TransEnterix, Inc. (TRXC) CEO Todd Pope on Q4 2018 Results - Earnings Call Transcript

Feb. 26, 2019 2:50 PM ETAsensus Surgical, Inc. (ASXC)2 Comments
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TransEnterix, Inc. (TRXC) Q4 2018 Earnings Conference Call February 26, 2019 8:00 AM ET

Company Participants

Mark Klausner - Investor Relations

Todd Pope - President and Chief Executive Officer

Joe Slattery - Executive Vice President and Chief Financial Officer

Conference Call Participants

Rick Wise - Stifel

Glenn Novarro - RBC Capital Markets

Larry Keusch - Raymond James

Operator

Good afternoon, ladies and gentlemen. Welcome to the TransEnterix Fourth Quarter and Full Year 2018 Financial and Operating Results Conference Call. As a reminder, this call is webcast live and recorded. It is now my pleasure to introduce your host, Mr. Mark Klausner of Westwicke Partners. Please go ahead, sir.

Mark Klausner

Thank you. Good afternoon and thank you for joining us for the TransEnterix fourth quarter conference call. Joining us on today’s call are TransEnterix President and Chief Executive Officer, Todd Pope; and its Executive Vice President and Chief Financial Officer, Joe Slattery. I would like to remind you that this call is being webcast live and recorded. A replay of the event will be available following the call on our website. To access the webcast, please visit the Events link in the IR section of our website, transenterix.com.

Before we begin, I would like to caution listeners that certain information discussed by management during this conference call, including guidance related to the number of Senhance systems expected to be sold in the first quarter of 2019 are 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 our forward-looking statements due to risks and uncertainties associated with the company’s business. The company undertakes no obligation to update the information provided on this call. For a discussion of risks and uncertainties associated with TransEnterix business, I encourage you to review the company’s filings with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 2017 to be filed this week.

During this call, we will also present certain non-GAAP financial information related to adjusted net loss and adjusted earnings per share. Management believes that non-GAAP financial measures, taken in conjunction with U.S. GAAP financial measures, provide useful information for both management and investors by excluding certain non-cash and other expenses that are not indicative of the company’s core results. Management uses non-GAAP measures to compare our performance relative to forecast and strategic plans to benchmark our performance externally against competitors and for certain compensation decisions. Reconciliations from U.S. GAAP to non-GAAP results are presented in the tables accompanying our earnings release which can be found in the Investor Relations section of our website.

With that, it’s my pleasure to turn the call over to TransEnterix President and Chief Executive Officer, Todd Pope.

Todd Pope

Thank you, Mark, and welcome to our fourth quarter 2018 conference call. We will begin today’s call by providing a high level overview of our fourth quarter performance, followed by review of the progress we made during 2018. I will then turn the call over to Joe to provide a financial overview, after which I will discuss our priorities for 2019.

Starting with our fourth quarter performance, in the fourth quarter, we sold 5 systems [Technical Difficulty], 1 in the U.S. and 1 in Asia. We were very pleased with our results during the quarter. Notably, this was the first quarter in which we sold at least 1 system in each of the three geographic regions. Starting in the EMEA region, we sold 3 systems, one was a direct sale to an end-user hospital in Switzerland and the other 2 were sales to end-user hospitals by distributors. The direct sale in Switzerland was our first sale in Switzerland to Moncucco Clinica Lugano, which is the largest hospital in the Ticino Canton, and they have already begun performing procedures in general surgery with plans to expand the use to multiple specialties.

Turning to the U.S., we sold a Senhance to Hackensack Meridian Health at Pascack Valley, which is part of a large hospital system, including 13 hospitals in New Jersey. This represents an important expansion into a key geography with a major healthcare system. We are pleased to be partnering with leading surgeons within this hospital to offer patients access to advanced minimally invasive surgery in general surgery and gynecology. Now that training is complete, we anticipate these surgeons to perform their first cases in the coming weeks. We also had one sale in Asia to Fu Jen Catholic University Hospital in Taiwan. This sale comes on the heels of our fourth quarter Taiwanese FDA approval and is our second sale in Taiwan. These initial systems can serve as locations for surgical observations and training to support growth in Asia.

