Misonix's (MSON) CEO Mike McManus on Q2 2016 Results - Earnings Call Transcript

| About: MISONIX, Inc. (MSON)

Misonix, Inc. (NASDAQ:MSON)

Q2 2016 Earnings Conference Call

February 9, 2016 16:30 ET

Executives

Joe Diaz - Managing Partner, Lytham Partners, LLC

Mike McManus - President, CEO

Rich Zaremba - SVP, CFO

Analysts

Scott Billeadeau - Walrus Partners

Michael Kaufman - MK Investments

Operator

Good afternoon, and welcome to the Misonix Incorporated Second Quarter Fiscal Year 2016 Financial Results Conference Call. All participants will be in listen-only-mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note today's event is being recorded.

I'd now like to turn the conference over to Joe Diaz of Lytham Partners. Please go ahead, sir.

Joe Diaz

Thank you, Rocco. And thank all of you for joining us to review the financial results of Misonix Incorporated for the second quarter and the first half of fiscal year 2016, which ended on December 31, 2015. As the conference call operator just indicated, my name is Joe Diaz, I am with Lytham Partners. We are the Investor Relations consulting firm for Misonix.

With us on the call representing the company are Michael McManus, President and Chief Executive Officer; and Richard Zaremba, Senior Vice President and Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. If anyone participating on today's call does not have a full text copy of the release, you can access it from the company's Web site at misonix.com or numerous financial Web sites.

Before we begin with prepared remarks, we submit for the record the following statements. Statements made by the management team of Misonix Incorporated during the course of this conference call that are not historical facts are considered to be forward-looking statements subject to risks and uncertainties. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements. The words believe, expect, anticipate, estimate, will and other terms of expectation identify these forward-looking statements.

Investors are cautioned that forward-looking statements made during the course of this conference call are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially from the statements made. The company disclaims any obligation to update forward-looking statements. Risk factors include but are not limited to factors discussed in the company's annual report on Form 10-K, subsequent quarterly reports on Form 10-Q and current reports on Form 8-K.

With that, let me turn the call over to Michael McManus, President and Chief Executive Officer of Misonix. Mike?

Mike McManus

Thanks Joe. As always we greatly appreciate your time and intention of participating on today's call. Your continued interest in Misonix is truly appreciated by all of us here at the company.

I would characterize the performance in the first half of fiscal year 2016 is solid. We generate a strong double-digit growth with domestic BoneScalpel revenue increasing 33% and SonicOne O.R. worldwide revenue growing by 78% compared to the first half of fiscal 2015.

Overall, U.S. revenue increased 23% and accounted for 56% of total revenue for the six month period compared to 50% for the same period last year. Want to remind you, so have in the past, that in the U.S., our model is to consign both BoneScalpel and SonicOne to operating room surgeons. We then sell single use disposable to these customers as a company with the relatively small but growing market penetration, it's important for us to get our surgical instruments into the hands of carefully selected surgeons that we know perform high volume procedures that can demonstrate the clinical and economic benefit of our product.

When these surgical instruments are placed, there is no revenue generated at that time. As a result, we look at the disposable revenue and its growth as an important indicator of the success of our business model. We are pleased that BoneScalpel unit placement and sales in the United States increased by 24% for the six month period while revenue from disposables increased to 66% of total revenue. We still replaced 115 BoneScalpel units worldwide during the six month which sets the stage for continued recurring revenue growth going forward.

We are very pleased that our razor -- razor blade model continues to drive revenue growth and positions Misonix for a strong performance in the second half of the year and into the future. We are particularly pleased with the 23% revenue growth in the United States. Our sales and marketing team are doing a great job in placing our products in the hospitals and medical institutions that can really benefit from the technology and the features and benefits that our products provide.

During the first half, we continued to introduce our products and train surgeons around the world on how our products can significantly improve on the execution of the surgical procedures they specialize in and the improved outcomes to their patients and the medical institutions at which they practice.

In the six month period, we participate in the number of major surgical conferences including the North American spine society in Chicago, EuroSpine 2015 in Copenhagen, Denmark, the international meeting on advanced spine technologies in Kuala Lumpur, Malaysia and the society for minimally invasive spine surgeries annual meeting.

