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Executives

Julie Tracy - SVP and CCO

Jim Corbett - Chairman, President and CEO

Pat Spangler - CFO

Analysts

David Lewis - Morgan Stanley

Rick Wise - Bear Stearns

Charles Chon - Goldman Sachs

Jason Mills - Canaccord Adams

Tom Gunderson - Piper Jaffray

Joshua Zable - Natixis

ev3 Inc. (EVVV) Q4 2007 Earnings Call February 22, 2008 8:30 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the fourth quarter 2007 ev3 Earnings Call. My name is Carissa and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions).

I would now like to turn the call over to Ms. Julie Tracy. Please proceed.

Julie Tracy

Thank you and good morning, everyone. Welcome to ev3's fourth quarter 2007 conference call. We appreciate you joining us. I'm Julie Tracy, ev3's Chief Communications Officer. With me on the call today are Jim Corbett, ev3's Chairman, President and Chief Executive Officer, and Pat Spangler, ev3's Chief Financial Officer. We issued a press release this morning regarding our fourth quarter and full year 2007 results. A copy of that press release is available on our website at www.ev3.net.

The agenda for this call will include business update and merger integration report from Jim, a review of our fourth quarter and full year financial results from Pat, and closing comments from Jim, followed by a question-and-answer session.

Before we begin, I'd like to remind you that during the course of this conference call, we will make forward-looking statements that involve risks and uncertainties, relating to future financial and business performance.

The forward-looking statements we will make on this call are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and ev3 desires to avail itself for the protections of the Safe Harbor for those forward-looking statements.

ev3's future financial and operating results, the potential synergies, cost savings and other benefits of the merger with FoxHollow, and timing thereof, effects of ev3's recent US peripheral vascular sales force restructuring activities, new product benefits and market acceptance, ev3's plans, objectives, expectations and intentions with respect to future operations, products and services and other statements that are not historical facts.

Please be advised that actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those described in our most recent quarterly report on Form 10-Q and our annual report on Form 10-K for the year ended December 31, 2006.

We suggest that you read these reports and other future filings that we may make with the Securities and Exchange Commission. ev3 disclaims any duty to update or revise our forward-looking statements as a result of new information, future events or developments or otherwise.

With that, I will now turn the call over to Jim for a business update and merger integration report. Jim?

Jim Corbett

Thanks, Julie and welcome to everyone that has joined us on our call today. As reported, on January 7, 2008, net sales in the fourth quarter 2007 increased 60% to $92.2 million versus sales of $57.7 million in the comparable quarter of 2006. Fourth quarter net sales included $26.9 million of FoxHollow product sales from the October 4th, closing of the FoxHollow merger.

For the year ended December 31, 2007, ev3's net sales increased 40% to $284.2 million versus $202.4 million for the year ended December 31, 2006. Net sales for fiscal 2007 included $26.9 million of FoxHollow product sales and research collaboration revenue from the date of merger.

Annual sales growth in 2007 reflected net sales growth in each of ev3's reportable business segments and geographic markets. However, our results in the fourth quarter of 2007 for our peripheral vascular business were negatively impacted by greater than anticipated sales force integration challenges related to the FoxHollow merger and elevated customer inventory levels of certain products.

We believe that the actions we have taken to-date, including eliminating a layer of sales management and optimizing the size of the peripheral vascular sales organization will enable us to overcome these challenges and support our future growth objectives. We reported a net loss for the quarter of $1.06 per share, reflecting several one-time accounting related adjustments made in connection with our merger with FoxHollow. Pat will take you through these adjustments later on the call.

ev3's earnings before interest, taxes, depreciation and amortization, excluding charges for non-cash stock-based compensation was a negative $93.7 million in the fourth quarter of 2007, compared to a positive $3.0 million in the fourth quarter of 2006.

As we previously reported, we also accelerated certain other integration activities into the fourth quarter, bring the total annualized merger cost savings to approximately $70 million. We see substantial leverage potential in our business model with the inclusion of the FoxHollow technology and expect to see increasing benefits in the quarters ahead.

Worldwide net sales of our neurovascular division increased to $28.3 million, up 20% compared with the prior year period. Our growth during the fourth quarter reflected strong contributions from both of our neurovascular product groups. The growth in our embolic products continued to be driven by our Onyx Liquid Embolic System, which is used in the treatment of arterio-venous malformations of the brain or AVMs and by the launch of our Axium coil.

We are very excited about the launch of our Axium coil, which occurred in the US in the fourth quarter of 2007 and is now available worldwide. Early clinician response to our new Axium coil has been very positive. With many physicians studying its high degree of conformability, softness, stretch resistance, precision and ease of coil placement as key product advancements.

Clinicians also like the Axium's proprietary instant detachment or ID system, which offers instant coil detachment without the use of wires of syringes. This unique detachment device facilitates precise and rapid coil deployment while minimizing procedure time, which may be especially important in ruptured aneurysms or when blood flow to the brain has been restricted.

During our Axium physician preference test in the US, our average coil usage was approximately six coils per case, which compares favorably to our prior launches of approximately two coils per case. As evidenced by both our success in converting accounts and the increase in the number of coils per case that physicians utilized during the physician preference test we are encouraged by our early Axium experience.

In Europe, we received several key country approvals for the Axium coil in Q4, including Turkey and the Middle East and recently received approvals for Australia and Korea in January 2008. We were very pleased with the response to the Axium coil in Korea where we got off to a strong start with approximately 600 implants completed in January.

While it is still early in the launch, we believe that the Axium may enable neurovascular specialists to approach even the most challenging anatomy with new capability and confidence. Our focus with the Axium is on gaining product evaluations and increasing share. And we believe it can be a leading contender in the embolic coil market based on its product attributes and a favorable physician feedback received to-date.

We're currently in the planning stages for our Axium post-market study in the US, which we expect to initiate in the second quarter of 2008. This study is designed to collect additional safety and efficacy of clinical data and support market commercialization, as the acceptance in the use of minimal invasive treatment options for cerebral aneurysm and AVMs continues to grow and we remain optimistic about our growth prospects for our neurovascular business.

With one of the broadest product portfolios in the neuro space, the launch of our Axium coil, continued market penetration of our Onyx Liquid Embolic System and access devices, as well as the expanded opportunities brought forth from our Novation agreement, we expect our neurovascular business to grow faster than the estimated 20% overall worldwide neurovascular market annual growth rate and be a strong contributor to our total company performance in 2008.

Turning now to our peripheral vascular business. We experienced growth in our peripheral vascular division with worldwide net sales of peripheral vascular products increasing 70% to $57.9 million versus $34 million in the fourth quarter of 2006, primarily as a result of the merger with FoxHollow.

