Matt Clawson – Investor Relations, Allen & Caron Inc.
Bruce Barclay – President and Chief Executive Officer
Peter Osborne – Interim Chief Financial Officer
Tim Lee – Piper Jaffray Roche
David Lewis -- Morgan Stanley
Hansen Medical, Inc. (HNSN) Q4 2010 Earnings Call February 23, 2011 5:00 PM ET
Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to the Hansen Medical fourth quarter and year end conference call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator instructions)
I would now like to turn the conference over to our host Mr. Matt Clawson, with Allen & Caron. Please go ahead sir.
Thank you, Jeremy. Good afternoon, everyone. Welcome to Hansen Medical’s 2010 fourth quarter and yearend results conference call. With us today are Hansen Medical’s President and CEO, Bruce Barclay; and the Company’s Interim Chief Financial Officer, Peter Osborne.
Before I turn the call over to management, please remember that our prepared remarks and responses to questions will contain forward-looking statements that are subject to a number of risks and uncertainties, the examples of such statements include statements about the expectations for commercializing our vascular roboting system, and the fossil technology, expectations regarding procedure and shipment trends, expectations round operating expense levels and the sufficiency of cash to support the launch of the next generation flexible catheter robotic flexible technology, important factors that could cause actual results may differ materially from those indicated by forward looking statements include, among others, that the development of new products and applications of technology are subject to design, engineering, manufacture challenges that could delays and uncertain timelines, costs, and results of clinical studies and of development.
Clinical studies, regulatory filings, and commercialization. Potential regulatory issues that could delay, suspend, or terminate clinical studies, regulatory approvals for sales, uncertain timeline costs, and the results of trials and the development of new products; our ability to plan, and manage cost reduction or operational efficiency initiatives; the scope and validity of intellectual property rights applicable to products being developed, additional cost or resources necessary to address these existing or potential claims, the procedures related to the safety and regulatory issues that could slow or suspend sales.
The rate of adoption of our systems and the rate of use of our catheters at customers that have purchased our systems; our ability to successfully manage our manufacturing and operating expenses; 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 capital spending by potential purchasers of our systems; additional cost and resources necessary to address existing and potential claims and proceedings related to the restatement of our financial statements; our ability to remediate material weakness in internal controls over financial reporting and other risks detailed in the Risk Factors section of our periodic SEC filings, including our quarterly report on Form 10-Q for the three months ended September 30, 2010 as filed with the SEC on November 9, 2010 of this year.
Given these uncertainties, you should not place undue reliance on the forward looking statements made during this call. We undertake no obligation to revise or update 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 President and CEO, Bruce Barclay. Good afternoon, Bruce.
Thank you Matt. Good afternoon everyone. Thank you all for joining us for our fourth quarter and full year 2010 results conference call. As you saw from the press release this afternoon, Q4 2010 and the first two months of 2011 have been very productive at Hansen. The pace of change is accelerating and the progress we are making implementing our strategic initiatives is very encouraging. Some of the recent business highlights include closing a major deal with Phillips by monetizing a portion of our intellectual property for non-core applications outside of robotics. This transaction generated a $29 million upfront payment, and Hansen has the potential to receive up to $78 million in future payments, if the technology is commercialized successfully.
Second, generating record catheter sales and product utilization in the EP market, third fully launching our new Lynx ™, an irrigated ablation catheter in Europe, fourth, gaining unconditional IDE approval from FDA for the artisan clinical trials, fifth, unveiling the new flexible catheter vascular system, at an important endovascular symposium. Sixth, hiring key senior leadership for US commercial sales, engineering, and training in clinical affairs, and seventh, opening our new European headquarters and clinical education center, to start the base to grow our international business in 2011 and beyond.
In achieving these milestones, I’ve been impressed with the ability of the entire organization, including both new and longtime employees, to adopt a new commercial focus and culture of execution that will be critical to our success. And many highlights in the period reflect that commitment and energy. Operating and financial results for Q4 showed encouraging momentum as well. As noted, we posted strong increases in EP utilization, as we delivered record catheter sales and procedures and impressive growth in both, increasing 24% and 34% over Q4 2009 respectively. In addition, we reduced OpEx by $3 million versus Q4 2009, and cut cash used in operations by $5 million versus Q4 2009; a significant achievement considering the high level of development and other non-selling activities undertaken in the period.
