Doug Sherk – IR Karen Zaderej – President and CEO Bob Johnston – CFO.

Jeffrey Cohen – Ladenburg Thalmann John Gillings – JMP Securities Nathan Cali – Noble Financial.

Greetings and welcome to the AxoGen Incorporated Third Quarter 2014 Results Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder this conference is being recorded. It is now my pleasure to introduce your host Doug Sherk.

Please go ahead..

Thank you and good afternoon everyone. Thank you for joining us today for the AxoGen conference call to discuss the financial results for the third quarter ended September 30, 2014 as well as recent corporate developments including the financing provided by Oberland Capital.

Following today’s market close, AxoGen issued two press releases announcing its third quarter financial results and the completion of a financing agreement with Oberland Capital. Both releases are posted on the company’s website at www.axogeninc.com.

In addition, the company’s 10-Q for 2014 third quarter and 8-K regarding the transaction with Oberland Capital were filed with the SEC earlier this afternoon. Today’s call is being broadcast live via webcast which is available on the AxoGen website.

Within an hour from the end of the live call a replay will be available on the company’s website at www.axogeninc.com under Investors. Before we get started I would like to remind you that during the course of this conference call, the company will make projections and forward-looking statements regarding future events.

We encourage you to review the company’s past and future filings with the SEC including, without limitation the company’s Forms 10-K and 10-Q and today’s 8-K which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements.

These factors may include, without limitation, statements regarding product development, product potential, regulatory environment, sales and marketing strategies, capital resources or operating performance. And with that I would like to turn the call over to Karen Zaderej, President and Chief Executive Officer of AxoGen.

Karen?.

Thank you Doug, and good afternoon everyone. Welcome to our third quarter 2014 conference call. Joining me on the call today are Bob Johnston, our Chief Financial Officer and Greg Freitag, our General Counsel and Senior VP of Business Development.

Today we reported on two significant milestones for AxoGen and in doing so we provided a clear path to increased growth as well as shareholder value. The first milestone AxoGen achieved was another record quarter of revenue.

The second milestone is we entered into a new financing agreement with Three Peaks Capital, an indirect wholly-owned subsidiary of Oberland Capital Healthcare Master Fund LP. The Oberland agreement allows us to retire our existing royalty agreement with PDL BioPharma and substantially lower our future annual debt payments.

Bob will walk through the details of the transaction in a few minutes but I’d like to take a moment to express my thanks to Oberland Capital, PDL BioPharma and the AxoGen team for working together to make this transaction happen. So let’s start with an overview of the quarter and the execution of our strategic plan.

Our record quarterly revenue of $4.67 million represents a 58% increase over the year ago third quarter. We ended the quarter strong and this momentum continued throughout the month of October. In addition to the record revenue, our gross margins expanded to over 80%. We delivered improved performance across our key metrics.

The contributing factors that drove our revenue growth include a number of accounts using two or more of our brands increased by 50% over the same quarter in 2013. Revenue provided by accounts purchasing two or three of our products has increased by nearly 80% from last year’s third quarter.

This was a key objective for our team this year and our focus has delivered an impressive growth rate. And finally, we have also focused on driving penetration from existing accounts. The revenue contribution from these existing customers in the third quarter of 2014 was nearly 88% of our sales.

Peripheral nerve repair is an large and untapped market opportunity that is estimated to be $1.6 billion. I believe we are uniquely positioned to provide the best solution to this market.

Our comprehensive product portfolio creates a competitor barrier to entry and it addresses a rising issue among surgeons, how to provide treatment options for patients in a safe and cost effective manner without the potential complications of a second surgery.

AxoGen’s portfolio of nerve repair products provides surgeons with the off-the-shelf options to restore of life to patients suffering from peripheral nerve injury. Our product eliminates the need for a second surgery and offers new options to treat the more than 900,000 nerve injuries that will be surgically repaired this year in the United States.

This is one reason why our value proposition is compelling and explains why surgeons are beginning to migrate to our portfolio of regenerative nerve repair products. I’d like to take a moment and review the growth strategy that our team has successfully executed.

Our portfolio of off-the-shelf products addresses all of the surgeon’s nerve repair and protection needs. The first of these products is Avance Nerve Graft. It is donated human nerve tissue processed through our proprietary cleansing and re-sterilization [ph] method and intended for the surgical repair of peripheral nerve gaps.

Next is AxoGuard Nerve Connector, the only extracellular matrix coaptation aid for tensionless repair of severed peripheral nerves. AxoGuard Nerve Protector is the only extracellular matrix surgical implant used to protect injured nerves and to reinforce the nerve reconstruction while preventing soft tissue attachments.

