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Uroplasty, Inc. (NASDAQ:UPI)

F4Q 2013 Earnings Conference Call

May 30, 2013 4:30 p.m. ET

Executives

Jenifer Kirtland – IR, EVC Group

Rob Kill – Interim President and CEO

Darin Hammers – VP of Sales

Mahedi Jiwani – CFO

Analysts

Matt Dolan – Roth Capital Partners

Charles Haff – Craig-Hallum Capital Group

Jose Haresco – JMP Securities

Charlie Pine – Van Clemens & Co.

Tim Clarkson – Van Clemens & Co.

Joe First – First Associates

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Uroplasty Fourth Quarter Fiscal 2013 Financial Results Conference Call.

[Operator Instructions]. This conference is being recorded today May 30, 2013.

I would now like to turn the conference over to Jenifer Kirtland of EVC Group. Please go ahead.

Jenifer Kirtland

Thank you, operator, and good afternoon everyone. Thank you for joining us for the Uroplasty conference call to review the financial results for the fiscal fourth quarter and full year 2013 ended March 31, 2013. The news release announcing the results crossed the wire this afternoon shortly after the market closed and is currently available on the company's website. We have arranged for a taped replay of this call which can be accessed by phone. This call is also being streamed live on the Investor Relations section of our webcast at uroplasty.com and it will be archived there.

Before we get started, during the course of this conference call the company will make projections and other forward-looking statements regarding future events including statements about sales, reimbursement for procedures performed with our products, the potential market opportunities for our products and new product initiatives. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the anticipated results. These risks and uncertainties are more fully discussed in the company's annual report on Form 10-K and other quarterly reports filed with the SEC.

Additionally, the statements made on this conference call are made only as of today May 30, 2013 and we assume no obligation to update these forward-looking statements to reflect future events or actual outcomes, and we do not intend to do so.

And with that, I'd like to turn the call over to Rob Kill, Interim President and Chief Executive Officer of Uroplasty.

Rob Kill

Thank you, Jenifer, and good afternoon everyone. Thank you for joining us today to review Uroplasty's fiscal fourth quarter and full year 2013 financial results as well as some discussion around recent corporate developments.

With me today is Mahedi Jiwani, our Chief Financial Officer, and Darin Hammers, our Vice President of Sales. I will start with a brief overview of our recent performance, then I'll turn the call over to Darin for comments on his first 90 days leading our sales organization and strategy for driving the growth of Urgent PC. Mahedi will then offer additional detail on our financial results, and then I'll conclude with some updates on other operational highlights of the quarter, and we'll open up the call for your questions.

Global sales during our fiscal fourth quarter declined 1% year over year to $5.5 million. In the US, total sales increased 2%, driven by an 11% increase in sales of our Urgent PC system. For the full fiscal year, sales were $22.4 million, a 9% increase over total sales for fiscal 2012. In the US, total sales increased 18%, reflecting a 9% increase in sales of Urgent PC.

Our results were disappointing and reflect poor execution on our part. Consequently, we implemented several changes, primarily in our sales organization in the fiscal fourth quarter to reinvigorate and regain momentum of our Urgent PC sales in the US.

The sequential quarterly decline was largely attributable to the transition of sales representatives in several territories. By mid-May we've replaced sales representatives in six territories and by the end of June we expect to add three to four more as we continue to realign our organization to return to continued sequential sales growth. Our goal is to complete the year with 45 experienced sales reps onboard.

Clearly sales strategy and implementation are critical to our success. So to provide you with some additional direct insight, I'd now like to turn the call over to Darin Hammers, our new Vice President of Sales, who joined us earlier this year.

Prior to joining Uroplasty, Darin spent 13 years at Boston Scientific in its urology and gynecology business unit. Following Boston Scientific, Darin joined CR Bard, spending four years there as Vice President of Sales for Bard Medical Division. And while there, he focused on growing the business within five different sales organizations including urology.

Darin joined us in January and has begun to drive change in our sales organization already. And he can share with you some of his thoughts, plans and progress to date. Darin?

Darin Hammers

Thank you, Rob. Excuse me.

Throughout the past several months I've had the opportunity to talk to many physicians and other clinicians I know about Uroplasty and Urgent PC. And what I've learned is it's truly an outstanding product with tremendous opportunity for growth in the treatment of symptoms of OAB in the US.

