Q2 2024 Stereotaxis Inc Earnings Call

August 12, 2024

Speaker Change: Good afternoon and welcome to the Stereo Taxis, Inc. 2nd Quarter 2024 Earnings Conference Call.

Unnamed Speaker: Certain statements during the question-and-answer period to follow may relate to future events and expectations and, as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of the company in the future to be materially different from the statements that the company's executives make today. These risks are described in detail in our public filings with the Securities and Exchange Commission, including our latest periodic report on Form 10-K or 10-Q. However, we assume no duty to update these statements.

Operator: Certain statements during the question-and-answer period to follow may relate to future events and expectations and, as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of the company in the future to be materially different from the statements that the company's executives make today. These risks are described in detail in our public filings with the Securities and Exchange Commission, including our latest periodic report on Form 10-K or 10-Q. However, we assume no duty to update these statements.

Speaker Change: Certain statements during the question and answer period to follow may relate to future events, expectations, and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker Change: Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the company in the future to be materially different from the statements that the company's executives make today.

Speaker Change: These risks are described in detail in our public filings with the Securities and Exchange Commission, including our latest periodic report on Form 10-K or 10-Q. We assume no duty to update these statements.

Operator: At this time, all participants have been placed in a listen-only mode. The floor will be opened for questions and comments following the presentation. As a reminder, today's call is being recorded. It is now my pleasure to turn the floor over to your host, David Fischel, Chairman and CEO of Stereotaxis. Thank you, operator, and good afternoon, everyone. We have made significant progress this quarter on several key aspects of our strategic transformation. I want to spend the majority of today's call reviewing those advances and how we are establishing a solid foundation upon which to build a substantial and successful company.

Speaker Change: At this time, all participants have been placed on a listen-only mode. The floor will be open for questions and comments following the presentation.

Speaker Change: As a reminder, today's call is being recorded. It is now my pleasure to turn the floor over to your host, David Fischel, Chairman and CEO of Stereo Taxis.

David Fischel: Thank you, Operator, and good afternoon, everyone. We have made significant progress this quarter on several key aspects of our strategic transformation. I want to spend the majority of today's call reviewing those advances and how we are establishing a solid foundation upon which to build a substantial and successful company. Before getting to that, though, I want to address head-on our commercial results and financial position. I recognize the quarterly numbers were disappointing. Our results for the first half of this year were significantly impacted by reduced capital revenue. These results do not reflect a steady-state reality.

David Fischel: Thank you, operator, and good afternoon, everyone.

David Fischel: We have made significant progress this quarter on several key aspects of our strategic transformation. I want to spend the majority of today's call reviewing those advances and how we are establishing a solid foundation upon which to build a substantial and successful company.

Operator: Before getting to that, though, I want to address head-on our commercial results and financial position. I recognize the quarterly numbers were disappointing. Our results for the first half of this year were significantly impacted by reduced capital revenue.

David Fischel: Before getting to that though, I want to address head-on our commercial results and financial position.

Speaker Change: I recognize the quarterly numbers were disappointing.

Speaker Change: Our results for the first half of this year were significantly impacted by reduced capital revenue. These results do not reflect a steady state reality.

David Fischel: These results do not reflect a steady state reality. We are confident in a significantly stronger second half of this year from both a revenue and cash flow perspective. Let me briefly address the first half and share the source of our optimism in an improved text. Despite our significant backlog of genesis orders, the timing of multiple hospital projects and associated system shipments became elongated, leading to minimal capital revenue in the first and second quarters.

David Fischel: We are confident in a significantly stronger second half of this year from both the revenue and cash flow perspectives. Let me briefly address the first half and share the source of our optimism in an improved text. Despite our significant backlog of genesis orders, the timing of multiple hospital projects and associated system shipments became elongated, leading to minimal capital revenue in the first and second quarters. Capital sales are inherently lumpy, and the first half was far below a normalized level.

Speaker Change: We are confident in a significantly stronger second half of this year from both a revenue and cash flow perspective.

Speaker Change: Let me briefly address the weak first half and share the source of our optimism in an improved second half.

Speaker Change: Despite our significant backlog of Genesis orders, the timing of multiple hospital projects and associated system shipments became elongated, leading to minimal capital revenue in the first and second quarters.

David Fischel: Capital sales are inherently lumpy, and the first half was far below a normalized level. However, our visibility into system shipments during this third quarter and the remainder of this year gives us high confidence in significantly higher revenue, recognition, and cash flow. There are currently two Genesys systems in transit to European customers as we speak, with revenue recognition taking place upon delivery of those systems. There is one additional system ready to be shipped within the coming days, and we have signed purchase orders with down payments for two additional systems planned to be shipped before year-end.

Speaker Change: Capital sales are inherently lumpy and the first half was far below a normalized level.

David Fischel: Our visibility into system shipments during this third quarter and the remainder of this year gives us high confidence in significantly higher revenue, recognition, and cash flow. There are currently two Genesys systems in transit to European customers as we speak, with revenue recognition taking place upon delivery of those systems. There is one additional system ready to be shipped within the coming days, and we have signed purchase orders with down payments for two additional systems planned to be shipped before year-end.

David Fischel: One of those has a contractual requirement dictated by a tender to deliver the system in the fourth quarter. The three Genesys systems currently being shipped will generate $5.5 million in revenue recognition upon delivery. The two additional symptoms I noted would add an additional $3 million.

Speaker Change: Our visibility into system shipments during this third quarter and the remainder of this year gives us high confidence in significantly higher revenue, recognition, and cash flow.

Speaker Change: There are currently two Genesis systems in transit to European customers as we speak with revenue recognition taking place upon delivery of those systems.

Speaker Change: There's one additional system ready to be shipped within the coming days and we have signed purchase orders with down payments for two additional systems planned to be shipped before year-end.

Speaker Change: One of those has a contractual requirement dictated by a tender to deliver the system in the fourth quarter.

Speaker Change: The three Genesis systems currently being shipped will generate $5.5 million in revenue recognition upon delivery.

Speaker Change: The two additional systems I noted would add an additional $3 million.

David Fischel: There remains a backlog of ordered systems beyond these five, which are still waiting on hospitals to be ready for delivery and will likely take longer, but could accelerate. We also have an active late-stage sales pipeline in all three of our two geographies, and we expect additional purchase orders for Genesis Systems in the coming months. Our cash utilization in the first half of this year was significantly impacted by the weakness we had in capital sales.

David Fischel: There remains a backlog of ordered systems beyond these five, which are still waiting on hospitals to be ready for delivery and will likely take longer, but could accelerate. We also have an active late-stage sales pipeline in all three of our key geographies, and we expect additional purchase orders for Genesis Systems in the coming months. Our cash utilization in the first half of this year was significantly impacted by the weakness we had in capital sales.

Speaker Change: There remains a backlog of ordered systems beyond these five, which are still waiting on hospitals to be ready for delivery and will likely take longer, but could accelerate.

Speaker Change: We also have an active late-stage sales pipeline in all three of our two geographies and we expect additional purchase orders for Genesys Systems in the coming months.

Speaker Change: Our cash utilization in the first half of this year was significantly impacted by the weakness we had in capital sales.

David Fischel: We can model the substantial cash receipts due with delivery of the systems I just referenced, and based on those, our best assessment is to end this year with approximately $13 million in cash and no debt. While it would be nice to have a more substantial balance sheet, we feel confident in our upcoming milestones and the incremental revenue and profit they will deliver. Our existing balance sheet allows us to reach key milestones, commercialize our new innovation, and profitably grow our business.

Speaker Change: We can model the substantial cash receipts due with delivery of the systems I just referenced, and based on those, our best assessment is to end this year with approximately $13 million in cash and no debt.

Speaker Change: While it would be nice to have a more substantial balance sheet, we feel confident in our upcoming milestones and the incremental revenue and profit they will deliver.

Speaker Change: Our existing balance sheet allows us to reach key milestones, commercialize our new innovations, and profitably grow our business.

David Fischel: Shifting now to the progress I mentioned, our strategic innovation efforts. On the past several calls, I reviewed the full spectrum of strategic efforts we're advancing in parallel and how those are establishing a solid foundation upon which to build a substantial and successful company. I'll focus today's call going in more depth on three of the most impactful areas for future commercial success, for which we have made significant progress in the last quarter: Genesis X, Magic, and the APT acquisition. Let me start with Genesis.

David Fischel: Shifting now to the progress I mentioned in our strategic innovation effort. On the past several calls, I reviewed the full spectrum of strategic efforts we're advancing in parallel and how those are establishing a solid foundation upon which to build a substantial and successful company. I'll focus today's call going in more depth on three of the most impactful areas for future commercial success, for which we have made significant progress in the last quarter: Genesis X, Magic, and the APT Acquisition. Let me start with Genesis.

Speaker Change: Shifting now to the progress I mentioned, our strategic innovation efforts.

Speaker Change: On the past several calls, I reviewed the full spectrum of strategic efforts we're advancing in parallel and how those are establishing a solid foundation upon which to build a substantial and successful company.

Speaker Change: I'll focus today's call going in more depth on three of the most impactful areas for future commercial success, for which we have made significant progress in the last quarter.

Speaker Change: Genesis X, Magic and the APT Acquisition

David Fischel: In a press release this afternoon, we were excited to introduce Genesys X publicly and to share the accomplishment of key regulatory milestones, obtaining the CE mark for the system in Europe and submitting a 510K application with FDA. Genesis X is an entirely new robotic platform. The third for Stereotaxis after Niobe, which was released in 2003, and Genesis in 2020, it incorporates newly designed magnets that are significantly smaller than before, a particularly innovative robotic base with built-in magnetic shielding, and more streamlined, distributed, and sophisticated electronics throughout the system.

David Fischel: In a press release this afternoon, we were excited to introduce Genesys X publicly and to share the accomplishment of key regulatory milestones, obtaining the CE mark for the system in Europe and submitting a 510k application with FDA. Genesis X is an entirely new robotic platform. The third for Stereotaxis after Niobe, which was released in 2003, and Genesis in 2020, it incorporates newly designed magnets that are significantly smaller than before, a particularly innovative robotic base with built-in magnetic shielding, and more streamlined, distributed, and sophisticated electronics throughout the system.

Speaker Change: Let me start with Genesis X.

Speaker Change: In a press release this afternoon, we were excited to introduce Genesys X publicly and to share the accomplishment of key regulatory milestones.

Speaker Change: obtaining CE marks for the system in Europe and submitting a 510k application with FDA.

Speaker Change: Genesys X is an entirely new robotic platform. The third for Stereotaxis after Niobe, which was released in 2003, and Genesys in 2020.

Speaker Change: It incorporates newly designed magnets that are significantly smaller than before, a particularly innovative robotic base with built-in magnetic shielding, and more streamlined, distributed, and sophisticated electronics throughout the system.

David Fischel: Genesis X builds upon the well-established proprietary technology that Stereotaxis has pioneered and mastered robotic magnetic navigation. It's designed with the same uncompromising eye toward clinical performance, robust real-world reliability, and intuitive ease. It retains the speed and immediate responsiveness of Genesis, which has been well received by our physicians.

David Fischel: Genesis X builds upon the well-established proprietary technology Stereotaxis has pioneered and mastered, robotic magnetic navigation. It's designed with the same uncompromising eye toward clinical performance, robust real-world reliability, and intuitive ease. It retains the speed and immediate responsiveness of Genesis, which has been well received by our physicians. What is special about Genesys X is that we have made robotic magnetic navigation available in a form factor that supports broad accessibility and commercial scalability.

Speaker Change: Genesis X builds upon the well-established proprietary technology Stereotaxis has pioneered and mastered, robotic magnetic navigation.

Speaker Change: It's designed with the same uncompromising eye towards clinical performance, robust real-world reliability, and intuitive ease of use.

Speaker Change: It retains the speed and immediate responsiveness of Genesis, which has been well received by our physician users.

David Fischel: What is special about Genesys X is that we have made robotic magnetic navigation available in a form factor that supports broad accessibility and commercial scalability. I've mentioned in the past the challenges of translating physician interest in robotics into adoption and commercial growth. We operate in a huge and highly attractive market in which we hold less than 1% market share despite our established clinical benefits and unique differentiated features. We've had hundreds of physicians express genuine interest in our technology since launching Genesys. Over 95% of people never end up getting a robot.

Speaker Change: What is special about Genesys X is that we have made robotic magnetic navigation available in a form factor that supports broad accessibility and commercial scalability.

David Fischel: I've mentioned in the past the challenges of translating physician interest in robotics into adoption and commercial growth. We operate in a huge and highly attractive market in which we hold less than 1% of the market share despite our established clinical benefits and unique differentiation. We've had hundreds of physicians express genuine interest in our technology since launching Genesys, but over 95% never end up getting a robot. The single largest impediment is the reliance on hospital construction and the long, extended timeline that creates, along with the complexity of translating physician clinical interest into full organizational movement at the hospital.

Speaker Change: I've mentioned in the past the challenges of translating physician interest in robotics into adoption and commercial growth.

Speaker Change: We operate in a huge and highly attractive market in which we hold less than 1% market share despite our established clinical benefits and unique differentiation.

Speaker Change: We have had hundreds of physicians express genuine interest in our technology since launching Genesys.

David Fischel: The single largest impediment is the reliance on hospital construction and the long, extended timeline that it creates, along with the complexity of translating physician clinical interests into full organizational movement at the hospital. Our Niobe and Genesys systems require architectural planning and construction to accommodate their installation. Preparing an operating room to accommodate a system entails significant structural modification, including the installation of thousands of pounds of magnetic shielding in the walls, reinforcement of the floor, high-power electrical work, and extensive cabling through conduits between the operating room, control room, and cabinets. This adds cost for the hospital, but more importantly, in terms of purchase, into a long, complex process. The complexity of coordinating site planners, architects, and contractors leads many potential deals to stall or fizzle away.

Speaker Change: Over 95% never end up getting a robot.

Speaker Change: The single largest impediment is the reliance on hospital construction and the long extended timeline that creates, along with the complexity of translating physician clinical interest into full organizational movement at the hospital.

David Fischel: Our Niobe and Genesys systems require architectural planning and construction to accommodate their installation. Preparing an operating room to accommodate a system entails significant structural modification, including the installation of thousands of pounds of magnetic shielding in the walls, reinforcement of the floor, high-power electrical work, and extensive cabling through conduits between the operating room, control room, and cabinets. This adds cost for the hospital, but more importantly, in terms of purchase, into a long, complex process. The complexity of coordinating site planners, architects, and contractors leads many potential deals to stall or fizzle away.

Speaker Change: Our Niobe and Genesys systems require architectural planning and construction to accommodate their installation.

Speaker Change: Preparing an operating room to accommodate a system entails significant structural modification.

Speaker Change: including the installation of thousands of pounds of magnetic shielding in the walls, reinforcement of the floor, high-power electrical work, and extensive cabling through conduits between the operating room, control room, and cabinet room.

Speaker Change: This adds cost for the hospital, but more importantly in terms of purchase, into a long complex process.

Speaker Change: The complexity of coordinating site planners, architects, and contractors leads many potential deals to stall or fizzle away.

David Fischel: In the fortunate cases where a robotic sale comes to fruition, we and the interested customers work through a multi-year sales cycle before translating interest into actual yield. Genesis X allows us to transition from a construction model to a placement model. The system's smaller magnets are stored in magnetic shielding built into the robotic base itself, negating the need for the shielding otherwise installed in the walls of the operating space. Trent Sussex requires no structural anchoring through the floor and operates using standard 120 or 230 volt power, same with use for your laptop or iPhone.

David Fischel: In the fortunate cases where a robotic sale comes to fruition, we and the interested customers work through a multi-year sales cycle before translating interest into actual revenue. Genesis X allows us to transition from a construction model to a placement model. The system's smaller magnets are stored in magnetic shielding built into the robotic base itself, negating the need for the shielding otherwise installed in the walls of the operating space. Genesis-X requires no structural anchoring through the floor and operates using standard 120 or 230 volt power output, same as the use for your laptop or iPhone.

Speaker Change: In the fortunate cases where a robotic sale comes to fruition, we and the interested customers work through a multi-year sales cycle before translating interest into actual use.

Speaker Change: Genesis X allows us to transition from a construction model to a placement model.

Speaker Change: The system's smaller magnets are stored in magnetic shielding built into the robotic base itself, negating the need for the shielding otherwise installed in the walls of operating rooms.

Speaker Change: Genesys X requires no structural anchoring through the floor and operates using standard 120 or 230 volt power outlets. The same was used for your laptop or iPhone.

David Fischel: A single thin fiber is routed from each robot to the system cabinet, which is 96% and 99% smaller compared to the cable bundles routed to the cabinets of Genesys or NIO. The cabinet of Genesis X is itself 80% smaller than the cabinet of Genesis and can fit under a table in the operating or control room rather than in a separate dedicated cabinet. We expect to be able to install a Jensen Tech System over the weekend and for it to be a viable solution for the majority of labs.

David Fischel: A single thin fiber is routed from each robot to the system cabinet, which is 96% and 99% smaller compared to the cable bundles routed to the cabinets of Genesis or Naomi. The cabinet of Genesis effects is itself 80% smaller than the cabinet of Genesis and can fit under a table in the operating or control room rather than in a separate dedicated cabinet. We expect to be able to install a Jensen Tech system over the weekend and for it to be a viable solution for the majority of lives.

Speaker Change: A single thin fiber is routed from each robot to the system cabinet with 96% and 99% reduced volume compared to the cable bundles routed to the cabinets of Genesis or Niobe.

Speaker Change: The cabinet of Genesis X is itself 80% smaller than the cabinet of Genesis and can fit under a table in the operating or control room rather than in a separate dedicated cabinet room.

Speaker Change: We expect to be able to install a Jensen Tech System over the weekend and for it to be a viable solution for the majority of labs.

David Fischel: Accessibility for customers is of primary importance. Also important is ensuring the scalability of manufacturing and operation. We designed GenesysX to support improved supply chain, manufacturing, and installation operations. The two sides of the Genesis X robot are identical to each other, rather than mirrors of each other like in Genesis or Naomi. This substantially reduces the number of unique components in genus effects, improving supply chain management and simplifying assembly and types. We're reducing the shipping requirements from 12 big crates per Genesis system to 6 crates with Genesis X.

David Fischel: Accessibility for customers is of primary importance. Also important is ensuring scalability of manufacturing and operation. We designed GenesysX to support improved supply chain, manufacturing, and installation operations. The two sides of the Genesis X robot are identical to each other, rather than mirrors of each other like in Genesis or Naomi.

