LipoScience's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Mar.10.14 | About: LipoScience (LPDX)

LipoScience, Inc. (NASDAQ:LPDX)

Q4 2013 Results Earnings Conference Call

March 10, 2014 4:30 PM ET


Bob Yedid -ICR, Investor Relations

Howard Doran - President and CEO

Lucy Martindale - Executive Vice President and CFO


Dave Clair - Piper Jaffray

Dan Arias - UBS

Bill Quirk - Piper Jaffray

Paul Nouri - Noble Equity Fund


Good day, ladies and gentlemen. Thank you for standing by. And welcome to the LipoScience Fourth Quarter and Full Year 2013 Financial Results 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, this conference call is being recorded. I’d now like to turn the conference to our host, Mr. Bob Yedid of ICR. Sir, you may begin.

Bob Yedid

Thank you, Rack. Good afternoon, everyone. Welcome to LipoScience’s fourth quarter and full year 2013 financial results conference call. Before we begin, I will read the following Safe Harbor Statement.

Statements or comments made on this conference call maybe forward-looking statements, may include but are not necessarily limited to financial projections or other statements regarding the company’s plans, objectives, expectations or intentions. These matters involve certain risks and uncertainties.

The company’s actual results may differ materially from those projected or suggested in any forward-looking statements due to a variety of factors which are discussed in detail in the company’s filings with the Securities and Exchange Commission.

Joining the call today are Howard Doran, President and Chief Executive Officer; and Lucy Martindale, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will turn the call back to the operator for your questions.

It is now my pleasure to turn the call over to Howard. Howard?

Howard Doran

Thanks, Bob. And welcome to our call today to review our performance for the fourth quarter and full year 2013. Before we get into the review of the fourth quarter, I want to say, I am very excited to be at LipoScience and have the opportunity to lead the company.

We have the best-in-class technology platform, coupled with the only FDA cleared test for LDL particles, a test that enables physicians to more precisely manage the patient's risk of cardiovascular disease.

Clinical evidence indicate that LDLP by the NMR LipoProfile test is superior to the older LDLC or LDL cholesterol measurements in predicting cardiovascular events, especially in discordance patients.

This provides our company with an enormous near-term opportunity to change patient management with the NMR LipoProfile test to cost effectively reduce cardiovascular events and to approve lives one patient at the time.

Today I will confine my remarks to the following topics. Early observations after my first 30 days on the job, a brief review of the state of the clinical evidence supporting use of our NMR LipoProfile test, our evolving communications with insurers, our progress in R&D, our model for future success and finally, my thoughts on financial guidance.

Before that, however, I want to thank Bob Greczyn who served as Interim Chief Executive Officer for the last six months. I am pleased to take the range from Bob who remain on the Board of Directors having been an important member of our Board for over three years. In addition, Bob has agreed to chair a new Board committee that will actively support our efforts to expand coverage and reimbursement.

What is exciting to me about the opportunity at LipoScience are the parallel to my experience at Cytyc. I am motivated by the challenge and changing an entrenched standard of care and providing a better solution that improves patients’ outcomes and save lives.

At Cytyc we dramatically improved outcomes and reduce the incidence of cervical cancer, with both of the ThinPrep Pap Test and the Cytyc Automated Imaging Systems, we changed the 50-year old standard of care that was widely available, low cost and which many believe was adequate,

I look forward to working with the team at LipoScience to having a similar impact on cardiovascular disease by making our NMR LipoProfile test the standard in managing patients with cardiovascular risks and improving patient outcomes.

In my first month of CEO, I've had the pleasure of spending time with the LipoScience Board. I’ve also participated in our sales meeting, a number of meetings with managed care plan and have begun development of new relationship with our team here in Raleigh. I have also spent time in the field with our cardiovascular specialist and plan to do more that in the near future.

Among my initial impressions are the following, first, we have a very solid scientific foundation with published evidence-based society guideline and recent cost effectiveness data supporting more routine use of our test.

Second, we have a team dedicated to and capable of changing an entrenched standard of care.

