AtriCure Inc (ATRC) 2012 Q3 法說會逐字稿

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

My name is Jodi and I will be your operator for today.

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

Later we will conduct 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 conference over to your host for today, Ms. Lynn Pieper, AtriCure Investor Relations consultant from Westwicke Partners.

Please proceed.

Thank you, Jodi.

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

If you have not received a copy, please call 513-755-4136 to have one e-mailed to you.

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 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, governmental approvals, and other risks and uncertainties described from time to time in AtriCure's SEC filings.

AtriCure's results may differ materially from those projected on today's call.

AtriCure undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events, or otherwise.

Additionally, we may refer to non-GAAP (technical difficulty).

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 approved certain AtriCure products for the treatment of atrial fibrillation, or AF, or for stroke reduction.

The Company and others acting on its behalf may not promote these nonapproved products to train doctors for the surgical treatment of AF or stroke reduction unless the product is so indicated.

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 to focus only on the general attributes of the products for the current cleared uses.

AtriCure educates and trains doctors in the proper use of its products and related technologies, including for the treatment of AF, in accordance with the products' specified indication.

With that, would like to turn the call over to Dick Johnston, Chairman of the Board of AtriCure.

Thank you, Lynn.

Good afternoon and welcome to AtriCure's third-quarter 2012 conference call.

Joining me today, Mike Hooven, one of AtriCure's founders and Board members; Andy Wade, Vice President of Finance; and Mike Carrel, just announced as AtriCure's President and CEO.

On today's call I will provide an overview and then turn the call over to Mike Hooven, who will provide a review of business trends, our strategy for capitalizing on our AF approval, and an update on our clinical trial progress.

Andy will provide more detail on our third-quarter financial results.

And finally, we will open the call for your questions.

Before we begin I would like to address the announcement that we made this afternoon, that Mike Carrel has joined AtriCure as President and CEO.

Mike was most recently President and CEO of Vital Images, which was publicly traded on NASDAQ and acquired by Toshiba in 2011.

Under his leadership, Vital Images grew revenue and profitability, increased global market share, expanded its presence to over 90 countries, and raised over $100 million in equity financing.

We are pleased to welcome Mike and look forward to his leadership and expertise in further developing and executing our strategy here at AtriCure.

Over the past few months, Mike Hooven and I have worked closely with the management team and employees at the Company to carry out the strategic and operational priorities.

We have great people who are all committed to our growth and success.

I appreciate their support and the support of our partners and associates during this transition time.

I will now turn the call over to Mike Hooven for a more detailed update on business trends, the strategy for capitalizing on our AF approval, and clinical trial progress.

Mike?

Thank you, Dick.

Good afternoon and thank you for joining us.

I also would like to take the opportunity to welcome Mike Carrel to our team.

Mike brings a solid track record of establishing strategic vision, expanding businesses internationally, and driving revenue growth and subsequent profitability.

We look forward to his leadership and contribution here at AtriCure.

Turning to business trends, we are pleased to report that in the third quarter US open-heart revenue including AtriClip was up 11% compared to the same period a year ago.

We believe that this is evidence that our investments in strategic priorities are building momentum and resulting in sustainable growth opportunities.

In the US, procedure trends have remained generally stable throughout the third quarter, despite the typical seasonal slowdown; and we continue to experience strong growth trends from our international markets, which were up 17% versus prior year on a constant currency basis.

We are continuing to capitalize on our investments in support of our AF approval through education activities designed to increase awareness and improve patient outcomes.

We initiated our first training and certification event in January of this year, and to date we have trained 569 cardiac surgeons, up from 377 surgeons we reported last quarter.

We are successfully expanding this program which, as we anticipated, is resulting in increased utilization, competitive share gains, and cross-selling opportunities.

Training levels are strong, and conversions are proceeding as expected, but the cycle time from training to the sales process has been slightly longer than anticipated due to the increased focus and time on product value analysis at hospitals.

This modest increase in conversion time coupled with seasonality in Q3 led to a bit of weakness.

We have worked through this effect of this longer cycle time and do not see it impacting us in Q4.

In addition, MIS sales were affected by a one-month delay in the release of our new Coolrail product, as some surgeons were delaying procedures in anticipation of release.

The product is now available on the market.

Separately, MIS sales were also impacted by a one-month delay in the start of our DEEP AF trial, which is now underway.

With training and certification proceeding ahead of schedule, our new Coolrail product available and on the market, and the start of our DEEP AF trial, we see both open and MIS trends picking up in the fourth quarter.

