TORONTO, Aug. 7 /PRNewswire-FirstCall/ - Novadaq(R) Technologies Inc. , a developer of real-time medical imaging systems and image guided therapies for the operating room, today announced its financial results for the second quarter ended June 30, 2007. In this press release, unless otherwise indicated, all dollar amounts are expressed in US dollars.
“Strong efforts of our direct sales team and our ability to provide total image guided revascularization during open heart bypass surgery enabled us to meet our revenue goal for this quarter” said Dr Arun Menawat, President and Chief Executive Officer, Novadaq Technologies Inc. “Acquisition of the intellectual property from Xillix represented another important milestone for Novadaq. We can now build revenues with our existing FDA approved products and build a healthy pipeline of products for longer term growth within our sales channel.”
Q2 2007 Operating and Financial Highlights - Recorded 2nd Quarter Revenue of $3.75 Million - Completed $30 Million (CDN) private placement of common shares - Completed the acquisition of all intellectual property and certain capital assets and inventory from Xillix(TM) Technologies Corp. and hired key R&D employees - ICD-9-CM Procedure Code for Intra-operative Fluorescence Vascular Angiography published in the Federal Register on April 17, 2007. The code - 88.59 - effective October 1, 2007, will be used by hospitals to bill for costs associated with SPY Imaging procedures performed by cardiac surgeons in the operating room - Announced the results of the first clinical experience utilizing Novadaq’s fluorescent imaging technology for plastic and reconstructive surgery. The study was presented during the World Congress for Reconstructive Micro Surgery held in Athens, Greece, June 24 - 26, 2007 Subsequent Events
In mid-July the FDA announced an extension of the expiry date of ICG from 24 to 36 months and Novadaq resumed normal operations. Novadaq believes it has secured a sufficient inventory of ICG for its continuous operations through to the end of November 2007. Novadaq understands that Akorn continues to work diligently to obtain approval of its manufacturing site change request and resume production of ICG. In addition, Pulsion Medical Systems (Pulsion), an alternative manufacturer of ICG which is currently approved in Europe, expects FDA approval for its ICG during the second half of 2007, perhaps as early as the third fiscal quarter of 2007, which will ultimately provide two suppliers of ICG in the US marketplace.
Financial Results Quarter Ended June 30, 2007 “Q2-2007" Compared to Quarter Ended June 30, 2006 “Q2-2006"
Total revenue increased to approximately $3,750,000 in Q2-2007 from $509,000 in Q2-2006. Recurring revenue, which includes consumable kit and rental revenue, increased to approximately $1,205,000 in Q2-2007 from approximately $500,000 in Q2-2006. The main reason for the growth in revenue is the acquisition of the TMR business in March 2007. Our ability to grow recurring revenue during the quarter was negatively impacted by an interruption of the supply of ICG which meant we were unable to sell SPY Paqs in May and June. In early July the FDA announced that the expiry date of existing lots of ICG had been increased from 24 months to 36 months such that normal sales of SPY Paqs has resumed. The interruption of ICG supply is not expected to have a material negative impact on Q3-2007 recurring revenue.
Capital sale revenue increased to $2,120,000 in Q2-2007 from $9,000 Q2-2006. Revenue from sales of CO2 Lasers increased significantly from the level achieved in Q1-2007. Part of the increase in capital sale revenue was attributable to the sale of SPY Systems in the US. While we remain committed to our recurring revenue model, we are offering somewhat lower SPY Paq prices in conjunction with the purchase of SPY Systems where hospital capital budgets are available.
Other revenue includes service revenue and parts revenue. The majority of service revenue relates to extended warranty contracts on CO(2) Lasers. Revenue on service contracts is recognized over the term of the contracts. Novadaq sub-contracts the provision of maintenance services to the manufacturer of the CO(2) Laser.
Gross profit increased to approximately $1,787,000 in Q2-2007 from approximately $297,000 in Q2-2006 and $679,000 in Q1 2007. The increase relates to the increases in revenue discussed above. Gross profit percentages were impacted negatively during Q2 2007 by depreciation expenses recorded for SPY Systems that were not productive during the interruption of ICG supply.
Sales and marketing expenses increased to approximately $2,889,272 in Q2-2007 representing a 140% and 30% increase from Q2-2006 and Q1-2007 respectively. The increase includes higher commissions related to sales growth, and to overlap of sales coverage during the period resulting from the addition of the sales team hired in conjunction with the TMR acquisition. Prior to the acquisition Novadaq had a sales team which included 10 sales executives trained to sell the SPY System. After adding 4 sales executives in connection with the acquisition, Novadaq rationalized the sales team to end the quarter with 10 sales executives fully trained to sell all of Novadaq’s products in the US. Novadaq incurred severance costs of approximately $186,000 related to the rationalization.
