Fourth Quarter and Full Year 2012
Highlights
Fourth quarter revenue totaled $30.2 million
Full year 2012 revenue totaled $102.7 million, a 22% increase
over 2011
Fifteen RIO® systems sold in the fourth quarter, of which
thirteen were sold to domestic customers
A total of 45 RIO systems sold worldwide in 2012, increasing
worldwide commercial installed base to 156 RIO systems and domestic
commercial installed base to 151 RIO systems
2,904 MAKOplasty® procedures performed in the fourth quarter, a
29% increase over the same period in 2011
Total of 10,204 MAKOplasty procedures performed in 2012, a 47%
increase over 2011
Eleven MAKOplasty Total Hip Arthroplasty (THA) applications sold
in the fourth quarter, of which three were sold to existing
customers
As of December 31, 2012, 62% of worldwide commercial installed
base is MAKOplasty THA enabled
2013 Annual Guidance
2013 RIO system sales estimated to be 45 to 48 systems
13,500 to 14,500 MAKOplasty procedures anticipated to be
performed in 2013
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 and year ended December 31, 2012.
Recent Business Developments
RIO Systems – Fifteen RIO systems were sold during the fourth
quarter, of which thirteen were sold to domestic customers and two
were sold through international distributors to hospitals in Italy
and Thailand. The revenue associated with the two RIO systems sold
to and customer accepted by the international distributors will be
deferred until all revenue recognition criteria are satisfied. A
total of 45 new RIO systems were sold worldwide in 2012, bringing
MAKO's worldwide commercial installed base of RIO systems to 156
systems and domestic commercial installed base of RIO systems to
151 systems as of December 31, 2012.
MAKOplasty Procedure Volume – During the fourth quarter, 2,904
MAKOplasty procedures were performed, of which 2,756 were performed
at domestic sites and 395 were THA procedures. The 2,904 MAKOplasty
procedures performed represent a 20% increase over the procedures
performed in the third quarter of 2012 and a 29% increase over the
procedures performed in the fourth quarter of 2011. The 395 THA
procedures performed represent a 31% increase over the THA
procedures performed in the third quarter of 2012. The average
monthly utilization per system was 6.6 procedures during the fourth
quarter of 2012, an increase from 6.2 procedures per system per
month in the third quarter of 2012. A total of 10,204 MAKOplasty
procedures were performed in 2012, representing a 47% increase over
the total procedures performed in 2011. Through December 31, 2012,
approximately 23,000 procedures have been performed since the first
procedure in June 2006.
MAKOplasty Total Hip Arthroplasty Applications – In the fourth
quarter, eleven MAKOplasty THA applications were sold, eight of
which were sold with RIO systems sold during the quarter and three
of which were sold as upgrades to existing customers with knee-only
commercial systems. As of December 31, 2012, 96 RIO systems, or 62%
of the worldwide commercial installed base, were MAKOplasty THA
enabled.
Clinical Research and Marketing – During the fourth quarter,
three papers were published related to accuracy of knee and hip
MAKOplasty, bringing the total number of published peer-reviewed
papers up to 31. The hip accuracy study published in the Journal of
Engineering in Medicine* compared MAKOplasty THA with manual THA on
six paired cadavers and showed that the MAKOplasty THA cups were
100% in the safe zone compared to 30% of the manually placed cups.
In addition, MAKOplasty THA accuracy was shown in this study to be
4-6 times greater than manual accuracy in both inclination and
anteversion.
Equity Investment – In November 2012, MAKO completed a public
offering of our common stock, issuing 3,498,300 shares at a price
per share of $13.15, resulting in net proceeds to MAKO of $42.9
million after underwriting commissions and expenses.
"We continued to make progress in the fourth quarter towards
reestablishing our growth trajectory in RIO system placements and
putting 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. "While 2012 was a challenging year
for MAKO, we believe that the sales process changes we initiated in
the second half of the year will position MAKO well for improved
performance in 2013 and ultimately assist us in achieving long term
success."
*Volume 227, Issue 3, March 2013
2012 Fourth Quarter Financial Review
Revenue was $30.2 million in the fourth quarter of 2012 compared
to $32.9 million in the fourth quarter of 2011, representing an 8%
decrease. The decrease in revenue was attributable to the
recognition of revenue from thirteen RIO systems and eleven
MAKOplasty THA applications in the fourth quarter of 2012, as
compared to the recognition of revenue from eighteen RIO systems
and thirty-seven MAKOplasty THA applications (upon the commercial
release of the MAKOplasty THA application in September 2011) in the
same period in 2011, which was partially offset by an increase in
procedure revenue and service revenue.
Gross profit for the fourth quarter of 2012 was $20.3 million
compared to a gross profit of $22.4 million in the same period in
2011. Gross margin for the fourth quarter of 2012 was 67%,
consisting of a 66% margin on procedure revenue, a 64% margin on
RIO system revenue and an 83% margin on service revenue. Procedure
gross margin for the fourth quarter of 2012 was negatively impacted
by an inventory reserve adjustment of $1.2 million for excess
procedure inventory due to the anticipated future releases of
enhancements to certain of existing implant and disposable
products. Excluding the $1.2 million inventory reserve adjustment,
the margin on procedures would have been 74% and overall gross
margin would have been 71% for the fourth quarter of 2012.
