Hansen Medical's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb.20.14 | About: Hansen Medical, (HNSN)

Hansen Medical, Inc. (NASDAQ:HNSN)

Q4 2013 Earnings Conference Call

February 20, 2014 5:00 PM ET

Executives

Peter Mariani – CFO

Chris Lowe – Interim CEO

Analysts

John Demchak – Morgan Stanley

Chris Pasquale – JPMorgan

Jeffrey Cohen – Ladenburg Thalmann

Brooks West – Piper Jaffray

Chris Hamlet [ph] – Cowen and Company

Operator

Good day, ladies and gentlemen, thank you for standing by. Welcome to the Hansen Medical 2013 Fourth Quarter results conference call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions (Operator Instructions)

I would now like to turn the conference over to Mr. Peter Mariani, Chief Financial Officer. Please go ahead, sir.

Peter Mariani

Thank you, Camille. Good afternoon, everyone. Welcome to Hansen Medical’s fourth quarter 2013 results conference call. My name is Pete Mariani and I am the Chief Financial Officer of Hansen Medical. With me today is Chris Lowe, Hansen Medical’s Interim CEO.

Before we begin, I would like to inform you that comments made on today’s call maybe deemed to contain forward-looking statements. Actual results may differ materially from those expressed or implied by such forward-looking statements as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in the company’s Securities and Exchange Commission filings included in our most recent Form 10-Q filed on November 8, 2013. These filings can be found through our website or at the SEC’s EDGAR database. Prospective investors are cautioned not to place undue reliance on such forward-looking statements.

And with that, I will turn the call over the Chris.

Chris Lowe

Thank you, Pete. Good afternoon, and thank you for joining us today. I’m pleased to be able to address you today as the interim CEO and providing update on our business. Having served on the Company’s Board of Directors since 2006, the Hansen Medical story is quite familiar to me.

There were a number of key aspects to the technology and value proposition that were compelling when I joined the company and I believe those traits will continue to expand and improve as we go forward in the future.

Our intravascular robotics platforms and related products compete in large global markets with very strong growth prospects. Currently we believe our Magellan and Sensei robotic systems and related catheters can access more than 75% of the nearly 2 million peripheral and electrophysiology procedures that occur each year.

As our technology platform is fully developed, we believe our expanded product line has the potential to impact up to 4 million endovascular procedures performed annually including peripheral, EP, cardiovascular and neurovascular interventions. We are focused on demonstrating the breath of capabilities our robotics platforms provide and further validating the clinical and economic benefits of our technologies.

I would also like to thank our former CEO, Bruce Barclay for this hard work, many accomplishments while at the company. I personally believe we are well prepared to continue the growth of our platform as we move forward.

The balance of our opening remarks will consist of a review of our fourth quarter and fiscal year 2013 operating results, then I will turn the call over to Pete for a detailed review of our financial results, balance sheet and a summary of our operating priorities for 2014, at which time, we will open the call for your questions.

Now, as detailed in this afternoon’s release, the highlights of our fourth quarter included the commercialization of six systems, bringing our full-year 2013 number of commercialized systems to 14. Ten of these systems we commercialized in the second of the year.

Of the 14 commercialized systems in 2013, 9 were Magellan systems and 5 were Sensei systems. Additionally, we demonstrated continued procedure growth in the fourth quarter and fiscal-year periods of 8% and 19% year-over-year respectively.

To the full-year 2013, physicians performed an estimated 3,210 procedures. These results were in line with our previously stated outlook, but more importantly, these results represent significant progress towards our goals of broadening our user base and demonstrating the clinical experience and economic value of our platforms.

Now, establishing regional reference and training centers for physicians, medical staff and hospital administrators which we call our centers of excellence provides significant opportunities for clinical case observation, training and the test drives that our future hospital partners demand as part of their due diligence process. To that end, we are extremely pleased to announce the addition of two new centers of excellence in the fourth quarter, the Keck Medical Center at the University of Southern California and Premier Health Miami Valley Hospital in Dayton, Ohio. This brings our total number of new centers of excellence to four at the end of 2013.

