TORONTO, Nov. 5 /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 third quarter ended September 30, 2007. In this press release, unless otherwise indicated, all dollar amounts are expressed in US dollars.
“While third quarter results demonstrated the lost sales from our ICG shortage, we are pleased to have this issue behind us, as we concentrate on the continued commercialization of SPY and the TMR Heart Laser System,” said Dr Arun Menawat, President and Chief Executive Officer, Novadaq Technologies Inc. “The launch of PINPOINT, our first imaging product for minimally invasive treatment of lung cancer has been received well by thoracic surgeons. This product requires no external fluorescent agent for imaging and will be the base product for future expansion into image guided minimally invasive surgical procedures”
American College
Total revenue increased to approximately $2,149,000 in Q3-2007 from $532,000 in Q3-2006. Recurring revenue, which includes consumable kit and rental revenue, increased to approximately $1,235,000 in Q3-2007 from approximately $402,000 in Q3-2006. The main reason for the growth in revenue is the acquisition of the TMR business which occurred in March 2007.
The Company’s ability to grow recurring revenue during the quarter was negatively impacted by an interruption of the supply of ICG. The Company announced in mid July that the FDA had approved an extension of the expiry date for existing inventory of ICG from 24 to 36 months allowing Novadaq to resume shipments of ICG. However, the Company was not in a position to re-label product, and the Company believes that many customers were not receptive to using ICG beyond the printed expiry date on the original label. As a result, SPY(R) usage was inconsistent during Q3 - 2007. On September 26, 2007 Akorn Inc., the manufacturer of ICG, announced that its alternate ICG manufacturing site had been approved by the FDA. The approval resolved the shortage of ICG in the United States, and the Company has resumed its policy of holding 6 to 12 months supply of ICG.
Capital sale revenue increased to $617,000 in Q3-2007 from $130,000 Q3-2006. The increase includes a year over year increase in SPY System sales from $130,000 to $265,000 as well as revenue from sales of CO(2) Lasers in 2007. The Company’s ability to increase SPY capital sale revenue was affected by uncertainty about the long term supply of ICG. The increase also includes approximately $351,000 of revenue related to the sale of CO(2) lasers as a result of the acquisition of TMR distribution rights in Q1 2007. Capital sale revenue from CO(2) lasers was lower in Q3-2007 than it was in Q2 2007.
Service revenue increased from nil in Q3-2006 to approximately $297,000 in Q3-2007. Service revenue is generated in connection with the TMR distribution rights acquired in Q1-2007. Service revenue decreased in Q3-2007 from approximately $349,000 in Q2 2007.
Gross profit increased to approximately $929,000 in Q3-2007 from approximately $271,000 in Q3-2006. The increase is related to the increases in revenue described above. The gross profit percentage achieved in Q3-2007 was impacted negatively during Q3-2007 by depreciation and maintenance expenses recorded for SPY Systems that were relatively unproductive during the quarter as a result of the ICG disruption discussed above. The gross profit percentage earned in Q3-2007 was lower than the percentage earned in Q2-2007 because capital sale revenue was lower in Q3-2007, and the affect of SPY related depreciation and maintenance charges was more pronounced.
Sales and marketing expenses increased to approximately $2,093,000 in Q3-2007 from approximately $1,134,000 in Q3-2006. The increase includes the cost of building a direct sales team which began in December 2006 and higher commissions related to sales growth. Sales and marketing expenses in Q3-2007 decreased from approximately $2,889,000 in Q2-2007 as a result of a rationalization of the direct sales team hired by the Company in late 2006 and the sales team hired in connection with the acquisition of the TMR distribution rights. The rationalization was completed late in Q2-2007.
Research and development expenses increased to approximately $1,452,000 in Q3-2007 from approximately $1,164,000 in Q3-2006. The largest increases include an increase in salary expense of approximately $146,000 which occurred primarily as a result of hiring former employees of Xillix and an increase in patent and trademark expenses. Similarly, the increase in total research and development expense from approximately $1,306,000 incurred in Q2-2007 relates primarily to Xillix related salary expense and increased patent and trademark expenses.
General and administration expenses increased to approximately $1,371,000 in Q3-2007 from $852,000 in Q3-2006. The increase from Q3-2006 relates primarily to an increase of approximately $134,000 in salary expense incurred to support direct sales activities including those related to the TMR distribution business, an increase in professional fees of approximately $155,000 incurred to develop commercial agreements to support direct sales and to file a complaint regarding infringement of our IP in Japan, and increased rent and other expenses incurred in relation to the acquisition of Xillix assets. The same factors led to an increase in general and administration expenses from $1,067,000 incurred in Q2-2007.
