Viveve Medical, Inc.

Patricia Scheller - Chief Executive Officer and Director Scott Durbin - Chief Financial Officer

Jeffrey Cohen - Ladenburg Thalmann & Co Anthony Vendetti - Maxim Group Greg Chodaczek - B. Riley & Co Brian Marckx - Zacks Investment Research Charles Haff - Craig Hallum Capital Group LLC

Thank you, operator, and good afternoon, everyone. Thank you for joining us today to discuss our fourth quarter and year-end financial results.

Before we begin, let me remind you that on today's call we will be making forward looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement.

This includes remarks about the corporations, projections, expectations, plans, beliefs and prospects. These statements are based on judgments and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

These risks and uncertainties are described more fully in our Annual Report on Form 10-K and other filings we make with the SEC which are also available on our website. In addition, any forward-looking statements represent our views only as of today and should not be relied upon us representing our views as of any subsequent date.

Joining me on the call today is Viveve’s Chief Executive Officer, Patricia Scheller and following our prepared remarks, we will open the call to a limited Q&A session. I'll begin the call with a brief review of fourth quarter followed by our full-year financial results for 2016.

Since launching commercially in the third quarter of last year, we have seen continued sales momentum around the globe resulting in six quarters of consecutive double-digit sales growth. For the fourth quarter revenue was approximately $2.5 million or 33% increase over the third quarter and 226% increase over the fourth quarter of 2015.

Revenue in the fourth quarter was primarily driven by the sale of 55 systems and more than 1,300 disposable treatment tips making our current global installed base as of December 31, 2016 217 systems. During the fourth quarter sales were attributable to the following regions; 68% of sales came from Asia-Pacific; 13% from North America, 13% from Latin America; and 6% from Europe.

Gross profit for the fourth quarter of 2016 was $956,000 or 39% of revenue compared to gross profit of $287,000 or 38% of revenue a year-ago. Total operating expenses for the fourth quarter of 2016 were $6.5 million.

Spending on research and development during the fourth quarter was approximately $2.1 million compared to $1.5 million in Q4 of 2015. The increase is associated with additional engineering and development work with our contract manufacturing partner related to product line expansion efforts.

Selling, general and administrative expenses for the fourth quarter of 2016 were $4.4 million compared to $2.3 million in Q4 2015. This increase is mainly attributable to additional marketing efforts to build brand and market awareness, expenses associated with being a public company and financing efforts.

Net loss for the fourth quarter of 2016 was $5.8 million or a loss of $0.55 per share based on approximately $10.7 million weighted average shares outstanding during the period. Finally, from a balance sheet perspective, we ended the fourth quarter with approximately $8.1 million in cash and equivalents.

For the full-year 2016 revenue totaled $7.1 million from the sale of 175 systems and more than 2,700 treatment tips, compared to revenue of approximately $1.4 million for the full-year 2015. Gross profit for the full-year 2016 was $2.5 million or 35% of revenue, compared to gross profit of only $462,000, or 32% of revenue, for the full-year 2015.

Total operating expenses for the full-year 2016 were approximately $21.2 million. Again spending on research and development was $8.4 million compared to approximately $5 million in 2015.

And again was associated with the costs of additional engineering and development work with our contract manufacturing partner related to product expansion and improvement efforts. Selling, general and administrative expenses for the full-year 2016 were $12.9 million versus approximately $7.5 million in 2015.

And again SG&A was the result increased because of sales and marketing efforts to build brand and market awareness and expenses associated with being a public company and financing efforts. Net loss for the full-year 2016 was $20.1 million or a loss of $2.18 per share compared with a net loss of $12.4 million or a loss of $2.47 per share for the full-year 2015.

I would now like to make several comments about our financial expectations for 2017. With several recent and key international regulatory approvals as well as U.S.

approval and the launch of our U.S. sales force, we believe we are well-positioned to build on our 2016 success and are anticipating a very strong 2017.

