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Executives

Peter Mariani – Chief Financial Officer

Bruce Barclay – President and Chief Executive Officer

Joe Guido – Vice President, Marketing and Business Development

Analysts

Brooks West – Piper Jaffray

Jeffrey Cohen – Ladenburg Thalmann

Hansen Medical, Inc. (HNSN) Receipt of 510(k) Clearance for the Magellan Robotic System Conference Call June 4, 2012 5:00 PM ET

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Hansen Medical Receipt of Magellan 510(k) Clearance from FDA 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) This conference is being recorded today Monday, June 4, 2012.

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. I am Chief Financial Officer of Hansen Medical. With me today is Bruce Barclay, our President and CEO and Joe Guido, our Vice President of Marketing and Business Development. We have scheduled this call to discuss today FDA announcement related to the FDA 510(k) Clearance of our Magellan Robotic System, NorthStar Robotic Catheter, and related accessories for peripheral, vascular interventions.

As we begin today’s call, 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. All statements other than statements of historical fact could be deemed forward-looking statements, including statements containing the words; plan, expects, potential, believe, goal, estimate, anticipate and similar words. These statements are based on the current estimates and assumptions of our management as of the date of this call and are subject to risks, uncertainties, changes and circumstances and other factors that may cause actual results to differ materially from the information expressed or implied by such forward-looking statements.

Examples of such statements include statements about the timing of future clinical cases to be performed with the System, the potential benefits of the System on vascular procedures, and the timing of commercializing our Magellan System.

Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include among others: engineering, regulatory and sales challenges in developing new products and entering new markets; potential safety and regulatory issues that could slow or suspend our sales; the uncertain timelines, costs and results of pre-clinical and clinical trials; the rate of adoption of our systems and the rate of use of our catheters; the scope and validity of intellectual property rights applicable to our products; competition from other companies; our ability to maintain our remedial actions over previously reported material weaknesses in internal controls over financial reporting; the effect of credit, financial and economic conditions on capital spending by our potential customers; our ability to manage expenses and obtain additional financing; and other risks more fully described in the Risk Factors section of our quarterly report on Form 10-K filed for the quarter ended March 31, 2012 filed with the SEC on May 7, 2012 and the risks discussed in our other reports filed with the SEC.

Given these uncertainties you should not place undue reliance on forward-looking statements included in our remarks and responses to questions. We undertake no obligation to revise or update information herein to reflect events or circumstances in the future even if new information becomes available.

And with that, I’ll turn the call over to Bruce.

Bruce Barclay

Thank you, Pete. Good afternoon, everyone and thank you all for joining the call today. This is a very exciting day for Hansen Medical and one of the most significant milestones in the company’s history.

Earlier today, we announced 510(k) clearance from the U.S. FDA for our Magellan Robotic System, the NorthStar Robotic Catheter, and related accessories. We received 510(k) clearance prior to June 30th our previously communicated expected outside clearance date delivering on a key commitment of the company. The product was cleared to be used facilitate navigation to anatomical targets in the peripheral vasculature and subsequently provide a conduit for manual placement of therapeutic devices.

The Magellan System is a significant technological advancement in the field of intravascular robotics and is a major step forward in the transformation of vascular interventions. Not only does Magellan have the potential to be a significant growth driver for Hansen, but it also offers potential clinical benefits to patients, procedural benefits to physicians, and economic benefits to hospitals. Before going into this in greater detail, let me provide some context around the significant market opportunity we see for the Magellan system in the vascular market.

The global vascular surgery market is large and expanding rapidly, driven by long-term trend such as an aging population, the rising prevalence of type 2 diabetes and obesity and an increase in disease awareness. Of the more than 3 million vascular procedures performed each year, approximately one-third to one-half of them are in the peripheral vasculature, which is the target market for the Magellan Robotic System.

Importantly, we believe the Magellan system is uniquely positioned to penetrate deeply and broadly as adoption of the technology grows and as we launch new products and expanded applications over time. The technology we have developed with the Magellan Robotic System has a number of potentially significant advantages over the current standard of care.

