR Surgical conference call to review the financial results for fourth quarter and year end of 2007 which ended on December 28th. The news release announcing the fourth quarter and year end results crossed the wire this afternoon shortly after the market closed. If you haven't received a copy of the release and would like one, please call our office at 415-896-6820 and we'll get one to you immediately. Additionally we've arranged for a tape replay of this call which may be accessed by phone. The replay will become available approximately one hour after the calls conclusion and remain available for seven days. The dial-in number to access the replay is 800-405-2236 or for international callers, 303-590-3000. Both numbers will require a passcode of 11100168 followed by the pound sign. That's again is 11110168 followed by the pound sign. The call is being broadcast live and an archived replay will also be available to access the webcast go to STAAR's website at www.staar.com.

Before we get started, during the course of this conference call the Company will make projections with forward-looking statements regarding future events including statements about sales & Company's beliefs about its revenues and net earnings for 2007. We wish to caution you that all statements that are-- excuse me, and that's also for 2008, wish to caution you that statements that are not statements of historical facts that are forward-looking statements include any projections of earnings, revenues, sales cash or other financial statements, any statements of the plans, strategies and objectives of Management for future operations, any statements regarding it's expectations that is in excess of the ICL or other products in the U.S. or international markets, any statements concerning proposed new products and government approval of new products, services or developments, statements of expectations regarding pending transactions, any statements regarding future economic conditions of performance, statements of beliefs, and any statements of assumptions underlying any of the foregoing, these statements are based on expectations and assumptions as of the date of this conference call and are subject to numerous tasks and uncertainties and risk which could cause actual results to differ materially from those described in the forward-looking statements.

The risks and uncertainties include are limited capital resources and limited access to financing, our ability to overcome negative publicity resulting from warning letters and other correspondence from the FDA Office of compliance, the willingness of surgeons and patients to adopt a new product or procedure and our ability to launch and market the ICL in the U.S. while overcoming the foregoing challenges. Our ability to capitalize on the opportunity presented by the U.S. ICL approval depends on our overall financial condition, which can be adversely affected by general economic conditions, and other factors beyond our control including those detailed from time-to-time in our reports filed with the Securities and Exchange Commission. STAAR assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so. Now, I'd like to turn the call over to Barry Caldwell, President and Chief Executive Officer, of STAAR Surgical.

Thanks, Doug and good afternoon, everyone. Thank you for joining us today to review our fourth quarter and full year 2007 results. With me today is Deborah Andrews, our Chief Financial Officer. After my opening remarks, Deborah will cover the financial highlights of the fourth quarter and fiscal year, and then we'll take your questions. It's been three months since we implemented the leadership transition here at STAAR Surgical, and I'd like to focus my remarks today on the progress we've made over that timeframe. I would like to first thank Dave Bailey for his committment to a smooth transition. We've worked well together, and as a team, we're determined to continue our international growth, right the ship in U.S, reduce our cash burn and avoid potential future dilution to our shareholders. We've made progress on all fronts during the past month and I'd like to share with you some examples of that progress.

First, overall cash burn is the top priority for the Company. During 2007, several steps were taken that produced tangible results. In December, we began a process to very closely rationalize and evaluate our spending levels. Our evaluation have identified opportunities that we expect to yield approximately $3 million in cost savings during 2008. These initiatives includes streamlining our U.S. organization by reducing levels of spending in all areas so that we can right size our business, renegotiating or eliminating certain obligations and eliminating all executive bonus opportunities until we generate consistent positive trends in the business. These initiatives began during the first quarter. We're also are beginning a process which will generate manufacturing efficiencies, by rationalizing product lines. In addition, we've established a task force comprised of certain Senior Management Team members to identify and implement an additional $2 million to $3 million in global cost reduction initiatives.

Implementing these additional costs should be completed by the beginning of second quarter. In total, this represents a reduction of $5 million to $6 million in spending from the 2007 levels. We've already identified 90% of these reductions. Combined with the actions taken last year by Dave and the team, these additional savings and a modest increase in our revenue trends, we believe we can significantly reduce our cash burn and position the Company for profitability.

