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Executives

William R. Osgood Ph.D. - Chief Executive Officer, Director

Matthew T. Plavan - Chief Financial Officer

Analysts

Jon Hickman - MDB Capital Group

Joe Pratt - W.D.

John Hickman – MBD Capital

ThermoGenesis Corp. (KOOL) F4Q08 Earnings Call September 9, 2008 5:00 PM ET

Operator

Welcome to the ThermoGenesis fiscal year 2008 fourth quarter results conference call. Some of the statements made during this conference which are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements including but not limited to certain delays beyond the company’s control with respect to market acceptance of new technologies and products; delays in testing and evaluation of products; initiation and successful completion of products; initiation and successful completion of clinical trials for new claims on existing products; capital resources required to fully execute on business plans; and other risks detailed from time to time in the company’s filings with the Securities and Exchange Commission. (Operator Instructions)

I would now like to turn the conference over to Dr. William Osgood, CEO.

William Osgood

With me today is Matt Plavan, the company’s Chief Financial Officer. Matt will review our financial results and outlook for fiscal 2009. After I review the key events during the quarter and year and provide some perspectives on the year ahead.

ThermoGenesis ended fiscal 2008 in very solid fashion with fourth quarter revenues of $7.2 million, more than double the fourth quarter revenues a year ago. This brought us to full year fiscal 2008 revenues of $21.9 million versus $16.8 million a year ago, for an increase of 31%.

As Matt will discuss, our revenue growth in the quarter was driven principally by an increase in disposable revenue of $4.2 million and higher bi-archives system revenues. Importantly, we ended the year financially strong with over $25 million in cash and investments and virtually no debt.

At the time of our fourth quarter conference call a year ago, I had been in the Chief Executive Officer role for about two months. During that call I outlined our new strategy and what I saw as key milestones for 2008. I would like to take a couple of minutes to review our progress over the last year and how these accomplishments are laying the groundwork for the year ahead.

As I indicated at the time, I believe that ThermoGenesis possessed a number of key assets that could be leveraged to accelerate the growth of the company. These included our leading market position in the umbilical cord blood-banking sector; broad IP protection; solid balance sheet; the strength and dedication of our people and leadership team; and the ability to apply our cryopreservation in high-speed centrifugation technology to the emerging regenerative medicine markets.

I also noted that after my brief time in leading the company it had become increasingly clear to me that shareholder value would be maximized by our ability to become a leader in the developing and commercializing innovative products and service solutions that process and store adult stem cells for later treatment of disease and injury.

I also outlined a three-pronged strategy to support our vision: One, continue growing our share of the umbilical cord blood market. Two, position the company to benefit from the anticipated explosive growth in the use of adult stem cells in regenerative medicine, a market projected to be several orders of magnitude larger than cord blood. Three, facilitate the company’s entry into various untapped markets by adding to our product portfolio and by leveraging our core technologies.

You will remember that we laid out a series of milestones for achieving our strategy, which I will review quickly for you now.

The first milestone was to reshape the GE Healthcare agreement. We announced on May 7, 2008 the amended distribution agreement with GE Healthcare that included the following key elements: Return of all buyer archive territories by July 1, 2008; return of AXP territories in China, Latin America and Russia CIS countries; improve transfer pricing; any clarification of the field abuse to cord blood applications.

Following the GE Healthcare amended agreement we announced new distributors for our BioArchive System and we have now assumed direct sales responsibility in North America. In addition we have signed distributors for our AXP platform in China, Russia, Central and South America. We are currently in discussions with GE Healthcare regarding the return of distribution rights for the AXP in Japan.

In summary, we have successfully addressed the BioArchive distribution matter and we have reestablished a very amicable and opportunistic relationship with GE Healthcare.

A second milestone was to ramp up AXP production to meet growing demand and clear the order backlog. A number of critical design improvements were implemented and we established a second source from which first production shipments were received here in Q4.

