AtriCure Inc (ATRC) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2010 AtriCure Incorporated earnings conference call.

My name is Twanda and I will be your coordinator for today.

At this time, all participants are in listen-only mode.

Later, we will be facilitating a question-and-answer session.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to Mr.

David Drachman, President and CEO.

Please proceed, sir.

Thank you, Twanda.

Good morning, and welcome to our fourth-quarter earnings conference call.

Joining me on the call today is Julie Piton, Vice President of Finance and Administration and Chief Financial Officer.

At this time, I would like to turn the call over to Julie for a few introductory comments.

Thank you, Dave, and good morning, everyone.

By now, you should have received a copy of the earnings press release.

If you have not received a copy, please call Sarah [Lukon] at 513-755-4136, and she will fax or e-mail you a copy.

Before we begin today, let me remind you that the Company's remarks 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 revenue and earning 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, governmental approval, and other risks and uncertainties described from time to time in AtriCure's SEC filing.

AtriCure's 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.

Additionally, we will refer to non-GAAP financial metrics.A reconciliation of these non-GAAP measures is included in our press release, which is available on our website.

I would like to remind everyone on the call today that the Food and Drug Administration or FDA, has not cleared our products for the treatment of atrial fibrillation, or AF, or for stroke reduction.

The Company and others acting on its behalf may not promote any of it products or train doctors for the surgical treatment of AF or stroke reduction.

These restrictions do not prevent doctors from choosing to use the products for the treatment of AF or stroke reduction or prevent AtriCure from engaging in sales and marketing efforts that focus only on the general attributes of the product for the current cleared uses.

AtriCure educates and trains doctors in the proper use of it products and related technologies.

With that, I would like to turn the call back to Dave.

Thank you, Julie.

Fourth-quarter 2011 revenue was $16.4 million, which represents AtriCure's highest quarterly revenue in constant-currency growth revenue growth of 20%.

Domestic revenue was $13.1 million, up 21%, and international revenue was $3.3 million, up 18% on a constant-currency basis.

These results reflect our team's successful execution of our 2010 strategic priorities.

In terms of profitability and operating leverage, we reported positive quarterly net income for the first time, and fourth-quarter unadjusted EBITDA was a record $1 million.

These results reflect our continued focus on cost control and high gross margins while investing in innovation, sales force expansion, and obtaining regulatory approvals.

Turning to an update on our US sales-force realignment and expansion activities and highlights of revenue results by sector, we have completed the realignment and expansion of our sales organization, which resulted an increase from 30 to 39 sales territories.

We currently have 64 sales and sales support professionals in the US, representing a 20% increase since the beginning of 2010.

Our open-heart business grew $2 million or 30% over the fourth quarter of 2009, which reflects growth in both our radio frequency and cryo-ablation products, which grew 11% as well as $1.3 million in sales from the AtriClip system during our first full quarter of sales.

Fourth-quarter 2000 in sales of minimally invasive products were $4.3 million, including approximately $300,000 in sales from capital equipment.

Adjusting for capital equipment sales, minimally invasive products sales were flat for the fourth quarter of 2009 and increased sequentially.

Fourth-quarter international revenue of $3.3 million was up 18% on a constant-currency basis and accounted for 20% of total revenue.

We are encouraged by these results, which primarily reflect our investments in the expansion of direct sales in Europe.

Now, turning to our investments in FDA approvals and clinical science, we have made significant progress toward our FDA initiative during the quarter.

In December, we filed the fourth and final PMA module in support of our ABLATE clinical trial.The clinical trial was filed during December, ahead of our previously communicated schedule.

We continue to believe that an atrial fibrillation approval for our open-heart products during mid-2012 is achievable.

In addition, during December, we enrolled the first patient in our DEEP AF feasibility trial.

To date, we have enrolled seven of the 30 patients required for the trial.

Our investigators are encouraged by the acute results and initial outcomes.

