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Executives

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

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

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

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

Analysts

Lawrence S. Keusch - Morgan Keegan & Company, Inc., Research Division

Brooks E. West - Piper Jaffray Companies, Research Division

Jonathan J. Palmer - Credit Agricole Securities (USA) Inc., Research Division

David R. Lewis - Morgan Stanley, Research Division

Matthew Taylor - Barclays Capital, Research Division

Michael Matson - Mizuho Securities USA Inc., Research Division

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

Miroslava Minkova - Leerink Swann LLC, Research Division

Kristen M. Stewart - Deutsche Bank AG, Research Division

Topher Orr - Goldman Sachs Group Inc., Research Division

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

Robert A. Hopkins - BofA Merrill Lynch, Research Division

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

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

Anthony Petrone - Jefferies & Company, Inc., Research Division

Suraj Kalia - Rodman & Renshaw, LLC, Research Division

Gregory Hertz - Citigroup Inc, Research Division

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

Jayson T. Bedford - Raymond James & Associates, Inc., Research Division

CR Bard (BCR) Q4 2011 Earnings Call January 31, 2012 5:00 PM ET

Operator

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

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

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

During the call, references will be made to certain non-GAAP measures, which management believes provide an additional and meaningful assessment of core operating performance of the company and its individual product franchises. Reconciliations of non-GAAP measures to the most comparable GAAP measures are provided in Bard's earnings press release and it's on the company's website at www.crbard.com.

All information that is not historical is given only as of January 31, 2012, and the company undertakes no responsibility to update any information. Unless otherwise noted, all comparisons are to the prior-year period.

At this time, I'd like to turn the conference over to Mr. Timothy Ring. Please go ahead, sir.

Timothy M. Ring

Thank you, Tom. I'd like to welcome everybody to Bard's Fourth Quarter 2011 Earnings Conference Call and thank all of you for taking the time to join us today. I would expect the presentation portion of the call would last about 20 minutes. And just to further go along with the introductions, John DeFord, our Senior VP of Science Technology and Clinical Affairs is in attendance with us as well today.

The agenda today will go as follows: I'll begin with an overview of the results for the fourth quarter; John Weiland, our President and COO, will review fourth quarter product line revenue; Todd Schermerhorn, our Senior VP and CFO, will review the fourth quarter income statement, balance sheet, as well as our expectations for Q1. And since we just covered our product development pipeline in a fair amount of detail at our December 20 analyst meeting, we'll wait until our first quarter earnings call to do a detailed update on that. And then finally, we will close with Q&A.

Fourth quarter 2011 net sales totaled $751.9 million. That's up 5% over Q4 of last year on both an as-reported and constant-currency basis. Currency impact for the quarter versus Q4 2010 was favorable by about 30 basis points. And as we predicted, the deal that we closed in Q4 contributed about 1% of growth for the quarter.

Net sales for the full year 2011 were $2.896.4 billion (sic) [$2,896.4 million], up 6% as reported and 5% on a constant-currency basis. Net income for the fourth quarter was $113.8 million and diluted EPS were $1.30.

As previously disclosed, we took a charge of $51 million related to a legal matter in our brachy therapy business. Excluding this and other items that affected the comparability of results between periods, which Todd will get into later, fourth quarter 2011 net income and diluted earnings per share were $148.6 million and $1.70, up 4% and 10%, respectively.

Full year 2011 net income was $328 million and diluted earnings per share were $3.69. Excluding items that affect comparability between periods, full year 2011 net income was $568.9 million and diluted EPS was $6.40, up 6% and 14%, respectively, over 2010 results.

Looking at revenue growth geographically compared to the fourth quarter 2010 on a constant-currency basis, net sales from the U.S. increased 2% and Europe was up 4%. In Japan, we were up 13% against the light prior year quarter. Our other international businesses grew 18%, including 38% growth in our emerging markets.

In the past 3 years, we've added close to 300 people in emerging markets and have built 2 state-of-the-art physician training centers. These investments have provided rapid returns and the opportunity in front of us remains significant. We're pleased with the caliber of the teams that we've built and we'll continue to build on that foundation and increase our share in these rapidly expanding markets.

On the business development front, as we've discussed at our annual analyst meeting last month, during the fourth quarter, we closed the Clearstream, Medivance, and Lutonix fields. As we've always said, the business development process is opportunistic and can be a little bit lumpy, and we saw that last quarter. But I want to be clear that you should not assume a strategic shift here to more or necessarily bigger M&A deals.

Our strategy, our filters and our priorities for cash, and our processes remain consistent. We have a growth agenda that includes geographic investment, new product development, acquisitions and share repurchases. This approach has served us well in the past and we believe it will continue to allow us to meet our short-term commitments, while at the same time positioning ourselves appropriately for the long term.

Looking back at 2011, despite increasing headwinds in the macro environment, we hit our original revenue and EPS guidance for the year because of our multifaceted approach. Our geographic portfolio was on display this year as our international businesses grew 9% in constant currency, while the U.S. markets were under pressure.

We allocated resources to the best opportunities for growth from a geographic and product perspective. In the past year, you've seen us continue this process through some restructuring as well as the U.S. sales realignment at the end of the year that we believe will get us even closer to our customers.

While this should strengthen our sales execution, it will also improve our ability to recognize unmet needs in the marketplace, which feeds our new product development process.

Our R&D engine continues to produce across our broad product portfolio. We launched 51 new products in 2011. Our cost improvement programs in our factories provided savings that exceeded the pricing headwinds we saw last year, and our business development process continues to focus on identifying the best opportunities for long-term shareholder return.

Looking forward, we plan to continue this balanced approach of relentlessly pursuing double-digit growth opportunities both internally and externally. We're confident this formula will continue to shift the mix of our portfolio favorably, and we expect to continue to outperform our markets over the long term.

Now, let me hand it over to John Weiland for a review of the fourth quarter product line revenue.

John H. Weiland

Good evening, everyone. Before I start, as usual, I'll be giving all percentage growth data in comparison to the prior-year period on a constant-currency basis, unless otherwise noted.

So let's begin with Vascular. Growth in this category for the quarter was 7%. Total net sales were $220.7 million, up 8% over the fourth quarter of 2010 on an as-reported basis. Our United States business was up 4% for the quarter. Internationally, we grew 11%, which included a 53% increase in our emerging markets.

Electrophysiology sales were down 5% this quarter as the EP disposables were down 8%. In the fourth quarter, our EP lab system sales were up 10% against a strong prior-year period, including 44% growth in emerging markets.

Sales in our vascular graft category, which represents only 9% of total vascular sales, were down 7% in the fourth quarter, below recent trends.

Our Endovascular business increased 12% in the fourth quarter, with about 200 basis points coming from the ClearStream acquisition. Within endovascular, our biopsy line was up 9%. This is our sixth quarter since the SenoRx acquisition, and those products grew 20% over the fourth quarter of 2010.

Our peripheral PTA products were up 13% this quarter. ClearStream accounted for roughly 600 basis points of this growth, and we continue to see very strong performance from our CTO product line, which grew more than 50% over the prior-year quarter. The enrollment in the LEVANT 2 clinical trial for drug-coated balloons continues at rapid pace, with over 220 patients enrolled to date, and the integration of Lutonix is proceeding as planned.

