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Cynosure, Inc. (NASDAQ:CYNO)

Q4 2012 Results Earnings Call

February 12, 2013 9:00 AM ET

Executives

Scott Solomon - Vice President, Sharon Merrill Associates, IR

Michael Davin - President and CEO

Tim Baker - Executive Vice President and CFO

Analysts

Anthony Vendetti - Maxim Group

Richard Newitter - Leerink Swann

Bill Plovanic - Canaccord Genuity

Paul Nouri - Noble Equity Fund

Operator

Good day. And welcome to Cynosure’s Fourth Quarter 2012 Conference Call. Today’s call is being recorded. There will be an opportunity for questions at the end of the call. (Operator Instructions)

At this time, I would like to turn the call over to Mr. Scott Solomon, Vice President for Sharon Merrill Associates. Please go ahead, sir.

Scott Solomon

Thank you, Dan, and good morning, everyone. Thank you for joining us today. With me on this morning’s call are Michael Davin, Cynosure’s President and Chief Executive Officer; and Tim Baker, Executive Vice President and Chief Financial Officer.

Michael will begin today’s call with a discussion of Cynosure’s fourth quarter results and a business overview. Tim will take you through the financials, after which management will take your questions.

Before we begin, please note that various remarks management makes on this conference call about future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve risks and uncertainties. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including those discussed in Cynosure’s most recent quarterly report on Form 10-Q, which is filed with the SEC. These filings can be accessed on the Investor Relations section of the company’s website, www.cynosure.com.

In addition, any forward-looking statements represent the company’s views as of today, February 12, 2013. These statements should not be relied upon as representing the company’s views as of any subsequent date. While Cynosure may elect to update forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so.

With that, I’ll turn the call over to Michael Davin.

Michael Davin

Thank you, Scott, and good morning, everyone. Cynosure posted record revenue for the fourth quarter and full year of 2012, reflecting gains across all geographic regions. Our Q4 topline revenue of $42.7 million increased 25% from the same period of 2011. This was our 12th consecutive quarter of year-over-year revenue growth. For the year, revenue climbed 39% to $153.5 million.

As revenues have increased, we have maintained our focus on expense control, resulting in continued operating leverage. Operating expenses decreased to 48% of revenue in the current quarter as compared to 52% for the fourth quarter of 2011.

This leverage combined with higher revenue and favorable product mix help to increase our net income in the quarter to $4 million, nearly four times greater than net income from the fourth quarter of 2011.

Turning to our domestic performance, North American laser product revenue grew 44% for the quarter and 66% for the year compared with the same period of 2011. These results were driven by the U.S. launch of our new Cellulaze Cellulite Laser Workstation early in 2012.

As well as a strong demand for established aesthetic treatments such as our Elite family of products or laser hair removal, the MedLite C6 and RevLite Workstation for skin rejuvenation and the Smartlipo system for laser lipolysis.

On our third quarter call in late October, I talked about the favorable reception that Cellulaze was enjoying in the U.S. market from aesthetic plastic surgeons and their patients.

Three and half months later, sales of Cellulaze have remained on an upward trajectory, demand is strong both from our installed base of Smartlipo MPX and Triplex customers and from those that are new to Cynosure’s minimally invasive products. Majority of Cellulaze sales in the quarter were new systems to new customers.

The feedback on this program remains very positive. In addition, Cellulaze continues to receive industry accolades. Last month, Cellulaze received the MyFaceMyBody Award for most innovative aesthetic treatment of 2012.

The award recognizes brands for product innovation, exceptional consumer experiences and outstanding customer service. Three elements that are essential to our core philosophy. Wining this award is rewarding because it is based on nominations by experts in the aesthetic, beauty and dental industry, and voted on by consumers.

International laser product revenue is up 14% for the quarter and 29% for the year as compared to the same period in 2011. The increase was largely driven by strong quarters from our direct distribution channels and our subsidiaries in both Europe and Asia.

