Stereotaxis Inc (STXS) 2008 Q1 法說會逐字稿

Ladies and gentlemen, thank you very much for standing by and welcome to the Stereotaxis first quarter 2008 earnings conference call. During today's presentation all parties will be in a listen-only mode and following the presentation the conference will be open for questions and answers. (OPERATOR INSTRUCTIONS) This call is being recorded Tuesday, May 6th of 2008.

I would like to turn the call over to Doug Sherk with EVC Group. Please go ahead, sir.

Thank you, operator, and good morning, everyone. Thank you for joining us for the Stereotaxis conference call and webcast to review financial results for the first quarter of 2008. Before we get started we'd like to remind you that during the course of this conference call the Company may make projections and other forward-looking statements regarding future events or the future financial performance of the Company, including without limitation statements regarding operating results for calendar 2008 and 2009, growth opportunities and other statements that refer to Stereotaxis' plans, prospects, expectations, strategies, intentions and beliefs.

These statements are subject to many risks and uncertainties that could cause actual results to differ materially from expectations. For a detailed discussion of the risks and uncertainties that affect the Company's business and qualify the forward-looking statements made in this call, we refer you to the Company's recent public filings with the SEC, specifically the Form 10-K for the fiscal year ended December 31, 2007. The Company's projections and forward-looking statements are based on factors that are subject to change and therefore these statements speak only as of the date they are given. The Company assumes no obligation to update any projections or forward-looking statements.

Now I'd like to turn the call over to Bevil Hogg, Chief Executive Officer of Stereotaxis.

Thank you, Doug, and good morning, everyone. On the call with me this morning is Jim Stolze, our CFO. When we last talked to you in early March we had just been notified by our partner that they were temporarily halting procedures performed on our Niobe® system with their magnetic irrigated catheter due to specification conformance issues before commercialization of the long-awaited magnetic irrigated catheter is expected to drive a point of inflection and demand for our Niobe® system, as well as increase in Niobe® utilization, so the news was disappointing to say the least. However, we quickly modified our business plans and expectations accordingly and two months later I am very pleased to inform you that Stereotaxis has made substantial progress. The relevance of the irrigated catheter to our business model is that most left-sided complex procedures, such as atrial fibrillation are performed with irrigation. Consequently, the usage of our systems has been preponderantly focused on right-sided procedures of which we've done over 7,000, although our clinicians have performed roughly 3,000 AF procedures, mostly with irrigation.

What is important to note that our about basic business case is an excellent one. even without the irrigated catheter. and we continue to do a substantial and increasing number of cases, currently on the order of 500 per month, across a broad install base that is approaching 100 systems worldwide and to generate significant orders for new systems. However, we regard the irrigated catheter as an accelerant to our business model, one that is likely to drive greater utilization and catalyze more rapid growth in our system sales. We're extremely pleased, therefore, to be able to report to you that our partner has made excellent progress towards returning this catheter to the market and I'll talk to you more about this later in the call.

While our first quarter revenue is off compared to last year's first quarter, this is in the shadow of the irrigated catheter issue. What we believe is more indicative of the progress we're making is the substantial increase in orders generated during the first quarter. We booked approximately $13 million in orders for the period, a record for any first quarter, and our ending backlog of $66 million also set a new record. In addition to this robust order growth, the mid to late-stage portion of our order pipeline is also very strong and has grown to over 300 accounts and we expect that the higher percentage of orders written in the first quarter than we originally anticipated will now be delivered this year.

The impact of competition on this segment of our pipeline remains slight. We attribute this strong order momentum, which we expect to translate into solid revenue growth beginning in the second quarter, to a number of factors including the FDA approval of the irrigated catheter earlier this year and most importantly to the excellent results achieved in the external evaluation of the catheter in Europe, coupled with broad market confidence in our partner's commitment to resolve the issues that led to its withdrawal. Despite news media comments about curtailment of hospital capital equipment spending, we're finding that hospitals are indeed quite willing to direct capital equipment dollars to programs experiencing patient demand growth,while at the same time providing excellent patient outcomes and increasing levels of reimbursement. Electrophysiology meets all of these criteria. As independent analysts have noted the electrophysiology lab appears to be a high priority within the hospital market, and within the electrophysiology lab robotic surgery devices are also high priorities.