That said, the top line results in the period are not where they need to be, and are a strong reminder that the challenges in our current market have not gone away. We have work to do before we produce the kind of top and bottom line improvements that I believe are possible, and that will be necessary to generate long term sustainable growth for the company. Before we get to the details of the highlights I just mentioned in our 2011 outlook, I want to update you in some of the principal areas of execution that we focused on in the second half of 2010, starting with our EP business. First, our first goal was to grow our system shipments. Our physician customers performed a record number of procedures, and purchased a record number of catheters in both Q4 and all of 2010. In fact, there were more Sensei® assisted EP procedures performed in 2010 than in the prior two and a half years combined, going back to our initial product launch.
While this momentum is a positive signal longer term, we fell short of our system placement target by shipping six systems in the second half of the year. So how do we really read this result? Our pipeline remains active, the timing on system shipments continues to be difficult to predict. We believe that the steady growth in procedural volumes indicates a growing level of enthusiasm for the systems use, and the value it brings to patients, physicians, and hospitals alike.
Continued adoption and experience by leading physicians as evidenced by the healthy procedure growth as well as the generation of additional clinical data is expected to increase interest, and result in greater system ship quarters in the future. Second, our second goal was to launch new products in EP. In September we announced the first sale of our Lynx ™ irrigated ablation catheter and the successful treatment of the first patients using the device. The full launch of the Lynx ™ catheter in the current quarter marks an important next step in our drive to expand our core target market from robotic navigation technology to include proprietary therapy delivery devices. The new Lynx™ catheter is a smaller profile catheter with a flexible integrated and irrigated ablation tip, designed to not only improve the treatment of arrhythmias, but also to drive adoption of the Sensei® X robotic technology in Europe.
We also receive a higher price with Lynx™ than with our Artisan catheter. In addition to Lynx™ we also introduced software enhancements to be used with the Sensei® X system, to expand capability of our cohesion visualization module, and St. Jude’s new EnSite velocity mapping system to create better 3D visualization capabilities. Several clinical cases were successfully performed in both the US and Europe with this new product. Our third goal was to obtain final IDE approval from the FDA, and to continue to enroll patients in our AFib clinical trial.
In November we announced receipt of our unconditional IDE approval from the FDA, authorizing the Artisan AF trial, the clinical trial to investigate the use of the Sensei ® X and the Artisan control catheter for the treatment of atrial fibrillation. The study, which is underway, will enroll up to 300 patients at 14 leading hospitals, where a prospective randomized study of the Sensei ® X, in tandem with the biosense Webster Navistar thermocool catheter in patients with AFib. The trial is designed to evaluate robotic technique versus manual technique for the ablation of AFib.
Before I switch gears to vascular, to summarize; EP is a growing market, we have implemented several components of our growth plan we expect will generate growth going forward. We have enhanced our commercial approach and implemented new tools, brought in new leadership, added important new products, and continue to invest in the generation of new clinical data. We believe that these steps are laying a foundation that we can build upon within EP.
Turning now to vascular, we aim to complete our first advance study with the new flexible catheter vascular robotics system. On October 4, as you know, we announced the completion of our first advanced study during which 20 endovascular procedures were successfully performed with our new vascular robotic system. The procedures went well, and our development teams have taken the learnings from that study and made further enhancements to the vascular system. Our stated goal was to file for approval of our vascular platform in both the US and Europe. Our development and regulatory teams are hard at work finalizing the flexible catheter vascular robotic system, and making a strong and thoughtful submission to the regulatory bodies. We’re on track to make those submissions soon, and once we receive the necessary clearances, we expect to make our commercial launches in the US and Europe in the second half of 2011.
Finally, we set an ongoing goal of strengthening our cash position and prioritizing our expenses to focus on programs that create the most value for the company. We have made significant progress on this goal. Pete will give you more color in a moment, but given our recently executed agreement with Phillips, we are beginning 2011 with a stronger balance sheet than we’ve had in a long time. In addition, I’m encouraged by the progress we’ve made to target costs and reformulate spending priorities, and we expect that work to continue well into 2011. In particular, OpEx in the quarter decreased $3 million and as mentioned earlier, cash used in operations decreased $5 million, both from Q4 2009.
Turning now to Q4 results, we shipped three Sensei ® systems and recognized revenue on two systems, along with the sale of a record 666 catheters. I’m pleased to report that there were 647 procedures performed by customers during Q4, also a record number for the second consecutive quarter, and up 34% compared to the 484 procedures performed in Q4 2009. For all of 2010, 2474 procedures were performed, a 50% increase compared to the 1652 procedures performed in 2009. Again, impressively, more procedures were performed in 2010 than in all of 2007 when the product was first launched, 2008, and 2009 combined. We are very encouraged about the EP procedural growth, as it testifies to the continued market adoption, safety, and clinical relevance of our Sensei ® system and the value that it delivers to patients, physicians, hospitals, and payors.
