Second Quarter 2013 Highlights
Second quarter revenue totaled $28.2 million, a 19% increase
over the same period in 2012
Ten RIO® systems sold in the second quarter, of which eight were
sold to domestic customers
A total of fifteen RIO systems sold worldwide in the first six
months of 2013, increasing worldwide commercial installed base to
171 RIO systems and domestic commercial installed base to 164 RIO
systems
3,274 MAKOplasty® procedures performed in the second quarter, a
26% increase over the same period in 2012
6,262 MAKOplasty procedures performed in the first six months of
2013, a 28% increase over the same period in 2012
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, 2013.
Recent Business Developments
RIO Systems – Ten RIO systems were sold during the second
quarter, of which eight were sold to domestic customers and two
were sold through international distributors in Italy and Turkey.
The revenue associated with one RIO system sold to and customer
accepted by our Italian distributor will be deferred until all
revenue recognition criteria are satisfied. These ten RIO systems
bring MAKO's worldwide commercial installed base of RIO systems to
171 systems and domestic commercial installed base to 164 systems
as of June 30, 2013. At the end of the quarter, MAKO had 164
MAKOplasty sites worldwide. Nine MAKOplasty total hip arthroplasty,
or THA, applications were sold during the quarter, six of which
were sold with new RIO systems sales and three of which were sold
as upgrades to existing customers with knee-only commercial
systems. As of June 30, 2013, 111 RIO systems, or 65% of the
worldwide commercial installed base, have the MAKOplasty THA
application.
MAKOplasty Procedure Volume – During the second quarter, 3,274
MAKOplasty procedures were performed, of which 3,125 were performed
at domestic sites and 577 were THA procedures. The 3,274 MAKOplasty
procedures performed represent a 10% increase over the procedures
performed in the first quarter of 2013 and a 26% increase over the
procedures performed in the second quarter of 2012. The 577 THA
procedures performed represent a 24% increase over the THA
procedures performed in the first quarter of 2013 and a 106%
increase over the THA procedures performed in the second quarter of
2012. The average monthly utilization per site for all MAKOplasty
procedures was 7.0 procedures during the second quarter of 2013, an
increase from 6.6 procedures during the first quarter of 2013.
Through June 30, 2013, approximately 29,000 procedures had been
performed since the first procedure in June 2006.
Clinical Research and Marketing – At the 2013 Computer Assisted
Orthopedic Surgery meeting in June, three key presentations were
made on MAKOplasty. First, Dr. Bryn Jones presented additional
early data from the randomized controlled trial (RCT) performed at
the Glasgow Royal Infirmary with the University of Strathclyde. Dr.
Jones presented three-month data for the entire cohort of 139
patients highlighting accuracy, pain level, American Knee Society
scores and hospital cost savings. MAKOplasty unicompartmental knee
procedures results were favorable to the manually placed Biomet
Oxford® implants in nearly all measured categories. Second, Dr.
Riyaz Jinnah's group presented data on a retrospective registry
review of 125 lateral uni-compartmental knee arthroplasty, or UKA,
patients, 88 of which were MAKOplasty patients. At the patients' 24
month follow up appointment, the MAKOplasty lateral UKA group had a
statistically significant lower revision rate, shorter average
hospital stay and better alignment than the manual lateral UKA
group. Lastly, Dr. Benjamin Domb's group presented data comparing
acetabular cup position for a matched pair series of 50 MAKOplasty
total hip procedures versus 50 manual total hip procedures. The
data showed that 92% of the MAKOplasty cups were within the
stricter Callanan, or Massachusetts General Hospital, safe zone,
compared to 62% of the conventional cups. All results are
statistically significant, and provide additional evidence of the
clinical and economic benefits of MAKOplasty over manual
procedures.
"We are pleased that our programs implemented in the first
quarter to drive utilization and system sales are beginning to show
positive business results," said Maurice R. Ferré, M.D., President
and Chief Executive Officer of MAKO. "Additionally, the recently
released favorable data on both knee and hip MAKOplasty provides
continuing support for the clinical value proposition of our
procedures."
2013 Second Quarter Financial Review
Revenue was $28.2 million in the second quarter of 2013 compared
to $23.7 million in the second quarter of 2012, representing a 19%
increase. The increase in revenue was primarily attributable to the
recognition of revenue of 3,274 MAKOplasty procedures performed,
which represents a 26% increase over the procedures performed in
the second quarter of 2012, and an increase in service revenue.
Gross profit for the second quarter of 2013 was $16.8 million
compared to a gross profit of $17.3 million in the same period in
2012. Gross margin for the second quarter of 2013 was 59%,
consisting of a 51% margin on procedure revenue, a 62% margin on
RIO system revenue and a 91% margin on service revenue. Procedure
gross margin for the second quarter of 2013 was negatively impacted
by an inventory valuation adjustment of $4.1 million for excess hip
implant inventory related to the RESTORIS Trinity Cup and RESTORIS
Metafix Femoral Stem implant system and the RESTORIS Z implant
system. The valuation adjustment was primarily due to the greater
than anticipated adoption of our RESTORIS PST Cup and Tapered
Femoral Stem hip implant system, or RESTORIS PST implant system,
which MAKO commercially launched in October 2012, as a percent of
total THA procedures. In the second quarter of 2013, over 75% of
the THA procedure volume was performed with the RESTORIS PST
implant system.
