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ResMed Inc. (NYSE:RMD)

Deutsche Bank AG Health Care Conference Call

May 8, 2012 10:00 am EDT

Executives

David Pendarvis – Chief Administrative Officer and Global General Counsel

Analysts

David Low – Deutsche Bank

David Low – Deutsche Bank

Good morning, everyone. My name is David Low. I cover Healthcare stocks out of Australia, including ResMed, which has obviously got dual listing. Today, we've got David Pendarvis, who is the Chief Administrative Officer at ResMed. David's got ten years' experience at ResMed. And he's going to give us a presentation and then take a few questions. Thanks very much, David.

David Pendarvis

Fantastic. Thank you, David, and thanks to Deutsche Bank for having us, and for covering the ResMed both here, obviously, and down on the Australian Stock Exchange, where we are dual listed. So, the forward-looking statements, obviously, hold on to your seat belts when we predict things, we can at sometimes be wrong. And I want to really focus on sort of three main points here.

If you take nothing else away from this presentation, it's that ResMed really is sort of the Holy Grail of healthcare, in the sense that we do three things, we prevent disease, in particular the disease of sleep apnea and we improve the quality of life.

But, we also reduced the cost of health care. So, as systems around the world are trying to struggle with delivering higher quality for less cost. We do that and we do that in this space. So, those are really the three primary things that ResMed delivers here.

The company focuses on both developing to an extensive R&D program and a manufacturing with manufacturing plants, primarily based in Australia as well as in Singapore and Malaysia with some component factories in the U.S. We manufacture our own devices and then we distribute, primarily through wholesaling our products although we do have some direct-to-patient sales throughout the world of medical devices and the bulk of our sales are therapy devices that are meant to treat sleep-disorder breathing. But, we also have ventilatory assistance for other respiratory conditions.

So, primarily and what a lot of the focus of the presentation in business really is about is about sleep-disordered breathing, but we do have another significant business in the sense of dealing with our ventilation sales.

So, we have several things that we do to in order to achieve the Holy Grail. First of all, we focus on innovation. We've got innovative products and technology We are consistently raising the bar to try to make sure that there is effective diagnosis, that therapeutic options that are available to patients are effective and they're going to treat the scourge of sleep disorder breathing, but also the patients are comfortable and they are able to actually want to use their devices so that they get the benefits from them.

And we are consistently doing that and we have done that for the 20 years of the company's existence. We’re also continuing to promote education and awareness. Because we don't want to simply react to the market, we want to help drive the market and as a market leader, we want to consistently make sure that folks are aware of both in the patient community and in the physician community about the issues involved in sleep disorder breathing and the opportunities that there are to have this condition treated and the impact that it can have, not only on the quality of life for someone who is suffering from sleep disorder breathing, but also in other aspects of their life and other aspects of their health.

As I mentioned before we have ventilation, we also recently came out with a significant launch of a monitoring system that basically a patient management system called EasyCare online and I will get to that in a moment. The market opportunity continues to be enormous here 20% of the adult population has sleep apnea and 7% about a third of that if you will is a moderate to severe case meaning you start breathing 15 or more times an hour and mild cases represent about 13% of the adult population.

As ongoing obesity, which I’ll get to in a little bit, but it is topical because if those of you who are fans of the USA today arrived outside your hotel room today, you would have seen the CDC that U.S. centers for disease control issued a report yesterday predicting that the obesity rates in the United States are going to get to 42% of adults by 2030.

So they are at about 36% now that 6% increase by 2030 of the CDC’s predictions prove to be correct we are going to cause enormous healthcare cost to the entire U.S. healthcare system. A lot of those costs are driven and on the other hand can be ameliorated by effective treating for sleep apnea because obviously patients who are significantly obese have significant high rates of sleep apnea.

The sleep disorder breathing is, as many of you are familiar here the guy on the left is healthy, he is breathing clearly while he sleeps, the middle guy here has got a (Inaudible) up where you can see this tongue, muscle of the tongue is rolling back, upper airway is starting to close and then you have fully obstructed air way with whereas the guy on the far left is getting the blue representing the air getting down into the lungs. The

The guy on the far right has an obstruction here and he is not breathing at all, that’s happening repeatedly throughout the night if you have sleep apnea and causing significant drops in the oxygen levels in your blood stream, significant impacts in terms of the fight or flight impact of your body on trying to wake yourself up repeatedly during the night and this has a significant chronic impacts on your health long-term.

