Greetings, and welcome to the CryoLife’s third quarter 2010 financial conference call. Now at this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instruction). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Steve Anderson, President and CEO for CryoLife. Thank you. You may begin.

Good morning everyone. This is Steve Anderson, CryoLife’s President and CEO, and I would like to welcome you to CryoLife’s third quarter 2010 conference call. With me today is Ashley Lee, Executive Vice President, COO and CFO. The agenda for today’s call is as follows. Actually we will review today’s press release and we’ll comment on the company’s revenues by product line. We will also bring you up to date on the litigation and dispute with Medafor. I will discuss the recent Starch Medical transaction, the rollout of BioFoam in Europe, the status of the BioFoam clinical trials of the US and the recent approval of BioGlue in Japan. After my comments, Ashley will return with financial guidance for the rest of 2010 and our initial forecast for 2011. After Ashley’s forecast comments are completed we will open the call for questions. At this time Ashley will discuss this morning’s press release and the company’s performance for Q3.

Thanks Steve. To comply with the Safe Harbor requirements of the Private Securities Litigation Reform Act of 1995 I would like to make a following statement. Comments made in this call which look forward in time, involve risk and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements made as to the company’s or management’s intentions, hopes, beliefs, expectations or predictions of the future. Additional information concerning risk and uncertainties that may impact these forward-looking statements is contained from time-to-time in the company's SEC filings, including the risk factor section of our previously followed Form 10-K for the year ended December 31, 2009, our previously filed Form 10-Qs for the quarters ended March 31 and June 30, and for the quarter ended September 30, 2010, which we expect to file shortly and in the press release that went out this morning. On the call today I will discuss certain non-GAAP financial measures. You can also find the comparable GAAP measures and the reconciliation of these non-GAAP measures to the applicable GAAP measures as scheduled to the press release that went out this morning, a copy of which is contained on the Investor Relations portion of our website. This morning we reported our results for the third quarter and the first nine months of 2010. We set all time third quarter and first nine month revenue records of 28.4 and 87.4 million for the period ended September 30, 2010. As of September 30, 2010, we had 36.3 million in cash, cash equivalents and restricted securities which includes 1.8 million received from the DOD and 5.3 million in restricted securities. The 36.3 million reflects the 6.7 million paid in September 2010 in connection the Starch Medical transaction. 4.3 million…

Because we were unable to secure a long-term or even a short-term arrangement to ensure that we would have a powdered hemostat in our product portfolio. We began looking for an alternative product. On September 28, we announced that we had signed a worldwide distribution agreement and manufacturing license for an absorbable polysaccharide hemostat and its delivery devices that is presently approved and marketed in Europe by Starch Medical in San Jose, California. We had been competing with the CE mark Starch product in Europe over the past two years and felt that there were certain features of their products that were superior to the Medafor product. We believe that the Starch product PerClot is between two and three times more absorbent than the Medafor product. The PerClot product also has a higher adhesive strength than the Medafor product and is stickier. The differences between the two products are visibly striking when the two products are demonstrated side-by-side in separate Petri dishes. The Starch transaction will be transformational for CryoLife as it involves the complete technology platform that addresses the worldwide market of about $2 billion and provides us a product functionally superior to the one we are losing. Our license with Starch Medical includes indications for all medical specialties and does not limit us to just cardiovascular procedures like our previous distribution agreement did. Also we are anticipating that the gross margins of the PerClot product will be in excess of 80% when we begin manufacturing the product here at our corporate headquarter facility in Georgia. Presently, the gross margins for the product that we will be buying from Starch will be between 50 and 60%. In the US we anticipate filing for our PerClot IDE-PMA in early 2011. As we envision it, this clinical trial will consist of…

