PLYMOUTH, Minn., July 28 /PRNewswire-FirstCall/ -- ev3 Inc. , a global endovascular device company, today reported financial results for its fiscal second quarter of 2008 and its updated financial guidance for 2008.
ev3's net sales were $107.7 million in the second quarter of 2008 representing a 65% increase over the same quarter of the prior year and a 6% increase over the first quarter of 2008. Legacy ev3 peripheral vascular and neurovascular net sales, excluding atherectomy and research collaboration related revenues, increased 17% in the second quarter of 2008 compared to the prior year quarter. Atherectomy net sales increased 10% on a sequential basis in the second quarter of 2008 compared to the first quarter of 2008.
Robert Palmisano, president and chief executive officer of ev3 Inc., commented, "I am pleased to report strong second quarter results for the company, which exceeded our expectations. Our stronger than anticipated sales results were driven by the increased productivity we are seeing from our U.S. peripheral vascular sales organization, continued improvement in atherectomy product sales and expansion in our neurovascular and international businesses."
Palmisano continued, "We were encouraged to see a double-digit sequential quarter increase in our atherectomy net sales, and believe that our efforts to expand the body of clinical evidence and generate awareness in the referring physician community will be important factors in expanding the role of our atherectomy products in the treatment of peripheral artery disease in the U.S. We are particularly pleased by the growing interest in atherectomy shown by endovascular specialists outside the U.S., providing the company another avenue for growth."
ev3 also reported that its collaboration and license agreement with Merck & Co., Inc. has been terminated. As a result of the termination, ev3 anticipates that Merck collaboration related revenues will be approximately $4.1 million in the second half of 2008. ev3 also recorded a one-time non-cash impairment charge related to the contract termination of approximately $10.5 million in the second quarter of 2008.
Palmisano commented further, "Due to the strong performance of our business and our expectations for the remainder of the year, we are maintaining our full-year 2008 guidance despite the termination of the Merck agreement that was reported earlier today. Over the last several months, we have been actively engaged with Merck and had fully expected to renegotiate the terms of the agreement. Although Merck's decision to terminate the agreement was unexpected, the research collaboration was not a vital, strategic program for ev3. We are encouraged by the growing momentum in our peripheral vascular division, including the recovery of our U.S. atherectomy business, as well as the continued strong performance of our neurovascular and international businesses."
ev3's net loss for the second quarter of 2008 increased to $27.4 million compared to $11.9 million in the second quarter of 2007. ev3's net loss per common share was $0.26 for the second quarter of 2008 compared to a net loss per share of $0.20 in the second quarter of 2007. Total weighted average common shares outstanding used in the per share calculations were 104.2 million and 59.5 million for the second quarter of 2008 and 2007, respectively.
ev3's earnings before interest, taxes, depreciation and amortization (EBITDA), excluding charges for non-cash stock-based compensation of $3.9 million and a one-time, non-cash $10.5 million impairment charge related to the termination of ev3's collaboration and license agreement with Merck reported earlier today, was a negative $1.6 million in the second quarter of 2008, compared to a negative $3.5 million in the second quarter of 2007. ev3 uses the non-GAAP financial measure, EBITDA, excluding charges for non-cash stock-based compensation and the research collaboration asset impairment, and certain other non-GAAP financial measures, as supplemental measures of performance and believes that these measures facilitate operating performance comparisons from period to period and company to company. EBITDA, excluding charges for non-cash stock-based compensation and the research collaboration asset impairment, for the second quarter of 2008 and 2007 are reconciled to ev3's net loss for the respective periods immediately following the detail of net sales by geography later in this press release.
Second Quarter Business Highlights
During the second quarter of 2008, ev3 reported the following business highlights:
-- Received approval from the U.S. Food & Drug Administration on a clinical trial IDE (Investigational Device Exemption) to study RockHawk and SpiderFX for endovascular use -- Completed co-marketing agreement with BioMedix Vascular Solutions Inc. for marketing activities in the U.S. to increase awareness, diagnosis, and treatment of peripheral vascular disease -- Implanted first EverFlex 200mm stent in the DURABILITY II IDE study, representing the first time a stent over 150mm has been implanted clinically in the U.S. -- Completed initial European clinical cases as part of physician preference test for new EverCross PTA balloon catheters -- Enrolled first patient in RACER (Researching Axium Coiling Experience and Recanalization) U.S. post-market study for the Axium coil -- Substantially completed consolidation of the Redwood City manufacturing operations into existing Irvine, CA and Plymouth, MN facilities Sales Review
Peripheral vascular segment net sales in the second quarter of 2008 increased 74% to $70.8 million versus $40.6 million in the second quarter of 2007. Excluding atherectomy revenue of $24.9 million, peripheral vascular sales increased 13% to $45.9 million in the second quarter of 2008 versus $40.6 million in the second quarter of 2007. Stent product sales increased 22% to $27.1 million from $22.2 million. Thrombectomy and embolic protection product sales decreased 16% to $7.1 million from $8.4 million, primarily due to an embolic protection device stocking order from Volcano in the second quarter of 2007, while sales of procedural support and other peripheral vascular products increased 16% to $11.7 million from $10.0 million.
