Conformis, Inc.
Q1 2017 Earnings Call Transcript

Published: 11 May 2017

[Operator:]

Good afternoon. My name is Michelle, and I will be the conference operator today. At this time, I would like to welcome everyone to the ConforMIS’ First Quarter 2017 Earnings Conference Call. [Operator Instructions] Before we begin, I would like to remind you that the management will make statements during this call that include forward-looking statements within the meaning of Federal Securities law, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts should be considered to be forward-looking statements. All forward-looking statements including without limitation, statements about ConforMIS’ strategy, future operations, future financial positions and results, gross margin, project margin, operating trends, financial guidance, market growth, total revenue and revenue mix by product and geography, the potential impact and advantages of using customized implants, business initiatives, and transitions and/or commercial operations are based upon certain estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements, including those discussed in the Risk Factors section of ConforMIS’ public filings with the Securities and Exchange Commission. Accordingly, you should not place undue reliance on these forward-looking statements. While ConforMIS may elect to update these forward-looking statements at some point in the future, ConforMIS disclaims any obligation, except as required by law, to update or revise any financial projections and forward-looking statements whether because of new information, future events or otherwise. This conference call contains time sensitive information and is accurate only as of the live broadcast today, May 10, 2017. I will now turn the call over to Mark Augusti, the Company’s President and Chief Executive Officer. Mark?

[Mark Augusti:]

Thank you, operator, and welcome everyone to ConforMIS’ first quarter 2017 earnings conference call. With me on the call today is our CFO, Paul Weiner. During the call Paul and I will share our prepared remarks on a variety of topics including our first quarter financial and operating performance. Following the prepared remarks, Paul and I look forward to answering your questions. As discussed during our last call 2017 will be a transition year for ConforMIS as we make changes in our commercial operations and improve our gross margin, including the development of a more targeted commercial strategy; the addition of employee sales reps and independent agents, and further investment in commercialization activities and gross margin improvement projects, which I will discuss in more detail below. First on project – product margins, later in the call I will discuss our efforts and results in some more detail. For now I will share that we have made progress in Q1 and we believe that we will realize further improvement through the upcoming quarters consistent with our previous guidance. Secondly, on commercial execution, we believe we have delivered better than expected revenue performance for Q1, more importantly we are in the process of making changes to enhance the selling organization as part of our plan to improve our longer term growth profile. I continue to believe the ConforMIS has differentiated technology and capabilities that are making a difference to patient outcomes. The recent OOS meeting was a great example of the compelling nature of our technology, as we have strong surgeon interest in ConforMIS each day of the event. Furthermore, a key to surgeon’s adoption of our product is consumer awareness. We will continue to emphasize our digital and social media campaign that drive consumer engagement. I’ll comment more on that later in the call. Finally, we continue to build our clinical evidence. You may have seen our recent announcement pertaining to the iTotal PS. At the British Association for Surgery of the Knee meeting commonly referred to as the BASK meeting, researchers presented findings of the iTotal PS kinematic motion, much like our iTotal CR, more closely resembles that of a human need, first is that of traditional off-the-shelf knee systems. With that, let me turn the call over to Paul for a detailed review of our financial results. Paul?

[Paul Weiner:]