Speaker Change: Accessibility for customers is of primary importance.

Speaker Change: Also important is ensuring scalability of manufacturing and operations.

Speaker Change: We designed Genesys X to support improved supply chain, manufacturing, and installation operations.

Speaker Change: The two sides of the Genesis X robot are identical to each other, rather than mirrors of each other like in Genesis or Niobe.

David Fischel: This substantially reduces the number of unique components in Genesys X, improving supply chain management and simplifying assembly and testing. We're reducing the shipping requirements from 12 big crates per Genesis system to 6 crates with Genesis X. The system will be shipped nearly fully assembled, with the magnets already installed, allowing for rapid installation with less time spent on site. Simplifying site planning, shipping, and installation allows us to scale our business without the strains and investment of scaling those organizational capabilities.

Speaker Change: This substantially reduces the number of unique components in Genesys X, improving supply chain management, and simplifying assembly and testing.

Speaker Change: We're reducing the shipping and requirements from 12 big rates per gen system to 6 cranes with gen effects.

David Fischel: The system will be shipped nearly fully assembled, with the magnets already installed, allowing for rapid installation with less time spent on site. Simplifying site planning, shipping, and installation allows us to scale our business without the strains and investment of scaling those organizational capabilities. Transitioning from a construction model to a placement model may sound minor, but it is a world of difference. Being freed from complex planning or construction enables a more streamlined and rapid translation of clinical interest into clinical use. It allows us to confidently offer alternative financial models for adoption. While Genesis X will demand a premium over Genesis, it will be available for purchase, operating lease, or for placement with disposable commitments.

Speaker Change: The system will be shipped nearly fully assembled with the magnets already installed, allowing for rapid installation with less time spent on site.

Speaker Change: Simplifying site planning, shipping, and installation allows us to scale our business without the strains and investment of scaling those organizational capabilities.

David Fischel: Transitioning from a construction model to a placement model may sound minor, but it is a world of difference. Being freed from complex planning or construction enables a more streamlined and rapid translation of clinical interest into clinical use. It allows us to confidently offer alternative financial models for adoption. While Genesis X will demand a premium over Genesis, it will be available for purchase, operating lease, or for placement with disposable commitments.

Speaker Change: Transitioning from a construction model to a placement model may sound minor, but it is a world of difference.

Speaker Change: Being freed from complex planning or construction enables a more streamlined and rapid translation of clinical interests into clinical use.

Speaker Change: It allows us to confidently offer alternative financial models for adoption.

Speaker Change: While Genesis X will demand a premium over Genesis, it will be available for purchase, operating lease, or for placement with disposable commitment.

David Fischel: As we look at the EP field and then the broader universe of endovascular surgery, there's easily room for thousands of robotic magnetic navigation systems. Genesix X comes in an architecture that allows us to imagine realistically scaling a business that can positively transform our larger world. Obtaining the CE mark and filing our 510k submission are major milestones. We look forward to supporting the FDA review of Genesis X, and it is reasonable to expect regulatory clearance by year end. There is some additional work to be done prior to full commercial operation.

Speaker Change: As we look at the EP field and then the broader universe of endovascular surgery, there's easily room for thousands of robotic magnetic navigation systems.

Speaker Change: Genesix X comes in an architecture that allows us to envision realistically scaling business that can positively transform our large markets.

Speaker Change: Obtaining CE mark and filing our 510k submission are major milestones.

Speaker Change: We look forward to supporting the FDA review of Genesis X, and it is reasonable to expect regulatory clearance by year-end.

David Fischel: There is some additional work to be done prior to full commercial launch. First and foremost, and I'll discuss this in more detail in a moment, we are advancing towards regulatory approval of the compatible MAGIC ablation catheter, which is necessary to use Genesis X.

David Fischel: First and foremost, and I'll discuss this in more detail in a moment, we are advancing towards regulatory approval of the compatible MAGIC ablation catheter, which is necessary to use Genesis X. In parallel to regulatory efforts, we will use the coming months to enhance Genesys X's compatibility with various x-rays, prepare our supply chain, manufacturing, installation, and commercial processes, and demonstrate real-world use of the system. We expect a full launch of the system and initial significant adoption of Genesys X in 2025.

Speaker Change: There is some additional work to be done prior to full commercial launch.

Speaker Change: First and foremost, and I'll discuss this in more detail in a moment, we are advancing towards regulatory approval of the compatible MAGIC ablation catheter, which is necessary to use genesis X.

David Fischel: In parallel to regulatory efforts, we will use the coming months to enhance Genesys X's compatibility with various x-rays, prepare our supply chain, manufacturing, installation, and commercial processes, and demonstrate real-world use of the system. We expect a full launch of the system and initial significant adoption of Genesys X in 2025. This segues into the second critical puzzle piece in our new foundational product ecosystem, our proprietary, robotically navigated ablation catheter magic.

Speaker Change: In parallel to the regulatory efforts, we will use the coming months to enhance compatibility of Genesys X with various x-rays, prepare our supply chain, manufacturing, installation and commercial processes, and demonstrate real-world use of the system.

Speaker Change: We expect a full launch of the system and initial significant adoption of Genesis X in 2025.

David Fischel: This segues into the second critical puzzle piece in our new foundational product ecosystem, our proprietary, robotically navigated ablation catheter magic. As we have discussed in the past, we've been hampered clinically, commercially, and strategically by our dependence on the J and J catheter used in every robotic procedure. That ablation catheter is a 20-year-old design with significant room for improvement in clinical performance. MAGIC incorporates many design enhancements that we believe will improve the experience of our physician users and the outcomes of their patients, including increased stability, more intuitive navigation, better information from the ablation tip, and reduced fluid load.

Speaker Change: This segues into the second critical puzzle piece in our new foundational product ecosystem.

Speaker Change: Our proprietary, robotically-navigated ablation catheter, MAGIC.

David Fischel: As we have discussed in the past, we've been hampered clinically, commercially, and strategically by our dependence on the J and J catheter used in every robotic procedure. That ablation catheter is a 20-year-old design with significant room for improvement in clinical performance. MAGIC incorporates many design enhancements that we believe will improve the experience of our physician users and the outcomes of their patients, including increased stability, more intuitive navigation, better information from the ablation tip, and reduced fluid load.

Speaker Change: As we have discussed in the past, we've been hampered clinically, commercially, and strategically by our dependence on the J&J catheter used in every robotic procedure.

Speaker Change: That ablation catheter is a 20-year-old design with significant room for improvement in clinical performance.

Speaker Change: MAGIC incorporates many design enhancements that we believe will improve the experience of our physician users and the outcomes of their patients, including increased stability, more intuitive navigation, better information from the ablation tip, and reduced fluid load.

David Fischel: Commercially, Stereotaxis receives no revenue or economic value from J&J's sales of the current catheter, robbing us of the vast majority of disposable revenue in every robotic procedure. While we have a razor and razor blade business model, we've been giving up 80% of the razor blade.

Darius Texas: Commercially, Darius Texas receives no revenue or economic value from J&J's sales of the current catheter, robbing us of the vast majority of disposable revenue in every robotic procedure.

Speaker Change: While we have a razor, razor blade business model, we've been giving up 80% of the razor blade.

David Fischel: Magic will allow us to fairly rapidly multiply our disposable revenue and gross profit from every robotic procedure. That improved revenue model allows us to profitably scale a commercial organization in a much more robust fashion. Lastly, strategically, our dependence on J&J's catheter has limited our ability to collaborate and develop a healthy ecosystem around our robot. You've already seen some of the collaborations that have come from the realization that magic is approaching commercialization, and additional opportunities are becoming increasingly possible. The development, clinical, and regulatory process for an ablation catheter is an arduous path.

Speaker Change: Magic will fairly rapidly allow us to multiply our disposable revenue and gross profit from every robotic procedure.

Speaker Change: That improved revenue model allows us to profitably scale a commercial organization in a much more robust fashion.

Speaker Change: Lastly, strategically, our dependence on J&J's catheter has limited our ability to collaborate and develop a healthy ecosystem around our robot.

Speaker Change: You've already seen some of the collaborations that have come from the realization that magic is approaching commercialization, and additional opportunities are becoming increasingly possible.

Speaker Change: The development, clinical and regulatory process for an ablation catheter is an arduous path.

David Fischel: We have invested many years of effort and millions of dollars getting our proprietary magic catheter to the cusp of commercialization. Earlier this year, we announced submission of a CE application to the EU Notified Body and submission of a PMA application to the FDA for matching. We have made meaningful progress on both submissions. The European Regulatory Review consists of three distinct sections: A Clinical, Technical, and Microbiology Assessment.

Speaker Change: We have invested many years of effort and millions of dollars getting our proprietary magic catheter to the cusp of commercialization.

Speaker Change: Earlier this year, we announced submission of a CE application to the EU Notified Body and submission of a PMA application to the FDA for MAGIC.

Speaker Change: We have made meaningful progress on both submissions.

Speaker Change: The European Regulatory Review consists of three distinct sections.

David Fischel: Since our last call, we successfully completed both the clinical and technical reviews by the EU Notified Body, with receipt of written confirmation of having met all requirements in those two sections. We are still waiting to receive the microbiology questions that have been advised that they should arrive momentarily and hope to similarly successfully complete that section in the coming weeks. With receipt of the CE Mark, we will initiate a full launch of MAGIC in Europe, benefiting from the clinical experience and awareness generated by the ongoing MAGIC clinical study.

Speaker Change: A Clinical, Technical, and Microbiology Assessment.

Speaker Change: Since our last call, we successfully completed both the clinical and technical reviews by the EU Notified Body, with receipt of written confirmation of having met all requirements in those two sections.

Speaker Change: We are still waiting to receive the microbiology questions that have been advised that they should arrive momentarily and hope to similarly successfully complete that section in the coming weeks.

Speaker Change: With receipt of CE Mark, we will initiate a full launch of MAGIC in Europe, benefiting from the clinical experience and awareness generated by the ongoing MAGIC clinical study.

David Fischel: In the U.S., it's not as simple to describe the regulatory review process, but there has also been significant progress in recent years. We've had continuous dialogue with FDA since the PMA submission and are very appreciative of the collaborative and thoughtful discussions and guidance. The PMA submission is being refined with that guidance, and the ongoing dialogue supports our expectation of achieving an initial regulatory approval leveraging the existing data being generated in the European MAGIC study with a clear plan for subsequent post-approval studies in the U.S. We appreciate the responsiveness and collaborative nature of these discussions and believe they are reflective of a shared appreciation for the importance of ensuring MAGIX becomes available for patients and physicians who depend on it.

Speaker Change: In the U.S., it's not as simple to describe the regulatory review process, but there has also been significant progress in recent weeks.

Speaker Change: We've had continuous dialogue with FDA since the PMA submission and are very appreciative of the collaborative and thoughtful discussions and guidance.

Speaker Change: The PMA submission is being refined with that guidance.

Speaker Change: And the ongoing dialogue supports our expectation of achieving an initial regulatory approval leveraging the existing data being generated in the European MAGIC study with a clear plan for subsequent post-approval studies in the U.S.

Speaker Change: We appreciate the responsiveness and collaborative nature of these discussions and believe they are reflective of a shared appreciation for the importance of ensuring MAGIX becomes available for patients and physicians who depend on it.

David Fischel: The final topic that I want to cover on this call and which will have significant importance to our trajectory is acquisition of access point technology. We announced the agreement to acquire APT on our call in May and closed the acquisition just over a week ago at the end of July. This was Stereotaxis' first acquisition ever, reflective of our selectivity and focus.

Speaker Change: [inaudible]

Speaker Change: Thanks for watching!

Speaker Change: The final topic that I want to cover on this call and which will have significant importance to our trajectory is acquisition of access point technologies.

Speaker Change: We announced the agreement to acquire APT on our call in May and closed the acquisition just over a week ago at the end of July.

Speaker Change: This was Stereotaxis' first acquisition ever, reflective of our selectivity and focus.

David Fischel: The acquisition was opportunistic and pursued in a financially prudent fashion, but what is most important for significant value creation is the strong synergistic and strategic rationales for the acquisition. We were fortunate to announce the acquisition immediately before the largest conference in our field, HRF. APT's products were included in the Stereotaxis booth, and both teams worked together at the conference. We have entered into this agreement cognizant of the natural sales syner

David Fischel: The acquisition was opportunistic and pursued in a financially prudent fashion where what is most important for significant value creation is a strong synergistic and strategic rationale for the acquisition. We were fortunate to announce the acquisition immediately before the largest conference in our field, HRF. APT's products were included in the Stereotaxis booth, and both teams worked together at the conference. We have entered into this agreement cognizant of the natural sales synergy. APT had minimal U.S. revenue from differentiated, high-quality diagnostic EP catheters, a consequence of having no dedicated sales.

Speaker Change: The acquisition was opportunistic and pursued in a financially prudent fashion, but what is most important for significant value creation is the strong synergistic and strategic rationales for the acquisition.

David Fischel: Stereotaxis has over 20 people in the field across the US who are particularly skilled and focused on enabling and improving the treatment of the most complex arrhythmias. APT's products and Stereotaxis' commercial teams align beautifully from a messaging perspective and from both a physician and procedure focus. These sales synergies were on full display at HRF.

Speaker Change: We were fortunate to announce the acquisition immediately before the largest conference in our field, HRS.

Speaker Change: APT's products were included in the Stereo Texas booth and both teams worked together at the conference.

Speaker Change: We have entered into this agreement cognizant of the natural sales synergy.

David Fischel: APT had minimal U.S. revenue from differentiated, high-quality diagnostic EP catheters, a consequence of having no dedicated sales. Stereotaxis has over 20 people in the field across the US who are particularly skilled and focused on enabling and improving the treatment of the most complex arrhythmias. NPT's products and Stereotaxis' commercial teams align beautifully from a messaging perspective and from both a physician and procedure focus. These sales synergies were on full display at HRF.

Speaker Change: APT had minimal U.S. revenue from differentiated high quality diagnostic EP catheters, a consequence of having no dedicated sales team.

Speaker Change: Karyotaxis has over 20 people in the field across the U.S. who are particularly skilled and focused on enabling and improving the treatment of the most complex arrhythmias.

Speaker Change: APT's products and stereotechnicist commercial team align beautifully from messaging perspective and from both a physician and procedure focus.

David Fischel: The Stereotaxis commercial team picked up on the products quickly and was enthusiastic about the new opportunity. In addition, customers of Stereotaxis were very pleased and supportive of the acquisition strategy, and while the vast majority had never before been exposed to APD's products, they viewed the catheters as attractive and relevant. Following HRS, we did a more formal training of our entire team, began the process of establishing commercial plans, and started engagement in the field.

David Fischel: The Stereotaxis commercial team picked up on the products quickly and was enthusiastic about the new opportunity. Physician customers of Stereotaxis were very pleased and supportive of the acquisition strategy, and while the vast majority had never before been exposed to APD products, they viewed the catheters as attractive and relevant. Following HRS, we did a more formal training of our entire team, began the process of establishing commercial plans, and started engagement in the field.

Speaker Change: The sales synergies were at full display at HRS.

Speaker Change: The Stereo Texas commercial team picked up on the products quickly and were enthusiastic about the new opportunity.

Speaker Change: Physician customers of Stereotaxis were very pleased and supportive of the acquisition strategy and while the vast majority had never before been exposed to APD's products, they viewed the catheters as attractive and relevant.

Speaker Change: to

Speaker Change: Following HRS, we did a more formal training of our entire team, began the process of establishing commercial plans, and started engagement in the field.

David Fischel: We already have over a dozen physicians and hospitals newly exposed to APT that have tried the catheters or begun value analysis committee submissions at their hospitals to be able to purchase the catheters. APT's U.S. capital revenue in July was approximately 50% higher than the average monthly revenue in the first half of this year or 2023. Working through VAC submissions and building commercial momentum is more like a snowball than flipping a light switch.

Speaker Change: We already have over a dozen physicians and hospitals newly exposed to APT that have tried the catheters or begun value analysis committee submissions at their hospitals to be able to purchase the catheters.

Speaker Change: APT's U.S. capital revenue in July was approximately 50 percent higher than the average monthly revenue in the first half of this year, or 2023.

Speaker Change: Working through VAC submission and building commercial momentum is more like a snowball than flipping a light switch.

David Fischel: But we are already seeing an initial impact and believe we can grow these products substantially in the coming months. Sales synergy also works both ways. APT's catheters contribute incremental revenue in the practices our team already calls upon. And in reverse, these catheters serve as a door opener at centers focused on complex arrhythmias to pave a path for the adoption of robotics. Our primary motivation for acquiring APT was not the opportunistic nature of the situation, nor the sales synergy, but rather the strategic value of having in-house catheter development and manufacturing expertise.

Speaker Change: But we are already seeing an initial impact and believe we can grow these products substantially in the coming months

David Fischel: APT's catheters contribute incremental revenue in the practices our team already calls upon. And, in reverse, these catheters serve as a door opener at centers focused on complex arrhythmias to pave the path for the adoption of robotics. Our primary motivation for acquiring APT was not the opportunistic nature of the situation nor the sales synergy, but rather the strategic value of having in-house catheter development and manufacturing expertise. APT's team, expertise, and capabilities will significantly amplify and accelerate Stereotaxis's next wave of innovation efforts as we look to develop a broader family of interventional devices that are navigated by our robots within electric physiology There are three specific areas of focus I want to touch upon. First, a broader family of robotically-steered catheters to complement MAGIC in EP.

Speaker Change: The sales synergy also works both ways.

Speaker Change: APT's catheters contribute incremental revenue in the practices our team already calls upon and in reverse these catheters serve as a door opener at centers focused on complex arrhythmias to pave a path for the adoption of robotics

Speaker Change: Our primary motivation for acquiring APT was not the opportunistic nature of the situation nor the sales synergy, but rather the strategic value of having in-house catheter development and manufacturing expertise.

David Fischel: APT's team, expertise, and capabilities will significantly amplify and accelerate Stereotaxis's next wave of innovation efforts as we look to develop a broader family of interventional devices that are navigated by our robots within electric physiology and across a range of endovascular procedures. There are three specific areas of focus I want to touch upon.

Speaker Change: APT's team expertise and capabilities

Speaker Change: will significantly amplify and accelerate Stereo Texas's next wave of innovation efforts as we look to develop a broader family of interventional devices that are navigated by our robots within electric physiology and across a range of endovascular procedures.

