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Bacterin International, Inc. Announces Second Quarter and Six Months 2012 Financial Results


8/10/2012 10:52:58 AM

BELGRADE, Mont., Aug. 9, 2012 /PRNewswire/ -- Bacterin International Holdings, Inc. (NYSE MKT: BONE), a leader in the development of revolutionary bone graft material and antimicrobial coatings for medical applications, today announced its financial results for the second quarter ended June 30, 2012:

Highlights:

  • Revenue increased 9% to $8.2 million in the second quarter of 2012, compared to the $7.5 million for the same period a year ago. Excluding a stocking order sale of approximately $1.2 million included in the 2Q 2011 figure, revenues increased from $6.3 million in the 2Q of 2011 to $8.2 million in the 2Q of 2012, an increase of 30%.
  • The Company reported positive EBITDA of approximately $8,000 and Gross Margin was 72% within the Company's previous guidance of 70 to 75%;
  • Inventory increased 42% to $13.3 million, compared to $9.4 million at the end of 2011, as a result of an increase in the receipt of donor inventory and increased production associated with the Company adding a second production shift during the first quarter of 2012.;
  • The Company exited its backorder status on a large production push, and expects increased production to continue throughout the second half of 2012
  • 6 additional product codes were added to address Foot and Ankle, Sports Medicine, and Breast Reconstruction markets.
  • 18 new sales representatives were added and one additional Regional Vice President of Sales in the first half of 2012.
  • The Company has filed 5 new patent applications in the first half of 2012, and continues to pursue 5 patent applications protecting its core products including the patent "Elastomeric Article Having a Broad Spectrum Antimicrobial Agent and Method of Making" which is a composition of matter patent related to our licensing agreement with RyMed Medical
  • A peer review article in Orthopedic Research and Reviews determined OsteoSponge® exhibits ideal properties for bone regeneration, similar to those of autograft (graft of patient's own bone) with a distinct advantage over autograft, in that there is no risk of complications at the harvest site or donor pain postoperatively.
  • Recent studies conducted at the Hospital for Special Surgery have shown the OsteoSelect DBM putty proved equivalent to autologous bone graft in the posterolateral intertransverse rabbit model. The data was submitted to the Eastern Orthopedic Association and received the "Best Paper" award.
  • The Company has begun a 75 patient registry for OsteoSponge SC, the Company has received IRB approval in 5 of 6 sites and the first patient was enrolled in July.
  • The paper, utilizing the OsteoSponge SC product, "Reconstruction of Complex Osteochondral Lesions of the Talus with Cylindrical Sponge Allograft and Particulate Juvenile Cartilage Graft: Provisional Results with a Short Term Follow Up" has been accepted by Foot & Ankle Specialist.
  • The Company secured an accounts receivable credit facility with Midcap Financial LLC and Silicon Valley Bank for up to $5 million through January 1, 2015 based upon a predetermined formula for borrowings of up to 80% of Bacterin's eligible accounts receivable, as defined in the credit and security agreement.
  • A third national GPO contract was signed: three-year agreement with Novation, a leading health care supply chain expertise and contracting company, to provide OsteoSponge®, OsteoSelect® DBM Putty, OsteoWrap®, OsteoLock®, BacFast®, hMatrix®, Sports Medicine Allografts, and traditional allografts to the GPO's nationwide network of hospitals and medical practices.
  • On July 10, 2012 the Company announced its fourth national GPO contract, a three-year agreement with Premier Healthcare Alliance, one of the nation's largest GPOs, serving over 2,600 hospitals and more than 84,000 other healthcare sites that represent over $43 billion in annual purchasing power.
  • Hospital accounts in the 2Q of 2012 increased to 768 facilities, compared to 756 facilities in 1Q 2012.

Management Commentary

"We have already achieved 45% of the low end of our annual revenue guidance in the first half of this year," said Guy Cook, CEO of Bacterin. "With our backorder behind us, inventory levels up and planned clean room expansion for 3Q, we expect continuing increased revenues in the second half of 2012 enabling us to achieve our stated 2012 annual revenue guidance. Gross margin of 72% was within our previous guidance and operating expenses decreased from the 1Q of 2012 enabling us to report positive EBITDA for the quarter, and a 54% reduction in EBTIDA loss for the first half of 2012 compared to the prior periods.

