Vivani Medical, Inc. (VANI) Q4 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing. Welcome to the Second Sight's Fourth Quarter and Year End 2015 Results Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded today Thursday, March 3, 2016. I would now like to turn the conference over to Ms. Lisa Wilson, Investor Relations for Second Sight. Please go ahead.

Thank you, Colin. Good afternoon, and welcome to Second Sight's fourth quarter and full year 2015 earnings call. This is Lisa Wilson of In-Site Communications, Investor Relations for Second Sight. With me on today's call are Dr. Robert Greenberg, Chairman of the Board of Directors; Will McGuire, President and Chief Executive Officer; and Tom Miller, Chief Financial Officer of Second Sight. At the close of market, the company issued a press release detailing financial results for the fourth quarter and full year ended December 31, 2015. The press release can be accessed through the Investor Relations section of the Second Sight website at www.secondsight.com. You can also access the webcast of this call from there. Before we get started, I would like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Second Sight management as of today, and involve risks and uncertainties, including those noted in this afternoon's press release and Second Sight's filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. Second Sight specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law. A telephone replay of the call will be available after completion of this call for the next two weeks. You'll find the dial-in information in today's press release. The archived webcast will be available for one month on the company's website, secondsight.com. For the benefit of those, who may be listening to the replay or archived webcast, this call was held and recorded on March 3, 2016. Since then Second Sight may have made announcements related to the topics discussed, so please reference the company's most recent press releases and SEC filings. And with that, I'll turn the call over to Second Sight's Chairman, Dr. Robert Greenberg.

Thank you, Lisa. Good afternoon, everyone, and thank you for joining us on today's call. Before we begin our business discussion, I'd like to say a few words about Alfred Mann, who as you all know, passed away last week. Al was not only the co-Founder of Second Sight, he was a consummate inventor, entrepreneur, philanthropist, and a close personal friend. He was a truly extraordinary individual whose life's work changed people's lives for the better in many ways, and inspired so many of us to follow his lead. Al was a true visionary whose foresight and leadership made possible what was unimaginable to most. I am thankful for his mentorship and friendship. And, while we are all deeply saddened by his passing, we are honored to be continuing his legacy with the important work we are doing at Second Sight. So, let me share with you what we accomplished in 2015 towards building Second Sight for a solid future. It was a busy and exciting first year for us as a public company. We made significant progress on the commercial expansion of our Argus II Retinal Prosthesis Systems, growing volume 159% to 75 total implants for the year compared to 29 in 2014. In line with our volume growth, our revenue was up 164% to $8.9 million for the full year. We significantly expanded our commercial footprint, adding 15 new implanting centers during the year. We had 33 centers of excellence worldwide at the end of 2015, nearly double the 18 centers that we had at the end of 2014. Growing the number of implanting centers and increasing reimbursement coverage globally are key aspects of our commercialization strategy. Argus II remains the first and the only FDA-approved medical device for the totally blind, and the only device that has demonstrated long-term safety and benefit. We are the leading platform technology for the blind, supported by more than 16 years of research and development. More than 170 implants have been done since 2002, and the technology is protected by a very substantial patent portfolio consisting of 344 approved patents and 155 pending applications in the U.S. and abroad at year end. Our closest competitors are many years behind us, particularly in the U.S. Alternative approaches, like gene therapies and stem cell research, are still years away from commercialization, and none has shown the ability to restore vision to patients with complete blindness. We have an exceptional edge in this market. And, while we have a clear market lead today, we will continue to innovate so that we can keep our technological and clinical advantage well into the future. And, we believe that there are multiple exciting opportunities to reach larger populations with our platform. We aim to do this in three ways. First, by enhancing our existing Argus II technology. We plan to file for regulatory approval this year for our next generation externals, in other words new glasses and video processor. We are doing research and development work on advanced software enhancements, retinal stimulation protocols, and next generation implants. Second is our goal of entering the AMD market. The feasibility clinical trial was initiated last year and we now have enrolled four of the five subjects and have identified and are scheduling the fifth patient. And, lastly by expanding into direct cortical stimulation with the Orion I technology. Will is going to discuss the business in greater detail shortly. But first, Tom Miller, our CFO, will review our fourth quarter and full year financial results. Tom?