Thank you, Mark. Total revenue for the first quarter of 2017 increased $200,000 to $20.5 million, up 1% year-over-year on a reported basis, excluding the negative impact of changes in foreign currency exchange rates of $229,000. The Company’s total revenue increased 2% on a constant currency basis. Total revenue in the first quarter of 2017 and 2016 included royalty revenue of approximately $76,000 and $268,000 respectively related to patent license agreement. The year-over-year decline in royalty revenue in the first quarter of 2017 was related to timing of royalty payments received. First quarter product revenue increased $400,000 to $20.4 million or 2% year-over-year on a reported basis and 3% on a constant currency basis. Total product revenue growth was driven by strong sales at iTotal PS which increased $2.7 million or 113% year-over-year to $5.1 million, offset partially by $2.3 million decline in sales of the Company’s iTotal CR, iUni and iDuo products. Sales of these base business products represented approximately 75% of total product revenue in the first quarter of 2017, compared to approximately 88% of total product revenue for the same quarter last year. U.S. product revenue increased $1.3 million to $16 million or 9% year-over-year. The increase in U.S. product revenue was driven by strong sales of our iTotal PS, offset partially by decrease in the sale of the Company’s base business product lines. First quarter U.S. product revenue represented 78% of total product revenue, compared to 74% of total product revenue for the same quarter of 2016. Rest of world product revenue decreased $859,000 to $4.4 million, or 16% year-over-year on a reported basis and decreased 12% on a constant currency basis. This year-over-year decrease in rest of the world product revenue was primarily due to the decline in sales in the base business product line. First quarter rest of the world product revenue represented 22% of total product revenue compared to 26% of total product revenue in the same quarter of 2016. Turning to a review of our results across the rest of the P&L. First quarter gross margin was 32% of total revenue compared to 33% of total revenue last year. The decrease in gross margin year-over-year was driven by the impact of foreign currency exchange rate changes and the timing of royalty payments received. First quarter operating expenses increased $2 million to $23.8 million or 9.3% year-over-year. The increase in expenses driven primarily by higher general and administrative expense, compared to the first quarter of 2016, including a $1.4 million increase in patent litigation expense and a $700,000 increase in personnel costs. Net loss was $17.2 million, or $0.40 per share, compared to $15 million or $0.37 per share for the same period last year. We realized better than expected Q1 revenue performance of roughly $2 million driven by the combination of the following two factors. First, we saw roughly $1 million of surgeries recognized in January, having been delayed from the second half of December, most likely due to the year end holidays. Second, we experienced a significantly higher conversion rate of orders into surgeries in the first quarter. This resulted in roughly $1 million of surgeries occurring in the first quarter that we would have expected to occur in the second quarter based on historical conversion trends. Based on these results, we are maintaining the financial guidance that we provided on February 15, 2017. For the full year 2017, the company continues to expect the total revenue in a range of $80 million to $84 million, with product revenue in a range of $79 million to $83 million, and royalty revenue of approximately $800,000, and total gross margin in a range of 36% to 38%. With that, I will turn the call back to Mark.

[Mark Augusti:]

Okay. Thanks, Paul. As I mentioned on our last call, we are focused on four strategic priorities at ConforMIS; commercial execution, gross margin improvement, innovation, and talent management. First on commercial execution, we’ve identified number of new areas where we plan to make field investments either through direct representation or an agent relationship. We’re making changes in our U.S. and the U.S. sales management teams. In addition we’ve added new management resources to our contracting and market access teams. We continue to believe that outpatient knee surgery is an important opportunity, is an area of focus for us during this period of transition. And of course as mentioned previously, consumer awareness is also an area focus for us. We’ve added two resources to focus on microsite marketing and the patient experience. Our patient ambassador program is helping to drive patients to ConforMIS, while our Track My Implant program is allowing us to communicate directly to patients prior to the surgery, which helps patients make informed decisions with respect to their care. All of this is key to our current commercial strategy. Regarding gross margin; in the first quarter, I appointed dedicated leadership and project teams to focus on our gross margin improvement initiatives. We continue to make progress with our vertical integration strategy. As communicated previously at the end of 2016 we in-source all of our iTotal CR and iTotal PS metal tibia trays. As planned in Q1, we begin manufacturing of our polyethylene inserts of iTotal CR, and pleased to report that we are producing internally more than half of those poly-inserts. Our plans to start making iTotal poly – excuse me, iTotal PS poly later this year remain on track. We continue to make significant progress with the development of new processes for 3D printing of our patient’s specific iJigs resulting in print cycle time reduction and powder utilization. We believe this will reduce our capital outlays for 3D nylon printers in 2017 and onward. Our multi-year plan to offshore some of our CAD design work as well as our continued improvements in designed software and CAD automation should provide additional gross margin expansion over time. In short, we are seeing steady progress in our operating programs which we believe will yield progressive improvements in gross margin in 2017 and 2018, with continued incremental improvement in future years. As for innovation, we’ve kicked off development programs for our next generation iUni and iTotal systems. We continue to prepare – excuse me, to pursue our iTotal hip clearance and of course we are constantly evaluating new technology and new partnership opportunities. We have a great team here at ConforMIS. We consider ourselves change agents in the field of orthopedics and are committed to producing the best total knee system available. We’re passing on our belief that everyone should have access to our technology and every knee patients should have the ability to make a choice that leads to better outcomes and satisfaction. Thank you for your participation today. We’ll now turn it over for questions and back to the operator.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from the line of Mike Weinstein with JPMorgan. Your line is open, please go ahead.

