Cardiovascular Systems, Inc. (CSI) (Nasdaq: CSII), a medical
device company developing and commercializing innovative
interventional treatment systems for vascular disease, today
reported financial results for its fiscal third quarter ended March
31, 2009. On February 25, 2009, CSI completed a reverse merger with
Replidyne, Inc. and is now listed on the Nasdaq Global Market�
under the symbol �CSII.�
CSI�s revenue in the third quarter of fiscal 2009 rose to $15.1
million, a 97-percent increase over revenue of $7.7 million in
third quarter of last fiscal year. The third-quarter loss from
operations improved 30 percent to $(6.5) million from $(9.3)
million in the third quarter of fiscal 2008. The net loss improved
64 percent to $(3.8) million in the third quarter, from $(10.6)
million in the third quarter of fiscal 2008. Net income available
to common shareholders, which includes the effect of accretion of
redeemable convertible preferred stock, was $21.9 million, or $2.63
per basic common share and a net loss of $(0.32) per diluted common
share, compared with a net loss of $(24.8) million, or $(5.45) per
basic and diluted common share, in last year�s third quarter. The
number of weighted average common shares outstanding increased by
3.8 million due to the completion of the reverse merger, issuance
of restricted stock and exercise of stock options.
The fiscal 2009 third-quarter net loss includes income of $3.2
million from a decline in the value of redeemable convertible
preferred stock warrants, estimated just prior to their conversion
to common stock warrants in connection with the reverse merger. In
addition, the third quarter�s net income available to common
shareholders includes income of $25.8 million from a decline in the
value of redeemable convertible preferred stock, estimated just
prior to its conversion to common stock. The third quarter of 2008
includes losses of $(0.7) million and $(14.2) million from the
accretion of the redeemable convertible preferred stock warrants
and stock, respectively.
David L. Martin, CSI president and chief executive officer,
said: �In our first quarter as a publicly traded company, we
continued strong revenue growth and meaningful bottom line
improvement, as we drive toward profitability and financial
independence. We also refinanced our debt, increasing our credit
line and extending repayment terms. On the operations side, we
continued to expand and enhance our product offerings, built a
clinically oriented sales organization, and laid the groundwork for
additional clinical trials.�
CSI�s revenue has grown each quarter since the September 2007
launch of the Diamondback 360o� System, a minimally invasive
catheter system for treating peripheral arterial disease (PAD) in
leg arteries. Martin said, �More than 12,000 procedures have been
performed with our system � a strong endorsement. We are definitely
playing an important role in raising the standard of care for
patients with PAD. Our Diamondback 360o offers favorable clinical
and economic outcomes and clear advantages over other treatment
options, as well as an unprecedented safety profile.�
The number of hospitals using the Diamondback 360� system rose
to 487 by the end of the third quarter, up from 400 at the end of
the second quarter of fiscal 2009 and 106 at the end of the third
quarter of fiscal 2008. Sales of disposable units also grew with
nearly 4,600 units sold in the third quarter this fiscal year,
compared to 2,300 units in the third quarter of fiscal 2008. The
90-day reorder rate for the quarter was strong at over 90 percent,
and revenue generated from reorders comprised over 80 percent of
total revenue for the quarter.
The fiscal third-quarter gross margin increased to 74 percent
from 67 percent in the same period last year, driven by higher
disposable volumes, product cost reductions and manufacturing
efficiencies. Sales, general and administrative expenses grew 41
percent - a rate less than half of the revenue growth rate - to
$14.3 million. The increase was due to expansion of the direct
sales organization to nearly 100 professionals from 36 in March
2008. The sales team is expected to grow to just over 100 in the
fiscal fourth quarter. CSI has continued to invest significantly in
innovation and product development; however, research and
development expenses declined 21 percent to $3.4 million due to the
completion and timing of projects.
The balance sheet as of March 31, 2009 reflects the reverse
merger. Cash increased to $37.8 million from $6.4 million at
December 31, 2008 and $7.6 million at the end of fiscal 2008. All
preferred stock warrants and preferred stock have been converted to
common stock warrants and stock, and recorded in shareholders�
equity. CSI now has 13.8 million common shares outstanding.
