BioForm Medical, Inc. F1Q09 (Qtr End 09/30/08) Earnings Call Transcript

BioForm Medical, Inc. (BFRM)

F1Q09 (Qtr End 09/30/08) Earnings Call

November 6, 2008 8:00 am ET

Executives

Steve Basta - CEO

Derek Bertocci - CFO

Analysts

Tom Gunderson - Piper Jaffray

Peter Bye - Jefferies & Co.

Ken Trbovich - RBC Capital Markets

Presentation

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the BioForm Medical first quarter fiscal year 2009 financial results conference call, hosted by Steve Basta, the CEO of BioForm Medical and Derek Bertocci, CFO of BioForm.

During today's presentation all parties will be in listen only mode. Following the presentation the conference will be open for questions. This conference is being recorded today, Thursday, November 6th.

I would now like to turn the conference over to Steve Basta, CEO of BioForm Medical. Please go ahead, sir.

Steve Basta

Thank you, Michelle. Good morning and thank you to everyone who has joined us for the call this morning for our fiscal 2009 first quarter earnings call.

Before, I begin the prepared remarks just a quick reminder for those who attending the call. We will make projections and may make other statements about the company's business that are forward-looking and are subject to many risks and uncertainties that could cause actual results to differ materially from expectations.

A detailed discussion of the risks and uncertainties that affect our business is contained in the company’s periodic SEC filings, particularly under the heading Risk Factors. Copies of these filings are available online from the SEC or the BioForm website.

The company’s projections and forward-looking statements are based on factors that are subject to change, and therefore these statements speak only as of the date they are given. The company does not undertake to update any projections or forward-looking statements.

By now everyone should have access to the first quarter fiscal 2009 financial results release, which was distributed this morning, the release is also available on the Investor Relations section of the BioForm website at biofrom.com, and we will be filing an 8-K with the SEC latter today. If you do not have online access, you can call our office at 650-286-4025 and we will fax one to you.

Reviewing our first quarter fiscal 2009 revenue; our revenue in the September quarter was $15.7 million as compared to $15.2 million in the corresponding quarter last year. So year-over-year revenues were up which we find very encouraging particularly given the macroeconomics pattern that has occurred over the past twelve month period.

Revenues were down sequentially quarter-over-quarter from the June 30 results to the September 30 results. That is our typical seasonal pattern, which we expect each year. We typically find that the September quarter performance somewhat below the June quarter performance, just due to the summer seasonality.

We actually find the September quarter performance for RADIESSE and the recently announced Juvederm results from Allergan to be encouraging that the dermal filler market is thus far being rather more stable than some forecast might anticipate and we are encouraged by our ability to hold market share in this environment.

We have a premium product, delivering better performance; certainly we have what we believe to be the best value message. There are also other products which are available at lesser prices. We are certainly encouraged by our ability to win share by the robustness and strength of the market over the past quarter.

Speaking about the trends in the dermal filler market and where we go going forward. As I described we certainly believe that the recent quarterly performance of RADIESSE, (inaudible) stabilization over the September quarter, but we keep in mind as we think of our planning going forward. That the September quarter results reflect the macroeconomic environment prior to the most recent equity and credit markets turmoil, which may, in fact teams with this environment and the aesthetics market environment.

As such we are conscious about the outlook for the coming quarters. If the recession worsens and there is much talk around the macroeconomic basis of that happening. It is possible and indeed we are modeling several scenarios where we may see a hit to dermal filler sales.

We do not have precision in our visibility and our ability to forecast future quarters. So we have reset our revenue range and guidance to a boarder range that we have typically provided in the past and we set our revenue guidance range down to $60 million to $70 million range from the previously guided $74 million to $78 million range.

The reason for the downward adjustment is in fact, the financial markets turmoil that took place in September and October, and the expectation that that is going to have a meaningful impact in the aesthetics marketplace in the coming quarters. We have not seen it yet through the September quarter, but we anticipate that the macroeconomic conditions that they have impact to impact our market.

The boarder range results from the fact that we can model scenarios in this environment that show a decline in dermal filler sales, which would lead to the $60 million number, stabilization of flat sales which would lead to the mid 60s number. At the top of the range an increase in sales versus last year, and its difficult for us to have precision about which of those scenarios is the most likely.

We also announced today that we are taking a significant cost production action to reset our operating expense run rate and I want to discuss that for a few minutes. The factors that led our decisions to take this action include the following and macroeconomic environmental factors.

