BioForm Medical, Inc. F2Q09 (Qtr End 12/31/08) Earnings Call Transcript

BioForm Medical, Inc. (BFRM)

F2Q09 (Qtr End 12/31/08) Earnings Call

February 5, 2009 5:00 pm ET

Executives

Steve Basta - CEO

Analysts

Tom Gunderson - Piper Jaffray

Brian Kennedy - Jefferies & Company

Doug Hellma - Oppenheimer

Presentation

Operator

Good day and welcome everyone to the BioForm Medical second quarter fiscal 2009 financial results conference call, hosted by Steve Basta, the CEO of BioForm Medical.

During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. Today's conference call is being recorded, Thursday, February 5th.

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

Steve Basta

Thank you, Melissa. Good morning and thank you for joining us for our second quarter fiscal 2009 earnings call.

Before I begin my remarks, I would like to remind those attending that during this call we will make projections and may make other statements about the company's business that are forward-looking and 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 on 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 that they are given. The company does not undertake to update any projections or forward-looking statements.

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

Joining today with us the Q&A portion of the discussion will be: Adam Gridley, our Senior Vice President of Corporate Development; J.D. Floyd, who is a consultant serving in an interim capacity as our Principal Accounting and Financial Officer; and Fred Lee, our recently promoted Controller.

As we look at the Q2 results, our revenue in the December quarter was $16.7 million compared to $18.6 million in the comparable quarter in the prior year. Revenues were up sequentially when you look at the September quarter from $15.7 million in September to the $16.7 million level that we saw in December.

We are heartened by the stability of our dermal filler business over the recent months, despite worsening macroeconomic US and international conditions. Our typical seasonal pattern is such that our quarters ending in December and June are the stronger quarters, while March and September are the weaker quarters. And in fact, we saw the uptick this December.

As we think about how to interpret the financial results and everyone will bring their own interpretation on to what's happening in the macroeconomic environment and in the dermal filler markets specifically, one context that we find to be helpful is to look at our performance rather the overall market looking at sequential peak quarter.

So, what I mean by that is, if you look at strong quarter followed by the next seasonally strong quarter, followed by the next seasonally strong quarter. If we look at the last three sequential seasonally strong periods, we did $18.6 million in the December 2007 quarter; $16.7 million in the June 2008 quarter, again December and June are the peak periods, and then $16.7 million again in the December quarter, which would indicate relative stability rather to the June 2008 period on that sequential peak quarter assessment.

We find the stability in sales from the June 2008 to the December 2008 period to be encouraging. This stability likely indicates one of two things or potentially both factors. One, the dermal filler market may not have contracted as much as some people had feared what happened in the context of the economic downturn. And, the other is that potentially we gave market share.

Personally, looking at the results and then the conversations that I've had with physicians, my sense is a little bit of both; that there is some weakness, but not as much as had been feared, and we are in fact gaining market share. We think that both are happening.

If we think about the overall market conditions, we continue to remain cautious about the outlook for the coming quarters due to the macroeconomic headwinds. Counterbalancing, this is a long-term underlying growth demographic in the dermal filler market, and it's easy to lose sight of this. And so while it's obvious if you take a look at the 5, 6, 10 year history of the dermal filler market, it's worth noting, this is a market with long-term growth trajectory of potentially 20% to 30% or more annually.

More and more people over time are becoming comfortable with dermal filler treatments. This social trend in essence creates a tailwind for our revenues which counteracts to some degree the macroeconomic headwind. So while more people become comfortable minimally-invasive aesthetic procedures, there are people who are anxious about the economic circumstances and those two balance each other to some degree that may contribute to why we're seeing more stability in this market than in some others. And we have the benefit of the long-term growth trajectory in this marketplace behind us.

Given our caution, however, about the fact that the macroeconomic conditions are difficult, and you just have to turn on the news to see them, we have taken significant cost reduction steps, which we announced in our November call. Our cost reduction plan, which was announced in November 6th, has been implemented. All the employee terminations were accounted for in the Q2 period and several programs have been terminated and others are in the process of being run down with plans put in place already for orderly program reductions in expenses.

