LeMaitre Vascular's CEO Hosts Analyst Day Conference (Transcript)

| About: LeMaitre Vascular, (LMAT)

LeMaitre Vascular, Inc. (NASDAQ:LMAT)

Analyst Day Conference Call

September 25, 2012, 09:30 am ET


Aaron Grossman - General Counsel & Secretary

George LeMaitre - Chairman & CEO

Dr. Michael Curi - Assistant Professor of Surgery & Chief of the Division of Vascular Surgery, University of Medicine & Dentistry of New Jersey; Director of Vascular Surgery, University of Medicine, Jersey City Medical Center

Peter Gebauer - President, International Operations

Rob Linden - SVP, Sales, The Americas

Dr. Larry A. Scher - Attending Vascular Surgeon, Division of Vascular Surgery, Montefiore Medical Center, Bronx, New York & Professor of Clinical Surgery, Albert Einstein College of Medicine

Ryan Connelly - VP, Research & Development

Dave Roberts - President

JJ Pellegrino - CFO


Aaron Grossman

[Abrupt Start]

The people interested in learning about LeMaitre the very first time, we’ve got a very great program for you guys today. You will be hearing from several members of our Executive Management team as well as two prominent vascular surgeons. The first of which will be Dr. Michael Curi, Assistant Professor of Surgery and Chief of the Division of Vascular Surgery at the University of Medicine and Dentistry of New Jersey; he is also the Director of Vascular Surgery at the University of Medicine at Jersey City Medical Center.

Our second surgeon presenter will be Dr. Larry A. Scher, Attending Vascular Surgeon at the Division of Vascular Surgery at Montefiore Medical Center in Bronx, New York and Professor of Clinical Surgery at the Albert Einstein College of Medicine, also in Bronx. We kindly ask that you hold all of your questions until all of the presentations have been finished; when the last presenter finishes, we’ll invite everybody to pose questions to our panel of presenters.

Before I introduce our CEO, George LeMaitre, I would just like to mention a couple of housekeeping items. We have a restroom over on the left hand side. Also you will find a menu card in front of your place settings, some point over the next hour or so just circle back, you’re going to want the lunch and now I would just like to quickly read our disclaimer regarding forward-looking statements.

This presentation contains certain forward-looking statements that involve risks and uncertainties. Actual results and events may differ significantly from results and events discussed in forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to those discussed in Risk Factors in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission. Unless otherwise specified, all information contained herein is provided as of June 30, 2012, except that all previous management guidance is as of July 31, 2012.

And now it is my pleasure to hand the microphone over to our Chairman and CEO, George LeMaitre.

George LeMaitre

Thanks a lot Aaron, I appreciate it and thanks to everyone here. I had a couple quick questions for you guys before I get started. There is going to be about six or seven, eight people talking to you for about 15 each and then at some point you guys who want to get hungry and you get to state around (inaudible). But there are a couple of quick questions; I would love to know how many people remember being here year and a half ago at the analyst day, if you show your hands? There is about nine of you; maybe there is 35 or 40 people. How many folks have been in one on one with JJ or Dave? [Technical Difficulty]

So today’s theme and I’ll just jump right into it and again thanks for coming. Today’s theme is profitable growth; we're going to try to show you how we like a lot a value in this equity that we can grow organic sales 8% or 9% as we gain leverage through better gross margins and operating (inaudible) we are going to keep coming back to this theme, operating growth. JJ had a puzzle piece made up for your desk which reminds you or putting all the pieces of puzzle together for profitable growth. We’ll talk a lot about who we are, so a lot of that is going to go historically once you know the roots of the firm where we came from historically. We’ll also spend a lot of time breaking the world down into things that we did since Analyst Day December 2010, as we came here I sat here with a very specific story about here are the five things we're going to do.

And I think largely speaking we’ve done a good job of executing those things, along the way here or there, but we've done a pretty good job executing and that there is a lot more for me to chew on this story than it was in December 2010 and then we’ll also start talking about future initiatives, most of the stuff are (inaudible) you are going to hear today has been released on calls, on various earnings calls, but there are some selected as we dig deeper for you, we take a deeper dive, you are going to see some new things, of course this being webcast for everyone else. We’ll do that and we’ll put that under the heading of future initiatives.

So all the pieces of profitable growth; what are we trying to get at? We are trying to show you we have an effective strategy. This is a changing environment and healthcare is obviously a big topic these days and we seem well positioned in this environment. The fundamental asset of the company, we will try to show you is our sales platform; we have 84 sales rep all around the world, we are dramatically more direct to hospital in most of our small and micro cap tiers; also a recent topic in the last three or four years that were made has been we've got in a way from the acquisition only model and we’ve moved a little bit more towards the product development from acquisition. So we are trying to do both of those things now and we will talk a lot about of that; Ryan, our head of R&D is here to help you go through that in detail.

We’re still an acquisition company; we haven’t done quite as many as we would have wanted to in the last four or five years, but we still see a lot of value in doing acquisitions; more like bolt-on acquisitions and sort of game changer, but we look at those as well. You will see the evidence is pretty clear, we made the pretty cheap New England company at today and we have great control of our expenses and this should give us leverage particularly at the gross margin coming back into focus at around 74, 75, 76 and also recently and I call this shareholder ice cream whether it be chocolate or vanilla, we have gotten more into giving away shareholder ice cream over the last couple of years; new to these stories since Analyst Day has been dividend and we have a 1.6% yield right now.

So stepping back a little bit to show you the roots of the firm, this is just interesting to see how we have changed and usually all direct mail way back went with me and my mom and my dad. We had two product lines; we were U.S. only; and me and my mom and my dad, owned the whole company. If you cut it today; it’s changed a lot; we gotten away a little bit from direct mail model. We’ve moved towards sales reps with 84 of them. I mentioned; I don’t know the exact number here, but we are probably the sixth or seventh largest sales channel in vascular. This is the growth in sales reps over the last 10 years.

We have 13 product lines; we’re also in 13 countries; we are very deep geographically into all of these European countries as well as Japan and we also obviously we’ve got the (inaudible) and we did our IPO in ’06; interesting if you want to look back at the IPO for one quick second, real historical for in 2006 in October lets say we are exactly six years moved from that, for me it was a $34 million company; we are loosing about $2 million or $3 million a year; we had 34 sales reps and two engineers and now the exact same value because the price is six times then, it’s six-tenth as our sit here today; you get $57 million company so we have almost doubled in sales; on this profitable $5 million paying out dividends; we have 84 sales reps, so we’re much deeper, more penetrated and we have 14 R&D engineers. So the value seems to be there if you believe it was correctly valued at the IPO something is amiss here and I feel like it indicates there is some value left in the stock.

Okay, now the current snapshot getting a little bit away from history; here is our guidance for this year, $57 million; our profit is $5 million. The nice way to remember this is that it is a pair of nine; we’re going to show you 9% organic growth and 9% op margin, its hard to forget that one. We are in 13 product lines in 13 countries. We are high watermark right now for employees with 300; I think may be when I stood here year and a half ago around 200 or 225, so we have grown a lot in terms of sales reps, in terms of manufacturing employees and in terms of engineers.

We have $20 million of cash in the bank with no debt; it’s really conservatively run company, and you can talk about these later in the presentation. We think the peripherals are $3 billion market; we don’t participate in the heart; we don’t want to; we don’t participate in the brain; we don’t want to and the drivers of peripherals, all the drivers that you usually see here ageing population, smoking, obesity etcetera, etcetera and you guys anyone invest in healthcare stock has been missed before, so that’s not new news.

Little change in the last four five years of LeMaitre which is we used to be only, really only looking at niches and we sort of ignored these larger things, these larger commodity type items. We have gotten into this; there is sort of evolving two pieces of the business. One, I would say and we will break it down again later, one is more niche, high price, high tech and I would say that’s where we make our money, but where we make our entrée sometimes is this and this is one of the most well (inaudible) endo-catheters as well as uses. Commodity types, lower price items; we’re starting to get in the mode of it's okay to cut prices in one segment of our business, it’s again that entrée, remember you can go into both parts of the business, the high profit, high tech stuff.

In general, LeMaitre is a niche company. We love dealing in niches. One of the principle lessons of the stent-graft adventure was we do better in niches or larger markets where the main competition has turned it's focus elsewhere. Why do you like niches? Well, this may be business one on one, but there is lower rivalry. We tend to have pricing power in a lot of these markets. We think our channel is right sized for these niches. We like the technology leaders, sometimes you can in niche markets and it's part of and it's a large market because the R&D that comes fro other companies and we think we have a little R&D advantage, when working the smaller markets where no one else is trying to do R&D in that market and we keep extending our lead, our technological lead.

Our customer, this is probably a little old for folks who have been involved with the story, but we just sell to vascular surgeons. We really don’t sell to cardiologists or radiologists. Why do we do that? I mean, it starts off with my dad was a vascular surgeon, but it's a nice size customer base to approach. We think we can cover this 5,000 person customer base with about a 125 sales reps when our sales force is fully flowered.

We like the fact that vascular surgeons owns the patient and once the patients comes to a vascular surgeon, the vascular surgeon keeps that patient and then does procedures on that patient rather than saying it's a bench of radiologists, is a support function in a hospital to a certain extent. A vascular surgeon does both open and endovascular surgery. It's a big market. One thing on endo, I want to clarify because we're going to come back to it a lot today, when we say endovascular, we just left the stent-graft market, but it's not to say we don’t love endovascular. Endovascular is a great growing part of our business in our field. So try to keep making that distinction and it’s confusing with our investors keeping it straight (inaudible) stent graft, but we do like endovascular and right now something like 15% or 20% of our business comes from our endovascular platform.

Okay, so very simple strategy, compete in niche markets; when we say niche, I think our sweet spot is about $10 million to $50 million in a market. Secondly, we are also expanding our sales force and again I would say I think the principle asset of LeMaitre Vascular is its very deep wide sales force everywhere; it’s very rare that you find that and then also add new products and how do we add new products. You hear me talking about we are beefing up R&D, we also always been very acquisition friendly and we will continue to do that and we do have a small war-chest.

So just a little prime on these niche markets, here is a couple of them, the Valvulotome, the shunt and the tape, you see we are exhibiting high market share; I think this is U.S. market share and we are also able may be not so much in the future, but historically we really been able to push on price increases which is why you are always going to see we’ll make coming back to you with a 74%, 75%, 76% gross margin and our competitors, here are the competitors in these markets, not many of these competitors really care about these three markets; where they guide it really cares about it and so we’re the ones putting R&D into the markets and we’re the ones innovating and then we grow share as well.

So our sales force if you talk a lot about and you are going to hear a lot about the sales force today. In say 1996 we were just a U.S. company and right at the cusp of the IPO we have expanded this lets call it also the Northern Europe and also Japan in ‘05 I suppose and then in ‘06 since the IPO we have taken some of the IPO money we spread ourselves out geographically getting into all of these other countries and I don’t want to launder and you will see laundry list later. Historically, the products are 60% from acquisitions; it’s just a reminder that we have built ourselves looking for leverage of the acquisitions and then also more recently R&D initiatives kicked in and has punch off a bunch of products. So we're about 40% from what we call what we develop internally plus the Valvulotome from way back.

It’s an interesting slide here and JJ at the end of the presentation is going to dig much deeper into the financials, but what we like to show you is that compound annual growth rate of 13% that includes acquisitions. This is reported growth. We do feel like we're an 8% or 9% organic growth story and then we add a little bit the acquisitions but more importantly here you can see we made something around breaking even in the beginning of the (inaudible) at the IPO and around the IPO.

I think we started spending a lot of money thinking we could be a 20% grower 25% grower maybe the investment banker has gotten in my head, I don't know what, but we spend a lot of money down; we are loosing $4 million a year to $5 million a year. And February of ‘08 right before the Lehman crisis, we had our own little come to Jesus ourselves, I think we terminated a fourth of the company at that point. We really start saying, we want to be profitable first and grow second. And I think that was a big swap and previously we've been trying to grow almost at any cost not worrying about the bottomline.

Now this is our story, I think it is mirrored by a lot of other companies, but we came to that ourselves and we decided we're not that sexy; we're not at 20% company; we more of 9%, 8%, 10% company; don't press too hard on the accelerator, less than profit accrued to the bottomline. And I think that's the recovery that you are seeing here. I think this point the stock was at $1.80 and the stock is $6 bucks now so we've had a nice bounce back from what was a bad place for us.

Alright, so another little historical way to look at this is, when I was here in December of 2010, we announced, you can go back over to this slide, I think we changed some of these names, but we announced five initiatives here and more or less we are here to tell you, we have done the initiatives and here are the results of the initiatives. So we brought a company in December, 2010 called LifeSpan, why we do it? We are always trying to widen the sales bag and we always want to sell vascular surgery staple items. This is one of those vascular surgery staples which you can always sell, it’s not very (inaudible), but you can always sell it.

And very important for us, probably the center piece of this strategy shift was get out of the stent graft. We found we are having two hard of a time against Medtronic, Cook and Gore and our 5%, 8% R&D department couldn’t handle the turns that were going on for Medtronic and Gore, so we got out of those. Why do that? Well, save a lot of money, but also we allocate R&D expenses into more productive projects and get our European sales reps away from selling those products. They were spending their time today selling endologic stent grafts and they weren’t spending their time selling my Valvulotome and shunts and that was great for them because they got commissions off of that, but it didn’t helped too much for the company. This has been a major win and Peter Gebauer, who is our Head of International is going to come and talk to you about the big change over in Europe.

We need to close a couple of factories; these are just manufacturing transfers, we still own and sell both of those products, but we are always trying to centralize our production to Burlington; I don’t need to tell you why that’s more efficient but it’s widely more efficient to have everything made in one building. Secondarily, and even more important to me is that once you get the products near the R&D team which is Burlington, Massachusetts, you are able to innovate a lot faster and again R&D has come a bigger of piece of who we are trying to be.

We went direct in Spain and Denmark; we told you about that last December and that went swimmingly and that is the same old things. It’s basically hiring more reps when you get into a new country you are dealing sometimes in different currency like Denmark and sometimes you need a new office like Madrid for us. And then also we had a couple of big launches going since the Analyst Day and they are over here, the UnBalloon, a fantastic concept I would say we are still teasing with this; it’s still not a commercially successful product, but it is a phenomenal idea; all you got to do is go to one trade show and watch the surgeons respond to the UnBalloon and you know why we are still on this device.

And then over to Valvulotome; more of a blocking and tackling move. This is to bring the endovascular revolution to Valvulotome; put it over a wire and also we noticed that we had made a significant upgrade to our core device for nine years before that and we felt like we need to do something here; Valvulotome

is going better commercially and technically this one is perfect and everything is fine with that device.

And another thing that happened since Analyst Day, so we I think it was December of 2009, we started distributing a product called XenoSure which is a bovine [pericardium] patch and this is a great demonstration so it went from in ‘09 we got it, there was a $500,000 product line, it went to a $1 million and now it is up here at $4.5 or something like that; we have grown this thing 65% a year for five years and it’s starting to become a big piece of what we are. This is distributed for a company in Canada, a publicly traded company in Canada called Neovasc. Inside of this distribution relationship is a hard option by LeMaitre to buy that by starting January 2014 and the prices are all worked out etcetera.

