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C. R. Bard, Inc. (BCR)

December 20, 2011 4:30 pm ET

Executives

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

Sharon M. Alterio - Group Vice President of International Businesses

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

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

Todd W. Garner - Vice President of Investor Relations

Jim C. Beasley - Group Vice President of Bard Peripheral Vascular Divisions

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

Analysts

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

Matthew J. Dodds - Citigroup Inc, Research Division

Konstantin Tcherepachenets - Morgan Keegan & Company, Inc., Research Division

Michael Matson - Mizuho Securities USA Inc., Research Division

Frederick A. Wise - Leerink Swann LLC, Research Division

Topher Orr - Goldman Sachs Group Inc., Research Division

Brooks E. West - Piper Jaffray Companies, Research Division

Unknown Analyst

Matthew Taylor - Barclays Capital, Research Division

Robert A. Hopkins - BofA Merrill Lynch, Research Division

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

Jonathan Demchick - Morgan Stanley, Research Division

Thomas Kouchoukos - Stifel, Nicolaus & Co., Inc., Research Division

Kristen M. Stewart - Deutsche Bank AG, Research Division

Kimberly Weeks Gailun - JP Morgan Chase & Co, Research Division

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

Todd W. Garner

Good evening. I'm Todd Garner, Vice President of Investor Relations at Bard. Before we get started tonight, I'm going to take -- I'm going to just cover a couple of points. First, during the presentation, we'll be discussing some forward-looking statements, the accuracy of which is subject to risk and uncertainties. Please refer to the cautionary statement regarding forward-looking information in our most recent 10-Q and the information under the caption Risk Factors in our 10-K from December 31, 2010, including disclosure of the factors that could cause actual results to differ materially from those expressed or implied.

Please also note that information that is not historical is given only as of today, December 20, 2011, and the company undertakes no responsibility to update. Additionally, references will be made to certain non-GAAP measures, which management believes provide additional and meaningful assessment of the core operating performance of the company. These non-GAAP measures are reconciled to reported results in the Investor Relations section of our website.

As we go through the presentation tonight, all of our comments on revenue growth will be global and year-to-date through Q3 of 2011 in constant currency unless noted otherwise. In terms of sales and market sizes, all references will be global unless we say differently. And the markets only include the specific product segments of a given market that we participate in. And finally, a recording of this meeting will be available on our website for replay. And with that, I'll introduce Tim Ring, Bard's Chairman and CEO.

Timothy M. Ring

Thanks, Todd. Good afternoon, everybody. Welcome to Bard's annual analyst meeting. Our agenda today will go as follows. After my opening remarks will be a business and product review with John Wyland, our President and COO; and John DeFord, our Senior VP of Science Technology & Clinical Affairs. After that will be financial guidance by Todd Schermerhorn, CFO. We'll then close with a question-and-answer period. We'll call the group Vice Presidents up to join us. We have the table there and then we'll move over to the other side of the fourier for a product fair.

A year ago, this was my beginning slide as we addressed the 2010 environment as we're looking ahead into 2011. We talked about the headwinds certainly in the regulatory area. And the uncertainty there are pricing, device utilization and patient volumes. Frankly, today, I'm not sure you could find anyone who would argue that any of these elements have gotten any easier. The most common question we get from investors is whether the changes in the environment are a cyclical or are they secular. And well, nobody actually knows for sure. We think at least some of these trends are more than just short term. So we'll take a minute. Give you our snapshot in time perspective as we see them today and tell you what we're going to do about them.

We've made some good progress in the last few years in making our clinical, regulatory and quality functions a competitive advantage in this evolving and dynamic environment. In fact, we've added well over 100 people in those functions over the last 3 years. And while overall regulatory timelines have lengthened, if you compare objective public metrics from the FDA, you'll see that we score very well in average review times versus competitors in both 510(k) and PMA submissions. And we've always, frankly, had strong metrics here but over the last few years that advantage has actually increased by those measurements.

We've developed very good relationships with regulatory agencies around the world and we believe we understand the changing reg requirements there as well as anyone can. Given our leading share positions, it's not unusual for a regulatory body to contact us for advice and input as they contemplate change in any particular area that's happened several times over the last few years. We continue to push all those regulatory agencies for clarity and transparency of the rules. Then it's up to us to be better than the competition. Having said that, we don't expect the regulatory climate to get any easier in the U.S. or abroad, so we would call that secular.

Pricing has always been an issue in the marketplace and the sustained economic pressures that U.S. hospitals are under today certainly look and feel secular to us. Because we sell differentiated products in markets where the ASPs are typically less than $500, we've been able to avoid this pressure better than most, but we certainly aren't immune to it as evidenced by our second and third quarter results. However, we view the pricing question really is more of a value question. If you look across med tech, you see multiple examples including even within our own company, where differentiated products are experiencing very strong growth even with premium pricing. As our customers get more sophisticated about purchasing decisions and technology adoption, we think we'll continue to have a competitive advantage through higher quality products, produce better long-term clinical outcomes with proven evidence of the value they bring to the marketplace. In other words, better clinical results with lower overall costs.

Moving onto utilization, especially again in the U.S., our customers' P&Ls are under as much pressure as they've ever been. And we are seeing some customers reducing device utilization because they see that as an easy lever to pull that they can control to reduce costs. Increased scrutiny on more expensive treatment options, we believe is certainly warranted and necessary but the right primary endpoints are long-term patient outcomes and improved quality. We support protocols that consistently provide the right care to the right patient in a responsible manner. In fact, we try to create them. However, the wrong step down in treatment protocol can ultimately harm patients and cost our customers more money if the cheaper option increases complications, such as infections or otherwise reduces the quality of care, so this really gets us back to the value question. Our large call point focused sales force and our clinical support teams put us in a consultative role to help the customers identify the proper solution for their patients. We see this as a competitive advantage for us.

We believe that the hospital systems that will thrive will be those that have a long-term integrated view of the role of medical technology both clinically and economically, and we will provide them with the evidence to help make decisions with that view. As far as cyclical versus secular, it seems apparent that there's been at least some overutilization in the marketplace. And while we're not sure how much of that bubble is left, at some point we'll reach a new baseline. So while we think pressure on utilization is likely secular, we believe the current rate of decline is temporary. So that then gets us to patient volumes. We told you a year ago that our guidance assumed that the market would not get any better or any worse. Most of the external analysis we saw a year ago concluded that admissions couldn't continue to decline and would at least moderate in 2011 and potentially improve. While we're now at 7 straight quarters of decreasing admissions reported by the publicly-owned hospitals in the U.S. and according to IMS data, physician office visits are significantly down over that same period. While we can't find anyone who thinks Americans are getting healthier and we're positive they're not getting any younger, so this continuing decline really wasn't expected. It now appears that procedures that we all would've considered nonelective a few years ago are at least more discretionary than once thought. In most cases, when patients delay treatment, they eventually present at a higher acuity level. This could mean there could be a pent-up demand for products. And we've all seen the demographic forecast. This year, the oldest baby boomers turn 65 and the youngest turn 47. So with our products weighted toward patients over 65 years old, we have to conclude that the slope of the demand curve will increase in the years ahead. The decline in patient volumes are certainly cyclical. Could it continue into future quarters and years? Yes. But at some point, we believe the slope turns the other way. As hospitals consolidate and fill up again, there will be less capacity in the system. So the most valuable solutions will be those with the -- that resolve in the most effective care for patients, reducing complications, infections, length of stay and readmissions. Hospitals and patients will demand this and payers will value devices that provide meaningful outcomes with fewer complications.

And so while you look back at this slide and realize that all these factors may be to some degree, worse than a year ago, we remain convinced that product leadership is the optimum long-term strategy, again albeit, at a reasonable cost. And we believe we have a competitive advantage in the area as necessary for success in the med tech environment of tomorrow.

Navigating the short term while positioning for the long term is how we've remained strong and successful for over 104 years. And the current environment requires us to be even better than we've been in the past.

Going back several years, what we told you the way to achieve double-digit revenue growth was by investing in high-growth opportunities and that's how we'll get back there again. Today, we are actively shifting the mix of our portfolio to double-digit growth opportunities both geographically and from a product perspective. If you look back at our most recent quarter, you can see that the product lines where we made acquisitions in 2010 are growing at a healthy double-digit rate post anniversary. Also in 2011, our R&D process produced key product launches in our PICC area, stents, and synthetic ventral hernia repair, all of which grew at double-digit rates in the third quarter. These product lines in aggregate make up a little less than about 30% of our total revenue. So our focus is to continue to shift the mix of the portfolio toward higher growth acquisitions, R&D investments and salesforce investments and redeployments.

You can see that the shift in our prioritization of SG&A resources toward emerging markets resulting in 38% sales growth year-to-date through September. Over the last 4 years, we've seen significant growth in our emerging market revenue, which now approximates still only about 5% of our sales. Our investments there have provided rapid returns and we continue to invest in a substantial way. You'll also hear and see today a realignment in the U.S. designed to improve effectiveness and efficiency in our sales force and get us closer to our customers making us better business partners for them. On the business development front, the recent Medivance acquisition takes advantage of our significant critical care sales resources, gives them a leading product in an adjacent space that is vastly underpenetrated and growing very quickly. We believe we can strengthen that leadership position and we expect sustained double-digit growth there long term. We think this market potential is $500 million today and can expand significantly with future indications.

In some other spaces like PTA, we've demonstrated success over the long term in shifting our portfolio. Over the last few years, we've seen this move to a product leadership position through internal developments and acquisitions. We started with our high-pressure conquest product expanded with 8 other internally-developed or acquired platforms, including our recent ClearStream purchase. We believe that the next big move in this space, and by big I mean like greater than $1 billion big, will occur in drug-coated balloons. We see this disruptive technology is both a significant opportunity and a threat to our market-leading presence in PTA. We've been developing our plans here for several years now and tonight I'm excited to announce the acquisition of Lutonix and their drug-coated balloon technology. In our evaluations, Lutonix has the only third-generation drug-coated balloon, or DCB technology, we think they have a tangible lead toward U.S. launch with the first and the only IDE approval for DCB. The highest quality and depth of preclinical science, the highest quality clinical program with several completed studies in over 160 patients already enrolled in the pivotal IDE in just over 4 months, a highly skilled and motivated team, a coating technology we believe will demonstrate superior safety as well as efficacy. Now many of you have asked me over the years if we had the appetite for a dilutive deal. I've answered that would have to be strategically compelling enough and that we would be convinced technically, clinically and economically that the opportunity was real. Well, we think the Lutonix acquisition represents such a direct and strategic fit for us. Their product-leading position in clinical advantage make this the right move at the right time.