We estimate that during the course of these events approximately 400 surgeons from numerous countries participate in BoneScalpel workshop primarily led by our key opinion leaders. The surgeons have attended these presentations also received hands on training throughout the event through various meet the expert sessions which allowed for peer to peer demonstrations and explanations of the BoneScalpel system and the new BoneScalpel MIS, minimally invasive surgical product.

The benefits of the product were highlighted including control bone cutting and removal which reduces bone bleeding and a soft tissue sparing. We also exhibited that the 28th Annual Southern Regional Burn Conference where we unveiled a newly redesigned SonicOne O.R. device, an hand piece for the debridement and treatment of burn wound. The SonicOne O.R. was enthusiastically received by the surgeons in burn teams and attendance from all across the United States. At that conference, we also held our first ever training meeting for new distributors more than 16 distributors representing the SonicOne O.R. product line throughout the United States attended workshop to learn about the unique clinical advantages.

We are pleased with the way the SonicOne O.R. has been received by the distributor community and we believe this will set a stage for a broader utilization by burn treatment professionals. The wound and burn markets are very large. And we have the technology and the products to better treat and improve the quality of life for those patients afflicted with these serious conditions. These are large and important markets around the world and thus represent significant growth opportunities for Misonix in the future. These industry segment events provide unparalleled platforms for us to conduct training sessions with a broader cross-section of surgical professionals from around the world using a number of highly respected surgical leaders that currently use our instruments on a regular basis in their own practices and can attest to the benefits of using the Misonix products. These workshop opportunities have positive impact on increasing our future product acceptance.

We also believe our new Better Matters corporate branding introduced in the first order of 2016 is having a positive effect in terms of positioning for products in the market. Better Matters is a commitment to continue innovate around these technologies were Misonix already commands a leadership position and to proactively seek out other platforms that can complement and contribute new solutions to our surgical markets worldwide.

Even more elementary than that actually is Better Matters are pledged to be better at everything that we do in delivering surgical solutions and value propositions that cannot be received with our other product.

Looking ahead, the company continues to be in a strong financial position with cash of approximately $9.6 million and no long term debt. We are pleased with the continued strong performance of our sales teams and distributors around the world and by our employees in our headquarters here in the United States as well as by the increasing products that inspire our customers.

We look forward to continuing to drive solid operational and financial results throughout the rest of fiscal 2016.

With that let me turn the call over to Rich Zaremba, our Chief Financial Officer for a view of the financials. Rich?

Rich Zaremba

Thank you, Mike.

Revenue for the three months ended December 31, 2015 was $6 million, an 8% increase when compared to revenues of $5.6 million for the same period in fiscal 2015.

BoneScalpel revenues increased 8% to $3.2 million; SonicOne O.R. revenue increased 64% to 745,000 and SonaStar revenues increased 10% to $1.9 million. If we look quarter-over-quarter, BoneScalpel revenues increased 12% to $3.2 million; SonicOne O.R. revenues increased 15% to $745,000; and SonaStar revenues increased 30% to $1.9 million for the second fiscal quarter 2016 as compared to the first fiscal quarter 2016.

The company reported net income for the three months ended December 31, 2015 of $175,000 of $0.02 earnings per diluted share as compared to earnings of $901,000 or $0.11 earnings per diluted share for the same period in fiscal 2015.

Revenue for the six months ended December 31, 2015 were $11.3 million and 11% increase when compared to $10.1 million, the same period in fiscal 2015. The company reported a net loss of $45,000, $0.01 loss per diluted share for the six months ended December 31, 2015, compared to net income of $1.3 million or $0.16 earnings per diluted share for the same period in fiscal 2015.

The company's cash position as of December 31, 2015, was $9.6 million, days sales outstanding is at 66 days, inventory turnover is 1.4x and the company has no long-term debt. The company's backlog of unfilled orders as of December 31, 2015 was $46,000. Most orders are shipped when received. Mike?

Mike McManus

Thanks Rich. Operator, we would be happy to open up the line now to questions, if there are any?

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Scott Billeadeau of Walrus Partners. Please go ahead.

Scott Billeadeau

Hi, guys. I'm wondering, can you walk me through because we've seen pretty good growth in BoneScalpel placement, but BoneScalpel revenue growth is running quite a bit behind BoneScalpel placement percentage. Maybe kind of walk through what -- how to kind of put those two together for me?