Sales in our Vena Cava Filter Line were down 3% in the fourth quarter after 5 consecutive quarters of double-digit declines. We told you that the fourth quarter launch of the Meridian filter would change the trajectory in this product line, and we do expect return to growth here in 2012. Our customers seem pleased with our improvement of enhanced anchoring and reduced mobility.

Our Stent business was up 9% in the fourth quarter, including LifeStent, up 17% from a year ago. Our new 200-millimeter LifeStent Solo, with an improved delivery system and enhanced x-ray visibility, increases our advantage over the competition. We remain the only stent on label in the FSA, and we have longer lengths and long-term data that demonstrates excellent performance.

Now let's turn to Urology. Total net sales were $190.4 million, which is up 3% versus Q4 of last year, on both a constant-currency and as-reported basis. The United States business was flat, while internationally, we were up 9%.

Without the acquisition of Medivance in the middle of the quarter, we would have seen global urology sales slightly down when compared to the prior year quarter. While we're only a couple of months past the close of the Medivance acquisition, we're pleased with the sales execution and integration so far, which is ahead of our models.

Our basic drainage business was up 3% in the fourth quarter, driven by a strong quarter in Japan. The United States business was down 1%.

I.C. Foley saw the same geographical relationship, with global sales up 2% while the United States was down 3%. So we haven't seen any change in the factors impacting the United States market here.

Our Continence business was down 16% in Q4, with half of the impact coming from the second quarter 2011 discontinuation of our bulking agent Contigen.

As you may have seen, the area of surgical and Continence products for women is under intense scrutiny by the FDA. While we're in discussions with the FDA on what additional data may be required, I'd like to point out that the United States sales of the affected products represent less than 1/2 of 1% of our total sales.

Within Continence, we did launch our next-generation fecal management system, DIGNISHIELD, this month and the early response from clinicians has been very positive.

Sales in neurological specialties were down 2%, with brachytherapy up 1% for the quarter, as the growing international business is now larger than the declining United States business.

And finally, our StatLock catheter stabilization line was up 2% this quarter.

Let's move to oncology. Total net sales in this category were $201.4 million, an increase of 6% over the fourth quarter last year on both constant-currency and as-reported basis. Net sales in the United States were up 5%, while outside the United States, sales were up 10%.

Our Port line, which represents about 32% of our total oncology sales, were up 3% versus the fourth quarter last year.

PICC revenue growth was 7% in the fourth quarter, with continued strong performance in emerging markets. We provided quite a bit of detail on our last couple of meetings on the success of the Sapiens' rollout and I can tell you, that success continues.

Our vascular access ultrasound product line was up 18% this quarter. We are pleased with our growing presence in this market, as the installed base of these systems is an important factor in our ability to help expand the placement of PICCs by nurses at the bedside. And to complete the results in oncology, our dialysis catheter business was up 7% in the fourth quarter.

So let's finish our revenue discussions with the surgical specialty segment. Net sales in this category were $116.6 million in the fourth quarter, up 2% on both an as-reported and a constant-currency basis. United States sales increased 1%, while international sales were up 4%.

Our soft tissue repair business grew 3% overall for the quarter. Our total synthetic hernia products were up 7% versus Q4 last year, with our synthetic ventral products growing double digits for the second quarter in a row, which was the first full quarter of sales for our VENTRIO ST, VENTRALEX ST and ECHO PS new product launches, while our natural tissue products grew 18% in Q4.

Our hernia fixation business was down 29% in Q4, as the market adjust to 3 players. We expect to be facing the headwinds of higher comps until the back half of the year in 2012.

Closing out the surgical category, our performance irrigation business was down 7% in Q4 and our hemostasis business was down 3%.

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

Todd C. Schermerhorn

Thanks, John. Let me start by covering the items that affect comparability of our results between periods. As Tim mentioned, we took a charge related to the brachytherapy matter, $51 million. The charge is only partially tax deductible, as you can see from the reconciliation of earnings in our press release. We also had acquisition-related items of $7.9 million related primarily to the 3 deals we closed in Q4, and we had a net reversal of restructuring charges of $1.1 million.

Further deterioration in Europe has caused us to recognize $4.5 million of further impairment on our Greek bonds. And to finish off the list, we recorded income of $16.5 million related to the completion of IRS examinations for the years 2005 to 2007, and the closure of an examination in the U.K. These items, as always, are detailed in the notes to the financial statements and the reconciliation accompanying our Q4 earnings release.

Let's go through the statement of income for the quarter. Gross profit was $469.8 million or 62.5% of sales for Q4, up 70 basis points sequentially despite new amortization of 30 basis points, again sequentially. Year-over-year price comparisons moderated slightly to 70 basis points of headwind on the revenue line, and just under 30 basis points in GP. So a little less price pressure, but not significant enough to suggest a change in trend.

SG&A expenses were $214.2 million for the quarter, 28.5% of sales. On an adjusted basis, SG&A was $210.4 million or 28.0% of sales, 50 basis points lower than the prior-year period. This reflects incremental investments in emerging markets of about 80 basis points, offset by the benefit of our prior restructuring activities and across-the-board expense control.

R&D expenditures totaled $43.6 million for the fourth quarter, 5.8% of sales. Admittedly, a very low quarter for us. Full year sales at the low end of our guidance has forced us to make tough choices about investing, and at least at this point in time, the emerging market investments are providing more attractive and faster returns.

Looking forward, we expect R&D to increase, primarily driven by our investment in drug-coated balloons.

Interest expense was $9.3 million for the fourth quarter, up very slightly as our debt increased in Q4 related to the acquisitions.

Other income expense was $60.7 million of expense for the fourth quarter. On an adjusted basis, it was $2.2 million of expense, driven mainly by foreign exchange.

The effective tax rate for the quarter was 19.9%. On an adjusted basis, it was 27.3%, taking us to 28.1% on a full year adjusted basis, dead center of our full year guidance.

All in then, EPS totaled $1.70 for Q4, excluding items affecting comparability, bringing us in at 14.3% EPS growth for the full year on the same basis, right on our commitment once again and despite a continuing challenging environment in 2011, especially in the United States.

We repurchased roughly 1.4 million shares of our stock in Q4. The balance sheet as of December 31, 2011, reflects cash, restricted cash and short-term investments of $743.5 million versus $967.3 million at September 30, the decrease being driven by the deals in Q4.

For the full year, AR days were up 0.7 days and inventory days were down 4.3 days. Capital expenditures totaled $21.5 million for the quarter and $71.4 million for the year.

On the liability side, with the addition of short-term borrowings to finance the deals, total debt was $1.213 billion as of December 31 versus $908.9 million at September 30. Debt to total capital at the end of the fourth quarter was about 40% and total shareholder investment was $1.782 billion at December 31.

Moving onto financial guidance. We're expecting constant-currency sales growth in the range of 4% to 7% for the first quarter. From an EPS standpoint, the ClearStream and Medivance deals will become more accretive as we move through the year, so we see first quarter in the range of $1.53 to $1.57, excluding items affecting comparability, if any.

