AtriCure Inc (ATRC) 2011 Q1 法說會逐字稿

Good morning and welcome to AtriCure's first quarter 2011 earnings conference call.

My name is Caris and I will be your coordinator for the call today.

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

We will be facilitating a question-and-answer session towards the end of today's call.

(Operator Instructions)

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

And now I would like to turn the call over to Mr.

David Drachman, President and Chief Executive Office of AtriCure.

Mr.

Drachman, please proceed.

Thank you Caris.

Good morning, and welcome to our first 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 Luken at 513-755-4136, and she will fax or e-mail you a copy.

Before we begin, 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 approvals, 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.

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

Thank you Julie.

First quarter 2011 revenue was $15.6 million, an increase of $1.7 million or 12% over the first quarter 2010.

US revenue was $12.1 million, up 10% and international revenue was a record $3.5 million, up 21%.

In addition, we continue to demonstrate operating leverage as adjusted EBITDA improved by approximately $500,000 to $260,000.

These results reflect the impact of our growing product portfolio, investments in our sales and marketing structure, our commitment to profitability and the execution of our strategic priorities.

During the quarter we implemented the realignment and expansion of our US sales organization from 30 to 39 sales territories which included transitioning customer accounts and increased training activities for our newer sales representatives.

As a result, our US sales force is well positioned to increase adoption in existing accounts and penetrate competitive accounts.

The AtriClip system opens new doors and creates cross-selling opportunities for a series of new ablation products.

We believe the strength of our product portfolio combined with our best in class US sales organization and the increasing opportunities and momentum from our international markets will enhance our market leadership and result in new growth opportunities.

In reviewing the quarter in more detail we are pleased with the continued success and execution of our launch strategy for AtriClip in the US.

US sales of the AtriClip system were $1.5 million and during the quarter 20 additional accounts began stocking the system.

US ablation revenues decreased approximately $400,000 or 4% compared to the first quarter of 2010, which reflects a reception in sales of products used in minimally invasive procedures.

This was primarily offset by an increase in sales from open-heart ablation products.

The reduction in revenue from products used in minimally invasive procedures is partially a result of our plan to focus our US sales organization on capitalizing on our first mover advantage with the AtriClip system which is resulting in opportunities to increase adoption and share gains from open-heart ablation products.

More significantly, however, we made a proactive decision to limit our training to new physicians to FDA regulated clinical trials which we anticipate will have an impact on sales from products used in minimally invasive and hybrid procedures.

As previously noted, we anticipate a decline in revenue from products used in minimally invasive procedures during 2011 but expect a return to growth with the initiation of our DEEP AF pivotal trial during 2012 as we move from six to approximately 35 investigational sites using our products.

During the year we expect a short-term moderation of minimally invasive trends to be more than offset by growth from the AtriClip system and market share gains in our open-heart ablation business resulting primarily from new product introductions supported by an expanded sales force and strong momentum from international markets.

Revenue from our international markets was a record $3.5 million, up 21% over the first quarter of 2010.

We are encouraged by these results as we believe they reflect our investments and the expansion of our direct sales force in Europe and an increase in sales from Asia.

We are increasingly optimistic about our opportunities and progress in our international markets and believe that our recent investments and ongoing efforts will continue to drive growth, particularly in our direct market.

In terms of Japan, our starts are with our Japanese colleagues and long-term distributors.

Japan represents approximately 4% of our consolidated revenue.

Based on our discussions with our distributor in Japan, we do not expect the recent and unfortunate devastation to have a material impact on international sales or growth prospects.

Now, turning to our investments and FDA approvals and clinical science, as you recall, the ABLATE clinical trial is designed to expand the indications of our Isolator Synergy product line to include the treatment of atrial fibrillation.

The trial enrolled patients undergoing elective open-heart concomitant ablation procedures with a history of permanent atrial fibrillation.

In reviewing the status of our ABLATE PMA filing, in February 2011 we were notified by the FDA that our filing achieved a viable status and an expedited review.

Then in March we received a series of questions in the form of a deficiency letter.

We are working interactively with the agency and our physician advisors to respond to FDA's questions.

The FDA letter primarily highlights questions surrounding the changes in classification of atrial fibrillation patients.