[Mike Weinstein:]

Good afternoon, guys, and thanks for taking the questions. Mark, as the starting point, you made some comments just about the sales management in the U.S. – in your U.S. sales teams some changes there. Can you give us more specifics in terms of what you may have already done or what you’re planning to do?

[Mark Augusti:]

Yes, I can, and obviously, a lot of these are personnel-related. But we have two area VPs that will be retiring towards the middle of the year. We’ve already back filled one of those roles and we’re in the process of a search for the second role, as well as we have made some changes in a couple of our recent regional sales manager roles.

[Mike Weinstein:]

Okay. And is that the extent of it or are there bigger changes? And has there been turnover in your reps at this point over the last six month?

[Mark Augusti:]

Well, there will be more changes, Mike. As I said, it’s the year of transitions, and out of respect, some of those things – we’ll talk about those as they come about. We have made the additions, I’m pleased to say where we’ve brought in a new VP for our national accounts, which is gentleman who has over 18 years of experience; we are so very excited about that. As well as I think as I communicated last time, we’ve identified an individual, I don’t believe he started as of our last call, maybe he have. But we have a VP of market access, which I think is really going to be helpful as we move going forward. So we’ll continue – I continue to look at things in that area, but we are going to continue to make changes in the field as I see necessary.

[Mike Weinstein:]

And you – in the comments you made today and then on the 4Q call, you kind of talked about redoing effectively the commercial playbook for the Company. Where are you and kind of your thought process on what that needs to look like going forward? And is there a point in which you think lay that out in greater detail to the industry?

[Mark Augusti:]

Well, I don’t know if we’ll lay it out in greater detail. But we’ve developed it – detailed, we’re rolling out on training, we’re actually in the search process for higher-level sales training individual. But again, these areas that we talked about, sales execution, the playbook will talk about targeting and identification and selling and kind of how we go through the business process here at ConforMIS. So it’s a big thing about sales execution and the other things we’ll do around to support that will be the things that we’ve talked about before we’re on an outpatient knee surgery, direct-to-consumer, KOL engagement. I mean, the course will continue our investment around trails that support health economic and patient outcomes.

[Mike Weinstein:]

Okay. And have you made any decisions on product map on your pipeline in which you want to be investing in?

[Mark Augusti:]

Well, probably it’s the newest information that you may have picked up in the prepared remarks is we have kicked off next generation of our iUni products and our iTotal products. So we’ve made some decisions around that. We’re excited about the opportunities there. As you know, we can’t sit still, there’s always continuous improvement in learning and with our model at ConforMIS we’re able to roll out some of those changes I think more easily and certainly with less capital outlay. And then, we continue to pursue the hip with the FDA and we’re – our policy is obviously not to comment on that, but as soon as there is news on that, we’ll certainly, disclose that as appropriate; and then when we do, we’ll talk more about what the plan is from there.

[Mike Weinstein:]

Okay. Last item, can you just spend a minute on the changes you’re making to iTotal and iUni?