Mike McManus

Yes. So, how are you, Scott? Good to have you on the call. So a couple of things, I think that we have to remember is, one, what exactly are we looking at? When we look at BoneScalpel growth, BoneScalpel growth in terms of placements and sales have been good over the last six months. The thing that happens if you are looking at disposal revenues is -- and you are looking at it in the world is that the usage outside the United States isn't the same as it is inside the United States.

So it depends, if you are looking at the United States and you at revenue growth inside the United States in disposables with the BoneScalpel, it's terrific.

Scott Billeadeau

Good.

Mike McManus

Do you follow me?

Scott Billeadeau

Yes. I guess, I'm trying to -- when you -- when I -- when you look at displacements have been running quite like you said you mentioned BoneScalpel placements and whether it's consigned or not and still that's been a big number. And I guess --

Mike McManus

Let me try to answer your question a little bit more clearly then.

Scott Billeadeau

Okay.

Mike McManus

Because if you look at BoneScalpel's and we say sale -- sold or placed and we're talking about --

Scott Billeadeau

Placed, correct.

Mike McManus

-- the world, right? So we sell it to distributors outside the United States non-stocking distributors.

Scott Billeadeau

Okay.

Mike McManus

Okay. And they then sell it to hospitals, doctors in their countries.

Scott Billeadeau

Yes.

Mike McManus

We also sell them the disposables and they did the same thing with the disposals.

Scott Billeadeau

Okay.

Mike McManus

So the [indiscernible] of those outside the country are really sales, inside the United States most of our transactions are consignments. We do have a few sales but the vast majority of our transactions in the United States are consignments of the BoneScalpel that we carefully put in hospitals that we can identify with our metric system with a surgeon that does a high volume of procedures that typically or more complex procedures where the use of the BoneScalpel can most demonstrate the benefits of safety, less blood loss, better cutting and less time overall procedure.

Those doctors then are identified because we believe that they ought to be able to use a larger number of blades on a monthly basis. And then eventually there ought to be a second doctor using the same system in the hospital. So you will see faster consignment growth in the United States and revenue growth in the United States then you will outside the United States.

Scott Billeadeau

Okay. So you get the consignment not really sell then its the idea though is that disposables blade you should be higher with those placements over time?

Mike McManus

That's right. Because they are better targeted in the United States; we have better information about the doctors and their practices. And in the United States we only use a blade one time.

Scott Billeadeau

Yes. And in terms of the go-to-market strategy here in the U.S., where are you on sales force expansion, the number of guys, you got what you need out there kind of talk about where are you on that front?

Mike McManus

Yes. We said last time that at the beginning of our physical year, our new budget caused us to bring on some additional regional managers and some additional what we call [ab] [ph] specialist, the people that actually train the doctors. And so we brought a number of -- couple of regional managers and a number of ab specialist. And they are in place now they have been in place. So over time, over the six months but they are all in place now. And we think we have the team in the field to be able to generate the returns we expect to see.

Scott Billeadeau

Great. And as you do that, when you bring [indiscernible] either quota carrying guys that quotas are up year-over-year maybe just briefly kind of re-up me on kind of how you look at the sales force and what you can expect for production from them?

Mike McManus

There is no question that when you bring on somebody new it takes them a little bit of time to get going. But once our people have been on board for a couple of months, they start to generate benefits to us. And depending upon what region you are in -- you definitely have pulled it. And anybody that doesn't make the quota isn't going to here very long. And the same is true with our distributors both in the United States and outside the United States all of them have quotas. All of them outside the United States have contracts with certain obligations. And if people aren't performing, we will look to change them. There is no question about it.

Scott Billeadeau

And at this point most of them are -- much of a turnover in that, most of them on -- in the game plan for where they are again a lot of these guys really --

Mike McManus

Actually there is only -- there is only a few that are new.

Scott Billeadeau

Okay.

Mike McManus

Most of the team that's in place now for more than a year, they understand the products, they understand the targets, they understand how to talk to these surgeons. And so we added a few extra people but most of the people have been with us for a year; most of our distributors around the world that's been with us for more than a year. So it's a team that knows the products well and are really starting to develop momentum that you can see.

Scott Billeadeau

Yes. Okay. And then, I think that's it all. I will just hop back let someone else for the question. Thanks.

