AtriCure Inc (ATRC) 2005 Q3 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Third Quarter 2005 AtriCure Earnings Conference Call. My name is Gregory, and I will be your coordinator for today.

[Operator Instructions].

I would now like to turn the presentation over to your host for today's call, Ms Carol Ruth of Investor Relations. Please proceed, ma'am.

Thank you, operator. Joining us on the call today are David Drachman, President and Chief Executive Officer, and Tom Etergino, Vice President and Chief Financial Officer. By now you should have received a copy of the earnings press release. If you have not received a copy please call Zack Cubelle (ph) at 646-536-7020 and he will fax or email you a copy.

Before we begin I'd like to remind everyone on the call today that the United States Food and Drug Administration has not cleared or approved 2 products included in AtriCure's bipolar ablation system for the ablation of cardiac tissue for the treatment of Atrial fibrillation or AF. The products include the Ablation Sensing Unit or ASU and the Isolator clamp. The company and others acting on its behalf may not promote these 2 products for the surgical treatment of AF or. train doctors to use the products for the surgical treatments of AF.

However, these restrictions do not prevent doctors from choosing to use the products for the treatment of AF or, prevent AtriCure from engaging in sales and marketing efforts that focus only on the general attributes of the products for the approved indicated uses, and not on the ablation of cardiac tissue or the treatment of AF. Although AtriCure educates and trains doctors as to the general skills involved in the proper use of the products and the related technology, the company does not educate or train doctors to use the products for the ablation of cardiac tissue or the surgical treatment of AF.

The FDA has cleared AtriCure's Isolator pen device for the surgical ablation of cardiac tissue. As such, the company may promote this device to doctors and provide an education and training on the use of the pen device for that use. The company's remarks today may also include forward looking statements within the meaning of the Private Securities Litigation and Reform Act of 1995.

Forward-looking statements include statements that address activities, events or developments that AtriCure expects, believes or anticipates will or may occur in the future such as earnings estimates, other predictions of financial performance, launches of AtriCure of new products, and market acceptance of AtriCure's products. Forward-looking statements are based on AtriCure's experience and perception of current conditions, trends, expected future developments, and other factors it believes are appropriate under the circumstances, and are subject to numerous risks and uncertainties, many of which are beyond AtriCure's control.

These risks and uncertainties include the rate and degree of market acceptance of AtriCure's products, and other risks and uncertainties described from time to time in AtriCure's SEC filings. AtriCure does not guarantee any forward-looking statement and actual results may differ materially from those projected. AtriCure undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

With that, I'd like to turn the call over to AtriCure's President and Chief Executive Officer, Dave Drachman. Dave?

Thank you, Carol. It is a real pleasure to welcome all of you to AtriCure's conference call to cover our third quarter 2005 results. We are pleased with our performance in the third quarter, particularly the considerable progress we made toward our strategy initiatives. We completed the launch of our Isolator pen on schedule, saw our improved Isolator Long product gaining market traction, initiated smooth integration of Enable Medical, received 510(k) clearance for the Isolator endoscopic ablation system, and enrolled the first patient in our RESTORE-SR II clinical study.

Before getting into more details of the quarter and our recent developments, let me briefly summarize our financial results. The third quarter consolidated revenue was 7.2 million, an increase of 59.3% over third quarter of last year. Domestic open heart revenue represented 73% of consolidated revenue. Domestic revenue from minimally invasive sole-therapy products represented 18% of consolidated revenue, and international revenue represented 9%.

Comparisons to the second quarter of 2005 were impacted by historical seasonality. Tom Etergino, our CFO, will provide more detail in his financial review. During the third quarter we performed minimally invasive sole-therapy procedures in 45 medical centers, versus 33 medical centers in the previous quarter. This is a 36% increase. Our domestic minimally invasive revenue per procedure remains relatively constant per quarter, quarter-over-quarter at approximately $7,000 per procedure.

We believe, that our new product launches will enable us to maintain our attractive revenue per procedure prices on a go-forward basis. Some of these new products include our Isolator endoscopic ablation system, and our left atrial appendage exclusion system. We plan to introduce both systems into the market in 2006.

Although our products are not FDA-approved for the treatment of atrial fibrillation, we remain the U.S. market leader for the surgical treatment of AF. During the quarter we believe we made subtle improvements to our U.S. market share, due to the launch of our Isolator pen, and the market adoption by surgeons of our minimally invasive sole-therapy products. We estimate that our market share stands at approximately 50%.