Our Magellan robotic platform continues to be featured at industry events and medical meetings and we are proud to have had the platform utilized in seven live cases in 2013. These live cases which were presented before hundreds of physicians provide a tangible demonstration of the clinical utility of the platform. We believe these cases can be an important driver of interest and adoption of our robotic technology as key opinion leaders become advocates for our platform now and in the future.

The Magellan platform is of growing interest in the research community as well. To date, the Magellan platform has been featured in 16 peer review publications as well as other abstracts and poster presentations providing additional evidence for adoption of our platform in the eyes of our hospital customers.

The continued expansion of our technology is a key focus for our organization, including the development of a sweep [ph] of catheters to broaden the clinical applications in which our technology can be utilized. These efforts will realize earlier in 2014 as we receive clearance of our new Magellan 6 French Robotic Catheter for peripheral vascular interventions. The 6 French catheter’s noble design provides for precise robotic navigation and control in a single small diameter catheter and it enables the use of the Magellan robotic system in smaller vessels in the peripheral, vasculature and by physicians who may also prefer a smaller diameter vessel insertion site.

Now, ensuring the highest quality user experience is another focus area for the organization. The continued investment in our sales and distribution operations allows us to execute on this goal. During 2013, we added a new Senior VP of Global Sales and we also doubled the size of our U.S. capital sales team allowing us to manage a growing pipeline of opportunities for 2014 and beyond.

Now, before I turn the call over to Pete, it’s also important to highlight our capitalization. We executed two significant financing events in 2013 including an up to $93 million private placement transaction and the closing of a $33 million long-term interest only debt facility. These transactions were conducted with a very experienced investors in the healthcare space and provide a foundation of long-term capital and increased the confidence in our long-term financial stability in the eyes of our customers, employees, suppliers and shareholders.

And with that, I’ll turn the call over to Pete for a detailed review of our financial results and our 2014 priorities.

Peter Mariani

Thanks, Chris. Fourth quarter revenue increased 29% to $5.6 million compared to $4.3 million in the prior year. We did commercialize six systems in the quarter including five Magellan and one Sensei system, compared to two systems in the prior year’s fourth quarter which were one Magellan and one Sensei system.

The company sold 600 catheters in the current quarter representing a 29% decrease compared to790 unit sold in the prior year. The decrease was primarily due to certain hospitals and distributers intentions to manage inventory at lower levels at the end of the year despite the continued growth in procedure volumes. We estimate that physicians performed approximately 815 Hansen robotic procedures during the fourth quarter representing a year-over-year increase of 8%.

On a full-year basis, we recorded revenue of $17 million, a decrease of 4% compared to $17.6 million in the prior year. The company commercialized 14 systems in 2013, consisting of 9 Magellan and 5 Sensei including 2 rental systems compared to 13 systems in 2012 consisting of 4 Magellan and 9 Sensei.

Importantly, revenue in the fiscal year 2012 included approximately $2.6 million on five systems that were sold prior to 2012. For the year, catheter sales increased 2% to 2,857 compared to 2,807 in the prior year. In physicians performed an estimated 3,210 procedures in 2013, a 19% increase over the prior year.

As of the end of 2013, we have commercialized a total of 14 Magellan systems and have 1 additional Magellan that remains under a longer term evaluation agreement. Additionally, we have commercialized a total of 114 Sensei systems. Now, we provide updates to average selling prices on an annual basis. The 2013 ASP for robotic systems decreased 2% to approximately $662,000 in the year. The ASP decrease in 2013 was primarily driven by one-time discounts offered on the strategic sales of two specific systems and two international markets in the fourth quarter.

We believe that the discounts offered on these two systems will help open these markets and facilitate additional utilization in future system sales and higher prices. And although we are not breaking out ASPs or Magellan and Sensei for competitive reasons, the Magellan prices are typically higher than Sensei prices.