This is a big piece to watch; nothing has been done yet with that distribution agreement, but this is a big piece to watch and parenthetically the biomaterial as opposed to a lot of the other items that we sell are made out of PTFE, Dacron, metal plastics. This biomaterial is a new place for LeMaitre and actually coincidentally biomaterial seems to be selling a lot better to surgeons these days in general not just for this product line. So we got a little bit lucky with that, I don’t think that was a part of the hypothesis, but this demonstrates the value of our sales channel which is you take 84 reps and you put them on top of a $500,000 product line and you can go up by 10 times in four years.

Also again what’s the news since the Analyst Day? Last Analyst Day also new, we've just gotten into the share buyback routine back down and again this is borne out of the fact that if you are using your stock prices low and you have $20 million in the bank, well, then you should put your money where (inaudible) buy stock.

So we've been doing that. You guys knew about that in the last Analyst Day. That’s in the blue area. Same type of thing, what I will call chocolate ice cream for shareholders, which is if you like to repurchase will then dividend, it's something a little bit slightly different. We started paying out, I think well last year, we paid $0.08 a share for the whole year and this year it seems though that we are paying $0.10 a share the whole year. It's a 1.6% yield, maybe even a little bit better where the stock is today.

Talk a little bit about future initiatives; you are going to hear often lot more about this in the next 2.5 hours. We want to get 200 reps. We’re about to go direct in these three countries, Brazil, Canada and Switzerland. We have a bunch of R&D launches lined up here. The endo, our e-combo tool, you're going to hear about that. The 1.5 millimeter Valvulotome and also there is potential for some consolidation on this initial product as talked about and then always hanging out there our acquisition.

So those are future initiatives. Again, the theme here is we feel like we’re putting the other company that should exhibit profitable growth and we feel like the keyword here is operating leverage over the next couple of years. With that, I am going to turn it over to Dr. Curi.

Dr. Michael Curi

Thank you very much. Good morning. So I am Michael Curi. I am a vascular surgeon and I am a Chief of Vascular Surgery at New Jersey Medical School and at Jersey City Medical Center. These are two hospitals in Northern New Jersey; one is about a 550-bed hospital, the other is a 400-bed hospital.

And today I am going to just tell you little bit about myself and vascular surgeons. Talk a little bit about my thoughts about LeMaitre. And then go over some of the products that we use as vascular surgeons regularly and what this company is able to provide us in the operating room.

So I am like I said I am Chief of Vascular Surgery at New Jersey Medical School and director of a new vascular center that we are just opening actually at Jersey City Medical Center and what I think is significant about that is that this is a major tertiary hospital in Hudson County literally on the water across the Hudson river from us which really had no vascular surgery going on up until just the last couple of months when we are helping them develop it and it shows the hospitals in developing a vascular surgery line and they are willing to put significant resources into it to do it because they understand the growth of vascular surgery in their model for being successful as a hospital.

I trained at New Jersey Medical School originally from New Jersey. I have my Masters in Public Administration studying Health Policy and Management from NYU here in Manhattan. I went to college in Pennsylvania and I have been after medical school I went out to Chicago and trained at the University of Chicago for seven years, two of those years were spent doing research in vascular surgery.

I did my fellowship at Washington University in St. Louis which at the time my chief was the President of the National Society and I was fortunate enough to work with another gentlemen by name of [Tom Fogarty] who invented the aortic stent graft and is really one of the thought leaders in vascular surgery over the past couple of decades.

I worked a bit and been involved in some publications that set guidelines for how the thoracic aortic disease is treated. And LeMaitre is the company that I have known since I was actually a kid. My father was a vascular surgeon and I remembered my dad telling me about a new device that he was starting to use where we was able to pull the valves out of veins easily and so I kind grown up with LeMaitre.

And in my residency at University of Chicago, I remember begin a kind of amazed by some of the products that the vascular surgeons were using there and after seeing it a couple of times realizing that’s a LeMaitre product. You know the Shunt is one of those early things you see as the trainee in vascular surgery that really kind of attracts you to the field because it’s really an elegant concept.

And the company always seems to have that next thing that we need as vascular surgeons. I always had no issues with their products, the quality is not an issue where that is unfortunately not always the case with all products to use in the operating room and just one of the things that you just never think about with LeMaitre constantly they are making their products better and the nice thing for me as a Director of the division and for setting up a new sensor at a new hospital is that they help me get my hospital to get me what I need and getting products into our hospital these days has become incredibly challenging because hospitals are all trying to constraint their cost and when I can actually reduce the number of different companies that the operating room has to deal with and essentialize [money] of the products are used in one company that makes it a lot easier on the staff which are I mean these are just staff people who are trying to keep the products that we use in the hospitals and you would be amazed how far that goes and that it makes my life easier, makes their life easier and that goes a long way in a crazy environment like an operating room.

And the products that I use the Bovine Pericardium patch, the Occlusion catheters, the Embolectomy catheters, Shunts, Grafts, Contrast Injectors, Remote Endarterectomy which is a very interesting way of revascularizing a leg, Valvulotomes, Clips and Tape, whole bunch of kind of niche products but when you put them all together having your people in the operating room have to go to multiple different places for these as challenging.

So the Valvulotome is kind of the old standard from (inaudible) and it’s really the thing that we all learned about it made from [originally]. And it’s the really the made is the gold standard, it’s used for cutting the valves in the vein so when we have a leg that has blockages in the arteries and we want to do a bypass. We usually like to use the patients so in vein if possible. And there is two ways to do that we can slice the entire leg open and take the veins out, sew it around and into the artery above and below the blockages.

The reason we have to turn it around is because veins have valves in them because valves protect the leg from blood kind of standing column concept having a pipe pressure down at the bottom of the foot, it have 5 feet of standing column of blood pushing down, you would have high pressure in the veins down in the legs. Those valves make that standing column couple of centimeters. So they do their jobs by keeping the blood flow going directionally flowing up towards the heart but obviously if we are going to do a bypass, we want the blood going the other way, we want it going down to the leg. So either we have to the whole vein out, turn it around, and sew it in, in which case you are taking the big part of the vein. You are sewing it to the small part of the arteries and things like that it makes it somewhat difficult plus a huge wound.

The other way to do this is what is called the inside [tube] bypass which means you leave the vein where it is and you lice the valve, you cut the valve and that’s what the Valvulotome does in a very elegant way. I mean there is lot of difference in Valvulotomes invented over the years and this is the gold standard. This is the one that works. This is the simple one that makes it the easy on us and you don’t have to choose which size you are going to use one Valvulotome usually fits all the different sizes of the veins that we typically encounter.

It’s straight forward, simple to use and there is no gimmick. It’s not like trying to sell you something that you would not really need. It actually this provides consistent results. The over the wire Valvulotome is something that was the only thing missing. Because the only problem you can get into when you are trying to lead the vein in place is that vein you may not be able to cut the valves if you can’t get that catheter directed where you want and what this does is, it allows you to pass a wire under X-ray guidance again bringing that endovascular field where 70% of what I do these days is using X-Ray guidance.

So our operating room is set up for, so we just pass a wire down, get the wire where we know it's suppose to be and the valve goes in over the wire. So a nice advantage making it easier to avoid some of the hassles when the Valvulotome might go into a branch or some place you don’t necessarily want it. So again that’s one of the nice things that the company is thinking about us, making our lives are a little easier.

So a shunt is basically, it's a [straw] and we use it typically as vascular surgeons to provide blood clot to the brain or trying to clean out the artery that’s going to the brain, the carotid artery. It's very common, one of the most common operations we do and you have to clamp the artery and clean out that [flak] that’s in there and obviously when you are clamping it, the blood’s going up to the brain in that artery. So this shunt allows us to actually continue the blood flow by having a little straw that carries blood from one side of the clamp to the other side of the clamp and so we have a blood (inaudible) to operate in yet maintain blood flow to the brain.

And again, so LeMaitre is really a standard and it's a product that’s consistently works. It's no gimmick. They have a couple of different options for different configurations. So you don’t have to actually have three different companies providing three different types of shunts. They have what you need and it’s straightforward. We actually, as a trauma center starting using these in other places when somebody has a gunshot wound through the femoral artery in the leg.

Thrombo surgeon can put a shunt in there, seeing blood flow down in the leg and call me and I am able to get in there and repair the vessel, do whatever needs to be done and so I have actually seen a significant growth in the use of these products in our operating room by non-vascular surgeons, trauma surgeons. There is an interesting thing. Did they have something called the (inaudible) which allows us actually inject some (inaudible) into the actual vessels so you can do a study which is really nice option as well.

The UnBalloon, so this is a really amazing concept. This is a product that whenever a surgeon sees this typically, the first thing coming out of their mouth is wow because this is a device that allows us to dilate the aorta without blocking the blood flow in the aorta. The aorta is the main artery that takes blood out of the heart and to the rest of the body and in the chest the thoracic aorta comes out of the heart gives up three vessels that can go up to the upper extremities and the brain and then it’s a curving comes down the abdomen.

And in that part there is a lot of aneurysms that’s developing. So we fix those aneurysms by putting stent grafts in there but we have to oppose the stent graft to the wall of the artery and typically that’s always been done by blowing up a balloon. The problem with that is when you do that, the heart is now pumping up against a [stop]. And you see the blood pressure spike, you see the strain on the heart if you have an echo in there you could see the heart dilate immediately and the valve push. These are all patients with complicated medical problem. The valve has really struggled with it, the heart valve and so this is just an amazing concept where we could dilate that graft against the aortic valve with allowing the blood flow to continue because it doesn't stop the blood flow. It’s actually a wire mesh made of [Nitinol] that expands inside the graft and oppose the graft of the wall. It’s really ingenious and the reality it’s going to replace the use of balloons in this respect and this is a new product that not a lot of people using it yet.

I have a case on tomorrow where I am going to be using it. It’s one of those things it’s a new product. So getting them in the hospital is an issue. So it has actually taken me time to get it into my hospital so I am kind of excited about it.

The patch, XenoSure patch, this is basically a piece of bovine pericardium that we use to repair our arteries to it. And really in the past, we mostly use Dacron or ePTFE synthetic materials to do this. And we do this because when we repair an artery and we try to sew it back close we know it’s going to scare in there. So we don't want to close to back to its original size, we want to close it a little bit bigger to put patch on there.

Patch works great; it handles much more like normal tissue, human tissue and its very bio compactable. The real place that I see this as being a [federal] alternative to the prosthetic graft, I mean the prosthetic patch is that it’s more resistant to infection. And in fact, when I have infected graph that has to come out of a body, I actually a take the graft out and because I don't want it so close to that artery that damage and narrow it so much I patch it and I use this.

And unfortunately as people get (inaudible) more diabetics around, we're seeing a lot more infections. So this is actually been a life saver literally for many of my patient and I converted our hospitals from that (inaudible) to bovine pericardium and the new center we are just starting out with those.

So the concentration by this company on as vascular surgeons I feel like, I deal with somebody who understands what I do, whereas many of the other companies who service multiple different types of intervention list. So they don’t have that same kind of expertise and they don’t understand everything that I am talking about when I am asking them a question and they understand the difficulties of getting things into an operating room and they like to help.

I like to have things that make my life easy in the operating room obviously they like to sell their products and it really works quite well. And I came to New Jersey two years ago, 2.5 years ago and the first thing I asked to my hospital to get me was the cardiac patches that’s it just something that I need to have and that got me to meet the LeMaitre rep and from there we have been slowly adding products to the operating rooms that I need and it’s nice to have somebody who understands my needs and I think that not only me as the surgeon but the service line manager in the hospital in the operating room who is usually like a nurse.

She had somebody that she can talk to who probably knows the stuff better than she does and makes it easy on her. So, thanks for your attention to this.

Peter Gebauer

Okay, good morning everyone. I hope you can hear me. My name is Peter Gebauer. I am the President of International. I am in Frankfurt, Germany right now and therefore I am making this call over the phone. Let me start off and tell you a little bit about myself. I am an American citizen educated in the US and I speak German. I spent more than 30 years of my professional career in vascular surgery, 22 of those 30 somewhat years living in Europe developing international sales and marketing organizations across Europe and in Japan.

I’ve been employed by LeMaitre Vascular for the last 15 years directing the growth here internationally. Prior to that, joining Le Maitre, I worked for a company called IMPRA later acquired by Bard. It was a manufacturer of PTFE Vascular grafts. I worked for them for 16 years, seven of those years in Europe building sales and marketing organizations in the last nine years, serving as a VP of Marketing and International Business from its corporate headquarters in Arizona.

The locations that we have today since I’ve joined the company in ’97, I’ve established a direct sales presence in 14 countries, 13 in Europe and one in Japan and all international today, we have 67 employees, 44 of which are sales professionals. We have four locations with offices their own offices supporting sales admin and regulatory requirements. Frankfurt is the headquarters. It was open in 1997 and it serves let’s say support role for most of the direct markets in Europe. We have 45 employees, 26 sales reps and the support staff consisting of customer service, marketing and other administrative functions. We carry our own inventory here, process orders, deliver products to all the 13 direct markets in Europe and to all of our 40 or so distributor markets outside the Americas, Japan, Korea and Taiwan.

The Tokyo office was opened in July 2004 and serves us in the Asian headquarters. In total, we have 10 employees there right now, six being sales reps; we actually carry an inventory out of Tokyo and we process our own orders and ship products to the Japanese customers. Korea and Taiwan are also managed from Tokyo. We have approval to sell eight of our 13 product lines. The other five product lines that we have are in various stages of regulatory submission. It is a very strict regulatory climate in Japan for those of you that are not aware. So we have our own regulatory team as well in Tokyo.

Most recently, we also opened offices in Italy, in Milan in 2008 to serve the needs of our time customers. We have seven employees there, four of which are sales reps and then in Madrid we opened an office in July of last year to serve the needs of the Spanish customers and also to manage our Portuguese business. We have five employees and three of which are sales reps.

We sell all of our 13 products in Europe in all of our direct markets. We have new product launches going on to the exciting new project launches that George, Dr. Curi has mentioned. In Europe, the UnBalloon, Over-the-Wire, LeMaitre Valvulotome and XenoSure; in non-EU distributor markets we’re at various stages of obtaining market approval. As you can see also on this slide, we transitioned away from the stent grafts in Q3 of 2011.

We sell one of the things a little bit different I guess from the U.S. is we do have a sizeable business of Dacron and PTFE grafts. Surgical implants are a significant portion of our business here in Europe and the most recent additions of AlboGraft and PTFE grafts accounts for about 22% of our sales today. These products represent are playing a very large market opportunity for us, however lately they have become a commodity, but still are stable for vascular surgeons. Surgical implants have become price sensitive and are primarily sold through tenders; hospital offers and GPOs know that the life span PTFE is sold in Japan but AlboGraft is not today.