Our ConBio products, the Q-switched MedLite C6 and RevLite lasers continue to perform nicely in the international and domestic markets. Additional road for currencies have continued to fuel our international growth.

In recent months, we have secured a mix of international marketing clearances that broaden the presence of our products in key markets. Recent clearances include approval of the Cellulaze and Elite+ systems in Saudi Arabia, the Acclaim and the Elite MPX systems in Taiwan, the RevLite and MedLite systems in Australia and the SmoothShapes system in Singapore. We expect to receive additional marketing clearances in the quarters ahead.

Both on operational and financial perspective, we believe the milestones we achieved in 2012 strengthen our position as an industry leader. We believe these achievements position us for continued growth as we move to 2013 and beyond.

The FDA 510(k) clearance of Cellulaze, the world’s first and only minimally invasive treatment of Cellulite, marches one of three significant FDA 510(k) clearances we received last year. We believe each clearance opens a new and underserved market for our laser and light-based devices.

In July, we received FDA clearance to market a home-use over the counter device for the treatment of facial wrinkles. This product is the first being developed under our multi-year funded cooperative development agreement with Unilever. We expect Unilever will launch the device this year.

As a reminder, this is a royalty-based agreement for Cynosure. Unilever is responsible for marketing and production activities for the home-use system. While we believe the commercialization plan remains on track, we will defer to Unilever on the specific timing and launch details.

In December, the FDA cleared our PicoSure laser workstation, the first picosecond device for the removal of tattoos and benign pigmented lesions. The earlier reviews on PicoSure are positive.

An aesthetic dermatologist was participating in the clinical development of PicoSure has told us that he believes the device will become the first in class treatment for these indications. We do expect there will be a significant addition to the market.

We remain on schedule to launch PicoSure at the Annual Meeting of the American Academy of Dermatology in early March. Based on the timing of the launch, we expect the product revenue ramp to begin in the second quarter and accelerate, as we move through the second half of this year.

I’ve touched on several of the operational highlights of 2012. From a financial perspective, we completed a public offering of our common stock in November. The offering resulted in net proceeds to the company of approximately $55.3 million, augmenting our strong cash position.

We are focused on enhancing shareholder value by continuing to profitably grow the company. We believe our financial resources position us well for the future and provide us with the increased ability to consider promising opportunities that fit the criteria of our growth strategy.

Let me conclude by saying that we believe the long-term outlook for our business is very bright. Q4 and the full year 2012 were both record revenue periods for the company. We just completed our fifth consecutive GAAP profitable quarter, we completed an equity offering further strengthening our financial position and we believe we have built the foundation for profitable growth by our focus on the right products in the right markets at the right time. We begin 2013 with considerable momentum.

With that, let me turn the call over to Tim for his financial review. Tim?

Tim Baker

Thanks, Mike, and good morning, everyone. As Mike noted, we kept a record topline performance in 2012 with the highest quarterly revenue total in our history. Equally important, we generated continued operating leverage through careful management of our operating expenses.

Total revenues for the fourth quarter increased 25% from the prior year to a record $42.7 million, reflecting favorable sales mix and strong product demand.

Looking at our Q4 revenue in more detail, laser product revenue was $36.5 million or 85% of total revenues, compared with $28.4 million or 83% of total revenues for the fourth quarter of 2011. Service and parts revenue grew 10% in the fourth quarter to $6.2 million, compared to $5.7 million in the fourth quarter of 2011.

By territory, North American laser product revenue increased 44% to $19.5 million from $13.5 million in the fourth quarter of 2011. North America accounted for 53% of total laser product revenue in the fourth quarter, compared with 48% for the fourth quarter of 2011.

Average selling prices remained strong and the lending environment for aesthetic capital equipment was favorable.

International product revenue was up 14% to approximately $17 million, accounting for 47% of our total product revenue versus 52% in Q4 of 2011. European and Asian subsidiaries, as well as our international third-party distribution channel all posted year-over-year growth in the quarter.