Additionally, the full-year average selling price of catheters in 2013 increased 5% to $1,784. Increases were seen across all three of our EP and vascular catheters. Gross profit in the fourth quarter increased 29% to $1.1 million worth 20% of fourth quarter revenues compared to gross profit of $900,000 worth 20% of revenues in 2012.

Fourth quarter gross margin was also negatively impacted by the one-time price discounts on the separate strategic sales of two systems and the two international markets that I mentioned previously.

Research and development expenses for the fourth quarter were $3.7 million compared to $3.5 million in the same period of 2012. Current quarter, research and development expenses included incremental cost associated with new product development and additional clinical program initiatives.

Selling general and administrative expenses for the fourth quarter were $8 million compared to $6.8 million for the same period of 2012. The increase of $1.2 million is primarily due to cost related to the development of our global sales organization and increased marketing activities in the quarter.

Net loss for the quarter was $11.9 million or $0.12 per share based on the average weighted shares outstanding of $96.8 million. This compares to net income for the fourth quarter of 2012 of $9.6 million or $0.15 per share based on weighted average shares outstanding of $65.9 million.

Now as a reminder, net income in the fourth quarter of 2012 included a $20 million gain on the licensing of intellectual property to Intuitive Surgical. Net loss for the fourth quarter of 2013 included total non-cash stock compensation expenses of $1.3 million compared to $600,000 in the fourth quarter of 2012.

And turning to the balance sheet, cash, cash equivalents, short-term investments and restricted cash as of December 31 was approximately $35.3 million down $11.8 million compared to $47.1 million as of September 30.

Additionally, in February in 2014, we have received the FDA approval of the Magellan 6 French Robotic Catheter which triggers the required exercise period for the $14 million of Series A warrants to purchase our common stock that was issued in August 2013. We expect all proceeds from these warrants to be received by February 26.

Now, I’d like to shift to our review of the company’s operational priorities for 2014. These priorities are largely focused on continuing to build the clinical and economic case for the broad market adoption of our robotic platforms.

For 2014, we have four key priorities, increasing clinical experience in publishing data, expanding physician awareness of our robotic technologies, growing the installed base of systems and continuing to develop a product platform. Now let me speak to each of these priorities briefly.

First, we’ve been working to ensure that our physicians have excellent clinical experiences and build a clinical data to demonstrate the value of the platform. To date, the Magellan has been used in nearly 300 clinical cases and our KOL and evaluation programs are generating important clinical experiences and data largely focused in a broad set of challenging clinical procedures.

As Chris mentioned earlier, we are pleased with the growing body of clinical evidence, highlighting the benefits of the Magellan system and we will continue to grow this body of clinical evidence in the years to come. We are now leveraging this experience beyond the KOLs into a broader commercial strategy focused on community hospitals and we expect to see physicians expand their utilization of the Magellan platform.

On the Sensei side of the business, there is a growing body of worldwide clinical evidence showing the safety and effectiveness of the Sensei system in AFib as well as reduced procedure time and radiation exposure to both the patient and the physician. Our Sensei platform has been used in over 13,000 cases with over 2,000 patients treated in multiple clinical studies.

Building on our FDA approval of a single arm IDE study per Sensei in 2013, we expect to add to the clinical data set in 2014 which may potentially support an expansion of our label claim in the U.S. to include AFib treatment.

Regarding physician awareness, we will continue to participate in important clinical conferences and medical meetings and expect to see the demonstration of our robotic platforms, capabilities and several live cases in 2014. We also intend to expand a number of Magellan’s centers of excellence where physicians, medical staff and administrators gain the first-hand experiences with the Magellan.

Additionally, we have recently equipped a mobile lab with both a Magellan and a Sensei system and this lab is traveling to hospitals across the country to provide additional opportunities for physicians and administrators to experience the system prior to purchase. Along with aiding [ph] in the sales process, we believe this mobile lab initiative will further broaden community awareness of intravascular robotics.

Regarding the growth in our installed base, our capital reps are building our pipeline and are focused on increasing a number of commercialize systems in 2014. Our clinical reps in the broader sales distribution organization are focused on continuing to drive improving utilization of our robotics platforms.

