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Given Imaging Ltd. (GIVN) Reports Second Quarter 2012 Results


8/8/2012 9:53:50 AM

YOQNEAM, ISRAEL--(Marketwire - August 07, 2012) - Given Imaging Ltd. (NASDAQ: GIVN) today announced financial results for the second quarter ended June 30, 2012.

Revenues were $44.5 million in the second quarter of 2012, compared to $44.8 million in the second quarter of 2011. Excluding the negative impact of foreign currency translation, second quarter 2012 revenues were $46 million, a three percent increase compared to the same period last year.

Gross margin on a GAAP basis in the second quarter of 2012 was 76.6 percent, compared to 75.5 percent in the second quarter of 2011. Gross margin on a non-GAAP basis in the second quarter of 2012 was 78.2 percent, compared to 76.0 percent in the second quarter of 2011. The increase in non-GAAP gross margin is attributable to higher production volume, and a more favorable product and geographic mix.

On a GAAP basis, operating profit was $3.4 million, compared to $2.5 million in the second quarter of 2011. Non-GAAP operating profit was $5.5 million, compared to $4.8 million in the second quarter of 2011. On a GAAP basis, net income for the second quarter of 2012 increased 59 percent to $3.0 million, or $0.10 per share, compared to $1.9 million, or $0.06 per share, in the same quarter of last year. On a non-GAAP basis, net income for the second quarter of 2012 increased 21 percent to $4.9 million, or $0.16 per share on a fully diluted basis, compared to $4.1 million, or $0.13 per share on a fully diluted basis, in the second quarter of 2011.

A reconciliation of GAAP results to non-GAAP results is attached.

Cash and cash equivalents, short-term investments and marketable securities on June 30, 2012 totaled $111.3 million.

"We are pleased that ongoing initiatives to maximize efficiencies resulted in a solid increase in second quarter GAAP and Non-GAAP earnings per share. Our top line revenue of $44.5 million reflects a six percent increase in revenues from the Americas region. However, revenue growth was offset by a challenging southern European market, the weakness of the Euro, as well as lower than anticipated revenue growth in the APAC region," said Homi Shamir, President and CEO, Given Imaging.

Second Quarter 2012 Revenue Analysis

Revenues in the Americas region in the second quarter of 2012 increased by six percent to $28.4 million from $26.9 million in the same period last year. Revenues in the EMEA region decreased by 9 percent to $10.7 million compared to $11.8 million in the same period last year due to lower PillCam sales in the southern European countries and the weakness of the Euro. Excluding the negative impact of foreign currency translation, revenues in the EMEA region increased by $1.4 million, or three percent compared to the same period last year. APAC revenues decreased by 10 percent to $5.4 million, compared to $6.0 million in the same period in 2011.

Worldwide PillCam SB sales grew by one percent to 59,200 capsules in the second quarter of 2012, compared to 58,700 capsules in the same period last year. PillCam SB sales in the Americas region also increased by one percent to approximately 36,500 capsules, compared to 36,200 capsules in the second quarter last year. PillCam SB sales in the EMEA region increased by two percent to 15,500 capsules, compared to 15,200 capsules in the second quarter of 2011, while PillCam SB sales in the APAC region decreased by three percent to 7,100 capsules, compared to 7,300 capsules in the same period in 2011.

Worldwide sales of functional GI diagnostics products including the Bravo pH Monitoring System, Digitrapper pH-Z and Manoscan increased by 13 percent to $12.6 million in the second quarter of 2012 compared to $11.2 million in the same period last year. In the Americas region, functional diagnostics products revenue increased by 13% in the second quarter of 2012 to $9.9 million compared to $8.8 million in the same period last year. Functional GI diagnostics revenue in the EMEA region decreased by 11 percent to $1.6 million, while revenue in the APAC region increased by 58 percent to $1 million.

Supplemental second quarter data can be found at www.givenimaging.com in the Investor Relations section.

Six Month Financial Results

For the six month period ended June 30, 2012, revenues increased by two percent to $86.3 million compared to $84.8 million in the same period last year. Revenues in the Americas region in the first half of 2012 increased by eight percent to $55.2 million from $51.0 million in the same period last year. Revenues in the EMEA region decreased by seven percent to $21.4 million compared to $23.0 million in the same period last year due to lower PillCam sales in the southern European countries and the weakness of the Euro. EMEA revenues in the first half of 2012 increased by one percent compared to the same period last year, excluding the $1.9 million negative impact of the weaker Euro. APAC revenues decreased by nine percent to $9.7 million, compared to $10.7 million in the same period in 2011.

