LDR Holding's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb.27.14 | About: LDR Holding (LDRH)

LDR Holding Corporation (NASDAQ:LDRH)

Q4 2013 Results Earnings Conference Call

February 27, 2014 05:00 PM ET

Executives

Bob Yedid - Managing Director, ICR Inc.

Christophe Lavigne - President and CEO

Bob McNamara - Executive Vice President and CFO

Analysts

Mathew O’Brien - William Blair

Josh Jennings - Cowen and Company

Chris Cooley - Stephens

Matt Miksic - Piper Jaffray

Dave Turkaly - JMP Securities

Operator

Good day ladies and gentlemen and thank you for standing by. And welcome to the LDR’s Fourth Quarter and Full Year 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, today’s conference maybe recorded.

It’s now my pleasure to turn the floor over to Bob Yedid.

Bob Yedid

Good afternoon everyone. This is Bob Yedid with ICR. Thanks for joining us today to review LDR Holding Corporation financial results for the fourth quarter and full year ended December 31, 2013.

On the call today representing LDR Holding are Christophe Lavigne, President and Chief Executive Office; and Bob McNamara, Executive Vice President and Chief Financial Officer. Christophe will start the call with a review of key operating and financial achievements for the quarter and the full year and will [walk] on the company’s growth strategy. And Bob will discuss the fourth quarter and full year 2013 financial performance and our guidance for 2014. Finally, the company will open the call for your questions.

Before we start, I want to touch upon that any forward-looking statements made during the call will be management’s beliefs and expectations about the company’s future results. Please be aware they are based on the best available information to management and assumptions that management believes are reasonable. Such statements are not intended to be representation of future results and are subject to risks and uncertainties. Future results may differ materially from management’s current expectations. We refer all of you to LDR Holding’s quarterly reports on Form 10-Q and other filings with the Securities and Exchange Commission for more detailed information on the risks and uncertainties that have a direct bearing on the company’s operating results and performance -- operating results and performance and financial conditions.

On this call today, we are also going to discuss certain non-GAAP financial measures which we use a supplemental measures of performance and believe these measures provide useful information to investors in evaluating our operations period-over-period.

For each non-GAAP financial measure that we use on this call, we have included a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure in our press release. Please note the non-GAAP financial measures have limitations (inaudible) and should not be considered an isolation or substitute for our financial results compared in accordance with GAAP.

With that I will now turn the call to Christophe Lavigne. Christophe?

Christophe Lavigne

Bonjour and welcome everyone to our conference call. I am pleased to report that LDR’s total revenue for the fourth quarter ended December 31, 2013 reached $32 million compared to $25 million for the fourth quarter 2012 an increase of 28.1%. Our revenue from exclusive technology products grew a robust 32.9% to $27.5 million in the fourth quarter of 2013, while revenue from traditional fusion products increased 5.1% to $4.5 million.

For the full year ended December 31, 2013, our total revenue was $111.6 million, an increase of 22.7% as compared to $90.9 million for the same period a year ago. Our exclusive technology products generated revenues of $92.8 million, up 27.5% versus 2012 and represented over 83% for LDR’s 2013 revenues.

Our product portfolio is based on our exclusive VerteBRIDGE fusion and Mobi non-fusion technology platforms, both of which are designed for application in the cervical and lumbar spine. As compared to existing spine treatment alternatives, these exclusive technology products are designed to be less invasive, offer simplified surgical techniques, promote improved clinical outcomes for patients, and deliver cost effective solutions, rapid use of our cost for the (inaudible).

Our exclusive technology products are the primary focus for our company and we had good results in 2013. The 2 PMA approvals for Mobi-C of both one and two level cervical disc disease indication received in August were among the most significant accomplishments of 2013. That coupled with the completion of our IPO in October should give us the resources to invest in the compelling opportunity for Mobi-C, VerteBRIDGE and our overall R&D efforts.

In spine fusion, VerteBRIDGE technology continues to further penetrate the global market, despite our progress in Mobi-C, let me start by stating that cervical fusion will not go away of course as their condition for which fusion is clinically indicated.