Third, we have a clear model for success, we know that in situations where we have an in-network lab partner and reimbursement, our sales efforts are very productive and market conversion to our tests can take place.

Fourth, our FDA cleared Vantera platform allow further proliferation of the NMR LipoProfile test and the introduction of additional high value assays in the future.

And fifth and finally, I believe that we need to be committed to unfocused on dramatically changing the rate of adoption of our test. To that end, a significant amount of my time will be spent working very closely with the commercial team to charter a more specific strategy that focuses on accelerating physician adoption, improves lab access and broadened managed-care coverage.

I'm very impressed that during 2013 the way that the evidence supporting the use of LDL particles rather than cholesterol or LDLC continued to build. There were two noteworthy society recommendation update in 2013. First, was the publication of the 2013 American Academy of Clinical Endocrinology Consensus Statement that provides recommendations for specific LDLP targets for at risk patients.

Following that in November of 2013, the American Heart Association and American College of Cardiology published new practice guidelines on the treatment of blood cholesterol to reduce atherosclerotic cardiovascular risk in patients.

These new AHA/ACC guidelines represent a substantial change from prior guideline recommendations and are very good news for LipoScience and our NMR LipoProfile test.

The new AHA/ACC guidelines clearly recommend measuring lipoprotein to assess therapeutic response and adherence to therapy. And we believe there are substantial clinical evidence that measuring LDL particles in a superior way to assess response and adherence to therapy this makes the use of NMR LipoProfile test entirely consistent with these updated recommendations.

These two new guidelines plus prior publications continue to encourage physicians to manage patients with cardiovascular disease by regularly measuring lipoprotein levels. The clinical evidence demonstrates that measuring LDL particles provide a superior management tool for physicians treating patients with cardiovascular risk.

Let me repeat that for you, the clinical evidence demonstrate that LDL particle measurement offered by the NMR LipoProfile test will continue to be used as an improved and more accurate measurement of LDL, especially one that has been shown to be superior to older LDL cholesterol tests in managing patients with cardiovascular risk.

Let me now comment on reimbursement. We've been actively discussing with managed-care organization the emerging clinical and economic data that further supports utilization of LDL-P for the management of patients with CVD risk.

As mentioned on our last conference call, the real world outcomes data from the WellPoint Anthem database demonstrated that there was approximately 25% yearly reduction in cardiovascular related events over the three years of study when patients were at goal for LDL-P compared to patients who were at-goal for LDL-C.

Not only is this a highly significant finding but importantly one that was achieved in a cost-effective way in reducing cardiovascular events. The overall study findings have been accepted for presentation at the upcoming ACC meeting later this month and have also been submitted for a peer-reviewed journal for publication.

Using these results, our conversations with insurers have become more focused and aligned with their interests. As a result, I believe we will be successful in establishing broader and more consistent reimbursement.

We believe that the combination of the weight of the clinical evidence in support of LDL particle measurement is highlighted by the two recent guideline publications along with the WellPoint Anthem data findings provide payers compelling reasons to allow coverage for the NMR LipoProfile test. We will be bringing that message to insurance companies and payer decision-makers during every interaction.

In R&D, the development of our diabetes risk index test continues to be a top priority as we complete our product development activity and enhance our efforts to build market awareness. Our Diabetes Risk Index uses proprietary NMR-derived biomarkers to determine the patients’ risk of developing type 2 diabetes. The DRI test is designed to stratify the risk of patients with intermediate glucose levels who stand to benefit the most from targeted risk reduction treatment strategies.

Abstracts at both the upcoming ACC meeting later this month and the American Diabetes Association meeting in June will describe the clinical findings from two large five-year observational studies. We are strongly encouraged by the results in anticipating, committing a full manuscript to a peer-reviewed journal by midyear.

As we reported before and as I have observed personally, we have a model for success upon which we can build. As I experienced in my days with Cytyc Corporation, it is clear to me that in markets where we have both strong in-network lab support and managed-care coverage such as those in Alabama, North Carolina and Georgia, our direct sales efforts have an immediate, measurable and sustainable impact in creating physician demand.