Worldwide PillCam SB sales increased by two percent to 115,600 capsules in the first half of 2012, compared to 113,000 capsules in the same period last year. PillCam SB sales in the Americas region were approximately 70,200 capsules, a one percent increase compared to 69,600 capsules that were sold in the first half of 2011. PillCam SB sales in the EMEA region increased by one percent to 30,600 capsules, compared to 30,200 capsules in the first half of 2011, while PillCam SB sales in the APAC region increased by 12 percent to 14,800 capsules, compared to 13,200 capsules in the same period in 2011.

Worldwide sales of Given Imaging's functional GI diagnostics products increased by 19 percent to $25.2 million in the first half of 2012 compared to $21.1 million in the same period last year. In the Americas region, functional GI diagnostics product revenue increased by 24% in the first half of 2012 to $19.9 million compared to $16.1 million in the same period last year. Functional diagnostics revenue in the EMEA region were $3.6 million, similar to the first half of 2011, while revenue in the APAC region increased by 21 percent to $1.6 million.

Recent Developments

  • PillCam COLON 2 Clinical Trials Update
    Given Imaging has completed the 885-patient PillCam COLON 2 clinical trial for submission to the U.S. Food and Drug Administration (FDA). In the Company's view, its analysis of the data from the PillCam COLON 2 clinical trial in the U.S. support an FDA submission for visualization of the colon in patients who are unable to undergo colonoscopy or in cases of incomplete colonoscopies, rather than a submission for general screening.

    The Company plans to submit this product for FDA clearance in the fourth quarter of this year, following a meeting it plans to have with the FDA in the near future. Feedback from FDA may impact our planned submission.

    In Japan, the Company has completed the 72-patient PillCam COLON trial for submission to PMDA, the Japanese regulatory authority. The trial has been designed to evaluate the use of PillCam COLON for visualization of the gastrointestinal mucosa for diagnosis of colonic pathologies. Based on a preliminary review of the trial data, the Company believes the results support submission for the intended indication and plans to submit the results to PMDA in the fourth quarter of this year.

    The Company believes that submission for the proposed indications in the U.S. and Japan may provide a significant opportunity for Given Imaging, with an addressable market which is estimated by the Company to be $1.7 billion in our main markets, comprising 3.3 million procedures annually, one-third of which are in the U.S. and one-third in Japan.

    The Company continues to explore ways to expand the use of the PillCam COLON 2 capsule for a screening indication in the U.S.

    Given Imaging believes that it is on target toward achieving its goal of at least $450 million in annual revenues by 2016, which includes revenue projections for use of PillCam COLON for visualization of the colon as described above.

  • PillCam SB Expanded Indications Reimbursement
    Japan's Ministry of Health, Labor and Welfare (MHLW) issued reimbursement codes for the PillCam Patency Capsule for use with PillCam SB and for the PillCam SB video capsule for expanded indications for those patients with known or suspected small bowel disease, including the visualization and diagnosis of Crohn's disease. Reimbursement is effective for the entire 105-million adult population as of July 1, 2012.

  • Korea Intellectual Property Tribunal Upholds Given Imaging Patents
    In July, the Intellectual Property Tribunal of the Korean Intellectual Property Office (KIPO) re-affirmed the validity of two Given Imaging Korean patents asserted against Intromedic Co. Ltd. in Seoul's Central District Court. Intromedic has appealed this decision. In the meantime, the infringement proceedings that have been stayed pending a resolution in the invalidity proceedings before the KIPO have been resumed. Rulings in these proceedings are expected by the end of this year.

2012 Guidance Update

As a result of ongoing economic weakness in Europe, associated with the weak Euro and the lower than forecast revenue in the Asia Pacific region in the first half of 2012, the Company is lowering its revenue guidance for fiscal year 2012 from between $190 million and $200 million to between $185 and $190 million. Despite lowering top-line guidance, the Company believes that initiatives to maximize profitability will enable the Company to achieve its earnings per share guidance of between $0.45 and $0.55 on a GAAP basis, and between $0.70 and $0.80 on a non-GAAP basis. However, the Company expects that 2012 earnings per share will be closer to the lower range of the guidance.