Excluding FoxHollow revenues, peripheral vascular sales were $37.1 million during the fourth quarter of 2007, an increase of 8.9% versus Q4 of 2006. Increased market penetration of our EverFlex family of stents was the main contributor to our pre-merger ev3 peripheral vascular business growth in the fourth quarter.

Our customers continue to value the predictable deployment, links in diameter availability, and the unique design and fatigue resistance of the EverFlex family of stents. During the fourth quarter, we launched internationally an important product line extension to the EverFlex family, the EverFlex 5 millimeter in 20 to 100 millimeter links. And in January of this year, we launched the EverFlex 200 millimeter link stent in Europe, which is specifically designed for the unique anatomical needs of the superficial femoral artery, or SFA, and to reduce the need to place multiple stents in long lesions.

We are currently seeking 510(k) clearance in the United States on the EverFlex 5 millimeter stents and have received conditional approval from the FDA to use the EverFlex 200 millimeter link stent in our ongoing DURABILITY II IDE trial.

Before I discuss our progress with regard to the FoxHollow merger integration activities in the US, I want to touch on our peripheral vascular clinical trials. Our focus in 2007 and continuing in 2008 is to further validate the clinical and competitive benefits of our technology platforms. To accomplish this, we have a number of clinical trials underway and others that are currently in development.

We have received conditional IDE approval for our Protégé and Visi-Pro endovascular Iliac Trial called PROVE-IT, which is designed to study the use of balloon expandable and self-expanding stents for percutaneous stent treatment in the iliac vessels. Dr. Peter Faries, who is Professor of Surgery and Chief of the Division of Vascular Surgery at Mount Sinai in New York, and Dr. John Rundback, who is the Director of the Interventional Institute at Holy Name Hospital and Associate Clinical Professor of Radiology at Columbia University, College of Physicians and Surgeons, have agreed to be the co-principal investigators for this trial.

Assuming the success of completion of this trial and approval from the FDA, we expect to be the first company in the peripheral space to have an iliac stent indication for both our balloon expandable and self-expanding stent platforms.

Turning to our DURABILITY I trial in Europe, I am delighted to report that preliminary six-month follow-up results for our DURABILITY I study, measuring the durability of our PROTÉGÉ EverFlex stent in SFA lesions were presented at the LINC, Leipzig, Germany on January 23. You will recall that the DURABILITY I is the world's first prospective study to specifically test the efficacy and integrity of long stents and long challenging SFA lesions. It is also the first study to specifically evaluate the use of one long stent per patient. 151 patients were enrolled in the DURABILITY I trial at 13 centers.

I'd like to highlight three areas of conclusion presented at the LINC course. First, primary patency at six months was 91%, a gratifying and encouraging result, particularly in this very challenging patient population, which included a high percentage of diabetics and a significant percentage of long lesions.

Second, patients showed statistically significant improvement in standard measures of successful revascularization, such as ankle brachial index and Rutherford classification scores. Finally, out of 129 stents available for evaluation, there were 8 fractures, which represent a low per patient facture rate of approximately 6%. In addition to this low per patient fracture rate, further investigation of the fractures indicated that seven out of the eight fractures were associated with stents that were elongated at the time of deployment, which is contract to our instructions we use.

We are very encouraged by these results, which we believe show that single long stents maybe a viable alternative to multiple sure stents in long challenging lesions. Furthermore, when you consider that the patients enrolled in DURABILITY I trial had much longer lesions on average. A higher percentage of total occlusions, higher average Rutherford classifications, and higher percentage of diabetes in any other published trial to-date. These early results are even more compelling.

We will continue to follow patients in the DURABILITY I trial and look forward to the 12-month follow-up results, which were expected to be presented at the CIRSE meeting in September of this year. In the U.S, we are continuing to enroll patients in our DURABILITY II Child with the objectives of expanding our EverFlex stents in U.S indication to include treatment of peripheral artery disease or PAD.

You recall that the DURABILITY II trial is a prospective, multi-center, non-randomized study designed to demonstrate the EverFlex systems long-term patency and fracture resistance in symptomatic patients with PAD in the SFA and proximal popliteal arteries of the leg. It is the first trial in the treatment of PAD to explore single stent treatment of lesions as long as 16 centimeters in the use of a singe, first of its kind, EverFlex 200 millimeter self-expanding stent system and will include rigorous five-year follow-up on stent fracture.

It also will be the first study to follow the Performance Goal design, which was developed by the VIVA Physician Group and published in the March 2007 issue of Catheterization and Cardiovascular Interventions. Supported by the FDA, this design facilitates a single-arm study of bare nitinol stents in the superficial femoral and popliteal arteries.

The DURABILITY II trial is expected to enroll 287 patients at 30 clinical trial sites throughout the US and the results from the study will be used to support a feature PMA submission to gain approval of the EverFlex stent to treat peripheral vascular disease in the SFA and proximal popliteal arteries of the leg. Currently, we are in the early stages of patient enrollment for this trial and our continued activated additional clinical sites in the US.

We believe that the availability of compelling results from both the DURABILITY I and the DURABILITY II trials has the potential to change the clinical practice standards for how long difficult SFA lesions are treated, which may provide us with a significant competitive advantage supporting the use of our EverFlex family of stents.

Moving on the SilverHawk atherectomy products. During the fourth quarter, we launched our SilverHawk LS-M and MS-M products with the proprietary MEC or micro efficient compression technology in the U.S, also, which are intent to provide physicians with additional options and treating above the knee lesions in patients suffering from PAD. And in January of this year, we launched the SilverHawk LX-M, which offers an extended tip for the use in large vessels.

The design of all three of these catheters is intended to improve upon the first generation SilverHawk platforms to increase tissue extraction efficiency by reducing the number of insertion and decreasing procedure time. The ultimate goal is to write new devices, both above and below the knee that can offer clinical flexibility and drive plaque excision procedures towards a single insertion.

We are also pleased to announce that we received five 510(k) clearance on February 12, 2008 for our RockHawk Atherectomy system for surgical use, which provides the vascular surgeon with a new option for removing calcium utilizing a surgical cutdown technique. The RockHawk Atherectomy System includes all the advantages of the SilverHawk Plaque Excision platform, while incorporating a new cutting heads specifically design to remove calcium. During the first quarter of 2008, we will be initiating a physician preference test for the RockHawk for surgical use in the U.S and preparing for full launch outside U.S for both endovascular and surgical indications.

In addition, we submitted our IDE to initiate a U.S clinical trial for percutaneous removal of calcium using our RockHawk SpiderFX devices in early February. Assuming FDA approval for this IDE, we expect to initiate this trial in the second half of 2008. We are also pursuing a number of regulatory submissions to gain peripheral approval for RockHawk in key international markets.

