4Q and Year End 2005 Results
Company Reports Second Consecutive Profitable Quarter and Highest Annual Revenue in Five Years
FOOTHILL RANCH, Calif., March 1 /PRNewswire-FirstCall/ -- Cardiogenesis Corporation (OTC Bulletin Board: CGCP - News), the market leader in surgical products and accessories used in angina-relieving Transmyocardial Revascularization (TMR) and Percutaneous Myocardial Channeling (PMC) procedures, announced results today for its fourth quarter and year ended December 31, 2005.
The Company reported that revenues in the fourth quarter of 2005 were $4.1 million compared to $5.2 million in the same period in 2004, a decrease of 22%. For the full year 2005, revenues increased by 6% to $16.3 million, from revenues of $15.5 million in the prior year. This revenue increase from 2004 to 2005 was fueled by a 14% unit handpiece growth.
Chairman and CEO Michael J. Quinn commented on the quarter and year-end results, "In 2005 we achieved our third consecutive annual revenue increase since 2002. This is significant progress, particularly when considering the momentum in procedural utilization of our TMR systems in 2005. Our increase in revenue year over year is a result of our continued progress in developing the TMR market, reflected in the 14% increase in annual handpiece sales," stated Quinn. "We are creating the future of TMR with our Advanced TMR Platform, including the SolarGen 2100s console, our Robotic and Thoracoscopic PEARL delivery systems and the PHOENIX Revascularization Delivery System."
Sales, general and administrative expenses for the fourth quarter of 2005 decreased by 8% as compared to the prior year period. Sales, general and administrative expenses for the full year 2005 increased approximately 19% from the prior year period to $13.5 million. The increase was primarily due to the sales and marketing expansion which occurred at the beginning of 2005, as well as the marketing expenses directly related to the initial clinical introduction of the Company's new minimally invasive product line.
Research and development costs for the fourth quarter of 2005 increased by 34% as compared to the prior year quarter and increased by 20% for the full year 2005 from the prior year. The increase resulted from costs incurred for the product development and study costs for the new minimally invasive TMR handpieces and the Company's investment in important research initiatives.
In August 2005, the Company initiated a restructuring effort to significantly reduce the expense base and cash requirements to support the TMR business. The effects of these changes significantly reduced operating expenses by 35% post-restructuring. Sales, general and administrative expenses post-restructuring decreased by 32% as compared to the first six months of the year and research and development expenses decreased by 34% post-restructuring as compared to the first six months of the year.
"In the second half of the year, we achieved significant progress operationally," Quinn commented. "We implemented an aggressive restructuring effort which resulted in five consecutive months of profitability immediately following the implementation. Management is committed to achieving revenue growth while operating on a lower expense base. The effect of our actions during the second half of the year produced two consecutive profitable quarters."
Quinn added, "With the improvement in our operations in the second half of the year, we were able to make three principle payments towards the convertible note, preventing further oversupply of our stock on the market. If our operating results continue on an upward trend, we remain committed to using our current cash funds, instead of issuing more stock, towards paying back the principal on the note."
The Company generated income from operations of $388,000 and net income of $1,005,000 for the fourth quarter of 2005 and a loss from operations of $1.9 million and a net loss of $1.9 million for the full year 2005. The net loss includes non-operating, non-cash interest and other charges primarily resulting from the valuation of warrants and derivatives related to the convertible debt financing completed in October 2004.
During the fourth quarter of 2005, the Company shipped a total of 2 lasers, converted 2 evaluation lasers to sale and worldwide disposable shipments were 818 units. In 2005, a total of 37 lasers were shipped, 6 evaluation lasers were converted to sale and worldwide disposable shipments were 3,442 units. During the fourth quarter of 2004, the Company shipped a total of 6 lasers, converted 6 evaluation lasers to sale and worldwide disposable shipments were 806 units. In 2004, a total of 23 lasers were shipped, 11 evaluation lasers were converted to sale and worldwide disposable shipments were 3,018 units.
Quinn stated, "We are very encouraged by our results during the second half of 2005. We demonstrated the ability to drive disposables revenue and produce operating profit. We made significant progress in 2005 towards bringing our minimally invasive PEARL Robotic and Thoracoscopic tools to market, while also developing the TMR market as reflected in our 14% annual unit growth in disposable sales."
