SANUWAVE Health's (SNWV) CEO Kevin Richardson on Q4 2015 Results - Earnings Call Transcript

| About: SANUWAVE Health, (SNWV)

SANUWAVE Health, Inc. (OTCQB:SNWV) Q4 2015 Results Earnings Conference Call March 31, 2016 10:00 AM ET

Executives

Lisa Sundstrom - CFO

Kevin Richardson - Chairman and CEO

Pete Stegagno - VP, Operations and Regulatory Affairs

Iulian Cioanta - VP, Research and Development

Analysts

Brian Marckx - Zacks Investment

Stephen Axelrod - Wolfe Axelrod Weinberger

Operator

Greetings and welcome to the SANUWAVE Health 2015 Financial Results and Business Update.

At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Lisa Sundstrom, CFO of SANUWAVE. Thank you, Ms. Sundstrom. You may now begin.

Lisa Sundstrom

Thank you. Good morning. We appreciate your interest in SANUWAVE and in today’s call. Yesterday afternoon, SANUWAVE announced our 2015 financial results and filed our annual Form on 10-K with the SEC. If you have not received the news release or would like to be added to the Company’s distribution list, please call SANUWAVE at 678-578-0103 or go to the Investor Relations section of our website at www.sanuwave.com.

Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of SANUWAVE. We encourage you to review the Company’s filings with the Securities and Exchange Commission, including without limitation our forms 10-K and 10-Q which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, March 31, 2016. SANUWAVE undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

With that said, I would like to turn the call over to our Chairman of the Board, Kevin Richardson.

Kevin Richardson

Thanks, Lisa. Good morning, everyone, and thanks for joining us. At SANUWAVE, we had a robust fourth quarter. As previously announced, orders were very strong which led to the strong revenues internationally and a backlog that carried over into a really good start for 2016. We continue to work with the FDA on the FDA trial and in February submitted our pre-submission package to the FDA. We have a meeting scheduled for later next quarter. We’ve been particularly quiet over the last past 90 days as we have been in a capital raise which we announced first close on March 11th of $1.5 million.

The team performed extremely well getting an S-1 through the SEC and having a fully registered in effective offering while at the same time registering the shares associated with the well executed warrant conversion. These were not easy tasks, but necessary to help improve our capital structure to get to the goal of receiving FDA approval. Pete will spend some time walking through specifics with regard to the FDA.

But right now, let me turn it over to Lisa. Thanks Lisa.

Lisa Sundstrom

Thank you, Kevin. Revenues for 2015 were [$966,000] [Ph] an increase of $118,000 or 14% from prior year. Our revenues result primarily from sales in Europe, Asia and Asia Pacific of our orthoPACE and dermaPACE devices and related applicators. The increase in revenues for 2015 is primarily due to an increase in the sales of orthoPACE devices in Asia Pacific and the European community as compared to the prior year as well as higher sales of new and refurbished applicators.

Research and development expenses for 2015 were $2.2 million, a decrease of $828,000 or 28% from the prior year. The decrease in 2015 is a result of lower cost for clinical sites participating in the dermaPACE clinical study as there were a fewer active patients in the clinical study and that amount is partially offset by higher consulting expenses related to the calculation and analysis of the data.

General and administrative expenses for 2015 were $2.7 million, a decrease of $534,000 or 16% from the prior year. The decrease for 2015 was primarily due to higher consulting expenses in 2014 related to the capital raises completed in March of that year. This decrease is partially offset by stock compensation expense related to stock options issued to employees, Board of Directors and medical advisors and also increased legal fees in 2015 related to employee matters and patent filings.

Our net loss for 2015 was $4.8 million or $8 per share compared with a net loss of $6 million or $0.12 per share in 2014, a decrease in the net loss of $1.2 million or 19%. The reduction in the net loss for 2015 was a result of the reduced operating expenses in 2015, which I just discussed, and lower interest expense in 2015 related to promissory notes that were issued and outstanding during 2014.