Operationally, we embarked on several initiatives in the third quarter aimed at cost savings and improving efficiencies.

Our operations group has done a great job of implementing a series of initiatives which have significantly reduced scrap rates year-over-year.

A number of other key cost-savings initiatives are underway that should favorable impact our gross margin over upcoming quarters.

We launched two new products in the third quarter that we are particularly excited about.

First, we launched our next-generation articulating robot-friendly clip applier called [BoaPRO].

We believe the BoaPRO is ideal for a minimally-invasive right lateral thoracotomy approach used in minimally-invasive valve procedures, which is a growing opportunity.

We recently concluded our initial limited launch, and early feedback has been extremely positive.

And we are preparing for an open release this month.

We are submitting a supplement to the FDA to include BoaPRO in ABLATE 2 and anticipate using it in our initial cases.

The BoaPRO carries a significant ASP premium versus its predecessor.

Secondly, we also launched our next-generation Coolrail product in the third quarter.

Recall that the original Coolrail was taken off the market in mid 2011.

In retrospect this was not the right decision, as it led to several surgeons holding off a number of MIS procedures in anticipation of the release of a next-generation version.

Our next-generation Coolrail has been designed with improved usability, and we anticipate supporting the growth of our MIS procedures with this product.

Moving to an update on our clinical programs, we continue to invest in clinical science and FDA approvals.

In mid-September we announced FDA approval of the ABLATE post-approval study, or PAS.

This landmark three-year 350-patient study is intended to build additional evidence on the safety, efficacy, and long-term durability of the AtriCure Maze IV concomitant treatment for AF using AtriCure's proprietary surgical devices.

The initial FDA approval study, ABLATE, reported 84% of patients free from AF at six months following Maze IV treatment, and 75% of patients free of AF at a mean follow-up of 22 months, when assessed by 48-hour Holter monitors.

The AtriCure Maze IV procedure is normally performed at the time of a primary open-heart procedure where access to the heart is routinely established.

The ABLATE and PAS studies focus on the most difficult to treat chronic forms of AF, known clinically as non-paroxysmal AF.

The chronic AF patient group represents roughly half of the diagnosed patient population and has been extremely challenging to manage with conventional medical therapy or catheter ablation.

Our data suggest that currently only 3 in 10 cardiac surgery patients with an AF diagnosis are receiving an AF procedure, and only 1 in 10 receive a complete AtriCure Maze IV procedure.

We expect the PAS study will provide additional compelling evidence of the benefits of the AtriCure Maze IV procedure, and we are committed to making it the standard of care.

Recall that with a minimum of 75 patients included from ABLATE AF, we have roughly 275 patients of the 350 remaining to enroll.

We initiated enrollment in October and have 84 patients enrolled.

The patients will be followed for three years.

Moving to the Staged DEEP AF feasibility trial, we initiated enrollment in DEEP AF in September in two sites.

We continue to work with the additional four sites to obtain IRB approvals and expect this to be completed in the current quarter.

We have enrolled three patients to date, which is in line with our expectations.

As previously communicated, this feasibility study is expected to enroll 30 patients at six sites.

Our most recent FDA discussions indicated a 30-day interim analysis with an acceptable rate of pre-specified adverse events would enable the Company to move directly into a pivotal trial.

Our current plan includes the submission of an interim safety analysis and a pivotal trial protocol during the second quarter of 2013.

We anticipate initiating enrollment of the pivotal trial in support of Staged DEEP AF during the second half of 2013.

Moving on to ABLATE 2, we are pleased to announce that we have finalized our clinical protocol for ABLATE AF 2, submitted an IDE application with the FDA in the third quarter, and we have received conditional approval.

We expect to receive FDA approval to begin the study during the current quarter and to initiate enrollment during the first half of 2013.

Recall that ABLATE AF 2 is a single-arm pivotal trial enrolling 117 patients.

This clinical trial is intended for patients that have failed single or multiple catheter ablation attempts.

The FDA has indicated that it meets the criteria for a PMA supplement, which could significantly reduce the approval time for a minimally-invasive sole therapy platform.

Turning to our stroke trial, as discussed in our second-quarter call, we have placed our stroke trial on hold while we evaluate strategic priorities.

We will continue to work on the development of a minimally-invasive clip delivery system to be used in a sole therapy procedure.

We believe this sole therapy procedure, to reduce the incidence of stroke in patients for whom long-term oral anticoagulation therapy is contraindicated, could open up a large untapped market opportunity.