Thanks, Bob. For the fourth quarter of 2015, our revenue was $2.4 million, up 55% compared to $1.5 million in the fourth quarter of 2014. This increase in revenue was due to growth in implant volumes from 15 in the fourth quarter of 2014 to 21 in the fourth quarter of this year, and slightly higher revenue per implant in the fourth quarter of 2015. For the full year, revenues increased by 163% to $8.9 million, compared to $3.4 million in 2014, driven by the increase in implants from 29 to 75 in 2015. Our margins in Q4 were 29% compared to 7% in the prior year quarter, reflecting economies of scale from growing volume. For the full year, margins were 41%. Our operating expenses in the fourth quarter were $6.2 million, versus $5.7 million for the same period last year. R&D costs were $547,000, a decrease of 60% from the prior year fourth quarter mainly due to recognition of $570,000 of grant revenue in the fourth quarter compared to none in the prior year. Clinical and regulatory costs increased to $966,000 compared to $684,000 in the prior year quarter due to higher costs associated with post-market and clinical studies. Selling, general and administrative costs increased by 29% to $4.7 million compared to $3.6 million in the prior year quarter, driven by additional investment in our commercial activities, higher compensation and stock-based compensation charges, and increased costs of being a public company. For the full year, our operating expenses were $23.7 million, up 12.5% over 2014. R&D costs were $3 million net of grants, down 40% as a result of applying $1.8 million of grant revenue in the current year compared to none in the prior year. Clinical and regulatory costs were up 34% to $3.5 million, largely due to the higher cost of our post-market and clinical studies. Our selling, general and administrative costs increased by 28% for the year to $17.2 million compared to $13.4 million in 2014. These figures are in line with our expectations, and are a necessary part of doing business as a public company and executing our strategy to scale our business for better penetration in global markets. Our net loss for the fourth quarter was $5.5 million, or $0.15 per share, compared to a net loss of $13.6 million, or $0.46 per share, for the same period last year. The full year net loss was $20 million, or $0.56 per share, versus a net loss of $35.2 million, or $1.41 per share, in 2014. In the fourth quarter we recorded non-cash charges of $860,000, consisting of stock-based compensation. This compares to non-cash charges of $8.4 million in the fourth quarter of 2014, which included $7 million for the write-off of unamortized debt issuance costs related to the convertible debt we had outstanding prior to the IPO. Excluding non-cash items, our non-GAAP net loss for the fourth quarter of 2015 was $4.6 million, or $0.13 per share, compared to a non-GAAP net loss of $5.1 million, or $0.17 per share, in the fourth quarter of 2014. For the full year 2015, we recorded a non-GAAP net loss of $17 million, compared to a non-GAAP net loss of $19 million in 2014. A full reconciliation of our GAAP net loss to our non-GAAP net loss, including a per-share reconciliation, can be found in the tables at the end of our earnings release. Turning to the balance sheet, as of December 31, 2015, we had $16 million of cash and money market funds with no debt. At the end of January 2016, we filed a registration statement for a rights offering to raise up to approximately $20 million. We anticipate closing the subscription period in the second quarter. We estimate we currently have sufficient cash on hand to last into the fourth quarter of 2016. If the offering is fully subscribed, we would expect to have sufficient cash to last beyond the end of fiscal 2017. With that said, I'll turn the call over to Will.

