Mar 15, 2018
Executives
Scott Durbin - CFO Patricia Scheller - CEO James Atkinson - Chief Business Officer and President
Analysts
Joshua Jennings - Cowen & Company Jason Bedford - Raymond James Jeffrey Cohen - Ladenburg Thalmann & Company Anthony Vendetti - Maxim Group Lucas Baranowski - Craig-Hallum Capital Brian Marckx - Zacks
Operator
Good afternoon and welcome to the Viveve Fourth Quarter and Year-End 2017 Conference Call. All participants will be in listen-only mode.
[Operator Instructions] Speaking today are Viveve's Chief Executive Officer and Director; Patricia Scheller; the company's Chief Financial Officer, Scott Durbin; and the company's President and Chief Business Officer, Jim Atkinson. Management will provide any overview of the fourth quarter and year-end financial and operating results before opening up the call for questions.
Please note this event is being recorded. I'll now turn the call over to Scott Durbin.
Scott Durbin
Thank you, operator, and welcome everyone. Before we begin, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company.
Any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the Corporation's 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 the company's annual report on Form 10-K and other filings we made with the SEC, which are also available on the website.
In addition, any forward-looking statements represent management's views only as of the date of this conference call and should not be relied upon as representing management's views as of any subsequent date. I would now like to turn the call over to Patricia Scheller, our Chief Financial Officer.
Patricia Scheller
Thank you, Scott. Good afternoon everyone and thank you for joining us today to discuss Viveve’s fourth quarter and year-end financial and operating results.
I'll begin today's call with a brief review of our accomplishments in 2017 and finish by discussing our strategic initiatives for 2018. We are very pleased with our fourth quarter and year-end results, which capped off a remarkable year for Viveve.
Our success in 2017 underscores not only the scope of the opportunity for our technology, but also the remarkable execution delivered by our team over the course of the year. As I reflect on the many accomplishments achieved last year, I'm extremely proud of the hard work done by our team, which I believe set a strong foundation for continued future growth.
We started 2017 with approximately 40 employees in our Sunnyvale California facility and ended the year with about 100 employees in our new Englewood, Colorado headquarters. And here is what we accomplished.
We hired and trained our first direct sales organization, launched the Viveve system into the U.S. market and achieved record sales growth, expanded our patent portfolio and continued to rigorously defend our intellectual property position.
We licensed new technologies, secured 10 new or expanded regulatory clearances and approvals around the globe, strengthened our balance sheet with approximately $65 million in growth proceeds from equity and debt financing. We remain to the Russell 2000 Index and Deloitte's Technology Fast 500 list.
We published two articles in peer review journals, detailing the clinically proven outcomes achieved with a single Geneveve treatment and saw the first clinical data to support expansion into a new and very large market stress urinary incontinence. In 2017, we achieved full year revenue growth of 114% over 2016, which was driven by rapid adoption of the Geneveve treatment as evidenced by strong placements across multiple physician specialties.
Utilization rates, as measured by consumable treatment tip sales increased significantly across their install base. Despite having a small U.S.
commercial team in the field for only 10 months of the year, the inaugural U.S. sales team drove a substantial portion of that growth.
Our commitment to conducting sound scientific research and providing evidence based clinical results played a vital role in driving our sales performance. 2017 saw the publication of two articles, detailing the results of the landmark for Viveve-1 study in the journal of sexual medicine and in the journal of women’s health.
Two of the preeminent peer reviewed journals in our field. These publications, which detail the statistically significant results of this randomized blinded and sham-controlled study, set Viveve apart from the growing number of companies offering energy based devices proclaiming to address women’s intimate health condition.
We believe our strategic commitment to providing strong clinical evidence to physicians and consumers has set the standard for the evolving category of minimally invasive vaginal treatments. Viveve has always been and remains commitment to conducting rigorous clinical trials across a wide range of indication.
As awareness of the clinical benefits of our patented cryogen-cooled monopolar radio frequency technology or CMRF has grown, demand and utilization rates around the world have increased. With dedicated and effective marketing outreach, we have seen accounts in different regions of the world achieve significant growth in a number of Geneveve treatments.
The strategies and techniques used by these healthcare practitioners are being shared with other accounts to set standards and best practices around the world. In 2017 we received international regulatory approvals and clearances in 10 countries, opening up new markets and in some countries expanding beyond our originally improved indication.
