TearLab's (TEAR) CEO Elias Vamvakas on Q2 2014 Results - Earnings Call Transcript

Aug. 8.14 | About: TearLab Corporation (TEAR)

TearLab Corp. (NASDAQ:TEAR)

Q2 2014 Earnings Conference Call

August 07, 2014 04:30 PM ET

Executives

Bill Dumencu - CFO

Elias Vamvakas - CEO

Seph Jensen - President and COO

Analyst

Bill Bonello - Craig-Hallum

Drew Jones - Stephens Inc.

Chris Lewis - ROTH Capital Partners

Ben Natter - Emrose Capital

Ben Haynor - Feltl and Company

Operator

Good day ladies and gentlemen and welcome to the TearLab Second Quarter 2014 Earnings Call. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the call over to Bill Dumencu, Chief Financial Officer. Sir, you may begin.

Bill Dumencu

Thank you, Destiny. Just to remind everyone, certain matters discussed in today’s conference call or answers that maybe given to questions asked are forward-looking statements that are subject to risks and uncertainties relating to future events and or other future financial performance of the Company. Actual results could differ materially from those anticipated in these forward-looking statements.

The risk factors that may affect results are detailed in the Company’s most recent public filings in the U.S. Securities and Exchange Commission and the Canadian Provincial Securities Administrators and can be accessed through the EDGAR and SEDAR data basis found at www.sec.gov and www.sedar.com, respectively.

Please note that the Company is under no obligation to update any forward-looking statements discussed today and investors are cautioned not to place undue reliance on these statements.

I’d like to now turn the call over to Elias Vamvakas, TearLab’s Chairman and CEO.

Elias Vamvakas

Thanks Bill and good afternoon everyone. As with previous calls, I want to update you on our progress with respect to the commercialization of the TearLab system. As we reported earlier today, Q2 2014 revenues were 5 million, up 42% from last year’s second quarter. More importantly from a go forward perspective we returned to delivering strong sequential growth with Q2 revenues up about 20% from Q1.

In terms of expanding our install base and net of 171 systems were added in the second quarter. Of those, 126 systems were the Masters Multi Unit Program, 32 were through a minimum use access programs, two were direct purchases and 11 were purchased outside of the U.S. By the way, the systems we report are always a net number, meaning that we offset new placements with systems that has been removed or reassigned. I think that this is important to understand as I'm constantly been asked whether there are systems out there being returned and how we account for massive accounts who maybe downsizing.

To bottom line is that I think we now have an appropriate number of devices out there to handle our massive accounts requirements and there will continuing to be minor adjustments but all will be reported as a net number that we will provide for you quarterly. The other most frequently discussed issue is our guidance. Early in Q1 we issued full year 2014 revenue guidance of between 30 million and 33 million which represented angle growth of over 100%. While we didn’t have a lot of historical data to work with, we do our best to build it from the group up factoring in our existing recurring revenue base with systems placement estimates and what our sales organization expected to accomplish with respect to utilization rates and revenue growth.

As we discussed when we issued the guidance, we recognized that 2014 was our year to build an effective sales organization and get everything aligned in order to be able to deliver strong consistent growth. 2014 has been a building year as we evolved our commercial strategy which has included changes to our sales organization, compensation strategy reimbursement support and marketing initiatives. Frankly while we’re happy with all that we’ve accomplished so far and continue to be very excited about the opportunity that we see ahead of us, we are now recognizing that our timing and expectations were a little too aggressive with respect to how quickly we would capture the full benefit from the changes we started to make at the beginning of the year.

Now we’re two quarters of data and a better understanding of what we can reasonably expect from our sales team and based on the early positive impact that we’re starting to see from our initiatives, we have a lot better visibility into the remainder of the year. The bottom line is that we expect to see the sales momentum in Q2 continue through the rest of 2014. Doing the math with approximately 20% sequential quarter over quarter revenue growth in each of our third and fourth quarters, we think that our business will be able to deliver between $22 million and $23 million in total revenues in 2014.