The first step in driving our success is ensuring we have the right people. As Rob discussed in his remarks, we've had a transition in several of our US territories as we position ourselves as a challenger in our market. Since I joined Uroplasty, we've already added six new reps that bring direct sales experience in business to business or device sales to their respective territories. I anticipate that we will have three to four more reps by the end of the month.

Our objective is making sure we have the right people in place to reflect the true essence of the brand and to drive strong relationships with physicians. We are looking for reps with geographic market knowledge as well as track record of proven top 10% performance.

With the transition in our sales rep profile comes a transition in our compensation structure. We have better aligned our compensation plans to reward year-over-year growth across all territories.

The second key step in our sales transition process is training. Now that we are well underway in finding the right talent and skill set to meet our objectives, we are actively working on a number of resources and tools to support our sales organization. This includes gathering data on the efficacy of Urgent PC in the treatment of OAB symptoms and creating programs and materials that will directly support the marketing efforts. We want to establish awareness and reputation among physicians as being the best treatment available for their patients.

Moreover, we want to provide our sales reps with the best, most [acted] information on how we compare against our competitors. At a national sales meeting in mid-May, we addressed ways to embed PTNS at an established part of the OAB algorithm of care, as well as highlighting ways we can improve throughput and drive utilization of Urgent PC.

We've also engaged a consultant to help us better understand our customer, which physicians are buying our product and why. We'll be also identifying and prioritizing high-potential practices to determine where we should be directing more time and resources in the immediate term. And finally, we'll be looking at methods to retain our customers.

A sales tool that has been highlighted in the past is our [ITD-9] program which offers a simple way for physicians to identify patients that have come for treatment of OAB and may benefit from Urgent PC. Introduced last fall, this program is starting to see traction but it's taking longer than expected to see meaningful results. We will continue to make this program available to our sales reps as a tool to help drive Urgent PC growth in the US.

And the third step in our strategy centers around execution. Our revised compensation plan for our sales reps is aligned with improving sales of Urgent PC in the US. There are a number of territories that are currently meeting or beating their quotas on a regular basis but there are still some that aren't. We want to ensure that all the territories are achieving this metric. In addition to our existing customer base, we'll be looking to identify practices that haven't been exposed to Urgent PC to begin building awareness.

Today the focus is on growing Urgent PC, particularly in the US. We currently have 41 active territories and expect will add four by the end of the year, and potentially get those territories ramped up. We are also planning to add four clinical representatives to help train physician practices on how to identify patients that will benefit from Urgent PC as well as how to administer the treatment to support patients.

Our goal is to move our Urgent PC customer base from the early adopters to the early majority. With the right people and the right tools, I'm confident that this is possible. I'm excited to be part of Uroplasty and look forward to driving sales and growth in the future.

Now I will turn the call over to Mahedi to -- for a more detailed look at the financial results for the fiscal fourth quarter and year. Mahedi?

Mahedi Jiwani

Thank you, Darin. I will quickly recap our financial results for the quarter.

Sales during the fourth quarter of fiscal 2013 totaled $5.5 million, down 1% over the year-ago period. In the US, sales increased 2% year over year driven by an 11% increase in sales of Urgent PC.

We sold 3,365 lead set boxes to 581 active customers in the fourth quarter compared with 3,022 boxes to 538 customers in the year-ago quarter and compared with 3,501 boxes to 620 active customers in the fiscal third quarter.

US Macroplastique sales decreased 13% over the same quarter a year ago. The decrease in Macroplastique sales reflects the lack of emphasis that our sales force have been placing on this product this year as we shifted the focus to Urgent PC.

Sales outside of the US were $1.5 million in the fourth quarter, down 7% year over year. Excluding the impact of fluctuations in foreign currency exchange rates, sales outside of the US decreased by 1%. This decline in sales is related to price reduction on our Urgent PC in one geographic area due to reimbursement challenges.

Gross margin was 86.5% in the fourth quarter, an increase of 85.9% in the fourth quarter of the prior fiscal year. Gross margin expansion was driven primarily by favorable product mix.

Operating expenses in the fourth quarter were $5.8 million compared with $5.4 million in the year-ago quarter. This increase was driven by higher G&A and R&D expenses. Looking ahead, over the next several quarters we expect to increase our sales and marketing expenses to drive sales momentum of Urgent PC in the US.

