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MAKO Surgical Corp. (NASDAQ:MAKO)

Q2 2008 Earnings Call

July 29, 2008 4:30 pm ET

Executives

Mark Klausner - Managing Partner, Westwicke Partners

Maurice Ferré - Chairman, President and CEO

Fritz LaPorte - SVP of Finance and Administration, CFO and Treasurer

Analysts

David Roman - Morgan Stanley

Eli Kammerman - Cowen

Michael Matson - Wachovia

Matt Miksic - Piper Jaffray

Operator

Good afternoon, ladies and gentlemen, and welcome to the MAKO Surgical Corp. 2008 second quarter results conference call. As a reminder, today's conference is being recorded and will be available for replay on the company's website, www.makosurgical.com, under the Investor Relations section after the completion of the call.

It is now my pleasure to introduce your host Mr. Mark Klausner with Westwicke Partners. Please go ahead, sir.

Mark Klausner

Thank you, operator. Joining us on today's call are MAKO's President and CEO, Dr. Maurice Ferré, and the company's Senior VP and Chief Financial Officer, Fritz LaPorte.

Before we begin, I would like to caution listeners that certain information discussed by management during this conference call, including answers to your questions, will include forward-looking statements covered under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business. For a discussion of risks and uncertainties associated with MAKO's business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the Registration Statement on Form S-1, the Form 10-K for the fiscal year ended December 31, 2007 and the Form 8-K filed with our earnings release. MAKO disclaims any obligation to update any forward-looking statements made during the course of this call.

The company's press release of financial results has been released via Prime Newswire. Mr. LaPorte will detail the contents of this release following remarks by Dr. Ferré.

With that, it's my pleasure to turn the call over to MAKO's President and CEO, Maurice Ferré.

Maurice Ferré

Thank you, Mark. Good afternoon and thank you for joining us today to discuss MAKO's second quarter results. On today's call, I will provide you with an update on our business, and Fritz will provide you with the details of our financial results.

As most of you know, MAKO markets in advanced robotic-arms and implants that enables orthopedic surgeons to perform MAKOplasty, an innovative, restorative surgical solution to treat patient-specific, early to mid-stage osteoarthritic knee disease with consistent reproducible precision. Unlike conventional knee replacement surgery, which requires the extraction and replacement of the entire joint, MAKOplasty enables surgeons to isolate and resurface just the disease compartment of the knee.

Having commercially launched our Tactile Guidance System and implant systems in early 2007, we are relatively early in the adoption cycle. Nonetheless, we believe our solutions addresses the limitations of current methods of knee replacement and resurfacing very well, and as a result, we have a very significant market opportunity.

I am pleased with the progress we made in the second quarter. Key highlights, which I will detail later in the call include; number one, our customers performed 140 MAKOplasty procedures, representing a 37% increase over the first quarter of this year. 114 of these procedures were performed at our commercial sites, continuing the strong adoption trends that we saw in the first quarter. Our average monthly utilization at commercial sites increased to 5.4 MAKOplasty procedures per commercial site.

Number two, through June 30, the total number of MAKOplasty procedures performed since our first procedure in June of 2006 is 423 procedures. I should also note that our initial MAKOplasty patients are now over two years post-op procedure, which is an important critical milestone.

Three commercial Tactile Guidance Systems were installed and accepted by customers in the second quarter, bringing the total number of commercial sites in the field to 10. The new commercial sites are North Carolina Baptist Hospital, which is affiliated with Wake Forest University in Winston-Salem, North Carolina, New York Hospital for joint diseases, which is affiliated with NYU in New York City, and Good Samaritan Hospital in Los Angeles. As I will discuss later, these are important placements with five leaders in the orthopedic field.

We also made good progress on the regulatory front during the second quarter, and I am pleased to announce that we submitted a 510(k) for TGS version 2.0. In addition, during the quarter we received 510(k) clearance for our unicompartmental implants and a 510(k) clearance for our patellofemoral implant. These milestones keep us on track to obtain regulatory clearance of our TGS version 2.0 and bicompartmental knee implant system to allow for a commercialization of these products in the first half of 2009.

