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CR Bard Inc. (NYSE:BCR)

Q2 2010 Earnings Call

July 22, 2010 17:00 am ET

Executives

Timothy M. Ring - Chairman and CEO

John H. Weiland - President and COO

Todd C. Schermerhorn - SVP and CFO

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

Eric J. Shick - VP, IR

Analysts

Rick Wise - Leerink Swann

Mike Weinstein - JPMorgan

Joanne Wuensch - BMO Capital Markets

Tom Gunderson - Piper Jaffray

Michael Matson – Wells Fargo Securities

Bob Hopkins -Bank of America

Kristen Stewart - Deutsche Bank

Larry Keusch - Morgan Keegan

Gregory Hertz - Citi

Bob Goldman - C.L. King

Douglas Tsao - Barclays Capital

Tom Kouchoukos - Stifel Nicolaus

Operator

Welcome to the C. R. Bard, Incorporated Second Quarter 2010 Earnings Results Conference Call. At this time, all participants are in a 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 call is being recorded and will be available for future on-demand replay through the Bard website.

Today's presentation will be hosted by Timothy M. Ring, Chairman and Chief Executive Officer along with John H. Weiland, President and Chief Operating Officer, Todd C. Schermerhorn, Senior Vice President and Chief Financial Officer and John A. DeFord, Senior Vice President - Science, Technology and Clinical Affairs. Also in attendance today is 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 in Bard's March 31, 2010 10-Q, and the information under the caption Risk Factors in the company's 2009 10-K and first quarter 10-Q, 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 July 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 M. Ring

I'd like to welcome you to Bard's second quarter 2010 earnings conference call. Thank you all for taking the time to join us today. I would expect the presentation portion of the call to last about 35 minutes.

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

Second quarter 2010 net sales totaled $673.9 million. That's up 8% over Q2 of last year on an as reported basis and 7% on a constant currency basis. The currency impact for the quarter versus the second quarter of last year was favorable by 110 basis points.

Net income for the second quarter was $124.6 million and diluted earnings per share were $1.29. Excluding items that affected the comparability of results between periods, which Todd will get into, the second quarter 2010 net income and diluted EPS were $134 million and $1.39 up 8% and 13%, respectively.

Looking our revenue growth geographically compared to the second quarter of '09 on a constant currency basis, second quarter net sales in the US increased 7%, Europe was up 3% and Japan grew 4%. Our other international businesses grew 14%, driven by 28% growth in our emerging markets.

Turning to business development, as we announced in early July, we closed the acquisition of SenoRx. I would like to take this opportunity to welcome the SenoRx organization to Bard as part of our Peripheral Vascular division

The merger represents a very compelling strategic opportunity for Breast Biopsy business since the SenoRx stereotactic and therapeutic products and technology are highly complementary to Bard's ultrasound product line.

We believe the combination provides us with the best products in each segment of the percutaneous breast biopsy and treatment markets. The merger was driven by our product leadership strategy with the combination intended to yield positive benefits for hospitals, physicians and patients alike.

Within our broader strategy to grow revenue, business development continues to be hurdle ground for us. Further you will know that our level of organic R&D investment expanded this quarter. This includes the addition of several multidisciplinary new product development teams as we ramp up our investment in line with the strategy we outlined at our Annual Analyst meeting last December.

Let me turn it over to John for review of our product line revenue.

John H. Weiland

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

Let's start with Vascular. This category improved further this quarter with growth of 10%. Total net sales were $187.5 million, up 11% over the last year on an as reported basis. Our United States business, which represented 56% of the global vascular revenue was up 11% for the quarter. Internationally we grew 9%.

Our Electrophysiology sales grew 7% again this quarter. EP Lab Systems sales were up 47% versus the second quarter of last year and we have now seen full quarter’s of solid growth year despite what has been a weak overall capital equipment market.

Revenue in our disposable EP product lines was up 2% versus the second quarter last year, led by our steerable diagnostic catheters, which were up 6%. Sales in our surgical graft category, which represent a 12% of our Vascular business were about flat in Q2, which is within a typical range with this category.

Our Endovascular business increased 12% in the second quarter. Within Endovascular, our biopsy products were up 11%. Continued healthy growth in our core needle and vacuum assisted products gives us a great base to build on with SenoRx. The integration of our product lines and sales activities began following closure of the deal on July 6.

Sales in our peripheral PTA line increased 42%. Growth this quarter was driven large part by our recent entrance in the small vessel PTA market with our VascuTrak’s specialty catheter and our CROSSER catheter for addressing chronic total occlusions.

As we discussed in the last call, we closed the acquisition of FlowCardia and their flagship product, the CROSSER early in Q2. This device enables physicians to remain in the true lumen of the vessel and cross chronic total occlusions in the coronary and lower limb arterial system, thereby maximizing therapeutic options for subsequent treatment. Today, all aspects of the integration are going according to schedule.

In June, we completed training of our full United States sales force and they are now in the field detailing this important product. Our early experience with the device is confirmed our expectations for improved procedural success rates, reduced procedural times and pull through of additional products such as LifeStent and VascuTrak. The acquisition also brought with it a very talented group of professionals that further strengthen our pipeline and our team.

Together with our UltraVerse PTA catheters, which we also recently launched, the VascuTrak and CROSSER give us the broadest offering in this rapidly growing small vessel segment of the peripheral market.

Underlying our acceleration in PTA growth this quarter our core products including our Dorado Access survival catheters grew in the mid-teens. Sales in our Vena Cava line were down 8% in the second quarter versus the prior year period and looking forward, we expect the pending launch of our new Meridian filter late this year will be a step towards recovery in this line.

Our stent business grew 6% in the second quarter. Within our bare metal stent lineup, despite having annualized the SFA approval of LifeStent in the late first quarter, we continue to grow our US business at a really brisk rate, up almost 30% for the quarter.

In mid-June, the LifeStent resilient trial was published by the journal circulation Cardiovascular Innovations, which should help us to further broaden the clinical audience for this device, particularly cardiologists.

As we noted in the last quarter, sales of covered stents have been relatively consistent since the launch of our Flair device in late 2008. During the first quarter, the New England Journal of Medicine published the Flair clinical trial results, which we have used as a tool to introduce the benefits of this technology to a broader population of interventional radiologists, interventional nephrologists and vascular surgeon. This helped us drive 16% sequential growth in covered stent sales in the second quarter.

Urology, total net sales were $197.7 million, up 2% versus the second quarter of last year, up 3% on an as reported basis. The United States business was up 3%, while internationally we were flat. Distributor ordering patterns favorably affected growth in our urology business on a comparative basis by about three percentage points this quarter.

Our Basic Drainage business, which represented 57% of the urology category, was up 1% in Q2. Our I.C. Foley business was down 3% for the quarter. We now have third party objective data that shows that the United States Foley catheter unit market is declined 7% from its peak in the fourth quarter of 2008. This data also tell us that there has been no discernible change in market shares during the same period.

