Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

CR Bard (NYSE:BCR)

Q3 2013 Earnings Call

October 22, 2013 5:00 pm ET

Executives

Timothy M. Ring - Chairman, Chief Executive Officer and Chairman of Executive Committee

John H. Weiland - President, Chief Operating Officer and Director

Christopher S. Holland - Chief Financial Officer and Senior Vice President

John A. DeFord - Senior Vice President of Science Technology & Clinical Affairs

Analysts

Michael N. Weinstein - JP Morgan Chase & Co, Research Division

Robert A. Hopkins - BofA Merrill Lynch, Research Division

David L. Turkaly - JMP Securities LLC, Research Division

Matthew Taylor - Barclays Capital, Research Division

Matthew J. Dodds - Citigroup Inc, Research Division

Brooks E. West - Piper Jaffray Companies, Research Division

Kristen M. Stewart - Deutsche Bank AG, Research Division

Joanne K. Wuensch - BMO Capital Markets U.S.

David R. Lewis - Morgan Stanley, Research Division

David H. Roman - Goldman Sachs Group Inc., Research Division

Miroslava Minkova - Stifel, Nicolaus & Co., Inc., Research Division

Matthew O'Brien - William Blair & Company L.L.C., Research Division

Konstantin Tcherepachenets

Richard Newitter - Leerink Swann LLC, Research Division

Anthony Petrone - Jefferies LLC, Research Division

Joshua T. Jennings - Cowen and Company, LLC, Research Division

Jason Wittes - Brean Capital LLC, Research Division

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the CR Bard Inc. Third Quarter 2013 Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded and will be available for future on-demand replay through the Bard website. Today's presentation will be hosted by Timothy M. Ring, Chairman and Chief Executive Officer; along with John H. Weiland, President and Chief Operating Officer; Christopher S. Holland, Senior Vice President and Chief Financial Officer; and John A. DeFord, Senior Vice President, Science, Technology and Clinical Affairs. Also in attendance today is Todd W. Garner, Vice President, Investor Relations.

Today, Bard's management will discuss some forward-looking statements, the accuracy of which are necessarily subject to risks and uncertainties. Please refer to the cautionary statement regarding forward-looking information in Bard's June 30, 2013 Form 10-Q and the information under the caption Risk Factors in Bard's 2012 10-K, including disclosure of the factors that could cause actual results to differ materially from those expressed or implied.

During the call, references will be made to certain non-GAAP measures, which management believes provide an additional and meaningful assessment of the core operating performance of the company and its individual product franchises. Reconciliations of non-GAAP measures to the most comparable GAAP measures are provided in Bard's earnings press release and on the company's website at www.crbard.com.

All information that is not historical is given only as of October 22, 2013, and the company undertakes no responsibility to update any information. Unless otherwise noted, all comparisons are to the prior year period.

At this time, I will turn the call over to Mr. Timothy Ring. Please go ahead, sir.

Timothy M. Ring

Thanks, Lori, and good afternoon, everybody. I'd like to welcome you to Bard's third quarter 2013 earnings call. And thanks to all of you for taking the time to join us today. I would expect the presentation portion of the call would last about 30 minutes. The agenda today will go as follows: I'll begin with an overview of the Q3 results for 2013; John Weiland, our President and COO, will review third quarter product line revenue; Chris Holland, our Senior VP and CFO, will review the third quarter income statement and balance sheet, as well as our outlook for Q4; and then John DeFord, our Senior VP, Science, Technology and Clinical Affairs, will give you an update on our product development pipeline; and then finally, we'll close with the Q&A.

Third quarter 2013 net sales totaled $758 million. That's up 5% over Q3 of last year on an as reported basis, and up 4% on a constant currency basis. The currency impact for the quarter versus the same quarter last year was favorable by about 50 basis points. And the impact of acquisitions on the Q3 revenue growth was less than 100 basis points, consistent with our prior guidance.

Net income for Q3 was $93.2 million and diluted earnings per share were $1.15. Excluding items that affected the comparability of results between periods, which Chris will cover later, third quarter 2013 net income and diluted EPS were $122.3 million and $1.50, down 14% and 9%, respectively. The overperformance versus expectations on the bottom line was driven by stronger sales on the top line and controlled cost management. While it's always nice to beat expectations, the real objective here is above-market revenue growth on a sustained basis. And while we're pleased with the direction and trajectory of the investment plan, we're very focused on converting those plans into actual results.

Looking at the revenue growth geographically compared to the same quarter last year. Third quarter net sales in the U.S. grew 3%, which is better than it's been recently, but we're not prepared to declare it a trend given Europe's growth dynamics. Internationally, we grew 6% on a constant currency basis, with Europe growing 3% and Japan growing 4%, while our other international businesses grew 11%. Emerging markets represented 8% of total sales for the quarter.

As you know, we're focused on shifting the mix of our portfolio to faster revenue growth segments, and that's starting to get some traction. We're doing this through a combination of targeted internal investments in emerging markets and R&D, and we're also using business development to acquire technology platforms in faster-growing market segments.

In this quarter, we announced 3 acquisitions that we expect to improve our growth profile on a sustained basis. The projected double-digit revenue growth of the acquired sales from the Loma Vista, Medafor and the Rochester deals that we discussed on September 4 essentially replaces the declining EP sales and provides us with stronger growth platforms moving forward.

The Loma Vista and Medafor deals have closed. We expect the Rochester purchase and the EP divestiture to each close in the next 30 days. I would also add, in Q3, we acquired an early-stage technology for application in our oncology business that we recorded as an in-process research and development expense.

So without question, we're continuing to realign the portfolio, and we're very pleased with our results this quarter on several fronts. You'll hear more encouraging news from John DeFord later on the call. But we won't to be happy until we regain our position in the sector with sustained above-market revenue growth and profitability. The events of this quarter represent positive stepping stones down this path, and we're focused on the next steps to continue the transition.

Finally, we're pleased with the rulings from Judge Murguia on the Gore matter last week. We expect Gore to appeal those rulings, so the process could potentially move back to the Court of Appeals once again. As we told you, forecasting precise timing on this case is difficult, but the results to this point lead us to believe that it's really a question of when, and not if, on the release of the funds for the base infringement and the continuing royalty stream.

With that let me turn you over to John Weiland for a review of our product line revenue.

John H. Weiland

Good afternoon, everyone. Before I start, let me point out that I'll be giving all percentage growth data in comparison to the prior year period on a constant currency basis, unless noted otherwise.

So let's begin with vascular. Growth in this category was 2% for the quarter or 4% as reported, with total net sales of $209.9 million. Our United States business was down 1% for the quarter, while internationally, we grew 6%.

Our electrophysiology sales were up 7% this quarter, with EP LabSystems against an easy comp from a year ago. Our disposable EP product lines were down 3%. As Tim said, we expect to close the sale of this business to Boston Scientific within the next month.

