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Operator
Good day, ladies and gentlemen, and welcome to the Q3 2006 AtriCure, Inc.
Earnings Conference Call.
My name is [Jaquila], and I will be your coordinator for today.
[OPERATOR INSTRUCTIONS]
As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the call over to Mr. Nick Laudico from The Ruth Group.
Please proceed, sir.
Nick Laudico - Media Relations
Thanks, Operator.
Joining us on the call today will be Dave Drachman, President and Chief Executive Officer of AtriCure.
By now you should have received a copy of the earnings press release.
If you have not received a copy, please call [Zack Kubow] at 646-536-7020 and he'll fax or e-mail you a copy.
Before we begin let me remind you that the Company's remarks today may include forward-looking statements.
These statements include but are not limited to those 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 new products and market acceptance of new products.
Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond AtriCure's control including, but not limited to, 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 results may differ materially from those projected on today's call, and AtriCure undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.
I would also like to remind everyone on the call today that the Food and Drug Administration has not cleared or approved the Company's Isolator Bipolar Ablation clamps or its ablation sensing units for the ablation of cardiac tissue or the treatment of atrial fibrillation.
The Company and others acting on its behalf may not promote any of its products for the surgical treatment of AF or train doctors to use the products for the surgical treatment of AF.
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 current cleared uses and, except for the Isolator Transpolar Pen, not on the ablation of cardiac tissue or in the case of any product for the treatment of AF.
AtriCure educates and trains doctors in the proper use of its products and related technologies, and does not educate or train doctors to use any of its products for the surgical treatment of AF or to use its Isolator Bipolar Ablation clamps or its ablation and sensing unit to ablate cardiac tissue.
The FDA has cleared AtriCure's Isolator Transpolar Pen device for the surgical ablation of cardiac tissue.
As such, the Company may promote this device to doctors and provide education and training on the use of the Isolator Transpolar Pen device for that use.
AtriCure has provided research grants to institutions for the purposes of conducing certain studies referred to on this call.
All the primary authors of the papers referred to on this call are consultants to AtriCure.
With that, I would like to turn the call over to AtriCure's President and Chief Executive Officer, Dave Drachman.
Dave Drachman - President and CEO
Thanks, Nick, and thank you everyone for joining us on our third quarter 2006 conference call.
We are pleased with our financial and operational results during the quarter.
I want to commend our management team for their dedication, leadership and direction, which is fully in growth across all aspects of our business.
Before reviewing a number of key growth initiatives that continue to stimulate increasing business momentum, let me briefly summarize our financial results.
Considering the historical seasonality trends, third quarter consolidated revenue was strong at 9.4 million, a 31% year-over-year increase, exceeding the high end of our guidance.
Revenue from domestic open products was 5.5 million.
Domestic minimally invasive revenue of 2.8 million was a record performance and a 95% year-over-year increase.
International sales of 1 million was a 76% year-over-year increase.
I would like to thank our world-class sales organization for their passion and commitment toward expanding our leadership position in both the open and minimally invasive markets.
Now I would like to review the growth initiatives that we expect will further stimulate performance, beginning with our open business.
The new Isolator Open Clamp was successfully launched in the third quarter and is being well received in the marketplace.
We expect to fully launch a third-generation version of the open clamp in the second quarter of 2007. this new and innovative product takes advantage of our recently updated open clamp stealth design while integrating an important new Bipolar Ablation technology.
This new ablation technology will further enhance our competitive advantage by increasing the system's ability to ensure transmural lesions in thicker and more diseased tissues while continuing our superior safety profile, which can find the ablation energy to within the jaws of the device in order to reduce or eliminate the risk of thermal damage to surrounding structures.
While the recent launch of the new Isolator Open Clamp platform is performing well in the marketplace, we anticipate that its integration with our new Bipolar Ablation technology will make significant contributions toward increasing our open business during 2007.
Furthermore, we intend to launch a dissection tool for the open procedure during the first quarter of 2007, which we believe will make our system more adoptable to a broader group we're serving by providing a simpler solution to mobilizing the pulmonary veins.
Additionally, our new multi-functional pen continues to gain acceptance in the open market because it provides the surgeon with the ability to perform basic and advanced electrophysiology techniques and procedures in the operating room.
This is in line with our strategic initiative to transform the cardiac surgeon into the arrhythmia specialist.
As we will discuss in a moment, our multi-functional pen is also being widely adopted in our minimally invasive procedures.
Turning to our minimally invasive business, the growth catalysts include peer-reviewed publications, presentations at major meetings, and new product introductions.
I would like to begin by providing an update concerning the most current publications and presentations.
The October 31 supplement to Circulation, the official journal of the American Heart Association, published a peer-reviewed abstract of 47 patients who underwent our minimally invasive procedure.
The leading and senior authors of the abstract are Dr. James Edgerton and Dr. Michael Mack.
Both Doctors Edgerton and Mack are world-renown surgical innovators and clinical trialists from the cardiopulmonary research science and technology institute based in Dallas, Texas.
Of the 47 patients, 35 were paroxysmal and 12 were permanent.
The 6-month clinical and EKG follow-up is complete on the first 26 patients with an overall success rate of 92.3%. the use of continuous monitoring in order to record both symptomatic and asymptomatic episodes of atrial fibrillation demonstrated a 93.3% success rate for paroxysmal patients and a 66.7% success rate for permanent atrial fibrillation patients.
In terms of safety, there was one operative mortality related to the excision of the left atrial appendage.
That was directly attributable to a non-AtriCure surgical stapler.
Also, there was one clotted hemothorax that resolved with standard evacuation techniques and one transient brachial plexus palsy.
These results are very encouraging and further build on our passion and steadfast conviction that our minimally invasive products are positioned to make important clinical contributions toward expanding the treatment options for the hundreds of thousands of patients who suffer from atrial fibrillation.
