ATLANTA, April 28 /PRNewswire-FirstCall/ -- CryoLife,
Inc. (NYSE: CRY), an implantable biological medical device and
cardiovascular tissue processing company, announced today its
results for the first quarter of 2010. Revenues for the first
quarter increased 11 percent to a quarterly record of $29.7 million compared to $26.7 million for the first quarter of 2009.
Net income for the first quarter of 2010 was $1.9 million, or $0.07 per basic and fully diluted common share,
compared to $1.9 million, or
$0.07 per basic and fully diluted
common share, for the first quarter of 2009.
"We are very excited to start a new year by reporting record
revenues and our 13th consecutive quarter of profitability.
Cardiac and vascular preservation revenue growth of 16
percent and surgical sealant and hemostat growth of 9 percent for
the first quarter clearly demonstrate the continuing acceptance of
CryoLife's products and services by physicians throughout the
world. The increase in our cash balances of $2.6 million in the quarter to $37.7 million is illustrative of management's
ability to execute the Company's plans in a very difficult
economy," stated Steven G. Anderson,
president and chief executive officer.
The Company recorded pretax charges in the first quarter of 2010
of $729,000 in connection with the
write-off of capitalized legal expenses associated with BioGlue®
Surgical Adhesive intellectual property rights in Germany, approximately $380,000 in business development costs primarily
associated with the proposal to acquire Medafor, Inc., and
approximately $415,000 in costs
related to litigation with Medafor. Additionally, the Company
recorded an $817,000 gain on
valuation of derivative related to the investment in Medafor common
stock.
Preservation service revenues for the first quarter of 2010
increased 15 percent to $15.6 million
compared to $13.5 million for the
first quarter of 2009. The increase in preservation service
revenues was primarily due to increased shipments of cardiac
tissues for the first quarter of 2010 compared to the first quarter
of 2009.
Product revenues, which consist primarily of sales of BioGlue
and HemoStase®, were $14.0 million
for the first quarter of 2010 compared to $12.9 million for the first quarter of 2009, an
increase of 8 percent. The increase year over year primarily
reflects the growing usage of HemoStase in cardiac and vascular
surgical indications in the U.S., and cardiac, vascular, and
general surgery indications in many markets outside of the U.S.
Total preservation services and product gross margins were 60
percent and 64 percent for the first quarters of 2010 and 2009,
respectively. Preservation services gross margins were 40
percent and 45 percent for the first quarters of 2010 and 2009,
respectively. Product gross margins were 82 percent and 85
percent for the first quarters of 2010 and 2009, respectively.
General, administrative, and marketing expenses for the first
quarter of 2010 were $13.8 million
compared to $12.7 million for the
first quarter of 2009. General, administrative, and marketing
expenses for the first quarter of 2010 included a charge of
$729,000 related to the write-off of
capitalized legal expenses associated with BioGlue intellectual
property rights in Germany,
approximately $380,000 in business
development costs primarily associated with the proposal to acquire
Medafor, and approximately $415,000
in costs related to litigation with Medafor.
Research and development expenses were $1.3 million and $1.0
million for the first quarters of 2010 and 2009,
respectively. Research and development spending in 2010 was
primarily focused on the Company's BioGlue, BioFoam™ Surgical
Matrix, and SynerGraft® tissues and products.
Other income of $650,000 in the
first quarter of 2010 consists primarily of an $817,000 gain on valuation of derivative related
to the investment in Medafor common stock.
As of March 31, 2010, the Company
had $37.7 million in cash, cash
equivalents, and restricted securities, compared to $35.1 million at December
31, 2009. Of this $37.7
million, $2.5 million was
received from the U.S. Department of Defense as advance
funding for the development of BioFoam protein hydrogel technology,
and $5.3 million was designated as
restricted securities primarily due to a financial covenant
requirement under the Company's credit agreement. The Company
has net operating loss carryforwards that will reduce required cash
payments for federal and state income taxes for the 2010 tax
year.