So let me review how we are addressing the market. It’s a pioneering marketing and sales approach we cover our four pillars of growth. First we are building market awareness.

To make surgeons aware of the new treatment options we are interacting with them at hospitals, clinical conferences, promotional events and the surgeon education courses we sponsor.

At two recent industry conferences the American Society for Surgery of the Hand and the American Association of Oral and Maxillofacial Surgeons our efforts manifested in to increased attendance at our events. We exceeded our goals and we are pleased with the increased surgeon awareness. Patient stories are the real validation of our product’s impact.

Ana [ph] a 20 year old college student athlete was one of the several million people who have their Wisdom Teeth removed each year. However on the day following the procedure Ana noticed that her tongue was numb and she had no feeling. Ana’s parent’s reached out to Atlanta Oral Maxillofacial Surgeon, Dr.

Shahrokh Bagheri, who evaluated Ana and recognized that her symptoms were consistent with a severed lingual nerve, the nerve that provides sensation for the tongue. Knowing that the best outcome for a severed oral nerve injury happen with timely treatment, Dr. Bagheri recommended surgery. Dr.

Bagheri aligned Ana’s severed nerve ends and wrapped the repair site with an AxoGuard Nerve Protector, to provide protection from soft tissue attachments during the healing process. Today Ana is back at school and her central recovery is well underway. We were delighted to know that our product played a role in her recovery.

Our second pillar of growth is focused on surgeon education and the development of surgeon advocates. Our professional educational program supplements our local education efforts and our peer-to-peer education opportunities where we review the latest science and best practices in surgical nerve repair. We’ve held five of these in the past 12 months.

These are highly successful events from both the surgeon and the company perspective. We’ve observed a greater than 60% increase in revenue from the surgeons who attend the events and anecdotally we’ve heard surgeons telling us the many ways they are changing their treatment practice upon learning from the expert faculty.

Let me share an example of the type of immediate impact that we see following one of our best practice courses. An upper extremity surgeon from Georgia who attended the course that we held three weeks ago was new to AxoGen products.

Following the course he’s already used our AxoGuard Nerve Protector in a carpal tunnel release [ph] procedure and has scheduled three cases in which he plans to use our Avance Nerve Graft. The third pillar we focus on is growing our body of clinical data. We continue to make progress building data to assist surgeons in their decision making process.

We’ve initiated and sponsored the largest multi-center clinical study in peripheral nerve repair, called the Ranger Study. At the end of the third quarter the Ranger Study included 558 nerve repairs and results from the study have already been published in two peer reviewed journals and presented at more than 30 clinical conferences in the U.S.

and in Europe. What continues to impress the surgical community is that the outcome for Advance Nerve Graft remained consistently positive even as the population of repairs increases. The final and fourth pillar is solid sales execution. We’ve continued to grow our sales force strategically and focus on key markets.

At the end of the third quarter our sales force consisted of 23 direct reps. They have a solid understanding of the science of nerve repair and the ability to deliver a clear and compelling message about all three of our products. As I mentioned previously throughout this year our focus has been on breadth, depth and quality of our accounts.

Our primary goal is to penetrate deeper into existing accounts since those that order all three of our products generate five to seven times more revenue than an account ordering just one product. Slightly more than half of our reps have been with us for at 12 months and their knowledge about our product portfolio is contributing to our growth.

At the same time over half of direct reps have been with us for less than a year. We have several emerging start in this new group and we expect their productivity to increase in the coming quarters.

Additionally in the third quarter we had 24 independent agencies in the field representing our products combined with our direct reps we have a sales footprint covering most of the United States. We see substantial upside longer term in our current business of upper extremity as well as expansion opportunities in other areas of nerve repairs.

I’ll come back to this after Bob provides you with some additional details on our third quarter results and the transaction with Oberland Capital.

Bob?.

Thanks Karen and good afternoon everyone. I’ll focus my comments on financial highlights during our third quarter. But first let me start a few moments on the financing that retires our previous royalty agreement with PDL. Oberland Capital is a private investment firm focused exclusively on investing in the global healthcare industry.

The team possesses significant financial and operational expertise build throughout long tenures in the healthcare industry. Three Peaks Capital SARL, an indirect wholly owned subsidiary of Oberland Capital Healthcare Masterfund LP collectively Oberland Capital has provided us with $28.55 million in cash.