Minimally invasive treatments performed with AtriCure products will be the subject of three oral presentations at the upcoming American Heart meetings in Chicago next week.
On November 13th there are two invited talks in atrial fibrillation session.
During these oral presentations, Dr. Wolff will present "Minimally Invasive Treatment Of Atrial Fibrillation," and Dr. James Edgerton will present "Perspectives on Ganglionectomy."
Ganglionectomy is the aspect of our minimally invasive procedure which is designed to identify and ablate specific nerve bundles which are thought to be potential AF triggers using our multi-functional pen system.
Additionally, on November 15th during an arrhythmia session, Dr. James Edgerton and Dr. Michael Mack will present an update from their 47-pateint investigator-sponsored trial of approximately seven patients, which we believe will corroborate their early reported results.
Moreover, we are aware of an abstract submitted to the American College of Cardiology, which includes 111 patients from five separate centers using our minimally invasive products. if accepted, we believe that this multi-center effort will further validate the improved clinical outcomes with the use of our minimally invasive system.
We anticipate that both the American Heart Association and American College of Cardiology abstracts will be developed into manuscripts and submitted to major peer review cardiology and/or electrophysiology journals in the near future.
Additionally, Dr. Hamanchi Shucula and Dr. Warren Jackman have recently submitted a 55-patient multi-center manuscript to the Journal of Cardiovascular Electrophysiology.
We believe the reported results from these pioneering electrophysiologists will be consistent with previously reported results, and that the data, if published, will play a major role toward increasing the acceptance and adoption of our minimally invasive products and procedures.
Now I would like to update on the developments of our minimally invasive product portfolio for the treatment of the more persistent and permanent atrial fibrillation patients.
Our improved outcomes in the paroxysmal patient population continue to be validated in the clinical community.
However, we believe that the more persistent and permanent AF population represents a large untapped market opportunity for AtriCure, and these patients account for approximately 50% of the diagnosed population, and have limited treatment options.
These patients are typically refractory or intolerant to drug therapy, and are generally not considered good candidates for a catheter ablation.
Based on the initial results reported with the Cox Maze procedure and publications using AtriCure products for open ablation procedures, the peer-reviewed literature strongly suggests that an expanded lesion set will provide enhanced outcomes for patients diagnosed with more persistent and permanent atrial fibrillation.
We are pleased to announce that a pioneering group of surgeons and electrophysiologists has made significant progress toward the development of an expanded ablation treatment utilizing our minimally invasive products. this procedure includes additional ablation lines and confirmation of conduction block of all ablation lines.
An abstract describing the expanded ablation set was submitted to the American Association of Thoracic Surgeons in October.
If accepted, we believe that this abstract will demonstrate the feasibility of this newly developed treatment paradigm.
During these initial feasibility cases, surgeons used our current pen system to create additional ablation lines.
We are developing new ablation and mapping technology for our multi-functional pen system in order to facilitate and enhance the expanded ablation lesion set.
We are planning a major launch of this new multi-functional pen and mapping system with new cardiac ablation and mapping technology in the third quarter of 2007.
Additionally, we plan to further validate its role in the treatment of permanent atrial fibrillation patients in FDA-regulated clinical trials.
We believe that the development of a successful minimally invasive treatment for the more persistent and permanent atrial fibrillation patients represents a large and untapped market opportunity for our company, and we intend to take advantage of that opportunity.
As discussed earlier, we launched our multi-functional pen system during the third quarter. this product is now being used in the majority of our minimally invasive procedures.
We believe the multi-functional pen system will be a key business driver in both the open and minimally invasive procedures, and represents an important step toward integrating basic and advanced electrophysiology methods into the operating room in order to transform the cardiac surgeon into an arrhythmia specialist.
Now, turning to our left atrial appendage exclusion system.
There is a manuscript describing our system published in the August edition of the Journal of Thoracic and Cardiovascular Surgery.
This manuscript describes a chronic preclinical evaluation of our left atrial appendage exclusion system.
The conclusion of the investigators was that our system enables rapid, reliable and safe exclusion of the left atrial appendage.
We currently anticipate commercial release during the second half of 2007.
Now for a strategic overview of our RESTORE SR2 feasibility study.
As we previously reported, all 25 patients have been enrolled and treated in the RESTORE SR2 FDA regulated clinical trial as of May 31, 2006. we anticipate an abstract will be submitted to the Heart Rhythm Society by year-end describing our initial results.
We plan to file an extension to our RESTORE SR2 feasibility trial to include the expanded ablation lines during the first quarter of 2007.
We will work with the FDA to initiate a pivotal study focusing on evaluating the expanded ablation lines for the permanent atrial fibrillation patients who have failed medical management and have no other viable treatment alternatives.
If accepted by the FDA, we anticipate conducting a single-arm pivotal study avoiding the complexities of a randomized trial and generating rapid enrollment towards a PMA for an atrial fibrillation claim.
We anticipate rapid enrollment in a single-arm study for permanent AF patients due to the severity of the condition and the limited treatment alternatives.
Based on the open experience with the expanded ablation treatment, including the results of our ongoing RESTORE SR1 clinical trial, we would anticipate the successful outcomes in this important clinical trial design.
Now for an update regarding organizational developments.
Mr. Michael Hooven, our co-founder and Chief Technology Officer, will transition from his operating role into a consulting position with the company.
In his consulting role, Mike will focus on early stage product concepts for use by electrophysiologists while he continues to serve as a company director.
As a co-founder, director and major shareholder, Mike retains a significant interest in AtriCure's long-term success.
This transition allows Mike to continue value for AtriCure through his research of early-stage product concepts while also pursuing his interest as an independent entrepreneur and innovator in areas outside of AtriCure's field of interest.
With respect to our CFO search, we have retained one of the major search firms, and we are in the process of narrowing our search to a number of highly qualified financial executives.
