Third Quarter 2012 Highlights
Third quarter revenue totaled $29.2 million, a 46% increase over
the same period in 2011
Fifteen RIO® systems sold in the third quarter, increasing
worldwide commercial installed base to 141 RIO systems and domestic
commercial installed base to 138 RIO systems
A total of thirty RIO systems sold worldwide in the first nine
months of 2012
2,413 MAKOplasty® procedures performed in the third quarter, a
33% increase over the same period in 2011
7,300 MAKOplasty procedures performed in the first nine months
of 2012, a 56% increase over the same period in 2011
Fourteen MAKOplasty Total Hip Arthroplasty (THA) applications
sold in the third quarter, of which three were sold to existing
customers
As of September 30, 2012, 60% of worldwide commercial installed
base have the MAKOplasty THA application
Commercial launch of MAKOplasty RIO 2.5 and Hip 2.0 software
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, 2012.
Recent Business Developments
RIO Systems – Fifteen RIO systems were sold during the third
quarter to domestic customers. These fifteen RIO systems bring
MAKO's worldwide commercial installed base of RIO systems to 141
systems and domestic commercial installed base to 138 systems as of
September 30, 2012.
MAKOplasty Procedure Volume – During the third quarter, 2,413
MAKOplasty procedures were performed, of which 2,322 were performed
at domestic sites. Of the 2,322 domestic procedures, 302 were Total
Hip Arthroplasty (THA) procedures. The 2,413 MAKOplasty procedures
performed represent a 7% decrease over the procedures performed in
the second quarter of 2012 and a 33% increase over the procedures
performed in the third quarter of 2011. The average monthly
utilization per system was 6.2 procedures during the third quarter
of 2012, a decrease from 7.2 procedures per system per month in the
second quarter of 2012 and 6.5 procedures per system per month in
the third quarter of 2011. Through September 30, 2012, over 20,000
procedures had been performed since the first procedure in June
2006.
MAKOplasty Total Hip Arthroplasty Applications – In the third
quarter, fourteen MAKOplasty THA applications were sold, eleven of
which were sold with the domestic RIO systems sales during the
quarter and three of which were sold as upgrades to existing
customers with knee-only commercial systems. As of September 30,
2012, 85 RIO systems, or 60% of the worldwide commercial installed
base, have the MAKOplasty THA application.
Clinical Research and Marketing – Efforts to build a strong base
of clinical evidence for both partial knee and total hip MAKOplasty
continue, with over 70 clinical studies currently in process.
During the third quarter, MAKOplasty was discussed in five
presentations at the International Society for Technology in
Arthroplasty (ISTA) 2012 Meeting in Sydney, Australia and in three
presentations at the Harvard Advances in Arthroplasty Meeting in
Boston, Massachusetts. Two MAKOplasty presentations at these
meetings were of particular significance. At ISTA, the two year
survivorship data on MAKO's RESTORIS MCK onlay medial
unicompartmental implant using the RIO system was presented. This
four-site study reported on two year post implantation outcomes for
224 patients, and showed a 0.4% revision rate at two years for MCK
implants using the RIO, as compared to revision rates for manually
placed unicompartmental knees, which are documented at 4.0% in the
Swedish and 4.9% in the Australian registries. At the Harvard
meeting, Dr. Henrik Malchau compared acetabular cup placement in 77
MAKOplasty THA cases done at four hospitals to the results
presented by Callanan et al in the 2011 Clinical Orthopaedics and
Related Research (CORR) Charnley Award Paper. Based on 2D image
evaluation of the post-op x-rays, 84% of the RIO cases were inside
the Massachusetts General Hospital restricted safe zone compared to
47% reported in the CORR paper, while the 3D image evaluation of
the data showed that 96% of the cases were within this restricted
safe zone.
Product Commercial Launches – In the third quarter, MAKO
commercially launched the RIO 2.5 software, which improves the
efficiency of the MAKOplasty partial knee application, speeds up
the registration process and generally improves ease of use. Also
in the third quarter, MAKO commercially launched the MAKOplasty THA
2.0 software, which enables the direct anterior approach for
MAKOplasty total hip, as well as the use of the MAKO RESTORIS PST
Cup and Tapered Stem implant, designed in collaboration with
Pipeline Orthopedics, which was released in October 2012.
Pipeline Investment – Following the launch of the RESTORIS PST
Cup and Tapered Stem and in order to further strengthen an already
constructive relationship, MAKO has agreed to issue $7.0 million in
MAKO common stock to Pipeline Biomedical Holdings, Inc. Pipeline is
the parent company of Pipeline Orthopedics, MAKO's partner in
advanced implant development and commercialization. The $7.0
million consists of a $4.5 million equity investment in Pipeline
and $2.5 million which shall be applied as a credit pursuant to the
commercial agreement between the parties.
