Second Quarter 2012 Highlights
Second quarter revenue totaled $23.7 million, a 27% increase
over the same period in 2011
Nine RIO® systems sold in the second quarter, increasing
worldwide commercial installed base to 126 RIO systems and domestic
commercial installed base to 123 RIO systems
A total of fifteen RIO systems sold worldwide in the first six
months of 2012
2,590 MAKOplasty® procedures performed in the second quarter, a
66% increase over the same period in 2011
4,887 MAKOplasty procedures performed in the first six months of
2012, a 71% increase over the same period in 2011
Nine MAKOplasty Total Hip Arthroplasty (THA) applications sold
in the second quarter, of which two were sold to existing
customers
As of June 30, 2012, 58% of commercial domestic installed base
have the MAKOplasty THA application
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 June 30, 2012.
Recent Business Developments
RIO Systems – Nine RIO systems were sold during the second
quarter, of which eight were sold to domestic customers and one was
sold to its Chinese distributor, which in turn sold it for
commercial use to a prominent hospital in Hong Kong. These nine RIO
systems bring MAKO's worldwide commercial installed base of RIO
systems to 126 systems and domestic commercial installed base to
123 systems as of June 30, 2012.
MAKOplasty Procedure Volume – During the second quarter, 2,590
MAKOplasty procedures were performed, of which 2,494 were performed
at domestic sites. Of the 2,494 domestic procedures, 280 were Total
Hip Arthroplasty (THA) procedures. The 2,590 MAKOplasty procedures
performed represent a 13% increase over the procedures performed in
the first quarter of 2012 and a 66% increase over the procedures
performed in the second quarter of 2011. The average monthly
utilization per system was 7.2 procedures during the second quarter
of 2012, an increase from 6.6 procedures per system per month in
the first quarter of 2012 and 6.4 procedures per system per month
in the second quarter of 2011. Through June 30, 2012, approximately
17,700 procedures had been performed since the first procedure in
June 2006.
MAKOplasty Total Hip Arthroplasty Applications – In the second
quarter, nine MAKOplasty THA applications were sold, seven of which
were sold with the domestic RIO systems sales during the quarter
and two of which were sold as upgrades to existing commercial
systems. As of June 30, 2012, 71 RIO systems, or 58% of the
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 second quarter, Dr. Mark
Blythe presented data at the annual Computer Assisted Orthopaedic
Surgery UK meeting on the first 50 patients in the MAKO sponsored
Randomized Controlled Trial currently ongoing at the Glasgow
(Scotland) Royal Infirmary in conjunction with the University of
Strathclyde. The study compared unicompartmental knee implant
alignment error between two groups of patients: those receiving the
MAKO RESTORIS MCK unicompartmental implant delivered by the RIO
system and those receiving the Oxford® Partial Knee mobile bearing
unicompartmental implant using manual, non-robotic instrumentation.
The results are statistically significant and indicate more
accurate alignment using the RIO system.
"As noted in our release of selected operating results on July
9th, we have experienced slower than expected growth in 2012," said
Maurice R. Ferré, M.D., President and Chief Executive Officer of
MAKO. "While our core belief in the significant market opportunity
and the transformational value of our technology remains intact,
management's near term focus will be to improve our sales and
marketing execution for the remainder of 2012 and beyond."
2012 Second Quarter Financial Review
Revenue was $23.7 million in the second quarter of 2012 compared
to $18.6 million in the second quarter of 2011, representing a 27%
increase. Revenue in the second quarter of 2012 primarily consisted
of $13.0 million in revenue from the sale of implants and
disposables used in the 2,590 MAKOplasty procedures performed in
the quarter, $8.2 million in revenue from the sale of nine RIO
systems and two MAKOplasty THA applications to existing customers,
and $2.5 million in revenue from service.
Gross profit for the second quarter of 2012 was $17.3 million
compared to a gross profit of $13.1 million in the same period in
2011. Gross margin for the second quarter of 2012 was 73%,
consisting of a 76% margin on procedure revenue, a 66% margin on
RIO system revenue and an 82% margin on service revenue.
