Nanosphere, Inc. Q4 2008 Earnings Call Transcript

Feb.26.09 | About: Nanosphere, Inc. (NSPH)

Nanosphere, Inc. (NASDAQ:NSPH)

Q4 2008 Earnings Call

February 26, 2009 5:00 pm ET

Executives

William Moffitt – President & Chief Executive Officer

Roger Moody – Vice President of Finance, Treasurer & Chief Financial Officer

Michael McGarrity – Vice President of Sales and Marketing & Chief Marketing Officer

Analysts

William Quirk – Piper Jaffray

Catherine Hu – Credit Suisse

Bruce Cranna – Leerink Swann

Operator

Good day, ladies and gentlemen, and welcome to the Q4 2008 Nanosphere Incorporated earnings conference call. My name is [Keisha] and I will be your operator for today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder this conference is being recorded for replay purposes.

Before the call begins Nanosphere will like to state that certain statements made during this conference call, which are not based on historical facts, maybe deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Because these forward-looking statements involve known and unknown risks and uncertainties there are important factors that could cause actual results, events, or developments to differ materially from those expressed or implied by these forward-looking statements.

Such factors include those described from time-to-time in Nanosphere's filings with the United States Securities & Exchange Commission including without limitation of risk described in Nanosphere's most recent quarterly report on Form 10-Q on file with the SEC. Please note that Nanosphere undertakes no duty to update this information.

I would now like to turn the call over to Mr. Bill Moffitt, Chief Executive Officer. Please proceed.

William Moffitt

Thank you, [Keisha]. Good afternoon everyone and thank you for joining us for Nanosphere's investor conference call covering the fourth quarter and full year of 2008. In a few moments, I will turn the call over to Roger Moody, Chief Financial Officer of the company, who will review the results we released this afternoon and then Mike McGarrity, Chief Marketing Officer and I will update you on our progress in new product development, plans for product launches, and how we envision these products driving our business.

There is one key message this afternoon 2008 was our first full year of commercial operations and I believe it is fair to say we were disappointed with our results on some fronts, while highly encouraged on other fronts. We are encouraged by the progress we made in new product development programs, and believe that those efforts have positioned us to become a leader in this market. We now have four new products in the FDA for review and we have initiated clinical trials for our cardiac troponin I assay.

Looking back at 2008, there is no question that the controversy that surrounds the use of warfarin metabolism testing to guide therapy as evidenced by the resistance on the part of some payers to reimburse the test has had an impact on volume and system placements. We are disappointed that this test did not drive greater market adoption of our Verigene platform. We are however encouraged by the growing public attention focused on the value of warfarin metabolism as evidenced by the number of articles in major publications.

The Centres for Medicare and Medicaid services undertook a review of data and public opinion surrounding reimbursement and we would expect a final resolution later this year. If they are finding support broad reimbursement, we believe there will be an increase in demand and we are prepared to respond. The value proposition of the Verigene system namely its ease-of-use and on-demand testing capabilities was validated by the acceptance of our hyper-coagulation panel with individual customer utilization somewhat exceeding our expectations.

We have developed a platform that meets market needs. We are now expanding the test menu to make it the system of choice and increase penetration. During 2008, we made significant progress in development programs aimed at expanding the test menu and functionality of the Verigene system, which we believe will drive increased market penetration. After Roger recaps the fourth quarter and full year results, Mike, and I will review our new product introductions for 2009 and how we see those impacting our growth. Now let me turn the call over to Roger Moody. Roger?

Roger Moody

Thank you, Bill. This afternoon I will review Nanosphere's fourth quarter and full year 2008 financial results, which are accompanied by today's news release and 10-K filing with the SEC, both of which are posted on our website, which is www.nanosphere.us. We added nine customers in the fourth quarter bringing our year-end installed base to 50 customers. Overall, cartridge utilization fell short of expectation due to softness in the warfarin metabolism testing market.