"We made progress in the third quarter towards reestablishing
our growth trajectory in RIO system placements and have begun to
put the building blocks in place to drive MAKOplasty procedure
volume and utilization," said Maurice R. Ferré, M.D., President and
Chief Executive Officer of MAKO. "We recognize that it will take
time for the constructive improvements we are making to fully
manifest; however, we believe these changes will ultimately
optimize our business and provide for our long term success."
2012 Third Quarter Financial Review
Revenue was $29.2 million in the third quarter of 2012 compared
to $20.0 million in the third quarter of 2011, representing a 46%
increase. Revenue in the third quarter of 2012 primarily consisted
of $12.0 million in revenue from the sale of implants and
disposables used in the 2,413 MAKOplasty procedures performed in
the quarter, $14.4 million in revenue from the sale of fifteen RIO
systems and three MAKOplasty THA applications to existing
customers, and $2.7 million in revenue from service.
Gross profit for the third quarter of 2012 was $17.2 million
compared to a gross profit of $13.2 million in the same period in
2011. Gross margin for the third quarter of 2012 was 59%,
consisting of a 48% margin on procedure revenue, a 62% margin on
RIO system revenue and an 89% margin on service revenue. Procedure
gross margin for the third quarter of 2012 was negatively impacted
by an inventory reserve adjustment of $3.1 million for excess hip
implant inventory. Excluding the $3.1 million inventory reserve
adjustment, the margin on procedures would have been 74% for the
third quarter of 2012.
Operating expenses were $26.6 million in the third quarter of
2012 compared to $22.8 million in the third 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; 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, 2012 was $6.6
million, or $(0.15) per basic and diluted share, based on average
basic and diluted shares outstanding of 42.3 million. Included in
net loss for the three months ended September 30, 2012 was non-cash
and non-operating income of $3.1 million associated with the change
in fair value of a derivative asset related to a credit facility
agreement. This compares to a net loss for the same period in 2011
of $9.7 million, or $(0.24) per basic and diluted share, based on
average basic and diluted shares outstanding of 41.0 million.
Cash, cash equivalents and investments were $28.4 million as of
September 30, 2012 compared to $58.7 million as of December 31,
2011. As of September 30, 2012, no amounts have been drawn
under the credit facility agreement with affiliates of Deerfield
Management Company, L.P.
2012 Nine-Month Financial Review
Revenue was $72.5 million for the nine months ended September
30, 2012 compared to $51.6 million for the nine months ended
September 30, 2011, representing a 40% increase. Revenue for the
nine months ended September 30, 2012 primarily consisted of $36.6
million in revenue from the sale of implants and disposables used
in the 7,300 MAKOplasty procedures performed in the nine months
ended September 30, 2012, $28.5 million in revenue from the sale of
twenty-nine of the thirty RIO systems and fourteen MAKOplasty THA
applications to existing customers, and $7.4 million in revenue
from service. In addition to the twenty-nine 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 nine months ended September 30, 2012 was
$26.8 million, or $(0.64) per basic and diluted share, based on
average basic and diluted shares outstanding of 42.1 million.
Included in net loss for the nine months ended September 30, 2012
was non-cash and non-operating income of $2.9 million associated
with the change in fair value of a derivative asset related to a
credit facility agreement. This compares to a net loss for the same
period in 2011 of $30.6 million, or $(0.75) per basic and diluted
share, based on average basic and diluted shares outstanding of
40.6 million.
Outlook
2012 annual guidance of 42 to 48 expected RIO system sales
remains unchanged. Despite an otherwise favorable outlook for
MAKOplasty procedures in the fourth quarter, based on the total
procedures performed in the first three quarters of 2012 and the
unknown net effect of Hurricane Sandy, MAKO is resetting its 2012
annual guidance to 10,200 to 10,600 expected MAKOplasty procedures,
from prior guidance of 11,000 to 12,000 procedures.
Conference Call
MAKO will host a conference call today at 4:30 pm ET to discuss
its third 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 31473915. 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, delays in MAKO's product development cycles, 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, the effects of
Hurricane Sandy, 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.