We continue to have good success as illustrated by our excellent first quarter order growth rate, in demonstrating to hospital administrators and electrophysiologists the superior return on investment from most perspectives that we generate for our hospital customers. Stereotaxis dwarfs the competition in terms of procedures performed, with roughly 15,000 done so far, and about as many new procedures monthly as our competition has done since its inception, in spite of their long-standing access to irrigated catheters. We believe we are for our customers a far superior safety record compared to other technologies and to manual approaches. Our major adverse event record in electrophysiology stands at an impressive 0.1%. We believe this safety record is unsurpassed by far compared with both manual and competitive technologies and is supported by a substantial body of almost 90 peer-reviewed publications.

What is notable is that this exemplary safety record was achieved by a diverse group of well over 150 clinicians across a broad number of hospitals and many thousands of cases, so we're not just reporting ideal conditions at a few key sites in the most experienced hands. Moreover, we're proud of the fact that our clinicians have safely and effectively performed procedures in all four chambers of the heart, including the most difficult and complex cases, such as ischemic ventricular tachycardia with admirable success rates. Most importantly, we are extremely confident in our belief that well-informed physicians and their patients will invariably seek out the safer alternative. Historically, it seems to be true across a broad swath of medical technologies that, with effectiveness is a given the safer approach wins.

I have discussed the importance of the irrigated catheter as a factor in driving faster rates of growth for Stereotaxis, while noting it is not the only component of our business model. I would now like to address those other elements of our business model that we believe are likely to ensure our strong growth this year and profitability next year. First and foremost, we continue to sell Niobe's® at a robust rate, as evidenced by our first quarter orders, and we expect increasing demand over the balance of this year and next at sustainable or increasing ASPs. As I've already noted, our install base, which is approaching 100 systems, continues to drive a substantial number of procedures monthly without the irrigated catheter. And this level of utilization will climb as a function of further expansion in our instal base, which should reach an average of 150 systems next year with a goal of roughly 20,000 cases once we have the irrigated catheter in broad distribution.

When we first came to market with our Niobe® system we were eager to jump-start usage by supplying our proprietary Cardiodrive® disposable at relatively low cost to our customers. As the value of our system and its contribution to EP lab economics and clinical performance has grown in the eyes of customers, we've begun to leverage pricing power and are able to command much higher ASPs for Cardiodrive®. With the advent of our Cardiodrive® 2 model, which will be priced higher still, we expect to be entering a realm of per procedure revenues with the sale of our proprietary disposable and royalties can greatly exceed $1,000 per case. To this we add service and software license fees and in the future will be instituting a connection fee for our Odyssey network users.

Another important component of our drive to profitability is Odyssey. During the first quarter we added approximately $1.5 million in Odyssey orders to our backlog, as its capabilities to further simplify complex arrhythmia procedures become increasingly well known. Originally we expected to sell more than 20 Odyssey systems in 2008. We now expect to far exceed that target and believe that Odyssey can contribute substantially to our revenues this year and next. We believe the Odyssey platform, acting as the information and networking hub for the EP lab, can enable clinicians to improve efficiency and efficacy by making it possible to consolidate and better manage information, as well as procedural work flows, and to store this information and/or share remotely for training or consultation purposes.

Last week we highlighted a Trans-Atlantic arrhythmia procedure collaboration conducted by the Odyssey network and next week we will be demonstrating the remote capabilities of the Odyssey platform at the upcoming Heart Rhythm Society conference. In addition, we will be demonstrating Odyssey's new remote viewing and archiving feature, Odyssey Cinema. Odyssey Cinema will enable physicians to receive a real-time, high-definition view of a procedure from any point in the network. It also includes a powerful archiving capability that will allow clinicians to store and replay entire procedures or segments of procedures. In addition to the components of top-line growth that I've just referred to we are very focused on increasing our overall gross margins from our first quarter's 65.5% to 70% by next year and in reducing our operating expenditures on an absolute basis to a level in both 2008 and 2009 below that of 2007. I am pleased to report we've already shown a reduction in the first quarter operating expenses of about $1 million over the prior quarter.

