TORONTO, March 25 /PRNewswire-FirstCall/ - Novadaq(R) Technologies Inc. , a developer of real-time medical imaging systems and image guided therapies for the operating room, today announced financial results for the fourth quarter and year ended December 31, 2007. In this press release, unless otherwise indicated, all dollar amounts are expressed in US dollars.
"A year ago I stated that our vision of becoming the imaging company of the operating room began to take shape in 2006. In 2007 it gained momentum," said Dr. Arun Menawat, President and Chief Executive Officer of Novadaq Technologies Inc. "Though we met with obstacles this past year in the form of an ICG shortage, SPY sales bounced back and the business is regaining momentum. We received clearance for two new indications for SPY; obtained the rights to PLC's CO(2) HEART LASER in the United States, opening a sales channel with its current installed base; completed an upsized financing in tough markets; and created two new products - PINPOINT and SPYscope through the acquisition of certain assets from Xillix. 2007 was a transformative year and we continue to further our mission, to become the imaging company of the operating room."
American College
Total revenue increased by approximately $8,111,000 from approximately $2,175,000 in 2006 to approximately $10,286,000 in 2007. Approximately $7,490,000 of this increase related to sale of TMR products pursuant to distribution rights acquired from Edwards Lifesciences LLC in March 2007. Approximately $413,000 of the increase related to increased SPY revenue representing a 19% increase from 2006. Growth in SPY revenue was negatively impacted by an interruption in the supply of ICG which began to affect SPY sales as early as March 2007 and which was not fully resolved until September 2007. Approximately $194,000 of the increase related to the sale of the first PINPOINT systems in December 2007.
Gross profit as a percentage of sales decreased from 53% in 2006 to 46% in 2007. The primary reason for the decrease was that a number of used CO(2) lasers acquired from Edwards were sold at relatively low margins. In addition, SPY systems were relatively inactive during part of 2007 as a result of the ICG interruption resulting in low or negative margins after depreciation expense.
Sales and marketing expenses increased by approximately $5,155,000 to approximately $9,741,000 in 2007 from $4,586,000 in 2006. The increase relates primarily to a decision to build a direct sales team to support the SPY business as well as the acquired TMR distribution business. Sales and marketing expenses as a percentage of revenue decreased from 211% in 2006 to just under 95% in 2007.
Research and development expenses increased by approximately $482,000 to $5,585,000 in 2007 from $5,103,000 in 2006. The overall increase relates primarily to costs assumed in connection with the acquisition of intellectual property and know-how of Xillix. In connection with the acquisition the Company established a research and development facility staffed by former employees of Xillix. The primary focus of the research and development team since acquisition has been on the development of an endoscopic application of the SPY technology.
General and administration expenses increased by approximately $1,854,000 to $4,812,000 in 2007 from $2,958,000 in 2006. The increase resulted primarily from an increase in professional fees of approximately $645,000 related to costs incurred in Japan to protect issued patents; an increase in employee costs of approximately $529,000 incurred to support the TMR business acquired, the research and development facility staffed by former employees of Xillix, a write-off of $265,000 of corporate transaction costs incurred, and an increase in insurance expense of approximately $119,000 related to liability coverage for the acquired TMR business.
Depreciation expense increased by $117,000 to $288,000 in 2007 from $171,000 in 2006. The increase related primarily to the purchase of computer hardware and software and other infrastructure to support the Company's growth. Amortization expense increased by $537,000 to $976,000 in 2007 from $439,000 in 2006 as are result of the acquisition of intangible assets in connection with the purchase of TMR distribution rights, and Xillix patent rights.
Net loss increased by approximately $4,625,000 as a result of the changes described above.
As at December 31, 2007 the Company had cash, cash equivalents and short-term investments of approximately $18,861,000, an increase of approximately $2,032,000 from December 31, 2006. The increase in cash is the result of net proceeds of a private placement of $25,972,000 offset by cash used in operating activities of $15,614,000, investments in TMR business assets of $5,819,000 (including repayment of a $3,000,000 note payable) investments in intangible assets of $1,296,000, and investments in property plant and equipment of $1,201,000.
As at March 21, 2008 there were a total of 24,533,982 common shares (26,162,395 on a fully diluted basis) and no preferred shares outstanding. As at March 21, 2008 a total of 1,628,413 stock options were outstanding under the Company's employee stock option plan.