The FDA approved our ABLATE clinical trial based on the 2006 ACC AHA ESC guidelines for the management of patients with atrial fibrillation which at that time represented the industry and FDA gold standards for atrial fibrillation classification.

Since that time, the classifications of paroxysmal, persistent, long-standing persistent, and permanent atrial fibrillation evolved with the publication and widespread acceptance of the Heart Rhythm Society expert consensus statement on catheter and surgical ablation of atrial fibrillation.

The result is that the classification of permanent atrial fibrillation that was used to determine eligibility in our ABLATE clinical trial is no longer consistent with the current definition.

We are working interactively with FDA and independent physician experts to classify the ABLATE patients based on the current definitions in order to support approval and determine the most appropriate product labeling.

We are well into this process and anticipate filing our responses by the end of this month.

In addition, we continue to enroll patients in our FDA approved ABLATE AF clinical registry.

This registry is a study that mirrors the ABLATE clinical trial and has been approved for 20 sites and 50 patients.

The data from ABLATE AF registry will further enhance the conclusions from ABLATE both during the FDA review phase of the PMA and at the PMA panel meeting.

In addition, ABLATE AF will serve as the basis for our post-approval studies.

To date, we have enrolled 16 patients and plan to complete enrollment by year end.

Based on our best estimates, we continue to anticipate atrial fibrillation labeling approval for our Isolator Synergy product line during mid-year 2012.

In terms of our DEEP AF feasibility trial, 11 of the 30 patients required for the trial have been enrolled.

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

During the quarter the FDA approved a key amendment to the DEEP AF protocol.

This amendment provides for the minimally invasive exclusion of the left atrial appendage with a current generation of the AtriClip system.

This modification was requested the by study investigators and reflects their belief that the AtriClip is a safer and more effective method of excluding a left atrial appendage than other technologies.

We expect to complete enrollment in the DEEP AF feasibility trial during the third quarter and initiate our pivotal trial during 2012.

We believe that the initiation of our DEEP AF pivotal trial and the movement of six to approximately 35 investigational sites will be an inflection point for our US business and provide a growth catalyst for our products used in minimally invasive procedures.

With respect to our plan for a stroke clinical trial, in support of the AtriClip platform we plan to submit an IDE for a feasibility trial by the end of the second quarter which utilizes our current generation AtriClip system that was approved in the DEEP AF study for minimally invasive placement.

The feasibility trial will evaluate the initial safety and effectiveness of the AtriClip system to protect against stroke in patients with non-valvular atrial fibrillation who are considered to be at high risk for stroke and who are at high risk for bleeding complications associated with the use of oral anticoagulation.

We are currently planning to initiate our feasibility trial in the US during the first half of 2012 with the aim of initiating enrollment in our pivotal trial with our next-generation thoracoscopic AtriClip platform during 2013.

In addition, we plan to receive CE Mark approval and release of our thoracoscopic AtriClip system during the first half of 2013 in Europe.

We believe that our thoracoscopic AtriClip platform will be a preferred alternative to endovascular devices in a large and growing subset of patients.

Now, moving to our planned product releases and pipeline, we recently received 510(k) clearance for our next-generation open-heart radiofrequency bipolar clamping system, Synergy Access.

Synergy Access has several competitive advantages including articulation which provides physicians with a pivoting clamp, allowing surgeons to more easily position the system.

Synergy Access is our first pivoting clamp which is a feature that we believe will compete favorably with our primary competitors' flexible shaft.

Synergy Access provides our US sales organization with the opportunity to gain new momentum and ablation market share.

The launch of Synergy Access combined with cross-selling opportunities with the AtriClip system is a powerful combination.

We are planning for US commercial launch of the Synergy Access by the end of the current quarter.

Additionally, during the third quarter of this year, we plan to launch an automated cryoablation generator, Icebox.

The Icebox places the ablation controls with the physician and simplifies the use of our cryoablation platform.

Icebox replaces our existing cryogenerator, which was part of our 2007 acquisition of the Frigitronics product line and designed and developed over 20 years ago.

The existing Frigitronics generator is technically challenging to operate, which has limited our ability to penetrate a significant number of new accounts in both the US and European markets.

In addition, during the first quarter of 2012 we plan to launch a new disposable cryoablation platform, ACE.

The ACE cryoablation probe is designed for less invasive open-heart procedures and can be positioned robotically.

