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



11/7/2012 8:24:37 AM

YOQNEAM, ISRAEL--(Marketwire - November 06, 2012) - Given Imaging Ltd. (NASDAQ: GIVN) today announced financial results for the third quarter ended September 30, 2012.

Revenues were $45.4 million in the third quarter of 2012, compared to $44.7 million in the third quarter of 2011. Excluding the negative impact of foreign currency translation, third quarter 2012 revenues were $46.3 million, a four percent increase compared to the same period last year.

Gross margin on a GAAP basis in the third quarter of 2012 was 77.5 percent, compared to 77.1 percent in the third quarter of 2011. Gross margin on a non-GAAP basis in the third quarter of 2012 was 78.3 percent, compared to 77.6 percent in the third quarter of 2011. The increase in non-GAAP gross margin is attributable mainly to improved gross margins of the functional diagnostic products.

On a GAAP basis, operating profit was $6.5 million, compared to $4.1 million in the third quarter of 2011. Non-GAAP operating profit was $8.5 million, compared to $5.8 million in the third quarter of 2011. On a GAAP basis, net income for the third quarter of 2012 increased 58 percent to $6.0 million, or $0.19 per share, compared to $3.8 million, or $0.12 per share, in the same quarter of last year. On a non-GAAP basis, net income for the third quarter of 2012 increased 47 percent to $7.9 million, or $0.25 per share on a fully diluted basis, compared to $5.3 million, or $0.17 per share on a fully diluted basis, in the third 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 September 30, 2012 totaled $119.1 million.

"We are pleased that our focus on increasing profitability resulted in a significant increase in third quarter net income. On the top line we achieved, a solid six percent increase in revenues in the Americas region which was driven by sales of our functional GI diagnostics products. This is the third consecutive quarter of revenue growth in the region, which represents our largest market," said Homi Shamir, president and CEO, Given Imaging. "We remain committed to enhance the growth of our company as evidenced by our recent acquisition of the assets of the SmartPill Corporation. We continue to explore additional strategic alternatives that will help make Given Imaging an even stronger company for the benefit of our customers and shareholders."

Recent Developments

PillCam® COLON 2 U.S. Regulatory Update

  • The Company recently had a positive meeting with the U.S. Food and Drug Administration (FDA) to discuss the process for market clearance of the PillCam COLON 2 capsule for the visualization of the colon. Based on the meeting, the company plans to submit this product for FDA clearance in the next few weeks under the direct de novo route.

PillCam COLON 2 Regulatory Submission in Japan

  • In September, the Company announced that it filed for PillCam COLON 2 regulatory approval in Japan. The submission to the Japanese Pharmaceuticals and Medical Devices Agency (PMDA) includes the results of the PillCam COLON 2 pivotal clinical trial which was designed to evaluate the PillCam COLON 2 as a tool to visualize the mucosal layer of the colon for pathologies including colorectal cancer.

SmartPill Acquisition

  • In October, Given Imaging announced the acquisition of the assets related to the SmartPill® GI Monitoring System from The SmartPill Corporation, a U.S.-based company, for $6 million and an earn-out component, based on sales of the SmartPill product between 2013 and 2016. The SmartPill System measures gastric emptying and total GI (stomach, small bowel and colon) transit times and is used to evaluate motility disorders like gastroparesis and constipation. A Category 1 CPT code with a value of $873.25 becomes effective on January 1, 2013 for the SmartPill Wireless Motility Capsule Procedure.

Strategic Alternatives Evaluation

  • Given Imaging recently announced that it is evaluating a range of strategic options, including preliminary non-binding indications of interest received from a number of parties relating to a possible merger or sale of the Company. The Company intends to continue to actively explore these and other alternatives, including a strategic alliance or additional acquisitions. The Board of Directors has appointed an executive committee consisting of the Chairman and two independent directors to oversee the process. The investment banking firm Barclays is assisting the Company in this process.

