Cardiovascular Systems' CEO Discusses F3Q2014 Results - Earnings Call Transcript

| About: Cardiovascular Systems, (CSII)
This article is now exclusive for PRO subscribers.

Cardiovascular Systems Inc. (NASDAQ:CSII) F3Q2014 Earnings Conference Call April 30, 2014 4:45 PM ET

Executives

Larry Betterley – CFO

Dave Martin – President and CEO

Analysts

Danielle Antalffy – Leerink Partners

Ben Andrew – William Blair

Jose Haresco – JMP Securities

Ben Haynor – Feltl & Company

Brad Mas – Needham & Company

Jan Wald – Benchmark Company

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2014 Cardiovascular Systems Incorporated Earnings Conference Call. My name is Kim and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Larry Betterley, Chief Financial Officer. Please proceed.

Larry Betterley

Thank you, Kim. Good afternoon and welcome to our fiscal 2014 third quarter conference call. During this call we’ll make forward-looking statements. These forward-looking statements are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and include statements regarding CSI’s future financial and operating results or other statements that are not historical facts.

Actual results could differ materially from those stated or implied by our forward-looking statements due to certain risks and uncertainties, including those described in our most recent Form 10-K and subsequent quarterly reports on Form 10-Q. CSI disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments or otherwise.

We’ll also refer to non-GAAP measures because we believe they provide useful information for our investors. Today’s news release contains a reconciliation table to GAAP results.

I’ll now turn the call over to Dave Martin, CSI’s President and CEO. Dave?

Dave Martin

Thanks, Larry, hi everybody. Our third quarter was very successful for CSI, our physician users and the patients they serve. We continue to expand our $4 billion vascular market, increased usage of our current products and the introduction of new products led third quarter revenues to record levels.

Revenues rose 32% year-over-year, and 6% sequentially from the second quarter of this fiscal year. Our newly introduced Coronary product is growing significantly.

On the Peripheral side of our business, physicians continue to increase usage of our Diamondback 360 System. This was the primary driver of third quarter revenue growth. In addition, we received FDA clearance for our new, low-profile 60-centimeter Peripheral device. This device expands the number of patients in need that can be reached and released by providing physicians with broader treatment options for lower lag lesions.

On the Coronary front, the launch of our system is progressing very well with more than 400 patients treated, generating an additional $1.7 million of third quarter revenue. With a dedicated team of about 20 coronary sales specialist, we are focusing on a select number of top medical institutions in the United States.

We are executing a controlled commercial launch of our Diamondback 360 Coronary Orbital Atherectomy System. Since the launch began in late October, 2013, more than 100 physicians in over 30 key institutions have treated more than 500 patients using our unique technology.

Our technology is the first and the only device specifically approved to treat severe coronary calcium disease. Our technology is established in prestigious institutions such as Mount Sinai, New York, Columbia Presbyterian, New York and Duke University Hospital among others.

Prominent physicians are achieving excellent procedural success and outcomes, and those outcomes are consistent with our Orbit I and our Orbit II results in this large patient population.

A few physician quotes include Dr. Jeff Moses from Columbia Hospital, New York said, I’ve never seen a dramatic change with coronary artherectomy, this is impressive. And Dr. Art Lee from North Florida Regional Medical Center said, we’re able to do cases that we would not have done before. Comments like these and others that we’re getting from the field give us optimism for strong adoption in the future.

As we close out this fiscal year, our goals remain consistent to expand the use of our Orbital Atherectomy System as the primary therapy for treating calcified arteries in the PAD market both above and below the needs. And that includes those patients who are at risk for amputation.

Continue a successful targeted coronary rollout, build on our base a scientific data that supports safety, effectiveness and economic benefit of our products and further enhance and expand our product’s offering.

Now, Larry will provide more details on our financial results and I’ll come back to a recap clinical and research activities before we take your questions.

Larry Betterley

Thanks, Dave. CSI performed well in the third quarter. Compared to a year ago, total revenues grew 32% to $34.9 million, which exceeded our guidance range. Device revenues were 88% of the total.