Operating expenses were $25.8 million in the second quarter of
2012 compared to $23.1 million in the second 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 June 30, 2012 was $8.5
million, or $(0.20) per basic and diluted share, based on average
basic and diluted shares outstanding of 42.2 million. This compares
to a net loss for the same period in 2011 of $9.9 million, or
$(0.24) per basic and diluted share, based on average basic and
diluted shares outstanding of 40.6 million.
Cash, cash equivalents and investments were $35.3 million as of
June 30, 2012 compared to $58.7 million as of December 31,
2011. As of June 30, 2012, no amounts have been drawn under
the credit facility agreement with affiliates of Deerfield
Management Company, L.P.
2012 Six-Month Financial Review
Revenue was $43.3 million for the six months ended June 30, 2012
compared to $31.6 million for the six months ended June 30, 2011,
representing a 37% increase. Revenue for the six months ended June
30, 2012 primarily consisted of $24.6 million in revenue from the
sale of implants and disposables used in the 4,887 MAKOplasty
procedures performed in the six months ended June 30, 2012, $14.1
million in revenue from the sale of fourteen RIO systems and eleven
MAKOplasty THA applications to existing customers, and $4.7 million
in revenue from service. In addition to the fourteen recognized RIO
system sales, the revenue associated with the sale of an
international demonstration 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 net loss for the six months ended June 30, 2012 was $20.3
million, or $(0.48) per basic and diluted share, based on average
basic and diluted shares outstanding of 41.9 million. This compares
to a net loss for the same period in 2011 of $20.9 million, or
$(0.52) per basic and diluted share, based on average basic and
diluted shares outstanding of 40.4 million.
Outlook
Guidance of 42 to 48 expected annual RIO system sales and 11,000
to 12,000 expected annual MAKOplasty procedures remains unchanged
from the guidance provided in the press release attached as Exhibit
99.1 to MAKO's Current Report on Form 8-K filed with the Securities
and Exchange Commission on July 9, 2012.
Conference Call
MAKO will host a conference call today at 4:30 pm ET to discuss
its second 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 13992893. 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,
unanticipated changes in the timing of the sales cycle for MAKO's
products or the vetting process undertaken by prospective
customers, 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, any unanticipated impact
arising out of the securities class action or any other litigation
brought against MAKO, 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. Oxford®
Partial Knee is a trademark of Biomet, Inc.
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|
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Condensed Statements of Operations
(unaudited) (in thousands, except per share data) |
Three Months Ended June
30, |
Six Months Ended June
30, |
|
2012 |
2011 |
2012 |
2011 |
|
|
|
|
|
Revenue: |
|
|
|
|
Procedures |
$13,018 |
$7,676 |
$24,580 |
$14,143 |
Systems |
8,183 |
9,474 |
14,054 |
14,838 |
Service |
2,474 |
1,429 |
4,680 |
2,624 |
Total revenue |
23,675 |
18,579 |
43,314 |
31,605 |
Cost of revenue: |
|
|
|
|
Procedures |
3,118 |
1,716 |
5,775 |
3,514 |
Systems |
2,796 |
3,488 |
5,244 |
5,526 |
Service |
451 |
274 |
832 |
533 |
Total cost of revenue |
6,365 |
5,478 |
11,851 |
9,573 |
Gross profit |
17,310 |
13,101 |
31,463 |
22,032 |
Operating costs and expenses: |
|
|
|
|
Selling, general and administrative |
19,284 |
17,137 |
39,072 |
31,946 |
Research and development |
5,244 |
5,015 |
10,098 |
9,209 |
Depreciation and amortization |
1,270 |
977 |
2,544 |
1,952 |
Total operating costs and expenses |
25,798 |
23,129 |
51,714 |
43,107 |