We expect to transition to the lower cost structure over the last half of fiscal 2009 and expect to be at a future annual run rate on operating expenses of approximately $64 million to $68 million when we go into fiscal 2010, which starts July of this year.

That $64 million to $68 million run rate if you think about it on a quarterly basis represents, just if you do the math on four quarters, $16 million to $17 million per quarter, as compared to what we just reported with $21 million operating expense including the one-time charges in the past quarter.

That will be a substantial reduction in expenses. We will not reach that level immediately. We are going to reach that level over the next several quarters and so as we think about guidance for what you should expect to see in the next couple of quarters in Q3 and Q4 of this fiscal year, you will likely see operating expenses in the $17 million to $19 million range, as we transition down to that $16 million to $17 million target range for next fiscal year.

One other thing is that we have held it to be very important through these processes that our customers are not going to see an impact of this associated with the nature of our interactions with them on a day-to-day basis.

Most of our customers are not going to feel the impact at all. We kept a full strength media sales organization and a full strength of clinical training organization. We've done so in the US, in Europe with sales teams that are able to call on accounts with a frequency and reach that they have historically.

We believe that this business will therefore have no short-term adverse impact on revenue, although obviously in achieving these cost savings, we are foregoing some investments such as future R&D programs that will have some future impact. But we think that that’s a trade-off that’s appropriate to make in this environment.

A way to think about how we get to profitability and that we use internally and that might be helpful is to look at our future run rate total expenses. As we described, operating expenses will be $64 million to $68 million. If you add on top of that, the manufacturing COGS that’s in our products line, you get to total expenses that are some thing south of $80 million a year.

We think a lot about how we get to $80 million of revenue even in this downturn. We are guiding the $60 million to $70 million in revenue. If you take the midpoint of that at $65 million, we need to make up a $15 million delta and we need to drive $15 million of revenue growth to get to breakeven and profitability.

We are focused on doing that in the coming years in four ways. One is through market share gains. I think we won market share in the last quarter and we are very encouraged by that. We have a number of strategies in place that we believe are working and additional things that we’ll be doing to drive market share in future quarters.

We are working on new indications for RADIESSE, which we think will broaden RADIESSE usage and broaden dermal filler usage that’s not just a share of the existing market, but it will grow the dermal filler market overall and that will enhance sales and add significantly to revenue.

We are looking forward to the future launch of Polidocanol that will provide a new revenue stream with a significant new product that we believe the leading product and an important category sclerotherapy. And we acquired the Relaxed Expressions device and we have been doing a significant amount of work on improving treatment protocols and preparing for that future launch.

So while both of the product launches may still be several quarters out, or in the case of Polidocanol a year or more out before we launch that product, both of them should come within a time frame that has the ability to get us the profitability without assuming an economic recovery.

Obviously, if we see an economic recovery or a turn in sentiment that drives growth in the derma filler market, that provides the much more significant growth opportunity, but in managing the business prudently, we have to have a plan for how we get the profitability and sustainability even in the downturn if the downturn is protracted and we put that in place. And we are confident with the elements of that plan.

I will now take you through a bit more detail on the financial results and then we will take additional questions if there's further detail that's needed as people look at financials.

Worldwide revenue was $16.7 million for the second quarter of fiscal 2009, as compared to $18.6 million for the second quarter of fiscal 2008, a decrease of approximately 10% year-over-year. We do generally experience a seasonal variation in revenue in the first and third quarters, as I described, of our fiscal year being relatively weak and the second and the fourth quarter is relatively strong. We saw that seasonal trend again this year, with sales up 16% in the Q2 versus Q1 of this year.

In the United States, revenue from RADIESSE in the second quarter was $13.3 million, compared to $14.5 million for the second quarter of fiscal 2008, a decrease of 8% year-over-year.

