BioForm Medical, Inc. F3Q08 (Qtr End 03/31/08) Earnings Call Transcript

BioForm Medical, Inc. (BFRM)

F3Q08 Earnings Call

May 1, 2008 5:00 ET

Executives

Steve Basta - Medical Chief Executive Officer

Derek Bertocci - Chief Financial Officer

Analysts

Thomas Gunderson - Piper Jaffray

Echo He - Oppenheimer & Co.

Peter Bye - Jefferies & Co.

[inaudible] - Maxim Group

Presentation

Operator

Welcome to the BioForm Medical third quarter fiscal 2008 financial results conference call, hosted by Steve Basta, the CEO of BioForm Medical and Derek Bertocci, CFO of BioForm. (Operator Instructions) I’d now like to turn the conference over to Steve Basta, CEO of BioForm Medical.

Steve Basta

Good afternoon and thank you to everyone on the call for joining us for our third quarter earnings call. By now everyone should have access to the third quarter 2008 financial results release, which was distributed this afternoon after the market closed. For the reasons available on the investor relations section of the BioForm website at bioform.com, and available in a Form 8-K filed with the SEC today.

If you don’t have online access, you can call our office at 650-286-4025 and we will fax one to you.

During this call we will make projections and may make other statements about the companies business that are forward-looking and are subject to many risks and uncertainties that could cause actual results to differ materially from expectations. A detailed discussion of the risks and uncertainties that affect our business is contained in the company’s SEC filings, particularly under the heading Risk Factors. Copies of these filings are available online from the SEC or also on the BioForm website.

The company’s projections and forward-looking statements are based on factors that are subject to change and therefore these statements speak only as of the date that they are given. The company does not undertake to update any projections or forward-looking statements.

With that forward-looking statements disclosure, let me describe for you in summary the business aspects of the quarter and then Derek Bertocci, our CFO will take you through the financial results for the quarter and our updated guidance. We’ll open up this call to questions after the prepared remarks.

For revenue update and obviously this is a number that I expect a lot of people will be looking at, we’ve had strong sales growth year-over-year, essentially down in sales in this latest quarter versus December. The year-over-year increase was 36%, the decrease in sales from the December quarter to the March quarter was a decrease of $18.6 million in December, to $17 million in the March quarter.

Historically, as we indicted in our January call, we typically expect that the March quarter will, in most years, be down from the December quarter, but the drop that we experienced this year was larger than we had expected in our planning. The primary reasons for that is the macro economic impact.

We are hearing of significant declines in the aesthetics business in radius customer offices. In some offices certainly we are hearing that their not having declines and some practices are busy, but we are hearing an increasing number of offices reporting significant slow downs in the number of patients that are coming in for procedures and general decline in patient flow and both from physicians and from our reps, we’re hearing that that is adversely affecting our business and is the primary reason for the shortfall in sales in this quarter versus our expectations.

In light of that and in light of the macro economic conditions with ever worsening consumer confidence numbers on the broad base and the impact that that’s having on discretionary spending through out the economy, we are taking our guidance down further than we had previously, we’re taking it down to $66 or $68 million for the full year ended June 30, for 2008.

What this revenue guidance implies for June is basically a flat or possibly down quarter versus March. That result would be highly unusual based upon our history.

Historically the June quarter is typically strong with significant sales growth versus March and we would expect that we would be on precisely that path before the economic down turn and the ever worsening consumer confidence numbers that we’re hearing that literally this month are worse than they were last month, and last month were worse than they were the month before. So, in light of the declining consumer confidence and declining discretionary spending and the noise that we’re hearing about slowness of the aesthetics market from practices, we have chosen to take our guidance down and assume in that process a flatter or possibly even down quarter in June as unusual as that is in our industry for this particular year during this economic cycle.

An important note here and we’re going to talk about this, I’m sure, in the Q&A session, is this is really due to the economy and consumer sense in discretionary spending. What we are not seeing is a decline in interest in Radiesse; we’re not seeing competitive losses versus competitors.

We are actually seeing very significant new account growth. We are consistently opening new accounts at basically the same rate that we have been for the last several quarters, even during this recessionary down turn, we’re opening several hundred new accounts every quarter and that pace will be maintained.