The disruption generated from the distribution issues surrounding the change in Management of our independent sales team in the U.S. in my view certainly negatively impacted our sales throughout the year. The good news is that we seem to be making progress in this distribution channel and others. During the first 48 shipping days for 2008, our U.S. refractive sales have increased by double-digit percentage. Let me caution this only represents 75% of the shipping days for first quarter and there's no guarantee this positive performance will continue. Our sales team needs to stay focused on a new strategy and work hard to continue this positive trend.

Our international sales grew 17% during 2007, and a key to building shareholder value will be to continue that strong growth from our international operations. With our transition in December, Dave Bailey is now focused on doing just that. The completion of the acquisition of all of the other shareholders interest in our Japanese joint venture, Canon STAAR, was achieved at years end. At its current sales level, we expect to-- we expect that STAAR Japan will add in excess of $12 million of revenue to STAAR Surgical in 2008 as well as provide a boost to our gross margin . In addition the acquisition gives STAAR exclusive control over the rights to use our patents and other proprietary technology in Japan, China and worldwide while strengthening our intelectual property position in areas such as the Preloaded Injector systems. As Dave Bailey mentioned in the third quarter call, the Japanese market acts as the spirit of influence for the Asian market including China. Because of this Dave has made growing STAAR's business in Japanese market his number one objective for the year. We've made good progress so far, but we need to have a continued focus on this for the remainder of the year.

We received an additional boost when the State Food and Drug Administration of China granted us approval to market the STAAR Visian Toric lens as well as the STAAR Visian hyperopic lens, which is an implantable Collamer lens to correct hyperopia or farsightedness. I won't dwell on this important milestone which we detailed in a news release last week, but suffice to say we believe these approvals open new opportunities for us in China which has already experienced excellent growth with the ICL product during its first year.

Now let's turn to the U.S. Domestically the U.S. refractive business organization has been realigned. In early August we outlined our strategy to create a separate direct refractive sales team in the U.S. for our Visian ICL comprised of application specialists, practice development managers, both led by regionally based refractive sales managers. Our strategy has evolved to profiling and targeting key refractive surgeons who are committed to the Visian ICL technology and then surround them with support. Last week, I happened to be traveling on the East Coast and I met with four refractive surgeons. Each of whom wants to do more Visian ICL procedures. So our goal, our objective, our regional teams objective will be to work with these surgeons, as well as other motivated surgeons to build their Visian practice.

Recently the Visian ICL has received some excellent media coverage including the story by the ABC news team in San Francisco on a Visian procedure performed by Dr. Steven Chang on a professional surfer. And on this past Tuesday, Dr. Brian Boxer Wachler performed a live Visian procedure during the Today Show on an NBC sports commentator. If you're interested in seeing the Today Show coverage, you can go to our press release which has the website information for viewing.

Some of you may have interest in an update on the Toric ICL approval process for the U.S. The independent third party audit firm approved by the FDA has completed their on-site audit of all seven clinical sites. They are now preparing their report to the FDA and we have weighed any comments that might arise from that audit. The FDA has further authorized the audit firm to begin the next step in the process which is to audit the data and quality system here at STAAR in Monrovia. That audit is scheduled to begin in mid-March and should last about four weeks.

During 2007, cataract sales declined steadily. Despite the issues associated with the recently expired regional manufacturers representative contracts, a majority of the targeted independent territory representatives have agreed to stay with STAAR. This is a significant step in maintaining that continued quality service for STAAR's current U.S. cataract customer base. We've now moved to a direct management structure with this independent sales team. We believe it will provide a more focused direction for the STAAR product offerings.

During 2008, we're planning to introduce new delivery systems for our Collamer IOL products, make submissions for [NC IOL] status on three IOL products and seek approval of the Preloaded system in the U.S. One of our new delivery systems for the Collamer IOL is in pre-market release now. It is the nano-point injector which delivers the Collamer IOL through a 2.2 millimeter incision. The feedback from surgeons has been excellent and this product will have a full release in the U.S. during April.