Due to the significance of this hire, we want to ensure that we proceed systematically through the search process and hire a highly qualified candidate who meets our technical needs and fits with our high-energy results-oriented company culture.
We anticipate that we will identify a candidate in the near future.
In terms of our operations and quality systems, following the FDA inspection of Dr. Randall Wolff in May of this year, the FDA inspected AtriCure unannounced for cause based on articles that appeared in the Wall Street Journal that related to, among other things, Dr. Wolff's relationship with AtriCure.
At the close of these inspections and in subsequent communications, we are pleased to report that there were no formal inspectional observations noted and no Form 43 issued, indicating that the company's practices and procedures that were reviewed comply with FDA regulations.
The company received a closeout letter in October stating that there were no further actions required by the company. we expect to receive a standard final establishment inspection report from the FDA, which we believe will include recommendations for continuous improvements.
In summary, we believe that our business is building momentum across all functions.
We have successfully launched three new product platforms during 2006, including the Endoscopic Ablation platform, the new Open Isolator system, and the multi-functional Isolator Transpolar Pen System.
Additionally, we have four significant new disposable product launches planned during 2007, including a left atrial appendage clip.
Furthermore, there is a [robust] pipeline of clinical papers and presentations which we believe will further validate the superiority of our minimally invasive products for patients with paroxysmal atrial fibrillation.
Additionally, with the use of our products, investigators have developed new minimally invasive procedures which we believe will become a standard of care for patients with more persistent and permanent atrial fibrillation, and we are rapidly developing new cardiac ablation and mapping technology to support these procedures for the more permanent atrial fibrillation patients.
Lastly, we have validation that our clinical studies, promotional activities and practices, reporting procedures and quality systems comply with FDA regulations, and we are making important strides towards further developing our FDA clinical and regulatory strategy for our minimally invasive products.
Now for a review of our third quarter financials and key metrics.
Our third quarter 2006 consolidated revenue was 9.4 million, an increase of 31% over third quarter 2005 and a sequential decrease of 3% over second quarter 2006. we anticipated the sequential decrease based on seasonality trends.
The corresponding revenue contribution for the third quarter 2006 was 5.5 million from domestic open procedures, or approximately 58% of total revenue and 2.8 million from domestic minimally invasive procedures, or approximately 30% of total revenue.
International revenue for the third quarter was 1.1 million, or approximately 12% of total revenue.
Let me point out that revenue from our Isolator Transpolar Pen System, which is used in both open and minimally invasive procedures, is allocated between minimally invasive and open revenue based on our best estimate of the pen's actual usage.
Now I would like to update you on some key performance indicators.
The average domestic selling price for our open clamps increased approximately 2% quarter-over-quarter to $2,502. our quarter-over-quarter average selling price for our minimally invasive kit, which currently includes two clamps and a dissection tool, also increased approximately 2% to $7,527.
These favorable ASP trends are attributable to the release of our endoscopic platform for both minimally invasive and open procedures.
Separately, our Pen ASP remained constant quarter-over-quarter at $1,771. minimally invasive procedures were performed in 64 U.S. medical centers during the quarter of 2006 compared to 65 medical centers in the second quarter of 2006 and 46 medical centers in the first quarter of 2006. this number was flat sequentially due to seasonality, as summer vacations interrupt training activities that result in penetrating new medical centers.
Now for an update on gross margin trends.
Gross profit for the third quarter 2006 was 7.5 million with a gross margin of 79.8% compared to third quarter 2005 gross margin of 71.9% and to second quarter [2000 in] gross margin of 81.5%.
The year-over-year increase is attributable to the full quarter impact of acquiring Enable Medical Corporation, the former supplier of our disposable products.
Next, an update on operating expenses and EPS.
Research and development expenses were 3.2 million for the third quarter of 2006 compared to 2.6 million for the third quarter of 2005 and 2.9 million for the second quarter of 2006. the year-over-year increase was attributable primarily to increases in headcount-related expenses and the expansion of our clinical research activities. selling, general and administrative expenses were 7.7 million for the third quarter 2006 compared to 6.3 million for the third quarter 2005 and 8.5 million for the second quarter 2006.
Selling, general and administrative expenses increased year-over-year primarily due to increases in headcount and higher general corporate expenditures as a result of being a public company. the sequential decrease in selling, general and administrative expenses was primarily attributable to lower accounting-related expenses, a seasonal decrease in sales and marketing expenses due to an internal focus to manage and control expenses.
The net loss for the quarter was 3.2 million, or $0.26 per share.
This includes the after-tax impact of approximately .2 million, or $0.02 per share of stock-based compensation related to FAS123(R) and other non-cash based compensation.
In terms of the balance sheet, at September 30, 2006, cash, cash equivalents and investments were 22.3 million.
We had a total debt outstanding of 1.1 million and total working capital of 24.1 million.
Now, turning to the fourth quarter and full year 2006 guidance.
For the fourth quarter 2006 we expect revenue to be in the range of 10 to 10.4 million.
For the full year, we are raising the low end of our revenue guidance.
We expect total revenue to be between 37.6 million and 38 million and, for the full year 2006, we are lowering our loss per share estimates from a range of $1.30 to $1.50 to a range of $1.20 to $1.25, of which we estimate $0.08 to $0.10 will be a result of non-cash based compensation charges.
At this point I would like to open the call up to questions.
Operator
[OPERATOR INSTRUCTIONS.]
Tim Nelson with Piper Jaffray.
Tim Nelson - Analyst
Very thorough job on the call here.
You answered a lot of my questions already.
But, I guess the most important question I have for you is if you can just tell me a little bit on your discussions with the FDA surrounding this clinical plan to do a non-randomized follow-on study to the RESTORE SR study for current patients.
Have they bought off on that?