The majority of new approvals are for the treatment of vaginal laxity and or the improvement of sexual function. Several approvals were in large static and sexual medicine markets such Taiwan, South Korea and Mexico, countries that are recognized for influencing medical and health treatment trends in their regions.
The Viveve system is currently available in 62 countries around the world, to-date 58 countries has granted regulatory approvals to the Viveve system for the improvement of vaginal laxity and or a sexual function. Further, we have ongoing regulatory submissions in seven different countries, and anticipate receiving clearances in those countries over the next 12 months.
We believe customer response in our current markets coupled with additional regulatory clearances and approvals will position the company for continued growth in 2018. Moving to the regulatory front in the U.S.
to obtain a new U.S. indication for the improvement of sexual function that is consistent with our approvals in many countries around the world, Viveve submitted an investigational device exemption to the FDA under a De Novo 510K pathway for a multicenter U.S.
pivotal trial that we call Viveve-2. Last year we worked through multiple rounds of questions and held several meeting with the agency.
In response to the agency’s last request for a tissue temperature time history study, I am pleased to report the study has been successfully completed and we expect to hear back from the FDA soon. If the FDA accepts the in-vivo results, has no additional questions and approves our IDE submission, we intent to initiate the Viveve-2 study in the U.S.
in the second quarter of this year. Assuming the second quarter start date, the study could conclude in the second half of 2019.
In addition to pursuing an expanded sexual function indication in the U.S. Viveve’s label expansion strategy is centered on pursuing other indications that represent common and unmet intimate health needs among women that our CMRF technology can effectively address.
In late January, we announced positive results from a pilot study conducted by Dr. Bruce Allen, Founder and Medical Director of the Allen Center in Calgary, Alberta.
Dr. Allen's study, which included patients who underwent treatment for SUI with our CMRF technology using a proprietary treatment protocol, resulted in 89% and 100% responder rates or the percentage of patients showing an improvement from baseline using two different patient reported outcomes.
Additionally, patients experienced a 40% and 51% mean improvement at 12 months across the two validated questionnaire endpoints used in the study. Based on the positive outcomes seen in this pilot study, including sustained reduction of symptoms at 12 months Viveve has committed to conducting two registration studies for stress urinary incontinence.
One called LIBERATE International, and the second LIBERATE U.S. The purpose of these studies in addition to obtaining regulatory clearance is to further assess the safety and efficacy of the disease system in the treatment of mild to moderate SUI.
Both will be multi-centered randomized, double blinded and sham-controlled studies. The expansion of our product portfolio into this indication demonstrates the unique versatility of our globally patented CMRF platform and our dedication to advancing new solutions to improve women's intimate health.
We are excited by the potential for a non-invasive treatment that could have a profoundly positive impact on a women's quality of life in the estimated $10 billion to $12 billion global market for the treatment of stress urinary incontinence. Looking ahead to 2018, our areas of focus will include, first, broadening the applications for our CMRF platform.
The promising stress urinary incontinence clinical data generated by Dr. Allen marks the beginning of what we believe could be a broad expansion of the indications for use of the Viveve system.
We are also working closely with our key opinion leaders through our investigator sponsored research program to explore other conditions such as vaginal atrophy that represents significant areas of unmet need. Like SUI, we hope that these efforts will lead to randomized sham-controlled and blinded studies to seek regulatory clearances and approvals worldwide for additional indications.
Second, building our commercial teams and distribution partnerships to meet the demand of our global business; in 2017, we devoted significant energy to building our direct sales presence in the U.S. In 2018, we will turn our attention to expanding the North American team and enhancing our presence in select markets around the world by hiring local sales talent to augment our distribution network.
These efforts will I believe support our commercial expansion and demonstrate our commitment to providing the highest level of support and service to our global distribution partners and physician customers. Third, continuing to build market awareness of our CMRF technology and grow utilization around the world to drive increased revenue generation.
And fourth, enhancing our operating margins. We anticipate gross margin improvement in the second half of 2018 due to an increase in the average selling price of both our systems and treatment tips through our direct sales force in the U.S.
and as we seek to reduce our cost of goods sold. I'll now turn the call over to Jim Atkinson, our President and Chief Business officer.
Who will provide an overview of our commercial operations.
James Atkinson
Thank you, Patricia. Commercially Viveve achieved very strong results in 2017, shipping 227 Viveve systems and nearly 11,000 disposable treatment tips worldwide.