We sold nearly 10,000 devices bringing the life to-date total sold to more than 146,000. Devices sold included 460 coronary units. Coronary revenue also exceeded expectations totaling $1.7 million.

Reorder revenues remained high at 96% of total revenue consistent with last year. We added 46 new PAD accounts and 22 coronary accounts, all of which are also PAD customers.

Other product revenues rose 22% from the prior year quarter to $4.1 million driven by our overall procedure growth.

Gross profit margin increased to 78% from 76% in the prior year. The gain was driven by product cost improvements and higher production volumes. We expect engineering enhancements and increased production volumes to continue to reduce unit costs.

Operating expenses rose 43% over last year primarily from planned investments including approximately $10.3 million related to the coronary commercial, studying and product development. We also made investments in sales and marketing, expanded clinical and product development initiatives and medical education programs to continue to drive PAD adoption. All of these investments are geared towards generating higher future revenues.

Net other expense totaled $119,000 versus $809,000 in the prior year. The decrease was mainly due to lower debt levels this year and charges from debt conversions last year.

Net loss was $9.7 million or $0.32 per share, it compares to a loss of $6.2 million or $0.29 per share last year. The number of weighted average shares outstanding rose to $30.4 million from $21.5 million last year. This was due to the issuance of 5.3 million shares in our March-November 2013 stock offerings, as well as the issuance of stock from debt conversions, employee stock plans and warrant exercises. All of our warrants have now been exercised or have expired.

Adjusted EBITDA was a loss of $6.4 million compared to a loss of $3.3 million last year. The increase was from a larger operating loss partially offset by higher stock compensation expense. Excluding a loss of approximately $9 million relating to our coronary launch, adjusted EBITDA for our PAD business was positive for the quarter.

Our cash balance was $146 million at quarter end. We raised approximately $84.4 million of net proceeds in our November, 2013 public stock offering. Proceeds were being used primarily to fund growth investments including coronary launch initiatives, clinical studies, product portfolio expansion, education programs, international expansion and future capacity requirements.

Today’s press release also contains our nine-month performance date; I won’t discuss that in our prepared remarks but I’d be happy to answer your questions during Q&A.

I’ll now turn it back to Dave for further commentary.

Dave Martin

Thanks, Larry. As we looked at our coronary market, it’s estimated that calcium is present in nearly 40% of those patients undergoing coronary intervention.

Scientific and patient data, informs that calcium contributes to higher treatment costs and poorer outcomes when traditional therapies are used. Outcomes from the use of traditional therapies include a significantly higher occurrence of death and major adverse cardiac events. Calcium is a large and vastly underestimated problem medicine with limited options for treatment.

Once the FDA approved our technology, CSI was able to bring the first new Coronary Artherectomy device to market in more than 20 years. Ours is the only device approved to treat severe calcium.

In February, at the 2014 Cardiovascular Research Technology Conference, we released the one-year results from our Orbit II study. The Orbit II study evaluated the Diamondback 360’s effectiveness in treating severely calcified lesions.

At the conference, Dr. Jeff Chambers of Metropolitan Heart Institute in Minneapolis describes superior rates of freedom from adverse events of 84% and freedom from lesion reach treatment of 95%. These are groundbreaking results when compared to historical data for this difficult to treat patient population.

Patients treated with the Diamondback 360 technology experienced shorter procedure times, shorter hospital stay lengths and lower readmission rates. The estimated cost savings is in excess of $4,000 per patient. These are compelling proof-points supporting our plans for future adoption and revenue growth for this coronary device.

Looking at Peripheral, the FDA approved our new 60-centimeter peripheral device (inaudible), the 60-centimeter Peripheral device for the treatment of Peripheral vascular disease. This clearance expands options for treating challenging blockages in lower laid arteries.

These blockages are often associated with critical limb ischemia or CLI. CLI causes severe pain and non-healing wound which is left untreated often results in amputation. There are 2 million CLI patients in the U.S. alone, and about 160,000 amputations are done each year in the United States as a result of the disease.