While our guidance or at least the timing of it has changed, the way we see and run our business has not. Our primary focus continues to be on the integration of the TearLab [indiscernible] already test in a doctor's practice and we’re definitely seeing dividends from our efforts. In our last call we said that while we expected to see the results of our new initiatives weight in the back half of the year, there was a chance that we could see some early signs of that in Q2. I'm excited to report to you that our efforts are clearly taking hold.

To make things easier for investors and analysts to track our progress, we started reporting annualized revenue per U.S. device and committed to providing these revenues and utilization metrics for each type of contract for as long as it made sense to do that. As expected, our revenues per device for purchased units was virtually unchanged, however, we saw solid improvement in the utilization of our use contracts and more importantly we saw significant increase in our Masters’ contracts.

In our use agreements revenue per device great from 11,716 to 13,066. That’s a 12% sequential increase in the quarter. Our Masters’ units grew from 3,732 to 4,465. That’s a 20% increase in just this one quarter. We expect to see this trend continue. We’re also reporting revenue per account to provide further granularity and insight into our business. By account the annualized revenue was 3,664 for purchased units, 13,700 for use and 37,240 for Masters, again significant sequential increases of 20% just in the one quarter.

I think there are two takeaways from these metrics; first, they make our focus on Masters’ accounts more and more obvious and not only do we make so much more revenue per account but the potential revenue opportunity is also much bigger. Second, they point out to the fact that as we predicted, the majority of our sequential revenue growth is coming from increased utilization. In other words our growth strategy is working.

As we’ve discussed often before building an effective sales organization is key to sustained success. To that end, we made a number of important structural changes earlier in the year. One of those was the implementation of a new compensation plan that’s competitive in the industry while at the same time aligned with our overall corporate goals and more importantly our compensation philosophy which is designed to build a high performance organization. Those changes have been very well received by the majority of our team and as you can see from our Q2 results and guidance and while they are starting to have the positive impact that we expected, it has not been without some challenges that affected our timing.

Frankly, our sales team is split into two, albeit not equally fully sized camps. The majority doing very well, and the minority struggling. Obviously we like everyone to be in the doing well camp, but I think we have to put all this into perspective.

On average, our territory managers, that’s the title we gave our sales people, have been onboard for less than 10 months. In fact, more than two thirds of our territories have reps that have been with us for less than a year and more than half have been with us for less six months. In addition to that right now 20% of our territories are vacant. So clearly a big factor is a simple function of time and experience.

We have experienced significant learnings in identifying the kind of people that we need to build the high performance organization and at the same time we’re facing competition for talent from new entrants into the eye care diagnostic space. I have mentioned many times in the past that we do not see newly approved diagnostics as competitors and I happy to have other tests help build our category. However we’re finding ourselves competing with them in recruiting good sales people. As I said earlier we view 2014 as a major building year and the most significant aspect of the focus in our sales organization.

We are adjusting our force to requirement accordingly and we think that these learnings are going to help us build a strong sales organization going forward. When you put all this in perspective to be able to achieve 20% quarter over quarter growth with a sales force that has been with us for less than a year and with 20% of our territories currently vacant, it’s truly a testament to the value proposition that our test offers and the acceptance that Osmolarity as a vital sign of cornea and ocular surface test has created.

As with previous calls, I’d like to share with you where we stand with our device tallies. All of the numbers that I'm about to give as of the close of Q2 and exclude devices used strictly for research and/or educational purposes. At the end of Q2 we had 2,838 commercial units contracted in the U.S. Of those 2,746 were active while 92 have not yet been activated. Of the 2,746 active devices 254 were purchased, 774 were under minimum use contracts, and 1,718 were under our Masters’ program. In the rest of the world at the end of the quarter we had 514 devices.

Thank you again for taking the time to join us. Before jumping on to the Q&A session, I want to take this opportunity to briefly update everyone on the R&D front. As you know Dr. Sullivan and his team have been doing research for a next product for some time now we have resisted talking about it until it became closer to being a reality. I'm happy to tell you that that time has come. Most of the research has been completed and we are moving into the development phase and we are now finalizing development contracts with our partners. What’s most exciting is that we have leads on the development of a standalone IgE antibody test for allergy and have developed a whole new platform that combines a panel of tests including IgE and potentially other biomarkers and tiers along with Osmolarity; all in one chip, all quickly immediately at the point of care and all at one time with one sample. We are starting to plan an Analyst Day on September 23rd at our lab in San Diego to more formally introduce this new technology. We will be providing more details about that soon. In the meantime if you’re interested in attending just let us know.