For LDR, [ROI-C, TLIF C] and (inaudible) remain large parts of our business and will contribute to the continued growth of our exclusive technologies cervical product portfolio.

Our exclusive technology lumbar products grew at an impressive 34.7% in Q4 2013 compared to Q4 2012, with both Avenue L and ROI-A being more and more successful in the U.S. market.

We continue to believe that product differentiation depreciation in the lumbar marketplace is one of the keys to our success and that way we will continue to outpace market growth in this segment. I will spend the next several minutes discussing our progress with Mobi-C.

As we have said, we have the unique privilege to introduce a treatment proven to be superior to fusion, the current standard of care for thousands and thousands of American people who suffer from two-level cervical disc disease. Of the (inaudible) 200,000 patients receiving cervical procedures annually in the U.S., Mobi-C has been demonstrated to be a superior treatment at (inaudible) for a significant subset of patients currently receiving two level (inaudible) cervical fusion.

From these indications, we are on track to establish Mobi-C as the new gold standard for one and two-level cervical band spine treatment. At LDR, we are taking this responsibility very seriously and are committed to helping surgeons and patients to understand their options. We are pleased with the early reception to Mobi-C by our surgeon customers. The level of our training activity has been intact as we receive strong demand for our [February] training programs driven we believe by Mobi-C having the first FDA approval for two-level cervical disc replacement.

Through division (inaudible) by both our organization and our faculty surgeons, we were able to train more than 650 surgeons from the date of product introduction in late August through the end of 2013 higher than our prior expectation of 400 to 500 surgeons. We believe that this is a strong signal from the surgeon community, but like this a significant market opportunity for Mobi-C being the first and only cervical disc approved for one-level and two-level disease in the U.S., as well as representing the next generation in cervical disc technology.

To-date we have observed surgeons laboratory Mobi-C’s chemical advantages to promote their practices helping them to function their [best] as one of the leading spine cervical specialist in their region and to attract new patients to their clinical practice.

These surgeons have given TV interviews, issued press releases and [pasteurized] practice website updates and advertisement. This is all very positive news that will help to educate the community of patients on the severity of two-level Mobi-C disc replacement over fusion.

With regards to our volumes, we need more time to understand the potential cannibalization of some of our cervical fusion business. Thus we are seeing less cannibalization of our [ROI-C] sales than we expected as Mobi-C addition increases.

From the sales perspective, our exclusive surgical technology revenue grew 31.8% in Q4 2013 over Q4 2012. We believe that Mobi-C is reinforcing LDR’s position as the cervical spine expert. It will contribute to our increased market penetration in the global cervical market including the fusion cervical marketplace.

Our initial analysis indicates that Mobi-C is an excellent door opening product into spine practices that were not previously customers’ (inaudible). It will also have the pull through effect that may benefit our exclusive VerteBRIDGE fusion technology both cervical and lumbar.

On the clinical study side, the 48 months data from our pivotal clinical trial on Mobi-C was presented at the last annual meeting in October last year. This data will enforce the body of our outstanding clinical results on Mobi-C in both one-level and two-level indication.

In addition, we have completed correction and analysis of the five year data from the pivotal trial on Mobi-C. We anticipate this five year clinical data which is typically the benchmark for surgeons in understanding a device long-term safety and efficacy will be presented at a medical conference before the end of 2014. Currently we are sharing the data with payers as we seek to broaden the reimbursement coverage of two-level Mobi-C.

In sales and marketing, we are pleased that plans are being finalized for the U.S. sales organization for 2014 with more than 190 sales agencies already in place. These agencies more than 80% of them are exclusive to LDR for at least three of our four exclusive technology products, including Mobi-C and our VerteBRIDGE fusion product [LIC] -- or ROI-A.

As we explained during our IPO road show, the availability of our cervical disc is an important consideration for this in different agencies because Mobi-C is the only one on two-level device is [enable] to this group.

We feel that we have been able to attract and retain various currency agencies and spine experts. In the area of reimbursement, we continue to work diligently with payers to obtain national and regional coverage for Mobi-C for two-level possibility. As discussed on our previous calls, approximately $164 million lags are covered for (inaudible) business and there is a legacy in category CPT code.

