Q1 2020 Earnings Call

Good afternoon and welcome to.

ATRA cures first quarter 2020 earnings Conference call. My name is Chaucer and I'll be your coordinator for the call today at this time all participants are in listen only mode. We will be facilitating a question and answer session towards the end of today's call.

A reminder, this call is being recorded for replay purposes, I would now like to turn the call over to Lynn Lewis from the Gilmartin group were.

You introductory comment.

Thanks, Josh.

By now you should have received a copy of the earnings press release, if you've not received a copy. Please call 5137554, when threesix to have one emailed to you before we begin today, let me remind you that the company's remarks include forward looking statement.

Forward looking statements are subject to numerous risks and uncertainties many of which are beyond introduce control, including risks and uncertainties described from time to time and structures FCC filings Atricures results may differ materially from those projected atricure undertakes no obligation to publicly update any forward looking statement. Additionally, we refer to non-GAAP financial.

Measures, specifically revenue reported on a constant currency basis.

EBITDA and adjusted loss per share reconciliation of these non-GAAP financial measures within most directly comparable GAAP measures is included in our press release, which is available on our website with that I'd like to turn the call over to Mike Carroll, President and Chief Executive Officer, Mike.

Thanks, one good afternoon, and thank you for joining us today.

Before moving to review the quarter results I would like the first take a moment to acknowledge the cobot 19, pandemics its impact on our world our employees here nature and all of our stakeholders.

We're navigating through an extraordinary time of uncertainty remain resolute in our focus on our people.

Patience and partners.

We we are truly grateful for the shelf with dedication of our care givers battling on the front lines secure the health and safety of our patients in our communities.

For today's call, we're going to reverse order of discussion.

Andy Wade, our Chief Financial Officer will start with a brief overview of our first quarter performance.

Well then comment on a response to the Pandemics and our commitment to supporting positions and they said patients current trends in our business and our positioning for the long term with that I'll turn the call over to Andy to review our financials.

Thanks, Mike.

Our financial results were significantly impacted by the ever changing landscape caused by the cobot 19 pandemic as revenue in the U.S. started to decline in the second week of March.

Sales in the final weeks of the quarter down roughly 70% compared to the earlier part of Q1.

These final weeks, our when we would typically experienced strong results with an increase in daily bookings.

As a result first quarter 2020 worldwide revenue was $53.2 million a decline of 1.4% on a GAAP basis, and a decline of 1% on a constant currency basis, when compared to the first quarter of 2019.

U.S. revenue was $43.5 million, an increase of 1.1% from the first quarter of 2019.

The slow growth was due to the impact of cold 19 on the last three weeks of the quarter.

U.S. sales of appendage management products grew 11.2% to $17.4 million for the first quarter of 2020.

You asked opened ablation related product sales increased to $19.22 million representing growth of 1.2%.

These increases were offset by the continued volatility of our minimally invasive ablation franchise.

U.S. sales of products used in minimally invasive procedures were $6.6 million in the first quarter down 15.5%.

International revenue decreased to $9.8 million down, 11% on a GAAP basis, and 9.4% on a constant currency basis as compared to the first quarter of 2019.

The decline was caused largely by cobot 19, which included not receiving an order from our Chinese distributor in the first quarter.

Since then cases have started to ramp back up in China, and we have received our first order in early April foreshadowing a slight rebound.

Gross margin for the first quarter of 2020 was 73.1% as compared with 73.9% for the first quarter of 2019.

Gross margin remained consistent with the fourth quarter of 2019, as we continued production that comparative levels for the quarter and continue to absorb higher manufacturing costs from central heart operations.

Looking at operating expenses, excluding the effect of non cash adjustments to the contingent consideration liability.

Our operating costs increased $5 million from $46.9 million for the first quarter of 2000 $19 million to $51.9 million for the first quarter of 2020.

This increase is largely due to the incorporation of approximately $3.7 million, a central hard costs, which were not present in the first quarter of 2019.

As a reminder, central hurt operating expenses consist primarily of the amaze clinical trial and supporting field team as well as P.M.S.P.M.A. readiness efforts.

Organic expense drivers included an increase in product development and training activities.

On the first quarter of 2019, well incremental headcount costs in 2020 were offset by decreased variable compensation and travel spend.

Our operating loss for the quarter was $15.5 million compared to the operating loss of $5.3 million for the first quarter of 2019.

In addition, the increased operating expenses.

Just noted the increase in operating loss. This quarter also stems from a 4.1 billion dollar change in contingent consideration adjustment.

As a result of a 2.4 million dollar charge for accretion of the central hurt related liability in the first quarter of 2020 versus a 1.7 million dollar credit related to the incontact liability in the first quarter of 2019.

In the first quarter Twentytwenty, we had an adjusted EBITDA loss of $6.1 million compared to an adjusted EBITDA loss of $491000. So the first quarter of 2019.