On that note operator, please open up the call for questions.

Question-and-Answer Session

Operator

Our first question comes from Bill Bonello of Craig-Hallum. Your line is open.

Bill Bonello - Craig-Hallum

A couple of follow up questions. So I am just trying to understand on the sequential improvement. Last quarter you talked about a pretty substantial impact from the weather. And so I guess I am trying to figure out how much of the move we saw sequentially was simply accounts that had been utilized and at a nice pace returning to sort of normal utilization levels from what had been below normal because of the weather versus accounts that weren’t good utilizers really ramping up?

Bill Dumencu

Bill I am going to say that last quarter when we talked about the weather and people tried to put a number around that. We had no idea what the impact was and still don’t have any idea really what that impact is. The thing about weather with our accounts is that it’s not as if people are going to make up for it after it’s gone. The vast majority of doctors see X number of patients a day and they all with the X number of patients a day. So if they lose a day of testing, that day is gone. If you lose a day in the office, that day is gone. If you lose a day in surgery, that day is gone. So I would personally think that this would be minimal affect from the weather but I think when I'm out in the field then and Seph you can comment on that as well. We are definitely seeing the implementation work that we’ve been doing taking effect we’re seeing accounts growing significantly and frankly in many cases beyond what our expectations were.

Bill Bonello - Craig-Hallum

Okay, that’s helpful. I guess the other thing is just sort of understanding a little bit about the numbers are moving around and maybe combing that with your prepared comments. I'm not sure, you said you wanted to clarify that the numbers are net and you said because you get questions about returns and Masters’ accounts downsizing and you think the number of systems in the field is now appropriate. So I guess what I'm trying to get a sense of is have there been accounts that have been returning systems, that had too many systems. I noticed the number of used accounts actually went up but the number of used devices went down. Just sort of trying to figure out what’s actually been the experience there?

Bill Dumencu

We’ve had an action plan of going in and visiting every one of our accounts and making sure that that they have the appropriate number of devices and that we had the appropriate number of doctors by then. I think what we experienced in most cases is with the large accounts you may have 20 doctors in the practice but only five of them are really interested in using TearLab and the other doctors don’t know enough about it and are going to see how these first five do and so on.

So that’s one of the effects. So when we go into accounts we want to make sure that they have the right number of devices. They're not just sitting in a corner not being used. And just as importantly that there isn’t a significant amount of inventory sitting on the side of cards that has not been used. And that’s part of the effort and we talked about the fact that we’ve gone into every one of our accounts and that we are seeing where exactly we stand with utilization and we’re working to change that and because of inventories because of timing we were going to see effects of that happen as time went by.

So I think you are seeing the significant increases that you’re see in utilization because of those efforts and as I said I expect those to continue to increase. To give you a specific answer to your question I am going to turn over to Seph I know that we haven’t had -- I know we've had devices returned but it’s a very small number in the rightsizing of our Masters’ accounts. Seph you may have more specific color there.

Seph Jensen

Yes, sure. Yes, so Bill I would say two things. First of all when you look at the total number of devices I think you have to factor in that that number, even though it went down for use, that doesn’t only reflect some rightsizing process and as we’ve been working with these accounts and integration, many of those accounts that were in use are actually moving up into our Masters program. So there is a transition that we’re seeing from use to Masters so a lot of that reduction is representative of that.

The other thing is that as we have worked with accounts to get the right number of devices, certainly we’ve taken devices back but that is very different from standard accounting. We're going to return the whole TearLab systems. So there have been a very, very small number, maybe a couple of handfuls of accounts but in terms of devices you can see the total number up. A lot of that is migration to our Masters accounts.

Bill Bonello - Craig-Hallum

Okay. And then just I’ll let you go but presumably those were higher utilization accounts. So that’s helping boost the Masters’ utilization number a little bit when somebody switches from the use bucket to the Masters’ bucket?

