Executives
Frederic H. Moll - Co-Founder and Chief Executive Officer
Gary C. Restani - President and Chief Operating Officer
Daniel T. Wallace - Co-Founder and Vice President of Advanced Applications
Steven Van Dick - Chief Financial Officer
Kathy Waller - Financial Relations Board
Analysts
Stephan Ogilvie - ThinkEquity Partners
Jose Haresco - Merriman Curhan Ford
Glenn Reicin - Morgan Stanley
Sameer Harish - Needham & Co.
Michael Weinstein - JP Morgan
Jason Wittes - Leerink Swann
Jamie Lester - SoundPost
Spencer Nam - Summer Street Research Partners
Tim Meedy - Primary Fund
Hansen Medical Inc. (HNSN) Q4 2007 Conference Call February 19, 2008 5:00 PM ET
Operator
Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to the Hansen Medical Inc. fourth quarter 2007 Results Conference Call. In today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions.
(Operator instructions). This conference call is being recorded today, Tuesday, February 19, 2008.
I would now like to turn the conference over to Kathy Waller with the Financial Relations Board. Please go ahead.
Kathy Waller - Financial Relations Board
Perfect. Thank you, Mary. Good afternoon everyone. Welcome to Hansen Medical's 2007 Fourth Quarter Conference Call. With us today are Hansen Medical's Co-Founder and Chief Executive Officer, Fred Moll; President and Chief Operating Officer, Gary Restani; Co-Founder and Vice-President of Advanced Applications, Dan Wallace; and the Company's Chief Financial Officer, Steve Van Dick.
Before I turn the call over to management, please remember that our prepared remarks in responses to questions may contain forward-looking statements. Words such as may, will, should, expects, believes, estimates, targets, goals, could, and variations of these words and similar expressions, are intended to identify forward-looking statements that are subject to a number of risks and uncertainties, including but not limited to, statements about our expected financial results, the targeted numbers, locations and timings of placements of our Sensei systems, the timing and results of our future clinical studies, the receipt and timing of future regulatory approvals, our expected manufacturing capabilities and results, and the timing of future product introductions. Actual results may differ materially from those set forth in these statements, due to the risks and uncertainties inherent in our business including potential safety issues, the scope of the potential use of our products, the scope and validity of intellectual rights applicable to our products, competition from other companies, our ability to obtain additional financing to support our operations, our ability to successfully scale our manufacturing capabilities, our ability to successfully launch and market our products, and other risks that are detailed in the Risk Factor Section of our periodic SEC filings including our current report on Form 8-K filed with the SEC on January 23, 2008 and our registration statement on Form S3 filed on February 11, 2008 in connection with the shares we issued in our recently completed acquisition of AorTx. 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 is now may pleasure to turn the call over to Hansen Medical's Chief Executive Officer, Dr. Fred Moll. Fred?
Frederic Moll - Co-Founder and Chief Executive Officer
Thank you, Kathy. Good afternoon everyone and thank you for joining us today. On today's call, I will update you on the progress we have made during the fourth quarter on commercializing our Sensei technology and describe some briefing steps we have taken to expand our business opportunity in cardiovascular therapy. Gary Restani, our President and Chief Operating Officer, will then expand on commercialization efforts in the United States and Europe. Steve Van Dick, our Chief Financial Officer, will conclude with additional details about our financial results and will provide an outlook for 2008. After our prepared remarks, we would be happy to answer any questions you may have.
I continue to be pleased with our efforts in bringing the Sensei Robotic Catheter System to market in both the US and Europe. We are encouraged by the demand for our system and our expanding list of customer installations. We are equally pleased with the level of usage from the systems we have installed to date. Our clinical experience is ramping quickly as more physicians are trained and become experienced with the benefits of the Sensei system. During the fourth quarter, we installed and recorded revenue on six Sensei Robotic Catheter Systems bringing our worldwide installed base to fifteen systems in just seven months including nine in the US and six in Europe. We are very pleased with our 2000 system shipments in that it exceeded the higher end of the range we communicated to you during previous calls. Installation sites included both large University Medical Centers and Community Hospitals as well, which we believe, highlights the broad field of our technology. Of the installed sites which we have gained significant experience with our technology, several are now operating independently and no longer require the presence of our Clinical Support Specialists.
For Q4, we have seen approximately a 50% increase in the number of clinical cases reported over Q3. Our total clinical experience at the end of Q4 now stands at approximately 350 cases. Sensei sites are now performing cases independently. We no longer have complete visibility into the number of procedures performed. Therefore, in future earning calls, we will transition from reporting clinical cases to reporting the number of Artisan catheters sold.
During the recent Boston AF meeting, we saw strong enthusiasm for our Sensei system as evidenced by the interest following the successful live case and the number of physicians that requested a private demonstration. Despite a three-fold increase in the number of demo units in our booth, we could not accommodate all the requests for private system showings. Consequently, we will be reconfiguring our booth to increase the capacity for physician demos during the Harbor Society Meeting in San Francisco this May. We have made good progress during the quarter integrating the St. Jude Ensite system with Sensei. The innovations feature will be marketed under the name of CoHesion. Over fifty physicians have had the opportunity to navigate a pre-market version of the CoHesion module at the Boston meeting. In Europe, we have entered the limited market release space and now have four sites installed with CoHesion. The early European feedback from these sites, has been extremely encouraging. During the first few CoHesion cases in Prague with Dr. Josef Kautzner all pulmonary veins were isolated in less than ten minutes of fluoroscopy time. We will continue this limited release with two additional sites in the US once we receive FDA clearance. This clearance is anticipated during the second quarter.
As I have discussed in the past, we are committed to building clinical outcome data to demonstrate what we believe to be the benefit for the Sensei system. We now have a three-month followup data on a series of fifty-nine patients treated in Europe. The data is promising, showing an overall acute success rate for supraventricular tachycardias in 97% and a chronic success rate of 83%. This includes both simple and complex arrhythmias and the majority of these cases involve the treatment of both paroxysmal and chronic AF patients. To continue building the clinical outcome data, we will be undertaking a hundred subjects randomized study in Europe to compare the Sensei systems Robotic Navigation to conventional manual technique for the treatment of AFib. We expect to commence the study by the end of this quarter.
In addition to this European initiative, we are currently in discussions with the FDA to define an appropriate IDD study to gather clinical data in support of attaining an expanded product labeling which would include an ablation indication.
With regard to our work in the area of interventional cardiology and vascular surgery, we continue to make progress in pre-clinical testing of our Small Diameter Arterial catheter. There is persistent interest from interventional cardiologists, interventional radiologists and vascular surgeons, to adapt our technology to help address challenges in their clinical practice.
