Question-and-Answer Session
Operator
(Operator Instructions)
Our first question is from the line of Matt Dolan with Roth Capital. Please go ahead with your question.
Matt Dolan - Roth Capital
Guys, can you hear me?
Guy Mayer
Sure, we can, Matt.
Matt Dolan - Roth Capital
Okay. Thanks. On the gross margin, and I've been bouncing around a little bit here, so apologies if I missed it, but: can we talk a little bit more about the gross margin going forward? Why are the expectations coming down relative to what's been posted here over the last few quarters?
Guy Mayer
Matt, we expect it to come back to where the gross margin has been in the last few quarters. And, for what I mentioned earlier, we expect to continue to see our dental sales increase, that will improve our margins, price increases that we've done, continued growth of the high margin products, as well as the additional tissue that we've got from recently signed deals, and additional production efficiencies. So we expect the margin to be back up in the 57% to 59%.
Matt Dolan - Roth Capital
Okay. So, with the crux of the near-term decline surround cost of tissue sourcing in the nature of that business.
Guy Mayer
No. Matt, it's really not the tissue sourcing. It's the onetime write off that we've had in the quarter, some mix that affected the quarter, the $1 million sales to Zimmer Dental at a lower margin. And these are all onetime events. So, our tissue sourcing by itself should is not an effect on margin.
Matt Dolan - Roth Capital
Okay. Very good. And then, secondly, recently we've talked about the xenograft products for hernia repair. Can you give us an update on the progress there? And: would that be sold through your current distribution channel? Or: does that present new opportunities for you for distribution partnerships?
Guy Mayer
Matt, the product for hernia repairs, I talked about is our xenograft bovine pericardium, is a product that we will be launching in 2008. I've made the comment that we are in discussions with various potential partners. So, there is interest in that product we're just in the process of accumulating all of our clinical data. We have been doing some clinicals in Europe and we've also been selling the product in Europe. Bovine pericardium product in 2007 had sales of just under $3 million outside US. So, the product has been used in urology, it's been used in hernia repair, it's been used in dental. In all of the markets that we are selling, dermis and pericardium, Allograft dermis and pericardium today in the US. So, we are trying to get as much data as we can. A lot of these sales are through small distributors that don't have good data to share with us. But, we are confident that it's a good product and that we will see that introduction in 2008. And, by the way, the product is 510 (k) approved, so there are no regulatory barriers to that launch.
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