Thanks, Tom. 2015 was an exciting year for Second Sight. We more than doubled the number of implants performed in 2015 compared to 2014. We grew the number of centers, staffed and trained to implant our technology, to 33 across a broadening geographic footprint. We also expanded reimbursement and ended 2015 with Medicare coverage in 16 states, covering approximately 33% of the Medicare beneficiary population. Finally, we achieved meaningful milestones in our R&D and clinical programs. In 2016 we plan to build on this foundation to grow our commercial footprint, grow reimbursement coverage and achieve an appropriate payment rate in the U.S., expand patient outreach programs, enhance the Argus II technology, and explore the potential of our technology for the AMD market and more broadly in direct cortical stimulation. As we look at our 2016 commercial strategy, our footprint expansion in the U.S. and abroad will continue. Emphasis will be placed on adding centers in regions of the U.S. or Europe where we have or expect reimbursement in the near future. We also intend to broaden our reach into promising new geographic areas as evidenced by our recent partnership to distribute the Argus II in Argentina. We also recognize the need to support existing centers. We are expanding our patient outreach programs in order to identify new, qualified candidates who are then directed to one of our implanting centers for evaluation. After a thorough review of our U.S. patient interest list that included contacting everyone on the list, we now have identified over 150 candidates. We expect this list to grow as our local marketing efforts are beginning to show very positive results. Our drive for increased reimbursement coverage remains a priority. Today we have five of the 12 Medicare Administrative Contractor, or MAC jurisdictions reimbursing Argus II procedures for traditional Medicare fee-for-service patients. Our most recent MAC success was the decision by First Coast Service Options, which includes Florida, Puerto Rico and the U.S. Virgin Islands, to cover Medicare patients on a case-by-case basis. We are actively engaged with the remaining seven MAC jurisdictions who have not yet made an affirmative decision regarding Argus II, and are optimistic that we will obtain additional positive coverage decisions. We will certainly update you on this in due course. In the meantime, we continue to work on facilitating pre-authorizations for Medicare Advantage and commercial patients. In 2015, our success rate was approximately 90%. Since launch, 24 different private insurance or Medicare Advantage plans have approved implants on a case-by-case basis. In Europe, we continue to enjoy coverage in France, Germany and two regions in Italy. While we continue to make progress on reimbursement, we did experience a setback with CMS payment rates for outpatient procedures in 2016. Based on limited data that was derived from incorrectly billed claims, the outpatient reimbursement rate was set at $95,000 for the device and procedure. This was approximately $50,000 less than our average selling price in 2015. We remain engaged with CMS concerning the 2016 payment rate but, at this point, we are running our business with the expectation that outpatient reimbursement will be $95,000 for the remainder of 2016. Based on market feedback, the status of our discussions with CMS and our desire to make this life-changing technology available to all qualified patients, we are now temporarily discounting to facilitate U.S. hospitals providing the Argus II to patients. Prior to offering these discounts, our business was negatively impacted during the first two months of 2016 by the delta between our selling price and the 2016 payment rate for Medicare patients. More specifically, we believe at least three or four Medicare cases and one planned implanting center opening were delayed due to reimbursement concerns. Given these reimbursement concerns in the U.S. and the inherent variability of our results, we expect Q1 to be down sequentially from Q4. With U.S. discounts in place, we should see implants rebound in upcoming quarters as we open new centers, qualify more patients and benefit from expanded reimbursement coverage. We are also in active discussions with CMS concerning the reimbursement rate for 2017 and beyond. As previously outlined, we believe the 2017 reimbursement rate will improve as it will be based on claims data from 2015. In fact, CMS just posted preliminary OPPS cost data which showed the mean cost of Argus to be $165,000 from the 2015 claims currently in their database. As a reminder, this is the dataset that will ultimately be used to set rates for 2017. In parallel, we will propose the CMS changes to reimbursement policy for high cost, low volume devices such as ours that we believe would lead to more stable and appropriate reimbursement rates, and when we say appropriate we mean rates that are not too high nor too low. Recent clinical publications are critical to supporting our ongoing reimbursement