This reinforces our belief that robotic guidance for arterial catheters is a very compelling opportunity. As such, we have expanded our product development efforts on this area. This provides us the development plan for the introduction of our arterial product to the first half of 2009. This extended timeline will not have an impact on our ability to deliver 2008 revenues and we believe that positions are extremely well for expansion in two new applications in 2009. The integration of AorTx and the Hansen Medical is progressing as planned. We have committed 2008 revenues to test and validate the valve design as well as the integration into the Hansen Delivery System. We are presently pursuing discussions with several candidate companies that we believe would be natural partners to assist us in the development of the First Robotically delivered percutaneous heart valve.
In summary, 2007 was a year of tremendous accomplishment for Hansen. We have achieved a number of important milestones and invested heavily on our business and manufacturing models so that we are poised to significantly expand the presence of our technology worldwide in 2008.
As you know, we received regulatory clearance somewhat early, earlier than expected in 2007. Our response was to immediately accelerate our commercialization strategy resulting in significant system placements in the second half of the year. These placements surpassed our initial expectations for 2007 by a wide margin. We also made several key investments in our manufacturing organization and secured important alliances with contract manufacturers. These alliances will allow us to augment the supply of Sensei systems and Artisan catheters to better meet 2008 demand. Gary will expand on our manufacturing initiatives in a few moments.
We believe our alliance with St. Jude Medical has provided the integration needed to allow our customers to more consistently and confidently navigate the Artisan catheter within the heart. From early reports, clinicians are able to complete procedures with a vastly decreased level of radiation exposure to the patient, to the physician, and to the patient. As I mentioned, we are pleased with our early experience with the CoHesion module and look forward to commercial launch in the US after receipt of FDA clearance.
During 2007, we will also identify potential clinical applications for Sensei technology outside of the EP market to the combination of internal programs and business development activities. We remain very excited about the future opportunity in vascular applications with small diameter catheters and believe that our percutaneous valve program will afford us a powerful position in structural heart disease.
This concludes my prepared remarks. With that, I will now turn the call over to get Gary Restani, for a closer look at some of our key operating activities.
Gary C. Restani - President and Chief Operating Officer
Thank you, Fred. As Fred mentioned in his earlier remarks, during the fourth quarter, we recognized revenue on the sale of six systems including four delivered to sites in the US and two systems to Europe. In the United States, our Sensei system installations included Massachusetts General Hospital, The Lady Clinic, both in the greater Boston area, University of Maryland and Mount Sinai Hospital in New York.
Our European shipments during the fourth quarter consisted of a direct sale to St. Georg Hospital in Germany, and a system sale to our Italian distributor AD Medica. This unit is already designated for a key Italian hospital.
As I have discussed previously, our commercialization strategy in the past was that of a measured release intended to ensure the highest possible customer satisfaction by managing the important elements of physician training, clinical case support, installation, and field service. It is our belief that achieving excellence in these areas will lead to enhanced customer confidence in the Sensei system. Also, better procedure, outcomes per patients and maximization of our long-term market opportunity. In order to transition into full commercial release in 2008, the company made significant investments during the fourth quarter in several key areas including manufacturing process improvements, manufacturing capacity expansion, and our sales marketing clinical and service organizations. These investments will continue as we move in to the first half of 2008 and are vitally important to maximize the company's long-term productivity.
I would like to give you more insight into a few specific investment areas. First, let me address our investment in manufacturing capacity and capability improvements. Our growth dictated that we needed to increase our manufacturing capacity well ahead of the move to our new facilities scheduled for the end of Q2 2008. To that end, we reconfigured our current manufacturing space to allow us to triple the clean room operations, required to produce, test, and validate the Artisan catheter.
Additional investments were made to transition what was a 100% operated-dependent manufacturing model to a more processed dependent manufacturing operation. This translated into more reputability and predictability in our Artisan catheter manufacturing process resulting in significant yield improvements and increased outputs. In fact, our Q3 yields were in the 50% range; however, our improvements allowed us to end the year with yields in the 80% range.
Overall, these process improvements, headcount additions, and facility investments have allowed us to more than double our output of Artisan catheters during the fourth quarter compared to the third quarter. We are confident that our process improvement initiative in 2008 will continue to improve both our (inaudible) and reduce our cost of goods well in to 2008 and 2009.
Secondly, we have continued to invest in our sales, marketing, clinical, and field service organizations in order to adequately support the increased clinical usage and customer support that additional installations will generate. Over the last quarter, these organizations have grown from a combined total of 20 people to our current total of 31 people. Over the next few quarters, we expect to continue our investments in these organizations and hire additional people to support our 2008 sales forecast.
Thirdly, we continued to increase our presence outside of the United States through expanding our distribution network with opportunities in Central Eastern Europe, France, and Canada to name a few. We also had a significant presence at four major trade shows throughout Europe in an effort to educate more customers about the benefits of our technology.
Finally, as you know, we entered into an agreement with a contract manufacturer for the production of key electronic components for the Sensei system. Also, we recently agreed to work with a European contract manufacturer to provide us with custom-sub assemblies for the Artisan catheter. We are confident with the investments that we have put in place over the past few quarters to expand our manufacturing capacity. We have identified two indicators to help measure this progress.
Our first goal is to achieve a four-week safety stock inventory level of Artisan catheters by the end of the first half of this year. We feel strongly that this level of inventory is required to fully support our customers and ensure our technology is readily available for as many procedures as possible.
Our second goal is to bolster our system capacity from two to three units per month to five units plus per month. We expect to achieve these milestones by the end of Q2 and consequently, formally conclude our measured release program.
Overall, I am extremely pleased with the operating momentum we have been able to generate throughout 2007 and, in particular, in the fourth quarter. Our field sales, clinical support, service and marketing organizations are adequately staffed for the first half of 2008 and working in tandem with our customer sites to support an increasing clinical case (inaudible). We believe the momentum we have created in the market is due to the combination of the Sensei's clinical capability and compelling economics.
I look forward to an exciting year of expanding our presence worldwide and in being able to quickly and efficiently meet our customers' expectations.
With that, I will now turn the call over to Steve Van Dick our Chief Financial Officer for a closer look at the fourth quarter financial details and our outlook for 2008.
Steven Van Dick - Chief Financial Officer
Thank you, Gary. I am going to provide additional details on our fourth quarter financial results including our income statements balance sheet as well as our outlook related to Sensei system shipments for 2008.
