ATLANTA, July 29 /PRNewswire-FirstCall/ -- CryoLife,
Inc. (NYSE: CRY), an implantable biological medical device and
cardiovascular tissue processing company, announced today its
results for the second quarter of 2010. Revenues for the
second quarter increased 4 percent to a second quarter record of
$29.3 million compared to
$28.2 million for the second quarter
of 2009. Net income for the second quarter of 2010 was
$2.9 million, or $0.10 per basic and fully diluted common share,
compared to $2.5 million, or
$0.09 per basic and fully diluted
common share, for the second quarter of 2009.
"We are very pleased to be reporting record second quarter
revenues and our 14th consecutive quarter of
profitability. CryoLife continues to execute effectively on
its business plan despite a challenging economy, as evidenced by
the $3.7 million increase in our
cash, cash equivalents, and restricted securities in the quarter to
$41.4 million. We believe that
our continuing strong operating performance, coupled with our
ongoing stock repurchase plan and business development initiatives,
will lead to enhanced shareholder value over the near- and
long-term," stated Steven G.
Anderson, president and chief executive officer.
The Company recorded pretax charges in the second quarter of
2010 of approximately $420,000 in
costs related to litigation with Medafor and recorded a
$385,000 gain on valuation of the
derivative related to the investment in Medafor common stock.
Revenues for the first six months of 2010 increased 8 percent to
a first six month record of $59.0
million compared to $54.9
million for the first six months of 2009. Net income
for the first six months of 2010 was $4.9
million, or $0.17 per basic
and fully diluted common share, compared to $4.5 million, or $0.16 per basic and fully diluted common share
for the first six months of 2009.
The Company recorded pretax charges in the first six months 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 and approximately
$834,000 in costs related to
litigation with Medafor. Additionally, the Company recorded a
$1.2 million gain on valuation of the
derivative related to the investment in Medafor common stock.
Preservation service revenues for the second quarter of 2010
increased 6 percent to $15.0 million
compared to $14.1 million for the
second quarter of 2009. Preservation service revenues for the
first six months of 2010 increased 11 percent to $30.6 million compared to $27.6 million for the first six months of 2009.
The increase in preservation service revenues for the second
quarter of 2010 was primarily due to increased shipments of
vascular tissues. The increase in preservation service
revenues for the first six months of 2010 was primarily due to
increased shipments of both cardiac and vascular tissues.
Product revenues, which consist primarily of sales of BioGlue
and HemoStase®, were $14.1
million for the second quarter of 2010 compared to
$13.9 million for the second quarter
of 2009, an increase of 2 percent. Product revenues were
$28.1 million for the first six
months of 2010 compared to $26.9
million for the first six months of 2009, an increase of 5
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 61
percent for the second quarter of 2010 and 63 percent for the
second quarter of 2009. Total preservation services and
product gross margins were 60 percent and 64 percent for the first
six months of 2010 and 2009, respectively.
Preservation services gross margins were 40 percent for the
second quarter of 2010 and 43 percent for the second quarter of
2009. Preservation services gross margins were 40 percent and
44 percent for the first six months of 2010 and 2009,
respectively.
Product gross margins were 82 percent for the second quarter of
2010 and 84 percent for the second quarter of 2009. Product
gross margins were 82 percent and 84 percent for the first six
months of 2010 and 2009, respectively.
General, administrative, and marketing expenses for the second
quarter of 2010 were $11.7 million
compared to $12.3 million for the
second quarter of 2009. General, administrative, and
marketing expenses for the second quarter of 2010 included
approximately $420,000 in costs
related to litigation with Medafor.
General, administrative, and marketing expenses for the first
six months of 2010 were $25.5 million
compared to $25.1 million for the
first six months of 2009. General, administrative, and
marketing expenses for the first six months 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 and approximately $834,000 in costs related to litigation with
Medafor.
Research and development expenses were $1.2 million and $1.4
million for the second quarters of 2010 and 2009,
respectively. Research and development expenses were
$2.5 million and $2.4 million for the first six months of 2010 and
2009, respectively. Research and development spending in the
first six months of 2010 was primarily focused on the Company's
BioGlue, BioFoam™ Surgical Matrix, and SynerGraft®
tissues and products.
Other income of $215,000 and
$865,000 in the second quarter and
the first six months of 2010, respectively, consisted primarily of
a $385,000 and $1.2 million gain on valuation of the derivative
related to the investment in Medafor common stock.
As of June 30, 2010, the Company
had $41.4 million in cash, cash
equivalents, and restricted securities, compared to $35.1 million at December
31, 2009. Of this $41.4
million, $2.4 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.
Medafor Update
As previously disclosed, on March 18,
2010, Medafor informed the Company that Medafor was
terminating the exclusive distribution agreement (EDA) between the
parties. CryoLife filed a motion for a preliminary injunction
against Medafor's termination of the EDA in the U.S. District Court
for the Northern District of Georgia. The court held hearings on the
motion on May 10 and June 28, 2010, but has not yet ruled on
CryoLife's motion.