Seph Jensen

Well, certainly. They get to level of integration to where now they’ve got a volume, they’ve got a flow working to where they can support Masters and they get more people inside of an account on board. So certainly that is a contributing factor, no doubt.

Bill Dumencu

Well, actually Bill I think just to clarify your question they don’t just turn into a Masters’ account from a use account. You have to have five devices or more to become a Masters’ account. So what actually happens is as doctors integrate the device into their practice and understand the potential and the value that it brings, they look at it as I mentioned many times and say wow this is critical in order for me to integrate properly, I have to have one for every lane in my practice.

So it’s not as if you’re taking a device that’s being 13,000 of revenue and putting it in a pool of devices that has a lower revenue amount because if you just have the same utilization in an account that was using one and now you put in five devices that actually would bring the whole average down. So you are actually seeing true increase utilization, not just movement of accounts.

Operator

Thank you. Our next question comes from Drew Jones of Stephens Inc. Your line is open

Drew Jones - Stephens Inc.

Could you talk a little about the impact you are seeing from the reimbursement liaisons and how many accounts that they’ve successful at turning back on?

Bill Dumencu

So what we’ve seen, when you say turning accounts back on obviously you are talking about getting that utilization back to where you want to see it. In general seeing a positive trend on our accounts that have been hold to moving of uphold. And the biggest thing from a reimbursement standpoint, as you know there are a myriad of private pay plans out there. So we still have ways to in terms of contacting all of them and working through all of them, but what we can tell you is we continue to go into quote unquote problem areas where reimbursement at the private level is lagging behind the Medicare and even in our worst places now when we average all of the coverage together with Medicare we are finding average reimbursement barely at $20, right around $19.50. And those represent the customers, the markets where it is the biggest challenge. So I think it is pretty clear to see that when Medicare is right around $22 and we're getting a total average of $19, that that group is clearly having a positive impact we need.

Drew Jones - Stephens Inc

And how many you are in that group now and is that a sufficient number?

Elias Vamvakas

We have four and so for right now they are having very deep coverage of the country. We’re at a point where when customers have a problem we are able to point them to the reimbursement support specialist. So we don’t see a need to scale differently at this time.

Drew Jones - Stephens Inc

And then the last you touched on competitive technologies and all the conversations around that. Do you guys have clarity into your 200 Masters account how many of those are using TearLab system in concert with other technology?

Elias Vamvakas

I don’t have specific numbers. I would have to say its early days still but I would have to say that other technologies are doing fairly well and being adopted into practice. So I can’t give you a percentage because we don’t track that in any way but I think generally when I go to meetings and conferences, I hear the recommendation from many of the doctors is that everybody using advanced diagnostic technologies and certainly it’s a trend that we are seeing and it’s a trend that we are very excited about?

Operator

Thank you. Our next question comes from Chris Lewis of ROTH Capital Partners. Your line is open.

Chris Lewis - ROTH Capital Partners

In terms of the utilization improvements, something you can talk more a bit about just the timing and how we should think about that from the time you go in which is the wrapping a specialist into a Masters account and kind of get them up and running back to kind of full expectations I guess in full volume. And two kind of the on the other side, when the pickup in utilization and card orders have been, I would suspect there is sometimes a lag there, but maybe just walk us through that process.

Elias Vamvakas

Yes, I am happy to take that. So I think there is really two things and two scenarios I would outline for you. I think when we are signing up a new account or doctors are starting TearLab new, there is the integration really across the practice that needs to happen. So they have to understand from an accounting and finance standpoint, what reimbursement looks like and be prepared for that new code and that takes a little bit of time. You have to work with the technicians to figure out where you are actually going to put the devices so they can handle patient flow and where it fits into, how they are currently handling the different parts of the business from the patient. And then obviously we have to work with the doctors to make sure they understand really what our data gives them, what Osmolarity tells and how they are going to use that number to better manage their patient. So the ramp up for a new account, I would say from the time that they are exposed to the technology, maybe three months to six months and that’s obviously a clear waiver as well which we talked about a lot. So I think we see three to six months in new accounts, when we are working accounts that have stalled, then there is a variety of things that we address but once those things can be addressed from a current account, we often see not a slow ramp back up like a new account, but they will come right back on board.

