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CR Bard (NYSE:BCR)

Q3 2011 Earnings Call

October 25, 2011 5:00 pm ET

Executives

Todd C. Schermerhorn - Chief Financial Officer and Senior Vice President

John A. DeFord - Senior Vice President of Science Technology & Clinical Affairs

Timothy M. Ring - Chairman, Chief Executive Officer and Chairman of Executive Committee

John H. Weiland - President, Chief Operating Officer and Director

Analysts

Robert M. Goldman - CL King & Associates, Inc.

Matthew J. Dodds - Citigroup Inc, Research Division

Thomas J. Gunderson - Piper Jaffray Companies, Research Division

Michael Matson - Mizuho Securities USA Inc., Research Division

Michael N. Weinstein - JP Morgan Chase & Co, Research Division

Frederick A. Wise - Leerink Swann LLC, Research Division

David H. Roman - Goldman Sachs Group Inc., Research Division

Matthew Taylor - Barclays Capital, Research Division

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Bruce D. Jackson - Morgan Joseph TriArtisan LLC, Research Division

Joshua T. Jennings - Cowen and Company, LLC, Research Division

Jonathan Demchick - Morgan Stanley, Research Division

Joanne K. Wuensch - BMO Capital Markets U.S.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Suraj Kalia - Rodman & Renshaw, LLC, Research Division

Matthew O'Brien - William Blair & Company L.L.C., Research Division

Jason Wittes - Caris & Company, Inc., Research Division

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the CR Bard Inc. Third Quarter 2011 Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded and will be available for future on-demand replay through the Bard website.

Today's presentation will be hosted by Timothy M. Ring, Chairman and Chief Executive Officer; along with John H. Weiland, President and Chief Operating Officer; Todd C. Schermerhorn, Senior Vice President and Chief Financial Officer; and John A. DeFord, Senior Vice President, Science Technology and Clinical Affairs. Also in attendance today is Todd W. Garner, Vice President, Investor Relations.

Today, Bard's management will discuss some forward-looking statements, the accuracy of which are necessarily subject to risk and uncertainties. Please refer to the cautionary statement regarding forward-looking information in Bard's June 30, 2011, Form 10-Q and the information under the caption Risk Factors in Bard's 2010 10-K, including disclosure of the factors that could cause actual results to differ materially from those expressed or implied.

During the call, references will be made to certain non-GAAP measures, which management believes provide an additional and meaningful assessment of the core operating performance of the company and its individual product franchises. Reconciliations of non-GAAP measures to the most comparable GAAP measures are provided in Bard's earnings press release on the company's website at www.crbard.com. All information that is not historical is given only as of October 25, 2011, and the company undertakes no responsibility to update any information. Unless otherwise noted, all comparisons are to the prior-year period.

At this time, I will turn the call over to Mr. Timothy Ring. Please go ahead, sir.

Timothy M. Ring

Thanks, Cathy. I'd like to welcome everybody to Bard's third quarter 2011 earnings call. Thank you all for taking the time to join us today. I expect the presentation portion of the call will last about 20 minutes. The agenda today will go as follows. I'll begin with an overview of the results for the quarter. John Weiland, our President and COO, will review third quarter product line revenue. Todd Schermerhorn, our Senior VP and CFO, will review the income statement and balance sheet, as well as our expectations for the fourth quarter. John DeFord, our Senior Vice President in Science, Technology, and Clinical Affairs, will provide an update on our product development pipeline, and then we'll close with a Q&A.

Third quarter 2011 net sales totaled $719.2 million, up 6% over Q3 of last year on an as-reported basis and up 3% on a constant-currency basis. The impact of currency for the quarter versus the same quarter last year was favorable by about 280 basis points. Net income for the quarter was $130.1 million, with diluted earnings per share of $1.46. Excluding items that affected the comparability of results between periods, which Todd will cover later, third quarter 2011 net income and diluted EPS were $144.9 million and $1.62 , up 7% and 13% respectively.

Looking at revenue growth geographically compared to Q3 of last year, third quarter net sales in the U.S. increased 2%, demonstrating a continuation of the domestic headwinds we saw last quarter. Our international business grew 17% on an as-reported basis, and 7% on a constant-currency basis. Europe increased 2% on a constant-currency basis, with a couple few sales days compared to the prior-year period. Timing issues caused our sales to our joint venture in Japan to be flat this quarter compared to last year but the underlying customer demand in Japan remains steady in the mid to high single digit range. Our other international businesses grew 20% in constant currency this quarter, driven by 39% growth in emerging markets where we continue to execute well.

The U.S. sales environment today is certainly less predictable than it's been in the past. Despite the uncertainty around patient and procedure volumes, 3 of our 4 businesses are on track globally to be within or very close to our original guidance for the year, and in total, we expect to be within that original guidance, albeit at the low end. As John takes you through the product line detail for the quarter, you'll notice that in the product lines where we've made strategic acquisitions last year, we're growing in the mid-teens or better even after the anniversary mark. You'll also notice that our recent key launches in fix and synthetic ventral hernia have driven those product lines back to double-digit growth even in a tough volume period.

We think this underscores that executing our product leadership strategy continues to work even in uncertain and challenging economic times. So we'll continue to prioritize resources and investments in markets, products and technologies with double-digit growth and a clear line of sight to sustained product leadership. You'll also see this approach in our business development activities.

Last month, we announced our intention to acquire Clear Stream Technologies, and that acquisition has now been completed. Clear Stream supports our product leadership strategy in specialty small vessel PTA balloons. We are also pleased to announce today that we've reached an agreement to acquire Medivance, Inc., a private U.S. company with proprietary technology in the field of therapeutic hypothermia.

Medivance is a great fit for us, as it's the product leader in an emerging and growing market with its targeted temperature management system that sells a large unmet need for patients with cardiac arrest and for patients who require fever management. The technology also has the potential to be effective in the areas of acute myocardial infarction, traumatic brain injury, stroke, and other morbidities. This product line is synergistic with our critical care sales call point, and will be managed out of our Bard Medical Division. We see this as an entirely new growth platform and an important building block in our critical care product offering. We expect that both of these acquisitions will start contributing to the sales line in Q4, but they should not have a meaningful impact to EPS.

We'll continue to use business development to ship the mix of our portfolio toward higher growth markets, and I can tell you that our pipeline is as good as it's ever been. Before I turn you over to John Weiland, who will review the product line revenue, I would like to take a second to extend to you an invitation to our annual analyst meeting, where we will discuss our strategy and tactics for 2012 and beyond. We'll also review our new product pipeline and provide financial guidance for 2012. The meeting will be at the Waldorf Astoria in Manhattan on December 20 beginning at 4:30 in the afternoon. And for those that can't attend, the meeting will be available by webcast. Now, let me turn it over to John Weiland.

John H. Weiland

Good afternoon, everyone. And before I start, let me point out that I'll be giving all percentage growth data in comparison to the prior-year period on a constant currency basis, unless noted otherwise. So let's begin with vascular. Growth in this category was 5% for the quarter as we anniversary-ed the SenoRX acquisition at the start of Q3. Total net sales were $208.2 million, up 9% over last year on an as-reported basis. Our U.S. business was up 2% for the quarter, which is consistent with what we saw in Q2, excluding SenoRX. Internationally, we grew at 8%.

Our Electrophysiology sales were up 4%. EP Lab system sales were up 28% for the quarter, where in the prior year, we had a very weak Q3 and a very strong Q4. Revenue in our disposable EP product lines was up 1%, with our Steerable Diagnostic Catheter line up 2%. Sales in our surgical graft category were down 3% in the third quarter, within the range of our historical experience for this product line. Our endovascular business increased 6% globally this quarter, with double-digit growth outside of the United States, driven by strong performance in Europe and emerging markets.