So, you have a lot of the signs that you see and also things that you don’t see for folks who have sleep apnea on the visible side, the external side you see folks with these choking arousal, so they're stopping breathing, basically asphyxiating throughout the night and they have gas and coughs as they try to wake themselves up and open their air way.

They have fragmented sleep, the same type of sleep you might have as you’ve got repeated noises throughout the night, a barking dog, a new baby or whatever it is that’s repeatedly wakes you up and that sort of fragmentation in your sleep and exhaustion that you have the next day is with folks who have sleep apnea deal with every night of their life.

Not curious getting up multiple times the night to go to the bathroom and that’s caused by and as repeated stress in your system by trying to wake yourself up and the adrenalin and noradrenaline that you get. So, basically you wake up in the morning you don’t refresh, you know you’ve been in the bed, you think you’ve been sleeping for 8 to 10 hours, but you are still wreck, you got headaches in the morning, you’ve got an inability to concentrate at work and you are sleepy on the day, the way they can interfere with your life for example, if you are trying to drive a car or more worrisomely drive an 18 wheeler and you have difficulty staying awake that’s a problem.

Internally those things you don’t see are in some ways even more in serious and more significant, including hypoxemia, so you are basically having repeatedly starving your cells of oxygen. Throughout the night and oxygen is the workhorse, the fuel for yourself, so you are repeatedly stressing the cellular activity of your body and hypercapnia continue to buildup carbon-dioxide during the night, because you're not of gassing carbon-dioxide effectively, you are activating the sympathetic neural system and causing promissory endothelial system, causing issues with your metabolic system. So, all of these systems are to be regulated and properly balanced during the night or getting upset by this continuing surge of activity that’s trying to wake yourself up and block these apneas.

And that leads to high blood pressure and difficulty with your algorithms, it can ultimately lead to heart attack and a stroke. So you see on the one side the things you see people think of sleep apnea being a breathing problem, being a snoring problem being I am not sleeping well, I am sleepy during the day problem, all of that is real, all of that is significant and all of that needs treatment. But ultimately the chronic impacts of night after night, month after month, year after year of these internal issues can cause other and some ways more significant life threatening conditions.

So, as a result you see that sleep apnea is very prevalent in patients who have various other serious conditions. So you include obesity, which I represented earlier, 77% of those who are obese will have sleep disorder breathing, who got various forms of heart disease beginning here with hypertension may be about 40%. You have drug recession hypertension, you are on multiple medications in your drug, the drugs you are still not adequately controlling your high blood pressure it’s an 83% chance you have sleep disorder breathing.

Stroke, if you are a stroke victim. More than half the stroke victims are 63%, I have sleep apnea and on and on and on throughout you could see most of these are cardiac vascular issues. And the good news is that if you’re able to actually treat the sleep apnea you have a beneficial impact on all of these conditions.

So what we try to do from a strategic standpoint is make sure that we continue to focus on these connections between sleep disorder breathing and both cardiovascular and cerebrovascular saw heart attack and stroke issues.

We are continuing to focus on the association with Type II diabetes or adult onset diabetes, and the impact on preoperative risk, I’ll get to in a minute. Occupational health and safety and then ventilatory support. So those of the strategic initiatives that we continue to try to drive forward as a business and we’ve been doing that for several years and we’ll continue to do it, I predict the next several years.

So the cardiovascular space, we do know from what we saw earlier that it's highly prevalent, basically ranging from whatever your condition is 30% to 80% of the patients are going to have sleep apnea, in addition to their cardiovascular disease, and it increases the risk of heart failure.

So as you can see here whoops, sorry, bounced too forward. If you have an AHI, which is greater than 30, so 30 times more an hour you start breathing 68% more likely to develop heart disease than if you have normal sleep apnea, which is an event that occurs less than 5 times an hour.

You can also cause changes in the blood vessel function for people who are otherwise healthy, if you have sleep apnea, it's actually causing an impact on the modeling of the heart. So you can see repeatedly over time, having untreated obstructive sleep apnea has a significant effect on cardiovascular disease.

Now, the good news is that you can reverse this impact, if you actually treat the sleep apnea. So, you can actually reserve these blood vessel abnormalities. You can lower the blood pressure, and you can actually improve cardiovascular health for left ventricular ejection fraction and other intermediate measures here that are showing healthy hearts for folks that are treated for their sleep apnea, as opposed to those you are not treated their sleep apnea.