We attended five orthopedic specialty meetings in the second quarter, including the Dorr Institute Masters Series in Arthritis Surgery in April where Dr. Thomas Coon performed a live MAKOplasty procedure. Finally, we have submitted 36 abstracts to various orthopedic conferences, which will occur over the course of next year. We have also submitted and are in the process of preparing a number of additional manuscripts to submit to peer-reviewed journals. Additionally, two of our MAKOplasty surgeons have written chapters for surgical technique textbooks.

Overall, I remain enthusiastic about our products and market opportunity. I was pleased by the operating progress we made during the second quarter, building on the strong adoption trends we experienced during the two previous quarters.

Now I would like to turn the call over to Fritz, to review our financial results for the second quarter. Fritz?

Fritz LaPorte

Thank you, Maurice, and good afternoon everyone. In the second quarter of 2008, we recognized product and other revenue of $704,000 compared to $106,000 in the second quarter of 2007. The revenue was primarily comprised of MAKOplasty procedure revenue, generated from the 140 procedures performed in the second quarter of 2008 compared to the 21 procedures performed in the second quarter of 2007.

Deferred system revenue increased to $6.5 million at the end of the quarter of which $2 million was generated during the second quarter as a result of the sale and customer acceptance of three TGS units during the quarter. It is important to note that the three new commercial sites were installed and customer-accepted at the very end of the quarter, but did not perform any MAKOplasty procedures during the quarter.

Total gross profit for the second quarter of 2008 was $224,000 compared to $59,000 in the same period in 2007. Total gross margin for the period was approximately 32% comprised of a 58% margin on products, partially offset by a negative margin on TGS units.

As I have mentioned on our previous calls, although we differ 100% of the system revenue and the direct cost of system revenue associated with the sale of TGS units, we recognize in-cost of system revenue, the royalties associated with the sale, as well as the warranting reserve to cover the standard one year warranty. This results in a negative margin on system sales and reduces the total gross margin. We anticipate that this will normalize in the future after the introduction in sale of version 2.0.

Turning to expenses. Total operating expenses for the second quarter of 2008 were $8 million, an increase of $3.7 million from the $4.3 million for the second quarter of 2007. Breaking that down by major functions, sales, general and administrative costs were $5.1 million in the second quarter of 2008 compared to $2.4 million in the same period in 2007. The increase of $2.7 million from the comparable quarter in 2007 was primarily due to an increase in sales, marketing and operations cost associated with the commercialization of our products.

General and administration cost also increased as we continue to build infrastructure to support our growth and incurred additional cost associated with operating as a public company. R&D costs were $2.5 million for the second quarter of 2008 compared to $1.6 million for the same period in 2007. The increase of $900,000 from the comparable quarter in 2007 was primarily due to an increase in R&D activities associated with the development of version 2.0 of our TGS and the MAKO implant systems.

Our net loss attributable to common stockholders for the second quarter was $7.6 million, including non-cash stock-based compensation expense of $600,000 or $0.42 per basic and diluted common shares based on average shares outstanding of $18.1 million. This compares to a net loss attributable to common stockholders for the same period in 2007 of $5 million, including non-cash stock-based compensation expense of $100,000 or $3.19 per basic and diluted share, based on average shares outstanding of $1.6 million.

Let me quickly summarize our operating results for the six months ended June 30, 2008. Total revenue for the first six months of 2008 was $1.2 million compared with $206,000 for the same period in 2007. Total operating expenses for the first six months of 2008 were $16.7 million compared to $8 million in the same period in 2007.

Net loss attributable to common stockholders for the first six months of 2008 was $16.6 million or $1.20 per basic and diluted share based on average shares outstanding of 13.8 million compared to $9.2 million or $5.92 per basic and diluted share based on average shares outstanding of 1.6 million in the same period in 2007.

As of June 30, 2008, we had $39.1 million in cash, cash equivalents and short-term investments and no debt. Out net cash used in the second quarter of 2008 was $7.5 million and was primarily used in operating activities.

