MINNEAPOLIS--(BUSINESS WIRE)-- Vascular Solutions, Inc. (Nasdaq:VASC - News) today reported financial results for the third quarter ended September 30, 2010. Highlights of the third quarter include:
Achieved record net revenue of $19.9 million, an increase of 15% from the third quarter of 2009. Highlighted the clinical success of the GuideLiner® catheter at the Transcatheter Cardiovascular Therapeutics (TCT) meeting in Washington D.C. in September, with GuideLiner catheter sales increasing by 37% sequentially from the second quarter of 2010.
Achieved net income of $1,464,000, or $0.09 per diluted share.
Issued guidance for 14% to 16% revenue growth to between $20.8 million and $21.2 million in the fourth quarter of 2010 and net income of between $0.94 and $1.00 per share (including $14.3 to $15.0 million, or $0.83 to $0.87 per share, of income tax benefit as the result of the Company’s potential recognition of its remaining net operating loss carryforwards as a deferred asset in the fourth quarter).
Commenting on the results, Vascular Solutions’ Chief Executive Officer Howard Root said: “Contrary to what many companies in our sector are reporting, we are pleased to report 15% revenue growth in the third quarter to a new record quarterly level, resulting from substantial new product launches and continued sales expansion of our existing products. Of special note, our GuideLiner catheter has generated unprecedented interest in a Vascular Solutions’ product since its U.S. launch less than a year ago, and that interest is translating into broader sales opportunities and increased visibility at major medical meetings. With a full pipeline of internally-developed new products in development, along with acquisition and product distribution candidates in evaluation, we are very optimistic about our ability to continue with our consistent sales growth and success.”
Gross margin across all product lines was 64.7% in the third quarter of 2010, down from 66.0% in the third quarter of 2009. “Of the reduction in the gross margin, 120 basis points was due to the temporary purchase of finished SmartNeedle product from the former manufacturer during the transition to the sale of internally manufactured products, a process we expect to complete in the fourth quarter,” commented James Hennen, Vascular Solutions’ Chief Financial Officer. “An additional 10 basis points was due to a higher than expected selling mix in international markets, which caused a reduction in gross margin due to distributor pricing.”
Third quarter net income was $1,464,000, or $0.09 per share, compared to net income of $1,431,000 or $0.09 per share in the third quarter of 2009. Mr. Root commented: “Due to unusual scheduling, this year both our worldwide sales meeting and our largest medical meeting occurred in the third quarter, resulting in an additional $130,000 in sales and marketing expenses compared to the previous year. In addition, R&D expenses were higher than expected in the third quarter due to approximately $250,000 in re-testing of in-development mechanical devices, $110,000 in an unplanned R&D management transition, and $100,000 in early development of unbudgeted new products. G&A expenses included approximately $120,000 in litigation expenses related to the re-exam request on the AngioDynamics patents and the transfer of the litigation from a court in Delaware to Minnesota, both of which have been completed. Looking forward, we expect each of our R&D, Sales & Marketing and G&A areas to reflect a decrease in fourth quarter expenses from the third quarter, and to reach our targeted spending levels as a percentage of sales in 2011.” Net income for the third quarter of 2010 included $568,000 of non-cash stock-based compensation ($352,000 after-tax, or $0.02 per share), $89,000 of non-cash amortization ($55,000 after-tax) and $714,000 of non-cash income tax expense ($0.04 per share) based on a 38% tax rate.
Third Quarter Net Revenue by Product Line
Net sales of catheter products were $10.8 million in the third quarter, an increase of 42% over the third quarter of 2009. “Sales of our GuideLiner catheter increased 37% sequentially from the second quarter, and are now trending at over $5 million in annualized worldwide sales. The physician response to the GuideLiner continues to be extremely favorable, and based on the responses we’ve received and the expanded market potential we observe, we project the current rate of sales growth of the GuideLiner to continue throughout 2011. In addition, sales of our Pronto LP catheter continue to increase, with a 56% increase in the third quarter of 2010 from the third quarter of 2009. Adding to this sales growth in our organic products, in the third quarter we benefited from $790,000 in sales of the SmartNeedle products that we acquired in April 2010,” Mr. Root stated.
Net sales of hemostat products (primarily consisting of the D-Stat® Dry, D-Stat Flowable and D-Stat Radial products) were $6.1 million in the third quarter, a decrease of 5% from the third quarter of 2009. “During the third quarter one of our primary competitors in the patch market was subjected to an injunction preventing their sales in the U.S. as the result of a patent infringement verdict initiated by another competitor, but that injunction was quickly subjected to an administrative stay while the case is presented to the Federal Circuit. We expect that administrative stay to be subject to a substantive decision by the Federal Circuit very soon, which, if the injunction or judgment is allowed to stand, would open up approximately 15% of the patch market to our sales force,” commented Mr. Root.
Net sales of vein products (primarily consisting of the Vari-Lase® laser console and kits) were $2.8 million in the third quarter, a decrease of 1% from the third quarter of 2009. “Sales of our disposable kits continued to be well maintained by our sales force, as evidenced by a 10% increase in disposable revenue compared to the third quarter of 2009. Sales of our Vari-Lase console were soft in the third quarter, as we expected would occur in the summer months and given the current state of the vein market. With the trial now commenced in California against two of our laser vein competitors on patent issues, an issue that we settled back in 2008, we believe the fourth quarter will present a changing competitive position that should favor growth in sales of our Vari-Lase products, irrespective of the verdict,” commented Mr. Root.