Almost half of major amputations with procedures and rehabilitation cost of nearly $100,000 in just year one. In addition, life expectancy for the majority of patients receiving major amputation is only two years.

Dr. Mustafa of Metro Health Hospital Michigan was able to almost eliminate major amputations in his facility by treating lesions below the need using our device. He took 115 amputations annually just a few years back down to nearly zero. Dr. Novas Par (ph) in New York had a similar result and dramatic result in his New York Institution.

In a great way, we can replicate this across the United States. And I believe that’s inevitable that a major hospital chain will take on this new protocol and our tool in order to eliminate amputation.

Our new 60-centimeter Diamondback devices are compatible with four French introducer sheets. The use of smaller sheets, have been shown to reduce procedural and access site closure times. It’s also associated with lower radiation exposure and enables quicker patient recovery with fewer procedural complications from bleeding. Thereby providing benefit both to the patient, physician and staff.

More than 12 million Americans suffer from PAD, approximately 25% of these individuals were progressed to CLI which is associated with difficult and complex blockages in the fibular arteries.

The fibular arteries are the arteries responsible for supplying blood flow to the foot. It is estimated that up to 20% of these inclusion can’t be treated from traditional methods. Our new 60-centimeter device and the techniques that go with that device allow the use of retrograde tibiopedal access. This is a different option for the patient, an option where physicians shoot access to arteries in the foot or the ankle. This is new and significantly expense treatment options available for patients in need.

On the clinical side, we continue enrollment in Liberty 360. This study is evaluating the acute and long term clinical and economic outcomes of our Orbital Atherectomy Systems in treating PAD. It’s the first study of its kind to compare orbital atherectomy to all other PAD interventional treatment options.

Nearly 200 patients have been enrolled to date, and we expect enrollment to continue to accelerate as more sites complete their internal review board processes.

Now, I’ll detail our financial outlook for fiscal 2014, fourth quarter ending June 30, 2014.

We anticipate revenue to be in the range of $36.3 million to $37.8 million representing year-over-year growth of 26% to 31%. This includes approximately $2.5 million to $3 million of revenue from our controlled coronary launch and PAD revenue growth of 17% to 21% from last year’s third quarter.

CSI’s gross profit as a percentage of revenues should be consistent with the third quarter of fiscal ‘14. We anticipate operating expenses approximately 2% higher than the third quarter of fiscal ‘14 primarily to support additional coronary investments.

The resulting net loss is expected to be in the range of $8.4 million to $9.3 million or $0.27 to $0.30 loss per common share. This assumes 31.3 million average shares outstanding.

In closing, I want to emphasize that our market is expanding Orbital Atherectomy Systems, consistently provide safe and effective outcomes, even in the most difficult to treat patient populations, including those with a significantly calcified lesions and those suffering with critical limb ischemia facing possible amputation.

We expect these unique capabilities to expand the coronary and peripheral markets and spread auction of our systems providing continued attractive growth for CSI in leading to the future.

Now, I’ll turn the call back to the operator for questions.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Danielle Antalffy from Leerink Partners. Please proceed.

Danielle Antalffy – Leerink Partners

Good afternoon, Dave. Thanks so much for taking the question and congrats on a really solid quarter. I just wanted to ask, so just looking at your coronary utilization versus PAD, it’s significantly higher I’m coming out to around 20 per account or so.

And I guess, I was just wondering with your PAD utilization more on the mid-single digit range per account. Is there something unique about the coronary that pushes it that much higher, is that a sustainable for the utilization level, is there some trialing going on. Can you help us explain the discrepancy there and how sustainable that is for coronary?

Dave Martin

Yes, we’re excited by the coronary results. Thanks for the compliments Danielle and a really great question. There is a critical need, so I think you’re seeing lead-based usage, it’s been a real problem, severe calcium in the coronary arteries.