Our loss per share was 42 cents for the first quarter of 2020 compared to a 15 cents loss per share in the first quarter of 2019.

While the adult adjusted loss per share each period was 36, and 12 cents and 20 cents respectively.

We ended the quarter with approximately $68.5 million in cash cash equivalents and investments.

As a reminder, our cash burn is seasonally higher in the first quarter due to year end variable compensation payouts catches on vesting of equity awards heavy trade show spend and internal training meetings.

Due to the unpredictability of the duration in magnitude of the impacts and the cobot 19 pandemic, we withdrew our previously announced financial guidance for 2020 on April night.

As I mentioned, we saw an almost 70% decline in the final weeks of the quarter and into the first two weeks of April.

As Mike will discuss and as you have likely heard on other calls we have started to see increased activity the past weekend a half.

States and hospitals are starting to do more emerging an elective procedures.

There are products tend to be used.

This is a positive trend and we do expect a case volumes to increase in May and June and into the summer, but we do not want to get ahead of ourselves and cannot predict exact numbers.

As noted in our April nights release in response to the changing business conditions, we have implemented several measures to reduce our operating expenses, taking out over $25 million and costs.

Including delaying certain capital investments in hiring reducing executive management and board compensation and reducing non essential sales general and administrative expenses, where possible all without sacrificing investments in critical strategic initiatives.

Well, we may take additional action to further reduce our operating costs as the year progresses. We believe our current cash cash equivalents in investments are sufficient to fund our continuing operations.

At this point I would like to turn the call back over to Mike.

Thank you Andy we continue to experience Unprecedent uncertainty as we collectively combat the cobot 19 Pandemics.

The situation remains fluid, particularly in the health care space, where many hospitals in resources are centered around the treatment of those who are affected by this virus.

As many of your were not Emergen procedures have been insert indeterminant, we differ in order to preserve resource to cope with 19 patients and caregivers and to protect patients from potential exposure to covert 19.

Well, some HQ procedures, maybe insulated from this delay due to an emergent need.

The variability is to grade to allow us to measure the true impacted this disruption to our business into the future.

However, we are confident the large majority of procedures that have been deferred will return to patients will receive treatment.

Every day, we're seeing states insights across the country from Florida to Oklahoma to California in Washington begin to open up and perform more cases, where patients in need.

Additionally, our teams in the field has done a wonderful job posting positive during what they can to ensure the best possible customer care.

Early on we took measures to ensure the protection and well being of our employees patients and communities at the position our business to mitigate the disruption without weakening or readiness for a strong future.

Following federal local and agency guidelines most of our employees continue to work remotely in our restricted from non essential travel with few exceptions, which are primarily our field support teams.

Additionally, we are continuing critical manufacturing assembly in fulfillment of our products.

We have taken a central steps to streamline and implement processes to mitigate potential health and safety restore employees posed by covert 19.

Without a doubt one of the Atricures key Differentiators is the personal touch that we bring to our work.

Our health care for partners Trust, our products and rely extensively on the expertise of our field teams.

It's a privilege that weve earned by working tirelessly and often in person to forge authentic relationships with each with each other and those that we serve.

These strong connections that helps immensely as we now rely on virtual communication tools to innovate.

Learn and support cases in new ways.

Our field team remains available to our physician community. The on site visits is permitted as well as virtual Intel Telephonic class works.

I want to share a few wonderful examples of the creativity of our team and their commitment to our mission.

A surgeon in the north Eastern United States was able to them on ablation.

<unk> and feature foot placement on a patient with a virtual support Atricures regional sales manager and his team. Despite hospital rules that bar vendor personnel due to the pandemic.

Interest your team utilize virtual communication platform to connect with the staff member song.

In the operating room, and they communicated with the surgeon beginning at six am at the restructuring and through the end of the case.

In another case, a clinical support specialists and the new England area answer the last minute call, but cirrhotic surgeon in New York requested to help with a cryo nerve block case again utilizing virtual communication, our clinical support specialists walk the surgeon staff through the procedure from set up to proper placement of the broke out.

The word the surgeon said the willingness to go the extra mile did not go on notice.

In addition to continued case covered support our teams on regular communication with customer sites, providing encouragement and gratitude as well as clinical help when needed.

I feel team also remains very focused on education and training to continue building our market by utilizing online interactive training opportunities to enable remote learning.

For our customers and employees.

At the time of this call our teams across the globe have already completed hundreds of hours of programming, including sessions on ablation conversion procedures appendage management and more.

There's no shortage of examples of seller work like this across all functions of our company.

We have an amazing group of resilient people to answer here, whether they are building products supporting cases or volunteering to make say shields for their local community the spirit thoughtfulness and creativity of our team is truly amazing.

Responses like this makes even more proud to be part of the Atricure team.