But then typically we’re handling one of those clinical questions, we’re managing reimbursement questions and once those are addressed, the ramp returns very, very quickly.

Chris Lewis - ROTH Capital Partners

And then of the 206 I guess active Masters accounts out there have all of those accounts been I guess touched or gone back into by the implementation specialist group.

Elias Vamvakas

Yes. So the implementation specialist group, that’s really what they were. Their whole job description centers around Masters account. So, we certainly have a frequency of touch if you will with our Masters account is a level. So the coverage is not a problem with our Masters.

Chris Lewis - ROTH Capital Partners

Okay. And then on the order side, I think net place sense of 171 obviously the focus here is more on driving the utilization. But is that 170 good number quarterly number to think about in terms of orders going forward?

Elias Vamvakas

If I look at I don’t think it’s a bad number again I think we’ve talked in previous call our focus this year has been very much on driving utilization and not just getting distribution. So I think last quarter we were closer to 200-250, I think as we go forward we’re going to continue to focus on driving utilization. I think that the fact that we’re well through the right sizing process the fact that we’ve got a lot of customers through the learning curve on what Osmolarity tells them how to use the number and understanding reimbursement. We do expect that to free up some of our team to go out and work on developing new accounts.

So I think that would be on the low side but I don’t think it will be far off what you saw this quarter.

Operator

Thank you. Our next question is from Mark Massaro of Canaccord. Your line is open.

Unidentified Analyst

Thanks for taking my call. This is Dave filling in for Mark. Can you give us let us know where you are in terms of commercializing and monetizing OcuHub?

Elias Vamvakas

OcuHub is at the early launch stage they have a number of accounts that they’ve gone into and are working training and educating what we have found is that the largest customers once with large networks time just not ophthalmologist are very keen to get started early and so we’re in the process of installing systems in there. We hope to be live working with the system in September. So we’re making great progress and we’ve got lots amounts of interest in the field.

So we’re thrilled with kind of the uptick and interest level from some of the biggest accounts in the country.

Unidentified Analyst

Okay, thank you. And just a follow up on inflamator (Ph) I got received the clear waiver in February and I know you said you’re not really seeing the competition as much as you’re seeing pressure for a sales force. Is that from inflamator?

Elias Vamvakas

I think they as well as [indiscernible] has come out with it with the test for AMD and Sjogren's disease. So I just think generally the whole the market I think the business community is seeing a tremendous opportunity in the eye care space to be able to provide advanced diagnostics as opposed to some of the tests that have been around for 100 years.

And I think we paved the way in terms of doctor acceptance and we’re certainly continuing to pave the way in terms of doctor acceptance. And I think you’ll see a lot of other entrance to bring eye care at the similar -- from a disciplined perspective no different than all other medical dispensary, which use a lot of lab testing diagnostic test.

So I think you’ll see a lot more of that coming I don’t see it as again I don’t see as competitive but we welcome the whole category growing because honestly our biggest challenges is getting doctors to understand that they can practice differently more efficiently more effectively with lab test. And I think having more people out there demonstrating that point is a big winner for us.

Operator

(Operator Instructions) Our next question comes from Ben Haynor of Feltl and Company. Your line is open.

Ben Haynor - Feltl and Company

You mentioned that 20% of sales territories are vacant and some of that is due to competitors taking off your sale guy or complementary test in certain cases. How quickly do you think you can get those territories back filled up and is it all due to attrition or is some of it due to new territories that you haven’t filled the position yet?

Elias Vamvakas

I’ll take that, so turning to the first part of your question I would say we don’t think long I know that’s not very detailed but we do think we’ll be able to fill them relatively quickly. However, obviously one of the things that we’ve learned a lot about is the profile of sales reps that we think can be successful with TearLab and so we’re not going to rush to just fill we got to make sure we find the right person for organization and for the role that our field sales reps play.

