Safeguard Scientifics Inc. Analyst Day Conference Call Transcript

| About: Safeguard Scientifics, (SFE)

Safeguard Scientifics Inc. (NYSE:SFE)

Investor Day 2011

October 4, 2011 8:30 am ET


John E. Shave III – Vice President, Business Development & Corporate Communications

Peter J. Boni – President and Chief Executive Officer

Stephen T. Zarrilli – Senior Vice President and Chief Financial Officer

Kevin L. Kemmerer – Executive Vice President & Managing Director, Technology Group

David LangsamPresident & Chief Executive Officer, AdvantEdge Healthcare Solutions, Inc.

Dan Rosenberg – Senior Vice President of Business Development, MediaMath

James A. Datin – Executive Vice President & Managing Director, Life Sciences Group

Jane H. Hollingsworth – Chief Executive Officer, NuPathe Inc.

Jean Hoffman – Founder & Chief Executive Officer, Putney, Inc.

Ronald Blum – Chairman, President & Chief Executive Officer, PixelOptics, Inc.


Vinny Olmstead – Bridgevine Inc.

John E. Shave III

I've been here this morning, and especially our six partner companies that are going to be the highlight of our program today. We do have a jam-packed session. You will hear from four members of Safeguard management and six partner companies, and we’ll have you out of here at 11:30 sharp.

I’m sure that you will all make yourselves familiar with our Safe Harbor statements. We give this at the beginning of the program and have this be the Safe Harbor for each of our companies. I also want to remind everyone that the event is being webcast. So, for the presenters, when you do the Q&A, please repeat the question so that people viewing online get a good feel for what we are doing here.

And then when I was thinking about the event, and what really got me excited about it, it’s twofold. And two weeks ago I was at a Credit Suisse Conference down in Charlotte for emerging managers, and when they were laying out the data of venture capital and private equity investments, the 2006 vintage year venture investments have a 1.2x cash-on-cash return. And when I compare that against what we’ve been able to do, that tells me that we are performing at the highest levels against the broader group. That gets me excited.

And then the second thing that really got me excited was, when I looked at the companies that we're presenting, I thought it was a really good mix of a few companies that have been on – in the Safeguard family for a few years. So you can clearly see the value that’s being built in those. And then you also get a good feel for some of the newer things that we’re doing.

So two of our most recent partner companies will be here, Putney and PixelOptics, so you’ll get to hear all the good stuff some of our ’06 and ’07 and a ’08 companies are doing and you also get a good feel for the types of companies that we are working with today.

So with that, we have a good program lined up and I will turn it over to Peter Boni, our Chief Executive and President.

Peter J. Boni

Thank you, John. Good morning. So here at Safeguard, 58-year old firm with a real history of innovation, the first company of its kind listed on the New York Stock Exchange and actually the first company to do a subscription rights offering of a high-tech company, and this is how a couple of dozen firms actually got a public face, including QVC, Cambridge Technology Partners, Novell and a whole host of others.

We have an experienced team of people that you will see here today, participating in two attractive sectors of the economy, technology and life sciences. We’ve generated some very strong, proven results and have enormously shot up our balance sheet. So today, this is a raging buy for any would be shareholder.

We’ve been executing a five-part game plan since I joined the company at the end of 2005. If you recall ancient history, we had legacy firms, about a dozen of them that were stable services firms meant to give the company some stability after the burst of the Internet bubble, a lot of growth, lower valuation metric, high CapEx requirements.

The game plan was several fold, first of all build value in those legacy firms, realize the value with well timed exits, transform not only on our group of companies to be higher growth, higher valuation metrics, lower CapEx requirements, but also transform our balance sheet then begin to realize some value on those newer businesses that we’ve been putting on the books beginning in 2006. Now with the success there, go through some degree of platform expansion. So we are really pleased that we’ve been executing well against this game plan.

Among the team that you will see here today, Kevin Kemmerer, on the right of my picture, and Jim Datin on the left of my picture, and our support staff, General Counsel, Brian Sisko, John of course you know and Steve Zarrilli, our CFO.

The (inaudible) for the Safeguard Scientifics talent base is we have operational experience at the sea level as well as experience on the deal side of the house, and that goes for our support staff, as well as our deal teams and this is a significant differentiator for our business.

Now my mother is right, you are judged by the company you keep and I never like to be a lone ranger; I like friends and family along the way to help us out. We have developed great alliances and syndication partnerships with leaders in their fields. To include, the venture arms of J&J, Pfizer, Lilly, Glaxo and the like. We have built a strong advisory board of technology and life sciences professionals with great domain expertise in the areas that are strategic to our interest and our board of directors, similarly experienced, technology, life sciences, private equity, venture capital, finance and the like.

Our game plan or our business model is very simple. We are deploying capital in new and interesting situations in the tech and life sciences sector. We might do growth buyout financing, growth equity financing, we could do some early stage financing and we have the capacity also to do some selective debt financing. We partner with our partner companies in tech and life sciences and we work to build value, and we realize that value with well-timed exits.

That’s the driver of the economic engine; we are not an operating company. Revenue and EBITDA is not the way to measure the success of Safeguard Scientifics. Now, many people hear that and they say, well, Safeguard is a public venture capital vehicle, or Safeguard is a public private equity vehicle. There is some similarity, but there are many more differences.

First of all, we don’t play quite as early as the A round venture capital community. We don’t play quite as late as the private equity community. We’re somewhat of an in-betweener. We’re in early enough that we have a chance for a ten-bagger but we’re not in so early that we’re going to face 40% of everything that we deploy as a goose egg, which is the A round formula, 40% goose egg, 40%, you’re lucky if you get your money back and 20%, you’re making money. That’s not our formula.

We provide operational support services to our partner companies. We don’t fish for them but we help teach them how to fish as they go and grow in their business.

Now recognizing that our people have operational experience at the sea level, when we take board seats we don’t give advice based upon some case study we read in business schools. We give advice based upon scars of experience on our backs and that is usually valued to be much more helpful to growing a business.

Now from a shareholder perspective, you can put in a little bit or a lot. If you are a limited partner and a venturer or a private equity firm, you'll also have two choices; you put in a lot or a lot more. Here, you have immediate liquidity; you don’t have to wait several years for a distribution. There is plenty of liquidity. You can get in or out at any time, or in, out and back in again at any time.

And remember, this is New York Stock Exchange governance, so all of the transparency that comes with that as opposed to cloaking everything we have with a great deal of secrecy. So lots of differences in the Safeguard model. And our business model is different. When we have an exit, any gain that we’ve had has been sheltered from taxes by our NOLs and the money has been evergreened on our balance sheet, hence with self-funding to a management team, that says that we have a little bit more patience built into our model and we’re not likely to do a forced exit in a few years in order to return capital to limited partners and then raise a big fund every few years. So lots of differences in our model.

We have categorized our companies in four different buckets. We have developmental stage companies, and by the way, green is life sciences and blue is technology. Developmental stage company does not have revenue. They go into perhaps the latter pieces of the FDA approval process or they could be getting out of beta test and getting ready to go to market.

We have some initial revenue stage companies, up to $5 million just gaining penetration with their product offering and developing a testimonial customer base. We have some expansion stage companies, 5 to $20 million in revenue, full management team, full infrastructure, really gaining position and notoriety in their space and then we have a whole host of high traction companies, 20 to over $100 million in size, leadership in their space, making money, growing rapidly or on the edge of turning profitable. We can enter at any stage and we can exit at any stage. We don’t have to start on the left and then work our way all the way to the right before we exit.

To give you some examples, I’ll go from bottom to the top. The last two, Clarient and Avid were some exits that Safeguard had in the December timeframe of last year. Clarient, as you might remember, was once upon a time ChromaVision Medical Systems. This was a failing legacy company in the portfolio when this management team came in at the end of 2005, the beginning of 2006.

Now, as opposed to just selling this off, like we did with the other 11, we had a vision of taking the cellular imaging technology and using it to build a cancer diagnostics services business. We rebranded the business, Clarient, CLRT under NASDAQ, brought in a strong management team headed by Ron A. Andrews, who did a marvelous job working with Safeguard to build that business from $11 million to a $120 million in revenue. The company was making money, growing, and GE Healthcare found that to be really strategic asset for them. As a matter of fact, they are advertising GE Healthcare on television, featuring that they can now diagnose cancer at the molecular level. That is Clarient; they are advertising Clarient.

This was a $208 million of aggregate proceeds that Safeguard picked up from a series of exits in Clarient. That was the largest cash return in Safeguard's 58-year history and actually it was a 5x increase in the value from the time we repositioned the business until the time we sold it to GE. So we were really pleased about that exit.

Avid Radiopharmaceuticals was a developmental stage company with a diagnostics for neurogenerative diseases starting with Alzheimer’s and dementia. They proceeded through all three phases of the FDA. We are going to an NDA, and Eli Lilly, that was a venture investor, a syndication partner at Avid, put an offer on the table that was really very strong. It was a 3x cash-on-cash return for Safeguard initially, but with an earn out that if achieved could be 8x. So we are really pleased with this exit as well.

We had 2 exits so far in 2011, Advanced BioHealing and Portico Systems. Just to give you a case study on ABH, this was a regenerative medicines company that was once upon a time inside of the British firm, Smith and Nephew. Smith and Nephew penetrated the marketplace to a small degree. They built a lavish, beautiful manufacturing facility in Southern California, but they never figured out the pricing and reimbursement model. So what did they do? They closed the whole business; they shut it down.

Safeguard acquired the assets along with the syndication partner and worked with their management team. We hired back all the people and brought in another management team. We worked with that CEO and his management team. So we defined the pricing and reimbursement model, and they went back to the marketplace with their lead product Dermagraft in 2007. This was a cellular-based artificial skin used for diabetic foot ulcer and burn patients.

They increased their revenue from nothing in 2007 to $145 million in 2010 and filed an S1 and were getting ready to price an IPO when Shire came in and offered a 25% premium on the midpoint of that pricing range. And that was earlier this year.

The aggregate proceeds for Safeguard on that was $145 million back for the $10.8 million we put in. That was over 13 times cash-on-cash return or 90% IRR. That’s the example of the ten-bagger. We want to do that everyday, but it sure is nice when you do it. So we were just thrilled with how well ABH had built itself and were pleased to be a partner with them.

Portico Systems was a IT healthcare firm with the piece of software that enabled health insurers to design, build, manage, reimburse and support their healthcare provider networks. If the mandates that the payer and provider Portico Systems just to give you a case study on ABH. This was regenerated to the medicine’s company that was once upon a time inside of the British firm Smith & Nephew. Smith & Nephew penetrated the marketplace to a small degree, they built a lavish beautiful manufacturing facility in Southern California, but they never figured out the pricing in reimbursement model. So what did they do? They closed the whole business, they shut it down.

Safeguard acquired the assets along with the syndication partner and worked with their management team as we hired all back, we hired back all the people and brought in a new management team, we worked with that CEO and his management team to redefine the pricing and reimbursement model. And they went back to the marketplace with their lead product Dermagraft in 2007.

This was a cellular based artificial skin used for diabetes foot ulcer and burn patients. They increased their revenue from nothing in 2007 to $145 million in 2010 and filed an S1 and were getting ready to price an IPO when Shire came in and offered a 25% premium on the mid point of that pricing range and that was earlier this year.

The aggregate proceeds for Safeguard on that was a $145 million back for the $10.8 million we put in. That was over a 13 times cash on cash return or 90% IRR that’s the example of the (inaudible). We won’t do that everyday but insures nice when you do it. So we were just thrilled with how well ABH had built itself and we’re pleased to be a partner with them.

Portico Systems was an IT healthcare firm with a piece of software that enabled health insurers to design, build, manage, reimburse and support their healthcare provider networks, if a mandates to the payer and provider of healthcare must use commonality of various claims to protect the privacy of any patient, this regulatory compliance were among the things that Portico enabled.

So they built a few dozen customers including some big names CIGNA the big blues serving over 42 million members. The revenue increased significantly by double digit rates from 2007 to 2011. They were recognized as a leader by the Inc. magazine, by Gartner group leadership in their space and Maccazine found that this was really a strategic asset for them. With that $90 million in cash we’re anticipating that’s a four times cash on cash return for Safeguard or a 36% IRR, so very strong performance for Portico and for Safeguard.

Today with our companies aggregate revenue we’re forecasting that has grown from $30 million in 2007 to a forecast range of a $175 million to a $182 million this year, that’s up from a $140 million last year. So I think (inaudible) one would agree that in the face of some difficult economics over the last few years that’s pretty awesome growth.

We have 13 companies in our holdings today. We hold 21 board seats in these 13 companies, we always take a board representation of a firm, hands on with the management team. We are not a group that would show up every quarter and say hey Louis how is it going, we partner with people to build value.

Three of our businesses are making money today. Two of them are in the NDA process of getting their product and through commercialization. In aggregate, since the beginning of 2006 we’ve deployed $286 million and we have realized $631 million back since January of 2006.

We always measure our partner company’s satisfaction with us to determine how we might do things better to improve their building a value, and we measure their satisfaction and our performance. And we are pleased to tell you that every year we continue to increase in our scores with very strong satisfaction and highly testimonial recommendations from our partner companies.

So that’s the Safeguard Scientifics story with a significantly under valued stock that Steve Zarrilli, our Chief Financial Officer, who will outline to you today. Come on up Steve.

Stephen T. Zarrilli

So, good morning. Just a couple of quick slides here and then we’ll open it up to Q&A.

So, when you think about the financial fundamentals of Safeguard it’s not a very complicated analysis. The things that we focused on obviously are the amount of cash or capital that we have to deploy, how we are managing the right set of our balance sheet with regard to obligations, and that debt-to-equity ratio. We also have a, still a fair number of loss carry forwards, so we don’t anticipate paying taxes on future gains for quite some time.

