IRVINE, Calif., July 21, 2011 /PRNewswire/ -- Endologix, Inc.
(NASDAQ: ELGX), developer and marketer of innovative treatments for
aortic disorders, today announced financial results for the three
and six months ended June 30,
2011.
John McDermott, Endologix
President and Chief Executive Officer, said, "We are pleased with
our progress during the quarter and remain on track to achieve our
growth and new product development goals for 2011. In the
second quarter, global revenue grew by 22% compared to the prior
year and by 30% in the U.S. market, driven by the ongoing adoption
of our endovascular AAA devices and the effectiveness of our sales
force. During the quarter we received FDA approval of our new
AFX™Endovascular AAA System, which will provide clinicians with
improved access, precise deployment and enhanced sealing
characteristics. We introduced AFX at the Society for
Vascular Surgery annual meeting last month and received positive
physician feedback."
Mr. McDermott added, "Our recently announced decision to
accelerate the transition of our existing products to a direct
sales force in Europe is an
important step in becoming a leading player in the global
endovascular AAA market. We are already building
relationships with physicians in Europe and look forward to working with them
directly, starting on September 1,
2011. Our development and regulatory programs for AFX,
Ventana™ and Nellix® remain on track and we believe these new
technologies will improve outcomes and significantly increase the
number of AAA patients who can be treated with endovascular
devices."
Financial Results
Total revenue in the second quarter of 2011 was $19.2 million, a 22% increase from $15.7 million in the same quarter of 2010, and a
3% increase from the first quarter of 2011. Domestic revenue
was $16.6 million, a 30% increase
compared with $12.8 million in the
second quarter of 2010, and an 8% increase sequentially from the
first quarter of 2011. International revenue was $2.6 million, an 11% decrease compared with
$2.9 million in the second quarter of
2010, and a 19% decrease sequentially from the first quarter of
2011. The decrease in international revenue was the result of
lower sales of Endologix products to the Company's primary
distributor in Europe, LeMaitre
Vascular. The Companies announced an early termination
agreement for LeMaitre's European distribution rights of Endologix
products on July 18, 2011. The
agreement will take effect September 1,
2011.
For the six months ended June 30,
2011, total revenue increased 25% to $37.7 million, compared with $30.1 million for the six months ended
June 30, 2010.
Gross profit was $15.0 million in
the second quarter of 2011, which represents a gross margin of
78.4%. This compares with gross profit of $12.0 million and a gross margin of 76.9% in the
second quarter of 2010. Gross profit was $29.2 million for the six months ended
June 30, 2011, representing a gross
margin of 77.4%. This compares with gross profit of
$23.2 million and a gross margin of
76.9% for the six months ended June 30,
2010. Higher gross margin for the three and six months
ended June 30, 2011 was driven by
more favorable product mix associated with new products launched in
the second half of 2010, and by faster overall revenue growth in
the higher margin domestic market.
Total operating expenses were $20.2
million in the second quarter of 2011, a 65% increase
compared with $12.2 million in the
second quarter of 2010. Of this $8.0
million increase, $3.5 million
is related to the Nellix acquisition, including the ongoing
technology development work, the establishment of a direct sales
organization in Europe, and
general integration expenses.
Marketing and sales expenses increased to $10.8 million in the second quarter of 2011 from
$7.6 million in the same period last
year. This increase included the ongoing expansion of the
U.S. sales force, increased marketing costs, and building a direct
sales organization in Europe.
Research, development and clinical expenses increased to
$6.1 million in the second quarter of
2011 from $2.4 million in the same
period last year due primarily to the Nellix and Ventana
development programs. General and administrative expenses increased
to $3.3 million in the second quarter
of 2011, from $2.2 million in the
same period last year due to Nellix integration costs and a
$569,000 increase in patent
litigation expenses.