However, utilization for customer for the hyper-coag test exceeded our expectation. We anticipate overall utilization to increase after we receive FDA clearances and validate customers for our cystic fibrosis and HFE assays as well as Verigene SP. We expect the respiratory panel will begin to drive utilization in the 2009 and '10 flu season given that we are approaching the end of this flu season. Product revenue in the fourth quarter of 2008 was $313,000, which was up 517% over the prior year and 49% sequentially.

Revenue mix shifted from 9% product sales and 91% grants and contract revenue in 2007 to 75% product sales and 25% grants and contract revenue in 2008. Cost of product sales were $600,000 in the fourth quarter and $1.5 million for the full year. Operating expenses for the fourth quarter of 2008 were $9.1 million, compared to $8.9 million in the fourth quarter of 2007. Full year operating expenses were $37.3 million, compared to $34.9 million in 2007. This increase was primarily driven by investments in research and development as well as manufacturing development and scale up.

Also included in this increase was $1.5 million in insurance, legal, and accounting fees associated with operating as a public company. $32 million of cash was used in operations during 2008 plus $2.7 million for capital expenditures mostly related to property and equipment required for manufacturing scale up. $4.2 million was used in financing activities, $3.6 million of which was scheduled venture debt repayment. The 2008 ending cash balance was $75.4 million. Now, let me comment on the progress we are making in manufacturing.

Cartridge manufacturing capacity has more than doubled over the past year and our lot sizes have increased four fold. This significantly decreases labor and overhead cost per cartridge. Cartridge production yield increased substantially throughout the year rising from roughly 70% to more than 90%. Cartridge material costs have been reduced by 42%. Further reductions are being implemented through additional multi-cavity molds, bringing certain manufacturing steps in-house and continued process automation. At end of this call, I would be happy to take any questions you have regarding these results. Now, let me turn the call back over to Bill.

William Moffitt

Thanks, Roger. At the start of 2008, the test menu for the Verigene system represented a target market of approximately $85 million to $90 million, what could have been a $200 million market was effectively limited due to the controversy surrounding warfarin metabolism testing. The new tests we plan to launch in 2009 collectively address a market opportunity of approximately $1 billion. Moreover, we also plan to launch the next generation of the Verigene system, the Verigene SP previously referred to as the Verigene II. This designation more appropriately describes its automated sample to result capabilities.

Let me turn to our work on cardiac troponin. After these comments, Mike will provide his perspective on our preparations for product launch. Earlier this month, we commenced clinical trials for the troponin test in support of a 510(k) application to the FDA. These trials are expensive and involve running over 4,000 samples to establish performance, asses various attributes of the assay such as correlation to existing systems in the market and then precision and to determine whether the assay is subject to interferences.

At the same time, these studies will determine and validate cut off values used in diagnosis of acute coronary syndrome and myocardial infarct and the ability to distinguish these conditions from other comorbidities that cause increased troponin levels. These studies will be conducted at Nanosphere and two hospital-based clinical laboratories. While results that we experienced throughout the trials will ultimately determine the timing of these trials we believe this will take approximately two months to complete.

Now let me turn the call over to Mike McGarrity, Chief Marketing Officer, who will provide his perspective on this product and our plans for market launch and how he sees our programs driving market development. Mike?

Michael McGarrity

Thanks Bill. Our troponin market development activities are in full swing and are designed to procure the market for our assay in advance with regulatory clearance. As with any new technology capable of increased diagnostic and prognostic information in the acute setting, there are two-inflection points associated with adoption. Phase I normally runs from regulatory clearance until some landmark supplemental data is published in major medical journal.

Phase II falls with significant adoption based on unequivocal and statistically powered data associated with that landmark study. Our troponin assay will follow the same path. We are focused now on Phase I plan of execution that will provide for initial customer acceptance. We believe that data from our FDA trials should validate this improved tool for diagnosis and risk stratification of acute coronary syndrome patients. Moreover, this test should result in earlier disposition of these patients by ruling in and ruling out with greater clinical certainty.

Let me review with you the tactical aspects of this plan. First, we continue to engage advocates in cardiology, emergency medicine, and laboratory medicine to champion the diagnostic and clinical utility of our assay. And we are building relationships with scientific organizations and guideline test forces in cardiovascular medicine. We are establishing evaluation sites for independent non-regulatory pilot studies. These studies will aid in our early market launch plans resulting in white papers, presentations, and reference sites.

