CryoLife, Inc. (CRY) Acquisition of Hemosphere, Inc by CryoLife, Inc. Call May 15, 2012 11:00 am ET Executives Steven G. Anderson – Chairman, President and Chief Executive Officer D. Ashley Lee – Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer Analysts Jeffrey S. Cohen – Ladenburg Thalmann & Co. Matt Dolan – Roth Capital Partners Raymond Myers – The Benchmark Company, LLC Presentation Operator
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So turning to slide two, this conference call and presentation contains forward-looking statements and we encourage you to review this slide, the related slide discussing applicable risk factors and the risk factor discussions contained in our most recent Form 10-K and our other filings with the Securities and Exchange Commission.As outlined on slide three, over the last two years or so, we have been focused on accelerating CryoLife’s growth by expanding into new geographies with our existing products and by acquiring innovative new products and technologies. On the acquisition front, we believe there is a tremendous opportunity to leverage our expertise in cardiac and vascular surgery, our 70-rep global direct sales organization, including managers and distribution network and our strong commercial and clinical infrastructure. To accelerate the growth of complementary medical device products, we have been implementing this acquisition strategy for about the last 18 months to two years. We have focused on products utilized by our main call points of cardiac and vascular surgeons, targeting deals that provide the opportunity to drive revenue growth, expand our gross margins, increase our profitability and ultimately create shareholder value. We believe the acquisition of Hemosphere meets all of these criteria and opportunities with strong potential growth for the HeRO Graft once it is integrated into our business. Slide four covers the key highlights of the acquisition. Hemosphere’s FDA cleared and marketed product is the HeRO Graft, a proprietary graft-based solution for end-stage renal disease, hemodialysis patients with venous outflow obstruction. It provides a number of key advantages compared to alternatives, including reduced infection rates and improved dialysis treatments. It is the only long-term fully implantable AV access solution for hemodialysis patients with central venous stenosis. Hemosphere has a strong intellectual property portfolio on the HeRO Graft technology and the product has high gross margins. In 2011, Hemosphere drove HeRO Graft sales of $5.3 million with a limited U.S. sales force. We estimate the market opportunity for the HeRO Graft in the United States is approximately $150 million and growing annually with another $100 million market opportunity internationally.
Our initial focus will be driving broader adoption in the United States through our 28-rep cardiovascular sales force, which has the advantage of already selling our preserved tissues to vascular surgeon customers for use in AV access. Longer term, our global sales infrastructure will provide an incremental growth driver for this business.Slide five gives a more detailed view of strong sales force leverage we expect from this transaction, both in terms of accelerating HeRO Graft sales in the CryoLife customer base, but also to cross-sell our surgical sealants, hemostats and tissues into the HeRO Graft customer base and our other medical device customer bases. You can clearly see how our growth strategy has focused on leveraging our sales force with higher growth products and large market opportunities. We think the addition of the HeRO Graft will further advance the strategy and position CryoLife for long-term success. Now, I’d like to turn the call over to Ashley for his in-depth review of the HeRO Graft business. D. Ashley Lee Thank you, Steve. Turning to slide six, I’ll begin with an overview of the HeRO Graft. The product was initially cleared by the FDA in 2008 and received CE Mark approval in the second half of 2011. Since its U.S. commercial launch, more than 5,000 grafts have been implanted. The procedure and product are reimbursed and Hemosphere has strong clinical data and intellectual property around the product. The HeRO Graft is utilized in patients that have developed central venous stenosis that inhibits conventional hemodialysis access through grafts or fistulas. Read the rest of this transcript for free on seekingalpha.com