Depreciation expense increased to approximately $87,000 in Q3-2007 from approximately $45,000 in Q3-2006 and $60,000 in Q2-2007 primarily as a result of the depreciation of assets purchased from Xillix in Q2-2007, offset by a reduction related to a change in the estimated live of certain SPY Systems. Amortization increased to approximately $293,000 in Q3-2007 from $110,000 in Q3-2006 due to amortization of intangible assets recorded in connection with the acquisition of TMR distribution rights, and the intellectual property of Xillix. The increase from approximately $261,000 in Q2-2007 results from a full quarter of amortization of intangible assets related to Xillix in Q3-2007
The Company had interest expense in Q3-2007 of approximately $74,000 relating to a $3,000,000 note payable issued on March 20, 2007 in connection with the acquisition of TMR distribution rights. The note was not outstanding in Q3-2006. Interest expense decreased slightly from approximately $77,000 in Q2-2007 because the note was repaid on September 25, 2007 and was not outstanding through the entire Q3-2007.
Interest income increased to approximately $339,000 in Q3-2007 from approximately $284,000 in Q3-2006 resulting from higher investment balances in Q3-2007. The increase in investment income from approximately $214,000 earned in Q2-2007 results from an increase in investment balances resulting from the private placement completed in May 2007.
Net loss increased to approximately $4,083,000 in Q3-2007 from approximately $2,741,000 in Q3-2006 primarily as a result of an increase in sales and marketing costs of approximately $959,000, an increase in general and administrative expenses of approximately $519,000, an increase in research and development costs of $288,000 which were partly offset by an increase in gross profit of $658,000. Net loss increased by approximately $628,000 from $3,444,000 in Q2-2007 primarily as a result of a decrease gross profit of $859,000, an increase in general and administration expenses of $304,000, an increase in research and development expenses of $146,000 which were partially offset by a decrease in sales and marketing costs of approximately $796,000.
As at September 30, 2007 the Company had cash, cash equivalents and short-term investments of approximately $23,188,000, an increase of approximately $6,358,000 from December 31, 2006. The increase in cash is the result of net proceeds of a private placement of $26,032,000 offset by cash used in operating activities of $11,614,000, investments in TMR business assets of $5,667,000 (including repayment of a $3,000,000 note payable) investments in intangible assets of 1,330,000, and investments in property plant and equipment of $963,000.
As at October 29, 2007 there were a total of 23,992,012 common shares (26,101,895 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 third quarter 2007 results. To access the conference call by telephone, dial 416-644-3418 or 1-800-732-6179. Please connect approximately ten minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until November 12, 2007 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21251726 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 ICG imaging systems can be used to visualize blood vessels, nerves and the lymphatic system during a variety of surgical procedures. Novadaq’s SPY Imaging System, commercially available worldwide, enables cardiac surgeons to visually assess coronary vasculature and bypass graft functionality during the course of heart bypass surgery. The SPY System is expandable to include upgrade kits for use during other surgeries such as plastic, reconstructive and organ transplant surgery allowing surgeons to evaluate blood flow and tissue and organ perfusion. In addition, SPY is ideal for use during urological procedures enabling surgeons to visualize vessels, tumors, the lymphatic system and potentially nerve bundles. Novadaq’s OPTTX(R) 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 Imaging System. Novadaq also offers the FDA approved PINPOINT endoscopic system for visualizing native tissue fluorescence which allows surgeons to differentiate between healthy and cancerous tissue in the lung during thoracic surgery. Novadaq is also the exclusive United States distributor of PLC Medical’s CO(2) HEART LASER(TM) System for TMR (Trans-Myocardial Revascularization). 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, utilization of the recently implemented reimbursement code for the SPY System, future revenues arising from the sales of the Company’s products, the distribution arrangements with PLC Medical Systems Inc., research and development activities, FDA approval of additional 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 Company’s plan to place SPY Systems for use in reconstructive and microsurgery, 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 for both cardiothoracic surgery, and other indications including urological applications, the OPTTX System, PINPOINT (formerly ONCO LIFE(TM)), 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 PINPOINT, the clinical results of the use of PINPOINT in alternative indications, the results from post market clinical tests of the OPTTX System, 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, which 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 implemented 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 each of the SPY System, PINPOINT 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. Moreover, there can be no assurance that the intended collaborative efforts of the Company and Intuitive Surgical, Inc., will result in the development of any particular device, innovation, procedure, product or other business opportunity for the Company, Intuitive Surgical or both, or that, if developed same can be profitably marketed, if at all.
CONTACT: For further information 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; Michael Moore, Investor
Relations, The Equicom Group, (416) 815-0700 x 241, mmoore@equicomgroup.com