Mobi-C for 100 procedures is already covered by most of these private and public payers. This last number of current lags and basically in category one, CPT code or (inaudible) replacement, the server consolidation that cervical replacement is a stand out care for the last operation of patients suffering from (inaudible) disease.

Because these healthcare payers already understand the benefit of one one-level cervical disc replacement, we will build upon this foundation and aversively pursue positive coverage for two-level disc replacement. We will communicate with payers our two-level superiority claim, that’s its fusion from the Mobi-C clinical trial.

Our clinical investigators are generating a series of publication resulting in [peer] review interest, as well as Q4 amount physician regroups.

In addition, these investigators have pursue the study, but examining the cost effectiveness of two level cervical disc replacement that with traditional fusion in terms of overall cost to be at care of system. This research has been submitted for publication and we estimate this first economic data will be available in a medical journal before the end of 2014.

As with any new medical device, we are just encouraged that a process which takes time. To-date as expected, most reimbursement is being done on a case-by-case decision with payers. Payers will make a formal review of the (inaudible) to provide the best possible treatment options for their covered lives.

In our view, Mobi-C clearly certifies treatment and coverage based on priority data as compared to traditional fusion. LDR is making progress communicating with payers and we are pleased to announce that reimbursement coverage for Mobi-C has been granted by health center and (inaudible) including for two-level procedures.

These are important milestone and we anticipate additional positive decision in the future. And it’s important I believe that the patient is not, if but when Mobi-C will obtain growth national coverage of two-level procedures. Another important milestone is when we received technically one CPT code or an additional level cervical disc meaning of a treatment of 300 visits. That would be an important step and we expect we’ll benefit the only cervical disc replacement device approved for two-level Mobi-C.

As we look ahead to 2014, our exclusive technology product represents a unique business approximately for LDR. As we communicated in our call and meetings with investors, we want to invest in this opportunity and take advantage of our window of technological, clinical and competitive advantage.

It means that (inaudible) we would invest significant in surgeon training and education. Expanding our phase on marketing organization on a global basis, reinforcing our other organizations through hiring including in our reimbursement group and in this (inaudible) in capital and should be at inventory.

With that I’d like to turn the call to Bob McNamara. Bob?

Bob McNamara

Thank you, Christophe. And welcome everybody to our earnings conference call. Our total revenue for the fourth quarter ended December 31, 2013 reached $32 million compared to $25 million for the fourth quarter of 2012. An increase of 28.1% this growth was primarily driven by strong performance of our exclusive technology products growing 32.9% the $27.5 million.

Meanwhile, our traditional fusion product revenues increased 5.1% to $4.5 million. For the full year ended December 31, 2013 our total revenue was $111.6 million an increase of 22.7% compared to $90.9 million for the same period a year ago. Revenue from our exclusive technology products grew 27.5% to $92.8 million, while revenue from traditional fusion products increased 3.7% to $18.8 million.

We have strong revenue growth in both the cervical and lumbar portions of our portfolio of exclusive technology product. In the fourth quarter cervical revenues from exclusive technology products were up 31.8% year-over-year reaching $17.5 million. The key driver of the cervical product revenues was the strong year-over-year growth of Mobi-C that received a pre-market approval last August from the FDA. Lumbar product revenues from exclusive technology products in the fourth quarter reached $10 million and were up 34.7% over the prior year period, in part due to the FDA clearance of the Avenue L Lateral lumbar device that we introduced in September 2012. The exclusive cervical and lumbar products represented 63.5% and 36.5% respectively of our total exclusive technology revenue for the fourth quarter of 2013.

By geography, our fourth quarter revenue in United States increased 37.3% to $24.9 million compared to $18.1 million for the prior period. Fourth quarter international revenue totaled $7.1 million representing a 3.8% year-over-year increase. For the fourth quarter 2013 our U.S. and international revenue represented 77.7% and 22.3% of total revenue respectively.