First, the equity in credit markets impacted less 45 days, we believe is creating a business environment where no financing is likely to be available for both companies, possibly for a one to three year period or longer than two years.

We, therefore, need to operate in a reduced burn environment and get to cash breakeven and profitability with the cash resources that we have in-house without having to allow in any further financing. We want to eliminate financing risk and uncertainty from our business.

We also understand that if the recession deepens, there might be further weakness in the dermal filler market possibly for a one to two year period. In that situation, if we see further weakening in the aesthetics market, we might, we need to be prepared for that economic impact as well.

We are very well-positioned with our new cost structure to have a significant positive earnings impact when we either see recovery in the dermal filler market or even in the protracted downturn with revenue growth that is generated by the launch of new product and we are expecting new product within about a 12-month period to start kicking in and driving meaning for additional revenue. So even in protracted downturn, we can get to profitability with our new products. We also have the opportunity get to profitability even with the modest recovery in the dermal filler market.

Both the RELAXED EXPRESSIONS and pressures in the Polidocanol product have the opportunity to launch in late calendar 2009 or second half of calendar 2009, and generate revenue in fiscal 2010 and become quite meaningful in fiscal 2011.

The failings which we are taking in this cost cutting action come across the Board in our organization with the exception of our absolute prioritization and focus on field personnel and a customer-facing experience that our field representatives in clinical education team provide.

We have reduced our marketing programs, reduced clinical education programs, deferred two clinical trails, reducing staffing internally, and we will be reducing our work force by 35 employees today. We have taken significant additional savings, in fact, versus our initial budget because we have had a higher increase in place to several months. So we are down even more than that in terms of personnel versus our initial plans.

Across the country, nearly, every department has had programs or budget either cut or altered to save cost. It will take us one to two quarters to implement all of the transitions because some program have lead time associated with commitment and lead times associated with project that are ongoing. So, we will be transitioning in the second and third quarters to the reduced run rate. We are also reducing management compensation by a completely suspending and eliminating the cash bonus program for management in this financial environment.

Priorities on what we are keeping reflect what we think is absolutely critical to driving revenue. Our top priority in this is to our fields sales organization and our field clinical training teams. We are retaining all sales reps currently in place in the US and Europe. We are going to have a field force in the US of more than a 100 including sales representatives and clinical trainers, we will have a field force of more than 20 sales reps and clinical trainers.

The Europe, we are preserving a front line capability to influence physicians offices, train physicians on best practices with RADIESSE, drive clinical confidence among injectors and train office staff on how to communicate the advances [of the] RADIESSE to patients.

The core of how we win market share is what happens in the office and that is where we are making significant substantial investment and we have not compromised those capabilities in anyway by investing in this business activity.

Most of our customers therefore will not feel the impact of these cost cutting steps. Their rep, their clinical trainer will be exactly as they have been and the impact in their office, I think will be not felt at all from those customers.

That will enable us to have a significant ability to continue to drive revenue growth, and continue to drive share gains where our savings are coming in is in office space personnel at our San Mateo and Wisconsin facilities and in the programs that we have been running and we also will just across the board get much more rigorous about expense containment and travel expenses and other discretionary areas where we can control expenses.

The impact of this on our guidance is that revenues are, as we described earlier due to the macroeconomics environment, are revised downward from the previously expected $74 million to $78 million range for this fiscal year to a broader and reduced range of $60 million to $70 million. Again, we do not have precision on that number.

We can not tell you with any certainty that will be simply because the economic impact of the recent credit and equity markets turmoil has not yet been felt. We have not seen it yet, but we certainly anticipate that there likely to be an impact from those activity. We have therefore reduced our operating expenses from the previously guided range of $84 million to $86 million.

We are moving to an annualized run rate operating expense level of $64 million to $68 million. That is not revised guidance for this fiscal year because for the first four months, we operated at about higher expense level. It will take some numbers of months in the transition and we will be then operating in the new expense level for half of the year so that we expect on a blended basis that we will end up with operating expenses in fiscal 2009 of approximately $75 million to $78 million but come out of the year with a $64 million to $68 million annualized operating expense rate.

Gross profit is expected to be 80% to 83% of sales on an annualized basis, consistent, substantially consistent with our prior guidance and the ranges there we may actually have fluctuations within that range or outside of that range on a quarterly basis but on an annual basis, that is what we expect to come out and the net loss due to all of this will likely be in the $18 million to $25 million range for this fiscal year and substantially reduced in the future fiscal years associated with our substantially reduced operating expense level with the opportunity for us to get to profitability if we see revenue growth either due to growth in RADIESSE sales which we are certainly optimistic and driving towards and then to our growth in the sales associated with new product introductions.