Gross profit margin in Q4 increased to 58.1%, compared with 56.3% for the same period of 2011. The increase in Q4 gross margin reflected a favorable product mix and a larger percentage of laser product revenue from North America where average selling prices tend to be higher.

Total operating expenses were $20.6 million in Q4, compared with $17.8 million in the fourth quarter of 2011. As a percentage of revenues, total operating expenses declined to 48% of revenue for Q4 2012, compared with 52% of revenue for Q4 of 2011.

Looking at expenses in more detail, selling and marketing expenses increased $1.8 million in the fourth quarter to $12.7 million, up from $10.9 million in the fourth quarter of 2011. The increase primarily reflects higher selling and marketing costs based on revenue growth and the launch of Cellulaze in the United States.

On a percentage basis, selling and marketing expenses accounted for approximately 30% of revenues in Q4, compared with 32% in the same quarter of 2011.

By way of background, we exited the fourth quarter with approximately 42 sales reps in North America, including management consistent with our Q3.

Research and development expenses totaled $3.2 million in Q4, up approximately $355,000 or 13% from the same period in 2011. The increase is primarily attributable to development of our picosecond Alexandrite laser technology. R&D expenses declined to 7% of revenue, compared with 8% for the same quarter a year earlier.

General and administrative expenses increased approximately $700,000 to $4.3 million, compared to $3.6 million in Q4 of 2011. G&A expenses declined to 10% of revenue in Q4 of 2012 from 11% for the same period in 2011.

Net income for the fourth quarter of 2012 was $4 million or $0.27 per diluted share, compared with $1.1 million or $0.08 per diluted share for the fourth quarter of 2011, reflecting increased revenue and improved operating leverage for the 2012 period.

For the full year, net income was $11 million or $0.79 per diluted share, compared with a net loss of $2.9 million or $0.23 per share for 2011.

With the completion of our public offering in November which resulted in net proceeds of approximately $55.3 million to the company, Cynosure concluded the quarter with approximately $147 million in cash and equivalents and we have no long-term debt.

We generated approximately $5.8 million in cash from operations for the three months ended December 31, 2012, which largely reflects the combination of increased revenue and profit and balance sheet management. Day sales outstanding were 38 days at the end of the fourth quarter, which is consistent with the third quarter.

With that, we are ready to take your questions. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from Anthony Vendetti of Maxim Group. Caller, please proceed with your question.

Anthony Vendetti - Maxim Group

Thanks. Good morning.

Michael Davin

Good morning, Anthony.

Anthony Vendetti - Maxim Group

Just on the new products for 2013, obviously PicoSure is a big one for you and you’re going to be demonstrating that at AAD. Can you talk about when that’s going to be shipped commercially, if that’s starting already or is it just luminaries right now?

And then, if also, can you talk about the potential competition in the space. One of your competitors announced they’re going to come out with picosecond laser as well. So, I was just wondering, I know that technology has been out for a while, are there any patent issues surrounding that and just other new product introduction throughout 2013?

Michael Davin

Sure. Anthony, this is Michael. Per your first question, the PicoSure is running on schedule to launch at the American Academy of Dermatology less than a month from now, which is what our plan was all long, our long-term plan in the introduction of this technology.

We have mentioned maybe de minimus revenue in Q1, but really don’t expect revenue contributions until the second quarter and then ramping up going into the second half of the year. As it relates to potential competition, we don’t really comment on competition. What I will say though is we are very excited once again to be first mover in introducing what we believe is a game-changing technology in our picosecond technology, PicoSure.

We received FDA clearance late last quarter, which was a rigorous process with the FDA and a major accomplishment. And we’re very excited to be on schedule for the launch of the AAD. As you know, we also have very strong clinical data supporting this technology for papers that were presented at last year’s ASLMS.

And I assure you, there are more publications to come on this technology from well respected high level luminaries in our industry. So once again, our first mover physician, similar to what Smartlipo or Cellulaze or other technologies we’ve introduced, we believe will be a significant advantage for our company.