So, we are gaining share in more offices every quarter, we’re growing our account base, which we believe position us quite strongly when the recession ends coming out of that for even more rapid growth, and we’re hearing very high physician satisfaction with Radiesse, very high patient satisfaction with Radiesse, there is nothing fundamental in the business that in any way indicates a declining interest in the product, but rather the over arching answer that we hear from accounts regularly as to why their orders are lower than they had been is, they’re just not seeing the patient flow that they had had and they’re not going through the products as fast in their offices because there are not as many patients coming in.

We are taking steps to accelerate our ability to grow accounts and our ability to grow utilization within those accounts. One of those key steps is an expansion of our clinical education theme and in that process we believe that we can help more physicians to gain clinical confidence and continue to grow our business by expanding into new offices and by growing utilization within each office.

We are also taking significant steps and are quite proud of the steps we’re taking to grow the company overall in terms of our position as a leading medical aesthetics provider of aesthetics products.

The recent ACI acquisition is something we’ve been working on for a couple months to work through quite diligently a transaction that I think is going to be quiet important for us in the future in terms of how we position ourselves in physician offices. We are excited about this nerve ablation treatment for frown lines.

A quick note on the regulatory status of that: It is currently commercially available in the US. The product is cleared, DFRI 10-K to create radio frequency heat lesions in nerve tissue, so it is a commercially available product. We don’t yet have the specific aesthetics clearance for frown lines, but the product can be used commercially and in fact 45 physicians have used the product to date, both in the US and internationally and there have clearly been a number of patients treated with this material in a range of applications to date.

We are not expecting significant revenue impact from this product until we get that key aesthetics approval, a substantial part of our roll out plans will be tied to that profit yield for both specifically for frown lines, and the interim physicians can purchase the product and at their discretion use it in specific indications. But, we think the significant revenue impact comes post aesthetics approval and we’re expecting that during calendar year 2009. It may be in a 12 to 18 month timeframe that we’re able to achieve that milestone and at that point position us as the leader in a whole new category of procedures that can be offered by physicians.

This is a product that can deliver treatments that will provide patients longer lasting effects potentially than other neurotoxin treatments, but not during the head-to-head comparative studies. So, that’s not a [inaudible] claim at the current time, but rather from some of the clinical experience that physician’s reported to us, but it is achievable to get longer lasting effects when that’s material and we have also found it on consumer research a very significant population of patient that are not choosing to get toxin treatments today. They either aren’t getting toxin treatments because of the potential frozen face appearance that comes from neurotoxins.

We’re not giving toxin treatments just because they don’t want the toxin injected. So we believe that this product, as we roll it out, is in fact trying to grow aesthetics practices and becomes a very important part of our offering thousand organizations to physicians and that we are bringing Radiesse, a long lasting dermal filler that’s superior performance and improving their full outcomes. We’re going to be bringing them the ACI ablation device, which will provide them a new modality for treating patients that they otherwise couldn’t satisfy.

We as an organization, become a provider to physicians on multiple levels of treatments that enhance for facial aesthetics practices. I think that’s a very significant step as we look forward to our future as an organization.

In addition, we’re very pleased with progress that we’re making in our Aethoxysklerol

programs. We recently achieved a milestone in Aethoxysklerol of the completion of patient follow up and the Phase 3 study.

With that, the data analysis has recently been initiated on that critical trial in preparation for the NDA submission, which will be managed by our partner Proser Pharma in Europe. Their actual results were for both the conduct of the clinical studies and the NDA submission. They’ve been working with an independent TRO on the conduct of that clinical trial, currently working on that data analysis and we are looking forward to an NDA submission this calendar year with potential approval next calendar year.

As we look forward then to the next couple of years, we understand that investors will be disappointed with the lower revenue guidance currently and we’re in a recession with very low consumer confidence ratings. We’ve heard that these are the lowest consumer confidence ratings that have been seen in the last 50 years. They clearly have an effect on patient flow in our offices.

Even during the recession we’re converting new accounts at a significant wage. We’re gaining share of more offices. We are seeing positive impact to these offices from our clinical education initiatives at helping physicians to gain comfort and increase their utilization with Radiesse

and we’re not only growing our jump base for the utilization of Radiesse, but growing our account base as an introductory point for our new products.

