C. R. Bard, Inc. Q1 2008 Earnings Call Transcript

Apr.23.08 | About: C. R. (BCR)

C. R. Bard, Inc. (NYSE:BCR)

Q1 FY08 Earnings Call

April 23, 2008, 5:00 PM ET

Executives

Timothy M. Ring - Chairman and CEO

John H. Weiland - President and COO

Todd C. Schermerhorn - Sr. VP and CFO

John A. DeFord, Ph.D. - Sr. VP - Science, Technology and Clinical Affairs

Analysts

Kristen Stewart - Credit Suisse

Mimi Pham - JMP Securities

Taylor Harris - JPMorgan

Matthew J. Dodds - Citigroup

Joanne Wuensch - BMO Capital Markets

Frederick Wise - Bear Stearns

Robert Hopkins - Lehman Brothers

Christopher Warren - FBR

Jason Bedford - Raymond James

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the C. R. Bard First Quarter 2008 Earnings Results Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions]. As a reminder, this conference call is being recorded and will be available for future on-demand replay through the Bard website.

Today's presentation will be hosted by Timothy M. Ring, Chairman and Chief Executive Officer along with John H. Weiland, President and Chief Operating Officer; Todd C. Schermerhorn, Senior Vice President and Chief Financial Officer; and John A. DeFord, Senior Vice President, Science, Technology and Clinical Affairs. Also in attendance today are Frank Lupisella, Vice President and Controller; and Eric J. Shick, Vice President, Investor Relations.

Today Bard's management will discuss some forward-looking statements, the accuracy of which are necessarily subject to risks and uncertainties. Please refer to the cautionary statement regarding forward-looking information and the information under the caption risks factors in the company's 2007 10-K, including disclosure of the factors that could cause actual results to differ materially from those expressed or implied.

During the call, references will be made to certain non-GAAP measures which management believes provide an additional and meaningful assessment of the core operating performance of the company and its individual product franchises. Reconciliations of non-GAAP measures to the most comparable GAAP measures are provided in Bard's earnings press release and the company's website at www.crbard.com. All information that is not historical is given only as of April 23rd, 2008 and the company undertakes no responsibility to update any information. Unless otherwise noted all comparisons are to the prior year period.

At this time, I will turn the call over to Mr. Timothy Ring. Please go ahead.

Timothy M. Ring - Chairman and Chief Executive Officer

Thank you, Greg. I'd like to welcome everybody to Bard's first quarter '08 earnings call, and thank you all for taking the time to join us today. I would expect the presentation portion of the call to last around 25 to 30 minutes.

The agenda today will go as follows; I'll begin with an overview of the results for the first quarter. John Weiland, our President and COO will review first quarter product line revenue. Todd Schermerhorn, our Senior VP and CFO will review the first quarter income statement and balance sheet as well as our expectations for Q2 and then John DeFord, our Senior VP, Technology and Clinical Affairs will give you an update of our product development pipeline and then we will close with Q&A.

Looking at the first quarter, our net sales totaled $584 million. This is an increase over the first quarter of '07 of 11% on an as reported basis and 8% on a constant currency basis. Currency impact for this quarter versus the same quarter in '07 was favorable by about 250 basis points. Income from continuing ops for the first quarter of '08 was $78 million and associated diluted EPS was $0.76. As reported, income and diluted EPS from continuing operations were down 23% and 20% respectively, compared to the prior year periods.

Excluding purchased R&D primarily for the Edwards LifeStent deal, first quarter '08 income and diluted EPS from continuing ops were $109.1 million and $1.06, up 7% and 12% respectively over the prior year period. For your reference the adjustments to our results are detailed to reconcile to GAAP results in that tables and notes for the financial statement in our press release and also on our website.

Taking a look at revenue geographically on a constant currency basis, first quarter net sales in the U.S. increased 7%, Europe grew at 13%, Japan increased 6%, and the other international entities grew a total of 8%. Looking at net sales growth by product line in Q1, our oncology category grew within our full year '08 constant currency guidance while vascular and urology were just slightly below. As expected, our surgical business experienced a difficult quarter as a result of a challenging comp in the prior year period. Compounding the difficult comp was a hold on the sale of our Salute II product for much of the quarter and increased back orders in our performance irrigation business.

I would tell you on a more positive note, our core hernia sales have improved in each of the last two quarters. So, it looks like Q3 of last year was likely the inflection point for the trend in the core hernia business. John Weiland will give you more details of that in his discussion. As you know effective execution is critical to the success of our strategy and right now we are just not seeing it in our surgical business.

Beyond closing the Edwards deal in Q1, we did announce signing an agreement to acquire Specialized Health Products International or SHPI. They are small developer, manufacturing and marketer of vascular access products primarily Safety-Winged Infusion Sets, which are used to deliver therapeutic agents through vascular access ports. In that deal, we did recently receive Hart-Scott-Rodino clearance and anticipate closing the transaction around the middle of the year following approval by the shareholders of SHPI and the satisfaction of other customary closing conditions.

During the quarter we also closed on a small technology based transaction in our biopsy business. The technology is pretty exciting and we anticipate seeing a product launch around the second half of '09. So we will give you more details around that timeframe. We continue to pursue opportunities like these and the others we've done in the last several quarters including UltraClip, Therma-Stor, Sepramesh and then LifeStent.

In summary, outside of our surgical business it was a pretty good quarter. Todd will get to that guidance shortly, but we expect improving revenue growth rates and continued solid bottom-line results as the year progresses.

And let me turn you over to John Weiland for an overview of our product line revenue.

John H. Weiland - President and Chief Operating Officer

Good afternoon, ladies and gentlemen. Before I begin let me note that all percentage growth data will be in comparison to the prior yearon a constant currency basis, unless specifically noted otherwise.

So let's begin with the vascular category. Total net sales for the first quarter in this category were $150.4 million, which represents an increase of 13% over the prior year quarter. This increase was 18% on an as reported basis. The United States business grew 7% and internationally we were up 21%.

Our Electrophysiology business grew 21% for the quarter impacted by strong results in Europe for the quarter especially in. EP Lab Systems Our steerable diagnostic catheter line also continued its healthy trend with growth of 26% for the quarter. John DeFord will update you on our continued progress with our HD Mesh Ablation Catheter for the treatment of atrial fibrillation in Europe.

Graft product sales, which represented 16% of the vascular category were down 8% this quarter. OEM sales within the category were down by more then 20%. Our endovascular products grew 17% for the first quarter, further bolstered by the LifeStent acquisition starting in mid-January. Within endovascular, our biopsy product line had another healthy quarter growing 22%. The VACORA and UltraClip products continue to be growth drivers here.