So I'll now turn you back to Tim.

Timothy M. Ring

Great. Thanks, Todd. That does conclude the formal part of the presentation. I'll now turn the call back to the moderator to facilitate the Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question today comes from the line of Larry Keusch with Morgan Keegan.

Lawrence S. Keusch - Morgan Keegan & Company, Inc., Research Division

First question, Tim, I think -- or maybe Todd, in the third quarter call, you mentioned that the price pressure that you were seeing, which I think was 110 basis points was really much more of a U.S. issue. So I'm wondering if you could talk about if that still holds true, and also give us some thoughts on kind of how Europe is tracking for pricing.

Todd C. Schermerhorn

Well it is -- it does continue to be a U.S. issue, Larry. Although the improvement, now it's slight, but the improvement we saw was also in the U.S. this period. As it relates to Europe, I didn't know of any real change in the trends. Maybe John Weiland has...

John H. Weiland

I think you're right on about it.

Lawrence S. Keusch - Morgan Keegan & Company, Inc., Research Division

Okay. And then I guess, Todd, I know you're saying that it's too early for a trend on the pricing, but any thoughts as to why it may have moderated in the quarter? And I guess the other question for you is on the R&D, which again you admitted was somewhat light here, and you've talked about the emerging market strategy being a more attractive investment at this point, how should we think about the investment for 2012 in R&D? I think you've been targeting 7%, but does that make it now not the right way to think about it?

Timothy M. Ring

I'll handle the R&D part now. This is Tim. I wouldn't read too much in the R&D drop-off for the quarter. It was limited. There were a couple of specific issues. Number one, we had some redundancy in R&D in the drug-coated balloon area, and since we did the acquisition, we kind of turned over to Lutonix for that. So that was part of it. We did launch a new LifeStent platform, which accounted for a chunk of it. And then we had some -- we actually integrated some R&D with the SenoRx acquisition that had been planned for some period of time. So it was more of a timing thing and a little bit of lumpiness. But in terms of the investment going forward, that's still a plus for us in terms of something we want to continue to do. Let's have the rest over to you.

Todd C. Schermerhorn

Yes. And I don't think any of it changes in next year's guidance, Larry, relative to the 7%. As it relates to the price in those 2 businesses, I mean we're talking about 40 bps. It's a little hard to parse out. We certainly are extraordinarily cognizant of price now in all of our businesses, I guess as we have been all the way along. But we're actively looking for places to where we can offset it. And it may be at least for the current period, we found something. You also have to realize that it's a changing basis period as well. So we're now compared to the fourth quarter of 2010 and there could have been a change in that period. So there's a lot of moving parts in that. I don't know that there's anything really, at this point, significant enough that we could rely on it analytically going forward.

Operator

And our next question today comes from the line of Brooks West, representing Piper Jaffray.

Brooks E. West - Piper Jaffray Companies, Research Division

I wanted to test on your ability to accelerate emerging market development. Any thoughts? Could you do an in-country acquisition? Or what are the options there? And then second, I wanted to get your reaction to the AngioDynamics-Navilyst deal today. Any concerns there, especially around maybe price headwinds, increased price headwinds and PICCs and Ports from a more aggressive competitor?

John H. Weiland

In terms of -- we've always looked for opportunities for business development as it relates to accelerating our emerging markets group. I will tell you, we've been very aggressive on the organic growth side of the investment. For example, we added over 110 people in the fourth quarter of last year, of 2011, into the emerging markets. So our throttle is certainly well down on the pedal, to say the least. On the -- as far as the AngioDynamics-Navilyst, I mean it will be interesting to see how those 2 organizations combine. We noted that Navilyst had not been tremendously successful against us product line versus product line, since their spin out of Boston. I think that's evident by the revenues at the time they were spun out to what they were today at the time of this acquisition. They will have the bigger footprint in terms of sales forces. We're cognizant of that. But I'll tell you, we compete really on the product leadership strategy day-in and day-out, as opposed to the coverage strategy. That's how we compete around the world. And based on the portfolios of products that we see in the market today, we don't see any reason to have a different approach.

Operator

Our next question will come from Jonathan Palmer with CLSA.

Jonathan J. Palmer - Credit Agricole Securities (USA) Inc., Research Division

First one, Todd, could you maybe just talk about the sequential improvement of organic growth, excluding acquisitions throughout 2011? Because by my math, it looks like it's accelerated the last 3 quarters.

Todd C. Schermerhorn

I think it looks like 3% to 4% for this period. I did reconcile it from Q3 to Q4. I really think, Jonathan, I think it's really rounding. I don't think there's a lot of acceleration on organic growth between Q3 and Q4.

Jonathan J. Palmer - Credit Agricole Securities (USA) Inc., Research Division

That's very helpful. And then second, back to the emerging markets, maybe could you guys talk about the number of incremental hires you're looking to add this year and beyond relative to that couple of hundred you've done the last few years?

John H. Weiland

You'll see us -- our strategy is we added them in the fourth quarter, which was a major push for us to add that many people. We're going to see the benefit of that, obviously, throughout all of 2012 as they get trained and get assimilated. We do have plans for additional people in those markets. We're not rolling out what those numbers are for competitive reasons, but you can feel assured we continue to invest in those markets.

Operator

Line of David Lewis with Morgan Stanley.

David R. Lewis - Morgan Stanley, Research Division

Guys, you've talked quite a bit the last 6 months about the correlation between your business in utilization and physician office visits, and it did look like to us that the U.S. business got stronger for you in the fourth quarter. Could you just talk about sort of what you're seeing from a utilization perspective here in the fourth quarter, and potentially just remind us again what you've factored in from a utilization recovery perspective in the 2012 outlook?

John H. Weiland

Our viewpoint is that we have not seen a tremendous change in the dynamics of the U.S. market in terms of utilization. It's early to see the data for fourth quarter for hospitals, but there's nothing that we've seen thus far that would suggest to us that there is a resurgence in terms of utilization in the United States markets. Our attitude, as we built our forecasts for 2012, was in essence a constant market dynamics to what we saw in 2012 -- 2011. So we have not built anything in terms of an escalation into the U.S. market dynamics.

David R. Lewis - Morgan Stanley, Research Division

Okay, very helpful. And then just a quick modeling question, maybe for Todd. As we look at the 2012 outlook, the first quarter -- or I mean recent share repurchase activity, I should say, has been stronger than we thought. I know you're going to reduce the share count throughout the balance of the year, but could you give us a sense of maybe how you think the pacing of repurchase and the shares outstanding will trend throughout the balance of the year?

Todd C. Schermerhorn

Well as we indicated, we're active in the market in Q4 and the end of Q3. So that's going to average in on its own. That will help to push the shares down into Q1. But David, generally we don't commit ourselves to specific levels in each of the periods because as you know, our first priority for that capital is strategic acquisitions, and we're never quite sure what might come along. So I really can't give you discrete points there. But as you know, best indicator of our future behavior is what we've done in the past. We've shown a clear commitment to returning excess cash to shareholders. It'll just be a question of what hits our radar relative to deals.

Operator

And our next question is from the line of Matt Taylor with Barclays Capital.

