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MAKO Surgical Corp. (MAKO)

Q3 2010 Earnings Call

November 2, 2010; 04:30 pm ET

Executives

Maurice Ferré. - President & Chief Executive Officer

Fritz LaPorte - Senior Vice President & Chief Financial Officer

Mark Klausner – Investor Relations

Analysts

Matt Miksic - Piper Jaffray

Kimberly Gailun – JPMorgan

Rick Wise – Leerink Swann

Robert Gold of Brigantine Advisors

Bill Plovanic – Canaccord

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to the MAKO Surgical Corp 2010 third quarter results conference call. As a reminder, this conference is being recorded and will be available for replay on the company’s website www.makosurgical.com under the Investor Relations section after the completion of this conference.

It is now my pleasure to introduce your host for today’s conference Mr. Mark Klausner of Westwicke Partners.

Mark Klausner

Thank you, operator. Joining us on today’s call are MAKO’s President and CEO, Dr. Maurice Ferré; and the company’s Senior VP and Chief Financial Officer, Fritz LaPorte. The company’s press release of the financial results has been released via GlobeNewswire. Mr. LaPorte will detail the contents of the release, following remarks by Dr. Ferré. If you have not received a copy of the press release, it is available in the Investor Relations section of MAKO’s website www.makosurgical.com.

I would also like to remind you that this call is being webcast live and recorded. A replay of the event will be available later today on our website and will be available for at least 30 days following the call.

Before we begin, I would like to caution listeners that certain information discussed by management during this conference call including answers to your questions will include forward-looking statements covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company’s business. For a discussion of risks and uncertainties associated with MAKO’s business, I encourage you to review the company’s periodic reports filed from time-to-time with the Securities and Exchange Commission including the Form 10-K for the fiscal year ended December 31, 2009, Form 10-Q for the quarter ended September 30, 2010, and the Form 8-K filed with our earnings release. MAKO disclaims any obligation to update any forward-looking statements made during the course of this call.

With that, it’s my pleasure to turn the call over to MAKO’s President and CEO, Maurice Ferré.

Maurice Ferré

Thank you, Mark, and good afternoon and thank you for joining us to discuss MAKO’s third quarter results. On today’s call, I will provide you with an update on our business and Fritz will provide you with the details of our financial results.

I’m pleased with the progress we have made in the third quarter and particularly by the new system placements, procedure volumes and utilization we are experiencing in the market. Specifically, we sold nine RIO systems in the quarter; eight of these were installed at new domestic commercial sites, increasing our installed base of domestic commercial systems of 54, up from 46 at the end of the second quarter of 2010.

Additionally, we sold a system internationally to our Italian distributor representing our second international sale and further expanding our European presence.

Worldwide, through the end of the third quarter, we have sold a total of 20 RIO systems eclipsing our total 2009 system sales. Worldwide, our customers performed 815 MAKOplasty procedures in the second quarter representing a 3% increase over the prior quarter and a 95% increase over the third quarter of 2009. The average monthly utilization per domestic system was 5.7 in the quarter and is 6.2 year-to-date. We continue to focus on the development of clinical data supporting our RIO system and MAKOplasty procedures and have over 45 clinical studies in progress.

We completed two BioSkill meetings and continue to see strong interest from current and perspective surgeons attending these meetings.

Finally, I am pleased to announce that the first total hip procedures were recently completed using the RIO system. This marks the beginning of our surgical preference evaluation process and I will share some detail with you at the end of the call with regards to our hip MAKOplasty application development progress and expected commercialization timeline.

Overall, the third quarter was another positive one for MAKO. Out team continues to execute on our business plan as demonstrated by the expansion of our domestic installed base, our second international sale, the increase in procedure volumes and the progress with the development of our hip application.

Now, I’d like to turn the call over to Fritz to review our financial results for the third quarter. Fritz?

Fritz LaPorte

Thank you, Maurice, and good afternoon, everyone. In the third quarter of 2010, we recognized procedure, system and other revenue of $12 million representing an increase of $5.3 million or 79% from the $6.7 million generated in the third quarter of 2009. Revenue in the third quarter of 2010 was primarily comprised of $4.1 million in procedure revenue and $7.6 million in RIO system revenue. Procedure revenue of $4.1 million represented a $2.1 million increase or 105% over the third quarter of 2009, and was generated from 809 domestic MAKOplasty procedures performed in the quarter at an average selling price or ASP of $5100 per procedure, representing a modest increase over last quarter’s ASP.

In addition, our clinical research site at the Glasgow Royal Infirmary reported that six procedures were performed at its site during the quarter. System revenue of $7.6 million represented a $2.9 million increase or 64% over the third quarter of 2009, and was generated from the sale of nine RIO systems in the quarter of which eight systems was sold to domestic customers at an ASP of $861,000 per system.

Read the rest of this transcript for free on seekingalpha.com