Analyst Conference Call Summary

conference date: February 23, 2011 @ 2:00 PM Pacific Time
for quarter ending: December 31, 2010 (fourth quarter 2010)

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

Overview: Slow sales quarter, emphasized large payment from Philips in Q1.

Basic data (GAAP) :

Revenue was $3.5 million, flat sequentially from $3.5 million, but down 51% from $7.2 million in the year-earlier quarter.

Net income was negative $11.0 million, improved sequentially from negative $12.1 million, and improved from negative $11.7 million year-earlier.

EPS (earnings per share) were negative $0.20, improved sequentially from negative $0.23, and improved from negative $0.31 year-earlier.

Guidance:

None. 2011 depends largely on approval of FDA for vascular robotic system and timing of Sensei system shipments. Operating expenses should remain about flat.

Conference Highlights:

Upfront payment of $29 million from Philips for FOSSL technology was received on February 3, 2011; future payments could total $78 million.

Are "excited about the approaching commercial launch of our flexible catheter vascular system which we expect will accelerate market adoption of flexible robotics and expand our customer base over the coming 12 months." But sales were not where they need to be.

2 Sensei Robotic Systems had recognized revenue, but 3 were shipped, 2 in U.S. and 1 international. Pipeline is active, but timing of sales is difficult to predict. The revenue recognition was for systems shipped prior to the quarter. $605,000 average price.

666 Artisan Control Catheters were sold, up 15% sequentially and 24% y/y. $1630 average price.

Record number of EP (electrophysiology) procedures performed, 647, up 3% sequentially and 34% y/y.

Ended quarter with a deferred revenue balance of $11.6 million for 16 shipped systems that have not been recognized as revenue. A majority are with international distributors.

Lynx Irrigated Ablation Catheter launched in Europe; full launch this quarter. In U.S. the FDA approved the launch of the ARTISAN clinical trial for atrial fibrillation ablation. Showed the new flexible catheter vascular robotic system; preparing to apply for approval. Philips is partially funding the vascular research. Opened a London facility.

Cash and equivalents balance ended at $28.0 million. Cash used by operations was $6.2 million. Debt listed as $6.2 million.

Cost of revenue was $3.5 million, leaving no gross profit. Operating expense of $10.7 million included $3.2 million for R&D and $7.6 million for selling, general, and administrative expense. Includes some reimbursement by Philips. Loss from operations was $10.8 million, other loss was $0.2 million.

Operating expenses cut $3 million y/y, and cash expense reduced $5 million.

Q&A:

Milestone expectations? We actually were stating we have cash through the launch of a next generation catheter in 2012. Original Philips joint agreement has one payment left. Expecting EP business to continue to growth, it just is difficult to predict system shipment timing.

EP utilization drivers? Procedure growth has been encouraging and is broad based. Additional training and support of field organization has helped. Ablation share varies so much from site to site it cannot be generalized.

Qualitative systems guidance? Not comfortable even with just qualitative guidance. We feed we have good momentum out of 2010 because of increased use by current customers.

$78 million milestone payments from Philips? We are restricted in terms of what we can say. Will file redacted agreements when that process is complete. It is a commercialization based payment system.

Op ex run rate? Expectations are about flat, better to use 2010 as a whole than Q4.

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