C. R. Bard, Inc. Q1 2010 Earnings Call Transcript

| About: C. R. (BCR)

C. R. Bard, Inc. (NYSE:BCR)

Q1 2010 Earnings Call

April 22, 2010 5:00 pm ET

Executives

Timothy Ring - Chairman and CEO

John Weiland - President and COO

Todd Schermerhorn - SVP and CFO

John DeFord - SVP - Science, Technology, and Clinical Affairs

Analysts

Rick Wise - Leerink Swann

Seth Damergy - Deutsche Bank

Kim - JPMorgan

Joanne Wuensch - BMO Capital Markets

Tom Gunderson - Piper Jaffray

Gregory Hertz - Citi

Michael Matson - Wells Fargo Securities

Ben Andrew -William Blair

Kristen Stewart - Credit Suisse

Lawrence Keusch - Morgan Keegan

Robert Goldman - CL King

Douglas Tsao - Barclays Capital

Brooks West - Craig-Hallum Capital

Operator

Ladies and gentlemen, welcome to the C. R. Bard, Inc. first quarter 2010 earnings results conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions). As a reminder, this conference 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 A. Weiland, President and Chief Operating Officer and Todd Schermerhorn, Senior Vice President and Chief Financial Officer. Also in attendance today are John A. DeFord, Senior Vice President - Science, Technology, and Clinical Affairs and Eric J. Shick, 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 and the information under the caption "Risk Factors" in Bard's 2009 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 April 22, 2010, 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'll turn the call over to Mr. Timothy Ring. Please go ahead.

Timothy Ring

Thanks, Paul. I'd like to welcome everybody to Bard's first quarter 2010 Earnings Call. Thanks for taking the time to join us today. We expect the presentation portion of the call to last about 40 minutes.

The agenda today will go as follows. I'll begin with an overview of the results for the first quarter of 2010; John Weiland, our President and COO, will review the first quarter product line revenue; Todd Schermerhorn, our Senior VP and CFO will review the first quarter income statement and balance sheet as well as our expectations for Q2; John DeFord, our Senior VP of Science, Technology, and Clinical Affairs, will provide an update on our product development pipeline; and then we'll close with Q&A.

First quarter 2010, net sales totaled $650.8 million. That's up 9% over Q1 last year on an as reported basis and 6% on a constant currency basis. The currency impact for the quarter was favorable by 270 basis points.

Net income for the first quarter of 2010 was $120.9 million and diluted EPS were $1.24. Excluding items that affected the comparability of results between periods, which Todd will get into later, first quarter 2010 net income and diluted earnings per share were $122.4 million and $1.25, up 3% and 7%, respectively, which was at the top of our guidance range for the quarter.

Looking at our sales by business growth in the vascular category, it was up from Q4, but below the range of our guidance for the full year. Oncology was within its guidance range, while surgery grew above full year guidance. The urology category is at the high end of the range reflecting a favorable impact of a distributor destocking that occurred in Q1 of last year.

Looking at revenue growth on a geographic basis compared to the first quarter of last year, again on constant currency basis, first quarter net sales in the U.S. increased 8%, Europe was up 2%, Japan decreased 3% and all the other international businesses grew 15%.

Looking at our business development activities in early April, we acquired a small company called FlowCardia located in Sunnyvale, California for approximately $80 million. Their products and technologies for crossing chronic total occlusions or CTOs represent an important advancement for our lower limb arterial business strategy, complementing our PTA products and our peripheral vascular stents. The acquisition will advance our relationships with interventional cardiologists, which are the primary call point in endovascular lower limb arterial cases.

Additionally, with the acquisition comes an experienced R&D and marketing team with deep knowledge of the CTO market.

Looking ahead, we have several more deals currently in negotiation and a healthy pipeline of prospects in the assessment phase.

And finally, we received notification from the FDA in January that the warning letter for our Davol facility in Rhode Island had been closed down. And then, late last week, the FDA notified us that the warning letter for our Puerto Rico facility had also been closed.

This is certainly welcome news as these events are important milestones in our ongoing efforts to develop best practices around our product quality and regulatory capabilities and making them both competitive advantages for us.

Now, let me turn you over to John Weiland for a review of the product line revenue.

John Weiland

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

So let's start with Vascular. Growth in this category improved to 6% in the first quarter. Total net sales were $172.4 million, up 10% over last year on an as reported basis. Our United States business was up 5% for the quarter; internationally, we grew 7%.

Our Electrophysiology sales, which represented 19% of our vascular business, grew 7% for the quarter. EP Lab Systems were up 70% versus a low base in the first quarter of last year. While we would attribute this increase in part to the typical unevenness in system sales, we have experienced three solid quarters in a row.

Revenue and our disposable EP product lines was about flat versus the first quarter of last year. While our steerable diagnostic catheters were up 7%, sales in the balance of our disposables were down, so no change in the trend here.

Sales in our surgical graft category were down 8% in Q1. Excluding OEM sales which are historically lumpy, sales were down 3%, which is in the typical range for this product.

Our endovascular business increased 9% in the first quarter with a nice improvement in performance in PTA and a more modest improvement in the stents. Within endovascular, our biopsy products were up 6% fueled by growth in our VISICLIP marker here.

Sales in our peripheral PTA line increased 26%, a key driver in this step up in our growth rate was the launch of our new VascuTrak catheter, which was acquired in late Q4, as part of the purchase of Y-Med. This product line is highly differentiated with balloons that contain external wires to deliver focused longitudinal force to help crack calcified lesions at low inflation pressure. These catheters are compatible with 0.014 and 0.018 inch guidewires and are available with balloons up to 300 millimeters in length. So they give us a significant offering in the below-the-knee PTA market for the first time.

In late March, we took the next step in our entry into this market with the launch of the first of our family of new UltraVerse PTA catheters. Together with VascuTrak, they give us the broadest offering in the rapidly growing small vessel segment of the peripheral market. John DeFord will give you more details on UltraVerse shortly.

As Tim discussed, we closed the acquisition of FlowCardia, Inc., earlier this month. Their portfolio of endovascular products include the CROSSER catheter, MicroSheath support catheter and Porter family of guidewires, and represent a complete set of tools to cross CTOs.

The lead product is the CROSSER catheter. When energized, the device produces a high frequency mechanical vibration that supports advancement and ultimate passage of the catheter through its CTO within the true lumen of the vessel. Once through the occlusion, the physician can perform PTA stenting, atherectomy or other therapies deemed necessary to optimize longer-term positive outcomes.

For many patients, this therapy can eliminate the need for a potentially traumatic bypass procedure or even amputation. To help put the opportunity here in the perspective, the 2010 market for peripheral vascular CTO devices in the United States is estimated to be at about $60 million and projected to grow at a CAGR of close to 20% over the next several years.

We believe that the CROSSER catheter represents the best technology to access totally occluded arteries and we believe it should become a market leader in this space.

Sales in our vena cava filter line were down 8% in the first quarter versus the prior year period. After about a year and a half without a new product in this area we launched our new ECLIPSE filter this quarter and it's off to a good start.

We have been seeing a decline in our filter business over the last year or so in part due to a slowdown in the market, but also to our lack of new products. Consequently, we have some work to do but the good news is that we have a number of new vena cava filter launches that we expect to start rolling out later this year.