Turning to guidance. We continue to be comfortable with our previously issued annual guidance for 2008 of 8 to 10 new commercial site, of which we had 5 in the first six months, and 500 to 600 MAKOplasty procedures, of which 242 were performed in the first six months. While we are comfortable with our annual guidance, it bears mentioning that the third quarter of the calendar year is typically a seasonally slower quarter in orthopedics.

Now I'd like to turn the call back over to Maurice.

Maurice Ferré

Thank you, Fritz. Before we open the call up for questions, I'd like to spend a few minutes providing you some additional detail on our operational accomplishments during the second quarter.

I am pleased with the quality of the new commercial site added in the second quarter. North Carolina Baptist Hospital is a leading orthopedic medical center that is affiliated with Wake Forest University. The MAKOplasty team at New York Hospital for joint diseases is led by Dr. Joseph Zuckerman, who is the President Elect of the American Academy of Orthopedic Surgeons.

Lastly, our system at Good Samaritan is being used by Dr. Larry Dorr and his team. Dr. Dorr is the immediate past President of the Hip Society, the past President of the Knee Society, and the former President of the American Associations of Hip and Knee Surgeons. We are excited that MAKOplasty is being adopted by such orthopedic luminaries and believe that this will help as we continue to educate the market on the advantages and benefit of our knee resurfacing solutions.

Along with our new commercial sites, I am also encouraged by the adoption trends that we're seeing in our existing commercial sites where the average monthly utilization per site was 5.4 procedures during the quarter. It is important to note that the three new commercial sites were installed and customer-accepted at the very end of the quarter and did not perform any MAKOplasty procedures, and therefore, are excluded from the monthly utilization calculation.

At our experienced commercial sites where our systems have been in place for more than six months, the average monthly utilization per site was 6.3 procedures during the quarter. We made good progress in the quarter towards the clearance of our TGS version 2.0 in our bicompartmental knee system.

In late June, we made a 510(k) submission for the FDA for our version 2.0, which keeps us on track to have version 2.0 commercially launched in the first half of 2009. During the quarter, we also received 510(k) clearances for each of our unicompartmental implants and patellofemoral implants. These individual clearances represent a significant step in the process of obtaining clearance for the bicompartmental knee system. We continue to anticipate that the bicompartmental knee system will be cleared in time to launch with our TGS version 2.0 in the first half of 2009.

In the second quarter, we continue to be active in our clinical education and marketing efforts. We participated in five orthopedic specialty meetings, including the Dorr Institute Masters Series in Arthritis Surgery in Pasadena, California in April at which Dr. Thomas Coon performed a live MAKOplasty procedure. The Masters Series is an "invitation-only" three day event attended by approximately 200 orthopedic surgeons that focuses on cutting-edge topics in the field of orthopedic surgery.

In the third quarter, we will continue to be active and plan to attend additional orthopedic specialty meetings, including Contemporary Issues in Partial Knee Arthroplasty in early September, Annual Advancement in Arthroplasty and Trauma Conference in mid September, and the [Intel/Scott] Telemeeting also in mid September. These meetings provide important venues for our sales and marketing group to expose more physicians to the MAKOplasty technology. A complete listing of meetings where MAKO will exhibit can be found on the physicians' page of our website under the events category.

Our clinical team has also been active working with our physicians and has submitted 36 abstracts to various orthopedic conferences, which will occur over the course of the next year. We intend to remain visible at the leading orthopedic meetings as we continue to educate the market on our technology and the benefits of the MAKOplasty procedure.

Additionally, we have submitted and are in the process of preparing a number of additional manuscripts and submit to peer-reviewed journals for consideration for publication. While the ultimate acceptance and timing are difficult to predict, we hope to see some of these articles published in early 2009.

Lastly, two of our MAKOplasty surgeons have written chapters for surgical technique textbooks. These surgeons were invited to write a chapter specifically detailing the surgical technique for robotically-assisted unicompartmental knee orthoplasty. I should also note that we achieved a critical milestone this quarter with our first MAKOplasty patients now being two years post-surgery.