The U.S. commercial launch last year represented our entry into our largest target market.
The United States represented 70% of system sales for 2017 and 72% of our total revenue. We were gratified by the highly enthusiastic physician response to our safe and effective Geneveve treatment.
The initial U.S. sales team of nine people was expanded in the fall of 2017 to 17 capital representatives to address the rapidly increasing physician demand and provide appropriate customer support, two of these capital representatives were deployed in Canada.
In addition, five associate sales representatives were hired in U.S. to support in field commercial efforts.
As a result at the end of 2017, we had 27 total sales professionals covering North America, each of whom have experienced working with our targeted physician specialties. Our commercial growth plan based on the continued demand we are experiencing entails further expansion in 2018 for a projected North America sales organization at year end of 58 professionals including 27 regional capital sales representatives, 14 associated sales representatives, and 10 clinical practice development managers.
2018 marks the first year, practice development managers will be part of our team in the U.S. These seasoned professional will focus on supporting rapid adoption of our technology in physician practices, driving procedure volume and providing educational marketing support to offices and their patients.
The growing awareness of evidence based clinical results that support the effectiveness of our CMRF technology, and the fact that the Geneveve procedure is the only single treatment procedure in women’s intimate health marketplace has helped drive placements on a global basis. Consumer awareness of women’s intimate health conditions and treatment options is dramatically increasing across the globe.
Viveve has helped fuel this awareness with successful unbranded multi-channel educational marketing campaigns, and consumer outreach. Many of our physician customers have initiated multi-media and social campaigns that have helped increase patient demand for the Geneveve treatment within their clinics.
We expect that treatments currently performed on a clinic’s existing patient population will expand to new patients through these outreach programs. Moving to international, sales in the international markets and our global commercial distribution network were strong in 2017, and continuing to show tremendous potential in 2018.
Since launching internationally in the third quarter of 2015, Viveve has placed 277 Viveve systems through our global network of distribution partners. Asia Pacific continues to be our second largest sales region after the United States.
High launch regulatory clearance and launch in the fourth quarter of 2017 is resulting in a positive sales uptake by physicians along with patient procedures. South Korea with an expanded indication for vaginal laxity treatment granted in May of last year continues to see strong sales momentum and expanded procedure utilization.
Dynamic medical technologies expanded sales team hired in September of 2017 continues to penetrate the Chinese private market, which currently leads the world in overall procedure utilization. Latin America made solid progress in 2017, with recent country specific regulatory approvals and our distributor partners are building key opinion leader and physician interest that is projected to grow in these recognized larger static markets throughout 2018.
Our commercial footprint in the European markets increased in 2017. Although it was over shadowed by the U.S.
launch as was anticipated. In late 2017, we initiated a new sales model in certain European countries, a hybrid direct distributor model.
This strategy is being received positively by physicians and is successfully driving system sales and increased utilization in Europe. We look forward to expanding this strategy throughout 2018.
I’ll now turn the call over to Scott Durbin.
Scott Durbin
Thanks, Jim. I’d like to begin by providing a brief review of the fourth quarter, followed by our full year financial results for 2017.
For the fourth quarter revenue was approximately $5.1 million, a 25% increase over the third quarter and a 108% increase over the fourth quarter of 2016. Revenue in the fourth quarter was primarily driven by the sale 80 Viveve system and approximately 2,600 disposable treatment tips.
Making our current global installed base as of December 31, 2017 440 systems. Sales in the U.S.
accounted for 77% of Q4 revenue, while international accounted for 23%. Gross profit for the fourth quarter of 2017 was $2.8 million or 54% of revenue compared to gross profit of $956,000 or only 39% of revenue a year ago.
Total operating expenses for the fourth quarter of 2017 were $12.2 million. Spending on research and development during the fourth quarter was approximately $3.1 million compared to $2.1 million in the fourth quarter of 2016.
The increase is associated with additional engineering and development work with our contract manufacturing partners related to product line expansion efforts. Selling, general and administrative expenses for the fourth quarter of 2017 were $9.1 million compared to $4.4 million in the fourth quarter of 2016.
This increase is mainly attributable to increased sales and marketing to support our commercialization efforts, increased marketing expenses to build brand and market awareness. Our net loss for the fourth quarter of 2017 was $10.2 million or a net loss of $0.53 per share, based on approximately $19.4 million weighted shares outstanding during the period.