So when you look at the picture, we have about $280 million of cash before the repayment of some long-term debt, which today is an outstanding balance of just about $46 million, which is due in March of 2014. Our debt-to-equity ratio has substantially improved, in fact we probably have the strongest balance sheet that Safeguard has had in the last 15 years and our debt-to-equity ratio today is 1 to 8; it was 1 to 1 just about five years ago.

We have been managing our operating expenses. There was a slight increase this year for some initiatives with regard to our platform expansion, and the addition of a couple of key hires, but we still very much focused upon how those expenses relate to assets under management. But please keep in mind that when you look at our expense structure and begin to look at other comparables if you will from a fund management perspective, we do employ a number of key resources with operational capability and functional expertise that we’re able to apply to helping our company’s growth and ultimately get them to the point of a monetization event. And we do believe that that’s the value added attribute to Safeguard. We’ve heard that feedback from our partner companies that if that is the case. So we continue to work very hard to make sure that we have the right balance and skills in order to be a true value added partner to our partner companies.

And then the platform expansion initiatives are really there to not only diversify and expand the capital under management but to provide current income streams so that we can offset some of that operating expense and I’ll talk about (Inaudible) in just a minute.

So if you look at cash deployed or cash uses thus far this year including what we expect from on a full year basis with regard to operating expense, we’re right about $126 million and if you recall at the beginning of the year we provided some guidance that we thought that for the full year we would be somewhere between a $100 million and $150 million. So new capital deployed in follow-on capital along with the debt repurchase of $31 million around that number two just around $126 million.

Current holdings today, the takeaway from this slide is not only you have a picture of our carrying value and the cost associated with these current holdings and there are four new ones this year just to remind you (Inaudible) on the technology side now to some PixelOptics and Putney the recent addition last week on the life sciences side.

One other takeaway here from a carrying value most of the assets deploy here are carried under the equity method of accounting. What that means is, we pickup our share of the losses of those partner companies and reduce the carrying value of these investments quarter-by-quarter. Now we don’t have a mark-to-market evaluation that we have to perform on non-public companies, but that carrying value never gets increased and we then recognize the gain against the carrying value at the time of exit, which is usually substantially less than our cost, you can see the delta here of $167 million versus $121 million.

So that $167 million number is very important to us, and I’d like to share with you a view point that we think is meaningful here. Today our market cap as of 9:30 was just a little north of $300 million or $50 a share. On a net cash basis, we have $233 million of cash. So we are – the delta between market cap and cash isn’t all that significant, so some would suggest that we’re just trading at our cash value.

If you just take the cost of the current holdings of $167 million, add that to cash and divided by the number of shares outstanding you would arrive at a share value of $19 per share.

Peter and John mentioned that our track record to date exclusive of Clarient, all in winners and losers since 2006 is an average cash on cash return of 2.4 times. If you then begin to use that number as a proxy and create a range between two and three, you could see that we were giving credit for two times the asset cost that would suggest a share value of $27. And if you really got not your crazy and gave us three times credit that would suggest a share value of $35 a share.

So when you think Safeguard I know that many analysts and investors think of a some of a parts model. They will try to value the specific companies that we had, currently have is partner companies and add that to those other attributes like cash to come up with a proxy for value. And I am not suggesting that that’s completely wrong, but the other way to begin to look at Safeguard could be given the track record that we have build over the last three to four years, is to begin to look and at a cash on cash return that we are capable of generating and providing some insight to the future as to how that will impact the balance sheet and the value of Safeguard going forward.

So food for thought. Penn Mezzanine, the purpose and the objective of Penn Mezzanine was a) to provide asset diversification in connection with a platform expansion strategy that we have underway and two, b) to provide revenue and income back to Safeguard to ultimately reduced that operating expense number that I shared with you earlier.

Some of the specific attributes related to Penn Mezz, we have a 36% ownership in the management company. We will receive current income as our capital is deployed. We also have an 8% preferred return. We committed up to $30 million of which about $4 million has been deployed thus far principally in the form of capital into the management company with the balance we use for specific deployment into subordinated debt arrangements. And we have committed to rolling over this capital into future funds that the management team raises at our choosing.

So we think that those managers are doing a good job and we want to participate in fund two, three, four and five, we will be able to roll that capital over. If we don’t think that they are doing a good job, we will consider other alternatives.

Our equity incentive compensation, another quick point here, we really do believe that we are aligned with the shareholders in this regard. Our equity incentives are based - investing is principally based on performance other than the achievement of market capitalization goals or the achievement on cash on cash returns with regard to the capital that’s been deployed. On a fully diluted basis the equity incentives fully issued with approximately 20% of these shares outstanding.

So why on Safeguard? We have a track record now that we’re very proud of. We have adequate capital to do our job and to build continued value in this business. We think we are focused on the right segments in the market place as it relates to life sciences and technology. Our track record is getting us the opportunity to look at many deals, and many opportunities, but we are still applying the same discipline that we and you have come to expect over the last five years. And we are applying that now to the next wave of what we think are going to be real winners, and that you are going to have an opportunity to see today with regard to some of the companies that we think have real potential both in the short-term and in the long-term.

So with that I’m going to invite Peter back up and we’re going to take any questions that you may have, and John will remind me that I probably need to repeat the question since we are broadcasting the slide. Yes, in the front.

Unidentified Analyst

(Inaudible). Obviously it’s pretty incredible what you guys did with Clarient. However, you know in terms of cancer diagnostics, which is the Clarient cause, if I remember correctly the valuation that you guys got was at the market level, it was not, above what the cancer molecular diagnostic companies with the same profitability especially like Genomic Health were getting. So the question is that how did you decide on timing considering that Clarient was actually doing pretty well, it could have gotten much more profitable and hence gotten up to five times or so EBITDA sales?

Peter J. Boni

The question how do we determine the timing to exit Clarient and the value was in not that much of a premium. Let me first suggest to you that your facts are wrong. The exit of Clarient was some 25% premium to the vent market. It was a five times revenue metric which was the highest evaluation metric for a diagnosis company in 12 years, so we think that was a pretty strong premium to evaluation. How do we determine the timing on that we took a look at Clarient from a growth perspective, where could that be in a year two or three and did some risk adjustment on that based upon the premium the significant premium that the GE was willing to pay almost $600 million for a $120 million company and the board determined with the advise of capital markets that was a very compelling offer and we opted to approve that for the betterment of shareholders.

Unidentified Analyst


Peter J. Boni

So let just look at that historical track record of that

Stephen T. Zarrilli

Repeat the questions please.

Peter J. Boni

So are we comfortable with the expense structure the operating expenses at $17 million or $0.85 on a per share value basis. If you look at the historical structure of Safeguard’s operating expense over the last five years, we started at a high of 20, we brought it down to about 14.5, we realigned the resources that we currently had to make sure that we were better capable of producing the returns that we have over the last two or three years. That number has increased slightly for two particular reasons. One there were some one-time expenses this year with regard to platform expansion and getting those initiatives underway legal and other advisory cost.

And two we’ve actually increased the deal team sizes by bringing on a new partner level associate as well as an analyst and we are still out looking for one additional person. So our plan would suggest that our expense structure should be somewhere around $70 million for this year. We are comfortable with that number. When you look at that number in relationship to the assets under management and you look at that number with regard to the compensation of resources that we have we continue to believe very strongly that one of our key differentiators is the ability to have some of these other resources, higher level professionals with operating and functional experience that we can deploy and use in helping our partner companies grow.

Our customers I mean our partner company satisfaction surveys suggests that if we could do even more of that, that would even be a better thing and we realize that we can only do so much with the resources that we have. But we truly believe that that incremental cost and that expense structure that we have is actually adding value and hopefully and I think this is true accelerating the actualization of those monetizations in that three to five year time period. Yes.

Unidentified Analyst


Stephen T. Zarrilli


Unidentified Analyst


Stephen T. Zarrilli

So the question relates the Penn Mezzanine what they’re investing in, the people that are running in the fund. So Penn Mezzanine was launched by two very experienced mezzanine lenders the gentlemen by the name of Don Rice, and the gentlemen by the name of Darl Petty. And Don and Darl not only have long track records but they have about 15 years working together. Their thesis was to go out and initially raise a fund of somewhere between $75 million to $100 million and to be able to provide subordinated debt in the lending capability to the lower middle market in the size range of about $2 million to $5 million per credit. Their goal also is to achieve on a aggregate basis a targeted IRR of somewhere between 18% to 20%.

They are going out and providing this debt capital typically under the format of 12% to 14% coupon with warrants to ultimately achieve at or above that targeted IRR range. They don’t want to expand when they go out and raise the next pool of capital they want to stay within that $75 million to $100 million range. Their focus is to stay very disciplined on that segment of the market, which they think is a unreserved and provides a lot of opportunity, and we are seeing a quite a bit of activity with regard to their funds.

The diligence that we did was we went and look at their track record much like you would look at our track record or other fund manager’s track records, and validated their success and results, historical success and results and determine whether or not they were capable of producing the results that they have outlined. And thus far we are extraordinarily satisfied with their pace of deployment, the types of opportunities that they are looking at, the way they are going about structuring these fields the way their diligent seen the opportunities and we think its going to be a very nice relationship that we will provide real value to the Safeguard shareholder. Yes sir.

Unidentified Analyst

You tell us where you are with the $30 million or when you expect to fully invest the $30 million related to Penn Mezzanine, maybe secondly where are you with other alternative strategies that might come about?

Stephen T. Zarrilli

I’m going to take the first and you will take the second question. So, on the specifics with regard to Penn Mezzanine where are we with regard to the $30 million that was question number one. And question number two of the two part question was, what else that we have in line for platform expansion? With regard to Penn Mezzanine, that $30 million you really have to look out it in two pieces.

Roughly, $4 million that went into the capitalization of the management company, we are not being charged management fees on the $26 million, the balance that will be used for the deployment into these subordinated debt instruments. So $4 million into equity, $26 million to be used for actual deployment into Mezzanine structures. The pace of that $26 million we believe will occur not uniformly, but over the next 24 to 30 months.

So it is a commitment, but it will be used in conjunction with the other capital that they have. You are on a row steep go ahead and take it. With regard to asset platform expansion, we think of it in really two ways. The first way is what we call co-managed activities. Penn Mezzanine is a perfect example where we are co-managing those assets. One other element of they governing structure Penn Mezzanine to further illustrate the point is, we have two at a five board sheets.

We don’t necessarily sit on the investment committee and there're reasons why we don’t want to be on the investment committee, but we are very active in the governing of Penn Mezz, so that’s a co-managed opportunity. We will share in the economics of that platform.

The second version, which we have put energy around which we realize is going to take some time and effort is to see whether or not we can be successful in raising a co-participation fund. And the co-participation fund would be more typical of what you would see in the venture community or the private equity community where do you have institutional investors serving its LPs into a pool of capital for which we would manage and have a management fee and carried interest and we would take that capital and augment with the existing capital in order to do either more deals or times due maybe some bigger deals potentially look at areas that we haven’t necessarily focused on today, but they are the two primary initiatives in the way that we think about them as it relates to platform expansion and I hope that answers your question.

Unidentified Analyst

Thanks Steve.

Stephen T. Zarrilli

Yes sir.

Unidentified Analyst


Stephen T. Zarrilli

Whenever you lending money you’ll always have questions around credit quality it's part of the diligence process, we are looking at these companies they are all producing EBITDA they are cash flow positive they are capable of, let me answer it very specifically, we do not allow total debt senior as well as sub-debt to be any more than three times. So once you begin there and recognize that you are not over levering the company then you are able to then look at the other attributes such as the ability to repay in your credit evaluation process.

Peter J. Boni

We have time for one more question, then we’re going to move to Kevin Kemmerer for the technology front.

Unidentified Analyst

I am wondering where share repurchase sits in your value metrics.

Peter J. Boni

The question is with regards to share repurchase we continually seek advise from our advisors capital market advise with regard to whether or not that is a prudent thing to do given the capital requirements of this business. We have active dialog with our Board on this matter. Today, we believe and I know that this is not necessarily a view that is sell by all, we believe that we have a sufficient amount of capital to pursue our business objectives. If you keep in mind we’ve only had this pool of capital for about 12 months and we believe that we are seeing substantial opportunity in the marketplace to put this capital to work that will provide great returns to our shareholders. So though our shares are where we believe undervalued in the market as of this moment, we have made a decision to continue to deploy the capital in the ways that we’ve defined.

Now that doesn’t suggest that we won’t go back to the board room with some advice from our advisors and re-discuss if you will at the board level our uses of cash. But we actually believe that we have adequate capital, we have the right amount of capital to be incredible capital provider and to pursue these opportunities that are being presented to us.

Unidentified Analyst

Thanks very much. As 50 years ago this year that JFK went to Paris with his wife and he commented that he is the man that a company Jacqueline Kennedy the person he has enjoyed it. I’m the man that (inaudible) Steve’s really to the Investor Day and I’ve enjoyed it too. On that notion, we’ll got to Kevin Kemmerer, who is the executive running the Safeguard Technology Group. Kevin, welcome

Kevin L. Kemmerer

Good morning, everybody. If you could I thought we would do I will give a brief introduction of our technology group and our focus in what we are doing are excited about what we are doing as well. And then I want to turn it over to presentations from three of our partner companies I think that’s what your guys are here to see, frankly that’s what we are here to do is to help support those companies, and then we’ll have a Q&A session afterwards where you can ask questions to any of the CEO’s and folks that are presenting with our companies or anything about what we are doing on the technology side. Okay so, make sure I can go the right.

So let’s start with the teams, so there are number of reasons, we’re really excited about what we are dealing on the technology side, the most important always is our team. I want to start and talk about how we distinguish ourselves from our competitions, we are generally in competition with the venture capital firms sometimes with strategic that are providing capital for the company, so for the most part our competition is the VC firms and the private equity firms that are at our segment of the capital strength.

