The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q/A.

Except for the historical information contained herein, the matters discussed in this "Management's Discussion and Analysis of Financial Condition and Results of Operations," are forward-looking statements that involve risks and uncertainties. In some cases, these statements may be identified by terminology such as "may," "will," "should," "expects," "could," "intends," "might," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of such terms and other comparable terminology. These statements involve known and unknown risks and uncertainties that may cause our results, levels of activity, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to such differences include, among others, those discussed in this report in Part II, Item 1A "Risk Factors." Except as may be required by law, we undertake no obligation to update any forward-looking statement to reflect events after the date of this report.

Overview

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this amended quarterly report on Form 10-Q/A, and gives effect to the restatement of our consolidated financial statements as discussed in Note 3 of the condensed consolidated financial statements.

We develop, manufacture and sell a new generation of medical robotics designed for accurate positioning, manipulation and stable control of catheters and catheter-based technologies. Our Sensei™ Robotic Catheter System, or Sensei system, is designed to allow physicians to instinctively navigate flexible catheters with greater stability and control in interventional procedures. We believe our Sensei system and its corresponding disposable Artisan catheter will enable physicians to perform procedures that historically have been too difficult or time consuming to accomplish routinely with manually-controlled, hand-held catheters and catheter-based technologies, or that we believe could be accomplished only by the most skilled physicians. We believe that our Sensei system has the potential to benefit patients, physicians, hospitals and third-party payors by improving clinical outcomes and permitting more complex procedures to be performed interventionally.

We were incorporated in Delaware on September 23, 2002. In March 2007, we established Hansen Medical UK Ltd, a wholly-owned subsidiary located in the United Kingdom and, in May 2007, we established Hansen Medical Deutschland, GmbH, a wholly-owned subsidiary located in Germany. Since inception, we have devoted the majority of our resources to the development and commercialization of our Sensei system.

To date, we have incurred net losses in each year since our inception and, as of June 30, 2009, we had an accumulated deficit of $196.6 million. We expect our losses to continue through at least 2009 as we continue to expand the commercialization of our Sensei system and Artisan catheter and continue to develop new products. We have experienced significant quarterly fluctuations in revenues primarily due to still being in the early stages of our commercial launch and, especially in the fourth quarter of 2008 and the first and second quarters of 2009, general economic and capital market conditions. As discussed in our risk factors, these conditions can cause customers to delay purchases and can lengthen sales cycles and these factors contributed to our results in the second quarter of 2009 being lower than we anticipated. This included having no sales of Sensei systems to United States customers in the second quarter of 2009. Losses in the second quarter of 2009 were also impacted by the write-off of non-recoverable fixed assets in the amount of $1.1 million related to the company's decision to terminate its relationship with its European subcontractor for the manufacture of catheters. In 2009, we have initiated several cost-cutting measures, including a reduction in our work force in the first quarter of 2009 and the institution of four mandatory one-week furloughs during the year.

We have financed our operations primarily through the sale of public and private equity securities and the issuance of debt. Most recently, on April 22, 2009, we sold 11,692,000 shares of our common stock, resulting in approximately $35.3 million of net proceeds, after underwriting discounts and commissions and offering expenses.

We received CE Mark approval for our Sensei system in the fourth quarter of 2006 and made our first commercial shipments to the European Union in the first quarter of 2007. In May 2007, we received CE Mark approval for our Artisan catheter and also received FDA clearance for the marketing of our Sensei system and Artisan catheter for manipulation, positioning and control of certain mapping catheters during electrophysiology procedures. As a result, we recorded our first revenues in the second quarter of 2007. We have also received regulatory approvals in Russia and Australia.

We market our products in the United States primarily through a direct sales force of regional sales employees, supported by clinical account managers who provide training, clinical support and other services to our customers. Outside the United States, primarily in the European Union, we use a combination of a direct sales force and distributors to market, sell and support our products.

Critical Accounting Policies, Estimates and Judgments

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States. In doing so, we have to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues and expenses, as well as related disclosures of contingent assets and liabilities. In many cases, we could reasonably have used different accounting policies and estimates. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. We base our estimates on our past experience and on other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. Our significant accounting policies are fully described in Note 2 to our Financial Statements included in our Annual Report on Form 10-K/A for the year ended December 31, 2008 filed with the U.S. Securities and Exchange Commission. There have been no significant changes to those policies in the six months ended June 30, 2009.