In summary, there are encouraging signs of progress, resulting from hard work by our entire team. We've listened and understood from our shareholders and agree that we want to avoid any further dilution of our shareholders. We still got a lot to do, but we can maintain the current positive momentum and execute successfully the cash reduction activities we believe we can begin to build shareholder value. At this point in the call I'd like to turn it over to Deborah Andrews, our Chief Financial Officer.

Thanks, Barry. Good afternoon, everybody. Our release this afternoon provides significant detail in the quarters financial performance as well as the full year, so my comments will be limited to specific highlights of the fourth quarter, as well as a brief discussion on the closing of the Canon STAAR acquisition. Sales for the fourth quarter were 3% higher than Q4 2006. Once again, our international operations generated strong sales growth. International sales were up nearly 15% as compared to the fourth quarter of 2006.

Total refractive sales were $4.7 million an increase of 26% compared to $3.8 million reported for the same period of 2006. Refractive growth was driven by strong international sales which grew 37% to $3.7 million. U.S. refractive sales were $1.1 million, a decrease of 3% compared to the $1.1 million reported for the same period of 2006, and were essentially flat compared to the third quarter of 2007. During the fourth quarter of 2007, refractive sales represented 30% of total sales compared 24% last year. Overall fourth quarter cataract product sales were $11 million as compared to $11.5 million last year. In the U.S. market cataract sales were $3.6 million, a 19% decrease compared with a $4.5 million in the fourth quarter of last year. In international markets, cataract sales grew 5.7% to $7.4 million compared with $7 million last year due to the favorable effect of foreign exchange on sales.

Gross profit margin continues to improve. For the fourth quarter we achieved 50.1% gross profit margin as compared to 42.1% for the fourth quarter of 2006, and 49.7% for the third quarter of 2007. The increase year-over-year is primarily due to a reduction in inventory reserve and higher average selling prices of IOL 's and ICL's partially offset by the decrease-- the effect of decreased IOL volume and increased other costs of sales, and other cost of sales. SG&A increased 4% to $11.6 million due to increased G&A costs resulting from increased legal fees and noncash costs associated with executive relocation, partially offset by decreased R&D costs. Marketing and selling expenses were flat year-over-year during the fourth quarter. We ended the quarter with $11 million in cash, down from $14 million at the end of the third quarter. During the fourth quarter, we saw increased cash usage over Q3 levels primarily due to the effect on cash receipts of a continued decline in U.S. cataract sales. We also used $972,000 in cash to pay a note payable to the former minority shareholders of our Australian subsidiary in connection with our acquisition of their 20% interest.

As Barry mentioned we announced the major milestone in the Company in the form of our acquisition of Canon's 50% interest in the Canon STAAR joint venture. In connection with the transaction which closed on December 29th, 2007, we paid a total of $4 million in cash and issued 1.7 million shares of Series A convertible preferred stock to Canon and Canon marketing for their representative interest in the joint venture. This transaction was financed through a $5 million note with Broadwood Partners LP. Beginning in 2008 this transaction should increase our international revenue as well as our overall gross profit margin, excluding the effects of purchase accounting. Due to the investments in-- due to investments, the Japanese company will need to make an establishing it's direct distribution infrastructure, we expect the operations to break even in the first year.

Based on the extensive U.S. rationalization efforts that took place during the fourth quarter in early 2008 as Barry discussed, we expect a significant reduction in cash burn in the first half of 2008 versus the first half of 2007, and continued improvement during the second half of 2008. We have heard the concerns expressed by our investors and believe we have a plan that will reverse the negative trends in the U.S. business and will conserve cash in order to prevent additional dilution to investors. With that I'd like to open as our operator, to open up --

Certainly. Ladies and gentlemen, at this time we will begin our question-and-answer session. (OPERATOR INSTRUCTIONS). Our first question is coming from Larry Haimovitch with HMTC. Please go ahead.