Our Continence business was down 5% again in the second quarter. Within Continence, our DigniCare fecal management line was up over 50% in Q2. We are planning to launch a next-generation DigniCare device in the fourth quarter and John DeFord will cover this in more detail shortly.

In slings, the launch of our AJUST device shows some good sequential growth of 21%. We are encouraged by our first two quarters on the market with AJUST in this very competitive space, we have the only product that allows bidirectional adjustability and given this differentiation we expect to see some positive momentum to slings in the back half of the year.

We continue to see a decline in the pelvic floor repair portion of this business. Looking forward in this line, later this year we expect to launch our new [Web TO] product, which will market on the train name [Duet] and introduce our Alyte device in the United States.

Sales in urological specialties were down 5% versus the prior year quarter driven by an 18% decrease in Brachytherapy.

Standalone sales of our StatLock catheter stabilization line increased 24% in Q2, as this category was most affected by distributor inventory flow year-over-year. Demand in StatLock appears to be growing in the mid single-digits currently.

Our international StatLock business, which is developed some nice momentum, was up 26%.

Let's now turn to oncology. Total net sales in this category were $178.3 million, an increase of 5% over the second quarter last year, or 7% on an as reported basis. Net sales in the United States, which represented 76% of our global oncology revenue were up 4%, outside the United States sales were up 8%.

Our Port business was up 9% versus Q2 last year. Our international businesses were contributors to the step up there in growth, including strong shipments to our Japan joint venture.

Following the Q1 launch of our new Access port, which we use to address the more price-sensitive part of the market, we have had a good round of customer valuations that we anticipate will yield growth in the third quarter. Looking further ahead, we anticipate launching our antimicrobial PowerPort in the fourth quarter.

PICC revenues grew 6% in the second quarter. Although, we get it on a lag, we are starting to see third-party research data that validates the significant reduction in unit demand, we have been describing in the last four quarters. These sources indicate that annual PICC unit growth rate slowed by 10 percentage points from the first quarter of '08 to the first quarter of 2010.

Our vascular access ultrasound product line was up 13% this quarter. Growth here was driven by the early Q2 launch of our new Site-Rite Vision system, which builds upon our well-established technology platform with enhanced functions that expand its use beyond to venous access.

Vision adds color flow Doppler imaging, onscreen vessel measurement, enhanced compatibility with hospital data systems to simplify image storage and maintenance, and with a number of user favorable features. The new device is gaining and generating a lot of interest.

Our dialysis catheter business was up 8% in the second quarter with an increase of 11% in the United States, partially offset by a decline in Europe. Growth here continues to be driven by our Equistream, Trialysis and the catheters we acquired from Spire. Looking forward, we have additional Spire devices rolling out in the second half of this year.

Let's conclude our revenue discussions with surgical specialties. Global revenue growth in this category was 15% in the second quarter. Net sales were $106.2 million, up 16% on an as reported basis. United States sales increased 19%, while international sales were up 3% versus the prior year quarter.

Our soft tissue repair business had another strong quarter growing of 20%. Within soft tissue, our natural tissue products were up over 90%. We have seen growth in this line accelerate in a couple of stages. Initially, back in mid-2008, we began gaining share in the complex hernia market with our human tissue AlloMax patch.

Then in the second half of 2009, growth further accelerated when we launched our XenMatrix porcine hernia patch. At the same time, we also expanded the AlloMax call point to cover the market for post-mastectomy breast reconstruction procedures.

Our second quarter performance here was led again by XenMatrix, which had very good sequential growth. Published clinical data demonstrating XenMatrix's excellent strength characteristics and effective tissue in growth continue to make it a standout in the market. We also continue to gain share with healthy sequential growth in AlloMax for the breast reconstruction market.

Moving to our synthetic hernia products, sales were up 1% over the second quarter last year with growth coming from our inguinal and absorbable barrier Ventral products.

In our inguinal products, US sales were up 6% as we continue to develop some momentum with the help from our recent lightweight 3DMax and PerFix Plug launches.

In Ventral products, our Sepramesh absorbable barrier product had another strong showing versus the prior year quarter. The momentum we have been gaining with this product bodes well for the expansion of our separate offering in to our other ventral lines beginning later this year.

Our Fixation business grew over 80% in the second quarter led again by our SorbaFix device, which we launched in early Q2 of last year. Following the first quarter launch of PermaFix, a permanent anchor version of SorbaFix, we now have a complete hernia fixation bagged.

While we are clearly doing well in this market, we aren’t resting our success, and we have enhancements to both devices scheduled to launch early next year. We like the momentum we have gained from our strategic decisions in soft tissue repair space, our expertise and physician in the market have turned out to be exactly the asset we expected.

Our trajectory here coupled with a healthy new product pipeline are the reasons we have recently expanded our surgical field sales organization by more than 35% in the United States. Closing out the surgical category, our performance irrigation business declined 3%, the challenging comps we faced here over the last year are now behind us. Finally, our hemostasis business was down 9% this quarter.

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

Todd C. Schermerhorn

Thanks, John. Let me start by covering the items that affect comparability of our results between periods. First, we had acquisition-related items of $6.4 million, legal and valuation expenses, purchased R&D, milestone accretion and a small amount of integration-related expenses.

Second, we took a charge of $3.8 million, relating to the realizable value of public hospital receivables increase. These items are detailed in the notes of the financial statements and the reconciliation accompanying our Q2 earnings press release.

Now, let's go through the statement of income for the quarter. Gross profit was $422.2 million, or 62.7% of sales for Q2. On an adjusted basis it was $424 million, or 62.9% of sales, up 90 basis points over the prior year quarter.

New amortization of intangibles relating to transactions closed in the last 12 months cost us about 40 basis points year-over-year this quarter. We turned the corner on the inventory adjustments from Q1 exactly as we had planned and communicated and maybe even a little more strongly than we had expected.

I have made reference to improving manufacturing efficiencies over the last several quarters and you can clearly see the progress we've made in this quarter's results. In addition, mix continues to favorably affect gross profit as a soft tissue growth accelerates.

Adjusted for amortization, our organic improvement is at 130 basis points that are evened in our long-term 50 to 100 basis point expectations, and at the same time, you will note when we get to the balance sheet that we have done a very good job managing inventories so far this year.

SG&A expenses were $189.5 million for the quarter. On adjusted basis, they were $183.2 million, or 27.2% of sales, reflecting a 10 basis point increase over the prior year period. There is no new news here in SG&A. Our spending continues to reflect our investment agenda together with an appropriate level of control.

R&D expenses totaled $45.1 million for the second quarter. On adjusted basis, they were 44.6 million, a 13% increase over the prior year quarter. Consistent with our full year guidance and reflecting the expansion of R&D teams that Tim mentioned.