As you know, earlier this month, we entered into a license and sub license agreement with Phillips, allowing them to develop and commercialize Hansen Medical’s fiber optics shape sensing and localization technology, or FOSSL, for non robotic applications. And we strengthened our existing program with Phillips on the development of our vascular system. Under the agreements, we received an upfront payment of $29 million and have the potential to receive an additional $78 million in future payments associated with the successful commercialization by Phillips or its collaborators of products containing FOSSL technology. It’s also important to note that Phillips will pay the product development costs associated with this FOSSL commercialization efforts. As we see it, the primary benefits of the agreements include entering an agreement with Phillips has both financial and strategic value for our shareholders. The financial benefits are obvious, and have the potential of becoming even more significant down the road; but in addition, Phillips product development efforts are expected to help establish the value and the brand surrounding this technology and its use in manual vascular, orthopedic, and potentially endoluminal applications, leading the way for our efforts to market that technology for robotic applications.
Second, by placing a tangible value on FOSSL as a new localization technology, the agreement validates the potential future impact of the technology for use in robotic applications, which we continue to develop within Hansen Medical and with our partner, Luna Innovations. And finally, by negotiating $29 million in upfront payments, we were able to provide a significant cash infusion and strengthen our balance sheet; importantly without incurring a diluted financings to company’s existing shareholders. This payment will extend our horizon significantly, as we develop new products and work to grow our sales and reduce our expenses going forward. Let me now update you on our vascular program.
As I mentioned, in November the robotic vascular program and its pending commercial launch is fast becoming the most exciting aspect of the Hansen story. It has been a very active period for our technical teams as we follow up on our successful first man experience with a series of activities aimed at hitting our target of commercial launch in the second half of this year. Both the pre-clinical studies and the first in man experience indicate that the vascular robot has the potential to improve catheter navigation, reduce in vessel trauma during catheter manipulation, reduce radiation exposure to patients and physicians alike, lessen physicians fatigue, and improve access time to some vasculature, all compared to manual technique.
Results also continue to show that the robot has the potential to standardize catheter navigation and level the playing field among physicians with different levels of endovascular experience, which may lead to more predictable procedures. As we work toward gaining regulatory approval and launching the vascular system, we continue to gather evidence from our target physician customers indicating that the vascular surgery market may be far more receptive to flexible robotics than the EP market. In addition to the positive feedback we are getting from those physicians exposed to the system so far, it is also important to consider the market dynamics that led us to believe that vascular surgery is a great market to be moving into.
First, the applicable market in vascular may be up to ten times the size of the current arrhythmia market. Second the vascular surgeon may be far more receptive to the new technology as a physician group since, as a group, they have a substantial interest in augmenting their catheter skills as compared to interventionalists, though we are seeing good interest from interventionalists as well. We believe that our technology has potential to standardize procedures, which may provide an opportunity for a whole new segment of vascular surgeons to safely and effectively perform more complex cases that they might have either converted to open surgery or referred away in the past. Finally, our internal marketing, selling, and training infrastructure is far better suited today to a robotic market launch and to post sales physicians support than it has ever been, and we anticipate further strengthening of that capability between now and the launch date.
Our optimism for this product was strengthened in November when several leading physicians provided an overview of the robotic systems preclinical and first in man study at the 37th annual VEITHsymposium in New York. Those presentations reviewed the progress we’ve made with many of the world’s foremost clinicians and thought leaders in the vascular surgery and interventional community. The feedback and interest since then has been very encouraging. As you know, Phillips is partially funding development costs of the vascular platform based upon our achievement of certain development milestones. We received our most recent milestone in December 2010, ahead of when we anticipated. We should meet the requirements of our last and largest milestone payment sometime in 2011.
My final operational update involves our cost containment initiatives. Our stated goal was to reduce our cash requirements during the second half of 2010. We were successful in that effort. Additionally, we are pleased that cash used in operations for all of 2010 was $10.1 million less than 2009 and the lowest amount of cash used in operations in the last four years at Hansen. While encouraging, we are not stopping with that progress. We continue to find ways to achieve savings without materially affecting our ability to deliver on our EP and vascular initiatives, and as importantly, without significantly impacting our customer related activities such as sales, clinical support, and field service.