Finally from a balance sheet perspective, we ended the fourth quarter with approximately $20.7 million in cash and equivalents, excluding the recent $35 million financing we concluded in February. For the full year 2017, revenue totaled $15.3 million from the sale of 227 system and more than 10,800 treatment tips, compared to revenue of approximately $7.1 million for 2016, representing a growth rate of 114% year-over-year.
Sales in the U.S. during 2017 accounted for 72% of revenue, while international accounted for 28%.
Gross profit for 2017 was $7.4 million or 49% of revenue compared to gross profit of only $2.5 million or 35% of revenue for the full year 2016. Total operating expenses for 2017 were approximately $41.2 million.
Spending on research and development was $12.3 million compared to approximately $8.4 million in 2016. This increase was again the result of costs associated with additional engineering and development work with our contract manufacturing partners related to product improvement efforts.
Selling, general and administrative expenses for 2017 were $28.8 million versus approximately $12.9 million in 2016. The increase in SG&A was the result of increased cost associated with the initial launch and mid-year expansion of the U.S.
commercial sales organization, increased marketing efforts to support sales, building brand and market awareness, expenses associated with being a public company and financing efforts. Net loss for 2017 was $37 million or a net loss of $2.11 per share compared to a net loss of $20.1 million or a loss of $2.18 per share for 2016.
Finally, as we continue to execute our commercial strategy around the world, we believe we will see growth of both the women's intimate health market and increased adoption of our Geneveve treatment. We do however anticipate quarterly seasonality in system and treatment tip sales in all global markets in 2018 with the first and third quarters being the softest and the second and fourth quarter being the strongest.
And finally consistent with the guidance we announced in early January, we expect full year revenue for 2018 to be between $22 million and $24 million. I will now turn the call back to Patricia, who will say a few closing remarks before we take questions.
Patricia Scheller
Thank you, Scott. In summary, there was a lot to be proud of in 2018.
We're pleased with our progress and excited about the opportunity ahead of us. For the Viveve team, it is because of your talent and dedication that we have achieved significant milestones and realized explosive growth in 2017.
And that is because of your passion and perseverance that I look forward to seeing what we can accomplish together in 2018. At this time, I'd like to turn it over to the operator for a question-and-answer session.
Operator
[Operator Instructions] Our first quarter comes from Joshua Jennings with Cowen & Company. Please go ahead.
Joshua Jennings
Hi, thanks for taking the questions and congrats on all the progress throughout 2017. I was hoping to maybe start with the stress urinary incontinence indication.
I was rather seeing you are going out to the mild to moderate urinary incontinence patients. Could you just help us think about what the standard of care is for these patients today?
And the level of anecdotal patient feedback you're getting back for patients who have treated with Geneveve for laxity from your physician customers?
Patricia Scheller
Sure, so the standard of care for stress incontinence right now there are a couple of different options that physicians have one being to ask women to do Kegel exercises and to use various devices we actually have in controlled medical products that do address stress urinary incontinence as well as urge incontinence and other incontinence conditions. And those types products do work well and can actually help a women very substantially and seen progress with her incontinence issues.
Our product will I think be very helpful in providing a continuous level of improvement in symptoms right now we have data out to 12 months on a single treatment. So we believe that it will be a technology and a procedure that allow women to have one single procedure that's minimally invasive, painless and they can maintain the results that they see with our in control medical products.
On the other end of the spectrum for women with very serious conditions there is of course is surgical option, which includes usually the implantation of a sling or vaginal mesh both of which have significant risk factors and side effects associated with them.
Joshua Jennings
Great. And if I could follow-up with just a question on the FDA path, and it sounds like you have this made two request to-date and both of which you have met.
Does this potentially lower the risk associated with review process once you deliver the actual Viveve II results. It seems that the agency is front loading its request around safety management, to around [ph] giving a real world data.
Is that a fair way to think about where you are now with the IVE process of the FDA dialogue?
Patricia Scheller
Josh, I would love to think that the FDA has in fact front loaded this process and they have ask a number of questions with regards to the safety of the technology all of the data that we have submitted we believe adequately addressed their questions. And we know from the results of the Viveve-1 study that the efficacy of the technology has been demonstrated both in the reduction in vaginal laxity and in the improvement in sexual function.
So my hope is that they do get through the clinical study and have no further questions or concerned that they would like to address at that time. But of course I am obligated to put the caveat out there that it is the FDA.