Do you have some indication that they're going to buy off on that, or is that just, at this time, a strategic plan that isn't locked and loaded?
Dave Drachman - President and CEO
Well, it is a strategic plan that actually is based on good working relationships with the FDA and working through RESTORE SR1.
You may remember that RESTORE SR1 is not a randomized trial.
It's a single-arm permanent AF trial in patients that undergo concomitant AF treatments and, based on those negotiations, we were able to negotiate a single-arm study, which has a matching control arm of patients that do not have atrial fibrillation but are undergoing the same operation and have similar demographics.
So, we've been through this process with the FDA, and we believe, based on that series of discussions and the negotiation of our clinical trial design in RESTORE SR1, which is the only non-randomized AF clinical trial that the FDA will be open to a single-arm trial for permanent AF patients.
Tim Nelson - Analyst
Again using a historical control?
Dave Drachman - President and CEO
Well, the historical control, or some sort of control, whether it's drug or historical based on open-heart surgeries, would be used for safety, but the patient would be their own control in terms of efficacy.
Tim Nelson - Analyst
And any idea on how many patients that would be?
You said rapid enrollment, but how many patients, how many sites would you be thinking about?
Dave Drachman - President and CEO
We think that would be less than 200 patients, could probably be done in 25 or 30 sites.
We're excited about it because the permanent AF patients have no other viable treatment alternatives in general.
They're not going to be randomized, which is a big complexity of the paroxysmal treatment strategies because the patients have already failed drugs.
They come to their physicians, and now they're asked to be randomized drug versus device, and they can often get the device on the open market.
We wouldn't be asking patients to randomize, and they'd be getting best medical management by being in the clinical study, and we think that that's going to be a trial which will stimulate rapid enrollment because of the non-randomization.
It's also, Tim, going to be a trial that's going to be more easily controlled because you don't have to do the extensive monitoring.
If patients have paroxysmal atrial fibrillation, you have to monitor them for weeks beforehand to establish an atrial fibrillation burden, and then at six and 12 months you've got to ask them to wear continuous monitoring systems for a minimum of three weeks.
With our clinical trial, which is focused on permanent AF, there won't be any monitoring as a preamble to the treatment, and we believe that the six and 12-month monitoring will be much easier for patients to follow because we're looking for reductions in permanent atrial fibrillation treatment.
We're very enthusiastic about this strategy, although we have a fair amount of work to do in terms of expanding our feasibility study to include the expanded lesion set and working with the agency.
Tim Nelson - Analyst
As I understood the paper, that had 12 patients that had this lesion set done on a minimally invasive basis, and the success rate was 66%?
Did I hear that right?
Dave Drachman - President and CEO
No, you didn't hear that right.
All patients treated, all 47 patients received pulmonary vein isolation.
They received this GP ablation, or partial denervation of the left atrium and left atrial appendage exclusion.
That is our treatment paradigm which we are demonstrating as in excess of 90% success rate even with continuous monitoring in the paroxysmal patients.
That procedure was never intended to be a highly successful procedure in permanent AF patients.
The patients with paroxysmal atrial fibrillation have triggers.
By doing pulmonary vein isolation denervation, we can actually eliminate those triggers and get very high success rates.
When patients actually move into the permanent phase, the atrial fibrillation becomes more substrate-related and requires more ablation treatment.
So, we have known from the onset that we needed to expand the ablation treatment in order to get higher efficacy results in that patient population.
And we're very excited that we've actually been able to do that through a minimally invasive technique with our current Pen technology, and we're rapidly driving to superior technologies to make these additional ablation lines and to confirm that they're blocked with mapping systems.
Is that clear, Tim?
Tim Nelson - Analyst
It's getting clearer.
I don't understand totally, and maybe I need a picture, and I'll talk to you offline about it, on the lesion set and how it's different between the two procedures.
Dave Drachman - President and CEO
Well, it's basically a full left-sided Maze procedure versus just pulmonary vein isolation and denervation.
You're adding lines to the mitral valve, you're adding roof lines, and we're also confirming that these lines are fully blocked.
And if you look at the surgical literature for concomitant, this is what's really interesting, Tim.
When you look at the surgical literature in the concomitant mode, patients that undergo mitral valve operations and have permanent AF respond extremely well to the lesion set that we're now performing through a minimally invasive approach in patients that are less sick.
It's a less sick population because they don't have operable structural heart disease.
So, we're very optimistic that the current treatment has high efficacy rates in the paroxysmal patients, and that the expanded ablation lines, which is a full left-sided Maze procedure through a thorascopic approach, will be a targeted therapy for the more permanent AF patients, and we're hopeful that we can negotiate that clinical trial with the FDA.
Tim Nelson - Analyst
Moving on to products.
On the multi-functional Pen, you have the Pen launched already.
Isn't that right, or are you talking about the enhanced version next year?
Dave Drachman - President and CEO
Yes.
We're talking about a much-enhanced version of that Pen.
One of the challenges, as with any bipolar or any uni-directional technologies, particularly a uni-directional technology to make full thickness lesion on the outside of a beating heart, can become challenging.
We've used our current generation Pen, which is bipolar, and it's been acceptable, although it's been harder than we would have liked to make full thickness lesions.
We've been able to confirm block by bringing people like Sonny Jackman into the operating room and using mapping techniques to show that these additional lesions, like rooflines and mitral valve lines, are fully blocked.
But, what we're developing rapidly is a very slick system that will make deeper lesions that are uni-directional but bipolar on an epicardial beating heart, and we're also developing algorithms to demonstrate that these lesions online are a transmural or a full thickness.
So, that's a very exciting part of our development portfolio, and we believe that that's really going to enable us to expand into the more permanent AF patients.
And by the way, the clip may have its biggest applicability in these permanent AF patients because they tend to be older patients with higher CHAD scores and tend to have higher risk of stroke in general.