In the second quarter of 2008, ev3's neurovascular segment net sales increased 24% to $30.7 million versus $24.8 million in the second quarter of 2007. Within the neurovascular business segment, sales of embolic products increased 36% to $17.4 million from $12.8 million, and sales of neurovascular access and delivery products were up 11% to $13.3 million from $12.0 million. The primary growth drivers for the neurovascular segment were the Axium coil and the continued market penetration of the Onyx Liquid Embolic System for the treatment of brain arterio-venous malformations (AVMs).
Research collaboration revenue resulting from ev3's former collaboration and license agreement with Merck was $6.2 million for the second quarter of 2008.
On a geographic basis, when compared to the second quarter of 2007, ev3's second quarter 2008 U.S. net sales increased 82% to $71.8 million, while second quarter 2008 international net sales increased 39% to $35.9 million, over the prior-year quarter. ev3's second quarter 2008 U.S. net sales increase was primarily due to the FoxHollow acquisition. International sales growth was primarily due to the launch of the Axium coil and further market penetration of the EverFlex family of stents. Changes in foreign currency exchange rates had a positive impact of approximately $3.4 million on second quarter 2008 net sales compared to the second quarter of 2007.
An investor presentation summarizing the company's second quarter 2008 results is available at http://ir.ev3.net/.
Outlook
ev3 expects fiscal year 2008 net sales to remain in the range of $425 to $430 million consisting of $408 to $413 million of product net sales and $16.5 million of research collaboration revenue. Full-year revenue guidance represents an increase in total product revenue guidance from a range of $400 to $405 million to a range of $408 to $413 million. ev3 expects fiscal year 2008 earnings per share, as adjusted to be in the range of $0.00 to $0.05 per diluted share based on approximately 104 million of outstanding shares. Earnings per share, as adjusted does not include pre-tax charges for amortization expense of approximately $30.0 million, non-cash stock-based compensation of approximately $15.5 million and the $10.5 million non-cash impairment charge related to the termination of ev3's collaboration and license agreement with Merck.
The company expects third quarter 2008 net sales to be in the range of $104 to $106 million consisting of $100 to $102 million of product net sales and $4.1 million of research collaboration revenue and net (loss) earnings per share, as adjusted to be in the range of $(0.02) to $0.01 per diluted share based on approximately 104 million of outstanding shares. Net earnings per share, as adjusted does not include pre-tax charges for amortization expense of approximately $7.0 million and non-cash stock-based compensation of approximately $3.4 million.
Earnings Call Information
ev3 will host a conference call tomorrow, July 29, 2008, beginning at 7:30 a.m. Central Time (8:30 a.m. Eastern Time) to review its results of operations for the second quarter of 2008 and future outlook, followed by a question and answer session.
The conference call will be available to interested parties through a live audio webcast at http://ir.ev3.net/, where it will be archived and accessible for approximately 90 days. The live dial-in number for the call is 888-679-8033 (U.S.) or 617-213-4846 (International). The participant passcode is 64950600.
If you do not have access to the Internet and want to listen to an audio replay of the conference call, dial 888-286-8010 (U.S.) or 617-801-6888 (International) and enter passcode 10431647. The audio replay will be available beginning at 9:30 a.m. Central Time on Tuesday, July 29, 2008 until Tuesday, August 5, 2008.
About ev3 Inc.
Since its founding in 2000, ev3 has been dedicated to developing innovative, breakthrough and clinically proven technologies and solutions for the treatment of lower extremity vascular and neurovascular diseases. ev3's products are used by endovascular specialists to treat a wide range of peripheral vascular and neurovascular diseases and disorders. The company offers a comprehensive portfolio of treatment options, including the primary interventional technologies used today - peripheral angioplasty balloons, stents, plaque excision systems, embolic protection devices, liquid embolics, embolization coils, thrombectomy catheters and occlusion balloons. More information about the company and its products can be found at http://www.ev3.net/.
ev3, the ev3 logo, Axium, Onyx, EverFlex, EverCross, FoxHollow, SilverHawk and RockHawk are trademarks of ev3 Inc., registered in the U.S. and other countries. All trademarks and trade names referred to in this press release are the property of their respective owners.