Before I update you on our FoxHollow merger integration activities, I'd like to provide a brief update on our Merck collaboration. Our relationship with Merck has continued to move forward as evidence by the three different clinical trials as clinical studies that we currently have underway with Merck. With Dr. Simpson's recent departure from ev3's Board, Merck had the right to terminate the agreement with ev3 and has six months from the time of Dr. Simpson's departure to exercise this right.

We have been given no indication from Merck, who has a representative on ev3's Board that it plans to cancel the existing agreement. Regarding the payments we receive from Merck, the payments ev3 currently receives from Merck are for exclusivity and collaboration. If Merck cancels the agreement completely including both the exclusivity and collaboration portions with agreement, we will loose future revenue, but also we'll not be require to incur certain significant expenses associated with the collaboration.

If Merck cancels the collaboration portion of the agreement but the not the exclusivity portion, we will continue to be entitled to exclusivity payments from Merck through at least 2010, but we will not incur certain significant expenses associated with the collaboration.

Now turning to our FoxHollow merger integration activities. As we previously announced, we successfully completed our merger with FoxHollow on October 4th, 2007. We remain very confident in the strategic and financial rational for the merger between ev3 and FoxHollow, which we believe created a company within unequaled focus of peripheral vascular diseases, with one of the largest distribution footprints in endovascular devices with a broad and technologically advanced product offering in treating vascular disease.

However, our fourth quarter results were clearly below our expectations. A number of factors contributed to these results including greater than anticipated challenges combining and integrating the sales organizations. In addition we believe that the higher than expected customer inventory levels on SilverHawk products significantly restrained our fourth quarter sales.

While we continue to expect that the sales force integration challenges and the elevated inventory levels will likely affect our net sales in to the second half of 2008. We also believe that customer inventory levels and certain accounts are beginning to return to more normal levels as evidenced by the fact that our average daily sales has started to trend upward within the first quarter of 2008. And some of our larger SilverHawk accounts have started to reorder product.

We also put additional systems in place to better manage field inventories, such as our radio frequency inventory tracking system commonly known as RFID that will enable us to more accurately and efficiently track field inventory levels.

We also retained a third party research firm to further examine our US Atherectomy business and validate the internal work that we completed in the fourth quarter of 2007 with regard to the SilverHawk field inventory situation. We also wanted to gain additional confirmation for R&D in clinical research initiatives that are currently underway.

Over a two week period this month the research firm conducted interviews with a significant number of physicians and sales force representatives and analyzed secondary data to understand factors driving the change in SilverHawk usage and Atherectomy procedures.

The results of this survey validated our previous findings regarding the impact of excess inventory and sales force disruption on the sales shortfall in our Atherectomy business during the fourth quarter of 2007. The survey results also suggested that the availability of competitive Atherectomy technologies did not have a significant effect on SilverHawk usage during the past six months.

More importantly, this research also confirmed our previously stated belief in the importance of investing in the necessary trials to build the clinical foundation for the SilverHawk Atherectomy device and capitalizing on our next-generation technologies to expand clinical usage particularly in treating calcified lesions, total occlusions and longer lesions.

Based on the results of this research, we feel very confident the investments that we are making in advancing our Atherectomy clinical trial initiatives. The recent surgical approval of RockHawk in the US and pending launch of RockHawk in Europe to treat calcified lesions, and our continued commitment to market development programs to increase our share of voice with our customers in referring physicians will enable us to strengthen our leadership position in the Atherectomy market.

As we previously reported, we restructured US peripheral vascular sales organization during the fourth quarter, including eliminating a layer of management and optimizing the sales organization to approximately 150 direct sales professionals.

Although we did have a number of sales rep transitions out of the organization, we have had very few departures from the top-half of our sales group and we believe that we have maintained the top-talent from both the pre-merger organizations.

I'm particularly pleased to report that we were successful in recruiting three new field vice presidents during the fourth quarter. Two of them were recruited from outside the company and have extensive medical device industry experience. The new senior sales leadership team has been well received by the field sales organization, which we believe has resulted in a more stable and productive sales team that's focused on selling the complete portfolio of products. Due to the unique product platform the merger has created, we have also been able to hire top performing reps from other endovascular companies with backgrounds that we believe will allow for a rapid integration.

We believe that our sales organization is now positioned for broad coverage and greater efficiency creating a strong differentiated channel to the endovascular specialist that is scalable to support future growth with the depth of leadership necessary to ensure effective execution stability and productivity. At this time, we do not anticipate further changes to the management's structure or the approximate size of the US peripheral vascular sales organization in 2008.

One of the key benefits of our merger with FoxHollow was the opportunity to combine two experienced sales forces with well-established physician relationships and to leverage the combined company's expanded product portfolio to increase revenues through cross selling opportunities. Due to the distractions created by the merger integration activities and sales force restructuring, we did not gain the traction we had expected with our cross selling initiatives in the fourth quarter.

At the beginning of January, we held a three day intensive product training meeting for our US peripheral vascular sales organization that was focused on leveraging our entire product portfolio with clinicians to increase market share. With this additional sales training and a new leadership team in place that is focused on cross selling we are making progress as evidenced by the many anecdotal success stories we have heard from our sales organization.

As an example, we are hearing about the number of cases where clinicians are initially using our SilverHawk device to clear the vessel and then dilating with our balloons to smooth the channel on the same patient. While we believe that our cross selling strategy has been validated anecdotally, we will continue to focus on demonstrating consistency across our entire sales organization as the year progresses.

We continue to believe that the cross-selling opportunities to have the potential to generate significant revenue synergies over the next several years, and we believe we now have the appropriate sales focus and leader structure in place to take advantage of these opportunities as the year progresses.

During the fourth quarter, we also performed our first SilverHawk cases in Europe. Initial feedback from clinicians was very favorable. Currently, our focus internationally is on training physicians, establishing key opinion leaders, conducting European clinical research and developing specific products and procedure reimbursement strategies to support the broad dissemination of the procedure and our products.

Finally, I'll like to do address competition. During the fourth quarter, CSI launched the Diamondback Atherectomy device in the US. Based on CSI's narrow clinical dataset, CSI's strategy appears to be focused on targeting short calcified below-the-knee lesions. While we expect clinicians to trial the device over the next few quarters, we don't believe that they will see it as a broad treatment alternative for PAD. We obviously will continue to monitor developments in the market and we'll report to you what we learnt.

In summary, with the completion of the FoxHollow merger and the majority of integration activities in the fourth quarter of 2007, we are now focused on expanding our position in the large under penetrated peripheral vascular market. We believe that ev3 is uniquely positioned in this market as the only company who can provide a full compliment of interventional technologies, including stents, PTA balloons and plaque excision devices to treat PAD depending on a patient's condition and physician preference.

We have one of the largest direct peripheral vascular sales forces focused on delivering these technologies to clinicians around the world. We are investing in development of the next-generation atherectomy products like RockHawk to expand product usage in supporting the necessary clinical trial programs to bring new products to market and support broader procedure adoption.

