Cardiovascular Systems Reports Fiscal 2013 Fourth-Quarter and Full-Year Financial Results

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Cardiovascular Systems Reports Fiscal 2013 Fourth-Quarter and Full-Year Financial Results

Conference Call Scheduled for Today, August 7, 2013, at 3:45 PM CT (4:45 PM ET)

ST. PAUL, Minn.--(BUSINESS WIRE)-- Cardiovascular Systems, Inc. (NAS: CSII)

  • Revenues of $28.8 million rose 26 percent over the fiscal 2012 fourth quarter, and 9 percent sequentially over the fiscal 2013 third quarter
  • FDA questions were received on completed PMA application to treat coronary artery disease
    • CSI submitted responses to FDA on July 19, 2013
  • Coronary data from ORBIT II presented in late-breaking trial sessions at EuroPCR and C3 conferences
    • 92.8 percent of patients free from severe angiographic complications
    • Final procedure mean residual stenosis 4.7 percent
    • Results exceeded trial's primary safety and efficacy endpoints by a significant margin
  • Company began enrolling patients in Liberty 360° peripheral study

Cardiovascular Systems, Inc. (CSI) (NAS: CSII) , a medical device company developing and commercializing innovative interventional treatment systems for vascular disease, today reported financial results for its fiscal fourth quarter and year ended June 30, 2013.

CSI's fourth-quarter revenues rose to $28.8 million, a 26-percent gain from $22.9 million in the fourth quarter of fiscal 2012. Substantial demand for the company's Stealth 360°® peripheral arterial disease (PAD) System drove Stealth 360° revenues to 99 percent of total device revenues. Customer reorder revenues remained strong at 96 percent of total revenue.

CSI's fiscal 2013 fourth-quarter net loss was $(6.8) million, or $(0.28) per common share, compared to $(4.6) million, or $(0.24) per common share, in the fiscal 2012 fourth quarter. Adjusted EBITDA for the quarter was a loss of $(4.3) million, compared to a loss of $(2.5) million in fiscal 2012. Losses increased from the prior year primarily due to planned investments, including approximately $4.0 million to advance the ORBIT II coronary clinical trial and prepare for a coronary market launch. Other investments included competitive enhancements to sales and marketing, and expansion of medical education programs.

The company's fourth-quarter gross profit margin was 76 percent, compared to 77 percent in the year-earlier quarter. The favorable effect of increased production volume was offset by higher unit costs of the Stealth 360° versus its predecessor Diamondback 360°® device, and by lower average selling prices.

David L. Martin, CSI president and chief executive officer, said, "We had a strong finish to the fiscal year, building significant momentum as we enter fiscal 2014. Our easy-to-use and effective technology, combined with our focused sales strategy, educational initiatives, and expanding wealth of scientific data, are driving our strong year-over-year top-line growth in the large and expanding $2.0 billion PAD market."

"We remain steadfast in our goal of providing a superior solution to treat arterial calcium, which is present in approximately 65 percent of all PAD arteries treated and in nearly 80 percent of the small arteries treated below the knee. In addition, our compelling ORBIT II study results and PMA application progress with the FDA have us excited about the $1.5 billion calcified coronary market opportunity and its future growth potential," said Martin.

Full Fiscal Year 2013 Results
For the fiscal 2013 full year, revenues increased to $103.9 million, up 26 percent from the prior fiscal year. Gross margin was 77 percent, consistent with fiscal 2012, while operating expenses rose 31 percent as a result of planned investments. Net loss totaled $(24.0) million, or $(1.11) per common share, versus $(16.8) million, or $(0.93) per common share, last year. Adjusted EBITDA loss increased by $(5.6) million to $(14.0) million.

Said Martin, "Fiscal 2013 was a year of many accomplishments that the whole CSI team can be proud of. We delivered very strong revenue growth, submitted a key coronary PMA application to the FDA, expanded adoption-driving education initiatives and continued our leadership in providing PAD scientific data on our products. This sets the stage for further growth in the year ahead."