We are able to convert a sizable portion of these markets from other cholesterol test to the NMR LipoProfile test. We are convinced that as we create more of these high-growth situation with strong in-network lab support and broad insurance coverage, we can significantly accelerate physician adoption on our way to creating a new, improved standard of care. This will be my immediate focus along with our commercial team. And I look forward to reporting successes to you on future costs.

Before I turn our call over to Lucy for a detailed review of our financial results for 2013, I'll start with a brief topline review and give you my thoughts on financial guidance. The number of NMR LipoProfile test ordered in the fourth quarter of 2013 was approximately 511,000 and increase of 4.4% over the fourth quarter of 2012.

In contrast to this increased test volume, total revenue in the fourth quarter of 2013 was $12.7 million, a decrease of 6.2% compared to fourth quarter of 2012 due to lower contracted pricing and channel mix. For the year 2013, the number of NMR LipoProfile test performed was approximately $2.1 million, a record for LipoScience, an increase of 6.1% over 2012. During 2013, we generated total revenues of $52.4 million, down 4.4% year-over-year again due to lower contracted pricing and channel mix.

With respect to financial guidance, at this time, we were providing revenue guidance for the first quarter of 2014. The reason why we be limiting our guidance at this time to the current quarter rather than the full year is that there are a number of external factors affecting our test volumes, both positively and negatively.

On the positive side, as I said we're working on solidifying our partnerships with more full service in-network lab and working with these labs to a new managed-care contracts and improve physician office adoption of our test. Essentially we are replicating the model for success I described earlier.

Counterbalancing these initiatives, however, our recent decision by some managed-care plans to move business away from out-of-network lab who are also our customers, while continuing their pressure on physicians to ensure appropriate test utilization and on lab to provide lower pricing. I'm very confident that we will have the clinical and cost-effectiveness evidence to drive increased utilization with our lab partners at acceptable price levels.

Although the impact created by the insurers in moving away from out-of-network lab providers make timing of our return significant, predictable growth in test volumes somewhat uncertain. It will happen and I'm confident that we can and will return significant growth we've experienced in the past.

However after only 30 days in my position, I am not able to predict the timing of that return to a significant growth with confidence. As a result, I believe it is more prudent to provide guidance for Q1 now and to update investors as we have more information and greater confident in our predicted growth rate as we progress through the year.

With that, I will turn the call over to Lucy then we'll take your questions. Lucy?

Lucy Martindale

Thank you Howard and good afternoon everyone. I’d like to start of by walking through our 2013 fourth quarter and full year financial results and then provide our revenue outlook for the first quarter of 2014. During the quarter, volumes of the NMR LipoProfile test increased by 4.4% to 511,000 units compared to Q4 2012 and were slightly higher compared to Q3 of 2013.

Fourth quarter total revenue was $12.7 million down by 6.2% compared to last year and revenues for our NMR LipoProfile test were $12.2 million, down 4.6% from Q4 of 2012. For the full year 2013, unit volume of the NMR LipoProfile test rose by 6.1% over the prior year 2.1 million units -- to 2.1 million units.

For 2013, total revenue was $52.4 million, down by 4.4% year-over-year. NMR LipoProfile test revenue was $50.4 million, down about 3% compared to last year. While we experienced unit growth for both the fourth quarter and the full year, the change in average selling price, or ASP, of the NMR LipoProfile test drove our overall revenue performance lower. The ASP of the NMR LipoProfile test decreased to 8.6% in the fourth quarter and decreased 8.3% for the full year.

Approximately 70% of the ASP change is attributable to certain lab partners, achieving volume thresholds that resulted in lower contracted pricing, and also contributing to the ASP change is the continuing channel mix shift, as physicians order tests through lab partners versus sending orders directly to us.

With respect to our channel mix, in 2013, 2.8% of our volumes were direct compared to 4.7% in 2012. As Howard mentioned, there is greater scrutiny by all payers on the number and the cost of diagnostic tests. Moreover, certain managed care plans are asking physicians not to use out-of-network lab services due to their typically higher costs and instead to use in-network laboratory services.

