First Quarter 2013 Highlights
First quarter revenue totaled $24.8 million, a 26% increase over
the same period in 2012
Five RIO® systems sold in the first quarter, increasing
worldwide commercial installed base to 161 RIO systems and domestic
commercial installed base to 156 RIO systems
2,988 MAKOplasty® procedures performed in the first quarter, a
30% increase over the same period in 2012
Six MAKOplasty Total Hip Arthroplasty (THA) applications sold in
the first quarter, of which one was sold to an existing
customer
As of March 31, 2013, 63% of worldwide commercial installed base
is MAKOplasty THA enabled
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, 2013.
Recent Business Developments
RIO Systems – Five RIO systems were sold during the first
quarter to domestic customers. These five RIO systems bring MAKO's
worldwide commercial installed base of RIO systems to 161 systems
and domestic commercial installed base to 156 systems as of March
31, 2013. At the end of the quarter, MAKO had 154 MAKOplasty
sites worldwide. In addition, the revenue associated with two
previously deferred international commercial system sales was
recognized in the first quarter as all revenue recognition criteria
were satisfied. Six MAKOplasty THA applications were sold, five of
which were sold with the domestic RIO systems sales during the
quarter and one of which was sold as an upgrade to an existing
customer with a knee-only commercial system. As of March 31, 2013,
102 RIO systems, or 63% of the worldwide commercial installed base,
have the MAKOplasty THA application.
MAKOplasty Procedure Volume – During the first quarter, 2,988
MAKOplasty procedures were performed, of which 2,861 were performed
at domestic sites. Of the 2,988 procedures, 467 were THA
procedures. The 2,988 MAKOplasty procedures performed represent a
3% increase over the procedures performed in the fourth quarter of
2012 and a 30% increase over the procedures performed in the first
quarter of 2012. The average monthly utilization per site was 6.6
procedures during the first quarter of 2013. Through March 31,
2013, approximately 26,000 procedures had been performed since the
first procedure in June 2006.
Clinical Research and Marketing – At the 2013 American Academy
of Orthopedic Surgeons in March 2013, Dr. Mark Blyth presented the
initial results of the first 100 patients from the prospective,
single center, randomized controlled trial (RCT) performed at the
Glasgow Royal Infirmary with the University of Strathclyde.
The RCT compares the MAKOplasty unicompartmental knee arthroplasty
performed with MAKO's RESTORIS MCK implants to manually placed
Biomet Oxford® implants. MAKOplasty resulted in significantly lower
post-operative pain from day one to eight weeks post-op and it took
eight weeks for Oxford patients to reach the lower pain levels that
MAKOplasty patients were already reporting after six days.
MAKOplasty also demonstrated higher accuracy in all dimensions
measured, with statistically significant differences in four of the
six dimensions. Finally, a significantly higher percentage of
MAKOplasty patients had "Excellent" American Knee Society Scores at
three months.
Patent Infringement Actions – On April 16, 2013, MAKO agreed to
settle all patent infringement actions against Stanmore Implants
Worldwide Limited and affiliated entities. Under a confidential
settlement agreement and an asset purchase agreement between the
parties, in exchange for a cash payment to Stanmore, MAKO withdrew
all legal actions against Stanmore and received Stanmore's robotic
business assets and related intellectual property, as well as
Stanmore's agreement to withdraw from robotics.
"The first quarter is typically a slower quarter for MAKO, and
our first quarter results were in line with our expectations," said
Maurice R. Ferré, M.D., President and Chief Executive Officer of
MAKO. "The initial results of our programs designed to drive
utilization and system sales are encouraging, and I remain
confident in our outlook for 2013."
2013 First Quarter Financial Review
Revenue was $24.8 million in the first quarter of 2013 compared
to $19.6 million in the first quarter of 2012, representing a 26%
increase. The increase in revenue was primarily attributable to the
recognition of revenue of 2,988 MAKOplasty procedures performed,
which represents a 30% increase over the procedures performed in
the first quarter of 2012, and an increase in system revenue and
service revenue.
Gross profit for the first quarter of 2013 was $18.3 million
compared to a gross profit of $14.2 million in the same period in
2012. Gross margin for the first quarter of 2013 was 74%,
consisting of a 75% margin on procedure revenue, a 63% margin on
RIO system revenue and an 87% margin on service revenue.
Operating expenses were $27.2 million in the first quarter of
2013 compared to $25.9 million in the first quarter of 2012. The
increase in operating expenses was primarily due to an increase in
sales, marketing and operations costs associated with the
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 March 31, 2013 was $9.6
million, or $(0.21) per basic and diluted share, based on average
basic and diluted shares outstanding of 46.8 million. Included in
net loss for the first quarter of 2013 was a non-cash and
non-operating expense of $661,000 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 2012
of $11.7 million, or $(0.28) per basic and diluted share, based on
average basic and diluted shares outstanding of 41.7 million.
Cash, cash equivalents and available-for-sale investments were
$71.0 million as of March 31, 2013 compared to $73.3 million as of
December 31, 2012. As of March 31, 2013, no amounts have been drawn
under the credit facility agreement with affiliates of Deerfield
Management Company, L.P.
Outlook
MAKO's 2013 annual guidance of 45 to 48 RIO systems sold and
13,500 to 14,500 MAKOplasty procedures performed remains
unchanged.
Conference Call
MAKO will host a conference call today at 4:30 pm ET to discuss
its first quarter 2013 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 58873803. 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, finished
goods, 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, 2012 filed on February 28, 2013. 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® is a registered trademark of Biomet Orthopedics.