Let's move briefly to our acquisition of Enable which we closed in conjunction with our August IPO. The integration of Enable has been a smooth and on-schedule process. We've begun to realize some of the expectations of this acquisition including enhanced engineering capabilities, and shortened product lead times. We believe the acquisition of Enable will enhance our long-term gross margins. However, third quarter gross margins were negatively impacted by non-recurring manufacturing costs, stronger-than-expected international sales, and the higher cost of inventory that was purchased prior to our acquisition of Enable. Tom will cover this in more detail during his financial review.

Not let me address new products, and new product developments. First, the Isolator bipolar pen was released midway into the third quarter. Consolidated sales of the Isolator bipolar pen in the quarter were approximately $285,000 and represented sales into 42 medical centers. Next, we improved our Isolator Long product. Our Long product was developed for patients with large left atriums. Large atriums are often associated with more permanent atrial fibrillations, and more advanced structural heart disease. Because of the advancement in trends in interventional cardiology we see movement toward patients presenting to the operating room with more advanced structural heart disease and larger left atriums.

We believe this could result in an increased demand for our Long product. This has the potential to favorably impact product mix, since the average selling price of our Isolator Long product is approximately 10% higher than the standard length Isolator. In terms of new product developments, during the quarter we filed our 510(k) for the Isolator endoscopic ablation system. In October we received FDA clearance for the system, with a soft tissue ablation indication. The clearance covers the Isolator endoscopic ablation system which includes a custom transfer guide. The Isolator endoscopic ablation system is designed to simplify our minimally invasive ablation procedure making it more adoptable to a broader number of surgeons while at the same time allowing surgeons the option to reduce the surgery to a completely thorascopic procedure.

In terms of simplifying the minimally invasive procedure, we believe the Isolator endoscopic ablation system has two significant advantages over our existing system. First, there has been a redesign of the system including the elimination of catch points. This will allow surgeons to more easily glide the ablation device into position. Secondly, the system is packaged with a custom transfer guide. Currently the exchange from the dissection tool to our ablation guide is often the most technically challenging aspect of the procedure.

The Isolator endoscopic ablation system is packaged with a custom transfer guide which simplifies this exchange. We are in the process of completing our engineering pilot, and we are on schedule for a full commercial release of the Isolator endoscopic system during the first quarter of 2006. Next an update on our left atrial appendage exclusion product. We plan on completing the preclinical studies to support our FDA 510(k) submission by year-end 2005 and submitting our 510(k) and CE Mark filings during the first quarter of 2006. We are on schedule to release the open heart product in the second half of 2006, and the minimally invasive product by year-end 2006.

Lastly, we've begun working under a development agreement, in order to develop a HIFU ablation probe, which is intended to be used in conjunction with our Isolator bipolar ablation systems. The initial product is expected to be released in 2007. Now for a brief update on our regulatory efforts and clinical trials. On October 20th, 2005 we received notification from TUV (ph) Germany that the assessment for Isolator ablation system as it relates to the clinical evaluation portion of our designed dossier has met the requirements to expand our current indications to include the treatment of cardiac arrhythmias. The information has been forwarded TUV America, and we anticipate CE Mark approval during the first quarter of 2006.

In order to maximize the impact of this anticipated approval, and to increase our market share and gross margins in Europe, we are planning to establish a European subsidiary company by year-end. The AtriCure BV (ph) will be headquartered in the Netherlands. We anticipate the cost associated with the establishment and the ongoing operations to impact our operating expenses by approximately $1 million in 2006.

Next a progress report on our RESTORE-SR II clinical trial. Earlier this week we announced the treatment of our first patient in this FDA-regulated study. The study is designed to investigate the use of our Isolator bipolar ablation system as a minimally invasive sole-therapy treatment for atrial fibrillation. This prospective, non-randomized feasibility study is expected to enroll 25 patients at 5 leading U.S. medical centers.

The procedure involves the following steps. First, electrical isolation of the pulmonary veins is performed using the Isolator bipolar ablation system. Then electrophysiology testing is conducted to confirm complete electrical isolation of the pulmonary veins from the atrium. Next, ablation of the autonomic ganglia is performed and electrophysiology testing is conducted to confirm that the targeted ganglia have been innervated. The autonomic ganglia containing neurons are present on the epicardial surface of the atrium, and data suggests that ablation of these ganglia could be an important factor in reducing the reoccurrence of atrial fibrillation.