Other revenues include both ancillary and research components. For the full year, ancillary revenues were $0.9 million compared to $1.7 million last year, and this is due primarily to the lower ancillary volumes ordered directly by physicians as our channel mix shift.

Gross margin in the fourth quarter of 2013 was 79% compared to 82% in the prior year period. For the full year 2013, gross profit was $41.6 million compared to $44.7 million in the prior year, a decrease of 6.9% and primarily a result of the lower year-on-year ASPs. Gross margin in 2013 was 79.5% compared to 81.6% in 2012, consistent with our estimates.

Sales and marketing expenses for the fourth quarter of 2013 were $6.6 million, up 17.5% as compared to $5.7 million in the prior year quarter. For the full year 2013, sales and marketing expenses increased by 23.8% to $27.7 million or 52.9% of revenues, and this compares to sales and marketing expenses of $22.4 million or 40.9% of revenues in 2012. And the majority of the increase costs were related to our field sales organization expansion during the year.

Research and development expenses during the fourth quarter of 2013 were $3.1 million, a 21% increase compared to $2.6 million in the prior year period. For the full year 2013, research and development expenses were $12.7 million or 24.3% of revenues compared to $10 million or 18.3% of revenues in 2012, and the increase is primarily due to higher staffing levels and associated operational and allocated costs.

General and administrative expenses for the fourth quarter of 2013 were $2.5 million as compared to $2.6 million for the fourth quarter of 2012. And for the full year 2013, G&A expenses increased to $11.9 million or 22.6% of revenues from $10.4 million or 19% of revenue last year. The majority of cost increase was $1 million in the new U.S. medical device excise tax that became effective in January 2013 and applies to the sales of our NMR LipoProfile test. Additionally, we incurred higher professional fees primarily as a result of becoming a publicly traded company.

In 2013, our employees and management team remain focused on managing our operating expenses within plan and we ended 2013 with a net loss of $12.5 million compared to net income of $1.3 million last year. At the end of December, we had cash and cash equivalents of $49.6 million and $15.8 million of debt.

From a cash flow perspective, we used $10.2 million in cash from operations during the full year of 2013 and we spent approximately $4.6 million of capital expenditures. We generated $39.7 million in cash from financing activities, which was primarily attributable to the net proceeds from our IPO in 2013.

As Howard stated earlier, we are committed to overcome the challenges associated with the changing healthcare reimbursement landscape and return the business back to a path of steady and sustainable growth. At the same time, we are continually reviewing our operating expenses to ensure that we are allocating our resources to the areas that will have the greatest benefit to the business.

We have 66 sales territories during Q4 of 2013. We regularly evaluate our sales territories and realign in areas as needed to best support our business. As a result during 2014, we will operate with roughly 60 territories and for the remainder of this year, we will continue to execute on increasing physician office demand for the NMR LipoProfile test, expanding our relationships with in-network labs and working to increase the number of managed care plans that cover the NMR LipoProfile test.

With our focus on these key objectives, we are only providing first quarter revenue guidance. At this point in the quarter, we are forecasting revenues at approximately $12.2 million and volume levels of approximately 500,000 tests. The number of patient visits to physician offices has been negatively impacted by weather this quarter.

Our revenue and units guidance takes this into account and we expect that the ASP percentage change will be 6% to 7% lower than the first quarter of 2013. From a cash flow standpoint, we extended the interest-only period of our existing term debt by one year through January 2015 to help position the company to avoid meeting an additional capital infusion in the next two to three years. And this amortization period represents an extension of one year for interest-only and has a positive impact of $5 million in cash for 2014.

With that, I would like to turn the call back to Howard for closing remarks.

Howard Doran

Thanks, Lucy. To summarize, I am excited about the opportunity at LipoScience to change the standard-of-care by which physicians can manage patient’s risk of cardiovascular disease. Clinical evidence indicates that LDL-P body NMR LipoProfile test is superior to the older LDL-C measurement in predicting cardiovascular events, especially in discordant patients.

We are looking forward to the future publication of the outcomes data from WellPoint Anthem that demonstrates the meaning reduction in cardiovascular events, resulting in a net savings for the healthcare system.