And they do have the prerogative to continue to ask questions until we have satisfied whatever their issues are.
Joshua Jennings
Great. And maybe my last question is just as you think of building out the U.S.
sales force there has been some disruption at some of your competitors in the space. And then how big of an opportunity is that in look types of resumes are you seeing come across your desk?
Thanks for taking the questions.
Patricia Scheller
Great, thanks Josh. And Jim would please address that question for Josh.
James Atkinson
Yes, thank you, Patricia. Currently as we are building U.S.
commercial organization to 58 people in 2018, we are seeing quite a number of competitive static reps resumes. The interest of these reps is based on the CMRF technology being a single treatment the only single treatment technology out there.
And with our blinded sham-controlled studies in the past they are very enthusiastic about joining our companies. So we are getting quite a number of very good candidates to add to our team, I will not comment on competitors and what’s going on there.
But the majority of the people adding to 2018 due have significant experience in the four specialties that we’re calling on currently. Does that answer your question?
Operator
And our next question comes from Jason Bedford with Raymond James. Please go ahead.
Jason Bedford
Good afternoon, can you hear me okay?
Patricia Scheller
Yes, Jason welcome. Thanks for joining us.
Jason Bedford
Great, thanks. Maybe just to follow on the last line of questioning, when will you -- it look like you are going to add about 30 reps throughout the year, how does that pace -- maybe how many have you added so far this year?
And when come we think about these folks being added throughout the year?
Patricia Scheller
Great. And Jim maybe you can expand on your answer.
James Atkinson
Yes, so currently today we are at 22 capital reps, we are at six associate reps and we are right in the midst of adding six practice manager team members. The second on slot of bringing the reps will be right after the July 4th weekend.
In July will be bringing on the other team member to have the full group on in the second half for the year. So that is our plan currently.
Jason Bedford
Okay. And maybe just couple of question in the commercial business, the LIBERATE trial do you expect that to have a bit of a halo effect on existing centers, meaning I realize you can’t market for the SIU indication, but I am just wondering if you expect this trial to have a positive impact on the rest of your commercial business.
Patricia Scheller
Yes, just as we saw with the Viveve-1 study, once these studies get published doctors around the world become aware of the work that’s being done in these other indications. So I do believe that there will be a halo effect.
And as we've been saying in all of the conferences, which we've been attending, the LIBERATE international study, we are hopeful will get underway in the second quarter of this year. We have submitted the protocols to Health Canada, it is under review and they had previously reviewed that protocol for a non-registration study and had very few questions in non-dealing with the protocol itself.
So, we are hopeful that that particular study with a six months follow-up period could be available for the investigators to present on before the end of the year, which would allow us to obviously get the information out into the public before the beginning of 2019.
Jason Bedford
Okay, that's helpful. And maybe this is my last question, I appreciate all the data you gave us, but can you just talk about the pricing environment more so in the U.S.
on capital and with tips?
Patricia Scheller
Sure, and Jim, I'll turn that one back over to you.
James Atkinson
Yes, thank you, Pat. In the pricing we still are seeing an increase in our ASP currently in United States.
And also a very consistent pricing for the patient charge, physician tip charge, we're seeing pretty stable prices at this point, but we are seeing on the capital side an increased sale price. And I think it comes down to the clinical studies we've done in the past and the fact that we are a single treatment, the only single treatment out there of all the different companies.
And so that brings value not only to the physician practice, but to the patient they don't have to return multiple times for multiple treatments.
Jason Bedford
Great, thank you.
Operator
And our next question comes from Jeffrey Cohen with Ladenburg Thalmann & Company. Please go ahead.
Jeffrey Cohen
Good afternoon, Patricia, Scott and James. Can you hear me okay?
Patricia Scheller
Yes, we can. Thanks, Jeff for joining us.
Jeffrey Cohen
Wonderful. Patricia I hope you’re well and you’re on your feet running around so to speak.
Patricia Scheller
I can, thank you.
Jeffrey Cohen
So I guess my first question is for Jim, if you can elaborate perhaps a bit more on the hybrid model and the timing of that in the specific territories, which maybe the first this year? And what's the ratification so that upon what you talk about earlier with the total commercial force going to 58?
James Atkinson
Yes, the 58 is the United States number. We initiated in Europe in the fourth quarter the hybrid model and we have put a direct capital rep in France and a direct capital rep in the UK.
