TROY, Mich., Jan. 23 /PRNewswire-FirstCall/ -- Somanetics Corporation reported financial results for the fourth fiscal quarter and year ended November 30, 2007.
“Our solid fourth quarter and fiscal 2007 financial performance reflects the continued adoption of our INVOS technology in adult, pediatric and neonatal cardiac surgeries and the pediatric intensive care unit,” said Bruce Barrett, Somanetics’ president and chief executive officer. “Entering 2008, we believe we are well positioned to continue to make progress in these market segments as the visibility for our technology continues to increase. For example, the January 1, 2008 addition of cerebral oximetry to the STS Adult Cardiac Surgery Database was an evidence-based decision that illustrates the potential for cerebral oximetry to become a standard of care in adult cardiac surgeries. Clinicians have reported positive early experience with our newly designed sensors for infants in the pediatric and neonatal intensive care units and we expect these sensors to increase the potential for our technology in these markets.”
Fourth Quarter Results
Fourth quarter 2007 net revenues increased 47 percent to a record $11.3 million from $7.7 million in the same period of 2006. U.S. net revenues increased 41 percent to $9.5 million from $6.8 million in the same period of 2006. International net revenues increased 92 percent to $1.8 million compared to $927,474 in the fourth quarter of 2006.
Gross margin was 88 percent compared to 89 percent in the fourth quarter of 2006.
Somanetics reported fourth quarter income before income taxes of $4.5 million, compared to $2.0 million in the fourth quarter of 2006. Somanetics’ net income in the fourth quarter of fiscal 2007 was $2.8 million, or $0.19 per diluted share.
Fiscal 2007 Results
For the fiscal year ended November 30, 2007, net revenues increased 34 percent to a record $38.6 million from $28.7 million a year ago. U.S. net revenues increased 36 percent to $31.6 million and international net revenues increased 30 percent to $7.0 million.
Gross margin was 88 percent, the same as in fiscal 2006. Income before income taxes increased 55 percent to $14.9 million from $9.6 million in 2006 while net income was $9.7 million, or $0.67 per diluted share. Fiscal 2006 net income included a $750,000 net tax benefit primarily resulting from changes in Somanetics’ deferred tax asset valuation allowance, partially offset by taxes on income in fiscal 2006. There were no reversals of deferred tax asset valuation allowances in fiscal 2007.
Somanetics ended fiscal 2007 with a cash, marketable securities and long- term investments balance of $85.8 million and no borrowings.
Pediatric and Neonatal ICU Market Entry Update
Somanetics plans to build on the use of the INVOS technology in the congenital heart surgery market by introducing infant sensors for cerebral and somatic monitoring. These sensors are tailored to the small size and head shapes of this patient population. Two hospitals are currently using the new sensors and providing positive feedback, and Somanetics is planning to expand usage to between 15 and 20 hospitals within the next few months. During that time, clinical data and experience will be obtained to support a broader sales and marketing campaign later in the year. Six clinical managers have been hired to support these expanded efforts in the pediatric and neonatal ICUs.
Sales and Marketing Activities
Effective January 1, 2008, The Society of Thoracic Surgeons (STS) added cerebral oximetry information as a metric to be collected as part of the STS Adult Cardiac Surgery Database. According to the STS, the STS Adult Cardiac Surgery Database is the largest cardiothoracic surgery outcomes and quality improvement program in the world and is viewed as the national gold standard for cardiothoracic surgery. This data is used for quality assessment in cardiothoracic surgery and has been used to establish benchmarks for clinical comparisons. One of the data points to be collected is whether cerebral oximetry was the first indication of a problem that may have led to an injury or death. Somanetics believes that over time the data may demonstrate the relationship between cerebral oximetry values and patient outcomes, potentially leading to the adoption of cerebral oximetry as a standard of care in adult cardiac surgery.
Medical meetings, scientific conferences and clinical papers play an important role in promoting Somanetics’ INVOS System. To support sales and marketing initiatives, Somanetics participated in more than 70 meetings and anticipates participating in a similar number of meetings during 2008.