Operating expenses were $29.6 million in the second quarter of
2013 compared to $25.8 million in the second quarter of 2012. The
increase in operating expenses was primarily due to the new medical
device tax, which became effective January 1, 2013, and a $2.0
million asset impairment charge for excess hip implant
instrumentation associated with the RESTORIS Trinity Cup and
RESTORIS Metafix Femoral Stem implant system and the RESTORIS Z
implant system.
Net loss for the three months ended June 30, 2013 was $19.7
million, or $(0.42) per basic and diluted share, based on average
basic and diluted shares outstanding of 46.9 million. Included in
net loss for the second quarter of 2013 was a non-cash and
non-operating expense of $6.9 million associated with the change in
fair value of a derivative asset related to a credit facility
agreement. Upon expiration of the credit facility's draw period on
May 15, 2013, the derivative asset had no value resulting in a $6.9
million charge to non-operating expense in the second quarter of
2013. This compares to a net loss for the same period in 2012 of
$8.5 million, or $(0.20) per basic and diluted share, based on
average basic and diluted shares outstanding of 42.2 million.
Cash, cash equivalents and available-for-sale investments were
$62.9 million as of June 30, 2013 compared to $73.3 million as of
December 31, 2012.
2013 Six-Month Financial Review
Revenue was $53.0 million for the six months ended June 30, 2013
compared to $43.3 million for the six months ended June 30, 2012,
representing a 22% increase. Revenue for the six months ended June
30, 2013 primarily consisted of $31.2 million in revenue from the
sale of implants and disposables used in the 6,262 MAKOplasty
procedures performed in the six months ended June 30, 2012, $14.7
million in revenue from the sale of fourteen RIO systems, ten of
which included MAKOplasty THA applications, four MAKOplasty THA
applications sold to existing customers, recognition of two
previously deferred international commercial RIO system sales, and
$7.1 million in revenue from service. In addition to the fourteen
recognized RIO system sales, the revenue associated with the sale
of one international commercial system including a MAKOplasty THA
application was deferred until all revenue recognition criteria are
satisfied.
The net loss for the six months ended June 30, 2013 was $29.3
million, or $(0.63) per basic and diluted share, based on average
basic and diluted shares outstanding of 46.9 million. Included in
net loss for the six months ended June 30, 2013 was non-cash and
non-operating expense of $7.6 million associated with the change in
fair value of a derivative asset related to a credit facility
agreement, a $4.4 million non-cash inventory valuation adjustment
for excess hip implant inventory and a $2.3 million non-cash asset
impairment charge associated with hip implant instrumentation. This
compares to a net loss for the same period in 2012 of $20.3
million, or $(0.48) per basic and diluted share, based on average
basic and diluted shares outstanding of 41.9 million.
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 second 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 17131905. 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," "outlook," "guidance" 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 and duration 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 (including from sole-source suppliers),
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 or system utilizations, 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 or future
products, including initiating and communicating product actions or
product recalls and meeting Medical Device Reporting requirements
and other requirements of 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 actual and 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, and the taxing of medical device
companies, unanticipated changes in reimbursement to our customers
for our products, any unanticipated impact arising out of the
securities class action or any other litigation, inquiry, or
investigation brought against MAKO, any negative impact from the
generation or interpretation of clinical study results related to
MAKOplasty, 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 or market position. 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 June
30, |
Six Months Ended June
30, |
|
2013 |
2012 |
2013 |
2012 |
|
|
|
|
|
Revenue: |
|
|
|
|
Procedures |
$ 16,378 |
$ 13,018 |
$ 31,214 |
$ 24,580 |
Systems |
8,231 |
8,183 |
14,730 |
14,054 |
Service |
3,616 |
2,474 |
7,090 |
4,680 |
Total revenue |
28,225 |
23,675 |
53,034 |
43,314 |
Cost of revenue: |
|
|