Our stent business grew 8% in the first quarter. Within our bare metal stent line, LifeStent were better than 50% in the United States and roughly 10% outside of United States. We anticipate publication of the LifeStent RESILIENT trial in a prestigious medical journal later this year. This publication along with our new CROSSER device's ability to access CTOs should positively impact our SFA franchise. However, we do start to face some tougher comps in Q2 as we pass the anniversary of LifeStent's SFA indication.

Sales of covered stents have been relatively consistent since our Flair device got off to a strong start following its PMA approval in late 2008. During the first quarter, the New England Journal of Medicine published the Flair clinical trial results, which provides us a useful tool to introduce the benefits of this technology to a broader population of interventional radiologists, interventional nephrologists, and vascular surgeons.

Let's move on to urology now. Total net sales were $174.3 million, up 5% versus Q1 of last year, up 7% on an as reported basis. The United States business, which was 72% of global urology revenue, was up 6%, while internationally we grew 2%.

As you will recall, our performance here this quarter was up against the period with heavy distributor destocking in the first quarter of ’09. We estimate the impact on the growth in this business to be favorable by about 500 basis points.

Our basic drainage business was up 3% in the first quarter. Our IC Foley business was about flat for the quarter.

Our continence business, which represented 13% of the urology category, was down 5%. Within continence, our DigniCare fecal management line was up over 100 % in the first quarter. With its unique features and strong clinical performance, we have been rapidly gaining share in this market. This performance was offset by another double-digit decline in our surgical continence products this quarter, which was primarily driven by weakness in our pelvic floor repair line.

In slings, we are pleased with the early progress of our AJUST launch, the value proposition of strong anchoring and full sling adjustability has resonated with our customers and they see the advantages it provides versus other single incision slings on the market.

We look for our surgical continence business to improve as we continue the roll out of AJUST. In the pelvic floor repair portion of this business, we launched our new ALYTE Y-Mesh in Europe late in the Q4.

In the second half of the year, we anticipate the launch of our new Ventrio product, which will bring many of the same benefits of the AJUST system to our pelvic floor repair platform.

Also, in that timeframe, we expect to launch the ALYTE in the United States, which should allow us to capitalize on the growing [sacropoplexy] market here.

Sales in urological specialties were up 2% versus the prior year quarter. Standalone sales of our StatLock catheter stabilization line increased 31% in Q1. This was up against a low comp than prior year in the United States.

Our international StatLock business continues to do well growing 38% this quarter, following a series of investments we made over the last couple of years and are selling business internationally.

Our next segment is oncology. Total net sales in this category were $174 million, an increase of 6% over the first quarter last year or 8% on an as reported basis. Geographically, net sales in the United States were up 6%. Outside the United States, sales were up 3%.

Our port business was up 4% versus Q1 last year. In the first quarter, we launched our new line of CT power injectable ports. As we've discussed previously, this more basic port will be used only to address the parts of the markets where we have seen pricing pressure from competitive devices with less features.

PICC revenue grew nicely at 10% in Q1, and I am pleased to note that we are starting to see some traction outside of the United States where we grew 32%. While we saw nice growth in all of our geographic categories, the most significant contribution came from our emerging markets.

We haven’t seen any real change in unit growth in the United States PICC market, though we have started to have a little more success in up-selling technology, particularly with our Sherlock TLS tip tracking system. In fact, for the first quarter in the United States, our average selling price for our PICC line was up 3% versus the prior year quarter.

Our vascular access ultrasound product line was up 12% this quarter, but it was up against the lowest comp in two years. Sequentially, the line was flat with the fourth quarter, so no sign of increased capital spending here yet.

Last quarter, I said, we expected our dialysis catheter business to continue to strengthen in 2010 and after growing 9% in the fourth quarter, we saw our growth move up to 13% in Q1.

Behind our recent momentum in this business are last year's launches of two internally developed catheters, Equistream and Trialysis. Then late in Q4, we acquired the Spire dialysis business, which includes a strong intellectual property portfolio and three chronic dialysis catheter families, Alta, Decathlon and RetrO. We are now integrating these products into our bag and believe the combination of the Bard and Spire technologies and intellectual properties gives us the strongest split-tip catheter franchise in the market.

And finally, our Enteral Feeding line was down 29% this quarter, reflecting the product discontinuations we discussed on the last of couple calls. These discontinuations negatively impacted growth in our total oncology business by about a point again in Q1, with most of the impact being felt outside of the United States.

Let's complete our revenue discussions with surgical specialties. Global revenue growth in this category improved to 14% in the first quarter. Net sales were $109.2 million, up 16% on an as reported basis. United States sales, which represented 78% of our global surgical revenue, increased 18%, while international sales were flat to the prior year quarter.

Our soft tissue repair business had another strong quarter with growth of 22%. Within soft tissue, our natural tissue products were up over 75%. Our Allomax tissue line had a great quarter with significant growth coming from our new breast reconstruction call point. The clinical performance of Allomax continues to meet with strong physician acceptance at a time when more surgeons are choosing allograft implants in place of using patient's own tissue for post mastectomy breast reconstruction procedures.

Further in our natural tissue line, our new XenMatrix porcine implant delivered an even stronger performance than Allomax. Part of the reason, this xenograft product has been doing so well right out of the blocks, is that our sales force is armed with published clinical data that illustrates its excellent strength characteristics and effective tissue in growth.

This is a great case study supporting our plans to develop more clinical data under our accelerating R&D investment strategy.

Moving to our synthetic hernia products, sales were up 2% over Q1 last year with growth in both, groin and ventral products. In the inguinal space, on the heels of the launch of our new lightweight 3DMax, we launched a new lightweight PerFix plug in early Q1, with both products receiving positive clinical feedback.

In the ventral space, our Sepramesh absorbable barrier grew 36% versus the prior year quarter, which highlights why we plan to begin expanding our other proprietary ventral implant lines to include the resorbable Seprafilm barrier starting in the second half of this year.

Our strategy here is to continue selling our current PTFE barrier versions as well, so clinicians will really have the choice of using either a permanent or resorbable barrier implant product.

In the fixation category, SorbaFix drove a 200% increase for the third consecutive quarter. This resorbable anchor device received a lot of positive attention at the American Hernia Society meeting in mid-March. One notable highlight of the meeting was an animal study presented by Dr. Neal Agee of Carolina's Medical Center that compared SorbaFix to the market-leading device.

The study showed SorbaFix has statistically significant advantage in preventing what's called tenacious adhesions of scar tissue or adjacent organ tissue, which is an important characteristic for fixation devices.

Following on the success of SorbaFix, we launched a permanent anchor called PermaFix in January. It's been met with positive clinical response as well and was also shown to have an advantage over the competitive device in the same Carolina's Medical Center study.

With the launch of PermaFix, we now have both resorbable and permanent anchor fixation devices in our bag.

Closing out the surgical category, our performance irrigation business declined 8% as we continue to feel the effect of the return to the market of a major irrigation competitor. Looking ahead, the associated comp situation improves in Q2.

And finally, our hemostasis business was down 10% this quarter.