In fact, we believe intravascular robotics has the potential to truly revolutionize the way endovascular procedures are performed. Today, most catheter and catheter-based technologies for vascular disease use blood vessels as highways to guide their movement to specific parts of the body. These technologies are based on manually-controlled, handheld instruments, and physicians often have no ability to accurately manipulate the distal working tips of these devices. This can be particularly challenging and risky when performing procedures that require precise navigation.

This has been the standard technology used for over 30 years since the beginning of the angioplasty, and from our perspective, innovation in this market has been limited, creating a significant unmet clinical need until now. We believe the Magellan Robotic System is hitting the market at the right time with highly differentiated technology. The Magellan System offers physicians the ability to more precisely navigate vessels using a simpler, more instinctive approach.

Our proprietary technology offers simultaneous and independent distal tip control of a catheter and a sheath as well as robotic manipulation of standard guide wires, all with incredible stability. This independent catheter tip articulation is an important advancement in treating vascular disease because it provides physicians with more accurate and predictable control of the catheter. This leads to faster, easier, and safer vessel navigation, which may result in less vessel trauma, reduced patient healing time, faster, more predictable procedures, and an improved case throughput.

The Magellan Robotic System also has the potential to improve the learning curve for endovascular interventions, enabling physicians of varying skill level to perform new and more complex interventions. Additionally, with Magellan, physicians can now perform the procedures in a comfortable setting from a centralized remote workstation, potentially lowering radiation exposure, and reducing procedural fatigue. The clinical benefit of the Magellan Robotic System can be significant as we seen from our first-in-man study and early clinical cases from St. Mary’s Hospital in London.

As I mentioned in May during our Q1 earnings conference call, there are exciting early benefits coming out of the clinical cases being performed with Magellan in London. In a physician training session in April following Charing Cross, two cases were performed in fenestrated endografts, and a third was in an infrarenal endograft case. These three cases alone represented over 10 emulation targets inside patients and yet only one NorthStar Robotic Catheter and one guide wire were used for each patient. This is another advantage of Magellan. It is quite common in manual cases for multiple catheters and guide wires to be used and there are multiple clinical targets in the patient, adding cost in time to the procedure.

Each case was difficult for the physician to access vessels manually. But overall, the cases were extremely successful with the robotic approach. The cases demonstrated superior robotic catheter navigations accessed the target vessels for manual catheter navigation repeatedly failed. The economic benefit of the new technology is critical to hospitals long-term success, in addition to quality patient care and it’s more important than ever the hospitals and health systems ensure sound financial judgment in all purchase decisions. We believe the Magellan Robotic System provide that compelling value proposition.

The Magellan System may allow for additional cases to be performed each day due to decreased procedure times, less trauma, more predictable cases and less physician fatigue. Additionally by increasing cath lab utilization and throughput, hospitals can better manage case scheduling to improve their profitability. For patients, the Magellan System provides an alternative to conventional catheter-based technologies by potentially lowering procedural complications and trauma, shortening procedure time reducing radiation exposure.

In addition, the system was designed to allow better access to hard to reach more distal peripheral anatomy, expanding the procedures that can be treated. As you can see, we believe the systems value proposition and clinical benefits combined with our highly differentiated technology provide a strong foundation for successful commercialization.

With that, I’ll now turn the call over to Joe Guido, our Head of Marketing to talk through our commercialization strategy. Joe?

Joe Guido

Thanks, Bruce. The hospitals purchasing the Magellan System are the same for our Sensei system, and range from large university medical centers, two community hospitals. However, we are able to target a different broader subset of physicians with the Magellan System. Physicians using this robot include interventionalists, cardiologists, radiologists, and endovascular surgeon. It is estimated that over 3,000 hospitals in U.S. to peripheral vascular cases today. Further, approximately 2,200 U.S. hospitals with more than 150 beds performed lower extremity endovascular interventions. It should be noted that a large portion of these intuitions already enjoyed the benefits of an active intuitive surgical robotics program.

As such, we have found that hospitals with prior experience with medical robotics are better able to understand the clinical and economic potential of additional robotics programs in their intuitions. Our initial commoditization strategy in U.S. will focus on partnering with a select group of esteemed physicians who are both influential and early adopters of disruptive technologies and we will provide them with our robust training program at various physician support activities. This focused and controlled commercial launch will enable us to generate positive clinical experiences and data. It will also serve to drive both interest and adoption among other physicians and hospitals in the large and rapidly expanding U.S. peripheral vascular surgery market.