In short, we believe we are positioned for a long-term success in the peripheral vascular market with our complete endovascular portfolio, large dedicated peripheral vascular sales force and pipeline of future products.

Turning now to Novation. As previously announced last August, ev3 was awarded three three-year contracts by Novation, the healthcare contracting and services company of VHA and the University Health System Consortium, two national healthcare alliances. Nearly 2,500 hospital members and affiliates of VHA and UHC now have access to our comprehensive portfolio of peripheral vascular and neurovascular products through Novation's peripheral intervention thrombus management and neuro intervention contracts.

To-date, our efforts with Novation accounts have focused on establishing target accounts for our peripheral vascular and neurovascular businesses where we have the greatest potential in securing product evaluations at these accounts. We are taking a dual-pronged approach in these target accounts that involve sales rep calls and product detail into positions along with presentations to hospital management by our sales manager and the corporate accounts group.

We believe that this approach can shorten the time to gain product evaluations and ultimately secure letters of commitment from Novation accounts for conversion to ev3 products. Although it is still early and we were focused on completing merger integration activities in our peripheral vascular business during the fourth quarter, we are pleased with our progress.

On the neuro side, we have made economic wire presentations in 80% of our target Novation accounts to-date and have secured product evaluation commitments in 80% of those accounts. We are pleased to report that in January neuro sales in Novation accounts grew approximately 85% faster than the rate of sales in non-Novation accounts.

On the peripheral vascular side, we have identified target Novation accounts that represent the greatest upside opportunity for ev3 and have started to intensify our activities in these accounts now that the merger integration activities of the fourth quarter are behind us. We're encouraged that year to-date peripheral sales in Novation accounts, excluding SilverHawk, are growing approximately 22% faster than the rate of sales in non-Novation accounts.

On an overall basis, sales in Novation accounts are growing approximately 73% faster than the rate of sales in non-Novation accounts. We are very encouraged by this early progress and believe that successful execution in Novation accounts will be a key driver of increased account penetration, market share growth and provide the ultimate cross-selling lever as we go forward.

Finally, as you saw in the press release that we issued this morning, we are not making any changes to our previously issued guidance. Let me provide some additional color on how things are going this quarter.

To-date this quarter, the performance of our international business is stronger than we expected. Worldwide neurovascular is running ahead of plan. We are experiencing a significant upturn in Novation accounts and cross-selling progress on an anecdotal basis is very encouraging. But we still have work to do to achieve consistency throughout our sales organization.

However, our biggest challenge remains our US peripheral vascular business, and more specifically, the recovery of the SilverHawk business. Ordering activity indicates the accounts that have previously decreased their ordering because of the inventory build up that occurred in prior quarters, are beginning to order again. Although encouraging, this trend needs to continue in order for us to achieve our guidance.

With that said, customer response through the strategic rationale for the merger and the combined product line offered by our peripheral vascular sales organization is very positive, and we look forward to continuing to gain share and grow our leadership position in the peripheral vascular market.

With that business update, I would now like to turn the call over to Pat for discussion of our fourth quarter and fiscal 2007 financial results and guidance.

Pat Spangler

Thank you, Jim. I'd like to begin by covering consolidated fourth quarter net sales results on a geographic basis. Consolidated sales increased 60% to $92.2 million in the fourth quarter of 2007 compared to $57.7 million for the fourth quarter of 2006. On a geographic basis, U.S and international net sales increased 86% and 22% respectively over the fourth quarter of 2006. In the U.S our sales increased to $64.2 million in Q4 of '07 compared with $34.6 million in Q4 of '06. Our international sales grew to $28 million in Q4 of '07, up from $23.1 million in Q4 of '06. Changes in currency exchange rates had a positive impact of approximately of $2.2 million on fourth quarter 2007 net sales compared to Q4 of '06.

ev3's net loss for the fourth quarter of 2007 was a $107.9 million or $8.06 per common share compared to $4.6 million or $0.08 per common share for the fourth quarter of 2006. Included in net loss for the fourth quarter is $10.3 million of integration related expenses incurred as a result of combining and training the sales forces and charges related to realizing ongoing cost synergies. We also incurred $70.7 million in process research and development charge in the fourth quarter.

ev3 uses the non-GAAP financial measures EBITDA excluding charges for non-cash stock-based compensation as a supplemental measure of financial performance and we believe that this measure facilitates operating performance comparisons from period-to-period and company-to-company.

Our fourth quarter EBITDA excluding charges for non-cash stock-based compensation was a negative $93.7 million in the fourth quarter 2007 compared to a positive $3 million in the fourth quarter of 2006. EBITDA excluding charges for non-cash stock-based compensation was negatively impacted in the fourth quarter by the IPR&D and integration related charges mentioned previously. For reconciliation of our EBITDA loss excluding charges for non-cash stock-based compensation to our net loss as reported, please refer to our press release issued earlier today which can be found on our website at www.ev3.net.

In Q4 of '07, we achieved an overall consolidated gross margin of 62%. Excluding research collaboration, our product gross margin was 60.6%. When comparing Q4 of '07 to Q4 of '06, product gross margin declined by 6.5 percentage point. This decline in product gross margin was due in part to the commencement of royalty payments in January of 2007 and certain of our Nitinol products under the license agreement we entered into with Medtronic in Q3 of 2006.

Write-up of the FoxHollow inventory is required under purchase accounting and adjustments in our excess and obsolete inventory reserves for the planned discontinuation of the PRIMUS balloon expandable stent and the SAILOR 0.035 balloon due to our strategic marketing focus on new product introductions.

These declines on a quarter-over-quarter basis were partially offset by higher sales and favorable product mix. On a sequential quarter basis, product gross margin declined by 3.9 percentage points. This sequential quarter decline was due primarily to conversion costs associated with the launch of our new Axium coil the previously mentioned adjustments in our excess and obsolete inventory reserves and the FoxHollow inventory write-off.

Operating expenses in the fourth quarter of '07 have increased in absolute dollar when compared to fourth quarter of '06 primarily due to the merger with FoxHollow. SG&A expense increased by 19 percentage points to 76% of net sales in Q4 '07 as compared with 57% of net sales in Q4 '06. Included in SG&A expenses for the quarter, our one-time merger integration related charges of $10.3 million as previously mentioned and increased non-cash stock-based compensation charges of $1.4 million. Our research and development expenses excluding our IPR&D charge were up 9 percentage points to 21% of net sales in Q4 of '07 from 12% of net sales in Q4 of '06. This increase was due to increased R&D and clinical study efforts.

Amortization of intangibles increased approximately $4.2 million to 9% of net sales in Q4 of '07 compared 7% of net sales in Q4 of '06. This increase was primarily due to the additional intangible assets recorded as a result of the merger with FoxHollow. In addition, operating expenses included and acquired in process research and development charge of $70.7 million or 77% of net sales in Q4 of '07 related to the in process projects at FoxHollow that had not yet reached technological feasibility and had no alternative use as of the date of the merger.

