Power Medical Interventions, Inc. Wall Street Analyst Forum's 20th Annual Institutional Investor Conference Transcript

Power Medical Interventions, Inc. (PMII)

Wall Street Analyst Forum's 20th Annual Institutional Investor Conference Transcript

March 25, 2009 9:10 am ET

Executives

Gerald Scott – President and Founder, The Wall Street Analyst Forum

Michael Whitman – Chairman, President and CEO

Brian Posner – CFO

Presentation

Gerald Scott

Thank you, ladies and gentlemen. In our attempt to adhere to the published schedule, I would like to begin today's program, which is a health care program. We’ll do everything we can to stay on schedule, not only for the benefit of the physical analysts and portfolio managers that are at the conference, but also for the webcast attendees, which in general outnumber the physical attendees by anywhere from two to – in some cases 20 to 1. So we would like to welcome both the physical attendees and the professional investors, the retail investors, and in some cases, the competition that accesses the webcast who are attending, a couple of competitors like, what, how do you know? How does he know?

The program is structured such that each company conducts a 40 minute presentation and Q&A session in the group meeting room and then there is a 40 minute breakout session that is conducted in the breakout room immediately following the group presentation Q&A session. So there is two 40 minute blocks of time that are back to back, so if you're interested in going to the breakout session, you need to only follow the management out to the hall, and the breakout room is right here on the ninth floor.

As I mentioned, the second group of attendees is the webcast attendees. The third group of attendees which we think are pretty cutting edge about are those investors globally that can actually access and available to everyone up here as well, the transcript of our presentation and Q&A sessions word for word is web searchable on the stock pages on Yahoo Finance, Google Finance, AOL Finance, MSN Money, and the financial portals.

I would send you to Yahoo Finance, they seem to pick it up the quickest, and so every company presentation here, just as if it were a press release on Business Wire or PRNewswire, is picked up by the financial portals. Seeking Alpha does that and they do it right out of Israel, which is pretty cool. So any investor in the world can access the conference via the webcast, but if they want to get it quicker and easier, sometimes you can go through a transcript, in seven or eight minutes, you can get everything you want out of a transcript. So transcripts became outdated until they became web searchable and then all of a sudden they came back in vogue once again.

So, okay, so I would like to go ahead and introduce the first company in today's program, a company that has presented with us in the past. Power Medical Interventions is the world's only provider of computer assisted power actuated surgical stapling products. PMI’s Intelligent Surgical Instruments enable less invasive surgical techniques to benefit surgeons, patients, hospitals and healthcare networks. PMI manufactures durable, recyclable technology to reduce medical waste and help keep the planet clean.

The company was founded in 1999 and headquartered in Langhorne, Pennsylvania, with additional offices in Germany, France and Japan. PMI’s Intelligent Surgical Instruments are computer assisted, power actuated endomechanical instruments that surgeons use for cutting, stapling and tissue manipulation in a variety of procedures in open surgery and minimally invasive surgery. The company believes that compared to conventional endomechanical devices, its Intelligent Surgical Instruments offer greater precision and consistency, superior compressive force, improves access to anatomical sites and enhanced ease-of-use.

So without any further introduction, I would like to introduce Michael Whitman, Chief Executive Officer and President of the company, and Brian Posner, Chief Financial Officer.

Michael Whitman

Thank you, Gerry. I appreciate the invitation to address the group here this morning. Brian and I, as Jerry said, we will be happy to take questions after the presentation. We will be providing some forward-looking statements, so our statement on forward-looking comments is here.

As Gerry said, Power Medical was founded 10 years ago to address the need in the emerging field of NOTES, Natural Orifice Translumenal Endoscopic Surgery and to enhance the penetration of minimally invasive surgery. The devices are stapling devices. They are used in life-threatening diseases, in numerous applications. Our current target is over 700,000 procedures annually, and a market that is over $1 billion in size today and growing at about 12%.