This will be filed later this year with full launch activities, in which we will scale the training program, expand our geographic penetration, and further validate our clinical and commercial value proposition. We are excited about the initial interest in a number of key U.S. hospitals have shown in Magellan and in advance of the launch. We’ve targeted 20 top accounts with physicians that are familiar with the Magellan System and who have expressed interest and possibly acquiring a system when it became cleared in U.S.

As we have learned, capital acquisition time that most hospital still requires from 6 to 18 months. We have already had some success here in the U.S. with preclinical sales of research vascular systems in two hospitals, the Methodist Hospital in Houston, Texas, and Hartford Hospital in Hartford, Connecticut. Both hospitals previously owned multiple Hansen medical robotic systems and are creating an intuitional focus on intravascular robotics. These centers are pioneers in their use of robotics for vascular interventions, and among their peers are seen as two of the leading centers of excellence for their peripheral and cardiovascular robotics programs.

The preclinical activity undertaken in these sites as already generated significant interest from a clinical community, which we will build upon as we launch the Magellan Robotic System. Given the enhancements we have made to our existing intravascular robotics technology with Magellan, we believe this product should support a premium price in the marketplace. Our list price for the robot will be $1.49 million and $4,995 per each of the three lengths of the catheter that will be available to the customer. The system will be sold including a one-year warranty with service for subsequent years available for purchase had approximately 10% of the price of the capital per year.

In terms of specific indications, the label claim cleared in the U.S. is as follows. The product is intended to be used to facilitate navigation to anatomical targets in the peripheral vasculature, and subsequently provide a conduit for manual placement of therapeutic devices. We will first focus on addressing the peripheral vascular disease market, which includes the aorta, both abdominal and thoracic, renal, iliac, SFA, and popliteal arteries, a market that by itself is 5 to 7 timers larger than the electrophysiology market. Beyond peripheral vascular disease, further studies are planned to test additional uses of the Magellan Robotic System and submit for further indications to expand the use of the technology.

Additionally, we have new catheters in system technologies in the pipeline including products, which have a lower profile for use in smaller vessels. We are also incorporating fossil-enabled products into our platform to further reduce the need for radiation and to enable 3D robotic visualization. We hope to uptake you on the development and commercial progress of these new technologies in upcoming calls. I am also excited to tell you, we will be exhibiting Magellan at this week’s Society of Vascular Surgeons meeting, which is June 7 to 9 in Maryland.

I’ll now hand the call to Pete to discuss other aspects of our launch.

Peter Mariani

Thanks, Joe. We are well prepared for the launch of the Magellan Robotic System. In addition to the commercial launch strategy Joe has outlined, we are also prepared with inventory customer financing strategy and sufficient catheters to support the initial launch. Specifically, we have several systems in inventory and a ready supply of catheters and accessories to fulfill pending deals in Europe and potential opportunities in the U.S. Additionally, as we have previously noted, we have taken steps to improve our manufacturing productivity. We are prepared to support anticipated sales volumes across both our Sensei and Magellan product lines.

We are also prepared to work with customers to identify creative financing solutions including leasing options, which may meet their specific needs. Additionally, the launch is also supported by our strong cash position of $38.5 million as of March 31, which we believe is sufficient to fund the company’s operations at least through the initial commercialization efforts. And the company is continuing its efforts to bring improved efficiency to our spent and improve our cash burn.

I’ll now turn the call over to Bruce for final comments.

Bruce Barclay

Thanks, Pete. In summary, we believe this is a tremendous opportunity for Hansen Medical, one that could change the landscape of vascular surgery by expanding treatment options and improving patient outcomes. The Magellan Robotic System is a truly differentiated product with a significant market opportunity. We are prepared with an effective commercial strategy and the resources required to execute the launch.

Before I turn the call over to the operator, I would like to say that today’s announcement is indeed a testament to the talented development and support teams at Hansen Medical that worked tirelessly to reach this important milestone, and I want to personally thank them for their hard work and perseverance. I would also like to thank all of our shareholders for their continued support and dedication.

This concludes our prepared remarks. I would now like to pass the call back to the operator for Q&A. For those of you with questions given that we are now in the third month of the quarter, I would ask that you limit your questions to today’s announcement. Operator?