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

Todd Schermerhorn

Thank you, John. Good afternoon everyone. Let me start with the items that affect the comparability. In Q1, we had acquisition-related items of $1.6 million, majority of which were legal costs associated with the Y-Med and FlowCardia transactions. This item is detailed in the notes, the financial statements and the reconciliation accompanying our Q1 earnings press release.

Now let's go to the statement of income for the quarter. Gross profit was $398.1 million, 61.2% of sales, down 120 basis points from the prior year quarter.

As we discussed at our December Analyst Meeting and again on the Q4 call, the reduction in inventory in the latter part of 2009 created production and efficiencies that are reported as we sell that inventory, which occurred this quarter. Financial impact turned out to be very close to what we had forecasted and communicated.

Otherwise, our core manufacturing improvement programs continue to progress nicely and we continue to expect to be back in the mid-62s in the second quarter.

New amortization of intangibles relating to transactions closed in the last 12 months cost us about 30 basis points year-over-year this quarter. SG&A expenses were $179.7 million for the quarter, 27.6% of sales. On an adjusted basis, they were $178.5 million or 27.4% of sales, a 10 basis point improvement over the prior year period, as our annual guidance had suggested. This includes some good progress on our sales force expansion in our surgical business.

R&D expenditures totaled $40.6 million for the first quarter, 6.2% of sales, not our strongest investment quarter, but again we are hiring additional resources and we expect R&D to expand as we move through 2010.

Interest expense was $2.9 million for the first quarter in the range of our historical results. Other income expense was 100K of income for the quarter. The effective tax rate was 30.7%. On an adjusted basis, it was 30.5%. That does not include any assumptions about the expansion of the U.S. R&D tax credit.

We repurchased 1.2 million shares of the company stock in Q1. We will continue to be buyers of our stock as cash balances and market conditions permit.

The balance sheet at March 31, 2010, reflects cash and short-term investments of $733.8 million versus $674.4 million at December 31. For the quarter, accounts receivable days were up 0.8 days, and inventory days were down 9.1 days, the majority of which was currency related.

Capital expenditures totaled $9.2 million for the quarter. On the liability side, total debt was $149.8 million, unchanged from December 31st. Debt to total cap at the end of the first quarter was about 6%, and total shareholder investment was $2.229 billion at March 31.

Moving on to financial guidance for Q2, we are expecting constant currency sales growth of 6% to 8% again, and from an EPS standpoint excluding any items affecting comparability, we see the second quarter in the range of $1.34 to $1.38.

I'll now turn you over to John DeFord.

John DeFord

Good evening. At our December Analyst Meeting, we detailed 42 products from our pipeline with 23 scheduled to launch in 2010. In Q1, we have lunched eight of those new products. So we're off to a pretty good start and we're building momentum for the year.

Moving to products, I'll start with the HD Mesh Ablation System and our atrial fibrillation activities. As discussed in December, we stopped our MAGELLAN pivotal trial to allow incorporation of a number of meaningful device and energy delivery improvements.

We're making good progress and are in discussions with FDA regarding the initiation of a study of this new system. In December, we anticipated a late 2010 launch in Europe followed by the start of our U.S. clinical activities in early 2011.

While our U.S. clinical activities remain on track, some recent changes to the regulatory path for the system in Europe will likely delay introduction from late this year to early to mid 2011, as the U.K. has characterized our heparin coding as a medicinal agent. This change will require a drug-like review and we expect it will take a few additional months before CE marking.

In EP Lab Systems, we remain on track for second half 2010 launch as several upgrades and enhancements, including a new 3D navigation system that's under development through our alliance with Philips Healthcare.

Now moving to stents, we're making steady progress on our LifeStent platform enhancements, including the 200 millimeter lengths, the addition of radiopaque markers on all sizes, and a new tri-axial delivery system. Launch is anticipated in late Q2 or early Q3 in Europe concurrent with the start of a small multi-center clinical study to support FDA filing and anticipated U.S. launch in the second half of 2011.

On the stent graft front, we continue to work towards the start of a U.S. clinical study of our Fluency self-expanding stent graft products to support expanded indications.

We've previously forecast beginning the clinical trial in the second half of this year. However, our recent discussions with FDA have let us to conduct some additional animal and bench testing that will push out our IDE submission until Q3 and likely delay first patient enrollment until late in December or early next year.

Our next generation stent graft technologies are also progressing though we have had a couple of twists and turns in that path.

In December, we started our development activities surrounding both the new AV Access focused product and our first stent graft designed for SFA use. Following discussions with FDA, we have confirmed our ability to leverage a great deal of our LifeStent bench and clinical data to reduce the scope and size of both bench testing and clinical evaluation requirements for the SFA targeted product.

Now, this new information has allowed us to prioritize our efforts towards the SFA device and we now anticipate the second half 2011 launch in Europe and a 2013 U.S. launch following completion of a medium-sized clinical study with one-year follow up. This is an improvement of about a year from our previous plan and puts our focus on that larger market opportunity.

Now, we are currently evaluating the impact this will have on the timing of our next generation AV Access product and will pass along to you our updated expectations on another call.

Now, moving to PTA, as John mentioned, we began to roll out our new UltraVerse technology platform in late Q1 with the launch of the UltraVerse.018. This is designed to treat long calcified and diffused intra-aortic disease and will be offered in 2 to 9 millimeter diameters and lengths from 20 to 220 millimeters. We will continue to expand this offering over the second quarter to include the UltraVerse.014 family designed specifically for small peripheral vessels, and will be offered in diameters from 1.5 to 5 millimeters and lengths up to 220 millimeters.

Both products are designed for enhanced traceability, utilizing our hydrophilic coding and patented checkering technology.

Now in filters as noted earlier, we launched our electropolished ECLIPSE vena cava filter in the first quarter. Picking up our cadence here, the next generation in the ECLIPSE family is on track for a Q4 2010 launch. This new filter will incorporate enhanced anchoring technology and a new delivery system for both femoral and jugular replacement.

Then as we discussed in December, we anticipate the launch of a new filter platform in the second half of 2011 with a lower profile and design for increased durability.

And finally the FlowCardia acquisition includes some important clinical data on the CROSSER catheter family. The device is used to aide and crossing both coronary and peripheral chronic total inclusions and was evaluated in several clinical studies. For example, the PATRIOT multi-center registry study enrolled 85 patients with CTOs treated using CROSSER, and recanalization was achieved 83.5% of the time.

There were no perforations and the average activation time was 2 minutes and 6 seconds with an average lesion length of 117.5 millimeters. We began commercial sales of product in mid April.

Now this is a synergistic addition to our portfolio and as John mentioned, the FlowCardia team's brings a wealth of experience and an exciting pipeline that I will discuss at a future date.

Turning to urology incontinence, as John mentioned we have launched two new products in the past two quarters, including the AJUST single incision sling in the U.S. and the ALYTE pelvic floor prolapse system in Europe.

We anticipate launching ALYTE in the U.S. in the second half of the year and we are completing the development work on our [MTO] device, a next generation of anterior and posterior pelvic floor repair systems slated for launch late in Q4 of this year.

These procedural kits will offer full distal and proximal adjustability for prolapse repair along with enhanced ease of access to anchoring points to reduce or prevent the risks associated with deep trocar passes.