Our peripheral PTA line was up 23% building on the Conquest Annapolis platform; our new Dorado catheter gained some good traction this quarter. The clinical response to the product has been very positive and we experienced little cannibalization here since we didn't have a very competitive offering in the five French balloon catheters prior to Dorado's launch late in the Q3 last year. Our vena cava filter line was up 6% versus a strong prior year quarter. The recent approval of a removability claim for our G2 filter positions us well to take... continue to take market share.

Our stent business grew 19% this quarter with the addition of LifeStent. Our integration activities have been well executed, and while it's early our sales of LifeStent are tracking favorably to our model. The story in our stent business is really all about the future as we are poised to build momentum in the second half of the year, following the anticipated PMA approvals of an SFA indication for LifeStent, and iliac indication for the E-Luminexx, and the Flair AV Access Stent Graft.

With these three approvals, we expect to have one of the broadest and best performing peripheral vascular stenting lines in the United States. We will also help drive growth by capitalizing on the size and the strength of our vascular sales organization, already in place here in the United States.

Turning to urology, total net sales for the first quarter 2008 were a $168.7 million, an increase of 7% over the first quarter of 2007. This increase was 9% on an as reported basis. The United States business which represents 72% of global revenue grew 9%, internationally, we grew at 2%. Standalone sales of our StatLock catheter stabilization line increased 37%.

On the last couple of earning calls, we attributed strong growth in part to increased dealer inventory levels ahead of a price increase that was effective in the fourth quarter. We saw some offset this quarter but not to the extent we had expected. In the market, StatLock continues to meet with the rapid clinical acceptance. We are investing in additional field sales resources to meet the demands of a very full account conversion pipeline and our flow of new products is also very robust. We are in very good shape here.

Our basic drainage business grew 7% in the first quarter, 11% in the United States. Our Bard X IC infection control catheter line had a strong quarter growing 14% globally and 20% in the United States. We are beginning to see increased interest in Bard XIC due to the new CMS rules that will eliminate reimbursement for specific hospital-acquired infections, which includes urinary tract infections beginning in October of this year. In fact in March, we had a record number of Bard X IC account conversions.

Our overall continence business, which was 15% of the urology category was up 8% in the first quarter. Our surgical continence line, which includes slings and pelvic floor repair devices, grew 19% in Q1. Our new Align sling drove growth of 27% in our sling line for the quarter within our pelvic floor repair line, while our Avaulta kit products continue to grow nicely at 40% in Q1. We are beginning to see a drop off in the older flat sheet technology products. Q1 growth in our overall continence business was also impacted by an 8% sales of Contigen, our injectable bulking agent.

Sales in urological specialties were down 6% versus 2007. Brachytherapy, which is about half of the business in this category was down 10%. In the brachytherapy market we are seeing a drop in case volume due to competitive therapies most notably, robotic procedures for radical prostatectomies.

Turning to our Agento IC respiratory infection control product. Since its launch in December we have been very pleased with the positive reaction we are getting with the device. Clinicians are impressed by the benefits the product delivers, both clinically and economically. Feedback from hospital administration continues to demonstrate that they recognize the high cost of ventilator associated pneumonia and the value Agento represents.

As we've noted in the past, since the sales cycle is fairly lengthy with this product, initially the revenue figures will not noticeably impact the urology category. That said, we have already converted accounts and are beginning to see our first three orders. We are very optimistic about Agento's potential.

Let's turn to oncology. Total net sales in this category were $150.0 million, an increase of 15% over the first quarter of 2007. This increase was 17% on an as reported basis. Geographically, net sales in the United States were up 18%, outside the United States we grew 8%. Implanted ports grew 10% for the quarter.

We will continue the expansion of our PowerPort line with the planned Q2 launch of our new intermediate sized MRI isp PowerPort. We believe this product could be the largest selling, most popular port in our line providing full power injection capabilities in a small non-metallic platform. Also as Tim noted, we expect to close the SHPI deal around mid year. Infusion sets are important component of our port line, and this acquisition that helps strengthening our full range of devices specific to port-based therapies.

SHPI's market-leading SafeStep device provides a differentiated approach to reducing a needlestick injuries and the associated risk of transmitting blood-borne pathogens.

Growth in our PICC and Midline products accelerated to 28% in the first quarter following launch of our new PowerPICC SOLO late in fourth quarter. The SOLO with its unique proximal valve design significantly reduces a maintenance protocol for PICCs, and was of to a very strong start in Q1, in what was effectively its first quarter in the market.

Having received concurrence during Q1 for the next generation of SHERLOCK tip locator system, this technology continues to drive growth, and didn't differentiate our product offering in the market. PICCs that include the SHERLOCK technology now represent almost 30% of our sales for the line.

Our vascular access ultrasound product line had another robust quarter growing 23% on the continued success of our Site-Right 6. The integration of the SHERLOCK II functionality into our Site-Rite line further enhances our ability to facilitate the placement of PICCs at the bedside by specifically trained nurses. The technology offering we provide to hospitals positively impacts the institutions, their clinicians and their patients. This is a good example of how providing products that are both clinically and economically differentiated benefits everyone.

And finally, our surgical specialties business. Global net sales decreased 6% from the first quarter last year to $93.0 million. This was a 4% decrease on an as reported basis. Sales in the United States which represented 72% of the total surgical revenue were down 11% for the quarter. Internationally, we were up 9%.

As we've discussed in the past, the first quarter represents our toughest 2008 comp for the surgical business. Q1 '07 was the highest sales quarter last year in our soft tissue repair of business. We declined each quarter through Q3, and then improved in the fourth quarter And as Tim noted, challenges with our Salute II fixation device and our performance irrigation line contributed the decline year-over-year, and I will cover this in more detail shortly.

Within soft tissue, our core hernia sales were little stronger than we expected in the first quarter. Core hernia products which include both synthetic and biological devices were flat against the very strong first quarter in 2007. First quarter performance in core hernia was helped by Sepramesh IP which we began selling late in December. We are getting a very positive level of feedback from clinicians on Sepramesh and expect it to gain momentum throughout the year.

Our natural tissue products had a good quarter, growing 13% with our Allomax patch driving growth. As we noted on the last call in order to better address the clinical challenges associated with specific types of infections, we are segmenting our approach to complex hernia repairs between cross linked and non-cross linked devices. This experience is the basis for the advancements we are making to our CollaMend patch. As we have noted in the past, we expect to bring a new version of CollaMend to market in the second half of this year.