We anticipate completing enrollment in the feasibility trial mid-year and initiating our pivotal trial during 2012.

Notably, in the upcoming months, we plan to meet with FDA to discuss our pre clinical plans and the design of a stroke clinical trial in support of our thoracoscopic standalone AtriClip platform.

If our discussions with FDA are favorable, we plan to initiate a stroke feasibility trial utilizing our thoracoscopic standalone AtriClip system during 2012.

Furthermore, we are planning to conduct a clinical trial in Europe for CE Mark approval in support of a stroke indication for thoracoscopic standalone AtriClip system during the first half of 2012.

In terms of the European opportunity for the AtriClip, we are encouraged that NICE is reviewing guidelines for reimbursement for thoracoscopic exclusion of the left atrial appendage in atrial fibrillation with or without other cardiac surgical procedures for the prevention of thromboembolism.

Moving to our recent and planned 2011 product releases.

In October, we released an improved cryo probe, Cryo Ice, which incorporates key product enhancements.During the first half of 2011, we plan to introduce a highly featured and simplified cryo-ablation generator, the Ice Box.

Ice Box replaces our existing cryo generator, which generally requires sales personnel to support the system during cryo-ablation procedures.We expect that once the sites are trained on Ice Box, it will free up our sales personnel to focus more time on new selling opportunities.

Additionally, during the second half of 2011, we plan to release a new open-heart cryo ablation probe, the Ace.

Ace is a new platform technology that is designed for less invasive open-heart approaches and can be positioned robotically.

We also continue to advance our radio frequency technologies.

We recently submitted a 510(k) in support of our next generation, open-heart, bipolar clamping system, Synergy Access.

Synergy Access has several competitive advantages, including articulation, which allows surgeons to more easily place the clamp into position.

The launch of Synergy Access is planned for the second quarter of this year.

During 2011, we plan on having our thoracoscopic standalone AtriClip system ready for human uses and regulatory submissions.

This system features a new deployment system in combination with the existing AtriClip.

Now, turning to an overview of our growth strategy.

Beginning with our near-term growth prospects, we expect our near-term growth in the US to come primarily from sales of the AtriClip system and open-heart market-share gains.

We believe this growth will be driven by a series of new-product releases and an anticipated atrial fibrillation approval.

Our recent sales force realignment and expansion prepared us to capitalize on these near-term growth opportunities.

The AtriClip system represents our largest near-term growth catalyst, and is a $200 million open-heart market opportunity.

We believe that this is becoming increasingly accepted in the surgical community, that the AtriClip provides a safer and more effective approach for exclusion of the left atrial appendage.

At the recent Society of Thoracic Surgeons meeting in San Diego, a faculty of highly respected, multidisciplinary physicians chaired a CME event focused on the left atrial appendage.

Registration for the event exceeded expectations and was standing-room only.

The faculty discussed new surgical and percutaneous left-atrial appendage devices.It was noted that the AtriClip system is designed to acutely exclude the left atrial appendage from outside of the heart, leaving no foreign body inside the heart, which emphasizes on acute closure.

Additionally, they highlighted the fact that the AtriClip system does not require medical management as a result of the device implant, which we believe is a significant advantage.

Our initial selling efforts are focused on our top 250 open-heart ablation accounts.

To date, this phase of our strategy has begun and has been effective and during 2010, more than 100 accounts have begun stocking and reordering the AtriClip system.

The average selling price continues to exceed $1,000.

As we move into 2011, our focus is to increase utilization by existing customers, continued penetration of our top 250 open-heart ablation accounts, and in coordination with the release of our new open-heart ablation products, begin targeting competitive ablation accounts.

In terms of our open-heart ablation markets, we remain confident that the AtriClip system will open new doors and create cross-selling opportunities for our new ablation products.

Internationally, we remain committed to high-growth trends and the expansion of our international markets, which are under-penetrated when compared to the US market.