Working with several key advisors and hospitals we are validating our pricing and economic models and developing education programs for each medical specialty. Finally, we are building a sales team as well as focusing efforts in parallel on European markets. Now let me turn the call back over to Bill.

William Moffitt

Thanks Mike. It's obvious we are excited about this assay and the prospect it holds from proving the way physicians' triage suspected acute coronary syndrome patients. As you know, we've previously filed 510(k) applications with the FDA for a cystic fibrosis assay and a first generation respiratory virus panel. We have responded to follow-up questions and comments from the FDA and await further interaction or clearance. Meanwhile we're preparing for product launch and we'll keep you apprised of our progress.

Just this week we filed a special 510(k) with the FDA for the Verigene SP ahead of our originally planned schedule for introduction in the second half of this year. While we can never predict timing with the FDA, we would expect to get this product into the market significantly ahead of the original schedule. I can tell you first reactions to this product are very enthusiastic. This is a true sample to result system incorporating all of the aspects of sample preparation and DNA extraction into the automated test process.

In addition, earlier this quarter we filed a 510(k) with the FDA for our HFE assay for the detection of genetic mutations associated with hemochromatosis. Since there is no previously cleared HFE assay, this is a de novo 510(k), which entails the FDA establishing a guidance document in addition to the normal course of review of the application. Generally speaking this could take a bit longer than our traditional 510(k). With the clearance of these products, our test menu will expand to hyper-coagulation, warfarin metabolism, cystic fibrosis, hemochromatosis, and our first entry into the infectious disease base with the respiratory virus panel.

In the coming months, we will provide further insight into continued developments in menu expansion including a second-generation respiratory virus panel to run on the Verigene SP and further development in the area of using genomic assays to replace traditional infectious disease test methods. Now, let me turn the call back over to Mike for a few comments on our marketing plans for the Verigene SP and our growing menu of genomic assays. Mike?

Michael McGarrity

Our customers are looking for greater simplicity ease-of-use and a broad testing menu. These are key criteria for any hospital-based laboratory today. Verigene SP and our expanding test menu directly address these issues. In our first 15 months of commercialization, we reached more than 10% of U.S. hospital-based molecular market. We expect to build on our penetration in 2009, while increasing utilization with current and new customers. Our CF assay currently under FDA review will be targeted to both existing and new users. We have a number of our current customers awaiting validation, while also placing new placements on Verigene SP.

The hemochromatosis assay currently under review will market truly proprietary offering to our customers. We will be the only FDA cleared and licensed provider of this test outside the Central reference laboratory. We have a significant pipeline of both current and new customers. While the timing of our pending respiratory assay may not allow for meaningful traction in this flu season, our market development efforts will pay off for next season as we identified a pipeline of customers, who are awaiting our offering particularly as formatted on the Verigene SP.

We believe warfarin metabolism testing will be adopted as the best solution to avoiding the expense of advisory actions resulting from and otherwise very economical anticoagulation, coagulant therapy. Finally, let me emphasize the excitement in the sales and marketing organization surrounding the upcoming product launches and the associated leverage it provides in building our customer base. Now, let me turn the call back over to Bill.

William Moffitt

Thanks, Mike. Before moving onto take your questions, let me give you my perspective on these recent developments. As I discussed at the beginning of the call, we are disappointed with our results for 2008. We are however excited about the prospects for our business as we launch the next generation of the Verigene system and significantly expand the test menu to provide greater value for our customers. Moreover, our troponin assay is on-schedule performing to our expectations and should provide additional impetus for our business. Based on what we have discussed with you today, 2009 should be a good year as we continue to grow and evolve our business, expanding market penetration and providing the foundation for increased shareholder value. Now, we would be happy to take your questions and [Keisha] I will turn the call back over to you.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Bill Quirk with Piper Jaffray. Please proceed.

William Quirk – Piper Jaffray

Hi. Can you hear me?