During the fourth quarter of 2007, we recorded revenue of $4.2 million on the sale of six systems and shipments of Artisan control catheters. The average selling price for the six systems was $634,000. Cost of goods sold totaled $4.2 million and included non-cash stock compensation expense of $139,000. In the fourth quarter of 2007, cost of goods sold was impacted by higher direct labor costs, yield losses and costs to increase capacity and improve yield. This resulted in no gross profit for the period as the company fully expects gross profit to improve significantly during 2008 as revenues grow and we realized improvements in operating efficiencies.
In reviewing the key expense line items on the income statement, research and development expenses for the fourth quarter was $5.1 million. Included in the fourth quarter R&D expense was non-cash stock compensation expense of $494,000. For the same period last year, R&D expense was about $4.4 million which included non-cash stock compensation expenses $289,000.
Research and development expenses for the three months ending December 31, 2006 included development stage manufacturing expenses of $700,000 and a credit to adjust inventory valuation of about $400,000. The remaining change in research and development expenses was due to increased prototype and material expenses and increased compensation expenses related to higher headcount necessary for the development of our Sensei system and disposable Artisan control catheter for electrophysiology market as well as other future applications in addition to the increased non-cash stock compensation expense. The company anticipates research and development expenses to continue to increase in 2008 as we develop future applications and invest in a percutaneous aortic valve initiative.
Selling, general and administrative expenses during the fourth quarter were $7.9 million and included non-cash stock compensation expense of $1.4 million. This compares to SG&A expenses of $3.7 million in the same period in 2006 which included non-cash stock compensation expense of $853,000. The increase in selling, general and administrative expenses due to increased compensation expenses related to higher headcount necessary to support our continued growth with the costs for the development of our intellectual property portfolio and other IP and litigation-related labor costs, as well as costs associated with being a public company and increased employee and non-employee non-cash stock compensation expenses. The company expects selling, general, and administrative expenses to increase in 2008 as we continue to expand our sales in clinical support groups and continue to build our intellectual property portfolio.
In-process research and development expenses with the three months ended December 31, 2007 were $11.4 million. There were no comparable expenses incurred during the same period of 2006. In November 2007, the company completed its acquisition of AorTx, an early stage company developing heart valves which may be delivered minimally invasively through the skin and blood vessels. The acquisition was accounted for as an acquisition of assets since the operations of AorTx did not meet the definition of a business as defined by the prevailing accounting standards. As such, the assets acquired and the liabilities assumed were recorded at their estimated fair value during the fourth quarter. In addition, all the acquisition costs were allocated among the relative fair value of the assets acquired and no goodwill was recorded as part of the transaction. Therefore, the transaction included the acquisition of in-process research and development costs of $11.4 million which were expensed immediately.
Other income net for the three months ended December 31, 2007 was $545,000 compared to $410,000 for the same period of 2006. The increase was primarily due to higher interest income related to higher average cash and cash equivalent in short-term investment as a result of the completion of the company’s initial public offering on November 15, 2006 including total non-cash stock compensation expense of $2 million and the additional of $11.4 million of in-process research and development expense. The net loss for the fourth quarter was $1.10 for basic and diluted share based on average basic and diluted shares obtaining a $21.7 million shares. This compares to a net loss of $7.7 million or $0.76 per share per basic and diluted share based on an average basic diluted shares outstanding of 10.2 million for the same period of 2006. Total non-cash stock compensation expense in the fourth quarter of 2006 was $1.1 million. Included in the balance sheet cash, cash equivalents and short term investment as of December 31, 2007 was $48.6 million compared to $89.9 million as of December 31, 2006. The decrease is mainly due to the company’s normal operating expenses and $5.1 million related to the AorTx acquisition. We will remain confident that we are sufficiently capitalized to execute our business plan for the remainder of 2008.
Going into 2008, we see continued momentum in the demand for the Sensei system globally. In 2008, we are targeting annual system placements of between 44 to 50 systems. We also expect utilization of the Artisan catheters to remain strong throughout 2008. The 2008 outlook we just provided updates and supersede an inadvertent and inaccurate report that appeared in today’s New York Sun newspaper.
I thank you for your attention and at this time I would like to turn it back over to Fred for some concluding remarks.
Frederic Moll - Co-Founder and Chief Executive Officer
Thank you, Steve. I hope we have communicated to you our confidence in the opportunity for Hansen in 2008. We are seeing strong demand for the product in electrophysiology and are moving to expand our commercial opportunity in the other vascular therapies. I will look forward to updating you on our progress in achieving our 2008 goals in the next number of months. At this time, we would like to open it up to questions. Operator?
Question-and-Answer Session
Operator
Thank you. (Operator instructions).
And our first question comes from Michael Weinstein with the JP Morgan. Please go ahead.
Michael Weinstein
Good afternoon gents. How are you doing?
Frederic Moll
Hi Mike.
Mike Weinstein
Let me pick up where you left off there. At this point, we will talk a little about the commentary on 2008, I think (inaudible) will be encouraged by the expectations that you guys laid out there was pretty much in line with our own. Could you just comment on how you used to do that ramping? How your manufacturing capability impacts that in the first half of the year or not, and then in addition to the comments you made on system placements, how shall we think about the experience curve that maybe which you can identify one at this point for someone who buys the Sensei system, gets trained on the system and did set up at running. What is the ramp you are saying at this point for someone who is doing on the system now for six months or longer?
Frederic Moll
Yeah. I think Mike what I will do is I will handle the kind of the first of part of that and I will turn it over to Gary to kind of talk about the customer cycle part of it.
Mike Weinstein
Yep.
Frederic Moll
And I think we are still in the early stage of our commercial launch and we have really been active here. This is our, basically our second full quarter of activity and we have been able to move from four units in the second quarter to 5 and the third and six units in our fourth quarter, and here, we are, I think, we are going to continue, we would continue to see, expect to see, kind of stairstep approach, here going into ’08 and as far as the natural consequence of the kind of a stairstep, you are going to see obviously more units in the back half of the year than the front half.
Gary Restani
Right. And Mike if I can add I think you have mentioned manufacturing, because that still a factor. You are going to see that become less of a factor as the year goes on obviously and in the first two quarters will be a small element of it but as you heard me say that at the end of the first half, we officially announced that our measured release will be formally concluded. What that means is that we will be more demand-driven in the latter half of the year which falls exactly in line to Steve’s point of how the business ramps at this early stage. Your other question I believe related to the customer I guess...
Mike Weinstein
Yeah experience with their own ramp on once they have gotten trained of what are the usage patterns.