Research and development expenses in Q2-2007 were approximately equal to levels incurred in Q2-2006 and Q1-2007. The focus of R&D expenditures is on generating clinical data on the use of SPY in solid organ transplant, and other general surgical procedures, and the use of LUNA both in Canada and the US in urological procedures, continued generation of post market registry data on the use of OPTTX, and the development of endoscopy systems which will allow the application of the Company’s imaging platform to minimally invasive surgery.
General and administration expenses increased to approximately $1,067,000 in Q2-2007 from $675,000 in Q2-2006 and $878,000 in Q1-2007. The increase from Q1-2007 relates primarily to increased professional fees incurred in Q2-2007, increased insurance expense to cover the TMR business, and increased employee costs.
Depreciation expense increased to approximately $60,000 in Q2-2007 from approximately $40,000 in Q2-2006 and $52,000 in Q1-2007 primarily as a result of the depreciation of assets purchased from Xillix in the quarter. Amortization increased to approximately $261,000 in Q2-2007 from $110,000 in Q2-2006 and $121,000 in Q1-2007 due to amortization of intangible assets recorded in connection with the acquisition of TMR distribution rights, and the intellectual property of Xillix.
The Company had interest expense in Q2-2007 of approximately $77,000 relating to a $3,000,000 note payable issued on March 20, 2007 in connection with the acquisition of TMR distribution rights.
The Company had interest income of approximately $214,000 in Q2-2007 on its cash and short-term investments which is similar to income generated in Q2-2006 and which represents a small increase from Q1-2007 when interest income was $194,000. The increase from Q1-2007 was the result of a higher average investment balance due to the completion of a CDN$30,000,000 private placement in late May 2007.
Net loss increased by approximately $832,000 to approximately $3,444,000 in Q2-2007 from approximately $2,612,000 in Q2-2006 primarily as a result of an increase in sales and marketing costs of approximately $1,691,000, an increase in general and administrative expenses of approximately $392,000 which were partly offset by an increase in gross profit of $1,489,000. Net loss decreased by approximately $257,000 from $3,701,000 in Q1-2007 primarily as a result of an increase gross profit of $1,107,000 which was partly offset by an increase in sales and marketing costs of approximately $672,000, and an increase in general and administrative expenses of approximately $189,000.
As at June 30, 2007 the Company had cash, cash equivalents and short-term investments of approximately $30,358,000, an increase of approximately $19,925,000 from March 31, 2007. Approximately $25,831,758 of the increase relates to the completion of a private placement for gross proceeds of CDN$30,000,000 which was partly offset by cash used in operating activities of $3,059,000, investments in intangible assets of $3,934,000, investments in property plant and equipment of $647,000, and investments in deferred research and development costs of $65,000.
As at July 30, 2007 there were a total of 23,980,354 common shares (25,830,645 on a fully diluted basis) and no preferred shares outstanding.
Conference call
Novadaq will host a conference call and live webcast this afternoon at 4:30 p.m. E.T. to discuss its second quarter 2007 results. To access the conference call by telephone, dial 416-644-3425 or 1-800-590-1508. Please connect approximately ten minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until August 14, 2007 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21241897 followed by the number sign.
About Novadaq Technologies
Novadaq Technologies Inc. develops and commercializes medical imaging systems and real-time image guided therapies for use in the operating room. Novadaq’s proprietary imaging platform can be used to visualize blood vessels, nerves and the lymphatic system during surgical procedures. Novadaq’s SPY(R) Imaging System, commercially available worldwide, enables cardiac surgeons to visually assess coronary vasculature and bypass graft functionality during the course of open-heart surgery. Novadaq’s OPTTX(R) System which received CE Mark approval in November 2006, is aimed at the diagnosis, evaluation and treatment of wet Age-related Macular Degeneration (AMD) by using the same core imaging technology that is used in the SPY Imaging System. The HELIOS(TM) Imaging System, which received FDA clearance in January 2007, is the first fluorescent imaging system available for use during plastic reconstructive surgery allowing surgeons to evaluate pre- and intra-operative blood flow, as well as post-surgery perfusion. Novadaq’s LUNA(TM) Imaging System is designed to enable surgeons to visualize nerve bundles during the course of urological and neurological procedures. LUNA has been granted a license for use by Health Canada. Novadaq is also the exclusive United States distributor of PLC Medical’s CO(2) HEART LASER(TM) System for TMR (Trans-Myocardial Revascularization). Novadaq recently acquired a comprehensive portfolio of minimally invasive native tissue fluorescence imaging technology with the vision to expand the applications for this technology in Novadaq’s surgical markets. For more information, please visit the company’s website at www.novadaq.com.