Sales in our surgical graft category were down 4% in Q3, within the range of recent experience. Our endovascular business increased 2% in the third quarter. Within endovascular, our biopsy products grew 10% this quarter compared to Q3 last year. While we have seen some positive momentum recently, especially in emerging markets, Q3 of 2012 was one of the easier comps for this product family.

Sales in our peripheral PTA line increased 11%. Our Lutonix drug-coated balloon sales in Europe were a key driver of the global growth in this category. Sales in our vena cava filter line grew 13% in Q3, which marks the best sales growth in this product line since the first quarter of 2009. We said that our new Denali filter should get us back to growth in this category. And with the launch 6 months earlier than anticipated, we're pleased with the quick start.

Our stent business was down 13% in Q3. I'll remind you that it was Q3 of last year when our competitor with a quality issue came back on the market. So while some tough comps are behind us, we expect continued headwinds here, as we've told you that we're seeing significant price pressure driven by the competitor's return to the market and the increased number of competitors now on-label in the SFA.

So let's go to urology. Total net sales were $193.7 million, up 3% versus Q3 of last year on both a constant currency and an as reported basis. The United States business grew 2%, while internationally, we grew 6%. Our targeted temperature management products continue to provide healthy double-digit growth, both in the United States and internationally.

Our basic drainage business was up 3% globally in Q3 and up 2% in the United States. Our I.C. Foley business was up 1% globally, which is the first positive number in almost 2 years. That performance was driven by Japan and Europe, as the United States was down 4%, consistent with recent results.

Our continence business declined 9% in the third quarter, and we expect continued declines going forward. Sales in the urological specialties business grew 1% in Q3, with our brachytherapy business flat for the quarter. And finally in this category, standalone sales of our StatLock catheter stabilization line grew 1% in Q3.

So let's now move on to oncology. Total net sales in this category were $215.5 million, an increase of 6% on both a constant currency and as reported basis over the third quarter last year. Geographically, net sales in the United States were up 4% and international sales were up 11%. Our port business increased 4% again this quarter. Our PICC revenue was up 7% in Q3, which included continued strong uptake of our 3CG product. And vascular access ultrasound product line was up 3% this quarter, and our dialysis access product line was up 10% over Q3 of last year.

Now let's wrap things up with our surgical specialties business. Total net sales in this category were $118.1 million, up 9% on a constant currency basis and up 10% on an as reported basis. United States sales were up 12% and international sales grew 3% this quarter. This category benefited from the surgical sealant sales acquired from Neomend, and we're very pleased with the trajectory of this product line as we anniversary the acquisition in Q4.

Our soft tissue repair business grew 5% in Q3. Within soft tissue, our synthetic ventral hernia repair products grew double digits, while our natural tissue products grew 2% in the quarter. Within our biologic hernia products, we continue to see a shift in mix from human tissue to xenograft when compared to a year ago. While this is a headwind from an ASP perspective, we believe that our presence and competitive position with our xenograft product is strong, and we have the most comprehensive product offering within soft tissue repair, more broadly, across all materials.

Our hernia fixation business declined 3% this quarter. We have some new fixation products we expect in 2014. But before that, we face an especially tough comp in Q4. And closing out the surgical category, our performance irrigation business was down 14% in Q3.

This concludes our product line revenue discussion. I'll now turn you over to Chris Holland.

Christopher S. Holland

Thank you, John. Let's start with the items that affect the comparability of our results between periods. In Q3, we had acquisition-related items of $33.7 million, the largest item being the IP R&D expense that Tim talked about, and we also had costs related to our divestiture of EP of $9.7 million. We took a $3.4 million charge for an asset impairment and had a $2.2 million reversal of tax accruals related to an item identified in a prior period. P&L impact for these items is detailed in the notes to the financial statements and the reconciliation accompanying our Q3 earnings release.

Now let's go through the statement of income for the quarter. Gross profit was $466.1 million or 61.5% of sales for Q3, down 80 basis points from the prior year, but up sequentially from Q2, as we projected. New amortization of intangibles related to transactions that closed in the last 12 months was about 20 basis points again this quarter. Price was unfavorable at 80 basis points on the revenue line and approximately 30 basis points in GP. This metric can bounce around a little. And at this point, we assume there's been no real change in the environment and still expect the pricing pressure on the revenue line to be in -- to be between 100 and 150 basis points going forward. So as we projected, our gross margins have continued to improve through 2013. As you know, we have a very active Q4, with the divestiture of our EP business and integrating 3 meaningful acquisitions. The incremental amortization, start-up costs and early investments to bring the new facilities into our quality and operating systems will have a significant temporary impact resulting in higher cost of sales in Q4. We're also making some targeted investments that are designed to help drive improved leverage through the P&L starting next year.

SG&A expenses were $223.9 million for the quarter or 29.5% of sales. On an adjusted basis, SG&A as a percentage of net sales was 29.1% or 210 basis points higher than Q3 of 2012, driven by our increased investment in emerging markets, as well as the new medical device excise tax. R&D expenditures totaled 9 -- $99.4 million or 13.1% of sales on a reported basis for the third quarter. On an adjusted basis, R&D was $66.1 million or 8.7% of sales, which is up 180 basis points as a percent of sales from the prior year due to our investment plan.

Interest expense was $11.2 million for the third quarter, up as expected from a year ago because of our bond offering, which we completed in Q4 of 2012. Other income and expense was $12.6 million of expense for the third quarter as reported and $2.7 million of expense on an adjusted basis, driven primarily by foreign exchange.

The effective tax rate for the quarter was 26.2%, in line with our expectations, excluding the Gore royalty. Diluted shares for the period were 80 million shares even, and we repurchased approximately 2 million shares in the third quarter. The net result is adjusted EPS of $1.50 a share, well above the guidance range we provided for the quarter. As Tim said, this is the result of the combination of higher-than-expected sales, as well as disciplined cost management.

The balance sheet as of September 30, 2013, reflects cash, restricted cash and short-term investments of $800.7 million versus $868.3 million as of June 30. For the quarter, accounts receivable days were down 1.2 days and inventory days were up 0.7 days. Capital expenditures totaled $16.7 million for the quarter.

On the liability side, total debt was $1.5 billion as of September 30, no change from June 30. And debt to total cap at the end of the third quarter was about 50%. Total shareholder investment was $1.5 billion at September 30, 2013.

Now moving to financial guidance. For Q4, we are expecting constant currency sales growth between 1% and 3%. This includes the impact of the Q4 acquisitions and the divestiture of EP, which essentially offset each other in the quarter.

Although our Q3 organic revenue growth was a bit stronger than that, we remain cautious about the sales environment, particularly in the U.S. We have seen the same survey data that you have that suggests no reliable improvement in physician office visits or hospital admissions, and we have some tough comps in Q4, specifically in biopsy and soft tissue repair. Of course, recognizing the Gore royalty as revenue now looks like a 2014 event.

From an EPS standpoint, excluding items affecting comparability, our 2013 guidance after our acquisition call on September 4, including the $0.10 of dilution from EP and the acquisitions and excluding Gore, was between $5.55 and $5.60. On the back of the Q3 beat, we are raising the full year 2013 adjusted EPS guidance to between $5.70 and $5.75 a share, which puts Q4 between $1.34 and $1.39 per share.

