Dan Gladney - CEO Greg Lea - CFO.

Suraj Kalia - Northland Securities Chris Lewis - Roth Capital Partners Matt Hewitt - Craig-Hallum Capital.

Good morning, ladies and gentlemen. And welcome to the ETRM Fourth Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to introduce your host for today’s conference Mr. Greg Lea, Chief Financial Officer. Sir, you may begin..

Good morning and thank you all for joining us on today’s call. I am pleased to be joined by Dan Gladney, our CEO, who will provide an update on our commercial progress and other recent company developments as well as discuss what is expected in the coming months. I will then review our financial results for the fourth quarter and 2015 full year.

Following our prepared remarks we will be available for questions during the Q&A session. As a reminder, this conference call as well as EnteroMedics SEC filings and website at enteromedics.com contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Our actual results could differ materially from those discussed due to the known and unknown risk, uncertainties and other factors.

These risks and uncertainties are described more fully in the company's filings with the Securities and Exchange Commission, particularly those factors identified as risk factors in the company's 10-K filed March 13, 2015. I will now turn the call over to Dan.

Dan?.

Thank you, Greg. And thank you all for joining us this morning. We are very excited to talk to you about some of the strategies we are implementing here at EnteroMedics' to deliver on the promise of vBloc Therapy as a treatment for obesity and its co-morbidities.

vBloc Therapy stands out as the highly innovative ground breaking treatment option for patients with obesity, bridging the gap between the short term options of diet, exercise and pharmaceutical interventions to traditional restrictive bariatric surgery.

How this translates into practice is that the patients who want to see meaningful weight loss, weight loss that can’t for example address their high held risk related co-morbidities such as diabetes and hypertension and the expense associated with these now have an option, an option that doesn’t pose with often severe social lifestyle and natural health consequences, consequences of restrictive bariatric procedures and that may include irreversible changes to the anatomy.

While our experience in the commercial setting has been limited since I joined a few months ago, anecdotal evidence from the field suggest that vBloc is delivering on exactly this profile, with outcomes that deliver on our promise to our physician partners and their patients.

Our opportunity as a company is to share this message with the right audience. Physicians, health care professionals, payers and patients and to continue revolving our product to meet the demands of our target audience.

So how do we win? We’ve made a fundamental shift in the company’s 2015 post approval strategy which at that time was focused on broad, national efforts center and position training to drive adoptions and patient coverage via the prior authorization appeals process to one that today 2016 employs highly focused regional, direct to patient marketing tactics, targeting cash pay patients aligned with our KOL or key opinion leaders and center specific partnering initiatives to drive our revenue goals.

Combined with a multi faceted reimbursement strategy that addresses surgeon and patient demand, clinical outcomes and cost affect to this data, societal support and lastly creating noise in the payers minds with several initiatives including our IDN or Independent Delivery Network and vBlock institute partnerships.

We are almost two months into the execution of our direct to patient marketing campaign to build vBlock awareness in our strategic markets. As mentioned, we are targeting cash paying patients in high income regions in managing these patients from initial contact all the way through surgery.

This focused effort is supported by the KOL surgeon partners integrated delivery networks for IDNs and our vBlock institutes. In less than two short months this program has been in place we’ve seen significant response in terms of filling the top of what we call our patient funnel.

With over a thousand individuals taking the first step of responding to our advertising and media campaigns. Beginning to end this process takes some three to six months to flow from the top for an inquiry or kicking the tires into the call center to where the patient is scheduling a surgery with support from each step designed to minimize attrition.

Many if not most of these calls are exploratory, and only a small percentage actually are planted. Let me walk you through this process for a moment. What I’d like to do is I’m going to have Greg play a radio ad that’s being played right now by Winthrop hospital in the New York City area concerning vBlock. Go ahead, Greg.

[Audio advertisement Clip] Thank you Greg. After the initial inquiry is made, we screen these patients who may be good candidates. Those that are transferred to our patient relationship coordinator or what we like to call our PRC and are further engaged about their journey to seek a surgical solution to their obesity.

PRCs are the custodians for the patient when they make the contact or the telephone call all the way to surgery. Most importantly, the PRC makes patients aware of a cash pay scenario they must face and what options that they have available.

Those patients that have met all the criteria in discussions with the PRC are then ready to schedule an appointment with our physician. To streamline this process further, we offer to make an appointment for the patient. From here we discuss payment options and options to address payers.