Let me turn it over to Derek for the financial discussion and then we will take questions after Derek's financial comments.

Derek Bertocci

Thanks Steve. Worldwide revenue increased 3% in the first quarter of fiscal 2009 from the comparable quarter in prior year. In the United States, our revenue from sales of RADIESSE in the first quarter increased 1% from the first quarter of the prior year.

Compared to the fourth quarter of fiscal 2008, revenue was down 5%. We generally experienced a seasonal variation in revenue for the first and third quarter of fiscal year being relatively weak and the second and fourth quarters being relatively strong.

In the first quarter of fiscal 2007, revenue from US sales of RADIESSE was down 5% from the fourth quarter of fiscal 2006, while in the first quarter of fiscal 2008, it was up 4% in the fourth quarter of fiscal 2007.

In International markets, revenue in the first quarter increased 13% from the first quarter of the prior year, due to growth in sales for our international distributors. Revenue through direct sales in Western Europe was down duly believed to the impact of the weakening economy in this market.

The decline in consumer confidence and the weak economy have weighed on the dermal filler market in the US since September 2007. We began to see these factors impact our international revenue in Western Europe in the first quarter of fiscal 2009. From December 2007 to June 2008, our revenue declined by approximately 10%, we believe primarily due to the decline in consumer confidence and an associated contraction in dermal filler usage.

In the September quarter as we described, revenue appeared to follow the historical seasonal patterns, and therefore, we do not believe we have seen more erosion in the dermal filler market, in this recent quarter. Macroeconomic factors have worsened significantly in September and October.

Given uncertainty about the depth and duration of the current downtrend in the economy in the US and our major international market, it is not clear to us if our revenue will hold stock, decline, or possibly grow during the next few quarters. Accordingly, our revised revenue guidance of $60 million to $70 million for fiscal 2009 is both more cautious and wider in range that our prior guidance. Our actual revenue for fiscal 2008 was $67.5 million.

Our gross profit margin in the first quarter of fiscal 2009 is 83.6%, up from 81.6% in the comparable period in the prior year. We incurred some sales promotion expenses in cost of goods in fiscal 2008, but none in the current year. Our average selling price was lower this quarter, partially offsetting the benefits in its production and expenses.

With our planned expense reduction, we anticipate our gross margins will be in the range of 80% to 83% for the balance of fiscal 2009 though it may vary somewhat by quarter. The most notable driver of our operating expenses is sales and marketing expenditures, which were 30% higher in the first quarter of fiscal 2009 than in the same period of prior year.

We have identified significant reductions in programs and support costs in sales and marketing. We intend to maintain our direct field sales and clinical training organization, with more than 100 field personnel in the US and more than 20 in Europe. We believe that with these teams we have the resource to compete with the leading companies in our industry and realize the sales potential of RADIESSE, as well as the products in our R&D pipeline.

Ongoing research and development expenses in the first quarter of fiscal 2009 were not significantly changed from the comparable quarter in the prior year or the fourth quarter of fiscal 2008. General and administrative expenses increased due to additional accounting insurance and legal costs related again to the publicly owned company.

Our tax profitability involves growing revenue while not adding significantly to our selling and marketing cost structure. We believe that the expense reductions that we are implementing will enable us to turn profitable at approximately $80 million in annual revenues.

The additional revenue to reach and surpass this level can come from number of sources bringing new products in our pipeline to market successfully, improvement in current sales of RADIESSE from a rebound in the economy and consumer confidence, or combination of these elements.

Now, I would like to turn the call back to Steve.

Steve Basta

Thank you, Derek, and Operator, we will take questions at this time and then end with closing comments after the questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from Tom Gunderson with Piper Jaffray.

Tom Gunderson - Piper Jaffray

Tough times out there but necessary moves that you're making. Two questions. One, I know, it’ll sound a little too philosophical, but I’d still like to hear your answer to that, Steve. We think we understand the market that’s out there. You have what could be called a luxury good that is in a tough retail market. People are pulling in tougher economic times. The question is what do you think it takes to bring women back to the doctor? They’ve been cutting back. What brings them back in a more regular basis? What bring the new customer back into the position?

Steve Basta

Okay. Do you want to do them just one at a time or you are going to give me both questions?

Tom Gunderson - Piper Jaffray

The other question is can I get an update on the regulatory path for Aethoxysklerol.

