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LeMaitre Vascular inc  (NASDAQ:LMAT)
Q4 2018 Earnings Conference Call
Feb. 19, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to LeMaitre Vascular Fourth Quarter 2018 Financial Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Mr. JJ Pellegrino, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir.

Joseph P. Pellegrino -- Chief Financial Officer and Board Director

Thank you, Ashley. Good afternoon, and thank you for joining us on our Q4 2018 conference call. With me on today's call is our Chairman and CEO, George LeMaitre; and our President, Dave Roberts.

Before we begin, I'll read our safe harbor statement. Today, we will make some forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, pursue, forecast and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, February 19th, 2019, and should not be relied upon as representing our estimates or views on any subsequent date.

Please refer to the cautionary statement regarding forward-looking information in the risk factors in our most recent 10-K and subsequent SEC filings, including disclosure of the factors that could cause results to differ materially from those expressed or implied.

During this call, we will discuss non-GAAP financial measures, which include organic sales and growth numbers and EBITDA, as well as return on invested capital and operating income growth expectations, excluding certain one-time gains. A reconciliation of GAAP to non-GAAP measures discussed in this call is contained in the associated press release, and is available in the Investor Relations section of our website, www.lemaitre.com.

I'll now turn the call over to George LeMaitre.

George W. LeMaitre -- Chairman and Chief Executive Officer

Thanks, JJ.

We posted record sales of $28.4 million in Q4, a 9% increase year-over-year. This was largely the result of our sales rep surge, our two recent acquisitions and a 79% quarter in Asia Pacific. We ended the year with 108 sales reps versus 90 at the end of 2017, a 20% increase. This increase was spread across our three major geographies, the Americas, EMEA and APAC. As we look to 2019, we intend to maintain roughly this level of sales reps. We also promoted a 15 year LeMaitre veteran, Chance Kriesel, to the position of VP, Sales for the Americas. In January, we began our worldwide installation of Salesforce.com.

Our two recent acquisitions, Applied's embolectomy business and Cardial, contributed $1.9 million of sales in Q4. We acquired these products because they are complementary to our current catheter, valvulotome and Dacron graft product lines. They should be nice vascular plug-in acquisitions right out of the LeMaitre playbook. These two acquisitions had sales of about $6.9 million in the year prior to their acquisitions.

Asia-Pac sales were driven by 68% organic growth as well as the acquired embolectomy catheters. In Q4, we also established our APAC headquarters in Singapore. On the XenoSure regulatory front, we obtained Australian approval in September. We have 224 of our 288 patients enrolled in the Chinese clinical trial and we file for Japanese approval in December.

From a product perspective, carotid shunt, surgical glue and embolectomy catheters were our top performers in Q4, while XenoSure grew 4% organically -- excuse me, 5% organically. As a follow-up to the Q3 earnings call, our allograft business posted a record Q4 and grew 18% and we made significant progress with tissue supply. Valvulotomes also bounced back in Q4 to post a record quarter.

I expect our 9% Q4 sales growth to extend into 2019 as reflected in our 8% sales guidance.

With that, I'll turn it over to JJ.

Joseph P. Pellegrino -- Chief Financial Officer and Board Director

Thanks, George.

Our Q4 2018 gross margin was 67.7%, down 2.1% versus the prior year period. This was driven primarily by the addition of lower gross margin Cardial and Applied sales and the subtraction of higher gross margin Reddick sales. We did this to further focus our call point on the vascular surgeon. This new, lower gross margin may persist for several quarters while we execute integration and cost cutting measures typical after our acquisitions. As a reminder, the Reddick general surgery divestiture was in April 2018.

We ended Q4 with $48 million in cash, an increase of $2.4 million during the quarter. The increase was driven by cash from operations of $6.6 million in the quarter. For the full year, we generated $19.5 million in cash from operations. Excluding the one-time gains from the Reddick divestiture and Cardial acquisition, our return on invested capital was 20% in 2018.

Our Board of Directors recently approved a 21% increase in our quarterly dividends from $0.07 to $0.085, implying a yield of 1.4%. Our Board also authorized a share repurchase program of up to $10 million of our common stock.

Our guidance is detailed in the press release. Highlights include 8% reported and 5% organic sales growth for the full year 2019. We also expect full year operating income adjusted for one-time gains to improve 9% to $22.6 million at the midpoint.