Q4 is obviously a little muddy with EP moving out of the P&L and the adjustments we are making around that, while at the same time integrating the new businesses and the start-up costs associated with those transactions. We're very pleased that with all of these moving parts, excluding the Gore royalty, we're on track to bring the year in where we said we would from both the sales and profitability perspectives.

As Tim said, based on last week's rulings, we are confident in our expectation of the Gore royalty coming, but the precise timing remains uncertain. We've been transparent with you along the way, and we'll continue to do just that.

Let me now turn you over to John DeFord.

John A. DeFord

Thanks, Chris, and good afternoon, everyone. Over the first 3 quarters of the year, we've launched almost 30 organic products and a number of new technologies associated with acquisitions. We've got a lot to cover in the pipeline today, so I'm going to jump right in with some highlights.

I'll start with our drug-coated balloon program. As you likely know, we completed the 1-year follow-up of the LEVANT 2 study for the treatment of SFA and popliteal disease in Q3. Though we continue to work through this data to finalize our analysis and the clinical study report, we are very pleased to say that at this point, the results indicate that we met both our primary safety and efficacy endpoints. We're certainly not taking FDA approval for granted though. Our team has a lot of work to do and is focused on completing the final module of the PMA for submission this quarter.

We are very proud of the scientific rigor of the LEVANT 2 study. There's a substantial body of clinical evidence that's been developed over the last several years in the SFA. The Lutonix team looked at prior studies and applied many of their strong points to LEVANT 2. At the same time, in consultation with our investigators, as well as other experts in the field, the team culled out elements of those past protocols that might have biased those results. There are 2 examples of this enhanced scientific rigor you'll continue to hear more about over the next several months.

First, in LEVANT 2, we only randomize patients after a successful pre-dilatation. And second, at the follow up, the physician who made the decision on revascularization was blinded to both the product used in the index procedure and the Doppler patency measure until after the clinical evaluation and decision concerning re-intervention were completed. The scientific rigor of this study is one of the reasons we felt so strongly about the Lutonix asset in 2011. As we complete our analysis, we believe our focus on good science will be helpful as we approach the FDA and the clinical community. Many are already trying to compare LEVANT 2 to other studies, whether they were registries, small randomized trials or stent trials. We believe at this time, there is no comparison. We know everyone's anxious to know more about our results. However, we're sticking with the plan we articulated several months ago to preserve the 12-month randomized data for a first look by the FDA. We'll also preserve the ability of our investigators to seek publication in the best and most appropriate journal possible. Next week at TCT, one of our primary investigators will present 6-month data from our randomized cohort. This protects our publication strategy, while beginning to help the scientific community better understand the study.

LEVANT 2 is just a part of our activity around this substantial program. In September, we also completed enrollment in our 650-patient Continued Access Registry. This study enrolled patients following the same inclusion and exclusion criteria as with the LEVANT 2 study, and results will be used to further support the safety of the Lutonix DCB technology in our PMA submission. Beyond these 2 studies, we also have an open label SFA and popliteal registry outside the U.S. that's enrolled over 200 patients. And our LEVANT 2 Japan study is rapidly recruiting, and we anticipate completing enrollment early next year.

In the Below the Knee study, the technology that we've been studying, we have approximately 1/2 the sites up and enrolling, and we're making reasonable progress. This study is in a much sicker patient population, as we're treating critical limb ischemia not claudicants. We anticipate enrollment to continue through 2014.

Next in our DCB developments is the planned launch of coronary products in the first half of 2014 in Europe and an IDE filing in that timeframe to commence a study of the technology in peripheral in-stent restenosis.

Now moving to some of our other vascular developments, we reported back in Q1 that we reached our enrollment target in the clinical study of the FLUENCY PLUS family for the AV access in-stent restenosis indication. We've recently completed our 6-month follow-up and remain on track to file the clinical module of the PMA in Q4. Launch is predicated upon PMA approval, currently estimated late in 2014.

At our June Analyst Day, we alluded to some other stent and stent graft product developments. Due to the competitive dynamics in this space, we're going to keep a few of those under wraps for another quarter or 2. But I'm excited to let you know that we're nearing completion of a balloon-expandable stent graft platform that we plan to launch in Europe for iliac use around midyear 2014 and start a pivotal IDE study in that same timeframe.

Now moving to urology. We're continuing our technical and clinical developments to expand the approved use and indications for our targeted temperature management technology. We reported earlier in the year the completion of our Arctic Blast product family to support the initiation of cooling sooner in the patient treatment paradigm. We're evaluating the product in a number of centers and in small feasibility studies, along with our new shiver detection technology. We're also deep in the development of a technology for use in neonates and pediatric patients, and anticipate initiating o U.S. studies of the products in the back half of next year.

Moving to oncology. We continue to expand our ClearView platform with several technology advancements that are focused on increased functionality. In the last quarter, we launched our new iPrevue [ph] portable ultrasound system in several o U.S. geographies. iPrevue [ph] Supports PICC and PIV placements and is specifically tailored for the o U.S. markets, which we see as an opportunity to expand ultrasound capabilities and use on a global front. We're also nearing the launch of our new Site-Rite Vision 2 platform slated for U.S. and E.U. release in the first half of 2014, and we're also on track to launch our freehand stereotactic system for vascular access, now called Pinpoint GT, in that same timeframe. This technology could significantly improve the success of first-attempt needlestick access, and we look forward to getting this into the hands of clinicians next year.

In PICCs, we introduced to you 3 new platforms under development at the June Analyst Day. For competitive reasons, I'm not going to discuss all 3, but I will tell you a bit about 2 of them: An antimicrobial PICC family and a thromboresistant PICC family. These products have strong regulatory predicates, and we anticipate launching both of them in 2014 across our most popular PICC sizes and configurations. While these represent nice-to-have platforms, we see the opportunity to move beyond just a coatings discussion, which we'll shed more light on in 2014.

Our Sherlock 3CG Tip Confirmation System continues to perform at a very high level, and we're excited to announce that we'll launch the next phase of this platform in early 2014, where we'll provide applications aimed at enhancing the user experience and driving faster elimination of chest x-ray.

We're also nearing the launch of additional sizes of our POWERGLIDE midline catheter family in the next few months. Late last year, we launched a 20-gauge version, and we're expanding that strong base with 18- and 22-gauge devices, which grow the potential utilization of this important and successful platform. Our simplified insertion technique and all-in-one design has already made this product family a popular alternative to PIVs for patients who need venous access for up to 29 days, but don't need the central access of a PICC. This provides patients with vascular access that's tailored for their needs, while reducing the need for swapping out a PIV during the duration of their therapy.

Moving to surgery. We recently expanded our offering of the ECHO mesh placement system by coupling it with our popular VENTRALIGHT ST laparoscopic ventral hernia repair mesh. This has an increased range of hernias where this technology can be employed and expands upon the base of surgeons who have been -- become accustomed to ECHO's clinical and ease-of-use advantages.