So we do distinguish ourselves as Peter described by our combination of not only operating experience, but the providing capital experience and so if I just go on our chart here, Erik Rasmussen has been with Safeguard for over six years now, he has 15 plus years of experience providing capital to the companies, before that he has focused primarily, he started actually carrying a bag for enterprise software companies and he has performs functions in sales marketing [desktop] product management et cetera, so a good history of experience on the commercial side with the software companies.

My experience, I actually started out my career as a software developer and then made a number of big IT projects in the financial technology community here in New York frankly, before getting to the finance side and have over 10 years of providing capital to our companies, and then I’d like to announce Phil Moyer, Philip Moyer joined us about four months ago although he has been in the Safeguard family for five or six years now, but Phil is in the best, he is a new managing director for us here at Safeguard, we’re really excited to have him.

Phil brings a wealth of operating experience to the table, I’ll embarrass him a little bit but most recently he was the CEO of EDGAR Online which is a publically traded company here in New York in the FinTech space before that he actually went on and bought his own software company, ran it successfully sold that company and prior to that he was a 15 year vendor in Microsoft where he had a number of high level role high profile roles in the company including leading their global accounts initiatives and running a large part of their business on the East Coast.

So we are thrilled to have Phil, but if you look at our whole team, it’s a very complementary team in terms of the skills that we bring to the table and if you look at us relative to those that we compete against, we have a lot more experienced helping build companies and building the technology and software than the majority of our peers who are competing against us and that resonates very well with our companies and hopefully it does provide the added value to get the outsized return.

So where we are focusing, again this is another way that we really distinguish ourselves from our competitor, the fact that we can show four buckets up there alone is a big differentiator for us, most firms that we compete against a various general they are – basically if it’s technology sales folks they’ll do the deal, there’s really no focus to what they do. For us we are very focused, we are focused on markets where one there is a huge amount of opportunity in terms of this the disruption in those markets, and two, they are generally more East Coast oriented markets, we don’t have any desire to go out to Silicon Valley and be the very best of the firm providing capital against Silicon Valley firms that down to file there. We want to be the very best to providing capital through the firms that we can actually help and add value to primarily closer to us geographically.

We also have this great saying that we use internally that if you want to learn how to build the great product, you go to the West Coast, if you want to learn how to access customers you come to the East Coast. So there is a huge advantage of being here on the East Coast, and if you look at our markets they’re very East Coast centered markets. On the internet space, before I go to that this specifically we lead by sector expertise, sector knowledge, so we focused on Erik Rasmussen leads our internet initiatives.

I lead our Healthcare IT initiatives, Phil and I both co-lead our FinTech initiative and I will go through some examples of that and then Phil is now leading our enterprise software initiatives which is a new initiative for us, he came here last year this is new for us and I’ll describe that in a minute. But just to talk about some trends and why we are excited about these areas.

On the Internet, there’s no questions, the big trend is taking the media spend and moving it off-line to online. This $500 billion worth of media spend globally, only 20% of that today is online. And online is where the only place you can actually measure the return on your campaign. And so there is still a huge amount of opportunity if the couple of our companies today that are taking advantage of that move from off-line to online spend.

On the FinTech space, the big trend is happening and you guys all know that because you’re in the financial community as all the new regulatory requirements that have come down in the last three to four years. And those regulatory requirements provide a great opportunity for new technology providers to come in aggregate certain types of data, aggregate on work flows as well, and be able to provide that oversight and transparency, that hasn’t been in some segments of the market. So we are really spend a lot of our time helping facilitate this next generation of regulatory requirements, so better to work in the market, it’s great opportunities for us in the technology side.

Healthcare IT there’s no question, the healthcare reform is a big driver, the biggest driver there is the adoption of the electronic medical records, because those medical records you’re basically providing the foundation of data, which you can then use that data to help provide with technology and data aggregation, the collaboration of the different participant in the value chain of healthcare to try to do, what we haven’t been able to do today, which is to reduce the cost of healthcare. If you normally do that by leveraging the data, you can’t get to the data without the medical records and now that’s just starting to happen and again you will hear from David Langsam from AHS on how we are benefiting from what we are doing there, as that markets begins to unfold.

The new segment for us is enterprise software 3.0. If you think about this is a trend that we started early that we have – that we’ve spend a lot of time focusing on it today which is and it’s one that still makes it still early not everybody is focused on it. You see most of the venture capital firms is still focused on B2C and getting in the next Twitter and Foursquare and Facebook, now certainly we’ll look at those as well. But we actually see the huge a next big trend emerging is actually going to be in the enterprise.

And the concept is if you think about Gen-1 of the enterprise it was mainframe type computers, Gen-2 we move to the PC and client server initiatives. Gen-3 was we started moving to the internet and we started to see more internet applications like a, excuse me and now you are seeing what we’re calling enterprise 3.0 which is a idea that and applications are now moving out of the data center, moving into a cloud environment and is really leading this initiative by putting infrastructure out there for people to build application in the cloud.

So second thing that’s happening is the mobile devices have proliferated, the smart devices have proliferated. We are starting to see adoption in the enterprise of mobile applications and so that’s very new and it’s different from the way applications have been built in the past, we have a whole disruption there, it’s going to help build a whole new set of companies.

So that’s a second layer. The third thing is, if you think about the social aspect, so Facebook and Twitter, great concept from the consumer side, but the reality is the businesses are starting to use these concepts as well, the best example there is LinkedIn. So you find in these LinkedIn for professional purposes and HR recruiting purposes.

But we are starting to see the same concept applied to a number of other initiatives in the business space. So we’re – so our belief is the enterprise is going to be the next big opportunity in technology, it is we are starting to go through that next big platform shift led by the movement of the cloud, and feel more as read in that initiative and really we’re finding some great companies there that we’re likely to or hopefully to get in early and have an opportunity to build some great companies.

So the last thing, I will talk about is our pipeline. I’ll tell you just qualitatively our pipeline has never been stronger we are in a great position with a number of great opportunities in our pipeline. We did a deal early this year called ThingWorx, ThingWorx is in that enterprise 3.0 category. The concept there is they are literally in a brand new market called the internet of things. It sounds complicated, but what it really is, is if you think about warehouse or a distribution center, a lot of the devices like scale, conveyor belts, packaging systems et cetera are all now found to be Internet enabled, IT enabled, you can address them with a browser.

As different devices and they are called Thing become Internet enabled, you are going to need a platform that actually is able to communicate with the devices and able to aggregate data from those devices and build workflow applications and reporting on top of those requirements. That’s exactly what ThingWorx does. And so, ThingWorx is what we consider one of the biggest new markets that’s just starting to emerge now and it is getting a lot of buzz in the technology space.

So, it gives you an example of what we have done in the pipeline. There’s a couple of things that have really -- we benefited from and building our pipeline. One is clearly our sector focus, because we are focused on specific sectors and we have expertise within each of our staff in specific levels, it enables us to go – it enables us to go early, do initial revenue deals, up to late stage deals, which could be $25 million, $30 million revenue company that are growing rapidly, because we are focused primarily on sector, it enables us to now analyze the company, whether it’s an early stage company or a late stage company.

So that’s one benefit. The other is frankly our assets and what we have done in building the brand and especially over the last five or six years of rebuilding the brand of the area that we’ve been focused on and the game plan that Peter put in place early on that brand is now resonating extremely well.

We have incredible deal flow in New York and you will hear about MediaMath, which is the company that we have done a deal with here, but our brand is strong and it’s now getting stronger and when we go to a conference now, people are excited to talk to us about what we are doing, because there is so much buzz about what we are doing now, compared to a lot of our (inaudible) in the venture capital industry, that are still kind of doing the same thing, but we have been actually performing, showing active and have a lot of momentum building our teams et cetera.

So there is a lot excitement that helps propel our pipeline. You will see in here, it’s a good diversification of pipeline across our different segments as well as across states. So, I won’t go into any one of these specifically, but there is a lot of opportunity there that we are pursuing.

So with that, let me invite David Langsam from AHS, who I have had the pleasure of working with for a few years now, we have a lot of fun at AHS, David?

David Langsam

Thank you, Kevin. Is the mic on, can everybody hear me? Good morning, everybody, I am David Langsam, President and CEO of AdvantEdge Healthcare Solutions or AHS and I am really excited to talk to you not just about what we’ve accomplished to-date, but what we’ve got to look forward to in the near future.

For those of you that aren’t aware, AdvantEdge Healthcare Solutions is one of the nation’s leading technology enabled providers of physician billing and practice management solutions. We provide those solutions primarily to large physician practices, hospitals and ambulatory surgery centers.

We leverage a proprietary technology that allows us to improve physician cash flow, accelerate that cash flow, reduce operating expenses and provide a better higher level service of reporting and access information for the practice.

And again, while we are tremendously excited about we’ve accomplished and very proud of our revenue and EBITDA growth to-date, it’s really the future that gets us pretty jazzed. Because we provide services to healthcare providers on a recovering contracted and exclusive basis, we get great visibility into our revenue and we have very predictable recurring cash flows.

The technology that we use allows us to be very, very efficient, much more efficient than our competitors and because we are more efficient than our competitors, we can better deploy human resources, we can outperform competitors, we can provide better information back to our client base and most importantly, especially with downward pressure on reimbursement, we are able to leverage a pricing advantage in the marketplace when and if we choose to. And for those of you that, the track healthcare technology, you are well aware that that sector tends to grow at a quicker pace than many of the other sectors of the market.

Our management team is focused on five very core fundamental objectives. The first is to grow the business, both organically and acquisitively. The second is, not just to be profitable, but to continually expand our profit margins and we focus on that each and every day. Third, is client satisfaction, and as a company we have little to no tolerance for client attrition.

The fourth key objective is to leverage technology. Now, we don’t just leverage it to make sure that we are doing things better, smarter, faster than our competitors, but we also leverage that technology outward facing into the marketplace to create a differentiation, a visible differentiation, a competitive and strategic advantage.

And the fifth, since acquisitions are a key part of our strategy, it’s really, really important that we are passionate about integration. We don’t believe that one plus one equals three unless you’re creating a common brand, common vision and common culture; of course your enterprise. And as I’d like to say to the members of our management team, if we are engaged in any activity, any day that isn’t fitting into one of these five boxes, then we should probably be staying in bed or at least doing something else.

The company was founded in 1999, but didn’t take its first institutional capital until 2006 and that was from Safeguard, another private equity group. I joined the business in 2007, and since then, we’ve acquired five companies and really transformed the business from a Mom & Pop operation to one of the nation’s leading providers and key players in the healthcare billings and receivables management space.

And most notably, we’ve taken revenue from $7 million in 2007 to about $41 million, which is what we’ll finish with in 2011 and we’ve taken EBITDA margins while not quite to that 20%, we’ve taken EBITDA from less than zero in 2007 to a $7 million run-rate at the end of this year.

Our value prop is pretty simple, our services allow physicians to mitigate and minimize the downward pressure on their reimbursement by focusing on how to collect more revenue quicker for them. While everybody knows that there is a significant regulatory complexities and requirements and risks that are facing physicians when they use our services much of that complexity and much of those requirements shipped from the physician practice to us and thereby minimize the physician’s risk.

We eliminate or at least mitigate in a large part of practices need to invest in and manage significant technology infrastructures. And we do that because we provide the entire back-end technology infrastructure that they are going to leverage, and from a front-end standpoint, what we are delivering back to those practices is anytime, anywhere, web based reporting and business information and analytic tools, so that they can manage their business and measure our performance.

And we deliver all with what we call client first. And what I’d like to say to the client is, no, no, no; client first doesn’t mean the client is always right. What client first means is that we are in a service business, our client’s vote is the only vote that counts, because they get to vote with their feats of the business, and a leadership team, we need to be making decisions through the lens of the clients knowing that by delivering a high level of service and outstanding performance on the back-end, we’ve got to be managing our operation to drive profitability.

Over the last year, we spent a lot of time beefing up the management team both to help us grow the business, but really to not just grow the business, because each of these executives brings as much value to each client relationship as they do to the business itself. So, we basically as were acquiring businesses and you transition legacy leadership out of those acquired companies at some point in time.

We are taking each of those largest clients of those acquired businesses and assign executive sponsors to them, and those are the key members of management team in all facets of business to take ownership for that.

While the company focuses on an outbound basis, which I’ll talk about in a couple minutes on hospital base practices. We have got a really nice specialty mixer or and by specialties I mean, cardiologists, radiologists, pathologists, anesthesiologists, OB/GYN practices. A nice mix of specialists about 75% who operate in the hospital setting and about 25% that operate in an office or a business base setting.

And we’ve got a very nice geographic distribution as you see the little blue dots are where we have got clients throughout the country, but we’ve got meaningful market penetration in and around areas where we have operating centers and that’s because most of those operating centers are the results of acquired businesses and healthcare has always been very parochial and grown in a very localized nature. So, we’ve done some centralization and consolidation and we expect to do more, including taking our three new England locations and consolidating them into 2 or less.

One of the most interesting things we’ve had the opportunity to leverage over the last year is our most recent acquisition had an operation in Bangalore, India. We had not operative offshore before other than through some small partnerships and we’ve learned a lot having a captive operation.

One of the things that’s really exciting to us is, we have come to learn that the Bangalore operation isn’t just about labor arbitrage, you read the books, you talk about offshoring and it’s all about cost of labor, right, that’s what everybody is focused on, how do you reduce your labor cost.

We’ve always felt that the real challenge to chase that labor arbitrage across all around the globe and it doesn’t static, right, it moves. So, for a small company and at $41 million in revenue, we still consider ourselves a small company, it’s hard to chase the cost of labor around the world. But having this captive operation, what we’ve learned is it’s not all about labor cost, it’s about time on task, their day is our night, their night is our day.

So, we’ve got an opportunity to run essentially a 24-hour shift in an economically rational manner. To do that in the United States would be cost prohibitive. So, while our people in the States are sleeping, we’ve got people in India, in Bangalore prepping work and getting it ready, so that when the lights go on the next morning, our people can be executing on that work instead of prepping that work for themselves.