Anthony Vendetti - Maxim Group

Okay. And then the rest of 2013, do you have a roadmap for any other product introductions or upgrades at this point?

Michael Davin

Andy, as we’ve committed back when we went public in ‘05, we will introduce at least one new technology to address the high volume indication. Certainly, PicoSure meets that commitment. And as you know, we’ve strengthened our balance sheet, which also allows us to continue to be active as we were in 2011 from the non-organic opportunities. So we have a lot going on, on both of those fronts, and certainly our R&D team is very active on developing additional exciting new technologies to the market.

Anthony Vendetti - Maxim Group

Okay. And then on the financials, Tim, the gross margin, can you talk about the new product in terms of pricing and will it be at -- I’m talking about PicoSure? Will it be at the corporate gross margin, a little bit higher and then where do you see gross margins trending in 2013?

Tim Baker

Sure. We expect to be in our normal corporate gross margins. Again, it will be initially a North America product and typically, we obviously get higher selling prices in North America and a little higher contribution out of North America. But we do expect it to be at least at the corporate kind of average gross margin.

Going forward, again, we’ve kind of guided we’d be in this 58% to 60% level. We’re about a 50-50 for the year in terms of international mix and domestic mix. We’re not expecting a major change with that going into 2013. So we would expect our margins to still stay strong in this high 50s growing towards 60s, which is our goal.

Anthony Vendetti - Maxim Group

Okay. Great. Thanks, guys.

Michael Davin

Thanks, Anthony.

Operator

(Operator Instructions) The next question comes from Richard Newitter of Leerink Swann. Caller, please proceed.

Richard Newitter - Leerink Swann

Hi. Good morning, guys. Thanks for taking the questions.

Michael Davin

Good morning, Rich.

Richard Newitter - Leerink Swann

Maybe, I’ll just start off with your comments there, Michael, about your cash position and the recent offering. I think investors have been kind of wondering a little bit. What kind of opportunities are you guys sniffing out these days?

Is it more tuck-in technology? Are you willing to do something more transformative? What are the product areas, perhaps, if you could give us some color that you think is either missing in the portfolio? And then also what -- maybe, you could just kind of tackle that a little bit.

Michael Davin

Yeah. So, Rich, when we went on the road for the secondary offering, we did speak about holes that we felt we had in our product portfolio that we will either address through organic developments or through non-organic activities. Certainly, we’re not going comment for obvious reasons on what our strategy is in utilizing the proceeds.

But certainly, we have a strategic plan at the board level and also at the executive level that we have engaged in, we’re very active in, and we do anticipate activity in the not too distant future as it relates to addressing the holes in the portfolio in bringing flagship type technology into our portfolio to address these high volume indications and technology that our customers and our distribution will be very excited about. So we are, once again, very active and we anticipate things to begin to take place in the not too distinct future.

Richard Newitter - Leerink Swann

Thank. And then, maybe just to follow-up on that. Are there any specific criteria that you guys adhere to, when you look at an acquisition, whether it’s a dilution, accretion, tolerance and or return on invested capital metrics?

Tim Baker

Sure. It is Tim. So, obviously, we’re looking at opportunities that we can leverage of our current organization. We’re not looking for start-up type businesses that don’t have a revenue, don’t have a commercial product. We’re looking for products that we can either bring through our distribution or through our technology development and get to market.

We’re looking at acquisitions and opportunities that could be accretive in the fairly short period of time, typically within the first full year after we would do a deal. So we’re not looking for development type companies. We are looking for companies that we can help drive our profitability.

Richard Newitter - Leerink Swann

Great. And if I could just ask two quick ones on PicoSure, sounds like a really exciting new product cycle that you have coming up there. The first is, does -- can you give us a sense of maybe initially how luminaries roughly or test sites, because I know the Cellulaze launch is very methodical and you want to make sure you had it in the right hands being used properly. Can you just give us a sense of, if PicoSure is going to follow the same path and roughly how many kind of luminary sites you anticipate?