Condensed Statements of Operations
(unaudited) |
Three months ended |
Nine months ended |
(in thousands, except per share data) |
September 30, |
September 30, |
|
2012 |
2011 |
2012 |
2011 |
Revenue: |
|
|
|
|
Procedures |
$ 12,042 |
$ 9,108 |
$ 36,622 |
$ 23,251 |
Systems |
14,413 |
9,315 |
28,467 |
24,153 |
Service |
2,722 |
1,591 |
7,402 |
4,215 |
Total revenue |
29,177 |
20,014 |
72,491 |
51,619 |
Cost of revenue: |
|
|
|
|
Procedures |
6,226 |
2,484 |
12,001 |
5,998 |
Systems |
5,453 |
3,973 |
10,697 |
9,499 |
Service |
295 |
378 |
1,127 |
911 |
Total cost of revenue |
11,974 |
6,835 |
23,825 |
16,408 |
Gross profit |
17,203 |
13,179 |
48,666 |
35,211 |
Operating costs and expenses: |
|
|
|
|
Selling, general and
administrative |
20,258 |
16,533 |
59,330 |
48,479 |
Research and development |
4,973 |
5,054 |
15,071 |
14,263 |
Depreciation and
amortization |
1,323 |
1,177 |
3,867 |
3,129 |
Total operating costs and expenses |
26,554 |
22,764 |
78,268 |
65,871 |
Loss from operations |
(9,351) |
(9,585) |
(29,602) |
(30,660) |
Other income (expense), net |
2,842 |
(51) |
2,867 |
161 |
Loss before income taxes |
(6,509) |
(9,636) |
(26,735) |
(30,499) |
Income tax expense |
45 |
19 |
84 |
60 |
Net loss |
$ (6,554) |
$ (9,655) |
$ (26,819) |
$ (30,559) |
Net loss per share - Basic and diluted |
$ (0.15) |
$ (0.24) |
$ (0.64) |
$ (0.75) |
Weighted average common shares outstanding
- |
|
|
|
|
Basic and diluted |
42,306 |
40,981 |
42,054 |
40,568 |
|
|
|
|
|
|
Condensed Balance Sheets
(unaudited) |
September 30, |
December 31, |
(in thousands) |
2012 |
2011 |
|
|
|
Current Assets: |
|
|
Cash and cash equivalents |
$ 11,180 |
$ 13,438 |
Short-term investments |
17,242 |
36,354 |
Accounts receivable |
19,599 |
20,783 |
Inventory |
24,562 |
19,529 |
Deferred cost of revenue |
544 |
160 |
Financing commitment asset |
6,814 |
– |
Prepaid and other current
assets |
4,340 |
1,800 |
Total current assets |
84,281 |
92,064 |
Long-term investments |
21 |
8,902 |
Property and equipment, net |
23,878 |
19,389 |
Intangible assets, net |
6,080 |
7,284 |
Other assets |
169 |
132 |
Total assets |
$ 114,429 |
$ 127,771 |
|
|
|
Current Liabilities: |
|
|
Accounts payable |
$ 2,497 |
$ 4,231 |
Accrued compensation and
employee benefits |
2,292 |
7,579 |
Other accrued liabilities |
8,077 |
10,622 |
Deferred revenue |
7,135 |
4,826 |
Total current liabilities |
20,001 |
27,258 |
Deferred revenue, non-current |
981 |
75 |
Total liabilities |
20,982 |
27,333 |
Stockholders' equity: |
|
|
Common stock |
42 |
41 |
Additional paid-in capital |
309,221 |
289,352 |
Accumulated deficit |
(215,844) |
(189,025) |
Accumulated other comprehensive
gain |
28 |
70 |
Total stockholders' equity |
93,447 |
100,438 |
Total liabilities and stockholders'
equity |
$ 114,429 |
$ 127,771 |
|
|
|
|
Condensed Statements of Cash Flows
(unaudited) |
Nine months ended
September 30, |
(in thousands) |
2012 |
2011 |
|
|
|
Operating activities: |
|
|
Net loss |
$ (26,819) |
$ (30,559) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
Depreciation |
4,281 |
3,188 |
Amortization of intangible assets |
1,269 |
1,026 |
Stock-based compensation |
10,418 |
7,433 |
Provision for inventory reserve |
3,262 |
222 |
Amortization of premium on investment
securities |
297 |
365 |
Loss on asset impairment |
828 |
148 |
Provision for doubtful accounts |
245 |
137 |
Issuance of restricted stock under
development agreement |
681 |
1,440 |
Non-cash changes under credit facility |
(3,204) |
– |
Changes in operating assets and
liabilities: |
|
|
Accounts receivable |
939 |
195 |
Inventory |
(10,568) |
(9,808) |
Deferred cost of revenue |
(384) |
(125) |
Prepaid and other current
assets |
(2,540) |
(827) |
Other assets |
(37) |
50 |
Accounts payable |
(1,734) |
3,300 |
Accrued compensation and
employee benefits |
(5,287) |
(1,856) |
Other accrued liabilities |
(2,545) |
2,679 |
Deferred revenue |
3,215 |
836 |
Net cash used in operating activities |
(27,683) |
(22,156) |
Investing activities: |
|
|
Purchase of investments |
(3,159) |
(30,646) |
Proceeds from sales and maturities of
investments |
30,813 |
41,175 |
Acquisition of property and equipment |
(7,325) |
(8,115) |
Acquisition of intangible assets |
(65) |
(1,200) |
Net cash provided by investing
activities |
20,264 |
1,214 |
Financing activities: |
|
|
Proceeds from employee stock purchase
plan |
1,344 |
798 |
Exercise of common stock options and warrants
for cash |
3,989 |
2,411 |
Payment of payroll taxes relating to vesting
of restricted stock |
(172) |
(965) |
Net cash provided by financing
activities |
5,161 |
2,244 |
Net decrease in cash and cash
equivalents |
(2,258) |
(18,698) |
Cash and cash equivalents at beginning of
period |
13,438 |
27,108 |
Cash and cash equivalents at end of
period |
$ 11,180 |
$ 8,410 |
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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