MONTREAL, Aug. 9 /PRNewswire-FirstCall/ -- CryoCath Technologies Inc., the global leader in cryotherapy products to treat cardiovascular disease, today announced financial results for the third quarter, ended June 30, 2007.
Selected Third Quarter Financial and Operational Highlights:
- Reported record third quarter revenue of $11.7 million, a 20.5%
quarter-over-quarter increase
- Revenue in core EP business grew by 37.8% quarter over quarter to
$8.3 million, reflecting strong performance of Arctic Front(R) in
Europe
- Increased gross margins to 58.0% from 50.5% in the third quarter of
2006
- Transformation of company into a high growth pure play EP/AFib
company with relentless focus on its blockbuster potential through
Arctic Front approval in the US and driving rapid profitable growth
in Europe.
- Completed sale of surgical portfolio to ATS Medical in a cash
transaction valued at US$22 million. With milestone payments, the
agreement could increase in value to reach a total of US$30 million.
These proceeds provide sufficient financial means to fund operations
into the US launch of Arctic Front.
"The third quarter of 2007 was one of solid revenue growth while we also made significant progress in several key strategic areas. We achieved record sales, driven by a marked uptake in growth of our core EP business," said Jan Keltjens, President and CEO. "This increase in EP revenue is composed of ongoing growth in our core focal cryoablation business, compounded by the rapidly accelerating growth in the number of Atrial Fibrillation ablations utilizing our flagship Arctic Front system in an increasing number of trained sites in Europe. Last but not least, we successfully completed the sale of our surgical portfolio to ATS Medical, providing financial runway to the US commercial launch of Arctic Front while creating the required focus on this blockbuster opportunity".
"We also made good progress towards our goal of achieving Arctic Front approval in the US. We continue to believe that we can complete enrolment towards the end of this calendar year. Furthermore the on-going clinical results that we receive from commercial use in Europe continue to create confidence in the efficacy of our products."
The Company's total sales reached $11.7 million for the third quarter, an increase of 20.5% over the $9.7 million for the same quarter last year. For the nine-month period ending June 30, 2007, sales increased 14.6% to $33.1 million compared to $28.9 million in the same period a year ago.
Gross margins for the third quarter of fiscal 2007 were $6.8 million or 58.0% of sales, an increase over the $4.9 million or 50.5% seen in the third quarter of fiscal 2006. On a nine-month year-to-date basis, gross margins were $20.1 million or 60.7% of sales, versus $16.7 million or 57.6% from the same period a year ago. The increase in gross margins reflects higher revenues and the impact of ongoing improvements in our manufacturing operation, partially offset by mix and one-time charges taken last year.
The Company's sales and marketing expenses for the third quarter of 2007 decreased to $6.8 million compared to $7.1 million in the same period last year. On a nine-month year-to-date basis, sales and marketing expenses were $19.1 million versus $20.0 million for the same period a year ago. The decreases are associated with lower headcount and better control over discretionary expenses.
Net research and development expenses for the quarter ended June 30, 2007 was $3.4 million compared to $3.2 million in the same quarter last year primarily as a result of higher clinical costs. On a nine-month year-to-date basis, net R&D expenses were $8.6 million versus $9.3 million in the same period in 2006. The decrease year to date is due to a significant decrease in non-core R&D projects partly offset by higher clinical costs incurred in the STOP AF IDE trial.
Administrative expenses for the third quarter of 2007 increased to $1.8 million from $1.7 million for the same period last year. On a nine-month year-to-date basis, administrative expenses were $4.9 million versus $4.1 million for the same period a year ago. The increase in both periods is driven by continued spending to develop the robust infrastructure to support rapid and sustainable growth.
Other expenses, primarily composed of non-cash items, totaled $2.8 million in the quarter as compared to $1.5 million in the same quarter last year. For the nine months year to date, other expenses were $5.1 million compared to $3.5 million last year. The increased expense in both periods was driven by foreign exchange losses due to the appreciation of the Canadian dollar and high interest expense related to the additional debt taken on in July 2006.
CryoCath's net income for the third quarter ended June 30, 2007 was $2.4 million or $0.06 per share as a result of the $10.1 million gain recorded on the sale of the surgical business. In the third quarter of fiscal 2006, the company recorded a net loss of $8.4 million or ($0.22) per share. On a nine month year-to-date basis, the company posted a net loss of $7.2 million or ($0.19) per share. For the same period one year ago, the company recorded a net loss of $19.5 million or ($0.52) per share.
