Third Quarter and Nine-Month 2011
Highlights
Third quarter revenue totaled $20.0 million, a 67% increase over
the same period in 2010
Eleven RIO® systems sold in the third quarter, increasing
worldwide commercial installed base to 97 RIO systems
A total of thirty RIO systems sold worldwide in the first nine
months of 2011, a 50% increase over the same period in 2010
1,813 MAKOplasty® procedures performed in the third quarter, a
122% increase over the same period in 2010
4,674 MAKOplasty procedures performed in first nine months of
2011, a 100% increase over the same period in 2010
MAKOplasty® Total Hip Arthroplasty commercially launched in
September 2011 and twelve MAKOplasty Total Hip Arthroplasty
applications sold in the third quarter of 2011
MAKO Surgical Corp. (Nasdaq:MAKO), a medical device company that
markets its RIO® Robotic Arm Interactive Orthopedic surgical
platform, MAKOplasty® joint specific applications, and proprietary
RESTORIS® implants that together enable orthopedic surgeons to
consistently, reproducibly and precisely treat patient specific
osteoarthritic disease, today announced its operating results for
the quarter ended September 30, 2011.
Recent Business Developments
RIO Systems – Eleven RIO systems were installed and customer
accepted at domestic commercial sites during the third quarter,
bringing MAKO's worldwide commercial installed base of RIO systems
to 97 systems as of September 30, 2011, of which 95 are installed
domestically. Four of the third quarter RIO system sales were part
of the first quarter binding commitment for eleven new MAKOplasty
sites received from Health Management Associates, Inc. (NYSE:HMA),
an operator of acute care hospitals primarily in the southeast and
southwest areas of non-urban America. A total of ten RIO system
sales have been fulfilled under the HMA order, with the remaining
one RIO system expected to be installed and customer accepted in
the fourth quarter of 2011.
MAKOplasty Procedure Volume – During the third quarter, 1,813
MAKOplasty procedures were performed, of which 1,752 were performed
at domestic sites. The 1,813 MAKOplasty procedures performed
represent a 16% increase over the procedures performed in the
second quarter of 2011 and a 122% increase over the procedures
performed in the third quarter of 2010. During the nine months
ended September 30, 2011, a total of 4,674 MAKOplasty procedures
were performed. Through September 30, 2011, a total of 10,543
procedures had been performed since the first procedure in June
2006.
MAKOplasty Total Hip Arthroplasty Commercial Launch – In
September 2011, MAKO commercially launched MAKOplasty Total Hip
Arthroplasty (THA). Subsequent to the commercial launch, twelve
MAKOplasty THA applications were sold through September 30,
2011.
Clinical Research and Marketing – Efforts to build a strong base
of clinical evidence for MAKOplasty continue, with over 70 clinical
studies currently in process. During the third quarter, 20
abstracts were submitted for peer-review to four different
conferences.
"We are pleased with our strong operating results in the third
quarter of 2011, including the commercial introduction of
MAKOplasty Total Hip Arthroplasty," said Maurice R. Ferre, M.D.,
President and Chief Executive Officer of MAKO. "We believe that the
expansion of our product offering through the launch of the hip
application will allow us to continue to drive the adoption of
MAKOplasty to help enable surgeons to deliver consistent,
reproducible precision to orthopedic procedures."
2011 Third Quarter Financial Review
Revenue was $20.0 million in the third quarter of 2011 compared
to $12.0 million in the third quarter of 2010, representing a 67%
increase. Revenue in the third quarter of 2011 primarily consisted
of $9.1 million in revenue from the sale of implants and
disposables used in the 1,813 MAKOplasty procedures performed in
the quarter, $9.3 million in revenue from the sale of eleven RIO
systems and twelve MAKOplasty THA applications and $1.6 million in
revenue from service.
Total gross profit for the third quarter of 2011 was $13.2
million compared to a gross profit of $7.5 million in the same
period in 2010. Total gross margin for the third quarter of 2011
was 66%, including a 73% margin on procedure revenue, a 57% margin
on RIO system revenue and a 76% margin on service revenue.
