First Quarter 2012 Highlights and Debt Funding
Commitment
First quarter revenue totaled $19.6 million, a 51% increase over
the same period in 2011
Six RIO® systems sold in the first quarter, increasing worldwide
commercial installed base to 118 RIO systems and domestic
commercial installed base to 116 RIO systems
2,297 MAKOplasty® procedures performed in the first quarter, a
76% increase over the same period in 2011
Thirteen MAKOplasty Total Hip Arthroplasty (THA) applications
sold in the first quarter, of which nine were sold to existing
customers
As of March 31, 2012, 53% of commercial domestic installed base
have the MAKOplasty THA application
On May 7, 2012, MAKO entered into a credit facility agreement
with Deerfield Management Company providing MAKO with committed
access to up to $50 million.
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 March 31, 2012.
Recent Business Developments
RIO Systems – Six RIO systems were sold during the first
quarter, of which five were sold to domestic customers and one was
sold to our distributor in Japan, for use in securing regulatory
approvals and to demonstrate MAKOplasty to build interest in that
market. These six RIO systems bring MAKO's worldwide commercial
installed base of RIO systems to 118 systems and domestic
commercial installed base to 116 systems as of March 31, 2012. The
revenue associated with the sale of the international system was
deferred due to a contingent obligation to reimburse the
distributor for the costs it incurs in the regulatory process
should the agreement be terminated prior to obtaining regulatory
approval. The revenue associated with this sale will be recognized
upon obtaining regulatory approval.
MAKOplasty Procedure Volume – During the first quarter, 2,297
MAKOplasty procedures were performed, of which 2,219 were performed
at domestic sites. Of the 2,219 domestic procedures, 211 were Total
Hip Arthroplasty (THA) procedures. The 2,297 MAKOplasty procedures
performed represent a 2% increase over the procedures performed in
the fourth quarter of 2011 and a 76% increase over the procedures
performed in the first quarter of 2011. The average monthly
utilization per system was 6.6 procedures during the first quarter
of 2012, a decrease from 7.2 procedures per system per month in the
fourth quarter of 2011 and an increase from 6.2 procedures per
system per month in the first quarter of 2011. Through March 31,
2012, over 15,000 procedures had been performed since the first
procedure in June 2006.
MAKOplasty Total Hip Arthroplasty Applications – In the first
quarter, thirteen MAKOplasty THA applications were sold, four of
which were sold with the domestic RIO systems sales during the
quarter and nine of which were sold as upgrades to existing
commercial systems. As of March 31, 2012, 62 RIO systems, or 53% of
our domestic installed base, have the MAKOplasty THA
application.
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 first quarter, 25
abstracts were accepted to five conferences supporting our RIO
system and MAKOplasty knee and hip procedures. These abstracts are
expected to be presented in 14 podium and 11 poster presentations
at upcoming conferences.
Credit Facility – On May 7, 2012, MAKO entered into a credit
facility agreement with affiliates of Deerfield Management Company,
L.P., pursuant to which they agreed to loan MAKO up to $50 million,
subject to the terms and conditions set forth in the credit
facility agreement. Under the terms of the agreement, MAKO has the
option to draw down on the credit facility in $10 million
increments at any time until May 15, 2013. Any amounts drawn accrue
interest at a rate of 6.75% per annum. MAKO has the right to prepay
any amounts owed without penalty. Any principal amount drawn is
payable on the third anniversary of each draw. As of May 7, 2012,
MAKO has not drawn any amounts under the credit facility. In
connection with the execution of the credit facility agreement,
MAKO issued to Deerfield warrants to purchase 275,000 shares of its
common stock at an exercise price equal to a 20% premium to the
mean closing price of its common stock over the 20 trading day
period beginning on May 8, 2012. Each $10 million disbursement, if
any, shall be accompanied by the issuance of warrants to purchase
140,000 shares of common stock, at an exercise price equal to a 20%
premium to the mean closing price of MAKO's common stock over the
five trading days following the notice of the draw. The warrants
have a seven year term from the date of issuance.