So, we think the clip is going to fit really well into that strategic plan.
Tim Nelson - Analyst
The current Pen you mentioned were allocated between open and closed procedures, the current Pen sales.
Is that the current bipolar Pen with the switch box for mapping, isn't it?
Could you give us the allocation of clips between the two procedures?
Dave Drachman - President and CEO
Yes.
Last quarter it was 55/45, 55 open, 45 MIS.
This quarter it was actually 57.5 for the open and 42.5 for the MIS.
Tim Nelson - Analyst
And looking at international sales, that the second really strong quarter in a row, and particularly in -- internationally where seasonality is often more pronounced than in the U.S.
Can you talk about why your international sales were so strong?
Dave Drachman - President and CEO
Well, certainly seasonality is a bigger issue in Europe than it is in some of the Asian markets, so Asia was fairly strong during the quarter.
In general, the European BV has worked out extremely well.
We anticipate in excess of 100% year-over-year growth in Europe.
And in terms of the rest of the world, we're adding additional headcount both in Europe and Japan.
We have educational programs planned for our stocking distributors, and we're taking several other precautions to make sure that we maximize the international opportunity.
We also believe that our cardiac arrhythmia approval in Europe is stimulating progress there as well.
Tim Nelson - Analyst
So, there wasn't a big stocking order or anything that would lead one to believe that maybe this isn't a sustainable sales level?
Dave Drachman - President and CEO
No, this actually -- it's 75% year-over-year growth but, Tim, the quarter was actually down.
Last quarter was 1.3 million.
This quarter was 1.1 million.
Tim Nelson - Analyst
I know, but I look back historically, you have a lot of 500 and $600,000 quarters, so I'm just wondering how to think about U.S. sales in a dollar level on a go-forward basis, and it sounds like it's going to be at this level or better going forward.
Dave Drachman - President and CEO
We believe so, and the reason why you had more cyclical ups and downs was because the business was less developed.
As you know, in a smaller, less developed business, you tend to have more up and down cycles.
You don't have as many ways to catch up.
Now that we've expanded our international markets and we have strong presence in Europe, Japan, China, developing stronger presence in South America, we anticipate to see more of a step-wise function versus more of a cycle-looking trend.
Tim Nelson - Analyst
On the domestic side, given the very well-controlled SG&A line, is there any sales force reductions?
Is it pretty stable out there?
Dave Drachman - President and CEO
It's actually pretty stable.
We did separate two sales representative due to performance issues, and we replaced two of those positions.
And we did lose one sales representative due to his travel restraints.
So, there was three turnover, two that we separated, one that left the company. [Three of the two] are filled.
Tim Nelson - Analyst
How many new accounts did you say you had on the MAS side?
Is that 55, did I hear?
Dave Drachman - President and CEO
Well, we didn't say new accounts.
Our metrics, as you know -- what we report on is the number of accounts that we've performed procedures on within the quarter.
And so, if you look at the 64 accounts that performed MIS procedures in the third quarter, that compares to 65 in the second quarter and, basically, 46 to the first quarter.
Tim Nelson - Analyst
Is there a lot of [inaudible] turn in that number, or is it the same number of accounts, pretty much?
Dave Drachman - President and CEO
We're very excited about this trend.
If you think about the trend, basically we had a record month at 2.8 million domestically, and we didn't increase the number of accounts a lot because of seasonality and the difficulty with education and training during the summer months.
So, this 2.8 million was driven from reorders in existing accounts.
It was driven by the release of the Pen, which, by the way, was only released in August, so it was released midway through the quarter, and it was also driven by a 2% increase in ASP.
So, we think that the trend for minimally invasive in the third quarter was very favorable and, actually, beat our own expectations.
Operator
Steve Ogilvie with ThinkEquity.
Steve Ogilvie - Analyst
Most everything's been covered.
You were very thorough.
Just a quick question on the clip.
Did you say if you know it's going to be a 510K?
Have you received that for sure, or is there still maybe a remote chance that it will be a more strenuous approval cycle?
Dave Drachman - President and CEO
There's certainly always a remote chance.
Our consultants have taken the temperature at FDA.
There's also another company that submitted a predicate device only for a left atrial appendage claim and received it.
So, we believe that there's history here.
Our initial discussions through consultants, the fact that one of our competitive companies filed for only a left atrial appendage claim and received it, and the fact that our preclinical studies are robust, we believe that we have a very good opportunity to have this cleared under a 510K and out in the market in the second half of the year.
Steve Ogilvie - Analyst
Do you know when you'll know if it's a 510K?
Dave Drachman - President and CEO
We'll submit the 510K in the later portion of the first quarter, and we should know whether or not it's a 510K certainly by midyear.
Steve Ogilvie - Analyst
I think before you gave guidance on how many minimally invasive accounts you hope to have by year-end.
Did you say anything about that on the call, or do you have any color on that?
Dave Drachman - President and CEO
Yes.
We had been talking about 100 accounts, and we will have 100 accounts that have purchased minimally invasive product by year-end.
Now, in terms of accounts performing procedures within the quarter, which is what we like to report on, we think that's the most important metrics.
We're likely not to achieve 100 accounts performing procedures even though 100 accounts will have bought product.
And the reason for that is that the time between training, purchasing product and selecting the most appropriate patients can be elongated.
For example, we very often get physicians in place and ready to go, and the first four, five or six referrals are not necessarily ideal candidates for their first procedures.
So, I think it's fair to say that approximately 20 new accounts will be performing procedures in the fourth quarter, which means that our current target is in the mid-80 range for the fourth quarter, but there will have been 100 accounts that will have purchased product that won't actually get up and running until the first quarter 2007.
Steve Ogilvie - Analyst
On the competition, Medtronic has come out with a device that looks a lot like your Wolff dissector, and has a light on the end of it and has a sheath on the nose of their jaw so they can pull through for a less invasive approach.