Also slated for Q4 is the launch of our next-generation DigniCare fecal management system. DigniCare 2 will continue to build upon the existing design that promotes skin and lower valve integrity to our patent pending cuff system, which is design to conform to the anatomy and maintain seal integrity with the lowest cuff pressure on the market.

Now moving to oncology, already in Q2 we launched our new Site-Scrub catheter hub disinfecting product. Site-Scrub is a small single use hub cleaning and disinfecting product that is designed to be used before and after every hub access.

The innovative design cleans and disinfects both the inner and outer surface of the catheter hub in one easy step - to reduce the likelihood of touch contamination that can lead to catheter related blood stream infection or CRBSI.

In PICCs, our Sherlock's 3CG system, which combines our Site-Rite ultrasound venous access technology, Sherlock tip tracking system and ECG catheter tip confirmation technology, has been used in the placement and tip position confirmation in over 500 PICC cases.

We received five 10-K concurrence late last year with general PICC placement indications and continue to discuss with FDA a path to expand the device claims to remove the need for X-ray or other imaging confirmation of catheter placement.

We have discussed a number of potential study designs with FDA and they are currently reviewing our plan. So I don’t have specific details to provide you today on the design or anticipate the start and completion dates. However, based on our early customer feedback, we've decided to launch the product with existing claims in Q3 as we continue to work toward expanding the claims and providing clinical evidence to support our customer's scientific and clinical needs.

We have a couple of other important innovations in the PICC pipeline; one planned for launch in the second half of this year and then building on that one an additional launch in the first half of 2011. These catheters will incorporate new technology designed to address two of the external clinical events that can lead to catheter removal and replacement.

And turning to ports, beyond the recent launch of the CT Power injectable ports that John discussed, in Q1 we also launched our new Port Access kits and are on track for a Q3 launch of our new anti-microbial PowerPort family. We anticipate launching both titanium and MRI version simultaneously in our new [Comfort Port] design.

The [Comfort Port] is structured to enhance and simplify placement through a new suturing system that allows anchoring almost anywhere on the port body, not just in predefined suture holes. The new design will also reduce the discomfort that can sometimes be associated with hard surfaces found in other port design.

And in imaging, we recently received 510(k) concurrence of our new Site-Rite Vision and launched it just a few days ago. The new ultrasound based product builds up upon our Site-Rite platform and it provides functions that expand its use beyond just being as access. Vision adds color flow Doppler, onscreen vessel measurements and enhanced compatibility with hospital data systems, to simplify image storage and maintenance and includes a number of user features.

And now, moving to our surgical business over in the final stretch here. In fixation, we launched the PermaFix permanent fixation system in Q1, as John mentioned. The PermaFix product provides a permanent anchoring option and builds upon the very successful design that we pioneered with the Q209 launch of SorbaFix family.

The PermaFix is offered in either at 15 or 30 tack configuration, and in early 2011, we planned to launch some enhancements to the tack delivery system for both PermaFix and SorbaFix.

In the ventral hernia repair space, we received 510(k) concurrence today for our Ventrio product line. We have inventory ready and we will launch next week. The new Ventrio family incorporates a lighter mass configuration and is now available in a broader range of sizes all with parts proprietary, resorbable, self-expanding ring design.

As we move through the remainder of the year, we continue to anticipate launching new versions of both Ventrio abdominal and Ventralex umbilical repair patches that incorporate our Sepra resorbable barrier technology for a [lighter] repair without a permanent adhesion barrier.

Then around the end of the year we expect to introduce a new device called [VentraLite ST], a resorbable barrier mesh designed specifically for laparoscopic ventral hernia repair.

And finally, we are in the middle of a number of regulatory discussions relating to our obesity therapy project.

Recall, we conducted a small feasibility study of our RS2 endoscopic suturing device for the primary treatment of obesity. After completing our 12-month follow-up with positive results, we initiated discussion with FDA in Q1. At this moment, we are discussing a number of key study design issues and until those are concluded, we can’t really provide an estimate to when or if, we would start a pivotal study of this technology. It is clear that FDA's view of this and similar technologies is still evolving.

Now we've covered a lot of ground here and I appreciate your attention and now let me turn you back to Tim.

Timothy M. Ring

Thanks John. That concludes the formal part of the presentation. I will now turn the call back to the moderator to facilitate the Q & A session.

Question-and-Answer Session

Operator

Ladies and gentlemen we will now begin the question and answer session. (Operators Instructions). First question is from Rick Wise with Leerink Swann. Please go ahead.

Rick Wise - Leerink Swann

A couple of questions. First maybe for you, Todd, gross margin, just to make sure if the inventory, the lower margin inventory work through, are you done? And you talked about the 62% second quarter margin, does that reflect the complete cessation? And maybe just last part of that, how do we trend to the year given all the exciting new products, you think that gross margins would trend higher from the second quarter?

Todd Schermerhorn

The answer to your first question is I think we are mostly done, Rick. Early on in December, we had expected some of that to flow into Q2. It doesn't look like much going into Q2 at this point, so that mid-62 does not really reflect much in terms of inventory reduction.

As it relates to the rest of the year? Yeah, I think we should see it continue to move favorably. As we go out to Q3 and Q4, our core cost improvement work is really good and yeah, as you as said the mix is working in our favor right now.

Rick Wise - Leerink Swann

That just sounds like, if I remember your guidance correctly for the year, flat gross margins. It sounds off late conservative.

Todd Schermerhorn

I don't know, Rick. When you start at 61.2 and you got to get back to 62.2 for the year, that math's working against you there.

Rick Wise - Leerink Swann

Definitely yes. The second question is, surgery is clearly doing great. Had your numbers, guidance, 9 to 12 excess, actually, it did 14 in the first quarter. Again, I was just out of pages, it seemed like a lot of excitement about SorbaFix and the breast reconstruction opportunity, etcetera. How should we think about that 9 to 12 ex Fx guidance now, given where you are?

John Weiland

Well, I think that, Rick, this is John, I say that we obviously are very positive on the business right now and the momentum we have. We like the progression of the launches that we have accomplished. We have liked the pipeline and what's coming out, particularly, what's coming out in some of the synthetic area and our PI comps get easier as we go downstream. So on and on, I think we like where we are at.

Rick Wise - Leerink Swann

Sounds like it could be better. And last, for Tim, if I could. Tim, just your general perspective on procedures, the environment, J&J seemed very optimistic earlier that procedures are picking up and turning around, Covidien seemed more cautious. How do view things? Thanks.

Timothy Ring

We see them basically the way they were at the end of the year. We don’t see any significant change one way or the other.

Operator

We have a question from Seth Damergy with Deutsche Bank.

Seth Damergy - Deutsche Bank

Thanks for taking the question. First, I just wanted to ask you a quick question on the vascular business. Your performance this quarter, as you pointed out was a bit below your annual guidance, and I am assuming that’s the small balloon products are going to add some meaningful revenues in the back half of the year. So can you just give us some color on the market, your strategy to penetrate it and what emphasis your reps are going to put on this products? And then also with FlowCardia, if you could just hash out like any revenues that that business may have had?