Forward Looking Information
This press release contains certain information that may constitute forward-looking information within the meaning of securities laws. In some cases, forward-looking information can be identified by the use of terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or other similar expressions concerning matters that are not historical facts. Forward-looking information may relate to management’s future outlook and anticipated events or results, and may include statements or information regarding the future financial position, business strategy and strategic goals, research and development activities, projected costs and capital expenditures, financial results, research and clinical testing outcomes, taxes and plans and objectives of or involving Novadaq. Without limitation, information regarding future sales and marketing activities, SPY System placement targets and utilization rates, the implementation and utilization of the recently published reimbursement code for the SPY System, future revenues arising from the sales of the Company’s products or the distribution arrangements with PLC Medical Systems Inc., and research and development activities, FDA approval of sources of indocyanine green (“ICG”), the fluorescent agent used with some of the Company’s products, and or the manufacturing of an alternate form of the florescent agent by the Company, the Company’s plans to seek additional regulatory clearances for additional indications, the expected benefits of the combination of TMR with the SPY System, as well as the Company’s plans for each of the SPY System, HELIOS System, the OPTTX System ONCO-LIFE(TM) (now branded PINPOINT), and LUNA, and the current development by the Company of a family of prototype endoscopes is forward-looking information.
Forward-looking information is based on certain factors and assumptions regarding, among other things, market acceptance and the rate of market penetration of Novadaq’s products, the adoption by customers of a rental mode of arrangement for the SPY System, the effect of a recently announced reimbursement code for the SPY System, the clinical results of the use of the SPY System, market acceptance and the rate of market penetration of the HELIOS System, the clinical results of the use of the HELIOS System, market acceptance and the rate of market penetration of PINPOINT, the clinical results of the use of PINPOINT in alternative indications, the results from clinical tests of the OPTTX System and LUNA, and potential opportunities in the AMD treatment market and in image guided conventional and minimally invasive urological applications including nerve-sparing radical prostatectomy. While the Company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
Forward looking-information is subject to certain factors, including risks and uncertainties, that could cause actual results to differ materially from what we currently expect. These factors include risks relating to the transition from research and development activities to commercial activities, market acceptance and adoption of the Company’s products, the risk that a recently published reimbursement code will not affect acceptance or usage of the SPY System, risks related to third party contractual performance, dependence on key suppliers for components of the SPY System and the OPTTX System, regulatory and clinical risks, risks relating to the protection of intellectual property, risks inherent in the conduct of research and development activities, including the risk of unfavorable or inconclusive clinical trial outcomes, potential product liability, competition and the risks posed by potential technological advances, risks related to the completion, and risks relating to fluctuations in the exchange rate between the US dollar and the Canadian dollar.