So, what we're also trying to do now is come up with a very rigorously long-term mortality study. And so that's the SERVE-HF clinical trial. And the aim is to demonstrate that our most advanced therapy, which can be used in heart failure population can actually not only have these intermediate impacts we talked about earlier, you can walk further for six minutes, your ability to breathe oxygen is improved, you're less sleepy during the day, that not only do you get those benefits, but also that you live longer.

And so, what we've done is, we've designed a trial that's ultimately going to have 1,200 patients. We're now up to about 1,000 patients in this trial. It's being run in Germany, France and the UK, primarily. And there, what we're doing is taking a control arm, which has patients who are Class 3 and 4 heart failure, who have been optimally medically treated for their cardiovascular disease.

And then you have the other arm, with patients who have similar medical treatment, but also are being treated with our ACS device, or our adaptive servo-ventilator, and that's being used to treat their complex sleep apnea. So, we're going to run the trial and look to see what are the mortality rates in those two arms. So it's an event-driven trial. It's not like we put people on a particular fixed timeframe, but basically wait and see on how things go particularly with regard to the deaths in that patient population, and wait to see their statistical significance in the death rates in the two arms.

So, this trial will continue to run for another few years, but we're hopeful that we'll be able to demonstrate the significant mortality difference. In addition to that, we are trying to collect information about expenses, hospitalization expenses, (inaudible) rehospitalization admission rates and then what are some of those other intermediate outcomes that I talked about earlier about six minute walk, quality of life, those kinds of measurements.

So, we might be able to report some of those intermediate results earlier on the ultimate study here we’ll take a few more years as the death rate progresses. So, we're investing a lot in this study and we believe that, if it's successful to pay dividends for us and for patients. So in the cardiovascular space you have got a lot of activity going on to try to drive strategic impact.

The Type II diabetes area, we talked earlier about some of the impact with 72% almost three quarters the patients with Type II. Type II diabetes, obviously being driven as well by obesity, although this impact independent of obesity, but again if you’ve got the CVC is right you are going to have more Type II diabetics and then, thus more sleep apnea patients. A lot of the medical costs that are associated with the obesity epidemic are associated with Type II diabetics.

But, we also know here that OSA is associated with both diabetes development, insulin resistance, and you can actually look to a sleep clinic for the impaired glucose tolerance. We're trying to look now, we've got some data that should be coming out shortly on whether or not there is an impact if you treat sleep apnea, can you again reduce the HpA1c levels in the blood. That's a [straw] called Glycosa that has finished and we are waiting for the analysis of the data there.

But, we do note from the IDF, it is the International Diabetes Federation, they came out with a consensus statement on sleep apnea, so they analyzed all of the data that's out there, and basically indicated that there's proven benefits for improving day time sleepiness, quality of life and blood pressure, blood pressure being a significant issue for Type II diabetics.

And also good supportive data that treating sleep apnea will improve insulin resistance, it can, as I said reverse or certainly improve metabolic syndrome and improve the overall control and reduce mortality. So, we think it’s very important in this patient population to continue to do research, but more importantly continue to raise awareness and get patients who got Type II diabetes to get screened and then ultimately treated for their sleep apnea. So we are doing things try to make sure that happens.

So, basically I talked about earlier this is sort of now, old data. We basically by 2010, 36% of the U.S. adults were obese. This is data from the CVC. And then the data that came out today was in a prediction on top of this. So this is the latest epidemiological data through 2010. The prediction was now what will happen to this, will this level of for the next 20 years or will it continue to increase. And the prediction from the CDC as of yesterday was that it will continue to increase and so as the obesity epidemic continues to flourish that’s going to bring more patients into the sleep apnea and add in drive more need to control the cost that are associated with these patients.

And it’s not just U.S., globally there is significant predictions that the world’s overall population will continue to grow both figuratively and literally and then particularly in some of the developing countries as those countries develop higher rates of GDP. Please spend more on their diets, their diets gets worse and you can see significant rates of obesity in areas developing areas like China and Brazil for example.

So the WHO is predicting there’s going to be over 2 billion people overweight by 2015 and 700 million of them will be obese so it’s a massive problem. It’s also a significant perioperative risk. So post operatively what happens if you got untreated sleep apnea as supposed to someone going in for another condition.

And almost one out of every four patients who come in for surgery, actually have undiagnosed, obstructed sleep apnea, which is a significant A opportunity for us to identify and screen those patients as they come through the surgery ward, but also a significant risk because as you can see from the second bullet if you’ve got sleep apnea post and you go into surgery you have a more a higher chance of intubation not going well. So the anesthesiologist is really struggling to try to keep you intubated.