[Mark Augusti:]

Yes. So first off, I think there’s been a couple of follow-ups, that’s money in the bank, Mike. But as it relates to iUni and iTotal, look, we get surgeon feedback and there’s some changes for making the procedure easier, so just to give you one example. When we first launched iUni, our iJig’s weren’t referenced off the osteophytes; yes, that discrete the osteophytes off and then you had a physician at the iJig. And there was a little bit of flexing and some uncertainty and it was a little bit of challenging learning skill for some of our surgeons and in spite of that we still got great outcomes. But when we launched the iTotal, we referenced – our iJigs referenced off the osteophytes and we realized that’s actually a much better way and the surgeons actually really like that. So one, an example with our iUni program is one of the goals of that program will be to change the referencing so that we reference off the osteophytes and the disease that’s present at the knee at a time so we’ll make that procedure better. Another small example on the iTotal is announcing the IPS – the iTotal PS, we’ve made some improvements on tibial tray. We see an opportunity to actually merge the tibial tray both CR and PS projects. So part of the goal of that program will be to do that. That will actually give us – we think can improve clinical performance, ease-of-use in the surgery, as well as Mike it will be part of gross margin improvement for us.

[Mike Weinstein:]

That’s helpful. Thanks Mark.

[Mark Augusti:]

Thank you.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from the line of Larry Biegelsen with Wells Fargo. Your line is open. Please go ahead.

[Larry Biegelsen:]

Hey, guys, good afternoon. Thanks for taking the question. Paul, couple of questions on the quarter. Just trying to understand the underlying growth in the U.S. given all the moving parts; I think plus 9% year-over-year, but you benefited a year ago. I think catch up from the recall but it sounds like there was a one-time benefit this quarter. Can you help parse out what you see is underlying growth in the U.S.? And I do have a follow-up. Thanks.

[Paul Weiner:]

Yes, so as we have talked about in the last call, as far as 2016, the first quarter of 2016, there were – it left us with a difficult case because of the late surgeries related to the recall and that amounted somewhere estimated around $3 million to $3.5 million of additional revenue that we recognized in the first quarter of 2016. That’s not necessarily reoccurring revenue, it was delayed from 2016. So you need to take that out and that obviously, got it to the underlying growth, but here we’re talking about is 10% to 15%. But certainly this is – the first quarter by certainly much greater than the 9%. And then, when we’re looking at the performance in the first quarter, there are a couple of items that I mentioned that helped off the first quarter. And the first one – and we’re still talking about $2 million in excess of our expectations for the first quarter. And about half of it was related to surgeries in the second half of December that really happened in January because of the holidays around the end of December. So that helps us out by about $1 million in the first quarter. The second fee is related to the conversion rate. And the conversion rate ended up being much higher in the first quarter than historical averages and that helped us out by about $1 million. We would expect that that higher conversion rate not continue going forward, which means that we could have a fall in from the second quarter into the first quarter on that. We had a same effect actually in the second quarter of last year where our conversion rate was higher in the second quarter and we ended up with a pull in from the third quarter. So we’re in the same situation here with the first quarter, having a higher conversion rate potentially pulling in from the second quarter.

[Larry Biegelsen:]

That’s helpful. Just doing a math, Paul, is it – as you saying that, if you do the math the underlying growth in the U.S. looks like it was 20%, maybe even greater, just making those adjustments. Would you agree with that? And just lastly for me, maybe could you help us understand what’s going on outside the U.S.? I know you talked about changes in Germany. In the last call, your OUS performance was much better than we expected this quarter. How should we think about the remaining quarters this year? Thanks for taking the questions guys.

[Paul Weiner:]

Yes. The underlying growth you’re talking about in the first quarter in the U.S., I would agree with that, an excess of when you do the adjustments. The rest of world, I think we did a little bit better than we expected on the partial business related to the reimbursement, but we don’t expect that to continue throughout the rest of the year. And overall, we did have a little bit weaker performance in our German business in the first quarter. Keep in mind that OUS, just like the U.S. had the difficult ops because of the delayed surgeries as well as in the first quarter, which did affect our growth percentage OUS.