Mike McManus

Thank you.

Operator

[Operator Instructions] Our next question comes from Michael Kaufman of MK Investments. Please go ahead.

Michael Kaufman

Hi, Mike. Very good quarter. Congratulations.

Mike McManus

Thank you, Mike. How are you?

Michael Kaufman

Pretty good. I have two questions. One is kind of planning theoretical question that most companies thought to address them. That is, what is your plan for the long-term model in terms of expense to revenue like you're at $25 million run rate now? And what it would be if they're 35 or 50, and the question there is, where do you see like sales expense to revenue, which went from 37 to 48 because you front-end loaded a lot of dummy variable expenses in terms of trainers and other kind of stuff. But eventually that just start to attenuate and the same thing was G&A, where you had a pick-up just in terms of all that stuff, so you get a front-end hit. But as the revenue grow that starts to moderate. So it would be interesting, if you maybe in the future call or maybe you can talk about it now. What are your expense to revenue ratio models for the company as you see it moving out?

Mike McManus

Sure. Well, I mean, in a perfect world, I think SG&A sort of it ought to be more in the 20s and the 40s. And G&A has got to come down as well but the problem with G&A is controlling things like insurance and accounting expenses and those kinds of things. But I think that if -- our R&D expense probably depending upon new product introductions as supposed to line extensions might go up as a percentage of revenues as you get closer to 50 but certainly the selling expense ought to be down in the upper 20s maybe and G&A got to come down as well.

Michael Kaufman

R&D might get up to 10 or something, but the question is, it would be interesting at some point if you can start thinking and addressing that longer term model and whether you -- at what levels you expect to reach it. Most of the companies do talk about stuff like that which help the investor community?

Mike McManus

Sure. As I said, there are some things that we can't control, no companies can control. Some of our expenses are going up and they are affected by forces outside of our own control. But we think that we've got the people that we need now. But the important thing for us we think is to manage our expenses but make sure that we are gaining market share because market share is an important indication of the acceptance of our products. And we still have a very low market share.

And so the important thing is to understand how we -- most effectively get our systems into the hands of the right doctors that are going to use them often and talk about them and get more than one doctor on a system. And we think that the expense of doing that is going to slowdown because we've got a pretty good body of people right now including two people we had it in international. And so that ought to flatten out. And G&A should too pretty much except for the expenses we can't control things like taxes, insurance, accounting those kinds of things.

Michael Kaufman

Sounds very good because you're early stage. So you are in the transient state. And the only other question I had is, I see that the inventory level went up by 1.1 million or 25%. Now is that raw material work in progress, finished goods, or is there any consigned inventory in that number?

Mike McManus

No. There is no consigned inventory. I mean part of the growth is, what it was compared to in the earlier year. I mean because we are growing fast and where we carry inventory but we move it out very quickly. And we also recognize that in the businesses that we are in, we have to have some safety stock because if a doctor needs a blade or disposable some time in the middle of the night and he doesn't have it. We got to makes sure we can get it to him. So it's a combination of how it compares to the number last year with the growth that we've had in the 12 months reflected and having to carry more inventory to ship out in a relatively short turnaround period. Rich, you want to add to that?

Rich Zaremba

Yes. I think as Mike said, the -- as you know the fourth quarter which is what we are comparing to is usually our best quarter and certainly that's probably the lowest point that our inventory and we also recognize that not having the right disposables available for doctors and having an inadequate supply that if we have a stock out position we are basically out of business with that. So we've consciously increased those disposable availabilities. And of course, the inventory has increased, the good news is that it's all usable inventory. There is no obsolete or it's going to be obsolete. It's all items that we can use at a certain point in time.

Michael Kaufman

Since you have a lot of reusable, repeatable stuff, you combine more [doc] [ph] and get a lower cost?

Mike McManus

Well, that's true too. So I think the inventory particularly at this stage where -- what we actually consciously increased that amount particularly for this quarter making sure that as we continue to grow we have enough parts to not have any issues with any customers.

Michael Kaufman

Last question, the consigned inventory, is that in property, plant and equipment?

Mike McManus

The consigned that we send out is in property, plant and equipment that's correct and we depreciate that over three years.

Michael Kaufman

Three years. Thank you very much. Great job. Good luck and sounds good.