Financial Overview

Revenues

Our revenues consist of sales of Sensei systems, Artisan catheters, other disposables and service contracts. We have experienced significant fluctuations in quarterly revenues, primarily due to still being in the early stages of our commercial launch and, especially in the fourth quarter of 2008 and the first and second quarters of 2009, general economic and capital market conditions. As discussed in our risk factors, these conditions can cause customers to delay purchases and can lengthen sales cycles and these factors contributed to our results in the second quarter of 2009 being lower than we anticipated. We expect revenue fluctuations to continue throughout 2009. We do not anticipate that revenues in 2009 will be sufficient to eliminate losses.

Cost of Goods Sold

Cost of goods sold consists primarily of materials, direct labor, depreciation, overhead costs associated with manufacturing, training and installation costs, royalties, provisions for inventory valuation, service contract expenses and warranty expenses. We expect that cost of goods sold both as a percentage of revenue and on a dollar basis will continue to vary from quarter to quarter in 2009 due, among other things, to fluctuations in revenue levels, average selling prices, the mix of products sold, manufacturing levels and manufacturing yields.

Research and Development Expenses

Our research and development expenses primarily consist of engineering, software development, product development, quality assurance and clinical and regulatory expenses, including costs to develop our Sensei system and disposable Artisan catheters. Research and development expenses include employee compensation, including stock-based compensation expense, consulting services, outside services, materials, supplies, depreciation and travel. We expense research and development costs as they are incurred. We expect research and development expenses for the remainder of 2009 to decrease as compared to 2008 levels due primarily to our reduced employee costs, including the effects of quarterly one-week furloughs, and as we carefully manage expenses related to our development activities for the electrophysiology market and exploring certain other potential future applications of our technology.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses consist primarily of compensation for executive, finance, sales, legal and administrative personnel, including sales commissions and stock-based compensation. Other significant expenses include costs associated with attending medical conferences, professional fees for legal services (including legal services associated with our efforts to obtain and maintain broad protection for the intellectual property related to our products) and accounting services, consulting fees and travel expenses. We expect our selling, general and administrative expenses for the remainder of 2009 to decrease as compared to 2008 levels due primarily to our reduced employee costs, including the effects of quarterly one-week furloughs.

Results of Operations

Comparison of the three months ended June 30, 2009 to the three months ended June 30, 2008

Revenues

Revenues primarily related to the following:

                                                                  Three months ended
                                                                       June 30,
                                                               2009               2008
                                                            As Restated        As Restated
United States Sensei system units                                      1                  4
International Sensei system units                                      1                  1

Total Sensei system units                                              2                  5

Sensei system average selling price (in thousands)         $         671      $         597

Artisan catheter units                                               576                284

Artisan catheter average selling price (in thousands)      $         1.6      $         1.8

Our average selling prices of Sensei systems in the second quarter of 2009 were positively impacted by our recognizing revenue on an international shipment from early 2008 when there were more favorable exchange rates and less discounting. Catheter sales for the second quarter of 2009 included the sale of approximately 100 catheters to a single international medical center. We have experienced significant fluctuations in quarterly revenues, primarily due to the fact that we are still in the early stages of our commercial launch and, especially in the fourth quarter of 2008 and the first and second quarters of 2009,

general economic and capital market conditions. As discussed in our risk factors, these conditions can cause customers to delay purchases and can lengthen sales cycles and these factors contributed to our results in the second quarter of 2009 being lower than we anticipated. During the fourth quarter of 2008 and into the first two quarters of 2009, in a period of economic uncertainty, we saw many potential customers lengthen their sales cycles and postpone purchase decisions. We expect revenue fluctuations to continue throughout 2009.