|
|
Procedures |
7,949 |
3,118 |
11,616 |
5,775 |
Systems |
3,149 |
2,796 |
5,580 |
5,244 |
Service |
342 |
451 |
784 |
832 |
Total cost of revenue |
11,440 |
6,365 |
17,980 |
11,851 |
Gross profit |
16,785 |
17,310 |
35,054 |
31,463 |
Operating costs and expenses: |
|
|
|
|
Selling, general and administrative
(exclusive of depreciation and amortization) |
21,841 |
18,783 |
41,979 |
38,159 |
Research and development
(exclusive of depreciation and amortization) |
5,633 |
5,244 |
10,646 |
10,098 |
Depreciation and amortization |
2,103 |
1,771 |
4,149 |
3,457 |
Total operating costs and expenses |
29,577 |
25,798 |
56,774 |
51,714 |
Loss from operations |
(12,792) |
(8,488) |
(21,720) |
(20,251) |
Other income (expense), net |
(6,936) |
(33) |
(7,613) |
25 |
Loss before income taxes |
(19,728) |
(8,521) |
(29,333) |
(20,226) |
Income tax expense |
– |
14 |
15 |
39 |
Net loss |
$ (19,728) |
$ (8,535) |
$ (29,348) |
$ (20,265) |
Net loss per share - Basic and diluted |
$ (0.42) |
$ (0.20) |
$ (0.63) |
$ (0.48) |
Weighted average common shares outstanding
- |
|
|
|
|
Basic and diluted |
46,935 |
42,161 |
46,870 |
41,927 |
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) |
June 30, |
December 31, |
|
2013 |
2012 |
|
|
|
ASSETS |
|
|
Current Assets: |
|
|
Cash and cash equivalents |
$ 19,579 |
$ 61,367 |
Short-term investments |
40,054 |
11,899 |
Accounts receivable |
21,131 |
22,389 |
Inventory |
21,580 |
25,080 |
Deferred cost of revenue |
1,021 |
967 |
Financing commitment asset |
– |
7,608 |
Prepaid and other current
assets |
2,678 |
1,972 |
Total current assets |
106,043 |
131,282 |
Long-term investments |
3,295 |
– |
Cost method investment |
4,181 |
4,181 |
Property and equipment, net |
22,441 |
22,996 |
Intangible assets, net |
5,771 |
5,657 |
Other assets |
2,788 |
2,786 |
Total assets |
$ 144,519 |
$ 166,902 |
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
Current Liabilities: |
|
|
Accounts payable |
$ 1,742 |
$ 2,267 |
Accrued compensation and
employee benefits |
4,861 |
4,298 |
Other accrued liabilities |
7,088 |
8,727 |
Deferred revenue |
9,953 |
9,973 |
Total current liabilities |
23,644 |
25,265 |
Deferred revenue, non-current |
769 |
800 |
Total liabilities |
24,413 |
26,065 |
Stockholders' Equity: |
|
|
Common stock |
47 |
47 |
Additional paid-in capital |
371,033 |
362,364 |
Accumulated deficit |
(250,924) |
(221,576) |
Accumulated other comprehensive
income (loss) |
(50) |
2 |
Total stockholders' equity |
120,106 |
140,837 |
Total liabilities and stockholders'
equity |
$ 144,519 |
$ 166,902 |
|
|
|
Condensed Statements of Cash Flows
(unaudited) |
|
|
(in thousands) |
Six Months Ended June
30, |
|
2013 |
2012 |
|
|
|
Operating activities: |
|
|
Net loss |
$ (29,348) |
$ (20,265) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
Depreciation |
3,552 |
2,832 |
Amortization of intangible assets |
884 |
839 |
Stock-based compensation |
5,879 |
6,122 |
Provision for inventory reserve |
4,443 |
95 |
Amortization of premium on investment
securities |
112 |
221 |
Loss on asset impairment |
2,290 |
511 |
Provision for doubtful accounts |
398 |
77 |
Issuance of stock under development
agreement |
389 |
454 |
Non-cash changes under credit facility |
7,608 |
(62) |
Changes in operating assets and
liabilities: |
|
|
Accounts receivable |
860 |
1,692 |
Inventory |
(2,877) |
(11,432) |
Deferred cost of revenue |
(54) |
(458) |
Prepaid and other current
assets |
(706) |
(2,714) |
Other assets |
(2) |
(37) |
Accounts payable |
(525) |
3,776 |
Accrued compensation and
employee benefits |
563 |
(4,747) |
Other accrued liabilities |
(639) |
(1,365) |
Deferred revenue |
(51) |
2,378 |
Net cash used in operating activities |
(7,224) |
(22,083) |
Investing activities: |
|
|
Purchase of investments |
(42,868) |
(3,160) |
Proceeds from sales and maturities of
investments |
11,254 |
22,298 |
Acquisition of property and equipment |
(3,353) |
(3,839) |
Acquisition of intangible assets |
(998) |
(65) |
Net cash provided by (used in) investing
activities |
(35,965) |
15,234 |
Financing activities: |
|
|
Payment under credit facility |
(1,000) |
– |
Proceeds from employee stock purchase
plan |
874 |
844 |
Exercise of common stock options and warrants
for cash |
1,642 |
2,176 |
Payment of payroll taxes relating to vesting
of restricted stock |
(115) |
(172) |
Net cash provided by financing
activities |
1,401 |
2,848 |
Net decrease in cash and cash
equivalents |
(41,788) |
(4,001) |
Cash and cash equivalents at beginning of
period |
61,367 |
13,438 |
Cash and cash equivalents at end of
period |
$ 19,579 |
$ 9,437 |
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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