Stereotaxis Inc (STXS) 2010 Q1 法說會逐字稿

Good morning, ladies and gentlemen and thank you for standing by, and welcome to the Stereotaxis first quarter 2010 financial results conference call. (Operator Instructions) And as a reminder, this conference is being recorded today, May 6, 2010.

At this time, I would now like to turn the conference over to Mr. Doug Sherk, who is with EVC Group. Please go ahead.

Thank you, Craig and good morning, everyone. Thank you for joining us for the Stereotaxis conference call and webcast to review the financial results for the first quarter of 2010, which ended on March 31, 2010.

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 future operating results, 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 filed with the SEC, specifically the Form 10-K for the fiscal year ended December 31, 2009. 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.

In addition, regarding orders and backlog, there can be no assurance that the Company will recognize revenue related to its purchase orders and other commitments in any particular period or at all because of some of these purchase orders and other commitments are subject to contingencies that are outside of our control. In addition, these orders and commitments may be revised, modified or canceled either by their express terms as a result of negotiations or by project changes or delays.

Now, I'd like to turn the call over to Mike Kaminski, President and Chief Executive Officer of Stereotaxis.

Mike Kaminski Thank you, Doug and good morning everybody. On the call with me this morning is Dan Johnston, our CFO.

Total revenue for the first quarter was $10.6 million, comprised of four Niobes, $5.2 million in capital revenue and $5.4 million in recurring revenue.

For the quarter, there were several highlights. First, another record quarterly revenue quarter, which reflects the success of our ongoing focus on clinical adoption. Second, record gross margins of 72.5%, third continued expense control resulting in the improved bottom line and fourth, backlog grew for the first quarter in over a year.

Even though, we reduced our operating loss by nearly $1.0 million over last year, we acknowledged that we still have work to do to drive improvements in the Company's bottom line and achieve breakeven. The path to this milestone and is clearly delineated and it starts with moving current Niobe users through the adoption curve and leveraging them to increase the penetration of magnetic platforms, more specifically in North America.

The specific steps we have taken include beginning in the first half -- or the last half of 2009, we transformed the commercial team in the U.S. to accelerate utilization growth. This includes adding key new talent in training, site support, and management to understand how to move customers through a disruptive technological learning curve.

Second, we have focused our resources on key sites, which can be leveraged as advanced training sites. We have now identified three sites in U.S. where we will host advanced training courses. Third, we have developed the North American reference sites, which are capable to host prospective customers and demonstrate the full value of Niobe platform.

All of these points are reflected in our recurring revenue growth, but more importantly provide the foundation for our rebound in North American capital sales. Our number one initiative remains driving adoption of the Niobe platform throughout the installed base.

Previously, we've discussed the strong usage of our system in Europe and the relatively weaker pattern in North America. This morning, I'm very pleased to share with you that the program we discussed in late February to build utilization in the U.S. is beginning to show signs of success. We transformed our approach to clinical adoption in the U.S. through a comprehensive effort inclusive of a clearly defined clinical plan, which focuses on continual learning, clinical and marketing support, and a mutual commitment to build a Stereotaxis magnetic treatment program.

Our goal is to drive a stepped improvement in the number of sites embracing our technology while we collectively drive patient awareness and substantially increase the number of procedures using Niobe systems. Under this new program, we've seen a significant and meaningful increase in the U.S. Niobe utilization rates. Utilization rates in the U.S. are up markedly since the beginning of the year and we expect this trend to continue.

Importantly, the increased adoption in the U.S. has led to stronger reference sites to host advanced training and improved procedure skills. It is important to note that, in addition to changing the adoption process, we've also increased our field staff for clinical support, dramatically changed their training process and we're scheduled to release several new products that will continue to enhance our value proposition.

The new products release scheduled for this are the introduction of the magnetic version of the CARTO 3 Advanced Mapping System, which will improve our combined efficiency for mapping and ablation. The NAVIGANT 3.2 UI software scheduled for release in the second half of 2010 leverages the CARTO 3 capabilities for targeting and automation of catheter movements. The rollout of the 0.1 Tesla feature enabled a 25% improvement in magnetic stream. And in the balance of the year we're also planning for release of several new products, which will expand the capability of the Niobe platform, some of which will be unveiled at HRS.