We are going to the top institutions, they’ve seen this need for a long time and when they see how ease-of-use our device is, and all of the associated benefits, we’re getting some great up-tick.

Also, because of the ease-of-use and the safety of this device, either we’re going deep into the physician groups, it’s not a specialty item or where just one or two physicians per hospital can use the device, it’s back now, every physician can treat these patients and treat them safely and routinely now that they’ve got the right tool.

On the Peripheral side, we continue to see exciting growth particularly as we awaken those physicians to – without our tool, couldn’t routinely treat those three tibial arteries that are in each side, that are critical for treating the foot. And we believe is truly essentially for a great clinical and economic outcome.

And the more we turn on physicians to treating those vessels, we get extraordinary results like we just talked about with Dr. Mustafa who took 116 amputations in one year at Metro Health Center in Michigan down to nearly zero last year.

And I talked to him today. He said, the only difference David was, we treated tibial arteries and we used your device. And that can be replicated, we’re very excited about that. So, I think we’ll see continued market expansion with this tool particularly in the lower extremities and I think we’ll see story after story come out of this institutions to install new protocol and use our new device to get extraordinary results.

Larry Betterley

Yes, this is Larry, Danielle. The other thing I’d like to point out is that a lot of our coronary accounts are just getting up and running. So we feel pretty optimistic about our ability to sustain high usage in our accounts going forward.

Danielle Antalffy – Leerink Partners

Right. And if I could follow, thank you for that, guys. If I could follow-up on the coronary, you gave great color on the reorder revenue, I think that’s a combined number or just for PAD 96%, what percentage of coronary revenue was reorder revenue this quarter, can you give that number?

Larry Betterley

Yes, I can. I can pick that out. It would be a little less with coronary because we are opening obviously a higher number of new accounts. But that is a combined number. I’ll find that for you and disclose it shortly.

Danielle Antalffy – Leerink Partners

Okay, Larry. Thank you. Thanks guys.

Operator

Your next question comes from the line of Ben Andrew from William Blair. Please proceed.

Ben Andrew – William Blair

Hi, good afternoon guys, a few questions from me. Starting with the kind of training opportunity and what you’re seeing in terms of physicians engagements, the types of cases they’re going after. You’ve obviously had good success here with the early launch, does it involve you to kind of accelerate the efforts in the short term or is this kind of remains steady and you can think of maybe just talk about the approach in the next one to two quarters?

Dave Martin

Sure, thanks Ben for the question. We’ll stay disciplined. The biggest feel good for us and the physicians is the initial commercial experience produced a result that was exactly like our fantastic Orbit I results and our Orbit II results. And we want to stay right there.

The training is extensive. When we get to account, we really take our time to go over historically all the key learnings both data and the procedural, we support the entire staff and hospital not just the physician. And we provide partnership in peer-to-peer contact as well. It’s been a great recipe. And we’re going to stick with it.

Ben Andrew – William Blair

Okay. And are there clinicians, when they’re treating in these patients, one of these calcified reasons I would assume just for the surgery. Are they pulling patients away from surgery that they can announce so they wouldn’t otherwise have confidence to do or give us a sense of the mix you’re seeing?

Dave Martin

Yes, great question, and I ask it all the time. And anecdotally, from early set of physicians and practices, the number is 20%. 20% of the patients either could be treated or would have gone to surgery that are being treated now in just a few minutes with us, 60 seconds of standing with our Diamondback device.

Ben Andrew – William Blair

Other than the Orbit II follow-up data, are you guys doing any kind of registry work with those patients to collect overall cost, because I had to think there is a pretty good economic argument to be made longer term for the product if you’re avoiding surgery?

Dave Martin

You bet. It’s as clean as fair for people to know what the economic outcomes are with all patient populations. But we’ve already got information that shows that we can save the institution $4,000 per patient. Those numbers came from a retrospective look by Dr. Jeff Stone and his 14,000 patient database.

In addition, and inspired by that information, we’ve got an adverse event study ongoing right now. I think approaching 200 patients in a row and that’s to confirm that result. But in a forward prospective way, what happens to those patients with coronary calcium, what’s the outcome both clinically and economically and we’re enrolling those as we speak. We think that will be a very important study.