The opportunity in the complex hernia market lies in the ability of future products to reduce the recurrence rates being seen in this complex hernia repair market today. We believe this will require significant advancements in technology and we continue to focus on this within our R&D project portfolio. Fixation sales were down 58% in Q1 as we shipped very little of our Salute II device in the period. In the past, we have discussed the challenges we've experienced with the design and manufacture of the tip component of Salute II, which is where the fixation construct is formed. This quarter, we experienced variability in the formation of the construct that was outside acceptable limits. So, we put the manufacture of the product on hold. We are working diligently on a resolution, but at this point we estimate that the earliest we would be back in the market would be late Q3 or Q4.

That said, although we have not discussed them previously, we currently have third generation fixation devices under development and the timeframe for their launch may be the very small window of opportunity for re-engineered Salute II. So, we are weighing the relative timelines, technical challenges and associated risks in order to determine the best course of action. In terms of what the future holds for our soft issue repair business, we see our Sepramesh product as a strong competitor in the growing absorbable barriers segment of the market. And we expect it to continue to build momentum within our synthetic hernia line.

Our base synthetic hernia business appears to be stabilizing and should provide a platform for growth as we continue to launch new products. John DeFord will get into more details; but over the second half of 2008 we plan to launch a resolvable ring Kugel device and the new configuration of the CollaMend device.

Closing the surgery category, our performance irrigation business, which represents 20% of the surgery category, in Q1 was down 11% due in part to a small backorder that has since been resolved. And finally our hemostasis business was up 2%.

This concludes our product line revenue discussion. I'll turn you over to Todd Schermerhorn.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Thanks, John. Start with the income statement for the quarter. Gross profit was 61.4% of sales, up 50 basis points from the first quarter of '07, and 40 basis points sequentially. Incrementally amortization on intangibles from new transactions cost us about 40 basis points year-over-year and about 20 basis points sequentially. So, on an organic basis, we've improved about 90 basis points year-over-year. Product cost is really the biggest driver of improvement, and we think in GP we are well positioned to achieve the full year guidance that we provided in the summer.

SG&A expenses were $168.9 million for the quarter, 28.9% of sales,up 10% over the prior year. Majority of that increase is result of continued investment in our selling organization as we talked about in December, otherwise really no notable exceptions in our SG&A this quarter. R&D totaled $85.8 million for the quarter. We recorded purchased R&D of $44.4 million associated with the LifeStent acquisition and $4.9 million related to the biopsy technology deal that we closed in Q1. So, excludingthose charges, R&D was $36.5 million, 6.3% of sales and up 21% over first quarter of last year.

Interest expense was $3 million for the first quarter, up 100 K from the prior year; other income expense was $4 million of income for the quarter that was down $3.4 million from the prior year quarter as a result of lower interest income driven by lower cash balances due to our share buyback program and also lower yields in our dollar-based investments. Obviously the reduction in interest income is offset by the 3.4 million share reduction year-over-year. Tax rate for the quarter is 25.6 on adjusted basis that is excluding the purchased R&D the rate was 29.2, that's 100 basis points lower than our full year 2007 rate before any items affecting comparability, just as we guided.

Balance sheet as of March 31st reflects cash and total investments of $448 million versus $570.6 million at the year end. Our account receivable days were up 1.7 days and inventory days were up 8.2 days. It is difficult for our inventory days to increase a little bit early in the year as fourth quarter days reflect plant shutdowns during the holidays.

Capital expenditures totaled about $10.4 million for the quarter, in line with our guidance, maybe just a little less. On the liability side total debt was 149.8 million as of March 31, with little change from $150.6 million as of 12/31/07. Our debt to total cap at the end of the first quarter was about 8% and our total shareholder investment was $1.825 billion at March 31. We repurchased a little over 1.7 million shares of our own stock this quarter. We will continue to be buyers of our stock as cash balances, as market conditions permit.

Moving on to financial guidance; as we said last quarter, we anticipate improvement in sales growth as we move through 2008. So, we do expect it will grow double digits on a constant currency basis in the second quarter. And I would note that, that estimate includes an assumption of zero sales for the Salute II product.

From an EPS standpoint, we are expecting $1.07 to $1.08 for the second quarter, excluding any items affecting comparability. We do plan to continue to be in investment mode relative to the sales force and R&D and business development throughout the year. If we earned $1.08 in Q2 that would leave us with a requirement of $2.21 for the second half of 2008 to get the 14% EPS growth. At this point, we are confident that that's achievable.

So, now I will turn you over to John DeFord.

John A. DeFord, Ph.D. - Senior Vice President - Science, Technology and Clinical Affairs

Good afternoon and let me jump right in with HD Mesh Ablation product atrial fibrillation activities. As we discussed in the past, our European commercialization efforts continue and service our proving ground for the refinement of our training and marketing approach. We are carefully developing clinical experience and have a host of new podium presentations as well as publications, describing the results with the product now with a longer-term follow-up.

These reports continue to validate a significant decrease in overall procedure time and excellent short and long-term effectiveness measures, including over 90% acute success and 80% long-term success, which is defined as freedom from atrial fibrillation with follow-up beyond six months. Our product safety record continues with no cases of PV stenosis, spreading nerve injury or esophageal fistula.

Additionally, we are preparing to enroll our first U.S. patients late in Q2 or early in Q3 in our U.S. pivotal study named Magellan. We qualified and selected more than 20 sites in this roughly 280 patient randomized trial. To further support the HD Mesh initiatives in Europe this month we are launching our new 100 watt RF generator. Our first ever generator is specifically designed to seamlessly integrate with our tin [ph] pulse post RF control unit as part of the HD Mesh System as well as provide work force ablation capabilities as a standalone device. In the U.S., we'll include this generator in our HD Mesh trial.

In December, we discussed the launch of our ElectroView 3D mapping software. Along with the ElectroView, we are preparing for a second quarter launch of our new EP logics, suite of analysis tools that augment ElectroView mapping and our ElectroView mapping system with features including dominant frequency analysis, automated AF cycle length calculation and voltage and activation mapping tools. EP logics will be offered as a software upgrade to our market leading lab system pro.

Moving to stents; we continue to await concurrence of our E-Luminexx, self-expanding biliary stents. We have received and responded to some minor questions from FDA and we are hopeful for a U.S. launch this quarter. This electropolished E-Luminexx was launch over a year ago in Europe. On the Iliac front, we filed our final module of the PMA for the E-Luminexx Iliac stent with the FDA last month and anticipate gaining this vascular indication in Q3 with launch immediately following the approval.