We anticipate international growth will be driven by our direct markets, capitalizing on our investments in direct sales personnel, a series of new-product introductions, geographic expansion, and continued training and development activities in support of our distribution partners.

This strategy, combined with the under-penetrated markets provides us confidence that high growth is sustainable in the international markets.

Now, transitioning to our mid- to long-term growth strategy.

We are optimistic about our mid- to long-term growth platforms, including our minimally invasive and hybrid platform, as well as thoracoscopic standalone exclusion of the left atrial appendage.

We remain highly encouraged by the growing interest in hybrid procedures and hospitals' continued commitment to develop hybrid facilities and programs.

We believe that our DEEP AF hybrid approach represents a novel, clinical, and game-changing solution for a large and growing patient population with limited effective treatment alternatives.

The approach is designed to treat atrial fibrillation patients with persistent forms of AF or patients that are not indicated for a failed single or multiple capital ablation attempts.

As a reminder, the US market for minimally invasive and hybrid procedures is estimated to be in excess of $2 billion.

Minimally invasive and hybrid continues to represent our largest ablation market opportunity, and we believe we have the leading technologies, clinical approach, thought-leader support, and a regulatory program to capitalize on this large and growing opportunity.

Although our selling efforts are currently focused on the open-heart concomitant market opportunity for the AtriClip system, our development activities are focused on a thoracoscopic standalone platform, which we believe represents another new highly strategic and large market opportunity for AtriCure.

We believe that our thoracoscopic standalone AtriClip system will compete favorably with the Atritech Watchman device and the AGA Amplatzer Occluder.As a reminder, Atritech and AGA were recently acquired by Boston Scientific and St.

Jude, respectively.

Additionally, we continued to invest in further research and innovation to ensure that AtriCure maintains it market-leading position.

In summary, we believe our strategy positions us well to capitalize on our large market opportunities and drive sustained growth.

I would now like to turn the call over to Julie for a review of our financial performance

Thank you, Dave.

I will begin by providing information related to revenue.

For the fourth quarter of 2010, total revenue increased 19%, or 20% on a constant-currency basis, to a record $16.4 million.

Revenue from domestic sales grew $2.3 million, or 21%, to $13.1 million.

Revenue from domestic open-heart products increased $2 million, or 30%, to $8.7 million, driven primarily by $1.3 million in sales from the AtriClip system, as well as an increase in sales from both our open-heart radio frequency and cryo-ablation platforms.

Minimally invasive domestic revenue for the quarter was $4.3 million and includes approximately $300,000 in capital-equipment sales.

Adjusting for capital-equipment sales, domestic minimally invasive revenue was flat as compared with the fourth quarter of 2009 and reflected double-digit sequential growth over the third quarter of 2010.

International revenue grew 11%, or 18% on a constant-currency basis, to a record $3.3 million.

The increase in international revenue was driven primarily by growth in our direct European markets.

As we enter 2011, we will be making a change to our revenue reporting.

Beginning with the first quarter of 2011, we will report our US sales in two categories, ablation-related products and the AtriClip system.

We are making this change as it is becoming more increasingly common for our products to be utilized in either an open-heart or minimally invasive ablation procedure.

As a result, we believe that our current report reporting may not be reflective of product usage.

Now turning to gross margin.

Gross margin for the fourth quarter of 2010 was 75.1%, as compared with 75.2% for the fourth quarter of 2009.

The change in gross margin as compared to the third quarter of 2010 of 77.2% was primarily due to a change in product mix resulting from an increased mix of revenue from the AtriClip system and an increase in capital-equipment sales, both of which carry a lower gross margin than our other products.

We continue to anticipate gross margins on a quarterly basis to fluctuate in a range of 74% to 77%, with variations driven primarily by product mix and the mix of revenue from international sales.

Next, an update on operating expenses.

Operating expenses were consistent quarter-over-quarter at $12.5 million.