Interest expense was $2.8 million for the quarter in the range of our historical results. Other income was 2.1 million of expense for the quarter, but on an adjusted basis, it was just 500K of expense again, consistent with our historical patterns.

Effective tax rate for the quarter was 31.7. On an adjusted basis, it was 30.5, dead center of our annual guidance. We repurchased roughly 1.6 million shares of the company stock in Q2. We will continue to be buyers of our stock as cash flow and market conditions permit.

The balance sheet at June 30 reflects cash and short-term investments of $605.5 million versus $733.8 million at March 31. For the quarter, accounts receivable days were down 3.4 days, down 2.9 days if you exclude the impact of the write down of the receivable in Greece, and inventory days were down 0.4 days.

Capital expenditures totaled $11.1 million for the quarter. On the liability side, total debt was $179.8 million at June 30 versus $149.8 million at March 31. Debt to total cap at the end of the second quarter was about 8%, and total shareholder investment was $2.14 billion.

Moving on to financial guidance for Q3, we are expecting constant currency sales growth between 8% and 10%, as the SenoRx transaction should add about 200 basis points of growth.

From an EPS standpoint, we closed the SenoRx transaction at the earliest possible date within our original estimate. So, in line with the guidance we gave when we announced the deal we will have the full $0.03 delusion in each of the two remaining quarters of 2010. So taking this in to account and excluding items affecting comparability, we see the third quarter EPS in the range of $1.37 to $1.41.

Adjusting this year's 9% annual EPS growth guidance for the SenoRx dilution, leaves us with an EPS goal of 5.49 for the full year and we are confidently and squarely aimed at that target.

I'll now turn you over to John DeFord.

John A. DeFord

Starting with our atrial fibrillation activities, we are making good progress on a number of HD Mesh Catheter and energy delivery improvements. We are in discussions with FDA regarding the design and initiation of a study of this new system and are on track to start our US clinical study in the first half of 2011.

As discussed last quarter, some recent changes to the regulatory path for the system in Europe have us anticipating introduction between late this year and early to mid 2011, because of our heparin coding has been newly classified as medicinal agent. This change will require a drug-like review, which we expect will take a few additional months before CE mark approval.

In EP Lab Systems, we remain on track for a Q4 launch of several upgrades and enhancements, including a new 3D navigation and mapping system under development through our alliance with Philips Healthcare.

In stents, we have completed development efforts on our LifeStent platform enhancements, including 200 millimeter lengths, a new tri-axial delivery system and the addition of radiopaque markers on all sizes.

We received the CE mark late in Q2 and began the launch of the product earlier this month throughout Europe. Simultaneous with the CE mark approval, we began enrollment in a European multi-center clinical study to support FDA submission for these device and delivery system enhancements. We anticipate filing a PMA supplement in the first half of next year and expect the late 2011 US launch.

In Stent Grafts, we are in the early start up phase of the US clinical study of our FLUENCY Plus, self-expanding stent graft to support expanding sizes in peripheral vascular indications. We anticipate filing our IDE in Q3, and expect to begin patient enrollment late in December or early next year.

Our next generation stent graft development is on track with the projections we gave last quarter. This new device leverages our LifeStent platform in proprietary graft technology to create a product design for greater flexibility in vessel conformance. This new product is targeted for the SFA indication. We anticipate the second half 2011 launch in Europe and a 2013 US launch, following completion of a clinical study with one year follow-up.

Now moving to PTA, we continue the rollout of our new UltraVerse PTA family with the Q2 introduction of the UltraVerse.014 designed for small peripheral vessels in diameters from 1.5 to 5 millimeters and lengths up to 220 millimeters. The UltraVerse.014 and 018 family contain a hydrophilic coating and are processed with our patented checkering technology to reduce catheter profile and hence tractability and improve overall delivery.

In filters, John mentioned and we continue to make good progress on both, our next-generation in the ECLIPSE family called Meridian and our entirely new filter platform. The Meridian vena cava filter incorporates enhanced anchoring technology and a new delivery system for both femoral and jugular placement and we expect a late Q4 2010 launch.

Our next generation filter system is on track from an engineering perspective and we anticipate completing our development bench and animal testing activities in mid-2011. We stated in our last call that we had anticipated launching a device with a permanent indication in the second half of next year, while conducting a clinical study to support expansion of indications to include retrievability. However, recent discussions with FDA have revealed a change in their policy requiring clinical data to support the permanent indication.

We are incorporating this new requirement into our planning and are in the midst of creating a new study design to support both permanent and retrievable indications. We still have a number of questions to resolve with FDA, so I don’t have any launch plans to share today. However, I am confident this change will push our US launch back at least a year.

Tim provided you an overview of the SenoRx transaction and I am happy to provide you a few more of the key product details.

The Encor console provides us with our first SIMS or Single-insertion, Multi-sample vacuum assisted biopsy system for procedures utilizing stereotactic guided and MRI guided imaging. The Gel Mark bioabsorbable markers provide us with an entry into the large stereotactic guided side of the marker market and the Contura MLB therapeutic catheter controls the delivery of precise radiation for site specific partial breast brachy-therapy after lumpectomy. Contura is Bard's first breast therapy product within this accelerated partial breast radiation balloon brachy-therapy segment. The SenoRx also brings a wealth of expertise and an exciting pipeline for future products that we will discuss further as we move through integration and get near to market entry.

Now turning to urology incontinence, We anticipate the launch of the Alyte Mesh with the expanded (inaudible) suspension indication in the US later this year.

We are completing the development work on our next-generation anterior and posterior pelvic floor repair system named (inaudible) and our current schedule anticipates launch mid to late Q4.

The (inaudible) procedure kits will offer full distal and proximal adjustability and are designed to enhance the anchoring points to reduce or prevent the risks associated with deep trocar passes.

Within our basic range of business we have been keeping a project under wraps that we feel could be quite a step forward in fluid management. Late this quarter we anticipate the roll out of our new automated urine output system. This new product will automate the current manual system where clinicians, most often the nurse, will measure fluid output and try to assess any trends that maybe occurring in renal function. Our new system combines highly accurate fluid volume measurements, data trending for much easier and enhanced analysis and automatic tool elimination system to prevent residual liquid from collecting in the tubing and intuitive graphical user interface and the ability to track other key physiologic parameters like core body temperature and pressure. This new platform is designed to improve nursing efficiency and create a tool to aid in fluid management and analysis, a key issue especially in the critically ill patient.

Then in Q4 we anticipate the launch of our next-generation DigniCare fecal management system. [Dignishield] will build upon the existing design that promotes skin and lower bowel integrity through our patent pending cuff system designed to conform to the anatomy and maintain seal integrity with the lowest cuff pressure on the market.