We believe that the launch of ACE will stimulate significant new growth opportunities and market share gains.

Furthermore, during the first quarter of 2012 we plan to have our thoracoscopic standalone AtriClip platform ready for use in clinical trials in the US and Europe.

We believe that this innovative version of the AtriClip system will result in less invasive procedures, facilitate [sole] therapy AtriClip approvals and support commercialization and widespread adoption.

Now, turning to other business updates, at the upcoming Mitral Valve Conclave Meeting in New York next week, there will be a CME luncheon event entitled, "The Left Atrial Appendage - a New Surgical Frontier." Based on the growing adoption of our AtriClip system, we anticipate that this event will highlight the benefits of the AtriClip system for left atrial appendage exclusion.

Additionally, recently there was a case report published in "Circulation" highlighting the use of the AtriClip system to electrically isolate the left atrial appendage to successfully treat a tachycardia originating from the left atrial appendage.

It has been reported that as many as 27% of the atrial fibrillation triggers in failed catheter ablation patients originate from the left atrial appendage.

We believe that there is a rapidly growing trend for physicians to consider electrical isolation as a critical endpoint when selecting techniques and technologies to treat the left atrial appendage and that the AtriClip platform is uniquely designed to benefit from this clinical advantage.

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

Thank you Dave.

I'll begin by providing information related to revenues.

For the first quarter of 2011 revenue increased $1.7 million or 12% to $15.6 million.

Revenue from product sales in the US grew 10% or $1.1 million to $12.1 million.

Revenue from ablation related product sales in the US decreased by approximately $400,000 driven primarily by a decrease in sales of products used in minimally invasive procedures.

This decrease was partially offset by an increase in revenue from open-heart ablation products, which we believe reflects continued market share gain.

US sales of the AtriClip system were $1.5 million during the quarter.

International revenues grew to a record $3.5 million reflecting a 21% increase over the first quarter of 2010.

The increase in international revenue was driven primarily by growth in our direct European markets as well as an expansion in select Asian markets.

Currency fluctuation did not have an impact on our reported revenue growth rates.

Now turning to gross margins, gross margin for the first quarter of 2011 was 76.1% as compared with 76.5% for the first quarter of 2010.

The change in gross margin was primarily the result of an increased mix of revenue from the AtriClip system, which initially has a lower gross margin than our other disposable products.

We continue to anticipate gross margins on a quarterly basis to fluctuate in the 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 increased 5% on a 12% increase in revenue from $12.4 million for the first quarter of 2010 to $13 million for the first quarter of 2011.

Research and development expenses, which include clinical activities, increased 11% or approximately $300,000 from $2.7 million for the first quarter of 2010 to $2.9 million for the first quarter of 2011.

The increase in R&D expenses was primarily due to increased costs in support of our clinical trials.

SG&A increased 3% or approximately $300,000 driven primarily by a $400,000 increase in head count and travel related expenses associated with the expansion of our worldwide sales and marketing team.

Operating loss improved 36% to $1.1 million and adjusted EBITDA, a non-GAAP measure, improved by approximately $500,000 to $260,000.

Note that during the quarter we wrote off approximately $150,000 in expenses related to the modification of our credit facility, which increased our loss per share for the quarter by a penny.

Our loss per share for the quarter improved 38% to $0.08.

Now turning to a few balance sheet items, in terms of cash from operations, we reduced our cash used in operations by $2.1 million to $0.9 million driven primarily by a reduction in our net loss and the reduction in cash used to support working capital needs.

During the quarter we modified our existing credit facility.

The modification increased our term loan to $7.5 million, reduced our borrowing rate from 10% to 6.75% and extended the maturity date to 2016.

Additionally, we modified the revolving portion of our credit facility to reduce the borrowing rate and to extend the maturity date to 2014.

We ended the quarter with $15.7 million in cash, cash equivalents and investments, an increase of $3.1 million as compared to year end.

And we have $7.5 million in debt outstanding under our credit facility.

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

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

Thank you Julie.

In terms of outlook, we believe the recent launch of our AtriClip system, US sales force expansion and realignment, a series of important new product introductions and anticipated atrial fibrillation approval on the horizon, and our investments in DEEP AF hybrid ablation and sole therapy AtriClip clinical trials, positions us for increased market leadership and sustainable growth.