And that’s not exactly like the traditional pharma sales model. So I can go in more detail on that if you’d like. But we do believe there is a lot of candidates out there if you’ve been watching the space there has been a lot of activity in space from some of the bigger companies which we think have created kind of very fruitful market out there. And we’re also going to look outside of ophthalmology which we think can provide some really good talent and the right profile and experience that can be successful.

So in terms of the turnover in terms of where we are I would say a lot of it is attrition. Again as Elias said I think the fact that we were the first ones in this diagnostic space and when you see people like TearScience and Eye Cox and our [indiscernible] come in we’re the ones that were already established having success. So there is no one else to pull from to put into their company. So it wasn’t surprising to us. But again I think it’s been as part of moving to those companies but at the same time making positive changes to make sure that our sales force is composed of the right profile that we want. So lot of this contract upon our side as well.

Elias Vamvakas

Yes. And if I could just add a comment just a comment on that. I would say that a small part of the loss has been through other company. That I think part of the culture we’re trying to building is an organization where the sales people really get paid for performance not activity. And we put together a competition plan that had a very significant 50% of the competition was variable performance. And that was really paying for results. And I think that culture is the culture we want to build in our organization and that culture has created both change that you see and loss of attrition of sales peoples, not all of them have been voluntary impact. I would say that most of them have not been voluntary as part of the process of rightsizing and getting the right people in place.

Ben Haynor - Feltl and Company

And then do you have a figure that where that may have been at exiting Q1 or exiting at the end of the year in terms of vacancies.

Bill Dumencu

I don’t know the exact number we didn’t look at it -- in that detail. I don’t think it was radically different. I think it’s been a process as Elias said we’ve been proactively working through. So I certainly not unlike how we’ve been rightsizing with our accounts and we feel like we’re in a very strong position now to really focus on growth. We’re getting into the right position with our sales force too. The people we have on Board now we just finished two sales meetings one on the west, one on the west, very, very positive and we think the sales force is highly focused and motivated and we are on the same page now. So as we fill these final few territories, no sales team ever runs at perfect efficiency but we clearly feel that we are closer to that than where we were in Q1.

Ben Haynor - Feltl and Company

And then the purchase devices ticked up pretty good at least the once that were active. Is there a reason for that?

Elias Vamvakas

Nothing other than we are going after every one of our accounts and making sure that they understand utilization, make sure that we are servicing them. And like I said and generally I think there was a very the wind is very much in our favor here with the value of diagnostic tests. I think doctors are ringing me that I go to, everybody is talking about Osmolarity is being a vital sign of iHealth. In the last meeting that we’ve been through everybody talks about the fact that you really should be doing any surgery in the eye without measuring Osmolarity. So I think we are getting a significant amount of I am going to say industry acceptance, doctor acceptance that is moving down to our focus with our accounts utilization as well as new account and we are seeing lots of interest.

Ben Haynor - Feltl and Company

And then you mentioned IgE moving along in the development timeline. How soon do you expect that you might be able to introduce that? I am assuming that’s sometime in 2015. Would it be first half, second half?

Elias Vamvakas

Well, what we want to do is want to lay out a more detailed path of exactly what we are doing. And that’s why we said that we are going to have sort of an Analyst Day through that. I would say products getting out in the markets there are two timings that you have to consider, one is for research purposes which is much quicker as well as the commercial products. And the difference between those two is regulatory. And we are not a 100% sure on the regulatory path because we have, we’re talking about a platform and we’re talking about a [indiscernible] with more than one test on it. So the regulatory side of that might be a little longer but the end result is going to be amazing and certainly works the way. But anyway we want to provide a lot of color and more insights to kind of what we are doing and where we are going with the future of our technology.

Ben Haynor - Feltl and Company

And then lastly, given the guidance update for 2014 and the improvements you’ve put in place in terms of the sales trend and the structure and getting the accounts on these protocols. Would you expect 2015 growth to accelerate off of the base that you put out there in last guidance for 2014?

Elias Vamvakas

Yes, accelerate is a broad term. Honestly, I think everything we’re seeing is showing really positive results. So I’m going to say that yes I expect it to continue to accelerate and I expect that from what we are seeing is a utilization with new accounts to be much quick and much more immediate as part of the process.