On the next slide you will see that the UnBalloon and the XenoSure, these are exciting new technology niche products at various stages of market introduction over here in Europe. Unfortunately, both products are not yet available in Japan. The UnBalloon, we started with a controlled introduction at the back end of 2011, the UnBalloon technology is very unique and creates lots of interest among the users and the attention of stent graft users as well as key opinion leaders. It seems like wherever you sell this product, they notice that once you explain it to them they really understand the benefit of it and are very excited to start working with it. While we’ve had some limited success here selling and commercializing the product, the UnBalloon, the product refinements has been necessary to capture a larger customer base.

XenoSure patches on the right side of your screen; they were also launched in Q4 2011. These patches as you just recently heard are another staple products for vascular surgeons; huge, huge market opportunity and previously dominated by synthetics, materials, Dacron or PTFE. This product has been extremely successful in our hands this year or since we've launch the product mainly to the growing size of our sale force we're able to visit more doctors and present the product to them. The product as you have heard as well has excellent product features and benefits and in Europe there is a market trend moving toward bio or bio synthetic material away from the traditionally used synthetic material. We've very, very excited and encouraged with the sales momentum we have today and we're looking to expand our approvals into new geographies.

The next slide will show you a little bit about in fact the rep growth that we've had here and the ramp up of our international sales force. We now have because on the far, we have 38 reps and six regional sales managers.

So on the next slide you can see the organic sales growth; you can see that the chart, you can see that stent graft perhaps were really a growth anchor for our business ever since Q3 2010 through Q2 2011 and then you can see when we entered the stent graft business how the organic growth recovered and has been moving in the right direction ever since. We have experienced since the transition away from stent grafts and quarterly organic growth rates have been 5%, 13% and in Q2, 2012, 15%.

You can see here also on the next slide that we had the compound aggregate growth rate of 13% over the last 10 years. If you noticed, in 2012, there the average sales per rep has declined significantly, mainly due to the reps hiring surge to fill in new open geographies and our direct markets. Its hiring surgeons are forward investment by the company and that should pay dividends once these reps become more operational in six or more month time, we are already starting to see that happen.

Next slide, you can see a quick snapshot of our go-direct history here in Europe; you can see, we can go direct almost one new country almost every year.

Going to the next slide, you can see that one of the reasons why we go direct is that – you want a sales force snapshot there, I am sorry. Yeah, 33% of our sales worldwide come internationally; 90% of our business is direct to hospital. In Europe, we are direct in 12 countries, five regional country managers, 32 sales reps including our export sales manager and we export to approximately 40 distributors in 40 different countries. In Japan, we have one country manager, six sales reps and export to Korea and Taiwan.

Our sales reps profile; when we were in the stent graft business our sales force was predominantly experienced, highly skilled and very expensive reps and that were in excess of 100,000 per year and a combination of fixed salary and commissions. Since the exit of stent grafts in Q3, 2011 we had a significant turnover of our sales force; today we hire predominantly Tier A sales reps; they are less skilled, less expensive sales reps; we save about 30% per sales rep that we hire; kind of meaning that for every three reps that we hire, we basically have one free. So today we have our 38 reps sales force consist of 75% Tier A reps, earning around $70,000 in the combination of fixed salary and we also offer them a very aggressive commission program.

If you look at how we do business with all the direct markets that we have right now, we go to numerous trade shows around 35 a year. We do direct marketing in all these different languages and all these different countries. We have journal articles; we advertise in the large journal programs as well as the different trade show programs that are there. We have numerous hospital workshops where surgeons that are interested in learning how to use our Valvulotome and InvisiGrip (inaudible) we have them scattered throughout Europe. We do this day in and day out and this is an example here of what our trade show booth looks like. We just came back from the European Society of Vascular Surgery last week and this is a represented picture of what the trade show booth actually looks like.

Our sales approach. The sales approach that we have right now is, there is really some changing dynamics, only just to address a point here relating to the European economic crisis. Let me just point out that at this point, the impact of the European crisis has had some effect in our distributor markets like Greece. However, there has been a little impact in our direct market. We really are too small. We’ve got limited market penetration and especially in the markets of the new direct markets of Spain and Italy and we really haven’t felt that much of an impact of the economic crisis.

In regards to our sales approach however, we’ve got two approaches. One dedicated to the low-tech products and one for high-tech products. They’re both intertwined and they both leverage or they both support each other. So the low-tech products; these are for large markets, high volume business, like vascular grafts and catheters. The decision really is more and more heading into the direction of the purchasing departments, the business administrators, the hospital tenders and GPOs, less through surgeons, less surgeon influence on these products. However, and the key to success here is price, availability of product and quality. It is strategically a door opener to build relationships for high-tech products and so it's very important part of our overall business strategy over here.

On the high-tech side, surgeons still remains the decision. It's still surgeon driven. The keys to the success here in patient outcomes, surgeon preference, pricing is less of an issue and once you actually are in there as well, if you start with the high-tech product, you develop the relationship and immediately it becomes a door opener for low-tech product sales opportunities as well, so it’s really intertwined and very important part of our business model.

So what’s next? Why go direct? Well, we have, since I have come over here at ‘97 we have had limited success working with distributors. Distributors have their own agendas and many times have their own competitive products, so what we have therefore early on George and I have agreed that the best direction for us in Europe is to really move towards a direct business model and this is what we have been doing; you can see the kind of success that we have had here with a compound annual growth rate for all the different countries; some examples. What it does give us, that a distributor does not give us is control over the sales channels, higher revenues, we sell the entire bag in higher gross profit, more marketing, just so many benefits for us going direct in all of these countries.

So what’s next? Switzerland, well this is what we are keying up right now the go direct by the end of the year. We have a distributor here that is another example of what’s happened with the other 12 distributors that we had that I just mentioned earlier through the last 10 years. The distributor in Switzerland has been our distributor for more than 10 years. He did pretty well up until about 2007 and then he is pretty much to become a growth anchor for our European business. He currently sells six of our 13 product lines; 70% of the sales are catheters and he has competing products, so most of our other products makes the product lines, so we have been shut out; we have been unable to sell the other seven product lines that we have had.

So it’s time that we move on and so Switzerland is next; Switzerland, just some facts on Switzerland; there are 8 million people there; 65% are German speaking, 20% French speaking and 5% Italian. Switzerland is surrounded by all other direct markets that we have and they do have private healthcare, they are moving toward a reimbursement to DRG system. So very high developed allograft market with close ties to Germany and also Austria and we’re in process of hiring two reps right now we see we might be able to add a third one there at some point. We have all regulatory approvals and I think we should be able to tap in very nicely into this $2 million to $3 million market potential.

As we look forward into the future, I see that we have a potential for hiring some where between 50 and 60 reps in Asia and as well as in our current direct markets in Europe. We are ramping with a Tier A model as I mentioned 75% right now. Many of these Tier A reps have less than one year experience, so I still think the best is yet to come from this so the Tier A rep that we have hired now. They average about 40 hospitals and we do need to build a sales management team underneath them to support the ever increasing number of Tier A reps.

So what’s next year, I am looking forward in the future; while we have switched volumes in other direct markets, we already looking at some others. There is still a few remaining direct markets in Europe that we are looking at and we still feel that there is a lot of fuel in the tank to leverage our XenoSure momentum and many more direct markets as well as distributor markets. We are just starting to and we are very excited about the changes that our R&D team has made to the UnBalloon and Over-the-Wire and Valvulotome also offers great opportunities for us going forward.

We have been very aggressive with catheter; we have catheter strategy; it’s a low price strategy and it’s working incredibly well with the factory direct program, especially our export distributor markets and I mentioned Tier A reps are going to become more productive looking forward. We should and we do expect continued growth in our new direct markets of Spain and Denmark, further market that penetration in export and we are looking in getting faster approvals right now in many markets; non-EU markets as well, where we don’t have the approvals.

We are recovering in the process of recovering our AlboGraft business in the UK and France; we hope that we will be in a position to sell our AlboGraft product line in the UK without any guidance at all from the MHRA. And we have got tremendous cross selling opportunities and we’ve taken a look at the business that we have and most of our business through our hospitals come, they sty by in between three or four products; we’ve got lots of opportunities to bundle and sell many more of our quality products there.

Thank you very much.

Rob Linden

Thank you everybody. My name is Rob Linden, I am Senior Vice President of Sales here at LeMaitre Vascular and what I want to cover today a little bit who I am and what we sell out there; some information on how we’ve done in the past and a little bit about my team and how we want to go forward in the future.

I have been about 18 years in the medical device industry; I spend the early part of my career with big companies like DePuy; small companies like distributorships, startup companies like Vasca, stable vascular companies like Atrium. So when I came, or should I say when I had the privilege to come to LeMaitre, I brought with me a wealth of experience and idea of how to navigate the landscape and now in my position here at LeMaitre Vascular starting off as a sales rep and really being with the surgeons on a daily basis and as a manager and director and now Vice President, I am able to really understand what it takes for LeMaitre devices and particular to grow out here in the United States and in really North America and I have done that every step of the way. So the confidence that brings to me understanding exactly what the surgeons need and how to get it is really I get on about every morning.

So I know some of these slides will be a little bit redundant; we have got, obviously we sell many of the same products here in Europe and you can see here at the left, so this gives you left side of the screen more of a niche unique products that we have in the shunt and the UnBalloon and AnastoClip and our Valvulotome and this is a picture of our newest iteration of the Valvulotome. And then we also have products that the surgeons are using everyday, so basically anytime a vascular surgeon is doing a procedure outside of the heart, there is LeMaitre device that they can use from the top of the carotid all the way down to the leg and really even to dorsalis pedis artery in the foot and that’s important because what we, the business model when we were out there is that they’re going to do a procedure, there is a LeMaitre device, a gold standard LeMaitre device that they’re going to have in their hands and that’s the one thing everything has in common, whether it's unique niche product or it's a common every day grafted balloon, the LeMaitre device is the gold standard in that space.

So I want to highlight on to some of the products here. These are the horses if you will that can make up almost half of my sales, the Valvulotome and the shunt. The Valvulotome, as Dr. Curi had talked about is our original flagship product and the shunt is something we acquired in 2001.

Two very elegant products that are highly differentiated from their competition. There is little rivalry in these spaces and the mature markets and in a mature market how you dominate and how is you grow is by keep getting better. When you hear gold standard, you hear about best-in-class believe me, you might sit there and say, hey the guys got a picture of (inaudible) next to his bed every morning that he drinks before. He goes to work, which I do but this is factual. Every day and every year, we're making different improvements in the products. This is our sixth generation of the Valvulotome and it was the best device in the market five generations ago.

Two other products and I know Peter talked a lot about the biological patch, I [said] Dr. Curi. We began distribution in 2009. It's when they were very synergistic, back in the business model. We’re in the procedure for carotid surgery. It's used in probably 90% of the carotid surgeries and in a lot of different other procedures and once you get it in the hospital, it's going to find its way to the different surgeons and we've increased sales ten-fold in four years and that’s consistent and when we see this increase, we’re still only in about a third of the hospitals in the United States but every week at LeMaitre we have brought four new hospitals on board and that’s not just every week of the past month and may be the first couple of months we have had it through the past three and half years we bring four new hospitals a week.

The UnBalloon is like Dr. Curi had said, this is a unique device that is satisfying a need that cannot be addressed in the market and why that’s important for myself and my staff is that when you walk in with something that can do something that nothing else can do, the surgeons do want to speak with you. The surgeons that use it want to speak with you. The surgeons that might not have a need for still want to be find out what this new device is and that opens up our ability to cross-sell the entire bag because it’s opening towards and putting us in front of surgeons that might not have seen us in the past.

So historically LeMaitre, as we started out as a direct [sales] company and we started to get sales reps on the field and we have been growing over the past decade assume we had 17 reps and mangers back in 2002. We now with a (inaudible) mark of 51 and with that increase in reps you can see our growth has followed a long suit and we are keeping the average sales per rep close to a $1 million a little bit of a quite tick down recently just because we have added a few more reps but I anticipating that just, this is probably level out over the next couple of years and hopefully this bar will go a little bit higher.

These are the current stats snapshot of where we are and a little bit about what we are. We make up 67% of worldwide on that sales, all of our sales are direct to hospitals. We have 43 US reps and two up in Canada right now and we also have six [RSMs], myself and on a daily basis we get to cover 40% of the US hospitals when I say cover that’s a rep visiting a surgeon or approaching the department on a daily or weekly basis and only 20% in Canada.

So who are these folks out there? The experienced reps from and we build our sales force years ago much like many other companies, the sports analogy would be go out and grab for agents. You go to existing medical device companies, you grab that someone is doing well there, they cost more money, you bring in and their turn key ready to go. And currently right now, we have about 10% of our sales force that fit this whole model and that's because of about four years ago probably to this month George and I down Indianapolis and discuss going to a different model and that model was Tier A and that was let's build this sales force to the (inaudible).

Let's find folks that are hungry that are aggressive, that are smart and they know how to sell. They have been trained by great companies but they want to break into probably one of the most liquid and even most competitive sales and industries out there and that's medical devices and we've done that over the past four years and now 90% of our sales force follow this model and this model allows them to grow within the organization.

We promote from within so that loyalty is going to lead to more [10 year] I mean they hunger and the ability to sale what’s carry us through. In the future, we think that we would be able to service some of the tertiary markets out there by going down and really just going back to that [graft] maybe in the fifth or sixth around if you will and get folks that are hungry that might not know how to sell or might not know much about vascular but we can teach them those things and it might take a little bit longer to get up to a speed but they are going be there that much longer because they are going to have clear growth pattern that I think will near the economic growth.

And when they are around the field LeMaitre has always been ahead of the curve when it comes to technology in their hands. We want them to be able to order product from their iPhones to get to the [trunk] next day with them be able to check history for the customers they walk in and we also want them to be able to show a video to a surgeon and the iPhone and the iPad it’s something that allows them to grab a surgeon in the five seconds to 10 seconds because they only have minutes to speak with you to start and we are able to get them right in the procedure that we are doing and show them a quick video in the iPhone and iPad allow that. It also gives them, for me this is great because we are able to track the record everyday and that’s what (inaudible) sales reps succeed.

We like Peter; we will continue to exhibit it at all major national and regional trade shows. We realized that, though we go into the surgeon’s office and their operating room every day, we also need to come from every angle and that is direct mail and the mail box at the trade shows that were visible, we can answer their questions. We have surgeons training centers if they want to try a product if they have not done a procedure that way we are able to send them out and train them and then we also have not just a customer service department that take the orders but to (inaudible) at hospitals and help us to sell as well.

Now (inaudible) is changing all over the world, and I really believe we are positioned perfectly for this. These two folks are now getting in this surgeon’s way and Dr. Curi spoke about that and its really I think puts us in a great position. Why because as the purchasing agent and the internal revenue committees been at different levels per (inaudible) that usually [attacks] the commodity type products, it opens up those.