The FDA questions on the PMA submission for the LifeStent, which we acquired from Edwards Lifesciences in Q1, were answered by Edwards in March and we believe we are on track for a Q4 U.S. launch of the product with SFA indications. We continue to follow the patients enrolled in the resilient clinical study and will start a post approval clinical study named Continuum after FDA approval.

Moving to stent grafts, we discussed in December a small clinical study evaluating enhancements to our Flair AV access stent graft delivery system. We completed enrollment, follow up, and submitted our PMA supplement to FDA in Q1. We anticipate the launch of this stent graft for the treatment of AV access graft stenosis in the second half of this year.

So to summarize, our near term stent and stent graft positions, we have three PMAs under review at FDA. The development work on those projects is done, and we expect to launch them with key vascular indications over the next few quarters.

Our development efforts also are progressing on our next generation self expanding ePTFE-covered stent product family. As we discussed last December we expect to launch a highly flexible fracture resistant stent graft on a new lower profile delivery system in Europe in the second half of the year. And in PTA we continue to progress on schedule and anticipate the launch of extensions to our Conquest line of high pressure balloon catheters in the back half of this year.

Improvements to our Atlas line of large diameter catheters are also progressing well and are anticipated for launch in the first half of 2009. In vena cava filters, as John noted we have received concurrence on the retrieveability indication for our G2 filter in Q1 following completion of our Everest clinical study. This study demonstrated successful filter retrievable with implant times of 5 days to 300 days with a mean explant at a 140 days.

As John noted, we launched the G2 with this new indication and are readying an additional version called the G2 Express that supports snare retrieval. We submitted our 510(k) on the Express just a few days ago and anticipate launching this new product in the second half of the year.

Turning to urology, we are building on the successful Align sling introduction with excellent progress towards the late 2008 launch of our new less-invasive sling. This new sling will provide tissue fixation with a new tissue anchor and utilize a low profile mesh designed to be placed over a single small anterior vaginal incision, eliminating the need and risks associated with deep needle passes that are required for the current TVT or TO sling procedures.

I know we've really not talked about it much in the past, we continue to launch multiple new StatLock devices each quarter. This year we anticipate launching 37 new product codes across our peripheral IV and Foley catheter lines with additional emphasis on products developed specifically for the international market.

Moving to our oncology business, we are continuing to build upon our market-leading Power platform, our SOLO valve technology and our tip location technology. John mentioned our PowerPICC SOLO product line, which entered the market at a critical time. The current difficulties surrounding the use and availability of Heparin can be eased through the use of SOLO, which requires only saline flushing once per week in lieu of the daily heparinized saline flushing.

We will be expanding the SOLO valve technology to the PowerLine and Power Hitman [ph] over the remainder of the year. Also as noted in Q2, we plan to launch the intermediate sized MRI ISP PowerPort, and beyond that in Q3, we expect to launch the PowerPort Duo, a duo looming PowerPort for use in patients that require simultaneously injection of incompatible drugs.

In imaging, we continue to work toward the launch of two new platforms late this year, further integrating our ultrasound and vascular access technology with our PICC Tip location system. These imaging systems tentatively named the Site-Rite 7 and Site-Rite Vision, will incorporate our popular needle guide technology along with the Sherlock tip locator system allowing for seamless transition from catheter insertion through tip tracking to final placement location.

And moving to our surgical business, we are working to integrate the Sepra coating technology to support internal manufacture of the Sepramesh IP Composite and expand this technology to a host of other hernia products. We are also completing our development efforts surrounding a new family of resorbable ring self-expanding ventral hernia products, and anticipate the launch of our first product in this family in the fourth quarter.

We continue to receive strong feedback from our customers and in peer review publications such as Dr. David Ionetti's paper that self-expanding hernia repair products have significant procedural advantage in both open and laparoscopic surgeries. As the only self-expanding technology available, we are confident this new product family will provide our customers with their desired performance benefits without concern over a permanent ring.

And in our biological product offerings, as John mentioned we remain on schedule to launch a new CollaMend product toward the end of the year. And also as noted, we are working toward the launch of a third-generation fixation product that's planned to be available in both permanent and resorbable versions. We feel this device has the potential to provide both improved performance in resorbable device constructs with delivery enhancements over existing products in the market.

And finally, moving to our VCD therapy project. Our RS2 next-generation endoscopic suturing device was recently approved by the FDA for inclusion in our primary weight loss trial named Trim. As we discussed in December, we've shifted our efforts in obesity into RS2, and its evaluation through the Trim study for the primary treatment of obesity.

Trim will incorporate two sites and 20 patients in the feasibility portion with a six months follow-up. And we anticipate enrollment of patients to begin this quarter and continue into early Q4 with follow up through Q2 of next year. Our current plan anticipates starting a pivotal study for primary weight loss toward the end of next year, and as we discussed in December this timetable has us anticipating launch late in 2010.

Thanks for your attention. I'll now turn you back to Tim.

Timothy M. Ring - Chairman and Chief Executive Officer

Thanks, John. We will glad to open up the lines for questions now, Greg.

Question And Answer

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. And first we go the line of Kristen Stewart with Credit Suisse. Please go ahead.

Kristen Stewart - Credit Suisse

Hi, thanks for taking my call. I was just wondering if you could help us kind of get to more underlying growth figure for you. I realize you had LifeStent in the quarter, and maybe some other acquisitions. If we are looking at constant currency, how much has that really been affected by some acquisitions?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Well, Kristen, we are in some very competitive spaces. The two deals are in hernia... the two deals of note are in hernia and in stenting. In both places we have some very viscous competition. We are really not interested in laying out those figures at this point.

Kristen Stewart - Credit Suisse

And what the contribution was in the quarter from LifeStent?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Right.

Kristen Stewart - Credit Suisse

Okay. Could you talk just little bit about the hernia repair franchise what sort of market share you think you've lost, and whether you still feel comfortable with the guidance in light of kind of first quarter trends in Salute?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Okay. Well, let me start with guidance and then may be John can talk a little bit about market share. At least as it relates to the surgical arena, we think it's going to be pretty difficult for us to hit the 4% to 9% growth guidance for this year, but depends on what happens with Salute product line. If we stay in the Salute business then I think that's still up for grabs. If we can't stay in the Salute business then it's going to be very difficult for us to grow probably at all in surgery, let alone get to 4% to 9%.

Now the other point I'd make is we don't need a growth in surgery. We don't need Salute sales to grow double digits for the year though. I think we still feel as if double digit's entirely attainable with or without Salute.