Michael Davin

Yeah. We do not except PicoSure to follow the same path or the guardrails that we had around the introduction of Cellulaze. Keep in mind, Cellulaze is a minimally invasive device, so we’re more on a surgical environment. We also commented that Cellulaze is different from Smartlipo laser lipolysis and we’re working very close to the service of the skin.

So we want to make sure that the guidelines for the people who acquired the technology and the training of regiment that we put people through was something that was unprecedented for us, but something we were committed on making sure it took place before the technology went into the hands of the people who acquired it.

As it relates to PicoSure, this is noninvasive device. It’s a very safe device. We’re not going to have the restrictions on who can acquire the technology, albeit we believe the dermatologist is really the core discipline. They understand what picosecond technology brings to them from a clinical perspective and from a practice perspective. Dermatologists treat the majority of tattoos and pigmented lesions.

Hence, why we’re launching this at our industry’s most exciting conference, the AAD and this is really a device that we know fits very well into the dermatology practice. But in terms of restrictions that we’ll sell it to as it relates to our normal physician based business. So keep in mind, 100% of our revenue comes from physician-based business. We won’t have anywhere near the restrictions that we had on Cellulaze.

As far as luminaries, we have four key luminaries right now that have the technology and are using it on a regular basis. Now that we have the FDA clearance that we received in November or early December of last year, that allows them now to do a -- there is a limit on treatments as it relates to say working under an IDE study, so and we will continue to expand that part of our strategy in this quarter, if you want to put additional luminary units out there which were on track to do.

Richard Newitter - Leerink Swann

Great. And then just one last one on, PicoSure. I was just wondering what -- I think someone had asked your pricing strategy. I think in the past, you had said something about the $200,000 price range. Is that roughly where you think this will be priced?

Michael Davin

Yeah. Rich, we do think and it’s a premium product first to market and it will be priced north of $200,000.

Richard Newitter - Leerink Swann

Thanks a lot.

Michael Davin

Thanks, Rich.

Operator

(Operator Instructions) Our next question comes from Bill Plovanic of Canaccord Genuity. Caller, please proceed with your question.

Bill Plovanic - Canaccord Genuity

Great. Thank you. Good morning.

Michael Davin

Good morning, Bill.

Bill Plovanic - Canaccord Genuity

Couple of questions here. Just on the international, I think you said it was up about 14% year-over-year. Just any strength or weakness in any particular geographies I might have missed that in your comments?

Tim Baker

Hi, Bill. This is Tim. The nice part is we saw good growth across -- really across the globe. Both our European subsidiaries, our Asia-Pac subsidiaries and our overall distribution, all reported good year-over-year growth, so good strong growth across all the international markets.

Bill Plovanic - Canaccord Genuity

Okay. And this might be a bit of a naïve question, but TruSculpt, it’s approved for cellulite. From what you are seeing in the marketplace, are they using it for cellulite or are they really using it for the fat indication?

Michael Davin

I believe that’s a Cutera product. Bill, I don’t know what the status is with that.

Bill Plovanic - Canaccord Genuity

Okay. That’s actually -- that’s all I had. We’ll, see you at AAD. Thanks.

Michael Davin

All right. Thanks, Bill.

Operator

Our next question comes from Paul Nouri of Noble Equity Fund. Caller, please proceed with your question.

Paul Nouri - Noble Equity Fund

Good morning.

Michael Davin

Good morning.

Paul Nouri - Noble Equity Fund

What percent of your revenue now comes from service or is recurring?

Tim Baker

For the last quarter, grossly about 14% of our revenue comes from servicing our installed base and our service business is about $6.2 million, again, up 10% for the year.

Paul Nouri - Noble Equity Fund

And the Unilever product that comes down in the coming year. Is it going to be more geared towards, like high-end department stores or is it going to be more of a mainstream product?