Gary Restani
Right. As we see personally, we speculated when we started this project that we would stay with their account anywhere from eight to 15 cases and for all the intention purposes, that average is about right, we are seeing and as a matter of fact, we currently have three institutions going to four which will be virtually independent of our clinical specialist support and others, we have more varied number of EPs and depending on their cycling through the practice, we have been with a little longer than others so we are still on some of those accounts, so at early stages we believe we fairly, we understand the process extremely well, we have learned a lot, we have helped them develop procedure practice that helps them become more familiar with our system. No major surprises for after this stage so the progress that we see going forward, we believe will be I think favorable to us in the sense of number of utilization of cases. We are commenting on that as you saw. We have got visibility up to a point now. In the future we will be talking to you about actual cathetership and that should give you a good indication of actual activity.
Mike Weinstein
If I can you continue to talk a little about the visibility on placements and you gave us guidance for this year. How good is your visibility on whatever today has covered 19th on placement for the first half of the year I would say. How good is your visibility on all right we have a pretty visibility on what the first half of the year has grown quite a bit. Is that a fair statement or how would characterize that?
Gary Restani
Yeah. I am not sure how to answer Mike, with the caveat that we have been very clear, we are not going to get the backlog again. As I have said, we are experiencing a strong demand that we have obviously a long list of potential customers that are in various stages of the order process, some of them are just interested in the technology and some are obviously left further down the line, and so although we have not been selling the systems all that long, we have been out there for a significant period of time talking about the technology and so we feel likely we have a pretty good clarity on where we are and how to execute to get to our goals in 2008.
Mike Weinstein
Just a quite a few of couple of clarifications that most of have been, could you provide us with what the breakdown was in disposable and system revenues in the quarter if you gave that, I apologize if I missed it and then what the slope with the average selling price in the system has.
Gary Restani
Well, we really do not provide, we are yet to provide that breakdown. The average selling price on the system for the fourth quarter was $634,000 and that is the level of detail we provided today other than last quarter I think we did provide our average ASP for the disposable catheter which quarter that came in at $1700.
Mike Weinstein
Okay. Great. I will jump back. Thanks.
Gary Restani
Thank you.
Operator
And our next question comes from Glenn Reicin with Morgan Stanley. Please go ahead.
Glenn Reicin
Thank you. Just some rapid fire top questions for Mike. The ASP in U.S. is what for this system?
Michael Weinstein
The ASP in the U.S. for the fourth quarter was about $621,000.
Glenn Reicin
And then as we look into the first quarter, are sales going to be up sequentially, if the system sells and do we actuate the capacity in expense in the end of the second quarter?
Michael Weinstein
One, we are not commenting on quarterly numbers but we do not feel that Q1 is currently based up on what we think we are going to be able to accomplish in Q1 manufacturing capacity is not going to be a constraint for our system placements.
Glenn Reicin
Okay. I just don’t understand what stairstep means? Stairstep. Does that mean steady? Does that mean, I do not quite understand what that means.
Frederic Moll
You know, I would interpret it as a gradual increase.
Glenn Reicin
Okay. And pretty flat, this pretty straight line. Similar slope as the year progresses?
Frederic Moll
Yeah.
Glenn Reicin
That is what stair is, right? I mean it is sort of a similar slope.
Frederic Moll
I guess Glenn you have two factors. You have the fact that we are still an early stage company that is on a ramp. Also, the nature of capital equipment which, I think, you are all very familiar with, has a lumpiness to it. Our ability to, our ramp, I guess, stage now may take some of that lumpiness out, but it will be a progression front to back.
Gary Restani
I think we feel very comfortable which is why we provide guidance to forty four to fifty systems through '08 but what we are not prepared to do right now is to do (inaudible) a specific quarter-by-quarter blow of how we think they are going to break out. And so we are going to let you kind of run your imagination on that, Glenn.
Glenn Reicin
Okay sir. I am not too imaginative, but okay let us keep going here. You said gross margins improved, I should hope so to a 50%-50% by '08.
Frederic Moll
You like our statement to be obvious, Glenn?
Glenn Reicin
Yeah. Can you get the 50% in '08?
Frederic Moll
Can you get the 50% in '08? Definitely I think that is a reasonable target to hit by the fourth quarter of '08.
Glenn Reicin
Okay. And then as you know, you are hitting the year roughly at $32 million run rate. Is that what you expect for all 2008?
Frederic Moll
I mean, like we said in our statements, that we are not commenting on our Q4 SG&A. We have 7.9 million. We are going to be making additional investments in terms of people in our sales organization. So I think when you look at SG&A, the G&A part of it is going to remain relative, I mean, it is going to be a very modest growth in that but we will see as an additional full and clinical support people being added to the portfolio run rate numbers, probably more towards the back half of '08 than the early part.
Glenn Reicin
I understand because I thought there would be a leveling off by now and it has been over a $1.5 million of sequential growth the last two quarters, so maybe just give us a sense of where or what we should be looking at in terms of increases in run rate if it is , if we are at $32 million as a run rate. Would this year come out at 35, 34?
Frederic Moll
We have not, I mean, I know you are trying to timeline my feet down to a number…I know. You are working real hard on me here, Glenn. But I think we kind of have to think of it that way if you look at adding the sales guys in towards the year-into-year time frame and think of the cost or sales guide. I think we can kind of come up with what would be a reasonable number.
Glenn Reicin
Okay. I guess. I do not know. Okay so it is really just the sales people. And you are going to 30 you said going from what to what? Thirty one today so where are you going to?
Gary Restani
Yeah we see that again, but the investment has, as you can imagine would be in line of the growing of installed base. That is where the trending will follow. In fact, we are going to double it January, February of this year and then we will continue to grow. But yeah, I think, you are going to see clinical sales people growing maybe by, if we have eleven now, you may be sort of seeing something like a 30% growth in those people and about a 15% growth in actual salespeople.
Glenn Reicin
Okay now. We will try to work here something. Okay and then when you talk about utilization, you said you do not really comment on it then you throw out a number like ten. If you go through just your numbers that you provided, you do have a thirty per center right now- thirty procedures per center per quarter, I think. So how do we look at that number going forward, I mean, those are real procedures, it was not just stocking. So how does that sort of, how is that number, what do we do with that number going forward and how do we think about stocking of Artisan catheters?
Frederic Moll
Glenn, when you say ten, I am not sure, we are not sure what you are referring to.
Glenn Reicin
I thought you may have said ten per quarter per center or maybe I did not hear it right.
Frederic Moll
That was not intended to be so. I think Gary was commenting on the terms of the training and learning curve that is taking eight to fifteen. That is kind of what we originally thought and I do not know if you are referring to that.