In the first nine months of fiscal 2009, revenue grew to $40.8
million, compared to $12.3 million in the same period last year,
which only had two quarters of revenue due to the timing of FDA
clearance to market the initial Diamondback 360� product. The gross
margin in the first nine months of fiscal 2009 was 71 percent, up
from 57 percent in the same period last year, due to higher product
volumes, manufacturing efficiencies and product cost reductions. In
the first nine months of fiscal 2009, the net loss was $(26.3)
million, compared to $(27.8) million in the same period last fiscal
year. The lower net loss reflects higher revenue, partially offset
by significant investments in sales and marketing, infrastructure
to support growth and product development. The net loss available
to common shareholders, including declines or accretion of
preferred stock, was $(3.5) million, or $(0.57) per common share,
in the first nine months of fiscal 2009, compared to $(47.2)
million, or $(11.04) per common share, in the comparable period
last year.
Debt Refinanced
CSI expanded its accounts receivable line of credit by $5.0
million to $10.0 million on April 30, 2009, providing additional
available funding for the future. Term loans totaling $5.5 million
that were due in September 2009 were also refinanced with a new
term loan having a fixed interest rate of 9 percent and a final
payment at maturity of 1 percent of the original loan amount. The
new loan will be repaid in equal installments of principal and
interest over 30 months beginning on June 1, 2009. No advances are
outstanding under the line of credit; however, availability is
reduced by the outstanding balance of the new term loan.
Product Offerings Expanded
In April 2009, CSI expanded its product portfolio by signing an
agreement with Invatec, a comprehensive provider of interventional
products, to market Invatec�s PTA balloon catheter line in the
United States. In addition, CSI launched the newest addition to its
Viper line of supplemental products, the ViperSheath� Introducer
Sheath.
Martin noted, �We are committed to providing comprehensive
endovascular tools to physicians to treat PAD. Invatec is a strong
strategic fit for CSI. Many physicians are already familiar with
Invatec products and are confident using them. Our ViperSheath
launch is another important addition to our portfolio. These
developments expand our product offerings while leveraging our
national sales organization.�
In some patient cases, balloon angioplasty may also be used to
achieve a larger vessel diameter after removing plaque with the
Diamondback 360�. Initial treatment with the CSI system can make
large vessels above the knee more compliant, so that the Invatec
balloons expand with far less pressure, avoiding both dissection
and the need to stent. CSI will offer the Invatec balloon catheter
line, including the SubMarine Plus� PTA Balloon Catheter, the
Admiral Xtreme� PTA Balloon Catheter and the Amphirion Deep� PTA
Balloon Catheter.
The ViperSheath is an introducer sheath providing a smooth,
pliable solution for vessel access. A tapered soft tip means low
insertion force and minimal trauma on vessel walls during
insertion. A kink- and crush-resistant catheter allows for optimal
crossability and easy navigation of tortuous vessels. ViperSheath
joins the existing CSI product portfolio, which includes
ViperSlide�, ViperTrack� and ViperWire�.
Clinical Trials to Be Launched
CSI plans to initiate two clinical trials in mid-calendar 2009
to generate additional data on outcomes achieved with the
Diamondback 360o. The company recently appointed Dr. Nabil Dib,
MSc, FACC, a highly qualified and respected interventional
cardiologist and researcher, as medical advisor. Dr. Dib, in
conjunction with a world-class science task force he has assembled,
will oversee the company�s ongoing clinical programs and ensure
that clinically useful data is provided to the physician
community.
Martin continued, �CSI is committed to addressing PAD and that
includes generating scientifically sound data for clinicians. Dr.
Dib and his renowned task force members will guide these efforts.
The studies we are launching will expand on the knowledge gained
through our landmark pivotal OASIS clinical trial, the first-ever
prospective multi-center trial evaluating an atherectomy product.
We also expect to complete an IDE submission to the FDA later this
year for a coronary application of our product.�
Summaries of two clinical studies are as follows:
- The Calcium 360o
study is a prospective, randomized study comparing the
effectiveness of the Diamondback 360o to balloon dilation in
treating heavily calcified lesions below the knee. Calcified
lesions occur in 75 percent of lesions below the knee. This study
will enroll 50 patients at four U.S. medical centers.