Within endovascular, our biopsy products were up 14%, which included 45% growth from the SenoRX products, despite passing the anniversary of the acquisition early in the quarter. And the Q3 launch of our next-generation vacuum-assisted console system, named ENCOR ENSPIRE, is off to a strong start in all geographies.

Sales in our peripheral PTA line increased 5% in the third quarter. Our CTO and specialty small vessel product lines grew at a combined 23% this quarter, while the growth in the base PTA business decelerated to low single digits. Sales in our Vena Cava Filter line were down 21% this quarter, consistent with the trajectory we've recently seen. We have received 510(k) concurrence for our new Meridian Vena Cava Filter for jugular delivery indication, and we expect the femoral indication any day. We're in the process of that sales launch.

Our combined stent and stent graft business was flat this quarter, following 1% growth in Q2. LifeStent returned to double-digit growth again in the third quarter, with fairly balanced growth domestically and internationally. According to the U.S. IMS data from the last 2 quarters, we are the number one in SFA stents. And while we anticipate competitive responses, we remain on offense here with our longer lengths and our clinical results with long-term data. In fact, we received FDA approval of our LifeStent Solo family with lengths up to 200 millimeters, a new delivery system and enhanced x-ray visibility, so that launch is underway.

Turning now to our urology segment. Total net sales were $182.2 million, flat this quarter on a constant-currency basis, and up 2% on an as-reported basis. The United States business was down 3%, while internationally we were up 6%. Very similar results to last quarter. Our basic drainage business grew 1% globally in the third quarter, and was down 1% in the United States. Our I.C. Foley business was down 4% globally, which is consistent with recent experience here.

Our Continence business was down 20% in Q3, relatively consistent with what we saw last quarter. Half of this decline is due to the discontinuation of our Contigen product line back in the second quarter. This market is also contracting due to the public notices from the FDA concerning public organ prolapse repair. John DeFord will discuss the impact that the recent FDA discussions, and also give you a latest update on our DIGNISHIELD launch.

Sales in neurological specialties were up 4% in Q3. Within that category, brachytherapy grew at 5%, up against a very low comp from a year ago. So even though this is the first time in positive territory in recent memory, we're not ready to say the challenging trends in this product line are behind us. Standalone sales of our StatLock catheter stabilization line grew 5% for the quarter, with U.S. sales up 2% and international sales growing 21%.

Let's now move to Oncology. Total net sales in this category were $198.9 million, an increase of 6% over Q3 last year on a constant-currency basis and 9% on an as-reported basis. Geographically, net sales in the United States were up 6%, while outside the United States, sales were up 7%. Our port business was up 3% versus the Q3 last year, with strong growth continuing in emerging markets.

PICC revenue was up 10% this quarter. The rollout of our Sapiens Tip Confirmation System continues to go well and pick up steam. Our metrics are staying fairly consistent, with over 85% of the accounts that have completed evaluations committing to the product. And over half of those accounts already eliminating x-ray in their PICC placement procedures. What has changed is the number of accounts involved. Last, quarter we told you that we are in over 100 accounts between evaluations and conversions. That number now exceeds 200 accounts. Just based on the accounts that have already eliminated x-ray in their protocols, we estimate that over 60,000 x-rays have been eliminated annually.

And to finish off Oncology, our vascular access ultrasound product line was up 4% in Q3, and our dialysis catheter business grew 8%. Let's finish our revenue discussion with our surgical specialties business. Total net sales in this category were $107.6 million, up 1% on a constant-currency basis and 3% on an as-reported basis. United States sales were down 1% and internationally, sales were up 6% for the quarter.

As Tim mentioned, this is the area where our results have fallen short of guidance. The good news is that the 3 key product launches we talked about on the last call are making their mark as we grew our synthetic hernia business by 8% this quarter, the highest growth rate in this product family since early 2006.

More specifically, the synthetic ventral products grew double digits as VENTRALEX ST for umbilical hernia repair, VENTRIO SG for ventral hernia repair and our ECHO PS mess positioning system, for the laparoscopic segment of the market are off to a strong start. Growth in this synthetic hernia segment is a big deal in that it represents over 50% of our entire Surgical business. However, we did see a slowdown in the growth of our natural tissue products, which grew at 6% this quarter, and our hernia fixation products declined 18% in Q3 due to increased competitive activity. The net result was 4% growth this quarter in our soft tissue repair business, which was consistent with last quarter. Sales execution is the key here to capitalize on the significant opportunities available to us in both synthetic and biologic hernia repair.

Closing out the Surgical category, our performance irrigation business declined 13%, and our hemostasis business was flat this quarter. This concludes our product line revenue discussion. I'll now turn you over to Todd Schermerhorn.

Todd C. Schermerhorn

Thanks, John. Let me start with the items that affect comparability of results between periods. First, we continue to adapt to the changing environment by reallocating resources in favor of our growth markets and we have booked a charge for restructuring in Q3 of approximately $10 million. Charge is made up almost entirely of severance and related benefits and we expect to save about $16 million annually as a result of this plan. Second, recent events in Europe have caused us to recognize a $7 million impairment on our Greek bonds. We also had acquisition-related items of $2.7 million in the quarter and a credit from a state tax audit of $1.1 million. These items are detailed in the notes of the financial statements and reconciliation that accompanies our Q3 press release.

Now, let's go to the statement of income for the quarter. Gross profit was $444.3 million or 61.8% of sales for Q3, down 20 basis points sequentially and a bit lower than we anticipated. Price erosion was again a challenge this period, with 110 basis points on sales versus prior year and the soft surgical sales hurt our mix. Looking forward, manufacturing cost improvement programs look as strong as ever, but with the price erosion seemingly accelerating, margins become more difficult to predict. SG&A expenses were $189.3 million for the quarter or 26.3% of sales.

On an adjusted basis, SG&A was $187.2 million or 26% of sales, down 110 basis points year-over-year, as we told you that our expected savings from last year's restructuring will be weighted to the back half. R&D expenditures totaled $46.9 million for the third quarter, with 6.5% of sales on a reported and an adjusted basis. This is down 50 basis points from prior year as a percent of sales and a function of our conservative approach in the face of uncertain markets.

Interest expense was $9 million for Q3, consistent with last quarter. Other income expense was $17 million of expense for the third quarter without the restructuring charge and the Greek impairment, the number would've been zero. The effective tax rate for the quarter was 28.6% reported and 28.2% on an adjusted basis, bringing the year-to-date adjusted effective tax rate to 28.3%, consistent with our guidance.

Diluted shares for the period were 87.8 million. The ASR was completed in September. In addition, we repurchased roughly 1.3 million shares of the company stock in Q3, and going forward, we intend to be buyers of our stock from time to time as cash balances and market conditions permit.

Balance sheet as of September 30, 2011, reflects cash, restricted cash and short-term investments of $967.3 million versus $911.9 million at June 30. For the quarter, accounts receivables days were up 0.7 days, and inventory days were down 3.1 days. Capital expenditures totaled $18.2 million for the quarter.

On the liability side, total debt was $908.9 million as of September 30 compared to $901.1 million at June 30. Debt to total cap at the end of the third quarter was about 33% and total shareholder investment was $1.849 billion.