Good afternoon, Barry, hi, Deborah.

Hi, Larry.

Several questions. Let me start with maybe a little housekeeping. Deborah, when you calculate fully diluted common shares, and include the Canon STAAR Series A, how many fully diluted common shares should we be thinking about?

Well, it'd be about 32 million.

Roughly 32?

Yes.

Okay. And I would assume that the Canon shares do get included in the fully diluted calculation?

Yes.

Okay, second though, you and Barry talk quite a bit about cash burn and yes we're all concerned about cash burn and we're delighted that you're listening to us. What is your sense, and I imagine there are several moving parts, either you or Barry can take a shot at this, what is your sense about what is the revenue break even point for cash, or P&L or both?

Well, I think we've said in the past, and I got to take out the Japanese joint venture --

Right.

$75 million, approximately.

$75 million. And although you didn't provide guidance, if you add 12 on to what you did, you're getting pretty close to that aren't you?

Yes.

Okay. Barry, you mentioned good news on the first quarter refractive sales.

Yes.

It's my understanding that STAAR does not consign refractive IOL's but rather recognizes revenue on shipment. There were a couple of periods before your time where we saw some big bulges in growth followed by slumps in growth because of inventory shifting. Are you confident that there's no inventory building going on and what you've seen so far is what we would-- what accountants would probably not refer to but I refer to as apples-to-apples?

Yes, you raised-- you raise a very good point, Larry, and we've spent quite a bit of time here going through this in terms of the value of bilk sales overall and clearly as a business, we prefer to see single purchases rather than bulks. So far, the first whatever it is, eight, nine-- nine and a half weeks of the quarter, we've seen insignificant bulk orders so far this quarter. Now there's certain customers that they only buy in bulk, like the military service. But so far through this quarter, we haven't seen any of that. And I might add that I think the growth that we've seen so far, though was only a short period of time, I think it is encouraging, in light of the fact that the number one share leader in laser-based refractive procedures is now projecting a 10% decline for the year, based on what they've seen earlier in the year and obviously the ICL has seen different trends than that. And secondly, in spite of what's going on in the U.S. economy.

Great. We've been waiting a long time for the Preloaded injector to come to the U.S. market. That's a product that you guys have desperately needed and frankly it's been disappointing that you haven't made the kind of progress I would have hoped. Sounds like you're moving there. Could you give us a little more color on where we are on the Preloaded injector, Barry?

Yes, first of all, I think the major stumbling block in the past came from the joint venture experience that we had in Japan, and getting that cleared up at the end of the year , the team did a great job on completing successfully that acquisition. We're now, we now got full access to that technology. As a matter of fact we have two members of the Monrovia R&D team in Japan all week this week going through and sharing core competency so that's very important. Secondly, we developed what we think is a pretty good regulatory strategy for getting this approved in the U.S, And while you're always dealing with the FDA and I don't want to make any projections on when the product may become a available, but I think we probably feel as confident if not more confident than we ever have in our regulatory strategy to get approval in the

Some time could you make some sort of wild guess about when we might see that product in the U.S, Barry?

No, but I'm encouraged by our strategy and when you're dealing with the FDA, it's just we've got to work under their guidelines.

Sure.

Follow their processes, so it's not fair to predict.

Is it a PMA, is it a 510K with clinicals, is it a PMA supplement, what-- just give us an idea of what the regulatory path is?

Yes, our current strategy is a 510k with a realtime supplement to follow.

Okay, great. And Deborah, one quick question for you and I'll jump back in the queue. I don't want to be too pushy here about the time. On the fourth quarter or the year, obviously the dollars been very weak versus the Euro. In particular you derive a lot of your foreign sales from Europe. How much did you you benefit on the P&L just with pure translation as opposed to again the apples-to-apples of pure unit growth?

The effective exchange in the fourth quarter was $754,000, and on the full year, it was $2.2 million.

So you benefited full year sales $2.2 million and roughly $750,00 in Q4?

Yes.