- The Compliance
360o study, also prospective and randomized, will
evaluate the clinical benefit of alteration in vessel compliance
with the Diamondback 360o. The study compares the performance of
the Diamondback 360� plus a low-pressure balloon inflation with
that of a high-pressure balloon inflation alone. The study calls
for enrolling 50 patients at five U.S. medical centers.
Fourth-Quarter Fiscal 2009 Earnings Guidance
For the fourth quarter of the fiscal year ending June 30, 2009,
CSI anticipates revenue in the range of $15.9 million to $17.9
million. This represents growth of about 60 percent to 80 percent
over the fourth quarter of fiscal 2008. Gross margin is expected to
be similar to third quarter this year. The company anticipates the
net loss to range from $(7.5) million to $(8.6) million,
representing a 24-percent to 34-percent improvement over the fourth
quarter of fiscal 2008. An improvement is also expected on an
adjusted EBITDA basis, calculated as loss from operations, less
depreciation and amortization and stock-based compensation expense.
The adjusted EBITDA loss for the fourth quarter of fiscal 2009 is
expected to be between $(4.1) million and $(5.2) million, versus
$(10.0) million in last year�s fourth quarter. The improvements in
net loss and adjusted EBITDA are due to increasing revenue and
gross profit, with lower operating expense growth.
Martin added, �The PAD market is large and growing, yet was
underserved by prior treatment options. We believe the Diamondback
360� fills a previously unmet need, which will drive growth in both
PAD atherectomy procedures and in CSI�s revenue. We expect to limit
our expense growth to a rate lower than our revenue growth rate, as
we continue to drive the company toward profitability and financial
independence. To that end, our goal is to achieve our first
profitable quarter by the end of calendar 2010 and to operate
within our current available cash, supplemented as necessary with
available debt.�
About the Diamondback 360�� Orbital Atherectomy
System
CSI�s primary product is the Diamondback 360o�, a minimally
invasive catheter system for treating peripheral arterial disease
(PAD) in leg arteries. The Diamondback 360o is highly effective in
removing plaque in vessels both below the knee and above the knee.
Between 8 million and 12 million Americans suffer from PAD, which
is caused by the accumulation of plaque in peripheral arteries
(commonly the pelvis or leg) reducing blood flow. Symptoms include
leg pain when walking or at rest, and PAD can lead to tissue loss
and eventually limb amputation.
Conference Call Today at 4 PM CT (5 PM ET)
Cardiovascular Systems, Inc. will host a live conference call
and webcast of its fiscal third-quarter 2009 results today,
Wednesday, May 6, 2009, at 4 p.m. CT (5 p.m. ET). To access the
call dial (888) 713-4214 and enter 26726197. Please dial in at
least 10 minutes prior to the call. To listen to the live webcast,
go to the investor information section of the company�s Web site,
www.csi360.com, and click on
the webcast icon. A webcast replay will be available beginning at 7
p.m. CT the same day.
For an audio replay of the conference call, dial (888) 286-8010
and enter access number 71489482. The audio replay will be
available beginning at 8 p.m. CT on Wednesday, May 6, 2009, through
6 p.m. CT on Monday, May 11, 2009.
Safe Harbor
Certain statements in this news release are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 and are intended to enjoy the protection of the
safe harbor for forward-looking statements provided by that Act.