Shifting gears to our strategic priorities. At this time last year, we discussed the following strategic priorities for 2018 to continue to drive the adoption of Senhance, maximize the effectiveness of our commercial sales infrastructure, expand the portfolio of instruments available for use with Senhance, broaden the indications for use with Senhance, and continue to achieve regulatory clearances in key geographies. We made tremendous progress within each of these strategic priorities.

Taking each one in order; first, maximize the effectiveness of our commercial sales infrastructure. 2018 represented a major shift in our commercial efforts as it was the first full year where we had Senhance approvals in both U.S. and Europe, and late in the year we achieved Taiwanese FDA approval as well. As a result, we focused on managing the effectiveness of our commercial sales infrastructure across the organization, which shifted from operating primarily in Europe to one that is now focused on driving the adoption of Senhance in three major geographic regions and multiple countries.

We took a major step in that direction with the hiring of Eric Smith as Chief Commercial Officer in September. This was a newly created role whose responsibility is to lead the company’s global commercialization efforts with a focus on both strategic and tactical execution efforts in sales, upstream and downstream marketing, field clinical support, and training both internal and external with a focus on adoption and clinical excellence. The addition of this position has had strong positive impact on our global sales and marketing organization as well as our ability to effectively leverage our global momentum and share best practices across all three geographies.

One of the key accomplishments of 2018 was the establishment of our U.S. based commercial sales team to support the approval of Senhance. We initially launched the sales force with 15 sales reps. We felt this was the appropriate sized sales force to handle the challenge of bringing a new product to market with a focus on key high volume laparoscopic surgeons and hospitals. We feel very good about the position we put ourselves in throughout the year to drive long-term growth in the U.S. We are confident in the robustness of our pipeline generated by this team, and as we continue to expand our footprint throughout the U.S., we will evaluate the location and timing of additional hires.

Outside the U.S., our growing installed base of Senhance systems and the successful clinical uptake is generating high level of demand. To capitalize on this demand in the EMEA region, we took the opportunity to evaluate and increase use of distributors to optimize our success from the commercial organization. We continue to see increased effectiveness by utilizing distributors due to their deep understanding of local landscape when working with complex sales and hospitals in various geographies throughout EMEA.

Our second strategic priority was to expand the portfolio of instruments available for use with Senhance. Our ability to move quickly in adding instruments is one of the benefits of our open architecture strategy for the Senhance platform. Competing robotic systems are closed or vertically integrated requiring hospitals to utilize only technology offered by the robotic system manufacturer regardless of the technology preference of the surgeon or the current capital equipment owned by the hospital. With our open architecture strategy, we can rapidly integrate today’s leading technologies for use with our platform which allows hospitals to leverage existing and new investments for use in their robotics program. In 2018, we made great strides to show the potential of this open architecture strategy.

As we continue to strive to make Senhance more broadly applicable to surgeons, we focus on aggressively expanding our instruments offering to allow Senhance to be used in more high volume procedures. This was done while also accommodating the instrument and technology preferences of surgeons and hospitals. Our portfolio expansion initiatives focused around three groups of instruments, 3 millimeter micro laparoscopy instruments, articulating instruments, and advanced energy instruments. In October, we received FDA 510(k) clearance for 3 millimeter diameter micro laparoscopy instruments. The clearance of the 3 millimeter instruments represent a first in robotic-assisted surgery. There is growing adoption in the 3 millimeter manual laparoscopic instruments in addition to reduced scarring, smaller incisions offer the potential for less pain and lower narcotic use after surgery. The Senhance’s digital interface addresses the challenge of manually controlling these small instruments.

Our 3 millimeter instruments, coupled with 5 millimeter endoscopes from our vision system partners each represent a new standard in robotic surgery. Another portfolio expansion initiative in 2018 was for articulating instruments. During the fourth quarter, in line with expectations, we received CE Mark approval for 5 millimeter articulating instruments and we submitted our application for FDA 510(k) clearance. Our most important instrument portfolio expansion initiative in 2018 was the Senhance Ultrasonic, an advanced energy instrument. Advanced energy devices are some of the most versatile and critical tools for laparoscopic surgeons. They are used in a high percentage of cases across a wide range of procedures. Because of this, it’s often viewed as one of the most important instruments for laparoscopic surgeons. We believe the addition of the Ultrasonic instrument offering is significant and broadens the attractiveness of digital laparoscopy with the Senhance platform for surgeons across the globe.