Moving to financial guidance, for Q4 we're expecting constant currency sales growth of 3% to 5%, including 1% from the new acquisitions. And from an earnings perspective, we remain squarely focused on a $6.38 target for the full year, excluding items that affect comparability, which would mean $1.68 for Q4. I'll now turn you over to John DeFord.

John A. DeFord

Thanks, Todd. And with the analyst meeting just a few weeks away, I'll just hit a few of the highlights tonight, starting with Encompass, our atrial fibrillation ablation technology. We're in the late startup phase of our multi-center feasibility study and we anticipate filing for the CE Mark later in Q4. We expect to begin enrollment around the end of the year and use those data to support our pivotal IDE submission next year and provide marketing data for our European rollout.

In stent grafts, we submitted our IDE in September to commence clinical evaluation in approximately 200 patients with our new Lifestream Stent Graft. The Lifestream is built upon our LifeStent and EPG FE Graft platforms and is targeted for the treatment of SFA disease. We plan to include lengths of up to 200 millimeters in 6 and 7-millimeter diameters in the study. We anticipate commencing enrollment in European launch around the end of the year.

In filters, John discussed our recent 510(k) concurrence and launch of the Meridian Vena Cava Filter late in Q3. Moving to our next-generation Denali filter, as presented on our last call, we began enrollment in our clinical study early in Q3, and we're actively recruiting to enroll about 200 patients to [indiscernible] permanent and retrievable filter placements. Our current timeline has enrollment continuing into Q3 of next year, and U.S. launch into the second half of '13.

Turning to Urology and Continence, we joined [indiscernible] and other industry representatives at the September 8 and 9 FDA panel discussion on the classification of mesh products for the treatment of Pelvic Organ Prolapse and Incontinence. We've also had several independent discussions with FDA over the last several quarters concerning the appropriate regulatory path for our NuVia SI single incision pelvic floor repair kits. Based upon FDA's guidance, we submitted the NuVia SI 510(k) in early September and understand that the product will be reviewed under its current regulatory classification.

However, until we receive additional feedback from FDA, it's really unclear as to the timing of a U.S. launch. Meanwhile, we've launched NuVia SI in Europe and have received very positive feedback from the first several cases. Our next generation device for the management of fecal incontinence, DIGNISHIELD, was introduced in a controlled manner last quarter, and early evaluations have led us to make some minor enhancements. We expect to be in full launch by Q1 of 2012.

Moving to oncology, early in the quarter, we began rolling out a Sapiens TCS and Sherlock TLS integrated catheter placement system for accounts that utilize non-Bard ultrasound technology. We also continued to enroll patients in our clinical trial for the 3CG system that integrates ultrasound, Sherlock tip tracking and ECG tip confirmation and anticipate launching this fully integrated system with indications in the second half of 2012.

In PICCs, our antimicrobial covert power PICC is undergoing additional bench testing for 510(k) submission later this quarter. We received some insights into new FDA requirements, and we're performing some additional testing that will push our 510(k) submission out until late this quarter, and we're hopeful for a U.S. launch around mid next year.

And finally, moving to surgery, we continue to advance our antimicrobial ventral hernia repair products and anticipate submitting our pre-IDE this quarter. Our recent antimicrobial experience with FDA on other products have left us a bit cautious on providing any filing or launch dates until we have further clarity. Thanks for your attention, and again, we extend to you an invitation to Bard's annual analyst meeting on December 20. For those of you that can't attend in person, we'll be webcasting the presentation. Let me now turn you back to Tim Ring.

Timothy M. Ring

Thanks, John. That concludes the formal part of the presentation. I'll now turn you back to the moderator to facilitate the Q&A session. Cathy?

Question-and-Answer Session

Operator

[Operator Instructions] And the first question will come from Mark (sic) [Michael] Weinstein with JPMorgan.

Michael N. Weinstein - JP Morgan Chase & Co, Research Division

First, I have 2 questions for you. One, Todd, can you talk a little bit about the gross margin performance this quarter, both the impact of mix on that gross margin and the impact of pricing? And then with that context, can you talk a little bit about the ability to actually improve gross margins from here? Let's say that utilization doesn't pick up and your revenue run rate remains at something near this, call it, organic 3% level and you have 110 points of pricing pressures you touched on in your comments. Given that backdrop, is gross margin expansion still possible?

Todd C. Schermerhorn

If you look at margins sequentially, we were down 20 basis points, when we were looking for what I call modest improvement in the quarter. Now, we have 100 major product lines in 20 plants so finding 20 basis points is a little bit of a fool's game. But when we compared the quarters, it looks to us like price, mix and foreign exchange all eroded sequentially by about 10 basis points going into Q3. Looking at margins over prior year, Q3 of 2010 was a pretty strong quarter and a tough comp. And margins are the one metric that's subject to a bunch of timing issues, just simply because of the number of SKUs we have. So sometimes looking at it in a 90-day increment, it might put too fine a point on the analysis. I think it might be better if we looked at it on a year-to-date basis over prior. I think we'd get a little bit more insight as to what's going on. And that will, I think it serves to wash out some of the timing issues. So year-to-date, we show margins down 40 basis points on an adjusted basis, Mike. Of that, foreign exchange is 30 to 40 bps down. New amortization is 30 bps down. The change we've had for Puerto Rico excise tax accounting cost us 10 basis points. So those 3 items somewhat uncontrollable, 70, 80 basis points of headwind. So then you add to that 30 basis points of price, negative. And then offset it with mix at 20 basis points favorable and then cost year-to-date of 40 to 50 basis points favorable. You end up with that 40 points. So our guidance was 50 basis points of improvement outside new amortization and the Puerto Rico accounting change. And that has been effectively 50 to 100 basis points. If you also exclude FX, which is clearly temporary, we'd be up 30 to 40 basis points, even in the face of difficult pricing. In my mind, certainly the pricing situation hasn't made it easier. It's maybe dampened the margin story by a little bit. But I think that demonstrates that there's still is opportunity for improvement going forward.

Michael N. Weinstein - JP Morgan Chase & Co, Research Division

So if I really focus on those last items, so at this revenue growth rate at this mix run rate and with this level of current pricing pressure, basically mix and pricing are washing themselves out and it's really how much you guys are able to drive on the cost side that will determine how much we should be thinking about gross margins improving from here, absent a pickup on the top line.

Todd C. Schermerhorn

I don't think it's a bad analysis. I think we're subject to foreign exchange and it bounces around a lot, sometimes difficult to explain. But I think fundamentally, your analysis is right.

Operator

Then we'll go next to David Lewis with Morgan Stanley.

Jonathan Demchick - Morgan Stanley, Research Division

This is actually Jon Demchick in for David. I wanted to start with a question on Medivance and on the hypothermia market. Historically, market expansion, reimbursement, and demonstrating significant clinical value have made this I guess more of a challenging market. And I was wondering if you could give us some color on the size of the total market and your strategy on how you plan to grow the market or if you see a lot of opportunity to take share?

John A. DeFord

This is John DeFord. Just jumping in on the market question, the primary market right now is in patients who have cardiac arrest and then are resuscitated. So there's about 300,000 patient market in the U.S., of patients outside the hospital that suffer cardiac arrest. And AHA guidelines are pretty strong. In fact, level 1 society recommendations for cooling of those patients. So that is where the Medivance technology has initially entered that space. But there's also the European resuscitation council. There's also focus on stroke, and neurological injury and fever. So there's a lot of opportunity for continued growth here. The Arctic Sun family of products out of Medivance are clearly the market leaders. They have been growing in double digits, and because of the noninvasive nature, the high efficiency of cooling, they have really gained a lot of share and continued to gain a lot of usage. The way this technology works, it allows the patient to be accessed with the cooling system on. It's much more user-friendly than say pads or ice packs and doesn't require vascular access. So we see this as really an important opportunity for us in our critical care call point and also expansion of this technology into a lot of other areas.