[Larry Biegelsen:]

Thanks for taking the question guys.

[Operator:]

Thank you. And our next question comes from the line of Kyle Rose with Canaccord. Your line is open. Please go ahead.

[Kyle Rose:]

Hi, great. Thank you for taking the questions. Can you hear me all right?

[Mark Augusti:]

Yes, Kyle.

[Kyle Rose:]

Great. I’m in the airport, so I apologize about any background noise. But I just wanted to ask one quick question on the new product discussion, and then just a follow-up on the outpatients. On the new product discussion, I realize your previous management have talked about just the fact that you got the adjust in time delivery of inventory and the ability to innovate much of your products without large capital installed base from instrumentation standpoint can allow for quicker market entry or quicker innovation on a product plan. Just wanted to see what your thoughts are on the timing of new products? And when you think these may be able to contribute? And then, you also mentioned outpatient is being a focus moving forward. Just wondering if you could give us an idea where outpatient is as a percentage of U.S. revenues now? And then how do you think about that as a growth contributor moving forward?

[Mark Augusti:]

Sure, this is Mark. Kyle, relative to iUni and iTotal projects, at this point from a timing standpoint, we would expect that we would be on a limited market release, being able to get kind of first practicing market in the second half of 2018, we’re still flushing out a couple of things around the iTotal project, which is a little bit of a bigger project. But certainly by Q4 of 2018, I would think on both the new iUni and the new iTotal, we could be in the market with our clinical versions. So I think that’s pretty fast comparing to traditional systems. As it relates to outpatient surgery, we – I don’t think we’re prepared to give that breakout at this point. It’s a very new space. We’re looking at that whether there’s – I don’t know if there’s a general acceptable classification around that yet. So I don’t know that I would want to hazard a number, I don’t know, Paul, if you have any thoughts on kind of outpatients surgery break out?

[Paul Weiner:]

Yes, I know that’s difficult at this point in time, we’re still in the process of hiring somebody just be dedicated to growing that side of the business.

[Mark Augusti:]

Yes, and to be clear, the way to envision that role is it’s kind of a sales marketing contracting role where all role is one. That space is moving pretty quickly. We think we’ve got a great opportunity with our product concept and the logistics and the way we do things here at ConforMIS, but there’s still a lot to be involved as far as how you work with the providers and the payers around outpatient needs. So we want to be – our goal is to be at the forefront of that, so that’s why we’re looking to bring someone on that will focus in that area.

[Kyle Rose:]

Okay, great. And then just one follow-up. I think in the last call you talked about, in 2017 you would be in a bit of a transition year as you really took charge and made some strategic and infrastructure changes to the organization. Just wanted to see your thought process on that now. And just how you view the cadence for some of those changes layering into the business as far as your driving top line growth over the course of the next 12 months to 18 months? Thank you.

[Mark Augusti:]

Yes. Well, it’s like anything else. Some things are better than expected, some things are not. But in general, we’re on plan and I think as you can tell from messaging here and there’s going to be change and change is always a challenge to manage. So I would say that it’s kind of as anticipated at this point. Thank you, Kyle. Operator, next question.

[Operator:]

Thank you. Our next question comes from the line of Steve Lichtman with Oppenheimer & Company. Your line is open. Please go ahead.

[Steve Lichtman:]

Thanks. Mark, you talked a lot about the initiatives underway with the commercial organization. I was wondering if the part of that you expect net sales rep addition this year? And if so, about how much growth would you expect in the sales force?

[Mark Augusti:]

So, as you know, we don’t give out our rep numbers, but I can absolutely say we do expect the net addition. Now obviously, you always have unanticipated attrition and whatnot that we have to deal with and we’ll backfill those. But in general, yes, the plan is definitely to have net sales/agent additions.

[Paul Weiner:]

And just to give a little bit more detail on that. We are targeting the third quarter to bring on a number of additional reps.