efforts. Last week, five-year data based on our original multi-center trial confirmed the continued safety and efficacy of our implants. This data, presented by Dr. Handa of the Johns Hopkins University Wilmer Eye Institute at the 39th Annual Macula Society Meeting, represents over 200 cumulative patient-years of clinical trial follow-up and demonstrated the ability for the Argus II to improve visual function over an extended duration. As reported by Dr. Handa, visual function and functional vision performance was improved with the System ON compared to System OFF, and these results were stable out to five years post-implant. The data supported previously published three year study results from the same patient cohort which appeared in the journal Ophthalmology last June. Last month we announced the publication of the separate three year FLORA study of 26 patients which measured the functional vision abilities of the subjects when using the device. In that study 24 of 35 tasks, or 69%, showed a statistically significant improvement in the outcome when using the device. The availability of additional peer-reviewed studies that support the long-term safety, reliability and benefit of the Argus II design should aid our efforts in securing reimbursement. In 2016, we expect a total of three papers concerning various aspects of the Argus II to be submitted for publication. Now, turning to R&D. We will continue investing to make our technology even better. We plan to file for FDA approval and CE mark regulatory clearance for our next generation externals before year end. The externals consist of eyewear, a camera and a new video processing unit or VPU. The new VPU will deliver 25x the processing power of today's VPU, allowing more sophisticated software enhancements and retinal stimulation techniques. Ultimately these improvements will increase the performance of Argus II and potentially allow expansion into a larger patient pool that includes better sighted individuals. In addition, we are pursuing new indications for Argus II that will allow us to reach new populations of low-vision patients, such as those with dry-AMD. Four of our five subjects have been enrolled in our dry-AMD pilot study initiated last year and the center has identified the potential fifth subject. All subjects will be evaluated over a six-month period. We will finalize our go-forward strategy after patient performance is more fully known and in consultation with our physician and scientific advisors. We have also spoken in the past about expanding into direct cortical stimulation. We believe there is a significant opportunity to leverage our existing Argus technology to bypass the optic nerve and directly stimulate the visual cortex. We expect to have fully active animal implants in Q2 and our goal is to submit an IDE to the FDA before year end leading to a human feasibility study beginning sometime in early 2017. If successful, this would potentially treat vision loss in a subset of the approximately 5.8 million individuals blinded by causes such as trauma, glaucoma, optic nerve disease and other currently untreatable causes. In order to maximize our financial flexibility to fund our commercial and R&D activities over the next few years, we filed a rights offering in January which allows us to raise up to approximately $20 million, fully subscribed. We expect to close in Q2 of 2016. The additional cash will provide us with the necessary runway to execute our strategic goals for 2016 and beyond. So to recap, our objectives for the year. Securing reimbursement coverage with additional MACs in the U.S. as well as other key markets globally; restoring a higher reimbursement rate in the U.S. for Medicare fee-for-service patients in 2017 and beyond; expanding our global footprint by continuing to grow the number of implanting centers and entering additional markets; improving the Argus II technology, including significant R&D milestones for the next generation externals and advanced software; completing enrollment of the dry age-related macular degeneration feasibility clinical trial and finalizing a go forward strategy; and finally completing animal testing and filing the IDE application with the FDA to test the Orion in humans. Overall, we are very encouraged by the interest in our technology and the foundation we are building. More than 16 years of ongoing technological investment, growing evidence in the safety, reliability and longevity of our technology, and a very extensive patent portfolio protecting our work, support our position as the dominant industry player for the foreseeable future. I am honored and proud to have joined such a dynamic and innovative company at this time. Over the last six months, I've had the pleasure of engaging with dedicated, hardworking professionals at all levels of our organization. We have a great team in place with the right expertise to bring Second Sight to new levels of success. With that, I'd like to open the call for questions. Operator, please go ahead with the instructions.