At the end of Q4 we nearly filled the existing backlog of AXP bagset orders and we now believe that the challenges related to AXP quality are now well behind us and that our major hurdle going forward is to grow market demand by expanding our customer base.

Next we identified a critical need to brand ourselves as an adult stem cell company and establish a presence outside of cord blood. We developed a comprehensive marketing campaign; hired an outside public relations company; adopted the tag line from stem cells to solutions; overhauled the company’s website; redesigned and printed new sales collateral; redesigned our corporate brochure to clearly deliver the message that ThermoGenesis is a stem cell company; created new booth graphics expanding our message to cover cell processing an cryo preservation of stem cells, not just cord blood,; and attended a number of important industry events, including the European Group for Blood and Marrow Transplantation meeting or EBMT and the International Society for Cellular Therapy meeting or ISCT with our new booth graphics and message.

Another important milestone was to ensure that the AXP platform was adopted for adult stem cell, animal, and human clinical studies. To reach this milestone we completed the development of the marrow express or MXP, which is an AXP line extension designed specifically for bone marrow applications. In June we received CE mark for the MXP which allows us to market the device in Europe. The following month we received authorization from FDA for marketing the MXP in the US. In parallel, we initiated discussions with potential clinical study investigators in treating critical limb ischemia and ischemic heart disease.

We also sought to increase the value of our wound care business segment. We were successful in reducing our cost structure related to CryoSeal and TPD and we focused our sales efforts outside the US primarily in Europe and South America. We will continue to invest judiciously in this business segment including securing registration in Japan and supporting the sanguine clinical trials in Holland for the use of allogenic fibrin sealant in cardiac and orthopedic surgery.

We also initiated a program to divest the thermal line either through an outright sale or by sunset. Currently we are in discussions with a healthcare company interested in acquiring the line. We also wanted to strengthen the management team and we have done so during the year. In addition we recently appointed two new executives; Leslie Schnoll joined us in June as Vice President of Quality and Regulatory Affairs. Les has more than 20 years of quality and regulatory compliance experience with companies such as Theravance, Selectron, and Hill-Rom. Since joining the company Les has taken on additional responsibility for operations.

More recently, Menachem Shavit has joined as Vice President of Research & Development. He has more than 20 years of product development and R&D experience and comes from Trig Medical, an Israeli obstetrics company.

Finally, we wanted to add board members. Our newest director, Tiffany Olson formerly

President and Chief Executive Officer, Roche Diagnostics Corporation, North America, joined our board last month. Tiffany, who has more than 25 years of health care industry experience, led to $1 billion plus revenue growth for Roche. She has also held global market development, quality and other senior positions at Roche. She is the second new board member added this year along with Dr. Mahendra Rao, our other recently appointed board member. The total number of independent directors stands at five.

In addition to these milestones we initiated the following programs to generate new revenue streams in the near future: We uncovered a potential opportunity to leverage our AXP and BioArchive technology into the veterinary market late last calendar year, specifically in treating equine soft tissue injuries with bone marrow and umbilical cord derived stem cells and treating wounds with platelet rich plasma or PRP concentrated from peripheral blood.

To pursue this opportunity we formed our Vantus subsidiary early this year and a research alliance was established with UC Davis Center for Equine Health. We expect this program to deliver new revenues in calendar 2009. We identified the critical need for a point of care bone marrow cell processing platform to compliment the MXP and we launched an internal development project and made rapid progress on our new rescue platform.

We anticipated the potential use of adipose stem cells and the need for innovative processing and banking solutions. Adipose stem cells come from body fat. Working with lipo aspirate provided by a local plastic surgeon we have been learning how to process adipose tissue with ASP technology in our laboratories. This development work is in the early concept phase and will pick up speed in fiscal 2009. The urgency is high; as we believe adipose stem cell banking services will emerge quickly.

We recognize that success in regenerative medicine will require partners in orthopedic injury, cardiovascular diseases, wound care, and plastic surgery. We have been networking with key opinion leaders in each of these disciplines and have initiated discussions that could lead to several mutually beneficial partnership agreements, the first of which was announced today.