With that I will turn it back over to the operator for questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) And our first question comes from the line of Jason Mills with Canaccord Genuity. Your line is now open.

Cecilia Furlong -- Canaccord Genuity -- Analyst

Hi, this is actually Cecilia on for Jason, and I just wanted to ask about the recent acquisitions and really what drove the strong Q4 performance, and then just looking at guidance for 2018, what your expectations for the business going forward, just quarterly cadence as well.

George W. LeMaitre -- Chairman and Chief Executive Officer

Okay. Lots in there. Maybe we'd break it down. Maybe Dave, you take the acquisition part of the question?

David B. Roberts -- President, Board Director

Sure. Thanks, Cecilia, for the question. Yeah, you're right to point out that the acquisitions that we completed on September 20th, the Applied acquisition and the Cardial acquisition we completed on October 22nd are coming in strong out of the gates. The two deals combined are running about 6% ahead of our deal model. Cardial, especially, is doing well. It's about 20% ahead of the model, and that was driven by -- we got really a few orders that we didn't expect that quickly. One was a glue order in the Middle East and then also some OEM orders that -- there is a small amount of OEM business at Cardial as well. But at a high level, the transition plan for both Cardial and for Applied, the channel transition is going very smoothly. There is one more material distributor to transition with Applied, and so we're just pleased that their performance in Q4 was better than we expected.

George W. LeMaitre -- Chairman and Chief Executive Officer

And then, Cecilia, in terms of the quarter, there were a number of things that went well, and coming out of Q3, some of these are important as well. So we talked in Q3 about RestoreFlow being down 5% last quarter was an normally. It was up 18% this quarter. A nice rebound, and sequentially up $400,000 or $500,000. So a good story underneath that with RestoreFlow, sort of bump of Q3, still coming through in Q4 and hopefully into 2019 as well as we add new customers, as we plug that product line into our sort of 50 or so sales folks in the US. We talked about and valvulotomes, if you recall in Q3. And that was down a little bit as well, and sequentially a really nice rebound in valvulotomes, $4.5 million, maybe up to $5.5 million or so. So back on track if you will in valvulotomes. Our export was down in Q3 as well. A nice sequential rebound there. There is still an issue year-over-year with sort of growth topics there and we've talked a lot about those in the last two calls. So year-over-year comps in our non-direct sales still not great. Still working on those. We'll get to those and we'll fix those, but sequentially from Q3, a nice rebound. And so those topics really repaired nicely in Q4 versus Q3. And then on top of that, the acquired sales that Dave was talking about, really led to a nice strong Q4 to answer your question.

Cecilia Furlong -- Canaccord Genuity -- Analyst

Okay, great (multiple speakers).

George W. LeMaitre -- Chairman and Chief Executive Officer

Cecilia asked about cadence for the quarters also. So we -- at the beginning of the year, we usually don't break it out. I would say, as we we're going through selecting our guidance and looking at the quarters, it didn't seem like there was anything really that odd about this year. Typically, Q2 and Q4 are our largest quarters of the year.

Cecilia Furlong -- Canaccord Genuity -- Analyst

Okay, thank you for all the color. And then just looking at OUS trends, specifically Asia-Pac, kind of what you're thinking going forward through 2019? I realize you don't break out specific sequential numbers, but just kind of overall trends, what you're seeing there and what you think you can do going forward.

George W. LeMaitre -- Chairman and Chief Executive Officer

Right. Maybe I'll look to history to answer that question because you're right, we're trying not to pull apart guidance into three regions. But I think when we were looking at this -- one of the reasons we're so excited about Asia-Pac is that if you look back over the last 10 years of our business, I think I'm quoting big numbers but I think organic growth is up like 11% a year for the last 10 years, whereas Europe is kind of 8% and the Americas is kind of 4% or 5%. So I think there's a material difference between Asia-Pac and the other two. It should be the place that grows the best. That's why you're seeing us build a Singapore office and start growing the sales force over there a little bit more.

Cecilia Furlong -- Canaccord Genuity -- Analyst

Okay, great. Thank you for taking our questions.

Operator

Thank you. And our next question comes from the line of Joe Munda with First Analysis. Your line is now open.