It’s going to a stay away from the niche products which is a Valvulotome, our EndoRe, our clips, our unballooned but it’s going to open up and it’s going to play in our favor in the other end because we don’t sell a lot of the commodity products here in the stage. We just got in the grafts and Embolectomy Catheters, we are trying to attack the market share, in other words, this opening will allow us to sell those and it makes us more important to the surgeon because, the surgeon can no longer just ask for something. You need the sales rep to walk that product through the process at the hospital and that’s we are positioned to do.

So my philosophy as you heard before, I believe that if we get somebody who is hungry, smart and willing to succeed and committed to succeed, we can train them on them our devices and have a sale and we believe that once we get out in front of the surgeon, we have to offer them multiple products. We can’t just offer them one and if we have more reps in the field it allows us to stay in front of surgeon and not behind the windshield and sell them multiple products and as you can see from my earliest picture that all of our products are going to be used in the course of the day or week.

Okay, what’s next? Canada, this will be our first going direct here in the Americas. Peter has done it in many different countries. We've covered Canada for about, we put our first rep there in 2007. We have one rep often on the air for the past five years and then we added a second rep right at the end of 2010 and we just added a third in June. We are actually right now, we just have two because one of them left and we are looking to rehire there but now we are put the flag in the ground and we are going to hire a country manager and office. So that when a Canadian hospital calls, they get a Canadian person on the other line and they are not going through customs, they are getting new orders next day and we have someone focused on growing in this country because our growth has been something that’s not been focus of a regional management in the US. It was just one territory in that region and now with the country manager, our reps is able to focus, he or she is able to focus and [roll] down one growing inside all of these different regions and then that only comes with the renewed focus.

Brazil, another market we are going to go direct. You can see we have spent very little time selling there; most of our sales where endovascular affect all of it really and this was getting out of the business. We’re starting to get a little bit this is without any endovascular business. So we’ve increased a little bit this year and as a BRIC growing nation, we realized that by being here and the amount of the population there and our regulatory approvals, as we developed this market and move towards adding direct reps there, the potential is going to be very high for LeMaitre.

What's next in the US, more reps. I talked earlier than we have probably in front of the 40% of the hospitals. We want to go out and (inaudible) 60. We want to knock behind the windshield. We want them in the different markets maybe in areas like Las Vegas or Kansas City and then putting more reps in big cities like New York and Los Angeles and Chicago.

If we shrink down the average hospital per territory and then can increase that sales we are really, I think, grow tremendously here and I think the Tier AA model will help us get into these tertiary markets.

And what's going to do it. XenoSure, we're growing very well with that. We still only hit about a third of the hospitals and inside each hospital, that device can grow on its own because it can be used for many different procedures. We think that’s going to really help us go forward. We have the best catheters on the market and we just really started to go after that. The graft is something that we just released. We have a graft here in the US the traction with that. UnBalloon is going to get us in front of folks and obviously expose us to whole different surgeon and then converting some of our other launches like the Over-the-Wire Valvulotome.

Get all of those things going with more reps on the field. Obviously, we will be able to cross-sell all these great devices. Thank you.

Dr. Larry A. Scher

Good Morning. I am Larry Scher. I am a vascular surgeon at Montefiore Hospital here in Bronx and I was asked to cover a variety of different subjects today to give you an overview of where healthcare stands and the nature of particular interest of vascular surgeon. So what I would like to do is just brief to tell you who I am and to cover submissions about healthcare, about changing trends in vascular surgery and some of the (inaudible) and vascular surgery also to that new changes in healthcare and the physician relationship.

So having said that I have been a practicing vascular surgeon, got to tell you I (inaudible) to make myself look more credible, but I have been practicing since 1979 with the college of Brandeis University Medical School (inaudible) Wisconsin. Did my surgical (inaudible) Medical College of Virginia and Richmond vascular fellowship at (inaudible) Hospital, Newark. I spent 10 years at Montefiore Medical Center and I became the Chief of vascular surgery at North Shore University Hospital on Long Island for about 15 years and with Montefiore about eight years ago.

I have been involved in local and national vascular societies; I am the President of local vascular society in New York. A number of years ago I have been interested in hemodialysis access surgery and was involved in the development and running of society dedicated to vascular access surgery for patients with end stage renal disease and I have been involved in authoring or co-authoring many publications in all areas of vascular surgery.

Healthcare costs are clearly not going down. They continue to rise. I think we all know this the United States in particular has enormous healthcare cost and unfortunately increased cost is not always correlated with increased quality. The United States spent a tremendous amount of money on end of life care and there is some very difficult decisions that would need to be made to cut those costs and in the area that I am interested in that being end stage renal disease, we spent a huge amount of money, a huge number of Medicare dollars on a relative small number of patients. I was told there when Medicare began to fund dialysis for end stage renal disease patients, they expect there is a number to cap out of 50,000 patients and they were 500,000 now on dialysis.

You can see why this healthcare core sort of rising. In addition, the percentage of healthcare cost relative for (inaudible) product is also rising. This clearly is not sustainable. The lack of coordinated hospital systems tends to duplicate cost. There are always incentives for physicians often to provide unnecessary services because of the decrease in reimbursement to the physician all of these are very, very difficult problems. (inaudible) reform of the huge problem for every vascular surgeon and physician in the United States and to failure to deal with some of this problem is led to increasing healthcare cost as well.

Many new treatments are available and not really proven and yet there was a funding for this treatment basically industry driven and that’s one of the interesting things about LeMaitre, they deal with really established products and not some of these products that are really should be questionable in terms of reimbursement for these banks.

And clearly these things are going to have to be look at if we are going to control healthcare cost. Also we need to recognize as I mentioned earlier when (inaudible) care is not likely to succeed and one of the biggest problems in my mind is that we have a poor profit industry generating healthcare. These companies are public companies and they provide healthcare and their only responsibility is to see their investors, they can only cut cost by [rationating] care or decrease in reimbursements of late premium.

So obviously these problems will have to deal with as really are proceed with reforming healthcare. George mentioned this earlier, there are some tough force that involve in the care of vascular surgery patients, I am a vascular surgeon and we believe that the vascular surgeons really provide a full range of care to these patients. We have endovascular options, surgical options and also medical options for patients that don’t need any intervention at all. This is different than the other specialist involved in care and as George mentioned, they are focus on the vascular surgeon not the cardiologist who really can’t do open surgery or the intervention list of catheter open surgery.

But the vascular surgeon clearly can do all of these things. These (inaudible) really should not lead to unnecessary treatment will change thresholds for interventions but unfortunately and sometimes they do. So we really need to monitor the interventions that they have done, monitor who does them; monitor the training of the specialist that are involved in vascular care.

And we still think that the vascular surgeon should be at the forefront of this care but clearly there are other specialties involved as well. The vascular arena has been changing over the last couple of decades in terms of endovascular versus open surgery. Clearly, the aneurysm market as you have been hearing shifted over to the use of stent graft and endovascular technologies rather than open surgery.

And this is also true in many of our other endeavors whether it be carotid surgery for carotid artery disease or lower extremity surgery to preserve limbs and treat even limbs threatening ischemia or claudication which is a disabling symptom that patients with vascular disease get.

And clearly as you see on this chart has been an increase in the endovascular surgery that’s been done over the last several decade. In addition to that, a lot of the surgery that sign has been shifted to office practices because of incentives provide care in an office rather than the hospital and reimbursements that would encourage the physicians and the specialists to do this.

We have monitor vascular and endo surgery and endovascular procedure volumes are the few things like we see on the slide, which is at the number of endovascular procedures has gone up, the number of office based procedures has gone up, these are patients who were treated for critical limb ischemia which is limbs threatening problems and also for claudication.

So our number of endovascular procedures has gone up and number of office based procedures has gone up but the open surgical volumes that we do has not disappeared and as you could see on this slide. This is our monitor experience with these procedures. You can see that our endovascular vascular volume had little dip as we are going back up with the number of lower extremity operations that we do which remains fairly stable in spite of this and we have a huge service that treats patients who have limb threatening ischemia and this open surgical volume whether it would be in the lower extremities or in the carotids as you see on this slide is important to the products that LeMaitre sells.

Many of those are focused on the open surgical patient and you could see here even though the carotid [stents] have been available now for 10 years or so, the number of open carotid endarterectomy that we used to treat use to carotid occlusive disease has disease has remained fairly stabilized I think this is the experience that we see nationwide.

The other thing that has changed over the last couple of decades is the purchasing dynamics. Our hospitals have really incentivized to try to reduce cost obviously and many of the office based practice also have to reduce cost to maximize reimbursement.

Hospital mergers and healthcare systems have developed and emerged to try to increase purchasing power this clearly pressure on the part of the hospitals and physician offices to meet budget demands and new product committees are present in the hospital which will attempt to control costs and critically evaluate new products and as Dr. Curi said, a company that offers a number of these different products may be able to work with the hospital in terms of price strategies excluding beneficial on that relationship really should be encouraged.

The affordable care access really been thrust upon us as clearly lot of our goals to expand healthcare coverage and decrease costs, but there are many potential consequences of this act, including the economic impact, increased taxes, potential for care rationing and the increased taxes on the pharmaceutical and device companies, which may affect funding for medical education and research. And there are a number of strategies that vascular surgeon community has proposed to try to deal with some of these changes and survive under the affordable period and participate in physician quality reporting systems, which should not be viewed as an incentive to provide additional reimbursement.

We can try to maintain a certification which again is another government initiative. The electronic medical records issue is an interesting issue. I don’t know how many of you saw in the New York Times, but it proposed electronic medical records of trying to reduce cost and it turns out that the ease of ratcheting up the level of compare using electronic medical records as enormous increase of cost. So maybe this hasn’t really provided the outcome the government expected.

Accountable care organizations are groups of healthcare providers that assume responsibility of the delivery, cost and quality of medical care to group of Medicare beneficiaries and care has become an accountable care organization and this is important in the future of all these healthcare changes. There has been a general shift to the outpatient setting in providing vascular care to these patients and again that’s been incentivized by the reimbursement strategies the government has offered. And the vascular surgeons in particular have looked to changing income sources whether it be from vascular laboratory testing, outpatient centers which still provides reasonable revenue and outpatient endovascular suites which provides additional revenue overdoing these procedures in the hospital setting.

The other thing that’s change recently is the relationship between physicians and industry and I don't think this is a particularly good thing. We need to limit the abuses that have existed between physicians and industry. But clearly a lot of the developments in medicine have been a result of these relationships, but the Sunshine Act has forced companies to report spending of greater than $100 a year where physicians and teaching hospitals, but unfortunately the reporting doesn’t’ separate legitimate expenses from other abuses. So I really believe you cannot separate doctors and industry; it’s a natural relationship that stimulates medical advances and although we clearly need to have limit the abusers that have been present in the past, there have to be ways to do this without siphoning growth of medical devices and medical progress.

I do believe LeMaitre is well positioned to deal with some of the changes in the healthcare environment; refer this over and over again, but they do specialize in niche products. These are products done for commonly done vascular procedures and the open surgical market will not go away and they have expanded their role in the endovascular market as well. They provide leading technology in many product areas; we can avoid high costs of high profile devices with reimbursement challenges. They do compete in lower rivalry product areas as well, reimbursement is often under these ERG codes and not reimbursement for individual devices and I do believe they are truly an innovator with worldwide access to new products. And new ideas and as you also heard earlier, I believe many of the products that they have available either through acquisition or recently through research and development are clearly important to vascular surgery and the future vascular surgery.

Having said that, I thank you very much for your time.

Ryan Connelly

Hello everyone. My name is Ryan Connelly; I am here to talk to you today about research and development at LeMaitre which for us includes product development and also even too some regulatory topics. I will give you a little bit of history about where those groups have come from; I'll talk about some recent product launches as well as for the first time something we don't generally do give, I’ll give you a look at some things coming on immediate horizon and then again square up in-depth regulatory information.

So the first engineer at LeMaitre was hired in 1999 and at that time and until the IPO we generally had two or three people on the department at one time. We focused on line extension in next generation devices generally lower risk things to be done to the device. There is a limited investment and that's kind of what drove us to not really take too much risk in the products we were attempting to do in the project. That’s what till today, we really increased, I am going to jump till end the commitment here as George talked about, I think we see R&D as an avenue that was kind of untapped for us to getting at some growth; you all know historically this company has grown through acquisition.

But we see R&D as the way we could help to get ourselves to better growth rate in a faster pace and so we've seen an increased in resources, an increase in spend, today we have 14 product development engineers in the company; most importantly for us, I think what allowed to do is attack bigger each year, more healthy projects and product line. This really allowed us to take some risk, not all risk, not a lot of risk but some risk and where we really couldn't afford to do that before.

Right now the team, a very balanced team; I focused a lot in the last several years on who should we bring in to this group? I tried to get a diverse mix of people really as engineers what it comes down further may, we’re mechanical and biomedical engineers, truly that's what we do day-to-day. However, we do have a good diversification of people around us to run into technical issues all the time of many different natures; plastics engineers, diagnostic engineers, process engineers, manufacturing engineers all of these backgrounds are inside of the group; now it’s really a good diverse mix of people, so that we can handle quickly and efficiently the problems that come for us, without having to go outside. Going outside is always possible for us, but it adds the time.

The other thing that we pay a lot of attention to these days, are the way that we choose projects. We do have a pretty rigorous selection process, hurdles, IRR metrics to come through, but really one of the questions I always get asked, where do ideas come from? And my frank answer to people is, well, they come from everywhere, they come doctors, they come from us being in surgery, from inside the building being in surgery, they come from business guys out there in the world, they come from literature, everywhere; we get ideas from everywhere.

And so, we have all these ideas and we mix them and we put them into funnel, we do deal with the research and the sales and marketing sides as well as the feasibility side and technical aspects and then we throw them to a bunch of our steering committees in order to get to the end and select the project to and really we have been working on that.

As I mentioned we have increased R&D spend. You can see here the trend of the graph is pretty apparent. There is a blip here in the middle of this for us was clinical trail spend around stent graft; so even without if you were to remove that away from the equation you can still see pretty healthy increase in spend over the last several years particularly since ’06 the big jump and then different trend there but always going up in the right direction, again that was George was saying increasing the commitment of the spend to R&D in order to get to that growth rate.

So the other thing that I have done in the last couple of years particularly is really increased the focused on what we are doing. It use to communicate and this will be apparent on another slide or two. As we added engineers, we would add a project into the mix and we try to do another thing and try to do another thing and really we were just too spread out for that; what we have done now is really I have taken the team and I take these 14 product engineers and we split them up into smaller teams and we have more people, fewer projects and make it faster and somewhere efficiently; generally higher quality if you will fewer revisions after things are launched and really that allows me to then have the confidence to go back and say, all right great, lets start doing these higher risk, higher reward type projects; we have a big team around us where we can try to go handle these problems, so that’s really what’s happened in the last couple of years. So we are not off tackling 14 projects right now; at the moment actually we are doing three and so we have these 14 guys and girls split up into three teams to really go after these problems efficiently.