Complications post-surgery intend to go not just from the surgery ward, but then into the intensive care ward and you are more likely to stay in hospital longer, which is significant economic burden on the hospital and the health system or may be only getting a DRG payment for that particular surgery.

There also are significant issues, from a management standpoint, from a risk management standpoint of patients who are going in for what you would be thought of is relatively minor surgeries and then leave and have maybe patient administered pain medications or otherwise opiates and their system, perhaps the opiates basically down regulate the response to sleep apnea.

So, if you then have an obstruction in your airway, the opiates may interfere with the ability of the brain to tell the system to wake you up and block that airway and there actually been several deaths that have been reported sort of post-surgery from relatively minor surgery so it’s a significant risk issue.

So, as a result the American society of anesthesiologist have guidelines to basically say you ought to identify patients who are coming in for surgery whether or not they have got sleep apnea, and if they are take steps after the surgery to make sure that their obstructive sleep apnea is going to be monitored.

So we think this is presenting another significant opportunity to not only help people’s quality of life and health, but improve the economics of the situation. So, on the other side of the fence here, folks that are outside of the hospital that are driving down the highway, you got almost 30% of truck drivers who have got sleep apnea. And they are six times more likely to have a crash.

They've got sleep apnea if they don't. When they've done tests on drivers, your ability to have the same kind of time to step on the brakes and time to turn the wheel to avoid something in front of you. You're as impaired if not more impaired then if you’ve got too much of alcohol in their system.

So, basically think of these as, perhaps 30% of the truck drivers driving drunk, is really what can be going on here from our risk standpoint. So it’s a significant issue. It's got significant costs associated with it. And recently, there was a hearing before the Federal Motor Carrier Safety Administration on whether to impose mandatory testing for truck drivers with a BMI, a blood, I’m sorry, a body/mass index of greater than 35. There was a strange event, that happened a couple of weeks ago where the Federal Motor Carrier Safety Administration proposed regulations, to impose this regulation came out on their website for portion of a day, and then were pulled back with a comment that they were put out in air.

So everyone’s kind of scratching their heads and wondering, what someone hit the send button a day earlier, are they really rethinking these guidelines, or no one really knows, but that’s a pretty good indication that the guidelines have at least gotten to the point internally of being drafted, and we're hoping that ultimately will be issued, and then you can continue to pick up the commercial truck drivers and other transportation workers as they come in for their requalification’s of their commercial licenses every three years.

So, that's sort of on the market driving side on the product side as indicated earlier, one of our goals of how we do what we do is, we continue to drive innovation. And we have significantly innovated over the years, and we're going to continue to innovate. We spend 7%, 8% of our revenue on R&D. And so on the mask side, we've got what we call the Trilogy of FX, or the FX Trilogy.

So this is a full face mask, which would actually go underneath your lower lip. For the Quattro FX, which is a fantastic product. The Swift FX is a nasal pillows product, so it just seals around the nares of the nose. Very small, very lightweight, very comfortable and then the latest addition to the Trilogy here is the Mirage FX, which was launched about a year ago, very, very small comfortable this one size will fit 90% of the patients that are out there, in terms of size.

It’s got only four separate parts, four components, and incredibly comfortable. And these products are doing incredibly well, drove the significant mask growth rates, which you would have seen in this past quarter. The For Her series, which is one of the issues we identified, is that the number of new patients are women. This is a problem that occurs in men and women about at equal rates post-menopausal for women.

Pre-menopausal, men might outnumber women 2 or 3 to 1. But nevertheless, a significant number of women are coming into the sleep labs, and surprise, surprise, most products have been designed for men. So, we first tasked a few years ago a team of women engineers to come up with a substantially different product for women to deal with things like the different size that they have, different hair management issues, different cosmetic issues.

And they came out initially with Swift FX For Her. It was so popular that we then put the For Her series on all of our different masks, including this latest mask, called the Bella, which has headgear that actually just wraps around the ears in some manner, kind of like eyeglasses that would go all the way around, rather than wrapping around the back of your head. So it's been very successful. It's been a significant driver of mask sales for us.

On the front of our flow generators, the higher end products, the bi-levels and the VPAP Adapt, are the products that are significantly driving our U.S. flow generator sales at this moment, but also we’re continuing to see products move up from the value segment to the premium segment, particularly with regard to our automatic device.