Since these ganglia are located on the outer surface of the atrium, they are more easily ablated from a minimally invasive surgical approach, versus a percutaneous catheter approach. If ganglia ablation proves to be an important treatment strategy, it could accelerate the adoption of our minimally invasive surgical procedure. Lastly, the procedure involves removing the left atrial appendage. The left atrial appendage is thought to be a major contributor to atrial fibrillation-related strokes. The removal of the appendage is intended to reduce the patient's long-term risk of stroke.

We are pleased to report that our first patient was discharged, is doing well, and has normal sinus rhythm, and free of atrial fibrillation symptoms. Since we treated our first patient we have successfully treated 5 additional patients, and enrolled a total of 13 patients. There have been no complications reported, and the 5 patients are all in normal sinus rhythm. We expect to complete the treatment of all 25 patients in the first quarter of 2006. We are planning discussions with the FDA during the first quarter of 2006 to review the design and timing of a pivotal study.

In terms of our SR, RESTORE-I clinical trial, during the first quarter we expanded the eligible centers from 11 to 13 and enrolled 2 additional patients. Now, finally, we promoted Steve Cambridge the Vice President of Sales to lead our domestic sales organization. Steve has been a key member of the sales management team for more than 4 years. Steve's leadership, sales experience, and management skills make him an ideal fit for the position.

At this point, I'd like to turn the call over to Tom Etergino for a review of our second quarter financials.

Thanks Dave, and good afternoon everyone. I will now review our financial results for the third quarter ended September 30, 2005 then review the results on a pro forma basis, giving effect to our acquisition of Enable and our IPO as if these events had occurred by January 1st, 2005. For the third quarter 2005 we recorded revenue of $7.2 million, an increase of 59.3% over the $4.5 million in revenue for the third quarter of 2004.

This is comprised of $5.2 million in domestic open heart revenue including approximately $264,000 from the sale of our pen, $1.3 million in domestic sole-therapy minimally invasive revenue, approximately $633,000 in international revenue, and approximately $42,000 which represents revenue from our Scissors products, which were added as part of our Enable acquisition. The corresponding revenue contribution was approximately 73% domestic open heart, 18% domestic sole-therapy minimally invasive, and 9% international. On a sequential quarter basis the third quarter 2005 revenue seasonally declined 7.3% from the $7.7 million of revenue in the second quarter of 2005. This sequential decline was lower than the 12% seasonal decline we experienced in third quarter 2004.

Domestic open heart revenue decreased $334,000 or 6% on a sequential basis from $5.5 million for the second quarter 2005, to $5.2 million in the third quarter of 2005. Domestic sole-therapy minimally invasive revenue decreased $348,000 or 21.2% from $1.6 million in the second quarter 2005 to $1.3 million in the third quarter of 2005. International revenue was up on a sequential basis from approximately $554,000 in the second quarter 2005 to $633,000 in the third quarter of 2005. The sequential decrease in revenue is due primarily to historic seasonality as we had anticipated, and discussed on our last quarterly call.

As we anticipated, we experienced a lower level of activity in the summer months, especially in the minimally invasive sole-therapy product which tends to be a more elective procedure. Our seasonal decline was partially offset by strong international sales particularly in Japan and China. Gross profit for the third quarter 2005 was $5.2 million, with a gross margin of 71.9% compared to the third quarter 2004 gross profit of $3.3 million and a gross margin of 74.2%. Gross profit for the second quarter 2005 was $5.8 million, with a gross margin of 74.4%.

The decline from our traditional gross margin is related to the mix of international versus domestic sales, the regional mix within international sales, and the absorption into cost of revenue of certain one-time charges, related to the recruiting of senior operations personnel. Another contributing factor as mentioned by Dave, was the inventory purchased from Enable prior to our acquisition of Enable. During the quarter we continue to sell this higher cost hand-piece inventory. We expect that gross margins will return to the mid-70s in the fourth quarter.

Research and development expenses were $2.6 million for the third quarter of 2005, compared with $1.2 million for the third quarter 2004. In the second quarter 2005, R&D was $2 million. The absolute dollar increases both year-over-year and sequentially are attributable primarily to the recruitment of additional full-time engineers, and the expansion of our product development programs, in particular our endoscopic ablation system, left atrial appendage system, and our HIFU development program, as well as other expansion of our clinical trials as Dave discussed earlier.