Operating burn for the quarter decreased by 17.0% to $4.7 million versus $5.6 million in the third quarter of 2006. On a nine-month year-to-date basis, operating burn decreased to $10.0 million from $13.3 million in 2006. The decrease in burn is primarily related to higher revenues and gross margins.
The Company, as of June 30, 2007, had access to approximately $35.3 million in cash and borrowing facilities. The increase is the direct result of the sale of the surgical portfolio to ATS Medical and provides sufficient runway to the US commercial launch of Arctic Front expected in late 2009.
The Company will host a conference call to discuss the third quarter and provide an update on its business on Friday, August 10 at 8:30AM (EST.) The call will be audio-cast live from CryoCath's website and archived for 90 days.
Complete financials will be filed at http://www.sedar.com/.
About CryoCath
CryoCath - http://www.cryocath.com/ - 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 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.
This press release includes "forward-looking statements" that are subject to risks and uncertainties, including with respect to the timing of regulatory trials and their outcome. For information identifying legislative or regulatory, economic, climatic, currency, technological, competitive and other important factors that could cause actual results to differ materially from those anticipated in the forward looking statements, see CryoCath's annual report available at http://www.sedar.com/ under the heading Risks and Uncertainties in the Management's Discussion and Analysis section.
Balance Sheets (unaudited)
As at June 30 September 30
2007 2006
$ $
ASSETS
Current assets
Cash and cash equivalents 31,979,747 9,178,123
Cash subject to restrictions 568,750 -
Short-term investments held to maturity - 5,616,907
Accounts receivable 10,205,449 8,119,660
Investment tax credits receivable 993,148 502,033
Inventories 7,852,349 7,105,974
Prepaid expenses 180,146 1,044,039
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Total current assets 51,779,589 31,566,736
Cash subject to restrictions 853,125 -
Balance of sale 1,608,168 -
Net investments in leases - 5,967
Deferred financing charges - 2,636,636
Consoles at customers' premises 1,904,786 1,858,465
Property, plant, and equipment 3,516,517 3,212,551
Intellectual property 2,887,372 15,194,606
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62,549,557 54,474,961
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness 7,700,000 -
Accounts payable and accrued liabilities 14,113,534 10,201,378
Fair value of derivative financial instruments 48,860 -
Current portion of long-term debt 1,148,269 -
Current portion of deferred revenue 538,900 491,683
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Total current liabilities 23,549,563 10,693,061
Long-term debt 23,560,084 22,399,317
Deferred revenue 294,922 228,774
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Total liabilities 47,404,569 33,321,152
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Shareholders' equity
Capital stock 180,777,848 180,655,193
Contributed surplus 8,539,199 7,469,343
Deficit (174,172,059) (166,970,727)
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Total shareholders' equity 15,144,988 21,153,809
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62,549,557 54,474,961
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Statement of Operations and Deficit (unaudited)
Three months Three months Nine months Nine months
ended ended ended ended
June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006
$ $ $ $
REVENUES
Sales 11,700,212 9,707,584 33,120,310 28,909,279
Cost of sales
(including
amortization,
and console write-
downs of $868,179
and $2,421,486;
2006 - $1,164,673
and $2,613,473) 4,908,403 4,806,476 13,015,264 12,258,894
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Gross Profit 6,791,809 4,901,108 20,105,046 16,650,385
Surgical distribution
rights - 209,600 - 209,600
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Interest income 6,791,809 5,110,708 20,105,046 16,859,985
107,810 147,106 280,838 457,907
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6,899,619 5,257,814 20,385,884 17,317,892
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EXPENSES
Research and
development 3,499,617 3,385,375 9,051,234 9,764,437
Investment tax
credits (136,140) (140,394) (491,115) (494,712)
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Net research and
development 3,363,477 3,244,981 8,560,119 9,269,725
Administrative 1,748,761 1,698,116 4,899,034 4,064,450
Sales and marketing 6,770,695 7,124,941 19,128,230 19,967,145
Amortization of
intellectual
property 58,625 56,139 173,459 165,218
Amortization of
property, plant,
and equipment 239,070 269,256 670,064 813,945
Amortization of
deferred
financing charges 84,424 57,856 343,122 155,686
Interest on long-
term debt 645,399 282,036 1,858,447 783,394
Foreign exchange
loss 1,381,492 253,561 655,332 166,452
Loss on foreign
exchange embedded
derivative 62,882 - 48,860 -
Non-cash compensation
expense 300,100 445,000 1,069,856 1,245,894
