CryoCath Announces 2007 Fourth Quarter and Fiscal Year End Financial Results
CryoCath® Technologies Inc., the global leader in cryotherapy products to treat
cardiovascular disease, today announced financial results for the fourth quarter
and year ended September 30, 2007.
Montreal, December 17, 2007 - CryoCath® Technologies Inc., the global leader in cryotherapy products to treat
cardiovascular disease, today announced financial results for the fourth quarter
and year ended September 30, 2007.
Selected FY 2007 Financial and Operating Highlights:
- - Following the sale of the surgical portfolio to ATS Medical, we
successfully transitioned our organization in Q4 towards a high growth, pure
play EP/AFib company, with relentless focus on the blockbuster potential of
Arctic Front®. As part of this transition we did incur a number of one-time
charges in fiscal Q4’07.
- - Revenue of $39.7 million, a growth of 3.4% over prior year. This growth is
composed of 14.2% growth of our electrophysiology (EP) business to $29M, offset
by the impact of selling the surgical business at the end of Q3 2007.
- - Q4 2007 sales were $6.6 million, a growth of 1.1% over our EP business
revenue in Q4 2006. In what is traditionally our weakest quarter, sales growth
was further slowed down by unfavorable exchange rate impact, a one-time revenue
accrual and abandoning quarter-end volume discount sales practices.
- - Global growth is fueled by the strong performance of our flagship Arctic
Front product in European markets. The number of active Arctic Front users has
grown in Q4 from 20 to 23 and is accelerating. At the end of Q4 a total of
approximately 1,600 Arctic Front procedures have been performed in Europe. Our
Atrial Fibrillation (AFib) business grew by 52.1% in FY2007 and 61.7% in Q4.
Excluding a one time revenue accrual, our AFib revenue growth accelerated to
60.1% for the year and a strong 97.8% for Q4.
- - Gross margins increased significantly to 59.2% from 53.6% in fiscal 2006.
- - Excluding the impact of the sale of the surgical portfolio, the net loss
for 2007 was $29.2 million or a drop of 2.4% as compared to $30.0 for 2006.
Including the gain from selling the surgical portfolio the net loss ended at
$19.0 million.
- - Overall operating burn increased marginally from $19.8 million in 2006 to
$20.3 million in 2007.
- - A total of 162 patients have been enrolled to date in our STOP AF IDE
pivotal trial. This study continues to be the fastest enrolling AFib trial in
the US. At the current enrollment rate per center we will reach full enrollment
by April 2008. This keeps this key program on track for late 2009 approval by
the FDA.
- - There is a growing body of strong clinical evidence around our Arctic
Front system. In various studies in US and Europe, the system lives up to its
expectations and provides solid 12-month outcomes and no permanent side effects
in Paroxysmal AFib patients in a relatively simple procedure.
“The past year has been packed with positive changes for CryoCath. More than
ever, we are now focused on commercialization and growth,” said Jan Keltjens,
President & CEO of CryoCath. “Undoubtedly, the sale of the surgical products
division at the end of Q3 was the pivotal initiative in this respect, enabling
us to concentrate fully on the huge potential offered by the electrophysiology
market and atrial fibrillation, in particular. Our focus is on obtaining US
approval for our revolutionary Arctic Front system and rapid, profitable growth
in Europe. In both areas, we made solid progress in 2007. In the last couple of
months of 2007 we were able to resolve supply constraints for Arctic Front and
embarked on a solid commercial roll-out plan in Europe. As a result, Arctic
Front has started to show its explosive growth potential and has become the
largest driver of our growth.
We are also confident with the progress in
our pivotal trial in the US. STOP AF continues to be the fastest enrolling trial
in this space and is on track to support a late 2009 US Arctic Front approval.
Our confidence in the blockbuster potential of Arctic Front is strengthened
continuously based on the solid clinical performance and enthusiastic feedback
from both our European customers as well as our US investigators. We feel that
in 2007 we created the foundation needed to allow us to bring our Arctic Front
breakthrough therapy to millions of Paroxysmal AFib patients and create a
significant and profitable business.”
FY 2007
For
the 12-month period ending September 30, 2007, sales increased 3.4% to reach
$39.7 million compared to $38.4 million in fiscal 2006. US disposable EP product
sales grew by 2.6% to $12.3 million, whereas outside US disposable revenue
driven by the success of Arctic Front, grew by 17.6% to $8.0 million. Total EP
growth in the US was 11.1% to $18.3 million and outside US growth was 20.1% to
$10.7 million.
Gross margins in fiscal 2007 were $23.5 million or 59.2%
of sales, versus $20.6 million or 53.6% of sales in 2006. This increase in
margins is a result of improved focus on the product supply process and the
corresponding increase in output and yields, and the increase in sales of our
higher margin new generation of products. Excluding the impact of the revenue
accrual for returned goods included in the Q4 FY2007 results, but not in FY2006,
gross margin for the year would have increased by 0.3% to 59.5%.
Total
expenses in fiscal 2007 were $53.5 million, up 4.2% from $51.3 million in fiscal
2006.
