MINNEAPOLIS, July 20 /PRNewswire-FirstCall/ -- Vascular Solutions, Inc. (Nasdaq: VASC - News) today announced record revenue for the second quarter ended June 30, 2006 of $10.9 million, a 35% increase over the $8.1 million recorded in the second quarter of 2005. On a sequential basis, net sales increased 10% from the first quarter of 2006.
The second quarter of 2006 represented the company’s tenth consecutive quarter of record net sales. Growth in each major product line contributed to the increase in revenue. In total, over 86% of net sales in the second quarter came from sales of new product lines Vascular Solutions has internally developed and launched in the U.S. since 2003.
The resulting net loss for the second quarter was $653,000 or $0.04 per share, compared to net income of $75,000 or $0.00 per share in the second quarter of 2005. During the second quarter of 2006 the company incurred $952,000 in expenses related to the development and qualification of a new supply of thrombin, a primary component of its hemostatic products, and $316,000 of stock-based compensation expense. As adjusted (excluding the thrombin qualification expenses, stock-based compensation expense and assuming a tax rate of 39%) net income was $375,000 or $0.02 per fully diluted share in the second quarter of 2006, increasing from adjusted net income of $131,000 or $0.01 per fully diluted share in the second quarter of 2005. The second quarter of 2006 represented the company’s sixth successive quarter of adjusted net income.
Commenting on second quarter results, Vascular Solutions Chief Executive Officer Howard Root said: “Following an excellent first quarter, in the second quarter we once again demonstrated outstanding sales growth led by our two largest product lines, the D-Stat Dry(TM) hemostatic bandage and the Pronto(TM) extraction catheter. Similar to the first quarter, the overall result was revenue that exceeded the upper end of our guidance. Importantly, we continue to manage the qualification of our new source of thrombin within our timing and budget requirements, and we continue to believe that our current working capital and line of credit are adequate for all of our future capital needs. Building off this progress, we expect to continue to set new quarterly sales records each quarter for the foreseeable future.”
Net sales of the D-Stat Dry product line were $4.3 million during the second quarter, an increase of 26% over the second quarter of 2005. “Our D- Stat Dry product line showed continued quarterly growth, with a gain of $261,000, or 6%, sequentially from the first quarter of 2006,” commented Mr. Root. “Looking forward, we believe that the product line extensions of the ThrombiGel® and other new versions in development will result in continued increases in sales of the D-Stat Dry product line throughout the remainder of 2006.”
Net sales of the Pronto extraction catheter totaled $2.3 million in the second quarter, an increase of 41% over the second quarter of 2005 and 12% sequentially from the first quarter. “In the second quarter we saw new competition in the U.S. market for extraction catheters, and we were able to meet the competition and continued to grow sales of our V3 version due to its superior performance characteristics,” commented Mr. Root.
Net sales of the Vari-Lase® endovenous laser product line totaled $1.6 million in the second quarter, an increase of 59% over the second quarter of 2005 and 14% sequentially from the first quarter. Net sales of the disposable products within the Vari-Lase product line increased 86% in the second quarter of 2006 over the second quarter of 2005 and 24% sequentially from the first quarter. “Our improvements in the new ‘completely custom’ disposable offering have been favorably received by our customers,” commented Mr. Root. “Even more important, our direct sales force has shown the coverage, support and consistency necessary to satisfy the competitive requirements of endovenous laser therapy customers,” Mr. Root added.
Net sales of specialty catheters, which consist of the Langston® dual lumen catheters, Twin-Pass(TM) dual access and Skyway(TM) support catheters, were $846,000 in the second quarter of 2006, an increase of 374% over the second quarter of 2005. “Our specialty catheters have now become the fourth major product line for Vascular Solutions,” commented Mr. Root. “The new Twin-Pass has been received very well, and we have several additional products working through our development process that should add to the outstanding growth in the specialty catheter product line through 2006 and into 2007,” added Mr. Root.
Net sales of access products, which consist of micro-introducers and specialty guidewires, totaled $369,000 in the second quarter, an increase of 155% over the second quarter of 2005 and 19% sequentially from the second quarter. “The access product line has outstanding growth potential which we are only beginning to realize,” commented Mr. Root. “This product line is expected to grow substantially with broader sales activities and several new products being introduced within the next year,” Mr. Root added
Net sales of the D-Stat® Flowable hemostat were $671,000 in the second quarter of 2006, an increase of 31% over the second quarter of 2005. “We expect the D-Stat Flowable to continue to grow modestly with its current indications for use,” commented Mr. Root. “Driving future growth will be the ‘pocket protector’ indication of the Flowable for use in pacemaker and ICD implants which we now have pending with the FDA and addresses a potential $10 million annual market.”
Net sales of the Duett(TM) sealing device totaled $570,000 in the second quarter of 2006. “We continue to support and ‘harvest’ our Duett product line with our existing customers, resulting in the expected decline in sales,” commented Mr. Root.
Overall gross margin across all products was 67% in the second quarter of 2006, in line with expectations, but down from 71% in the second quarter of 2005. The gross margin decrease was principally due to the growth in sales of products other than the D-Stat Dry, which has a substantially higher gross margin than the other products, and the conversion to the Pronto V3, which has a higher manufacturing cost than the original Pronto. Gross margins also were negatively affected by the addition of the new stock-based compensation expense. Based on projected increased sales of the V3, planned manufacturing cost improvements and the inclusion of stock-based compensation, gross margins for the remainder of 2006 are expected to increase to between 68% and 69%.
During the second quarter, development and qualification of a new source of thrombin for use in the company’s hemostatic products also continued. “In the second quarter we received conditional approval from the FDA to commence our clinical study, and we remain on track for the approval of the use of our thrombin in our hemostatic products by mid-2007. Our current supply of approved thrombin is projected to last us into 2008 under current sales forecasts,” commented Mr. Root.
The company also issued guidance for the third quarter of 2006 and raised its 2006 annual sales guidance. Net sales in the third quarter are expected to increase to between $11.0 million and $11.5 million, at least a 28% increase over the third quarter of 2005. “Due to the outstanding performance of the first two quarters, it is now reasonable to raise guidance for 2006 sales to between $43.5 million and $44.5 million. Longer term, net sales are expected to continue to increase by at least 25% annually over the next several years. We continue to believe that our strategy of internally developing a variety of new clinically-based products sold by our focused direct sales force to our existing customers will allow us to achieve our next long term milestone, which is $100 million in annual sales,” concluded Mr. Root.
Conference Call & Webcast Information
Vascular Solutions will host a live webcast starting at 3:30 p.m., Central Time today to discuss the information contained in this press release. The live web cast may be accessed on the investor relation’s portion of our web site at http://www.vascularsolutions.com . Web participants are encouraged to go to the web site at least 15 minutes prior to the start of the call to download and install any necessary audio software. An audio replay of the call will be available until Thursday, August 3, 2006 by dialing 1-800-642- 1687 and entering conference ID #2483573. A recording of the call will also be archived on the investor relation’s portion of the Company’s web site, http://www.vascularsolutions.com until Thursday, August 3, 2006. During the conference call the Company may answer one or more questions concerning business and financial developments and trends, the Company’s view on earnings forecasts and new product development and financial matters affecting the Company, some of the responses to which may contain information that has not been previously disclosed.