In addition, we’re going to let the Orbit IIH. And year one, those exciting results came out and to see our Q meetings just a couple of months ago and are providing a lot of confidence to our physician users and prospective physician users. But we’ll let that age, we’re excited to get year Q out. I believe we’ve got some economic data coming out from Orbit II in just the upcoming months. I believe that one of the May meetings will have economic year one data from Orbit II that will be supportive as well.

Ben Andrew – William Blair

Okay, thank you. A couple of quick number questions from me. Was the 460 unit, was that usage or is that sales in the quarter? And is it $1.7 million in revenues or $1.5 million and $5 million in coronary?

Larry Betterley

Yes. The 460 of sales but that’s close to the usage number was long. And $1.7 million includes some of our ancillary product that goes with the device sales. The other number you referenced is just for device revenue.

Ben Andrew – William Blair

Got it. And obviously, the other revenue, I guess the ancillary revenue has been doing very well and roughly tracking your volumes. What’s your opportunity there for pocket share, either with product you got in-house already or things that you’re thinking about adding to the portfolio?

Larry Betterley

There are opportunities there. It’s been pretty consistent as you know around that 12% of revenue, just a little lower this quarter, the coronary doesn’t use the full set of ancillary. But there is definitely a potential to add things to the bag in the future. We’ll right now are prioritized to course our opportunities in coronary and our below the need product introductions.

Ben Andrew – William Blair

Okay, thank you very much.

Larry Betterley

And in response to Daniel’s question earlier, the order revenue percentage for coronary is 84% and for peripheral was 97%, for an overall average of 96%.

Operator

Your next question comes from the line of Jose Haresco from JMP Securities. Please proceed.

Jose Haresco – JMP Securities

Hi guys, good afternoon and congratulations on a good quarter.

Dave Martin

Thanks Jose.

Jose Haresco – JMP Securities

I guess, specially first question is for Larry. Did you talk to us about on, I guess buying patterns or is there a lot of talking going on in the new accounts that you have or people kind of ordering on a quarterly basis, on a weekly basis. I’m just trying to get a sense of kind of with early adoption before council you’re opening versus the ones you’ve already got?

Larry Betterley

Yes, I think that’s a good question Jose. I think we’ve got a very good cadence to our sales. And we’re going to see, while at the end of the quarter is higher. We see really a good cadence throughout the quarter, so it doesn’t depend on a lot of stocking orders at the end. We have some accounts that orderly but that’s a much lower. And it’s been dropping as a percentage of sales for the quarter for the last few quarters. So, it’s more of a consistent stream of sales.

Jose Haresco – JMP Securities

Okay. As you guys think about your forward guidance, if I’m not mistaking, it looks like you went from 20 accounts at the end of the December to 30 accounts at the end of the March quarter. Is that a pretty typical cadence of adding 10 current new stores to the coronary base every quarter, is that how we should we think about that patient?

Larry Betterley

Well, yes, it’s probably a little light. Yes, we were at, and when we look at where we were – we’re at 11 at the end of December, you might have been referencing the January number which we also disclosed last time.

So, we added 22 new accounts this quarter. It’s probably not a bad rate, but we’re not really driving around any given quarter to those sales reps through. More focused on, as we’ve said before, those top 75 accounts getting multiple physicians in those accounts and driving adoption. So, the last quarter wasn’t a bad number, I think it was a pretty good number for introduction. We are going to focus on those 75 and not necessarily go broader in that first year.

Jose Haresco – JMP Securities

Okay. And I guess, as you think about your guidance going forward, which is in spite of being good. Is that largely a function of, I guess you’ve split out the impact of going deep within certain accounts as opposed to opening new accounts. How do you think about those two as you look ahead?