Joe Munda -- First Analysis -- Analyst

Good afternoon, guys. Can you can hear me OK?

Joseph P. Pellegrino -- Chief Financial Officer and Board Director

We can, Joe.

Joe Munda -- First Analysis -- Analyst

So real quick, can you talk about your rep surge? You have 108. Can you give us a breakout? North America, Europe, rest of the world? And then your thoughts -- are you going to stick with the same size force going into '19 here? I'm guessing -- maybe you could give us some color on what your expectations are as a result of this recent surge and how it carries us over into '19.

George W. LeMaitre -- Chairman and Chief Executive Officer

Okay, great. So breakdown is the Americas -- or North America as you're putting it, 57 reps right now. That's up 24% year-over-year. Europe is, it's 38 reps. That's up 12% year-over-year. And Asia-Pac is 13 reps, which is up three people, which is up 30%. So the whole group of them as we mentioned, is up 20%. You have the guidance right now. We're saying 8% reported sales growth guidance. We think this is a pretty good foundation for that growth rate. But we don't know and -- we don't know really when they exactly come on. We just have a feeling things are getting a little better around here every day that we have these reps on. As far as how many reps we're are going to have for the year, it's at 108. We actually have eight or nine in the middle of being hired, but there's always what we call breakage, which is, some people coming some people going, and so maybe 110, 112,108 is kind of what you can think is going to be happening. But it will go up, and now we're not too focused on it. When we, quote, miss guidance and there's fewer reps than there should be, we don't get that worried about it when we overdo it, we don't get worried about that either. Something like 110 or so.

Joe Munda -- First Analysis -- Analyst

Okay. And then -- that's helpful. And then JJ, can you give us a split on how much biologics were as a percentage of sale in the quarter? And as a group, how much they were up?

Joseph P. Pellegrino -- Chief Financial Officer and Board Director

I think biologics were about 35% of sales in the quarter. And I think that was a 10% or so increase in the quarter, Joe. And we've got a new entrant in that category, the buyout, the glue that we acquired from Cardial is now in our biologic category as well.

Joe Munda -- First Analysis -- Analyst

Okay, OK.

Operator

(Operator Instructions) And our next question comes from the line of Mike Petusky with Barrington Research. Your line is now open.

Mike Petusky -- Barrington Research -- Analyst

Hi, good evening, guys. A few questions. In terms of the valvulotome, what was the year-over-year comp on that? I didn't catch that, if you provided it.

George W. LeMaitre -- Chairman and Chief Executive Officer

Right. I think we didn't say it. We just said it was a record, but I'm happy to say -- I think it was up 2% organically, and it was a record quarter.

Mike Petusky -- Barrington Research -- Analyst

Okay. And then -- just I want to confirm what I think I heard, was it 244 out of 288 are enrolled in the XenoSure trial in China?

David B. Roberts -- President, Board Director

Yes (multiple speakers).

George W. LeMaitre -- Chairman and Chief Executive Officer

224 of 288. 224.

Mike Petusky -- Barrington Research -- Analyst

224 of 288. Got it. Thank you (inaudible). And then George, I guess in terms of the top line guidance, and I'm not asking you to go back to the 10 (ph) and 20 (ph), but just generally speaking, in the 8% top line, what's assumed therefore for pricing? And if there -- is there any M&A assumed in there for -- other than what's already -- the recent transactions?

George W. LeMaitre -- Chairman and Chief Executive Officer

Okay. So easily, the answer is no. There's never M&A in our guidance. We always just -- what we've already bought plus what we are. So, no. No M&A in that. And then as far as pricing goes, I would say we'll see what happens with pricing this year. But in general, it feels to me like LeMaitre is a 3% or 4% price hiker each year. I feel like it's been a little bit more challenged in the last couple of years and we used to be more like a 5% or 6% five years ago.

Mike Petusky -- Barrington Research -- Analyst

Okay. All right. And obviously some positive unit volume assumption as well.

George W. LeMaitre -- Chairman and Chief Executive Officer

And the balance is being unit volume, yeah.

Mike Petusky -- Barrington Research -- Analyst

Yeah, OK. And then I guess JJ, in terms of getting at the efficiencies, and maybe this is just me not quite remembering correctly last few years. But it feels like you guys have been able to get at efficiencies usually quicker than maybe it seems like you're going to -- you're assuming that you'll get at efficiencies this time in terms of sort of taking the gross margin back toward 70%. Are these recent acquisitions just a little bit tougher to integrate or any comment around that?