Selling, general, and administrative expenses were $6.3 million for the third quarter 2005, compared to $3.9 million in the third quarter 2004. In the second quarter 2005, SG&A was $5.1 million. The absolute dollar increases year-over-year and sequentially are primarily attributable to the expansion of our sales and marketing personnel and programs, as well as increases in general corporate expenditures.

The company reported a net loss to shareholders for the three months ended September 30th, 2005 of $4 million, compared to the net loss available to shareholders of $2.7 million for the three months ended September 30th, 2004. Net loss per share for the third quarter 2005 was $0.50 on a basic and fully diluted basis with weighted average shares outstanding of 8.2 million. For comparative purposes, the net loss per share for the third quarter of 2004 was $1.46 on a basic and fully diluted basis with weighted average shares outstanding of 1.8 million.

Next, I will outline third quarter pro forma results, after giving effect to the acquisition of Enable Medical and the initial public offering as if these events had occurred on January 1st, 2005. We believe these figures can serve as a valuable basis for comparison going forward. On a pro forma combined basis third quarter 2005 revenue was $7.2 million. This is similar to AtriCure's GAAP results as our revenue represented substantially all of Enable sales during the quarter.

Pro forma gross profit was $5.5 million with gross margins of 77%. Pro forma research and development expenses were $2.7 million and SG&A expenses on a pro forma basis were $6.5 million. Third quarter 2005 pro forma net loss was $3.5 million. On a per share basis after factoring in the conversion of all of AtriCure's shares of preferred stock into common stock, and the $4.15 million common shares issued in the not initial public offering, the basic and fully diluted net loss per share was $0.30, utilizing weighted average shares outstanding of approximately 12.1 million.

With that, I'll turn it back to Dave for his final comments.

In summary, a few short months after the closing of our IPO, we have made considerable progress in advancing crucial product in clinical milestones and integrating Enable Medical.

And at this time, we would like to take your questions.

[Operator Instructions].

And your first question comes from the line of Tom Gunderson of Piper Jaffray. Please proceed.

Hi, good afternoon. Dave I'm curious about the 33 centers at the end of Q2 going to 45 centers in the MIS product in July/August/September. What are those 12 centers? How long were they in queue from the time that they showed interest? I assume they were doing open chest and the training etcetera. Are we looking at 6 months, 9 months, what kind of timeframe would you take from that group of 12? And do you expect that we will see these kinds of increases for a while given the efforts that you've put forth over the last year.

Good question, Tom. I think certainly that progressively the timeline from start to first case has certainly gotten -- we've certainly taken those timelines down. I think the issue would be these accounts that we're talking about I would estimate about 90 days from the time they actually did a cadaver. From cadaver lab training to actual first case, between the schedules of proctors and getting people into position, it's about a 90-day process.

Okay you expect that, I mean, when you look at the pipeline of people who have been through cadaver labs are you saying that we could add somewhere in the neighborhood of a dozen or more centers per quarter going forward?

I think it's -- our plan is not quite that aggressive. We're still at a point where we want to be relatively slow and systematic, and make sure that we pick the right centers to work with. And again, we want to go deep versus wide in the early evolution of this process. But certainly have the resources to go to 10 per month. But right now our plan doesn't call for that. We'll be ramping up as the year goes on, and in the second half of the year we could be in the 10 to 12 accounts per month. But right now we're more in the 7 to 8 range.

Do you want to clarify that because we can kind of hear in the background? Is it per quarter or per month?

Per quarter.

Okay, and then last question for now, and that is surprisingly strong numbers coming out of international particularly given the quarter. Can you give us a little bit more color of what's going on in Japan and China right now?

Well certainly Japan is a very strong market for us, Tom. We've got -- what we see is about 55% market share in Japan. Most of that is in open business. We've just described and just signed up some agreements with some Chinese distributors and we're just beginning to get our initial op quarters into China. But we look at that as a very a -- as a growth market for us in 2006.

Okay, thank you.

Hey, Tom?

Yes.

There was some confusion from some of my colleagues here in the background. We were talking about monthly numbers, not quarterly numbers.

Got it.

In new centers.

Got it, thanks.

You're welcome.

And your next question comes from the line of Pat Pace of UBS. Please proceed.

Hey, hi are you guys doing?

Great, Dave, Pat.

I hope you can hear me because it's kind of loud behind me. Just had a question actually to follow up on training, can you talk about where you are in terms of number of proctors and where you hope to take that over the next couple of quarters?