In international markets, the revenue of $3.4 million, compared to $4.1 million in the comparable quarter last year, represents a decrease of 17%, a bit more than we saw in the US. And that's really due to multiple factors including, of course, in part, the weakening economy, but also in that drop was exchange rate fluctuations and just the timing of the distributor orders which varies from quarter-to-quarter and plays a little bit of fluctuation in our international quarter-to-quarter revenues.

Our gross profit margin for the second quarter of fiscal 2009 was 83.2%, down from 83.3% in the comparable period of the prior year, but generally consistent with our guidance range of 80% to 83%. And as we've noted, there will be some quarterly fluctuation halfway outside of those ranges, but we expect on an annual basis that we should be in the 82% to 83% range on cost of goods and gross margin.

OpEx for Q2 included more than $1 million of non-recurring charges, most of which related to the cost reduction actions. So as you look at the Q2 expenses, one of the natural questions, the Q2 expenses appear a little bit higher than Q1 expenses, that delta is accounted for by the one-time expenses that we saw in the quarter and we expect the Q3 and Q4 operating expenses will be coming down.

For guidance for this year, we are maintaining our revenue guidance in the $60 million to $70 billion range. We're tracking to that level with revenue of $32 million plus for the first six months. Our operating expenses, we are guiding to $76 million to $78 million that is the narrowing of the range. We had previously announced in November that we had guided $75 million to $78 million, we believe that will be in the $76 million to $78 million range.

We do intend to reduce operating expenses over the coming quarters, consistent with the personnel reduction and other cost reductions that we took in the second quarter. We expect to reduce operating expenses for fiscal 2010 to the $64 million to $68 million annual target range.

Gross profit is about described, we're continuing to guide to the 80% to 83% range, and our net loss guidance is $20 million to $25 million for fiscal 2009.

Our long-term strategy remains as it has been to continue to grow the core business and further establish ourselves through multiple products launches as one of the leading medical aesthetics companies worldwide.

That strategy is unchanged, although prudence and revenue impact to the macroeconomic cycle have dictated short-term actions related to being more conservative in spending in some areas. But we are absolutely focused on how we become one of the leading medical aesthetics companies worldwide.

One of the key elements of that is getting the profitability and sustainability. As I described a moment ago, a key target number for us is getting to $80 million of revenue, while holding expenses to below that number. And we have again the four key strategies to get their RADIESSE market share, developing new indications for RADIESSE, the future launch of Polidocanol and the development of the improved treatment protocols and plans for future launch for our Relaxed Expressions device.

With that as a summary, Melissa, I'll turn it back to you and you can take questions from the callers.

Question-and-Answer Session

Operator

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

Tom Gunderson - Piper Jaffray

Hi, good afternoon.

Steve Basta

Hello. Tom.

Tom Gunderson - Piper Jaffray

Hi. Three quick questions. First, if I can look at the balance sheet relative to your $80 million break-even projection and the $15 million delta. If we look at the midpoint, you reported, I think, close to $45 million in cash at the end of the quarter. Those are expenses Steve. What do you see your cash burn per quarter with this model that you are putting out?

Steve Basta

The cash burn will be somewhat less than that. We haven't broken it out in terms of the exact non-cash expenses on a public basis, but that $64 million to $68 million number includes somewhere between $1.5 million and $2 million of stock comp expenses. And you will also have some depreciation in there.

And so, it will be some $2 million or so shy of what the expense P&L number is. It might be a little bit different from that. I will have Fred take a look at that in more detail. And if there is any clarification or treat to that number, we will provide you whatever guidance we've got.

Tom Gunderson - Piper Jaffray

Okay. But, if I summarize that with the plan that you laid out, everybody knows how bad the economy is, and what it means for some of these procedures. But you've got a plan here that conserves your cash, despair for, on the face of it, three or more years?

Steve Basta

That's the target. When we put the plan in place, the target was at three years of cash.

Tom Gunderson - Piper Jaffray

Okay.