We used this cash along with $1.75 million of our capital to retire the existing PDL royalty agreement. The company also issued 1.75 million of common stock at market without warrants to PDL for cash. PDL investing approximately $1.75 million in AxoGen further validates the company and its progress.

Through Three Peaks, Oberland Capital has extended us a six year $25 million term loan with interest only payments due quarterly with a final principal payment due at the end of the six year term. The interest rate under the new agreement is 9% plus the greater of LIBOR or 1% which resulted in a rate of 10% at closing.

Under certain conditions the company has the options to draw additional $7 million during the period of April 1, 2016 and June 29, 2016. We also entered into a 10 year revenue interest agreement with Oberland Capital.

The royalty payments are based on a royalty rate of 30.75% of AxoGen’s revenues up to a maximum of $30 million in revenues in any 12 month period. The company has the option to prepay the term loan in the revenue interest agreement at any time in whole or in part.

The overall projected yearly debt payments of approximately $3.6 million for the term loan and the revenue interest agreement represents a significant reduction in debt payments yearly.

As compared with our previous agreement we expect the same $3.2 million in total debt payments in 2015, $5.6 million in 2016 and $5.4 million in 2017 and for each year beyond. Again these numbers reflect the annual reduced debt payments we have achieved under the new agreement.

In addition to the term loan and revenue interest agreement Oberland Capital also purchased 3.55 million of common stock of AxoGen at market and without any warrants, validating their belief in AxoGen and its prospects.

We believe our ability to attract well regarded partners, first with PDL and now Oberland Capital demonstrate the potential of the peripheral nerve repair market and AxoGen’s leadership position in this market. Now let me discuss our quarterly results.

Our revenues increased 58% to $4.7 million for the third quarter compared to the same time period last year. This growth is primarily due to increased product usage by existing accounts, which as Karen noted has been a major focus of our strategy for 2014. We also have approximately $57,000 in grant revenues.

Gross profit for the quarter increased to $3.8 million or 64% compared to $2.3 million for the prior year quarter. Gross margin expanded to 80.8% compared to 78% in the year ago third quarter, reflecting price increases in March 2014, manufacturing efficiency and a positive product Now let me turn to expenses.

Sales and marketing expenses increased approximately 17.9% for the quarter primarily due to increased investments in sales and marketing efforts, including surgeon education events, and trade shows. As Karen referenced earlier we are already seeing a strong positive impact in our results from the surgeon events.

Sales and marketing expenses as a percentage of sales declined to 59.6% from 93.2% in last year’s third quarter as a result of our strong revenue increase. General and administrative expenses increased 33.5% over the 2013 third quarter.

The year-over-year increase is due to several factors, including increased compensation which included non-cash stock option compensation and increased insurance expenses. As a percentage of sales G&A expenses were 35.2%, down from the 41.7% in third quarter last year.

We expect G&A expenses to increase minimally overtime and to further decline as a percentage of sales and sales increase. R&D spending increased 14.6% to a total of $681,000.

The increases are related to clinical activities, including expenses this year related to the Biological License Application or BLA for the Avance Nerve Graft as well as increased investments in our product development pipeline. As a percentage of sales R&D expenses declined from 20% to 14.6% for the same period last year.

Interest expense was up 13.6% to approximately $1.4 million due to the increased interest related to the PDL royalty agreement from higher revenue and interest accrued related to the royalty agreement.

For the nine months ended September 30, our revenues increase 51%, to slightly over $12 million compared to approximately $7.9 million for the nine months ended September 30, 2013. So we have already surpassed our full year 2013 in just the first nine months clearly demonstrating the progress in our strategies and continued business momentum.

Gross profit increased 56% to $9.5 million, compared to $6.1 million for the prior nine month period. Gross margin improved to 79.3% for the nine months ended September 30, 2014 compared to 76.9% for the same period in 2013.

Total cost and expenses for the first nine months increased to 16.6 compared to 12.9 in the year ago period primarily due to funding our sales and marketing activities in addition to brining in personnel to meet our growth prospects.

During the quarter we continued to actively manage our cash as the monthly burn rate declined from $1.1 million per month in the first quarter to $900,000 per month in the second quarter to $800,000 per month in the third quarter. We ended the quarter with $11.8 million in cash.

We have sufficient cash resources to meet our operating needs for at least the next 12 months. With that I’ll now turn it back to Karen for her summary comments..

Thanks, Bob. With the success and continuing momentum of our current focus in upward upper extremity nerve repair we have been evaluating expansion efforts into other nerve markets such as plastic surgery to address impotence and incontinence, opportunities in oral and maxillofacial surgery, lower extremity nerve injuries and breast reconstruction.