Looking at our cash flows, as of December 31, 2015, we had cash on hand of $153,000 compared with $3.5 million at December 31, 2014. Net cash used by operating activities was $3.5 million for 2015 compared to $6.7 million for 2014. The decrease for 2015 in cash used for operations was primarily due to lower operating expenses in 2015 and the reduction of accounts payable and accrued expenses in 2014. We continue to project that our cash burn rate from operations will be approximately $175,000 to $225,000 per month in 2016 during the preparation of the submission strategy to FDA and the actual submission to the FDA.

Now, let me turn the call back to Kevin Richardson for a business review.

Kevin Richardson

Thanks, Lisa. Now, we’ll have Pete Stegagno, our VP of Operations and Regulatory Affairs walk you through the status of the dermaPACE clinical trial. Pete?

Pete Stegagno

Thanks, Kevin, and good day everyone. Late last year, we reported preliminary top line data in the supplemental clinical trial for dermaPACE in the treatment of diabetic foot ulcers. In this supplemental trial and in the first Phase 3 pivotal trial, the primary endpoint was to assess the effectiveness, which is defined as the incidence of complete wound closure of dermaPACE and Sham-control groups 12 weeks post-initial application. While superiority was not demonstrated at 12 weeks, superiority was demonstrated at 20 weeks and 24 weeks post-initial application.

As we have previously reported Study 2 does not demonstrate superiority in the total patient population at these time points, p values of 0.339 at 12 weeks and 0.254 at 24 weeks. The overall population indicates that the device does offer benefit to patients at a very low risk. The wound closure rate for dermaPACE at 24 weeks in Study 2 was 35.4% compared to 26.2% in the Sham-control.

On a combined basis, at the 12-week endpoint, the total of 39 out of 172 patients or 22.7% of using dermaPACE had complete wound closure, compared to 30 out of 164 or 18.3% in the control group. There was no statistically significant difference in wound closure at the 12-week follow-up between the dermaPACE and control group. However, in subsequent visits, a trend toward significance was shown resulting in significant difference by the 20-week endpoint that was maintained through the end of the study.

At the 24-week endpoint, the rate of wound closure in the dermaPACE cohort was 37.8% compared to 26.2% for the control group, resulting in a p value of 0.023. These results do demonstrate an assurance of effectiveness of later time points when using dermaPACE system, when looking at an endpoint of complete wound closure.

Our next step was to continue to analyze the data for secondary endpoints involving wound closure, wound reduction and Time-to-Closure. Here we found that the dermaPACE arm performed significantly better as compared to the control arm. In Time-to-Closure analysis on the combined study data, the proportion of patients with wound closure indicate a statistically significant difference between the dermaPACE and the control group in the proportion of subjects with the target ulcer not closed over the course of the study for p-value of 0.0346.

Approximately 25% of dermaPACE subjects reached wound closure per the study definition by day 84, which is week 12. The same percentage in the control group, 25%, did not reach wound closure until day 112, which is week 16. These data indicate that in addition to the proportion of subjects reaching wound closure being higher in the dermaPACE group, subjects are also reaching wound closure at a faster rate when dermaPACE is applied.

The mean wound area reduction for both cohorts was analyzed and the mean wound reduction for dermaPACE subjects at 24 weeks was 1.92 centimeter squared compared to 0.16 centimeter squared in the control group.

There was a statistically significant difference between the wound-area reductions of the two cohorts from the 6-week follow-up visit through the end of the study. Because means can be influenced by outliers in the data, the median wound reduction was also reported in [favored] [ph] dermaPACE. This data is important by identifying the fact that dermaPACE has a significantly positive effect in reducing the size of wounds. The effective wound reduction equates to effective wound management.

An analysis was performed on subjects who had 50% wound area reduction maintained at two consecutive visits. At 12 and 24 weeks, the dermaPACE group has a higher percentage of subjects with the 50% wound reduction compared to control, p values of 0.0554 and p of 0.0899 respectively. Both time points demonstrate a trend toward statistical significance. An analysis on the number of patients reporting an increase in wound size demonstrates that a significantly greater proportion of Sham-control subjects had an increase of at least 10% in their wound area. This indicates that not only does dermaPACE aid in wound healing meaning a decrease in wound size, dermaPACE also may prevent wounds from getting worse, which is increasing in wound size. The differences are statistically significant in favored dermaPACE with the exception of week 2 and week 24, which are both trending towards significance.

