KERA 1st Quarter Conference Call 4/17/00 Tom Loarie (TL) John Galantic (JG) Mark Fisher-Colbrie (MFC) TL: Executing on transition plan from a training company (revenues from kit sales) to company growing revenues through sales of Intacs to treat vision problems. Seeing success in procedure growth. Past quarter focused on developing fast-track centers; presently working with about 40, expanding this group in the second quarter. Fast-track centers will be the focal point of consumer marketing initiatives which have been in development. Waited to implement these initiatives till we had a group of practices that were trained and prepared to receive consumers and to meet consumer expectations. This initial core of fast-track practices is in various stages of development, but far enough along to proceed to phase two of the fast track program, which is implementing the consumer programs which are designed to: 1) Create awareness and demand among discontented contact lens and eyeglass wearers wary of laser surgery. 2) Match these consumers with one of the local fast-track practices. With these fast-track distribution points now in place in key markets, we are now ready to move into the consumer phase, which we will begin implementing in May with the new consumer programs. MFC: Revenues of $1.0 million for the first quarter, net loss of $9.8 million (EPS -0.54). Up slightly from a net loss of $9.5 million in the previous quarter (EPS -0.52). Decrease in revenue from Q4 to Q1, related to the continued transition from sales of start-up kits to sales of Intacs. Two key points: 1) Sales of instruments produced one-time revenue 2) Procedure revenue is growing, and set a new record for the 1st quarter, it is not to the point of offsetting the revenue from the starter-kit sales. Other elements: R&D expense up slightly due to continued work on the Phase III clinical trials for Intacs addressing a wider range of myopia. Cost of sales down slightly, primarily as a function of fewer kit sales. SG&A expenses of $6.7 million were significant but down slightly, although we do expect SG&A to grow significantly over the year as we continue to launch the programs which John Galantic will discuss. Cash and equivalents were nearly $40 million. JG: Our focus is to increase procedure volume. Our basic strategy is straightforward: first get fast-track practices trained and operating with Intacs as their procedure of choice for mild myopes. Second, add direct-to-consumer marketing programs which drive qualified consumers to these fast-track practices. A fast-track practice is one which demonstrates a commitment to make Intacs the procedure of choice for mildly nearsighted patients. In exchange for this commitment, we provide them with special clinical and commercial training which helps them generate patient interest and convert this patient interest into procedures. We developed several programs to do this, including patient seminars, cooperative advertising, special promotions, and expansion of their optometrist referral channel. We continue to test and refine some of these programs as we move ahead, and we will add more fast-track practices in Q2 and Q3. To best execute this strategy at the practice level, we've taken steps to revamp the sales force. This organizational change reflects the shifting focus from a training and proctoring organization to one focused on developing the fast-track practices and generating procedure volume. We anticipated these changes last fall, and we've been moving towards them since then. Where personell changes were required, we've been able in many cases to promote from within the company. The transition should be complete by the end of April. Already we have a team that is very tightly focused on the steps needed to insure that the fast-track practices are effectively marketing Intacs. New appointment: David Applegate, VP Medical Marketing and New Business Development. David was Director of New Product Marketting at the JNJ Vistikon division, where he launched One-Day Acuvue in 1995, the world's first daily disposable contact lens, with current estimated world-wide sales of $200 million. Later, as VP of Marketing at Summit Technology, he directed the consumer launch for the first FDA-approved excimer laser. Among the assets David brings to KERA is the know-how to build physician referral channels, and, in the case of Acuvue and now Intacs, the strength and the role that optometrists can play in generating consumer referrals to the fast-track. To fully understand the second component of our strategy, driving consumers to the fast- track practices, let me start with our consumer research findings, which are the foundation for all of our direct-to-consumer communications. Last year we engaged Rosetta Marketing Strategies to learn more about our consumer, and specifically, how refractive consumers make brand decisions. We gained a number of very valuable insights; for instance, we found that approximately 50% of mild myopes are dissatisfied with their eyeglasses and contacts. Of these, about 80% are apprehensive about the refractive surgery options. However, when presented with the Intacs concept, the number of mild myopes who say they are considering refractive surgery shoots up 38%. We also learned that Intacs have stronger appeal than LASIK to this large group of apprehensive consumers. This suggests that as we educate the consumer, KERA's total available market grows markedly. We also developed a clearer profile of the person most drawn to the Intacs concept. We've used our learning from the Rosetta research to design a new web site, as well as the other consumer programs that have been under development since late last year. Our consumer marketing programs will consist of print and radio advertising, as well as direct mail pieces to targeted consumers in zip codes around our fast-track practices. By the end of May, we'll be launching a new interactive