Additionally, as we released last week, we're in discussions with J&J regarding an expanded strategic partnership. These discussions are focused on advancing the design of the magnetic catheter offering and a potential relationship around our Odyssey product line. We extended the current agreement until August 1st to give us ample time to work through these discussions.

With our increased adoption we've also experienced an increase in our clinical science and proof of value. Though it has only been a few weeks since our last update, there have been several new clinical releases that further underscore Stereotaxis' clinical value. During the ACC meeting in Atlanta in March, the group from St. David's in Austin, Texas presented data from a series of patients treated with a magnetic irrigated catheter for atrial fib. In this series they were able to attain 100% acute success in pulmonary vein isolation when using their preferred circular mapping, catheter-guided approach and noted no complications in any procedure.

At the German Society of Cardiology meeting in Mannheim, the group from Heart Center in Munich published a paper detailing how the advanced mapping and navigation capabilities of Stereotaxis allowed them to achieve a 97% success rate in a group of 27 patients with extremely complex anatomy due to previous congenital heart surgery. They concluded that Stereotaxis allowed them to successfully treat these patients and significantly reduced the patient's exposure to radiation.

On the subject of pediatric and congenital applications, we were recently made aware of another success story about a five-year-old boy in Tulsa, Oklahoma whose life was saved with the help of our technology. This child was diagnosed with a dangerous ventricular tachycardia during a routine physical exam and was rushed to the University of Oklahoma. Fortunately his primary physician was able to reach Dr. Shah, who performed an emergent magnetic ablation of the boy's arrhythmia.

Dr. Shah noted in a newspaper article that our system allowed him to place the catheter right on top of the abnormal tissue and to safely ablate the arrhythmia with only one lesion, in a tissue that was only one millimeters thick. Stories such as this are becoming commonplace within Stereotaxis and we cannot overemphasize the power that our technology can have in improving or even saving patient's lives.

In addition to this data, we're very excited about the new information that will be shared at the scientific community at next week's Hearth Rhythm Society in Denver. There will be six key podium presentations and eight poster presentations that will detail our continued leadership in complex ablation. Specifically, several Stereotaxis physician users will present their clinical outcomes for atrial fib, ventricular tachycardia and pediatric and congenital arrhythmias.

Stereotaxis will also be featured as one of the four live cases presented at the meeting. We're well aware of several additional, very compelling publications, which we believe will come out later this year, highlighting the broad applications for our platform. We look forward to sharing the specifics of this data once it's made available.

Our confidence in the adoption of the Niobe platform is reaffirmed by the feedback we continue to receive from EP clinicians. They've expressed several important advantages of our system to a broad number of applications in every chamber of the heart. These include- our system provides unparalleled capability to generate precise maps, allowing better targeting for complex arrhythmias without the pitfalls of manual mapping and ablation. It easily performs high-density mappings with minimal geometric distortion and catheter-induced arrhythmias that allows vastly improved map quality.

Ablation lesions are more precise, uniform, and predictable compared to manual lesions. The capability addresses the most difficult arrhythmias, such as ventricular and atrial tachycardias and is supported by emerging data highlighting this unique benefit. Second, due to the safety profile, our system allows for automated movement of the catheter on a line which is designed to consistently generate a more contiguous line, thus targeting the redo rate for AF patients.

Finally, our system can address areas, which are particularly challenging and potentially dangerous, such as the coronary sinus pediatric patients in the atrial appendage. And in some cases, we enable procedures, which could not have been performed with manual catheters even by the world's best physicians. This gives us great confidence that for EP applications we have a superior technological solution, which can address a broad set of patient arrhythmias and become the standard of care.

The financial results of approved adoption are highlighted by the momentum in our recurring revenue, which, at $5.4 million, is 26% over prior year.

Turning now to the capital portion of our business model and the leading indicator, new capital sales. New orders totaled $7.3 million for the first quarter. There were five new NIOBE orders in the quarter, four of which came from outside of the U.S. Although backlog grew in the first quarter, it was the result of the new orders generated from outside of North America.

We're very pleased with the rest of the world penetration and believe this will continue, but not satisfied with our results in the U.S. There were three major factors that impact U.S. capital penetration. First is the macro trend on hospital spending and releasing of monies for capital. We continue to see signs that this macro trend is improving in a positive and more favorable direction. This is confirmed by our partners in other industry capital companies.