2010 Financial Guidance
The Company is reiterating its guidance for the full year of
2010 subject to the potential impact of the ongoing litigation with
Medafor, including the uncertainty of whether CryoLife will be able
to continue to sell HemoStase throughout the rest of the year, as
described below. The Company expects total revenues for the
full year of 2010 to be between $118.0
million and $123.0 million, which includes between
$1.5 million and $2.5 million related
to funding received from the Department of Defense in connection
with the development of BioFoam. The Company expects tissue
processing revenues and BioGlue revenues to each increase between
mid-single and low-double digits on a percentage basis in 2010
compared to 2009, with HemoStase revenues increasing significantly
more than that on a percentage basis. The Company expects
earnings per share of between $0.36 and
$0.40 for 2010.
The assumptions upon which this guidance is based include the
following: The earnings guidance contains general expenses
associated with business development opportunities, but does not
include significant expenses associated with specific targets, such
as Medafor. The Company has withdrawn its proposal to acquire
Medafor and does not currently anticipate a transaction with it
occurring during 2010; however, should CryoLife renew its proposal
or take other actions to acquire Medafor, such as a proxy contest
or tender offer, it could incur expenses or changes in the value of
the Medafor derivative that could materially affect this guidance.
Medafor informed CryoLife on March 18,
2010 that the distribution agreement between the parties was
terminated. CryoLife filed an emergency motion for
preliminary injunction in federal court requesting that the court
order the agreement to not be terminated. The court has set a
hearing date for May 10, 2010.
If Medafor is successful in its attempt to terminate the
agreement and elects to discontinue shipping HemoStase to CryoLife,
then the Company's full year 2010 guidance would be materially,
adversely affected. The Company believes that Medafor does
not have a basis for terminating the agreement, and the guidance
above assumes that it will not be successful; however, litigation
is inherently risky and there is no guarantee that the outcome will
match our expectations. Additionally, the Company has
budgeted for a certain level of expenses related to its on-going
litigation with Medafor. However, if actual future legal
expenses exceed the amounts budgeted, then it could materially,
adversely affect our expense and earnings guidance.
Webcast and Conference Call Information
The Company will hold a teleconference call and live webcast
today at 10:00 a.m. Eastern Time to
discuss the results followed by a question and answer session
hosted by Mr. Anderson.
To listen to the live teleconference, please dial 201-689-8261 a
few minutes prior to 10:00 a.m.
A replay of the teleconference will be available from
April 28 through May 5 and can be
accessed by calling 877-660-6853 (toll free) or 201-612-7415.
The account number for the replay is 244 and the conference
number is 349352.
The live webcast and replay can be accessed by going to the
Investor Relations section of the CryoLife Web site at
www.cryolife.com and selecting the heading Webcasts &
Presentations.
About CryoLife, Inc.
Founded in 1984, CryoLife, Inc. is a leader in the processing
and distribution of implantable living human tissues for use in
cardiac and vascular surgeries throughout the U.S. and Canada. The Company's CryoValve® SG
pulmonary heart valve, processed using CryoLife's proprietary
SynerGraft® technology, has FDA 510(k) clearance for the
replacement of diseased, damaged, malformed, or malfunctioning
native or prosthetic pulmonary valves. The Company's
CryoPatch® SG pulmonary cardiac patch has FDA 510(k) clearance for
the repair or reconstruction of the right ventricular outflow tract
(RVOT), which is a surgery commonly performed in children with
congenital heart defects, such as Tetralogy of Fallot, Truncus
Arteriosus, and Pulmonary Atresia. CryoPatch SG is
distributed in three anatomic configurations: pulmonary
hemi-artery, pulmonary trunk, and pulmonary branch. The
Company's BioGlue® Surgical Adhesive is FDA approved as an adjunct
to sutures and staples for use in adult patients in open surgical
repair of large vessels. BioGlue is also CE marked in the
European Community and approved in Canada and Australia for use in soft tissue repair.
The Company's BioFoam™ Surgical Matrix is CE marked in the
European Community for use as an adjunct in the sealing of
abdominal parenchymal tissues (liver and spleen) when cessation of
bleeding by ligature or other conventional methods is ineffective
or impractical. BIOGLUE Aesthetic® Medical Adhesive is
CE marked in the European Community for periosteal fixation
following endoscopic browplasty (brow lift) in reconstructive
plastic surgery and is distributed by a third party for this
indication. CryoLife currently distributes HemoStase®, a
hemostatic agent, in much of the U.S. for use in cardiac and
vascular surgery and in many international markets for cardiac,
vascular, and general surgery, subject to certain exclusions.