website to educate and pre-sell consumers, who will then be directed to a fast-track surgeon in their area. When we consider everything we've learned from our research about the Intacs consumer - that he or she is highly educated, high-income, a high internet user - we believe that this direct-to-consumer internet strategy will be highly efficient in allowing us to reach our consumer in an economical way. So how are those strategies working so far? Total procedures for the quarter were at a record - over 1,100. About 90% of these procedures were performed by surgeons who had already completed Intacs training and proctoring, and were performing Intacs on an ongoing basis. So the number of these "post-training" Intacs procedures for the first quarter was approximately 1000, which is twice the average quarterly rate of 1999. This increase was led by the fast-track group, whose post-training procedures were up 47% over the fourth quarter. We intend to continue sharing this kind of data on a quarterly basis. Also enouraging is the growth of our non-fast-track practices, up 23% vs. Q4. We believe this data is particularly encouraging when considering the fact that they were achieved without the help of the major consumer programs scheduled for launch next month. As cooperative advertising, direct mail activity, web site, and other initiatives are implemented, we believe demand will grow, and so will procedure volume. And as fast-track practices create enough Intacs wearers to make up a strong patient referral network, they eventually will become self-sustaining distribution points. Exciting new vision-care applications for Intacs: In addition to the large mild-myopia market, Intacs are also being developed for a variety of new applications, and we've made significant strides in these areas in the first quarter. These include the treatment of keratoconus, hyperopia, and post-LASIK ectasia. We also saw a number of surgeons in the US and internationally conducting independent efforts to expand Intacs applications. Some of the most interesting work involves using Intacs as a complement to LASIK, such as repairing LASIK-induced corneal thinning, using Intacs in combination with LASIK to treat pre-presbyopes before they need reading glasses, and using LASIK followed by Intacs to treat high myopes, so that they have an extra zone of protection from corneal thinning. The Intacs technology is a potent one, and it may be that we've barely touched the possibilities for manipulating corneal curvature in order to treat refractive error injuries and diseases of the eye. TL: This is a very exciting time for both the company and those of us who have been working to begin Intacs to commercial success for many, many years. The new applications are very exciting, John and his team are executing on the market development plan. We are now seeing Intacs procedures growing due to a well-executed plan, our fast-track model. I think most importantly for me and others who've been around a long time is that we are gaining our market confidence based on these results. We now are learning how to grow our business with refractive surgeons in a predictable way. I am eagerly looking forward to the next phase which is about to be implemented that will link, or match, the discontented contact lens and eyeglass wearers who are seeking alternatives, but who have been and are now apprehensive about RK and laser-based procedures. Execution of this next phase will add the "consumer pull" element which I have from the beginning believed is critical to penetrating the market and growing and ultimately maintaining a significant market share. KERA has an extremely unique opportunity with its branded approach to treating common vision problems, and I am very confident that we are now well on our way. __________________________________________________________________________________ Q & A: Lawrence Keusch (GS): Share a little more on how much of the 1,100 procedures did the fast-track procedures account for? In other words, of the ones that were trained and going, how much did they account for? A: About one-half, Larry. LK: Ok, so if I just do the math quickly, and there's about 550 procedures and there are 38 fast-tracks, that means they were each doing 14, so about 5 per month. I guess... and I don't quite understand if these guys have been going for a while now - 5 a month sounds awfully small to me given the relative volume of procedures that are done out there. I'm just trying to gain some sense of what that means. A: Larry, what you've got to keep in mind is that the fast-track is being added to in continual increments, and we've got a core group we started with of 15 doing a much higher average. We had another group of 15 come on-line in the first quarter, and they're doing slightly lower, and then we had another group of 7 which just started and is just barely off the ground. TL: Also, Larry, we've talked about this a lot, this is establishing our clinical platform, our distribution points, and because of the momentum we've seen over the last few years with LASIK, and even without that, we've always believed that ours is a branded product, and what we're seeing now is the growth of the procedures in a very competitive market without reaching the consumer. And one of the big, big things as you walk around this country and talk to people about Intacs is that we have a very low level of awareness with the consumer. That part will start to be implemented as we go forward here in the next 90 days. JG: What I'd add to that is that the procedure growth that we're getting in the fast-track and overall is driven completely by, I'll call it sweat and elbow grease on the sales side, working with the practice, and very very little by direct-to-consumer, and that's the part we're about to put in next month, which will have a significant effect on procedure growth. LK: You mentioned before that these [fast-track] centers were committed to making this the procedure of choice. Does that mean that they are not doing LASIK or some other sort of procedure? JG: No, not at all, in fact I would say that just about all of our customers are doing both LASIK and Intacs, and a few are doing some other of the smaller procedures. But they are making a commitment to make Intacs the procedure of choice within our range, which you'll recall is maybe 15% of the existing market but over 50% of the myopes. LK: I guess what I'm getting at is that, if these are established practices... I don't know exactly how the advertising works with the laser guys out there, but a lot of the practices were out there doing their own and competing with other practices, so am I to assume that these guys are not advertising for Intacs? JG: Most of them have started some sort of advertising for Intacs, albeit on a small scale. I'd say just about all. TL: I'd add, Larry, that we're dealing with a marketplace today where LASIK is really on the airwaves and well-known, and it's not differentiated. The doctor is not adding any value in the mind of the consumer to the LASIK procedure, which is leading to the downward pressure on pricing in the LASIK arena. We're not going into a market and having everybody in town doing Intacs. We have an opportunity now to co-brand with these doctors. And everybody now, because there's so much pressure on LASIK pricing, everyone has discovered this new market called "the mild myope," from -1 to -3 diopters. And that's where the game's going to be played, and that's where we think we have significant attributes giving us a strong position going forward, but up until now this part of the market has been very under-developed. LK: Given the pace at which the market on the laser side is transitioning to $2000 or less bilateral, what position does that put you guys in relative to your pricing. Because it seems to me they're going to create a market out there that's very affordable to many interested parties. TL: Remember what I think John said in his remarks that the number one reason for not having laser surgery or RK has nothing to do with price - it's fear. And there was a study that came out last year - it wasn't our study - that if you offered LASIK for free, only 50% of the eligible people would take that opportunity. Fear is the number one driver, and that's why we did the segmentation study, so that we could identify, quantify, and understand the attitudes associated with that fear, and position our product appropriately. We have a significant advantage over every product that has ever come into the market, and that is the fact that this can be exchanged, it can be removed, and I can assure you that in the data that is a big advantage. It has been in every market study we've done, and now we're in a position to show it because we're going to be able to go to the consumer in the next couple of months. And as you know, we were unable to do that in the European market. LK: Ok, so I guess what I'm hearing is that you're not planning on dropping your price... TL: Our prices right now are holding pretty good. LK: Lastly, where do you think your procedure volume can go for the year, based on this 1,100 in the first quarter; and you said you had $40 million in cash, where does that put you in terms of needing to raise additional financing. JG: In terms of procedure volume, Larry, what we're doing is creating the business model, and we'll be updating people quarter by quarter as we make that volume grow. Obviously we believe we've got the recipe for doing that and when we kick in the consumer parts of it we expect to see some nice growth going into Q2. On the cash side, the issue there is really what is the revenue ramp and how much money will we be spending on the sales and marketing on the consumer side. What we are doing is very much testing the methodology whereby we will see what is the most efficient means of communication. We believe that with our targeted direct-to-consumer communications it will be done cheaply and effectively, not done on a broad-based scale like a shotgun but more like a rifle-shot approach. What that means in total is that as we look at what programs are effective we will continue to build on them, and therefore it's a little bit indeterminate to be saying how much our sales and marketing will be growing over the course of the year. Of course those are the two drivers for the break-even analysis, the revenue ramp and the sales and marketing expenditures. TL: Let me just add on the sales and marketing expense side that we've spent a fair amount so far on our web site. We're using a major web site developer, which we will announce shortly, but it's very well-known in the world of internet. This web site, the reason we went this way, is that we know last year that when we had all promotion, or PR around our approval by the FDA, quite a few people went in and saw doctors, and the doctors tried to convert them to LASIK or successfully did convert them to LASIK because they weren't educated. We know that educating our patient through print, radio, and TV ads is pretty darn expensive. This website will be a portal that we can direct people to through advertising, and the doctors can as well, and become an educational, interactive site, and this site will have it's own eye exam, there will be financing available, so when the patient comes out, they're essentially going to be handed to the doctor, and a doctor that is doing procedures and providing good outcome. As we get beyond the initial expense of putting this in place, this will allow us to be more cost-effective in our over-all advertising program. LK: Do you think procedures can double or triple in the next quarter? What's you visibility in the second quarter. TL: I think as we drop in our consumer stuff we'll be able to tell you how that's going to impact. LK: So you can't tell us right now? TL: No. Michael Murphy (Murphy Mutual Funds): I've actually been hearing radio ads for Intacs here in California, which I assume have all been paid for by the doctors? A: In the fast-track there's a sharing of costs between KERA and the practice, but there are also quite a few accounts which have started advertising on their own, without the financial support of KERA. MM: I'd like to pursue this rifle-shot thing, because that to me means not spending a lot of money on radio and TV, as opposed to what? You get lists of contact lens wearers and go after them, that kind of thing? JG: Well that is a big piece of our marketing mix, which is a direct mailing to consumers who are contact lens users, and some of those mailings actually allow us to target within our range. MM: Sounds good, thanks. Dave Dirkelson (?) (Dain Rauscher Wessels): What is the rate of adding new fast-track practices for the balance of the year? JG: It's going to be somewhat a factor of just how effective we are in our direct-to- consumer marketing which comes into play in May or June. We're going to decide whether it's better to have more patients and have a higher procedure per practice rate or whether it's better to continue to ramp up as we've been doing and add fast-track practices. DD: It seems to me that another part of the equation is just the overall simplicity of the procedure itself; are there things that you're doing on that front that might make this more attractive to a broader group of physicians? You've talked about this in the past - can you give us an update? TL: We have a procedure task team that's working with a number of doctors that is focused on about six separate elements where we believe we can not only improve the procedure reducing the skill but also improve the throughput time for the doctor, and that's a major program within the company. JG: One of the advantages of our fast-track strategy is that we have a very focused approach working clinically with these practices to perfect their technique, take them down the learning curve. We then take those learnings, codify them, and expand them to new customers. TL: One thing I want to point out is on that percentage increase within the fast-track practices, I want to emphasize the sweat, blood and tears that goes into that. This is not a group of new patients that are coming in that have heard about Intacs, this is the doctors actually switching the patients that are coming in the door to Intacs, which requires this whole practice-integration effort, and as we stated before, we believe the consumer part will now bring in that new patient population that everyone's seeking. Joseph Milsap (Huntley Securities): Can you describe what the cost to bring a new fast- track clinic on would be, and how many physicians in the fast-track programs - what kind of numbers are we talking about relative to the numbers which have already gone through the training? TL: I believe we have 38 fast-track doctors right now, and we will continue to expand that group through the year. As we drop in our consumer marketing, we'll make a decision if we want to stay with a narrowly-focused program or move to a more broadly-focused program; so the speed that we adopt will have a lot to do with our consumer marketing. Initially there is an expense because we have our people in their practices a day a week, working with their practices, that's both on the clinical side and on the business management side. So there's a declining involvement by our people on a full-time basis as time goes on, and then we move into some of the co-op programs that we have for the doctors. JG: The other expense, of course, is some of the marketing program, in the co-op advertising, and what we see is that some of our larger customers who have been doing a significant number of procedures for several months now are starting to build up a patient referral network in their community, and what we're going to discover over the next few months is where is that point of critical mass at which the practice becomes a sustaining distribuition point on its own through a number of patients in the area. JM: Are there any markets that you can point us to that we should be doing some of our own work on to better understand the consumer and physician activity relative to the level of acceptance of the implant relative to LASIK? What's your most important market? JG: I'm afraid that we'd be compromising our customers' wishes if we did that, because they don't want to deal with a lot of questions about their consumer marketing and about their practice from analysts or anybody else right now. JM: Geographically, is there a much greater level of activity in the fast-tracks on the west coast than perhaps, say, the northeast, I mean, is there any geographic concentration we're dealing with at this point? JG: It's pretty balanced around the country. I'd say that generally speaking there's relatively less activity in the northeast because it was a sales territory which was vacant for a couple of months late last year. Richard Dixon (Dixon Consulting): I've been a keratoconus patient for 33 years. I'm interested in your clinical trials in Europe, how soon they'll be complete and your expectations for FDA approval in the US? TL: A doctor that was one of our investigators in Europe approached me 2 1/2 years ago with the idea that he could, he thought he could treat keratoconus with Intacs. If you're familiar with the product, the ring is actually split into two halves, and the doctor has the ability to use different size segments to treat the cone. He went ahead on his own, he treated only aggressive keratoconus patients, and he's got close to 20 right now, with a number of them out to two years. These patients - and it's all anecdotal and there's no guarantee - the patients that he's treated so far have not had any progression of the disease since inserting the Intacs. Then what we've found is that a condition