Quinn commented on the progress of the PEARL trials, "We are close to completion of the feasibility trials with our minimally invasive PEARL Robotic and Thoracoscopic trials. We expect to complete those trials in the near future and submit the required follow up data to the FDA. We are forecasting initial commercial sales of these products in the fourth quarter of this year."
Upcoming opportunities for the Company to highlight its minimally invasive PEARL delivery systems include: Louis A. Brunsting, III, M.D., an attending Cardiothoracic Surgeon at Centennial Medical Center, (an HCA facility in Nashville, TN) is invited to present his clinical TMR experience with the Cardiogenesis PEARL Robotic delivery system at the Advanced Cardiac Techniques in Surgery (ACTS) Meeting in New York in April; and, Gary S. Allen, M.D., Chief of Cardiothoracic Surgery at Osceola Regional Medical Center (Kissimmee, FL) will be presenting his early and midterm results with our PEARL Thoracoscopic delivery System at the International Society of Minimally Invasive Cardiothoracic Surgery (ISMICS) Meeting in June.
Regarding these developments, Quinn stated, "Cardiothoracic surgeons are excited about the advancements that we are bringing to market. In the completion of the required FDA feasibility trials, we are also developing the marketing tools to assist our surgeons with education of the medical and patient communities about these minimally invasive tools and techniques for delivering our significant and enduring therapy."
Quinn described the progress and plans for the Advanced TMR Platform. "In addition to completing the trials leading to commercialization of the minimally invasive PEARL delivery systems, we have made significant progress in the evaluation and application of our PHOENIX Revascularization Delivery System which combines the delivery of our Holmium: YAG TMR therapy with biologic or pharmacologic materials to enhance the overall physiologic and clinical response. We announced the successful completion of the initial clinical safety and feasibility cases earlier this quarter and are continuing to collect this important data in support of our PHOENIX program initiatives."
The Company is evaluating the potential for increasing the patient response to its Holmium: YAG therapy by adding precise biologic/pharmacologic delivery to the TMR procedure in the PHOENIX Revascularization Delivery System. Quinn explained, "The delivery of the pulsed Holmium: YAG energy through our proprietary fiberoptic delivery system stimulates the tissue surrounding the TMR channel with thermoacoustic energy. At the time of surgery, this initiates the body's own angiogenic response in and around the channels. It has been reported in the early clinical experience that delivery of biologics or pharmacologic materials to this stimulated myocardium can enhance the physiologic effect in tissue and contribute to improved regional and global ventricular mechanical function."
Dr. Marvin Slepian, the Company's Chief Scientific Officer and Director of Interventional Cardiology at the Sarver Heart Center at the University of Arizona in Tucson, commented on the PHOENIX system, "The phenomenon of combining Holmium:YAG TMR and biologic/pharmacologic therapies is analogous to the lighting of a match. The match is essentially the fiber of the Holmium:YAG laser delivery system, the spark is the addition of the biologic or pharmacologic agent and the resulting explosion is the robust angiogenic response resulting from the combination of the two in the thermoacoustic stimulated tissue zone."
"There is a tremendous amount of scientific and clinical interest in the potential for biologic/pharmacologic therapies for treating cardiovascular diseases," Quinn stated. "In the future, medical devices will primarily serve as delivery systems to optimize the effectiveness of innovative biologic/pharmacologic therapies. Our PHOENIX development program is focused on optimizing patient outcomes with the targeted, precise delivery of biologics/pharmacologics to the thermoacoustic stimulated tissue zone created with our Holmium: YAG TMR system."
The Company reported during January the FDA had approved the protocol for its PMC System. The protocol is a prospective, randomized, sham controlled, multi-center trial and will require approximately 400 patients. Regarding the trial status, Mr. Quinn explained, "We remain committed to achieving approval of our PMC technology in the United States. We expect to continue to be profitable based upon our growing TMR franchise, as we search for a corporate partner to help fund this significant PMC trial. We are fortunate to have a prominent group of respected cardiologists committed to supporting this important effort as soon as we have secured the necessary support."