Steve Basta

And actually, one of our colleagues just handed me a note that reminded me one of the other elements of COGS is that we are amortizing the prepaid royalty, and so that also is a non-cash charge which shows into that. We've prepaid our royalty in September of 2007, but that gets amortized through 2011. So that's about $0.5 million to $1 million each year.

Tom Gunderson - Piper Jaffray

Got it. Of course you probably have some CapEx over the next two to three years?

Steve Basta

We were being pretty prudent on that.

Tom Gunderson - Piper Jaffray

Okay.

Steve Basta

We've got a manufacturing facility that's capable of producing some 2 to 3 million units a year. So we are not running at that run rate yet. I don't know, we are going to have huge manufacturing expansions.

Tom Gunderson - Piper Jaffray

And then the second question is, just think you've gained some market share in the quarter. Give a sense of whether that's coming from your current customers getting better traction with them or adding new customers?

Steve Basta

I think it's both. We are in fact continuing, converting customers but we are also growing current customers.

Tom Gunderson - Piper Jaffray

Okay. And any sense of what's contributing more, or is it a tossup?

Steve Basta

I haven't broken up the numbers to try to get to a quantitative sense. Our new account conversion rate has remained pretty constant over the past two quarters.

Tom Gunderson - Piper Jaffray

Okay.

Steve Basta

We've been converting new accounts steadily, and in fact, not over the last few quarters but over the last couple of years. And so, what we are seeing more of is somewhat increased utilization per account. But, in fact, we do see in fact growth of our business associated with new accounts.

Tom Gunderson - Piper Jaffray

Got it. Thanks. And then the last question is you mentioned Relaxed Expressions and there was news announcement out of Michigan for Dr. Kotlus who was doing the Relaxed Expressions to do that. Can you give us a little bit of sense of what you said you are getting? This will add to your sales when you launched, but this clearly is in it. What's the status of the product right now in the US?

Steve Basta

We've actually got about 45 boxes in the field already. So there are physicians that had bought units from the ACI and use it. And there are number of physicians where we've placed the boxes as part of an exploratory program related to the use of the product and they are helping us develop best practices and usage profiles. And so, there are several physicians who have materials, who are using that. It's not a significant revenue driver for us.

We are not trying to sell boxes. We are not trying to generate revenue from it at this point. We are simply working with physicians to identify best practices, identify the best treatment protocols, and determine how best to use the product in what applications, and in what areas should the treatment be optimized. This all becomes part and parcel also of working through the FDA process related to the claims that we want to have related to material, and so both things need to happen.

We need to learn several things regarding this procedure. One, how do we get more consistent treatment outcome? There are some physicians who are getting 80%, 90% success with excellent outcomes over the last year or more. There are other physicians who are getting 60% or 70% success. And that's not a high enough rate of consistency for this to be commercially successful to the degree that we want.

We want to better understand exactly what that difference is, and how do we optimize that consistency so that when we're out training physicians in the future, we're getting the best results possible. Obviously, as we've described earlier, we'll be working ultimately through an FDA process to gain clearance to promote this product for the vocal folds. This is, right now, approved generically as a nerve lesion generation device. And the third element is trying to get to the best pain management practices to minimize discomfort for the patients.

That said, those are all of the caveats that we need to optimize regarding the treatment protocols and how we best use the device. We've got physicians who are delighted with it. Patients who are delighted with it, who are getting 18 months results or better that just love the outcomes. We're very encouraged by some of what we're hearing.

Tom Gunderson - Piper Jaffray

Thanks for the color.

Operator

Our next question will come from Brian Kennedy with Jefferies & Company.

Brian Kennedy - Jefferies & Company

Hi Steve. How are you?

Steve Basta

I'm doing well, Brian. How about yourself?

Brian Kennedy - Jefferies & Company

Good. I had a question about just how the operating expense changes for next year play out in your mind in terms of account focus. Is that going to be deeper focus into certain accounts, or do you foresee the same balance of new accounts with all existing accounts?