Research and development expenses, which include clinical activities, increased approximately $700,000 from $2.8 million for the fourth quarter 2009 to $3.5 million for the fourth quarter of 2010 .

The increase in R&D expenses was primarily due to increased costs in support of our regulatory and clinical initiatives and activities and an increase in development-related expenses, primarily related to our new cryo generator and next-generation cryo-ablation devices.

SG&A decreased 5%, or approximately $500,000, driven by a $600,000 decrease in share-based compensation, which was due primarily to a nonrecurring charge in 2009 fourth quarter and a $600,000 decrease in sales and marketing events and activities.These reductions were partially offset by an $800,000 increase in headcount-related expenses driven by an expansion of our worldwide sales and marketing team by approximately 10, as compared to the average headcount during the fourth quarter of 2009.

As a reminder, we anticipate that our global sales and marketing expansion efforts will result in an increase to 2011 SG&A expenses of approximately $2 million.

Adjusted EBITDA, a non-GAAP measure for the fourth quarter of 2010, was a record $1 million.

Adjusted operating loss was a record low at approximately $238,000, and net income was positive for the first time as a public company.

Note that during the quarter, we received a nonrecurring grant from the IRS for approximately $500,000, which is recorded as a component of other income.

Now, turning to a few balance-sheet items.

In terms of cash from operations, we approached breakeven during 2010, which included a heavier than normal use of cash to support working-capital needs, driven primarily by new-product introductions and growth in the second half of 2010.

Fourth-quarter cash generated from operations was $1.5 million, inclusive of $500,000 in nonrecurring grant income.

We ended the quarter with $12.6 million in cash, cash equivalents, and investments, and we had $2.9 million in gross debt outstanding under our credit facility.

Additionally, we had over $8 million of borrowing capacity under the revolving portion of our credit facility.

At this point, I would like to turn the call back to

In terms of outlook, the AtriCure team plays to win.

We believe that we have shown the resolve to will and the will to win, even though we were temporarily challenged.

We will continue to play to win.

We believe that AtriCure is well positioned to capitalize on our current momentum and our near-term and long-term growth opportunities.

Sales-force expansion, the AtriClip system, new-product introductions, atrial fibrillation approvals, minimally invasive and hybrid procedures on the horizon, the continued growth prospects from our international markets, and entering the stroke market with a thoracoscopic standalone AtriClip deployment system is a plan that we believe will result in sustainable high growth.

We will now open the call for your questions.

Thank you.

(Operator Instructions)

For the Q&A session, we ask that callers limit your questions to one with one follow-up to allow for broader participation.

You may rejoin the queue to ask additional questions.

(Operator Instructions)

Your first question comes from the line of Tim Lee with Piper Jaffray.

Hi.

Good morning, and thanks for taking the question.

I guess let's first start on the ABLATE data.I know you submitted the final module in December, so when can we expect to see that?

When will that be presented in a public forum?

The ABLATE data was recently submitted.

So it was recently updated with longer-term data.

Initially, we had a series of investigated which has now expanded with our ABLATE AF registry.

We are currently putting in place a publication and presentation committee that will begin to plan for publications and presentations.

I would anticipate they will begin to see a series of presentations and publications during the second half of this year.

Got it.

Thank you.

Very helpful.

From a financial perspective, solid numbers here this quarter.From a cash-flow -- first from a cash flow position, should we expect the company to be cash flow positive on a quarterly basis here, on a going-forward basis?And on the adjusted net-income side, could we expect to see sustained or regular profitability on that front, as well?

With respect to cash, obviously it's dependent on our -- that the biggest driver is going to be revenue during 2011.

As you think about cash on a quarterly basis, we would continue to anticipate similar trends as we've have had in the past.

So for example, a heavier use of cash for operations during the first quarter and then fluctuations into the back end of the year, pretty consistent, dependent on working capital needs and fluctuations therein.

In terms of profitability, again, we're not giving guidance with respect to profitability, and we do anticipate an uptick in SG&A, as we commented.