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

The innovative design cleans both the inner and outer surface of the catheter hub with isopropyl alcohol in one easy step to reduce the likelihood of touch contamination that could lead to catheter-related bloodstream infection.

In PICCs, we're preparing for the start of our pivotal clinical study of the Sherlock 3CG systems to expand our current claims to remove the need for X-ray or other imaging conformation of catheter placement.

We anticipate enrollment to commence late in Q3 or early in Q4. The Sherlock 3CG combines our Site-Rite Ultrasound Venous Access technology, Sherlock tip tracking system and ECG-based catheter tip conformation technology with our market-leading PICC in a fully integrated catheter placement system.

As we discussed previously, we received 510(k) concurrence late last year with general PICC placement indication, and have been working with FDA to define a path to expand the device claims to remove the need for X-ray or other imaging conformation of catheter placement.

Though we are beginning the study in the next few months, our early customer feedback has lead us to plan the launch of the product with existing claims in Q3. With our current study design, we anticipate filing additional clinical data with FDA in Q1 of 2011 and expanding our claims in the second half of 2011.

We have a couple of other important innovations in the PICC pipeline, one planned for launch in Q4, and then an additional launch in the first half of 2011. These catheters will incorporate new technology designed to address two of the external events that can lead to catheter replacement. Due to the competitive nature of this space, I'm going to hold back those details until launch.

Now turning to ports, we continue to work toward a Q3 or more likely a Q4 launch of our new antimicrobial PowerPort family. Our development activities are complete and we are working with FDA to answer some recent questions they asked on our 510(k) submission.

We expect to respond in the next couple of weeks and anticipate launching both, titanium and MRI versions of the antimicrobial PowerPort simultaneously, both of which incorporate our net comfort port design. The comfort port is structured to enhance and simplify placement. The new design will also reduce the discomfort that can sometimes be associated with hard surfaces commonly found in other port designs.

John discussed the launch of our new Site-Rite Vision enhanced ultrasound platform, so I will move on to our surgical business. In Q2, we launched our updated Ventrio product line. The new Ventrio family incorporates a lighter mesh configuration and is available in a broader range of sizes, all with Bard's proprietary resorbable self expanding ring design.

In fixation, we remain on schedule with our plan to launch an enhanced delivery system for both PermaFix and SorbaFix in 2011, and near the end of the year, we anticipate the launch of several new mesh products that expand the use of our Sepra barrier technology, starting with the [VentraLight ST], a lightweight mesh design specifically for laparoscopic ventral hernia repair. After [VentraLight ST], we anticipate launching new versions of both the Ventrio and Ventralex platforms that incorporate our Sepra resorbable barrier technology for ventral and umbilical repair solutions that incorporate an alternative for our permanent adhesion barrier technology.

Finally, we continue to work with FDA on regulatory and study design issues in order to find an appropriate path forward with our endoscopic obesity therapy projects. Until these business critical issues are resolved, we can't really provide an estimate is to when or if we could start a pivotal study of this technology.

Once again, we have covered a lot of ground and I appreciate your attention. I will now turn you back to Tim Ring.

Timothy M. Ring

That does conclude 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. (Operator Instructions). The first question from the line of Rick Wise with Leerink Swann.

Rick Wise - Leerink Swann

Let me start on the EPS if I could. 549 is the target as you said Todd, a couple of things is that still excluded in the R&D tax credit. Two what’s your current year assumption baked into all that and third just relate to Alt EPS how do we think about if we did 509 in 2009, you told I think you are going to grow up per single digit up 9% minus $0.06 dilution gets you to that number, but you did better in the first quarter and the second quarter. So, it just seems like a conservative number is what I’m getting at?

Todd C. Schermerhorn

Okay Rick. So, that does not include the R&D tax credit and that would come in, that would additional to the 549. Currency, we have models obviously that try and look out towards the end of the year, in our models anyway we consider the euro in the low 120. So, we are actually a little better than that right now.

As it relates to conservatism, I mean that we planned investment at the same time so we get ourselves anchored around the commitment to you folks and then series of investments we get lined up. This would be R&D process and something you can start and stop on a quarterly basis and so we have all those investments lined up and that total gets us to 549, as I said, where our aims clearly at it.

Rick Wise - Leerink Swann

On the gross margin front, as you point out, it did a bit better by and up by mix and manufacturing efficiencies to the key components. You told us that few months ago that gross margins be flat this year, but it feels like with the mix continue to improve, the ongoing efficiency that second half should be better, especially some of the new products launch. Does flat sound that maybe a say on the conservative side now?

Todd C. Schermerhorn

As you recall flat starts with 61.2 in the first quarter so we start from the low point for the year and makes a little hard to grow the GP significantly for the full year. As it relates to the second half, Rick, I think the cost momentum is still good, but you have to understand, we're going to have new amortization from the SenoRx deal that's about $3 million a quarter. So, it’s going to make it difficult to grow GP from here. In fact, it’s a little bit of a headwind. I think that we'll probably see something in the mid-62s to high-62s for Q3 and Q4. That's the way we are thinking about right now.

Rick Wise - Leerink Swann

Sounds good. Just a last broad question maybe for you, Tim or John. It feels like a lot of confusing inputs on procedures and growth and pricing. Listening to you guys it sounds like things are pretty stable. Some companies are talking about improving capital environment. I'm hearing that little bit from you, some are talking about improving procedures, others are talking about deceleration. How do you see the environment? How would you sum it up right now?

Timothy M. Ring

Rick, as we've said in the past, it's really tough to tell in a quarter, what exactly is happening. When we talked to you guys in December, we gave you our assumption for the year that there was going to be no improvement in the external environment and I think there is enough uncertainty out there right now, as you just pointed out that I think that’s still a very good assumption.

Operator

We have a question from the line of Mike Weinstein with JPMorgan.

Mike Weinstein - JPMorgan

Let me just start with the guidance. I was a little bit surprised on the call just relative to the full impact of Senorx that flowing through I think people would look the first half of the year and say that the company it had a good first half at both top and bottom line relative to the expectations, certainly that it would be back in December, when you gave the 9% EPS growth guidance. So it seems fundamentally, you have done well and you particularly done well relative to a lot of the industry peers. So, the decision not to at least for part of the SenoRx impact into your guidance for the full year. Is that because you want to spend in other areas or you don’t feel like the underlying fundamentals of the base business can offset that?

Timothy M. Ring

Well, I think you have to put in the context of the longer term plan that we talked about in December. We are trying to get the R&D line in 9% to 10% of sales and if we have any extra powder, then we are going to be looking to do that as we move through, not only this year, but next year and year after.

Mike Weinstein - JPMorgan

Shall we view the R&D tax credit percentage that’s upside to the 5.49 number, but should we viewed is that we are going to reinvest that because just want to ramp up the R&D spend?