Tim Baker

As Mike spoke to earlier in his comments, I mean, the launch is obviously a Unilever’s focus there. They are taking their product to market. They have a mixed market strategy. Initially, it will be launched with a high-end consumer product, but as we’ve said, we’re deferring the launch plans to Unilever.

Paul Nouri - Noble Equity Fund

Okay. Thanks.

Michael Davin

Welcome.

Operator

Our next question is a follow-up from Richard Newitter of Leerink Swann. Caller, please proceed.

Richard Newitter - Leerink Swann

Hi. Thanks for taking the follow-up. I just was hoping, maybe you could give us or help us frame the tattoo removal market a little bit, or at least in the U.S. I don’t know what kind of market data you have but can you talk about how big of an opportunity -- on a may be dollar basis or a unit basis this is for you?

And then, also, I think in the past you’ve talked about a game-changing new product launch for Cynosure is typically driving at least a minimum or expected to drive at least a minimum of, call it $10 million of year one incremental sales. Is that still kind of how you guys think about this or is PicoSure maybe even more of a big game changing product we should expect something more than that?

Michael Davin

Yeah, so Rich, the first part of your question, I’ll give you some data points that we’ve received from third-party analyst. So right now the tattoo market is 45 million Americans that have at least one tattoo. The regret factor, meaning they want it removed, is greater than 20%.

So let’s just use a number of 20%. That would be nine million tattoos in the U.S. market that are looking to be removed. Today’s technology, which is nanosecond technology, pre-pico introduction, averages anywhere from 10 to 15 treatments to get about 60% to 70% resolution and 70% is not the high of those tattoos.

If you look at PicoSure, which we’ve been able to demonstrate through our published articles and our significant clinicals, we’ve been able to reduce that number of treatment down to half. But if you just take a look at the current market, say 10 treatments is an average and 9 million tattoos, its 90 million treatments, to get only 60% of resolution.

In the case, if you look at PicoSure, it’s still an opportunity for 45 million treatments to get closer to 85% to 100% resolution, which once again, not only demonstrate reducing the number of treatments at least by half but also significantly increasing the clearance of the tattoo. Also what’s important to know is tattoo art has become very sophisticated today, a lot of blues, and greens and purples, not your traditional black tattoos.

PicoSure has demonstrated phenomenal results in treating the blues and the greens, and even the purple color. So as the advancements has taken place in body art, this device works very, very well compared to the older technology in removing the sophisticated tattoos as it relates to color.

So the market opportunity is significant. And now if you just look at dermatologist as, say, our core focus from a discipline, there’s 14,000 dermatologists in the United States only, there’s 40,000 worldwide. If you’re going to address potentially 10% of that market, you can do the math, at average price of over $200,000 per units, it’s a significant market opportunity.

As it relates to what we’ve always said on a new flagship introduction, we expected to generate as first calendar year, $10 million of incremental revenue. We certainly would put PicoSure in that category.

Richard Newitter - Leerink Swann

Great. That’s very helpful. And if I could just ask one follow-up on Cellulaze, I think in the past you’ve given kind of a characterization of what percentage of the sales that you derived from kind of upgrades of the Triplex systems out in the field and which are kind of greenfield accounts.

Are you mostly through the kind of the upgrade process and we should think of Cellulaze as all new accounts at this point? And then if you can just give us a sense of where you are in that product cycle, are we still kind of on the steep part of your adoption curve there?

Michael Davin

As I mentioned in my earlier comments, pretty much 100% of our sales last quarter were to new customers. Our existing customers that own MPX or Triplex had maybe moved to a full new system. It was full systems last quarter.

The majority of our upgrade opportunity has been addressed. I’d say going forward, 99% of our revenue is going to be new systems that are small percentage of upgrades that may continue in 2013.

Once again, kind of like PicoSure, if you look at Cellulaze, you had 5,800 plastic surgeons in the United States, that’s the core discipline. We would go after with this technology, probably 90% of our sales were to plastic surgeons last year. And we believe we penetrated less than 10% of that opportunity in the U.S. As we’re getting international clearances, we announced an additional clearance that was in Taiwan.