Timothy M. Ring - Chairman and Chief Executive Officer

John, go ahead at the market share?

John H. Weiland - President and Chief Operating Officer

In terms of market share, quite frankly having a flat quarter considering the fact that Q1 was our toughest comp. We were actually very encouraged with the results in our base hernia repair business both in ventral and then very strong in inguinal side as well. So we'd like where we are at there right now in terms of our ability to improve from there. We think that Sepramesh IP will be an important part of that improvement. We think that the new products which we have coming out in the latter part of this year, specifically the resorbable ring, and new CollaMend configuration will have the positive effect on it, and also we have a lot of runway in front of us with Permasorb which was the resorbable fixation device which launched mid-last year.

So although we are going through some troubles on Salute II now and we are not sure what the outcome will be on that through the rest of the year, we feel pretty positive that we are seeing some momentum appearing in our base hernia business.

Kristen Stewart - Credit Suisse

And it doesn't sound like you saw any impact in the first quarter from lower surgical volumes. I know that's been talked about by a couple of other your competitors, but sounds like it was more kind of product specific?

John H. Weiland - President and Chief Operating Officer

We have heard those reports and looked at them. We have not seen anything analytically in our data or in our market views to justify that view point.

Kristen Stewart - Credit Suisse

Perfect. Thanks very much.

Operator

Thanks. We turn to the line of Mimi Pham with JMP Securities. Please go ahead.

Mimi Pham - JMP Securities

Hi, good afternoon. When the Agento data is published in a peer of your journal, do you expect that to make a big difference in adoption?

John H. Weiland - President and Chief Operating Officer

Well,first of all this is a pretty complex sale. We are not learning anything that we didn't expect in terms of the complexity of it, based on the number of decision makers that are involved in it. I think what we, and I mean you are talking pulmonologists, the physician director of ICU, directors of respiratory services, infectious diseases docs and I can go on and on. They are all involved in making a decision I like this. Now, I think the important aspect of it is putting Agento into a hospital is a significant investments decision for that given hospital. Many hospitals have implemented evident space medicine policies for any new technology that comes into their hospital, especially ones that are significant investments. So, today we are somewhat at a disadvantage because those hospitals don't have all of the evidence based medicine information, which would be included in a publication at their fingertips today, so we do think it will positively impact us. Having said that though, we are moving ahead with some of that... with those hospitals that are not focused on evidence based medicine in terms of early adoption and early closures.

Mimi Pham - JMP Securities

And did you give out how many hospitals you have launched Agento and what your target is for the year?

John H. Weiland - President and Chief Operating Officer

No.

Mimi Pham - JMP Securities

Okay.

John H. Weiland - President and Chief Operating Officer

Just from a competitive standpoint.

Mimi Pham - JMP Securities

Okay. And on the HT Mesh rollout, are you still rolling out to new accounts and are you seeing increased innovation at your more established HD Mesh sites?

John H. Weiland - President and Chief Operating Officer

We are continuing with the rollout to additional sites in Europe, and we are seeing... continue to see an uptick both in number of sites and overall procedures being done on the device.

Mimi Pham - JMP Securities

Okay. And then last on the surgical, so you still think you can achieve Promissor... certain level of Promissor sales even without having Salute in the market for the next two or three quarters?

John H. Weiland - President and Chief Operating Officer

Yes, we know... the Promissor device we think has a very important place in the fixation marketplace, that's resolvable, and we continue to use that heavily in terms of our detailing.

Mimi Pham - JMP Securities

Okay, thank you.

John H. Weiland - President and Chief Operating Officer

You are welcome.

Operator

Next we turn to the line of Taylor Harris with JPMorgan. Please go ahead.

Taylor Harris - JPMorgan

Thanks a lot. Just sticking on the hernia business here for a couple of questions; we have got in the model of about $25 million of fixation sales annually, is that about right and what percentage of that is Salute II?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

I would say Taylor that the Salute business in '08 should have been under normal circumstances... it's hard to get to a normal quarter now, but somewhere between $5million and $6 million a quarter.

Taylor Harris - JPMorgan

Salute alone?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Yes, yes.

Taylor Harris - JPMorgan

Okay. And did you loose basically all of that in the first quarter?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Right, we had a comp... well, the comp for permanent fixation was Salute and Salute II together, Salute I and Salute II for the first quarter that was $7 million. We did 700 K in permanent fixation. So that will give you an idea of what we lost. It may help you may be if I give you the comps from last year to help you to kind of think through the growth rates.

Taylor Harris - JPMorgan

Yes, that would be great.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

So with $7 million in the first quarter, this is Salute I and Salute II together, so permanent fixation, $7 million in the first quarter, three, four in the second quarter, it was just 700K in the third quarter because we were dealing with the manufacturing issues and we had just recalled. And then four, two in the fourth quarter, and that would have been just Salute II alone. So we would have kind of expected to see that get to $5 million to $6 million a quarter after that four, two in that fourth quarter last year.

Taylor Harris - JPMorgan

Okay. And so for right now, you are saying zero for 2Q '08, probably zero for 3Q, and then we'll see about 4Q, is that right?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Probably, I think that sounds about right, yes.

Taylor Harris - JPMorgan

Okay. And are there... just to make sure, are there other fixation products that you can ramp up or...

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Right, so to John's earlier point, we have absorbable fixation products. We are not going to get in to what exactly we sell in those. They are not as big as Salute just yet, but we'll see. They are going to certainly be the focus of our selling efforts.

Taylor Harris - JPMorgan

Okay. Was this a purely a company decision on Salute II? Was it made in conjunction with the FDA and then just along that line, can you update us on the status of the FDA dialogue in your... the couple of plans that have been the subject to the warning letter in the 483?

John H. Weiland - President and Chief Operating Officer

Sure, first of all on Salute II; now that was entirely an internal decision that we made after looking at the data and looking at some of the issues we are dealing with in terms of trying to qualify this product line in our manufacturing locations. So turning to the FDA issues, the Davol warning letter of last year, we expect to be in a position to have an inspection by the FDA in the mid-summer timeframe at our plant, our new location up in Rhode Island. We've been working hard at preparing that operation for that audit.

Secondly on the, Puerto Rico 483, we received on the 13th of February, there were 13 observations on that and we worked very, very diligently to ensure that we responded in a very timely manner to the agency on that letter. We did respond fully in our minds on March 18th with our response to it. We'll be working between now and the end of July to complete the implementation on all the issues that we identify as the root causes and fixed to the number of observations that were in that 483 letter and then at that point in time, we would be expecting to have another inspection potentially at that location or the agency could accept our letter and our response holistically.