In October, we received CE Mark approval for our Ultrasonic instrument and subsequent to the end of the fourth quarter we received FDA 510(k) clearance. The majority of our EU and U.S. accounts have received and begun to use Ultrasonic with Senhance. The clinical feedback from this device has been excellent with many surgeons utilizing the instrument to perform complex dissections in general surgery, colorectal, bariatric, gynecology and urology with speed and safety. Several additional product enhancements occurred in 2018, including compatibility with 2 additional vision systems as well as a 4k monitor capability in addition to the existing 3D HD on the Senhance. We now have compatibility with virtually all of the market leading laparoscopic visualization systems and continue to expand these offerings.

Shifting gears to expanding indications for use. In the fourth quarter of 2017, when we received FDA clearance for Senhance, the system was initially approved for laparoscopic colorectal and gynecologic surgery which provided immediate access to over 1.5 million surgeries in the U.S. While this was a tremendous achievement, it still remained important procedures in additional surgical specialties that we believed would be key for the adoption of Senhance in the U.S. In May of 2018, we received FDA clearance for expanded indications for hernia and gall bladder procedures. This more than doubled our addressable market bringing the total available procedures to over 3 million annually.

Our final strategic initiative was to expand regulatory clearances in key geographies. In 2018, this focused primarily around countries in Asia. In the fourth quarter and in line with expectations, we received Taiwanese FDA approval for Senhance instruments. This was the second of two TFDA approvals required to receive a full clearance, the first of which was for the Senhance surgical system, which we received in the second quarter of 2018. Our other focus area was building a foundation in Japan. As we have discussed in the past, Japan is the world’s second largest robotics market by country only behind the U.S. In 2018, we established a Japanese subsidiary to focus on the regulatory process and eventual commercial needs in this market.

Outside of these key initiatives, we also wanted to continue to advance the capabilities of Senhance. In September, we announced the acquisition of the assets of medical surgery technologies or MST in Israel-based med-tech company, focused on surgical image analytics whose technology we believe will meaningfully advance the benefits of digital laparoscopy to patients, surgeons and operating rooms globally. Specifically, the key underlying technologies are software-based image analytics powered by advanced visualization, same cognition, artificial intelligence, machine learning and data analytics. As I just reviewed, we made significant progress throughout the year.

At the beginning of 2018, we look quite different than we do now. In the U.S., we have just received the FDA clearance for Senhance and we are in the very early stages of launching our commercial sales efforts. We had a limited instrument set available and indications for use within two surgical specialties. With only 1 U.S. sale in 2017, we had very limited number of available reference sites in the U.S. for surgeons to observe surgery and interact with the system. Today, our total addressable market in the U.S. is double its initial size as we have expanded our indications for use into high volume surgical specialties. We added two significant instrument expansions, 3 millimeter instruments and ultrasonic and expanded our U.S. installed base from one system in Florida to six systems. We have a large addressable market opportunity. We have added key surgeon preference instruments and made it significantly easier for surgeons in our pipeline to access Senhance in the U.S.

In our international markets we had similar transformations both in terms of the expansion of our key instruments and the expansion into new geographies. This dynamic shift in our product offering and geographic footprint was the key driver in our significant growth in 2018 as we expanded the applicability of Senhance to more surgeons, hospitals and patients on a global scale. Looking at our performance for the full year, we saw a significant improvement in both system sales and revenue growth. In 2017 we sold five systems and recognized $7.1 million in revenue and in 2018 we sold 15 systems and recognized $24.1 million in revenue, nearly a 240% growth. We are all very proud of what we have been able to accomplish in 2018 and the foundation we have established as we go into 2019.

I would like to now turn the call over to Joe to provide the financial review.

Joe Slattery

Thanks Todd. For the three months ended December 31, 2018, we reported revenue of $7.5 million comprised of $6.3 million in systems revenue from the sale of five systems, $820,000 in instruments and accessories and $383,000 in services. Of the $7.5 million approximately $7 million was from new installations during the quarter reflecting average revenue per a new placement of approximately $1.4 million and $500,000 in revenue from customers that purchased systems prior to the fourth quarter. Gross margin for the fourth quarter was 25%.