Forward-Looking Statements
Statements contained in this press release that are not historical information are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about future financial and operating results and business strategies and other statements identified by words such as "expect," "anticipate," "intend," "will," "may," "believe," "could," "outlook," "guidance," or words of similar meaning and any other statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of ev3's management and are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied. Such potential risks and uncertainties include, but are not limited to, in no particular order: the failure to achieve profitability within expected time periods, the effect of the termination of ev3's collaboration and license agreement with Merck & Co, Inc., the failure to realize revenue synergies and cost-savings from ev3's acquisition of FoxHollow, the closure of its Redwood City facility or delay in realization thereof; the businesses of ev3 and FoxHollow not being integrated successfully, or such integration taking longer or being more difficult, time- consuming or costly to accomplish than expected; the impact of competitive products and pricing; changes in the regulatory environment; availability of third party reimbursement; potential margin pressure resulting from volume selling, as well as potential adverse effects on future product demand resulting from volume purchases; delays in regulatory approvals and the introduction of new products; market acceptance of new products and success of clinical testing. More detailed information on these and additional factors which could affect ev3's operating and financial results is described in the company's filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K and subsequent quarterly report on Form 10-Q. ev3 Inc. urges all interested parties to read this report to gain a better understanding of the many business and other risks that the company faces. Additionally, ev3 undertakes no obligation to publicly release the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.
Use of Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), ev3 uses certain non-GAAP financial measures. In this release, ev3 uses the non-GAAP financial measures, "EBITDA, excluding charges for non-cash stock-based compensation and the research collaboration asset impairment," "peripheral vascular and neurovascular net sales, excluding atherectomy and research collaboration related revenues," "peripheral vascular sales, excluding atherectomy revenues" and "adjusted earnings (loss) per share." ev3 uses non-GAAP financial measures as supplemental measures of performance and believes these measures facilitate operating performance comparisons from period to period and company to company by factoring out potential differences caused by acquisitions, non-recurring, unusual or infrequent charges not related to ev3's regular, ongoing business, variations in capital structure, tax positions, depreciation, non-cash charges and certain large and unpredictable charges. ev3 also believes that the presentation of certain non-GAAP financial measures provide useful information to investors in evaluating the company's operations, period over period. Non-GAAP financial measures have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of the company's results as reported under GAAP. When analyzing ev3's operating performance, investors should not consider ev3's EBITDA, excluding charges for non-cash stock-based compensation and the research collaboration asset impairment, ev3's peripheral vascular and neurovascular net sales, excluding atherectomy and research collaboration related revenues, ev3's peripheral vascular net sales, excluding atherectomy revenues, or ev3's adjusted earnings (loss) per share as substitutes for ev3's net income (loss), ev3's net sales, ev3's peripheral vascular net sales or ev3's net income (loss) per share, respectively, each as prepared in accordance with GAAP. In addition, investors should note that any non-GAAP financial measures used by ev3 may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies. Whenever ev3 uses historical non-GAAP financial measures, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure. A reconciliation of ev3's EBITDA, excluding charges for non-cash stock-based compensation and the research collaboration asset impairment, to ev3's net loss prepared in accordance with GAAP can be found immediately following the detail of net sales by geography later in this press release. This information is also made available on the company's website at http://www.ev3.net/. ev3, however, does not provide forward- looking guidance for certain financial data, such as depreciation, accretion, net income (loss), net income (loss) per common share and as a result, is not able to provide a reconciliation of GAAP to non-GAAP financial measures for forward-looking data.
