Hansen Medical, Inc. Q4 2008 Earnings Call Transcript

Feb.13.09 | About: Hansen Medical, (HNSN)

Hansen Medical, Inc. (NASDAQ:HNSN)

Q4 2008 Earnings Call

February 12, 2009 5:00 pm ET

Executives

Frederic H. Moll, M.D. – Co-Founder and Chief Executive Officer

Gary C. Restani – President and Chief Operating Officer

Steven M. Van Dick – Chief Financial Officer

Analysts

Chris Pasquale – J.P. Morgan

Ryan Chu – Morgan Stanley

Ben Forrest – Summer Street Research Partners

Ed Shenkan – Needham & Company

Jose Haresco – Brean Murray

Thomas (Paleo) – Oppenheimer & Company

Operator

Welcome to the Hansen Medical fourth quarter 2008 results conference call. During today's presentation, all parties will be in a listen-only mode, and following the presentation, the conference will be opened for questions. (Operator instructions). As a reminder, this conference is being recorded today, Thursday, February 12, 2009.

At this time, I would like to turn the conference over to Kathy Waller with Financial Relations Board.

Kathy Waller

Welcome today to Hansen Medical's 2008 fourth quarter conference call. With us today, we have Hansen Medical's Co-Founder and Chief Executive Officer, Dr. Fred Moll; President and Chief Operating Officer, Gary Restani; and the company's Chief Financial Officer, Steve Van Dick.

Before I turn the call over to management, please remember that our prepared remarks and responses to questions will contain forward-looking statements. Words such as "may", "will", "should", "expects", "believes", "estimates", "targets", “projects”, "goals", "could", "scheduled", “plans”, “opportunity”, “guidance” and variations of these words and similar expressions are intended to identify forward-looking statements that are subject to a number of expressions of risks and uncertainties. Examples of such statements include statements about our expected operational and financial results, the expected numbers, locations, and timings of placements of our Sensei System and recognition of revenue on our system, the timing and results of our future clinical studies, the receipt and timing of our future regulatory approvals, results of future clinical trials, and our expected manufacturing capabilities and results, and the timing of future product introductions.

Actual results may differ materially from those set forth in these statements due to the risks and uncertainties inherent in our business, including potential safety and regulatory issues that could slow or suspend sales, our ability to effectively sell, service, and support our products, the rate of adoption our Sensei Systems and, and the rate of use of our catheters by customers that have purchased our systems, our ability to successfully scale our manufacturing capabilities, our reliance on third-party manufacturers and suppliers that could adversely affect our ability to manufacture products on a timely basis, the scope and validity of intellectual property rights applicable to our products, competition from other companies, the effect of credit, financial, and general economic conditions on potential purchases of our systems, our ability to obtain additional financing to support our operations, and other risks detailed in the ‘Risk Factors’ section of our periodic SEC filings, including our quarterly report filed with the SEC on November 5, 2008. We undertake no obligation to update or revise our information herein to reflect events or circumstances in the future, even if new information becomes available.

With that, it's now my pleasure to turn the call over to Hansen Medical's Chief Executive Officer, Dr. Fred Moll.

Fred Moll

Good afternoon everyone and thank you for joining us. On today's call, I'll provide an update on our operating results and business highlights for the 2008 fourth quarter and full year. Following my comments, Gary Restani, our President and Chief Operating Officer, will then expand on our commercialization efforts for our Sensei Robotic Catheter Systems in the United States and in Europe. Steve Van Dick, our Chief Financial Officer, will then conclude with additional details about our financial results and our business outlook for 2009. After our prepared remarks, we'll open the call to questions.

Despite a challenging economic climate, 2008 was a year of tremendous accomplishment for Hansen Medical. We wrapped up the year with an installed base of 55 systems worldwide and shipped over 1600 Artisan catheters. We were also successful in establishing strong partnerships that we believe will put us in a position to significantly expand our business in the years ahead. On the clinical front, we continue to accumulate impressive procedural data that speaks to the efficacy of our technology. In addition, we are pleased with the ongoing development efforts to position our flexible robotic technology in a number of positional applications beyond electrophysiology, which represent large future market opportunities for Hansen.

As we disclosed early last month, during the fourth quarter, we shipped 11 Sensei Systems and recognized revenue on the placement of 10 systems. The eleventh system shipped in the fourth quarter is expected to be recognized as revenue in the first quarter of 2009. For the full year of 2008, we recognized revenue on 40 systems. Through the end of 2008, we recognized revenue on 55 systems, which refer to as our worldwide installed base. This includes 36 systems in the United States and 19 in Europe.

