NASDAQ, TSX: NVCN
VANCOUVER, May 10, 2017 /PRNewswire/ - Neovasc Inc.
("Neovasc" or the "Company") (NASDAQ, TSX: NVCN)
today announced financial results for the first quarter ended
March 31, 2017 (all figures in U.S.
dollars unless otherwise indicated).
"It was another quietly successful quarter," commented Neovasc
CEO, Alexei Marko. "We recently
treated two additional patients with the Tiara, one of whom
represents the start of our European CE Mark study which is now
approved in both Italy and
Germany; our success rates with
the Tiara to treat mitral regurgitation continue to support Tiara
as one of the leading transcather mitral valve therapy programs,
and sales of our patented treatment for refractory angina, Reducer,
continue to perform well across Europe."
The Company's proprietary product for treating mitral valve
disease, Tiara™, continues to perform well and has now been used to
treat 28 patients under early feasibility, compassionate use and
clinical study protocols across North
America and Europe.
The 30-day survival rate for the first 26 patients (those
treated more than 30 days ago) is 23 of 26 or 88% and there has
been no 30-day mortality observed in any of the last 17 patients.
The first patient treated with the Tiara is now past three
years' post implant. Importantly, the Company has begun
enrolling patients into its European CE Mark trial, with an initial
case performed in Italy and
additional cases to be scheduled in Germany and Italy over the coming months.
Implantation is completed through a short trans-apical procedure
and typically results in complete resolution of the patient's
mitral regurgitation without significant residual leaks or
obstruction of the ventricular outflow tract.
European sales of the Neovasc Reducer™ ("Reducer"), the
Company's innovative device to treat refractory angina, grew in the
quarter by 22% over the same period last year, reaching
$260,000. The growth is a
function of both new centres adopting the technology and higher
volumes at existing installed centres. Underlying the adoption and
higher volumes are the positive efficacy results physicians and
patients are witnessing post implantation with Reducer,
specifically reduced pain and angina discomfort, and improved
quality of life.
Results for the quarters ended March
31, 2017 and 2016
Revenues
Revenues for the three months ended
March 31, 2017 were $1,481,360 compared to revenues of $2,006,742 for the same period in 2016, a
decrease of 26% and consistent with the Company's plan to continue
to focus its business away from its traditional revenue streams
towards development and commercialization of its own products, the
Reducer and the Tiara. Reducer sales for the three months ended
March 31, 2017 were $260,765, compared to $213,765 for the same period in 2016,
representing an increase of 22%.
Contract manufacturing revenues for the three months ended
March 31, 2017 were $133,963, compared to $606,783 for the same period in 2016,
representing a decrease of 78%. The decrease in revenue for
the three months ended March 31, 2017
compared to the same period in 2016 is primarily due to the loss of
Boston Scientific Corporation ("Boston Scientific") as a
customer. In December 2016, the
Company entered into an agreement for Boston Scientific to acquire
the Company's advanced biologic tissue capabilities and certain
manufacturing assets and make a 15% equity investment in Neovasc,
for a total of $75 million in cash. Under the terms
of the approximate $68 million asset
purchase agreement the Company has been granted a license to the
purchased trade secrets and know-how and access to the sold
facilities to allow it to continue its tissue and valve assembly
activities for its remaining customers, and continue its own
tissue-related programs, including advancing the Tiara through its
clinical and regulatory pathways. The Company believes that
going forward contract manufacturing revenues will be derived from
a smaller customer base as the transcatheter aortic valve market
matures.
Revenues from consulting services for the three months ended
March 31, 2017 were $1,086,632, compared to $1,186,194 for the same period in 2016,
representing a decrease of 8%. The loss is indicative of the
trend the Company is seeing in consulting service revenue.
The Company anticipates that its consulting services revenue will
decline in the long-term as its consulting customers continue to
transition to becoming contract manufacturing customers or cease to
be customers at all.
Cost of Goods Sold
The cost of goods sold for the
three months ended March 31, 2017 was
$808,628, compared to $1,445,644 for the same period in 2016. The
overall gross margin for the three months ended March 31, 2017 was 45%, compared to 28% gross
margin for the same period in 2016. The Company has seen its
gross margins increase due to a change in the product mix as
Reducer revenues reflect an increasing proportion of the overall
revenues.