Sales and marketing expenses in fiscal 2007 totaled $24.7 million
versus $27.4 million for the same period a year ago. This decrease is based on a
reduced head count and reduced commissions and other variable expenses as a
result of the sale of the surgical portfolio to ATS Medical.
On a
12-month basis, net research and development expenses were $11.9 million versus
$10.9 million in fiscal 2006. The increased expenses in research and development
are related to additional clinical expenses associated with the enrollment in
our STOP AF IDE pivotal trial.
Total administrative expenses in fiscal
2007 were $7.6 million versus $6.0 million for the same period a year ago as the
company continued to invest in the resources to build a robust infrastructure
required for rapid and sustainable growth.
Other expenses were $1.1
million in fiscal 2007 and $1.8 million in the prior year and are associated
with realignment initiatives. The costs in fiscal 2007 are the result of the
sale of the surgical business and the Company’s strategy to transition itself
into a lean, focused and fast growing electrophysiology cryoablation company.
Interest expense for the year increased as a result of higher debt
levels and totaled $2.8 million, an increase of $1.4 million over 2006.
Most of the Company’s sales revenues are denominated in either US
dollars or Euros as are a significant amount of our assets. Foreign denominated
expenses and liabilities only provide a partial natural hedge against currency
fluctuations, which were significant in 2007. As a result the Company incurred a
foreign exchange loss in 2007 of $2 million versus $0.2 million last year.
Net loss in fiscal 2007 was $19.0 million or $0.50 per share versus
$30.0 million or $0.79 per share in the same period a year ago. This decrease in
net loss was aided by the one time gain from the sale of the surgical portfolio
to ATS Medical which netted $10.0 million.
On a 12-month basis, the
operating burn was $20.3 million versus $19.8 million in 2006. Excluding one
time costs related to the sale of the surgical business and the FY07
restructurings, the operating burn in FY2007 would have been $15.3 million.
Q4 2007
The Company’s revenues were $6.6 million
in the fourth quarter, a decrease of 30.8% from sales of $9.5 million in the
fourth quarter of fiscal 2006. This decline reflects the absence of revenues
from the surgical portfolio (sold at the end of the third quarter) offset by a
1.1% increase in EP revenues as compared to the same period last year. US
disposable EP product sales declined by 21.4% to $2.7 million, whereas outside
US disposable revenue driven by the success of Arctic Front, grew by 10.0% to
$1.8 million. Total EP sales in the US declined by 5.4% to $4.4 million while
outside US revenue was 16.9% to $2.3 million.
Gross margins in the
fourth quarter of fiscal 2007 were $3.4 million, or 51.5% of sales, an increase
from 41.1% or $3.9 million from Q4 of fiscal 2006. As with the year, the
decrease in gross margin dollars was directly attributable to lower revenues in
the quarter, but offset in part by the higher gross margin percentages.
Excluding the impact of the revenue accrual for returned goods included in the
Q4 FY 07 results, but not in FY06, gross margin for Q4 would have increased by
2.2% to 53.7%.
Total expenses in the fourth quarter of 2007 were $15.7
million, up 8.9% from the fourth quarter of 2006.
The Company’s sales and
marketing expenses for the fourth quarter of fiscal 2007 were $5.6 million
compared to $7.5 million for the fourth quarter of fiscal 2006, and were
associated with lower headcount, reduced commissions and lower variable
spending.
Net research and development expenses for the fourth quarter
were $3.3 million, compared to $1.6 million for the fourth quarter of fiscal
2006, and were related to higher clinical costs incurred in the STOP AF
Trial.
Administrative expenses for the fourth quarter of 2007 were $2.7
million compared to $1.9 million for the fourth quarter ended September 30,
2006, and were related to investment in internal infrastructure to support
growth.
The appreciation of the Canadian dollar against the US dollar led
to a foreign exchange loss in the fourth quarter of $1.3 million versus nil in
the same quarter last year.
CryoCath’s net loss for the fourth quarter
ended September 30, 2007 totaled $11.8 million or $0.31 per share compared to a
loss of $10.5 million or $0.27 per share in the fourth quarter of fiscal 2006.
Operating burn for the quarter was $10.2 million versus $6.5 million for
the fourth quarter of 2006. Excluding one time costs related to the sale of the
surgical business and the FY07 restructurings, the operating burn in Q4 2007
would have been $5.9 million.
Working capital was $18 million at
September 30, 2007, as compared to $20.9 million on September 30, 2006. At
quarter end, CryoCath could access $28.5 million in cash and credit lines
comprised of $24.0 million in cash, cash equivalents and short-term investments
in addition to $4.5 in unused borrowing facilities.
The Company will
host a conference call to discuss the fourth quarter and year-end results on
December 17, 2007 at 4:30 p.m. EST. The call will be audio-cast live and
archived for 90 days at www.cryocath.com.
About Medtronic CryoCath
CryoCath - 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 www.sedar.com under the heading Risks and Uncertainties in the
Management’s Discussion and Analysis section. The financial results referred to
in the press release and accompanying statements are unaudited and may differ
from the final audited numbers.
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