CRYOCATH INCREASED 3RD QTR FISCAL REVENUE BY 6% TO $9.7 MIL.
Selected Third Quarter Financial and Operating Highlights
- Increased revenue by 6% over third quarter of fiscal 2005, from $9.2 million to $9.7 million;
- Increased disposable units sold by 26% over third quarter of fiscal 2005, from 3,657 to 4,622;
- Installed 48 new surgical and EP console systems;
- Successfully completed treatment of an additional 15 patients in the company's STOP AF IDE feasibility study;
- Presented independent peer reviewed data on Arctic Front; reported 100% acute success data following ablation on 26 patients treated for paroxysmal Atrial Fibrillation (AF);
- Presented 19 oral and poster abstracts at 27th Annual Scientific Sessions of the Heart Rhythm Society, the preeminent annual event for electrophysiologists, with over 6,000 clinicians in attendance;
- Subsequent to quarter's end, expanded banking facilities and drew down second traunch of Biolevier program. As a result, the company has access to additional funds of $19.5 million
"On balance, the third quarter of 2006 was one marked by progress here at CryoCath. We sold the highest number of disposable units ever in one quarter. We also advanced the Arctic Front program with the completion of the feasibility stage of the STOP AF IDE study and the majority of manufacturing issues related to this product were also resolved," said Henri Vienneau, interim CEO and chairman of the board of directors. "As the year progresses, our top priority will be to continue to advance the AF program. We will also focus on ensuring that our burn-rate is commensurate with our revenue and resources."
The company's product revenue reached $9.7 million for the third quarter, an increase of $0.5 million or 6% over product sales of $9.2 million for the third quarter of fiscal 2005. For the nine-month period ending June 30, 2006, sales increased 24.0% to reach $28.9 million compared to $23.3 million in the same period a year ago.
Gross margins for the third quarter of fiscal 2006 were $4.9 million, or 50% of sales, a decrease from $5.8 million or 64% seen in the third quarter of fiscal 2005. On a nine-month year-to-date basis, gross margins were $16.7 million or 58% of sales, versus $14.7 million or 63%. Gross margins in the third quarter of fiscal 2006 were impacted by the reduction in the U.S. dollar versus the Canadian dollar, which reduced margins by almost 4%; increased amortization expenses for the Endocare license reduced margins by 2.5%; as well, margins are reflecting lower average selling prices due to increased competitive activity; finally, margins were also impacted by higher manufacturing costs to resolve scale-up manufacturing issues of Arctic Front (these costs are expected to decrease after all corrective actions are completed).
Also during the quarter, a number of significant adjustments occurred as a result of the company's ERP post implementation and remediation process. The company conducted a full physical inventory count and performed a detailed review of the consoles at its customers' premises. As a result of the physical inventory count on June 30, 2006 and the reconciliation of the consoles held at customers' premises with its records, the company determined that the value of inventory and consoles at customers' premises were overstated, which required a restatement of previous quarters' financial statements totaling $439,000. Restated financial statements and amendments to the Management Analysis and Discussion for the first quarter ended December 31, 2005 and the second quarter ended March 31, 2006 have been filed on SEDAR.
Research and development expenses for both the third quarter of 2005 and 2006 were $3.4. On a nine-month year-to-date basis, R&D expenses were $9.8 million versus $8.6 million in the same period in 2005. The increase can be attributed in large part to expenditures for our clinical feasibility trial and in preparation for the follow on pivotal study.
Administrative expenses for the third quarter of 2006 were $1.9 million compared to $1.0 million for the third quarter ended June 30, 2005. On a nine-month year-to-date basis, administrative expenses were $4.2 million versus $2.9 million for the same period a year ago. The company incurred in the quarter approximately $0.6 million in professional fees and other costs related to their examination of financing proposals.
The company's sales and marketing expenses for the third quarter of fiscal 2006 were $7.1 million compared to $6.4 million for the third quarter of fiscal 2005. On a nine-month year-to-date basis, sales and marketing expenses totaled $20.0 million versus $17.9 million for the same period a year ago, but decreased as a percentage of sales to 69% from 77%.
CryoCath's net loss for the third quarter ended June 30, 2006 totaled $8.4 or ($0.22) per share compared to a loss of $3.4 million or ($0.09) per share in the third quarter of fiscal 2005. On a nine-month year-to-date basis, the net loss was $19.4 million or ($0.52) per share versus $14.1 million or ($0.39) per share in the same period a year ago. The increase, quarter over quarter, reflects the decrease in the income derived from the sale of certain surgical distribution rights ($1.7 million) in its U.S. territory hospital accounts to a distributor and to professional and other fees related to various financing alternatives ($0.6 million). As well, it also reflects the impact of the aforementioned adjustments.
Operating burn for the quarter was $5.6 million versus $2.0 million for the third quarter of 2005. On a nine-month basis, the operating burn was $13.3 million versus $9.7 million in 2005.
Working capital was $17.7 million at June 30, 2006, a decrease of $7.0 million over the $24.7 million of working capital at March 31, 2006. Subsequent to quarter's end, the company expanded its banking facilities. As a result, CryoCath has access to approximately $33 million in cash and cash equivalents, short-term investments and borrowing facilities. The company believes that it will continue to be able to access sufficient working capital to meet its current and future anticipated requirements.
On August 11, 2006, the company signed a new credit facility with a new senior lender, National Bank of Canada (Health Group). The credit facility includes an $11,000,000 revolving operating line and a $3,500,000 term loan. The new facility replaces the company's existing $5 million operating line. As well, the company recently drew a further $10 million from its Biolevier program with Investissement Quebec.
"With access to $19.5 million in new capital, we are now equipped with the financial flexibility to pursue our corporate objectives, most notably the advancement of our Atrial Fibrillation program," said Mr. Vienneau, chairman of the board and acting CEO. "Furthermore, that we were able to obtain such financing without diluting shareholder value underscores the long-term potential of both our product pipeline and our ability to generate growth."
Under this new facility, the company will no longer be required to maintain deposits with the service lender equal to the amounts advanced. Direct advances under the revolving operating facility bear interest at Canadian prime plus 1.75% and are collateralized by a general security agreement in respect of most current assets. Direct advances under the term facility bear interest at variables rates, either at Canadian prime or U.S. base rate plus 2.00%, have a three-year term, with defined quarterly principal repayments.
CryoCath is a medical technology company that leads the world in cryotherapy products to treat cardiovascular disease. With a priority focus on providing physicians with a complete solution of catheter and surgical products to treat cardiac arrhythmias, CryoCath has multiple products approved in the U.S., across Europe and several ROW countries. The company is developing additional products to expand its pipeline of products to treat cardiac arrhythmias and has development projects for the treatment of cardiac ischemia (angina) and peripheral arterial disease (PAD).
For more information, visit http://www.cryocath.com or call 416/815-0700 ext. 231.
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|Comment:||CRYOCATH INCREASED 3RD QTR FISCAL REVENUE BY 6% TO $9.7 MIL.|
|Publication:||Biotech Financial Reports|
|Article Type:||Company overview|
|Date:||Oct 1, 2006|
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