We expect to provide further clarity on our clinical strategy for stroke prevention when we report year-end 2012 results.

In summary, we're making meaningful progress with ABLATE PAS, DEEP AF, and ABLATE 2. Our new product introductions continue to reinforce our reputation as the innovator in the field.

We continue to train surgeons at accelerating rates, which is beginning to drive increased utilization and market share gains.

I will now turn the call over to Andy Wade, our Vice President of Finance, to provide more detail on third-quarter financial results.

Thank you, Mike.

For the third quarter of 2012, revenue increased 6% to $16.1 million.

Revenue from product sales in the US was $12.4 million, an increase of 5.1% from the third quarter of 2011.

Revenue from ablation-related product sales in the US increased by approximately $400,000 to $10.8 million, with an increase in open sales of approximately $700,000 and a decrease of approximately $300,000 in sales of products used in minimally-invasive procedures.

US sales of the AtriClip system during the third quarter of 2012 were $1.6 million as compared to $1.4 million for the third quarter of 2011.

When looking at the open ablation business along with the AtriClip system, revenue increased $900,000 or 10.6%.

International revenue grew 9% on a GAAP basis and 16.7% on a constant currency basis as compared to the third quarter of 2011, up to $3.8 million.

The increase in international revenue was driven primarily by growth in Europe.

Gross margin for the third quarter of 2012 was 71.6%, as compared with 72.8% for the third quarter of 2011 and 69.6% for the second quarter of 2012.

Similar to what we have described for earlier quarters, the year-over-year change in gross margin was primarily the result of investment in manufacturing and quality systems to transition and maintain the manufacturing of PMA approved products and to support our expanding operations, along with a small portion driven by the continued increase in the mix of international sales, along with an increase in the placement of capital equipment.

We continue to be highly focused on establishing enhanced operational processes to drive increased efficiencies and lower product costs.

We have seen a decline in manufacturing scrap and are encouraged by the programs that are being introduced into our manufacturing and quality systems.

Operating expenses increased 14.7% or approximately $1.8 million, from $12.3 million for the third quarter of 2011 to $14.1 million for the third quarter of 2012.

Sequentially, operating expenses were flat.

Research and development expenses, which include clinical activities, were $2.9 million for the third quarter of 2012 and $3.1 million for the third quarter of 2011.

The decrease was primarily in clinical activities, as there were heavier costs in the third quarter of 2011 in preparation for the FDA panel meeting held in the fourth quarter of last year.

We expect clinical costs to increase modestly in support of our key initiatives, namely, the post-approval study, DEEP AF, and ABLATE AF 2.

SG&A increased approximately $2 million, with $700,000 due to the charges taken in conjunction with the departure of our CEO in September and the remaining increase driven primarily by an increase in selling, marketing, and training costs.

Our operating loss for the quarter was $2.6 million as compared with approximately $1.2 million for the third quarter of 2011.

Our adjusted EBITDA loss was approximately $950,000 compared to $100,000 for the third quarter of 2011.

Our net loss per share was $0.16 for the third quarter of 2012 compared to $0.07 for the third quarter of 2011.

Approximately $0.04 of the current year loss is attributable to expenses related to the departure of the Company's CEO in September.

Now turning to a few balance sheet items, we ended the quarter with $13 million in cash, cash equivalents, and investments.

Additionally, we had approximately $5 million of borrowing capacity under the revolving portion of our credit facility.

We believe our current cash position will support the execution of our strategic plan.

Lastly, as an update to guidance, we are planning to reinstate formal guidance for 2013 when we report our year-end 2012 results and Mike Carrel has had some time here at the Company.

In the interim, based on current trends, we anticipate top-line growth for the fourth quarter of 10% to 12% year-over-year on a GAAP basis, and gross margin to be consistent with what was reported in the third quarter.

At this point I would like to turn the call back to Mike for closing comments.

Thank you, Andy.

Overall, we are pleased with our third-quarter performance and commend the team at AtriCure for staying on course through a transitional summer.

We expect growth in the fourth quarter to be driven by stable procedural volumes in the US and overseas, enrollment in DEEP AF, new product introductions, and ongoing training and education initiatives.

We continue to see healthcare reform trends impact our industry, which is moving to a model where physicians are rapidly becoming hospital employees.

We believe that AtriCure is well positioned to capitalize on these trends, as the only company in the industry with an AF label and strong education in sole therapy platforms.