During the time period between Medafor's announcement on
March 18, 2010 and late June, Medafor
rejected three of the Company's purchase orders for HemoStase
totaling approximately $1.8 million.
Due to these rejections, the Company did not have sufficient
inventories of all sizes of HemoStase to fulfill all orders,
specifically the 1 gram international product. In addition,
management believes that the Company lost additional sales of
HemoStase due to uncertainty in the market as to whether the
Company had the authority to market HemoStase and whether it would
be able to continue to supply the product in the future, as well as
due to continued sales by Medafor of its product into the Company's
exclusive territory in violation of the EDA.
Beginning June 29, 2010, Medafor
began shipments of HemoStase to CryoLife pursuant to a $2.5 million purchase order that CryoLife
submitted on June 25, 2010. By
mid-July CryoLife received the 1 gram international product ordered
on June 25. On July 9, 2010, the Company submitted an additional
purchase order for approximately $1.35
million of HemoStase. Medafor has begun shipments
under this purchase order. As of July
27, 2010 Medafor has filled approximately $2.5 million of the $3.8
million aggregate in June and July purchase orders.
If the EDA with Medafor remains in effect and Medafor fills
purchase orders in compliance with the EDA, the Company believes
that HemoStase revenues will increase for the full year 2010 as
compared to 2009. HemoStase is still in a growth phase and
has significant room to further penetrate CryoLife's existing
customer base. However, on July 27,
2010 the Company received notice from Medafor alleging that
CryoLife had materially breached the EDA and stating that Medafor
will terminate the EDA if the breach is not cured in 30 days.
CryoLife does not believe that Medafor will be able to
terminate the EDA per the terms of the notice without breaching the
EDA. CryoLife's ongoing litigation with Medafor and recent
Medafor actions, including this new notice, may negatively affect
the Company's ability to distribute HemoStase. Based on the
Company's existing inventory levels of HemoStase as of June
30, 2010 and additional receipts of HemoStase through July 27, 2010, CryoLife expects that it can
generate between $6.0 and $7.0
million in future sales of HemoStase unless the EDA is
ultimately terminated. The guidance below includes a range of
$4.0 to $4.5 million in HemoStase
revenues for the second half of 2010.
2010 Financial Guidance
This guidance is given subject to the assumptions and
qualifications discussed below. The Company expects total
revenues for the full year of 2010 to be between $118.0 million and $122.0 million, which includes
between $1.0 million and $2.0 million
related to funding received from the Department of Defense in
connection with the development of BioFoam. The Company
expects tissue processing revenues to increase between mid-single
and low-double digits on a percentage basis in 2010 compared to
2009, BioGlue revenues to increase by low single digits on a
percentage basis, and HemoStase revenues to increase more than
tissue or BioGlue revenues on a percentage basis. The Company
expects earnings per share of between $0.34
and $0.38 for 2010.
The assumptions upon which this guidance is based include
HemoStase revenues of between $4.0 million
and $4.5 million in the second half of the year, levels of
Medafor related litigation expenses in the second half of the year
consistent with the first half of the year, and that the EDA will
not be terminated. The earnings guidance contains general
expenses associated with business development opportunities, but
does not include significant expenses associated with specific
targets. The Company has withdrawn its proposal to acquire
Medafor and does not currently anticipate a transaction 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.
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
July 29, 2010 through August 6, 2010 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 353429.
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, our
expectation that, unless the EDA is ultimately
terminated, we can generate between $6.0 million and $7.0 million in future sales of
HemoStase based on current inventory and additional receipts of
HemoStase through July 23, 2010, our
expectation that our continuing strong operating performance,
coupled with our ongoing stock repurchase plan and business
development initiatives, will lead to enhanced shareholder
value over the near- and
long-term, 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, any
impact on our 2010 performance if Medafor is successful in
terminating the EDA and discontinues the shipment of product,
our belief that Medafor will not be able to terminate the EDA
per the terms of the notice without breaching the EDA, and
any impact on our 2010 financial guidance if
actual litigation expenses in the second half of the year
exceed litigation expenses in the first half of the year, the EDA
is terminated, or HemoStase revenues for the second half of the
year are less than expected. 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 nullified our main BioGlue patent in