So, our automatically adjusting pressure devices, or APAP, are being driven by home sleep testing as well to being the best algorithms on the market today. So, this is our kind of our lineup that we are seeing strong growth throughout the world, particularly in the U.S. with our flow generators.

On the ventilation side, I don't want to spend too much time on this, but we've recently launched the Stellar 100 and the Stellar 150, which will come next. And this is basically bringing ventilation technology and ResMed’s engineering to the market with a very, very high featured, non-invasive ventilation product that can also be used invasively when necessary. This has been launched throughout Europe and Asia and it is also being sold now in the U.S. through a distributor CareFusion distributes for us into the hospital segment, and then there are some sales in the home care segment.

So it’s not a big segment for us in the U.S., but should be growing for us, (Inaudible) learn still in the market. As indicated earlier, the Stellar 150, the primary difference here is it has a very intelligent system for managing the pressure support. So think about this as an automatic pressure support for ventilation product that targets particular alveolar ventilation levels, and provides the ventilation that you need when you need it.

So the physician simply sets the target ventilation, and the device delivers the pressure necessary to achieve that ventilation. Some of you may remember, we bought a company in Germany a while back called Gruendler and this is now their next generation product in hospital humidification.

So, this product is being sold throughout Europe. We'll be seeking FDA approval for this device, and hope to be launching it in the U.S. Again, very high quality product, performs very well, and being very well received in the market. I mentioned EasyCare Online. This is the latest launch press in the U.S. This was launched at Medtrade, which is the industry trade show in April.

And it's basically a cloud-based patient management system. That's a very significant product launch for us. It's not a product in the sense that we're selling subscriptions, or you can go out and buy one or two or three. But it basically is something that we think we'll be shifting brand preference to ResMed, and will operator as a platform, which we can build all sorts of modules for managing data throughout the years to come.

So, it's being very well received by our customers, it was the result of looking to the markets, and saying what is the market need and the market totals was improved, your software, give us the software management solution that's very flexible, very easy so with one click you can generate the compliance reports you need. We think we’ve hit this target and this will be rolled out over the course of the next few months.

So this is how EasyCare online works, basically in this pictorial form, you get the data from the device either from this wireless module into the cloud or from data cards in one way or the other it's hosted in the cloud and that enables the HME or home care provider to be able to look and see which patients are compliant, which patients are having problems. But, also anyone else involving your primary care physician or your sleep lab specialist or others, payers or whomever can all get access through web portal to this device and to the system. It's got very, very user-friendly interface and it's very successful.

Home sleep testing is another driver of the U.S. market and this map is short of showing the coverage now is almost 20% of the adult lives in the country now have to seek pre-authorization before they can have a laboratory test. So that 15% to 20% of the tests that are being done now are being done at home.

This is part of the driver for our increased positive missed shift on our floor generators to using our automatic devices, it's a cheaper it's a more convenient means of diagnosing and we believe this will ultimately lead to greater new patient acquisitions.

So, this is being driven both by the payers who have put this diagnosis pre-authorization to place, but also by sleep lab companies that are doing this independently, but now one of every four sleep labs are also doing home sleep testing. So, it's becoming more and more important.

I mean, lastly a little bit of the economic costs, leave time for questions, but it would make a couple of points that you’ve got, chronic conditions are 75% of healthcare spending and 165 billion is the overall cost of obstructive sleep apnea in the U.S. it’s a big target for us to reduce. And where that number comes from is really therapy and diagnosis is just the tip of the iceberg.

That's a very small number here. The big number here is in the medical costs of these comorbidities and also traffic accidents. It’s one of the reasons that we're focusing on cardiovascular disease, Type II diabetes, occupational health and trucking. But also, you can see all these other costs found here including absenteeism and societal cost.

So all of this is going to add up to depending upon where your assumptions are $67 billion to $165 billion in cost and by getting the message out entreating we are going to be able to have an impact on that. In terms of the individual companies you can certainly save money and this is what we have shown with waste management and this is all available on our website, so I’m not to spend too much time here.

Schneider Trucking said similar cost reductions in the medical costs incurred by patients in the year after they were treated versus the year before they were treated. And then you were all familiar with our financial results, up 13% in constant currency in Q3 at the top line, and 30% on the EPS line, I am sorry 29% on the EPS line. This is our breakdown in terms of geographic sales and in terms of our product sales.