Okay, great. Thanks very much. I'll jump back in queue.

Thank you, Larry.

All right, thank you. Actually there are no further questions in queue at this point. (OPERATOR INSTRUCTIONS) Rick Dote with Columbia Management, please go ahead.

Hi, yes. Just a couple of questions. In the prepared remarks, you outlined that you expect Canon to be at least I think you said $12 million in revenue and contributed to margins, and then I think Deborah's comment later was expect to be breakeven for the first year. What kind of revenue-- what are the-- are you using $12 million as your revenue number to get to that breakeven status?

Yes.

Okay. And then in answering the first gentleman's question on breakeven revenues without Canon, you said $75 million. Does that incorporate the cost saves that were announced today?

No, no.

So theoretically it should be less than that obviously?

Yes.

Okay. What is the incremental, you've seen some I guess early on this year, on the cataract side of the business, a little bit of positive data so far or results. What is the feeling on the new products and the timing of the new products and is there any kind of feedback from those independent reps?

Yes, good question, Rick, and again let me reiterate, I'm just really pleased that the independent reps have hung in there with STAAR. I did last week visit with the entire East Coast of our independent reps and we've got some really good folks out there, and I think in the past, there's been a big communication gap between the home office and that field force and maybe some of that was because of the management structure the way it is. I think we've changed that now and I think we've made some positive steps in opening up some real good communication between our direct reps and the home office, so I think that's very helpful. I think when they went through a lot of emotions last year not knowing if STAAR was going to continue to work with them and their manager was going through issues, so I think having gotten through all of that and making some changes and getting some new products in their hand, like these new delivery systems which we showed to them last week, I think they're going to be very beneficial for us in making the changes in a positive fashion on the cataract side.

Any feedback from some of the recent media? Is it-- any-- it's probably too early to tell whether it's likely to pull any kind of new business through the doctors, but has there been any early feedback?

Yes, we've certainly gotten a lot of calls. That first news clip up in the Bay Area a couple of weeks ago, that was early February, I think first week of February, that generated quite a call, quite a few calls as did the Today Show, earlier this week. And we've got-- that came from both patients and from physicians doing ICL's, and of course, physicians would like to find their own ways to get some media attention to what they're doing and that's part of our new strategy with our practice development managers is to help them find new ways to get this type of media around what they're doing in their local communities.

Okay, and then lastly, the $1 million or so in outside of the operating losses related to buying in, forgive me for not knowing the details, what was it an Australian JV?

Oh, right. Right, correct.

Okay is there anything outside of operating burn that you're expecting this year? Is there anything on the horizon that--?

No.

Okay.

The biggest thing that we're going to have are costs associated with the valuation, fair valuation of the Japanese joint venture. But that still regardless, I still forecast our cash burn will be less in the first half of this year versus what it was last year, because last year we had the [dummy] lens investigation cost in the first half which were pretty significant. So, but nothing other than that really.

So when you say the value in the joint venture, that's using an outside professional firm and the fees associated with that? Is that what you're referring to?

Yes, yes. We've had to engage PWC to perform a fair valuation of all of the intangibles and that kind of thing.

Okay. So when are you scheduled to go on Oprah show, I guess that's the key thing here?

Well, we'll try to do our best to move that forward as quickly as we can, Rick.

Okay. All right that's all I have, thanks again.

Thank you, Rick.

All right, thank you. We have a follow-up from Larry Haimovitch. Please go ahead.

Deborah or Barry, could we drill down a little bit more on Japan, I want to make sure I understand. There's-- you've said there's going to be an extra $12 million in sales this year, but in '07 when you own 50% of the joint venture, didn't you take in consolidate half of the sales, so was the $12 million over and above what you took in in '07 or is it 100% of '08 sales?

It's 100% Larry, because prior to the acquisition, it was an unconsolidated affiliate so there was nothing recognized on the revenue line from (inaudible) STAAR.

All right, so if we look at the estimated, or guesstimated, 2008 STAAR Japan , it's a $12 million revenue business and you're saying given that you're developing your own infrastructure and stuff we should expect cost of goods and operating expenses to roughly come to $12 million, thus it's

Right.

