TORONTO, May 8 /PRNewswire-FirstCall/ - Novadaq(R) Technologies Inc. , a developer of medical imaging systems for the operating room, today reported its results for the first quarter ended March 31, 2006.
“Novadaq’s technology is continuing to gain recognition as the logical technology platform for imaging in the operating room,” said Arun Menawat, President and CEO of Novadaq Technologies Inc. “The SPY(R) System is the first commercial implementation of the technology and we are pleased with the progress made so far in terms of growing sales in the United States. During the first quarter we also made significant progress in developing a tangible product pipeline which may allow us to significantly expand our market opportunity by applying the technology to other markets including Ophthalmology and Urology.”
Selected First Quarter, 2006 Financial and Operating Highlights - SPY (Cardiac): 30 SPY systems placed in the United States as of March 31, 2006, up from 20 systems at the end of December 2005. Procedure based revenues in the first quarter of 2006 more than doubled from the previous quarter as adoption of the SPY system in cardiac surgery in the United States continues to increase. 36 SPY systems placed in the United States as at May 1, 2006. - OPTTX(R) (Ophthalmology): On track to file for CE Mark approval in the second quarter and to begin a limited launch of the product in Europe in the second half of 2006. Hired new general manager from a leading ophthalmology company to commercialize the OPTTX system. Renegotiated licenses with Johns Hopkins University to eliminate future license payments, reduce minimum royalty obligations, and clarify running royalty obligations. - LUNA(TM) (Urology): Licensed Intellectual Property from the University of Rochester that enables visualization of nerves and lymphatics during urological procedures including prostate surgery. Financial Results
Revenue increased to approximately $518,000 in Q1-2006 from approximately $156,000 in Q1-2005. The increase reflects an increase in both procedure based revenue and capital sales revenue. Procedure based revenue increased due to the launch of SPY in the US in the first half of 2005. The fourth quarter of 2004 (“Q4-2005") was the first full quarter of sales activities by Sorin, and procedure based revenue more than doubled in Q1-2006 from Q4-2005.
Capital sales revenue also increased to approximately $189,000 in Q1-2006 from approximately $135,000 in Q1-2005, despite a decision made to move to a blended procedure/capital sale model in Japan. Whereas SPY imaging systems are fully financed by the Company in the US, in Japan, the blended model allowed for the recovery of the manufacturing cost of the imaging systems plus a small margin. In Q1-2006 six imaging systems were sold under this model, versus one Imaging System sold in Q1-2005. The move to a blended business model in Japan is expected to contribute to the Company’s recurring revenue stream.
Gross profit increased to approximately $137,000 in Q1-2006 from approximately $119,000 in Q1-2005, although gross profit as a percentage of sales decreased as a result of the use of a blended procedure/capital model in Japan. Gross profit decreased as a percentage of sales from 34% in Q4-2005 to 26% in Q1-2006 as a result of lower margins on capital sales to Japan.
Sales and marketing expenses increased by approximately $559,000 to approximately $661,000 in Q1-2006 from approximately $102,000 in Q1-2005 when the SPY System had not been cleared to be marketed in the US. Sales and marketing expenses also increased from Q4-2005 to Q1-2006 because additional clinical educators were hired in 2006. Sales and Marketing expenses are expected to continue to increase moderately during 2006 as the Company continues to build its team of clinical educators and other internal resources.
Research and development expenses increased by approximately $664,000 to approximately $1,383,000 in Q1-2006 from approximately $719,000 in Q1-2005. The overall increase relates primarily to increases in employee and related office and travel costs for additional engineering staff to support the OPTTX design efforts and to support commercial manufacturing of SPY, and additional clinical staff to plan and execute OPTTX trials. The increase also related to increased costs incurred to design and build next generation OPTTX devices for use in clinical trials and an increase in SPY product development costs. Research and development costs also increased from Q4-2005 to Q1-2006 primarily due to increased patent costs associated with expanding the company’s intellectual portfolio to cover new areas including urological applications such as nerve sparing radical prostatectomy. Research and development costs are expected to continue to increase moderately during 2006 to support the patient registry and product development initiatives for SPY and clinical trials for OPTTX and LUNA.
