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Executives

Kevin Quinlan – Chief Financial Officer

Charles Sherwood – President & Chief Executive Officer

Analysts

Jim Gentrup – Discovery Investment Research

Mark Landy – Summer Street Research

Bill Gibson – Legend Merchant

Anika Therapeutics, Inc. (ANIK) Q1 2012 Earnings Call May 4, 2012 9:00 AM ET

Operator

Good morning, ladies and gentlemen, and welcome to the first quarter 2012 Anika Therapeutics investor conference call. My name is Jeff, and I’ll be your coordinator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session towards the end of this conference call. (Operator instructions) As a reminder, this conference is being recorded for replay purposes.

I will now turn the call over to Mr. Kevin Quinlan, Anika’s Chief Financial Officer, and you have the floor sir.

Kevin Quinlan

Thank you Jeff and good morning everyone. If you’ve not received a copy of the Anika news release, which was issued yesterday after the market closed or you would like to be added to our contact list, please contact Sharon Merrill Associates at 617-542-5300. The news release is posted in the Investor Relations section of our website at anikatherapeutics.com.

In addition, a slide presentation is posted on the Anika website that illustrates some of the points we’ll be covering during the call today. These slides can be found on the Investor Relations section under the Events, Webcasts & Presentations tab. We invite you to take a moment to open the file and follow the presentation along with us.

Please turn to slide number two. Before we begin, please remember that the statements made in this call, which are not statements of historical fact, are forward-looking statements as defined in the Securities Exchange Act of 1934. Words such as will, believe, appear, plan, expect, anticipate, forward, seek, continue, target, goal, objectives, on track, intend, pursue, outlook, as well as other expressions, which are predictions or indications of future events or trends and which do not constitute historical matters identify forward-looking statements.

These statements are based on the current beliefs and expectations of management and are subject to significant risks and uncertainties. The company’s actual results could differ materially from any anticipated future results, performance or achievements described in the forward-looking statements as a result of a number of factors, which include those set forth in last evening’s press release and the company’s SEC filings.

Please turn to slide number three, as I turn the call over to Anika’s President and Chief Executive Officer, Dr. Charles Sherwood.

Charles Sherwood

Thank you Kevin, and good morning everyone and thanks for joining us today. Anika began 2012 on a solid note with record first-quarter earnings and revenue resulting from a 22% total revenue growth for the quarter. That said, the quarter could have been even stronger.

We faced some ordering and supply chain challenges in our Woburn facility that pushed some shipments into the second quarter. I will speak to more details on this later on in the call. The fundamentals of our business continue to be strong. The growth on our top line continues to be driven primarily by sales of Orthovisc in our Orthobiologics franchise, both domestically and internationally.

For the first quarter, Orthovisc in the US market were up 27% from Q1 last year. Orthovisc sales grew 44% in markets outside the United States. On the bottom line, our net income was up substantially from Q1 of 2011. Product gross margin improved to 53% from 49% a year ago. We indicated that results from Anika S.r.l. would be inconsistent from quarter-to-quarter but profitable for 2012 as a whole, and S.r.l. did operate at a loss this quarter as they have historically done for the first quarter, following a very strong fourth quarter last year.

The normal trend was further exacerbated by a change in distribution partners in Italy due to performance issues. This change resulted in Q1 revenue softness as our new partner comes up to speed. Our R&D and SG&A expenses remain tightly managed company-wide, resulting in an EPS of $0.14 for the quarter.

From an operational perspective, as we said on our Q4 conference call in March 1, we received approval from the FDA in Q1 to manufacture Orthovisc and Hyvisc at our Bedford facility for sale in the United States. The FDA also recently approved our proprietary ophthalmic product for manufacturing in Bedford, also for sale in the US. We are currently working closely with Bausch & Lomb to gain approval for the manufacture of Amvisc, Amvisc Plus in Bedford, which we expect around the same time as we close Woburn, namely in June of this year.

Looking at some of our other operational areas, we enlisted the assistance of our Orthovisc distribution partner, DePuy Mitek, in helping us move forward with the FDA in their ongoing review of our PMA for Monovisc. More about this later in the call. And in addition, we continue to make progress towards initiating European clinical trials for Hyalograft C and Cingal.

I will discuss the recent activity in each of our product franchises, and conclude with some comments on the business outlook, after Kevin’s financial review. And with that, I will turn the call back to you Kevin.