John H. Weiland

This is John Weiland. I think one of the critical things to add is that Medivance has been very successful since their introduction, with a relatively small sales force that they have been very good at showing the clinical benefits of the product, to those people suffering under cardiac arrest. We think we've put it into our footprint substantially larger than a Medivance footprint and we can help accelerate that growth opportunities in the future and conversions by just seeing more critical care opportunities in those spaces.

Jonathan Demchick - Morgan Stanley, Research Division

One quick question on 4Q guidance, given the guidance of 3% to 5% revenue growth, including the acquisitions, I was wondering what assumptions you're including for 4Q, given that it looks like pressures for pricing and volumes are actually getting a little worse? Are you assuming they're getting worse? Are you assuming they stay more constant?

John H. Weiland

It's a SKU by SKU analysis, basically. We don't have the kind of metrics on our forecast that we'd have on our actual results. I don't think we're planning for a dramatic changes from the current environment.

Operator

Next we have Rick Wise with Leerink Swann.

Frederick A. Wise - Leerink Swann LLC, Research Division

One big picture and one more focused one. Tim, you talked about the domestic headwinds continuing. Just big picture. Any thoughts on any possible change? Any hints of stabilization or improvement? And maybe just as part of that, just to your strategic thinking, where do you go next? Are you trying to step up focus on emerging markets to help offset that as that persists?

Timothy M. Ring

Yes, clearly in terms of the macro environment in the U.S., anyway. It's hard to predict when you're going to see improvement turn around. We've been saying now for a couple of years, we think there's a tighter correlation on unemployment rates and healthcare expenditures and now, we've got obviously several quarters under our belt and I think there's nothing to make us change our belief that, that still holds true. I think relative to what you do about it, as I mentioned in my opening comments, you just start making investments in faster growing areas and that includes geographic markets, the emerging markets, and we're investing heavily there, getting good results there and good execution of the team. Within our internal R&D investments, we're prioritizing obviously faster growing segments in each of those businesses as evidenced by these 2 deals we've just announced. All of our acquisition activity is targeted towards that double-digit faster growing market segment as well. So that's how we initially got the double-digit revenue growth back 7, 8, 9 years ago, and that's how we're going to get back to it again.

Frederick A. Wise - Leerink Swann LLC, Research Division

Separate follow-up question, maybe for Todd, SG&A. You talked about the restructuring benefits weighted to the back half. $189-odd million you spent this quarter, is that the new normal, plus or minus? Is that what we can expect in the fourth quarter and any thoughts about further restructuring in light of the pricing?

Todd C. Schermerhorn

Fourth quarter has typically a pretty good sales jump, and there are commissions and obviously the normal expenses that go with sales. But I think the level of savings for Q4 out of the prior year restructuring will be similar to what they were this year. That's how you did your model for SG&A. As it relates to future restructuring, I think we prefer to wait until the analyst meeting to talk about that. And I'm not saying that we have it or we don't. It's just, this isn't the place to announce that.

Operator

The next question comes from Matthew Dodds with Citigroup.

Matthew J. Dodds - Citigroup Inc, Research Division

A couple of questions. On Medivance, can you give a little bit more color on sort of what their sales run rate is, because 1 point is about $7 million, so I'm not sure when you expect it to close? And then also, just broadly, how's their margin structure look versus Bard average?

Timothy M. Ring

True. Well, Matt, I think we'll combine the two acquisitions that we just did. And as we've said, 1% for Q4, I think when they're both on board, the combined run rate of those 2 acquisitions is $14 million a quarter. And so, and that presumes a late November close on Medivance. If they become actuals we'll be, as we typically are, very transparent with that. In terms of margin structure on Medivance, similar to what we got or better outside of the amortization.

Matthew J. Dodds - Citigroup Inc, Research Division

One other question on surgery business, biologics slowing a lot and the synthetics doing better. I know the synthetics is partially new products but, maybe John DeFord, do you think that the market is shifting a little bit away from biologics and that the unit growth between the 2 is shifting and the overall growth is consistent?

John A. DeFord

Matt, I don't see that at this point. I think it's a little bit of sales focus on our side while we were rolling out Echo and doing other things. So I certainly don't see that. I don't know what the other guys are thinking here...

John H. Weiland

I'd say Matt, our perspective on it is when you have this many new products that we're rolling out, particularly in the ventral space, our sales team we're in doing ventral cases along with all these products and Echo. And I would say that we weren't in as many new biologic cases as we have been over the last year and half. We need to get a little better balance in our sales force there in the next couple of quarters.

Matthew J. Dodds - Citigroup Inc, Research Division

So is it unrealistic to think that the biosurgical part will bounce a little bit?

John H. Weiland

Is it unrealistic to think that the biologics side would increase?

Matthew J. Dodds - Citigroup Inc, Research Division

Yes, some improvement next quarter.

John H. Weiland

I think as we spend more time in new, biologic cases, that would tend to drive our sales up.

Operator

We have Bob Hopkins with Bank of America.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

So first a question for Todd, and then one for Tim or John DeFord. First, Todd just to follow-up a little bit more on gross margins, can you talk a little bit about where you're seeing the incremental pricing pressure in which one of your businesses, in which geography? And then just what gives you confidence that it's not going to get much worse than what we're seeing right now.

Timothy M. Ring

I would say probably not real smart for us to get into the pricing dynamics in discrete product lines for competitive reasons. But this looks mostly like a U.S. phenomenon to me. We've had some bouncing around internationally on price. But that's generally been a function of our initiatives there and going direct and those kind of things. The real change is occurring in the United States. And I would say not only, obviously, looked at this hard from a bunch of different angles. It tends to happen more in the older product lines where we're aging, where we might be waiting for a new product to come along, whether we've had regulatory delays or approval committees in hospitals or our own issues, whatever it is. When we're left to fight the fight with a little bit of an aging product line, I think we tend to see more price in those circumstances.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

So is this driven mostly by competitors or driven by hospitals pushing back more?

Timothy M. Ring

We'll I'm going to leave that for the guys that are actually run the front end of the business.

John H. Weiland

We've been very successful, Bob, and this is John. We've been very successful on our GPO strategies We had been 23 different contracts that were up thus far through the year, and we are 23 for 23 in terms of renewals. Usually, with those, there's a little bit of price that goes with it. I think that's some of what we're seeing here in our renewals. We will stay aggressive on those. We have a number more to go between now and the end of the year but I like our batting average right now in terms of our ability to maintain our market shares in all these key products.

Timothy M. Ring

And I can't imagine -- our selling process doesn't lead with price anywhere. You can't play product leadership and lead on necessarily on the downside with price. So that's not us pushing the market.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

And then for Tim, or John DeFord, on Medivance. I mean this is one of the bigger deals you guys have done in a long, long time. And so I'm curious as to why you're going this route. Obviously Medivance has a place in the marketplace but why not go with one of the startup cooling companies that has shown much more rapid time to cooling than what I think Medivance has. And how long does it take for this device to get the body down to 33-degree Celsius, John? And I'm just curious as to why you went this route rather than some of the up and comers that may seem to have maybe better, faster cooling times than what Medivance is able to put up?