Rich Zaremba

Thank you, Mike.

Mike McManus

Thank you.

Operator

And our next question comes from [Al Katz] [ph] a Private Investor. Please go ahead.

Unidentified Analyst

Hi, Michael. It looks like --

Mike McManus

Hi, Al. How are you?

Unidentified Analyst

Good. Looks like things are progressing.

Mike McManus

Thank you.

Unidentified Analyst

I have two questions. Number one, the third quarter of your current cycle compared to the second quarter, what can we expect?

Mike McManus

You can expect us to continue to work really hard to try to grow this business as fast as we can. And I think you will see continued growth. I can't tell you exactly what the number will be. We don't give guidance or try to make forecast.

Unidentified Analyst

No, no. You have for that quarter in already, how is that quarter doing?

Mike McManus

I think we are doing well. I think we are doing well. I think we are continuing to see growth in all of our products and I think that's going to continue. The acceptance is, is really remarkable. It really is. I mean I think talking to doctors and having them without prompting them, tell us the difference that our products make in their practice. And the benefits that they see, it's really rewarding and remarkable.

Unidentified Analyst

Yes. I think that's true, very true. But I just sort of got a real concern because the percentage dropped from the first -- the increase in the percentage kind of dropped off between the first and the second quarter of the current year. So --

Mike McManus

Yes. The increase in the percentage of what?

Unidentified Analyst

Of your revenue?

Mike McManus

Right. But again, remember our revenue is generated in a number of different ways and as I said in the press release, we've got about a little bit less than half of our revenue comes from international market. And we had a bit of a short fall there as most companies in the United States have reported already to their shareholders. And in our case that's called China and Russia that were big customers. Notwithstanding those the press release I guess that over the six months our revenues have grown in the international market by 30%.

So I think when you're a small company and you're selling in 49 countries, there is a lot of benefits because companies can pick up here and pick up there. But when Russia and China aren't doing well, it's a negative for everybody and it was for us. I think you will see those come back and I think you will see the growth pick up on all cylinders.

Unidentified Analyst

Great. That's quite helpful. Second question, we have that fee drop-off in the first quarter of the future. How long will it take to rest the balance that out?

Mike McManus

Well, the drop-off is in the royalty that we get from Covidien and it's in our total, which is our second quarter. But, we think that on our present run rate that we're looking to pick that up as quickly as we can. And we are hoping that we will pick it up some time in the year -- in the next 12 months.

Unidentified Analyst

Thank you so much. I appreciate it. Have a good third and fourth quarter.

Mike McManus

Thank you so much. Good to talk with you.

Operator

And our next question comes from [Anthony Lewis] [ph] a Private Investor. Please go ahead.

Unidentified Analyst

Hi. Thank you for taking my call. One of the other people did address one of my questions. But I wanted to go back to the inventory level; I know that you'd provided response. Right now, inventory days outstanding is approximately 253 days and I heard some commentary, it sounded like, you're trying to maintain so that you are not running out of inventory but there is quite a big level there. Can you explain that a little more fully?

Mike McManus

Well, a percentage of what you are talking about is inventory that we maintain as what we call safety stock to make sure that we could fill orders that maybe aren't forecasted that some sort of an emergency need or anything to product her customers. So that's the percentage of that inventory. The rest of it has to do with some of our lead times with three months so we have some things in here as parts visit then become parts of systems.

The good news is that almost everything that we make goes out in a very short period of time. So you will the inventory build, as the forecast come in and as the business grows we hope that demand is going to increase. So it's inventory to fill short-term demand plus a safety stock.

Unidentified Analyst

And do you have any in terms of your international markets and some of the other parties out there that are selling your product through sales arrangements. Are any of those products in your inventory as well or are those record to sales when shipped to them?

Mike McManus

No. We record them as sales when we ship to them and we don't have any on consignment. All of our international distributors are non-stocking distributors. They are the customer.

Unidentified Analyst

Got it. Got it. And then the second question, I know there was some inquiry regarding the expense levels that you guys are operating at right now. So I know you are building model is -- this razor blade model. I know there is some costs that are upfront. But just looking year-over-year, you see that the sales were up $400,000 understanding that there was a Russia and China impact, while expenses were up $1.1 million and obviously, we have the royalty issue coming in the near term. So it's definitely going to have stress on your numbers. Could you comment further on that?