Coronary PMA Submission Update
CSI completed submission of its PMA application to the FDA for the company's orbital atherectomy system to treat calcified coronary arteries on March 15, 2013. On June 14, 2013, the FDA provided CSI with its questions on the application. CSI was able to quickly reply, submitting its responses by July 19. The company anticipates that approval could occur in late calendar 2013 or early 2014, primarily depending on whether or not a full advisory panel is required by the FDA.

ORBIT II Coronary Data Presented in Late-Breaking Trial Sessions
CSI presented 30-day results from its ORBIT II study of coronary artery disease in late-breaking presentations at the 2013 European Association of Percutaneous Cardiovascular Interventions (EuroPCR) conference in Paris, and the 2013 Complex Cardiovascular Catheter Therapeutics (C3) conference in Orlando, Florida. Dr. Jeffrey Chambers of Metropolitan Heart and Vascular Institute, Minneapolis, highlighted data showing that 92.8 percent of patients were free from severe angiographic complications. Additionally, core lab assessed final procedure residual stenosis was 4.7 percent.

ORBIT II demonstrated that CSI's technology produced clinical outcomes that exceeded the trial's two primary safety and efficacy endpoints by a significant margin — within one of the most challenging patient populations to treat. Results showed that at 30 days, patient freedom from major adverse cardiac events, or MACE, was 89.6 percent and procedural success was 88.9 percent (including in-hospital MACE). Patients had less than 50 percent residual stenosis 98.6 percent of the time, and 97.7 percent of stents were successfully delivered. Previous studies of calcified lesions showed significantly higher rates of MACE and death.

According to Dr. Chambers, "Patients who suffer from severely calcified coronary lesions are one of the toughest-to-treat populations, and 30-day ORBIT II results demonstrate that CSI's orbital atherectomy technology may be a practical treatment option. Patients with moderate-to-severe calcium are more likely to experience MACE, or even death."

For more information, click here.

First Patients Enrolled in Liberty 360° Study
During the fourth quarter, CSI began enrolling patients in its post-market study, LIBERTY 360°. The study is evaluating the acute and long-term clinical and economic outcomes of the company's orbital atherectomy system in treating PAD. It is the first study of its kind to compare orbital atherectomy to all other PAD interventional treatment options in a difficult-to-treat patient population. As a prospective, observational, multi-center post-market study, LIBERTY 360° will enroll up to 1,200 patients at 100 sites across the United States, including 500 patients with claudication (painful circulatory problems), 500 who suffer from critical limb ischemia (a severe form of PAD) and 200 scheduled for amputation.

Martin said, "LIBERTY 360° is unique in that it's assessing long-term outcomes and durability in a patient population that includes complex cases, even those with advanced and severe PAD — a subset that hasn't been studied before. CSI is dedicated to providing physicians with the information they need to make sound treatment decisions for their patients. LIBERTY 360° is the latest example of that commitment, and we're looking forward to the data and insights it will provide."

For more information, click here.

Fiscal 2014 First-Quarter Outlook
For the fiscal 2014 first quarter ending September 30, 2013, CSI anticipates:

  • Revenue growth of 18 percent to 22 percent over the first quarter of fiscal 2013, to a range of $27.5 million to $28.5 million, including the effect of lower expected procedure volumes during the summer;
  • Gross profit as a percentage of revenues slightly higher than the fourth quarter of fiscal 2013;
  • Operating expenses approximately 9 percent higher than the fourth quarter of fiscal 2013, including approximately $6.0 million for the ORBIT II trial and preparation for a potential future coronary market launch;
  • Interest and other expense of approximately $(300,000), excluding the potential effect of debt conversions or valuation changes of the related conversion option asset; and
  • Net loss in the range of $(9.6) million to $(10.2) million, or loss per common share ranging from $(0.39) to $(0.42), assuming 24.5 million average shares outstanding, and excluding the potential effect of debt conversions or valuation changes of the related conversion option asset.

