Neovasc Inc. Reports Results for the Second Quarter of 2015
NASDAQ: NVCN
TSX: NVC
VANCOUVER, Aug. 6, 2015 /PRNewswire/ - Neovasc Inc. ("Neovasc" or the "Company") (NASDAQ: NVCN) (TSX: NVC) today announced financial results for the quarter ended June 30, 2015.
"With steady activity in our tissue business, Reducer's European launch going well, and with additional successful Tiara implantations, the second quarter was constructive across all facets of our company," commented Neovasc CEO, Alexei Marko. "We are taking steps to accelerate patient recruitment in the TIARA-I study and during the quarter we made crucial adjustments towards this objective. Specifically, we have made revisions to the trial protocol to enhance enrollment and have increased the number of participating sites. We are now expecting to have eight centres recruiting patients by the end of Q3. More importantly, we are adding a second valve size to the TIARA-I study, a 40mm Tiara to complement our existing 35mm device, significantly increasing the population of eligible patients. We anticipate first use of the 40mm size in Q4 of this year. Development of the 45mm Tiara is also well underway to provide further treatment options to patients. To date, the 35mm Tiara is performing very well, meeting our expectations and clearly demonstrating its potential to greatly improve the quality of life for patients suffering from severe mitral regurgitation through a minimally invasive, catheter-based valve replacement procedure."
"Our balance sheet remains very strong, with nearly $100 million in current assets at the end of the quarter," said Christopher Clark, CFO of Neovasc. "We anticipate these funds to be more than sufficient to complete our ongoing clinical trials for Tiara and other regulatory initiatives we have for Reducer, as well as to support Reducer's European launch. Of note, Reducer sales from our controlled and limited release in Europe, although modest, have been going very well, with excellent feedback from both physicians and our distributors."
Tiara Update
Tiara has been implanted in eight patients to date with encouraging results. In seven of eight cases, Tiara was successfully implanted as intended, resulting in a stable and well-anchored prosthetic valve with complete resolution of the patient's Mitral Regurgitation (MR). In one case the Tiara valve was malpositioned and required conversion to surgical valve replacement. No significant transvalvular gradients, no left ventricular outflow tract (LVOT) obstruction, no paravalvular leaks or negative interactions with surrounding structures, including the aortic valve, have been observed. Implantation of Tiara has been successfully undertaken in patients suffering from both degenerative MR and functional MR and in multiple patients with pre-existing prosthetic aortic valves. Patients are continuing to thrive with significantly improved quality of life, with one patient nearing their 18-month post implant follow-up.
To date no mechanical failures of Tiara, including frame fractures or thrombus formation have been observed in clinical use, nor has any other issue been identified requiring significant modification of the current design beyond expansion of the available size matrix.
All clinical use to date has been undertaken using the 35mm Tiara. Neovasc anticipates the first clinical use of the 40mm Tiara in Q4 and the 45mm Tiara in early 2016.
A more detailed update of clinical results to date will be provided at the 27th Annual Transcatheter Cardiovascular Therapeutics (TCT) scientific symposium, the world's largest educational meeting specializing in interventional cardiovascular medicine, being held October 11-15 in San Francisco, CA.
Revenues
Revenues decreased 18% year-over-year to $3,599,834 for the three months ended June 30, 2015, compared to revenues of $4,404,515 for the same period in 2014. Revenues decreased 22% year-over-year to $6,460,480 for the six months ended June 30, 2015, compared to revenues of $8,240,650 for the same period in 2014. The Company started its sales of Reducer product in the first quarter of 2015 as it initiates its focused commercialization of the product in Europe. The Company also ceased its production of surgical patches in June 2015. The Company anticipates that as the traditional revenues from the tissue business decline, revenue from the Reducer will compensate.
Reducer sales for the three months ended June 30, 2015 were $165,528, compared to $nil for the same period in 2014. Reducer sales for the six months ended June 30, 2015 were $215,668, compared to $nil for the same period in 2014. These sales should be categorized as stocking orders as newly qualified distributors took receipt of their initial order of product. The Company anticipates that Reducer sales will gradually grow in 2015, initially with stocking orders from additional distributors in other countries and then later in the year, with repeat orders.
Cost of Goods Sold
The cost of goods sold for the three and six months ended June 30, 2015 was $2,232,359 and $4,227,608, respectively, compared to $3,066,924 and $4,981,446 for the same periods in 2014. The overall gross margin for the three and six months ended June 30, 2015 was 38% and 35%, respectively, compared to 30% and 40% gross margin for the same periods in 2014. Gross margin improved in Q2 2015 due to an increase in raw material yields and the sales of low margin products is discontinued. The Company anticipates the improvement in gross margin will continue in 2015 as the revenue mix shifts to higher margin products.