Total operating expenses for the six months ended June 30, 2011 were $39.2
million, compared with $23.6
million for the six months ended June
30, 2010. Of this $15.6
million increase, $7.0 million
is related to the Nellix acquisition in the categories noted
above.
Marketing and sales expenses increased to $21.3 million in the first six months of 2011, up
from $14.6 million in the same period
last year. Research, development and clinical expenses
increased to $11.0 million in the
first six months of 2011, up from $4.7
million in the same period last year. General and
administrative expenses increased to $6.9
million in the first six months of 2011, up from
$4.3 million in the same period last
year.
On a GAAP basis, Endologix reported a net loss for the second
quarter of 2011 of $13.7 million, or
$(0.24) per share, compared with a
net loss of $380,000, or $(0.01) per share, for the second quarter of
2010. The second quarter 2011 loss includes an $8.6 million non-cash fair value adjustment
related to the contingent consideration for the Nellix acquisition.
On an adjusted (non-GAAP) basis, excluding the $8.6 million non-cash fair value adjustment,
Endologix reported Adjusted Net Loss for the second quarter of 2011
of $5.1 million, or $(0.09) per share. The significant change
in the fair value of the Nellix contingent consideration, which is
payable in common shares, resulted from the recent increase in
Endologix's stock price.
For the six months ended June 30,
2011, the Company reported a net loss of $18.5 million, or $(0.33) per share, compared with a net loss of
$605,000, or $(0.01) per share, for the six months ended
June 30, 2010. On an adjusted
(non-GAAP) basis, excluding the $8.6
million non-cash fair value adjustment related to the
contingent consideration for the Nellix acquisition, Endologix
reported Adjusted Net Loss for the six months ended June 30, 2011 of $9.9
million, or $(0.18) per
share.
Total cash and cash equivalents were $30.9 million as of June
30, 2011, compared with total cash and cash equivalents of
$38.2 million as of December 31, 2010.
"Despite lower international sales in the second quarter of 2011
related to our anticipated transition to a direct sales force in
Europe, we remain on track to
achieve our full year revenue guidance," stated Endologix Chief
Financial Officer Bob Krist.
"On the bottom line, excluding the charge related to the
$1.3 million one-time payment
associated with the early termination agreement with LeMaitre to be
recorded in the third quarter, and the fair value adjustment of the
contingent purchase consideration related to the Nellix
acquisition, we continue to expect full year loss per share in the
range of $0.25 to $0.30 per
share."
Financial Guidance
Based on the second quarter results, the Company is reiterating
its full year 2011 revenue and net loss per share guidance.
The Company anticipates total revenue to be in the range of
$78 million to $82 million,
representing growth of 16% to 22% over 2010. In 2011, the
Company expects to generate a net loss of between $0.25 to $0.30 per share due to planned
investments in building a direct sales force in Europe and developing the acquired Nellix
technology in anticipation of both a commercial launch in
Europe and the initiation of a
U.S. IDE clinical trial in 2012. The Company's 2011
loss per share guidance also includes ongoing investments in the
U.S. sales force, research and development and clinical
initiatives, and litigation expenses, but excludes the potential
impact of adverse litigation outcomes, acquisition related charges,
and other business development transactions (including the charge
related to the $1.3 million payment
for the Company's early termination agreement with LeMaitre
Vascular).
Conference Call Information
Endologix management will host a conference call to discuss
these topics today beginning at 5:00 p.m.
Eastern time (2:00 p.m. Pacific
time). To participate via telephone please call (877)
407-0789 from the U.S. or (201) 689-8562 from outside the U.S.
A telephone replay will be available for seven days following
the completion of the call by dialing (877) 870-5176 from the U.S.
or (858) 384-5517 from outside the U.S., and entering pin number
375778. The conference call will be broadcast live over the
Internet at www.endologix.com and will be available for 30
days.
About Endologix
Endologix, Inc. (the "Company") develops and manufactures
minimally invasive treatments for aortic disorders. The
Company's focus is endovascular stent grafts for the treatment of
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. The Nellix® Endovascular System and
Ventana™ Fenestrated Stent Graft System are investigational
devices.