The operating loss for the quarter was $968,000 compared with an operating loss of $589,000 in the same quarter last year. Excluding non-cash charges for depreciation, amortization and stock-based expenses, the operating loss for the quarter was $478,000, up from $122,000 in the year-ago quarter. We continue to expect the greatest operating leverage to come from our US sales organization. Our goal is still that each US sales rep should generate approximately $1 million in revenue for the year.

In the fourth quarter, our average annualized revenue per full-time equivalent rep was about $406,000, with a few of our reps trending in excess of $700,000. Our US sales organization at end of March was comprised of 34 employee sales reps, five regional sales directors, and five field reimbursement managers. As I mentioned, sales and marketing was an area of investment for us over the next several quarters as we have sales reps and other personnel and marketing programs to support our growth objectives.

Now turning to the full year results, for fiscal '13 ended March 31, 2013, net sales were $22.4 million, a 9% increase compared to sales in fiscal '12. Net sales to customers in the US grew 18% to $16.4 million in fiscal '13. Sales in the US of our Urgent PC product increased 35% to $10.5 million. In fiscal '13 we sold 13,725 lead set boxes compared with 10,118 lead set boxes in fiscal '12. Net sales increased because of expanded reimbursement coverage by third-party payers and the impact of our larger rep sales organization and marketing efforts in support of Urgent PC.

Sales to customers outside of the US were $6 million in fiscal 2013, a decrease of 10% compared to fiscal '12. Excluding the translation impact of fluctuations in foreign currency exchange rates, sales decreased by approximately 6%. Included in the results for fiscal '13 were $2.1 million of Urgent PC sales outside of the US, up 5% from fiscal '12. Excluding the translation impact of fluctuations in foreign currency exchange rates, Urgent PC sales increased by approximately 10%.

Urgent PC sales excluding the fluctuations in foreign currency exchange rates increased 39% in the first half of the fiscal year and declined 11% in the second half of the fiscal year. The decline in the second half of fiscal year is largely due to price reduction in one geographic area due to reimbursement challenges. And in addition, in the second half of fiscal '12, we had a one-time order from a third-party funded clinical study.

Finally turning to the balance sheet, at March 31, 2013 we had cash, cash equivalent and investments of $13.9 million compared with $15.6 million at the end of March. We believe we have sufficient cash to fund -- to meet our liquidity needs beyond the next 12 months.

This now concludes my remarks. I will turn the call back over to you, Rob. Rob?

Rob Kill

Thanks, Mahedi. And before we move on to Q&A, I'd like to provide an update on reimbursement and clinical studies as well as our search for a new CEO.

This afternoon we were pleased to announce that Uroplasty received a positive coverage decision from Wisconsin Physician Services which is a Medicare administrative contract to providing medical and drug benefits to approximately 8 million Medicare beneficiaries. Effective June 1, beneficiaries in Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska and Wisconsin will be reimbursed for PTNS treatments using Urgent PC. We now estimate that PTNS coverage has been extended to a total of 135 million private coverage and Medicare beneficiaries.

Moreover, this expanded coverage demonstrates that more payers understand the role of PTNS in treating OAB and associated symptoms. During the clinical studies, we recently received the positive three-year results from the STEP study on PTNS treatments for overactive bladder using Urgent PC. Published in the Journal of Urology, the study determined that patients who received an average of 1.1 treatments per month sustained significant improvements in voiding complications and quality of life measures following treatment with Urgent PC. Moreover, there were no serious adverse events reported throughout the study.

The recent AUA/SUFU OAB guidelines affirm that for those patients for whom OAB drug therapy and other conservative therapies have not worked, PTNS is an ideal option. We expect these findings to play a role in reaffirming physicians' confidence in Urgent PC and driving increased adoption of our system.

Our search for a new CEO is also moving forward. We have engaged an executive search firm to help us find a senior executive with the experience to take Uroplasty to the next level. We are seeking someone with the experience in the commercial expansion of new medical device therapies and in scaling an organization into $25 million to $200 million revenue range of revenue for sustained top and bottom line growth. We have several strong candidates and we'll communicate with you when the search is complete, most likely in the next 30 to 45 days.

That concludes our updates on our financial results and operational initiatives. I hope that through our comments today we've conveyed our optimism about the future of Urgent PC and our commitment to drive revenue growth and improve the operational results in the second half of the fiscal year.