So, it has enabled us to really efficiently accelerate the billing and claiming process without incurring some of the costs required if you are going to run multiple shifts here in the United States. From a sales and marketing perspective, we try to focus our sales team in those areas where our value proposition in the highest.

So I’m going to talk a little bit about where we focus our efforts, but that doesn’t mean that we don’t like doing business for an internal medicine practice, even though there are in the red zone. If those internal medicine practices are approaching us, reaching out to us at trade shows, enquiring on the web as to whether we can provide services, we are very, very happy to explore that with them. What we are not going to do is send our sales team out and spend money on an outbound marketing effort, where we don’t think that spend is going to produce the highest rate of return.

So, we want to spend that money where we think the value proposition is the highest and the barriers for our entry into that situation are the lowest. And we track them on two sets of axes, the first set of axes is the administrative cost and practice revenue. And the relevance of that is the administrative cost that the practice bear is a phenomenal window into how big a problem they have got.

Yes, we need to know that they have got enough practice revenue that they can afford our solutions and that it can be worthwhile for us to engage with them. So that’s the first set of axes, and you see that the green zone is where we like to outwardly market.

The next set of axes is the amount of direct interaction a physician has with the patient population and their need for nonclinical administrative employees. The reason that’s important is because the directness of the relationship that the physician has with their practice is going to make it or be a good measurement of how intrusive our services are.

A radiologist and a pathologist don’t see patients, they see pictures or parts of patients. A primary care physician has a one-on-one relationship with their patients. Who is going to be more or likely to led a third party intervene in that relationship. Well, the physician that doesn’t have a direct one-on-one relationship with that patient.

So, we want to be delivering our services intrusively, un-intrusively as possible and the reason that a need for nonclinical personnel is important is because we want to be able to deliver our services as transparently to that physician operation as possible. So, we want low consultation contact and low need for non-physician personnel or not clinical personnel and you see a common pattern emerging. So, from an outbound standpoint, we are really focused on the hospital based practice.

And notwithstanding that, the market is huge, right. We use $4 billion to $8 billion as a market estimate, but I hear as much nowadays is 8 to 12. So, we know that the market is huge and we know physician expenditures are growing. We know healthcare is expected to be 20% of the GDP by 2015, think about that $0.20 of every dollar, every American spends by 2015. So, not only is the market huge, but we expect that those trends are obviously going to continue.

Lastly, and in support of acquisition strategy or buy and build strategy, you’ve got a highly fragmented market with not a single player owning more than 5% of share, not a single player owns more than 5% of that $4 billion to $8 billion or $8 billion to $12 billion market. And you’ve got more than a 1,000 companies that are under $5 million in revenue.

So, it’s highly fragmented and continues to be right for consolidation and we as a company are a phenomenal consolidation vehicle, we are a great landing zone for those companies, but we also can do great things with those companies. And this is a typical example of what an acquisition looks like to AHS. When we talk to Safeguard or we talk to our Board about an acquisition, we look at multiples on a pre-integration basis and a post-integration basis when we are making acquisition decisions.

And in a typical example, if we are looking at a $10 million company, that company is going to have 150 employees and we know this, because we know that the average business in our space operates at a revenue per [SE] is about $67,000. So they are going to have 150 employees, $10 million in revenue and about a $1 million of 10% EBITDA.

We are going to buy that company through the strength of our technology and work processes. We are going to free up 25 of those 150 employees at least. Now, we have two choices with those 25 employees, if we need the capacity for organic growth that’s fantastic organic growth is wildly incrementally profitable, because we don’t need to hire to support it.

If we don’t need the capacity for the organic growth, then our next alternative is switch [with] those resources and take that headcount down from 150 to 125, while still improving performance for our clients providing them better data and information, the higher level of service than they were used to experiencing.

The by-product of taking that 150 people down to 125 either by using it for capacity for organic growth or trading those resources, is you take a $10 million business with $1 million in EBITDA and you create a $10 million business with $2 million or 20% EBITDA. And the math is that simple and that’s not to say that it is simple to migrate the business, to integrate the business or to create a common culture across those acquired enterprises, but the mass has to work as a starting point and you have got to execute properly as an ending point.

And we think we’ve done that and these two charts are revenue on your left and EBITDA on your right and they chart quarter-by-quarter growth since 2009. So, we’re very, very proud of our growth, but one of the most significant things that we are striving to accomplish we think we’re succeeding at isn’t just the revenue in the EBITDA growth that might be relative to our acquisition strategy, it’s the margin expansion that’s relative to the strength of our platform, the efficiency of our technology and the workflow processes that we have in place.

In the fourth quarter of 2010, we produced 11% margin. In fourth quarter of 2011, we are going to produce a 15% margin and we still have several businesses that are in different stages of migration, so we think that climb from 15 to 20 and higher is right within our grasp.

And while there are no companies exactly like AHS in the public sector, those that are most similar to AHS enjoy wildly fantastic valuations. The two on here that are most similar to us would be Accretive Health and Athenahealth and those companies enjoy wild valuations as all of them do on this chart from an EBITDA multiple standpoint and a revenue multiple standpoint. And even in today’s economy, those average multiples are moving forward.

So, as a company, we think we got a great business with the great team of people we think we provide a great service to a market that’s greatly in need of the services that we provide. And we think we provide a great opportunity for Safeguard and our investors to capitalize on what we are building here. So, with that Kevin, thanks very much, thank you folks and questions now or you want to take those after. Okay, great.

Question-and-Answer Session

Kevin L. Kemmerer

Thank you very much, David. Let’s have Vinny Olmstead from Bridgevine come up.

Vinny Olmstead - Bridgevine Inc.

Thanks Kevin and thanks Peter. And I am going to start by stating that Safeguard has been a great partner for us since 2007, when they invested both in the good times and the bad. We went through a small patch of bad times and they were right there by us and since then, the company has done a wonderful upward trajectory.

So, I will give you a little bit of an overview on Bridgevine, and then sort of tell you about the market. Basically, Bridgevine is a customer acquisition platform that goes out and we help about 75 different companies now acquire new customers into their system.

And the way we do it is purely on performance. So, for every customer that we deliver to either Comcast or AT&T or Constellation Energy, they pay us somewhere between $50 and $250 for new customers. And we bring them in all in the digital world. Kevin commented earlier on the fact that things are going from offline to online and we are right now the sweet space for offline to online and we are very good at what we do.

So with the performance based market, which I will talk about in a second, we are very aligned with these advertisers and these customers, because we bring them obviously a very predictable cost to customer. So, you can read our value proposition, I will talk for a second about the space that we focus on. We focus primarily around home services, high speed Internet, video, (inaudible) voice, security, utilities.

Utilities is intriguing, deregulated utilities are in 16 states right now. And we are in line to search or through display, bring these customers for new utilities, and they are naïve on how to market online, and our bunch of our growth is coming from given – bringing new customers for utility companies.

Moving services periodicals, and we are also in the SMB space. So when small businesses are looking for things from T1, any type of services to their resident or their businesses, we find those customers and we deliver them to the backend Comcast, AT&T et cetera. 110,000 plus orders per month so pretty nice volume increase, we’re up about a 100% over two years ago, and as I noted we have about 75 customers that I’ll show you in a moment.

We’ve found in 2003 with 75 employees in Atlanta, Georgia, about 40% of our people are in Atlanta, Georgia, 60% in Vero, probably the most interesting number here is the 75 plus employees in 2009. We have 75 employees and in 2010 we have that 75 and in 2011 and we will double our revenue between 2009 and 2011 with the same number of employees, (inaudible) that we have a pretty awesome platform, and the scalability of this incredible.

We are profitable; we did 21 million of revenue in 2009. We did 31 million in 2010, and we should be close to 40, 2011. And the great news about 2010 is that – in 2010 and 2011 as we put some new initiatives and some products out and they are really hitting the last part of this year. So we are going into 2012 with a very predicable revenue base that shouldn’t skew even higher than our growth that we’ve already have. So the business is doing super there. Funded by Safeguard, JPMorgan has a venture arm, constellation ventures that came in 2005, and then we had a great group of angels that helps us out in 2004 and 2005 and Pat Welsh is one of the gentlemen, who is - on our Board and also is an angel investor. This is not a Welsh Carson investment. That’s a quick snapshot about Bridgevine.

I’ll talk about the market a little bit from our point of view. And you probably – you may or may not seen this (inaudible), but they are proliferated throughout the advertising row quite a bit, and there is a lot of great companies on there, especially MediaMath. But when we look at this as a whole, we say this is their still back, half of my business comes from advertising; I don’t know why it has, and so our value proposition, [we view under] our customers are, yes, there is a lot of these ad technologies. Yes, there is a lot of cost that you’re going in, but you still don’t know, there is still not as predictable as used to be. So our value proposition when we go into our customer base is we’re going to – you are going to payoff the predictable amount, I’ll take care of all of this and others give you that customer ad X number of dollars.

So which leave me into our value proposition, which is bring you new customers at predictable costs as supposed to confusing unpredictable expenses. Proof is in the puddings with certain degree. Here, the advertisers, you’ll recognize a lot of these brands. They are murky in their space, again, the company’s history started off around selling high speed Internet and has evolved to multiple verticals and to multiple customers we’re getting 75 different checks every month on the performance basis, and a pretty good list of payers and customers there. And we’re really integrated and partnered with these guys. The backend technology – one analogy of it is, like, Expedia for home services. When you buy through our digital domains in our 300 websites, mobile and desktop, when you buy a service from us and you hit submit that order is actually pushed in the backend provisioning system of these companies. So if you call Comcast one second after ordering on our platform, our order is in their system and ready for provisioning.

So it’s not sort of (inaudible) front end of selling something then pushing it over we have great vision into the customer. We push it over them by X amount. We’re able to remark into those customers. But this - in front list of our advertisers, there is deep integrations. We bring in a significant amount of their quarterly new customers our competitive space and we’re one of the leaders in that space.

[Proof is] for every $20 in revenue, the advertisers, they spend $1 for every $20 that they get from us, which is pretty great. And the question from you should be why don’t you’re getting more and more try, we’re getting more $1 for every $20, but it’s great again value proposition to our ultimate underlying advertisers.

I’m not going go into a lot of details on this slide, but it eliminates a couple of things, number one is we started off with just a top section, which is a performance solution, which is we bring in new customers, we manage the whole experience. We thought it is our technology is pretty interesting and that this year some of our customers, partners and new launch rates actually wanted to lease our technology, so part of our growth story is not only we’re bringing new customers, but we also have a licensing in a transaction based licensing up of our software. And we have three products in that space down below – very nominal amount of revenue in 2010, we’ll do $3 million in 2011 and we only have - already have contracted for 2012 almost $9 million in revenue from a whole new solution, which is more of a bet services type of solution.

On the top, you can see sort of a typical ad agency, digital ad agency type approach which is we create demand on our own, we do it through all the online ways of doing it search display mobile has been absolutely fascinating. We’ll do almost 10% of our revenue from people going to a mobile phone or a tablet looking for Constellation Energy or AT&T and actually trend acting and buying on their phone, and we see that growth continuing that the data behind is staggering and how much folks are searching in these – on these mobile devices and we are a leader of Google actually did a case study on us that is fixed a symposium and they looked at what we are doing analytically and said we are more advanced in any other company that they are working within the mobile space. So some of our growth next year is going to be around that mobile advertising space and we are very good at that.

So you can take a look at sort of that work experience, which probably is not that exciting, other than we have a great technology. We have - our conversion rate is unbelievable, we – when someone comes through our flow versus even our advertisers flow, we convert twice as many as they do, because our user experience is incredible, we give the customers what they want, when they want and they convert on the platform.

Just a couple of examples, we have a 300 something websites that I alluded to earlier plus both in the online and mobile. Here is the few examples of the different websites that we operate all underline is one thing single platform, we have about two people who from a content management standpoint manage all of those websites and we drive customers depending on what they are looking for in the digital world through one of them and the reason why we have so many is people are looking for different things and we get that – we would want to put the right offers in front of them, so platform drives all the different websites and mobile websites, but here is just a way to visualize what we are doing from a web and mobile standpoint.

Second part was the enterprise, which is the new area of growth – one of the new areas of growth for us this year. We have three products, AMPassist, AMPstore, and AMPconnect and again we’ll do $3 million or so in revenue on this year, $9 million contracted for next year already. I won’t go into the gory detail, I’ll give you a couple of quick examples, Time Warner Cable came to us and they’ve licensed our technology for all of the Spanish by flow, so anybody who comes for the Time Warner website and wants to buy something in Spanish, they leased our technology, they give us a fee per month and a transaction fee and that all on ours and they are ecstatic because they tried it on their own.

And again, our conversion rate was three times as much as theirs was. DIRECTV and NewEgg are couple of other examples; what they are doing is NewEgg, if you know NewEgg, it’s a big electronics aggregation site, but they are taking their customer base and selling our services, the little different model, they drive the traffic, we don’t drive the traffic, they may use our platform underlying and saying the DIRECTV; DIRECTV up-sells and cross-sells, things like when you’re buying video from DIRECTV, they up-sell you AT&T or Verizon because they find that their churn decreases. So they are using all platform to up-sell and cross-sell high speed Internet with their video. Again, a little bit of a different model for us; web services model, very predictable model, but because we built this great technology, we’ve used - we’ve found a way to refurbish it.

Looking into 2012, we’re ecstatic about our growth opportunities, and I summarize them down to four. But I think it’s important, a lot significant growth in 2012; one is continuing with the 75 customers, plus, and doing the customer acquisition that we’re doing now, and adding more and more mobile and other distribution methods digital by – of going out and bringing in new customers.