As we look forward over the next one to two years, that growing account base creates an opportunity for us to accelerate growth of Radiesse and it creates the opportunity for us with the launch of the ATI device to be that into our existing accounts and with the launch of Aethoxysklerol to bring that into our existing accounts and of course with the launch of BioGlue, which is a bit further out from the timeline perspective, but as each of our new products launches we will be able to take advantage of that account base.

Those new products will get us into accounts that we have not been able to get into yet, because they will provide novel treatment alternatives with the HI device creating a treatment option that physicians otherwise wouldn’t have but for this device and therefore we become the sole provider of that.

The Aethoxysklerol product becoming the market-leading product in Aethoxysklerol therapy in Europe with the exception of that and the potential of becoming the market-leading product in the US, we can provide key entry points for additional practices.

Each of these products will be synergistic with the others, because each product allows us an entrée into an office through which we can then cross sell our other offerings.

We think that the portfolio that we are building will position us to be a major player in the medical aesthetics market and we’re quite optimistic about how the future of this organization will be built in the coming years; although recognizing that in the current recessionary environment, this quarter and next quarter are going to be painful relative to expectations that we’d all had for what revenue would look like, because of the consumer sentiment chip.

Let me turn it over to Derek to go through the prepared financial remarks and then we’ll open the call to questions from any investors that are on the phone.

Derek Bertocci

Revenue is [inaudible] 36% in the third quarter of fiscal 2008 from the comparable period in the prior year. In the United States revenue is up 37% from the third quarter of the prior year.

Radiesse sales accounted for all of the increase. We continue to experience good growth in the number of doctors using Radiesse in the third quarter, but saw a decrease in the average purchases.

Specifically, the growth in the number of doctors using Radiesse in the third quarter over the second quarter was comparable to the growth in the second quarter over the first quarter of fiscal of 2008.

Last year in the third quarter we saw a modest decrease in the average number of units purchased per doctor. The decrease this year in the third quarter was larger than we anticipated. Many of our customers have reported seeing a decrease in patient flow. We believe this reflects with the climb in consumer confidence and spending.

In summary, we are continuing to win physicians, but more doctors that have dropped in patient flow over related to the decline in consumer confidence, is negating these physician gains at this time. Our average selling price is substantially unchanged from the second quarter.

In international markets revenue was up 35% from the prior year. We experienced continued growth in sales through our direct sales force in Western Europe. Sales through our distributors outside Western Europe generated the majority of the overall increase in revenue in international markets.

We anticipate that we will generate revenue in the range of $66 to $68 million in fiscal 2008, which represents an increase of approximately 40% to 45% of the $47 million of revenue generated in 2007.

Historically we have experienced favorable variations in our revenue growth within each year in the following pattern: During our second and fourth quarters which end on December 31 and June 30 respectively, revenues had increased from the previously preceding quarter. Conversely revenues generated in our first and third quarters which end on September 30 and March 31 respectively, have generally been down from revenue posted in the immediately preceding quarter.

We caution that our normal pattern of revenue growth in the first quarter may not occur this fiscal year, due to weakness in the US economy and are therefore guiding that revenue may be flat or possibly down in the fourth quarter as compared to the third quarter.

Our gross profit margin was 80.9% in the third quarter of fiscal 2008, down from 83.4% in the same period the prior year. The average selling price for Radiesse in the United States in the third quarter was approximately unchanged from the second quarter, but was down from the prior fiscal year.

The decline in the gross profit margin was due primarily to the year-over-year decline in the average selling price radius in the United Sates, which was primarily associated with customers having an increase in average purchase quantities and therefore qualified for lower prices under our volume pricing programs, and increased costs associated with certain promotional programs offered during the quarter.

These additional costs were off set by, partially by lower overhead and lower case expense per unit. We anticipate that our gross margin will be in the range of 81% to 83% for the fourth quarter and full year in fiscal 2008.

The most notable driver of our operating expenses is our sales and marketing expenditure, which represented 85% of total sales in the quarter ended March 31.

Sales and marketing expenses were 30% higher in the third quarter of fiscal 2008 as compared to the same period the prior year.