As we have shared previously, we have embarked on a two-pronged commercialization strategy. In the U.S., our capital sales reps are targeting a broader group of community hospitals at both the clinical and executive levels. Outside the U.S., we are focused on penetrating our existing markets and on expanding into new international markets with distribution partners willing to commit to multi-year, multi-system agreements.

The final area of focus is continuing to develop our product platform. We are pleased to have introduced the 6 French Catheter earlier this month. And during 2014, we expect to continue to bring innovation to the market in three important ways.

First, we are completing development on a Magellan mobility platform that will allow hospitals to easily move robotic arm away from the table and will allow us the opportunity to sell multi-room installations at potentially higher price points.

Second, we plan to complete regulatory submissions on a larger profile Magellan 10 French Robotic Catheter which physicians can use in the placement of covered stems, larger atherectomy devices and in other procedures where a larger diameter lumen is preferred.

And third, we will enhance our Sensei robotic platform to bring next generation performance in process and capabilities to EP procedures and we expect to achieve these goals in the second half of this year.

We are encouraged by our progress in fiscal 2013 particularly with respect to our building a solid foundation from which we will drive our commercialization efforts in the future. While this will be a multi-year effort, we believe that we are putting the right pieces in place to demonstrate the clinical and economic value of our platforms and to achieve our goal of making our platforms the standard of care in intravascular procedures.

And as we assess our outlook for 2014, we are pleased with both the growing momentum in the business and the quality of our system pipeline. Given our current CEO transition, we will not be providing formal system placement and procedure guidance, however in the coming year, we would expect growth across many metrics in our business including the number of systems commercialized, procedure volumes and revenues.

And with that I’d like to open the call up to take your questions.

Question-and-Answer Session

Operator

Thank you, sir. Ladies and gentlemen, we’ll now begin the Question-and-Answer session. (Operator instructions). Our first question is form the line of David Lewis with Morgan Stanley, please go ahead.

John Demchak – Morgan Stanley

Hello, this is actually John Demchak in for David.

Peter Mariani

Hi John.

John Demchak – Morgan Stanley

I know you guys mentioned that you’re not giving a formal guidance right now but I want to discuss systems a bit as obviously the first half of the year and the second half of the year were quite different. So, I’m trying to think about if we should be thinking about this as this increase seasonality into the society or if there is really an inflection point maybe halfway through the year and that that’s more of the run rate that we should be, I guess thinking of it into the future and then also maybe some initial thoughts on the broader dealing strategy and any results that have come from that already.

Peter Mariani

Yes, good question. I mean, clearly, we agreed there was a – the first half of last year and then the second half of last year and we have been speaking about getting along to a sales ramp where we would begin to see more regular sales of systems on a quarterly basis. And we clearly believe that we have gotten to that ramp at the back half of last year.

However, as you know this is continuing to be a lumpy business so you would expect to see some variability quarter to quarter but I think the overall driver for us is we are just pleased with the momentum that came together in the back half of the year. We’re pleased with the conversations that we’re having in a growing pipeline of deals. And we feel confident that 2014 can be a good year for us as well.

John Demchak – Morgan Stanley

Thank you. Very helpful and just a quick follow up on I guess just the cash burn in general and the ability to leverage going forward. I think we’ve seen over the past couple of quarters, even as a revenue has increased, there’s been that $10 plus million cash burn rate and I guess as throughout the year where you’ve I think doubled your capital reps as well as build out the tier a little bit more that as we think about it into next year on an absolute basis, can you – do you think you can hold the operating cost and R&D and SG&A at a relatively flat level even with sales growing?

Peter Mariani

Yes, we’re – look, a couple of things here to answer your second question first. Yes, we can hold spending in line but we’re going to continue to make investments in – on the R&D side. We’ll continue to invest in growing out our sales and distribution group. But keep in mind, we did have a lot of G&A spend in 2013 related to litigation spending and other legal issues that we would not expect to repeat next year. So hopefully you’ll see a shift in some of that spending from the G&A or for the sales and marketing and in R&D.