Operationally financially and strategically.

H, a cure is well positioned to navigate through the current business environment and our continued commitment to our pillars of innovation education and clinical science.

Will enable us to help millions of patients over the next decade.

Turning now to our strategic initiatives, we're prioritizing our investments in converge and amaze trials as well as progression of our new product development pipeline.

As many as you know the trial results of converge our landmark <unk> clinical trial were accepted as part of the late breaking presentations at the heart rhythm Society or HRS annual meeting.

Since the in person physician meeting was canceled the late breaker presentations will be conducted by a weapon are posted on the heart rhythm 365 to societies digital information platform.

Dr., David Dillards, you director of Electrophysiologist, Emory Heart and vascular Center Emery.

And the National T.I. for the converged trial will present the results on the morning of May Eightth.

Additionally, the abstract we published in the supplement to the May issue of the heart rhythm journalists.

We will be hosting a virtual analyst and investor meeting and briefing on May eight at one PM Eastern time, which will feature Dr. Diller, Joe as well as Dockers you Caulkins director of cardiac arrhythmia servers services at Johns Hopkins and Dr. Christian sold the cardiac surgeon from.

Medstar, Washington Hospital in Washington, D.C., who was also a P.I. for his site.

The clinicians will offer a brief presentations on the data and its implications as well let's take questions.

We will announce the details of the webcast in short order.

As a reminder, converge trial is designed as a randomized controlled superiority trial, comparing our hybrid approach to catheter ablation alone for this patient population.

The first trial of its kind in the fit market.

In addition to our late breaker at HRS than May there'll be other non randomized controlled trials studying some advanced forms of they said.

Needless to say that converts trial is uniquely differentiated.

We firmly believe that we are investing in the future. We both converge enemies trials, both of which has the potential to substantially increase our addressable markets.

So you might expect this is an exciting time.

And I am thankful for the expertise and focus of our clinical and regulatory James.

On converge as well as all the other clinical trials.

There's still much more to do after the convert results are presented in our teams are actively working with the FDA to complete regulate the regulatory process and make this therapy broadly available to patients suffering from advanced forms of they fit.

We continue to expect the FDA to convene a panel later in 2020.

In addition to our advancements in the clinical data in science, the strength of our innovation remains steadfast.

The <unk> the be CWIP line of products launched in 2018 continues to be a driver of growth for our appendage management business.

In the open ablation platform, we are waiting five 10-K clearance for our new open class.

Encompass and the team is preparing for market launch this new class provides a simpler and faster approach to a bleeding heart in open procedures.

We expect the encompass clamp to resonate with surgeons and yocum concomitant space and to be accretive to our open ablation revenue in future years.

As we look out over the next several months, we expect meaningful portion of it you get procedures across the United States and globally to be differ with the largest impact falling in the second quarter.

Further we believe progress back to normalcy will occur at different rates and timelines throughout our markets.

We have completed an extensive demand analysis hospital by hospital and we monitor the Stanley.

Are we going encouraging signs in certain regions of hospital systems that are beginning to come back on line, such as Florida, Texas, Seattle and throughout California, and just the other day, we heard it she and you PMC plan to start selective cases again in it and Matt.

In Asia procedures in China are also starting to resume.

While it's too early to call trends, we are optimistic that there is light at the end of the tunnel.

And the majority of procedures that have been deferred will return and patients will receive treatment.

Before closing I want to thank our team at age of here for the strength in effort they've shown through these tenuous times.

Every day they are working to improve the lives of patients dedicating their time and expertise to helping hospital customers in response to the pandemic.

I'm incredibly proud to be part of this team and the foundation, we have built together.

The pipeline of new products robust randomized clinical data.

And our continued commitment to world class education.

All of which will enable us to help millions of patients over the next decade.

I have full confidence that together, we will come out of this period, even stronger as a company.

Now I will open up for questions.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound Keith Please standby we've compiled the kuni roster.

Our first question comes from Robbie Marcus with JP Morgan You May proceed to do question.

Hi, This is actually Lilly on for Robbie Thanks for taking my question.

Let me give us a sense of how we should be thinking about the deferred ability under various business lines.

Now how emerging our minimally invasive birds is open variances H procedures and policies and trending in recent Steve.

Yeah I.

I'm not going talk about the specific trending by weeks I don't think that's quite frankly, I'm very eliminating or doesn't get much but what I will tell you is if you look at our business. There's really two major portions of it the open business tends to have more emerging cases, so cabbages and aortic are those are things are actually getting some treatment today.

And it depends on from that standpoint things are getting tougher, but a patient that as much will valve disease is going to get treated its just going to get deferred a month or two months and that's what you're seeing if the hospitals. It's also one of the reasons that you start to see a pickup on that opened side of our business not just our business, but just in general and those types of cases, which is that.