Glenn Reicin
Oh no. I guess I did not hear right. Though how should we be thinking about capital sales? And how does that relate to the number of units that are placed right now? Is there any sort of benchmarks that you are shooting for or any sort of guidance you can get on that front?
Gary Restani
Right. First let me clarify. I think that number, what I was saying, eight to fifteen, that was the number of procedures where a physician was getting to start to feel comfortable by not requiring further clinical support.
Glenn Reicin
Ok.
Gary Restani
So, in the past, I think the models were out there early on, demonstrated a utilization that we felt we exceeded significantly last year. We are going to stay on that ramp. But to give you a number right now, we have not been given any.
Frederic Moll
No, I mean, unfortunately, utilization is one the toughest things until you get through the, until it gets you more quarters under our belt but let’s help you piece together some of the puzzle that we have, given the fact that we are trying to vague, even though it seems that we are. We told you we had about a 50% increase in cases done over Q4 over Q3. We reported Q3 cases at about 100 or higher cases. So you can get an idea what the cases were that we delivered in Q4 and we had it in installed base that went from nine to fifteen. And so I think you can work through a set of number to kind of reach the conclusion and then check it whichever way you want.
Glenn Reicin
Sure. Okay.
Operator
Thank you. Our question comes from Ed Shenkan from Needham & Co. Please go ahead.
Sameer Harish
Hi guys. This is Sameer Harish for Ed.
Frederic Moll
Hi Sameer.
Sameer Harish
I just wanted to ask a little bit about some of the cases that you are seeing today. I think in the past you have given us a breakdown on how many of the cases that you have completed are right-sided and how many were atrial fibrillation?
Frederic Moll
Yeah. We do not have an exact breakdown; as you know, we are not in a few centers. We no longer have a complete record of you know what cases are done, but as far as I guess, Dan just handed me a number, it says, we have done 201 atrial fibrillation cases.
Sameer Harish
That’s great. That helps. Thank you very much. Also I wanted to ask a little bit on as you reach full manufacturing capacity. What should we think about as far as ordering time lines and time to shipment?
Gary Restani
Yeah, Sameer, as we have indicated, we were graduating from a 90 to 120-day system order to shipment time frame. And our goal is by the second half of ’08, towards the second half of end of ’08, we will be at, our goal is get to a 30-day order to ship. And as I said that at that second half we will be relinquishing our measured release approach and be virtually on demand ship to demand.
Sameer Harish
Ok. Perfect. And when you do move to the new manufacturing facility, before I do that, have you guys already begun these manufacturing, of that facility have you started building a new facility or where are we at this point?
Frederic Moll
No. I mean, the new facility is still basically an empty shell and we are waiting for permits from the city to be able to begin construction, we have started some cutting of concrete and some basic infrastructure work that we are allowed to do before we get permits. And the Phase I which is the completion of our manufacturing areas of the new facility will be occurring in the mid to latter part of Q2 and given that where our in 510-K process, the validation of the clean room spaces is pretty straight forward; it’s basically a cleanliness, air particle testing and things and there is consulting firms out there that can work pretty rapidly at validating facilities. That is really not a long lead time item for us.
Sameer Harish
Ok. You feel like you can occupy the facility in the first half of ‘08?
Frederic Moll
Yeah, the very end. Yeah, we are looking at the manufacturing groups, we will be moving in the latter part of the second quarter.
Sameer Harish
Ok. Perfect. And I just wanted to clarify, have you begun clinical studies for the expanded indications into abrasions?
Frederic Moll
No.
Sameer Harish
You haven’t started yet. Okay, do you have a timeline on when you expect to begin that?
Frederic Moll
We just had early discussions to talk about the outlook of what that is going to look like and we are going to be submitting in the next 30 to 60 days and then start the process from there on it.
Sameer Harish
Thank you, guys.
Operator
Thank you. Your next question comes from Jason Wittes with Leerink Swann. Please go ahead.
Jason Wittes
Hi, thanks a lot. If I look at your placement this quarter, it was mostly at large centers, not so much with some of the overseas centers, but I am assuming those were also large centers; obviously, be the distributor is a separate case. But is that what you would expect during initial phase, at least through the first half that you are going to be mainly focusing on the larger centers and then after that can you give us an indication of how you gauge demand at some of the smaller centers that made your (inaudible)?
Gary Restani
Yes. Jason, actually if we will do a little mapping of our first 15 placements and there was an interesting article put up by one of your colleagues, not your direct colleague for that, not ours, a Sander group, that stated size of hospital distribution, therefore, number of Sensei systems in each of the distribution. For example, under 300 beds, this article stated that there was basically zero percent consideration for one of our systems. 300 to 500 beds with a 10% consideration and over 500 beds has 30% consideration. The good news is that in the zero work where we just had the zero percent consideration under 300 beds, we already have three placements in that area of potential under 300 beds: two in Europe, one here in the US. And in Europe, it is interesting; you will see more, you would not see only the big 500-bed hospitals utilizing this technology, technology is applied in a broader array. Currently, in the US, that seems to be the play that the larger hospitals have a bigger number of our distribution, but we have been able to demonstrate placements in everyone of those segments, not just a 500-bed or big teaching hospitals or the so-called early adopters.
Jason Wittes
So you are anticipating to see the second half to be less of constraint. A lot of your placements are going to be into those smaller centers.
Gary Restani
Yeah we full do.
Jason Wittes
And, I mean, is there some kind of dependence on how much they have to do at present or is it more a desire of how much AF they want to do in the future?
Frederic Moll
Well, you know I think it is both. Obviously you know the people that are doing a lot AF are the more likely customers for this technology, but there is an equal number that we believe are doing small amounts or no AF and this technology is a way to either dramatically increase their volume in AF because it gives them comfort. They can do a wide array of arrhythmia patients. Or really put people, get people going who currently do not do the procedure do it in very small volume and giving them the skills to dramatically increase their volume. And so, I think it’s a myth.
Jason Wittes
Ok that good. It is what we have been hearing as well. Also, I wanted to ask you, you are targeting 30 days from order to placement, is there also an amount of time required for a patient to accept the machine or is it any different in the US and Europe in terms of the accounting?
Gary Restani
It is not so much of an accounting issue quite frankly, Jason, on the accepting of once the order is in, it is not so much on accounting, it is availability of the staff to be trained and properly and when to do the actual installation, even though our installation is a three to four hour installation, it is still more of a logistics issue more so than a financing or accounting area.
Jason Wittes
Could we say that there needs to be training with at least eight or ten of these before they accept the system, that kind of thing?