Taylor Harris - JPMorgan

Okay, great and then Todd, I guess just back to guidance for the overall surgical business. Would you say that... it seems that you are saying Salute is not coming back until at least the fourth quarter. So, does that put you at the flat level for the year? I just want to make sure we've got that right.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Well,I mean if it came in the fourth quarter you could... if we didn't have at all, we think we are close to flat for the year. If it got back in the fourth quarter, I gave you the rough run rate.

Taylor Harris - JPMorgan

Right, okay. But I guess the assumption to be flat despite almost no sales from Salute is core hernia continues to improve. Is that right?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Probably a little bit; Taylor, I mean I don't think we have crazy assumptions under core hernia. I think it's little improvement as we move along.

Taylor Harris - JPMorgan

Okay.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

And obviously as you know we talk about it over and over. I mean the Q2, Q3 aren't particularly difficult concepts so.

Taylor Harris - JPMorgan

Right, right. Okay, thanks a lot I will hop back in queue.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Okay.

Operator

And we have a question from the line of Matthew Dodds with Citigroup. Please go ahead.

Matthew J. Dodds - Citigroup

Thank you; a couple of questions. First on the product side, the basic drainage number, the 11% up in the U.S. and 7% overall; I know U.S. is most of it, so -- how far off was international in waste and drainage, is there a particular reason if it was off a lot; that is the first question. And the second question, Todd, on the gross margin, it didn't go up even with the higher amortization and I would think that with surgery down it wouldn't have gone up as much. So I am wondering if one foreign exchange helped or two of because it was fixation that was down, that may have a lower... much lower margin than what we generally think of with surgery?

John H. Weiland - President and Chief Operating Officer

Why don't you answer the first one, Todd?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Sure. I am not... as it relates to basic drainage, the growth driver in that category is really primarily infection control product line. In the United States, we have by far a much greater penetration level just because of the interest in hospital acquired infections versus other places around the world and in particular versus Europe. So, by natural assumption, we are going to get a larger uptick there as we continue to make... continue to have growth in those segments. And I say overall the international segments in terms of basic drainage itself are not growing at the same level as the United States.

Matthew J. Dodds - Citigroup

John, can you say what basic drainage did on constant currency outside the U.S.?

John H. Weiland - President and Chief Operating Officer

It was pretty flat, Matt, overall, down slightly, single-digits if I am not mistaken.

Matthew J. Dodds - Citigroup

Outside the U.S. was down 1%.

John H. Weiland - President and Chief Operating Officer

Down by 1%

Matthew J. Dodds - Citigroup

Okay. And the margin, Todd?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Yes, well if you're looking at the margin sequentially, Salute... the Salute business had a standard margin. It's probably a little less than our average, but in addition to that, we had clearly dramatic manufacturing issues and they've caused us a fair amount of money. So, there is some improvement that occurs quarter-to-quarter, there as a result of lower production levels or no production levels on Salute. Foreign exchange quarter-to-quarter sequentially, Matt, isn't that different. Foreign exchange is up nicely. If you look at in the prior year, it's probably somewhere we calculated somewhere between 20 and 40 basis points, but sequentially all the movement is product cost, where we were in a period here; we have some pretty decent product cost momentum. And I think that's what you're seeing at 61.4.

Matthew J. Dodds - Citigroup

So mix versus product cost and when you say product cost, you are just talking... you're getting better lower cost of goods versus a better mix in the products?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

That's right.

Matthew J. Dodds - Citigroup

All right. Thank you Todd; thanks John.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Okay.

John H. Weiland - President and Chief Operating Officer

Thank you, Matt.

Operator

Next we turn to the line of Joanne Wuensch with BMO Capital Markets. Please go ahead.

Joanne Wuensch - BMO Capital Markets

...for taking my question. At your analysts meeting in December you talked about beefing up the sales force. If memory service it was by about 50 individuals. Where are you in that hiring process and what categories are they focused on?

John H. Weiland - President and Chief Operating Officer

Well, we are well underway in terms of implementation. It's focused geographically, heavy in Europe it's primarily on our StatLock, and specifically also general rollout of additional sales represent a Pacific rim with a great focus on China. We are about... where we would expect to be in rollout, I would say we are about 60% completed across the board in terms of that right now. And we are also increasing in the United States on a select basis and certain businesses like a region per division, where we see specific growth opportunities.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

I think our guidance to that Joane was 75 to 85 reps.

Joanne Wuensch - BMO Capital Markets

Okay. And when you talk about the second half of the year LifeStent approvals and products, which are coming into the market, how should we think about a ramp in those? Is that something that's somewhat gradual or will you have the infrastructure in place to get out there and start owing the product?

John H. Weiland - President and Chief Operating Officer

Well, I'd say specifically to the... I guess in general on the through PMA approvals that we have posted and I'll use LifeStent is a good example. I mean Edwards has done an excellent job with introducing that product line with, I believe... off the top of my head, if ... let's just use that number 45 representatives, 50 representatives worldwide. You put that in our hands of 150 reps worldwide in that category, we expect to have a nice uptick in terms of our ability to take market share. But equally important is the fact that when you look at these three PMA indications, there are all three on-label indications. We don't detail products to clinicians in an off-label fashion. It's off limit to our sales force; they can't even have it in their bag when they talk to physicians who are not applicable for those product lines. So, as they get on-label indications, I think that you're going to see a lot of... from our sales reps stand point, pent up demand in terms of ability to effectively detail those products to the indication that they will now have.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

The only thing I would add Joanne is, this is a... one of those products, where docs don't know how to delivers stents like in some of our other products, where we have to do fairly significant training to get make sure that the clinician's up to speed to deliver the product. Stent... expanding stents have been there out a long time and majority of the docs who do procedures already know how to deliver the products.

Joanne Wuensch - BMO Capital Markets

Okay so if I look at the next couple of quarters, you've got that coming out in the second half of the year, you have hernia strengthening in the fourth quarter. Is the best way to think of this is the next quarter or sort of a low point and then we dig out from there or was this the low point and we are digging out from here?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Well, our guidance for growth for next quarter Joanne is double-digits... revenue growth. So, I doubt whether that's a low point. And if we put up $1.07 or $1.08 and keep moving sequentially relative to earning side, it's hard to imagine Q2 would be considered any kind of a low point?

Joanne Wuensch - BMO Capital Markets

Okay, that's very helpful. Thank you.

Operator

Next we turn to line of Rick Wise with Bear Stearns. Please go ahead.

Frederick Wise - Bear Stearns

Good afternoon, everybody.