Conference Call / Webcast Information

Given Imaging will host a conference call on Wednesday, August 8, 2012 at 9:00am ET, 4:00pm Israel time to discuss second quarter 2012 financial results. To participate in the teleconference, please dial the following numbers fifteen minutes before the call is scheduled to begin: U.S. and Canada, 1-877-604-9665; Israel, 1-80-925-8243. Callers in other countries should dial 719-325-4838. The call will also be webcast live at www.givenimaging.com.

A replay of the call will be available for two weeks on the company's website, or until August 22, 2012, by dialing 888-203-1112. Callers outside of the U.S. should dial 719-457-0820. The replay participant code is 1564690.

Use of Non-GAAP Measures

This press release provides financial measures for net income and basic and diluted earnings per share that exclude certain items and are therefore not calculated in accordance with generally accepted accounting principles (GAAP). Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance that enhances management's and investors' ability to evaluate the Company's net income and earnings per share and to compare it with historical net income and earnings per share.

The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management uses both GAAP and non-GAAP measures when evaluating the business internally and therefore felt it is important to make these non-GAAP adjustments available to investors.

About Given Imaging Ltd.
Since pioneering the field of capsule endoscopy in 2001, Given Imaging has become a world leader in GI medical devices, offering health care providers a range of innovative options for visualizing, diagnosing and monitoring the digestive system. The company offers a broad product portfolio including PillCam® video capsules for the small bowel, esophagus and colon, industry-leading ManoScan™ high-resolution manometry and Bravo® wireless and Digitrapper® pH and impedance products. Given Imaging is committed to delivering breakthrough innovations to the GI community and supporting its ongoing clinical needs. Given Imaging's headquarters are located in Yoqneam, Israel, with operating subsidiaries in the United States, Germany, France, Japan, Australia, Vietnam and Hong Kong. For more information, please visit www.givenimaging.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, projections about our business and our future revenues, expenses and profitability. Forward-looking statements may be, but are not necessarily, identified by the use of forward-looking terminology such as "may," "anticipates," "estimates," "expects," "intends," "plans," "believes," and words and terms of similar substance. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual events, results, performance, circumstances or achievements of the Company to be materially different from any future events, results, performance, circumstances or achievements expressed or implied by such forward-looking statements. Factors that could cause actual events, results, performance, circumstances or achievements to differ from such forward-looking statements include, but are not limited to, the following: (1) our ability to develop and bring to market new products, (2) our ability to successfully complete any necessary or required clinical studies with our products, (3) our ability to receive regulatory clearance or approval to market our products or changes in regulatory environment, (4) our success in implementing our sales, marketing and manufacturing plans, (5) the level of adoption of our products by medical practitioners, (6) the emergence of other products that may make our products obsolete, (7) lack of an appropriate bowel preparation materials to be used with our PillCam COLON capsule, (8) protection and validity of patents and other intellectual property rights, (9) the impact of currency exchange rates, (10) the effect of competition by other companies, (11) the outcome of significant litigation, (12) our ability to obtain reimbursement for our product from government and commercial payors, (13) quarterly variations in operating results, (14) the possibility of armed conflict or civil or military unrest in Israel, (15) the impact of global economic conditions, (16) our ability to successfully integrate acquired businesses, (17) changes and reforms in applicable healthcare laws and regulations, (18) quality issues and adverse events related to our products, such as capsule retention, aspiration and failure to attach or detach, bleeding or perforation that could require us to recall products and impact our sales and net income, and (19) other risks and factors disclosed in our filings with the U.S. Securities and Exchange Commission, including, but not limited to, risks and factors identified under such headings as "Risk Factors," "Cautionary Language Regarding Forward-Looking Statements" and "Operating Results and Financial Review and Prospects" in the Company's Annual Report on Form 20-F for the year ended December 31, 2011. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except for the Company's ongoing obligations to disclose material information under the applicable securities laws, it undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

            Given Imaging Ltd. and its Consolidated Subsidiaries            
                               Excluded Items                               
              For the Three Months Ended June 30, 2011 and 2012             
                      (Unaudited, dollars in thousands)                     
                                                                            