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions) Our first question comes from the line of Brooks West with Piper Jaffray. Please go ahead.

Brooks West – Piper Jaffray

Thanks. Can you hear me?

Bruce Barclay

Yeah, we can, Brooks. Thanks.

Brooks West – Piper Jaffray

Great. And congratulations guys.

Bruce Barclay

I appreciate it. Thank you.

Peter Mariani

Thank you.

Brooks West – Piper Jaffray

Pete, you mentioned the pending European orders, and you guys kind of touched upon that there is somewhat of a U.S. commercial pipeline. I’m just wondering if you can update us on where you are in the European commercialization and understand that the kind of timing of 6 to 18 months to convert the pipeline. But is there an expectation that we will see orders in the U.S. in addition to Europe, yet this year?

Peter Mariani

Certainly, there is an expectation that we will see orders in the U.S. this year as well. The exact timing on those, though, as you can imagine would be dependent upon when the hospitals actually complete their acquisition process. But as we said in the previous quarter’s call, we continue to be actively involved with several potential deals in Europe, those continue to move forward. We expect closure on those. Again, I won’t give a specific timeline, but soon, and the indication we have given you here today was that we know that there is certain interest here in the U.S. and now that we have approval, we’ll be able to engage with those accounts very specifically and understand what their timing might be on a potential acquisition.

Brooks West – Piper Jaffray

Great. I had a question on the label and I want to make sure I got this right facilitating the navigation, but then it was also manual placement of the device. Does that mean that you can’t use the robot to (plug the) device or did I hear that incorrectly? Could you kind of talk about, I understand navigation to the lesion site, but then can you use the robot to actually place the device?

Bruce Barclay

Yeah, the robot isn’t designed to robotically drive the therapeutic device. You will recall this is an open architecture, which allows physicians to use their treatment catheters or treatment devices of choice assuming that there is compatibility with the ID of that entered catheter. Now that said, once the therapeutic catheter is in place, there is the opportunity to continue to manipulate that outer sheath. That’s the outer sheath of the NorthStar catheter robotically, so that you can deflect the therapeutic catheter to the extent that they are compatible in that setting.

So, I wouldn’t call that necessarily by any means for robotic manipulation of the therapeutic catheter, but you do have some of the robotic capability on that therapeutic device. And again, one of the benefits of this system as we see it set up is that it’s not limited to any particular company’s therapeutic device as you know, there have been 30 years of advancements with balloons and stents and atherectomy and all of the things that have gone with that and the ability to leverage all those in this system again assuming compatibility with that the ID of our sheath is we think a real strength of the system.

Brooks West – Piper Jaffray

Yeah, that’s helpful. And then Bruce you mentioned there is going to be three catheters. What’s available right now in terms of the length of the catheters and how far up into the vasculature did that gets you? And then can you give us a timeline on kind of additional lengths and also additional widths of diameters?

Bruce Barclay

So, the three lengths of the system, I don’t remember actually Brooks off the top of my head, but the ability to navigate far superiorly and inferiorly is again one of the advantages of the system. Obviously, it depends upon the height of the patient as well. But we certainly believe that being able to access superiorly to the heart and down near the knee region inferiorly is certainly possible with the existing lengths of the catheters.

Brooks West – Piper Jaffray

Okay. And then didn’t you have smaller French catheters that were in development that could possibly get up into the products with the (neural) vasculature?

Bruce Barclay

We do have a smaller diameter catheter in development and that is fairly far along. And so, it is our idea as we continue to launch additional products that we go with different diameters as multiple offerings. So, we feel that going smaller to the order of 6 French OD is something that will be important.

Brooks West – Piper Jaffray

And just two more, if I may, you will indulge me, any additional sales force build out now that you’ve got the approval in the U.S. you need to accelerate anything there? And then Pete you mentioned the $38.5 million of cash, I think you’ve also got some credit lines. Can you kind of talk about where the quarterly cash burn is for the next call it the rest of year? Thanks.

