AtriCure CEO says strong revenue growth to continue

Jennifer Schonberger | Feb 21, 2008 10:42am EST | Comment

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SmallCapInvestor.com reporter Jennifer Schonberger is reporting from the 20th Roth Capital Partners Annual OC Growth Stock Conference this week in Dana Point, Calif. The conference features presentations from more than 300 small-cap companies.

AtriCure, Inc. (Nasdaq: ATRC), a developer of surgical devices designed to create precise lesions, or scars, in cardiac and soft tissues for patients with atrial fibrillation (AF), has experienced strong growth year-to-date, but CEO David Drachman said it is about to kick into high gear.

In an interview at the Roth OC Growth Stock Conference in Dana Point, Calif. on Wednesday, Drachman told SmallCapInvestor.com that AtriCure’s growth story will take flight by 2010 and 2011.

AtriCure has gone from two platforms in 2005 to eight platforms in 2008.

“If you look at our product platform in 2005, the platform was a bipolar ablation clamp, and a protection tool,” said Drachman. “If you look at the product platform in 2008, it’s a series of open heart bipolar ablation clamps, a series of minimally invasive endoscopic, bipolar ablation clamps, a multifunctional end system that can perform basic electrophysiology like matching cardiac arrhythmia … then there’s a whole platform of enabling technologies.”

By mid-March, the company expects to launch what it calls its cool rails linear ablation tank, which allows more ablation treatments during a minimally invasive approach to obtain more regular outcomes for more permanent patients.

AtriCure’s market share for surgical cardiac ablation devices on the open heart side is approximately 50%, according to Drachman, while its share of the invasive market could be 80% or higher.

“There’s no close second,” said Drachman. “The closest is Boston Scientific.”

While growing rapidly, AtriCure still is not profitable. When asked when the company would turn profitable, Drachman said, “We’ve been talking about revenue run rates between $65 million and $100 million. In line with those revenue run rates, cash flows from operating activities should follow pretty quickly.”

For the fourth quarter ended Dec. 31, 2007, the West Chester, Ohio-based company recorded a net loss of $1.6 million, or $0.11 per share, compared with a net loss of $4.3 million, or $0.35 per share earned in the fourth quarter of 2006. The consensus of five analysts surveyed by Thomson Financial was for a net loss of $0.20 per share.

Revenue for the three month period was $13.2 million, compared with $10.6 million booked in the same quarter last year. Revenues were right in line with the consensus of five analysts polled by Thomson Financial of $13.2 million.

For the fiscal 2008, the company is guiding for revenues in the range of $58 million to $60 million and a net loss per share in the range of $0.55 to $0.70. The consensus of five analysts surveyed by Thomson Financial is for a net loss of $0.63 on revenues $58.7 million.

On Feb. 11, the company reported that its first patient was successfully treated in its “Ablate clinical trial.” The purpose of the trial was to evaluate the safety and effectiveness of AtriCure's Isolator Synergy bipolar ablation system, which is intended to reestablish normal heart rhythm in patients with permanent AF, requiring concomitant open-heart surgery.

The system is designed to create precise lesions, or scars, on heart muscle, which block irregular electrical signals and restore normal sinus rhythm.

“The way that we’re going to win is through the deep sea of innovation and continue to ‘out-innovate,’ which is why we put such a strong emphasis on developing our technology and developing the right products,” said Drachman. “We’re going to build the market.”

More than five million people worldwide, including approximately 2.5 million Americans, have been diagnosed with AF.