The technology has applications in open, minimally invasive and natural orifice surgery, and natural orifice surgery being the most recent emerging trend in surgery, and a growing segment of our business. We have a strategic collaboration with Intuitive Surgical Corporation, the world’s only robotic surgery system. Intuitive Surgical is a publicly traded company and can be accessed by their symbol ISRG. We have a growing product pipeline and a strong intellectual property position and a very experienced management team with a strong track record of success.

Pictured here is one of our instruments, the i60. It is an endoscopic articulating instrument that has advantages over manual devices that could not be matched by manual instrumentation, has greater precision and consistency, improved medical outcomes through that consistency, has superior compressive forces in the jaws, and has a relatively low acquisition cost for the hospitals to integrate into their practice. The product is reusable, which is distinguished from the current technology, which is totally disposable. And because of that it increases – reduces inventory, increasing shelf space, and reduces medical waste and the impact on the environment.

It is important to note that the technology is a suite of products, it is not a single instrument. There are numerous steps in a surgical procedure that are carried out with each of the instruments. For instance, if we were doing a lung resection for lung cancer, we would use a number of our instruments for the resection and transection of the pulmonary arteries and veins, and then a different instrument for the resection and transection of the bronchus. Because of that, there is a high revenue, because of that phenomena, there is a high revenue generation from each procedure.

The targeted procedures are in thoracic, morbid obesity for bariatric patients, the overweight patients in the world, and then for colon and rectal surgery. So the disease states that are addressed by this technology are life-threatening and really make up the vast majority of inpatient operations in hospitals around the world.

We’ve had a prolific effort in generating IP and expanding our product line derivatives. We also had a significant event in the 2006-2007 timeframe as we transitioned from OEM manufacturing to self manufacturing, and I'm going to talk a little bit more about that, because it has a dramatic impact on our financial performance over the last two years, and you'll see evidence of that later in our discussion.

In this particular slide that I'm showing here, it shows a little bit of the pipeline. In 2003 through 2005, our original product offering was launched to the surgical community in Europe, Asia and the United States. As Gerry mentioned, we have offices around the world, and have been able to penetrate the surgical markets on all three continents. As we have developed – as is true with any new technology, as we have developed both our infrastructure and our responsiveness to the customers needs, the products are iterating and becoming more ergonomically concise and easier to use and becoming again broader product lines.

You will see here in this slide the shift from a relatively large box – I'm not sure if we have a pointer here or not, I don’t see one – but you'll see here there is a large computer assisted capital piece of equipment that was the initial platform. The transition, as I mentioned, from OEM to in-house manufacturing took the platform from a large capital piece of equipment to wireless, self-contained instruments. So the last few years, these instruments have, as I showed you in the previous slide, have become self-contained and lithium-ion battery driven, which of course has made it a lot easier to get the technology into the hospital and reduce the complexity of setting the instrumentation up.

This video, our webcast participants obviously can't see this, so I'll speak a little bit to it as it is going, shows the original platform. This is a power console, the original PC which housed our motors, our power source, our wireless communications and all the software to drive the different steps of the procedure. But through the reduction in size of electronics and circuitry, we have been able to miniaturize this motherboard and the associated motors to take the technology into a hand held platform as you see here. This platform is driven by a lithium ion battery. And again this is an instrument, there are multiple instruments across the whole platform, this is just an example. And the information which was resident in the original PC box is now in a wireless box, very small box that sits outside of the sterile fields, in the operating room, but outside of the sterile field.

The iconsole [ph] here is pairing with the i60 instrument which is demonstrative here, and that pairing can take up to – that iconsole can pair with up to 15 instruments in a given procedure. So the concept here with the iconsole is to provide information to the surgeon intraoperatively, to help with placement and decide the application of the staples intraoperatively, which in turn should have a beneficial effect on the outcomes of the procedures.