Timothy M. Ring

Let me take the first part of the question and I'll let John answer the specifics of Medivance technology. We're obviously continue to be active. This is a space that we've looked at now for some period of time. We've talked -- I've talked before about kind of the white space activity that we've had for about the last 1.5 years, looking at new areas for us. And this is a result of that process. In the past, when we talked about larger deals, SenoRX was one last year. Of the 70 deals or so we've done in the last 8 years, only 3 up until now have had significant revenue and in the last couple of years, we've been saying you can't do 3 of those every 8 years. You're going to have to step that up and maybe do one every other year or one every 18 months, something like that. So this is, in our view, consistent with what we've been planning and the strategy that we've been trying to execute on the acquisition side.

John A. DeFord

Let me talk a little bit about the time to cooling, because I think we need to inform you and get you some of the clinical data here. The Medivance Artic Sun actually cools as fast as any device on the market, faster than any of the blankets. And in a head-to-head comparison, comparing the LCS Cool Guard to Arctic Sun, they cooled at exactly the same amount of time, got patients down to body temperature versus the catheter-based system without the risks and those kind of issues. And then there's another study that was conducted that compared patients that were submerged in cool water to Arctic Sun and again had identical cooling times. So we think this device, with its hydrophilic adhesive kind of connection to the patient and rapid cooling, with all the other advantages of being noninvasive, put this at the head of the game. And I think that's why you're seeing that as the market share leader in rapid growth. And we see a lot of opportunity for it because of that.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

And Todd, how fast is this growing right now? And I assume, including amortization, it would be dilutive to kind of next 12 months, or is that not the right way to look at it?

Todd C. Schermerhorn

If it's dilutive, it's not much. So the sales in this product line are probably -- they're growing greater than 20%, Bob, put it that way, probably closer to 30%.

Operator

Next question is from Matt Taylor with Barclays Capital.

Matthew Taylor - Barclays Capital, Research Division

Just a clarification first on the price in the quarter. You said it was 10 basis points worse than last quarter. Last quarter, I think you gave us down 80 year-over-year. Does that mean it was down 90 this quarter?

Timothy M. Ring

I'm sorry, 110 year-over-year. That's at the price level. Gets a little confusing because the impact on GP is less.

Matthew Taylor - Barclays Capital, Research Division

And then second question, just for clarity on the Medivance acquisition, I wanted to understand how big your sales force is that's going to be now pushing that product and whether you're going to keep the folks from the company and how it's going to be integrated. And then any update on Gore would be great.

John H. Weiland

The sales force size of Medivance is presently 27 and we'll combine that group with our sales force of approximately 70 in our critical care environment. So the footprint goes about 4x as a result of that. We'll keep specialists focused on it, as well as our acute care generalists helping to drive conversions.

Timothy M. Ring

And no update on Gore, Matt.

Operator

A question from Tom Gunderson with Piper Jaffray.

Thomas J. Gunderson - Piper Jaffray Companies, Research Division

Can we talk about LifeStent a little bit. There was an FDA panel last week on Zilver PTX and I was just wondering if you could talk about how you compete against Zilver in Europe with LifeStent? And then also, maybe add in a little color on if you're gaining any share in addition to being the only labeled for SFA. But are you gaining any share because of some of the disruptions going on with Cordis and their distribution?

John H. Weiland

I'd say first of all, as it relates to our activity with LifeStent in Europe, we really haven't seen much of an effect of Zilver in Europe, quite frankly. We have not seen them really be very aggressive in there. And as a result of that, we continue to focus on LifeStent in trying to grow that around the world, quite frankly, including Europe. I think we're very excited about our new covered LifeStent, which John DeFord talked about, which we'll launch into -- we anticipate the launch in Q4 of this year in Europe. And then later, when we get approval in the United States. But I'll let John talk a little bit about our positioning of LifeStent and how we think that stacks up versus Zilver.

John A. DeFord

So Tom, if you saw some of the Zilver results and you got to say that they're really good results. They're right on par. I think if you line them up head-to-head with Resilient and our data, it'd be hard to draw a statistical difference. So pretty similar results from them and us. I think we've got some advantages on a lot of usage. We've got longer lengths. We just launched the Solo, which is 200 millimeter lengths, Cook has up to 80 millimeters length at this point. So a little bit of give-and-take there. No question that from a positioning perspective you got to say they're good results. They're results that are right on par with Resilient. So you would expect that from a competitive perspective, we'll be talking about the benefits of each device. I think we're still pretty happy with our position. We are still gaining share. And don't forget this, even though we're the only device on label in the U.S., it's a competitive marketplace. There's a lot of players that have devices being used in that space even though we're the only one with the indication. So it's not like it's going to be all-new having some competition there.

John H. Weiland

The only comment that we would make on Cordis is that the S.M.A.R.T. Stent still has a sizable chunk of market around the world. Everyday, our people are competing very rigorously with LifeStent versus the S.M.A.R.T. Stent, and I think we certainly like the results we're seeing in the United States and other key markets around the world but I can't say that we've seen a difference in their mode of competition since they changed their structure or emphasis.

Thomas J. Gunderson - Piper Jaffray Companies, Research Division

And then if I switch over to the hernia market, fixation down 18%. It was down last quarter. I'm assuming that's J&J. Is that a feature and benefit that they're winning on? Is it trialing? Is it just another player that you have to split up the pie with? How should we look at that going forward?

John H. Weiland

I think it's a little bit of all those. Certainly you've gone from 2 players in the market now to 3 players in the market, step one. Step two is that J&J has been very aggressive about rolling that out and trying to get trials on it and using all the force that they have of their various sales forces in terms of introducing that, they're getting trials. Whether that will convert into conversions is a whole nother story and we continue to be out there very active in the fixation side of it, trying to talk about the features and benefits of our product lines.

Operator

Your next question is from David Roman with Goldman Sachs.

David H. Roman - Goldman Sachs Group Inc., Research Division

I was hoping to go through a few strategic areas, and specifically, Tim, you talked a few times about investing for product leadership and ensuring that you stay above the curve, but R&D has come in, well over 100 basis points below I think what people had expected year-to-date and actually in the quarter was down on a dollar basis. And then you also talked about investing in emerging markets in new growth areas, but SG&A also continues to come down as a percentage of revenue. So can you help us square up the comments about reinvestment versus what we're actually seeing in spending levels today?

Timothy M. Ring

Sure. I'll deal with the last part of the question first. We're reallocating our resources if you think about it that way. So we mentioned the restructuring. Most of that was in severance. It's a simple case of taking resource out of the slower growth areas and moving them over to the faster growth areas. So it's kind of a tradeoff, if you will. So we're increasing investment in one area and decreasing a similar type of investment in another area as it relates to the sales forces. Relative to R&D, we continue to believe that investment in our pipeline is a critical factor to fuel future growth. However, it's a bit difficult to create smooth quarter-over-quarter growth in that investment. Clearly, the current demand environment in the U.S. is putting additional pressure on the P&L. We've had a couple of changes in the U.S. regulatory process which have delayed some product launches in several clinical trials. Our clinical trial expense versus what we had planned is down several million dollars because of delays. So that factors into that too. But I would tell you, we remained focused on investing in key areas and the faster growing areas. We still believe product leadership is the way to go as evidenced by several of the examples we've cited during this call, and just when you're growing slower, you got to do it at a little different pace.

John H. Weiland

I'll just make a comment on emerging markets in that we announced just about this time last year a major rollout in China of over 100 people and we are doing the same thing this year in China. So I mean, I think that we are putting the resources in those markets where we expect our biggest opportunities to be.