Kevin Quinlan

Thanks Chuck. Please turn to slide number four in the presentation. I wrapped up my comments last quarter, by saying that we were looking forward to a better start to the year compared to the first quarter of 2011, and by growing revenue and earnings per share greater than 20% for the first quarter, Anika delivered on those expectations.

Total revenue for the first quarter of 2012 increased 22% from the first quarter last year to $14.4 million, and product revenue was up 23% year-over-year. Focusing specifically on the Orthobiologics franchise in slide number five, total franchise revenue for the first quarter grew 26% year-over-year to $10.1 million. The majority of this growth was attributable to strong sales of Orthovisc. In addition, international sales of Monovisc grew 30%. S.r.l. orthopedic sales were down slightly for the quarter.

The decrease was primarily due to timing of orders and weakening of the Euro versus the dollar. We hope to increase S.r.l. orthopedic sales in the coming quarters by expanding our distribution network for these products in markets outside of Italy, which Chuck will discuss later. Breaking it down geographically, Orthobiologics product revenue in the US domestic market increased 27% for the first quarter, compared with the same period in 2011. And international Orthobiologics including Anika S.r.l. grew 23% in the first quarter.

Both domestically and internationally, Orthovisc continues to drive overall revenue growth. Looking at our other product franchises on slide number six, product revenue for the first quarter in our ophthalmic franchise was up 47% reflecting increased product shipments to Bausch & Lomb. Chuck mentioned in his opening remarks that our performance could have been better in certain areas, and this is one of them.

Dermal franchise product revenue for the first quarter was down 15% from the first quarter last year, primarily due to lower than expected shipments of our Hyalomatrix advanced wound care product to the United States. First quarter product revenue in our surgical franchise decreased 12% from first-quarter last year due to order timing for our ear, nose and throat product line, which we expect to make up in future quarters.

This delay offset the very strong sales we had for our Hyalobarrier product in both Europe and Korea. Slide number seven covers our income statement highlights for the quarter and the year. Our first-quarter products gross margin increased to 53% from 49% in the first quarter last year. The increase was driven primarily by a more profitable product mix.

Operating income for the first quarter of 2012 was $3.1 million compared to $557,000 in Q1 of 2011, a 450% increase year-over-year. This improved profitability was driven mainly by our revenue growth, higher gross margin and lower SG&A spending, including last year’s cost savings initiatives. Net income for the first quarter of 2012 was up 489% to $1.9 million or $0.14 per diluted share from $324,000 or $0.02 per diluted share in Q1 of 2011.

The improved EPS was achieved despite the larger number of diluted shares outstanding as a result of our higher stock price. Our first quarter 2012 effective tax rate was 36.5%, slightly lower than our tax rate of 37.1% in the first quarter of 2011.

Turning to slide number eight, our research and development expense for the first quarter of 2012 was flat compared to the first quarter of 2011, both periods reflecting a relatively low level of clinical study spending. As I mentioned on the last two calls, we are planning to ramp up our preclinical and clinical activities in 2012, and we expect R&D spending to increase modestly in the second half of the year as we commence a clinical trial for our Hyalograft C product.

As shown on slide number nine, selling, general and administrative expenses for the first quarter of 2012 were $3.4 million, down 17% from the first quarter of 2011. The reduction in SG&A in Q1 was attributable to the classification of our unused Bedford manufacturing facility cost as G&A in the first quarter last year, and subsequently classifying it as manufacturing space this year, based on the FDA approvals received.

Turning to our balance sheet highlights on slide number 10, Anika closed the first quarter of 2012 with $34 million of cash and equivalents, compared with $35.8 million on December 31, 2011. We used $1.7 million of cash in operations during the quarter, typical for a first-quarter.

With the significant volume of orders already received, we expect to have a very strong second-quarter and full year 2012.

And with that I will turn the call back to Chuck.

Charles Sherwood

Thank you Kevin. Since our year-end conference call was only two months ago, I will focus my comments on the most recent developments in our business, and these topics are summarized on slide number 11.

Looking at the first bullet, in the Orthobiologics franchise, our flagship product Orthovisc continues to gain share in a highly competitive global market. In the United States, our distribution partner, DePuy Mitek, is more convinced than ever that Orthovisc has the potential to become the number one multi-injection product on the market.

They are pushing hard to make this happen, with a three part strategy that is continuing to work very well for us. The first element of strategy is to expand physician awareness and comfort with Orthovisc through active outreach to doctors in a wide range of physician specialties across the country.