Once the communication is established between the outside link and the instrument, that instrument can then be communicated with any other digital piece of equipment, and that leads to the attractiveness of our relationship with Intuitive Surgical Corporation. Obviously, their robotic system, if you're familiar with it, is a digitally driven system. It currently does not currently have a stapling product in its armamentarium of instruments, so Power Medical is with them collaborating on developing that instrument, and we will be the exclusive supplier of the reloads that go into the stapling instrument.

Just a note on that since I know there is a lot of technology I'm throwing in a very brief period of time, but just to formulate the business model, the instruments themselves, the i60 instruments, which we just saw an example of, that is a razor. And the razor blades are the reloads that I'm referring to, and I'm going to show you a little bit more of that in a second, but there is recurring revenue stream from the application of the instrument in a reload format. So the instrument themselves are durable, autoclavable, reusable, which we mentioned in our opening comments, and the reloads which go in generate the recurring revenue stream.

It is amazing to me when I speak to lay people about this business, the size of this business is really not well known, because both of the current competitors are divisions of multinational corporations, so they don't report earnings as a separate entity. So you never see the size and magnitude of this business, but the original business in the manual stapling was generated by US Surgical Corporation. For those of you that remember the story of US Surgical in the 80s and the 90s, it was a very prolific growth company. They were the – they brought Russian instruments to the United States and made them disposable and enhanced the quality and application. And that's occurred in the 1960s and 70s and then in the 1980s and 90s, minimally invasive surgery became a boon, and we had laparoscopic cholecystectomy, lap colons, lap hernia, and that business grew dramatically. Ultimately that business was acquired by Tyco International and then just several years ago spun out as a division of Covidien.

The other supplier of these instruments is Ethicon Endo-Surgery, who is a division of Johnson & Johnson, but the markets are very, very large, in excess of a billion dollars worldwide, and we're the only reusable powered computer mediated offering in the marketplace. The current offerings are all manually driven. So this would be – an easy analogy would be a manual drill bit versus a power drill. Just you could vision, there are actually knobs to turn and levers to pull, just like a manual drill would be, and in the breakout session, we could discuss this in a little more detail if there are any questions on that.

But I just want to – it is a very large business and colon and rectal cancer procedures have been growing at a pretty consistent 4.5% to 6% annually for the last 30 or 40 years. It affects a large patient population. There is growing incidence of thoracic cancer and, of course, the morbid obesity epidemic in the world is fairly well documented. And we see it, we remember it mostly when we see celebrities have their stomachs stapled. You have probably heard, I think Al Roker here in New York was one of those individuals that had this procedure and many people have, and these are the types of instruments that are used in that procedure. So I am trying to bring the procedures and these applications to life here for us to demonstrate that even in a severe economy, these technologies are paramount to the health of the population, are usually the last type of procedures that are affected, because of their life-threatening nature.

So we don't believe that the overall market for these devices, of course, will be affected and there'll be price pressures, but as the government looks at broader healthcare for broader populations, we think the business incidence of these procedures will either be maintained or increased in their trends. If there is going to be an effect, it will be on lower cost and being the, as you see in this first slide here on the business strategy, there are three Is to growth, increased sales, new indications, and our Intuitive Surgical, our relationship. And the increased sales, I just mentioned, if there is going to be any pressure on the market for these instruments, we believe it will be in the cost of the instruments. And being reusable, lower cost product, we feel like we are in a very good position. That coupled with our environmental, lower environmental impact puts us in a unique position in a new category of instrumentation for the operating room.

The newer indications, when we have the advent of new technologies, it opens up doors and avenues that weren’t previously available to the surgeon in their armamentarium. I'm going to discuss with you a number of applications that we're working with very prominent institutions on that could not only help us penetrate the current market but expand the market by addressing life-threatening diseases such as very high-cost diseases such as reflux disease. I mentioned the bariatric market, we have a new procedure which is a 30 minute procedure, that is done through a single port in the umbilicus. It is almost a painless procedure. And the early indications of what we're seeing in the first two months of this technological study proved to be durable, could be almost an outpatient procedure for morbid obesity, which would be significant savings on the cost on the healthcare system.