Third Quarter 2012 Revenue Analysis

Revenues in the Americas region in the third quarter of 2012 increased by six percent to $28.6 million from $26.9 million in the same period last year. Revenues in the EMEA region decreased by six percent to $10.1 million compared to $10.7 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 $0.3 million, or three percent compared to the same period last year. APAC revenues decreased by six percent to $6.6 million, compared to $7.1 million in the same period in 2011.

Worldwide PillCam SB sales were 58,200 capsules in the third quarter of 2012, compared to 58,900 capsules in the same period last year. PillCam SB sales in the Americas region were 35,000 capsules, compared to 34,800 capsules in the third quarter last year. PillCam SB sales in the EMEA region increased by two percent to 14,100 capsules, compared to 13,800 capsules in the third quarter of 2011, while PillCam SB sales in the APAC region decreased by 10 percent to 9,200 capsules, compared to 10,200 capsules in the same period in 2011, due to lower PillCam sales in China.

Worldwide sales of functional GI diagnostics products including the Bravo pH Monitoring System, Digitrapper pH-Z and ManoScan increased by five percent to $13.2 million in the third quarter of 2012 compared to $12.6 million in the same period last year. In the Americas region, functional diagnostics products revenue increased by 15% in the third quarter of 2012 to $10.8 million compared to $9.4 million in the same period last year. Functional GI diagnostics revenue in the EMEA region increased by four percent to $1.8 million, while revenue in the APAC region was $0.6 million.

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

Nine Month Financial Results

For the nine month period ended September 30, 2012, revenues increased by two percent to $131.8 million compared to $129.5 million in the same period last year. Revenues in the Americas region in the first nine months of 2012 increased by eight percent to $83.9 million from $78 million in the same period last year. Revenues in the EMEA region decreased by seven percent to $31.6 million compared to $33.8 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 $0.6 million, or two percent compared to the same period last year. EMEA revenues in the first nine months of 2012 denominated in local currencies increased by two percent compared to the same period last year. APAC revenues decreased by eight percent to $16.3 million, compared to $17.7 million in the same period in 2011. The decrease is attributable to weakness in sale of functional GI diagnostics products in the Far East and to lower capsule sales in the first half of 2012 in Australia and Japan.

Worldwide PillCam SB sales increased by one percent to 173,900 capsules in the first nine months of 2012, compared to 171,800 capsules in the same period last year. PillCam SB sales in the Americas region were approximately 105,200 capsules, compared to the 104,400 capsules that were sold in the first nine months of 2011. PillCam SB sales in the EMEA region increased by two percent to 44,700 capsules, compared to 44,000 capsules in the first nine months of 2011, while PillCam SB sales in the APAC region increased by three percent to 24,000 capsules, compared to 23,400 capsules in the same period in 2011.

Worldwide sales of Given Imaging's functional GI diagnostics products increased by 13 percent to $38.2 million in the first nine months of 2012 compared to $33.8 million in the same period last year. In the Americas region, functional GI diagnostics product revenue increased by 20% in the first nine months of 2012 to $30.7 million compared to $25.5 million in the same period last year due to higher sales of Sierra Scientific products. Functional diagnostics revenue in the EMEA region were $5.2 million, slightly lower than the first nine months of 2011, while revenue in the APAC region was $2.2 million compared to $2.7 million in the same period in 2011.

Gross margin on a GAAP basis in the first nine months of 2012 was 76.8 percent, compared to 76.4 percent in the same period in 2011. Gross margin on a non-GAAP basis in the first nine months of 2012 was 77.6 percent, compared to 77.0 percent in the same period in 2011.

On a GAAP basis, operating profit was $10.2 million in the first nine months of 2012, compared to $8.1 million in the same period in 2011. Non-GAAP operating profit was $16.1 million, compared to $14.5 million in the same period in 2011. On a GAAP basis, net income for the first nine months of 2012 increased 46 percent to $9.2 million, or $0.30 per share, compared to $6.4 million, or $0.20 per share, in the same period last year. On a non-GAAP basis, net income for the first nine months of 2012 increased 20 percent to $14.9 million, or $0.48 per share on a fully diluted basis, compared to $12.4 million, or $0.40 per share on a fully diluted basis, in the same period in 2011.