Other expenses
- 179,490 299,274 179,490
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14,654,925 13,611,376 37,705,797 36,811,399
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Net income (loss)
and other
comprehensive income
(loss) before
undernoted item (7,755,306) (8,353,562) (17,319,913) (19,493,507)
Gain on sale of
surgical
portfolio 10,118,581 - 10,118,581 -
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Net income (loss)
and other
comprehensive
income (loss) 2,363,275 (8,353,562) (7,201,332) (19,493,507)
Deficit, beginning
of period (176,535,334) (148,144,210) (166,970,727) (137,004,265)
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Deficit, end of
period (174,172,059) (156,497,772) (174,172,059) (156,497,772)
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Weighted average
number of common
shares 38,016,719 37,866,322 37,985,809 37,748,090
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Basic earnings
(loss) per share 0.06 (0.22) (0.19) (0.52)
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Diluted earnings
(loss) per share 0.05 (0.22) (0.19) (0.52)
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Statement of Cash Flows (unaudited)
Three months Three months Nine months Nine months
ended ended ended ended
June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006
$ $ $ $
OPERATING ACTIVITIES
Net income (loss)
and other
comprehensive income
(loss) for the
period 2,363,275 (8,353,562) (7,201,332) (19,493,507)
Items not affecting
cash
Gain on sale of
surgical
portfolio (10,118,581) - (10,118,581) -
Non-cash compensation
expense 300,100 445,000 1,069,856 1,245,894
Interest on long-
term debt 591,769 282,036 1,732,124 783,394
Amortization of
intellectual
property 552,085 639,168 1,526,502 1,277,443
Amortization of
consoles at
customers' premises 264,289 486,089 742,601 1,226,329
Amortization of
property, plant,
and equipment 349,499 364,811 995,906 1,088,864
Amortization of
deferred financing
charges 84,424 57,856 343,122 155,686
Unrealized loss on
foreign exchange
embedded derivatives 62,882 - 48,860 -
Unrealized foreign
exchange loss 871,489 440,688 871,489 366,656
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(4,678,769) (5,637,914) (9,989,453) (13,349,241)
Net change in non-
cash working capital
balances relating
to operations 4,261,128 (163,176) 1,276,530 (1,138,364)
Increase in net
investments in
leases - 16,376 5,967 49,557
Increase (decrease)
in deferred
revenue (60,505) (49,023) 117,804 (18,101)
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Cash flows related
to operating
activities (478,146) (5,833,737) (8,589,152) (14,456,149)
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INVESTING ACTIVITIES
Net proceeds from
sale of surgical
portfolio 20,222,586 - 20,222,586 -
Proceeds from
maturities of
short-term
investments - 18,189,541 5,616,907 45,709,482
Acquisition of
short-term
investments - (12,633,678) - (22,140,941)
(Increase) decrease
in cash subject
to restrictions 109,375 - (1,421,875) -
Acquisition of
intellectual
property (106,897) (72,491) (330,089) (365,413)
Acquisition of
property, plant,
and equipment (755,296) (460,080) (1,329,252) (1,401,969)
Increase in consoles
at customers'
premises (481,950) (476,400) (1,407,958) (1,572,615)
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Cash flows related
to investing
activities 18,987,818 4,546,892 21,350,319 20,228,544
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FINANCING ACTIVITIES
Issuance of common
shares - 75,000 120,105 473,612
Decrease in employee
share purchase
loans - 30,000 2,550 46,320
Decrease (increase)
in deferred
financing charges - 506 (167) 506
Repayment of bank
indebtedness - (220,000) - (220,000)
Increase in long-
term debt - - 3,534,000 -
Repayment of long-
term debt (221,284) - (663,407) -
Increase in bank
indebtedness 4,700,000 - 7,700,000 5,000,000
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Cash flow related to
financing
activities 4,478,716 (114,494) 10,693,081 5,300,438
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Effect of exchange
rate change on
cash and cash
equivalents (652,624) (17,567) (652,624) (2,769)
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Net change in cash
and cash
equivalents 22,335,764 (1,418,906) 22,801,624 11,070,064
Cash and cash
equivalents,
beginning of
period 9,643,983 13,141,131 9,178,123 652,161
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Cash and cash
equivalents,
end of period 31,979,747 11,722,225 31,979,747 11,722,225
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Cash and cash
equivalents
consist of:
Cash 29,840,947 6,241,477 29,840,947 6,241,477
Cash equivalents
- commercial
paper and other
investments with
maturities less
than 90 days 2,138,800 5,480,748 2,138,800 5,480,748
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31,979,747 11,722,225 31,979,747 11,722,225
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Supplemental cash
flow information
Cash paid during
the period for:
interest 217,612 67,625 376,948 104,085
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