Cardiovascular Systems, Inc. (Nasdaq: CSII):
- Revenues increased 5 percent over
the second quarter of fiscal 2011, and 6 percent over the first
quarter of fiscal 2012 to $19.7 million
- Reorder revenues grew 11 percent to
95 percent of total revenue
- Stealth 360°™ PAD System revenues
rose 55 percent sequentially over fiscal 2012 first quarter and
comprised 67 percent of total device revenues
- Revenues from office-based labs grew
12 percent sequentially over first quarter of fiscal 2012
- ORBIT II enrollment is over 50
percent completed
- Results from six clinical studies
presented at Transcatheter Cardiovascular Therapeutics (TCT)
scientific symposium
- Stealth 360° PAD System honored as a
New Technology of the Year by LifeScience Alley
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 second quarter ended
December 31, 2011.
CSI’s revenues in the second quarter rose to $19.7 million, a 5
percent gain over revenues of $18.8 million in the second quarter
of last fiscal year. Revenues from customer reorders increased 11
percent to 95 percent of total revenue, from 91 percent a year ago.
The conversion to the new Stealth 360°™ PAD System continued at a
high rate, with a 55 percent increase in revenues over the first
quarter of fiscal 2012, to 67 percent of total device revenues in
the just-completed quarter.
Net loss was $(4.1) million, or $(0.23) per common share, for
the quarter, compared to $(2.0) million, or $(0.13) per common
share, in the second quarter of last fiscal year. Net loss includes
expense of $(0.2) million, or $(0.01) per common share, related to
conversion and valuation changes of convertible debt, compared to
income of $0.4 million, or $0.02 per common share, in the
prior-year period. The net loss also increased due to higher
operating expenses associated with advancing the ORBIT II clinical
trial for a coronary application, additional sales and marketing
staff, and payments related to disputed amounts with a former
vendor. Prior-year operating expenses included a $0.5 million
credit for a grant under the Qualifying Therapeutic Discovery
Project program. The increase in operating expenses had a similar
effect on Adjusted EBITDA, which was a loss of $2.2 million in the
second quarter of fiscal 2012, compared to income of $72,000 in the
prior year.
David L. Martin, CSI president and chief executive officer,
said, “As expected, we saw a strong increase in Stealth 360°
revenues, driven by an 81 percent gain in the number of Stealth
360° accounts over the first quarter to nearly 400, as well as
higher device usage in those accounts. Stealth 360° is as easy to
set up as a balloon or stent, and utilizes CSI’s proven orbital
mechanism of action that protects healthy tissue while removing
even the most difficult-to-treat plaque throughout the entire leg
in short procedure times. Physicians’ recognition of these
important benefits is driving the conversion.
“CSI also made progress in the emerging office-based lab market,
with revenues rising 12 percent sequentially over the fiscal 2012
first quarter. We believe that our growing body of compelling
clinical data on our orbital technology’s safety and effectiveness,
in even the most complex patient population, will spur long-term
growth in both the hospital and office settings.”
The gross profit margin was 77 percent versus 79 percent and was
affected by a higher mix of Stealth 360° sales, which currently
carry higher unit costs due to limited initial component purchasing
volumes. Also, the ramp up of CSI’s second manufacturing facility
in Texas for additional future production capacity has temporarily
increased production costs.
In the first six months of fiscal 2012, revenues increased to
$38.4 million, up 4 percent from the same period last fiscal year.
The gross margin was 77 percent compared to 78 percent, while
operating expenses rose 4 percent. Adjusted EBITDA loss increased
by $(1.9) million, while the net loss totaled $(8.0) million, or
$(0.45) per common share, compared to $(6.3) million, or $(0.40)
per common share, last year.
OPERATING HIGHLIGHTS
Update on ORBIT II Clinical Trial
Patient enrollment in CSI’s ORBIT II clinical trial for a
coronary application is now more than 50 percent complete, with
nearly 40 of 50 potential U.S. medical centers enrolling patients.
CSI is targeting to be fully enrolled near the end of fiscal 2012.