The oral and maxillofacial surgery market is estimated to be a $129 million opportunity. Nerve injuries in oral maxillofacial surgery are unmet clinical need that we are able to address with our current product portfolio.

As we discussed on our last earnings call following successful completion of a pilot launch into the oral max we rolled the launch out to our entire field sales team in July of this year. In fact, this past weekend we hosted a two day professional educational events for Oral and Maxillofacial Surgeons and dentists hosted by Dr.

John Zuniga from the University of Texas Southwest. Surgeons from around the country flew in to attend this event which included didactic and hands on surgical skills training.

We are less than one week following the end of this course but I can already share with you that the feedback from the course was extremely positive and we scheduled cases with three surgeons who attended the course. With respect to prostate cancer surgery enrollment and follow up in the pilot clinical study is completed.

We took the data analysis from this preliminary study in the first half of 2015. Additionally we are looking at the potential of expanding our existing products into other surgical areas such as nerve entrapment in the lower extremities and the reconstructive breast market.

In summary we had a strong third quarter and we had continued momentum throughout the month of October.

Our year-to-date results reflect the optimism earlier in the year when we introduced our revenue objectives and we are now more confident than ever that we’ll exceed our original 2014 revenue target of $16 million while maintaining gross margins of at least 75%.

Before we take questions we would like to let investors know that we’ll be at the Green Capital’s 2014 Life Science Conference on Monday November 24th in New York City and we’re also available to meet on Tuesday November 25th in New York City. Finally we will be San Francisco during the JPMorgan Conference and EVC is arranging our schedule.

If you would like to meet with us during any of these events please do let Doug know. With that thank you and Chad we are ready to take some questions..

Certainly, thank you. We will now conduct a question-and-answer session. [Operator Instructions]. Our first question comes from Jeffrey Cohen with Ladenburg Thalmann. Please go ahead..

Hello Karen, Bob, Greg and Doug, can you hear me okay?.

Yes we can..

Yes we can, Jeff..

Good afternoon, sorry for any background noise, so could you talk a little bit or can you better sense of revenue composition for the quarter specifically for the percent from Avance?.

Yes approximately Jeff our revenues are 55% Avance on a revenue basis and 45% AxoGuard..

Okay and it looks like – is it safe to say from a breakeven perspective that it appears as your costs appear to be remaining on a pretty good control for the quarter, is it safe to say that breakeven could be approximately $7 million to $7.5 million on a quarterly basis, is that a good estimate from our perspective?.

At this point Jeff as you know we haven’t provided guidance beyond 2014 and we’re going to continue to evaluate our needs as we grow the business..

Okay.

And as far as the PDL arrangement just trying to get my hands around the money exchange and the time frame so the money borrowed from October 2012 was $24 million [ph] so you repaid back $28.55 million this quarter plus obviously the interest payments over the last eight quarters plus approximately 643,000 shares which represented an additional $1.75 million?.

Yes the total that was repaid to PDL was $30.3 million. The $28.55 million that we received from Oberland and then $1.75 million came from our capital but then we turned around in sold $1.75 million in shares to PDL..

Okay, and there was about another $68 million that was paid in interest over the past eight quarters, so the total IRR was 31% is that accurate?.

We don’t go into those details of what the IRR was for PDL. I can tell you that on our books at closing our notes payable to PDL were $28.7 million and then [indiscernible] additional negotiations that number was $30.3 million off the original amount was $20.8 million that they extended us in October 2012.

Jeffrey Cohen – Ladenburg Thalmann Okay, got it.

And then lastly on Karen I wondered if you could discuss a little bit about the preparation or the beginning for the BLA trial for Avance could you kind of outline maybe some of the parameters and anticipated time period and cost that we might see?.

So the BLA trial is – we are gearing up for that as I have mentioned before the FPA was approved quite some time ago with the FDA. So the protocol is set and approved by the FDA.

Again since we are doing this in parallel we are actually doing multiple things in parallel, since the product is already on market and we are transitioning over to the license Biological License and so we are in the final phases of completing the IND which typically you do first before the protocol but we did them in parallel.

We are looking to begin involvement of that trail starting right after the first of the year, sometime in the first quarter but of course that’s subject to discussions with the FDA as we finalized our readiness with them..

Okay.

And duration and cost anticipated?.

Yeah, so the study costs are about $2 million.