The left atrial appendage obliteration here listed under new indications is for stroke. Much has been written about atrial fibrillation and there are numerous technologies chasing the electrode, the electrical impulse side of this disease, in other words the actual fluttering of the heart. So cardiac ablation is a tool that is in the armamentarium of the cardiologist today. The flutter – the nodosum from the arrhythmia per se itself, what is life-threatening is the emboli, and we believe that the emboli is resident in the left atrial appendage, which is a vestigial organ on the left atrium of the heart. And when the heart goes into arrhythmia, the heart is struggling to get back its normal sinus rhythm, and when it does, it ejects whatever has been in the atrium for those few moments and the appendage, especially as we age, becomes filled with embolic clot and other debris.

So it's a like a cul-de-sac, the flow is not as dramatic there as it is in the main chamber of the atrium. So we have acquired a patent from Dr. W. Johnson, who is the first surgeon in the world to do multiple bypass surgeries, and he believes very strongly that the cause of embolic stroke is not the atrium itself, it is the clot coming from the appendage. So we have the technology and the study aimed at proving that occluding the atrial appendage in a simple, single core procedure could reduce embolic stroke.

I mentioned morbid obesity already and natural orifice translumenal endoscopic applications. We previously announced in press releases that in Japan we have successfully performed transvaginal resection of stomach tumors. We are going to have a press release probably by the end of this week. The fourth such procedure was conducted yesterday. I happened to witness the live television, I guess, so I happen to receive that note from the surgeon – I have a little video, so I will show that to you in a second, it is an animation, not a live video, to save everybody the gore, but the patient woke after the operation and said I guess you couldn’t do the procedure. And they said why, she said, I don't feel any pain at all. So a 61 mm tumor was removed from the patient and she had no feeling of the procedure. So while that remains controversial and out there a little bit, there's certainly enough evidence from our perspective that there is a lot of intrigue about continuing to pursue the efficacy and long-term durability of such procedures.

Intuitive Surgical, that has been an incredibly wonderful business story and medical story. I’ve had the pleasure of actually operating that system in an AMNC [ph] lab, and the technology is (inaudible) and we're very pleased to have been selected as the company which provides technology for them in adding a stapling apparatus to their robot. So that is progressing well. We previously announced that – I believe just about two weeks ago, we received a milestone payment from them, and I think it is $2 million, is that correct? $2.5 million. So that program continues to move forward. There are other payments due as the technology progresses, but this is just very, very exciting. We hope to expand that relationship into some of these new indications in the future if possible.

So on the increasing sales side of the ledger here, I have already mentioned this, but I would just like to reiterate it. These are very high growth, large high volume surgical specialties, focused on life-threatening diseases. If we can contribute to better outcomes at lower delivered costs, then we would fulfill our mission statement. And I think there's a real opportunity and a real need for that, especially in the current environment. To do that, we need to continue to launch our new product offerings and new armamentarium, especially in the advanced areas, as the trend moves from open surgery to minimally invasive to natural orifice, if it is going to continue, clearly new technology is going to be needed.

And I have lived through this in my career, having been – I started in the surgery business in early 1980s and I have watched the transformation from open surgery, I have participated in that trend from open surgery to minimally invasive. And surgery gives way slowly to new ideas, because it is a very practical and very vigorous approach, scientific approach. But once that rigor has been applied and proven, it rapidly adapts the new technology. So I would suggest that we may be in the middle of one of those periods again, where there is a lot of interest in perceived benefit moving from minimally invasive surgery to NOTES and we are actively actually participating as large institutions try to approve that through scientific rigor.