For example, statements in this press release regarding (i) CSI�s
plans to initiate two clinical trials in calendar 2009; (ii) CSI�s
expectation of making an IDE Submission to the FDA later this year
for a coronary application of CSI�s product; and (iii) anticipated
revenue, gross margin, net loss, and adjusted EBITDA for the fourth
quarter of fiscal 2009, are forward looking statements. These
statements involve risks and uncertainties which could cause
results to differ materially from those projected, including but
not limited to the potential for unanticipated delays in enrolling
medical centers and patients for clinical trials; new data or
events that may disrupt plans to file the IDE for coronary
applications; dependence on market growth; the difficulty in
accurately predicting product, customer and geographic sales mix;
the reluctance of physicians to accept new products, the impact of
competitive products and pricing; dependence on major customers;
the difficulty to successfully manage operating costs; fluctuations
in quarterly results; approval of products for reimbursement and
the level of reimbursement, general economic conditions and other
factors detailed from time to time in CSI�s SEC reports, including
its registration statement on Form S-4 declared effective by the
SEC on January 26, 2009 . CSI encourages you to consider all of
these risks, uncertainties and other factors carefully in
evaluating the forward-looking statements contained in this
release. As a result of these matters, changes in facts,
assumptions not being realized or other circumstances, CSI's actual
results may differ materially from the expected results discussed
in the forward-looking statements contained in this release. The
forward-looking statements made in this release are made only as of
the date of this release, and CSI undertakes no obligation to
update them to reflect subsequent events or circumstances.
Use of Non-GAAP Financial Measures
To supplement CSI's consolidated condensed financial statements
prepared in accordance with U.S. generally accepted accounting
principles (GAAP), CSI uses certain non-GAAP financial measures in
this release. Reconciliations of the non-GAAP financial measures
used in this release to the most comparable U.S. GAAP measures for
the respective periods can be found in tables later in this release
immediately following the consolidated statements of operations.
Non-GAAP financial measures have limitations as analytical tools
and should not be considered in isolation or as a substitute for
CSI's financial results prepared in accordance with GAAP.
About Cardiovascular Systems, Inc.
Cardiovascular Systems, Inc. is a medical device company focused
on developing and commercializing interventional treatment systems
for vascular disease. The company's Diamondback 360�� System is
capable of treating a broad range of plaque types both above and
below the knee, including calcified vessel lesions, and addresses
many of the limitations associated with existing treatment
alternatives. In August 2007, the U.S. FDA granted 510(k) clearance
for the use of the Diamondback 360� as a therapy for PAD
(peripheral arterial disease), and CSI commenced a U.S. product
launch in September 2007. The Diamondback 360� system has been
adopted by nearly 500 hospitals across the United States. For more
information visit the company's Web site at www.csi360.com.
Cardiovascular Systems, Inc. Consolidated Statements of
Operations (Dollars in Thousands, except per share and share
amounts) (unaudited) � �
Three Months Ended
Nine Months Ended
March 31,
March 31,
2009 �
2008
2009 �
2008 Revenues $
15,115 $ 7,654 $ 40,766 $ 12,285 Cost of goods sold �
3,920 � �
2,512 � �
11,954 �
�
5,244 � Gross profit �
11,195 � �
5,142 � �
28,812 � �
7,041 �
� Selling, general and administrative 14,253 10,095 45,626 23,276
Research and development �
3,428 � �
4,338 � �
11,851 � �
10,662
� Total expenses �
17,681 � �
14,433 � �
57,477 � �
33,938 � Loss from operations
�
(6,486 ) �
(9,291
) �
(28,665 ) �
(26,897 ) Other income (expense)
Interest expense (971 ) � (1,831 ) � Interest income 171 399 3,180
1,012
Decretion (accretion) of
redeemable�convertible preferred stock warrants
3,157 (696 ) 2,991 (912 ) Gain on investments 300 � 300 �
Impairment on investments �
� � �
(1,023
) �
(2,233 ) �
(1,023 ) Total other income (expense) �
2,657 � �
(1,320 ) �
2,407 � �
(923 ) Net loss
(3,829 ) (10,611 ) (26,258 ) (27,820 )
Decretion (accretion) of
redeemable�convertible preferred stock
�
25,778 � �
(14,216 ) �
22,781 � �
(19,422 )
Net income (loss) available to