We are confident in our people and the power of our strategic plan and we believe that these initiatives position us for growth during 2011 and beyond.

We will now open the call for your questions.

(Operator Instructions)

Thom Gunderson, Piper Jaffray.

Hi good morning.

Good morning Thom.

Good morning Thom.

So on the sales expansion, Dave, going from I think you said 30 to 39, can you describe those -- where those nine came from and if they're new, how long does it take them to get to full productivity?

Is that six months, nine months?

Can you give us some color on that?

We actually added five headcount and realigned some more junior people into territories.

In terms of starting up and being maximally efficient, that can take two, maybe three quarters but people can be productive right out the gate.

Selling the AtriClip system and our open-heart products is really a one or two quarter process.

Getting into the more sophisticated procedures, whether it's minimally invasive or hybrid, that can certainly take a longer period of time.

Thanks.

And then on AtriClip, you've got another quarter under your belt.

Can you -- how's it going as far as making the calls?

Have you knocked on the door and had it open at least for initial calls on all 250?

Are you getting there?

And then on the early part, where you're kind of getting the friends of the family on the low hanging fruit, can you give us a little bit how reorders are going?

Sure.

We have basically out of the top 250 AtriCure accounts, 100 of those accounts are now stocking the AtriClip system.

The key issue is that we have average selling prices at about $1,100 per clip.

We wanted to make sure that we maintained selling prices that we think are consistent with the premium nature of the product.

But certainly in today's hospital environment, between value analysis committees and hospital administrators, stocking products is more of an effort than it has been in the past, especially maintaining premium pricing on premium products.

So we're highly encouraged that we've penetrated 100 of our top 250, and 100 of those accounts are placing reorders and stocking the product.

We continue to be encouraged moving forward that we can use the AtriClip system to basically open new doors and pull through our series of new ablation products with our expanded sales force.

Got it.

That's it for me, Dave.

Thanks.

Thank you Thom.

Please limit your questions to one initial question and one followup.

Matt Dolan with Roth Capital Partners.

Hi guys, good morning.

Hi Matt.

Question Dave on the sales side maybe looking at both the international and domestic geographies, first internationally it was a nice tick up sequentially.

Can you help us understand how much of that is the conversion to direct -- to a direct presence over there versus underlying volume growth?

Basically help us kind of see if this is a sustainable type of growth rate.

It's about half and half.

We've been direct in Germany for quite some time now so in Germany it's 85 million people and almost one-third of the European population.

We feel very good about our progress in Germany and we have a significant number of targets going forward.

We have approval for cardiac arrhythmias and atrial fibrillation on our main products.

We think that that's a really powerful, high growth market for the Company.

In (inaudible) we went direct more recently and I would say that about 50% of the growth in that area is coming from just the transition to direct selling and 50% is coming from expansion.

Okay.

And then trying to maybe better quantify your discussion in the US, I understand there's new products coming and a lot of growth drivers especially as you go into 2012, but with MIS being a drag here in the near term, what type of a growth rate should we expect for both the market and then your ability to take competitive market share?

First of all we're clearly the leaders in minimally invasive and hybrid.

There's really not a close second competitor.

Number two, I really wouldn't use the word 'drag' because we think minimally invasive and hybrid is our highest growth opportunity on the long term horizon.

In the short term, we've taken some action, some proactive action to mitigate any risk in a highly dynamic enforcement and compliance environment.

And those actions basically focus our training activities on our clinical trial sites to make sure that we mitigate any risks and don't damage or set back the high growth opportunity that minimally invasive and hybrid offers the Company.

In addition, minimally invasive is going to be a much bigger growth driver in the European markets.

Now that we have more direct people, which is what's required to expand minimally invasive in general, we anticipate that Europe is really going to come on strong in the area of minimally invasive.

Okay.

And if I can sneak one in on ABLATE, looking at the -- you've obviously maintained your guidelines or your guidance for mid 2012 approval, but given the nature of the questions, can you just walk us through how many, kind of the next steps with FDA?

Do you expect another round of questions or should this resubmission on your behalf take care of things?

I think there will be more questions from FDA but remember the expedited review process is an interactive process.

And it's worked out really well for us.

We actually have been talking to FDA while we're developing our current responses.