R&D expenses in the quarter increased to approximately $6.4 million as compared to the prior year period at $5.2 million due primarily to increased personnel and consulting costs. Sales and marketing expenses in the quarter increased to $7.9 million from $5.5 million in the prior year period as we continued to expand investment in our commercial infrastructure with the focus in the U.S. General and administrative expenses in the quarter increased to approximately $3.9 million from approximately $3.6 million in the prior year period, primarily due to increased headcount in consulting services to support our overall growth and geographic expansion.

GAAP net loss for the quarter was $6.4 million or $0.03 per share compared to a GAAP net loss of $76 million or $0.40 per share in the prior year period. Adjusted net loss for the quarter was $14.7 million or $0.07 per share compared to an adjusted net loss of $14.1 million or $0.07 per share in the prior year period. The primary adjustment from GAAP net loss relates to accounting for the change in fair value of warrant liabilities which is driven mostly by changes in our stock price. Cash and short-term investments as of December 31 were $72.9 million.

On December 28, 2018, we entered into an at-the-market equity offering sales agreement or ATM to sell from time to time at our option up to $75 million of shares of common stock. An ATM is designed to allow companies to opportunistically access equity capital markets particularly during periods of high volume of volatility and allows us to pursue raising equity at a lower overall cost of capital because of fees structure as lower and pricing discounts common with fully marketed financings are avoided. Under the ATM we are under no obligation to sell any shares, the timing frequency in terms of any sales orders are entirely at our discretion.

During the fourth quarter, we have received $10 million second tranche from – of non-dilutive financing relating to the debt agreement with Hercules Capital bringing the total debt under this agreement to $30 million. We continue to anticipate that the third tranche of $10 million will be funded in 2019 and believe that our existing cash and additional debt proceeds will support the business into late 2020. As Todd mentioned, we also closed the MST transaction in the fourth quarter. This transaction was valued at $20.3 million and was funded with $5.8 million of upfront cash, 3.15 million shares of common stock and a deferred payment of $6.6 million in either cash or stock at our election on or before October 31, 2020.

Now, I will turn the call back over to Todd. Todd?

Todd Pope

Thank you. I would like to discuss our key strategic priorities for 2019. First, we will focus on driving adoption of digital laparoscopy with Senhance in the U.S. Our experience commercializing Senhance in Europe and more recently in the U.S. has given us a deeper understanding of the volume process. Surgeons at hospital typically need to complete a system demonstration followed by preclinical labs and finally a live surgery observation. Until recently, surgeons and hospitals may have been able to do some of those activities in the U.S., but they would have to fly to Europe to observe live surgery. For obvious reasons, this was a hurdle to progress in accounts through the pipeline. As a result of the greater number of installed systems in the U.S. and increased credentialing and training of surgeons, we continue to approve our ability to allow pipeline accounts to interact with the system in the U.S. and we are focused on continuing to expand this capability. We believe that this along with the advances and instrumentation as well as a broader label will help convert our U.S. pipeline at a higher pace in the second half of 2019 and beyond.

Second, implement key instrument expansions in the U.S., while we made significant strides in 2018 we still have additional opportunities to expand our instrument offerings in 2019. The first of which is the FDA approval of Senhance Ultrasonic instruments, which we received in January. The second is articulating instruments which we expect to receive FDA clearance for in the fourth quarter of 2019. Third, advance to technological capabilities of Senhance through the integration of Image Analytics technology. As I mentioned previously, the acquisition of MST gave us immediate access to a variety of innovations driven by augmented intelligence that we believe will meaningfully advance the benefits of digital laparoscopy to patients, surgeons and operating rooms globally.

Our initial application of the technology acquired will enable three new and unique features for the Senhance. The first prevents instruments from leaving the field of view which is a fundamental element of laparoscopic best practice. The second permits the camera to follow instruments autonomously, which improves workflow and allows the surgeons to focus on the task at hand. The third is a suture-assist feature that recognizes when the surgeon is suturing to permit automatic zooming in and out to ensure accurate placement of sutures and simplify workflow. In 2019, we will work towards the rollout of these innovative capabilities. The initial step involves additional product development followed by submission of an FDA 510(k) application, which we expect to complete by the end of 2019.

