Endologix, Inc. (Nasdaq: ELGX), developer and manufacturer of the
Powerlink� System endoluminal stent graft (ELG) for the minimally
invasive treatment of abdominal aortic aneurysms (AAA), today
announced financial results for the three and nine months ended
September 30, 2008. �We had a solid third quarter, generating
global sales of $9.4 million, an increase of 42% over the third
quarter of 2007. In the fourth quarter, we expect global sales of
at least $10 million, which represents 2008 full-year sales growth
of at least 38% over 2007,� said John McDermott, President and
Chief Executive Officer of Endologix. �During the third quarter we
significantly improved our liquidity position and remain confident
that we will begin generating positive operating cash flow in the
first half of 2009. �Last week, we received FDA approval for our
new Powerlink XL� device, and are in the process of launching this
important new addition to our product line,� he added. Financial
Results Total product revenue in the third quarter of 2008 was $9.4
million, a 42% increase from $6.6 million in the third quarter of
2007 and a 1% increase from $9.3 million in the second quarter of
2008. Domestic product revenue was $8.1 million, up 39% from $5.8
million in the 2007 third quarter and up 2% from $7.9 million in
the 2008 second quarter. International product revenue of $1.3
million was up 69% compared with $765,000 in the comparable quarter
last year and down 6% from $1.4 million in the second quarter of
2008. During the third quarter of 2007, the Company recorded
$500,000 in revenue in return for a fully paid license of certain
non-AAA technology to BioLucent, Inc. For the nine months ended
September 30, 2008, total product revenue increased 41% to $27.0
million, compared with $19.1 million for the nine months ended
September 30, 2007. Gross profit was $6.9 million in the third
quarter of 2008 or 74% of total revenue, compared with gross profit
of $4.7 million or 66% of total revenue in the third quarter of
2007. For the first nine months of 2008 gross profit of $19.4
million was 72% of total revenue, compared with $12.1 million or
61% of total revenue for the first nine months of 2007. The gross
margin improvement for the three and nine months ended September
30, 2008 was due primarily to the utilization of ePTFE graft
material produced in-house, and the margin for each period is
within the Company�s 2008 gross margin guidance of 71% to 75%.
Total operating expenses were $9.9 million in the third quarter of
2008, versus $8.6 million in the third quarter of 2007. The third
quarter of 2007 included a $550,000 cash payment related to the
formal termination of Endologix�s agreement with C.R. Bard, Inc. to
supply ePTFE material. Marketing and sales expenses increased by
27% to $6.1 million in the third quarter of 2008 and were driven by
a 19% increase in the number of covered sales territories and
variable commission payments on higher product revenue. Research,
development and clinical expenses for the third quarter of 2008
were $1.4 million, versus $1.6 million last year, with the decrease
primarily due to lower costs associated with new product
development materials and lower clinical trial expenses. General
and administrative expenses were $2.4 million, versus $1.6 million
last year, with the increase primarily due to an increase in legal
fees and litigation related matters of approximately $500,000, and
stock based compensation. Total operating expenses for the first
nine months of 2008 were $30.0 million, versus $24.6 million in the
comparable period in 2007. Marketing and sales expenses increased
by 23% to $18.0 million driven by a 21% increase in the number of
covered sales territories and variable commission payments on
higher product revenue. Research, development and clinical expenses
for the first nine months of 2008 and 2007 were unchanged at $4.7
million. General and administrative expenses were $7.3 million for
the first nine months of 2008, versus $4.7 million in the
comparable period of last year, reflecting an increase of $1.3
million in legal fees and litigation related matters, $550,000 in
costs associated with the CEO succession which occurred in the
second quarter of 2008, and other personnel costs. Endologix
reported a net loss for the third quarter of 2008 of $3.0 million,
or $0.07 per share, compared with a net loss of $3.4 million, or
$0.08 per share, for the third quarter of 2007. The net loss for
the third quarter of 2007 included a $314,000 gain on an investment
which was subsequently sold in October 2007. The net loss for the
third quarter of 2008 included $659,000, or $0.02 per share, for
stock-based compensation expense. This compares with $652,000, or
$0.02 per share, for stock-based compensation expense in the third
quarter of 2007. The Company reported a net loss for the nine
months ended September 30, 2008 of $10.4 million, or $0.24 per
share, compared with a net loss of $11.5 million, or $0.27 per
share, for the nine months ended September 30, 2007. The net loss
for the first nine months of 2008 included $1.9 million, or $0.04
per share, for stock-based compensation expense, whereas the net
loss for the first nine months of 2007 included $1.8 million, also
$0.04 per share, for stock-based compensation expense. Cash and
cash equivalents as of September 30, 2008 were $9.0 million. During
the third quarter of 2008 Endologix drew $2.0 million from its $5.0
million revolving credit facility and $3.0 million from its term
debt facility. Endologix Chief Financial Officer Bob Krist stated,
�Although we believe our cash was sufficient to reach positive cash
flow from operations, we decided to draw on our available credit
because of the unprecedented upheaval and uncertainty in the world
credit markets.� Commenting on the Powerlink XL FDA approval, Mr.