So in summary, in a period of continued weakness in the U.S. and Europe, we're taking our destiny into our own hands. We continue to invest significantly in emerging markets. We've made some big moves and platform acquisitions that we expect will provide strong long-term growth. And you'll see today that this confluence of factors will cause us to fall short of our aspiration for double-digit earnings growth in 2012. As John Weiland and John DeFord take you through the different businesses, you'll see that throughout the presentation we're focused on shifting the mix of the portfolio to double-digit growth through acquisitions of new platforms, geographic investments, our own new product development and enhanced sales focus. We're confident that this formula will improve our growth profile. So with that, now let me turn it over to the 2 Johns.

John H. Weiland

Good afternoon, ladies and gentlemen. Let's begin with our Vascular business, which we report in 3 categories: endovascular products including biopsy, vascular grafts and electrophysiology. These markets total roughly $4.2 billion. We see the strongest growth opportunities in endovascular radiology as we move forward on all fronts, including biopsy, vena cava filters, stents and PTA with added opportunity in the emerging markets. The biopsy market that we participate in is about $650 million with the fastest growing segments being ultrasound guidance and vacuum-assisted systems, both of which use markers.

Our biopsy revenue was up roughly 40% year-to-date inclusive of the SenoRX acquisition in early Q3 2010 or a healthy 8% organically. This acquisition is a good example of our strategy for business development. As Tim stated, we're always looking for opportunities to expand our pipeline and our portfolio through both internal development and acquisitions, with platform acquisitions our primary business development focus. Now that we're 18 months post close, you can begin to see how we can expand upon our acquired platforms with new offerings.

In the third quarter, we launched the next generation of our console-based vacuum assisted biopsy system, ENCOR ENSPIRE. This new platform is focused around the patient with benefits, including single-insertion, multiple sample capability, local anesthesia delivery, simplified sample tracking and an ultra-sharp tip design for reduced trauma during insertion. The clinician also sees benefits from this new device through a simplified user interface and a computer-controlled touchscreen. It also features a new ergonomic tube cassette and a vacuum cassette that improves ease-of-use and also simplifies setup between patients. We're still in the early rollout of this new technology domestically and internationally and we're pleased with the acceptance in the market thus far.

John A. DeFord

Ultrasound guided biopsy is one of the fastest-growing segment in the biopsy market and ultrasound is the most common imaging modality used to support breast tissue sampling. We focused on the ultrasound space for several years with products like Vacora and FINESSE 14, And early this month, we released the newest product in our FINESSE family, the Ultra 10 probe and will be in full launch next month. The FINESSE Ultra 10 maintains the benefits of vacuum-assisted biopsy and the ability to take multiple samples through a single insertion while delivering larger tissue samples all in a self-contained handheld unit.

To further expand on our ultrasound platform, we're developing an integrated biopsy and ultrasound system we're calling Inspire Vision along with a standalone portable product named Ultra Vision. We believe we pulled together some key technologies to add to our base Site-Rite ultrasound platform that together will create unique and differentiated product offerings in the biopsy space. We'll also be adding enhanced capabilities for needle tracking and a proprietary technology for stereotaxis that I'll explain in more detail in a few minutes. We anticipate launching the first product in this family in the first half of 2013.

Now moving to markers, migration and enduring visibility under varying imaging modalities remain key unmet needs. Since the breast is significantly compressed during stereotactic and MRI biopsy in marker insertion, accurate placement and migration of the marker post compression remain significant clinical challenges. Follow-up exams are frequently done using ultrasound, making long-term stability and visibility of the marker critically important. To address these needs late in the second half of 2012, we anticipate launching a new family of markers to add to our market-leading product offering. The Cinemark Ultra is designed to improve accuracy, reduce migration post compression and provide enhanced and enduring visibility under ultrasound.

John H. Weiland

Moving to stents and stent grafts, the market we participated is a little over $1 billion. Our stent and stent graft revenue is up 3% year-to-date inclusive of our LifeStent family of products, which are up 12% year-to-date. Growth in this space has been dominated by advancements in the treatment of the SFA. We recently launched our 200-millimeter length LifeStent solo at both Vida and TCT, our 3-year pivotal trial data represented, demonstrating durable freedom from TLR, target vascularization -- target lesion revascularization. We benefited from having the only SFA-indicated stent in the United States market though there are many other players that our products used off label for the treatment of the SFA. While we anticipate increased competition in this space with both drug alluding and bare-metal stents, we expect to enter the market in the coming months. We're confident in the value proposition that we propose. Our strong clinical data with long-term follow-up and best-in-class results essentially equivalent to higher risk drug alluding products, the longest device lengths, our unique stent architecture and our very broad product offering should continue to drive our leadership position into 2012.

John A. DeFord

In stent grafts, we have several platforms under development in clinical evaluations. For AV access in-stent restenosis, we're actively enrolling in the rescue study to support the use of the FLUENCY PLUS stent graft family. In the U.S., about 20,000 bare-metal stents are used each year to treat venous outflow obstruction in dialysis patients. About 80% of these stents will restenose within 6 months to 1 year. To address this significant clinical need, we began enrollment in the rescue study in Q1 of 2011. We've had a few changes driven by FDA for increased patient numbers and we now expect enrollment to continue into the second half of 2012. With a minimum of 6 months follow-up, then regulatory review, we now anticipate launch in the U.S. in the second half of 2013.

To treat SFA disease, we've developed the Lifestream stent graft which combines our LifeStent bare-metal platform with our graft technology and a new delivery system to create a low profile stent graft with lengths up to 200 millimeters. The Lifestream IDE was submitted in September and we continue to negotiate with FDA to get this study started. We currently anticipate launching the product in Europe in the first half of 2012 and commencing our pivotal study of between 200 and 300 patients in that same timeframe, and we anticipate commercialization in early 2014 in the U.S.

John H. Weiland

Moving to PTA, the market we participate in is about $600 million and our revenue is up 16% year-to-date. As we've discussed with you over the last few years, our internal pipeline and business development activities have been strong in peripheral vascular and our really focus on the unmet needs in the lower limb arterial disease space has yielded several market-leading platforms. Our FlowCardia acquisition in 2010 fueled our peripheral arterial growth while addressing the key unmet need for physicians facing the challenge of treating Chronic Total Occlusions. And their effort to restore the vascular patency to patients the CROSSER technology enables the physicians to arthrectomize channel for passage through the hardened occlusion and generally in combination with additional therapy, such as angioplasty complete the interventional procedure and restore arterial blood flow.

Our recent ClearStream acquisition provides us with additional angioplasty products distributed in key international markets along with the vertical integration of an important technology. These acquisitions are important pieces that brought us to product leadership in PTA.

As Tim outlined a few minutes ago, we think the next big move in PTA is drug-coated balloons or DCBs. DCBs have gained increased awareness for several years now with multiple Paclitaxel-based technologies on the market in Europe and more underdeveloped in the United States and around the globe. However, a quotable technology that is safe, efficacious, durable, manufacturable and commercially viable has been elusive. These difficulties led us to dig deeply into this space and evaluate many of these technologies. Through that effort, we found Lutonix to be an exception to the rule. There is significant investment and understanding the needs of the clinician and the patient, their exhaust of coating development efforts, their extensive preclinical and early human testing gave us confidence that this technology is real, tangible and executable. The Lutonix drug-coated balloon is based on the ClearStream PTA platform and is the first and only drug-coated balloon technology under investigational device exemption from the FDA, giving us a first mover advantage with a significant head start and the opportunity to set the bar for others to follow. The Levant 1 first-in-man randomized controlled trial treating SFA and popliteal disease demonstrated a significantly statistical 6-month reduction in late lumen loss compared to uncoated balloon angioplasty. The Lutonix coronary first-in-man studies named PERVIDEO and De Novo further demonstrated the therapeutic event and benefit of drug-coated balloon technology in the arterial system. We're both pleased and excited to add the Lutonix team and the technology to the Bard family.

John A. DeFord

The mechanism of action for the Lutonix drug-coated balloon occurs in 3 stages. And for those of you here tonight, you can see an animation of this process. First, during the initial inflation of at least 30 seconds, Paclitaxel is transferred from the balloon to the luminal surface of the vessel. Next, Paclitaxel diffuses over several days into the deeper intimal cell layers. And after about 30 days has been substantially transported from the surface to allow for vessel surface healing and reendothelialization, while sustaining therapeutic drug levels in the arterial wall for ongoing restenosis inhibition.

On the clinical front, the Levant 2 pivotal IDE is a prospective randomized, single blind, multicenter trial comparing the Lutonix drug-coated balloon to uncoated PTA. The trial will enroll 476 patients across 55 clinical sites, including 40 in the U.S. and 15 in Europe. Lutonix began recruiting patients in Q3 and has enrolled actually over 170 patients now and is well ahead of schedule. Eligible patients in the Levant 2 study suffer from claudication or rest pain with significant stenosis in a previously unstented SFA or popliteal artery lesion up to 150 millimeters in length. We've agreed with the FDA that these patients will be followed for 5 years with PMA submission after 1 year of follow-up. At this time, we anticipate that submission could occur in 2014. Lutonix received CE mark approval earlier this year and we anticipate launching in Europe in the second half of 2012. We also plan to begin a larger registry study concurrent with the launch to support broader marketing claims and obtain additional clinical data. Beyond SFA and popliteal indications, we're in the planning phase relative to other high-value vascular areas, including the coronaries. We'll be working through the best way to capitalize on those opportunities whether it's on our own or with a partner or even monetizing those rights. We'll provide more information as we move further along in the planning.

In addition to Lutonix, we're also working toward the launch of a number of PTA products in 2012 and beyond. We're on track to launch in the first half of 2012 a new ultrahigh pressure Conquest product named Conquest HP, with rated burst pressures of up to 40 atmospheres. We're also planning to launch of new ATLAS family of large diameter and high-pressure balloons in that same timeframe. And in the second half of next year, we anticipate the launch of extensions to the VASCUTRAK family and the introduction of a new CROSSER product for chronic total occlusion crossing by atherectomy.

John H. Weiland

There's no doubt that the Lutonix acquisition is a significant move for us. Though we've never been about 1 big thing, an opportunity to launch a product in the market that could reach over $100 million in its first year is not an everyday occurrence anywhere in med tech and we're obviously excited about these possibilities.