David Fischel: Second, an emerging and tangible multi-life PFH strategy. And third, our expansion into new clinical applications. On the first topic, the emergence of high-density mapping has been a significant change to the EP field over the past decade.

David Fischel: First, a broader family of robotically-steered catheters to complement MAGIC in EP. Second, an emerging and tangible multi-life PFH strategy. And third, our expansion into new clinical applications. On the first topic, the emergence of high-density mapping has been a significant change to the EP field over the past decade.

Speaker Change: There are three specific areas of focus I want to touch upon.

Speaker Change: First, a broader family of robotically-steered catheters to complement MAGIC in EP.

Speaker Change: Second, an emerging and tangible multi-life PFH strategy, and third, our expansion into new clinical applications.

Speaker Change: On the first topic, the emergence of high density mapping has been a significant change to the EP field over the past decade.

David Fischel: Stereotaxis has never developed a robotically-steered, high-density mapping catheter, and so in a majority of our procedures, the physician navigates a manual mapping catheter by hand, separate from the robotically-steered ablation catheter. The workflow is viable, but not ideal, and there has been strong physician interest, value from a procedure workflow perspective, and clinical merit for robotically-steered, dedicated mapping caps. We had already begun developing such a catheter prior to the acquisition and are now accelerating that process with the catheter design complete and production of hundreds of units taking place for formal regulatory testing.

David Fischel: Stereotaxis has never developed a robotically-steered, high-density mapping catheter, and so in a majority of our procedures, the physician navigates a manual mapping catheter by hand, separate from the robotically-steered ablation catheter. The workflow is viable, but not ideal, and there has been strong physician interest, value from a procedure workflow perspective, and clinical merit for a robotically-steered, dedicated mapping app. We had already begun developing such a catheter prior to the acquisition and are now accelerating that process with the catheter design complete and production of hundreds of units taking place for formal regulatory testing.

Speaker Change: Stereotaxis has never developed a robotically steered high-density mapping catheter and so in a majority of our procedures the physician navigates a manual mapping catheter by hand separate from the robotically steered ablation catheter.

Speaker Change: The workflow is viable, but not ideal, and there has been strong physician interest, value from a procedural workflow perspective, and clinical merit for robotically steered dedicated mapping casting.

Speaker Change: We had already begun developing such a catheter prior to the acquisition and are now accelerating that process with the catheter design complete and production of hundreds of units taking place for formal regulatory testing.

David Fischel: We expect the catheter to receive regulatory approval within a year and to be highly synergistic with magic. From a commercial perspective, if the introduction of MAGIC increases our expected revenue per procedure three to four-fold, the addition of a mapping catheter leads to a five to six-fold increase in revenue per procedure. Those numbers sound absurd, given our current situation, but reflect the normal revenue model and pricing of any other participant in the EP field.

David Fischel: We expect the catheter to receive regulatory approval within a year and to be highly synergistic with MAGIC. From a commercial perspective, if the introduction of MAGIC increases our expected revenue per procedure three to four-fold, the addition of a mapping catheter leads to a five to six-fold increase in revenue per procedure. Those numbers sound absurd, given our current situation, but reflect the normal revenue model and pricing of any other participant in the EP field.

Speaker Change: We expect the catheter to receive regulatory approval within a year and to be highly synergistic with MAGIC.

Speaker Change: From a commercial perspective, if the introduction of MAGIC increases our expected revenue per procedure three to four-fold, the addition of a mapping catheter leads to a five to six-fold increase in revenue per procedure.

Speaker Change: Those numbers sound absurd given our current vantage point, but reflect the normal revenue model and pricing of any other participant in the EP field.

David Fischel: They shine light on the missed opportunity embedded in our current product ecosystem and the structural transformation at play. On to the second topic, PFA. Pulse field ablation, or electroporation, is a new energy source available for cardiac ablation procedures as an alternative to radiofrequency or cryo.

Speaker Change: They shine light onto the missed opportunity embedded into our current product ecosystem and the structural transformation at play.

Speaker Change: On to the second topic, PFA.

Speaker Change: Pulse field ablation, or electroporation, is a new energy source available for cardiac ablation procedures as an alternative to radiofrequency or cryo.

David Fischel: The first PFA catheters have just entered the field and are already on track for over a couple billion dollars in annual revenue, partially through the conversion of procedures from other energy sources, but principally through market expansion. Stereotaxis has been largely protected from the effects of PFA in our existing procedures, but we recognize the impact it is having in the field and the importance of offering choice and a broader ecosystem of catheter options in our role.

Speaker Change: The first PFA catheters just entered the field and are already on track for over a couple billion dollars in annual revenue

Speaker Change: Partially through conversion of procedures from other energy sources, but principally through market expansion.

Speaker Change: Serious access has been largely protected from the effects of PFA in our existing procedures, but we recognize the impact it is having in the field

Speaker Change: and the importance of offering choice and a broader ecosystem of catheter options with our robot.

David Fischel: I can't yet fully share our activities in PFA, but I can shed some light on our efforts. We have three distinct, more advanced PSA opportunities being advanced in TANF. One leverages the MAGIC catheter, and the other two use unique PFA catheters.

Speaker Change: I can't yet fully share our activities in PFA, but I can shed some color on our efforts.

Speaker Change: We have three distinct, more advanced PFA opportunities being advanced in tandem.

Speaker Change: One leverages the MAGIC catheter and the other two use unique PFA catheters.

David Fischel: Two are done in collaboration with partners, and one is a fully owned technology we acquired with APT that is being advanced in collaboration with the Mayo Clinic. We've had an accelerating pace of preclinical PFA studies in recent months and have a line of sight toward first-in-human studies for at least two of these opportunities within the next six to 12 months; one is likely to even become commercially available in Europe in 2025.

David Fischel: Two are done in collaboration with partners, and one is a fully owned technology we acquired with APT that is being advanced in collaboration with the Mayo Clinic. We've had an accelerating pace of preclinical PFA studies in recent months and have a line of sight toward first-in-human studies for at least two of these opportunities within the next 6 to 12 months; one is likely to even become commercially available in Europe in 2025.

Speaker Change: Two are done in collaboration with partners, and one is a fully owned technology we acquired with APT that is being advanced in collaboration with the Mayo Clinic.

Speaker Change: We've had an accelerating pace of preclinical PFA studies in recent months and have a line of sight towards first-in-human studies for at least two of these opportunities within the next 6 to 12 months.

Speaker Change: One is likely to even become commercially available in Europe in 2025.

Operator: Conference Call. Certain statements during the call, question and answer period to follow may relate to future events, expectations, and as such constitute forward-looking statements within the meaning of the Private Security's litigation reform act of 1995. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the company in the future to be materially different from the statements that the company's executives make today.

David Fischel: Our collaboration with the Mayo Clinic is exciting, and I had the opportunity to visit them last month. The PFA catheter they designed with APT is particularly differentiated, addressing some of the clinical challenges with efficacy, durability, and patient safety that are starting to emerge with commercial single-shot PFA catheters. After significant effort, we are starting to see green shoots emerge, with multiple shots on goal for clinically meaningful, technologically differentiated, and commercially impactful PFA cats.

Speaker Change: Our collaboration with the Mayo Clinic is exciting, and I had the opportunity to visit them last month.

Speaker Change: The PFA catheter they designed with APT is particularly differentiated, addressing some of the clinical challenges with efficacy, durability, and patient safety that are starting to emerge with commercial single-shot PFA catheters.

Speaker Change: After significant effort, we are starting to see green shoots emerge with multiple shots on goal for clinically meaningful, technologically differentiated, and commercially impactful PFA catheters.

Operator: These risks are described in detail in our public filings with the Securities and Exchange Commission, including our latest periodic report on Form 10K or 10Q. We assume no duty to update these statements.

David Fischel: The last topic, the expansion of our robotic technology into a broader set of applications, is something we've discussed previously. We are in the late stages of developing robotically steered guide wires and guide catheters that expand the value of our robot into several large fields, such as neurointervention, interventional cardiology, and interventional radiology. These are advancing on track for regulatory submissions within the next six months, and the guide catheter is being developed with APT.

Speaker Change: The last topic, the expansion of our robotic technology into a broader set of applications, is something we've discussed previously.

Operator: At this time, all participants have been placed on a listen-only mode. The floor will be opened for questions and comments following the presentation. As a reminder, today's call is being recorded.

Speaker Change: We are in the late stages of developing robotically-steered guide wires and guide catheters that expand the value of our robot into several large fields such as neurointervention, interventional cardiology, and interventional radiology.

David Fischel: It is now my pleasure to turn the floor over to your host, David Fischel, Chairman and CEO of Stereotaxis. Thank you, operator, and good afternoon, everyone. We have made significant progress this quarter on several key aspects of our strategic transformation.

David Fischel: These are advancing on track for regulatory submissions within the next six months, and the guide catheter is being developed with APT. Having skilled in-house catheter design and manufacturing expertise will be particularly beneficial as we explore innovative ideas shared by physicians for ways our technology can add value in these new indications. It dramatically accelerates the time to an initial prototype and the ability to iterate with feedback.

Speaker Change: These are advancing on track for regulatory submissions within the next six months and the guide catheter is being developed with APT.

David Fischel: Having skilled in-house catheter design and manufacturing expertise will be particularly beneficial as we explore innovative ideas shared by physicians for ways our technology can add value in these new indications. It dramatically accelerates the time to an initial prototype and the ability to iterate with feedback. While the first guide wire and guide catheter will allow for a strong initial offering as we begin to address the broad endovascular surgery field, the in-house capabilities of APT are of great strategic value to accelerating and improving our expansion.

David Fischel: I want to spend the majority of today's call reviewing those advances and how we are establishing a solid foundation upon which to build a substantial and successful company. Before getting to that, though, I want to address head-on our commercial results and financial position. I recognize the quarterly numbers were disappointing. Our results for the first half of this year were significantly impacted by reduced capital revenue. These results do not reflect a steady state reality.

Speaker Change: Having skilled in-house catheter design and manufacturing expertise will be particularly beneficial as we explore innovative ideas shared by physicians for ways our technology can add value in these new indications.

Speaker Change: It accelerates dramatically the time to an initial prototype and the ability to iterate with feedback.

David Fischel: While the first guide wire and guide catheter will allow for a strong initial offering as we begin to address the broad endovascular surgery field, the in-house capabilities of APT are of great strategic value to accelerating and improving our expansion. We are pleased with the significant progress we are making in establishing a healthy foundation for Stereotaxis upon which to build a substantial, high-growth, profitable business. This was a busy quarter for us, particularly in these three key areas but also in our other efforts, including regulatory efforts in China and the Synchrony and Sync Telesurgery platform.

Speaker Change: While the first guide wire and guide catheter will allow for a strong initial offering as we begin to address the broad endovascular surgery field, the in-house capabilities of APT are of great strategic value to accelerating and improving our expansion.

David Fischel: We are confident in a significantly stronger second half of this year from both a revenue and cash flow perspective. Let me briefly address the week first half and share the source of our optimism in an improved second half. Despite our significant backlog of genesis orders, the timing of multiple hospital projects and associated system shipments became elongated, leading to minimal capital revenue in the first and second quarters. Capital sales are inherently lumpy, and the first half was far below a normalized level.

David Fischel: We are pleased with the significant progress we are making in establishing a healthy foundation for Stereotaxis upon which to build a substantial, high-growth, profitable business. This was a busy quarter for us, particularly in these three key areas, but also in our other efforts, including regulatory efforts in China and the Synchrony and Sync Telesurgery platform. We see the puzzle pieces falling into place in each of our three key geographies, the U.S., Europe, and China. We have the opportunity for a full ecosystem coming together and driving breakout. The opportunity in any individual geography can dwarf our current entire vision.

Speaker Change: We are pleased with the significant progress we are making in establishing a healthy foundation for stereotaxis upon which to build a substantial, high-growth, profitable business.

Speaker Change: This was a busy quarter for us, particularly in these three key areas, but also in our other efforts, including regulatory efforts in China and the Synchrony and Sync Telesurgery platform.

David Fischel: We see the puzzle pieces falling into place in each of our three key geographies, the U.S., Europe, and China. We have opportunity for a full ecosystem coming together and driving breakout growth. The opportunity in any individual geography can dwarf our current entire vision. I'll hand the call over to Kim now to discuss our financial results. Kim?

David Fischel: Our visibility into system shipments during this third quarter, and the remainder of this year gives us high confidence in significantly higher revenue, recognition, and cash flow. There are currently two genesis systems in transit to European customers as we speak, with revenue recognition taking place upon delivery of those systems. There is one additional system ready to be shipped within the coming days, and we have signed purchase orders with down payments for two additional systems planned to be shipped before year end.

Speaker Change: We see the puzzle pieces falling into place in each of our three key geographies, the U.S., Europe, and China. We have opportunity for a full ecosystem coming together and driving breakout growth.

Speaker Change: The opportunity in any individual geography can dwarf our current entire business.

Kimberly Peery: I'll hand the call over to Kim now to discuss our financial results. Kim?

Speaker Change: I'll hand the call over to Kim now to discuss our financial results. Kim?

Kimberly Peery: Thank you, David, and good afternoon, everyone. Revenue for the second quarter of 2024 totaled $4.5 million, compared to $7.9 million in the prior year's second quarter. System revenue for the second quarter was $0.2 million, and recurring revenue was $4.3 million, compared to $3.3 million and $4.6 million in the prior year's second quarter. The majority of the revenue decline in the current quarter is driven by the timing of system deliveries delayed by elongated customer construction projects.

Kim: Thank you, David, and good afternoon, everyone. Revenue for the second quarter of 2024 totaled $4.5 million, compared to $7.9 million in the prior year's second quarter.

David Fischel: One of those has a contractual requirement dictated by a tender to deliver the system in the fourth quarter. The three genesis systems currently being shipped will generate $5.5 million in revenue recognition upon delivery. The two additional systems I noted would add in additional $3 million. They remain the backlog of ordered systems beyond these five, which are still waiting on hospitals to be ready for delivery and will likely take longer, but could accelerate.

Kim: System revenue for the second quarter was 0.2 million and recurring revenue was 4.3 million compared to 3.3 million and 4.6 million in the prior year second quarter.

Kim: The majority of the revenue declining in the current quarter is driven by timing of system deliveries delayed by elongated customer construction projects.

Kimberly Peery: System revenue in the current quarter reflects minimal revenue recognized on system installations compared to more substantial system revenue recognized in the prior year quarter from system delivery. System revenue is inherently uneven from period to period, and the performance in the quarter is not reflective of our expectation for the balance of the year. We maintain a system backlog of $15.3 million as of the end of the second quarter. Gross margin for the second quarter of 2024 was 74% of revenue. Recurring Revenue Gross Margin was 76%, and System Gross Margin was 22%. Operating expenses in the quarter of $9.3 million included $2.5 million in non-cash stock compensation expenses.

Kim: System revenue in the current quarter reflects minimal revenue recognized on system installations compared to more substantial system revenue recognized in the prior year quarter from system delivery.

David Fischel: We also have an active late-stage sales pipeline in all three of our two geographies, and we expect additional purchase orders for genesis systems in the coming months. Our cash utilization in the first half of this year was significantly impacted by the weakness we had in capital sales. We can model the substantial cash receipts through its delivery of the system digest reference, and based on those, our best assessment to end this year with approximately $13 million in cash and no debt. While it would be nice to have a more substantial balance sheet, we feel confident in our upcoming milestones and the incremental revenue and profit they will deliver.

Kim: System revenue is inherently uneven from period to period and the performance in the quarter is not reflective of our expectation for the balance of the year. We maintain system backlog of 15.3 million as of the end of the second quarter.

Kimberly Peery: Gross margin for the second quarter of 2024 was 74% of revenue. Recurring revenue Gross Margin was 76%, and System Gross Margin was 22%. Operating expenses in the quarter of $9.3 million included $2.5 million in non-cash stock compensation expenses. Excluding non-cash stock compensation expenses, adjusted operating expenses were $6.8 million, comparable to prior year adjusted operating expenses of $6.9 million. Operating expenses in the quarter were impacted by higher acquisition-related legal costs and regulatory-related activities, counteracted by the reversal of a historical approved liability.

Kim: Gross margin for the second quarter of 2024 was 74% of revenue.

Kim: Recurring revenue gross margin was 76% and system gross margin was 22%.

Kim: Operating expenses in the quarter of $9.3 million included $2.5 million in non-cash stock compensation expense.

Kimberly Peery: Excluding non-cash stock compensation expense, adjusted operating expenses were $6.8 million, comparable to prior year adjusted operating expenses of $6.9 million. Operating expenses in the quarter were impacted by higher acquisition-related legal costs and regulatory-related activities, counteracted by the reversal of a historical approved liability. Operating loss and net loss for the second quarter of 2024 were $6 million and $5.8 million, compared to $5.3 million and $5 million in the previous year. Adjusted Operating Loss and Adjusted Net Loss for the quarter, excluding non-cash stock compensation expense, were $3.5 million and $3.3 million, compared to $2.7 million and $2.4 million in the previous year. Negative free cash flow for the second quarter was $3.1 million.

David Fischel: Our existing balance sheet allows us to reach key milestones, commercialize our new innovations, and profitably grow our business.

Kim: Excluding non-cash stock compensation expense, adjusted operating expenses were $6.8 million, comparable to prior year adjusted operating expenses of $6.9 million.

David Fischel: Shifting now to the progress I mentioned are strategic innovation efforts. On the past several calls, I reviewed the full spectrum of strategic efforts were advancing in parallel and how those are establishing a solid foundation upon which to build a substantial and successful company. I'll focus today's call going in more depth on three of the most impactful areas for future commercial success, for which we have made significant progress in the last quarter.

Kim: Operating expenses in the quarter were impacted by higher acquisition-related legal costs and regulatory-related activities, counteracted by the reversal of a historical approved liability.

Kimberly Peery: Operating loss and net loss for the second quarter of 2024 were $6 million and $5.8 million, compared to $5.3 million and $5 million in the previous year. Adjusted Operating Loss and Adjusted Net Loss for the quarter, excluding non-cash stock compensation expense, were $3.5 million and $3.3 million, compared to $2.7 million and $2.4 million in the previous year. Negative free cash flow for the second quarter was $3.1 million. Our financial statements for the second quarter do not reflect any consolidation or impact from the APT acquisition beyond legal expenses incurred during the acquisition process. We are consolidating APT's results starting August 1st, so our third quarter financial results will therefore include two months of APT results. At June 30th, we had cash and cash equivalents of $15.2 million and no debt.