                               Research   Selling  General    Tax           
                      Gross      And        And      And    Expense         
                      Profit Development Marketing  Admin  (Benefit)   Total
                     ------- ----------- --------- ------- ---------  ------
Three month period                                                          
 ended June 30, 2012                                                        
Compensation                                                                
 expenses            $     - $       192 $     509 $   856 $       -  $1,557
Sierra PPA               237         222        81       -      (217)    323
                     ------- ----------- --------- ------- ---------  ------
Total                $   237 $       414 $     590 $   856 $    (217) $1,880
                     ======= =========== ========= ======= =========  ======
Three month period                                                          
 ended June 30, 2011                                                        
Compensation                                                                
 expenses            $     - $       160 $     499 $ 1,306 $       -  $1,965
Sierra PPA               237           -        81       -      (128)    190
                     ------- ----------- --------- ------- ---------  ------
Total                $   237 $       160 $     580 $ 1,306 $    (128) $2,155
                     ======= =========== ========= ======= =========  ======
                                                                            
                                                                            
            Given Imaging Ltd. and its Consolidated Subsidiaries            
                               Excluded Items                               
               For the Six Months Ended June 30, 2011 and 2012              
                      (Unaudited, dollars in thousands)                     
                                                                            
                               Research   Selling  General    Tax           
                      Gross      And        And      And    Expense         
                      Profit Development Marketing  Admin  (Benefit)   Total
                     ------- ----------- --------- ------- ---------  ------
Six month period                                                            
 ended June 30, 2012                                                        
Compensation                                                                
 expenses            $     - $       350 $     738 $ 1,898 $       -  $2,986
Sierra PPA               474         222       162       -      (344)    514
                     ------- ----------- --------- ------- ---------  ------
Total                $   474 $       572 $     900 $ 1,898 $    (344) $3,500
                     ======= =========== ========= ======= =========  ======
Six month period                                                            
 ended June 30, 2011                                                        
Compensation                                                                
 expenses            $     - $       342 $   1,060 $ 2,700 $       -  $4,102
Tax (benefit)            474           -       162       -      (255)    381
                     ------- ----------- --------- ------- ---------  ------
Total                $   474 $       342 $   1,222 $ 2,700 $    (255) $4,483
                     ======= =========== ========= ======= =========  ======
                                                                            
                                                                            
            Given Imaging Ltd. and its Consolidated Subsidiaries            
             Reconciliation of GAAP results to non-GAAP results             
              For the three months ended June 30, 2011 and 2012             
           Condensed, in thousands except share and per share data          
                                                                            
                               Q2/12                       Q2/11            
                             Specified     Non           Specified     Non  
                       GAAP  Items (*)    GAAP     GAAP  Items (*)    GAAP  
                     ------- ---------  -------- ------- ---------  --------
Gross profit         $34,555 $     237  $ 34,792 $33,788 $     237  $ 34,025
Research and                                                                
 development, net      6,479      (414)    6,065   5,619      (160)    5,459
Sales and marketing   19,073      (590)   18,483  19,869      (580)   19,289
General and                                                                 
 administrative        5,568      (856)    4,712   5,729    (1,306)    4,423
Income tax expense       360       217       577     716       128       844
Net income                                                                  
 attributable to                                                            
 shareholders        $ 3,043 $   1,880  $  4,923 $ 1,917 $   2,155  $  4,072
Diluted EPS                                                                 
 attributable to                                                            
 shareholders        $  0.10 $    0.06  $0.15606 $  0.06 $    0.07  $0.13006
                                                                            
(*)See specified items                                                      
                                                                            
                                                                            
            Given Imaging Ltd. and its Consolidated Subsidiaries            
             Reconciliation of GAAP results to non-GAAP results             
              For the three months ended June 30, 2011 and 2012             
           Condensed, in thousands except share and per share data          
                                                                            