From your point of view, what's the strategy in terms of intellectual property?
Is that something that you would pursue, or is that more of just a technique that can't be patent-protected?
Dave Drachman - President and CEO
Well, we certainly have a robust intellectual property portfolio.
I think you know that we've got 21 issued U.S. patents, 25 applications pending and more than 20 foreign patents issued or pending.
So, we have a comprehensive intellectual portfolio of our own.
We're also planning to file an additional 15 to 20 new applications this year, and we're monitoring the industry within our space and keeping an eye on the intellectual property landscape.
More than that I can't comment.
Steve Ogilvie - Analyst
You talked about the sales force, how there's been just a little bit of turnover, nothing material.
Do you intend to grow the sales force in the near future or are you holding where you are and just keeping your training schedule going?
Steve Ogilvie - Analyst
We don't have any significant plans to grow the sales force.
There's a probability that we'll pick up a small number of new people, three to five new people, between now and maybe the third quarter.
But, in general, we feel like we have the operating capacity, both in terms of product development, clinical, regulatory, operations.
We feel like we've put the operating capacity in place this year to leverage revenue, and our goal right now is to get on a vertical revenue trend while we control and contain expenses.
And we think we have the distribution channels primarily in place to do that.
Operator
Keay from Unterberg.
Keay Nakae - Analyst
Did I hear you correctly in that you plan on launching some new mapping technology?
Steve Ogilvie - Analyst
We do.
We have signed an agreement with a company, and we believe that integrating electrophysiology techniques, such as our multi-functional Pen and other cardiac ablation technology and mapping systems in order to transform the cardiac surgeon to the arrhythmia specialist, that these electrophysiology products will actually improve clinical outcomes and will allow the referring physicians to have more confidence in the rigor of these procedures.
So, we are working with a company and plan to have a mapping system out in the first half of 2007, and then that will be coupled with our new second-generation cardiac ablation technology for the expanded lesion set, this Pen derivative, if you will, in the third quarter of 2007.
Keay Nakae - Analyst
Okay, so you'll integrate your system into one of the existing mapping systems that's already out there?
Is that the way we should think about that?
Dave Drachman - President and CEO
That's one way to think about it.
I'd like to think about this as much more of a custom system.
It deals much more with the needs that are required in the operating room.
But, it's more of an OR mapping system.
There aren't many of those around anymore, and this is much more updated in terms of the types of techniques and electrophysiology methods that would streamline the procedure and improve clinical outcomes.
But, it is existing.
The hardware and software and algorithms are generally out in the market.
Keay Nakae - Analyst
And in terms of the capital costs of this piece of equipment, the surgical suite's going to need to buy this piece of equipment that might already exist, I guess, in the electrophysiology lab.
Is this going to be a lower priced version of a product that would today be sold into the electrophysiology lab?
Dave Drachman - President and CEO
I think that's a fair statement.
I think it will be a lower price.
It doesn't need all the expanded capabilities that you might use in the EP lab.
It's a more focused system.
It's a more focused mapping system specifically for the surgical approach to atrial fibrillation.
Operator
Larry Haimovitch with HMTC
Larry Haimovitch - Analyst
I wanted to first congratulate you on a really terrific quarter, obviously making great progress.
Dave Drachman - President and CEO
I'd like to take the congratulations but, really, the employees, they really deserve the credit.
This has just been a tremendous quarter, and it's really due to the passion and enthusiasm the team has here at AtriCure.
But, thank you.
Larry Haimovitch - Analyst
Well, it's indicative of the organization and how you've bounced back from some adversity nine months ago.
So, congrats.
Couple of questions and couple of clarifications.
On the results that are going to come out the American Heart, Edgerton, etc., you talked about a 92, 93 -- I don't remember the exact number -- percent success, and I think you were emphasizing, which I thought was important, I wanted to clarify, the monitoring.
This is really good, continuous halter monitoring for a week at a time or two weeks at a time so we know, in fact, the patient is truly on sinus rhythm?
Dave Drachman - President and CEO
It's two to three weeks, and I'm really glad you asked that question.
That's really an excellent question.
One of the things that we've been talking about with our centers is that we would like them to look at the data in three different ways, from the single EKG, from a clinical perspective, which means symptoms, and from continuous monitoring.
When I look through the EP literature, and I have for many years, it's virtually impossible to understand what the end point was in terms of how they measured success.
It sort of reminds me of the original angioplasty case.
And from our perspective, we want to be more rigorous because we're coming in with a surgical technique, and we want our surgeons to be able to be very thoughtful about how they follow their patients and follow them with electrophysiologists.
So, the majority of our patients actually are getting continuous monitoring at six and 12 months.
For example, one of the interesting things that we talked about in this script was that the 92.3% was based on clinical and EKG.
Actually, for paroxysmal patients, the results improved and went from 92 to 93%.
Now, that's obviously a small differential, but that's because patients -- it often works the other way.
Sometimes patients think they're having AF and they're not really having it.
But, in general, that is certainly the most rigorous approach, and the Jackman manuscript of 55 patients has continuous monitoring for a minimum of two weeks at six months on all patients.
So, that should be very exciting data.
Larry Haimovitch - Analyst
Well, no, I agree.
You and I have talked about how erratic or unreliable some of the data is because of how they're doing post-op or post-procedure monitoring.
So, I'm glad to hear that you're doing that, and I'm hoping that other companies will start to do that as well, to really put results on a kind of apples-to-apples basis.
Dave, on the minimally invasive versus open, I heard a couple numbers.
I just wanted to clarify it.
Did I hear you say 57.5% was open in the quarter?
And then, that revenue or is that procedures?
Dave Drachman - President and CEO
No.