Second is the strengthening of our reference sites in the U.S. Until recently this has been a real challenge, as we waited for the right products to be launched, the physicians to become advocates and the science to emerge. In this past quarter we've made large strides to improve this foundation for the top sites in the U.S. Lastly is our internal sales capabilities. We've made several key changes in our U.S. sales organization, and albeit early, the market traction is impacting the size and velocity of our sales prospects.

Our confidence in the U.S. performance is built not only on these trends, but also the leading internal indicators, which include the number of medium-to-late-stage customers in the sales pipeline for Niobe orders is four times the size of the number of new orders we closed in 2009. Of course this may not -- we may not secure all of these, but having a large number of customers in the decision-making process, along with stronger reference sites is a positive trend.

The number of meetings with high-level or c-level hospital administrators is increasing, again, a leading indicator of hospital interest and the movement of a decision through the process. And third, there are now 17 hospitals throughout the U.S. who we now consider and use as reference sites. Thus, in the U.S., we've made the internal changes, generated significant traction and utilization and the macro markets are improving. Our expectations are for new orders to show significant improvements in the last half of the year.

Outside of the U.S. our capital orders in Europe remain on track, while Asia is emerging as an untapped potential for robotic interventional medicine. In Asia, we've sold 16 systems, largely throughout Northern Asia. We believe Japan is the largest EP market in Asia and we are on plan to complete our regulatory trial enrollment in 2010. In addition, we recognized a large opportunity in China where we recently increased our staff for both clinical adoption and new capital sales.

Due to the continuing results outside of the U.S. and the leading indicators in the U.S., we remain committed to our guidance for a 40% increase in new capital orders in 2010.

Let me now turn to Odyssey. Odyssey for standard labs was released in the fourth quarter of 2009. The vast majority of the market for Odyssey must go through the normal capital allocation budget process and approvals take some time. Customer interest in Odyssey continues to build and we expect to make significant progress during 2010 in terms of sales to both traditional and magnetic labs.

We believe there are multiple opportunities to build marketing partnerships for Odyssey that will increase the market awareness and sales of the system and with next week's HRS, the Odyssey network backbone will highlighted at various locations throughout the show.

So, in summary, our team is extremely optimistic about the direction and progress. The optimism is illustrated by a reiteration of today's 2010 guidance. We're doing the right things to see significant progress in our efforts to drive clinical adoption of the Niobe in the U.S. and abroad. We believe this is an important catalyst to drive demand of our technology, as clinicians understand the full value we can bring to the treatment of complex arrhythmias. And as we expand the number of reference centers, we believe this will result in an increase in orders.

Odyssey is a significant opportunity for the Company and we expect sales to increase in the second half of the year. With strong gross margins and good expense control, we believe we will be able to leverage our revenue to improve operating results in 2010.

Now I'd like to turn the call over to Dan for a more detailed look at our first quarter result. Dan?

All right, thanks Mike and good morning.

Revenue for the first quarter was $10.6 million, a decrease of 4.6% versus the $11.1 million in revenue for the prior year. Systems revenues totaled $5.2 million versus $6.9 million a year ago. We recognized revenue on four NIOBE systems, one less than a year ago.

We have deferred revenue on our balance sheet of $8.1 million at March 31st, an increase of $900,000 from December 31, 2009. The increase in deferred revenue was principally driven by the deferral of one Niobe system, but this system title-transferred within the quarter. However, other revenue recognition criteria were not met by March 31st. Odyssey revenue was essentially flat with last year.

Recurring revenue grew 26% and set another record at $5.4 million. The growth was due to a greater number of procedures and favorable pricing. Procedure growth was driven by our success in clinical adoption and the growth in our installed base.

New orders for the first quarter totaled $7.3 million, including $5.8 million for five Niobe systems - one in the U.S., three in Europe and one in Asia-Pacific. The balance of our new orders relates to Odyssey. Backlog at the end March increased to $38 million from $37 million at the year-end, the first increase in our backlog in over a year.

Gross margin for the year was $7.7 million. As a percentage of revenue, the first quarter gross margin of 72.5% was substantially improved from the 68.9% reported in the first quarter a year ago. The increase was attributed to strong recurring revenue pricing and the mix of recurring revenue to systems revenue, versus the first quarter of 2009.