Eventually these patients need to get treated and so they may be able to defer them for a little bit, but they can't differ them forever and you hear different reports all over the country about how they've got to get some of these patients back into the awards. So they can treat them.

On the more elective side or the patients that fall into like the convergent for the deep type procedures those procedures interestingly enough, though we do anticipate there will be some bounce back with them because we do treat with the most complicated and sickest patients and so as a result of that they tend to kind of fall in line.

And we do believe that we're starting to see some things pick up for the May June and July timeframe, we're already starting to see Oh ours open up for some of those electus cases, but it's going to be tough to so really no. Each hospital is going to be very different in terms of how to handle it as you might imagine the northeast is pretty much not doing a lot of procedures right now any I heard.

I mean, you heard governor Cuomo recently talk about going back and getting some elective procedure. So there might be some movement there, but in other parts of the country like the central U.S. as I mentioned, California, and many other states you're actually starting to see them come back and come back on a more regular basis.

Great. Thank you and one quick one on how are you thinking about the recovery.

Over the coming month.

Are you, assuming we pick up any law procedures.

No what the way when thinking about the recovery is more along the lines of April and May are going to be bad months I think for just about everybody. We are as as we both mentioned there are comments, you're starting to see like this week was better than last week.

Turning to see cases begin to get booked in May and June and July. So we do see an incremental growth back and throughout the second quarter, but the second quarter is gonna be a rough quarter I think the third quarter, you'll begin to see that's going to be a little bit better than the second quarter I think you'll start to see it increasing by month and hopefully with back to more normal see by the fourth quarter.

I can't pick an exact date, when that's going to happen per se or what week, it's going to happen in but I do anticipate that beginning to kind of go back up you're hearing from different places around the country that over the summer time, they're going to be working weekends, and they're gonna be working and trying to get that extra case in every single day, while I'm.

Optimistic and hopeful that something like that could happen, we're not going to plan for that just because the logistics are gonna be difficult and I think everybody's going to be a learning mode over the next couple of months to find out how realistic is that but again I do you see it incrementally every mark getting better to getting closer to mousy by the fourth quarter.

Thank you and as a reminder, please limit yourself to one question and one follow up question at a time and then you may return to the keys for any additional questions. Our next question comes from Matthew O'brien with Piper Sand you May proceed with your question.

Oh afternoon. Thanks, Thanks for taking my questions.

Mike Michael Andy just a follow up on.

Last question, there, that's what you're saying, Mike. So it's fair to say that things tend to bottom. The first couple of weeks of April as far as procedure volumes go was that just strictly domestic comment or was it up more global comment and then you know how do we think about you know just frame you things up you know.

I think that a little bit better here the last last week.

So kind of hit the bottom first couple maybe down 50 ish.

Last couple of man scaled down over the next probably couple of months before fully stabilized sometime in Q3 is that the best way to kind of characterize that and then again is that as that on a domestic basis or a global basis, Yes, I'll hit on all hit on the different geography.

It will help it's a great question, Matt So let's start with Asia Asia was really bad in Q1, we had zero revenue as Andy mentioned from China. We did not have an order and the case volumes were almost zero throughout the month, but they started to pick up at the end of March and we actually already got an order from them. So Asia is actually.

Pretty close to back to normal at this point, they're not quite there, but they are beginning to move down that path and making good progress I anticipate that by the end of the quarter they'll be kinda back to a more normal place obviously, that's a much smaller parts a smallish geography of business.

The U.S. and for Europe, There was a similar trend that happened the U.S. as many companies and you've heard it on a lot of different conference calls you saw at the end of that kind of like the last two and a half weeks volumes just declined precipitously during that period of time.

As people went into Lockdown mode, and then that continued for about a total of about five weeks I would say, where it was just really bad and really low out it was down up to 70% from what it what we were doing at the beginning of March and we would have expected it to actually have gone up at the end of March versus it going down by almost 70% and then it kind of maintain that level for that period.

Hi for that four to five week period, and as I said this week last week. It started walking that he had the week start to see a come up again.

A little bit this week and in the U.S. in Europe are actually very similar they've been trending very similarly.

In Europe, what you're seeing is the southern countries are pretty much still in not ordering mode, but in the more northern countries. So Germany.

The Netherlands, and the Nordic countries, Switzerland. Some of those areas are actually there is there kind of getting back to work and actually treating patients again as well. So those countries is where you're kind of seeing over in Europe right now.

But the southern countries, like France, Spain, and Italy, which we don't do a ton of business in those areas, but in general there are still pretty much in locked down as you look at the United States I'd say, it's more similar to some what the northern countries, but it really depends on where you are in the United States as I mentioned, the northeast has been hit very hard.

And we have not seen any kind of come back there yet, but we are starting to see it in pockets of as I mentioned, like Oklahoma, or California in Minnesota, or Texas in places like that where we're starting to see things begin to open up.