Frederic Moll
No. They are trained usually before we shift the system.
Steven Van Dick
Right. Yes. This is Steve. And in terms of the revenue recognition requirements whereas it is the same whether it is in Europe or in the US which is that we have to cross ship install system and then the customer has to be trained in terms of how to use the system and training is something that is really done before the system’s actually installed; they get to the place where they can drive the system because we send them to the Center of Excellence where they go through a process which includes labs and watching aces and once they get trained in that way because even under our FDA constraints, we ship them an Artisan Catheter they have to be trained in the use of the system to be able to do that.
Jason Wittes
One prior clarification, you made a statement but it was not clear to me, the Artisan Catheters can they be stocked or bought in bulk or are they put on consignment and do you get revenue every time at once used?
Gary Restani
We do not consign. We ship. They are bought and every center will buy the required amount based on their anticipated case load and it is currently quite a just-in-time type of shipment, so there is not a lot of stocking going on currently. There may be some as hospitals get to learn their utilization curves and maybe go through different holiday periods, they will stock some, but there is not a lot of stocking built into our number at this point.
Jason Wittes
Can we assume that once you once you get supply issues under control that people will look to stock? So, potentially in the second half we will see some stock in their counts?
Steven Van Dick
I think you will always see possibly a little bit but not a lot because the current shelf-life on the catheter is not that long. So there is not going to be a lot of …
Jason Wittes
Could you remind us again what the shelf-life is?
Steven Van Dick
The shelf-life right now is 6 months, going to go to a year some time in the second half of 2008.
Jason Wittes
Okay great. Thanks a lot guys.
Steven Van Dick
Thank you.
Operator
Your next question comes from Jamie Lester with SoundPost. Please go ahead.
Jamie Lester
Hi guys. I just want to clarify something on the procedures per system, I think. Someone said it was about 30 per quarter but it seems closer to 10. Does that sound closer, right? Or 11 maybe per quarter?
Gary Restani
Here is the problem. I am sorry if I have to interrupt. Here is the issue why. We are not trying to avoid the issue. The concern is at this early stage with 15 systems based on how many of them have been out for a reasonable period of time to get that statistical value. For example, of the 6 that we shipped in the last quarter, 3 of them were shipped in the mid-December time frame. So if you do the math, you are going to get a wrong utilization at this stage. Once they are in an account for a reasonable period of time, then you can start getting good utilization numbers. So that is the concern, we are not trying to avoid the answer, we are just trying to get some good data and at the right time help you with the right utilization data. In areas where we have seen systems in place, our utilization is consistent and trending upwards is the best way we can tell you now.
Jamie Lester
I don’t mean to -- I guess I understand, I actually asked the same question last quarter and you said most of the five in the third quarter were shipped towards the end of the quarter then, too. So, which I would imagine is just kind of the way things go. Are you saying that usage per -- because as you said procedures quarter-over-quarter went up 50% and I would say average machines went up and has got to be closer to 100%, so my assumption would have been that the procedure volume went down and maybe there is some seasonality associated with that. Is that the case? Did it actually …
Frederic Moll
No, I think in the math, that it is very difficult to do. We are seeing a trend upwards in procedures. We are also shipping new systems and for that exact reason we have told you how many procedures we have done. We have told you how many systems we have shipped. What we cannot correlate very well is usage per system because we are growing the business and we are shipping new systems and so we are not going to get into a prediction of how many catheters are used per system per week or month or quarter until we have better data.
James Lester
Now is that a change? It just seems like a change. On the face it seems like utilization is lower and does it generally ….
Frederic Moll
That is not a true statement. It is just not a true statement.
James Lester
And so the corporate philosophy that the change to catheter shipped is that going to give a better idea of utilization than procedure volume? Or I guess how difference between those two?
Frederic Moll
Because we are not aware of all procedures. We do not have visibility on every procedure that is done. We are not going to be able to accurately, we are always going to be low if in reporting the procedures that we knew occurred. So a more accurate, we believe, is we do not believe there is a big stocking component to it. The more accurate way to report disposable units is to tell you exactly how many we have sold and that is going to be more accurate than trying to estimate a procedure number that is, the further we go the less accurate that is going to be.
James Lester
And then you mentioned on the training aspect which I have not thought about. Are there people actually at the account? Is it full product and one person kind of bouncing around with different accounts when the procedures are schedules to help them with the initial 10 or 15 procedures?
Gary Restani
It is not training. It is a clinical support where the training would have been completed once the system was installed. So, what happens is, you are right, it could be one person that may be there for that first week of cases, it could be another person there the other week. We do have regional, now as our clinical specialists are building up. We have more regional focus by certain clinical specialists so they become more familiar with one site versus another, but it is not one person dedicated to only one site. So, we provide this clinical support in order to allow them to get that learning curve and ramp up learning faster but they would have fulfilled their training obligation before they even got the shipment. So this is just to help them through the learning curve.
Jamie Lester
Is that the same thing as the clinical sales force that you talked about earlier on?
Gary Restani
That is the clinical support sales force. That is correct.
Jamie Lester
So going from 11 to 15 sales people is going to be able to support that training? You know you may go from 15 to say 60 systems?
Frederic Moll
You forget that once we train the customer and once we train them, we are done.
Gary Restani
For example, there is already 3 sites now that do not require a clinical sales specialist there, right? So, that frees up those people that were handling those accounts are moving on to new accounts, and as the maturity of these accounts increase, you are going to see that ability to move people out of one account which are more mature to new accounts and so, we believe the numbers that we have in play which we had 11 clinical specialists at the end of 2007 and increasing in 2008 will suffice to meet our range that we covered with you in the outlook.
James Lester
So, at 15 clinical sales people, it can support 50 placements as a general rule, and going forward beyond 2008 also, that is the rate?
Gary Restani
And by the way, as we learn, if we feel it is not, we will be adding based on demand. But currently we feel that that math works.
James Lester
Okay. And have you given any indication on the mix of the placements, US versus Europe? Or is there any way to think about… should that stay roughly the same or will that change?
Gary Restani
We are not going to be able to give you that mix right now because if you looked at it earlier on, it was a higher mix of Europe and now shifting towards the US. Again, we are early stage, as we have another two or three quarters behind our belt, then we will be able to get a better indication of what that true mix will fall out to be.
James Lester
Thanks a lot guys. I appreciate it.
Operator
Thank you and your next question comes from Steve Ogilvie with ThinkEquity Partners. Please go ahead.