That number two is the mobile space; number three is vertical expansion; we’ve got utilities this year, that’s been a very nice area for us, we’ve added a couple of other ones. We’ll do a couple million in revenues in these new verticals, but their run rate at the end of the year is going to be close to $3 million in these new verticals, so next year looking real great for some of the new verticals. We’re looking t wireless right now and we’ll enter wireless next year. Wireless is likely $5 million plus revenue just next year from selling wireless AT&T type services.

And then from enterprise standpoint, again $3 million, $9 million contracted. We have $50 million in pipeline if you look at all of these four, a lot in the enterprise space. So we have a big; we're looking forward to a big upside next year. And again, profits are rising and revenues rising. We’ve been profitable since the second half of 2009, 2010 profits keep growing. This business ultimately is 22% or so EBITDA and we’re not far off of that right now.

Highlights, again seven years of providing these advertisers with proven ROI, technology platform that we are viewed in our space as the number one technology platform. Our philosophy is whom ever had the best product ultimately will win. We have some exclusive contracts. Future growth, I just talked about the business model, just illustrated through 75 employees for the last three years, even though we double our growth and we have a great management team that’s got there and done that sort of a combination of entrepreneurs and executives that have experience that we are able to work together.

So that’s a quick overview of Bridgevine. Thank you.

Unidentified Company Representative

Thanks a lot Vinny. Okay, next we’re going to have Dan Rosenberg, SVP of Business Development for MediaMath, cool slides of the presentation.

Dan Rosenberg

All right, thanks very much. So MediaMath, our goal here is to empower the digital marketing professional and really turn them into a hero with our empowering sword. So the products here is – it’s a software-as-a-service product that access through desktop, at marketing agencies and the marketing departments at our advertisers and it enables them to buy media, set up campaigns, optimize the campaigns in real time and then take away insights so they can use to improve their marketing strategies and also report back to their clients.

So again just more details on that, but let me give you the quick elevator pitch, so first of all this is actually a market that’s very, very big, so right now digital advertising is around $15 billion market and may have seen the Mary Meeker and Morgan Stanley numbers, but I will ask you that’s about a $50 billion opportunity when you kind of look at the mismatch between a matter of time spent in the Internet media and versus how much portion of advertising spend on the medium to their TV. So the opportunity is big and we are still at the very early days of growth for digital advertising.

So we view ourselves as kind of Bloomberg terminal for digital advertising on the desktop, specials can log in, they can get data, they can analyze the campaigns, they can decide exactly how much to pay for particular media and they can actually execute the bias within our platform see the results and what we’ve seen in our three years results is we particularly get around 10X better ROI versus other existing methods for digital media buy.

So our clients today, we have about 50% of the Fortune 50, our client so we have very large clients – our folks is on industrial strength platform for the largest advertisers, so we sell directly to the large advertisers, then we also sell to agencies Omnicom, WPP, Publicis that are servicing these major Fortune 500 companies.

The team here – we’ve also seen that will help us any most of the scale, we have teams from (inaudible) Yahoo, AOL, et cetera all those have the major media players, right we are exiting the year about a $100 million of run rate and we had about a 150% CAGR since inception in early 2008, and we think we are just really at the very beginning of the growth story for digital advertising and we are become kind of the key player in the space.

So this is some of the areas where we differentiate and where we find our value proposition. I will just focus on a couple of the areas, so the top left, our best results so one of our first areas of focus is our optimization engine. So we have an algorithm that helps us actually value every impression that our marketers buy. We value them in real time.

So we can optimize around cost for acquisition, we can choose exactly which impressions we want to buy. We find that Soccer Moms in Seattle, APM or converting in the higher rate, we are going to lead into that and spend more on media that’s converting in that area that’s performing and less so in other areas. So that’s one of the pieces that’s under the herd for the platform, I know, here we are talking about the best ecosystem. So adhere focus for us is making the platform a place where the marker can go kind of a one stop shop, where they could try, all the different new capabilities, you saw on the Bridgevine slide, there is a slide that’s could going around the Internet that you may have seen that [Terry Claudia] has put out is a media banker, it shows all the different – it’s probably 200 different companies that are exploring new capabilities for digital advertising and so it’s confusing to the marketer.

There is a ton of innovation, but they can come to meeting that and use our platform to test out all these different capabilities and lean into the ones that are working well. We make it easy for them by creating this best of class ecosystem. Then in other areas, I will touch on is the bottom rate there, two transparency. So we really focused on exposing all the results that we generate to our clients. We have one of our product lines actually called [Math Clarity] and it is our reporting tool and it shows every impression that we buy, why we buy it, how we value every impression. So we really believe in true transparency although we have an algorithm that does the buying. We completely open that up to our clients, so it’s not a black box is really that can go and see exactly why we’re doing that. So again going back to the idea of empowering the marketing professional, they’re buying our product, but it’s really enabling them to tell the story to their clients and that’s one of the way that we drive spend with our existing clients.

Just to give you a sense of the landscape here is, in this category, as come known is a demand side platform or DSP you may have heard that term. So there really three core players that are doing the kind of - taking the kind of approach that we are taking. So one of them is, a company called Invite Media that was acquired by Google last year for around a 100 million, a little bit less than 100 million, another one is churn it’s also like (inaudible) an independent company. But what we’re finding is that, there are other players here, but the three of us are kind of distancing ourselves from any of the others and we’re really taking share, but and we find that – we actually got the press last week that we win 19 out of 20 head-to-head competitions against these other competitors. So we feel good about our competitive positioning.

So I’ll just touch on a few areas, we’ll first talk about go to market, so we actually sell the direct – directly to large advertisers. We sell to largest agencies like I mentioned, the large agencies has also have with some of the trading desks, where they actually have groups within, say, Omnicom that are just focused on digital adverting buying. So we sell to them we power some of those agency trading desk on a white label basis. So it’s been a very good business for us.

We also are starting to sell more and more through channel sales. So of all those other players in the ecosystem are accessible through our platform and in turn they sell their plants or if you want to buy our data you want to use our capability is you want to buy our media, you should really buy that through MediaMath, because it’s a great one stop shop and it will make easier for you to buy our products, so that’s been working out very well.

Some of the areas where we are growing, or traditionally we’ve been strong in display media, so like when you go to, you see the ads low on the typical display, but from the areas of growth are social media, so we have Facebook and Twitter, we’ve got press in Adweek last week for being the first player in our category to integrate directly with Facebook, as we all know Facebook is seeing incredible growth in something like one in five impressions on the Internet are on Facebook, so we want to be there for that. One of the other competitors that I showed on the slide is invite me to acquire by Google, so they may have a hard time integrating there with Facebook, so we feel that’s a great opportunity for us.

Another area is mobile, mobile is growing at around 20% annual growth rate advertising on mobile. Video is another area, a very strong growth where we just seeing the beginning of the optimized advertising around video and then the fourth category, there is premium advertising so traditionally, we’ve been focused on advertising that is not the first one sold by the sales force over launch in fact is with the front page on, but increasingly we’re getting into that because increasing advertisers they want to get all their advertising sold through one channel where they can see the results and they can optimize and report on that, so we’re seeing a lot of growth in that area too.

I touched on this little bit already, but it was really around our, we’ve invested quite a bit on our sales force, we – I’ll show you in a minute our sales offices of what we’ve been our direct sales have been growing quite a bit and then also through our partners. From the sales office point of view, the small red dots here are existing offices, so New York, Boston, Chicago, LA, San Francisco and London.

We opened a London office last year; it’s a great case study. We sent two of our founders to London to open the office and it has been going phenomenally well. We have two datacenters in Europe, one in Paris and one in Zurich; and we expect to expand across other markets this year in Q4, actually next month we are opening a datacenter in Hong Kong. So we expect to see quite a bit of growth in Asia, we haven’t even touched the Chinese market, so we see lots of growth to come in those new markets.

In addition we’ll do some acquisitions, we made one acquisition last year of a company that had a great feature for optimizing the actual imagery and a display ad and it’s been great, so one of the great things about, the position what the brand, as we see the different capabilities we enable on buying across lots of different types of companies and new technologies and capabilities when we see when that’s working, we are in a great position to say, hey, this is really working and we can see what margins are getting. So we want to pull their margins on to our platform so we’ve an opportunity to make acquisitions.

So some of these we will be tuck-in acquisitions around features, but it could also be acquisitions that are more vertical integration on the stack where we see opportunities that really bring margin on to our platform. We are actually rising around capital, we expect this to be a more Q1 close for additional capital; some of that will be for sales offices, some will be building out of the technology and some will be for these kinds of acquisitions.

So actually the background here on this slide is a screen shot of our terminal, just to give you a sense, so this is actually what a market log-in, they’d actually see it, they can log-in, they see all the campaign in running and all the data around that, they create budgets, they create target customer acquisition goals so it is actually very robust. So thank you very much I think we are ended up, thank you.

Unidentified Company Representative

Thanks, Robert.

Unidentified Company Representative


Unidentified Company Representative

I wanted to invite all the presenters to come up and stand and we can take questions now. My favorite think about Jane, he has been the first guy (inaudible) I’ve ever seen wear a jacket, impressive. If anybody come up there as they come up. And we’ll take your questions. You can shoot any questions to anyone of us. Yeah.

Unidentified Analyst

For immediate assets next future generated capital (inaudible)?

Unidentified Company Representative

The target is around $50 million.

Unidentified Company Representative

Oh I think we should see the price and we are on the webcast…

Unidentified Company Representative

Through the capital raise that we are just bidding for Q1 be around $50 million plus or minus.

Unidentified Analyst

Thank you.

Unidentified Analyst


Unidentified Company Representative

So the question is on valuation comps and we’ll start with [Vine].

Unidentified Company Representative

So from a public market standpoint, bank rate is a good comparable or prospective comparable company. What we’re seeing in the acquisition there is sort of two buckets, one is the lead gen and there is a customer acquisition piece and the customer acquisition is getting a premium over the lead gen, but the way we would give guidance to folks and we have told we are raising money, et cetera, but it’s more an EBITDA multiple in a friendly range of 8 to 15 and there are a number cases that have happened recently that are higher than that. We think that that’s a fair sort of range, the EBITDA multiple one-year forward, that’s how we are at it. That’s how we give guidance to look at valuation.

Unidentified Company Representative

And Dan I think the biggest comp we’ve seen is (inaudible) media.

Dan Rosenberg


Unidentified Company Representative

And so it’s about $100 million acquisition and their net revenue was – I don’t know it’s…

Dan Rosenberg


Unidentified Company Representative

Yeah, between 10 and 20…

Dan Rosenberg

Yeah, yeah.

Unidentified Company Representative

So there’s been…

Dan Rosenberg

And there are some other recent comp rolled in the [ad deck]. MediaMind is a publicly traded company, MDMD is ticker that was acquired earlier this year by DGIT is ticker, DG FastChannel for about $400 million – 450, similar size. It actually MediaMind went public last year and another one could be AdMeld, which is still pending review, but it acquired by Google for rough 400 million and had a revenue of about 100.

Unidentified Company Representative

And lower market…

Dan Rosenberg

Lower market, yeah.

Unidentified Analyst


Unidentified Company Representative

I don’t have the data, I’d say, AdMeld for that longer on their EBITDA lead if it goes around…

Unidentified Company Representative

Yeah, well, so I think the point question, yeah, is the comparables that we use for MediaMath and absolutely revenues definitely any business that’s growing as fast as MediaMath will command a revenue multiple. There is a switch over and we think about that all the time and we think how we value our company, whereas a company like Bridgevine is growing at still a very rapid pace, but once we start seeing that EBITDA expansion, we’re going to push for an EBITDA multiple, because they are treating the company better, that’s all I could say. Yes.

Unidentified Analyst


Unidentified Company Representative

So the question was about differentiations in the sales process, how we differentiate out services from our competitors? And what we do is, we use our technology very aggressively in the sales process because you are right, the billing component of what you are doing in some I’m seeing to commoditize in the minds of the physician, because it’s not a new industry. So you’ve got to do with case study and the best proof of outcomes that you can deliver to them that you are going to out perform your competitors. And we do that by showing them how our technology works, how we operate that technology in the back-end and it becomes very, very clear to them that we have the deliberateness in the way we use our people and our technology that allows us to produce improved or better performance than our competitors, referenceability of our clients obviously plays a role in that, but in a sales process where we think, here is how we do this, here is how we do that, here is how we do the next thing, now we ask our competitors or the other companies that are considering how they do those three things and what you are going to hear is hummina-hummina-hummina and that’s not a good answer, so that’s really how we do it.

Unidentified Analyst


Unidentified Company Representative

The question was whether we’ve got patents and the right software that we use, so that’s it is something that’s truly proprietary for the company, correct. Yes, so, so the answer is yes we own our IP for most of our processing technology and it’s evident that from a clean claim standpoint we outpace almost everyone of our competitors, that’s clearly where the runner meets the road, what a lot of billing companies will do is, they will allow the payer to you use their cash to manage the exceptions by taking a bad claim and spitting it back to the billing company and gives you a list of exceptions so they’d say hey we’ll rely on the payers to spent their money to show us what’s not clean, but that elongates the process and every time you get those rejections back there is some delusion your liquidity of those rejections. We focus on having clean payable reimbursable claims out the door the first time out we have in excess of a 97% clean claim ratio today.

Unidentified Company Representative

This is an area we spent a lot of time on when we first did the deal with AHS. The easiest metric to look at is the productivity metric, you compare AHS against this peers in the market and it’s dramatically more productive and that’s why we’re able to get the synergies we are in acquisitions, but in the second thing is as you look at how they are able to do that that’s where it’s impressive we have third time that they got architect of the software is architected in and so there is a lot of little things that I noticed at least due diligence to allow them to get really big savings, because they’ve done this a few times before and it’s can create technology architecture. Yes, in the back.