Thank you, sir. [Operator Instructions] Our first question comes from the line of Jim Collins with PGLLC. Your line is open. Please go ahead.

Good afternoon, guys. First of all condolences on the passing of Mr. Mann. He was a great man. Secondly, the question is just on pricing, globally. Just wondering, if there's been any pressure from the non-U.S. markets, once that $95,000 CMS number came through here in the States?

Jim, this is Will. No, we've not received any pressure or heard from any markets outside the U.S. concerning the new payment rate in the U.S. for Medicare patients. So, I've to say that, that did not happen at some point at time but at this point we haven't heard anything about it and I would hope at a point in the not too distant future say three or four months from now we would also have visibility on next year's payment rate that would be higher and that would become public as well.

So what exactly is the methodology there when into that constant sort of give and take between you and the CMS providers or how does that work in terms of getting the feedback?

It's a good question, I mean right now for outpatient reimbursement we have transitioned if you will into their standard procedure and what happens is every year they evaluate claims data from two years previous. So right now CMS is beginning the process of setting rates for outpatient procedures in 2017 and to do that what they do is they go back into their database and look at data from 2015 claims Medicare, traditional Medicare claims. And they look into those claims because their intent is to make sure they're setting the reimbursement rate that fully compensates the hospital for their costs, so their procedure costs as well as the cost of Argus in this case. And so what we know has happened is that CMS just published two days ago the first data if you will that they're starting to use to set rates for 2017 and that data I think it contained four or five claims for Argus with an average cost of $165,000. So going forward they will continue collecting data, we would expect a few more claims to be added to that dataset. They'll analyze it. They'll make sure that the data is clean and then sometime in July, CMS would post a preliminary rule and that preliminary rule would be their first cut if you will on what they're proposing for 2017 payment rates for Argus. And then there will be a comment period of approximately 60 days to 90 days in which we can comment on what they have posted and what they have proposed and if we think something is wrong that needs to be changed, we will make our point during that time period. And then later in the year, I believe its end of October, first couple of days of November, CMS will then post their final rule which is in most regards the final payment rate that they expect to put into law for 2017 rates.

Okay. And then I guess it's just a little confusing as to how they got to the $95,000 number. I mean the first place, because that's never been something that you guys have talked about in terms of cost of the device or implantation?

Sorry that was not our cost. Our cost in the U.S. has consistently been at $143,000, $144,000, but what they do is, again they went into -- to set the 2016 payment rate, they went into their data base and pulled 2014 claims data and unfortunately there was only two claims they could use from 2014 for Medicare patients and it's our belief that those claims were filed incorrectly. So the hospitals that filed those claims basically submitted a claim in which they didn't get reimbursed fully for the procedure and for the device as they should have. So CMS then pulled that data and used that data to set the 2016 rate. And so we had engaged CMS at the end of the year and throughout the early part of this year to make the correction, possibly that the claims being incorrect. But unfortunately, they had gone into law and CMS was unwilling to make changes to that claim.

So that is the rate for all of calendar 2016 is that?

That is correct. So at this point we believe that will be the rate for calendar 2016, again it's $95,000. It's for outpatient procedures which is in the case of I will say all of our procedures. And for the procedural costs and we get approximately $92,000 or approximately $92,000 of that $95,000 is dedicated to the device in this case.

And our next question comes from line of Amit Dayal with Rodman & Renshaw. Your line is open. Please go ahead.

You spoke about the disconnect between the CMS reimbursement rates versus what the pricing is right now, there were some delays in potential implants and the new center opening. You seemed to have some positive outlook on what the rates for 2017 may look like, but you also have to discount these devices right now. So how should we look at the next one or two quarters playing out in relation to this issue still remaining in play right now?

So I'll take part of it and then Tom may want to jump in. but we were still in very, I'd say very active discussions with CMS at end of last year and really for the first part of this quarter, the first half or first couple of months of this quarter. And given that it was still in our mind, slight uncertainty as to whether or not we would have a rate -- reimbursement rate change for 2016, we were not willing and we didn’t think it appropriate to consider any discounts on our product and therefore it did create a bit of a gap if you will between the price that we were asking and at that point what the institutions were expecting for reimbursement. So there was hesitation to move forward with some implants and some new institutions we had hesitation to move forward with opening because they just weren’t sure how things would play off and whether or not there would always be this $50,000 delta if you will between our asking price and what they were expecting for reimbursement. So what we did is we decided given that it was causing this issue in the market place and as we said earlier our desire to making continue building our business and to continue making sure this technology is available to patients we have made the decision to create discounts on our product, so that in essence on it we are eliminating this financial burden for institutions to do in Argus case. So we think we will regain momentum and we have -- again we will lead this area if you will for histologies moving forward with these Medicare patients.