Matthew Taylor - Barclays Capital, Research Division

I want to follow up on some of the comments on the acquisitions. It seems like things are going fairly well across the board, and you also commented that your strategy really hasn't changed. Can you give us a little bit more color on the acquisitions you've made? And then also specifically on LEVANT 2. It seems like that's going a little faster than scheduled. Is that right? And could that mean a little bit earlier submission?

John H. Weiland

I'll start, and I'll let John DeFord give a little bit more commentary on it. We like the integration of both Medivance and Lutonix into our organization. I mean all our organizations are highly focused on it. The Medivance acquisition and its integration from a commercial selling standpoint has gone extremely well. I think those people feel very comfortable as part of our organization. They're executing extremely well, and our organization has been very complementary to theirs as it relates to the commercial opportunities and the ability to take that technology on a wider footprint. I'll make one comment on Lutonix, and I'll turn it over to John. And that is as of 4 p.m. today, we have 227 patients enrolled in the study, not that we pay attention to that kind of detail, but we are obviously focused on how well that is going and the great interest that clinicians have on being part of that trial and enrolling patients in the trial. And John, I'll let you take over from there.

John A. DeFord

Sure. So Matt, as John said, the study is going along quite well at this point, and we're very happy with the Lutonix team and where this is taking us. Although to say that it might give us a little bit of shorter time line on the regulatory filing would be a little premature at this point. There's a lot of things that go into that. It's not just the clinical data. And so at this point, we're sticking to our 2015 date, 2014 submission. If we think that, that's materially going to change, we'll obviously let you know as time goes on. But it's a little too early to tell at this point. We're obviously happy with the way things are going.

Matthew Taylor - Barclays Capital, Research Division

Great. And anything broadly that you would call out that's changed since we met in December with everyone?

John A. DeFord

No. I think everything's pretty much on track to what we talked about a month ago.

Operator

Next question today comes from the line of Michael Matson, Mizuho Securities.

Michael Matson - Mizuho Securities USA Inc., Research Division

Yes, just given how volatile exchange rates have been, I was wondering if you could just remind us what your currency exposure is on the bottom line. I think you do have some bottom line currency exposure. And then if the euro were to continue to weaken, where do you think it would start to become a problem for you to absorb that and offset it? And maybe in your guidance.

Todd C. Schermerhorn

Yes, sure. We planned 2012 with the euro in the high $1.30 range, and I think pound at $1.60. And at the current rates at $1.31 and $1.55, we did the math a couple of times. We did in December for you. And now we're still looking at 1% maybe or a little less than 1% in terms of the change with, what, maybe 8 or 9 points change in the euro. So that kind of gives you a sensitivity in the model. It's not easy or not fun to find 1%, but it is manageable here. If we were to move another 10 points, then it starts getting painful, admittedly. But as it stands now, I think it would be at a manageable level. It's kind of bounced off of $1.26, $1.27, the euro has. And it seems a little steadier at $1.31, but who knows?

Michael Matson - Mizuho Securities USA Inc., Research Division

Okay. And then I know that you've got a atrial fibrillation product on the market in Europe, and you've got in your pipeline in the U.S. But just given the size and the growth of that market, is that something where you have an interest in maybe doing more M&A or doing M&A to begin with, to try to broaden out the product offering or even potentially developing additional products internally to get to the market maybe a little quicker than -- I don't remember the name of the product, but the afib product that you've got you've talked about?

John H. Weiland

We're in the, obviously, the very early stages of that real patient usage. And as it relates to the M&A side of things, I mean each of our businesses is chartered with looking for opportunities from an M&A standpoint that's complementary to their business but which meets our hurdles in terms of product leadership and growth potential. So there's no business that's excluded from that caveat in our organization.

Operator

Our next question today comes from the line of Mike Weinstein with JPMorgan.

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

Can I follow up the R&D discussion? And specifically, if I went back a couple of years ago to the planned increase in spending in R&D, it hasn't materialized to a degree to which I think we all anticipated, and the fact that we look at R&D as a percent of sales, it was actually lower in 2011 than it was in 2009. So the comment about the spend in 2012 is understood. I was hoping you could maybe back out Lutonix and give us a sense for what R&D spending looks like in 2012, x not only Lutonix but the rest of the acquisitions. So x acquisitions, what's the plan for R&D spend?

Todd C. Schermerhorn

It would be low 6%, I think, or it was the calculation, Mike.

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

That would be the 2012 math?

Timothy M. Ring

Yes. Without Lutonix, without...

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

And that's helpful. So if we think about the investments going forward in the Bard base, the pre-deals, does that grow? Or is it the thought that the incremental R&D spend going forward for the company is principally going to be tied to these acquisitions, and in additional acquisitions the company may make?

Timothy M. Ring

No, it will grow. I mean it's selective. And as we mentioned, we're focused on areas where we think there's good growth, double-digit growth preferably. So we're making more selective decisions kind of in between businesses, if you will, or even within product lines to allocate resources into those areas where we think there are going to be good growth. So clearly we're not investing at the level we said a couple of years ago. When we made that statement, our top line was growing at a much faster level than we are right now. So we're a little bit restricted there. But the theme, if you will, is still to invest in the faster growing opportunities we have, both internally and the ones we acquired, which we view as platforms to invest in.

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

Let me ask one price-related question. Could you just talk about the health of the hernia repair market, and in particular what pricing is looking like in synthetics and fixation?

John H. Weiland

If we look at the hernia repair market, and specifically the new product launches that we've had in the hernia repair space over the last number of quarters, the whole VENTRALEX, VENTRALIGHT ST product lines, as well as the VENTRALIGHT and the composite with ECHO product lines, we see great opportunity based on the additional benefits that they offer to physicians to upsell with those product lines. I think that as you know, where we've had our trouble recently is in the fixation lines. We had a third entrance into that market from a competitive standpoint. We see our -- after that initial impact, we've seen that level out at this point in time, but it will take us a couple more quarters to get through the difficult comps that we're going to have in the first quarter and second quarter of 2012.

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

And John, how would you describe pricing in fixation and in synthetics at this point?

John H. Weiland

I'd say very stable.

Operator

A question comes from the line of Miroslava Minkova with Leerink Swann.

Miroslava Minkova - Leerink Swann LLC, Research Division

It's Miroslava for Rick today. Let me start with just following up on surgery. I appreciate the new products there and synthetics doing a lot stronger and fixation, but your guidance actually calls for an acceleration besides the fixation comps getting easier towards year end. What are the drivers to, I suppose, accelerate your outlook there?

John H. Weiland

The accelerators are all those new products that I mentioned, as well as some additional new products that we have in the biological space that we're launching right now. I mean all the ST products and those products combined with ECHO, all of those are one new physician user at a time type products. So your sales force is there. They're out talking to physicians. They're detailing the products, trying to convince one case at a time, one physician at a time. And that momentum builds over a long period of time as you convert one physician or one user after another. So that, plus the fixation comps, and we think our ability with our XENMATRIX line, they would really be the growth drivers for us in 2012 to get acceleration.

Miroslava Minkova - Leerink Swann LLC, Research Division

Great, that's very helpful. And just a follow-up on emerging markets, can you remind us where -- what percentage of sales is emerging markets today? And with the investments that you're making, where do you see it going?