General and administration expenses increased by approximately $134,000 to approximately $568,000 in Q1-2006 from $434,000 in Q1-2005. This increase includes increases totaling approximately $254,000 relating to additional employee costs to support the commercial launch of SPY and public company costs, offset partially by a decrease stock based compensation expense of approximately $120,000. The decrease in stock based compensation expense resulted primarily from the contractual vesting of all options issued prior to 2005 upon the completion of the Company’s initial public offering in June 2005. General and administrative costs decreased by approximately $126,000 from Q4-2005 to Q1-2006 primarily as a result of a reduction in professional fees and reduced travel expenses.
Depreciation expense increased to approximately $36,000 in Q1-2006 from approximately $8,000 in Q1-2005 primarily as a result of additional SPY devices being used in research and development activities and due to additional computer hardware, software and other office equipment to support the growth of the Company’s infrastructure. Amortization increased by slightly from Q1-2005 to Q1-2006 as a result of license payments made in June 2005 which are capitalized and amortized.
The Company had a total investment return of approximately $246,000 in Q1-2006 on its cash and short-term investments, including interest income of approximately $185,000, and other income of approximately $61,000 earned on money market funds. The increase in investment returns over Q1-2005 is the result of an overall increase in cash and short term investment balances following completion of the Company’s initial public offering on June 10, 2005, and higher interest rates.
Net loss increased by approximately $1,153,000 to approximately $2,375,000 in Q1-2006 from approximately $1,222,000 in Q1-2005 primarily as a result of an increase in sales and marketing costs of approximately $559,000, an increase in research and development expenses of approximately $664,000, an increase in general and administrative expenses of approximately $134,000, offset partially by an increase in investment returns of approximately $202,000.
As at March 31, 2006 the Company had cash, cash equivalents and short-term investments of approximately $25,296,000, an increase of approximately $2,522,000 over December 31, 2005. The increase in these balances was primarily the result of the exercise of warrants and special options in March 2006 for proceeds of approximately $5,429,000 and employee stock options for proceeds of $2,500 offset by cash used in operations of 2,056,000 and cash invested in property and equipment and licenses of $853,000 during the Q1-2006.
The Company is authorized to issue an unlimited number of common shares and an unlimited number of preferred shares, issuable in series. As at March 31, 2006 there were a total of 19,680,276 common shares (21,290,622 on a fully diluted basis) and no preferred shares outstanding. As at March 31, 2006 a total of 1,610,346 stock options were outstanding under the Company’s employee stock option plan. Additional information concerning the Company, including its Annual Information Form for the year ended December 31, 2005, is available on SEDAR at www.sedar.com.
Conference call
Novadaq will host a conference call and live webcast on Monday, May 8, 2006 at 4:30 p.m. E.T. to discuss its first quarter 2006 results. To access the conference call by telephone, dial 416-644-3427 or 1-800-814-4857. Please connect approximately ten minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until May 15, 2006 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21187061 followed by the number sign.
About Novadaq Technologies
Novadaq Technologies Inc. develops and commercializes medical devices based on its proprietary imaging platform for the diagnosis and treatment of human vascular, ophthalmic, and neurologic diseases and conditions. Novadaq’s SPY Intra-operative Imaging System, commercially available worldwide, enables cardiac surgeons to visually assess coronary vasculature and bypass graft functionality during the course of open-heart bypass surgery. Novadaq’s ophthalmic product, the OPTTX System, 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 System. The OPTTX System is currently being evaluated in clinical trials. Novadaq’s product for nerve visualization in prostate surgery, LUNA(TM) is designed to enable surgeons to visualize nerve bundles during the course of radical prostatectomy in order to reduce negative outcomes including impotency. For more information, please visit the company’s website at www.novadaq.com.
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. Particularly, information regarding future sales and marketing activities, future revenues and research and development activities, as well as the Company’s plans for each of the SPY System and the OPTTX System, and the potential for development of an application for the Company’s imaging device in image guided conventional and minimally invasive nerve-sparing radical prostatectomy, 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 SPY System, the clinical results of the use of the SPY System, the results from clinical tests of the OPTTX System, 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 SPY System, 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, 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.
This press release was prepared from information available to May 1, 2006.