John A. DeFord

And I will add one last thing to that, David. So we're growing SG&A year-to-date 6%. So that's, what? $30 million and that is sort of inclusive of having restructured and saved about $19 million on an annual basis. So to Tim's point, we're trying to save where we can and invest where we can and we are making, I think, substantial investments, particularly in SG&A in terms of dollar terms into these emerging markets.

David H. Roman - Goldman Sachs Group Inc., Research Division

I guess then just given the size of the relative businesses then, is the right way to look at it that if you're taking resources, for example, out of Western Europe, if you're taking x out of that business, you only have to reinvest 0.6x in some of the emerging markets because they're much smaller as a percentage of revenue? Or is it shifting or gross savings -- or net savings, excuse me.

Timothy M. Ring

I think there's some truth to that. In a lot of the cases, it's cheaper per head in these markets where we're making these investments. So I don't know if you meant that in terms of exact numbers but...

David H. Roman - Goldman Sachs Group Inc., Research Division

No, just to be illustrative.

Timothy M. Ring

Yes, I think there's something to that. Yes.

David H. Roman - Goldman Sachs Group Inc., Research Division

Lastly, given the commentary regarding external investment, can you maybe just comment on what the overall M&A landscape looks right now from an opportunity perspective? And also from a competitive standpoint, given that a number of your peers have talked about going down a relatively similar pathway?

John A. DeFord

Sure. We're very excited about the pipeline. We remain very active. We have been -- because we're market leaders in most of our 80% of our sales, a lot of opportunities come to us first as we get into newer things like the Medivance acquisition. We go after that, we're very serious. People can see the kind of diligence and homework that we've done and they regard us very seriously when we get into those kind of things. So will it be more competitive going forward? Possibly, but we really have not felt that yet on the M&A front.

Operator

We have a question now from Michael Matson with Mizuho Securities USA.

Michael Matson - Mizuho Securities USA Inc., Research Division

I guess I just wanted to start with your PICC business. Obviously, a good growth rate. It seems like that was the impact of Sapiens. But is that just the sales of the Sapiens device itself or are you actually getting some pull through effect on your actual PICC sales as well?

John H. Weiland

No, I think that you're going to see and the long-term game plan with Sapiens is really on both sides of it. We have a unique opportunity with this device to eliminate x-ray confirmation for patients. It's a big deal. Patients get their therapy hours faster than they would have otherwise, and at the same time, it's a great economic benefit to the hospitals. So our game plan is to really be offensive with Sapiens, competitive conversions, non-Bard accounts to Bard accounts, utilizing Sapiens. Then there's the capital component and there's the disposable component, which would be parts of the location system as well as the base PICC. So it's offensive in all categories. And I'd say that while we believe that Sapiens is an important growth driver, our expansion internationally, and from a share standpoint, is also in at market building standpoint is an awful big component of our growth as well.

Michael Matson - Mizuho Securities USA Inc., Research Division

And then just another product related question. Can you maybe give us some more detail on the Encompass product and how it compares to the prior generation product that I guess you're still selling in Europe?

John A. DeFord

So the encompass device, if you kind of break it down, now there's a lot of subtleties here but to kind of hit the big broad strokes. It's an over the wire system, softer, flexible device. Still maintains the same 36 electrode configuration that we had in the HD mesh product. We've also changed the tent poles device and the way that it connects up and delivers energy so our energy delivery algorithm, we've had some changes there. Our user interface has got significant changes and we got changes in the catheter system itself. So kind of across the board differences there.

Michael Matson - Mizuho Securities USA Inc., Research Division

And then just in the hernia business, the slower growth -- forgive me if you mentioned this, but what are you seeing from a procedural growth perspective there? Has there been a slowdown? J&J kind of alluded to some slower general surgery procedure growth in the quarter. Is that consistent with what you guys saw at all?

John H. Weiland

I cannot say that we saw a vast difference in the quarter but we did see a slowdown this year, that's for sure, in the overall number of hernia procedures that is being done. And I'd say the most dramatic area that we saw a procedure slowdown has been fixation [ph] , quite frankly, that where a market in a very significant growth mode and it went to flattening very quickly.

Operator

Your next question is from Jason Wittes with Caris.

Jason Wittes - Caris & Company, Inc., Research Division

You had the issues with transvaginal repair in Pelvic Organ Prolapse. Could you remind us, a, what percentage of your business is impacted by those changes; and b, is this something that recovers or should we just assume that this business is going to be impaired for a while?

Timothy M. Ring

Why don't you take the second question first and I'll figure out the percentages.

John H. Weiland

It's a smaller number, that's for darn sure.

Timothy M. Ring

1% or 2% is probably the way to describe it, of our overall sales.

John A. DeFord

I think it's really unclear what the overall impact is going to be. There's certainly some questions that have been raised around safety and effectiveness of mesh products for Pelvic Organ Prolapse. The historic issue has been when patients are treated with Pelvic Organ Prolapse without a mesh, there's extremely high recurrence rate, 60%, 70%. And with mesh, much lower recurrence rate. So there's still a significant need for patients out there. There's no doubt that we're seeing physicians and patients being much more cautious. Certain areas where we do have some advantages like our ALYTE Y-Mesh product for sacrocolpopexy. That continues to grow pretty well for us. And honestly, I would just be speculating at this point to see what's going to happen in the U.S. in this marketplace. We haven't really seen changes outside the U.S. Of course I'm the R&D guy, so I'm not necessarily the guy they give a lot of detail on that.

John H. Weiland

So pure pelvic floor is only about 0.5% of sales, not even.

Jason Wittes - Caris & Company, Inc., Research Division

And I guess we shouldn't assume there's any peripheral effects to any other mesh business other than isolated to those procedures, specifically? Is that the way to think about it?

John A. DeFord

Yes, I think that's correct.

Jason Wittes - Caris & Company, Inc., Research Division

And just -- a lot of questions on Medivance. I guess I think they did about $30 million of revenues last year. Is that the right number to be thinking about? And assuming they grew that, they're growing at about 20% this year. Is that the right way to think about Medivance right now?

John A. DeFord

I don't have that data in front of me, but that's not far.

John H. Weiland

Spreading the gain.

Operator

We will go next to Kristen Stewart with Deutsche Bank.

Kristen M. Stewart - Deutsche Bank AG, Research Division

I guess Todd, for you, where will Medivance be recorded in terms of the different product line breakouts?

Todd C. Schermerhorn

Urology.

Kristen M. Stewart - Deutsche Bank AG, Research Division

In urology? And then I assume ClearStream will be up within the vascular business, correct?

Todd C. Schermerhorn

That's correct, yes. Endovascular, yes.

Kristen M. Stewart - Deutsche Bank AG, Research Division

And then just in terms of I guess the pricing commentary that you had, I think there was a mention of kind of resigning all the GPOs and you guys have been very successful clearly with your batting average. But I'm just curious, you also made the link to resigning the GPO contract saying that, that was contributing to a little bit more potentially of the negative pressure in the U.S. I guess how should we think about that going forward being that it seems like then that would imply we're kind of in the early innings of seeing those contracts and maybe a little bit lower pricing run through and it could get worse certainly from here? And then what gives you the confidence, I guess that Europe doesn't get worse in terms of price kind of just looking out on the horizon?

John H. Weiland

I'd say on the GPO side of it, we have been consistently signing those agreements throughout the course of the year. So I can't say that we've seen a big build in that. In fact, I think if you look at the difference last quarter to this quarter, it wouldn't be there was really a ramp in pricing. It was that we didn't have an offset in certain international markets where we went direct and increased the price. I mean that the velocity has not changed all quarters.