Placing 55 systems in the field, after 20 months of commercialization, outpaces the adoption rate of both Intuitive Surgical and Stereotaxis at a similar phase in their commercial lifecycles. As important a metric in this stage of our company’s development is the enthusiasm expressed for our technology by a growing group of clinicians who believes that they are better able to perform complex arrhythmia procedures using the Sensei Systems. I’m also pleased to report another strong quarter of disposable sales. During the fourth quarter, we recognized revenue on 520 Artisan catheters bring the full year total to 1621 catheters.

Regarding our clinical experience, physicians are gathering a growing volume of clinical data that we believe reflects the benefits our technology can provide to customers and patients. I’d like to briefly discuss two examples of published data in peer-reviewed journals and presentations that describe the clinical success if using the Sensei Systems. First, Dr. Joseph Gallinghouse and his colleagues from the Texas Cardiac Arrhythmia Institute in Austin, Texas, reported on 6-month followup data of 162 Hansen Medical procedures at The American Heart Association Scientific Sessions in November.

Their data included mapping and treatment for 106 paroxysmal and 56 chronic atrial fibrillation patients, and they reported 100% successful acute pulmonary vein isolation. 94% of the paroxysmal patients and 87% of the chronic patients reaching 6-month followup were free of atrial fibrillation. They also reported a 1.2% rate of pericardial effusion and a 0.6% rate of vascular complications. We believe that both the efficacy and complication rates compare very favorably to rates for manual procedures found in the published literature.

As a second example, the University of Hamburg’s Eppendorf Clinic published results from a randomized 50-patient study comparing Sensei to manual treatment for atrial flutter. They found that Sensei achieved 100% bidirectional block and used 49% less RF energy and 35% less RF ablation time when compared to the manual cohort. Both groups of patients reported no complications. We believe this study demonstrates the opportunity to reduce energy delivery and radiation exposure in ablation therapies when using the Sensei Systems.

In addition, earlier in 2008, we began a 100-subject randomized study in Europe to compare Sensei robotic navigation to conventional technique for the treatment of AF. This study is being performed in St. Bartholomew's Hospital in London with Dr. Richard Schilling as the principal investigator. The study is progressing well with 62 patients enrolled. Generally, we believe there is a growing perception among clinicians that use of the Sensei System is able to create better clinical outcomes for several reasons, including, one, a better control of the catheter; two, better contact with tissue; three, the ability to make continuous lesion in a systematic fashion. In addition, unlike manual techniques, our system gives clinicians the ability to perform complex procedures while seated at workstation, shielded from radiation without the need for protective lead aprons; thus, the clinician is comfortable, protected, and given enhanced ability to perform the procedure in an optimal manner.

Now, let’s turn our attention to new applications for the Sensei System. As you remember last year, researchers at St. Mary’s Hospital in London made excellent progress in developing the use of the Sensei System for endovascular surgery. In the third quarter of 2008, we announced the completion of the first human case involving the use of robotics in an endovascular procedure. This specific application involves improving the accuracy of fenestrated stent graft placement for the repair of abdominal aortic aneurysm. This case highlights the opportunity for improved accuracy, decreased time, and improved predictability in the placement of a stent graft with our technology.

From this base of experience, I’m excited to report that we are making significant progress in the development of a broader vascular platform for applications in interventional cardiology, interventional radiology, and vascular surgery. In 2009, we will continue human clinical studies and initiate the regulatory process leading to commercialization of our new vascular platform.

In summary, I'm very pleased with our progress and accomplishments during this past year. Despite a tough economic environment, adoption of our technology has been strong. We have gained experience in a large number of clinical cases, in a variety of different hospital settings which is indicative of the broad appeal of our system. I continue to be impressed with the enthusiasm with which the majority of our customers embrace our Sensei technology, and I believe we are building a strong position in the EP market. With full acknowledgement of the uncertain economic environment in 2009, we do believe that based on our current field activity, it is appropriate to reaffirm our system placement guidance of 53 to 65 systems for 2009.

This concludes my prepared remarks. With that, I'll now turn it over to Gary Restani for a closer look at some of our key operating activities.

Gary Restani

I’ll begin by providing some additional color on our system and catheter sales during the quarter. Of the 10 systems that contributed to fourth quarter revenue, 6 were delivered to sites in the United States and 4 were delivered internationally. Our 4 international sales consisted of 3 systems sold to distributors including our first sale to our Canadian distributor and one direct sale to an end-user.

Looking at disposable sales during the quarter, the 520 catheters sold is more than 20% higher than the previous single quarter record of 423 established in Q3. Our 2008 full year total of 1621 catheters is more than five times higher than the total number of catheters sold during our 7 months of commercial catheter shipment in 2007. During our last call, I discussed the conversion of some of our initial Sensei Systems from warranty coverage to full service agreements. I’m pleased to report that through the fourth quarter, we have now converted a total of 25 customers to full service agreements, 15 of which were closed in the fourth quarter.