William Moffitt

I can now, Bill. How are you?

William Quirk – Piper Jaffray

Good. Thanks, good, and obviously user error on this side here.

William Moffitt

It's okay.

William Quirk – Piper Jaffray

A quick question for you on the fast track study, that you guys highlighted in the 10-K, when would you expect to see I guess completing enrollment for that and then when should we expect data?

William Moffitt

Yeah, Bill. It’s interesting. We are at a period of time, Bill when we really can’t say an awful lot about this. As you know, with these kinds of significant pivotal trials, you register them on clinicaltrials.gov and that sort of the official kick off if you will, and you can jeopardize your ability to get a publication in a top – top-tier journal if you say an awful lot about the trial before you register it. I will tell you we are in the process of registering it. So, we should be able to speak more freely in the future, but when do we expect to see some culmination here, it's probably I think toward the end of this year, early Q1 next year.

William Quirk – Piper Jaffray

Okay. Have you guys, I assume you have already identified the PI and in terms of potential folks, who are going to participate in this, should we be thinking about kind of recognizable names within the cardiac space, Bill?

William Moffitt

Yeah. I don’t want to go too far here, let me just say highly recognized.

William Quirk – Piper Jaffray

Okay. I know, fair enough.

William Moffitt

Easily recognizable.

William Quirk – Piper Jaffray

Okay, I understood. And then just a question on Roger, cash management obviously given the slower than expected launch, the break-even and for that matter cash flow break-even has been pushed out, how are you guys thinking about managing cash assets, potentially having to do a raise here and I guess by my calculations probably within a couple of years, but how, help us think a little about how you guys are managing that?

Roger Moody

Sure. Well, first of all, as you know, we don't make any financial projections. So, I can't answer your question specifically, but just to give you an idea, our current excess cash as you know is being kept in money market accounts. So, that we don't have any of this market risk of erosion of that capital. Secondly, all of the plan that were described by Bill and Mike earlier are funded into our current burn rate. So, we are not expecting to increase our cash burn in anyway to bring these new products to market. Now that's not saying that in any given quarter we might not have $1 million or $2 million above or below our 2008 run rate, but we do not need to expect to increase it. With regard to our overall structure we continually as a ordinary course of business evaluate each of these programs that we have underway and evaluate the financial implications of each of those programs and as of right now we're continuing the fund each of these programs that's about all of it that I can say and we do feel and we reported in our 10-K that our cash on hand plus our revenues will provide enough operating capital through at least the end of 2010.

William Moffitt

Hey Bill. This is Bill Moffitt. Let me add one another comment, because I think it's important especially with the economy the way it is in this day and time, I would say to you we have made some reductions here, we have had some I wouldn't call them programs, because I think the programs is being things that we are very formally focused on and heavily involved and in making investments, but we've had some projects sort of at the periphery here a bit, that were I don't know maybe put them in the category of nice to have, they are gone. So, we have definitely streamlined the company and tightened back to making investments only in those projects that are core to our business in the next two years or so.

William Quirk – Piper Jaffray

I understood. And then one last one for Roger and then I want to jump over to Mike for a quick question Roger what was the average share count specifically for the fourth quarter?

Roger Moody

It was $22,228,496 as of year-end.

William Quirk – Piper Jaffray

Okay, perfect. And then Mike if you think about, as we think about you role here managing the sales team obviously I would assume you guys have to be little disappointed in terms of the overall revenue and placements results for this year. Given that you have got a pretty exiting pipeline coming down the road, how do you keep these guys motivated, what are you doing in your role to, make sure that we are not losing any particularly important sales people given the upcoming troponin launch?

Michael McGarrity

I am sorry can you repeat that last part of that question?

William Quirk – Piper Jaffray

Yeah. The last part of the question Mike is just, essentially how are you keeping these guys motivated, how are keeping them hungry in light of obviously the challenges that you have had with warfarin, but given the opportunity that you have with troponin?