Kim: Operating loss and net loss for the second quarter of 2024 were $6 million and $5.8 million compared to $5.3 million and $5 million in the previous year.

Kim: Adjusted Operating Loss and Adjusted Net Loss for the quarter, excluding non-cash stock compensation expense, were $3.5 million and $3.3 million, compared to $2.7 million and $2.4 million in the previous year.

David Fischel: Genesis X, Magic, and the APT acquisition. Let me start with Genesis X. In a press release this afternoon, we were excited to introduce Genesis X publicly and to share the accomplishment of key regulatory milestones, obtaining the EMARC for the system in Europe and submitting a 510K application with FDA. Genesis X is an entirely new robotic platform. The third for stereotaxis after Nairobi, which was released in 2003, and Genesis in 2020. It incorporates newly designed magnets that are significantly smaller than before, particularly innovative robotic space with built-in magnetic shielding and more streamlined, distributed, and sophisticated electronics throughout the system.

Kim: Negative free cash flow for the second quarter was $3.1 million.

Kimberly Peery: Our financial statements for the second quarter do not reflect any consolidation or impact from the APT acquisition beyond legal expenses incurred during the acquisition process. We are consolidating APT's results starting August 1st, and our third quarter financial results will, therefore, include two months of APT results. At June 30th, we had cash and cash equivalents of $15.2 million and no debt.

Kim: Our financial statements for the second quarter do not reflect any consolidation or impact from the APT acquisition beyond legal expenses incurred during the acquisition process.

Speaker Change: We are consolidating APT's results starting August 1st. Our third quarter financial results will therefore include two months of APT results.

Speaker Change: At June 30th, we had cash and cash equivalents of $15.2 million and no debt.

David Fischel: As mentioned previously, we continue to focus on realizing our strategic transformation while maintaining commercial momentum and preserving financial strength. Substantial value creation is ultimately predicated on establishing the right foundations for the company upon which we can profitably grow orders of magnitude larger. While our short-term results have minimal impact on our long-term value, we recognize the quarterly numbers are disappointing.

David Fischel: I will now hand the call back to Dave.

Speaker Change: I will now hand the call back to David.

David Fischel: Thank you, Kim. As mentioned previously, we continue to focus on realizing our strategic transformation while maintaining commercial momentum and preserving financial strength.

David Fischel: Genesis X builds upon the well-established proprietary technology stereotaxis has pioneered and mastered robotic magnetic navigation. It's designed with the same uncompromising eye towards clinical performance, robust real world reliability, and intuitive ease of use. It retains the speed and immediate responsiveness of Genesis, which has been well received by our physician users. What is special about Genesis X is that we have made robotic magnetic navigation available in a form faster that supports broad accessibility and commercial scalability.

David Fischel: Substantial value creation is ultimately predicated on establishing the right foundations for the company upon which we can profitably grow orders of magnitude larger.

Speaker Change: While our short-term results have minimal impact on our long-term value, we recognize the quarterly numbers are disappointing.

David Fischel: Our visibility into the second half of this year gives us high confidence in significantly improved performance compared to the first half of this year. We expect greater than $14 million in revenue in the second half of this year, with stable recurring revenue and minimum revenue from the Genesys systems currently being shipped. We expect likely upside to that minimum expectation, with four-year revenue approximately equal to the previous year. These expectations do not incorporate contributions of revenue from APT or potential revenue from the launch of Genesis X and Magic.

David Fischel: Our visibility into the second half of this year gives us high confidence in significantly improved performance compared to the first half of this year. We expect greater than $14 million in revenue in the second half of this year, with stable recurring revenue and the minimum revenue from the Genesys systems currently being shipped. We expect likely upside to that minimum expectation, with four-year revenue approximately equal to the previous year. These expectations do not incorporate contributions of revenue from APT or potential revenue from the launch of Genesis X and Magic.

Speaker Change: Our visibility into the second half of this year gives us high confidence in significantly improved performance compared to the first half of the year.

Speaker Change: We expect greater than $14 million in revenue in the second half of this year with stable recurring revenue and minimum revenue from the Genesis systems currently being shipped.

David Fischel: As mentioned in the past, the challenge is translating physician interest in robotics into adoption and commercial growth. We operate in a huge and highly attractive market in which we hold less than 1% market share despite our established clinical benefits and unique differentiation. We've had hundreds of physicians express genuine interest in our technology since launching Genesis. Over 95% never end up getting a robot. The single largest impediment is the reliance on hospital construction and the long extended timeline that creates, along with the complexity of translating physician clinical interests into full organizational movement at the heart.

Speaker Change: We expect likely upside to that minimum expectation with full year revenue approximately equal to the previous year.

Speaker Change: These expectations do not incorporate contributions of revenue from APT or potential revenue from the launch of Genesis X and Magic.

David Fischel: We are cognizant of the importance of protecting our balance sheet, protecting shareholders from unnecessary dilution, and managing Stereotaxis in a financially prudent fashion. We expect to end this year with $13 million in cash and no debt. We view our existing balance sheet as allowing us to reach key milestones, commercialize our new innovation, and profitably grow our business. We have no intention of diluting shareholders at current valuation levels and will be thoughtful in how we manage our financial position and protect shareholder value. Operator, can you please open the line for Q&A?

Speaker Change: We are cognizant of the importance of protecting our balance sheet, protecting shareholders from unnecessary dilution, and managing stereo taxes in a financially prudent fashion.

Speaker Change: We expect to end this year with $13 million in cash and no debt. We view our existing balance sheet as allowing us to reach key milestones, commercialize our new innovation, and profitably grow our business.

David Fischel: Hospital. Our Naomi and Genesis systems require architectural planning and construction to accommodate their installation. Preparing an operating room to accommodate a system entails significant structural modification, including the installation of thousands of pounds of magnetic shielding in the walls, reinforcement of the floor, high power electrical work, and extensive cabling through conduits between the operating room, control room, and cabin room. This adds cost for the hospital, but more importantly, turns a purchase into a long complex process.

David Fischel: The complexity of coordinating site planners, architects, and contractors leads many potential deals to stall or fizzle away. In the fortunate cases where robotic sale comes to fruition, we and the interested customers work through a multi-year sales cycle before translating interest into actual use. Genesis X allows us to transition from a construction model to a placement model. The system's smaller magnets are stored in magnetic shielding built into the robotic base itself, negating the need for the shielding otherwise installed in the walls of operating room.

Speaker Change: We have no intention of diluting shareholders at current valuation levels and will be thoughtful in how we manage our financial position and protect shareholder value.

Operator: We view our existing balance sheet as allowing us to reach key milestones, commercialize our new innovation, and profitably grow our business. We have no intention of diluting shareholders at current valuation levels and will be thoughtful in how we manage our financial position and protect shareholder value. Operator, can you please open the line for Q&A? Thank you. We will now open the line for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad, raise your hand, and join the queue.

Operator: Thank you. We will now open the line for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad, raise your hand, and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are dialed in and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Our first question comes from the line of Adam Maeder with Piper Sandler. Please go ahead.

Operator: If you would like to withdraw your question, simply press star 1 again. If you are dialed in and listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: Operator, can you please open the line to Q&A?

Speaker Change: Thank you. We will now open the line for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad, raise your hand, and join the queue. If you would like to withdraw your question, simply press star 1 again.

Speaker Change: If you are dialed in and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Operator: Our first question comes from the line of Adam Maeder with Piper Sandler. Please go ahead. Good afternoon, David and Kim.

Speaker Change: Our first question comes from the line of Adam Mader with Piper Sandler. Please go ahead.

Adam Maeder: Thank you for taking the questions and congratulations on Axan getting approval in Europe. I guess a couple of questions for me, you know, the first one would be on the magic catheter and wanted to, I guess, better understand the CE mark, you know, commentary there. So it sounds like you're getting pretty close. I think I heard you use the verbiage, hope to complete.

Adam Maeder: Good afternoon, David and Kim. Thank you for taking the questions and congratulations on the approval for Axan in Europe. I guess a couple of questions for me, you know. The first one would be on the magic catheter. I wanted to, I guess, better understand the CE mark, you know, commentary there. So it sounds like you're getting pretty close. I think I heard you use the verbiage, hope to complete the Microbiology part of the submission or review shortly, and then you'll kind of be off to the races.

Adam Mader: Hi, good afternoon, David and Kim. Thank you for taking the questions and congrats on the approval.

Adam Mader: for AXAN in Europe.

Adam Mader: I guess a couple questions for me, you know, the first one would be on the magic catheter and wanted to

Speaker Change: I guess better understand the CE mark commentary there. So it sounds like you're getting pretty close. I think I heard you use the verbiage, hope to complete.

Adam Maeder: The Microbiology, you know, part of the submission or review, you know, shortly, and then you'll kind of be off to the races. And then I also heard there's no assumed contribution and guidance from magic. So, David, maybe you can kind of help square that up.

David Fischel: Genesis X requires no structural anchoring through the floor and operates using standard 120 or 230 volt power outlets, the same we would use for your laptop or iPhone. A single thin fiber is routed from each robot to the system cabinet with 96% and 99% reduced volume compared to the cable bundles routed to the cabinets of Genesis or NEOP. The cabinet of Genesis X is itself 80% smaller than the cabinet of Genesis and can fit under a table in the operating or control room rather than in a separate dedicated cabinet room.

Speaker Change: The microbiology, you know, part of the submission or review, you know, shortly and then you'll kind of be off to the races.

Speaker Change: And then I also heard there's no assumed contribution in the guidance from MAGIC.

David Fischel: For us, you know, once you have CU Mark approval in hand for the magic catheter, you know, how aggressively will you launch it into the marketplace? That's my first question, and I have a follow-up question. Sure. Thanks, Adam. Good afternoon.

Adam Maeder: And then I also heard there's no assumed contribution in the guidance from MAGIC. David, maybe you can kind of help square that up. For us, you know, once you have CU Mark approval in hand for the magic catheter, how aggressively will you launch it into the marketplace? That's my first question, then I have a follow-up question. Sure, thanks.

Speaker Change: David, maybe you can kind of help square that up. For us, you know, once you have CU Mark approval in hand for the Magic Catheter, you know, how aggressively will you launch into the marketplace?

David Fischel: Sure. Thanks, Adam. Good afternoon.

David Fischel: So you have understood our regulatory progress and status correctly in Europe. There are three areas of review that the notified body does as part of the review of the submission. Two out of those three, including the most important one for us, which was the clinical area, which a year ago prompted us to have to do the clinical study, we passed successfully. So those kind of are the buttoned-up and final kind of success mark.

Speaker Change: That's my first question and I have a follow-up or two.

David Fischel: Sure. Thanks, Adam. Good afternoon.

David Fischel: So, you have understood our regulatory progress and status correctly in Europe. There are three areas of review that the notified body does as part of the review of the submission. Two out of those three, including the most important one for us, which was the clinical area, which a year ago prompted us to have to do the clinical study, we passed successfully. So, those kinds of are the buttoned-up and final kind of success marks.

Speaker Change: progress and status correctly in Europe.

David Fischel: We expect to be able to install a Genesis X system over the weekend and for to be a viable solution for the majority of labs. Accessibility for customers is a primary important. Also important is ensuring scalability of manufacturing and operations. We design Genesis X to support improved supply chain, manufacturing, and installation operations. The two sides of the Genesis X robot are identical to each other rather than mirrors of each other like in Genesis or NEOP.

David Fischel: There are three areas of review that the Notified Body does as part of the review of the submission. Two out of those three, including the most important one for us, which was the clinical area, which a year ago prompted us to have to do the clinical study, we passed successfully. So those kind of are buttoned up and final kind of success marks.

David Fischel: The microbiology questions we have not yet received, and so we're waiting to receive them. We've been told that they should come any day. We thought that they would already have arrived last week, and we're waiting with bated breath for those questions. We never know exactly what to expect, whether those are going to be few questions or many questions, whether there's going to be any questions that require more significant effort to respond to or whether they're largely administrative responses to them.

David Fischel: the microbiology question we have not yet received.

David Fischel: And so we're waiting to receive we've been told that they should come any day We thought that they would already have arrived last week, and we're waiting With bated breath for those questions, and we never know exactly what to expect Whether those are going to be few questions or many questions whether there's going to be any questions that are That require more significant effort to respond to or whether they're largely administrative responses to them So as we get that we're obviously going to have a much better feeling for the status About a year ago or a little bit over a year ago when we went through the review process at the time there were Essentially no material questions on the microbiology side of things when they asked us to to do a

David Fischel: This substantially reduces the number of unique components in Genesis X, improving supply chain management, and simplifying assembly and testing. We're reducing the shipping and requirements from 12 big crates per Genesis system to six crates with Genesis X. The system will be shipped nearly fully assembled with a magnet already installed, allowing for rapid installation with less time spent on site. Simplifying site planning, shipping, and installation allows us to scale our business without the strains and investment of scaling those organizational capabilities.

David Fischel: So, as we get that, we're obviously going to have a much better feeling for the status. About a year ago, or a little bit over a year ago, when we went through the review process at the time, there were essentially no material questions on the microbiology side of things when they asked us to do a clinical study because they couldn't pass us on the clinical side.

David Fischel: So, we're hopeful that we'll have something similar to that when we get the first round of questions, but obviously, we have to wait to see those questions. Once the microbiology questions are received, we respond to them, and let's kind of hope that that goes smoothly, and we get kind of written confirmation that we passed the microbiology review. Then, really, there's no additional review.

David Fischel: Transitioning from a construction model to a placement model may sound minor but it is a world of difference. Being freed from complex planning or construction enables a more streamlined and rapid translation of clinical interest into clinical use. It allows us to confidently offer alternative financial models for adoption. While Genesis X will demand a premium over Genesis, it will be available for purchase, operating lease, or for placement with disposable commitments, as we look at the EP field and then the broader universe of endovascular surgery there's easily room for thousands of robotic magnetic navigation systems. Genetics X comes in an architecture that allows us to envision realistically scaling a business that can positively transform our large markets.

David Fischel: clinical study because they couldn't pass us on the clinical side.

David Fischel: So, we're hopeful that we'll have something similar like that when we get to the first round of questions, but obviously we have to wait to see those questions.

David Fischel: Once the microbiology questions are received, we respond to them, and let's kind of hope that that goes smoothly, and we get some written confirmation that we passed the microbiology review. Then, really, there's no additional review.

David Fischel: And once the microbiology questions are received...

David Fischel: We respond to them.

David Fischel: and let's kind of hope that that goes smoothly and we get kind of also written confirmation that we passed the microbiology review. Then really there's no additional review. There's, I think, some administrative effort just to get the final signatures and kind of the sign off from them, but that's the last part substantive to the whole process.

David Fischel: There's, I think, some administrative effort just to get the final signatures and kind of the sign-off from them, but that's the last substantive part to the whole process. We have benefited in some ways through this time that we're working through the regulatory process in preparing for a commercial launch. And we have about 35 or so hospital accounts in Europe, and the knowledge of the human experience in the clinical trial has spread organically from the physician users in Copenhagen and Vilnius, where the clinical trial was taking place, naturally to many of the other physician users there.

David Fischel: There's, I think, some administrative effort just to get the final signatures and kind of the sign-off from them, but that's the last part, substantive to the whole process. We have benefited in some ways through this time that we're working through the regulatory process in preparing for a commercial launch. And we have about 35 or so hospital accounts in Europe, and the knowledge of the human experience in the clinical trial has spread organically from the physician users in Copenhagen and Vilnius, where the clinical trial was taking place, naturally to many of the other physician users there.

David Fischel: We have benefited in some ways through this time that we're working through the regulatory process.

David Fischel: in preparing for a commercial launch, and we have about 35 or so hospital accounts in Europe, and the knowledge of the

David Fischel: Obtaining CE Mark and filing our 510K submission are major milestones. We look forward to supporting FDA review of genesis X and it is reasonable to expect regulatory clearance by year end. There is some additional work to be done prior to full commercial launch. First and foremost, and I'll discuss this in more detail in a moment, we are advancing towards regulatory approval of the compatible magic ablation catheter which is necessary to use genesis X. In parallel to the regulatory efforts, we'll use the coming months to enhance compatibility of genesis X with various X-rays, prepare our supply chain, manufacturing, installation and commercial processes, and demonstrate real world use of the system.

David Fischel: We expect a full launch of the system and initial significant adoption of genesis X in 2025.

David Fischel: Human experience in the clinical trial has spread organically from the physician users in Copenhagen Vilnius where the clinical trial was taking place Naturally to many of the other physician users there And so I think there's good awareness of the performance of magic and how it has improved the situation There's also been the benefit of that

David Fischel: And so I think there's good awareness of the performance of magic and how it has improved the situation. There's also been the benefit of InsightX integration with Stereotaxis, which has had more and more time to become adopted across multiple sites there. And so that also sets things up well for magic. And so we're going to kind of do a full launch of magic as soon as we get regulatory approval. I think I've spoken in the past that there are certain geographies where there are kind of more local tender requirements beyond the CE mark approval.

David Fischel: And so I think there's good awareness of the performance of MAGIC and how it has improved the situation. There's also been the benefit of End Site X integration with Stereotaxis, which has had more and more time to become adopted across multiple sites there. And so that also sets things up well for MAGIC.

David Fischel: take a look.

David Fischel: And so we're going to kind of do a full launch of MAGIC as soon as we have regulatory approval. I think I've spoken in the past that there are certain geographies where there are kind of more local tender requirements beyond the CE mark approval. So you have to wait until you receive the CE mark before you can go through some of those tenders. That will slow down adoption in some of the accounts as you work through those administrative items. But, generally, we plan to do a full launch.

Speaker Change: where there are kind of more local tender requirements beyond the CE marks approval. So you have to wait until you receive CE mark before you can go through some of those tenders that will slow down adoption in some of the accounts as you work through those administrative items, but generally we plan to do a full launch.

David Fischel: This segues into the second critical puzzle piece in our new foundational product ecosystem, our proprietary robotically navigated ablation catheter magic. As we have discussed in the past, we've been hampered clinically, commercially and strategically by our dependence on the J&J catheter used in every robotic procedure. That ablation catheter is a 20-year-old design with significant room for improvement in clinical performance. Magic incorporates many design enhancements that we believe will improve the experience of our physician users and the outcomes of their patients, including increased stability, more intuitive navigation, better information from the ablation tip and reduced fluid load.