And this is Tom, if I could just add to that. To put numbers around it, as you know our revenue per implant is generally in the $110,000 to $120,000 range when you look at it over a period and a few quarters and average it and we would expect our revenue per implant to be now in the low 90s. And then as Will says we are optimistic or have reason to be optimistic about pricing next year and hopefully the ASP, or the revenue in current plan will increase next year.

Great. So if we give discounts now for next quarter does that come back and haunt us in 2018?

That's a great question. And yes it could if we are not successful in our strategy which is to, to go to CMS and work with them to establish a much better methodology for setting reimbursement rates for a device such as ours. I mean we have very -- relatively speaking we have very low volume and a very high cost and we don’t think it is good for us, not good for the hospitals and it's not good for CMS to see reimbursement fluctuate likely -- could fluctuate starting from last year to this year to next year. We could see movement between $95,000 and $140,000 or $150,000. So you can make an argument that in some years CMS is not reimbursing the hospitals enough to the cost of the product then you can probably make an argument and other years they maybe reimbursing the hospitals too much. So we would like to go away from the current model and find a methodology again for -- primarily for like HTE type devices that have higher costs and lower volumes and move away from the current methodology. So we've started those discussions and we will be filling together a proposal and that will be one thing that of course we can update in future quarters and future calls as far as our progress there.

Great. And could these lower prices actually benefit you guys on the volume side? Has that been an issue in terms of getting approvals or implants, et cetera, done if we can pick up the number of implants that might be a little bit of a more comfort for investors even if the reimbursement rate is lower?

I mean last year we had [pass through] status, so the expectation for the hospitals should have been, at least for the America patients, it should have been that if they did a patient this is in areas where we have coverage that if they submitted appropriately that they would get reimbursed. I think the reality was that most of the hospitals had very little experience with a device that was this expensive in the pass through arena, and it probably did cause certainly some confusion and I think some hesitation from some hospitals. Now we have a payment rate that is set and the areas where we have coverage, I think there should be quite a bit more confidence now from the institutions that they are going to in fact get reimbursed $95,000 or there could be some variations based upon their geographic location but they should be quite assured that they are going to get reimbursed and it's going to cover the cost. And now as long as they have pricing from us it is approximate to that and yes, I think we've removed some of the uncertainty and hopefully we see our volume ramp in the coming months and quarters, especially as we add additional coverage on it.

Got it. And does this reimbursement issue impact your strategy to open new centers or we still going to remain aggressive on that front?

Yes, I mean we're going to continue opening new centers. We haven't really given a goal for the year. I would expect something similar to what we did last year maybe a little less. I think the more important -- there are a couple of things that are as important. I mean one is, not just the sheer volume of centers but making sure that we're opening centers in areas where we have a very clear reimbursement pathway. So when we open the center we know what the reimbursement pathway is. The hospital or institution knows it and therefore they're not hesitant to go out and recruit patients because they know they're going to get paid. And then you know on top of that we'll probably spend more of our time and put more effort into our work with existing centers and doing some of our outreach programs and identifying these RP patients that are in the geographic area close to the center. And then making sure we connect those patients with the center, so that the center maintains a good pipeline if you will of patients that meet the criteria for our device.

And then speaking about the pipeline, you mentioned a number, 150 potential patients, is that a number that you are trying to achieve for 2016 or is that a longer timeframe issue you're looking at.