Loss from operations |
(8,488) |
(10,028) |
(20,251) |
(21,075) |
Other income (expense), net |
(33) |
120 |
25 |
212 |
Loss before income taxes |
(8,521) |
(9,908) |
(20,226) |
(20,863) |
Income tax expense |
14 |
1 |
39 |
41 |
Net loss |
($8,535) |
($9,909) |
($20,265) |
($20,904) |
Net loss per share - Basic and
diluted |
($0.20) |
($0.24) |
($0.48) |
($0.52) |
Weighted average common shares outstanding -
Basic and diluted |
42,161 |
40,605 |
41,927 |
40,358 |
|
|
|
Condensed Balance Sheets
(unaudited) |
June 30, |
December 31, |
(in thousands) |
2012 |
2011 |
|
|
|
Current Assets: |
|
|
Cash and cash equivalents |
$9,437 |
$13,438 |
Short-term investments |
25,335 |
36,354 |
Accounts receivable |
19,014 |
20,783 |
Inventory |
28,905 |
19,529 |
Deferred cost of revenue |
618 |
160 |
Financing commitment asset |
3,672 |
― |
Prepaid and other current
assets |
4,514 |
1,800 |
Total current assets |
91,495 |
92,064 |
Long-term investments |
531 |
8,902 |
Property and equipment, net |
21,846 |
19,389 |
Intangible assets, net |
6,510 |
7,284 |
Other assets |
169 |
132 |
Total assets |
$120,551 |
$127,771 |
|
|
|
Current Liabilities: |
|
|
Accounts payable |
$8,007 |
$4,231 |
Accrued compensation and employee
benefits |
2,832 |
7,579 |
Other accrued liabilities |
9,257 |
10,622 |
Deferred revenue |
7,092 |
4,826 |
Total current liabilities |
27,188 |
27,258 |
Deferred revenue, non-current |
187 |
75 |
Total liabilities |
27,375 |
27,333 |
Stockholders' equity: |
|
|
Common stock |
42 |
41 |
Additional paid-in capital |
302,385 |
289,352 |
Accumulated deficit |
(209,290) |
(189,025) |
Accumulated other comprehensive
gain |
39 |
70 |
Total stockholders' equity |
93,176 |
100,438 |
Total liabilities and stockholders'
equity |
$120,551 |
$127,771 |
|
|
|
Condensed Statements of Cash Flows
(unaudited) |
Six Months Ended |
(in thousands) |
June 30, |
|
2012 |
2011 |
Operating activities: |
|
|
Net loss |
($20,265) |
($20,904) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
Depreciation |
2,832 |
2,081 |
Amortization of intangible assets |
839 |
640 |
Stock-based compensation |
6,122 |
4,946 |
Inventory write-down |
95 |
28 |
Amortization of premium on investment
securities |
221 |
195 |
Loss on asset impairment |
511 |
148 |
Provision for doubtful accounts |
77 |
154 |
Issuance of restricted stock under
development agreement |
454 |
1,080 |
Non-cash changes under credit facility |
(62) |
― |
Changes in operating assets and
liabilities: |
|
|
Accounts receivable |
1,692 |
(612) |
Inventory |
(11,432) |
(5,583) |
Deferred cost of revenue |
(458) |
(97) |
Prepaid and other current
assets |
(2,714) |
(955) |
Other assets |
(37) |
33 |
Accounts payable |
3,776 |
663 |
Accrued compensation and employee
benefits |
(4,747) |
(2,090) |
Other accrued liabilities |
(1,365) |
949 |
Deferred revenue |
2,378 |
491 |
Net cash used in operating activities |
(22,083) |
(18,833) |
Investing activities: |
|
|
Purchase of investments |
(3,160) |
(22,703) |
Proceeds from sales and maturities of
investments |
22,298 |
22,820 |
Acquisition of property and equipment |
(3,839) |
(2,754) |
Acquisition of intangible assets |
(65) |
― |
Net cash provided by (used in) investing
activities |
15,234 |
(2,637) |
Financing activities: |
|
|
Proceeds from employee stock purchase
plan |
844 |
469 |
Exercise of common stock options and warrants
for cash |
2,176 |
1,930 |
Payment of payroll taxes relating to vesting
of restricted stock |
(172) |
(666) |
Net cash provided by financing
activities |
2,848 |
1,733 |
Net decrease in cash and cash
equivalents |
(4,001) |
(19,737) |
Cash and cash equivalents at beginning of
period |
13,438 |
27,108 |
Cash and cash equivalents at end of
period |
$9,437 |
$7,371 |
|
|
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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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