In the first quarter of fiscal 2008 we grew sales territories to 56 80 in the United States and began to expand our direct clinical training team.

In Europe we increased sales territories from 16 to 25 over the first half of fiscal 2008.

We have built our direct sales and clinical training teams and marketing capabilities in the United States and Europe to compete effectively with the leading companies in our industry. We believe these resources are a core asset that will maximize the sales potential radius and the additional products in our pipeline.

We anticipate that overall operating expenses will be in the range of $75 to $77 million for fiscal 2008, excluding the effect of any charges related to our acquisition of assets from ACI.

As we determine the proper accounting for the ACI acquisition, it is possible that we may take a significant charge in the fourth quarter related to that acquisition which we called our “year end reported expense” to be higher than this range.

This revised expense guidance represents an overall $2 million reduction in expenses versus prior guidance.

Our operating loss in the third quarter was $5.4 million; our net loss in the third quarter was $4.5 million. Income tax expense relates to our European subsidiaries principally.

In the United States we have significant net operating losses. We do not anticipate exhausting these NOLs for some time.

Loss per share was $0.10 based on the 46, 229,000 weighted average common shares outstanding for the quarter.

With our IPO on November 7, 2007, we sold $11.5 million new common shares and converted all outstanding preferred shares into common shares, resulting in 46, 213,000 common shares, and options to purchase approximately 5.5 million shares outstanding immediately after the IPO. Accordingly the weighted average number of shares used to calculate EPS after the IPO will be significantly higher than the average before the IPO.

On a final note, we have recently purchased substantially all the assets of API and associate technology rights for the following consideration: $12 million in cash, the function of approximately $2 million in payables, contingent consideration based on future sales…

Steve Basta

Just a quick note, $0.2 million on payables.

Derek Bertocci

That’s $0.2 million on payables, contingent consideration based on future sales, a milestone payment if future sales reach specified levels.

We will prepare a valuation analysis to determine the appropriate allocation of the purchase price. A portion of the consideration will be allocated to tangible assets for equipment and inventory purchased. We anticipate that the majority of the consideration will allocated to technology assets.

This amount could be allocated to intangible assets which will be amortized to expense in the future or to in process R&D which will be expensed as of the acquisition and or to goodwill.

We are in the beginning stage of evaluation analysis for this acquisition and cannot, at this time, estimate how much if any of the consideration will be allocated to in process R&D, which would be charged to expense in the first quarter.

I’d like to turn the call back to you now Erin, for questions from participants.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Tom Gunderson - Piper Jaffray.

Thomas Gunderson - Piper Jaffray

I guess I want to start with the Q4 guidance. If we look at the low end of that guidance where it’s down sequentially; if I’m hearing your tone correctly, tell me where I wrong here, that you’re assuming for that that ASPs are flat sequentially; that you continue to add accounts at a similar rate that you’ve been doing for a while. But that the units per account, the whole consumer kind of issue that hit this quarter, is the one that brings you down sequentially. Is that a fair assessment?

Derek Bertocci

That is, generally, a fair assessment. We’re not expecting any significant change in ASP. We believe that the guidance is related to the economy and the fact that unit purchases would be flat to down.

Thomas Gunderson - Piper Jaffray

Okay and then just a quick cash flow question Derek. You’ve got on your balance sheet at the end of the quarter $76.8 million in cash and equivalents. A full $12 million will be paid out to ACI during this quarter?

Derek Bertocci

Correct.

Thomas Gunderson - Piper Jaffray

It looks like, either because you knew you were having a seasonally low quarter anyhow or because you got wind of the lower sales earlier in the quarter that you were able to control some of your R&D and G&A expenses better than at least we had estimated. Is that something that you can sustain going forward, not just into the next quarter, but the rest of the calendar year?

Derek Bertocci

I think that into next quarter we’re anticipating that we will have some pick up in R&D expenses. We do have a number of programs that are evolving and we do expect some additional clinical trial and other R&D expenses. But, the remainder of the expenses, at least for this quarter through the end of the year, we expect to be relatively in line with what our past says. We are not yet ready to give guidance for next year and our fiscal year that starts July 1.