Lastly, continue to facilitate the commercial adoption in Asia. Having recently received full TFDA approval in Taiwan, we are now free to commercialize within that geography. We have significant interest in Taiwan, one of many markets in Asia where robotic surgery is typically an option only for patients who can pay out of the pocket due to high procedure cost. We believe that the low per procedure cost of Senhance will make it an attractive option in this market. In Japan, we will continue to make progress on the regulatory process. This process is typically measured in years not quarters, so we will provide updates in future calls as warranted.

Turning to guidance, in the first quarter, we expect to sell 2 to 4 systems and remain confident in the depth and breadth of our pipeline, which we expect to result in solid growth throughout the rest of the year. To recap, we are incredibly excited about the future at TransEnterix. We grew our business significantly and accomplished all of the key milestones we set out for in 2018. We sold 15 systems globally during the year and increased revenue by approximately 240%. We advanced our portfolio of instrument offerings to include ultrasonic and 3 millimeter. We expanded indications for use to approximately 3 million procedures annually in the U.S. and we entered into a new geographic territory in Asia. In addition, we acquired the technology assets and IP of MST, which significantly advances the capabilities of Senhance to deliver on our vision of digital laparoscopy. We put ourselves in a great position to continue to drive the adoption of Senhance during 2019 and into the future.

And with that, I would like to open up the line for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question comes from Rick Wise with Stifel. You may proceed.

Rick Wise

Alright, good morning. Let me start Todd, you gave a great run down and it’s really a great deal of positive things happened in ‘18, it’s hard not to start just at a high level, sort of summing it all up as we reflect on the potential impact on ‘19 sales, and you gave us – you say in the first quarter 2 to 4 systems, so not surprisingly a little seasonally softer there, but maybe you could talk about how we should think about the flow the rest of the year, and you are saying stronger second half. Is the pipeline so strong and the demos setup and the training so clear that you really see a clear path to that sort of good acceleration to be a stronger second half, maybe you could characterize the pipeline, some of these training and demo activities and just help expand on the comments that you made earlier? Thank you.

Todd Pope

Certainly. Yes. And the answer I will say to your question is, yes, a resounding yes. We do feel very strong about what we put in place in 2018 and how that’s going to play out in 2019 as we mentioned especially increasing momentum in the second half. And as you think about our pipeline, we have talked about it, it’s robust. There is no doubt about it, we have had consistent sales over the last several quarters, and our visibility is really improving on the type of quality deals we have in the pipeline, so the trends are all moving in the right direction. And as you look at 2018, we were top tier medtech growth, and we expect 2019 to be top tier med tech growth, no doubt about it. As you look, we put quite a few goals in front of the business and communicated those publicly for 2018, and we achieved every single one of those. So we feel good about that track record of success parlaying into similar success in 2019.

Rick Wise

And Todd, maybe talk about the instruments and the impacts of the instrument approvals and, I am sorry those about to be approved and the impact it’s having on discussions, I mean obviously you said that the energy device, the ultrasonic energy device is the most critical, but is that literally tipping people over the edge in terms of moving from waiting to more interested, are you – are people now more willing to talk to you, again maybe just help us understand the impact of the instruments, and I’ll ask one other part there before, sort of as part A of instruments, part B is should we imagine sort of separate revenue generation coming from the instruments and impacting 2019 revenues? Thanks.

Todd Pope

Yes. Sure. Let me take both of your questions in order. First of all, as far as there are more people willing to talk to us, I will tell you hands down we have no lack of interest in the system when you are the first robotic system for soft tissue to be approved in 19 years, and there is so much fervor in the robotics industry. We have an increasing steady amount of inbound interest from all geographies around the world. So, just to make the point a little bit more clear on your question, let’s take a look at like two different instruments. 3 millimeter, 3 millimeter is really a first in robotics, as we talked about manual laparoscopy, patients and surgeons continue to drive more towards smaller instruments because of the obvious benefits that play out there, patients have a good cosmetic result, and they certainly have less pain post-op, the recovery, the return in normal activity is all quicker, so there is a benefit. And then when surgeons are using 3 millimeter instruments manually or by hand in laparoscopy, it’s sometimes hard to get the precession that you want with the smaller instrument in hand. When you have that on a stable robotic arm of the Senhance, your precision can really be heightened and that’s really important with the smaller instruments. So that way with Senhance, you get all the benefits of less invasiveness with a smaller instrument 3 millimeter, but you have that stability and precision of a robotic arm with Senhance. So, to answer your question, that’s really more of a kind of a epiphany for folks wow, we can have that small of an instruments on a robotic platform, we have never thought about that before, that’s very exciting, and people like that. You juxtaposed that to advanced energy.