We're also working on 3 new mesh fixation technologies. The first is a spring-loaded resorbable tack device named OPTIFIX, targeted to launch in the first half of 2014. This is a highly competitive space, so I'll hold further details on the other projects until we get closer to launch.

In our biologic mesh category, we've just submitted our 510(k) for a new antibiotic XENMATRIX product family. This "first of its kind" product will utilize our proprietary coating, which is intended to preserve the integrity of the graft in abdominal wall reconstruction procedures. Demonstrating broad spectrum safety and efficacy against several typically-encountered bacteria, we expect that this product, in addition to our XENMATRIX family, should increase market adoption for our biologic mesh category.

In Q3, we also launched our second Phasix-based product for complex abdominal wall repair. As you may recall, Phasix is a fully-resorbable polymer that provides the short-term strength of standard mesh, yet fully resorbs in about a year. This Phasix flat sheet, together with the pending launch of XENMATRIX AB, provides surgeons with 2 compelling and proprietary products to treat those patients who are at high risk of developing infections. In this group, Phasix provides a cost-effective alternative to the fully-biologic mesh offerings.

Moving to our recently formed biosurgical product family, which includes Progel, Arista AH and Avitene, we're pleased to communicate solid advances against our goals. With respect to our Progel sealant family, we're making excellent progress in 3 categories. First, we continue to enroll patients in our video-assisted and robot-assisted thoracic surgery study and anticipate completing enrollment in the first quarter of next year. Next, we received IDE approval in the summer and expect to enroll our first patients in our vascular sealant study by the end of the year. We anticipate enrollment will continue through 2014, with PMA submission in 2015 and a launch following approval.

And finally, we continue to execute on the global launch of Progel, which includes expanding our labeling in Europe and gaining approval in other emerging markets. We also recently announced the closing of our deal with Medafor. This acquisition brings the Arista AH technology, which is a plant-based hemostatic agent,, to our surgery portfolio. The surgery team is busy at work integrating the operation.

I know we've covered a lot of ground here today, and I've only really been able to hit some of the highlights. Thanks for your attention, and let me now turn you back to Tim.

Timothy M. Ring

Thanks, John. That does conclude the formal part of the presentation. I'll now turn the call back to the moderator to facilitate the Q&A session. I will tell you there's a lot of investors on the call tonight. [Operator Instructions]

Question-and-Answer Session

Operator

[Operator Instructions] And the first question comes from the line of Mike Weinstein with JPMorgan.

Michael N. Weinstein - JP Morgan Chase & Co, Research Division

Maybe I'll focus one on the third quarter and then another on the announcement on the LEVANT 2 trial. Let me start with the quarter. Tim and John, it certainly looks like the underlying business continues to accelerate here, and particularly if we look at, one, the U.S. performance relative to where it was a couple of quarters ago, and then the continued progress you're making in the emerging markets. So can you talk about your view on the kind of the base business today and just kind of where it's at? And I know you tried to caution us to go too far with our fourth quarter assumptions, but it certainly looks like across not just 1 or 2 businesses, but the whole portfolio, that the underlying base of what -- off of which you're building is a little bit stronger. And then on -- John DeFord, and then on Lutonix and the disclosure on hitting the endpoints for LEVANT 2. So obviously, that's great news. It puts you guys in a position to file with the FDA. Can you just talk about where you are in that process? Are you going to file the clinical module with the randomized data alone? Or will you wait for some of this registry data you talked about to be ready to be filed as well?

Timothy M. Ring

Thanks, Mike. I'll cover the kind of the macro environmental view, which touches on kind of the revenue that we saw in the quarter, and I'll let John Weiland respond specifically to product. I think as I mentioned, given the uncertainty in the U.S. environment, I'm not sure we're ready to call this a trend. We had a strong quarter. There's no question about that. But we've been kind of in a prolonged flattish-to-declining cycle. There's nothing in the physician's office visits or hospital data we look at that would point to any change in trajectory. So we're remaining cautious there. John Weiland?

John H. Weiland

I'd say that in emerging markets, we remain on track in terms of our investment profile, and we talked about the fact that we had almost 200 physicians that we were going to add in the emerging markets on selling this year. We're on track to complete that as expected. And I'd say on the U.S. business from a commentary, yes, we did see a nice step-up. And it was primarily because the 3 of our 4 businesses, our vascular, our surgery and our urology business all had a performance that was slightly better than what their year-to-date performance is. But as Tim says, we're not ready to call that a trend, especially looking at some of the data points that we've seen recently in the market.

Timothy M. Ring

John DeFord, you want to cover LEVANT?

John A. DeFord

Sure. So on LEVANT 2 and our final module, as I said, we are on track to get that module filed this quarter. We're going to file that, of course, with our all of our randomized data and the roll-ins. And frankly, we're required to submit on whatever data we've got. So we'll be giving them everything we've got in terms of the registry data and other information that we have, which would include LEVANT 1 and any o U.S. data.

Michael N. Weinstein - JP Morgan Chase & Co, Research Division

And can I just ask one follow-up on LEVANT? So you're going to have the data published hopefully soon here. That will give you a chance to go out and start marketing in '14 more aggressively with the product outside the U.S. Can you just talk for a minute about that? So once that is published and in the public domain, what your plans are to try and really accelerate the business internationally in 2014?

John A. DeFord

Sure. So obviously, we've always said that having the data is going to be critically important. I think figuring out what the exact timing is of the publication is tough. We do think the publication will come slightly before the panel meeting, whenever that occurs. And so once we have that in our hands, we obviously, will use that to the full extent we can outside the U.S., and try to be careful not to promote here in the U.S. until we can get approval from FDA.

John H. Weiland

The primary market for us right now is Europe, which is about an $80 million market. And we've said all along that clinical data will certainly help our results in that marketplace, and that's certainly squarely how we're looking at things today, Mike.

Operator

And we have a question from Bob Hopkins from Bank of America.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Well, congrats on Lutonix, and I just wondered, since you're willing to make these disclosures on this call, if I could push a little bit on that, and I just wanted to confirm that you're filing this quarter. Did you say that?

John A. DeFord

Yes, we did. And Bob, just to be clear, I didn't want to say anything, but our Investor Relations and legal teams said that we needed to disclose, so that's why we told you today.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Terrific. And I appreciate that. On Lutonix, can we assume that the patency rates are similar to what we saw with the roll-in data you showed a couple of weeks ago?

John A. DeFord

Well, you'll see at TCT some of the randomized data. So I don't want to take any anything away from our investigators having the opportunity to present.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Okay, understood. And then 2 other quick follow-ups. One on Gore and then one on the financial guidance that was provided. On Gore, I know you guys assume the royalty rate declines over time, and I ask this only because I've been getting a lot of questions on it. I just wondering, at this point, do you have any reason to believe that Gore thinks their new materials don't violate your current patents? And then lastly, Chris, I was wondering if you could provide a bridge from the original guidance of that $6.25 to $6.30 versus where you are now, and just in terms of the various moving parts that have affected the change over time?