John H. Weiland

The emerging market today are 5% of our sales. We don't have any upward limit to what that can mean for us in terms of percentage. And I should have added to your last question, the emerging market growths in our surgery business will also have a positive impact on our accelerating growth rates as we continue to roll products out and get deeper with our launches in emerging markets.

Miroslava Minkova - Leerink Swann LLC, Research Division

Great. And my final question, gross margins did improve sequentially for the first time this year despite the additional amortization. Maybe if you could tease out the drivers a little bit, and how are you positioned as you head into the year? You did guide to, I think, some year-on-year decline including the amortization.

Todd C. Schermerhorn

Yes. I think I would call it a [indiscernible] quarter, Miroslava. I don't think we saw anything we weren't expecting. Cost was the major improvement factor from Q3 to Q4 when we look at it sequentially. But I don't see anything in these results that change the guidance that we gave. I think the one thing you have to realize is so this quarter, we talked about 30 basis points sequentially of increased amortization. But that will grow to 70 because we only have the deals for a possible period in Q4. So that will weigh that 62.5, down and that's kind of how we get to the guidance we gave you for 2012.

Operator

The next question today comes from the line of Kristen Stewart with Deutsche Bank.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Just wanted to go back on the acquisition impact in the quarter based upon, I guess, some of the commentary in the prepared remarks. I just wanted to make sure that the numbers are right. I think you had mentioned that within the Endovascular business, it added 2 percentage points of growth. So that I guess it's roughly like $3 million. And then it sounded like within Urology, Medivance added or would have been slightly flat versus up 3%, so it looks like that was 6%. And I'm a little bit surprised by those numbers. I don't know if I'm doing the math wrong, but I would have thought Clearstream would have been a little bit more and maybe Medivance a little less. I don't know if you can comment on that.

Todd C. Schermerhorn

Well I think you're pretty close with your numbers. As to exactly what those values should be, we're going through the transition of an acquisition here. It's not always intuitive, those first couple of weeks and how we get organized around them. I don't think we're at all off target relative to our own expectations. And I think we're pretty clear about what that means next year. We're talking about 2% to the total value next year. And I'm not sure, Kristen, did we ever say the dates that we did each one of those things? So you'd have to actually extrapolate the days to get a real good sense of that, closing date. So I guess net-net, your numbers are close, and we consider them pretty much on track relative to our models.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. And then just thinking about emerging markets, is there one particular product, category or area where your emerging markets are a little bit more? I don't know if it's a little more emerging markets in things like Urology or I know you cited surgical as being a growth driver. But do we think about that 5% as being sprinkled across all the major business units or focused on any one particular?

John H. Weiland

You're seeing great growth in all 4 of our major segments.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. And then I guess just kind of real big picture, kind of going off of the R&D, lower R&D. Just thinking about the outlook for mix going forward, one of the arguments that you had a couple of years back on the higher R&D spend was the inability to bring incremental products to market and get value from that. So how concerned are you now kind of on a go-forward basis with a low-level spending in that low 6% just in terms of your ability to bring products to market and get pricing premiums, since nothing has really changed in terms of the FDA's requirements or hospitals' desire to look at more and more data to substantiate pricing premiums?

Timothy M. Ring

Yes. I'll start, and then I'll hand it over to John DeFord. Our ability -- our view is this, that you've got to have a compelling value proposition with new technologies that you bring out there. I think last year, we did 51 clinical trials, something like that, John DeFord?

John A. DeFord

Yes, yes.

Timothy M. Ring

And maybe 30% to 40% of those were for regulatory approvals. So the rest were to generate this data, both clinical and economic data. And I think to the extent that you can do that, and show that you've got a compelling value proposition, you can continue to charge for that. Relative to the FDA, there were a couple of issues last year we had and a couple of -- well it actually goes back 2 years relative to some coating technology changes, the way they view things. Our Vena Cava Filter was delayed for about a year. But other than that, we've done pretty well with the FDA in terms of our own expectations.

John H. Weiland

The only thing I'd add to that is I wouldn't get too hung up on the percentage number here, Kristen. I mean the reality of it is we've got very strong share positions around the world in all our major businesses. And when you look at the amount of R&D dollars that we spend across each of our 4 major segments, with those dominant market share positions, I mean somebody's got to outspend you that has a very low position in the market to beat you. And that's a very difficult dynamic in today's market to really get your arms around, in our mind. Now having said that, we're looking at every major product line that we're in and seeing what's the next generation of product leadership that we need to invest in. But I wouldn't get too hung up on 6.3% versus 7% of R&D.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Should we just think about it as the maybe natural maturity of your products, and that your view is that incremental introductions across the base business are just not warranted, so why spend the money? And you're obviously putting a lot more into acquisitions and obviously looking across areas and just saying, it's not worth the incremental level anymore, we're just not going to get out of it and appropriately investing elsewhere. Is that the right way to think about it?

Timothy M. Ring

I wouldn't walk away with the takeaway here that we've got a change in strategy. I mean the goal here has been to invest in growth areas. We continue to do that as we do with the acquisition targets that we go after as well. So it's all about chasing growth and that's both from an internal R&D investment, and as well as acquisition. So nothing will change strategically there.

John A. DeFord

Yes, nothing's changed strategically, Kristen. But we certainly are looking at our projects with a much finer eye. We're being, I'd say a little more selective. We're certainly much more involved. The senior team here, in reviewing the projects and the portfolio and evaluating those. So that slows things down a little bit. That changes the emphasis a little bit and we're obviously raising the bar on what projects we'll do internally. So that certainly does have an impact. And in the kind of market dynamics we have, we've got to be selective. And with the kind of growth that we've seen so far, again, we've got a whole piece of business here that we got to manage broadly and that impacts what we can do. There's no doubt that I'd like to spend more on R&D. We've got a balance of that, and I think we're doing a good job of doing that balance right now.

Operator

David Roman.

Topher Orr - Goldman Sachs Group Inc., Research Division

It's actually Topher Orr, in for David. I was wondering if you could talk about competition in emerging markets. I know relative to some of the more high-tech implantable devices, competition levels in these regions, notably China, are pretty -- are getting higher especially for some of the more basic supply categories. So I was wondering if you could just kind of go through your 4 main product categories and just talk about competition levels that you've experienced so far in these markets for each.

John H. Weiland

I don't -- if you look at the United States market and look at the major players that we compete against in the United States market, they are the same players you're going to see in our markets, where we compete at in China. You'll have some local Chinese manufacturers at the very low end of the technology scale, which is where we're not concentrating, quite frankly. But it's the same individuals and the same organizations that we compete against in the United States.

Topher Orr - Goldman Sachs Group Inc., Research Division

Okay. So from a technology standpoint, it's more of your higher-tech products that you're bringing into these markets first?

John H. Weiland

Yes. We have brought mid-tier products with the potential and with the strategic viewpoint to move up over time.