A little bit and it's it's not coming back on everything is opening up right away. It's it's slowly coming back. So I anticipate you'll just kind of get a little bit better every single week.

As the quarter continues to progress.

Okay. That's real helpful. Yeah, that's really helpful. Mike.

And then again, if you Michael or Andy just on the Opex reductions I think I know the answer. This question I just want to hear it from you guys, but as far as the investments go as you think about prepping for.

Convergence going forward, none of the $25 million reduction that you guys talked about is earmarked for slowing things down as far as adding folks.

Be able to sell convergent more aggressive way our education anything else along those lines and then that doesn't that question is how durable is that $25 million going forward as their 10 million Bucks that youve found MACI.

Thank you don't think you'll need to spend next year or even in 22, if things are going on life.

I'll answer the beginning part of analysts to answer the other one I mean, what we've done for converge and then for me is is that we've really made sure that.

Fortunately for US we have a great team in place we did by center heart last year. So we took the opportunity to accelerate some of the training for that team. So we have a very robust E. P team that is ready and in place for when we get that approval. We're cross training people were taking advantage of this time to make sure everybody's cross trained and all of our.

Product lines to be ready for that launch we will have more than enough people.

To be ready for when that comes back and the teams are already beginning to talk and do their planning in their territories getting ready for when that occurs.

So I'd say that we're super well positioned from that standpoint, Andy can refer or talk to the.

Other costs, if any of them can be.

Saved.

No I look at things like projects, Matt. So you know other research and development projects you know outside of some of the things Mike mentioned like encompass those things are more deferral, rather than thinking about stripping out of the cost structure. So it's just a matter of sort of pushing off as as we could and navigate through the pandemic timeframe.

Okay makes sense, thanks much guys.

Thank you. Our next question comes from Jason Mills would kind of course you May proceed with your question.

Hi, Thanks, Hi, Mike will move.

Here once healthy can you hear me okay.

Yeah.

Yes Super.

So one of the pickup on the last thought Mike about converge in training and Oh, hitting the ground running.

Whether that's you get enough good clearance so assuming you're on the same time on and assuming you're right where your boss.

To some semblance of normalcy.

In and around the fourth quarter are you anticipating that earned 2021.

What you had modeled maybe here Q4 with respect to site activation.

New customers doing convergent procedures.

Alright, if this point in time are you changing the model.

Q.

Have you thought about.

Either.

Focusing a little bit more on certain regions or doing anything differently as it relates to the rollout strategy specifically in training for converged post up the approval.

Yeah, I don't think that weve necessarily changed much but we have taken advantage of the time to solidify business plans on hospitals, and where we're going to go first and the ordering of that.

And also in cross training people across the business to make sure that we have more and more people trained and understanding both convergent and then eventually malaria product for 2022. So we've taken advantage of the time to put together a lot of deep internal training as best you can without going to labs.

To make sure those teams are ready to rock and roll. So it's going to be a combination of the how weve strategize by market. It we've accelerated a little bit more on that side and we've basically accelerated some of the cross training that would've otherwise happen, but from a go to market standpoint, and which ones that has not necessarily change.

Obviously, we're playing a day by day in terms of one when do we get the approval because that's not our control at this point and then two is what happens with Kroger does it come back in the in the fall time et cetera. Those will obviously be think left to react with a time when they come.

But we're planning as if we're going to get that approval and and and move forward.

Good to hear so on that last plans as it related follow up how how do you.

At this point in time model the not only the number of sites that will want to opt to date, but their ability to interest.

Sure the interest level in treating persist in April has not a will not lane I'm wondering if you could give us any insight b b your conversations with physicians or any patient service you've done he trying to ascertain what the patient response is going to be Q.

Coming back into the hospital.

It also what the physicians bandwidth is going to look like as they're trying to catch up perhaps on some of these procedures like mitrals than you might you mentioned Deborah.

We're in the case of electrical beyond what you've said there were ablation I do think that Electrophysiologist do pacemakers integra and getting in new procedures will that be something that we should think about over the medium terms as well.

Thank you bye bye.

I think that absolutely going to impact the medium term I mean, I got it depends on when we get the approval and does the approval come soon after things have gone back to know policy or what is the exact time, we get that letter and again I. We we don't know the answer to that and until it. It does come I mean, Meanwhile, obviously the data will be coming out next week.

Hi.

For people to digest from that standpoint, but in terms of.

All the all the nuances and tentacles that you just talked about are absolutely factors that we have to look into and that we have looked at played out the different scenarios and we've got to do our best to make sure that we're staying in front of our customers and helping them as best they can helping educate them about this from EPA is that we spoke to and I've spoken to throughout.

I mean, everybody is looking forward to seeing the data and then obviously.

When we get to the FDA and get the approval, we can that go market more broadly at that time.