This health economics status should be a powerful tool to drive managed care coverage and to increase physician acceptance of our test. We look forward to continuing to communicate LipoScience’s progress with our investors.

With that, Lucy and I would like to take your questions. Operator?

Question-and-Answer Session


(Operator Instructions) And our first question comes from Bill Quirk of Piper Jaffray. Please go ahead.

Dave Clair - Piper Jaffray

Hi. Good afternoon, everybody. It’s actually Dave Clair in for Bill. First question for me, I know you don't want to give guidance beyond the first quarter here, but is it safe to assume that you’re kind of looking at this as a bottom with increases going throughout the year?

Howard Doran

Dave, this is Howard. I think we're going to stick to what we’ve given out, which is guidance for the quarter. When we talked about headwinds in the marketplace what we’re really referring to is, we’ve had quite a few payers who have really gotten more stringent and more diligent, and really trying to push testing through the proper and appropriate channel for their plan.

And what that basically means is they sell these policies out to the clinicians and then the clinician staff. And we have to go out and find those clinicians and resell them on the right message, make sure they’re targeting the right patients and they are pushing it through the right laboratory channel. And that also helps us with the managed care companies look favorable towards us which hopefully will help us with extended coverage.

But the challenge is understanding how much of that business will decline as opposed those clinician stopping versus the new clinicians that we’re bringing on board simultaneously. So we really are going to stick to what we provided today, which is only guidance for the quarter.

Dave Clair - Piper Jaffray

Okay. And then CMS is doing a review of the test on the clinical lab fee schedule, do you guys see any risk there on kind of the payment review, that’s going on?

Howard Doran

We have Tim Fisher, who is assisting with a lot of our managed care activities. He is our COO and he is joining us for the Q&A. I’m going to throw that question to Tim.

Tim Fisher

Hey, Dave, we actually -- there was a new fee schedule that came out that just determined the year and that we are currently reimbursing its holding, it’s at I believe $43 in change. And we know there’s always review policies going on within the CMS schedule, but at this time we believe we have -- that the current rate is appropriate and that we don’t see any significant changes in near future.

Dave Clair - Piper Jaffray

Okay. And in terms of sales and marketing expense in the quarter, why was it -- given revenue was basically flat sequentially, what was the downtick there?

Lucy Martindale

Sales and marketing expense for the quarter, most our field force represents the vast majority of expense, but there are program expenses that can be irregular during the year and those were lower during the quarter.

Dave Clair - Piper Jaffray

Okay. And then just one last one for me, but you alluded to a weather impact is included in your 1Q '14 guidance, which you feel to quantify what you’ve kind of baked in there?

Lucy Martindale

Yes, Dave. We are estimating at this point the weather impact is roughly 2% to 3% of our volumes.

Dave Clair - Piper Jaffray

Okay. Thank you. Very helpful.

Lucy Martindale

Thank you.


Our next question comes from Dan Arias of UBS. Please go ahead.

Dan Arias - UBS

Yes, thanks. Hi, guys. Howard, can you just talk to the selling experience right now and how your sales force is performing? And I guess, as you look at what you have to work with now that you are in your seat. Do you feel like the reps are properly incentivized and have the training that they need at this point?

Howard Doran

Dan, thanks. We’re asking to do some different things, one is we are happy to have them go out each and every day and not only look for new customers and new clinicians to adopt our tests, but also they need to be going back to in certain markets where these managed care letters have come out to go back and reinforce to make sure that if the physician is stopped due to these policies that get them restart, so we're really asking them to kind of try to grow and kind of protect.

And the challenge of that right now is as you believe that many of our territories are closing new clinicians each and every day, but in the backend we have some of these policies that are coming into play. So I think what we’re really trying to -- I’ll say it again to retailer the message is we want to – we’ve simplified our marketing materials to really identify the patients that we’re talking about, the benefits of our tests, I think, have been greatly simplified for the clinician. So I think it’s easier to have the conversation.

The second is the right target. Again, utilization is being looked at not just at the laboratory level but at the right patients being managed with our test. So we’re making sure that we’re spending time on the right target. We are spending an enormous amount of time making sure that clinicians know who the network providers are that service their office to make sure that test goes to the right channel. And we're doing this for multiple reasons, one is we think it will add stickiness to the business once we earn it.