John Weiland

Let me start with the flow cardiac. It represents about $10 million of the existing businesses. We picked it up and we have the benefit of putting it in our significantly larger sales force hence as we bought this thing out pretty aggressively. I’d say with and our advantage point vascular was affected a little bit by couple of unusual circumstances in the first quarter. Japan, you noted our growth rates in Japan, our growth rates out the door of our joint venture were significantly higher than what our sales were in to the joint venture. One area that was particularly affected in that inventory issue was our vascular business. And also we saw four major customers in the OEM segment of our vascular business just delay orders in the first quarter. And hopefully we won't experience those two issues as we go through the year.

Now, I should look at our portfolio of new products in there, we are very optimistic about what we have coming downstream. I mean we have the LifeStent with the new 200 mm lengths. We are going to roll FlowCardia out aggressively. You talked about UltraVerse, we think that has a lot of growth opportunities associated with it. We just recently launched the ECLIPSE, new vena cava filter and The New England Journal of Medicine publishing your Flair data. We are just starting to get a little bit of positive momentum from that. In fact we had 500 doctors in the month of April alone take part in meetings to see the clinical data that was presented on it. So, I think all in all, we were off to a slower start than we expected in vascular for a couple of defined reasons and we are optimistic that as the year rolls out we'll pick up some momentum.

Seth Damergy - Deutsche Bank

That’s helpful and a general market question, and that’s to piggy back of Rick. Last time you spoke I think in analyst meeting, you said there is little reluctance for the upsell and for hospitals to pick up some more premium priced products. Have you seen any change in hospital usage trends?

John Weiland

I say that the only trend different trend is that we noted. One that we are seeing some life in our ability to up sell PICCs that’s important to us especially as we roll out the 3CG technology later in the year. You note our urology growth in basic catheters, I think the issue from our advantage point is admissions number one, but also number two utilization and that there has been recent data that was published on the hospital acquired infections. The number one hospital acquired infection is a urinary tract infection. Hospital infections have not gone down. It actually has gone up even with the lot of emphasis and there is some pressure on hospitals to stop utilization of catheters unless they are absolutely necessary in the urological space. So, that gives us a little bit of head when as we move downstream.

Seth Damergy - Deutsche Bank

Got you. Just one last one if I could, on the biologic mesh business your performance is pretty strong of a lower base. I was wondering if you think are you displacing the market leader in that space or you penetrating surgeons that haven’t previously used biologics? Thanks a lot.

John Weiland

We are taking share, but there is also lot of share there yet to be taken too.

Operator

The next question is from Mike Weinstein with JPMorgan.

Kim - JPMorgan

This [Kim] here for Mike. I wanted to just on start on the oncology segment. You mentioned in your prepared remarks that PICC pricing was up 3% I believe. I wanted to see if you could give us some color on what's going on in ports? What the pricing will look like in ports for the quarter?

Timothy Ring

Pricing in ports was pretty stable. We are up about 2% in terms of ASPs in ports.

Kim - JPMorgan

Okay and then, one follow up on that is, with this new anti-microbial port coming later in the year, what do you think your ability to take price there will be?

John Weiland

Well we certainly won't be selling it for less than we are selling basic ports, that’s for sure. So I mean, I think it's an important clinical need. We think it has an excellent space. It will have an excellent place in the market for those clinicians that are worried about infections or port placement. We think it will be positive.

Kim - JPMorgan

Okay, great, and then one last one and I will drop. I would like to hear a little bit more about the customer's feedback, any data points that you can give us on the 500 cases with 3CG that you mentioned?

John DeFord

Sure. So we have been rolling this device out in a very careful way as we have been working with FDA and we have got a lot of very excited customers out there who have begun using the device. And so, at this point we have not had any problems with the device at all and we are beginning to see more interest and so we have decided that instead of holding off a broad launch until we get broader indications, we go ahead and launch this product starting in the third quarter or so.

Kim - JPMorgan

Any sense from the customers that they will use it with or without X-Ray with the initial launch?

John DeFord

Right now, they will probably still X-Ray but we certainly expect that as more and more information is available then the hospitals are going to be collecting some data on that to make their own decisions.

Operator

We have a question from Joanne Wuensch with BMO Capital Markets.

Joanne Wuensch - BMO Capital Markets

Thank you very much for taking my question. I’m going to assume since you commented on second quarter guidance, is the full year guidance is still intact?

Todd Schermerhorn

It is.

Joanne Wuensch - BMO Capital Markets

I just wanted to confirm that. Second, some companies have been making some comments on healthcare reform. Is there anything that you would like to toss in to the batch now that this is [mashed] and it's down a bit?

Timothy Ring

I guess, the first thing is, we don’t have retiree health benefits, so with that those charges that a lot of companies are taking now, don’t really impact us. Beyond that, you know way of bill was processed with essentially no reconciliation between the house and the senate version. The Secretary of HHS has an awful lot of authority in [determining] in the details of that bill. And there is an awful lot of things and terms of detail that need to be worked out over the or probably over the next 90 days, the volume of which is such I don’t think that’s going to be possible. So to the extent that some of those things may impact us or the industry – I am sure the industry association will be involved in discussion about those things but there is still an awful lot of detail that’s non relative to the medical device tax. Now clearly that is known for 2013 at 2.3% of US sales. So that’s a significant number for all the medical device companies.

Joanne Wuensch - BMO Capital Markets

Okay. One of your competitors has talked about, I want to say its PICC in the port market and they were talking pricing difficulties, can you comment on what you experienced in particular those two areas in the sum – in this quarter versus last year even sequentially? Thank you

John Weiland

Yes, I think I commented on that in my general comments early on, but PICCs we actually saw ASPs increase during the quarter 3% and ports, we saw ASPs increase 2%, so we are not seeing that pricing.

John DeFord

That's over prior year. Sequentially, pretty leveled up slightly, I would say.

Operator

We have a question from Tom Gunderson with Piper Jaffray.

Tom Gunderson - Piper Jaffray

I've got a couple on distribution. The first I think is for Todd, and that would be you shifted the price increases for distributors from Q4 into Q1 and Q2, can you give us a number to delineate what you think the impact was on Q1, Todd?

Todd Schermerhorn

There was a very little pricing increase impact on Q1, under couple million dollar, I would say and not in urology. The comps on urology were above the price increase in the fourth quarter of 2008, which lead to a destocking in the first quarter of 2009, which gave us an easy comp and that was the reference point. As it relates to the June price increase, I'll let John comment if there's anything.

John Weiland

We expect the price increase to be much lower than our historical price increases for a number of reasons, so as we sit here today, we don't expect and we're doing it in June 1st, so we don't expect to have a significant effect in the quarter.

Tom Gunderson - Piper Jaffray

John, the surgical sales force is expanding. You talked about last quarter, the managers being hired and then having them hire the sales people as we go into this quarter can you give us an update on that. Whatever hires you've made for commissioned people in the field is that having an impact yet on earnings?

John DeFord

I would say that we've been very pleasantly met with our ability to hire really effective people. Thus far we're at 94% or 95% of what our expectation was. We are expanding that group by 48. We have got 44 onboard as we speak here today. Now those people are going through training. They are getting into their territories. We expect that impact to be happened in the latter part of the year. We always say it takes two to three quarters for rep to really become effective in these territories. We'd expect to see that effect downstream.