Mike McManus

Yes. I don't know what I can except of the -- we are very much aware of it every day. We have to -- we have to grow the model to be able to make up for the Covidien royalty shortfall. We know when it's going to occur. And we are pushing as hard as we can. One of the reasons that we put more into the expenses at the beginning of this fiscal year. We added to our budget to challenge our sales guys to go faster. And we want to keep them focused but we want to see if we can grow the business faster and we are trying to do that to fill the void that we know is going to occur in October. And we try to push on that everyday. That's all I can tell you. It's the only thing that we can do.

Rich Zaremba

The other thing Anthony as you know, we are in an accelerator filer now which was as of the end of December of last year, which required us to have SOX compliance by our auditors which basically doubled our audits fee. So we have things like that that Mike as mentioned before that these are uncontrollable items that I guess its good news, bad news. Our market cap increases for accelerated filer but we have the expense associated with it.

Unidentified Analyst

Right, right. I wish that mostly impacting your G&A not the sales cost. But I know, you are making those investments for the future there.

Rich Zaremba

Right.

Unidentified Analyst

I mean that's all the question, I appreciate your timing. Those are the questions I have right now.

Mike McManus

Thank you for being on the call.

Operator

And our next question comes from [Robert Smith] [ph] a Private Investor. Please go ahead.

Unidentified Analyst

Thank you. Thanks for your effort this quarter. It looks like you did a good job.

Mike McManus

Thank you, Robert.

Unidentified Analyst

Look, I need a little clarity on the royalty payment, I just -- I didn't hear anything about that. Is that ended or is that ending in October?

Mike McManus

Yes. It's a licensing agreement that we have with -- when it started it was with U.S. surgical which then became Tyco became Covidien. It's on patented technology that Covidien still uses. The patent expires on October 16 of this year. If you look at the non-operating income or additional income line, you will see in there a number of about $900,000 per quarter for royalties that we receive on the basis of 5% of Covidien sales of the patented technology. And as I said the patent will expire on October 16.

Unidentified Analyst

Okay. My next question was about the international situation and you are using the -- how often they use the same -- [indiscernible] one-time use in the United States and I think you mentioned in earlier calls too that they maybe using it more than one time?

Mike McManus

Yes. In some countries around the world the culture basically is for multiple use and even though the blades for instance are packaged as FDA approved for single use. In some countries doctors will use them more than once. And that's just a fact of life that everybody deals with and some people say "Well, why don't you just fix the box," so it can be only used one-time per blade. And the problem is that your competitor would win because they buy from somebody where they can use the blade more than once. And it's a cultural thing. We look at it all the time. There are certain countries where its -- its more prevalent than others but it's a matter of fact of doing business in the international market.

Unidentified Analyst

Okay. Thank you.

Mike McManus

Yes, sir.

Operator

And our next question is a follow up Scott Billeadeau of Walrus Partners. Please go ahead.

Scott Billeadeau

Guys just one of my questions was asked by one of the other folks here. I just got a question on, again, just on revenue growth was -- overall revenue growth at 8% and even U.S. BoneScalpel revenue up 13. Are those good numbers for you guys? I mean maybe give us a perspective of what your expectations are?

Mike McManus

If you talk to people around here, you'd say they are sick and tired of me pushing them everyday to grow faster. There is sort of a tradeoff in terms of what we are accomplishing and how fast we can go. We have a wonderful metric system now that allows us to take a look at using Medicare numbers to know which doctors where in the United States are doing a lot of volumes with our products. And so we know what the targets are and we know what the value of the target is, if we get a percentage of their volume of use in a spine procedure, we know exactly what the dollar volume of that is. So spend a lot of time everybody has got some of the targeted list and we go to sell to the biggest fish. And sometimes that takes longer; sometimes more than one doctor as to sign off because it's a very active large hospital. But we are putting them in places that are high profile target. So the value of a high profile target even if it takes a little bit longer is better. It's more high value.

But if you look at the growth of the number of units that are being consigned in the United States, it's substantial. If you look at revenue from the disposables, it's substantial as well. The growth is pretty terrific. The way I look at the business is we need to get market penetration. For us market penetration is getting a BoneScalpel system in the hands of the right doctor who is going to use it frequently during the month. And so if you look at the number of units that are being placed over the six month period of time, you can see the substantial growth in the number of unit that are going to high profile doctors.