So yeah I think everything you just talked about is going to be out there for us to consider and we'll just have to kind of wait and see kind of how things progress as people kind of had the come back overall.

Thank you. Our next question comes from David Saxon with Needham.

Proceed with your question.

Yeah, Hi, thanks for taking the questions.

I guess just another one on converge just wanted to gauge your expectations. So can you talk about what you pick the data need to show it to be clinically meaningful.

Yes, I mean, as we've talked about on this call before we don't really kind of hit on that directly but we basically says that we've got to be statistically and clinically significant that you need to look for.

If were statistically significant it will be clinically significant because the end is so small at 153 patients. The delta has got to be large enough in order to have some clinical significance to hit that statistical number. So I think thats, probably the best way to think about it at a very objective level. The next one to look at is not just the primary endpoint, but it's going to be you're gonna.

When you look at the burden rate reduction as well and that's going to be something that is obviously going to play into clinician decisions over time also.

Okay, Great and then can you give an update on the amazed trial and I'm I'm, assuming there's going to be some sort of delay.

So and any color there would be helpful.

Fortunately on on the amaze trial the it it happened.

We had finished enrollment on December 13th of last year. So Fortunately for US enrollment was complete we don't have any delay on the enrollment knowledge on follow up.

We we Fortunately also have a reasonable window to cock follow up on that patient. So we're tracking it literally every day and weak looking at what patient is supposed to come back at it hit that one year window that we have to follow up on and so we're fairly confident that we won't see too much of a delay in that in those follow up procedures and that we should be in a fine.

Position, so that the timeline behind it as a reminder is that the last patient should have follow up and kind of the March April time frame of next year.

And after that we will accumulate the data submitted to the FDA. It took us about four and a half months to do that with converge. So you can assume that sometime mid to late summer we would be submitting and then working through the fall and into 2022 on getting the approval on at that time and obviously.

Then there is just the back and forth that that is the natural currents. Once it's in the FDA hands at that time. So that hopefully gives you a pretty good timeline or kind of how things are going to basically transpire over the next year and half of the mess, but I, we don't anticipate any significant delays because of the enrollment is complete.

Okay. Yeah, that's very helpful. Thank you.

Thank you. Our next question comes from Serasa cleaner with Oppenheimer. Sir you May proceed to do question.

Good afternoon, everyone hope, everyone is safe and healthy.

So Mike Andy a couple of questions, Mike Let me I knew it this is being asked by by other folks old swing I'll try to come at it from a different angle. The first is from a housekeeping perspective.

I think so I heard you guys say, 70% reduction in the last two or three weeks in March I guess I'm trying to understand what is the denominator, maybe a different way of looking at it is you know how many regions in your opinion are open how should we look upon for example in Q2.

What does the 50% reduction mean.

What kind of business is done in the last two weeks or the quarter, what the down 70% from that just any additional color you'll can provide from housekeeping perspective would be great.

Yeah, I'll try to do my best for here Serasa get any meaningful information, but when we talk about a 70% reduction we're talking about if you look at our first week of March then or the that that week to pass and then you look at the next week, we were down 70% or so in that next week and then the coming weeks thereafter, so it was off of that number.

I would have expected that to have gone up we're not giving weakening numbers, we're not going to getting the game of doing that because quite frankly.

It doesn't help you out and there's a lot of different cadences that happened throughout any given quarter and so if somebody is capable of giving you exactly what they should you want to specific day year over year I think there.

That's very very difficult for anybody to do quite frankly, so from our standpoint, we looked at it as a what we're going to week before and we see a drop we saw the drop for about that five week or so period and then we're starting to see it's kind of come back.

In terms of the number of places that were kinda shutdown as you say I'm in for a period of time they've been very few places were open up in the United States. Originally you saw a complete shut down on the west coast for kind of the March timeframe and the beginning part of April and then you started to see the west coast begin to come back in line.

You're not in line he started to see some cases get booked and begin to get booked.

As it became less significant in they started some declines the best thing to do is look at when you hear of places, saying that they're long elective procedures or they are seeing declines the number of cobot patients. That's when those places are beginning to open up.

The northeast I will say is still pretty much.

Pretty shutdown I mean, it's just not that part of the country is not.

Doing a lot of volume at this point, but other parts and pockets are doing it.

Especially in the Midwest and on the West Coast right now.

Parts of the kind of southeast and southern parts of the country.

Got it in Mike I'm loath to questions and converge.

Thanks, a question was that just asked about what you are expecting in converge.

Again come come at this question from a slightly different perspective, we knew the trial design.

In terms of statistical significance and in you articulated it pretty pretty nicely.

You as shepherding the company how would you see what kind of for results you think would lead to a pull through demand in the field versus a push environment. Once you get approved.

What does that let's see the statistically significant I don't think 71 is expecting otherwise what are the key things that you've seen that he would say you know what if this happens this is going to lead to a pull through demand in the field beginning to let's say.