Additional highlights from this past year include the completion of key investments to enhance our manufacturing capabilities and our ongoing progress in commercializing our CoHesion 3-dimensional visualization module, which is a collaborative effort with St. Jude Medical. In June, we moved into our new facility which includes two state-of-the-art EP labs. This facility gives us significant advantages for customer training and demonstrating our technology. It also helps accelerate our product development activities.

We received FDA 510(k) clearance for the CoHesion Module mid year, and since receiving regulatory approval, the vast majority of our system sales have included the CoHesion module demonstrating the clinical value of this enhancement. We are pleased to report that 7 Sensei Systems sold in Q4 were configured with the CoHesion Module, 5 of which were sold in the US.

In the fourth quarter, we also recorded our second sale to St. Jude Medical under our co-marketing agreement. As a reminder, our co-marketing agreement allows St. Jude to sell our CoHesion enabled Sensei System to hospitals when it is leveraged with other St. Jude products. We feel that our co-marketing agreement with St. Jude will provide our customers with an alternative to traditional means of acquiring capital equipment which I believe is especially valuable in today’s economic environment.

In addition, during the fourth quarter, we signed a distribution agreement with St. Jude in France. This agreement contributed to the sale of one unit during the quarter. We will continue to work to establish additional distribution channels in 2009 to complement our direct international sales organization.

Subsequent to the end of the fourth quarter, we announced joint development and cooperation agreement with Royal Phillips Electronics to co-develop integrated products for the EP market. This agreement will enable the creation of integrated product solutions by combining Phillips Allura Xper X-ray system with our Sensei system. With this collaboration, we are targeting applications that will improve visualization capabilities for robotic catheter control and further enhance our value proposition to our customers. We look forward to updating you on the success of this collaboration in future periods.

Throughout 2007 and 2008, as we entered into our initial commercialization phases, we made aggressive investments in all areas of our business from our manufacturing and engineering organizations to our sales, service, marketing, and clinical teams. This also included the move into a new larger facility which was completed in 2008. These investments were necessary in order to get our business off the ground and running. As expected, these investments have affected margins and operating expenses.

Our new facility is designed to accommodate our capacity requirements for the next three to four years and therefore positions the company to effectively handle a significant increase in production volume. This capacity for growth will continue to be a major factor in our gross margins in 2009, but beyond 2009, as Hansen Medical transitions into a more mature business and with many of our initial investments behind us, our operating expenses should be better aligned with the level of our revenue.

As a part of our 2009 planning process, we mandated the Hansen management team to focus on rigorous expense controls. As a result, we’ve undertaken reductions in our workforce, targeted variable cost reductions, as well as process improvement initiatives that we believe will reduce our operating expenses for 2009 below current 2008 levels. We’ve designed expense reduction initiatives for 2009 to achieve these operating expense goals without significantly affecting our ability to deliver product enhancement opportunities in EP and in our new vascular segments, and more importantly without compromising our customer facing activities such as sales, field clinical support, and field service support.

In conclusion, our business performance remains very solid. Our adoption rates are strong with 55 systems placed in the first 20 months our commercialization. I’m also very pleased with our internal development programs in both the areas of complex arrhythmia and vascular applications. As a final note, you may be aware that Hansen filed an 8-K earlier this afternoon announcing my transition from President and COO back to my originally intended role as a member of the Board of Directors.

To give some historical perspective, I was invited to join the Hansen Board in September of ‘06 as outside board member because of my extensive operational experience with large medical device organizations. Soon thereafter, Fred and the board asked me to step into the role of President and COO with the goal of establishing a strong manufacturing infrastructure and building a premiere commercialization team. To that end, we now have in place an exceptional operating team that includes people like Sean Murphy as our Senior Vice President of Operations, Dan Wallace as VP of Clinical and Regulatory, and Chris Sells as Senior Vice President of Commercial Operations.

I’m very proud of the team’s achievements during the last 2-1/2 years, and I’m grateful to have been part of the early Hansen commercialization efforts. Under Fred’s leadership, I’m very confident in the team’s ability to continue to implement and execute on our business strategies with great success. With that, I’ll now turn the call over to Steve Van Dick, our Chief Financial Officer, for a closer look at the fourth quarter financial details and our outlook for 2009.

Steve Van Dick

Moving first to our fourth quarter of 2008 income statement, we recorded quarterly revenue of $7.3 million, primarily on the sale of ten Sensei Systems and the shipment of 520 Artisan Control catheters. This represents a 74.3% increase over the $4.2 million (inaudible) catheters. The average selling price for the 10 systems sold during the quarter was approximately $601,000. This compares to an ASP of $634,000 in the fourth quarter of 2007. The lower ASP is due primarily to sales to Europe which were adversely affected by distributor discounts and exchange rates. The ASP for the 40 systems sold for the full year of 2008 was $658,000 compared to an ASP of $625,000 for the 15 systems sold for the full year of 2007. The Artisan Control Catheters sold in the quarter had an average selling price of approximately $1626 compared to $1819 in the fourth quarter of 2007.

