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IsoTis SA (ISTSF.PK) Reports Q2 2006 Results


8/2/2006 11:54:50 AM

LAUSANNE, Switzerland and IRVINE, California, August 2 /PRNewswire-FirstCall/ -- IsoTis S.A. , the orthobiologics company, today reported its results for the second quarter and six months ended June 30, 2006. Revenues were US$10.8 million for the second quarter of 2006, representing a 43% increase over revenues of US$7.5 million for the second quarter of 2005. For the first six months of 2006, revenues were US$20.6 million, representing a 34% increase over revenues of US$15.3 million for the same period in 2005.

Revenue Analysis

IsoTis' chief distribution channels are its U.S. network of independent agents and its network of international distributors, while the remaining portion of its revenues is derived from private label agreements. In the second quarter of 2006, revenues from the U.S. network grew 22% to US$6.7 million compared to US$5.5 million in the second quarter of 2005, while in the first six months of 2006, revenues from the U.S. network grew 18% to US$13.2 million, compared to US$11.2 million in the first six months of 2005. In the second quarter of 2006, international revenues grew 39% to US$2.5 million compared to US$1.8 million in the second quarter of 2005, while in the first six months of 2006 international revenues grew 43% to US$5.0 million, compared to US$3.5 million in the first six months of 2005.

Results Comparison & Cash Position

The loss from operations for the second quarter of 2006 was US$2.2 million, compared to US$2.5 million for the second quarter of 2005. In the first six months of 2006, the loss from operations was US$4.7 million, compared to US$4.8 million in the first six months of 2005.

Due in large part to the impact of foreign currency movements on intercompany loans, the net result for the second quarter and first half of 2006 was a loss of US$6.2 million and US$10.0 million respectively.

At June 30, 2006, IsoTis had cash and cash equivalents and restricted cash of US$15.0 million.

Highlights

- Private label agreement with Alphatec Spine

- Appointed Jim Poser, Ph.D. as VP of Research and Development and Chief Technology Officer

- Elected professor Barbara Boyan to the Board of Directors

Pieter Wolters, President and CEO of IsoTis said, "I am very pleased with our revenue performance and improved operational results. This quarter was the seventh consecutive quarter of revenue growth. We believe this demonstrates the increasing acceptance of our proprietary Accell product family by orthopedic surgeons. As a result of our performance year to date and our expectations for the next two quarters, we decided to increase our guidance for 2006 to revenue growth between 25% and 30%. As we continue to improve sales traction in our distribution channels, we remain focused on strategic marketing and product development to support our further growth."

Business Outlook for 2006

- IsoTis anticipates total revenues for full year 2006 to grow by between 25% and 30%.

- IsoTis continues its product and business development efforts aimed at introducing new products.

Conference Call

IsoTis will conduct a conference call today at 1.30 p.m. CET/7.30 a.m. ET/4.30 a.m. PT. Dial: +41-91-610-5609 (Europe); +44-20-7107-0613 (UK); +1-866-865-5144 (toll free dial in US/Canada); no password required. Digital playback is available for 24 hours after the conference starting at 3.30 p.m. until August 3, 2006, 3.30 p.m. CET, dial: +41-91-612-4330 (Europe); +44-20-7108-6233 (UK); +1-866-416-2558 (US/Canada); playback ID: 507#. The call will also be webcast live on the IsoTis website at www.isotis.com. The webcast will remain available on IsoTis' website through September 30, 2006.

IsoTis has a product portfolio with several innovative and proprietary natural and synthetic bone graft substitutes on the market and others in development, an established North American independent distribution network and an expanding international presence. IsoTis' main commercial operations are based in Irvine, California, and its international sales headquarters are based in Lausanne, Switzerland.

Certain statements in this press release are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including those that refer to management's plans and expectations for future operations, prospects and financial condition. Words such as "strategy," "expects," "plans," "anticipates," "believes," "will," "continues," "estimates," "intends," "projects," "goals," "targets" and other words of similar meaning are intended to identify such forward-looking statements. One can also identify them by the fact that they do not relate strictly to historical or current facts. Such statements are based on the current expectations of the management of IsoTis only. Undue reliance should not be placed on these statements because, by their nature, they are subject to known and unknown risks and can be affected by factors that are beyond the control of IsoTis. Actual results could differ materially from current expectations due to a number of factors and uncertainties affecting IsoTis' business, including, but not limited to, a competitive sales and marketing environment, the timely commencement and success of IsoTis' clinical trials and research endeavors, delays in receiving U.S. Food and Drug Administration or other regulatory approvals (a.o. EMEA, CE), market acceptance of IsoTis' products, effectiveness of IsoTis' distribution channels, development of competing therapies and/or technologies, the terms of any future strategic alliances, the need for additional capital, the inability to obtain, or meet, conditions imposed for required governmental and regulatory approvals and consents. IsoTis expressly disclaims any intent or obligation to update these forward-looking statements except as required by law. For a more detailed description of the risk factors and uncertainties affecting IsoTis, refer to IsoTis' Annual Report on Form 20-F for the fiscal year ended December 31, 2005, filed with the SEC and to IsoTis' reports filed from time to time with the Swiss Stock Exchange (SWX), Euronext Amsterdam N.V., SEDAR at www.sedar.com and the Toronto Stock Exchange (TSX).