It’s actually a very economical regulated biologic trial for a lot of reasons but it will take us about three years to complete that trial once we begin enrollment it’s a two year enrollment period with a one year follow-up and then of course after that there will be data analysis and the actual BLA submission.

So there another year on that top of that in terms of data analysis by the time we are done..

Okay. Karen that does it for me. Thanks a lot of for taking the questions..

Thank you Jeff..

Thank you, Jeff..

[Operator Instructions]. Our next question comes from John Gillings with JMP Securities..

Hey, guys can you hear me okay?.

Yes, John..

Yes, John..

Okay, great. Well congratulations on the financing..

Thank you..

Thank you..

First, just wanted to ask a follow-up there and make sure I got my head around it so your annual financing cost for debt will be $3.6 million and then in the second quarter of ‘16 when you can take down additional the $7 terms will that be under the same terms, same interest rates?.

Yes, John..

Okay, all right, thanks. And just want to take a quick look at the gross margin, 80.8% was a little higher than we were modeling.

Is that sustainable, was there anything sort of one time in the quarter?.

No, you know it definitely John is dependent on what our product mix is for a particular quarter and so we did experience a favorable product mix during the third quarter. We also had some manufacturing efficiencies and we were able to continue to take advantage of the price increases that we had in March.

We are comfortable John that it will continue to exceed 75% but we want to indicate that it all – a lot of it depends on the product mix as we you know go from quarter to quarter..

Okay, that’s helpful. And then in terms of reps, you guys have talked about adding four to six new reps in the back half and it looks like you added one during the quarter.

Given the momentum you have seen in the sales and the refinancing you know maybe freeing up some of the cash flow, any update you can give us on what hiring might look like in the next quarter or two?.

Yeah, we are going to be adding some additions reps. We have shifted the timing somewhat because we really felt that we really wanted to focused our attention on the reps that we had existing in fields and continue to help their development and growth.

Having that said that we will be adding additional reps and going forward, I would still say on an annual basis you should look at we would be somewhere in the six to 10 range that we would be adding reps..

Okay, thanks. And it looks like the majority of the growth in the quarter came from an increased penetration in existing accounts but we were at the meeting in Boston and it seemed like the attendance was pretty solid.

Is this something or it just takes time for the new guys to sort of ramp-up and get going or was there something in the quarter like a bunch of hospitals getting through the committee process or something like that. Just any color you can give us there will be helpful..

Yeah, this is not based on really new accounts as a big driver, really the growth has been and our focus has been on building and penetration in account already in and we do continue to add new accounts especially in new territories but the lowest hanging fruit and a big opportunity for us is to increase our penetration into the accounts that we are already in and what we have seen in this area is that surgeons that we are really starting to help people reset what they have done in nerve repair and it is something completely different than what they were trying to and often intend and so this is an evolutionary process where surgeons want to hear from experts, things like our professional education events, they want to try some implants in their own hands and see their own results and they want to evolve as they continue to adapt the products and that’s the growth that we have seen.

I think things like the conferences that we had earlier this year were very good help for us and surgeons continue to get excitement and growth from some again hearing the opportunities and the cases that they have heard from case experts, so that was a big boost as well..

Okay, and then just last one, I apologize if missed it earlier.

Would you be willing us to tell us what pricing contributed to growth in the quarter?.

You know what we have said before in our past earnings call is it was mid-to high single-digit was the contribution..

And we took the price increase in March so the primary impact was in the early part of the year..

Okay. And so that will anniversary next March. All right, that’s it for us thanks..

Thanks John..

Thank you, John..

There appears to be no further questions at this time so, I’d like to turn the floor back over to management for any closing remarks..

Thank you everybody for joining us. It looks like there might be additional question from Nathan..

Sure. This is the operator. We do have a question from Nathan Cali with Noble Financial. Please go ahead, Nathan..

How are you doing? I am sorry I was on speaker trying to ask a question, so maybe that’s why you didn’t answer..

Yeah, thanks Nathan. I got interrupted, just didn’t say good bye but I am glad that you are here..

So, I just a lot of my questions were answered I just want to ask you guys what do you think the major key differences are – I haven’t gone through the significant detail yet between PDL and your new agreement, and what would you point to there as either the same or not the same?.

So, I think they are all significant benefits. What we have stressed and Nathan to your question, it is going to substantially reduce yearly debt payments compared to the prior deal and we have been able to take advantage of current market terms today that has better positioned the company.

So that is the biggest benefit to the new financing that we have done with Oberland. I will say that it is a six year deal that’s interest one.