In the fourth quarter 2013 our gross margin was 83.2% as we enjoyed strong gross margins from a higher mix of exclusive technology products and revenue mix by geography. Freight costs which are included in cost of goods sold were higher than expected as the demand for Mobi-C mandated the need for high priority shipping of instruments sets in order to cover procedures and in some cases shipping both Mobi-C and ROIC these higher freight cost may continue in 2014.

Moving on to operating expenses, our research and development expenses decreased 2.3% to $2.2 million in the fourth quarter 2013 compared to the fourth quarter of 2012 primarily due to lower IVE expenses and a higher R&D tax credit that gets netted against the operating expense. We expect R&D spending to increase overtime on an absolute dollar basis.

Sales and marketing expenses increased 38.6% to $19.9 million compared to $14.4 million for the fourth quarter of 2012. This reflects an increase of higher sales and marketing expenses for Mobi-C in the U.S. including investments in our sales organizations hiring of additional direct sales management and marketing personnel, extensive medical training workshops and other product launch initiatives. Our general and administrative expenses were $5.4 million in the fourth quarter of 2013 compared to $4.1 million one year ago.

For the fourth quarter of 2013 G&A expenses includes the medical device tax of approximately $237,000. We expect our G&A expenses to continue to increase as we hire additional personnel to support growth of our business and incur higher U.S. medical device excise taxes as our sales increase in the U.S. Additionally we expect to experience higher expenses as a result of being a public company.

Total other income and expense for the fourth quarter of 2013 was $13.5 million, of which $12.9 million was non-cash interest expense including $7.4 million in non-cash expense related to the beneficial conversion of promissory notes and $5.5 million in non-cash accretion related to warrants and discounts on long term debt.

Going forward are only anticipated interest expense will be from our standard line of credit with a U.S. bank and revolving debt with European banks. Net loss for the fourth quarter of 2013 totaled $15.1 million or $0.69 per share which included the non-cash interest charge of $12.9 million just discussed.

So tracking this out year with a loss of $2.2 million or $0.10 per share this compares to a net loss of $2.4 million or $0.52 per share for the same quarter a year ago. Adjusted EBITDA for the fourth quarter of 2013, was $1 million compared to an adjusted EBITDA of $1.1 million for the fourth quarter of 2012.

Now let’s move on to our balance sheet. As of December 31, 2013, we had $56.7 million in cash and cash equivalents with $55.4 million in working capital and $25.3 million in debt. We have repaid portions of our short term and long-term debt and continue to have $18.2 million outstanding under our existing line of credit and the remainder in debt with European bank.

Now I would like to turn to guidance for 2014. We think it is important to put the fourth quarter’s performance in perspective, since the fourth quarter’s results were ahead of our expectations for a number of reasons. First, it is likely that patients with high deductible health plans schedule procedures in the fourth quarter, because they had satisfied their deductibles for the year. Likely, they would incur a lower pocket expenses by having the procedure done in the fourth quarter as compared to the first quarter when deductibles reset.

Second, at LDR we typically see historically more procedures done in the fourth quarter, prior to the holidays as patients have more time off to recover. For the full year 2013 we are confident in our previous expectation of 15% to 16% growth in 2014 year-over-year, which imply the range of approximately $128 million to $130 million in revenues.

And now I would like to turn the call back to Christophe for closing remarks.

Christophe Lavigne

Thank you Robert. To summarize our company delivered strong growth in both our cervical and lumbar exclusive technology products. We continue to focus on the launch of Mobi-C and that is a high priority for the company.

We look forward to continuing to communicate with investors about LDR’s progress. With that review Bob and I would like to take your questions. Operator?

Question-and-Answer Session

Operator

Yes, sir. (Operator Instructions). Our first question will come from the line of Matt Miksic with Piper Jaffray. Please go ahead sir your line is open. Miksic, your line is open please check your mute button. All right so, we’ll proceed to our next questioner then. Our next phone question will come from Mathew O’Brien with William Blair. Please go ahead your line is open.

Mathew O’Brien - William Blair

Afternoon thank you for taking the question. I certainly could start off with the Mobi-C performance here in Q4. And I understand maintenance (inaudible) performance at our Avenue L and ROIC as well, but is it fair to characterize the sales number in the fourth quarter of something around $3 million and with that a function primarily of implants or was there any kind of stocking that we should be aware of?