Operating expenses were $22.8 million in the third quarter of
2011 compared to $16.5 million in the third quarter of 2010. The
increase in operating expenses was primarily attributable to the
following: an increase in sales and marketing activities for the
continued expansion of the direct sales force and commercialization
of the RIO system and RESTORIS implant systems; an increase in
research and development activities associated with continuous
improvement of the RIO system and MAKOplasty applications and the
development of potential future products, including the recently
launched MAKOplasty THA application and associated implant systems;
and an increase in general and administrative costs as MAKO
continued to build infrastructure to support growth.
Net loss for the three months ended September 30, 2011 was $9.7
million, including non-cash stock-based compensation expense of
$2.5 million, or $(0.24) per basic and diluted share, based on
average basic and diluted shares outstanding of 41.0 million. This
compares to a net loss for the same period in 2010 of $8.9 million,
including non-cash stock-based compensation expense of $1.7
million, or $(0.27) per basic and diluted share, based on average
basic and diluted shares outstanding of 33.5 million.
Cash, cash equivalents and investments were $67.4 million as of
September 30, 2011 compared to $96.8 million as of December 31,
2010.
2011 Nine-Month Financial Review
For the nine months ended September 30, 2011, revenue was $51.6
million, primarily generated from the sale of thirty RIO systems,
twelve MAKOplasty THA applications, 4,674 MAKOplasty procedures
performed and warranty and maintenance services provided, compared
to $29.5 million for the nine months ended September 30, 2010.
The net loss for the nine months ended September 30, 2011 was
$30.6 million, including non-cash stock-based compensation expense
of $7.4 million, or $(0.75) per basic and diluted share, based on
average basic and diluted shares outstanding of 40.6 million. This
compares to a net loss for the nine months ended September 30, 2010
of $28.9 million, including non-cash stock-based compensation
expense of $4.6 million, or $(0.87) per basic and diluted share,
based on average basic and diluted shares outstanding of 33.4
million.
Conference Call
MAKO will host a conference call today at 4:30 pm ET to discuss
its third quarter 2011 results. To listen to the conference call,
please dial 877-843-0414 for domestic callers and 914-495-8580 for
international callers approximately ten minutes prior to the start
time. The participant code is 16435167. To access the live audio
broadcast or the subsequent archived recording, visit the Investor
Relations section of MAKO's website at www.makosurgical.com.
About MAKO Surgical Corp. MAKO Surgical Corp.
is a medical device company that markets its RIO® Robotic-Arm
Interactive Orthopedic system, joint specific applications for the
knee and hip, and proprietary RESTORIS® implants for orthopedic
procedures called MAKOplasty®. The RIO is a surgeon-interactive
tactile surgical platform that incorporates a robotic arm and
patient-specific visualization technology, which enables precise,
consistently reproducible bone resection for the accurate insertion
and alignment of MAKO's RESTORIS implants. The MAKOplasty solution
incorporates technologies enabled by an intellectual property
portfolio including more than 300 U.S. and foreign, owned and
licensed, patents and patent applications. Additional information
can be found at www.makosurgical.com.