Moving to vena cava filters. We estimate that the market is contracted to about $200 million with our revenue down 25% year-to-date but we think 2012 is when we return to growth with this life-saving product line. Our recently launched Meridian filter is really the next step in pulmonary embolism prevention and is designed to address the key optional filter market concerns of durability and fracture that are impacting the filter market today. Meridian incorporates an enhanced anchoring system designed to reduce movement in the challenging and dynamic vena cava environment. And we believe that the enhanced local stability will lead to reduced risk of fracture. The product is now available with both jugular and femoral placement delivery systems and early feedback suggests a shift towards growth.

John A. DeFord

Our next-generation DENALI filter is in clinical studies to support both permanent and retrievable indications. DENALI takes our filter design to a new level in addressing the market concerns of migration and fracture and also cable penetration. The unibody electro-polished implant with integrated retrieval hook and enhanced anchoring system is designed to secure the device within the vena cava, limit penetration and support uncomplicated retrieval. We started the study in early Q3 and anticipate enrolling about 200 patients. The enrollment phase is expected to continue through Q3 of 2012. And with follow-up and regulatory review, we anticipate launching in the second half of 2013.

John H. Weiland

So that wraps up our discussion of endovascular radiology. And I think as you can see, we're moving aggressively on several fronts to change the growth mix of our portfolio. We also continue to invest aggressively in emerging markets where biopsy and stent products are growth drivers for us.

Now we'll move to electrophysiology area where our revenue is flat year-to-date. This $1.5 billion electrophysiology market is driven by the standard Ablation Catheter segment where we have little presence to date. The solutions in this space are still evolving and we continue to see significant opportunity. We've been working on our atrial fib technology named ENCOMPASS for the last 2 years. And in 2012, we'll start to see the fruits of those labors as we expect to launch in Europe.

John A. DeFord

We'll begin enrollment in our multicenter feasibility study in the next several weeks. And we'll use those data to support our CE mark submission in late Q2, the pivotal IDE submission in the second half of 2012 and to provide marketing data for our European rollout. While the U.S. launch is anticipated for 2016, we're actively seeking complimentary solutions through internal development or external acquisition to move our growth curve forward in this business. We've talked about several products in the vascular business today, but as you can see on this slide there are several worthwhile opportunities we didn't have time to discuss in detail. We'll give more information on these projects as the year progresses. And keep in mind that this list of 14 launches represents only a portion of our vascular pipeline.

John H. Weiland

The next of our 4 major businesses is urology, a roughly $3.2 billion market. Here we'll report basic drainage, continence, urological specialties and catheter fixation products. We'd like to start the discussion in urology with a deeper dive into the targeted temperature management space and tell you why we see this as a sustained double-digit growth opportunity with long-term product leadership. Our direct and broad presence through sales marketing and clinical resources identified years ago the temperature management was an area of significant future growth. As for the data for therapeutic hypothermia has grown, we've been seeking an appropriate entry position based on our product leadership strategy. Before we get into the technology, let's take a look at the current need and the potential market for targeted temperature management.

The benefit of therapeutic hypothermia to aid in preserving organ function during events that deprive the body of oxygen is well known. However, the ability to precisely control the patient's temperature while inducing hypothermia has always been a challenge. Targeted temperature management is growing rapidly, primarily with out-of-hospital cardiac arrest patients and with patients that develop neurogenic fever. Studies have shown that normal neurological recovery increases from 20% to 60% to 70% in cardiac arrest survivors treated with therapeutic hypothermia. In the same manner, the mortality rate amongst patients with neurogenic fever decreases from about 35% to 10% with therapeutic hypothermia. In the future, we expect this therapy to be widely used for a number of patient conditions, including acute myocardial infarctions or AMI, perinatal asphyxia and spinal cord injury amongst others. The level of evidence for each one of these potential applications differs but early results look promising.

In terms of market size, we believe that the global market for targeted temperature management is roughly $80 million today growing to a potential $500 million, primarily composed of out-of-hospital cardiac arrest and neurogenic fever management patients. We expect the cardiac arrest portion to continue to experience rapid adoption over the next 3 to 4 years and fever management to continue to grow at a sustained pace over the next 10 years. AMI, as I said earlier, is the next opportunity with a market potential over $200 million and as I said,, we think this technology will expand to even other indicators in the future.

The typical institution seeking a therapeutic hypothermia solution will usually try cooling blankets or ice bags first, which are -- is obviously the least expensive of approach. But often they quickly discover that simply placing something cold near or on the patient does not effectively produce the outcomes expected. So they need a solution that rapidly cools and then maintains the patient at the targeted temperature level for a very sustained period of time and then brings them back to a normothermic conditions in a very controlled manner. That leaves them with 2 options today. One option is endovascular catheters, which are invasive and need to be inserted in a sterile and image-equipped environment with a skilled interventionalists. Beyond the obvious delay in therapy that this involves, these technologies come with serious potential complications, including vascular injury, blood loss, infection, interference and treatment of the underlying condition and the list goes on and on. Or they can receive the same benefit with the less expensive, less invasive Arctic Sun system. The Arctic Sun system utilizes a proprietary set of external hydrogel adhesive cooling pads that dramatically increase the heat transfer and rapidly cool the patient to therapeutic temperatures with precise control. The physician maintains good access to the patient as the pads only cover about 40% of the body versus at least 80% with other external cooling systems. The Arctic Sun pads can be applied and managed by nurses or technicians with little training in a very short period of time and in almost any setting. The key advantages of this technology Medivance has been driving the market with that an average of only 20 reps over the past few years. Like most acquisitions that we do, this one has significant synergies with our sales force and the R&D pipeline is robust, putting Bard in a position for sustained product leadership. In fact, the execution model somewhat mirrors the Venetec acquisition and integration that the same team has executed so well on over the last 6 years. The Artic Sun 5000 and Arctic Chill platforms provide a strong base for continued innovation and we're pleased to welcome the Medivance team to Bard.

John A. DeFord

There are a few technologies that advertise a very fast drop in patient temperature, but that's only part of the equation. Most patients require cooling but a short rapid cooling cycle followed by uncontrolled rewarming will not be adequate. The patients with the best outcomes are those who are controlled at the proper temperature for the requisite period of time, which can be as long as several days for neurogenic fever patients and then rewarmed slowly, precisely and carefully over many hours to prevent complications. Building on this platform, our next step is to start the cooling process as early as possible. Effective therapeutic hyperthermia has not been available at the first point of patient contact outside of the hospital. To address this need, we're working to complete the development of a new Arctic gel pad system that will have all the benefits of the current device, including the proprietary hydrogel adhesive technology for excellent heat transfer, negative pressure water cooling to prevent leaks, and the rapid cooling of the patient. It's designed to be placed on the patient outside of the hospital and provide a couple hours of cooling independent of the Artic Sun 5000.

We expect this new development to bring the benefits of therapeutic hypothermia to the patient wherever they may be in an emergent situation and alleviate concerns of cooling outside of the hospital. Beyond this development, we also have several other innovations to aid in patient management and control that we'll discuss as we get closer to launch.

John H. Weiland

The basic drainage market, which we participated in is -- participate in is a little over $1.5 billion. This space is very mature and our revenue is up 3% year-to-date with the majority of that growth outside of the United States. And yet there are certain segments within this market with attractive growth potential such as the home-based intermittent catheter segment. This market segment has been growing in the strong double-digit rates since 2008 when the reimbursement for self catheterization in the United States changed from 1 catheter a week to a new catheter for every use up to 200 per month. While Bard has products available in this market today and we have benefited from this market growth, we do not have a hydrophilic catheter, which is the fastest-growing segment of this space.

John A. DeFord

We expect to launch our synthetic latex comfort glide hydrophilic intermittent catheter in the second half of next year, which will have the comfort and properties of a latex catheter without the natural proteins that can cause allergic reactions. At the same time, we're increasing sales resources and programs to drive adoption through the distributors who interface with these customers.

John H. Weiland

The continence market, which we participate in is an estimated $600 million market, which includes surgical slings, pelvic floor repair and fecal management. Our continence revenue was down 14% year-to-date following the discontinuation of our injectable continence product, Contigen, in the second quarter of this year. We have also seen contraction in our surgical continence products due to the industrywide FDA warnings on pelvic floor repair and yet we do see an opportunity for growth in this space. In 2009, we were third to the market in the fecal incontinence segment with our launch of internally developed DIGNICARE product. We quickly moved into the #2 position in the market getting above 20% share in our first full year of sales. We now expect to further improve our position with the full launch of DIGNISHIELD in the first half of 2012.

John A. DeFord

DIGNISHIELD builds upon the best of DIGNICARE, including our proprietary Conoco [ph] balloon designed for reduced pressure and a very tight seal to prevent leakage, skin irritation and ultimately skin breakdown while maintaining bowel integrity. DIGNISHIELD will also provide a low permeability drainage system to enhance odor control and a completely closed system to reduce the risk of cross contamination, leakage or spillage during collection system exchange. Now I've got a great video to show you, so -- no, I guess, they won't allow me to show it, sorry.

John H. Weiland

Rounding up the rest of our Urology business, the urological specialties market we participate in is approximately $450 million and our revenue is up 2% year-to-date. And the catheter stabilization market is estimated at $550 million with our revenue up 6% year-to-date. We'll discuss an important shift in our focus for our STATLOCK sales force in just a minute. As we look at broader opportunities for our Urology portfolio, we've been aggressively pursuing the growing need for our existing endo-urology products in a significant number of emerging markets. And these markets, we're investing in physician training, marketing, sales force growth and expanding product breadth.

John A. DeFord

Closing out the Urology category, we have a number of new products in development for women's health, STATLOCK and basic drainage. We don't have time to cover each of them in detail today, but we'll provide more information as we move toward launches in 2012 and beyond. Here's a summary of the anticipated launch dates for several products in the Urology pipeline.