Dave Martin

Well, going deeper is the strategy, no doubt. And we could drive more quality, it’s allowing us to get the optimal patient outcomes both in our late procedures. A lot of which are near the physicians did not learn as a matter of routine to treat below the need. But we know how important it is for outcomes both economic and clinical for them to treat routinely down there.

Going deep, staying home, sharing that scientific data, giving the medical education training that was so dedicated to doing, in the peripheral as well as the coronary, will further are reputation for being science oriented and outcomes oriented. So we’ll continue good to go deep.

Jose Haresco – JMP Securities

Okay. I guess last question, do you have a sense of what share you might be taking of cases from Rotoblader?

Dave Martin

We don’t measure share a whole lot. We’re really focused on disease state. And we are absolutely expanding the market. We’re bringing patients into the treatment queue that couldn’t be treated both on the peripheral and coronary side. Patients who had no other option but for our device back to the hospital treated, and we’re hearing stories like that weekly.

A couple of exciting stories on the peripheral side, so with our real short hair like device, the 60-centimeter, tibiopedal device, there was a patient who had end-stage leg disease that two weeks before was sent home basically with a sentence for amputation and that percentages were to go that way.

And they were brought back and Dr. Mustafa was able to treat that patient in less than half an hour. He treated mortal vessels he did it with less than 4 minutes of radiation exposure time which is unbelievably less, 500% less than what would be in a typical case.

And they closed up that little tiny puncture wound with a little bit of finger pressure. And that patient had a new and extraordinary result. So, you can imagine that patient going home and the family and the joy of the staff of Dr. Mustafa. So that’s just one example of market expansion. And I think on both sides coronary and peripheral that’s where we’re headed.

Jose Haresco – JMP Securities

Okay. I guess, lastly, anything new at EuroPCR that we ought to be expecting?

Dave Martin

We’ll be there. Our economic results are for Orbit II will be presented. And I picked up the continued interesting presentations overall regarding that, prevalence of calcium, the difficulty in cost and complication with calcium. Dr. Pepe has been presenting and you may have seen that he presented recently about we’re all excited about drug-coated balloon technology.

But the number one predictor for drug-coated balloon failure as presented by Dr. Pepe was the presence of calcium. And he said some really compelling things that he’ll be talking about at EuroPCR and beyond that calcium may decrease drug penetration. The prevalence overall calcium is increasing with the aging population that free treating of vessel of atherectomy, he believes may improve drug therapies and expand the market of patients to advance it from them.

And we agree, our device is extraordinary at least in the native artery intact but taking out the most complicating factor calcium. And what you have left after a few seconds of standing is a smooth tubular lumen.

Jose Haresco – JMP Securities

Okay. Thanks very much. Congratulations on the quarter.

Dave Martin

Thanks, Jose.

Operator

(Operator Instructions). Your next question comes from the line of Ben Haynor from Feltl & Company. Please proceed.

Ben Haynor – Feltl & Company

Good afternoon gentlemen.

Dave Martin

Hi Ben.

Ben Haynor – Feltl & Company

I know in the past you’ve talked about one-two in the coronary approval that you may think about taking both devices outside the U.S. So, I’m just wondering if you could offer any update on plans there, how soon we might be able to expect that?

Dave Martin

Yes, great question Ben, thanks for that. We’ve been really aggressively doing all the pre-work to lay the foundation for that. We’ve been working closely with the ministry over in Japan, looking for fast-track opportunities. And we really think we’re on a great path there.

And then in Europe and we’ve identified some select markets, where we’ll do a controlled launched. Right now, it’s kind of building the foundation bricks. We’ll need to get our CE mark. The great news is that we’ll be able to go with our best technologies over there now that we’ve just had the great news with the coronary device and a great success with that.

And now that we’ve got the improved and new peripheral devices, we are very excited to get international and help those patients in need. We’re probably still a year out from revenue while we do the brick building so to speak. But we’re on track and aggressively pursuing.

Ben Haynor – Feltl & Company

Excellent, that’s very helpful. And then, this is kind of a weird question as I suppose, with the solid quarter that you had. But do you think it was impacted by weather at all and maybe could have even been a little bit better?