Patients are then scheduled and ready to have surgery to have a surgery consult with their doctor. The last step of course is surgery, the implant. Again, this process takes some three to six months beginning to end. With the kind of attrition at each step that one would expect with an elective surgical treatment.

Today, we are very happy with where patients are tracking through each step which is in line with our models and projections and hope to see the pay off of this strategy starting in the late second quarter timeframe.

Because of the relationship this process fosters between the Company as providers, we have the ability to execute on only those opportunities that are synergistic and will quickly and efficiently expand our commercial reach. As we discussed in our last call, we are focusing our efforts on 12 centers in 10 geographies to perfect our processes.

This includes major population centers in New York, Delaware, Connecticut, Georgia, Florida, Texas, Minnesota, California, Colorado and Washington. Our focused commercial strategy is also designed to be synergistic with our reimbursement and coverage strategy.

We believe that not only will focusing on select geographies allow us to identify patients able to use their own resources for a vBlock procedure, it will also allow us to generate vBlock’s patient demand with payers through our IDN partnerships and build upon our ongoing interactions with payer policy decision makers and our continued support of the prior authorization process.

Through these efforts, we expect to see two main effects.

First, we will establish vBlock as a medically necessary value based treatment which meets an unmet need in the care continuum, for treating obesity and metabolic diseases based on clinical outcomes data, economic evidence, societal support and physician and patient demand via independent delivery network partnerships and prior authorizations and appeals.

Second, the program will increase our products visibility with these targeted payers to the point of creating a critical mass with the potential of leading to a positive coverage decision. We must demonstrate the value of proposition for vBlock to support its use for a specific patient population.

To that end, in 2015 we presented data from our FDA study supporting the efficacy and safety of vBlock at two years and data that demonstrate the patients with moderate obesity with an obesity related co-morbidity achieved excess weight loss of 34%.

This data provides us insight into which patients are likely to be the most successful with our technology and therefore provides another data point to support our belief that in the commercial environment vBlock has the potential to be able to deliver a higher level of weight loss.

Also as part of building key opinion leader support, in January of 2016 we announced the publication of a physician statement on vBlock in the ASMBS Journal or American Society of Metabolic and Bariatric Surgery Journal, which is called the surgery for obesity and related diseases.

The ASMBS position statement reflects a strong level of support for vBlock within the bariatric community and an eagerness to continue exploring its potential in the clinical and commercial settings.

On the pharmacoeconomic front, we are working with experts in the bariatric field to publish the results of an economic bottling report that supports the cost benefits of vBlock therapy treating the diabetic patient. In an anecdotal point, I’d like to make here is from one of our early commercial patients that was implanted in late 2015.

This individual who was treated at Winthrop-University has seen an over 50 pound reduction in weight in his first three months. 50 pounds in three months and as and [ph] a discontinuation of his diabetes and cardio vascular medications that previously cost as insurance provider over $15,000 annually.

We look forward to continuing to publish data from both our clinical trials and commercial experience in addition to seeking out independent assessments with a goal of providing greater support of a long term efficacy and safety of the vBlock therapy.

We are very excited about our IDN and vBlock institute partnership strategy which is an avenue for bridging the gap between a self pay environment and national payer coverage.

Our independent delivery networks or IDNs are networks of typically self insured hospitals that ensure their staff directly as well as offer coverage plans to other employers in their market for new technologies and IDN many times will conduct a small trial in a short time frame to validate the results and then add this technology as a covered benefits for all their lives under contract in a matter similar to currently covered bariatric procedures.

In January, we announced our first of hopefully several successes in our independent delivery network and vBlock institute partnership program with the Winthrop University hospital in New York becoming the first employer in the United States to add vBlock as an included benefit for its nearly 8000 eligible employees and their spouses.

These partnerships have generated a lot of excitement as vBlock differentiates providers, like Winthrop in the market they serve. We are engaged in negotiations with other IDNs and look forward to providing you with updates as these discussions progress.

With that, I will now ask Greg to make a few comments about our current financial position and other company developments..

Thank you, Dan. Key to supporting our commercial efforts is the strong balance sheet, and we were pleased to announce in January the second tranche of our $25 million senior amortizing convertible notes offering announced in November of last year has closed and for proceeds of $11 million.

This adds to cash, cash equivalents and short term investments that totaled $7.9 million at the end of last year. The third and final tranche of this offering for proceeds of $12.5 million when completed will permit us to implement our current commercial plans through all of 2016.

Another important component of our balance sheet is the simplification of our capital structure. In 2016, we anticipate that some 1.2 million warrants will expire representing 32% of our total outstanding warrants as we ended 2015 resulting in a significant reduced number of diluted shares outstanding.