Timothy M. Ring

Those average in every period. There's no particular quarter where you do more or less of those I don't think. As it relates to where this is going, Kristen, I think we'd be fooling you if we said we know necessarily. We've got -- in terms of data points of acceleration in the U.S. we've got 2 periods here. So there's not enough data really to create a trend for us and to allow us to predict where the third and fourth data points are going to be with any certainty. I don't think we have a huge move coming here. But trying to give you any assurance around that is pretty difficult.

Kristen M. Stewart - Deutsche Bank AG, Research Division

And then I guess just earlier you had mentioned on Medivance that it should be minimally dilutive. I just wanted to check on that. The price paid just strikes me as pretty high given the fact that the revenues were probably in that $30 million ballpark. Can you just repeat maybe I guess profitability of it and why it's not going to be more dilutive? I don't think that you're going to be taking out as kind of one-time integration or excluding amortization.

Timothy M. Ring

So we don't exclude amortization in any of that. We will have some one-time costs associated with acquisitions as we typically do but there's not a big exclusion there. I think fundamentally, the issue is the cost of money is very cheap right now, and that makes it easier to do these deals from a dilution standpoint clearly.

Kristen M. Stewart - Deutsche Bank AG, Research Division

And I guess just for Tim, obviously you guys have talked for a while now, just kind of alluded to earlier in some of the other questions but just kind of this need to kind of balance the near-term results versus the longer-term. How comfortable are you kind of where your spending levels are today in R&D and SG&A. I know you'll give 2012 guidance in December but if the environment doesn't improve, are you worried that next year you won't have the same level of flexibility through the P&L or with share repurchase options that try to still get to that targeted kind double-digit growth rate? Because what I worry about is just kind of some of the lower spending, whether it be the FDA just kind of stalling a little, but you mentioned a couple million due to clinical trials getting pushed out, but it just kind of seems that next year we're going to see significant step ups in R&D and SG&A and if the top line doesn't reaccelerate it seems like there's going to be a bit of a growth challenge?

Timothy M. Ring

On a strategic level, we still believe firmly that we need to increase R&D investment. There's no question about it and that all relates back to the product leadership strategy that we have. I think when we look at acquisitions -- the 2 we announced -- we look at all of our acquisitions as platforms to put more R&D into and obviously, those are in faster growing segments. So we think those are good investments with more R&D going forward. And then just be more selective in terms of how you do your R&D when you're growing slower. When you're growing 10%, you can spread a little bit more R&D money around everybody and when you're growing slower than that, we get more involved as to where that R&D money gets directed for higher growth opportunities and maybe we don't do as many as the little ones that frankly on an incremental basis just didn't add a whole lot to move the needle. So it's just a little bit more tighter management but strategically, we still believe that more increase is needed there.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Just in terms of looking out, do you think there's still substantial investments on the horizon that you need to make to get where you need to be? I think at one point you had mentioned ramping up R&D was like 9% to 10% of sales. Is that still something that you have in the back of your mind?

Timothy M. Ring

Directionally, we think we need to do more. That is a number we said that we were growing at a much higher rate. It's just going to take us longer to get there at this growth rate.

Operator

We'll move on to Josh Jennings with Cowen.

Joshua T. Jennings - Cowen and Company, LLC, Research Division

Just to start off, I mean looking at Surgical Specialties Division and the deceleration over the last 2 quarters. It's been gaining some importance from our perspective in terms of establishing some of the expected mix contribution and supporting jam expansion. Understanding the headwinds that are in place, with utilization trends and competition and such. You do have new -- have introduced new product lines full launch I believe for 3 hernia products in this quarter. What are the strategic initiatives can you pursue to improve the performance of that division going forward outside of just new product introductions?

Timothy M. Ring

I think that certainly, we continue as in all of our businesses to try to be extremely active on the business development front within that segment. I'd say in addition to that, our sales force execution in moving both the natural and synthetic product lines, both are important for us. The change in the growth rates was really due to the change in fixation quarter versus quarter Q2 versus Q3. And the key for us will be to get back on the offensive fixation-wise, and make sure the trials don't turn into conversions. But I think that we'll continue to drive the R&D pipeline there, the new product development pipeline, our pipeline of business development and also our sales execution.

Joshua T. Jennings - Cowen and Company, LLC, Research Division

Just in terms of business development, with the Medivance acquisition, does this represent a shift in new business development strategy in terms of larger deals with a more substantial revenue run rate rather than just tuck-ins of pre-revenue?

Timothy M. Ring

No, I wouldn't call it a shift in strategy. Each deal is a little bit different when you go and look at them and we still continue to look at tuck-in deals, technology deals, as well as freestanding companies. So we're not changing the strategy in terms of how we're looking at deals now.

John H. Weiland

The strategy stays. Really product leadership and growth potential. And sometimes they're bigger, sometimes they're smaller, but the consistent aspect on it is the growth potential and product leadership potential.

Operator

Our next question is from Suraj Kalia with Rodman & Renshaw.

Suraj Kalia - Rodman & Renshaw, LLC, Research Division

Forgive me for harping on Medivance again. Just one question, for anyone, Tim or John. When you look at the therapeutic hypothermia market, and please correct me if I'm wrong, just based on past history, the randomized control trials whether it's just for neuro-protected outcomes have been mixed at best. I think I heard somebody talk about comparing the Arctic Sun to the Alsius catheter. Again, if my memory serves me right, that was a single center observational study, and our understanding of the market -- theoretically it makes a lot of sense -- no question about it -- but the outcomes are affected by a plurality of factors, sedation, cooling duration, so on and so forth. I guess the question I have is you guys have paid a pretty nice premium for this technology. Can you shed some color as to what was the key thing you saw that you said, you know what, we got to go after Medivance because -- is it, one, because of Bard sales footprint and hence you could flood the market? Is it some additional randomized trials you're looking at that you think you can do better and the reason I ask is again, our understanding is, that there are over 15 companies in this space, guidelines and protocols are all mishmash. You guys have obviously looked at something, I'm not sure I followed so far in the call. If you could shed some color, that would be great.

John H. Weiland

Let me start, and then John DeFord will move down there, clinically, from there in terms of the clinical results. First of all, if you look at the actual growth rates this company has been able to generate, they are significant. They've been able to do that by really talking about the clinical benefits to patients in hospitals that suffer from cardiac arrest and have the need for general cooling, for fever management. You take that same track record of success, you put it in the hands of a sales force that is almost 4x larger. The opportunity for exposure and then compete effectively is enhanced significantly. We like that aspect of ` the technology and combining it with the clinical benefits that John will talk to.

John A. DeFord

Actually, I think you have some very great points and I got to tell you that when we first started looking in the space, which frankly was years ago, I was skeptical because there's been a lot of technology thrown at this, there's intravascular devices, there's cooling blankets, there's submersion technologies and nothing seemed to be a winner, frankly. So we'd look at this and continued to look because there's compelling evidence that therapeutic hypothermia has significant benefit in a large number of patients. And so we've kind of nibbled around the edges and looked at that. One of the things that Medivance really nailed is the longer-term piece. So there's a lot of cooling technologies -- there's not a lot of technologies that can keep the patient cool for a long period of time. And as you probably know, a number of the guidelines suggest keeping the patient cool, say 33 degrees for 12 to 24 hours. That's very difficult to do with an intravascular device. Certainly very difficult to maintain for somebody with cooling blankets and other technologies. The other thing that these guys have done is nailed the rewarming, so that you can, in a very controlled fashion, cool the patient very quickly. So patients are cool between 150 and 250 minutes, which is right on par with the intravascular devices and on par with submersion. And then able to maintain them at those temperatures for long periods of time, days if required, and then warm them back up, also over a long period of time or a relatively short period of time, depending on the clinical need. So that was something unique to this technology and then the clinical data that's been building in this space and with this technology just reached the point where we felt it was compelling. Certainly, a lot more to be done there, a lot more rigorous clinical data to be collected. We think we can bring some expertise to that. And then as John said, our sales, team, focus, and expertise, and a call point we're already in was very synergistic.