To summarize, a little over one year ago we were a two-product stem cell company, BioArchive and AXP, serving one relatively small market segment, cord blood banking. Today we have developed or are developing new products and processes targeting potentially huge markets outside of cord blood that provide the following solutions: Temperature controlled cell and tissue harvesting and transportation systems for Vantus; laboratory processes for extracting stem cells from human and equine cord matrix tissue; bone marrow stem cell concentration at point of care and in a laboratory setting; adipose tissue cell concentration in a laboratory setting; cryor preservation of stem cells derived from cord matrix tissue, bone marrow, and adipose tissue; culture and expansion of stem cells derived from cord matrix tissue, bone marrow and adipose tissue; platelet rich plasma or PRP concentrated from peripheral blood for human and animal wound healing applications.

While I am pleased with the accomplishments that the ThermoGenesis team has achieved in the past year, I believe we are poised for even greater success as we begin fiscal 2009.

Before turning the call over to Matt I want to take a few minutes to discuss the dynamic market environment in which we are focusing our efforts and our outlook for the year ahead.

In addition to our accomplishments over the past year we have developed a much better understanding of the regenerative medicine markets and their potential to provide revenue opportunities for ThermoGenesis and we better understand how to segment and address these markets with new products and services.

New research findings suggest that the therapeutic potential of stem cells depends on cell source, viability, dose and cell age. For sourcing our technologies are a perfect fit for harvesting and processing stem cells from cord blood, cord matrix, bone marrow, peripheral blood and adipose tissue, all of which are well known sources used by researchers, clinical trial investigators and practicing physicians.

Our products deliver the highest cell recoveries and cell viability statistics in the industry. Through our veterinary initiative we have developed laboratory processes for culturing and expanding umbilical cord blood, cord matrix and bone marrow stem cells up to therapeutic dose levels. Cell age means simply that younger cells have more therapeutic potential than older cells, which may drive new business models for banking bone marrow and adipose stem cells, both well within our capability to provide solutions.

We know that regenerative medicine is practiced inside and outside the US. In the US it is practiced under prescription or under FDA approval to treat no-option patients. In Europe we found that regenerative medicine is practiced routinely at some centers and is typically reimbursed, so the regenerative medicine markets are real and they are growing.

Let me take a few minutes to talk about emerging adult stem cell banking models, because they offer near term revenue opportunities for ThermoGenesis. We believe every person should store cells from their cord blood and cord matrix at birth or from their bone marrow or adipose tissue early in life to have these young, potent, cells readily available for treatment of diseases and injury later in life. There is scientific evidence that young donor cells engraph with higher efficiency than older cells and we know that the function of stem cells declines during aging and disease and they have a reduced capacity to regenerate injured tissues and organs.

The biologic reality is clear. Store essential stem cells when you are young. We believe this growing realization should spur new business models in cord matrix and adipose stem cell banking and these business models could create revenue opportunities for ThermoGenesis in advance of FDA approved regenerative medicine therapies.

The tipping point for accelerated regenerative medicine revenue growth is achieving approvals from regulatory agencies, as there are 155 clinical studies using adult stem cells, excluding blood disorders, listed on clinicaltrials.gov in July 2008. Over 90% of these clinical studies use bone marrow derived stem cells and 38 of them are industry sponsored.

In the veterinary field bone marrow stem cells have been used to treat soft tissue injuries since the late 1990’s. The regulatory thresholds are much lower than for human treatment and equine insurance companies reimburse many stem cell procedures. So, what we believe we can count on today is regenerative medicine revenues from the veterinary market and steadily growing revenues from the human market as clinical studies are concluded, the FDA approvals are granted, and countries outside the US approve stem cell therapies.

As you piece together the potential for regenerative medicine, our excitement and eager anticipation could not be higher. Our technologies are in perfect alignment with the regenerative medicines scientific discoveries and emerging clinical practices and we are building a number of potential new revenue bridges from cord blood processing and storage to human regenerative medicine, including the veterinary regenerative medicine and adult stem cell banking opportunities we just discussed.

