Sunshine Heart Announces Third Quarter And Nine Months 2014 Financial Results And Provides Corporate Update

EDEN PRAIRIE, Minn., Oct. 30, 2014 (GLOBE NEWSWIRE) -- Sunshine Heart, Inc. (Nasdaq:SSH) today announced its financial results and provided a corporate update for the third quarter and nine months ended September 30, 2014.

"I am particularly pleased with progress achieved this past quarter across corporate and clinical fronts highlighted by COUNTER HF™ reaching double digit enrollment. This milestone marks the continuation of doubling enrollment quarter over quarter for this study throughout the year, and all of us at the Company are excited regarding this momentum," commented Dave Rosa, Chief Executive Officer of Sunshine Heart.

Third Quarter Corporate Highlights:

• Nineteen sites activated in the C-Pulse® COUNTER HF^™ U.S. investigative pivotal study, up from sixteen at the end of the second quarter 2014.
• Fourteen additional patients enrolled in the U.S., with three new centers enrolling their first patient.
• Publication of feasibility study results in JACC HF and histology results of C-Pulse's effect on the aorta published in ASAIO.
• Activated four additional centers in Europe for the OPTIONS HF post-market study; five new centers have identified patients.
• Completed European notified body regulatory audit with zero major non-conformities.
• Oral and poster presentations at the TCT and Heart Failure Society of America conferences.

Third Quarter Financial Highlights:

• SG&A expense totaled $2.4 million in the third quarter and $7.0 million year-to-date 2014 vs. $2.5 million and $6.6 million, respectively, in comparable periods of 2013.
• R&D expense totaled $3.8 million in the third quarter and $12.3 million year-to-date 2014 vs. $3.7 million and $9.3 million, respectively, in comparable periods of 2013.
• Loss per share of $(0.36) and $(1.12) in the third quarter and nine months ended September 30, 2014, respectively, vs. loss per share of $(0.47) and $(1.29) in comparable periods of 2013.
• Cash used in operations was $17.4 million for the nine months ended September 30, 2014 vs. $11.8 million in the comparable period of 2013.
• Cash and cash equivalents on hand at September 30, 2014 was $36.6 million vs. $54.1 million at year-end 2013.

FINANCIALS

The Company's results for the three and nine months ended September 30, 2014 include reimbursement revenue of $59,000 and $118,000, respectively, compared to $59,000 in each of the comparable periods of the prior year, for implants of the C-Pulse System under the U.S. COUNTER HF study. Although the Company's C-Pulse System is not approved for commercial sale in the U.S., the FDA has assigned the C-Pulse System to a Category B designation, making it eligible for reimbursement at certain U.S. sites during clinical studies. As such, the Company is able to invoice hospitals and clinics that are eligible for reimbursement by Medicare, Medicaid or private insurance companies. The Company currently estimates approximately 30% of devices implanted in its COUNTER HF study will be reimbursed. Product costs incurred for the Company's clinical studies are deemed to be development costs and, accordingly, are expensed to research and development as incurred. Upon commercialization, product costs will be capitalized in inventory and recorded to cost of sales as the inventory is sold.

Operating expenses in the third quarter of 2014 totaled $6.2 million, compared to $6.2 million in the third quarter of 2013. Operating expenses for the nine months ended September 30, 2014 totaled $19.2 million, compared to $15.9 million in the comparable period of 2013. Equity compensation expense totaled $0.7 million and $2.2 million for the three and nine month periods ended September 30, 2014, respectively, as compared to $1.1 million and $2.1 million, respectively, for the comparable periods of 2013.

Excluding equity compensation expense, non-GAAP operating expenses totaled $5.5 million and $17.1 million for the third quarter and nine months ended September 30, 2014, respectively, as compared to $5.2 million and $13.8 million for the comparable periods of 2013. The increase over the prior year periods was primarily attributable to increased clinical research and infrastructure expenses related to the U.S. pivotal and EU post-market studies and increased development expense associated with our fully-implantable device.

We received an income tax benefit of $136,000 for the state of Minnesota R&D tax credit during the third quarter of 2013. Included in the full year results are income tax benefits from the receipt of R&D tax credit refunds in Australia totaling $0.3 million in the nine months ended September 30, 2014 and $1.1 million in the comparable period of 2013.

Net loss in the third quarter and nine months ended September 30, 2014 was $6.1 million, or $0.36 per share; and $18.8 million, or $1.12 per share, respectively. This compares to losses of $6.0 million, or $0.47 per share; and $14.7 million, or $1.29 per share, in the comparable periods of 2013. Excluding equity compensation expense, third quarter and nine month periods ended September 30, 2014 net non-GAAP losses totaled $5.4 million, or $0.32 per share; and $16.7 million, or $0.99 per share, respectively. This compares to net non-GAAP losses of $5.0 million, or $0.39 per share; and $12.5 million, or $1.11 per share, in the comparable periods of 2013.

Cash used in operating activities totaled $17.4 million for the nine months ended September 30, 2014 compared to $11.8 million for the comparable period of 2013, with the increase driven primarily by higher clinical and research expenses. The Company had $36.6 million in cash and cash equivalents at September 30, 2014, compared to $54.1 million at December 31, 2013.

In addition to financial results for the third quarter and nine months ended September 30, 2014, Sunshine Heart also announced several corporate updates related to ongoing clinical studies for the C-Pulse System and the progress of internal product development.

CORPORATE UPDATE

As projected in the second quarter conference call, the Company achieved significant progress with C-Pulse's COUNTER HF™ pivotal study as fourteen patients were enrolled in the study, doubling the enrollment from the second quarter. To date, twelve of nineteen centers have enrolled patients. The Company remains enthusiastic about the pace of site enrollment and is pleased that all participating centers have identified patients. Furthermore, one of the study's principal investigators is working to assist centers that have identified patients but have been unsuccessful in consenting them, while others have high rates of patient consent.

Four additional centers in Europe have been activated, bringing the total number of clinical sites to thirteen. While management and country personnel changes temporarily delayed the recruitment process, the Company is optimistic regarding future progress. Five centers have identified patients, with one patient already scheduled for implant in the fourth quarter of 2014. The Company was also pleased to report the successful completion of the audit of its facility by the Company's European notified body (regulatory agency), with no major non-conformities.

Meaningful progress was achieved during the quarter with the development of C-Pulse II, a fully implantable device that has the same non-blood contacting, non-obligatory and MIS implantation characteristics as the current C-Pulse System, alleviating the need for the percutaneous drive line. The Company expects to provide a more detailed development schedule for the C-Pulse II by the end of 2014.

"The next generation C-Pulse utilizes cutting-edge electromagnetic technology to give heart failure patients all the benefits of C-Pulse, but in a fully implantable system. No other cardiac device has achieved this technological advancement in treating this patient population, in over 25 years. As we head into the final quarter of 2014, I'd like to extend my appreciation to the C-Pulse study and development teams for their dedication to advancing both the COUNTER HF™ and OPTIONS HF studies, and the continued advancement of C-Pulse II." concluded Mr. Rosa.

QUARTERLY CONFERENCE CALL

The Company will host a conference call and webcast at 9:00 a.m. Eastern time today to discuss its financial results and provide an update on its ongoing clinical studies.

To access the live webcast, please visit the Investors page of the Sunshine Heart website at http://ir.sunshineheart.com. Alternatively, you may access the live conference call by dialing (877) 303-9826 (U.S.) or (224) 357-2194 (international) and using conference ID 24120657. An audio archive of the webcast will be available following the call at http://ir.sunshineheart.com.

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