This outreach is being reinforced by a fast and convenient distribution channel that consistently gets the products into the doctor’s hands with minimal hassles and administrative staff time. Mitek’s second strategic focus is reimbursement, building private payer acceptance for Orthovisc as a preferred multi-injection product, and getting on as many formularies as possible.

And third, they are doing a great job generating patient awareness of Orthovisc as an alternative to knee replacement surgery, and educating the market, particularly the baby boomer generation about its benefits. In markets outside the United States, Q1 Orthovisc sales were up 44% year-over-year, demonstrating both growing product awareness and the ongoing expansion of our international distribution.

Looking at the rest of our Orthobiologics franchise, the second bullet, we had mixed results this quarter. Sales of our orthopedic products from S.r.l. were down from Q1 of 2011 for the reasons stated previously. We are continuing to work on expanding distribution for our products in markets outside our home market of Italy, and we expect sales in Italy to rebound in the quarters ahead.

Going forward, as indicated by the third bullet, our plan for expanding S.r.l.’s orthopedic distribution channel remains focused on Hyalofast, as well as Hyalograft C autograft, the first cartilage regeneration product bioengineered for minimally invasive surgery. We made good progress this quarter towards initiating a randomized, placebo-controlled human clinical trial, and patient enrolment should begin as early as this fall.

Expanding our distribution and growing our sales of Hyalograft C first in Europe and then in the United States will be an important step towards realizing Anika’s vision to offer our portfolio of Orthobiologics products and run the gamut from palliative treatments to highly advanced regenerative therapies for healing damaged tissue.

Complementing Hyalograft C's potential as a therapy for trauma of the knee is our pipeline product Cingal, as single-injection viscosupplementation treatment for osteoarthritis that combines hyaluronic acid with a therapeutic agent. As we reported last quarter, we submitted our dossier for CE Mark approval of Cingal, which we believe has significant near-term sales potential in Europe.

Our clinical strategy for Cingal, particularly in the United States, should solidify after we get a definitive response to our CE Mark application later this year. A word is appropriate at this juncture on the status of our PMA application with the US FDA for Monovisc. As we have repeatedly stated, we believe, and Mitek concurs that the product should be approved on the strength of the clinical data that we submitted. This week we received word that our request for an appeal hearing with the director of the Center for Devices and Radiological Health has been granted.

We are currently working with the FDA to schedule the hearing within the next two months. As Kevin discussed, we also had mixed results this quarter in our dermal and surgical franchises. This decline in dermal primarily reflected lower-than-expected shipments of our Hyalomatrix skin substitute through our distribution partner Misonix. We did see a rebound in sales of our aesthetic dermatology product Elevess, albeit off a relatively low base.

Elevess is a good foundation product, a product that will be important in our dermal portfolio as we expand it with additional new products emerging from our development laboratories. Our ongoing growth trajectory in the surgical franchise was interrupted in Q1. S.r.l.’s anti-adhesion product Hyalobarrier continued to see very strong growth both in Europe, as well as in Korea through our distribution partner, the Korean Green Cross. This growth was offset, however, by order timing in our ENT product line.

We anticipate shipping these orders this year in future quarters, and continue to expect strong growth in the surgical franchise for 2012 as a whole. Moving on to the second to last bullet on slide number 11, the 47% first-quarter growth in our ophthalmic franchise reflected increased product shipments to Bausch & Lomb, and actually would have been greater had it not been for some ordering and supply chain issues we encountered in the quarter.

We are operating at peak levels, to complete the additional lots in process, at our facility in Woburn before shutting down this facility in June. Looking ahead, with the second B&L contract extension signed at the end of last year, we expect to continue to have significant shipments in revenue through 2014, but likely at somewhat lower levels than we have experienced with Bausch & Lomb historically.

Turning to the last bullet on slide number 11, as I mentioned earlier, during the first quarter, we received approval from the FDA to manufacture Orthovisc and Hyvisc at our Bedford facility for sale in the US, as well as for our proprietary ophthalmic products. We are now moving forward with Bausch & Lomb to obtain approval for the rest of their ophthalmic portfolio. This will be the final step towards significantly improving our operational efficiency by consolidating all of our manufacturing in Bedford, a process we expect to complete by the end of the second quarter this year.