We have a good guidance for 2016 and that number -- those patients would be done -- I think it'd be safe to look at those patients as being done over a longer period of time. It doesn't mean that the only patients that we implant in the U.S. this year come from that list of -- that's just a list or pipeline if you will that we have developed from our efforts and from calls that are coming into Second Sight and we're continuing to grow that list now. I mentioned we've done some outreach programs in some geographic areas really in the last 90 days, so we've had some very good initial success and we think those efforts will continue adding to this list. And it's most important to add to this list patients who are geographically close to a center and even more importantly patients that are geographic close to a center where we have reimbursement coverage in place. So again if we're adding patients who are very far from a center and maybe who don't have appropriate insurance is not going to do us a lot of good in 2016 or 2017. So we're really focusing on ID-ing patients close to the right centers.

Got it. And just you know, we have 33 centers now, should we expect implants like 1 per center per quarter? Like how should we look at implant rates for 2016?

It's a good question. I'm not sure -- one we haven't given. We had 75 implants last year with 33 centers. So approximately, so I'm not sure how I'd model that. It's kind of hard to model it just based upon the centers because there's going to be a handful of centers who do a larger volume for us, a larger volume for us there's probably five or more per center, and there's going to be another group of centers in the middle that are doing two or three and then we'll probably have a host of centers, especially some of the new ones that have only done one. So maybe that’s, maybe that's something that we can give more visibility to in the future as we grow our business kind of what our center productivity looks like and how you should think about that.

Got it, thank you. I'll get back in queue.

And we do another question on the phone line, [Operator Instructions] Our next question comes from the line of [Ning Xia with Sentry Management], your line is open, please go ahead.

Hi, Bob, Tom and Will, congratulations on the progress, very impressive and I'm really sorry about the loss of Mr. Mann. Can you guys hear me all right?

Yes.

I guess getting back on the reimbursement and thanks for explaining the situation, but my question is as you get more volumes is there any additional risk to your 94,000 or 95,000 average selling price given the broad reimbursement pressure and the cost of your device?

At this point I'd say no, just because, if I understand your question correctly, especially in the U.S. our volumes are quite low and even if we double or triple our volume at that ASP we're still a very small cost in the whole scheme of things. Certainly in future years, we aspire to be an issue from that standpoint because our volume is so high but not in the next few years I don't think the cost is going to really create a lot of additional pressure for us given our volumes.

And then so you've mentioned this you just expanded Argentina and that's a great news, so was kind of curious whether you can share what are the other countries you are working with in terms of expanding your distribution?

Sure.

We probably won't disclose any additional countries now, because we're in some negotiations, but safe to say that we're looking primarily at a few markets in Asia. We may consider another market in Latin America in the near future and then some additional markets in Eastern Europe and the Middle East. And then we are also spinning -- we've got some other approvals in Europe and areas where we don't have reimbursement and we really don't have a business right now. So, as was mentioned earlier, we have reimbursement efforts targeting additional countries as well and if you think about Europe I think we even mentioned in our S1, we're targeting the U.K., Belgium, Netherlands, Switzerland, and Turkey as well for more broad reimbursement coverage. So, places where we have product approval but we can add the reimbursement coverage there, that's one of the best things we can do to drive our business forward.

And then because I may have missed this, but were you able to sign up any private insurers?

Let's see, yes, I can give you an idea of -- let me find my notes here. The private insurers, we have done typically on case-by-case basis. So if you look at 2015, if you put together VA, Kaiser and private insurance we did five patients in 2015. I think two of those were private insurance patients.

And in addition there're about half a dozen private insurance including Blue Cross Independence that have -- that do have coverage policies for the Argus II in place.

All right. Thank you guys so much. That was helpful.

And there are going to be no further questions on the phone lines at this time. Mr. McGuire, I'll turn the call back to you.

Thank you all again for joining us today and thank you to our shareholders for helping us make the dream of sight a reality for blind individuals worldwide. Have a great day. Thanks.

Ladies and gentlemen, that does conclude the conference call for today. We thank you all for your participation. You are now free to disconnect your lines.