With that, Mahedi, Darin and I will be happy to take your questions. So, operator, could you please open the call for Q&A?

Question-and-Answer Session

Operator

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions].

Our first question is from the line of Matt Dolan with Roth Capital Partners. Please go ahead.

Matt Dolan – Roth Capital Partners

Hi guys, good afternoon. Can you hear me okay?

Rob Kill

Yup.

Matt Dolan – Roth Capital Partners

Okay, great. So congratulations on the reimbursement announcement. I wanted to get a little more detail there on WPS. Maybe first of all, how you were able to finally get them to reverse their decision. And then secondly, should we expect you to add some resources to that area? And how quickly could you see some uptake in the newly-insured areas?

Darin Hammers

Sure. Hey, Matt, it's Darin. It's been a long time in the making to get that positive coverage and the reimbursement team has been on that for some time. We expected that we would get a decision this month, and we did.

The good news is it's very positive coverage for us; the better news is we're prepared to execute in that market. We're obviously having a launch meeting in the next week, week and a half, where we'll direct resources on those states where we haven't had coverage. So the additional sales team members to that are already part of the sales team, as well as the reimbursement team working that area to really help get this off the ground.

Matt Dolan – Roth Capital Partners

So you should see some benefit in the June quarter, is that fair?

Darin Hammers

Yes, that's fair.

Matt Dolan – Roth Capital Partners

Okay. And then with respect to the overall sales force transition or reorganization or whatever we want to define it as, relative to the March quarter that you just reported, now we're two months into the June period, can you just help us understand, is the March quarter kind of the trough and now that you've fully reinstated reps in that territory we should start to see some improvement in the June period? And then obviously you've talked about an acceleration in the back half of the year, but help us understand maybe what you've seen so far.

Darin Hammers

Well, you know, I can't tell you, I can't predict how it's going to turn out over the next two quarters other than to say the team has done a fantastic job of recruiting the talent. We just did our first initial sales school, had seven people in that class. Very pleased with the outcome. They're going to be in the territory in the next coming weeks. We expect that they'll make an impact quickly. But obviously, and we've communicated to you in the past, there's going to be some turbulence as we go through these transitions with the change in compensation, the change in territory or area managers as we move forward. So we're optimistic the changes that we've made are taking hold, and we'll start to see results soon.

Matt Dolan – Roth Capital Partners

So, should the level of disruption in the March quarter be worse in the June quarter or should it start -- should we see again a steady improvement?

Darin Hammers

I think you're going to see a steady improvement.

Matt Dolan – Roth Capital Partners

Okay. And then on the pipeline, I'm trying to understand the language in the press release. I think it said later this year for the -- I believe it's the fecal pilot study. What do you mean by this year? I think we had you down for maybe a late calendar this year to complete the pilot study, so I had to make sure, you know, you're still on track or if that's delayed or we're just getting confused between calendar and fiscal year.

Rob Kill

Matt, it's Rob. And it's on track as you understood. Obviously we're in the enrollment phase and we're early stages there. But as we sit here today, it's on track as communicated prior.

Matt Dolan – Roth Capital Partners

Okay. And then the implantable, is it mid this year, calendar year, or mid 2013 CE Mark submission still the plan?

Rob Kill

It is.

Matt Dolan – Roth Capital Partners

Okay. So that's June or mid fiscal year?

Rob Kill

In the June, July timeframe.

Matt Dolan – Roth Capital Partners

Okay, perfect. All right, I'll let some of the other guys get on. Thank you.

Rob Kill

Thanks, Matt.

Operator

Our next question is from the line of Charles Haff with Craig-Hallum. Please go ahead.

Charles Haff – Craig-Hallum Capital Group

All right. Thanks for taking my questions. First question was on WPS. The coverage that they've agreed to, is that a 12-week coverage or something different?

Darin Hammers

It's actually, Charles, 12-week initial coverage and then once per month for two years.

Charles Haff – Craig-Hallum Capital Group

Great. And then the three to four reps that you plan on adding, Darin, will those be in the WPS territory or will those be elsewhere?

Darin Hammers

Originally they were designed to be elsewhere just because we weren't sure when and if this positive coverage is going to take effect. Obviously we're rethinking our alignment right now, so that's in process. The bottom line is we'll divert resources to that area to make sure that we're optimizing our opportunity.