2012 Guidance

The Company is reaffirming its revenue guidance for fiscal year 2012. The Company expects its 2012 revenues to be between $185 million and $190 million. The Company expects that its 2012 earnings per share to be between $0.45 and $0.55 on a GAAP basis, and between $0.70 and $0.80 on a non-GAAP basis.

Conference Call / Webcast Information

Given Imaging will host a conference call on Wednesday, November 7, 2012 at 9:00am ET, 4:00pm Israel time to discuss third 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, 1-888-297-0339; Israel, 1-80-924-5905. Callers in other countries should dial 719-325-2492. 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 November 21, 2012, by dialing 888-203-1112. Callers in Israel should dial 1-80-924-6038. Callers outside of the U.S. and Israel should dial 719-457-0820. The replay participant code is 7043550.

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® capsule endoscope for the small bowel, esophagus and colon. The company also offers industry-leading GI functional diagnostic solutions including ManoScan™ high-resolution manometry, Bravo® capsule-based pH monitoring, Digitrapper® pH-Z impedance, and the SmartPill® GI monitoring systems. 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, Hong Kong and Brazil. 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. Such forward-looking statements include statements relating to the Company exploring strategic alternatives and considering possible strategic transactions involving the Company. 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 ability of the Company to reach agreement on any strategic alternative and/or to complete any such alternative, as well as 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 to the extent expressly required under applicable law, the Company undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

Financial Tables Follow

                                                                            
                                                                            
            Given Imaging Ltd. and its Consolidated Subsidiaries            
                               Excluded Items                               
           For the Three Months Ended September 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                                                               
 September 30,                                                              
 2012                                                                       
                                                                            
Compensation                                                                
 expenses         $    - $        194 $      696 $    741 $        -  $1,631
Sierra PPA           348            -         81        -       (170)    259
                  ------ ------------ ---------- -------- ----------  ------
Total             $  348 $        194 $      777 $    741 $     (170) $1,890
                  ====== ============ ========== ======== ==========  ======
                                                                            
Three month                                                                 
 period ended                                                               
 September 30,                                                              
 2011                                                                       
                                                                            
Compensation                                                                
 expenses         $    - $        157 $      475 $    738 $        -  $1,370
Sierra PPA           237            -         81        -       (126)    192
                  ------ ------------ ---------- -------- ----------  ------
Total             $  237 $        157 $      556 $    738 $     (126) $1,562
                  ====== ============ ========== ======== ==========  ======
                                                                            
                                                                            
                                                                            
                               Excluded Items                               
            For the Nine Months Ended September 30, 2011 and 2012           
                      (Unaudited, dollars in thousands)                     
                                                                            
                           Research     Selling   General     Tax           
                  Gross       And         And       And     Expense         
                  Profit  Development  Marketing   Admin   (Benefit)   Total
                 ------- ------------ ---------- -------- ----------  ------
                                                                            
Nine month                                                                  
 period ended                                                               
 September 30,                                                              
 2012                                                                       
                                                                            
                                                                            
Compensation                                                                
 expenses        $     - $        544 $    1,434 $  2,639 $        -  $4,617
Sierra PPA         1,044            -        243        -       (514)    773
                 ------- ------------ ---------- -------- ----------  ------
Total            $ 1,044 $        544 $    1,677 $  2,639 $     (514) $5,390
                 ======= ============ ========== ======== ==========  ======
                                                                            
Nine month                                                                  
 period ended                                                               
 September 30,                                                              
 2011                                                                       
                                                                            
                                                                            
Compensation                                                                
 expenses        $     - $        499 $    1,535 $  3,438 $        -  $5,472
Sierra PPA           711            -        243        -       (381)    573
                 ------- ------------ ---------- -------- ----------  ------
Total            $   711 $        499 $    1,778 $  3,438 $     (381) $6,045
                 ======= ============ ========== ======== ==========  ======
                                                                            
                                                                            
                                                                            
            Given Imaging Ltd. and its Consolidated Subsidiaries            
             Reconciliation of GAAP results to non-GAAP results             
           For the three months ended September 30, 2011 and 2012           
           Condensed, in thousands except share and per share data          
                                                                            