Together with careful expense management and the execution of our commercial strategy, we believe EnteroMedics' is well-positioned for value creation into the future. On to the income statement, for three months ended December 31, 2015, the Company reported sales of $149,000 with gross profits of totaling $78,000.

The Company reported a net loss of $6.8 million, or a negative $0.95 per share, including selling, general and administrative expenses of $5.9 million and research and development expenses of $1.7 million. For the full year ended December 31, 2015, the Company reported sales of $292,000 with gross profits totaling $167,000.

Also for the full year the Company reported a net loss of $25.5 million, or negative $4.27 per share. Operating expenses were primarily associated with commercialization of vBloc including marketing and reimbursement activities, the cost of supporting multiple ongoing clinical trials, and the continued development of vBloc.

Our focus is always on effectively managing our critical cash resources. For 2016 we have develop the budget that carefully manages the spend that supports our commercial strategy as well as been consistent with our spending levels for last year.

As expected increase spending will occur in sales, marketing and reimbursement as we grow our commercial activities offset by less spending on clinical and research areas. Sales, marketing, reimbursement develop clinical and regulatory spending will make up almost 70% of our total budget for 2016.

To conclude, we believe that we have capability to meet the requirements for commercial activities and revenues growth anticipated for 2016. With our commercial programs in place we plan to revisit our product development activities in an effort to reduce cost of our system that advanced our technology to the next level.

With that, I’d like to open up the call to questions for myself or Dan..

[Operator Instructions] And our first question comes from Suraj Kalia from Northland Securities. Your line is now open..

Good morning, gentlemen..

Good morning..

Good morning..

So, Dan let me start out, you gave some incremental information on your plans for commercializing vBloc, some interesting tidbits here.

The patient you talked about in a commercial setting that lost 50 pounds, can you give us an idea what the baseline weight was? I’m just trying to gauge what commercial efficacy is versus what we saw in the clinical trial?.

Sure, sure. First of all, that patient was little over 300 pounds. And he lost 50 pounds in the first three months. What’s interesting here and we’re excited about is and I stated since I walk in the door here.

I think that with the vBloc Achieve Program and now we can institute in a commercial environment which is a program that offers the patient support, follow-up, meeting with his doctor and the staff on regular basis, that type of support program as well as having the patient have skin in the game of paying for the implant and the procedure is a real motivator for patient to stick with the program to lose weight.

We couldn’t really do that in our PMA study. PMA study was all about what’s the implant. What’s the result? We couldn’t really incorporate a vBloc Achieve Program there and of course the patients didn’t pay for the implant. So, we think that really is going to motivate and support the patient to lose more weight than commercial environment.

This is just one of the first patients in the commercial environment in the quarter 4 that got implanted that we’re following. We will follow all of our patients and our hope is that at some point in 2016 we’ll have enough data here that we can submit that to publication. So I think we are going to see more weight loss..

And would I be fair in saying, Dan, that there was nothing out of the ordinary regarding this patient.

In other words that it was simultaneous taking anti-obesity drugs or whatever, it was just basically you’re able to make the patient more compliant? Because we are talking roughly 20% total weight loss, I mean, that’s a big deal considering we were talking I think so about 7% TWL in the pivotal trial 7% or 6%.

So, just to make sure there wasn’t anything out of ordinary for this patient in the commercial setting, correct?.

Yes. I mean, there’s nothing really out of the ordinary, I mean, that’s why Winthrop-University is very excited about this. And the ad that we played, we are supporting the New York market with our own short-term TV ads, as well as radio advertising, but the ad that you just heard was actually being paid for by Winthrop-University themselves.

I mean, they are very excited about this technology. The other thing I would mention is that particular patient was on other drugs and cardiovascular as well as I believe diabetes. And he was taken off those within three months. So his blood panels were very, very good.

He didn’t need to be on those drugs anymore, so these are the things that I think we’re going to see, promoted in the commercial environments that are going to be very advantageous to patients who get implanted with this product..

Excellent. Dan, when you talk about -- you mentioned something about critical mass for vBloc in a commercial setting, and that would be sort of the stepping stone for a favorable payer policy.

Dan, can you qualitatively we understand when you talk about critical mass, but quantitatively what does that mean? You’re saying that a thousand patients in the funnel, 12 centers in 10 states, can you put some parameters around what really constitute critical mass – at least what’s your thinking is where you could push the BCBS, the Kaisers whatever at a certain point in terms favorable policies?.