So what you can see here is just a snapshot of how the launches have come off and kind of illustrating what I was saying there, you might think, oh, 14 product engineers, you must be doing a lot more projects. And as I said it’s actually exactly the opposite; right after the IPO we were hiring people and then beginning to throw off a lot of smaller projects, but stent grafts did really consumed us in ‘07, ‘08 and ’09, we did a lot of stent graft projects and the four or five people I had were all stent graft related really, so we kind of started doing; we had one or two small projects going and a lot of stent graft focus going on. Hence again back at that other chart why the dollars were so high in the stent graft space.

So then at the end of ‘10 we changed our focus and changed our approach again to get more focus, I should say and now you see two major launches coming out at a time generally it’s what’s going on for us. Every year we try to have a couple of big beefy projects coming off and we can see that in the last couple of years with the AnastoClip GC, the long tape as we talked about, too big products for us, the UnBalloon and Over-the-Wire, Valvulotome at the back half of last year. This year the one 1.5 millimeter Valvulotome, these are things that are coming up and the multi-task is coming up. I will talk about both of those in a second as well as the next-generation UnBalloon; we just continue to go and iterate on that product line.

Here is a chart that shows R&D sales as a percent of all sales. This is for new catalogue numbers only as we look at it in-house. Back in the IPO days, 2%, so not a lot of productivity measured in this sense coming out from a dollars perspective. We did have a big blip here in this chart and this is actually, it’s worth talking about for a second. This is kind of one of the philosophies that we have. It's just the product of our philosophy. This is around the shunt and the shunt for us as you heard from our doctors here today, it's one of our goal standard. The device that we wanted to go make some improvement to but at the same time, we didn’t really want to (inaudible). The shunt is good the way it is. Let’s make sure we don’t mess with the shunt.

So we did launch the shunt. We gave it, year and s half-ish to run in parallel with our previous version of the shunt to make sure that device is technically perfect. It wasn’t going to have any problems and then we hard switched the device over and of course when you hard switch the device and pull it off the market, sales for that jump and so that’s the slip that you see here, even without the blip. If you were to kind of smooth out that graft and just ignore that part, we see the trend going in a great direction, up to about 8% of sales are coming from products launch within the last 36 months.

I will talk for a second about some of the two recent product lines that have come up and then I will go into the future things that are coming. So I will talk about the UnBalloon. Dr. Curi, I think did a great job of telling you clinically why this device is useful. One of the things that I like to hear, he says, he gets a lot a while. So one of the things that I get when I came to the facility for the first time is, I am amazed still how many times people say, ooh, I wish I was there; just if you look at it and you know exactly we are supposed to do very intuitive probably that sounds to be very intuitive to use as well which is great for the device.

Here is a couple of pictures of it being used in humans, so you can see the nice things about it; it’s very clear it’s very, very opaque. This is the catheter here and it’s closed shape, so the doctors are very capable of seeing where the device is and what’s it doing; all these other pieces of metal right here that’s the stent graft that interacting with later on. On the left and the right you can see it conforming to the vessel nicely in two different kinds of anatomy, so this device is very easy for them to see; it can be used in both abdominal and the thoracic space which is nice and again really what it provides them, I have started to lead off the conversation was, you have time, in OR, this part of the surgery is very intense, you don’t have a lot of time. You were to picture a balloon here instead of the UnBalloon here, it would like a solid mass because that’s what a balloon is through the aorta when you blow it up; it’s a doorway that you have just close. So you have no time; you have to quickly inflate it and very quickly deflate it. This thing allows you time, you have time to sit there and model and do the work.

Another recent launch we have had is Over-the-Wire Valvulotome; and again as you have heard about it a little bit already, this was something where we thought a couple of things are going out for us internally. First was, we really have not changed the Valvulotome; we have ignored our flagship product and we need to go back and do something for that device, so let’s look at what other things we could be doing. One of them is, hey how come this product has not gone under vascular; all the other surgeries, there is a lot of trend for that direction, why isn’t this one and of course we feel like we have the gold standard placed already, so anybody should be making this procedure; endovascular, it should be us promoting it, so let’s go do that. Technically, a very challenging project actually, we inside; all we do is put a wire in the middle, but we really did is to put a whole half of the diameter down the middle of the device and so it has to be as robust and work just as well.

So it was a very technically challenging project. It came in a quick amount of time actually. Here is a couple of slides of the device being used. This is in animal actually, this is not in human, but the idea is exactly the same. The green thing is the wire you can see here, we'll place the wire first, so it paves the road like the thing. This is the multi-task procedure for the surgeon. So put the device up once, pull it out, pull it up again, pull it out, pull it up the third time, pull it out. Every time it goes out you have the possibility with any of the other Valvulotome of it not finding the right place.

So it’s a little time consuming; what we have done is here again like with any wire based procedures, you lay the road down first, don't have to worry about where it’s going; pass it up and you pull out. So you can see the green is the wire in this case you can see this is the head of the Valvulotome; these little tinny things here are the reefer, the vein, the valves of your vein. And here you can see how they have been ablated, they have been damaged. This side has been cut to shred, this side is gone which is exactly the idea is you get rid of the valves inside the vein and allow blood to get back and forth.

AnastoClip GC; this is probably the oldest of the launches. This is a great example of an acquisition that we had. There is a different product line that we acquired for this; we watched it for a couple of years and realized, we should really do this to that product line to make it easier to use, to make it better for the faster uptake for the docs, less time to watch for our sales reps to process the cases, so it becomes much easier to teach. The principal of the idea is the same as the AnastoClip, the original AnastoClip, you take the place of future to provide an interested anastomosis that will allow blood to flow nicely in the vein and then you can see here this is the device in action and this is anastomosis that had been done. These marks here, these are all split that are placed with two ends of the vessels together and you clip, clip, clip, clip and you run down you clip them. You can be technically a little I’ll say sloppier although it’s a poor word, with this device than with the original, it’s more forgiving; it allows the doc to not have to be so precise spread to work directly.

Sp things coming up, I’ll talk quickly about two things that are coming up, the first is the EndoRE, the multi task tool. This is a procedure for us called endarterectomy. The idea is to get rid of total occlusions in your leg which allows blood flow to get back down to the foot. We do the surgery now; we have some tools around this here today, however we are trying to do is improve the procedure by combining the functionality of several of the tools into one tool, this are over on the table might be easier to see there, but essentially, then the idea is to reduce the potential of a complication, because we do fewer passes down the leg and every pass down the leg is the possibility something can go along.

And then finally the 1.5 million Valvulotome, this is the next advance that we are going to make in the Valvulotome; it doesn’t sound like a lot when you think about 1.5 millimeters, 1.8 millimeters is really that different. The idea though really is we are making these things smaller so that it can cut more efficiently even ours does today, so we are increasing is we think the offering of this device. We’ll maintain some of the important features on the top side; it will cut and use in work and that’s what it does today, all it will be more effective in the smaller vessels. The other nice thing is, if everything goes according to plan, this will get down to the size of a guidewire, so it would feel and act more like a guidewire in the doctors hands than the catheter does and we think there is some advantages to that when navigating into the vessels.

I am going to switch gears here and talk a little bit about the regulatory side which obviously has to go hand-in-hand with product development. Similar story here in ‘07 right after the IPO, two people dedicated to regulatory of the company and we roughly gotten about two approvals a year. If you fast forward to today, its seven people right now, this is also a group that is growing and expanding and they can pump out about 10 approvals per year, so a dramatic difference from then to now.

This is a nice shot that we have; it shows all the yellow check marks are where things are approved. One of the nice things of course is in our major markets here EU, US and Canada, we have essentially all of our approvals; we have a nice way to look at all of these blank boxes are essential future revenue upside to build the company. Slide here showing some momentum; you can see that as we beget to put resources and personnel into the regulatory group, the amount of approvals that came out really shot up, but again up to about 10 years today.

And finally, these are things that are still to come right now, so actually half the press is this number two, this was just approved, so we are now gearing up to be able to start our human use trials for the multitask device. But still a lot of potential outside here in the very recent future coming up here from the regulatory group; major markets, major devices some of our outlying markets and some of our old devices, so a very, very good broad mix. Thank you.

Dave Roberts

Thanks Ryan. Thank you everybody for joining us today. I am Dave Roberts; I am the President LeMaitre Vascular, Head of Business Development. I will cover what was done with respect to primarily to acquisition. Over the past several years, we did a few case studies like that we don’t just do this and forget about them, it's a learning process for us as we go. Talk about potential acquisitions for the future, the long share and active pipeline but I'll give you a sense of some of that types of targets we’re looking at and then there is one slide at the end of distributor.

So as many of you know, acquisition is an important part of the LeMaitre story. We get about 60% of our revenues from products that were originally acquired rather than developed in-house. We've done 12 acquisitions in 15 years. This arrow here point at 2011 should actually be pointed back at 2009 but it’s really important way we had products in the bag. Ryan developed them internally and then I help acquire products from the outside of the company.

The criteria, I would say hasn’t changed a lot although it's always being refined as we learn more and more from the deals we’ve done. Just focus on the top three. Obviously, you understand, this business plan is a leverage to (inaudible) point business plan. It's all about Rob and Peter and [rep] getting in them and at the doctor’s office to visit Dr. Curi or Dr. Scher and then being able to take out more and more products to make that visit effective. So the number one criteria is we look for products that are used by vascular surgeons.

We're frankly agnostic as to whether the product is open or endovascular. However, we like what we call niche markets. We like less rivalry in markets where we know we can win. That was one of the lessons from the stent graft acquisition that we did in 2005 and as we divested last year.

We try to stay away from capital equipment and we like products that we can quote, easily drop into sales bag and what does that mean? Now we shifted as you heard from a more experienced sales rep model and your Tier A rep model, so it’s nice to be able to match the types of products that the types of reps that we have is ensures a good example of a product that did that. So the reps coming with less vascular experience and a patch frankly the surgeons know how to use patches. It’s easy for the reps to understand. There is not a lot of training, there is not frankly that much [prospect] of bureaucracy and that was easy to put into the bag and that’s one of the reasons that product line has been successful.

The revenue sweet spot $5 million to $10 million but we look large I will talk about that in a few minutes, approved a major markets again to leverage the sales forces that we have and also we try to if possible stay away from clinical trials those can be costly and take a lot of time. I will talk about valuation too in a couple of slides.

With respect to the segmentation of this market, the vascular surgery and vascular surgeon market has shifted pretty dramatically in the last 10 years or 15 years. Usages fees sort of that’s the corner specialty if you will open vascular doing bypasses and then the endovascular revolution took place and so today what you have is open vascular products which are transforming the hospital by and large, the markets are small to medium size. They generally not growing but there is less rivalry in those markets.

The endovascular devices, stent graft and angioplasty, atherectomy products like that those products are tend to be may be higher priced may be with a little bit less evidence proving their effectiveness or their cost effectiveness. The procedures also can and have in certain instances then pushed out of the hospital. So it’s a different place to visit for the sales rep. And then there are couple other interesting spaces as well the vein space is a very interesting space treating varicose veins and maybe DBT and some other pathologies.

These are very big markets with fast shifting technology, varicose veins now there is a next generation of treatment devices is (inaudible) treatment devices but there is also a reimbursement component which is very dynamic and frankly in my mind somewhat unreliable in that space, but we stay a clear a little bit of that historically and then the access base is Larry Scher pointed out is very interesting, it’s a exploding pathology unfortunately in this country 8% of Medicare going to 1% of the patients. It’s approach through open end into vascular needs and there are lot of interesting devices in and around that space, that's space that a particular interest to me. But the theme here are we like markets that have less competition. It allows us to have a higher profitability of being successful.

As we more successful and we grow, we have more market strength and we will look a little bit more end market growth rates. We would like to be moving into higher growth market into the future. We like our sale reps visiting hospitals, they pay better, they are not as cheap when doctors goes into an office and buys everything themselves they don’t want to pay a lot for that muffler. And then as I said, we're frankly agnostic between endo and open vascular.

A lot of the trends that consideration for us with respect to acquisitions as has been discussed already, the one that’s intriguing, is there a resurgence in biomaterials or biological products perhaps there is we've seen a lot of interest in (inaudible). So that's a new an area of focus for us. Obviously, the ongoing growth of dialysis access less and less rivalry in niches has been interesting point to pause on because I happen to believe the barriers to entering the device industry are growing and then it makes niches harder for competitors to get in and complete with us. You think about the FDA process and how that’s getting a little bit more difficult those keeping smaller players out.

You think of a trend towards evidence based medicine where you can’t just have a device to sell based on some core features and outcomes but you have to begin improving that the device is more patent and it’s also more cost effective. We hear a little bit about concentration of procedures and I heard this last week in Europe and over in the UK concentration and procedures in certain hospitals, so that physicians, vascular surgeons are doing more peripheral work, they are now doing more [collated] work, and we want to visit a surgeon who is doing a higher volume of certain procedures.

You know, that I think and our niches as well hurt small companies as well, and then frankly the Affordable Care Act, the excise tax is just because it’s based on sales, its gear to get smaller company.

So as a company who is already in vascular surgery, already focusing on niches. I think we are in a good place to keep exploring and expanding into these niches and then overtime grow into the faster growth market. Other trends moving out of the hospital setting, there is also is a trend for more hospitalist physician employed, surgeons and interventionalist in the hospital.

The European crisis Peter touched on that as well and the Affordable Care Act. So these are all just considerations that we think about when we do acquisition. Again, we have done 12 deals in the last 15 years. I am not going to go to roll through the chart but this is a way of just letting you know as we look at each deal and we evaluate them looking back overtime. There are lessons we take away from each one. Somebody asked be beforehand, have all of the deals been successful and my answer is unfortunately no, the (inaudible) deal we did in 2003 we ended up closing that product line. We didn’t have enough clinical data and there was a clinical trial associated with that we discontinued and frankly the stent graft in 2005 and (inaudible) that was just too big and hot competitive of the space and so we ended up getting out of that as well. Plus there are positive lessons as well. The balloon catheters, the highest quality balloon in the market, quality will sell devices as Rob and Peter pointed out. And so that is important.

In 2001, Horizon medical products that’s the prudent (inaudible) and I can emphasize the importance of a brand for vascular surgeon. We sit here and we drink Coca Cola because we know the brand and the distribution channel is great. Well that’s Le Maitre we have a terrific brand and we have a terrific distribution channel to the vascular surgeons. And also the importance of factoring in the training component to the products and day we acquire you look at AnastoClip which is a 2004 acquisition and 2007 vascular architect, we have to factor in how much training is required on the other side of the acquisition, how much of our sales reps time is going to take out because obviously we want them to be as efficient with their time as possible.

So there are lots of lessons that we have learned along the way and again we just try to be entered in and factor those in, learn from them and keep moving ahead. So with respect to valuations and what we pay for acquisitions as you know you guys study evaluation all day long, our peers we generally think are valued anywhere where from 2.5 to 4 times revenues when they are being acquired and on a daily basis may be they are trading 2 to 2.5 times revenue our historical acquisitions this should really be more 1.5 to 2 times though. I would make this point we are highly disciplined acquirer of products. We do sometimes participate in auctions but I think I never won one. I think sort of a winner’s curse at play with respect to auctions.