Thomas Gunderson - Piper Jaffray

ACI is an R&D expense that begins immediately?

Derek Bertocci

There are some expenses from ACI that are R&D. There are also some modest expenses from ACI that will be in the sales and marketing area. There will be some increase in those from this acquisition.

Thomas Gunderson - Piper Jaffray

Could you again tell me and maybe offer a little more color as to why gross margin as down sequentially and what you expect there?

Derek Bertocci

Sequentially there are two things going on or actually gross margin, I had given you the guidance as to why gross margin was down year-over-year, but in terms of sequentially, it was really a slight reduction in the overall volume, which really meant that the volume of production, on which we spread overhead, was lower. We did have some slight increase in money related to marketing programs; those are the two main factors.

Steve Basta

The marketing programs Derek was referring to are programs where we were, there was a marketing program where we were selling a package of Radiesse along with some supportive material that went with that order in terms of the marketing in the offices, because that went with the order that actually got charged into cost of goods and that was a one time promotion during this quarter, that is not continuing into the next quarter; which is why we expect the gross margin to go back up in the coming quarter relative to the third quarter.

Operator

Your next question comes from Echo He - Oppenheimer & Co.

Echo He - Oppenheimer & Co.

Last quarter you had talked a little bit about seeing some increased competitive pressures and I just wanted to see if you could help us get some more confidence that the decrease in volume that you’re seeing is really economic and that your competitors are seeing the same issues and that you’re not losing market shares.

Steve Basta

If it’s absent seeing the revenue numbers from each of our competitors, I don’t know that there’s any way for me to give you certainty on that. What I can give you color on is conversations that we’ve had with physicians and conversations that we’ve had with our sales reps as to what they’re seeing in the field.

Where as in the January call we were talking about what we heard from December and in January in terms of competitive pressures and there were new promotions that were being introduced by both Allergan and METASIS and more aggressive promotional programs with that period of time, that we heard specifically from our reps, that as we were nearing the end of December some of the aggressive promotions from competitors impacted to some degree where our December quarter numbers were.

What I’ve been hearing for the last month, six weeks, from reps and from customers, and we’ve had a number of meetings with physicians, is not a switching from Radiesse to other products because they’re cheaper or they’re being promoted more aggressively, bundled and getting free DuoDERM or free Restalin or anything of the sort.

What we’re hearing is “I’m just not using the substance yet because I don’t have that many patients in my office. So, our belief from those conversations is that the primary impact right now is an economic impact of patients slow in offices, not an impact of well that’s a promotional program from our competitors.

The programs from our competitors haven’t changed in any substantial way versus where they were in December or January. They had an impact, we’ve adjusted to them, other people adjusted to them, the physicians adjusted to them in terms of how they worked through that process and one of the things that we are doing is attempting to alter our marketing messages to physicians to focus very heavily on patient preference associated with the recent publications, to focus very heavily on value per syringe associated with the fact that we have a 1.3 cc syringe, seeing these competitive products are lower price’s our value is terrific.

Those messages appear to be resonating and I’m not hearing that people are switching to other products. I’m just hearing that offices are slow.

Derek Bertocci

One other point to keep in mind is that, Steve mentioned earlier also, while in full that more of a, to the quantifiable things, the increase in our accounts continue steadily quarter-after-quarter. I think if we were seeing significant erosion in our ability to hold and gain market share, we wouldn’t be seeing the continued increase in accounts using our products.

Echo He - Oppenheimer & Co.

That’s good to know. Also, you seem to have a pretty good grasp on what the doctors are doing in the market. Can you give us a feel for what the market for dermal fillers grew in the quarter? Was it better than your growth or lower than your growth? Are you still growing faster than the market?

Steve Basta

I don’t have as good a feel for that, because there is a significant variable that we don’t participate in. We are predominantly in core accounts. We’re in plastic surgery, dermatology, facial plastic surgery accounts. So, most of the utilization of Radiesse is by core physicians who are providing primarily aesthetics services in their practice.

Where we don’t participate is in a lot of the sort of non-core accounts that are doing a little bit aesthetics and I know that Allergan has been making a pretty significant push in terms of doing those non-core accounts, where we’ve been focusing really heavily on core accounts and what we’re seeing is a slow down in patient flow in our core account business.