Charles Haff – Craig-Hallum Capital Group

So if you were confident that you wanted to add reps in other territories outside of WPS, why not add six to eight reps then now that you have WPS? I'm a little bit confused on that.

Darin Hammers

Well, obviously it's not just a function of, you know, having the infinite number of reps. We want to make sure that we do it responsibly. So I could potentially move some of these other opportunities where we haven't hired into those states to make sure that we've got coverage. But quite frankly, Charles, we have reps in those areas, and they've just been selling Macroplastique and then Urgent PC to private payers.

Charles Haff – Craig-Hallum Capital Group

Okay.

Rob Kill

Capacity issues are not going to be our challenge.

Charles Haff – Craig-Hallum Capital Group

Yeah. I understand. Well, it's good news nevertheless.

And then did you have clinical reps or clinical specialists in the fourth quarter at all, and if so, how many did you add?

Darin Hammers

No, we're in the process of adding those clinical resources the first quarter of this year. We've been actively in the search process for the last 25 days and has started the interviewing process.

Charles Haff – Craig-Hallum Capital Group

Okay. And what's usually the profile for somebody that would be a clinical rep or specialist?

Darin Hammers

It's someone obviously with an [RN] background that has either been working most recently with another company doing a similar role or somebody that comes off of the floor that understands patient care and can be trained on the usage of Urgent PC.

Charles Haff – Craig-Hallum Capital Group

Okay, sounds great. And then on US Macroplastique, that was a little bit weak this quarter. I think in Mahedi's comments he mentioned lack of emphasis on Macroplastique in the US. Can you expand on that a little bit and maybe try to help me understand that a little bit more?

Darin Hammers

Sure. Obviously the driver for our growth is going to be Urgent PC, so our team is focused on driving that in the US. We opportunistically look at Macroplastique as -- if we're with a urologist who is doing both, our sales team is going to present both products or have the potential to do both. But at the end of the day, the vast majority of their time is really spent focusing on those big opportunities for growth with Urgent PC.

Charles Haff – Craig-Hallum Capital Group

Okay, great. Thank you. And then you mentioned in the prepared remarks that you had a price decline in one geographic area due to some reimbursement challenges. Can you expand upon that and maybe tell us which region that was?

Mahedi Jiwani

We are talking about outside of the US business, Charles. This was in Netherlands.

Charles Haff – Craig-Hallum Capital Group

Okay.

Mahedi Jiwani

We are not talking about the US side.

Charles Haff – Craig-Hallum Capital Group

Okay. So the -- for the ASP then in the US, that hasn't moved?

Mahedi Jiwani

That has not changed much from prior periods.

Charles Haff – Craig-Hallum Capital Group

Okay, great. And then last question from me, Rob, just on the CEO search, I didn't quite understand the comment on the CEO search, you said in the next 30 to 45 days you hope to have somebody named or you're just finishing your process? I wasn't quite clear on that, sorry.

Rob Kill

Was probably one and the same, Charles. I mean we started the search back at the beginning of April. Typically these things take on average 90 days and that kind of puts us 30 to 45 days out from where we are today having someone named and completing the process. That answer your question?

Charles Haff – Craig-Hallum Capital Group

Yes. Thank you very much. Okay.

Rob Kill

Sure. Thanks.

Operator

Our next question is from the line of Jose Haresco with JMP Securities. Please go ahead.

Jose Haresco – JMP Securities

Hi guys, good afternoon. Thanks for taking the question. Can you hear me okay?

Darin Hammers

Yes.

Jose Haresco – JMP Securities

Okay. Darin, a couple of questions for you. The restructuring in the sales force, was that an issue of a lack of performance with regards to revenue generation or was that an issue of a misalignment of geography versus, you know, opportunity? In other words, you know, you had reps in the wrong places and, you know, versus not enough in Florida for example? Or is it a little bit of both?

Darin Hammers

Yeah, it was primarily the execution, Jose. You know, anytime we get an opening, we look and assess, is there opportunity there for that individual to be successful. So there've been territories where we've contracted just because we [did the contraction] initially. But the turnover that we had was around execution, and quite frankly we've upgraded those areas and are optimistic about being able to expand that business moving forward.

Jose Haresco – JMP Securities

When you say upgrade, could you be a little bit more specific? And then somewhat related to that, when you restructure the com plan for driving your growth, could you distinguish between same-store sales versus new store openings and how they're compensated between the two?