Our financial guidance is subject to the risks described in the financial guidance in forward-looking statement disclaimer sections contained in the press release that we issued this morning. We expect total revenues for the fourth quarter of 2010 to be between 28 and 30 million which includes between 500 and 750,000 related to BioFoam funding received from the DoD. We expect HemoStase revenue of between 2 and 2.5 million in the fourth quarter of 2010. R&D expenses are expected to be between 2 and 2.5 million for the fourth quarter of 2010. We expect EPS of between 6 and $0.08 for the fourth quarter of 2010. Our effective income tax rate for the fourth quarter will be approximately 42%. We expect total revenues for the full year of 2011 to be between 122 and a 128 million which includes between 1.5 and 2 million related to BioFoam funding received from the DoD. We expect tissue processing revenues to increase between mid-single and low double-digits on a percentage basis in 2011 compared to 2010. BioGlue revenues to increase to mid-single digits on a percentage basis in 2011 compared to 2010 with revenues from powdered hemostats including HemoStase and PerClot to be between 4 and $6 million. R&D expenses are expected to be between 10 and 12 million in 2011. We expect earnings per share of between 26 and $0.30 in 2011. We expect our effective income tax rate for 2011 to be around 41 to 42%. I want to emphasize that we are committed to accelerating the growth of the company. We are increasing our R&D spend as reflected in our guidance and we are currently rolling out and expect to launch several new products in the near future including BioGlue in Japan, BioFoam in Europe, PerClot in international markets first and subsequently in the US and SynerGraft aortic heart valves hopefully next year. Additionally we are actively seeking a partner to commercialize ProPatch prevential hernia repair. Given our strong financial performance and cash position we are well positioned on the business development front to identify complementary products for companies that we can acquire to leverage our existing infrastructure and sales force. We have carefully evaluated our alternatives and believe business development efforts are a prudent use of our cash reserves and a strategy that will create value for our shareholders. We will also return value to our shareholders through our ongoing stock repurchase program. Beginning next year, we will begin providing our initial guidance in our year-end financial conference call as opposed to our third quarter financial conference call, which has been our practice over the last few years. That concludes my comments and now I’ll turn it back to Steve

At this time I will open the call up for questions.

Thank you. We will now be conducting question-and-answer session. (Operator Instructions). Our first question is from Joe Munda with Sidoti. Please go ahead with your question.

I was wondering if you could go into a little bit with more with the charge for the valuation of the Medafor common stock, the $3.6 million. Can we expect similar charges going forward or is this a one-time charge?

As of now we hope and believe that this is a one-time charge. We accounted for our investment in Medafor on a cost basis and we are required as an organization to periodically review that valuation if circumstances arise that lead us to believe that there could be an impairment. And as indicated earlier in the call with the termination of their largest distributor which is us, we became aware of some other facts that led us to revalue or reconsider the carrying value of our investments. So, we think that this is a one-time charge and we don’t yet currently expect to have future write-downs but that might not be the case.

Actually how much outstanding, is it still 11% ownership in Medafor that you guys sold?

To the best of our understanding we think currently we still own between 10 and 11% of their shares. And just so you know, as of right now the current carrying value of our investment in Medafor is roughly $2.6 million as of the end of the third quarter.

And you also mentioned a 1.6 million in related to HemoStase inventory that the company does not believe they’ll be able to distribute. Now, why is that, is it because of the ongoing litigation that’s occurring with Medafor?

No. There is a provision in the contract that indicates that upon termination of the contract we would have six months to continue distributing the inventory that we have. So what we have to do is evaluate how much inventory we currently have and estimate how much we can sell over those six months that we believe that we can distribute. And absent any other information, the best indication of what we can sell is where our historical sales trends had been.

And that’s how you got to about 1.6 million number? It is becoming how much inventory you have and how long it is going to take sell and what is left over is 1.6 million in inventory that you believe you won’t be able to sell.

That is correct. Now, I will say that we are going to do our best to sell everything that we have, and we hope to do that. But again we had to look at the objective information that we had to evaluate and estimate what we would sell and that was our historical sales trends.

And as far as litigation is concerned, is there any number you could come up with as far as what you think litigation expense is going to be going forward?

As we indicated in the press release earlier today, for the months of this year we have spent roughly $1.1 million, okay, and we had budgeted for a similar amount going forward which would indicate about $400,000 that we recruited in our budget out for the remainder of this year. We expect now that the discovery has started, that there could be a spike in our expenses while discovery is ongoing. And then we would expect the spending to increase up until the time that the trial actually starts, if we ever even get to a trial. So that is what we are kind of expecting.