2021, Thank you for taking my questions.

Yeah.

Oh, I'm going to answer similar to what the way I answered it before and I know people want more information, but quite frankly. This is my belief it did statistically significant they will be clinically significant and will provide.

Excitement for patient population that is not treated today. This is the only trial that has randomized controlled data for persistent and longstanding persistent patients. If you remember this trial basically was looking at patience and you could have basically out. The 10 years you could have an atrium size of up to six centimeters no other trial comparison.

That every other trial on the market isn't apples to oranges kinda comparison, because their single arm. This is a randomized trial. If we show statistical significance for that really complicated patient population I feel like you'll get excitement for that patient population. Once we're able to market. It I mean, we're not just because the data comes out in a week that doesn't mean, we're able to market at that point.

We can't and we will work with the FDA very closely over the <unk> as long as it takes to get the approval and to move forward on that so again I believe long term, if we get statistical significance, it will be statistically and clinically significant and long term drive.

The treatment or some of these really sick patients.

And the other thing to remember is our procedure is a hybrid procedure, which means it's not just our product there's actually the catheter based product gets used during the procedure as well. So it's a combination of both that create the very durable and longstanding durability in those leases sets.

Thank you. Our next question comes from Rick Wise with Stifel. You May proceed with your question.

Hi, Mike in India, So drew on for current Tonight I.

I also have a leveraged question [laughter] hi, guys.

So we heard from multiple specialties that they've been discussing potential post could inefficiencies and recovering their wells procedures, but as you think about bringing conversion to market do you think the procedure it could be.

Adoption could shift towards a more staged approach as the primary method versus single day, because it just seems like that might be but we could potentially resolve any inefficiency or logistical considerations. The hospital might have as well as maybe allow for easier Amyas clipped placement just what are your thoughts there.

Yeah, I mean, you can look at how how it gets practice today. The trial was run on a same day. So that is how the trial was runs to the efficacy and everything we're going to be able talk about is if you're doing it in that same day setting.

To your point many sites make a decision on their own for logistical reasons that and also for maybe the patient benefit for a variety of other reasons as well that they believe staging it is a better form and today about 60% of the sites that we work with they make that decision to stage, we as a company or a different house.

Ever they choose to do it in the best interest to their patients or how they can care for their patients is how it happens to your point many of them do do that for logistical reasons it'll be interesting to see with cobot if.

Because of that demand it becomes more difficult than they do move more towards staging.

I'm not 100% certain with that I think what you do is you wind up getting believers that believe staging is the best way to go and others that believe doing it same day and they make those choices on the wrong.

And I think Thats 60, 40 percentage may hold true even after converge is approved.

Got it and then just.

Two questions to follow ups on that.

When you were the 60% you're doing stage procedures now versus doing.

Single day is there any noticeable difference in there and their entry clip attachment rate I mean, you quoted it before about being 50%, but just curious.

Yes to your point, you would think that that would be the case, but actually it's not I mean it. It's we have sites. The do it same day that do the clip it really comes down to.

How that EPA, if that if he believes and what they believe in relative to managing the appendage and getting it over with and kind of combining that procedure. We do have many sites that do do it same day that put at the same time, so I wouldn't say that that is a driving factor.

At least in the sites today now that may change as things evolve and we get out to more sites, but as it is today I would say that that's not necessarily the case.

It's more dependent upon you piece concept of the clip.

And then just touching on cries here for a moment you launch the product and basically February 2019, just hoping to hear how the first year went relative to your expectations.

And how its performance trending heading into the pandemic.

Great question, where we've been very happy we've exceeded expectations overall.

Now, we set up low expectations for ourselves, primarily because we were looking at a new market and because it was a brand new market. We didnt know how much of it was going to cannibalize the old sales already happening with it and so we kind of wanted to balance all that when we set the expectation. What we're finding is we are getting a lot of net new sites.

They are trying it and they are very pleased with the results that they're getting.

Interestingly enough during coded that's one of the products that continues to do reasonably well because they are a part of procedures to get paid a lot of times, they're using it to get patients out of the hospital faster.

And so as a result of that we're getting lots of phone calls from people trying to get them trained to learn how to use the products and so it's been interesting to kind of see that happened and see that that's actually been than one of the bright spots in our business over the last.

Most of them up in half.

Thank you. Our next question comes from a retail book with.

Etiology you May proceed with your question.

Thank you for taking my question I want to ask a quick one on converge or really more around the approval of the technology just want to be sure that.

Any of the logistical things like pre approval inspection audits that can be handled under the new environment or if you foresee any delays around that.

I don't necessarily see delays with that obviously to be told as to what's going to happen within the FDA, but at this point, we're in very collaborative in active discussions with the FDA they've been incredibly responsive and we've been going back and forth on a variety of different matters and and they're continuing to before it on the audit as well.