Operating expenses were $26.2 million in the fourth quarter of
2012 compared to $28.0 million in the fourth quarter of 2011. The
decrease in operating expenses was primarily the result of
compensation expense related to bonus awards incurred in 2011, but
not in 2012, and the timing of expenditures associated with the
continuous improvement of the RIO system platform and associated
applications and the development of potential future products.
Net loss for the three months ended December 31, 2012 was $5.7
million, or a loss of $0.13 per basic and diluted share, based on
average basic and diluted shares outstanding of 44.5 million. This
compares to a net loss for the same period in 2011 of $5.6 million,
or a loss of $0.14 per basic and diluted share, based on average
basic and diluted shares outstanding of 41.3 million.
Cash, cash equivalents and available-for-sale investments were
$73.3 million as of December 31, 2012 compared to $58.7 million as
of December 31, 2011. As of December 31, 2012, no amounts have been
drawn under the credit facility agreement with affiliates of
Deerfield Management Company, L.P.
2012 Full Year Financial Review
Revenue was $102.7 million for the year ended December 31, 2012
compared to $84.5 million for the year ended December 31, 2011,
representing a 22% increase. The increase in revenue was
attributable to an increase in procedure revenue and service
revenue, which was partially offset by a decrease in RIO system
revenue attributable to the recognition of revenue from forty-two
RIO systems and forty-seven MAKOplasty THA applications in 2012, as
compared to the recognition of revenue from forty-eight RIO systems
and forty-nine MAKOplasty THA applications in 2011. In addition to
the forty-two recognized RIO system sales, the revenue associated
with the sale of three international systems was deferred until all
revenue recognition criteria are satisfied.
The net loss for the year ended December 31, 2012 was $32.6
million, or a loss of $0.76 per basic and diluted share, based on
average basic and diluted shares outstanding of 42.7 million.
Included in net loss for the year ended December 31, 2012 was
non-cash and non-operating income of $3.7 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 $36.1 million, or a loss of $0.89 per basic and diluted
share, based on average basic and diluted shares outstanding of
40.8 million.
2013 Annual Guidance
MAKO anticipates that it will sell 45 to 48 RIO systems and that
its customers will perform 13,500 to 14,500 MAKOplasty procedures
in 2013.
Conference Call
MAKO will host a conference call today at 4:30 pm ET to discuss
its fourth quarter and full year 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 86531216. 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 general economic conditions and credit conditions,
changes in the availability of capital and financing sources for
our company and our customers, 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, changes in the
relationship between supply of and demand for our products,
fluctuations in costs and availability of raw materials and labor,
changes in other significant operating expenses, slowdowns, delays,
or inefficiencies in MAKO's product research and 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, 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 initiating and communicating product
actions or product recalls and meeting 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, developments adversely affecting our potential sales
activities outside the United States, increases in cost containment
efforts by group purchasing organizations, the impact of the United
States healthcare reform legislation enacted in March 2010 on
hospital spending, reimbursement, unanticipated changes in
reimbursement to our customers for our products, and the taxing of
medical device companies, any unanticipated impact arising out of
the securities class action or any other litigation, inquiry, or
investigation brought against MAKO, loss of key management and
other personnel or inability to attract such management and other
personnel, increases in costs of retaining a direct sales force and
building a distributor network, unanticipated issues related to, or
unanticipated changes in or difficulties associated with, the
recruitment of agents and distributors of our products, 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
December 31, |
Years Ended December
31, |
|
2012 |
2011 |
2012 |
2011 |
Revenue: |
|
|
|
|
Procedures |
$ 14,298 |
$ 11,387 |
$ 50,920 |
$ 34,638 |
Systems |
12,752 |
19,774 |
41,219 |
43,927 |
Service |
3,178 |
1,727 |
10,580 |
5,942 |
Total revenue |
30,228 |
32,888 |
102,719 |
84,507 |
Cost of revenue: |
|
|
|
|
Procedures |
4,844 |
2,795 |
16,845 |
8,793 |
Systems |
4,592 |
7,196 |
15,289 |
16,695 |
Service |
539 |
484 |
1,666 |
1,395 |
Total cost of revenue |
9,975 |
10,475 |
33,800 |
26,883 |
Gross profit |
20,253 |
22,413 |
68,919 |
57,624 |
Operating costs and expenses: |
|
|
|
|
Selling, general and administrative
(exclusive of depreciation and amortization) |
19,039 |
20,208 |
76,992 |
67,965 |
Research and development (exclusive of
depreciation and amortization) |
5,185 |
6,329 |
20,256 |
20,592 |
Depreciation and amortization |
1,944 |
1,499 |
7,188 |
5,350 |
Total operating costs and expenses |
26,168 |
28,036 |
104,436 |
93,907 |
Loss from operations |
(5,915) |
(5,623) |
(35,517) |
(36,283) |
Other income (expense), net |
184 |
84 |
3,051 |
245 |
Loss before income taxes |
(5,731) |
(5,539) |
(32,466) |
(36,038) |
Income tax expense |
1 |
45 |
85 |
105 |
Net loss |
$ (5,732) |
$ (5,584) |
$ (32,551) |
$ (36,143) |
Net loss per share - Basic and diluted |
$ (0.13) |
$ (0.14) |
$ (0.76) |
$ (0.89) |
Weighted average common shares outstanding
-- |
|
|
|
|
Basic and diluted |
44,455 |
41,297 |
$ 42,658 |
40,752 |
Depreciation expense for certain property and equipment was
reclassified from selling, general and administrative expense to
depreciation and amortization expense in the prior period's
statement of operations to conform to the current period's
presentation. This change in presentation only affects the
components of operating costs and expenses and does not affect
total operating costs and expenses, revenue, cost of revenue, net
loss or cash flows.