I mean, I know you guys signed up now, you’re with PerClot and you are hoping to move their manufacturing in-house. My question to you is, what are you hoping to get out of this trial from Medafor as it compensatory damages are you looking to keep distribution? What is end game with Medafor?

Well, let me phrase it this way, we believe that we will be entitled to the lost profits that we would have made had we been able to remain in that contract through the beginning I mean through the middle of 2014. So if you look at the amount of lost profits that we could have generated, the numbers are very significant you know potentially in excess of $10 million, that’s as you look at the litigation moving forward, that’s really what we would be going after our damages which equate to lost profits.

Has Medafor approached you on buying you guys out of the 11% of your hold currently?

We are not going to get into any discussions that have or might to want between the companies. We’ve included a very thorough discussion of the situation with Medafor that the current status of the litigation and things of that nature and it’s very comprehensive and then it’s in our 10-Q and that we expect to follow that in the very near future. So I’d refer you to that discussion.

The next question is from Tim Lee with Piper Jaffray. Please go ahead with your question.

You made some comments regarding the performance characteristics of PerClot compared to that of the HemoStase, I think you said it was two to three times more observant, are you planning on any studies either conducted by yourself or by independent third parties to provide some hard performance characteristics of PerClot relative to some of the other products HemoStase or other competitive products in marketplace?

We are planning to do something like that down the road and in the future. But the visual comparison of our products work chemically is so striking that I don’t think that we have to do that in order to get good market acceptance. I think it would be helpful if we did do that so that we would have very specific scientific data to show the differences in strength and (inaudible) ability of the two products side by side, but I don’t think it’s going to inhibit our launch of the product, not to have that.

In terms of the PerClot clinicals in the US, you said it was a 300 patient study, is that a randomized study?

Randomized study.

And what is it randomizing? Can you just…

I believe it’s (inaudible).

And just the general cost to conduct these studies and how should we think about the P&L impact of that study in 2011 and 2012?

Yes and I refer you to our press release when we announced the Starch Medical Transaction Tim, but what we’ve indicated is that we think that the trial will cost somewhere between 5 and $6 million of which we are going to spend up to $750,000 in the fourth quarter of this year and the bulk of that spending we expect to incur over the next I would say eight quarters.

Your next question is from Matt Palmer with Roth Capital Partners. Please go ahead with your question.

First question on BioGlue, you mentioned you are launching in Japan in 2011. You also mentioned in your prepared remarks that you are expecting mid-single digit growth in BioGlue for 2011. If I heard you right I was curious what are your expectations for BioGlue revenue in Japan and how much of that is I guess in US market what your underlying growth expectations?

The number I gave you for the growth in Japan was about $1 million in the first 12 months of the products is approved and in the market. When I say approved I mean we have to go through a quality inspection before we can begin distributing there so we expect to pass that. But we expect that inspection to be within the next few months. We expect to pass it and then starting with after we passed it for the first twelve months, I am expecting that we will do about a million dollars in the first twelve months in Japan. So considering that Matt I think that in the US we are expecting probably low single digit growth maybe the mid-single digit growth and we expect that to be augmented by the rollout in Japan. To take that one step further, and this comment kind of relates to what we projecting for tissues too is that our sales force will have more time in 2011 to devote to tissues and to BioGlue with the absence of us being able to distribute in the States in the US market for the better part of the year. So that increased time and focus we think is going to be beneficial for the other product lines.

That is helpful thank you and secondly in your 2011 guidance you’ve included hemostat revenue expectations of 4 to 6 million, how much would be factored in for HemoStase specifically in 2011? How much HemoStase supply do you currently have? And is your 2011 guidance depended on additional shipments of hemostat?

The guidance for all powdered hemostats was between 4 and 6 million, and we expect at least 4 million probably between 4 and 4.5 million of that to be from PerClot, all right? As it relates to the amount of inventory that we have on hand for HemoStase, I would say that we have got adequate inventory to continue distributing through mid-to-late March which is the time at which we expect to discontinue shipping HemoStase in the US.

The next question is from Raymond Myers with The Benchmark Company. Please go ahead with your question.