We're the only company in the world with an FDA approval to treat the most serious forms of atrial fibrillation.

We believe that AtriCure is uniquely positioned for worldwide growth in this increasingly challenging healthcare environment.

To conclude, I believe the team at AtriCure is in good hands, and I have confidence in our people.

We have a strong management team and a Board that is committed to continuing the trajectory of success and increasing shareholder value.

We welcome Mike Carrel's leadership to further develop and execute our strategy.

We will now open the call for your questions.

(Operator Instructions) Thomas Gunderson, Piper Jaffray.

Yes, hi.

This is Misha Dinerman actually for Thom.

First, let me congratulate you, Mike, on joining the Company.

If I could ask you a question, it would be -- can you tell us a little bit about what in the due diligence that you did made you particularly excited about this opportunity?

Sure.

Well, thank you.

I appreciate the first question coming to me tonight.

It was actually pretty simple.

I met the management team, the Board, and I really like the strategy they put together.

Over the last three months, Mike Hooven and Dick have really crystallized that strategy, put a focus on the right areas of the business, and they continue to invest in both the products and the innovation and also the service to the customers.

And I really like that.

And I saw a huge opportunity for a market potential as well.

The A-fib market is a tremendous market.

I have been studying it for quite some time, been working with cardiologists for the last five years, and it has become a really, really critical disease state to basically treat.

And that was something I got really excited about.

So, you combine all those things together, a combination of the team, the Board, and the market opportunity, that is what got me excited.

Okay, great.

Then do you guys have an update on the CFO search?

Right now, I have to congratulate Andy Wade on the terrific job he has done for the last six months, and our financial house is in great, great shape.

We are going to leave that decision up to Mike Carrel.

But there is no immediate urgency at this point, and we wanted to leave that to decision to Mike.

Okay, great.

Thank you.

Jason Mills, Canaccord Genuity.

Thanks, everyone, for taking the question.

Can you hear me okay?

Yes.

Great.

My first question has to deal with the Maze IV training and development of that market.

Once again it seems you had another good quarter of training, as referenced by the number of centers that have been trained on the Maze IV procedure.

But obviously the open-heart revenue was down sequentially.

Could you talk about the cycle that exists between the time that the docs are getting trained on the procedure and how long it is taking to get purchase orders to start to ramp at those hospitals that have been trained, where they hadn't been trained in the past?

That's a great question, Jason.

That is actually the primary reason that the open sales came in a bit under expectations this quarter, is that cycle time is running a little bit longer than we expected.

There's really two categories that we are looking at.

If it is a current customer that is being trained and the condition has already gotten approval, and -- the time frame is essentially faster.

We are in many cases increasing the utilization of AtriCure products for that customer.

They may only use ablation products, but with the AtriCure Maze IV that also involves a cryo product.

So there may be some additional training that that surgeon requires.

And in addition that surgeon needs to get comfortable with that procedure.

So to drive increases in revenue at existing accounts we are looking at a cycle time that is a little bit longer than we had anticipated really to start that ramp.

So what we are going to be looking at is a ramp where that surgeon is looking at increased utilization of our products and then building up their procedure volume.

The second case -- and this is something we have been looking at in a lot of detail, because we initially started training with kind of the low-hanging fruit, which was our existing accounts and our best customers.

And in the first quarter and second quarter, we were transitioning to some competitive accounts.

And third quarter we have been training quite a few competitive accounts.

The issue with the cycle time on a competitive account is it is a bit longer.

Because first of all, let's say that surgeon that is using competitive product comes out of the account.

And because of the new role that many surgeons are in, where they are hospital employees, they don't quite have the leverage that they used to have.

And that surgeon has to go through a value analysis at the hospital.

So that value analysis does take some time.

Then frequently they will require that surgeon to utilize, let's say, two or three products and perform two or three procedures before we can actually sell product into that hospital.

And then once we get the okay to sell product into that hospital, there is frequently some inventory that needs to be worked through.

So, we are very, very enthusiastic about the progress that we are seeing in this training.

We are getting a very, very high conversion rate of competitive accounts.

But I do have to say we are learning things about the training procedure and the process and the cycle time.

I think the other thing to note is that our training itself has gotten a lot better in this quarter versus last quarter, and it was better the second quarter than the first quarter.

So I think all of those things look very good for the upcoming quarter, and we feel extremely positive about the trends in our open procedures for the upcoming quarter based on the training and the conversion of accounts.

But it did result in some softness in this quarter for the open procedure.