As I mentioned on our last call, on the patient awareness front, we continue to see media interest in highlighting MAKOplasty in our center of excellence. Four MAKOplasty stories were aired by 30 TV stations nationwide and MAKOplasty was featured by the PBS Nightly Business Report, which reached approximately 250 cities. As evidenced in the average monthly utilization at our commercial site, this continues to demonstrate the ability to increase patient flow to our surgeon and customers through a targeted marketing effort.

In closing, I am pleased by the operating progress we made during the second quarter, building on a strong adoption trend that we experienced during the two previous quarters. I am also enthusiastic about the high quality of the surgeons and hospital facilities that are adopting MAKOplasty.

With that, I would like to open the call to take your questions.

Question-and-Answer Session

Operator

(Operator Instructions). We'll go first to David Roman with Morgan Stanley.

David Roman - Morgan Stanley

Good evening, everyone. Thank you for taking the question. Just a couple of things, firstly on the P&L, Fritz, can you give us a breakdown of what revenue was between procedures and other?

Fritz LaPorte

Sure. The total revenue for the quarter was $704,000 of which $579,000 was from products, which is generated from our MAKOplasty procedures and $125,000 was other. For the six months ending June 30, it was $1.2 million in total revenue of which $993,000 was generated from products and $208,000 was generated from other.

David Roman - Morgan Stanley

And then on the P&L, both in SG&A and R&D, we saw a pretty big sequential step down in absolute dollars. Is that to do with timing of specific projects or is that a more normalized run rate we should be looking at now?

Fritz LaPorte

I'm sorry, David, you said which categories?

David Roman - Morgan Stanley

In R&D we saw versus the first quarter a pretty big step down in absolute dollars.

Fritz LaPorte

Right. So in R&D, if you recall, we had approximately $950,000, almost $1 million, in the first quarter associated with a non-recurring stock-based expenses associated with some consultants.

David Roman - Morgan Stanley

Okay. And then, lastly, the ASP is a little higher I think on the systems that you've been talking about. Is that consistent across all three systems or have we seen prices go up throughout the quarter?

Fritz LaPorte

The average ASP for the quarter was about $659,000 and I think that's a good average. They are all coming in right around that.

David Roman - Morgan Stanley

Okay. Thank you very much.

Fritz LaPorte

You are welcome.

Maurice Ferré

Thank you, David.

Operator

And we'll go next to Eli Kammerman with Cowen.

Eli Kammerman - Cowen

Good afternoon.

Fritz LaPorte

Good afternoon, Eli.

Maurice Ferré

Good afternoon, Eli.

Eli Kammerman - Cowen

First question is, now that you've got the President Elect of the AAOS as one of your key users, do you feel like you're getting closer to an endorsement by the Knee Society itself. And if so, when might we expect such an endorsement?

Maurice Ferré

Eli, good afternoon, first of all. We are very pleased not only to have the President Elect, Dr. Joseph Zuckerman over at NYU and his team embracing the MAKO technology and I think they are going to be a super site for us in the New York area, we are very excited to have them. And we have one of the exciting things about that site is that we're seeing not just one surgeon, but multiple surgeons showing a lot of interest of being able to use the system. And that, obviously, is something that's going to be very exciting as we look through and as we see this going forward. But we also this quarter have got the very visible Dr. Larry Dorr who is a giant in our industry and has also been part of the Hip and Knee Society.

And those two endorsements, I think, are going to help just to keep building consensus. They have huge followings. But to specifically get the Knee Society to endorse this, I think the good news is that we've got a bunch of folks that are already users, like Jess Lonner, who are part of the Knee Society and are already planning some of these abstracts that we've sent out. These 36 abstracts that we sent out, a whole bunch of them are to the Knee Society.

So we're pretty excited about getting this type of visibility. I think this industry is looking for innovation and I think MAKO is really providing that. And I think that's why we're seeing these types of surgeons starting to embrace this type of technology. I mean the need for persistence and accuracy reproducibility are all key things that are driving the interest of a lot of these top surgeons.