Germany, and if the ruling is
upheld on appeal, we would be prevented from suing to prevent third
parties from infringing the 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,
if Medafor is successful in its attempts to terminate our
distribution agreement with it, we will be unable to continue to
distribute HemoStase, which will have a material, adverse impact on
our revenues and profitability, Medafor could refuse to comply with
the EDA or continue to not perform under the EDA, which could have
a material, adverse impact on our revenues and profitability,
Medafor has sold product directly into our exclusive territory and
field, and has delayed and refused to timely fill all purchase
orders, and such actions may negatively impact our ability to
distribute HemoStase by creating uncertainty with our customers and
distributors as to whether we will continue to have the right to
sell HemoStase; our investment in Medafor has been diluted as a
result of Medafor's issuance of 1.8 million shares to Magle Life
Sciences, and we could in the future determine that an impairment
in the value of our investment in Medafor common stock has
occurred, which could have a material, adverse impact on our
financial condition and profitability, we may not be able to
readily liquidate our investment in Medafor, and if we are able to
liquidate our investment, we may receive less cash than our
original investment and we may receive less than the carrying value
of our investment, healthcare policy changes, including recent
federal legislation 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, and we are
dependent on key personnel. 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
June 30, 2010, our Form 10-Q filing
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
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2010
|
2009
|
|
2010
|
2009
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
Revenues:
|
|
|
|
|
|
|
Preservation
services
|
$15,005
|
$14,091
|
|
$30,588
|
$27,639
|
|
Products
|
14,146
|
13,918
|
|
28,101
|
26,863
|
|
Other
|
112
|
154
|
|
291
|
349
|
|
Total revenues
|
29,263
|
28,163
|
|
58,980
|
54,851
|
|
|
|
|
|
|
|
|
Cost of preservation services
and products:
|
|
|
|
|
|
|
Preservation
services
|
9,013
|
8,027
|
|
18,411
|
15,518
|
|
Products
|
2,481
|
2,241
|
|
5,008
|
4,203
|
|
Total cost of preservation
services and products
|
11,494
|
10,268
|
|
23,419
|
19,721
|
|
|
|
|
|
|
|
|
Gross margin
|
17,769
|
17,895
|
|
35,561
|
35,130
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
General,
administrative, and marketing
|
11,670
|
12,306
|
|
25,487
|
25,054
|
|
Research and
development
|
1,240
|
1,367
|
|
2,532
|
2,393
|
|
Total operating
expenses
|
12,910
|
13,673
|
|
28,019
|
27,447
|
|
|
|
|
|
|
|
|
Operating income
|
4,859
|
4,222
|
|
7,542
|
7,683
|
|
|
|
|
|
|
|
|
Interest
expense
|
65
|
61
|
|
116
|
110
|
|
Interest
income
|
(6)
|
(20)
|
|
(10)
|
(63)
|
|
Gain on valuation
of derivative
|
(385)
|
--
|
|
(1,202)
|
--
|
|
Other expense
(income), net
|
111
|
(60)
|
|
231
|
92
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
5,074
|
4,241
|
|
8,407
|
7,544
|
|
Income tax
expense
|
2,148
|
1,739
|
|
3,547
|
3,093
|
|
|
|
|
|
|
|
|
Net income
|
$2,926
|
$2,502
|
|
$4,860
|
$4,451
|
|
|
|
|
|
|
|
|
Income per common
share:
|
|
|
|
|
|
|
Basic
|
$0.10
|
$0.09
|
|
$0.17
|
$0.16
|
|
Diluted
|
$0.10
|
$0.09
|
|
$0.17
|
$0.16
|
|
|
|
|
|
|
|
|
Weighted-average common shares
outstanding:
|
|
|
|
|
|
|
Basic
|
28,246
|
28,067
|
|
28,240
|
28,038
|
|
Diluted
|
28,483
|
28,174
|
|
28,513
|
28,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRYOLIFE, INC. AND
SUBSIDIARIES
|
|
Financial
Highlights
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2010
|
2009
|
|
2010
|
2009
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
Preservation
Services:
|
|
|
|
|
|
|
Cardiac
tissue
|
$6,861
|
$6,470
|
|
$13,764
|
$12,062
|
|
Vascular
tissue
|
8,144
|
7,577
|
|
16,824
|
15,448
|
|
Orthopaedic
tissue
|
--
|
44
|
|
--
|
129
|
|
Total preservation
services
|
15,005
|
14,091
|
|
30,588
|
27,639
|
|
|
|
|
|
|
|
|
Products:
|
|
|
|
|
|
|
BioGlue and
BioFoam
|
12,261
|
12,379
|
|
24,173
|
24,143
|
|
HemoStase
|
1,893
|
1,467
|
|
3,998
|
2,577
|
|
Other medical
devices
|
(8)
|
72
|
|
(70)
|
143
|
|
Total products
|
14,146
|
13,918
|
|
28,101
|
26,863
|
|
|
|
|
|
|
|
|
Other
|
112
|
154
|
|
291
|
349
|
|
Total revenues
|
$29,263
|
$28,163
|
|
$58,980
|
$54,851
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
U.S.
|
$24,418
|
$23,579
|
|
$49,347
|
$46,323
|
|
International
|
4,845
|
4,584
|
|
9,633
|
8,528
|
|
Total revenues
|
$29,263
|
$28,163
|
|
$58,980
|
$54,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, and
restricted securities
|
$41,442
|
|
$35,121
|
|
Receivables, net
|
15,110
|
|
14,636
|
|
Deferred preservation
costs
|
33,642
|
|
36,445
|
|
Inventories
|
7,645
|
|
6,446
|
|
Investment in equity
securities
|
6,245
|
|
3,221
|
|
Total assets
|
140,207
|
|
133,859
|
|
Shareholders' equity
|
116,046
|
|
110,446
|
|
|
|
|
|
|
|
|
|
|
|
|
For additional information about the Company, visit CryoLife's
Web site:
http://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.