Christopher S. Holland

Sure, Bob. With respect to Gore, as we've said, it's hard for us to say what they're doing and what they're trying to do, right? We get the information on the royalty on a lagged basis, as you know. We expect the next payment to come next week for the September quarter. And we really don't have visibility into what they're doing beyond that. So we're focused on executing the investment plan. And obviously, over time, that royalty will be what it's going to be, I think, is probably the right way to say it. The bridge from the original guidance, so if you go back to January, Bob, we guided for the full year $6.25 to $6.30. I think we were very clear at that time that we assume 2 quarters worth of Gore royalty, as well as the impact of the bolus buyback being executed in Q3. And we said, each quarter it was worth about $0.30 a share between the royalty and the impact of the buyback. So that's $0.60 a share for Gore in 2013. When you back that out, you're at $5.65 to $5.70. And then on the September 4 call, we said that there was $0.10 of dilution in Q4 from the net effect of the divestiture of EP and the 3 acquisitions that we announced. So that would take you down to $5.55 to $5.60 coming into this call tonight. So with the beat in Q3 and what we're now guiding for Q4, which is $1.34 to $1.39, you end up at $5.70 to $5.75 as our full year guidance.

Operator

And we have a question from Dave Turkaly with JMP Securities.

David L. Turkaly - JMP Securities LLC, Research Division

And just to follow-up on that last question. If we're using a slightly lower base for 2013 EPS, given the royalty is not here, can we assume then that your high level 2014 EPS growth, could we actually see more than 22% to 25% in 2014?

Christopher S. Holland

Yes, I think were not going to give 2014 guidance today. But obviously, the fact that there was 0 Gore in 2013 would imply that, that would be the case, Dave.

David L. Turkaly - JMP Securities LLC, Research Division

Great. And I can't help myself. Just one quickly on the Gore, I know you have legal experts there, a legal team. Can you give us any further color on whatever you'd consider the most likely scenario here? Do you think we have this -- at least the bulk of the money before this year is over?

Christopher S. Holland

I think the safest way to think about it is that we believe it's reasonable to assume that at this point, we would have the infringement dollars in hand by the end of January. And I think that's the next relevant date from an accounting standpoint. So assuming that is the case and, again, we think that's a reasonable assumption sitting here on October 22, that would allow us to essentially recognize 4 quarters worth of royalty in 2014. I think being more precise than that is dangerous as we've, I think, learned with this case. But we think that's a very reasonable assumption.

Operator

And we have a question from Matthew Taylor from Barclays.

Matthew Taylor - Barclays Capital, Research Division

Maybe just to ask another one on that. I was just curious if you could give us a best guess in terms of kind of the timeline here. I know you expect it before next quarter, but can you talk a little bit about the appeals process? And then can you confirm that sort of your prior plans for investment and buyback kind of remain intact here, but they've just been pushed back a little bit because of the timing?

Christopher S. Holland

Yes. I think we've been very consistent on the investment plan. Regardless of when this came, we were fully committed to this plan and we remain fully committed. The one piece that is subject to the final receipt of the funds is the bolus buyback. So that will occur upon receipt of the funds. But the investment in emerging markets and the investment in R&D is happening every day. And that's going to continue to happen regardless of when the money arrives. And the process is, again, they can appeal all 3 rulings, which we certainly would expect them to. And that will then begin a process at the appellate level that from an infringement standpoint, again, we think plays itself out in a way where we'll have the infringement proceeds by the end of January. I think I'd just rather not try to be more specific than that because, as we've seen, the vagaries of the court schedule is one that's difficult to predict.

Matthew Taylor - Barclays Capital, Research Division

Sure. And maybe just on LEVANT. So you did mention in your prepared comments that you saw, I guess, some good growth of drug-eluting balloons in Europe, and can you just talk about, prior to the U.S. approval, how the LEVANT 2 data could help you in Europe in terms of expanding reimbursement or increasing penetration in the markets where you do have some sales?

John A. DeFord

Yes, so while reimbursement -- that's a great question because even though there's the European Union, reimbursement is country-by-country. And there's limited reimbursement today for drug-coated balloons, additional reimbursement beyond standard PTA. So whether the data will really help drive governmental changes, I don't think that's a near-term event for us. But obviously, we'll do everything we can, once we have data in hand, to push that as far and as fast as we can.

Operator

And we have a question from Matthew Dodds from Citicorp.

Matthew J. Dodds - Citigroup Inc, Research Division

A couple of quick ones. First, it seems like Neomend was the only deal in the quarter. Can you just say roughly how much that added to the surgery's growth?

Christopher S. Holland

I think it was about 500 basis points to the surgery number, Matt.

Matthew J. Dodds - Citigroup Inc, Research Division

Okay. And then just a quick one for Tim. Tim, what's taking John DeFord so long to get all this data analyzed and get that manuscripted?

Timothy M. Ring

Didn't do so well in math.

Operator

And we have a question from Brooks West from Piper Jaffray.

Brooks E. West - Piper Jaffray Companies, Research Division

A question for John Weiland. John, I asked you last quarter if the vascular franchise could get back to growth, and you said it would be tough. You did better than that obviously. I'm just wondering if you could call out kind of the major contributors there? And I'm trying to think about that franchise in Q4 without the EP business, and then I've got one follow-up.

John H. Weiland

Yes, I think your question last quarter was, can it get back to growth considering the difficult situation in the stent business overall? But to answer your question on the drivers of performance, first of all, EP helped -- EP was up 7%. It's up 2% year-to-date. And as we mentioned in the prepared remarks, we had pretty easy comps in the systems business in EP, which helped us drive that growth. Endovascular, in general, was up 2% versus minus 2% on a year-to-date basis. And that was driven by, overall, our PTA growth being up 11%. These -- drug-coated balloon helped that from Europe versus about 9% growth on a year-to-date basis. Biopsy, a very strong quarter, up 10%. Emerging markets was significant. We also had an uptick in the United States business. Stents were down 16% year-to-date. We are down 13% in the quarter. I wouldn't read too much into anything. That's still a very competitive space, especially as it relates to the pricing in that environment and the number of new entrants that are on-label in that area. And then I'd say, finally, the vena cava filters was a real highlight for us, being up 13% for the quarter. And that helped our overall year-to-date performance, where we're up 8%. So all those key lines were contributors, and it's nice to see those in the right direction this quarter.

Brooks E. West - Piper Jaffray Companies, Research Division

And then John DeFord, what -- you mentioned DEBs in coronaries and also in in-stent restenosis. Can you just kind of layout the timelines again there, Europe and U.S. for those indications?

John A. DeFord

Yes. So what I said was, around midyear next year is when we'd expect to launch the coronary DCB product family in Europe. And then about that same timeframe is when we'd expect to submit our IDE for in-stent restenosis, and that will be a U.S. study, primarily.