Eli Kammerman - Cowen

Okay, that's helpful. My other question is that with the approximate 50% increase in commercially accepted units at the end of the quarter, it seems wholly realistic that you would see a significant quarter-to-quarter increase in procedures in the third quarter, which to me implies that you're much more likely to achieve procedures somewhere between 600 and 700 this year rather than 5 to 6, so why the reluctance to raise your procedure guidance?

Maurice Ferré

Well, I'm going to let Fritz answer that on the guidance side, but I'm just going to say that we're very excited with the type of quarter-to-quarter growth that we're seeing on procedure volume. And I think it's a little early for us in the cycle to really kind of put our hats off here. I'm going to have Fritz talk about the earnings guidance.

Fritz LaPorte

Okay. So relative to the procedures, Eli, as Maurice said we're pleased with the progress we made to-date in driving our adoption in our existing sites. The 240 procedures for the first six months of the year put us on track to attain our 500 to 600 procedures that we've guided to. And at this point, we still have the six months ahead of us, as well as additional system placements that we are also guiding to.

So at this point, we still feel comfortable with our guidance. Clearly, it looks like we're tracking to the higher end of that guidance. But I think at this point, we're comfortable with the guidance that we provided.

Eli Kammerman - Cowen

All right. And one last small question. Are you still estimating R&D to come out somewhere around $12 million for the whole year?

Fritz LaPorte

Yes. We still have some large expenditures ahead of us, as we finalize the development of our version 2.0, finish building the prototypes production equivalents, as well as on the MAKO bicompartmental system, on the prototypes and testing as well.

Eli Kammerman - Cowen

Okay, great. Thanks very much.

Fritz LaPorte

Thank you, Eli.

Maurice Ferré

Thank you, Eli.

Operator

(Operator Instructions). We will go next to Michael Matson with Wachovia.

Michael Matson - Wachovia

Hi. I guess just with regards to the implants that you just got approved, the bicompartment and the Uni. Are you going to need to get an approval to use or to market those products for use together in a bicompartmental configuration or is that something that you'll be able to do with the current approvals?

Maurice Ferré

This is Michael, right?

Michael Matson - Wachovia Securities

Yeah, Mike Matson from Wachovia.

Maurice Ferré

Mike, how are you doing?

Michael Matson - Wachovia Securities

Good.

Maurice Ferré

So Mike, look, I think the good news is that we've now got our initial clearances with regards to the MAKO uni and the MAKO patellofemoral. And it's our goal to be able to provide our customers with both of them being used as individual parts or together. So the submissions we've done to-date have been separate. So it allows the surgeons the intended use and the labeling of it is as indicated as single use, but I just wanted to remind everybody that it's all in lieu and tying into the TGS 2.0 system. So these implants are designed to work specifically with the TGS 2.0 system, which we said we just recently submitted our application to the FDA.

With regards to combining them together, we see that there is a clear path that the FDA has already done, has already set up of predicate devices that has a use for bicompartmental, and it's our goal to file another set of submissions that will allow us to use both these compartments together. So the indication will be for bicompartmental.

Michael Matson - Wachovia Securities

Okay. So that would be another separate 510(k) from the one that you've submitted on the TGS version 2.0?

Maurice Ferré

Yes. That's correct.

Michael Matson - Wachovia Securities

Okay. So what's the timing on that? And when you launch the version 2.0, I guess you've got until early '09, are you going to be able to immediately offer the bicompartmental market for that application, or is that something that may be delayed by a few months or something?

Maurice Ferré

I mean we have from day one told the market that we are going to be writing for full commercialization of our 2.0 system with our bicompartmental by the first half of 2009, and I think that we're clearly on our way to do that. I think we are on a really good shape, we feel good about it, and we know where we stand. And we think we could meet those milestones.

Michael Matson - Wachovia Securities

Okay. And then I was just wondering with the sites that have a system installed, I know that in sort of the modeling that you had done around and marketing the product, you were expecting some sort of a halo effect where you're having a robot who would drive additional other orthopedic procedures, particularly total knees, but maybe even other things as well. Is there any evidence that that's actually happening in any of these sites?