Summary financial statements attached: For complete financial statements please go to www.sedar.com NOVADAQ TECHNOLOGIES INC. Incorporated under the laws of Canada BALANCE SHEETS (expressed in U.S.$) Unaudited As at As at March 31, December 31, 2006 2005 $ $ ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 922,237 750,727 Short-term investments 24,374,119 22,023,536 Accounts receivable 310,778 233,977 Investment tax credits receivable 41,165 41,341 Prepaid expenses and other receivables 461,358 553,534 Inventory 252,778 410,064 ------------------------------------------------------------------------- Total current assets 26,362,435 24,013,179 ------------------------------------------------------------------------- Property, plant and equipment, net 1,204,267 464,483 Deferred charges 9,320 11,259 Licenses, net 2,936,114 3,030,711 ------------------------------------------------------------------------- 30,512,136 27,519,633 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS’ EQUITY Current Accounts payable and accrued liabilities 1,309,754 1,432,560 Current portion of deferred revenue 28,013 37,351 ------------------------------------------------------------------------- Total current liabilities 1,337,767 1,469,911 ------------------------------------------------------------------------- Deferred revenue 21,789 21,789 ------------------------------------------------------------------------- Total liabilities 1,359,556 1,491,700 ------------------------------------------------------------------------- Shareholders’ equity Share capital 51,687,730 46,255,988 Contributed surplus 3,479,688 3,411,851 Deficit (26,014,838) (23,639,801) ------------------------------------------------------------------------- Total shareholders’ equity 29,152,580 26,028,038 ------------------------------------------------------------------------- 30,512,136 27,519,633 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NOVADAQ TECHNOLOGIES INC. STATEMENTS OF LOSS AND DEFICIT (expressed in U.S.$,) Unaudited Three months ended March 31, 2006 2005 $ $ ------------------------------------------------------------------------- Revenue 518,226 155,418 Cost of sales 381,153 36,300 ------------------------------------------------------------------------- Gross profit 137,073 119,118 ------------------------------------------------------------------------- Operating expenses Sales and marketing 660,909 101,732 Research and development 1,383,504 718,650 General and administration 567,505 433,571 Depreciation 36,966 8,266 Amortization 109,597 105,283 Loss (gain) on foreign exchange (442) 7,475 ------------------------------------------------------------------------- 2,758,039 1,374,977 ------------------------------------------------------------------------- Loss before the following (2,620,966) (1,255,859) Other income 60,896 0 Interest income 185,033 34,321 ------------------------------------------------------------------------- Net loss for the year (2,375,037) (1,221,538) Deficit, beginning of period (23,639,801) (16,765,343) ------------------------------------------------------------------------- Deficit, end of period (26,014,838) (17,986,881) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per share (0.13) (0.08) ------------------------------------------------------------------------- ------------------------------------------------------------------------- NOVADAQ TECHNOLOGIES INC. STATEMENTS OF CASH FLOWS (expressed in U.S.$) Unaudited Three months ended March 31, 2006 2005 $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss for the period (2,375,037) (1,221,538) Add (deduct) items not involving cash Depreciation and amortization 208,322 116,887 Stock based compensation 67,837 160,609 ------------------------------------------------------------------------- (2,098,878) (944,042) Net change in non-cash working capital balances related to operations 42,738 1,199,932 ------------------------------------------------------------------------- Cash (used) in operating activities (2,056,140) 255,890 ------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance common shares, net 5,431,742 - ------------------------------------------------------------------------- Cash provided by financing activities 5,431,742 - ------------------------------------------------------------------------- INVESTING ACTIVITIES Purchase of property, plant and equipment (838,508) (13,097) Purchase of licenses (15,000) - Investments in short-term investments, net (2,350,582) (61,791) ------------------------------------------------------------------------- Cash provided by (used in) investing (3,204,090) (74,888) ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents during the period 171,511 181,002 Cash and cash equiv. beginning of period 750,726 434,380 ------------------------------------------------------------------------- Cash and cash equivalents, end of period 922,237 615,382 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Novadaq Technologies Inc.
CONTACT: For further information visit our website at www.novadaq.com, orcontact: Arun Menawat, PhD, MBA, President & CEO, Novadaq TechnologiesInc., (905) 629-3822 x 202, amenawat@novadaq.com; Michael Moore, InvestorRelations, The Equicom Group, (416) 815-0700 x 241, mmoore@equicomgroup.com