Except for historical information contained herein, this news
release contains forward-looking statements, including with respect
to 2011 financial guidance, the launch and market acceptance of new
products, planned investments in research and development and sales
and marketing activities, the integration of Nellix's technology,
the progress of clinical trial initiatives, the establishment of a
direct sales force in Europe, and
litigation expenses, 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 the success
of sales efforts for the Company's existing products and related
new products, product research and development efforts, unexpected
litigation expenses 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, 2010, 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.
Adjusted Net Earnings (Loss) and Adjusted Net Earnings (Loss)
per Share Definitions:
"Adjusted Net Earnings (Loss)" is a non-GAAP measure defined by
Endologix as GAAP Net Earnings (Loss) excluding all effects arising
from the application of GAAP purchase accounting treatment of
Endologix' acquisition of Nellix Endovascular, Inc. ("Nellix"),
which was completed on December 10,
2010. In the three and six months ended June 30, 2011, the effect includes the fair value
adjustment to the liability for contingent payments to the former
shareholders of Nellix in the form of Endologix common stock.
In future periods, Adjusted Net Earnings (Loss) may continue to
include fair value adjustments to the liability for contingent
payments to the former shareholders of Nellix in the form of
Endologix common stock as the probability of achieving the payment
milestones changes and the value of Endologix common stock varies.
The corresponding charge or credit will flow through the earnings
statement. The adjustment may also include the amortization of
capitalized In Process Research & Development (IPR&D) as a
charge to cost of goods sold as the products resulting from the
Nellix technology are commercialized.
"Adjusted Net Earnings (Loss) per Share" is a non-GAAP measure
defined by Endologix as Adjusted Net Earnings (Loss) divided by
average diluted or non-diluted shares outstanding,
respectively.
Management believes that the "Adjusted Net Earnings (Loss)" and
"Adjusted Net Earnings (Loss) Per Share" measures enhance an
investor's overall understanding of Endologix's financial
performance and future prospects by being more reflective of
Endologix's core operational activities and more comparable with
the results of the Company over various periods. Management uses
these financial measures internally for strategic decision making,
forecasting future results and evaluating current performance.
ENDOLOGIX,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
2011
|
2010
|
|
2011
|
|
2010
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Domestic revenue
|
|
$
|
16,598
|
|
$
|
12,762
|
|
$
|
31,960
|
|
$
|
24,777
|
|
Non - U.S. revenue
|
|
2,577
|
|
2,892
|
|
5,763
|
|
5,357
|
|
Total revenue:
|
|
19,175
|
|
15,654
|
|
37,723
|
|
30,134
|
|
Cost of revenue
|
|
4,150
|
|
3,612
|
|
8,523
|
|
6,973
|
|
Gross profit
|
|
$
|
15,025
|
|
$
|
12,042
|
|
$
|
29,200
|
|
$
|
23,161
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Research, development and
clinical
|
|
$
|
6,076
|
|
$
|
2,426
|
|
$
|
10,999
|
|
$
|
4,701
|
|
Marketing and sales