John H. Weiland - President and Chief Operating Officer

Hi, Rick.

Frederick Wise - Bear Stearns

Gross margins... touch on that again... given kind of the issues you were talking about, you still had a damn good gross margins in the quarter without... take as much many specifics, just want to give. But the gross margins stay at this level and improve throughout the rest of the year, if this is the low point and as you bring on the new products as pricing continues to evolve we see them expand from here.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Well, we guided for improved margins period, despite 60 basis points of amortization, so we still have we don't have a full quarter worth of the LifeStent amortization of these numbers either, Rick so...

Frederick Wise - Bear Stearns

That's a good point.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Yes, so I think we will... I'll be happy if we could stay here at the low 61's for a quarter or two. We still have some cost improvement programs that we are not yielding yet that are kind of out in front us that are worth while and the numbers that you noticed. So, perhaps we could be stronger into the fourth quarter, just it's a little hard to see from here. So, for your purposes I would just kind of look at for next quarter kind of low 61somewhere for the next couple of quarters and then maybe a movement in the fourth quarter.

Frederick Wise - Bear Stearns

Okay.Turning back to urology and urology growth rate, you had guided us to 8% to 10% XFX for the year. First quarter if I have it right it was 7%, help me understand again is it comp, is it Agento or StatLock; what are the drivers of acceleration that gets you into that range, maybe into the upper end?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Yes, the wild card for us in the first quarter if we really look at it was our urological specialties particularly brachytherapy. We were very happy with our growth rates and our sequential growths in all the categories. Brachy was down 10%, as you know... there is a lot pressure in that business right now, primarily from robotic radical prostectomies. You are seeing a shift in the market towards that. You can probably see that in some of other companies that are in that business, sort of other companies that is in that business and what they are reporting; that was the wildcard that drove down.

I think we are going to have a tough slugging in the brachytherapy business through the remainder of the year... Q2 is our toughest comp for the year for us. So, we'll be slugging it out. I think that our new product flow mainly Agento and another new product we have called Dignicare that we'd be launching, will be positive for us along with our slings and pelvic floor line, but we'll have a tough time in brachy through the rest of the year.

Frederick Wise - Bear Stearns

But that doesn't... that 8% to 10% is still achievable, though.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Yes, at this point we are certainly not giving up on 8% to 10% for one quarter at 7%.

Frederick Wise - Bear Stearns

Okay. Back to Agento; I think John, you mentioned that you are not seeing a visible impact on growth or margins yet. When should we start to see more... a more visible impact on growth and margins from Agento? Can you give us any color there?

John H. Weiland - President and Chief Operating Officer

I think this was built throughout the course of the year, and I think by the time we get to Q4, we'll see a meaningful contribution of it. I mean we are on track with where we expected to be, we are on track in terms of the conversions that we made versus our models. We like where we are at right now in that. The wild card for us is the quicker that a publication could appear on that I believe it will be help us more.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Just to put it in perspective, Rick, if you go back and we've been selling Bardex I.C. for 12 years, something like that.

Frederick Wise - Bear Stearns

Right.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

But still today that conversion cycle on an account is about six months still Bardex I.C., which is well established and had a lot data around it. So that gives you some indication of this and there is many more touch points with these other product that John described. So, it's a slower ramp up to convert here.

Frederick Wise - Bear Stearns

Yes.

John H. Weiland - President and Chief Operating Officer

There is basically five committees that have to sign off in an account for a conversation to happen. So, you can imagine your logistics of getting five separate committees to sign off. Now the data we believe will be compiling enough to get people, but it does take time in order to organize all that.

Frederick Wise - Bear Stearns

Last question; back to what I'll cal Salute III or the next-gen product; how... when you likely decide about to go, no go and do you wait for Salute II or go for Salute III?

John H. Weiland - President and Chief Operating Officer

Well, we are evaluating now exactly what additional changes we would have to make to Salute II to make that a viable product and have it reach the quality standards we are expecting. There will be a lot of work going on over the next month on that internally. And at the same time, we are going to evaluate when we can come out with a next generation device at what point near the end of the year can we come out with that and do we have to shift resources. So, I would say the next month or two we will have a pretty good idea of what we are going to be on Salute II long-term.

Frederick Wise - Bear Stearns

That's great. Thank you very much.

Operator

Next we turn to the line of Bob Hopkins with Lehman Brothers. Please go ahead.

Robert Hopkins - Lehman Brothers

Okay, thank you and good afternoon.

John H. Weiland - President and Chief Operating Officer

Hi Bob.

Robert Hopkins - Lehman Brothers

So Todd just to clear; even assuming zero growth in surgery, you are still comfortable with 10% or greater constant currency growth for the full-year 2008?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Yes.

Robert Hopkins - Lehman Brothers

And if you are at zero, what's the primary area, where you are making up the difference?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Well, Matt... Bob, if you take the ranges we gave you to start the year and you plug in zero for surgery and the high end of other ranges, you don't have to globe or any of those other categories to make 10%.

Robert Hopkins - Lehman Brothers

Okay. Could you give us the hernia... the core hernia number for the quarter?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

Sure, growth wise. Yes, so soft tissue was down five in total, right. That includes core hernia and fixation. Core hernia was basically flat, zero growth against, as John mentioned, a very tough comp. Now core hernia includes two pieces, synthetics and biologics. The synthetics were minus one and the biologics were plus 13 and that's how we get to flat. So then you take flat you combined with a fixation of minus 58, I think we mentioned that and you have soft tissue of minus five.

Robert Hopkins - Lehman Brothers

Correct me if I am wrong, but in the past have you given us this specific number though for total hernia sales.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

I don't think we have no.

Robert Hopkins - Lehman Brothers

Okay. And I am just calculating after growth numbers. And then on hernia again, for Tim or John a broader picture question, it seems like over the of course of last year, almost every quarter we have had a different hernia issue, certainty each of the issues has been small, but they just see every quarter another one sort of pops ups. And I was just wondering if you could comment on that, is there a bigger picture issue here, or is this just a series of unfortunate one timers that we now think are behind us. Any comments there would be helpful.

John H. Weiland - President and Chief Operating Officer

The well -- quiet frankly the fact that we haven't met our own expectations in that business is some thing of significant discussion within this organization. We are not used to missing something the way we have in that quarter after quarter and I will tell you its taken a lot of attention at the senior level of this organization in getting down to the bowels of it. Having said that, looking back over the last year and all the issues quite frankly, if we went back and made this... made all the same decisions on what to change in the product configuration, how to change it, when to come out, we would have made exactly the same decisions.