Darin Hammers

Sure. I guess I'll start with the latter first. Historically we paid 10% from dollar one, and so the larger the territory, the larger the income. What we did find was it's a little hard to really drive execution because a lot of the territories could set their own equilibrium for compensation. The changes that we've made reflect more of a growth type compensation plan, so every territory manager is reward for year-over-year growth versus just territory size. And with that, it allows us the opportunity to expand the number of territories that we have without negatively impacting our existing account managers who have done fantastic jobs. So we've aligned it to really help drive year-over-year growth and the team has embraced that and has already started to execute.

Jose Haresco – JMP Securities

Okay. Prior [inaudible] issues we've seen over the last few years was, you know, over-emphasizing new store openings and new accounts which inevitably deemphasized the churn that you could get from driving utilization. I just want to make sure that there's still that balance between the two [inaudible] those of us who want to see the technology [to succeed] are going to be looking for that same-store sales growth.

Darin Hammers

Sure. And that is a big component of our strategy for fiscal 2014. We did a deep-dive analysis on our existing customer base and segmented them by variables, number of claims, number of physicians treating OAB, and tiered those accounts so we could help our team understand where to focus our time on those existing customers and what best-in-class look like and try to get the other practices up to that level. So that's the one part of the strategy.

Second part is there's still tremendous opportunity in new account growth. And so we're embracing the opportunity to do both and to keep that balance and quite frankly drive to the revenue targets with both of those opportunities.

Jose Haresco – JMP Securities

Okay. And what did you -- what do you mean by upgrade?

Darin Hammers

Upgrading the level of talent. Obviously if we had an execution issue, it was typically around that person's ability to move sales to that market. So what we've done is changed the hiring profile to reflect more of a challenger mentality, someone who has prior business-to-business or medical device experience to help really scale the business.

Jose Haresco – JMP Securities

Okay. As opposed to what in the past? I'm trying to get some understanding of the delta between what you had and what you have now.

Darin Hammers

Sure. I think historically --

Jose Haresco – JMP Securities

Less experienced or -- yeah, go ahead. I'm sorry.

Darin Hammers

It's not necessarily less experience. We focus a lot and rightly so on really attractive individuals who had overactive bladder experience with pharmaceutical companies. And what we found is you're not always able to hit about a thousand with that. We've had some really successful individuals come over and they've really changed the level of performance here, but we've also had some opportunities where it didn't work out so well. So we're looking at doing both and really trying to identify people who quite frankly have had previous experience where they've gotten a purchase order and have proven track record of top 10%, top 5% historically.

Jose Haresco – JMP Securities

Okay, great. Thank you.

Last question, you mentioned hiring a consultant to help you understand who's buying and who's not buying. At the beginning of the exercise a couple of years ago, it was our understanding that, you know, script data would tell you where the high-volume [ops] were. This suggests that it's harder to find the needles in the haystack maybe than we would have thought and certainly as we've seen the company grow through the last few years, it seemed that way. So what is it that's so difficult in this population that makes these high-likelihood buyers difficult to find? And I realize you've only been there a few months, but -- a couple of months, but what sticks out in your mind that this is not obvious?

Darin Hammers

Well, you know, Jose there's more than just the scripts that are being written out of that practice. There are other components. Do they have [extenders], they have nurse practitioners or physician's assistants, you know, what's their algorithm for care? Do they use other modalities in that space? So, you know, we wanted to really dig into the many variables that affect why or why not these practices were buying.

So it's not like we're running away from high-prescription offices, we just wanted to see if there were commonalities among the higher-performing offices that we could point to to say, okay, here are the characteristics that these accounts have that really indicate the opportunity for success. And so what we did is we dug in and found those opportunities and directed our teams to spend their time [there].

Jose Haresco – JMP Securities

So given that, what are some of the variables that you think drive some -- that drive high-performing office? And the last question is, what's your thoughts on how to best position this against practices that use a lot of Botox?

Darin Hammers

Sure. Well, obviously claims is one great indicator. The higher the claims, the more opportunity. Obviously we have seen more OAB patients. The extenders, nurse practitioners, physician's assistants, that's all obviously a driver as well. The number of physicians within the practice that treat OAB. And then, you know, we've looked at the reimbursement issues, so, from a coverage perspective, which areas had better success with similar coverage.

