C.R. Bard Inc. Q3 2008 Earnings Conference Call Transcript

CR Bard, Inc. (BCR)

Q3 FY08 Earnings Call

October 22, 2008, 5:00 PM ET

Executives

Timothy M. Ring - Chairman and CEO

John H. Weiland - President and COO

Todd C. Schermerhorn - Sr. VP and CFO

John A. DeFord, Ph.D. - Sr. VP of Science, Technology and Clinical Affairs

Analysts

Shagun Singh - BMO Capital Markets

Matthew Doods - Citigroup

Taylor Harris - JP Morgan

Mimi Pham - JMP Securities

Fredrick Wise - Leerink Swann Llc.

Robert Hopkins - Banc Of America Securities

Kristen Stewart - Credit Suisse

Christopher Warren - Caris & Company

Jayson Bedford - Raymond James

Joanne Wuensch - BMO Capital Markets

Presentation

Operator

Ladies and gentlemen thank you for standing by. Welcome to the CR Bard Incorporated Third Quarter 2008 Earnings Results Conference Call. At this time all participants are in a listen-only mode and later we'll conduct question-and-answer session, instructions will be given at that time [Operator Instructions].

As a reminder this conference call is being recorded and will be available for a future on demand reply through the Bard website. Today's presentation will be hosted by Timothy M. Ring, Chairman and Chief Executive Officer along with John H. Weiland President and Chief Operating Officer. Todd C. Schermerhorn Senior Vice President and Chief Financial Officer and John A. DeFord Senior Vice President Science, Technology and Clinical Affairs.

Also well attendance today is Eric J. Shtick Vice President Investor Relations. Today Bard's management will discuss some forward-looking statements, the accuracy of which are necessarily subject to risks and uncertainties. Please refer to the cautionary statement regarding forward-looking information in Bard's June 30th, 2008, 10-Q and the information under the caption risk factors in the company's 2007 10-K including disclosure of the factors that could cause actual results to differ materially from those expressed or implied.

During the call, references will be made to certain non-GAAP measures which management believe provide an additional and meaningful assessment of the core operating performance of the company and its individual product franchises.

Reconciliations of non-GAAP measures to the most comparable GAAP measures are provided in Bard's earnings press release and on the company's website at www.crbard.com. All information that is not historical is given only as of October the 22nd, 2008. And the company undertakes no responsibility to update any information. Unless otherwise noted all comparisons are to the prior year period. At this time I will turn the call over to Mr. Timothy Ring. Please go head.

Timothy M. Ring - Chairman and Chief Executive Officer

Okay thanks Laurie, I would like to welcome everybody to Bard's third quarter 2008 earnings conference call and I want to thank all of you for taking the time to joining us today. I would expect the presentation portion of the call to last around 25 to 30 minutes. As usual our discussions today will go as follows, I will begin with an overview of the results for third quarter. John Weiland our President and COO will review third quarter of product line revenue. Tom Schermerhorn our Senior VP and CFO will review the third quarter income statement, balance sheet as well as our expectations for the fourth quarter and John DeFord our Senior VP, Science Technology and Clinical Affairs, will give you an update on our product development pipeline and then we'll close with the Q&A:

Before I get to the details let me say we were very pleased with our results for the quarter and we do like the momentum we're gaining, it's nice to be in our space during these kinds of volatile times economically on a macro level. Third quarter of 2008 net sales totaled $616.8 million. This is an increase of the third quarter of '07 up 13% on an as reported basis and 11% on a constant currency basis. Currency impact for the quarter versus the same quarter in '07 was favorable around 220 basis points. Looking at net income for the quarter with a $111.2 million, diluted EPS were $1.09 excluding items that affected the comparability of results between periods. Third quarter 2008 net income and diluted EPS were a $112.4 million and a $1.10 up 14% and 18% respectively over the prior year period. Todd will review the Q3 '08 items when he goes through the income statement in a few minutes.

Looking at revenue growth geographically, on a constant currency basis third quarter net sales in the U.S. increased 11%, Europe grew at 12, Japan increased 6% and our other international businesses grew 12%. Our growth in Japan is more a matter of timing since sales of our products by joint venture partner there were actually up 9% in the third quarter; so essentially this is pretty strong quarter across all of our geographies.

Looking at the four major businesses as we report them in Q3 are vascular and oncology businesses each delivered strong growth over the prior period, while growth in our urology business was a bit off pace in our [Indiscernible] and our surgical business showed growth for the first time since Q4 of last year. Now, while surgical had its easiest comp for the year end Q3, we did see a more stable performance from our synthetic hernia repair line and also good growth in our hernia biologics.

On the business development front, after closing the shipping [ph] deal in Q2, we didn't close any transactions this quarter, though we continued to pursue a number of opportunities. There is no change in our posture here as usual as you know with business development and acquisitions it's just a matter of time.

On the quality front, last quarter we told you that we are ready for the FDA to comeback in and re-inspect our Davol facility in Rhode Island where we have an outstanding [Indiscernible]. The FDA had conducted that the re-inspection and as a conclusion issued a three item 483. One observation was corrected prior to completion of the inspection and we do expect to remove the other two observations shortly, so we think we've got that well under control.

On the same subject, the company has responded to the unrelated warning letter at our Puerto Rico facility and continues to implement corrective actions to address the observations there as well. With all the turmoil that we are all dealing within the financial markets today, I thought I will take a second and step back and talk a little bit of how Bard in a broader financial context.

If you look at it, even with our significant business development activity and share repurchases of $650 million over the past 18 months we hold about $535 million or so in cash globally with about a $130 million of that available here in the U.S. So I think you can see with that, our ability to turn sales into earnings and then earnings into cash continues to be one of our greatest strengths. In addition to the cash on hand, we have $400 million available through a committed credit facility that's good up through 2012 with the bank group that includes the largest and most solvent U.S. banks.

We invest our cash with primary objectives of safety and liquidity and as a consequence we've not experienced losses in our investment portfolio. We have also not seen any degradation in the quality of our accounts receivables at this point and as a result of the current economic conditions, we've seen no abnormal supplier disruptions in any of our manufacturing or divisional operations.

We do have as I think most of you know relatively low exposure to the capital purchasing cycle in hospitals typically less than 2% of our sales are subject to that process. To sum this all up I'd say that the disciplined and sound financial fundamentals that we have build on are great assets at times like these. And while the outside world has provided great drama over the past several weeks, our operations continue along frankly undistracted.

