FOOTHILL RANCH, Calif., Nov. 3 /PRNewswire-FirstCall/ -- Cardiogenesis Corporation , the market leader in surgical products and accessories used in angina-relieving Transmyocardial Revascularization (TMR) and Percutaneous Myocardial Channeling (PMC) procedures, announced results today for its third quarter ended September 30, 2005.
The Company reported that revenues in the third quarter of 2005 were $4.4 million compared to $2.8 million in the same period in 2004, an increase of 55%. Revenues in the 2005 third quarter were fueled by a 14% increase in handpiece unit sales and a significant increase in laser revenue. The Company reported that 833 handpieces were shipped worldwide in the third quarter, the second highest quarterly handpiece sales performance in the last three years. For the first nine months of 2005, revenues increased by 20% to $12.3 million, from revenues of $10.3 million in the same period last year. This revenue increase through the first nine months of 2005 is fueled by 19% unit handpiece growth.
Chairman and CEO Michael J. Quinn commented on the third quarter results, "Our 20% growth in revenue through the first nine months of the year is built upon the foundation of increased utilization of TMR. We are encouraged by our progress in developing the TMR market, as reflected in our disposable unit growth. Review of our performance in the first nine months shows that our sales growth is resulting from our expanding the awareness and acceptance of TMR in the medical community as well as by increasing market share. Our Advanced TMR Platform, including the SolarGen 2100s console and Robotic and Thoracoscopic PEARL delivery systems are defining the future of TMR."
"Revenues of $4.4 million for the quarter represents the third highest quarterly revenue performance during the past 4 years," Mr. Quinn stated. "We are currently on a trajectory to achieve significant growth for the year in unit handpiece sales for the first time since 2000. Our efforts at developing the awareness and acceptance of TMR in the medical community are beginning to pay off. The combination of the long term data with our Ho:YAG system published in the Annals of Thoracic Surgery in 2004 combined with our Advanced TMR Platform is generating increased interest and adoption of TMR in the cardiothoracic community."
Sales, general and administrative expenses for the third quarter of 2005 were flat as compared to the prior year period. Sales, general and administrative expenses for the first nine months increased approximately 29% from the prior year period to $10.8 million. The increase was primarily due to the sales and marketing expansion which occurred at the beginning of 2005, as well as the marketing expenses directly related to the initial clinical introduction of the Company's new minimally invasive product line.
Research and development costs for the third quarter of 2005 decreased by 33% as compared to the prior year quarter and increased by 17% for the first nine months of 2005 from the prior year period. The increase resulted from costs incurred for the development and study costs for the new minimally invasive TMR handpieces and the Company's investment in important research initiatives.
Mr. Quinn described the development focus for the company related to the Advanced TMR Platform. "In response to the consistent request from leading clinicians around the world, we are developing advanced tools for the delivery of angiogenic therapeutics in and around the TMR channels," Quinn stated. "The published research from Duke and Columbia highlights the benefits of our proprietary Ho:YAG system in creating a stimulated zone of tissue around the TMR channels. The Ho:YAG thermoacoustic energy wave, as delivered through our proprietary fiberoptic delivery systems, penetrates the tissue surrounding the channel and initiates the body's own angiogenic response to provide neovascularization to the targeted ischemic area. The result, as published in research from Columbia and Duke, is a significantly greater amount of neovascularization around the TMR channels produced by the Cardiogenesis TMR system compared to other wavelengths and modalities."
"As the application of angiogenic therapeutics for the treatment of advanced heart disease advances to clinical practice, there is growing experience combining these materials with TMR. Our goal is to provide advanced tools to deliver angiogenic therapeutics into the Ho:YAG stimulated field of tissue surrounding the TMR channels, thereby multiplying the therapeutic effect to the patient," concluded Quinn.
In August, the Company initiated a restructuring effort to significantly reduce the expense base and cash requirements to support the TMR business. The effects of these changes significantly reduced third quarter operating expenses. Sales, general and administrative expenses for the third quarter decreased by 36% over the previous quarter and research and development expenses for the third quarter decreased by 49% over the previous quarter.
"In the third quarter, we achieved significant progress operationally," Quinn commented. "We increased our total revenue by 55% in the third quarter over the prior year quarter while restructuring the company in order to significantly reduce the expense base for our TMR business. We have made significant progress in reducing our expense base and have implemented a vigilant cost containment effort. The effect of these actions during the quarter produced operating income of almost half a million dollars. This is a big step in the right direction from the previous quarter and represents an improvement in operating income of $1.5 million."
Quinn added, "We are focused on strengthening the company financially. This includes an effort to prevent the ongoing oversupply of our Company's stock on the market as a result of the convertible note financing that we completed back in October 2004. If our operating results continue on the upward trend that we anticipate, we are committed to using our current cash funds, instead of issuing more stock, towards paying back the principal on the note."
The Company generated income from operations of $462,000 and net income of $807,000 for the third quarter of 2005 and a loss from operations of $2.3 million and a net loss of $2.9 million for the first nine months of 2005. The net loss includes non-operating, non-cash interest and other charges primarily resulting from the valuation of warrants and derivatives related to the convertible debt financing completed in October 2004.