In order to – this is not something that you kind of start and walk out of your home and start having discussions with surgeons about advanced procedures. You really require the knowledge base that is pretty deep and therefore tracking and maintaining highly experienced executives and managers, both internally and in the field is paramount to your success. We believe that we have a very strong management team globally. We mentioned the two incumbent players and I would say that our GM, Managing Director in Germany and France are both 20 year plus veterans of this industry. The same is true of our Tokyo Manager and the same is true for our Managers in the United States. So you really have to have a full complement of experience people across the board, not only in sales, but regulatory and product development to be able to address this opportunity, and I think we've done a nice job in pulling together an effective management team.

Just last point, just a reiteration of what I have already said, in an environment where cost containment, where greater application is needed, where a shrinking dollar is required to address those constituents, this is the type of technology that really can proliferate in this kind of an environment. And you will see, we are actually growing quarter to quarter even in this economy.

Just a brief touch on the markets that we have addressed. I have mentioned this in the past but here are some statistics of the size of them. 170,000 bariatric procedures and growing, I think that is a bit dated now. I believe last year it was about 220,000, but that number is not referenceable yet as it hasn’t been published, but this is academic. And associated with bariatric surgeries, for those of you that may not know, is Type II diabetes. This procedure that I'm going to share with you in a moment not only addresses morbid obesity for weight loss, but also in the four patients that we have done acutely in the first four weeks post operatively shows to be effective in the treatment of Type II diabetes, at least in the immediate time frame post operatively. Now we were going to follow these patients for a year to see if the effect is durable, but the early indications are very exciting for the company and of course for the patients.

In colon and rectal surgery, there are very effective treatments, surgical treatments for these diseases. The American Society of Colon and Rectal Surgeon has been focused exclusively on these diseases for over 60 years. There are always ways of improving but the procedures here, estimated to be 246,000, are approximately penetrated by 50% to 55% in minimally invasive approaches versus open. So one would ask themselves if we started pursuing laparoscopic cholecystectomy in 1988 and fully penetrated the conversion from open to minimally invasive surgery by 1995, why haven't we done so in a colon and rectal surgery. And the answer we would propose is the instrumentation never met the need of the surgery. We were dealing with larger organs, the colon and rectum, than the appendix or the gallbladder. So that requires a more dramatic capability. Gastric procedures are a small percentage but still growing and life-threatening also.

Here is the animation I promised you. Very close, we had to have at least two animations to make it exciting these days, so we did that. Now the theory is a picture is worth a 1000 words. This procedure, this is our i60 XXL [ph] is an animation vision of it. It is a very, very good animation of it, that is really what instrument the looks like. And the procedure I referenced that was done in Japan yesterday was done transvaginally, and the long instrument went through the vagina and up to the stomach. Now this is not the procedure, this is a new procedure called the vertical gastroplasty. And because of our technology, you see the surgical stapler is being applied to the stomach, and then a nice way to transect. In this instance, we only go half way to the middle of the buttonhole and this is key to the success of this procedure, and I referenced this a moment ago and said that the weight-loss was dramatic and also the Type II diabetes which you saw, this is the procedure, I was referring to.

Now once you get to the buttonhole, it gives you the ability to insert the instrument into the posterior side of the stomach. For the device to be effective, you have to compress the anterior and posterior stomach together, so that you can apply that staples and transect. By transecting – sorry, I am not able to get that back up – by transecting the stomach like that, you effectively reduce the outsize. So as the patient eats post operatively, he becomes satiated much more quickly. But the interesting thing about this approach, sleeve gastrectomy and duodenal switch in Billroth-II applications in morbid obesity, are the procedures of choice and armentarium of the bariatric surgeon today. So it is not like we're going after a new surgical population, what we're doing is, going after – this is stomach stapling as we hear on television or as I mentioned earlier.