For the full year 2007, our net sales increased 40% to $284.2 million versus $202.4 million for full year '06. Geographically, our US net sales increased 46% to $177.2 million in 2007, up from a $121.2 million in 2006 and our international net sales increased 32% to $107 million, up from $81.2 million in 2006.

Within our reporting segments, full year peripheral vascular net sales increased 43% to $173.8 million over 2006, full year sales of $121.1 million. The increase in peripheral vascular full year sales was driven by atherectomy sales or sales of the SilverHawk Plaque Excision System of $20.9 million from the date of the merger. Excluding FoxHollow revenues, peripheral vascular sales were $152.9 million during 2007 an increase of 26% versus 2006.

Increased market penetration of our EverFlex family of stents was the main contributor to our legacy ev3 peripheral vascular business growth in the fourth quarter as stent sales increased 34% to $86 million, thrombectomy and embolic protection sales increased 20% to $26 million and procedural support sales increased 15% to $40.9 million.

Net sales in our neurovascular segment increased 28% to $104.4 million over 2006, full year sales of $81.3 million. The increase in neurovascular sales was driven by embolic products increasing 44% to $56 million and neuro access and delivery products increasing 14% to $48.4 million.

Our overall gross margin declined to 64.5% for the full year 2007, as compared to 64.8% in 2006, excluding research collaboration, our product gross margin was 64.1% in 2007. This year-on-year change can be attributed to the same factors previously discussed in the quarterly results with benefits from volume increases in ev3 legacy products offset by SilverHawk inventory step up and Medtronic royalties.

SG&A expenses as a percentage of net sales decreased one percentage point to 69% of sales in 2007 as compared with 70% of sales in 2006. Our research and development expenses were up four percentage points to 17% of sales in 2007 from 13% of sales in 2006. We also incurred a one time special charge of $19.1 million in 2007, related to agreements in principle to settle certain patent infringement and other litigation between ev3 and its subsidiaries, The Regents of the University of California and Boston Scientific Corporation.

ev3's net loss for the full year 2007 increased to $165.7 million or $2.37 per common share compared to a net loss of $52.4 million or $0.93 per common share for the full year 2006. ev3's EBITDA loss excluding charges for stock-based compensation declined to a negative $126.9 million for the full year 2007 versus a negative $23.3 million for the full year 2006.

As Jim mentioned earlier, we are not announcing any changes to our guidance that was issued on January 7th, 2008. We continue to expect our full year 2008 net sales to be $500 million or greater and Q1 2008 net sales to be $107 million or greater. We continue to expect our full year 2008 adjusted earnings per share, which includes the impact of amortization expense, but excludes one time transaction related costs to be $0.50 or greater per diluted share based on approximately 107 million of outstanding shares, and Q1 2008 adjusted EPS to be $0.08 or greater per diluted share.

The company's 2008 adjusted earnings per share guidance excludes the impact of non-cash stock-based compensation expense of approximately $19.5 million on a pretax basis or $0.10 per diluted share on a tax effected basis and also excludes amortization expense of approximately $33 million on a pretax basis or $0.18 per diluted share on a tax effective basis.

The company's 2008 Q1 adjusted EPS guidance excludes the impact of non-cash stock-based compensation expense of approximately $4.4 million on a pretax basis, or $0.02 per diluted share on a tax-effected basis, and also excludes amortization expense of approximately $8.3 million on a pretax basis, or $0.05 per diluted share on a tax-effected basis.

While a substantial majority of the company's US income tax payment obligations will be offset for the foreseeable future by a significant net operating loss carry forwards the application of financial accounting principles is expected to result in an effective income tax rate of approximately 41%.

With that, I would like to turn the call back over to Jim.

Jim Corbett

Thanks, Pat. Over the past few months, we have worked diligently to complete our FoxHollow merger integration activities and build an even stronger growth platform in our peripheral vascular business for the long-term.

We accelerated additional cost synergies into the fourth quarter, restructured the US peripheral vascular sales organization and aligned our R&D and clinical programs to sharpen our focus on growth and execution.

Given the progress that we have made today, as well as our continued efforts in executing programs to drive growth in our neurovascular business, I believe we are well-positioned to execute on our stated objectives for 2008. First, we remain absolutely committed to our goal of being profitable in the first quarter of 2008, as well as for the full year of 2008.

As previously reported, we realized approximately $70 million in annualized expense savings from actions taken during the fourth quarter, which has helped us establish a cost structure for 2008 that balances the investment needed to build our business with delivering profitable growth for our shareholders.

In addition to achieving profitability throughout 2008, we will continue to build upon our foundation to drive long-term shareholder value by, first, increasing procedural penetration across both divisions through expanding the distribution channel to endovascular specialists worldwide. Second, improving sales rep utilization and productivity by taking advantage of cross-selling synergies and leveraging our agreement with Novation to gain access to accounts that currently do not use ev3 products.

Third, expanding our product portfolio of product solutions to treat peripheral vascular and neurovascular disease. Fourth, driving growth and continuing our expansion in international markets. Fifth, investing in broad clinical trial programs to further expand the scientific underpinnings of our current endovascular procedures and to gain market clearance to bring new products to market in the US and internationally. And finally, achieving year-over-year improvement in operating margin, adjusted EPS and free cash flow.

In closing, I want to just thank the entire ev3 worldwide team for their efforts during the fourth quarter to complete our merger integration activities while continuing to focus on our core business. I am proud of what our people have accomplished in the face of significant challenges. While we recognize that there are still short-term pressures, we believe there are even more extraordinary opportunities ahead.

Driving our business forward and executing according to our plan will continue to be our top priority. Now, as one unified company, I believe we are well positioned to continue our work towards fulfilling our mission of improving the lives of patients with vascular disease through the development of innovative endovascular therapies. I look forward to reporting on our progress throughout the year.

Thank you for listening today and for you interest in ev3. Operator, I'd like to now open up the call to take questions.

Question-And-Answer Session

Operator

(Operator Instructions)

And your first question comes for the line of David Lewis of Morgan Stanley. Please proceed.

David Lewis - Morgan Stanley

Good morning, Jim.

Jim Corbett

Good morning.

David Lewis - Morgan Stanley

A couple of quick questions here, I know we're running late. First-off, you talked about some interesting comments for international growth into your first quarter that was a major driver for 2007 as well. Can you talk about your growth expectations for US versus OUS for your core business for 2008, as well as if you can give me as little as which division or which segment do you think is going to grow faster that will be helpful?

Jim Corbett

So just to restate, you are asking what's driving the growth in international?