Maurice Ferré

Yeah. If you look at our website, we just published what we call the MAKO View. And the MAKO View is our newsletter that goes out. And on one of our sites in particular -- we actually feature two sites. We feature Foundation Surgical Hospital in Houston and also Holy Cross here in Fort Lauderdale. And both of them are sites that have -- obviously Holy Cross being our first site and there's a whole section there that talks about, from the CEO's perspective, how the modeling has been successful in terms of looking at the ROI models, and how from an administrative perspective they're happy with how the results are coming in, in terms of volume.

And specifically on the Holy Cross, there's a little discussion about how it's also pushed a certain amount of new business, total knee business into it. And I think we're seeing that consistently across our different markets that we've seen and we don't see that changing.

Michael Matson - Wachovia Securities

Okay. And then the new sites and surgeon customers that you picked up in the most recent quarter, how many of those were existing, high-volume uni users? Have any of them decided to really ramp up their use of uni's because of the robot or are they just converting existing uni volume to the robot?

Maurice Ferré

I think it's a mix of both. I think what we're experiencing are customers that are looking at the whole treatment of the disease of osteoarthritis of the knee. And I think the thesis of the 50 million people that are the silent sufferers out there and that there's a patient demand of an unmet need and a technique of being able to with high precision go in and do these MAKOplasty procedures on top of what the patients are asking for in terms of a less invasive technique. These are all driving volumes up at all our sites.

We're seeing high-volume surgeons that are bringing in more doctors that kind of fill in and doing the late stage stuff, so that they can focus on the early and the mid-stage osteoarthritis.

Michael Matson - Wachovia Securities

Okay. And then, you may have mentioned this so I apologize if I missed it, but for Fritz, I was just wondering if you'd said anything on your cash position and cash burn and guidance around that. Because I think on the last call, you gave some guidance and just wondering if that still holds?

Fritz LaPorte

Sure. Mike, our cash burn for the quarter was $7.5 million approximately, which approximates the first quarter as well. And the guidance that we gave previously is that we would end the year 2008 with approximately $20 million in cash balance and we continue to believe that, that is where we are going to end up for the year.

Michael Matson - Wachovia Securities

Okay, that's all I have got. Thank you.

Fritz LaPorte

Thank you.

Maurice Ferré

Thank you.

Operator

We will go next to Matt Miksic with Piper Jaffray.

Matt Miksic - Piper Jaffray

Hi, guys.

Fritz LaPorte

Hi Matt.

Maurice Ferré

Hey, Matt nice to hear your voice.

Matt Miksic - Piper Jaffray

Thanks for taking the question. So just a couple of detailed kind of mix here, and maybe one just broader question. The first was on just OR times that I apologize if I missed it. But I was curious how the times in the OR have been trending and maybe where some of your best times are now versus six or seven months ago?

Maurice Ferré

No. Matt, I mean, I think what we are seeing is our average MAKOplasty time is averaging about -- it's about time neutral, which is about 45 minutes. We had mentioned in previous calls that in our first MAKOplasty procedures, these were long procedures and what we are now experiencing is right off the gate with our training programs that -- and then most of our training programs by the way have kind of moved from an onsite to now an offsite. So we are able to train surgeons at the facility. We have a whole protocol. And before they get into the operating room, we are seeing our surgeons doing their first procedures in less than an hour.

So I think consistently we are meeting that metric of being able to be at least time neutral for these types of procedures.

Matt Miksic - Piper Jaffray

Great. And then another thing that I remember hearing early on was a concern and maybe it was more among investors than among docs. But just the question is to why and how willing docs are to trust the implants that you are using given that they are not implants that individually have been on the market for 10, 15, 20 years, and if they look at the longevity of that versus the longevity of something else and have questions. I am just wondering has there been an issue or is that something that docs get comfortable with quickly or maybe seen a change in the way they are reacting to using your implants versus another larger manufacturers?