called post-LASIK ectasia, or LASIK-induced keratoconus, a doctor from another country outside the US approached us a year ago saying that he was seeing a fair number of these that were five years out, and it's very much like keratoconus, and he has a separate study under way for that. After that, we decided to go forward with a formal study in Europe which is now underway, which we announced in January, and we hope, if all goes well, that we can get, first of all that we can get approval in Europe by year-end or the first half of next year. With that, there's a young man here in the US named Robert Gavin who's also a keratoconus patient, and he used to be a TV star with the TV show "Baywatch," and he's been working with us quite a bit. He runs a web site called www.kcenter.org I believe, and with his background work and his encouragement we think there's a group of doctors that may begin a study this year on a "physician IDE [?]" basis - the company is not in a position right now to sponsor it in the US, but we hope that the physicians will file an IDE and we should have a study under way really run by the doctors, not by the company, sometime this year, we hope. RD: Thank you very much for your response. Your marketing department works very well; as I was on hold, my fax machine just generated six pages. I commend you on your research for keratoconus, and to the financial consultants sitting in the crowd there, if this is a solution for keratoconus, invest money in this company. TL: Just to add to that, in the last study that was done on it, it was shown that the incidence of keratoconus is about one in 2000. With the advent of refractive surgery and the improvement in diagnostic techniques, many of the experts believe it is one out of a thousand, possibly one out of 500. So the incidence of keratoconus is believed to be much higher than it was believed to be just a few years ago, and represents a sizable therapeutic application for Intacs if the trials continue to go as well as they have thus far. Larry Hamovich (HMTC): (Joined late - asked about procedure numbers) MFC: We estimate greater than 1,100, based on registry cards coming back, we expect to see some more coming back over the next few weeks. LH: Are you able to break down the revenue into kits and Intacs sales? MFC: We did around 10 kits or so, the break-out's about 50-50 between Intacs and kits. LH: So roughly $.5 million kits, $.5 million Intacs? MFC: In that ballpark, yeah. LH: So the ASP is about $500 MFC: Yes, we're holding firm on the average selling price currently. LH: OK. The reason I'm asking is that I was under the impression that during the quarter you were running some sort of promotional deals for the fast-track centers enabling them to acquire Intacs at a lower price than the full selling price; I wonder if you can help me understand where I perhaps went wrong on that. MFC: We are reporting and tracking our procedure volumes because that's one of the key metrics going forward. That doesn't always directly translate to revenue because some doctors have inventory from the starter kit, and there are some programs which John will talk about as well. JG: To help a new fast-track practice get down the learning curve quickly both clinically and commercially, we are letting them launch and intro special offer, usually around $999, which is enabled by a free Intac. It allows them to do a significant number of procedures in a short amount of time, attracting consumers while still making some money on the procedure. But that is an intro offer, there's not a lot of procedures it applies to, and it's for a new fast-track practice. The other point, just to elaborate on what Mark mentioned earlier, is that there are practices out there who still have inventory, and so not every procedure translates into an Intac reorder today. LH: Okay, so there really wasn't much of a change in the ASP, though, because I had heard that there was a fairly strong promotion going on, and it sounds like it was very limited, and therefor didn't affect your ASPs very much. JG: That's correct. LH: You mentioned that there were some changes in the sales force. How many salesmen did you have at the end of 1999, and how many did you have at the end of Q1? MFC: It's the same number, we're not changing the number of salespeople, it's still 15. LH: I guess I'm confused because I heard there was a lot of turnover. Have you been able to replace all the ones that have been turned over? MFC: We have replaced already or have commitments for all 15 of our territories currently. LH: How many territories are now filled, though? MFC: All but one, 14 out of 15. I would say that this is less of an instrument-selling, commision sort of sales force, and more of a consultative marketing partnership sort of sales force. The initial group we had in did a very good job of selling instrument kits, but along the way the focus of the company shifted from a procedure focus, and that means that a practice needs help on a regular basis in training their staff, in talking to consumers, in setting up the co-op programs in the market, and that's what this new profile person is really good at doing. LH: What type of company has this individual been coming from? MFC: It depends, but as we invest more time and more resources in building optometric networks of referrals, it's logical that we get people who have expertise in this area, who come from contact lens companies, or companies who market contact lenses. LH: I seem to recall [in the 4Q conference call] that there was a number that we were talking about in terms of revenue of about $15 million for the year, and I wonder if at this point you can revise this or give us better estimates. MFC: I think you were thinking of street estimates, which varied from about $11 million to $15 million for the year, and obviously people will take into consideration this quarter's revenue, and take a look at the procedure volume and work on their models, and then we can chat. Roy Friedman (Edith [?] Foundation): My question concerns the small number of patients who have experienced fluctuating vision or similar problems several months after implantation. 