Quinn stated, "We are very encouraged by our results in the third quarter. We demonstrated the ability to support revenue growth while reducing our expense base, thereby producing significant operating profit. We are committed to bringing new and innovative, angiogenic technology to the marketplace. With the exciting new minimally invasive cardiovascular tools added to our market basket, the Robotic and Thoracoscopic delivery systems, we are leading the way to the future of TMR. We are also making significant progress in educating the medical community on the significant and enduring patient benefits of TMR which has led to the increased adoption of the technology that we are seeing today."
During the third quarter of 2005, the Company shipped 9 lasers and worldwide disposable shipments were 833 units. This compares to the shipment of 5 lasers and worldwide disposable shipments of 731 units in the third quarter of 2004.
Conference Call
Cardiogenesis will host a conference call today to discuss the Company's results for its third quarter and year ended September 30, 2005. The call will take place at 12:00 p.m. EDT (Eastern) and will be broadcast live over the Internet. Those interested in listening to the live webcast of the conference call may do so by going to the Company's website at www.cardiogenesis.com.
Web participants are encouraged to go to the selected website at least 15 minutes prior to the start of the call to register and, if necessary, download and install any needed audio software. An online webcast replay of the call will be accessible at www.cardiogenesis.com for seven days starting shortly after the live webcast.
About Cardiogenesis Corporation
Cardiogenesis is a medical device Company specializing in the treatment of cardiovascular disease and is a leader in devices that stimulate cardiac angiogenesis. The Company's market leading Holmium: YAG laser system and disposable fiber-optic accessories are used to perform a FDA-cleared surgical procedure known as Transmyocardial Revascularization (TMR) to treat patients suffering from angina. Surgical products and accessories for the Cardiogenesis TMR procedure, which are marketed in the U.S. and around the world, have been shown to reduce angina and improve the quality of life in patients with coronary artery disease. Surgical products and accessories for the Company's minimally invasive Percutaneous Myocardial Channeling (PMC) procedure are currently being marketed in Europe and other international markets.
For more information on the Company and its products, please visit the Cardiogenesis company web site at www.cardiogenesis.com or the patient and physician website at www.heartofnewlife.com. heartofnewlife.com is a resource for patients and physicians which provides medical information on TMR.
With the exception of historical information, the statements set forth above include forward-looking statements. Any forward-looking statements in this news release related to the Company's sales, profitability, the adoption of its technology and products and FDA clearances are based on current expectations and beliefs and are subject to numerous risks and uncertainties, many of which are outside the Company's control, that could cause actual results to differ materially. Factors that could affect the accuracy of these forward-looking statements include, but are not limited to: any inability by the Company to sustain profitable operations or obtain additional financing on favorable terms if and when needed; any failure to obtain required regulatory approvals; failure of the medical community to expand its acceptance of TMR or PMC procedures; possible adverse governmental rulings or regulations, including any FDA regulations or rulings; the Company's ability to comply with international and domestic regulatory requirements; possible adverse Medicare or other third-party reimbursement policies or adverse changes in those policies; any inability by the Company to ship product on a timely basis; the Company's ability to manage its growth; adverse economic developments that could adversely affect the market for our products or our ability to raise needed financing; actions by our competitors; and the Company's ability to protect its intellectual property. Other factors that could cause Cardiogenesis' actual results to differ materially are discussed in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the year ended December 31, 2004, the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, and the Company's other recent SEC filings. The Company disclaims any obligation to update any forward-looking statements as a result of developments occurring after the date of this press release.
TABLES FOLLOW CARDIOGENESIS CORPORATION CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 Net revenues $4,392 $2,837 $12,268 $10,254 Cost of revenues 809 499 2,339 1,570 Gross profit 3,583 2,338 9,929 8,684 Operating expenses: Research and development 350 520 1,387 1,189 Sales, general and administrative 2,771 2,746 10,822 8,398 Total operating expenses 3,121 3,266 12,209 9,587 Income/(Loss) from operations 462 (928) (2,280) (903) Non-operating income/(expense), net 345 4 (582) (18) Net income (loss) $807 $(924) $(2,862) $(921) Net income (loss) per share -- basic and diluted $0.02 $(0.02) $(0.07) $(0.02) Shares used in per share computations Basic 43,989 41,388 42,907 41,054 Diluted 44,488 41,388 42,907 41,054 CARDIOGENESIS CORPORATION CONDENSED AND CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) September 30, December 31, 2005 2004 ASSETS Cash and cash equivalents $1,755 $4,740 Accounts receivable, net 3,115 3,578 Inventories, net 3,410 1,782 Property and equipment, net 534 601 Restricted cash 2,474 2,884 Other assets 1,696 2,098 Total assets $12,984 $15,683 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable, accrued liabilities, and other liabilities $4,383 $2,675 Deferred revenue 569 658 Secured convertible term note and related long term obligations 4,516 7,615 Shareholders' equity 3,516 4,735 Total liabilities and shareholders' equity $12,984 $15,683
Cardiogenesis CorporationCONTACT: Michael J. Quinn, Chairman and CEO, +1-714-649-5050, Christine G.Ocampo, VP, CFO, +1-714-649-5066, both of Cardiogenesis Corporation