We have the resources necessary to continue to execute on our product leadership strategy, the core health of our business remains very solid, and frankly if anything as I mentioned, we're currently gathering momentum.

As an organization, we're focused on the tasks at hand, and remain very optimistic about our future; again, it's all about execution. Before I turn you over to John for a review, John Weiland for a review of our product line revenue, let me note that our Annual Analyst Meeting scheduled for December 18th at 4:30 in the afternoon at the Paris Hotel, Manhattan. For those of you've who got counterpanes [ph] we will web cast that live. So now let me turn me turn you over to John Weiland.

John H. Weiland - President and Chief Operating Officer

Good afternoon, ladies & gentlemen, and let me purpose my comments by noting that I'll be giving all percentage growth data in comparison to the prior year period on a constant currency basis, unless specifically noted otherwise.

So let's start with the vascular business. Total net sales for the third quarter in this category were $160.6 million, increasing 15% over last year. This increase was 20% on an as reported basis. Our United States business and international businesses both grew 15% for the quarter. The EP business which represented 20% of the vascular category grew 14% for the quarter. Our steerable diagnostic catheter line continued its strong growth trend with an increase of 23%. And while our steerables line has grown double digits in all, but one quarter over the last several years, we're currently the number three player in this double digit growth market. So to continue to have room to gain share with our current portfolio of products. Our 8-bit product line while working off a smaller base is the fastest growing component of our EP business, up 45% over the prior year quarter, John DeFord will update you on the continued progress our HD MESH Ablation Catheter for the treatment of atrial fibrillation in Europe, when he discusses the progress of our U.S. clinical trial.

Graft product sales were down 5% this quarter, primarily due to a decline in OEM sales within the category. Our endovascular business had a particularly strong performance growing 21% in the third quarter as we did in the second quarter. Now many investors focus on the addition of our strong LifeStent results here, but it's far more than just a LifeStent story, because we are seeing strong momentum across all the product lines in this business. Our biopsy product line was up 12% with our Vacora vacuum-assisted device up 18%.

We continue to improve our share position in the healthy U.S. vacuum-assisted biopsy market. Included in biopsy sales of the UltraClip breast biopsy market were up about 40%, versus the third quarter of '07 which was the first full quarter of sales following the acquisition on Align in the second quarter of '07.

This is the great example of business development activities that not only buy, but also build value as we acquire new technologies. Sales in our peripheral PTA line increased 35%. Our new Dorado 5 print standard PTA catheter which launched in early Q3 last year continues to be the primary growth driver here. Much like the high pressure and large diameter segments of the PTA market, we launched Dorado from a low initial share position in the 5 print segment.

That said, given the clinical benefits of our proprietary balloon technology, we have some nice growth potential here. The Vena Cava filter line was up 19% versus the prior year quarter driven by growth in our removable G2 filter and the launch this quarter of our new G2 express filter.

Our stent business grew 26% in the third quarter with LifeStent continuing to perform nicely ahead of our original 2008 expectations. Edwards has submitted their response to the second round of FDA questions on the LifeStent PMA for an SFA indication. This response was not finalized until early September due to a number of verbal clarifications requested by the FDA. Though it's still possible before the end of this year based upon this submission date, we now believe approval was more likely to occur in Q1 or possible early Q2 of 2009.

With regard to our other stent lines, we anticipate receiving approvals for two additional PMAs before year-end. The first, for our Flair AV Access stent graft and the second for an Iliac indication on our EYLuminex stent.

As we've noted earlier, these approvals along with the approval of life stent for the SFA will position us very well in the peripheral vascular stent market in the United States.

Let's turn now to urology. Total net sales were $174.5 million, an increase of 4% over Q3 last year or 5% on an as reported basis. The United States business, which represented 72% of global revenue grew 2%, internationally we grew 8%. Standalone sales of our StatLock catheter stabilization line increased 1% due to tougher counts. You may recall that in the third quarter and fourth quarter of last year, we grew 82% and 63% respectively due to increase in dealer purchases in advance of our November '07 price increase.

When we examine all the data we can continue to see year-over-year organic growth in the product line of about 20%. Our basic drainage business, which represented 58% of the urology category grew 10% in Q3. The driver here continues to be our Bardex I.C. Infection Control catheter line, which was up 18%. As we discussed last quarter, we attribute this primarily to the heightened focus on preventing hospital acquired infections, as a result of CMS discontinuing reimbursement, for urinary tract infections, effective October 1st.

Our overall continence business was up 1% in the third quarter against the tough company, late into Q2 last year, we launched the new aligned sling in our surgical sling line and the Avaulta plus and Solo in our pelvic floor repair line.

As a result in the third quarter and fourth quarter of 2007, we saw a significant acceleration in our surgical countenance business roughly 15% sequential growth in each of those two quarters.

Consequently, this business faces another tough comp in Q4. Q3 growth in our overall countenance business was also impacted by a 5% decline in our sales of the Contigen Injectable Bulking product. Sales in urological specialties were down 10% versus 2007.

Brachytherapy which is roughly half the business in this category was down 18% for the quarter. While we saw a modest growth in Brachytherapy outside of United States this quarter, the United States market continues to loose procedures to competitive therapies including IMRT and robotic surgery, in fact we've seen this trend accelerate in the last two quarters.

But we believe this procedural will shift stems impart from recent legislation that removes road blocks to urologist owning standalone IMRT centers which is an attractive economic option for them under current reimbursement rules.

Turning to Agento I.C., we were pleased to have the results of a clinical study published in the August 28th edition of the journal of the American Medical Association. Having the full study results published, especially in a prestigious medical journal provides an important tool for our sales process.

As we've noted the sales cycle here is rather lengthy and may take up nine months to get through the various hospital committees, required to approve the conversion to Agento. For the some of our prospective on Agento, we have the tools we need, the environment is right for our product and we expect to generate a steady ramp from here.

Let's now turn to oncology. Total net sales in this category were a $169.3 million an increase of 18% over the third quarter of 2007 or 20% on an as reported basis.

Geographically, net sales in United States were up 21% outside United States we grew 10%. Implanted port grew 20% in Q3 the first full quarter of sales for both the MRI and medium size power port and the safety wind infusion sets we acquired from Shippy [ph].

These two products were the main drivers of acceleration and growth in our port business. The MRI ISP configuration was already the largest selling most popular standard port on the market. The new power injection capable version is off to a strong start and has experienced good clinical acceptance in the marketplace.