The success results at 12 and 24 weeks have been stratified by demographic characteristics to determine if any notable differences were identified when each characteristic is compared. At 12 weeks, the only statistically significant difference observed between the two groups was in the subjects who were greater than or equal to 70 inches in height. The percentage of dermaPACE subjects who had a complete would closure in this group was 30% compared to 14.1% in the control group. At 24 weeks, several subpopulations demonstrated a statistically higher percentage of wound closure in dermaPACE subjects compared to the control subjects.

Subjects with age less than 65 years, BMI less than 32, height greater than or equal to 70 inches in male subjects all had success rates statistically significantly higher than the control group, which would be a p value less than 0.05.

In addition to efficacy, we were pleased to see that the safety data in the second trial was very favorable for dermaPACE, validating the results that were seen in the first trial. The primary safety endpoint of the overall rate of adverse events throughout the 24-week study was not statistically different between dermaPACE and Sham-control. The total number of serious adverse events related to application site infections was reduced in dermaPACE and no issues regarding the tolerability of dermaPACE treatment was shown throughout the application, treatment and follow-up periods of the study.

In addition to a lower rate of serious adverse events, the dermaPACE cohort exhibited a lower rate of target ulcer recurrence and amputations. The recurrence rate for dermaPACE patients was 7.7% compared to 11.6% in the control group, a p value of 0.490. The percentage of patients that had to undergo amputation of the target ulcer was lower in the dermaPACE as well, 2.3% versus 3% and p value of 0.745 respectively.

In conclusion, compared to the control, the dermaPACE data demonstrates a greater reduction in wound size beginning very early in the treatment regimen and a lower number of subjects with an increase in wound size all the while demonstrating a very safe delivery profile.

Additionally, wound closure at later points in times significantly favored dermaPACE. As such, dermaPACE could be a factor in reducing the risks of infections, amputation and comorbidities associated with diabetic foot ulcers and improving the patient’s quality of life, all the while affording the treating clinician the opportunity to effectively manage the wound. The adverse events associated with the dermaPACE treatment were compared to those seen in the control group in both incidence and type. These events are most likely a result of the diabetes of the foot ulcer rather than the actual dermaPACE device treatment. We also see that various subgroups of patients respond significantly better. This gives us a key insight for developing follow-on studies.

What’s next? First, SANUWAVE has previously reported that we met with FDA to discuss proposals for additional analyses of the trial data beyond complete closure at 12 weeks. SANUWAVE was aware of the time that success would not be achieved at 12 weeks based upon interim analyses of the data monitoring committee. SANUWAVE presented these facts to FDA. The FDA stated they were on board with our plan to analyze additional secondary objectives, but that we should maintain the prospectively defined primary endpoint of complete wound closure at 12 weeks. They also stated that they will review a submission and make a final decision on approvability, taking into account the totality of the results, looking at primary and secondary endpoint analyses as well as subgroup analyses.

Importantly, all efficacy data will be reviewed in the context of the benefit and risk profile. In February of this year, SANUWAVE working with our regulatory consultants, musculoskeletal clinical research associates sent a pre-submission package to FDA outlining the data analyses I have just presented. We requested a face-to-face meeting with the FDA to discuss the results and to discuss submission strategies. We will be meeting with FDA late April or early May. Our expectation for this meeting is to gain agreement with FDA in determining the most expeditious route to product approval. We will report the results of this meeting in May.

With that said, I’ll turn it back over to Kevin.

Kevin Richardson

Thank you, Pete. Lisa will summarize the progress have made internationally? Let me turn it back over to Lisa now.