We continued to maintain good control of our operating expenses. Operating expenses were just under $14 million in the first quarter 2010, compared with $14.8 million in the first quarter of last year, a decrease of 6.0%.

R&D expenses increased 2.0% from the prior year, reflecting growth and development costs related to new product introductions. Sales and marketing expenses declined about 10%. Two-thirds of this reduction in sales and marketing costs relate to lower non-cash compensation costs due to changes in forfeiture rates. The remaining third is the result of lower cash spending.

G&A expenses fell about 4.0%, largely due to a reduction in bad debt expense. The net result was continued improvement in the reduction of our operating loss to $.6.3 million, compared with $7.1 million in the first quarter of last year. We reported a net loss of $8.4 million, or $0.17 per share, versus a net loss of $7.5 million or $0.18 per share, in the first quarter a year ago.

$0.03 per share of our $0.17 per share loss is related to the mark-to-market impact of the revaluation of the warrants we issued as part of our December 2008 financing. This non-cash charge of $1.5 million reported as other expense on the P&L is driven by the increase in our stock price from year-end to March 31st. Absent this charge, our loss per share would have been $0.14.

Average shares outstanding for the first quarter were $49.6 million, compared to $41.3 million in the same quarter a year ago, reflecting the issuance of 7.5 million shares as part of our follow-on stock offering completed in October of 2009.

We continue to make good progress in reducing our cash burn. We used $6.4 million in cash during the quarter, compared to $11.5 million last year. This represents a 44% decrease in cash burn from the same period last year. This burn rate approximates the operating loss for the quarter, which in turn speaks to our continued success in managing our working capital.

Now, turning the balance sheet, cash at the end of the quarter was at $24.5 million. Total current and long-term debt is $22.7 million at March 31st, down about $1.0 million from year-end and down $6.5 million from last year. Our borrowings include $10 million drawn against the $30 million working capital line we have at Silicon Valley Bank, the same as last year, last year-end.

Finally, I'd like to reiterate our goals for 2010. We expect the following - new capital order growth, in dollars, greater than 40%; total revenue growth in the mid-20% range; Odyssey revenue growth greater than 75%; and operating expenses of approximately $60 to $65 million for the year. Revenue and order growth will be decidedly weighted towards the back half of the year and gross margins, on average, will be about 65%.

With that, I'll turn it back to Mike.

Operator, we're ready for questions.

Certainly. (Operator Instructions) Imron Zafar, Deutsche Bank

Hi. This is actually Imron Zafar in for Tao. Thanks for taking my questions.

Hi Imron.

Hey Imron.

Hi, good morning. So, if we look at the Q1 results, you guys -- the revenues were down year-over-year, yet you've maintained your full year guidance and talked about the backend-loaded nature of the year. What gives you the confidence so that you can have such strong growth in the back half relative to the first half? Is that just improvement in the CapEx environment? Is it that they're the fruits of your reference sites or what gives you that confidence?

The -- well, to start the first quarter was largely an aberrant of that one system that moved (inaudible - multiple speakers) --

Yes, but if even if you add that system back it it's still -- you still get growth of single-digit growth.

Yes. So then if you start with -- obviously we would start with backlog and the conversion of backlog and feeling comfortable that we know what will convert this year from capital backlog to revenue. And secondly is the expectations on recurring revenue as part of our income statement, our tracking to above plan, so we know those are tracking very well.

And then Odyssey, I think we know we had a long period of time, Imron, to get orders and convert those orders to revenue, so in the indication and the pipeline is building nicely for that. So we're comfortable. Largely the Niobe orders we're talking about will dictate the growth rate in 2011 more than it will 2010.

Got you. There was a slowdown in Niobe, excuse me, in Odyssey sales and orders in Q1. Can you talk about that?

Yes. We expected that as we flip to the standard labs we'd have to go through -- it's budgeting process, which is disconnected from a Niobe. So the Niobe is already obviously well through a process. If you add an Odyssey onto that it classically doesn't require another process to go on. But as you start selling this to non-Niobe labs, it's an independent capital process.