Expenses
Total expenses for the three months ended
March 31, 2017 were $8,489,404, compared to $10,075,039 for the same period in 2016,
representing a decrease of $1,585,635
or 16%. The decrease in total expenses for the three months
ended March 31, 2017 compared to the
same period in 2016 reflects a $2,578,692 decrease in general and administrative
expenses and a $970,736 increase in
product development and clinical trial expenses to advance the
Tiara and the Reducer development programs.
Selling expenses for the three months ended March 31, 2017 were $187,168, compared to $164,847 for the same period in 2016,
representing an increase of $22,321,
or 14%. The increase in selling expenses for the three months
ended March 31, 2017 compared to the
same period in 2016 reflects costs incurred for commercialization
activities for the Reducer.
General and administrative expenses for the three months ended
March 31, 2017 were $3,248,713 compared to $5,827,405 for the same period in 2016,
representing a decrease of $2,578,692, or 44%. The decrease in general
and administrative expenses for the three months ended March 31, 2017 compared to the same period in
2016 can be substantially explained by a $3,164,430 decrease in litigation expenses,
offset by a $462,676 increase in
share-based payments. Due to certain black-out periods during
2016 the Company was unable to grant annual option grants to
directors and officers of the Company. The 2016 annual awards
were granted in 2017. The charge for 2017 reflects
stock-based compensation for both the annual grants for 2016 and
2017.
Product development and clinical trial expenses for the three
months ended March 31, 2017 were
$5,053,523, compared to $4,082,787 for the same period in 2016,
representing an increase of $969,736,
or 24%. The increase in product development and clinical
trial expenses for the three months ended March 31, 2017 represented an increased
investment in the Tiara development program.
Other Income and Loss
The other loss for the three
months ended March 31, 2017 was
$28,299, compared to $1,319,023 for the same period in 2016, a
decrease of $1,290,724.
Included within other loss is a charge of $211,884 for post-judgment interest on the
damages provision related to the litigation with CardiAQ Valve
Technologies Inc. ("CardiAQ"), (see "Trends, Risks and
Uncertainties" and "Contractual Obligations and Contingencies" in
the Company's first quarter Management's Discussion and
Analysis). The decrease in the other loss can be explained by
a $52,636 decrease in the loss on
foreign exchange and by a $1,505,875
increase in the unrealized gain on the damages provision.
Losses
The operating losses and comprehensive losses
for the three months ended March 31,
2017 were $7,844,987 and
$7,927,304 respectively, or
$0.10 basic and diluted loss per
share, as compared with losses of $10,881,138 and $7,677,054, or $0.16 basic and diluted loss per share for the
same period in 2016. The $1,697,269 decrease in the operating loss
incurred for the three months ended March
31, 2017 compared to the same period in 2016 can be
substantially explained by a $2,578,692 decrease in general and administrative
expenses (of which $3,164,430 was a
decrease in litigation expense and $462,676 was an increase in stock-based
compensation charges) offset by a $970,736 increase in product development and
clinical trial expenses. The Company has incurred significant
costs in defending itself in lawsuits filed by CardiAQ. Total
litigation costs since the initial claims were filed in
June 2014 are approximately
$21.9 million and the Company may
require an additional $1 million to
cover additional litigation expenses up to and including the appeal
hearing, currently scheduled for August
2017.
Discussion of Liquidity and Capital Resources
Neovasc
finances its operations and capital expenditures with cash
generated from operations and equity financings. As at
March 31, 2017 the Company had cash
and cash equivalents of $16,206,632
compared to cash and cash equivalents of $22,954,571 as at December
31, 2016.
Cash used in operating activities for the three months ended
March 31, 2017, was $6,308,755, compared to $10,903,712 for the same period in 2016.
For the three months ended March 31,
2017, operating expenses were $6,153,498, compared to $10,256,486 for the same period in 2016.
This can substantially be explained by a decrease in litigation
expenses of $3,164,430 offset by an
increase in product development and clinical trial expenses of
$970,736.
The Company's working capital deficit is $24,221,853 as at March
31, 2017 compared to a working capital deficit of
$17,497,931 as at December 31, 2016. Unless the Company is
successful in an appeal of the verdict in the litigation with
CardiAQ, or otherwise is successful in reducing the amount of the
approximate $112 million damages
award to an amount less than the $70
million held in escrow, the Company will require significant
additional financing in order to pay the damages and to continue to
operate its business. There can be no assurance that such
financing will be available on favorable terms, or at all.
Going Concern
The Company may be faced with
significant monetary damages in the litigation with CardiAQ that
could exceed its resources and/or the loss of intellectual property
rights that could have a material adverse effect on the Company and
its financial condition. These circumstances indicate the
existence of material uncertainty and cast substantial doubt about
the Company's ability to continue as a going concern.