1)Why does fluctuating vision occur 2)Is the frequency of these complications declining over time as surgeons become more experienced 3)To what extent are these kinds of problems holding back market acceptance? TL: There is some of that is in the learning curve, second, some of is in the procedure itself, not in all cases, because of the fact that you have edema, and as the cornea closes around the Intacs you still have some instability, third, LASIK itself also has fluctuating vision, it's not talked about but it's there, so they're similar in that regard. I would say that the big difference between us and a LASIK procedure is that, as somebody said, the best your going to see with LASIK is the day after surgery, and there is some slight regression over time. With Intacs, you'll get a very good result on day one, but vision will continue to improve over time, and there's a much better visual result that you will find after 30 days because of the nature of the procedure maintaining the central optical zone. So there's a little that you give up early on with what people like to call the "Wow Factor," but at the end of the day, when you get through that 30 day period you end up with a much higher quality of vision. That is certainly something that we're communicating to those that are considering getting Intacs. I do want to caution everyone that there a lot of things about LASIK in the first couple weeks that aren't talked about as well, because there's a healing response that they have. [Discussion of low diurnal variation in a study of Intacs. See "medical information" page.] We learned last year that the high-volume production-line LASIK surgeon is not Intacs- friendly, and what we have found, and we still find pockets of it, there's a lot of misinformation out there that's being communicated by people that have other interests in the marketplace, and we think that for the most part, particularly with our fast-track program, we've overcome most of that. Matthew Campbell (Knot Partners): Should we assume that we will continue to spend around $10-11 million per quarter going forward? MFC: We expect sales and marketing to go up a bit. The offsetting gains will come from higher revenue. Our net loss was about $10 million roughly, and that's approximately our cash-flow rate. On the R&D side, we'll have a little bit of an uptick dealing with our clinical trials, our Phase IIIb, but that should trend down a bit over time. MC: Is there a learning period for these new salespeople to get up to speed? JG: Fortunately, not really, because as I said, the bulk of the job is not selling instruments, it's more working with the practice on a regular basis, and that's a skill that all of these people have used in previous jobs. The only are were there's a little bit of a learning curve for some of them is in understanding our procedure, but we have a pretty quick way of centralizing that kind of training for the new people. Joseph Milsap (Huntley Securities): How many surgeons and associates were trained in the first quarter? Also, address the issue clinically, if at all possible, why do the high- volume physicians that presumably would be some of the more peer-respected practitioners be so averse to the Intacs product line? TL: 32 surgeons trained, mostly associates, which means they were affiliated with someone who'd already paid for a kit. The answer to your second question is that I've learned in my 30 years in surgical technology, is that when a surgeon is running at capacity with a procedure, they find it very difficult to get off their production line and do something else. It's easier to see retrospectively. Back in the 70's when angioplasty was new, the bypass surgeons said that they didn't need to do angioplasty, that it was a silly thing to do; that I think typifies what you're seeing with the LASIK surgeons. With the price discounting now that you're seeing in the LASIK market, when the surgeon is not running at capacity, when he or she is trying to differetiate themself in the market, this is what we learned last year, this is where we're finding our success, this is our target market. It goes back to segmentation of the market, and finding what works best where, and we're finding that the higher volume center is - it's just too much of an uphill climb for us, it's just easier for us to go into another part of the market. Joseph Thompson (J&W Securities): Have you looked at what your options might be if you get close to running out of cash, to get through that difficult time? TL: That discussion is ongoing, we've been faced with it for 14 years, and we're still going forward. We're always concerned with our cash, and we'll work our way through; we have a product with a very high margin. That's the best way to raise cash, and that's the way we're focused on growing the business. Roy Friedman (Edith [?] Foundation): Do you have plans to offer Intacs with thicknesses in between the currently available thicknesses, and do you have any information you can share with us on the possibility of insurance coverage for Intacs? TL: On the first part, yes, we're putting together a program on in-between sizes, which will boost the outcome for Intacs users. [Excited about the under -1 diopter market. Study shows a third of this group is interested in refractive surgery, but LASIK walks a very fine line on the possibility of overcorrection.] JG: We found that there are some doctors who are leveraging existing insurance coverages, basically substituting Intacs for previous approved coverage, and we think that trend will continue to increase and that we'll be able to eventually capitalize on insurance plans as a source of business.