IsoTis S.A. Consolidated Statements of Operations-Unaudited US Dollars Three Months Ended Six Months Ended 30-Jun-06 30-Jun-05 30-Jun-06 30-Jun-05 Revenues Product sales US$10,788,776 US$7,495,931 US$20,567,141 US$15,303,149 Other revenue - 38,825 35,816 38,825 Total revenues 10,788,776 7,534,756 20,602,957 15,341,974 Operating expenses Costs of sales 3,980,292 2,988,246 7,674,120 5,922,259 Research and development 1,894,196 1,320,286 3,608,017 2,436,017 Marketing and selling 4,219,415 2,995,043 8,533,205 5,994,087 General and administrative 2,860,528 2,759,351 5,467,723 5,785,735 Total operating expenses 12,954,431 10,062,926 25,283,065 20,138,098 Loss from operations (2,165,655) (2,528,170) (4,680,108) (4,796,124) Interest income 137,402 124,975 278,237 254,548 Interest expense (25,703) (70,873) (56,484) (124,748) Foreign exchange (loss) gain (4,106,757) 5,184,543 (5,509,544) 8,323,484 Other (6,840) 229,641 (3,919) 231,803 Net income(loss) before taxes (6,167,553) 2,940,116 (9,971,818) 3,888,963 Provision for income taxes - - - - Net income(loss) US$(6,167,553) US$2,940,116 US$(9,971,818) US$3,888,963 Basic and diluted net income(loss) per share US$ (0.09) US$ 0.04 US$ (0.14) US$ 0.06 Weighted average common shares outstanding Basic 70,940,455 70,248,226 70,906,992 70,181,120 Diluted 70,940,455 71,849,650 70,906,992 71,782,544 IsoTis S.A. Consolidated Balance Sheets - Unaudited June 30, 2006 December 31, 2005 Assets Current assets: Cash and cash equivalents US$11,579,019 US$15,714,442 Restricted cash 1,638,831 2,184,063 Trade receivables, net 7,153,018 6,306,518 Inventories 11,164,580 10,020,906 Unbilled receivables 297,649 295,115 Value added tax receivable 158,605 95,505 Prepaid expenses and other current assets 864,013 761,355 Total current assets 32,855,715 35,377,904 Non-current assets: Restricted cash 1,750,000 2,250,000 Property, plant and equipment, net 1,891,402 1,359,280 Goodwill 16,383,069 16,383,069 Intangible assets, net 12,312,737 13,585,250 Total non-current assets 32,337,208 33,577,599 Total assets US$65,192,923 US$68,955,503 Liabilities and shareholders' equity Current liabilities: Trade payables US$3,505,013 US$2,910,114 Accrued liabilities 7,026,763 6,680,989 Deferred revenue 130,000 344,719 Current portion of interest-bearing loans and borrowings 1,008,493 1,015,471 Total current liabilities 11,670,269 10,951,293 Non-current liabilities: Interest-bearing loans and borrowings 1,547,242 2,043,781 Total non-current liabilities 1,547,242 2,043,781 Total shareholders' equity 51,975,412 55,960,429 Total liabilities and shareholders' equity US$65,192,923 US$68,955,503 IsoTis S.A. Consolidated Statements of Cash Flows-Unaudited US Dollars Six Months Ended June 30, 2006 June 30, 2005 Cash flows from operating activities Net (loss) income from continuing operations US$(9,971,818) US$3,888,963 Adjustments to reconcile net (loss) income to net cash used in operating activities: Depreciation and amortization 1,669,722 1,317,992 Bad debt expense 191,348 25,663 Gain on sale of assets (642) (228,128) Stock-based compensation expense 251,073 385,862 Foreign currency transaction loss (gain) 5,509,544 (8,323,484) Change in operating assets and liabilities: Inventories (1,019,815) (22,857) Trade receivables (862,124) (932,587) Other current assets (87,752) 1,007,608 Deferred revenue (217,830) 146,910 Trade and other payables 547,870 (1,997,339) Restructuring provision - (673,197) Net cash flows used in operating activities (3,990,424) (5,404,594) Cash flows from investing activities Purchase of property, plant and equipment (883,073) (398,477) Change in restricted cash 1,128,164 1,125,661 Proceeds from sale of property, plant and equipment and assets - 966,288 Net cash flows provided by (used in) investing activities 245,091 1,693,472 Cash flow from financing activities Proceeds from issuance of common shares 100,610 591,404 Repayment of interest-bearing loans and borrowings (507,895) (3,863,230) Net cash flows used in financing activities (407,285) (3,271,826) Gain (loss) on cash held in foreign currency 17,195 (372,277) Net decrease in cash and cash equivalents (4,135,423) (7,355,225) Cash and cash equivalents at the beginning of the period 15,714,442 25,539,602 Cash and cash equivalents at the end of the period US$11,579,019 US$18,184,377

IsoTis OrthoBiologics

CONTACT: For information contact: Hans Herklots, Director IR, Tel:+41(0)21-620-6011, E-mail: hans.herklots@isotis.com, Rob Morocco, CFO,+1-949-855-7155, robert.morocco@isotis.com



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