And the fact that FDA did not go back and ask for additional patients we think is a major benefit in terms of the overall outlook and approval process.

So we're very optimistic about the ability to gain FDA approval on our timeline.

We think the classification issue is sort of an evolving issue that we just need to respond to.

Our physician advisors who are independent have gone through the source documentation of our ABLATE patients and has scrubbed the source documentation and classified each patient based on the current definitions and nomenclature.

So we feel very confident that we can respond effectively that our patients fit a persistent -- long-standing persistent classification and that the process going forward is consistent with a mid 2012 approval.

Great.

Thanks for the time.

Thank you Matt.

Jason Mills with Canaccord Genuity.

Good morning Dave and Julie.

Thanks for taking the questions.

Can you hear me okay?

Hi Jason.

Hi.

Good morning Dave.

So going back to Thom's question on the AtriClip, in terms of the penetration of the accounts here stateside, what do you think, Dave, it'll take or what will be your strategy over the next, I don't know what timeline you want to use, year or two years, to go from 100 to potentially the majority, 200 plus accounts, in terms of your existing AtriCure customers?

And then also separate from that, what sort of early successes have you seen with AtriClip penetrating the competitive accounts or should we see more of that when Synergy, the new Synergy product is launched towards the end of this quarter?

Excellent questions, Thom.

It's Jason.

Sorry, Thom.

Excellent question Jason and Thom.

I think in terms of going forward in the top 250, the fact that we've expanded our sales force and that we have more call points on customers and that we can work the administrative process and part of our strategy with maintaining premium pricing on the AtriClip system and getting it on the shelf is to basically use it and sell it for specific indications, for example off-pump CABG procedures where the clip is a very nice product because it's a very tenuous procedure to exclude the appendage while the heart is beating.

So in some of those accounts where it is a more tortuous process from the selling perspective, our strategy is to sell for specific, more challenging procedures, maintain the premium ASP, get our surgeons more comfortable with the use of the clip and then expand its use.

And that process beyond the low hanging fruit and the first 100 or so accounts is a little bit longer process and I would anticipate that that's going to take another 12 to maybe 15 months before we can fully execute that.

I hope that answers your question.

With respect to the competitive accounts, Jason, it's just under 20 accounts and we really have not aggressively gone after competitive accounts at this point but we do plan to do so with the Synergy access launch as well as the cryo -- the new cryo platform.

Okay.

Thanks guys.

That's helpful on that front.

So more aggressive on the competitive side probably more second half of the year, correct.

I think it's a very good point, Jason, the way that you initially asked the question was with the new products and part of our strategy is that we really want to focus on AtriCure accounts now and then use the clip to open doors in competitive accounts when we have new ablation technologies and pull through those new ablation technologies with cross-selling techniques.

So part of our strategy is really to wait on Synergy access which is here and now and also the cryoablation generator I think you'll see in the second half of the year that will take a more aggressive position in competitive accounts.

That's helpful.

And one followup for me, in my opinion DEEP AF along with a couple of other things, perhaps one of the more important things for the Company over the next couple of years, the hybrid procedure and our due diligence is gaining some traction.

You guys are sort of right in the maelstrom there in the middle of that.

Could you talk about -- Dave, just help us understand any pitfalls that could occur as you go from the feasibility to the pivotal?

I just want to make sure I understand everything there is to understand on that front because I think the start of the DEEP AF pivotal trial is an important inflection point for the Company, as you mentioned and I agree with you.

I just want to make sure we have our eyes wide open as it relates to a relatively cantankerous FDA and regulatory process where they're really looking at every I and T.

Excellent question Jason.

I think the major issue for us when I think about the DEEP AF is that we're combining epicardial/endocardial surgical and endovascular techniques and that requires training.

So I think we just need to maintain discipline in site selection, ensure that we have surgeons and Eps that are committed and that we also maintain discipline in terms of run-in cases.

One of the things that's been a little bit of a drag in terms of completing the feasibility trial but has led to, we think, superior results is that we require each center to perform five run-in procedures and make sure that we check the box before we move forward in a clinical trial.

So I think FDA is going to want to see a safe procedure, number one, knowing that we're combining two different subspecialties into one procedure and I think if we can do that by maintaining the discipline in selecting the correct centers and making sure that we have the proper number of run-in cases and check those training activities in terms of all the boxes with cadaver labs and run-in cases, I think we'll be in good shape going forward.