Joseph P. Pellegrino -- Chief Financial Officer and Board Director

Yeah, there has been -- I think that typically when we do an acquisition that doesn't come with a facility and doesn't have a lot of sort of tribal knowledge or learning a new process or about a new product, things happen a lot quicker when we move that product line into our facility and off we go. In the case of allografts, that's a pretty complicated logistical challenge as it turns out, and we figured out a lot about that over the last year and a half or so. And so we're starting to improve that part of the equation, but it's taking longer than usual. I think that's the generally correct observation. And then with the recent two acquisitions, they're coming in at pretty low gross margins, in the sort of around the 40%-ish range or so, and so those will drag us down for a while until we figure out how to grapple with those. But I think you can bet that we'll be working on all of those pieces going forward, figuring how to -- figuring out how to get efficiencies out of those.

George W. LeMaitre -- Chairman and Chief Executive Officer

Mike, I think it's also germane that we have four factories outlying right now. And when you have four, you can't -- it's impossible to be closing four at the same time. So some of them necessarily are going to be open a little bit longer than you might want or you might think that we would -- that we would keep them open. So it's -- part of that is, hey, we just did two, therefore, you can't -- we don't have infinite bandwidth inside LeMaitre to close four factories at once.

Mike Petusky -- Barrington Research -- Analyst

Got you, got you. And just last one on the sort of surprising recovery, particularly in terms of degree in allografts. It seems like you guys had sort of set expectations of hey, this may take a while to work through, there is customer losses, sourcing difficulties, but it -- it feels like really quick and sprang, bounced back. Are you guys on the other side of that or is that still tough to sort of work through?

Joseph P. Pellegrino -- Chief Financial Officer and Board Director

I feel like that -- certainly in the quarter that was a strong bounce back, and I think the big high level answer is still very much intact, which is we're acquiring new customers daily and the new larger sales force -- maybe we added 120 or more, sort of, since the acquisition, and that will essentially take over from that issue that we affected -- that we saw that affected us in Q3. But I would say, you might get a little chunkiness. Even though recovered really quickly in this quarter, maybe it's a little chunky here and there as we go through the year, next year, but I think the story high level over the next year is still intact as well, which is you can probably expect some decent growth out of that as we continue to grow that customer base.

Mike Petusky -- Barrington Research -- Analyst

Okay. Very good. Thanks, guys. Really appreciate it.

Operator

Thank you. And our next question comes from the line of Jim Sidoti with Sidoti & Company. You may proceed.

Jim Sidoti -- Sidoti & Company -- Analyst

Hi, good afternoon. Can you hear me?

George W. LeMaitre -- Chairman and Chief Executive Officer

Yes, we can.

Jim Sidoti -- Sidoti & Company -- Analyst

Great, great. I just want to go over a couple of the numbers you put out before. You said Restore (ph) was at 18% in the industry. I think you said that was (ph) 5%. And then, did you give an overall number for the biologics business?

Joseph P. Pellegrino -- Chief Financial Officer and Board Director

Yeah, we said up 10%, Jim.

Jim Sidoti -- Sidoti & Company -- Analyst

10% overall?

Joseph P. Pellegrino -- Chief Financial Officer and Board Director

Yeah.

Jim Sidoti -- Sidoti & Company -- Analyst

Okay. And you said you improved the situation with tissue supply. Can you give me a little more color around that?

George W. LeMaitre -- Chairman and Chief Executive Officer

Sure. This one is a pretty clean cut one. I think I said this on call, but I forget. So we are having tissue supply problems. And you may remember I grew a beard to protest the back orders for our tissue. I think we talked about this the last time. I don't know. Well, the beard got shaved on January 23rd at our holiday party, and the beard was supposed to represent we want to make sure that we have 10 of the 70 centimeter devices available and 10 of the 80 centimeter devices available at all times for our reps. That had not been the case before the whole backorder beard project started. We think we're good to go on that part of the supply issue.

Jim Sidoti -- Sidoti & Company -- Analyst

All right. Thank god it was you and not JJ.