Before I turn the call over to Peter, I want to provide you with an outlook for our business in 2011. In 2011, we will continue to focus on our three strategic initiatives; growing the electrophysiology business, developing and launching the vascular platform, and achieving operational excellence. The company has already delivered on one of its previously communicated 2011 outlook objectives, which came with the execution of the new agreements with Phillips for the FOSSL technology. While the company anticipates multiple system shipments in 2011, given the uncertainty of timing of those shipments we will not be providing specific guidance on this metric. The company expects continued growth in catheter shipments and procedures in 2011, in light of the positive trends shown last year. Overall, OpEx levels are not expected to change significantly in 2011 from the prior year. We do expect to receive regulatory clearance in the US and Europe for the flexible catheter vascular robotic system, and to offer the system for commercial sale in the second half of 2011.
Finally, the current cash position, including anticipated cash gross from our last milestone payment under the original development agreement with Phillips are expected to be sufficient to fund the company operation through the launch of our next generation flexible catheter vascular robotic technology in 2012. We will track and report to you our progress against these goals in the coming months. In summary, Q4 2010 and the beginning of 2011 have been extremely busy and productive for the company. Transforming Hansen Medical from a company of great promise to one of great execution and finally to profitability will take time.
Over the past six months, we’ve been able to accomplish the majority of our goals while avoiding any major setbacks. We appreciate the support of our investors and our other stakeholders, as we are convinced that the payoff is potentially enormous. We are getting ready to enter an attractive market in vascular, fueled by an aging population and an epidemic of obesity and diabetes, armed with a potentially game-changing platform, which I believe someday can be found the standard fare in interventional vascular medicine. I will now turn the call over to Peter Osborne for a closer look at our Q4 financial results.
Thank you Bruce. Let’s begin with some additional insights into our Q4 income statements. We recorded quarterly revenue of $3.5 million, primarily on the sale of two Sensei ® systems and 666 catheters. Q4 revenues decreased 52% compared to the $7.2 million of revenue in the same period in 2009, where we recognized revenue on nine Sensei ® systems, and 539 catheters. Most of the Sensei ® systems recognized in Q4 had been shipped in prior quarters in 2010. As of December 31, 2010, the company had a total secured revenue balance of $11.6 million. The company has shipped 16 Sensei ® systems that have not yet been recognized as revenue.
As Bruce mentioned in his remarks, we shipped a total of three Sensei ® systems during Q4, two within the US and a third to an international distributor. Revenue won’t be recognized on the three systems until they are installed and physicians are trained. The average selling price included maintenance for the three systems shipped in the quarter was approximately $605,000. This compares to an ASP of approximately $623,000 in the prior quarter and approximately $819,000 in the same quarter in 2009. The comparable Q4 decline in ASP is primarily attributable to two very attractively priced international deals in Q4 of 2009 that have no comparative in Q4 2010.
The catheters sold in the quarter had an average selling price of approximately $1630, similar to the $1610 in the prior quarter and the $1660 in Q4 last year. Gross loss was $59,000 or a negative 1.7% of Q4 revenues, and paid a gross profit of $2.4 million or 33.2% of revenues in the same quarter in 2009. We expect the cost of revenues, both as a percentage of revenue and on a dollar basis, will continue to vary from quarter to quarter as (inaudible) levels fluctuate and as revenues fluctuate due to changes in product mix. The timing of revenue recognition of shipped systems and average sales prices per system and per capita. Prior to providing you with the details of our Q4 OpEx, I would like to remind you of the financial accounting of our original joint product development agreement with Phillips, which fits into context the comparison of quarterly results.
Our joint product development agreement provides for uneven cash payments along certain milestones, estimated to occur throughout 2011, which are accounted for on a contingency adjusted performance model as an offset to R&D expense. Whilst the funding from Phillips is not significant to our overall development expenditures, certain quarters will show fluctuations in reported costs because of their required financial accounting associated with the joint development agreement. Total OpEx were $10.6 million in Q4, compared to $13.7 million in Q4 last year. Included in OpEx in Q4 are R&D expenses that net of a recorded offset of $2 million and the company’s original joint product development agreement with Phillips. The principal other reasons for the decreases in OpEx were lower selling, general administrative expense attributable to decreased employee related expenses in travel and outside services, a decrease in litigation costs pursuant to the 2009 Luna litigation, and the decreasing expenses associated with the receivers.