This opens up the markets internationally, which our international distribution is very excited about. There is another say 15,000 plastic surgeons outside the United States. And that is kind of what we call it the low-hanging fruit, but that’s the natural discipline for us to go after with this minimally invasive technology. So we think it’s still very early in the game.

Richard Newitter - Leerink Swann

Great. Thanks a lot.

Michael Davin

You bet.

Operator

Our next question is a follow-up from Anthony Vendetti of Maxim Group. Caller, please proceed with your question.

Anthony Vendetti - Maxim Group

Sure. Just on Cellulaze, are you giving out an approximate installed base that you have right now or can you characterize, I know you said less than 10%. You just said less than 10% of the opportunities has been penetrated but can you talk about the actual number or the number that you have installed right now?

Michael Davin

Yeah. Anthony, we don’t give any color on our installed base. But as you heard me say, if you look at the 5,800 or so plastic surgeons in the United States, we’re less than 10% penetrated in that opportunity.

Keep in mind, there are other disciplines that are interested in this technology. And by design, our focus has been on the plastic surgeon. We have the aesthetic surgeon. We also have the derm surgeon and we do see ourselves beginning in the next couple of quarters to move towards those categories to introduce the opportunity to those folks as well, which is an increase over the 5,800 or so plastic surgeons in the U.S. and then, once again, the international opportunity.

Anthony Vendetti - Maxim Group

So in terms of the surgeons, how many of the 14,000 U.S. dermatologists or 40,000 worldwide derms are dermatologic surgeons that could actually perform this procedure, approx?

Michael Davin

Yeah. In the U.S., Anthony, there is about 3,000 derm surgeons. I wouldn’t quote me on that but I’m pretty sure that’s the number. And they have their own society meeting, which is usually held in late summer or early fall. But I think the attendees are right around that 2,000 to 3,000 that’s U.S.

And I would say there is probably a little larger number OUS, maybe somewhere around 5,000 derm surgeons. So, maybe, total out of the 40,000, maybe, 25% would be called derm surgeons. These are folks who practice Mohs surgery and do other dermatological surgery procedures.

Anthony Vendetti - Maxim Group

Now are there other surgeons that or other physicians that are certified to perform surgery that would be an opportunity for you down the road?

Michael Davin

Yeah. There are. I mean, as you know, with our SmartLipo, we have other surgeons outside of what we would call the core derms and plastic surgeons, that own the technology. But once again, we have not changed at all our criteria with Cellulaze even after its first anniversary year which really was just last month, receiving its FDA clearance in January 29th of 2011, excuse me ‘12.

So, we are still, no matter who buys this product, they’re still required to go through the rigorous training process and certification in order to get the technology. But right now, the focus is still on the core surgeons. So right now, we’re still focused on plastic surgeons and derm surgeons and aesthetic surgeons.

Anthony Vendetti - Maxim Group

Okay. And then last, Tim, I was hoping somebody else would ask this, but do you have the breakout for the stock-based comp across the expense lines?

Tim Baker

I was hoping you will come with that Anthony. Yeah, so, Q4, sales and marketing is 217, R&D, 124, G&A, 388, 34 in COGS, so 765 total stock-comp.

Anthony Vendetti - Maxim Group

The last one is 34 in COGS?

Tim Baker

Yeah.

Anthony Vendetti - Maxim Group

Okay. Great. All right. Thanks guys.

Tim Baker

Thank you, Anthony.

Operator

It appears we have no further questions at this time. I would now like to pass the floor back to management for closing comments.

Michael Davin

Thank you, Operator. And for those of you working and/or traveling in New York City this month, Tim and I would be participating in the Health Care conferences hosted by Leerink Swann and Citigroup. We hope to see you there. Thank you for joining us this morning. We look forward to updating you on our progress. Have a great day.

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