Dave Martin

I don’t think so. I think patients in need, especially some of the patients who are end-phase disease like we treat, they get themselves to the hospital or to the doctor’s office. So we didn’t see weather as a factor.

Ben Haynor – Feltl & Company

Okay. That’s all I had. Thank you very much gentlemen.

Dave Martin

Thanks Ben.

Operator

Your next question comes from the line of Brad Mas from Needham & Company. Please proceed.

Brad Mas – Needham & Company

Hi guys, this is Brad calling in for Mike. Actually this drug-coated balloon, I was just wondering if I could get your thoughts on the current kind of results and the changes you at all of the impact of PCB on the Peripheral Atherectomy market?

Dave Martin

Well, we’re excited by the resources in the space. As you know, historically outcomes for peripheral intervention had been chaotic. You don’t have to look past those 160,000 amputations. The surgeries and the massive use of things in the asset bay, but the absence of the use of things in those critical outflow vessels.

Previous to the Diamondback, the tools that doctors had available weren’t going where the disease went. And so, in fact you have a lot of spot evolving and intriguing just where you could get. And the clinical and economic outcomes showed that there were pour overall.

I think new investment, new dollars, new retention has been addressed there in this space will be great. I think it will be a market expansion plan. And I think for, you’re all hoping for the drugs to produce a good result, to sub-Medtronics PCB study in the SFA. And some of the P&C rates, they could benefit those patients what the calcium could benefit from being cleaned out before that. So, I think we can make that good product go a longer way for more patients and we’ll see how it works out.

They’re still, we’re doing great work below the need. We would be hopeful that there would be not clean for drug, it should be down there as well. We’re taking a close look at our role, our role would be primary. And we’re going to clean out that vessel first and leave that later artery hopefully intact that’s the way to start a case.

And conjunctively, a patient could benefit from drug, then I think it would be great. I’d like to think that in a year or two or three that the whole category one is much larger and Q has dramatically different patient outcomes.

Brad Mas – Needham & Company

Great, thanks. And one number question, I think I missed fourth quarter outlook for the coronary revenue, was it 2.5 to 3?

Larry Betterley

That’s correct, all in revenues $2.5 million to $3 million.

Brad Mas – Needham & Company

Awesome. Thank you very much.

Operator

Your next question comes from the line of Jan Wald from Benchmark Company. Please proceed.

Jan Wald – Benchmark Company

Hi, good afternoon. Congratulations on the quarter, really, it really looked quite good I guess. A lot of my questions has been asked, but so let me begin by asking about the coronary launch. And I guess, there is an expectation in my part, and I don’t know how wide spread this is there.

Eventually going to be something like a hockey stick when you unleash the hounds, if you will and you start to control launch, there is got to be something like an inflexion point. When, is that correct and two, when do you think we should see something like that happen?

Dave Martin

Yes, thanks for the question. We don’t see there is a hockey stick, really sticking to our living sort of pick one institution at a time. We’ve already seen great up-tick on a per institution basis. It is a coronary procedure, we’re real protective of our results and concerned about patient outcomes and a great physician experience.

So, I think we’re going to stay with this controlled launch. We’ve got a great medical education program, we’re growing the number of faculty by the week. We have a stronger and stronger podium presence as we get key opinion leaders involved. So there won’t be any need to un-gate this. I think we’ll continue in our measured way with patient outcomes of the focus. And that will be the proof-point that will allow us to a great long-term technology place for patients in need.

Larry Betterley

Jan, I think what you’re probably referring to is us broadening out the sales effort to our peripheral sales organization, who called 70% on interventional cardiologists. So they, we were starting to train those people and we’re going to broaden that out for fiscal ‘15. But it’ll still be a staged process we’re not going to open it up all at once.

It’s going to be training folks and groups and rolling that out, with very extensive training for those PAD sales folks and also certifying the physicians. So, while the revenue growth will accelerate, it will hockey stick because of that staged approach.