McDermott said, �The Powerlink XL opens a new segment of the U.S.
market for Endologix, which represents up to 15% of AAA procedures
and more than $70 million in annual sales. Our device has the
lowest profile delivery system in the U.S. to treat large neck
aneurysms and we are the only company to offer both infrarenal and
suprarenal configurations, giving physicians more options to treat
their patients.� Endologix announced that William D. Jordan, Jr.,
M.D., Professor and Chief of Vascular Surgery at UAB Hospital in
Birmingham, Alabama will present data from the Company�s
prospective, multi-center Powerlink XL clinical study on November
20, 2008 at the 35th Annual VEITHsymposium� in New York. Endologix
plans to announce these clinical data in a press release to be
issued following Dr. Jordan�s presentation. Mr. McDermott added,
�We also recently received FDA approval for IntuiTrak�, a new
delivery system that simplifies the delivery and deployment of the
unibody bifurcated Powerlink device. IntuiTrak features a
low-profile catheter with enhanced flexibility, advanced hemostasis
control and a hydrophilic coating to facilitate smooth delivery.
Additionally, the device has an integrated sheath for the
introduction of ancillary devices, which has the potential to
reduce procedure time and blood loss. Over the next several months,
we will conduct a limited market release with a goal to fully
launch IntuiTrak in the second quarter of 2009. The new product
launches, in conjunction with a series of operating initiatives and
recent management additions, provide Endologix with a strong
foundation for long-term growth.� Conference Call Information
Endologix management will host a conference call to discuss third
quarter results and answer questions today beginning at 5:00 p.m.
Eastern time (2:00 p.m. Pacific time). To participate via telephone
please call (888) 463-4487 from the U.S. or (706) 634-5615 from
outside the U.S. A telephone replay will be available for two days
following the completion of the call by dialing (800) 642-1687 from
the U.S. or (706) 645-9291 from outside the U.S., and entering
reservation number 67783386. The conference call will be broadcast
live over the internet at www.endologix.com and will be available
for 14 days. About Endologix Endologix, Inc. develops and
manufactures minimally invasive treatments for vascular diseases.
Endologix's Powerlink System is an endoluminal stent graft for
treating abdominal aortic aneurysms (AAA). AAA is a weakening of
the wall of the aorta, the largest artery in the body, resulting in
a balloon-like enlargement. Once AAA develops, it continues to
enlarge and, if left untreated, becomes increasingly susceptible to
rupture. The overall patient mortality rate for ruptured AAA is
approximately 75%, making it a leading cause of death in the U.S.
Additional information can be found on Endologix�s Web site at
www.endologix.com. Except for historical information contained
herein, this news release contains forward-looking statements,
specifically with respect to 2008 financial guidance, market
introductions of new products, and achievement of positive cash
flow, the accuracy of which are necessarily subject to risks and
uncertainties, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of Endologix.