Lisa Sundstrom

Thank you. Our international sales have continued to expand with an increase of 38% in device sales in 2015 as compared to 2014. This was due to sales of our orthoPACE device in South Korea which is becoming a key market in the use of our technology, and sales of our orthoPACE device in Italy, which has always been a key market in the use of our technology for treating tendinopathies such as for knee and shoulder pain. In addition, in South Korea in conjunction with our exclusive distributor, we achieved approval for use of our device for wound care. A distributor already has approval for our orthopedic device, orthoPACE. We will continue to provide updates as these efforts continue to progress.

And now, I’ll turn it back to Kevin.

Kevin Richardson

Thanks Lisa. As you just heard, in 2015, we had many accomplishments that we’re proud of. But now we can look forward and tell you what you can expect in the near-term. First, we’ll begin the submission process with the FDA; second, we will conclude the equity offering which will help us fund our approval process through the FDA. As we’ve stated before, when the product is approved, we think the adoption will be quick because the patient will benefit from the convenience and ease of the application and the fact there is no surgery. The physician benefits because you will make more money on his time spent on the treatment. Finally, payers will benefits as the pricing is much more competitive than the current available offerings in the advanced wound care space.

Let me stop there. I know there might be a lot of questions. So, we’ll open it up for questions at this point in time. Thank you.

Question-and-Answer Session

Operator

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] We do have a question from the line of Brian Marckx with Zacks Investment. Please go ahead with your question.

Brian Marckx

I apologize. My phone -- I had some problem this morning I think it clicked on and off about three times through the call, so I just got back in. So, I wondered if you can go through the studies again. In terms of what hit statistical significance and what didn’t. So, I know on the 12-week endpoint neither of the studies hit. So, at 20 and 24 weeks, can you give me the breakdown between the two?

Kevin Richardson

So Brian, I am going to turn it over to Pete in a second. But, we’ve let people know once we found out about the primary endpoint which was 100% closure 12 weeks. We’ve let people know we weren’t there. But in meeting with the FDA back in June of last year, again, they saw a lot of the data in the sub-indications and that’s what Pete will go over. We’ll talk about what weeks we got to the 100% closure on a statistically significant basis. Some of the subgroups and some of the areas that I think are important to think about or just getting the wound moving in the right direction, so speed at which the wound area reduction and then the wounds that we can get over 50%, so there is a few other sub-indications, again that we’ve pulled from the data that the FDA has found particularly interesting.

And it’s mainly driven partially by the clinicians that are out there that really view diabetic foot ulcers in wound care as a chess match. And they think about -- we tend to get caught up in a silo approach to how we think about treating a wound. And the clinician who is dealing with the wound that’s been open, in this case, our 336 patients, I think the average age was 13 months. So, these are wounds that are old, they are impacting the person’s life, and they are looking for ways, anything that can help move them in the right direction, so they might tackle this with more than just quite frankly our device. But the one thing we know is that if we can get the wound healed 50% or started on that healing path, it gives the clinicians a lot more flexibility with how to treat it if it’s 98% closed. So, that’s a broad picture backdrop. But I’ll let Pete go through the specifics of where we had statistical significance, in particular what we’ll be focused on with the FDA. And Pete, if you can just conclude on the safety side as well, just because I think that’s a large factor relative to some of the other advanced wound care therapies out there. We tend to trend a lot more safe or safer than other modalities. So, Pete?

Pete Stegagno

Sure. I mean repeating ad nauseam, we did not get the primary at 12 weeks. So, we stated that. Where we have had successes is everywhere else. We’ve had success with wound area reduction and maintain the significance for wound area reductions starting at six weeks all the way to the end of the study. We did actually see not only a significance of wound closure at 20 weeks; it was suggested at 18 weeks, we could actually see the trend going towards significance at roughly 14 and 16 weeks. We did get statistical significance at 20 weeks and then 24 weeks.

In subgroups, we, as far as wound closure goes, we did have significance at 12 weeks for patients with a BMI of 32 or less. And then we also did have significance in patients taller than 70 inches. So, tall skinny people responded quite well to dermaPACE. And I don’t mean to be [indiscernible] but what it does show is that larger patients, particularly obese patients are in a disease state that at least this particular protocol didn’t seem to have as significant an effect. It did have an effect but not in a statistically significant fashion.