Other expense net for Q4 was $194,000 compared to other expense net of $299,000 for the same period in 2009. The decreased expense was primarily due to lower interest expense on the company’s amortizing term of debt. At the bottom line, net loss for Q4 2010 including total non-cash stock compensation expense of $1.4 million was $11 million for a loss of $0.20 per basic and diluted share, based on average, basic, and diluted shares outstanding of 53.8 million shares. In comparison, the net loss for Q4 2009 including non-cash stock compensation expense was $1.3 million with $11.7 million for a loss of $0.31 per basic and fully diluted share based on average, basic, and diluted shares outstanding of 37.5 million shares.
Turning to the balance sheet, we had $11.6 million deferred revenue on the balance sheet, which includes systems which we have shipped but have not yet completed the revenue recognition process. The majority of the systems currently classified as deferred revenue are with international distributors which whom we cooperate finding the ultimate timing of recognition is based on their efforts with placing the systems with end users. Cash, cash equivalents and short term investments, as of December 31, 2010 were $28 million, compared to $28.3 million as of December 31, 2009. The flat cash balance was due primarily to the net proceeds of approximately $29.8 million raised from the product offering in April 2010 offset by the company’s OpEx during the year.
We have an existing debt facility with Silicone Valley Bank that converted to installment debt in 2009. During Q4, we paid down the debt by approximately $900,000, leaving a total balance of approximately $6.2 million as of the end of Q4. During Q4, our cash used by operations was approximately $6.2 million compared to approximately$8.2 million in Q3 2010, and $11.2 million in the comparable Q4 2009. The sequential and comparable decline in cash used by operations was primarily due to lower OpEx. Most of these OpEx reductions were achieved by eliminating product development activities not part of our current core focus, focusing on marketing program efforts in critical areas, managing head counts, and reducing the use of third party service providers where ever possible. We continue to actively challenge all our OpEx in order to control costs and reduce our cash burn while maintaining our ability to deliver on our EP and vascular initiatives, while still controlling our customer facing activities and sales and clinical support and field service.
That concludes our prepared remarks. Thank you for your attention, and at this time we’d like to open the call to questions. Operator?
Thank you Sir. (Operator Instructions.) Our first question comes from the line of Tim Lee with Piper Jaffrey Roche. Please go ahead.
Tim Lee – Piper Jaffray Roche
Good afternoon, thank you for taking the questions. A couple of them; I guess first in terms of your cash position, you had noted that given your current balance, you expected milestones sufficient to fund operations through the end of 2012. Can you share with us kind of what your assumptions are in terms of what the expected inflows from those milestones are over call it the next 15 months?
I think the reference to the last milestone payment, is that what you’re referring to Tim? In our prepared remarks?
Tim Lee – Piper Jaffray Roche
Yes, I think you had said you had sufficient cash on hand and incoming to fund operations to the end of 2012, so I’m trying to figure out what the assumptions of the expected inflows are, to augment your current position.
Right, okay. Because the statement we actually used was sufficient cash to ensure launch of our next generation catheters. That’s not the one coming up, it’s the one after we expect to be launched here in 2011, which will occur in 2012. So we didn’t mention the end of 2012.
Tim Lee – Piper Jaffray Roche
Okay, sorry. My bad on that one. I keep getting to the expected inflows. Can you kind of share with us what your assumptions are on that front?
Sure, and we can do that at a high level; so we’ve got one more milestone payment to go with Phillips under the original JDA. Again, as in the past we’re not able to quantify those specifically, but it is the most significant of the multiple payments that we’ve received to this point, so we expect that to be a significant one. We expect our EP business to continue to grow, as we’ve said, the system shipments are difficult to predict, even though we have continued strong interest as evidenced by catheter and procedure growth that we’ve seen in Q4 2010. Just the timing and predictability of timing of those particular shipments continues to be difficult, but there is a robust pipeline and a number of activities in place to ship multiple systems in 2011.
We do have some assumptions internally around that as well, obviously. And the then other big driver there is the assumption around the timing around both US and Europe, for launch of the vascular system. Again, we’ve got assumptions inside, but they are very much based upon our success in getting the products approved through Europe and the US and because of those assumptions, we just can’t be more specific than that right now, publically. But those went into all of our thinking relative to our cash usage position. We continue to manage expenses as best we can.
You’ve seen evidence of that in the last couple of quarters, that we are making progress there. But at the same time we’re trying to be realistic with shareholders that you’re not going to see that come down dramatically because we are delivering on a number of key initiatives relative to the vascular product in R&D and then preparing our filed organization for the vascular launch here in 2011. So those are the high level assumptions.