Condensed Statements of Operations
(unaudited) (in thousands, except per share data) |
Three Months Ended March
31, |
|
2013 |
2012 |
Revenue: |
|
|
Procedures |
$ 14,836 |
$ 11,562 |
Systems |
6,499 |
5,871 |
Service |
3,474 |
2,206 |
Total revenue |
24,809 |
19,639 |
Cost of revenue: |
|
|
Procedures |
3,667 |
2,657 |
Systems |
2,431 |
2,448 |
Service |
442 |
381 |
Total cost of revenue |
6,540 |
5,486 |
Gross profit |
18,269 |
14,153 |
Operating costs and expenses: |
|
|
Selling, general and administrative
(exclusive of depreciation and amortization) |
20,138 |
19,376 |
Research and development (exclusive of
depreciation and amortization) |
5,013 |
4,854 |
Depreciation and amortization |
2,046 |
1,686 |
Total operating costs and expenses |
27,197 |
25,916 |
Loss from operations |
(8,928) |
(11,763) |
Other income (expense), net |
(677) |
58 |
Loss before income taxes |
(9,605) |
(11,705) |
Income tax expense |
15 |
25 |
Net loss |
$ (9,620) |
$ (11,730) |
Net loss per share - Basic and diluted |
$ (0.21) |
$ (0.28) |
Weighted average common shares outstanding
-- |
|
|
Basic and diluted |
46,804 |
41,694 |
|
|
|
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 condensed 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) |
March 31, 2013 |
December 31, 2012 |
ASSETS |
|
|
Current Assets: |
|
|
Cash and cash equivalents |
$ 41,469 |
$ 61,367 |
Short-term investments |
28,393 |
11,899 |
Accounts receivable |
15,111 |
22,389 |
Inventory |
25,129 |
25,080 |
Deferred cost of revenue |
759 |
967 |
Financing commitment asset |
6,947 |
7,608 |
Prepaid and other current
assets |
2,453 |
1,972 |
Total current assets |
120,261 |
131,282 |
Long-term investments |
1,165 |
– |
Cost method investment |
4,181 |
4,181 |
Property and equipment, net |
23,414 |
22,996 |
Intangible assets, net |
5,229 |
5,657 |
Other assets |
2,786 |
2,786 |
Total assets |
$ 157,036 |
$ 166,902 |
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
Current Liabilities: |
|
|
Accounts payable |
$ 1,509 |
$ 2,267 |
Accrued compensation and
employee benefits |
2,505 |
4,298 |
Other accrued liabilities |
7,702 |
8,727 |
Deferred revenue |
8,622 |
9,973 |
Total current liabilities |
20,338 |
25,265 |
Deferred revenue, non-current |
752 |
800 |
Total liabilities |
21,090 |
26,065 |
Stockholders' Equity: |
|
|
Common stock |
47 |
47 |
Additional paid-in capital |
367,114 |
362,364 |
Accumulated deficit |
(231,196) |
(221,576) |
Accumulated other comprehensive
gain (loss) |
(19) |
2 |
Total stockholders' equity |
135,946 |
140,837 |
Total liabilities and stockholders'
equity |
$ 157,036 |
$ 166,902 |
|
|
|
|
|
|
Condensed Statements of Cash Flows
(unaudited) (in thousands) |
Three Months
Ended March 31, |
|
2013 |
2012 |
Operating activities: |
|
|
Net loss |
$ (9,620) |
$ (11,730) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
Depreciation |
1,759 |
1,378 |
Amortization of intangible assets |
428 |
420 |
Stock-based compensation |
2,938 |
2,721 |
Provision for inventory reserve |
311 |
28 |
Amortization of premium on investment
securities |
51 |
128 |
Loss on asset impairment |
265 |
249 |
Provision for doubtful accounts |
117 |
45 |
Issuance of stock under development
agreement |
194 |
227 |
Non-cash changes under credit facility |
661 |
– |
Changes in operating assets and
liabilities: |
|
|
Accounts receivable |
7,161 |
8,218 |
Inventory |
(1,284) |
(5,041) |
Deferred cost of revenue |
208 |
(230) |
Prepaid and other current assets |
(481) |
(2,333) |
Other assets |
– |
13 |
Accounts payable |
(758) |
1,344 |
Accrued compensation and employee
benefits |
(1,793) |
(4,707) |
Other accrued liabilities |
(1,025) |
(3,066) |
Deferred revenue |
(1,399) |
443 |
Net cash used in operating activities |
(2,267) |
(11,893) |
Investing activities: |
|
|
Purchase of investments |
(25,018) |
(3,160) |
Proceeds from sales and maturities of
investments |
7,287 |
10,186 |
Acquisition of property and equipment |
(1,518) |
(2,183) |
Net cash provided by (used in) investing
activities |
(19,249) |
4,843 |
Financing activities: |
|
|
Proceeds from employee stock purchase
plan |
406 |
360 |
Exercise of common stock options and warrants
for cash |
1,270 |
2,026 |
Payment of payroll taxes relating to vesting
of restricted stock |
(58) |
(81) |
Net cash provided by financing
activities |
1,618 |
2,305 |
Net decrease in cash and cash
equivalents |
(19,898) |
(4,745) |
Cash and cash equivalents at beginning of
period |
61,367 |
13,438 |
Cash and cash equivalents at end of
period |
$ 41,469 |
$ 8,693 |
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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