Forward-Looking Statements
This press release contains forward-looking statements
regarding, among other things, statements related to expectations,
goals, plans, objectives and future events. MAKO intends such
forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in Section 21E
of the Securities Exchange Act of 1934 and the Private Securities
Reform Act of 1995. In some cases, forward-looking statements can
be identified by the following words: "may," "will," "could,"
"would," "should," "expect," "intend," "plan," "anticipate,"
"believe," "estimate," "predict," "project," "potential,"
"continue," "ongoing" or the negative of these terms or other
comparable terminology, although not all forward-looking statements
contain these words. These statements are based on the current
estimates and assumptions of our management as of the date of this
press release and are subject to risks, uncertainties, changes in
circumstances, assumptions and other factors that may cause actual
results to differ materially from those indicated by
forward-looking statements, many of which are beyond MAKO's ability
to control or predict. Such factors, among others, may have a
material adverse effect on MAKO's business, financial condition and
results of operations and may include the potentially significant
impact of a continued economic downturn or delayed economic
recovery on the ability of MAKO's customers to secure adequate
funding, including access to credit, for the purchase of MAKO's
products or cause MAKO's customers to delay a purchasing decision,
changes in competitive conditions and prices in MAKO's markets,
unanticipated issues relating to intended product launches,
decreases in sales of MAKO's principal product lines, increases in
expenditures related to increased or changing governmental
regulation or taxation of MAKO's business, unanticipated issues in
complying with regulatory requirements related to MAKO's current
products or securing regulatory clearance or approvals for new
products or upgrades or changes to MAKO's current products, the
impact of the recently enacted United States healthcare reform
legislation on hospital spending, reimbursement, and the taxing of
medical device companies, loss of key management and other
personnel or inability to attract such management and other
personnel and unanticipated intellectual property expenditures
required to develop, market, and defend MAKO's products. These and
other risks are described in greater detail under Item 1A, "Risk
Factors," in MAKO's periodic filings with the Securities and
Exchange Commission, including MAKO's annual report on Form 10-K
for the year ended December 31, 2010 filed on March 10, 2011 and
quarterly report on Form 10-Q for the quarter ended September 30,
2011. Given these uncertainties, undue reliance should not be
placed on these forward-looking statements. MAKO does not undertake
any obligation to release any revisions to these forward-looking
statements publicly to reflect events or circumstances after the
date of this press release or to reflect the occurrence of
unanticipated events.
"MAKOplasty®," "RESTORIS®," "RIO®," as well as the "MAKO" logo,
whether standing alone or in connection with the words "MAKO
Surgical Corp." are trademarks of MAKO Surgical Corp.
| Condensed Statements of Operations
(unaudited) |
Three Months Ended |
Nine Months Ended |
| (in thousands, except per share data) |
September 30, |
September 30, |
| |
2011 |
2010 |
2011 |
2010 |
| |
|
|
|
|
| Revenue: |
|
|
|
|
| Procedures |
$9,108 |
$4,069 |
$23,251 |
$11,937 |
| Systems – RIO |
9,315 |
7,579 |
24,153 |
16,641 |
| Service |
1,591 |
366 |
4,215 |
936 |
| Total revenue |
20,014 |
12,014 |
51,619 |
29,514 |
| Cost of revenue: |
|
|
|
|
| Procedures |
2,484 |
1,034 |
5,998 |
4,100 |
| Systems – RIO |
3,973 |
3,317 |
9,499 |
7,440 |
| Service |
378 |
208 |
911 |
686 |
| Total cost of revenue |
6,835 |
4,559 |
16,408 |
12,226 |
| Gross profit |
13,179 |
7,455 |
35,211 |
17,288 |
| Operating costs and expenses: |
|
|
|
|
| Selling, general and administrative |
16,533 |
11,648 |
48,479 |
33,183 |
| Research and development |
5,054 |
4,018 |
14,263 |
11,002 |
| Depreciation and amortization |
1,177 |
795 |
3,129 |
2,166 |