And that being said, in 2013 we did – our ramp really occurred in the back half of the year and with six systems that we sold in Q4 really happened toward the end of the fourth quarter. So you think about 2013 really did not have a lot of cash from system sales in 2013 and so now we’re closing 2013 with six commercialized systems. We would begin to receive cash on those primarily in the first quarter and if we continue to commercialize more robots quarter-to-quarter, in 2014, we’re going to see more cash from those systems and that will impact our cash burn in ‘14 compared to ‘13.

John Demchak – Morgan Stanley

Thank you. Just one quick final follow up, some of the evaluation program that you guys had a few quarters ago, I think there was one system left. I’m just wondering if you had thoughts on the program going forward and if you planned on maybe pushing more programs or more systems into an evaluation mode rather than sales?

Peter Mariani

Yes, our whole strategy around evaluation units has been about getting utilization of the system as quickly as possible from some key opinion leaders and others who are interested in really demonstrating the utility of the system. And I think we were able to achieve that with the units that we put out there in 2013. And to the extent, we would see the need for a few of those in 2014, again, if it brings more utilization or focus on specific types of procedures and it made sense to do so for the business, we might consider that.

But I don’t think it needs to be a key part of the strategy from a commercialization standpoint in 2014.

John Demchak – Morgan Stanley

Thank you very much.

Operator

Thank you, our next question is from the line of Chris Pasquale with JPMorgan. Please go ahead.

Chris Pasquale – JPMorgan

Hi, thanks for taking the question. Just to start off with – I just want to circle back on the systems count, how many were actually shipped this quarter? So you commercialize six, two of those were previously places that are converted, did any you shipped forward? Did you ship some that weren’t recognized?

Peter Mariani

No – yes, that’s right. We shipped four, one was – and two of them were shipped in previous quarters, so that’s correct.

Chris Pasquale – JPMorgan

Okay, so as I do the math on Magellan units, you still have five that have been in placed or shipped out in the field that have not been commercialized at this point?

Peter Mariani

No, there’s only one.

Chris Pasquale – JPMorgan

Okay.

Peter Mariani

We’ve commercialized 14 in all years and we only have one remaining long-term evaluation program out there.

Chris Pasquale – JPMorgan

Okay. We’ll circle back on that later. So –

Peter Mariani

You might be thinking about the rental units because we do have two systems on rental contracts as well.

Chris Pasquale – JPMorgan

Okay, that’s probably – before I disconnect [ph]

Peter Mariani

Right.

Chris Pasquale – JPMorgan

The [indiscernible] U.S. systems and the discounting this quarter, can you give us any more information on where those were placed, why that was an attractive option for you guys, what market you think you may have opened up as a result of those decisions.

Peter Mariani

Yes, for competitive reasons I don’t want to speak specifically to the markets but let me just characterize. In one case it’s a situation where the physician that is a good user of the Magellan technology – a significant user of Magellan technology and well thought off and it was just a situation where it made sense for us to accept that type of discount because of the volume of activity that he will likely generate.

And then the second situation it was on the Sensei side of the business where we have a lot of interest but needed the help, generate some of those first initial sales to our distributor and we thought that this transaction would help to do that. And we would not expect to continue to make that type of transaction in the future.

Chris Pasquale – JPMorgan

Okay. And then the last one for me just on the catheters sold this quarter and the draw down in inventory levels, if you sensed that that’s a one-time event and then things will turn to normal going forward or is there still access inventory to be run from the system?

Peter Mariani

Well, I think it’s more along the lines of how much inventory do these hospitals want to carry in. And what some of these hospitals might typically carry 60 to 90 days of inventory and I think what we’ve heard in our conversations toward the end of the year is that for various reasons, one being cash in the hospitals and the other one being space utilization in hospitals, that they would like to see if they can manage their inventory closer to 30 day levels; which actually is fine with us because that spreads out the catheter shipments more across the quarters.