And how does the, it's operating expenses look relative to the cost of goods, Deborah? Is it a relatively low cost of goods as we see in a lot of IOL's businesses and a fairly high SG&A, R&D?

Yes, I would say so, yes.

Okay. And then let's go beyond '08, Barry. Do you have any thoughts on what the we can do to grow that business in '09 and '10? Are there new products that can come in? Is it better Management, is it more reps, is it lower cost of goods, or what do you look at as initiatives beyond '08?

Well I think first and foremost and what's been exciting to us since the close of the acquisition is that we know we have obviously some core competencies here in Monrovia in terms of material and intraocular lens products. We also know in Japan with the acquisition that there's some core competencies that we've acquired there and that's why for example, there are meetings going on in Japan all week this week with Monrovia and Japan engineers to really find where the synergies are in those core competencies. We have some expectations and our expectations are that by combining the core competencies, we're going to come out better in some key areas in terms of IOL products and key areas in terms of materials and delivery systems, and maybe some new product ideas.

Barry, and you look at the revenue base for Canon STAAR, it's all entirely intraocular lenses of a cataract or also includes refractive lenses in that mix of sales?

There's a little bit of refractive sales in Japan. The ICL not yet approved in Japan. We're making progress in the regulatory process there and there are some expectations that we would get approval for the ICL in '09 but not this year.

Okay. So you have that potentially as a nice addition to the product line there?

Yes.

And then the other questions, Barry for you and maybe Deborah can pipe in as well, you're cutting pretty significantly your operating cost and that's a large number compared to your overall expense levels and your overall revenue level. How do you fine tune that so you don't cut through the bone and end up with more cuts that are demoralizing and slowing the organization down?

Larry, I think that's a great question, except from my past experiences, I'd say we had a lot of fat here so we're not getting close to the bone.

Yes so there's been plenty of opportunities here that don't suggest cutting too close? How about R&D? Are you comfortable with the R&D spending level or would you hope over time to be able to jack that up ?

Well, I think we've got to wait to see how these core competencies fit with what the we've acquired in Japan because we'll now have an R&D department for cataract products in Monrovia and in Japan so we've got to analyze that as we go through this year.

Great. Okay. Thanks very much.

Thank you.

All right, thank you. Our next question is from Jack Fraser with Seamark Capital. Please go ahead.

Hi, guys. I just want to make sure I understand the progress in the nano-point accurately. So if I understood you correctly, Barry, you're thinking that nano-point delivery system could be fully released in the U.S. in April of this year; is that right?

That's correct, yes. We're in pre-market release right now, and we're using it in cataract surgery every day.

Okay. And where are we in terms of the FDA review process of that injector?

It's approved.

Okay. Could you share with us a little more about what you're finding in the IP side of the Canon STAAR, JV, with respect to injector technology, what, what-- just generally speaking what aspects of what the they have are appealing to you and where might they be applicable?

Well first of all I think from our experience in the joint venture, we realized that there's some very good intellectual property around injector systems and we think provides us some protection not only in Japan but worldwide, and so that's-- that was very important to us in terms of this acquisition. So I would say overall, Jack, we feel like this puts us in a unique and number one position worldwide in terms of IP around injector technology.

Okay, super. And I'm just wondering, and Deborah maybe you have a view on this, how would you like us to think of Q4 ICL volumes in Europe as compared to the prior year?

Q4?

Yes, in other words, last quarter, how would you like-- how was year-over-year ICL volumes comparisons in Europe, which had been a strong market for you?

In just Europe?

I mean, Q4 increased 37%.

Internationally.

Internationally versus Q4 2006.

But Korea has been growing relatively rapidly, right and--?

Both Korea and Spain, they both have been growing pretty rapidly.

Okay, super. And as yet, we're not yet marketing in India, is that right?

That's correct.

Is there any thought as to when that might develop?

I think there are plans to.