But the difference is, this is a very, very simple procedure, because we leave the stomach intact, and because our technology is able to create that little channel between the remnant stomach and the newly created pouch, all procedures today requires removal of the stomach. So when you're removing a big viscera, you obviously have to have either an opening incision or some way of getting it out. If you don't remove the viscera and leave it in place, the procedure becomes very simple. You don't have to dissect the nerves or the lymph nodes or the blood vessels, and you don't have to remove this large organ. So by leaving it inside you, if you get the same effect, you cut a really big side effect. The morbidity, the mortality of the procedure would go down, just almost by definition. The time of the procedure, I had actually personally stood in one of these procedures. We have done a six of these now in the United States. These products are approved for market by the FDA (inaudible) but we don't have the long-term data to support the claim that it is durable and safe and efficacious procedure. That is why we are entering into studies with some very prominent institutions to do randomized trial on this to see if that does support the hypothesis. So 28 minutes from the time that they put the patient under to the completion of the procedure. Now in surgical terms, that is very, very fast for a gastric procedure. And the same is true for the transvaginal approach that was conducted in Japan yesterday. The time the patient spends under anesthesia and the operating room time is greatly, greatly reduced.

I'm going to show just other animation and another breakthrough that we are working on and then I'm going to have to move quickly through the remainder of the slides because I'm getting the five minutes left indication here. This is another configuration of our i60. This particular application has two joints instead of one, has an elbow end of it, and you'll notice perhaps that the instrument opens in opposite way than the previous one. We call this the reverse (inaudible) and what does, it allows us to gets up under the rib cage at the bottom of the diaphragm, which is the apex of the stomach, and apply a (inaudible) of instruments. You will see here it is going posteriorly, the anvil will come up. The stomach will plicated, and in this case, we're not cutting the stomach. We're simply stapling it close. Now what that does is, it effectively elongates the esophagus and by doing that and repairing the hernia at the esophageal gastric junction one hopes to greatly reduce the incidence of reflux. There is a procedure called a Nissen fundoplication. It is a surgical procedure for reflux, extremely efficacious. It has been around for 30 years. However, it is a very invasive procedure. This procedure has the potential for being noninvasive and hopefully effective.

These are just some of the institutions that we are working with around the United States. We're very ecstatic that such a young company has access to so many great minds and it is a privilege for us to be able to work with these institutions in pursuit of these applications.

So I mentioned the reflux, left atrial appendage, bariatric and NOTES, and I would like now just to touch very briefly on the Intuitive Surgical licensing agreement. This has been previously publicly disseminated, it is available through Web search or if more information is needed, we will be happy to answer questions. But we have really two agreements, a license and development agreement, the actual arm goes on the robot, the razor, and then the supplier agreement on the reloads, which is the razor blade. So this basically expands our distribution channel with very little incremental cost to the company.

We have over 136 applications with 41 issued patents. We have to believe this is a strong portfolio. Kenyon & Kenyon here in New York has been our IP Counsel since the beginning, inception of the company, and we believe we are the first mover in intelligent wireless surgical instruments, so that gives us some advantage. Operation in Langhorne, Pennsylvania, Shelton, Connecticut, Hamburg, Germany, Toulouse, France, and Tokyo Japan, I mentioned our management team earlier. Here is just a quick list of those folks, you can see the experience 28, 25, 18, 35 years across a broad array of applications, a broad array of companies with brand names and a lot of well-trained executives to help execute on this business plan.

On the financial plan, I just had a couple of brief comments here. You can see on the revenues side, we continue to grow even in this environment. A lot of the efficiencies that you see, especially gross margin here, represents our change from OEM to self manufacture. The negative gross margins in the first half predominantly relate to slack and inefficiencies in the operation and the transfer from the original platform to a new platform. We think the second half gross margin number more accurately represents the underlying business continuum. And you will see that the cash burn has been reduced greatly and will continue to be reduced as efficiencies relating to our cost containment efforts which we took action in October last year continued to roll through both the supply chain and through the operation itself.