Steve Basta

Okay. Let me take the second one first, because that one is easy. The first one, your idea is a bit more philosophical. The update on the regulatory path as we have previously indicated, we expect to complete the NDA filing by the end of this year. We are on track to do that. The work that is required to complete that by the end of clinical trial was done over the summer.

We announced the results in our September 4 call associated with the June 30 quarter and we also announced we are completing tradition manufacturing validations and documentation, that work is nearly complete and should be done in November with the filing in December. So we think that we're on track in that timeline from the NDA to be submitted this calendar year. That is an NDA and so it is the standard NDA review timeline that we expect if we don't have any meaningful questions or delays with FDA, we could be on the market by late 2009.

If, in fact, that NDA process takes a little bit longer and certainly we are conscious of the fact that FDA, NDA review processes, which have in some places take longer, it could be into calendar 2010 before the launch. But, we think it's right on track with the clinical data. It's very clean and very straight forward. So, we're looking forward to that review.

On the first question, which is what did it take to bring patients back into these offices. Let me actually change the tone of the sort of thought process here a little bit, which is we've not seen that patients are coming into these offices for dermal fillers. So, we are seeing impact to the aesthetics market right now in a more profound fashion as a much expensive procedure. Certainly, the ASPS Conference this past weekend was indicative of the fact that surgeons are seeing drop offs in their surgery and there is clearly an impact when you're talking about $10,000 surgical procedures.

The dermal filler market has taken a hit. If you look at our December quarter in which we did north of $18 million in revenue and look forward to the June quarter, where our revenue had dropped to below $17 million, they argue believe there is a 10% hit or so, typically December and June are two peak quarters, so looking peak to peak, you'd see about a 10% decline in that period of time and the seasonality that we expect is what we've seen in the September quarter. So, we're not seeing the patients have dropped out of these offices; in fact, what we're seeing is through the September quarter reasonably stable sales levels with seasonality factored in relative to where we were in June and we're encouraged by that.

It's unclear however, as we talked about what's going to happen going forward because the economic recession is going to get meaningfully worse associated with the credit market collapse and with the equity market issues and so it's unclear looking forward whether or not we will have an impact and how big that impact will be and so we are modeling several difference scenarios.

There are several thought processes on how people make decisions about dermal fillers. There is one thought process that is dermal fillers are maintenance treatments like beauty cream or getting your hair done, it is something that someone does on a regular basis to make sure that they look their best and those sorts of treatments at a more modest price. These tend to be much more resilient in downturns and there are other thought processes that in general aesthetics treatments are luxury goods and will contract in an economic downturn.

The dermal filler market today has a very different look than it has ever looked in the prior downturn in terms of the size and [strength] and breadth of reach in the patient community and so we just don't know how the model like that precisely. I haven’t given you’re a full answer because I don't yet understand exactly what we're going to see in the coming quarters and so I'm not sure how to speculate on what it would take to fix it. We're certainly very encouraged by the fact that physicians still seemed to be doing a lot of these procedures.

Tom Gunderson - Piper Jaffray

So, I didn’t expect a definitive answer. I just wanted to get your color on it. Thanks.

Steve Basta

All right.

Operator

We'll take our next question from Amit Hazan with Oppenheimer.

Steve Basta

Hello Amit.

Unidentified Analyst

It’s actually Angela calling in for Amit this morning.

Steve Basta

Angela. Hi, Angela.

Unidentified Analyst

Hi. My first question is on RADIESSE in the US and basically if you could talk a little bit about market share and new account growth. Because I know, you haven’t penetrated all of the dermatologists and plastic surgeons yet and there is still performing some dermatologists. Have you been able to continue penetrating that?

Steve Basta

We are continuing our near account penetration at about the same rate that we have been running the entire quarters. We don’t give granularity on exactly what the numbers accounts of each quarter but our pattern in the summer quarter was similar to prior quarters in terms of the rate of new account conversion.

The overall market share that we believe that we got in the September quarter versus prior quarter is about the same. So, we are holding market share. We are not, we didn’t win market share as certainly over the last nine months about one market share at the rate that we would like to.

We are looking at a number of initiatives that will assist us in driving faster market share gains but it is obviously a competitive market and I am sure our competitors are also looking at initiatives that they think will drive market share gains and we will found in the next few quarters who is successful in that endeavor.