Joseph P. Pellegrino -- Chief Financial Officer and Board Director

Thanks, Jim.

George W. LeMaitre -- Chairman and Chief Executive Officer

Yeah, hard to (inaudible) that.

Jim Sidoti -- Sidoti & Company -- Analyst

All right. You talked about the Asia-Pac office in Singapore. What, once approved right now, that you can sell in Asia?

George W. LeMaitre -- Chairman and Chief Executive Officer

So that's always a big topic. The regulatory burdens are a lot heavier over there, but we're growing percentages. And on our website, there is a presentation that always shows what percent in each geography. So I'm going to talk out of memory, but you can go find it after you get off the call. I think in Japan, about 55% of our sales are approved. I think in Australia, about 83% of our sales are approved. And I think in China, about 25% of our sales were approved. So in other words, of all the catalog numbers we have, our Chinese sales reps, the four of them only can sell 24% or 25% of those catalog numbers. And so they're certainly hamstrung and there's great blue sky later for those folks. But in Australia, I'd say we largely have it going on. And then each country is different. There is no CE Mark for Asia. So then after that, each country is different, and it's a couple of them are detailed on the website.

Jim Sidoti -- Sidoti & Company -- Analyst

All right. And then the last couple -- it sounds like you expect a little over $5 million from the acquisitions in 2019. Now you said the sales -- 12 month trailing sales were close to about $7 million. Is the delta just the difference you did in the fourth quarter?

George W. LeMaitre -- Chairman and Chief Executive Officer

I don't remember saying we're going to do $5 million for these products this coming year. Was that some kind of trick?

Jim Sidoti -- Sidoti & Company -- Analyst

But it was in the press release.

George W. LeMaitre -- Chairman and Chief Executive Officer

Did we say that?

Joseph P. Pellegrino -- Chief Financial Officer and Board Director

I don't think we said that.

George W. LeMaitre -- Chairman and Chief Executive Officer

You're on -- you're on the semi, small guidance that we gave at each press release when we bought the products. So that was the initial couple first three months. I think we guided, I don't know $550,000 for Applied Medical and I think we guided $300,000 for Cardial and those were just in the start-up quarter and that was all we gave, it was $550,000 and $300,000.

Jim Sidoti -- Sidoti & Company -- Analyst

All right. If you look on page seven in your press release, you have the net impact of acquisitions, excluding currency of $5.3 million.

Joseph P. Pellegrino -- Chief Financial Officer and Board Director

So that's the organic -- or part of the organic growth calc, Jim. And so if you took an annualized number and then you adjusted it for when you acquired the product line. So you don't adjust out a full year for Applied because you bought it September, October, and you don't adjust that for full year. And so why it's lower than -- if you took them, the two of them and added them up for an annualized number, and you come up with whatever around $7 million bucks or so it's lower because you don't adjust out a full year for those. You adjust out as of when they were acquired.

Jim Sidoti -- Sidoti & Company -- Analyst

Okay. Alright. So that's what I was saying. Because you did about $2 million revenue from those products in the fourth quarter.

George W. LeMaitre -- Chairman and Chief Executive Officer

Yeah, and that was a particularly strong year. So the first question of the call Dave answered and we got this huge order from Iraq related to one of the product lines. So it was a bit anomalous, I would say, in Q4 the revenues that we saw on the two acquisitions.

David B. Roberts -- President, Board Director

Yeah. I wouldn't -- Jim, it's Dave. I wouldn't necessarily take Q4 and multiply it by four, again because of the anomalous order to Iraq as well as some OEM business. But even without all that, we felt like it was a healthy start for the two acquisitions.

Jim Sidoti -- Sidoti & Company -- Analyst

Okay. All right. And then last question. It looks like you expect about a $2 million currency headwind in '19. What currency there, I mean, the troublesome ones?

Joseph P. Pellegrino -- Chief Financial Officer and Board Director

The euro is the big bugaboo, so it was $1.18 or so for 2018 and we are now at $1.13 and change or so. So there's like a $1.5 million topic from that year-over-year. And then if you bring in the pound and the yen and the Canadian and whatever else, it gets you about $1.7 million or so. So having a stronger dollar and low interest rates in Europe. Jim.

Jim Sidoti -- Sidoti & Company -- Analyst

All right. Thank you.