The principal is due at the end of the six year term and we have the ability to prepay which we didn’t have before and they have also then taken an equity position what we think is also favorable in supporting AxoGen and its future prospects..

And I would add that this also gives us some additional potential $7 million that we could draw at the point again in the future and just extending our and increasing our options as we look at our growth plan..

And I think you guys made a comment your current cash, I believe $11 million is expected to carry you for next 12 months..

Correct. So 11.8 million at the end of September, that will take it for at least the next 12 months..

Okay.

And then on breakeven point you previous mentioned that from a top-line prospect what do you guys expect can be breakeven at?.

Well you know we mentioned earlier Nathan that, that at this point we haven’t provided guidance beyond 2014..

Okay..

And we will continue to evaluate as our business grows and the needs for the business..

Okay, all right, great. Thanks a lot for taking my question there..

Thank you, Nathan..

Thank you, Nathan..

Thank you. We also have another question and that’s from Bill Disenect with Merriman Companies [ph]. Please go ahead..

Yeah, good quarter guys.

I got a question for you within your market on your product lines primarily your AxoGuard competitors which appear to be products made by Cenova Lifesciences and Integra Lifesciences and [indiscernible] against AxoGuard can you tell me or do you know what the current revenue is for these products for these companies on a yearly basis? One, and two on the other side of business your Avance product which I would assume competes with Autograft which is taking a nerve from another part of the body and those are new competitor, now what the revenue possibilities are for that market on a yearly basis?.

So let me step back and talk about our competition. We compete against some off-the-shelf products and we also compete against Autograft which is taking a nerve from somewhere else in the patient’s body and transplanting it.

We also compete in many cases against direct repair where surgeons will not need to have a graft because there is not a substantial loss in deficit but they still need to align the two nerve ends. And so those are the ways that we compete in the transected nerve space.

In terms of those areas we compete a little differently than what the other off the shelf products do. We look first at the direct repair and believe that we offer a beneficial connector that helps to provide as a core patient aid alignment for those separate nerve ends. That’s the AxoGuard Connector.

That is a market that for us is growing but we see a lot of untapped potential there. As soon as there is a gap than we recommend the Avance Nerve Graft and so that’s algorithm that we teach and demonstrate to surgeons. Today surgeons comparatively will use a whole combination of things.

Some will use the off-the-shelf conduits, the hollow-tubes those are sold up to length of 30 millimeters although typically they are used in 10 millimeters or less. Some surgeons do use them longer but typically they are used in 10 millimeters or less and predominantly only in digital nerve injuries.

In all other types of injuries they are going to use an autograft. And so the biggest competition for us is autograft, again a technique not a product.

When I look at the rest of the market then in these digital nerve injuries with the hollow-tubes, the short graft use where the hallow-tubes are used the market size of that today we don’t have a great estimate because those product lines are fairly small.

So they are not broken out in the public documents but if we extrapolate from a number of sources we would estimate that it’s $50 million, $55 million market of existing sales today and sold by the three companies that you listed..

Thanks for that.

And then on the autograft side obviously it’s not a product but the amount of money that’s spent doing that your estimate is in hundreds of millions?.

It’s substantial, I guess I have never really thought about in total but what we do is we look at it in comparison to doing that same technique with our product and if you do an autograft it does cost quite a bit of money first and importantly in our healthcare system it’s not reimbursed separately. So it is not – it’s simply a cost for the hospital.

There is no financial payment for the autograft and an autograft takes substantial amount of operating room time. Typically it adds 30 to 90 minutes of additional operating room time. Hospitals will have their own estimates of what a minute of OR time cost but it’s anywhere from $67 to well over a $100 a minute. So that’s expensive.

There is supplies that are in to transact that second surgical site, there is risk of more complications like surgical site infections which today hospitals are financially responsible for if that patient readmits.

And lastly because you have got two different surgical sites in the body they will use general anesthesia and with our product they are able to go to a regional or local anesthesia. So it certainly helps to reduce the cost for the hospital..

Well that leads to next question, does that become more of a pull-through you are calling the surgeon to the hospital because of the efficiencies the hospital gains or do you find your sales as you have mentioned of course through the surgeon and then hospital adoption of product, end product set?.

So it’s actually both but the most important thing is the surgeon. The surgeon is the person who decides to care for that patient and then the hospital actually buys the product and so we do need to work with both. Both are concerned about outcomes but it is the surgeon’s decision on the final care of that patient..

Okay, thank you so much..

Thank you. With that thank you everybody for joining us on our third quarter 2014 call..

Thank you. The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..