Frankly, at the end of the day, getting a good valuation on acquisition which is very important to us, I think comes down to good sourcing. You have to have good alternatives. Fortunately, we’ve been doing acquisitions as a company for 15 years. I have an acquisition’s database which has 80 different product categories in it with 200 different companies represented, altogether over 800 product lines.

Now of course I am not focused on all those at once but we’ve been in this space a really long time. We hear about deals, deals come to us because we now have a reputation of being acquisitive in the space. So the niche players come to us and say hey, would you like to buy my product line or my company. As Ryan pointed out, where the deals come from? They come from physicians, they come from distributors. They come from other industry contacts. They come from vascular congresses and trade shows, vascular journals, sort of a broad range bankers account, lawyers etcetera, etcetera. Again just being in the space for 15 years, having done this at the end of the day, if there is a great acquisition but it doesn’t have the right price, we will pass on it and we will go to the next acquisition down because we always have back up in the pipeline.

Then just a few case studies and I will be brief on this but embolectomy catheters have worked out really well. If you think about this space, it's a $15 million market. Our main competitor is Edwards Lifesciences and the guys at Edwards it’s a percutaneous heart valve company. I am not sure many of you knew they had vascular products, embolectomy catheters. We are not focused on them and then frankly at some point, it probably would make sense for them to divest them and in the meantime there are competitors and we’re taking share because we’re focused on vascular surgery. So when Dr. Curi or Dr. Scher says, that they’re using our embolectomy catheters in all likelihood, they got rid of the Edwards catheters and started using ours in their place.

UnBalloon I won’t talk about the products; you have heard enough about that but this is an example of us working very closely with Ryan and the R&D team. We do like technology; we are interested in acquiring niche technology with some interesting barriers to entry. Again, this is a niche market a $10 million to $30 million market call depending upon how you measure it and there is nobody else with the device like this.

So as we continue to grow as a company, you may see more acquisitions of technologies like this which we are very fond of, again niche technologies not large markets with lots of rivalry. And in that respect, one acquisition that we did that wasn’t a good fit, it turns out was the stent graft we couldn’t keep up with Medtronic, Cook and Gore too much investments there pouring in the R&D, they are pouring into their sales force, they are putting into surgeon support, somebody less at the European society of vascular surgery meeting. You told me there are 14 stent grafts available on the market in Europe right now that’s just incredibly competitive.

We got into that, it was a mistake but we figured it out and we got out of it last year and now you are starting to see the momentum from that decision. So we are not afraid to admit when we make a mistake and we learn from it and we move on.

And then XenoSure this is an interesting product. Again, we distribute this. We don’t own it at this point, but we have an exclusive option to acquire it in 15 months. We will be crazy not to exercise that option frankly, in summer we would like to do it sooner but it’s 15 months from now it’s within the contract. This deal we restructured a little bit differently. This one was try before we buy, so we distribute and we are learning about the product is already a pre-established formula which is in public talking about how much we pay for the product line when we acquire it. But when we do if and when we do this should be nice interesting uplift to the gross margin. So we like to try before we buy and it introduced us to a whole new world of biological product.

Okay. So frequently people say hey what's in the pipeline, what other kind of products I think there is a always a fear out there that vascular surgery is a small world and there aren’t many products out there and again I mentioned there are about 80 products and product categories are focused on this is probably half or a little bit more than half of. I just pick product line people might understand or be familiar with, I split them up and products that use that are used in surgery in a hospital versus endovascular either in the hospital or in a clinic or maybe in an office or sometimes both like we have a surgical and an interventional value from now.

I also spilt up by sort of tradition vascular surgery dialysis act that’s in a bucket called two [open] accessories. And again I am not going to go through all of this but as just to give you a sense that there are lot of devices out there, lots of types of devices for us to keep executing this business plan in as we go forward, the dynamic space the field, the science is always changing and they are always is innovation and interesting products to acquire out there.

With the respect to, if we do acquisition how we will pay for them, smaller deals of course we have a $20 million of cash on the balance sheet. So we use our cash first, secondly if the deals got little bit larger we have no debt everybody realizes that so we could always take debt facility help pay for it and then we've come across as once in the last few years where there was a much larger target we had a $60 million transaction that certain way down the process where we were thinking about issuing some equity to complete the transactions. We wouldn’t be (inaudible) of that for the right transaction; however I always like to distinguish between the large and transformational acquisition.

So we are not interested in transformational and that we don’t want to do big acquisition that puts us into a totally new space, a new call point that would really hurt the business plan. We want products that are used by vascular surgeons. So we like looking at large acquisitions, market share building acquisitions but to get a product that used by interventional neuroradiologist, no thanks that’s not what we do. So but we will consider large acquisitions and that’s how we will fund them.

This is my last slide, the (inaudible) department helps either and Rob, the sales guys with respected distributor buyouts as you saw we are going direct next year or later this year in Switzerland we are expanding Canada and then also we expect to the entering Brazil our first BRIC market here and over the next few months.

And then when we think about what’s was beyond those three markets, frankly, if we look at a whole range of factors, but frankly a couple of important ones are, where is the money in the healthcare system and so where are the vascular procedures that’s A and then B where can we leverage our existing infrastructure, our US headquarters, European headquarters etcetera that’s the second consideration and you can see some of the countries we are thinking about there but this is an ongoing process.

With that I will turn it over to JJ. Thank you.

JJ Pellegrino

Great. Thanks Dave. So today you have seen a number of concepts and opportunities and ideas based around this theme of profitable growth and what I like to do is take a few minutes to look at some of these with the green eye shade from a finance perspective and some of those revolve around sales opportunities and some of those revolve around our expense structure and what that looks like now and what that might look like going forward and then may be take a quick talk about asset allocation and what are we doing with our and cash and our profitability and then talk about guidance.

So sales rep is number the one thing you have heard in terms of expansion from the sales force. It’s a model that we know and we like and we have replicated for quite some time in successful way. I think we had about 36 reps at our IPO up to about 85 now and the sales rep model is one that varies by geography and certainly by product mix and depending on what each individual rep is selling and by and large when you take the cost of a rep fully loaded may be 150,000 who joined 25000 a year that’s the rep base plus commission plus Rob Linden and other regional managers travel and entertainment and all that good stuff and then you look at that versus what they bring back to the table, we expect them to bring $60,000 to $100,000 a year of sales a new sales into the business and also retain some sales.

And then you look at through the lens of our gross margin sort of by geography you wind up with nice favorable [IRR]. Historically, it’s a little bit more favorable in the US, it’s been in Europe but then it might me changing these days and those change sort of overtime quarter-to-quarter as things transpire right now. Peter is growing nicely in Europe as you have seen and so his [IRRs] are probably looking pretty good right now with this new Tier A reps.

Nonetheless in year one, as the rep is ramping you see that you can lose a little bit money on the off income side. We probably breakeven in year two and then the reps starts to be productive from contribution perspective as the years go on.

There is another opportunity for sales increases clearly comes in penetration and penetration within our product lines and so we have talked about this niche strategy throughout the presentation and you can see it holding through here. Generally, we're in sort of these smaller markets. $25 million to $50 million only worldwide markets and we generally have nice beefy market share, 10% to 50% market shares, 20% to 50% market shares in each of these markets and they are not 25% of our markets but they are not minus 5% either by and large as sort of zero to 5% in our markets and we're generally by and large getting share, getting new units within these markets, why, because of the increased brand presence. We can have a nice brand presence with 85 sales reps and only 5,000 mass consultants worldwide. I think in there with nice coverage.

And outside, presence from a brand perspective and also from a technology perspective as Ryan works on these niches, where large companies, frankly aren’t going to stoop down and pick up the nickels and these niches and here we are working day and night on improving products within these niches. So these are sort of stylized numbers, 2011, 2012 kind of numbers, but $13 million, $14 million product line in a $25 million market. Still room to grow even with the 50%, 55% market share. Same with catheters, little over $13 million product line in a $50 million market, maybe a 25% market share, plenty of room to grow there as well.

And then of course, there is always ASP increases; average selling price increases, and we generally put through price increases in the U.S. of about 2% to 5% a year and that’s so in Europe about 0% to 2% and these price increases have a nice effect on the bottomline when you’re increasing prices only. You probably have about 80% of that, but drops through the bottomline. You are just paying extra commissions to sales reps. And then if you’re selling more units conversely, you are paying for the sales reps incremental commission of the cost of sale and so you have a little bit less 50% dropping to the bottomline. So ASPs are nice way for us to grow sales and the bottomline at the same time.

Another sales opportunity for us is the distributor buyout and we had Dave and Rob and Peter talk about this at length. From an economic perspective, these are case by case but we generally look for sort of a critical mass in a geography that we like is there enough vascular surgery going on in that geography, do you have three, four, six $700,000 of business through a distributor that you can then sort of takeover and when you do it you put in your expense structure; you hire a couple of reps, may be you put an office and may be you put a country manager in place. And so in year one, you lose some money and then in year two you probably breakeven and then you have throughout nice operating contribution after that.

Generally speaking, you get nice sales growth numbers initially and those come down overtime; you are getting the jump from the distributor level to hospital level sales, but you are also owning the channel also, you are controlling the channel, you are selling all of the breadth of your products and you are concentrating on that 100% whereas a distributor does not. So this is another model that we have done successfully historically and we’ll continue to do it going forward.

R&D is another bucket where we have been putting more and more resources towards recently and this chart deserves a little bit of an explanation. This is a look at product development spend each year, divided product development related revenues each year. So you can think about it as may be akin to an acquisition multiple. So here we are paying four times for $1 of sales and down here we are paying less than half times for $1 of sale; sort of breaking even when you consider gross margin each year at about $0.75 or about one sort of more or less $1 for $1 and so you can see we spend a lot on stent graft spend in sort of the ‘06, ’07, ’10, ’09 range and then coming back as Ryan get better across this in place and gets more product out to market you can see this ratio coming down. This is just one way to look at R&D spend. Ryan gave you another one certainly by product IRR is a project, IRR is important to us as well and when we look those internally, but I think this is a nice indication that were starting to understand how our R&D spend is in terms of the payback and in terms of efficiency.

Then of course sales opportunities from acquisitions are always just around the corner than sort of they are impetus, you wait for a willing seller to appear and come to an agreement; we're certainly working hard at those as Dave has mentioned that we've done well over 13 in the last 15 years or so and they account for 60% of sales. These deals obviously are looked at on a case by case basis and we look at IRRs and accretion dilution and all that stuff that you expect us to look at.

And that bring us to our expense side, so moving down the P&L if we look at gross margin the story here is basically been one of a 70% to 75% gross margin company. And you can see us bumping around as we do acquisitions or we do product line integrations into our central facility in Burlington. So in ’07 we bought Biomateriali that where our gross margin in ‘08 we spend the next couple of years repairing that. And then more recently, we have integrated a couple facilities into Burlington, and that took our gross margin down in 2011, but we were rebounding now and in fact if you take a closer a look on a quarterly basis you can see that the rebound might even been a little bit more obvious so in Q1, Q2, Q3 of 2010 year up in the 74% to 76% range and you start doing your factory consolidations, the integration from bringing to Italy and the integration from California the AlboGraft and LifeSpan.

And those cost money, you are doing training, you are doing startup, you are trying to learn how to make the product more efficiently, you are probably over staffing for a while and as you get through those issues which I think we larger are true at this point, we start to see improvements in the gross margin line quarter-by-quarter and hopefully we will see more of that going forward.

So moving down the P&L on the expense side, operating expenses, this is another story as well. We have been pretty tight with the drifty New England company and we generally look for cost cutting throughout the year, but we generally have a nice cost cutting effort every 15 months or so and can see the results we have kept our op expenses pretty flat despite increases in sales over the last five years and in fact as a percent of sales have actually come down. So a nice type of expenses control, we hope to see that continue going forward.

And then for all that’s together, you remember George’s slide at the beginning; it was pre IPO breakeven company go public; investment spend in sales reps, R&D and acquisitions in the amount of $4 million or $5 million; you decided you don’t want to be that company and then we go on a cost cutting spree to be get those op expenses to where you saw in the previous slide, you start to throw off cash.

And then the question is where do that go and so in our most recent quarter, we have been sort of the 72% gross margin company, 35% in selling and marketing, 20% in G&A, 8% or 9% in R&D for about 9% or 10% op profit but if you look at our peers, a lot of our similarly market cap peers probably are loosing money, so relevant. Medium sized peers and larger peers are getting to the 15% to 25% op contribution range maybe somewhere in there, so maybe for us there is a story where sales grow, you don’t need another CFO and CEO and President, and you get some leverage on your G&A line, get more inline with your peers, your high teens, the 17% to 18% selling and marketing Dave and Rob were just telling you and Peter about reps that we have hired recently, as those folks come online and we get a bit of leverage with them; may be we get our selling and marketing expenses down a bit and we would like to keep R&D up or may be even spend of more, 9% to 10% or so and that gets you to be may be 10% to 15% on the op profit line. So this is something we will be working towards going forward; this is not guidance, but this is something that helps you think about how we might be able to get there.

And as a result of all these things, for throwing off about $5 million a year in cash, I mean our cash balance has been pretty strong and remains stable over the last number of quarter as you can see. A good 70% to 80% of that cash right now is going into dividends and share repurchases and we will see what we do with it going forward and one other question is where do you allocate this cash?

So clearly all of these choices, investment profit and shareholders have their own dynamic strategic and sort of permanent internal rate of return standpoint and when you invest in a business may be in the short term you are hurting profitability and when you invest in profits, you generate more profits may be you are slowing down sales growth in the short term. So there is clearly a balance here between where to invest next and we think we have struck a nice balance between investments and profits and with most of those profits going out to the shareholders and that’s sort of the view point we have taken recently and today.

So turning to our guidance, this is the same guidance that we gave at our last Q2 call and its unchanged $13.9 million in sales, up for Q3 and up income of $1 million that’s about a 7% organic growth rate. And for the full year, $57 million and $5 billion up income and as George said nine to nine growth rate on sales and op contribution for the full-year numbers. And looking ahead for 2013, excluding acquisitions or business changes or FX changes, I would imagine we would continue to grow in the high single-digits and hopefully we’ll increase our op contribution and our absolute dollar op as well.

So lunch is going to be coming shortly. Please feel free to start when it does. If I can ask all the management folks to come on up and we’ll take some Q&A from you guys. And otherwise thanks very much for coming.

Question-and-Answer Session

Unidentified Analyst

(Question Inaudible)

Rob Linden

Okay, around the UnBalloon, we do have several plans in the process right now for the UnBalloon, both U.S. and international plans. We feel pretty good about things going on. You know, with the U.S. it's a little bit of a waiting game and right now we’re just waiting. We have our application in. In international, there is a little more activity. It's a little bit further along, but we still feel pretty good about being able to get some protection on that.

