Analyst Conference Call Summary

biotechnology

conference date: February 22, 2012 @ 2:00 PM Pacific Time
for quarter ending: December 31, 2011 (Q4, fourth quarter 2011)

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

Overview: Greatly improved quarter, but still operating at a loss.

Basic data (GAAP) :

Revenue was $6.2 million, up 15% sequentially from $5.4 million, and up 77% from $3.5 million in the year-earlier quarter.

Net income was negative $9.5 million, improving sequentially from negative $10.1 million and also improving from negative $11.0 million year-earlier.

EPS (earnings per share) were negative $0.16, improving sequentially from negative $0.18 and also improving from negative $0.20 year-earlier.

Guidance:

No specific guidance, but expects to ship more system in 2012 than were shipped in 2011, with improved gross margins but a modest increase in operating expenses. Cash should be sufficient to to fund the initial commercialization of Magellan. Believes is well-positioned to lower cash burn in 2012.

Conference Highlights:

The first Magellan vascular robotic system was installed in St Mary's Hospital, London, England with the NorthStar robotic catheter. Clinical cases were successfully completed. The Lynx irrigated Ablation catheter was approved and commercially launched in Europe. Magellan response from FDA expected in Q2. Filed for Magellan in Canada after recently being approved for Sensei there, and received regulatory approval in Australia.

8 Robotic Systems had recognized revenue (2 U.S., 6 international). Six new systems were shipped: 4 Sensei, 1 Magellan and 1 vascular research system (Magellan in U.S., waiting for FDA approval). 2 systems were shipped to the U.S. and 4 internationally. Of the 6 new shipments, 4 had revenue recognized in the quarter. At end of quarter 6 systems had been shipped but not recognized for revenue, resulting in $6.4 million in deferred revenue. Average Sensei System price $598,000, but will not release this information in the future for competitive reasons. Vascular system has a much higher list price.

Artisan, Lynx or NorthStar Catheters were sold was 714, up 2% sequentially and up 7% over the year-earlier quarter. Record number of catheters sold in 2011. Includes a small number of vascular catheters.

Number of EP (electrophysiology) procedures performed was 633, up 6% sequentially but down 2% from year-earlier. Record number of procedures performed in 2011.

Currently in multiple discussions with administrators in multiple hospitals in Europe to adopt the Magellan system. U.S. sales force has already been upgraded in anticipation of FDA approval of vascular catheter systems. One vascular research system was sold in the U.S. already in Q1.

Cash and equivalents ended at $52.2 million. Debt ended at $29.1 million. Placed $10 million in private equity. $9.4 million cash used in quarter.

Cost of revenue was $4.5 million, leaving gross profit of $1.6 million. Operating expense of $10.5 million include $1.9 million for research and development and $8.6 million for selling, general and administrative expense. Loss from operations was $8.9 million and other expense was $0.6 million. Expenses included $1.2 million for non-cash stock compensation. $3.7 million Philips payment offset some R&D operating expense, which will not continue in 2012.

Working on a path to profitability, but it depends on adoption of the vascular robotic systems.

Q&A:

Both Methodist and Hartford hospitals now have both a Sensei and a vascular robotic system.

Lynx ablation catheter? We see good use in Europe. Because of the length of time and expense, we have de-prioritized applying for U.S. approval.

$29 million debt? All long term, interest only for first 12 months, extendible to 18 months if Magellan approval in U.S. this year.

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