George W. LeMaitre -- Chairman and Chief Executive Officer

Thank you very much.

Operator

Thank you. (Operator Instructions). And our next question comes from the line of Brooks O'Neil with Lake Street Capital. Your line is now open.

Brooks O'Neil -- Lake Street Capital -- Analyst

Hi guys. I have a couple of questions. I'm recognizing that there is a lot of moving parts from last year to this year. But how would you characterize kind of the organic EPS growth from 2018 to 2019 if you strip out kind of all the extraneous moving parts, the benefits and cost of acquisitions and stuff like that? How do you feel about the core earning power of the business that you're running today?

Joseph P. Pellegrino -- Chief Financial Officer and Board Director

Yeah, so -- if you strip out -- if you strip out the one-timers year-over-year for our guidance, the EPS growth is sort of flattish. And I would say a lot of the answer is in this gross margin topic. So those two recent acquisitions are probably a negative 2% bad guide of the gross margin in that range. And so that's $2 million plus that sort of otherwise would normally drop to the bottom line, it doesn't. If you added back that $2 million you come into a sort of more normalized year-over-year EPS growth numbers. So a lot of it is that. And then there is another piece, of course, which is op expenses. And I think we are thinking that they're going to be pretty well in check for 2019, but still growing. So if you're growing your op expenses 5%, 6% or something like that, and your, say, your top line is growing 8%, that's not a necessarily a ton of leverage, particularly when you run it through a lower gross margin. So that's kind of the dynamic of that of -- that answer. And I would say as we repair that gross margin over time that will certainly help and as we -- as these investments that we're making now and those operating expenses that I'm talking about start to bring on more sales growth potentially, we'll get good answers there as well on the bottom line.

Brooks O'Neil -- Lake Street Capital -- Analyst

It's great, JJ. And -- I was listening, but I might have forgotten the answer you said earlier. You think you can get that GM up somewhat in 2019 or will it take longer than that?

Joseph P. Pellegrino -- Chief Financial Officer and Board Director

I would say I think about it as taking longer. We've guided 69.5% for the full year. So anything below 70 is not a great number for us. So I would say that's still in repair during the year.

Brooks O'Neil -- Lake Street Capital -- Analyst

Okay. And then -- again, I'm not meaning to pick at this, but I'm just curious if you strip out the impact of the acquisitions, would you say that you're entering 2019 with accelerating organic growth or is it coming in a little bit lighter than what we saw in the fourth quarter and during 2018?

George W. LeMaitre -- Chairman and Chief Executive Officer

Okay. So fourth quarter 2018 is a lot different than 2018 -- 2018, we had 3.8% organic growth, 4% as rounded. So, no, the 5% organic growth that we're quoting for next year, 2019 seems like an acceleration of organic growth.

Brooks O'Neil -- Lake Street Capital -- Analyst

Great, George. Thank you very much, and good luck this year.

George W. LeMaitre -- Chairman and Chief Executive Officer

Thank you very much.

Operator

Thank you. And our next question comes from the line of Scott Henry with ROTH Capital. Your line is now open.

Scott Henry -- ROTH Capital -- Analyst

Thank you and good afternoon. Just a couple questions. First, did I hear you speak about XenoSure having roughly 5% organic growth?

George W. LeMaitre -- Chairman and Chief Executive Officer

Yes, that was in the transcript.

Scott Henry -- ROTH Capital -- Analyst

Okay. And so my question is when we think about that, it's pretty large product in the portfolio. When we think about 2019, 5%, maybe another 3% for pricing, is it reasonable to think about that in the range of an 8% to 10% grower in 2019? I'm not trying to get too line item focused, but it is a new product.

George W. LeMaitre -- Chairman and Chief Executive Officer

I know. Scott, we really do look at this as a mutual fund of devices. And so the 5% is for the whole portfolio. It is interesting you're bringing together -- I hadn't really put these together, but you're putting together, that it was a 5% grower in Q4 and then does it match the 5% maybe in next year 2019. I don't know. There's some logic to make net assumption, but I don't know. The product line was 17% in 2018 -- '17, excuse me, and then it was 6% organic in 2018. So there's no question it's decelerated a little bit. But to pull it out for next year, I don't think we'd be very good at doing that for you.