Thank you.

Those are my two and I will get back in line.

Thank You.

Your next question comes from the line of Jason Mills with Canaccord Genuity.

Good morning Dave and Julie.

Congrats on a good quarter.

So I have, Dave, a growth outlook question and then a clinical question.

On the growth outlook question, you have several things, both launching right now and then products in the pipeline, that you are excited about.

We saw the slope change with respect to your growth profile in 2010, and that was not a full year of AtriClip and several products that were launched at the end of the year.

So my question is, on the top line, can we expect, with what's going on in your pipeline, for growth to accelerate modestly again in 2011 as it did in '10 over 2009?

I do believe that we have momentum in our business.

The AtriClip system has only been out for one full quarter, and we have a series of new products to launch.

So we certainly have growth catalysts in the pipeline to help support accelerated growth.

I think it's a little early to tell and to comment on growth trends throughout 2011 at this point.

Okay.

Just as a follow-up, more specific to what's going on in the US market with the AtriClip device, it seems like you're not only getting good traction with that device, specifically, but it may be pulling through some revenue or expectation that it will pull through revenue from the open-heart, minimally invasive ablation businesses.

Is that a fair assumption to make?

And specific to the AtriClip, believe you're on a run rate now over $5 million.

Would you expect that run rate to continue sequentially improve as you penetrate more of those 250 existing accounts, and then as you mentioned, target competitive accounts?

I have one clinical follow-up.

To answer your first question, our strategy is very specifically to use the AtriClip system to get into new, competitive accounts during the course of 2011, and then to use our series of new open-heart products to create cross-selling opportunities and share gains.

So we anticipate that that strategy will be successful.

In terms of the AtriClip trends, I think this is a growth-catalyst product, and we believe that the AtriClip trend swill continue to accelerate during the course of the year.

Okay.

That's helpful.

With respect to the stroke prevention labeling for AtriClip and the trial that you're planning, presumably, although a stroke-prevention labeling for AtriClip would require a long-term follow-up, presumably you could enroll patients currently on warfarin since the Clip is placed on the outside of the heart, unlike some of the percutaneous devices.

So could you comment on that and other AtriClip attributes which could result in a different protocol for Watchman as we think about the pivotal trial and labeling down the line?

Excellent question.

First, I want to just clarify that we'll be meeting with FDA, we believe, around mid-year to review our pre clinical and clinical-trial design recommendations.

Based on the outcome of that meeting, we'll make a decision whether or not to move forward in the US with a stroke trial or not.

Okay.

In terms of the medical management, so, if you look at the endovascular device, right now the hypothesis is that these devices are not inferior to Coumadin, which we believe is sort of a moving target with the new anti-coagulation treatments being approved and now entered into the new guidelines.

So, our strategy will likely be a slightly different.

We'll be looking at a standalone thoracoscopic placement for those patients where their scores, bleeding scores, and there are new bleeding scores such as the HAS-BLED score.And you can use those scores in combination with CHAD scores to create a patient population where the risk-benefit ratio of anti-coagulation treatment is on the tipping point.

Those patients are patients that we would view as being candidates for a thoracoscopic standalone Clip, and we actually think over the long term, that's the larger opportunity.In the endovascular segment, we believe that patients may choose to use some of the new anti-coagulation treatments first before an endovascular device, and then those endovascular devices require anti-coagulation treatment for at least 45 days, platelets for at least six months, and a lifetime of aspirin.

So we're targeting a different patient population, a population of patients where the risk-benefit ratio of anti-coagulation treatment begins to reach that tipping point, and we're offering them a different alternative.

That's our clinical strategy.

I hope that was clear.

It was.

It makes a lot of sense.

Thanks Dave, I will get back in few.

Your next question comes from the line of Matt Dolan with ROTH Capital Partners.

Hi good morning Dave and Julie.

Good morning Matt.