Later in the year, we also expect to transfer the manufacturing of S.r.l.’s gel-based HA products to Bedford as well. In conclusion, we believe that Anika is well-positioned for further operational improvement and strong financial performance in 2012. Based on the orders we received thus far, we are expecting an excellent second quarter and are optimistic about the outlook for the second half of the year, and we look forward to reporting our progress to you.

And with that, I will turn it back over to Jeff so we can take some of your questions. Jeff.

Question-and-Answer Session

Operator

(Operator instructions) Our first question comes from the line of Jim Gentrup with Discovery Investment Research. Please proceed.

Jim Gentrup – Discovery Investment Research

Hi, good morning gentlemen.

Charles Sherwood

Good morning Jim.

Jim Gentrup – Discovery Investment Research

Last year, you had a sort of a catch-up I think in Q2 if I remember. So, when you talk about growth and having strong orders for Q2 this year, does that mean you still expect, you know, year-over-year growth, and then also if you could just maybe talk about the categories, the different product categories a little bit, such as surgical, and you expect surgical to catch up quickly in Q2 or, just a little more color on the growth?

Kevin Quinlan

Okay Jim, sure. The first part of the questing yes, we do expect the revenue in the second quarter will exceed the second quarter of last year. It is going to be led once again in the Orthobiologics area, but also the ophthalmic areas should be up significantly.

ENT it looks as if that will rebound as well. But I think that is about the extent of the comment at this point on that.

Jim Gentrup – Discovery Investment Research

Now, you said that also a pick -- I missed some of the prepared note remarks, did you have a distributor change, or what did you do, was it Italy only, or can you expand upon that a little bit?

Charles Sherwood

Yes, Jim. This is Chuck. We felt the need to change distributors in Italy for our S.r.l. products because of performance issues with our former distributor. The distributor that we now market the S.r.l. product through is the same distributor that has always marketed our Orthovisc and Monovisc products in Italy.

And we see some real opportunities for bundling, for developing some new key opinion leaders, and even for refreshing some of the brands working with this old but new distributor. So we are optimistic. As you might imagine, when you change operations from one group to another, there is some lag to catch up, and we experienced that during the first quarter. But we expect that we will have overall strong performance for the year as we become backup to full speed, and hopefully beyond what we did before.

Jim Gentrup – Discovery Investment Research

And then just on the, just the gross margin side 53%, nice growth over last year. But I would expect that probably to extend a little bit more, is that something that -- is that a correct assumption?

Kevin Quinlan

Our target is over the next few years is to certainly get much higher than that. And I think if you look back at some of the quarters last year, where we had more volume and more revenue, we were able to improve our net numbers. So yes, we have more revenue and volume. We would expect to improve on that number.

Charles Sherwood

Also I would add that, you know, getting out of Woburn will provide some benefit as well, and that will happen in June of this year.

Jim Gentrup – Discovery Investment Research

Now was this quarter kind of what you expected to start as seasonality this quarter, or was there more cost effects this year, maybe give us a idea of, you know, the seasonality effect?

Charles Sherwood

This is Chuck. I will give you some qualitative assessment and then if Kevin wants to jump in and be a little more quantitative he can. If you go back several years, with Anika Inc. what you’ll see is that first quarter is historically always our worst quarter of the year. And that seasonality it is coming of the first quarter for maybe some other reasons as well.

With the addition of S.r.l. they had absolutely the same trend. So we expect that things will significantly pick up in the second quarter, but it is not unusual to have a first quarter that is not very stellar, I mean, and it has been that way for years.

Kevin Quinlan

As Chuck has said in his opening remarks, it was a record quarter for us for the first quarter. And at $0.14 I think we were quite happy with the result.

Jim Gentrup – Discovery Investment Research

One more question, and I will let somebody else jump in. You mentioned surgical still expecting good growth for the year, can you say that about dermal as well?

Charles Sherwood

On the dermal side, part of the equation is the aesthetic product, and we think we’re going to see some good growth on the aesthetic side. We are going to have to wait-and-see on the advanced wound care products, and what is happening in the US market with our distributor there. So, I am less sure on that point.

Kevin Quinlan

We also had some market expansion opportunities. We are a little cautious about projecting the real benefit of that, but we think that will happen in the second half of the year as well.

Jim Gentrup – Discovery Investment Research

Okay. Thanks guys.

Operator

Our next question comes from the line of Mark Landy with Summer Street Research. Please proceed.

Mark Landy - Summer Street Research

Good morning folks.