"While the first quarter is typically our slowest quarter of the
year and system placements are very difficult to predict on a
quarterly basis, our results this quarter were at the low end of
our expectations," said Maurice R. Ferré, M.D., President and Chief
Executive Officer of MAKO. "On the positive side, we were
encouraged by the continued interest shown in our hip application
and the quality and quantity of clinical data that continues to be
generated that supports the clinical and economic benefit of
MAKOplasty. Additionally, we are pleased to have enhanced our
working capital flexibility through a credit facility arrangement
with Deerfield, an acknowledged leader in health care
investing."
2012 First Quarter Financial Review
Revenue was $19.6 million in the first quarter of 2012 compared
to $13.0 million in the first quarter of 2011, representing a 51%
increase. Revenue in the first quarter of 2012 primarily consisted
of $11.6 million in revenue from the sale of implants and
disposables used in the 2,297 MAKOplasty procedures performed in
the quarter, $5.9 million in revenue from the sale of five domestic
RIO systems and nine MAKOplasty THA applications to existing
customers, and $2.2 million in revenue from service.
Gross profit for the first quarter of 2012 was $14.2 million
compared to a gross profit of $8.9 million in the same period in
2011. Gross margin for the first quarter of 2012 was 72%,
consisting of a 77% margin on procedure revenue, a 58% margin on
RIO system revenue and an 83% margin on service revenue.
Operating expenses were $25.9 million in the first quarter of
2012 compared to $20.0 million in the first quarter of 2011. 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, MAKOplasty applications 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; and an increase in general and administrative costs as
MAKO continued to build infrastructure to support growth.
Net loss for the three months ended March 31, 2012 was $11.7
million, or $(0.28) per basic and diluted share, based on average
basic and diluted shares outstanding of 41.7 million. This compares
to a net loss for the same period in 2011 of $11.0 million, or
$(0.27) per basic and diluted share, based on average basic and
diluted shares outstanding of 40.1 million.
Cash, cash equivalents and investments were $46.8 million as of
March 31, 2012 compared to $58.7 million as of December 31,
2011.
Outlook
Based on the slower than expected start to the year, MAKO now
anticipates selling 52 to 58 RIO systems in 2012, which compares to
prior guidance of 56 to 62 RIO system sales. MAKOplasty procedure
guidance remains unchanged at 11,000 to 13,000 expected procedures
in 2012.
Conference Call
MAKO will host a conference call today at 4:30 pm ET to discuss
its first quarter 2012 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 73226469. 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, decreases in
utilization of MAKO's principal product lines or in procedure
volume, increases in expenditures related to increased or changing
governmental regulation or taxation of MAKO's business, both
nationally and internationally, unanticipated issues in complying
with domestic or foreign regulatory requirements related to MAKO's
current products, including Medical Device Reporting requirements
and other required reporting to the United States Food and Drug
Administration, or securing regulatory clearance or approvals for
new products or upgrades or changes to MAKO's current products, the
impact of the United States healthcare reform legislation enacted
in March 2010 on hospital spending, reimbursement, and the taxing
of medical device companies, the potential impact of the informal
Securities and Exchange Commission inquiry and the findings of that
inquiry, 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,
2011 filed on March 8, 2012. 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) (in thousands, except per share data) |
Three Months Ended March
31, |
|
2012 |
2011 |
|
|
|
Revenue: |
|
|
Procedures |
$ 11,562 |
$ 6,467 |