Bob McNamara

In the U.S., we do not have stocking distributors or sales agents. So every time there is a sale, it is an in sale to the hospital. So, we have no stocking orders in the U.S. Relative to the revenue and volume within Mobi-C, we do not break that out separately. We do look at the cervical business in total though. And you can see the growth numbers associated with that.

Mathew O’Brien - William Blair

Correct. And I think you mentioned a bigger portion of that likely came from or it came from Mobi-C?

Christophe Lavigne

So we had a very good start with Mobi-C in Q4 of 2013.

Mathew O’Brien - William Blair

Okay, great. And then moving over to the surgeon training side I think 650 a pretty impressive number in such a short amount of time. Can you give us any kind of sense for the conversion rates you’ve been seeing so far in terms of when some of the major facilities get back to their practice and then start using it? And then how -- and I know it’s early days but how sticky that’s been so far?

Christophe Lavigne

Yes. I think the answer was in your question. We need a little bit more time to be able to assess the conversion rate. So, it’s clearly something that we will analyze in the coming month. I think that what we try to do is to target these surgeons guide well. But to be very honest, we have received so many requests from surgeons wanted to be trained on Mobi-C, especially due to the fact that Mobi-C is the only cervical disc available to them for two level treatment. But we’ve been very, very busy in Q4 trying to train all these surgeons. So, as I understand, it has been a very, very busy quarter for us. I’m not sure we’ll be able to sustain in this space in the future, but we will continue to invest in training on education.

Mathew O’Brien - William Blair

That’s helpful.

Christophe Lavigne

Yes, maybe one thing to add on that as you noticed on the commercial rate the hospital approval is (inaudible) the process and or classification, preauthorization. So that’s another reason why we need more time to have more detailed information on that.

Mathew O’Brien - William Blair

That’s fair. Just within there, is there any -- do you have any sense for the percentage of that 650 that was for your existing customers versus maybe competitive customers?

Christophe Lavigne

So, I don’t have an exact percentage to answer but what I can say here is that we have been able to attract surgeons who had no relationship with LDR before. We have been able to attract them through Mobi-C. So we believe that this is a very good sign for LDR in 2014.

Mathew O’Brien - William Blair

Okay. That’s certainly well below 50% of that 650 then?

Christophe Lavigne

I don’t have a percentage in my mind, and I don’t want to give you wrong information.

Mathew O’Brien - William Blair

Okay, I appreciate it. Thank you.

Operator

Thank you, sir. And it looks like our next phone question will come from the line of Josh Jennings with Cowen and Company. Please go ahead your questions please.

Josh Jennings - Cowen and Company

Thanks gentlemen. Just sticking on Mobi-C what we’ve heard anecdotally that there is significant demand to be trained and some surgeons are waiting to be trained; is there any way you can accelerate the pace with outstanding 650 by the year end but anything you can do to accelerate that? And how should we thinking about any incremental expenses flowing through kind of in the first half or through 2014?

Christophe Lavigne

Yes, so the first thing and I think that it’s important for all of us to remember that we don’t want to train surgeons, we want to train them well. It means that we want to make sure that they understand the good education for Mobi-C for one and two levels. So, it means that I don’t know want to accelerate the training, if we have to compromise the quality of the training. So what we decided to do is to invest in our training organization, so we have hired qualified people to help us in 2014. We have organized more training events, I would say more local training events to make it easier for surgeons to participate instead of having to travel from New York to California. So, this is what we are in process to do. So, to answer your question, yes we will invest in training on education, and it’s what said last year during our IPO road show because we believe that’s a unique opportunity for LDR.

Josh Jennings - Cowen and Company

That helps. And on the reimbursement front, congratulations on the two approvals for multi level. Can you just talk to us about that process and may be how deeper you would with some other payers in terms of these discussions and presenting the data to them and then looking to having an accelerated approval timeline, positive decision?

Christophe Lavigne

Yes, as I said, we all know that it’s a process, any new technology, it takes time, and today it’s a case per case distribution, but as the time what we are doing now is making sure that insurance company has access to the clinical data on Mobi-C. Remember, we just got approved two months ago.