That's fair.

But the point being -- the point that you are trying to make, it sounds like, Mike, is that you expect that this is a leading indicator of the growth that you could achieve not only in the fourth quarter but in 2013.

So my follow-up question, if that's true, is -- you obviously withdrew guidance when Dave left.

Can you generally speaking give us a sense for your plans for 2013, what you think this market should grow?

And given that you are training competitive accounts, what you think your share should do next year?

And also as a follow-up, just your thoughts on potentially expanding to more markets internationally from a direct standpoint?

And thanks, I will get back in queue.

Thanks, guys.

Yes, you bet.

At this point as we stated I think in the initial part of the call, we are not going to be giving guidance on this call for 2013.

I will say that, based on what we are seeing this month, which has been very encouraging, we feel comfortable putting out about a 10% to 12% top-line growth this quarter.

It's based on strong trends.

And what we are seeing in October, it is possible we could come in at the high end of this range, but we also have to factor in that we are seeing one less selling day in the fourth quarter, and we don't yet know the impact of Hurricane Sandy on our revenue in the Northeast.

Fair enough.

Thanks.

And what about the international market, direct plans?

Yes, we are -- this is been one of our key initiatives, to support our international market growth.

We have about a 20% market share in Europe.

So you compare that to what we believe is over 50% market share here, we think there is a significant potential to increase our market share in Europe.

We have the MIS procedure over there; that is being done.

And we also are looking at new markets in Asia and specifically China, and we are looking as well at South America.

Great.

Thanks, guys.

Matt Dolan, ROTH Capital Partners.

Hey, guys.

This is Chris Lewis on the line for Matt.

Thanks for taking the questions.

First, Mike, just wanted to congratulate you and welcome you to the Company there.

Thank you.

Can you guys just discuss any disruptions the Company may have seen during the quarter related to the transition?

Just in terms of possible physician relationships, hospital relationships, or just any salesforce disruption or turnover the Company may have seen.

Yes, this is something that I have spoken to a number of you about, and I think I talked to Matt about this, but it has been actually very surprising.

We, to my knowledge, have not lost a single account.

We have not negatively impacted any surgeon relationships.

In fact, that has gone the other way for a few of them.

And we have seen, in terms of turnover, we did -- we had no salesforce turnover whatsoever.

So this has been, in terms of the key customers, the key accounts, their main question is -- are you going to continue to work with me?

And at this point we are saying -- absolutely.

Okay, great.

I think you mentioned in your comments related to the training programs, but can you expand a little bit more and provide some more commentary around the competitive market share gains you saw during the quarter?

I can't give you actual numbers, but I can tell you that the conversion of competitive accounts -- I mean we look at net conversions, and we look at the number of accounts we have converted, competitive accounts; and then we subtract the number of competitive accounts we have lost.

And we are doing extraordinarily well in converting competitive accounts.

So we think this is going to pay some significant dividends.

It just -- the only downside of that is the cycle time is a little bit longer than we anticipated.

Okay.

Then just last question here.

The 10% to 12%, is that for the fourth quarter?

Is that a year-over-year growth rate?

Yes.

Okay.

Thanks, guys.

Danielle Antalffy, Leerink Swann.

Hi, this is Robert Marcus in for Danielle.

Mike, congratulations on the new appointment.

Just wanted to see if you have had time to assess your strategy, if you are going to continue with the current strategy, or if there are different roads that you think you might take going forward.

Well, first of all, thank you.

Right now I haven't had a chance to assess the strategy in the period of time that I have been able to -- through the interview process.

But I am going to continue to reevaluate it.

I think they have got a strong track -- it's one of the things that actually attracted me to them, and in terms of the conversations with Mike and Dick.

But obviously there is always going to be things up for looking at over the course of the next 60 to 90 days, and I will give an update to everybody on the earnings call in the February time frame.

Great.

Thanks a lot.

Charley Jones, Barrington Research.

Good afternoon.

Thanks for taking the questions.

I guess my first one is around the salesforce.

I was curious.

Are you -- how many reps do you have?

How many managers do you have?

Are you still using electrophysiology specialists, and how many of those are there?

And are we all three in agreement of the sales levels we need?

Or what are some of the varying choices you have in front of you?

Yes, right now, we have somewhere in the order of 40 reps, and about 10 management, and we have about 60 personnel out in the field.

We have looked at -- we are actually in the process -- and this is something that we are very excited about having Mike onboard so he can evaluate this.