But it appears that our market share has been flat over the last few quarters relative to the broader market and this is not absolute precision on that because no survey that we can do is sufficiently precise nor will it reach all customers and there is a buy in that state or anything of that sort. So, we are all making as to the promise?

But it looks like we've had flat market share, we have had continued new account conversions and we are continuing to penetrate new accounts. We are also continuing to grow accounts and we’re very encouraged by both of those phenomenons. So, we are still not seeing a drop off in new account conversions for example in the summer quarter versus prior quarters.

Unidentified Analyst

Okay, that’s very helpful. Also you mentioned that you had some sales promotions last year and that you discontinued those this quarter. Can you talk a little bit about what competition is doing on pricing as well? Is that something that everyone is trying to do in order to preserve their margins or is that possibly something that from a pricing standpoint, you are looking at in terms of maintaining your market share?

Steve Basta

Actually all of the companies in this space run sales promotions pretty regularly. The sales promotions that we've ran last summer had along with the sales of RADIESSE and additional component which physicians got which ran through the cost of goods line, which is why we cited it in the context of our gross margin change that not running that particular sales promotion resulted in our gross margin going up by 1%.

That shouldn't imply that we don’t run sales promotions. In fact, we run sales promotions probably six to eight months out of the year and so we will run a promotion for 60 days, take a break for a period of time, run a different promotion of a different sort over some period of time and similarly we see patterns with our competitors. Where they will run a promotion for some period of time halt that start a different promotion, which has a different structure and we are seeing that on a constant basis in our industry.

Physician buying patterns tend to be promotion sensitive to some degree and if that’s how reps are able to communicate with physicians to spur or purchase then I suspect that each of this will continue to do that in the future quarters. But it's not an absence of promotions that was naturally implied in the press release, but rather the structure of the promotions that we are will running now don't run through the gross margin line and so they won't have same the impact on gross margin.

Unidentified Analyst

Okay, great, thanks guys.

Steve Basta

You're welcome Angela, thank you.

Operator

Our next question comes from Peter Bye with Jefferies & Co.

Peter Bye - Jefferies & Co.

I had called you on your expense control and just sort of efforts in the new economy here. But also just looking your stock here and where it's been and the changing economics of the environment here. I mean just thought about, what consolidation, some other types of exit strategies down the road. Are these on the table, off the table? You answer the phone if it rings, I know you are not going to obviously tell us, hey, we are going to do a deal with, X, Y people, is that may be just talk about a little bit.

Steve Basta

Our primary motivation is and has been to build a leading medical aesthetics company. Our absolute focus and the guidance that I have got from the Board is very clear that we are building a leading medical aesthetics company. Yes, we are experiencing the current economic malaise and the weakness that everyone else is experiencing. The cost reduction actions are keen full that we are taking today and even more so for the employees that are affected and we understand the significance of that action on many of the families that are impacted in that process.

But in the long-term, we think that there is enormous leverage in the medical aesthetics marketplace. Dermal fillers are going to recover. They are going to recover very meaningfully. We've now got a well established top three position in this industry and we've had probably a flat market share for the last few quarters, but there is premium performance associated with RADIESSE that we believe we are going to be able to drive into market share gains.

So the long-term outlook for the company is significant and the desire to even that we are seeing something of the current price, I don’t think that there is any appetite of doing that. That said, we are a publicly traded company and it’s impossible to say, we are never under any circumstances. We have public company obligations, but there is simply no desire or appetite at these kinds of levels to even entertain a phone call.

Peter Bye - Jefferies & Co.

Okay. And just the, the three years of viability at the burn rate under the new -- once the expenses fall through, and also I assume there is no ramp up in expenses for the launch of the new products in the quarterly net revenue. I assume the launch of the products is going to be somewhat unprofitable for a while, and you’re going to have to spend the rates. So maybe if you talk about what -- or is it too early to talk about what you’re going to do with Aethoxysklerol depends what the market is doing at that time, it depends on the economy and that sort of stuff. Just give me a thought generally how we should think about that longer-term, and where the cash goes over the next two, three years?

Steve Basta

I don’t think actually that the launch of the products is going to be nearly as expensive as one might model. We’ve recently done a customer survey of 1,200 of our existing customers. This is just an online survey, we invited physicians, our office managers to respond regarding their own practice patterns, what they are doing with other products; 63% of our existing customers today do sclerotherapy.