But secondly, we’re sharing that same message with the payor and we really want to be partners with them. And we think that will help in some of the expanded coverage opportunities that we’re shooting for.

Dan Arias - UBS

Okay. And just on the payor front, part of the problem in the past has been or present has been that you are being classified as a novel biomarker test that's probably in your mind and a lot of people’s mind not the way to look at it. Is it fair to say that you feel like you’re starting to make progress in changing that toward clinical mindset or is that something that’s going to take a little bit in terms of showing meaningful results as it relates to ordering patterns or as it relates to coverage patterns?

Howard Doran

Yeah, I think, couple of things. One is the whole approach to managed-care has been retooled over the last six to nine months. And frankly, for those reopening the door, that’s one of the first thing that have to be cleared up. The way you're looking at our test is actually should be viewed as differently. I think because of all the guidelines that have come out, the payor is trying to figure out this landscape a little bit.

So having the age consensus guidelines that actually gave a target of therapy associated with our test and in combination with being able to share the preliminary data of the health quarter findings has been very impactful. So I think the way we're approaching them is different. I think the fact that we have new data and new outcomes information has gone extremely well.

Do we have a win yet? No, but I would say that we’re pleasantly surprised with the willingness to continue on the conversation years after some of these policies were made. And the fact that they're very open about our learning more and we’re getting to places in further down that path than we have in the past. So we’re encouraged by the progress, but we have to get some wins before we get some momentum.

Dan Arias - UBS

Okay. And then maybe one for Lucy. Lucy, just looking at the territories that you are in and the way the last quarter shaped up versus this quarter, can you comment on the declines in the territories that you saw last year? I think it was roughly half of them. Any data on whether or not any portion of them are starting to turn things around?

Lucy Martindale

So we had -- so obviously we had slight growth in Q4 over Q3 and we had a smaller percentage of our territories that had decline in performance in Q4 as compared to Q3.

Howard Doran

Dan, I am just going to throw out a couple of more things. One is, again it goes back to I do believe we have large percentage of our sales organizations closing the docs. Unfortunately, we are losing some again on the backend just as fast and some of the flatness. But in regards to the numbers, we are going to budget 60 territories through the year.

I know in the past when we were in a ramp situation of new hires and so forth, a lot about productivity was being asked about. Right now the biggest thing that’s challenging us is this kind of churn of doctors stopping and then restarting. So we’re going to -- from this point forward, we are just going to talk about the amount of budgeted hedge we have which is 60.

We’ll have normal attrition like any other diagnostic company would have that's going to cause that number to vacillate a little bit but we are going to go full year for this 60 if we make any investment that’s different than that, we’ll certainly let you know. But I don’t think that a few hedge makes a difference one way or the other on our ability to grow our business or not. So we are going to stick with 60 for the balance of the year.

Dan Arias - UBS

Fair enough. Okay, thank you.

Lucy Martindale

Thanks, Dan.


Our next question comes from Bill Quirk of Piper Jaffray. Please go ahead.

Bill Quirk - Piper Jaffray

Yes, hi. So I guess this bill on for Bill this time around. Good afternoon, everybody. Welcome, Howard to LipoScience.

Howard Doran

Thanks, Bill.

Bill Quirk - Piper Jaffray

They went through a number of our questions but just few more from me. And specifically just thinking about the out-of-network impact and that's having in your volume. Is there any way to quantify what the effect of some of these payors coming down on the docs trying to progress?

Howard Doran

Yes, I will answer that two ways. One is we believe the impact of that segment is about 30% to 40% of our business. And I also want to be real clear that we want to support all of our customers. The challenge with doing that in all market is the vigilant that the payer has chosen in certain markets where they basically said, you can’t use this channel anymore. And that's where have to kind of order our strategy and make sure that again we provide the right message to resell the clinicians for the right-targeted patients, for the right channel or lab and again that helps us on the managed care front.