Growth in picks and mid-line products was 25% in the third quarter reflecting another healthy performance fueled primarily by power port and our Sherlock Tip Locator System. Both of these differentiated technologies also continue to meet with excellent clinical acceptance.

At the same time, hospitals are embracing these types of innovations with the understanding that they favorably impact both clinical outcomes and overall procedural costs.

Our vascular excess ultrasound product line had a good quarter growing 12%. We continue to see good growth in this line from our Site~Rite 6 which passed the anniversary of its launch in Q2.

In addition to the growth this line generates, portable ultrasound leads to increased use of fix by facilitating placement, by nurses at the bedside. John DeFord, will talk about some exiting advances we're pursuing in this area.

Now let's finish up with surgical specialties.

Global net sales were up 7% in the third quarter to $90.8 million. This increase was 9% on an as reported basis. Sales in the United States which represented 73% of the total surgical revenue were up 6% for the quarter. Internationally, we are up 11%.

Our soft tissue repair business which represented 72% of the surgical category was up 5% for the quarter. Natural tissue devices were up 33% on a very strong quarter for AlloMax human tissue device. The synthetic cornea category was up 3% fuelled by a growing Sepra Mesh business.

And despite the discontinuation of salute II, fixation was only down 12% due to a modest comp in the prior year and nice growth in the sales of our PermaSorb resorbable fixation device.

Looking ahead at Q4, growth in our soft tissue business will be more difficult due to a large fixation comp in the prior year quarter. As, Tim, noted, our Q3 growth in surgery, more specifically in hernia was in comparison to lowest comp quarter in '07.

That's been said, however, we remain the market leaders in hernia repair. Key elements of our business like umbilical hernia repair products have remained very healthy and we are seeing more stability in the products and areas that have been the most challenging in recent years.

We have recently launched our ventral family of reabsorbable range, ventral hernia patches and later in Q4, we expect launch our newly configured colomen. Beyond that we feel very good about what's in the development pipeline for hernia repair.

John DeFord will get into a bit more detail shortly, but we will talk more specifically about our expectations for 2009 and beyond at our annual Analyst Meeting at December.

Closing to surgical category, our performance of irrigation business was up 14%. We are continuing to benefit here from a supply challenges affecting the irrigation line of one of our competitors in that space.

And finally in the third quarter and our hemo spaces business was up 12%. This concludes our product line revenue discussion.

I will now turn it over to Todd Schermerhorn.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Thank you John, we'll start with the income statement for the quarter as Tim, noted we have some items in Q3 that affect the comparability between quarters. They were relatively minor and net they decreased EPS by a penny.

The first item was again of 700K pretax on the sale of our former older manufacturing facility in Puerto Rico. Second item was a reorganization charge of $1.3 million free tax associated with the right sizing of our brachytherapy efforts and an associated transfer of a product line between divisions. And in the last item was an adjustment of $1 million even in our income tax provision as a result of a recent tax item.

Gross profit was 61.2% of sales for Q3 consistent with the comments we made on last quarter's call that's year-over-year, that's improvement of 40 basis points. New amortization of intangibles relating to transaction that we pulled in from the last 12 months. It cost us about 40 basis points since period and 50 if you include amortization of inventory step up.

So operationally we continue to see nice improvement. This quarter we saw particularly strong results in our plans those results are deferred as the inventory in an expense as the inventory is sold which will occur in the fourth quarter.

Now we also expect to have some currency headwind in Q4, based on the recent movement in rates. But net, net we'd expect some sequential improvement in gross profit in Q4.

SG&A expenses were $180.6 million for the quarter or 29.3% of sales, a 20 basis point improvement over the prior year quarter.

We guided for the year for a modest improvement in SG&A as a percent of sales and we consistently been 10 or 20 basis points better each quarter of the year so far.

R&D expenditures totaled $35.1 million for the quarter, 5.7% of sales. This was not a particularly heavy quarter for us from a R&D standpoint. I would attribute that to the timing of project spending and in particular, clinical trial expenses there have been no softening in our commitment to research and development and in fact I would be surprised if that figure didn't rise noticeably in Q4.

Interest expense was $3.1 million for the third quarter up 200K from the prior year. Other income expense was $1.9 million of income for the quarter, which includes the net impact of the gain on to sale of plant and the reorganization charge.

On an adjusted basis other income expense was $2.5 million of income versus $8.9 million of income in the prior year quarter reflecting lower yields on our investments portfolio and lower average cash balances due to our share buyback and business development activities.

Tax rate recorded for the quarter was 30.7% on an adjusted basis excluding the items I discussed, the rate was 30.2% bringing up to a full year effective tax rate of 29.5%. This is slightly higher than our guidance of 29.2% for the year.

As I think you probably hear from many companies this quarter will book the R&D tax credit next quarter and we believe we'll beat our guidance for the full year.

Balance sheet as of September 30 reflects cash and short term investments of $535 million versus $434 million at June 30.

For the quarter, account receivable days were down 2.5 days, and inventory days were up 2.8 days.

Capital expenses totaled $11.4 million for the quarter. On the liability side, total debt was $149.8 million with no change from June 30. Debt to total cap at the end of the third quarter was about 7%, and total shareholder investment was $1.957 billion at September 30.

We repurchased 493,000 shares of the company's stock this past quarter. We'll continue to be buyers of our stock as cash balances and market conditions permit.

Moving to financial guidance, we expect to see double digit top lying growth once again next quarter in constant currency.

With respect to EPS, we're forecasting in the range of $1.17 to $1.18 for Q4, excluding items affecting comparability if any, effectively increasing our full year earnings guidance to $4.43 to $4.44, growth of 16% over the prior year.

Okay. And I'll now turn you over to Dr. John DeFord.

John A. DeFord, Ph.D. - Senior Vice President of Science, Technology and Clinical Affairs

Okay. We have a lot to cover, so let's start with our atrial fibrillation activities and specifically the HD MESH Ablation product.

Our U.S. pivotal study is now underway, and we've begun enrolling patience. We have about 20 sites qualified and 6 sites are screening and enrolling, and we're ramping up our clinical centers over the remainder of the year. This two armed studies is designed to enroll about 280, in a two to one randomization of ablation to antiarrhythmic drugs. In Europe, we continue to expand our experience base, and see growth in the number of podium presentations and publications. We're even seeing a few public news articles. Here, our strategy remains consistent. We value a careful approach to growth and market expansion with emphasis on training and follow up, including the recent initiation of a 100 patient European registry designed to collect real world used procedural data, adverse events, and short and long term results.