David Fischel: Commercially, various taxes received no revenue or economic value from J&J sales of the current catheter, robbing us of the vast majority of disposable revenue in every robotic procedure. While we have a razor razor blade business model, we've been giving up 80% of the razor blade. Magic will fairly rapidly allow us to multiply our disposable revenue and gross profit from every robotic procedure. That improved revenue model allows us to profitably scale a commercial organization in a much more robust fashion.

David Fischel: Very helpful color, David. Thank you for all that. And for the follow-up question, just a multi-part question on the Genesys X system. And, you know, I guess one part is just trying to better understand the pricing and margin profile, the pricing strategy, and the margin profile of the system. And then, you know, I also heard you reference, you know, different selling models there. I think I heard, you know, outright capital purchase, operating lease, and volume based.

David Fischel: So you have to wait until you receive the CE mark before you can go through some of those tenders, which will slow down adoption in some of the accounts as you work through those administrative items. But generally, we plan to do a full launch, very helpful color David, thank you for all that and for the follow-up, just a multi-part question on the Genesys X system. And, you know, I guess one part is just trying to better understand the pricing and margin profile, the pricing strategy and margin profile of the system. And then, you know, I also heard you mention, I think, reference, you know, different selling models there. I think I heard, you know, outright capital purchase, operating lease, and volume-based.

Speaker Change: It's very helpful color David, thank you for all that and for the follow-up just a multi-part question on

Speaker Change: the Genesys X system.

Speaker Change: And, you know, I guess one part is just trying to better understand the pricing.

Speaker Change: and margin profile, the pricing strategy and margin profile of the system. And then, you know, I also heard you, I think, reference, you know, different, you know, selling models there. I think I heard, you know, outright capital purchase, operating leasement, volume-based.

Adam Maeder: Agreements. So we'd love for you to kind of, you know, flesh those out for us. And then just any color in terms of, you know, speed of launch.

David Fischel: Agreements. So we'd love for you to kind of, you know, flesh those out for us. And then just any color in terms of, you know, speed of launch. I mean, it certainly sounds like 2025 is really when you're going to kind of be making a bigger push in Europe with X and, I guess, the U.S., for that matter. But I would love just to hear a little bit more about kind of, you know, the initial launch plans. Thanks so much for taking the time. Sure.

Speaker Change: agreement, so we'd love for you to kind of, you know, flesh those out for us.

Speaker Change: And then just any color in terms of, you know, speed of of launch. I mean, it certainly sounds like.

Adam Maeder: I mean, it certainly sounds like, you know, 2025 is really when you're going to kind of be making a bigger push in Europe with X and, I guess, the U.S., for that matter. But I would love just to hear a little bit more about kind of the initial launch plans. Thanks so much for taking the time.

Speaker Change: 2025 is really when you're going to kind of be making a bigger push in Europe with X, and I guess the US for that matter. But would love just to hear a little bit more about kind of the initial launch plans. Thanks so much for taking the questions.

David Fischel: Sure, thanks for the good question. So, we obviously can't launch Genesis X until we get Magic approved, both in Europe and the US. And so, that is a little bit holding us back at this point from trying to launch the system or even announce it in a more complete way. And we're going to use the remainder of this year to get those approvals, to prepare ourselves for a full launch. And I would view some of the larger conferences next year in Europe and the US as ideal settings in which to launch Genesis X.

David Fischel: Sure, thanks for the good question. So, we obviously can't launch Genesys X until we get Magic approved, both in Europe and the US. And so, that is a little bit holding us back at this point from trying to launch the system or even announce it in a more complete way. We're going to use the remainder of this year to get those approvals, to prepare ourselves for a full launch. And I view some of the larger conferences next year in Europe and the US as ideal settings in which to launch Genesys X.

David Fischel: Lastly, strategically, our dependence on J&J catheter has limited our ability to collaborate and develop a healthy ecosystem around our robot. You've already seen some of the collaborations that have come from the realization that magic is approaching commercialization. And additional opportunities are becoming increasingly possible. The development, clinical and regulatory process for an ablation catheter is an arduous path. We have invested many years of effort and millions of dollars getting our proprietary magic catheter to the cusp of commercialization.

Speaker Change: Sure, thanks for that. Good question.

Speaker Change: So...

Speaker Change: We obviously can't launch Genesis X until we get Magic approved both in Europe and the U.S.

Speaker Change: And so, that is a little bit holding us back at this point from trying to launch the system or even announce it in a more complete way. We're going to use the remainder of this year to...

Speaker Change: to get those approvals, to prepare ourselves for a full launch, and I'd view some of the larger conferences next year in Europe and the U.S. as ideal settings in which to launch Genesys X. In many ways, this is not just a product launch. This is

David Fischel: In many ways, this is not just a product launch. This is reframing, reintroducing Stereotaxis to the community, to our EP community, in a way that breaks down many of their historical misperceptions or perceptions about the technology. And so, we view doing a good launch of the technology when we're able to do so as very important, and we plan to make a lot more noise than we are doing today, given that today, again, we're not really at the point of launching the technology fully. From a pricing margin revenue model or sales model perspective, I don't want to give too much detail at this point.

David Fischel: Earlier this year, we announced the mission of a CE application to the EU notified body and a submission of a PMA application to that DA for magic. We have made meaningful progress on both submissions. The European regulatory review consists of three distinct sections, a clinical, technical, and microbiology assessment. Since our last call, we successfully completed both the clinical and technical reviews by the EU-notified body with receipt of written confirmation of having met all requirements in those two sections.

Speaker Change: reframing, reintroducing stereotaxis.

Speaker Change: and...

Speaker Change: to the community, to our EP community in a way that breaks down many of their historical misperceptions or perceptions on the technology. And so kind of with you kind of doing a good launch of the technology when we're able to do so as that's kind of very important and we plan to make a lot more noise than we're doing today given that today again we're not really at the point of launching the technology fully.

David Fischel: And so, we view doing a good launch of the technology when we're able to do so as very important. And we plan to make a lot more noise than we did today, given that today, again, we're not really at the point of launching the technology fully. And from a pricing margin revenue model or sales model perspective, I don't want to give too much detail at this point. There'll be an opportunity in the future to provide more details, so I'll just kind of talk philosophically about how we're approaching it.

Speaker Change: from a pricing margin revenue model.

David Fischel: We are still waiting to receive the microbiology questions, but have been advised that they should arrive momentarily and hope to similarly successfully complete that section in the coming weeks. With receipt of CE Mark, we will initiate a full launch of magic in Europe, benefiting from the clinical experience and awareness generated by the ongoing magic clinical study.

David Fischel: There'll be an opportunity in the future to provide more details, so I'll just kind of talk philosophically about how we're approaching it. And again, when we do a full launch, there'll be opportunities to speak with more details. Philosophically, Genesys X will command a premium over Genesys.

Speaker Change: Sales Model Perspective. I don't want to give too much detail at this point. There'll be an opportunity in the future to provide more details so I'll just kind of talk and philosophically how we're approaching it

David Fischel: And again, when we do a full launch, there'll be opportunities to speak kind of with more details. Philosophically, Genesys X will command a premium over Genesys. It is the latest technology. It saves the hospital significant amounts of investment that they would otherwise make in the system. And so I think that's kind of a warranted natural move for us.

Speaker Change: And again, when we do a full launch, there will be opportunities to speak with more details.

David Fischel: It is the latest technology. It saves the hospital significant amounts of investment that they would otherwise make in the system, and so I think that's kind of a warranted natural move for us. In terms of the complexity of manufacturing and installation, this is still a highly sophisticated device with many expensive components. This is because we're building complex, very high-quality robotic technology, and we've done various smart things, like I mentioned in the prepared remarks, to make manufacturing and installation simpler.

Speaker Change: and...

David Fischel: In the US, it's not as simple to describe the regulatory review process, but there has also been significant progress in recent weeks. We've had continuous dialogue with FDA since the PMA submission and are very appreciative of the collaborative and thoughtful discussions and guidance. The PMA submission is being refined with that guidance, and the ongoing dialogue supports our expectation of achieving an initial regulatory approval, leveraging the existing data being generated in the European magic study with a clear plan for subsequent post-approval studies in the US. We appreciate the responsiveness and collaborative nature of these discussions, and believe they are reflective of a shared appreciation for the importance of ensuring magic becomes available for patients and physicians who depend on it.

Speaker Change: Philosophically, Genesys X will commend a premium over Genesys. It is the latest technology. It saves the hospital significant amounts of investment that they would otherwise make in the system and so I think that's kind of a warranted natural move for us.

David Fischel: In terms of the complexity of manufacturing and installation, this is still a highly sophisticated device with many expensive components. We're building complex, very high-quality robotic technology. And we've done various smart things, like I mentioned in the prepared remarks, to make manufacturing and installation simpler. And so generally, I would expect, you know, I think it'd be fair for you to expect that we would benefit from those types of moves.

Speaker Change: In terms of the complexity of manufacturing and installation, this is still a highly sophisticated device with many expensive components. This is, we're building, you know, complex,

Speaker Change: very high quality robotic technology and we've done various smart things like I mentioned in the in the prepared remarks.

David Fischel: And so generally, I would expect – I think it'd be fair for you to expect that we would benefit from those types of moves. And when it comes to the commercial models, we plan to – The value of a robot remains the value of a robot. And so we don't plan to discount the value of the robot. You can capture that value, though, in different ways from a cash flow perspective, from a kind of commercial model perspective that you present to the customer.

Speaker Change: to make manufacturing and installation simpler and so generally I would expect, you know, I think it'd be fair for you to expect that we would benefit from those types of moves and and when it comes to the commercial models

David Fischel: And when it comes to the commercial models, we plan to. The value of a robot remains the value of a robot. And so we don't plan to discount the value of the robot. You can capture that value, though, in different ways from a cash flow perspective, from a kind of commercial model perspective that you present to the customer. The most natural way, the way that Stereotaxis has experienced its entire existence, is selling a system, right? And so we'll obviously continue to sell a system like we do currently with Genesys. We'll sell Genesys X.

David Fischel: The final topic that I want to cover on this call, and which will have significant importance to our trajectory, is acquisition of access point technologies. We announced the agreement to acquire APT on our call in May, and closed the acquisition just over a week ago at end of July. This was stereotaxis's first acquisition ever, reflective of our selectivity and focus. That acquisition was opportunistic and pursued in a financially prudent fashion, but what is most important for significant value creation is the strong synergistic and strategic rationales for that acquisition.

Speaker Change: We plan to

Speaker Change: The value of a robot remains the value of a robot, and so we don't plan to discount the value of the robot. You can capture that value, though.

Speaker Change: in different ways from a cash flow perspective, from a kind of a commercial model perspective that you present to the customer.

David Fischel: The most natural way, the way that Stereotaxis has experienced its entire existence is selling a system, right? And so we'll obviously continue to sell a system like we do currently with Genesys. We'll sell Genesys X.

David Fischel: It will be at a premium, but obviously the hospital will benefit from reduced costs in terms of architects and contractors. We will also offer two other models that will, again, retain the same value of the robot but offer it through different mechanisms. One will be a leasing model, and the other will be a placement of the robot with a minimum of disposable purchase commitment. And so those are both viable models.

Speaker Change: The most natural way, the way that stereotaxis has experienced its entire existence is selling a system.

David Fischel: It will be at a premium, but obviously the hospital will benefit from reduced costs in terms of architects and contractors. We will also offer two other models that will, again, retain the same value of the robot, but offer the robot through different mechanisms. One will be a leasing model, and the other will be a placement of the robot with minimal disposables, or a minimum of disposable purchase commitment.

Speaker Change: Right. And so we'll obviously continue to sell a system like we do currently with Genesys. We'll sell Genesys X. It will be at a premium, but obviously the hospital will benefit from from reduced costs in terms of architects and contractors.

David Fischel: We were fortunate to announce that acquisition immediately before the largest conference in our field, HRS. APT's products were included in the stereotaxis booth and both teams worked together at the conference. We had entered into this agreement cognizant of the natural sales synergy. APT had minimal U.S, revenue from differentiated high-quality diagnostic EP casters, a consequence of having no dedicated sales team. Failure taxes has over 20 people in the field across the U.S, who are particularly skilled and focused on enabling and improving the treatment of the most complex arrhythmias.

Speaker Change: that we will also offer two other models that will, again, retain the same value of the robot, but

Speaker Change: offer the robot through different mechanisms. One will be a leasing model, and the other will be a placement of the robot with minimal disposable, or a minimum of disposable purchase commitment.

David Fischel: We're not innovating completely new things. There are very, very large companies that have trod this path before us. And so we're obviously learning from that experience. If you look at kind of, you know, obviously the leader in the robotic surgical field, not in our space at all, not a competitor, but the leader in surgical robotics, they have by now the majority of their system placements in any given year are leases and placements with disposable commitments rather than sales outright.

David Fischel: And so those are both viable models. We're not innovating completely new things. There are very, very large companies that have gone down this path before us, and so we're obviously learning from that experience. If you look at kind of, you know, obviously the leader in the robotic surgical field, not in our space at all, not a competitor, but the leader in surgical robotics, they have, by now, the majority of their system placements in any given year are leases and placements with disposable commitments rather than sales outright.

Speaker Change: And so those are both viable models. We're not innovating completely new things. There's a very, very large companies that have tread this path before us. And so we're obviously learning from that experience. If you look at kind of, you know, obviously the leader in the robotic surgical field, not in our space at all, not a competitor, but the leader in surgical robotics, they by now the majority of their system placements in any given year are leases and placements with disposable commitments rather than sales outright. And so I think that's a model that also hospitals are very comfortable with. And from a financial perspective for us.

David Fischel: APT's products and stereotaxis commercial teams align beautifully from messaging perspectives and from both a position and procedure both. Focus. These sales synergies were at full display at HRS. The Stereotaxis commercial team picked up on the products quickly and were enthusiastic about the new opportunity. Physician customers of Stereotaxis were very pleased and supportive of that position strategy and while the vast majority had never before been exposed to APD's products, they viewed the catheters as attractive and relevant.

David Fischel: And so I think that's a model that hospitals are also very comfortable with. And from a financial perspective for us, given the significant recurring revenue model that is starting to be built around our business, right? The razor blade model that is being enhanced with the magic catheter, with the high density mapping catheter I mentioned, with the devices that can allow the same robot to be used in other applications, it becomes very financially reasonable to offer those alternative models and to deal with the cashflow and not have any kind of, you know, not to have any particular challenges from a working capital perspective. Thanks for all the coverage, David. I'll hop back in the queue.

David Fischel: And so I think that's a model that also hospitals are very comfortable with. And from a financial perspective for us, given the significant recurring revenue model that is starting to be built around our business, the razor blade model that is being enhanced with the magic catheter, with the high density mapping catheter I mentioned, with the devices that can allow the same robot to be used in other applications, it becomes very financially reasonable to offer those alternative models and to deal with the cash flow and not to have kind of, you know, not to have any particularly challenges from a working capital perspective.

Speaker Change: given the significant recurring revenue.

Speaker Change: model that is starting to be built around our business, right? The razor blade model that is being enhanced with the magic catheter, with the high density mapping catheter I mentioned, with the devices that can allow the same robot to be used in in other applications.

David Fischel: Following HRS, we did a more formal training of our entire team, began the process of establishing commercial plans, and started an engagement in the field. We already have over a dozen physicians and hospitals newly exposed to APD that have tried the catheters or begun value analysis committee's missions at their hospitals to be able to purchase the catheters. APD's US catheter revenue in July was approximately 50% higher than the average monthly revenue in the first half of this year or 2023.

Speaker Change: It becomes very financially reasonable to offer those alternative models and to deal with the cash flow and not to have any particular challenges from a working capital perspective.

Adam Maeder: Thanks for all the coverage, David. I'll hop back in queue.

Speaker Change: i

David Fischel: Working through VAC's emissions and building commercial momentum is more like a snowball than flipping a light switch, but we are already seeing an initial impact and believe we can grow these products substantially in the coming months. The sales synergy also works both ways. APD's catheters contribute incremental revenue in the practices our team already calls upon, and in reverse, these catheters serve as a door opener at centers focused on complex arrhythmias to pay the path for the adoption of robotics.

Speaker Change: Thanks for all the color, David. I'll hop back in queue.

Operator: Our next question comes from the line of Josh Jennings with TD Cowan. Please go ahead. Hi, good afternoon.

Joshua Jennings: Our next question comes from the line of Josh Jennings with TD Cowan. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Josh Jennings with TD Cowan. Please go ahead.

Joshua Jennings: Hi, good afternoon. Thanks for taking questions and great to see the genetic section. I wanted to ask David about the MAGIC-FAST study, and I think we saw a glimpse of the first 40 patients at HRS, maybe just anything else you can share just on the results from that study and on top of that is the data is the data set that's submitted for CMARC that will be submitted for CMARC approval it already has been actually as you disclosed the same data set that you can submit in the U.S. for the FDA for the PMA filing or is there going to be more patients that have been enrolled and and then we're longer follow-up that's required.

Josh Jennings: Thanks for taking questions and great to see the GENESICS Act CE Mark approval in hand. I wanted to ask David about the MAGIC-FAST study.

Josh Jennings: Hi, good afternoon. Thanks for taking questions and great to see that you have success.

Josh Jennings: I wanted to ask David about the Magic Fest study and I think we saw a glimpse of the first 40 patients at HRS.

Josh Jennings: And I think we saw a glimpse of the first 40 patients at HRS. Maybe just anything else you can share just on the results from that study and, on top of that, is the dataset that's been submitted for CMARC, that will be submitted for CMARC approval, has already been, as you disclosed, the same dataset that you can submit in the U.S. to the FDA for the PMA filing, or are there going to be more patients that have been enrolled and a longer follow-up that's required? Sure. Hi Josh, and good afternoon.

Speaker Change: But maybe just anything else you can share just on the results from that study

David Fischel: Our primary motivation for acquiring APD was not the opportunistic nature of the situation nor the sales synergy, but rather the strategic value of having in-house catheter development and manufacturing expertise. APD's team, expertise and capabilities will significantly amplify and accelerate stereotypes in the next wave of innovation efforts as we look to develop a broader family of interventional devices that are navigated by our robots within electric physiology and across a range of cardiovascular procedures.

Speaker Change: and...