Ten proctors that we currently view as active proctors. And as we begin to ramp up the number of new centers in minimally invasive on a monthly basis, we currently think our proctor situation is pretty good. At this stage it's really picking the right surgeons that we feel like are conducive to the technology, making sure that these centers have good referral sources for patients, getting through the cadaver process and scheduling the proctors.

So I think right now for where we are at this point in time proctors are not a bottleneck. It's really a matter of just the overall system of identifying physicians, getting them into training, getting them into cadaver training, getting the initial cases in place so that when the proctors come to the account they can be effective.

Great, thanks. That's helpful. And then just on the R&D side you spent a little bit less actually than what I thought you would in the quarter. Is that a fair number going forward or, should that tick up as you enroll more people in the SR-II trial, and then hopefully expand that in the next year?

Looking at the R&D expense to increase during the next several months, and as we get into 2006 based on the product activities, as well as the ramping up of RESTORE-SR clinical II which has been somewhat ahead of schedule.

Okay, and then just one last one. On your MIS revenues, I know early in the year you guys -- some of your revenues were from new accounts stocking, just want to find out is that true demand or is there some stocking in that, and so we can get a sense of where the procedure volumes are going? And then also I'm going to meet my plane (ph) after this, just if you can give us a sense of the referral patterns that you are seeing for those procedures? And if they're coming through the EPs or directly from general cardiologists? Thanks.

Yes well it is -- first of all there has been some stocking orders but in general if you look at the 45 accounts in the third quarter versus the 33 accounts in the second quarter we view that as a very favorable trend. The referrals seem to be coming primarily from electrophysiologists. Our strategy is approach the electrophysiologists, make sure that we work with them, partner with them, partner with the electrophysiologist and the surgeon, and then our first initial cases generally come from electrophysiologists.

Once we have that relationship established we feel like we can go beyond the electrophysiologist and begin to talk to cardiologists, maybe some direct to patient activity, as well as looking at some stroke clinics and in Acumen (ph) clinics as well. We think that could be a good source for driving referrals also.

Great, thanks so much.

And your next question comes from the line of Tim Nelson of Piper Jaffray. Please proceed.

Tim (inaudible) bit here from Piper. But could you talk a little bit more about the open procedure and how the pen is working its way into those procedures? And how it's being used? Is the pen sort of gaining share for you, getting new accounts or, is it just being used in the assessment of procedures you would have probably being doing anywhere?

Tim the majority of the clamps have actually been used in accounts where we don't have business. So we're actually -- been more aggressive using the inventory that we've had to go out and look at converting other pen accounts. However, we're also very aware that there's an opportunity to combine clamps and pens into one procedure, and I think you'll look for us to do more of that as time goes on. But the first 300 or so -- the first 181 units a good percentage of those units actually went into accounts where they were competitive accounts where we did not have our clamps on the shelves.

That's what I (ph) was supposed to do. Then can you talk -- you talked about the mix between the short and the Long products in the open side. What was your ASP in those, in that business? Did it go up or go down given that mix increase?

Well basically our average weighted open clamp price domestically was $2,447 and was up slightly over the second quarter.

Okay great. And then last question, you talked about an investment in the European infrastructure. Does that imply going direct in those markets, and should we be looking for incremental sales, and what kind of timeframe would you go for that investment?

Well first of all the challenge with the -- and the opportunity with this AtriCure BV was we were selling to distributors, we're selling to sub-distributors. So we're basically going to stock product at the BV, and then sell directly to distributors so that we can maximize the margins and have a closer relationship with what's happening the market.

Secondly, we wanted to gain some more exposure as a European company, especially as we begin looking at launching closed chest minimally invasive procedures, and gaining training centers and momentum in Europe we thought we'd be better off having our own subsidiary company in Europe. So I think it gives us more exposure, more presence. It eliminates the middleman and it allows us to increase our margins.

And what time would you expect that operation to become effective?

Effective year-end.

Okay. Great thanks.

Okay.

And your next question comes from the line of Ed Antonian (ph) of Chartwell. Please proceed. And Mr. Antonian your line is open.

[Operator Instructions].

And your next question comes from the line of Harry Hamelvitch (ph) of HMTC. Please proceed.

Good afternoon. Congratulations on all the progress. Can you hear me?

Yes, thank you, thank you.

Okay Dave I have three questions. One is relating to the minimally invasive procedure where I think you're making some really excellent progress. I've talked to a couple of surgeons recently who are AtriCure customers and happily so. Both of them indicated to me that the minimally invasive procedure as you're proposing now works effectively, but requires tremendous surgical skill and one of them said, "Every time I do it, it's just totally nerve-wracking." He said, "It's very difficult as a procedure, and I'm doing it because I've had good results, but it's very challenging from a technique standpoint." Can you comment on that?