So, this is actually helping us in crafting forward planning for additional studies and follow-on studies. So, it was actually enlightening for us.

In addition, while we didn’t have significance in recurrence, our recurrence rate is right around 7%. If you compare that to other modalities, if I recall, Dermagraft was around 20% and Apligraf was closer to 40% recurrence, which required additional treatments after reopening. What we’re finding is that the dermaPACE treatment is extremely robust. And once the wound closure is achieved, it stays closed. So that’s significant for the quality of life for the patient, for the treating clinician and for cost associated with treatment.

So, overall, what we’re finding is that wounds close faster for dermaPACE; they reduce faster and more significantly than Sham-control. We also find that the control group actually will show a worsening of the wound area, meaning that area gets larger and that we do have complete closure at later points in time.

Where this is beneficial is the fact that we with a high safety profile, number one the tolerability of the treatment as very good, the patients have [indiscernible] complaints about the treatment, requires no anesthesia. So, the tolerability is good. It’s very quick. It can be used in conjunction with a [indiscernible] but the overall benefits of the dermaPACE is showing that they have lower risks of infection, lower [indiscernible] of the target ulcer foot and also faster reduction in wound area. So from an overall wound management perspective, we believe that the dermaPACE will be quite useful in the wound management regimen for any clinician.

Brian Marckx

Pete, can you give me, in terms of the 100% wound closure, if we just focus on that and then give me at the 20 and 24 weeks the pivotal, the supplemental and then combined; where you hit statistical significance on the 100% wound closure?

Pete Stegagno

I may not have all the numbers in front of me. At 12 weeks, neither study achieved significance. I don’t have the numbers in front me. So, I won’t try to go off with memory. At 20 weeks, it did achieve significance in the pivotal -- first pivotal trial. We did not have significance [indiscernible] Study 2. On a combined basis, the result for wound closure at 20 weeks was significant. I think it was 0.346 for p value -- 0.0346 of value, and then also at 24 weeks, we had that as well. And that was…

Brian Marckx

And that was on the combined, right? So, how about the 24 weeks with the supplemental study, was that -- did that hit statistical significance?

Pete Stegagno

No, it did not.

Brian Marckx

Okay. The pivotal obviously did.

Pete Stegagno

Pivotal, and then on the combined basis…

Brian Marckx

It did, okay.

Pete Stegagno

We did a poolability analysis and they were very few differences between the patient populations in the two groups. So, the ability to pool the data, we’ve proven statistically is valid.

Brian Marckx

Okay. Given that the supplemental study didn’t show statistical significance, and that one used the treatment boosts, yet the pivotal did show at 20 and 24 weeks, which didn’t use the treatment boosts, how do you -- I guess how do you kind of explain that? It’s somewhat counterintuitive. Is it patient makeup or maybe wound size or is there something else in the data that might explain the difference there?

Pete Stegagno

In the subgroup, we did have significance in the second trial. We did have significance for patients with the BMI less than 32. The maximum value for the BMI for any patient to enter the trial was 40, which is -- 32 is patients who are in better health, and speculatively speaking, possibly better control of the disease state.

So, what we’re seeing -- in the both trials, we had a one protocol, one treatment fits all type of approach. And especially what we’re seeing in the second trial is that certain subgroups responded significantly better to the dermaPACE treat than did the entire population as a whole. So, what we’re looking at is the possibility that the larger patients maybe wheelchair-bound and/or just have, with their weight problems have much harder ability to control to the diabetes in the disease state. And this subgroup, diabetes patients themselves, they can be extremely seek. And so, what we’re speculating, again, to speculating is that for larger people who don’t have the diabetes under control, just there so many additional comorbidities that are associated with the disease state that may have an effect and limit the ability of dermaPACE to get complete wound closure. We did see wound area reduction beneficial for all group; it was just the wound closure proportion.