"We expect uptake in the wound care market for hMatrix to accelerate next year with the expected issuance of a Q code by January 1, 2013. In the interim, we are gaining traction with our shifted manufacturing and marketing focus, beginning in the second quarter, for hMatrix to address additional markets in sports medicine and reconstructive surgery.

"OsteoSelect DBM putty is gaining sales momentum, leveraging recent animal data equivalency to autologous bone graft, the current gold standard for spinal fusion.

"Data for our coatings remains on track for the second half of this year, as well as independent data on OsteoSponge SC."

2Q 2012 Financial Results

Revenue for the quarter was $8.2 million compared to $7.8 million in the previous quarter and an increase of 9.3% compared to $7.5 million in the second quarter of 2011. The year over year increase was largely the result of increased sales generated from the Company's direct sales force and independent distributors compared to the second quarter of 2011.

Costs of tissue sales consist primarily of tissue and medical device manufacturing costs. Costs of sales increased by 33.7% to $2.3 million compared to $1.7 million for the three months ended June 30, 2011. The increase was largely the result of increased costs associated with our higher sales. As a percentage of tissue sales, cost of tissue sales was 28% of revenues for the second quarter of 2012 compared to 23% in the comparable prior year period.

Gross profit margin for the quarter was 72%, as compared to 76% in the previous quarter and 77% in the year-ago quarter.

Operating expenses increased 3%, or $179,869, to $6.2 million for the three months ended June 30, 2012 compared to the three months ended June 30, 2011.

General and administrative expenses increased 54%, or $814,686, to$2.3 million, for the three months ended June 30, 2012 compared to the same period of 2011. The increase is primarily due to higher administrative costs supporting the higher revenue in addition to added rental and maintenance expense for increased operational space.

As a percentage of revenue, selling and marketing expenses decreased to 47% in the second quarter of 2012 from 58% in the second quarter of 2011. The decreases were primarily the result of more variable compensation paid to our direct sales force compared to salaries earned in the comparable period of 2011 and a lower corporate sales commission structure.

EBITDA for the quarter totaled $8,000, compared an EBITDA loss of $(541,000) for the previous quarter, and EBITDA of $35,000 for the second quarter of 2011.

YTD 2012 Financial Results

Revenue for the six months ended June 30 2012 increased 18% to $16.0 million compared to $13.5 million in the first half of 2011. The increase of $2.5 million was largely the result of increased sales generated from our direct sales force and independent distributors compared to the first half of 2011.

Costs of tissue sales consist primarily of tissue and medical device manufacturing costs. Costs of sales increased by 53% or $1.5 million to $4.2 million for the first half of 2012. The increase was largely the result of increased costs associated with our higher sales. As a percentage of tissue sales, cost of tissue sales was 26% of revenues for the second quarter of 2012 compared to 20% in the comparable prior year period.

Gross profit margin was 74%, as compared to 80% in the previous period.

Operating expenses increased 3%, or $414,507, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.

General and administrative expenses increased 26%, or $1.0 million, to $4.9 million, for the six months ended June 30, 2012 compared to the same period of 2011. The increase is primarily due to higher administrative costs supporting the higher revenue in addition to added rental and maintenance expense for increased operational space.

As a percentage of revenue, selling and marketing expenses decreased to 50% in the second half of 2012 from 64% in the first six months of 2011. The decreases were primarily the result of more variable compensation paid to our direct sales force compared to salaries earned in the comparable period of 2011 and a lower corporate sales commission structure.

EBITDA loss for the first half of 2012 totaled $(527,497) compared an EBITDA loss of $(1.1) million for the comparable period of 2011.

Cash and cash equivalents and net accounts receivable was $7.8 million at June 30, 2012, compared to a total of $9.0 million at March 31, 2012.

"We believe that product constraints were a short term issue we have resolved and that the future and long term opportunity for Bacterin products, in multi-billion dollar addressable markets, remain very strong."Accordingly, we are reiterating our 2012 revenue guidance of $35 to $40 million.

Conference Call Details:

Conference Call Details:

Date: Thursday, August 9, 2012
Time: 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time)
Dial-In Number: 1-877-941-1429
International: 1-480-629-9857
Conference ID#: 4557186

The conference call will be broadcast simultaneously and available for replay here and at the investor section of the company's Web site at http://bacterin.com/index.htm.

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Hayden IR at 1-646-755-7412.

A replay of the call will be available after 7:30 p.m. Eastern Time on the same day and until September 9, 2012.


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