Statements made in this press release that look forward in
time or that express management's beliefs, expectations or hopes
are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements
include those regarding anticipated 2010 performance, statements
regarding the expected impact of our net operating loss
carryforwards on our cash outlays for tax obligations, our current
expectation that a transaction to acquire Medafor will not occur in
2010, any impact on our 2010 performance or on the value of the
Medafor derivative that would occur if we renew our proposal or
take other actions to acquire Medafor, and any impact on our 2010
performance if Medafor is successful in terminating the
distribution agreement and discontinues the shipment of product.
These future events may not occur as and when expected, if at
all, and, together with our business, are subject to various risks
and uncertainties. These risks and uncertainties include that
we are significantly dependent on our revenues from BioGlue and are
subject to a variety of risks affecting this product, including
that a German Patent Court has indicated it will nullify our main
BioGlue patent in Germany, we are
subject to stringent domestic and foreign regulation which may
impede the approval process of our tissues and products, hinder our
development activities and manufacturing processes and, in some
cases, result in the recall or seizure of previously cleared or
approved tissues and products, Medafor is attempting to terminate
our distribution agreement with it and there is no guarantee that
we can convince the court to grant our motion for an injunction to
prevent the termination, or that Medafor will not otherwise succeed
in its attempts to terminate the agreement, if Medafor's
termination of the agreement is successful and Medafor ceases
shipping HemoStase to us, it will materially adversely impact our
revenues, our investment in Medafor could be impaired in the
future, our investment in Medafor is illiquid and if we sell our
investment we might not obtain appropriate value or may sell it for
less cash than our original investment and/or less than the
carrying value of those shares, healthcare policy changes,
including pending proposals to reform the U.S. healthcare system,
may have a material adverse effect on us, uncertainties related to
patents and protection of proprietary technology may adversely
affect the value of our intellectual property, uncertainties
related to patents and protection of proprietary technology for
products distributed by CryoLife may adversely affect our ability
to distribute those products, the tissues we process and our
products allegedly have caused and may in the future cause injury
to patients, and we have been and may be exposed to product
liability claims and additional regulatory scrutiny as a result, we
are dependent on the availability of sufficient quantities of
tissue from human donors, our CryoValve SGPV post-clearance study
may not provide expected results, demand for our tissues and
products could decrease in the future, which could have a material
adverse effect on our business, the success of many of our tissues
and products depends upon strong relationships with physicians,
consolidation in the health care industry could lead to demands for
price concessions or limits or eliminate our ability to sell to
certain of our significant market segments, our existing insurance
policies may not be sufficient to cover our actual claims
liability, we may be unable to obtain adequate insurance at a
reasonable cost, if at all, the loss of any of our sole-source
suppliers could have an adverse effect on our revenues, financial
condition, profitability, and cash flows, intense competition may
affect our ability to operate profitably, regulatory action outside
of the U.S. has affected our business in the past and may affect
our business in the future, rapid technological change could cause
our services and products to become obsolete, continued fluctuation
of foreign currencies relative to the U.S. dollar could materially
and adversely impact our business, our credit facility limits our
ability to pursue significant acquisitions, key growth strategies
may not generate the anticipated benefits, there are limitations on
the use of our net operating loss carryforwards, our ability to
borrow under our credit facility may be limited, we may not be
successful in obtaining necessary clinical results and regulatory
approvals for services and products in development, and our new
services and products may not achieve market acceptance, extensive
government regulation may adversely affect our ability to develop
and market services and products, investments in new technologies
and acquisitions of products or distribution rights may not be
successful, if we are not successful in expanding our business
activities in international markets, we may be unable to increase
our revenues, we are not insured against all potential losses, and
natural disasters or other catastrophes could adversely affect our
business, financial condition, and profitability, we are dependent
on key personnel, and our CryoValve SG pulmonary heart valves have
a one-year shelf life. These risks and uncertainties include the
risk factors detailed in our Securities and Exchange Commission
filings, including our Form 10-Q to be filed for the quarter ended
March 31, 2010 and our Form 10-K
filing for the year ended December 31,
2009, and the Company's other SEC filings.
The Company does not undertake to update its
forward-looking statements.