|
|
|
Condensed Balance Sheets
(unaudited) |
|
|
(in thousands) |
December 31, |
December 31, |
|
2012 |
2011 |
ASSETS |
|
|
Current Assets: |
|
|
Cash and cash equivalents |
$ 61,367 |
$ 13,438 |
Short-term investments |
11,899 |
36,354 |
Accounts receivable |
22,389 |
20,783 |
Inventory |
25,080 |
19,529 |
Deferred cost of revenue |
967 |
160 |
Financing commitment asset |
7,608 |
– |
Prepaid and other current assets |
1,972 |
1,800 |
Total current assets |
131,282 |
92,064 |
Long-term investments |
– |
8,902 |
Cost method investment |
4,181 |
– |
Property and equipment, net |
22,996 |
19,389 |
Intangible assets, net |
5,657 |
7,284 |
Other assets |
2,786 |
132 |
Total assets |
$ 166,902 |
$ 127,771 |
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
Current Liabilities: |
|
|
Accounts payable |
$ 2,267 |
$ 4,231 |
Accrued compensation and employee
benefits |
4,298 |
7,579 |
Other accrued liabilities |
8,727 |
10,622 |
Deferred revenue |
9,973 |
4,826 |
Total current liabilities |
25,265 |
27,258 |
Deferred revenue, non-current |
800 |
75 |
Total liabilities |
26,065 |
27,333 |
Stockholders' Equity: |
|
|
Common stock |
47 |
41 |
Additional paid-in capital |
362,364 |
289,352 |
Accumulated deficit |
(221,576) |
(189,025) |
Accumulated other comprehensive gain |
2 |
70 |
Total stockholders' equity |
140,837 |
100,438 |
Total liabilities and stockholders'
equity |
$ 166,902 |
$ 127,771 |
|
|
|
|
Condensed Statements of Cash Flows
(unaudited) |
|
(in thousands) |
Years Ended December
31, |
|
2012 |
2011 |
Operating activities: |
|
|
Net loss |
$ (32,551) |
$ (36,143) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
Depreciation |
5,909 |
4,352 |
Amortization of intangible assets |
1,692 |
1,446 |
Stock-based compensation |
13,137 |
9,901 |
Provision for inventory reserve |
4,484 |
256 |
Amortization of premium on investment
securities |
335 |
476 |
Loss on asset impairment |
1,033 |
146 |
Provision for doubtful accounts |
266 |
158 |
Issuance of restricted stock under
development agreement |
907 |
1,691 |
Non-cash changes under credit facility |
(3,998) |
– |
Changes in operating assets and
liabilities: |
|
|
Accounts receivable |
(1,872) |
(9,381) |
Inventory |
(12,699) |
(11,619) |
Deferred cost of revenue |
(807) |
(160) |
Prepaid and other current assets |
(172) |
(517) |
Other assets |
(331) |
66 |
Accounts payable |
(1,964) |
2,713 |
Accrued compensation and employee
benefits |
(3,281) |
2,033 |
Other accrued liabilities |
(1,895) |
5,558 |
Deferred revenue |
5,872 |
1,721 |
Net cash used in operating activities |
(25,935) |
(27,303) |
Investing activities: |
|
|
Purchase of investments |
(9,615) |
(33,131) |
Proceeds from sales and maturities of
investments |
42,545 |
57,252 |
Acquisition of property and equipment |
(7,885) |
(12,337) |
Acquisition of intangible assets |
(65) |
(1,200) |
Net cash provided by investing
activities |
24,980 |
10,584 |
Financing activities: |
|
|
Proceeds from issuance of common stock in
equity financing, net of underwriting fees |
43,243 |
– |
Equity financing costs |
(356) |
– |
Proceeds from employee stock purchase
plan |
1,885 |
1,168 |
Exercise of common stock options and warrants
for cash |
4,315 |
2,932 |
Payment of payroll taxes relating to vesting
of restricted stock |
(203) |
(1,051) |
Net cash provided by financing
activities |
48,884 |
3,049 |
Net decrease in cash and cash
equivalents |
47,929 |
(13,670) |
Cash and cash equivalents at beginning of
period |
13,438 |
27,108 |
Cash and cash equivalents at end of
period |
$ 61,367 |
$ 13,438 |
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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