John H. Weiland

I'd like to use the transition to oncology to tell you about a change in our U.S. sales alignment that we think will increase focus and efficiency across 3 of our divisions. This graphic demonstrates our call point focused approach in 2005 between our vascular and our access business although there's always been some redundancy with the interventional radiologist, the product bags were relatively simple and our reps could be experts in the field as they focused on specific disease states. Since 2005, however, through acquisitions and internal research and development, the breadth and depth of our product offering has dramatically increased. The Oncology business has more than doubled with advances in pics, ports and dialysis access products with increasingly diverging sales focus in nursing and interventional radiology. At the same time, we've dramatically increased our presence with vascular surgeons and interventional radiologists with the LifeStent family of products, PTA balloons, CTO technology and our broad product offering for hemodialysis across interventions. During that same time period, peripheral arterial disease procedures have shifted from the interventional radiologist to the vascular surgeon or the interventional cardiologists. This evolution in our Vascular business requires extensive training for our sales force who now cover a wide range of diseases, products and call points. Moreover in parallel, we've dramatically increased our presence with nursing teams through the safety in technology and our access sales force and a successful introduction in evolution of capital stabilization technology with our dedicated STATLOCK sales force. Our success has expanded our reach and we bump into each other more today than we have in the past. We think now is the right time to focus our sales alignment and increase sales efficiencies with the same total costs.

This next slide shows you our new alignment. We've created an arterial interventional sales force who will focus on interventional cardiologists and vascular surgeons selling our CTO products, arterial balloons and stents. Our peripheral vascular sales force will focus on the interventional radiologists selling our AV access products, dialysis catheters, filters and ports. And while our access system sales force will focus on PICC and IV nursing teams selling pics, imaging and catheter stabilization. To be clear, this is a shifting of resources and focus. This is not a reduced selling cost program, but should increase sales efficiencies by getting us more closely aligned with our customers making us stronger partners, increasing sales effectiveness and on approving our ability to find and identify double-digit growth opportunities in those spaces that are tangential to them.

Now in Oncology category, we compete in an overall market that we value at $1.4 billion. This market is comprised primarily of pics, ports, imaging and dialysis access products. Our primary double-digit growth opportunity here is in pics, both in the United States and internationally. We estimate that the PICC market is $450 million with our revenue up 9% year-to-date. We've been updating you on the success of our Sapiens Tip Confirmation System for the last couple of quarters and I can tell you that our metrics are rapidly improving as we continue to rollout expanded offerings of this technology. We have been or are being evaluated in over 250 accounts presently. And for those that have come to a final decision, or conclusion, our adoption rate is 90%. And 59% of those accounts have already eliminated confirmatory x-rays from their protocols. This amounts to an elimination of over 89,000 x-rays already on an annualized basis saving the healthcare system about $4.3 million in direct cost and not only improving the speed the treatment for patients, but also reducing radiation exposure to clinicians and patients alike. This is a great example of where the market is quickly moving up the technology curve because it makes perfect sense from a patient care and economic standpoint.

Quite frankly while we're still in just the first inning here in the rollout, we aren't seeing very much competitive resistance. It's not difficult to imagine that at some point in the future, x-rays as part of the PICC placement protocol will be a historical footnote.

John A. DeFord

Moving to the pipeline, we're finishing up our development activities on our integrated 3CG tip confirmation system. To refresh your memory, 3CG combines our ultrasound platform with Sherlock catheter tracking and our ECG-based catheter tip confirmation system in a single integrated unit. 3CG is anticipated for launch in the U.S. in the first half of 2012 and in Europe and other international markets beginning in the second half of next year.

Continuing into our PICC pipeline, we're submitting the 510(k) for our COVERT POWERPICC family of antimicrobial catheters next month. Based upon the recent submissions to FDA on coated technologies, I'm a bit nervous about predicting a launch date at this time. However, after almost 12 months of dialogue, we'll be ready to launch in the first half of 2012 pending concurrence from the FDA.

We have a robust pipeline of other PICC products for launch over the next several quarters, including a new high flow, 5 french triple-lumen power PICC, which actually launched than just the last few days, custom kits that are rolling out in new configurations each and every month based on the specific needs of the customer, new catheters designed for internal jugular placement also scheduled to launch in the first half of 2012 and a new family of POWERPICCs designed for high flow and enhanced resistance to certain drug and flushing solution combinations for launch in the second half of next year.

John H. Weiland

While we continue to build the PICC nursing market in the United States, we're replicating the model outside of the United States and especially in emerging markets where our PICCs are our biggest opportunity for growth. The compelling message of treating vascular access patients with the most cost and clinically effective vascular access device resonates with doctors and nurses all over the world, and the cost savings and convenience of bedside placement by nurses is universally understood. We're simply following a proven playbook within Bard. We look for markets where nursing skills and privileges are high enough to tackle insertion, but where they use primarily IV catheters for access. We provide the education and the training on PICC placement internally and stay close to the customer with an ongoing clinical commitment to improve patient care and maintenance. This is critical to the long-term success of our strategy. So even though we weren't first to market in some of the developing countries, there is a significant opportunity for us to leverage our experience and capabilities and establish a sustained product leadership position in all of these markets. To further illustrate the international opportunity here, we note that our PICC business is up 65% year-to-date in emerging markets. And those results are with our legacy products. And our new PICC technologies provide even more benefit and opportunity for growth outside of the United States. Our close customer focus, experience and insight in the vascular access has allowed us to identify important needs and have lead us to product leadership in PICCs and in ports.

Turning that knowledge and insight into the broader vascular access market, we've identified a new market opportunity in midlines. Midlines or intermediate dwell catheters are smaller vascular access segment with more limited use.

John A. DeFord

The CDC recommends the use of midlines when central venous access is not required, but peripheral venous access is needed for more than 6 days. However, the placement of midlines today requires almost as much specialized training and skill as that required to place PICCs. Therefore, PIVs continue to be used in this population often resulting in multiple PIV placements and in some cases significant vascular injury or complications and certainly resulting in unnecessary expense. So the need for a midline that can be placed as easily as a PIV is clear and our new intermediate dwell catheter or IDC will address this opportunity in the first half of 2012. This product will be initially introduced in common PIV needle gauge sizes and will be compatible with our latest imaging systems that we'll discuss in just a few moments.

John H. Weiland

Moving to ultrasound and our imaging technology, we estimate this market to be $90 million and our sales were up 6% year-to-date. Our historical focus here has been to enable the placement of our Access Systems and drive more effective use source utilization within the clinical setting. From this focus has emerged our Site-Rite, Sherlock and more recently, Sapiens platforms. As we continue to evaluate opportunities for significant growth, the leverage of technologies across businesses is an obvious place for us to look. We've evolved our ultrasound technology and expertise to other diagnostic uses as we talked earlier tonight.

John A. DeFord

Additionally, we're nearing the launch of 3 new imaging platforms that further expand our core technologies into exciting high clinical value spaces. The first new product is the Site-Rite preview, a highly portable ultrasound system designed specifically for vascular access and PIV catheter placement and is anticipated to launch in the first half of next year. The preview is designed to ease the placement of difficult PIVs and will incorporate an innovative disposable gel cap in proprietary needle guide. We believe this technology will cost-effectively increase the success rate of PIV placement while making the procedures more convenient and comfortable for the patient.

Also in the second half of next year, we anticipate launching our new Site-Rite 7 platform in the U.S. and Europe. Site-Rite 7 will become our new base imaging platform and will be available with a host of options ranging from basic imaging and imaging controls to advanced image filters, color flow doppler, integrated 3CG and our new needle visualization enhancement technology. This will also serve as a new platform for the broader international community with launches planned over the following several quarters around the world.

Along that same vein, just seeing if you're paying attention, we're expanding the technology that formed the basis of our Sherlock system to create a new needle visualization and freehand stereotactic system that we've internally named Faser. [ph] This technology virtually links the needle to our imaging system and allows the user to select the desired trajectory and in realtime, track the needle as it advances to the target. This is a unique solution that we plan to introduce the first half of 2013 for vascular access and then quickly adapt the technology to other ultrasound-guided needle access procedures. For those of you here in the audience, please visit the product fair where you'll have the opportunity to see these technologies.

John H. Weiland

And we'll close out our oncology discussion with implanted ports. The port market is currently estimated at about $325 million with our revenue up 5% year-to-date. Our growth in this space has been really fueled by strong demand in the emerging markets growing 25% year-to-date.

John A. DeFord

In 2012, we have a broad lineup of rapid PowerPort introductions based on a new low artifact port platform. We'll start with our intermediate size PowerPort early in the year then anticipate the launch of a low-profile version in Q2, a low-artifact dual lumen PowerPort in Q3, and a low-profile dual lumen PowerPort in Q4. We also expect to launch the PowerPort line in Japan, which will provide Japanese clinicians and their patients to access the power injectable port technology for the first time. This technology, as you may know, has become the gold standard here in the U.S. Before we move on, here's a summary of some of the upcoming launches in the oncology space and our anticipated launch dates.

John H. Weiland

Well, if everybody's still with us, this will be the last of our major businesses in surgical specialties, which include soft tissue performance irrigation and hemostasis. The market for these products currently estimates approximately $1.8 billion. Our double-digit growth opportunities in this space include laparoscopic synthetic hernia, biologic hernia repair and breast reconstruction. The ventral hernia market that we participate in is about $700 million with our revenue growing 6% year-to-date. In the laparoscopic synthetic hernia space, our Echo PS and VENTRALIGHT ST products are leading the way and taking customers up the technology curve. Echo is demonstrating that a unique delivery technology that significantly improves and simplifies the procedure can gain share and at a premium even in this difficult economic environment. At the same time, our lighter weight VENTRALIGHT ST with the resorbable separate technology barrier is driving adoption through excellent outcome and enhanced abdominal wall compliance providing both an efficient use of all our resources and improving results for patients.

Our other recent launches, including VENTRIO ST and VENTRALEX ST are adding good growth in both open ventral and umbilical repair where our competitive entrants have been making an impact. In umbilical hernia repair, there are over 100,000 procedures performed in the United States every year and many times that number within global markets. The addition of the VENTRALEX ST as a complement to our original VENTRALEX product allows to build on our strong market leadership position.

In biologic hernia repair we offer a very comprehensive line of both allograft and xenograft products, including ALLOMAX, Callomend and the XENMATRIX. All of our products are virally inactivated and offer terminal sterilization to enhance product safety, while providing a receptive collagen scaffold to strengthen and promote the patient's natural healing process. In 2011 we saw several clinical studies published on XENMATRIX that further support its use in challenging hernia repair cases.

Breast reconstruction has been a significant growth opportunity for us with 51% growth year-to-date, and we anticipate further market expansion as biologically derived materials continue to demonstrate continual and continuous clinical benefit. The use of traditional flap techniques using the patient's own tissue as a graft continues to decline as clinicians became more familiar with the use of allograft implants such as ALLOMAX. Our recent launch of ALLOMAX 1 millimeter has further fueled growth by providing a graft with the uniform thickness, which is particularly important when performing bilateral breast reconstructing following mastectomy. Other key attributes of the product include rapid rehydration, a terminally sterilized and virally inactivated product for enhanced safety and a non-cross-linked collagen structure for rapid tissue incorporation.