As we reviewed during our last call with you two months ago, following a successful external evaluation of our partner's magnetic irrigated catheter a relatively small number of catheter's appeared to demonstrate specification conformance issues. As a result, our partner stopped further shipments of their irrigated irrigated catheter in Europe and launched a thorough root-cause analysis. They have now informed us that they have successfully characterized the specification conformance issue, or root cause, and are moving forward to resolve the problem in the context of the current design so as to return the irrigated catheter to full commercial availability in the earliest possible timeframe. Their feedback indicates that the magnetic irrigated catheter should be back in the hands of clinicians before the end of the year. However, we do not yet have specific dates or other details to share with you.

We have reason for further confidence in the value proposition offered to the market by our Niobe® system as a competitive magnetic irrigated catheter is likely to receive regulatory approval in the European market in the very near term. While a competitive magnetic irrigated catheter would limit our royalties on irrigated catheter sales until our partner is able to return to the market, we aren't concerned about its potential impact on our business model given the pricing power we are establishing for proprietary Cardiodrive® disposable. In addition, the availability of any magnetic irrigated catheter is likely to generate a positive impact on Niobe® sales and should be seen as a tremendous endorsement of our technology.

For the remainder of 2008 we are focused on continuing to build on the robust order momentum generated during the first quarter and on translating our backlog into revenues. We're working to maximize the market opportunity for Odyssey and have every expectation of capitalizing on this interest during the upcoming HRS conference in San Francisco, May 14 through 17, where we will also introduce our new NAVIGANT 3.0 software platform. We believe we have the liquidity in place to execute our strategy in 2008 and I look forward to updating you later on our progress at HRS.

Now I'd like to ask Jim Stolze to review the aspects of our first quarter.

Thank you, Bevil. Stereotaxis reported total revenue of $7 million in the first quarter compared with $9.2 million in the first quarter of last year. Total revenue included $4.4 million generated from sales of our systems, with three Niobe® systems recognized in the U.S., one in Europe, as well as two Odyssey systems recognized this quarter. We also generated $2.7 million in revenue from disposable services and accessories. This compares with $2.0 million recognized in the first quarter of 2007. Increase continues to reflect the growing install base of our systems and usage across a broad range of applications.

Gross margin for the quarter was $4.6 million, comprising 65.5% of revenue, compared to a gross margin of 64.5% of revenue in the comparable 2007 quarter. Operating expenses in the first quarter were $17.8 million, an increase of 7% over the $16.7 million recorded in the first quarter last year, but we're down approximately $1 million compared to the fourth quarter of last year. Research and development expenses were reduced by approximately $1 million compared to the prior-year quarter, with increases occurring in sales and marketing and in our general administrative category, which includes our regulatory, training, clinical and general management costs.

Looking to the full-year 2008 we would expect that research and development expenses will continue at or below the current run rate and this we would limit the increases in sales, marketing and general administrative costs in order to achieve our goal of holding full-year operating expenses at less than $70 million compared to the $73 million recorded in 2007. We reported a net loss of $13.5 million in the quarter, or $0.37 per share. This compares with a net loss of $10.5 million, or $0.31 per share in the prior-year's first quarter. Average shares outstanding were 36.5 million compared with 34.4 million in the same period last year. The increase is primarily due to the issuance of the 1.9 million shares in a registered direct offering completed in March 2007.

Cash and investments totaled $11.4 million at March 31st. Total debt at the end of March was $6.7 million with $5 million drawn against our bank line of credit and no funds drawn again the $20 million commitment received from two insiders in February of this year. We used approximately $12 million of cash in operations in the first quarter but anticipate that to be significantly reduced in the second quarter and beyond. We continue to believe that the current availability under the bank and insider lines will provide sufficient liquidity to take the Company into the first half of 2009. As Bevil has indicated, our backlog, net of systems taken to revenue, grew to $66 million at the end of March, and as a reminder, we do not include orders for disposables, service or accessories in this data.

Now Bevil and I would be happy to answer any of your questions. Operator?