So there will be some time delay as those processes happen, but the funnel's building, feel very good about the prospects. We got several partners we're in discussion about and I think that you'll see the results of that in the last half of the year and again, we've gone from order to cash on Odyssey in a matter of a few weeks. So we have almost the whole year take orders for Odyssey.

Okay and then I'm sorry if I missed this on the call, but what was the backlog in the quarter, end of the quarter?

Around $38 million, Imron.

$30 million, okay. Great. I'll get back in queue. Thank you.

Thank you.

Mimi Pham, Soleil Securities

Hi, good morning.

Hi Mimi.

In terms of the U.S. new orders for Niobe, can you just give us a sense of what you think that could ramp to, I guess by mid-year and by year-end? I just want to get kind of some more color on if those centers you talked about being in the late-stage pipeline could get through this process in the next three months or in the next six months.

Yes. We certainly think in the late-stage they'll get through by year-end and as I mentioned, the ones in the next quarter or so may fall into shipping this year. Because they may have a construction cycle that would align with that, and in the last half of the year largely its for backlog for 2011. So, if you look at that, there's quite a few customers in the decision process between now and the end of the year and most of the mid-to-late-stage would make decisions by the end of 2010.

I guess we were also looking for a new ramp maybe starting more like mid-year. Does that seem like that's too early, like that we should kind of reset our expectations then, I guess, for like a fourth quarter ramp in that U.S. new order number?

No. I think third and fourth quarter. We should see a nice increase.

Okay and then can you talk about -- you said the new catheter for CARTO 3. What can you do with that catheter that you can't do now? Is that one of your new products?

Oh. I think you're referring to when we -- we extended the J&J relationship. Part of -- there's a -- there's two different pieces, I think, to this, Mimi. One is I talked about the CARTO 3 that was being released now and the CARTO 3 was, you know well, is a J&J product. But what it does is it allows efficiency in mapping an ablation, in combination with our UI, which takes that -- the ability of the CARTO 3 and really updates and improves our automated features. So that was -- those are scheduled to release this year.

Okay.

The extension of the J&J agreement is in concert with discussions around advancing the catheter line.

Oh, okay and then your utilization. You said that there are currently 17 high volume U.S. labs that were -- could possibly used as reference sites? What's your expectation for that number exiting the year? Like do you expect to add more to that base?

Well, that particular reference was in regards to establishing geographic locations for reference sites. So, if somebody in St Louis wouldn't have to fly to the other coast to find somebody to sit down with and look at it for potential purchase. So, we think we have a nice foundation for that.

As far as the A accounts, we continue to focus on and stratify our user base and to A's and largely put our resources around the top third to 40% of our accounts to makes sure we drive them all the way through the adoption process. So we anticipate that'll continue to go on throughout this year and we'll be disproportionately focused on the top half of our customer base.

Okay, thank you very much.

Thanks.

Sameer Harish, Needham & Company

Good morning, Sameer.

Good morning. Thanks for taking the questions.

Sure.

Just wanted to -- if you could, for us -- we haven't seen any numbers in terms of utilization. Can you frame for us what you're seeing in terms of trends for utilization from last quarter or from last year in the U.S. and Europe?

Europe. Let me start with the U.S. The U.S., if you take the A accounts rom January to March, there was a significant increase. So, in January it was slightly down and the reason it was down is were transforming into this more programmatic, but then the stepped improvements between January through March was considerable. It didn't quite double, but it was significant and those trends will continue. In Europe it's more of an increase, a gradual increase in Europe, so, because obviously we think that we're well penetrated and continuing to go through the normal adoption curve in Europe.

Okay and just in terms of how physicians think about Niobe? I think historically it's kind of been a case by case decision point. Is there a way to try to convert that into more broadly, thinking about Niobe for like all ED cases or all ablations and how do you think you can achieve that?

Well, I think that what's happening now is the three points I mentioned really are beginning to resonate in everybody's minds that we have an incredible ability and the technological advantage in our ability to map. And where that plays out, of course, is atrial tach and VT. And you can get a high-density map and manually it's very difficult to get a high-density map without causing and errant arrhythmia, right, or PVC. And so the Niobe has that right combination of mapping ability and lesion quality.