Topher Orr - Goldman Sachs Group Inc., Research Division

Okay. And then just one question. I know everybody has been talking about the R&D component here, but if I could just ask it a different way. I know you said 51 new products more or less have been brought -- you guys have brought to market in 2011 and going back to your Analyst Day, I know that you said the pacing of some products, notably within surgical specialties, had been delayed relative to, say, 2010. As we look to 2012, would you say the number of new products should mirror that of 2010 levels? Or should it remain in that 2011 area?

John A. DeFord

Well, so 2011 was a pretty big year for us, frankly. We had 51 new product introductions. See, we've sort of over the years, historically been sort of in the low- to mid-30s new products a year. And in 2012, we're kind of in that same ballpark, sort of in the mid-30s is what we're anticipating with -- obviously that 2011, we had some acquisitions in there that added some new products. I think if you look organically, we were sort of in the high-30s last year for organic new products that we've launched. So kind of in that same ballpark is what we'd expect in 2012.

Operator

Our next question comes from the line of Joanne Wuensch with BMO Capital Markets.

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

Do we have anything new on the Gore litigation front?

Todd C. Schermerhorn

No.

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

That was an easy one. Other income expense was somewhat higher than I expected. Is that a go-forward rate?

Todd C. Schermerhorn

No. It bounces around. The $2 million -- it was $2.2 million net, once you take out the items of effective comparability. So it just happens, currency bounces around, Joanne, and it could be $2 million up one period and $2 million down the next. So there's no pattern there.

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

So that's where your FX hedges are going?

Todd C. Schermerhorn

Yes. Some, not all of them. But that's where parts of them go, yes.

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

Okay. And a lot of companies have begun to talk about 2013 and how they're going to manage the med tech tax. Would you like to throw your hat in the ring on that one?

Timothy M. Ring

Well we threw our hat in, we don't have a silver bullet for it. That's for sure. We'll see what happens from a policy standpoint, et cetera, et cetera. But we don't have any answer for that at the moment, no.

Operator

Our next question comes from the line of Bob Hopkins with Bank of America.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Tim, can you give us your updated thoughts on Europe? The growth area has been fairly stable over the last couple of quarters. How confident are you given what you're seeing in the world that, that stability can continue throughout 2012?

Timothy M. Ring

Well Europe is a little bit interesting, especially when you compare it to the United States. We're not seeing the volatility in Europe that we're seeing in the U.S. And I think, in large part -- although obviously government is under some fiscal constraints, individuals there for the most part don't have to worry about deductibles, out-of-pocket costs and so on, maybe they'll tell you got to come back next week or next month for a procedure. But the healthcare expenditures on their priority list is fairly high over there. So not great growth, but fairly stable compared to what we've been seeing over the last several quarters certainly as it compares to the United States. So we don't see any significant change there, although obviously the whole situation over there could blow up tomorrow, which could throw everything up in the air. We just can't predict that. But as it's been so far, it's been more steady than what we've seen in the U.S.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Okay. And for Europe for 2012, you forecast kind of low double digit -- I'm sorry, low single-digit growth?

Todd C. Schermerhorn

Yes.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

And then a couple -- 2 quick non-fundamental questions. Just back on Gore, what's your best estimate on timing?

Todd C. Schermerhorn

It's totally out of our control. The appeal was heard and we are just waiting for a result. And so the next thing you hear from us will be the results of that appeal. But there are three-judge panel. When they rule is completely unknown at this point.

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Okay. And then, Tim, just lastly, on the release you guys put out a couple of weeks ago regarding the new board seat and ValueAct. I'm just curious to the degree that you're willing to comment or able to comment on that situation. And the reason I asked is that we've always thought of Bard as one of the strongest, if not the strongest operating company in the medical device space, with good margins, and it has been returning capital to shareholders. And I'm just curious if you could comment on that announcement and perhaps the value proposition that ValueAct is thinking about?

Timothy M. Ring

Sure. I can say a few things about it. First of all, I'd say we've had a very positive relationship with ValueAct since they've been shareholders. Frankly we don't talk about our discussions with any shareholders with other shareholders, so no comment on that. Secondly, I would say, we don't anticipate any change at all in the strategic direction of the company as it relates to this, and we determined that given where things stood it was in the best interest of our shareholders, to add them to our board in a cooperative fashion. So that's about all I have to say about that. But I don't anticipate any changes there. And you can see the agreement that we have with them that was filed publicly as well. So I don't anticipate any change there.

Operator

We will go to Jason Wittes' line, representing Caris.

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

A couple of things, first off, I know there's been a lot of questions about R&D and it sounds like you're refocusing a little bit more on emerging markets. A lot of your competitors are really looking at this as a growth driver. In fact, some of the companies are expected to get half their growth from emerging markets. Are you guys looking to up the ante and get that aggressive? And what kind of -- you're 5% now, what type of outlook should we have for the next say 3 or 4 years from emerging markets?

Timothy M. Ring

More.

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

More, of course. But...

Timothy M. Ring

Yes, I know. Look, as we mentioned, we've added over 300 people there over the last 3 years, and we'll continue to invest there across all fronts, infrastructure, sales people, training specifically, product registrations. It's kind of a fundamental basic blocking and tackling there. But we're going to go where the growth is, and the growth is there right now. We see it's a great opportunity for us going forward.

John H. Weiland

And this is nothing new for us. We started these investments back in 2007. We started to build these businesses that they've just gotten into a meaningful size now, and the results are meaningful enough that it has an impact on the overall growth rate of the corporation.

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

Can we assume that there's a slight bump in SG&A as a result of this? And so near term, it's slightly dilutive with a little bit of a delay until you get the infrastructure in place with the block and tackling?

Todd C. Schermerhorn

There's a little dilution next year. But as we've talked about in December, that's really coming more from the deals than the investment in emerging markets, plus we're doing both. So it's hard to say which one actually tipped the scale. But I would say, we've been doing the emerging market investments, as John said, going on 3, 4 years now and some of those have size and have been affording them nicely, albeit against 3 years of restructuring. We had some nice savings from those restructurings, and we call that a reallocation of resources. We were restructuring where we could, and then putting the money into emerging markets in a relatively large way. So I think so far, the point is we've been able to afford it within our P&L, and I think we would attempt to continue to do that.

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

Okay. So basically, you're still finessing through the P&L but not necessarily making an incremental big step-up this year for that opportunity?

Todd C. Schermerhorn

No, we gave you our guidance for next year for SG&A. It was up 50 bps as a percent of sales. But as I said, I think we said at the time that the deals deleverage SG&A by 80 bps. So if you do those adjustments, even with the big geographic investments, we were still leveraging SG&A on an organic basis, if you will.

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

Okay. If I could just ask quickly about vascular pricing, because my understanding looking at the last -- the sequential sort of drop in the U.S. market from the third quarter -- from the second quarter to the third quarter, a big piece of that was pricing and a big part of that pricing was actually within vascular. So what is the outlook? What did it look like this quarter and what is sort of the outlook for 2012 for you guys for vascular?

John H. Weiland

I think vascular will continue to have some pricing headwinds added. I mean it's a pretty competitive space with large players in it. So we think we'll continue to have some pricing pressure within that segment.

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

Can you guys quantitate at all the impact for vascular specifically on pricing? Or is that a little too much detail?