What I can’t give you a sense of is whether or not the durable filler market in non-core accounts that Allergan might experience with DuoDERM is growing, because they have an account base, that is, I’ve heard estimates that it’s close to $20,000: ours is a fraction of that. We’re not into all of the accounts that Botox is in and so I’m not sure that I’ve got a really good handle on how many new accounts they might have opened up in those non-core areas which would impact the overall derma filler growth number.

Operator

Your next question comes from Peter Bye - Jefferies & Co.

Peter Bye - Jefferies & Co.

I just want to make sure I heard you correctly, that in the quarter in Q3 that you saw a decrease in the units per account.

Derek Bertocci

Yes, we did.

Peter Bye - Jefferies & Co.

But, that ASPs are lower because of the increase in bulk volumes?

Derek Bertocci

No the AFTs were proximally unchanged in Q3 from Q2. But, when you compare Q3 of this year Q3 of last year, the ASTs were down.

What we had seen is that as accounts have increased their usage, and the usage is up quite a bit from last year on an average per account, that pushes accounts into higher usage levels. Our pricing programs are designed to incentivize customers and reward them with volume discounts to go to higher levels. As they have moved to higher levels year-over-year, we’ve seen a modest decline in ASP, but quarter-to-quarter we did not see a decline in ASP.

Peter Bye - Jefferies & Co.

Relative to our model anyway, it was actually a pretty good US quarter. I mean there was kind of a rounding area you missed on the gross by a couple hundred basis points that we had on a year-over-year basis, but international, it’s fallen off pretty steeply on that front quarter-over-quarter. What’s going on there? I mean I would expect sort of more of an acceleration given the sales force, the longer traction period, more tenure. I mean tenures probably the wrong word given that we’re talking about months not years, but can you comment on what’s going on there?

Derek Bertocci

The biggest thing is we do have the seasonality in our international business, just as we do in the US.

On a quarter-to-quarter basis, sequential quarter, we actually had a decrease in the sales through our distribution partners outside of Western Europe. That’s really the bulk of the decrease on the international side on a quarter-to-quarter basis.

Sequentially the direct European sales were down only slightly.

Peter Bye - Jefferies & Co.

When I look at Q4, are you looking back in uptick into international growth into 50% plus range? What’s a good number or are you seeing economic slow down there too?

Derek Bertocci

Well we are seeing some impact of the economic situation in Europe. Not yet as pronounced as here, but we are trying to be a little bit cautious on our expectations there also.

Peter Bye - Jefferies & Co.

So I mean, you’re looking at growth here slipping again or flat to what it was Q3?

Derek Bertocci

You mean on the international side?

Peter Bye - Jefferies & Co.

Yes.

Derek Bertocci

I think we would anticipate growth year-over-year, but we’re trying to be cautious as to how much that growth is and that’s based into our overall guidance for the fourth quarter and the fiscal year.

Steve Basta

Generally, we’ll probably stop shy of giving detailed guidance on the break out between US and Europe, OES and international.

One of the things that we always have to keep in mind in the context of our international sales is they’re really two components to international sales. We have a direct European business, we also have international distributor sales, which are a significant percentage of the total international number and their tentative on the lumpiness of the orders that we get with international distributors, so it’s harder for us to predict those specifically on a quarter to quarter basis.

We’ve got a general sense of what they look like over the course of the year, but you might get timing of orders in one [inaudible] another and this will go slower for them in terms of international distributor orders than the last one.

Operator

Your next question comes from [inaudible] - Maxim Group.

[inaudible] - Maxim Group

Just a quick question about the accounts: So you’re saying that they’re growing on a quarterly basis. Would you be able to quantify that as far as new accounts opened during the quarter?

Steve Basta

We’ve chosen not to give the specifics of those metrics, because once we start the habit of doing that, we’ll end up having to give the specifics of those metrics every quarter and it just, they were there in the future. We’ve made the big push in new accounts, we’ll see a big jump in new account conversions, but we made the big push in going deeper in existing accounts, but not in opening new accounts. We might see one quarter down a bit from the prior quarter and I’d rather not get into trying to explain every metric with every promotional program that we run, so we stop shy of that.