Thank you, sir. (OPERATOR INSTRUCTIONS) First question comes from the line of Keay Nakae from Collins Stewart. Please go ahead.

Good morning.

Hi, Keay.

Bevil, with respect to the irrigated catheter, they've identified the root cause, what else do they need to do and more specifically do they need to file a PMA supplement to bring the product back into the market?

Well, first of all let me say that I'm no expert in this area and it's always problematic to second guess the FDA, however, the current expectation is that the fix can be done in the context of the current design and it should not require a PMA supplement, although that could change.

And I know you have limited visibility there, but what would have to happen for the situation to be worse? It sounds like they've got a good handle on it. but in order for them to proceed down the path you just suggested not requiring a PMA supplement, what would need to change?

Well, nothing needs to change as I see it and I'm, again, no expert here. There are a range of regulatory options in the United States. .It's always simpler in Europe and more straight-forward. But this range of options, which could scale from very simple filing to a real-time review, which might take 90 days to a PMA supplement, which could take 180 days, our inclination is to believe in the likelihood of the middle option. However, it's too early to prognosticate with any level of accuracy. But I would add that whether or not it's an easy regulatory filing or slightly more complex one, it would only make a difference of about a quarter or so and we don't think that that would have a huge impact on our prospects.

Okay. Moving on to the Odyssey you seem to be generating some good traction there. The viewer and archiver seems like some very positive feature additions. When do you expect to formally roll those out and what type of price point are you expecting?

We expect to roll out the additions to the Odyssey line -- namely Odyssey Cinema -- at HRS with shipments later this year, probably beginning in the fourth quarter. And the price point will be -- for that feature will be on the order of $150,000, but in addition to the up-front cost, there will be a connection cost that is yet to be determined.

Will the connection cost apply to all Odyssey users or just the ones using, say, the viewer?

There may be a variable connection cost and service fee depending on the level of commitment to the Odyssey platform, so that somebody who has Odyssey plus Odyssey Cinema would pay a higher recurring fee and a higher service fee.

Okay. So it looks like -- it looks like you're looking at a potential up-front fee of close to perhaps $400,000 with some additional recurring revenue from Odyssey?

Let me qualify something and it's important to make this qualification. The $400,000 or $450,000 is a list price. We do offer our customers discounts from that list price, so the final amount will be somewhat less than that.

All right. Well,very good, I'll get back in queue. Thanks.

Thank you.

Thank you. (OPERATOR INSTRUCTIONS) The next question comes from Ed Shenkan with Needham & Company. Please go ahead.

Thanks, Bevil. Hi. You gave a timeline that you'd expected the irrigated catheter to come back on the market by the end of this year. Can you tell us what are the milestones that have to occur for it to get back by the end of the year?

The most important milestone has already been accomplished, which was to figure out what was wrong and to determine some approaches to resolving what's wrong, so that's been done. The next step is to complete the engineering and the regulatory filings, and then probably to do a limited external evaluation again and then to bring the market -- the product to full market release.

At what point will they determine whether it's a PMA supplement or that you don't have to do the supplement? When will you know that?

Probably within the next 90 days.

Okay. And is the engineering work and the regulatory -- is the engineering work being done by Stereotaxis or J&J?

It's being done by J&J and they have a very substantial commitment to it.

And for the external evaluation, how many sites or physician groups might need to be involved, do you think?

I don't know yet, but I would imagine that it would be either on the order of what was done previously or less than.

And just remind u, what it was previously?

Previously there were nine sites doing a couple hundred cases.

Okay. And at present are accounts holding off on taking possession of the Niobe® system because the irrigated catheter's not yet on the market? Are you seeing any of that?

Not really. I would say that it's fair to state that accounts are not rushing to take delivery of their systems, but we have no evidence that there is a material impact from accounts withholding delivery.

So in other words you have the purchase order for an account. They might not take possession yet, but they still intend to certainly take possession of that unit?

Yes, we have not ever had a cancellation from the backlog nor do we expect one in the frame work of where the irrigated catheter is likely to come out resulting from the irrigated catheter issue. It is not impactful for -- n hospital administrations in the larger picture, although it has made it more and more difficult for us to accelerate shipments.

