Hansen Medical Q2 2010 Mixed Bag

Hansen Medical (HNSN), which makes robotic catheters for medical procedures, reported $7.0 million revenue for Q2 2010. That is up 159% sequentially from $2.7 million, and up 133% from $3.0 million in the year-earlier quarter.

Unfortunately, while Hansen's long term prospects are good, we are not likely to see a continuing rapid revenue ramp in Q3 or Q4 of 2010.

Hansen's major source of revenue is new Sensei Robotic Catheter Systems, which are currently approved by the FDA for cardiac arrhythmia EP (electrophysiology) procedures. Hansen recognized revenue for 7 systems in Q2, but shipped only 3 systems to customers. Hansen does not recognize revenue on systems until they are in place, working, and physicians have been trained to use them. At the end of the quarter it had a backlog of 14 systems in the field that had not been recognized for revenue.

In comparison, in Q1 Hansen shipped 7 systems but only recognized revenue on 1 system. So for the first half of 2010 10 systems were shipped and revenue was recognized on 8.

These systems run $650,000 to $700,000 each, and are relatively new to the medical community, which has had tight capital equipment budgets the last few years. So both shipments and recognition of revenues vary widely by quarter. That is likely to continue until robotic catheters are adopted for more types of procedures.

There are two main near-term areas where Hansen could sell more robots. The closest is for Atrial Fibrillation (AF) therapy. A clinical trial is already enrolling patients, but results are not likely until well into 2011.

Most promising is using robotic catheters in vascular (blood vessel) procedures. Philips is partnering with Hansen for this, providing partial funding. But this is a development phase product, with no certain plan for clinical trials at present.

Hansen investors will need to be patient. Electrophysiology alone might ramp to a profitable business over the next two or three years, but serious money is unlikely to be made (this is my opinion) until 2012 and after.

On the good side, the stock is dirt cheap. On the cautionary side, nothing guarantees that Hansen will sell more robots for EP, or get FDA or European approval for AF or vascular procedures.

For details see my notes at Hansen Medical Q2 2010 Analyst Conference Call Summary.

So keep diversified!