So I can't say that we have a difference of opinion with let's say our divisional management team, or how we would manage this thing, but I think what we have realized and Salute II is the biggest issue that we really had to deal with over the last year along with the Salute I recall. The reality is I think that we have become believers in the complexity of this device, and in this significant level of tolerances that are necessary to produce this device in an effective fashion and I think that has resonated on us pretty substantially over the last number of iterations with this.

Robert Hopkins - Lehman Brothers

Okay so, on Kugel, when is the next Kugel coming out, is that still fourth quarter, I think that's what you said previously?

John H. Weiland - President and Chief Operating Officer

That's correct, Bob.

Robert Hopkins - Lehman Brothers

And that's still the same, the same timeline there.

John H. Weiland - President and Chief Operating Officer

That's correct.

Robert Hopkins - Lehman Brothers

Okay, thanks very much, that's all I have.

Operator

Next we turn to the line of Christopher Warren with FBR, please go ahead.

Christopher Warren - FBR

Thanks so much for taking the questions. A couple of quick ones on the port and PICC growth in the quarter. I know you said the last couple of quarter it seems like the forward growth has lagged a little bit on the year-over-year basis. Should we think about the two markets as somehow exhibiting separate secular growth rate?

John H. Weiland - President and Chief Operating Officer

Well the port is... Tim, I'll start and let the other guys jump in. The port market globally... we have growing, these are '07 numbers, at about 11%. So, pretty good growth numbers there. Clearly with the power technology moving in and the ASP charge we get for that in terms of the uptick. We are growing a dollar a market will be faster in that segment. On the PICC market, globally picking mid lines we are growing at almost -- a little over 18% globally. So between the two, we're still it's a pretty good healthy markets for us and John DeFord went through a number of new products we've got coming out throughout the ... throughout the year, frankly and we feel that with each one of those launches we can push that market growth rate a little bit higher. But definitely Chris to your point, definitely different secular growth rate, definitely different dynamics in the PICC business we're penetrating the total IV market, a little at a time here, so set of different concepts. I think while what PICCs grew 28% this period, PICCs is a very much a function of what products and when. From the power products to the Sherlock products to Solo and so on and each time we come out with a new one we tend to move the needle pretty well. On ports, the power port has been driving the platform over the last several quarters. We're going to have an intermediate PowerPort real soon here in Q2. That is our highest selling product. Well in terms of the sizes of ports, that's the highest selling one, plastic intermediates with power, this will be the first time we get to that piece of the market and so would expect that growth to... we expect that growth to pick up. But they are different markets with different dynamics and so you see different growth rates at different times there.

Christopher Warren - FBR

And what kind of premium will you charge for the MRI phase device?

John H. Weiland - President and Chief Operating Officer

I don't have it off the top my head, I can tell you that it's typical for us to get between say 15% and 35% depending upon the utility that we're offering the cost for saving whatever was the next generation. So I don't have that one per se in my wallet here, but it is typical for us to get a nice price premium on each new advancement.

Christopher Warren - FBR

Perfect and just one question on the personal stent market, could you comment on the growth in the quarter from the market perspective and whether or not you thought you took share?

John H. Weiland - President and Chief Operating Officer

Well, we don't have... the market there data lags by about six months, so we don't have the first quarter market data. Specifically, the overall self expanding stent and stent graft market, in '07 grew a little over 11% globally. We think the key for us, the drivers for the market is getting those online there and label approvals and then we think we'll be able to drive a lot more growth in that area.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

But we obviously took share because of the Edward's integration into our business and that is a natural course there.

Christopher Warren - FBR

Okay, Thank you very much. I appreciate it.

John H. Weiland - President and Chief Operating Officer

Okay.

Operator

Next we turn to the line of Jason Bedford with Raymond James. Please go ahead.

Jason Bedford - Raymond James

Hi, good afternoon. Just a couple of quick questions for you, just on the... just a final question on the Agento IC, I realize it has to go through many channels, but is there any... is there a common source of resistance to the product when you discuss it with hospitals.

John H. Weiland - President and Chief Operating Officer

No, and in fact, I would say that I'd evidence that by saying that our ASPs and our early indications in all discussions at the high end of our range. So we've not seen pressure on pricing, we're not seeing people pushback on pricing and at a very conservative number which we have been using internally of $16,000 as a cost of a case of that. I contrast that with CMS, CMS is using $135,000 as a cost of that. At $16,000, the breakeven for a hospital is paying approximately $450 for the Agento IC 2 versus our requested price of approximately $110 or $120.

I think the other thing, just to give you an anecdotal, one of the investor days in the trial where obviously you have seen the data, a big supporter of it, he had just said that his institution is such a big believer in terms of how they bring new technologies into their hospital through this committee process, John outlined. He doesn't want to violate that even though he is a big believer of the data and the products. So he's letting course through their normal committee process, which takes sometime.

Jason Bedford - Raymond James

Okay, that's helpful and then just on the costs side of things with the broader offering of the peripheral stent side later this year, do you anticipate an increased spend in front of that launch?

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

In terms of our manufacturing capacity?

Jason Bedford - Raymond James

Just manufacturing and may be sales headcount.

Todd C. Schermerhorn - Senior Vice President and Chief Financial Officer

No, we're well positioned with our headcount existing to put that in our existing bag and really roll it out as soon as we have the approvals.

John H. Weiland - President and Chief Operating Officer

That was one of the things that really attracted us besides the technology and we already have the infrastructure in place to be able to roll this thing out.

Jason Bedford - Raymond James

Okay fair enough and just last quickly on the hernia business. How do you position SEPRAMESH in, I guess, just is it priced at a premium to the rest of the portfolio?

John H. Weiland - President and Chief Operating Officer

Yes, it is priced at a premium to the rest of the portfolio. It does offer additional benefits with the resorbable barrier technology and so we position at in that resorbable barriers space. So they are lot of physicians who are very interested in a technology that reduces the amount of material left behind long term. And so when you pair that with our biologics offering and our full synthetic offering, we've got the full bag.

Jason Bedford - Raymond James

Okay thanks.

Operator

[Operator Instructions]. And there are no additional questions. This concludes our Q&A session. I would now like to turn the call over to Bard's management for closing or additional comments.

John H. Weiland - President and Chief Operating Officer

I would like to finalize by reiterating Todd's guidance for the year. We fully expect to achieve our double-digit revenue growth despite the issues that we have outlined for you here, we have experienced in Q1. And thank all of you for listening today and look forward to talking to you at the end of the second quarter. Thanks.

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