ev3 Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) (unaudited) For the Three Months For the Six Months Ended Ended June 29, July 1, June 29, July 1, 2008 2007 2008 2007 Sales Product sales $101,509 $65,396 $196,559 $126,895 Research collaboration 6,208 - 12,415 - Net sales 107,717 65,396 208,974 126,895 Operating expenses Product cost of goods sold (a) 34,290 22,362 66,260 42,819 Research collaboration 1,899 - 3,547 - Sales, general and administrative (a) 65,936 40,882 125,764 80,019 Research and development (a) 14,054 11,323 25,780 18,756 Amortization of intangible assets 7,941 3,864 16,184 7,964 Intangible asset impairment 10,459 - 10,459 - Gain on sale or disposal of assets, net - (1,004) - (988) Total operating expenses 134,579 77,427 247,994 148,570 Loss from operations (26,862) (12,031) (39,020) (21,675) Other (income) expense: Realized and unrealized gains on investments, net (400) - (400) - Interest (income) expense, net 85 (297) (356) (406) Other (income) expense, net 345 (195) (2,087) (512) Loss before income taxes (26,892) (11,539) (36,177) (20,757) Income tax expense 530 332 1,015 608 Net loss $(27,422) $(11,871) $(37,192) $(21,365) Earnings per share: Net loss per common share (basic and diluted) $(0.26) $(0.20) $(0.36) $(0.37) Weighted average common shares outstanding 104,247,782 59,543,827 104,176,206 58,529,041 (a) Includes stock-based compensation charges of: Cost of goods sold $179 $187 $476 $345 Sales, general and administrative 3,443 2,207 7,036 4,066 Research and development 270 266 1,111 448 $3,892 $2,660 $8,623 $4,859 ev3 Inc. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) June 29, December 31, 2008 2007 (unaudited) Assets Current assets Cash and cash equivalents $38,749 $81,060 Short-term investments - 9,744 Accounts receivable, less allowance of $7,826 and $6,783, respectively 73,726 66,170 Inventories 65,356 64,044 Prepaid expenses and other assets 4,096 6,371 Other receivables 1,726 981 Total current assets 183,653 228,370 Restricted cash 1,736 2,204 Property and equipment, net 34,840 37,985 Goodwill 594,238 586,648 Other intangible assets, net 205,616 231,000 Other assets 536 899 Total assets $1,020,619 $1,087,106 Liabilities and stockholders' equity Current liabilities Accounts payable $18,214 $21,511 Accrued compensation and benefits 30,704 35,301 Accrued liabilities 23,752 49,429 Deferred revenue 4,128 9,347 Current portion of long-term debt 3,571 3,571 Total current liabilities 80,369 119,159 Long-term debt 4,643 6,429 Other long-term liabilities 4,488 3,037 Total liabilities 89,500 128,625 Stockholders' equity Common stock, $0.01 par value; 300,000,000 shares authorized; shares issued and outstanding: 105,633,613 shares at June 29, 2008 and 105,078,769 shares at December 31, 2007 1,056 1,051 Additional paid in capital 1,748,911 1,739,064 Accumulated deficit (818,231) (781,039) Accumulated other comprehensive loss (617) (595) Total stockholders' equity 931,119 958,481 Total liabilities and stockholders' equity $1,020,619 $1,087,106 ev3 Inc. SELECTED NET SALES INFORMATION (Dollars in thousands, except per share amounts) (unaudited) For the Three Months For the Six Months NET SALES BY SEGMENT Ended Ended June 29, July 1, June 29, July 1, 2008 2007 % change 2008 2007 % change Peripheral Vascular Atherectomy $24,932 $- NA $47,632 $- NA Stents 27,128 22,153 22% 51,160 41,959 22% Thrombectomy and embolic protection 7,097 8,443 -16% 13,052 14,661 -11% Procedural support and other 11,633 10,035 16% 23,059 20,502 12% Total peripheral vascular 70,790 40,631 74% 134,903 77,122 75% Neurovascular Embolic products 17,431 12,827 36% 35,295 25,753 37% Neuro access and delivery products 13,288 11,938 11% 26,361 24,020 10% Total neurovascular 30,719 24,765 24% 61,656 49,773 24% Research collaboration 6,208 - NA 12,415 - NA Total company $107,717 $65,396 65% $208,974 $126,895 65% NET SALES BY For the Three Months For the Six Months GEOGRAPHY Ended Ended June 29, July 1, June 29, July 1, 2008 2007 % change 2008 2007 % change United States $71,869 $39,576 82% $138,321 $74,716 85% International 35,848 25,820 39% 70,653 52,179 35% Total net sales $107,717 $65,396 65% $208,974 $126,895 65% ev3 Inc. NON-GAAP FINANCIAL MEASURES (Dollars in thousands) (unaudited) For the Three Months For the Six Months Ended Ended June 29, July 1, June 29, July 1, 2008 2007 2008 2007 Reconciliation of net loss to EBITDA Net loss, as reported (GAAP basis) $(27,422) $(11,871) $(37,192) $(21,365) Interest (income) expense, net 85 (297) (356) (406) Income tax expense 530 332 1,015 608 Depreciation and amortization 10,868 5,670 22,044 11,574 EBITDA $(15,939) $(6,166) $(14,489) $(9,589) Stock-based compensation 3,892 2,660 8,623 4,859 Research collaboration asset impairment 10,459 - 10,459 - EBITDA, as adjusted $(1,588) $(3,506) $4,593 $(4,730)