So let’s come down to C-level and look at our updated strategy and milestones for 2009.

Our strategy is simple, get profitable in our core businesses, and steer our core technologies into larger and faster growing revenue streams. The four key elements of the strategy are as follows: One, achieve profitability; two, capitalize on new cell and tissue banking opportunities; three leverage our high speed centrifugation technology to address new business opportunities in point of care and laboratory stem cell processing; and four, maximize shareholder value in our wound care segment.

To implement our strategy we have established seven key milestones for 2009 and they are the following:

Q4 profitability: Our goal is to achieve profitability by the end of fiscal 2009 through the following means: volume growth in our cord blood processing and banking product line; expense controls; reduce quality costs; better pricing on the existing ASP bagset; and value pricing on the new four compartment AXP bagset which will be released early next calendar year.

Matt will speak more specifically to fiscal 2009 guidance later in the call.

MXP revenues: As you read in today’s announcement Celling Technologies, a subsidiary of Spine Smith will begin using the MXP for bone marrow stem cell processing and orthopedic surgeries. Celling technologies provides bone marrow processing services to orthopedic surgeons who use autologous stem cells in their spine fusion procedures. We expect initial revenues from Celling in the second fiscal quarter of the year.

In parallel we expect to successfully conclude a number of customer MXP evaluations outside of orthopedics which are scheduled over the coming months.

Vantus revenues: There are almost six million active performance horses worldwide, between 30 and 50% of these horses will be lame during their lifetime. These soft tissue injuries represent a significant economic cost to the equine industry and it is clear that traditional therapies do not do an adequate job of regenerating damaged tissues. Stem cells are used to treat soft tissue injuries routinely and equine insurance companies reimburse these procedures.

We are planning on three Vantus revenue streams: One, umbilical cord blood stem cell harvesting and storage services; two, bone marrow stem cell processing and storage services; and three, sales of point of care bone marrow stem cell processing products and point of care PRP processing products.

T-Scientific milestones have been met; meetings are on going with breeders and veterinarians in California and Kentucky and revenues are expected to begin during the upcoming foaling season which begins January 2009.

Rescue revenues: Last year we initiated development of the rescue platform which is a simple yet elegant point of care solution for bone marrow processing and peripheral blood platelet concentration. The development phase will conclude early next calendar year. We have started the five 10-K submission preparation and expect to submit early next year along with the CE mark application.

Because of lower regulatory thresholds sales to veterinarians and equine hospitals are expected in fiscal Q3. Assuming timely regulatory approvals sales to physicians who will use the product for processing bone marrow and PRP at the point of care will start in fiscal Q4.

Adipose processing and banking solution: We strongly believe that collection and storage of stem cells from adipose tissue is an emerging opportunity with near-term revenue potential. We expect new banking services to emerge from plastic surgery groups, family cord blood banks, and new entrepreneurial adventures. Our current strategy for this emerging market segment is to develop an offering using our existing devices with new disposable sets during the 2009 fiscal year and then launch a program for creating an integrated system with models for point of care processing, laboratory processing and for cryopreservation.

Stem cell branding: This year our trade show participation will grow significantly and include the EBMT and ISCT mentioned previously; the American Association of Blood Banks, or AABB; the International Society for Stem Cell Research or ISSCR; the North America Spine Society or NAAS; and the International Federation of Adipose Therapeutics and Science or IFATS. We plan to sponsor and host a symposium at the annual ISCT meeting that will focus on our MXP and Rescue product lines and their use in regenerative medicine both interoperatively and in the stem cell laboratory. We expect to publish articles and abstracts related to stem cell regenerative medicine; finally we have plans to launch an advertising campaign in stem cell and regenerative medicine journals such as Blood and Cytotherapy.

Lastly, regenerative medicine partners: We are aggressively pursuing partnerships on a number of fronts. We are not only seeking near term revenue generation, but also funding for clinical studies, and PME approvals. We are focusing on the most promising indications such as orthopedic injury, peripheral artery disease, cardiac ischemia, wound care, and cosmetic surgery.