Unidentified Analyst


Unidentified Company Representative

Yes, so the question is, have we looked at using a second market or an equivalent secondary source of us trading for liquidity for our current our companies? At Safeguard we have not, we tend to be bullets on the companies until the time is right to seek an exist and at that time it’s generally a strategic exit, not always but generally. There are companies like MediaMath so that would have the potential for second market to actually create a market to provide liquidity for its shareholders if they choose to do so. But we just put $9 million into MediaMath earlier this year, I mean we’re very bullish on the company. But I don’t think we have any specific experience with second market, but it’s not a Safeguard strategy to go out and try to get a modest amount of liquidity through that type of market. Okay. Yeah.

Unidentified Analyst


Unidentified Company Representative

The question is about our AR revenue model and if we see that evolving or changing over time. So I apologize for my cold here, but our revenue model is, every time we bring in a new customer we get paid x number of dollars, and what we’ve seen over the last few years is that on the positive side, that it is creeping upward. And if you compare our cost of acquisition to others, it’s typically cheaper. So, what these large companies are realizing is, I can start paying them a little bit work for incremental customers, it’s still less than what they’re paying now. So inside of our model as we project future, we don’t model without ad upticks but if you look historically, those dollars have been doing upward.

Unidentified Analyst

Maybe you can also point this with the new business models, revenue models that you have been using, where licensing is not only the nice pricing platform in addition to just getting paid for customers.

Unidentified Company Representative

Yeah, so just to illuminate on that for a second. So we sort of have two pieces of the business, one is the traditional piece where we’re going out and getting paid for every new customer we bring. Again, there’s two ways to increase that revenue; one is by getting higher dollar amount, the other is by selling more things to every customer, which we’ve also been very good at. So if you buy two things, versus one obviously we are getting more revenue that way. So both of those trends are going upward; higher commissions and number of items that people are buying.

On the other side, on the licensing side, we’re paid a licensing fee and a transaction fee, primarily and so it is a little bit of different business model and revenue model, but we make a pay $25,000 or $35,000 a month just to use our technology and then we may get between $4 and $8 for every transaction on that platform. And we are very early into that product suites, so I’m not certain where the pricing well, but we know what the pricing that we put out there for the handful of 10 company’s that are using the platform right now has been fairly stable than it is early to know what where that’s going to evolve to.

Unidentified Company Representative

Other questions? Okay, thank you very much we will now turn to Jim Datin, who leads our Life Sciences team.

James A. Datin

Good morning. We setup some extra coffee or jolter, Dr. Prep or whatever you need like that caffeine and keep going here. Nice to see it, my expectation this morning is to make a couple of brief opening comments and then save the majority of time for our CEOs. I’ve been with Safeguard for six years now; in this past year was an exceptional year where we sold four company’s that started by putting together a strong team lead by Dr. Gary Kurtzman. Gary has a deep domain knowledge, operating experience and an ultra successful track record before and during Safeguard the time of Safeguard.

We also at Safeguard have a couple of MDs and PhD., and several smart MBAs that have contributed to build this company up. My own background as long as having been a CEO of a couple of healthcare related companies and executives with GlaxoSmithKline and Baxtor welcome as well.

I’m going to take just a moment to share with you a little bit about our proactive approach to putting capital work. Our focus has stayed very consistent over the last couple of years to target capital efficient diagnostic companies like [Alvirex] or [Avid] that we believe will get to the FDA process and have successful outcomes similar to what [Avid] had. We also like to put capital work into large device markets where we believe it’s more of a commercialization execution play, not one that’s dictated by the FDA or a reimbursement issue.

Our specialty pharma area just has been expanded recently by a new deployment into Putney, which will when you think about it providing generic meds for the vet industry. We will have minimal, it will be a private pay marketplace, we don’t have an easier regulatory pathway as well. You will have a chance to hear the NuPathe story shortly, but we are all very excited about the prospects of NuPathe moving forward.

We’ve had a very disciplined capital deployment approach to putting capital to work and have been very proactive in areas like healthcare services and consumer driven healthcare two of our recent areas where we have bought in new partner companies such as NovaSom, a company to diagnose in chronic obstructive sleep apnea, 15 million Americans today are suffering from that had not been diagnosed, representing a multi billion dollar opportunity and companies like PixelOptics that you’ll here Ron Blum in just a moment talk a little bit about the opportunities there. We also think that’s a very high growth marketplace.

Having spend six years here and some of the exits that we’ve recently had, I can tell you I’m just as excited if not more with some of our current holdings that we have in the portfolio today.

So our capital deployment strategy have stayed consistently tend to lead or co-lead most of our transactions. We are typically very proactive and disciplined in the areas we like to put capital work whether it’s initial deployment of somewhere between $5 million to $20 million. We’ve migrated to more of a revenue model where we are looking for more commercialization in revenue opportunities as opposed to early science risk stage companies. We believe that will yield the best return with manageable risk. And certainly we are a very active partner to our companies, you can ask people Rony Andrews at Clarient; (inaudible) Ramsky at [Avid], where Kevin (inaudible) of the value that we provided and what was created as a result of that.

In six years, our pipeline is the strongest that it has ever been since I’ve been here at Safeguard and well I don’t have time to go in great details here. We build great syndicate partners, our deal flow is at a very high rate, it’s a great time in the life science industry to be putting capital to work. Capital has become tight in many circles, there is opportunity for us to come in, we’re actively sort out by other investors and CEOs that companies that want to partner and work with us because of our expertise, our track record and again I believe our current holdings today could rival or exceed some of the most recent exists that we had.

With that I’d like to turn it over to Jane Hollingsworth, the CEO of NuPathe, Jane?

Jane H. Hollingsworth

Thanks, Jim. Good morning, everyone. Thank you for coming and thank you very much Safeguard for organizing this day. It’s a great opportunity for us to tell our story, we’re always happy to do that and thrilled when people are here to listen to it. We continue to evolve and as some of the companies here are not public, we are publically traded so please keep that in mind and note the forward-looking statements.

So who are always, some of you know, some of maybe new to the story. We are a biopharmaceutical company focused on the neuroscience space. There is a lot to solve there, many commercial needs and we have honed in on several of them. Our lead product is a Migraine Patch, we first looked at that opportunity as a market where we saw lots of needs, in particular we have a migraine community that is about 31 million people just in the U.S. alone, many more outside the U.S. and about half of those have nausea and vomiting even associated with the migraine which makes it difficult for them to take an oral medication, but in true U.S. form at least we have developed seven oral really good oral treatments for migraine.

So what occurred to us and I happen to be one of those people that has nausea and vomiting occasionally with migraine, it seemed a little bit counterintuitive to have a disease with many GI issues and have oral treatment. So we said about determining whether we could develop an ideal on our mind, ideal non-oral treatment for this disease. We thought that ideal with the transdermal medication because we’ve seen transdermals really grow in market share growing acceptance, patients actually really like these. The difficulty has been in the developers have not really had the expertise to develop them in the past, so that was what we thought was really the sweet spot here.

We quickly learned we needed an active technology because there is no patch right now for migraine for the simple reason that is really difficult to do. We were told by many that it could be done because that have been tired and they had not been successful. What we did was we took Intophoresis, a known technology which is electrical current and miniaturize and advance that technology to a point where we could embed it in a patch allow the drug to be delivered quickly through the skin and in a controlled fashion so that you could really in our minds have the (inaudible) you needed to, have the efficacy without having to go through the guts.

So really when we have gone through the whole development process we filed our NDAs efficacy is excellent with the products so we really feel like we have overcome all the barriers to what we perceive to be this ideal treatment for many migrant patients including myself by the way. So we filed our NDA last year in the fall with the FDA, we received the letter at the end of August with additional questions before they are prepared to approve the product. Where as you note on the slide have a November 9, meeting with the FDA to discuss some of these questions and it is our expectation that after that meeting we’ll be able to come out to the market and update the market on timing for launch. Previously we have been considering launch in the first half of 2012 next year, that will now be later, we just don’t know exactly when until we sit down with the FDA and talk to them.

In addition to the migraine product, we’ve taken a similar approach and develop or in developing two other products with the different technology; one for schizophrenia and bipolar disorder and a second one for Parkinson’s disease, both of these we see as really addressing big needs in the market that have not been effectively address because they really take a delivery method improving on the delivery method improves efficacy and safety and in the case of schizophrenia and bipolar complaints for patients and therefore outcomes. So that’s our approach to development, that’s our approach to our products.

So let’s dig in a little bit on the migraine market. In the early 1990s, Imitrex was approved, is the first triptan, this is the class of drugs we are using, the first triptan approved by the FDA, first on the market. As soon as that was brought out, it took over the prescription migraine market. This is a class of drugs that has really the gold standard and Imitrex which has sumatriptan as the active ingredient is the gold standard of that class. So we choose sumatriptan to put into our batch because we don’t want to fix something that doesn’t need to be fixed and we put it into a better way of delivering that treatment.

Patients, when they have trouble and often it's GI issues with a particular drug usually it’s a triptan move onto a second triptan or a third or a fourth. It really is where the vast majority of patients get their medication for migraine. This is our patch picture of it. You place it on your arm or your leg, it’s a four hour delivery, so when you get the symptoms of a migraine you put the patch on.

There is a little button when you push on. There is a program, it all runs automatically. Same dose for everyone. Obviously avoids all the GI issues associated with the disease. Goes off automatically. It’s disposable, you throw it in trash when you’re finished. Very simple being a migraine sufferer myself, I understand the value of something that’s easy to use that you don’t have to think even see that well in particular when you have migraine because there are visual issues associated with the disease at times as well.

So let’s look at what’s the point here. We talked about migraine related nausea, that is really the commercial driver for us, that is the big one, and we’ll go right out of the gates with migraine related nausea and we’re effectively addressing that with a number of the patients and physicians now. 90% have nausea with migraine, not all the time but some times. Almost 60% vomit, so why are we developing all the treatments for this disease. It doesn’t make a lot of sense. So that’s pretty intuitive to most people. It makes sense to have a patch. The other thing is gastroparesis. This is not quite as well understood, the clients has not been as well developed, but what happens is, with migraine it’s part of the disease that your absorption can be slowed or paralyzed in the gut.

So what we have here is when a disease just to the head, is what we think about, big headache, it’s a lot more than that. It’s really a disease of the gut as well and the experts in this field are really starting to understand this better and do more research in this area and it’s an area that we NuPathe really want to be and are the leader in. No other product really hit the sweet spot. This is ours, we intend to own this space, we are the GI migraine company. And so what we can do by avoiding this oral delivery is avoiding inconsistency that you have with the slowdown or paralyzed GI track.

And then last, triptan adverse event as we call them. There is an injection, actually that was the first triptan introduced into the market because there was a recognition with their GI issues with this disease. However the problem with injection is a segment of the patients typically don’t like injection. When you deliver so much drug so quickly in an uncontrolled fashion, you can picture an injection peak, you end up with more triptan side effects in this case. They are what’s know as like core cardiovascular concerns; meaning, these are vassal constructors, these drugs, and patients then feel a tightening for the chest, paralysis or tingling down the arms, numbness of the nose things that mimic a cardiovascular event. It’s very scary to physicians and patients. We can with the technology we’ve embedded in our patch deliver an efficacious amount of drug and then hold it to that level.

So we don’t get those peaks and our data now demonstrates very clearly that we practically eliminate this triptan adverse event. It’s a really big deal. So as we look at the opportunity here for this patch and there is clearly overlap among these numbers, we don’t know exactly what the overlap is but when you think about it the more overlap there is, the more likely that as the patient for this product. So these numbers get pretty big and if you will note down there on the bottom, you’ll see co-morbidities and their GI issues.

Some of the people that understand this disease of migraine the best are actually the GI doctors, and the reason is when people come in to see them with IBS or other GI issues, they often have migraine and these physicians have noted that and they are actually studying gastroparesis they are with way ahead of the migraine doctors in this area. We’ve now brought those two together and it’s really pretty exciting from a scientific perspective as well as from a product perspective for us.

So as I mentioned, MRN, remember that term, MRN is a key commercial driver for this product. About half of migraineurs have nausea from the disease not caused by the treatment, from the disease, that makes it difficult for them to treat either on time or at all, that’s the sweet spot right out of the gates for us from the launch perspective. And what you see, there is a lot of data that we’ve been digging up that we didn’t have to do those studies, there is data out there that show nausea really is a predictor of poor response to oral treatments. So when you think about your physician and you’ve got a patient and you find out that have nausea, why are you going to prescribe an oral treatment when you know that the likelihood is that they have nausea they will respond not as well to an oral as they will to a non-oral. It’s a great opening for us. And when you think about the numbers, it’s about 7 million patents in the U.S alone that have nausea to the point where it affect their ability to treat.

So some of our data; we did a pivotal Phase III trial that’s our largest trial. These end points you see up here are the typical end points that the regulators are very concerned about and then look at and they have confirmed efficacy with this product, so it’s very strong on the efficacy side. They are also obviously the commercial drivers for this product. Something to really note here is, we understand the promise for the product but now we have a data that has the strongest nausea data of any product, migraine product out there in the market. So not only does it make sense intellectually, but we now have the data that demonstrates that it does make a lot of sense and actually solve the problem for patients.

From a side effect profile, we have typical patch adverse events; meaning, skin irritation is a typical patches that are out in the market. One thing that we really were looking very carefully at in our data was, we have obviously an intellectual understanding of when you have triptan adverse events, it’s because of the high plasma levels of drug in the system. Well now we have Phase III data in patients to demonstrate that. If you can control that, you can get efficacy without this triptan adverse events and you can see that on the bottom there. Many people told us that was impossible. If you have efficacy, you must have triptan adverse events. And now we know, we’ve proven to the migraine community and to everyone else that those two are not related, you can have efficacy without the side effects.

So the safety profile for the product and we just actually released safety day yesterday, we had done two long term safety trials for the FDA’s request, 12 months open label trials. And what we see with that data is, one, again very low levels of triptan adverse events. In fact they continue to decrease under one 1%. Under 1%. It’s pretty good. No increased skin irritation with repeat use, so these patients used the product for over for 12 months, 12 month study. And we also saw that those who completed those 12 months of the study used about 2.5 patches a month. Now that’s good, that’s really good because the average migraineur has about two migraines a month, so lot of our core casting, lot of our data is tied to that two a month. Now we have from our own trial is, an average of 2.5 a month. So we know patients are using it at least one average what the market shows.