Systems – RIO |
5,871 |
5,364 |
Service |
2,206 |
1,195 |
Total revenue |
19,639 |
13,026 |
Cost of revenue: |
|
|
Procedures |
2,657 |
1,798 |
Systems – RIO |
2,448 |
2,038 |
Service |
381 |
259 |
Total cost of revenue |
5,486 |
4,095 |
Gross profit |
14,153 |
8,931 |
Operating costs and expenses: |
|
|
Selling, general and administrative |
19,788 |
14,809 |
Research and development |
4,854 |
4,194 |
Depreciation and amortization |
1,274 |
975 |
Total operating costs and expenses |
25,916 |
19,978 |
Loss from operations |
(11,763) |
(11,047) |
Other income, net |
58 |
92 |
Loss before income taxes |
(11,705) |
(10,955) |
Income tax expense |
25 |
40 |
Net loss |
$ (11,730) |
$ (10,995) |
Net loss per share - Basic and diluted |
$ (0.28) |
$ (0.27) |
Weighted average common shares outstanding -
Basic and diluted |
41,694 |
40,107 |
|
|
|
|
|
|
Condensed Balance Sheets
(unaudited) |
|
|
(in thousands) |
March 31, |
December 31, |
|
2012 |
2011 |
|
|
|
Current Assets: |
|
|
Cash and cash equivalents |
$ 8,693 |
$ 13,438 |
Short-term investments |
36,345 |
36,354 |
Accounts receivable |
12,520 |
20,783 |
Inventory |
23,248 |
19,529 |
Deferred cost of revenue |
390 |
160 |
Prepaid and other current assets |
4,133 |
1,800 |
Total current assets |
85,329 |
92,064 |
Long-term investments |
1,754 |
8,902 |
Property and equipment, net |
21,239 |
19,389 |
Intangible assets, net |
6,864 |
7,284 |
Other assets |
119 |
132 |
Total assets |
$ 115,305 |
$ 127,771 |
|
|
|
Current Liabilities: |
|
|
Accounts payable |
$ 5,575 |
$ 4,231 |
Accrued compensation and employee
benefits |
2,872 |
7,579 |
Other accrued liabilities |
7,556 |
10,622 |
Deferred revenue |
5,269 |
4,826 |
Total current liabilities |
21,272 |
27,258 |
Deferred revenue, non-current |
75 |
75 |
Total liabilities |
21,347 |
27,333 |
Stockholders' equity: |
|
|
Common stock |
42 |
41 |
Additional paid-in capital |
294,604 |
289,352 |
Accumulated deficit |
(200,755) |
(189,025) |
Accumulated other comprehensive gain |
67 |
70 |
Total stockholders' equity |
93,958 |
100,438 |
Total liabilities and stockholders'
equity |
$ 115,305 |
$ 127,771 |
|
|
|
|
Condensed Statements of Cash Flows
(unaudited) (in thousands) |
Three Months Ended March
31, |
|
2012 |
2011 |
Operating activities: |
|
|
Net loss |
$ (11,730) |
$ (10,995) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
Depreciation |
1,378 |
834 |
Amortization of intangible assets |
420 |
320 |
Stock-based compensation |
2,721 |
2,300 |
Inventory write-down |
28 |
― |
Amortization of premium on investment
securities |
128 |
108 |
Loss on asset impairment |
249 |
148 |
Provision for doubtful accounts |
45 |
101 |
Issuance of restricted stock under
development agreement |
227 |
720 |
Changes in operating assets and
liabilities: |
|
|
Accounts receivable |
8,218 |
3,376 |
Inventory |
(5,041) |
(2,266) |
Deferred cost of revenue |
(230) |
(380) |
Prepaid and other current assets |
(2,333) |
(876) |
Other assets |
13 |
17 |
Accounts payable |
1,344 |
(59) |
Accrued compensation and employee
benefits |
(4,707) |
(3,357) |
Other accrued liabilities |
(3,066) |
(732) |
Deferred revenue |
443 |
1,079 |
Net cash used in operating activities |
(11,893) |
(9,662) |
Investing activities: |
|
|
Purchase of investments |
(3,160) |
(15,086) |
Proceeds from sales and maturities of
investments |
10,186 |
15,636 |
Acquisition of property and equipment |
(2,183) |
(1,263) |
Net cash provided by (used in) investing
activities |
4,843 |
(713) |
Financing activities: |
|
|
Proceeds from employee stock purchase
plan |
360 |
241 |
Exercise of common stock options and warrants
for cash |
2,026 |
516 |
Payment of payroll taxes relating to vesting
of restricted stock |
(81) |
(357) |
Net cash provided by financing
activities |
2,305 |
400 |
Net decrease in cash and cash
equivalents |
(4,745) |
(9,975) |
Cash and cash equivalents at beginning of
year |
13,438 |
27,108 |
Cash and cash equivalents at end of year |
$ 8,693 |
$ 17,133 |
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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