Endologix's CEO Presents At Morgan Stanley Healthcare Conference (Transcript)

Endologix Inc. (ELX)

Morgan Stanley Healthcare Conference

September 10, 2012 11:45 am ET

Executives

John McDermott - Chairman of the Board, President, Chief Executive Officer

Analysts

Presentation

Unidentified Analyst

Great, let's go ahead and get started here. I look managed care with medical devices. So it’s a pleasure to have with us here the session before we get into the lunch break here, Endologix's CEO, John McDermott. Just quickly for medical device recent disclosures, go to the Morgan Stanley website and you can see all of my recent disclosures. It’s a great read.

So, for many of you know this, that Endologix is not a covered company for Morgan Stanley. So the real question is, why are they here and the route is, we see Endologix is attacking a very large and growing end-market in AAA stenting and John will sort of walk us through that.

I also would say this, since John has joined the company, several years ago, you have seen significant improvement in both their international distribution, their product reps have expanded the business in terms of the pipeline with their acquisition of Nellix. So this business in the last three to four years has been completely transformed and John obviously has a lot to with that.

So we see here is an emerging medical device company in an important growing end market and frankly with a significant amount of operational change. So what we are going to do is let John and he will give us a minute preamble and then we are going to jump into the Q&A. John.

John McDermott

Okay, thank you. So, Endologix, for those of you who aren’t familiar with the company is a medical device business. We make a device to treat abdominal aortic aneurisms. That is a leading cause of death in the United States, particularly for men. The historical way to fix these aneurisms is with an open surgery. There is a new way to fix aneurisms and that is with a percutaneous or through the catheter type of approach, so this less invasive.

We were one of the later entrants into this market, have grown very rapidly over the last few years, have a differentiated technology which is capturing share but more interestingly over the last couple of years have invested a considerable amount of our efforts and resource into a new portfolio of devices as that are getting ready to be introduced over the next few years in Europe first and then in the United States.

So we have been growing nicely. We grew in the first half about 30%. We have given five year guidance to grow at 20% or better over the next several years. We have just been expanding into Europe and have very promising future. So it's an exciting company with a lot of growth potential.

Question-and-Answer Session

Unidentified Analyst

Great job, thanks. So you were one of the reasons why I think Endologix is particularly interesting. Obviously there is a pullback in the stocks past the quarter. In fact, they would have bought you anyway but it is a clear opportunity for investors. Maybe in the sense of star care, there are some people who believe that it was related to Nellix but, frankly, probably it was more related to earnings expectations and guidance there. So maybe walk us through what happened on the quarter specifically.

John McDermott

Yes, I think there was a pullback in the stock. For those of you, again, who aren’t familiar with it, one of the featured new technologies in the portfolio was a device called Nellix. The current devices today, we treat an aneurism by putting in a tube to isolate the blood flow from the aneurism sack and that has worked pretty well with pretty good results but the problem is you still get, what we call and endo leak. You get leaks around these tubes that require annual CT scans and life time of surveillance for these patients.

We have developed a new technology which effectively seals that aneurism sack and there isn’t anything like it. It's been developed for many, many years. We actually bought the company that have been developing it about a year and half ago and integrated some of our technologies.

We made a decision just prior to the last call to hold that device back a little bit, make a few final design enhancements before we start our USIDE and our European trial and the effect of that was, instead of getting a CE mark and launching that in Europe around now, it was a limited market release, we will do that in about the middle of next year. I think that was the biggest reason for the change in the stock.

Unidentified Analyst

Okay, and obviously, we have got a pretty big room here. So if there are questions, please raise them high enough and we will get to them. John, I want to mention another (inaudible) debate that has been out there for several months. Actually in upwards of a year, and just your larger competitor, there really are two competitors in the market. One today, and the one potential in the future.

So, talking about Medtronic and Endurant and Endurant II, with that now in the market place, can we talk as to how the competitive environment in your mind has changed in the last 12 and 24 months, specifically with Endurant and if you think about, and obviously it is much further in the future but with TriVascular, maybe several years in the future, how does the competitive environment for you transform last year and the next two years?

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