Well, we've made investments and we will be selling in India during '08. We do expect that we'll have above average growth rate in India in '08 but that is above, I mean, that's on a low base to start with.

Okay, super. And just last question, the FFDA approval in China was obviously fairly sweeping. Should we be thinking that there's a possible ramp in volumes that will be actually noticeable or material to results as the year wears on with respect to volumes and the business levels coming out of China?

Well, we do know Jack, that the ICL in China was approved late in '06. And in it's first year, China became our number four market in terms of ICL products and that was without-- that was without the Toric. So now with with the Toric and the hyperopic ICL and the population the demographics of China, we think that we will, this will be a significant opportunity for us in '08 in terms of growth we can get from Toric. the Toric is approved, the Toric represents about one third of the total ICLs in that country.

Super, thanks very much, guys, congrats on the work.

Thank you, Jack.

All right, Jack.

Thank you. Our next question is coming from Michael Lions, a Private Investor. Please go ahead.

Barry, Mike, and I just want to try to understand the U.S. market, the IOL U.S. market and the problems you're having with that. The Preloaded, if I'm not mistaking that's silicon, and I thought we were going to be going in the direction of Collamer?

Yes, good question, Michael. You're right, that the Preloaded injector technology that we have today, that's the first Preloaded technology that will move forward in the U.S. is for the silicon product. Recognizing, you're right, that the silicon percentage overall of the IOL market in the U.S. is declining, I think it's somewhere between 28% and 30% today, and will continue to decline two or three points a year. But even at 20% of the market, that's still 600,000 procedures in the U.S. where a silicon IOL product will be used. And we believe that the silicon Preloaded injector will give us an advantage in that market position.

Secondly, the Preloaded technology used outside of the U.S. that we're selling includes an acrylic IOL, so outside the U.S, Preloaded is with acrylic interocular lenses and there is some hope, not in '08 but as we move forward that STAAR will be able to offer an acrylic Preloaded injector in the U.S. And then the next step would be and-- but this requires an invention, we don't have the answer to that today, is to get our Collamer material which we certainly believe is the best material available on the market today into a Preloaded product.

I see. All right, well thanks so much and I've been doing some cost averaging and going through the long term so we'll see.

We're with you, Michael.

Thank you, buddy.

Thank you.

All right, thank you. (OPERATOR INSTRUCTIONS). And I'm not registering any further questions. Please continue with any closing comments.

Okay, Michael, if there are no further questions what I would like to leave you with is maybe a way you could look at us in 2008, and measure our performance and what we're doing. So I'd like to give you some key metrics to watch in order to gauge what our progress is. I think the first metric that we're looking at the is cash burn quarter-by-quarter. As Deborah reviewed we expect our cash burn to be higher in the first half of the year as compared to second half of the year due to the acquisition cost and the audit fees, et cetera. However, our cash burn in the first quarter should be dramatically lower than our cash burn during the first quarter of 2007 and that cash burn should continue to decline through the year.

The second metric to look at is our continued gross margin improvement. We've said that Japan will help our gross margin and we think we'll see the beginning of that impact in Q2 and Q3 and 4 as we continue through the year. The third metric would be our international revenue growth and we're expecting those growth rates to be comparable to or better than our '07 rates and that's without Japan, so factor Japan out of that because if you throw a $12 million plus in obviously you're going to have some nice growth numbers, but excluding that we're expecting the same type of growth rate.

The fourth metric then would be Japan, and we expect as we've said there's revenues to exceed $12 million. Then the fifth metric would be the domestic ICL growth rate which we expect it to be a growth rate in 2008 versus what happened in '07. So we thank you very much for participating in the call this afternoon, and we might add that if you have any questions you'd like to follow-up with please feel free to give Deborah or I a call here in Monrovia. Thank you very much and have a nice evening.

Thank you, ladies and gentlemen. This concludes the STAAR Surgical Q4 '07 results conference call. At this time you may disconnect. Have a very pleasant rest of your day, and we thank you for using ACT Conferencing .