In conclusion, we see a bright future for ThermoGenesis. The management team and all our employees could not be more excited. Thank you again for your time and I will turn the call over to Matt.

Matthew Plavan

Starting from the top revenues for the fourth quarter of fiscal 2008 were $7.2 million, 104% increase versus the fourth quarter a year ago and compared to $5.6 million in the prior quarter. As Bill mentioned, total revenues for the year were $21.9 million versus $16.8 million in fiscal 2007, a 31% increase.

In terms of the quarter our growth was driven by disposable revenues which increased to $4.2 million or almost triple those of $1.5 million a year ago and increased shipments of the BioArchive, nine versus three a year ago.

For all of fiscal 2008 disposable revenues were $11.7 million or 53% of total revenues. This compares with $6.7 million or 40% of total revenues in the prior year. This increase is largely driven by a near three-fold increase in the sale of AXP bagsets over the year from 36,000 in fiscal 2007 to 99,000 in fiscal 2008. Total backlog at the end of the year was $2.3 million consistent with the $2.2 million of a year ago.

As we had discussed with you in the past, we are focused on increasing our recurring revenues and leveraging the impact of higher margin disposals on our overall gross margin and in fact that is what we saw in the fourth quarter with gross margins of 33% as compared to the 26% gross margin in the fourth quarter a year ago.

Over the past three years the percent of disposable revenue to total revenues has steadily increased from 32% to 40% in fiscal 2006 and 2007 respectively to 53% or over half of our revenues in fiscal 2008.

Turning now to operating expenses in the quarter, they were $5 million versus $4 million a year ago and $4.5 million in the prior quarter, that being the third fiscal quarter. The increase in operating expenses for the fourth quarter this year is principally the result of increased R&D activity in support of the Vantus technology and the incremental costs associated with the newly created position of chief technology architect filled by our former Chief Executive Officer Phil Coelho.

The net loss for the quarter was $2.5 million or $0.04 per share versus a net loss of $2.6 million or $0.05 per share in the same period a year ago.

I want to speak briefly to our operating expenses for the fiscal year, beginning with research and development.

For fiscal 2008 they were $7.2 million an increase of $3.1 million or 75% over the prior year, due primarily for the reasons I noted a moment ago, including stock compensation, salaries and consulting fees of approximately $1.8 million related to the CTA position which was effective August 1, 2007.

Effective May 1, 2008 Phil resigned and became a consultant to the company. The other key components of the increase in R&D expenses included $620,000 in expense associated with the Vantus venture and $130,000 in payments made to UCD in connection with an agreement to develop stem cell treatments.

We were able to hold the line on sales general administrative expenses as they rose a modest 6% over the prior year due mostly to increased legal costs primarily related to the discussions with GE Healthcare regarding the distribution agreement and consultation during the voluntary AXP recall effort. We are pleased that we effectively managed to a relatively minor increase in sales and G&A costs while having grown revenues 31% year-over-year.

Turning now for a moment to liquidity and capital resources, we ended the year with cash and short-term investments of $25.3 million versus $33.4 million at the end of fiscal 2007. Working capital at the end of the period was $30 million versus $37.8 million at the end of fiscal 2007. We have minimal debt. Our use of cash for operations and capital expenses together was $3.6 million during the quarter versus $1.6 million in the prior quarter. The burn for the quarter was due mostly to the loss of $2.5 million combined with a net lag in receivables and build up of inventory together totaling a use of cash of $1.1 million.

Before opening the call up to questions we’d like to provide some visibility into our expectations for fiscal 2009.

Driven in large part by increased AXP disposable bagset sales as well as initial revenue contributions from the new MXP device and disposables, in addition to the Vantus launch and the launch of our new point of care system, which is the Rescue device, we expect overall revenue growth to be between 30 and 35% in fiscal 2009. We also expect continued gross margin improvement during the year with fourth quarter gross margins anticipated to exceed 40% and net operating expenses will be relatively comparable with fiscal 2008. As a result, as Bill had mentioned, we will exit the fourth fiscal quarter at break even.