Since the primary endpoints of ORBIT II are based on 30-day patient
follow-up post procedure, a PMA application to the FDA should
follow soon after enrollment completion.
According to Martin, “ORBIT II is a critical trial for CSI. A
coronary application of our orbital technology would open up a
large, underserved market opportunity for CSI, while leveraging our
high quality customer base that is comprised of over 70 percent
interventional cardiologists today. Our confidence to successfully
complete ORBIT II is high, given our technology’s ability to treat
calcified lesions in small arteries and our success in the ORBIT I
trial.”
Data from Six Clinical Studies Presented at TCT
Data from multiple CSI studies were presented at the 23rd Annual
Transcatheter Cardiovascular Therapeutics (TCT) conference in
November.
- Six-month data from the COMPLIANCE 360°
prospective, randomized study of severely calcified lesions
above-the-knee demonstrated that, compared to PTA alone, the
Diamondback 360® PAD System with low-pressure PTA leads to less
need for bailout stenting, while delivering a stent-like long-term
result and maintaining future treatment options for the patient.
Procedural success of achieving less than 30 percent stenosis
without bailout stenting was 92.1 percent for the Diamondback 360°,
versus 21.4 percent for PTA alone.
- The ORBIT I coronary trial data showed
a low, 8 percent rate of major adverse cardiac events (MACE) at six
months and, in a single center study of 33 patients, the MACE rate
at two years was only 15.2 percent.
- Data from the CALCIUM 360° study of
below-the-knee lesions demonstrated superior outcomes with the
Diamondback 360° versus PTA, with fewer major dissections of 4
percent versus 24 percent, greater procedural success (final
residual stenosis less than or equal to 30 percent without bailout
stenting) of 89.7 percent versus 76.5 percent, and superior
durability with 100 percent freedom from reintervention after six
months in the Diamondback 360° arm of the study. Critical limb
ischemia and calcified lesions in the small arteries below the knee
are especially challenging to treat.
- Results from CONFIRM II Predator, a
prospective registry of 1,127 patients/1,734 lesions, reinforced
superior outcomes (34 percent residual stenosis post Predator 360°
and 10 percent after adjunctive low-pressure PTA) and safety
findings (dissections of 2.5 percent, bailout stenting of 4.6
percent and perforations of 0.6 percent), as well as short
procedure times (average device run time of 103 seconds). A
Predator 360° single center study with 46 patients/57 lesions
reported similar procedural results in addition to durable
long-term results as demonstrated by an 89.1 percent freedom from
reintervention rate at 12 months.
Details on the data presented at TCT on the six clinical studies
can be found here:
http://pub.psbpr.com/CSI/mediakit-2010/newsroom/newsrelease.aspx?p=1628318
Stealth 360° PAD System Honored as a New Technology of the
Year by LifeScience Alley
CSI’s Stealth 360° PAD System has been honored as a New
Technology of the Year by LifeScience Alley. The annual award is
given to the top 10 novel products that address a medical need,
demonstrate the ability to improve healthcare and have significant
market potential. Expert industry judges selected ground-breaking
medical and health care technologies from established and emerging
organizations from around the United States and Canada.
“We thank LifeScience Alley for this recognition — a direct
reflection of the hard work and many contributions of our talented
employees in Minnesota,” noted Martin. “This honor recognizes CSI’s
innovative technology that safely treats routine and complex
peripheral arterial disease (PAD) cases."
Fiscal 2012 Third-Quarter Outlook
Martin added, “We continue to make solid progress on the Stealth
360° and office-based lab transitions this year and expect that
momentum to result in sequential quarter revenue growth for the
remainder of this fiscal year. At this point, however, we do not
believe the progress will be sufficient to achieve our targeted 10
percent revenue growth for fiscal 2012 over fiscal 2011. At the
same time, with the introduction of Stealth 360° and FDA approval
to continue our ORBIT II coronary trial, CSI is at an appropriate
stage to invest further in sales and marketing, and clinical trials
to capitalize on our growth opportunities. This will increase
operating expenses for the remainder of this fiscal year. As a
result, we do not expect to achieve positive net income in the
fourth quarter of fiscal 2012.”