Charles Sherwood

Hi, gross margin Mark.

Mark Landy - Summer Street Research

Hi guys. Just perhaps maybe to follow on a little bit of Jim’s line of questioning with respect to the quarterly pacing, you know, [inaudible] Chuck, you are right, I did go back and look at the first quarter, and it has been for a while the weakest quarter, but if we look back to the third quarter and the fourth quarter of 2011, the third quarter seemed to be a catch-up quarter for a couple of things that perhaps had been back over the second quarter. And in the fourth quarter, I think also had a little bit of catch up in there, and also some give up in perhaps ophthalmics. How did the fourth quarter look relative to that, was this more of a normalized quarter and I understand the distributor stocking is always lumpy, and that you did have some issues this quarter. But was this more of a normal quarter relative to the other two?

Kevin Quinlan

Yes. Mark this is Kevin. I would say no. As Chuck had said in his -- we also mentioned in the press release the quarter could have been better. And you know we had some orders, but mechanically in terms of the whole supply chain and being able to fill them, we came close to being able to do that. But we were unable to get it through our normal manufacturing process because of the timing of the orders.

So, we could have been more than the $1 million, $1.5 million higher in our revenue number. And I assume you are asking about the first quarter relative to…

Mark Landy - Summer Street Research

Right.

Kevin Quinlan

It being a -- is it a normal reflection of what we would expect?

Mark Landy - Summer Street Research

Kevin, I think you are on kind of a track of my question, I understand that each quarters have their own give and takes, but you know, if I look at the last three quarters, perhaps in the third quarter there was a lot more, you know, take than give up, given some back order filling the third quarter. The fourth quarter seemed to also have some catch all in it.

So just quantitatively, or rather than looking at it in terms of the hard numbers, did this seem to be more of a normal reflection of a quarter versus the other two, or is that always going to be lumpy, with the gives and the takes?

Kevin Quinlan

Well, this particular quarter I would describe as having had some lumpiness to it. We did have some slippage out of the first quarter of 2011 and that positively impacted the second and third quarters last year, and we have had through that supply chain item, we had some impact on Q1 this year as well.

Mark Landy - Summer Street Research

All right. And then in terms of the margin, the impact from closing down the Bedford manufacturing, or just the complete consolidation, sorry, Bedford consolidation, how much more margins should we think of that could go into the second quarter, third and fourth quarter or is it more a reflection of volume that will drive those margins and the SG&A?

Kevin Quinlan

I think the way I would look at it would be the impact of closing Woburn, and so we’re talking now about starting with Q3 of this year. The impact would be about $1 million a year, and you can quarterize that.

Mark Landy - Summer Street Research

Okay, great. That is 250 K a quarter.

Charles Sherwood

Yes, somewhere in that range.

Mark Landy - Summer Street Research

Okay, excellent. And in terms of the cash utilization this quarter, how much was attributed to S.r.l.?

Charles Sherwood

I would say nothing was attributed to S.r.l. the real cash impact was twofold. One, as you can tell, or will be able to tell when we file our 10-Q shortly, the inventory grew significantly. This is reflective of the fact that we are going to be closing down Woburn and needed to build up inventory, particularly in the ophthalmic area.

And then secondly, our cash collections were down a little bit. Nothing to be alarmed at, but just more to do with the timing of the shipments. So the combination of the two just caused us to use some of the -- use some cash from operations. We still expect to have strong positive cash flow from operations in 2012 as a year.

Mark Landy - Summer Street Research

Okay. All right, Kevin, I will catch up with you off-line just to understand some inventory work, and then where the collections, kind of where some of that was, but Chuck, if I look at slide eleven, perhaps maybe since I have a couple of questions relating to the business update, pursuing new opportunities for orthopedic distribution channels, I’m assuming that is US?

Charles Sherwood

That is correct.

Mark Landy - Summer Street Research

Okay. Would that be in traditional markets or in kind of some of the non-traditional markets as you -- relative to your business?

Charles Sherwood

We are looking -- we have got some initiatives going on in some markets in Asia. We are looking to increase our presence with some of our franchises in South America, and you know, we -- it is not a huge opportunity, but we have -- and are expanding also in the Middle East. So most of it is not related to the United States, and not so much related to Europe either.

Mark Landy - Summer Street Research

Have you identified your partners there, or this is something that is really in kind of the initial phases?

