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Conceptus, Inc. (CPTS)

Q4 2008 Earnings Call Transcript

February 17, 2009, 4:30 pm ET

Executives

Kim Sutton Golodetz – Investor Relations, Lippert/Heilshorn & Associates

Mark M. Sieczkarek – President & Chief Executive Officer

Gregory E. Lichtwardt – Chief Financial Officer, Executive Vice President & Treasurer

Analysts

Shawn Fitz – Stephens Inc.

Jayson Bedford – Raymond James

Eric Snyder – UBS

Jonathan Block – SunTrust Robinson Humphrey

Steve Brozak – WBB Securities

Amit Hazan – Oppenheimer

Presentation

Operator

Welcome to the Conceptus fourth quarter 2008 financial results conference call. At this time, all participants are in a listen-only mode. Later instructions will be given for the question-and-answer session. (Operator instructions) As a reminder, this conference is being recorded February 17, 2009.

I would now like to turn the conference over to Kim Golodetz. Please go ahead, ma'am.

Kim Sutton Golodetz

Thank you. This is Kim Golodetz with Lippert/Heilshorn and Associates. Thank you all for participating in today's call. Joining me this afternoon from Conceptus are Mark Sieczkarek, President and Chief Executive Officer and Greg Lichtwardt, Chief Financial Officer.

This call will follow the usual format, beginning with prepared remarks by management, and then we'll open the call up to your questions. In order to accommodate as many of you as possible, we ask that you limit your questions to one, plus one follow-up before rejoining the queue.

Earlier today, Conceptus issued financial results for the fourth quarter of 2008 and financial guidance for 2009. If you have not received this news release or if you would like to be added to the Company's distribution list, please call Lippert/Heilshorn in New York at 212-838-3777 and speak with Cheryl Palazzo.

Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements regarding the operations and future results of Conceptus that involve risks and uncertainties. I encourage you to review the Company's filings with the Securities and Exchange Commission, including without limitation the Company's Form 10-K and Forms 10-Q, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

These factors include strategic planning decisions by management, reallocation of internal resources, general recessionary pressures, decisions by public and private sector payers, scientific advances by third parties, an introduction of competitive products, among others.

Importantly, the content of this conference call contains time sensitive information that is accurate only as of the date of the live call, today, February 17, 2009. The Company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

With that said, I would like to turn the call over to Mark Sieczkarek. Mark?

Mark Sieczkarek

Thank you, Kim, and good afternoon to everyone. Thanks for joining us today. In our prepared remarks, Greg and I will discuss the financial performance of Conceptus for the fourth quarter and full year fiscal year 2008, guidance for 2009, and then I’m going to update you on our important goals for next year and beyond and then, of course after that we'll take your question.

So let me start with the brief discussion about our 2008 financial performance and 2009 guidance before turning the call over to Greg. For the full year 2008, we recorded net sales growth of 58%. In addition to growing the business substantially during 2008 there were many important accomplishments and I’d like to list some of those for you right now.

First off, the European acquisition was highly successful. We continued to execute well against our plan and integrated the entity without a hitch.

Our third generation Essure product that was launched in late 2007 with nationwide and early 2008 to rave reviews by physician basically for its further improvements and ease of use. We also launched our direct to consumer program and achieved tremendous growth and objectively measured consumer awareness of the Essure while meeting our payback expectations through the end of the year.

We secured an advantageous Californian Medicaid coverage decision that will enable to save as much as $100 million annually for permanent birth control procedures. We improved sales force productivity by over 25% for the year, thereby improving our operating cost structure and expense ratios.

We continued our march to the office, despite a preference for patients and exited the year with 3400 physicians performing 59% of total Essure procedures in the office. No other advanced minimally invasive gynecological procedure had been able to be performed so successfully in the office to the benefit of patients, physicians, and the healthcare economy. We view that as a critical strategic accomplishment in the current economic environment with the near term increase scrutiny of healthcare cost, benefit ratios under the new administration.

During 2008, we added over 2000 new physicians to Essure training and certified over 2000 physician to perform Essure on their own, and now have over 9000 OB/GYNs using Essure. For many of these physicians, Essure has demonstrated that they can become proficient at using a hysteroscope in their practice. And as our enthusiastic endoscope partners have identified, Essure is truly the killer app for office-based hysteroscopy and is enabling a critical review of other procedures that might be able to be moved out of the high cost hospital environment to the physician office.

Fourth quarter net sales increased 54% year-over-year, while we recorded the largest growth in our tracked physician performance metrics, of any previous quarter in the company’s history. While we are very proud of the results we turned in for the year. The fourth quarter fell a little bit short of what we had hoped and planned to do and it’s important you understand the costs.

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