Steve Ogilvie
Thanks. A question that has not been asked. I want to know how long it takes a clinical and sales support person to get up to speed in terms of a new hire, three weeks, three months?
Gary Restani
Good question. A pure sales person is about a 3 month cycle where we are hiring a lot of experienced sales people in capital equipment capability. From a sales person that would be about the learning curve. From a clinical sales specialist, we think it is more like a – it could be from a 3 to 6 depending on their experience base, and that’s why the qualifications of these people are critical to us and we provide very intensive training in making sure that they support the sites very effectively. So that has been our experience right now.
Steve Ogilvie
Okay. Thanks. That is very helpful. And then the other question I have is I think you said you hope to start the 100-patient study in Europe this quarter for the (inaudible) on AFib. I guess you are working on this frame of design right now but would it be possible to see data at the end of this year?
Gary Restani
I am just clarifying with Dan, it probably will be Q2 next year?
Daniel Wallace
I think with follow up and the desire to collect a good chunk of data before presenting I think, it is going to be next year.
Steve Ogilvie
And then, this other question I have is why do this study, I mean, if it is very hard to define a successful outcome? There is a lot of controversy about that. A lot of the catheter companies have not even done studies. What is your motivation behind the studies?
Dan Wallace
I think you pointed out something that is very important. There is a lot of mixing in the way people report data, report outcome and test for invisibility. I think largely we believe that we can provide a good foundation of data for our customers to reference even though they may not do the case exactly the same way or test the arrhythmia exactly the same way that we can provide something that indicates how our system works for them.
Steve Ogilvie
Okay. Great. Thank you.
Operator
Your next question comes from Spencer Nam with Summer Street Research Partners. Please go ahead.
Spencer Nam
Thanks for taking my question. I just wanted to ask you a few quick questions in terms of burn rate. What kind of burn rate are we seeing right now? And do you see any way we can get a sense of what that is going to be for the next couple of quarters?
Steven Van Dick
I think for the next couple of quarters, we would expect the burn rate is going to remain relatively flat, go up possibly a little bit as we continue to make some of the investments in the SG&A area and a little bit in the R&D area. I think in terms of this quarter, given the AorTx acquisition there is about a $14 million cash burn of which about $5 million of that came from AorTx. So from quarter-to-quarter our burn rate from Q3 to Q4 went up about $1 million. It should begin to moderate a little bit as we get into the second half of ‘08 and as we get into ‘08 you are not going to see such significant increases in cash burn as you have been seeing during 2007.
Spencer Nam
I appreciate the details. On the sales and marketing with your sales reps, the clinical sales people, are they the ones who are essentially quarter backing these sales? How does the actual sales process take place? Combination of clinical sales people with the other sales people or the clinical sales people leading the process?
Gary Restani
Yeah, it is actually the reverse. The quarter back is the sales territory executive that gets the sales process moving, gets the order in house and gets ready for revenue recognition and once it is ready for installation, that is when the clinical sales specialist takes over from a sense of being there on a case by case basis until the account gets that capability that they feel they do not need any further support and not only are they there to help a support physician but they are also there to look at the flow of catheter usage and procedure usage so we can learn from it and help the patient improve the procedure utilization with our Sensei system.
Frederic Moll
Let me correct one thing before we go on. The cash burn for Q4 was a little bit higher than expected. The actual total cash burn was $16.5 million, with about $5.1 million coming from AorTx. Just to make sure that I did not leave that confused. So it is about $11.4 million cash burn coming out of what we consider normal operations.
Steve Ogilvie
I appreciate that. And then just on the competition side, what are you seeing out there with your competitor right now? Is there taking any share away from them? Any comment that you can make on that?
Gary Restani
Let me maybe put it this way, our growth in the fourth quarter was slightly higher than we had predicted and I think their growth was significantly lower than they had predicted. I guess to say we are taking share at this early stage may be a reach but I know that we have been more than very competitive in a number of very key sites where we have come up with installations where previously was not expected.
Steve Ogilvie
So you are seeing some switch overs?
Gary Restani
Switch overs I do not know if I would term switch over. Switch over to me would indicate switching over to another unit.
Frederick H. Moll
I will put it this way, we were surprised that the competition’s comments about conditions in the market place. We are seeing strong demand and we are excited about what that demand is going to translate into with regards to the results for 2008 and so, we cannot comment on the competition but feel like we are in a very good position and feel like the market conditions are very favorable.
Steve Ogilvie
Thanks very much.
Operator
You next question comes from Jose Haresco with Merriman Curhan Ford. Please go ahead.
Jose Haresco
Hello to you guys thank you for taking my question.
Gary Restani
Hi Jose.
Jose Haresco
A couple of questions for you. Just touching on the sales cycle a little bit more. You have been in the market a couple of quarters now, could you give us a sense of how the selling process qualitatively and then quantitatively in terms of time may or may not have changed now that you have been out there. You have been in a couple of very large conferences. In terms of how much time are you spending just telling people about the system versus what it can actually do? How has that changed for you guys?
Gary Restani
Yeah. I am just giving thought to your question. How has that changed? Well, earlier on, honestly, before we had an FDA approval we were on an awareness campaign then as we started to be able to demonstrate the system more and actually once we got approval, promote the fact that we are approved for mapping et cetera, and ablation in Europe that allowed us to step up the intensity, if you will, of the selling process. What has changed? The demand to Fred’s point, we have not seen a diminishing in demand. We have seen that continues to be strong. Our ability -- our goal is to get out in front of the selling cycle. We have a pipeline of opportunities that we mind constantly everyday that go out well into the 12 to 18 month cycle. The closer they are to the current quarter that is where the focus is put on closing that sale, getting all the financial terms in place and getting it done. So, the process has not changed quite frankly. We believe we have more opportunities than we had seven months ago and that’s great and that just intensifies our ability to get out there and improve that close ratio.
Jose Haresco
Fred, you had mentioned that you were expanding the focus of the 7-French program. Is that going to fall in the first half of 2009? Given the sense of how you are expanding it just in terms of maybe in the number of catheters or just the types and indications that you will be chasing now that it has been pushed back a little?
Frederick Moll
So, I cannot get into too much of the specifics there, but only generally a snapshot. What we have seen when we went out and we built some smaller catheters, have been testing them and then we have engaged a variety of interventionalists, interventional radiologists and vascular surgeons in this process of understanding what the lower hanging fruit might be and with regard to use of robotics in vascular procedures and the more we do, the more excited we get about it and so we have rather than try and push something out as quickly as we can, we see there is a big opportunity here and we have increased our focus and a little bit of an increase in resources on developing this new platform in vascular because we think it is going to be a big story for the company. It is going to take a little longer than if we just did it as quickly as possible but we think it warrants the attention and investment because we think there is just a lot to do on this.