Scott Henry -- ROTH Capital -- Analyst

Okay. But I appreciate the color on that. And then just one other question. R&D has been trending at a higher rate in the past couple of quarters and into Q4. I guess the question is, could you talk a little bit about where that investment is going and what categories you're targeting?

George W. LeMaitre -- Chairman and Chief Executive Officer

Sure, sure. So at a very high level we could just say the word XenoSure and then we could also say the CE Mark and the XenoSure side of this is you're hearing a big approval process going on in Japan right now. No clinical trials -- no human clinical trials. But it's a big process. It's just launched in December and you're hearing about the Chinese clinical trial, that we're in the middle of a human clinical trial over there. We are also pursuing approval in Korea and we just got approval in Australia. So a lot of this is regulatory, related to that. A lot of this is new products related to XenoSure. We've talked a little bit on these calls about XenoSure 2.0, our next-gen device. We've talked about XenoSure Dura which is a different indication that we're trying to pursue which other competitors have. And we've also talked about XenoSure fat guy (ph), which is a thicker device. So a lot of R&D and a lot of regulatory dollars which are classified as R&D dollars on your income statement. So there's that. So there is also CE Mark, which I think a lot of our competitors have talked about on their calls, which is the CE folks are moving to a much more serious system. I would say they used to be a little bit easier than the US FDA 10 years ago and it's clear to me that in three or four years, they're going to be harder than the US FDA in terms of approvals. Even things that you've already got approvals on, you've now got to go and prove that those actual devices do work in human beings. And so there's a lot of prospective studying that they're asking us to do and retrospective study they're asking us to do. All those things you're seeing come out as R&D dollars for LeMaitre. We're now at 8% of revenues in R&D dollars, and I feel like it was only five or eight quarters ago that we were at 6% R&D dollars. So some of the difficulties we're having in expanding our op margin are certainly related to that.

Scott Henry -- ROTH Capital -- Analyst

Okay, great. Thank you for taking the questions.

George W. LeMaitre -- Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. And we do have a follow-up question from the line of Mike Petusky with Barrington Research. Your line is now open.

Mike Petusky -- Barrington Research -- Analyst

I figure I'd give Dave a shot to earn his pay here, get him involved. So, David, could you just talk about what you're seeing in terms of assets out there, pipeline for you guys, specifically pricing versus maybe what you're saying 12 to 18 months ago? Thanks.

David B. Roberts -- President, Board Director

Yeah, sure. So it's only-Mike, it's now been about four or five months since we completed those last two deals. And while on the one hand, we've been very focused on the integration, this big team inside of LeMaitre helping with that. Also, the deal team here, we've turned and started moving in the next play. So I would say at a high level without getting into details, the pipeline does look good, it looks robust. As you of course know we've done about a deal a year for a little over 20 years. So we always, I'd say, have a decent sized pipeline. In terms of valuations, I think there are a couple ways to look at it. One is public market valuations. If you look at the IHI medical device index, it's at its near all-time high. So public stocks -- medical device stocks are fairly high, and then in terms of deals that we see in this space, there was a property that traded in our space recently, Vascular Insights was acquired by Merit for about four times sales; if you include the earnout, it was about 6x. So I would say valuations are high, although normally LeMaitre is not participating in auctions and we're often in discussions with individual private companies and carve-outs. So it's very situational dependent. So in that respect, we are always very disciplined in terms of what we pay, and we've been like that in the past, and I would expect that we'll be like that for the foreseeable future as well.

Mike Petusky -- Barrington Research -- Analyst

All right. Very good. Thank you.

Operator

Thank you. And I'm not showing any further questions at this time. Ladies and gentlemen, that concludes today's conference. I would like to thank you for your participation. And you may now disconnect. Have a great day.

Duration: 34 minutes

Call participants:

Joseph P. Pellegrino -- Chief Financial Officer and Board Director

George W. LeMaitre -- Chairman and Chief Executive Officer

Cecilia Furlong -- Canaccord Genuity -- Analyst

David B. Roberts -- President, Board Director

Joe Munda -- First Analysis -- Analyst

Mike Petusky -- Barrington Research -- Analyst

Jim Sidoti -- Sidoti & Company -- Analyst

Brooks O'Neil -- Lake Street Capital -- Analyst

Scott Henry -- ROTH Capital -- Analyst

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