Operator

And we have a question from Kristen Stewart from Deutsche Bank.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Just wanted to get your thoughts just around with drug-coated balloons and if your expectations on the level of contribution have changed? I think in the past, you guys have called at about $100 million in the first full year of sales in the U.S., is that still something that you guys feel comfortable in?

Timothy M. Ring

Yes, there's nothing that, at this point, would change us off of what we had thought regarding that.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. And just around the fourth quarter, Chris, I think you mentioned that, from a growth perspective, 1% to 3%. I thought there was an extra selling day in the fourth quarter. I'm not sure if I'm remembering that correctly. And then just to confirm again that the EP business and the divestiture there completely offsets or whether there's a little net benefit from acquisitions during the quarter expected?

Christopher S. Holland

So actually the extra day in the U.S. is essentially offset by the anniversary-ing of Neomend, when you think sequentially. So that -- there is an offset there that really dilutes the impact of the extra day in Q4. And then we did say that the divestiture of EP and the impact of the deals coming in about offset each other in the quarter as well. So the 1% to 3% is essentially a pretty clean number from that perspective.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. And then can you provide any additional context just around the gross margin again? I know you had called out in the prepared remarks that you're going to see higher costs of just bringing in the acquisitions. But how should we just think about gross margins in the fourth quarter and then just kind of moving beyond?

Christopher S. Holland

Yes. I think, again, it's going to be a very muddy quarter for Q4 from a GP standpoint. So there's obviously the incremental amortization that'll come in. But there's also a fair amount of what I'd call onetime start-up costs and investment-related spend associated with bringing these factories onto our systems. So it'll be a pretty material step-down from a year-over-year basis in Q4. But a fair amount of that, again, we will get behind us as we move into the early part of '14.

Kristen M. Stewart - Deutsche Bank AG, Research Division

And those one-time costs, I assume those are not included in your formal EPS guidance for the quarter?

Christopher S. Holland

Those are operating costs that we're bearing. And so they are part of what's getting us to $1.34 to $1.39.

Operator

And we have a question from Joanne Wuensch with BMO Capital Markets.

Joanne K. Wuensch - BMO Capital Markets U.S.

A little bit of clarification. When you talk about a bolus buyback, have you quantified how much you think that might be?

Christopher S. Holland

Yes, we've been pretty consistent that half of the after-tax proceeds from the infringement process -- so right now there's $854 million of infringement award that's sitting with the court. And we said, half of the after-tax proceeds would be immediately deployed into incremental buybacks.

Joanne K. Wuensch - BMO Capital Markets U.S.

Okay. And then, have you announced where you think the DBS data, the Lutonix data will be published?

John A. DeFord

No, we haven't submitted a manuscript yet. So a little premature.

Joanne K. Wuensch - BMO Capital Markets U.S.

Okay. And then just finally, in your women's health business, is there anything to update on the litigation front?

Christopher S. Holland

No, there's not. Obviously, we had taken the reserve we did in the June quarter. And there's no update to that reserve based on the information we currently have with respect to that, that whole entire topic.

Operator

And we have a question from David Lewis from Morgan Stanley.

David R. Lewis - Morgan Stanley, Research Division

Maybe just 2 quick questions. Chris, I know you're not going to give 2014 guidance, but if you just think about the LRP you laid out in the beginning of the year and think about the next several years, based on what you've learned this year in terms of investment spend, is there any areas where you feel like you're doing either ahead on either revenue cadence or ahead on relative spending or ahead on COGS relative to the plan that we got 10 months ago?

Christopher S. Holland

No. I'd say we're tracking pretty well, and the spend will continue to sequentially increase. So Q4, we'll continue to see some sequential increase in R&D and SG&A spending as we continue to execute. I mean, again, this is north of 40 individual projects. So I think, we really are focused day in and day out on executing against that plan, and there's lots of moving parts. But I think in general, we are tracking, I think, the way we had expected, both from a spending and a results standpoint.

David R. Lewis - Morgan Stanley, Research Division

Okay, very helpful. And then Tim, just on emerging markets, I know you've given different metrics across the quarters this year. I think first quarter, you said EM was around 7%. I think this quarter EM is around 8%. I guess, given that the U.S. got a little better here in the third quarter, can you give us a sense about how you think you're doing relative to plan as it relates to EM? And is there a sense that you've got a much clearer picture that this EM as a percent of sales can be a double-digit number next year?

Timothy M. Ring

Yes, that's actually a very good question and a good point you raised for a couple of different reasons. We're very -- let me start by saying we're very pleased with the performance of the emerging market businesses and the investments that we've made so far. So -- and were going to track that performance against what our expectations are. With the noise that you've seen, putting aside for a moment just the U.S. performance in Q3, a lot of the acquisitions that are coming in are more U.S.-centric. EP was more x U.S. focused. So that, that's going to mix that up a little bit. So that as you get into next year, that dynamic may change a little bit. We'll continue to report and tell you how the performance is in the emerging markets, which is really the key and most important part of that, not necessarily the percentage of total revenue. So we'll clarify and be transparent with you. But we're very pleased with the performance in emerging markets this year.

Operator

And we have a question from David Roman from Goldman Sachs.

David H. Roman - Goldman Sachs Group Inc., Research Division

I wanted to come back to just clarify a few quick financial points. So just coming back to the fourth quarter, and I think, Chris, you laid out in quite -- in a number of pieces the detail about the earnings picture. But I'm just trying to understand, sequentially, it sounds like your guidance implies a greater amount of absolute revenue dollars in the fourth quarter versus the third quarter, but a fairly significant decline in the earnings profile. So it sounds like the investment spending you're talking about, whether it's new amortization or some of the quality control initiatives, that could be -- that could take the gross margin back down to closer to Q1 levels. Is that a fair way to look at it?

Christopher S. Holland

Yes. I think that's not a bad way to look at it, David. And then as I said, the investment projects continue to ramp throughout the year. And so Q4, you will also see sequential increases in spending from an SG&A and R&D perspective related to these specific investment projects.

David H. Roman - Goldman Sachs Group Inc., Research Division

And then maybe just a follow-up on the investment spending comment. I think you said in your prepared remarks that CapEx was just under $17 million in the quarter. I think previously, you had talked about a number of closer to $85 million to $90 million for the year. Just thinking about cash flow going forward, is the year-to-date performance a better reflection or there's some major capital projects coming that haven't yet been announced?

Christopher S. Holland

Yes, there are a couple of significant IT-related projects that are actually just starting a little bit later in the year than we probably anticipated from a budget standpoint. So some of that dollar spend will likely move into '14. But I don't think -- there's not going to be -- it's not going to be a material change, I think, to what we'll spend overall in '14. But we'll probably end up a bit light in '13, just as we've geared up to begin executing against 2 pretty substantial IT projects.

David H. Roman - Goldman Sachs Group Inc., Research Division

And then maybe the last time -- and I just come back to the comments around the overall operating environment. I think, obviously, there are still companies left to report this quarter. But as you look at the commentary from either HCA or UNH or LabCorp, for example, I mean, it does look like the data points are coming together to suggest an improved dynamic in the U.S. Maybe if you could just shed a little more detail on the types of metrics that you're watching or what you will be looking for that would make you more confident in calling a turn here?