Kevin Richardson

And Pete -- it’s Kevin, we saw in study, supplemental versus pivotal, an increase both in our device in closure rates but the Sham actually improved pretty dramatically as well. So, that’s at the -- one of the things that was different in the second trial versus first trial is that Sham actually had a better rate of healing for whatever reason, maybe standard of care has gotten better over the subsequent three years. But that was another element to why the statistics came out the way they did.

Brian Marckx

So, do you see it somewhat as an anomaly? What the treatment boost? I guess it seems somewhat counter intuitive that you wouldn’t see better efficacy with treatment boost, right? I understand the patient populations are identical and the wound sizes and there can be differences in there, maybe that’s what explains it, I don’t know.

Kevin Richardson

And there were -- in the supplemental, the healing -- a lot of the results were better with the device. The problem, like I said is that the Sham actually performed even better, which if you kind of look at other studies that have occurred within the diabetic foot ulcer space, I would say that our first study was probably on the low side from a Sham closure rate at 12 weeks and the second study was on the high side. And when you combine them, which is how FDA is going to look at it, was probably spot on. But when you compare it that way -- and Pete can help me here in a second, but that was my interpretation of some of how Sham performed in Study 1 and then Study 2, was worse than maybe anticipated in Study 1 and better than anticipated in Study 2. And that change was big enough to cause the statistics relative to the device to skew a little but the device itself actually performed as expected, maybe a little better in Study 2. Pete, help me out there, if I butchered it.

Pete Stegagno

You got it right, Kevin. It was the number of patients in the second trial [technical difficulty] to do about the whole Bayesian analysis and that was -- all of that was based on the rates of closure that we saw in the first trial. We anticipated an improvement in the Sham-control closure but we didn’t anticipate the level of closure that we saw in the second trial compared to the first. The level of closure in the second trial actually meets pretty much what you see in literature. So, it’s not that they did any better than any other cohort in other trials but it just -- they just did better compared to the first trial. And because of how that figured into the Bayesian analysis that’s what affected the results as they were and predictions and anticipations. By a statistician that looking at the trends that we’re seeing at 130 patients when we stopped, had we done a full frequencies analysis -- study of 250 to 300 patients, it was in his opinion, it was highly likely we would have seen success on the dermaPACE side.

Brian Marckx

Okay. If you can just talk about what your expectations are regarding the meeting, the upcoming meeting with FDA; and then your thoughts in terms of an eventual filing and what you would expect to use as an endpoint; would it be the 20-week data, or the 24 week data? And would you need to stick to in your opinion what FDA has required in the past, which is the 100% wound closure or is there an opportunity potentially to use some of the secondary endpoint potentially as a primary?

Kevin Richardson

Before I let Pete dive in, just as a backdrop, ever since we started the supplemental trial, it’s been a very collaborative engagement with the FDA. And I think that’s been something I give kudos to Pete for approaching it that way with the statistician and then bringing on [indiscernible] to help us, where it’s been of pretty robust in open dialog about how to work best with the device because the group we’re working with the FDA sees that there is something going on and they’re trying to figure it out. And I think we’ve explained it now well enough with the 336 patients, so we can get to closure at a later point than our primary endpoint. But I think they want to understand as they’ve said, time and time again the totality of the data. And they also know that it’s a very safe product. And that’s one of the things that in the wound care space, you are dealing a lot with the pretty unhealthy people where infection rates are probably on the higher than average side. And then there are some treatments out there that get a black box label. And we’re coming along with something that’s extremely safe.

And as Pete’s pointed out, it can be used in conjunction with other modalities. And so I think, they’ve been very open in working with us and are trying to help us; I don’t want to say thread a needle here but effectively find some way that we could get the product on the market, so that we can start using it to help treat, which is a problem which isn’t getting taken care of with the current standards out there or they come with added risk.

So, Pete, maybe I’ll turn it over to you but as a backdrop, they’ve been extremely helpful in helping us shape things and giving us feedback and input, so that we could get to the point where we have our meeting coming up in a few weeks. The point of that meeting is really to figure out exactly what it is that we’ll submit, so that they can have, quite frankly, the easiest time possible to or the least controversial way possible to help us bring our product to market.