So (inaudible) a very complex story. I appreciate your patience in listening to me; I am trying to communicate things quickly to you in a broad way and hopefully in some kind of a meaningful fashion. Sometimes I wonder because there is so much to communicate in a short period of time. I would like to wrap up by saying that the instruments themselves have applications in large and growing indications. We believe we are a low cost, low impact, environmental impact provider. The technology is revolutionary, there's no one else that has anything like it. It has applications in current, existing, large markets and new emerging less invasive markets and minimally invasive surgery in NOTES. And our strategic agreement, supply agreement with Intuitive Surgical is one that we're very proud of and can provide even further growth for the company in the future to help support our growing product pipeline of strong intellectual property position and an experienced management team to execute on it.

With that, I would like to thank you all very much for your time. I think we will open the floor for questions.

Question-and-Answer Session

Unidentified Participant

(inaudible).

Michael Whitman

The question was, are there any operations that I just described that a mechanical manual stapler cannot do currently? And the answer is yes. That is one of the reasons I wanted to show an animation on the GERD application and on the Mid Cut application. Neither one of the manual devices can do that. The reason is that the reverse stapler requires a different type of technology than the manual stapler presently can do. They are open from the other end. So by just reversing that, because all of it is powered, are drive mechanisms, patented drive mechanisms allows us to do that. You have to reconfigure the manual in its entirety to do that. And the Mid Cut, the procedure you saw where we saw it make a little buttonhole, we're the only technology that cuts from back to the distal end to the proximal end. All the manual devices cut this way, so it would have cut that little tail off and you can't do that procedure that way. So thank you. That was a good question. Yes sir?

Unidentified Participant

(inaudible).

Michael Whitman

I'm just repeating the question for the web cast. The question was on financing, there is $8 million in cash shown on the slide we presented and the question was the burn shows that there is not a lot of run way, are we going to get some (inaudible).

Unidentified Participant

(inaudible).

Brian Posner

No comment, no. Thank you. As we said on the earnings call, we're looking at different options. Obviously, we're looking at the debt that we have, there is $25 million of debt due March of next year. We're looking at financing, and we're looking at strategic relationships. As Michael Whitman just alluded to in his presentation, we have a relationship with Intuitive, so we have a great technology platform, so we are pursuing multiple avenues to address the financial situation of the company.

Unidentified Participant

How many shares outstanding?

Brian Posner

We have 17.1 million shares outstanding.

Michael Whitman

I would just like to add to that, we have hired an agent to help us with the debt issue and addressing those issues, so we're actively pursuing that. We also have a growing internal business. That is something that may not be obvious, but we would really like to see very rapid penetration in the marketplace, which would also obviously help our cash position.

Unidentified Participant

(inaudible).

Michael Whitman

The question was who owns the debt.

Brian Posner

Yes, there is about seven or eight parties that own the debt.

Unidentified Participant

All institutions?

Brian Posner

Yes.

Unidentified Participant

Are they all…

Brian Posner

Well, mostly institutions.

Unidentified Participant

Are they also stockholders?

Brian Posner

In certain cases.

Michael Whitman

Are there any other questions?

Unidentified Participant

(inaudible).

Michael Whitman

The question was how long does it take us to develop products and what are regulatory pathways? Are there any hurdles or anything to inhibit us? Just very briefly, it takes us approximately 18 months from inception to launch, but there are 21 products in the market already. We have over nine products in the pipeline, so it is not 18 months from today, it is 18 months from when we started 18 months ago. So there's a continuous flow of innovative products has been part of a strategy. On one of our slides as you see here, is the continuous flow of innovation that the company set up to continue to reiterate and the derivatives. On the regulatory side for instance, the reverse stapler you saw, has already been approved by the FDA. The only reason it is not in the market is we're not through with our verification and validation testing. But we have shown to have an effective regulatory strategy in the EU countries, in the United States and in Japan. So we feel that the ongoing organization is well dressed to launch. We would like to launch 6 to 8 products a year on an ongoing basis, and we feel we are capable of doing that.

Okay, thank you all very, very much for your time today. Thank you, Gerry.

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