Concluded Martin, "CSI is committed to helping physicians successfully address the most difficult disease states, including arterial calcium, given the complications it presents for the millions who suffer from PAD and CAD. We do this through clinical rigor, constant innovation, and a defining drive to set the standard in safe, effective and economical medical devices that improve patient outcomes. Our fiscal 2014 focus is twofold: We will continue to prepare for a coronary launch, making growth investments as appropriate, while driving clinical and educational initiatives for further PAD adoption."

Conference Call Today at 3:45 p.m. CT (4:45 p.m. ET)
Cardiovascular Systems, Inc. will host a live conference call and webcast of its fiscal fourth-quarter results today, August 7, 2013, at 3:45 p.m. CT (4:45 p.m. ET). To access the call, dial (888) 679-8034 and enter access number 39331740. Please dial in at least 10 minutes prior to the call and wait for assistance, or dial "0" for the operator. To listen to the live webcast, go to the investor information section of the company's website, www.csi360.com, and click on the webcast icon. A webcast replay will be available beginning at 7 p.m. CT the same day.

For an audio replay of the conference call, dial (888) 286-8010 and enter access number 41201456. The audio replay will be available beginning at 5:45 p.m. CT on Wednesday, August 7, 2013, through 11 p.m. CT on Wednesday, August 14, 2013.

Use of Non-GAAP Financial Measures
To supplement CSI's consolidated condensed financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), CSI uses certain non-GAAP financial measures in this release. Reconciliations of the non-GAAP financial measures used in this release to the most comparable U.S. GAAP measures for the respective periods can be found in tables later in this release immediately following the consolidated statements of operations. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for CSI's financial results prepared in accordance with GAAP.

About Peripheral Arterial Disease
As many as 12 million Americans, most over age 65, suffer from PAD, which is caused by the accumulation of plaque in peripheral arteries (commonly the pelvis or leg) reducing blood flow. Symptoms include leg pain when walking or at rest. Left untreated, PAD can lead to severe pain, immobility, non-healing wounds and eventually limb amputation. With risk factors such as diabetes and obesity on the rise, the prevalence of PAD is growing at double-digit rates.

Millions of patients with PAD may benefit from treatment with orbital atherectomy utilizing the Stealth 360°and Diamondback 360°, minimally invasive catheter systems developed and manufactured by CSI. These systems use a diamond-coated crown, attached to an orbiting shaft, which sands away plaque while preserving healthy vessel tissue — a critical factor in preventing reoccurrences. Balloon angioplasty and stents have significant shortcomings in treating hard, calcified lesions. Stents are prone to fractures and high recurrence rates, and treatment of hard, calcified lesions often leads to vessel damage and suboptimal results.

About Cardiovascular Systems, Inc.
Cardiovascular Systems, Inc., based in St. Paul, Minn., is a medical device company focused on developing and commercializing innovative solutions for treating vascular and coronary disease. The company's Orbital Atherectomy Systems treat calcified and fibrotic plaque in arterial vessels throughout the leg in a few minutes of treatment time, and address many of the limitations associated with existing surgical, catheter and pharmacological treatment alternatives. The U.S. FDA granted 510(k) clearance for the use of the Diamondback Orbital Atherectomy System in August 2007. To date, nearly 120,000 of CSI's devices have been sold to leading institutions across the United States. CSI has also completed its ORBIT II Investigational Device Exemption clinical trial to evaluate the safety and effectiveness of its orbital technology in treating coronary arteries. The coronary system is limited by federal law to investigational use and is currently not commercially available in the United States.

For more information, visit the company's website at www.csi360.com.

Safe Harbor
Certain statements in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are provided under the protection of the safe harbor for forward-looking statements provided by that Act. For example, statements in this press release regarding (i) CSI's potential coronary application and the anticipated timing of FDA approval; (ii) the $1.5 billion estimate of the market for a coronary application and its future growth potential; (iii) CSI's LIBERTY 360° study; (iv) potential future growth of CSI; (v) anticipated revenue, gross profit, operating expenses, interest and other expense, and net loss; and (vi) CSI's fiscal 2014 focus, are forward-looking statements.