For AF, I think what people are seeing is the automated feature and the targeting can bring this contiguous line. In fact, there was a paper by Chen that has come out in the fall, which showed the redo rates were down on first applications for AF patients, based on using the contiguous line from Stereotaxis.

And then the safety profile, as I mentioned, those congenital hearts, so what's happening is the profile of left sided ablations in very difficult cases are getting triaged into the room on a more standard basis. And so part of the learning curve is going through broad applications and how to use our system into also move through several physicians, not just one. In certain sites, there's multiple physicians who come into the lab, so we'll have to got through a learning curve with each physician.

Okay and just a quick follow-up on guidance. Are you still expecting procedures to be up 25%? I think that was part of the previous guidance.

Yes.

Yes. No change in that.

No change. Okay, great, thank you.

Okay, thanks Sameer.

Spencer Nam, Summer Street Research Partners

Thanks for taking my questions. So a couple of questions here on the backlog. Is that, based on what you guys reported this quarter, is that flat quarter-over-quarter, roughly?

No. It's up a little over $1.0 million.

Okay, so it's slightly up.

Yes. It's up.

Okay and then in terms of -- I know you guys have done this in the past, but I wasn't sure that you did this. Maybe I missed it during the call, but 12 versus 24 months of the 1.0-% backlog is near near-term versus the mid-near-term. Any sense on that?

Well, this backlog here, what we're reporting is what we kind of think is the active backlog and active projects. We kind of think about it as between a year and two years worth of activity. There's other backlogs, but we don't really talk about it because it's just --

Why not?

It's not very active. It's on -- it's multiple years out. But there's additional dollars there, but we've kind of just tried to not talk about that as much because its just we're not actively managing it and the certainly around it is less.

Okay and then in terms of Odyssey, this year, I mean, whether you guys could even qualitatively discuss how much of the growth the Odyssey will be accounted for. The Q1, you guys, you indicated its a little slow start, but where would the Odyssey be by end of this year?

We think the revenue for Odyssey will be up over 75% in 2010 over 2009. I mean, it was how we entered the year. We still believe that's true and part of that is it is a different business model in the sense that we know we can take orders almost to the mid part of the fourth quarter and still get them to revenue.

So the number of standard -- and the real effort there is pushing into standard labs and our definition, of course of the standard lab is a non-Niobe lab. And so, as it moves through that process, we think the orders will begin to continue to pick up as we move into the last half and we can convert those to revenue pretty quickly.

And Spencer, while that's a large percentage, it's on a fairly small dollar base. Last year we did Odyssey probably just under $5.0 million, so we're talking about achieving an $8.0 million number this year.

Right, right.

So we're not too concerned at this moment.

Okay. So you guys think that that's a fairly reasonable outlook for you for Odyssey at this point?

Yes.

We do.

Okay and then on the disposables, I thought you guys did al little better than what this we may have been expecting. But how do you -- do you still see a sequential growth on the disposables revenues and if so, its -- what kind of -- where should we see these uptakes? Is it going to be through same instrument sales, if you will, versus new placements? What are -- how would the mix change?

The answer to your first question is yes. We continue to see -- and part of the confidence there is, as I mentioned, Spencer, we went into first quarter with a pretty low January and continued to build on that in April. So we know the slope and April continues the slope, right.

Sort accelerate (inaudible - multiple speakers) --.

Yes and so the slope is on a very positive trend. So we know the trend line is moving in a very good way. Now, we're concentrating on obviously new installs and those sites that we've categorized and just named A-accounts, which are the sites that are either high volume or have the profile to adopt, the interest and the profile to adopt and we're focused on those. So it's a combination of both. Its same sites to the A-accounts as well as new sites coming on.

I see. Then a final question is -- one of your competitors announced that they're going to launch a trial.

Yes.

Against manual procedures.

Yes.

What are your thoughts on maybe you guys running one of those trials? What does it mean if the outcome of the trial is positive and in fact, maybe if you could even comment what would be a positive outcome, potentially, for one of those trials against manual and whether you guys are thinking about doing something like that yourselves?

Well, there's -- it's interesting. You know trials are expensive and we're getting a lot of clinical science publications that are emerging right now. Some will come out at HRS. There's some going through the circulation that we're aware of. We don't know the specifics. We just know that they're submitted.

But what's interesting about this is there's already a standard established with the Biosense trial in late 2008, right, for the expectations and I assume what you're talking about is AF.