Just wanted to follow-up on AtriClip in a two-part question.

First, Dave, in terms of the run rate and trajectory, can you help us, anecdotally speaking, I'm assuming you've obviously gone after your best accounts right out of the gate.

How difficult is it getting into these new accounts that you're targeting?

How should we think about that process relative to the 30% sequential uptick that we just saw in Q4?

Again, a little early to tell.

We just began commercializing the product in July of 2010.

So, this is our first full quarter.

And as you said, we targeted our top 100 AtriCure accounts.

However, the momentum in the remainder of the top 250 and in certain competitive situations is very good.

So, we're very optimistic that the trajectory that we're currently on with the AtriClip system is sustainable and that the AtriClip system will become a major growth catalyst for the Company, both in the open-heart as well as, potentially, as a standalone alternative to anti-coagulation or endovascular devices.

Okay.

On that note, in terms of the standalone opportunity, I know this was discussed at STS in that evening event, but if you're reimbursement and regulatory efforts are successful, what's your current assessment of that standalone opportunity, clinically speaking?Meaning, are surgeons on board at this stage?

Or is it going to be a bit of a missionary type of program to help create awareness and create this market?

I'll give you an example, Matt.

In our DEEP AF clinical trial, we wrote the clinical trial for the stapler, because our current AtriClip systems are designed for open-heart use.All of our DEEP AF investigators are fundamentally demanding the use of the AtriClip system in the DEEP AF trial and have begun using the AtriClip system in the DEEP AF trial and making it work through a minimally invasive incision.

So, the surgical community is very enthusiastic about this alternative.

We've also had meetings with key people in stroke neurology and cardiology.

And they believe there's a significant need for a device that's placed epicardially that doesn't require medical management but, again, addresses these patients that reached this tipping point where anti-coagulation treatment -- the risk-benefit ratio no longer makes sense, and they need another alternative.

So we believe that the surgical community, as well as stroke neurologists and cardiologists, are going to be very much behind a standalone thoracoscopic AtriClip implant.

Okay.Lastly, again, appreciate you not providing guidance, but, clearly, a number of variables at work.

Maybe you can help us just understand the cadence through the year going to -- in terms of revenue and growth.

Have you started to see any competitive conversions?

When did these new products kick in and so forth?

So what we're getting at is there kind of a sequential down tick in Q1 and these things start to layer in throughout the year?Is that a fair way to look at it?

I think it's early to tell about Q1, and we're not giving guidance, as you pointed out.

But we are planning to launch Synergy Access, which is an important new open-heart product.

Many of our competitive accounts have decided to use the Medtronic clamp because it has a flexible neck.We believe articulation competes favorably with a flexible neck.

In terms of cryo, the Ice Box technology puts the controls in the surgeon's hands.

Even though it's a generator, we think that hardware is going to be favorably received by our customers.

And then, the Ace cryo probe in the second half of the year, we think is a very important new product, a very elegant solution for minimally invasive open-heart procedures and will be very well received.

We believe that between the AtriClip system, combined with a series of new open-heart products, during the second half of the year, that we will be getting into more competitive accounts with the AtriClip system and pulling through our new ablation products.

And that should lead to sustainable growth.

Thanks for the time, guys.

Thank you Matt.

Your next question comes from the line of Charley Jones with Barrington Research.

Good morning.

Thanks for taking my questions.

I guess to focus on the Clip, I was hoping you could talk a little bit more about the opportunity for reimbursement in Europe, what the timing looks like there, what countries you believe you can get reimbursement for first, and any more detail around reimbursement in Europe for the Clip.

Well, the UK decision through NICE will be made by the end of this year.

So we'll have more information on reimbursement by the end of this year.

We are developing selling strategies which bundle the Clip with our ablation products to allow European accounts to utilize the Clip.

Once again, at the end of the year -- at the end of this year, 2011, we'll have selected sites to conduct a CE Mark trial for the approval of a standalone thoracoscopic stroke indication.