We look forward to the analyst day. Is there anything you could tell us to anticipate?

We're just feeling very positive about the expansion to our platform that is occurring, both in the software arena and with regard to Odyssey. The beauty of the Stereotaxis platform as a whole is that it's a digital platform, and therefore, the software only keeps on getting better.

We'll see you at the Heart Rhythms Society. Thanks.

Thank you.

Thank you. The next question comes from the line of Mimi Pham with JMP Securities. Please go ahead.

Hi, good morning.

Hi, Mimi.

How are the irrigated catheter updates being communicated to your Niobe® center? Is it through your sales force or J&J's?

You mean how is it being communicated to the --

Yes, like these updates, the similar updates that you're just giving us now. Like how are you --?

It's being [solicited] by J&J -- by Biosense, excuse me, to their customers to their customers nd it is also being propagated by us. But we prefer to let our partners take the initiative -- the principal initiative in this domain.

And are you giving the similar message in terms of timing sometime by year end or are you choosing to be maybe a little more conservative?

I think that the element of conservatism would be in not talking about how broad the distribution would be by year end, but Biosense has indicated a pretty high level of confidence that the catheter will be back in the hands of clinicians.

and then on the design fix, is this something that they've seen before in either the manual catheters or your other three Niobe® catheters, or is it something, for whatever reason, very specific just to the irrigated magnetic catheter solution and expect to see this anywhere else?

I think it's specific to the magnetic irrigated catheter, although there are general issues that pertain to the manual irrigated catheter, as well.

You can clarify that comment again you just said?

I said that this is principally specific to the magnetic irrigated catheter; however, in a much broader sense, the same principals apply to the manual irrigated catheter.

But this issue shouldn't -- do they feel pretty confidence this issue shouldn't come up, for instance, in your other three Niobe® catheters that are currently available in the market?

No, not at all.

Okay, thank you very much.

Thank you. The next question comes from the line of Larry Keusch with Goldman Sachs. Please go ahead.

Hi, good morning, Bevil.

Hi, Larry.

So obviously a lot of questions on the irrigated catheter. I think what will be useful for everybody is if you could just help us understand what exactly the root cause is, then we don't have to dance around trying to guess the issues associated with this catheter versus other catheters?

well, Larry, the root cause lies in conformance to specifications,and I know this sounding like I'm being repetitious but there are some very, very complex specifications in the design of the irrigated catheter. And the interaction between different components in the device and the tolerances of those various components and the configuration of those various components apparently gave rise to the issue and it will take a realignment of those components and a reconfiguration of those components and specifications to resolve it. That's the best I can say.

Okay. So it sounds like it was a manufacturing-associated issue where you had some processes or some components that were out of spec? Were out of tolerance.

Well, I would say it's perhaps a bit more complicated than that because you can have specifications that are difficult to manufacture.

Right.

And so simply saying that it's a manufacturing problem doesn't solve the problem because you've got a very complex set of specifications that have to be aligned and sometimes it's better to reconfigure some of the components of the catheter in terms of their tolerances and juxtaposition and so on -- I'm no engineer -- to come up with a more robust solution.

Okay. So it sounds like for those of us that want to be a bit more conservative here as you talk about what has been done to get to the issues, and if you were to assume there's some FDA pathway that's more than just a letter to file, if it's taking --?

I think that would be a reasonable assumption.

Okay.

So if you're saying it takes 90 days to figure out the pathway through the FDA and then I assume the worst case pathway is six months through a PMA supplement, we're really -- while you're saying yes, it could be in the hands of clinicians by the end of the year, the reality this really does become a 2009 event if you follow that pathway? If you follow worst-case scenario that is indeed correct.

Okay, perfect. And then lastly, Bevil, just two clarification questions. When you say that you now expect to far exceed the 20 unit goal for Odyssey what does that mean and is that just -- are you speaking just to orders or is that going to actually hit revenues? And then the second question is, I was just wondering if you could help us understand both in the new orders and the total backlog this kind of U.S., O-US break down?