Advanced energy, people use advanced energy at almost the majority of their laparoscopic procedures. They at least want to have it available if they need it. So that was more of a kind of a ticket to play if you will. People want to have advanced energy. So, we have had a lot of people that have been very interested in this system, very excited about the system, and certainly some of our pipeline surgeons have been saying when that is available that would help push us over the line. So, as we mentioned in the call, the majority of our placements around the world have been able to order in advanced energy and begin to utilize them and the results we are hearing back is fantastic. It’s not enough just to have an approved product, it has to perform as advertised and surgeons really like the advanced energy. It has limited thermal spread. It doesn’t have a lot of smoke in the field of view, and we are getting a very strong clinical acceptance back on that. So those are really like two different takes on how instruments continue to help us for sure, and we think as we roll out advanced energy in 3 millimeter to more and more of our current accounts, and let our pipeline accounts get their hands on those whether they are in a dry or wet lab or watch them to be able to be observed in surgery as we have talked about. We really think that’s going to continue to accelerate the pipeline. And then the second part of your question is yes, anytime that you have instruments that you are able to bring and they are preference instruments and they are not necessarily reusable, case in point the advanced energy; that can and will add additional revenue to our bottom line. So we are excited about that. Those are instruments that in current laparoscopy or robotics people pay a per procedure cost and we will be able to enjoy that same benefit.

Rick Wise

One last one for me for now Todd, just reflecting on your initial experience in the U.S., is there any common threat in the accounts that have bought Senhance initially or that you think our like-list to buy in 2019, are these dedicated experienced robotic centers, are these non-robotic centers today trying to get in, are these all laparoscopic centers, is there anything that we can and should understand about this early customers here in the U.S. that might help us think about the future or the near future? Thanks a lot.

Todd Pope

Sure. I will take that in two parts. First of all, I will just say one of the common threats that we felt would be similar cross buying patterns is people want to go and watch surgery they really do. They are excited about a new platform. There hasn’t been a new platform in a couple of decades. So they really do want to go watch surgery, talk to the surgeons, talk to the OR staff, see how it’s being used and we talked about all of our sales in Europe so far have been able to go – I am sorry all of our sales in the U.S. have been able to go to Europe and get some of that validation, but that’s not really scalable. So that’s why we are excited that we have systems all the way from New York down to Florida now in the eastern half of the U.S. to make that much easier. As far as the way we look at different accounts, I would say that when people have acquired Senhance to begin to use them, the hospitals are excited because they typically already have a robot in their hospitals, so they are looked at by the patients in their surrounding area as a destination for robotic surgery and these hospitals have been excited to offer the newest robotic technology available in Senhance and it’s really kind of raising their stature in their community of patient pull, because now they have acquired the latest and greatest robotic platform. So for them I think they are enjoying the benefits of their current robotic platform, but they are expanding cases with the new platform being Senhance and they not only feel like that’s helping them the way patients view them and they are offering the latest technology, but as they recruit and try to retain surgeons very important in this labor market even with surgeons that hospitals have a very good value prop to recruit and keep surgeons over there and having this enhance on board has really helped that. We have seen that across the board. So those are some of the similar threads we are seeing as we rollout the system here in the U.S. and we think that will continue.

Rick Wise

Thank you.

Todd Pope

Thanks Rick.

Operator

And our next question comes from Glenn Novarro with RBC Capital Markets. You may proceed.

Glenn Novarro

Hi good morning guys. Todd, I wanted to follow-up on articulating instruments and maybe talk about how important these instruments are to the system placements in 2019. And then the FDA approval timeline, approval in the fourth quarter of ‘19, why is it going to take the FDA 12 months to review your submission? Thanks.