Thank you again for joining us on the call today and we will now open it up to questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Jon Hickman of MDB Capital Group.

Jon Hickman - MDB Capital Group

What can you tell me about Spine Smith. Do you know revenues anything like that? I take it their not public.

William Osgood

They’re not.

Jon Hickman - MDB Capital Group

So can you tell us anything about their —.

William Osgood

Well they are a privately held company. They are a distribution company. They also have a consortium of orthopedic surgeons that develop and use implants with stem cells. They are a service provider to orthopedic surgery groups to process themselves and they’re growing very rapidly. So, they are out on the frontier in a very innovative company, but what’s important to us is they’re more than a distributor, they’re distributor and clinicians and they want to develop products with us and that was what we found to be very attractive. And they are growing fast.

Jon Hickman - MDB Capital Group

Could you give us an example? I mean I know you’re postulating there, but like what is a product they could develop with you? I mean, I know how they can process bone marrow and get stem cells but what do you mean a product?

William Osgood

We are all learning about regenerative medicine and now with selling and Spine Smith we are going to really learn about point of care applications and what we’ll get from that is an understanding of how to streamline and improve our products over time and evolve them so they really are the best fit for quick turn-around point of care solutions. The only way to do that is to get experience with them and that’s what we’ll get with this company.

Jon Hickman - MDB Capital Group

So that is more like a delivery mechanism type thing?

William Osgood

Could be.

Jon Hickman - MDB Capital Group

Was their any upfront money here?

William Osgood

No.

Jon Hickman - MDB Capital Group

So they are going to start using your product to process stem cells. They already process stem cells with a different method so they are going to start using yours?

William Osgood

Correct.

Jon Hickman - MDB Capital Group

So whatever volume they have now, that will slowly move to your MarrowXpress?

William Osgood

Correct.

Jon Hickman - MDB Capital Group

In your R&D, Matt can you go through that again? I mean Bill was the CTO and there was a lot of expenses for his options and he resigned, so you expect R&D to be flat going forward for fiscal 2009 I mean, help me out there. You’ve got Vantus, you’ve got all these other things you’re doing so…

Matthew Plavan

Starting with our overall guidance, we expect to keep our total operating expenses flat. I think you’ll see some costs being reduced. Stock comp will probably come down pretty meaningfully. As Bill mentioned we have hired a VP of R&D so there are some other areas where costs will probably replace those costs that are going down, but overall we expect to keep our operating expenses flat.

Jon Hickman - MDB Capital Group

What was stock based compensation and deprecation in the quarter? Can you share that?

Matthew Plavan

In the quarter stock comp was $300,000; depreciation was $200,000.

Jon Hickman - MDB Capital Group

Were there any one-time items in your SG&A that won’t be there going forward? Like is the recall completely cleaned up?

Matthew Plavan

Yes, that was cleaned up in the third quarter. During the quarter there were a number of clean up items that were non-recurring but I wouldn’t want to give the impression that with those going away that we would see operating expenses declining. I think our expectations are going to remain relatively constant.

Jon Hickman - MDB Capital Group

With your expectation of Vantus starting to generate some revenues with the foaling season, which I think that coincides with your second fiscal quarter right?

William Osgood

Third.

Matthew Plavan

Yes it’s the third fiscal quarter.

Jon Hickman - MDB Capital Group

The third fiscal quarter so is starts in March?

William Osgood

January.

Jon Hickman - MDB Capital Group

You haven’t announced any contracts yet and you’re only three months away. Can you help us out there?

William Osgood

We will announce them at the time. We have meetings going in Kentucky this week and we continue to progress in getting the commitments we’re looking for.

Jon Hickman - MDB Capital Group

I think you had a target of like you’re initial batch was going to be like 70 horses or something like that?

William Osgood

Closer to 700 is our target.