Maurice Ferré

Yeah, I think that initially those were certain concerns that we had and they're still - the way the sales process works is that they very quickly get flushed through the process. Obviously as you know we have implants that are very, very comparable to implants that are out there in the field that are popularly used.

And you know from our perspective, we are working with the same types of suppliers that are making these implants that the larger companies are using. So there is a clear understanding of the materials, we don't have a different type of material as chromium, cobalt and high ultra polyurethane.

So these are materials that are well known. These are geometries that are very well known and understood, and we usually walk them through the design of the implants, the techniques, and how they compare to other types of unicondylar implants and resurfacing implants. And very quickly they get comfortable with it. It hasn't been an issue, and if it were an issue, I think you would start seeing it in the slow down of the types of adoption or utilization that we're seeing.

So, very quickly, they get comfortable and we get them through it and they are very excited also with how the progress of the new generation of these implants are coming with our patellofemoral and our unicompartmentals. So in general I think they're really buying into the whole concept.

And the whole idea is from our perspective, it's not just the implants, I think, it will become important is how you actually put these implants in. So we're taking into the next level of being able to design implants that can only be put in robotically and take advantage of the Tactile Guidance robotic system to place these things in.

Matt Miksic - Piper Jaffray

Great. It clearly doesn't seem like it's been a problem so far. And then, also just kind of an update on some of your products that you have launched, the inlay versus onlay, can you give us a sense of how that and there was some, I think thinking early on that some folks would be more willing to work with one versus the other? What the interest has been on either side of that?

Maurice Ferré

I think that there is an indication and a taste for different types of implants. As for those listeners out there, there are two types on the tibial side. We have the inlay implant, which is more of the [PC] technique and then the onlay, which kind of lays on the subchondral of the cortical bone. And the indications for the inlay versus the onlay are very clear in the [ledger] and what we're seeing is because we've had so much success with the inlay that a lot of our surgeons are predominantly using the inlay technique. But I think we're kind of agnostic to it and we're providing both solutions to the market, because that's what they're asking for.

Matt Miksic - Piper Jaffray

Great. Well, thanks again for taking the questions.

Maurice Ferré

Thanks. Thanks, Matt.

Operator

And we'll take our last question from Eli Kammerman with Cowen.

Eli Kammerman - Cowen

Thank you very much for taking the follow-up. I was noticing that Dr. [Michel], the President of Foundation Hospital commented that he is in the process of adding MAKOplasty capability to two other hospitals in the Foundation's system. Are those systems already in place? Or are those placements that might happen in the next three to six months?

Maurice Ferré

So Eli, thanks for the follow-up question. You know, isn't it wonderful to hear a CEO from a hospital start talking about buying additional systems into his systems. That's the type of stuff that we love to hear. And it's a good testimonial of how pleased he is with how things are going over there in Houston.

And I think we're going to continuously see those types of events, specifically which hospitals and how that's all going to play? I can't comment at this time on those things, but I could tell you that what we're seeing is just a huge amount of encouragement of a real interest of robotics in orthopedics. And I think just a continuous trend of putting up the numbers, putting up high volume at these sites, making it a win-win for the hospital, for the docs, for the patients, is really what it's all about.

And I think that this is the third quarter that we've been able to demonstrate this. We're getting real visibility. The fact that we've now got these abstracts and publications and peer reviewed journals coming out, the fact that we're going to be out there continuously hitting hard on clinical-based evidence. We've got clinical sites up and running, registries going up and these are all very positive things as we continue to grow.

Eli Kammerman - Cowen

Okay. Thank you.

Operator

And that concludes our question-and-answer session. I'd like to turn the conference back to Maurice Ferré for any closing remarks.

Maurice Ferré

Well, thank you everybody. And let me close by thanking all of you for taking the time to join us on our call today. We sincerely appreciate your interest in MAKO and look forward to updating you on our continued progress.

Operator

Thanks, everyone. That does conclude today's conference. You may now disconnect.

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Source: MAKO Surgical Corp. Q2 2008 Earnings Call Transcript
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