Ryan Connelly

Thanks [Kyle] for the question. With respect to looking at larger deals, we do, we have and we do look at larger transactions. I mentioned the ones we’ve looked at a few years ago that had $30 million in revenue at a $60 million transaction price. So the question is, I think the order in which we would fund these transactions would be first obviously, use the cash that we have and leave out reasonable buffer, $5 million, $8 million whatever that might be.

And then secondly, just depending upon the status of the debt markets and how many turns of cash we could get, that’s clearly where we are going next somewhere between senior and mezz debt that and then beyond that then you get into interesting cushions, because we feel like the shares are undervalued so out there buying shares, but for the right transaction, we would issue equity. So it’s just really a matter of how compelling we feel that transaction would be. But again, the example from a few years ago was $60 million purchase price, I think we had $10 million or $15 million of cash and another $20 million or so $25 million of debt and then the rest was a small equity round.

Unidentified Analyst

(Question Inaudible)….with the sales accelerating the way they are and obviously you can’t disclose the full nature of the terms, but are we talking about $15 million, $20 million, $25 million kind of deal, is it cash upfront; as clearly that’s going to takeout whatever capacity you have based on the outline you just left for something else?

Ryan Connelly

Right, without going into a lot of detail, let’s just to say the multiples, generally speaking in the range of what we have experienced in the past it’s not an outlandish multiple so do I have personal concerns about burning through all of our cash at that point in the future, no, I think it’s an amount of cash that we can certainly handle as the company. And then obviously when the transaction is done, we will be more profitable, the gross margin will go up, hopefully the operating margin will go up as well, we'll get more cash and that will lead to good things.

Unidentified Analyst

I just want to follow-up on his question. The UnBalloon, how would you characterize your intellectual property; is it chemical, is it biomaterial – what realm is this in?

Ryan Connelly

I think we are not talking about design….

Unidentified Analyst

In my experience most of mechanical IPs were so easy to get around, okay. On your R&D expenses are you including both the product development and your regulatory; what you are saying is aggregate and if so can you give us a percentage of the 9%, how much of the 9% is actually going into research?

Ryan Connelly

So we do include both in the calculation.

Unidentified Analyst

It’s about half and half?

Ryan Connelly

No, product development is roughly 50-50 or so.

Unidentified Analyst

Around 50-50, okay. I don't need to monopolize right, I have a couple of questions. Ryan, do you any material scientists working for you and how many PhD’s are working in your lab?

Ryan Connelly

At the moment we have one with college educated material scientist; practicing not so much to be frank; I mean our engineering expertise is much more mechanical in nature than material science; plastics engineering, if you call plastics…….

Unidentified Analyst


Ryan Connelly

And at the moment no PhDs.

Unidentified Analyst

Okay, George has heard this comment. Right now as you said you are very conservative sleepy New England company or you happen to be surrounded by one of the great intellectual pools of balance. So have you ever visited Harvard or MIT, their materials sciences, their bio-engineering, their mechanical engineering to look either for people or hires or product acquisition?

George LeMaitre

That’s a good question. So yes, and really I feel like as far as engineering goes that we are surrounded by several very good respectable institutions obviously out there. So we do talk with them, I would say they are not official relationships, but we know people, I know people. We consider our Chief Scientific Officer has relationships with Harvard particularly as well. So we do deal with some of it. You got to remember I think that we are not materials, we are not bio-based at all yet, I mean that’s not something that we handle, so the materials, the biologists and the PhD’s and those raw scientist, we don’t really do that kind of work yet. Not to say we are not trying to do that stuff in research or around that but at the moment it’s not now one of our big focuses, but we do direct with those guys.

Unidentified Analyst

You know your Xeno patch, I am interested to know that is bovine and not procine (inaudible)?

Unidentified Analyst

Thank you. Just trying to get an idea of how faster markets that you compete in are growing; you quoted 9% organic revenue growth; part of that includes average selling price increases, okay. And some of that would include market share gain as well. So if you ex those two out, how fast are these vascular procedure markets growing?

Peter Gebauer

Yeah, so we are probably growing, you can think of us for saying 7% or 9% organic growth half units and half ASPs in the markets that we’re in are generally going you saw that slide sort of zero to 5% minus 1% or 3% in that range generally speaking, those are the niche markets that we talked about where we can get those advantages.

Unidentified Analyst

I have along the same lines; you seem to be getting at 2% to 5% price increases which in the US, I assume that’s largely because your niche and small that people (inaudible) what we believe are there any other new products new portfolio that are – if you look at the range of products that you have, what’s getting the higher pricing, what’s going to lower pricing on that dynamic?

George LeMaitre

Yes, we are getting reimbursed under GRG general procedures and then our devices come inside of that so if it’s $13,000 to do a leg procedure and you spend $1000 on the Valvulotome sort of fits well within that and we haven’t seen much pricing pressure on that and so I would say yes that’s generally right and I forgot the second part of the question?

Unidentified Analyst

(Question Inaudible)

George LeMaitre

Yeah, (inaudible) in that store; I would take the two commodity products, the grafts, the PTFE grafts and the Dacron grafts they generally compete in $175 million or so worldwide markets to $200 million worldwide markets. There are eight or competitors and we don’t have dominant market shares; we have smaller market share, so we are not the price leaders in those markets; we are trying to live within those commodity markets.

Unidentified Analyst

And for the doctors, can you tell us a little bit about what the environment is like; now you salary physicians within the hospital to work in and then are you engaged in things like gain sharing where you’ve got incentives to reduce price or hospital procedures over the day and then the degree that you are aligning yourselves and you become aligned with the hospitals?

Dr. Larry A. Scher

I am Larry Scher and we have pretty miserable incentive plan there. So we’ve been through the salary. We’re obviously trying to control cost and trying to maximize revenue in the department but on the salary and department of surgery (inaudible).

Unidentified Analyst

Affected the way you look at the purchasing of products?

Dr. Larry A. Scher

No. I have been at two hospitals when I was a Chief at North Shore; they had a much more aggressive product committee, trying to really control new products coming into the institution. Monitoring has been a lot more liberal with the policies they are trying to get people in the institution. I think, again, one of the advantages we’re dealing with our company that has multiple product lines, is that once that company is known and they have a relationship with the hospital, usually get the other products and they have not. I mean obviously they’re looking at controlling cost in this environment but they’ve been lot more user friendly through new products and my previous experience (inaudible).

Unidentified Company Speaker

And currently, I am actually, my compensation is part salaried and part generated by my activity and it's about 60% based on my activity and 40% salary and as a Division Director, you know, I am very involved with the hospital’s activity and I do spend a lot of time with the hospital figuring out ways to do business smarter and I think that , all the hospitals are clearly always looking for ways to reduce their cost and there are lots of ways to do that on product pricing and that’s where things like I’ve just switched over all our grafts actually through LeMaitre graft because they are less expensive.

They work the same as the other grafts we were buying and it's just a benefit that way when I asked them for something I need like an UnBalloon as good they understand that I am working on trying to reduce costs where I can yet provide advanced care which costs and they know that for me to attract patients I need to be able to do the advanced care that is not always available elsewhere and you pay up for that stuff. And so there is always that trade off and I relate they got physicians of course so we have not been as involved as we should be in helping constraining the costs in hospitals. I do it a lot and I think that this company happens to be really well placed because of the products that they offer that it allows us to do that quite a bit.

Unidentified Company Representative

I could comment, I think there is a tremendous amount of pressure from some industry people to try to put products on the shelf as they have been out for six months and really are improving to the degree that I would like to see an improvement. I don’t think these are products that we are talking about today and I think that some of the products that are available have been time tested and are niche products, but while we are struggling with new products and how long they have to be out and how much level one evidence we need to support the use of these products and that’s tremendous problems in this current environment.

Unidentified Analyst

Question for the doctors as well. I was hoping you could compare patency rates your procedures versus endovascular procedures, are you seeing improvements in the endovascular procedures and is there a point where you feel like more of your business away from endovascular (inaudible)?

Dr. Michael Curi

So patency rates our one piece of the equation for how you choose how to treat a patient and clearly a patient who is 85 and has a wound on their foot and you are going to try to do something endovascular even though you know that might have longevity of about six months of durable patency because it might be six months that’s all the patient needs to heal a wound on their foot and you might be able to get them healed and not have to deal with it afterwards and if you have to deal with it afterwards you are always thinking do I have something to do afterwards and its usually the bypass. So a lot of times we try minimally waste of things first. The comparison in patency is not a real comparison. I mean because you can't compare them patency of bypass is so superior to tabula angioplasty which tabula are the vessel below the knee and that's were the biggest growth is actually in the endovascular in these tabula things and it’s not growing because they are as good they are as the bypass.

So the bypass market would shrink because of the growth in the endovascular market. You can have the growth of the endovascular market going up and keep the bypass and that's actually (inaudible) experience showed exactly that. Washington University which is one of the largest vascular centers in the country we saw exactly that, that the bypass number of bypasses state the same despite a big increase in endovascular procedures.

Dr. Larry A. Scher

I sort of agree with you said. I don't think the open bypass is going away. They are time tested. I think part of the problem is willing to accept patency rates on the endo vascular procedures as acceptable to jump on that bandwagon and then 85 of your patients who needs a short-term fix side I understand that’s okay. But the other patient sometimes I felt endo vascular procedure will compromise the bypass results. I don’t think these open procedures are going away. I mean the fact that with the tremendous growth in endo vascular procedures the market for these products has remained stable over the last decade, as a real testament to the fact that the open procedures are both stay with us.

Dr. Michael Curi

You know one of the other things that as far as the market for vascular surgeons, so just in the last five years the number of training spots available clearly the training spots for vascular surgeons has increased 15% to 20% and so we have gone from training a 128 vascular surgeons to nearly 160 vascular surgeons a year in the United States and that’s just going to keep going up. The vascular surgery residencies, the new integrated vascular surgery residencies are the most competitive residency of any sort in someone who is graduating from medical school. We get the top; we get who is the cream of the crop because it’s a growth field. The job market for vascular surgeons is blistery. I am actually hiring somebody now and I am just applaud what I am going to have to pay because there are such incredible competition because every hospital in the country wants more vascular surgeons. And when I finished my fellowship in 2005, starting salary was somewhere in the range of $200,000 to $225,000 or so, we are now starting people at $325,000 to $450,000 depending on like where in certain underpenetrated markets hospitals and a lot of these jobs are hospital based jobs because that’s in all types of practices hospitals are acquiring more and more physicians.

Unidentified Company Representative

Someone can send my CV because I am just down the road 50 years when people start smoking and they manage to cure liver sclerosis and the baby bloom of population disappears but I mean for the next decade or two I think (inaudible) of stay and certainly it’s a growth market unfortunately.

Unidentified Analyst

My question is for JJ, in regards to med devices pacts with the Affordable Care Act I know you guys have talked about in the past (inaudible) I think between 2% to 4% a year is that correct? So on top of that is there going to be or you guys going to raise prices to offset the tax?

JJ Pellegrino

Yes, so the tax itself is probably going to cost us $800 grand to $1 million a year. It’s 2.3% of the US sales and there is decent amount of bureaucracy in calculations to actually figure it out. We are paying it twice a month. So that’s coming starting January 1. In terms of how we are going to pay for that I would say probably comes from a little bit of our pockets may be try and get a little more ASP increases particularly in the US if you can although we have been pretty healthy price increases in the US. Historically, so adding on to that probably not too desirable but may be a little bit there may be a higher one less sales rep or one less R&D engineer. I take it out at somewhere else and may be a little bit comes out profit too I don’t know. So we are going through the budgeting process as we speak and we are going to figure that out but I better want to be in a mixed bag.

Unidentified Analyst

Then one question for George. Why didn’t you become a vascular surgeon like your father?

George LeMaitre

I have failed organic chemistry.

Unidentified Analyst

The question is such. In terms of although these offerings have least number of applications, have the procedures reduce the number of applications? I believe they have.

Unidentified Company Representative


Unidentified Analyst

Have they been reducing?

Unidentified Company Representative


Unidentified Company Representative

I think the outcomes of these procedures have become significantly better over the last two to three decades and our ability to bypass to small arteries in the foot to endovascular procedures in the absence of a suitable option for bypass. All of these things have actually resulted in salvaging wins in situations where 30 years ago it would not have been possible.

Unidentified Analyst

Are we going to see a decrease in endovascular procedures in younger patients recently you talked about before or the patients driving these?

George LeMaitre

I don't know if I can answer that. I mean in the aneurysm market, younger patients traditionally have been offered preferentially open surgery. The endovascular devices have gotten better, maybe that's not true. I think the lower extremity bypass is simple, good result intervention. I think of probably can be offered to anybody independent of the rates but some of them more complex interventions. My prefer would be to treat with bypass that we know is durable. I think those options are still going to be preferable.

Dr. Michael Curi

I think there are so many different factors going into the driving up of these endovascular procedures. One is, they’re being done by multiple different specialties. We see a vascular surgeons people coming to see us after they have had multiple endovascular procedures by cardiologist turned interventional radiologist who doesn’t have the other option and their fingertips and clearly they might have benefited from having more durable procedure done first and it was just a waste to get all those other endovascular procedures done and unfortunately that’s part of American medicine is that they are incentivized to do those procedures and because they can they do.

At some point, I think that there is going to be this incentive put in place and clinical effectiveness and cost benefit ratios are going to be made in part of the decision making for these things and when that happens I think we are going to definitely see either a drop in the number of procedures done or a significant drop in the price of all these stents and these devices. I don’t think it’s sustainable. And as I do 70% of my procedures is endovascular at this point.

Dr. Larry A. Scher

There is another comment, whatever (inaudible) we end up with end of this whole cycle of healthcare reform despite into the spectrum it’s going to be in elder patients who probably don’t benefit from any kind of care and you saw that on the slides I showed you and probably on the other end where I grew up treating claudication which is basically just walking related not limb threatening symptoms very conservative way and that’s changed over the years with the minimal evasive technology. I am not sure that’s correct because there were complications and failures of these procedures end up causing the patients more symptoms than they started off. So I think whatever decisions are made as a result of this healthcare reform we are going to have to be on both end.

Unidentified Analyst

That’s been very helpful thanks. I just had a question either for Dave or George? There seems to be have been pause in the acquisitions that you’ve made I think the last one is about two years ago. So I am just wondering will you close a lot or just the price it’s been asked was too high or you just not seeing any attractive candidates or maybe in particular that $30 million.

George LeMaitre

Good question. So the last acquisition we did was November 2010 the Lifespan acquisition. 2011 we were basic integrating that. And then also as you guys probably remember some of the year for us is to divest stent graft and exit the Endologix agreement. So we have focused a little on that as well as in the (inaudible) department we are busy helping go direct in Spain, Denmark. So we are certainly focus on other things a little bit in 2011 while we were integrating Lifespan and then 2012 frankly, yeah a we've taken around one or two things I lost in auction back in May of this year and there are other things in the pipeline now.

So I mean I guess rather the point is, we don't feel like we have to do an acquisition very year too. When there are good acquisitions in front of us, we'll do them in ‘07 or happened before. And if there are we won't pull trigger, we'll be patient and we'll wait for our fetch.