So regulatory stuff, we talked about we have in the review meeting on November 9th and we do hope to update everyone on timing shortly thereafter and we have earnings that will report mid November, so it could well be associated with that report.

So what do we intend to do with this product when we get it out of the market. We are as you know earlier stage company emerging biopharmaceutical, how are we going to effectively launch this product. Well, there are couple of reasons why we are doing this. When we first started developing the product, we thought this is a great idea for migraine makes perfect sense. We didn’t actually know whether we're going to launch it ourselves, because at that time every big company and every big pharma was in this market seven oral triptans, Pfizer GSK Merck they were all here. So wouldn’t make sense for little all new path to launch.

Now here we are in 2011 they are all going, there is almost no one in this market anymore it is wide open, Allergan is in it with a chronic treatment using Botox which of course used for everything and that is complementary to our product. So you’ve got one larger company in Allergan and then a wide open market. It makes perfect sense for a small company to take advantage of that opportunity because what you have here is our patient population that is really struggling that is looking for something new we’ve identified the need we can very carefully put our 1100 sales reps which is what we intend to hire to the specialist that a specialist and neurologist and with 3% of the physicians hit 30% of the opportunity.

Its beautiful timing in many ways we call the perfect storm of timing. And obvious question that people ask, well who is going to pay for this, I mean we are living in a different world now, we have to be very thoughtful about who will pay for it and how? In this market, we have the advantage of it’s not one of the top 20 for payers, so diabetes we are not in that room. It is mostly a private pay market, so we don’t have a Medicare Medicaid issue for the most part, it’s mostly private insurers, because this is a working population. The sweet spot for migraine is 25 to 50. They are typically working, they typically have private pay, so easier to work with those kinds of payers. Those payers understand that GI issues are component of the diseases that may need to have a way to address.

Typically, from the early days of the triptans they have non-oral treatments on tier 2. Then it doesn’t mean you have to buy a way on even, it may mean that you just have data or that you just a non-oral. So we’ve gotten feedback from payers tier 2, tier 3 is where we will be. Then we look at pricing. Well, what we see here is a non-injector, excuse me, an inject able needle free inject able out on the market branded it's now price of $87 per injection.

So that is a very important price point for us. We have not set a price. We won’t until we launch the product. So what we are doing is making some estimates, we’ve done some simple math for everybody here and $50 we think $50 to a $100 is the range in which we will set the price. At 50 if you take two patches a month, as I mentioned we do our forecasting of that even though we have an average in our long-term of 2.5, so 50 a month that’s 1200 year per patient.

It doesn’t take long to get up into some really big numbers when you use those price points. So what you have is a market with the patient population that is ours there is no other really competitive product for this space a premium price product and a market where there is not a lot of competition from our marketing perspective, timing is good.

Then we look at the broader opportunity here. Our initial approval will be for acute migraine. It should be a label that allows us to market to all migraine patients but we’ve talked about the GI as our focus. But then you look at this, you’ve got the ex-U.S. opportunity obviously. We own the technology. We own the product. We owe no royalties to anyone. We can use the technology for anything we want.

And we have really advanced (inaudible) product technology the point where we understand a lot more about it and probably anyone else and know where it can be used. Pediatric migraine, pediatric neurologists seek us out because they don’t have anything for these patients. What we’ve learned is you know there is a syndrome called cyclic vomiting syndrome children have. What they are starting to understand is that’s actually migraine because remember it, it’s a GI disease to not just the headache disease and once you used for these children, so we will be doing studies in pediatric as well and that was goes on.

Now moving to our earlier stage pipeline, we have a completely different technology that we licensed specifically because that could solve a problem, that’s a little different then we’re talking about with migraine. We wanted to solve the problem for schizophrenia and bipolar of compliance, it’s a massive problem, a lot of patients, a big market but there is really no good treatment to address this compliance problem. These are difficult drugs. Patients do not like taking it for the most part, if they stop taking them, it often leads to some sort of psychotic break, you lose function, once they get back out of that they never quite get to the same level.

It’s a big cost to the system, as you can imagine and so what we have developed is a technology, we licensed from the University of Pennsylvania where we can inject small implant plan of right size implant into the subcu space gradually delivers the active ingredient drug over a period of months and then you come back and get your next injection. So you don’t have to worry about taking your drug everyday and you always stay at a good level.

And then similarly in Parkinson’s disease this is more of an efficacy and improved side effect profile story, not so much of compliance story although that is a component. Well with Parkinson’s drug you end up with this on off as they call it, so you get the highest where you can end up with psychosis too much strong on your system and then the lows where you have freezing up and you really can’t function our Parkinson symptom.

So, the idea again is let's level it out steady dose and keep good function over a long period of time. So that’s our story, we will look forward to getting this product approved by the FDA and on the market launching and really doing all the things that we have been comparing for and planning for so many years, thank you all for coming.

Unidentified Company Representative

Thanks Jane, what a great story and we all look forward to when the products gets on the market place which is such a big market and unmet need and a lot of demand for. Next we would like to introduce Jean Hoffman,, Jean is the CEO of Putney. Putney is our most recent partner company one that we're all very excited about. I think you all enjoy the story here.

Jean Hoffman

Good morning. Welcome. Thank you, Jim, Peter, John Heather and the Safeguard team we are Safeguard’s newest investor, Safeguard a new spring closed less than one week ago, so its particular order pleasure for me to be here and speak to you. I also want to think one of my earliest backers and strongest supporters in my prior company Newport Strategies, John Gibbons of Odin Partners who is here and representative I am sure of the high quality investors that’s Safeguard brings to the table

Putney is revenue stage specialty pharmaceutical company focused on drugs for pets we are developing drugs and taking them through the FDA center for veterinary medicine a parallel center at the FDA that approves that vet drug under regulations similar to those for human drugs. We are developing drugs for dogs and cats. The market overall that we are initially addressing is the prescriptions drug market for pets which globally is about $5.6 billion.

We currently have about 10 million in revenues. All of those products are in licensed and we expect significant product approvals next year and going forward we have a pipeline of about 20 drugs in various stages of development and submission to the FDA center for veterinary medicines.

Our main competitors are the brand side of animal health, big pharma animal health has big pharma has animal health subsidiaries that are literally cash counts for the parent companies. And there are very limited generics available today. 96% of the drugs at the FDA has approved for dogs and cats lack a generic equivalent nearly opposite to the human side where almost every product has a generic at patent expiry or often as soon as patents are invalidated in card. Because there is no third party payer there is of course no reimbursement risk. But the pet owners who are paying out of pocket and the veterinarians who both prescribe and dispense drugs and therefore earn a significant portion of their practice revenues from drugs. Because of these dynamics the veterinarian and the pet owner are both highly economically sensitive thereby creating a significant unmet need that Putney is the first company to address well.

Looking at the global animal health market, total global animal health revenues are estimated at 20 billion in 2010 that breaks out into drug for food or production animals, animals we eat and pets. It also is further subdivided into the biologicals vaccines et cetera as well as the prescription synthetic traditional drugs for pets which again is the slight that we at Putney are initially going after.

Our initial development efforts are focused only in the U.S. and we are not currently focused on the larger global market which we can’t address in the future. I’m sure many of you have pets. Our pets have come in from the barnyards, they are no longer tied to a tree, they are in our beds, they are in our houses, and we don’t want them to be covered with open source or flees or worms or to be suffering from pains. A lot of Americans have pet’s, more than 71 million households have more than a 171 million dogs and cats and cats are particularly underserved market, since there are very few drugs developed for cats and cat owners tend to be even more economically sensitive than dog owners.

There are growing similarities between the pet pharma market and the human pharma market. Our pets now that they are inside and being coddled, they are living longer, they are developing arthritis and needing end-sage for their arthritis when they are old. They are also sometimes obese. They are developing behavior problems when shutting the household deck. So the market for pets is developing not only because Americans have pets because there is an economic need for lower cost medications, but also there is growing treatment for pets and the need for medications that are properly dosed and have been approved for the pets to meet the changing medical need of those pets and the veterinarians who treat them.

So Putney’s target is FDA regulated prescription drugs for pets in the U.S. market, that total market that we are addressing in terms of the branded drug component of the market was about $3 billion. Again, veterinarians are our primary customer because the vets both prescribed and dispense drugs. The vet channel like the human pharmacy channel is consolidating, in the past there were Mom and Pop drug stores everywhere and now we have CVS, Wal-Mart, Walgreens, the small Mom and Pop veterinary practices are consolidating into larger practices run by business people as businesses that are much more economically driven and they are also consolidating into larger higher tax specialty practices.

Our affordable drug options that Putney is developing and has on the market today empower the veterinarians to actually be able to get the pet owners to fill the scripts increasing compliance and pet owners are very happy to have lower cost prescriptions closer to what they were paying for the human generic drugs. Human generics now 78% of the scripts, human drugs 78% of the script are filled with generics. So pet owners are accustomed to generic drugs for their human family members.

Our strategy at Putney is to combine the skill set and manufacturing an FDA compliance infrastructure that has already been built to support the large human generics market and deploy that through the veterinary market focused front end and dedicated veterinary focused product development and regulatory capability focused on getting products through the FDA center for veterinary medicine. We are combining the infra structure that already exists for human generics with the vet market dedicated focus to ensure rapid adoption to market professionally to veterinarians and to ensure our products get efficiently through the FDA center for vet medicine.

Our value extends from the pet patient to the pet owner achieving cost savings to the veterinarian who is not only able to increase their margins but also to keep pet owners in their practice to keep revenue that would otherwise be lost to online or the pet owners not filling their scripts. Our product help vets and pet owners provide good medical care to pet. Our products help veterinarians choose the optimal medically recommended treatment for first line treatment rather than scripting out something cheaper to try to enable the pet owner to afford the drug.

At Putney our model is a branded generics model parallels more with the European model where we are building a corporate brand that is already trusted by veterinarians, distribution, channel partners and pet owners who are excited about the ability to afford generic drug for their pet family members.

Thank you.

John E. Shave III

Thank you, Jean. So you can understand our enthusiasm for a large multi billion dollar marketplace with private pay and with a company that has 20 plus products in a pipeline is going to be exciting next couple years. Our final speaker is Dr. Ron Blum, Ron is the CEO of PixelOptics and when we had a chance to meet Ron last year the first words out of our mouth were while and I think he is going to have to use many say while as well.

Ronald Blum

Thank you. I appreciate it. Let me start out with some bring this hope to everybody in the audience. How many people in here are a bifocal, let’s see if you will admit it, reading glasses are bifocal, okay. And how many people in here or lets say you’re in their 30s or early 40s. Okay, so I think I pretty much have mailed to everybody. Now here is some sovereign facts. Those of you who are in your 30s or early 40s, by the time you are 45 75% of you will be able to benefit with some kind of the reading prescription. You may or may not get it but you’ll benefit from it. By the time you are 50 to 55, about 90% to 95% of you will benefit from it. Very sovereign facts and it’s reality.


We’ve been very, very fortunate. We made a decision to go to the consumer electronic show, we’re a class one medical device in the optical industry. It just doesn’t happen. You don’t go to the consumer electronic show. We made a decision to do that this past January and we walked away and it was just absolutely amazing. It’s probably one of the best business decisions that I have never had any part of, and what has happened to us this year has just been incredible.

I put together a little brief video that I would like you to see in a few minutes, and it’s really to give you a feel for the media attention that this company is getting and our product and also the public interest. And this is not just in the United States; this is all around the world.

Here we go. Well, not really. So let me see if I can do this here.


Unidentified Company Representative

So, what is emPower!? emPower! is the world’s first and only electronic focusing eyeglasses. They actually focus faster than the blink of an eye, in 7 milliseconds. They do it without any moving parts and they make absolutely no sound.

Now it’s a transformational change for the optical industry. I mean you would expect me to say this, but people are saying this within our industry. It is probably the biggest significant change, potential change and we are going to do everything we can to make it not only a reality around the world. Then since Benjamin Franklin invented the bifocal, it is a enormous sea change for the industry, I’m wearing them right now.

To demonstrate very quickly, I know you can't see what I’m seeing, but to be able to look at my watch if I want to, and I can put it in automatic, all I do is I take my fingers, I touch right here and it just pops right into focus. And if I want to turn it off, I'll do that. It turns itself off, and the floor is perfectly clear.

If I want to look at you all I can swipe my temple, and now they are in automatic mode. You all look great. I look down, pops into focus; I look far away, pops back into focus. I examined eyes for 20 years, and wearing glasses, you think of it it's more of a crutch, you don’t think of eye glasses as being fun. I can tell you that these are fun.

So I put together another brief video and we'll see how this works. I’m trying to do some multimedia here, and this will give you a little more information on how they work. Here we go.


And we see if I can get in together in next, there we go. So let’s talk about the market and business opportunity. If the Vision Care industry is in an amazing large industry in a global basis, it’s roughly in $82 billion business globally. And out of that $82 billion, a little bit less of $60 billion of the $82 billion is really frames and lenses. It may surprise everybody today, but that’s really this as of this industry.

Now if you look at the units, its units are extremely large and they’re growing, as the world’s population ages and as the developing counties become a little more fluent, what’s happening is more and more people are moving not only to eyeglasses, but they either (inaudible) progressive addition lenses. And progressive addition lenses are really the market where we’re totally focused. Although (inaudible) we’ll definitely get some of that market as well. So it doesn’t take a lot of penetration for us to have a very nice size business. Every 1% penetration of the progressive markets $200 million of revenue and every 1% penetration of the (inaudible) progressive market, is $400 million of revenue.