Operator

Thank you. Our next question comes from Ben Natter of Emrose Capital. Your line is open.

Ben Natter - Emrose Capital

Obviously there was a slight reduction in guidance and I noticed obviously placements were down and cash utilization looks to be around above 5 million. So I guess I am wondering how you are guys are thinking about obviously revenue is coming down, are you thinking about any cost initiatives to preserve kind of liquidity as you move into the back half of the year and do you have any sort of estimate for us on where we could end the year in terms of cash?

Bill Dumencu

Not really, we are not looking at cost cutting from a business perspective in fact we are very comfortable with where our cash flow is. We were investing in a business and we’re seeing that investment they often seeing that investment grow. So I think what you should expect as we continue that our cash burn to reduce as our revenue continues to grow.

Operator

Thank you. We have a follow up question from Bill Bonello of Craig-Hallum. Your line is open.

Bill Bonello - Craig-Hallum

Just again sort of coming at this recalibration of the guidance and I guess trying to get a sense of as you look out longer term whether there has been any kind of change in what you assess ultimately to be the utilization at a typical account or used to talk about $15,000 annual rate per system. I mean does the potential that you see remain unchanged or as you’ve gotten further into the process I guess and I am trying to get just simply moderating a sense of the time the pace at which accounts are going to ramp up or is a moderation of the sort of magnitude of what that ramp up might ultimately be?

Elias Vamvakas

Bill, I am going to say that that I see the business and the market to be as strong potentially as we’ve ever seen it. And I see the future to be as big if not frankly bigger. I am very comfortable with our clinical position and how doctors see the test. And I continue to believe that it’s just a matter of time before it become standard of care. Timing is the issue for us. I am going to Seph to give you his opinion on that question.

Seph Jensen

Sure. First of all, I’ll give you a little different color but my result is the exact same thing. It’s anything a more bullish on the long term potential. One of the things we have to keep in mind here is that all of the modeling all of the discussions that we’ve been talking about and legitimately really that we’ve been focusing our commercialization efforts on is centered around classic dry-eye. And as we’ve continued to work with our consultants, the key opinion leaders in the market we actually are getting a lot of interest proactively coming to us about the application of our technology and as it relates to things like cataract surgery even directly.

So we believe that market is a market that is really near and something that we’re going to see results from soon. In addition to that, we think contact lenses both of which we talked about in the past but again the difference now is as we’ve gone through more months and more time we’re continuing to hear feedback about the importance of what we’re doing and how it relates to better outcomes in both of those other applications.

So dry-eye is just one aspect. So I think when you look long term the thesis is very much intact.

Bill Bonello - Craig-Hallum

So clearly in terms of the breadth of the physicians that you might think would adapt this et cetera but should it within an individual practice? You also think the utilization you continue to believe it ultimately within a given practice will be as high as what you had previously believed?

Elias Vamvakas

No we’ve done a lot of work in that area in trying to understand our business and the potential around our business and now that sort of stuff in. We’ve been modeling what’s the best thing to look at from a business standpoint is that accounts as a doctors devices at the end of the day as I mentioned before for us the number of devices out there is really all about making it most convenient for a doctor.

So we’ve been looking at different metrics overall. I am going to tell you from what we’ve seen is the best metric that we’ve seen so far is the number of tests that a doctor does whether he does it in one lane, two lanes, three lanes or five lanes, probably doesn’t make that much of a difference. And we are not seeing that number be really any different than what we’ve seen in the past. We see the doctors seeing potential ex number of patients.

And whether that those patients are done with once device or five devices it probably doesn’t make that much difference to us I know it make some difference in the revenue per device numbers but that’s why we’ve always looked at the size of the market. We’ve always talked about 50,000 doctors and I think it’s bearing out to be the accurate way of looking at the maximum and total potential of the business.

Bill Bonello - Craig-Hallum

That’s very helpful makes sense. Okay, thank you.

Operator

And I am not showing any further questions at this time.

Elias Vamvakas

Thank you. I will say thank you very much for joining us on the call. If you have any other questions or thoughts, we’d be happy to answer any questions that you have. Thanks again and have a good day.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. You may all disconnect. Everyone have a great day.

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