For the full year of 2008, the Artisan Control Catheter sold for an average of $1739 compared to an average of $1855 for the full year of 2007. Cost of goods sold for the quarter was $5.2 million and included non-cash stock compensation expense of $710,000. Gross profit for the quarter was $2 million yielding a gross margin of 29%. This compares to a gross profit of a negative $23,000 and gross margin of a minus 0.5% for the same period in 2007. For 2009, we expect that cost of goods sold both as a percentage of revenue and on a dollar basis will continue to vary significantly from quarter to quarter due to a variety of factors including revenue levels, fluctuations in average sales prices, product mix, manufacturing levels, and yield fluctuations.

In reviewing the key expense line items on the income statement, research and development expenses for the fourth quarter were $6.8 million including non-cash stock compensation expense of $700,000. In the same period last year, R&D expense was $5.1 million, which included non-cash stock compensation expense of $500,000. The increase in R&D expense is primarily due to increased employee-related expenses due to higher average R&D headcount, along with increased outside services, materials and overhead expenses. The 2009, we anticipate research and development expenses to decline from the levels in 2008 as we carefully manage expenses related to our development efforts for the electrophysiology market and other applications and realize savings from the recently completed reduction in force.

Selling, general, and administrative expenses during the third quarter were $10.1 million and included non-cash stock compensation expense of $2.7 million. This compares to SG&A expense of $7.9 million for the same period in 2007, which included non-cash stock compensation expense of $1.4 million. The increase in selling, general, and administrative expenses was primarily due to employee-related expenses related to higher average headcount necessary to support our growth, severance costs associated with the departure of two executives, legal costs for the development of our intellectual property portfolio along with other IP and litigation-related legal costs, supplies, equipment, and overhead, and non-cash stock compensation expenses.

In 2009, we expect selling, general, and administration expenses to decline from the 2008 levels as the result of careful expense management and savings realized from the recently completed reduction in force. Other loss net for the fourth quarter of 2008 was $102 compared to other income net of $545,000 for the same period in 2007. The change was primarily due to higher interest expense due to our borrowings under the new equipment line of credit in addition to lower interest income related to lower average cash, cash equivalents, and short-term investments. We expect our interest expense to increase as we continue to utilize our equipment line of credit, and our interest income will continue to decrease as we utilize our cash to cover our operating and other expenses.

Net loss for the fourth quarter of 2008, including non-cash stock compensation expense of $3.6 million, was $14.9 million, or $0.59 per basic and diluted share, based on average basic and diluted shares outstanding of 25.2 million. The net loss for the fourth quarter of 2007, including non-cash stock compensation expense of $2 million was $23.9 million or $1.10 per basic and diluted share, based on average basic and diluted shares outstanding of 21.7 million shares for the same period in 2007.

Turning to the balance sheet, cash, cash equivalents, and short-term investments as of December 31, 2008, were $35.2 million, compared to $48.6 million as of December 31, 2007. The lower cash balance was due to the company’s normal operating expenses and $18.4 million in capital expenditures during 2008, partially offset by capital raised from financing activities during the year.

During the fourth quarter, our net cash burn from operations moderated to approximately $9 million from nearly $14 million in the third quarter of 2008 and nearly $11 million in the fourth quarter of last year. We have access to a $25 million debt facility with Silicon Valley Bank which is comprised of $15 million equipment line of credit and a $10 million revolving line of credit. The $15 million equipment line was used to finance construction of our new facility and other capital equipment acquired since December 1, 2007, as well as to refinance the company’s previous term loan. The company can continue to draw down on this facility until March 31, 2009. As of December 31, 2008, $12.5 million had been drawn down on this facility. The undrawn $10 million revolving line of credit allows the company to borrow against qualified receivables and inventory. We believe our current liquidity position gives us the ability to execute our business plan in 2009. In addition, we are committed to funding the company through cash flow break even and as such we will continue to evaluate various funding options.

Before wrapping up my prepared remarks, I’d like to reiterate our business outlook for 2009, which we initially provided last month when pre-announced our fourth quarter results. The economic downturn has significantly impacted many of our customers’ capital spending decisions which increases the difficulty of accurately forecasting the timing of our systems sales. As a result, we are looking at a wide range of possible system placement scenarios in 2009 than might ordinarily be the case. Based on our pipeline of potential customers that we have identified, we continue to expect to recognize revenue on a range of 53 to 65 systems for 2009.

Among other factors, we believe this range takes into account the uncertainty around the length and severity of the current economic recession and the impact it will have on our customers’ purchase decisions in 2009. With that said, it is important to note that the low end of this range represents a more than 30% growth in system sales compared to 2008.

Thank you for your attention, and at this time I’d like to turn the call back over to Fred for some concluding remarks.