And from our perspective as long as we see procedure growth we recognize that catheters will eventually catch up.

Chris Pasquale – JPMorgan

Okay, thank you.

Operator

Our next question is from the line of Jeffrey Cohen with Ladenburg Thalmann, please go ahead.

Jeffrey Cohen – Ladenburg Thalmann

Hi, thanks for taking my questions. Thank you Pete for the commentary. As far as the number of procedure for the quarter of 3,210 third quarter, you said, could you break those out at all?

Peter Mariani

3,210 for the year and no we’re not breaking those up between Sensei and Magellan yet. We would talk broadly about Magellan being nearly 300 procedures over the span of the product cycle. But quarter to quarter, we continue to have incremental growth in the Magellan procedure, thus, as more of these systems become placed and the physicians increase their utilization.

Jeffrey Cohen – Ladenburg Thalmann

Okay, and no insight for the quarter to the 600 sales as well.

Peter Mariani

That’s right.

Jeffrey Cohen – Ladenburg Thalmann

Okay and I’m not sure if I heard it correctly, you said, 210 procedures are in 2013?

Chris Lowe

3,210.

Peter Mariani

3,210 procedures in all of 2013.

Jeffrey Cohen – Ladenburg Thalmann

Okay, got it. Could you talk a little bit about the ASP average? Was that just for the fourth quarter? Or what was that for in the $662,000 number?

Peter Mariani

Full year ‘13 compared to ‘12. So full year ‘13 was the number I gave you and that was a decrease of 2% year-over-year from 2012.

Jeffrey Cohen – Ladenburg Thalmann

Full year ‘13 was $662,000 for all Senseis and Magellans?

Peter Mariani

Yes.

Jeffrey Cohen – Ladenburg Thalmann

For 14 systems, nine Magellans and five Senseis, the average was $662,000?

Peter Mariani

Well, two of these Magellans were rental units so it would be seven Magellans and five Senseis.

Jeffrey Cohen – Ladenburg Thalmann

Okay. And the disposables on average for the year as well were $1,784.

Peter Mariani

That’s right.

Jeffrey Cohen – Ladenburg Thalmann

Okay. Could you tell us, what’s the current share count? Was it the 96 reported in quarter plus 14 expected to close by the 26? What do you expect the share count would be by the 26?

Peter Mariani

Yes, so the 10k will say 99 million as of the end of the year and then we would expect 14 million here to come in this quarter. And then if you think about additional share usage for compensation in 2014, that would be the other add that you would think about for next year. So a couple 2 million or 3 million more and then whatever you would factor in for a new CEO.

Jeffrey Cohen – Ladenburg Thalmann

Okay. So 115 is by the end of this month?

Peter Mariani

That’s correct.

Jeffrey Cohen – Ladenburg Thalmann

Okay, got it. So I want to circle around on some of the previous course questions. So I know you’re not providing any guidance. But should we anticipate the R&D and SG&A spend should be in the order of $15 million to $16 million for R&D and $31 million, $32 million for SG&A? I mean are we looking at another $46 million or $48 million in spend between the two line items in ‘14?

Peter Mariani

I wouldn’t – again, I don’t want to give a specific number, but I would say, moderate growth and spending next year versus – and that’s well first of all, you have to back off the settlement expense. So if you back off the $4.5 million of the litigation settlement, take that number, I would expect that we would have just moderate, a small level of growth in ‘14 versus ‘13.

Jeffrey Cohen – Ladenburg Thalmann

So moderate growth from a 47.9 number?

Peter Mariani

Right.

Jeffrey Cohen – Ladenburg Thalmann

Got it. Okay, that does it for me. Thank you.

Peter Mariani

All right. Thanks.

Operator

Our next question is from the line of Brooks West with the Piper Jaffray. Please go ahead.

Brooks West – Piper Jaffray

Hi, thanks for taking the questions. I want to ask Chris a question just more macro maybe speaking for the board on just the thoughts behind the timing of the CEO change? And any loose timeline in terms of when you expect to get somebody new on board?