So we've had many of the audit you only audit really outstanding at this time is the one of our manufacturing facility, but all the other audits as customers suppliers they've continued to be active on that front and feedback. So to date, we have not seen that.

I have not gotten any indication relative to that particular group, it's working on that on our project.

That would necessarily getting away.

That's great to hear and then last one on a tariff and thinking about the data really weak typically these medical society, they're kind of a chance for doctors to discuss the data and get a little bit of bonds on and that's a little tougher obviously in kind of a virtual settings. I'm curious if the p. eyes will be hosting things with furnish.

And to discuss the data in more detail beyond what they're doing with US and then you know just generally if you could frame up kind of the excitement or level of interest part of the technology in the field at this point.

Yeah, I mean, we're taking a maybe a little different approach on that I mean.

The release of the data is as much but a lot of its going to be for investors to get the data out into the market, obviously that it's going to be a scientific session for customers to be able to debate and discuss it but we're not going to be doing anything other than the scientific session that there for customers.

Primarily because while we've got clearance for the product today, we do not have the approvals to go promoted aggressively and therefore, we're not going to be doing that and so we're not going to be setting up.

The types of discussions between physicians on that front at this time, we're going to let the data.

Speak and then they can have obviously the rich discussions if they need to have in the scientific sessions, we will be hosting an analyst day and also and thus are very shortly after some investors or analysts can ask the questions.

And we can obviously have.

People that have been involved in the trial and an independent person Dr. coffins from Johns Hopkins give you their perspective, many of the questions you're asking Tonight about how do they see this in the market and rolling out over the next several years.

Thank you. Our next question comes from Daniel Enterprise with a CV Larry you May proceed in your question.

Hey, good afternoon, guys. Thanks, so much for taking the question Mike I, just kind of follow up question on the recovery curve as you think about that and I guess, especially in the open I get more than minimally invasive business that feels a little bit maybe more elective deferrable less likely to get made up super quickly, but as we think about.

On the open ablation doesn't it feels like these are tied to pretty urgent relatively urgent procedures that you can't really delay all that well that long. So I guess I'm just curious to get your view on that sort of piggybacking off the commentary you gave around hoping to get back to normal by Q4.

And then I have one follow up flat.

Yeah, I mean depends on the tight I mean cabbages or to your point, there typically more immersion procedures.

And but like mitral valves tend to be I mean, if you think about how they're treating and attempt treat them earlier earlier in the disease state Nowadays those can be delayed and pushed off a little bit further so interestingly enough you're seeing more cabbages and the orders going on now versus the Mitrals that are getting pushed out and so that's why I think it's going to be just kind of it'll come back, but it's not going to come back haul.

Once and there are obviously going to be talking about the o., our rooms et cetera, but from I mean, they can push the michaels off a little bit further I guess is probably the thing you should leave with on that front.

I can't recall, Daniel maybe there was a second question that you had well yeah no I had asked it yet so you didn't forget anything on it. So my follow up and you sort of started to allude to that the terms logistic perspective is there anything about.

These procedures that logistically makes it tougher you do I think about other service lines like tighter for example in Cath labs and extended hours you mentioned hearing about physicians wanting to extend hours that you all got to consider a capacity at the hospital from a resource perspective anesthesia anesthesiologists et cetera. So is there anything unique.

Q. These procedures that your products are used in that could make the logistics a little tougher I'm a recovery thanks for match.

I think I think you hit on the the biggest logistical issues that I think is a to be told by hospital, how well they are manage and how they're managing their workforce I think it's going to be a matter of everything you. Just described each hospitals, a little bit different in terms of that and that those are going to be the pieces that are going to be obstacles in certain places do they have enough staff nurse.

Nursing staff anesthesiology et cetera are they willing to.

Work at the extra hours during this time.

And certain places we're hearing absolutely others like you were kind of mentioning probably maybe a little bit less outlets I think thats part of the calculus as things begin to come back and how you want to meter that out. The other one is just making sure that you've got the rooms available I think thats, probably the other big one meeting the rooms, and then the I see you beds and making sure that they've got enough of those.

Those available so that if there is there actually operating six seven days a week do they have enough for that can they get patients out of that hospital faster, but also say safely as well the going to be able to treat everybody. Those are the obstacles are gonna have to overcome I don't have a direct answer I don't know all the answers to that because it's going to be hospital by hospital.

That's helpful. Thanks much.

Yep.

Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Mike Carroll for any closing remarks.

Great well again.

Thank you everybody for joining Tonight, we remain fully committed to support our people patients and customers in our communities are strong foundation is built to whether this changing period for all of us and we are well positioned operationally financially and strategically to the long term. We look forward to talking to every one of you in just over a week and stay.

Safe, everyone and thanks for joining us.

Thank you ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.

Yeah.

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