Again, our product safety record continues with no cases of PV stenosis, chronic nerve injury or oesophageal fistula. John's already provided an update on the progress of the LifeStent, so let me jump into our pending PMAs for both the EYLuminexx self expanding Iliac Stent, and the Flair AV Access Stent Graft. Both are in what we believe to be the final stages of FDA review, and though nothing is a 100%, we anticipate... we don't anticipate any additional questions in either of these submissions, and continue to believe that approval could occur, and launch of both products should occur in Q4.

Additionally, we're on track for the second half 2009 launch in Europe of our next generation self expanding stent graft family. And plan to begin two U.S. clinical studies of this device. We expect to seek both an AV Access claim and an arterial vascular claim for this lower in profile, highly flexible and fracture resistant product.

In PTA, we've launched enhancements to our conquest family of high pressure balloon catheters, and are on schedule to launch improvements and extensions to our Atlas line of large diameter products in the first half of next year. Also, on the recent launch list, we received FDA concurrence on our retrievability claim for the G2 Express, and John noted that we launched that product in the U.S. in Q3. The G2 Express filter is essentially our G2 filter is essentially incorporating a retrieval hook that allows removal with either a recovery retrieval cone or vascular snare thus giving clinicians a choice of retrieval options based on the circumstances of the case.

Turning to urology, we are awaiting FDA 510(k) concurrence on our new less invasive sling. This new sling employs a low profile MESH and tissue anchor fixation system designed for placement through a single small anterior vaginal incision without the need for deep needle passage required in either TBT or TO sling procedures. In our stent lot family we continue our rapid development in introduction of new products. Our plan was to launch about 37 new product codes across our peripheral IV pick [ph] and Foley catheter lines this year. And we are on track to exceed that number. Actually since acquisition of Anitec in 2006, we've launched over a 100 new products in the stent lot family develop here at Bard.

Before moving to oncology, I would like to take a couple of minutes to discuss some additional analysis of the Agento product and the NASCENT clinical study results. The study demonstrated a 35.9% reduction in ventilator associated pneumonia incidents between the control in the tracheal tube and the Agento tube for patients innovated 24 hours or more and a 47.6 reduction in incidents within 10 days. Though the study was really not powered for secondary endpoints, there are a number of interesting findings.

If you've read the general article you may have noted that the analysis of secondary outcomes for ICU stay, hospital stay and mortality in the broad sense did not show statistically significant differences due to the growing number of overall Wap patients. However in post stock analysis, the investigators explored differences in Wap and non-Wap subgroups in addition to the Wap patients who received Agento versus those that received control.

Now these analyses provide an interesting perspective. For example analysis of patients innovated more than 24 hours confirm that Ventilator-Associated Pneumonia with associated with a statistically significant increase in duration of incubation, 10 days versus 3.8 days. ICU stay at 18 days versus 7days in the agento group and hospital stay of 27 days versus 15. All of these were highly statistically significant with P-values less than 0.001. Likewise when subgroup analysis was performed for all patients' diagnosed with WAP gross mortality of the agento group was a quarter of that of the control group. 13.5 % versus 37.5% and again highly statistically significant. So while these are post hoc analysis they do demonstrate the robust effect of the agento product. Our investigators have informed us of their plan to publish the results as soon as possible.

So now moving to our oncology business we have began the rollout of our [indiscernible] valve catheter technology in the power port line. This expands and differentiates our power port offering by providing the only valve port technology on the market combined with the important power injection indication. We also anticipate launching before the end of this year our new MRI power port duo, a duo alumin MRI compatible power port.

In vascular access ultra sound as we noted last quarter we are completing the development of a new siderite technology platform. This project combines our ultra sound capability surelock [ph] chip location system and our new chip conformation technology into a single platform that has the potential to significantly advance the speed and accuracy of insertion, tracking and confirmation of website pic placement. We began enrolment in a feasibility clinical study of this new product and anticipate the commencement of a pivotal study in the second half of next year. We believe this could be a breakthrough technology and expect to be in a position to talk more about this opportunity at our December Analyst Day.

Moving to our surgical business, we recently launched our new Ventrio family of self expanding ventral hernia products to replace composite spigot [ph]. Now Ventrio incorporates our new bioreservable wing technology. This marks our first major launch in the ventral synthetic space in a few quarters and is the first introduction in a string of new products and our pipeline that incorporates both synthetic and bioreservable technologies.

Also in our biological products offering, we remain on schedule to launch our new covenant product around the end of the year. We are also making very good progress towards the launch of a third generation fixation product that we plan to sell in both permanent and resolvable versions. This new device and technology appears to have the potential to provide significant fixation enhancements of our existing products on the market.

We continue to anticipate launching the resolvable version around the end of Q1 next year, with a permanent version of the construct launching in the second half of the year. With the increasingly competitive nature of the hernia space, we don't want to give too many specifics at this time. But we plan to explain more of the pipeline at our December analyst meeting.

And now finally moving to our obesity therapy project, we're nearing completion of patient enrollment in our trim feasibility trial setting the RS2 next generation endoscopic Suturing device, the primary endoscopic treatment of obesity. Now we've already enrolled the majority of our patients in this 20 patient feasibility study, with early results that are very encouraging, and we look forward to completing enrollment this quarter with follow up to continue to the middle of next year.

We currently plan to start a pivotal study for the primary weight loss claim towards the end of next year. This timetable has us anticipating launch in 2010 with the general surgical indication and expanding the indication for weight loss in late 2011 or 2012 after submission of the trim pivotal results.

Now before I turn you back to Tim, I'd like to also extend you an invitation to attend our December 18th analyst presentation. We'll discuss a number of new items in our development pipeline.

Thanks for your attention I will now turn you back to Tim.

Timothy M. Ring - Chairman and Chief Executive Officer

Thanks John. That concludes the formal part of our presentation and I'll now turn the call back to Laurie to facilitate the Q&A session.

Question And Answer

Operator

And ladies and gentlemen we will now begin the question-and-answer session. [Operator Instructions] Our first question from the line of Joanne Wuensch, with BMO capital markets. Please go ahead.