So most of this companies didn’t have access to the Mobi-C clinical data information when visit their annual (inaudible) review. So what we are doing now is making sure that they have all this information, so they can include that in their next meeting and for sure will emphasize the key priority of Mobi-C over fusion. So that’s what we do. Internally, we also decided to invest more in reimbursement and we have created a reimbursement department in LDR to secure this process.

Josh Jennings - Cowen and Company

And then last question from me, just switching over to the lumbar side, very strong performance here in Q4. You called out Avenue L as a driver, can you talk about other drivers in the quarter and whether or not you believe your lumbar unit’s performance was aided by the launch of Mobi-C, you did talk about some pull through there. Thanks for taking the questions.

Christophe Lavigne

Yes, thank you. Good question. So, in the lumbar area, we had been very successful in Q4, with two products, one is called Avenue L, and it’s our lateral cage; and the other one is called ROI-A and it’s ALIF standalone cage. So, I would say both of them have been very strong for us in Q4. And you are correct about pull through effect but we have seen coming from Mobi-C to ROI-C, but this is to our lumbar VerteBRIDGE range of product.

The benefits we have is when surgeon is using a VerteBRIDGE application, for example in cervical, it’s easier for us to introduce the usage of this technology, VerteBRIDGE technology for our lumbar application. And so we have seen some positive pull through effect in Q4.

Operator

Okay, alright. We’ll go to our next question. Our next phone question will come from the line of Chris Cooley with Stephens. Please go ahead, your line is open.

Chris Cooley - Stephens

Good afternoon and thank you for taking the questions. If I may, can we start with just the surgeon training again? I mean phenomenal job there in the 2013. Could you give us maybe a milestone for maybe what your expectations might be for training this year 2014, so we can may be better gauge our growth expectations for the Mobi technology here in the U.S.? And then I have a follow-up.

Christophe Lavigne

Yes. So, I would answer the question in a different way, because as you know surgeons ask to be trained, we don’t call surgeons to be trained. And so it will be linked to the demand. We believe that we will have a strong demand in 2014 as we have had for the end of 2013. So what we did internally is making sure that we are organized to be able to train more surgeons in 2013, but also as I said before, keeping the same quality of training.

We really want to make sure that these surgeons are trained equally so they all have the same chance of success with Mobi-C. I cannot give you a number now, because I’m not sure like it would be an accurate information that we will be able to use for your model.

Chris Cooley – Stephens

Understood. Thank you so much. And then if I could, just briefly following back up on the reimbursement question there as well, curious especially as it pertains to the [Blue’s] was that two year, I’m sorry, was that multi-year, multi-level indication based off of four year data or the five year data which is yet to be published, I’m just kind of curious, normally we have to see that five year data before we start seeing payers in the establish or formal code, I’m just kind of curious what the color behind that discussions? Thanks.

Christophe Lavigne

Yes, so as we know it was based on the two years data what we see for two-levels, you are correct, it’s for multi-levels. I think that if you see all the -- if you take all the evidence on cervical disc by using the 1-Level I mean you will see that one of the benefit of cervical disc is that you reach the success rate just right after the surgery. And you can sustain this success rate at 3 years, 4 years, 5 years or even more. And I believe that payers start to understand that. They see the benefit, the immediate benefit of cervical disc compared to fusion especially for tow levels. And when we see that 2 years, we have been able to sustain that with the superiority claim. Remember we have the superiority claim on the fusion, meant to better treatment on fusion. That’s I believe they decided to turning positive coverage from Mobi-C levels.

Chris Cooley - Stephens

Understood. And if I may squeeze one more and I’ll hop back in queue. I realized it’s early days still but can you give us any level of detail on the mix for Mobi-C, here in the states between single level and multiple level use here in the early adoption phase? Thanks so much.

Christophe Lavigne

Yes. So, it’s a little bit too early to tell. But I would say we have seen so far what we were expecting from Mobi-C on the mix between 1 and 2-Levels.

Operator

Thank you. (Operator Instructions). And it looks like our next question will come from Matt Miksic with Piper Jaffray. Please go ahead. Your line is open.