Outstanding Share Data
As at May 10, 2017, the Company had 78,897,345 common
voting shares issued and outstanding. Further, the following
securities are convertible into common shares of the Company:
9,234,029 stock options with a weighted average price of
C$3.57. The fully diluted share
capital of the Company at May 10,
2017 is 88,131,374.
The Company prepares its consolidated financial statements in
accordance with International Financial Reporting Standards, as
issued by the International Accounting Standards Board.
Neovasc's first quarter 2017 financial statements and notes and
its Management's Discussion and Analysis will be posted on the
Company's website at www.neovasc.com and will be filed on SEDAR and
EDGAR. In addition to the summary contained herein, readers are
encouraged to review the full disclosure in Neovasc's first quarter
2017 financial statements and Management's Discussion and
Analysis.
Conference Call and Webcast Information
Neovasc will
be hosting a conference call today at 4:30
pm ET to discuss these results. To participate in the
conference, dial 888 390 0546 or 416 764 8688. A recording of
the call will be available for 72 hours by calling 888 390 0541 or
416 764 8677 and using passcode 364834#. A link to the live
and archived audio webcast of the conference call will also be
available on the Presentations and Events page of the Investors
section of Neovasc's website at www.neovasc.com.
NEOVASC
INC.
|
Condensed Interim
Consolidated Statements of Financial Position
|
(Expressed in U.S.
dollars) (Unaudited)
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
2017
|
|
2016
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
16,206,632
|
$
|
22,954,571
|
|
|
Cash held in
escrow
|
|
70,076,034
|
|
70,000,000
|
|
|
Accounts
receivable
|
|
2,154,575
|
|
3,117,474
|
|
|
Inventory
|
|
460,721
|
|
196,723
|
|
|
Prepaid expenses and
other assets
|
|
877,948
|
|
505,340
|
|
Total current
assets
|
|
89,775,910
|
|
96,774,108
|
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
|
|
Restricted
cash
|
|
450,360
|
|
449,760
|
|
|
Property, plant and
equipment
|
|
1,760,872
|
|
1,585,635
|
|
Total non-current
assets
|
|
2,211,232
|
|
2,035,395
|
|
|
|
|
|
Total
assets
|
$
|
91,987,142
|
$
|
98,809,503
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
2,004,783
|
$
|
2,490,943
|
|
|
Damages
provision
|
|
111,992,980
|
|
111,781,096
|
|
Total current
liabilities and total liabilities
|
|
113,997,763
|
|
114,272,039
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Share
capital
|
|
168,746,036
|
|
168,712,673
|
|
|
Contributed
surplus
|
|
23,647,293
|
|
22,301,437
|
|
|
Accumulated other
comprehensive loss
|
|
(4,775,357)
|
|
(4,693,040)
|
|
|
Deficit
|
|
(209,628,593)
|
|
(201,783,606)
|
|
Total
equity
|
|
(22,010,621)
|
|
(15,462,536)
|
|
|
|
|
|
Total liabilities
and equity
|
$
|
91,987,142
|
$
|
98,809,503
|
|
|
|
NEOVASC
INC.
|
Condensed Interim
Consolidated Statements of Loss and Comprehensive
Loss
|
For the three months
ended March 31,
|
(Expressed in U.S.