Fred Moll

With 55 systems in the field in a little over a year and a half of commercialization and projected year over year systems sales growth of more than 30% in 2009, we believe we’re experiencing strong demand for our technology in the EP market. We’re also encouraged by the progress we are making in market outside of EP and believe that this success provides evidence of the opportunity to leverage the Sensei platform into a variety of other interventional applications. Thus, despite the tough economic environment, we are optimistic regarding the company’s commercial opportunity in 2009 and beyond.

Prior to our Q&A, I’d like to take this opportunity to personally thank Gary for his enormous contribution to Hansen. We have been very fortunate to benefit from his experience and leadership. He helped create a powerful management team that will allow Hansen to fulfill its promise and grow to potential. I look forward to continuing to work with Gary in his role as an outside board member.

At this time, we’d like to open the call to questions.

Question-and-Answer Session

Operator

Ladies and gentleman, we will now begin the question-and-answer session. (Operator Instructions). Your first question comes from the line of Mike Weinstein with J.P. Morgan.

Chris Pasquale – J.P. Morgan

This is Chris Pasquale here for Mike. Just to start off, obviously the macro environment is still very fluid. Can you just give us an update of what you’re seeing during the first few weeks of the year? Are things stabilizing or still getting worse, and how is the environment evolving internationally compared to the US?

Fred Moll

Let me answer the last part of that question first. We don’t have great visibility on the international scene, but I do believe that the changes we’ve seen relative to what we saw in Q4 are more moderate internationally, and so we don’t see a lot of change there in purchasing decisions, and with regard to what we’re seeing domestically, I’d be careful not to call it a rebound from Q4, but we have seen some concern in Q4 and a pullback in Q4 and some hesitancy to make purchasing decisions, and generally although people were hesitant in 2008, they remain serious about going forward with their purchasing decision on the Sensei System, so obviously nobody has too accurate a crystal ball on the rest of the year, but generally in Q1, our visibility is such as I emphasized in the call, and we’re reiterating guidance based on what we’re seeing.

Chris Pasquale – J.P. Morgan

Understanding that you’re not providing quarterly guidance at this point, where do you think expectations broadly should be for the first quarter? This is a business that ultimately you would expect some seasonality from, but obviously it’s still very early in the ramp.

Fred Moll

We’re in a little bit of unchartered territory, but if you sort of take that as a given, you look at generally what you see during the year in a capital equipment business, and as we’ve talked about before, historically it’s a little bit back-loaded, so how those two balance whether the environment recovers toward the back half of the year and you continue to see that seasonality with the backend loaded nature of a typical year on the capital equipment business, there’s a lot going on in the market. It’s really hard to tell, but I think it’s a little early to say. I can’t be too specific about it.

Chris Pasquale – J.P. Morgan

Who’s going to be taking over Gary’s responsibilities, and what made this the right time for the company to make a transition at that position?

Fred Moll

As I mentioned in the call, Gary did a fabulous job of parachuting into the company from taking a management role after we had put him on the board, and he came in and really helped us build a management organization that I’m very excited about. Sean Murphy who is running R&D and Manufacturing is stepping up to Senior VP of Operations and will be taking a larger role as will Dan Wallace taking over Regulatory and Quality, and I really think that we’ve gotten great benefit from Gary’s mentoring of Chris Sells who is VP of Commercial Operations, and so in a sense, we’re going to have a little bit more of a flatter organization, but we think we have the people to run this organization in a very efficient and very successful manner.

Gary Restani

Chris, if I could just add, outside of the fact that I’m getting extremely old, the real reason, when I first came on board, my intention was always to be in nonoperational roles, but it was an exciting situation, and it was an opportunity that I really felt I could add some value in the meantime, but before that, I had family commitments that I had to balance, and I put that off for 2-1/2 years, and as you know, as you go on, commitments are becoming obligations. The timing was, I think, good because the team is ready. I’ve never seen a more talented organization, really, in the years that I’ve worked in medical devices. So the readiness of the organization is obvious, and quite frankly, my personal commitments started to become more pronounced, so that’s the best way I can answer it.

Operator

Your next question comes from the line of David Lewis with Morgan Stanley.

Ryan Chu – Morgan Stanley

You said in January that you had experienced a few order delays, but you had no cancellations. I just wanted to check if that’s still the case that you’ve had had no cancellations that you of.

Fred Moll

No cancellations that we know of, no.

Ryan Chu – Morgan Stanley

Further clarification on guidance, I’m wondering if that assumes a similar mix of US OUS placements as you experienced in ’08?

Gary Restani

It’s fairly balanced. We’re staying at that rate. We finished at about 28% to 30% international to US, and it’ll probably be in that same range.

Fred Moll

We don’t see a big shift there going forward.

Ryan Chu – Morgan Stanley

I was also wondering about the geographical distributions of your installed base. I think right now you have 36 systems in the US. Are you trying to see these clustering around certain areas, maybe three or four in a certain area and then maybe three or four in another area, so greater than maybe 50% to 60% are in only three or four geographies?