That doesn’t create a huge launch cost, it’s literally making brochures and posters and some trade journal advertising on launch. Virtually anybody who does sclerotherapy knows about Polidocanol, and there is an enormous desire for this product, an enormous belief that there is -- there are superior performances associated with this product versus other agents that are available. Launching into that environment doesn’t take an enormous amount of marketing to convince people that this is the product they want to use. We simply have to let people know that it's available and it's our existing customer base through our existing sales force.

So there is not incremental sales force cost associated with launching Polidocanol that goes through our existing sales force into our existing customer base with some marketing cost, but it's not nearly as big as one might typically model for the launch of the significant new product. So we think we can do within the operating expense structure that we're describing that we can, in fact, launch that product and launch RELAXED EXPRESSIONS product.

We haven't defined precisely what the timing of the RELAXED EXPRESSIONS launch will be, because one of the things that we have clearly identified over the recent months is that we have to optimize that treatment protocol prior to a significant commercial launch. There is work to be done around creating consistency of outcome with RELAXED EXPRESSIONS device.

Some physicians are reporting to us that they are getting 80% to 90% success rates. Other physicians are reporting that they are getting 60% to 70% success rates. We want to get it to the higher success rate level and create more consistency and have much more predictability over the treatment outcome, and we're going to be doing some work on that over the coming months.

But as we start to optimize those treatment protocols again, that's a product that will be sold through our existing sales force, same sales organization, which is the majority of our sales and marketing cost into the same customer base.

If you think about who uses RADIESSE, the physicians who use RADIESSE are generally core providers, the plastic surgeons, facial plastic surgeons, dermatologists. Generally they are the early adopters who are willing to adopt premium products and procedures that deliver longer lasting outcomes for their patients. That's exactly who we believe is going to want to buy RELAXED EXPRESSIONS.

It would be physicians who want to differentiate the factors because they are using a premium product or offering a service that not every other physician in the marketplace is going to be able to offer. It differentiates their practice. That’s our core customer base with whom our sales reps have relationships today. So there is again some marketing expense, but I think it can be launched within the operating expense structure we are creating.

Peter Bye - Jefferies & Co.

All right, great A couple more. You mentioned, the new account growth has been similar to the past; can you talk about how many ordered relatively speaking in the quarter than past quarters? And do you think if there is a drop beyond seasonality, its just people are extending their order time or docs ordering just less at a time?

Steve Basta

Yes, we don’t give the actual numbers. I want to be very cautious about not providing these specific numbers of accounts over each quarter because that creates a whole new metric every quarter.

Peter Bye - Jefferies & Co.

Right

Steve Basta

But year-over-year, we actually have more accounts orders in the last quarter than the order the year ago, and we were basically flat from the prior quarter. So we had about as many people order RADIESSE in the September quarter versus the June quarter and sales were approximately of the same level.

Peter Bye - Jefferies & Co.

Thanks.

Steve Basta

So we are not seeing a drop-off in usage. We're not seeing a change in pattern of usage.

Peter Bye - Jefferies & Co.

Well, its great. I’ll jump back in queue. Thanks Steve.

Steve Basta

All right, thanks, Peter.

Operator

(Operator Instructions). Our next question comes from Ken Trbovich with RBC Capital Markets.

Ken Trbovich - RBC Capital Markets

Thanks for taking the question. Steve and I guess I just wanted to follow-up on the last comment. Just with regard to the account volume versus procedure volume and obviously you made the statement that the September quarter might not have been as that as we all would expect. Can you, perhaps, separate that out when you look at the account base that existed a year ago at this time and sort of separate out some of that increase in account base, we actually saw year-over-year in the quarter.

Steve Basta

I'm not sure what you mean by separate...

Ken Trbovich - RBC Capital Markets

So, if we look at it we thought, if we thought of it as physicians that ordered a year ago in the quarter, essentially represented in establish base. What was the order pattern like from that established base? Was it the modest sort of decline that you talked about in terms of the sort of 10% number or was the number greater than that and offset by new physicians and new processes essentially being opened over the last year?

Steve Basta

I haven't look at the analysis in quite that way Ken and so I don't have a precise number for you. But there are some extrapolations that you can take from the fact that revenue was up modestly versus a year ago. If our total account base is up, then sales per account would be down a little bit and that's generally the pattern as we looked at various metrics on top thousand accounts or other areas.

What we see is that the usage of dermal fillers in offices that have declined, that we estimated between December and June as where we looked at it more closely has declined about 10%, maybe 10% to 12% within accounts from December to June. Our decline in the sales from $18.6 million I believe it was in December, the 16.7 in June was not due to a drop off in accounts. We had as many accounts buying the product. It was due to a drop off in utilization per account and so we are ordering per account and I think that's just the macroeconomic cycle.