Michael McGarrity

Yeah. I think first of all, what we just talked about is why they're excited it's easy to keep them motivated I mean they see that while this churn we are making here with four submissions to the FDA they would have liked to have see sooner as we all would. They see the opportunity that's pending on the other side of that and I think when you look at the reception of the customers that we have and the work that they have done with them I think its, they have up close visibility to the value proposition that we are delivering to your customers and whatever the number is of placements in 2008, we feel comfortable with the engagement of those customers and the opportunity to build on those relationships with both additional test menu and utilization. So, I think that both from the nucleic acid side of the business, as well as obviously the potential associated with troponin, there is a high level of engagement and I think their patients will pay off.

William Quirk – Piper Jaffray

Okay. Understood. Thank you.

Michael McGarrity

Thanks, Bill.

Operator

(Operator Instructions). Your next question comes from the line of Catherine Hu with Credit Suisse. Please proceed.

Catherine Hu – Credit Suisse

Hi it's Catherine calling in for Kristen Stewart. I just have a couple of questions for you. First, have you gotten any pushback from customers due to the economy considering it’s a very new type of technology?

William Moffitt

Catherine I will let Mike address that.

Catherine Hu – Credit Suisse

Okay.

Michael McGarrity

Catherine we have not yet, obviously, when you can’t help to hear about hospital capital budgets potentially being affected from a CapEx spending standpoint, we have not seen that and has not impacted our current pipeline. However, we continue to offer and expand our flexibility for our customers from a financial acquisition standpoint. So, Roger and I are working together to make sure that we can provide as many vehicles as possible to allow for acquisition regardless of their capital structure or availability particularly heading into ’09, and with the pending launch of the Verigene SP systems. So, that's where we are moving between or from one Verigene product evolution from the Verigene to the SP, we are comfortable that we will be able to position those from a pricing standpoint. So haven’t seen any gap, but obviously are very focused on and are working through those.

Catherine Hu – Credit Suisse

Okay. Well I guess on that when you have the Verigene SP available would you still offer the version of Verigene I guess at a lower price?

Michael McGarrity

We absolutely, we will still offer Catherine and not, not necessarily as a price point validation, but mainly because we can offer positioning in a couple different setting so if you think about current molecular labs that may be running, a number of different tests just like our current customers they maybe running a sample prep process, that they're very comfortable with, that they're used to, and that they run from an efficiency of work flow standpoint that we wouldn’t want to change. That allows us to continue the Verigene positioning for those hospitals. I think what we will offer with SP is obviously additional workflow benefit for those customers, but more importantly and as a growth opportunity for the marketplace for those that are starting and either may not have invested in an automated sample methodology and/or not as familiar with those methodologies we will provide them that turnkey start and sample results and be able to move, the respiratory is really the key that moves this over as well into the infectious disease where we can build positioning there. So, we expect a mix looking out into 2009 of both Verigene I and Verigene II – SP customers and even potentially both in one place depending on their menu and other runner workflow.

Catherine Hu – Credit Suisse

Okay. And then just lastly could you look to like third parties to offer financing resistance by Verigene using a lease reagent?

Roger Moody

Sure Catherine this is Roger. We are currently evaluating third-party financing alternatives and are speaking to a number of potential providers, who are putting together programs that we feel will be attracted to our customers.

Catherine Hu – Credit Suisse

Okay great. That's it for me. Thank you.

Operator

Your next question comes from line of Bruce Cranna, Leerink Swann. Please proceed.

Bruce Cranna – Leerink Swann

Hey, good afternoon guys.

William Moffitt

Hi Bruce, how are you?

Bruce Cranna – Leerink Swann

Good thanks.

William Moffitt

Good.

Bruce Cranna – Leerink Swann

Just wanted to do little math first, Roger did you say the 9 adds in the quarter on the instrument base and leaving us with 50?

Roger Moody

Correct.

Bruce Cranna – Leerink Swann

Whether any drops in there or I thought I heard you like 46 or some in last quarter?

William Moffitt

41.

Roger Moody

No, I think you might be thinking of instrument count that was mentioned on the prior call, but there were no drops in that number.

Bruce Cranna – Leerink Swann

Okay were there any outright sales in there with this?