So, you know, we looked at a lot of variables, but those were the four real key drivers that indicated the likelihood of success.

Jose Haresco – JMP Securities

Okay, great. And then [inaudible] question, how do you think about the two?

Darin Hammers

Sure. I've had a lot of questions over the last several months just around Botox, and, you know, certainly I'm not one to ever underestimate Allergan's ability to market. But we are confident that they're going to drive more patients into the physician's practice. Not everybody is going to be a candidate for Botox or any of the other modalities. So in our world, have to win at the physician level, that they understand where Urgent PC fits in their algorithm for care. And we're confident that our outcomes are going to be very positive despite the launch of Botox and the initial interest.

Jose Haresco – JMP Securities

Okay, great. Well, thank you very much. Appreciate you taking so many questions.

Darin Hammers

You bet.

Operator

Our next question is from the line of Charlie Pine and Tim Clarkson with Van Clemens & Co. Please go ahead.

Charlie Pine – Van Clemens & Co.

Hi, this is Charlie Pine. I just have three questions. First of all, my first question is directed to Mr. Kill. Mr. Kill, are you considering yourself to be a candidate for the permanent CEO slot?

Rob Kill

Hi, Charlie. You can call me Rob. But I'm here as the interim CEO. We've got an external search going on and we've got some really strong external candidates that we're looking at for the role. So we're focused on that.

Charlie Pine – Van Clemens & Co.

Okay. So you're not -- you didn't put your number, you know, so your hat is not in the ring in other words?

Rob Kill

It is not at this point.

Charlie Pine – Van Clemens & Co.

Okay. And my -- the other question would be, congratulations of course on getting this, you know, this other Medicare region to cover. What's the status on the one I believe is just the one last hold-out?

Rob Kill

We are engaged in the same kind of discussions with them that we were with WPS over the past, predates my time, but for the past couple of years. And we have a lot of confidence in the work that our reimbursement team is doing, but also in the efficacy of the treatment and the data that we have supporting that. So just like WPS, we found out about this this week, right? And we'll know on [NGS] when they make a decision. But we'll work at the same way we worked WPS.

Charlie Pine – Van Clemens & Co.

But as the extension, sort of my follow-up, are there any different people that you're engaging with in -- with [NGS] that has been in place there say in the last year or two when you first were getting the resistance?

Rob Kill

Since I've been here for 30, 45 days, I don’t know the history. And Darin's relatively new and Mahedi is not involved in the reimbursement discussions. So it's a question that we'll have to get an answer to you separately, Charlie.

Charlie Pine – Van Clemens & Co.

Okay, great. Thanks. My colleague Tim Clarkson would like to ask a couple of questions too.

Tim Clarkson – Van Clemens & Co.

Yes. Darin, I'm just wondering, just in terms of the sheer amount of potential chaos that was going on in the sales this last quarter, I mean, how many bodies are we talking about changed -- that been changed in the last couple of months since you've come onboard, are we talking about five salesmen, 10 salesmen, 15 salesmen? What exactly are we talking about in terms of people being replaced to new people coming in?

Darin Hammers

Yes. So of the 10 hires that we'll be making in the first quarter, four of them are expansion and six of them were individuals who were there prior. So we've turned over six in the last 90 days.

Tim Clarkson – Van Clemens & Co.

It's a fair level of dislocation that was going on obviously, right?

Darin Hammers

Yes.

Tim Clarkson – Van Clemens & Co.

Right. And in terms of, you know, when you're, you know, with Botox out there now, how exactly are you differentiating Uroplasty's product versus Botox? What would be the advantages of Uroplasty over Botox, one or two that you're illustrating with [inaudible].

Darin Hammers

Sure. Well, the complication profile for Urgent PC is very, very minimal versus just in the data that you saw during the initial study of Botox there's morbidity associated with that that not every patient is going to be accepting of. So we feel strongly that, you know, that with the rising tide, all ships will rise as well, and we're going to be a beneficiary of that. And quite frankly there's a whole patient population that's not going to be, you know, actively seeking to have Botox treatment and they're a great candidate for Urgent PC.

Tim Clarkson – Van Clemens & Co.

Right. Really, isn't your product the safest product against everything, isn't it?

Darin Hammers

Yes.

Tim Clarkson – Van Clemens & Co.