Matt Miksic - Piper Jaffray

Hi, good evening. Thanks for taking my questions. I had one, surprisingly, not surprisingly to follow-up on Mobi-C, the progress we are making there. One Christophe, if I could on your comments about the cannibalization of your exclusive cervical lines like ROI-C I think you mentioned that you were not seeing that degree of cannibalization that you were planning or were thinking could happen is more favorable than you expected. Could maybe talk about does that mean I mean were you expecting those revenues to actually be kind of to be sideways to be down and they were better than that. Can you give us some directional sense of what you were expecting what you are seeing without getting too far into quantifying the numbers?

Christophe Lavigne

Yes. So as I said, we need a little bit more time to validate this first analysis. But to answer your question I think there are two separate aspects. The first one is as I always said and as you know there is very good indication for fusion. And for these indications ROI-C we believe is the best solution.

So we took the assumption that Mobi-C will potentially cannibalize some of the indication where ROI-C was not appropriate or where fusion will be most appropriate. But what we have seen also is that we have been able to attract new customers through Mobi-C training session and when surgeons realize the benefit of ROI-C when they see for their fusion case, we gain not only customers with Mobi-C, but we gain also customers on ROI-C.

And at the same time with our existing base of customers we can secure these surgeons as an LDR user. And one aspect I think very important is this surgeon attract more patients to their practice when they can promote Mobi-C being part of their treatment option. And it means this surgeon can increase their activity in the cervical business, which means that we can also increase our business distributions on Mobi-C and ROI-C. Now we need more time to sanction this analysis, but this is the first takeout.

Matt Miksic - Piper Jaffray

That’s great. That’s very helpful. And when you speak of some new adoption training, I think you have mentioned in the past that your initial thinking was that you were going to expand the market, expand the adoption of cervical disc through your current customer not yet using of cervical disc. Can you talk a little bit about even though it’s early maybe what’s your, do you think that you are having more success with existing players in cervical disc to users of say, some more competitive devices or whether you are seeing more adoption that you are seeing any evidence its only one way or the other?

Christophe Lavigne

No, we have seen both. I would say if I try to separate the two categories on our existing customers clearly that strong benefit of Mobi-C (inaudible), due to this severity trend and this is obvious as a surgeon they have to refer the best treatment to their patients.

And on the new customers coming to us to LDR, they come first because we have the only two-level disc approved in the United States and this will bait on the severity trend. But what we see from them, from these new customers is that, they are not only using Mobi-C for two-levels, but they are using Mobi-C for one-level and two-levels applications.

Matt Miksic - Piper Jaffray

Excellent. And finally on that two-level success that you are seeing so far and the approvals that you’ve received, can you walk through us again, you’re talking about the regional boost in those income range. Then you also talk about the process for establishing that code. In the interim maybe just can you remind us how these surgeons are getting paid in a region where it’s covered, but there is no code? How that being gentle and is that an attractive arrangement for surgeon as you’ve experienced it so far, understanding it’s still anecdotal and very early?

Christophe Lavigne

Yes. So reimbursement is a difficult subject. So I will try to summarize very high level. Today when surgeon is doing one-level cervical disc there is technically one CPT code. So there is [RVUs] associating with appointment payment of a surgeon. And as you may know the payment today associated with one-level cervical disc is a little bit less compared to fusion for one-level.

On the two-levels, there is a temporary code as of today. And what we hope is that a new code will be created means technically one code for two-levels, for the additional level means for two-level application, because if you have these category one code RVUs we’ll get specific with it, means that surgeons will know how much we get paid when they do two-levels. Did I answer your question?

Operator

Okay. We’ll go to our next question Dave Turkaly with JMP Securities. Sir your line is open, please go ahead.

Dave Turkaly - JMP Securities

Thanks and thanks for the initial guidance. So I guess if I could push you a little there, quickly in because lumbar has been strong as well you look at 15% to 16% for the company. I was wondering if you might be willing to help us a little bit. How you see that breaking out between cervical and lumbar?

Christophe Lavigne

How we breakout the revenue between the two?

