CAESAREA, Israel, Nov. 14, 2014 /PRNewswire/ -- LabStyle Innovations Corp. (OTCQB: DRIO), developer of the Dario Diabetes Management Solution, today reported its financial and operational results for the three month period ending September 30, 2014 and provided an update on recent corporate achievements and anticipated milestones for the remainder of 2014 and 2015.
Of particular note, LabStyle reported that:
- Distribution and sales of the Dario blood glucose monitoring and diabetes management system (including Dario smart meters, test strips and lancets) are scaling up in LabStyle’s initial “soft launch” markets including, in addition to the U.K. and New Zealand, the Netherlands and Australia. Dario has been well received with excellent feedback from users. This has resulted in over 25,000 free Dario app downloads in the initial launch territories, and a higher than industry average pick up rate, thus indicating the potential to convert downloads to users of Dario in an efficient and productive manner.
- LabStyle anticipates recording revenue next quarter and is implementing a strong strategy for growth based on new market penetration, including in Latin American and the Asia Pacific region.
- LabStyle is currently anticipating a potential FDA clearance and U.S. launch of Dario by mid-2015. Based on its interactions with the U.S. Food and Drug Administration on its previously announced 510(k) application for Dario, LabStyle will soon commence a new 300 subject English language User Performance Evaluation in the U.S., which LabStyle views as a promising development towards the FDA clearance.
- LabStyle believes it is demonstrating success in building a strong supportive community of people with diabetes using Dario for their diabetes management needs, primarily in the United Kingdom. Early Dario adopters have expressed great satisfaction with the product and have experienced enhanced user performance and adherence when using the Dario smart meter.
The initial launch of Dario has been undertaken on a limited basis as the company conserves resources and evaluates distributor and end-user feedback as it refines its longer term roll out plans. Even on this limited basis, LabStyle made initial shipments to distribution partners amounting to approximately $113,000 during the first nine months of the year, of which $66,000 were in the third quarter. In accordance with U.S. generally accepted accounting principles (GAAP), LabStyle did not formally recognize revenues from such activities. The company expects to recognize initial revenues, which is expected to be derived from recurring orders of test strip cartridges and lancets and, in a small number of select jurisdictions, sales of Dario smart meters, during the fourth quarter of 2014 upon receipt of payment from distributors.
Erez Raphael, LabStyle’s President and Chief Executive Officer, stated “We believe that proof of our commercial potential has been demonstrated as we are now selling Dario in targeted countries and expanding into new countries in a focused and planned manner. Following our most recent financing in September, we are scaling up production in order to meet demand from our soft launch. We will continue our commercialization efforts for the remainder of 2014 and into 2015 by launching Dario in new selected markets as well as accelerating activities seeking to create other potential revenue streams through strategic digital health partnerships”
“In the U.S., we are pleased to report that we have been diligently working with FDA on obtaining clearance for Dario” continued Mr. Raphael. “This interaction has led us to recently finalize plans for a new U.S. study aimed at evaluating the usability of the Dario and its accuracy in the hands of end-users, and we are commencing this study imminently. We view this as a promising development for two reasons. First, we believe this shows that our 510(k) application (which will include the results of this new study) is progressing towards what we have always anticipated would be a positive ultimate outcome. Second, we have a demonstrated track record of performing these types of studies with successful outcomes, both recently in Israel and also in conjunction with our 2013 CE Mark approval of Dario. As a result, we remain as hopeful as ever that we will achieve U.S. clearance for Dario. Due to the need for this new study, we are conservatively moving out our anticipated timing for potential clearance from early 2015 to mid-2015.”
During the third quarter of 2014, LabStyle has achieved the following on target milestones as the company continues to implement its global rollout and user acquisition plans for Dario:
- Received regulatory approval to sell the Dario Smart Meter in Australia and Israel.
- Shipped first orders for initial distribution in the Netherlands and generated early sales through an e-commerce website.
- Received a Notice of Allowance from the U.S. Patent and Trademark Office for core patent claims covering the Dario smart meter.
- Built a business and marketing strategy for initial sales in Canada together with the company’s Canadian distribution partner.
- Built a strong strategy for Dario brand awareness to diabetes professionals, general practitioners and caregivers in order to facilitate patient reimbursement and ease of access to the Dario smart meters, test strips and lancets.
- Worked to optimize production of Dario smart meters for both Android and iOS smartphone operating systems by enhancing the logistics and shipment process enabling delivery of the Dario smart meters, test strips and lancets in a timely and productive manner.
- Launched the Android supported Dario smart meter and app. This was a positive addition to the Dario community as according to IDC, 80% of the smartphone market is comprised of Android device users.
- Ramped up the product launch in New Zealand and the United Kingdom where positive feedback is being received from users of Dario. The product launch in Italy has been paused in order to reevaluate the Italian marketing strategy and leverage data accumulated regarding the Italian market.
- The Dario app has been downloaded by tens of thousands of users in the markets where available, and LabStyle is implementing its strategy to convert these app users into Dario smart meter users.
- Reimbursement for the Dario smart meter has been obtained in the initial Dario launch markets. Achieving approval for insurance reimbursement allows LabStyle to reach more users through deeper market penetration.
- NHS code received for sales in England, Wales, Scotland and Northern Ireland where Dario strips and lancets are available under reimbursement status in all major pharmacies.
Summary of Financial Results
As evidenced by a reduction in expenses as detailed below, LabStyle’s management is working to focus the company’s resources on activities aimed at driving stockholder value.
As of September 30, 2014, LabStyle had had cash, cash equivalents and short-term bank deposits of approximately $4,257,000. LabStyle forecasts such funds will be sufficient to continue its activities into March 2015, and additional financing will be required in order for LabStyle to fund planned operations
Ramp up of manufacturing costs for the third quarter of 2014 were approximately $585,000 compared with none for the third quarter of 2013, and for the first nine months of 2014 were approximately $1,611,000 compared with none for the first nine months of 2013. The increase was due to the commencement of initial commercial sales during March 2014 with first shipments occurring during April 2014.
Research and development expenses for the third quarter of 2014 were approximately $769,000 compared with approximately $1,078,000 for the third quarter of 2013, and for the first nine months of 2014 were approximately $3,209,000 compared with $3,169,000 for the first nine months of 2013. The decrease was mainly due the increased focus in production as well as sales and marketing efforts with relation to our commencement of initial commercial sales offset by increase in our regulation and product localization efforts related to relevant requirement in different jurisdictions.
Marketing and pre-production expenses were approximately $252,000 for the third quarter of 2014 compared with approximately $763,000 for the third quarter of 2013 and approximately $911,000 in the first nine months of 2014 compared with approximately $1,924,000 for the first nine months of 2013. This decrease was mainly due to pre-production costs which were recorded during 2013. During 2014, LabStyle began to ramp up manufacturing and commenced initial shipments to distributors and therefore did not record any additional pre-production costs.
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