Shagun Singh - BMO Capital Markets

Hi thank you for taking the question this is Shagun Singh for Joanne Wuensch. Could you provide some comments on the adoption of Agento I.C in terms of new accounts? I know you're commented that the sales cycle is lengthy, but when do we actually start seeing the adoption and conversion?

John H. Weiland - President and Chief Operating Officer

This is John Weiland answering that the Agento I.C conversion, it is a one hospital at a time conversion plan. It really takes our entire sales force, which is focused on this and all of them had targets in their specific territory initial targets that they're approaching on it. I would say since we have seen the publication in the American Medical Journal on the Agento I.C study, we have seen a significant impact in terms of the targets accessibility towards this device. Now it's early to tell, because each one of these accounts takes approximately nine months to convert. Not much different than the sales process that we had with our I.C infection control catheter line and as you know, since we have gone step product over 12 years ago, the last six or seven years in terms of the conversion rates it is a very steady ramp process, that's what we expect to have with the Agento I.C as well.

Shagun Singh - BMO Capital Markets

So you're looking for it to pick up in the first quarter of '09, second quarter at that time frame?

John H. Weiland - President and Chief Operating Officer

I think it will be slow and steady ramp throughout 2009.

Shagun Singh - BMO Capital Markets

Okay my next question is regarding R&D. So it looks like R&D is back at the 5.7% level. Could you comment a little bit about a couple of more initiatives there?

John H. Weiland - President and Chief Operating Officer

About what?

Shagun Singh - BMO Capital Markets

About on the R&D pipeline.

Timothy M. Ring - Chairman and Chief Executive Officer

Let me take that. This is Tim Ring. We don't manage R&D on a corporate average. It adds up we manage it by business, each business requires a different set of investment than the other and it just adds up to be the corporate average. So we do not have an R&D percentage of sales goals as a corporation. We manage each of the businesses individually.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Well I think may be just to add another comment specific to Q3, we had a couple of clinical trials that ended in that time period that and then timing of starting up some others that really impacted this number. So going forward I think this is just the timing issue as our studies ramp up and projects get going.

Timothy M. Ring - Chairman and Chief Executive Officer

Butwe certainly do not modulate R&D on a quarter-by-quarter basis. It's a longer term financial planning, effort and obviously it would be disruptive to do that. We don't do that, we never have.

Shagun Singh - BMO Capital Markets

Okay thank you very much.

Operator

And our next question is from the line of Matthew Dodds with Citi. Please go ahead.

Matthew Doods - Citigroup

Good evening, a couple of different questions. First Todd for you; I don't want to be greedy on the gross margin, because you are up.

But if you look at the mix between the businesses urology was the slower and both surgery was a little better than expected and oncology was strong but I just wanted to put in context, A: why wasn't it up a little more or what you were talking about with the inventory is that really going to show up more in Q4 when you look at that mix, that's first question.

John H. Weiland - President and Chief Operating Officer

Well I think surgery was a little bit better map but it's still not grown as the company average so its still is a weight from a mix standpoint. Our mix component was down 20 basis points year-over-year. So while it is better we are not all the way there yet.

Matthew Doods - Citigroup

Alright then just the second question I guess for Tim, on Sepra Mesh or for John, when could we see that the one of your internal products in synthetic hernia, how far away are we looking that could be attached?

John H. Weiland - President and Chief Operating Officer

That is certainly in our product pipeline. You won't see it in '09 but it's certainly in our pipeline directly after that. And we'll talk about it in the December meeting as well.

Matthew Doods - Citigroup

Okay. Then one housekeeping question. For the surgical business in continent you didn't give a growth rate, John. I know you said the overall is at 1%, oncology was down 5%. Is it with surgical group constant currency?

John H. Weiland - President and Chief Operating Officer

We will wrap it for your math. Surgical group was incontinence.

Matthew Doods - Citigroup

Yes.

John H. Weiland - President and Chief Operating Officer

Up 4%.

Matthew Doods - Citigroup

Alright. Thank you.

Operator

And our next question from the line of Taylor Harris with J.P. Morgan. Please go ahead.

Taylor Harris - JP Morgan

Thanks. Tim, I just wanted to go back to some of the macro topics that you brought up and two issues that I don't think you discussed was, what you are seeing with surgical volumes as a group or by category. And then another question I had is just any distributors where you've seen inventory pullbacks at the distributor level, so maybe just touch on those two topics.

Timothy M. Ring - Chairman and Chief Executive Officer

Sure, you know surgical volumes most of our procedure are really not elective procedures, as I said it really is investment meetings 16.5 years been here, never had a patients call me once asking about trying to use one of our products. That being said there is some seasonality that we see occasionally with that but it is nothing that we can see right now trend wise relative to the economic conditions effect the point of your questions. So, we haven't been impacted by that, in terms of distributor pullbacks that's a timing issue, it's quarter-to-quarter, it's really becomes a kind of days in the quarter kind of a thing but we've not seen any significant pullbacks on that and nor as far as we know are they in a financial difficulty at all, so we feel pretty secure about funds.

Taylor Harris - JP Morgan

Okay, great. And one product specific question on STATLOCK. I think the comments would imply that the business pulls back in the third quarter versus the second quarter. Is that simply a seasonality issue or is there something out that should be flushed out there?

Timothy M. Ring - Chairman and Chief Executive Officer

No, it's really the comps that we talked about; we had a price increase in the November timeframe of '07. There is a buying that happened in both the third and fourth quarters as a result of announcing that price increase. So really, I think we talked about the growth last year was in 63% and 82% in those two quarters and it's really a comp issue more than anything else. We still believe that's a 20% organic growing business for us.

Unidentified Company Representative

Sequentially it grew nicely, actually about 10%.

Taylor Harris - JP Morgan

Okay, all right, I'll just have to adjust that. But I guess the point for the fourth quarter would be that you've still got a tough comp ahead for both STATLOCK and in Continence and the urological specialties I guess with that.

Unidentified Company Representative

Yes, that is correct.

Taylor Harris - JP Morgan

Okay. So it sounds like that the fourth quarter overall growth should... by division should look pretty similar to the third quarter except the surgical business probably has a tougher comp. Is that?

Timothy M. Ring - Chairman and Chief Executive Officer

I mean that's your call Taylor, but we'll give you the overall, get some little ups and go down to the various pieces here and do it with any certainty.