On the fixation front, we estimate the market at approximately $225 million and our sales are flat year-to-date. This is a very competitive space and where there was once only 2 competitors, now there are 3. We expect the competition to remain intense and we have projects in our new development pipeline to put us in a position to gain market share here again. We also expect to see a continued expansion of fixation outside of the United States market as laparoscopic adoption remains robust.

We estimate the growing hernia market at $250 million globally and our sales are up 3% year-to-date. We see the strongest opportunity here in the emerging markets. We are seeing good growth up 36% year-to-date. These markets are really starving for both procedural and product training and we're putting a lot of effort and investment to exactly that. For example, in 2010, we opened our first training center in China and almost immediately found that the staff and the center were booked 24/7 leading us to open our second training center just a few months ago in Beijing, where actually our first hernia training class there was attended by 120 leading surgeons throughout China with presentations led by experts in the United States and other places around the world. In Surgical Specialties as with all of our businesses, growth comes from a combination of internal research and development and external business development. And we're active on all fronts where we see double-digit growth opportunities.

John A. DeFord

As John said, the hernia repair space has historically been intensely competitive and our recent launches in Surgical Specialties have filled to quiver with new and impactful products. As we move into 2012, we're focused on continuing to build momentum across the franchise, but to help support our competitive edge, I'm only going to hit the couple of the pipeline highlights today. First, we anticipate expanding our Echo PS inflatable mesh positioning system into several new products and new configurations with launches beginning in the second half of next year. We also have a number of new xenograft surgical graft sizes based on our XENMATRIX process for launch both in the first and second half of next year. We're also working toward the launch of our first antibiotic-coated mesh. We've submitted our 510(k)for the first in a series of products planned with this technology. I'm a little hesitant to put an estimated launch date on the table today as combination products are the toughest to predict coming out of the FDA.

I'll close our pipeline discussion with the inguinal space where we've been developing a new fully resorbable mesh technology internally named FASIX [ph] and anticipate introducing the product in flat sheet form in the first half of 2012 and then in the second design around the end of the year. Our FASIX [ph] technology is designed to reduce complications that can occur with permanent mesh implants and provide enhanced patient comfort to a completely resorbable monofilament-based mesh product. From the physician perspective, the FASIX [ph] technology is designed to have the feel and function of our standard propylene products with equivalent strength in the early healing period yet fully resorbed after about 1 year leaving no foreign material in the patients. Here's a summary of some of the surgical products we anticipate launching over the next several quarters. And before we go to our guidance, here's the full summary of the 47 project families we discussed tonight. Keep in mind, this is only a sample of the broader pipeline in each of our businesses. And as we typically do on our quarterly earnings calls, we'll discuss other notable products as we bring them to market. Thanks for your attention. Now let me hand you over to Todd Schermerhorn.

Todd C. Schermerhorn

Hi, everyone. Happy holidays. I should probably start by apologizing for John DeFord's sense of humor. It really is not his fault as many of you know the poor thing was born without a funny bone.

Before we get into the 2012 guidance, let's talk for a minute about how we expect 2011 to end. In October, we told you to expect fourth quarter sales growth in constant currency of 3% to 5% and our current view looks to be within that range. From a Q4 EPS perspective, we guided to $1.68 and excluding items and we continue to expect performance at that level. So despite the volatility in the external environment that Tim talked about, we still expect to deliver both top and bottom line performance in line with our original guidance from this meeting a year ago.

Let's look at 2012 expectations starting with constant currency net sales growth by product category. First, Vascular business. So SenoRX has now fully anniversaried, but we still see nice growth in that product line for 2012. In addition, a change in the trend for vena cava filters, as John talked about, should also help our organic growth rates. And the ClearStream products should also bolster an already strong PTA business. So all in, those factors lead us to guidance of 6% to 9%.

Urology will end the year at about 1% growth within the range that we established last year at this meeting. We forecast a little or no improvement in the base business in 2012. However, the Medivance product line will be reported in this category and should add several hundred basis points to the growth rates. So we're calling this business at 4% to 7% growth for 2012.

Our Oncology business is experiencing what I'll call another solid year in 2011 with around 6% growth in a continued challenging U.S. environment. Looking forward, we expect the further roll out of our Sapiens technology and our strength in emerging markets to be the key drivers and we'll put our guidance for '12 between 5% and 8% growth for Oncology.

Looking at the longer-term trends in surgery, you can see a nice rebound in our growth rates in 2009 and 2010 from essentially new product cycles. In 2011, we had a little gap in timing and it wasn't until the back half of the year that we launched our latest group of growth drivers, our ST and our Echo products. The initial response to those products has been positive and that makes us a bit more hopeful for 2012 with growth rates between 4% and 7%. So that works out to overall sales guidance at about 4% to 7% in constant currency, including about 200 basis points from the acquisitions.

Moving on to the financial statements, let's start with gross margins. Historically, our long-term objective for margin improvement has been 50 to 100 basis points a year, excluding new amortization. As you all know the pricing environment is difficult right now, but even so we think our cost improvement programs in 2012 could get us up to 50 basis points of improvement. But that would be the high end of our expected range. The low side, we estimate to be 20 or 30 basis points of improvement. You should also note though that the recent acquisitions will add about 70 basis points to amortization in 2012 so the all-in GP calculation will likely be down slightly.

In SG&A, we expect to see about a 50 basis point increase as a percent of sales in 2012. The new acquisitions will de-lever the SG&A by about 80 basis points. So that means that even with our significant investments in emerging markets, we continue to drive operational improvement in SG&A. We expect R&D as a percent of sales to approach 7% in 2012. The increase coming from the newly acquired platforms and predominantly Lutonix. As far as the tax rate is concerned, we expect another 50 to 70 basis points of improvement in 2012 and that is without the R&D tax credit, which is worth about $4 million.

So moving onto EPS and shares, we have resumed historical practice of buying back our shares as our cash balances and market conditions permit and we would expect to see further share count reduction in 2012. Without the impact of Lutonix our guidance would have been 7% to 8% adjusted EPS growth. As our press release noted today's transaction will dilute the 2012 adjusted EPS by about $0.25 or 400 basis points of growth. So our 2012 all-in guidance is for between 3% and 4% EPS growth excluding items that affect comparability. I would also note that the lack of the R&D tax credit in 2012 cost us about a point of EPS growth.

Moving to cash. As you know, we're not a particularly capital-intensive business. We did predict a very slight step up in CapEx in 2011 and we think that level of investment will continue in 2012, so we're calling it to $65 million to $75 million range. And finally, we see operating cash flow in the mid-$500 million range in 2012 while we work off about $185 million of cash payments for the hernia settlements. Otherwise, operating cash flow is building nicely with income.

So that concludes the financial portion of the presentation. And now Tim will come back up and moderate the Q&A.

Timothy M. Ring

Great. Thanks, Todd. first of all I'd like to ask 3 of our group Vice Presidents to join us up here for the Q&A: Sharon Alterio, Jim Beasley and Tim Collins. We'll open up for questions now. [Operator Instructions]

Question-and-Answer Session

Unknown Analyst

Two questions just to start off. Tim just one big picture again, I hear you caution about procedures. We've seen some signs that have sets [ph] you before the meeting from some others that's impossible stabilizing in procedures, how conservative do you think your view is just the procedure environment? And are you seeing any indication of any recovery there? And then just -- I'll ask the second question now, post Lutonix -- I mean, given the significant dilution, does this mean you're significantly less likely to do more deals or more tuck-ins in 2012?

Timothy M. Ring

In terms of the environment question in the U.S., we don't see anything out there that says improvement's coming anytime soon. In fact, if you look at that trend of doctor's office visits, that's got even more severe in terms of decline. And if you think of the process of if you go see a primary care physician, you go to a specialist, you get a procedure done. That initial leading indicator, physicians office visits being down, I'm not sure changes much in terms for the positive. Relative to the Lutonix field and does it affect our appetite for other deals? No. Within that guidance that Todd gave, we would plan on doing more acquisitions. The pipeline still looks great. We're active on a lot of different fronts. This one's a little bit different profile. We just thought that it was so strategically compelling that it was one that we had to do, so I don't think it changes our behavior on the acquisition front.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Bob Hopkins from Bank of America. 2 questions on the tax. First for John, what was the longest term for some mandated you're able to see before you went forward with this transaction? And how many patients? And then I have a follow-up for Todd.

John A. DeFord

Sure. So there were 3 different studies for first-in-man but the Levant I, which had a primary endpoint at 6 months, which was late lumen loss. So we saw those data and that was in roughly 80 patients. They then had 2 coronary studies, the De Novo study and the PERVIDEO study and each of those we're roughly in that same kind of a time period and also in the same ballpark in terms of patient numbers. So really, a significant number of patients approaching a couple of hundred patients in terms of evaluable data for us.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Anything else further than the 6 months that you're able to see?

John A. DeFord

No. Lots of animal data, but not human data past 6 months.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Okay. And then Todd, can you just walk me through the dilution in its separate parts. It seems like a bigger number than I would've thought just from a 30,000-foot level. I hadn't have time to work through it, but would you mind breaking that down for us in as many pieces that you're willing to provide?

Todd C. Schermerhorn

Sure. It's about 90% R&D level, that's where it's coming from. Not much utilization there until we enter the U.S. market at a later point, so it's largely in R&D load over the next 3 years.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Okay. I assume [indiscernible] anything with cash.

Todd C. Schermerhorn

Yes.

Jonathan Demchick - Morgan Stanley, Research Division

This is Jonathan Demchick from Morgan Stanley in for David Lewis. I have another question on Lutonix and I was wondering if you could break out the investment spend that's going to be needed there a little more kind of into what amount of its U.S. clinical compared to U.S. rollout for next year.

John H. Weiland

Let me start that. Just at a broad level the investment stays at constant for about 3 years and then we see accretion after at that point and the level of R&D is actually very similar in each one of those years.

Jonathan Demchick - Morgan Stanley, Research Division

And also I was just wondering if you could discuss the market size especially in the OUS markets for the balloon and then the risks that you kind of see to your vascular franchises.

John H. Weiland

Jim Beasley, do you want to cover that?

Jim C. Beasley

Yes, the market today really only primarily exists in Europe and we've put the European market size at around $100 million split between coronary and peripheral. I didn't catch the back half of your question, I'm sorry.