Timothy M. Ring

Yes. I think there's 2 things with that. Number one, certainly given that this started back in kind of 2008, 2009, more in 2009, 2010, I should say, it's taken us a while to get there. So to take 1 quarter and say, "Hey, there is the spot it turned around," is extremely difficult for anybody to do, I would say, number one. Number two, there is certainly a lot of noise going on, especially as it relates to the factors of co-pays, out of pockets, deductibles. There's, obviously, a lot of noise now with people getting insurance access, et cetera. I think that's going to confuse metrics for a while. And additionally, the definition of some of those metrics, observation status versus an admission, a lot more being done out of the hospital, where does that show up in some of the reported metrics? It's a little more confusing and maybe not as pure to track as it was several years ago. Having said all that, we see nothing that would indicate this is necessarily a rising tide at this point. So we're just being, we think, appropriately cautious based on what we think is going to happen and the unpredictability of being able to tell you what that is.

Operator

And we have a question from Miroslava Minkova with Stifel.

Miroslava Minkova - Stifel, Nicolaus & Co., Inc., Research Division

Let me just start with the outlook. And I appreciate you probably won't be able to give us too much detail on 2014, but you did share in your plan that you were going for a mid-single-digit top line growth outlook in 2014 in your long-range plan. And it sounds like just the royalty itself will get you there. Wondering if you would be able to sort of share with us, given all the pluses and minuses with the divestiture and acquisitions, what do you think the actual profile of your business looks like at this point?

Christopher S. Holland

Yes, I think, you can appreciate -- I can appreciate why you asked, and I think you can appreciate why we'd like to wait until January to lay that out for you. Obviously, we think everything we've done is going to be very positive from that perspective. Obviously, we've added a significant amount of double-digit growing sales, as we talked about, while exiting a decliner in EP. And obviously, we feel very good about the royalty as we move into January. So if you put that all together, I think we feel good about the profile, but we're not going to get into any specifics tonight.

Miroslava Minkova - Stifel, Nicolaus & Co., Inc., Research Division

Okay, understood. And separately, there is -- there was a proposed change in outpatient vascular procedure reimbursement. Wondering if you could comment on whether you do expect any impact on outpatient procedures or on your stent or vascular business at all?

Timothy M. Ring

Yes. I think what we have found historically, especially when it relates to an interventional kind of procedure, these are people that need the treatment. So essentially what happens is, they'll move from one stenting to another. And I would expect that the underlying disease and the prevalence of it isn't going to change because of reimbursement rates. It's just going to move the dynamic in terms of where the patient is treated. I would suspect that's what's going to happen moving ahead.

Operator

And we have a question from Matt O'Brien with William Blair.

Matthew O'Brien - William Blair & Company L.L.C., Research Division

I apologize. I jumped on a little bit late, so if you've covered this, again, I apologize. But I think you mentioned a little bit more on the 3CG product this time around than you have in the past. Can you talk a little bit about what's driving some of the improvement there or just some of the metrics that you used to give us in terms of penetration of existing accounts and where you think that can go over time?

John H. Weiland

Well, we think -- I guess the description I would give is, we think we're in about the fifth inning in terms of our ability to continue to grow that business in the United States. We haven't even started with it outside of the United States to any significant effect at this point in time. The metrics we really use are number of conversions. And those number of conversions, the percentage of those that are eliminating x-rays. And I would say that our growth in terms of the conversions continues at a very strong rate. And the rate with which those customers eliminate x-ray within their hospitals is also continuing to grow at a very strong rate. So I got to tell you, we're delighted with where we are with 3CG.

Matthew O'Brien - William Blair & Company L.L.C., Research Division

Okay. And then just on that question real quick. When do you think we'll start to see a little bit more o U.S. penetration? And then I have one quick follow-up.

John H. Weiland

Well, we think that will take time because in moving to this technology, you have to first be able to move to ultrasound. And then after you get accompanied -- accomplished in ultrasound, then you can move up the technology ladder in terms of 3CG. We're just introducing ultrasound into the emerging markets and markets out of the United States. So we have a lot of growth ahead of this on both sides of the spectrum as we start to do that. But we think both technologies are very compelling to clinicians and patients in terms of the efficacy of PICC devices.

John A. DeFord

One other quick thing to add is, it also requires nursing placement of PICCs, and not every country is yet to that point. So there's a lot of training, as John points out, to get nurses skilled with ultrasound and then move up the technology ladder. And then in some cases, there are some regulatory requirements, too.

Matthew O'Brien - William Blair & Company L.L.C., Research Division

Understood. So one more for you. I think you mentioned the emerging market spend that you outlined earlier this year is on track. But I'm not sure if you mentioned this before as far as the R&D spend goes. If that's on track in terms of the number of projects that you are pursuing, you still feel comfortable about those timelines? And specifically, some of the returns that you had mentioned, I think it was around 50% on some of those investments, still feel pretty comfortable in terms of what you've seen to-date in hitting those numbers?

John H. Weiland

As you can imagine, Matt, we're managing this very tightly, and we're very comfortable that we're on track with both our original investments and then the returns on those investments.

Operator

And we have a question from Konstantin Tcherepachenets with Raymond James.

Konstantin Tcherepachenets

First, I guess, if I can start off with -- can you just maybe provide more color in terms of what gives you comfort that Lutonix can be -- can reach $100 million in sales in 2015. So if you can maybe share some granularity?

John A. DeFord

I think approval would help.

Timothy M. Ring

That would be a good start. I think the -- it goes back to -- and there's been a lot of kind of third-party published reports at this point of what the potential is for that market. Clearly, there's unmet needs in the marketplace. In fact, it still is very -- a very underdiagnosed disease. And there's an awful lot of amputations that are done in the United States. I think it's somewhere around 170,000 or something like that, annually. So all those data points line up to tell you that this is a technology that will have a dramatic impact. The other thing is, because it is delivered via a PTA balloon, this is a technology of a delivery system that is well understood, widely practiced. So there's not a big training curve associated with introducing this, as there may be with other kinds of first-in-man type device introductions. So when you put all those together, it makes us very optimistic about what the uptake for this product could be.

John H. Weiland

I'd also add that our original assumptions -- when we first started down this investment trail and analyzing this in '09, '10, our original assumptions in terms of obesity, diabetes and related peripheral vascular disease, we have not seen anything that would say that our original assumptions were not correct.

Konstantin Tcherepachenets

Terrific. And then my follow-up is, so you guys have done a number of M&A deals here. You guys still have a very healthy balance sheet. Just wanted to gauge your appetite for more M&A? And also just in terms of your capital allocation, are there any thoughts of any meaningful increase to your dividend, given that I think the payout is significantly below peers?

Timothy M. Ring

Sure. We remain extremely active on the acquisition front. That has been that way and will always be that way, as we look for new technologies that will contribute to our revenue growth. And relative to use of cash, our priorities remain the same. Strategic is first; acquisitions, buybacks would be second; and dividends would be third.