[Steve Lichtman:]

Okay. And then, just second question just a follow-up on outpatient side. You mentioned hiring someone obviously to lead that effort. But where do you envision that going over the next couple of years? Do you envision a separate sales force calling on the ambulatory surgery centers? How do you see this program working for you generally over the next couple of years?

[Mark Augusti:]

So, yes – no, I don’t envision different sales force at all. As I said, because of our unique selling model, I think we’re well positioned there. But part of what we have to do I think is help be the change agent that can help providers, physicians feel comfortable about outpatient surgery program and we have to be knowledgeable on all the things that it takes to make that program successful. Because we’re all committed – look, we’re all committed to better patient outcomes, and a safe environment for total knee patients that given in outpatient setting. So that’s why I say this, this role is I see is a coordination role, and frankly helping to refine the marketing message, and then to train our existing sales force about what it means to do outpatient knee surgery. Because you know, it’s not exactly the same as inpatient. And as I go around and talk to physicians, there’s a lot of interest around this, but again, there’s a lot of questions. So that’s kind of the way I envision it. But absolutely, it would be the same sales force, but it will be a tailored kind of targeted message when they’re looking at outpatient opportunities.

[Steve Lichtman:]

Got it. Thanks guys.

[Operator:]

Thank you. And our next question comes from the line of Bruce Nudell with SunTrust Robinson Humphrey. Your line is open. Please go ahead.

[Bruce Nudell:]

Good afternoon. Thanks for taking the question. Depending upon how you slice the revenue, a portion of that in the U.S. market, it looks like you have 6% to 8% partial knee share on a revenue basis, and 3% to 4% CR share. This quarter there was a decline in that base business and it seems sluggish. Have you guys asymptoted in that sector? Or is it just the sales force is focused on the PS, which is bigger, arrogant revenue opportunity?

[Mark Augusti:]

Well, there’s no doubt that the PS is a bigger aggregate revenue opportunity, Bruce. But it’s a fair question. Look, I don’t think we’ve reached some point where we are falling back, at least that’s not the expectation I have. I think we’ve got a great product in the CR and a great product in the PS. And I think, again, we talked about this in the past, there’s going to be some of our surgeons that move over to PS and I think we’ve kind of seen that play out now in the fifth quarter, so as the PS launch, but we are – but I still think that we have an opportunity in the CR and I’d like to think that as we keep up our commercial performance – or excuse me, improve our commercial performance, we’ll see that not just in PS, but also in the base business.

[Bruce Nudell:]

And just to clarify, when I talked to investors, they routinely push back and say well, the surgeon I talked to said he’s reluctant to use ConforMIS because if it doesn’t work in that particular instance, there’s a big problem and he doesn’t have “bailout”. Could you just speak to the frequency of which that happens? And perhaps also speak to how are you training your surgeons to deal with that probably unlikely circumstance?

[Mark Augusti:]

All right. Well, again, this is a question even in my diligence, I ask myself and it’s certainly a question that’s going to come up, we need think about. What I can say is, when I do my own channel checks with my ConforMIS users, I’m not going to say it’s never happened but we’ve done 50,000 procedures or more to-date and I’d probably can count on less than – well, I can certainly personally count less than one hand the number of times that a surgeon admits to me that there’s been some need to change the surgery during the procedure. So what I would say and what I do say personally to surgeons that are considering trying ConforMIS is, there’s a lot of work in the industry around, if you feel you need a backup plan there for your first few cases, by all means, do that. But when you talk to any of our longtime users and our high-volume users, it’s just not something that you have to be concerned about. And even in – let’s say, even in traditional knee surgery, things happen that require them to switch systems or to change out that have happened. I would say our occurrence of that is at least, again, I don’t want to say something out on specific study too, but I would say it’s probably not any greater rate than I’m aware of. So I think it’s a fair thing that we have to get over and that’s part of what our sales force deals with everyday. But we’ve got a great product that’s delivering improved outcomes and I think that concern it is worth overcoming to deliver better patient results.