Tom Gunderson - Piper Jaffray

Then the last question on this theme and that is maybe a similar update to help the vascular sales forces doing and how that’s coming together in Europe?

John DeFord

The movements that we made in our sales force in Europe was not particularly focused on vascular. We were changing our entire sales force and with a much greater focus on selling effectiveness in Europe and right now, we are set 97% completion in terms of filling all those territories and managers in Europe.

John Weiland

We got that vascular people in the fourth quarter. They are all in and embedded and productive I think.

Operator

We have a question from Gregory Hertz with Citi.

Gregory Hertz - Citi

Maybe we could start off with some question here; again kind of coming out of stages, there is a lot focus on the surgical side there. The launch of PermaFix, obviously you are doing well with SorbaFix as well, as you noted on the call. I am just wondering, how much of a benefit do you think you are getting from the launch and your overall improvement fixation as far as a carryover into the tissue and synthetic mesh business?

John DeFord

Quite frankly, we are seeing, the PermaFix, we have not seeing any effect to speak up because we are just really rolling it out right now, so we would expect to see that downstream. We are seeing some benefit of using SorbaFix in conjunction with our synthetic meshes. We saw that improved in the forth quarter and continue to improve in the first quarter and would expect that be a positive force as we move downstream.

John Weiland

Both groin and ventral groin in synthetic hernia this quarter and I can’t remember the last time we had both on the upside.

Gregory Hertz - Citi

So there really was no impact or benefit really from PermaFix in the quarter?

John Weiland

Not to speak up.

Gregory Hertz - Citi

Okay, even though the launch in January?

John Weiland

I mean we have launched it out on a slow even [keel]. So, we'd expect it really start to see some significant activity in Q2, Q3.

Gregory Hertz - Citi

Is there a fair amount of hands-on training that goes along with that product? I’m just wondering how we should expect to see sales for that product progress throughout the year and do you have any internal expectations that you'd care to share as far as what do you think realistic mix would be between SorbaFix and PermaFix?

John Weiland

We certainly do have some expectations. We probably prepare not to share, but I’d say that much like anything in the surgery space, it’s the game plan as you can convert one new surgeon at a time and as reps are out there making calls and doing cases and convincing surgeons of the benefit of it, we make conversions. I think it’s a little bit easier in this case for those surgeons, who use both absorbable and fixation devices in that. We’ve got a pretty good track record with lot of commissions right on SorbaFix.

Gregory Hertz - Citi

Then one question if I could for John DeFord. I know we spoken before on the 3CG trials and I know there is a couple different phases as part of that, could you just refresh my memory and may be share the earlier phase I think it was maybe 100 to 300 patients. Is there any ability to kind of move forward with that or is that also contingent upon discussion with the FDA? And could you shed any light on this as far as with the sticking points might be and the discussion with the FDA?

John DeFord

Let me try to give you a little bit of additional detail here. There are a number of studies that we have talked about, some of those are more of a clinical data to support the nursing societies, the hospitals and so on and some are for the FDA and expand our indication. So, we have already run a couple of studies with this technology. We have talked about those in the past, some imaging studies just to get level set a little bit of detail on how we setup our training program those kind of things, but for the FDA frankly, we presented them a proposal relatively small size trials, small to mid-sized trial and they are reviewing it right now. So, until we hear back from them I don’t really know.

Operator

We have a question from Michael Matson with Wells Fargo Securities.

Michael Matson - Wells Fargo Securities

Hi, I was wondering if you could provide an update on the impact of currency on your earnings, and whether or not that’s become worse given the strength in the dollar here and given you reiterated your guidance, I assume you are able to absorb that.

Todd Schermerhorn

From a top-line standpoint, I think we said 270 basis points favorable. Bottom-line, it was I would say modestly favorable; there is not enough money to notice for the quarter.

Michael Matson - Wells Fargo Securities

For the remainder of the year, what are you expecting?

Todd Schermerhorn

I can’t talk about the bottom-line for the remainder of the year. I don’t know exactly, where the currency is going to go. So I would say, we forecasted for the year 50 to 100 basis point impact on sales. I would say right now at this rate, it would be favorable, that is 50 basis points favorable. And I would say, we're on the low end of that. As far as the bottom-line, I would say it's manageable at this point. It's going to get tougher in Q3 and Q4 because as you can see, the comps get tougher in Q3 and Q4, but right now in the mid 135 range euro, I think it's manageable.

Michael Matson - Wells Fargo Securities

Okay, and just curious if you have any thoughts on the neurovascular market and if that’s something that Bard would be interested in entering?

Timothy Ring

I don’t know if you are referring to the property that’s being sold right now. Being in the vascular space in general neurovascular is something that we've looked at for a long period of time. Obviously we haven’t done anything there. So we'll keep an eye on it and we are aware of the activity in the area.

Michael Matson - Wells Fargo Securities

Can you give us the revenue that FlowCardia had, annual revenue prior to the acquisition?

Todd Schermerhorn

Yes, I think I mentioned it. It's $10 million annually.

Michael Matson - Wells Fargo Securities

Finally, your R&D spending was up about 11% this quarter year-over-year, a little bit less than I think we were expecting. Just in general, what can we expect for R&D spending in terms of the ramp or trajectory that you are going to follow as you target that 10% number this year and then next few years?

Todd Schermerhorn

I would say, increasing. I think this quarter was just a little bit of timing. When you go through a hundred projects, it’s a little bit of ebb and flow in there. So it wasn’t really attributable to any one thing, necessarily. We are expecting a bit of move in the second quarter. I would be surprise if we were in the mid sixties in terms of percent in the second quarter and we will continue to fuel the fire as we see opportunities to do that as walk to it

John DeFord

The guidance we gave for the year was 6.5% to 7%.

Michael Matson - Wells Fargo Securities

Okay. That’s all I have got. Thank you

Operator

We have question from Ben Andrew from William Blair. Please go ahead.

Ben Andrew -William Blair

Just wanted to follow up on the R&D side a little bit and talk about how the peripherals and CTOs and what not, do you feel like you've got the portfolio of clinical data to really go at that market effectively, because historically there has been a bit of dearth of compelling, randomized and really a good quality data there. So do you feel like that's something that you can be affective with, with the FlowCardia and the portfolio that you have or is it going to take you some time to develop that the clinical portfolio?

John DeFord

I think we are actually in a pretty good spot right now. We have, on the coronary side, there were three different studies that were run for this technology on the peripheral side the primary one is the PATRIOT study that I mentioned. There is another larger registry study ongoing right now. So we feel like we have got a lot of good clinical data. There are a couple of publications. A few more in the works. And so, as CTOs go, we think we are in pretty good shape.

Ben Andrew -William Blair

Okay, and then, what’s the extent of the opportunity for you to round up the therapeutic portfolio, leveraging that? Is that something you are looking to, longer term?

John DeFord

Well we are certainly talked about our stance. We've talked about our Stent Grafts, we think those are very synergistic and obviously PTA is the workhorse that goes right with this. So we feel like we have got a good combination in the pipeline and a rally healthy product offering right now.

Ben Andrew -William Blair

Okay, and then just briefly on the 510(k) process. It sounds like your clicking along through the plans for this year. Have you seen a change in terms of FDA requirements steepening since the meeting in December that you already referred to in terms of data request and length of reviews? Or is that tracking with your expectations still yet this year?

