Analyst Conference Call Summary

biotechnology

conference date: February 27, 2013 @ 2:00 PM Pacific Time
for quarter ending: December 31, 2012 (Q4, fourth quarter 2012)

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

Overview: Still having trouble selling its surgical robots. But $20 million gain on licensing.

Basic data (GAAP) :

Revenue was $4.3 million, down 16% sequentially from $5.1 million and down 31% from $6.2 million in the year-earlier quarter.

Net income was $9.7 million, more than reversing sequentially from negative $8.4 million, and also reversing the negative $9.5 million in the year-earlier quarter.

EPS (earnings per share) were $0.15, up sequentially from negative $0.14, and up from negative $0.16 year-earlier.

Guidance:

No specific guidance, but believes cash is sufficient to fund operations for the year 2013. Believes will ship more robots in 2013 than in 2012, but due to uncertainty in timing cannot provide specifics. Believes will also sell more catheters. Operating expenses are expected to increase modestly to support Magellan launch, and R&D should be up to create new products.

Conference Highlights:

Magellan Robotic Vascular System sales ramp stalled, with just 1 system shipped.

3 Hansen Robotic Catheter Systems shipped in the quarter, 1 Magellan and 2 Sensei. Revenue was recognized on just 2 systems, one Magellan and one Sensei. 1 of the 2 Sensei systems was shipped under the commercial evaluation program, so not recognized for revenue.

Artisan, Lynx or NorthStar Catheters sold was 840, a record, and up 22% sequentially from 689 and up 18% y/y.

Number of EP (electrophysiology) procedures performed was 755, up 15% sequentially from 659 and up 19% y/y.

Expects to have 9 installed clinical Magellan vascular surgery robots by the end of Q1 (this quarter), but most are under commercial evaluation rather than being sold. Built a strong pipeline of potential buyers in 2012. The 3 systems under commercial evaluation in Q3 continue to be evaluated, with results being published.

During Q1 Hansen has shipped 3 additional Magellan systems for evaluation in Europe.

Cash and equivalents ended at $41.2 million, a $19.5 million gain in the quarter. $30 million was raised from Intuitive Surgical with an expanded licensing agreement and stock purchase, but there was a $0.6 million negative valuation adjustment on a short-term investment. $2.8 million deferred revenue for service contracts. Inventories rose to $9.1 million.

Shares outstanding increased to 57.9 million.

Stock-based compensation expense was $0.6 million.

Cost of goods sold was $3.5 million, leaving gross profit of $0.9 million. Operating expenses were $10.3 million consisting of: $3.5 million for research and development; $6.8 million for selling, general and administrative. There was a $20 million gain on licensing of intellectual property. Operating profit was $10.6 million. Other expense was $0.9 million. Income taxes $0.1 million.

Strategy is to extend the specific types of cases addressable by the robots and catheters. Lower-profile 6 French O. D. catheter with a 4 French inner lumen, is the next to be released. Can develop catheters for other aspects of anatomy, including neurology.

Q&A:

Can you make cash last beyond this year? In Q3 and Q4 we lowered our spending run rate from the first half of 2012. We expect top line growth in both systems and catheters. Our operations will improve in efficiency. So we do believe the cash will be sufficient for the year.

Catheter sales increase, reasons? Mainly it is the 6th quarter of procedure growth. Some from new Magellan systems.

Are procedures per system comparable between Sensei and Magellan? There are more procedures in vascular than in EP, so as Magellan comes online we would expect more cases per system, but the data is scant so far.

As of now (February), 11 Magellan vascular systems shipped: 5 sold including 2 training systems, 6 under commercial evaluation. In Q4 we had 1 Magellan system that sold outright.

We are seeing EP utilization increase particularly in accounts that bought systems over the last 2 years.

We continue to hold the short-term investment, the stock price of it dropped.

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