We have had a couple strategic AF marketing managers who are -- who have been very successful in driving referrals and converting accounts and training.

So we are evaluating.

We believe we are sufficiently staffed.

The question is, do we want to reallocate some of the support resources maybe to focus a little more heavily on our open procedure and our AF labeling?

Have you seen some of your EPs slow down on referrals as a result of Dave's departure, or is that the same as the cardiac surgeons?

Not at all.

Okay.

Just a couple quick more -- a couple more.

ABLATE 2, is that a minimally-invasive or is that an open concomitant for these people who failed previous catheter ablation?

Yes, ABLATE 2 is actually a very exciting study.

It is becoming more exciting because we believe we have a way to place our new clip system with the new BoaPRO clip applier.

It is a right lateral thoracotomy.

It is essentially the same procedure that is becoming the procedure of choice for surgeons who are doing minimally-invasive valves.

What we are adding to that procedure is essentially all of the lines for the AtriCure Maze IV done under direct visualization.

So we anticipate the outcome -- and this is done on a stopped heart with a fem-fem bypass.

So we anticipate that the results of this procedure should be similar to our ABLATE results that got us FDA approval.

We have word from the FDA that this is eligible for a supplemental PMA.

And when I talked about the BoaPRO clip applier, just a few weeks ago we had a surgeon use this product in one of our user studies.

Took that surgeon a matter of seconds to apply the clip to the appendage.

We are in process of putting together some videos, and we've had a number of other surgeons do the same procedure.

So we think the potential is not only -- and we are submitting an amendment today or tomorrow to the FDA to incorporate this clip into the ABLATE 2 trial.

And we believe there is not only a selling opportunity to use this clip in this stand-alone procedure, which is -- the advantage of this procedure is it's very familiar to cardiac surgeons.

Any cardiac surgeon that does a minimally-invasive valve knows this procedure.

So we have the advantage of not only being able to sell the clip into this procedure, but we can also sell the clip into minimally-invasive valve procedures for any surgeon that wants appendage management for that procedure.

And the ASP for this product is significantly higher than the ASP for the previous system.

Just one real quick follow-up.

It's about Boa 2. I was hoping you could be a little bit more specific about the differences.

Is it just a longer delivery device, or is there anything different?

And if you have the ability to go in minimally invasively here, why the delay of the stroke trial, given the potential value creation there?

What -- is it that you are waiting on product development, or did you see something that -- was this going to be too difficult to get through the FDA?

Maybe you could talk a little bit about that stroke trial.

It sounds like maybe even financing has something to do with it, and I would be curious Mike Carrel's initial view on whether or not this Company is properly capitalized.

Okay, that's really like three questions, but --

Yes.

Yes, let me.

So you wanted to know about the Boa 2, the BoaPRO, and the differences.

And why not stroke?

Why the delay of the stroke trial?

You wanted to know about the stroke trial, and you wanted to know about the capitalization.

It seemed like it was related to capital.

Okay.

Let me address the stroke trial first.

The stroke trial is a huge undertaking, and what we decided was that we'd do two things.

One is, we would look at really going -- if we're going to do the trial, we have to go big in the trial, and we want to look at an NIH-funded trial.

So we'd need to get serious NIH support for that trial.

Second is, since it's going to take some time to do that and we've had great success in developing our latest BoaPRO product, we would want to develop an even more minimally-invasive system for delivering that clip.

So when we do the trial we do it with NIH funding and with a significantly less-invasive product than the one we already have.

Now to answer your question about the BoaPRO, there's quite a few differences from the existing system.

The first difference is that the surgeon was required to cut the sutures to release the product from the delivery part of the mechanism.

So in the BoaPRO it is a very simple system where the sutures are simply released by pulling on a piece on the handle.

You extend that piece, and the clip is released.

Also -- and this is why this product is so -- is being -- we are so excited about this for the right lateral thoracotomy procedure.

The head of the product that contains the clip can be articulated in any one of the axes.

So -- as opposed to the previous product where you could only rotate that in one axis.

The third thing is it is robot friendly.

We have designed it to be grasped by a robotic grasper.

And the fourth is the ASP is significantly higher.

We believe we can command a much higher price for this product.

(Operator Instructions) At the present time we have no further questions.

I would now like to turn the call back over to Mike Hooven for closing remarks.

Just like to thank everybody for joining us.

We are really excited about the future of the Company going forward under Mike Carrel's leadership, and look forward to our next earnings call.

Thank you.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect.

Have a great day.