CRYOLIFE, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
March 31,
|
|
|
|
2010
|
|
2009
|
|
|
|
(Unaudited)
|
|
Revenues:
|
|
|
|
|
|
Preservation services
|
$
|
15,583
|
$
|
13,548
|
|
Products
|
|
13,955
|
|
12,945
|
|
Other
|
|
179
|
|
195
|
|
Total
revenues
|
|
29,717
|
|
26,688
|
|
|
|
|
|
|
|
Cost of preservation services and
products:
|
|
|
|
|
|
Preservation services
|
|
9,398
|
|
7,491
|
|
Products
|
|
2,527
|
|
1,962
|
|
Total cost of
preservation services
|
|
|
|
|
|
and
products
|
|
11,925
|
|
9,453
|
|
Gross
margin
|
|
17,792
|
|
17,235
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
General, administrative, and
marketing
|
|
13,817
|
|
12,748
|
|
Research and development
|
|
1,292
|
|
1,026
|
|
Total operating
expenses
|
|
15,109
|
|
13,774
|
|
Operating
income
|
|
2,683
|
|
3,461
|
|
|
|
|
|
|
|
Interest expense
|
|
51
|
|
49
|
|
Interest income
|
|
(4)
|
|
(43)
|
|
Gain on valuation of
derivative
|
|
(817)
|
|
--
|
|
Other expense, net
|
|
120
|
|
152
|
|
Income before income
taxes
|
|
3,333
|
|
3,303
|
|
Income tax expense
|
|
1,399
|
|
1,354
|
|
|
|
|
|
|
|
Net
income
|
$
|
1,934
|
$
|
1,949
|
|
|
|
|
|
|
|
Income per common share:
|
|
|
|
|
|
Basic
|
$
|
0.07
|
$
|
0.07
|
|
Diluted
|
$
|
0.07
|
$
|
0.07
|
|
|
|
|
|
|
|
Weighted-average common shares
outstanding:
|
|
|
|
|
|
Basic
|
|
28,235
|
|
28,009
|
|
Diluted
|
|
28,539
|
|
28,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRYOLIFE, INC. AND SUBSIDIARIES
Financial Highlights
(In thousands)
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March 31,
|
|
|
|
2010
|
|
2009
|
|
|
(Unaudited)
|
|
Preservation services:
|
|
|
|
|
|
Cardiac tissue
|
$
|
6,903
|
$
|
5,592
|
|
Vascular tissue
|
|
8,680
|
|
7,871
|
|
Orthopaedic tissue
|
|
--
|
|
85
|
|
Total preservation
services
|
|
15,583
|
|
13,548
|
|
|
|
|
|
|
|
Products:
|
|
|
|
|
|
BioGlue and BioFoam
|
|
11,912
|
|
11,764
|
|
HemoStase
|
|
2,105
|
|
1,110
|
|
Other medical devices
|
|
(62)
|
|
71
|
|
Total
products
|
|
13,955
|
|
12,945
|
|
|
|
|
|
|
|
Other
|
|
179
|
|
195
|
|
Total revenues
|
$
|
29,717
|
$
|
26,688
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
U.S.
|
$
|
24,929
|
$
|
22,744
|
|
International
|
|
4,788
|
|
3,944
|
|
Total revenues
|
$
|
29,717
|
$
|
26,688
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
|
2010
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, and restricted
securities
|
$
|
37,699
|
$
|
35,121
|
|
Receivables, net
|
|
15,386
|
|
14,636
|
|
Deferred preservation costs
|
|
34,693
|
|
36,445
|
|
Inventories
|
|
6,265
|
|
6,446
|
|
Investment in equity securities
|
|
6,142
|
|
3,221
|
|
Total assets
|
|
137,342
|
|
133,859
|
|
Shareholders' equity
|
|
113,165
|
|
110,446
|
|
|
|
|
|
|
For additional information about the company, visit CryoLife's
Web site: www.cryolife.com.
Media
Contacts:
|
|
|
|
D. Ashley
Lee
|
|
Executive Vice
President, Chief Financial Officer and
|
|
Chief Operating
Officer
|
|
Phone:
770-419-3355
|
|
|
|
Nina
Devlin
|
|
Edelman
|
|
Phone:
212-704-8145
|
|
|
SOURCE CryoLife, Inc.