So I wanted to be real clear that we will continue to support all of our customers but the payer is making us certainly behave differently in certain market because of these policies but we want to make sure that the right test is provided to the patients that need it. So we will have to adjust in those areas but right now our exposure of those that we would consider in-network versus out is about 30 to 40 and most labs have some portion of their business that's in-network and some that’s out. So it’s hard to get too granular but we think that's a pretty good range for you to be thinking about.

Bill Quirk - Piper Jaffray

Understood. And then you made reference to DRI and some data that is going to be released for the observational study that is going to be released here at ACC. Can you just talk a little bit about timing from a marketing standpoint for that actual product?

Howard Doran

Yeah. We certainly still have some more development work to do in the second half of the year, as well as publications et cetera. And what I would say is by year end what we plan on doing is working with some key [K] (ph) wells, many of which we have had in recently for forearm and really target our initial lab developed cast to those handful of [K] (ph) wells in their institutions to get some use of the tool, give us some feedback, but more importantly, a jump towards our publication strategy to assist and make sure that is stronger before we do a full commercial launch.

Bill Quirk - Piper Jaffray

So which part do you thinking more like 2015 then, Howard?

Howard Doran

Certainly, we wouldn’t have any revenue this year for…

Bill Quirk - Piper Jaffray

Okay. I understood. That's fine. And then last question for me is and you are recognizing that, obviously, LipoScience that long? But we have had obviously some changes at the top of leadership structure, 2013, certainly didn’t end I think the way everyone wanted to, everyone thought it was at the beginning of the year? And so can you talk a little bit about just employee morale, maybe within the sales team and just kind help us think a little bit about the messaging that you are giving internally?

Howard Doran

Yeah. That's a great question. I mean, to be honest, I didn’t know what to expect when I arrived, because the interview process itself obviously cut me far remove from any day to day employees within the organization.

So I really did comment a little bit blind on those facts. What I can say is that I have been pleasantly surprised. I think we have a team here that really cares about this technology and really believe that it can do exactly what I have experienced in the past, which has taken an entrenched standard and changing it.

So I really see that within the walls here in Raleigh. I did have just as timing would have it, I did have a chance to participate in our national sales meeting where we are rolling out some of our new simplified materials and again focusing on right message, right target, right channel.

And again just pleasantly surprised by the enthusiasm, I think they understand, I was trying to share with them some of the thoughts from my past on how I think a lot of things that were challenged with today are very similar to things that we have done in the past and kind of talk them through some of the things that we need to do differently and they seem to open to learn and open to go to different direction and I believe that over the time they have confidence in the entire management team that will get them there. So again, I was pleasantly surprised across the Board both internally and externally.

Bill Quirk - Piper Jaffray

Very good. Thank you very much.

Lucy Martindale

Thanks, Bill.


(Operator Instructions) And our next question comes from Paul Nouri from Noble Equity Fund. Please go ahead.

Paul Nouri - Noble Equity Fund

Earlier last year, there was some talk about kind of rationalizing the cost structure? So as we look at the operating expenditures for the quarter, is this kind of what we can expect for 2014?

Lucy Martindale

At this point, we are talking about Q1 and I would tell you that our Q1 operating expenses would be broadly in line overall with Q4.

Paul Nouri - Noble Equity Fund

And I think it was in the press release that you had mentioned that you brought some of the Vantera analyzers into your own lab, is that going to have a positive effect on gross margin in the near-term?

Lucy Martindale

We said, that's the project that has been phased in over the course of the year and it does give us some productivity gains. The effect on at -- in this year because we are phasing over the course of the year would be minimal.

Paul Nouri - Noble Equity Fund

Okay. Thanks.


I see no further questions at this time, I would like to turn it back over to management for closing remarks.

Howard Doran

I’ll first say thank you for participating on today’s call. We look forward to updating you on our next investor call. In addition, the company will be presenting at Barclays Healthcare Conference on Wednesday, March 12th and at the UBS Healthcare Conference in May. Thanks, again, everyone have a nice evening. Take care.


Ladies and gentlemen, this does conclude today’s conference. Thank you for your attendance. You may now disconnect. Everyone have a great day.

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