We're very excited about that.

We think that has a large opportunity in many of our European accounts.Even though they might not have reimbursement, they do reallocate resources to new, growing, and promising technologies and procedures.

On that same line, I was wondering if you could talk a little bit about the size of that patient population that is maybe at a higher risk of stroke due to being at that tipping point you were referring to for when they're on anti-coagulation.

It's hard for us to actually model the market at this stage.

We just have taken a broad brush in terms of the market size.

Charley, if you think about it, the majority of patients that have atrial fibrillation are over 70 years of age.

We have a series of comorbidities, and many of them are at high risk of bleeding.

So, we believe that the larger opportunity for left-atrial appendage exclusion may be in these patients that are 70 years of age and older and have a series of comorbidities and are at high risk for bleeding.

I can't -- I don't want to, necessarily, give you a firm market-size potential, but we believe the market is very big.

In terms of average selling prices, if you look at the Watchman device and the AGA, they're selling the products, currently, in the $6,000 range.

We believe these technologies that we're developing will have high SAPs and that there will be a large and growing market for them as we begin to enter these new markets.

Great.

I will jump back in queue.

Thanks.

(Operator Instructions)

Again, please limit your questions to one with one follow-up.

Your next question comes from the line of Jose Haresco with JMP

Good

morning, and congratulations on a good quarter.

Thank you.

I just wanted to follow up here on a number of things.

On the Clip, you're targeting your top 100 accounts.

Could you give us a sense of how much of your quarterly volume those accounts are responsible for, number one?

Number two, how long, do you think, it took to get people comfortable with the Clip?

Where do you do those accounts are on average with regards penetrating the total volume in those accounts?

We launched the Clip in July of 2010.

We now have 100 accounts that are purchasing and reordering the Clip.

In terms of the time a surgeon takes to get comfortable with the Clip, it's really one, maybe two implants.

The technology is very intuitive in the open-heart setting, especially.

Our timeframe in terms of getting the Clip stocked has to do more with the hospital environment-evaluation committees and the whole purchasing process in hospitals today.

We now have 100 accounts, 100 accounts that are purchasing and reordering, stocking the Clip starting from July through 2010.

We think that's a very significant amount of progress, especially considering that we're dealing with a very challenging purchasing environment.

What that means is that the surgeons that tried the Clip needed to go to bat to get the Clip stocked on their shelves.

So, we needed a lot of surgeon support to get these 100 accounts to stock the AtriClip systemVery good sign that going forward, the Clip is going to be a very significant growth catalyst for the Company.

On those 100 accounts, what do you think the catalyst is going to be for you guys to move beyond those top 100, number one?Then you touched on the new-technology evaluation committees.

Are you sensing any sort of sea change coming in the next quarter or two?

Or is it still pretty tough out there?

It's interesting.

It's certainly a price-sensitive environment.

If you look at our prices across all of our product lines, our average selling prices have held up and instituted the superiority of our technologies.

In terms of the AtriClip system, one of the major aspects of our growth strategy for AtriClip, open-heart and otherwise, is the consolidation of sales territories.

Effectively, we went from 30 to 39 sales territories, gives our people more selling time to go through the whole physician trial, but most importantly, the time-consuming process of working with purchasing to get the products stocked on the shelves so that they can be used on a re-ocurring basis.

We feel very good that we now have 39 territories, 64 sales people in total, which, again, is a 20% increase from where we started in the beginning of 2010.

The strength of the AtriClip system, the extension of our sales organization, the number of new open-heart ablation products, we believe, is a very strong growth strategy in the near term.

David, on that point, on those six -- on those additional hires, are they now all fully trained, number one?Do you see, as we start to think about the next 12 to 24 months, do you see that number expanding more?

They've all past their initial competency tests.

We have different levels of competency, so they'll be going through additional competency tests.

But I don't think anybody's ever fully trained.

We continue to reinforce training and education.