Quarter Ended December 31, 2007 Compared to Quarter Ended
September 30, 2007
Total revenue increased to approximately $2,959,000 in Q4-2007 from $2,149,000 in Q3-2007 representing an increase of 37%. Recurring revenue, which includes consumable kit and rental revenue, increased to approximately $1,405,000 in Q4-2007 from approximately $1,235,000 in Q3-2007 representing an increase of a 14%. The meaningful recurring revenue growth rate indicates that disruptions to the TMR business related to the acquisition, and to the SPY business related to the ICG supply interruption have now been addressed.
Capital sale revenue increased to $1,266,000 in Q4-2007 from $617,000 Q3-2007.
Service revenue primarily relates to extended service contracts where revenue is recognized over the term of the contract. Service revenue decreased in Q4 2007 by approximately 3% from Q3-2007.
Gross profit increased to approximately $1,301,000 in Q4-2007 from approximately $929,000 in Q3-2007 as a result of increased recurring revenue and capital sales. The gross profit percentage achieved in Q4-2007 was similar to Q3-2007.
Sales and marketing expenses increased to approximately $2,542,000 in Q4-2007 from approximately $2,093,000 in Q3-2007. Sales and marketing expenses were quite volatile in 2007 as the company hired a direct sales team early in early Q1-2007, added the capital sales team from Edwards in connection with the TMR acquisition in late Q1-2007, rationalized the sales team by eliminating overlaps in geographic coverage in late Q2- 2007 and finally, supplemented the team in Q4-2007 to address weakness identified in Q4-2007. While there were a number of hires which occurred in Q1-2008 to complete this process, future adjustments to the sales team are expected to be much less drastic than experienced in 2007.
Research and development expenses increased to approximately $1,533,000 in Q4-2007 from approximately $1,452,000 in Q3-2007. The largest increase in cost related to a software development project commenced in Q4-2007 related to flow and perfusion quantification applications to be implemented in the SPY system in the second half of 2008.
General and administration expenses increased to approximately $1,509,000 in Q4-2007 from $1,371,000 in Q3-2007. Expenses recorded in Q4-2007 include a write-off of approximately $265,000 of corporate transaction costs which had been incurred throughout 2007. The costs were written off on the basis that the Company ceased to be engaged on a regular and ongoing basis with completion of the corporate transactions and it is not likely that activities will resume within the next three months. General and administration expenses not including the write-down of corporate transaction costs were approximately $127,000 lower in Q4-2007 than in Q3-2007.
Depreciation and amortization expenses in Q4-2007 were consistent with 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 repaid on September 25, 2007 and there was no interest incurred in Q4-2007.
Interest income decreased to approximately $253,000 in Q4-2007 from approximately $339,000 in Q3-2007 resulting primarily from lower investment balances in Q4-2007. The lower investment balance relates partly to the repayment of the Edwards Note and the reduction in interest income was partly offset by the reduction in interest expense.
Net loss increased to approximately $4,432,000 in Q4-2007 from approximately $4,083,000 in Q3-2007 primarily as a result of an increase in sales and marketing costs of approximately $449,000, an increase in general and administrative expenses of approximately $138,000, an increase in research and development costs of $81,000 which were partly offset by an increase in gross profit of $372,000.
Conference call
Novadaq will host a conference call on Tuesday, March 25, 2008 at 4:30 p.m. EST. to discuss the financial results for the fourth quarter and full year ended December 31, 2007. To access the conference call by telephone, dial 416-644-3417 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 April 1, 2008 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21266249 followed by the number sign.
A live audio webcast of the conference call will be available at www.novadaq.com. Please connect at least ten minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above website for 365 days.
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 other cardiovascular, 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 PINPOINTTM 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 System for TMR (Trans-Myocardial Revascularization). For more information, please visit the company's website at www.novadaq.com.
Forward looking Statements
Certain statements included in this press release may be considered forward-looking. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements, and therefore these statements should not be read as guarantees of future performance or results. All forward-looking statements are based on Novadaq's current beliefs as well as assumptions made by and information currently available to Novadaq and relate to, among other things, results of future clinical tests of PINPOINT and the SPY System, anticipated financial performance, business prospects, strategies, regulatory developments, market acceptance and future commitments. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Due to risks and uncertainties, including the risks and uncertainties identified by Novadaq in its public securities filings actual events may differ materially from current expectations. Novadaq disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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; Michael Moore, Investor Relations, The Equicom Group,
(416) 815-0700 x 241, mmoore@equicomgroup.com