Todd Pope

Yes. Thanks Glenn. As we have talked about we have felt like our most important device we wanted to get approved in the end use was advanced energy and we have that. Certainly articulation will add some more capabilities, but the procedures and the surgeons that we are going after in digital laparoscopy certainly don’t have as many needs for articulation. Articulation is really it’s a feature that enables folks when they are in really tight spots anatomically having to reach whether it’s really low in the pelvis or certain areas that you can’t get a good angle, but in the majority of laparoscopic surgeries when you have the abdomen expanded with CO2, you have a broad working space and features like being able to have 3 millimeter instruments, being able to finally have haptic feedback on the robotic platform that they have not been able to have up to this point. The ability to have the newest fluorescence technology has really been a big value driver, the ability to be able to drive the camera simultaneously with your other two robotic arms without having to stop. Those are the features that are driving the most interest in our platform. We really don’t have that many people saying for the applications that you are talking to us on, we really can’t do them well without articulation that’s why we really didn’t prioritize it ahead of other things like I have just mentioned. We prioritized 3 millimeter haptic feedback, advanced energy, the ability to have separate robotic arms so you can setup your lap trocars just like you would in a regular lab case, the ability to control three robotic arms simultaneously. Those are all the features that we felt like as we are developing the system and now that we have rolled them out that generated the most interest. We find that articulation is certainly most beneficial in certain anatomic sites and those aren’t prevalent across all lab procedures.

Glenn Novarro

Okay. And then the 12 months timeline when some of your other approvals came within three months to six months?

Todd Pope

Yes. That all just depends on how the interaction goes along with the FDA and right now those are just the guidance we are providing as far as our articulation submission.

Glenn Novarro

Okay. And then just some quick ones here, in the fourth you sold three systems in Europe, two were distributors, have those systems been placed already in hospitals and I have two follow-ups for Joe?

Joe Slattery

Yes. Glenn, this is Joe. Yes, all the sales are in the hospitals having done cases. So if we were selling a system that was in transit at a distributor, we will always be transparent about that.

Glenn Novarro

Okay. And then two quick more for you Joe, you established the ATM in December, has there been any activity in the ATM and then to follow-up on Rick’s question, how should we model advanced energy sales, I am assuming you are selling advanced energy out right, so price how should we model advanced energy? Thanks.

Joe Slattery

Sure. With respect to the ATM we haven’t done any sales as of today. As far as the advanced energy, the ASP per use will be in the $400,000 to $500,000 per procedure range. And that won’t be used in procedure that perform, so we would estimate that would be anywhere from 30% to 50% of procedures once it gets out there. As you know Glenn in these early days with the majority of our procedures being performed by growing installed base, the procedure volume is low relative to the fleet, because we – most of the fleet has only been out there for a couple of quarters. So, it won’t really have a particularly meaningful impact on revenue throughout this year probably on the order of less than $1 million.

Glenn Novarro

Thanks, Joe.

Operator

And our next question comes from Larry Keusch with Raymond James. You may proceed.

Larry Keusch

Hi, good morning. Todd, I was hoping that maybe you could – as we think back over 2018, gives you a sense of kind of which procedures are mostly being performed on the Senhance platform? And then also I recognize that the procedures at this point are relatively small, but could you give us some quantification to how many procedures were actually done in 2018?

Todd Pope

Hey Larry, thanks for the question. I would say as we step back and just kind of look at a high level as far as what type of procedures are being done. We really are starting to gravitate towards some of these higher volume laparoscopic procedures. There’s certainly a truism that everyone out there doing surgery today has been called on to see if they’re interested in robotics over the last 10 years to 12 years and a lot of those people have made those decisions. We’re going back and talking to folks about a new robotic alternative, call it, Senhance, and we’re bringing a lot of different things to the table. And most of the things that we’re bringing to the table kind of address some of the trade-offs, people felt like they needed to make in the past to go to some of these higher volume procedures like gallbladder and hernia. A lot of folks felt like for those type of procedures, they wanted to be able to keep their OR efficiency high, they wanted to be able to use the cameras that they already had in their lap tower, their trocars hospital already had on contract, they certainly wanted to put their lap trocars and the Senhance trocars in the same spot, so if they ever needed to do any type of hybrid procedure, they didn’t have to add trocars. We solve all those issues. They really like haptic feedback, because if you’re peeling the gallbladder off the liver bed or if you’re making a defect and you’re trying to repair that in like inguinal hernia, it’s very important to have type of feedback. So, all of the features that we’ve offered and the benefits subsequently that they provide have kind of fed into these higher volume procedures that typically have not been a good fit for traditional robotics. So, that’s where we’re kind of each hospital that we’ve sold into usually already has a robot, and so we’re not necessarily taking procedures from that current robotic usage pattern. We’re really adding more procedures that can be done robotically because of what Senhance offers and we think that’s when they continue to play out. Not only does that allow surgeons to be able to start using a more and more robotic options with Senhance, but it also kind of helps level out block time on their current robot. They – it can be used for the certain procedures that really make the most sense and then Senhance can really pick up in some of these newer alternative procedures that really haven’t been thought of as a good fit for robotics. So, I would think that’s how we do that and we really haven’t talked about any quantity of procedures yet. We’re continuing to build our base across Asia and Europe and the U.S., and as we continue to get those systems rolled out in the future, we’ll provide more details on number of procedures.