Gary Restani

Are you talking about the US?

Ryan Chu – Morgan Stanley

Yes. The 36 in the US.

Gary Restani

Actually, if you looked at our map, early on, it was very clustered. At this stage, you’re seeing we’ve got great penetration obviously in the northeast. We’re starting to see the southwest developing, and now we’re proud to say the West which was light for us has really stepped up, and that’s becoming pretty established, again, the Midwest has always been one of our first entries, so very balanced actually Ryan.

Ryan Chu – Morgan Stanley

Do you see further clusters developing anywhere?

Gary Restani

As you know, there are obvious clusters that are related to demographics where there is aging of the population and demand of procedures being performed, but our clusters are defined as opportunities. We are targeting the big centers and the high-growth areas significantly these days, and I think we hope to have clusters because of the number of systems we sell into these important areas, but no geographically driven clusters.

Ryan Chu – Morgan Stanley

Lastly, last quarter you talked about some initiatives to take a closer look at, like the relationship between customer inventory and utilization. I was wondering if you had an update on anything you found that you could give us today.

Fred Moll

We continue to look at it. What we’re excited about is in the future we hope to be able to electronically monitor usage of our system remotely, and we think that ultimately is going to be the best way to understand utilization, and short of that, we’ve started instituting a process whereby our clinical people periodically are going to be asked to take inventory at certain institutions where we’ve sold systems to get a better and regular update on the number of catheters they utilize versus the inventory of the hospital, and so that’s still ongoing. From the work we’ve done, we’re not seeing any big surprised, but no strong conclusions yet. We think long term that sales of catheters are going to be the best proxy for utilization, and I think it’s going to bounce around a little bit until we get to higher volumes, but ultimately I think that’s where we’re headed.

Operator

Your next question comes from the line of Ed Shenkan with Needham & Company.

Ed Shenkan – Needham & Company

Steve, I was wondering if you could break out US system ASP and maybe international system ASP.

Steve Van Dick

We currently don’t provide that level of detail on our ASPs. I think it’s safe to say if I were to take a hard look at it, especially given the quarter that we just finished where we had four systems internationally that we shipped three out of four of those systems were to distributors, the ASP for the international, it runs probably when we go distributors 20% to 25% less than what’re planning for end-users in the US.

Ed Shenkan – Needham & Company

What was the FX impact in the quarter?

Steve Van Dick

I think it was $70,000 to $80,000.

Ed Shenkan – Needham & Company

Internationally, are you selling in euros or dollars your systems?

Steve Van Dick

We sell in euros.

Ed Shenkan – Needham & Company

And the dollar became more valuable compared to the euro. The total impact was only $70,000 or $80,000 on the four units?

Steve Van Dick

Yes, based on the receivable base. What I don’t have and what I should start capturing which I don’t have right now is what the change in the exchange rate is from one quarter to the quarter that we used to translate our revenue, so Ed, why don’t you let me get that, and I can get back with you.

Ed Shenkan – Needham & Company

Did you drop price in the US on the systems in the quarter?

Steve Van Dick

We didn’t have a specific program that dropped prices in the fourth quarter, but I think as Gary has alluded in our preannouncement call, this was the fourth quarter, and the economic situation provided pressure, and as is typical with the year end, customers bargain very heavily in the fourth quarter as they know companies are trying to make their year end, and so we probably saw more discounting in the fourth quarter than we’ve seen in Q1, Q2, or Q3.

Ed Shenkan – Needham & Company

The CoHesion, did you break out pricing on that, and do you still charge extra for CoHesion or does it just get wrapped in to the overall price?

Steve Van Dick

We do break out a separate price for CoHesion, and when a customer says that they want Sensei with the CoHesion module, there’s a different list price than for a Sensei system without CoHesion.

Ed Shenkan – Needham & Company

The $601,000 ASP that you talked about earlier, that did not include CoHesion, correct?

Steve Van Dick

That would include any system that was purchased with CoHesion, yes.

Steve Van Dick

The only time it would not include it is if we sold CoHesion to an existing customer.

Gary Restani

As you know, the upgrades Ed are charged at a certain rate, and then if you have it factory installed, you’re actually getting a premium for the CoHesion unit, but on units that we had sold prior to having CoHesion and we have an installation of $125,000, those are becoming less and less because we pretty completed that cycle. Now they’re being sold virtually in most cases as integrated systems.

Ed Shenkan – Needham & Company

Your press release mentioned that there were two executive separations costs in the quarter. Who were you referring to?

Steve Van Dick

During the fourth quarter, we had David Shaw, our general counsel, leave the company as well as our VP of Sales, Jed Palmacci.