Speaker Change: And on top of that, is the data set that's submitted for CMARC, that will be submitted for CMARC approval, it already has been actually, as you disclosed, the same data set that you can submit in the U.S. for the FDA for the PMA filing? Or is there going to be more patients that have been enrolled?

David Fischel: Sure. Hi Josh, and good afternoon.

David Fischel: Thanks for that question. As you mentioned, the MAGIC-VET study is a clinical human study that's taking place at two centers in Europe. And they have used MAGIC over the last several months from the beginning of this year in treating a broad range of arrhythmia patients. During that time, we submitted initial data at the end of February on the patients that had enrolled up till that point in our CE-MARC submission, and we included it in the PMA submission as well. And those sites have continued to enroll patients.

Speaker Change: and a longer follow-up that's required.

David Fischel: Thanks for that question. So, like you mentioned, the MAGIC VEST study is a clinical human study that's taking place at two centers in Europe. They have used MAGIC over the last several months from the beginning of this year in treating a broad range of arrhythmia patients. During that time, we submitted initial data at the end of February on the patients that had enrolled up until that point in our CE-MARC submission, and we included it in the PMA submission as well.

Speaker Change: Sure, hi Josh and good afternoon. Thanks for that question

Speaker Change: So, um...

David Fischel: There are three specific areas of focus I want to touch upon. First, a broader family of robotically steered catheters to complement magic in AP. Second, in emerging and tangible multi-liked PFH strategy. And third, our expansion into new clinical applications. On the first topic, the emergence of high density mapping has been a significant change to the EP field over the past decade. Stereotaxis has never developed a robotically steered high density mapping catheter and so in the majority of our procedures, the physician navigates a manual mapping catheter by hand, separate from the robotically steered oblation catheter.

Speaker Change: So, like you mentioned, the MAGIC VEST study is the...

Speaker Change: clinical human study that's taking place at two centers in Europe, and they used magic.

Speaker Change: over the last several months, from the beginning of this year, in treating a broad range of arrhythmia patients. Over that time, we submitted initial data at the end of February on the patients that had enrolled up until that point with our CE Mark submission, and we included it in the PMA submission as well. Those sites have continued to enroll patients, and while initially the study was designed with a maximum of 30 patients per site, we did expand that upper bound, and so they're continuing to enroll patients as we speak.

David Fischel: Those sites have continued to enroll patients, and while initially the study was designed with a maximum of 30 patients per site, we did expand that upper bound, and so they're continuing to enroll patients as we speak. We're overall very pleased with the performance of MAGIC.

David Fischel: And while initially the study was designed with a maximum of 30 patients per site, we did expand that upper bound, and so they're continuing to enroll patients as we speak. And we're overall very pleased with the performance of MAGIC.

David Fischel: The workflow is viable, but not ideal. And there has been strong physician interest, value from a procedure workflow perspective and clinical merit for robotically steered dedicated mapping catheter. We had already begun developing such a catheter prior to that acquisition and are now accelerating that process with the catheter design complete and production of hundreds of units taking place for formal regulatory testing. We expect the catheter to receive regulatory approval within a year and to be highly synergistic with magic, from a commercial perspective, if the introduction of magic increases our expected revenue per procedure three to four fold, the addition of a mapping catheter leads to a five to six fold increase in revenue per procedure.

David Fischel: So, the physicians did present some of the data at HRS, so that's available through them. They're working together, and they have submitted for publication additional data beyond that. It's not my place to share the exact results, given that they're trying to get them published. So, I think I'll leave that for them to publish, but overall, we're delighted with the performance of MAGIC. It's definitely a good catheter. It's working well in humans. It's treating patients on a regular basis, and the clinical improvements and performance improvements versus the thermocol RMT catheter of J&J are real and are being seen in real life.

David Fischel: So, the physicians did present some of the data at HRS, so that's available through them. They're working together on, and they submitted for publication additional data beyond that. I don't, it's not my place to share the exact results, given that they're trying to get it published. So, I think I'll kind of, I'll leave that for them to publish. But overall, we're delighted with the performance of MAGIC. It's definitely a good catheter.

Speaker Change: and we're overall very pleased with the performance of MAGIC. So the physicians did present some of the data at HRS.

Speaker Change: So, that's available through them. There's they're working together on and they submitted for publication additional data beyond that. I don't.

Speaker Change: It's not my place to share the exact results given that they're trying to get it published So I think I'll kind of I'll leave that for them to publish. But um, but overall we're we're delighted with the performance of magic It's definitely a good catheter it's working in humans treating patients on a regular basis and and it is the clinical improvements and performance improvements versus the thermocool RMT catheter of J&J are Real and are being seen in the real world

David Fischel: It's working in humans. It's treating patients on a regular basis. And the clinical improvements and performance improvements versus the thermocol RMT catheter of J&J are real, and they are being seen in the real world. M. When we look at FDA, I mentioned in my prepared remarks kind of the regular discussions we're having with FDA, and a lot of that is tied to what would be the most useful data for FDA to see at this point to be able to provide regulatory approval in the U.S., leveraging the data that's coming out of Europe, and what data and what study designs would be useful for a post-approval study in the U.S.

David Fischel: Those numbers sound absurd given our current vantage point, but reflect the normal revenue model and pricing of any other participant in the EP field. They shine light onto the missed opportunity embedded into our current product ecosystem and the structural transformation at play.

David Fischel: Adam [inaudible] When we look at FDA, I mentioned in my prepared remarks kind of the regular discussions we're having with FDA, and a lot of that is tied to what would be the most useful data for FDA to see at this point to be able to provide regulatory approval in the U.S., leveraging the data that's coming out of Europe, and what data and what study designs would be useful for a post-approval study in And so that's been the majority of the discussions around that topic, and there is, let's call it focusing on the types of patients, types of data that's being collected in Europe based off of the feedback that's being received from FDA and those discussions with FDA.

Speaker Change: and...

Speaker Change: When we look at FDA,

Speaker Change: I mentioned in the prepared remarks, kind of the regular discussions we're having with FDA, and a lot of that is tied towards

David Fischel: Onto the second topic, PFA. Pulse field ablation or electric operation is a new energy source available for cardiac ablation procedures as an alternative to radio frequency or trial. The first PFA catheters just entered the field and are already on track for over a couple of billion dollars in annual revenue, partially through conversion of procedures through other energy sources, but principally through market expansion. Area taxes has been largely protected from the effects of PFA in our existing procedures, but we recognize the impact it is having in the field.

Speaker Change: What would be the most useful data for FDA to see at this point?

Speaker Change: to be able to provide.

Speaker Change: regulatory approval in the U.S. leveraging the data that's coming out of Europe.

Speaker Change: and what data and what study designs would be useful for a post-approval study in the U.S., both to corroborate the data through a U.S. study and to expand label, expand indications.

David Fischel: And so that's been the majority of the discussions around that topic, and there is, and let's call it focusing on the types of patients, types of data that's being collected in Europe based off of the feedback that's being received from FDA and those discussions with FDA. So there's continuous enrollment in Europe, and I think, again, that we have a good kind of shot and good alignment in terms of that data, assuming it continues to enroll well and will be good for our FDA submission. Thanks for that! And just on the magic catheter, there are a lot of enhancements and capabilities. 1.

Speaker Change: in the U.S. to kind of have a broader label. And so that's been the majority of the discussions have been around that topic. And there is some.

David Fischel: And the importance of operating choice and a broader ecosystem of catheter options with our robot. I can't yet fully share our activities in PFA, but I can shed some color on our efforts. We have three distinct more advanced PFA opportunities being advanced in tandem. One leverages the magic catheter and the other two use unique PFA catheters. Two are done in collaboration with partners and one is a fully owned technology required with APT that is being advanced in collaboration with the Mayo Clinic.

David Fischel: We've had an accelerating pace of pre-clinical PFA studies in recent months and have line of sight towards first in human studies for at least two of these opportunities within the next six to 12 months. One is likely to even become commercially available in Europe in 2025. Our collaboration with the Mayo Clinic is exciting and I have the opportunity to visit them last month. The PFA catheter they designed with APT is particularly differentiated addressing some of the clinical challenges with efficacy, durability, and patient safety that are starting to emerge with commercial single shot PFA catheters. After significant effort, we are starting to see green shoots emerge with multiple shots on goal for clinically meaningful technologically differentiated and commercially impactful PFA catheters.

Speaker Change: and let's call it focusing of the types of patients

Speaker Change: types of data that's being collected in Europe.

Speaker Change: based off of the feedback that's being received from FDA and those discussions with FDA. So, there's continuous enrollment in Europe, and I think, again, that we have a good kind of shot and good alignment in terms of that data, assuming it continues to enroll well, will be good for our FDA submission.

David Fischel: So there's continuous enrollment in Europe, and I think, again, that we have a good kind of shot and good alignment in terms of that data, assuming it continues to enroll well, will be good for our FDA submission.

Joshua Jennings: Thanks for that. And just on the magic catheter, there are a lot of enhancements and capabilities. 1, um, It's exciting to hear about all the PFA development programs that are underway under your roof now. Are you going to ultimately pursue a high-power, short-duration energy delivery approach with MAGIC-CAP? I believe that you can get up to 100 watts with MAGIC, but I guess J&J is having some success with QDOT, and I just wanted to touch on that topic.

Speaker Change: Excellent. Thanks for that. And just on the magic catheter, a lot of enhancements and capabilities. One

Josh Jennings: And it's exciting to hear about all the PFA development programs that are underway under your roof now. Are you going to ultimately pursue a high-power, short-duration energy delivery approach with MagicCap? I believe that you can get up to 100 watts with Magic, but I guess J&J is having some success with QDOT, and I just wanted to touch on that topic.

Speaker Change: And it's exciting to hear about all the PFA development programs that are underway under your roof now.

Speaker Change: Are you going to ultimately pursue a high-power, short-duration energy delivery approach with MagicCaf? I believe that you can get up to 100 watts with Magic, but I guess J&J is having some success with QDOT.

David Fischel: Sure. So, high power, short duration, radio frequency ablation is an exciting and interesting part of the EP landscape. We tested the MAGiC catheter through bench and preclinical testing up to 100 watts. And one of the beautiful features of the MAGiC catheter and the Gold Tip specifically is how stable the temperature of the tip stays, even at very, very high powers. And so, usually, as you increase power, you run the risk of char and heating up the tip, which can lead to coagulation and kind of other clinical risks.

David Fischel: Sure. So, high power, short duration, radio frequency ablation is an exciting and interesting part of the EP landscape. We tested the MAGIC catheter through bench and preclinical testing up to 100 watts. And one of the beautiful features of the MAGIC catheter and the Gold Tip specifically is how stable the temperature of the tip stays, even at very, very high powers. And so, usually, as you increase power, you run the risk of char and heating up the tip, which can lead to coagulation and kind of other clinical risks.

Speaker Change: I just wanted to touch on that topic.

Speaker Change: Sure

Speaker Change: So, um...

Speaker Change: So...

Speaker Change: High Power, Short Duration, Radio Frequency, Ablation isn't an exciting and interesting part of the EP landscape. We tested the MAGIC Catheter through bench and pre-clinical testing up till 100 watts.

David Fischel: The last topic, the expansion of our robotic technology into a broader set of applications is something we've discussed previously. We are in the late stages of developing robotically steered guide wires and guide catheters that expand the value of our robot into several large fields, such as neural intervention, interventional cardiology, and interventional radiology. These are advancing on track for regulatory submissions within the next six months and the guide catheter is being developed with APT.

Speaker Change: and one of the beautiful features of the magic catheter and the gold tip specifically is how stable the temperature of the tip stays even at very very high powers.

Speaker Change: And so usually as you increase power, you run the risk of char and heating up of the tip which can lead to coagulation and kind of other clinical risks.

David Fischel: The tip of MAGIC stays extremely stable, even at very high wattage, which is kind of, again, a beautiful kind of aspect. It's related to both the material of the tip and the way the irrigation flows through the tip, even when you have very low irrigation use, kind of reducing the fluid load that typically a patient is receiving during an ablation procedure.

David Fischel: The tip of MAGiC stays extremely stable, even at very high wattage, which is kind of, again, a beautiful kind of aspect. It's related to both the material of the tip and the way the irrigation flows through the tip, even when you have very low irrigation use, kind of reducing the fluid load that typically a patient is receiving during an ablation procedure.

David Fischel: Having skilled in-house catheter design and manufacturing expertise will be particularly beneficial as we explore innovative ideas shared by physicians for ways our technology can add value in these new indications. It accelerates dramatically the time to an initial prototype and the ability to iterate with feedback. While the first guide wire and guide catheter will allow for a strong initial offering, as we begin to address the broad end of Asgard's surgery field, the in-house capabilities of APT are of great strategic value to accelerating and improving our expansion.

Speaker Change: The tip of magic stays extremely stable, even at very high wattage, which is kind of, again, a beautiful kind of aspect. It's related to both the material of the tip and the way the irrigation flows through the tip.

Speaker Change: And even when you have very low irrigation use, that kind of, you know, reducing the fluid load that typically a patient is receiving during an ablation procedure.

David Fischel: Catheters in the U.S., almost all radiofrequency ablation catheters, are approved only up to 50 watts from a power setting. And so we have only pursued, in terms of the pivotal animal studies and what was submitted for label, we have only pursued up to 50 watts. And so while the device is definitely built towards things beyond that and can accommodate powers beyond that, that's not part of a label that we're pursuing, and that won't be part of any initial device.

David Fischel: In the U.S., almost all radiofrequency ablation catheters are approved only up to 50 watts from a power setting. And so we have only pursued, in terms of the pivotal animal studies and what was submitted for label, we have only pursued up to 50 watts. And so while the device is definitely built towards things beyond that and can accommodate powers beyond that, that's not part of a label that we're pursuing, and that won't be part of any initial device.

Speaker Change: Catheters in the US, almost all radio frequency ablation catheters, are approved only up till 50 watts.

Speaker Change: from a power setting and so we have

David Fischel: We are pleased with the significant progress we are making in establishing a healthy foundation for Stereotaxis upon which to build a substantial, high-growth, profitable business. This was a busy quarter for us, particularly in these three key areas, but also in our other efforts, including regulatory efforts in China and the synchrony and sink tele surgery platform. We see the puzzle pieces falling into place in each of our three key geographies, the U.S., Europe and China, we have opportunity for a full ecosystem coming together and driving breakout growth. The opportunity in any individual geography can dwarf our current entire business.

Speaker Change: We have only pursued in terms of the pivotal animal studies and what was submitted for label We have we pursued up to 50 watts

Speaker Change: And so while the device is definitely built.

Speaker Change: towards Things beyond that and can accommodate that that's not part of a label That we're pursuing and that won't be part of any initial device, and so I think kind of will have opportunity to pursue higher power short-duration post-approval and we can do additional studies, but we haven't been attempting to do that at this point

David Fischel: And so I think we'll have the opportunity to pursue higher power, short duration post-approval. We can do additional studies, but we haven't been attempting to do that at this point. But even at 50 watts, we have had beautiful lesions that form overall in a very rapid fashion. So I think the performance of the catheter is very much in line with that evolution. Thanks for that, too. And sorry, Takk, one more in here, but I think you're going to get, we're going to be able to, your magnetic VT study results, the Traverse data was presented as a late break at ACC, just thinking about... those two data sets if they're positive and how that could benefit your marketing to EP labs for the clinical value proposition for robotic magnetic navigation once those data sets are read out Thanks a lot.

Speaker Change: But even at 50 watts, we have had beautiful lesions that form overall in a very rapid fashion. So I think the performance of the catheter is very much in line with that evolution of the field.

Kimberly Peery: I'll hand the call over to Kim now to discuss our financial results.

Kimberly Peery: Thank you, David, and good afternoon, everyone. Revenue for the second quarter of 2024 totals 4.5 million compared to 7.9 million in the prior year's second quarter. System revenue for the second quarter was 0.2 million and recurring revenue with 4.3 million compared to 3.3 million and 4.6 million in the prior year's second quarter. The majority of the revenue decline in the current quarter is driven by timing of system deliveries delayed by elongated customer construction projects.

Joshua Jennings: Thanks for that too, And sorry, tack one more in here, but I think you're going to get, we're going to be able to get your magnetic VT study results, the Traverse data was presented as a late break at ACC, just thinking about... those two data sets if they're positive and how that could benefit your marketing to EP Labs for the clinical value proposition for robotic magnetic navigation once those data sets are read out or the magnetic VT studies

Speaker Change: Thanks for that too, and sorry to tack one more in here, but I think you're going to get, we're going to be able to...

Speaker Change: your magnetic VT study results.

Speaker Change: The Traverse data was

Speaker Change: was presented as a late-breaker at ACC, just thinking about...

Speaker Change: those two data sets, if they're positive.

Speaker Change: and how that could benefit your marketing to EP Labs for the clinical value proposition for robotic magnetic navigation once those datasets are read out or the magnetic VT studies read out.

Kimberly Peery: System revenue in the current quarter reflects minimal revenue recognized on system installations compared to more substantial system revenue recognized in the prior year quarter from system deliveries. System revenue is inherently uneven from period to period, and the performance in the quarter is not reflected of our expectation for the balance of the year. We maintain system backlog of 15.3 million as at the end of the second quarter. Gross margin for the second quarter of 2024 was 74% of revenue, recurring revenue gross margin was 76% and system gross margin was 22%.

David Fischel: So the Magnetic BT Study was a prospective, randomized study comparing robotics versus manual cardiac ablation for ischemic CT patients. We decided to stop enrollment early just because it was enrolling relatively slowly and it wasn't strategically critical to our path in terms of building this new product ecosystem.

David Fischel: Thanks a lot. Yep, sure. So, um,

Josh Jennings: Yep, sure. The Magnetic VT Study was a prospective, randomized study comparing robotics versus manual cardiac ablation for ischemic CT patients. We decided to stop enrollment early just because it was enrolling relatively slowly, and it wasn't strategically critical to our path in terms of building this new product ecosystem. So, we enrolled—at the end of the day, it's probably actually the largest randomized prospective VT study that's out there in the ablation field. We enrolled roughly 180 patients.

Speaker Change: Yep, sure. So the magnetic B-Teach study was a prospective, randomized,

Speaker Change: and...

Speaker Change: study comparing robotics versus manual cardiac ablation for ischemic CT patients. We completed...

Speaker Change: We decided to stop enrollment early, just because it was enrolling relatively slowly, and it wasn't...