                                Q3/12                       Q3/11           
                              Specified    Non            Specified    Non  
                       GAAP   Items (*)    GAAP    GAAP   Items (*)    GAAP 
                     ------- ----------  ------- ------- ----------  -------
                                                                            
Gross profit         $35,204 $      348  $35,552 $34,466 $      237  $34,703
Research and                                                                
 development, net      5,185       (194)   4,991   6,847       (157)   6,690
Sales and marketing   17,939       (777)  17,162  18,006       (556)  17,450
General and                                                                 
 administrative        5,634       (741)   4,893   5,267       (738)   4,529
Income tax expense       662        170      832     780        126      906
Net income                                                                  
 attributable to                                                            
 shareholders        $ 6,006 $    1,890  $ 7,896 $ 3,762 $    1,562  $ 5,324
Diluted EPS                                                                 
 attributable to                                                            
 shareholders        $  0.19 $     0.06  $  0.25 $  0.12 $     0.05  $  0.17
                                                                            
(*) See specified                                                           
 items                                                                      
                                                                            
                                                                            
                                                                            
            Given Imaging Ltd. and its Consolidated Subsidiaries            
             Reconciliation of GAAP results to non-GAAP results             
            For the nine months ended September 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       $101,183 $    1,044  $102,227 $98,956 $      711  $99,667
Research and                                                                
 development, net    18,530       (544)   17,986  17,927       (499)  17,428
Sales and                                                                   
 marketing           55,431     (1,677)   53,754  55,124     (1,778)  53,346
General and                                                                 
 administrative      16,839     (2,639)   14,200  17,518     (3,438)  14,080
Income tax expense    1,646        514     2,160   2,088        381    2,469
Net income                                                                  
 attributable to                                                            
 shareholders      $  9,250 $    5,390  $ 14,640 $ 6,356 $    6,045  $12,401
Diluted EPS                                                                 
 attributable to                                                            
 shareholders      $   0.29 $     0.17  $   0.46 $  0.20 $     0.20  $  0.40
                                                                            
(*) See specified                                                           
 items                                                                      
                                                                            
                                                                            
                                                                            
            Given Imaging Ltd. and its Consolidated Subsidiaries            
                     Interim Consolidated Balance Sheets                    
                       In thousands except share data                       
                                 (Unaudited)                                
                                                                            
                                                 September 30   December 31 
                                                -------------  -------------
                                                     2012           2011    
                                                -------------  -------------
Assets                                                                      
                                                                            
Current assets                                                              
Cash and cash equivalents                       $      42,350  $      24,285
Short-term investments                                 37,162         64,762
Accounts receivable:                                                        
  Trade                                                30,229         32,406
  Other                                                 4,596          5,259
Inventories                                            24,988         22,921
Prepaid expenses                                        2,630          1,373
Deferred tax assets                                     3,613          1,538
Advances to suppliers                                   1,416          1,207
                                                -------------  -------------
                                                                            
Total current assets                                  146,984        153,751
                                                                            
                                                                            
Assets held for employee severance payments             7,264          6,854
                                                                            
Long-term investments                                  39,627         16,003
                                                                            
Non-current Inventory                                   4,654          4,926
                                                                            
Other long term assets                                  1,046          1,266
                                                                            
Fixed assets, at cost, less accumulated                                     
 depreciation                                          12,516         12,301
                                                                            
Intangible assets, less accumulated                                         
 amortization                                          28,308         29,075
                                                                            
Goodwill                                               24,089         24,089
                                                -------------  -------------
                                                                            
                                                                            
Total Assets                                    $     264,488  $     248,265
                                                =============  =============
                                                                            
                                                                            
                                                                            
            Given Imaging Ltd. and its Consolidated Subsidiaries            
                    Interim Consolidated Balance Sheets                     
                       In thousands except share data                       
                                (Unaudited)                                 
                                                                            
                                               September 30    December 31  
                                              -------------   ------------- 
                                                   2012            2011     
                                              -------------   ------------- 
Liabilities and equity                                                      
                                                                            
Current liabilities                                                         
                                            

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