                               YTD 12                      YTD 11           
                             Specified     Non           Specified     Non  
                       GAAP  Items (*)    GAAP     GAAP  Items (*)    GAAP  
                     ------- ---------  -------- ------- ---------  --------
Gross profit         $66,201 $     474  $ 66,675 $64,490 $     474  $ 64,964
Research and                                                                
 development, net     13,223      (572)   12,651  11,080      (342)   10,738
Sales and marketing   37,836      (900)   36,936  37,118    (1,222)   35,896
General and                                                                 
 administrative       11,205    (1,898)    9,307  12,251    (2,700)    9,551
Income tax expense       984       344     1,328   1,308       255     1,563
Net income                                                                  
 attributable to                                                            
 shareholders        $ 3,244 $   3,500  $  6,744 $ 2,594 $   4,483  $  7,077
Diluted EPS                                                                 
 attributable to                                                            
 shareholders        $  0.10 $    0.11  $   0.21 $  0.08 $    0.14  $   0.22
                                                                            
(*)See specified items                                                      
                                                                            
                                                                            
            Given Imaging Ltd. and its Consolidated Subsidiaries            
                     Interim Consolidated Balance Sheets                    
                       In thousands except share data                       
                                 (Unaudited)                                
                                                                            
                                                    June 30     December 31 
                                                 ------------- -------------
                                                      2012          2011    
                                                 ------------- -------------
                                                                            
Assets                                                                      
                                                                            
Current assets                                                              
Cash and cash equivalents                        $      27,091 $      24,285
Short-term investments                                  44,549        64,762
Accounts receivable:                                                        
  Trade                                                 29,064        32,406
  Other                                                  5,413         5,259
Inventories                                             24,329        22,921
Prepaid expenses                                         2,253         1,373
Deferred tax assets                                      3,389         1,538
Advances to suppliers                                    1,799         1,207
                                                 ------------- -------------
                                                                            
Total current assets                                   137,887       153,751
                                                                            
                                                                            
Assets held for employee severance payments              7,033         6,854
                                                                            
Long-term investments                                   39,656        16,003
                                                                            
Non-current Inventory                                    4,202         4,926
                                                                            
Other long term assets                                   1,030         1,266
                                                                            
Fixed assets, at cost, less accumulated                                     
 depreciation                                           12,628        12,301
                                                                            
Intangible assets, less accumulated amortization        27,828        29,075
                                                                            
Goodwill                                                24,089        24,089
                                                 ------------- -------------
                                                                            
                                                                            
Total Assets                                     $     254,353 $     248,265
                                                 ============= =============
                                                                            
                                                                            
                                                                            
            Given Imaging Ltd. and its Consolidated Subsidiaries            
                    Interim Consolidated Balance Sheets                     
                       In thousands except share data                       
                                (Unaudited)                                 
                                                                            
                                                  June 30      December 31  
                                               -------------  ------------- 
                                                    2012           2011     
                                               -------------  ------------- 
                                                                            
Liabilities and equity                                                      
                                                                            
Current liabilities                                                         
                                                                            
Current installments of obligation under                                    
 capital lease                                 $          62  $         139 
Accounts payable:                                                           
  Trade                                                8,413          8,081 
  Other                                               25,841         28,397 
Deferred income                                          497            521 
                                               -------------  ------------- 
Total current liabilities                             34,813         37,138 
                                               -------------  ------------- 
                                                                            
Long-term liabilities                                                       
Obligation under capital lease, net                      108            120 
Liability in respect of employees' severance                                
 payments                                              7,795          7,720 
Deferred tax liabilities                               5,018          5,362 
                                               -------------  ------------- 
Total long-term liabilities                           12,921         13,202 
                                               -------------  ------------- 
Total liabilities                                     47,734         50,340 
                                               -------------  ------------- 
                                                                            
Equity                                                                      
Shareholders' equity                                                        
Ordinary Shares, NIS 0.05 par value each                                    
 (90,000,000 shares authorized; 30,927,116 and                              
 30,448,838 shares issued and fully paid as of                              
 June 30, 2012 and December 31, 2011,                                       
 respectively)                                           366            359 
Additional paid-in capital                           214,742        208,838 
Capital reserve                                        1,591          2,051 
Accumulated other comprehensive loss                    (595)          (885)
Accumulated deficit                                   (9,485)       (12,729)
                                               -------------  ------------- 
Total shareholders' equity                           206,619        197,634 
                                               -------------  ------------- 
Non-controlling interest                                   -            291 
                                               -------------  ------------- 
Total Equity                                         206,619        197,925 
       

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