Ed Shenkan – Needham & Company

It seems like there are quite a few departures in recent times. Maybe Fred could address this. Is there anything we should read into this?

Fred Moll

No. There are two things we’re trying to accomplish obviously. One is have the best management team possible. The other one is to control cost, and there has been some shuffling around, but it does not reflect on any sort of internal issues that you can point to. We hired a VP of commercialization over our VP of sales, and although we didn’t know how that would turn out, it was not a big surprise that VP of sales was going to depart, and with regard to David Shaw, there was a lack of fit, and I’m not going to go into the whole story, but he contributed an enormous amount when he was here, and he left on very good terms, and we felt for a variety of reasons it was the right move, but there is nothing to read into this other than we’re trying to build the right team, have the right fit with the right people, and have a fairly flat organization that can execute on sales and product development, and we think we have that. So I feel very good about the team in the go-forward plan with this team.

Operator

Your next question comes from the line of Ben Forrest with Summer Street Research Partners.

Ben Forrest – Summer Street Research Partners

I was wondering if you could talk to us a little bit more about your guidance of 53 to 65 systems. I think towards the end of your prepared comments, you mentioned a wider range of potential customers. Are there customers out there that maybe weren’t considering a system in the past who now are? Could you give a little bit of insight on that?

Steve Van Dick

I’m not sure what you mean.

Ben Forrest – Summer Street Research Partners

Could you tell us just a little bit more about where the 53 to 65 systems come from? How you get that number?

Steve Van Dick

It’s based on looking at our pipeline and having the benefit now almost a month and a half of Q1 and understanding and reassessing that pipeline and doing the hard work of understanding where we are with each potential account.

Gary Restani

I think the range, Ben, was based on the depth and breadth of our pipeline. Are there new opportunities that come along? Absolutely. In fact, in Q4, we did convert an account which wasn’t on our pipeline because it was solidly in the Stereotaxis camp and they sacrificed their downpayment to shift the order to Hansen, so you’ll get those types of things happening, but overall we have a very good visibility of the depth and breadth of our pipeline, and that’s how we build our ranges.

Fred Moll

As Steve mentioned in the call, that is blended with the recognition of the uncertainty of the economic environment in 2009. We feel pretty bullish on 2009, but understand we don’t know where the economy is going any better than anybody else, and so a wider guidance we think is prudent.

Operator

Your next question comes from the line of Jose Haresco of Brean Murray.

Jose Haresco – Brean Murray

This is the second or maybe the third quarter that we’ve perhaps shipped more systems that we were able to book revenue for. Could you give us a little insight as to whether that’s a function of just the environment that we’re in and the billing cycles, or is that something that we should perhaps think about building into our models going forward simply because you might ship something on the last day of the quarter, for example, and obviously not be able to recognize it until it’s installed? How should we think about that particular item?

Steve Van Dick

There are some quarter where we get an order in the last days of the quarter, and the customer is looking to take delivery of that in a specific time period, yet for various reasons we can’t complete our obligation under the agreement before the end of the quarter, and therefore it’s a unit that’s shipped but we can’t take revenue on, understanding that we do fall under 97-2 in terms of our revenue recognition policy which means that we have to be able to deliver the system, we have to install it, and the customer has to be trained in most cases before we can take revenue, so every time we get an order we look at all of our obligations to the customer for that order, and given our requirements, we have to make sure that we fulfill all of our obligations under the sales contract before we can take revenue, and there will be time from quarter to quarter where those obligations that we have will span from one quarter to the next quarter.

Jose Haresco – Brean Murray

On the whole macroeconomic issue, I think Fred you mentioned earlier you haven’t seen any real change in people’s intentions to move forward with the purchase of your system as we had in the first few weeks of January here. Would you say it’s a similar type of situation with regards to their ability to purchase? I’m trying to get a distinction between whether the want is translating into there may be more able to purchase the system now in January versus where we were in September, October, or November of last year. Have you seen a shift there, I guess, and how loose those budgets are? Are there still the same? Have they gotten worse or have they gotten better?

Fred Moll

With this economic environment, there are certainly hospitals that have tightened their budget and are less able to buy capital equipment than they were certainly a year ago or six months ago. There’s no question about it. On the other hand, we think that’s a fairly small percentage of the hospitals that are potential candidates to buy a system, but what it speaks to is the need to, we think, approach your sales activity a little differently, which is an important part of building our pipeline is to not only identify a customer that’s very interested in the technology and an institution that might consider buying it, but also qualifying the institution with regard to their ability to purchase, and obviously we did that before, but we’re really putting a real focus on really understanding each institutions in our pipeline with regard to not only interest and enthusiasm, but ability to pull the trigger and the ability to fund the purchase the system. So I think certainly in some institutions, there is either going to be less ability to buy or you will experience a slower process in the sale of the system. Having said that, there are plenty of institutions that still have plenty of capability to buy systems, and it’s really our job to with the broad pipeline we have to understand how to go about selling this year in a most efficient and most effective way to really match an institution that has the financial wherewithal to buy a system to a clinician that is very excited and will drive the purchase process to the executive level. So I think it’s the environment demand is a little bit different in sale strategy, but we think we still have a very robust pipeline that can be managed in a way that we get to our goals.