On a long term performance been 15% five year company annual growth rate at the top line, 21% five year annual compound growth rate at the net income line and then EPS at about 20% five-year company annual growth for the last fiscal year. We got a very strong balance sheet and as many of you know we've been actively buying back our shares and showing our share repurchase program, which represented almost the 11 million shares year-to-date in 2012 and with the last quarter representing about almost 2.5 million shares.

So that's where I will leave it. We think we are there with achieving Holy Grail, I haven’t left too much time for questions Dave, but happy I given to you or anyone in the audience.

David Low – Deutsche Bank

Sure. Thanks, sir. That’s a very comprehensive presentation. We have five minutes, if there are any questions from the audience?

Question-and-Answer Session

Unidentified Analyst

[Question Inaudible]

David Pendarvis

So the question was what are the one or two key resistance factors? How do we try to overcome those barriers and what's our marketing and advertising strategy?

One of the main resistance is just simply patient reluctance someone not warning to wear something all night long. Someone reluctant to sort of take on an overall treatment system. And what we try to do with that is really primarily in two ways our product development tries to make the devices as comfortable as possible that's why our masks are so important because it’s like a comfortable pair of shoes.

It doesn’t hit your pain points, it’s very, very comfortable light easy to use and then on the device side, we try to make the devices as quite as possible and the actual algorithm that changes the pressure as easy for someone to tolerate as possible. So we make them basically very easy to use on the one hand.

On the other hand, we try to drive education and awareness by respiratory therapists, both as to why you should use this or why it is significant for your health, as well as making patients aware off and so EasyCare Online for example is all about putting tools in the hands of the providers, so they can intervene and get patients compliant.

In terms of marketing and advertising we don’t have a significant direct-to-consumer advertising campaign, it’s primarily marketing to those who buy the products, which are really the retailers. So they are odd customers they are really the DMEs, the Durable Medical Equipment suppliers and also to physicians. So that's really where our marketing is directed primary to physicians and the customers not directly to patients.

David Low – Deutsche Bank

David one of the questions that I get pretty regularly it how competitive bidding is going to affect ResMed, given it's on the horizon now particularly in terms with numbers coming out in full, just maybe I get you touch on the expectations and how ResMed expects it will affect the business?

David Pendarvis

Sure, but first you got to size that up. So for us in the U.S. as you saw early represents a little over 50% of our global sales. Medicare patients represent only about 20% or so of the patients, that’s data we get back from our customers, who obviously are the ones who are submitting for reimbursement. So, it is only about 10% of our revenues that are overall associated with competitive bidding.

When we looked at what happened in round one, what we saw was the revenue that we got in the markets that were competitive bid those first nine metropolitan fiscal areas. We are roughly in line with the revenue growth that we saw in the rest of the U.S. market. So from that we concluded that there was not a significant revenue hit for us.

Pricing again, broadly consistent, obviously a variation between whether you won the contract or didn't win the contract, and interestingly the pricing for those who won the contracts were much better for us than those who didn't win contracts obviously trying to work with customers who’ve lost a significant chunk of revenue there. But on a blended basis again roughly in line with our overall experience in the market and that's because we've been dealing with declining reimbursement for years.

On the 80% of the business that's private pay. So, all in, we in fact will be able to work with our customers and to be able to deal with competitive bidding when it comes out in July of 2013 and we don't expect a significant impact in our business.

Unidentified Analyst

[Question Inaudible]

David Pendarvis

So, the question is over, you know what are the trends in occupational health and that focus on sleep that sort of in broad strokes. And we’ve seen an increasing interest it began, a lot of companies do it medically and so the question is what is part of our medical suite of benefit offerings, shall we make this part of our benefit offerings and it's basically there.

So, then the next stage becomes, is there an economic benefit and that's the data I showed quickly about Schneider Healthcare and Waste Management. So, we’ve got a team that are out there pitching to these companies, demonstrating to them, they can save the healthcare costs. The third level really is increased productivity and I’d have to say we are kind of at level II. I don't think a lot of companies are focusing yet on the increased productivity that they can get, but we're seeing growing interest from companies and putting in place systems to screen and to treat their patients, so almost every company will have it as a medical benefit, more companies are doing proactive screening to try to lower their healthcare costs and we're hopeful in the long run that will lead to demonstrations of productivity and we’ve got a lot of assets in terms of people working in this area ourselves, so we think we’ll continue to grow it.

David Low – Deutsche Bank

I think we have hit time there. So, David thank you very much. It was a very comprehensive presentation.

David Pendarvis

Thank you. David again, and to Deutsche Bank. Thanks to everyone for your interest.

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