|
|
10,802
|
|
7,590
|
|
21,300
|
|
14,567
|
|
General and
administrative
|
|
3,324
|
|
2,213
|
|
6,903
|
|
4,284
|
|
Total operating
expenses
|
|
20,202
|
|
12,229
|
|
39,202
|
|
23,552
|
|
Loss from operations
|
|
$
|
(5,177)
|
|
$
|
(187)
|
|
$
|
(10,002)
|
|
$
|
(391)
|
|
Other
income/(expense)
|
|
|
|
|
|
|
|
|
Other
income/(expense)
|
|
111
|
|
(193)
|
|
141
|
|
(214)
|
|
Change in fair value of
contingent consideration related to acquisition
|
|
(8,600)
|
|
—
|
|
(8,600)
|
|
—
|
|
Total other
income/(expense)
|
|
(8,489)
|
|
(193)
|
|
(8,459)
|
|
(214)
|
|
Net loss
|
|
(13,666)
|
|
(380)
|
|
(18,461)
|
|
(605)
|
|
Basic and diluted net loss per
share
|
|
(0.24)
|
|
(0.01)
|
|
(0.33)
|
|
(0.01)
|
|
Shares used in computing basic
and diluted net loss per share
|
|
56,217
|
|
48,325
|
|
56,062
|
|
48,160
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Reconciliation –Net
Loss to Adjusted Net Loss and Adjusted Net Loss per
Share:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(13,666)
|
|
$
|
(380)
|
|
$
|
(18,461)
|
|
$
|
(605)
|
|
Fair value adjustment to the
liability for contingent payments to the former Nellix shareholders
(non-cash)
|
|
8,600
|
|
|
—
|
|
8,600
|
|
—
|
|
Adjusted net loss
|
|
$
|
(5,066)
|
|
$
|
(380)
|
|
$
|
(9,861)
|
|
$
|
(605)
|
|
Adjusted net loss per
share
|
|
$
|
(0.09)
|
|
$
|
(0.01)
|
|
$
|
(0.18)
|
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENDOLOGIX,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
Unaudited
(In
thousands)
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
December
31,
|
|
|
|
2011
|
|
2010
|
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
30,865
|
|
|
$
|
38,191
|
|
|
Accounts receivable,
net
|
|
12,560
|
|
|
12,212
|
|
|
Other receivables
|
|
379
|
|
|
515
|
|
|
Inventories
|
|
13,568
|
|
|
8,350
|
|
|
Other current assets
|
|
846
|
|
|
560
|
|
|
Total current assets
|
|
58,218
|
|
|
59,828
|
|
|
Property and equipment,
net
|
|
2,668
|
|
|
2,429
|
|
|
Goodwill
|
|
27,073
|
|
|
27,073
|
|
|
Intangibles, net
|
|
44,151
|
|
|
44,863
|
|
|
Other assets
|
|
187
|
|
|
182
|
|
|
Total Assets
|
|
$
|
132,297
|
|
|
$
|
134,375
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable and accrued
expenses
|
|
$
|
13,525
|
|
|
$
|
11,243
|
|
|
Current liabilities
|
|
13,525
|
|
|
11,243
|
|
|
Long term
liabilities:
|
|
|
|
|
|
Other long term
liabilities
|
|
1,046
|
|
|
1,029
|
|
|
Contingently issuable common
stock
|
|
36,800
|
|
|
28,200
|
|
|
Long term liabilities
|
|
37,846
|
|
|
29,229
|
|
|
Total liabilities
|
|
51,371
|
|
|
40,472
|
|
|
Stockholders' equity:
|
|
|
|
|
|
Common stock, $.001 par value;
75,000 shares authorized, and 57,760 and 56,896 shares issued, and
57,265 and 56,401 outstanding
|
|
58
|
|
|
57
|
|
|
Additional paid-in
capital
|
|
235,500
|
|
|
230,017
|
|
|
Accumulated deficit
|
|
(153,971)
|
|
|
(135,510)
|
|
|
Treasury stock at cost, 495
shares
|
|
(661)
|
|
|
(661)
|
|
|
Total stockholders'
equity
|
|
80,926
|
|
|
93,903
|
|
|
Total Liabilities and
Stockholders' Equity
|
|
$
|
132,297
|
|
|
$
|
134,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPANY
CONTACT:
|
INVESTOR
CONTACTS:
|
|
Endologix, Inc.
|
The Ruth Group
|
|
John McDermott, CEO
|
Nick Laudico (646)
536-7030
|
|
(949) 595-7200
|
Zack Kubow (646)
536-7020
|
|
www.endologix.com
|
|
|
|
|
SOURCE Endologix, Inc.