| Total operating costs and expenses |
22,764 |
16,461 |
65,871 |
46,351 |
| Loss from operations |
(9,585) |
(9,006) |
(30,660) |
(29,063) |
| Other income (expense) |
(51) |
84 |
161 |
256 |
| Loss before income taxes |
(9,636) |
(8,922) |
(30,499) |
(28,807) |
| Income tax expense |
19 |
16 |
60 |
63 |
| Net loss |
($9,655) |
($8,938) |
($30,559) |
($28,870) |
| Net loss per share - Basic and
diluted |
($0.24) |
($0.27) |
($0.75) |
($0.87) |
| Weighted average common shares outstanding -
Basic and diluted |
40,981 |
33,481 |
40,568 |
33,361 |
| |
|
|
|
|
| |
|
|
|
|
| Condensed Balance Sheets
(unaudited) |
September 30, 2011 |
December 31, 2010 |
|
|
| (in thousands) |
|
|
|
|
| Current Assets: |
|
|
|
|
| Cash and cash equivalents |
$8,410 |
$27,108 |
|
|
| Short-term investments |
42,071 |
46,401 |
|
|
| Accounts receivable |
11,228 |
11,560 |
|
|
| Inventory |
18,164 |
10,504 |
|
|
| Deferred cost of revenue |
125 |
― |
|
|
| Prepaid and other current
assets |
2,110 |
1,283 |
|
|
| Total current assets |
82,108 |
96,856 |
|
|
| Long-term investments |
16,894 |
23,283 |
|
|
| Property and equipment, net |
15,917 |
9,212 |
|
|
| Intangible assets, net |
7,704 |
7,530 |
|
|
| Other assets |
148 |
198 |
|
|
| Total assets |
$122,771 |
$137,079 |
|
|
| |
|
|
|
|
| Current Liabilities: |
|
|
|
|
| Accounts payable |
$4,818 |
$1,518 |
|
|
| Accrued compensation and employee
benefits |
3,690 |
5,546 |
|
|
| Other accrued liabilities |
7,743 |
5,064 |
|
|
| Deferred revenue |
3,941 |
3,071 |
|
|
| Total current liabilities |
20,192 |
15,199 |
|
|
| Deferred revenue, non-current |
75 |
109 |
|
|
| Total liabilities |
20,267 |
15,308 |
|
|
| Stockholders' equity: |
|
|
|
|
| Common stock |
41 |
40 |
|
|
| Additional paid-in capital |
285,828 |
274,712 |
|
|
| Accumulated deficit |
(183,441) |
(152,882) |
|
|
| Accumulated other comprehensive
gain (loss) |
76 |
(99) |
|
|
| Total stockholders' equity |
102,504 |
121,771 |
|
|
| Total liabilities and stockholders'
equity |
$122,771 |
$137,079 |
|
|
| |
|
| Condensed Statements of Cash Flows
(unaudited) |
Nine Months Ended |
| (in thousands, except share data) |
September 30, |
| |
2011 |
2010 |
| Operating activities: |
|
|
| Net loss |
($30,559) |
($28,870) |
| Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
| Depreciation |
3,188 |
1,728 |
| Amortization of intangible assets |
1,026 |
751 |
| Stock-based compensation |
7,433 |
4,632 |
| Inventory write-down |
222 |
1,270 |
| Amortization of premium on investment
securities |
365 |
391 |
| Loss on asset impairment |
148 |
986 |
| Provision for doubtful accounts |
137 |
― |
| Issuance of restricted stock under
development agreement |
1,440 |
― |
| Changes in operating assets and
liabilities: |
|
|
| Accounts receivable |
195 |
(4,112) |
| Inventory |
(9,808) |
(5,937) |
| Deferred cost of revenue |
(125) |
― |
| Prepaid and other current
assets |
(827) |
(840) |
| Other assets |
50 |
(60) |
| Accounts payable |
3,300 |
326 |
| Accrued compensation and employee
benefits |
(1,856) |
(684) |
| Other accrued liabilities |
2,679 |
2,831 |
| Deferred revenue |
836 |
3 |
| Net cash used in operating activities |
(22,156) |
(27,585) |
| Investing activities: |
|
|
| Purchase of investments |
(30,646) |
(8,515) |
| Proceeds from sales and maturities of
investments |
41,175 |
37,581 |
| Acquisition of property and equipment |
(8,115) |
(2,157) |
| Acquisition of intangible assets |
(1,200) |
(562) |
| Net cash provided by investing
activities |
1,214 |
26,347 |
| Financing activities: |
|
|
| Proceeds from employee stock purchase
plan |
798 |
556 |
| Exercise of common stock options and warrants
for cash |
2,411 |
334 |
| Payment of payroll taxes relating to vesting
of restricted stock |
(965) |
(342) |
| Net cash provided by financing
activities |
2,244 |
548 |
| Net decrease in cash and cash
equivalents |
(18,698) |
(690) |
| Cash and cash equivalents at beginning of
period |
27,108 |
17,159 |
| Cash and cash equivalents at end of
period |
$8,410 |
$16,469 |
CONTACT: Investors:
MAKO Surgical Corp.
954-628-1706
investorrelations@makosurgical.com
or
Westwicke Partners
Mark Klausner
443-213-0500
makosurgical@westwicke.com
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