[Bruce Nudell:]

Thanks so much.

[Mark Augusti:]

Thank you, Bruce. Any other questions?

[Operator:]

Thank you. We have a follow-up question from the line of Larry Biegelsen with Wells Fargo. Your line is open. Please go ahead.

[Larry Biegelsen:]

Hey guys, thanks for taking the follow-up. Mark, I heard you – I think the prepared remarks talk about potential collaboration. I think that’s the first time I have ever heard ConforMIS talk about that. Did I hear correctly? And could you elaborate on what you might be thinking about? Thanks for taking the question.

[Mark Augusti:]

Yes, you did read me right and that probably is maybe a different statement. There’s nothing – certainly nothing that I’m prepared to talk about or nothing that I would say is there. But the point is we are an orthopedic company, we happen to have a different process and different model, but we’re looking to grow the company. So we look at technology opportunities, we look at those opportunities either through acquisition, development opportunities, or we look for partner – partnership opportunities and this can both be insourcing or potentially outsourcing. So nothing Larry I’m afraid to talk about today other than to just to state publicly that we’re considering – things around certainly considering those things and we are looking at them.

[Larry Biegelsen:]

Fair enough. Thanks for taking the question, Mark.

[Mark Augusti:]

Yes.

[Operator:]

We have a follow-up question from the line of Bruce Nudell with SunTrust Robinson Humphrey. You line is open. Go ahead.

[Bruce Nudell:]

Hi, Mark. Just one follow-up question. Stryker really highlighted the Mako robot. And both your system and their system have a heavy dose of pre-planning that takes almost a lot of the ambiguity out of every case. You guys go about reducing variability in different ways of course, but their argument with regards to the ultimate superiority of the robot pertains to the fact that they can adjust within the case to any soft tissue anomalies that won’t show up on a CT scan. And could you just speak to the evidence that you have to-date that in fact your implant which is kind of perfect to begin with really doesn’t face much problem in the field in dealing with soft tissue anomalies?

[Mark Augusti:]

Yes, absolutely. So a couple of things. First off, look, I will – I understand that a robot can take the variability out of making a surgical bone cut and I think that’s the real value of that. But at the end of the day Stryker is still focused on trying to make a challenging surgery better, the reason why the surgery is challenging is because the surgeon is using a tool that’s 30 years old; they’re using an ill-fitting L-shaped implant. At ConforMIS, we are taking modern technology and we’re creating a better implant that is matched to the patient’s anatomy. And as a result, as we’ve seen in papers that have reported this or certainly posters reported this, we have less of these soft tissue releases. When you have to re-cut or redo something, it’s because you’ve got a problem with alignment o rotation, you’ve got a problem with fit. They’re going to have to do that more often; and so, yes, the robot is going to help them do that. Our system, the incidence of having to do that as reported in these posters is much less. Now having said that, we still have to have a good surgeon and a well trained surgeon put our implant in. And if it cuts off a millimeter or two, we have ability in our iJig for them to be able to make that adjustment when they go. But the number of times they have to do either a ligament release or some type of an adjustment on cut, especially an adjustment on cut is very, very rare. And we feel like at the end of the day they get a better outcome and we think that our solution what we’re providing will be a much bigger improvement over historical or traditional off-the-knee – off-the-shelf knee surgery than the robot will provide, I will allow that. Hopefully they’ll demonstrate it through their own clinical trials and their own research, and not just kind of anecdotal information. But I will allow that robot should allow for more reproducible cuts. That is the whole question about the health economic value of that, but I’ll leave that for the robot companies to decide at this point. But it’s a great question, Bruce, and we think we’ve got a better mousetrap, as it relates to that.

[Bruce Nudell:]

Thanks so much.

[Operator:]

Thank you. And this does conclude today’s Q&A session. This also does conclude today’s program. Ladies and gentlemen, thank you for participating in today’s conference. You may all disconnect. Everyone have a great day.