John DeFord

As far as our 510(k)'s go, we've actually done pretty well at the start of this year, but when you look at, and I mentioned in the comments, a lot of our projects, we've got a lot more regulatory risk and then we feel then technical risk and so when we talked about our Stent Grafts, we talked about our HD Mesh, we talked about, even our stent products, 3CG and you go down the pathway, we're getting a lot more questions from FDA and it's still a bit of a moving target.

Ben Andrew -William Blair

Okay, and so is your guidance reflecting that conservatism in that? And if that conservatism turns out to be true, does that push you towards the low end of the range?

Todd Schermerhorn

I'm not sure if that's directly correlated, Ben. It's a big portfolio and there's a lot of stuff moving at any given time. So we don't draw a direct line between the FDA activity necessarily and that sales growth number.

Ben Andrew -William Blair

Okay, but you've got some conservatism built into the plan based on that regulatory uncertainty.

John DeFord

I think we are reasonable the way that we look at those timelines from a product development standpoint.

Operator

We have a question from Kristen Stewart with Credit Suisse.

Kristen Stewart - Credit Suisse

I just want to double-check on the urology side. You had said that the impact from the easier comps was about 500 basis points, so on a more normalized basis that business would have been flat. Is that a correct way to think about it?

Todd Schermerhorn

Right. Yes.

Kristen Stewart - Credit Suisse

So it was the total company then it probably was about a percentage point so that was about 5% then I guess, underlying.

John DeFord

I think that is true, Kristen, but this is Bard. There's a thousand stories here in any particular period. So we have items, several items on the other side of the ledger in this period too from the performance irrigation is still up against tough comps. As John said, we shift less into Japan and demand the bidding, OEM vascular is off, so overall for the company, maybe reported might be just marginally ahead of demand for the period.

John Weiland

This time the net comps will be pretty.

Kristen Stewart - Credit Suisse

Sure, and then, you had commented that the price increase earlier that you guys were taking a little bit less than you had historically for a number of reasons. Can you maybe just expand upon that? Why it is a little bit less? I know that you said in the past but that it doesn’t really have much of an impact on that?

Todd Schermerhorn

I think that’s awful economically.

John Weiland

No. It really washes out pretty quickly and we just think that there was not a significant benefit available to us by taking a larger price increase because most of the prices are really negotiated with the group purchasing organizations.

Kristen Stewart - Credit Suisse

So, it's not a reflection on your inability to price or the distributor's ability to price?

John Weiland

No. Not a bit.

Kristen Stewart - Credit Suisse

Okay, and then just, on the individual business lines in terms of the guidance that you gave relative to December. With vascular growing 6% this quarter, are you still comfortable with the 10 to 13 and is the 10 to 13 now including sales from the FlowCardia business or is that incremental to the growth rate.

John Weiland

Well, it certainly doesn’t include FlowCardia and we had plans from business development standpoint from December and back in November for several of these deals but I will let John talk about the different streams to expand.

John DeFord

Well, and we don’t normally change our guidance for each of the divisions or segments as we go through the year, but as I mentioned earlier, Kristen, we know that we are going to have to improve our growth rates in this category and we think we have enough of it, enough gunpowder to do that and I talked about those items, but talked about the longer lengths of life stent, we talked about the CROSSER from FlowCardia, we talked about UltraVerse, the new ECLIPSE filter that we just launched, then you add on top of that, the momentum we are building in Flair, all those should be very positive to us and we would expect that the OEM business wouldn’t stay in the same position it was in Q1 and we expect Japan to come back. So we expect we will be chasing the number for a while, but we are heading in the right direction in all lines.

Todd Schermerhorn

And the way we look at it, Kristen is again, vascular is run in a little cold right now, but it is a portfolio. We have got surgery run in nice and hot and, so in the end, these things offset themselves that will be consistent with the botched story of the less, six or seven years. That’s how we do it.

Kristen Stewart - Credit Suisse

Okay, and with, I guess, FlowCardia and the $10 million in, Y-Med in there, I forget what the annual sales of that are. What is embedded within your forecast of contribution from acquisitions, because it seems that?

Todd Schermerhorn

Y-Med was at a run rate of under a $500,000 in the fourth quarter. So it is not that much. We expect to do more of with it, but there wasn’t much embedded sales when we picked that up.

Kristen Stewart - Credit Suisse

Okay, so contribution from acquisitions this quarter was not really significant?

Todd Schermerhorn

No.

Operator

We have a question from Lawrence Keusch with Morgan Keegan. Please go ahead.

Lawrence Keusch - Morgan Keegan

Hi, good afternoon. Hey, Todd. Just a couple of quick questions here, on FlowCardia. I may have missed it, but did you say how much you guys paid for that?

Todd Schermerhorn

We did.

John DeFord

I said it was about $80 million.

Lawrence Keusch - Morgan Keegan

$80 million, okay. Great, and you also mentioned that you had a number of other ones in negotiation just as we think about what your objectives are for the year. I recognize M&A can go in any direction and take longer or deals don’t happen at all, but what’s should we be thinking for numbers for the year and what aggregate amount might we would be thinking about you guys spending.

Todd Schermerhorn

Well, I think the way you look at it, if you look at the deals we have done over the last seven years or so, which are over 50, only two of them had any significant revenue associated with them. So, in the pipeline we are looking at those kinds of things in addition to the types of things we have done recently. In terms of deals being closed, you certainly could expect more, but we are not going to disclose. We haven’t closed them yet. So, we can’t really tell you what the sales are gong to be.

John Weiland

From a dollar standpoint, we always set aside around $300 million in our cash flow planning. We actually haven’t quite gotten there in the last couple of years, but it just really depends on what comes along. I mean we certainly have the balance sheet capacity to do more if we needed to and generally if we do less, we buyback shares.

Lawrence Keusch - Morgan Keegan

Yes, understood. And I don’t remember the exact number from the fourth quarter where there was five or something like that that you did, but should we thinking about this if you guys move forward on these ones that you are negotiating, one or two quarters out again, so is the right magnitude.

John Weiland

Larry it’s very hard because you got to reach agreement. You got contracts you have to negotiate. It's just very hard to predict. Couple of years ago I said we do some, but we didn’t do any.

Lawrence Keusch - Morgan Keegan

Okay.

John Weiland

So, that's just difficult to predict, but we are very active.

Todd Schermerhorn

Very opportunistic, Larry.

Lawrence Keusch - Morgan Keegan

Yeah, understood. And then, Todd, is there insights that you may have just relative to where would we do stand with the R&D tax credit? I know it's not in your guidance, but any signals one way or the other, whether that may happen?

Todd Schermerhorn

Look, Larry, I am hardly an expert on Washington, and so I don't know that I can add any insights to that whatsoever. What I really does believe to be optimistic. I know there is some push to have it done before Memorial Day, but I think that the people on the inside are kind of wondering how that can happen, so all I know.

Lawrence Keusch - Morgan Keegan

And then the last one, just for John, I think you mentioned on the obesity product, you've kind of used the words when or if, the FDA would sort of let you proceed here and they kind of needed some incremental education. Could you just flush out perhaps what's going on there?