These statements involve risks and uncertainties which could cause results to differ materially from those projected, including but not limited to dependence on market growth; the reluctance of physicians to accept new products; the effectiveness of the Stealth 360°; actual clinical trial and study results; the impact of competitive products and pricing; the difficulty to successfully manage operating costs; fluctuations in quarterly results; FDA clearances and approvals; approval of products for reimbursement and the level of reimbursement; general economic conditions and other factors detailed from time to time in CSI's SEC reports, including its most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. CSI encourages you to consider all of these risks, uncertainties and other factors carefully in evaluating the forward-looking statements contained in this release. As a result of these matters, changes in facts, assumptions not being realized or other circumstances, CSI's actual results may differ materially from the expected results discussed in the forward-looking statements contained in this release. The forward-looking statements made in this release are made only as of the date of this release, and CSI undertakes no obligation to update them to reflect subsequent events or circumstances.

Product Disclosure
The Stealth 360°® PAD System, Diamondback 360® PAD System and Predator 360® PAD System are percutaneous orbital atherectomy systems indicated for use as therapy in patients with occlusive atherosclerotic disease in peripheral arteries and stenotic material from artificial arteriovenous dialysis fistulae. The systems are contraindicated for use in coronary arteries, bypass grafts, stents or where thrombus or dissections are present. Although the incidence of adverse events is rare, potential events that can occur with atherectomy include: pain, hypotension, CVA/TIA, death, dissection, perforation, distal embolization, thrombus formation, hematuria, abrupt or acute vessel closure, or arterial spasm.

 
 
Cardiovascular Systems, Inc.
Consolidated Statements of Operations
(Dollars in Thousands, except per share and share amounts)
(unaudited)
 
  Three Months Ended  Year Ended

June 30,

June 30,

2013 20122013 2012
Revenues$28,821$22,907$103,897$82,490
Cost of goods sold 6,929  5,178  24,382  19,216 
Gross profit 21,892  17,729  79,515  63,274 
 
Selling, general and administrative24,62718,47486,71866,366
Research and development 3,946  3,241  15,216  11,374 
Total expenses 28,573  21,715  101,934  77,740 
Loss from operations(6,681)(3,986)(22,419)(14,466)
Interest and other (expense) income (160) (619) (1,618) (2,324)
Net loss$(6,841)$(4,605)$(24,037)$(16,790)

Net loss per common share:

Basic and diluted$(0.28)$(0.24)$(1.11)$(0.93)

Weighted average common shares used in computation:

Basic and diluted 24,181,465  18,909,220  21,685,932  18,035,635 
 
 
Cardiovascular Systems, Inc.
Consolidated Balance Sheets
(Dollars in Thousands)
(unaudited)
 
  

 June 30, 

  

 June 30, 

20132012
ASSETS
Current assets
Cash and cash equivalents$67,897$35,529
Accounts receivable, net14,73013,644
Inventories6,2437,061
Prepaid expenses and other current assets 959 1,536
Total current assets 89,829 57,770
Property and equipment, net2,9992,163
Patents, net3,2192,635
Other assets 850 556
Total assets$96,897$63,124
 

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Current maturities of long-term debt$5,095$4,678
Accounts payable7,2305,610
Deferred grant incentive156302
Accrued expenses 9,932 7,262
Total current liabilities 22,413 17,852
Long-term liabilities
Long-term debt, net of current maturities7,47212,842
Other liabilities 180 241
Total long-term liabilities 7,652 13,083
Total liabilities 30,065 30,935
Commitments and contingencies
Total stockholders' equity 66,832 32,189
Total liabilities and stockholders' equity$96,897$63,124
 
 
Cardiovascular Systems, Inc.
Supplemental Sales Information
(Dollars in Thousands)
(unaudited)
 
  Three months ended  Year ended
   June 30,  June 30,
   2013  2012  2013  2012
             
Device revenue  $25,375   $20,174   $91,238   $73,016 
Other product revenue   3,446    2,733    12,659    9,474 
Total revenue  $28,821   $22,907   $103,897   $82,490 
             
Device units sold   8,138    6,293    28,948    22,982 
             
New customers   59    49    191    172 
             
Reorder revenue %   96%<
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