Todd C. Schermerhorn

Yes. I'm not sure we want to get into the specific product lines and what's going on in pricing in each one of those. It doesn't really help us competitively per se. I think, as John said, we probably will continue to have price pressure there. The other side of that equation is they had a great period in stents, and that's about LifeStent and it's about 200-millimeter stents. So there's still the opportunity to upsell when you have unique technology. And we're doing it there. So it's a little bit of both worlds.

John H. Weiland

I think the biggest indicator that I would give you is we have 40 large GPO contracts in the United States that were up last year for renegotiation. We re-signed all 40. I mean it shows you that even if pricing pressure is on, it's coming from the outside, we still are able to maintain very rigorously our share opportunities with our key customers.

Operator

We'll go to Matthew O'Brien with William Blair.

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

I was just hoping to dig in a bit more on a couple of questions that have been asked. With respect to the emerging markets and given how well they've been doing recently, is it a function more of just adding more product to the bag that all those new people have in place now? And if you are to characterize it that way, what percentage of your portfolio do you believe you'll eventually sell there? Where are we at today? And then how should we think about exiting 2012?

John H. Weiland

No, I don't think it's as simplistic as just adding more products to the bag. I mean it really starts with building the infrastructure, then it starts with geographical expansion. And quite frankly, if you look at geographically where we are versus what the potential is in key markets, we're only 1/3 of the way, let's say, where we want to be in terms of being able to fully coverage large pieces of geography that we want to get great penetrations. Then it comes down to execution. The sales execution training of our sales forces, training of physicians and clinicians, and then thirdly or fourthly, it would be adding new products and further generations of technology, that you can show the additional benefits to patients once you bring clinicians up the technology curve. So it's a series of execution moves on all of those fronts.

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

Okay. But when you're thinking about those markets today, given how new you are to most of those territories, would it be fair to characterize it as more of a low hanging fruit kind of opportunity? Or is there going to be a lot of market development activity that needs to go along with it?

John H. Weiland

No. I think that in each one of these markets, we've spoken about the fact that we loved the market development aspect of it. For example, PICCs in China. PICCs weren't used in China until we started developing the markets and teaching nurses how they can place PICCs in the market. So an awful lot of it is clinician training, market development, sales force development, sales force training. I mean it's a whole -- it's really -- there's not one issue that you hang your hat on when you want to go build these markets.

John A. DeFord

To that point, we certainly are very much investing in getting new products into these markets, so no question about that. And I think John was pointing that out. We've got a lot more focus there and just like John said, there's a lot of training that's required. And so we're deeply involved with that as we focus on getting some new products in there as well, but through a regulatory time frame in some of these emerging markets are not short either. So it's all part of the execution strategy.

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

Understood, very helpful. The other question that I have was just following up on an earlier question on the excise tax. Tim, when you think about things going forward, and I know you don't want to get into '13 guidance at this point but on a more normalized basis, excluding the headwinds you're facing with Lutonix this year on the bottom line, inclusive of the excise tax and with the end markets growing at about these levels, can you generate double-digit EPS growth?

Timothy M. Ring

We'll give guidance for next year in December of this year.

Operator

And next, we will go to Anthony Petrone's line, representing Jeffrey.

Anthony Petrone - Jefferies & Company, Inc., Research Division

One for Tim, just in terms of the M&A strategy, how you look at that. Can you speak to the strategy as it relates to maturity of assets? I guess specifically looking at Lutonix and to a lesser extent Medivance, they seem to be more early stage adding to R&D, more than immediate revenue growth. So when you look at that going forward, does that reverse? And then a couple of follow-ups for John and John, just on some products, timing for COVERT PowerPICC and 3CG, if we can get an update there. And then in the past year you've given updates on Sapiens, the trial funnel for Sapiens. I believe a few quarters back, it was around 200 and it takes about 2 to 4 months for hospitals to trial. So any updates there would be helpful.

Timothy M. Ring

Sure. I'll take the first 2, then I'll pass to the others. Relative to the deals, Medivance was a business already with revenue existing and we had quoted that revenue growing in excess of 20% annually. So existing business with revenue, yes, there's R&D and we talked about some of the other indications that we're going to chase there, and we'll continue to invest in that. And then Lutonix, clearly is almost all R&D at the moment, although we did say we would launch at the back end of this year in Europe, with the big expectation of the U.S. launch in 2015. But there's significant R&D there with the clinical trials, et cetera. And frankly, we're already investing in further indications for that technology within the vascular space. So there'll be a lot of R&D in that area. I turn it over to you guys for the other questions.

John H. Weiland

I'll just make a brief comment on Sapiens and John can comment. First of all, I'd say that we talked about the number of accounts that we were in December, and we haven't stopped there, obviously. We continue to grow that base pretty substantially, and we believe that there's well over 100,000 x-rays that have now been eliminated for patients in the United States. And that value for patients, even more so than the economic value to hospitals, has great resiliency with those clinicians that are making decisions on what PICCs should be placed in their institutions. I'd also add that there's a tremendous amount of excitement pent-up for what we believe will be a great product in the 5 French Triple Lumen PICC as well.

John A. DeFord

Yes. So then, Anthony, just commenting on COVERT PowerPICC, that [indiscernible] is right on the verge of going in, which was a discussion we've had in December. So we're excited about getting that in and engaging with FDA. We think we got a good plan there. On the 3CG, we are right on track. We said we anticipate of launching that in the first half of the year, and that's still our plan right now. And then getting that into the OUS markets later in the year. So I think both of those programs are right on track from where we said in December. And we didn't give a date on launch for COVERT Power PICC just because we know FDA has got a lot more sensitivity around these coatings, and we expect to have a little bit of back and forth in discussions with them. But I think we got a good plan.

Operator

And next we'll go to the line of Suraj Kalia with Rodman & Renshaw.

Suraj Kalia - Rodman & Renshaw, LLC, Research Division

Tim, just have a very macro-level question. And I know this is a tough one, but I'll still ask. Given the differential price elasticity of demand in U.S., Europe and the emerging markets, is the strategy in emerging markets still to maintain price leadership? And I guess the sub-part of that is what are the lessons learned from the developed markets, whether it's for market share, sales or whatever that you think are translatable to the emerging markets? I'm just trying to understand what we know from some of these markets, at least anecdotally, and how Bard looks at this and the prospects for let's say the next 2 to 4 years.

Timothy M. Ring

Sure. Let me just simply say that in the emerging markets, the thirst for high-technology, high-quality, best-in-class products is as high as it is anywhere else in the world. And people are prepared to pay for that. So we're -- it's a little bit counterintuitive perhaps, but we're very pleased with our ability to -- in fact, there may be even more of an appreciation for the features and benefits of newer technology because it is new than there may be even in some of the more developed markets.

Operator

And next, we'll go to the line of Greg Hertz with Citi.

Gregory Hertz - Citigroup Inc, Research Division

Greg Hertz here, calling for Matt. Couple of questions, one on the PICC side of things. Can you maybe talk a bit about how Sapien has improved your economics at the hospitals where you've launched? I know you probably don't want to divulge a lot of detail there, but obviously you're providing a fair amount of value in terms of cost savings for the hospitals. So if you could share anything, I'd appreciate it.