We believe that our sales force is very well equipped with information, technology, and support from the company to accomplish their mission.

Okay.

Julie, you talked about G&A stepping up in the next quarter or next year or so.

In terms of modeling, is it pretty spread out, or is there going to be any lumpiness that we should be aware of?

Yes, I would expect continue trending with historical.

Typically in the first quarter, we have an uptick in operating expenses.We have some major industry events.We also have our national sales meeting.

Beyond that, I think you'll have a more kind of flattening of expenses, consistent decreases.

Okay.

Thank you very much.

Thank you.

Your next question is a follow up from the line of Charley Jones with Barrington Research.

Just two quick follow-ups.

I was wondering if you could discuss the minimally invasive trends in the accounts that are in your feasibility trial.

Are you starting to see those accounts increase more than your other accounts?

Could we expect that to continue as that trial -- as the number of accounts in your next trial expands?

We are.

We've got now have three of the six enrolling.By the end of the quarter, all six will be enrolling.

We're certainly seeing an uptick in momentum in our DEEP AF, FDA -sanctioned clinical sites.

So, we're encouraged by that.

As we move into a pivotal trial in 2012, we believe that moving from six to approximately 30 to 35 centers will create a buzz in the market.

It will create more awareness about the opportunity for hybrid programs.

And that centers outside of the trial, independently of AtriCure, will decide to adopt hybrid programs as a standard alternative for patients with persistent forms of atrial fibrillation and the growing number of patients that have failed single and multiple catheter attempts.

A quick follow-up on that.

Could you discuss -- can you give us a couple of the ranges you are seeing out there from single-center studies out of Europe for a DEEP AF type of procedure?

I think there's a couple of doctors out there with six months or a year of data.

I was wondering if you could kind of give us the range that you're seeing as far as success rates?

There is a publication coming out that we're aware of, with 18 months worth of follow-up that has very rigorous monitoring, off anti-arrhythmic drugs.

All of these patients had long-standing, persistent forms of atrial fibrillation and failed at least one catheter procedure, and the 18-month results, with very rigorous monitoring, was 85% off anti-arrhythmic drugs.

That is helpful.

The last question.It's kind of a tough one, but I am hoping you can answer it.

Do you believe the AtriClip system can develop a lower stroke rate than Saint Jude or Boston's recently-acquired products will be able to show?

What I believe is that we have a better acute closure.

The appendage, when you look at it from the inside, Charley, looks like a football.It's an elliptical structure.

We have a parallel closure system.

The Clip opens and it closes in a parallel fashion.

Imagine parallel closure on an elliptical structure.

We believe that we get the best end-to-end anastomosis on the endocardial surface of the heart, and that occurs acutely, versus the endovascular devices, which occur over time.

Additionally, we have data from 55 animals to suggest that the -- that there's an endothelial layer that grows over that anastomosis within seven to 14 days.

Also, we have data to suggest that the neighborhood around the appendage becomes electrically isolated.

EPs are very high on the concept of electrically isolating the left atrial appendage, because it's become known that more and more triggers come from the left atrial appendage, especially in patients with persistent forms of atrial fibrillation.

So, we believe the Clip provides for a better acute closure.

We believe the Clip renders the neighborhood around the appendage electrically isolated, which is an anti-arrhythmic benefit.

And we believe the Clip has a significant advantage that the device implant itself does not require any medical management.

So, we believe that there are a series of reasons to be very optimistic that the Clip, with a thoracoscopic deployment system, will compete very favorably in the standalone market for LAA exclusion.

I'll take that as a yes.

Thanks a lot.Appreciate it.

Ladies and gentlemen, that concludes the question-and-answer session.

I would now like to turn the conference over to Mr.

David Drachman for closing remarks.

Thank you for your time and attention.

We look forward to our next earnings call.

Thank you.

Thank you for joining today's conference.

That concludes the presentation.

You may now disconnect, and have a great day.