David Lewis - Morgan Stanley

Yeah. The regions that are driving the growth, whether you think international is going to be a faster growth driver than US growth for the corporation this year? And then if you could give us sort of expectations for SilverHawk outside the United States?

Jim Corbett

Sure. Well, let me try and get broad as I can and then give you a couple specific points. I expect the international growth to be approximately 2x the US growth, so substantially faster. And that is reflective of a very strong management team that we put together over the last few years in international and their maturation as an execution team. And it's really driven by both the direct business in Europe where we have direct selling, but also a very effective distributor management group that covers Latin America and Asia where we've made some direct investments. For example, in China, although we use a distributor, we have over 20 employees that work with distributors that are employees of ev3. So about 2x and it's really a maturation of that organization.

On a product line basis, first of all, neuro will grow also faster in international than it will in the US. And Axium will be the lead there, it will be the driver. We expect significant share growth in Europe with Axium and that will be the driver.

On the peripheral side we have a couple of advantages. We expect the 5 millimeter EverFlex and the 200 millimeter EverFlex to really drive the peripheral growth. And with respect to SilverHawk we haven't given specific guidance for SilverHawk internationally, although we are quite pleased with the early results that we have had launching it in Europe. In this case the sales reps have been able to handle the cross selling task really quite well. So I think I will give you some better visibility as the quarter ends on SilverHawk. But I can say we have done quite a number of cases already. And we have a lot of physician interest.

David Lewis - Morgan Stanley

Okay, just one last question. Julie, I forgot to say good morning to you. So good morning. I am sorry.

Julie Tracy

Good morning.

David Lewis - Morgan Stanley

So Jim on inventory, obviously that's a question I think we are all trying to get better visibility in to. Can you give us a sense or any metric at all, if you look across the percentage of accounts, have you sort of identified the accounts where several maybe larger offenders or had greater levels of inventory on a percentage basis. Are you basically tracking to reducing that number of accounts down to a certain level or weeks of inventory? So can you kind of convert that in to percentage in terms of how many of those accounts have sort of been adjusted back to the weeks of inventory whatever metric you have assumed?

Jim Corbett

Well, the first answer to your question is yes, we know who the accounts are and we are tracking them. So that is first. Reducing it to percentages is difficult. We did expect that the upturn in accounts would start to occur during the first quarter and we are seeing the signs of that. That said they have to continue. So it is very hard to turn in to a percentage and one reason is, let me give you the reason. A big account that might use 10 or 15 or 20 a month, they actually have a pretty high inventory turn and if they have five or six months of inventory let us just hypothetically say, they can work through that in a very predictable manner.

Another hospital might have 25 units on the shelf and be doing five cases one month to another in ten or third and it's so difficult to just -- and that by the way comprises the majority of the accounts that type of usage. So it's just really hard off the cuff just give you that answer. But we do know this is our prime directive is to watch all those accounts we are working and making sure that all the accounts have sufficient supports they do, work down that inventory and return to a normal ordering pattern.

David Lewis - Morgan Stanley

But did you know how many devices are out in the field?

Jim Corbett

We think we have a very good idea about that.

David Lewis - Morgan Stanley

Okay.

Jim Corbett

We have not surveyed every single account, but we have done extensive auditing internally and through third party and we targeted the accounts we audited through their purchasing patterns. So we didn't randomly go out and count. We specifically targeted the groups that we thought had too much.

David Lewis - Morgan Stanley

Okay. Well thank you. I'll jump back in queue.

Jim Corbett

Okay.

Operator

And your next question comes from the line of Rick Wise of Bear Stearns. Please proceed.

Rick Wise - Bear Stearns

Good morning everybody.

Jim Corbett

Good morning.

Rick Wise - Bear Stearns

Good morning to Jim.

Jim Corbett

Yes, I can.

Rick Wise - Bear Stearns

Okay, sir I have to just scratch your voice here. A couple of things, can you talk a little bit more about RockHawk, it's sounds like the approval, if I'm remembering correctly is earlier than you expected, which I thought was second half '08 and maybe you can help us better understand the incremental contribution to sales that it could represent?

Jim Corbett

Sure, well. It is a more a favorable approval if you recall at the time of the announcement of the merger, we thought we would get in Q4, '07.

Rick Wise - Bear Stearns

Exactly.

Jim Corbett

And the questions they had were new and different and we did really know how they are going to react to different testing methods that we had to develop to answer the questions. So we gave that guidance, because we just didn't know. It turned out that we answered their questions officially the first time and we did get approval earlier than expected from that reset.

So that said what about the opportunities, well there is really three opportunities to think about. First of all 38% of SFA lesions are calcified and we do not currently treat. So on a pure market opportunity basis the RockHawks expands the market opportunity for atherectomy substantially. The approval that we have in the US now is for a surgical cut down method. And that will increase our market opportunity not for that full 38%, but some portion of it. A little bit difficult to kind of wrap my fingers all around that one.

The second market opportunity of course is that we are commencing and we have filed for the RockHawk IDE with the Spider embolic protection system. And that trial we expect to get approved and start sometime over next several months and that will really drive usage for that technology.

And the third leg of course we'll be launching RockHawk, because it is ready to launch in Europe rather shortly, we expect over the next few months. And it's the same actual device with different indications, so the surgical device is the same device as the endovascular device, they just come with different labeling for different markets. So I think it presents a good opportunity for us.

Rick Wise - Bear Stearns

Yeah, sounds like it is. Two P&L questions, Pat very clearly went through the gross margins impacts in the fourth quarter about 62% obviously the down year-over-year and down sequentially. How do we think about modeling gross margin in '08 given all the puts and takes, higher volume and better mix lower cost should have them improving from here or any help there may be on R&D. At the same time, you are doing so many excellent clinical trails, the offset is may be you can help us to think through R&D spending, just like it will be in '08 as a result?

Pat Spangler

Yeah, thank you Rick. We did end up at 62%, obviously there was a number of special charges that went through the fourth quarter that related to the merger with FoxHollow. I guess, from a guidance perspective what I would tell you is that we have taken cost out of our product and we continue to do that and will continue to do that throughout the year of 2008.

On the longer term we still are anticipating, that we're shooting for that 70% gross margin range and that is something that we feel that we should be able to exit the year at. So from that perspective, we feel very good about that. As you remember, we put all of our manufacturing under a gentleman in the name of Dave Mowry this year and as a result we are driving efficiencies throughout all three locations of our operations.

Rick Wise - Bear Stearns

On the R&D Pat.

Pat Spangler

On the R&D side, basically we are still shooting for that kind of 12% overall, in terms of spend relative to sales but about $60 plus million in terms of total R&D spend.

Rick Wise - Bear Stearns

Okay, one last one, I will sneak in here. Jim, I think one of concerns that folks are vary about the possible impact that Bard and LifeStent might have on ev3 and EverFlex. Are you seeing any impact, should we be concerned, how should we be thinking about it? Thanks a lot.