Steve Basta

I don't think you're actually going to see a significant change here in our account call patterns associated with the OpEx reductions. We are not reducing field personnel. And so, we are reducing some marketing programs. We're reducing some of our clinical education program.

But in terms of the direct sales calls, our sales reps trained, our field clinical specialists trained to provide clinical training in the offices, that still happens and we are very heavily focused simultaneously on continuing to grow and deepen our impact in existing accounts that is both through sales reps and through field clinical specialists providing additional clinical confidence.

One of the key variables that we find is even when the physician starts to use RADIESSE until they are fully clinically confident and the product is hard to use, it's actually just as easy to inject as Juvederm.

But there is some anxiety associated with use of the longer-term filler. There is some anxiety associated with using a filler that provides a more robust augmentation, because you get such a dramatic effect to you put it in the wrong area, like a too dramatic effect.

So, there are some elements of clinical confidence that need to come into play and we find that having a clinical specialist and having a nurse in that office spending some time with the physician, helping guide them through few patients' experience, helps to build their clinical confidence. That works for both new accounts and for existing accounts to help grow their utilization.

And so our emphasis is simultaneously on both. And I don't think that the cost reduction steps that we have taken, we have specifically preserved the strength of the field organizations so don't minimize our ability to both grow existing accounts and convert new.

Brian Kennedy - Jefferies & Company

Okay. Can you get any anecdotal feedback from physicians about the merits of RADIESSE from an economic perspective being felt more now, or do you have any comments on that?

Steve Basta

We get comments that flow both ways, and then I have an overarching belief as to the winning argument. So the comments that flow favorably towards RADIESSE are that patients are really value sensitive and they are not going to buy two syringes; they will rest on their two syringes of Juvederm and so they might be cutting back to just one syringe. And if they are cutting back to just one syringe, they are not going to get a real good treatment.

So getting a RADIESSE syringe is a much better value because you are going to get a real good treatment. And RADIESSE is clearly the best value proposition in the industry. On a durability basis and on a augmentation per dollar basis, it's clearly, probably 2x the value than any of the HA products are, because you are not only going to get twice the augmentation with one syringe of RADIESSE versus one syringe of AHA, we also get longer durability. We pay a little bit more for it, but it's a huge value proposition.

So that's what clearly cuts toward RADIESSE on a favorable perspective. One of the things that we have seen is that there is a little bit of price sensitivity that comes in this market that will cause people to buy HAs rather than RADIESSE. If RADIESSE is in the office is $700 and HA is $500, there are times in this economy when someone is going to pick the cheapest product.

The winning argument though is patient satisfaction. It is more important in a weak economy even though in the strong economy that every single patient who comes into the office is delighted with the outcome, because the physician can't afford to disappoint anybody. You really don't want to lose anybody from your practice. You want everybody to be delighted. And if the patient is going to come in and get a one syringe treatment because they are sensitive as to how much they spend.

The right treatment is to give them RADIESSE and delight them, because when they are delighted they are come back to you for their other treatments, not just for other filler treatments, but also for the laser treatments, for dermabrasion, for liposuction, for surgeries or any number of things.

And so, the way to keep a patient in your practice is to delight them with that first treatment. And what we find real compelling is when a physician gets the awareness of, oh my god, this is so much better than the outcome that I could have achieved with an hour on a gas, and that my patients are going to be so much happier. The argument to a physician in this economy is that the thing you really want to do is delight your patients because that's how you keep them in your practice, and that's how you preserve your business. That's pretty compelling.

Brian Kennedy - Jefferies & Company

Okay. All right. And then lastly, does potential price competition for botulinum toxin created distraction in the marketplace in your mind, and if so, how do you kind of refocus practitioners on treatments, action, and issues like that?

Steve Basta

Price competitions for botulinum toxin meaning there are people who are offering Botox for $14?