dollars) (Unaudited)
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
|
|
|
|
REVENUE
|
|
|
|
|
Reducer
|
$
|
260,765
|
$
|
213,765
|
Contract
manufacturing
|
|
133,963
|
|
606,783
|
Consulting
services
|
|
1,086,632
|
|
1,186,194
|
|
|
1,481,360
|
|
2,006,742
|
|
|
|
|
|
COST OF GOODS
SOLD
|
|
808,628
|
|
1,445,644
|
GROSS
PROFIT
|
|
672,732
|
|
561,098
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
Selling
expenses
|
|
187,168
|
|
164,847
|
General and
administrative expenses
|
|
3,248,713
|
|
5,827,405
|
Product development
and clinical trials expenses
|
|
5,053,523
|
|
4,082,787
|
|
|
8,489,404
|
|
10,075,039
|
|
|
|
|
|
OPERATING
LOSS
|
|
(7,816,672)
|
|
(9,513,941)
|
|
|
|
|
|
OTHER
INCOME/(EXPENSE)
|
|
|
|
|
Interest
income
|
|
89,969
|
|
89,274
|
Interest on damages
provision
|
|
(211,884)
|
|
-
|
Foreign exchange
loss
|
|
(1,355,661)
|
|
(1,408,297)
|
Unrealized gain on
damages provision
|
|
1,505,875
|
|
-
|
|
|
28,299
|
|
(1,319,023)
|
LOSS BEFORE
TAX
|
|
(7,788,373)
|
|
(10,832,964)
|
|
|
|
|
|
Tax
expense
|
|
(56,614)
|
|
(48,174)
|
|
|
|
|
|
LOSS FOR THE
PERIOD
|
$
|
(7,844,987)
|
$
|
(10,881,138)
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD
|
|
|
|
|
Exchange difference
on translation
|
|
(1,588,192)
|
|
3,289,436
|
Unrealized gain on
damages provision
|
|
1,505,875
|
|
-
|
|
|
82,317
|
|
3,289,436
|
|
|
|
|
|
LOSS AND
COMPREHENSIVE LOSS FOR THE PERIOD
|
$
|
(7,927,304)
|
$
|
(7,591,702)
|
|
|
|
|
|
LOSS PER
SHARE
|
|
|
|
|
Basic and diluted
loss per share
|
$
|
(0.10)
|
$
|
(0.16)
|
|
|
|
NEOVASC
INC.
|
Condensed Interim
Consolidated Statements of Cash Flows
|
For the three months
ended March 31,
|
(Expressed in U.S.
dollars) (Unaudited)
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Loss for the
period
|
$
|
(7,844,987)
|
$
|
(10,881,138)
|
Adjustments
for:
|
|
|
|
|
|
Depreciation
|
|
111,283
|
|
147,483
|
|
Share-based
payments
|
|
1,361,677
|
|
561,584
|
|
Damages
provision
|
|
211,884
|
|
-
|
|
Write-down accounts
receivable
|
|
40,000
|
|
4,859
|
Income tax
expense
|
|
56,614
|
|
-
|
Interest
income
|
|
(89,969)
|
|
(89,274)
|
|
|
(6,153,498)
|
|
(10,256,486)
|
|
|
|
|
|
Net change in
non-cash working capital items:
|
|
|
|
|
|
Accounts
receivable
|
|
955,503
|
|
(43,249)
|
|
Inventory
|
|
(264,179)
|
|
(484,910)
|
|
Prepaid expenses and
other assets
|
|
(427,692)
|
|
(264,894)
|
|
Accounts payable and
accrued liabilities
|
|
(508,858)
|
|
64,489
|
|
|
(245,226)
|
|
(728,564)
|
|
|
|
|
|
Interest
received
|
|
89,969
|
|
81,338
|
|
|
89,969
|
|
81,338
|
|
|
|
|
|
Net cash applied
to operating activities
|
|
(6,308,755)
|
|
(10,903,712)
|
|
|
|
|
|
INVESTING
ACTIVITES
|
|
|
|
|
|
Increase in cash held
in escrow
|
|
(76,034)
|
|
-
|
|
Purchase of property,
plant and equipment
|
|
(275,226)
|
|
(305,585)
|
Net cash (applied
to)/received from investing activities
|
|
(351,260)
|
|
(305,585)
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
Proceeds from
exercise of options
|
|
17,542
|
|
48,495
|
Net cash received
from financing activities
|
|
17,542
|
|
48,495
|
|
|
|
|
|
NET CHANGE IN CASH
AND CASH EQUIVALENTS
|
|
(6,642,473)
|
|
(11,160,802)
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS
|
|
|
|
|
Beginning of the
period
|
|
22,954,571
|
|
55,026,171
|
Exchange difference
on cash and cash equivalents
|
|
(105,466)
|
|
3,037,823
|
End of the
period
|
$
|
16,206,632
|
$
|
46,903,192
|
|
|
|
|
|
Represented
by:
|
|
|
|
|
Cash
|
|
7,162,305
|
|
6,822,114
|
Cashable high
interest savings accounts
|
|
9,044,327
|
|
21,558,219
|
Cashable guaranteed
investment certificates
|
|
-
|
|
18,522,859
|
|
$
|
16,206,632
|
$
|
46,903,192
|
About Neovasc Inc.
Neovasc is a specialty medical device company that develops,
manufactures and markets products for the rapidly growing
cardiovascular marketplace. Its products include the Neovasc
Reducer™, for the treatment of refractory angina which is not
currently available in the United
States and has been available in Europe since 2015 and the Tiara™, for the
transcatheter treatment of mitral valve disease, which is currently
under investigation in the United
States, Canada and
Europe. The Company also sells a
line of advanced biological tissue products that are used as key
components in third-party medical products including transcatheter
heart valves. For more information, visit: www.neovasc.com.