Okay. With regard to Odyssey we need to generate orders in order to be able to ship and recognize revenue, so I was really referring to the order phase of Odyssey where we will far exceed our goal. But Odyssey can be translated into revenues quite a bit faster than Niobe® so that we would also expect a favorable impact to our original expectation for Odyssey this year and a very favorable one next year.

Okay. And so you don't want to tell us what far exceed means?

No. I would say that our orders are probably going to be 30% to 50%, or more, higher than our original expectation.

Okay.

I'm not quite sure exactly how that will translate into revenues because there is an installation cycle that goes along with that.

Understood. And then the U.S./O-US?

The percentage of our backlog currently stands at about 75% domestic, 25% O-US in -- measured in units, although our Q1 orders were 60/40, 60% being the U.S. and 40% overseas. So we're seeing a pickup in Europe -- just say the beginnings of a pickup in Europe which had fallen off last year, and this is very consistent with our expectation given the successful early release of the irrigated catheter in that marketplace.

Okay. And then lastly, Bevil, I just want to clarify one last thing here and then I'll jump off. When you say you just haven't seen any signs of the hospitals reacting from a capital equipment purchasing environment, it feels like if there were anything that happened in this past quarter -- something happened in March, that's probably the height of the auction rate security issues and the credit market issues -- so I could see how January and February and maybe parts of March were fully on track. I just want to make sure of that, again, as you exited this quarter and you've gone into April you're still confident in saying that you haven't seen any issues?

I didn't mean to imply that we haven't seen any issues. That would be foolish. What I meant to say is that if there is a curtailment of hospital capital expenditures out there, we don't believe that it is or will materially impact the electrophysiology sector.

Okay. Great. Okay, thank you, Bevil.

Thanks.

Thank you. The next question comes from the line of Rick Wise with Bear, Stearns. Please go ahead.

Hi, guys, it's James filling in with Rick. Bevil, just switching gears, maybe a little different topic away from the irrigated catheter. A lot of physicians appear focused on getting more supportive clinical data for bringing ablation to the forefront for treatment of A-Fib, hoping you can provide a little more color and maybe outline what you're looking for in terms of key upcoming clinical data and/or trials?

I think there -- are a number of issues here. One is the ability of Stereotaxis to demonstrate that its Niobe® solution is clinically relevant, and I've mentioned that we have upwards of 90 peer-reviewed publications out there. We've mentioned chronic success rates, not acute success rates, but chronic which is much harder to come by of upwards of 98% in SVT, close to 70% in ischemic letee, which is probably the most challenging arena in electrophysiology today. Acute success rates in the mid-90s for AF because there is not a body of chronic data out there yet. So in terms of proving our value, we think we're doing it or have done it.

In terms of reclassifying atrial fibrillation as an on-label procedure in the United States, we believe that there's a lot of background activity going on by the major players who are working towards seeking a specific labeling for atrial fibrillation. This is a complex process because we understand it requires a one-year follow up and a lot of monitoring during the one-year period. But we are optimistic that we will begin to see labeling success in this arena over the next 12 to 18 months and that that will substantially drive the demand for atrial fibrillation because it will enable companies to be able to talk about it and to train for it in the United States and to do it in the United States.

Okay, great. And maybe back on the irrigated catheter, your thoughts maybe on the potential for other manufacturers coming to the market with a magnetic irrigated catheter in the near future?

We have in the near term very specific information that at least one company is on the verge of CE-mark approval for an irrigated magnetic catheter and we expect that his catheter will be launched onto the European market within a matter of a few months, perhaps sooner, but that's the extent of our knowledge.

Okay, and maybe one follow up for Jim. Jim, I'm just wondering, you'd mentioned Odyssey margins were going to be a little depressed because of some introductory pricing, wondering if that's still the case and where you see that going over the next year or two?

Yes, it will improve, James, as we go down -- that statement still is true about introductory and the structure of some of the earlier transactions that surrounded the earlier Odyssey offerings.

Is that brought system revenues -- or gross margins down as a whole sequentially is the introduction of odyssey?

Yes.

Okay, great. Thanks, guys.

Thank you. The next question comes from the line of Stephan Ogilvie with ThinkPanmure. Please go ahead.