Jon Hickman - MDB Capital Group

You think that’s doable even at this kind of latest stage, or don’t you think this is a late date?

William Osgood

We are still confident that we are going to see some of the breeders start with a small number and then as they see how the process works they’ll start to add; so we’re expecting to see some upfront commitments, but we’re also expecting to see contracts come in during the foaling season.

Jon Hickman - MDB Capital Group

I want to talk about Rescue, but I’ll get back in queue.

Operator

Your next question comes from Joe Pratt of W.D.

Joe Pratt - W.D.

Is there any way you can give us an idea on selling in terms of their market penetration capability? Do you measure it by the number of clinics they’re involved with or the number of folks in their sales force, how can we quantify that?

William Osgood

When you’re pioneering markets that is always the question people want answered, but it’s a touch one to answer. These guys have a long track record in orthopedics, running distribution companies and growing businesses very big. They understand the stem cell market better than most of the companies out there because they are one of the pioneers. They have built, I think, an extraordinarily attractive business model and having distribution together with the actual practicing orthopedic surgeons who are using these products and they are going out and attacking BMP use a surgeon at a time. When you are pioneering it takes time and you have to slug it out, so they’re converting surgeons who are using BMP to stem cells.

There was a recent article in the Wall Street Journal that certainly it helps their cause that was related to Medtronic and their products that use BMP. We are expecting these guys to move very rapidly and we plan to go with them as they evolve these markets, so we’re excited.

Joe Pratt - W.D.

What kind of trade group would they appear in and what particular trade show would they end up at?

William Osgood

Any orthopedics show; they will be at NASS which is in Toronto in a couple months and North America Spine Meeting.

Joe Pratt - W.D.

Geographically are they focused just on North America or the lower 48?

William Osgood

Initially they started in a regional area, but they are expanding very rapidly and right now we believe that they will be well positioned in North America here shortly and then they’ll go international.

Operator

Your last question comes from John Hickman of MBD Capital.

John Hickman – MBD Capital

Rescue, how does that compare on a revenue basis to you versus the MarrowXpress?

William Osgood

Rescues is an exciting product because it has four markets that it will address, two in the human side and two on the vets side. It’s an excellent product for volume reducing bone marrow in an operating room for immediate application back to the patient and it’s also excellent for processing peripheral blood in an operating room to isolate the platelets for use in wound care or wound healing.

I can tell you my son calls me all the time, he is an anesthesiologist and he is telling me about how that more and more surgeons are using PRP directly in operations, but it also has the same two-market applications on the veterinary side both for treating immediate bone marrow treatments of tendon/ligament injuries at point of care and also from PRP from peripheral bud for treating wounds, so it has quite a bit of application.

In terms of the size of the market we believe that it could be, it is interesting as we have tried to understand and have realized that there is a point of care market and there is a lab market and they are a little bit different and the needs are a little bit different and that’s why we had to come out with Rescue, is that the MXP is really best suited for laboratory applications, although it could be used for point of care, but the Rescue is a beautiful point of care for applications; so with the Rescue and the MSP we can cover the market needs very well.

The Rescue is a different technology. It’s a far simpler. It’s a very elegant solution. It has very good margins and we’re very excited about it.

John Hickman – MBD Capital

So revenue wise you don’t care what you sell?

William Osgood

We always want to sell more; of course we care.

John Hickman – MBD Capital

You don’t care whether you sell the MarrowXpress or Rescue?

William Osgood

I think that we have found that there are some places that really prefer the MXP because it is a closed system. It’s got a little bit higher recoveries. It’s better suited for volume processing and there is other applications where people really prefer Rescue because it’s easier to use, it could be used in an operating room, and so I don’t, we haven’t really seen where there is a conflict and again it is because we have really started to get clear that there is a point of care market that is a lot different than a laboratory off, you know, away from the operating room type of market. It could be in the hospital or it could be a freestanding clinic, so I don’t think that conflict is going to occur.

Operator

Thank you for participating in the ThermoGenesis conference call. This concludes today’s event.

William Osgood

Thank you.

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