Tim Lee – Piper Jaffray Roche
Okay, got it. Just a couple of follow-ups now. You did mention you expect the EP business to grow. What’s been driving the utilization in those accounts, and is there further room for improvement? And one just kind of correlated to that is what type of procedural penetration do you have in those labs that you’re currently in?
Sure, the procedural volume growth has been very encouraging. We had a record procedure number in Q3, and we had a record procedure in Q4. It’s been very broad based. We’ve got procedure growth coming out of new system installations that have occurred over the last several months. We’ve got more cases coming out of our super users and additional users at those particular sites that are picking up the system. Just overall, I think our marketing plan has been working. We identified a couple of quarters ago the growth plan we had in place, and that’s been rolling out very nicely in terms of new product launches, additional training and support of our field organization, continued investment in clinical data, the opening of our new education center and further investment in education and training, and on and on. We’ve got a number of activities that are working, I think, quite well. So we do expect the catheter and procedure numbers to grow in 2011, compared to 2010, and that’s been very encouraging for us.
Tim Lee – Piper Jaffray Roche
And then lastly, in terms of penetration are you getting a quarter of ablation procedures, half ablation procedures, what type of procedural penetration are you seeing with your customer sites?
It’s across the board. I really can’t speak to the specifics of that, it varies from site to site. Again, I’d say the most encouraging point from the procedural growth has just been that it is broad based. There’s no one particular site or geography that’s driving this, we’re seeing it in US and Europe, and it’s been broad based across a number of different sites.
Tim Lee – Piper Jaffray Roche
Got it, thank you. I’ll jump back in queue.
Thank you, and our next question comes from the line of David Lewis with Morgan Stanley. Please go ahead.
David Lewis -- Morgan Stanley
Hi guys, this is actually Bill Carlisle in for David Lewis. I understand that you guys don’t want to give any specific guidance around box placements into ’11 because of uncertainty in the environment, but maybe on a more general scale, when comparing your expectations for ’11 against ’10; can you say qualitatively whether you expect placements to grow, decline, remain flat?
No, I’m not comfortable at this point giving that level of guidance. I can tell you that again, we have a number of activities in place; we’ve outlined those in our prepared remarks and in the press release we identified some as well, and again, we feel good momentum coming out of 2010 with procedural volume. End of the day, one of the key metrics that we track is are the customers using our products or not? And obviously, we’re very encouraged by what we’re seeing there, but beyond that we can’t provide more specifics at this time.
David Lewis -- Morgan Stanley
Okay, fair enough. And with regard to the recent Phillips agreement, the $78 million in milestones payments that will be coming up here. Is there any further granularity you can give us, as far as are those payments going to be a lump sum? Are there multiple milestones that we’re looking at going forward here, that could play out over a period of time? Any additional detail you could give there?
We are restricted in terms of what we can say in terms of confidentiality under the agreement. We will be going through the process here, redacting the agreements, having those reviewed by our partner at Phillips, and then eventually we’ll be filing those redacted agreements publically. So I can’t speak to exactly what will come out eventually, but at this point we really can’t give much more information that what we have said already.
They are based upon commercialization of the products by Phillips or its partners. So I’ve done transactions in the past where you’ve gotten paid on development milestones being accomplished. Those are not part of the agreement, this is a commercialization based payment to us. Other than that, I really can’t speak to more detail.
David Lewis -- Morgan Stanley
Okay, thanks a lot.
(Operator instructions) And we do have a follow up question from the line of Tim Lee with Piper Jaffrey. Please go ahead.
Tim Lee – Piper Jaffray Roche
Thanks for taking the followup. Just on the OpEx side of the equation, you said that you expected to go down significantly from current year levels. The Q4 OpEx was $10.8 million; is that kind of like a good base line that we should be thinking about on a quarterly run rate for ’11?
Tim, I think we said that the company expects not to have significant changes in our OpEx levels in 2011 so I guess I would kind of look at 2010 as a whole to be a proxy for 2011.
Tim Lee – Piper Jaffray Roche
Got it, thanks for that clarification.
Thank you, and Mr. Barclay, there are no further questions at this time, please continue with any closing remarks you may have.
Thanks Jeremy, and thank you all again for joining us on our Q4 and yearend results conference call, and for your interest in and support of the company. We look forward to updating you on progress against our initiatives, and to provide further evidence of a new focus that will serve the company well going forward. I look forward to updating with you in May when we review our Q1 results.
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: firstname.lastname@example.org. Thank you!