Speaker Change: strategically critical to our path in terms of building this new product ecosystem. So we enrolled, at the end of the day, it's probably actually the largest randomized prospective.

Joshua Jennings: So we enrolled, at the end of the day, it's probably actually the largest randomized prospective BT study that's out there in the ablation field. We enrolled roughly 180 patients. All the patients finished their follow-up, and we've been working with statisticians and the PIs to get the results ready for presentation at one of the upcoming conferences. So again, I'd expect that at one of the upcoming conferences, the PIs are going to present the results, and we'll do a concurrent release at the time.

Kimberly Peery: Operating expenses in the quarter of 9.3 million included 2.5 million in non-cash.compensation expense. Excluding non-cash.compensation expense, adjusted operating expenses for 6.8 million comparable to prior year adjusted operating expenses of 6.9 million. Operating expenses in the quarter were impacted by higher acquisition related legal cost and regulatory related activities counteracted by the reversal of a historical approved liability. Operating loss and net loss for the second quarter of 2024 were 6 million and 5.8 million compared to 5.3 million and 5 million in the previous year.

David Fischel: All the patients finished their follow-up, and we've been working with statisticians and the PIs to get the results ready for a presentation at one of the upcoming conferences. So, again, I'd expect that at one of the upcoming conferences, the PIs are going to present the results, and we'll do a concurrent release at the time. Our next question comes from the line of Frank Takkinen with Lake Street Capital Markets. Please go ahead. Hey, this is Nelson Cox on for Frank.

Speaker Change: VT study that's out there in the ablation field. It's enrolled roughly 180 patients and all the patients finish their follow-up and we've been working with statisticians and the PIs.

Speaker Change: to get the results ready for a presentation at one of the upcoming conferences. So again, I'd expect that at one of the upcoming conferences, the PIs are going to present the results and we'll do a concurrent release at the time.

Frank Takkinen: Our next question comes from the line of Frank Takkinen with Lake Street Capital Markets. Please go ahead.

Speaker Change: Our next question comes from the line of Frank Takinen with Lake Street Capital Markets. Please go ahead.

Nelson Cox: Hey, this is Nelson Cox on behalf of Frank. Good to see all the progress and congratulations on the CE mark. I wanted to follow up on the earlier question on the manufacturing scale-up process for Genesis-X. Sounds like confidence there is strong, but can you help us quantify the scale you will be able to build versus how that compares with Genesis and maybe how the timelines of production compare?

Operator: Good to see all the progress and congratulations on the CE mark. I wanted to follow up on the earlier question on the manufacturing scale-up process for Genesys X. Sounds like confidence there is strong, but can you help us quantify the scale you will be able to build versus how that compares with Genesys and maybe how the timelines of production compare? Sure, that's hard to do with specificity given that we have only manufactured less than a handful of Genesys X systems to date, and those have been manufactured largely by the R&D team rather than the dedicated manufacturing team.

Kimberly Peery: Adjusted operating loss and adjusted net loss for the quarter, excluding non-cash.compensation expense for 3.5 million and 3.3 million compared to 2.7 million and 2.4 million in the previous year, negative free cash flow for the second quarter was 3.1 million. Our financial statements for the second quarter do not reflect any consolidation or impact from the APT acquisition beyond legal expenses incurred during the acquisition process. We are consolidating APT's results starting August 1st. Our third quarter financial results will therefore include two months of APT results. At June 30th, we had cash and cash equivalent of 15.2 million and no debt.

Speaker Change: Hey, this is Nelson Cox on for Frank. Good to see all the progress and congrats on the CE mark.

Nelson Cox: I wanted to follow up on the earlier question on the manufacturing scale-up process for Genesis X. It sounds like confidence there is strong, but can you help us quantify the scale you will be able to build versus how that compares with Genesis and maybe how the timelines of production compare?

David Fischel: Sure. That's hard to do with specificity given that we have only manufactured less than a handful of Genesys X systems to date, and those have been manufactured largely by the R&D team rather than the dedicated manufacturing team. And so that is really part of this process over the next few months is how do you make sure that it can be built by the manufacturing team directly in an efficient way. We know that we can build it reliably, but you want to kind of do all the little tricks and little processes that make it an efficient manufacturing process.

Speaker Change: Sure, that's hard to do with specificity, given that we have only manufactured less than a handful of Genesis X systems to date, and we've not yet...

Speaker Change: And those have been manufactured largely by the R&D team rather than the dedicated manufacturing team. And so that is really part of this process over the next few months, is how do you make sure that it can be built.

Operator: And so that is really part of this process over the next few months is how do you make sure that it can be built by the manufacturing team directly in an efficient way. We know that we can build it reliably, but you want to kind of do all the little tricks and little processes that make it an efficient manufacturing process. Overall, in the past, we've talked about how the new headquarters that we established a couple of years ago that allowed us to manufacture tens of systems, let's say the mid-high tens of systems a year in this facility. We would obviously have to scale our personnel as we go to those levels, but we can manufacture roughly a system a month and then have enough space to do more than four at a time.

David Fischel: I will now hand the call back to David. Thank you, Kim. As mentioned previously, we continue to focus on realizing our strategic transformation while maintaining commercial momentum in preserving financial strength. The potential value creation is ultimately predicated on establishing the right foundations for the company upon which we can profitably grow orders and manage to larger. While our short-term results have minimal impact on our long-term value, we recognize the quarterly numbers are disappointing.

Speaker Change: by the manufacturing team directly in an efficient way. We know that we can build it reliably, but you want to kind of do all the little tricks and little processes that make it an efficient manufacturing process.

David Fischel: And overall, in the past, we've talked about how the new headquarters that we established a couple of years ago allowed us to manufacture tens of thousands of systems, let's say the mid-high tens of thousands of systems a year in this facility. We would obviously have to scale up our personnel as we go to those levels, but we can manufacture roughly one system a month and have enough space to do more than four at a time.

Speaker Change: and overall in the past we've talked about how the new headquarters that we established a couple years ago that allowed us to manufacture in the tens of systems you know let's say the mid-mid-high tens of systems

David Fischel: Our visibility into the second half of this year gives us high confidence and significantly improved performance compared to the first half of the year. We expect greater than $14 million in revenue in the second half of this year with stable recurring revenue and the minimum revenue from the Genesis systems currently being shipped. We expect likely upside to that minimum expectation with full-year revenue approximately equal to the previous year. These expectations do not incorporate contributions of revenue from APT or potential revenue from the launch of Genesis X and Magic.

Speaker Change: a year in this facility, we would obviously have to scale our personnel as we go to those levels.

Speaker Change: but we can manufacture roughly a system a month and have enough space to do more than four at a time. And so that's one factor I'd say with Genesys X.

David Fischel: And so that's kind of – that's one factor. I'd say with Genesys X, given that the systems do not have to be assembled facing each other, and they're, again, the left and the right are identical to each other, you have definite efficiencies from a time and personnel complexity perspective over Genesys. And so I don't know exactly where we're going to end up, but it's definitely – we can grow by an order of magnitude from where we are right now in our current facility with the technologies we have, and I look forward to the challenges and problems of having to scale beyond that.

Operator: And so that's one factor I'd say with Genesys X, given that the systems do not have to be assembled facing each other, and again, the left and the right are identical to each other, you have definite efficiencies from a time and personnel complexity perspective over Genesys.

Speaker Change: given that the systems do not have to be assembled facing each other and they're

Speaker Change: Again, the left and the right are identical to each other. You have definite efficiencies from a time, personnel, complexity perspective.

David Fischel: We are cognizant of the importance of protecting our balance sheet, protecting shareholders from unnecessary dilution, and managing stereo taxes in a financially prudent fashion. We expect to end this year with $13 million in cash and no debt. We view our existing balance sheet as a loudness to reach key milestone, commercialize our new innovation, and properly grow our business. We have known tension of diluting shareholders at current valuation levels and will be thoughtful in how we manage our financial position and protect shareholder value.

Frank Takkinen: And so I don't know exactly where we're going to end up, but it's definitely, we can grow by an order of magnitude from where we are right now in our current facility with the technologies we have, and I look forward to the challenges and problems of having to scale beyond. Perfect. That's great.

Speaker Change: over Genesis, and so I don't know exactly where we're going to end up, but it's definitely... We can grow an order of magnitude from where we are right now in our current facility with the technologies we have, and I look forward to the challenges and problems of having to scale beyond that.

Nelson Cox: Perfect. That's great. And then with the CE mark and expected, you know, incoming FDA 510k, sounds like interest is strong. I guess one question there is, Will this cause hospitals to pause and wait for the next generation system, or is that not something you're really thinking about right now, or any color there?

Frank Takkinen: And then with the CE mark and expected, you know, incoming FDA 510K, sounds like interest is strong. I guess one question there is, Will this cause hospitals to pause and wait for the next generation system, or is that not something you're really thinking about right now, or any color there? It's definitely a factor on our minds, and there is a little bit of that that takes place and plays out. I'd say we did include in the press release, in the prepared remarks, commentary about there being a late-stage pipeline of Genesis orders, and Genesis systems across three geographies.

Speaker Change: Perfect. That's great.

Speaker Change: And then with the CE mark and expected, you know, incoming FDA 510k sounds like interest is strong. I guess one question there is...

Operator: Operator, can you please open the line to Q&A? Thank you. We will now open the line for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad, raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are dialed in and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: Will this cause hospitals to pause and wait for the next generation system or is that not something you're really thinking about right now or any color there?

David Fischel: It's definitely a factor on our minds. There is a little bit of that that takes place and plays out.

Speaker Change: It's definitely a factor on our minds.

David Fischel: I'd say we did include in the press release in the prepared remarks commentary about there being a late-stage pipeline of Genesis orders, Genesis systems across three geographies. There definitely are customers for whom Genesis is the most reasonable, best option. Imagine a hospital that already has a Niobe system and wants to upgrade. They already have a lab that is shielded and reinforced. All of that has already been built in.

Speaker Change #100: and there is a little bit of that that takes place and plays out. I'd say, we did include in the press release in the prepared remarks, commentary about there being a late-stage pipeline of genesis.

Adam Maeder: Our first question comes from the line of Adam Maydart with Piper Sandler. Please go ahead. I get afternoon, David and Kim.

David Fischel: Thank you for taking the questions and congrats on the approval for X and Europe. I guess a couple of questions from me. The first one would be on the magic catheter and wanted to, I guess, better understand the CE mark commentary there, so it sounds like you are getting pretty close. I think I heard you use the verbiage hope to complete the micro biology part of the submission or review shortly, and then you will be off to the races.

Speaker Change #100: and orders Genesys systems across three geographies. There is definitely, despite Genesys X, there are customers for whom Genesys is...

Frank Takkinen: There are definitely customers for whom Genesis is the most reasonable and best option. Imagine a hospital that already has a Niobe system and wants to upgrade. They already have a lab that is shielded, that is reinforced, all of that kind has already been built in. It just makes sense for them to get the Genesis robot. It does make sense for them to wait for Genesis X, since they've already done the construction work for it. There are definitely some labs like that.

Speaker Change #101: the most reasonable, best option, right? Imagine a hospital that already has a NIOBE system and wants to upgrade. They already have a lab that is shielded, that is reinforced, all of that kind of has already been built in.

David Fischel: It just makes sense for them to get the Genesis robot. It doesn't make sense for them to wait for Genesis X. They've already done the construction work for it, so there are definitely labs like that.

Speaker Change #101: It just makes sense for them to get the Genesis robot. It doesn't make sense for them to wait for Genesis X. They've already done the construction work for it. So there are definitely labs like that where,

David Fischel: I also heard there is no assumed contribution in the guidance from magic, so... David, maybe you can kind of help square that up. For us, you know, once you have CU Mark approval on hand for the magic catheter, you know, how aggressively will you launch into the marketplace? That's my first question that I follow up or two. Thanks. Sure. Thanks Adam. Good afternoon. So you understood our regulatory progress and status correctly in Europe.

David Fischel: Genesys X won't cause any confusion or mix-up or delays. There is an aspect of some of our greenfield pipeline wanting to wait for Genesys X, and I think that that's kind of, that's okay. We'll be able to, you know, we have enough clarity into our backlog of Genesys orders, we have enough clarity into our pipeline of newer term Genesys orders that, you know, that can carry us through for the coming months, and then as Genesy So I'm delighted if customers decide that they ultimately want to choose Genesys X. We have no problem with that.

David Fischel: Genesis X won't cause any confusion or mix-up or delays. There is an aspect of some of our greenfield pipeline wanting to wait for Genesis X, and I think that that's kind of, that's okay, we're, we'll be able to, you know, we have enough clarity into our backlog of Genesis orders, we have enough clarity into our pipeline of newer term Genesis orders that, you know, that can carry us through for the, for the coming months and, and then as Genesis X ramps up, in reality, that's, that is an easier again product to scale from an organizational perspective, so I'm, I'm delighted if, if customers decide that they ultimately want to choose Genesis X, we have no problem. And then maybe just one more quick one.

Janet: Janet's effects won't cause any

Janet: confusion or mix-up or delays. There is an aspect of some of our greenfield pipeline.

Janet: wanting to wait for Genesis X. And I think that that's kind of...

Janet: That's okay. We're, we'll be able to, you know, we have enough clarity into our backlog of Genesis orders. We have enough clarity into our pipeline of

David Fischel: There are three areas of review that the notified body does as part of the review of the submission. Two out of those three, including the most important one for us, which was the clinical area, which a year ago prompted us to do the clinical study. We passed successfully. So those kind of are put in the final kind of success marks. The microbiology questions we have not yet received. And so we're waiting to receive.

Janet: newer term Genesis orders that, you know, that can carry us through for the coming months. And then as Genesis X ramps up, in reality, that is an easier, again,

Janet: product to scale from an organizational perspective so I'm I'm delighted if customers decide that they ultimately want to choose Genesis X we have no problem with that.

Nelson Cox: And then maybe just one more quick one. I know a lot of it is construction timelines, but can you just walk us through at a high level anything from a macro perspective in terms of capital equipment purchasing patterns or what you've seen there?

Frank Takkinen: I know a lot of it is construction timelines, but can you just walk us through at a high level anything from a macro perspective in terms of capital equipment purchasing patterns or what you've seen there? Sure. It's been asked sometimes in the past.

Speaker Change #103: Perfect, and then maybe just one more quick one. I know a lot of it's construction timelines, but can you just walk us through at a high level anything from a macro perspective in terms of capital equipment purchasing patterns or what you've seen there?

David Fischel: We've been told that they should come any day. We thought that they would already have arrived last week. We're waiting with baited breath for those questions. We never know exactly what to expect. Whether those are going to be few questions or many questions, whether there's going to be any questions that are that require more significant effort to respond to or whether they're largely administrative responses to them. So as we get that, we're obviously going to have a much better feeling for the status about a year ago or a little bit over a year ago when we went through the review process at the time.

David Fischel: I mean, we feel like we're a tiny, tiny fish in a big ocean. And so whether the macro environment, you know, raises the tide a little bit, or reduces the tide a little bit, to some extent, we're fighting our own battle. And it doesn't make a major difference for us. There's definitely some macro weakness and headwinds in China. There are kind of macro factors there that are making it difficult, not just for us, but we know all the other capital equipment companies; they have similar challenges now. And no one knows exactly when that's going to change.

David Fischel: Sure, it's been asked sometimes in the past. I mean, we feel like we're a tiny tiny fish in a big ocean And so whether the macro environment, you know raises the tide a little bit reduces the tide a little bit to some extent We're fighting our own fight and then and it doesn't make a major difference for us. There's definitely some macro Weakness headwinds in in China there are kind of macro Factors there that are making it difficult not just for us, but we know all the other capital equipment companies they have similar challenges now and No one knows exactly when that's going to turn but but you know Hopefully by the time we are getting approval for the full ecosystem of robot catheter mapping system in in China It'll be a better macro environment there Despite that and again even in in bad macro environments there still is There still is always some opportunities some purchasing.

Speaker Change #104: Sure, it's been asked sometimes in the past. I mean, we feel like we're a tiny, tiny fish in a big ocean.

Speaker Change #105: and so whether the macro environment, you know, raises the tide a little bit, reduces the tide a little bit, to some extent we're fighting our own fight and then...

Speaker Change #105: and it doesn't make a major difference for us.

Speaker Change #105: There's definitely some macro weakness, headwinds in China. There are kind of macro factors there that are making it difficult, not just for us, but we know all the other capital equipment companies.

David Fischel: There were essentially no material questions on the microbiology side of things when they asked us to do a clinical study because they couldn't pass us on the clinical site. So we're hopeful that we'll have something similar like that when we get to first round of questions, but obviously we have to wait to see those questions. And once the microbiology questions are received, we respond to them. Let's kind of hope that that goes smoothly.

David Fischel: But, you know, hopefully, by the time we get approval for the full ecosystem of the robot catheter mapping system in China, it will be a better macro environment there. And despite that, and again, even in bad macro environments, there is still always some opportunity, some purchasing. So we definitely have a pipeline of customers, of real engaged customers, also in China.

Speaker Change #105: they have similar challenges now. No one knows exactly when that's going to turn, but hopefully by the time we are getting approval for the full ecosystem of robot catheter mapping system in China, it will be a better macro environment there. Despite that, and again, even in bad macro environments,

David Fischel: And we get kind of also written confirmation that we passed the microbiology review. Then really there's no additional review. There's, I think some administrative effort just to get the final signatures and kind of the sign off from them. But that's the last part substantive to the whole process. We have benefited in some ways through this time that we're working through the regulatory process in preparing for a commercial launch. And we have about 35 or so hospital accounts in Europe and the knowledge of the human experience in the clinical trial has spread organically from the physician users in Copenhagen, Vilnius, where the clinical trial was taking place naturally to many of the other physician users there.

David Fischel: So we definitely have a pipeline of customers of real engaged customers Also, in China and in Europe and in the US, I think that it's an it's you know I don't sense any major changes to the overall environment since we started rebuilding a capital sales capability in 2020. It has been an overall macro headwind environment, right? We had the chaos of kovat and the chaos of personnel challenges where hospitals didn't have nurses and didn't have techs. We're spending huge amounts to try to recruit and hire people just to run their daily operations, as the macroeconomic environment hasn't been the easiest environment.

Speaker Change #106: there still is, there still is.