Jose Haresco
Is it fair to assume that we will see a number of catheters launched as part of the program that targets in each of these different indications and surgeon tests?
Frederick Moll
Yeah, I think it is a reasonable way to think about our progression in this market is we are going to have a family of catheters and I sort of liken it to days of intuitive, we had a variety of different instruments. Our catheters are instruments. You can see a family of catheters and there will not be lots and lots of them but there will be a family and because they are going to be pointed at different applications.
Jose Haresco
Okay. Great. Thanks.
Operator
Your next question is from the line of Glenn Reicin of Morgan Stanley. Please go ahead.
Glenn Reicin
Okay folks. Just a couple of follow up questions here. In terms of the systems you have placed so far. How many of them were stereotyped as users? That is something you had pointed to previously.
Frederic Moll
Let me see. I do not have that precalculated total but…
Glenn Reicin
Total majority of customers?
Steven Van Dick
Four in the US and one in Europe, I would say.
Glenn Reicin
I am sorry. Say that again.
Gary Restani
Four in the US and one in Europe.
Steven Van Dick
That is just off the top of my head.
Glenn Reicin
Okay. That is still a majority.
Gary Restani
Of fifteen?
Glenn Reicin
You are talking about the total sold?
Gary Restani
Yup.
Glenn Reicin
Okay. Alright. And then when you look at this coming year and you are thinking about mix, US, international. What do you think that is?
Gary Restani
As I tried to allude to earlier, our early experience if you looked at the mix in the first two quarters, it was almost 40% Europe. It will not persist that way, and as we get a broader base, after only 2 ½ quarters to look at a percentage to be 40% or 30%, we are not just quite there yet. So I think it will be a reasonable portion of our business, but it won’t be in the same rate that we have experienced the first two quarters of the year which is pretty high.
Glenn Reicin
Okay. And then when you start -- what do you think the AorTx standing will be for 2008? I know I am jumping around here.
Steven Van Dick
When we made the acquisition, we put a range of $3 to $5 million, I think, if we were to tighten that range a little bit, it is probably going to be between $4 to $5 million for 2008.
Glenn Reicin
Okay. Good. And then just a final question. What was the nature of the 7-French delay and then when are we going to actually see some visibility on non-vascular applications?
Steven Van Dick
What I would characterize delay in rolling out the story?
Glenn Reicin
French cath are you hoping to get in mark in the second half of this year without saying first half of 2009. What is the nature of the redesign and what are you trying to accomplish.
Steven Van Dick
We think there is a lot to do with the platform and we want to get it more than one specific procedure and we think there is opportunity to that. It is going to broaden the scope of the project and so, it is more development, more software, and we have some pretty exciting changes to the catheter architecture that we think are going to take a little longer but are going to, as I say, dramatically expand the capability of the platform into a variety of procedures.
Glenn Reicin
Good. And when do you think as you are saying it is really software related?
Steven Van Dick
It is both software and catheter architecture related.
Glenn Reicin
Okay. (inaudible) off-line what you are trying to accomplish. And then in terms of non-vascular applications, when can we get some visibility on that front?
Frederic Moll
Right now we are not addressing non-vascular applications. So, not at this time.
Glenn Reicin
Okay. Thank you.
Frederic Moll
Sorry, are we talking about structural heart disease?
Glenn Reicin
No, I was actually thinking about non-vascular applications. You got it right.
Operator
And your next question comes from Tim Meedy with Primary Fund. Please go ahead.
Tim Meedy
Good afternoon, gentlemen. I was wondering if you could talk about longer term gross margin structure of the system sales as you aware of, a new manufacturing strategy or your manufacturing strategy evolves I guess it would be better said. And then if I could just clarify you think you gross margins will be longer term more in the consumables.
Steven Van Dick
I have always believed in can be consistently said that as we get in the out years and as the volume ramps up appropriately and we really feel that we can get blend-in margins in the mid 60s, which to do that means that system margins are going to be in the low 60s and that the consumables are going to be more in the high 60s, low 70s.
Tim Meedy
I am surprised that they are that close in margin structure. And how far out though do you expect a target like that? Are we talking 2010 or which is something like?
Steven Van Dick
We are talking about late 2009.
Tim Meedy
And I noticed that you do not break out service revenues, is there a service component here?
Gary Restani
Oh yes.
Steven Van Dick
There will be a service component but there is no service component today.
Gary Restani
Well, we have field service people in play, we have six people out there currently.
Frederic Moll
In the first year most people elect to buy the system such that the first year of service is free.
Tim Meedy
Understood, okay. And when I think about the – I am just moving down the income statement, when I think about the variation between sales or SG&A and sales of units, how should I think about that relationship as you ramp your sales, your system sales?
Steven Van Dick
I think early on, you are going to see that we are going to have to make investments in front of the revenue ramp and I think you saw that in Q4 and that is going to moderate as we go through ‘08.
Tim Meedy
And you mentioned as some additional R&D spending, is that going to be on top of the current run rate that we see?
Frederic Moll
Yes, the AorTx R&D spend that we specifically talked about will be on top of AorTx for basically 4 to 5 weeks in Q4 so that is not yet reflected in Q4 run rates. And so that will be fully reflected in Q1 run rate.
Tim Meedy
Just going over the balance sheet real quick. Are sources of cash outside of your cash and equivalents on the balance sheet? Do you have credit lines? Or discuss anything?
Frederic Moll
We do not have any credit lines.
Tim Meedy
You do not have any credit lines. You will just go back to the public equity market for …
Steven Van Dick
We had a facility in the end of 2005 that we utilized fully in early 2006 and we are just in the process of hanging that down.
Tim Meedy
Will that cover any CapEx extension plans on the manufacturing side?
Steven Van Dick
No. Fully utilized facility that is just going to pay back loan.
Tim Meedy
Thanks very much. I appreciate your time.
Gary Restani
Thank you.
Operator
Thank you. And, ladies and gentlemen that is all the time we have for questions and answers for today. At this time, I will turn it over to Fred Moll for closing comments.
Frederic Moll
Thank you very much for your attention, and I appreciate your interest in Hansen Medical and look forward to speaking to you again in a few months.
Operator
Thank you. Ladies and gentlemen that will conclude today’s teleconference. If you would like to listen to a replay of today’s conference please dial in 330-509-3000 or 1800-405-536 and enter the access code of 11108667 followed by the pound sign. We thank you for your participation and at this time you may disconnect.
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