In terms of the launch of our product, we actually started this off launch in July of this year in Virginia, North Carolina, Florida, and Alabama. We did this in a very controlled number of locations and it was really for us to find out what we did now. It was to debugging the system. It was to set up a customer care group. It was to figure out how to better communicate with the patients and I’m really pleased to tell you that it is going very well. We are extremely pleased.

Right now we are now in almost what I would call hard launch mode. We are going to take a number of practices somewhere between 50 to 100. And what we plan on doing now is finding out how to optimize the sales in those practices and how to really make those practices hum. And then after we do that, then we’ll put the pedal to the metal and launch the product.

We’ve been very fortunate in being able to hand fit the laboratories in North America that we want to work with, and by the way this is happening around the world. I wish I had more time today, but this is on a global basis, that went on showing is occurring.

In North America, we were able to pick the top of the top labs and every one of them wanted to work with us which is wonderful. And those 15 labs and will probably expand it to 20, believe it or not they are doing 33,000 pair of eyeglasses a day. So there is no problem at all with us being able to take care of what we need through this what we call almost the exclusive lab network.

With regards to sales reps, we made a decision on how to go to market the most efficient way that we possibly could, and we wanted to leverage the relationship with our partners, we licensed the eyeglass frames to a company out of Canada, it’s called Aspex Eyewear. They have roughly 150 sales reps that cover United States. They’re well established well known and we take their sales reps, and then you take also the lab reps from the laboratories and then you add on our 30 reps that will have spread across the U.S. You get, I think at somewhere around 330 by the end of next year we will probably close to 400. So what’s exciting is we’re only paying for 30. So we’re leveraging the relationships that we have with our partners.

This should – this I think, says more than anything that I can show you. Last week at Vision Expo which is the second largest vision care show in North America, it was in Las Vegas. We made an announcement in the press conference that we had signed up over a thousand eye care doctors and these doctors had to commit $4,000 in advance of getting the product, that’s for the frame display, the eyeglass frames in the demo unit.

And today I’m pleased to tell you, we’re closing in on 1,200 and we’re going to continue to grow that. And also this past week at SILMO in Paris, which is the largest vision care show in Europe. We were invited into the largest laboratories both who have this to have the largest booth at the show and our area was so busy that they had to expand – the area they gave us, because there was too many people spilling out to other people’s booths.

So the interest in this product is very, very substantial. Intellectual property, we’ve been following the patents and we now have over 300 patient applications pending, we actually have 43 that have already issued in the United States alone.

Now, I have one final video and I never know what’s going to happen when I push this, so I’m going to try and it’s very short and what it is – the reaction that we get, 65% to 75% of the time when the person puts on these glasses and it’s unsolicited. Now and it’s quite extraordinary and very personally rewarded when it occurs.


We’ve literally have hundreds of those videos, yesterday in one-on-ones and last night at the little cocktail, I was letting people try these on and I did eight downloads I was a 100% for I think ahead of bunch of wells I had three wow, wow, wows and I actually had one, oh my god. So it is fun. Now, I’ve only got two more slides and we’re I’m almost finished here.

Those of who wear progressive addition lenses and this is a little bit of an exaggeration but not a lot, the area out in here on each side of the lens is blurry and down here on the floor. So you get this distortion out here the floor is fuzzy, everything straight ahead is nice and clear and everything faraway is nice and clear.

So, when you’re wearing progressive addition lens this is beautiful; that’s beautiful you get this distortion where each side is blurry down here. Within power here is what happens. It literally just – it clears off. But as good as that is this is really where we get the most attention. Those of you wear biofocus today are reading glasses. You know that when you read, you are reading at 14 to 16 inches. So if you look at the floor and has to be blurred, it’s just the laws of physics. Because if it’s focused here, it can’t be clear there. And so within power, because I can literally dynamically turn my glasses off here is what happens, it just clears up.

So these are dynamic eye glasses, everybody’s glasses today with those who wearing eyeglasses, you have static lenses. And let me leave you with this, I believe the future in eye glasses will become dynamic. And the glasses that you all are currently wearing are static and that’s going to become a commodity and you are going to see the price continue to erode. And in the future you’re going to see dynamic lenses become more and more of the thing.

So this is the final slide I have and I know that if I don’t discuss this with you you’re going to ask it anyway and it’s the price point. So these are a 30% premium. This is where we positioned it to a top of the line progressive additional lens, top of the line fair frames today. So they are retailing for $1250. We will see some eye doctors selling them at $999 and we will see other selling them at $1,500, I am sure this is going to be that range. At $1,250 the eye doctor is putting $500 in his pocket. It represents the most money he makes on anything he sells in his office.

So consequently we hope that the financial motivation is there for the eye doctor to sell them and if he wants to give the patient the best type of vision, we hope those two things are going to make him want to sell the product. And I thank you very much for your attention. Jim?

Unidentified Company Representative

Thank you, Ron. Well done. Gene and James, I want you to come on up please. We’re going to open it up for questions hopefully you are as excited as I am certainly in the past has produced some good returns. We think the present today our stock is greatly under valued and you can see the future of Safeguard, there is some very exciting opportunities here. So why don’t we open it up for questions. Yes, sir.

Unidentified Analyst


Unidentified Company Representative

Excuse me, can you repeat the question please.

Unidentified Company Representative

Could we repeat the question? Okay, question sensitivity as we did it. We did extensive testing in that area. We found is that the difference between $991 and $1250, it wasn’t, there was very little price sensitivity. Once we got to $1500 we saw a 40% decrease.

Unidentified Company Representative

There is a follow-up question as far as manufacturing capacity.

Unidentified Company Representative

Well, great question, right now we are partnering with Panasonic. Panasonic is making the electronic semi-finished lens blanks for us. We literally taught them how to do that. It sounds kind of crazy, but we did. And there is not, I don’t want to say there is not a capacity limit, but Panasonic has already increased their capacity 50% for us and they are now eyeing a plant, Indonesia. So we don’t see that being a problem. They look as long as we have the business they will continue to expand and I am happy to say, they are doing it on their nickel.

Unidentified Company Representative

Yes sir.

Unidentified Analyst


Unidentified Company Representative

Okay, I will start with your second question first. Botox is approved for chronic migraine, which is used to really minimize the number of headache days that patient have.
So for example, the Botox data I believe is instead of 17 headache days a month that reduced to 15 headache days a month. So when you’re having, when you are taking drugs for chronic migraine, you’re also using drugs for acute migraine. So you still need to have these acute treatments.

And so we think it’s complementary because Allergan with Botox out there promoting used for chronic as well as raising awareness for some of these treatments of migraine and all of these patients still need acute treatment. So in terms of non-orals there are no other patches and development that we know of and we also know from really working on this product it’s an exceedingly difficult technical challenge.

We are really threading a needle here to be able to deliver the appropriate amount of drug without causing undo irritation to the skin and be able to manufacture it and keep it stable as long as you need to. So it’s not a simple process, beyond transdermals there is an inhale delivery of a different active ingredient, a different class of drug which is the class of as used prior to triptans coming out on the market. So typically patients will run through whole host of triptans before they get to that class. And in addition that also happens to have nausea as one of the major side effects. So for the GI nausea population that really we don’t see was appropriate and everything else probably won’t do much more than what we already have, which is why we really think this is market as here for our taking.

Unidentified Company Representative


Unidentified Analyst


Unidentified Company Representative

So the question was what’s been the patient compliance rates when use with the patch.

Unidentified Company Representative

Well, you mean how easier for them to use things like that?

Unidentified Analyst


Unidentified Company Representative

Well, the data we have so far is we have these two long-term trials over 12 months and I think the data about the 2.5 times per month average really speaks pretty well to it. We haven’t seen really patients having trouble using it. So we’re feeling pretty good about what we have so far in the vet data.

Unidentified Company Representative

Yes, sir.

Unidentified Analyst


Unidentified Company Representative

The big opportunity for Putney in the recent Safeguard new spring investment is our pipeline. And the existing products are in license that we also have some human drugs that we’re offering for sale. So we expect continued incremental growth from the existing drugs but the significant growth is from the pipeline.

Undefined Analyst


Unidentified Company Representative

Jane if you could repeat that?

Unidentified Company Representative

Yes. The question is what’s the risk of the branded animal health companies creating their own generics? One of the attractive aspects of Putney is that I can see the future quite clearly. Having spent a carrier in human generics globally, we do expect competition and we do expect authorized generics, which is the term on the human side for generics that are offered by the branded companies themselves or the rights licensed out to other generic player with the specific intent of undercutting true generic entrant.

So we expect that, we’re prepared for that. We think no one branded animal health company will be able to match the breadth of our pipeline with so many drugs in development across multiple branded competitors across multiple dosage forms and delivery systems. The synergy of that pipeline we expect to be very powerful to veterinarians. I like to say that we do product development backwards, which is that we have really done a lot of work to focus our pipeline, our portfolio choices around the drugs that veterinarians want the drugs that will enable us and enable veterinarians to grow the pie and so I think our offering is a very powerful one.

Unidentified Analyst


Unidentified Company Representative

Sure, question.

Unidentified Analyst


Unidentified Company Representative

Well, Perrigo is primarily a private label company and they primarily sell OTC. They have been investing. They bought a derm company, so they’ve been trying to go into the prescription generics. And though is a little bit different in terms of their strategy, but I will say yes they’re parallels between Putney and the diversified human generics companies such as Teva, which is of course an outstanding company. And we are partnered with some of the largest human generics companies in the development of our product.

Unidentified Company Representative

We have a question from the web for Ron at Pixel. What was the rate of change from glasses to contacts, contacts to soft contacts, was it a $1 boost to DRs as transition occurred?

Ronald Blum

You are saying the, rate of change from glasses to contacts?

Unidentified Analyst

Yes, and then the contacts to soft contacts?

Ronald Blum

Well contact lenses have flat totaled around 20%, and contact lenses, you know it’s that lenses – without question contact lenses have a lot of benefits, I actually wanting for a long time, but when you get to the age of 40 to 45 years of age, I don’t know if I answering this – the question, what happens is contact lenses falls off like a rock and that’s caused by two reasons, one because people become presbyopic the need for near focus and you – most contact lenses will not deliver that. And the second is changes within the human body where the tear rate starts to diminish and the contact lenses become more uncomfortable. So I don’t know if I’m answering their question or not but that’s probably the best I know how to do without having them across to make sure.

Unidentified Analyst

Sure thank you. Yes sir.

Unidentified Analyst


Unidentified Analyst

Jane, if you could repeat that?

Jane H. Hollingsworth

The question concerns the cost to develop a generic animal drug, which is known as an ANADA similar to the human which is ANDA, it depends of course on the deal structure with our partners the details of which we don’t disclose but Putney bears the cost of all of the clinical studies in animals including bioequivalent studies as well as tolerability and any other studies, and the cost of those studies ranges anywhere from above $300,000 up to $1.5 million for a generic. And there are additional cost of course for the formulation development, the submission batches et cetera and sometimes Putney bears all of those costs sometimes a portion of those it really depends on the optimal deal structure that we have selected with what we feel is the optimal partner on each product.

Unidentified Analyst


Unidentified Company Representative

The question concerns whether there is a 505B2 equivalent pathway on the veterinary side, and there is a similar, but slightly different pathway called a hybrid application where you can file for instance to those as a suspension instead of as a tablet, so there is a somewhat similar pathway to the 505B2.

Unidentified Analyst

Ron, there was a follow-up question for you, are doctors financially incented to make a switch from glasses traditional glasses to PixelOptics?

Ronald Blum

When you say financially incented, I’m not sure if I totally understand the question I will tell you that you can’t in our industry a kick back for an under the table payment is not permissible. So it’s not in that regard, but clearly if they sell a product it’s better for the patient, and they make more money than they are incented in that way if it’s legally for legal way..

Unidentified Analyst

Sure. Thank you. Yes sir.

Unidentified Analyst


Jane H. Hollingsworth

Well for our…

Unidentified Analyst

Jane, if you could repeat that question?

Jane H. Hollingsworth

I’m sorry yeah how difficult is it to get to the physicians we need to get to in order to launch a product? So we would be going out to neurologist and headache specialist there are lot of headache centers around the country that have a lot of patients in them, so we feel like with a 100 sales reps. We can really get the cream of the crop so to speak. And we are doing a lot of work and we have been over the last month to really hone in on that. We are not going to just do it in a relatively simple way. We’re looking at things like which of these physicians like to try to new things, which of these physicians like patches, which of them don’t like patches, which of these physicians really understand at a deeper level, how much of the GI issues are affecting these patients. So really how much of these where are these physicians located in terms of the payer environment, are they being reimbursed in that environment and not say in a different geographic area. So we will really use these 100 sales rep as effectively as possible and that’s one of the advantages of this delay from the FDA, because it gives us an opportunity to do more of that, and really be – we think more effective once we do launch the product.

Unidentified Analyst

We have time for one more question.

James A. Datin

With that I would like to thank Jean, Jane and Ron and I want to remind the group here just a four years ago, we had some young companies up here on the stage including Clariant, Avid and ABH. Clariant was just starting to grow some revenue traction, Avid was going to do some FDA trials and tribulations in advanced biohealing was just launching no revenue. When we get together in the next couple of years, we’ll be exciting to fall off these three companies because we think there is a enormous potential for growth and upside like what we’ve had in the past so. Thank you Ron, Jane and Jean, we appreciate it.

Jane H. Hollingsworth

Thank you.

James A. Datin

With that, I want to turn it over to Peter Boni to close.

Peter J. Boni

Thank you, Jim, nice job folks. So Safeguard Scientifics our vision statement is that we are the preferred catalyst to build great companies. We think you’ve seen some great companies here today. We also think there is an extraordinary opportunity for Safeguard Scientifics to build terrific shareholder value. On that note, we have a survey that we would encourage your filling out to give us some feedback, and we also have a box lunch for you to take as well. And if you fill out the survey, you will get a cookie in your box lunch. Okay, thanks very much.

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