Cost of Goods Sold



                                              Three months ended
                                                   June 30,                                   Change
(Dollars in thousands)                    2009                  2008                   $                   %
                                      As Restated            As Restated          As Restated         As Restated
Cost of goods sold                   $        2,664         $       4,181        $      (1,517 )              (36 )%
As a percentage of revenues                    90.3 %               107.5 %

Cost of goods sold for the second quarter of 2009 included stock-based compensation expense of $214,000 as compared to $171,000 for the second quarter of 2008. Cost of goods sold for the second quarter of 2009 as a percentage of revenues benefited from manufacturing efficiencies as we have reduced the cost of producing our products, partially offset by the effects of overhead applied to our inventory, primarily due to our move into a new facility during the third quarter of 2008. We expect that cost of goods sold both as a percentage of revenue and on a dollar basis will continue to vary from quarter to quarter during 2009 due, among other things, to fluctuations in revenues, average selling prices, the mix of products sold, manufacturing levels and manufacturing yields.

Operating Expenses

Research and Development

The change in research and development expenses in the second quarter of 2009 compared to the second quarter of 2008 was primarily due to the following:

• A decrease of $0.8 million in employee-related expenses, including travel expenses, primarily due to a decrease of 20 in average research and development headcount and the effects of the Company's one-week furlough during the second quarter of 2009; and

• A decrease of $0.5 million in outside services, materials and overhead expenses.

Total research and development expenses in the second quarter of 2009 included $688,000 of stock-based compensation expense compared to $763,000 in the second quarter of 2008. We expect research and development expenses for the remainder of 2009 to decrease as compared to 2008 levels due primarily to our reduced employee costs, including the effects of quarterly one-week furloughs, and as we carefully manage expenses related to our development activities for the electrophysiology market and exploring certain other potential future applications of our technology.

Selling, General and Administrative

The change in selling, general and administrative expenses in the second quarter of 2009 compared to the second quarter of 2008 was primarily due to the following:

• A $1.1 million charge in 2009 for the write-off of non-recoverable fixed assets related to the Company's decision to terminate its relationship with its European subcontractor for the manufacture of catheters;

• An increase of $0.9 million in litigation costs associated with our trial against Luna Innovations Incorporated;

• An increase of $0.3 million in supplies, equipment and overhead expenses;

• A decrease of $0.1 million in non-compensation marketing expenses;

• A decrease of $0.2 million in professional service fees exclusive of Luna litigation costs;

• A decrease of $0.5 million in employee-related expenses, including sales commissions and travel expenses, due primarily to a decrease in average general and administrative headcount of 12, partially offset by an increase in average sales and marketing headcount of two, and the effects of the Company's one-week furlough during the second quarter of 2009;

• A decrease of $0.7 million in lease costs allocated to selling, general and administrative expenses as a result of all lease costs for our new facility prior to our occupancy in the third quarter of 2008 having been charged to selling, general and administrative expenses; and

• A decrease of $0.9 million in stock-based compensation expense due primarily to the effects of our lower average stock price and lower headcount.

Selling, general and administrative expenses in the second quarter of 2009 included $1.0 million of stock-based compensation expense compared to $1.9 million in the second quarter of 2008. We expect our selling, general and administrative expenses for the remainder of 2009 to decrease as compared to 2008 levels primarily due to reduced employee costs, including the effects of quarterly one-week furloughs.

Interest Income

Interest income decreased in the second quarter of 2009 compared to the second quarter of 2008 primarily due to significantly lower interest rate returns available in the market for highly rated investments as compared to the rates available in the previous year. We expect our quarterly interest income to remain consistent with the second quarter 2009 amounts for the remainder of 2009.

Interest and Other Expense, net

Interest and other expense, net, consists mainly of interest expense and net realized and unrealized foreign exchange gains and losses. Net foreign exchange losses increased in the second quarter of 2009 as compared to the second quarter of 2008 due primarily to the impact of unfavorable movements in the Euro exchange rate on our Euro-denominated accounts receivable. Interest expense increased in the second quarter of 2009 as compared to the second quarter of 2008 primarily due to the interest on our term equipment line. We expect our interest expense to increase in the remainder of 2009 over 2008 levels as we have a full year of interest related to the term equipment line.

