Analyst Conference Call Summary

biotechnology

conference date: May 2, 2012 @ 2:00 PM Pacific Time
for quarter ending: March 31, 2012 (Q1, first quarter 2012)

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

Overview: Typically slow Q1. Waiting for FDA approval of Magellan vascular robotic system.

Basic data (GAAP) :

Revenue was $4.7 million, down 24% sequentially from $6.2 million and down 11% from $5.3 million in the year-earlier quarter.

Net income was negative $11.8 million, up sequentially from negative $9.5 million but reversing positive $11.7 million year-earlier.

EPS (earnings per share) were negative $0.20, down sequentially from negative $0.16, and down drastically from positive $0.21 year-earlier.

Guidance:

None.

Conference Highlights:

Having a bad quarter to report, CEO Bruce Barclay looked to an FDA clearance for the Magellan Robotic Catheter vascular surgery system this quarter. Where it is approved in Europe "the number of hospitals currently evaluating Magellan System Purchases is encouraging," but "top-line growth in the quarter was adversely affected by the weakened economic environment." We are in discussions with multiple hospitals about deal structures, but capital equipment acquisition is a lengthy process.

4 Robotic Catheter Systems had recognized revenue, 3 in the U.S. and 1 international. Shipped 3 new Robotic Catheter Systems, all in the U.S., two Sensei and one Magellan for research, and all 3 were recognized for revenue.

Artisan, Lynx or NorthStar Catheters sold was 574, down 20% sequentially from 714 and down 17% from Q1 2011 as customers reduced inventory levels.

Number of EP (electrophysiology) procedures performed was 636, up slightly sequentially from 633, but down 5% from year-earlier.

Good clinical results have been shown by the Magellan in practice, including operations that were too difficult to accomplish manually.

GAAP comparisons to year-earlier are skewed by sale of IP rights in Q1 2011.

Cash and equivalents ended at $38.5 million, down sequentially from $52.2 million. $1.5 million in accounts receivable came in after the quarter ended. Cash use of $13.7 included inventory builds prepping for U.S. launch of Magellan. $5.9 million of deferred revenue on balance sheet. $29.2 million in debt.

Cost of revenues was $3.9 million, leaving gross profit of $0.7 million. Operating expense of $11.7 million included $4.3 million for research and development and $7.4 million for selling, general and administrative. Loss from operations was $10.9 million. Other expense was $0.9 million.

$0.3 million of expense was for non-cash stock-based compensation.

Steps have been taken to reduce spending to offset the loss of Philips payments.

Q&A:

Magellan approval confidence? We have had questions from the FDA, nothing is final, but we are answering their questions and narrowing the issues.

Europe economics, pricing strategy? Pricing has come up, but we feel Magellan is a premium price system compared to Sensei. It is hard to tell from one system placement. More of the discussion is around the structuring of the payments and sources for funding.

Disappointing EP (electrophysiology) orders? This quarter Europe had a record number of procedures, U.S. was down. Despite the lower catheter sales we think the overall trend is good. But inventory pullback was both in U.S. and Europe.

We continue to upgrade our U.S. sales force, and are having pockets of success. Since we sell Sensei systems every quarter and clinical data shows their value, we expect to see more sales and usage.

Would not confirm or deny average analyst guidance of $30 million (probably annual revenue).

Were St. Mary's cases femoral access? Yes.

Q2, anything so far? Too early to say about the trend.

Ramifications of Stereotaxis competition? Can only say we believe if there are accounts that see the utility of robotics, we feel good about the Hansen solution.

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