Pete Stegagno

I mean, basically you have said in the nutshell, Kevin. We have all the data in front of us. We have closure data at 12 weeks and every week that we monitored the patients and our primary is wound closure. What we also have are secondary analyses of the primary; we have secondary endpoints; we have safety endpoints that are all highly favorable for dermaPACE. So, we don’t have any one particular submission strategy right now. That’s the key point that we’ll be talking to FDA about in this meeting later, hopefully at the end of April or early May at the latest. And we’ll have the data presented; we’ll suggest certain submission strategies for it. We’ve also asked FDA what additional analyses they’re interested in. And we anticipate them coming back with at least a few, so we’ll put our statisticians to work quickly after that’s identified. But once we leave that meeting, we’ll have a very strong feeling as to how the final submission strategy will be put together. So, sorry to be a little vague but we’re still -- the biggest thing is to talk to FDA, and as Kevin said, collaboratively come to a strategy.

Brian Marckx

Okay. So, following that meeting, and I’m not going to hold you to it, but is it your expectation or hope that you will be able to say something publically, shortly after the meeting about exactly what your strategy is or will there still need to be potentially some data analysis and some other conversations, I guess or anything?

Kevin Richardson

Yes, we’ve been very -- the second we get the information, we tend to spend time internally, making sure we understand it, analyze it, we have the Board review it, and then we share it. And that’s just the policy we’ve always had and good, bad or otherwise. And so far, it’s been quite frankly more on the bad side, just because of the primary endpoints. But we always try to come out as timely as possible with that information. Assuming we have a meeting with the FDA where they’re asking for some further analysis, we do that analysis, and if there is any follow-up, we’ll let the market know, let people know, once we have a good understanding of it, so that we feel comfortable with letting people know, hey, here is what we’re doing with the FDA and here is what you can expect from a timeline standpoint. So, I would expect something like that probably a few weeks, meaning two to four, two to six weeks after we meet with the FDA, because we know they’re going to ask for something. We don’t know what it is. But they’re going to ask for some further analysis. And after that analysis is done, then we will probably come out and say, hey, here’s where we’re at and here’s what we expect as far as the process goes. And again, we’ve been trying to work collaboratively with them. So, we would expect that to continue.

Operator

[Operator Instructions] Our next question is from the line of Stephen Axelrod with Wolfe Axelrod Weinberger. Please go ahead with your question.

Stephen Axelrod

I think you’ve made a great progress over the last period of time, and I just have a couple of things if I could. One, first, my conclusion, I think that you’ve mentioned that compared to alternative technologies that are on the marketplace, this stands out as being essentially much more efficacious; is that correct? That’s number one.

Kevin Richardson

So, I’ll answer them as you’re asking but as far as efficacious, the other modalities that are out there that are -- go with their gross closure rate, so they can close at a higher rate than we can from an efficacy standpoint at an earlier point in time, meaning some of the surgical procedures, but they also have a pretty high recurrence rate, and some of them actually come with a black box label. So, where there is, if things go bad it’s really bad. So, I would say, when you look at us, you have to look at the safety profile, the convenience profile and compare that as well with the efficacy. And I’d say, we stand up extremely well against the other competitors that are out there. But there are some modalities out there that are more effective on a gross basis when you look at it on a net basis for recurrence. We’re more or less in the same ballpark. I mean statistically, I am sure there are some differences but we’re all somewhat similar. I think the big benefit for us is the safety factor and the convenience factor, and the fact that we can get the vascularization occurring fairly quick in the wound area reduction piece of it. So, our approach is going to be more about the wound management aspect of it when we’re going to market.

Stephen Axelrod

I am sure the patient is going to be very happy to hear that. The second thing I had, you previously announced that you received the patent for Special Reflectors. I don’t know if it’s been used on the dermaPACE as yet and if it has, hasn’t been; I wondered that you think that that will have any bearing on the ability to close wounds quicker by using these new reflectors?