Good morning. This is [Diego Verta] filling for Steve Ogilvie. Just have a few questions. How much cash are you burning per quarter and how much do you have left and are there any plans to curb spending? And if so, where? Thank you.

Jim, I'll let you address that, but I believe we've been quite specific about our plans to curb spending.

Right. Yes, as I mentioned, operating cash this quarter was $12 million, we have $11.5 million in cash and investments at the end of the quarter, we have a bank line, we have a $20 million insider line, which is not drawn upon at all at this point, our expectations are that our two credit facilities will last us well into 2009, and as we've indicated, our goal this year is to bring operating expenses in at less than 2007. Specifically, to be less than $70 million for the current calendar year. As Bevil mentioned, our target is to extend that spending focus into 2009, as well.

Thank you, sir. (OPERATOR INSTRUCTIONS) The next question comes from the line of Spencer Nam with Summer Street Research Partners. Please go ahead.

Thanks for taking my questions. Just a couple of quick questions. On the EP room upgrade situation right now, with this irrigated catheter getting pushed back, is there a possibility that these -- the committed backlog customers may just forego their upgrade or go with competitor product if they're really interested in trying out a robotic system? What risks do we have on that right now?

Well, we certainly don't exist in a risk-free environment, however I can talk to what we know. We have a pretty accurate fix on our pipeline. These are the sales prospects that are moving through the acquisition process or the decision-making process to acquire. Our mid to late-stage pipeline has now increased from where it was at about 275 accounts to over 300 and we're now measuring this electronically with a new software system so we have pretty accurate data and we're seeing virtually no impact from the competition. So if the competition is not impacting our pipeline of prospects, it's certainly not impacting our backlog and we would be very, very surprised -- although it's not impossible -- to see any attrition to our backlog. Moreover, most hospitals that have orders in our order book -- or backlog are taking scheduled deliveries over the next six to 12 months or even longer, so plus or minus three months or even six months in the delivery of an irrigated catheter is not going to make a huge difference to them. Where it impacts us negatively is our ability to accelerate placement of systems.

I appreciate that clarification. The second question is, in your press release you talked a lot about your outlook for 2009 and how many systems that you expect to place by then and so forth. Where do you get the level of confidence to discuss '09? And also, what is the -- is there a target number that you guys have in mind with respect to 2008, given that you actually discussed this in last quarter's call where the revenue may be if the irrigated catheter were available second half of this year?

With regard to last conference call I was very specific in saying that we were not giving guidance for 2008 and we have reiterated that this call that we're not in a position to give guidance for this year because we're not yet sure of the precise return date for the irrigated catheter. However, if we look over a longer-term horizon we're extremely confident about 2009 because we've already sold close to 150 systems so that the install base in 2009 is largely going to accrue from systems that have been sold, that are in backlog, plus incremental orders that we will take this year.

Great. And the final question is what were the numbers of placements in the U.S. and O-US this year, this quarter? This quarter?

Three and one.

Thank you.

Thank you, sir. The next question is a follow-up question from Larry Keusch from Goldman Sachs. Please go ahead.

Hey, Bevil, just one quick question for you. As you think of the backlog and the new order activity, did any -- was any of that positively influenced by orders that you had been anticipating in the fourth quarter that didn't come through given that was what seemed like a very low -- low number of new order activity back then? Did some of that that you had been anticipating in the fourth quarter, did that actually now show up in the first quarter?

I think that there is some lumpiness at work here and we've always stated that our model -- our business model is subject to lumpiness, so I would say that the answer is, yes, there is some favorable impact this year. I'm not sure how much of it is in Q1 that would result from a poorer showing in the last quarter of last year.

Okay, that's great. That's what I suspected. Okay, thanks Bevil.

Thanks.

Thank you. That's all the time we have for questions today. I'd like to turn it back over to management.

I would just like to thank all of you for your attendance and I look forward to seeing most of you at the Heart Rhythms Society conference in San Francisco. Good-bye.

Thank you. Ladies and gentlemen, this does conclude the Stereotaxis first quarter 2008 earnings conference call. You may now disconnect and thank you for using ACT teleconferencing.