common�shareholders
$ 21,949 �
$
(24,827 )
$ (3,477 )
$ (47,242 ) Net income (loss) per common
share: Basic
$ 2.63 �
$
(5.45 ) $ (0.57
) $ (11.04 )
Diluted
$ (0.32 )
$ (5.45 ) $
(0.57 ) $
(11.04 )
Weighted average common
shares�used in computation:
Basic �
8,343,660 � �
4,552,694 � �
6,096,523 � �
4,278,109 � Diluted �
12,048,581 � �
4,552,694 � �
6,096,523 � �
4,278,109 � � �
Stock-based compensation supplemental detail (included in
amounts above): (Dollars in Thousands) (unaudited) Cost
of goods sold $ 92 $ 72 $ 367 $ 141 Selling, general and
administrative 1,400 1,116 4,124 5,893 Research and development �
220 � �
88 � �
441 � �
188 � Totals
$ 1,712 �
$ 1,276 �
$
4,932 �
$ 6,222 �
Cardiovascular Systems, Inc. Consolidated Balance
Sheets (Dollars in Thousands) (unaudited) � �
��March 31,
��June 30,
2008
2008
ASSETS Current assets Cash and cash equivalents $ 37,844 $
7,595 Accounts receivable, net 8,092 4,897 Inventories 2,737 3,776
Prepaid expenses and other current assets �
1,179 �
1,936 � Total current assets 49,852 18,204 Auction
rate security put option 2,700 � Investments, trading 19,800 �
Investments, available for sale � 21,733 Property and equipment,
net 1,624 1,041 Patents, net 1,265 980 Other assets �
530
���
Total assets
$ 75,771 $
41,958 � �
LIABILITIES AND SHAREHOLDERS�
EQUITY (DEFICIENCY)
� Current liabilities Current maturities of long-term debt $ 24,964
$ 11,888 Accounts payable 4,841 5,851 Accrued expenses 4,438 3,467
Deferred revenue �
� �
116 � Total
current liabilities �
34,243 �
21,322 �
Long-term liabilities Long-term debt, net of current maturities
5,498 � Redeemable convertible preferred stock warrants � 3,986
Lease obligation and other liabilities �
1,561 �
100 � Total long-term liabilities �
7,059
�
4,086 � Total liabilities �
41,302 �
25,408 � Commitments and contingencies Redeemable
convertible preferred stock � 98,242 Total shareholders� equity
(deficiency) �
34,469 �
(81,692 ) Total
liabilities and shareholders� equity (deficiency)
$
75,771 $ 41,958 �
Non-GAAP Financial Measures
To supplement CSI's consolidated condensed financial statements
prepared in accordance with GAAP, CSI uses a non-GAAP financial
measure referred to as "Adjusted EBITDA" in this release.
Reconciliations of Adjusted EBITDA to the most comparable U.S.
GAAP measure for the respective periods can be found in the table
below. In addition, an explanation of the manner in which CSI's
management uses Adjusted EBITDA to conduct and evaluate its
business, the economic substance behind management's decision to
use Adjusted EBITDA, the substantive reasons why management
believes that Adjusted EBITDA provides useful information to
investors, the material limitations associated with the use of
Adjusted EBITDA and the manner in which management compensates for
those limitations is included following the reconciliation table
below.
Cardiovascular Systems, Inc. Supplemental Sales
Information (unaudited) (Dollars in Thousands) � � � �
Q2 2008 � �
Q3 2008 � �
Q4 2008 � �
Q1
2009 � �
Q2 2009 � �
Q3 2009 Revenue
Components: � � � � � � � � � � � � � � � � � � Devices � � $
4,157 � � $ 6,867 � � $ 9,000 � � $ 10,664 � � $ 12,853 � � $
13,694 Other � � � 474 � � � 787 � � � 892 � � � 982 � � � 1,151 �
� � 1,421 Total revenue � � $ 4,631 � � $ 7,654 � � $ 9,892 � � $
11,646 � � $ 14,004 � � $ 15,115 � � � � � � � � � � � � � � � � �
� � Device units sold � � � 1,404 � � � 2,328 � � � 3,063 � � �
3,636 � � � 4,368 � � � 4,558 � � � � � � � � � � � � � � � � � � �
Customers, at quarter end � � � 39 � � � 106 � � � 183 � � � 283 �
� � 400 � � � 487
Cardiovascular Systems, Inc. Adjusted
EBITDA (unaudited) (Dollars in Thousands) � �
Actual �
Projected Range Three Months Ended �
Nine Months Ended Three Months Ending
March 31,
March 31,
June 30, 2009
2009 �
2008 �
2009 �
2008 High �
Low Loss from operations $ (6,486 ) � $ (9,291 ) $ (28,665 )
� $ (26,897 ) $ (6,500 ) � $ (7,600 ) Add: Stock-based compensation
1,712 1,276 4,932 6,222 2,200 2,200 Add: Depreciation and
amortization � 136 � � � 95 � � � 332 � � � 227 � � 200 � � � 200 �
Adjusted EBITDA $ (4,638 ) � $ (7,920 ) � $ (23,401 ) � $ (20,448 )
$ (4,100 ) � $ (5,200 )
Use and Economic Substance of Non-GAAP Financial Measures
Used by CSI and Usefulness of Such Non-GAAP Financial Measures to
Investors
CSI uses Adjusted EBITDA as a supplemental measure of
performance and believes this measure facilitates operating
performance comparisons from period to period and company to
company by factoring out potential differences caused by
depreciation and non-cash charges such as stock based compensation.