Dave Roberts

Maybe I expand on the May acquisition because it’s all public information now. This is an interesting case study on us for not wanting to pay a lot for that (inaudible). You know (inaudible) spot that human (inaudible) company. Some of these guys didn’t hear me know that they paid $21 million including the earn out basically paid four times sales for that and we were staying with the auction, staying with the auction we came up with about 60% of that was the right price for us and one of the nice things about LeMaitre well all of its tentacles and all these product lines as well as these (inaudible) we just keep seeing better uses of capital then going and paying someone four times sales or a $5 million company that’s losing money. So that’s a great case study but where less people beat us.

The other thing they consider from a capital allocation respect of this in May this is a for our stock went up and this went down again but our stocks are $5 a share and unable to buy, unable to go outside at whatever size I want a $1 million, $1.5 million and $3 million and buy a stock at one time sales which is profitable, global has a brand and reputation where I am being asked to pay four time sales for a money losing operation based in Minnesota that’s just sell stuff in the US.

So with all of these choices in front of JJ’s capital allocation slide was a pretty good one. That’s a little bit get you know ahead when we see something down a four time sales, that is incredibly compelling we are staying away from it.

Unidentified Analyst

Dr. Scher you had a slide that on carotid endarterectomy versus carotid stenting at your hospital and that those trends were still in favor of the endarterectomy? Both physicians on the (inaudible) carotid artery stenting versus endarterectomy where you think trends are going and any insight into any potential near term reimbursement decision by [CMS] and then secondarily George and Dave if you could comment on, your guys outlook for that market and then how you are thinking about growth of position going forward and what are your expectations of the trends as well?

Dr. Larry A. Scher

This has been a going debate. I mean the results of the trial which is the randomized trial that looked at (inaudible) versus surgery has never proven any benefit to the stenting. They are trying to prove equivalents and the complicated, no larger complications because the stenting have been higher and the cardiologic complications of the surgery have been higher and they are very, very few studies out there among the ones that we are done that really proving the true benefit to stenting over open surgery. So I think the majority of the market is still favoring carotid endarterectomy whether this will change in the next few years it’s hard to say.

There was some clear indications for stenting and patients who were too ill to undergo surgery which is few and far between my experience and people have anatomic restrictions to the surgery and stent might be better and there are situations where that clearly is the case. When I think overall, we have done very few stents and our open surgery volume has been fairly well maintained and my (inaudible) is across the country there are places that clearly do more stenting than I do and New Jersey may be one of them. But I think the open carotid surgery volume has been fairly well maintained over the last few years in spite of the (inaudible) of products.

George LeMaitre

So from my vision of this market. It’s not the most exciting market. It’s one of our big markets and I think it is about 18% to 20% of revenue. So it’s important to us but it’s not something that we think is going to grow leaps and bounds. The experience that we have gotten in our level has nothing to do with carotid stenting we keep going back and asking doctors and the reps, are you scared about carotid stenting? The answer has been no, no I think I haven’t seen those till last night but the mono cure experience sort of says where we see which is down with the flat market.

The issue is shunting and I believe we will have record revenues in Shunt this year as a company. So we are not really that worried about it this year but in the long run we do see cost pressures about the Affordable Care Act. Doctors have starting to say why shall I open a Shunt for every case, it’s $500 and the methodology, the actual technical methodology in operating room is you open up the shunt before the procedure whether you are going to use the shunt or not and so you wasted your $500 before you actually do the procedure. We are seeing things like EEG monitoring, which is honestly, is five times expensive except the hospital already has an EEG monitor sitting in it's operating room and they already have an EEG tech sitting there, being paid $90,000 a year, but they don’t do that. They just think oh, it's a free service.

So we do face cost-based pressures in these markets. That’s in the U.S., outside of the U.S., where we're experiencing a lot of what I will call geographic creep. You can just see, like IV it just keeps going places and in that instances we just keep building share and taking shunting away from other companies and other techniques. So we have healthy, healthy unit growth outside of the U.S. and in U.S. not as much.

Unidentified Analyst

It's so fascinating to see the sales rep; over the last several quarters and down I guess most recently, probably because you have got this AA theme. Can you talk about that a little bit more and where it might go and also if you were to analyze it as a sales production per dollar salary instead of per rep, all at lower salary. So is that still positive; is it a look at it that way?

George LeMaitre

What we have always seen by putting reps in to these secondary markets, so that’s where we really started, so you take for example, we have a rep who within Nashville cover most of Tennessee and Kentucky and the frequency that you’re getting at Kentucky is very small. You’re trying to maybe go two hours outside of your home and you are rolling for most of the time and then you fly into Kentucky or you drive in, and it's a drive by, can grab some low hanging fruit whatsoever, whatever proposition you are going to do that.

And so that, you take that rep who is fantastic, but only given 20% of effort if that stay in Kentucky; you put someone in Kentucky who is from Kentucky in those hospitals, the people, the culture they may not be as good in the beginning, because that I am experienced, but they are there everyday and when you have a surgeon who has never seen Valvulotome, but can hear about the Valvulotome because these guys they don’t have the time really to go to as many meetings and read as many journal articles and now someone is your product that’s been working that’s going to work make your life easier and more efficient. So that’s the impact we are seeing; that’s why you are seeing the average territory stay pretty strong because when you have something that’s better than everything else they just haven’t seen it that gives you the ability to really grow that way. Jay, may be you want to...

JJ Pellegrino

You can think they were saving about $50,000 a year by having these less experienced rep and if you take 80 reps and multiply it by 50 is that 4 million and the bottomline last year was $4 million; very high level it’s really changed how we look at things and change our profitability in a big way having the lower price reps. Are we getting at your question or some parts that we missed?

Unidentified Analyst

(Question Inaudible)

JJ Pellegrino

I think Peter made this point, but I want to reiterate this point. So Peter said, wonderful Europe, we had wonderful growth over in Europe in the last year and a half; we hired so many reps that in a very short run the sales has gone down per rep, but one would expect that if you started a year with let’s say you and I had 80 reps in December 1st and then all of a sudden we hired 10 by December 31st you clearly have to expect that the sales per rep will go down in the very short run but we expect it to lift up. We think a very typical American sales rep for all medical devices companies usually carries a bag of about $1 million of sales per rep; you’ve known that in your previous analyst reports, I have read from you. So we think it’s about $1 million and that should be roughly what you are going to get in the US and Europe is a little I think $5000 to $6000 something like that.

Unidentified Analyst

(Question Inaudible)

JJ Pellegrino

Right, at a really high level right now you can see that in our op expense control of $36 million for five years straight, but yeah…

Unidentified Analyst

(Question Inaudible)

JJ Pellegrino

Okay. Definitely we plan to have operating leverage; if we are sitting here and saying 8% or 9% organic sale growth for you guys definitely have to do something better on the bottomline. We feel like its coming out with the factory closures and I'll go even further than that when and as we make these acquisitions and when and as these new product gain attraction probably get additional leverage because the upside sales growth will pull -- its going to drop down even better because the expenses won't increase that much.

Unidentified Analyst

(Question Inaudible)

JJ Pellegrino

Gross margin is a big piece of it; gross margin is a big piece of it and I think you’ve seen in the last five years a very steady op expense thing, so that should also provide some leverage, if we get down to a lower percentage of sales.

Unidentified Analyst

(Question Inaudible)

Peter Gebauer

Well, the Valvulotome, clearly that’s like the Valvulotomes that are out there that’s not the (inaudible) and of the patches the XenoSure patches, the patches when they want. You know the UnBalloon is a unique product and that’s something that you know I think that I need to have that on myself. But you know the thing that actually really makes me like them as a company is the fact that they have a whole bunch of other stuff and it makes my life easier to have one guy to go to and so where there are products that are, others that available that I think are similar and obviously I don’t want my hospital overpaying for such and I want to make our lives easier, both mine and mine service line manager in the operating room and that’s what I like about LeMaitre as they provide a bunch of different stuff that you know I would have to chase a bunch of different companies for and there is one person to deal with.

Unidentified Company Representative

I would agree with Valvulotome, I used the couple of products that have been mentioned. I came to use the other shunt that was available and the (inaudible) we used during endovascular procedures, I think its a phenomenal product. I don’t know that it generates enormous profits for the company, I haven’t even asked them, but I think they are sort of unique products that really make things easier.

Unidentified Analyst

I have a question and a comment. So the question is, you have done a very good job about distribution and particularly in the Asian market, we see Korea and Japan and Taiwan. And George knows this question, what are we doing, I know it’s a very difficult market to enter for our products. What are we doing about Mainland China and I don’t see any connection now between that goes to that country through Japan. I think that’s can’t be done. So that’s my one question. My comment is I heard that acquisitions are going for 2.5 to 4 times the one that you lost. Here is a company that’s selling one-time sales, so we can be on the market instead of us acquiring somebody could be picking us off so that’s why we are very cheap.

George LeMaitre

So I agree with the comment that we are very cheap. Good if you want to get in now but we will assure it is valued more highly. Definitely, yeah. And your question about Japan and China what are we doing with those. I don’t even call it, I am going to go up and we will call the BRIC market Brazil, Russia, India and China and also we fully agree China cannot be served out of Japan for all the reasons which we are just seeing with the strike at Toyota plants in China right now.

There is no question those are historically angry markets towards each other, so we are not even thinking about starting our Chinese effort out of Japan. We spent a lot of time on the BRIC markets over the last 12 months as the management team trying to because we feel like even though we have done a tremendous job getting into all these markets even then we are in the stable developed markets LeMaitre doesn’t have a lot of exposure to the wild and crazy exploding markets like BRIC markets. So we spent a lot of time going through this and our answer for now is we go to Brazil right now and then at some point go to China, we do keep getting intimidated by the size and breath of the investment necessary for China and in some sense we are trying to be a little cautious by “just going to Brazil”.

Unidentified Analyst

We get the (inaudible) like going to Hong Kong, Macau. Macau is now servicing a lot of medical tourism and if there is a lot of money there and also Hong Kong. So maybe your home page to all these regulatory and as sort actually a very poor population that may not be able to afford your products but if you do start I would, (inaudible).

George LeMaitre

Hong Kong being good entry door for China. It's a good recommendation. You know we got our hands full at all of these foreign integrations but yes we will definitely it put on the list.

Unidentified Analyst

As you said early on with the UnBalloon that it was felt teasing, still in the early stages and I think Dr. Curi was saying that, as taking some time to get into a hospital. So I wondered if there was a learning curve, was there anything logistical going on with hospital boards that makes it little hard to get into this?

George LeMaitre

Okay. There is a big answer but the funny answer, Dr. Curi’s hospital is, they had a flood at their hospital and we had two products and (inaudible) got washed away. So we had to make an extra $1,500 because of the flood but the bigger question you’re asking is yes and I think this is a good question in terms of. We’re seeing a lot more difficulty putting new technologies into hospitals. We always felt this way over in Europe and I think now for the first time as a team, we’re feeling it over in the US. You really got to go through a lot of committees and you got to prove a lot of things to a lot of bureaucrats to get a product into hospitals. However, I would say, I would love to be able to hide behind that and say that’s why the UnBalloon isn’t exploding right now but I think it’s on us right now.

The UnBalloon we had over for five years now. We got it out after three years, had some problem pulled it off the market; put it back on about nine months ago or so. So the [T-wing ] that I am talking about is more about the technical aspects of the device and it's the challenge. It's a cute name, right? UnBalloon and it says, oh, we'll do everything that a balloon does except the water can go through us. So the blood can go through us but doing everything that a balloon does is very difficult and we have learned that over the last two or three years modeling mesh tubes to act like a balloon is very difficult and I would say that’s generally been what’s been causing the problems the doctor gets the idea, he gets all excited the thing over promises it’s going to act like a balloon except the blood can go through and then it’s not quite exactly like a balloon and then Ryan and I are going back and back and back and back with revision after revision I would say we probably said this four times in four analyst meetings before but it feels like we are getting it now and we have on the drawing board the next three changes that will get us there, but I would say it’s still on us, it’s not about the hospitals. Once it’s a great product, the committees will find a way to get out of the way and the doctors will run into the committees and scream at them and get it through so for now it’s on us.

Unidentified Analyst

By the way it’s so impressive that you are able to get this 9% growth by the way and if you look around but very few companies are going like that in the medical device space, so good for you but when you hear about some of the really great products and like Peter talking about the Europe and the potential there, some of the new products the graft part is growing leaps and bounds, [sounds] it could be higher than nine and what are some of the categories may be that are holding you back if you are not able to grow better than nine?

George LeMaitre

Okay, so catheters I would say the Valvulotomes and the Shunt right now if they were growing better, we would be growing better as a group, but on the bright side when and as this initial product obtains even bigger size it’s 60%, 40% growth rate we will really start to make a difference, so that’s one way out of this 8%, 9% sort of we are giving you sort of blanket guidance I guess if you will or non-guidance the blanket I don’t know what you call it, but we are going to grow 8% for a while and how do you get out of that I think a little bit is to ensure getting bigger and larger and also think about even we've been making insight for about four years now. As our R&D team gets bigger as these launches become more routine and we refresh product over and over faster and making new device like this UnBalloon that I think how we think we are getting out of it and all the time we are going to throwing on in the background of additional geographic.

Unidentified Analyst

Thank you. Just picking up on UnBalloon for a second. You said you are a couple of phases away from really perfecting it for the time you not on the hospital. Could you tell me how long period of time that you expect that?

George LeMaitre

Sure, when I say perfecting I actually think we never going go perfect on things just like (inaudible) 911 is always is going to be next generation in next revision. Right now, what you got is a very functioning device the things that we need to do which will be let’s call this one a four month issue with the balloon net needs to get tougher that will be four months, six months and then at some point maybe you are talking about the [cheapest] device to make it even more simple and right now believe or not it’s not so simple even though we think it’s simple. We may need to sheet off; we also need to an abdominal version which is a little bit different size and shape of the balloon. So I say there are about three big moves and roughly they come four months, six months prior over the next 18 months something like that.

Unidentified Analyst

And they are all new regulatory applications that go?

George LeMaitre

In some cases yes, we've just went through a whole round of revisions on a regulatory. We've just got the silicon UnBalloon which is a distinction we think waste your time today. We put silicon on this thing two month ago and we went through a whole revision with the FDA or CE mark, and the next three changes I would say 1.5 of them (inaudible) regulatory filings but we're got a staff of seven guys now punching these things out and the changes that I am talking about are quite small and FDA does have the thing called the special 510-K which is if the changes so small they let it run through in 30 days, they found its really small I think we use that mechanism for the silicon UnBalloon. We use the special 510-K. So just because there is regulatory barriers doesn’t mean we won’t get over them. You know the FDA has been great to us over the years and we think they will keep being great.

Aaron Grossman

Great. So thanks for the great questions, guys. We are going to wrap it up now. We will be within the room accessible and if any time you want to reach out to any of us by phone or e-mail we are available throughout. Thanks every much for coming. The snacks will be coming out shortly. Thanks for coming.

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