The question was asked is what's our best estimates of the Pen, and our team does a bottoms-up by-account analysis each quarter to understand how to allocate sales from a Pen perspective to minimally invasive versus open.
And what we allocated this quarter was 57.5 went to open and 42.5 went to minimally invasive versus last quarter.
It was 55 to open and 45 to minimally invasive.
I think this is also an important point that shows how well we did the minimally invasive, because we actually reduced the allocation of Pen to minimally invasive because we had many more open accounts.
So, thought that was also a favorable outcome, considering the way the allocation worked out.
Larry Haimovitch - Analyst
So, let me ask then about procedure growth year-over-year of open versus last year, and then also minimally invasive versus last year, or against the second quarter.
Dave Drachman - President and CEO
Yes.
So, in terms of year-over-year open growth, we're at basically 7% year-over-year.
I'm sorry, quarter-over-quarter we're at 7%.
Larry Haimovitch - Analyst
So, third quarter to third quarter up 7%?
Dave Drachman - President and CEO
Right.
Larry Haimovitch - Analyst
And how about to the second quarter?
Was there sequential growth or was it down?
Dave Drachman - President and CEO
Larry, let me step back.
I'm just getting some data.
Year-over-year growth was 7%.
Sequential growth was down 3%, and year-to-date growth is up 3%.
Larry Haimovitch - Analyst
OK.
So, basically a lot of the growth this year is coming from the minimally invasive.
Is that a fair ...
Dave Drachman - President and CEO
That's a fair characterization, and I think that's a natural one because we placed a lot of attention, as you and I have talked about, in designs and developments for the minimally invasive, although we've also grown international quite nicely from an open perspective.
But, I'd like to come back to that point, because we just released in the third quarter, actually in August, our first new platform for the open, which was the Open Isolator Clamp.
The multi-functional Pen has a big opportunity in the open cases, and then we have an open dissection tool that we're going to release in the first quarter, and this new ablation technology will be released on an open clamp.
So, we basically have four new products within about a seven or eight-month period of time that we're planning to release into the market that are leveraged off designs and developments that we had with minimally invasive, and we're bringing them back to the open and we believe that those products will get us back on a more natural growth trend in the open market.
Larry Haimovitch - Analyst
In the minimally invasive market, I kind of model the U.S. minimally invasive market total, yours and everyone's, at maybe about 2,000 procedures this year, and my guess is you've got 60 to 70% of the procedure market in minimally invasive.
Does that sound kind of close to what you guys are thinking?
Dave Drachman - President and CEO
Yes.
We're thinking that we have between 70 and 75% market this year.
Larry Haimovitch - Analyst
OK.
And your minimally invasive procedures would be, what, in that 12, 13, 1,400 range?
Dave Drachman - President and CEO
Yes.
Larry Haimovitch - Analyst
OK, great.
Congrats.
Keep up the good work.
Operator
[OPERATOR INSTRUCTIONS.]
Bob Koshgarian with Kairos Partners
Bob Koshgarian - Analyst
Congratulations on a nice quarter.
Dave Drachman - President and CEO
Thank you.
Bob Koshgarian - Analyst
Couple quick housekeeping questions to start, if I may.
What was total Pen revenue in the quarter?
Dave Drachman - President and CEO
Total Pen revenue domestically was 1.1 million, up 32% quarter-over-quarter.
Bob Koshgarian - Analyst
How many new accounts did you train in the quarter?
Dave Drachman - President and CEO
We haven't typically given guidance on new accounts that we've trained, so don't hold me specifically to this number, but it's about 15 accounts that we actually went through training for the quarter.
Bob Koshgarian - Analyst
And would that be a similar number if I asked what is the backlog?
You referred to earlier that you're targeting mid-80 users in the fourth quarter, centers that do minimally invasive procedures.
There's a number of centers that have been trained but haven't really done a patient yet.
Would that be a similar number if we call that the backlog?
Dave Drachman - President and CEO
Yes.
I think if we're saying the same thing, I think that where I'm going from 64 to the mid 80s, based on the fact that it takes a quarter, basically.
You're always a bit of a quarter behind in terms of the way that it works.
Between training, getting new products into the accounts and lining up cases, that's about a three-month process.
So, considering the fact that we have 15 accounts trained during the third quarter, we feel pretty confident that we can get to the mid 80s in terms of the fourth quarter, as it relates to accounts performing procedures within the quarter.
Bob Koshgarian - Analyst
So, the number of accounts who have been trained but aren't yet doing procedures is pretty much 15 in that neck of the woods?
Dave Drachman - President and CEO
Correct.
Bob Koshgarian - Analyst
On the extension to the feasibility study, could you talk a little bit more about that?
I know at one point you were talking about extending it by 15 patients.
And I just wanted to understand if that still looks like the outlook that you'll try to file for, and how many centers do you think you'll need in order to do those 15, and so on.
Dave Drachman - President and CEO
Well, we can do it in a relatively small number of centers, but our strategy [inaudible] develop, Bob, that we'd like to have 10 centers on board.
That'll give us leverage going into a pivotal trial. so, the more centers we have on board that have IRB approvals, that are trained, it gives us a little bit of more momentum going into a pivotal trial.
Bob Koshgarian - Analyst
Just for the extension?
Dave Drachman - President and CEO
Well, in other words, the extension, if we go into the extension, and during that extension there are 10 centers that participate, and the FDA gives us approval to go into a pivotal trial, have the 10 centers contributing patients in a feasibility trial is better than having five in terms of momentum building into your pivotal.
So, we would ask for 10 centers and probably 25 patients.
We wanted to increase the number of patients a little bit so we could get a better general sense of what the anticipated efficacy would be so that we could more clearly define our end points going into a pivotal trial.
Bob Koshgarian - Analyst
OK, that makes sense.
And again, it would be a six-month follow-up, most likely?
Dave Drachman - President and CEO
Yes.