Kevin Richardson

I am going to turn this over to you Iulian real quick, but -- because he is our expert on R&D and technology, but for the most part, the answer is, it’s not going to change anything today. It’s more about; we have a product plan and a product development plan that we’re going to implement where we can add some functionality to the core power device. We can make changes and adaptations to the applicators as well over time. And I think it’s just good business that we’re always constantly trying to innovate, so we can bring the latest and greatest technology, so that we’re improving the product, bringing -- driving cost down and improving the functionality. And those are two things that are going to differentiate us in the marketplace over time as that if we can continue to improve the product, continue to improve the efficacy, the functionality. That’s what is going to drive more use of the product. But, I’ll turn it over to Iulian real quick too.

Iulian Cioanta

Yes, you’re right. I mean whatever we develop here from the R&D point of view, we’re trying to improve efficacy of those devices. And yet that different kind of reflector designs that can do that by treating a larger surface in one pass or putting more energy into the tissue. Also some other reflectors are used to put the energy deeper into the body for other applications. So, all these kind of new approaches they are looking to make the technology much better, much more efficient.

Stephen Axelrod

Thank you. I appreciate the answer and I think that’s a good sign as well. Good luck. Hopefully, the FDA will see it appropriately as well.

Operator

Thank you. [Operator Instructions]. Our next question is from Jimmy Guy, [ph] private investor. Please go ahead with your questions.

Unidentified Analyst

Kevin, given that you have approval in foreign countries to sell the device, did it make sense to try to get a strategic partner, so you can drive those sales in these foreign countries, so you have more of the bandwidth to go after people?

Kevin Richardson

It’s a great question. Over the last year, we’ve been relooking at a lot of what we’re doing internationally. And I think we began to see the fruits of that effort kick-in in the fourth quarter this year when we had more demand than we could handle internally. So, we actually had a backlog spillover into 2016. We’re seeing a lot of demand come out of our Korean distributor. He’s doing a great job. I was over there last week at one of the big tradeshows and he’s got six people on the ground, staff out selling and pushing for sales. And he just got the approval to treat wounds. And so, I think it’s got to be country by country when we look at our distribution strategy.

There are certain markets where -- specifically I’ll Korea, [ph] he has a great local knowledge; he has actually sold a lot of our competitors’ product into the market in the 2000s. And so, he has a very good knowledge of the market space. There are other markets where we have zero penetration; I think you’re spot on. And we’ve had conversations with some of the larger players specifically in Europe and we’ll be heading over there in May to sit down and really hammer out some hopefully broader relationships. We’re not in every country right now. We know that we’ve got good data now to support the dermaPACE product. And so I think you’re going to see us make a bigger push specifically in Europe. But, right now the one that’s driving a lot of our growth is in Asia. We just kind of kicked things off with Australia; Canada just started to kick off late last year. So, we’re beginning to see the benefits on a country by country basis. But I think you’re spot on, we’re looking at a broader relationship where they can really drive revenue for us is something we need to focus on. So, it’s a great question. And I am hoping we can -- when we give an update after the second quarter, have some things that we can talk about as far as the expansion of those relationships.

Operator

Thank you. At this time, I would like to turn the floor back to Kevin Richardson for closing remarks.

Kevin Richardson

Thank you very much everyone for joining us. As we’ve stated, we have a busy month ahead of us with the FDA meeting coming up. We’ll let people know as soon as we can as far as how that goes. The pre-submission package is in and we’re doing a lot of analysis, so we can help the FDA get us to an approval point. We also have had good success so far in raising capital and it’s what will get us to the FDA approval process, so we can then expand the market domestically. And then internally, we’re just very excited about the opportunities there. Our pipeline and backlog internationally is extremely strong right now and it should bode well for the remainder of 2016. So, we’re looking forward to continuing what we’ve done in the past, which is try to expand internationally, focus on getting FDA approval and then expanding our patents and specifically trying to gain some ground on the non-medical side as well. If anyone has any questions, please feel free to reach out to the Company and we can set up the call or answer questions via email. Thank you very much. Have a good day.

Operator

This concludes today’s conference. Thank you for your participation. You may now disconnect your lines at this time.

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