And secondly, you look at the growth in the disposables and its pretty terrific as a matter of fact, it's gone up to more than half of our total revenues were from disposables. So I think the growth is good, could be better, you bet.

Scott Billeadeau

Yes. Those are the metrics purely the placements and the razor blade revenue?

Mike McManus

Yes, absolutely.

Scott Billeadeau

All right. Thanks guys.

Mike McManus

Thank you.

Operator

And today's final question comes from Michael Kaufman of MK Investments. It's a follow-up.

Michael Kaufman

Hi, guys. Just one other thought. It looks like you got a real compelling story developing and I guess we talk on a few calls about whether there is any potential analysts too was thinking of covering the company. Could we get an update on that? And do you have any plans; I know you did one conference six months ago or three months ago, any chance of visiting some institutions to explain this opportunity because it is more complicated.

Mike McManus

Yes. Thanks for the question Mike. It's a good one. Yes, we are constantly talking to people that we believe could cover the company and we do it regularly. As you know Sidoti covered us previously and the gentlemen from Sidoti, who covered us, will ask the first question on the call Joe Munda left Sidoti and went to another firm in Chicago. We were hoping he will cover us from there. In the mean time, we are hoping somebody else at Sidoti will cover us. But, we are also talking to a number of firms that have the capability of covering a small company like ours.

As you know, part of the issue is the number of shares of stock that trade today. And so if you write a good research report, it's difficult they say for people to get in and out. So keep feeding them up on how they can look very smart by writing a story about Misonix is a good buy and when it goes up, they will make a lot of new friends and they will recognition. And we try to sell that story to a lot of people and we are hoping that some time in the near future not only Sidoti but one or two other firms will start to cover Misonix.

Michael Kaufman

I remember investing in [Hanson Brewery] [ph] at $10 million market cap which is now months -- but I don't know, $8 billion or something. So it can happen, the people who identify always got a lot of credit. So one -- just a last question, at some point there was some discussion that Covidien had a some lawsuit with somebody who was infringing on the patent which was Misonix's patent. Was there any progress on that because there would be some payment in Misonix, Covidien prevailed?

Mike McManus

Yes. So, yes, it was Covidien and Johnson and Johnson and Covidien had won in the early stage and I believe lost on appeal. And I haven't heard about whether they are going to appeal to a higher court. But they lost on appeal and so although we looked it in the early first court decision is something that could be a nice reward for Misonix, we are now waiting to find out whether Covidien takes it to the next level because as of the latest court decision, we wouldn't be entitled to anything and neither would they.

Michael Kaufman

Sounds good. Thanks for the update.

Mike McManus

You bet. Thank you for the question.

Michael Kaufman

Good luck.

Mike McManus

Thank you.

Operator

And this concludes our question-and-answer session. I would like to turn the conference back over to Mr. McManus for any closing remarks.

Mike McManus

Thank you very much operator and thank all of you for being on the call. As a follow-up to Mike Kaufman's usual good question, I just wanted you to know that for all of you that are interested we will be conducting an Investors Day next week Wednesday, February 17 at our corporate headquarters in Farmingdale, Long Island where we will be demonstrating our products, if you want to use them. Get some first hand experience on how our instruments work. We have a pretty good list already of people some of them are people that we hope maybe interested in covering this stock after they've used the products. And we have an open invitation to people to participate and that if you are interested.

If you would like to attend please call Joe Diaz at Lytham Partners at 602-899-9700, I feel like I'm on sort of a charity call or something right now, so the number is 602-889-9700. And he will make sure to provide you with the particulars and make the necessary arrangement. And we love to see you out here for all of the times that we talk about these products that makes a huge difference to come out and actually hold a BoneScalpel in your hand. Cut some bone, really get a sense of what the SonicOne does, it makes a big difference. And so we invite you to attend and we hope you participate.

In the meantime though, I thank you for all of your questions. We enjoy the opportunity to speak with you. And we appreciate your interest in Misonix. Thank you and good evening.

Operator

And thank you, sir. Today's conference has now concluded. And we thank you all for attending today's presentation. You may now disconnect your lines. And have a wonderful evening.

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