We expect our current installed base as well as consumable sales to increase significantly and expect full-year revenue for 2017 to be between $14 million and $16 million. We also anticipate strong gross margin improvement this year as we anticipate an increase in the average selling price of both our systems and treatment tips due to our direct sales force in the U.S.

and as we seek to reduce our cost of goods sold by mid-year. With that, I'd now like to turn the call over to Patricia Scheller, our Chief Executive Officer.

Thank you, Scott. Good afternoon, everyone and thank you for joining us.

I’ll start the call with a brief review of some of our accomplishments in 2016 and finish by discussing our strategic initiative for 2017 then we will take questions. We are very pleased with our strong fourth quarter results which capped off an excellent year for Viveve.

This extremely busy and successful quarter our sixth consecutive quarter of double-digit growth since launching commercially in the third quarter of 2015, underscores not only the scope of our opportunity, but also the remarkable execution delivered by our team over the course of the year. As I reflect on 2016, I am proud of our many accomplishments, which I believe that are the strong foundation for future growth.

For 2016, we achieved full-year revenue growth of 394% over 2015 driving increased adoption of the GENEVEVE treatment as evidenced by strong new account generation and increased treatment tip utilization. We have seen a growing awareness of the benefits of our technology throughout the medical community as demonstrated by our attendance at 13 Medical Society Congresses and invitations from six of the medical societies to present the clinical results of the GENEVEVE treatment including our groundbreaking VIVEVE I clinical study.

In this study, the Viveve System became the first and to date the only energy-based technology in the market to garner positive clinical evidence from a rigorous multi-center randomized, blinded and sham-controlled study in over 150 women from around the world suffering from structural gynecological changes that impacted their quality of life. Both the primary and key secondary endpoints for the VIVEVE I study were achieved with statistical significance.

And the results were accepted by and recently published in the February 2017 issue of the Journal of Sexual Medicine. Based upon the results of our numerous clinical studies, the Viveve System is currently available in over 50 countries around the world with regulatory approval to treat vaginal laxity and improve sexual function in women and for general surgical uses.

Many of those regulatory approvals came in 2016, including several large static and sexual medicine markets such as the United States, Brazil and South Korea, as well as approvals in Australia, Colombia, Lebanon and the United Arab Emirates. A total of 10 new regulatory approvals were obtained in 2016 bringing the total number of countries in which the Viveve System has regulatory approval or clearance to 51.

We believe these regulatory clearances and approvals position the company for continued growth in 2017. Further, we have regulatory submissions in place in 14 different countries and anticipate receiving additional clearances over the next 12 months.

In the fourth quarter of 2016, Viveve received FDA regulatory clearance for general surgical procedures for electrocoagulation and hemostasis. To obtain a new U.S.

indication for the improvement of sexual function that is consistent with approvals in most countries around the world. Viveve has submitted an Investigational Device Exemption or IDE to the FDA under a de novo 510(k) pathway for a multi-center U.S.

pivotal trial called VIVEVE II. The FDA has through two rounds of questions and several meetings provided their input on the protocol which has been incorporated into the latest version that will be returned to the FDA this month.

We expect to begin the VIVEVE II study in the U.S. if and when the FDA approves our IDE.

The proposed VIVEVE II clinical study is a randomized double blinded and sham-controlled trial with a planned enrollment of approximately 250 patients from up to 25 study sites in the United States and Canada. Subjects will be randomized in a one-to-one ratio for active and sham treatments.

The primary endpoint with the mean change in the total score of the Female Sexual Function Index or FSFI validated patient reported outcome questionnaire acceptable to the FDA. Secondary endpoints will include two of the six domains of the FSFI questionnaire that contributed most heavily to the statistically significant outcome in VIVEVE I the arousal and orgasm domains.

We anticipate patient follow-up will continue to 12 months post procedure. The VIVEVE II study will if successful demonstrate that the GENEVEVE treatment provides clinically significant benefits to patients suffering from sexual dysfunction.