Dave Turkaly - JMP Securities

The growth, yes 15% to 16% for the year, even directionally, realizing cervical is much bigger, what are you expecting for this to franchises?

Christophe Lavigne

Yes, I think we won’t break out the growth specifically between cervical and lumbar, I think which you can look at, if you think about the lumbar the lower numbers (inaudible) over base. And so you taken out into consideration. I think initially if you look at the cervical, why is the growth as high as it is obviously Mobi-C plays into their own business, introducing and launching that products in the U.S. in the fourth quarter.

So I think you will have to take that in the consideration, but we don’t specifically breakout the growth rates for both of those areas.

Dave Turkaly - JMP Securities

So is it fair maybe guys at lumbar off smaller base might be higher than the total revenue range or not even there?

Bob McNamara

Well, I don’t want to provide the growth rates for that particular area, but I think if you do have a smaller base, there often time the growth rate is higher.

Dave Turkaly - JMP Securities

Thank you. And then on the again minus on pricing for Mobi-C. Again is that a premium product today and if maybe ballpark percentage of how it compares to the other discs that are out there?

Christophe Lavigne

Yes, so as you know this, where already sold in the United States (inaudible) there is a kind of market price, already established by our competitors. So is there a premium for Mobi-C I think I saw reverse application, we have a premium, because we can sale two products instead of one. On the (inaudible) as expected and we have been able to protect our sphere based on the quality of the clinical that we have on Mobi-C.

Dave Turkaly - JMP Securities

And 1-Level kind of in line with the group?

Christophe Lavigne

Excuse me.

Dave Turkaly - JMP Securities

In the 1-Level is kind of in line with your peers in terms of ASP?

Christophe Lavigne

Yes, most of the time. Now what we have said because we have the premium over fusion because it’s a bit better than treatment. And we are very competitive compared to other disc.

Dave Turkaly - JMP Securities

Great. And then last one for me just obviously lot of spine companies talking about pricing maybe getting a little better. Do you guys know what pricing was as a contribution for you either in the fourth quarter and the entire year of 2013 whether that net positive I mentioned or can you even quantify that in any level?

Christophe Lavigne

I am sorry. Could you repeat the question?

Dave Turkaly - JMP Securities

Sure. A lot of your peers talk about pricing in spine and there has been some challenges lately realizing that your fair amount fashion rate with some premium products I imagine you’re not seeing that but do you know even at ballpark what was the pricing contribution to your revenue growth in either the fourth quarter or the full year of 2013 anyway to get that model?

Bob McNamara

Yes. So, relative to pricing pressure because we do have exclusive products, because they are selling at a premium. We haven’t seen the pricing pressure that say (inaudible) or commodity products would have because those are all based off of pricing competition whereas ours are based off of technology and superiority to what’s out there today.

Dave Turkaly - JMP Securities

Okay. Thanks.

Operator

All right. Our next question will come from Chris [Blackman] (inaudible) Capital. Please go ahead. Your line is open.

Unidentified Analyst

Yes. Can you give us an update on the amount of independent solo agencies you have signed and how many sales reps that represents please? Thank you.

Bob McNamara

We have signed -- at the end of the year we had over 190 sales agencies in place. And they can have anywhere from they might have one person they might two, they might have 10 people selling the product. So it really depends on the size of the agency but 190 over 190 independent sales agencies.

Unidentified Analyst

Okay. And is there a number that you would see that growing to reach saturation or like…

Christophe Lavigne

I think I can’t answer this question what we want it cover one of the person of the United States and it’s complicated today, today we are just covering I believe health of the entire country, so we have lot of room to grow our distribution in the future.

Unidentified Analyst

Excellent thank you.

Operator

Thank you, sir. (Operator Instructions). Presenters, currently I am showing no additional phone questions in the queue. I would like to turn the program back over to management for additional or closing remarks.

Christophe Lavigne

Okay thank you for participating in today’s call, we look forward to addressing you on our progress on the first quarter call in May.

Operator

Thank you gentlemen and thank you ladies and gentlemen. This does conclude today’s call. Thank you for your participation and have a wonderful day. Attendees you may log off at this time.

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