Brian Kennedy - Jefferies & Company

Yes. Do you anticipate kind of the market refocusing for a bit from treatment satisfaction and results to being more price-oriented and with Botox competition in the US, does that create a lot of noise in your mind, and if so, how do you manage it?

Steve Basta

It's interesting. I don't hear any of our sales personnel ever talking about Botox pricing at an office altering how someone is using fillers.

Brian Kennedy - Jefferies & Company

Sure.

Steve Basta

And so, I don't perceive that whether an office is expensive or cheap for Botox has any impact on whether or not people are going to be using fillers. That impacts whether or not their business is growing. And many people are using Botox price competition as a lost leader to get people to get into the practice.

And certainly, I suspect Allergan loves that because they could have total Botox volume, but that doesn't impact the treatment choice regarding which filler to use. You're doing Botox for the vocal folds, then you're going to do fillers for your nasolabial folds and when you get to the nasolabial fold, the issue is what's going to deliver the best outcome.

Brian Kennedy - Jefferies & Company

Right.

Steve Basta

And it's not a straight price question between RADIESSE or Juvederm or Restylane because there are fundamental differences.

Brian Kennedy - Jefferies & Company

Okay.

Steve Basta

And that your question is also implying what happens with Lanoxin launches, but I actually don't think it changes much when the Lanoxin launches because Lanoxin is fundamentally from a performance perspective comparable to Botox.

Brian Kennedy - Jefferies & Company

That was my question. Do you see practitioners' mindset changing to something like, "I have to be more focused on my profit now and I'm looking for discounts from all my suppliers" and do you anticipate behavior like that with price becoming more of an issue for competition than the differentiation of the product?

Steve Basta

It always existed as it does in any other marketplace in which someone is paying out of their pocket for a product. I mean, this is not a reimbursed marketplace. You're asking physicians to actually write a check for the product, and they will be sensitive to the pricing on the products, and that's why all of the companies in this space offer various promotions in order to induce purchases. That's not inappropriate promotions, but there's price discounting, there's free goods associated with buy 50 get 10 free, that kind of thing, that any of the companies are offering at various times. That's been a feature of this industry for the last several years. That's not changed in this economy.

Brian Kennedy - Jefferies & Company

Right. Okay. Thanks so much.

Steve Basta

You're welcome.

Operator

Our next question will come from Amit Hazan with Oppenheimer.

Doug Hellma - Oppenheimer

Hi. This is [Doug Hellma] filling in for Amit Hazan.

Steve Basta

Hello.

Doug Hellma - Oppenheimer

Hi. I just want to get a sense in terms of what's happening in terms of the pricing environment. And what we've seen, we heard Allergan basically increasing their rebates since October on fillers. And I'm just wondering what you guys are seeing, are you guys providing any rebate or you get seeing any pressure?

Steve Basta

We are not providing rebates. We don't do anything that matches the kinds of rebates programs of both Allergan and Medicis that have been running. I was just talking Brain a moment ago regarding the competitive landscape. Rebates seem to be sort of the latest spin, but they are not so new, even Restylane has had their awards program since they launched. So if you go back to the Restylane awards program, what in essence it was, it was a patient rebate associated with use of multiple Restylane syringes.

It's not a new concept and it's not a fundamentally different kind of introduction. But as we evolve through this industry, what we are finding is that each of the companies is attempting different kinds of structures to see what sticks and what drives the incremental purchase. But it's not fundamentally changing in character.

Doug Hellma - Oppenheimer

Okay. I guess, so your strategy is basically not to do something like that even though the economy right now obviously is impacting you on the procedure side?

Steve Basta

We haven't needed to.

Doug Hellma - Oppenheimer

Okay.

Steve Basta

We haven't done it, and we won't share.

Doug Hellma - Oppenheimer

Okay. And then just another question. In terms of, I know your international exposure is relatively smaller, but, I guess, speaking on the trends obviously, you said a bigger define internationally in terms of sales. I guess, maybe if you could just give some color on that in terms of what you are seeing there in terms of procedures?