Jonathan Demchick - Morgan Stanley, Research Division

I was just wondering if you saw any risks for cannibalization in some of your other franchises.

John H. Weiland

It's interesting. I think in general, we would see the drug-coated balloons cannibalize the stent market in general. We don't see a huge amount of that with LifeStent though. The real sweet spot for LifeStent is going to be longer lesions, diffused disease and bailout stenting. So I think we think of drug-coated balloons this technology is shorter to intermediate link lesions and it's really complementary so we don't see a ton of cannibalization down the road.

Matthew J. Dodds - Citigroup Inc, Research Division

Matt Dodds, Citigroup. On Lutonix as well, John. For Levant 2, given the enrollment rate, if you finish sometime in the third quarter of '12, couldn't you get it submitted before 2014? Is there a reason why it wouldn't slip into '14? That's the first question.

John H. Weiland

Very perceptive of you, Matt. So it's certainly possible. So again if we complete enrollment in Q3 of next year, we have to have a year of follow-up. That's going to put us into Q3 of 2013, well then, we have to pull all those data and do the analysis and submit that module. So it's likely, even best case, it's kind of -- first quarter of 2014 as kind of best case.

Matthew J. Dodds - Citigroup Inc, Research Division

And then Tim, for you, you haven't in the past done much on the divestiture side. Some of the other surgical competitors have shown some divestiture recently. What's your view there for Bard?

Timothy M. Ring

Yes. It's a good question. You know it's a lot easier to divest entire businesses versus, say, product lines. And although obviously we have some product lines that aren't growing, some aren't growing at all, some are declining, net-net, when you look at the energy and effort that goes into that versus staying focused on growth and investment in some of the other areas, our view is -- the view is not worth the time to divest that product line or 2, and it wouldn't make that big of a difference in the financials anyway. So we don't really have a standalone business that we'd say, at this point, we don't want to be in.

Kristen M. Stewart - Deutsche Bank AG, Research Division

It's Kristen Stewart from Deutsche Bank. I just wanted to get an update, not to push you out the door, Todd, but anything on the CFO front in terms of timing? We do love you, Todd.

Timothy M. Ring

Well I'm not going to give you the update. As I mentioned throughout -- after the announcement, internal, external search, I've seen several candidates. I'm pleased at the progress that we're making. We've seen some outstanding people, and we'll let you know when we fill the position.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. And then excluding this deal, I guess EPS growth would have been 7% to 8%. That's obviously below your 10% target. Can you just maybe walk us through kind of your thinking in terms of different levers with R&D? Are you just deciding to spend more in R&D? Are you assuming any erosion in price within the guidance? Kind of what's the delta between your normal targets?

Todd C. Schermerhorn

Yes, well as I said in my remarks without the R&D tax credit, it was 1%, right? So you would be up to 8% to 9%. But I think the big issue is this 200 basis points in the sales growth guidance from the deal, so if you adjust that down to sort of organic sales growth, you're talking about 2% to 5% and that is -- pick a number in that range or in the middle of that range, it's below what we've been dealing with, right? So we've been getting the double-digit EPS growth, but generally with that 5% organic sales growth level. So I think the issue is still plenty of leverage in the P&L. I think the issue is -- and you can see that and say, a 3.5 and an 8.5 number or 9, I think it’s just an issue of the markets in the revenue growth rate, there's only so far you can go. And as we said multiple times, there are investments that we're making in emerging markets where we get very nice and pretty near-term payback, and we're really committed to doing those. So the combination of all that gets us to what we discussed.

John A. DeFord

And just before we move on, I just wanted to give a little more detail to Bob, to your question, I just was double checking the numbers here, the LEVANT I study was a little over 100 patients and that was 6 months. The PERVIDEO study was roughly 50 patients that was 6 months. But the DE NOVO study did have roughly 30 patients out to a year, and we just saw some of those year data. So I'm sitting here think it through, I realized that we had some data out to a year.

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

Jason Wittes from Caris. Sorry, for the another [indiscernible] question, but when you -- there are several companies out there with competing technologies in Europe. It sounds like you think this approach is clearly the best, but also it sounds like it was the lead in the U.S. in terms of timelines that really pushed you over the edge towards this particular acquisition. So could you kind of give us kind of your lay of the land in terms of how much of the lead you're going to have been in the U.S. and who else, other timelines that you anticipate, other competitors getting in the market?

Timothy M. Ring

Sure. I'm going to let Jim Beasley again answer that. He's the guy that puts most of the effort into this. Jim?

Jim C. Beasley

If you look at what we know, we know we got 170 patients enrolled in the first IDE in the U.S., and really anything beyond that is speculation and surmise. But we think that it's a year or 2 head start for sure. And by the way, we think this is the right asset here, too. So there are other companies out there, there's companies in Europe for sure, but we think, as we said, this is a third-generation technology. We think we'll get to the U.S. market first.

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

Okay. And a clarification on the R&D spend, did I hear correctly, so basically the type of dilution that we see this year continues for the next few until it gets in the market? Or are you guys interpreting...

Todd C. Schermerhorn

Yes. It's about a 3-year run. It doesn't get any worse, it doesn't get any better. You dilute 1 year, and then you grow from there.

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

Okay. But the 7% R&D rate, it includes Lutonix, and also it's kind of the rate we should look for the next few years.

Todd C. Schermerhorn

Well the Lutonix investment doesn't change going forward. As far as what the rest of our investments will be, you got to give us a year and you'll get that guidance from somebody else, I think.

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

Okay, and one last thing on the sales force reorganization. It sounds like that was simply you're hoping for some synergies there, but again there's really not a lot of cost cutting, and is there any changes in terms of the numbers of salespeople that you actually have out on the field?

John H. Weiland

We didn't do this for a synergy program. We did this for focus, and we think it gives the sales forces a very clear customer focus and product focus as opposed to having a more matrixed environment, which we had in the past. There's no synergies planned. The same headcount as we have today, we plan on essentially the same headcount going into next year when we finish this.

Timothy M. Ring

Okay. Why don't we go over to this side. I don't want to ignore anybody over here.

Michael Matson - Mizuho Securities USA Inc., Research Division

I'm Mike Matson from Mizuho Securities. I just had a follow-up question on the sales force changes. I guess just given that you're having to split it up and maybe some of the salespeople lose some products that they were making commissions on, is there any risk here that we're going to see some turnover maybe and what's the timing on this? Has this already been implemented? Did we see any sales post these changes in the third quarter?

John H. Weiland

The approach that we took on this realignment was a very careful, planned approach, territory by territory, district by district, sales force by sales force. Spent an awful lot of time analyzing what the potential opportunities were, where we had additional growth opportunities and how to capitalize on those. We've already launched this with the sales force. Everyone is aware of it. They're having their discussions on where their territory is going to be located, what products they're selling. I will tell you, our management team has done an outstanding job. You'll meet some of them tonight that we're responsible for that, and when you go to the product fare, and I'll tell you our people are energized, they're excited. And when you couple that with the pipeline, I think they're very excited about what the future growth opportunities are for them.

Michael Matson - Mizuho Securities USA Inc., Research Division

Okay. And then I just wanted to ask a question on the Gore patent suit as well. Just wondering if there's any update there. And if not, can you give us any kind of outlook in terms of what you plan to do with the windfall from that settlement, if you plan to win and be able to book that cash payment? And potentially the royalties as well, how much of that do you think you'd end up letting fall through the bottom line? Would you use some of that to buy back stock, et cetera?

Timothy M. Ring

Todd, why don't you take it.

Todd C. Schermerhorn

Well there's no update. And I don't think Gore will run out of options until sometime in '12, maybe late '12. It's our intent to invest about half of what I'd call the earnings power associated with -- so if you think about this as a bolus of cash tax affected and used to buy back shares and then an ongoing royalty, we would look to invest about half of that earnings power back into our business and try to make that a competitive advantage for us going forward and let the other half of that earnings power flow through to the EPS. That's the way we're thinking about it. Now we're in the planning phase but like you, we're just waiting.

Kimberly Weeks Gailun - JP Morgan Chase & Co, Research Division

Kim Galen, JPMorgan. A couple of questions for Todd. I guess the first is on gross margin. So it sounds like you're guiding to gross margin improvement year-over-year of about 20 to 50 bps, excluding all new amortization. And so I guess, curious, what's driving that improvement? We're looking at increased pricing, we've got surgical, just one of your higher-margin business is growing towards the lower end, so what's the driver of the gains there? And then I've got one follow-up.

Todd C. Schermerhorn

Good, I'd like to get that out. So as we look at those pieces, we don't see much from foreign exchange at least. We did most of the planning here in to high 130s for the euro, so it wasn't look like much of foreign exchange. We are in a more difficult price environment. Our best estimates at this point are around 100 basis points impact on the top line and that's about 30 at the gross margin level. Mix, as you said, mix isn't -- when we think we really learned well from a new product cycle, we can get mix up to maybe 50 basis points. And we've had it, on the other side, we've had it negative. Mix is sort of modestly favorable at this point. It's not a large number, and in part because of what you just indicated. The real value being driven in gross margin is our cost improvement programs, and I think I come on to the conference calls each period and talk about how strong those are, and I think they actually get even a little bit stronger next year. So we're pleased with those. We don't get tremendous visibility long term, 3 to 5 years, but when we look out a year, 18 months, we're real pleased with what we see with the cost improvement opportunities.

Kimberly Weeks Gailun - JP Morgan Chase & Co, Research Division

Okay, great. And then the quick follow-up was just on share repurchase. You said you'd be back in the market, but can you give us the kind of ballpark of how much you think you'll buy back in '12?

Todd C. Schermerhorn

I really can't because it really is dependent upon what we see for business development opportunities. So it's let's say, sort of a fixed pool of cash flow. I think we did a pretty good job of taking it through, all the pieces of the P&L, that's the one that we sort of hold in reserve, and it allows you to balance your models. But we simply don't know what those shares will be because we just don't know how -- what -- the business development is opportunistic, and we don't know what will come along. But we do -- I think you can look at what we've done in the past and use that as a guide because our thought process hasn't really changed that much.

Brooks E. West - Piper Jaffray Companies, Research Division

Brooks West, Piper Jaffray. Tim, given current cost of capital, can you talk how you guys are approaching the buy-versus-build equation internally? And do you see any opportunities to maybe reduce some R&D programs through acquisitions? And I have a follow up for Jim.

Timothy M. Ring

Todd, you want to handle the financial aspect of it?