Ken Trbovich - RBC Capital Markets

Certainly, I understand the cycle and I guess the reason I ask the question is it's specifically because December to June comparison doesn't include sort of the initial part of the biggest concern that we're all talking about it. I think you see, the reports out of the automakers of 30% drop in volumes and based on the numbers you're reporting clearly it doesn't suggest you've had 30% drop in volumes. So I was just trying to get a better sense for what that volume decrease may have been quarter-over-quarter as oppose to December versus June.

Steve Basta

And what we we're telling you is certainly in the September quarter, we didn't see that. We did not the see in the last two weeks of this September were different from the pattern that we would have expected to see.

Ken Trbovich - RBC Capital Markets

Okay.

Steve Basta

We've just not seen that impact yet.

Ken Trbovich - RBC Capital Markets

That's great news and against that the next question is…

Steve Basta

Just going to hold but certainly this is very different for example from laser vision correction where you've seen later procedures drop off. Let me give you a little bit of at least in their internal discussions, the character of the difference of discussion, because we've been having a very active dialogue among the management team about how do we forecast in this economical environment and there are a range of scenarios and just among our executive staff as you go around the table. There are different scenarios that are proposed as realistic and possible from a 10 or more percent further decline of the dermal filler market to flattening of the dermal filler market to starting the recent recovery, because there was pent-up demand and certainly there is a possibility that between December and June people were putting up procedures in December and September we would historically have been expecting a 30% growth rate, that means that there are lot of people that have been putting our procedures that at some point they are going to come back into this market even in a weak economy.

They are going to want to come back in, so there is a least of scenario that says in the down market, in the down economic cycle you might see growth.

There are also clearly scenarios that say in the down economic cycle you might see contraction. What we don't expect to happen is anything that looks like what's happening in the laser vision correction because the quality of decision making the patients make in getting a dermal filler treatment is different from a laser vision correction treatment just to take that example and I happen to use that [dermatologist] sitting left to you, was a CFO, so he has instructed me dramatically there are more insights for vision correction world but in that environment a patient is making a once in a lifetime decision.

If you've been wearing glasses for 30 years and you are thinking about your vision correction and getting a significant procedure, the ability to put that off for a year or two is pretty easy. You've been wearing glasses for 30 years. You could wear glasses for 32 years, that's a rather easy thought process to say. I'm just not going to take this discretionary item. Today, I'm going to wait until I've got a more robust economy and that's why procedures of that sort get hit much more substantially.

Certainly, with an auto purchase if you own your car four or five years you can own it for six years. It doesn't fundamentally alter your lifestyle in any way to have your car for a year longer and that's why you are seeing a significant downturn precipitously in the auto purchases, just because it's easy to put that off for a few months.

If you think about women's decisions and 90% of our customers are women, women's decisions in beauty regimens, putting off your beauty regimen is actually a fundamental change in your lifestyle and putting off the dermal filler treatment if you have gotten into the habit of getting aesthetics treatments, is potentially a more significant lifestyle change and certainly this market has in prior downturns been more resilient than other discretionary spending items.

I see that was a caveat and the caution that this economic recession looks to be different than anything that we've seen in modern financial history and we don't know how to model what the behavior is going to be in this economic cycle over the coming quarters.

Ken Trbovich - RBC Capital Markets

Okay. Then specifically within that range of estimates do any of those include for '09, do any of those include the contributions from new products specifically?

Steve Basta

For fiscal '09, no.

Ken Trbovich - RBC Capital Markets

Okay.

Steve Basta

On internal products.

Ken Trbovich - RBC Capital Markets

In terms of when we think of sort of the range to which you've tested is on volume decreases, is there still a count to the point of the question earlier that gives you confidence that you can continue to grow the account base. I know you said it was slight quarter-over-quarter, but is there an effort to perhaps, look out there across the landscape and try to determine if there is any opportunity to continue the account growth?

Steve Basta

Absolutely, as we've described in the past, we've got something on the order to 7,000 to 8,000 accounts that have ever ordered RADIESSE. And if you think about the number of Botox accounts and the number of, and clearly Allergan is driving growth in Juvederm, not just with their existing account base but by taking Juvederm into every accounts that’s using Botox. Its very simple broadening of the account base model and so if they have the potential of going into 20,000 accounts for Juvederm that creates a marketplace for us where we are only into a third of a potential account.