And we have a new Managing Director that has been working with us for three months. In the early timeframe, right now we are seeing very positive signs from physician adoption of the technology.
We are early into the model, but seeing very, very positive results. And we are also seeing more patient utilization over there based on the LIBERATE data for the Canadian study and future U.S.
studies. So, we will follow this over the next coming quarters.
But this model is working well with our distributors and frankly very excited about it. Pat, do you have anything to add to that?
Patricia Scheller
No, I think you cover it. Great, thanks James.
Jeffrey Cohen
Okay, that's helpful. And then could you talk a little bit about -- I know Scott went through the numbers and discussed a little bit about the R&D and some of the expansion on the portfolio.
Could you get into a bit more specifics with us about talking about referring to treatment tips or form factor or a specific wave length or energies of sorts? And then how that may rollout and what we may see and also as a kind of sideboard to that specific for this -- for SUI is it the precise same technology that you are envisioning as well?
Patricia Scheller
Yes, so Jeff with regard to new product rollouts and how a set with our SUI indication. As we've discussed previously it is our intent over the course of the back half of this year to have a significant reduction in our costs of goods with the introduction of a newer model.
So, that new model will have very similar performance characteristics to our existing platform, but will have a new skin and look different than our existing one. And we will at that point be introducing treatment tips that will have some SUI characteristics that will allow us to treat for that condition.
Jeffrey Cohen
Okay, perfect. That’s it for me.
Thanks for taking the questions.
Operator
And our next question comes from Anthony Vendetti with Maxim Group. Please go ahead.
Anthony Vendetti
Thanks. I was just wondering if no questions come back after you've submitted the tissue temperature study, if no questions come back you expect to commence it did you say by second quarter 2018?
Patricia Scheller
Yes.
Anthony Vendetti
Okay. And I guess if there are questions it could get pushed into 3Q is that what you are thinking?
Patricia Scheller
Yes, it certainly could be pushed later into the year, right now Anthony we have not had any indication of any new areas of concern on the part of the FDA. What we’ve heard from them has all centered around most recently the temperature time history profile, which we believe we have addressed.
So anything that were to come back from the FDA at this point would be on a new area.
Anthony Vendetti
Okay. And based on that I mean most likely if there was a new area that probably would have popped up sooner, so that’s why you are not anticipating it, correct?
Patricia Scheller
Yes, I think that typically the FDA does try and start the dialogues fairly early in the process and get new thoughts on the table during discussions about previous concerns. We haven’t seen that and we don’t know whether or not they have any, but at this point nothing has surface.
So we are very hopeful that they might come back to us soon and allow us to start the study.
Anthony Vendetti
Okay. And then just and maybe this is for Scott, but on the gross margins improvement, I know it was stated on the call that a lot of the growth came from the U.S.
is the U.S. because there isn’t a transfer price involve there just going to have a higher gross margin is that why the margin was higher, or is there were just a greater mix of tips than systems?
And then on top of that for 2018 do you have -- what should we look at in terms of percentage of sales from system versus tips approximately?
Scott Durbin
Thanks, Anthony. So, with respect to 2017 or I think your questions was specifically related to gross margins in Q4, I think it’s a combination of factors it was -- we’re seeing as Jim mentioned increasing ASPs on the treatment tips globally.
And in the U.S. we’re seeing increasing ASPs on the console and the treatment tips.
And so both of -- all of that and relative mix is associated with the increased margins in Q4. With respect to 2018, we’ve been very cautious as you know given how early we are in this market and the global launches in every region, to not give sort of gross margin guidance specifically for any particular period coming up in 2018.
We can tell you anecdotally that we see an believe the increasing ASP and the increasing utilization which will increase gross margins, we see that continuing in 2018, we’re not going to have a 20% increase in gross margins in 2018, but we see definitely an increase towards the end of the year.
Anthony Vendetti
Okay, great. And then lastly on the systems sold in the fourth quarter, I guess, there were 80 -- how many were in the U.S.?
Scott Durbin
57 were placed in the United States and Canada, so what we’re referring to now is North America and 23 internationally.
Anthony Vendetti
Okay, great, I’ll hop back in the queue. Thanks.
Operator
Your next question comes from Alexander Bulo [ph] with Mizuho Securities. Please go ahead.
Unidentified Analyst
Hey, good afternoon guys, this is Alex on for Difei Yang actually. Thank you for taking the questions.