Expenses
Total expenses for the three and six months ended June 30, 2015 were $9,764,899 and $17,064,889, respectively, compared to $7,782,507 and $10,132,078 for the same periods in 2014, representing an increase of $1,982,392 or 25%, and $6,932,811 or 68%, respectively. The increase in total expenses for the three months ended June 30, 2015 compared to the same period in 2014 reflects a $2,231,766 increase in general and administrative expenses and a $2,367,102 increase in product development and clinical trial expenses to advance the Tiara and Reducer development programs, and offset by $2,738,571 decrease in share-based payment. The increase in total expenses for the six months ended June 30, 2015 compared to the same period in 2014 reflects a $3,269,281 increase in general and administrative expenses and a $4,861,408 increase in product development and clinical trial expenses to advance the Tiara and Reducer development programs, and offset by $1,442,205 decrease in share-based payment.
Selling expenses for the three and six months ended June 30, 2015 were $154,302 and $307,985, respectively, compared to $24,413 and $44,328 for the same periods in 2014, representing an increase of $129,889, or 532%, and $263,657 or 595%. The increase in selling expenses for the three and six months ended June 30, 2015 compared to the same periods in 2014 reflects costs incurred for Reducer commercialization activities in the first six months of 2015. The Company anticipates a significant increase in selling expenses in 2015 as it initiates a focused commercialization of the Reducer in select countries in Europe.
General and administrative expenses for the three and six months ended June 30, 2015 were $4,347,076 and $7,234,486, respectively, compared to $4,644,387 and $5,740,841 for the same periods in 2014, representing a decrease of $297,311, or 6% and an increase of $1,493,645, or 26%, respectively. The decrease in general and administrative expenses for the three months ended June 30, 2015 compared to the same period in 2014 can be substantially explained by a $2,529,077 decrease in share-based payments, and offset by a $2,231,766 increase in other expenses. The $2,231,766 increase includes, but is not limited to, approximately $2,000,000 related to litigation expenses, approximately $235,000 related to the rent of new administration office, insurance, and information system expenses and approximately $370,000 related to an increase in general and administrative staff and an increase in compensation to the board, and senior management. The increase in general and administrative expenses for the six months ended June 30, 2015 compared to the same period in 2014 can be substantially explained by a $3,269,281 increase in other expenses, and offset by $1,775,636 decrease in share-based payment. The $3,269,281 increase includes, but is not limited to, approximately $2,500,000 related to litigation expenses, approximately $400,000 related to the rent of new administration office, insurance, and information system expenses and approximately $460,000 related to an increase in general and administrative staff and an increase in compensation to the board, and senior management.
Product development and clinical trial expenses for the three and six months ended June 30, 2015 were $5,263,521 and $9,522,418, respectively, compared to $3,113,707 and $4,346,909 for the same periods in 2014, representing an increase of $2,149,814, or 69% and $5,175,509, or 119%. The increase in product development and clinical trial expenses for the three months ended June 30, 2015 was due to a $781,454 increase in cashbased employee expenses as the Company hired additional staff to advance product development and a $1,585,648 increase in other expenses as the Company invested in its two major new product initiatives, offset by a $217,288 decrease in share-based payment. The increase in product development and clinical trial expenses for the six months ended June 30, 2015 was due to $314,101 increase in share-based payment, a $1,471,654 increase in cashbased employee expenses as the Company hired additional staff to advance product development and a $3,389,754 increase in other expenses as the Company invested in its two major new product initiatives.
The Company's expenses are subject to inflation and cost increases. Salaries and wages have increased on average by 6% in the six months ended June 30, 2015 compared to the same period in 2014. The Company has not seen a material increase in the price of any of the components used in the manufacture of its products and services.
Other Income
The other income for the three months ended June 30, 2015 was $94,008, compared to other expense of $26,995 for the same period in 2014. The other income for the six months ended June 30, 2015 was $370,758, compared to other income of $20,891 for the same period in 2014. The Company's investments in high interest savings accounts and guaranteed investment certificates generated $432,665 interest in the six months ended June 30, 2015.
Losses
The losses for the three and six months ended June 30, 2015 were $8,303,416 and $14,461,259, or $0.12 and $0.23 basic and diluted loss per share, as compared with a loss of $6,471,911 and $6,851,983, or $0.12 and $0.13 basic and diluted loss per share for the same periods in 2014. The $1,831,505 increase in the loss incurred for the three months ended June 30, 2015 compared to the same period in 2014 can be substantially explained by $2,231,766 increase in general and administrative expenses, $2,367,102 increase in product development and clinical trial expenses, and offset by a $2,681,543 decrease in share-based payment. The $7,609,276 increase in the loss incurred for the six months ended June 30, 2015 compared to the same period in 2014 can be substantially explained by $1,026,332 decrease in gross profit, $3,269,281 increase in general and administrative expenses, $4,861,408 increase in product development and clinical trial expenses, and offset by $1,363,552 decrease in share-based payment. In the first six months of 2015 and 2014 certain directors, officers and employees of Neovasc were granted options under the Company's established remuneration and incentive plans. However, the number of options granted in the first six months of 2015 was much less than the grant in the same period of 2014, and therefore resulted in a lower non-cash charge to the income statement in 2015.
Discussion Of Liquidity And Capital Resources
Neovasc finances its operations and capital expenditures with cash generated from operations, lines of credit, and equity financings.
To read full press release, please click here.
Help employers find you! Check out all the jobs and post your resume.