Yes.

We have emerging data of different site-specific reports. It's using almost the same criteria. In fact, I think Dr. Chen from Copenhagen came out with some data, I think there's some coming out from other parts of Europe that are going to be very favorable, using the same standards that we used for the BioSense, meaning same follow-up, same process and its showing favorable to us. So I'm not sure that, at this point, it makes sense for Stereotaxis to spend money on a trial when the clinical science is emerging without us spending money.

Got it. Thank you.

Thank you.

Charley Jones, Barrington Research

Hi Charley.

Thanks for taking me questions. Sorry, I have a cold. Obviously you had systems shipped out of the first quarter, probably into the second. I was curious if you saw anything else in the quarter that makes you believe that maybe there's some shift that can occur in the back part of the year that put your guidance somewhat more at risk than what it was following the fourth quarter call? Or do you still feel good about the timing of some of these bigger projects that could impact your numbers by the end of the year.

Charley, I actually feel better about it and here's why, is when we talked about -- and I didn't get into it in the script. But when we talked about hospitals in the U.S. making decisions and moving through a capital process, the other side of that that we're seeing is those hospitals in backlog are now committing to installation dates.

So they were sitting out letting construction kind of lapse and we're seeing that emerge to where they're moving through and saying, "Okay, now let's commit to get that project done where the monies are available". So it could have been in backlog, kind of in not hold, but just kind of moving from quarter-to-quarter and I believe it's much more aligned and predictable now than it has been.

That's a very helpful take, thank you, Mike. On Odyssey, a couple questions there. You talked about a partnership I think with Biosense. Could you talk a little bit about how that -- whether or not you would continue to sell their product direct and how does this affect Odyssey systems that are kind of already in the queue or where you already have hard of soft orders?

Yes. So let me -- I'd rather not discussion Biosense, since we're in discussions with that, but let me give you a general overview of where Odyssey really has some market traction capability is. There's two parts to Odyssey. One is this what everybody sees as the physical screens, which is kind of the point of integration for the workstation around the lab.

In Niobe rooms we're almost selling an Odyssey for every robotic lab, because it makes sense that the physician now is the control room. But there are, obviously, in standard labs there's all sorts of ways to merge and integrate that data and what's happening is the other part of Odyssey, which is Cinema, the information backbone, is really the point at which we can take data from imaging partners, from catheter partners and we can integrate the screens in the lab to the backbone. And that's the part -- the Cinema backbone is really the part I think that has the biggest potential to have partnerships across the industry.

So the screen's really emerge with new labs, but the backbone can go on to any lab and there's a lot of discussions with people who want to take this data, send it offsite, network it and compress and it's a very robust and nice way to do that. And I think there's a real way that we can sell direct and we can facilitate, without competing with antibody, how this backbone gets established as a standard.

All right, that's helpful. But so we shouldn't assume -- we shouldn't be worried about second half revenue begin affected by a partnership change?

No. In fact, if anything, it should be accelerated.

Okay great and then the last question. I know you touched on it a little bit with utilization. You shared with us a year ago, I believe, the A, B, and C accounts. I think was the first quarter. Would you mind giving us an update if you have them available? And that's it for me, thank you.

Charley, I briefly looked at them yesterday. I know we're penetrating more A's and I'd have to go back and do some more data analysis, but I think in general this focus is the same. Obviously the results you see are very positive. There's been a marked improvement in the U.S. and there's more now. So part of it is we've re-categorized more accounts as A's, right, and it's a fluid structure in the sense that the way we categorize A is what we're focusing, not because there's some definition of an account.

Right.

And so, as we move more accounts there and all new installs are considered A's, those are the ones we're focused on and those are the ones that are growing disproportionately faster.

Yes. I mean, maybe I'll just go into it a little bit deeper then. That's helpful. So, but so if you look at your growth and you look at the utilization of those original A accounts and then the utilization of the B and C, is it fair to say that maybe we plateaued or we saw the growth rate decelerate a little bit in the last couple of quarters with the A accounts, but the B and C continue to really ramp up utilization and move into the next kind of grouping of utilization?

No. I think it's the A's have accelerated the most, the Bs have grown a little bit and the C's I don't know they have changed at all. I believe that's right, (inaudible - multiple speakers) --.