Great.

I'll get back in queue.

Thanks.

Thank you Jason.

Charley Jones with Barrington Research.

Good morning.

Thanks for taking my questions.

I apologize that I missed this but I was hoping you could repeat the timeline you have for the US and the EU approval of the minimally invasive clip system.

And I guess as part of that I was hoping that you could talk a little bit about the latitude surgeons will have in the DEEP AF pre-pivotal trial to use the minimally invasive clip system on other people and I'll stop there.

First of all let me just -- in terms of the DEEP AF clinical trial, the amendment was recently approved to use the AtriClip system in the DEEP AF clinical trial, so that's currently being done now.

Each DEEP AF patient that's being treated is receiving a minimally invasive clip.

Now that is with our current generation clip.

Our plan is to file our IDE this quarter for a feasibility trial with our current generation clip and then when our thoracoscopic ablation or our thoracoscopic AtriClip platform is ready for human use, we'll do some GLP studies and prepare that for a pivotal trial.

So during 2012 we'll complete our feasibility trial with our current generation AtriClip system and then in 2013 we would anticipate being in a pivotal trial with our newer thoracoscopic AtriClip platform.

Great.

That's helpful.

And could you talk a little bit about the potential impact of centers preparing to be included in the DEEP AF trial, the pivotal trial and when will they have everything in place that they need to begin treating patients kind of on these early patients before the patients are actually included in the trial?

We're currently actually vetting centers now so we're looking at new centers and talking to centers about their participation.

We want to see how well the surgeons and the electrophysiologists partner and work together.

We want to evaluate their facilities and we want to invite them to the cadaver lab, which are R&D cadaver labs, to ensure that they have the thoracoscopic skills and the common mindset to perform hybrid procedures.

So we're actively pursuing and selecting centers for that pivotal trial now.

Once we get beyond the feasibility phase, and initiate our pivotal trial in 2012, we should be in good shape in terms of site selection but each site will be required to perform a series of run-in procedures and we'll need to check the box to make sure that the protocol is being followed as written and that we're comfortable before we begin enrolling patients into that pivotal trial.

If I can just squeeze one in that I'm not sure you can answer anyway, could you just tell us what your success rate was in the ABLATE clinical trial or some rough range to kind of give us a good sense of where you're at there?

First of all, these were patients that generally had a pre-existing history of atrial fibrillation and that was in the range of five years.

They had a left atrial diameter of six centimeters.

Our clinical advisors who are expert electrophysiologists that were involved in writing the Heart Rhythm Society Concensus Statement reviewed the source documentation, their comments that these were patients that were not treatable with catheter ablation.

And the results in this permit population of patients are consistent with the peer review publications and basically in the mid-70s off antiarrhythmic drugs, long term followup and monitoring.

Thanks a lot.

(Operator Instructions)

Larry Haimovitch with HMTC.

Good morning Dave and Julie.

Good morning Larry.

Good morning Larry.

A couple of questions on AtriClip, one, how are the ASPs fairing?

Did they change much from the previous quarters and what are they approximately?

We had a slight uptick in ASPs, Larry.

They're up over $1,000.

Oh, that's great.

So you're actually staying at a very, very high level and Dave, second, on the AtriClip as well.

Any update on competitive products that are either in the clinic or moving toward that status?

Not on the surgical side.

We really haven't seen any new products that we anticipate coming to the market at any time in the near future, so we believe that our first mover advantage will continue for some period of time and we're beginning to look at the endovascular devices as being our long-term competition since we believe that that's a bigger market opportunity and that we're going to compete very favorably versus the endovascular devices.

And I think in the press release, just one more followup on the AtriClip.

It was mentioned that the AtriClip continues to carry a lower gross margin than the rest of the business.

Are those gross margins improving though as you ramp up the volume?

They are improving as a result of volume as well as next generational devices and cost mitigation activities within the business, so we expect some additional cost reductions in that product offering and we're pleased with the progress we've made with respect to the cost of that product.

Great.

Thanks Julie.

Thank you Larry.

And at this time there are no further questions in queue.

Thank you very much.

We look forward to our next earnings call and we very much appreciate your support and wish you a happy day.

Thank you.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect.

Have a wonderful day.