ATLANTA, Oct. 27, 2011 /PRNewswire/ -- CryoLife, Inc. (NYSE: CRY), a leading tissue processing and medical device Company focused on cardiac and vascular surgery, announced today its results for the third quarter and first nine months of 2011. Revenues for the third quarter increased 4 percent to a record $29.7 million compared to $28.4 million for the third quarter of 2010. Revenues for the first nine months increased 2 percent to a record $89.2 million compared to $87.4 million for the first nine months of 2010.
“We continue to execute on our strategy to leverage our core infrastructure with the addition of higher growth and higher margin medical products, such as the Cardiogenesis acquisition and the Starch Medical licensing agreement,” stated Steven G. Anderson, president and chief executive officer. “We made strong progress on the integration of both the TMR and PerClot product lines and continue to search for other strategic business development opportunities as an attractive use of the free cash flow from our ongoing business operations.”
Net income for the third quarter of 2011 was $2.0 million, or $0.07 per basic and fully diluted common share, compared to net loss of $3.0 million, or ($0.11) per basic and fully diluted common share, for the third quarter of 2010. Excluding pretax expenses of $1.1 million related to business development activities and to the Company’s acquisition of Cardiogenesis, and applying a normalized tax rate of 36 percent as opposed to the quarter’s actual tax rate of 12 percent, non-GAAP adjusted net income for the third quarter of 2011 was $2.2 million, or $0.08 per basic and fully diluted common share.
The Company’s effective income tax rate for the third quarter of 2011 was favorably affected by a one-time benefit for 2010 tax deductions taken on recently filed tax returns.
Net income for the first nine months of 2011 was $5.5 million, or $0.20 per basic and fully diluted common share, compared to net income of $1.8 million, or $0.07 per basic and $0.06 per fully diluted common share, for the first nine months of 2010. Excluding pretax expenses of $4.1 million related to the Company’s acquisition of Cardiogenesis and other business development activities, non-GAAP adjusted net income for the first nine months of 2011 was $8.1 million, or $0.30 per basic and $0.29 per fully diluted common share.
Surgical sealant and hemostat revenues, which consist primarily of sales of BioGlue®, PerClot, and HemoStase, were $12.8 million for the third quarter of 2011 compared to $13.2 million for the third quarter of 2010, a decrease of 3 percent. The decrease in surgical sealant and hemostat revenues was primarily due to the loss of HemoStase revenues in the third quarter of 2011, partially offset by a 10 percent increase in BioGlue revenues and the addition of PerClot revenues. The increase in BioGlue revenues was primarily attributable to shipments into Japan. The loss of HemoStase revenues was due to the Company’s discontinuation of sales of HemoStase at the end of the first quarter of 2011.
Surgical sealant and hemostat revenues were $40.6 million for the first nine months of 2011 compared to $41.3 million for the first nine months of 2010, a decrease of 2 percent. The decrease in surgical sealant and hemostat revenues in the first nine months of 2011 was primarily due to a decrease in HemoStase revenues, partially offset by the addition of PerClot revenues and a 5 percent increase in BioGlue revenues.
Revascularization technology revenues were $2.1 million for the third quarter and $3.3 million for the first nine months of 2011 as a result of the Company’s acquisition of Cardiogenesis in mid May 2011.
Preservation service revenues for the third quarter of 2011 decreased 3 percent to $14.7 million compared to $15.1 million for the third quarter of 2010. The decrease in preservation service revenues for the third quarter of 2011 was primarily due to a decrease in shipments of cardiac valves and vascular tissues, partially offset by an increase in shipments of cardiac patch tissues and an increase in average service fees.
Preservation service revenues for the first nine months of 2011 decreased 1 percent to $45.0 million compared to $45.7 million for the first nine months of 2010. The decrease in preservation service revenues for the first nine months of 2011 was primarily due to a decrease in shipments of cardiac valve tissues, partially offset by an increase in average service fees.
Total gross margins increased to 64 percent in the third quarter of 2011, up from 53 percent in the third quarter of 2010, driven by higher gross margins from the Company’s existing products, and the loss of lower margin HemoStase revenues, and no write-off of HemoStase inventory as occurred in the prior year period. Preservation services gross margins were 43 percent and 41 percent for the third quarters of 2011 and 2010, respectively. Product gross margins were 84 percent and 67 percent for the third quarters of 2011 and 2010, respectively. Total gross margins for the third quarter of 2010 included a pretax charge of $1.6 million to write-off HemoStase inventory that the Company did not believe it would be able to distribute.
Total gross margins were 63 percent and 58 percent for the first nine months of 2011 and 2010, respectively. Preservation services gross margins were 43 percent and 40 percent for the first nine months of 2011 and 2010, respectively. Product gross margins were 84 percent and 77 percent for the first nine months of 2011 and 2010, respectively. Total gross margins for the first nine months of 2010 included a pretax charge of $1.6 million to write-off HemoStase inventory that the Company did not believe it would be able to distribute.
General, administrative, and marketing expenses for the third quarter of 2011 were $14.7 million compared to $11.4 million for the third quarter of 2010. General, administrative, and marketing expenses for the third quarter of 2011 included approximately $1.1 million in costs related to the Company’s business development activities, including the acquisition of Cardiogenesis.
General, administrative, and marketing expenses for the first nine months of 2011 were $42.7 million compared to $36.9 million for the first nine months of 2010. General, administrative, and marketing expenses for the first nine months of 2011 included approximately $4.1 million in costs related to the Company’s acquisition of Cardiogenesis and other business development activities. General, administrative, and marketing expenses for the first nine months of 2010 included approximately $542,000 in costs related to business development activities.