The reason we’ve chosen to talk about it in this call is that we think that it’s important for describing what it is that we’re seeing that’s driving the revenue drop in the March quarter versus the December quarter; that it’s not a slow down in our ability to grow the business in terms of expanding the account base and converting physicians to become new users of Radiesse.

We’re still seeing significant physician enthusiasm. It is within our existing accounts. They are just seeing less patient flow and so that’s the only reason it was talked about in this call, though we will typically not discuss exact patterns of new accounts whether they go up or down one quarter. On a general basis they are as strong in this past quarter as they have been on average for the preceding several quarters, but we don’t give the specific number.

[inaudible] - Maxim Group

All right fair enough. Moving on to sales and marketing, there was an uptick this quarter. I’m wondering is there something that that’s specifically attributable to? Is this like a fixed sales force cost, or is this some sort of a promotion? Could you give us a little bit more color on that?

Derek Bertocci

What we did do is we described in the, during the months earlier is we have expanded our fund of education team. So, in our US organization we have direct sales representatives and then we also have a parallel organization of field clinical specialists that provide clinical training and the uptick is our sales and marketing expense is really associated with the fact that we expanded that kind of [budget] team over the course of the past quarter.

[inaudible] - Maxim Group

How large is that team, if you wouldn’t mind disclosing that?

Derek Bertocci

That team is currently 24 field professionals, in addition to 80 direct sales representatives.

[inaudible] - Maxim Group

That includes the 24 was from how many?

Derek Bertocci

Was from 16 previously.

[inaudible] - Maxim Group

Moving onto ACI, you’re expecting to start shipping in calendar ’09?

Steve Basta

We expect that we will have some sales, but they will just not be significant in the next several quarters, but sometime during calendar ’09 we expect to get our FedEx clearance that will provide the significant uptick in sales.

But we’ve chosen not to be more precise in providing that calendar year guidance, as we’ve not yet had conversations with the FDA about the detailed nature of the clinical study that they’d need, how long patient follow up etc…all of which impact exactly what the timing of approval will be.

[inaudible] - Maxim Group

Correct me if I’m mistaken, but I believe ACI was developing a treatment for migraine headaches?

Steve Basta

There is actually a sister company to ACI that was going to open a treatment for migraine headaches and we are in discussions with that sister company to license the technology that we’ve acquired for them to continue that development for migraines.

[inaudible]-Maxim Group

Could you give us some sort of additional color as far as the development of that product and its progress as far as when do you think it might be commercially available?

Steve Basta

For migraines?

[inaudible] - Maxim Group

Yes.

Steve Basta

No, that’s their business. We may license it to them, but they’d already initiate development for it and as a private company, since I would not have the rights to the pros and status of their business. We have confidentiality agreements that aren’t even related to this technology. I’m not at liberty to talk about their development status.

Operator

Mr. Basta, I’d like to turn the conference back to you.

Steve Basta

Thank you to each of the folks who joined us for the questions through the course of this call and to all of you who have taken the time to listen in.

We do recognize that the revenue has been impacted due to the recessionary [inaudible] and the consumer confidence impact on the macro economic basis, but we are quite optimistic about where our business is headed.

Our ability to continue converting new accounts, the expanded investment of our field clinical specialist team, and the ability to accelerate some of that clinical training opportunity’s for physicians, I think will be critical to expanding utilization of Radiesse and in the future, in calendar year 20098 as we look forward to what’s to come for BioForm.

Not only do we anticipate growing our business with Radiesse, but we will be launching two very significant products for it, the ACI ablation device, and the Aethoxysklerol sclerotherapy product which will really be transformative events for BioForm.

So, as we look out over the next couple year, we are quite excited about the future of the company as a leader in medical aesthetics and quite optimistic about where we’re headed in the leadership position in this industry; although I do recognize that as we all look at the immediate quarter, there is some anxiety about the recession.

We are building our company for the future; we are building our company to be a major player in the medical aesthetics industry. That is only possible with the support of all of our investors and as I mentioned in prior calls, we take quite seriously our obligation to our investors to walk on your behalf, as we create a very successful outcome for the company.

Thank you for your support and for your time today.

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