John DeFord

Yeah. Let me try to make this as clear as I can. FDA provided us some feedback on our IDE that’s really tough, and they provided us a direction that, frankly, is very difficult for us to get our arms around and so we are in discussions with them on how to resolve that issue. Until we do, I just can't tell you that where we're going to with that?

Lawrence Keusch - Morgan Keegan

Got you, so are you suggesting that it's at a point right now, where this project may not go forward just because they are creating barriers that are very high?

John DeFord

It's certainly possible.

Operator

You have a question from Robert Goldman with CL King.

Robert Goldman - CL King

I have two questions for you. First on FlowCardia. You did acquire the company and then I called out there a while, this teleconference was going on, and customer service introduces themselves as Bard, so it's all quite real, but it's interesting that it was so quiet, no press release, no announcement on their website, their owned or were owned by Venture capitalist and they usually like to talk about the sale of portfolio of companies. I’m curious, you know, why so quiet about it?

Timothy Ring

Well, Bob, we are not terribly promotional as you know, Bob, and often times it's helpful for us from a competitive standpoint to have a little bit of a jump on the competition, I think. In that case, that's just the way we did it that we knew we had this call, we just did it in the beginning of April, so we knew we had this call to right get it out there, and that's the way we plan to do it.

Robert Goldman - CL King

Let me follow-up too on PICC. I mean, you did mentioned obviously that the average selling price was up 3%, but probably more relevant to the company everybody is talking about is what the same-store prices were on the lower end of PICCs?

In other words, you mentioned some up-selling of PICCs. I imagine that have an impact of in and of itself eating your ASPs, but on the lower end what happened to PICC prices?

Todd Schermerhorn

Yeah, I think that's right Bob. The 3% is mix, we're up-selling. From a same-store basis I’d say it's probably down that same amount couple of percent.

Robert Goldman - CL King

And then finally, and it’s a bit of a mid-PICC, but still if I take, Todd, your net income and divided by the number of shares I actually get to $1.27 rather than $1.25, and I am thinking that's timing of the share buybacks, but I wanted you to speak to that?

Todd Schermerhorn

Our share hold par our earnings splits, Bob. You go back to the back page and there's a reconciliation of this is issue of participating securities, and I think this occurred since you left the analysis of Bard, and I'll take you back.

We get caught in this FSP for participating securities going back a year-and-a-half ago, and so as a consequence the truth is the front of the income statement does not put its GAAP, but the reconciliation is on the third page of the press release.

Robert Goldman - CL King

I'll review it again. All right thank you, guys.

Operator

We have a question from Douglas Tsao with Barclays Capital.

Douglas Tsao - Barclays Capital

On the PICC business, you just noted that you got a lot of success up-selling this quarter, were there any particular products that stood out in terms of sort of increase in your volumes?

Timothy Ring

Yes. It was really driven by our tip location system, which is quote on our future strategy in this segment.

Douglas Tsao - Barclays Capital

You made a comment, Tim. I think it was on terms of the prevalence of urinary tract infection. One thing that I noticed for (inaudible) payment system also came out last week, or earlier this week. They had some data in terms of the cost savings from urinary tract infection, and it wasn't a very large number, and I was just wondering where you are in terms of seeing? Are you seeing additional pushback in terms of some hospitals trying to go back to the standard follies rather than the anti-infected versions?

Timothy Ring

You could count the number of hospitals that have done that on one hand, quite frankly. What we are really seeing is just that and we're being very successful in converting the hospitals, but I'd also say that there is some pressure on just utilizing fewer catheters in hospitals in terms of trying to control infections.

Douglas Tsao - Barclays Capital

When you think about a patient in hospital, is it sort of revisiting and questioning, do we need to actually use, we need a catheter in the patient and is it really necessary is that sort of, what's going on?

John DeFord

That's exactly correct.

Douglas Tsao - Barclays Capital

The final question that I have is, could you provide an update in terms of the stenting business and the growth that you saw in this quarter?

Todd Schermerhorn

Sure. I'll just get out our notes. We said the total stent business grew about 8% globally in constant currency.

John DeFord

LifeStent, the US growing above 50.

Douglas Tsao - Barclays Capital

LifeStent is still growing above 50? Okay.

Todd Schermerhorn

Yeah, in the US. Yeah.

Operator

We have a question from Brooks West with Craig-Hallum Capital.

Brooks West - Craig-Hallum Capital

I wanted to drill down on a couple of things. In urology, John, you mentioned another double-digit decline surgical [continence], and I wanted to delineate are you seeing a change in procedure volume there, either year-over-year or sequentially? Or is it just the delay in getting the Pro-Lab sling out and do you guys continue to give up some share there?

Todd Schermerhorn

I think there is a little pressure on our marketplace in terms of decreased procedures being elective in nature as they are, but also I think it's a matter of us just losing share to our new products come out.

Brooks West - Craig-Hallum Capital

Are you seeing a significant drop-off from Q4, or just not really, but just general pressure?

Todd Schermerhorn

General pressure and not a significant decrease versus Q4.

Brooks West - Craig-Hallum Capital

On the surgical specialties another great quarter in biologics, do you feel like you are through a lot of the stocking orders and is that now organic growth that you are seeing?

Timothy Ring

I think we are seeing definitely, in cases, we are seeing share builds on our side quite frankly. That's not stocking orders.

Brooks West - Craig-Hallum Capital

And where do you think you're in terms of market share right now? Maybe separating in hernia and breast recon?

Timothy Ring

We won't separate it just because we don’t want to give too much of a roadmap for where we are, but we’d say 15% in aggregate.

Brooks West - Craig-Hallum Capital

Are you seeing kind of equal growth and or is growth rated one to the other?

Todd Schermerhorn

I think we mentioned during the course of the comments that both segments are growing pretty substantially.

Brooks West - Craig-Hallum Capital

Then Tim, you guys have typically done the little tuck-in acquisitions, maybe even favoring some IP acquisitions. Any apatite to do a larger deal. Would you look at, call it, $0.5 billion or $1 billion deal if it was right?

Todd Schermerhorn

Well, that’s been our track record. We look at all things. It's not to say we haven’t looked at larger deals in the past. We just have summary that we're attracted, so, anything that’s kind of available or we think would fit strategically with us, we would approach it first at that level as appose to a dollar amount.

Like I’ve said in the past, we want to roll a big deal out, but it would have to be so strategically compelling that first of all the senior team here would have to be convinced, would have to convince our board, and then when we talk to guys like you, we have to be able to convince on why we did it and how compelling it was.

Brooks West - Craig-Hallum Capital

You just haven’t seen any of those out there?

Timothy Ring

You know, Brooks, it's all about adding value and you get it, and it's when those companies have been around for several years, they're well-known, their equity is generally priced up. It's so much harder to add value at that level of acquisition.

I wouldn't say it's easy, but it's been very nice for us at the low end, where we can attach these technologies, where we add little value to them, we bring and put them into the buy bag, into sales forces, at a good size, and we've just done extraordinarily well with that.

Operator

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

Timothy Ring

Yeah. Thanks very much. We're running a little bit late. Let me just conclude that the way we feel about beyond Q1, we are right about where we told you where we would be when we met with you in December, and we'll see you again at the end of next quarter. Thanks again for taking the time.

Operator

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

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