Todd C. Schermerhorn

Well, I'm not sure what you mean, Brooks, can you be a little clearer with the trade-off?

Brooks E. West - Piper Jaffray Companies, Research Division

Well I mean talk through influencers of top line growth. Given low cost capital right now, are you favoring more buying revenue versus building revenue? And could you actually reduce some R&D programs through some acquisitions?

Todd C. Schermerhorn

I'm sorry. Okay, I got you now. Well I think the most productive thing we can do is do it inside. The returns are dramatically better if you can develop these things from scratch inside. And so that's an ongoing process. We're not at all deemphasizing that. I can tell you that for sure. I think we feel strongly that we need to each year get better and better in doing that. We need to improve our productivity in R&D continuously. But that's always going to be a really big part of our model. I don't think that the cost of capital really affects the way we go about looking at business development. It's highly opportunistic. It's about what assets come on, on the market or available or progress to a certain point from a clinical standpoint. It isn't really -- and we're very disciplined about returns and the like, so we're not watching the cost of capital decline and say, "Hey let's get a whole lot more aggressive and get close to the margin on deals." It's not how we do. We look at what comes along. We determine if it's fit for our business, and if fit financially we can get the kind of returns that we expect out of, then we'll do it.

Brooks E. West - Piper Jaffray Companies, Research Division

And then just wanted to clarify, did you say $100 million for Lutonix in '12? Was that the guidance there? And then just a follow-up for Jim?

Todd C. Schermerhorn

I'm sorry, $100 million -- I think what John said was $100 million at U.S. launch.

Brooks E. West - Piper Jaffray Companies, Research Division

At U.S. launch.

Todd C. Schermerhorn

Yes. I mean he was saying roughly conceptually, it's the type of thing that could have a $100 billion in the U.S. launch. We're a few years away at this point.

Brooks E. West - Piper Jaffray Companies, Research Division

Okay. And then just for Jim, do you not have a full toolbox for peripheral vascular disease? Do you need an atherectomy product? I mean what are other products that you guys might want to -- think about adding to the bag there?

Jim C. Beasley

Brooks, we've been -- we've got a strategy we've been executing for many, many years now, and we don't intend to telegraph our punches where we're exactly headed next. I like where we are in the SFA at the moment, but we're not going to stand still, and I wouldn't say we're finished. We've got some other things to do.

Konstantin Tcherepachenets - Morgan Keegan & Company, Inc., Research Division

Konstantin Tcherepachenets, Morgan Keegan. Tim, I was wondering if you can just provide an update, I might have missed it, on what is contemplated in your guidance in terms of price?

Todd C. Schermerhorn

I think I just gave that, we said 100 basis points at sales level and 30 in gross margin.

Konstantin Tcherepachenets - Morgan Keegan & Company, Inc., Research Division

Okay. And then in terms of, Todd, in terms of how you're thinking about your capital structure, I guess, if you can provide some updated thought. Last year you guys were opportunistic considering interest levels were low, you guys decided to get that to buy back stock, have something like that been discussed when you're going into 2012 and just in general how you're thinking about using debt?

Todd C. Schermerhorn

Yes. That's a good question, Konstantin. I think last year's ASI was kind of a no-brainer relative to the capital structure. As we look out at this point, I would say that the transparency in the markets is not great right now, and I'm not sure it would be wise to make any major moves to our capital structure without knowing what the long-term growth rates are going to be in these markets. So I think we need to let time transpire a little bit here, and I'm not saying we have a major move in capital structure. I'm just saying how to make strategic moves either capital or overall strategy moves without a real good sense of how these markets are going to grow over the intermediate and the longer term, and I don't think we have a lot of confidence in that right now. So we have no sudden movements. We'll continue to do the dollar cost averaging that we've historically done, it's kind of the way we think about it. And we'll just see where that takes us.

Konstantin Tcherepachenets - Morgan Keegan & Company, Inc., Research Division

Okay. And then in terms of, I know you're not providing quarterly guidance right now, but is it fair to assume that your confident -- first half is going to be tougher and things should improve in the second half of the year? Just trying to gauge the gating.

Todd C. Schermerhorn

No, no, I get it. Well I mean we're going to hit a fair amount of amortization from these deals right off the bat here in the first quarter, so that will -- that tends to create a little bit more of a steeper curve during the year. That having been said, we're usually pretty careful about spending in the first quarter to make sure we get off on the right foot and make sure we're in a position to sort of control our own destiny as far as making numbers. But so I would say the bias would be towards a slightly steeper curve, but not dramatically so.

Konstantin Tcherepachenets - Morgan Keegan & Company, Inc., Research Division

Okay, perfect. And the last one for me is, I just -- if you can provide any preliminary thoughts on how you guys are thinking about excise tax in 2013, in terms of what percent are you going to eat, how are you going to try to pass it along to the end customers?

Timothy M. Ring

Sure, I'll take that. As you know 2.3% of U.S. sales, we don't have a magic bullet for that. You see what's happening in the price now. If we could take a 2.3% price increase, we'd do that right now. So I don't see how it's going to be easily passed on to customers at all, and we'll see there's a little bit more optimism in the political circles that there's a little more support to get rid of the tax. We still think that's a long shot, but we'll see what happens over the next year.

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

Bob Goldman at CL King. So Tim, as you know I've been an admirer of the company and you for a very time. And the environment is tough, but many companies have flourished in very tough environments. Apple beating RIM, Amazon destroying Best Buy are examples. Outside of a potential home run on your recent acquisition, I'm not hearing the vision to get back to double-digit earnings per share growth. Could you take us through how and when you intend to get there x the potential home run on this acquisition?

Timothy M. Ring

Yes. I wouldn't call the acquisition home run at this point at all. I think the whole course of the presentation, what we're trying to do is show you how we're shifting the mix of investments both from a product point of view and geographic point of view to more double-digit growth opportunities. The way you get back to double-digit growth is you have more of that than the other stuff, so that's how we're going to do it. And as for Best Buy and Apple and all that, love to be in those environments where you don't to go through a regulatory agency to get approval, but we're not in that kind of world.

Todd W. Garner

Why don't we go in the back over there?

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

Josh Jennings from Cowen. So, John Weiland, just a quick question if you want Medivance, looking at some of the future opportunities, not the current market opportunities, and some of the future indications, can you just talk about Bard's initiatives to add to the body of clinical evidence? What types of studies can you perform to get into the acute MI, potentially stroke, brain injury markets and how quickly do those markets develop potentially for Medivance and then Bard?

John H. Weiland

I'm going to let Sharon Alterio and John DeFord both take a shot at that, and then I'll add something if anything's necessary. But I did want to say to Bob Goldman, I've been a fan of Tim's for a lot of year too, Bob, just so you know.

John A. DeFord

So if we look on the clinical front, bringing that events onboard brought with it 13 clinical studies that are either ongoing or in various stages of development. So I think to put this into perspective, at least from my view, this kind of technology has taken a long time to develop, so the markets really took a while to begin to develop even though there was a lot of level 1 evidence, frankly, and significant data that demonstrated the cooling was of significant importance. However, it just took a long, long time. So we think that we are on the growth curve right now in a number of these opportunities. And some of the others, frankly, might take a little bit of time, and we're willing to invest that time. In fact it's kind of a Bard business for us to take things that we can grow year after year in double digits. That's kind of the way we're looking at this. There are a number of studies not only with our technology, but with competitive technologies that we think will also help move the market into some of these other areas. And so I think capitalizing on the activities we have ongoing and the broader information in the marketplace is going to be helpful.

Sharon M. Alterio

Just a little bit to add to that is that there's a great opportunity in the applications and the claims that we have right now. So while we start seeding some of the other opportunities, it's really all hands on deck to get after what's already in front of us. And I think we have seen enough exciting opportunities to get at while we pursue guidelines and trials in other areas.

Timothy M. Ring

Just stay in the back there, we're a little behind.

Topher Orr - Goldman Sachs Group Inc., Research Division

Topher Orr from Goldman Sachs. Just going back to the gross margins. You talked to your planning being based around the EURO to dollar, high $1.30. Given where rates currently are the low $1.30 range, I was hoping maybe you could help us parse out what -- if rates were to stay at these levels, the impact will be on the P&L in '12.

Todd C. Schermerhorn

Sure. We've been running a lot of that for the last couple of weeks or so. It's been really bad 30 days for the euro. It's not crushing at $1.30 and $1.55 on the pound. We'd have something like a percent on sales -- impact on sales, 1%, and less than 1% on net income because we have built-in hedges and all that down to the P&L. So it affects net income at a lower rate, but either way not a number that's going to kill us, but something we're going to have to manage.

Topher Orr - Goldman Sachs Group Inc., Research Division

I was hoping we could talk a little bit about emerging markets. Firstly, taking a look at your growth rate, maybe you could parse out what portions are coming from, say, penetration into new geographies, new product introductions in current geographies and then maybe shared gains from some of your competitors.

Timothy M. Ring

Sure. Sharon, you want to cover that?

Sharon M. Alterio

Sure. Right now the primary country where we see the growth coming from is China. We have quite significant growth year-to-year there. We're also looking to penetrate Latin America more aggressively, and we're seeing some nice growth coming from Brazil. I would say those 2 contribute to the majority of the number, but we have also got more than 20% growth in several other countries too. So we're working to diversify that but for the most part, we're focusing our efforts in the areas that we think we can get the fastest and most sustainable growth.

John H. Weiland

And I'd just add that an awful lot of the growth that we're generating, we're building these markets. I mean they're not in existence today, for example, the PICC market is very, very small in China. We're building that market. We're building the hernia repair markets. We're building the other access markets via physician and clinician education and an awful lot of early market development work.

John A. DeFord

And I think to just add one more thing to that piece, we have some of the growth coming from new products, obviously in existing geographies. But frankly a lot of that growth coming from, as Sharon said, some of the emerging markets where we have some legacy products. Just because of the regulatory timeframe there, we're moving toward the launch of our newer technologies in those spaces, so kind of an overall mix to answer that question a little more fully.

Topher Orr - Goldman Sachs Group Inc., Research Division

Okay. And just one last question on that topic. You touched on the regulatory piece, maybe you could talk about what percent of sales right now -- or what percent, sorry, of your existing product portfolio has regulatory approval in these markets relative to the U.S. or Europe.

Timothy M. Ring

Sharon, I'll let you answer that. Virtually all of them have some -- their own type of regulatory process. Some take longer than others and some ask for different kinds of information, but it's not one answer I can give you. Sharon, you want to...