Todd C. Schermerhorn

No. We said in December we don’t know when that would happen and so we probably wouldn’t have the time to reinvest. A couple of years ago that was boarded on December and we got it like the last month. So, we said from the beginning if we get that, that will become earnings, well it’s not predictable and for us to queue up R&D in spending and so on to go against it.

Mike Weinstein - JPMorgan

Maybe actually a couple business segment questions. We have fair amount of anticipation ahead of the 3CG launch to recognize we need to have the label in place. How we should think about the contribution from that product prior to actually getting the label later next year.

Timothy M. Ring

I think we will have a small impact upon launch as we start to build the clinical base behind that product, but I think that the larger amount of the momentum we build once we have the labeling.

Mike Weinstein - JPMorgan

I don’t think I got your view and what the hernia repair market is growing right now. You have obviously gained a lot of momentum particularly versus where you were a year ago. Can you just give us your own perspective you have been in line market (inaudible).

Todd C. Schermerhorn

I’d say low single digits.

Mike Weinstein - JPMorgan

That as a second quarter view.

Todd C. Schermerhorn

Yes, I think that’s a consistent view point low single digit.

Operator

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

Joanne Wuensch - BMO Capital Markets

Are you able to share with us the [low] cardia revenue contribution in the quarter?

Todd C. Schermerhorn

We told you that the base was $10 million so that be $2.5 million a quarter. We did better than that, so we're building value there.

Joanne Wuensch - BMO Capital Markets

Also, I was really sort of interested by your fourth quarter '08 to current discussion of declines in actually Foley catheters and declines in the couple of other pieces of it. Two questions, how do you read into that? Is that just lower hospital admissions, and the second portion of that is that accelerating?

John H. Weiland

Let's deal with it in two pieces. One, I think if you look at the, let's say the PICC market for example, there is a number of issues that we've talked about in the PICC market that we have slowed units.

One is, constraints on nurses being able to be trained and some nurses that were PICC placers themselves that are no longer within that organization. I think there has been some pressure in terms of hospitals not going to upgrade to PICCs which has slowed the momentum, so that's really a different set of stories in each market.

Now, if you look at the Foley market, we think it's really two issues. Hospital admissions in general and then secondly the need for hospitals to reduce urinary tract infections has also caused them to say let's make sure that we're only putting a Foley catheter in when we absolutely have to, so then the usage side of things has also compounded it. Is it increasing? No. I would say, it's been pretty steady in terms of the decreases in both segments.

Joanne Wuensch - BMO Capital Markets

The second thing, which I thought was interesting, was that you've hired new people in your surgical sales business. Any other businesses in which you are adding to that, because my impression was that that you are going to hold off on building up some of those individual sales efforts as you move throughout the year, but that may have been my wrong impression.

John H. Weiland

We are making some significant investments in emerging markets, specifically we call Latin America, the Pacific grim in Latin America. We talked about the surgical expansion and with the SenoRx transaction, in essence; we've increased our biopsy sales force by about 2.5 times, so I think we are seeing a nice rollout in sales forces as a result.

Joanne Wuensch - BMO Capital Markets

My final question has to do with ubiquitous price question. Can you please address what you are experiencing in area in the United States and in Europe?

Todd C. Schermerhorn

No change, Joanne, to the trends. We have been seeing 10, 20, 30 basis points of price erosion and now it's very small obviously, but that's been historical and that this quarter was 30 basis points.

Operator

We have a question from the line of Tom Gunderson with Piper Jaffray.

Tom Gunderson - Piper Jaffray

Some of the other companies have reported, and we have got other data that say that there were fewer doctor office visits in Q2. You are mostly a surgical business and I wouldn’t expect that to have an impact in Q2, but it might have an impact on the surgical calendars going into Q3 and Q4. Have you noticed anything like that? Has the sales force or the marketing people bubbled that up to?

Timothy M. Ring

This is Tim and John Weiland may want to jump in here as well. We do talk to some people, other companies that call on physician's offices and that we have heard the same thing that the initial office visits are down.

Clearly there is a trail of process through the clinical evaluation period that starts typically with the doctor's visit, so that could have some impact down the road, but we are, as you said, more hospital-based focused or adding to a synergy center-type focus, so we don’t really follow the initial primary physician office visits very closely.

Tom Gunderson - Piper Jaffray

Got it. Then I'll join the rest of the group and ask another question about Europe, but most in this reporting week have been saying that haven't seen anything yet from austerity you mentioned what you did with the write-down of AR for Greece, but I am wondering Boston Scientific said yesterday that separate from any government programs, they were seeing in Spain, Portugal, Italy, Greece increased hospital, pricing pressure, increases above and beyond what we are normally seeing. Can you comment on that?

John H. Weiland

We've seen some pockets like that, especially some of the smaller geographies that are having a particularly difficult economic time right now, but I don’t think it’s anything that we see as a broad trend throughout Europe right now.

Timothy M. Ring

I would say, Tom, the other part of it is, a lot of business in Europe is done with tenders. Those are lock-in for a period of time. They obviously happen all the time, various parts of the year, but as John said it’s kind of been sporadic for us.

Tom Gunderson - Piper Jaffray

Got it. That's it for me. Thanks guys.

Operator

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

Michael Matson – Wells Fargo Securities

I guess my first question is just around your product development cycles. What's sort of the mean time to market and at what point are we going to start seeing some of the new products flow that's resulting from the increased R&D spending?

John A. DeFord

This is John DeFord. Michael, a couple of things, when you look across our business, we have number of different business units and so our cycle time varies, so you can imagine our vascular space that's primarily PMA, those are long cycle times.

Some of our other areas are shorter cycle times, but on average, we're sort of in that 16 to 18-month timeframe, if you sort of average across the organization, so you would expect as we began to add teams in our organization. It's a couple of years before you begin to see significant output from that investment.

Michael Matson – Wells Fargo Securities

I guess, just wondering what your appetite is for larger acquisitions? You've been doing a number of smaller tuck-in deals, we've seen some of your competitors doing bigger things. Just wondering if you can give us any thoughts on how long you ought to do something bigger that could potentially be more dilutive?

John H. Weiland

Tim, I'll take that one. The answer is kind of the same answer we have given in the past. If we saw the right kind of deal that was there that was strategically compelling that, A, we could be convinced, we could convince our board, and then when all you heard the story, tell you that that's right, because I haven't seen any of this. As you know we got a lot of flow right now, and we had some good flow last year and that continues.

You never say never, but as you know size-wise the As are not a lot of those out there. They are fairly well known those that are there, and we kind of like the way we've been doing it over the last several years.

Michael Matson – Wells Fargo Securities

All right. I thinking investors like it too, so that's a good thing. All right. Thanks.

Operator

We have a question from Bob Hopkins of Bank of America. Your line is open.