That's always hard to characterize in terms of what the FDA is going to require in the feasibility study to move into a pivotal trial.
The study will be a 12-month study because all AF trials are 12-month studies.
But, what generally happens is you often submit an interim report with three or six months results, and that's what our plan would be.
We complete the 25 patients.
We would add that to the original patients, and that would give us 50 patients, and we would probably submit an interim report.
We'd have a fairly long mean follow-up on the first 25 and a shorter mean follow-up on the second 25.
And I think if the FDA viewed the procedure as being safe, then we could move into a pivotal trial relatively rapidly.
Bob Koshgarian - Analyst
Would you refresh my memory, Dave?
Were any of the original 25 permanent AF patients, and they got a full lesion set?
Dave Drachman - President and CEO
No.
We've only recently developed a full lesion set.
The protocol and the methods in the protocol was pulmonary vein isolation, partial denervation, which is this GP ablation, and left atrial appendage exclusions.
So, all 25 patients got that procedure.
Now, as it happens, we took all comers.
We didn't exclude permanent AF patients.
Bob Koshgarian - Analyst
How many were permanent, then?
Twenty-five?
Dave Drachman - President and CEO
Some of those patients were permanent, yes.
Bob Koshgarian - Analyst
Do you have a number?
Dave Drachman - President and CEO
It's about 30% of the patients were permanent.
Bob Koshgarian - Analyst
Last question on the extension and the move to do additional permanent patients with the full lesion set.
At this point, do you feel like the current generation Pen will be what you want to go into the extension with, and will it do the job?
Are you kind of feeling like you need the next generation pen to do this?
Dave Drachman - President and CEO
Great question.
What we'd like to do is use this generation Pen and some mapping methods that we've developed to make sure that these additional blocking lines are actually full thickness, and then actually leverage those patients and move into a pivotal trial with the newer technology, considering that the new technology we think will be viewed as a similar predicate-like technology to our current Pen.
And we'll be able to show the bench-top data in terms of ablation safety, so we think there's a fairly good possibility that FDA would not require additional patients for the -- let's call it a second-generation cardiac ablation Pen with mapping system.
That's our current strategy.
Want to get moving faster than sooner.
I will tell you that we have developed some very sophisticated mapping systems in the operating room that we sort of pieced together with combination of different technologies, and we are confident that we can make full thickness ablation with this current generation Pen.
It's just a little bit more difficult than we'd like to have it be for the general cardiac surgeon.
Bob Koshgarian - Analyst
On the ACC abstract that was submitted, the 111 patients, when would you know that it got accepted?
Dave Drachman - President and CEO
By the end of November.
Bob Koshgarian - Analyst
OK, so it's reasonably quick.
And I apologize.
You said the Jackman 55-patient study was submitted to the Journal of Cardiac Electrophysiology?
Dave Drachman - President and CEO
Right.
Bob Koshgarian - Analyst
OK.
And you'll have an idea on that one when?
Dave Drachman - President and CEO
Well, it's hard to know how quickly the reviewers will turn it around, but I think in the first quarter we'll have an understanding of where that fits.
Now, typically, papers that are submitted independent of who submits them and the quality of the paper, it's common for them to get some comments and for the manuscript to need to be resubmitted addressing the comments.
So, I think it's fair to estimate that this is a mid-year 2007 time frame.
That's what our current ...
Bob Koshgarian - Analyst
For both of them.
Sounds like for both of them.
Dave Drachman - President and CEO
The ACC will be -- actually, that's in March.
The ACC is in March.
I think the 55 patients -- it could happen sooner or later, but I think mid-year 2007 is a fairly good estimate.
And then, there's the 20 patients that we talked about that was submitted in October to AAPS with the expanded lesion set.
This is the only data that was submitted where all 20 patients received this full ablation set that is intended for the AF patients that are more persistent and more permanent.
Bob Koshgarian - Analyst
If I may, just a couple more question on operating expenses.
I heard what you said about the rep turnover.
Any changes to commission structures or anything like that?
It seems like you dropped quite a bit in your sales SG&A expenses.
Dave Drachman - President and CEO
No.
I think there were a couple factors.
One was that we had an extension for S-Ox.
The company has a very robust S-Ox plan, but we were rushed to basically implement that S-Ox plan by the end of the year.
There were some, basically, changes in the regulations that allowed us to extend S-Ox into 2007 and do it in a more systematic and controlled environment, which has actually lowered SG&A expenses.
There's also some decreases in legal expenses to go along with that.
T&E decreased quite a bit because of the summer months.
Those were really the major buckets.
And actually, our auditing expenses, we had a catch-up in the second quarter, so we had a decrease in the third quarter.
Bob Koshgarian - Analyst
The guidance for loss per share for the full year, that would drive a $0.42 to $0.47 loss per share for the fourth quarter, which would be quite different than the $0.25, $0.26 you've been running at.
Is that just being conservative, or is there something on the operating side that is likely to hit in the fourth quarter?
Dave Drachman - President and CEO
No, I think it's just a matter of year-end bonus payouts.
Bob Koshgarian - Analyst
OK, so the SG&A line may jump due to year-end bonus payments?
Dave Drachman - President and CEO
Yes.
Generally speaking, we sort of leverage the sales organization to a year-end number.
And so, there's bonus payouts to sales, and there's also bonus payouts to management, and that's really the differential.
Operator
There are no further questions in queue at this time.
I would now like to turn the call over to Mr. Drachman for closing remarks.
Please proceed, sir.
Dave Drachman - President and CEO
Well, on behalf of AtriCure, we'd like to thank everybody for your support and cooperation, and for joining the call today.
We look forward to making important contributions and serving our customers and physicians and shareholders.
So, thank you very much.
Operator
Thank you for your attendance in today's conference.
This concludes the presentation.
You may now disconnect.