For the fiscal 2012 third quarter ending March 31, 2012, CSI
anticipates:
- Revenues in the range of $20.5 million
to $21.5 million.
- Gross profit as a percentage of
revenues similar to the second quarter of fiscal 2012.
- Growth in operating expenses of
approximately 7 percent from the second quarter of fiscal
2012.
- Interest and other expense of about
$(400,000), excluding the potential effect of conversions or
valuation changes of convertible debt.
- Net loss in the range of $(4.2) million
to $(4.8) million, or loss per common share ranging from $(0.23) to
$(0.27), assuming 18.0 million average shares outstanding, and
excluding the potential effect of conversions or valuation changes
of convertible debt.
Conference Call Today at 3:45 p.m. CT (4:45 p.m. ET)
Cardiovascular Systems, Inc. will host a live conference call
and webcast of its fiscal second-quarter results today, February 7,
2012, at 3:45 p.m. CT (4:45 p.m. ET). To access the call, dial
(888) 680-0860 and enter access number 50105170. Please dial in at
least 10 minutes prior to the call and wait for assistance, or dial
“0” for the operator. To listen to the live webcast, go to the
investor information section of the company’s website, 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 28270965. The audio replay will be
available beginning at 8 p.m. CT on Tuesday, February 7, 2012,
through 6 p.m. CT on Friday, February 10, 2012.
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 Peripheral Arterial Disease
As many as 12 million Americans, most over age 65, 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. Left untreated, PAD can
lead to severe pain, immobility, non-healing wounds and eventually
limb amputation. With risk factors such as diabetes and obesity on
the rise, the prevalence of PAD is growing at double-digit
rates.
Millions of patients with PAD may benefit from treatment with
the Stealth 360° and Diamondback 360°, minimally invasive catheter
systems developed and manufactured by CSI. These systems use a
diamond-coated crown, attached to a guide wire, which sands away
plaque while preserving healthy vessel tissue — a critical factor
in preventing reoccurrences. Balloon angioplasty and stents have
significant shortcomings in treating hard, calcified lesions.
Stents are prone to fractures and high recurrence rates, and
treatment of hard, calcified lesions often leads to vessel damage
and suboptimal results.
About Cardiovascular Systems, Inc.
Cardiovascular Systems, Inc., based in St. Paul, Minn., is a
medical device company focused on developing and commercializing
innovative solutions for treating vascular and coronary disease.
The company’s Stealth 360°™, Diamondback 360® and Predator 360® PAD
Systems treat calcified and fibrotic plaque in arterial vessels
throughout the leg in a few minutes of treatment time, and address
many of the limitations associated with existing surgical, catheter
and pharmacological treatment alternatives. The U.S. FDA granted
510(k) clearance for the use of the Diamondback 360° in August 2007
and for the Stealth 360° in March 2011. To date, more than 61,000
PAD procedures have been performed using the Diamondback 360° and
Stealth 360° in leading institutions across the United States. CSI
has also commenced its ORBIT II Investigational Device Exemption
clinical trial to evaluate the safety and effectiveness of its
orbital technology in treating coronary arteries. The coronary
system is limited by federal law to investigational use and is
currently not commercially available in the United States.
For more information, visit the company’s website at
www.csi360.com.
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 provided under 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
future profitability and future growth; (ii) CSI’s expectation that
its growing body of compelling clinical data on its orbital
technology’s safety and effectiveness will spur long-term growth in
both the hospital and office settings; (iii) CSI’s clinical trials
and the expected results of those trials; (iv) the market and
expansion opportunity provided by a coronary application; and (v)
anticipated revenue, gross profit, operating expenses, interest and
other expense, and net loss, 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; dependence on
market growth; the reluctance of physicians to accept new products;
the effectiveness of the Stealth 360°; actual clinical trial
results; the impact of competitive products and pricing; the
difficulty to successfully manage operating costs; fluctuations in
quarterly results; FDA clearances and approvals; 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 most recent annual report on Form
10-K and subsequent quarterly reports on Form 10-Q. 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.