Now our core focus is in plastics, derms, facial plastics, even within that account base it is estimated they are between 10,000 and 12,000 core accounts. So we are just over half way through first sales into those accounts. We have a lesser number, probably a third of that total core account marketplace that we consider to be really meaningful users of RADIESSE. So there are both new account opportunities and accounts that have ordered from us once or twice but aren’t really using the product yet, in any meaningful fashion where we’ve got an opportunity to win market share in a pretty significant way.

So even in a flat market environment, if we are successful at driving market share gains through account penetration and growing what our relatively small user accounts currently we could have very big positive revenue impact.

Ken Trbovich - RBC Capital Markets

Okay. To what extent is the account base growth helps to offset the volume decrease, is it, that we have already sort of cautioned about. Certainly, I think that's the offset that maybe the rest of us don't have a lot of visibility on. We have a goal of increasing the account base by 10% to 15% a fiscal year, is there something that that makes you (inaudible) as in metric to offset the volume?

Steve Basta

Ken, we don't offer those kinds of metrics because on a quarter-to-quarter basis, our initiatives change. There will be times when we focus our sales force on new account conversion and then we'll run special programs targeted to new accounts. There will be times when we focus our sales force on going deep within existing account and we want them to be running training programs for office staff and reinforcing that with training programs, [mostly] of clinical specialist for -- as their physicians were injecting in those offices. And so it will vary from quarter-to-quarter what core initiatives we are driving into our sales activities.

We just can't give in those metrics because we might have a very successful quarter where we drive revenue growth, but our core focus is in taking small accounts and growing them. And you actually see new accounts drop off precipitously because that's just not what we're focused on that quarter. Then the next quarter we might come back and see a targeted program for big Restylane and Juvederm account. So we've a targeted program for all of the non-RADIESSE users within area and it will just vary from quarter-to-quarter. So we have not given that granularity.

Ken Trbovich - RBC Capital Markets

That's fine. I can appreciate. I guess maybe what I am looking for is some better understanding than of what the focus was from June to September. Was it on new account growth? Was it on sort of some other promotional effort from the comparison? Could you mention the account base was essentially flat, I'm just trying to better understand how that worked in the quarter.

Steve Basta

I appreciate that. I will actually defer answering, I will [have to] answering that question because if I start the pattern of answering that question for the last quarter then end up -- it creates awkwardness in future quarter if we say, well, we answered it then, we're not answer it now. I will respectfully pass on, offering that granularity on the historic quarter.

Ken Trbovich - RBC Capital Markets

Not a problem. I appreciate it. Thank you.

Steve Basta

Thanks, Ken.

Operator

(Operator Instructions). And gentlemen, there are no further questions at this point.

Steve Basta

Great. Thank you very much, Michelle. And just in closing, let me offer my thanks first and foremost to all of our [accounts] employees. We have been fighting in a very competitive marketplace over the past year. And doing so, quite effectively, against larger competitors with more resources, I’m really quite proud of the work that our team has done.

And to the employees who are impacted by today’s cost-reduction actions, our sincere and heartfelt regrets for the impact that this is going to have on their families. For our remaining employees, we are looking forward to getting it to an aligned around how do we create significant success and growth over the coming quarters.

For investors who are on this call, thank you for sticking with us through what has been a very difficult macroeconomic cycle, and truly a downturn broadly in the aesthetics industry. We are as optimistic and enthusiastic as ever about the long-term potential for RADIESSE to become, if not the leading product, one of the leading products.

We’re certainly one of the top three players, but we intend to have a much bigger share in this market in the coming years, and drive very meaningful growth. We are also quite optimistic about the success that we’re going to have in future years with Polidocanol and RELAXED EXPRESSIONS, and then further on, with BioGlue, although we are deferring the timelines on that program somewhat due to the cost reduction actions.

I think we’ve got a suite of products that would be fundamentally differentiated in the medical aesthetics marketplace. We’ve positioned BioForm as an organization that provides unique value to physicians in their offices and creates a very significant leverageable business for us in the medical aesthetics arena. We need to get through this economic downturn and get back to the growth that's going to occur in this industry and we think that growth will come with substantial pent-up demand and a substantial and robust accelerating growth pattern in future years, but we are quite cautious about the coming quarters and observant of what's happening in the macroeconomic cycle in terms of the near-term impact. In fact, thank you for sticking with us at what's been a very difficult international market. We appreciate everybody's time today. Thank you, Michelle.

Operator

And that does conclude today's presentation. Have a great day.

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