We continue to believe that it will represent a paradigm shift in a market where many companies promote products unlimited or no scientific evidence and may very well be the first sexual function claim ever cleared by the FDA. Since research has confirmed that problems with sexual health and wellness have a direct effect on women's overall health and well being, the Viveve is passionately committed to delivering long overdue solutions for women in this regard.

To that end, we have established a vibrant external research program for our physician customers that is geared to gathering deeper and broader insights into how Viveve technology can provide additional benefits in addressing women's health needs and to cultivating top research methodologies. Also in 2016, we announced seven new distribution agreements representing some of the largest worldwide markets for aesthetic medical procedures.

The Viveve now has 26 distribution partnerships covering 67 countries. In 2016, we put in place the commercial infrastructure to drive and support a strong and high growth business.

In 2017, we believe we will light the fuse that ignites this explosive growth. Our areas of focus this year will include increasing awareness of women's sexual health conditions specifically vaginal laxity a condition that affects millions of women worldwide.

Through the use of social as well as traditional media, we will work with our physician customers around the world to educate women on their treatment options and the clinical results achieved with GENEVEVE. The establishment of scientific advisory and key opinion leader boards across multiple physicians specialties will serve to cement our corporate positioning as a company dedicated to evidence based medicine and sound scientific research.

Key opinion leaders in countries around the world have been and are continuing to be identified. These key opinion leaders will help facilitate our educational efforts through podium presentations at scientific meetings by training new physicians and their staff and through variance media outreach programs.

Our ongoing marketing efforts to increase awareness of the Company, our products and treatment will we believe help position Viveve as an innovator in women's health and wellness. Second, generating additional differentiating clinical data not only through the VIVEVE II study, but also through our external research program.

With these clinical studies, we intend to expand our U.S. indication to include improvement of sexual function.

Additionally, we will explore new indications in the area of vaginal atrophy and stress urinary incontinence initially through our external research program and as appropriate through randomized sham-controlled and blinded studies to seek regulatory clearances and approvals world-wide. Third, launch new products, as we seek new indications it will be necessary to expand our product portfolio to provide the right products to address significant women's health conditions and achieve the desired outcomes most effectively.

To this end, we are actively developing in partnership with our contract manufacturing partner and our physician advisors and new products that will address additional indications. Our fourth major initiative is building a strong commercial team to address our U.S.

and Canadian markets. Earlier this year, we announced the formation of our initial North American commercial sales team.

We are proud of the talented and seasoned professionals we have assembled to launch GENEVEVE into the U.S. market.

Possessing successful experience and capital as well as consumable medical device sales, our team will reach practitioners in multiple subspecialties to advance women's health and wellness treatment options. We believe the Viveve is well-positioned to build on our rapidly expanding commercial footprint and are committed to providing the highest level of support and service to our commercial team and our physician customers.

We will also continue to support the efforts of our global distribution partners, driving commercialization through increased marketing efforts centered around building patient awareness, the attainment of additional regulatory clearances and local support with practice management and outreach. And finally, enhancing our operating margins.

As Scott mentioned earlier, we anticipate a strong gross margin improvement in 2017 due to an increase in the average selling price of both our systems and treatment tips due to our direct sales force in the U.S. and as we seek to reduce our cost of goods sold.

To further enhance operating margins, we will move to a new corporate headquarters in Colorado towards the end of the first quarter of this year. This move comes with $2.3 million in state tax credit.

In addition, the greater Denver area is a dynamic business center especially for medical technology companies with a strong economy, a positive growth outlook and a highly educated workforce. Our new 12,400 square foot facility will serve as the location for Viveve’s corporate offices as well as warehouse operations to support our global distribution network in 69 countries around the world.

Our operations team is already working to ensure a smooth seamless transition to guarantee an uninterrupted supply of products to our customers. As Scott has detailed, we achieved another record quarter of sales growth, increasing revenue by 33% and our installed base of Viveve Systems by 17% over the third quarter of 2016.

This marks our sixth consecutive quarter of double-digit growth for both revenue and system placements. This incredible record of growth brings our current global installed base to 217 systems.

As we continue to aggressively advance our commercial strategy around the world, we believe we will see growth of both the market and the adoption of the GENEVEVE treatment. In summary, there is a lot to be proud of in 2016 and in the fourth quarter in particular.

We are very pleased with our progress and very excited about the opportunity ahead of us. To the Viveve team who diligently listens to these calls it is because of your talents and dedication that we have made great progress this year, and it is because of your passion and perseverance that I look forward to seeing what we can accomplish in 2017.

Together, we will light the fuse that will result in explosive growth. And at this time, I'd like to turn it back over to the operator for a limited question-and-answer session.

Hey, Pat and Scott. How are you?

Good. Jeff, how are you?

Great Jeff.

Just great. So I'll try to limit my questions somewhat, so the first question your answer because your K just hit a few moments ago, so thank you for that.

Can you just verify so another iteration going back to the FDA on VIVEVE II, you did mention 12 months follow-up period with two of the FSFI endpoints being secondary outcome measures. Is that how it looks now?

That is correct. The FDA has asked that we have a 12-month follow-up period for VIVEVE II study, so that has been incorporated into our protocol.

Okay. Got it.

And can you give us a little more color on margins and form factors and product expansions as you see here for 2017, I guess correctly modeling in a fairly significant increase in margins up to say mid-40% range. How does that work in a new form factor or sounds like form factors perhaps this year?

Well Jeff, I'll respond to the gross margin question. We've internally made a decision not to sort of guide in terms of where exactly gross margins are going to go.

There are a lot of variable factors. In-house 2017 will shape up and so while we've given topline revenue guidance we’ve shied away from gross margin guidance at this stage I think as we get through next year that will come.

But as we said we're expecting significant margin improvement over 2016 due to the fact that we're now going to be selling direct in the United States and the implementation of a long overdue and long awaited cost of goods sold improvement effort that we expect to hit in midyear of 2017.

Okay. Got it.

What is the size of the current sales force now domestically and what might that look like over the next 12 months.

Sure. So Jeff right now we have in place eight sales reps that covers the entire U.S.

and one of them also extends into Canada. We have two regional directors that cover the east and west and we also have EVP of the sales.

The intent is to start expanding that sales organization in the second half of this year, and I believe we will bring on Board between four and six reps in the second half to accommodate increased demand.

Okay. Can I assume that when you said approximately 13% of, I think Q4 was from North America, does that mean approximately seven systems replaced what’s your guesstimate?

Yes.

Okay. That’s great.

And I guess one more if I may. It appears as if your utilization has virtually doubled between Q2, Q3 and what I'm calculating in Q4 which is tremendous from 1,300 procedures.

Could you provide any color there and give us any further color on what you're seeing as far as key opinion leaders, some of the physicians out there pulled through in demand because that’s quite unusual the utilization would jump so highly.

Well I'll comment from a quantitative perspective and let Pat comment qualitatively. I think at least we've talked to you about and others about, this business is about a maturing installed base over time.

We were very, very pleased to see the level of utilization that we achieved in Q4. We continue to believe that that utilization given the size of the market and the feedback from our distributor customers, our physician customers and patients on the tremendous outcomes that are being achieved that will continue to drive that utilization – that rate up as we go forward.

So it’s our expectation to continue to drive utilization and as our installed base matures, we're expecting to see that.

Fantastic. Well done.

And one more if I may and then I’ll leave it there. Any commentary on your previous quarter commentary regarding IP and [dermy]?

So, Jeff, we continue to be in the midst of the actual litigation, so I am not free to comment on the case at this time.

Okay. Thank you for that.

Thanks guys.

Thank you.

Thanks Jeff.

Thanks. I just wanted to follow-up a little bit on the FDA process, so as I understand from your comments on the quality, you're submitting – based on two rounds of questions you are submitting to be FDA by the end of February within the next couple weeks here.

Is it a final protocol and then you wait for at this point once you submitted their blessing of the protocol, is that correct?

That's correct Anthony. As you noted obtaining an IDE approval is a process and fortunately we've had very good communication and meetings with the reviewers thus far.

They have given us a significant amount of input and we appreciate their input and we believe that the submission that we are preparing for them will be our final response and we are hopeful that we will receive the approval to proceed with our IDE study upon their review.

Okay. And Pat just because I know when there is around the questions when you are actually submitting for clearance they have up to 90 days to respond.

This is a different situation where they could literally approve it within a couple weeks it doesn’t necessarily have to take longer than that is that accurate?

On the IDE process as I understand it is a 30-day response time and the FDA keeps the clock running as long as they reviewing once they provide you with questions or commentary to which you most respond the clock stops. So that 30-day period then resume once you resubmit or provide your documentation to them.

So we are still within that 30-day period and once we respond, the clock will start again and they will then have a certain number of days in which they need to get back to us.

Okay. So if I look at the timeline that we currently have, it sounds like we are still potentially on track for beginning enrollment by the end of March maybe it’s beginning of April, but it’s pretty much on track with what you had laid out for us in the beginning and then you will do the enrollment and then there is follow-up that you have to do after all the 250 patients are treated the 12-month follow-up.

Is the time – the timeline that you see for potential FDA approval following all of the steps is it still on track as you have laid out in the past or do you see any potential delay in the process based on what you’ve learned from the FDA?

Our original timeline Anthony incorporated two rounds of questions from the FDA and the 12 months follow-up. We try to look at what we felt would be reasonable timeline based upon our knowledge of the FDA.

And as it played out there have been two rounds of questions and they do anticipate a 12-month follow-up. So I believe very close to our original projected timelines should we have any additional requests from the FDA, we maybe looking at a delay in that timeline, but right now we should be fairly close to it.

Okay. Great.

So as long as there's no additional questions should be closed on track. If there are additional questions it sounds like between the questions coming in and then being able to respond, it could push it out maybe two months, but that's it sounds like that would be at this point in the process that would be the most push out.

Yes. I’d say – looking at a quarter, yes.

Yes, at most. Okay.

And then Scott you mentioned you have $8.1 million in cash and equivalents on the balance sheet right now and I know you start to ramp up the U.S. sales force, James working hard on that.

But you're probably looking at where you are now and saying okay, I think we can handle what we have in the first half and then adding four to six more people in the second half. Can you just talk a little bit about your expected burn rate maybe if it's not going to be the same every quarter through the year, maybe what you expected to be in the first half versus the second half of 2017?

Yes, generally speaking Anthony, we're still contemplating given the growth we're expecting next year on topline with combined margin improvement, we're still expecting a cash burn rate in the $2 million a month range on average through 2017.

Okay. Great.

I think you mentioned – I think you are in 52 to 53 countries right now on regulatory improve, you have another 14 submissions waiting for clearance. Is that why you said you expect to be in 67 countries by the end of the year, is that accurate?

So we do have 51 countries where we have regulatory clearance or approval and we have 14 ongoing regulatory submissions currently. We have 67 countries covered through distribution agreements, some of those countries do not yet have regulatory clearance or approval.

So the 14 that I mentioned where we do have submissions in are among those countries where we have distributions, but no approval to date.

Okay understood. Okay.

So each test is obviously different, but the 14 you have in submission or one that you would expect to get by the end of 2017, correct?

Yes, for the most part we anticipate that these will be countries that should come in 2017. Although, I will caution that among those there are some countries such as Russia where the regulatory process can be quite lengthy, and we do know that in some of these countries it will be required to do a local clinical trial and that of course could extend beyond the end of 2017.

Okay. And just lastly, Scott if you could just provide the total number of diluted shares including all the warrants and so forth what’s that now right at this point?

Yes, it is approximately 10.5 million shares of common. We have a total option pool eligible which is approximately 2.5 million shares and there are roughly 0.5 million warrants.

Okay, perfect. Okay guys, thanks.

I'll hop back in queue. Appreciated.

Thanks Anthony.

Thanks Anthony.

Thanks and congratulations Pat and Scott and I promise I limit, just two questions.

Hi, Greg.

Thanks Greg.

Number one any sales in the U.S. or is that all Canada in the fourth quarter?

It does include U.S. sales, as I mentioned geographically fourth quarter, North America contributed that 13% which someone asked that question it was seven systems of the 55 system sold in Q4 yes.

Okay. So off the seven there is some in the U.S.?

Correct.

Yes, I believe all seven were in the U.S.

Okay. All right.

Then the next question is for the reps, how are they selling to doctors in the U.S. based on the label?

So one of the things that we have been very clear with ours sales rep about is selling on the products per the label that we have, so we have made a very strong policy that they need to adhere to the label in the U.S. This does allow them to provide if asked a reprint of published information on peer reviewed journal articles for clinical data, so that is all that we are able to provide and that is all that our sales reps do provide.

However, I would say that most of the physicians in this space has been very actively following the developments that have been happening outside the United States and [ask them to attend] various professional meetings where they see other physicians presenting their data on various products that are used for vaginal rejuvenation. So we are actually getting a lot of calls with regard to the availability of our product here in the U.S.

Got it. Thanks Pat and Scott I got two more very short questions.

Number one for 2016, the DMT purchased all 47 systems?

They did.

Okay. And if I look at guidance for 2017 it looks like the installed base is going to double or thereabouts and I'm assuming that includes the other 75 from DMT, is that true?

The latter is true. I don't want to comment on, I don’t want to give you unit guidance, but the fact is that DMT has a 75 unit minimum that has been publicly disclosed for 2017.

Okay. All right.

I'll leave it there and congratulations again. Thanks.

Thanks Greg.

Thanks Greg.

Hi, Patricia and Scott and congratulations on the quarter, great progress. Can you talk a little bit about utilization again and I guess more maybe in general terms, what are your thoughts in terms of utilization per machine say just for example, machine that has been on the market for say six or 12 months.

What do you think that utilization per machine could be expected to be?

It's a very interesting question Brian, because we’ve actually studied this in some of our accounts in Asia. So and looking at some of the early accounts that were brought on line in Japan and after working closely with the practice to have outreach to their patient base and to start building awareness in their community.

There were two accounts that that we followed quite closely and we showed that with dedicated outreach these accounts went from one or two patients a month, up to 12 to 15 patients a month. So the demand was definitely there and these accounts were able to tap into it and generate the interest and bring the patients in.

We have accounts in China that are – they're seeing weigh more than 12 to 15 patients per month. And so it really does speak to the power of being able to reach out and provide the information to the patients to make them aware of not only the condition, but also the fact that there is some treatment available that will help them.

Okay, great. In terms of the current U.S.

marketing strategy, Patricia you talked about a little bit in terms of the label. Does the current label in anyway restrict the physical locations were you detail to clearly the aesthetics market in the aesthetics clinics in the U.S.

is a big growth area, would it – somewhat in anyway restrict you from calling on those potential accounts with just the surgical label?

We have received inquiries from physicians across all specialty groups, including OB/GYN, UroGyn, derms and plastic surgeon. The first sales into the U.S.

have included individuals in each of those subspecialties. So I believe the interest is in fact pretty widespread and the awareness of treatments for various vaginal conditions is certainly out there and growing, and I believe that that we are able to tap into that given the significant amount of clinical data that we've generated and with the publication of the results very recently after getting approval in the U.S.

Okay. Wonder if you guys want to comment on the Allergan, acquisition of Zeltiq and just sort of in general and in the context of kind of how that reflects on the attractiveness of the aesthetics market?

It has certainly been a very busy week for M&A activity in the aesthetics space between Celtic and [sinus] are being required. We're still assessing the implications for us, but there are several thoughts about how these deals could affect the market that we're in and Viveve in particular.

Looking from a capital perspective, hopefully it means that there will be more investor capital looking to be redeployed and with fewer players from which to choose it could be a net positive for Viveve as people turn to us as a standalone company in which they can invest that capital and hopefully there were also be some distraction that results from all of this corporate consolidation going on that could help us to gain additional traction in the market. Some additional thoughts, Hologic is focused on female health and their expansion into the aesthetics space basically validates our dual commercial pathway between both the aesthetic doctors and the OB/GYN UroGyn doctors, which was nice to see, and hopefully it will increase the opportunity for Viveve in the future.

And Scott, I don't know if you have any additional comments you thought you'd like to make?

No, I think with respect to Brian, Celtic specifically I think Allergan has long been on the drug side and this is a big shift for them and energy based devices and validates the efficacy of that particular treatment paradigm and bodes well for Viveve.

Yes. Okay, all right, great.

Thanks a lot guys, appreciate it.

Thanks, Brian.

Hi, thanks for taking my questions. Can you hear me okay?

Absolutely, Charles.

Yes, thanks. So regarding the utilization, we looked at the number of treatment tips you sold this quarter and compared to the number of Viveve boxes that you had last quarter and I think is somebody mentioned earlier there was a dramatic jump and now have over eight treatment tips per installation this quarter when you use that formula.

How should we think about that the pacing of that? Have you looked at it that way or can you kind of help us understand how you kind of think about that?

Yes, it's a little bit – I'll say in the early quarters here. Things are going to be a little bit bumpy, and not in a bad way bumpy, but in some quarters are going to have sort of greater utilization per installed base per system per month than others in the early days here, a lot of that has to do with as orders go out to new physicians, a lot of our business is growing our installed base right now and in some instances you have a multi-physician practice buying a system, who may buy a greater stocking order of treatment tips out of the gate versus others who maybe a single physician practice and then you have the sort of ongoing consumable component to our utilization as well.

So things are a bit bumpy and they were – filter marginal there as well and Celtic in the early days in terms of utilization, we tend to think about it in terms of over the course of the last six quarters. What has the installed base utilization rate been and that's how we think about modeling it over time.

Ultimately, we believe that right now our utilization on average over the last six quarters has been just over two treatment tips for system per month. Ultimately, we think on average over many periods that that will grow to six to eight and we were pleased to obviously see their utilization rate in Q4 and as we've stated expect that momentum to continue.

Great, thanks for the additional color. And then looking at a couple of O-US geographies here, I know you're working on a South Korea label expansion and expanded label there, any updates that you can provide on that?

Yes, the submission has gone into the South Korean regulatory authority and it is working its way through the process. We do anticipate that we will hear back from them in the first half of this year.

Okay, great. Thanks for that.

And you mentioned last quarter that China was very strong and then I heard you when we were talking about utilization. You had some strong orders in China.

I'm just wondering if you can characterize China generally this quarter, where you seeing stronger growth there like you did last quarter.

Yes, so Asia-Pacific represented again about 68% of Q4 sales and much of that was due to China, but also South Korea. We continue to expect that Asia will be a significant portion from a percentage perspective of our total revenue going forward.

It's a huge market for us and as we've mentioned on the call already, our distribution agreement just for China calls for a minimum purchase of 75 systems in 2017.

Great, and then on Brazil with HT Medical, how was that proceeding so far? I know it's relatively new.

Yes, things are going well in Brazil and HV is a great partner for us in market. And we are just getting started there, but we have started to see contraction in the market and believe that the first half of this year will be a good time for us in Brazil.

Okay, great. Well, thanks for taking my questions.

I appreciate it.

Thanks Charles.

Thank you. End of Q&A