So first question, I was just wondering if you could discuss the utilization rate for the consumables maybe in Q4 versus Q3.
Patricia Scheller
Sure, thank you so much Alex for joining us. Jim, would you take the utilization question please?
James Atkinson
Yes, thank you, Pat. We are seeing increased utilization in Asia in the three primary markets of China, Taiwan being approved in the fourth quarter and South Korea.
Interesting enough in China and in South Korea those distributors have added practice managers which is probably what’s helping with the increased utilization from that area of the globe. In United States we continue to see increased utilization in our accounts that are a little bit older from the standpoint of having a technology.
And based on the physician's license and the information coming out on Libare [ph]. Those practices in the United States that have not only doing vaginal laxity sexual function procedures, but based on their medical license the physician’s license in the practice have moved over to treating patients for SUI.
We are seeing increased utilization. Due to that fact seeing this dynamic in the fourth quarter as where Pat and Scott had approved bringing on the practice management team in the United States a year earlier than other companies such as Celtic [ph] did.
So again being early in the United States with our launch not even through a full year, while we currently are through a full year based on March 1st. We are seeing procedure uptick and with the practice managers being out and giving those practice that have the Viveve system the correct customer service we do expect to see good utilization figures increasing in the United States like we have seen in Asia.
Unidentified Analyst
Okay, great. That’s very helpful, thank you.
And then just wondering you mentioned earlier you have these sort of four physician specialties that represent the bulk of your orders. Is there -- are they all pretty much equally split?
James Atkinson
Yes, we continue to see the aesthetic market, which is the plastic surgeons, you may have aesthetics spas in there and dermatologist one side of the equation and on the other the URO/GYNs, GYNs. We're seeing still about a 50-50 split not only in United States, but around the world of adoption of the technology.
We're not sure that's going to change and the four specialties plastic surgeons and URO/GYNs and GYNs probably are the quickest adopter. But in the last three or four months the dermatologists around the world are actually adopting the technology.
And I think the reason why is that a few years ago, this was considered maybe a procedure that may not have longevity. But over the last three and half years it's been going on in the United States.
This intimate women's health is here to stay. And so dermatologists especially young dermatologists need to adopt the procedure into their practice like the plastics URO/GYNs and GYNs are.
So that's very exciting for us. And we are seeing the same kind of dynamics around the world.
Unidentified Analyst
Great, thank you very much. Very helpful.
Operator
And our next question comes from Lucas Baranowski with Craig-Hallum Capital. Please go ahead.
Lucas Baranowski
Yes, this is Lucas on for Matt Hewitt here at Craig-Hallum. Looking at the 2,600 treatment tips that were sold during the quarter, I was wondering could you provide the split on that, North America versus international?
Patricia Scheller
And Scott maybe you can address that?
Scott Durbin
Yes, hi Lucas. The split was about 1,500 treatment tip in North America and about 1,100 treatment tips international.
Lucas Baranowski
Okay, thank you. That's helpful.
And then one other question here. You mentioned that treatment tip ASPs are increasing globally and earlier in the year it had sounded like there was a little bit of pricing pressure on the international side due to competition.
So has that competition started to abate or what's driving that?
Scott Durbin
Yes, we did make mention of that in one particular country Lucas and that being China. I think we’re beginning to see greater adoption in other parts of the world, through as Jim mentioned the direct distributor model in Europe as Latin America has gained additional regulatory clearances.
And so the increasing ASP from a treatment tip perspective is related to regional mix of unit sales.
Lucas Baranowski
Okay, thank you. That’s very helpful.
I’ll hop back in the queue.
Operator
And our next question comes from Brian Marckx with Zacks. Please go ahead.
Brian Marckx
Hi, everybody and congrats on the quarter and another good year. Just a little bit of clarity on SUI, Patricia I thought I heard you say that SUI might require a different tip, but Jim said that there was some utilization for SUI, did I miss understand that or does it actually need a different tip?
Patricia Scheller
Yes, we have been treating SUI patients with our current treatment tip and Dr. Bruce Allan has been utilizing a different treatment protocol and we believe that ultimately having treatment tips that address specific conditions could be a very easy way for us to track each of these indications.
So right now SUI is being treated with our existing treatment tips.