Bob Hopkins -Bank of America

First, Tim, just to sum up on all the macro questions. Is it that the basic message from Bard is that relative to your expectations and relative to what you've seen in the first quarter, there is really no major change in procedure volumes, pricing, European outlook? Is that the basic message from Q2?

Timothy M. Ring

I think that's the message. Yeah. I mean, our guidance is right, and our results were right where our guidance was, so, yeah, I think it's way too early to start calling trends out here.

Bob Hopkins -Bank of America

Okay. Then John, I wonder if we could talk a little bit more about hernia. You guys faced more difficult comparisons this quarter, and yet you are putting a very good growth there, and you are saying that the market really isn't accelerating, and could you just talk a little bit about where you think you are taking share and a little bit more about market dynamics and how much you think that momentum can continue. Obviously, I asked the question in part, because I know that the mesh business is such a high margin business, so any details would be great.

John H. Weiland

I think it's three pieces. Number one, from our base mesh, you’ve seen improved performance year-over-year on our base meshes, really led by some of the new product launches that we had in that space, and for example, this month have an inguinal growth of 6%, so a departure from what the trend is that we've had.

The second piece of the story is biologics, and it's both, in breast and in XenMatrix. We’ve continued to take share there and we like the clinical story that we are developing in particular with our XenMatrix product, and I think that clinical story start to resonate with physicians.

The third piece of that is what we are doing in fixation. The SorbaFix has been very well received. We have built a nice momentum there and I'd say on top of that, our new permanent addition will also be a positive step in it, and then wrap that whole bow up of those three items with the expansion of our sales force, and it’s a pretty nice story and yes, we do have some tougher comps coming up based on when we launch some of these new products, but I think we are also liking the momentum we are building with that.

Todd C. Schermerhorn

Yes, I think very clearly the biologics are just blowing through the comps. We will have a little tougher comp and fixation in the fourth quarter but every time we reach we saw a tough comp in biologics, we have just blown right through it.

Bob Hopkins -Bank of America

Yes, that has been strong performance. Do you think that you are gaining share in the basic mesh business because that’s where a lot of the margins lies and do you think that your growth rates can continue in that specific line and along the lines both seen recently?

Timothy M. Ring

I think in the basic mesh business, we are just starting to see some highlights from the new product launches that we have had, with the number of what we think a pretty powerful new product launches over the next year in that segment, but obviously, we are taking share on biologics and we are taking share on fixation.

Operator

We have a question from the line of Ben Andrew with William Blair. Please go ahead.

Unidentified Analyst

Good afternoon, it’s actually [Matt] in for Ben. Just wanted to talk a bit about the peripheral market. Tim I think you just said that the procedure volumes in general are pretty steady which goes against what we have seen in some other markets this quarter. Can you talk a little bit about market growth in peripherals in terms of volume mix and price?

Timothy M. Ring

Boy, that is a tough one, because our whole business in peripheral is really been built off with the new product launches that we have. So you have to go segment-by-segment. Now that will take us a heck of a long while to get through that but I would say, in general, significant interest in the small vessel side of things particularly below the knee, we are very well positioned there now, with LifeStent, and the number of the new products that we have been launched and our balloon portfolio that’s probably the fastest growing portion of the segment. So I'd say in general, we are taking advantage of a developing segment there.

Todd C. Schermerhorn

You know, Matt, we don’t see any real time procedure data and if others do, I don’t know where they get it. So what you tend to hear from companies is their results, extrapolated to the market.

Unidentified Analyst

Sure. I mean you guys are clearly taking a boatload of share, but the question is underlying market growth.

Todd C. Schermerhorn

Yeah. It’s very hard for us to tell. As John said, vascular is carved out into a whole bunch of fragments and all at any time behave differently from one another.

Unidentified Analyst

Okay. So then, as far as having this new clinical data available for LifeStent and taking it to the interventional cardiologist, how you plan on going to those account it to three new reps, is it through your existing sales force and then how do you continue to service the vascular surgeons?

John A. DeFord

No, its really through our existing sales force, we have expanded our core points in that area, and also some of the unique new products that we've talked about tonight have a particularly great resonance with the cardiovascular community. So what really helps are interior things like LifeStent into that space, CROSSER would be a good example.

Unidentified Analyst

Okay, and one quiet final one and I know these are early days but can you talk about just either reorder rates or increase sequentially utilization of the 3CG in some of the first hospitals that used it during the first quarter?

John A. DeFord

I think it is all too early to talk about that at this point in time, I mean hospitals is a starting point. I have really got say what is their own internal physician as it relates to X-ray confirmation, or any other type of confirmation and how can they can utilize the 3CG technology to the burden of that prior to us getting their claim. So it's a little early to really comment on that.

John H. Weiland

Matt, just to jump in there, we haven’t really launched that product. We have a number of the devices out in the field for clinical activity. We are collecting some clinical data and we’ve been doing some evaluations, but we, as I said haven't launched that. We are looking to launch that later this quarter.

Unidentified Analyst

Sure. Just any anecdotal feedback that you’ve gotten so far? Do they love it? Are they skeptical?

John H. Weiland

Well, the feedback is that they would like us to launch it. So we are launching it in this quarter.

Operator

We have a question from the line of Kristen Stewart with Deutsche Bank.

Kristen Stewart - Deutsche Bank

Hi. Thanks for taking my question. Just as a point of clarification, in urology, of course that you mentioned, you mentioned that the distributor I guess was a price action, had about a three percentage point impact. Is that correct?

John A. DeFord

That’s right.

Kristen Stewart - Deutsche Bank

Okay. So then, absent that, I guess.

John A. DeFord

It was not price. It's really a reflection of the de-stocking that occurred in the prior year.

Kristen Stewart - Deutsche Bank

Okay. So then, should we expect to see, is there any fluctuations as we look ahead to 3Q? Just in terms of or is it simply a quarter-over-quarter effect?

John A. DeFord

Yeah. The de-stocking that occurred last year was virtually all first half. So things normalize very well as we go into Q3 and Q4. We will end up back at demand rates, which if you do the math, we’ve been sort of in the zero range of demand in overall urology.

Kristen Stewart - Deutsche Bank

Okay. Then just kind of leading to my next question, which is seeing the trends that you’ve had within the Foley based business, the lack of up-tick and the I.C. Foley actually being down for the first time since I can remember, then the StatLock, you said, was also very much reduced, do you still feel like you can get urology to be 2% to 5% grower this year or really what turns that tide

John A. DeFord

I think there is a couple of issues that come to mind, one is, hospitals are now moving from hospital acquired infections reporting to the point that there will be compensation downstream off of actual rates of urinary tract infections. So, that’s we are seeing some individual hospitals continue to be interested in converting to the I.C. Catheter.

Secondly, we talked about some of the new products that we have in this space. The automated urine output monitor, it affects about 15% of Foley's used or applicable in that space. We think that will be a nice addition.