Christopher S. Holland

And Konstantin, just on the payout, I would just add, I think given our size, right, which certainly skews smaller than most of the peer group, and given our preference, again, for making investments that will drive higher organic growth over time, we just don't think it makes sense from our shareholders perspective, frankly, for us to meaningfully increase the dividend. And frankly, it would take a very material increase in the dividend to matter. That, that is a good trade-off when we think about the flexibility we currently have for acquisitions and then buybacks.

Operator

We have a question from Richard Newitter from Leerink Swann.

Richard Newitter - Leerink Swann LLC, Research Division

Just a quick one. I know you're being kind of cautious heading into the fourth quarter. You don't want to get ahead of yourselves and kind of call a turnaround one quarter to make a trend. But just on the pricing, it looks like the pressure kind of eased slightly this quarter, and I was just wondering if you could comment on if there's any division in particular, or product area where, perhaps, pricing might have eased?

John H. Weiland

No. We didn't see any significant trend in that. It was kind of across the board, primarily in the United States. So I would say that there was no new trend that would cause us to change our perspective on what the pricing impact will be.

Richard Newitter - Leerink Swann LLC, Research Division

Got it. And did you mention -- I think you had mentioned a potential FDA panel next year. Did you say when that might potentially be? Or are there any kind of goal posts or target timeframes that we should be thinking of?

John A. DeFord

Well, it's really completely in FDA's hands on when they would schedule a cardiovascular devices panel. So it just would be pure speculation to give you a time.

Richard Newitter - Leerink Swann LLC, Research Division

Okay. But it's fair to assume that, that would -- if we just think of the order of publication and a peer review journal versus when that might happen, can you give us a sense of any restrictions or what you think needs to happen in order for the -- that process to move forward?

John A. DeFord

I doubt that a publication would be predicated on panel or vice versa. I mean really once we've got everything into FDA and they have a little bit of time to review it, we'll be working on the manuscript anyway. And so timing of the manuscript will really be dictated by the -- by whatever journal accepts it. And it's possible if panel meetings were to come early or relatively speaking early, that could push the publication a little earlier. But otherwise, again, it's just pure speculation.

Operator

[Operator Instructions] And we have a question from Anthony Petrone from Jefferies Group.

Anthony Petrone - Jefferies LLC, Research Division

Just one on Lutonix and a follow-up on peripheral. On Lutonix, can you maybe walk through the pricing and volume dynamics for the Lutonix product in Europe? And maybe how that would be materially different or the same in the U.S. once you enter the market? And then just a follow-up on peripheral vascular, can you maybe speak to how Cook's drug-eluting stent broadly plays in for both stents and, eventually, balloons overall?

John H. Weiland

I'll take the first part. We don't see anything at this point in time developing in the European market that would prevent us from hitting our internal guidelines in terms of our expectations on Lutonix in the United States and any place else around the world. So there's no dynamic there from pricing or anything else that causes us to be concerned.

John A. DeFord

I think on the Zilver product, we really haven't seen a lot of impact from it yet. We know that Cook had some issues in getting that out. We understand that they're back on the market or getting back on the market now. So again, I don't know that we have any clear indication at this point of what that impact might be.

Operator

And we have a question from Joshua Jennings from Cowen.

Joshua T. Jennings - Cowen and Company, LLC, Research Division

Just had a first one for John DeFord on the LEVANT 2 data. Congratulations on hitting the 15 efficacy endpoints. I'm just wondering, speaking to interventional cardiologists, we get a little bit of a range of what the primary patency rate you need to really secure meaningful traction in the peripheral market and really open some eyes and maybe hit the target of opening the eyes of an FDA panel, as well as that $100 million first year kind of target you guys have set. Internally, what is the primary -- the 12-month primary patency rate that you think you need to hit in order to achieve all those goals?

John A. DeFord

Josh, I'm really not in a position to start giving numbers out, because when I do that it's going to start giving 12-month data for LEVANT 2. I think were not really in a position to do that at this time.

Timothy M. Ring

Nice try though, Josh.

Joshua T. Jennings - Cowen and Company, LLC, Research Division

I was just curious because we get a range but -- and then just in terms of the disclosure today, does that limit your ability with any of the high-profile journals or is it -- does just announcing the successful endpoints, does that limit your opportunity with -- for any specific high-profile journals that you may want to approach with the manuscript?

John A. DeFord

Yes, we don't think it impacts anything. We haven't given any details. We've just given you top line. It's -- in our analysis, we don't think that's going to be a problem for us. Although, I'll go on record again saying, I would've liked to have not had to do it, but we did.

Joshua T. Jennings - Cowen and Company, LLC, Research Division

Great. And then just lastly, can you remind us how we should be thinking about the sustainability of the Gore royalty rate through expiration in the first half or second half of '19?

Christopher S. Holland

Yes, Josh, we haven't been specific, other than saying, in '14, we assume we have a full year at the current run rate. And then, we've modeled a consistent decline beginning in '15 through '19.

Operator

And we have a question from Bob Hopkins from Bank of America.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Oh, sorry, I'll be real quick. I was just wondering if you guys, as you consider 2014, are going to move to cash EPS in light of the amortization that you've called out. Obviously, a bunch of other -- a bunch of your peers have.

Christopher S. Holland

Yes, Bob, we're obviously continuing to monitor what other folks in the sector are doing. Obviously, we're very focused right now on getting these transactions closed, and obviously, working through the accounting for them, which, as you guys know, takes a couple of months from a valuation standpoint. So we'll see where we are in January. We'll see where the sector is in January, and we'll make a decision at that point in time.

Operator

And we have a question from Jason Wittes with Brean Capital.

Jason Wittes - Brean Capital LLC, Research Division

Just 2 quick follow-ups. One for drug-eluting balloons. Do you see much advantage in doing atherectomy prior to the procedure? I imagine you haven't seen much of it in Europe because of reimbursement, but do you feel that's a viable option that you might see in the U.S.?

John A. DeFord

Well, it's a good question. We don't have any data to support it. There's 30-day data that was presented at VIVA. So whether some kind of plaque modification is important and whether atherectomy is that, it's just unclear at this point.

Jason Wittes - Brean Capital LLC, Research Division

Okay. And also just a quick follow-up. I know plenty of questions on timing of Gore, but are you assuming a petition -- another petition to the Supreme Court from Gore at this point in that timing?

Christopher S. Holland

Certainly, on the infringement, we're not.

Operator

And there are no additional questions. This concludes our Q&A session. I would like to turn the call back over to Bard's management for closing or additional comments.

Timothy M. Ring

Great. Thanks. Let me close by just thanking Bard employees around the world for all their efforts and commitment for a strong quarter. And I'd like to thank all of you for joining us this afternoon, and we'll talk to you next quarter.

Operator

Thank you. Ladies and gentlemen, this does conclude our conference call for today. Thank you for your participation and for using AT&T Executive TeleConference Service. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: CR Bard Management Discusses Q3 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts