HNSN Hansen Medical, Inc. (MM)

This Annual Report on Form 10-K contains forward-looking statements. These forward-looking statements are based on our current expectations about our business and industry and include statements regarding our strategies, products and product capabilities. In some cases, these statements may be identified by terminology such as “may,” “will”, “should,” “expects,” “could,” “intends,” “might,” “plans,” “anticipates,” “targets,” “believes,” “estimates,” “predicts,” “projects,” “potential,” or “continue,” or the negative of such terms and other comparable terminology. Examples of such statements include our expectations for future operating and financial trends and results. Our forward-looking 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 Item 1A “Risk Factors.” Furthermore, such forward-looking statements speak only as of the date of this report. 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. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

We have applied for trademark registration of, and claim trademark rights in, “Magellan” and “Hansen Medical Magellan.” We have obtained trademark registration for, and claim trademark rights in “Artisan Extend,” “Hansen Medical,” “Hansen Medical (with Heart Design),” “Heart Design (Logo),” “Sensei,” “Lynx,” “Artisan,” “Instinctive Motion,” “Fine Force Technology” and “IntelliSense.” This report also includes other trademarks, service marks and trade names of other companies.

Overview

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. While earlier generations of medical robotics were designed primarily for manipulating rigid surgical instruments, our technology is designed to enable and improve medical procedures that are reliant upon flexible tools like guide wires, catheters, sheaths, balloons and stents.

Our Sensei ^® Robotic Catheter System, or Sensei system, is designed to allow physicians to instinctively navigate flexible catheters with solid stability and control in interventional procedures within the atrial heart chambers. Instinctive navigation refers to the ability of our Sensei system to enable physicians to direct the movements of a robotic catheter like our currently marketed Artisan ^® Control Catheter and Artisan Extend™ Control Catheter, or Artisan catheters, and our Lynx ^® Robotic Ablation Catheter, or Lynx catheter, to a desired anatomical location in a way that is natural and inherently simple. We believe our Sensei system and its corresponding disposable catheters enable physicians to perform procedures that historically have been 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 outcomes and permitting complex procedures to be performed interventionally.

Our Magellan ^TM Robotic System is a proprietary peripheral vascular interventional platform that, used in combination with the Magellan™ Robotic Catheters, has the potential to provide endovascular specialists with vessel navigation, catheter stability during the manual delivery and placement of therapeutic devices, reduced procedural radiation exposure and fatigue, and precise robotic control of distal catheter tips. The Magellan Robotic System with the Magellan Robotic Catheter, or “Vascular System”, cannulates peripheral vessels with a proprietary technology that delivers simultaneous and independent distal tip control of a catheter and a sheath as well as robotic manipulation of standard guide wires, from a centralized, remote workstation. This technology is designed to provide a robotically stabilized conduit for the manual placement and delivery of other companies’ therapeutic devices. Additionally, the Magellan Robotic System is designed to allow for sufficient extension inside the body to access hard to reach, distal peripheral anatomy.

1

Table of Contents

For the most part, catheters and catheter-based technologies have used blood vessels and other tubular anatomic structures as “highways” to constrain and guide their movement to specific parts of the body. However, we believe that physicians have limited ability to accurately control the distal working tips of these manually-controlled, hand-held instruments, which may hinder the physician’s ability to perform procedures that require precise navigation and stability of catheters in tortuous vessels. These issues are magnified in larger open spaces such as the atria and ventricles of the heart and large diameter blood vessels of the body such as the aorta where the navigation of the tip of the catheter is no longer aided by vessel walls.

We believe our technology has additional applications outside of the fields of electrophysiology, or EP, and peripheral vascular intervention. We plan to investigate the advancement of our technology into these markets so that the benefits of flexible robotics and instinctive control can be experienced by a larger group of physicians and patients.

Electrophysiology

Electrophysiology, or EP, is the study of electrical impulses through the heart. EP is focused primarily on diagnosing and treating cardiac arrhythmias, which are conditions in which electrical impulses within the heart vary from the normal rate or rhythm of a heartbeat. Such conditions may be associated with significant risks to patients. Our Sensei system and Artisan catheter are labeled and marketed for manipulation, positioning and control of certain mapping catheters during EP procedures, a critical step in the identification of the heart tissue generating abnormal heart rhythms that may require ablation or other treatment. We believe our products have the potential to improve the efficiency, consistency of results and ease of performing many catheter-based interventional procedures. Our initial focus in EP procedures outside the United States is for the diagnosis and treatment of patients who suffer from abnormal heart rhythms, or arrhythmias. Our products are currently labeled and marketed in the United States for manipulation, positioning and control of certain mapping catheters in the atria of the heart connected with these procedures, and in the European Union and certain other countries for manipulation, positioning and control of diagnostic and therapeutic catheters within the atria of the heart. Atrial fibrillation, which is the most common form of arrhythmia, results from abnormal electrical impulses that cause a rapid, irregular heartbeat within the upper chambers of the heart, leading to ineffective pumping of the blood through the heart, as well as complications that include a significantly increased risk of stroke. According to a forecast by Millennium Research Group in 2008, approximately six million people in the United States and the European Union alone suffer from atrial fibrillation.

Many patients with atrial fibrillation are initially treated with drug therapies, which may cause significant side effects. Patients who are either not responsive to drug therapy or are unhappy with its side effects may be candidates for catheter-based ablation treatments. However, we believe non-robotic catheter-based approaches have significant drawbacks that we believe directly relate to the difficulty of manually controlling the catheters. These drawbacks include success rates of only approximately 75 percent and risks such as lengthy procedure times, which can lead to extensive radiation exposure for the physician and the patient. We believe that many of the electrophysiologists in the United States do not regularly perform these catheter-based procedures because of the difficulty of manual technique, lack of clinical data and the complexity and time-consuming nature of treating atrial fibrillation.

Most of the procedures completed to date using our Sensei system involved mapping and ablation of cardiac tissue to treat atrial fibrillation. The use of the Sensei system and Artisan catheter in the United States for ablation procedures has been done on an off-label basis. Without FDA clearance for labeling that includes certain ablation procedures, this use (and any use other than manipulation, positioning and control of certain mapping catheters during EP procedures) is considered an off-label use of our products, and we are prohibited from labeling or promoting our products, or training physicians for such off-label use. Off-label use is possible because physicians are not precluded from using an FDA-cleared product in the practice of medicine beyond the scope of its cleared indications. To address this issue, we have received approval of an Investigational Device Exemption, or IDE, to investigate the use of our Sensei system and Artisan Control Catheter in the treatment of

2

Table of Contents

atrial fibrillation in a clinical study designed to support a submission to the FDA to obtain clearance or approval for the expansion of our current labeling in the United States beyond mapping. The study was planned to involve approximately 300 patients and involves the ablative treatment of atrial fibrillation. The study includes a seven-day follow-up for safety and a one-year follow-up for efficacy at intervals of 90, 180, and 365 days. We enrolled our first patient in May 2010 and approximately 50 patients have been enrolled to date. A proposed modification to the study protocol was submitted to FDA for review in January 2013, to reduce the required sample size. The modified study, which plans to enroll a minimum of 125 additional subjects, was approved by the FDA in August 2013 and 19 additional patients have been enrolled to date. If successful, we intend to use the data from this study to support a submission to the FDA to obtain clearance for use in atrial fibrillation procedures.

We believe that our Sensei system may improve a physician’s ability to perform certain EP procedures because of its ability to provide stable robotic control of the working tip of catheters and flexible instruments. Based on our experience with previous catheter and catheter-based procedures, the results of the procedures performed with our Sensei system and feedback from the physicians that have used our Sensei system, we believe that our Sensei system offers significant benefits over conventional catheter-based technologies.

Peripheral Vascular

An additional and more recent focus of our robotic catheter technology has been the endovascular treatment of vascular disease, an area that we expect to be a key growth driver for the business. Endovascular procedures are catheter-based procedures done in the arterial and venous vasculatures and include interventions involving the abdominal and thoracic aortic grafting as well as access, percutaneous transluminal angioplasty, or PTA, atherectomy and stenting of branches of the aorta and arterial system including the coronary and carotid arteries and the iliac, femoral, popliteal, infra popliteal renal and mesenteric vessels. To address this market, we have developed our Magellan Robotic System and associated Magellan Robotic Catheters which is based on our Sensei system and preserves the open architecture featured in the Sensei system to allow for the subsequent use of some 6Fr therapeutic devices on the market today. We believe this platform and its clinical capability has the potential to open new markets for Hansen by providing vascular surgeons, interventional cardiologists, and interventional radiologists with accurate control of the catheter tip to enable vessel navigation, helping them to perform more complex catheter based procedures in a systematic way. In July 2011, we received CE Mark for our Magellan Robotic System and in October 2011 received a CE Mark for the Magellan Robotic Catheter and related accessories designed for use with the Magellan Robotic System. We received FDA clearance for the marketing of our Magellan Robotic System including the catheter and accessories in June 2012 and we received FDA clearance for the marketing of our Magellan 6Fr Robotic Catheter in February 2014.

We also believe that robotic control of flexible instruments has potential application to a broad range of interventional procedures. We have investigated expanding the uses for our technology beyond EP procedures to additional interventional applications in peripheral vascular and cardiovascular diseases. Consistent with this strategy, we have investigated the application of robotic delivery techniques to endovascular interventions such as angioplasty and stenting, as well as structural heart applications such as percutaneous aortic valve replacement and mitral valve repair.

Background

Over the past thirty years, one of the most significant medical trends has been the development of less traumatic or minimally invasive methods of diagnosing and treating disease. These less traumatic methods have largely fallen into two groups:

3

Table of Contents

Minimally invasive surgery reduces the trauma of open surgery, and interventional procedures cause even less trauma and can reach many areas of the body that rigid-instrument robotic surgery cannot. Each year, catheter-based technologies are used for millions of interventional diagnostic and therapeutic medical procedures worldwide. However, manually-controlled hand-held catheter delivery devices, even in the hands of the most skilled specialists, have inherent instrument control limitations. In traditional interventional procedures, devices are manually manipulated by physicians, who twist and push the external ends of the instrument in an iterative process that attempts to thread the internal end of the instrument through tubular anatomic structures to a specific treatment site. Manual control of the working tip of the catheter becomes increasingly difficult as more turns are required to navigate the instrument to the treatment site. These control problems are significant in constrained tubular spaces such as blood vessels and become even more difficult in unconstrained spaces such as the atria and ventricles of the heart and large diameter blood vessels such as the aorta and tortuous vessels commonly seen in patients with vascular disease. In addition, while sophisticated imaging, mapping and location-sensing systems have provided visualization for interventional procedures and allowed physicians to treat more complex conditions using flexible instruments, the substantial lack of integration of these information systems requires the physician to mentally integrate and process large quantities of information from different sources in real time during an interventional procedure. These systems display data differently, requiring physicians to continuously reorient themselves to the different formats and displays as they shift their focus from one data source to the next while at the same time manually controlling an inherently difficult-to-control catheter.

The Hansen Medical Solution

Our systems principally consist of two modules: a physician control console and a patient-side module that can be easily connected to most procedure tables and do not require any specialty room designs. Physicians sit at the control console outside the radiation field and use their hands to instinctively control the motion of and navigate our disposable catheters, which are attached to the patient-side module. Our catheters are designed to accurately deliver third-party catheters and catheter-based technologies to specific sites in a broad range of procedures.

We believe our Sensei system and Magellan Robotic System, combined with our disposable catheters, overcome the limitations of hand-held navigation catheters. We designed our systems to have the following attributes:

4

Table of Contents

We believe that our robotic solution may offer the potential for substantial benefits to patients, physicians, hospitals and third-party payors including:

Since the 2007 commercial launch of our Sensei system, clinical studies have been performed outside the United States comparing robotic versus manual procedures and describe differences in efficacy and treatment outcomes, procedure times, power use and power settings, complication rates, and fluoroscopy time (exposure to radiation). A growing body of evidence from these clinical studies, in which over 1,000 atrial fibrillation patients have been treated, demonstrates:

Presently, there are two active studies to assess and to further describe the use of flexible robotic navigation for atrial arrhythmia. One study is occurring outside the United States and one study is occurring in the United

5

Table of Contents

States under an FDA approved IDE. These studies are being conducted prospectively as well as retrospectively; multi center as well as multi operator. The studies are being performed to report on the previously reported complication rates of major cardiac events such as tamponade and pericardial effusion and esophageal lesions as well as long term follow up data to assess the durability of the procedure using the Sensei system and Artisan catheter. As additional studies conclude and a greater body of cases are performed, we believe there will be greater empirical data for the acceptance and adoption of our products and technology.

Our Products

Sensei system

Our Sensei system is principally comprised of two modules: a physician control console and a patient-side module that can be connected to most procedure tables. The control console can be located inside the Electro-Physiology Laboratory, or EP lab, and close to the patient or outside the EP lab in a separate location shielded from radiation. The control console features an instinctive motion controller, which robotically controls the patient-side module to move the catheter within the patient anatomy. Our robotics technology uses sophisticated software and system control algorithms to command the motion of our catheters. Having navigated the catheter to the targeted area, the physician uses instinctive controls to place the working tip of the control catheters to the desired location.

Our patient-side module is a robotic manipulator actuated by motors that control pull-wires in our catheters. The manipulator is mounted on an articulating, or pivoting, arm that is in turn mounted to the procedure table in the EP lab or other treatment room. The manipulator may be directed over the patient during a procedure and thus positioned optimally for that procedure.

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 Control Catheter and also received U.S. Food & Drug Administration, or FDA, clearance to market and promote our Sensei system and Artisan Control Catheter in the United States for manipulation, positioning and control of certain mapping catheters during electrophysiology, or EP, procedures. To better define the scope of our initial mapping clearance, the FDA also required that we label these products for the United States with language stating that their safety and effectiveness for use with ablation catheters have not been established in the treatment of cardiac arrhythmias including atrial fibrillation. Our Sensei system and our Artisan catheter have been used in the United States for ablation procedures in an off-label manner.

To assist physicians in applying the appropriate force with the catheter tip, we have developed our proprietary IntelliSense Fine Force Technology ^TM to measure and display the amount of force in grams transmitted along the shaft of the catheter as a result of catheter tissue contact. We obtained premarket notification, or 510(k) clearance, from the FDA for this feature in 2008. In the third quarter of 2009, we introduced Sensei X, our next generation Sensei system. We received CE Mark for our Lynx ^® catheter in July 2010. In July 2011, we received CE Mark for our Magellan Robotic System and in October 2011 received a CE Mark for the Magellan Robotic Catheter and related accessories designed for use with the Magellan Robotic System. We received FDA clearance for the marketing of our Magellan Robotic System including the catheter and accessories in June 2012 and we received FDA clearance for the marketing of our Magellan 6Fr Robotic Catheter in February 2014. We recognized revenue on our first Sensei system in the second quarter of 2007 and on our first Magellan Robotic System in the first quarter of 2012. Our end customers for these systems range from large university medical centers to community hospitals and many systems were shipped to distributors outside the United States.

Magellan Robotic System

Our Magellan Robotic System is similarly comprised of two modules: a physician control console and a patient-side robotic arm that can be connected to most procedure tables. The control console can be located

6

Table of Contents

inside the lab and close to the patient or outside in a separate location shielded from radiation. The control console features an instinctive motion controller, which robotically controls the patient-side module to accurately move the catheter within the patient anatomy. Our robotics technology uses sophisticated software and system control algorithms to command the motion of our catheters. The Magellan Robotic System controls the proprietary Magellan Robotic Catheter, which is a telescoping, robotically steerable catheter designed to facilitate remote catheter navigation and vessel cannulation, and to provide a robotically stabilized sheath for manual delivery of therapeutic devices.

Our patient-side module is a robotic manipulator actuated by motors that can control the remote insertion, rotation, and bend of the Magellan Robotic Catheter, as well as the remote insertion and rotation of a standard-sized guide wire. The manipulator is mounted on an articulating, or pivoting, arm that is in turn mounted to the procedure table in the interventional lab or hybrid operating room. The manipulator may be adjusted for optimal positioning over the patient.

Artisan catheter

Our disposable Artisan catheter and guide catheter assembly consists of a telescoping set of control catheters that are integrated to provide the desired motion of the tip of a diagnostic or therapeutic catheter that is inserted through the center lumen of the Artisan catheter. In this manner, the Artisan assembly is designed to accurately control the movement of a third-party catheter chosen by the physician. As a result, physicians are not limited to using particular proprietary catheters. In addition, the center lumen of the Artisan catheter is designed to allow physicians outside the United States to adapt and expand the procedures they can perform as other manufacturers invent new therapeutic or diagnostic catheters. Each Artisan catheter is designed to be used only once and then discarded.

Our disposable Artisan catheter and guide are designed to move together or independently, and can move with multiple degrees of freedom when attached to the robotically-controlled motors of our Sensei system. In addition, our Artisan catheter has a programmable chip that prevents use of an Artisan catheter that has been previously used and that restricts other control catheters from being plugged into our Sensei system patient-side module. In May 2007, we received CE Mark approval for our Artisan Control Catheter and also received FDA clearance for the marketing of our Artisan catheter for manipulation, positioning and control of certain mapping catheters during electrophysiology procedures. In fall of 2009, we introduced our Artisan eXtend catheter, which provides improved flexibility and ease of use and included a new flush assembly. However, some of the catheters experienced a leak in the new flush assembly. Although no patient is known or suspected to have experienced any consequences associated with the leak in the new flush assembly, we voluntarily recalled all of the catheters that included the new flush assembly and reported the events to the FDA in accordance with applicable regulations. A newly-designed Artisan Extend Control Catheter was cleared and introduced into the market in 2012.

Lynx catheter

We began shipping our proprietary Lynx catheter outside of the United States in September 2010. This limited market roll out of the Lynx catheter, a standard sized, flexible, integrated irrigated ablation catheter that can be controlled by our Sensei system without the need for an Artisan catheter was the culmination of our development work on improvements in catheter design, flexibility, and control, and in the development program of the irrigated RF ablation tip. The feedback from physicians from our limited market roll out confirmed that the quality of ablation, cooling capabilities, and navigation and control capabilities of this catheter are consistent with our requirements. We commenced broader commercialization activities outside of the United Sates in January 2011. We believe the Lynx catheter will provide users the opportunity to use a flexible, integrated, irrigated ablation product that also affords them the opportunity of reducing the disposable procedure cost.

7

Table of Contents

Magellan Robotic Catheter

Our Magellan Robotic Catheter was designed to accompany our Magellan Robotic System for the treatment of vascular disease. Our disposable Magellan Catheter consists of a telescoping set of control catheters that are integrated to provide the desired motion of the tip of a diagnostic or therapeutic catheter that is inserted through the center lumen of the catheter. It allows for independent, individual robotic control of the distal tips of both the outer sheath and the inner leader catheter, as well as robotic manipulation of standard guide wires. Its low profile, robotically steerable catheter is compatible with some 6Fr treatment catheters and it has robotic sheath stabilization for therapy delivery. In addition, we received FDA clearance for the marketing of our Magellan 6Fr Robotic Catheter in February 2014. The Company will begin a limited release of the Magellan 6Fr Robotic Catheter, collecting clinical and procedure data over a broad set of cases over the next several months, and anticipates a more wide-scale release later in 2014.

CoHesion ^TM 3D Visualization Module

Our CoHesion 3D Visualization Module, or CoHesion Module, is a software interface between our Sensei system and the St. Jude Medical EnSite ^TM System for EP procedures. It is designed to provide physicians with 3D visualization to augment their ability to move a catheter throughout the atria, as well as increase control over placement of the catheter in specific locations. The CoHesion Module expands the utility of the EnSite and Sensei systems to provide physicians with a comprehensive and easy-to-use remote navigation and mapping system for EP procedures. Key features of the CoHesion Module include:

Published clinical studies have shown that the use of the CoHesion Module results in the reduction of radiation exposure to the patient compared to conventional procedures. The CoHesion Module became commercially available in the European Union in the first quarter of 2008 and we obtained FDA clearance for the CoHesion Module in the United States at the end of the second quarter of 2008.

The EnSite system is a computer-based technology marketed worldwide that facilitates EP procedures by creating real-time 3D graphical displays or maps of cardiac structures and arrhythmias. These maps are designed to provide the visual guidance necessary to navigate catheters used during EP procedures. Two-dimensional technologies such as fluoroscopy or ultrasound can also be used to assist physicians with guiding catheters inside the heart, but provide limited information regarding the three-dimensional space inside the heart. Combining the Sensei and EnSite technologies provides physicians with 3D visualization that augments their ability to confidently move a catheter throughout the heart, as well as increase control over placement of the catheter in specific locations. The EnSite System is used by EP clinicians during EP procedures to create 3D models of their patients’ cardiac anatomy and then to visualize catheters used in those procedures as they are navigated to critical anatomical targets. The system collects and organizes activation and voltage data from the inner surface of the heart, which allows physicians to visualize arrhythmias on the 3D model and more easily determine a treatment strategy. Localization of our Artisan catheter within the EnSite System’s 3D map gives physicians the ability to move the catheter deliberately and accurately while seeing specifically, in three dimensions, the location of the catheter inside the heart. We believe this integrated functionality enables clinicians of varying skill levels to effectively treat complex cardiac arrhythmias.

Our Strategy

Our goal is to establish our technology as the leading robotic platform for complex interventional catheter-based procedures for cardiovascular and peripheral vascular diseases. We believe our Sensei system and Magellan Robotic System will accomplish this objective by potentially improving outcomes, reducing physician

8

Table of Contents

fatigue which may allow for additional cases to be performed in one day, reducing radiation exposure for primary physicians and reducing overall procedure costs and hospital expenditures. We also believe that we will be able to increase the number of procedures treated with catheter-based approaches and enable more doctors to perform such procedures. We market our products in the United States through a direct sales force of regional sales employees, supported by clinical sales representatives 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.

Elements of our strategy include:

9

Table of Contents

Our Sensei system and Artisan catheter were cleared by the FDA for manipulation and control of certain mapping catheters in electrophysiology procedures. This robotic catheter system is compatible with fluoroscopy, ultrasound, 3D surface map and patient electrocardiogram data. In the United States, the Sensei system is not approved for use in guiding ablation procedures; this use remains investigational. The U.S. product labeling therefore provides that the safety and effectiveness of the Sensei system and Artisan catheter for use with cardiac ablation catheters in the treatment of cardiac arrhythmias, including atrial fibrillation, have not been established. Our future business prospects, however, will depend on the use of our Sensei system in the treatment of atrial fibrillation and other cardiovascular procedures. Depending upon regulatory requirements and our understanding of the needs of the physician community, we plan to seek future clearances or approvals for labeling that includes certain ablation procedures. Without such clearance or approval, each of these uses is considered an off-label use of our Sensei system, and we are prohibited from labeling or promoting our Sensei system, or training physicians, for such off-label use. Due to these legal constraints, our sales and marketing efforts focus on the general technical attributes and benefits of our Sensei system and its use to map the atrial anatomy. As a result of promotional limits based on our labeling and the competitive nature of the market, some hospitals or physicians may not adopt our Sensei system or use our products unless and until we are able to broaden the scope of FDA clearance for our products. In addition, if the FDA determines that we have engaged in off-label promotion, we could be subject to significant liability. See Item 1A — Risk Factors — “ We may incur significant liability if it is determined that we are promoting off-label use of our products in violation of federal, state and countries regulations in the United States or elsewhere” and “If we fail to comply with healthcare laws and regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected .”

Clinical Focus

Electrophysiology

Electrophysiology, or EP, is the study of electrical impulses through the heart. EP is focused primarily on diagnosing and treating cardiac arrhythmias, which are conditions in which electrical impulses within the heart vary from the normal rate or rhythm of a heartbeat. Such conditions may be associated with significant risks to patients. Drug therapies have traditionally been used as initial treatments but they often fail to adequately control the arrhythmia and may have significant side effects. As a result, a significant unmet medical need for long-term solutions persists.

Severe heart rhythm disturbances were historically treated by highly invasive open chest heart surgery and are therefore typically only performed in conjunction with other procedures unrelated to the arrhythmia such as coronary artery bypass surgery or valve replacement and, as such, the total procedure can be very expensive. While generally very effective, these procedures are extremely traumatic for the patient, and usually require long hospital stays followed by a significant period of convalescence. Minimally invasive surgical procedures for the treatment of severe heart rhythm disturbances, including some which are robotically controlled, were devised to

10

Table of Contents

add visualization and instrument control using an endoscope in order to reduce the trauma for the patient. While these minimally invasive surgical techniques have been used for a number of anti-arrhythmic procedures, we believe the results have been mixed and the trauma to the patient and procedure cost remain high.

Interventional electrophysiology further advanced these surgical procedures in EP labs through visualization provided by real-time X-ray imaging, often enhanced by electro-anatomic mapping and intracardiac ultrasound. These advances enable physicians to insert and navigate catheters into the vasculature, then into the open chambers of the heart to deliver diagnostic and therapeutic technologies.

In EP mapping and ablation procedures, physicians have traditionally used specialized hand-held catheters. These catheters are manually navigated using a system of mechanical control cables to first map the electrical signals within the patient’s heart and then to ablate the heart tissue to eliminate arrhythmias. Generally, ablation is accomplished by applying radiofrequency energy or electrical energy, or freezing the diseased tissue giving rise to the arrhythmia, usually through a catheter which creates a small scar that is incapable of generating or conducting heart arrhythmias. EP procedures have proven highly effective at treating arrhythmias at sites accessible through the vasculature. According to Millennium Research Group, in studies conducted 2008 and 2009, approximately 265,000 EP procedures for diagnosis and treatment of arrhythmias were forecasted to have been conducted in the United States and approximately 150,000 such procedures in the UK, France, Germany and Italy in 2010.

Control of the hand-held devices used in these EP procedures requires significant skill, because navigation in the blood vessels and the chambers of the heart can be difficult. The path that the interventional device must follow to arrive at the treatment site can be complex and tortuous and can include crossing the septum of the heart. Existing hand-held devices are limited in their ability to accurately navigate the tip of the mapping and ablation catheter to the treatment site on the heart wall, to keep the catheter in the targeted place and maintain adequate tissue contact within a beating heart to effect treatment and perform complex ablations within the left atrium of the heart. Physicians using manually-controlled, hand-held devices often utilize a range of different catheters and sheaths in an attempt to find the right device or combination of devices for the procedure being performed. Our Sensei system has been designed to address the challenges associated with the use of current hand-held devices in performing many EP procedures.

We believe the instinctive robotic control of our Sensei system may provide greater accuracy, tip stability and control, reduce the variability of procedure times and improve the efficacy of EP procedures, including:

11

Table of Contents

The following table summarizes arrhythmias we believe could benefit from use of our Sensei system. All data regarding prevalence is based on forecasts by Millennium Research Group for 2010 made in 2008:

12

Table of Contents

In 2008, it was projected by Millennium Research Group that over 6 million people will have atrial fibrillation, 140,000 will have atrial flutter, and 380,000 will have both atrial fibrillation and flutter in the U.S. by 2035.

Vascular Market

Peripheral vascular disease presents a significant market opportunity for us. Patients with peripheral vascular disease can suffer from decreased blood flow which can lead to disability and amputation, stroke or blood clots, and death. The rates of diabetes, hypertension, atherosclerosis, and obesity are also on the rise worldwide and are contributors to the growth rate of vascular disease in an aging population. Endovascular procedures are catheter-based procedures done in the arterial and venous vasculatures and include interventions involving the abdominal and thoracic aortic grafting as well as access PTA, atherectomy and stenting of branches of the aorta and arterial system including the carotid arteries and the iliac, femoral, popliteal, renal and

13

Table of Contents

mesenteric vessels. In 2013, Millennium Research Group forecasted that approximately 1.1 million of these procedures would be performed in the United States alone in 2013. In addition, in 2008, Millenium Research Group forecasted that in 2010, an additional 3.4 million of these procedures would be performed in the heart, for treatment of coronary artery disease. For comparison, in 2008, Millennium Research Group forecasted that approximately 265,000 electrophysiology procedures would be performed in the United States per year with approximately one third to one quarter of those for atrial fibrillation.

We believe that our technology has the potential to improve efficacy, safety and efficiency for a number of procedures that can generally be grouped into the category of endovascular therapies. From simple, straightforward procedures, to complex, challenging endovascular procedures, we believe robotic catheter control has the potential to (1) allow endovascular physicians to perform procedures less invasively, (2) reduce radiation exposure to physician and reduce procedural fatigue, and (3) reduce the likelihood of prolonged procedure times.

Complex vascular procedures, which we estimate range from 10% to 20% of endovascular interventions, have limited technical success, longer procedure times and fluoroscopy use, and expose the patient to significantly increased risks of adverse events and extended hospitalizations. We believe that the individual robotic control of the distal tips of both the outer sheath and the inner leader catheter, as well as robotic manipulation of standard guide wires can enable navigation to the anatomical area of interest inside an artery and can facilitate placement of a stent, graft or other therapeutic or implantable device. In particularly diseased or tortuous arteries, facilitation of steering of the catheter may assist in avoiding contact with atheromatous (and calcification) disease present in the vessel wall, may facilitate procedures that are now difficult to do and could impact outcomes. For some patients with particularly challenging anatomy or lesions, robotic catheter control may enable endovascular procedures in situations that might conventionally have been treated surgically. In these circumstances, we believe there may be significant benefits to the physician and hospital. In addition, similar to EP applications, we believe the use of robotic catheter control can lead to material reductions in radiation exposure to the physician, and potentially the patient, in the treatment of vascular disease. Remote navigation using the Sensei system has already demonstrated reductions in radiation exposure to the physician in electrophysiology applications. Finally, robotic catheter control (for simpler or off-the-shelf devices) has the potential to provide the improvements in radiation exposure reduction and 3D visualization of anatomic targets for more straightforward endovascular or interventional cases.

We also believe there is the potential to convert surgical cases to endovascular cases using robotic catheter control, an innovation that could, if achieved, materially affect the course of endovascular disease management.

Our Magellan Robotic System has been designed and engineered to meet the needs of vascular surgeons, interventional cardiologists, interventional radiologists and interventional neuro-radiologists, and extends the current Hansen Sensei architectural achievements in robotic catheter manipulation, catheter design, robotic capabilities, instinctive control, and data visualization. The architecture is intended to constitute a platform that we believe will extend our robotic capabilities significantly, and therefore depart from the current Sensei architecture in the following ways:

14

Table of Contents

We anticipate that our Magellan Robotic System will be used in a variety of endovascular interventions, which may include some of the vascular applications described below. To date, The Magellan Robotic System has been used in approximately 300 endovascular procedures. We will first focus on addressing the lower extremity and thoraco-abdominal markets, which include endovascular treatment of the ilio-femoro-popliteal disease, and renal, celiac and mesenteric artery disease. We also intend to pursue robotic catheters for the diagnosis and treatment of disease in the coronary, carotid, and neurovascular areas with future development.

Potential endovascular interventions

Lower Extremity Artery Interventions. Critical limb ischemia, or CLI, occurs when the patient’s lower extremity arteries, such as femoral, popliteal, and below-the-knee arteries, cannot carry sufficient oxygen to ensure proper metabolism. This may limit the patient’s ability to perform common activities such as walking or climbing stairs. If untreated, CLI often results in limb amputation. According to Millennium Research Group, the number of angioplasty and stenting procedures of the ilio-femoro-popliteal and infrapopliteal segment in the US and in portions of Europe (the UK, France, Germany and Italy) in 2013 was forecasted to be approximately 565,300 and 332,500, respectively. The lower extremity market continues to be a fast-growing market showing device and technique innovation. While a broad range of therapeutic tools is available to the endovascular specialist, acute iliac bifurcations, tortuous iliac arteries, and chronic total occlusions, or CTOs, appear to remain key contributors to procedure complexity and unpredictability. We believe that the control at the catheter tip and the increased stability provided by the Vascular System may simplify the navigation of complex iliac bifurcation and other anatomic branch points and areas of tortuosity, minimize time from femoral stick to angioplasty or stenting, and result in shorter, more predictable procedure times. In addition, the Vascular System has the potential to provide a systematic approach for navigation of the iliac bifurcations and access to the contralateral leg, which may reduce the physician’s dependency on proper guide wire and catheter selection, and may reduce delays or technical failures. We also believe that by providing user-friendly and individual control of a guide wire and the catheter tip and through the provision of increased catheter support, the Vascular System may allow the crossing of CTOs, reduce the volume of conversions to bypass surgery, reduce procedure time and radiation exposure and enable more endovascular specialists to expand their practice to include the treatment of complex vascular disease.

Renal, Mesenteric and Celiac Artery Interventions . According to Millennium Research Group, the number of renal artery stenting procedures forecasted in 2013 in the U.S. and in Europe was approximately 52,300 and 15,700, respectively. There has been an ongoing controversy on the superiority of renal artery stenting over medical therapy, and one of the concerns associated with renal artery stenting has been the risk of embolization caused by the dislodgement of embolic debris during manipulation of conventional catheters. We believe that providing instinctive steering of the catheter and accurate manipulation of the catheter tip to avoid point contact with the vessel wall may positively impact outcomes of renal, mesenteric and celiac artery stenting.

Abdominal and Thoracic Aortic Aneurysm Repair. Abdominal aortic aneurysms, or AAAs, were forecasted to be the 13 ^th -leading cause of death in the US in 2010. Millennium Research Group estimated in 2008 that there are over 1.2 million people with an AAA in the US and only about 200,000 are diagnosed. According to a Millennium Research Group study, in 2013, the number of abdominal and thoracic aneurysm endovascular repairs performed in the US and in Europe was forecasted to be approximately 60,260 and 26,650, respectively. Endovascular aneurysm repair, or EVAR, has been growing rapidly and cannibalizing surgical repair, because it has proven to be a minimally invasive procedure with similar effectiveness to surgical grafting and fast recovery times, which reduce costs of convalescence and perioperative complications and make EVAR a cost-effective solution to medical institutions.

EVAR, however, is in part technically challenging in situations where cannulation of portions of the graft must be achieved under fluoroscopy, or vessel embolization must be achieved prior to deployment of the endograft. The complex anatomy and the difficulty of controlling guide wires and catheters in an enlarged, diseased aorta may produce significant variability in procedure times, fluoroscopy use, and complication rates in

15

Table of Contents

patients needing pant leg grafts, or fenestrated or branched grafts. We believe that our Vascular System may be able to provide a more systematic approach to vessel and graft cannulation, which may result in shorter, more consistent procedure times, and reduce radiation exposure and use of contrast.

Carotid Artery Stenting . Carotid artery stenting, or CAS, is an alternate therapy to surgical carotid endarterectomy, and may be performed by the interventional cardiologist, the interventional radiologist, or the vascular surgeon. According to Millennium Research Group, the number of carotid artery stenting procedures forecasted in 2013 in the US and in Europe was approximately 30,200 and 22,900, respectively. The growth of CAS has been hindered by controversial clinical results. Carotid artery stenting is a procedure that requires, in many cases, navigation of tortuous anatomy, placement of multiple devices in sequence to achieve procedural success, and manipulation of these devices at a distance to achieve appropriate placement and long-term efficacy. We believe that by enabling fine control of the catheter tip and increased catheter stability, our Vascular System may provide a systematic approach for navigation of the aortic arch, improve access consistency for physicians treating complex arches and tortuous carotid anatomy, resulting in more consistent procedure times, and reducing physician’s fatigue caused by the lack of control of the distal end of conventional catheters.

Coronary Artery Interventions and Chronic Total Occlusion Crossing . According to Millennium Research Group in 2008, the number of percutaneous coronary interventions forecasted in 2010 in the US and in Europe was approximately 1,000,000 and 740,000, respectively.

Based on physician interviews we have conducted, technical difficulties associated with coronary artery stenting seem to originate from the lack of stability of the distal section of the guiding catheter and from limited ability of catheters and guide wires to cannulate acutely angulated coronary branches. We believe that by providing stability and steering at the tip of the catheter, as well as instinctive driving of the catheter, the Vascular System may facilitate branch cannulation. We also believe that active catheter control through tip steering and catheter pull wire manipulation can provide increased stability at the site of intervention and may decrease the risk of having the guiding catheter be dislodged out of the coronary artery during guide wire manipulation and therapy delivery.

Potential value of our Magellan Robotic System

Value to the hospital . We believe our Magellan Robotic System provides hospitals with the opportunity to deliver better patient care by providing an alternative to conventional endovascular technique using our flexible robotic technology. By reducing procedure times and streamlining endovascular interventions, physician procedural fatigue is reduced and our Magellan Robotic System could help hospitals increase their catheter laboratory utilization and throughput and manage case scheduling more efficiently. We also believe that converting surgical cases to endovascular cases may have a significant effect on length of stay, and may reduce radiation exposure. The Magellan Robotic System also has the potential to improve inventory management, by reducing the number of conventional catheters and guide wires required to be in stock. As part of our sales efforts, we have developed a financial model to assist hospitals in estimating the potential return on investment from purchasing a Magellan Robotic System. The model quantifies potential cost savings to be achieved from increased predictability of procedure times through the avoidance of overtime and other costs related to procedure time overruns, the contribution from potential improved lab utilization, and the potential incremental profit contribution that may arise from an increase in patients drawn to a hospital by our system.

Value to the physician . We believe that by providing an instinctive, controlled, systematic approach to vessel navigation, our Magellan Robotic System may reduce the number of catheter and guide wire exchanges required to complete endovascular interventions, simplify catheter and guide wire selection, and minimize the challenges provided by the lack of control of the distal end of conventional catheters. The Magellan Robotic System also has the potential to lower the learning curve for endovascular interventions and enable physicians of varying skill levels to perform more complex cases. Finally, by enabling remote catheter control and vessel navigation, and by providing an ergonomically friendly environment, the Magellan Robotic System may help reduce physician’s skeletal fatigue and exposure to harmful radiation.

16

Table of Contents

Value to the patient . We believe that our Magellan Robotic System for vascular applications may be able to provide patients with an alternative to conventional catheter-based interventions. By limiting the need for the operator to rely on vessel wall interactions to cannulate and navigate vessels with the catheter, patients may benefit from shorter procedure time and accurate delivery of therapy. In addition, we believe that a robotic system for vascular applications may reduce the volume of conversions to surgery, and allow complex cases to be performed using the less invasive, endovascular approach.

Other potential applications in interventional cardiology

Transcatheter Aortic Valve Replacement (TAVR). Transcatheter aortic valve replacement represents an emerging alternative therapy for high-risk and inoperable patients with severe valve disease, and may offer advantages over open heart surgery. For example, non-surgical heart valve replacement may minimize complications associated with general anesthesia, opening the chest wall and the use of heart-lung bypass machines. Percutaneous aortic valve replacement using a catheter-based approach may enable surgeons to perform procedures under local anesthesia in a cardiac catheterization lab. This may be a preferred alternative for high-risk valve disease patients who otherwise have no choice but open heart surgery, and more importantly, for those patients with life-threatening valve disease who cannot undergo surgery. We believe that the controlled and precise access and deployment that robotics can provide in an endovascular aortic valve replacement has the potential for enabling current surgical valve candidates to be treated less invasively.

Valve Repair . Heart valve disease is a common disorder which is characterized by a progressive deterioration of one or more of the heart’s valvular structures. Repair of heart valves has historically been accomplished by open heart surgery. Although often very successful in improving valve function, surgery of heart valves is associated with a risk of death and even if successful requires a long post-operative recovery. As a result, cardiologists tend to wait as long as possible before resorting to surgery in patients with deteriorating valve function. There is increasing interest in treating valve disease with less invasive means in order to enable treatment earlier in the disease process and potentially slow or stop the progression of heart failure. In recent years, catheter-based procedures have been developed to repair valves in a surgical manner. We believe that as these procedures develop, physicians will require a new generation of catheters that can be used like surgical tools and which can be precisely controlled. As a result, there may be an opportunity for us to participate in the development of a new generation of procedures in cardiac valve intervention as an alternative to conventional cardiac surgery, potentially offering a safer and more cost-effective approach to the early treatment of heart valve disease.

Left Atrial Appendage Occlusion . One of the significant clinical risks associated with atrial rhythm abnormalities is the development of blood clots in the atrial chamber which can result in stroke. The anatomic portion of the left atrium, referred to as the left atrial appendage, or LAA, is particularly susceptible to clot formation. One approach to elimination of the risk of clot formation in the LAA is the use of catheter-based devices that block blood flow and pooling of blood in the LAA, and thereby reduce clotting risk in the atrium. These devices are believed to work well if they are properly positioned and oriented at the opening of the LAA, however, placement can be exceedingly challenging with conventional catheter techniques. We believe that our robotic technology may be able to simplify the process of delivering these devices.

Biventricular Lead Placement . Pacemakers have been used in cardiology for many years to treat rhythm abnormalities and improve cardiac function. More recently, many physicians have concluded that pacing of both ventricles of the heart in synchrony is, in many patients, more effective than pacing one ventricular location. This technique requires that one of the pacing leads be positioned at an optimal location in the wall of the left ventricle. In order to deliver the left ventricular lead, cardiologists often use a catheter based approach that delivers the pacing lead by introducing a cannula or tube into the coronary sinus, a vein that runs along the outside of the heart. Navigating this coronary sinus vein requires significant catheter manipulation, and also requires stability of the catheter tip when the proper anatomic location is reached. We believe that our Sensei system may be able to simplify the placement of biventricular leads in their optimal location, particularly for physicians with limited experience with this technique.

17

Table of Contents

Ventricular Injection Therapy . Many chronic heart conditions lead to progressive deterioration in heart function, often resulting in a debilitating and eventually fatal disease referred to as congestive heart failure, or CHF. In CHF, the heart muscle becomes less efficient, the chambers of the heart begin to dilate and cardiac function tends to deteriorate. As the heart muscle becomes weaker, the heart has to work harder to pump an adequate amount of blood. The harder the heart works, the more damage is done to its structure and function. Clinicians treat CHF with a variety of drugs that decrease blood volume and increase contractility of the heart muscle. However, there is increasing investigation into techniques which attempt to repair the muscle cells that have been damaged through the direct injection of growth factors or healthy cells into injured muscle. These techniques have shown some ability to replace damaged muscle but often demand the precise control of a needle injector inside the heart. We believe that our Sensei system may be able to provide a very efficient means for more easily performing ventricular injection at the specific locations where clinicians desire to deliver drug and cell therapies.

Although the FDA has granted 510(k) clearance for the use of the Sensei system in mapping heart anatomy, we will not be able to label or promote either the Sensei system or the Magellan Robotic System or train physicians in their use for any of the above applications unless separate 510(k) clearance or premarket application, or PMA, approval from the FDA is obtained for each such application. See Item 1A — “Risk Factors — If we fail to maintain necessary FDA clearances/approvals and the CE Certificates of Conformity marks for our medical device products, or if future clearances, approvals or the delivery of CE Certificates of Conformity are delayed, we will be unable to commercially distribute and market our products.”

Research and Development

As of December 31, 2013, our research and development team consisted of 31 people and our regulatory, clinical and quality team consisted of 31 people. We have assembled an experienced team with recognized expertise in robotics, mechanical and electrical engineering, software, control algorithms, systems integration and disposable device design, as well as significant clinical knowledge and expertise.

Our research and development efforts are focused in the following major areas:

Our research and development team works independently and with other manufacturers of EP lab equipment to integrate our open architecture platform with key imaging, location sensing and information systems in the EP labs. We also collaborate with a number of highly regarded electrophysiologists and cardiologists in key clinical areas in search of new applications for our technology. We plan to use a similar strategy for incorporation into endovascular labs.

We have historically spent a significant portion of our capital resources on research and development. Our research and development expenses were $16.1 million, $16.1 million and $12.2 million in 2013, 2012 and 2011, respectively, which included credits of $10.6 million in 2011, related to funds received from our extended joint development agreement with Philips. See Item 1A, “Risk Factors — We may not be able to further develop our

18

Table of Contents

Magellan Robotic System as planned, which could significantly harm our ability to achieve future regulatory approvals and market acceptance ” and “— Our products and related technologies can be applied in different applications, and we may fail to focus on the most profitable areas or we may be unable to address successfully financial and technology risks associated with new applications, including applications for the vascular market.”

Sales and Marketing

We market, sell and support our products in the United States 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. We have established sales subsidiaries in the United Kingdom and Germany and have hired sales representatives in the UK and Germany. We currently have distribution agreements in Australia, Belarus, Bulgaria, Czech Republic, Denmark, France, Germany Italy, Indonesia, Netherlands, New Zealand, Poland, Russia, Saudi Arabia, Singapore, Slovakia, South Africa, Spain and Ukraine. A summary of our financial information by geographic location is found in Note 13, “Segments,” in the Notes to Consolidated Financial Statements. Our international operations and sales subject us to a variety of risks; see Item 1A, “Risk Factors,” for further discussion.

As of December 31, 2013, we had a direct sales force, clinical support team and marketing team of 42 employees. We use the same sales and marketing force to drive sales of both our Sensei system and our Magellan Robotic System.

Our sales and marketing process consists of two important steps: selling systems directly to the customer, and leveraging our installed base of systems to drive recurring sales of disposable interventional devices, software and services.

Our end users fall into three broad categories:

Many hospitals are part of an integrated delivery network, or IDN, and/or a group purchasing organization, or GPO. When possible, we focus on leveraging opportunities in which we believe a sale to one member of an IDN or GPO creates interest and drives competition within that group. We also focus sales and marketing development activities where strategic synergies or competition exist between our current installed base and other area hospitals.

Following the initial sale of a system to a hospital, we endeavor to expand the number of physicians who use our systems at that hospital. We believe these efforts will benefit early-adopting hospitals by increasing their market share in the procedures and specialties that benefit from procedures performed with our systems. We expect these efforts to increase demand for our disposable products among hospitals, physicians and referring physicians.

Sales of medical capital equipment generally follow a staged sales process that includes the following:

19

Table of Contents

Our systems utilize proprietary control catheters, as well as software tailored to specific clinical applications. After a system is installed and initial training has been completed, we provide ongoing support in order to increase customers’ familiarity with system features and benefits, with the goal of increasing usage of the system. More frequent usage will result in increased consumption of our disposable catheters. One year of customer support is included with each system. Thereafter, we market extended service contracts to continue to provide support and we anticipate that service beyond the basic warranty will increasingly be an important additional source of revenue.

We expect that our relationships with physician thought leaders in the fields of electrophysiology and vascular disease will continue to be an important element of our selling efforts. These relationships are often built around research collaborations that enable us to better understand and articulate the most useful features and benefits of our system as well as to develop new solutions to long-standing challenges in interventional electrophysiology and peripheral vascular disease. We plan to continue to provide support for and collaborate with highly regarded physicians in order to accelerate market awareness and adoption of our systems. Beginning in the third quarter of 2012, we initiated a limited commercial evaluation program to allow certain key accounts to install and utilize our systems for a limited trial period while the purchase opportunity is being evaluated by the hospital.

We have developed a comprehensive solution to assist our customers in marketing their new Sensei system and robotic electrophysiology program. The Flexible Robotics program is a broad based and robust toolkit designed to assist our customer hospitals in using the development of a robotic electrophysiology program as a tool to market the hospital’s quality, commitment to patient care and innovation. The program is a virtual toolbox that contains both the programmatic and content elements that are designed to plan, initiate, and execute public relations and outreach campaigns, influence and change referral patterns to improve market share in the hospital’s catchment area, enliven hospital personnel and patients around the benefits of our innovative robotic technology, and develop substantial awareness of the technology and the physicians employing it. We have experienced a number of hospital level examples of the benefits that this program brings to all of our constituents and believe it will be an important component of the drive to adoption and utilization of the technology. We have also developed these tools for use in our distributor channels. Leveraging off our experience with the Sensei system, we have developed a program to similarly market our Magellan Robotic System. See Item 1A — “Risk Factors — If we fail to comply with healthcare laws and regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.”

Customer Service and Support

As of December, 31, 2013, we had a customer service and support team of 9 employees. These employees form a call center, a network of field service engineers and a service parts logistics repair and delivery system. We also outsource the after-hours portion of our call center, including weekends and holidays, to an answering service. This infrastructure provides a single point of contact for our customers via telephone and email and enables us to provide online, telephone and on-site technical support services 24 hours a day, seven days a week. In addition, we now offer post-warranty maintenance plans for our customers to manage their on-going support needs. We plan to expand our technical training and support capabilities as our installed base continues to grow.

20

Table of Contents

Manufacturing

As of December 31, 2013, we had a manufacturing team of 47 employees. We manufacture our systems and catheters using a combination of in-house manufacturing and third-party contract manufacturers. Some of the components for our systems are single sourced. We may not be able to quickly establish additional or replacement suppliers for our single-source components, in part because of FDA requirements and because of the custom nature of the parts we utilize. Any supply interruption for any of these components or interruptions at our contract manufacturers could limit our ability to manufacture our products, which could have a material adverse effect on our business.

In 2008, we moved into a new facility, thus increasing our ability to produce systems and catheters. However, we still face technical challenges in our manufacturing processes, including manufacturing cost reductions, equipment design and automation, material procurement, problems with production yields and quality control and assurance. Developing our current manufacturing capacity has required the investment of substantial funds and additional changes in the future to reduce manufacturing costs or to adapt our capacity to market fluctuations may require the investment of substantial additional funds and the hiring and retaining of management and technical personnel who have the necessary manufacturing experience. We may not successfully complete any future required change in manufacturing ability on a timely basis or at all.

Lead times for materials and components ordered by us and our contract manufacturers vary and depend on factors such as the specific supplier, contract terms and demand for a component at a given time. We and our contract manufacturers acquire materials, complete standard subassemblies and assemble fully configured systems based on sales forecasts. If orders do not match forecasts, we and our contract manufacturers may have excess or inadequate inventory of materials and components. See Item 1A, “Risk Factors — If we are unable to manufacture our systems and catheters in a manner that yield sufficient gross margins, we will be unable to achieve profitable commercialization ” and “— We have limited experience in manufacturing and assembling our products and may encounter problems at our manufacturing facilities or otherwise experience manufacturing delays that could result in lost revenue or diminishing margins .”

The Sensei system and Magellan Robotic System

Our systems incorporate a number of custom parts and components that we have designed and which are manufactured to our specifications by third parties. Our manufacturing strategy for our systems is to assemble some critical subsystems in-house while outsourcing less critical subsystems, and to complete the final assembly and testing of those components in-house in order to control quality.

Artisan, Lynx and Magellan catheters and guide catheter assembly

Our catheters consist almost entirely of custom parts which we have designed and are manufactured either by us or by contract manufacturers to our specifications. We currently assemble catheters in-house. We outsource the manufacture of certain other disposable products, including sterile drapes used with our system in EP procedures. We also manufacture prototype disposables to facilitate future product development.

Software

We develop the software components of our systems, including control and application software, both internally and with integrated modules which we purchase or license from third parties. We perform final testing of software products in-house prior to commercial release.

Regulatory framework

Our manufacturing facilities operate under processes designed to meet the FDA’s requirements under the Quality System Regulation. We underwent an FDA inspection, which employed the Quality System Inspection

21

Table of Contents

Technique, or QSIT, in July 2010 and received two inspectional observations. The agency accepted our responses and the inspection was closed. If the FDA were to find that we are not operating in compliance with applicable regulations, we could be subject to FDA enforcement action including, but not limited to:

Our existing quality management system passed a European Notified Body audit in 2012, and it was determined that we are in compliance with the requirements of ISO 13485 standard. Through such compliance with the ISO 13485 standard, we benefit from a presumption of conformity with the relevant quality system requirements laid down in the Annexes to Council Directive 93/42/EEC concerning medical devices (Medical Devices Directive). If we fail to maintain compliance with the FDA requirements or maintain compliance with the ISO 13485 standard and the relevant quality system requirements laid down in the Annexes to the Medical Devices Directive in the future, we may be subject to enforcement action by the FDA and the competent authorities of the European Economic Area (EEA), the suspension or withdrawal of our CE Certificate of Conformity by our Notified Body or we may be required to cease all or part of our manufacturing operations for some period of time until we can demonstrate that appropriate steps have been taken to comply with such standards.

Our facility and our clinical investigational sites operate under procedures that govern the conduct and management of FDA-regulated clinical studies under 21 CFR Parts 50 and 812, and Good Clinical Practices. The FDA may conduct Bioresearch Monitoring (BiMo) inspections of us and/or our clinical sites to assess compliance with 21 CFR Parts 50 and 812, our procedures, and the clinical protocol. If the FDA were to find that we or our clinical investigators are not operating in compliance with applicable regulations, we could be subject to the above FDA enforcement action as well as refusal to accept all or part of our data in support our 510(k) or PMA and/ or we may need to conduct additional studies.

Our manufacturing facility also has been inspected and licensed by the California Department of Health Services, or CDHS, and remains subject to re-inspection at any time. Failure to maintain a license from the CDHS or to meet the inspection criteria of the CDHS would disrupt our manufacturing processes. If an inspection by the CDHS were to indicate that there are deficiencies in our manufacturing process, we could be required to take remedial actions at potentially significant expense, and our facility may be temporarily or permanently closed.

Force Dimension Development and Supply Agreement

On November 9, 2004, we entered into a Development and Supply Agreement with Force Dimension Sàrl, a Swiss limited liability company. Pursuant to the terms of the agreement, Force Dimension manufactures and supplies to us specially-configured motion controllers in accordance with a predefined pricing matrix. We may

22

Table of Contents

terminate the agreement for any reason upon 30 days notice to Force Dimension, provided that we will remain obligated to purchase all delivered and ordered master input devices at the time of such termination. Either party may terminate the agreement for a material breach by the other party if the material breach is not cured within 90 days of notice of the material breach. Force Dimension is a single-source supplier for the motion controllers in our Sensei system and our Magellan Robotic System.

Reimbursement

We expect that healthcare facilities and physicians in the United States will continue to bill various third-party payors, such as Medicare, Medicaid, other governmental programs and private insurers, for services performed using our products. We believe that procedures performed with our products are generally already reimbursable under governmental programs and most private plans and claims for services using our products are generally reimbursed under existing billing codes. We cannot be certain, however, that current coverage, coding and reimbursement policies of third-party payors will continue or the extent to which future changes to coding, coverage and reimbursement policies will affect some or all of the procedures that would use our robotic systems.

Future legislation, regulation or coverage and reimbursement policies of third-party payors may adversely affect the demand for our products (currently marketed and under development) and limit our ability to profitably sell our products. For example, the Budget Control Act of 2011, enacted on August 2, 2011, established a process to reduce federal budget deficits through an automatic “sequestration” process beginning in January 2013 if deficit reductions targets were not otherwise reached. Under the terms of the Budget Control Act, sequestration imposes across-the-board cuts to a wide range of federal programs, including but not limited to Medicare payments to plans and providers (subject to a 2% cap), in the years 2013 to 2021. Sequestration was delayed by two months, however, under the American Taxpayer Relief Act, which was enacted on January 2, 2013. Medicare payments to medical providers and health plans were reduced by 2% beginning in April 2013. The Bipartisan Budget Act of 2013, enacted on December 26, 2013, extends these cuts to 2023. Such changes to the reimbursement rates for procedures in which our products are used, or alternative budget proposals that include reductions in health care spending, could adversely impact our business. In addition, the Medicare payment systems for hospitals (inpatient and outpatient) and physicians are updated annually and reimbursement rates can vary from year to year based on a number of legislative, regulatory, and/or other policy changes. For example, there is a statutory formula known as the sustainable growth rate (SGR) formula for determining annual payment updates for physicians’ professional services. For several years, this statutory formula has resulted in significant decreases to physician reimbursement, but Congress has repeatedly enacted legislation to temporarily block the cuts. Most recently, Congress included a provision in the Pathway for SGR Reform Act of 2013, enacted on December 26, 2013, to prevent a scheduled 20.1% cut from going into effect; instead, Medicare physician payment rates generally increased by 0.5% through March 31, 2014. If Congress fails to intervene in the future to block schedule physician reimbursement reductions under the SGR formula, or if future legislation decreases Medicare payments to physicians, it could adversely impact our business.

Reimbursement for the treatment of patients with our products in EEA countries is governed by complex mechanisms established on a national level in each country. These mechanisms vary widely between the EEA countries. Moreover, these mechanisms evolve constantly, reflecting the efforts of these countries to reduce public spending on healthcare. As a result, obtaining reimbursement for the treatment of patients with medical devices has become more and more challenging. We cannot, therefore, guarantee that the treatment of patients with our products would be reimbursed in any of these countries.

We are aware that physicians may elect to use products we sell for off-label indications, including, for example, the use of our Sensei system for procedures to treat atrial fibrillation in the United States. Currently there is only one catheter which is approved by the FDA for the treatment of a particular sub-set of patients with atrial fibrillation. In February 2009, Biosense Webster, a Johnson & Johnson company, was granted marketing approval to the NAVISTAR ^® THERMOCOOL ^® Catheter for the treatment of drug refractory recurrent

23

Table of Contents

symptomatic paroxysmal atrial fibrillation, when used with compatible three-dimensional electroanatomic mapping systems. We believe that both physicians and hospitals are currently reimbursed for these and certain other procedures even when the procedures are performed off-label using other manufacturers’ products. We cannot be certain, however, that third-party payors will continue to provide coverage and/or reimbursement to physicians and hospitals for off-label use of products to treat atrial fibrillation or any other procedures. In addition, we cannot be certain that third-party payors will not require extensive clinical support showing the efficacy and cost effectiveness of off-label uses of our products before providing coverage and reimbursement for such procedures. If such support is required, we may not be able to satisfy such requests within the limitations of our FDA cleared labeling or the intended purposes for which our devices are CE marked.

Intellectual Property

Since our inception, our strategy has been to patent the technology, inventions and improvements that we consider important to the development of our business and technology. Our intellectual property portfolio, including patents and patent applications that we own or license, covers key aspects of our Sensei system and catheter products, as well as other technology that we have under development. As a result, we believe that we are building an extensive intellectual property portfolio to protect the fundamental scope of our technology, including our robotic technology, navigational methods, procedures, systems, disposable interventional devices and our three dimensional integration technology. As of December 31, 2013, we licensed or owned 103 issued U.S. patents and 120 pending U.S. patent applications, 41 granted foreign patents and over 63 pending foreign applications. We also share the rights to a number of patents and patent applications under the September 2005 cross license agreement and the January 2010 cross license agreement with Intuitive Surgical, Inc., or Intuitive, which in turn shares rights to certain of our patents and pending patent applications pursuant to the cross license agreements. In addition, we received a license to certain patents and patent applications licensed or owned by Luna Innovations Inc., or Luna, as part of the litigation settlement entered in January 2010. Some of our rights in these patents licensed from Luna have in turn been sublicensed to Philips in connection with our February 2011 agreements. We also have a number of invention disclosures under consideration and several new patent applications that are being prepared for filing, and we continue to gain the benefit of certain new patent applications and patents by virtue of the cross license agreement with Intuitive. Accordingly, we anticipate that the number of pending patent applications and patents in our portfolio will increase.

In addition to our existing patent coverage that we expect to build upon, we believe it would be technically difficult and costly to reverse engineer our products and technology. Further, we have developed substantial know-how in robotic design and robotic instrument control which we maintain as trade secrets or copyrighted software.

Further successful commercializing of our Sensei system, our Magellan Robotic System and any other products we may develop, will depend in part on our not infringing patents held by third parties. It is possible that one or more of our products, including those that we have developed in conjunction with third parties, infringes existing patents. From time to time, we receive letters from one or more third parties alleging that certain aspects of our systems infringe issued patent(s) or asking us to consider licensing their patent rights. While we do not believe that our systems infringe any valid and enforceable patent of any third party, there can be no assurance that any third party will not take further action, such as filing a patent infringement lawsuit, including a request for injunctive relief, to bar the manufacture and sale of our systems in the United States or elsewhere. There also can be no assurance that we will not seek to take the initiative in defending ourselves by instituting litigation against such third party challenges.

We have applied for trademark registration of, and claim trademark rights in, “Magellan” and “Hansen Medical Magellan.” We have obtained trademark registration for, and claim trademark rights in “Artisan Extend,” “Hansen Medical,” “Hansen Medical (with Heart Design),” “Heart Design (Logo),” “Sensei,” “Lynx,” “Artisan,” “Instinctive Motion,” “Fine Force Technology” and “IntelliSense.” This report also includes other trademarks, service marks and trade names of other companies.

24

Table of Contents

Cross License Agreement with Intuitive Surgical

On September 1, 2005, we entered into a cross license agreement with Intuitive. Pursuant to this agreement, Intuitive granted us a co-exclusive, worldwide license in the field of intravascular approaches for the diagnosis and treatment of cardiovascular, neurovascular and peripheral vascular diseases. In return, we granted Intuitive a co-exclusive, worldwide license in the fields of endoscopic, laparoscopic, thoracoscopic or open diagnosis and/or surgical procedures, including endoluminal applications in gastrointestinal, respiratory, ear, nose and throat, urologic and gynecologic surgery. These licenses cover our and Intuitive’s patents and patent applications that were filed on or prior to the date of the agreement, as well as later filed divisionals, continuations and continuations in part with respect to the matters that were part of the original patents and patent applications as of the date of the agreement, but not any other later-filed patents and patent applications. In addition, these licenses cover all trade secrets and other know-how that we and Intuitive disclosed to each other prior to the date of the agreement. Each party retained full rights to practice its own technology for all purposes. As consideration for the licenses granted by Intuitive, we issued 125,000 shares of our Series B preferred stock to Intuitive in 2005 (which converted into 125,000 shares of our common stock at the time of our initial public offering) and owe royalties to Intuitive on certain product sales, including annual minimum royalties of $200,000. We will not receive any royalties or other compensation from Intuitive under the agreement.

Each party has agreed not to engage in activities outside its licensed field that, to its knowledge, would infringe the other party’s licensed patents. Although we believe that there are opportunities for us to operate outside the licensed field of use without the use of the Intuitive intellectual property, Intuitive, from time to time has told us that it believes certain of our past activities that have fallen outside the licensed field have infringed its intellectual property rights. Although we disagree with Intuitive’s position, we presently remain focused within our licensed field and so have agreed to inform Intuitive before commencing any further outside clinical investigations for endoluminal applications or engaging in external technology exhibitions at non-intravascular conferences. There can be no assurance that Intuitive will not challenge any activities we engage in outside the intravascular space and we cannot be sure that in the event of such a challenge we would be able to reach agreement with Intuitive on whether activities outside our licensed field may be conducted without the use of Intuitive’s intellectual property. Any disputes regarding a party’s potential infringement of the other party’s licensed patents that cannot be resolved through discussions between the parties will be settled by litigation. If such litigation results in a judgment of infringement that cannot be appealed and the infringing party fails to cease such infringement within a specified cure period, the non-infringing party will have the right to terminate the agreement. The parties have also agreed on a procedure under which either party may, but is not obligated to, ask an arbitration panel to make a binding determination as to whether or not a new product being developed by such party would, if commercialized outside such party’s licensed field, infringe any issued patents of the other party.

The agreement may be terminated by either party for bankruptcy of the other party. We also have the right to terminate the agreement at any time on or after March 1, 2018, and if we exercise this termination right, the licenses granted to us by Intuitive will terminate, but the licenses granted by us to Intuitive will survive. Neither party is permitted to terminate the agreement based on a breach by the other party, except in the event of the other party’s failure to cease infringing activity as described above or to remedy a significant payment default that has been established through a court judgment that cannot be appealed. If a party terminates the agreement for one of these types of breaches, the licenses granted by this party will terminate, but the licenses granted to this party will survive. In the absence of any early termination, the agreement will expire upon the expiration of the last to expire of the patents licensed under the agreement.

On January 12, 2010, in association with the agreements signed as a result of our settlement with Luna Innovations, Inc, we entered into a cross license agreement with Intuitive, under which we and Intuitive granted each other royalty-free, non-exclusive licenses within the medical robotics field to certain fiber optic shape sensing/localization technology owned or in-licensed by each party as of the effective date of the agreement or within the five-year period after the effective date of the agreement. The non-exclusive licenses can only be sublicensed in connection with each party’s respective products, except for our right to sublicense for single degree of freedom medical devices.

25

Table of Contents

In addition, we and Intuitive granted each other royalty-free, co-exclusive licenses within the medical robotics field to certain fiber optic shape-sensing/localization technology developed in whole or in part by Luna for each party. The co-exclusive licenses can only be sublicensed in connection with each party’s respective products, except that we may freely sublicense single degree of freedom medical devices. We have the right, along with Intuitive, to enforce the co-exclusively licensed intellectual property. The term of this agreement is until the expiration of the last to expire of the patents licensed under the agreement, unless extended or shortened by mutual agreement.

In October 2012, we signed an amendment to our license agreement with Intuitive Surgical under which Intuitive Surgical paid us a $20 million licensing fee. The amendment of the license agreement is an update to the co-exclusive cross license agreement signed by the companies in 2005. Under the terms of the amended agreement, Intuitive Surgical’s existing co-exclusive rights to our patent portfolio to certain non-vascular procedures have been extended to include patents filed or conceived by us subsequent to the original 2005 agreement up to and including the period three years subsequent to the amendment though we have no obligations to conduct any research activities under the amendment. In addition, the first sentence of the definition of “Hansen Field of Use” was modified by the Amended License Agreement to read: “Hansen Field of Use” means the research, development, manufacture, use, sale, promotion, distribution and importation of medical devices and systems for intravascular approaches for the diagnosis and/or treatment of cardiovascular, neurovascular, and peripheral vascular diseases, wherein the distal end of the medical device or system, after entering a blood vessel, remains within the blood vessel or branches of the blood vessel for the delivery of the diagnostic or therapeutic modality for which the device or system is being used.” We retain the right to use our intellectual property for all clinical applications, both vascular and non-vascular.

License Agreement with Mitsubishi Electric Research Laboratories

On March 7, 2003, we entered into a License Agreement with Mitsubishi Electric Research Laboratories, Inc., or Mitsubishi. Pursuant to this agreement, we obtained an exclusive, worldwide license to certain Mitsubishi patents and related know-how for use in the field of therapeutic or diagnostic vascular or endoluminal intervention involving robotics, automation or telemanipulation. In consideration for such license, we issued 9,375 shares of our common stock to Mitsubishi and paid commercialization milestones. Additionally, we owe minimum annual royalties of $100,000 which reduces to $55,000 if the license becomes non-exclusive and royalties on certain product sales, subject to an annual royalty cap. Under the agreement, we are obligated to use reasonable commercial efforts to commercialize royalty-bearing products. The agreement may be terminated by Mitsubishi in the event of an uncured material breach by us. In addition, we can terminate the agreement for any reason with advanced written notice to Mitsubishi.

License Agreement with Luna Innovations, Inc.

On January 12, 2010, we entered into license agreement with Luna. Under the license agreement, Luna granted us a co-exclusive (with Intuitive), royalty-free, fully paid, perpetual and irrevocable license to Luna’s fiber optic shape sensing/localization technology within the medical robotics field. The license can only be sublicensed in connection with our products, except that we can grant full sublicenses to third parties for single degree of freedom medical devices. Intuitive received a corresponding co-exclusive license within the medical robotics field from Luna under a separate license agreement between Intuitive and Luna. Under the license agreement, Luna also granted to us a royalty-free, fully paid, perpetual and irrevocable license to Luna’s fiber optic shape-sensing/localization technology for non-robotic medical devices, which license is exclusive (and fully sublicenseable) within the orthopedics, vascular, and endoluminal fields and otherwise co-exclusive with Luna. We have the right along with Intuitive to enforce the intellectual property licensed by Luna within the medical robotics field.

The license agreement provides for us to grant to Luna a nonexclusive, sublicenseable, royalty-free, fully paid, perpetual and irrevocable license under certain of our fiber optic shape sensing/localization technology

26

Table of Contents

outside of the medical robotics field and outside the orthopedics, vascular and endoluminal fields. In this agreement, Luna confirmed our ownership of certain intellectual property developed in whole or in part by Luna under the parties’ prior development agreement as well as ownership of certain Hansen patents in the event it is determined that any Luna personnel are inventors with respect to such patents.

In January 2014, Luna sold to Intuitive substantially all of its assets related to its medical shape sensing business, including all of patents and patent applications used or useful for its fiber optical shape sensing and localization technology. Luna’s transfer of technology to Intuitive was made subject to their existing licenses and related obligations with us and Philips.

Agreements with Philips

In the fourth quarter of 2009, we entered into an extended joint development agreement with Philips. Under the terms of the agreement, we have, with support and collaboration from Philips, developed a vascular robotics platform and associated catheters, or “Vascular System”. The Vascular System does not include our Sensei Robotic Catheter System or any system used for endoluminal, cardiac or other non-vascular procedures. Pursuant to the agreement, Philips partially funded our development costs based upon our achievement of development milestones for the Vascular System and will receive royalties based on sales of the Vascular System subject to caps. In February 2011, we amended the extended joint development agreement, which increased the amount of funding provided by Philips for the development of the Vascular System and extended and increased the royalties to be paid to Philips. We reached the final milestone under the agreement and received our final payment from Philips in October 2011. We will pay Philips royalties based on the number of Magellan Robotic Systems and Magellan Robotic Catheters that are sold, subject to caps, through October 2017.

In November 2009, we entered into agreements with Philips to co-develop integrated products. In December 2009, we entered into an extended joint development agreement with Philips. Under the terms of the extended joint development agreement, we have, with support and collaboration from Philips, developed a vascular robotics platform and associated catheters, or Magellan Robotic System. The Magellan Robotic System does not include our Sensei system or any system used for endoluminal, cardiac or other non-vascular procedures.

Pursuant to the Agreement, Philips partially funded our development costs based upon our achievement of development milestones for the Magellan Robotic System and will receive royalties based on sales of the Magellan Robotic System subject to caps. In February 2011, we amended the extended joint development agreement. The amendment of the extended joint development agreement increased the amount of funding provided by Philips for the development of the Magellan Robotic System and extended and increased certain royalty fees to be paid to Philips based on sales of the Magellan Robotic System subject to caps. Funding received from Philips under this agreement including $8.0 million received from the original agreement and $6.0 million associated with the amendment in February 2011 was recognized as a reduction to research and development costs ratably as milestones were met through the end of the term of the agreement, which was in October 2011. We will pay Philips royalties based on the number of Magellan Robotic Systems and Magellan Robotic Catheters that are sold, subject to caps, through October 2017.

In February 2011, we entered, directly and through a wholly-owned subsidiary, into patent and technology license, sublicense and purchase agreements with Philips to allow them to develop and commercialize the non-robotic applications of our Fiber Optic Shape Sensing and Localization, or FOSSL, technology. Under the terms of the agreements, Philips has the exclusive right to develop and commercialize the FOSSL technology in the non-robotic vascular, endoluminal and orthopedic fields. Philips also receives non-exclusive rights in other non-robotic medical device fields, but not to any multi-degree of freedom robotic applications. If Philips does not meet certain specified commercialization obligations, we have the rights to re-acquire the licenses granted to Philips for pre-determined payments, which payments in the aggregate would be greater than the upfront payment amounts we received from Philips in connection with the agreements related to the FOSSL technology. The agreement also contains customary representations, warranties and indemnification provisions by each party.

27

Table of Contents

Each party may terminate the agreements for material breach by the other party. Philips also has the right to terminate the agreement and its rights under the agreement if we are acquired by a competitor of the relevant business unit of Philips. In connection with the agreements, we received upfront payments of $23.0 million and will be eligible to receive up to an additional $78.0 million in future payments associated with the successful commercialization by Philips or its collaborators of products containing FOSSL technology. Approximately two-thirds of these potential future payments could arise from Philips’ sublicensing the FOSSL technology and approximately one-third of the potential future payments are based on Philips’ royalty obligations on its sales of products containing the FOSSL technology. We would receive less than half of Philips’ proceeds for its sublicensing FOSSL technology, if and following Philips entering into an applicable sublicensing transaction. Philips’ FOSSL-related royalty obligations are calculated on a consistent annual basis between 2014 and 2020 and arise in any year only to the extent that Philips achieves a substantial number of commercial placements of FOSSL-enabled products in the calendar year.

Competition

The markets for medical devices are intensely competitive and are characterized by rapid technological advances, frequent new product introductions, evolving industry standards and price erosion.

We believe that the principal competitive factors in our market include:

We consider our primary competition for our robotic systems to be in the following areas:

28

Table of Contents

The use of catheters and catheter-based technologies is common for a broad range of interventional procedures in cardiology, vascular and in other medical specialties. Other companies may market guidance systems for use in complex vascular procedures as well as other uses outside of EP. In addition, we believe that Intuitive is developing a system to guide flexible medical devices in fields such as urology, gynecology, gastrointestinal disease, and other medical fields outside of cardiology. While they may not use our patents in EP, cardiology or vascular procedures, Intuitive may attempt to compete directly with us in EP and cardiology, and will likely compete with us if we decide to offer products outside of our licensed field of treating cardiovascular, neurovascular and peripheral vascular diseases. We also face competition from large medical device companies that have significantly greater financial and human resources for product development, sales and marketing, and patent litigation. Large medical device companies such as Johnson & Johnson, St. Jude Medical, Boston Scientific and others, as well as a variety of smaller innovative companies, such as Stereotaxis, Inc., are also expected to be targeting the EP and cardiology markets for guiding flexible medical devices. Increased competition could result in price reductions, reduced net revenue and profit margins and loss of market share, any of which could harm our business. See Item 1A, “Risk Factors,” for further discussion of risks regarding competition.

Government Regulation

The healthcare industry, and thus our business, is subject to extensive federal, state, local and foreign regulation. Some of the pertinent laws have not been definitively interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. In addition, these laws and their interpretations are subject to change.

Both federal and state governmental agencies continue to subject the healthcare industry to intense regulatory scrutiny, including heightened civil and criminal enforcement efforts. As indicated by work plans and reports issued by these agencies, the federal government will continue to scrutinize, among other things, the billing practices of healthcare providers and the marketing of healthcare products. The federal government also has increased funding in recent years to fight healthcare fraud, and various agencies, such as the U.S. Department of Justice, the Office of Inspector General of the Department of Health and Human Services, or OIG, and state Medicaid Fraud Control Units, are coordinating their enforcement efforts.

29

Table of Contents

We believe that we have structured our business operations and relationships with our customers to comply with all applicable legal requirements. However, it is possible that governmental entities or other third parties could interpret these laws differently and assert otherwise. In addition, because there is a risk that our products are used off label, we believe we are subject to increased risk of prosecution under these laws and by these entities even if we believe we are acting appropriately. We discuss below the statutes and regulations that are most relevant to our business and most frequently cited in enforcement actions.

U.S. Food and Drug Administration Regulation

The FDA strictly regulates medical devices under the authority of the Federal Food, Drug and Cosmetic Act, or FFDCA, and the regulations promulgated under the FFDCA. The FFDCA and the implementing regulations govern, among other things, the following activities relating to our medical devices: preclinical and clinical testing, design, manufacture, safety, efficacy, labeling, storage, record keeping, sales and distribution, postmarket adverse event reporting, recalls, and advertising and promotion.

Our medical devices are categorized under the statutory framework described in the FFDCA. This framework is a risk-based system that classifies medical devices into three classes from lowest risk (Class I) to highest risk (Class III). In general, Class I devices are subject to only general controls (e.g., labeling, medical devices reporting, and prohibitions against adulteration and misbranding) and, in some cases, to the 510(k) premarket clearance requirements. Class II devices generally require 510(k) premarket notification clearance before they may be commercially marketed in the United States. Class II devices also may be subject to special controls such as performance standards and FDA guidelines that are not applied to Class I devices. Most Class III devices require FDA approval of a premarket application, or PMA, prior to commercial distribution. Class III devices are those deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a previously cleared 510(k) device. Both premarket clearance and PMA applications are subject to the payment of user fees paid at the time of submission for FDA review. The current use of our Sensei/Artisan and Magellan are classified in Class II, but future applications, such as ablation in treatment of specific arrhythmias could be Class III.

The 510(k) Clearance Process . In the 510(k) process, the FDA reviews a premarket notification and determines whether or not a proposed device is “substantially equivalent” to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of premarket approval applications, referred to as a “predicate device.” In making this determination, the FDA compares the proposed device to the predicate device. If the new device is substantially equivalent in intended use and safety and effectiveness to the predicate device, the new device may be cleared for marketing. The FDA’s 510(k) clearance pathway usually takes from four to 12 months, but it can last longer and clearance is never guaranteed. In reviewing a premarket notification, the FDA may request additional information, including clinical data. Recent changes to FDA’s expectations for data support for 510(k) clearance may require the submission of more clinical or pre-clinical data than has previously been required. After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, requires a new 510(k) clearance or could require PMA approval. The FDA requires each manufacturer to make this determination in the first instance, but the agency can review any such decision. If the FDA disagrees with a manufacturer’s decision not to seek a new 510(k) clearance, the agency may retroactively require the manufacturer to seek 510(k) clearance or PMA approval. The FDA also can require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or PMA approval is obtained. Also, the manufacturer may be subject to significant regulatory fines or penalties.

In May 2007, the FDA cleared our Sensei system and Artisan Control Catheter for promotion for use in mapping the heart anatomy with two specified mapping catheters. When the FDA cleared our technology for promotion in the U.S., it concluded that there is a reasonable likelihood that our products will be used for an intended use not identified in the proposed labeling and that such uses could cause harm. The FDA therefore required that we label our products in the United States with language spelling out that the safety and

30

Table of Contents

effectiveness of our products for use with cardiac ablation catheters, in the treatment of cardiac arrhythmias including atrial fibrillation, have not been established. Although FDA did not require contraindication of this use in the labeling, the FDA, with supporting data (for example, based on observed trends in postmarket adverse event reports,) could later choose to require a specific contraindication for use in cardiac ablation procedures. We plan to seek FDA clearance or approval for labeling that includes ablation procedures.

In 2012, the FDA cleared our Magellan Robotic System for use to facilitate navigation to anatomical targets in the peripheral vasculature. Our FDA cleared labeling does not further specify the scope of the targets within the peripheral vasculature that are encompassed in the 510(k) clearance. FDA could disagree with our interpretation of the scope of this clearance. If the FDA concludes that our promotional materials exceed the scope of this clearance, the agency may retroactively require us to seek 510(k) clearance or PMA approval. The FDA also can require us to cease marketing for any claims beyond the scope of the clearance and can take other enforcement actions as outlined above.

We cannot assure you that the FDA will grant 510(k) clearance or PMA approval to promote our Magellan and Sensei system and disposable Artisan and Magellan families of catheters for other uses including for ablation procedures, or what additional data, beyond the on-going clinical trial, the FDA will require us to submit as part of the 510(k) process or PMA process for other uses. While 510(k) clearance would be preferable, the FDA could even deny 510(k) clearance to promote our system for other uses and require us to seek PMA approval.

The PMA Approval Process . A PMA must be submitted if the device cannot be cleared through the 510(k) process. The PMA process is generally more costly and time consuming than the 510(k) process. A premarket approval application must be supported by extensive data including, but not limited to, technical, preclinical, clinical trials, manufacturing and labeling to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its intended use. After a premarket approval application is sufficiently complete, the FDA will accept the application and begin an in-depth review of the submitted information. By statute, the FDA has 180 days to review the “accepted application”, although, generally, review of the application can take between one and three years and it may take significantly longer. During this review period, the FDA may request additional information or clarification of information already provided. Typically, the FDA will convene an advisory panel meeting to seek review of the data presented in the PMA for novel devices. The panel’s recommendation is given great weight, but is not dispositive of the agency’s decision. Prior to approving the PMA, the FDA will conduct an inspection of the manufacturing facilities and a number of the clinical sites where the supporting study was conducted. The facility inspection evaluates the company’s compliance with the Quality System Regulation, or QSR, which impose elaborate testing, control, documentation and other quality assurance procedures in the manufacturing process. The FDA may approve the PMA with post approval conditions intended to ensure the safety and effectiveness of the device including, among other things, restrictions on labeling, promotion, sale and distribution. Failure to comply with the conditions of approval can result in material adverse enforcement action, including the loss or withdrawal of the approval. Even after approval of a PMA, a new PMA or PMA supplement is required in the event of a modification to the device, its labeling or its manufacturing process. Supplements to a PMA often require the submission of the same type of information required for an original PMA, except that the supplement is generally limited to that information needed to support the proposed change from the product covered by the original PMA.

Clinical Trials . Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. Such trials, if conducted in the United States, generally require an investigational device exemption application, or IDE, approved in advance by the FDA for a specified number of patients and study sites, unless the product is deemed an non-significant risk device eligible for more abbreviated IDE requirements. Clinical trials are subject to extensive monitoring, recordkeeping and reporting requirements. Clinical trials must be conducted under the oversight of an institutional review board, or IRB, for the relevant clinical trial sites and must comply with FDA regulations, including but not limited to those relating to good clinical practices. To conduct a clinical trial, we also are required to obtain the patients’ informed consent that complies with FDA requirements, state and federal privacy regulations and human subject protection regulations.

31

Table of Contents

We, the FDA or the IRB could suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits. Additionally, we may decide at any time, for business or other reasons, to terminate a study. Even if a trial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device, may be equivocal, or may otherwise not be sufficient to obtain FDA clearance or approval to market the product in the U.S. Following completion of a study, we would need to collect, analyze and present the data in an appropriate submission to the FDA, either a 510(k) premarket notification or a PMA. In addition, FDA may perform a BIMO inspection of a study and if it finds deficiencies, we will need to expand resources to correct those deficiencies, which may delay clearance or approval or the deficiencies may be so great that FDA could refuse to accept all or part of our data or trigger enforcement action.

We have received an IDE approval to investigate the use of our Sensei system and Artisan family of catheters in the treatment of atrial fibrillation in a clinical study designed to support the expansion of our current labeling in the U.S. beyond mapping. The study was planned to involve approximately 300 patients and involves the treatment of atrial fibrillation. We enrolled our first patient in May 2010 and approximately 50 patients were enrolled as of January 2013. A proposed modification to the study protocol was submitted to FDA for review in January 2013. The modified study, which plans to enroll a minimum of 125 additional subjects, was approved by the FDA in August 2013 and 19 patients have been enrolled to date. The study includes a seven-day follow-up for safety and a one-year follow-up for efficacy at intervals of 90, 180, and 365 days.

Pervasive and Continuing Regulation . After a device is placed on the market, numerous regulatory requirements apply. These include:

Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the Federal Trade Commission and by state regulatory and enforcement authorities. Recently, promotional activities for FDA-regulated products of other companies have been the subject of enforcement action brought under healthcare reimbursement laws and consumer protection statutes. In addition, under the federal Lanham

32

Table of Contents

Act and similar state laws, competitors and others can initiate litigation relating to advertising claims. Accordingly, we may not market or promote our Magellan and Sensei systems for any off-label use. For example, we are not permitted to promote our Sensei system in the United States for use with any other mapping catheter other than the two specified in our 510(k) clearance, use with any ablation catheters, or in any other procedure such as ablation procedures. The FDA has specifically indicated that the commercial distribution of these devices for use in ablation procedures will require us to obtain a new 510(k) clearance or, more likely, PMA approval with significant clinical data. Nonetheless, physicians are using our devices off-label for these indications within their practice of medicine. It is our understanding that all or nearly all of the procedures performed using our technology have involved a combination of mapping and ablation. If the FDA determines that our promotional materials or training constitutes promotion of an unapproved use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. In that event, our reputation could be damaged and adoption of the products would be impaired.

Furthermore, our products could be subject to voluntary recall if we or the FDA determine, for any reason, that our products pose a risk of injury or are otherwise defective. Moreover, the FDA can order a mandatory recall if there is a reasonable probability that our device would cause serious adverse health consequences or death.

The Medical Device Reporting regulation (21 CFR 803), or MDR regulation, requires device manufacturers to report to the FDA whenever they receive or become aware of information that reasonably suggests that a device marketed by the manufacturer “may have caused or contributed to a death or serious injury” or has malfunctioned and, if the malfunction were to recur, likely would cause or contribute to a death or serious injury (21 CFR 803.50(a)). Adverse event reporting, under the MDR regulation, is subject to two different time frames and report types, depending on the nature of the event. Once reportable events have been identified, we must decide which individual adverse event report to file: a five-day report or a 30-day report. For events involving deaths, serious injuries or malfunctions that require remedial action to prevent an unreasonable risk of substantial harm to the public health, a five-day report must be filed. If remedial action is not necessary, a 30-day report must be filed. MDRs are disclosed to the public via the Manufacturer and User Facility Device Experience (MAUDE) database, which is maintained by the FDA. If we fail to report MDRs to the FDA within the required timeframes, or at all, the FDA could take enforcement action against us.

The FDA has broad post-market and regulatory enforcement powers. We are subject to unannounced inspections by the FDA to determine our compliance with the QSR and other regulations, and these inspections may include the manufacturing facilities of some of our subcontractors. In particular, we and our suppliers are required to comply with FDA’s Quality System Regulations, or QSR, and International Standards Organization, or ISO, regulations for the manufacture of our products and other regulations which cover the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, storage and shipping of any product for which we obtain clearance or approval. The failure by us or one of our suppliers to comply with applicable statutes and regulations administered by the FDA and other regulatory bodies, or the failure to timely and adequately respond to any adverse inspectional observations or product safety issues, could result in, among other things, enforcement actions. We underwent an FDA inspection, which employed QSIT, in July 2010 and received 2 inspectional observations. The agency accepted our responses and the inspection was closed.

In addition, later discovery of previously unknown problems with our robotic systems, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, or observations found during a future inspection, could result in enforcement action by the FDA or other regulatory authorities.

33

Table of Contents

Foreign Regulation

In order for us to market our products in other countries, we must comply with extensive safety and quality regulations in other countries. These regulations, including the requirements for approvals, clearance, or grant of CE Certificates of Conformity and the time required for regulatory review, vary from country to country. Failure to obtain regulatory approval, clearance, or CE Certificates of Conformity in any foreign country in which we plan to market our products may harm our ability to generate revenue and harm our business.

The primary regulatory environment in Europe is that European Economic Area (EEA), which is comprised of the 28 Member States of the European Union (EU), Iceland, Liechtenstein and Norway. In the EEA, our devices are required to comply with the Essential Requirements laid down in Annex I to the Medical Devices Directive. We are also required to ensure compliance with the relevant quality system requirements laid down in the Annexes to the Medical Devices Directive. Compliance with these requirements entitles us to affix the CE mark to our medical devices, without which they cannot be commercialized. To demonstrate compliance with the Essential Requirements laid down in Annex I of the Medical Devices Directive and obtain the right to affix the CE mark to our medical devices, we must undergo a conformity assessment procedure, which varies according to the type of medical device and its classification. With the exception of low risk medical devices (Class I devices with no measuring function and which are not sterile), in relation to which the manufacturer may issue an EC Declaration of Conformity based on a self-assessment of the conformity of its products with the Essential Requirements laid down in the Medical Devices Directive, a conformity assessment procedure requires the intervention of a Notified Body. This is an organization designated by the competent authorities of an EEA country to conduct conformity assessments. Depending on the relevant conformity assessment procedure, the Notified Body would typically audit and examine products’ Technical File and the quality system for the manufacture, design and final inspection of our devices before issuing a CE Certificate of Conformity. This Certificate demonstrates compliance with the relevant Essential Requirements laid down in Annex I of the Medical Devices Directive or the relevant quality system requirements laid down in the Annexes to the Directive. Companies compliant with ISO requirements such as “EN ISO 13485: 2003 Medical devices — Quality management systems — Requirements for regulatory purposes” benefit from a presumption of conformity with the relevant quality system requirements laid down in the Annexes to the Medical Devices Directive. The Notified Body issues a CE Certificate of Conformity following successful completion of a conformity assessment procedure conducted in relation to the medical device and its manufacturer and their conformity with the Essential Requirements and quality system requirements. This Certificate entitles the manufacturer to affix the CE mark to its medical devices after having prepared and signed a related EC Declaration of Conformity. In September 2006, we received CE Certificate of Conformity from our Notified Body permitting us to affix the CE mark and market our Sensei system in the EEF. In May 2007 we received a CE Certificate of Conformity for our Artisan Control Catheter which allows us to affix the CE mark to market our system for ablation procedures and to market it in the EEA. In July 2010, we obtained a CE Certificate of Conformity from our Notified Body enabling us to affix the CE mark to our Lynx catheter, and in February 2013, our Notified Body issued a further CE Certificate of Conformity for our Artisan Extend Control Catheter. In July 2011, we affixed the CE mark for sale of our Magellan Robotic System after having received a CE Certificate of Conformity from our Notified Body and, in October 2011, we received another CE Certificate of Conformity permitting us to affix the CE mark to our Magellan Robotic Catheter and related accessories. If we modify existing products or develop new products in the future, including new devices, we will need to notify our Notified Body and go through a conformity assessment procedure before having the right to affix the CE mark to such products. We will be subject to regulatory audits, currently conducted biannually, in order to maintain any CE Certificates of Conformity that have been issued by our Notified Body. We cannot be certain that we will be able to obtain CE Certificates of Conformity for new or modified products or that we will continue to meet the quality, safety and efficacy requirements necessary to maintain the CE Certificates of Conformity that we have already received. If we are unable to maintain our existing CE Certificates of Conformity for our products, we will no longer be able to affix the CE mark to them and sell our products in EEA countries. We will evaluate regulatory approval in other foreign countries on an opportunistic basis.

34

Table of Contents

Anti-Kickback Statutes and False Claims Acts

In the United States, there are federal and state anti-kickback laws that generally prohibit the payment or receipt of kickbacks, bribes or other remuneration in exchange for the referral of patients or other health-related business. For example, the federal healthcare program Anti-Kickback Statute prohibits persons from knowingly and willfully offering, paying soliciting or receiving remuneration, directly or indirectly, in cash or in kind, in exchange for or to induce either the referral of an individual, or the purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any healthcare item or service, for which payment may be made, in whole or in part, under federal healthcare program such as the Medicare and Medicaid programs. The statute has been interpreted to apply to arrangements between medical device manufacturers on the one hand and prescribers and purchasers on the other. The definition of “remuneration” has been broadly interpreted to include anything of value, including, among other things, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash and waivers of payments. Several courts and the OIG have interpreted the statute’s intent requirement to mean that if one purpose of an arrangement involving remuneration is to induce referrals of items or services for which payment may be made under a federal healthcare program, the statute has been violated. In addition, the Patient Protection and Affordable Care Act clarified that a person or entity need not have actual knowledge of the federal Anti-kickback Statute or specific intent to violate it. Penalties for violations of the federal Anti-Kickback Statute include imprisonment, criminal fines, civil monetary penalties and exclusion from participation in Medicare, Medicaid and other federal healthcare programs. In addition, under the Patient Protection and Affordable Care Act, any claim including items or services resulting from a violation of the Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act, discussed in more detail below.

The federal Anti-Kickback Statute is broad and prohibits many arrangements and practices that are permissible in businesses outside of the healthcare industry. Recognizing that the Anti-Kickback Statute is broad and may technically prohibit innocuous or beneficial arrangements, Congress enacted statutory exceptions and authorized the OIG to issue “safe harbors” regulations, which it did beginning in July of 1991. These statutory exceptions and regulatory safe harbors set forth provisions that, if an arrangement or transaction satisfies all applicable requirements, will protect the participants from prosecution or other regulatory sanctions under the Anti-Kickback Statute. The failure of a transaction or arrangement to fit precisely within one or more safe harbors does not necessarily mean that it is illegal or that prosecution will be pursued. However, transactions and business arrangements that do not fully satisfy a safe harbor may be subject to scrutiny by government enforcement authorities such as the OIG.

Many states have adopted laws similar to the Anti-Kickback Statute. Some of these state prohibitions apply to referral of patients for healthcare items or services reimbursed by any source, not only federal healthcare programs like Medicare and Medicaid.

Another trend affecting the healthcare industry is the increased use of the federal False Claims Act which imposes penalties against individuals or entities for, among other things, knowingly presenting, or causing to be presented, claims for payment of government funds that are false or fraudulent, or knowingly making, using or causing to be made or used a false record or statement material to an obligation to pay money to the government, or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay money to the federal government. The False Claims Act has been used to assert liability on the basis of inadequate care, improper referrals, and improper use of Medicare numbers when detailing the provider of services, as well as allegations as to misrepresentations with respect to the services rendered and promotion of products for off-label uses. The False Claims Act also includes “whistleblower” or “qui tam” provisions that allow a private individual to bring actions for violations on behalf of the government. In recent years, the number of suits brought against manufacturers and others by private individuals has increased dramatically. In addition, various states have enacted laws modeled after the federal False Claims Act and some states’ laws may apply more broadly to claims for items or services reimbursed regardless of payer.

35

Table of Contents

Federal civil False Claims Act violations may result in treble monetary damages, civil penalties of between $5,500 to $11,000 for each separate false or fraudulent claim and exclusion from participation in federal healthcare programs. There are also criminal penalties, including imprisonment and criminal fines, for making or presenting a false or fictitious or fraudulent claim to the federal government. We are unable to predict whether we could be subject to actions under the federal civil False Claims Act or any comparable state laws, or the impact of such actions. However, the costs of defending claims under the False Claims Act or any comparable state laws, as well as sanctions imposed under the Act, could significantly affect our financial performance. Civil liability under the federal False Claims Act or misdemeanor violations of federal health care laws gives the OIG the discretion to exclude a company’s products from reimbursement by federal healthcare programs. It is the discretion to exclude that leads companies to negotiate Corporate Integrity Agreements with the OIG so their products may continue to receive reimbursement. There are also criminal penalties, including imprisonment and criminal fines, for making or presenting a false or fictitious or fraudulent claim to the federal government. Moreover, the federal criminal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact, making any materially false, fictitious, or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services. Conviction under any of the aforementioned federal criminal statutes requires mandatory exclusion from participation in federal healthcare programs.

Our activities relating to the reporting of wholesale or estimated retail prices for our products, the reporting of discount and rebate information and other information affecting federal, state and third-party reimbursement of our products, and the sale and marketing of our products, may be subject to scrutiny under these laws.

Government officials have focused their enforcement efforts on marketing of healthcare services and products, among other activities, and recently have brought cases against sales personnel who allegedly offered unlawful inducements to potential or existing customers in an attempt to procure their business. As part of our compliance program, we have reviewed our sales contracts and marketing materials and practices to assure compliance with these federal and state laws, and inform employees and marketing representatives of the Anti-Kickback Statute and their obligations thereunder. However, we cannot rule out the possibility that the government or other third parties could interpret these laws differently and challenge our practices under one or more of these laws. If our past or present operations are found to be in violation of any of these laws, we could be subject to civil and criminal penalties, which could hurt our business, results of operations and financial condition.

Interactions between medical device manufacturers and physicians are also governed by strict laws, regulations, industry self-regulation codes of conduct and physicians’ codes of professional conduct in the individual EEA countries. The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medical devices is prohibited in the EEA. The provision of benefits or advantages to physicians is also governed by the national anti-bribery laws of the EEA countries. One example is the UK Bribery Act 2010. This Act applies to any company incorporated in or “carrying on business” in the UK, irrespective of where in the world the alleged bribery activity occurs. This Act could have implications for our interactions with physicians both in and outside the UK. Violation of these laws could result in substantial fines and imprisonment.

Payments made to physicians in certain EU Member States must be publically disclosed. Moreover, agreements with physicians must often be the subject of prior notification and approval by the physician’s employer, his/her competent professional organization, and/or the competent authorities of the individual EEA country. These requirements are provided in the national laws, industry codes, or professional codes of conduct, applicable in the EEA countries. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.

36

Table of Contents

Federal Physician Payment Sunshine Act and state marketing and disclosure laws

As of August 1, 2013, the federal Physician Payment Sunshine Act, being implemented as the Open Payments Program, requires certain medical device manufacturers to engage in extensive tracking of payments and other transfers of value to physicians and teaching hospitals, maintenance of a database containing such data, and public reporting of such data. Medical device manufacturers with products for which payment is available under Medicare, Medicaid or the State Children’s Health Insurance Program are required to track and report such payments. We began tracking applicable payments and transfers of value on August 1, 2013 and must begin reporting payment data to the Centers for Medicare & Medicaid Services by March 31, 2014 and annually thereafter. Failure to comply with the reporting obligations may result in civil monetary penalties.

Several states now require medical device manufacturers to report expenses relating to the marketing and promotion or require them to implement compliance programs or marketing codes. For example, California, Connecticut and Nevada mandate implementation of corporate compliance programs, while Massachusetts and Vermont impose more detailed restrictions on device manufacturer marketing practices and tracking and reporting of gifts, compensation and other remuneration to health care providers.

Health Insurance Portability and Accountability Act of 1996

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, created two new federal crimes: healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government sponsored programs. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services. A violation of this statute is a felony and may result in fines or imprisonment.

In addition to creating the two new federal healthcare crimes, HIPAA, and the regulations promulgated thereunder, also establish uniform standards for certain covered entities governing the conduct of certain electronic healthcare transactions and protecting the security and privacy of protected health information, or PHI, maintained or created by healthcare providers, health plans and healthcare clearinghouses. Implementing regulations have been promulgated under HIPAA, including: the Standards for Privacy of Individually Identifiable Health Information (the “Privacy Rule”), which restrict the use and disclosure of PHI and establish standards for the privacy of PHI; the Standards for Electronic Transactions, which establish standards for the content and format of certain common healthcare transactions, such as claims information, plan eligibility, and payment information; the Security Standards for the Protection of Electronic PHI (“Security Rule”), which require covered entities to implement and maintain certain security measures to safeguard electronic PHI; the Breach Notification Rule, which imposes standards related to the reporting of breaches of PHI; and the Enforcement Rule, which establishes standards for the enforcement of HIPAA.

The American Recovery and Reinvestment Act of 2009, or ARRA, commonly referred to as the economic stimulus package, was signed into law on February 17, 2009. The legislation includes a section called the Health Information Technology for Economic and Clinical Health (HITECH) Act. HITECH, among other things, introduced sweeping changes to HIPAA’s Privacy and Security Rules and expanded the scope of HIPAA enforcement and introduced a breach notification requirement. The new law makes many of HIPAA’s privacy and security standards directly applicable to covered entities’ “business associates” — independent contractors of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on their behalf. HITECH also increased the civil and criminal penalties that may be imposed for violations of HIPAA and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and in certain circumstances seek attorney fees and costs

37

Table of Contents

associated with pursuing federal civil actions. On January 25, 2013, the Office for Civil Rights of the Department of Health and Human Services (HHS) published a final rule implementing most of the HITECH Act privacy and security modifications to HIPAA, and strengthening the breach reporting requirements introduced under HITECH. The final rule was effective March 26, 2013, with a compliance deadline of September 23, 2013 for most provisions of the final rule applicable to covered entities and business associates.

Although we believe we are not a covered entity under HIPAA, we expect that our customers generally will be covered entities and they may obligate us to contractually comply with certain aspects of HIPAA. While the government intended this legislation to reduce administrative expenses and burdens for the healthcare industry, to the extent we contractually agree to comply with certain provisions of HIPAA we may experience significant costs. If we fail to comply with the standards that we have agreed to contractually, we may be subject to liability for violation of related contractual obligations we have with our customers. Pursuant to the HITECH Act and its implementing regulations, to the extent we are a business associate of our covered entity customers, we will be obligated to enter into certain agreements-business associate agreements- and directly subject to the HIPAA Security Rule, Breach Notification Rule and portions of the Privacy Rule and can be directly liable to HHS for noncompliance. Our compliance with these standards may entail significant costs for us and we cannot predict the effect of increased enforcement efforts in this area. To the extent we are subject to HIPAA, noncompliance can result in civil or criminal enforcement. Even if we are not directly subject to HIPAA, we could be subject to criminal penalties if we knowingly obtain or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

In addition to federal regulations issued under HIPAA, many states have enacted privacy and security statutes or regulations that regulate the use and disclosure of health information, including state medical privacy laws, state breach notification laws, and federal and state consumer protection laws. In some cases, these laws are more stringent than those issued under HIPAA and are not preempted. It may be necessary to modify our planned operations and procedures to comply with applicable state laws. If we fail to comply with applicable state laws and regulations, we could be subject to additional sanctions.

Foreign Corrupt Practices Act

The federal Foreign Corrupt Practices Act of 1997 and other similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from providing money or anything of value to officials of foreign governments, foreign political parties, or international organizations with the intent to obtain or retain business or seek a business advantage. Recently, there has been a substantial increase in anti-bribery law enforcement activity by U.S. regulators, with more frequent and aggressive investigations and enforcement proceedings by both the Department of Justice and the U.S. Securities and Exchange Commission. A determination that our operations or activities are not, or were not, in compliance with United States or foreign laws or regulations could result in the imposition of substantial fines, interruptions of business, loss of supplier, vendor or other third-party relationships, termination of necessary licenses and permits, and other legal or equitable sanctions. Other internal or government investigations or legal or regulatory proceedings, including lawsuits brought by private litigants, may also follow as a consequence. Violations of these laws may result in criminal or civil sanctions, which could disrupt our business and result in a material adverse effect on our reputation, business, results of operations or financial condition.

Certificate of Need Laws

In approximately two-thirds of the states, a certificate of need or similar regulatory approval is required prior to the acquisition of high-cost capital items or various types of advanced medical equipment, such as our system. At present, many of the states in which we expect to sell our system have laws that require institutions located in those states to obtain a certificate of need in connection with the purchase of our system, and we anticipate that some of our purchase orders may be conditioned upon our customer’s receipt of necessary certificate of need approval. Certificate of need laws were enacted to contain rising healthcare costs, prevent the

38

Table of Contents

unnecessary duplication of health resources, and increase patient access for health services. In practice, certificate of need laws have prevented hospitals and other providers who have been unable to obtain a certificate of need from acquiring new equipment or offering new services. A further increase in the number of states regulating our business through certificate of need or similar programs could adversely affect us. Moreover, some states may have additional requirements. For example, we understand that California’s certificate of need law also incorporates seismic safety requirements which must be met before a hospital can acquire our system.

Employees

As of December 31, 2013, we had 171 employees, 31 of whom were engaged directly in research and development, 15 in regulatory, clinical affairs and quality activities, 42 in sales and marketing activities, 9 in customer service and support, 47 in manufacturing and 27 in general administrative and accounting activities. None of our employees is covered by a collective bargaining agreement, and we consider our relationship with our employees to be good.

Additional Information

Hansen Medical, Inc. was incorporated in Delaware in 2002 under the name AutoCath, Inc. We file reports and other information with the Securities and Exchange Commission, or SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy or information statements. Those reports and statements as well as all amendments to those documents filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, (1) are available at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549, (2) are available at the SEC’s internet site (www.sec.gov), which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC and (3) are available free of charge through our website as soon as reasonably practicable after electronic filing with, or furnishing to, the SEC. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Our website address is www.hansenmedical.com. Information on our website is not incorporated by reference nor otherwise included in this report. Our principal executive offices are located at 800 East Middlefield Road, Mountain View, California 94043 and our telephone number is (650) 404-5800.

39

Table of Contents