We like our continued opportunities in terms of StatLock and increasing the number of hospitals that we have converged in to, specifically, the StatLock ID. DigniCare too, we are excited about. We think that has a nice space and we talked about couple of our offerings in the pelvic floor area. The adjust product which has been rolled out [Ventrio, NuVia] all those will have an opportunity for us to try to grow the business.

John H. Weiland

Just for point of clarity, Kristen, when we gave the guidance we knew about the de-stocking in the prior year. So we grown 3% year-to-date. We understand that it’s not necessarily organic growth and I think said at the time in December that we would get the benefit of the comps on the prior year de-stocking and that was included in the 2 to 5. So we don’t really have to do very much in Q3 and Q4 if we started three to hit the two number.

Kristen Stewart - Deutsche Bank

Got you. And then just in terms of the restructuring program that guys implemented last year, is that now starting to anniversary in terms of the savings that you had implemented in the third quarter?

John H. Weiland

Yes, that’s right.

Kristen Stewart - Deutsche Bank

Okay. And were the savings along the lines of what you expected?

John H. Weiland

Yeah. We hit on all cylinders all the way through there, probably just slightly better actually.

Operator

We have a question from the line of Larry Keusch with Morgan Keegan.

Larry Keusch - Morgan Keegan

Yes, hi. Just trying to think a little bit about the international opportunities, when does China become a real business for you guys?

John A. DeFord

All right. In our minds, it already is, we’ve strategically made investments in China three years ago in terms of expanding of our sales forces and the growth is that we are having there is significant and it makes a difference, a large difference in our emerging market growth rates.

Larry Keusch - Morgan Keegan

So, John, can you just help us to understand in any way that you choose to give some sense of the magnitude or the growth rates there on what that Chinese business is doing at this point?

John A. DeFord

In terms of the total size?

Larry Keusch - Morgan Keegan

Either total size or growth rates.

John A. DeFord

We don't usually roll out that kind of junk. We put it at the range of approximately 35 million.

Larry Keusch - Morgan Keegan

Got you. Okay, that’s helpful. Then just one question as we think about, again, the write-off was reasonably small associated with the receivables in Greece, but what’s the risk in terms of these other countries, Todd, that you can see some of this in the next couple quarters?

Todd C. Schermerhorn

Larry, I don’t know, I am hardly an economist. We do the simple stuff, we track the credit ratings, everybody else in that pool is A or better at this point. So, we are sort of hopeful, but boy, you would have to check your bank economist to give you any real guidance on that. I really can't help you.

Larry Keusch - Morgan Keegan

Okay, got you. Then the last one, I guess coming back to that new products on the auto urine monitor, output monitor, is the way to think about that, that is a piece of capital equipment that you would sell and then there would be disposables associated with it.

John A. DeFord

I'd say you got it pretty well figured out.

Larry Keusch - Morgan Keegan

The benefits of the device, John mentioned will be used in 15% of procedures, but just help us think about over the manual methods other than the obvious that it is automated, what else does it really provide the nursing staff with?

John A. DeFord

Well, we think that this is going to be important over a long period of time. There is new emerging fluid management protocols, where critical care patients are really being managed closely to get a sense whether they are becoming septic, whether they are having changes in organ function and in particular renal function. So we’ve tried to combine as much of that into this technologies we could to have temperature measurement, pressure measurement, the ability to show trending and the clinician can decide, whether they want to look on a minute by minute, half an hour by half an hour, hour by hour basis and get a sense of what’s going on with this patient. We don’t see this is coming out and making the big splash so to speak, but being a long-term growth as people really begin to understand the benefit of fluid management in these patients.

Operator

We have a question from the line of Gregory Hertz with Citi.

Gregory Hertz - Citi

Hey guys, Greg it’s calling in for Matt Dodds. Just a quick one here. The next-gen fixation products, you mentioned there is going to be, I guess a design change, is that sometimes going to address perhaps the legal issues going on right now?

John A. DeFord

We are designing this and the changes are all around improvement of functions for the customer. We’ve got some improvements to help them as they use the device and we think that's going to drive a lot of value.

Gregory Hertz - Citi

Do you think it will help to satisfy I guess on the legal risk?

Timothy M. Ring

We wouldn’t comment on that here, Greg.

Gregory Hertz - Citi

Okay and then also you mentioned a bit about the pressures since the early 2008 with respect to the take the market growth line 10%, outside maybe some obviously you guys haven’t talked broadly about your staffing at hospitals and perhaps conversion to IV catheters in certain cases. Can you talk about, where you see the growth of this segment improving especially with the benefit of 3CG and could it return to at the 10% levels or is it more reasonable to think about this is in line for what we have been seeing more recently? Thanks.

John A. DeFord

I think the 3CG technology will be a very important armentory in our bag and picks. We are not going to start projecting today, where growth rates will be next year here after, but it will certainly be an important weapon in our arsenal.

Timothy M. Ring

I think the only thing that I’d add although it’s a small number now, and tough to see. We are developing some of these markets outside the United States similar the way we developed one in the US and we are starting to see some nice uptick there, but it just very small right now.

Operator

We have a question from the line of Bob Goldman with C.L. King.

Bob Goldman - C.L. King

Two questions on R&D. One specific, one general, let me ask the specific first, and its also on 3CG, but I think you mentioned in your prepared comments that you will be beginning the study in the next few months, and that struck me as quiet definitive in Bard parlance. So, I wanted to ask if the IED has been approved and also if you are starting into the next few months and you still only need to do 200 to 300 patients. It seems like the study would be done, and the data collected by the end of year. So, I want to get a clear up that for me.

John A. DeFord

Okay Bob so, a couple of pieces of that. On the clinical study, we are prepared, we are moving forward. We don’t have any regulatory issues that are slowing us down on getting that study started. So that’s why we expect to get it started this quarter. We are working closely with our investigated sites and finishing up all the contract issues and so on. We think that September is a good time to get these things started and that’s what we are shooting for right now.

Now as far as the enrolment, you are absolutely right. We think that we can enroll this thing in about a quarter, is our hope. So, if we start in September and we enroll in a quarter, that puts us pretty much at the end of the year, by the time we do our analysis. As I said, there will be Q1 submission to FDA of clinical data then it’s really in their hands. So we said second half launch, obviously we are prepared to go as soon as they give us the green light.

So we based on our current regulatory understanding we have given ourselves a little bit of time there to make sure that we can answer any additional questions FDA might have and still meet our goals for you.

Bob Goldman - C.L. King

Let me go fast to follow up there and I will forego the general R&D question, but the follow-up is an IDE even required here and you do sound reticent to say, whether it’s has been approved or not and I’m just curious if it has or not or why you can’t say?