Chris Lowe

Sure, Brooks. So two questions in there. In terms of the timeline, there is no hard-and-fast timeline. The most important thing to us is finding the right person and the right talent to leverage the technology platform we have here.

If that takes a couple of months, that’ great. If it takes a little bit longer, that’s great. But this is really about finding the right person, not necessarily the first person. But we’ll keep you up to date as we go along and certainly as soon as we know something, we’ll share that with you.

In terms of your first question, in terms of kind of the why now? Look, when Bruce took over as CEO, he accomplished a lot in the last three to four years in terms of stabilizing the company, laying a foundation for growth. And so we kind of find that where we sit today – and we appreciate those contributions without a doubt – and where we sit today and look forward, we think we’ll find somebody of equal talent as Bruce brought to the table to help us unlock the commercial opportunity here.

I mean that’s really doing it from a position of strength to us, really one of the keys for us. The company is very well capitalized, starting to gain momentum in the commercial marketplace, broadening our clinical user experience. And now felt like the right time.

Brooks West – Piper Jaffray

Okay, thanks. And then also for Chris, just your thoughts around the viability of the Sensei platform versus focusing on Magellan. And did I hear maybe imply that the capabilities of the two platforms might be merged at some point in the future?

Chris Lowe

No, no, definitely didn’t mean to imply that the two would be merged. And I’ll let Pete clarify that here after I kind of answer your question. That’s something different. But definitely not planning any merging as you would indicate.

Both platforms are extremely important to us. There’s no doubt that Magellan is a key driver for us as we go forward. But we have a very large customer base in Sensei. And as we think about driving clinical utilization, increasing the breadth and volume of procedures at all of our customer sites, each of those sites is equally important to us. And so we want all customers to experience what our super user’s experience. And that’s the positive experiences that they have with both of our systems. And so we’ll treat all of those of equal importance as we go forward, without a doubt.

Peter Mariani

Yes, and Brooks, there is no need, there’s no really ability to merge the technologies or at least it wouldn’t be productive for us to try to do that. All those robots have similar foundations. They are very different in their clinical capabilities.

Brooks West – Piper Jaffray

Okay. And then I guess last for me, Pete. Can you comment specifically on the type of clinical and economic data that the hospitals are requesting from you to evaluate Magellan? And then any plans for specific trials to generate those data?

Peter Mariani

Yes, let me take the second one first. As you know we’ve got this ROVER database that’s collecting all procedures and we’ve got positions through our – putting data in there that are working through how to get the right data out of that database and publish at the right time.

And then separately from that, we are looking to generate some clinical activity to specifically allow targets like the economic benefit, reduction of radiation, reduction of time. And we see all that coming together at some pace across this year and ‘15. So we do see that kind of data coming together. And we see the opportunities to do it.

Now going back to your first question, when we talk with hospitals we really start with the macro level to talk about how the vascular line within these hospitals is one of the largest and fastest growing – or I’m sorry, most profitable and fastest growing service lines in hospitals today.

And most of the hospitals that we’re talking to already know that and are looking for opportunities to leverage that and to grow it more. And so we bring them the opportunity to say, hey, you could start a robotics program here, attract more patients to the hospital through your vascular service line. And that sort of starts the topline conversation.

And then when we get into understanding the costs with that and the ability to generate a return, each hospital is a little different. But when they start to evaluate this significant contribution margin that they get with each additional patient in the vascular service line that they can see that they can get a return on the system by just beginning with minimal incremental patients in the first year and then continuing to build it beyond that.

Brooks West – Piper Jaffray

So Pete, is that a patient marketing kind of direct to patient marketing poll that you’re pushing? I come to our hospital because we’ve got the robot? Or is it a throughput argument? Or is it a specific, hey, you can do an iliac stent procedure in two hours versus three hours? I mean can you kind of force rank what you’re hearing?

Peter Mariani

No, it’s a little of all of that. It really starts with it can help you draw more patients to the hospital and then secondly, improve the utilization of that lab so that you’ve got the capabilities to handle that increased patient flow and make a return on the investment.