Many factors may cause actual results to differ materially from
anticipated results including sales efforts, product development
efforts, and other economic, business, competitive and regulatory
factors. The Company undertakes no obligation to update its
forward-looking statements. Please refer to the Company�s Annual
Report on Form 10-K for the year ended December 31, 2007, and the
company�s other filings with the Securities and Exchange
Commission, for more detailed information regarding these risks and
other factors that may cause actual results to differ materially
from those expressed or implied. ENDOLOGIX, INC. CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS � (In thousands, except per
share amounts) (Unaudited) � � � Three Months Ended September 30, �
Nine Months Ended September 30, � 2008 � � � 2007 � � 2008 � � �
2007 � Revenue: Domestic Product Revenue $ 8,078 $ 5,827 $ 22,808 $
16,307 Non � U.S. Product Revenue � 1,296 � � 765 � � 4,144 � �
2,793 � Total Product Revenue: � 9,374 � � 6,592 � � 26,952 � �
19,100 � License revenue � 9 � � 560 � � 33 � � 678 � Total revenue
9,383 7,152 26,985 19,778 Cost of product revenue � 2,460 � � 2,432
� � 7,545 � � 7,649 � Gross profit $ 6,923 � $ 4,720 � $ 19,440 � $
12,129 � Gross profit as a % of total revenue 74 % 66 % 72 % 61 %
Operating expenses: Research, development and clinical $ 1,412 $
1,606 $ 4,708 $ 4,665 Marketing and sales 6,073 4,788 18,017 14,666
General and administrative 2,399 1,635 7,270 4,702 Termination of
supply agreement � --- � � 550 � � --- � � 550 � Total operating
expenses � 9,884 � � 8,579 � � 29,995 � � 24,583 � Loss from
operations $ (2,961 ) $ (3,859 ) $ (10,555 ) $ (12,454 ) Other
income: Interest income 19 152 59 558 Other income � (20 ) � 313 �
� 80 � � 349 � Total other � (1 ) � 465 � � 139 � � 907 � Net loss
� ($2,962 ) � ($3,394 ) � ($10,416 ) � ($11,547 ) Basic and diluted
net loss per share � ($0.07 ) � ($0.08 ) � ($0.24 ) � ($0.27 )
Shares used in computing basic and diluted net loss per share �
43,124 � � 42,870 � � 43,018 � � 42,767 � ENDOLOGIX, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS � (In thousands, except per share
amounts) (Unaudited) � September 30, 2008 � December 31, 2007
ASSETS Current assets: Cash and cash equivalents $ 8,513 $ 8,728
Restricted cash equivalents 500 500 Accounts receivable, net 5,323
4,527 Other receivables 9 234 Inventories 7,296 8,054 Other current
assets � 468 � � 581 � Total current assets 22,109 22,624 Property
and equipment, net 3,282 3,771 Goodwill 4,631 4,631 Intangibles,
net 7,860 8,913 Other assets � 104 � � 104 � Total Assets $ 37,986
� $ 40,043 � LIABILITIES AND STOCKHOLDERS� EQUITY Current
liabilities: Accounts payable and accrued expenses $ 5,329 $ 4,259
Short-term portion of debt � 310 � � --- � Current liabilities �
5,639 � � 4,259 � Long-term debt 4,690 --- Other long-term
liabilities � 1,061 � � 1,109 � Long-term liabilities � 5,751 � �
1,109 � Total liabilities � 11,390 � � 5,368 � � Stockholders�
equity: Common stock, $.001 par value; 60,000,000 shares
authorized, and 44,149,000 and 43,453,000 shares issued, and
43,654,000 and 42,958,000 outstanding � 44 � 43 Additional paid-in
capital 169,321 166,912 Accumulated deficit (142,153 ) (131,738 ) �
Treasury stock at cost, 495,000 (661 ) (661 ) Accumulated other
comprehensive income � 45 � � 119 � Total stockholders� equity �
26,596 � � 34,675 � Total Liabilities and Stockholders� Equity $
37,986 � $ 40,043 �
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