John A. DeFord

Well, so let me just be very clear. This product already has 510(k) concurrence and it will be used on label. So, it does not need an IDE for that study. So, there are no regulatory delays associated with this, but we will be collecting information, so it will be run with IRB approval. It will be run with full IDD controls, and so again we are not being delayed by a regulatory issue. We've got to work with our investigative sites and IRB is to get this thing going.

Bob Goldman - C.L. King

You are seeking though in FDA label claim next year that would eliminate the need for the confirmatory imaging?

John H. Weiland

That’s correct.

Timothy M. Ring

We are just looking to expand our existing labeling.

Operator

We have a question from the line of Douglas Tsao with Barclays Capital. Please go ahead.

Douglas Tsao - Barclays Capital

Just staying on topic with regards to the 3CG. I was just wondering if you had sort of thought in terms of introducing the product, rolling out the product without the expected marketing claim for next year. What that does in terms of your ability to capture all the price that you probably hope to get with the product when you initially planned on rolling out with the tip confirmation marketing claim.

I mean do you think that there is a challenge or that in initial rollout that you are not going to be able to get the price or how do you think about then needing to raise the price next year for basically the same product?

John H. Weiland

Our assumption is that the customer base will understand the value proposition associated with the product line as we roll it out.

Timothy M. Ring

To be clear as John said earlier, we don't expect and we are certainly not modeling huge uptake with this product. We want to get it out, make sure we’ve got our training programs in place. Haven't used obviously on label while we are conducting our clinical work, and so we don't expect this thing to be a big pop until we get those claims.

Douglas Tsao - Barclays Capital

Then in terms of what are you able to say in terms of how it's an improvement over the previous generation products?

John H. Weiland

We are able to say for our labeling, what the device does and how it's used. We still have the requirement within our instructions for use for confirmatory imaging, and so we expect to have a number of studies being done along with our own study to evaluate when they are doing that and obviously doing confirmatory imaging studies, how the product performs.

Douglas Tsao - Barclays Capital

Then just another quick question on the Foley catheter line. You made a comment that you were seeing evidence that hospitals were being more careful in terms of using Foleys, because they want to control or limit the number of urinary tract infections. Are you seeing any hospitals step away from using the I.C. product and going back to the standard Foleys in any instances?

John H. Weiland

We’ve seen a very, very few do exactly that, but it’s not a meaningful number.

Operator

(Operator Instructions). We have a question from the line of Jayson Bedford with Raymond James.

Jayson Bedford – Raymond James

I apologize for the background noise, but just one quick question for me. In terms of European sales growth at about 3%, it seems like you’ve been bumping around that level for a while and I realized there is a lot of uncertainties in that region. Are you seeing any benefit from the sales force realignment there? Are you fully staffed in Europe, and when do you expect to see the full benefit of that realignment?

Todd C. Schermerhorn

As you may recall, we were down 2%, I believe, in the fourth quarter of last year. We grew at 2% in the first quarter of this year, now 3% in the second quarter. I'd say we are cautiously optimistic.

We've completed reorganization, we are fully staffed where we want to be, and I think we are cautiously optimistic about what the up-tick will be from the number of people that we’ve added focused on the selling side of the business.

Jayson Bedford – Raymond James

And are you fully staffed? Are there any changes or any additions that still need to happen?

Todd C. Schermerhorn

There is nothing meaningful left to happen at this point in time.

John H. Weiland

Walk and attack one from here.

Operator

We have a question from the line of Brooks West with Craig-Hallum Capital. Please go ahead.

Brooks West - Craig-Hallum Capital

Couple of quick ones. In female urology, some nice growth out of the new continence sling and you are still suffering, from not having the new prolapse sling out? Are you generally seeing procedure volumes hold up in those areas? Then John, what was the timing again on the [NuVia] sling, and could there be staged anterior posterior?

John H. Weiland

I’ll jump in on [NuVia]. [NuVia] is late Q4 launch, so not meaningful this year, and that is anterior and posterior kits.

Brooks West - Craig-Hallum Capital

Both at the same time?

John H. Weiland

Yes

Brooks West - Craig-Hallum Capital

Okay.

John H. Weiland

It's also difficult to talk about the volumes when you have a new product that’s being launched out there, because you are in the mode of taking procedures that you hadn’t taken at a previous point in time.

That business was affected when the FDA made some of their pronouncements on the procedure and some warnings around the procedures. It’s really difficult to say exactly what’s happening in procedure volume from our base.

Brooks West - Craig-Hallum Capital

Then just a quick one on the surgical specialties. The XenMatrix product, it really seems like it's doing well. I’m wondering, is that just a hernia product or can that also be used in breast recon?

John H. Weiland

At this point in time, the focus is squarely on hernia with XenMatrix.

Brooks West - Craig-Hallum Capital

Any future plans to go into breast, I mean is that a transferable product?

Timothy M. Ring

We haven't really talked about that at this point. Obviously it's an area we are in with our AlloMax product and we are obviously looking to expand in all of our areas.

Operator

And our last question from the line of Tom Kouchoukos with Stifel Nicolaus. Please go ahead.

Tom Kouchoukos - Stifel Nicolaus

Just that most have been asked, but I wanted to drill down a little bit more into the full cardio deal and you guys had talked about kind of the synergy from that call point and then (inaudible) cardiologist that you could bring to LifeStent maybe broaden that up as well. Can you talk, I don’t know if you want to give absolute numbers, but can you talk about how many reps or maybe as a percentage of expanding your sales force you brought on with that deal and how much more exposure you have to the cardiologist today?

John A. DeFord

Because it's pretty competitive space, this is what I will say, when the CROSSER device was being sold by a handful of sales representatives before, we’ve incorporated that group into ours. Our entire sales force is selling it now. So there has been a pretty explosive increase in the number of people that are detailed on the product on a day to day basis.

Tom Kouchoukos - Stifel Nicolaus & Company,Inc.

Okay, that’s very helpful. Then just a last one. You might have given just a jump on the call late. Could you talk about what’s your expectations are for the currency impact on sales on that, I think you gave 8% to 10% growth for Q3, what currency impact are you expecting on the top-line and then maybe also for the full year?

John A. DeFord

Yes. Right now it looks like if the euro were in the low 120s, we would see about 200 basis points of unfavorable impact in Q3 and that could be as much as 300 in Q4.

Operator

This concludes our Q&A session. I would like to turn the call back over to Bard's management for closing or additional comments.

Timothy M. Ring

Thanks very much. In closing, I would just like to thank everybody for taking the time to listen in today. I would also like to take the opportunity to thank Bard employees around the world for another solid quarter and we will look forward to talking to you all at the end of the third quarter. Thanks.

Operator

Ladies and gentlemen, this will conclude our conference call, you may now disconnect.

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Source: CR Bard Inc. Q2 2010 Earnings Call Transcript
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