Topher Orr - Goldman Sachs Group Inc., Research Division

Sorry, I meant what percent of your current product suite, like would it be 20% of products that are currently approved in the U.S. are also approved...

Timothy M. Ring

Oh I see.

Sharon M. Alterio

Yes, we don't really look at it as a percent of the portfolio that's approved in the U.S. and Europe per se, but what we do is scope out what products we think will really resonate in those emerging markets and then what percent of the ideal portfolio, if you will, we have registered. And I'd say we're getting quite close to that. We should be able to, over the next couple of years, close the gap quite substantially. It's not really limiting our ability to grow tremendously, to have the gaps we have because there's enough there to be able to develop the markets to John's earlier point, but we do have plans to fill it out, and we'll see especially next year, we'll see quite a bit coming in from some of our businesses, and then the rest of the businesses will fill in the year thereafter.

John H. Weiland

And our strategy is not to sell the catalog in these environments. It's really to be very focused. Right now we're launching our early generations of technology. We haven't even started to launch our later generations of technology which we think is a -- it will be a continued growth driver for us.

Frederick A. Wise - Leerink Swann LLC, Research Division

Rick Wise, Leerink Swann. John, I want to follow-up on a couple of product comments, if I could. On the temperature management front on cardiac arrest you said you expect rapid adoption over the next 3 or 4 years. And I assume in the context that $300 million market that you mentioned as well, what is rapid adoption? I mean -- and what could that mean in incremental revenues and maybe talk a little bit about how you get there? And I'll ask the second question to Tim.

John H. Weiland

Without trying to forecast out for you exactly what we're going to do in Medivance over the next couple of years, I will tell you, our growth curve expectations are substantial for it. We think that the job that they've done historically with 20 sales representatives. You do it, you increase that by 4x, you're going to get a big change in your growth trajectory hopefully. The second point in time, with our infrastructure around the world, it gives us another opportunity to drive adoption in those markets. So I think that in this instance, based on the strengths that Bard has, I don't think you can find something that fits into our sweet space much nicer than this one.

John A. DeFord

I think one piece to that, Rick, too, is when you look at cardiac arrest, there's now a lot of data coming up in a number of areas, in fact New York City, Manhattan, where Mayor Bloomberg has said that patients shouldn't be transported to a hospital if they've had a cardiac arrest that doesn't do cooling. So there's beginning to be a real groundswell of interest in this type of technology for these patients because the outcomes are significantly improved.

Frederick A. Wise - Leerink Swann LLC, Research Division

And just to Tim, international as a percent of your total revenue has always been surprisingly low as a percentage of Bard's revenues to me. Is your thinking changing more broadly about the kind of exposure you want and if just specifically either overall or if emerging is 5% today, do you have any clear goal, that you want it to be 10% the next 3 to 5 years? Or do you have any metrics like that you're thinking about or we should be thinking about?

Timothy M. Ring

No, not that -- we have our own internal growth rates. We kind of look at growth, and our markets are a little bit different. For example, if you look at our urology market or revenue in the U.S., other than the U.K., we don't have a big urology business in Europe by choice because we're not going to go for the low-end price side of that market. Similarly, PICCs, which are our single biggest product line globally, very big in the U.S., are placed by nurses here. Interestingly enough placed by nurses predominantly in China. In Europe that doesn't exist. They don't practice like that. So we're a little bit different when you go -- you can't go at a 50,000 feet level and say, "You guys should be more 50/50." Because some of our bigger markets, the practice of medicine is just different. Having said that, we're all about revenue growth, and those markets where we see those opportunities on a very selective basis, as Sharon and John pointed out, we're not giving the guy the 10,000 SKUs and say, "Go sell them." There's a fair amount of analysis that goes in first in terms of what opportunities we want to invest in, and then we kind of -- we build on that. So I would expect that the emerging markets generally will grow faster, significantly faster than what we're seeing in U.S. and Europe. They're relatively small for us. It's going to take a period of time for them to have an impact. But we did notice a couple of quarters last year, they did have an impact in certain product lines rather significantly. But we don't have a goal where we want to be 50% by a certain date, nothing like that.

John H. Weiland

I think, Rick, that you saw though, that we started these investments back in 2007. We didn't talk about them an awful lot at that point in time, because they were in that investments, period. But we have continued to escalate the level of investments in those markets as you saw by the slide that Tim showed early on in his presentation, and you've seen the returns that we're generating also from the revenues. So we're going to keep on the investment side of the ledger on these markets. And we have our targets, and I think that it will continue to be very positive for Bard.

Sharon M. Alterio

Yes, if I could add, the way that we really approach the target as we look 3 to 5 years out and think about the potential in those particular markets, so taking country by country and saying based on our portfolio what is the potential in China, as an example, and then work backwards to make sure that we get to that each year. So it's really more of a potential per country target rather than looking at ratios of percentage of sales.

Konstantin Tcherepachenets - Morgan Keegan & Company, Inc., Research Division

Konstantin Tcherepachenets, Morgan Keegan. Tim, when you and Todd kind of took the helm, you guys drove very nice top line growth and very nice bottom line growth for the company. And now with Todd retiring and clearly the growth of Bard is not what it used to be and it clearly is an intriguing challenge to turn that around and to accelerate those growth rates, but the question really has to do with succession planning and how you're thinking about it and really for how long more do you want to do this.

Timothy M. Ring

I'm not making any announcements tonight. My wife will get a little P.O.'d at me, maybe. We spent a lot of time on succession planning. I will tell you Todd and I weren't the 2 that got to place the double-digit growth there, our earnings growth. But I am worried with Todd retiring if we're going to be able to get back that payment, if he isn't the CFO. As I mentioned to one of the earlier questions, you've got the -- the markets change, you've got to respond to that and anticipate where some of those changes are going to go going forward. So clearly this portfolio shift that we've been talking about and where we're making those investments, we're kind of retooling the portfolio, trying to make the investments internally where we think there's good double-digit growth, geographically, where we think there's good double-digit growth. And with these acquisitions, not just these, but I had the slide that showed the acquisitions we made in 2010 and the growth rates that they had after the anniversary in 2011, still well in the double-digit growth. So much like you guys manage your own portfolio, sort of investing in certain companies that are going to grow faster than others, we basically do that in a company from a product point of view. So that's how we'll get back there.

Can you go on the back.

Thomas Kouchoukos - Stifel, Nicolaus & Co., Inc., Research Division

I'm tom Kouchoukos for Stifel, Nicolaus. Can I step back for Lutonix for a second? Maybe, John, the comment you made earlier, was that combination products are very hard to predict these days, and it seems like you're very confident in the team that you are -- the expertise you get with Lutonix and the product itself. And the idea, you studied, it seems to be laid out pretty straightforward as well. How do you think about or how should we think about how FDA will look at this as novel drug device combo in terms of FDA risk.

John A. DeFord

Well I think it is first of a kind of the U.S. So it's the first IDE that's been approved in drug-coated balloons, so obviously paving some new ground. Now it's not completely new in the sense that FDA has had a lot of experience with drug-coated stents and has used that as their basic guidance around drug-coated balloons. That said, we've had the opportunity to obviously look very deeply at the interactions that Lutonix has had with FDA. And again Lutonix is not the only company we've looked at in the space over the last few years, and we feel confident that they've got the right plan going forward. Now we can't predict what the FDA might do, but they've got an approved IDE, fully approved IDE, tremendous number, I mean hundreds of interactions with the FDA over the last few years around this technology. And so it gives us some comfort that the plan is sound and that the path makes sense, and we think that we can execute it.

Timothy M. Ring

Okay. Two more questions and we're going to go across. Why don't you come up in front.

Matthew Taylor - Barclays Capital, Research Division

Matt Taylor with Barclays Capital. The first question is when you're thinking about planning for 2012 and came up with these ranges, I'm just curious to know what do you think are the biggest risks, the upside and the downside in terms of different drivers, volume price and mix competition and cadence to rollout those kind of things?

Timothy M. Ring

Well I'll answer, then I'll pass it over to John. I think in any given year, where we've had more risk in the last couple of years on the revenue side is new products either not getting out on time or being late that kind of thing. Even before that, the market slowdown more slowly than we had anticipated going back over the last couple of years. So I think I feel good about where we are on a regulatory point of view dealing with the agencies around the world. I feel good about the cadence of the new technologies coming through, and I feel good about the acquisitions that we've made. So the external environment is probably the one thing we can't control, and we showed the admissions and doctors visits, et cetera. But other than that, it would be being late on a particular planned launch of a given product. John, do you want...

John H. Weiland

No, I think the only thing that we constantly say is that our basic assumption is that U.S. growth rate will stay where they are, and there's not a huge implosion in Europe in terms of the whole healthcare system there based on different separate countries trying to control greater expenditures. So I think there are the 2 things that we look at more than anything else on our base assumptions.

Matthew Taylor - Barclays Capital, Research Division

And just a quick clarification on Lutonix you said a second half '12 CE Mark rollout, and talked about $100 million from a U.S. rollout, would you care to help us conceptually what a one year of CE Mark rollout would be in terms of the dollars?

John H. Weiland

Our expectations are not over the charts for that out of the blocks. I mean the key to that technology being adopted is really going to be the clinical data that we'll be generating for the pivotal trial. That's what's going to show clinicians that this is a very effective therapy for patients. Now having said that, we know that the physician's viewpoint is very intriguing as it relates to this technology. And I'd evidenced that by the quick and early uptick in terms of the way they're enrolling the clinical trial.

Jim C. Beasley

Just to -- the expectations on Europe for 2012, I'd just add that our priority there is to roll the product out into a registry. So we want to get the additional patient data, and the registry going in Europe. I would really think of that -- starting to accelerate into 2013.

Matthew Taylor - Barclays Capital, Research Division

I just have a couple of quick questions. On Lutonix, at what point do you make the decision on the coronary option?

John H. Weiland

We're going to look at all the options that we have in the coronary space, and that would be -- that could be going in it alone, making our investments in the clinical trials, et cetera, that could be partnering with another player on the coronary space or monetizing the asset if in fact we think that is the right opportunity. We'll be evaluating that throughout 2012.

Timothy M. Ring

Okay. Listen, thanks everybody for attending. It's 6:30, so we're going to move across the foyer there to the other hallway and go to the product fair. Thanks very much. Happy holidays to everybody.

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Source: CR Bard Inc., 2012 Guidance/Update Call, Dec 20, 2011
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