Yes. So, first of all, the over thousand that I mentioned, that’s at the top funnel. Realistically, as anyone has been involved into direct-to-consumer campaigns knows that, first of all, that’s a good number for up or under two months. That’s pretty good and we’re excited about that. But a big percentage of those fall off right away.

They don’t even make it to the patient coordinator. They are just calling in and kicking the tires. They’re not sure what it is. They hear that it’s actually mean surgery, poof, they are out of there, a big percentage of them, or they hear that it’s not covered right now by their insurance, they are out of there.

Or maybe they don’t fall into the BMI range that we are approved for through the FDA, they fall out of there. So, out of that over thousand patients, I mean, it’s not uncommon to have two-thirds of them fall off right away. They are just gathering information. And those patients might come back to us.

We’ve learned through this type of marketing that those patients they get the information they leave and then they think about it, they keep hearing the ads and they come back months later. But initially it’s not uncommon to see a high percentage of them fall off.

Now to try to address your question in reference to what do we mean by the math? You know what we’re trying to do is regionally go after a regional provider and get that provider support it. And so, what we need there is it would be great if we have thousands of in the funnel saying we want insurance coverage.

It will probably be more like 100s in the funnel is what we’re thinking and into a given provider. That’s what we really like to see. So, I can tell you right now that we are actually in contact with and having conversations with some of these local providers who are of course seeing it already. They’re getting pushed.

They are getting letters from their doctors in their area. They’re getting calls from their patients to provide and in some cases they’ve reached out to us. We’re meeting with them and we’re definitely seeing some steps forward.

The question is when, how long will it take? But I think it all starts with these kind of regional coverage plans and getting them on board. If we can just get one of those this year or two of those this year along with the IDNs, we will be a pretty good shape..

Dan, the 12 centers in 10 states and you mentioned all the states, well, you’re all putting in effort, that is determined by – which of the following, is it your internal strategic analysis that has determined the low hanging fruit in terms of patient’s ability to pay.

Is it determined by your internal resources namely feet on the ground or financial resources or is it determined by your strategic assessment of regional payer policy and if I get so and so on board hence I should put resources in the state and get going after patients there.

Can you give us some additional granularity on the 12 centers, 10 states and your thought-process behind that?.

Yes. Certainly, there’s a couple things that tie in to that decision. First is, key opinion leaders. So where are the guys, the surgeons that really believe in this from an early point-of-view? This is still very early in the market. So, who are the guys that aren’t just saying, yeah, I’d like to be trained.

Who are the guys that are saying, I only want to be -- I not only want to be trained and certified, but I want to be a key center for you guys. I really support this. This is important for my practice. I’m a believer. So, we look at that first, where are we going to have strong KOL support.

Secondly, we look at net income in the market, so what market could we go into, we know it’s a high net income market, where there’s a high probability that a patient that calls is going to – potentially going to be able to pay for this themselves, so, that’s very important to us.

And then thirdly, we make sure that it’s the hospital that not only has a very good reputation in a high population area, but it’s the hospital that is also believing in this and is willing to work with that patients on a cash pay basis where there are not necessarily going to charge their regular facility fees that they would send off to a private payer.

But something less, so that it makes it attractive enough to a standalone patient have to pay for themselves to take the next step and get the surgery done..

Fair enough. And finally Dan, any color on strategic partnerships, any distributors ships internationally that at one point were briefly mentioned in the past? Thank you for taking my questions..

Thank you. Here’s [Indiscernible]. I think if we do a good job, we’re not going to have to worry about that. So right now we’re not really out there trying to look for a strategic to buy this company.

We think first we have build value and we need to get patients calling for this, getting implants, getting surgeons all around the country saying, well, this is fantastic. We have to move this forward and getting a few private payers start paying for, that’s what going to build value for this company. We need to stay very, very focused.

Now, I will say thought that we are working in an effort to have at least one country outside the United States identified and country approval here by the end of the year, so that we can move in 2017 to marketing this outside the United States as well. So the goal is have one country approval ready to roll here by the end of the year.

And we’re always talking to strategic. They reach out periodically. Want to know how we’re doing. What’s an update that type of thing, but we’re not aggressively marketing ourselves through strategic at this time. We want to build high value here before that kind of a transaction or discussion might happen..

Thank you for taking my questions..

Got it..

Our next question comes from Chris Lewis from Roth Capital Partners. Your line is now open..

Hey guys, thanks for taking the questions. I wanted to start on the IDN partnership discussion, first congrats on the Winthrop announcement.