This news release contains forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of
1995 and applicable Canadian securities laws relating to the
Company's plans and expectations concerning its business, financial
results, trends, litigation and other matters, including the
Company's intentions and expectations relating to the CardiAQ
litigation, significant monetary damages and required additional
financing that may result from the CardiAQ litigation, the
Company's ability to continue as a going concern, additional
CardiAQ litigation expenses, the Company's intention to continue
the European CE Mark trial, and schedule additional cases in the
coming months the decline of contract manufacturing and consulting
revenues in future periods, the focus of the Company's business
toward development and commercialization of its own products and
the future success of the Company in advancing the standard of care
and quality of life for its patients. The words "expect", "may",
"believe", "continue", "remain", "strategy", and similar words or
expressions are intended to identify forward-looking statements.
Forward-looking statements are based on estimates and assumptions
made by the Company in light of its experience and its perception
of historical trends, current conditions and expected future
developments, as well as other factors that the Company believes
are appropriate in the circumstances. Many factors and assumptions
could cause the Company's actual results, performance or
achievements to differ materially from those expressed or implied
by the forward-looking statements, including, without limitation,
risks relating to our litigation with CardiAQ, including the
Company's ability to successfully appeal the validity of the awards
as well as the ruling on inventorship, which create material
uncertainty and which cast substantial doubt on our ability to
continue as a going concern; the substantial doubt about our
ability to continue as a going concern; risks relating to our need
for significant additional future capital and our ability to raise
additional funding; risks relating to claims by third parties
alleging infringement of their intellectual property rights; our
ability to establish, maintain and defend intellectual property
rights in our products; risks relating to results from clinical
trials of our products, which may be unfavorable or perceived as
unfavorable; our history of losses and significant accumulated
deficit; risks associated with product liability claims, insurance
and recalls; risks relating to competition in the medical device
industry, including the risk that one or more competitors may
develop more effective or more affordable products; risks relating
to our ability to achieve or maintain expected levels of market
acceptance for our products, as well as our ability to successfully
build our in-house sales capabilities or secure third-party
marketing or distribution partners; our ability to convince public
payors and hospitals to include our products on their approved
products lists; risks relating to new legislation, new regulatory
requirements and the efforts of governmental and third party payors
to contain or reduce the costs of healthcare; risks relating to
increased regulation, enforcement and inspections of participants
in the medical device industry, including frequent government
investigations into marketing and other business practices; risks
associated with the extensive regulation of our products and trials
by governmental authorities, as well as the cost and time delays
associated therewith; risks associated with post-market regulation
of our products; health and safety risks associated with our
products and our industry; risks associated with our manufacturing
operations, including the regulation of our manufacturing processes
by governmental authorities and the availability of two critical
components of the Reducer; risk of animal disease associated with
the use of our products; risks relating to the manufacturing
capacity of third-party manufacturers for our products, including
risks of supply interruptions impacting the Company's ability to
manufacture its own products; risks relating to breaches of
anti-bribery laws by our employees or agents; risks associated with
future changes in financial accounting standards and new accounting
pronouncements; our dependence upon key personnel to achieve our
business objectives; our ability to maintain strong relationships
with physicians; risks relating to the sufficiency of our
management systems and resources in periods of significant growth;
risks associated with consolidation in the health care industry,
including the downward pressure on product pricing and the growing
need to be selected by larger customers in order to make sales to
their members or participants; our ability to successfully identify
and complete corporate transactions on favorable terms or achieve
anticipated synergies relating to any acquisitions or alliances;
anti-takeover provisions in our constating documents which could
discourage a third party from making a takeover bid beneficial to
our shareholders; risks relating to conflicts of interests among
the Company's officers and directors as a result of their
involvement with other issuers; and risks relating to the influence
of significant shareholders of the Company over our business
operations and share price. These risk factors and others relating
to the Company are discussed in greater detail in the "Risk
Factors" section of the Company's Annual Information Form, which is
included in its Annual Report on Form 40-F and Management's
Discussion and Analysis of Financial Condition and Results of
Operations (copies of which filings may be obtained at
www.sedar.com or www.sec.gov). These factors should be
considered carefully, and readers should not place undue reliance
on the Company's forward-looking statements. The Company has
no intention and undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
SOURCE Neovasc Inc.