CSI's management uses Adjusted EBITDA to analyze the underlying
trends in CSI's business, assess the performance of CSI's core
operations, establish operational goals and forecasts that are used
in allocating resources and evaluate CSI's performance period over
period and in relation to its competitors' operating results.
Additionally, CSI's management is evaluated on the basis of
Adjusted EBITDA when determining achievement of their incentive
compensation performance targets.
CSI believes that presenting Adjusted EBITDA provides investors
greater transparency to the information used by CSI's management
for its financial and operational decision-making and allows
investors to see CSI's results "through the eyes" of management.
CSI also believes that providing this information better enables
CSI's investors to understand CSI's operating performance and
evaluate the methodology used by CSI's management to evaluate and
measure such performance.
The following is an explanation of each of the items that
management excluded from Adjusted EBITDA and the reasons for
excluding each of these individual items:
- Stock-based compensation. CSI
excludes stock-based compensation expense from its non-GAAP
financial measures primarily because such expense, while
constituting an ongoing and recurring expense, is not an expense
that requires cash settlement. CSI's management also believes that
excluding this item from CSI's non-GAAP results is useful to
investors to understand the application of SFAS 123R and its impact
on CSI's operational performance, liquidity and its ability to make
additional investments in the company, and it allows for greater
transparency to certain line items in CSI's financial
statements.
- Depreciation and amortization
expense. CSI excludes depreciation and amortization expense from
its non-GAAP financial measures primarily because such expenses,
while constituting ongoing and recurring expenses, are not an
expense that requires cash settlement and is not used by CSI's
management to assess the core profitability of CSI's business
operations. CSI's management also believes that excluding these
items from CSI's non-GAAP results is useful to investors to
understand CSI's operational performance, liquidity and its ability
to make additional investments in the company.
Material Limitations Associated with the Use of Non-GAAP
Financial Measures and Manner in which CSI Compensates for these
Limitations
Non-GAAP financial measures have limitations as analytical tools
and should not be considered in isolation or as a substitute for
CSI's financial results prepared in accordance with GAAP. Some of
the limitations associated with CSI's use of these non-GAAP
financial measures are:
- Items such as stock-based
compensation do not directly affect CSI's cash flow position;
however, such items reflect economic costs to CSI and are not
reflected in CSI's "Adjusted EBITDA" and therefore these non-GAAP
measures do not reflect the full economic effect of these
items.
- Non-GAAP financial measures are
not based on any comprehensive set of accounting rules or
principles and therefore other companies may calculate similarly
titled non-GAAP financial measures differently than CSI, limiting
the usefulness of those measures for comparative purposes.
- CSI's management exercises
judgment in determining which types of charges or other items
should be excluded from the non-GAAP financial measures CSI
uses.
CSI compensates for these limitations by relying primarily upon
its GAAP results and using non-GAAP financial measures only
supplementally. CSI provides full disclosure of each non-GAAP
financial measure CSI uses and detailed reconciliations of each
non-GAAP measure to its most directly comparable GAAP measure. CSI
encourages investors to review these reconciliations. CSI qualifies
its use of non-GAAP financial measures with cautionary statements
as set forth above.
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