Comparison of the six months ended June 30, 2009 to the six months ended June 30, 2008

Revenues

Revenues primarily related to the following:

                                                              Six months ended
                                                                  June 30,
                                                            2009            2008
                                                        As Restated      As Restated
United States Sensei system units                                  9                9
International Sensei system units                                  3                2

Total Sensei system units                                         12               11

Sensei system average selling price (in thousands)      $        620    $         621

Artisan catheter units                                         1,207              685

Artisan catheter average selling price (in thousands)   $        1.6    $         1.8

Our average selling prices of Sensei systems in the first six months of 2009 were negatively impacted by pressures related to the general economic and capital market conditions which have resulted in discounting and by the impact of unfavorable movements in exchange rates. This trend was mostly offset by the recognition of revenue on systems shipped in 2008 which were subject to less discounting and more favorable exchange rates. Catheter sales for 2009 included the sale of approximately 100 catheters to a single international medical center. We have experienced significant fluctuations in quarterly revenues, primarily due to the fact that we are still in the early stages of our commercial launch and, especially in the fourth quarter of 2008 and the first and second quarters of 2009, general economic and capital market conditions. During the fourth quarter of 2008 and into the first two quarters of 2009, in a period of economic uncertainty, we saw many potential customers lengthen their sales cycles and postpone purchase decisions.

Cost of Goods Sold



                                               Six months ended
                                                   June 30,                                  Change
(Dollars in thousands)                    2009                 2008                   $                   %
                                       As Restated          As Restated          As Restated         As Restated
Cost of goods sold                    $       8,045        $       8,718        $        (673 )               (8 )%
As a percentage of revenues                    77.3 %              102.4 %

Cost of goods sold for the first six months of 2009 included stock-based compensation expense of $437,000 as compared to $332,000. Cost of goods sold for the first six months of 2009 as a percentage of revenues for the first six months of 2009 benefited from manufacturing efficiencies as we have reduced the cost of producing our products, partially offset by the effects of overhead applied to our inventory, primarily due to our move into a new facility during the third quarter of 2008.

Operating Expenses

Research and Development

The change in research and development expenses in the first six months of 2009 compared to the first six months of 2008 was primarily due to the following:

• A decrease of $1.2 million in employee-related expenses, including travel expenses, primarily due to a decrease of 12 in average research and development headcount and the effects of the Company's quarterly one-week furloughs during 2009; and

• An increase of $0.3 million in outside services, materials and overhead expenses.

Total research and development expenses in the first six months of 2009 and the first six months of 2008 included $1.3 million of stock-based compensation expense.

Selling, General and Administrative

The change in selling, general and administrative expenses in the first six months of 2009 compared to the first six months of 2008 was primarily due to the following:

• An increase of $2.4 million in litigation costs associated with our trial against Luna Innovations Incorporated;

• A $1.1 million charge in 2009 for the write-off of non-recoverable fixed assets related to the company's decision to terminate its relationship with its European subcontractor for the manufacture of catheters;

• A $1.0 million charge for executive severance in 2009, consisting of $0.4 million of severance and $0.6 million of stock-based compensation;

• A decrease of $0.2 million in employee-related expenses, exclusive of executive severance, including sales commissions and travel expenses, due primarily to a decrease in average general and administrative headcount of 10, partially offset by an increase in average sales and marketing headcount of three, and the effects of the Company's quarterly one-week furloughs during 2009;

• A decrease of $0.3 million in non-compensation marketing expenses;

• A decrease of $0.4 million in professional service fees exclusive of Luna litigation costs;

• A decrease of $1.1 million in stock-based compensation expense, exclusive of stock compensation related to executive severance, due primarily to the effects of our lower average stock price and lower headcount; and

• A decrease of $1.2 million in lease costs allocated to selling, general and administrative expenses as a result of all lease costs for our new facility prior to our occupancy in the third quarter of 2008 having been charged to selling, general and administrative expenses.

Selling, general and administrative expenses in the first six months of 2009 included $2.8 million of stock-based compensation expense compared to $3.3 million in the first six months of 2008.

Interest Income

Interest income decreased in the first six months of 2009 compared to the first six months of 2008 primarily due to significantly lower interest rate returns available in the market for highly rated investments as compared to the rates available in the previous year.

Interest and Other Expense, net