AtriCure (NSDQ:ATRC) may have put up some red ink during the 4th quarter and 2011, but Wall Street investors remained unfazed today, sending shares up 3.5%.
That might be due to its king-of-the-hill status as the only company with a surgical cardiac ablation device on the U.S. market and its slow-but-steady plan to train surgeons on integrating the device into their practices.
The West Chester, Ohio-based firm reported losses of $2.1 million, or 13 cents per share, on sales of $16.8 million during the 3 months ended Dec. 31, 2011. That compares with profits of $31,000, or 0 cents per share, on sales of $16.4 million during Q4 2010.
For the full year, AtriCure posted a 9.1% sales increase, to $64.4 million, but losses of $5.5 million, or 35 cents per share, compared with sales of $59.0 million and losses of $3.8 million, or 25 cents per share, during 2010.
During a conference call with analysts, the dialogue centered around AtriCure’s plans for training cardiac surgeons on the Synergy device, which won pre-market approval from the FDA in December 2011, making it the 1st such device to hit the U.S. market.
CEO David Drachman said the company realigned its sales force to maximize its ability to win over key cardiac surgeons.
“The main initiative is to train the surgeons and make them confident in their ability to treat complex structural heart disease and integrate the ablation procedure into those complex, structural heart disease corrective operations, and then to increase the utilization,” Drachman said. “So just by training physicians and certifying them, that’s Phase I. What we need to do is go deeper than that, and we need to stay close to these physicians and monitor the effectiveness of the training.
“So rather than just training and certifying people in large numbers, our goal is actually to do more customized approaches, where we go out to centers, major centers, meet with all the physicians, maybe capitalize on one of the surgeons there that might be a more experienced major surgeons. Bring in our educators, go through a certification program and then talk to them about what their goals and aims are for surgical AF ablation in the pre-operative settings,” he said.
A relatively small revenue increase of 5% would drive about $12 million more in sales over 3 years, Drachman noted.
“So you can see, as you incrementally increase penetration, you don’t necessarily need large percentage increases to drive significant revenue growth. That’s why we’re focused on quality, not quantity, that’s why we’re focused on aligning our sales organization around current users where we think there is more opportunity to take people from 30% utilization to 60% utilization, and as well as targeting high users of competitive technology with our experienced main surgeons, and where they understand the advantages of using on label AtriCure product,” he said.
CFO Julie Piton said the gross margin decline – from 76.9% in 2010 to 73.0% last year – was due to re-tooling its manufacturing operations to meet pre-market approval standards. That initiative resulted in some inefficiencies and scrap waste that is expected to decrease once the kinks are out of the system, Piton said during the call.
“[A]ll of our gross margin softening was driven by the inefficiencies, so I would stick with probably our historical [gross margin] range of 74% to 77%,” she said. “Certainly, if international growth outpaces U.S., then that would be impacted by that on the lower end. But I would expect, hopefully by the end of the year, that we are back to those types of trends.”
ATRC shares closed at $10.71 today, up 3.5% on the day.