Bruce Barclay

Yeah, thanks Brooks, I’ll take the first question. We feel like we have set the right number of people in our U.S. commercial organization. We feel like we can adjust that upward as we see the need to do that, but again, we are very focused on growing that EP business, but also on a selective rollout. So, we know the names of the physicians and the accounts of those top 20 targeted locations in the U.S. They have all driven the system, they have all expressed strong interest clinically, and now it’s up to us to execute on those things. We feel like we have the right number of people in the U.S., but we are absolutely prepared to add to that as we need to. Pete, you want to talk about the cash?

Peter Mariani

Yeah, looking at last year, we sort of ran at a cash burn of $10 million to $12 million a quarter. We talked about the Q1 being in the high $12 million, almost $30 million. But it had about a $1.5 million of extra burn in there because we did, in fact, $1.5 million receivables in the quarter. So, and the way we talked about it is we expect with the launch and the other activity that we are doing here within the company for the burn to continue to come down across the quarters.

Brooks West – Piper Jaffray

Okay. That’s it from me. Thanks, and again, congratulations.

Bruce Barclay

Thanks very much.

Peter Mariani

Thanks for call.

Operator

Thanks you. Our next question is from the line of Jeffrey Cohen with Ladenburg Thalmann. Please go ahead.

Jeffrey Cohen – Ladenburg Thalmann

Hi, Pete, Bruce and Joe, thank you for taking the question.

Bruce Barclay

Thanks for call, Jeff.

Jeffrey Cohen – Ladenburg Thalmann

Could you talk about the two units that were sold to DeBakey and Hartford, as far as they were considered research vascular systems? Do they have to be modified or converted, or can they be used as is?

Bruce Barclay

Well, those as research systems they cannot by law be used with humans. So, they are strictly for research. So, there are no plans in place on either center to try to convert them.

Jeffrey Cohen – Ladenburg Thalmann

And were they sold as research units?

Bruce Barclay

Yes, they were.

Jeffrey Cohen – Ladenburg Thalmann

Okay. And could you recap for me the indications? You’ve talked about the aorta, the renals, the iliac, the SFA?

Bruce Barclay

And popliteal arteries, basically, the peripherals and some viscerals.

Jeffrey Cohen – Ladenburg Thalmann

Got it, okay. Does the label limit you, as far as how far down toward the feet that you can go or is it the size of catheter limits you?

Bruce Barclay

Right now, it’s the size of catheter.

Jeffrey Cohen – Ladenburg Thalmann

Okay. And you talked about a smaller vessel catheter. Would that still be a three-piece?

Bruce Barclay

Yes, it would.

Jeffrey Cohen – Ladenburg Thalmann

And it would go down to 5 or 4?

Bruce Barclay

Well, yeah. So, I’m quoting the outer diameter. So, it would be a 6 French outer diameter. The inter lumen would be in the order of about 4 to 4.5 French.

Jeffrey Cohen – Ladenburg Thalmann

4 to 4.5 in the inter-lumen, what is it now?

Bruce Barclay

Right now, you have a 6 French inter lumen and a 9 French outer.

Jeffrey Cohen – Ladenburg Thalmann

Okay, I got it. And you said the ASPs were $1.49 and $4,995 for the NorthStar.

Bruce Barclay

Those are the list prices.

Jeffrey Cohen – Ladenburg Thalmann

Okay. And as far as accessories, is a guide wire something that comes with this or can it be used with any off the shelf guide wire or is that one of the accessories that you will be selling?

Bruce Barclay

It could be used with any off the shelf guide wire.

Jeffrey Cohen – Ladenburg Thalmann

Okay. I think that does it for me. Thank you very much. Congrats.

Bruce Barclay

You’re welcome.

Peter Mariani

Thank you.

Jeffrey Cohen – Ladenburg Thalmann

Thanks again for the call.

Operator

Thank you. And there are no further questions at this time. I would now like to turn the call over to management for closing remarks.

Bruce Barclay

Great. Thanks (Camille). Thanks everyone for joining us on today’s conference call. We look forward to providing with a preliminary update on the commercial launch of the Magellan Robotic System in the United States on our second quarter conference call in August.

Operator

Ladies and gentlemen, this concludes Hansen Medical Receipt Magellan 510(k) Clearance from FDA conference call. If you would like to listen to replay of today’s conference, please dial 1-877-870-5176 and international participants can dial 1-858-384-5517 and enter the access code of 4544736. Thank you for you participation. You may now disconnect.

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