And we’ve seen examples around the world, London and Paris primarily, where they’ve really talked about it because when they’ve gone out and advertise the system either through the BBC program or something like this where they get this influx of patients who are prediagnosed calling a hospital saying, I want to be treated with the robot.

And we expect to see more of that beginning here in the U.S. and for us since one of – some of these community hospitals that we’re beginning to have success with in Miami Valley and Dayton, Ohio is one of them, they are a very progressive hospital from the standpoint of wanting to hold patients in their community, keep them from going to the bigger centers and the bigger cities. And they look at this as a real opportunity to advertise and pull patients in to their hospital.

And once they get in there, they believe that the Magellan will help them continue to make money and grow their business.

Brooks West – Piper Jaffray

So I guess the last question for me then. Are you confident that the registry that you have running is capturing the right kind of data so you can tease out throughput and other claims like that or are you going to have to run prospective post-market trials to generate that kind of data?

Peter Mariani

Well, I tell you, we’re going to do both. We’re going to pull data out of the ROVER registry that we can over time. But we’re also looking to do a targeted study that gets physicians to look at 25, 30 or 50 cases in a short period of time and evaluate it for those markers that you were mentioning.

Brooks West – Piper Jaffray

Okay, thank you.

Peter Mariani

Yes.

Operator

(Operator instructions) Our next question is from the line of Chris Hamlet [ph] with Cowen and Company. Please go ahead.

Chris Hamlet [ph] – Cowen and Company

Yes, thanks for taking the question. Just with regard to the Sensei systems placed in 2013, all five of those are recognizing revenue at this time, is that correct?

Peter Mariani

That’s correct.

Chris Hamlet [ph] – Cowen and Company

Okay. And then just on your pipeline regarding the 6 French catheter, any commentary you can make on expectations for the launch and how quickly this might roll out in 2014? And then just on the 10 French, when do you expect to file on the 10 French in – at the earliest, when could that potentially be cleared by FDA?

Peter Mariani

Yes, great questions. Again, as we said on the 6 French launch, we’re going to begin in a limited release to collect data with targeted physicians on the performance of that 6 French catheter and that will last for a few months.

And then at some time in the back half of the year, we’ll update you on where we are with that progress. But I would expect a broader launch in the back half of the year and we would expect to be doing that with a much broader set of placements that we would hope to achieve in the first half of this year.

So from a – the important thing of the 6 French is not so much how many units are we going to sell right away. It’s not just what was the experience that we’re able to demonstrate in these smaller vessel procedures? We’ve talked about and Dr. Katzen has talked about embolization type procedures and there’s a lot of interest around that, and to the extent that we can gain some experience with that here in the next several months, I think that speaks well to the future of that product.

And then we would, without going into more detail, on the timing of the 10 French, I’ll just say that we are expecting to file it in the back half of the year. And similar to the 6 French, this could be a 510 (k) special filing that could be anywhere from – it’s the FDA, it’s – you think about it as a 90-day process plus or minus whatever additional questions the FDA might ask as we go through that process with them.

So at this point, we’re focused on getting it filed sometime in the back half of the year and we’ll update you when that happens.

Chris Hamlet [ph] – Cowen and Company

Okay, thank you very much.

Operator

Thank you. And I’m seeing no further questions at this time. I’d now like to turn the call back over to Mr. Lowe for closing remarks.

Chris Lowe

Great. Thank you. So in closing, folks, we’re certainly encouraged by our progress in 2013 and the opportunity that lies in front of us.

We believe we have established a solid foundation from which we will drive our commercialization efforts and the expansion of our platform. We believe that we are putting the right pieces in place to demonstrate the clinical and economic value of our platforms and to achieve our goal of making our solution the standard of care in intravascular procedures.

Thank you all for joining us today. We appreciate your interest in Hansen Medical. And we look forward to updating you on our progress throughout 2014. Have a good day, everybody.

Operator

Ladies and gentlemen, that does conclude our conference call for today. Thank you for your participation. You may now disconnect.

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