Product Disclosure
The Stealth 360°™ PAD System, Diamondback 360® PAD System and
Predator 360® PAD System are percutaneous orbital atherectomy
systems indicated for use as therapy in patients with occlusive
atherosclerotic disease in peripheral arteries and stenotic
material from artificial arteriovenous dialysis fistulae. The
systems are contraindicated for use in coronary arteries, bypass
grafts, stents or where thrombus or dissections are present.
Although the incidence of adverse events is rare, potential events
that can occur with atherectomy include: pain, hypotension,
CVA/TIA, death, dissection, perforation, distal embolization,
thrombus formation, hematuria, abrupt or acute vessel closure, or
arterial spasm.
Cardiovascular Systems, Inc. Consolidated
Statements of Operations (Dollars in Thousands, except per
share and share amounts) (unaudited)
Three Months Ended Six Months
Ended December 31, December 31,
2011 2010
2011 2010
Revenues $ 19,718 $ 18,756 $ 38,378 $ 36,921 Cost of goods sold
4,560 3,972
8,906 8,113
Gross profit
15,158
14,784 29,472
28,808 Selling, general and
administrative 15,733 14,687 31,083 30,183 Research and development
3,084 2,114
5,148 4,536
Total expenses
18,817
16,801 36,231
34,719 Loss from operations (3,659 ) (2,017 )
(6,759 ) (5,911 ) Interest and other (expense) income
(476 ) 27
(1,235 ) (347
) Net loss
$ (4,135
) $ (1,990 )
$ (7,994 ) $
(6,258 )
Net loss per common share:
Basic and diluted
$ (0.23 )
$ (0.13 ) $
(0.45 ) $ (0.40
)
Weighted average common shares used in
computation:
Basic and diluted
17,781,326
15,827,046 17,634,134
15,598,101
Cardiovascular Systems, Inc. Consolidated Balance
Sheets (Dollars in Thousands) (unaudited)
December 31,
June 30, 2011 2011 ASSETS
Current assets Cash and cash equivalents $ 24,558 $ 21,159 Accounts
receivable, net 12,460 13,254 Inventories 7,963 5,818 Prepaid
expenses and other current assets
1,413
797 Total current assets
46,394
41,028 Property and equipment, net 2,388 2,383
Patents, net 2,499 2,314 Other assets
726
1,033 Total assets
$
52,007 $ 46,758
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities Current maturities of long-term debt $ 2,337 $
3,813 Accounts payable 5,633 5,181 Deferred grant incentive 995 647
Accrued expenses
5,300
5,545 Total current liabilities
14,265 15,186 Long-term
liabilities Long-term debt, net of current maturities 15,403 8,331
Deferred grant incentive 336 1,497 Other liabilities
103 109 Total long-term
liabilities
15,842 9,937
Total liabilities
30,107
25,123 Commitments and contingencies Total
stockholders’ equity
21,900
21,635 Total liabilities and stockholders’ equity
$ 52,007 $
46,758 Cardiovascular Systems,
Inc. Supplemental Sales Information (Dollars in
Thousands) (unaudited) Three
months ended Six months ended
December 31, December 31,
2011 2010
2011 2010
Device revenue $ 17,494 $
16,397 $ 34,042 $ 32,460
Other product revenue 2,224
2,359 4,336
4,461 Total revenue $
19,718 $ 18,756 $ 38,378
$ 36,921
Device units sold 5,509
5,504 10,795
10,846
New
customers 41 68
82 124
Reorder revenue %
95 % 91 % 95 %
93 %
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. Adjusted EBITDA
(Dollars in Thousands) (unaudited)
Actual
Three Months Ended Six Months Ended
December 31, December 31, 2011
2010 2011 2010 Loss from
operations $ (3,659 ) $ (2,017 ) $ (6,759 ) $ (5,911 ) Add:
Stock-based compensation
1,263
1,916
2,719
3,905
Add: Depreciation and amortization
227
173
448
337
Adjusted EBITDA $ (2,169 ) $ 72 $ (3,592 ) $ (1,669 )
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 amortization expense 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 to allocate 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 stock-based compensation guidance 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 expenses that require cash
settlement and are 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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