Taylor Harris - JP Morgan

Sure. Okay just one last question Todd, right now what would you expect the FX top line impact to be in the fourth quarter and then maybe looking at 2009?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Its obviously, I have to know what the exchange rates are going to be for the whole period I don't know that and certainly can't predict the next year. So we were 2% up this period, I'll just give you a comp prior year was I think 142 Taylor per Euro. So you can kind of calculate up there but... who knows if 129 is going to stick.

Taylor Harris - JP Morgan

Sure, okay. Thank you, guys.

Operator

And now our next question from the line of Mimi Pham with JMP Securities. Please go ahead.

Mimi Pham - JMP Securities

Hi, good afternoon, it sounds like you're the FDA session doesn't impact your ability to introduce new products in the surgical... in the hernia division, can you just confirm that?

Timothy M. Ring - Chairman and Chief Executive Officer

That is absolutely correct.

Mimi Pham - JMP Securities

Okay. And you did quantify 2% of yourself being CapEx some what to the previous question, can you actually quantify what percentage of your sales you might consider to be like this... and could move?

Unidentified Company Representative

A little had to do Mimi I mean there's all varieties of elective. So there had just been some. There have been some analyst's reports out there that peg that as kind of 50% or so. We think that might be high actually. So it's not a huge piece of our business.

Mimi Pham - JMP Securities

Okay, 50% would be high. And then would you consider divesting any slower areas of growth for instance your brachytherapy?

Unidentified Company Representative

Let me take that one. I think its just the diligent management frankly. You have two looks when you look at your businesses. One is stuff you want to get into and buy or acquire and then stuff that. If you have the opportunity to may be divest or do something else with, you keep that list going too and you kind of manage both.

So all I would tell you that's an ongoing process that we have had here for several years. You've noted in past years we have divested some businesses and its part of our regular process that we look at you know in both in terms of acquisitions and divestitures.

Mimi Pham - JMP Securities

Okay. I guess last question on Agento. For the hospital side you in and have reordered the product. Can you just talk about on what patients they are using on, what sub-groups. I know you talked about the higher sub-group, but can you just give us color what that means and what percentage of the patients we're talking about? Can you just give us a color into what you know what that means and what percentages of their patients you are talking about?

Timothy M. Ring - Chairman and Chief Executive Officer

Well every, every hospital is different. There the... what rate that what percentage of their patients using it on is highly depended upon their mix of patients in each institution and that's all over the board. But I would say that we are not surprised and it's closed to what our anticipated value was of those hospitals that have converted thus far.

Mimi Pham - JMP Securities

Some what I guess you've talked about before at one-third?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

That's a high number versus what we've targeted it quite frankly. It's in the area of 10% to 15% of those endotracheal tubes I believe is the number reduced in the past.

Unidentified Company Representative

When these conversions take place, they tend to be the areas where you'd expect the high risk patients so the ERs, so patients that get incubated in the ER, patients that get incubated in the in to base in the ICU or the CCU are the primarily targets for us as we go in there as opposed to those surgical patients. Most of them are elective or anticipated to the short term incubation.

Mimi Pham - JMP Securities

Okay. That's very helpful. Thank you.

Operator

And our next question from the line of Rick Wise of Leerink Swann. Please go ahead.

Fredrick Wise - Leerink Swann Llc.

Good afternoon. LifeStent you highlighted that the late filing and the shift in potential approval time lines. Maybe you could just remind us or take us through what we should expect next if the next thing here whenever it happens approval or inspections are there further interactions planned just give us a little perspective there?

Unidentified Company Representative

Well, Rick this is a very interactive process. So the reason as John, said in his comments that the PMA filing didn't go in July or August was lot of interaction with the FDA. It's try to make sure that the questions where being answered in great detail. So there wouldn't be an additional round of questions. There is also very routine interaction with the FDA. So this is an interactive process. There are number of additional steps.

But we think that it's moving along appropriately. Again we had a timeframe shift here from a submission date. It doesn't... they don't have to take the 480 days. So and we're you giving you the documentation, the dates here. We're given you an estimate based on sort of what we think could happen with FDA. Now there are some additional inspections that have to occur. This is natural with PMA. There is pre-approval inspection. So we'd anticipate that to occur sometime in this process.

John H. Weiland - President and Chief Operating Officer

But I don't think there are any more key communication points --

Unidentified Company Representative

No. No.

Unidentified Company Representative

We are just late involved here.

Unidentified Company Representative

That's right.

Fredrick Wise - Leerink Swann Llc.

So... so basically next time, we're going to here from you will be when it gets approved.

Unidentified Company Representative

Let's hope so.

Fredrick Wise - Leerink Swann Llc.

Definitely. A larger picture question, Tim, you highlighted I think the last quarter, you were all concerned about energy cost rising, obviously it's going the other way now, and maybe reflect for a second. Is this an... a modestly important, a very important incremental positive oil stays where it is now?

Timothy M. Ring - Chairman and Chief Executive Officer

I would put it in the minor category. Frankly. If you look at our gross profit margin over the last several quarters now, despite some of the issues we've had in surgery, we'd be there, kind of held our own or approved on a sequential basis. Clearly, with oil prices or energy prices, where they are now, it's going to help us, but we probably won't see that flow through until next year sometime.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

We also would tell you that the high point was never actually priced in, so the, because we obviously fight each one of these, and there's a timing aspect to when the suppliers come back to us, so slightly difficult number to come by, Rick.

Fredrick Wise - Leerink Swann Llc.

Yes. And one last, sort of bigger picture question. Again this is the time you were, I... traditionally think you're... we might see some acquisitions, maybe Tim, your perspective, is it less likely or more likely this year, given the environment, or maybe some thoughts on values, are greater values emerging, is it likelier that given the difficulty in financing some emerging companies, did we see you all being more aggressive, in the early stage companies. Again, just as your broad perspective.

John H. Weiland - President and Chief Operating Officer

The real frank answer is I don't know.

Fredrick Wise - Leerink Swann Llc.

Okay.

John H. Weiland - President and Chief Operating Officer

But I think the realty is we are buyers. We have been clearly, when there are times in the economy like we have now you would think that there will be more opportunistic opportunities for us but who knows? We just don't know. We are in the buying position and we've got a strong balance sheet and cash flow to be able to do that. So we are looking like crazy and we'll see what happens.

Fredrick Wise - Leerink Swann Llc.

At the risk of actually, I said the last one. Let me ask you one general thought Tim. Looking ahead to '09, I know you aren't ready to give guidance. It sounds like there is absolutely no reason to assume any particular significant material difference in the kind of growth we've seen talking about a month from Bard last couple of years, and no particular impediments that I am hearing you discussed that should make, I think it is going different in terms of the general trend or outlook from that.