Larry Keusch

Okay. And just coming back to that for one moment. So, is gallbladder the primary procedure or that’s the most, the highest volume procedure at this point or is – or it’s something else, I’m just trying to understand again which are the couple of procedures that are being used – the Senhance is being used most frequently for?

Todd Pope

I would say hernia, gallbladder and GYN, that’s where we see the most. The GYN procedures are the ones that really see benefit in the 3 millimeter along with hernia when you’re operating a low derm [ph] in toward the Pfannenstiel incision line, smaller instruments are really tolerated much better by patients, and also it’s just better to keep those small incisions low as possible and out of any site. So, I would say GYN, hernia, and gallbladders was driving the most of our volume, and that’s pretty consistent across Europe, Asia, and the U.S.

Larry Keusch

Okay, perfect. And then just two other quick ones. Relative to disclosure around the number of procedures, is that kind of based on when you guys get to some level of consistency or is there a threshold number that you’re looking for before you start reporting that? And then secondly, just on the IP landscape around articulating instruments, how do you think about that relative to the instruments that you expect to bring in the U.S.?

Joe Slattery

Hi, Larry, it’s Joe.

Larry Keusch

Yes.

Joe Slattery

What I would say is that with the installed base still on a low scale that the instrument – that the procedure patterns are not bubbling up to something that you’d come to a conclusion that actually describes what we see. What I can tell you is that in some of our accounts where there aren’t any number of frictions with proctoring or politics in the hospital and those kind of things, we see hospitals that are – have the right motivations getting quickly to 10 to 20 cases a month in their 1st month or 2. So, that more describes the potential of where we can go. Quite a few of our installations have very specific stories, for example, our sale in Japan without reimbursement there – they limit the use on the robot. So, if you put it all in the mix, it’s – it sense a kind of conflicting signal on what’s going on with the procedures.

Todd Pope

Larry, I would just say on your question about articulating instruments. We have articulating instruments that are CE-marked approved and being used in Europe. So, we don’t have the IP concerns there. We’re adding to that armamentarium with what we’re looking to file and get approved in the U.S., but there’s not IP concerns there. We just want to make sure that appropriate applications are identified and that’s where we roll it out. But we think about what we’re offering with Senhance. We really stand alone really focusing on converting lap and using primarily all reusable instruments, keeping our cost per procedure nearly at parity with laparoscopy. That is what continues to kind of separate us in addition to the features we’ve highlighted in some of the Q&A here. When hospital administrators can sit with us and not feel the burden of their operating room per procedure costs going up 3 times and 4 times versus current laparoscopy, but they still get the benefits of moving those procedures to a robotic platform with Senhance, that’s from the administration side of the hospitals what’s given us so much pull. Surgeons love a lot of our features as we’ve talked about in the past. But we get the most pull from administrators when they think about just the stability of their budget for robotic procedures can be with our platform with reusable instruments. So, I would say that’s how we think about instruments and really our value prop, both clinically and to the administrators of the hospital.

Larry Keusch

Okay, perfect. Thank you very much.

Todd Pope

Thanks, Larry.

Operator

Ladies and gentlemen, that concludes our question-and-answer session for today. I would now like to turn the call back to Mr. Pope for any closing remarks.

Todd Pope

Thanks to all of you for joining us on the call today, and we certainly look forward to updating you on our progress in the next quarter. Thank you.

Operator

Ladies and gentlemen, thank you for attending today’s conference. This does conclude the program. And you may all disconnect. Everyone have a great day.

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