(Inaudible - multiple speakers) we're not focusing on (inaudible - multiple speakers).

Yes.

Okay, all right, great. Thanks a lot.

Thanks, Charley.

(Operator Instructions) Chris Nix, UBS

Yes, good morning. Two questions, one is do you have a larger percentage of your sales force in Europe and you have do in the United States and if not, how do you account for the majority of your orders coming from Europe this quarter?

The answer is no. The larger number of people are in the U.S. The reason that we believe Europe continues to be very positive was a couplefold. One is, Chris, we have the Thermocool product, the catheter needed for left-sided ablation in Europe about a year ahead of time and we establish stronger referenced side faster in Europe.

It's one of the key items of focus in the U.S. was to get utilization and reference sites up, so there is perspective customers went to the decision process, they had an ability to talk to those who had bought and they did want to go to Europe. They wanted to talk to the people in the U.S., right So I think there was a disconnect in our ramps between the two markets.

Okay. So these were almost walk-ins that you have in Europe then, pricing orders?

Walk-ins. No. I mean, there's a normal sales process in the Europe, in the sense that in both markets there's a function of EP labs getting replaced or upgraded, of which then we walk -- we start talking to that customer about the potential to add a Niobe. And then they -- as interest emerges, that becomes our sales funnel, right. So then the sales funnel we work through a whole sales process and steps, but what I'm saying is in Europe it's a much more robust process because you had customers who had bought in the past who are very positive references. So the success of people moving through that pipeline is higher.

In the U.S. is either stagnated or we were unsuccessful. Now, we've gotten the reference sites in the U.S. up. They may not be in the exact level as Europe, but they are considerably better and now we believe we can leverage sales as well.

Okay. And are you seeing any positive impact from your relationship that you established with Novation? Are getting any sort of inquiries for through that route?

Yes. It certainly -- Novation, we're in continual discussions with Novation. I think it's certainly very positive. They do marketing programs. We've discussed how we can do an EP marketing program with them. So there's only upside to that relationship for our Company.

Okay. And last question I have and forgive me if you mentioned this before, but are you actively seeking an A-fib indication for the Niobe?

Well, the Niobe it's actually -- the indication itself is held BioSense Webster. It's the catheter that has the indication, not the system.

Okay.

The system itself is approved for ablation in any chamber.

I see.

And then J&J will have to go through a PMA supplement process to get the magnetic catheter approved for AF indication.

Okay. Have they given any indication they are doing now or is that just something for the future?

That has not started to date.

Okay, thank you.

Mike Kaminski Yes.

Mimi Pham, Soleil Securities

Hi, good morning. Just that quick follow-up, just regarding your comment stating the four order, four times the pipeline, and four times the number of orders closed in 2009. You're referencing that 19 new Niobe orders that you got 2009. Is that correct? So there's 80 centers in your mid-- your late and mid-to-medium stage pipeline?

It was a subset of that for U.S., so the U.S. numbers, not the total numbers.

Okay. When you talked about four times -- you're talking about four time your U.S. centers and your medium-to-late stage are four time the U.S. orders you got last year for that. year?

Mike Kaminski; Right. Exactly.

Okay. Thank you for that clarification,

And management, at this time, there are no further questions. I'd like to turn it back for closing comments that you may have.

Well, thank you very much, everybody, for attending the call. As I mentioned, we think we are making a lot of progress and holding costs, driving the dominos of full realization of our systems to our installed base, training sites and then reference centers developed and using those as the springboard and leverage to get capital sales up. At the same time, we believe this Odyssey has tremendous potential to sell with Niobe labs as well as independent Niobe labs.

So we are very bullish on that and we look forward to talking to again after Q2's results. And for those attending HRS, please stop by the booth and we'd love to chat with you further. Thank you.

Thank you. Ladies and gentlemen, this does conclude the Stereotaxis first quarter 2010 financial result conference call. If you would like to listen to a replay of this conference, you may do so by dialing either 303-590-3030 or 1-800-406-7325. You will need to enter the access code of 4284791. Those telephone numbers once again are 303-590-3030 or 1-800-406-7325 with the access code of 4284791. Again we thank for your participation on today's call. You may now disconnect your line at this time.