Timothy M. Ring - Chairman and Chief Executive Officer

Rick, we will just tell you we haven't seen anything as of today, how is that?

Fredrick Wise - Leerink Swann Llc.

Sounds good. Thank you.

Operator

Our next question is from the line of Bob Hopkins with Banc of America.

Robert Hopkins - Banc Of America Securities

Thanks and good afternoon. Two questions; just wanted to follow up on LifeStent and just to make sure that I am hearing you correctly. So, from your comments, I just want to make sure that you are not getting any new request for any preclinical or clinical data. This is question is of a different type, is that right?

John H. Weiland - President and Chief Operating Officer

Yes, that's correct. We stated in the last discussion that this last round of questions was not clinically focused.

Robert Hopkins - Banc Of America Securities

Okay. And then, I also wanted to just get a little more of an update on the timing of launches and I am sorry if I missed this. And I know you talked about the new Krugel [ph] launch and is the timing of that... did you say the end of the fourth quarter?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

It's launched.

Robert Hopkins - Banc Of America Securities

It's launched now. Okay, so it's out and that's on time and then previously you'd given us some thoughts on March timing for a number of the other hernia products that will come out and just you said you don't want to go into details until the analyst meeting, but I'm just wondering are there any changes in the time lines relative to what you've articulated previously.

Timothy M. Ring - Chairman and Chief Executive Officer

No, you will have a we should have a new colomen [ph] product out by the end of the year the new fixation device will be out by the end of the first quarter, I think there will be only two week for that specific timeline was on.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Yes.

John H. Weiland - President and Chief Operating Officer

Yes.

Timothy M. Ring - Chairman and Chief Executive Officer

So nothing, nothing has changed there in that.

Robert Hopkins - Banc Of America Securities

Okay, great thanks a lot guys.

Operator

And our next question from the line of Kristen Stewart with Credit Suisse, please go ahead.

Kristen Stewart - Credit Suisse

Hi, I have to just touch base on the Puerto Rico warning letter that was posted on the FDA website, kind of the last kind of line points to the potential that there could be systematic problems that may impact actually and quality programs, as to what degree can we expect to see maybe inspections in Puerto Rico and what might be the timeline here since it sounds like amusing, in the right direction with the other letter?

Timothy M. Ring - Chairman and Chief Executive Officer

Well Christine we've responded to the warning letter and in fact we filed that in August of this year. And we continue to progress with the implementation of what we believe is a very comprehensive corrective action program to address all the observations in that warning letter. Now there will be a subsequent inspection by the Puerto Rico district within our facility down there. What's the date of that will be we don't know. Typically as you complete all the corrective actions is their opportunity then to come back in and evaluate the effectiveness of those corrective actions. So that could really be anytime in the future to get that accomplished.

Kristen Stewart - Credit Suisse

Okay.

Timothy M. Ring - Chairman and Chief Executive Officer

Now in terms of increased inspections we believe we have had increased inspections over the last number of years. In fact I think it's important to note through from 2006 up to now we have had 19 sites that were inspected. 14 out of the 19 of those sites were with no 483 observations at all and three resulted in very minor 483 observation. The only applier to that were obviously Davol situation and the Puerto Rico situation which we believe we're addressing pretty vigorously.

Kristen Stewart - Credit Suisse

Okay. And I guess just secondly on LifeStent to what degree sorry if you have already addressed this, but to what degree do you feel that growth within that or maybe hampered by the push out in terms of the timeline, I know several of your competitors there have received subpoenas, I don't know if you have disclosed one just to have that. But how do you think that really affects your ability to grow the business in the near term?

Timothy M. Ring - Chairman and Chief Executive Officer

Well, I would say I'd answer it two ways. First of all we know we have not received any subpoena at this point in time. Secondly, and if you look at that market and the market opportunity it's about a $175 million market in the United States that we believe we have the best physician clinical product for that with the best data and with the, I think the best potential claims in that space. Other people that are also conducting trials in our minds are behind us at this point in time. So, even if we get approved in the second quarter of next year, we believe we'll have the best product in the market space with the right claims and the right sales force in order to introduce those clinical benefits to customers.

So, I'd also... it's also important to note that the business is growing very nicely in Europe, where we do have the SFA claim at this point in time and we are able to detail the features and benefits of that product line versus competitive product lines in the market place.

Kristen Stewart - Credit Suisse

And do you have any sense as to how much of that $175 million market is already being penetrated today through off level use?

Timothy M. Ring - Chairman and Chief Executive Officer

Well you could argue any number that, you could argue the whole number that could be penetrated by off level use, but I would say that we certainly are not detailing, are not touching the off label side of it at all and in fact the only thing our sales force is allowed to talk about is to bill your indication on that product line.

Kristen Stewart - Credit Suisse

Thank you.

Operator

Our next question from the line of Christopher Warren, with Caris & Company. Please go ahead.

Christopher Warren - Caris & Company

Thanks so much for taking it, wanted to see if you would address sort of the changing hernia competitive landscape, I know there has been a couple of products that have been launched during the last couple of weeks, have you from a product management prospective changed your tactics?

Timothy M. Ring - Chairman and Chief Executive Officer

No, in fact I would say more than anything else we continue to be focused on one thing and that's product leadership in this space. I mean if you look at our product pipeline and look at the plans that we have moving downstream for new product introductions, it's squarely focused on new product launches and product leadership capabilities. So our strategy has not changed at all and in fact we are optimistic now that we have that the pipeline is starting to produce new results, we're very optimistic about with that will hold for our surgery business.

Christopher Warren - Caris & Company

And just any secondary comments about the competitive landscape itself, do you sense more competition in the space?

Timothy M. Ring - Chairman and Chief Executive Officer

There is certainly more competition in the space. I think there is... without a doubt Covidien has enhanced the reference in the space, J&J to a degree and certainly the whole biologics, growth in biologics has added significant opportunity but also there is a competitor land space. So it's a very competitive space but we have been competing in this space for 10 years now on a vigorous environment. So it's not anything new to us in terms on how we approach it.

Christopher Warren - Caris & Company

And then just finally touching on Alamax [ph] I know you've highlighted it as a particular growth driver in that segment. Anything changing there that you think contributed to the leadership?