Charles Sherwood

We have identified some partners. We are doing some things in places like Korea, where we have some agreements. But it is very early on, so there is no revenue to speak of at this juncture. But we have been working on this for a while. And with some of our, particularly our Orthobiologics products that you might imagine there is some pretty significant interest.

There is also incredible interest for our aesthetic products. But it is our position that we want to fill out the product portfolio a little more with a couple of additions before we jump both feet into -- back into the aesthetics marketplace.

Mark Landy - Summer Street Research

Okay. Fair enough. And only two quick questions, and I will drop off. Kevin, could you quantify the word significance relative to the B&L contract extension, and then Chuck, just on the meeting that you are having with the FDA, you know, what do you hope to get out of that, those were the last two questions I have?

Kevin Quinlan

Mark, it is difficult to quantify the B&L piece because as you know, there was every expectation that could pretty much come to an end early in 2011, and we have had a series of good events in terms of continuing and expanding on a business that we thought was going to be going away. So, we know that there is -- will be business. There will be business in ’12, 2013, and 2014 with them, and that is great news. We are happy about that. But I can’t really quantify it.

Mark Landy - Summer Street Research

Does it get back to historical levels Kevin, or does it kind of just maybe perhaps approximate what you kind of perhaps shooting for this year?

Kevin Quinlan

It will be hard to expect it would be at historical levels. But then again, who knows.

Mark Landy - Summer Street Research

Fair enough.

Kevin Quinlan

I would have said the same thing about 2011.

Mark Landy - Summer Street Research

Fair enough. Fair enough. And then Chuck on the FDA?

Charles Sherwood

We filed an appeal for review of our Monovisc application. We were quite encouraged to get the meeting. The meeting will be held with someone on Dr. Shuren’s [ph] staff, who’s for lack of a better word, the top science guy, science and clinical person.

We intend to present our case. It will probably be our plan to bring some experienced clinicians to the meeting to review all of the data and the benefit of Monovisc as a therapy for osteoarthritis. So, we’re hoping to get that done in the next two months. The FDA actually have been quite cooperative in regard a response to our appeal very quickly. So it is incumbent upon us to make sure that we are extraordinarily well prepared.

We will also include J&J Mitek [ph] in our preparation. So, I think it will give us a legitimate forum to present all of our data in a light that is very objective, and we are optimistic that we will present a very solid case. What happens after that remains to be seen. It could go back for review. We could end up with some additional work to do. There could be a multitude of outcomes, but we’re quite satisfied that we are able to get to a presentation meeting, where we can objectively present the data, and have it be hopefully fairly evaluated.

Mark Landy - Summer Street Research

Thanks guys, and best of luck in that meeting.

Charles Sherwood

Thank you.

Kevin Quinlan

All right. Thank you.

Operator

Our next question comes from the line of Bill Gibson with Legend Merchant. Please proceed.

Bill Gibson – Legend Merchant

Hi, Chuck. In terms of the first quarter being able to ship more out of Woburn, and then you also mentioned changing distributors in Italy. Which had the greater impact?

Charles Sherwood

I’m going to let Kevin answer that one.

Bill Gibson – Legend Merchant

Okay.

Kevin Quinlan

I would say the first one, shipping the product out of Woburn.

Bill Gibson – Legend Merchant

Okay. And then just I guess what surprises me with

Lifecore [ph] operating a fraction of its capacity, is it quality of product that is giving you the continued business from Bausch & Lomb?

Charles Sherwood

Bill, I can only speculate. Two things have happened in Bausch & Lomb. One, I think their philosophy has changed a bit in terms of single supplier versus multiple supplier. Two, we have been there to meet their needs and I do believe that they have been very appreciative of the support that we have given and the product that we have delivered.

Of course we made money from that ourselves. As far as why Landec or Lifecore has been unable to supply product to meet B&L’s needs, I really don’t know the answer to that. It is pretty confusing to me because it has been quite some time.

Bill Gibson – Legend Merchant

Okay. Thanks Chuck.

Operator

Ladies and gentlemen, that does conclude the Q&A portion of our event. I would now like to turn the presentation over to you, Dr. Charles Sherwood, for closing remarks.

Charles Sherwood

Well, I just like to say thank you to everyone who joined us on the call today, and Kevin and I look forward to presenting the results of the second quarter to you here in a few months. Thanks.

Kevin Quinlan

Thank you.

Operator

Ladies and gentlemen that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a wonderful day.

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