Brian Marckx
Okay. And then in terms of the commercial model, I guess, assuming that you get an SUI indication, how do you I guess envision a clinician would market for the SUI, would that be essentially an upsell to vaginal laxity or sexual function or would that be by its own sort of -- its own menu item that a patient would come in for?
Patricia Scheller
Yes, so this is a very large market and its own right, in fact we think it could be almost double the vaginal laxity and sexual function market, it represents about $10 billion to $12 billion of potential opportunity. And I think that in certain markets we are going to see that stress urinary incontinence is the lead and that doctors are much more willing to market to their patient population for stress incontinence and for sexual function.
It’s different in every market, each one has its own cultural issues that it needs to deal with, but I think that we will see entire practices bring up around the treatment of stress incontinence.
Brian Marckx
Patricia, do you have any idea what the co-morbidity rate is between the two, if you have SUI what is the percentage of people that would have sexual function.
Patricia Scheller
Well with sexual function and SUI there is a very strong overlap, because stress incontinence creates a very great degree of concern on the part of women who experience that incontinence particularly during moments of intimacy. So they tend to shy away from having those moments, they tend to express their concern to their physician that it is impacting their quality of life in many different ways, one of which is their un-sexuality.
So whether it’s a cause, whether it’s an effect, I think there is that overlap between the two conditions.
Brian Marckx
Okay. And then in terms of the study information or data that you submitted most recently to FDA regarding the IDE for Viveve-2, I think that you would hope that you’re going to submit sheep data, or is that the data that you submitted or was it something else?
Patricia Scheller
We did submit sheep data to the FDA for the temperature time history profile study that they requested. And this study was an expansion of an earlier study that we had conducted and provided to the FDA previously in which we look at the temperature of sheep vaginal tissue at various depths from the surface down to the lamina propria.
And the data that was submitted to the FDA we felt very strongly supported the safety record that we have seen with this technology and procedure in the field. As many people now we have never seen a serious adverse event associated with the technology during our clinical studies or in the commercial use of the product.
And the data generated in this study we believe supported that very strong safety profile.
Brian Marckx
Patricia, it seems from the outside anyway looking in that the FDA is being overly cautious, which seems odd, I guess, given that this is a technology that is essentially been fairly proven on a safety profile. Is there anything that is specific or anything else that you think that the FDA is concerned about that just seems somewhat odd that they would have such a concern at this point over the safety of the technology when it has shown to be essentially safe.
Patricia Scheller
Yes, that’s a very good question Brian and one that ask internally often. So my thoughts on this area are twofold.
First, this is a group within the FDA that is not as familiar with energy based devices. So they have to become familiar they have to learn what it is about the technologies that make them safe or that present potential areas of risk.
And so part of this process I believe has been educational for the FDA and hopefully to that extent we have laid to rest any fears they have that our technology specifically represent an elevated risk for the patients. On the second point, I would note that this is also a group within the FDA that has in recent years had a significant number of devices that have created very serious safety risks for women thinking of vaginal mash, vaginal swings, the morcellator, the assure contraceptive device.
So they also now I think are highly sensitized to devices and women’s health and safety issues. So I think that is also played a role in their abundance of caution.
Brian Marckx
Okay. And just one last one, relative to the current customers and feedback from those customers in terms of the economics of providing the service, providing the Viveve system service, can you talk about any of that relative to is it obviously everything comes down to is it profitable or is it not.
Is there anything you can talk about relative to that are they essentially satisfied with the economics side of it?
Patricia Scheller
Well, that’s a great question, Brian and Jim I’ll weigh in on that one.
James Atkinson
Yes Brian, thank you for the question. From the United States standpoint the sale price of the patient around the nation averages somewhere between probably $2,100 to $2,500.
And then in larger cities such as LA, maybe in New York it maybe a little bit higher. The return to the physician for a 30 minute procedure probably is a one of the higher ASPs they have within their energy practice.
And so the feedback from the physicians that we are seeing having the increased utilization each month is very positive on the technology. If you look at other technology side the Othera [ph] was somewhere around $3,500 for an hour and half procedure.
So for coming in at $2,250 for half an hour procedure, that's very, very profitable for any aesthetic physician and URO/GYN and GYN physician. And we see consistent pricing out there around that level.
Brian Marckx
Great, thanks a lot everybody.
Patricia Scheller
Thanks, Brian.
Operator
This concludes our question-and-answer session as well as today's conference. We thank you for attending today's presentation.
And at this time you may disconnect.