Can you discuss pricing for that strategy and that partnership specifically, and then how does that Winthrop announcement support additional discussions you’re having with potential IDN going forward?.

Sure. First of all, we were not prepared to give specific pricing out realizing now there’s competitive advantage in not doing that in the marketplace but I can assure you we are working with the hospital that we’re working with the IDN.

We are working with them to ensure that we’ve got a price that is going to be a little more acceptable to a self-pay patient. So, we won’t give you the specifics on that, but I can assure you it takes three things; it takes the surgeon having to really believe and push it at his administration.

It takes the hospital administration willingness to discount their facility charge which of course is a cost of the operating room and nurses support the surgery and the surgeon fee. And then of course we as a manufacturer would give a slight discount to our product. So that’s pretty much how it works..

Yes.

And how does that went? I guess, the second part of my question, how does that went through announcement support your other discussion you’re having with potential other IDNs going forward?.

Yes. It helps, it helps, I can tell you that Winthrop got a lot of – that got a lot of press. And we have in one case we have an IDN not even on east coast or winter biz but in a completely different area that country that reach out to us after the Winthrop announcement went out, so we’re in early discussions with them.

And then we have a couple of other IDNs that we are moving forward and negotiations with other areas of the country down the Southeast and in the Midwest. So, the Winthrop announcement was very helpful..

And on the ASMBS ideal position of statement including vBloc, you elaborate and just what been their response, I know its not too long ago, but what’s the initial response you’ve seen and heard with that beariatric community since that statement was announced and how important is that do you think in your eye with payers going forward?.

Well, one of the top three things the payers wanted was this ideal support. So we’ve put out a great effort into working number of different societies and this is the first one to come out, which is a big one to come on. So that really helps with the private payers.

And secondly it helps with surgeons, surgeons that don’t really know us very well, when we knock on their door to be able to say hey, we got support of society that you are part of, that carries credibility. So, I would say that it’s been a lot more positive in those two areas that it has, patient don’t really understand it.

They don’t get that, so they are not really paying that much attention to that, but certainly with individual surgeons and with private payers it’s very helpful..

And you mentioned the economic modeling study.

Can you elaborate on what we can expect to see from that potential publication and what are the timing expectations for that this year?.

Yes. We’re working through that process now. We’re going through the editing process and our plan internally is that we would have a publication hopefully by some time in this first half of this year probably late second quarter.

And it will focus on the benefits of this technology versus some of what Dan talk about earlier, the reduction in the cost of treating the co morbidities and focused on the safety profile of our technology versus the other surgical procedure like this..

Yes. We should mention to them, I mean, there is no guarantees here that it will be publish. I mean, we’ve submitted it for publication, but there is no guarantees. We would expect that if it’s publish it will happen some time in late first half of the year, but again we can’t guarantee that..

Okay. Right.

And Dan, you brought on a new group of commercial team members recently, perhaps you can elaborate on the additions and some changes that you’ve made within the commercial infrastructure and leadership team, what drove this changes?.

Sure.

Well, first and foremost I would say that I didn’t buy into strategy that was – this company launch in 2015, so it sounds great, go out and spend a lot of time only in effort on training name, brand, institutions and 80 surgeons that’s great, but what I saw when I came in the door and spend literally my first month here I spend 50% of my time traveling in the field and meeting with some of these centers and talking to the doctors, really good folks.

But you know they didn’t have what I would call the true support. What they were doing was they would see V block patients coming in the door, patients would say, I’ve heard about this new technology, it’s minimally evasive, I really like it, ghosh I don’t have to restrict my diet, what can you tell me about it.

And what would happen as we lose that patient. They would end up getting a gastric sleeve or another bariatric procedure. So, there wasn’t really the loyalty there. It would be much easier for a surgeon to say, hey it’s a great technology, it’s really need, but realities are its not covered by insurance. You got to pay cash.

Or I can do a gastric sleeve for you and it’s completely covered by insurance policy and I’m going to have you in and out of the door in two weeks. I mean, that’s what we’re up against. So, that strategy just didn’t work and I didn’t buy into it.

And I felt we need a do direction and we needed a team that had this kind of experience of direct to patient marketing. I needed a team that was really going to buy into it and say, you know this make sense and we’re going to build tactical plan around that and be very focused on it. So that’s why I made the changes that I made.

It wasn’t a bad strategy last year, it just wasn’t working and I think that should been identified early on and changes should have made. So that’s I choose to do.