Jan Wald – Benchmark Company

Okay. Thank you. And I guess just 60-centimeter peripheral device, it’s great to hear that anecdote. But do you have a feel or can you quantify the number of patients that should go in the gains from having the smaller device or is it something that is just sort of an ease-of-use type of thing that will allow doctors to better about the things you’re doing just some patients could not appreciate more patients?

Dave Martin

That’s a really good question. It will definitely expand the market. There is, couple of million patients in the U.S. with CLI, they’re basically on the sidelines with no solutions. This is the solution for those patients.

And then every year, with the growing instance of the disease, because of the aging population, increased instance of diabetes and obesity, there are right now and growing 2.5 million new patients probably diagnosed with peripheral vascular disease. Of those, 1.9 million are treated that are kind of on the wait and see. So the market is enormous and aging has been a technology gain.

The inability to retain and safely treat below the need, I can emphasize how critical those three tibial arteries are. They are there for a reason that provides blood flow to the foot. And years to come data device that could not be treated with family now they can, number of proof sources, included in Dr. Mustafa earlier. But one of the studies he did was he headed off 32 planned amputations in a row by treating the tibial arteries that feed bloods to the foot and those patients did not have those planned imputations.

To raise one heart, I would argue that the leg market is way bigger than the coronary market. So, I think we’ve got a lot of work to do for years to come.

Jan Wald – Benchmark Company

Very good. I guess, the cost analysis that was done was impressive and you showed a $4,000 reduction per hospital visit. But cost reduction is not the same as cost effectiveness. Do you have a plan to do something to prove effectiveness of the device?

Dave Martin

You bet, both in the peripheral space and the coronary space. And all of our studies will feature both economic and clinical tracking Liberty for example does exactly that. So, we will have a cost effectiveness rating. Or that we set that up to track with clinical and economic. And those studies aging will get us to the compelling proof points that everyone is looking for. And we’re very bullish on what that’s going to look like.

Jan Wald – Benchmark Company

And do you have a sense of when those studies will, when the data would be ready and published, is it a year from now?

Dave Martin

For Orbit I and the Orbit II year one, we’ve got economic data coming out next 60 to 90 days. And then we’ll continue to age that and produce it every year. Liberty 360 which is prospective core lab adjudicated study. We’ve got approaching or maybe a little bit more than 200 patients enrolled in that.

And that’s wide open for presenting. So I would expect that some of the physicians participating physicians will start presenting that data in the fall. And then that will be open for a continuous stream of presentation. So it’s coming in the early – year-over-year it’s compelling in that $4,000 per patient on the coronary side savings as I think it can get better and better as patients avoid re-treatment which has been the biggest expense to the patients.

Jan Wald – Benchmark Company

Yes. This way the cost effectiveness would be something that would be really something to prove. And I guess, the last question was, what kind of data will we be seeing over the next year or so, but you’ve outlined at least what we’re going to see in terms of cross-data. But I’d expect we’ll see one year and two year data from the trials that you’ve had as well, is there anything else?

Dave Martin

Actually, we’ve got the adverse events on May 7, we’ve got Orbit II aging – Orbit I we’ve got a presentation coming up with five-year data on that. The Liberty 360, we’ll enroll that queuing through 1,000 patients. And we’ve got some key institutions involved in that. So, we’ve got a full play and we’ll track clinical and economic data. So you’ll see some from us at almost every meeting.

Jan Wald – Benchmark Company

Great. Well, thanks again for taking the questions and great quarter.

Dave Martin

Thank you.

Operator

This concludes our question-and-answer session. I would now turn the call back to Mr. Dave Martin.

Dave Martin

Thanks everybody for joining us today. We’re pleased by our progress this year as we continue to advance our technology on both the peripheral and coronary fronts. As a company, we’re committed to helping physicians conquer the most difficult disease states, including arterial calcium. Given the complication that presents for the millions who suffer from PAD and CAD. We look forward to updating you next quarter. And thanks to everyone including our hardworking CSI employees. Thank you very much.

Operator

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!