Michael McGarrity

There were and as of the end of the year we have maintained our percentage of about 25% it really seems to bounce around between 25% and 30% of the placements are purchasing outright.

Bruce Cranna – Leerink Swann

Okay. Thank you for that. And then just another I guess clarification, we are thinking about troponin and in enrollment Bill did you say something like a couple of sites at that we're looking at I guess higher numbers than a couple of sites?

William Moffitt

Yeah. Let me separate the two trials for you Bruce. The FDA 510(k) submission is according to the 510(k) protocol is run at three locations, one of those being the company location, the other two being outside typical customer environments.

Bruce Cranna – Leerink Swann

Yeah.

William Moffitt

So, that's the three sites, us and two outside, one of the outsides being brought upright now. Those are the sites that we will run the 510(k) application study, the 4000 plus samples have need to be run here in the next couple of months to get that work done, then a pivotal trial, a very different animal that will be in the order of 12 to 18 sites internationally diverse.

Bruce Cranna – Leerink Swann

Okay. Got it.

William Moffitt

I got to think about is two really totally separate trials, one for the purpose of regulatory approval, the other for the purpose of as Mike has referred to getting some real landmark publications to really drive long-term sustained adoption.

Bruce Cranna – Leerink Swann

You're just trying to get a clinician attention I guess, if you will?

William Moffitt

Right.

Bruce Cranna – Leerink Swann

A little early for this I know probably you talk about RSV, but you guys deferred back from the FDA, is that right?

William Moffitt

Yeah we've had a couple of back end force.

Bruce Cranna – Leerink Swann

Can you share any of that what's I guess?

William Moffitt

Most of it is in the, in fact now when you say most, say all of it was just ordinary course of 510(k) review process, and that's just we note on your tables such and such that you've calculated in given way what's it look like if you calculated a different way, it's that kind of stuff, it's nothing un-toured, it's just additional questions information from us that allow them to sort of more fully comprehend exactly what the assay is doing, how it works and then what the statistical meaning is of the results that we portray in that application, pretty standard suff.

Bruce Cranna – Leerink Swann

Okay.

William Moffitt

Which have caused that they have to go back and do any further testing.

Bruce Cranna – Leerink Swann

Got it okay. And I guess I know this is also a bit early as well, but in terms of pricing and I know you are thinking about next flu season, but per cartridge price I guess somewhere around kind of your current per cartridge price or maybe a bit higher I guess, but I am really getting as we've had a lot of as you know there are other panels on the market, molecular panels RSV on the market and we've heard a lot of pushback and pricing on some of those products have been quite high, and I am sort of wondering what's the marketing message there, and how are you I guess from a pricing standpoint looking at that market opportunity for you?

William Moffitt

I will let Mike add some comments here in a second Bruce, but I will tell you, the one way we do look at it is, the current version is in the FDA as we've referred to a sort of generation one, and there is some sample prep steps in front of running the Verigene system, frankly this was a very mild flu season, and it looks like it's almost behind us anyway. So, if you do look forward to the next flu season at the end of this year. Then the second-generation system it’s actually going to run on the Verigene SP, so it's going to be a fully integrated sample-to-result system. So, all contained in the one box, one cartridge to run the assay. The good news for us is, we have got a platform that's easy to use require a minimal amount especially the Verigene SP just a normal minimal amount of hands on time for the customer, and so their overall cost of running the assay will be significantly lower. You heard Roger make some comments about how we are making significant strides in reducing the cost to produce the cartridges so that puts us in a position to be as flexible as we need to be on the pricing side. Now that said let me get Mike to add a couple of comments about how he sort of thinks about and views where we what price point we might come to the market with.

Michael McGarrity

I think Bill just signed me out for a higher price point than most of our competitors. So, with that intro I will agree I think that our flexibility of our assays is formatted and the SP allows us to offer the as the test comes in sample the result in a multiplex format with multiple targets, and remember sometimes it's customers and labs and when pricing gets discussed they get discussed in batch process and often if you are not able to run a test in batch and you want to run them on-demand. You are paying a higher pre test cost. So, I think we will get close to our price positioning, but based on our feedback from our customers what we are offering, I think we will be at or above our trends here in the market.