Jim Corbett

Well, that transaction is underway and there is a transition of LifeStent to Bard, but I know that the Bard reps are out. Selling away I think at the moment, I think they will benefit from having a larger sales organization. What they, I think on the counter side they don't have the range of devices that we do and they don't have the proof of durability performance that we do. And I think actually most significantly the Durability I trial that was presented at Leipzig.

The physician who presented it, so wasn't a company presentation, compared it to SIROCCO trial of the SMART stent and the RESILIENT trial of Edwards and most markedly was the performance in long lesions relative to the two. They don't have the product portfolio to treat them. The results we had were better in long lesions than they had in shorter lesions.

So, I think in this one, its all about the product, it's like the Lance Armstrong start about with life, but this case it is. Its all about the product. So, we feel quite good about where EverFlex is relative to Bard and LifeStent, they still have under 5% share. So they got some work to do to really show up everywhere.

Rick Wise - Bear Stearns

Thank you very much.

Operator

Your next question comes from the line of Charles Chon of Goldman Sachs. Please proceed.

Charles Chon - Goldman Sachs

Good morning, thank you for taking the questions.

Jim Corbett

Good morning Charles.

Charles Chon - Goldman Sachs

Thank you for taking the question. Pat, just a little quickly, can we just revisit gross margins, can you quantify for us what the onetime items were in that line item and then we were or removed those items, so the write-off and the reversal of obsolescent, the inventory revenues, what would gross margins have been

Pat Spangler

Yeah, as an example, during the quarter what we took was we took about $3.7 million additional charge in excess and absolute inventory as I mentioned for the two product lines that we transitioned. The write-up on the inventory for FoxHollow was approximately $1.8 million and then our Medtronic royalty that we continue to pay had about a 1% impact on the overall gross margin, but that is at ongoing cost that we will have in the future.

Charles Chon - Goldman Sachs

Alright, so ultimately gross margins are really around the 68% level?

Pat Spangler

That's correct.

Charles Chon - Goldman Sachs

For the product side of the business.

Pat Spangler

Yes.

Charles Chon - Goldman Sachs

Thank you and then for gross margins for the Merck research collaboration came in at 82%, if I'm not mistaken I believe that's running a little bit higher than the gross margins that we've seen in the past for the Merck collaboration. Is this the level of gross margin that we should expect from the collaboration going forward?

Pat Spangler

No, this resulted familiar with the transition of the clinical trials that we have going on with Merck in this, what happens is at the beginning of the year we reset budgets and the spending for throughout the year and so the fourth quarter, just that quarter ended up itself but for '08 we're going to have a different spending pattern for Merck.

Charles Chon - Goldman Sachs

Okay, so where could we see gross margins trend then for the year, for the Merck piece that is?

Pat Spangler

Yeah, for now I would stay with roughly that 70% as well kind of just on the overall.

Charles Chon - Goldman Sachs

Okay, sounds good. And finally just a quick question on the complaint that was filed by ev3 against some former FoxHollow employees, as well as the restraining order against CSI, can you just give us a quick update there. And by the way can you tell us whether or not, especial the suit against the FoxHollow employees, where these employees who are let go as part of the sales force rationalization at the time the acquisition was closed or these are reps who became ev3 employees and then left?

Jim Corbett

Lot of choices there Charlie. Okay, so let me try to respond. First of all, in general, I don't want to comment too much about the litigation, but I'll give you some color to what you just asked. The fundamental of this case is about theft of confidential information that is what the case is really about. And the parties named in the suit are the employees that we believe participated in that and the company that facilitated it. So, that's what the case is about.

As far as the employees, there are all of the above that you just asked. So there are employees at CSI who were once part of FoxHollow well before the merger of the two companies. There are employees who left immediately around the merger time and then there are some employees that came in the last few months. Now in total including the past employees you are talking 15 to 20 people, but not 15 to 20 out of the post merger of population. Am I getting to your question?

Charles Chon - Goldman Sachs

Yes, you are. And I appreciate that this is a difficult topic to talk about. Thank you very much for that color.

Pat Spangler

My pleasure.

Operator

Your next question comes from the line of Jason Mills of Canaccord Adams. Please proceed.

Jason Mills - Canaccord Adams

Thanks everyone for taking my call. Hi, Jim.

Jim Corbett

Good morning.

Jason Mills - Canaccord Adams

Question on the peripheral vascular market, recently atherectomy market, clearly there was an impact in the quarter from the inventory issue, and you've given us some good details with respect to how much that is directionally. But if we look at market overall with respect to what you are reporting, what Spectranetics reported and then what we know CSI reported from their S1. It looks like sequentially it was down around $15 million, $20 million in sales through those three companies in the quarter, sequentially we expect fourth quarter to be better than the third.

So I'm wondering, can all that be explained way by the inventory issue or do we have sort of a deceleration in that market growth, as it relate to atherectomy, and if so, is that acute and sort what drivers do you expect to see in the market that would get us back to relatively decent growth in the atherectomy market?

Jim Corbett

Yeah. It obviously gets complicated, so let me kind of answer it from two or three different points of view. We've done a lot of research on this during Q4, and again, most recently in Q1 both internally and using external research firms, so I've got a fair bit of data that I think helps me understand this market.

First of all, we believed the atherectomy business of FoxHollow was in the $38 million to $42 million range at the time of the merger. We now think that given the inventory purchasing pattern that occurred in the 24 months, we probably would range find that just slightly lower in the mid-30s somewhere, so not as high as 40, but somewhere in the mid-30s.

Secondly, if you look at the Spectranetics report and you look at the S1 filed by CSI and when we look at our analysis and fortunately for us, we get to see all that data and we're the only ones. What I can say is the market is for atherectomy is not growing as fast as the PAD market. It's growing slower. And our research is very crystal clear about it. It's all about the clinical data. They want long term patency data and they want high quality clinical trials. And no company has actually run any yet.

Now, we have plans for two this year. the Spider RockHawk study will be an IDE, we had a great meeting with our scientific advisory board at the ISAT meeting, we are circulating a protocol right now to do a SilverHawk study that will be IDE quality, we are not required to, because we are on label. But what we want to do is create good strong long term patency data.

So I think the prospects, if you look at the atherectomy market long term, the PAD market is underdiagnosed and incidentally, we should talk about referral marketing and I will come back to that in a moment.

The PAD market is significantly underdiagnosed and it's big. As it pertains to the treatment, still growing very strongly, as it pertains to the specific atherectomy treatment, it's not growing as fast as the market and the reason is the physicians want that data. But they also want some treatment options and of course, RockHawk gives us an opportunity for that. So, I think there is work to do here for us and for the market and I hope I got your question in there.