Jose Haresco – Brean Murray

With this new partnership with Phillips, what are your expectations for when we might seen something come out of that partnership, and are there going to be any extraneous R&D costs associated with that going forward?

Gary Restani

Actually, the integrations that we’re working with are pretty straight forward. There’s not going to be a lot of extra R&D. As a matter of fact, we are working very closely with them right now. This enhancement is going to help our current offering as you know beyond just the 3-D navigation map. It also enhances our offering with St. Jude oddly enough. So it just combines a better overall imaging and mapping capability, and it’s not a difficult R&D project. It’s a necessary one. They’re a great partner. They’re very willing, and are very much into handling more than their share of the load in this integration and development.

Steve Van Dick

I would also say although we’re starting with some pretty straight forward projects and integration capabilities with Phillips, we are excited that this potentially could expand to very significant capabilities in the future.

Operator

Your next question comes from the line of Ryan Chu from Morgan Stanley.

Ryan Chu – Morgan Stanley

To followup on my geographic clustering question, I was wondering how the mix of centers that are ordering Sensei has changed. Has it become less academic? How that become a more even mix of academic community and small hospitals and VA? Curious as to where it stands now and how it has progressed over the last year or so.

Fred Moll

We get this question a lot, and it is a very nice mix of academic and private institutions, and I wouldn’t say that it has changed that much since we started, because it really is dependent on the enthusiasm of a clinician and obviously the institution’s interest in the technology, but the mix between academic and private has less to do with the amount of interest than the specifics of who it is that is interested in the system and the financial characteristics of the institution and their interest in competing in the marketplace potentially with an institution nearby, and oftentimes that can be an academia as well as a private institution, so it’s hard to say that there’s a lot of change there or that there’s a real identifiable pattern that says we’re going to see a preference of academic centers over private institutions going forward or vice versa.

Gary Restani

As a matter of fact, we’re starting to see in communities, to your cluster question a bit Ryan, is that competing hospitals in the region, if they see a big center has a system, they’re now much more interested in trying to be a part of that solution and want to have a system so they can compete for that patient base, and we’re starting to see that actually in Arizona, in California, and in the Southwest, in Texas area, and we have placements in Louisiana. So we’re really starting to see a good mix. We’re not just a big academic center type of offering. We can play in that arena, and we can bring equally if not even a better value proportion to the community hospital, and it’s demonstrating itself in our map, and Ryan, if you come by sometime we can share that map with you and you can see how that’s distributed. You’ll get a real good sense of that.

Ryan Chu – Morgan Stanley

So you’re saying neighboring hospitals purchase the system just to be competitive, kind of other robotic companies have experienced as well?

Gary Restani

We’re starting to see that happen now.

Steve Van Dick

When I was at Intuitive, I wildly underestimated the power of the competitive nature of using the technology to compete with the guy down the street. It is very powerful in the early years of the commercialization of this type of technology, and yes, we are seeing it.

Operator

Your next question comes from the line of Thomas (Paleo) with Oppenheimer & Company.

Thomas (Paleo) – Oppenheimer & Company

In your initial comments, you talked about developing solutions beyond the electrophysiology specialty, IR, vascular, and so forth. Can you elaborate little bit as to what your efforts are and how your progress is and which of these specialties you might have a solution the earliest?

Steve Van Dick

We talked about our initial foray with our current system in the endovascular market, but we really are excited about the new vascular platform that really, we believe, can offer the benefits of what we are doing in electrophysiology, which is better catheter tip control, better navigation, better stability, and remote navigation and offer those to others that are doing complex procedures that involves the use of catheters and where catheter control can enhance the procedure, and we believe that if you look at the complex vascular market, it is really an exciting opportunity to give to these specialties the ability to do a lot more with a catheter and have the ability to really control the delivery of therapy in a way that they have not been able to date. So when we look at our development program, we started in human trials. We will continue human trials this year with the vascular platform. I can’t be more specific about product introduction dates because it is the FDA regulatory path. There’s always a question, and although we believe that we have a pretty good handle on what that regulatory path looks like, and it is a 510K process. There is no great way standing today where we are to give you specific dates on when that approval would come through, but we are fully engaged in development. We will continue to do human clinical trials this year, and we are on the path towards regulatory approval, and we will have much more clarity as the year goes on as to what the path looks like.

Operator

At this time, I would like to turn it back to management for any closing remarks.

Fred Moll

We appreciate everyone’s attention and interest in Hansen Medical, and we are looking forward to a great year ahead. Thank you so much for your time.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!