So the Company – the Company already had individual heading upsales in marketing and they already had a standalone marketing executive and they already had somebody in reimbursement, so we didn’t make a lot of changes there. What we did was I brought in someone who is completely focus and nothing but sales.

They would be living in the field, they were traveling in the field every single week with they few sales people and calling in these independent delivery networks and building that as a strategy.

And two, I wanted somebody that had good both reimbursement experience at a senior level as well as good strong marketing experience at a senior level who could step in and just handle those two things and drive that forward. And then thirdly, I brought in high-level executive from an engineering and operations point of view.

So, the Company has I believe a really good opportunity here to lower its cost. Right now, nobody really notices it, because we don’t that in any price, so it just is getting started. But as we succeed in this direct-to-consumer approach we’re going to recognize real quick that we’re not making much gross margin dollars as we could.

And we’ve identified sources, manufacturers and techniques for building this product that can – that if we make what I’ll call our second generation product available, it will be half the cost manufacturer as we’re spending today, that has to happen and we need to do that now.

So, I wanted somebody running that for me that they had a lot of experience in working with outside manufacturers and driving program from a top level down, so that’s why we brought that individual in which is Pete Delange. And we also have with Pete, the guy that has s very strong business development background.

He is a guy that ran his own engineering firm herein the Minneapolis area that is one of the fastest growing engineering firms in town that he sold about six or eight months ago and I had a history with him. I had work with him before and I actually sat on his board of his engineering firm.

So, when I saw that he sold the company and he was just kind of traveling around and join himself what he thought was going to be a year, I grab him and said you can do that when you get old, come do this, deal with me. So he’s going to be very helpful to us both from an engineering leadership position and from a business development position..

Great. Appreciate the color there, and then just if I could sneak one more in for Greg.

Do you have fully diluted share count I guess as of 12/31 that includes both options in warrants and then what’s the timing expectation for the third tranche of the convertible note facility offering?.

The convertible – let me talk about the fully diluted, post split Chris, its about 12.8 million as of 12/31 and remember I commented in my discussion on the call that about 1.2 million of that fully diluted are going to be warrants that expire in 2016 here. So, yes, that little bit of additional information.

We’re working through the third tranche and the determining when we draw and how we draw that, so it will occur sometime here in most likely the second quarter or early third quarter..

Great. Thanks for the time..

Thank you..

And our last question comes from Matt Hewitt from Craig-Hallum Capital. Your line is now open..

Good morning, gentlemen, sorry, I jumped on little bit late, so sorry if you have to repeat yourself.

Couple of questions, how many doctors or centers do you have? Is it 12 centers that are currently certified and able to produce to conduct the procedures?.

We actually have 50 centers that have been trained certified in 80 surgeons.

What we’re doing is we’re focusing our advertising and our attention on 12 centers and those are centers where we would say we have a very high level of surgeon, interest in surgeon support and we also have a center that’s willing to work with us on a cash pay basis on these cash pay patients.

So, they’re willing to discount their facility change to make it a little easier for our patients to get implanted..

Okay. And then, secondly on the expense run rate, can we use Q4 as a good run rate going forward at least for 2016 anyway, roughly $7.6 million a quarter..

Yes, now while we don’t forecast going forward, my comments talk about we’re making every effort from our budget that we set to manage our expenses consistent with 2015, so I think '14 is a -- fourth quarter is a good run rate.

We’ll continue to see a shift to focus on more commercial spending related to sales and marketing and reimbursement and lastly around clinical and research, but in aggregate we’ve put a budget in place that says that we can control out expenses consistent with 2015..

Okay. Great, thank you.

And maybe one last one, so as of 12/31 12.8 million fully diluted shares outstanding, 1.2 million will follow up, what is that post the second tranche that was in January, what’s the fully diluted share count ?.

Well that continues to change as you know Mac [ph] because the count gradually changes with the amortization reach tranche, a lead tranche will amortize over a 24 month period, so it will be gradual over the year and we’ll report that on a quarterly basis..

Okay. All right thank you very much..

And I’m showing no further questions at this time. I will now like to turn the call back over to Dan for any closing remarks..

Thank you.

Thank you all for joining our call today and we look forward to providing you with updates throughout the year including on our next call which we don’t expect to host after the end of the first quarter, but rather after our annual shareholder meeting and once we have made material progress to our vBlock program we would anticipate that that’s going to be sometime late in the second quarter.

In the meantime, feel free to reach out to us at any time. Thank you everyone..

Ladies and gentlemen, thank you for participating in today’s conference. You may all disconnect. Everyone have a great day..