Jason Mills - Canaccord Adams

Yeah. That's helpful. So if we put some numbers to that, Jim. Are we looking at a procedural growth in the PAD market? You mentioned you wanted to go referral marketing, perhaps this would be a question you could be saying you'll do that within? Are we looking at a procedural market that's still growing, so the 15% to 20% and with the inventory issue and perhaps the lack of clinical data, we have in the atherectomy market that we should think about in terms of 10% growth, something less than that 15% to 20% growth, am I hearing you right on that?

Jim Corbett

You really are its definite. PAD market broadly is in the mid teens or up and the atherectomy market is less than that. Yes, you are hearing me correct. Having said that one of the things we learned from FoxHollow in the merger was what an impact referral marketing could have on the business. On an ongoing basis it affected the FoxHollow business in the very positive way.

We've done a lot of research also on that topic and one other things we're doing right now is we are preparing our own referral marketing strategy that will be ready to introduce some time in the next month or so. That we think is going to be very broad and scalable to all of our 150 sales territories.

One of the challenges that the FoxHollow strategy was this we had peripheral vascular consultants and that strategy although effective wasn't scalable 1% for every 150, I think at the peak there was 40 or 45 of them and currently we have under 20. So we are working on a much bigger idea that we'll not add to our cost structure that will allow us to really provide the referral marketing tools to all of our territories.

Jason Mills – Canaccord Adams

That's helpful. One quick question in addition and I'll get back in queue. I appreciate all the detail. I'm a newbie this, obviously just initiated not too long ago Jim. But closely I did follow, FoxHollow did closely track your business. And clearly the stock has reacted, I guess over the past year or so to results through all of the guidance and there are a lot of moving parts in there and it's hard to give guidance when you acquire business and all that.

But I am sure, you've been very shrewd to recognize the sort of performance relative to guidance has been something that's caused the stock to go down and you decided today to reiterate your guidance. What I hear from clients most often is, boy I am more worried that we are going to see a continuation of that trend.

So with that in mind clearly you have a strong belief in your guidance given in the past what you warned about, what the stocks done when the guidance has not been met. Could you give I guess a little bit more detail your general or specific with respect to what your most confident and with respect to your guidance and with all of that in mind. I know its a long question. I apologize.

Jim Corbett

Complicated question, I don't talk about the stock movement in the market, it has been pretty complicated for all stocks. But yes we did have a movement related to our Q4 performance, which as we have stated was not acceptable to us. What we did today just to be clear about it is we didn't announce any changes in guidance. And so when we looked forward we do recognize the need for us to meet guidance and so moving continually to focus on it as we execute going forward.

Operator

And your next question comes from the line of Tom Gunderson of Piper Jaffray. Please proceed.

Tom Gunderson - Piper Jaffray

Hi. Good morning.

Jim Corbett

Good morning.

Tom Gunderson - Piper Jaffray

Very thorough Jim and Julie thank you. Just some follow up here. A lot of information on SilverHawk and what's been done and what's going even quarter to date. Jim is it reasonable to assume that SilverHawk sales will be higher in Q1 and Q4?

Jim Corbett

You know Tom we don't specific guidance on a product line basis. But clearly the recovery from the inventory should drive sales in excess of Q4 levels.

Tom Gunderson - Piper Jaffray

Okay.

Pat Spangler

Okay and that's full Q4 including the three days of October.

Jim Corbett

I think that we could logically look at that picture and knowing what we know today, know that the and the sales are shipped kind of on a lump sum at the end of the quarter will probably be included in some of that forward selling activity. So I think I look at Q4 as reported.

Tom Gunderson - Piper Jaffray

Okay, thanks and then on Novation and the detail that you gave there and the targets that you are looking at on neurovascular where you had the earlier results. How many targets are we talking about that you hit 80%, are we talking of 100 or 20. Can you give some color on that?

Jim Corbett

I'd like to give you color, but that's kind of probably a little too specific for me. Lets just say the, quite a number that there is -- in the whole market there is only really 250 accounts that really drive the volume and but we've been really at Novation a little bit earlier than we were peripheral, because the contract was signed in October and during the fourth quarter the peripheral organization was really working on the integration and the neuro team wasn't burdened with that. So they've had a chance to get out quite a number of accounts and I would say a material amount.

Tom Gunderson - Piper Jaffray

Got it. I'll just do one more question in the interest of time and that is on the sales force and the cross selling. They've been trained twice. They have new managers in place that you believe and the feedback has been positive. They have since early January on the second training I had a chance to go out and I would guess see each of their accounts at least once between then and February 21st. Is there anything else that needs to be done? Is this a sales force that is in the US peripheral vascular that's fully ready to cross-sell.

Jim Corbett

It's kind of an exciting thing, I was thinking about that as I was waking up this morning, because we are at full power, we don't have any openings for the budgeted territories. We have the management team in place; we've trained them like you said. It's really all blocking and hackling now. We feel very confident about the changes we've made. We will likely do some activities going forward in the referral marketing area. But really this all about them going out and executing their jobs as they spend newly defined by the merger. And I've got to tell you, this is kind of an exciting point. I was on the field last week, the customers just universally, I haven't run into a customer or heard about one who doesn't think that this portfolio is not right way to have gone. And so that's one of those underpinnings despite our challenges that really gave me a lot of confidence, that it is a matter of time and execution and us getting it right and it will turn into a successful model.

Tom Gunderson - Piper Jaffray

Got it, thank you.

Operator

Your next question comes for the line of Joshua Zable of Natixis. Please proceed.

Joshua Zable - Natixis

Hey guys thanks so much for taking the call and for all the color here, most of my questions have been answered, just kind of want to follow-up on the RockHawk with Diamondback device out there. Can you just kind of talk about the difference sort of in may be how you guys are going to market RockHawk versus the Diamondback specifically for calcified lesions?

Jim Corbett

Well since we haven't launched yet. Let me just say it this way, the Diamondback is a 4 millimeter device, its designed for below the knee. The RockHawk is designed to treat the SFA, much bigger diameter vessel and a much bigger market. So, 38% of all SFA is calcified. So, we are really, the vein diagram on this one doesn't have a big cross over at the moment. Now they may introduce a bigger device and if they do, I will better be able to respond that. But at the moment, its kind of hypothetical that they will really collide in a significant manner.

Joshua Zable - Natixis

Oh, great, that's helpful, thanks guys.

Jim Corbett

Very good.

Operator

At this time I would like to turn the call back over to Jim Corbett for closing remarks.

Jim Corbett

Thank you, operator. As you heard, we are pleased with the progress that we are making and continue to be excited about our prospects for 2008. We look forward to reporting on our progress in all future calls. Thank you again for joining us today.

Operator

Thank you for your participation. This concludes the presentation. You may all now disconnect, good day.

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Source: ev3 Inc. Q4 2007 Earnings Call Transcript

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