William Moffitt

Bruce I think there is one other point to be made to and that is that, we have got the flexibility of a unit used design and we have got the flexibility of the sort of microarray format on the cartridge. So, number of the test, the two of their competitors that are out there frankly have sort of gone upstream on the number of target they've put in their assay. So, the customer sort of forced to take all of the targets and therefore pay for them. We will have the flexibility to do what we do with the hyper-coagulation cartridge, which is, all the targets on one cartridge or two-thirds or more one cartridge or a third of them or two or three different kinds of cartridges. That said I want to be careful that the message doesn't come across as we've got so much functionality and value we intend to charge an exceedingly higher price I don’t want that that is not the message. The message is this company is still early in its development, its early in its penetration of the market and so we have the flexibility to price product so that we can optimize the value split if you will between the company and the customer.

Bruce Cranna – Leerink Swann

Yeah. Thanks Bill. I mean that's kind of where I was going, I was wondering if you in fact I hate to say sort of design by need, different cartridges for different clients, but I mean I have heard just about zero interest in a 12 or 14 assay result at $300 or $400. So, I was that's kind of us getting it, I guess would you be prepared to kind of pair down the targets and really make it more, perhaps more economically proactive to a hospital client?

William Moffitt

Yeah let me, Mike is going to comment.

Michael McGarrity

Yeah. I think you're right Bruce. That is our planning, even if you look at our hyper-coag test, we have three different price points within our cartridge configuration that is the best validation that we have in the marketplace, that says a) our flexibility of our microarray allows us to provide the target in the configuration the customer wants and b) we can price them effectively to Bill's point where we are, it's both economically viable for the customer and we get the best value for our cartridges. We will take that same approach with respiratory and we will be able to position ourselves across the spectrum of those the majors want to run a single rest with flu, or those who want to expand as we develop our cartridge into additional targets with more coverage.

Bruce Cranna – Leerink Swann

Good. Okay.

William Moffitt

Yeah, it's also interesting to note, and just the hyper-coag is the example we sell a significant volume of each of the configurations. So, I mean it's clear that customers want the flexibility on a patient-by-patient basis to be able to run, exactly what they want to run and not incur the cost of sort of forced additional target.

Bruce Cranna – Leerink Swann

Yeah.

Michael McGarrity

I think we covered it Bruce, just the last comment is remember the physicians as they learn more, they order the test so the lab really needs the flexibility to be able to meet the physician order and that dictates what they report.

Bruce Cranna – Leerink Swann

Yeah, got it. And then last question for me how does I guess for black and better term HFE reimbursement work, I assume that and maybe this is a bad assumption there is no specific code or I guess, is there a reimbursement hurdle for users, in a hospital community for, I guess a test, I guess it has been home brewed up to this point?

Michael McGarrity

Yeah. There is normal genetic code staking that we have setup for the way our assay works, for that target and we've got potential customers in the queue that are comfortable with their reimbursement path and that's not a concern as it has been on the warfarin side, because it's a predisposition diagnostic screen and not a pharmacogenetic personalized medicine approach, which is where they still have learning curve and I think data expectation of our coverage.

Bruce Cranna – Leerink Swann

Yeah. Okay. Thanks.

William Moffitt

Thanks Bruce.

Operator

There are no further questions. I will now like to turn the call back over to Mr. Bill Moffitt, Chief Executive Officer for closing remarks.

William Moffitt

Thank you, [Keisha]. Thanks everyone for joining us for today's call covering the fourth quarter and full year of 2008. As we said earlier on the call, we are genuinely very excited about 2009, I don’t know other companies that have – diagnostic companies that have four products in the FDA at one-time with a significance that these four have about to launch a new platform that absolutely targets key issues in the marketplace and has a market leading troponin I teed up in clinicals and ready for commercialization later in the year. So, obviously we've got lot of work to do, but we are very excited we certainly appreciate your support. Thanks to everyone and have a good evening.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

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