Most of my questions have been answered but let me ask a few. One, does CryoLife have the right to return unsold products to Medafor?

We believe that we do, but that’s probably up to the courts to ultimately decide, Ray.

Okay. The reason I asked and I thought I read that in the agreement, but may be they are not accustomed to adhering to the agreement?

Again, I would say that we believe we have the right, but again that we would probably think that that would be an issue that would be decided by the courts.

Okay. So that could take some time.

But going back to a comment from earlier, we took that into consideration when we recorded the write-off the HemoStase inventory. So hopefully, we won’t have any issues with having to write anything off in the future. That’s our hope and expectation.

Yes, and our hope is that you might be able to recover so fast.

Yes. Again, we are going to do our best to sell all of it, but again that’s what we are currently seeing.

Are you still in HemoStase in Europe or the United States?

Both currently.

Why would you sell HemoStase in Europe once PerClot is a launch which is currently happening?

We’ve got approval to sell PerClot in a lot of international markets, but not all. So we continue to sell HemoStase into those markets where we need to do little bit more work to get PerClot approved, and then here in the US obviously PerClot is not approved, so we are distributing HemoStase.

And you can’t transfer the inventory from Europe to US?

I believe they are different product codes.

You’ve mentioned in the call, increased competitive pressures in the cardiac patch market, can you elaborate on that. Is that a concern going forward?

I think that we are going to be able to address that issue. The primary competitive product that we are seeing right now is from a company called Promatrix’. They’ve got a Xenograph patch that’s out there right now and they having some success with it. But again it’s affected our sales recently going forward. We are just going to redouble our efforts to promote our issues and the benefits of them out in the marketplace and hopefully we’ll able to address those competitive issues.

Are you seeing any changes in the underlying markets in the cardiac repair or the vascular businesses?

I don’t think that we are seeing any major underlying changes in the conditions. Again the cardiac area we have seen this competitive product come out in the cardiac hedge space, but as far as like underlying changes in the market, we are not seeing anything major at this time. Obviously, as we continue to look forward within the organization, it gets increasingly harder to continue to keep your growth rates up at the levels that they had with historically. And again that is why we have become much more aggressive than developing products internally through our own pipeline, as well as getting more aggressive as it relates to acquiring other complementary products and technologies out on the business development front, and I think that you can expect to continue to see that from us.

As the population continues to age and baby boomers get older that you should expect to see considerable growth in our vascular tissue transplant program just simply because of the aging of the population, the diseases that older people get, circulatory problems, the increase in diabetes and the circulatory problems that create. We are also looking at the timeframe that Homograft tissues performed very well for 15 to 20 years. And then in some cases they have to be replaced after 20 years and so. We have a huge backlog there of tissues that have been implanted in timeframes like that, that I would expect would become candidates for re-operation, and certainly with the increasing data that we have been able to present to the marketplace as well as doctors papers meaning medical papers that have been published. Homograph tissue performs better over the long term and many of the prosthetic alternatives that are out there, so I think we have a built in growth pattern in both areas due to the aging of the population and the vascular area and the expected lifetimes of transplanted homograph valves.

How long do you think this QMS audit will take in Japan so that you start recognizing revenue on BioGlue?

They have to make a date here. We expect them to make a date in the next 60-90 days at the very long. It will take probably about a week. If it takes 10 days that’s just fine. We expect to pass it without any problem, the last time that the FDA was here which was a few months ago, we passed the inspection without a single observation from the FDA. So I think that the inspection of the company will go extremely well.

So you expect that date to be scheduled in about?

Yes, we expect to hear from them soon. As a matter of fact I just signed quite a few documents yesterday authorizing them to come here and agreeing to meet the standards that they have set through their FDA. And the general type of an agreement that you would have to make with them so that they are going to be comfortable coming to visit us here. It’s different from an FDA inspection, and if the FDA can walk in the door here any time they want without giving prior notice, but the documents that I find yesterday were all in preparation for that inspection and so I am expecting it to be soon.

There are no further questions in queue. I’d like to turn the call back over to management for closing remarks.

Thank you for joining us today and we look forward to meeting with you at the close of the calendar year, fiscal year 2010.