In addition, more than 150 abstracts and articles related to the use of the INVOS technology were published during the year, including data that supports use of the INVOS System in adult cardiac surgery. The randomized, prospective study by John Murkin, MD, FRCPC, professor of anesthesiology at the University of Western Ontario, Canada, published in the January 2007 issue of Anesthesia and Analgesia, showed that using information from the INVOS System resulted in a 73 percent reduction in major organ morbidity and mortality and significantly shortened ICU stays in the intervention group.
Somanetics also expanded the sales, marketing and clinical education team, which has increased by 25 percent since the end of fiscal 2006. In December 2007, Somanetics added a director of market development in Europe to support its international sales and marketing initiatives.
Basic Science Research
During the year, Somanetics conducted basic science research with a neonatal piglet model to validate the use of INVOS technology for detecting ischemia of the kidney and the bowel. The neonatal piglet model is an accepted model for neonatal research. This research will be used to pursue expansion of product labeling and support market adoption of the technology in the neonatal and pediatric markets.
Research and Development
Somanetics continued to add personnel to expand its research and development team. Based on customer preferences, Somanetics has identified a number of projects to further advance the INVOS technology. In addition, Somanetics has filed for patents on certain features developed for the smaller sensor and plans to continue to strengthen its intellectual property in 2008.
Business Outlook
Somanetics’ financial guidance for fiscal year 2008 is based on market conditions and current estimates, which reflect management’s plan to invest in the clinical research, education and research and development projects to support the expansion of its efforts with infants in the pediatric and neonatal ICU markets. Somanetics undertakes no obligation to update its estimates. Somanetics is currently forecasting:
Somanetics to Host Conference Call
Somanetics will web cast its fiscal 2007 conference call at 10:00 a.m. (ET) today. To join the web cast, visit the Investor Center section of Somanetics’ website at www.somanetics.com and click on the “2007 Year-End Conference Call” link. The call also will be archived on the website.
About Somanetics
Somanetics Corporation develops, manufactures and markets the INVOS(R) Cerebral/Somatic Oximeter System, a non-invasive patient monitoring system that continuously measures changes in the blood oxygen levels in the brain and elsewhere in the body, in somatic, or skeletal muscle tissue in patients with or at risk for restricted blood flow. Surgeons, anesthesiologists, intensive care nurses and other medical professionals can use the information provided by the INVOS System, in conjunction with other available information, to identify cerebral or somatic oxygen imbalances and take necessary corrective action, potentially improving patient outcomes and reducing the costs of care. Somanetics supports its customers through a direct U.S. sales force and clinical education team. Covidien markets INVOS System products in Europe, Canada, the Middle East and South Africa and Edwards Lifesciences represents INVOS System products in Japan. For more information visit www.somanetics.com.
Safe-Harbor Statement
Except for historical information contained herein, the matters discussed in this news release, including financial guidance for fiscal year 2008, are forward-looking statements, the accuracy of which is necessarily subject to risks and uncertainties. Actual results may differ significantly from results discussed in the forward-looking statements and may be affected by, among other things, economic conditions in general and in the healthcare market, the demand for and market acceptance of our products in existing market segments and in new market segments we plan to pursue, our current dependence on the Cerebral Oximeter and SomaSensor, our dependence on distributors and independent sales representative firms for a substantial portion of our sales, our dependence on single-source suppliers, potential competition, the effective management of our growth, our ability to attract and retain key personnel, the potential for products liability claims, government regulation of our business, changes in our deferred tax assets, future equity compensation expenses, the challenges associated with developing new products and obtaining and maintaining regulatory approvals if necessary, research and development activities, the lengthy sales cycle for our products, sales employee turnover, changes in our actual or estimated future taxable income, changes in accounting rules, enforceability and the costs of enforcement of our patents, potential infringements of others’ patents and the other factors set forth from time to time in Somanetics’ Securities and Exchange Commission filings, including Somanetics’ 2006 Annual Report on Form 10-K filed on February 8, 2007 and its 2007 Quarterly Reports on Form 10-Q filed on April 3, 2007, June 29, 2007 and October 2, 2007, respectively.
CONTACT: Mary Ann Victor, Vice President and Chief Administrative Officer,
+1-248-689-3050, ext. 5803, fax: +1-248-689-4272, or William Iacona, CFO,
+1-248-689-3050, ext. 5819, both of Somanetics Corporation
Web site: http://www.somanetics.com/