So I mean that's a huge differential really on drugs, with the Medtronic product, with this. It's by far the safest product out there.

Darin Hammers

Yes.

Tim Clarkson – Van Clemens & Co.

Thanks. I'm done.

Darin Hammers

Thanks, Tim.

Operator

Our next question is from the line of Joe First with First Associates. Go ahead.

Joe First – First Associates

Good afternoon, gentlemen. I noticed in your release you'd talked about active Urgent PC customers, about 39 less this year than the previous year. Have you done any study to find out [what caused the loss of] 39 customers? Any trend to that or any particular thread running through the customers you lost?

Darin Hammers

Joe, what's interesting, since I've been here the last 90 days, I've really started to dig into what does the attrition rate look like and what's an active customer versus an inactive. And I think the more you dig, you understand that some of the inactive versus active is just simply ordering patterns. So if we look at the last quarter and said, okay, 650 accounts ordered, in this quarter only 630, we didn't necessarily lose 20 accounts, we just had 20 accounts that may have not ordered.

We're tracking very closely the number of new accounts that we bring on and then I have expanded the lost account to include the accounts that really haven't ordered for the last three quarters. So if you were an active account, you didn't order in the last three quarters, we consider you lost. And when you look at that, we've been fairly consistent. The problem is many new accounts we're bringing on, we were losing a fair number of existing accounts. And so that's what really affected our trajectory for growth.

Joe First – First Associates

Right. Then the ones you've lost, any particular reason you can identify for losing those accounts?

Darin Hammers

It's hard to generalize. I think you see a combination, some, you know, [may not have] the best initial patients, so we may not have done a good job with patient selection. We may not have done a fantastic job at identifying those targets as potential users. And then quite frankly, we probably have dropped the ball on some of the implementation and training and, you know, you get some turnover in the practices. And so we've just got to do a better job of making sure that we don't make those mistakes moving forward.

Joe First – First Associates

Thanks. It seems like you're making progress and appreciate your efforts.

Darin Hammers

You bet.

Operator

Thank you. Our next question is a follow-up from the line of Matt Dolan with Roth Capital Partners. Go ahead.

Matt Dolan – Roth Capital Partners

Hey guys. Two quick follow-ups. First just on the Botox question, have you seen any of the effects you're forecasting yet in the field, either some competitive [trialing toward] Botox or a positive effect with this [inaudible] concept?

Darin Hammers

Matt, it's hard to say. Anecdotally you hear Botox, there are a lot of physicians being trained. If you look at the coverage that they have, you know, I know those procedures are being done. But we're not seeing wide-scale movement either way either positively or negatively.

Matt Dolan – Roth Capital Partners

Okay. And then secondly just -- we're doing this call from the road, but it seemed like the metrics for Urgent PC were down year over year, both the active account number and the number of leads, so maybe you could walk us through what offset that. It looked like revenues grew but the metrics were down. So was it a product thing or system sales or what-have-you?

Darin Hammers

You want to take the first half of that.

Mahedi Jiwani

The pricing is not different from in the fourth quarter versus the third quarter. If you look at -- and I'm assuming that's what your question is, third quarter to fourth quarter, right, Matt?

Matt Dolan – Roth Capital Partners

What's in the press release? Is it the year-over-year comparison or is it the sequential comparison?

Mahedi Jiwani

When we talk in the script here, we talk both about the year over year as well as third quarter to fourth quarter. Year over year our number of [inaudible] increased about 36% and our revenue about 35%. That will imply that the pricing is not much different.

Matt Dolan – Roth Capital Partners

So the difference year over year was the number of boxes?

Mahedi Jiwani

We increased the number of boxes we sold by 36%.

Matt Dolan – Roth Capital Partners

Got it. Okay. Thank you.

Operator

At this time there are no further questions in queue. I'd like to turn the call back over to management for closing remarks.

Rob Kill

Thank you, operator, and thank you everyone for participating today. We certainly appreciate your interest in Uroplasty and your support of the organization. And we look forward to updating you on our progress for fiscal first quarter of 2014 in July. Thank you very much. Have a great afternoon.

Operator

And ladies and gentlemen, that does conclude our conference for today. If you'd like to listen to a replay of today's conference, please dial in the UK toll-free, you can dial 0800-358-3474, in the US locally you can dial 303-590-3030 or US toll-free 800-406-7325, and enter the access code 4618943.

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