Research and development expenses were $1.7 million and $1.6 million for the third quarters of 2011 and 2010, respectively. Research and development expenses were $5.1 million and $4.1 million for the first nine months of 2011 and 2010, respectively. Research and development spending in 2011 was primarily focused on PerClot, SynerGraft® tissues and products, BioFoam® Surgical Matrix, and BioGlue.
Acquired in-process research and development expense of $3.5 million in the third quarter of 2010 was related to an intangible asset for PerClot distribution and manufacturing rights in the U.S. and certain other countries in which PerClot does not have current regulatory approvals. Therefore the cost allocated to the asset was expensed upon acquisition.
Other expense was $207,000 for the third quarter of 2011 compared to $3.3 million for the third quarter of 2010. Other expense was $91,000 for the first nine months of 2011 compared to $2.5 million for the first nine months of 2010. Other expense of $3.3 million in the third quarter of 2010 consisted primarily of a $3.6 million charge related to impairment of the investment in Medafor common stock. Other expense of $2.5 million in the first nine months of 2010 consisted primarily of the $3.6 million charge related to the impairment of the investment in Medafor common stock, partially offset by a $1.3 million gain on valuation of the derivative related to the investment in Medafor common stock.
As of September 30, 2011, the Company had $26.4 million in cash, cash equivalents, and restricted securities, compared to $40.8 million at December 31, 2010. The decrease in cash, cash equivalents, and restricted securities is largely a result of the $21.7 million paid for the acquisition of Cardiogenesis in the second quarter of 2011 and $3.5 million paid for the purchase of Senior A Preferred stock of ValveXchange in early July 2011, partially offset by operating cash flows. Of this $26.4 million in cash, cash equivalents, and restricted securities, $1.4 million was received from the U.S. Department of Defense as advance funding for the development of BioFoam protein hydrogel technology, and $5.3 million was designated as restricted securities primarily due to a financial covenant requirement under the Company’s credit agreement. The Company’s net cash flows provided by operations were $13.7 million for the first nine months of 2011 and $13.8 million for the first nine months of 2010.
2011 Financial Guidance
The Company expects total revenues for the full year of 2011 to be slightly below the lower end of its range of between $122.0 million and $125.0 million, which include revenues of approximately $500,000 related to the use of funds received from the U.S. Department of Defense in connection with the development of BioFoam. The Company expects tissue processing revenues to be flat for the full year of 2011 compared to 2010, BioGlue and BioFoam revenues to increase in the mid-single digits on a percentage basis in 2011 compared to 2010, with revenues from powdered hemostats, including PerClot and HemoStase, to be between $4.0 million and $5.0 million. The Company expects revenues from revascularization technology to be between $5.0 million and $5.5 million in 2011. Research and development expenses are expected to be between $7.0 million and $8.0 million in 2011, down compared to the previous expected range of $10.0 million to $12.0 million as a result of a shift in timing of certain R&D expenses into 2012. The Company expects earnings per share of between $0.23 and $0.25 in 2011. Excluding expenses related to the acquisition of Cardiogenesis and other business development charges of approximately $0.09 per share incurred in the first nine months of 2011, the Company expects non-GAAP adjusted earnings per share of between $0.32 and $0.34 in 2011.
The Company expects the effective income tax rate for the fourth quarter of 2011 to be in the mid thirty percent range.
The Company’s financial guidance for the full year of fiscal 2011 is subject to the risks described below in the last paragraph of this press release, prior to the financial tables.
Webcast and Conference Call Information
The Company will hold a teleconference call and live webcast today at 10:00 a.m. Eastern Time to discuss the results followed by a question and answer session hosted by Mr. Anderson.
To listen to the live teleconference, please dial 201-689-8433 a few minutes prior to 10:00 a.m. A replay of the teleconference will be available from October 27 through November 3 and can be accessed by calling 877-660-6853 (toll free) or 201-612-7415. The account number for the replay is 244 and the conference number is 380521.
The live webcast and replay can be accessed by going to the Investor Relations section of the CryoLife Web site at www.cryolife.com and selecting the heading Webcasts & Presentations.
About CryoLife
Founded in 1984, CryoLife, Inc. is a leader in the processing and distribution of implantable living human tissues for use in cardiac and vascular surgeries throughout the U.S. and Canada. CryoLife’s CryoValve® SG pulmonary heart valve, processed using CryoLife’s proprietary SynerGraft® technology, has FDA 510(k) clearance for the replacement of diseased, damaged, malformed, or malfunctioning native or prosthetic pulmonary valves. CryoLife’s CryoPatch® SG pulmonary cardiac patch has FDA 510(k) clearance for the repair or reconstruction of the right ventricular outflow tract (RVOT), which is a surgery commonly performed in children with congenital heart defects, such as Tetralogy of Fallot, Truncus Arteriosus, and Pulmonary Atresia. CryoPatch SG is distributed in three anatomic configurations: pulmonary hemi-artery, pulmonary trunk, and pulmonary branch. CryoLife’s BioGlue® Surgical Adhesive is FDA approved as an adjunct to sutures and staples for use in adult patients in open surgical repair of large vessels. BioGlue is also CE marked in the European Community and approved in Canada and Australia for use in soft tissue repair and was recently approved in Japan for use in the repair of aortic dissections. CryoLife’s BioFoam Surgical Matrix is CE marked in the European Community for use as an adjunct in the sealing of abdominal parenchymal tissues (liver and spleen) when cessation of bleeding by ligature or other conventional methods is ineffective or impractical. CryoLife distributes PerClot®, an absorbable powder hemostat, in the European Community. CryoLife, through its subsidiary Cardiogenesis Corporation, specializes in the treatment of cardiovascular disease and the sale of devices that treat severe angina. Its market leading FDA-approved Holmium: YAG laser console and single use, fiber-optic handpieces are used to perform a surgical procedure known as Transmyocardial Revascularization (TMR).