Operator

Next question is from Joanne Wuensch with BMO Capital Markets.

Joanne K. Wuensch - BMO Capital Markets U.S.

Simplistically though, the way you beat EPS according to my model was by lower SG&A. What kind of things are you pulling back on? And do we have to worry about that on a go-forward basis?

John H. Weiland

I'd say what you see is really taking an expense base and say look, we froze our levels of spending at the Q2 levels. That's in essence what we tried to do in our model between Q3 and Q4 and at the same point in time, went out and looked for the restructuring opportunities that we announced to you this evening. That was basically our approach. And I don't think that from our standpoint, we were cutting muscle at any point in time during the process. We were maintaining our expenses at the Q2 level.

Joanne K. Wuensch - BMO Capital Markets U.S.

And then simplistically also, what kind of share repurchase program is still outstanding?

Timothy M. Ring

Well, the ASR is complete. We have plenty of authorization and as I think I said in my prepared remarks, we bought 1.3 million shares in the third quarter.

Operator

We will go to Bruce Jackson with Morgan Joseph.

Bruce D. Jackson - Morgan Joseph TriArtisan LLC, Research Division

Going back to the endovascular business and the launch of the Cook Zilver, do you think you need a restenosis management strategy, and are you working on any drug-eluting stents yourself or drug delivery balloons or anything like that, either internally or looking at acquisition targets?

John A. DeFord

It's certainly an area of interest. We continue to look at that space. But don't have information to share at this point.

Operator

[Operator Instructions] Next we have Matthew O'Brien with William Blair.

Matthew O'Brien - William Blair & Company L.L.C., Research Division

I hate to beat a dead horse here but I think it's probably important given the direction that it's moving. I think you said, in your career, you've kind of seen pricing down or either flat to down 1% over your 20-plus year career. Is there anything that you see in this environment that's different or that it gives you the sense that it could accelerate from these levels going forward? Or is it something that you've seen in the past and it's kind of typical of what we've seen with med device pricing?

John A. DeFord

There's more intensity certainly on pricing than there's been in a long time. I think what we're seeing at least in the United States is more value analysis committees in hospitals, where they're seriously now taking a very serious look at cost benefit analysis in various products and technologies. We're certainly seeing more of that than we've seen in the past. We frankly, think that's a positive thing for us because we do have a lot of the data to be able to demonstrate especially with the newer products and technologies how we can actually help. Sapiens is a great example of that, where we've eliminated 65,000 x-rays on an annual basis and we are still very early in the aspects of the launch there. So price has always been challenging as you pointed out. It's a little more challenging now than we've seen in a long time. I think that correlates to the economic overall environment that we're seeing. I think it will remain a challenge over the next several quarters.

Timothy M. Ring

Matt, I'd be more concerned about volatility if we had a narrower product portfolio. If we were selling one or two things, we're just selling hips, and knees, or we're just selling angioplasty catheters or whatever. You tend to get areas that are over competed for and that's where you see price really erode. Our portfolio is so wide, and as much as we talk about the price erosion, there are places where we're getting price today. It's always a composite of 100 different things, and generally that keeps us from having really big surprising moves. I can't guarantee anything but in the past, that portfolio effect has lowered risk overall of those kinds of events.

Matthew O'Brien - William Blair & Company L.L.C., Research Division

How receptive are those committees to your value proposition versus, look our volumes are depressed, we just need to save money on an absolute basis?

John H. Weiland

I think we talked about the success thus far with our Sapiens program and that were in over 200 accounts at this point in time. Our conversion rate has been significant. We talked about the number of x-rays that are eliminated. A number of those go through a value analysis committee in order to make -- give the final okay for a hospital to make the switch. I mean we're on the offensive value analysis committees. That's really how we sell with product leadership. Does it slow the process down? Absolutely it slows it down. But then once again, once you're there, once you get that value analysis committee sign off, it's also more difficult to switch you out in the future.

Matthew O'Brien - William Blair & Company L.L.C., Research Division

And then just one more quick one for me. You talked about kind of a, I believe it's a reallocation of funding away from your slower growth areas into some of the more fast growth areas. But does that leave you susceptible to potential share losses in slower growth categories? For example, fully catheters and so on. I guess what I'm trying to get -- durable are those areas in terms of your share leadership position if you're not investing heavily to come out with new products or new sales and marketing tactics?

John H. Weiland

We do it very thoughtfully. It's not like we do it off of working the numbers only. We analyze each of those decisions, and when we make those decisions on a case-by-case basis, it includes things like, well maybe we'll shift that particular product from that sales force over to another sales force so there's a number of aspects that go into those decisions. It's not -- the financial result is the outcome. It's not the driver that makes it do these things.

Operator

And our final question will come from Robert Goldman with CL King.

Robert M. Goldman - CL King & Associates, Inc.

Just a couple more on Medivance. Could you tell us when the last private financing round was for Medivance, and what the valuation was at that time and what has changed at Medivance to justify you paying out more or less compared to that valuation? And then secondly, if you wouldn't mind just telling us who represented Bard or advised Bard on the acquisition and the fairness opinion?

Timothy M. Ring

Bob, I don't have handy when their financing was or valuation work. You may be able to find that through the investment banking network. As it relates to a fairness opinion, we don't need a fairness opinion to do an acquisition. So it's not really relevant to us. But I would add when we look at a deal like this, the value paid is a function of how much money we can make and at the end of the day, as John said, a good technology, we perceive it as product leadership with a sales force that folded into and somebody mentioned this wasn't a tuck-in. I miss being folded into a sales force that's selling the same call point. So it largely is a tuck-in with a sales force that's 4x the size capable of carrying that everywhere. We feel like we can make hay with sales and income on that product line. So everything we do is done on a cash net present value basis. And we're very comfortable with our forecast and, at least the returns that are indicated with the forecast that we've built.

Todd C. Schermerhorn

Bob, I would also just conclude with the fact -- every year with our board we go through a report card of our last 5 years worth of deals. And we look at the model that the board approved. We look at sales, income and cash flow. I think this past meeting when we did that, a couple of months back, we had like 30 something deals that we have done in the last 5 years. We were then half a point on the revenue in aggregate, and some of those didn't work by the way. We ended up getting 0s, but not on many. And we killed the income and the cash flow. So I'm very comfortable with our execution on deals. This one hit all the bells that we look for, market leader, #1 and #2; double-digit growth rate, sustainable leadership; and at or above the corporate average in terms of profitability. So we're excited about the acquisition.

Robert M. Goldman - CL King & Associates, Inc.

And just as a point of clarification, is this the largest acquisition Bard has made?

Timothy M. Ring

Yes, think that's probably right. We have to go back a long time, but I think so.

Operator

And that will conclude our Q&A session. I'd like to turn the call over to Bard's management for closing comments.

Timothy M. Ring

I'd like to take the opportunity to thank Bard employees around the world for their dedication. I thank all of you for joining us today and I look forward to seeing you all in December at the Analyst Day.

Operator

Ladies and gentlemen, that conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

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