David Fischel: And in Europe, in the US, I think that it's, you know, I don't sense any major changes to the overall environment. Since we started rebuilding a capital sales capability in 2020, it has been overall a macro headwind environment, right? We had the chaos of COVID, the chaos of personnel challenges where hospitals didn't have nurses, didn't have techs, and were spending huge amounts to try to recruit and hire people just to run their daily operations, as the macroeconomic environment hasn't been the easiest environment.

Speaker Change #106: all the way some opportunities, some purchasing. So we definitely have a pipeline of customers, of real engaged customers.

Speaker Change #106: also in China, and in Europe and the U.S., I think that it's...

Speaker Change #106: It's, you know, I don't sense any major changes to the overall environment.

Speaker Change #107: Since we started rebuilding a capital sales capability in 2020, it has been overall a macro headwind environment, right? We had the chaos of COVID, the chaos of personnel challenges where hospitals didn't have nurses, didn't have techs. We're spending huge amounts to try to recruit and hire people just to run their daily operations.

David Fischel: And so I think there's good awareness of the performance of magic and how it has improved the situation. There's also been the benefit of end site X integration with stereotaxis having more and more time to become adopted across multiple sites there. And so that also sets things up well for magic. And so we're going to kind of do a full launch of magic as we have regulatory approval. I think I've spoken in the past that there's certain geographies where there are kind of more local kind of requirements beyond the CE marks approval.

David Fischel: So I think that's been kind of an overarching reality since we restarted capital sales four years ago and, obviously, we've made We've been able to make some headway despite that. So I think kind of we don't see things being particularly different, and neither on the negative or the positive, unless the environment changes where it's a macro tailwind environment. They'll be awesome, But we're not betting on that, and to some extent, it's the things that we do in-house to make the you know, to be the small fish in a very, very big ocean and becoming a stronger fish on our own that, to some extent, changes everything irrespective of whether the tides go up a few feet or down a few feet.

David Fischel: So I think that's been kind of an overarching kind of reality since we restarted capital sales four years ago. And obviously, we've made, we've been able to make some headway despite that. So I think we don't see things being particularly different, neither on the negative or the positive. You know, if the environment changes where it's a macro tailwind environment, that'll be awesome. But we're not betting on that. And to some extent, it's the things that we do in house to make the, you know, to be the small fish in a very, very big ocean and becoming a stronger fish on our own that, to some extent, changes everything, irrespective of whether the tides go up a few feet or down a few feet.

Speaker Change #107: as the macroeconomic environment hasn't been the easiest environment. So I think that's been kind of an overarching...

Speaker Change #107: and...

Speaker Change #107: kind of reality since we restarted capital sales four years ago and and obviously we've made We've been able to make some headway despite that so I think kind of way We don't see things being particularly different and neither on the negative or the positive You know if the environment changes where it's a it's a macro tailwind environment. That'll be awesome But we're not betting on that and to some extent it's the it's the things that we do in-house

David Fischel: So you have to wait until you receive CE mark before you can go through some of those tenders that will slow down adoption in some of the accounts as you work through those administrative items, but generally we plan to do a full launch.

Speaker Change #107: to make the, you know, to being the small fish in a very, very big ocean and becoming a stronger fish on our own, that to some extent changes everything, irrespective of whether the tides go up a few feet or down a few feet.

David Fischel: That's a very helpful color to David, thank you for all that.

David Fischel: And for the follow-up, just a multi-part question on the Genesis system. And, you know, I guess one part is just trying to better understand the pricing and margin profile, the pricing strategy and margin profile of the system. And then, you know, I also heard you, I think, reference, you know, different, you know, selling models there. I think I heard, you know, outright capital purchase, operating leasing and volume-based agreement. So, would love for you to kind of, you know, flesh those out for us.

Nelson Cox: Great. Congratulations again. Thanks, guys.

Frank Takkinen: Great. Congratulations again. Thanks, guys. Thank you very much. We have no further questions at this time. I will now turn the call back to David Fischel for closing remarks. Okay. Thank you very much for your questions. We look forward to working hard on your behalf and speaking again next quarter. Thank you.

Speaker Change #107: i

Speaker Change #108: Great, congrats again. Thanks guys.

David Fischel: We have no further questions at this time. I will now turn the call back to David Fischel for closing remarks.

Speaker Change #109: Thank you very much.

Speaker Change #109: We have no further questions at this time. I will now turn the call back to David Fischel for closing remarks.

David Fischel: Okay, thank you very much for your questions. We look forward to working hard on your behalf and speaking again next quarter. Thank you.

Operator: This will conclude today's conference call. Thank you all for your participation. You may now disconnect.

David Fischel: Okay, thank you very much for your questions. We look forward to working hard on your behalf and speaking again next quarter. Thank you.

Speaker Change #110: This will conclude today's conference call. Thank you all for your participation. You may now disconnect.

David Fischel: And then just any color in terms of, you know, speed of launch. I mean, it certainly sounds like, you know, 2025 is really when you're going to kind of be making a bigger push in Europe with X, and I guess the US for that matter. But, would love just a year a little bit more about kind of, you know, the initial launch plans. Thanks so much for taking the questions. Sure. Thanks for the good question.

David Fischel: So, we obviously we can't launch Genesis X until we get magic approved both in Europe and the US. And so, that is a little bit holding us back at this point, from trying to launch the system or even announce it in a more complete way. And we're going to use the remainder of this year to get those approvals, to prepare ourselves for a full launch. And I'd view some of the larger conferences next year in Europe and the US as ideal settings in which to launch Genesis X.

David Lowery: Mike Kunter, Quincy Johnson John Carpenter Baba Amin David Lowery David Lowery David Lowery David Lowery

David Fischel: In many ways, this is not just a product launch. This is reframing, reintroducing stereo taxes to the community, to our EP community in a way that breaks down many of their historical misperceptions or perceptions on the technology. And so kind of review kind of during a good launch of the technology when we're able to do so as that's kind of very important. And we plan to make a lot more noise than we're doing today, given that today, again, we're not really at the point of launching technology fully.

David Fischel: And from a pricing margin, revenue model or sales model perspective, I don't want to give too much detail at this point. There'll be an opportunity in the future to provide more details. So, I'll just kind of talk as philosophically how we're approaching it. And again, when we do a full launch, there'll be opportunities to speak kind of with more details. And philosophically, Genesis X will command a premium over Genesis. It is the latest technology.

David Fischel: It saves the hospital significant amounts of investment that they would otherwise make in the system. And so, I think that's kind of a warranted natural move for us. And in terms of the complexity of manufacturing and installation, this is still a highly sophisticated device with many expensive components. This is a building complex, very high quality robotic technology. And we've done various smart things, like I mentioned in the spare remarks, to make manufacturing and installation simpler.

David Fischel: And so, generally, I would expect, you know, I think it'd be fair for you to expect that we would benefit from those types of news. And when it comes to the commercial models, we plan to, the value of a robot remains the value of a robot. And so, we don't plan to discount the value of the robot. You can capture that value in different ways from a cash flow perspective, from a kind of a commercial model perspective that you presented to the customer.

David Fischel: The most natural way, the way that Stereotaxis has experienced this entire existence, is selling a system. So, we'll obviously continue to sell a system, like we do currently with Genesis, we'll sell Genesis X, it will be an premium, but obviously the hospital will benefit from reduced costs in terms of architects and contractors, that we will also offer two other models that will, again, retain the same value of the robot, but offer the robot through different mechanisms.

David Fischel: One will be a leasing model, and the other will be a placement of the robot with minimal disposable or a minimum of disposable purchase commitment. And so those are both the viable models, we're not innovating completely new things, there's a very, very large company that have tried this path before us, and so we're obviously learning from that experience. If you look at kind of, you know, obviously the leader in the robotic surgical field, not in our space at all, not a competitor, but the leader in the robot in surgical robotics, they buy now the majority of their system placement in any given year are leases and placements with disposable commitments, rather than sales outright.

David Fischel: And so I think that's a model that also hospitals are very comfortable with, and from a financial perspective for us, given the significant recurring revenue model that is starting to be built around our business, the razor blade model that is being enhanced with the magic catheter, with the high density mapping catheter I mentioned, with the devices that can allow the same robot to be used in other applications, it becomes very financially and reasonable to offer those alternative models and to deal with the cash flow and not have kind of, you know, not have any particularly challenges from a working capital perspective. Thanks for all the color, David, I'll back to you.

David Fischel: Thank you. Our next question comes from the line of Josh Jennings with TD Cowan. Please go ahead. Hi, good afternoon. Thanks for taking questions and great to see the Gen 6X CE mark approval in hand. Wanted to ask David about the magic test study. And I think we saw a glimpse of the first 40 patients at HRS, but maybe just anything else you can share just on the results from that study.

David Fischel: And on top of that is the data set that's the minute of CE mark that will be submitted for CE mark approval or how he has been actually, as you disclose, the same data set that you can submit for in the US, for the FDA, for the PMA filing, or is there going to be more patients that have been enrolled and were longer follow-up that's required? Sure, hi Josh and good afternoon.

David Fischel: Thanks for that question. So like you mentioned, the magic test study is the clinical human study that's taking place at two centers in Europe. They used magic over the last several months from the beginning of this year, in treating the broad range of arrhythmia patients. Over that time, we submitted initial data at the end of February on the patients that had enrolled up to that point with our CE mark submission. And we included it in the PMA submission as well.

David Fischel: And those sites have continued to involve patients. And while initially the study was designed with a maximum of 30 patients per site, we did expand that upper bound. And so they're continuing to involve patients as we speak. We're overall very pleased with the performance of magic. So the physicians did present some of the data at HRS. So that's available through them. They're working together on the submitted publication additional data beyond that.

David Fischel: It's not my place to share exact results, given that they're trying to get it published. So I think I'll leave that for them to publish, but overall we're delighted with the performance of magic. It's definitely a good catheter. It's working in humans, it's treating patients on a regular basis. And the clinical improvements and performance improvements versus the thermical RMT catheter of J&J are real and are being seen in the World. When we look at FDA, I mentioned in the prepared remarks, kind of the regular discussions we're having with FDA, and a lot of that is tied towards what would be the most useful data for FDA to see at this point, to be able to provide regulatory approval in the US leveraging the data that's coming out of Europe.

David Fischel: And what data and what study designs would be useful for post-approval study in the US, both to corroborate the data through a US study, and to expand label, expand indications in the US to kind of have a broader label. And so that's the majority of the discussions have been around that topic. There is some, let's call it focusing of the types of patients, types of data that's being collected in Europe based off of the feedback that's being received from FDA and those discussions with FDA.

David Fischel: So there's continuous enrollment in Europe, and I think again that we have a good kind of shot and a good alignment in terms of that data assuming it continues to enroll well will be good for our FDA submission. Thanks for that. And just on the magic catheter, we have a lot of enhancements and capabilities. One, and it's exciting to hear about all the PSA development programs that are underway under your roof.

David Fischel: Now, are you pursuing ultimately pursue a high power short duration energy delivery approach with magic catheter? I believe that you can get up to 100 watts with magic, but I guess you know, my dream is having some success with Q. And I just wanted to touch on that topic. Sure. So, so high power for duration radio frequency ablation is an is an is an exciting and interesting part of the EP landscape.

David Fischel: We tested the magic catheter through bench and preclinical testing up till 100 watts. And and one of the beautiful features of the magic catheter and the goal tip specifically is how stable the temperature of the tip stays even at very, very high powers. And so usually as you increase power, you run the risk of charge and and heating up of the tip which can lead to clagulation and kind of other clinical risks.

David Fischel: The tip of magic stays extremely stable even at very high wattage which is kind of again a beautiful kind of aspect. It's related to both the imperial of the tip and the way the irrigation flows through the tip. Even when you have very low irrigation use kind of you know reducing the fluid load that typically a patient is receiving during ablation procedure. Catheters in the US almost all radio frequency ablation catheters are approved only up till 50 watts and from a power setting.

David Fischel: And so we have that we have only pursued in terms of the pivotal animal studies and what was submitted for label. We have we pursued up to 50 watts. And so while the device is definitely built towards things beyond that and can accommodate powers beyond that. That's not part of a label label that we're pursuing and that won't be part of any initial device. And so I think kind of what have the opportunity to pursue higher power filtration post approval and we can do additional studies but we haven't been attempting to do that at this point.

David Fischel: But even at 50 watts we have that beautiful lesions that form overall in a very rapid fashion. So I think the performance of the catheters very much in mind with that with that evolution, of the fields. Thanks for that, too. I'm sorry, Takk, one more in here, but I think you're going to get, we're going to be able to, your magnetic VT study results, the traversed data was presented as a late-breakered ACC, just thinking about those two datasets if they're positive and how that could benefit kind of your marketing to EP labs for the clinical profile proposition for robotic magnetic navigation, once those datasets are read out or the magnetic VT studies read out.

David Fischel: Thanks a lot. Yep, sir. So, so the magnetic VT study was a prospective randomized study comparing robotics versus manual cardiac regulation for schemically T patients, we completed, we decided to stop enrollment early just because it was enrolling relatively flowally and it wasn't strategically critical to our path in terms of building this new product ecosystem. So we enrolled at the end of the day, it's probably actually the largest randomized prospective VT study that's out there in the Oblation field.

David Fischel: It's we enrolled roughly 180 patients and all the patients finished their follow-up and we've been working with statisticians and the PIs to get the results ready for a presentation at one of the upcoming conferences. So, again, I'd expect that at one of the upcoming conferences, the PIs are going to present the results and we'll do a concurrent release at the time. Our next question comes from the line of Frank Takenin with Lake Screte Capital Markets. Please go ahead. Hey, this is Elson Cox on for Frank. Good to see all the progress and congrats on the CE mark.

David Fischel: Yeah, I wanted to follow up on the earlier question on the manufacturing scale-up process for Genesis X. Sounds like confidence there is strong, but can you help us quantify the scale you will be able to build versus how that compares with Genesis and maybe how the timelines of production compare? Sure, that's hard to do with specificity given that we have only manufactured less than a handful of Genesis X systems to date and we've not yet, those have been manufactured largely by the R&D team rather than the dedicated manufacturing team.

David Fischel: So, that is really part of this process over the next few months is how do you make sure that it can be built by the manufacturing team directly in an efficient way? We know that we can build it reliably, but you want to kind of do all the little tricks and little processes that make it an efficient manufacturing process. Overall, in the past, we've talked about how the new headquarters that we established a couple years ago that allowed us to manufacture in the tens of systems, you know, let's say the mid-high tens of systems.

David Fischel: A year in this facility, we would obviously have to scale our personnel as we go to those levels, but we can manufacture roughly a system a month and have enough space to do more than four at a time. And so, that's kind of that's one factor. I'd say with Genesis X, given that the systems do not have to be assembled facing each other, and there, again, the less than the right are identical to each other, you have definite efficiencies from a time personnel complexity perspective over Genesis.

David Fischel: And so, I don't know exactly where we're going to end up, but it's definitely, we can grow and order magnitude from where we are right now in our current facility with the technologies we have, and I look forward to the challenges and problems that haven't and that. Perfect, that's great. And then with the CE mark and expected, you know, in coming FDA 510K, sounds like interested strong. I guess one question there is, will this cause hospitals to pause and wait for the next generation system?

David Fischel: Or is that not something you're really thinking about right now or any color there? It's definitely a factor on our minds. There is a little bit of that that takes place and plays out. I'd say, we did include it in the press release in the prepared remarks commentary about their being a late-stage pipeline of genesis and orders, genesis systems across three geographies. There is definitely despite genesis effects, there are customers for whom genesis is the most reasonable best option, right?

David Fischel: Imagine a hospital that already has a Naomi system, wants to upgrade, they already have a lab that is shielded, that is reinforced, that all of that kind of has already been built in, you know, it just makes sense for them to get to genesis robot, does make sense for them to wait for genesis act. They've already done the construction work for it, so there are definitely labs like that where genesis effects won't cause any confusion or mix-up or delays.

David Fischel: There is an aspect of some of our greenfield pipeline wanting to wait for genesis acts, and I think that's okay, we'll be able to, you know, we have enough clarity into our backlog of genesis orders, we have enough clarity into our pipeline of newer-term genesis orders that, you know, that can carry us through for the coming months, and then as genesis acts ramps up in reality, that is an easier, again, product to scale from an organizational perspective, so I'm delighted if customers decide that they ultimately want to choose genesis acts, we have no problem with that.

David Fischel: Perfect, and then maybe just one more quick one. I know a lot of it's construction timelines, but can you just walk us through at a high level anything from a macro perspective in terms of capital equipment purchasing patterns or what you've seen there? Sure, it's been asked sometimes in the past, I mean, we feel like we're a tiny, tiny fish in a big ocean, and so whether the macro environment, you know, raises the tide a little bit, reduces the tide a little bit, to some extent we're fighting our own fight, and then, and it doesn't make a major difference for us.

David Fischel: There's definitely some macro weakness, headwinds in China, there are kind of macro factors there that are making it difficult, not just for us, but we know all the other capital equipment companies that have similar challenges now, and no one knows exactly when that's going to turn, but hopefully by the time we are getting approval for the full ecosystem of robot catheter mapping system in China, it'll be a better macro environment there, despite that, and again, even in bad macro environments, there's still is, there's still is always some opportunity, some purchasing, so we definitely have a pipeline of customers, of real engaged customers, also in China, and in Europe and the US, I think that it's, you know, I don't sense any major changes to the overall environment, since we started rebuilding a capital sales capability in 2020, it has been overall macro headwind environment, right? We had the chaos of COVID, the chaos of personnel challenges where hospitals didn't have nurses, didn't have tax, we're spending huge amounts to try to recruit and hire people just to run their daily operations, as the macro economic environment hasn't been the easiest environment, so I think that's been kind of an overarching kind of reality since we restarted capital sales four years ago, and obviously we've been able to make some headway despite that, so I think we don't see things being particularly different, neither on the negative or the positive, you know, if the environment changes where it's a macro tailwind environment, that'll be awesome, but we're not betting on that, and to some extent it's the things that we do in-house to make the, you know, to build the small fish in a very, very big ocean, becoming a stronger fish on our own, that to some extent changes everything irrespective of whether the tide's go up a few feet or down, of UP. Great. Congrats again. Thanks, guys. Thank you very much.

David Fischel: We have no further questions at this time. I will now turn the call back to David Fischel for closing remarks. Okay. Thank you very much for your questions. We look forward to working hard on your behalf and speaking again next quarter. Thank you. This will conclude today's conference call. Thank you all for your participation. You may now disconnect.

Q2 2024 Stereotaxis Inc Earnings Call

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