Steve Basta

Yes, actually it wouldn't conclude from the delta year-over-year that in fact international is being hit harder than the US. In addition to the downward pressure associated with the economy, there are two other factors that played into the year-over-year delta. One was the several hundred thousand dollar impact associated with exchange rates. You see over the last six months dramatic exchange rate fluctuations between the US and the Euro and most of our international revenue is Europe. And so there is a significant impact in that regard.

And the other element is the delta. There is lumpiness associated with our distributor orders. And so you will see in any one quarter, you could see a few hundred thousand dollars more of distributor orders than you saw in the quarter before or in the quarter after and we just see their ability in distributor orders. So we actually had a couple more distributor orders in the year ago period than we had in this period that would account for a bit of the difference as well.

So, if you parsed out the elements of difference, the direct revenue impact in terms of our direct sales in Europe, I don't know that it was meaningful better than the US in terms of decline.

Doug Hellma - Oppenheimer

Okay. And if I were to quantify the impact of the decline between exchange rates and the economies there and market share, how would you rank that if you can?

Steve Basta

We don't provide that level of details and I don't want to get into the habit of breaking down those kinds of movements. If we were do that, I would want to do it on a formal basis with exact calculations. So I wanted to give you the color that I wouldn't take from a 17% year-over-year decline; an indication that we actually saw a 17% reduction in procedural volume in Europe. That's not what that indicates.

Doug Hellma - Oppenheimer

Okay. Fair enough. Thank you.

Steve Basta

You are welcome.

Operator

(Operator Instructions). We will take our question from (inaudible) Private Investor.

Unidentified Analyst

Hello. How are you today?

Steve Basta

I am doing well. Tom, how about yourself?

Unidentified Analyst

Doing good. I was reading your press release and you have a comment here about filing a PMA on RADIESSE with lidocaine. Can you detail that out a little bit, and is it simply a process, or do you have a natural line extension involved with that?

Steve Basta

There is a method that's being commonly used associated with mixing RADIESSE with lidocaine and it has clearly demonstrated substantial reduction in pain. We've evolved that into a way to modify our product to reduce pain substantially and that's under review with FDA.

We actually have several different strategies for how to integrate lidocaine into our product that are under development. One of them we have now is filed as PMA supplement and, at this point, for competitive reasons, I don't want to provide too much details on exactly how we are doing it.

Unidentified Analyst

Okay. But it's not actually a pre-filled premixed with lidocaine syringe. Is it a process in which to mix?

Steve Basta

At this point I'd rather not provide all of the competitive detail on exactly what our future products are going to look like.

Unidentified Analyst

Okay. All right. Thank you very much.

Steve Basta

You are most welcome.

Operator

And that would conclude our question-and-answer session. I would like to turn the program back to our speakers for any additional or closing comments.

Steve Basta

Thank you very much to each of you for joining. And obviously, as we look back at the last few months, we have all been sensitive to the macroeconomic cycles. There have been significant discussions about the fact that the aesthetics market, as a consumer spending sensitive market, is one that would be subject to the headwinds of the macroeconomic conditions.

In light of that macroeconomic environment, we're really quite pleased with our revenue in the December quarter and with the performance of the organization. I am really quite proud of our sales and marketing team and the work that we have done over the past months to not just hold our own, but I believe in many areas win share in this industry.

I think more and more physicians are realizing the merits of RADIESSE and the value that RADIESSE brings to their practice. And one of our great advantages is that RADIESSE is a very sticky product. Once physicians start to use it, they really like it, and they continue using it. And as we win practices, we can continue to grow our business in those practices, and then continue to expand into new one.

We think that bodes quite well for our future and we are continuing our efforts to do that, as well as continuing our efforts in several areas to try to drive revenue growth to reach profitability.

Thank you very much to all of our employees for the efforts and to all of our shareholders for your support through this process. Have a good day.

Operator

Thank you everyone for your participation in today's conference, and you may disconnect at this time.

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