John H. Weiland - President and Chief Operating Officer

I think, it's the additional availability of sizes and products for us and I think clinicians getting more experienced with the product after they initially use it and it's much like things like the Agento conversion. It's one new surgeon at a time in that space.

Christopher Warren - Caris & Company

Okay. Thanks very much.

Operator

Thank you and ladies and gentlemen. [Operator Instructions] We go next to the line of Jayson Bedford with Raymond James. Please go ahead.

Jayson Bedford - Raymond James

Hi, good afternoon. Just a couple of quick questions for you; on the hernia business and specifically the ventral line, when you look at ventrilo, sepramesh; and Composix Kugel, how do they rank in terms of pricing and then how do you position the three?

John H. Weiland - President and Chief Operating Officer

Well we ventral obviously will be at the far end of this spread in terms of pricing with the new benefits that we have and Sepra Mesh is very close to that and Kugel Composix will be a step down from all of those products in terms of pricing.

In terms of how we position those it really is position preference. There has been some recent papers published on Kugel Composix, which really shows outstanding clinical results over the largest number of patient that have been studied in a clinical setting on hernia repair space. Shows really outstanding results. There's many clinicians who continue to like that product.

There is other combinations that want to recall we had on Kugel Composix a few years ago moved to other competitive technologies. We've have seen to our market research that those surgeons are certainly willing to comeback to try this new offering considering that it has the resorbable advantage in it. So it really depends on what the physician's usage is today, what are their preference, and then we talk about the features and benefits based on their individual preference.

Jayson Bedford - Raymond James

Okay and then on Colemen what will be the key difference between the new Coleman versus the prior version?

John H. Weiland - President and Chief Operating Officer

Well we're not disclosing that at this point in time because of the competitive nature of that space. But we will launch, you'll hear from us on that in the December Analyst Meeting.

Jayson Bedford - Raymond James

Okay and then just on the surgical incontinence business there was a dear doctor letter that was issued yesterday for mention for incontinence and prolapse. I'm just wondering, I realize its a small portion of your business. But do you expect to see any impact on your business from that letter?

Timothy M. Ring - Chairman and Chief Executive Officer

We will not taken back by that letter at all and that all known complications either in the public floors sling surgery area or in the hernia repair space, so we won't take them back at all. You can't really predict how individuals will react, but I would say since the fact that they are known complications I would expect that most surgeons are already taking about those given complications to patients when they are consulting with them on a specific procedure.

John H. Weiland - President and Chief Operating Officer

And we've already seen it in the pelvic floor numbers.

Jayson Bedford - Raymond James

Okay that's helpful. And then just last question for Todd, I'm not sure if you gave the tax rate expectation for the fourth quarter. I wasn't sure of the impact of the tax credit.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

I said we can get back to 292 for the full year that's what we intent.

Jayson Bedford - Raymond James

Great. Thank you.

Operator

Our next question from the line of Joanne Wuensch with BMO Capital Markets. Please go ahead.

Joanne Wuensch - BMO Capital Markets

Hi thank you. I have a quick follow up. Can you talk about your FX hedging strategy?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Sure. Our major exposure is euro, euro basket. We have a pool of and most of our other international business or good chunk of our other international business export spend in dollars.

And our Japanese joint venture we sell though dollar. So our main exposure is euro. We have around $500 million in euro basket, dollar equivalent sales roughly.

Between 60% and 65% of that is naturally hedged through our commercial infrastructure in Europe and European manufacturing plants. So, that leaves about 35% to 40%. We hedge about 15% of that remainder either through forwards or options.

And all of that currency then, all of what's left over comes through the gross margin line.

Joanne Wuensch - BMO Capital Markets

Okay, and then quick question on surgical specialties business. I understand you have a couple of new products, product launches coming up. Can you comment on the growth in the surgical business in like 2008 and beyond that? I mean given there was 9% very strong growth in the quarter?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

You mean full year growth for surgery?

Joanne Wuensch - BMO Capital Markets

Right.Now they are even beyond, please.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Well, we just talked about '08. We are flat year-to-date. We think we will probably see flat and low single-digits in growth in the surgery business for the full year and we will talk to you about next year in about 60 days here when to get to our December Analyst Meeting.

Joanne Wuensch - BMO Capital Markets

Okay, thank you very much.

Operator

And our next question from the line Kristen Stewart with Credit Suisse. Please go ahead.

Kristen Stewart - Credit Suisse

Thanks for your follow-up. Just a real quick one. On Agento, did you guys comment on pricing trends overall and then just on the whole hospital acquired infections business. Are you still anticipating to see continued strong adoption pushing through the CMS change, I am wondering if you can comment on how ordering patterns have been over the last couple of months if you're seeing a big push heading into the CMS changes and if you have seen anything over the last couple of weeks.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Your are talking about Agento specifically Kristen?

Kristen Stewart - Credit Suisse

Agento, and then just a broader portfolio.

John H. Weiland - President and Chief Operating Officer

In terms of the ASPs we've seen in Agento we're right where we expect to in our plans in terms of how we are pricing Agento in the adoption of that from a pricing standpoint. In terms of hospital acquired infections, there are two notes. One is that CMS has put in the non-reimbursement for urinary tract infections that hit in October.

It's obviously been a large positive impact from an infection control fully catheter business. They have not put that same restriction on hospitals as it is related to ventilator associated pneumonia. They will wait until next year to roll on that and make a decision in next October, I believe in terms of whether that will go into effective or not. But at this point in time it is not been affected by that issue on CMS, but rather the entire approach of hospitals to reduce ventilator associated pneumonia, especially considering the way that hospitals have to publish those results in on a state-by-state basis now.

Kristen Stewart - Credit Suisse

Agento I think in the past you said around a 100 to 120, is that still kind of --

John H. Weiland - President and Chief Operating Officer

We are in that... we are still in that ballpark.

Kristen Stewart - Credit Suisse

Okay. Thanks so much.

Unidentified Company Representative

Okay.

Operator

and there are no additional questions. This concludes our Q&A session. I would now like to turn the call back over to Bard's management for closing or additional comments.

Timothy M. Ring - Chairman and Chief Executive Officer

Thanks very much. I would like to just thank everybody for joining us today. And again, we are very thankful for all of our employees, we will award for their efforts for the quarter. Again feel that executions is the key part of our strategy going forward and we continue to execute well. So we will see you next quarter. Thanks

Operator

And ladies and gentlemen, that does conclude your conference call for today. We thank you for your participation. You may now disconnect. .

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