Certainly I think we've just done about 550 procedures, so any time in the evolution of a new technology it has the ability (ph) to make a big impact on a disease state. The first 500 procedures with a new technology as well as new procedure, you would expect that kind of anxiety at each procedure. I think moving forward as the technology evolves, the training gets better, there's more of a critical mass of physicians that actually know how to do this procedure and can train for it, I think you'll see that the procedure falls more on line with the standard, a standard operation in terms of the level of complexity and the level of anxiety around the procedure.

So for example the first 550 procedures that were performed, were really performed with a lot of technologies that weren't specifically designed to be used that way. When we release the endoscopic, Isolator endoscopic system, that's going to certainly make the procedure easier to do. It's going to simplify that exchange, and we think that surgeons over time are going to get a lot more comfortable.

And I also think it just has to do with the numbers of procedures. Many surgeons that you're talking to have done 10, 15 procedures, and we all know that takes 15 to 100 procedures especially with a new procedure before they get comfortable. So, I think there's a variety of variables involved.

Okay, well that's a good answer. Thanks. It's a matter -- it's a matter of them just getting more and more comfortable with doing the procedure basically. Second question, I was very interested in your comments about looking at -- looking at the HIFU as another way of doing the procedure, and I'm wondering if you could elaborate that a little bit.

You've been an RF company. You've been a very successful RF company. You've pioneered a market. You've done a lot of wonderful things for the marketplace, but now you're talking about a new modality or at least a new energy source, and I'm wondering if you give some color to that?

Yes, that's a great big question. I mean we fundamentally look -- when we look at minimally invasive which obviously is our biggest opportunity, we have no doubt that the most superior technology for isolation of the pulmonary vein is AtriCure bipolar ablation system. So that is the central core of any AF treatment is pulmonary vein isolation. But there are patients, for example, who have more long-standing atrial fibrillation or more permanent atrial fibrillation that would benefit from more treatment. So more treatment generally means connecting lesions (ph).

Now internally we've developed the Isolator pen that we're currently using to some extent in our minimally invasive procedures from the epicardium. But the epicardial beating heart procedures that we're doing now, in order to make connecting lesions we think the pen could solve several different lesion sets that we might want to be able to offer patients, but we think HIFU also has potential for connecting lesions. So our goal here is to basically offer both technologies and really test both technologies side by side, knowing that the bipolar ablation system for pulmonary vein isolation is the essential portion of our procedure.

We also know that we want to offer the best possible connecting lesion technology, and quite honestly we're not sure whether or not that would be HIFU probe or a bipolar pen-like technology. The other piece is that the autonomic ganglia, we've had a lot of high profile electrophysiologists talk to us about bipolar pens and HIFU and we want to test that area, as well to see which one of the technologies actually performs best for actually treating those ganglia.

Is there, are there patent issues that you are facing? Because obviously there is some -- there is some activity and I believe Epicor got a pretty well developed business at this point, and I'm wondering how deeply you've looked into the intellectual property issues, Dave?

Without really addressing that question, we're confident in our position moving forward.

Okay and then one final question, and I'll just back in queue. Thanks for all the time. And that is, labeling, you don't have a full label to treat cardiac tissue for atrial fibrillation which obviously would be ideal. In practicality, does the less than specific label really hold you back in any way from broadening the market anymore than you already have?

Well, certainly it would be nice to have appropriate labeling on our products. But as you pointed out the company, because the key surgeons have adopted this technology as a standard of care that really has allowed the technology to be available for a broad base of patients. So without directly answering your question, it certainly would be nice to have the labeling. But the bipolar ablation system without the AF labeling indications certainly has picked up tremendous market share, and has become a standard treatment alternative for AF.

Dave, thanks very much. Very good, nice answers.

Thank you.

Ladies and gentlemen, I'm showing no further questions at this time. I would like to turn the call back over to Mr. David Drachman for any closing remarks.

Well first of all, Tom Gunderson I hope my answers were clear. We sort of got thrown off course here on your questions. I'll be happy to give you a call following our conference call here. But we want to thank all of you for participating in the call, and thanks for your interest in AtriCure, and we look forward to updating you in the near future. Thank you.

Ladies and gentlemen thank you for your participation in today's event. This concludes the presentation. You may now disconnect. Good day.