Analyst Conference Call Summary

conference date: November 3, 2010 @ 2:00 PM Pacific Time
for quarter ending: September 30, 2010 (third quarter 2010)

(at the time this is being written)
Forward-looking statements

Overview: Just 3 Sensei Robotic Systems shipped. Apparently until they can used in more procedures, hospitals are not that interested in them.

Basic data (GAAP) :

Revenue was $3.5 million, down 50% sequentially from $7.0 million, and down 24% from $4.6 million in the year-earlier quarter.

Net income was negative $12.1 million, down sequentially from negative $10.9 million, and also down from negative $11.9 million year-earlier.

EPS (earnings per share) were negative $0.23, down sequentially from negative $0.22, but improved from negative $0.32 year-earlier.

Guidance:

Will re-establish guidance for 2011 when Q4 2010 results are announced.

Conference Highlights:

The flexible catheter vascular robotic system first-in-man study was successful, which means in Q1 2011 Hansen should receive a milestone payment from Philips. Commercialization is expected in mid-2011. The quarter also saw the first successful treatment of atrial fibrillation (AF) patients with the Lynx irrigated ablation catheter in Europe.

Has a game changing technology, working on commercial execution. Vascular platform has demonstrated its potential in trials. Vascular market is ten times the size of the current addressable market. Philips is partially funding development costs through milestone payments, which will be recorded as offsets to R&D expense. In the quarter there was a $1 million offset recorded.

2 Sensei Robotic Systems had recognized revenue, and 3 were shipped in the quarter. 94 Sensei systems have been shipped in total. Average selling price $623,000.

581 Artisan Control Catheters were recognized for revenue. $1610 average selling price.

Procedures performed were a record 629 for the quarter, up 42% y/y.

Working on reducing operating costs, down $3 million y/y, but keeping up R&D efforts. Preserving cash is a priority.

Cash and equivalents ended at $35.3 million. Debt was $7.1 million. Cash use for operations was $8.2 million.

Deferred revenue balance was $10.4 million from 15 systems shipped but not recognized as revenue. Most of these systems are with international distributors.

Non-cash stock compensation expense was $1.3 million.

Cost of goods sold was $3.2 million. Gross profit $0.3 million. $4.2 million was spent on research and development; $6.2 million was spent on selling general and administrative. So total operating expense was $10.4 million and operating loss was $10.1 million. Other expense was $2.1 million, including $1.9 million writedown of value in investment in Luna.

Lynx is in limited circulation, but the feedback is very positive so far.

Six to twelve month sales cycle. "We expect shipments to trend up from here, but not necessarily in a straight line."

Q&A:

Operating expense color? Most savings were from focusing product development on EP and vascular. Those savings should continue going forward. There are a lot of good things going on in the organization right now, so we have to be careful where we cut expenses.

Commercial adjustments in present EP business? We are creating a better training system, and will be completing a new training facility in Europe. We have multiple marketing initiatives underway.

Anything specific driving the good catheter sales? The installed base is growing and our superusers are using and demonstrating the systems more. Physicians are getting more comfortable with the system. Lynx catheter in Europe should drive more volume in Q4, with full launch in early 2011.

Lynx plans in U.S.? We are in the learning phase outside the U.S. After we have done a final assessment, we will figure out a way to bring it into the United States.

R&D expenses should be flatish going forward in the near term.

Are you expecting systems sales to grow in Q4? We have a very robust pipeline, but it is hard to see how much of it will fall into Q4 or into Q1.

We will provide more guidance on the vascular system at our year-end conference.

Safety and efficacy end points for AF? Safety is no major adverse events. Efficacy is freedom from AF for the first year.

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