John H. Weiland

Sure. I'd say that the overall, if you look at the economics and how it's improved, when you think about eliminating an x-ray, eliminating having to move a patient from whatever ward they're in or whatever room they're in up to radiology, having the x-ray done, the cost of the x-ray, moving it down, having the x-ray, then go to interventional radiology to be read, having that communicated back to the floor, and then finally having therapy delivered to patients, the economics are really driven by all of that movement of the patients, but really on a hard cost basis on eliminating the x-ray itself and the need for the interventional radiologists to read that. The patient benefit is, obviously, the eliminating of the x-ray and the harmful form of radiation. But most importantly, and this is what's really resonating with customers and clinicians, the ability to get therapy very quickly to the patient. I was in an account yesterday, a very sophisticated hospital system that it takes up to 12 hours once the PICC is placed for them to have x-ray confirmation from interventional radiology and for them to start to receive therapy. Think about those patients that are critically ill and to be able to get them their therapy 8, 10, 12 hours earlier. That's what's really resonating with clinicians here about what it does to patient treatment. The economics are great, but the patient treatment side of it is very, very, very high on the radar screen.

Gregory Hertz - Citigroup Inc, Research Division

But could you maybe quantify a little bit more in terms of how it's helping your company and perhaps something like a same-store sales figure with respect to the oncology business specifically?

John H. Weiland

I think we said that we were in over 200 accounts and when we met in December, that's well north of that at this point in time. We've said we have 87 accounts in the United States that eliminated x-ray altogether already within that framework. So this is moving pretty quick, and we like what we see.

John A. DeFord

So I think if you're -- Greg, if you're asking for the upcharge that we have on this, that's not something we're going to give detail on, but we certainly do get an upcharge for this technology...

John H. Weiland

Pull-through.

John A. DeFord

And pull-through, yes.

Gregory Hertz - Citigroup Inc, Research Division

All right. We got you. Maybe just shifting over to fixation, which to me it seems like a bit of a challenging area to differentiate among the different tacking products, but maybe that's just the layperson's view. But at the same time, it also seems a little difficult, to craft a trial to allow on-label sales of biosurgicals that are more widespread and used in Europe. So how do you think about developing the pipeline in fixation? And is there really a way to bring biosurgicals to the U.S. for use in hernia repair?

John A. DeFord

Well I think we do have, and I think we talked a little bit about in December, at least we alluded to a couple other products under development in our fixation pipeline. Obviously the ability to use fixation products paired with biologically dry materials, which I think is what you're saying, is a piece that hasn't happened to a great extent yet. Obviously it's something on the radar screen. And like I said, we've got a couple of things that we're working on in the pipeline. But that's become an extremely competitive space, not one that we want to broadcast too widely where we're headed and what we're planning. So I'm not going to not -- just really not in a position to give you a lot of detail there. The other part of your question, I think on biologically derived materials in Europe is another question altogether because of the regulatory cycle. And so that's another thing that we're looking into, how we can get some of our products into some of those other markets.

Operator

And we'll go to Robert Goldman's line with CL King. [Operator Instructions]

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

Two questions. The first, Todd, if you wouldn't mind just reiterating first what your annual earnings per share guidance is for 2012? And then the other question also relates to the question on ValueAct. But Tim, 2 things on that. One, from your perspective, what does ValueAct bring to the table as a new member of the board? And secondly, the agreement that you have with ValueAct, as I read it, does seem to restrict what they can do relative to Bard's potential to being acquired. And I'm wondering if that restriction exists for all Bard board members?

Todd C. Schermerhorn

I'll talk about the guidance first, and mine is the simplest. The guidance is 3% to 4% EPS growth, Bob, all in.

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

And that's off of what base again, Todd?

Todd C. Schermerhorn

Well the $6.40 now. It was $6.38 originally, but we outperformed by $0.02.

Timothy M. Ring

Yes. In terms of ValueAct, they own roughly 7% of the company. We've got 12 board members, so that represents roughly their share, if you want to think about it that way. In terms of the value that they add, their thesis is to help companies that they've invested in. We look forward to working with them in that capacity. And the agreement in terms of what we agreed to with them speaks for itself and that's been publicly disclosed, so I don't have anything else to say about that.

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

And no comment on if that exists for the other board members as well?

Timothy M. Ring

In a written agreement, if there were any other written agreements, we would file those as well. So that's the only one we have.

Operator

Next question comes from the line of Jayson Bedford, representing Raymond James.

Jayson T. Bedford - Raymond James & Associates, Inc., Research Division

Just a couple of quickies. You guys have done a nice job of rightsizing the business over the past couple of years to reflect a slower growth environment. Just wondering, where are you with your restructuring programs, meaning outside of the sales force realignment? Do you have any active initiatives ongoing that you could benefit from going forward?

John H. Weiland

I think that the -- we don't have any active programs that we're announcing at this point in time nor do we have any big tricks up our sleeve. We always focus very, very succinctly on our plants around the world and look for driving efficiencies, drive our manufacturing operations, moving into tax-advantaged and low manufacturing cost environments. And we'll continue to do that as we have historically.

Jayson T. Bedford - Raymond James & Associates, Inc., Research Division

Okay. And just maybe a product line question. On the Biologics soft tissue business, it looked like growth picked up nicely in the quarter. Just wondering whether that's from hernia, breast? And then in which market do you think you have the most running room going forward?

John H. Weiland

We had a very strong quarter in breast. We think we have still great growth opportunities there. But also, we think with some of the new product launches that we have in the XENMATRIX area, that will also help us accelerate growth.

Operator

And we'll go to Kristen Stewart's line with Deutsche Bank.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Quick question. Todd, just a real quick one. I just wanted to make sure I understood the year-to-year impacts of the gross margin change. I know you talked a little bit about sequentially but year-to-year, I imagined the total amortization, was that also 30?

Todd C. Schermerhorn

Yes. That's why I asked Miroslava whether I was clear. We didn't get all the amortization into the fourth quarter, so we said it was 30 points of additional amortization that we moved from Q3 to Q4. But for next year, that number for the year is 70. So I suspect it will be about 70 as we get into the first quarter, which will push that 62.5 down a little bit.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Right. But just looking at 4Q '10 versus '11, the year-to-year comps, the 63.3 versus the 62.5, I guess pricing was a little more negative and that incremental amortization as well?

Todd C. Schermerhorn

Yes. Amortization, foreign exchange was 20 bps. Pricing was 30 bps. Mix isn't that much favorable year-over-year, but we added between 0 and 10 basis points. We had that Puerto Rico excise tax issue, Kristen, which took 20 basis points out of it. And So you add all that up, you end up with cost kind of 10 to 20 basis points favorable. Not a great cost quarter year-over-year, but simply because Q4 of 2010 was very, very strong.

Operator

There are no additional questions. This concludes our question-and-answer session. I would now like to turn the conference over to Bard's management for closing or additional comments.

Timothy M. Ring

Great, thank you. First of all, I'd like to take this opportunity to thank Bard employees around the world for their hard work and dedication for a successful 2011. And I'd like to thank all of you for taking the time to join us today, and we'll be talking to you at the end of the quarter.

Operator

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

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