OAKLAND, Calif., Nov. 14 /PRNewswire-FirstCall/ -- -- World Heart Corporation, a developer of mechanical circulatory support systems, today reported its third quarter 2006 financial results. In a separate press release today the Company also announced a $14.1 million private placement financing and a restructuring of its operations.
Revenues for the third quarter ended September 30, 2006 were $1.4 million, a decrease of 35%, compared with revenues of $2.2 million reported in the third quarter ended September 30, 2005. For the first nine months of 2006, revenues were $7.7 million, a decrease of 4%, compared with revenues of $8.0 million for the first nine months of 2005. The Company believes that the decrease in sales of its implant kits during the three months ended September 30, 2006 is indicative of the shift in market demand away from the first generation VAD products, including its Novacor LVAS, to next generation VAD products.
The net loss for the 2006 third quarter was $7.6 million, or $0.14 per share, when 55.5 million weighted average common shares were outstanding, compared with a net loss of $28.1 million, or $0.64 per share, in the prior year’s third quarter, when 43.8 million weighted average common shares were outstanding. The net loss for the nine month period ended September 30, 2006 was $15.0 million, or $0.27 per share, when 55.5 million weighted average common shares were outstanding, compared with a net loss of $36.7 million, or $1.42 per share for the nine-month period ended September 30, 2005, when 25.9 million weighted average common shares were outstanding. Results for the third quarter of 2006 included a $3.6 million charge to cost of sales associated with the write-down of certain of its Novacor LVAS inventory. WorldHeart’s cash and cash equivalents were $1.5 million at September 30, 2006, a decrease of $3.0 million from June 30, 2006 and a decrease of $9.1 million from December 31, 2005.
Additional Financial Information
For the three months ended September 30, 2006, the Corporation had a negative gross margin of $3.1 million, compared with a gross margin of $0.4 million for the three months ended September 30, 2005. For the nine months ended September 30, 2006, the gross margin was a negative $0.2 million, compared with a gross margin of $2.0 million for the nine months ended September 30, 2005. The significantly higher cost of goods sold in this year’s third quarter and the nine months ended September 30, 2006 was due principally to the $3.6 million write-down of Novacor LVAS inventories. WorldHeart determined that certain of its inventory would not be utilized in future periods due to reduced sales levels of Novacor LVAS product. There was no inventory write off in 2005. We will continue to monitor Novacor LVAS sales in the future and may initiate further reductions to align inventories with market demand.
Selling, general and administrative expenses for the three months ended September 30, 2006 were $2.0 million, a decrease of $0.6 million, or 23%, from the same period in 2005. For the nine months ended September 30, 2006, selling, general and administrative expenses were $6.7 million, a decrease of $2.3 million, or 26%, from the nine months ended September 30, 2005. These decreases were due to reduced selling and administrative costs, including savings realized from the consolidation of North American Novacor operations completed in June 2005.
Research and development expenses for the three months ended September 30, 2006 were $2.4 million, an increase of $0.5 million, compared with the three months ended September 30, 2005. Research and development expenses for the nine months ended September 30, 2006 were $8.1 million, an increase of $3.7 million, compared with the same period last year. These increases were primarily due to the MedQuest acquisition in July 2005 and the related development costs of the Levacor rotary ventricular assist device.
About World Heart Corporation
WorldHeart is a developer of mechanical circulatory support systems with leading next generation technologies and a full portfolio of product candidates. The company is headquartered in Oakland, California, USA with additional facilities in Salt Lake City, Utah and in Heesch, Netherlands. WorldHeart’s registered office is Ottawa, Ontario, Canada.
Any forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include statements regarding the Company’s expectations with respect to the cost reduction efforts and its impact on the Company’s ability to maintain operations, the Company’s ability to secure additional funding, including the completion of the $14 million private placement or enter into other strategic relationship, as well as, other statements that can be identified by the use of forward-looking language, such as “believes,” “feels,” “expects,” “may,” “will,” “should,” “seeks,” “plans,” “anticipates,” or “intends” or the negative of those terms, or by discussions of strategy or intentions. Investors are cautioned that all forward-looking statements involve risk and uncertainties, including without limitation: continued slow market acceptance of and demand for the Company’s Novacor LVAS product; completion of the private placement and need for additional financing in the future; costs and delays associated with clinical trials; limitations on third-party reimbursement; inability to protect proprietary technology; continued slower Destination Therapy adoption rate for VAD; loss of commercial market share to competitors due to WorldHeart’s financial condition; delays in completion of cost reductions programs associated with the restructuring plan; and other risks detailed in the Company’s filings with the United States Securities and Exchange Commission, including its Annual Report on Form 10-KSB for the year ended December 31, 2005, as amended.
WORLD HEART CORPORATION Consolidated Balance Sheets (United States Dollars - in thousands) September 30, December 31, 2006 2005 (Unaudited) ASSETS Current assets Cash and cash equivalents $1,541 $10,662 Trade and other receivables 1,721 3,896 Prepaid expenses 1,145 778 Inventory 4,203 8,216 8,610 23,552 Long-term assets Capital assets 1,435 1,837 Other assets 1,290 1,433 Total assets $11,335 $26,822 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable and accrued liabilities $4,265 $3,755 Deferred revenue 123 1,205 Other liabilities 1,048 1,149 Total current liabilities $5,436 $6,109 Total shareholders’ equity $5,899 $20,713 Total liabilities and shareholders’ equity $11,335 $26,822 WORLD HEART CORPORATION Consolidated Statements of Operations (unaudited) United States Dollars and shares in thousands except per share amounts) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 Revenue $1,387 $2,150 $7,660 $8,016 Cost of goods sold (4,524) (1,726) (7,846) (5,980) Gross margin (3,137) 424 (186) 2,036 Operating expenses Selling, general and administrative 1,964 2,540 6,695 9,003 Research and development 2,430 1,914 8,092 4,376 Restructuring costs -- (8) -- 333 Acquired in-process research and development -- 18,147 -- 18,147 Amortization of intangibles 48 31 144 287 Total operating expenses 4,442 22,624 14,931 32,146 Operating loss (7,579) (22,201) (15,118) (30,110) Other income (expenses) (40) (50) 169 (726) Net loss for the quarter $(7,619) $(22,251) $(14,948) $(30,836) Effect of warrant exchange -- (5,860) -- (5,860) Net loss applicable to common shareholders $(7,619) $(28,111) $(14,948) $(36,696) Weighted average number of common shares outstanding 55,480 43,797 55,480 25,918 Basic and diluted loss per common share $(0.14) $(0.64) $(0.27) $(1.42)
World Heart Corporation
CONTACT: Mr. Richard Juelis, +1-510-563-4713, or Ms. Peggy Allman,+1-510-563-4721, both of World Heart Corporation
Web site: http://www.worldheart.com//
