HeartWare Reports First Quarter 2016 Financial Results
FRAMINGHAM, Mass., May 4, 2016 /PRNewswire/ -- HeartWare International, Inc. (NASDAQ: HTWR), a leading innovator of less-invasive, miniaturized circulatory support technologies that are revolutionizing the treatment of advanced heart failure, today announced revenue derived from HeartWare® Ventricular Assist System (HVAD® System) sales of $55.1 million for the first quarter ended March 31, 2016, compared to $70.0 million in revenue for the same period in 2015.
"In the first quarter, our international revenue performance was impacted by competitive dynamics in Germany, as well as lower implant volumes in certain other international markets," said Doug Godshall, President and Chief Executive Officer. "In the U.S., the bridge-to-transplant segment of the market for which the HVAD System is approved, showed softness resulting from a slowdown in the volume of patients eligible for bridge-to-transplant procedures at the start of the year and an evolving trend toward destination therapy (DT) due to ease of reimbursement. Our first quarter financial performance and the overall market dynamics reinforce the importance of our work toward securing a DT indication in the U.S. and focusing our energies upon the continued enhancement of our technologies. Despite first quarter trends, the HVAD System remains the most versatile pump, utilized in the widest range of patients, among currently available ventricular assist systems. The versatility and utility of the HVAD was on full display at the recently concluded International Society for Heart and Lung Transplantation 36th Annual Meeting, where the HVAD System was the subject of more than 90 oral and poster presentations, reinforcing the positive, real-world commercial experience with the device."
First Quarter Financial Results
During the first quarter of 2016, 578 HVAD Systems were sold globally, which represented a 19% decrease from 713 units sold in the first quarter of 2015. During the quarter, U.S. revenue, generated through the sale of 295 units, was $33.3 million, which was a 21% decrease from $42.2 million in the first quarter of 2015. More than half of the comparative decrease in units sold in the U.S. was due to the completion of enrollment in the ENDURANCE2 DT trial in the third quarter of 2015. For the first quarter of 2016, revenue from international markets, generated through the sale of 283 units, was $21.7 million, which represented a decrease of 20% on a constant-currency basis from $27.8 million in the first quarter of 2015. Currency fluctuations negatively impacted total revenue growth by approximately $0.6 million, or approximately 1%, in the first quarter of 2016, compared to the same period in 2015.
Gross margin percentage decreased to 58.2% in the first quarter of 2016, compared to 68.5% in the first quarter of 2015, reflecting lower sales volumes and a $3.5 million charge in the first quarter of 2016 related to ongoing field actions targeting improved battery and controller performance of the HVAD System.
Total operating expenses for the first quarter of 2016 were $47.3 million, compared to $55.3 million for the first quarter of 2015.
Research and development expenses were $25.2 million for the first quarter of 2016, compared to $31.3 million for the first quarter of 2015. Excluding acquisition-related amortization and restructuring cost changes, research and development expenses decreased $3.9 million for the first quarter of 2016, compared to the same period in 2015, primarily as a result of lower project expenses and a decrease in share-based compensation.
Selling, general and administrative expenses were $21.5 million for the first quarter of 2016, compared to $21.9 million for the first quarter of 2015. Excluding acquisition-related amortization and restructuring cost changes, selling, general and administrative expenses increased $0.1 million for the first quarter of 2016, compared to the same period in 2015. The net increase was primarily due to professional fees, personnel costs and all other expenses, partially offset by savings of $0.9 million resulting from the moratorium on the Medical Device Excise Tax that went into effect on January 1, 2016.
Changes in the fair value of contingent consideration associated with the 2013 acquisition of CircuLite, Inc. resulted in $0.6 million of expense during the first quarter of 2016, compared to $2.1 million of expense in the first quarter of 2015.
Net loss for the first quarter of 2016 was $17.5 million, or a loss of $1.00 per basic and diluted share, compared to a net loss of $14.5 million, or a loss of $0.85 per basic and diluted share, for the first quarter of 2015.
Non-GAAP net loss for the first quarter of 2016 was $16.5 million, or $0.95 per basic and diluted share, compared to a non-GAAP net loss of $9.4 million, or $0.55 per basic and diluted share, for the first quarter of 2015. See "Use of Non-GAAP Financial Measures" and "Reconciliation of GAAP to Non-GAAP Net Loss Per Common Share."
At March 31, 2016, HeartWare had approximately $189 million of cash, cash equivalents and investments, compared to approximately $244 million at December 31, 2015. Total cash used during the first quarter included $31 million in loans made to Valtech Cardio, Ltd. in accordance with the terminated business combination agreement, annual incentive payments and costs associated with the battery and controller field actions.
Conference Call and Webcast Information
HeartWare will host a conference call on Wednesday, May 4, 2016 at 8:00 a.m. ET to discuss its financial results for the first quarter and the company's business outlook. The call may be accessed by dialing 1-877-407-0789 five minutes prior to the scheduled start time and referencing "HeartWare." Callers outside the U.S. should dial +1-201-689-8562.
A live webcast of the call will also be available from the Investors section of the company's website (http://ir.heartware.com/). A replay of the conference call will be available through the above link immediately following completion of the call.
About HeartWare International
HeartWare International develops and manufactures miniaturized implantable heart pumps, or ventricular assist devices, to treat patients around the world suffering from advanced heart failure. Dedicated to developing new, minimally invasive technologies to revolutionize the treatment of patients with end-stage heart failure, HeartWare has multiple technologies in development to offer progressively less-invasive mechanical circulatory support options. HeartWare's corporate headquarters are located in Framingham, Massachusetts, and the company has technology, operations, manufacturing and distribution centers in Miami Lakes, Florida; Arden Hills, Minnesota; and Hannover, Germany. For additional information about the company, please visit www.heartware.com.
Use of Non-GAAP Financial Measures
HeartWare management supplements its GAAP financial reporting with certain non-GAAP financial measures for financial and operational decision making. For example, we use "non-GAAP net loss" and "non-GAAP net loss per common share" to refer to GAAP loss per share excluding certain adjustments such as amortization of intangible assets, impairment charges, purchase accounting and acquisition-related transaction costs, loss on extinguishment of long-term debt, and restructuring and severance costs. These are non-GAAP financial measures under Section 101 of Regulation G under the Securities Exchange Act of 1934, as amended.
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