You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While Novadaq may elect to, Novadaq is under no obligation and does not undertake to update this information at any particular time. Unless otherwise indicated, this press release was prepared by management from information available to July 30, 2007. NOVADAQ TECHNOLOGIES INC. Incorporated under the laws of Canada BALANCE SHEETS (expressed in U.S.$) Unaudited As at As at June 30, December 31, 2007 2006 $ $ ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 607,869 2,311,973 Short-term investments 29,749,989 14,517,289 Accounts receivable 4,603,419 440,046 Prepaid expenses and other receivables 1,610,787 375,949 Inventory 1,177,001 185,792 ------------------------------------------------------------------------- Total current assets 37,749,065 17,831,048 ------------------------------------------------------------------------- Property, plant and equipment, net 2,869,614 1,933,896 Deferred charges 254,968 9,713 Deferred research and development costs 334,744 231,356 Intangible Assets, net 10,763,350 2,607,135 ------------------------------------------------------------------------- 51,971,741 22,613,148 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities 6,067,958 1,753,959 Note payable 3,000,000 Current portion of deferred revenue 891,649 61,786 ------------------------------------------------------------------------- Total current liabilities 9,959,607 1,815,745 ------------------------------------------------------------------------- Deferred revenue 513,012 - ------------------------------------------------------------------------- Total liabilities 10,472,619 1,815,745 ------------------------------------------------------------------------- Commitments and contingencies Shareholders’ equity Share capital 79,352,447 51,721,632 Contributed surplus 3,967,610 3,751,492 Deficit (41,820,935) (34,675,721) ------------------------------------------------------------------------- Total shareholders’ equity 41,499,122 20,797,403 ------------------------------------------------------------------------- 51,971,741 22,613,148 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NOVADAQ TECHNOLOGIES INC. STATEMENTS OF LOSS AND COMPREHENSIVE LOSS AND DEFICIT (expressed in U.S.$,) Unaudited Three months ended Six months ended June 30, June 30, 2007 2006 2007 2006 $ $ $ $ ------------------------------------------------------------------------- Revenue 3,750,925 509,260 5,178,349 1,027,486 Cost of sales 1,964,246 212,035 2,712,308 497,907 ------------------------------------------------------------------------- Gross profit 1,786,679 297,225 2,466,041 529,579 ------------------------------------------------------------------------- Operating expenses Sales and marketing 2,889,272 1,198,051 5,106,156 1,954,241 Research and development 1,305,523 1,241,658 2,600,398 2,625,162 General and administration 1,067,259 674,604 1,945,726 1,242,108 Depreciation 59,844 40,644 111,799 77,610 Amortization 261,296 109,660 382,817 219,257 Loss (gain) on foreign exchange (216,505) (76,080) (215,087) (76,522) ------------------------------------------------------------------------- 5,366,689 3,188,537 9,931,810 6,041,857 ------------------------------------------------------------------------- Loss before the following (3,580,010) (2,891,312) (7,465,770) (5,512,278) Interest expense (77,729) (87,125) Other income - 60,896 Interest income 213,658 279,305 407,681 464,339 ------------------------------------------------------------------------- Net loss for the period (3,444,081) (2,612,007) (7,145,214) (4,987,043) Deficit, beginning of period (38,376,854) (26,014,838) (34,675,721) (23,639,801) ------------------------------------------------------------------------- Deficit, end of period (41,820,935) (28,626,845) (41,820,935) (28,626,845) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per share (0.16) (0.13) (0.35) (0.26) ------------------------------------------------------------------------- ------------------------------------------------------------------------- NOVADAQ TECHNOLOGIES INC. STATEMENTS OF CASH FLOWS (expressed in U.S.$) Unaudited Three months ended Six months ended June 30, June 30, 2007 2006 2007 2006 $ $ $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss for the period (3,444,081) (2,612,007) (7,145,214) (4,987,043) Add (deduct) items not involving cash Depreciation and amortization 588,692 248,302 969,154 456,623 Stock based compensation 122,906 76,995 216,118 144,832 ------------------------------------------------------------------------- (2,732,483) (2,286,710) (5,959,943) (4,385,588) Net change in non-cash working capital balances related to operations (326,339) 264,678 (972,740) 307,416 ------------------------------------------------------------------------- Cash (used) in operating activities (3,058,822) (2,022,032) (6,932,682) (4,078,172) ------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance of common shares 27,630,815 30,565 27,630,815 5,462,307 Issuance of note payable 3,000,000 ------------------------------------------------------------------------- Cash provided by financing activities 27,630,815 30,565 30,630,815 5,462,307 ------------------------------------------------------------------------- INVESTING ACTIVITIES Deferred research and development costs (65,496) (103,390) Purchase of property, plant and equipment (646,732) (678,577) (1,540,829) (1,517,085) Purchase of intangible assets (3,934,459) - (8,525,321) (15,000) Investments in short-term inv., net (19,923,991) 1,819,352 (15,232,700) (531,230) ------------------------------------------------------------------------- Cash provided by (used in) investing (24,570,678) 1,140,775 (25,402,237) (2,063,315) ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents during the period 1,314 (850,692) (1,704,104) (679,181) Cash and cash equiv. beginning of period 606,555 922,237 2,311,973 750,726 ------------------------------------------------------------------------- Cash and cash equivalents, end of period 607,869 71,545 607,869 71,545 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Novadaq Technologies Inc.
CONTACT: visit our website at www.novadaq.com, or contact: Arun Menawat,PhD, MBA, President & CEO, Novadaq Technologies Inc., (905) 629-3822 x 202,amenawat@novadaq.com; Marni Hamilton, Vice President of CorporateDevelopment, Novadaq Technologies Inc., 905-629-3822 x 223,mhamilton@novadaq.com
